SEC. 1202. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD INVENTORY.
(a) In General- Section 170(e)(3)(C)(iv) (relating to termination) is amended by striking `2005' and inserting `2007'.
(b) Effective Date- The amendment made by this section shall apply to contributions made after December 31, 2005.
Pension Prot
ection Act 2006
SEC. 1203. BASIS ADJUSTMENT TO STOCK OF S CORPORATION CONTRIBUTING PROPERTY.
(a) In General- Paragraph (2) of section 1367(a) (relating to adjustments to basis of stock of shareholders, etc.) is amended by adding at
the end the following new flush sentence:
`The decrease under subparagraph (B) by reason of a charitable contribution (as defined in section 170(c)) of property shall be the amount
equal to the shareholder's pro rata share of the adjusted basis of such property. The preceding sentence shall not apply to contributions
made in taxable years beginning after December 31, 2007.'.
(b) Effective Date- The amendment made by this section shall apply to contributions made in taxable years beginning after December 31, 2005.
SEC. 1204. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF BOOK INVENTORY.
(a) In General- Section 170(e)(3)(D)(iv) (relating to termination) is amended by striking `2005' and inserting `2007'.
(b) Effective Date- The amendment made by this section shall apply to contributions made after December 31, 2005.
SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS TO CONTROLLING EXEMPT ORGANIZATIONS.
(a) In General- Paragraph (13) of section 512(b) (relating to special rules for certain amounts received from controlled entities) is amended
by redesignating subparagraph (E) as subparagraph (F) and by inserting after subparagraph (D) the following new subparagraph:
`(E) PARAGRAPH TO APPLY ONLY TO CERTAIN EXCESS PAYMENTS-
`(i) IN GENERAL- Subparagraph (A) shall apply only to the portion of a qualifying specified payment received or accrued by the controlling
organization that exceeds the amount which would have been paid or accrued if such payment met the requirements prescribed under section 482.
`(ii) ADDITION TO TAX FOR VALUATION MISSTATEMENTS- The tax imposed by this chapter on the controlling organization shall be increased by an
amount equal to 20 percent of the larger of--
`(I) such excess determined without regard to any amendment or supplement to a return of tax, or
`(II) such excess determined with regard to all such amendments and supplements.
`(iii) QUALIFYING SPECIFIED PAYMENT- The term `qualifying specified payment' means a specified payment which is made pursuant to--
`(I) a binding written contract in effect on the date of the enactment of this subparagraph, or
`(II) a contract which is a renewal, under substantially similar terms, of a contract described in subclause (I).
`(iv) TERMINATION- This subparagraph shall not apply to payments received or accrued after December 31, 2007.'.
(b) Reporting-
(1) IN GENERAL- Section 6033 (relating to returns by exempt organizations) is amended by redesignating subsection (h) as subsection (i) and
by inserting after subsection (g) the following new subsection:
`(h) Controlling Organizations- Each controlling organization (within the meaning of section 512(b)(13)) which is subject to the requirements
of subsection (a) shall include on the return required under subsection (a)--
`(1) any interest, annuities, royalties, or rents received from each controlled entity (within the meaning of section 512(b)(13)),
`(2) any loans made to each such controlled entity, and
`(3) any transfers of funds between such controlling organization and each such controlled entity.'.
(2) REPORT TO CONGRESS- Not later than January 1, 2009, the Secretary of the Treasury shall submit to the Committee on Finance of the Senate
and the Committee on Ways and Means of the House of Representatives a report on the effectiveness of the Internal Revenue Service in
administering the amendments made by subsection (a) and on the extent to which payments by controlled entities (within the meaning of section
512(b)(13) of the Internal Revenue Code of 1986) to controlling organizations (within the meaning of section 512(b)(13) of such Code) meet
the requirements under section 482 of such Code. Such report shall include the results of any audit of any controlling organization or
controlled entity and recommendations relating to the tax treatment of payments from controlled entities to controlling organizations.
(c) Effective Date-
(1) SUBSECTION (a)- The amendments made by subsection (a) shall apply to payments received or accrued after December 31, 2005.
(2) SUBSECTION (b)- The amendments made by subsection (b) shall apply to returns the due date (determined without regard to extensions) of
which is after the date of the enactment of this Act.
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