Subtitle B: Family Tax Relief - Phases-in a standard deduction on a joint (married) return equal to twice the deduction of a single (not married) return.
(Sec. 112) Applies the exclusion for foster care payments to payments by qualified placement agencies.
(Sec. 113) Increases the maximum credit for special needs adoptions and deems taxpayers making a special needs adoption to have incurred $10,000 in expenses.
(Sec. 114) Increases the maximum dependent care credit percentage. Indexes the maximum amount of eligible expenses.
(Sec. 115) Increases, by $2,000, the beginning point of the phase-out of the earned income credit on a joint return.
Subtitle C: Repeal of Alternative Minimum Tax on Individuals - Phases-in a repeal of the alternative minimum tax for individuals.
Title II: Relief from Taxation on Savings and Investments - Subtitle A: Capital Gains Tax Relief - Reduces the individual capital gains tax rate.
(Sec. 202) Indexes certain assets acquired after December 31, 1999, for purposes of determining gain.
(Sec. 203) Applies the capital gains tax rates to capital gains of designated settlement funds.
(Sec. 204) Provides, with respect to exclusion of gain from the sale of a principal residence, for the suspension of the five-year ownership and use requirement during the time that a member (or spouse) of the uniformed services or Foreign Service is on qualified official extended duty (as defined by this Act).
(Sec. 205) Excludes from the meaning of capital assets (for capital gains and losses purposes): (1) any commodities derivative financial instrument held by a commodities derivatives dealer, unless it is established to the Secretary of the Treasury's satisfaction that such instrument has no connection to the activities of such dealer as a dealer; (2) any hedging transaction clearly identified as such before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe); or (3) supplies of a type regularly used or consumed by the taxpayer in the ordinary course of a trade or business of the taxpayer.
(Sec. 206) Revises provisions concerning the worthless securities of financial institutions.
Subtitle B: Individual Retirement Arrangements - Increases the contributions permitted for both traditional IRAs and Roth IRAs.
(Sec. 213) Amends the Code and ERISA (the Employee Retirement Income Security Act of 1974) to permit employees to make IRA contributions under a qualified employer plan.
(Sec. 214) Increases the IRA maximum contribution limit for individuals who are age 50 and older.
Title III: Alternative Minimum Tax Reform - Permits a corporation to increase the use of minimum tax credits.
(Sec. 302) Repeals the 90 percent limitation on the utilization of the foreign tax credit.
Title IV: Education Savings Incentives - Renames education individual retirement accounts education savings accounts. Increases to $2,000 the maximum annual contribution allowed to such accounts. Permits tax-free expenditures from such accounts for elementary and secondary education expenses required for attendance at a public, private, or religious school, or for homeschooling that meets State requirements. Waives certain age limitations in cases of children with special needs. Permits corporations to contribute to such accounts.
(Sec. 402) Collegiate Learning and Student Savings (CLASS) Act - Permits private educational institutions to maintain qualified tuition programs which are comparable to qualified State tuition programs. Excludes qualified distributions from such accounts from gross income.
(Sec. 403) Excludes from gross income certain amounts received under the National Health Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, the National Institutes of Health Undergraduate Scholarship Program, or any similar State program.
(Sec. 404) Extends the exclusion for employer provided educational assistance until December 31, 2003.
(Sec. 405) Increases the amount by which certain governmental bonds used to finance public school capital expenditures may be exempted from specified arbitrage bond provisions.
(Sec. 406) Modifies arbitrage rebate rules applicable to public school construction bonds.
(Sec. 407) Repeals the 60-month limitation period on the allowance of the interest deduction on loans for higher education expenses. Increases the income limitation for such deduction.
(Sec. 408) Eliminates the two percent floor on miscellaneous itemized deductions for the qualified professional development expenses of elementary and secondary school teachers.
Title V: Health Care Provisions - Phases-in a 100 percent deduction (for both itemizers and nonitemizers) for the health and long-term care insurance costs of individuals not participating in employer-subsidized health plans.
(Sec. 502) Permits offering long-term care insurance under cafeteria plans and flexible spending arrangements.
(Sec. 503) Permits a taxpayer an additional exemption for certain elderly family members who need long-term care and who reside with the taxpayer.
(Sec. 504) Expands the time frame for human clinical trials qualifying for the orphan drug credit.
(Sec. 505) Adds to the list of taxable vaccines any conjugate vaccine of streptococcus pneumoniae.
(Sec. 506) Provides a deduction for certain former prescription drugs for medicare beneficiaries.
Title VI: Estate Tax Relief - Subtitle A: Repeal of Estate, Gift, and Generation-Skipping Taxes; Repeal of Step Up in Basis At Death - Repeals the estate tax, gift tax, and the tax on generation-skipping transfers, effective January 1, 2009.
(Sec. 602) Terminates, effective January 1, 2009, the current provisions providing for determining the basis of property the acquired from a decedent and sets forth new provisions for determining the basis of certain property acquired from a decedent dying after December 31, 2008.
Subtitle B: Reductions of Estate and Gift Tax Rates Prior to Repeal - Sets forth additional estate and gift tax reductions applicable to the period prior to repeal.
Subtitle C: Unified Credit Replaced Unified Exemption Amount - Replaces the unified credit with a unified exemption amount.
Subtitle D: Modifications of Generation-Skipping Tax - Amends provisions concerning the special rules for allocation of the generation-skipping tax (GST) exemption to provide, as a general rule, that: (1) if any individual makes an indirect skip during such individual's lifetime, any unused portion of such individual's GST exemption shall be allocated to the property transferred to the extent necessary to make the inclusion ratio for such property zero; and (2) if the amount of the indirect skip exceeds such unused portion, the entire unused portion shall be allocated to the property transferred.
Subtitle E: Conservation Easements - Modifies distance requirements with respect to qualified conservation easements.
Title VII: Tax Relief for Distressed Communities and Industries - Subtitle A: American Community Renewal Act of 1999 - Authorizes the Secretary of Housing and Urban Development to designate (upon local or State nomination) up to 20 renewal communities, of which at least four shall be in rural areas.
Requires for nomination purposes that: (1) the area be experiencing high rates of poverty and unemployment and general distress; and (2) State and local governments enter into written contracts with community organizations to promote specified economic growth and employment activities.
Excludes from gross income capital gains on the sale or exchange of a qualified community asset (stock, business property, or partnership interest) held for more than five years.
Allows a specified deduction for amounts paid into a family development account on behalf of a renewal community resident. Excludes from gross income account distributions used for qualified family development expenses (postsecondary education, first-home purchase, business capitalization, medical, and rollovers). Provides a penalty (with exceptions) in addition to inclusion as gross income for nonqualifying distributions.
Authorizes: (1) designation of earned income tax credit payments for family development account deposit; (2) a commercial building revitalization tax deduction; (3) increased first year expensing for renewal community businesses; (4) extension of environmental remediation cost expensing and the work opportunity credit for renewal communities; and (5) similar tax treatment of renewal communities and enterprise zones for specified youth residence requirements.
Permits a deduction for contributions to a family development account whether or not a taxpayer itemizes.
(Sec. 705) Makes conforming amendments to provisions respecting: (1) tax on excess contributions and prohibited transactions; (2) trust and annuity information; (3) tax exemption applications; and (4) the commercial revitalization credit.
Subtitle B: Farming Incentive - Disregards any option to accelerate the receipt of any payment under a production flexibility contract which is payable under the Federal Agriculture Improvement and Reform Act of 1996, as in effect on the date of the enactment of this Act, in determining the taxable year for which such payment is properly includible in gross income for purposes of the IRC.
Subtitle C: Oil and Gas Incentives - Permits a five-year net operating loss carryback for losses attributable to operating mineral interests of independent oil and gas producers.
(Sec. 722) Permits the deduction of delay rental payments.
(Sec. 723) Permits the deduction of incurred geological and geophysical costs.
(Sec. 724) Suspends, between December 31, 1998 and December 31, 2004, the limit on percentage depletion to no more than 65 percent of the taxpayer's taxable income.
(Sec. 725) Revises the refinery limitation on claiming independent producer status from an actual daily production to average annual daily production.
Subtitle D: Timber Incentive - Increases the maximum permitted amortization of reforestation expenditures.
(Sec. 732) Revises provisions concerning gain or loss on the disposal of timber.
Subtitle E: Steel Industry Incentive - Increases, for steel companies, the credit allowed against the regular tax for prior year minimum tax liability.
Title VIII: Relief for Small Businesses - Provides for the deduction of 100 Percent of the health insurance costs of self-employed individuals.
(Sec. 802) Increases to $30,000 the amount which may be expensed as section 179 property.
