Nov. 17, 2005: Congressional Record publishes “TEXT OF AMENDMENTS”

Friday, Sep 24, 2021 @ 7:09pm By EP News Wire Reports

Volume 151, No. 153 covering the 1st Session of the 109th Congress (2005 - 2006) was published by the Congressional Record.

The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.

“TEXT OF AMENDMENTS” mentioning the Environmental Protection Agency was published in the Senate section on pages S13186-S13252 on Nov. 17, 2005.

The publication is reproduced in full below:

TEXT OF AMENDMENTS

SA 2598. Mr. LAUTENBERG submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, insert the following:

SEC. __. COMPUTATION OF LIMITS ON IRA AND ROTH IRA

CONTRIBUTIONS.

(a) Certain Wage Replacement Income Treated as Compensation.--

(1) Wage replacement income.--Section 219(f) (relating to other definitions and special rules) is amended by adding at the end the following new paragraph:

``(8) Treatment of certain wage replacement income as compensation.--

``(A) In general.--Notwithstanding paragraph (1), applicable wage replacement income not otherwise treated as compensation shall be treated as compensation for purposes of this section.

``(B) Applicable wage replacement income.--For purposes of this paragraph, the term `applicable wage replacement income' means any amount received by an individual--

``(i) as the result of the individual having become disabled,

``(ii) as unemployment compensation (as defined in section 85(b)),

``(iii) under workmen's compensation acts, or

``(iv) which constitutes wage replacement income under regulations prescribed by the Secretary.''

(2) Certain excludable amounts may be taken into account for purposes of roth iras.--Section 408A(c)(2) (relating to contribution limit) is amended by adding at the end the following new flush sentence:

``In determining the maximum amount under subparagraph (A), subsections (b)(1)(B) and (c) of section 219 shall be applied by taking into account compensation described in section 219(f)(8) without regard to whether it is includible in gross income.''

(3) Effective date.--The amendments made by this subsection shall apply to taxable years beginning after December 31, 2004.

(b) Computation of Maximum IRA Deduction for Roth IRAs Using Compensation From 2 Preceding Taxable Years.--

(1) In general.--Section 408A(c) (relating to treatment of contributions) is amended by adding at the end the following new paragraph:

``(8) Compensation from preceding 2 years may be taken into account.--

``(A) In general.--A taxpayer may elect for purposes of paragraph (2) to take into account any unused compensation from the 2 taxable years immediately preceding the taxable year.

``(B) Unused compensation.--For purposes of this paragraph, the term `unused compensation' means with respect to an individual for any taxable year the compensation includible in the individual's gross income for the taxable year reduced by the sum of--

``(i) the amount allowed as a deduction under 219(a) to such individual for such taxable year,

``(ii) the amount of any designated nondeductible contribution (as defined in section 408(o)) on behalf of such individual for such taxable year,

``(iii) the amount of any contribution on behalf of such individual to a Roth IRA under this section for such taxable year, and

``(iv) the amount of compensation includible in such individual's gross income for such taxable year taken into account under section 219(c) in determining the limitation under section 219 or paragraph (2) for the individual's spouse.

``(C) Application to special rule for married individuals.--Under rules prescribed by the Secretary, in applying section 219(c) for any taxable year for purposes of applying paragraph (2)(A), unused compensation of an individual or an individual's spouse for the 2 taxable years immediately preceding the taxable year may be taken into account.''

(2) Effective date.--The amendment made by this subsection shall apply to taxable years beginning after December 31, 2004, but unused compensation for taxable years beginning before January 1, 2005, may be taken into account for taxable years beginning after December 31, 2004.

______

SA 2599. Mr. CONRAD (for himself, Mr. Dorgan, and Mr. Smith) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. EXTENSION OF FULL CREDIT FOR QUALIFIED ELECTRIC

VEHICLES.

(A) In general.--Section 30(b) (relating to limitations) is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2).

(b) Effective Date.--The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2005.

______

SA 2600. Mr. SHELBY proposed an amendment to the bill S. 467, to extend the applicability of the Terrorism Risk Insurance Act of 2002; as follows:

Modify section 3(c)(2) of the bill to read as follows:

(2) Conforming amendment.--Section 102(12)(A) of the Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 2326) is amended by striking ``surety insurance'' and inserting ``directors and officers liability insurance''.

______

SA 2601. Mr. NELSON of Florida (for himself, Mr. Dorgan, Mr. Leahy, Mr. Schumer, Mr. Dayton, Ms. Stabenow, Mr. Kohl, Mrs. Murray, Mr. Obama, Mrs. Clinton, Ms. Landrieu, Mr. Harkin, and Mr. Durbin) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

At the end of title IV, insert the following:

SEC. __. PROTECTION FOR MEDICARE BENEFICIARIES WHO ENROLL IN

THE PRESCRIPTION DRUG BENEFIT DURING 2006.

(a) Extended Period of Open Enrollment During All of 2006 Without Late Enrollment Penalty.--Section 1851(e)(3)(B) of the Social Security Act (42 U.S.C. 1395w-21(e)(3)(B)) is amended--

(1) in clause (iii), by striking ``May 15, 2006'' and inserting ``December 31, 2006''; and

(2) by adding at the end the following new sentence:

``An individual making an election during the period beginning on November 15, 2006, and ending on December 15, 2006, shall specify whether the election is to be effective with respect to 2006 or with respect to 2007 (or both).''.

(b) One-Time Change of Plan Enrollment for Medicare Prescription Drug Benefit During All of 2006.--

(1) In general.--Section 1851(e) of the Social Security Act

(42 U.S.C. 1395w-21(e)) is amended--

(A) in paragraph (2)(B)--

(i) in the heading, by striking ``for first 6 months'';

(ii) in clause (i)--

(I) by striking ``the first 6 months of 2006'' and inserting ``2006''; and

(II) by striking ``the first 6 months during 2006'' and inserting ``2006''; and

(iii) in clause (ii), by inserting ``(other than during 2006)'' after ``paragraph (3)''; and

(B) in paragraph (4), by striking ``2006'' and inserting

``2007'' each place it appears.

(2) Conforming amendment.--Section 1860D-1(b)(1)(B)(iii) of the Social Security Act (42 U.S.C. 1395w-101(b)(1)(B)(iii)) is amended by striking ``subparagraphs (B) and (C) of paragraph (2)'' and inserting ``paragraph (2)(C)''.

(c) Effective Date.--The amendments made by this section shall take effect as if included in the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173).

______

SA 2602. Mr. CONRAD proposed an amendment to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF

CONTENTS.

(a) Short Title.--This Act may be cited as the ``Fiscal Responsibility Act of 2005''.

(b) Amendment of 1986 Code.--Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I--TAX BENEFITS FOR AREAS AFFECTED BY HURRICANES KATRINA, RITA,

AND WILMA

Subtitle A--Gulf Recovery Zone Benefits

Sec. 101. Gulf Recovery Zone benefits.

Sec. 102. Expansion of Hope Scholarship and Lifetime Learning Credit for students in the Gulf Recovery Zone.

Sec. 103. Extension of special rules for mortgage revenue bonds.

Subtitle B--Tax Benefits Related to Hurricanes Rita and Wilma

Sec. 111. Extension of certain emergency tax relief for Hurricane

Katrina to Hurricanes Rita and Wilma.

TITLE II--EXTENSION OF EXPIRING PROVISIONS

Sec. 201. Extension and increase in minimum tax relief to individuals.

Sec. 202. Allowance of nonrefundable personal credits against regular and minimum tax liability.

Sec. 203. Election to deduct State and local sales taxes in lieu of

State and local income taxes.

Sec. 204. Tuition deduction.

Sec. 205. Extension and modification of research credit.

Sec. 206. Extension and modifications to work opportunity credit and welfare-to-work credit.

Sec. 207. Qualified zone academy bonds.

Sec. 208. Deduction for certain expenses of school teachers.

Sec. 209. Tax incentives for investment in the District of Columbia.

Sec. 210. Indian employment tax credit.

Sec. 211. Accelerated depreciation for business property on Indian reservation.

Sec. 212. Extension and expansion of charitable contribution allowed for scientific property used for research and for computer technology and equipment used for educational purposes.

Sec. 213. Expensing of brownfields remediation costs.

Sec. 214. Extension of full credit for qualified electric vehicles.

Sec. 215. Fifteen-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements.

Sec. 216. Application of EGTRRA sunset to this title.

TITLE III--REVENUE PROVISIONS

Subtitle A--Provisions Relating to Tax Shelters

Sec. 301. Clarification of economic substance doctrine.

Sec. 302. Penalty for understatements attributable to transactions lacking economic substance, etc. Sec. 303. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions.

Sec. 304. Modifications of effective dates of leasing provisions of the

American Jobs Creation Act of 2004.

Sec. 305. Revaluation of LIFO inventories of large integrated oil companies.

Sec. 306. Modification of effective date of exception from suspension rules for certain listed and reportable transactions.

Sec. 307. Doubling of certain penalties, fines, and interest on underpayments related to certain offshore financial arrangements.

Sec. 308. Penalty for aiding and abetting the understatement of tax liability.

Subtitle B--Provisions to Close Corporate and Individual Loopholes

Sec. 311. Tax treatment of inverted entities.

Sec. 312. Grant of Treasury regulatory authority to address foreign tax credit transactions involving inappropriate separation of foreign taxes from related foreign income.

Sec. 313. Treatment of contingent payment convertible debt instruments.

Sec. 314. Application of earnings stripping rules to partners which are corporations.

Sec. 315. Denial of deduction for certain fines, penalties, and other amounts.

Sec. 316. Disallowance of deduction for punitive damages.

Sec. 317. Limitation of employer deduction for certain entertainment expenses.

Sec. 318. Imposition of mark-to-market tax on individuals who expatriate.

Sec. 319. Modification of exclusion for citizens living abroad.

Sec. 320. Limitation on annual amounts which may be deferred under nonqualified deferred compensation arrangements.

Sec. 321. Increase in age of minor children whose unearned income is taxed as if parent's income.

Subtitle C--Oil and Gas Provisions

Sec. 331. Extension of superfund taxes.

Sec. 332. Modifications of foreign tax credit rules applicable to dual capacity taxpayers.

Sec. 333. Rules relating to foreign oil and gas income.

Sec. 334. Modification of credit for producing fuel from a nonconventional source.

Sec. 335. Elimination of amortization of geological and geophysical expenditures for major integrated oil companies.

Subtitle D--Tax Administration Provisions

Sec. 341. Imposition of withholding on certain payments made by government entities.

Sec. 342. Increase in certain criminal penalties.

Sec. 343. Repeal of suspension of interest and certain penalties where

Secretary fails to contact taxpayer.

Sec. 344. Increase in penalty for bad checks and money orders.

Sec. 345. Frivolous tax submissions.

Sec. 346. Partial payments required with submission of offers-in-

compromise.

Sec. 347. Waiver of user fee for installment agreements using automated withdrawals.

Sec. 348. Termination of installment agreements.

Subtitle E--Additional Provisions

Sec. 351. Modification of individual estimated tax safe harbor.

Sec. 352. Loan and redemption requirements on pooled financing requirements.

Sec. 353. Reporting of interest on tax-exempt bonds.

TITLE I--TAX BENEFITS FOR AREAS AFFECTED BY HURRICANES KATRINA, RITA,

AND WILMA

Subtitle A--Gulf Recovery Zone Benefits

SEC. 101. GULF RECOVERY ZONE BENEFITS.

(a) In General.--Chapter 1 is amended by adding at the end the following new subchapter:

``Subchapter Z--Hurricane Relief Benefits

``Sec. 1400N. Definitions.

``Sec. 1400O. Tax benefits for Gulf Recovery Zone.

``SEC. 1400N. DEFINITIONS.

``For purposes of this subchapter--

``(1) Gulf recovery zone.--The term `Gulf Recovery Zone' means that portion of the Hurricane Katrina disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina.

``(2) Hurricane katrina disaster area.--The term `Hurricane Katrina disaster area' means an area with respect to which a major disaster has been declared by the President before September 14, 2005, under section 401 of such Act by reason of Hurricane Katrina.

``(3) Rita zone.--The term `Rita Zone' means that portion of the Hurricane Rita disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act by reason of Hurricane Rita.

``(4) Hurricane rita disaster area.--The term `Hurricane Rita disaster area' means an area with respect to which a major disaster has been declared by the President before October 6, 2005, under section 401 of such Act by reason of Hurricane Rita.

``(5) Wilma zone.--The term `Wilma Zone' means that portion of the Hurricane Wilma disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act by reason of Hurricane Wilma.

``(6) Hurricane wilma disaster area.--The term `Hurricane Wilma disaster area' means an area with respect to which a major disaster has been declared by the President before October 25, 2005, under section 401 of such Act by reason of Hurricane Wilma.

``SEC. 1400O. TAX BENEFITS FOR GULF RECOVERY ZONE.

``(a) Special Allowance for Certain Property Acquired After August 27, 2005.--

``(1) Additional allowance.--In the case of any qualified Gulf Recovery Zone property--

``(A) the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 50 percent of the adjusted basis of such property, and

``(B) the adjusted basis of the qualified Gulf Recovery Zone property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.

``(2) Qualified gulf recovery zone property.--For purposes of this subsection--

``(A) In general.--The term `qualified Gulf Recovery Zone property' means property--

``(i)(I) which is described in section 168(k)(2)(A)(i), or

``(II) which is nonresidential real property or residential rental property,

``(ii) substantially all of the use of which is in the Gulf Recovery Zone and is in the active conduct of a trade or business by the taxpayer in such Zone,

``(iii) the original use of which in the Gulf Recovery Zone commences with the taxpayer after August 27, 2005,

``(iv) which is acquired by the taxpayer by purchase (as defined in section 179(d)) after August 27, 2005, but only if no written binding contract for the acquisition was in effect before August 28, 2005, and

``(v) which is placed in service by the taxpayer on or before the termination date.

The term `termination date' means December 31, 2007 (December 31, 2008, in the case of nonresidential real property and residential rental property).

``(B) Exceptions.--

``(i) Alternative depreciation property.--The term

`qualified Gulf Recovery Zone property' shall not include any property described in section 168(k)(2)(D)(i).

``(ii) Tax-exempt bond-financed property.--Such term shall not include any property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103.

``(iii) Qualified revitalization buildings.--Such term shall not include any qualified revitalization building with respect to which the taxpayer has elected the application of paragraph (1) or (2) of section 1400I(a).

``(iv) Election out.--For purposes of this subsection, rules similar to the rules of section 168(k)(2)(D)(iii) shall apply.

``(C) Special rules.--For purposes of this subsection, rules similar to the rules of section 168(k)(2)(E) shall apply, except that--

``(i) clause (i) thereof shall be applied by substituting

`after August 27, 2005, and before the termination date (as defined in section 1400O(a)(2))' for `after September 10, 2001, and before January 1, 2005',

``(ii) clauses (ii), (iii), and (iv) thereof shall be applied by substituting `August 27, 2005' for `September 10, 2001' each place it appears, and

``(iii) clause (iv) thereof shall be applied by substituting `qualified Gulf Recovery Zone property' for

`qualified property'.

``(D) Allowance against alternative minimum tax.--For purposes of this subsection, rules similar to the rules of section 168(k)(2)(G) shall apply.

``(3) Recapture.--For purposes of this subsection, rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified Gulf Recovery Zone property which ceases to be qualified Gulf Recovery Zone property.

``(b) Increase in Expensing Under Section 179.--

``(1) In general.--For purposes of section 179--

``(A) the $100,000 amount in section 179(b)(1) for the taxable year shall be increased by the lesser of--

``(i) $100,000, or

``(ii) the cost of section 179 property (as defined in section 179(d)) which is qualified Gulf Recovery Zone property placed in service during the taxable year, and

``(B) the $400,000 amount in section 179(b)(2) for the taxable year shall be increased by the lesser of--

``(i) $600,000, or

``(ii) the cost of section 179 property (as so defined) which is qualified Gulf Recovery Zone property placed in service during the taxable year.

``(2) Qualified gulf recovery zone property.--For purposes of this subsection, the term `qualified Gulf Recovery Zone property' has the meaning given such term by subsection (a)(2).

``(3) Coordination with empowerment zones and renewal communities.--For purposes of sections 1397A and 1400J, qualified Gulf Recovery Zone property shall not be treated as qualified zone property or qualified renewal property for any taxable year, unless the taxpayer elects not to have this subsection apply to all such qualified Gulf Recovery Zone property placed in service by the taxpayer during the taxable year.

``(4) Recapture.--Rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified Gulf Recovery Zone property which ceases to be Gulf Recovery Zone property.

``(c) Tax-Exempt Bond Financing.--

``(1) In general.--For purposes of this title, any qualified Gulf Recovery Zone Bond shall be treated as a qualified bond.

``(2) Qualified gulf recovery zone bond.--For purposes of this subsection, the term `qualified Gulf Recovery Zone Bond' means any bond issued as part of an issue if--

``(A) except as provided in paragraph (4), such bond meets the applicable requirements of part IV of subchapter B of this chapter,

``(B) such bond is issued by the State of Alabama, Louisiana, or Mississippi (or any political subdivision thereof),

``(C) the Governor of such State designates such bond for purposes of this section, and

``(D) such bond is issued after the date of the enactment of this section and before January 1, 2011.

``(3) Limitation on aggregate amount of bonds designated.--The maximum aggregate face amount of bonds which may be designated under this subsection shall not exceed the product of $2,500 multiplied by the portion of the State population which is in the Gulf Recovery Zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before August 28, 2005).

``(4) Special rules.--In applying this title to any qualified Gulf Recovery Zone Bond, the following modifications shall apply:

``(A) Section 143 (relating to mortgage revenue bonds: qualified mortgage bond and qualified veterans' mortgage bond) shall be applied--

``(i) by treating any residence in the Gulf Recovery Zone as a targeted area residence,

``(ii) by applying subsection (f)(3) without regard to subparagraph (A) thereof, and

``(iii) by substituting `$150,000' for `$15,000' in subsection (k)(4) thereof.

``(B) Section 146 (relating to volume cap) shall not apply.

``(C) Section 57(a)(5) shall not apply.

``(5) Separate issue treatment of portions of an issue.--This subsection shall not apply to the portion of an issue which (if issued as a separate issue) would be treated as a qualified bond or as a bond that is not a private activity bond (determined without regard to paragraph (1)), if the issuer elects to so treat such portion.

``(d) Advance Refundings of Certain Tax-Exempt Bonds.--

``(1) In general.--With respect to a bond described in paragraph (2) issued as part of an issue 90 percent (95 percent in the case of a bond described in paragraph (2)(B)) or more of the net proceeds (as defined in section 150(a)(3)) of which were used to finance facilities located within the Gulf Recovery Zone (or property which is functionally related and subordinate to facilities located within the Gulf Recovery Zone), one additional advanced refunding after the date of the enactment of this section and before January 1, 2007, shall be allowed under the applicable rules of section 149(d) if--

``(A) the chief executive officer of the issuer of the bond designates the advance refunding bond for purposes of this subsection, and

``(B) the requirements of paragraph (3) are met.

``(2) Bonds described.--A bond is described in this paragraph if such bond was outstanding on August 27, 2005, and is--

``(A) a State or local bond (as defined in section 103(c)(1)) other than a private activity bond (as defined in section 141(a)) issued by the State of Alabama, Louisiana, or Mississippi (or any political subdivision thereof), or

``(B) a qualified 501(c)(3) bond (as defined in section 145(a)) issued by or on behalf of any such State or political subdivision.

``(3) Additional requirements.--The requirements of this paragraph are met with respect to any advance refunding of a bond described in paragraph (2) if--

``(A) no advance refundings of such bond would be allowed under any provision of law after August 27, 2005,

``(B) the advance refunding bond is the only other outstanding bond with respect to the refunded bond, and

``(C) the requirements of section 148 are met with respect to all bonds issued under this subsection.

``(e) Low-Income Housing Credit.--

``(1) Increase in state housing credit ceiling.--

``(A) In general.--In the case of the State of Alabama, Louisiana, or Mississippi--

``(i) the amount otherwise determined under subclause (I) of section 42(h)(3)(C)(ii) for each calendar year beginning after 2005 and before 2010 shall be increased by an amount equal to 3 times the dollar amount otherwise specified for such calendar year under such subclause multiplied by the State population located in the Gulf Recovery Zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before August 28, 2005), and

``(ii) the unused State housing credit ceiling for such State for any calendar year under section 42(h)(3)(C)(i) shall be determined without regard to the amount of the increase determined under clause (i).

``(B) Elective carryforward of unused increased ceiling.--

``(i) In general.--If the amount determined under section 42(h)(3)(C)(ii)(I), as increased under subparagraph (A)(i), for any calendar year for any State described in subparagraph

(A) exceeds the aggregate housing credit dollar amount allocated during such calendar year by such State, such State may elect to treat as a carryforward to the following calendar year an amount equal to lesser of--

``(I) the amount of such excess, or

``(II) the amount by which the amount determined under section 42(h)(3)(C)(ii)(I) for such calendar year was increased under subparagraph (A)(i)).

``(ii) Use of carryforward.--If any State elects a carryforward under clause (i), any housing credit dollar amount allocated by such State during the calendar year following the calendar year in which the carryforward arose shall not be considered so allocated for purposes of section 42(h)(3)(C) and section 42(h)(3)(D) to the extent such housing credit dollar amount does not exceed the amount of the carryforward elected.

``(2) Difficult development area.--

``(A) In general.--For purposes of section 42--

``(i) in the case of property placed in service during 2006, 2007, or 2008, the Gulf Recovery Zone--

``(I) shall be treated as a difficult development area designated under subclause (I) of section 42(d)(5)(C)(iii), and

``(II) shall not be taken into account for purposes of applying the limitation under subclause (II) of such section, and

``(ii) subsection (b)(2)(B) thereof shall be applied with respect to any such property placed in service in the Gulf Recovery Zone by substituting `91 percent' and `39 percent' for `70 percent' and `30 percent', respectively.

``(B) Application.--Subparagraph (A) shall apply only to--

``(i) housing credit dollar amounts allocated during the period beginning on January 1, 2006, and ending on December 31, 2008, and

``(ii) buildings placed in service during such period to the extent that paragraph (1) of section 42(h) does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after December 31, 2005.

``(f) Treatment of Representations Regarding Income Eligibility for Purposes of Qualified Residential Rental Project Requirements.--For purposes of determining if any residential rental project meets the requirements of section 142(d)(1) and if any certification with respect to such project meets the requirements under section 142(d)(7), the operator of the project may rely on the representations of any individual applying for tenancy in such project that such individual's income will not exceed the applicable income limits of section 142(d)(1) upon commencement of the individual's tenancy if such tenancy begins during the 6-month period beginning on and after the date such individual was displaced by reason of Hurricane Katrina.

``(g) Application of New Markets Tax Credit to Investments in Community Development Entities Serving Gulf Recovery Zone.--For purposes of section 45D--

``(1) a qualified community development entity shall be eligible for an allocation under subsection (f)(2) thereof of the increase in the new markets tax credit limitation described in paragraph (2) only if a significant mission of such entity is the recovery and redevelopment of the Gulf Recovery Zone,

``(2) the new markets tax credit limitation otherwise determined under subsection (f)(1) thereof shall be increased by an amount equal to--

``(A) $300,000,000 for 2005 and 2006, to be allocated among qualified community development entities to make qualified low-income community investments within the Gulf Recovery Zone, and

``(B) $400,000,000 for 2007, to be so allocated, and

``(3) subsection (f)(3) thereof shall be applied separately with respect to the amount of the increase under paragraph

(2).

``(h) Treatment of Net Operating Losses Attributable to Gulf Recovery Zone Losses.--

``(1) In general.--If a portion of any net operating loss of the taxpayer for any taxable year is a qualified Gulf Recovery Zone loss, the following rules shall apply:

``(A) Extension of carryback period.--Section 172(b)(1) shall be applied with respect to such portion--

``(i) by substituting `5 taxable years' for `2 taxable years' in subparagraph (A)(i), and

``(ii) by not taking such portion into account in determining any eligible loss of the taxpayer under subparagraph (F) for the taxable year.

``(B) Suspension of 90 percent amt limitation.--Section 56(d)(1) shall be applied by increasing the amount determined under subparagraph (A)(ii)(I) thereof by the sum of the carrybacks and carryovers of any net operating loss attributable to such portion.

``(2) Qualified gulf recovery zone loss.--For purposes of paragraph (1), the term `qualified Gulf Recovery Zone loss' means the lesser of--

``(A) the amount of the net operating loss for the taxable year, or

``(B) the aggregate amount of the following deductions for such taxable year:

``(i) Any deduction for any qualified Gulf Recovery Zone casualty loss.

``(ii) Any deduction for moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, and allowable under this chapter to any taxpayer in connection with the employment of any individual--

``(I) whose principal place of abode was located in the Gulf Recovery Zone before August 28, 2005,

``(II) who was unable to remain in such abode as the result of Hurricane Katrina, and

``(III) whose principal place of employment with the taxpayer after such expense is located in the Gulf Recovery Zone.

For purposes of this clause, the term `moving expenses' has the meaning given such term by section 217(b), except that the taxpayer's former residence and new residence may be the same residence if the initial vacating of the residence was as the result of Hurricane Katrina.

``(iii) Any deduction for expenses paid or incurred after August 27, 2005, and before January 1, 2008, and allowable under this chapter to temporarily house any employee of the taxpayer whose principal place of employment is in the Gulf Recovery Zone.

``(iv) Any deduction for depreciation (or amortization in lieu of depreciation) allowable under this chapter with respect to any qualified Gulf Recovery Zone property (as defined in subsection (a)(2)) for the taxable year such property is placed in service.

``(v) Any deduction for repair expenses (including expenses for removal of debris) allowable under this chapter paid or incurred after August 27, 2005, and before January 1, 2008, with respect to any damage attributable to Hurricane Katrina and in connection with property which is located in the Gulf Recovery Zone.

``(3) Qualified gulf recovery zone casualty loss.--

``(A) In general.--For purposes of paragraph (2)(B)(i), the term `qualified Gulf Recovery Zone casualty loss' means any uncompensated section 1231 loss (as defined in section 1231(a)(3)(B)) of property located in the Gulf Recovery Zone if--

``(i) such loss is allowed as a deduction under section 165 for the taxable year, and

``(ii) such loss is attributable to Hurricane Katrina.

``(B) Reduction for gains from involuntary conversion.--The amount of qualified Gulf Recovery Zone casualty loss which would (but for this subparagraph) be taken into account under subparagraph (A) for any taxable year shall be reduced by the amount of any gain recognized by the taxpayer for such year from the involuntary conversion by reason of Hurricane Katrina of property located in the Gulf Recovery Zone.

``(C) Coordination with general disaster loss rules.--Subsection (j) and section 165(i) shall not apply to any qualified Gulf Recovery Zone casualty loss to the extent such loss is taken into account under this subsection.

``(4) Special rules.--For purposes of paragraph (1), rules similar to the rules of paragraphs (2) and (3) of section 172(i) shall apply with respect to such portion.

``(i) Treatment of Public Utility Property Disaster Losses.--

``(1) In general.--Upon the election of the taxpayer, in the case of any eligible public utility property loss--

``(A) section 165(i) shall be applied by substituting `the fifth taxable year immediately preceding' for `the taxable year immediately preceding',

``(B) an application for a tentative carryback adjustment of the tax for any prior taxable year affected by the application of subparagraph (A) may be made under section 6411, and

``(C) section 6611 shall not apply to any overpayment attributable to such loss.

``(2) Eligible public utility property loss.--For purposes of this subsection--

``(A) In general.--The term `eligible public utility property loss' means any loss with respect to public utility property located in the Gulf Recovery Zone and attributable to Hurricane Katrina.

``(B) Public utility property.--The term `public utility property' has the meaning given such term by section 168(i)(10) without regard to the matter following subparagraph (D) thereof.

``(3) Waiver of limitations.--If refund or credit of any overpayment of tax resulting from the application of paragraph (1) is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this section by the operation of any law or rule of law

(including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.

``(j) Special Rule for Gulf Recovery Zone Public Utility Casualty Losses.--

``(1) In general.--The amount described in section 172(f)(1)(A) for any taxable year shall be increased by the amount of the Gulf Recovery Zone public utility casualty loss for such year.

