850 
(1) IN
GENERAL.—Paragraph (2) of section 
4940(c) (relating to gross investment income) is 
amended by adding at the end the following new 
sentence: ‘‘Such term shall also include income from 
sources similar to those in the preceding sentence.’’. 
(2) CONFORMING AMENDMENT.—Subsection (e) 
of section 509 (relating to gross investment income) 
is amended by adding at the end the following new 
sentence: ‘‘Such term shall also include income from 
sources similar to those in the preceding sentence.’’. 
(b) CAPITAL GAIN NET INCOME.—Paragraph (4) of 
section 4940(c) (relating to capital gains and losses) is 
amended— 
(1) in subparagraph (A), by striking ‘‘used for 
the production of interest, dividends, rents, and roy-
alties’’ and inserting ‘‘used for the production of 
gross investment income (as defined in paragraph 
(2))’’, 
(2) in subparagraph (C), by inserting ‘‘or 
carrybacks’’ after ‘‘carryovers’’, and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(D) Except to the extent provided by reg-
ulation, under rules similar to the rules of sec-
tion 1031 (including the exception under sub-
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00850
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
851 
section (a)(2) thereof), no gain or loss shall be 
taken into account with respect to any portion 
of property used for a period of not less than 
1 year for a purpose or function constituting 
the basis of the private foundation’s exemption 
if the entire property is exchanged immediately 
following such period solely for property of like 
kind which is to be used primarily for a purpose 
or function constituting the basis for such foun-
dation’s exemption.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 1222. DEFINITION OF CONVENTION OR ASSOCIATION 
OF CHURCHES. 
Section 7701 (relating to definitions) is amended by 
redesignating subsection (o) as subsection (p) and by in-
serting after subsection (n) the following new subsection: 
‘‘(o) CONVENTION
OR ASSOCIATION
OF CHURCH-
ES.—For purposes of this title, any organization which is 
otherwise a convention or association of churches shall not 
fail to so qualify merely because the membership of such 
organization includes individuals as well as churches or be-
cause individuals have voting rights in such organiza-
tion.’’. 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00851
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
852 
SEC. 1223. NOTIFICATION REQUIREMENT FOR ENTITIES 
NOT CURRENTLY REQUIRED TO FILE. 
(a) IN GENERAL.—Section 6033 (relating to returns 
by exempt organizations), as amended by this Act, is 
amended by redesignating subsection (i) as subsection (j) 
and by inserting after subsection (h) the following new 
subsection: 
‘‘(i) ADDITIONAL NOTIFICATION REQUIREMENTS.— 
Any organization the gross receipts of which in any tax-
able year result in such organization being referred to in 
subsection (a)(3)(A)(ii) or (a)(3)(B)— 
‘‘(1) shall furnish annually, in electronic form, 
and at such time and in such manner as the Sec-
retary may by regulations prescribe, information set-
ting forth— 
‘‘(A) the legal name of the organization, 
‘‘(B) any name under which such organiza-
tion operates or does business, 
‘‘(C) the organization’s mailing address 
and Internet web site address (if any), 
‘‘(D) the organization’s taxpayer identifica-
tion number, 
‘‘(E) the name and address of a principal 
officer, and 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00852
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
853 
‘‘(F) evidence of the continuing basis for 
the organization’s exemption from the filing re-
quirements under subsection (a)(1), and 
‘‘(2) upon the termination of the existence of 
the organization, shall furnish notice of such termi-
nation.’’. 
(b) LOSS OF EXEMPT STATUS FOR FAILURE TO 
FILE RETURN OR NOTICE.—Section 6033 (relating to re-
turns by exempt organizations), as amended by subsection 
(a), is amended by redesignating subsection (j) as sub-
section (k) and by inserting after subsection (i) the fol-
lowing new subsection: 
‘‘(j) LOSS OF EXEMPT STATUS FOR FAILURE TO 
FILE RETURN OR NOTICE.— 
‘‘(1) IN
GENERAL.—If an organization de-
scribed in subsection (a)(1) or (i) fails to file an an-
nual return or notice required under either sub-
section for 3 consecutive years, such organization’s 
status as an organization exempt from tax under 
section 501(a) shall be considered revoked on and 
after the date set by the Secretary for the filing of 
the third annual return or notice. The Secretary 
shall publish and maintain a list of any organization 
the status of which is so revoked. 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00853
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
854 
‘‘(2) APPLICATION NECESSARY FOR REINSTATE-
MENT.—Any organization the tax-exempt status of 
which is revoked under paragraph (1) must apply in 
order to obtain reinstatement of such status regard-
less of whether such organization was originally re-
quired to make such an application. 