(Sec. 803) Makes the 6.2 percent Federal Unemployment Tax Act rate effective through calendar year 2004 (currently, 2007) and the 6.0 percent rate effective through calendar year 2005 (currently, 2008).
(Sec. 804) Increases the deduction for meal expenses.
(Sec. 805) Coordinates income averaging for farmers and commercial fishermen with the alternative minimum tax.
(Sec. 806) Permits eligible farmers, fishermen, and ranchers to establish Farm, Fish, and Ranch Risk Management accounts.
(Sec. 807) Provides that, for purposes of applying the passive income test to a bank or a bank holding company, interest income and dividends received on assets required to conduct a banking business are not to be treated as passive income.
(Sec. 808) Provides that qualifying director shares are not treated as a second class of stock.
Title IX: International Tax Relief - Permits, for interest allocation rule purposes, treating each electing worldwide affiliated group an affiliated group, subject to exceptions.
(Sec. 902) Revises provisions concerning the of application of look-thru rules to dividends from noncontrolled section 902 corporations to provide, in general, that any dividend from a noncontrolled section 902 corporation with respect to the taxpayer shall be treated as income in a separate category in proportion to the ratio of: (1) the portion of earnings and profits attributable to income in such category; to (2) the total amount of earnings and profits.
(Sec. 903) Excludes from the definition of "foreign base company oil related income" the pipeline transportation of oil or gas within such foreign country.
(Sec. 904) Excludes from the definition of "foreign base company services income" income derived in connection with the performance of services which are related to the transmission of high voltage electricity.
(Sec. 905) Defines overall domestic loss and sets forth provisions for determining taxable income for any taxpayer sustaining such a loss.
(Sec. 906) Repeals the special rule for military property with respect to exempt foreign trade income.
(Sec. 907) Exempts from taxation certain regulated investment company dividends received by nonresident aliens. Treats certain regulated investment company stock owned by nonresident noncitizens as non-U.S. property for estate tax purposes.
(Sec. 908) Repeals section 907 (Special Rules In Case of Foreign Oil and Gas Income) of the IRC.
(Sec. 909) Treats advance pricing agreements as confidential taxpayer information.
(Sec. 910) Phases in an increase in the dollar limitation on the section 911 (Citizens or Residents of the United States Living Abroad) exclusion.
(Sec. 911) Exempts from the 7.5-percent excise tax air transportation rights (frequent flyer miles/rights) sold which are credited to accounts of persons having a mailing address outside the United States.
Title X: Provisions Relating to Tax-Exempt Organizations - Exempts an organization from income tax if it is created by a State to provide property and casualty insurance coverage for property for which such coverage is otherwise unavailable.
(Sec. 1002) Amends the Tax Reform Act of 1984 to revise the special arbitrage rule.
(Sec. 1003) Requires the Secretary of the Treasury to establish a procedure for exemption from the self-dealing tax.
(Sec. 1004) Revises provisions concerning: (1) declaratory judgments relating to tax-exempt organizations; and (2) the special rules for certain amounts of unrelated business taxable income received from controlled entities.
(Sec. 1006) Excludes from gross income mileage reimbursements to charitable volunteers.
(Sec. 1007) Allows a limited deduction for specified sanctioned Alaskan whaling activities.
(Sec. 1008) removes the separate percentage limitation on grass roots lobbying expenditures.
(Sec. 1009) Permits specified tax-free withdrawals from IRAs for charitable purposes.
Title XI: Real Estate Provisions - Subtitle A: Improvements in Low-Income Housing Credit - Amends the Code, with respect to the low-income housing credit, to revise the formula for the State housing credit ceiling. Replaces the set multiplicand of $1.25 (to be multiplied by the State population) with a graduated applicable multiplicand rising from $1.35 for calendar year 2000 to $1.75 for calendar year 2004 and thereafter, and a maximum product of $2 million. Provides for cost-of-living adjustments to the State ceiling.
(Sec. 1102) Revises the housing priority selection criteria a housing credit agency must use to develop a qualified plan for allocating housing credit dollar amounts among projects. Requires such criteria to include: (1) whether the project would use existing housing as part of a community revitalization plan; (2) tenant populations of individuals with children; and (3) projects intended for eventual tenant ownership. Drops from such criteria participation of local tax-exempt organizations. Requires a qualified allocation plan to give preference in making allocations to projects located in qualified census tracts whose development contributes to a concerted community revitalization plan.
(Sec. 1103) Requires housing credit agencies to: (1) provide for a comprehensive market study (by a disinterested party, at the developer's expense) of the housing needs of low-income individuals in the area to be served by the project before the credit allocation is made; and (2) make public a written explanation for any allocation of a housing credit dollar amount not made in accordance with the agency's established priorities and selection criteria.
(Sec. 1104) Revises special rules for the determination of the adjusted basis of buildings eligible for the low-income housing credit. Requires adjusted basis to include property used throughout the taxable year in providing any community service facility designed to serve primarily individuals (even if they are not tenants) whose income is 60 percent or less of area median income.
Declares that assistance under the Native American Housing Assistance and Self-Determination Act of 1996 shall be disregarded in determining whether a building is federally subsidized for purposes of the low-income housing credit.
(Sec. 1105) Revises the definition of a qualified building (placed in service not later than the second calendar year following a housing credit dollar amount allocation) with respect to which the amount of a low-income housing credit may exceed the credit amount allocated to the building. Sets an alternative date for valuation of the taxpayer's actual basis in the project of which the building is a part (where the actual basis is more than ten percent of the taxpayer's reasonably expected basis). Allows the valuation of the actual basis to be as of the later of the date which is six months after the date that the allocation was made or (as currently) the close of the calendar year in which the allocation is made. Revises the formula for determination of the amount of State housing credit ceiling returned in a calendar year to include the dollar amount previously allocated to a project which fails to meet the ten percent test on a date after the close of the calendar year in which the allocation was made.
Revises special rules for the increased basis of a building located in certain high cost areas to redefine a qualified census tract to include, as an alternative to existing criteria, a tract with a poverty rate of at least 25 percent.
(Sec. 1106) Revises the formula for determining unused housing credit carryovers allocated among certain States.
Subtitle B: Provisions Relating to Real Estate Investment Trusts - Part I: Treatment of Income and Services Provided by Taxable REIT Subsidiaries - Excludes taxable REIT subsidiaries (TRSs) from the five and ten percent asset tests.
(Sec. 1112) Allows TRSs to provide non-customary tenant services.
(Sec. 1113) Allows a REIT to establish a TRS (as defined).
(Sec. 1114) Includes in the definition of "disqualified interest" (Sec. 163 of the IRC) any interest paid or accrued by a TRS to the REIT.
(Sec. 1115) Imposes a 100 percent tax on any interest payments by a TRS to the REIT in excess of the commercially reasonable interest rate.
Part II: Health Care REITs - Includes within the definition of the term "foreclosure property" any qualified health care property acquired by a REIT as the result of the termination of a lease of such property.
Part III: Conformity With Regulated Investment Company Rules - Changes the distribution requirement from 95 percent to 90 percent.
Part IV: Clarification of Exception From Impermissible Tenant Service Income - Provides, with respect to the definition of an independent contractor, that in the event that any class of stock of is regularly traded on an established securities market, only owners who own, directly or indirectly, more than five percent of such class of stock shall be taken into account as owning any of the stock of such class for purposes of applying the 35 percent limitation.
Part V: Modification of Earnings and Profits Rules - Provides rules for determining whether a Regulated Investment Company (RIC) has earnings and profits form a non-RIC year.
Subtitle C: Modification of At-Risk Rules for Publicly Traded Nonrecourse Debt - Revises, with respect to real property, provisions concerning the treatment under the at-risk rules of publicly traded nonrecourse debt.
Subtitle D: Treatment of Certain Contributions To Capital of Retailers - Defines the term "contribution to the capital of the taxpayer" to include any amount of money or other property received by the taxpayer if: (1) the taxpayer has entered into an agreement to operate a qualified retail business at a particular location for at least 15 years; (2) immediately after the receipt of such money or other property, the taxpayer owns the land and the structure to be used by the taxpayer in carrying on a qualified retail business at such location, or the taxpayer uses such amount to acquire ownership of at least such land and structure; (3) such amount meets the requirements of the expenditure rule; and (4) the contributor of such amount does not hold a beneficial interest in any property located on the premises of such qualified retail business other than de minimis amounts of property associated with the operation of property adjacent to such premises. Defines the terms "expenditure rule" and "qualified retail business."
Subtitle E: Private Activity Bond Volume Cap - Provides for an accelerated phase-in of specified increases in the volume cap on private activity bonds.