``(2) Gulf recovery zone public utility casualty loss.--For purposes of this subsection, the term `Gulf Recovery Zone public utility casualty loss' means any casualty loss of public utility property (as defined in section 168(i)(10)) located in the Gulf Recovery Zone if--

``(A) such loss is allowed as a deduction under section 165 for the taxable year,

``(B) such loss is attributable to Hurricane Katrina, and

``(C) the taxpayer elects the application of this subsection with respect to such loss.

``(3) Reduction for gains from involuntary conversion.--The amount of Gulf Recovery Zone public utility casualty loss which would (but for this paragraph) be taken into account under paragraph (1) for any taxable year shall be reduced by the amount of any gain recognized by the taxpayer for such year from the involuntary conversion by reason of Hurricane Katrina of public utility property (as so defined) located in the Gulf Recovery Zone.

``(4) Coordination with general disaster loss rules.--Subsection (h) and section 165(i) shall not apply to any Gulf Recovery Zone public utility casualty loss to the extent such loss is taken into account under paragraph (1).

``(5) Election.--Any election under paragraph (2)(C) shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.

``(k) Special Rules for Small Timber Producers.--

``(1) Increased expensing for qualified timber property.--In the case of qualified timber property any portion of which is located in the Gulf Recovery Zone, in that portion of the Rita Zone which is not part of the Gulf Recovery Zone, or in the Wilma Zone, the limitation under subparagraph (B) of section 194(b)(1) shall be increased by the lesser of--

``(A) the limitation which would (but for this subsection) apply under such subparagraph, or

``(B) the amount of reforestation expenditures (as defined in section 194(c)(3)) paid or incurred by the taxpayer with respect to such qualified timber property during the specified portion of the taxable year.

``(2) 5 year nol carryback of certain timber losses.--For purposes of determining farming loss under section 172(i), income and deductions which are allocable to the specified portion of the taxable year and which are attributable to qualified timber property any portion of which is located in the Gulf Recovery Zone, in that portion of the Rita Zone which is not part of the Gulf Recovery Zone, or in the Wilma Zone shall be treated as attributable to farming businesses.

``(3) Rules not applicable to certain entities.--Paragraphs

(1) and (2) shall not apply to any taxpayer which--

``(A) is a corporation the stock of which is publicly traded on an established securities market, or

``(B) is a real estate investment trust.

``(4) Rules not applicable to large timber producers.--Paragraphs (1) and (2) shall not apply with respect to any qualified timber property unless--

``(A) such property was held by the taxpayer--

``(i) on August 28, 2005, in the case of qualified timber property any portion of which is located in the Gulf Recovery Zone,

``(ii) on September 23, 2005, in the case of qualified timber property (other than property described in subclause

(I)) any portion of which is located in that portion of the Rita Zone which is not part of the Gulf Recovery Zone, or

``(iii) on October 23, 2005, in the case of qualified timber property (other than property described in subclause

(I) or (II)) any portion of which is located in the Wilma Zone, and

``(B) such taxpayer held not more than 500 acres of qualified timber property on such date.

``(5) Definitions.--For purposes of this subsection--

``(A) Specified portion.--The term `specified portion' means--

``(i) in the case of qualified timber property located in the Gulf Recovery Zone, that portion of the taxable year which is on or after August 28, 2005, and before January 1, 2007,

``(ii) in the case of qualified timber property located in the Rita Zone and no part of which is located in the Gulf Recovery Zone, that portion of the taxable year which is on or after September 23, 2005, and before January 1, 2007, and

``(iii) in the case of qualified timber property located in the Wilma Zone, that portion of the taxable year which is on or after October 23, 2005, and before January 1, 2007.

``(B) Qualified timber property.--The term `qualified timber property' has the meaning given such term in section 194(c)(1).

``(l) Expensing for Certain Demolition and Clean-up Costs.--

``(1) In general.--A taxpayer may elect to treat 50 percent of any qualified Gulf Recovery Zone clean-up cost as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which such cost is paid or incurred.

``(2) Gulf recovery zone clean-up cost.--For purposes of this subsection, the term `Gulf Recovery Zone clean-up cost' means any amount paid or incurred during the period beginning on August 28, 2005, and ending on December 31, 2007, for the removal of debris from, or the demolition of structures on, real property which is located in the Gulf Recovery Zone and which is--

``(A) held by the taxpayer for use in a trade or business or for the production of income, or

``(B) property described in section 1221(a)(1) in the hands of the taxpayer.

For purposes of the preceding sentence, amounts paid or incurred shall be taken into account only to the extent that such amount would (but for paragraph (1)) be chargeable to capital account.

``(m) Extension of Expensing for Environmental Remediation Costs.--With respect to any qualified environmental remediation expenditure (as defined in section 198(b)) paid or incurred on or after August 28, 2005, in connection with a qualified contaminated site located in the Gulf Recovery Zone, section 198 (relating to expensing of environmental remediation costs) shall be applied--

``(1) by substituting `December 31, 2007' for `December 31, 2006' in subsection (h) thereof, and

``(2) except as provided in section 198(d)(2), by treating petroleum products (as defined in section 4612(a)(3)) as a hazardous substance.

``(n) Gulf Recovery Zone.--For purposes of this section, the term `Gulf Recovery Zone' means an area--

``(1) with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act as a result of Hurricane Katrina, and

``(2) which is determined by the President to warrant individual assistance, or individual and public assistance, from the Federal Government under such Act.''

(b) Clerical Amendments.--The table of subchapters for chapter 1 is amended by adding at the end the following new item:

``Subchapter Z--Hurricane Relief Benefits.''.

SEC. 102. EXPANSION OF HOPE SCHOLARSHIP AND LIFETIME LEARNING

CREDIT FOR STUDENTS IN THE GULF RECOVERY ZONE.

In the case of an individual who attends an eligible educational institution (as defined in section 25A(f)(2) of the Internal Revenue Code of 1986) located in the Gulf Recovery Zone (as defined in section 1400N(1) of such Code) for any taxable year beginning during 2005 or 2006--

(1) in applying section 25A of the Internal Revenue Code of 1986, the term ``qualified tuition and related expenses'' shall include any costs which are qualified higher education expenses (as defined in section 529(e)(3) of such Code),

(2) each of the dollar amounts in effect under of subparagraphs (A) and (B) of section 25A(b)(1) of such Code shall be twice the amount otherwise in effect before the application of this subsection, and

(3) section 25A(c)(1) of such Code shall be applied by substituting ``40 percent'' for ``20 percent''.

SEC. 103. EXTENSION OF SPECIAL RULES FOR MORTGAGE REVENUE

BONDS.

Section 404(d) of the Katrina Emergency Tax Relief Act of 2005 is amended by striking ``December 31, 2007'' and inserting ``December 31, 2010''.

Subtitle B--Tax Benefits Related to Hurricanes Rita and Wilma

SEC. 111. EXTENSION OF CERTAIN EMERGENCY TAX RELIEF FOR

HURRICANE KATRINA TO HURRICANES RITA AND WILMA.

(a) In General.--Subchapter Z of chapter 1, as added by this Act, is amended by adding at the end the following new sections:

``SEC. 1400P. SPECIAL RULES FOR MORTGAGE REVENUE BONDS.

``(a) In General.--In the case of financing provided with respect to residences in the Gulf Recovery Zone, the Rita Zone, or the Wilma Zone, section 143 shall be applied--

``(1) by treating any residence in the Gulf Recovery Zone, the Rita Zone, or the Wilma Zone as a targeted area residence,

``(2) by applying subsection (f)(3) without regard to subparagraph (A) thereof, and

``(3) by substituting `$150,000' for `$15,000' in subsection (k)(4) thereof.

``(b) Application.--Subsection (a) shall not apply to financing provided after December 31, 2010.

``SEC. 1400Q. SPECIAL RULES FOR USE OF RETIREMENT FUNDS.

``(a) Tax-Favored Withdrawals From Retirement Plans.--

``(1) In general.--Section 72(t) shall not apply to any qualified hurricane distribution.

``(2) Aggregate dollar limitation.--

``(A) In general.--For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified hurricane distributions for any taxable year shall not exceed the excess (if any) of--

``(i) $100,000, over

``(ii) the aggregate amounts treated as qualified hurricane distributions received by such individual for all prior taxable years.

``(B) Treatment of plan distributions.--If a distribution to an individual would (without regard to subparagraph (A)) be a qualified hurricane distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified hurricane distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000.

``(C) Controlled group.--For purposes of subparagraph (B), the term `controlled group' means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.

``(3) Amount distributed may be repaid.--

``(A) In general.--Any individual who receives a qualified hurricane distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be.

``(B) Treatment of repayments of distributions from eligible retirement plans other than iras.--For purposes of this title, if a contribution is made pursuant to subparagraph (A) with respect to a qualified hurricane distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified hurricane distribution in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

``(C) Treatment of repayments for distributions from iras.--For purposes of this title, if a contribution is made pursuant to subparagraph (A) with respect to a qualified hurricane distribution from an individual retirement plan (as defined by section 7701(a)(37)), then, to the extent of the amount of the contribution, the qualified hurricane distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

``(4) Definitions.--For purposes of this subsection--

``(A) Qualified hurricane distribution.--Except as provided in paragraph (2), the term `qualified hurricane distribution' means--

``(i) any distribution from an eligible retirement plan made on or after August 25, 2005, and before January 1, 2007, to an individual whose principal place of abode on August 28, 2005, is located in the Hurricane Katrina disaster area and who has sustained an economic loss by reason of Hurricane Katrina,

``(ii) any distribution (which is not described in clause

(i)) from an eligible retirement plan made on or after September 23, 2005, and before January 1, 2007, to an individual whose principal place of abode on September 23, 2005, is located in the Hurricane Rita disaster area and who has sustained an economic loss by reason of Hurricane Rita, and

``(iii) any distribution (which is not described in clause

(i) or (ii)) from an eligible retirement plan made on or after October 23, 2005, and before January 1, 2007, to an individual whose principal place of abode on October 23, 2005, is located in the Hurricane Wilma disaster area and who has sustained an economic loss by reason of Hurricane Wilma.

``(B) Eligible retirement plan.--The term `eligible retirement plan' shall have the meaning given such term by section 402(c)(8)(B).

``(5) Income inclusion spread over 3-year period.--

``(A) In general.--In the case of any qualified hurricane distribution, unless the taxpayer elects not to have this paragraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable year period beginning with such taxable year.

``(B) Special rule.--For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) shall apply.

``(6) Special rules.--

``(A) Exemption of distributions from trustee to trustee transfer and withholding rules.--For purposes of sections 401(a)(31), 402(f), and 3405, qualified hurricane distributions shall not be treated as eligible rollover distributions.

``(B) Qualified hurricane distributions treated as meeting plan distribution requirements.--For purposes this title, a qualified hurricane distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A).

``(b) Recontributions of Withdrawals for Home Purchases.--

``(1) Recontributions.--

``(A) In general.--Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B)) of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), as the case may be.

``(B) Treatment of repayments.--Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(3) shall apply for purposes of this subsection.

``(2) Qualified distribution.--For purposes of this subsection--

``(A) In general.--The term `qualified distribution' means any qualified Katrina distribution, any qualified Rita distribution, and any qualified Wilma distribution.

``(B) Qualified katrina distribution.--The term `qualified Katrina distribution' means any distribution--

``(i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F),

``(ii) received after February 28, 2005, and before August 29, 2005, and

``(iii) which was to be used to purchase or construct a principal residence in the Hurricane Katrina disaster area, but which was not so purchased or constructed on account of Hurricane Katrina.

``(C) Qualified rita distribution.--The term `qualified Rita distribution' means any distribution (other than a qualified Katrina distribution)--

``(i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F),

``(ii) received after February 28, 2005, and before September 24, 2005, and

``(iii) which was to be used to purchase or construct a principal residence in the Hurricane Rita disaster area, but which was not so purchased or constructed on account of Hurricane Rita.

``(D) Qualified wilma distribution.--The term `qualified Wilma distribution' means any distribution (other than a qualified Katrina distribution or a qualified Rita distribution)--

``(i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F),

``(ii) received after February 28, 2005, and before October 24, 2005, and

``(iii) which was to be used to purchase or construct a principal residence in the Hurricane Wilma disaster area, but which was not so purchased or constructed on account of Hurricane Wilma.

``(3) Applicable period.--For purposes of this subsection, the term `applicable period' means--

``(A) with respect to any qualified Katrina distribution, the period beginning on August 25, 2005, and ending on February 28, 2006,

``(B) with respect to any qualified Rita distribution, the period beginning on September 23, 2005, and ending on February 28, 2006, and

``(C) with respect to any qualified Wilma distribution, the period beginning on October 23, 2005, and ending on February 28, 2006.

``(c) Loans From Qualified Plans.--

``(1) Increase in limit on loans not treated as distributions.--In the case of any loan from a qualified employer plan (as defined under section 72(p)(4)) to a qualified individual made during the applicable period--

``(A) clause (i) of section 72(p)(2)(A) shall be applied by substituting `$100,000' for `$50,000', and

``(B) clause (ii) of such section shall be applied by substituting `the present value of the nonforfeitable accrued benefit of the employee under the plan' for `one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan'.

``(2) Delay of repayment.--In the case of a qualified individual with an outstanding loan on or after the qualified beginning date from a qualified employer plan (as defined in section 72(p)(4))--

``(A) if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) for any repayment with respect to such loan occurs during the period beginning on the qualified beginning date and ending on December 31, 2006, such due date shall be delayed for 1 year,

``(B) any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under paragraph (1) and any interest accruing during such delay, and

``(C) in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2), the period described in subparagraph (A) shall be disregarded.

``(3) Qualified individual.--For purposes of this subsection--

``(A) In general.--The term `qualified individual' means any qualified Hurricane Katrina individual, any qualified Hurricane Rita individual, and any qualified Hurricane Wilma individual.

``(B) Qualified hurricane katrina individual.--The term

`qualified Hurricane Katrina individual' means an individual whose principal place of abode on August 28, 2005, is located in the Hurricane Katrina disaster area and who has sustained an economic loss by reason of Hurricane Katrina.

``(C) Qualified hurricane rita individual.--The term

`qualified Hurricane Rita individual' means an individual

(other than a qualified Hurricane Katrina individual) whose principal place of abode on September 23, 2005, is located in the Hurricane Rita disaster area and who has sustained an economic loss by reason of Hurricane Rita.

``(D) Qualified hurricane wilma individual.--The term

`qualified Hurricane Wilma individual' means an individual

(other than a qualified Hurricane Katrina individual or a qualified Hurricane Rita individual) whose principal place of abode on October 23, 2005, is located in the Hurricane Wilma disaster area and who has sustained an economic loss by reason of Hurricane Wilma.

``(4) Applicable period; qualified beginning date.--For purposes of this subsection--

``(A) Hurricane katrina.--In the case of any qualified Hurricane Katrina individual--

``(i) the applicable period is the period beginning on September 24, 2005, and ending on December 31, 2006, and

``(ii) the qualified beginning date is August 25, 2005.

``(B) Hurricane rita.--In the case of any qualified Hurricane Rita individual--

``(i) the applicable period is the period beginning on the date of the enactment of this subsection and ending on December 31, 2006, and

``(ii) the qualified beginning date is September 23, 2005.

``(C) Hurricane wilma.--In the case of any qualified Hurricane Wilma individual--

``(i) the applicable period is the period beginning on the date of the enactment of this subsection and ending on December 31, 2006, and

``(ii) the qualified beginning date is October 23, 2005.

``SEC. 1400R. EMPLOYMENT RELIEF.

``(a) Employee Retention Credit for Employers Affected by Hurricane Katrina.--

``(1) In general.--For purposes of section 38, in the case of an eligible employer, the Hurricane Katrina employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.

``(2) Definitions.--For purposes of this subsection--

``(A) Eligible employer.--The term `eligible employer' means any employer--

``(i) which conducted an active trade or business on August 28, 2005, in the Gulf Recovery Zone, and

``(ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after August 28, 2005, and before January 1, 2006, as a result of damage sustained by reason of Hurricane Katrina.

``(B) Eligible employee.--The term `eligible employee' means with respect to an eligible employer an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the Gulf Recovery Zone.

``(C) Qualified wages.--The term `qualified wages' means wages (as defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid or incurred by an eligible employer with respect to an eligible employee on any day after August 28, 2005, and before January 1, 2006, which occurs during the period--

``(i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Katrina, and

``(ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment.

Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.

``(3) Certain rules to apply.--For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a) shall apply.

``(4) Employee not taken into account more than once.--An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 with respect to such employee for such period.

``(b) Employee Retention Credit for Employers Affected by Hurricane Rita.--

``(1) In general.--For purposes of section 38, in the case of an eligible employer, the Hurricane Rita employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.

``(2) Definitions.--For purposes of this subsection--

``(A) Eligible employer.--The term `eligible employer' means any employer--

``(i) which conducted an active trade or business on September 23, 2005, in the Rita Zone, and

``(ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after September 23, 2005, and before January 1, 2006, as a result of damage sustained by reason of Hurricane Rita.

``(B) Eligible employee.--The term `eligible employee' means with respect to an eligible employer an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita Zone.

``(C) Qualified wages.--The term `qualified wages' means wages (as defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid or incurred by an eligible employer with respect to an eligible employee on any day after September 23, 2005, and before January 1, 2006, which occurs during the period--

``(ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment.

``(3) Certain rules to apply.--For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a) shall apply.

``(4) Employee not taken into account more than once.--An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under subsection (a) or section 51 with respect to such employee for such period.

``(c) Employee Retention Credit for Employers Affected by Hurricane Wilma.--

``(1) In general.--For purposes of section 38, in the case of an eligible employer, the Hurricane Wilma employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.

``(2) Definitions.--For purposes of this subsection--

``(A) Eligible employer.--The term `eligible employer' means any employer--

``(i) which conducted an active trade or business on October 23, 2005, in the Wilma Zone, and

``(ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after October 23, 2005, and before January 1, 2006, as a result of damage sustained by reason of Hurricane Wilma.

``(B) Eligible employee.--The term `eligible employee' means with respect to an eligible employer an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma Zone.

``(C) Qualified wages.--The term `qualified wages' means wages (as defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid or incurred by an eligible employer with respect to an eligible employee on any day after October 23, 2005, and before January 1, 2006, which occurs during the period--

``(ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment.

``(3) Certain rules to apply.--For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a) shall apply.

``(4) Employee not taken into account more than once.--An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under subsection (a) or section 51 with respect to such employee for such period.

``SEC. 1400S. ADDITIONAL TAX RELIEF PROVISIONS.

``(a) Temporary Suspension of Limitations on Charitable Contributions.--

``(1) In general.--Except as otherwise provided in paragraph (2), section 170(b) shall not apply to qualified contributions and such contributions shall not be taken into account for purposes of applying subsections (b) and (d) of section 170 to other contributions.

``(2) Treatment of excess contributions.--For purposes of section 170--

``(A) Individuals.--In the case of an individual--

``(i) Limitation.--Any qualified contribution shall be allowed only to the extent that the aggregate of such contributions does not exceed the excess of the taxpayer's contribution base (as defined in subparagraph (F) of section 170(b)(1)) over the amount of all other charitable contributions allowed under section 170(b)(1).

``(ii) Carryover.--If the aggregate amount of qualified contributions made in the contribution year (within the meaning of section 170(d)(1)) exceeds the limitation of clause (i), such excess shall be added to the excess described in the portion of subparagraph (A) of such section which precedes clause (i) thereof for purposes of applying such section.

``(B) Corporations.--In the case of a corporation--

``(i) Limitation.--Any qualified contribution shall be allowed only to the extent that the aggregate of such contributions does not exceed the excess of the taxpayer's taxable income (as determined under paragraph (2) of section 170(b)) over the amount of all other charitable contributions allowed under such paragraph.

``(ii) Carryover.--Rules similar to the rules of subparagraph (A)(ii) shall apply for purposes of this subparagraph.

``(3) Exception to overall limitation on itemized deductions.--So much of any deduction allowed under section 170 as does not exceed the qualified contributions paid during the taxable year shall not be treated as an itemized deduction for purposes of section 68.

``(4) Qualified contributions.--

``(A) In general.--For purposes of this subsection, the term `qualified contribution' means any charitable contribution (as defined in section 170(c)) if--

``(i) such contribution is paid during the period beginning on August 28, 2005, and ending on December 31, 2005, in cash to an organization described in section 170(b)(1)(A) (other than an organization described in section 509(a)(3)),

``(ii) in the case of a contribution paid by a corporation, such contribution is for relief efforts related to Hurricane Katrina, Hurricane Rita, or Hurricane Wilma, and

``(iii) the taxpayer has elected the application of this subsection with respect to such contribution.

``(B) Exception.--Such term shall not include a contribution if the contribution is for establishment of a new, or maintenance in an existing, segregated fund or account with respect to which the donor (or any person appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect to distributions or investments by reason of the donor's status as a donor.

``(C) Application of election to partnerships and s corporations.--In the case of a partnership or S corporation, the election under subparagraph (A)(iii) shall be made separately by each partner or shareholder.

``(b) Suspension of Certain Limitations on Personal Casualty Losses.--Paragraphs (1) and (2)(A) of section 165(h) shall not apply to losses described in section 165(c)(3)--

``(1) which arise in the Hurricane Katrina disaster area on or after August 25, 2005, and which are attributable to Hurricane Katrina,

``(2) which arise in the Hurricane Rita disaster area on or after September 23, 2005, and which are attributable to Hurricane Rita, or

``(3) which arise in the Hurricane Wilma disaster area on or after October 23, 2005, and which are attributable to Hurricane Wilma.

In the case of any other losses, section 165(h)(2)(A) shall be applied without regard to the losses referred to in the preceding sentence.''.

(b) Conforming Amendments.--

(1) Subsection (b) of section 38 is amended by striking

``and'' at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting a comma, and by adding at the end the following new paragraphs:

``(27) the Hurricane Katrina employee retention credit determined under section 1400R(a),

``(28) the Hurricane Rita employee retention credit determined under section 1400R(b), and

``(29) the Hurricane Wilma employee retention credit determined under section 1400R(c).''.

(2) The table of sections for subchapter Z of chapter 1 is amended by adding at the end the following new items:

``Sec. 1400P. Special rules for mortgage revenue bonds.

``Sec. 1400Q. Special rules for use of retirement funds.

``Sec. 140RQ. Employment relief.

``Sec. 1400S. Additional tax relief provisions.''.

(3) The following provisions of the Katrina Emergency Tax Relief Act of 2005 are hereby repealed:

(A) Title I.

(B) Sections 202, 301, and 402.

TITLE II--EXTENSION OF EXPIRING PROVISIONS

SEC. 201. EXTENSION AND INCREASE IN MINIMUM TAX RELIEF TO

INDIVIDUALS.

(a) In General.--Section 55(d)(1) is amended--

(1) by striking ``$58,000'' and all that follows through

``2005'' in subparagraph (A) and inserting ``$62,550 in the case of taxable years beginning in 2006'', and

(2) by striking ``$40,250'' and all that follows through

``2005'' in subparagraph (B) and inserting ``$42,500 in the case of taxable years beginning in 2006''.

(b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 202. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST

REGULAR AND MINIMUM TAX LIABILITY.

(a) In General.--Paragraph (2) of section 26(a) is amended--

(1) by striking ``2005'' in the heading and inserting

``2006'', and

(2) by striking ``or 2005'' and inserting ``2005, or 2006''.

(b) Conforming Provisions.--

(1) Section 30B(g) is amended by adding at the end the following new paragraph:

``(3) Special rule for 2006.--For purposes of any taxable year beginning during 2006, the credit allowed under subsection (a) (after the application of paragraph (1)) shall not exceed the excess of--

``(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

``(B) the sum of the credits allowable under subpart A and this subpart (other than this section and section 30C).''.

(2) Section 30C(d) is amended by adding at the end the following new paragraph:

``(3) Special rule for 2006.--For purposes of any taxable year beginning during 2006, the credit allowed under subsection (a) (after the application of paragraph (1)) shall not exceed the excess of--

``(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

``(B) the sum of the credits allowable under subpart A and this subpart (other than this section).''.

(3) Section 904(h) is amended by striking ``or 2005'' and inserting ``2005, or 2006''.

(4) The amendments made by sections 201(b), 202(f), and 618(b) of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to taxable years beginning during 2006.

SEC. 203. ELECTION TO DEDUCT STATE AND LOCAL SALES TAXES IN

LIEU OF STATE AND LOCAL INCOME TAXES.

Section 164(b)(5)(I) is amended by striking ``2006'' and inserting ``2007''.

SEC. 204. TUITION DEDUCTION.

(a) In General.--Section 222(e) is amended by striking

``2005'' and inserting ``2006''.

(b) Conforming Amendments.--Section 222(b)(2)(B) is amended--

(1) by striking ``a taxable year beginning in 2004 or 2005'' and inserting ``any taxable year beginning after 2003'', and

(2) by striking ``2004 and 2005'' and inserting ``After 2003''.

SEC. 205. EXTENSION AND MODIFICATION OF RESEARCH CREDIT.

(a) Extension.--

(1) In general.--Section 41(h)(1)(B) is amended by striking

``2005'' and inserting ``2006''.

(2) Conforming amendment.--Section 45C(b)(1)(D) is amended by striking ``2005'' and inserting ``2006''.

(b) Increase in Rates of Alternative Incremental Credit.--

(1) In general.--Subparagraph (A) of section 41(c)(4)

(relating to election of alternative incremental credit) is amended--

(A) by striking ``2.65 percent'' and inserting ``3 percent'',

(B) by striking ``3.2 percent'' and inserting ``4 percent'', and

(2) Effective date.--The amendments made by this subsection shall apply to taxable years ending after the date of the enactment of this Act.

(1) In general.--Subsection (c) of section 41 (relating to base amount) is amended by redesignating paragraphs (5) and

(6) as paragraphs (6) and (7), respectively, and by inserting after paragraph (4) the following new paragraph:

``(5) Election of alternative simplified credit.--

``(A) In general.--At the election of the taxpayer, the credit determined under subsection (a)(1) shall be equal to 12 percent of so much of the qualified research expenses for the taxable year as exceeds 50 percent of the average qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined.

``(B) Special rule in case of no qualified research expenses in any of 3 preceding taxable years.--

``(i) Taxpayers to which subparagraph applies.--The credit under this paragraph shall be determined under this subparagraph if the taxpayer has no qualified research expenses in any 1 of the 3 taxable years preceding the taxable year for which the credit is being determined.

``(ii) Credit rate.--The credit determined under this subparagraph shall be equal to 6 percent of the qualified research expenses for the taxable year.

``(C) Election.--An election under this paragraph shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Secretary. An election under this paragraph may not be made for any taxable year to which an election under paragraph (4) applies.''.

(2) Coordination with election of alternative incremental credit.--

(A) In general.--Section 41(c)(4)(B) (relating to election) is amended by adding at the end the following: ``An election under this paragraph may not be made for any taxable year to which an election under paragraph (5) applies.''.

(B) Transition rule.--In the case of an election under section 41(c)(4) of the Internal Revenue Code of 1986 which applies to the taxable year which includes the date of the enactment of this Act, such election shall be treated as revoked with the consent of the Secretary of the Treasury if the taxpayer makes an election under section 41(c)(5) of such Code (as added by subsection (a)) for such year.

(3) Effective date.--The amendments made by this subsection shall apply to taxable years ending after the date of the enactment of this Act.

(d) Expansion of Credit to Expenses of General Collaborative Research Consortia.--

(1) In general.--Section 41 is amended--

(A) by striking ``an energy research consortium'' in subsections (a)(3) and (b)(3)(C)(i) and inserting ``a research consortium'',

(B) by striking ``energy'' each place it appears in subsection (f)(6)(A),

(D) by striking ``Energy research'' in the heading for subsection (f)(6)(A) and inserting ``Research'' .

(2) Effective date.--The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act, in taxable years ending after such date.

SEC. 206. EXTENSION AND MODIFICATIONS TO WORK OPPORTUNITY

CREDIT AND WELFARE-TO-WORK CREDIT.

(a) In General.--Section 51(c)(4)(B) is amended by striking

``2005'' and inserting ``2006''.

(b) Eligibility of Ex-Felons Determined Without Regard to Family Income.--Paragraph (4) of section 51(d) is amended by adding ``and'' at the end of subparagraph (A), by striking

``, and'' at the end of subparagraph (B) and inserting a period, and by striking all that follows subparagraph (B).

(c) Increase in Maximum Age for Eligibility of Food Stamp Recipients.--Clause (i) of section 51(d)(8)(A) is amended by striking ``25'' and inserting ``40''.