‘‘(3) RETROACTIVE
REINSTATEMENT
IF
REA-
SONABLE CAUSE SHOWN FOR FAILURE.—If, upon 
application for reinstatement of status as an organi-
zation exempt from tax under section 501(a), an or-
ganization described in paragraph (1) can show to 
the satisfaction of the Secretary evidence of reason-
able cause for the failure described in such para-
graph, the organization’s exempt status may, in the 
discretion of the Secretary, be reinstated effective 
from the date of the revocation under such para-
graph.’’. 
(c) NO DECLARATORY JUDGMENT RELIEF.—Section 
7428(b) (relating to limitations) is amended by adding at 
the end the following new paragraph: 
‘‘(4) NONAPPLICATION FOR CERTAIN REVOCA-
TIONS.—No action may be brought under this sec-
tion with respect to any revocation of status de-
scribed in section 6033(j)(1).’’. 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00854
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
855 
(d) NO MONETARY PENALTY FOR FAILURE TO NO-
TIFY.—Section 6652(c)(1) (relating to annual returns 
under section 6033 or 6012(a)(6)) is amended by adding 
at the end the following new subparagraph: 
‘‘(E) NO PENALTY FOR CERTAIN ANNUAL 
NOTICES.—This paragraph shall not apply with 
respect to any notice required under section 
6033(i).’’. 
(e) SECRETARIAL OUTREACH REQUIREMENTS.— 
(1) NOTICE REQUIREMENT.—The Secretary of 
the Treasury shall notify in a timely manner every 
organization described in section 6033(i) of the In-
ternal Revenue Code of 1986 (as added by this sec-
tion) of the requirement under such section 6033(i) 
and of the penalty established under section 6033(j) 
of such Code— 
(A) by mail, in the case of any organiza-
tion the identity and address of which is in-
cluded in the list of exempt organizations main-
tained by the Secretary, and 
(B) by Internet or other means of out-
reach, in the case of any other organization. 
(2) LOSS OF STATUS PENALTY FOR FAILURE TO 
FILE RETURN.—The Secretary of the Treasury shall 
publicize, in a timely manner in appropriate forms 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00855
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
856 
and instructions and through other appropriate 
means, the penalty established under section 6033(j) 
of such Code for the failure to file a return under 
subsection (a)(1) or (i) of section 6033 of such 
Code. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to notices and returns with respect 
to annual periods beginning after 2006. 
SEC. 1224. DISCLOSURE TO STATE OFFICIALS RELATING TO 
EXEMPT ORGANIZATIONS. 
(a) IN GENERAL.—Subsection (c) of section 6104 is 
amended by striking paragraph (2) and inserting the fol-
lowing new paragraphs: 
‘‘(2) DISCLOSURE OF PROPOSED ACTIONS RE-
LATED TO CHARITABLE ORGANIZATIONS.— 
‘‘(A) SPECIFIC
NOTIFICATIONS.—In the 
case of an organization to which paragraph (1) 
applies, the Secretary may disclose to the ap-
propriate State officer— 
‘‘(i) a notice of proposed refusal to 
recognize such organization as an organi-
zation described in section 501(c)(3) or a 
notice of proposed revocation of such orga-
nization’s recognition as an organization 
exempt from taxation, 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00856
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
857 
‘‘(ii) the issuance of a letter of pro-
posed deficiency of tax imposed under sec-
tion 507 or chapter 41 or 42, and 
‘‘(iii) the names, addresses, and tax-
payer identification numbers of organiza-
tions which have applied for recognition as 
organizations 
described 
in 
section 
501(c)(3). 