Subtitle F: Deduction for Renovating Historic Homes - Allows a limited deduction for qualified rehabilitation expenditures to qualified historic homes.
Title XII: Provisions Relating to Pensions - Subtitle A: Expanding Coverage - Increases the $90,000 limit on defined benefit plans to $160,000. Changes the age from which such limit will be reduced from the social security retirement age to 62 and the age from which the limit will be increased from the social security retirement age to 65. Increases the $30,000 limit for defined benefit contribution plans to $40,000. Increases the $150,000 compensation limit to $200,000. Increases the elective deferral limit to $15,000.
(Sec. 1202) Eliminates certain current rules concerning plan loans made to an owner-employee.
(Sec. 1203) Revises the definition of a top-heavy plan and a key employee for purposes of the special rules for top-heavy plans. Takes into account: (1) matching contributions for minimum contribution requirements; and (2) distributions during the last year before the determination date.
(Sec. 1204) Provides that elective deferral contributions are not subject to deduction limits.
(Sec. 1205) Repeals specified coordination requirements under the Code for deferred compensation plans of State and local governments and tax-exempt organizations.
(Sec. 1206) Eliminates user fee requirements for requests to the IRS concerning the status of pension plans.
(Sec. 1207) Revises the definition of compensation, for purposes of the deduction rules, to include salary reduction amounts treated as a participant's compensation.
(Sec. 1208) Provides for optional treatment of elective deferrals as plus contributions. Defines such contributions.
(Sec. 1209) Amends the Employee Retirement Income Security Act (ERISA) of 1974 to provide that, during the first five years of a new single-employer plan of a small employer (100 or fewer employees), the flat rate Pension Benefit Guaranty Corporation (PGBC) premium will be five dollars per plan participant. Provides for a reduced additional PGBC variable premium for new employers.
Subtitle B: Enhancing Fairness for Women - Amends the Code to allow eligible participants age 50 or over to make additional elective deferrals (catch-up contributions) in any plan year according to a schedule of percentage increments (from ten percent to 50 percent) between 2001 and 2005 and thereafter.
(Sec. 1222) Increases from 25 percent to 100 percent of compensation (up to $30,000) the maximum allowable annual addition to a participant's plan account.
(Sec. 1223) Provides for faster vesting of certain employer matching contributions.
(Sec. 1224) Directs the Secretary of the Treasury (Secretary) to simplify and finalize the regulations relating to specified minimum distribution requirements, and modify them to: (1) reflect current life expectancy; and (2) revise the required distribution methods so that, under reasonable assumptions, the amount of the required minimum distribution does not decrease over a participant's life expectancy.
(Sec. 1225) Amends the Code to provide for distribution or payment (division of benefits) from an eligible deferred compensation plan upon divorce.
(Sec. 1226) Directs the Secretary to revise the hardship distribution regulations to provide that six months is the period an employee is prohibited from making elective and employee contributions in order for a distribution to be deemed necessary to satisfy financial need (safe harbor relief for hardship withdrawals from cash or deferred arrangements).
Subtitle C: Increasing Portability for Participants - Permits rollovers from and to various types of plans under the IRC.
(Sec. 1232) Permits individual retirement plan (IRA) rollovers only if certain conditions are met.
(Sec. 1233) Permits rollover of after-tax contributions in an exempt trust under specified conditions.
(Sec. 1234) Sets forth a hardship exception to the 60-day rule.
(Sec. 1235) Sets forth requirements for treatment of forms of distribution available under transferor and transferee plans, under the IRC and ERISA.
(Sec. 1236) Revises restrictions on distributions, including the same desk exception.
(Sec. 1237) Authorizes trustee-to-trustee transfers to purchase permissive service credit with respect to governmental defined benefit plans.
(Sec. 1238) Allows employers to disregard rollovers for purposes of cash-out amounts, under retirement plan provisions of the Code and ERISA.
(Sec. 1239) Revises minimum distribution and inclusion requirements for section 457 plans.
Subtitle D: Strengthening Pension Security and Enforcement - Amends the IRC and ERISA to revise the percentage of current liability funding limit.
(Sec. 1242) Revises maximum contribution deduction rules and applies them to all defined benefit plans under the IRC.
(Sec. 1243) Amends ERISA to revise requirements relating to missing participants. Directs the PBGC to prescribe rules relating to missing participants for multiemployer plans covered by the PBGC that terminate. Allows the administrator of a plan not otherwise subject to such PBGC regulation to elect to transfer a missing participant's benefits to the PBGC upon termination of the plan, under specified conditions.
(Sec. 1244) Amends the IRC to allow an employer, in determining the amount of nondeductible contributions for any taxable year, to elect not to take into account any contributions to a defined benefit plan except to the extent that they exceed the full-funding limitation.
(Sec. 1245) Imposes an excise tax on a plan failing to provide required notice of a significant reduction in the rate of future benefit accrual.
(Sec. 1246) Amends the Taxpayer Relief Act of 1997 with respect to certain limitations on investment in employer securities and employer real property by cash or deferred arrangements. Exempts from such limitations any elective deferral invested in assets consisting of qualifying employer securities, qualifying employer real property, or both, if such assets were acquired before January 1, 1999.
(Sec. 1247)Makes certain compensation limitations for defined benefit plans inapplicable to governmental and multiemployer plans.
Subtitle E: Reducing Regulatory Burdens - Amends the Code and ERISA to revise requirements relating to timing of plan valuations.
(Sec. 1252) Amends IRC requirements for applicable dividends to allow dividends of employee stock ownership plans to be reinvested without loss of dividend deduction.
(Sec. 1253) Repeals a transition rule relating to certain highly compensated employees under the Tax Reform Act of 1986.
(Sec. 1254) Directs the Secretary to modify certain regulations with respect to certain plan participation by employees of tax-exempt entities under the IRC.
(Sec. 1255) Excludes qualified retirement planning services from gross income (as a fringe benefit).
(Sec. 1256) Directs the Secretary to modify the annual return filing requirements for one-participant retirement plans (covering only the employer and spouse where the employer owns the entire business, or only one or more partners and spouses in a business partnership) to ensure that any plans with assets of $250,000 or less as of the close of the plan year need not file a return for that year.
(Sec. 1257) Directs the Secretary of the Treasury to continue to update and improve the Employee Plans Compliance Resolution System (or any successor program), giving special attention to certain tasks.
(Sec. 1258) Amends ERISA, with respect to limitations on the guarantee of single-employer plan benefits, to rename a "substantial owner" a "majority owner," who owns either the entire interest in an unincorporated trade or business, or: (1) 50 percent or more (currently more than ten percent) of either the capital interest or the profits interest in a partnership; or (2) 50 percent or more (currently more than ten percent) in value of either the voting stock of a corporation or all its stock. Revises the formula for the amount of benefits guaranteed for a majority owner of a plan which is in effect for less than 60 months when the plan terminates. Prescribes priorities for the allocation of assets to benefits when the assets available for the initial allocation are insufficient to satisfy in full the accrued benefits of all the individuals derived from their contributions.
(Sec. 1259) Amends the Code to repeal the restriction to situations where vouchers are not available of the exclusion from gross income of cash reimbursements as a qualified transportation fringe.
(Sec.1260) Repeals the Secretary is mandate, with respect to the nondiscrimination test for matching contributions and employee contributions, to prescribe regulations to prevent the multiple use of the alternative limitation for any highly compensated employee.
(Sec. 1261) Directs the Secretary to provide that a plan shall be deemed to satisfy nondiscrimination requirements if it satisfies the facts and circumstances test as in effect before January 1, 1994, but only if: (1) it satisfies conditions prescribed by the Secretary to appropriately limit the availability of such test; and (2) it is submitted to the Secretary for a determination of whether it satisfies such test.
Revises minimum coverage requirements to allow a plan that otherwise fails to meet such requirements to constitute a qualified plan if it meets certain requirements that were in effect immediately before enactment of the Tax Reform Act of 1986. (Such requirements stated that the plan must at least benefit employees qualifying under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are officers, shareholders, or highly compensated.)
Directs the Secretary to modify certain existing regulations with respect to employers operating separate lines of business to expand the ability of a pension plan to demonstrate compliance with the line of business requirements based upon the facts and circumstances surrounding the design and operation of the plan, even though the plan is unable to satisfy the mechanical tests currently used to determine compliance.
(Sec.1262) Amends the Taxpayer Relief Act of 1997 to extend to international organizations the moratorium on application of certain nondiscrimination rules applicable to State and local governmental plans.
Subtitle F: Plan Amendments - Prescribes application requirements for plan or contract amendments.