(d) Increase in Maximum Age for Designated Community Residents.--

(1) In general.--Paragraph (5) of section 51(d) is amended to read as follows:

``(5) Designated community residents.--

``(A) In general.--The term `designated community resident' means any individual who is certified by the designated local agency--

``(i) as having attained age 18 but not age 40 on the hiring date, and

``(ii) as having his principal place of abode within an empowerment zone, enterprise community, or renewal community.

``(B) Individual must continue to reside in zone or community.--In the case of a designated community resident, the term `qualified wages' shall not include wages paid or incurred for services performed while the individual's principal place of abode is outside an empowerment zone, enterprise community, or renewal community.''

(2) Conforming amendment.--Subparagraph (D) of section 51(d)(1) is amended to read as follows:

``(D) a designated community resident,''.

(e) Consolidation of Work Opportunity Credit With Welfare-to-Work Credit.--

(1) In general.--Paragraph (1) of section 51(d) is amended by striking ``or'' at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting ``, or'', and by adding at the end the following new subparagraph:

``(I) a long-term family assistance recipient.''

(2) Long-term family assistance recipient.--Subsection (d) of section 51 is amended by redesignating paragraphs (10) through (12) as paragraphs (11) through (13), respectively, and by inserting after paragraph (9) the following new paragraph:

``(10) Long-term family assistance recipient.--The term

`long-term family assistance recipient' means any individual who is certified by the designated local agency--

``(A) as being a member of a family receiving assistance under a IV-A program (as defined in paragraph (2)(B)) for at least the 18-month period ending on the hiring date,

``(B)(i) as being a member of a family receiving such assistance for 18 months beginning after August 5, 1997, and

``(ii) as having a hiring date which is not more than 2 years after the end of the earliest such 18-month period, or

``(C)(i) as being a member of a family which ceased to be eligible for such assistance by reason of any limitation imposed by Federal or State law on the maximum period such assistance is payable to a family, and

``(ii) as having a hiring date which is not more than 2 years after the date of such cessation.''

(3) Increased credit for employment of long-term family assistance recipients.--Section 51 is amended by inserting after subsection (d) the following new subsection:

``(e) Credit for Second-Year Wages for Employment of Long-Term Family Assistance Recipients.--

``(1) In general.--With respect to the employment of a long-term family assistance recipient--

``(A) the amount of the work opportunity credit determined under this section for the taxable year shall include 50 percent of the qualified second-year wages for such year, and

``(B) in lieu of applying subsection (b)(3), the amount of the qualified first-year wages, and the amount of qualified second-year wages, which may be taken into account with respect to such a recipient shall not exceed $10,000 per year.

``(2) Qualified second-year wages.--For purposes of this subsection, the term `qualified second-year wages' means qualified wages--

``(A) which are paid to a long-term family assistance recipient, and

``(B) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such recipient determined under subsection (b)(2).

``(3) Special rules for agricultural and railway labor.--If such recipient is an employee to whom subparagraph (A) or (B) of subsection (h)(1) applies, rules similar to the rules of such subparagraphs shall apply except that--

``(A) such subparagraph (A) shall be applied by substituting `$10,000' for `$6,000', and

``(B) such subparagraph (B) shall be applied by substituting `$833.33' for `$500'.''

(4) Repeal of separate welfare-to-work credit.--

(A) In general.--Section 51A is hereby repealed.

(B) Clerical amendment.--The table of sections for subpart F of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 51A.

(f) Effective Date.--The amendments made by this section shall apply to individuals who begin work for the employer after December 31, 2005.

SEC. 207. QUALIFIED ZONE ACADEMY BONDS.

Paragraph (1) of section 1397E(e) is amended by striking

``and 2005'' and inserting ``2005, and 2006''.

SEC. 208. DEDUCTION FOR CERTAIN EXPENSES OF SCHOOL TEACHERS.

Subparagraph (D) of section 62(a)(2) is amended by striking

``or 2005'' and inserting ``2005, or 2006''.

SEC. 209. TAX INCENTIVES FOR INVESTMENT IN THE DISTRICT OF

COLUMBIA.

(a) Designation of Zone.--Subsection (f) of section 1400 is amended by striking ``2005'' both places it appears and inserting ``2006''.

(b) Tax-Exempt Economic Development Bonds.--Subsection (b) of section 1400A is amended by striking ``2005'' and inserting ``2006''.

(1) In general.--Subsection (b) of section 1400B is amended by striking ``2006'' each place it appears and inserting

``2007''.

(2) Conforming amendments.--

(A) Section 1400B(e)(2) is amended--

(i) by striking ``2010'' and inserting ``2011'', and

(ii) by striking ``2010'' in the heading and inserting

``2011''.

(B) Section 1400B(g)(2) is amended by striking ``2010'' and inserting ``2011''.

(d) First-Time Homebuyer Credit.--Subsection (i) of section 1400C is amended by striking ``2006'' and inserting ``2007''.

SEC. 210. INDIAN EMPLOYMENT TAX CREDIT.

Section 45A(f) is amended by striking ``2005'' and inserting ``2006''.

SEC. 211. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON

INDIAN RESERVATION.

Section 168(j)(8) is amended by striking ``2005'' and inserting ``2006''.

SEC. 212. EXTENSION AND EXPANSION OF CHARITABLE CONTRIBUTION

ALLOWED FOR SCIENTIFIC PROPERTY USED FOR

RESEARCH AND FOR COMPUTER TECHNOLOGY AND

EQUIPMENT USED FOR EDUCATIONAL PURPOSES.

(a) Scientific Property Used for Research.--

(1) In general.--Clause (ii) of section 170(e)(4)(B)

(defining qualified research contributions) is amended by inserting ``or assembled'' after ``constructed''.

(2) Conforming amendment.--Clause (iii) of section 170(e)(4)(B) is amended by inserting ``or assembling'' after

``construction''.

(b) Computer Technology and Equipment for Educational Purposes.--

(1) In general.--Clause (ii) of section 170(e)(6)(B) is amended by inserting ``or assembled'' after ``constructed'' and ``or assembling'' after ``construction''.

(2) Special rule extended.--Section 170(e)(6)(G) is amended by striking ``2005'' and inserting ``2006''.

(3) Conforming amendments.--Subparagraph (D) of section 170(e)(6) is amended by inserting ``or assembled'' after

``constructed'' and ``or assembling'' after ``construction''.

SEC. 213. EXPENSING OF BROWNFIELDS REMEDIATION COSTS.

(a) Extension.--Subsection (h) of section 198 is amended by striking ``2005'' and inserting ``2006''.

(b) Expansion.--

(1) In general.--Section 198(d)(1) (defining hazardous substance) is amended by striking ``and'' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ``, and'', and by adding at the end the following new subparagraph:

``(C) any petroleum product (as defined in section 4612(a)(3)).''.

(2) Effective date.--The amendments made by this subsection shall apply to expenditures paid or incurred after December 31, 2005.

SEC. 214. EXTENSION OF FULL CREDIT FOR QUALIFIED ELECTRIC

VEHICLES.

(a) In General.--Section 30(b) (relating to limitations) is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2).

SEC. 215. FIFTEEN-YEAR STRAIGHT-LINE COST RECOVERY FOR

QUALIFIED LEASEHOLD IMPROVEMENTS AND QUALIFIED

RESTAURANT IMPROVEMENTS.

Clauses (iv) and (v) of section 168(e)(3)(E) are each amended by striking ``2006'' and inserting ``2007''.

SEC. 216. APPLICATION OF EGTRRA SUNSET TO THIS TITLE.

Each amendment made by this title shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 to the same extent and in the same manner as the provision of such Act to which such amendment relates.

TITLE III--REVENUE PROVISIONS

Subtitle A--Provisions Relating to Tax Shelters

SEC. 301. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

(a) In General.--Section 7701 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

``(o) Clarification of Economic Substance Doctrine; Etc.--

``(1) General rules.--

``(A) In general.--In any case in which a court determines that the economic substance doctrine is relevant for purposes of this title to a transaction (or series of transactions), such transaction (or series of transactions) shall have economic substance only if the requirements of this paragraph are met.

``(B) Definition of economic substance.--For purposes of subparagraph (A)--

``(i) In general.--A transaction has economic substance only if--

``(I) the transaction changes in a meaningful way (apart from Federal tax effects) the taxpayer's economic position, and

``(II) the taxpayer has a substantial nontax purpose for entering into such transaction and the transaction is a reasonable means of accomplishing such purpose.

In applying subclause (II), a purpose of achieving a financial accounting benefit shall not be taken into account in determining whether a transaction has a substantial nontax purpose if the origin of such financial accounting benefit is a reduction of income tax.

``(ii) Special rule where taxpayer relies on profit potential.--A transaction shall not be treated as having economic substance by reason of having a potential for profit unless--

``(I) the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected, and

``(II) the reasonably expected pre-tax profit from the transaction exceeds a risk-free rate of return.

``(C) Treatment of fees and foreign taxes.--Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (B)(ii).

``(2) Special rules for transactions with tax-indifferent parties.--

``(A) Special rules for financing transactions.--The form of a transaction which is in substance the borrowing of money or the acquisition of financial capital directly or indirectly from a tax-indifferent party shall not be respected if the present value of the deductions to be claimed with respect to the transaction is substantially in excess of the present value of the anticipated economic returns of the person lending the money or providing the financial capital. A public offering shall be treated as a borrowing, or an acquisition of financial capital, from a tax-indifferent party if it is reasonably expected that at least 50 percent of the offering will be placed with tax-indifferent parties.

``(B) Artificial income shifting and basis adjustments.--The form of a transaction with a tax-indifferent party shall not be respected if--

``(i) it results in an allocation of income or gain to the tax-indifferent party in excess of such party's economic income or gain, or

``(ii) it results in a basis adjustment or shifting of basis on account of overstating the income or gain of the tax-indifferent party.

``(3) Definitions and special rules.--For purposes of this subsection--

``(A) Economic substance doctrine.--The term `economic substance doctrine' means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.

``(B) Tax-indifferent party.--The term `tax-indifferent party' means any person or entity not subject to tax imposed by subtitle A. A person shall be treated as a tax-indifferent party with respect to a transaction if the items taken into account with respect to the transaction have no substantial impact on such person's liability under subtitle A.

``(C) Exception for personal transactions of individuals.--In the case of an individual, this subsection shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.

``(D) Treatment of lessors.--In applying paragraph

(1)(B)(ii) to the lessor of tangible property subject to a lease--

``(i) the expected net tax benefits with respect to the leased property shall not include the benefits of--

``(I) depreciation,

``(II) any tax credit, or

``(III) any other deduction as provided in guidance by the Secretary, and

``(ii) subclause (II) of paragraph (1)(B)(ii) shall be disregarded in determining whether any of such benefits are allowable.

``(4) Other common law doctrines not affected.--Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.

``(5) Regulations.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations may include exemptions from the application of this subsection.''.

(b) Effective Date.--The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

SEC. 302. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO

TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

(a) In General.--Subchapter A of chapter 68 is amended by inserting after section 6662A the following new section:

``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO

TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

``(a) Imposition of Penalty.--If a taxpayer has an noneconomic substance transaction understatement for any taxable year, there shall be added to the tax an amount equal to 40 percent of the amount of such understatement.

``(b) Reduction of Penalty for Disclosed Transactions.--Subsection (a) shall be applied by substituting `20 percent' for `40 percent' with respect to the portion of any noneconomic substance transaction understatement with respect to which the relevant facts affecting the tax treatment of the item are adequately disclosed in the return or a statement attached to the return.

``(c) Noneconomic Substance Transaction Understatement.--For purposes of this section--

``(1) In general.--The term `noneconomic substance transaction understatement' means any amount which would be an understatement under section 6662A(b)(1) if section 6662A were applied by taking into account items attributable to noneconomic substance transactions rather than items to which section 6662A would apply without regard to this paragraph.

``(2) Noneconomic substance transaction.--The term

`noneconomic substance transaction' means any transaction if--

``(A) there is a lack of economic substance (within the meaning of section 7701(o)(1)) for the transaction giving rise to the claimed benefit or the transaction was not respected under section 7701(o)(2), or

``(B) the transaction fails to meet the requirements of any similar rule of law.

``(d) Rules Applicable to Compromise of Penalty.--

``(1) In general.--If the 1st letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals has been sent with respect to a penalty to which this section applies, only the Commissioner of Internal Revenue may compromise all or any portion of such penalty.

``(2) Applicable rules.--The rules of paragraphs (2) and

(3) of section 6707A(d) shall apply for purposes of paragraph

(1).

``(e) Coordination With Other Penalties.--Except as otherwise provided in this part, the penalty imposed by this section shall be in addition to any other penalty imposed by this title.

``(f) Cross References.--

``(1) For coordination of penalty with understatements under section

6662 and other special rules, see section 6662A(e)

``(2) For reporting of penalty imposed under this section to the

Securities and Exchange Commission, see section

6707A(e)''.

(b) Coordination With Other Understatements and Penalties.--

(1) The second sentence of section 6662(d)(2)(A) is amended by inserting ``and without regard to items with respect to which a penalty is imposed by section 6662B'' before the period at the end.

(2) Subsection (e) of section 6662A is amended--

(A) in paragraph (1), by inserting ``and noneconomic substance transaction understatements'' after ``reportable transaction understatements'' both places it appears,

(B) in paragraph (2)(A), by inserting ``and a noneconomic substance transaction understatement'' after ``reportable transaction understatement'',

``6663'',

(D) in paragraph (2)(C)(i), by inserting ``or section 6662B'' before the period at the end,

(E) in paragraph (2)(C)(ii), by inserting ``and section 6662B'' after ``This section'',

(F) in paragraph (3), by inserting ``or noneconomic substance transaction understatement'' after ``reportable transaction understatement'', and

(G) by adding at the end the following new paragraph:

``(4) Noneconomic substance transaction understatement.--For purposes of this subsection, the term `noneconomic substance transaction understatement' has the meaning given such term by section 6662B(c).''.

(3) Subsection (e) of section 6707A is amended--

(A) by striking ``or'' at the end of subparagraph (B), and

(B) by striking subparagraph (C) and inserting the following new subparagraphs:

``(C) is required to pay a penalty under section 6662B with respect to any noneconomic substance transaction, or

``(D) is required to pay a penalty under section 6662(h) with respect to any transaction and would (but for section 6662A(e)(2)(C)) have been subject to penalty under section 6662A at a rate prescribed under section 6662A(c) or under section 6662B,''.

(c) Clerical Amendment.--The table of sections for part II of subchapter A of chapter 68 is amended by inserting after the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions lacking economic substance, etc.''.

(d) Effective Date.--The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

SEC. 303. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS

ATTRIBUTABLE TO NONECONOMIC SUBSTANCE

TRANSACTIONS.

(a) In General.--Section 163(m) (relating to interest on unpaid taxes attributable to nondisclosed reportable transactions) is amended--

(1) by striking ``attributable'' and all that follows and inserting the following: ``attributable to--

``(1) the portion of any reportable transaction understatement (as defined in section 6662A(b)) with respect to which the requirement of section 6664(d)(2)(A) is not met, or

``(2) any noneconomic substance transaction understatement

(as defined in section 6662B(c)).'', and

(2) by inserting ``and Noneconomic Substance Transactions'' in the heading thereof after ``Transactions''.

(b) Effective Date.--The amendments made by this section shall apply to transactions after the date of the enactment of this Act in taxable years ending after such date.

SEC. 304. MODIFICATIONS OF EFFECTIVE DATES OF LEASING

PROVISIONS OF THE AMERICAN JOBS CREATION ACT OF

2004.

(a) In General.--Section 849(b) of the American Jobs Creation Act of 2004 is amended by striking paragraphs (1) and (2), by redesignating paragraphs (3) and (4) as paragraphs (1) and (2), respectively, and by adding at the end the following new paragraph:

``(3) Leases to foreign entities.--In the case of tax-exempt use property leased to a tax-exempt entity which is a foreign person or entity, the amendments made by this part shall apply to taxable years beginning after December 31, 2004, with respect to leases entered into on or before March 12, 2004.''.

(b) Effective Date.--The amendments made by this section shall take effect as if included in the enactment of the American Jobs Creation Act of 2004.

SEC. 305. REVALUATION OF LIFO INVENTORIES OF LARGE INTEGRATED

OIL COMPANIES.

(a) General Rule.--Notwithstanding any other provision of law, if a taxpayer is an applicable integrated oil company for its last taxable year ending in calendar year 2005, the taxpayer shall--

(1) increase, effective as of the close of such taxable year, the value of each historic LIFO layer of inventories of crude oil, natural gas, or any other petroleum product

(within the meaning of section 4611) by the layer adjustment amount, and

(2) decrease its cost of goods sold for such taxable year by the aggregate amount of the increases under paragraph (1).

If the aggregate amount of the increases under paragraph (1) exceed the taxpayer's cost of goods sold for such taxable year, the taxpayer's gross income for such taxable year shall be increased by the amount of such excess.

(b) Layer Adjustment Amount.--For purposes of this section--

(1) In general.--The term ``layer adjustment amount'' means, with respect to any historic LIFO layer, the product of--

(A) $18.75, and

(B) the number of barrels of crude oil (or in the case of natural gas or other petroleum products, the number of barrel-of-oil equivalents) represented by the layer.

(2) Barrel-of-oil equivalent.--The term ``barrel-of-oil equivalent'' has the meaning given such term by section 29(d)(5) (as in effect before its redesignation by the Energy Tax Incentives Act of 2005).

(1) No change in method of accounting.--Any adjustment required by this section shall not be treated as a change in method of accounting.

(2) Underpayments of estimated tax.--No addition to the tax shall be made under section 6655 of the Internal Revenue Code of 1986 (relating to failure by corporation to pay estimated tax) with respect to any underpayment of an installment required to be paid with respect to the taxable year described in subsection (a) to the extent such underpayment was created or increased by this section.

(1) had gross receipts in excess of $1,000,000,000 for its last taxable year ending during calendar year 2005, and

(2) uses the last-in, first-out (LIFO) method of accounting with respect to its crude oil inventories for such taxable year.

For purposes of paragraph (1), all persons treated as a single employer under subsections (a) and (b) of section 52 of the Internal Revenue Code of 1986 shall be treated as 1 person and, in the case of a short taxable year, the rule under section 448(c)(3)(B) shall apply.

SEC. 306. MODIFICATION OF EFFECTIVE DATE OF EXCEPTION FROM

SUSPENSION RULES FOR CERTAIN LISTED AND

REPORTABLE TRANSACTIONS.

(a) In General.--Paragraph (2) of section 903(d) of the American Jobs Creation Act of 2004 is amended to read as follows:

``(2) Exception for reportable or listed transactions.--

``(A) In general.--The amendments made by subsection (c) shall apply with respect to interest accruing after October 3, 2004.

``(B) Special rule for certain listed and reportable transactions.--

``(i) In general.--Except as provided in clause (ii), the amendments made by subsection (c) shall also apply with respect to interest accruing on or before October 3, 2004.

``(ii) Participants in settlement initiatives.--Clause (i) shall not apply to any transaction if, as of January 23, 2006--

``(I) the taxpayer is participating in a settlement initiative described in Internal Revenue Service Announcement 2005-80 with respect to such transaction, or

``(II) the taxpayer has entered into a settlement agreement pursuant to such an initiative.

``(iii) Termination of exception.--Clause (ii)(I) shall not apply to any taxpayer if, after January 23, 2006, the taxpayer withdraws from, or terminates, participation in the initiative or the Secretary of the Treasury or the Secretary's delegate determines that a settlement agreement will not be reached pursuant to the initiative within a reasonable period of time.''.

(b) Effective Date.--The amendment made by this section shall take effect as if included in the provisions of the American Jobs Creation Act of 2004 to which it relates.

SEC. 307. DOUBLING OF CERTAIN PENALTIES, FINES, AND INTEREST

ON UNDERPAYMENTS RELATED TO CERTAIN OFFSHORE

FINANCIAL ARRANGEMENTS.

(a) Determination of Penalty.--

(1) In general.--Notwithstanding any other provision of law, in the case of an applicable taxpayer--

(A) the determination as to whether any interest or applicable penalty is to be imposed with respect to any arrangement described in paragraph (2), or to any underpayment of Federal income tax attributable to items arising in connection with any such arrangement, shall be made without regard to the rules of subsections (b), (c), and

(d) of section 6664 of the Internal Revenue Code of 1986, and

(B) if any such interest or applicable penalty is imposed, the amount of such interest or penalty shall be equal to twice that determined without regard to this section.

(2) Applicable taxpayer.--For purposes of this subsection--

(A) In general.--The term ``applicable taxpayer'' means a taxpayer which--

(i) has underreported its United States income tax liability with respect to any item which directly or indirectly involves--

(I) any financial arrangement which in any manner relies on the use of offshore payment mechanisms (including credit, debit, or charge cards) issued by banks or other entities in foreign jurisdictions, or

(II) any offshore financial arrangement (including any arrangement with foreign banks, financial institutions, corporations, partnerships, trusts, or other entities), and

(ii) has neither signed a closing agreement pursuant to the Voluntary Offshore Compliance Initiative established by the Department of the Treasury under Revenue Procedure 2003-11 nor voluntarily disclosed its participation in such arrangement by notifying the Internal Revenue Service of such arrangement prior to the issue being raised by the Internal Revenue Service during an examination.

(B) Authority to waive.--The Secretary of the Treasury or the Secretary's delegate may waive the application of paragraph (1) to any taxpayer if the Secretary or the Secretary's delegate determines that the use of such offshore payment mechanisms is incidental to the transaction and, in addition, in the case of a trade or business, such use is conducted in the ordinary course of the type of trade or business of the taxpayer.

(C) Issues raised.--For purposes of subparagraph (A)(ii), an item shall be treated as an issue raised during an examination if the individual examining the return--

(i) communicates to the taxpayer knowledge about the specific item, or

(ii) has made a request to the taxpayer for information and the taxpayer could not make a complete response to that request without giving the examiner knowledge of the specific item.

(b) Definitions and Rules.--For purposes of this section--

(1) Applicable penalty.--The term ``applicable penalty'' means any penalty, addition to tax, or fine imposed under chapter 68 of the Internal Revenue Code of 1986.

(2) Fees and expenses.--The Secretary of the Treasury may retain and use an amount not in excess of 25 percent of all additional interest, penalties, additions to tax, and fines collected under this section to be used for enforcement and collection activities of the Internal Revenue Service. The Secretary shall keep adequate records regarding amounts so retained and used. The amount credited as paid by any taxpayer shall be determined without regard to this paragraph.

(c) Report by Secretary.--The Secretary shall each year conduct a study and report to Congress on the implementation of this section during the preceding year, including statistics on the number of taxpayers affected by such implementation and the amount of interest and applicable penalties asserted, waived, and assessed during such preceding year.

(d) Effective Date.--The provisions of this section shall apply to interest, penalties, additions to tax, and fines with respect to any taxable year if, as of the date of the enactment of this Act, the assessment of any tax, penalty, or interest with respect to such taxable year is not prevented by the operation of any law or rule of law.

SEC. 308. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT

OF TAX LIABILITY.

(a) In General.--Section 6701(a) (relating to imposition of penalty) is amended--

(1) by inserting ``the tax liability or'' after ``respect to,'' in paragraph (1),

(2) by inserting ``aid, assistance, procurement, or advice with respect to such'' before ``portion'' both places it appears in paragraphs (2) and (3), and

(3) by inserting ``instance of aid, assistance, procurement, or advice or each such'' before ``document'' in the matter following paragraph (3).

(b) Amount of Penalty.--Subsection (b) of section 6701

(relating to penalties for aiding and abetting understatement of tax liability) is amended to read as follows:

``(b) Amount of Penalty; Calculation of Penalty; Liability for Penalty.--

``(1) Amount of penalty.--The amount of the penalty imposed by subsection (a) shall not exceed 100 percent of the gross income derived (or to be derived) from such aid, assistance, procurement, or advice provided by the person or persons subject to such penalty.

``(2) Calculation of penalty.--The penalty amount determined under paragraph (1) shall be calculated with respect to each instance of aid, assistance, procurement, or advice described in subsection (a), each instance in which income was derived by the person or persons subject to such penalty, and each person who made such an understatement of the liability for tax.

``(3) Liability for penalty.--If more than 1 person is liable under subsection (a) with respect to providing such aid, assistance, procurement, or advice, all such persons shall be jointly and severally liable for the penalty under such subsection.''.

``(g) Penalty Not Deductible.--The payment of any penalty imposed under this section or the payment of any amount to settle or avoid the imposition of such penalty shall not be deductible by the person who is subject to such penalty or who makes such payment.''.

(d) Effective Date.--The amendments made by this section shall apply to activities after the date of the enactment of this Act.

Subtitle B--Provisions to Close Corporate and Individual Loopholes

SEC. 311. TAX TREATMENT OF INVERTED ENTITIES.

(a) In General.--Section 7874 is amended--

(1) by striking ``March 4, 2003'' in subsection

(a)(2)(B)(i) and in the matter following subsection

(a)(2)(B)(iii) and inserting ``March 20, 2002'',

(2) by striking ``at least 60 percent'' in subsection

(a)(2)(B)(ii) and inserting ``more than 50 percent'',

(3) by striking ``80 percent'' in subsection (b) and inserting ``at least 80 percent'',

(4) by striking ``60 percent'' in subsection (b) and inserting ``more than 50 percent'',

(5) by adding at the end of subsection (a)(2) the following new sentence: ``Except as provided in regulations, an acquisition of properties of a domestic corporation shall not be treated as described in subparagraph (B) if none of the corporation's stock was readily tradeable on an established securities market at any time during the 4-year period ending on the date of the acquisition.'', and

(6) by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:

``(g) Special Rules Applicable to Expatriated Entities.--

``(1) Increases in accuracy-related penalties.--In the case of any underpayment of tax of an expatriated entity--

``(A) section 6662(a) shall be applied with respect to such underpayment by substituting `30 percent' for `20 percent', and

``(B) if such underpayment is attributable to one or more gross valuation understatements, the increase in the rate of penalty under section 6662(h) shall be to 50 percent rather than 40 percent.

``(2) Modifications of limitation on interest deduction.--In the case of an expatriated entity, section 163(j) shall be applied--

``(A) without regard to paragraph (2)(A)(ii) thereof, and

``(B) by substituting `25 percent' for `50 percent' each place it appears in paragraph (2)(B) thereof.''.

(b) Effective Date.--The amendments made by this section shall apply to taxable years ending after March 20, 2002. SEC. 312. GRANT OF TREASURY REGULATORY AUTHORITY TO ADDRESS

FOREIGN TAX CREDIT TRANSACTIONS INVOLVING

INAPPROPRIATE SEPARATION OF FOREIGN TAXES FROM

RELATED FOREIGN INCOME.

(a) In General.--Section 901 (relating to taxes of foreign countries and of possessions of United States) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

``(m) Regulations.--The Secretary may prescribe regulations disallowing a credit under subsection (a) for all or a portion of any foreign tax, or allocating a foreign tax among 2 or more persons, in cases where the foreign tax is imposed on any person in respect of income of another person or in other cases involving the inappropriate separation of the foreign tax from the related foreign income.''.

(b) Effective Date.--The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

SEC. 313. TREATMENT OF CONTINGENT PAYMENT CONVERTIBLE DEBT

INSTRUMENTS.

(a) In General.--Section 1275(d) (relating to regulation authority) is amended--

(1) by striking ``The Secretary'' and inserting the following:

``(1) In general.--The Secretary'', and

(2) by adding at the end the following new paragraph:

``(2) Treatment of contingent payment convertible debt.--

``(A) In general.--In the case of a debt instrument which--

``(i) is convertible into stock of the issuing corporation, into stock or debt of a related party (within the meaning of section 267(b) or 707(b)(1)), or into cash or other property in an amount equal to the approximate value of such stock or debt, and

``(ii) provides for contingent payments,

any regulations which require original issue discount to be determined by reference to the comparable yield of a noncontingent fixed-rate debt instrument shall be applied as if the regulations require that such comparable yield be determined by reference to a noncontingent fixed-rate debt instrument which is convertible into stock.

``(B) Special rule.--For purposes of subparagraph (A), the comparable yield shall be determined without taking into account the yield resulting from the conversion of a debt instrument into stock.''.

(b) Cross Reference.--Section 163(e)(6) (relating to cross references) is amended by adding at the end the following:

``For the treatment of contingent payment convertible debt, see section 1275(d)(2).''.