‘‘(B) ADDITIONAL DISCLOSURES.—Returns 
and return information of organizations with 
respect to which information is disclosed under 
subparagraph (A) may be made available for in-
spection by or disclosed to an appropriate State 
officer. 
‘‘(C) PROCEDURES FOR DISCLOSURE.—In-
formation may be inspected or disclosed under 
subparagraph (A) or (B) only— 
‘‘(i) upon written request by an ap-
propriate State officer, and 
‘‘(ii) for the purpose of, and only to 
the extent necessary in, the administration 
of State laws regulating such organiza-
tions. 
Such information may only be inspected by or 
disclosed to a person other than the appropriate 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00857
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
858 
State officer if such person is an officer or em-
ployee of the State and is designated by the ap-
propriate State officer to receive the returns or 
return information under this paragraph on be-
half of the appropriate State officer. 
‘‘(D) DISCLOSURES OTHER THAN BY RE-
QUEST.—The Secretary may make available for 
inspection or disclose returns and return infor-
mation of an organization to which paragraph 
(1) applies to an appropriate State officer of 
any State if the Secretary determines that such 
returns or return information may constitute 
evidence of noncompliance under the laws with-
in the jurisdiction of the appropriate State offi-
cer. 
‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN 
OTHER EXEMPT ORGANIZATIONS.—Upon written re-
quest by an appropriate State officer, the Secretary 
may make available for inspection or disclosure re-
turns and return information of any organization de-
scribed in section 501(c) (other than organizations 
described in paragraph (1) or (3) thereof) for the 
purpose of, and only to the extent necessary in, the 
administration of State laws regulating the solicita-
tion or administration of the charitable funds or 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00858
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
859 
charitable assets of such organizations. Such infor-
mation may only be inspected by or disclosed to a 
person other than the appropriate State officer if 
such person is an officer or employee of the State 
and is designated by the appropriate State officer to 
receive the returns or return information under this 
paragraph on behalf of the appropriate State officer. 
‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRA-
TIVE PROCEEDINGS.—Returns and return informa-
tion disclosed pursuant to this subsection may be 
disclosed in civil administrative and civil judicial pro-
ceedings pertaining to the enforcement of State laws 
regulating such organizations in a manner pre-
scribed by the Secretary similar to that for tax ad-
ministration proceedings under section 6103(h)(4). 
‘‘(5) NO
DISCLOSURE
IF
IMPAIRMENT.—Re-
turns and return information shall not be disclosed 
under this subsection, or in any proceeding described 
in paragraph (4), to the extent that the Secretary 
determines that such disclosure would seriously im-
pair Federal tax administration. 
‘‘(6) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) RETURN
AND
RETURN
INFORMA-
TION.—The terms ‘return’ and ‘return informa-
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00859
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS
860 
tion’ have the respective meanings given to such 
terms by section 6103(b). 
‘‘(B) APPROPRIATE STATE OFFICER.—The 
term ‘appropriate State officer’ means— 
‘‘(i) the State attorney general, 
‘‘(ii) the State tax officer, 
‘‘(iii) in the case of an organization to 
which paragraph (1) applies, any other 
State official charged with overseeing orga-
nizations of the type described in section 
501(c)(3), and 
‘‘(iv) in the case of an organization to 
which paragraph (3) applies, the head of 
an agency designated by the State attorney 
general as having primary responsibility 
for overseeing the solicitation of funds for 
charitable purposes.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 6103(a) is amend-
ed by inserting ‘‘or section 6104(c)’’ after ‘‘this sec-
tion’’. 
(2) Subparagraph (A) of section 6103(p)(3) is 
amended by inserting ‘‘and section 6104(c)’’ after 
‘‘section’’ in the first sentence. 
VerDate Aug 31 2005 
00:27 Jul 30, 2006
Jkt 049200
PO 00000
Frm 00860
Fmt 6652
Sfmt 6201
E:\BILLS\H4.CPH
H4
ccoleman on PROD1PC71 with BILLS