Title XIII: Miscellaneous Provisions - Subtitle A: Provisions Primarily Affecting Individuals - Amends provisions of the Taxpayer Relief Act of 1997 to extend the same public safety officer survivor tax benefits to survivors of officers killed in the line of duty before December 31, 1996, as are available to the survivors of officers killed after such date.
(Sec. 1302) Extends the District of Columbia (DC) homebuyer credit by one year and increases the phase-out range.
(Sec. 1303) Excludes from gross income amounts and lands received by Holocaust victims and their heirs.
Subtitle B: Provisions Primarily Affecting Businesses - Includes income from publicly traded partnerships as qualifying income of regulated investment companies. Excludes distributions from the source-based inclusion limitation applicable to other partnerships.
(Sec. 1312) Applies specified passive activity provisions for publicly traded partnerships to regulated investment companies.
(Sec. 1313) Makes certain large electric trucks, vans and buses eligible for the $50,000 deduction clean-fuel property deduction, but not the $4,000 electric vehicle credit.
(Sec. 1314) Modifies the special rules concerning nuclear decommissioning costs.
(Sec. 1315) Repeals certain provisions concerning the filing of consolidated returns by insurance companies.
(Sec. 1316) Provides that, for specified purposes of the active business definition, all members of a corporation's separate affiliated group shall be treated as one corporation.
(Sec. 1317) Modifies, for lending or finance companies, the exemption from the personal holding company tax.
(Sec. 1318) Revises the definition of qualified contamination site for purposes of expensing environmental remediation costs.
Subtitle C: Provisions Relating to Excise Taxes - Combines the Hazardous Substance Superfund and the Leaking Underground Storage Tank Trust Fund (LUST) into the Environmental Remediation Trust Fund (established by this Act).
(Sec. 1322) Repeals the: (1) LUST taxes on fuel used in trains; and (2) 4.3-cents-per-gallon General Fund excise tax on diesel fuel used by railroads and on fuels used by barges operating on designated inland waterways.
(Sec. 1323) Repeals the excise tax on fishing tackle boxes.
(Sec. 1324) Revises the excise tax on arrow components.
(Sec. 1325) Exempts small seaplanes from the air passenger excise taxes.
(Sec. 1326) Modifies the definition of a rural airport for purposes of the air passenger tax.
Subtitle D: Other Provisions - Provides for the treatment of a qualified highway infrastructure project bond as an exempt private activity bond.
(Sec. 1332) Permits, in general, an electing Alaska Native Settlement Trust to exclude contributions, during the year of contribution, from the gross income of a beneficiary.
(Sec. 1333) Doubles the Joint Committee on Taxation reporting threshold for refunds and credits.
(Sec. 1334) Establishes a limited credit for "qualified medical innovation expenses." Defines such expenses as amounts paid by a taxpayer to any qualified academic institution for clinical testing research activities.
(Sec. 1335) Provides that the patronage dividends of cooperatives shall not be reduced by stock dividends to the extent the stock dividends are in addition to amounts otherwise payable.
Subtitle E: Tax Court Provisions - Authorizes the Tax Court to charge a filing fee of up to $60 in all cases commenced by petition.
(Sec. 1342) Authorizes the Tax Court to make the $30 practice fee available to pro se taxpayers.
(Sec. 1343) Permits the Tax Court to apply the doctrine of equitable recoupment to the same extent that it is available in civil tax cases.
Title XIV: Extensions of Expiring Provisions - Extends, for five years, the: (1) research credit; (2) subpart F (Controlled Foreign Corporations) exemption for active income financing; (3) taxable income limit on percentage depletion for marginal oil and gas wells; and (4) work opportunity credit and the welfare-to-work credit. Redefines "qualified facility" for purposes the credit for producing electricity from certain renewable sources and adds poultry waste to the definition of "qualified energy sources."
Title XV: Revenue Offsets - Amends provisions involving returns relating to the cancellation of indebtedness by certain entities to include within the definition of "applicable financial entity" any organization a significant trade or business of which is the lending of money.
(Sec. 1502) Directs the Secretary to establish a program requiring the payment of user fees for requests to the IRS for ruling letters, opinion letters, determination letters, and other similar requests. Terminates fees October 1, 2007.
(Sec. 1503) Modifies rules relating to the exemption of certain ten or more employer plans from welfare benefit fund provisions.
(Sec. 1504) Increases the withholding rate for nonperiodic distributions from 10 to 15 percent.
(Sec. 1505) Makes a controlled entity ineligible to be a REIT. Defines "controlled entity."
(Sec. 1506) Treats a gain as an ordinary gain to the extent such gain exceeds the net underlying long-term capital gain where the taxpayer has gain from a constructive ownership transaction with respect to any financial position and such gain otherwise would be treated as a long-term capital gain. Provides that, to the extent such gain is treated as a long-term capital gain after the application of the previous sentence, the determination of the applicable capital gain rate (or rates) shall be determined on the basis of the respective rate (or rates) that would have been applicable to the net underlying long-term capital gain. Sets forth definitions and exceptions.
(Sec. 1507) Prohibits transfers of excess pension assets to retiree health account made after September 30, 2009, (currently, after December 31, 2000) from being treated as qualified transfers.
(Sec. 1508) Prohibits, in general, the use of the installment method of accounting for accrual method dispositions.
(Sec. 1509) Revises special rules which allow users of the accrual method not to accrue payments for personal services which (on the basis of experience) will not be collected, to limit such services to those performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.
(Sec. 1510) Disallows a deduction for the transfer of a charitable contribution to or for the use of a State or charitable tax-exempt organization or trust if in connection with such transfer: (1) the organization directly or indirectly pays, or has previously paid, any premium on any personal benefit contract (life insurance, annuity, or endowment contract, also known as charitable split-dollar life insurance) with respect to the transferor; or (2) there is an understanding (side agreement) that any person will directly or indirectly pay any premium on such contract with respect to such transferor. Imposes on such organization an excise tax equal to the premiums paid by it on the personal benefit contract.
Provides that certain persons shall not be treated as indirect beneficiaries: (1) in certain cases in which a charitable organization purchases an annuity contract to fund an obligation to pay a charitable gift annuity; or (2) solely by reason of being a noncharitable recipient of an annuity or unitrust amount paid by a charitable remainder trust that holds a life insurance, annuity or endowment contract.
(Sec. 1511) Prohibits from taking into account any dividend received from a closely held real estate investment trust by any person owning 10 percent or more of the stock or beneficial interests in the trust in computing annualized income installments in a manner similar to the manner under which partnership income inclusions are taken into account.
(Sec. 1512) Revises the anti-abuse rules related to assumption of liability.
(Sec. 1513) Provides that, as a general rule, a transfer of an interest in intangible property shall be treated (under provisions concerning the transfer of property to a corporation controlled by the transferor) as a transfer of property even if the transfer is of less than all of the substantial rights of the transferor in the property.
(Sec. 1514) Sets forth rules concerning distributions to a corporate partner of stock in another corporation.
(Sec. 1515) Requires any employee stock ownership plan holding employer securities consisting of stock in an S corporation to provide that no portion of the assets of the plan attributable to (or allocable in lieu of) such employer securities may, during a nonallocation year, accrue (or be allocated directly or indirectly under any qualified plan of the employer) for the benefit of any disqualified individual.
Title XVI: Compliance With Budget Act - States that: (1) all provisions (except as provided in clause (2)) of, and amendments made by, this Act which are in effect on September 30, 2009, shall cease to apply as of the close of September 30, 2009; and (2) the amendments made by sections 101, 111, 121, 201, 211, 214, and 1221 shall not apply after December 31, 2008.
[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2488 Introduced in House (IH)]
106th CONGRESS
1st Session
H. R. 2488
To amend the Internal Revenue Code of 1986 to reduce individual income
tax rates, to provide marriage penalty relief, to reduce taxes on
savings and investments, to provide estate and gift tax relief, to
provide incentives for education savings and health care, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 13, 1999
Mr. Archer introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to reduce individual income
tax rates, to provide marriage penalty relief, to reduce taxes on
savings and investments, to provide estate and gift tax relief, to
provide incentives for education savings and health care, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Financial Freedom
Act of 1999''.
(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.
(c) Section 15 Not To Apply.--No amendment made by this Act shall
be treated as a change in a rate of tax for purposes of section 15 of
the Internal Revenue Code of 1986.
(d) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--BROAD-BASED TAX RELIEF
Subtitle A--10-Percent Reduction in Individual Income Tax Rates
Sec. 101. 10-percent reduction in individual income tax rates.