(c) Effective Date.--The amendments made by this section shall apply to debt instruments issued on or after the date of the enactment of this Act.

SEC. 314. APPLICATION OF EARNINGS STRIPPING RULES TO PARTNERS

WHICH ARE CORPORATIONS.

(a) In General.--Section 163(j) (relating to limitation on deduction for interest on certain indebtedness) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph:

``(8) Treatment of corporate partners.--Except to the extent provided by regulations, in applying this subsection to a corporation which owns (directly or indirectly) an interest in a partnership--

``(A) such corporation's distributive share of interest income paid or accrued to such partnership shall be treated as interest income paid or accrued to such corporation,

``(B) such corporation's distributive share of interest paid or accrued by such partnership shall be treated as interest paid or accrued by such corporation, and

``(C) such corporation's share of the liabilities of such partnership shall be treated as liabilities of such corporation.''.

(b) Additional Regulatory Authority.--Section 163(j)(9)

(relating to regulations), as redesignated by subsection (a), is amended by striking ``and'' at the end of subparagraph

(B), by striking the period at the end of subparagraph (C) and inserting ``, and'', and by adding at the end the following new subparagraph:

``(D) regulations providing for the reallocation of shares of partnership indebtedness, or distributive shares of the partnership's interest income or interest expense, as may be appropriate to carry out the purposes of this subsection.''.

(c) Effective Date.--The amendments made by this section shall apply to taxable years beginning on or after the date of the enactment of this Act.

SEC. 315. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,

AND OTHER AMOUNTS.

(a) In General.--Subsection (f) of section 162 (relating to trade or business expenses) is amended to read as follows:

``(f) Fines, Penalties, and Other Amounts.--

``(1) In general.--Except as provided in paragraph (2), no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or entity described in paragraph (4) in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law.

``(2) Exception for amounts constituting restitution or paid to come into compliance with law.--Paragraph (1) shall not apply to any amount which--

``(A) the taxpayer establishes--

``(i) constitutes restitution (including remediation of property) for damage or harm caused by or which may be caused by the violation of any law or the potential violation of any law, or

``(ii) is paid to come into compliance with any law which was violated or involved in the investigation or inquiry, and

``(B) is identified as restitution or as an amount paid to come into compliance with the law, as the case may be, in the court order or settlement agreement.

Identification pursuant to subparagraph (B) alone shall not satisfy the requirement under subparagraph (A). This paragraph shall not apply to any amount paid or incurred as reimbursement to the government or entity for the costs of any investigation or litigation.

``(3) Exception for amounts paid or incurred as the result of certain court orders.--Paragraph (1) shall not apply to any amount paid or incurred by order of a court in a suit in which no government or entity described in paragraph (4) is a party.

``(4) Certain nongovernmental regulatory entities.--An entity is described in this paragraph if it is--

``(A) a nongovernmental entity which exercises self-regulatory powers (including imposing sanctions) in connection with a qualified board or exchange (as defined in section 1256(g)(7)), or

``(B) to the extent provided in regulations, a nongovernmental entity which exercises self-regulatory powers

(including imposing sanctions) as part of performing an essential governmental function.

``(5) Exception for taxes due.--Paragraph (1) shall not apply to any amount paid or incurred as taxes due.''.

(b) Reporting of Deductible Amounts.--

(1) In general.--Subpart B of part III of subchapter A of chapter 61 is amended by inserting after section 6050T the following new section:

``SEC. 6050U. INFORMATION WITH RESPECT TO CERTAIN FINES,

PENALTIES, AND OTHER AMOUNTS.

``(a) Requirement of Reporting.--

``(1) In general.--The appropriate official of any government or entity which is described in section 162(f)(4) which is involved in a suit or agreement described in paragraph (2) shall make a return in such form as determined by the Secretary setting forth--

``(A) the amount required to be paid as a result of the suit or agreement to which paragraph (1) of section 162(f) applies,

``(B) any amount required to be paid as a result of the suit or agreement which constitutes restitution or remediation of property, and

``(C) any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law which was violated or involved in the investigation or inquiry.

``(2) Suit or agreement described.--

``(A) In general.--A suit or agreement is described in this paragraph if--

``(i) it is--

``(I) a suit with respect to a violation of any law over which the government or entity has authority and with respect to which there has been a court order, or

``(II) an agreement which is entered into with respect to a violation of any law over which the government or entity has authority, or with respect to an investigation or inquiry by the government or entity into the potential violation of any law over which such government or entity has authority, and

``(ii) the aggregate amount involved in all court orders and agreements with respect to the violation, investigation, or inquiry is $600 or more.

``(B) Adjustment of reporting threshold.--The Secretary may adjust the $600 amount in subparagraph (A)(ii) as necessary in order to ensure the efficient administration of the internal revenue laws.

``(3) Time of filing.--The return required under this subsection shall be filed not later than--

``(A) 30 days after the date on which a court order is issued with respect to the suit or the date the agreement is entered into, as the case may be, or

``(B) the date specified Secretary.

``(b) Statements To Be Furnished to Individuals Involved in the Settlement.--Every person required to make a return under subsection (a) shall furnish to each person who is a party to the suit or agreement a written statement showing--

``(1) the name of the government or entity, and

``(2) the information supplied to the Secretary under subsection (a)(1).The written statement required under the preceding sentence shall be furnished to the person at the same time the government or entity provides the Secretary with the information required under subsection (a).

``(c) Appropriate Official Defined.--For purposes of this section, the term `appropriate official' means the officer or employee having control of the suit, investigation, or inquiry or the person appropriately designated for purposes of this section.''.

(2) Conforming amendment.--The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6050T the following new item:

``Sec. 6050U. Information with respect to certain fines, penalties, and other amounts.''.

(c) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred on or after the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.

SEC. 316. DISALLOWANCE OF DEDUCTION FOR PUNITIVE DAMAGES.

(a) Disallowance of Deduction.--

(1) In general.--Section 162(g) (relating to treble damage payments under the antitrust laws) is amended--

(A) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively,

(B) by striking ``If'' and inserting:

``(1) Treble damages.--If'', and

``(2) Punitive damages.--No deduction shall be allowed under this chapter for any amount paid or incurred for punitive damages in connection with any judgment in, or settlement of, any action. This paragraph shall not apply to punitive damages described in section 104(c).''.

(2) Conforming amendment.--The heading for section 162(g) is amended by inserting ``or Punitive Damages'' after

``Laws''.

(b) Inclusion in Income of Punitive Damages Paid by Insurer or Otherwise.--

(1) In general.--Part II of subchapter B of chapter 1

(relating to items specifically included in gross income) is amended by adding at the end the following new section:

``SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSURANCE OR

OTHERWISE.

``Gross income shall include any amount paid to or on behalf of a taxpayer as insurance or otherwise by reason of the taxpayer's liability (or agreement) to pay punitive damages.''.

(2) Reporting requirements.--Section 6041 (relating to information at source) is amended by adding at the end the following new subsection:

``(f) Section to Apply to Punitive Damages Compensation.--This section shall apply to payments by a person to or on behalf of another person as insurance or otherwise by reason of the other person's liability (or agreement) to pay punitive damages.''.

(3) Conforming amendment.--The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end the following new item:

``Sec. 91. Punitive damages compensated by insurance or otherwise.''.

(c) Effective Date.--The amendments made by this section shall apply to damages paid or incurred on or after the date of the enactment of this Act.

SEC. 317. LIMITATION OF EMPLOYER DEDUCTION FOR CERTAIN

ENTERTAINMENT EXPENSES.

(a) In General.--Paragraph (2) of section 274(e) (relating to expenses treated as compensation) is amended to read as follows:

``(2) Expenses treated as compensation.--Expenses for goods, services, and facilities, to the extent that the expenses do not exceed the amount of the expenses which are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recreation, as compensation to an employee on the taxpayer's return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages).''.

(b) Persons Not Employees.--Paragraph (9) of section 274(e) is amended by striking ``to the extent that the expenses are includible in the gross income'' and inserting ``to the extent that the expenses do not exceed the amount of the expenses which are includible in the gross income''.

(c) Effective Date.--The amendments made by this section shall apply to expenses incurred after the date of the enactment of this Act.

SEC. 318. IMPOSITION OF MARK-TO-MARKET TAX ON INDIVIDUALS WHO

EXPATRIATE.

(a) In General.--Subpart A of part II of subchapter N of chapter 1 is amended by inserting after section 877 the following new section:

``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

``(a) General Rules.--For purposes of this subtitle--

``(1) Mark to market.--Except as provided in subsections

(d) and (f), all property of a covered expatriate to whom this section applies shall be treated as sold on the day before the expatriation date for its fair market value.

``(2) Recognition of gain or loss.--In the case of any sale under paragraph (1)--

``(A) notwithstanding any other provision of this title, any gain arising from such sale shall be taken into account for the taxable year of the sale, and

``(B) any loss arising from such sale shall be taken into account for the taxable year of the sale to the extent otherwise provided by this title, except that section 1091 shall not apply to any such loss.

Proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or loss taken into account under the preceding sentence.

``(3) Exclusion for certain gain.--

``(A) In general.--The amount which, but for this paragraph, would be includible in the gross income of any individual by reason of this section shall be reduced (but not below zero) by $600,000. For purposes of this paragraph, allocable expatriation gain taken into account under subsection (f)(2) shall be treated in the same manner as an amount required to be includible in gross income.

``(B) Cost-of-living adjustment.--

``(i) In general.--In the case of an expatriation date occurring in any calendar year after 2005, the $600,000 amount under subparagraph (A) shall be increased by an amount equal to--

``(I) such dollar amount, multiplied by

``(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting `calendar year 2004' for `calendar year 1992' in subparagraph (B) thereof.

``(ii) Rounding rules.--If any amount after adjustment under clause (i) is not a multiple of $1,000, such amount shall be rounded to the next lower multiple of $1,000.

``(4) Election to continue to be taxed as united states citizen.--

``(A) In general.--If a covered expatriate elects the application of this paragraph--

``(i) this section (other than this paragraph and subsection (i)) shall not apply to the expatriate, but

``(ii) in the case of property to which this section would apply but for such election, the expatriate shall be subject to tax under this title in the same manner as if the individual were a United States citizen.

``(B) Requirements.--Subparagraph (A) shall not apply to an individual unless the individual--

``(i) provides security for payment of tax in such form and manner, and in such amount, as the Secretary may require,

``(ii) consents to the waiver of any right of the individual under any treaty of the United States which would preclude assessment or collection of any tax which may be imposed by reason of this paragraph, and

``(iii) complies with such other requirements as the Secretary may prescribe.

``(C) Election.--An election under subparagraph (A) shall apply to all property to which this section would apply but for the election and, once made, shall be irrevocable. Such election shall also apply to property the basis of which is determined in whole or in part by reference to the property with respect to which the election was made.

``(b) Election to Defer Tax.--

``(1) In general.--If the taxpayer elects the application of this subsection with respect to any property treated as sold by reason of subsection (a), the payment of the additional tax attributable to such property shall be postponed until the due date of the return for the taxable year in which such property is disposed of (or, in the case of property disposed of in a transaction in which gain is not recognized in whole or in part, until such other date as the Secretary may prescribe).

``(2) Determination of tax with respect to property.--For purposes of paragraph (1), the additional tax attributable to any property is an amount which bears the same ratio to the additional tax imposed by this chapter for the taxable year solely by reason of subsection (a) as the gain taken into account under subsection (a) with respect to such property bears to the total gain taken into account under subsection

(a) with respect to all property to which subsection (a) applies.

``(3) Termination of postponement.--No tax may be postponed under this subsection later than the due date for the return of tax imposed by this chapter for the taxable year which includes the date of death of the expatriate (or, if earlier, the time that the security provided with respect to the property fails to meet the requirements of paragraph (4), unless the taxpayer corrects such failure within the time specified by the Secretary).

``(4) Security.--

``(A) In general.--No election may be made under paragraph

(1) with respect to any property unless adequate security is provided to the Secretary with respect to such property.

``(B) Adequate security.--For purposes of subparagraph (A), security with respect to any property shall be treated as adequate security if--

``(i) it is a bond in an amount equal to the deferred tax amount under paragraph (2) for the property, or

``(ii) the taxpayer otherwise establishes to the satisfaction of the Secretary that the security is adequate.

``(5) Waiver of certain rights.--No election may be made under paragraph (1) unless the taxpayer consents to the waiver of any right under any treaty of the United States which would preclude assessment or collection of any tax imposed by reason of this section.

``(6) Elections.--An election under paragraph (1) shall only apply to property described in the election and, once made, is irrevocable. An election may be made under paragraph

(1) with respect to an interest in a trust with respect to which gain is required to be recognized under subsection

(f)(1).

``(7) Interest.--For purposes of section 6601--

``(A) the last date for the payment of tax shall be determined without regard to the election under this subsection, and

``(B) section 6621(a)(2) shall be applied by substituting

`5 percentage points' for `3 percentage points' in subparagraph (B) thereof.

``(c) Covered Expatriate.--For purposes of this section--

``(1) In general.--Except as provided in paragraph (2), the term `covered expatriate' means an expatriate.

``(2) Exceptions.--An individual shall not be treated as a covered expatriate if--

``(A) the individual--

``(i) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and

``(ii) has not been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) during the 5 taxable years ending with the taxable year during which the expatriation date occurs, or

``(B)(i) the individual's relinquishment of United States citizenship occurs before such individual attains age 18 1/2, and

``(ii) the individual has been a resident of the United States (as so defined) for not more than 5 taxable years before the date of relinquishment.

``(d) Exempt Property; Special Rules for Pension Plans.--

``(1) Exempt property.--This section shall not apply to the following:

``(A) United states real property interests.--Any United States real property interest (as defined in section 897(c)(1)), other than stock of a United States real property holding corporation which does not, on the day before the expatriation date, meet the requirements of section 897(c)(2).

``(B) Specified property.--Any property or interest in property not described in subparagraph (A) which the Secretary specifies in regulations.

``(2) Special rules for certain retirement plans.--

``(A) In general.--If a covered expatriate holds on the day before the expatriation date any interest in a retirement plan to which this paragraph applies--

``(i) such interest shall not be treated as sold for purposes of subsection (a)(1), but

``(ii) an amount equal to the present value of the expatriate's nonforfeitable accrued benefit shall be treated as having been received by such individual on such date as a distribution under the plan.

``(B) Treatment of subsequent distributions.--In the case of any distribution on or after the expatriation date to or on behalf of the covered expatriate from a plan from which the expatriate was treated as receiving a distribution under subparagraph (A), the amount otherwise includible in gross income by reason of the subsequent distribution shall be reduced by the excess of the amount includible in gross income under subparagraph (A) over any portion of such amount to which this subparagraph previously applied.

``(C) Treatment of subsequent distributions by plan.--For purposes of this title, a retirement plan to which this paragraph applies, and any person acting on the plan's behalf, shall treat any subsequent distribution described in subparagraph (B) in the same manner as such distribution would be treated without regard to this paragraph.

``(D) Applicable plans.--This paragraph shall apply to--

``(i) any qualified retirement plan (as defined in section 4974(c)),

``(ii) an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A), and

``(iii) to the extent provided in regulations, any foreign pension plan or similar retirement arrangements or programs.

``(e) Definitions.--For purposes of this section--

``(1) Expatriate.--The term `expatriate' means--

``(A) any United States citizen who relinquishes citizenship, and

``(B) any long-term resident of the United States who--

``(i) ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6)), or

``(ii) commences to be treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country and who does not waive the benefits of such treaty applicable to residents of the foreign country.

``(2) Expatriation date.--The term `expatriation date' means--

``(A) the date an individual relinquishes United States citizenship, or

``(B) in the case of a long-term resident of the United States, the date of the event described in clause (i) or (ii) of paragraph (1)(B).

``(3) Relinquishment of citizenship.--A citizen shall be treated as relinquishing United States citizenship on the earliest of--

``(A) the date the individual renounces such individual's United States nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),

``(B) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of an act of expatriation specified in paragraph

(1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),

``(C) the date the United States Department of State issues to the individual a certificate of loss of nationality, or

``(D) the date a court of the United States cancels a naturalized citizen's certificate of naturalization.

Subparagraph (A) or (B) shall not apply to any individual unless the renunciation or voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State.

``(4) Long-term resident.--The term `long-term resident' has the meaning given to such term by section 877(e)(2).

``(f) Special Rules Applicable to Beneficiaries' Interests in Trust.--

``(1) In general.--Except as provided in paragraph (2), if an individual is determined under paragraph (3) to hold an interest in a trust on the day before the expatriation date--

``(A) the individual shall not be treated as having sold such interest,

``(B) such interest shall be treated as a separate share in the trust, and

``(C)(i) such separate share shall be treated as a separate trust consisting of the assets allocable to such share,

``(ii) the separate trust shall be treated as having sold its assets on the day before the expatriation date for their fair market value and as having distributed all of its assets to the individual as of such time, and

``(iii) the individual shall be treated as having recontributed the assets to the separate trust.

Subsection (a)(2) shall apply to any income, gain, or loss of the individual arising from a distribution described in subparagraph (C)(ii). In determining the amount of such distribution, proper adjustments shall be made for liabilities of the trust allocable to an individual's share in the trust.

``(2) Special rules for interests in qualified trusts.--

``(A) In general.--If the trust interest described in paragraph (1) is an interest in a qualified trust--

``(i) paragraph (1) and subsection (a) shall not apply, and

``(ii) in addition to any other tax imposed by this title, there is hereby imposed on each distribution with respect to such interest a tax in the amount determined under subparagraph (B).

``(B) Amount of tax.--The amount of tax under subparagraph

(A)(ii) shall be equal to the lesser of--

``(i) the highest rate of tax imposed by section 1(e) for the taxable year which includes the day before the expatriation date, multiplied by the amount of the distribution, or

``(ii) the balance in the deferred tax account immediately before the distribution determined without regard to any increases under subparagraph (C)(ii) after the 30th day preceding the distribution.

``(C) Deferred tax account.--For purposes of subparagraph

(B)(ii)--

``(i) Opening balance.--The opening balance in a deferred tax account with respect to any trust interest is an amount equal to the tax which would have been imposed on the allocable expatriation gain with respect to the trust interest if such gain had been included in gross income under subsection (a).

``(ii) Increase for interest.--The balance in the deferred tax account shall be increased by the amount of interest determined (on the balance in the account at the time the interest accrues), for periods after the 90th day after the expatriation date, by using the rates and method applicable under section 6621 for underpayments of tax for such periods, except that section 6621(a)(2) shall be applied by substituting `5 percentage points' for `3 percentage points' in subparagraph (B) thereof.

``(iii) Decrease for taxes previously paid.--The balance in the tax deferred account shall be reduced--

``(I) by the amount of taxes imposed by subparagraph (A) on any distribution to the person holding the trust interest, and

``(II) in the case of a person holding a nonvested interest, to the extent provided in regulations, by the amount of taxes imposed by subparagraph (A) on distributions from the trust with respect to nonvested interests not held by such person.

``(D) Allocable expatriation gain.--For purposes of this paragraph, the allocable expatriation gain with respect to any beneficiary's interest in a trust is the amount of gain which would be allocable to such beneficiary's vested and nonvested interests in the trust if the beneficiary held directly all assets allocable to such interests.

``(E) Tax deducted and withheld.--

``(i) In general.--The tax imposed by subparagraph (A)(ii) shall be deducted and withheld by the trustees from the distribution to which it relates.

``(ii) Exception where failure to waive treaty rights.--If an amount may not be deducted and withheld under clause (i) by reason of the distributee failing to waive any treaty right with respect to such distribution--

``(I) the tax imposed by subparagraph (A)(ii) shall be imposed on the trust and each trustee shall be personally liable for the amount of such tax, and

``(II) any other beneficiary of the trust shall be entitled to recover from the distributee the amount of such tax imposed on the other beneficiary.

``(F) Disposition.--If a trust ceases to be a qualified trust at any time, a covered expatriate disposes of an interest in a qualified trust, or a covered expatriate holding an interest in a qualified trust dies, then, in lieu of the tax imposed by subparagraph (A)(ii), there is hereby imposed a tax equal to the lesser of--

``(i) the tax determined under paragraph (1) as if the day before the expatriation date were the date of such cessation, disposition, or death, whichever is applicable, or

``(ii) the balance in the tax deferred account immediately before such date.

Such tax shall be imposed on the trust and each trustee shall be personally liable for the amount of such tax and any other beneficiary of the trust shall be entitled to recover from the covered expatriate or the estate the amount of such tax imposed on the other beneficiary.

``(G) Definitions and special rules.--For purposes of this paragraph--

``(i) Qualified trust.--The term `qualified trust' means a trust which is described in section 7701(a)(30)(E).

``(ii) Vested interest.--The term `vested interest' means any interest which, as of the day before the expatriation date, is vested in the beneficiary.

``(iii) Nonvested interest.--The term `nonvested interest' means, with respect to any beneficiary, any interest in a trust which is not a vested interest. Such interest shall be determined by assuming the maximum exercise of discretion in favor of the beneficiary and the occurrence of all contingencies in favor of the beneficiary.

``(iv) Adjustments.--The Secretary may provide for such adjustments to the bases of assets in a trust or a deferred tax account, and the timing of such adjustments, in order to ensure that gain is taxed only once.

``(v) Coordination with retirement plan rules.--This subsection shall not apply to an interest in a trust which is part of a retirement plan to which subsection (d)(2) applies.

``(3) Determination of beneficiaries' interest in trust.--

``(A) Determinations under paragraph (1).--For purposes of paragraph (1), a beneficiary's interest in a trust shall be based upon all relevant facts and circumstances, including the terms of the trust instrument and any letter of wishes or similar document, historical patterns of trust distributions, and the existence of and functions performed by a trust protector or any similar adviser.

``(B) Other determinations.--For purposes of this section--

``(i) Constructive ownership.--If a beneficiary of a trust is a corporation, partnership, trust, or estate, the shareholders, partners, or beneficiaries shall be deemed to be the trust beneficiaries for purposes of this section.

``(ii) Taxpayer return position.--A taxpayer shall clearly indicate on its income tax return--

``(I) the methodology used to determine that taxpayer's trust interest under this section, and

``(II) if the taxpayer knows (or has reason to know) that any other beneficiary of such trust is using a different methodology to determine such beneficiary's trust interest under this section.

``(g) Termination of Deferrals, Etc.--In the case of any covered expatriate, notwithstanding any other provision of this title--

``(1) any period during which recognition of income or gain is deferred shall terminate on the day before the expatriation date, and

``(2) any extension of time for payment of tax shall cease to apply on the day before the expatriation date and the unpaid portion of such tax shall be due and payable at the time and in the manner prescribed by the Secretary.

``(h) Imposition of Tentative Tax.--

``(1) In general.--If an individual is required to include any amount in gross income under subsection (a) for any taxable year, there is hereby imposed, immediately before the expatriation date, a tax in an amount equal to the amount of tax which would be imposed if the taxable year were a short taxable year ending on the expatriation date.

``(2) Due date.--The due date for any tax imposed by paragraph (1) shall be the 90th day after the expatriation date.

``(3) Treatment of tax.--Any tax paid under paragraph (1) shall be treated as a payment of the tax imposed by this chapter for the taxable year to which subsection (a) applies.

``(4) Deferral of tax.--The provisions of subsection (b) shall apply to the tax imposed by this subsection to the extent attributable to gain includible in gross income by reason of this section.

``(i) Special Liens for Deferred Tax Amounts.--

``(1) Imposition of lien.--

``(A) In general.--If a covered expatriate makes an election under subsection (a)(4) or (b) which results in the deferral of any tax imposed by reason of subsection (a), the deferred amount (including any interest, additional amount, addition to tax, assessable penalty, and costs attributable to the deferred amount) shall be a lien in favor of the United States on all property of the expatriate located in the United States (without regard to whether this section applies to the property).

``(B) Deferred amount.--For purposes of this subsection, the deferred amount is the amount of the increase in the covered expatriate's income tax which, but for the election under subsection (a)(4) or (b), would have occurred by reason of this section for the taxable year including the expatriation date.

``(2) Period of lien.--The lien imposed by this subsection shall arise on the expatriation date and continue until--

``(A) the liability for tax by reason of this section is satisfied or has become unenforceable by reason of lapse of time, or

``(B) it is established to the satisfaction of the Secretary that no further tax liability may arise by reason of this section.

``(3) Certain rules apply.--The rules set forth in paragraphs (1), (3), and (4) of section 6324A(d) shall apply with respect to the lien imposed by this subsection as if it were a lien imposed by section 6324A.

``(j) Regulations.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.''.

(b) Inclusion in Income of Gifts and Bequests Received by United States Citizens and Residents From Expatriates.--Section 102 (relating to gifts, etc. not included in gross income) is amended by adding at the end the following new subsection:

``(d) Gifts and Inheritances From Covered Expatriates.--

``(1) In general.--Subsection (a) shall not exclude from gross income the value of any property acquired by gift, bequest, devise, or inheritance from a covered expatriate after the expatriation date. For purposes of this subsection, any term used in this subsection which is also used in section 877A shall have the same meaning as when used in section 877A.

``(2) Exceptions for transfers otherwise subject to estate or gift tax.--Paragraph (1) shall not apply to any property if either--

``(A) the gift, bequest, devise, or inheritance is--

``(i) shown on a timely filed return of tax imposed by chapter 12 as a taxable gift by the covered expatriate, or

``(ii) included in the gross estate of the covered expatriate for purposes of chapter 11 and shown on a timely filed return of tax imposed by chapter 11 of the estate of the covered expatriate, or

``(B) no such return was timely filed but no such return would have been required to be filed even if the covered expatriate were a citizen or long-term resident of the United States.''.

(c) Definition of Termination of United States Citizenship.--Section 7701(a) is amended by adding at the end the following new paragraph:

``(49) Termination of united states citizenship.--

``(A) In general.--An individual shall not cease to be treated as a United States citizen before the date on which the individual's citizenship is treated as relinquished under section 877A(e)(3).

``(B) Dual citizens.--Under regulations prescribed by the Secretary, subparagraph (A) shall not apply to an individual who became at birth a citizen of the United States and a citizen of another country.''.

(d) Ineligibility for Visa or Admission to United States.--

(1) In general.--Section 212(a)(10)(E) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to read as follows:

``(E) Former citizens not in compliance with expatriation revenue provisions.--Any alien who is a former citizen of the United States who relinquishes United States citizenship

(within the meaning of section 877A(e)(3) of the Internal Revenue Code of 1986) and who is not in compliance with section 877A of such Code (relating to expatriation).''.

(2) Availability of information.--

(A) In general.--Section 6103(l) (relating to disclosure of returns and return information for purposes other than tax administration) is amended by adding at the end the following new paragraph:

``(21) Disclosure to deny visa or admission to certain expatriates.--Upon written request of the Attorney General or the Attorney General's delegate, the Secretary shall disclose whether an individual is in compliance with section 877A (and if not in compliance, any items of noncompliance) to officers and employees of the Federal agency responsible for administering section 212(a)(10)(E) of the Immigration and Nationality Act solely for the purpose of, and to the extent necessary in, administering such section 212(a)(10)(E).''.

(B) Safeguards.--Section 6103(p)(4) (relating to safeguards) is amended by striking ``or (20)'' each place it appears and inserting ``(20), or (21)''.

(3) Effective dates.--The amendments made by this subsection shall apply to individuals who relinquish United States citizenship on or after the date of the enactment of this Act.

(e) Conforming Amendments.--

(1) Section 877 is amended by adding at the end the following new subsection:

``(h) Application.--This section shall not apply to an expatriate (as defined in section 877A(e)) whose expatriation date (as so defined) occurs on or after the date of the enactment of this subsection.''.

(2) Section 2107 is amended by adding at the end the following new subsection:

``(f) Application.--This section shall not apply to any expatriate subject to section 877A.''.

(3) Section 2501(a)(3) is amended by adding at the end the following new subparagraph:

``(C) Application.--This paragraph shall not apply to any expatriate subject to section 877A.''.

(4) Section 6039G(a) is amended by inserting ``or 877A'' after ``section 877(b)''.

(5) The second sentence of section 6039G(d) is amended by inserting ``or who relinquishes United States citizenship (within the meaning of section 877A(e)(3))'' after ``section 877(a))''.

(f) Clerical Amendment.--The table of sections for subpart A of part II of subchapter N of chapter 1 is amended by inserting after the item relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.

(g) Effective Date.--

(1) In general.--Except as provided in this subsection, the amendments made by this section shall apply to expatriates

(within the meaning of section 877A(e) of the Internal Revenue Code of 1986, as added by this section) whose expatriation date (as so defined) occurs on or after the date of the enactment of this Act.

(2) Gifts and bequests.--Section 102(d) of the Internal Revenue Code of 1986 (as added by subsection (b)) shall apply to gifts and bequests received on or after the date of the enactment of this Act, from an individual or the estate of an individual whose expatriation date (as so defined) occurs after such date.

(3) Due date for tentative tax.--The due date under section 877A(h)(2) of the Internal Revenue Code of 1986, as added by this section, shall in no event occur before the 90th day after the date of the enactment of this Act.

SEC. 319. MODIFICATION OF EXCLUSION FOR CITIZENS LIVING

ABROAD.

(a) Inflation Adjustment of Foreign Earned Income Limitation.--Clause (ii) of section 911(b)(2)(D) (relating to inflation adjustment) is amended--

(1) by striking ``2007'' and inserting ``2005'', and

(2) by striking ``2006'' in subclause (II) and inserting

``2004''.

(b) Modification of Housing Cost Amount.--

(1) Minimum amount.--Clause (i) of section 911(c)(1)(B) is amended to read as follows:

``(i) 16 percent of the amount (computed on a daily basis) in effect under subsection (b)(2)(D) for the calendar year in which such taxable year begins, multiplied by''.

(2) Maximum amount of exclusion.--

(A) In general.--Subparagraph (A) of section 911(c)(1) is amended by inserting ``to the extent such expenses do not exceed the amount determined under paragraph (2)'' after

``the taxable year''.

(B) Limitation.--Subsection (c) of section 911 is amended by redesignating paragraphs (2) and (3) as paragraphs (3) and

(4), respectively, and by inserting after paragraph (1) the following new paragraph:

``(2) Limitation.--The amount determined under this paragraph is an amount equal to the product of--

``(A) 30 percent of the amount (computed on a daily basis) in effect under subsection (b)(2)(D) for the calendar year in which the taxable year of the individual begins, multiplied by

``(B) the number of days of such taxable year within the applicable period described in subparagraph (A) or (B) of subsection (d)(1).''.

(i) Section 911(d)(4) is amended by striking ``and

(c)(1)(B)(ii)'' and inserting ``, (c)(1)(B)(ii), and

(c)(2)(B)''

(ii) Section 911(d)(7) is amended by striking ``subsection

(c)(3)'' and inserting ``subsection (c)(4)''.

(c) Rates of Tax Applicable to Nonexcluded Income.--Section 911 (relating to exclusion of certain income of citizens and residents of the United States living abroad) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

``(f) Determination of Tax Liability on Nonexcluded Amounts.--If any amount is excluded from the gross income of a taxpayer under subsection (a) for any taxable year, then, notwithstanding section 1 or 55--

``(1) the tax imposed by section 1 on the taxpayer for such taxable year shall be equal to the excess (if any) of--

``(A) the tax which would be imposed by section 1 for the taxable year if the taxpayer's taxable income were equal to the sum of--

``(i) the taxpayer's taxable income for the taxable year

(determined without regard to this subsection), plus

``(ii) the amount excluded under subsection (a) for the taxable year, over

``(B) the tax which would be imposed by section 1 for the taxable year if the taxpayer's taxable income were equal to the amount excluded under subsection (a) for the taxable year, and

``(2) the tax imposed by section 55 for such taxable year shall be equal to the excess (if any) of--

``(A) the amount which would be the tentative minimum tax under section 55 for the taxable year if the taxpayer's alternative minimum taxable income were equal to the sum of--

``(i) the taxpayer's alternative minimum taxable income for the taxable year (determined without regard to this subsection), plus

``(ii) the amount excluded under subsection (a) for the taxable year, over

``(B) the sum of--

``(i) the amount which would be the tentative minimum tax under section 55 for the taxable year if the taxpayer's alternative minimum taxable income were equal to the amount excluded under subsection (a) for the taxable year, plus

``(ii) the amount which would be the regular tax for the taxable year if the tax imposed by section 1 were the tax computed under paragraph (1).

For purposes of this subsection, the amount excluded under subsection (a) shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection

(d)(6) with respect to such excluded amount.''.

(d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. 320. LIMITATION ON ANNUAL AMOUNTS WHICH MAY BE DEFERRED

UNDER NONQUALIFIED DEFERRED COMPENSATION

ARRANGEMENTS.

(a) In General.--Section 409A (relating to inclusion of gross income under nonqualified deferred compensation plans) is amended by redesignating subsections (c), (d), and (e) as subsections (d), (e), and (f), respectively, and by inserting after subsection (b) the following new subsection:

``(c) Annual Limitation on Aggregate Deferred Amounts.--

``(1) Limitation.--If the aggregate amount of compensation which--

``(A) is deferred for any taxable year with respect to a participant under 1 or more nonqualified deferred compensation plans maintained by the same employer, and

``(B) is not otherwise includible in gross income of the participant for the taxable year,exceeds the applicable dollar amount for the taxable year, then such excess shall be included in the participant's gross income for the taxable year.

``(2) Inclusion of earnings.--If--

``(A) an amount is includible under paragraph (1) in the gross income of a participant for any taxable year, and

``(B) any portion of any assets set aside in a trust or other arrangement under a nonqualified deferred compensation plan are properly allocable to such amount,

then any increase in value in, or earnings with respect to, such portion for the taxable year or any succeeding taxable year shall be included in gross income of the participant for such taxable year or succeeding taxable year.

``(3) Applicable dollar amount.--For purposes of this subsection--

``(A) In general.--The term `applicable dollar amount' means, with respect to any participant, the lesser of--

``(i) the average annual compensation which--

``(I) was payable during the base period to the participant by the employer described in paragraph (1)(A), and

``(II) was includible in the participant's gross income for taxable years in the base period, or

``(ii) $1,000,000.

``(B) Base period.--The term `base period' means, with respect to any computation year, the 5-taxable year period ending with the taxable year preceding the taxable year in which the election described in subsection (a)(4)(B) is made by the participant to have compensation for services performed in the computation year deferred under a nonqualified deferred compensation plan, except that if the election is made after the beginning of the computation year, such period shall be the 5-taxable year period ending with the taxable year preceding the computation year. For purposes of this subparagraph, the term `computation year' means any taxable year of the participant for which the limitation under paragraph (1) is being determined.''.

(b) Conforming Amendments.--Sections 6041(g)(1) and 6051(a)(13) are each amended by striking ``409A(d)'' and inserting ``409A(e)''.

(c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005, except that taxable years beginning on or before such date shall be taken into account in determining the average annual compensation of a participant during any base period for purposes of section 409A(c)(2) of the Internal Revenue Code of 1986 (as added by such amendments).

SEC. 321. INCREASE IN AGE OF MINOR CHILDREN WHOSE UNEARNED

INCOME IS TAXED AS IF PARENT'S INCOME.

(a) In General.--Section 1(g)(2)(A) (relating to child to whom subsection applies) is amended by striking ``age 14'' and inserting ``age 18''.

(b) Treatment of Distributions From Qualified Disability Trusts.--Section 1(g)(4) (relating to net unearned income) is amended by adding at the end the following new subparagraph:

``(C) Treatment of distributions from qualified disability trusts.--For purposes of this subsection, in the case of any child who is a beneficiary of a qualified disability trust

(as defined in section 642(b)(2)(C)(ii)), any amount included in the income of such child under sections 652 and 662 during a taxable year shall be considered earned income of such child for such taxable year.''.

Subtitle C--Oil and Gas Provisions

SEC. 331. EXTENSION OF SUPERFUND TAXES.

(a) Excise Taxes.--Section 4611(e) is amended to read as follows:

``(e) Application of Hazardous Substance Superfund Financing Rate.--The Hazardous Substance Superfund financing rate under this section shall apply after December 31, 1986, and before January 1, 1996, and after December 31, 2005, and before January 1, 2015.''

(b) Corporate Environmental Income Tax.--Section 59A(e) is amended to read as follows:

``(e) Application of Tax.--The tax imposed by this section shall apply to taxable years beginning after December 31, 1986, and before January 1, 1996, and to taxable years beginning after December 31, 2005, and before January 1, 2015.''

(1) Excise taxes.--The amendments made by subsection (a) shall take effect on the date of the enactment of this Act.

(2) Income tax.--The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2005.

SEC. 332. MODIFICATIONS OF FOREIGN TAX CREDIT RULES

APPLICABLE TO DUAL CAPACITY TAXPAYERS.

(a) In General.--Section 901 (relating to credit for taxes of foreign countries and of possessions of the United States) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:

``(m) Special Rules Relating To Dual Capacity Taxpayers.--

``(1) General rule.--Notwithstanding any other provision of this chapter, any amount paid or accrued by a dual capacity taxpayer to a foreign country or possession of the United States for any period shall not be considered a tax--

``(A) if, for such period, the foreign country or possession does not impose a generally applicable income tax, or

``(B) to the extent such amount exceeds the amount

(determined in accordance with regulations) which--

``(i) is paid by such dual capacity taxpayer pursuant to the generally applicable income tax imposed by the country or possession, or

``(ii) would be paid if the generally applicable income tax imposed by the country or possession were applicable to such dual capacity taxpayer.

Nothing in this paragraph shall be construed to imply the proper treatment of any such amount not in excess of the amount determined under subparagraph (B).

``(2) Dual capacity taxpayer.--For purposes of this subsection, the term `dual capacity taxpayer' means, with respect to any foreign country or possession of the United States, a person who--

``(A) is subject to a levy of such country or possession, and

``(B) receives (or will receive) directly or indirectly a specific economic benefit (as determined in accordance with regulations) from such country or possession.

``(3) Generally applicable income tax.--For purposes of this subsection--

``(A) In general.--The term `generally applicable income tax' means an income tax (or a series of income taxes) which is generally imposed under the laws of a foreign country or possession on income derived from the conduct of a trade or business within such country or possession.

``(B) Exceptions.--Such term shall not include a tax unless it has substantial application, by its terms and in practice, to--

``(i) persons who are not dual capacity taxpayers, and

``(ii) persons who are citizens or residents of the foreign country or possession.''

(b) Effective Date.--

(1) In general.--The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after the date of the enactment of this Act.

(2) Contrary treaty obligations upheld.--The amendments made by this section shall not apply to the extent contrary to any treaty obligation of the United States.

SEC. 333. RULES RELATING TO FOREIGN OIL AND GAS INCOME.

(a) Separate Basket for Foreign Tax Credit.--

(1) Separate basket.--

(A) Years before 2007.--Paragraph (1) of section 904(d)

(relating to separate application of section with respect to certain categories of income), as in effect for years beginning before 2007, is amended by striking ``and'' at the end of subparagraph (H), by redesignating subparagraph (I) as subparagraph (J), and by inserting after subparagraph (H) the following new subparagraph:

``(I) foreign oil and gas income, and''.

(B) 2007 and after.--Paragraph (1) of section 904(d), as in effect for years beginning after 2006, is amended by striking

``and'' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ``, and'', and by adding at the end the following:

``(C) foreign oil and gas income.''

(2) Definition.--

(A) Years before 2007.--Paragraph (2) of section 904(d), as in effect for years beginning before 2007, is amended by redesignating subparagraphs (H) and (I) as subparagraphs (I) and (J), respectively, and by inserting after subparagraph

(G) the following new subparagraph:

``(H) Foreign oil and gas income.--The term `foreign oil and gas income' has the meaning given such term by section 954(g).''

(B) 2007 and after.--Section 904(d)(2), as in effect for years after 2006, is amended by redesignating subparagraphs

(J) and (K) as subparagraphs (K) and (L) and by inserting after subparagraph (I) the following:

``(J) Foreign oil and gas income.--For purposes of this section--

``(i) In general.--The term `foreign oil and gas income' has the meaning given such term by section 954(g).

``(ii) Coordination.--Passive category income and general category income shall not include foreign oil and gas income

(as so defined).''

(3) Conforming amendments.--

(A) Section 904(d)(3)(F)(i) is amended by striking ``or

(E)'' and inserting ``(E), or (I)''.

(B) Section 907(a) is hereby repealed.

(D) Section 907(f) is hereby repealed.

(4) Effective dates.--

(A) In general.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

(B) Years after 2006.--The amendments made by paragraphs

(1)(B) and (2)(B) shall apply to taxable years beginning after December 31, 2006.

(i) Separate basket treatment.--Any taxes paid or accrued in a taxable year beginning on or before the date of the enactment of this Act, with respect to income which was described in subparagraph (I) of section 904(d)(1) of such Code (as in effect on the day before the date of the enactment of this Act), shall be treated as taxes paid or accrued with respect to foreign oil and gas income to the extent the taxpayer establishes to the satisfaction of the Secretary of the Treasury that such taxes were paid or accrued with respect to foreign oil and gas income.

(ii) Carryovers.--Any unused oil and gas extraction taxes which under section 907(f) of such Code (as so in effect) would have been allowable as a carryover to the taxpayer's first taxable year beginning after the date of the enactment of this Act (without regard to the limitation of paragraph

(2) of such section 907(f) for first taxable year) shall be allowed as carryovers under section 904(c) of such Code in the same manner as if such taxes were unused taxes under such section 904(c) with respect to foreign oil and gas extraction income.

(iii) Losses.--The amendment made by paragraph (3)(C) shall not apply to foreign oil and gas extraction losses arising in taxable years beginning on or before the date of the enactment of this Act.

(b) Elimination of Deferral for Foreign Oil and Gas Extraction Income.--

(1) General rule.--Paragraph (1) of section 954(g)

(defining foreign base company oil related income) is amended to read as follows:

``(1) In general.--Except as otherwise provided in this subsection, the term `foreign oil and gas income' means any income of a kind which would be taken into account in determining the amount of--

``(A) foreign oil and gas extraction income (as defined in section 907(c)), or

``(B) foreign oil related income (as defined in section 907(c)).''

(2) Conforming amendments.--

(A) Subsections (a)(5), (b)(5), and (b)(6) of section 954, and section 952(c)(1)(B)(ii)(I), are each amended by striking

``base company oil related income'' each place it appears

(including in the heading of subsection (b)(8)) and inserting

``oil and gas income''.

(B) Subsection (b)(4) of section 954 is amended by striking

``base company oil-related income'' and inserting ``oil and gas income''.

(C) The subsection heading for subsection (g) of section 954 is amended by striking ``Foreign Base Company Oil Related Income'' and inserting ``Foreign Oil and Gas Income''.

(D) Subparagraph (A) of section 954(g)(2) is amended by striking ``foreign base company oil related income'' and inserting ``foreign oil and gas income''.

(3) Effective date.--The amendments made by this subsection shall apply to taxable years of foreign corporations beginning after the date of the enactment of this Act, and to taxable years of United States shareholders ending with or within such taxable years of foreign corporations.

SEC. 334. MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM A

NONCONVENTIONAL SOURCE.

(a) Taxable Years Ending Before 2006.--

(1) Modification of phaseout.--

(A) In general.--Section 29(b)(1)(A) is amended by inserting ``the calendar year preceding'' before ``the calendar year''.

(B) Conforming amendments.--Section 29(b)((2) is amended--

(i) by striking ``The'' and inserting ``With respect to any calendar year, the'', and

(ii) by striking ``for the calendar year in which the sale occurs'' and inserting ``for such calendar year''.

(2) No inflation adjustment for the credit amount in 2005.--Section 29(b)(2), as amended by paragraph (1), is amended by adding at the end the following new sentence:

``This paragraph shall not apply with respect to the $3 amount in subsection (a) for calendar year 2005 and the amount in effect under subsection (a) for sales in such calendar year shall be the amount which was in effect for sales in calendar year 2004.''.

(b) Taxable Years Ending After 2005.--

(1) Modification of phaseout.--

(A) In general.--Section 45K(b)(1)(A) is amended by inserting ``the calendar year preceding'' before ``the calendar year''.

(B) Conforming amendments.--Section 45K(b)((2) is amended--

(i) by striking ``The'' and inserting ``With respect to any calendar year, the'', and

(ii) by striking ``for the calendar year in which the sale occurs'' and inserting ``for such calendar year''.

(2) No inflation adjustment for the credit amount in 2005, 2006, and 2007.--Section 45K(b)(2), as amended by paragraph

(1), is amended by adding at the end the following new sentence: ``This paragraph shall not apply with respect to the $3 amount in subsection (a) for calendar years 2005, 2006, and 2007 and the amount in effect under subsection (a) for sales in each such calendar year shall be the amount which was in effect for sales in calendar year 2004.''.

(3) Treatment of coke and coke gas.--

(A) Nonapplication of phaseout.--Section 45K(g)(2) is amended by adding at the end the following new subparagraph:

``(D) Nonapplication of phaseout.--Subsection (b)(1) shall not apply.''.

(B) Application of inflation adjust-ment .--Section 45K(g)(2)(B) is amended by inserting ``and the last sentence of subsection (b)(2) shall not apply.''.

(C) Clarification of qualifying facility.--Section 45K(g)(1) is amended by inserting ``(other than from petroleum based products)'' after ``coke or coke gas''.

SEC. 335. ELIMINATION OF AMORTIZATION OF GEOLOGICAL AND

GEOPHYSICAL EXPENDITURES FOR MAJOR INTEGRATED

OIL COMPANIES.

(a) In General.--Section 167(h) is amended by adding at the end the following new paragraph:

``(5) Nonapplication to major integrated oil companies.--This subsection shall not apply with respect to any expenses paid or incurred for any taxable year by any integrated oil company (as defined in section 291(b)(4)) which has an average daily worldwide production of crude oil of at least 500,000 barrels for such taxable year.''.

(b) Effective Date.--The amendment made by this section shall take effect as if included in the amendment made by section 1329(a) of the Energy Policy Act of 2005.

Subtitle D--Tax Administration Provisions

SEC. 341. IMPOSITION OF WITHHOLDING ON CERTAIN PAYMENTS MADE

BY GOVERNMENT ENTITIES.

(a) In General.--Section 3402 is amended by adding at the end the following new subsection:

``(t) Extension of Withholding to Certain Payments Made by Government Entities.--

``(1) General rule.--The Government of the United States, every State, every political subdivision thereof, and every instrumentality of the foregoing (including multi-State agencies) making any payment for goods and services which is subject to withholding shall deduct and withhold form such payment a tax in an amount equal to 3 percent of such payment.

``(2) Exceptions.--Paragraph (1) shall not apply to any payment--

``(A) except as provided in subparagraph (B), which is subject to withholding under any other provision of this chapter or chapter 3,

``(B) which is subject to withholding under section 3406 and from which amounts are being withheld under such section,

``(C) of interest,

``(D) for real property,

``(E) to any tax-exempt entity, foreign government, or other entity subject to the requirements of paragraph (1),

``(F) made pursuant to a classified or confidential contract (as defined in section 6050M(e)(3)), and

``(G) made by a political subdivision of a State (or any instrumentality thereof) which makes less than $100,000,000 of such payments annually.

``(3) Coordination with other sections.--For purposes of sections 3403 and 3404 and for purposes of so much of subtitle F (except section 7205) as relates to this chapter, payments to any person of any payment for goods and services which is subject to withholding shall be treated as if such payments were wages paid by an employer to an employee.''.

(b) Effective Date.--The amendment made by this section shall apply to payments made after December 31, 2005.

SEC. 342. INCREASE IN CERTAIN CRIMINAL PENALTIES.

(a) In General.--Section 7206 (relating to fraud and false statements) is amended--

(1) by striking ``Any person who--'' and inserting ``(a) In General.--Any person who--'', and

(2) by adding at the end the following new subsection:

``(b) Increase in Monetary Limitation for Underpayment or Overpayment of Tax Due to Fraud.--If any portion of any underpayment (as defined in section 6664(a)) or overpayment

(as defined in section 6401(a)) of tax required to be shown on a return is attributable to fraudulent action described in subsection (a), the applicable dollar amount under subsection

(a) shall in no event be less than an amount equal to such portion. A rule similar to the rule under section 6663(b) shall apply for purposes of determining the portion so attributable.''.

(b) Increase in Penalties.--

(1) Attempt to evade or defeat tax.--Section 7201 is amended--

(A) by striking ``$100,000'' and inserting ``$500,000'',

(B) by striking ``$500,000'' and inserting ``$1,000,000'', and

(2) Willful failure to file return, supply information, or pay tax.--Section 7203 is amended--

(A) in the first sentence--

(i) by striking ``Any person'' and inserting the following:

``(a) In General.--Any person'', and

(ii) by striking ``$25,000'' and inserting ``$50,000'',

(B) in the third sentence, by striking ``section'' and inserting ``subsection'', and

``(b) Aggravated Failure to File.--

``(1) In general.--In the case of any failure described in paragraph (2), the first sentence of subsection (a) shall be applied by substituting--

``(A) `felony' for `misdemeanor',

``(B) `$500,000 ($1,000,000' for `$25,000 ($100,000', and

``(C) `10 years' for `1 year'.

``(2) Failure described.--A failure described in this paragraph is a failure to make a return described in subsection (a) for a period of 3 or more consecutive taxable years.''.

(3) Fraud and false statements.--Section 7206(a) (as redesignated by subsection (a)) is amended--

(A) by striking ``$100,000'' and inserting ``$500,000'',

(B) by striking ``$500,000'' and inserting ``$1,000,000'', and

(c) Effective Date.--The amendments made by this section shall apply to actions, and failures to act, occurring after the date of the enactment of this Act.

SEC. 343. REPEAL OF SUSPENSION OF INTEREST AND CERTAIN

PENALTIES WHERE SECRETARY FAILS TO CONTACT

TAXPAYER.

(a) In General.--Section 6404 (relating to abatements) is amended by striking subsection (g) and by redesignating subsections (h) and (i) as subsections (g) and (h), respectively.

(b) Effective Date.--The amendments made by this section shall apply to returns of tax filed after December 31, 2005.

SEC. 344. INCREASE IN PENALTY FOR BAD CHECKS AND MONEY

ORDERS.

(a) In General.--Section 6657 (relating to bad checks) is amended--

(1) by striking ``$750'' and inserting ``$1,250'', and

(2) by striking ``$15'' and inserting ``$25''.

(b) Effective Date.--The amendments made by this section apply to checks or money orders received after the date of the enactment of this Act.

SEC. 345. FRIVOLOUS TAX SUBMISSIONS.

(a) Civil Penalties.--Section 6702 is amended to read as follows:

``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

``(a) Civil Penalty for Frivolous Tax Returns.--A person shall pay a penalty of $5,000 if--

``(1) such person files what purports to be a return of a tax imposed by this title but which--

``(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or

``(B) contains information that on its face indicates that the self-assessment is substantially incorrect; and

``(2) the conduct referred to in paragraph (1)--

``(A) is based on a position which the Secretary has identified as frivolous under subsection (c), or

``(B) reflects a desire to delay or impede the administration of Federal tax laws.

``(b) Civil Penalty for Specified Frivolous Submissions.--

``(1) Imposition of penalty.--Except as provided in paragraph (3), any person who submits a specified frivolous submission shall pay a penalty of $5,000.

``(2) Specified frivolous submission.--For purposes of this section--

``(A) Specified frivolous submission.--The term `specified frivolous submission' means a specified submission if any portion of such submission--

``(i) is based on a position which the Secretary has identified as frivolous under subsection (c), or

``(ii) reflects a desire to delay or impede the administration of Federal tax laws.

``(B) Specified submission.--The term `specified submission' means--

``(i) a request for a hearing under--

``(I) section 6320 (relating to notice and opportunity for hearing upon filing of notice of lien), or

``(II) section 6330 (relating to notice and opportunity for hearing before levy), and

``(ii) an application under--

``(I) section 6159 (relating to agreements for payment of tax liability in installments),

``(II) section 7122 (relating to compromises), or

``(III) section 7811 (relating to taxpayer assistance orders).

``(3) Opportunity to withdraw submission.--If the Secretary provides a person with notice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed under paragraph (1) shall not apply with respect to such submission.

``(c) Listing of Frivolous Positions.--The Secretary shall prescribe (and periodically revise) a list of positions which the Secretary has identified as being frivolous for purposes of this subsection. The Secretary shall not include in such list any position that the Secretary determines meets the requirement of section 6662(d)(2)(B)(ii)(II).

``(d) Reduction of Penalty.--The Secretary may reduce the amount of any penalty imposed under this section if the Secretary determines that such reduction would promote compliance with and administration of the Federal tax laws.

``(e) Penalties in Addition to Other Penalties.--The penalties imposed by this section shall be in addition to any other penalty provided by law.''.

(b) Treatment of Frivolous Requests for Hearings Before Levy.--

(1) Frivolous requests disregarded.--Section 6330 (relating to notice and opportunity for hearing before levy) is amended by adding at the end the following new subsection:

``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding any other provision of this section, if the Secretary determines that any portion of a request for a hearing under this section or section 6320 meets the requirement of clause

(i) or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as if it were never submitted and such portion shall not be subject to any further administrative or judicial review.''.

(2) Preclusion from raising frivolous issues at hearing.--Section 6330(c)(4) is amended--

(A) by striking ``(A)'' and inserting ``(A)(i)'';

(B) by striking ``(B)'' and inserting ``(ii)'';

(D) by inserting after subparagraph (A)(ii) (as so redesignated) the following:

``(B) the issue meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A).''.

(3) Statement of grounds.--Section 6330(b)(1) is amended by striking ``under subsection (a)(3)(B)'' and inserting ``in writing under subsection (a)(3)(B) and states the grounds for the requested hearing''.

(1) in subsection (b)(1), by striking ``under subsection

(a)(3)(B)'' and inserting ``in writing under subsection

(a)(3)(B) and states the grounds for the requested hearing'', and

(2) in subsection (c), by striking ``and (e)'' and inserting ``(e), and (g)''.

(d) Treatment of Frivolous Applications for Offers-in-Compromise and Installment Agreements.--Section 7122 is amended by adding at the end the following new subsection:

``(e) Frivolous Submissions, Etc.--Notwithstanding any other provision of this section, if the Secretary determines that any portion of an application for an offer-in-compromise or installment agreement submitted under this section or section 6159 meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as if it were never submitted and such portion shall not be subject to any further administrative or judicial review.''.

(e) Clerical Amendment.--The table of sections for part I of subchapter B of chapter 68 is amended by striking the item relating to section 6702 and inserting the following new item:

``Sec. 6702. Frivolous tax submissions.''.

(f) Effective Date.--The amendments made by this section shall apply to submissions made and issues raised after the date on which the Secretary first prescribes a list under section 6702(c) of the Internal Revenue Code of 1986, as amended by subsection (a).

SEC. 346. PARTIAL PAYMENTS REQUIRED WITH SUBMISSION OF

OFFERS-IN-COMPROMISE.

(a) In General.--Section 7122 (relating to compromises), as amended by this Act, is amended by redesignating subsections

(c), (d), and (e) as subsections (d), (e), and (f), respectively, and by inserting after subsection (b) the following new subsection:

``(c) Rules for Submission of Offers-in-Compromise.--

``(1) Partial payment required with submission.--

``(A) Lump-sum offers.--

``(i) In general.--The submission of any lump-sum offer-in-compromise shall be accompanied by the payment of 20 percent of amount of such offer.

``(ii) Lump-sum offer-in-compromise.--For purposes of this section, the term `lump-sum offer-in-compromise' means any offer of payments made in 5 or fewer installments.

``(B) Periodic payment offers.--The submission of any periodic payment offer-in-compromise shall be accompanied by the payment of the amount of the first proposed installment and each proposed installment due during the period such offer is being evaluated for acceptance and has not been rejected by the Secretary. Any failure to make a payment required under the preceding sentence shall be deemed a withdrawal of the offer-in-compromise.

``(2) Rules of application.--

``(A) Use of payment.--The application of any payment made under this subsection to the assessed tax or other amounts imposed under this title with respect to such tax may be specified by the taxpayer.

``(B) No user fee imposed.--Any user fee which would otherwise be imposed under this section shall not be imposed on any offer-in-compromise accompanied by a payment required under this subsection.

``(C) Waiver authority.--The Secretary may issue regulations waiving any payment required under paragraph (1) in a manner consistent with the practices established in accordance with the requirements under subsection (d)(3).''.