Subtitle B--Marriage Penalty Tax Relief
Sec. 111. Elimination of marriage penalty in standard deduction.
Sec. 112. Elimination of marriage penalty in deduction for interest on
education loans.
Sec. 113. Rollover from regular IRA to Roth IRA.
Subtitle C--Repeal of Alternative Minimum Tax on Individuals
Sec. 121. Repeal of Alternative Minimum Tax on Individuals.
TITLE II--RELIEF FROM TAXATION ON SAVINGS AND INVESTMENTS
Sec. 201. Exemption of certain interest and dividend income from tax.
Sec. 202. Reduction in individual capital gain tax rates.
Sec. 203. Capital gains tax rates applied to capital gains of
designated settlement funds.
Sec. 204. Special rule for members of uniformed services and foreign
service, and other employees, in
determining exclusion of gain from sale of
principal residence.
Sec. 205. Treatment of certain dealer derivative financial instruments,
hedging transactions, and supplies as
ordinary assets.
Sec. 206. Worthless securities of financial institutions.
TITLE III--INCENTIVES FOR BUSINESS INVESTMENT AND JOB CREATION
Sec. 301. Reduction in corporate capital gain tax rate.
Sec. 302. Repeal of alternative minimum tax on corporations.
TITLE IV--EDUCATION SAVINGS INCENTIVES
Sec. 401. Modifications to education individual retirement accounts.
Sec. 402. Modifications to qualified tuition programs.
Sec. 403. Exclusion of certain amounts received under the National
Health Service Corps scholarship program,
the F. Edward Hebert Armed Forces Health
Professions Scholarship and Financial
Assistance Program, and certain other
programs.
Sec. 404. Additional increase in arbitrage rebate exception for
governmental bonds used to finance
educational facilities.
Sec. 405. Modification of arbitrage rebate rules applicable to public
school construction bonds.
Sec. 406. Repeal of 60-month limitation on deduction for interest on
education loans.
TITLE V--HEALTH CARE PROVISIONS
Sec. 501. Deduction for health and long-term care insurance costs of
individuals not participating in employer-
subsidized health plans.
Sec. 502. Long-term care insurance permitted to be offered under
cafeteria plans and flexible spending
arrangements.
Sec. 503. Expansion of availability of medical savings accounts.
Sec. 504. Additional personal exemption for taxpayer caring for elderly
family member in taxpayer's home.
Sec. 505. Expanded human clinical trials qualifying for orphan drug
credit.
Sec. 506. Inclusion of certain vaccines against streptococcus
pneumoniae to list of taxable vaccines.
TITLE VI--ESTATE TAX RELIEF
Subtitle A--Repeal of Estate, Gift, and Generation-Skipping Taxes;
Repeal of Step Up in Basis At Death
Sec. 601. Repeal of estate, gift, and generation-skipping taxes.
Sec. 602. Termination of step up in basis at death.
Sec. 603. Carryover basis at death.
Subtitle B--Reductions of Estate and Gift Tax Rates Prior to Repeal
Sec. 611. Additional reductions of estate and gift tax rates.
Subtitle C--Unified Credit Replaced With Unified Exemption Amount
Sec. 621. Unified credit against estate and gift taxes replaced with
unified exemption amount.
Subtitle D--Modifications of Generation-Skipping Transfer Tax
Sec. 631. Deemed allocation of GST exemption to lifetime transfers to
trusts; retroactive allocations.
Sec. 632. Severing of trusts.
Sec. 633. Modification of certain valuation rules.
Sec. 634. Relief provisions.
TITLE VII--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 1999
Sec. 701. Short title.
Sec. 702. Designation of and tax incentives for renewal communities.
Sec. 703. Extension of expensing of environmental remediation costs to
renewal communities.
Sec. 704. Extension of work opportunity tax credit for renewal
communities
Sec. 705. Conforming and clerical amendments.
Sec. 706. Evaluation and reporting requirements.
Subtitle B--Farming Incentive
Sec. 711. Production flexibility contract payments.
Subtitle C--Oil and Gas Incentive
Sec. 721. 5-year net operating loss carryback for losses attributable
to operating mineral interests of
independent oil and gas producers.
Subtitle D--Timber Incentive
Sec. 731. Increase in maximum permitted amortization of reforestation
expenditures.
Subtitle E--Steel Industry Incentive
Sec. 741. Minimum tax relief for steel industry.
TITLE VIII--RELIEF FOR SMALL BUSINESSES
Sec. 801. Deduction for 100 percent of health insurance costs of self-
employed individuals.
Sec. 802. Increase in expense treatment for small businesses.
Sec. 803. Repeal of Federal unemployment surtax.
Sec. 804. Restoration of 80 percent deduction for meal expenses.
TITLE IX--INTERNATIONAL TAX RELIEF
Sec. 901. Interest allocation rules.
Sec. 902. Look-thru rules to apply to dividends from noncontrolled
section 902 corporations.
Sec. 903. Clarification of treatment of pipeline transportation income.
Sec. 904. Subpart F treatment of income from transmission of high
voltage electricity.
Sec. 905. Recharacterization of overall domestic loss.
Sec. 906. Treatment of military property of foreign sales corporations.
Sec. 907. Treatment of certain dividends of regulated investment
companies.
Sec. 908. Repeal of special rules for applying foreign tax credit in
case of foreign oil and gas income.
Sec. 909. Study of proper treatment of European Union under same
country exceptions.
Sec. 910. Application of denial of foreign tax credit with respect to
certain foreign countries.
Sec. 911. Advance pricing agreements treated as confidential taxpayer
information.
Sec. 912. Increase in dollar limitation on section 911 exclusion.
TITLE X--PROVISIONS RELATING TO TAX-EXEMPT ORGANIZATIONS
Sec. 1001. Exemption from income tax for State-created organizations
providing property and casualty insurance
for property for which such coverage is
otherwise unavailable.
Sec. 1002. Modification of special arbitrage rule for certain funds.
Sec. 1003. Charitable split-dollar life insurance, annuity, and
endowment contracts.
Sec. 1004. Exemption procedure from taxes on self-dealing.
Sec. 1005. Expansion of declaratory judgment remedy to tax-exempt
organizations.
Sec. 1006. Modifications to section 512(b)(13).
TITLE XI--REAL ESTATE PROVISIONS
Subtitle A--Provisions Relating to Real Estate Investment Trusts
Part I--Treatment of Income and Services Provided by Taxable REIT
Subsidiaries
Sec. 1101. Modifications to asset diversification test.
Sec. 1102. Treatment of income and services provided by taxable REIT
subsidiaries.
Sec. 1103. Taxable REIT subsidiary.
Sec. 1104. Limitation on earnings stripping.
Sec. 1105. 100 percent tax on improperly allocated amounts.
Sec. 1106. Effective date.
Part II--Health Care REITs
Sec. 1111. Health care REITs.
Part III--Conformity With Regulated Investment Company Rules
Sec. 1121. Conformity with regulated investment company rules.
Part IV--Clarification of Exception From Impermissible Tenant Service
Income
Sec. 1131. Clarification of exception for independent operators.
Part V--Modification of Earnings and Profits Rules
Sec. 1141. Modification of earnings and profits rules.
Part VI--Study Relating to Taxable REIT Subsidiaries
Sec. 1151. Study relating to taxable REIT subsidiaries.
Subtitle B--Modification of At-Risk Rules for Publicly Traded
Securities
Sec. 1161. Treatment under at-risk rules of publicly traded nonrecourse
debt.
Subtitle C--Treatment of Construction Allowances and Certain
Contributions To Capital of Retailers
Sec. 1171. Exclusion from gross income of qualified lessee construction
allowances not limited for certain
retailers to short-term leases.
Sec. 1172. Exclusion from gross income for certain contributions to the
capital of certain retailers.
TITLE XII--PROVISIONS RELATING TO PENSIONS
Subtitle A--Expanding Coverage
Sec. 1201. Increase in benefit and contribution limits.
Sec. 1202. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 1203. Modification of top-heavy rules.
Sec. 1204. Elective deferrals not taken into account for purposes of
deduction limits.
Sec. 1205. Reduced PBGC premium for new plans of small employers.
Sec. 1206. Reduction of additional PBGC premium for new and small
plans.
Sec. 1207. Repeal of coordination requirements for deferred
compensation plans of State and local
governments and tax-exempt organizations.
Sec. 1208. Elimination of user fee for requests to IRS regarding
pension plans.
Sec. 1209. Deduction limits.
Sec. 1210. Option to treat elective deferrals as after-tax
contributions.
Subtitle B--Enhancing Fairness for Women
Sec. 1211. Additional salary reduction catch-up contributions.