(b) Additional Rules Relating to Treatment of Offers.--

(1) Unprocessable offer if payment requirements are not met.--Paragraph (3) of section 7122(d) (relating to standards for evaluation of offers), as redesignated by subsection (a), is amended by striking ``; and'' at the end of subparagraph

(A) and inserting a comma, by striking the period at the end of subparagraph (B) and inserting ``, and'', and by adding at the end the following new subparagraph:

``(C) any offer-in-compromise which does not meet the requirements of subsection (c) shall be returned to the taxpayer as unprocessable.''.

(2) Deemed acceptance of offer not rejected within certain period.--Section 7122, as amended by subsection (a), is amended by adding at the end the following new subsection:

``(g) Deemed Acceptance of Offer Not Rejected Within Certain Period.--Any offer-in-compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of the submission of such offer (12 months for offers-in-compromise submitted after the date which is 5 years after the date of the enactment of this subsection). For purposes of the preceding sentence, any period during which any tax liability which is the subject of such offer-in-compromise is in dispute in any judicial proceeding shall not be taken in to account in determining the expiration of the 24-month period (or 12-month period, if applicable).''.

(c) Effective Date.--The amendments made by this section shall apply to offers-in-compromise submitted on and after the date which is 60 days after the date of the enactment of this Act.

SEC. 347. WAIVER OF USER FEE FOR INSTALLMENT AGREEMENTS USING

AUTOMATED WITHDRAWALS.

(a) In General.--Section 6159 (relating to agreements for payment of tax liability in installments) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following:

``(e) Waiver of User Fees for Installment Agreements Using Automated Withdrawals.--In the case of a taxpayer who enters into an installment agreement in which automated installment payments are agreed to, the Secretary shall waive the fee (if any) for entering into the installment agreement.''.

(b) Effective Date.--The amendments made by this section shall apply to agreements entered into on or after the date which is 180 days after the date of the enactment of this Act.

SEC. 348. TERMINATION OF INSTALLMENT AGREEMENTS.

(a) In General.--Section 6159(b)(4) (relating to failure to pay an installment or any other tax liability when due or to provide requested financial information) is amended by striking ``or'' at the end of subparagraph (B), by redesignating subparagraph (C) as subparagraph (E), and by inserting after subparagraph (B) the following:

``(C) to make a Federal tax deposit under section 6302 at the time such deposit is required to be made,

``(D) to file a return of tax imposed under this title by its due date (including extensions), or''.

(b) Conforming Amendment.--The heading for section 6159(b)(4) is amended by striking ``Failure to pay an installment or any other tax liability when due or to provide requested financial information'' and inserting ``Failure to make payments or deposits or file returns when due or to provide requested financial information''.

(c) Effective Date.--The amendments made by this section shall apply to failures occurring on or after the date of the enactment of this Act.

Subtitle E--Additional Provisions

SEC. 351. MODIFICATION OF INDIVIDUAL ESTIMATED TAX SAFE

HARBOR.

(a) In General.--The table contained in section 6654(d)(1)(C) is amended by striking ``2002 or thereafter'' and inserting ``2002, 2003, 2004, or 2005'' and by adding at the end the following new items:

``2006..............................................................111

2007 or thereafter...............................................110''.

(b) Effective Date.--The amendments made by this section shall apply with respect to any installment payment for taxable years beginning after December 31, 2005.

SEC. 352. LOAN AND REDEMPTION REQUIREMENTS ON POOLED

FINANCING REQUIREMENTS.

(a) Strengthened Reasonable Expectation Requirement.--Subparagraph (A) of section 149(f)(2) (relating to reasonable expectation requirement) is amended to read as follows:

``(A) In general.--The requirements of this paragraph are met with respect to an issue if the issuer reasonably expects that--

``(i) as of the close of the 1-year period beginning on the date of issuance of the issue, at least 50 percent of the net proceeds of the issue (as of the close of such period) will have been used directly or indirectly to make or finance loans to ultimate borrowers, and

``(ii) as of the close of the 3-year period beginning on such date of issuance, at least 95 percent of the net proceeds of the issue (as of the close of such period) will have been so used.''.

(b) Written Loan Commitment and Redemption Requirements.--Section 149(f) (relating to treatment of certain pooled financing bonds) is amended by redesignating paragraphs (4) and (5) as paragraphs (6) and (7), respectively, and by inserting after paragraph (3) the following new paragraphs:

``(4) Written loan commitment requirement.--

``(A) In general.--The requirement of this paragraph is met with respect to an issue if the issuer receives prior to issuance written loan commitments identifying the ultimate potential borrowers of at least 50 percent of the net proceeds of such issue.

``(B) Exception.--Subparagraph (A) shall not apply with respect to any issuer which is a State (or an integral part of a State) issuing pooled financing bonds to make or finance loans to subordinate governmental units of such State or to State-created entities providing financing for water-infrastructure projects through the federally-sponsored State revolving fund program.

``(5) Redemption requirement.--The requirement of this paragraph is met if to the extent that less than the percentage of the proceeds of an issue required to be used under clause (i) or (ii) of paragraph (2)(A) is used by the close of the period identified in such clause, the issuer uses an amount of proceeds equal to the excess of--

``(A) the amount required to be used under such clause, over

``(B) the amount actually used by the close of such period,

to redeem outstanding bonds within 90 days after the end of such period.''.

(c) Elimination of Disregard of Pooled Bonds in Determining Eligibility for Small Issuer Exception to Arbitrage Rebate.--Section 148(f)(4)(D)(ii) (relating to aggregation of issuers) is amended by striking subclause (II) and by redesignating subclauses (III) and (IV) as subclauses (II) and (III), respectively.

(d) Conforming Amendments.--

(1) Section 149(f)(1) is amended by striking ``paragraphs

(2) and (3)'' and inserting ``paragraphs (2), (3), (4), and

(5)''.

(2) Section 149(f)(7)(B), as redesignated by subsection

(b), is amended by striking ``paragraph (4)(A)'' and inserting ``paragraph (6)(A)''.

(3) Section 54(l)(2) is amended by striking ``section 149(f)(4)(A)'' and inserting ``section 149(f)(6)(A)''.

(e) Effective Date.--The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.

SEC. 353. REPORTING OF INTEREST ON TAX-EXEMPT BONDS.

(a) In General.--Section 6049(b)(2) (relating to exceptions) is amended by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively.

(b) Conforming Amendment.--Section 6049(b)(2)(C), as redesignated by subsection (a), is amended by striking

``subparagraph (C)'' and inserting ``subparagraph (B)''.

______

SA 2603. Mr. PRYOR submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. DEFINITION OF CONVENTION OR ASSOCIATION OF CHURCHES.

(a) In General.--Section 7701 (relating to definitions) is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

``(o) Convention or Association of Churches.--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 because individuals have voting rights in such organization.''.

(b) Effective Date.--The amendment made by this section shall apply to taxable years ending after December 31, 2005.

______

SA 2604. Mrs. CLINTON (for herself and Mr. Obama) submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. HOME LEAD HAZARD REDUCTION ACTIVITY TAX CREDIT.

(a) In General.--Subpart B of part IV of subchapter A of chapter 1 (relating to foreign tax credit, etc.) is amended by adding at the end the following new section:

``SEC. 30D. HOME LEAD HAZARD REDUCTION ACTIVITY.

``(a) Allowance of Credit.--There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 50 percent of the lead hazard reduction activity cost paid or incurred by the taxpayer during the taxable year for each eligible dwelling unit.

``(b) Limitation.--The amount of the credit allowed under subsection (a) for any eligible dwelling unit for any taxable year shall not exceed--

``(1) either--

``(A) $3,000 in the case of lead hazard reduction activity cost including lead abatement measures described in clauses

(i), (ii), (iv) and (v) of subsection (c)(1)(A), or

``(B) $1,000 in the case of lead hazard reduction activity cost including interim lead control measures described in clauses (i), (iii), (iv), and (v) of subsection (c)(1)(A), reduced by

``(2) the aggregate lead hazard reduction activity cost taken into account under subsection (a) with respect to such unit for all preceding taxable years.

``(c) Definitions and Special Rules.--For purposes of this section:

``(1) Lead hazard reduction activity cost.--

``(A) In general.--The term `lead hazard reduction activity cost' means, with respect to any eligible dwelling unit--

``(i) the cost for a certified risk assessor to conduct an assessment to determine the presence of a lead-based paint hazard,

``(ii) the cost for performing lead abatement measures by a certified lead abatement supervisor, including the removal of paint and dust, the permanent enclosure or encapsulation of lead-based paint, the replacement of painted surfaces, windows, or fixtures, or the removal or permanent covering of soil when lead-based paint hazards are present in such paint, dust, or soil,

``(iii) the cost for performing interim lead control measures to reduce exposure or likely exposure to lead-based paint hazards, including specialized cleaning, repairs, maintenance, painting, temporary containment, ongoing monitoring of lead-based paint hazards, and the establishment and operation of management and resident education programs, but only if such measures are evaluated and completed by a certified lead abatement supervisor using accepted methods, are conducted by a qualified contractor, and have an expected useful life of more than 10 years,

``(iv) the cost for a certified lead abatement supervisor, those working under the supervision of such supervisor, or a qualified contractor to perform all preparation, cleanup, disposal, and clearance testing activities associated with the lead abatement measures or interim lead control measures, and

``(v) costs incurred by or on behalf of any occupant of such dwelling unit for any relocation which is necessary to achieve occupant protection (as defined under section 35.1345 of title 24, Code of Federal Regulations).

``(B) Limitation.--The term `lead hazard reduction activity cost' does not include any cost to the extent such cost is funded by any grant, contract, or otherwise by another person

(or any governmental agency).

``(2) Eligible dwelling unit.--

``(A) In general.--The term `eligible dwelling unit' means, with respect to any taxable year, any dwelling unit--

``(i) placed in service before 1960,

``(ii) located in the United States,

``(iii) in which resides, for a total period of not less than 50 percent of the taxable year, at least 1 child who has not attained the age of 6 years or 1 woman of child-bearing age, and

``(iv) each of the residents of which during such taxable year has an adjusted gross income of less than 185 percent of the poverty line (as determined for such taxable year in accordance with criteria established by the Director of the Office of Management and Budget).

``(B) Dwelling unit.--The term `dwelling unit' has the meaning given such term by section 280A(f)(1).

``(3) Lead-based paint hazard.--The term `lead-based paint hazard' has the meaning given such term by section 745.61 of title 40, Code of Federal Regulations.

``(4) Certified lead abatement supervisor.--The term

`certified lead abatement supervisor' means an individual certified by the Environmental Protection Agency pursuant to section 745.226 of title 40, Code of Federal Regulations, or an appropriate State agency pursuant to section 745.325 of title 40, Code of Federal Regulations.

``(5) Certified inspector.--The term `certified inspector' means an inspector certified by the Environmental Protection Agency pursuant to section 745.226 of title 40, Code of Federal Regulations, or an appropriate State agency pursuant to section 745.325 of title 40, Code of Federal Regulations.

``(6) Certified risk assessor.--The term `certified risk assessor' means a risk assessor certified by the Environmental Protection Agency pursuant to section 745.226 of title 40, Code of Federal Regulations, or an appropriate State agency pursuant to section 745.325 of title 40, Code of Federal Regulations.

``(7) Qualified contractor.--The term `qualified contractor' means any contractor who has successfully completed a training course on lead safe work practices which has been approved by the Department of Housing and Urban Development and the Environmental Protection Agency.

``(8) Documentation required for credit allowance.--No credit shall be allowed under subsection (a) with respect to any eligible dwelling unit for any taxable year unless--

``(A) after lead hazard reduction activity is complete, a certified inspector or certified risk assessor provides written documentation to the taxpayer that includes--

``(i) evidence that--

``(I) the eligible dwelling unit passes the clearance examinations required by the Department of Housing and Urban Development under part 35 of title 40, Code of Federal Regulations,

``(II) the eligible dwelling unit does not contain lead dust hazards (as defined by section 745.227(e)(8)(viii) of such title 40), or

``(III) the eligible dwelling unit meets lead hazard evaluation criteria established under an authorized State or local program, and

``(ii) documentation showing that the lead hazard reduction activity meets the requirements of this section, and

``(B) the taxpayer files with the appropriate State agency and attaches to the tax return for the taxable year--

``(i) the documentation described in subparagraph (A),

``(ii) documentation of the lead hazard reduction activity costs paid or incurred during the taxable year with respect to the eligible dwelling unit, and

``(iii) a statement certifying that the dwelling unit qualifies as an eligible dwelling unit for such taxable year.

``(9) Basis reduction.--The basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit (determined without regard to subsection (d)).

``(10) No double benefit.--Any deduction allowable for costs taken into account in computing the amount of the credit for lead-based paint abatement shall be reduced by the amount of such credit attributable to such costs.

``(d) Limitation Based on Amount of Tax.--The credit allowed under subsection (a) for the taxable year shall not exceed the excess of--

``(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

``(2) the sum of the credits allowable under subpart A and sections 27, 29, 30, 30A, 30B, and 30C for the taxable year.

``(e) Carryforward Allowed.--

``(1) In general.--If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (d) for such taxable year

(referred to as the `unused credit year' in this subsection), such excess shall be allowed as a credit carryforward for each of the 20 taxable years following the unused credit year.

``(2) Rules.--Rules similar to the rules of section 39 shall apply with respect to the credit carryforward under paragraph (1).''.

(b) Conforming Amendments.--

(1) Section 1016(a) of the Internal Revenue Code of 1986 is amended by striking ``and'' in paragraph (36), by striking the period and inserting ``, and'' in paragraph (37), and by inserting at the end the following new paragraph:

``(38) in the case of an eligible dwelling unit with respect to which a credit for any lead hazard reduction activity cost was allowed under section 30D, to the extent provided in section 30D(c)(9).''.

(2) The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 30C the following new item:

``Sec. 30D. Home lead hazard reduction activity.''.

(c) Effective Date.--The amendments made by this section shall apply to lead hazard reduction activity costs incurred after December 31, 2005, in taxable years ending after that date.

SEC. __. MODIFICATION OF EXCLUSION FOR CITIZENS LIVING

ABROAD.

(a) Inflation Adjustment of Foreign Earned Income Limitation.--Clause (ii) of section 911(b)(2)(D) (relating to inflation adjustment) is amended--

(1) by striking ``2007'' and inserting ``2005'', and

(2) by striking ``2006'' in subclause (II) and inserting

``2004''.

(b) Modification of Housing Cost Amount.--

(1) Minimum amount.--Clause (i) of section 911(c)(1)(B) is amended to read as follows:

``(i) 16 percent of the amount (computed on a daily basis) in effect under subsection (b)(2)(D) for the calendar year in which such taxable year begins, multiplied by''.

(2) Maximum amount of exclusion.--

(A) In general.--Subparagraph (A) of section 911(c)(1) is amended by inserting ``to the extent such expenses do not exceed the amount determined under paragraph (2)'' after

``the taxable year''.

(B) Limitation.--Subsection (c) of section 911 is amended by redesignating paragraphs (2) and (3) as paragraphs (3) and

(4), respectively, and by inserting after paragraph (1) the following new paragraph:

``(2) Limitation.--The amount determined under this paragraph is an amount equal to the product of--

``(A) 30 percent of the amount (computed on a daily basis) in effect under subsection (b)(2)(D) for the calendar year in which the taxable year of the individual begins, multiplied by

``(B) the number of days of such taxable year within the applicable period described in subparagraph (A) or (B) of subsection (d)(1).''.

(i) Section 911(d)(4) is amended by striking ``and

(c)(1)(B)(ii)'' and inserting ``, (c)(1)(B)(ii), and

(c)(2)(B)''

(ii) Section 911(d)(7) is amended by striking ``subsection

(c)(3)'' and inserting ``subsection (c)(4)''.

``(1) the tax imposed by section 1 on the taxpayer for such taxable year shall be equal to the excess (if any) of--

``(A) the tax which would be imposed by section 1 for the taxable year if the taxpayer's taxable income were equal to the sum of--

``(i) the taxpayer's taxable income for the taxable year

(determined without regard to this subsection), plus

``(ii) the amount excluded under subsection (a) for the taxable year, over

``(B) the tax which would be imposed by section 1 for the taxable year if the taxpayer's taxable income were equal to the amount excluded under subsection (a) for the taxable year, and

``(2) the tax imposed by section 55 for such taxable year shall be equal to the excess (if any) of--

``(A) the amount which would be the tentative minimum tax under section 55 for the taxable year if the taxpayer's alternative minimum taxable income were equal to the sum of--

``(i) the taxpayer's alternative minimum taxable income for the taxable year (determined without regard to this subsection), plus

``(ii) the amount excluded under subsection (a) for the taxable year, over

``(B) the sum of--

``(ii) the amount which would be the regular tax for the taxable year if the tax imposed by section 1 were the tax computed under paragraph (1).For purposes of this subsection, the amount excluded under subsection (a) shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection

(d)(6) with respect to such excluded amount.''.

(d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

______

SA 2605. Mr. OBAMA (for himself, Mr. Coburn, Mr. Lautenberg, Ms. Snowe, Mr. Johnson, and Mr. Ensign) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

At the appropriate place, insert the following:

SEC. __. SENSE OF THE SENATE ON USE OF NO-BID CONTRACTING BY

FEDERAL EMERGENCY MANAGEMENT AGENCY.

(a) Findings.--The Senate finds that--

(1) on September 8, 2005, the Federal Emergency Management Agency announced that it had awarded 4 contracts for emergency housing relief following Hurricane Katrina to The Shaw Group of Baton Rouge, Louisiana, Fluor Corporation of Aliso Viejo, California, Bechtel National of San Francisco, California, and CH2M Hill of Denver, Colorado;

(2) these contracts were awarded with no competition from other capable firms, and up to $100,000,000 in taxpayer funds were authorized for each of these contracts;

(3) in the midst of concerns about abusive and irresponsible spending of taxpayer funds, the Federal Emergency Management Agency pledged to re-bid these noncompetitive contracts, with Acting Under Secretary of Emergency Preparedness and Response, R. David Paulison, stating before the Committee on Homeland Security and Government Affairs of the Senate that ``[a]ll of these no-bid contracts, we are going to go back and re-bid'';

(4) the Federal Emergency Management Agency has yet to reopen these 4 contracts to competitive bidding, and declared on November 11, 2005, that these contracts would not be reopened for bidding until February 2006;

(5) by February 2006, the majority of the contracts will have been completed and the majority of taxpayer funds will have been spent;

(6) large and politically-connected firms continue to benefit from no-bid and limited-competition contracts, and contracts are not being awarded to capable, local companies;

(7) according to an analysis in the Washington Post, companies outside the States most affected by Hurricane Katrina have received more than 90 percent of the Federal contracts for recovery and reconstruction;

(8) the monitoring of Federal contracting practices remains difficult, with a report by the San Jose Mercury News stating

``The database of contracts is incomplete. Information released by Federal agencies is spotty and sporadic. And disclosure of many no-bid contracts isn't required by law''; and

(9)(A) there is currently no Chief Financial Officer charged with monitoring the flow of all funds to the affected areas; and

(B) the task of financial management is spread across disparate Federal departments and agencies with inadequate oversight of taxpayer funds.

(b) Sense of the Senate.--It is the sense of the Senate that the Federal Emergency Management Agency should--

(1) immediately rebid noncompetitive contracts entered into following Hurricane Katrina, consistent with the commitment of the Agency made on October 6, 2005, before millions of taxpayer dollars are wasted on irresponsible and inefficient spending;

(2)(A) immediately implement the planned competitive contracting strategy of the Agency for recovery work in all current and future reconstruction efforts; and

(B) in carrying out that strategy, should prioritize local and small disadvantaged businesses in the contracting and subcontracting process; and

(3) immediately after the awarding of a contract, publicly disclose the amount and competitive or noncompetitive nature of the contract.

______

SA 2606. Mr. KERRY (for himself and Mr. Wyden) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

On page 235, between lines 13 and 14, insert the following:

SEC. ___. EXTENSION AND INCREASE IN MINIMUM TAX RELIEF TO

INDIVIDUALS.

(a) In General.--Section 55(d)(1) is amended--

(1) by striking ``$58,000'' and all that follows through

``2005'' in subparagraph (A) and inserting ``$62,550 in the case of taxable years beginning in 2006'', and

(2) by striking ``$40,250'' and all that follows through

``2005'' in subparagraph (B) and inserting ``$42,500 in the case of taxable years beginning in 2006''.

(b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. ___. MODIFICATION OF EXCLUSION FOR CITIZENS LIVING

ABROAD.

(a) Inflation Adjustment of Foreign Earned Income Limitation.--Clause (ii) of section 911(b)(2)(D) (relating to inflation adjustment) is amended--

(1) by striking ``2007'' and inserting ``2005'', and

(2) by striking ``2006'' in subclause (II) and inserting

``2004''.

(b) Modification of Housing Cost Amount.--

(1) Minimum amount.--Clause (i) of section 911(c)(1)(B) is amended to read as follows:

``(i) 16 percent of the amount (computed on a daily basis) in effect under subsection (b)(2)(D) for the calendar year in which such taxable year begins, multiplied by''.

(2) Maximum amount of exclusion.--

(A) In general.--Subparagraph (A) of section 911(c)(1) is amended by inserting ``to the extent such expenses do not exceed the amount determined under paragraph (2)'' after

``the taxable year''.

(B) Limitation.--Subsection (c) of section 911 is amended by redesignating paragraphs (2) and (3) as paragraphs (3) and

(4), respectively, and by inserting after paragraph (1) the following new paragraph:

``(2) Limitation.--The amount determined under this paragraph is an amount equal to the product of--

``(A) 30 percent of the amount (computed on a daily basis) in effect under subsection (b)(2)(D) for the calendar year in which the taxable year of the individual begins, multiplied by

``(B) the number of days of such taxable year within the applicable period described in subparagraph (A) or (B) of subsection (d)(1).''.

(i) Section 911(d)(4) is amended by striking ``and

(c)(1)(B)(ii)'' and inserting ``, (c)(1)(B)(ii), and

(c)(2)(B)''

(ii) Section 911(d)(7) is amended by striking ``subsection

(c)(3)'' and inserting ``subsection (c)(4)''.

``(1) the tax imposed by section 1 on the taxpayer for such taxable year shall be equal to the excess (if any) of--

``(A) the tax which would be imposed by section 1 for the taxable year if the taxpayer's taxable income were equal to the sum of--

``(i) the taxpayer's taxable income for the taxable year

(determined without regard to this subsection), plus

``(ii) the amount excluded under subsection (a) for the taxable year, over

``(B) the tax which would be imposed by section 1 for the taxable year if the taxpayer's taxable income were equal to the amount excluded under subsection (a) for the taxable year, and

``(2) the tax imposed by section 55 for such taxable year shall be equal to the excess (if any) of--

``(A) the amount which would be the tentative minimum tax under section 55 for the taxable year if the taxpayer's alternative minimum taxable income were equal to the sum of--

``(i) the taxpayer's alternative minimum taxable income for the taxable year (determined without regard to this subsection), plus

``(ii) the amount excluded under subsection (a) for the taxable year, over

``(B) the sum of--

``(ii) the amount which would be the regular tax for the taxable year if the tax imposed by section 1 were the tax computed under paragraph (1).

For purposes of this subsection, the amount excluded under subsection (a) shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection

(d)(6) with respect to such excluded amount.''.

(d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

SEC. ___. MODIFICATION OF INDIVIDUAL ESTIMATED TAX SAFE

HARBOR.

``2006.........................................................121.1

2007 or thereafter.............................................110''.

(b) Effective Date.--The amendments made by this section shall apply with respect to any installment payment for taxable years beginning after December 31, 2005.

______

SA 2607. Mr. SUNUNU submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. ___. REPEAL OF STATE AND LOCAL TAX EXEMPTION FOR FANNIE

MAE AND FREDDIE MAC.

(a) Fannie Mae.--Section 309(c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1723a(c)) is amended to read as follows:

``(c) [Repealed.]''.

(b) Freddie Mac.--Section 303(e) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1452(e)) is amended to read as follows:

``(e) [Repealed.]''.

______

SA 2608. Ms. MURKOWSKI (for herself, Mr. Johnson, and Mr. Bingaman) submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

On page 235, between lines 13 and 14, insert the following:

SEC. __. CHARITABLE CONTRIBUTIONS OF FOOD INVENTORY TO INDIAN

TRIBES.

(a) In General.--Section 170(e)(3) of the Internal Revenue Code of 1986 (relating to special rule for contributions of inventory and other property) is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph:

``(D) Special rule for food contributions to indian tribes.--

``(i) In general.--For purposes of this paragraph, in the case of a charitable contribution of food which is apparently wholesome food (as defined in subparagraph (C)(iii)), an Indian tribe (as defined in section 7871(c)(3)(E)(ii)) shall be treated as an organization eligible to be a donee under subparagraph (A).

``(ii) Use of property.--For purposes of subparagraph

(A)(i), if the use of the property donated is related to the exercise of an essential governmental function of the Indian tribal government (within the meaning of section 7871), such use shall be treated as related to the purpose or function constituting the basis for the organization's exemption.''.

(b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

______

SA 2609. Mrs. FEINSTEIN (for herself, Mr. Sununu, Mr. Gregg, Mr. Wyden, Ms. Cantwell, Mr. Feingold, Mr. Burr, Mr. McCain, Mr. Kerry, Ms. Collins, and Mrs. Clinton) proposed an amendment to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

At the end of title IV, add the following:

SEC. __. REPEAL OF CERTAIN TAX BENEFITS RELATING TO OIL AND

GAS WELLS INTANGIBLE DRILLING AND DEVELOPMENT

COSTS.

(a) In General.--Section 263(c) (relating to intangible drilling and development costs) is amended by adding at the end the following new sentence: ``This subsection shall not apply with respect to wells (other than wells drilled for any geothermal deposit (as so defined)) of any integrated oil company (as defined in section 291(b)(4)) which has an average daily worldwide production of crude oil of at least 500,000 barrels for the taxable year in any taxable year beginning after December 31, 2005.''.

(b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2005.

______

SA 2610. Mrs. FEINSTEIN (for herself and Mr. Kerry) proposed an amendment to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

At the end of the bill, insert the following:

SEC. __. REINSTATEMENT FOR MILLIONAIRES OF 39.6 PERCENT

INCOME TAX RATE, PRE-MAY 2003 CAPITAL GAIN AND

DIVIDEND RATES, AND DEDUCTION LIMITATIONS UNTIL

BUDGET DEFICIT ELIMINATED.

(a) Repeal of Top Income Tax Rate Reductions.--

(1) In general.--Section 1(i) (relating to rate reductions) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

``(3) Exception for taxpayers with taxable income of

$1,000,000, or more.--Notwithstanding paragraph (2), in the case of taxable years beginning in a calender year after 2005, the last item in the fourth column of the table under paragraph (2) shall be applied by substituting `39.6%' for

`35.0%' with respect to taxable income in excess of

$1,000,000 ($500,000 in the case of taxpayers to whom subsection (d) applies).''.

(2) Effective date.--The amendment made by this subsection shall apply to taxable years beginning after December 31, 2005.

(3) Application of egtrra sunset.--The amendment made by this subsection shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 to the same extent and in the same manner as the provision of such Act to which such amendment relates.

(b) Restoration of Pre-May 2003 Tax Rates on Capital Gains and Dividends for Individuals In Top Rate Bracket.--

(1) In general.--Section 1(h) is amended by adding at the end the following new paragraph:

``(12) Increased rates for individuals in the top rate bracket.--

``(A) Dividends.--In no event shall the qualified dividend income of a taxpayer for any taxable year exceed the excess

(if any) of--

``(i) the minimum dollar amount to which the 39.6 rate applies under subsection (i) for the taxable year, over

``(ii) taxable income, reduced by adjusted net capital gain

(determined without regard to this paragraph).

``(B) Capital gains.--If a taxpayer has a net capital gain for any taxable year, the taxpayer's tax shall be increased by an amount equal to 5 percent of the lesser of--

``(i) the taxpayer's adjusted net capital gain, determined after application of subparagraph (A) and by only taking into account gain or loss properly allocable to the portion of the taxable year after December 31, 2005, or

``(ii) taxable income in excess of the minimum dollar amount to which the 39.6 rate applies under subsection (i) for the taxable year.''

(2) Application to minimum tax.--Section 55(b)(3) is amended by adding at the end the following new sentence:

``The rules of section 1(h)(12) shall apply for purposes of this paragraph.''

(3) Effective dates.--

(A) Capital gains.--Section 1(h)(12)(B) of the Internal Revenue Code of 1986 (as added by paragraph (1)) shall apply to taxable years beginning after December 31, 2005.