Sec. 1212. Equitable treatment for contributions of employees to
defined contribution plans.
Sec. 1213. Faster vesting of certain employer matching contributions.
Sec. 1214. Simplify and update the minimum distribution rules.
Sec. 1215. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Subtitle C--Increasing Portability for Participants
Sec. 1221. Rollovers allowed among various types of plans.
Sec. 1222. Rollovers of IRAs into workplace retirement plans.
Sec. 1223. Rollovers of after-tax contributions.
Sec. 1224. Hardship exception to 60-day rule.
Sec. 1225. Treatment of forms of distribution.
Sec. 1226. Rationalization of restrictions on distributions.
Sec. 1227. Purchase of service credit in governmental defined benefit
plans.
Sec. 1228. Employers may disregard rollovers for purposes of cash-out
amounts.
Sec. 1229. Minimum distribution and inclusion requirements for deferred
compensation plans of State and local
governments.
Subtitle D--Strengthening Pension Security and Enforcement
Sec. 1231. Repeal of 150 percent of current liability funding limit.
Sec. 1232. Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec. 1233. Missing participants.
Sec. 1234. Excise tax relief for sound pension funding.
Sec. 1235. Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit
accruals.
Subtitle E--Reducing Regulatory Burdens
Sec. 1241. Repeal of the multiple use test.
Sec. 1242. Modification of timing of plan valuations.
Sec. 1243. Flexibility and nondiscrimination and line of business
rules.
Sec. 1244. Substantial owner benefits in terminated plans.
Sec. 1245. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 1246. Notice and consent period regarding distributions.
Sec. 1247. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 1248. Employees of tax-exempt entities.
Sec. 1249. Clarification of treatment of employer-provided retirement
advice.
Sec. 1250. Provisions relating to plan amendments.
Sec. 1251. Model plans for small businesses.
Sec. 1252. Simplified annual filing requirement for plans with fewer
than 25 employees.
Sec. 1253. Intermediate sanctions for inadvertent failures.
TITLE XIII--MISCELLANEOUS PROVISIONS
Subtitle A--Provisions Primarily Affecting Individuals
Sec. 1301. Exclusion for foster care payments to apply to payments by
qualified placement agencies.
Sec. 1302. Mileage reimbursements to charitable volunteers excluded
from gross income.
Sec. 1303. W-2 to include employer social security taxes.
Subtitle B--Provisions Primarily Affecting Businesses
Sec. 1311. Distributions from publicly traded partnerships treated as
qualifying income of regulated investment
companies.
Sec. 1312. Special passive activity rule for publicly traded
partnerships to apply to regulated
investment companies.
Sec. 1313. Large electric trucks, vans, and buses eligible for
deduction for clean-fuel vehicles in lieu
of credit.
Sec. 1314. Modifications to special rules for nuclear decommissioning
costs.
Sec. 1315. Consolidation of life insurance companies with other
corporations.
Subtitle C--Provisions Relating to Excise Taxes
Sec. 1321. Consolidation of Hazardous Substance Superfund and Leaking
Underground Storage Tank Trust Fund.
Sec. 1322. Repeal of certain motor fuel excise taxes on fuel used by
railroads and on inland waterway
transportation.
Sec. 1323. Repeal of excise tax on fishing tackle boxes.
Subtitle D--Other Provisions
Sec. 1331. Increase in volume cap on private activity bonds.
Sec. 1332. Tax treatment of Alaska Native Settlement Trusts.
Sec. 1333. Increase in threshold for Joint Committee reports on refunds
and credits.
Subtitle E--Tax Court Provisions
Sec. 1341. Tax Court filing fee in all cases commenced by filing
petition.
Sec. 1342. Expanded use of Tax Court practice fee.
Sec. 1343. Confirmation of authority of Tax Court to apply doctrine of
equitable recoupment.
TITLE XIV--EXTENSIONS OF EXPIRING PROVISIONS
Sec. 1401. Research credit.
Sec. 1402. Subpart F exemption for active financing income.
Sec. 1403. Taxable income limit on percentage depletion for marginal
production.
Sec. 1404. Work Opportunity Credit and Welfare-to-Work Credit.
TITLE XV--REVENUE OFFSETS
Sec. 1501. Returns relating to cancellations of indebtedness by
organizations lending money.
Sec. 1502. Extension of Internal Revenue Service user fees.
Sec. 1503. Limitations on welfare benefit funds of 10 or more employer
plans.
Sec. 1504. Increase in elective withholding rate for nonperiodic
distributions from deferred compensation
plans.
Sec. 1505. Controlled entities ineligible for REIT status.
Sec. 1506. Treatment of gain from constructive ownership transactions.
Sec. 1507. Transfer of excess defined benefit plan assets for retiree
health benefits.
Sec. 1508. Modification of installment method and repeal of installment
method for accrual method taxpayers.
TITLE XVI--TECHNICAL CORRECTIONS
Sec. 1601. Amendments related to Tax and Trade Relief Extension Act of
1998.
Sec. 1602. Amendments related to Internal Revenue Service Restructuring
and Reform Act of 1998.
Sec. 1603. Amendments related to Taxpayer Relief Act of 1997.
Sec. 1604. Other technical corrections.
Sec. 1605. Clerical changes.
TITLE I--BROAD-BASED TAX RELIEF
Subtitle A--10-Percent Reduction in Individual Income Tax Rates
SEC. 101. 10-PERCENT REDUCTION IN INDIVIDUAL INCOME TAX RATES.
(a) Regular Income Tax Rates.--
(1) In general.--Subsection (f) of section 1 is amended by
adding at the end the following new paragraph:
``(8) Rate reductions.--In prescribing the tables under
paragraph (1) which apply with respect to taxable years
beginning in a calendar year after 2000, each rate in such
tables (without regard to this paragraph) shall be reduced by
the number of percentage points (rounded to the next lowest
tenth) equal to the applicable percentage (determined in
accordance with the following table) of such rate:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2001 through 2004...................... 2.5
2005 through 2007...................... 5.0
2008................................... 7.5
2009 and thereafter.................... 10.0.''
(2) Technical amendments.--
(A) Subparagraph (B) of section 1(f)(2) is amended
by inserting ``except as provided in paragraph (8),''
before ``by not changing''.
(B) Subparagraph (C) of section 1(f)(2) is amended
by inserting ``and the reductions under paragraph (8)
in the rates of tax'' before the period.
(C) The heading for subsection (f) of section 1 is
amended by inserting ``Rate Reductions;'' before
``Adjustments''.
(D) Section 1(g)(7)(B)(ii)(II) is amended by
striking ``15 percent'' and inserting ``the percentage
applicable to the lowest income bracket in subsection
(c)''.
(E) Subparagraphs (A)(ii)(I) and (B)(i) of section
1(h)(1) are each amended by striking ``28 percent'' and
inserting ``25.2 percent''.
(F) Section 531 is amended by striking ``39.6
percent of the accumulated taxable income'' and
inserting ``the product of the accumulated taxable
income and the percentage applicable to the highest
income bracket in section 1(c)''.
(G) Section 541 is amended by striking ``39.6
percent of the undistributed personal holding company
income'' and inserting ``the product of the
undistributed personal holding company income and the
percentage applicable to the highest income bracket in
section 1(c)''.
(H) Section 3402(p)(1)(B) is amended by striking
``specified is 7, 15, 28, or 31 percent'' and all that
follows and inserting ``specified is--
``(i) 7 percent,
``(ii) a percentage applicable to 1 of the
3 lowest income brackets in section 1(c), or
``(iii) such other percentage as is
permitted under regulations prescribed by the
Secretary.''
(I) Section 3402(p)(2) is amended by striking ``15
percent of such payment'' and inserting ``the product
of such payment and the percentage applicable to the
lowest income bracket in section 1(c)''.
(J) Section 3402(q)(1) is amended by striking ``28
percent of such payment'' and inserting ``the product
of such payment and the percentage applicable to the
next to the lowest income bracket in section 1(c)''.
(K) Section 3402(r)(3) is amended by striking ``31
percent'' and inserting ``the rate applicable to the
third income bracket in such section''.
(L) Section 3406(a)(1) is amended by striking ``31
percent of such payment'' and inserting ``the product
of such payment and the percentage applicable to the
third income bracket in section 1(c)''.
(b) Minimum Tax Rates.--Subparagraph (A) of section 55(b)(1) is
amended by adding at the end the following new clause:
``(iv) Rate reduction.--In the case of
taxable years beginning after 2000, each rate
in clause (i) (without regard to this clause)
shall be reduced by the number of percentage
points (rounded to the next lowest tenth) equal
to the applicable percentage (determined in
accordance with section 1(f)(8)) of such
rate.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
Subtitle B--Marriage Penalty Tax Relief
SEC. 111. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.