(B) Dividend rates.--Section 1(h)(12)(A) of such Code (as added by paragraph (1)) shall apply to dividends received after December 31, 2005.

(4) Application of jgtrra sunset.--The amendment made by this subsection shall be subject to section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 to the same extent and in the same manner as the provision of such Act to which such amendment relates.

(c) Repeal of the Scheduled Phase Out and Termination of the Limitations on Personal Exemptions and Itemized Deductions.--

(1) Repeal.--

(A) Personal exemptions.--Section 1(d)(3) is amended by adding at the end the following:

``(6) Reduction of phase out and termination not to apply.--Subparagraphs (E) and (F) shall not apply to a taxpayer whose adjusted gross income for the taxable year exceeds $1,000,000 ($500,000 in the case of a married individual filing a separate return).''

(B) Itemized deductions.--Section 68 is amended by adding at the end the following:

``(h) Reduction of Phase Out and Termination Not to Apply.--Subsections (f) and (g) shall not apply to a taxpayer whose adjusted gross income for the taxable year exceeds

$1,000,000 ($500,000 in the case of a married individual filing a separate return).''

(2) Effective date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005.

(3) Application of egtrra sunset.--The amendments made by this section shall be subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 to the same extent and in the same manner as the provision of such Act to which such amendment relates.

(d) Sunset of Amendments if Budget Deficit Eliminated.--

(1) In general.--The amendments made by this section shall not apply to taxable years beginning after the first calendar year for which the certification described in paragraph

(2)(B) is made.

(2) Estimates and certification.--

(A) In general.--Not later than October 15 of each calendar year beginning after 2005, the Director of the Office of Management and Budget, in consultation with the Secretary of the Treasury, shall estimate--

(i) the Federal budget deficit for the fiscal year ending in the calendar year, and

(ii) the Federal budget deficit for the fiscal year beginning in the calendar year (determined as if the amendments made by this section were not in effect for taxable years beginning in the following calendar year).

(B) Certification.--The Director of the Office of Management and Budget shall certify to the President of the United States and to the Congress the first calendar year for which the Director estimates under subparagraph (A) that there will be no Federal budget deficit for both of the fiscal years for which the estimate was made.

______

SA 2611. Mr. SCHUMER (for himself, Mr. Lautenberg, Mrs. Feinstein, Mr. Feingold, Mrs. Clinton, Mr. Kerry, Mr. Lieberman, Mr. Salazar, Mrs. Boxer, Ms. Stabenow, Ms. Mikulski, Mr. Kohl, and Mr. Kennedy) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, insert the following:

SEC. __. SENSE OF THE SENATE REGARDING THE FEDERAL TAX

DEDUCTION FOR STATE AND LOCAL TAXES.

(a) Findings.--The Senate finds the following:

(1) No American should be unnecessarily or excessively burdened with additional taxes.

(2) The Federal income tax has grown more complicated and unmanageable over time, imposing burdensome administrative and compliance costs on American taxpayers.

(3) On January 7, 2005, President George W. Bush created the President's Advisory Panel on Federal Tax Reform (the

``Panel'') via Executive Order 13369.

(4) The Panel was tasked with providing several options for Federal tax reform that would simplify Federal tax laws, retain progressivity, and promote long-run economic growth and job creation.

(5) In its final report, released publicly on November 1, 2005, the Panel recommended the complete repeal of the Federal deduction for State and local taxes, as a central component of both the ``Simplified Income Tax Plan'' and the

``Growth and Investment Tax Plan''.

(6) State and local taxes have been deductible from the Federal income tax since the inception of the Federal income tax in 1913.

(7) Eliminating the deduction for State and local taxes would create a new form of double taxation at a time where efforts are being made to reduce other forms of double taxation, since repeal would require millions of taxpayers to pay Federal taxes on income that is also taxed at the State or local level.

(8) Congress has recently taken steps to expand, rather than cut back, the State and local tax deduction, by reinstating a deduction for State sales taxes for some taxpayers (previously repealed as part of the Tax Reform Act of 1986), as part of the American Jobs Creation Act of 2004.

(9) There is some concern, as noted by the nonpartisan Urban-Brookings Tax Policy Center, that eliminating the deduction could ``lower support for public services and lead to a `race to the bottom' in terms of State and local expenditures as States compete to have the lowest taxes in order to attract higher-income households''.

(10) The deduction for State and local taxes is not just a concern for a small minority of taxpayers in the largest States, as 22 States saw more than \1/3\ of their taxpayers take the deduction in 2003, the latest year for which data is available (Maryland, New Jersey, Connecticut, Colorado, Oregon, Minnesota, Massachusetts, Virginia, Utah, California, Georgia, New York, Wisconsin, Arizona, Rhode Island, Michigan, Delaware, North Carolina, Illinois, New Hampshire, Nevada, and Idaho (ranked in order of the percentage of taxpayers affected)).

(11) In tax year 2003, 43,538,000 taxpayers in the United States took advantage of the Federal deduction for State and local taxes, deducting a total of $315,690,000,000, thereby saving taxpayers in the United States approximately

$88,390,000,000 in Federal income taxes, assuming an average marginal rate of 28 percent for taxpayers who itemize.

(12) In tax year 2003, the top 25 States ranked by the number of taxpayers affected represented 77 percent of the taxpayers affected nationally, and took 85 percent of the total deductions for State and local taxes, as described in the following subparagraphs:

(A) In California, 5,807,000 taxpayers deducted a total of

$54,920,000,000, saving California taxpayers approximately

$15,380,000,000 in Federal income taxes.

(B) In New York, 3,228,000 taxpayers deducted a total of

$37,600,000,000, saving New York taxpayers approximately

$10,530,000,000 in Federal income taxes.

$13,720,000,000, saving Illinois taxpayers approximately

$3,840,000,000 in Federal income taxes.

(D) In Ohio, 1,809,000 taxpayers deducted a total of

$12,720,000,000, saving Ohio taxpayers approximately

$3,560,000,000 in Federal income taxes.

(E) In New Jersey, 1,791,000 taxpayers deducted a total of

$18,750,000,000, saving New Jersey taxpayers approximately

$5,250,000,000 in Federal income taxes.

(F) In Pennsylvania, 1,765,000 taxpayers deducted a total of $12,400,000,000, saving Pennsylvania taxpayers approximately $3,470,000,000 in Federal income taxes.

(G) In Michigan, 1,627,000 taxpayers deducted a total of

$10,350,000,000, saving Michigan taxpayers approximately

$2,900,000,000 in Federal income taxes.

(H) In Georgia, 1,416,000 taxpayers deducted a total of

$8,720,000,000, saving Georgia taxpayers approximately

$2,440,000,000 in Federal income taxes.

(I) In Virginia, 1,355,000 taxpayers deducted a total of

$9,630,000,000, saving Virginia taxpayers approximately

$2,700,000,000 in Federal income taxes.

(J) In North Carolina, 1,304,000 taxpayers deducted a total of $8,720,000,000, saving North Carolina taxpayers approximately $2,440,000,000 in Federal income taxes.

(K) In Maryland, 1,260,000 taxpayers deducted a total of

$10,410,000,000, saving Maryland taxpayers approximately

$2,920,000,000 in Federal income taxes.

(L) In Massachusetts, 1,216,000 taxpayers deducted a total of $10,840,000,000, saving Massachusetts taxpayers approximately $3,040,000,000 in Federal income taxes.

(M) In Minnesota, 969,000 taxpayers deducted a total of

$7,060,000,000, saving Minnesota taxpayers approximately

$1,980,000,000 in Federal income taxes.

(N) In Wisconsin, 961,000 taxpayers deducted a total of

$8,000,000,000, saving Wisconsin taxpayers approximately

$2,240,000,000 in Federal income taxes.

(O) In Colorado, 856,000 taxpayers deducted a total of

$4,570,000,000, saving Colorado taxpayers approximately

$1,280,000,000 in Federal income taxes.

(P) In Arizona, 841,000 taxpayers deducted a total of

$4,110,000,000, saving Arizona taxpayers approximately

$1,150,000,000 in Federal income taxes.

(Q) In Indiana, 832,000 taxpayers deducted a total of

$4,530,000,000, saving Indiana taxpayers approximately

$1,270,000,000 in Federal income taxes.

(R) In Missouri, 772,000 taxpayers deducted a total of

$4,890,000,000, saving Missouri taxpayers approximately

$1,370,000,000 in Federal income taxes.

(S) In Connecticut, 713,000 taxpayers deducted a total of

$7,970,000,000, saving Connecticut taxpayers approximately

$2,230,000,000 in Federal income taxes.

(T) In Oregon, 641,000 taxpayers deducted a total of

$5,100,000,000, saving Oregon taxpayers approximately

$1,430,000,000 in Federal income taxes.

(U) In South Carolina, 574,000 taxpayers deducted a total of $3,390,000,000, saving South Carolina taxpayers approximately $949,000,000 in Federal income taxes.

(V) In Alabama, 538,000 taxpayers deducted a total of

$2,090,000,000, saving Alabama taxpayers approximately

$586,000,000 in Federal income taxes.

(W) In Kentucky, 515,000 taxpayers deducted a total of

$3,300,000,000, saving Kentucky taxpayers approximately

$925,000,000 in Federal income taxes.

(X) In Oklahoma, 434,000 taxpayers deducted a total of

$2,320,000,000, saving Oklahoma taxpayers approximately

$650,000,000 in Federal income taxes.

(Y) In Iowa, 397,000 taxpayers deducted a total of

$2,510,000,000, saving Iowa taxpayers approximately

$702,000,000 in Federal income taxes.

(b) Sense of the Senate.--It is the sense of the Senate that Congress should not repeal or substantially alter the longstanding Federal tax deduction for State and local taxes.

______

SA 2612. Ms. CANTWELL (form herself, Mr. Bayh, Mr. Lieberman, Mr. Schumer, Mrs. Boxer, Mr. Carper, Mrs. Clinton, Mr. Salazar, Mr. Kohl, Mrs. Murray, Ms. Stabenow, and Mrs. Feinstein) submitted an amendment to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

At the end of the bill, insert the following:

TITLE I--ENERGY EMERGENCY CONSUMER PROTECTION

SEC. __. UNFAIR OR DECEPTIVE ACTS OR PRACTICES IN COMMERCE

RELATED TO GASOLINE AND PETROLEUM DISTILLATES.

(a) Sales to Consumers at Unconscionable Price.--

(1) In general.--During any energy emergency declared by the President under section 3, it is unlawful for any person to sell crude oil, gasoline, or petroleum distillates in, or for use in, the area to which that declaration applies at a price that--

(A) is unconscionably excessive; or

(B) indicates the seller is taking unfair advantage of the circumstances to increase prices unreasonably.

(2) Factors considered.--In determining whether a violation of paragraph (1) has occurred, there shall be taken into account, among other factors, whether--

(A) the amount charged represents a gross disparity between the price of the crude oil, gasoline, or petroleum distillate sold and the price at which it was offered for sale in the usual course of the seller's business immediately prior to the energy emergency; or

(B) the amount charged grossly exceeds the price at which the same or similar crude oil, gasoline, or petroleum distillate was readily obtainable by other purchasers in the area to which the declaration applies.

(3) Mitigating factors.--In determining whether a violation of paragraph (1) has occurred, there also shall be taken into account, among other factors, the price that would reasonably equate supply and demand in a competitive and freely functioning market and whether the price at which the crude oil, gasoline, or petroleum distillate was sold reasonably reflects additional costs, not within the control of the seller, that were paid or incurred by the seller.

(b) False Pricing Information.--It is unlawful for any person to report information related to the wholesale price of crude oil, gasoline, or petroleum distillates to the Federal Trade Commission if--

(1) that person knew, or reasonably should have known, the information to be false or misleading;

(2) the information was required by law to be reported; and

(3) the person intended the false or misleading data to affect data compiled by that department or agency for statistical or analytical purposes with respect to the market for crude oil, gasoline, or petroleum distillates.

(c) Market Manipulation.--It is unlawful for any person, directly or indirectly, to use or employ, in connection with the purchase or sale of crude oil, gasoline, or petroleum distillates at wholesale, any manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of United States citizens.

SEC. __. DECLARATION OF ENERGY EMERGENCY.

(a) In General.--If the President finds that the health, safety, welfare, or economic well-being of the citizens of the United States is at risk because of a shortage or imminent shortage of adequate supplies of crude oil, gasoline, or petroleum distillates due to a disruption in the national distribution system for crude oil, gasoline, or petroleum distillates (including such a shortage related to a major disaster (as defined in section 102(2) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122))), or significant pricing anomalies in national energy markets for crude oil, gasoline, or petroleum distillates, the President may declare that a Federal energy emergency exists.

(b) Scope and Duration.--The declaration shall apply to the Nation, a geographical region, or 1 or more States, as determined by the President, but may not be in effect for a period of more than 45 days.

(1) extend a declaration under subsection (a) for a period of not more than 45 days; and

(2) extend such a declaration more than once.

SEC. __. ENFORCEMENT UNDER FEDERAL TRADE COMMISSION ACT.

(a) Enforcement by Commission.--This Act shall be enforced by the Federal Trade Commission. In enforcing section 2(a) of this Act, the Commission shall give priority to enforcement actions concerning companies with total United States wholesale or retail sales of crude oil, gasoline, and petroleum distillates in excess of $500,000,000 per year but shall not exclude enforcement actions against companies with total United States wholesale sales of $500,000,000 or less per year.

(b) Violation Is Unfair or Deceptive Act or Practice.--The violation of any provision of this Act shall be treated as an unfair or deceptive act or practice proscribed under a rule issued under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).

SEC. __. ENFORCEMENT AT RETAIL LEVEL BY STATE ATTORNEYS

GENERAL.

(a) In General.--A State, as parens patriae, may bring a civil action on behalf of its residents in an appropriate district court of the United States to enforce the provisions of section 2(a) of this Act, or to impose the civil penalties authorized by section 6 for violations of section 2(a), whenever the attorney general of the State has reason to believe that the interests of the residents of the State have been or are being threatened or adversely affected by a person engaged in retail sales of gasoline or petroleum distillates to consumers for purposes other than resale that violates this Act or a regulation under this Act.

(b) Notice.--The State shall serve written notice to the Commission of any civil action under subsection (a) prior to initiating such civil action. The notice shall include a copy of the complaint to be filed to initiate such civil action, except that if it is not feasible for the State to provide such prior notice, the State shall provide such notice immediately upon instituting such civil action.

(c) Authority To Intervene.--Upon receiving the notice required by subsection (b), the Commission may intervene in such civil action and upon intervening--

(1) be heard on all matters arising in such civil action; and

(2) file petitions for appeal of a decision in such civil action.

(d) Construction.--For purposes of bringing any civil action under subsection (a), nothing in this section shall prevent the attorney general of a State from exercising the powers conferred on the attorney general by the laws of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.

(e) Venue; Service of Process.--In a civil action brought under subsection (a)--

(1) the venue shall be a judicial district in which--

(A) the defendant operates;

(B) the defendant was authorized to do business; or

(2) process may be served without regard to the territorial limits of the district or of the State in which the civil action is instituted; and

(3) a person who participated with the defendant in an alleged violation that is being litigated in the civil action may be joined in the civil action without regard to the residence of the person.

(f) Limitation on State Action While Federal Action Is Pending.--If the Commission has instituted a civil action or an administrative action for violation of this Act, no State attorney general, or official or agency of a State, may bring an action under this subsection during the pendency of that action against any defendant named in the complaint of the Commission or the other agency for any violation of this Act alleged in the complaint.

(g) Enforcement of State Law.--Nothing contained in this section shall prohibit an authorized State official from proceeding in State court to enforce a civil or criminal statute of such State.

SEC. __. PENALTIES.

(a) Civil Penalty.--

(1) In general.--In addition to any penalty applicable under the Federal Trade Commission Act--

(A) any person who violates section 2(b) or 2(c) of this Act is punishable by a civil penalty of not more than

$1,000,000; and

(B) any person who violates section 2(a) of this Act is punishable by a civil penalty of not more than $3,000,000.

(2) Method of assessment.--The penalties provided by paragraph (1) shall be assessed in the same manner as civil penalties imposed under section 5 of the Federal Trade Commission Act (15 U.S.C. 45).

(3) Multiple offenses; mitigating factors.--In assessing the penalty provided by subsection (a)--

(A) each day of a continuing violation shall be considered a separate violation; and

(B) the Commission shall take into consideration the seriousness of the violation and the efforts of the person committing the violation to remedy the harm caused by the violation in a timely manner.

(b) Criminal Penalty.--Violation of section 2(a) of this Act is punishable by a fine of not more than $1,000,000, imprisonment for not more than 5 years, or both.

SEC. __. EFFECT ON OTHER LAWS.

(a) Other Authority of Commission.--Nothing in this Act shall be construed to limit or affect in any way the Commission's authority to bring enforcement actions or take any other measure under the Federal Trade Commission Act (15 U.S.C. 41 et seq.) or any other provision of law.

(b) State Law.--Nothing in this Act preempts any State law.

______

SA 2613. Mr. KENNEDY (for himself, Mr. Bingaman, Mr. Levin, Mr. Durbin, and Ms. Mikulski) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. __. EXPANSION OF HOPE SCHOLARSHIP CREDIT.

(a) Credit Allowed for Books and Room and Board.--

(1) In general.--

(A) Subsection (b) of section 25A is amended by striking

``qualified tuition and related expenses'' each place it occurs and inserting ``qualified higher education expenses''.

(B) Subsection (f) of section 25A is amended by adding at the end the following new paragraph:

``(3) Qualified higher education expenses.--The term

`qualified higher education expenses' has the meaning given such term under section 529(e)(3).''.

(2) Conforming amendments.--Subsections (e) and (g) of section 25A are amended by inserting ``qualified higher education expenses or'' before ``qualified'' each place it appears.

(b) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

SEC. __. MODIFICATIONS OF EFFECTIVE DATES OF LEASING

PROVISIONS OF THE AMERICAN JOBS CREATION ACT OF

2004.

(b) Effective Date.--The amendments made by this section shall take effect as if included in the enactment of the American Jobs Creation Act of 2004.

______

SA 2614. Mr. PRYOR submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. DEFINITION OF CONVENTION OR ASSOCIATION OF CHURCHES.

Section 7701 (relating to definitions) is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

______

SA 2615. Ms. COLLINS submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of subtitle F of title V, add the following:

SEC. __. REPEAL OF EXPENSING OF INTANGIBLE DRILLING AND

DEVELOPMENT COSTS FOR OIL AND GAS WELLS.

(b) Conforming Amendments.--Paragraphs (2) and (3) of section 291(b) are each amended by striking ``section 263(c), 616(a),'' and inserting ``section 616(a)''.

______

SA 2616. Mr. KERRY (for himself and Mr. Obama) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

On page 235, between lines 13 and 14, insert the following:

SEC. __. ACCELERATION OF MARRIAGE PENALTY RELIEF WITH RESPECT

TO THE EARNED INCOME TAX CREDIT.

(a) In General.--Subparagraph (B) of section 32(b)(2)

(relating to joint returns) is amended--

(1) in clause (ii) by striking ``, 2006, and 2007'', and

(2) in clause (iii) by striking ``2007'' and inserting

``2005''.

(b) Inflation Amount.--Section 32(j)(1)(B)(ii) is amended by striking ``calendar year 2007'' and inserting ``calendar year 2005''.

SEC. __. EXTENSION OF ELECTION TO INCLUDE COMBAT PAY IN

EARNED INCOME.

(a) In General.--Subclause (II) of section 32(c)(2)(B)(vi)

(relating to earned income) is amended by striking ``January 1, 2006'' and inserting ``January 1, 2008''.

(b) Effective Date.--The amendment made by this section shall apply to taxable years beginning after December 31, 2005. SEC. ___. MODIFICATIONS OF EFFECTIVE DATES OF LEASING

PROVISIONS OF THE AMERICAN JOBS CREATION ACT OF

2004.

(a) In General.--Section 849(b) of the American Jobs Creation Act of 2004 is amended by adding at the end the following new paragraph:

``(5) Leases to foreign entities.--In the case of tax-exempt use property leased to a tax-exempt entity which is a foreign person or entity, the amendments made by this part shall apply to taxable years beginning after December 31, 2004, with respect to leases entered into on or before March 12, 2004.''.

(b) Effective Date.--The amendments made by this section shall take effect as if included in the enactment of the American Jobs Creation Act of 2004.

______

SA 2617. Mr. SANTORUM submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, insert the following:

SEC. __. CLASSIFICATION OF AUTOMATIC FIRE SPRINKLER SYSTEMS.

(a) In General.--Subparagraph (B) of section 168(e)(3)

(relating to 5-year property) is amended by striking ``and'' at the end of clause (v), by striking the period at the end of clause (vi) and inserting ``, and '', and by adding at the end the following:

``(vii) any automatic fire sprinkler system placed in service after the date of the enactment of this clause in a building structure which was placed in service before such date of enactment.''.

(b) Alternative System.--The table contained in section 168(g)(3)(B) (relating to special rule for certain property assigned to classes) is amended by inserting after the item relating to subparagraph (B)(iii) the following:

``(B)(vii).........................................................7''.

(c) Definition of Automatic Fire Sprinkler System.--Subsection (i) of section 168 is amended by adding at the end the following:

``(18) Automated fire sprinkler system.--The term

`automated fire sprinkler system' means those sprinkler systems classified under one or more of the following publications of the National Fire Protection Association--

``(A) NFPA 13, Installation of Sprinkler Systems,

``(B) NFPA 13 D, Installation of Sprinkler Systems in One and Two Family Dwellings and Manufactured Homes, and

``(C) NFPA 13 R, Installation of Sprinkler Systems in Residential Occupancies up to and Including Four Stories in Height.''.

(d) Effective Date.--The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

______

SA 2618. Mr. SANTORUM submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, insert the following:

Subtitle B--Savings for Working Families

SEC. 411. DEFINITIONS.

In this subtitle:

(1) Eligible individual.--

(A) In general.--The term ``eligible individual'' means, with respect to any taxable year, an individual who--

(i) has attained the age of 18 but not the age of 61 as of the last day of such taxable year,

(ii) is a citizen or lawful permanent resident (within the meaning of section 7701(b)(6) of the Internal Revenue Code of 1986) of the United States as of the last day of such taxable year,

(iii) was not a student (as defined in section 151(c)(4) of such Code) for the immediately preceding taxable year,

(iv) is not an individual with respect to whom a deduction under section 151 of such Code is allowable to another taxpayer for a taxable year of the other taxpayer ending during the immediately preceding taxable year of the individual,

(v) is not a taxpayer described in subsection (c), (d), or

(e) of section 6402 of such Code for the immediately preceding taxable year,

(vi) is not a taxpayer described in section 1(d) of such Code for the immediately preceding taxable year, and

(vii) is a taxpayer the modified adjusted gross income of whom for the immediately preceding taxable year does not exceed--

(I) $20,000, in the case of a taxpayer described in section 1(c) of such Code,

(II) $30,000, in the case of a taxpayer described in section 1(b) of such Code, and

(III) $40,000, in the case of a taxpayer described in section 1(a) of such Code.

(B) Inflation adjustment.--

(i) In general.--In the case of any taxable year beginning after 2005, each dollar amount referred to in subparagraph

(A)(vii) shall be increased by an amount equal to--

(I) such dollar amount, multiplied by

(II) the cost-of-living adjustment determined under section

(1)(f)(3) of the Internal Revenue Code of 1986 for the calendar year in which the taxable year begins, by substituting ``2004'' for ``1992''.

(ii) Rounding.--If any amount as adjusted under clause (i) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

(C) Modified adjusted gross income.--For purposes of subparagraph (A)(v), the term ``modified adjusted gross income'' means adjusted gross income--

(i) determined without regard to sections 86, 893, 911, 931, and 933 of the Internal Revenue Code of 1986, and

(ii) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.

(2) Individual development account.--The term ``Individual Development Account'' means an account established for an eligible individual as part of a qualified individual development account program, but only if the written governing instrument creating the account meets the following requirements:

(A) The owner of the account is the individual for whom the account was established.

(B) No contribution will be accepted unless it is in cash, and, except in the case of any qualified rollover, contributions will not be accepted for the taxable year in excess of $1,500 on behalf of any individual.

(D) The assets of the account will not be commingled with other property except in a common trust fund or common investment fund.

(E) Except as provided in section 415(b), any amount in the account may be paid out only for the purpose of paying the qualified expenses of the account owner.

(3) Parallel account.--The term ``parallel account'' means a separate, parallel individual or pooled account for all matching funds and earnings dedicated to an Individual Development Account owner as part of a qualified individual development account program, the trustee of which is a qualified financial institution.

(4) Qualified financial institution.--

(A) In general.--The term ``qualified financial institution'' means any person authorized to be a trustee of any individual retirement account under section 408(a)(2) of the Internal Revenue Code of 1986.

(B) Rule of construction.--

(i) In general.--Nothing in this paragraph shall be construed as preventing a person described in subparagraph

(A) from collaborating with 1 or more qualified nonprofit organizations or Indian tribes to carry out an individual development account program established under section 412.

(ii) Qualified nonprofit organization.--The term

``qualified nonprofit organization'' means--

(I) any organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code,

(II) any community development financial institution certified by the Community Development Financial Institution Fund,

(III) any credit union chartered under Federal or State law, or

(IV) any public housing agency as defined in section 3(b)(6) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)(6)).

(iii) Indian tribe.--The term ``Indian tribe'' means any Indian tribe as defined in section 4(12) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(12), and includes any tribally designated housing entity (as defined in section 4(21) of such Act (25 U.S.C. 4103(21)), tribal subsidiary, subdivision, or other wholly owned tribal entity.

(5) Qualified individual development account program.--The term ``qualified individual development account program'' means a program established upon approval of the Secretary under section 412 after December 31, 2006, under which--

(A) Individual Development Accounts and parallel accounts are held in trust by a qualified financial institution, and

(B) additional activities determined by the Secretary, in consultation with the Secretary of Health and Human Services, as necessary to responsibly develop and administer accounts, including recruiting, providing financial education and other training to Account owners, and regular program monitoring, are carried out by the qualified financial institution.

(6) Qualified expense distribution.--

(A) In general.--The term ``qualified expense distribution'' means any amount paid (including through electronic payments) or distributed out of an Individual Development Account or a parallel account established for an eligible individual if such amount--

(i) is used exclusively to pay the qualified expenses of the Individual Development Account owner or such owner's spouse or dependents,

(ii) is paid by the qualified financial institution--

(I) except as otherwise provided in this clause, directly to the unrelated third party to whom the amount is due,

(II) in the case of any qualified rollover, directly to another Individual Development Account and parallel account, or

(III) in the case of a qualified final distribution, directly to the spouse, dependent, or other named beneficiary of the deceased Account owner, and

(iii) is paid after the Account owner has completed a financial education course if required under section 413(b).

(B) Qualified expenses.--

(i) In general.--The term ``qualified expenses'' means any of the following expenses approved by the qualified financial institution:

(I) Qualified higher education expenses.

(II) Qualified first-time homebuyer costs.

(III) Qualified business capitalization or expansion costs.

(IV) Qualified rollovers.

(V) Qualified final distribution.

(ii) Qualified higher education expenses.--

(I) In general.--The term ``qualified higher education expenses'' has the meaning given such term by section 529(e)(3) of the Internal Revenue Code of 1986, determined by treating the Account owner, the owner's spouse, or one or more of the owner's dependents as a designated beneficiary, and reduced as provided in section 25A(g)(2) of such Code.

(II) Coordination with other benefits.--The amount of expenses which may be taken into account for purposes of section 135, 529, or 530 of such Code for any taxable year shall be reduced by the amount of any qualified higher education expenses taken into account as qualified expense distributions during such taxable year.

(iii) Qualified first-time homebuyer costs.--The term

``qualified first-time homebuyer costs'' means qualified acquisition costs (as defined in section 72(t)(8)(C) of the Internal Revenue Code of 1986) with respect to a principal residence (within the meaning of section 121 of such Code) for a qualified first-time homebuyer (as defined in section 72(t)(8)(D)(i) of such Code).

(iv) Qualified business capitalization or expansion costs.--

(I) In general.--The term ``qualified business capitalization or expansion costs'' means qualified expenditures for the capitalization or expansion of a qualified business pursuant to a qualified business plan.

(II) Qualified expenditures.--The term ``qualified expenditures'' means expenditures normally associated with starting or expanding a business and included in a qualified business plan, including costs for capital, plant, and equipment, inventory expenses, and attorney and accounting fees.