(a) In General.--Paragraph (2) of section 63(c) (relating to
standard deduction) is amended--
(1) by striking ``$5,000'' in subparagraph (A) and
inserting ``twice the dollar amount in effect under
subparagraph (C) for the taxable year'',
(2) by adding ``or'' at the end of subparagraph (B),
(3) by striking ``in the case of'' and all that follows in
subparagraph (C) and inserting ``in any other case.'', and
(4) by striking subparagraph (D).
(b) Phase-in.--Subsection (c) of section 63 is amended by adding at
the end the following new paragraph:
``(7) Phase-in of increase in basic standard deduction.--In
the case of taxable years beginning before January 1, 2003--
``(A) paragraph (2)(A) shall be applied by
substituting for `twice'--
``(i) `1.778 times' in the case of taxable
years beginning during 2001, and
``(ii) `1.889 times' in the case of taxable
years beginning during 2002, and
``(B) the basic standard deduction for a married
individual filing a separate return shall be one-half
of the amount applicable under paragraph (2)(A).
If any amount determined under subparagraph (A) is not a
multiple of $50, such amount shall be rounded to the next
lowest multiple of $50.''.
(c) Technical Amendments.--
(1) Subparagraph (B) of section 1(f)(6) is amended by
striking ``(other than with'' and all that follows through
``shall be applied'' and inserting ``(other than with respect
to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
(2) Paragraph (4) of section 63(c) is amended by adding at
the end the following flush sentence:
``The preceding sentence shall not apply to the amount referred
to in paragraph (2)(A).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 112. ELIMINATION OF MARRIAGE PENALTY IN DEDUCTION FOR INTEREST ON
EDUCATION LOANS.
(a) In General.--Subparagraph (B) of section 221(b)(2) (relating to
limitation based on modified adjusted gross income) is amended--
(1) by striking ``$60,000'' in clause (i)(II) and inserting
``twice such amount'', and
(2) by inserting ``($30,000 in the case of a joint
return)'' after ``$15,000'' in clause (ii).
(b) Conforming Amendment.--Paragraph (1) of section 221(g) is
amended by striking ``and $60,000 amounts in subsection (b)(2) shall
each'' and inserting ``amount in subsection (b)(2) shall''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 113. ROLLOVER FROM REGULAR IRA TO ROTH IRA.
(a) In General.--Clause (i) of section 408A(c)(3)(B) is amended by
inserting ``($160,000 in the case of a joint return)'' after
``$100,000''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
Subtitle C--Repeal of Alternative Minimum Tax on Individuals
SEC. 121. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDIVIDUALS.
(a) In General.--Subsection (a) of section 55 is amended by adding
at the end the following new flush sentence:
``For purposes of this title, the tentative minimum tax on any taxpayer
other than a corporation for any taxable year beginning after December
31, 2007, shall be zero.''
(b) Reduction of Tax on Individuals Prior to Repeal.--Section 55 is
amended by adding at the end the following new subsection:
``(f) Phaseout of Tax on Individuals.--
``(1) In general.--The tax imposed by this section on a
taxpayer other than a corporation for any taxable year
beginning after December 31, 2002, and before January 1, 2008,
shall be the applicable percentage of the tax which would be
imposed but for this subsection.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2003........................................... 80
2004........................................... 70
2005........................................... 60
2006 or 2007................................... 50.''
(c) Nonrefundable Personal Credits Fully Allowed Against Regular
Tax Liability.--
(1) In general.--Subsection (a) of section 26 (relating to
limitation based on amount of tax) is amended to read as
follows:
``(a) Limitation Based on Amount of Tax.--The aggregate amount of
credits allowed by this subpart for the taxable year shall not exceed
the taxpayer's regular tax liability for the taxable year.''
(2) Child credit.--Subsection (d) of section 24 is amended
by striking paragraph (2) and by redesignating paragraph (3) as
paragraph (2).
(d) Limitation on Use of Credit for Prior Year Minimum Tax
Liability.--Subsection (c) of section 53 is amended to read as follows:
``(c) Limitation.--
``(1) In general.--Except as otherwise provided in this
subsection, the credit allowable under subsection (a) for any
taxable year shall not exceed the excess (if any) of--
``(A) the regular tax liability of the taxpayer for
such taxable year reduced by the sum of the credits
allowable under subparts A, B, D, E, and F of this
part, over
``(B) the tentative minimum tax for the taxable
year.
``(2) Taxable years beginning after 2007.--In the case of
any taxable year beginning after 2007, the credit allowable
under subsection (a) to a taxpayer other than a corporation for
any taxable year shall not exceed 90 percent of the excess (if
any) of--
``(A) regular tax liability of the taxpayer for
such taxable year, over
``(B) the sum of the credits allowable under
subparts A, B, D, E, and F of this part.''
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.
TITLE II--RELIEF FROM TAXATION ON SAVINGS AND INVESTMENTS
SEC. 201. EXEMPTION OF CERTAIN INTEREST AND DIVIDEND INCOME FROM TAX.
(a) In General.--Part III of subchapter B of chapter 1 (relating to
amounts specifically excluded from gross income) is amended by
inserting after section 115 the following new section:
``SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST RECEIVED BY
INDIVIDUALS.
``(a) Exclusion From Gross Income.--Gross income does not include
dividends and interest otherwise includible in gross income which are
received during the taxable year by an individual.
``(b) Limitations.--
``(1) Maximum amount.--The aggregate amount excluded under
subsection (a) for any taxable year shall not exceed--
``(A) in the case of any taxable year beginning in
2001 or 2002, $100 ($200 in the case of a joint
return), and
``(B) in the case of any taxable year beginning
after 2002, $200 ($400 in the case of a joint return).
``(2) Certain dividends excluded.--Subsection (a) shall not
apply to any dividend from a corporation which for the taxable
year of the corporation in which the distribution is made is a
corporation exempt from tax under section 521 (relating to
farmers' cooperative associations).
``(c) Special Rules.--For purposes of this section--
``(1) Exclusion not to apply to capital gain dividends from
regulated investment companies and real estate investment
trusts.--
``For treatment of capital gain
dividends, see sections 854(a) and 857(c).
``(2) Certain nonresident aliens ineligible for
exclusion.--In the case of a nonresident alien individual,
subsection (a) shall apply only in determining the taxes
imposed for the taxable year pursuant to sections 871(b)(1) and
877(b).
``(3) Dividends from employee stock ownership plans.--
Subsection (a) shall not apply to any dividend described in
section 404(k).''.
(b) Conforming Amendments.--
(1) Subparagraph (C) of section 32(c)(5) is amended by
striking ``or'' at the end of clause (i), by striking the
period at the end of clause (ii) and inserting ``; or'', and by
inserting after clause (ii) the following new clause:
``(iii) interest and dividends received
during the taxable year which are excluded from
gross income under section 116.''.
(2) Subparagraph (A) of section 32(i)(2) is amended by
inserting ``(determined without regard to section 116)'' before
the comma.
(3) Subparagraph (B) of section 86(b)(2) is amended to read
as follows:
``(B) increased by the sum of--
``(i) the amount of interest received or
accrued by the taxpayer during the taxable year
which is exempt from tax, and
``(ii) the amount of interest and dividends
received during the taxable year which are
excluded from gross income under section
116.''.
(4) Subsection (d) of section 135 is amended by
redesignating paragraph (4) as paragraph (5) and by inserting
after paragraph (3) the following new paragraph:
``(4) Coordination with section 116.--This section shall be
applied before section 116.''.
(5) Paragraph (2) of section 265(a) is amended by inserting
before the period ``, or to purchase or carry obligations or
shares, or to make deposits, to the extent the interest thereon
is excludable from gross income under section 116''.
(6) Subsection (c) of section 584 is amended by adding at
the end the following new flush sentence:
``The proportionate share of each participant in the amount of
dividends or interest received by the common trust fund and to which
section 116 applies shall be considered for purposes of such section as
having been received by such participant.''.
(7) Subsection (a) of section 643 is amended by
redesignating paragraph (7) as paragraph (8) and by inserting
after paragraph (6) the following new paragraph:
``(7) Dividends or interest.--There shall be included the
amount of any dividends or interest excluded from gross income
pursuant to section 116.''.
(8) Section 854(a) is amended by inserting ``section 116
(relating to partial exclusion of dividends and interest
received by individuals) and'' after ``For purposes of''.