(III) Qualified business.--The term ``qualified business'' means any business that does not contravene any law.

(IV) Qualified business plan.--The term ``qualified business plan'' means a business plan which has been approved by the qualified financial institution and which meets such requirements as the Secretary may specify.

(v) Qualified rollovers.--The term ``qualified rollover'' means the complete distribution of the amounts in an Individual Development Account and parallel account to another Individual Development Account and parallel account established in another qualified financial institution for the benefit of the Account owner.

(vi) Qualified final distribution.--The term ``qualified final distribution'' means, in the case of a deceased Account owner, the complete distribution of the amounts in the Individual Development Account and parallel account directly to the spouse, any dependent, or other named beneficiary of the deceased.

(7) Secretary.--The term ``Secretary'' means the Secretary of the Treasury.

SEC. 412. STRUCTURE AND ADMINISTRATION OF QUALIFIED

INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.

(a) Establishment of Qualified Individual Development Account Programs.--Any qualified financial institution may apply to the Secretary for approval to establish 1 or more qualified individual development account programs which meet the requirements of this subtitle.

(b) Basic Program Structure.--

(1) In general.--All qualified individual development account programs shall consist of the following 2 components for each participant:

(A) An Individual Development Account to which an eligible individual may contribute cash in accordance with section 413.

(B) A parallel account to which all matching funds shall be deposited in accordance with section 414.

(2) Tailored ida programs.--A qualified financial institution may tailor its qualified individual development account program to allow matching funds to be spent on 1 or more of the categories of qualified expenses.

(c) Coordination With Public Housing Agency Individual Savings Accounts.--Section 3(e)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437a(e)(2)) is amended by inserting ``or in any Individual Development Account established under subtitle B of title IV of the Tax Relief Act of 2005'' after ``subsection''.

(d) Tax Treatment of Parallel Accounts.--

(1) In general.--Chapter 77 (relating to miscellaneous provisions) is amended by adding at the end the following new section:

``SEC. 7529. TAX INCENTIVES FOR INDIVIDUAL DEVELOPMENT

PARALLEL ACCOUNTS.

``For purposes of this title--

``(1) any account described in section 412(b)(1)(B) of the Tax Relief Act of 2005 shall be exempt from taxation,

``(2) except as provided in section 45G, no item of income, expense, basis, gain, or loss with respect to such an account may be taken into account, and

``(3) any amount withdrawn from such an account shall not be includible in gross income.''.

(2) Conforming amendment.--The table of sections for chapter 77 is amended by adding at the end the following new item:

``Sec. 7529. Tax incentives for individual development parallel accounts.''.

(e) Coordination of Certain Expenses.--Section 25A(g)(2) is amended by striking ``and'' at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting ``, and'', and by adding at the end the following new subparagraph:

``(D) a qualified expense distribution with respect to qualified higher education expenses from an Individual Development Account or a parallel account under section 415(a) of the Tax Relief Act of 2005.''.

SEC. 413. PROCEDURES FOR OPENING AND MAINTAINING AN

INDIVIDUAL DEVELOPMENT ACCOUNT AND QUALIFYING

FOR MATCHING FUNDS.

(a) Opening an Account.--An eligible individual may open an Individual Development Account with a qualified financial institution upon certification that such individual has never maintained any other Individual Development Account (other than an Individual Development Account to be terminated by a qualified rollover).

(b) Required Completion of Financial Education Course.--

(1) In general.--Before becoming eligible to withdraw funds to pay for qualified expenses, owners of Individual Development Accounts must complete 1 or more financial education courses specified in the qualified individual development account program.

(2) Standard and applicability of course.--The Secretary, in consultation with representatives of qualified individual development account programs and financial educators, shall, not later than January 1, 2006, establish minimum quality standards for the contents of financial education courses and providers of such courses described in paragraph (1) and a protocol to exempt individuals from the requirement under paragraph (1) in the case of hardship, lack of need, the attainment of age 65, or a qualified final distribution.

(c) Proof of Status as an Eligible Individual.--Federal income tax forms for the immediately preceding taxable year and any other evidence of eligibility which may be required by a qualified financial institution shall be presented to such institution at the time of the establishment of the Individual Development Account and in any taxable year in which contributions are made to the Account to qualify for matching funds under section 414(b)(1)(A).

(d) Special Rule in the Case of Married Individuals.--For purposes of this subtitle, if, with respect to any taxable year, 2 married individuals file a Federal joint income tax return, then not more than 1 of such individuals may be treated as an eligible individual with respect to the succeeding taxable year.

SEC. 414. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOPMENT

ACCOUNT PROGRAMS.

(a) Parallel Accounts.--The qualified financial institution shall deposit all matching funds for each Individual Development Account into a parallel account at a qualified financial institution.

(b) Regular Deposits of Matching Funds.--

(1) In general.--Subject to paragraph (2), the qualified financial institution shall deposit into the parallel account with respect to each eligible individual the following amounts:

(A) A dollar-for-dollar match for the first $500 contributed by the eligible individual into an Individual Development Account with respect to any taxable year of such individual.

(B) Any matching funds provided by State, local, or private sources in accordance with the matching ratio set by those sources.

(2) Timing of deposits.--A deposit of the amounts described in paragraph (1) shall be made into a parallel account--

(A) in the case of amounts described in paragraph (1)(A), not later than 30 days after the end of the calendar quarter during which the contribution described in such paragraph was made, and

(B) in the case of amounts described in paragraph (1)(B), not later than 2 business days after such amounts were provided.

(3) Cross reference.--For allowance of tax credit for Individual Development Account subsidies, including matching funds, see section 45N of the Internal Revenue Code of 1986, as added by section 419(a).

(c) Deposit of Matching Funds Into Individual Development Account of Individual Who Has Attained Age 65.--In the case of an Individual Development Account owner who attains the age of 65, the qualified financial institution shall deposit the funds in the parallel account with respect to such individual into the Individual Development Account of such individual on the later of--

(1) the day which is the 1-year anniversary of the deposit of such funds in the parallel account, or

(2) the first business day of the taxable year of such individual following the taxable year in which such individual attained age 65.

(d) Uniform Accounting Regulations.--To ensure proper recordkeeping and determination of the tax credit under section 45N of the Internal Revenue Code of 1986, as added by section 419(a), the Secretary shall prescribe regulations with respect to accounting for matching funds in the parallel accounts.

(e) Regular Reporting of Accounts.--Any qualified financial institution shall report the balances in any Individual Development Account and parallel account of an individual on not less than an annual basis to such individual.

SEC. 415. WITHDRAWAL PROCEDURES.

(a) Withdrawals for Qualified Expenses.--

(1) In general.--An Individual Development Account owner may withdraw funds in order to pay qualified expense distributions from such individual's--

(A) Individual Development Account, but only from funds which have been on deposit in such Account for at least 1 year, and

(B) parallel account, but only--

(i) from matching funds which have been on deposit in such parallel account for at least 1 year,

(ii) from earnings in such parallel account, after all matching funds described in clause (i) have been withdrawn, and

(iii) to the extent such withdrawal does not result in a remaining balance in such parallel account which is less than the remaining balance in the Individual Development Account after such withdrawal.

(2) Procedure.--Upon receipt of a withdrawal request which meets the requirements of paragraph (1), the qualified financial institution shall directly transfer the funds electronically to the distributees described in section 411(6)(A)(ii). If a distributee is not equipped to receive funds electronically, the qualified financial institution may issue such funds by paper check to the distributee.

(b) Withdrawals for Nonqualified Expenses.--An Individual Development Account owner may withdraw any amount of funds from the Individual Development Account for purposes other than to pay qualified expense distributions, but if, after such withdrawal, the amount in the parallel account of such owner (excluding earnings on matching funds) exceeds the amount remaining in such Individual Development Account, then such owner shall forfeit from the parallel account the lesser of such excess or the amount withdrawn.

(c) Withdrawals From Accounts of Noneligible Individuals.--If the individual for whose benefit an Individual Development Account is established ceases to be an eligible individual, such account shall remain an Individual Development Account, but such individual shall not be eligible for any further matching funds under section 414(b)(1)(A) for contributions which are made to the Account during any taxable year when such individual is not an eligible individual.

(d) Effect of Pledging Account as Security.--If, during any taxable year of the individual for whose benefit an Individual Development Account is established, that individual uses the Account, the individual's parallel account, or any portion thereof as security for a loan, the portion so used shall be treated as a withdrawal of such portion from the Individual Development Account for purposes other than to pay qualified expenses.

SEC. 416. CERTIFICATION AND TERMINATION OF QUALIFIED

INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.

(a) Certification Procedures.--Upon establishing a qualified individual development account program under section 412, a qualified financial institution shall certify to the Secretary at such time and in such manner as may be prescribed by the Secretary and accompanied by any documentation required by the Secretary, that--

(1) the accounts described in subparagraphs (A) and (B) of section 412(b)(1) are operating pursuant to all the provisions of this Act, and

(2) the qualified financial institution agrees to implement an information system necessary to monitor the cost and outcomes of the qualified individual development account program.

(b) Authority to Terminate Qualified IDA Program.--If the Secretary determines that a qualified financial institution under this Act is not operating a qualified individual development account program in accordance with the requirements of this Act (and has not implemented any corrective recommendations directed by the Secretary), the Secretary shall terminate such institution's authority to conduct the program. If the Secretary is unable to identify a qualified financial institution to assume the authority to conduct such program, then any funds in a parallel account established for the benefit of any individual under such program shall be deposited into the Individual Development Account of such individual as of the first day of such termination.

SEC. 417. REPORTING, MONITORING, AND EVALUATION.

(a) Responsibilities of Qualified Financial Institutions.--Each qualified financial institution that operates a qualified individual development account program under section 412 shall report annually to the Secretary within 90 days after the end of each calendar year on--

(1) the number of individuals making contributions into Individual Development Accounts and the amounts contributed,

(2) the amounts contributed into Individual Development Accounts by eligible individuals and the amounts deposited into parallel accounts for matching funds,

(3) the amounts withdrawn from Individual Development Accounts and parallel accounts, and the purposes for which such amounts were withdrawn,

(4) the balances remaining in Individual Development Accounts and parallel accounts, and

(5) such other information needed to help the Secretary monitor the effectiveness of the qualified individual development account program (provided in a non-individually-identifiable manner).

(b) Responsibilities of the Secretary.--

(1) Monitoring protocol.--Not later than 12 months after the date of the enactment of this Act, the Secretary, in consultation with the Secretary of Health and Human Services, shall develop and implement a protocol and process to monitor the cost and outcomes of the qualified individual development account programs established under section 412.

(2) Annual reports.--For each year after 2007, the Secretary shall submit a progress report to Congress on the status of such qualified individual development account programs. Such report shall, to the extent data are available, include from a representative sample of qualified individual development account programs information on--

(A) the characteristics of participants, including age, gender, race or ethnicity, marital status, number of children, employment status, and monthly income,

(B) deposits, withdrawals, balances, uses of Individual Development Accounts, and participant characteristics,

(C) the characteristics of qualified individual development account programs, including match rate, economic education requirements, permissible uses of accounts, staffing of programs in full time employees, and the total costs of programs, and

(D) process information on program implementation and administration, especially on problems encountered and how problems were solved.

(3) Use of accounts in rural areas encouraged.--The Secretary shall develop methods to encourage the use of Individual Development Accounts in rural areas.

SEC. 418. AUTHORIZATION OF APPROPRIATIONS.

(a) In General.--There is authorized to be appropriated to the Secretary $1,000,000 for fiscal year 2007 and for each fiscal year through 2014, for the purposes of implementing this subtitle, including the reporting, monitoring, and evaluation required under section 417, to remain available until expended.

(b) Grants.--There is authorized to be appropriated to the Secretary $20,000,000--

(1) to make grants to qualified nonprofit organizations and Indian tribes to help defray the administrative costs associated with the operation of individual development account programs, including the required financial education courses, and

(2) to provide technical assistance to qualified nonprofit organizations and Indian tribes in meeting such program requirements.

SEC. 419. MATCHING FUNDS FOR INDIVIDUAL DEVELOPMENT ACCOUNTS

PROVIDED THROUGH A TAX CREDIT FOR QUALIFIED

FINANCIAL INSTITUTIONS.

(a) In General.--Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end the following new section:

``SEC. 45N. INDIVIDUAL DEVELOPMENT ACCOUNT INVESTMENT CREDIT.

``(a) Determination of Amount.--For purposes of section 38, the individual development account investment credit determined under this section with respect to any eligible entity for any taxable year is an amount equal to the individual development account investment provided by such eligible entity during the taxable year under an individual development account program established under section 412 of the Tax Relief Act of 2005.

``(b) Applicable Tax.--For the purposes of this section, the term `applicable tax' means the excess (if any) of--

``(1) the tax imposed under this chapter (other than the taxes imposed under the provisions described in subparagraphs

``(2) the credits allowable under subpart B (other than this section) and subpart D of this part.

``(c) Individual Development Account Investment.--For purposes of this section, the term `individual development account investment' means, with respect to an individual development account program in any taxable year, an amount equal to the sum of--

``(1) the aggregate amount of dollar-for-dollar matches under such program under section 414(b)(1)(A) of the Tax Relief Act of 2005 for such taxable year, plus

``(2) $50 with respect to each Individual Development Account maintained--

``(A) as of the end of such taxable year, but only if such taxable year is within the 7-taxable-year period beginning with the taxable year in which such Account is opened, and

``(B) with a balance of not less than $100 (other than the taxable year in which such Account is opened).

``(d) Eligible Entity.--For purposes of this section, except as provided in regulations, the term `eligible entity' means a qualified financial institution.

``(e) Other Definitions.--For purposes of this section, any term used in this section and also in subtitle B of part IV of the Tax Relief Act of 2005 shall have the meaning given such term in such subtitle.

``(f) Denial of Double Benefit.--

``(1) In general.--No deduction or credit (other than under this section) shall be allowed under this chapter with respect to any expense which--

``(A) is taken into account under subsection (c)(1)(A) in determining the credit under this section, or

``(B) is attributable to the maintenance of an Individual Development Account.

``(2) Determination of amount.--Solely for purposes of paragraph (1)(B), the amount attributable to the maintenance of an Individual Development Account shall be deemed to be the dollar amount of the credit allowed under subsection

(c)(l)(B) for each taxable year such Individual Development Account is maintained.

``(g) Credit May Be Transferred.--

``(1) In general.--An eligible entity may transfer any credit allowable to the eligible entity under subsection (a) to any person other than to another eligible entity which is exempt from tax under this title. The determination as to whether a credit is allowable shall be made without regard to the tax-exempt status of the eligible entity.

``(2) Consent required for revocation.--Any transfer under paragraph (1) may be revoked only with the consent of the Secretary.

``(h) Regulations.--The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including

``(1) such regulations as necessary to insure that any credit described in subsection (g)(1) is claimed once and not retransferred by a transferee, and

``(2) regulations providing for a recapture of the credit allowed under this section (notwithstanding any termination date described in subsection (i)) in cases where there is a forfeiture under section 415(b) of the Tax Relief Act of 2005 in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit.

``(i) Application of Section.--

``(1) In general.--This section shall apply to any expenditure made in any taxable year ending after December 31, 2006, and beginning on or before January 1, 2014, with respect to any Individual Development Account which--

``(A) is opened before January 1, 2012, and

``(B) as determined by the Secretary, when added to all of the previously opened Individual Development Accounts, does not cause the total number of such Accounts to exceed 900,000.

Notwithstanding the preceding sentence, this section shall apply to amounts which are described in subsection (c)(1) and which are timely deposited into a parallel account during the 30-day period following the end of the last taxable year beginning on or before January 1, 2014.

``(2) Determination of limitation.--The limitation on the number of Individual Development Accounts under paragraph

(1)(B) shall be allocated by the Secretary among eligible individuals as such individuals open such Accounts under qualified individual development account programs, except that, in the case of 300,000 Accounts, such limitation shall be equally allocated among the States.''.

(b) Credit Treated as Business Credit.--Section 38(b)

(relating to current year business credit) is amended by striking ``and'' at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting ``, and'', and by adding at the end the following new paragraph:

``(27) the individual development account investment credit determined under section 45J(a).''.

(c) Conforming Amendment.--The table of sections for subpart C of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

``Sec. 45N. Individual development account investment credit.''.

(d) Report Regarding Account Maintenance Fees.--The Secretary of the Treasury shall study the adequacy of the amount specified in section 45N(c)(2) of the Internal Revenue Code of 1986 (as added by this section). Not later than December 31, 2010, the Secretary of the Treasury shall report the findings of the study described in the preceding sentence to Congress.

(e) Effective Date.--The amendments made by this section shall apply to taxable years ending after December 31, 2006.

SEC. 420. ACCOUNT FUNDS DISREGARDED FOR PURPOSES OF CERTAIN

MEANS-TESTED FEDERAL PROGRAMS.

Notwithstanding any other provision of Federal law (other than the Internal Revenue Code of 1986) that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such provision to be provided to or for the benefit of such individual, any amount (including earnings thereon) in any Individual Development Account of such individual and any matching deposit made on behalf of such individual (including earnings thereon) in any parallel account shall be disregarded for such purpose with respect to any period during which such individual maintains or makes contributions into such Individual Development Account.

______

SA 2619. Mrs. HUTCHISON submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

On page 235, between lines 13 and 14, insert the following:

SEC. __. MODIFICATION OF BOND RULE.

(a) In General.--In the case of bonds issued after the date of the enactment of this Act and before August 31, 2009--

(1) the requirement of paragraph (1) of section 648 of the Deficit Reduction Act of 1984 (98 Stat. 941) shall be treated as met with respect to the securities or obligations referred to in such section if such securities or obligations are held in a fund the annual distributions from which cannot exceed 7 percent of the average fair market value of the assets held in such fund except to the extent distributions are necessary to pay debt service on the bond issue,

(2) paragraph (3) of such section shall be applied by substituting ``distributions from'' for ``the investment earnings of'' both places it appears, and

(3) Paragraph (4) of such section shall be applied by substituting ``March 1, 1985'' for ``October 9, 1969''.

(b) Increase in Minimum Penalty for Bad Checks and Money Orders.--

(1) In general.--Section 6657 (related to bad checks), as amended by section 535, is amended--

(A) by striking ``$1,250'' and inserting ``$2,000'', and

(B) by striking ``$25'' and inserting ``$40''.

(2) Effective date.--The amendments made by this subsection shall apply to checks or money orders received after the date of the enactment of this Act.

______

SA 2620. Ms. SNOWE (for herself and Mr. Schumer) submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. INTEREST DETERMINATIONS ON STUDENT LOANS.

(a) In General.--Section 221 (relating to interest on education loans) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

``(f) Determination of Interest Paid.--In the case of a qualified education loan made after December 31, 2004, for purposes of this section and notwithstanding any other provision of this title--

``(1) In general.--

``(A) Treatment as interest.--Any payment on such loan shall be treated as a payment of interest to the extent of the balance, immediately before such payment, in the accumulated interest account with respect to such loan.

``(B) Exception.--Subparagraph (A) shall not apply to any payment of collection costs, late fees, and penalties.

``(2) Accumulated interest account.--

``(A) In general.--The term `accumulated interest account' means an account which is adjusted in accordance with this paragraph.

``(B) Increases.--The balance in the accumulated interest account shall be increased for any period by the sum of--

``(i) the loan origination fees incurred by the borrower in such period,

``(ii) the amount of stated interest on the loan for such period, and

``(iii) the amount of any fee imposed under section 428(b)(1)(H) of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)(H)).

``(C) Decreases.--The balance in the accumulated interest account shall be decreased (but not below zero) by payments made on the loan to the extent treated as interest under this section.

``(3) Loan origination fees.--

``(A) Federal programs.--The term `loan origination fee' includes any fee imposed under any of the following provisions of the Higher Education Act of 1965:

``(i) Section 438(c) (20 U.S.C. 1087-1(c)).

``(ii) Section 455(c) (20 U.S.C. 1087e(c)).

``(B) Fees for services or property excluded.--Except as provided under subparagraph (A), the term `loan origination fee' does not include any fee which is a fee for services or property.

``(4) Stated interest.--The term `stated interest' means, with respect to any period, the amount of interest determined for the period based on the stated rate of interest applicable to the period (whether or not the interest is required to be paid in such period).

``(5) Anti-abuse rule.--The Secretary may prescribe rules to prevent the acceleration or deceleration of additions to the accumulated interest account where the loan origination fees or stated interest do not properly reflect the substance of the loan.''.

(b) Information Returns.--

(1) Interest and loan origination fee defined.--Subsection

(e) of section 6050S (relating to the general rule for form and manner of returns) is amended by inserting before the period at the end the following: ``, and the term `interest' has the same meaning as when used in section 221''.

(2) Pre-2005 loans.--The regulations under section 6050S of the Internal Revenue Code of 1986 which are applicable to loans made before September 1, 2004, shall also apply to loans made on or after such date which are made before January 1, 2005.

______

SA 2621. Ms. SNOWE submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. CLARIFICATION OF CASH ACCOUNTING RULES FOR SMALL

BUSINESS.

(a) Cash Accounting Permitted.--

(1) In general.--Section 446 (relating to general rule for methods of accounting) is amended by adding at the end the following new subsection:

``(g) Certain Small Business Taxpayers Permitted to Use Cash Accounting Method Without Limitation.--

``(1) In general.--An eligible taxpayer shall not be required to use an accrual method of accounting for any taxable year.

``(2) Eligible taxpayer.--For purposes of this subsection, a taxpayer is an eligible taxpayer with respect to any taxable year if--

``(A) for all prior taxable years beginning after December 31, 2004, the taxpayer (or any predecessor) met the gross receipts test of section 448(c), and

``(B) the taxpayer is not subject to section 447 or 448.''.

(2) Expansion of gross receipts test.--

(A) In general.--Paragraph (3) of section 448(b) (relating to entities with gross receipts of not more than $5,000,000) is amended by striking ``$5,000,000'' in the text and in the heading and inserting ``$10,000,000''.

(B) Conforming amendments.--Section 448(c) is amended--

(i) by striking ``$5,000,000'' each place it appears in the text and in the heading of paragraph (1) and inserting

``$10,000,000'', and

(ii) by adding at the end the following new paragraph:

``(4) Inflation adjustment.--In the case of any taxable year beginning in a calendar year after 2005, the dollar amount contained in subsection (b)(3) and paragraph (1) of this subsection shall be increased by an amount equal to--

``(A) such dollar amount, multiplied by

``(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting `calendar year 2004' for

`calendar year 1992' in subparagraph (B) thereof.If any amount as adjusted under this subparagraph is not a multiple of $100,000, such amount shall be rounded to the nearest multiple of $100,000.''.

(b) Clarification of Inventory Rules for Small Business.--

(1) In general.--Section 471 (relating to general rule for inventories) is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

``(c) Small Business Taxpayers Not Required to Use Inventories.--

``(1) In general.--A qualified taxpayer shall not be required to use inventories under this section for a taxable year.

``(2) Treatment of taxpayers not using inventories.--If a qualified taxpayer does not use inventories with respect to any property for any taxable year beginning after December 31, 2004, such property shall be treated as a material or supply which is not incidental.

``(3) Qualified taxpayer.--For purposes of this subsection, the term `qualified taxpayer' means--

``(A) any eligible taxpayer (as defined in section 446(g)(2)), and

``(B) any taxpayer described in section 448(b)(3).''.

(2) Conforming amendments.--

(A) Subpart D of part II of subchapter E of chapter 1 is amended by striking section 474.

(B) The table of sections for subpart D of part II of subchapter E of chapter 1 is amended by striking the item relating to section 474.

(1) In general.--The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

(2) Change in method of accounting.--In the case of any taxpayer changing the taxpayer's method of accounting for any taxable year under the amendments made by this section--

(A) such change shall be treated as initiated by the taxpayer;

(B) such change shall be treated as made with the consent of the Secretary of the Treasury; and

(C) the net amount of the adjustments required to be taken into account by the taxpayer under section 481 of the Internal Revenue Code of 1986 shall be taken into account over a period (not greater than 4 taxable years) beginning with such taxable year.

SEC. __. INCLUSION OF HEAVY VEHICLES IN LIMITATION ON

DEPRECIATION OF CERTAIN LUXURY AUTOMOBILES.

(a) In General.--Section 280F(d)(5)(A) (defining passenger automobile) is amended--

(1) by striking clause (ii) and inserting the following new clause:

``(ii)(I) which is rated at 6,000 pounds unloaded gross vehicle weight or less, or

``(II) which is rated at more than 6,000 pounds but not more than 14,000 pounds gross vehicle weight.'',

(2) by striking ``clause (ii)'' in the second sentence and inserting ``clause (ii)(I)''.

(b) Conforming Amendment.--Section 179(b) (relating to limitations) is amended by striking paragraph (6).

(c) Effective Date.--The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

______

SA 2622. Ms. MURKOWSKI (for herself and Mr. Stevens) submitted an amendment intended to be proposed by her to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; which was ordered to lie on the table; as follows:

At the end of title IV, add the following:

SEC. __. HYDROELECTRIC DEVELOPMENT INCENTIVES.

(a) In General.--Project numbers 1051, 10440, 11393, 11077, 11588, and 12379 of the Federal Energy Regulatory Commission shall be eligible for the maximum favorable treatment afforded under any Federal legislation or any amendments made by such legislation which promotes hydroelectric development that is enacted during the 10-year period that begins on the date that is 5 years prior to the date of enactment of this Act.

(b) Deemed Qualified Energy Resources.--All power produced by the project numbers specified in subsection (a) shall be deemed to be qualified energy resources for purposes of qualifying for any energy production credit or similar benefit enacted for hydroelectric development within the 10-year period described in subsection (a).

(c) Triple Interest and Penalties for Underpayments Related to Certain Offshore Financial Arrangements.--Section 532 of this Act is amended--

(1) in the section heading, by striking ``DOUBLING'' and inserting ``TRIPLING''; and

(2) in subsection (a)(1)(B), by striking ``twice'' and inserting ``3 times''.

______

SA 2623. Mr. DURBIN (for himself and Mr. Obama) submitted an amendment intended to be proposed by him to the bill S. 2020, to provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006; as follows:

At the end of title IV, insert the following:

SEC. __. REDUCED TAXES FOR PATRIOT EMPLOYERS.

(a) In General.--Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:

``SEC. 45N. REDUCTION IN TAX OF PATRIOT EMPLOYERS.

``(a) In General.--In the case of any taxable year beginning after December 31, 2005, and before January 1, 2011, with respect to which a taxpayer is certified by the Secretary as a Patriot employer, the Patriot employer credit determined under this section for purposes of section 38 shall be equal to 1 percent of the taxable income of the taxpayer which is properly allocable to all trades or businesses with respect to which the taxpayer is certified as a Patriot employer for the taxable year.

``(b) Patriot Employer.--For purposes of subsection (a), the term `Patriot employer' means, with respect to any taxable year, any taxpayer which--

``(1) maintains its headquarters in the United States if the taxpayer has ever been headquartered in the United States,

``(2) pays at least 60 percent of each employee's health care premiums,

``(3) if such taxpayer employs at least 50 employees on average during the taxable year--

``(A) maintains or increases the number of full-time workers in the United States relative to the number of full-time workers outside of United States,

``(B) compensates each employee of the taxpayer at an hourly rate (or equivalent thereof) not less than an amount equal to the Federal poverty level for a family of three for the calendar year in which the taxable year begins divided by 2,080,

``(C) provides either a defined benefit plan or a defined contribution plan which fully matches at least 5 percent of each employee's contributions to the plan, and

``(D) provides full differential salary and insurance benefits for all National Guard and Reserve employees who are called for active duty, and

``(4) if such taxpayer employs less than 50 employees on average during the taxable year, either--

``(A) compensates each employee of the taxpayer at an hourly rate (or equivalent thereof) not less than an amount equal to the Federal poverty level for a family of 3 for the calendar year in which the taxable year begins divided by 2,080, or

``(B) provides either a defined benefit plan or a defined contribution plan which fully matches at least 5 percent of each employee's contributions to the plan.''.

(b) Allowance as General Business Credit.--Section 38(b) is amended by striking ``and'' at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting ``, and'', and by adding at the end the following:

``(27) the Patriot employer credit determined under section 45N.''.

(c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2005. SEC. __. MODIFICATIONS OF FOREIGN TAX CREDIT RULES APPLICABLE

TO DUAL CAPACITY TAXPAYERS.