(9) Section 857(c) is amended to read as follows:
``(c) Restrictions Applicable to Dividends Received From Real
Estate Investment Trusts.--
``(1) Treatment for section 116.--For purposes of section
116 (relating to partial exclusion of dividends and interest
received by individuals), a capital gain dividend (as defined
in subsection (b)(3)(C)) received from a real estate investment
trust which meets the requirements of this part shall not be
considered as a dividend.
``(2) Treatment for section 243.--For purposes of section
243 (relating to deductions for dividends received by
corporations), a dividend received from a real estate
investment trust which meets the requirements of this part
shall not be considered as a dividend.''.
(10) The table of sections for part III of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 115 the following new item:
``Sec. 116. Partial exclusion of
dividends and interest received
by individuals.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 202. REDUCTION IN INDIVIDUAL CAPITAL GAIN TAX RATES.
(a) In General.--
(1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by
striking ``10 percent'' and inserting ``7.5 percent''.
(2) The following sections are each amended by striking
``20 percent'' and inserting ``15 percent'':
(A) Section 1(h)(1)(C).
(B) Section 55(b)(3)(C).
(C) Section 1445(e)(1).
(D) The second sentence of section 7518(g)(6)(A).
(E) The second sentence of section 607(h)(6)(A) of
the Merchant Marine Act, 1936.
(3) Sections 1(h)(1)(D) and 55(b)(3)(D) are each amended by
striking ``25 percent'' and inserting ``20 percent''.
(b) Conforming Amendments.--
(1) Section 311 of the Taxpayer Relief Act of 1997 is
amended by striking subsection (e).
(2) Section 1(h) is amended--
(A) by striking paragraphs (2), (9), and (13),
(B) by redesignating paragraphs (3) through (8) as
paragraphs (2) through (7), respectively, and
(C) by redesignating paragraphs (10), (11), and
(12) as paragraphs (8), (9), and (10), respectively.
(3) Paragraph (3) of section 55(b) is amended by striking
``In the case of taxable years beginning after December 31,
2000, rules similar to the rules of section 1(h)(2) shall apply
for purposes of subparagraphs (B) and (C).''.
(4) Paragraph (7) of section 57(a) is amended--
(A) by striking ``42 percent'' and inserting ``6
percent'', and
(B) by striking the last sentence.
(c) Transitional Rules for Taxable Years Which Include July 1,
1999.--For purposes of applying section 1(h) of the Internal Revenue
Code of 1986 in the case of a taxable year which includes July 1,
1999--
(1) The amount of tax determined under subparagraph (B) of
section 1(h)(1) of such Code shall be the sum of--
(A) 7.5 percent of the lesser of--
(i) the net capital gain taking into
account only gain or loss properly taken into
account for the portion of the taxable year on
or after such date (determined without regard
to collectibles gain or loss, gain described in
section (1)(h)(6)(A)(i) of such Code, and
section 1202 gain), or
(ii) the amount on which a tax is
determined under such subparagraph (without
regard to this subsection), plus
(B) 10 percent of the excess (if any) of--
(i) the amount on which a tax is determined
under such subparagraph (without regard to this
subsection), over
(ii) the amount on which a tax is
determined under subparagraph (A).
(2) The amount of tax determined under subparagraph (C) of
section (1)(h)(1) of such Code shall be the sum of--
(A) 15 percent of the lesser of--
(i) the excess (if any) of the amount of
net capital gain determined under subparagraph
(A)(i) of paragraph (1) of this subsection over
the amount on which a tax is determined under
subparagraph (A) of paragraph (1) of this
subsection, or
(ii) the amount on which a tax is
determined under such subparagraph (C) (without
regard to this subsection), plus
(B) 20 percent of the excess (if any) of--
(i) the amount on which a tax is determined
under such subparagraph (C) (without regard to
this subsection), over
(ii) the amount on which a tax is
determined under subparagraph (A) of this
paragraph.
(3) The amount of tax determined under subparagraph (D) of
section (1)(h)(1) of such Code shall be the sum of--
(A) 20 percent of the lesser of--
(i) the amount which would be determined
under section 1(h)(6)(A)(i) of such Code taking
into account only gain properly taken into
account for the portion of the taxable year on
or after such date, or
(ii) the amount on which a tax is
determined under such subparagraph (D) (without
regard to this subsection), plus
(B) 25 percent of the excess (if any) of--
(i) the amount on which a tax is determined
under such subparagraph (D) (without regard to
this subsection), over
(ii) the amount on which a tax is
determined under subparagraph (A) of this
paragraph.
(4) For purposes of applying section 55(b)(3) of such Code,
rules similar to the rules of paragraphs (1), (2), and (3) of
this subsection shall apply.
(5) In applying this subsection with respect to any pass-
thru entity, the determination of when gains and loss are
properly taken into account shall be made at the entity level.
(6) Terms used in this subsection which are also used in
section 1(h) of such Code shall have the respective meanings
that such terms have in such section.
(d) Effective Dates.--
(1) In general.--Except as otherwise provided by this
subsection, the amendments made by this section shall apply to
taxable years ending after June 30, 1999.
(2) Withholding.--The amendment made by subsection
(a)(2)(C) shall apply to amounts paid after the date of the
enactment of this Act.
(3) Small business stock.--The amendments made by
subsection (b)(4) shall apply to dispositions on or after July
1, 1999.
SEC. 203. CAPITAL GAINS TAX RATES APPLIED TO CAPITAL GAINS OF
DESIGNATED SETTLEMENT FUNDS.
(a) In General.--Paragraph (1) of section 468B(b) (relating to
taxation of designated settlement funds) is amended by inserting
``(subject to section 1(h))'' after ``maximum rate''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1999.
SEC. 204. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND FOREIGN
SERVICE, AND OTHER EMPLOYEES, IN DETERMINING EXCLUSION OF
GAIN FROM SALE OF PRINCIPAL RESIDENCE.
(a) In General.--Subsection (d) of section 121 (relating to
exclusion of gain from sale of principal residence) is amended by
adding at the end the following new paragraphs:
``(9) Members of uniformed services and foreign service.--
``(A) In general.--The running of the 5-year period
described in subsection (a) shall be suspended with
respect to an individual during any time that such
individual or such individual's spouse is serving on
qualified official extended duty as a member of the
uniformed services or of the Foreign Service.
``(B) Qualified official extended duty.--For
purposes of this paragraph--
``(i) In general.--The term `qualified
official extended duty' means any period of
extended duty as a member of the uniformed
services or a member of the Foreign Service
during which the member serves at a duty
station which is at least 50 miles from such
property or is under Government orders to
reside in Government quarters.
``(ii) Uniformed services.--The term
`uniformed services' has the meaning given such
term by section 101(a)(5) of title 10, United
States Code, as in effect on the date of the
enactment of the Financial Freedom Act of 1999.
``(iii) Foreign service of the united
states.--The term `member of the Foreign
Service' has the meaning given the term `member
of the Service' by paragraph (1), (2), (3),
(4), or (5) of section 103 of the Foreign
Service Act of 1980, as in effect on the date
of the enactment of the Financial Freedom Act
of 1999.
``(iv) Extended duty.--The term `extended
duty' means any period of active duty pursuant
to a call or order to such duty for a period in
excess of 90 days or for an indefinite period.
``(10) Other employees.--
``(A) In general.--The running of the 5-year period
described in subsection (a) shall be suspended with
respect to an individual during any time that such
individual or such individual's spouse is serving as an
employee for a period in excess of 90 days in an
assignment by the such employee's employer outside the
United States.
``(B) Limitations and special rules.--
``(i) Maximum period of suspension.--The
suspension under subparagraph (A) with respect
to a principal residence shall not exceed (in
the aggregate) 5 years.
``(ii) Members of uniformed services and
foreign service.--Subparagraph (A) shall not
apply to an individual to whom paragraph (9)
applies.
``(iii) Self-employed individual not
considered an employee.--For purposes of this
paragraph, the term `employee' does not include
an individual who is an employee within the
meaning of section 401(c)(1) (relating to self-
employed individuals).''.
(b) Effective Date.--The amendment made by this section shall apply
to sales and exchanges after the date of the enactment of this Act.
SEC. 205. TREATMENT OF CERTAIN DEALER DERIVATIVE FINANCIAL INSTRUMENTS,
HEDGING TRANSACTIONS, AND SUPPLIES AS ORDINARY ASSETS.
(a) In General.--Section 1221 (defining capital assets) is
amended--
(1) by striking ``For purposes'' and inserting the
following:
``(a) In General.--For purposes'',
(2) by striking the period at the end of paragraph (5) and
inserting a semicolon, and
(3) by adding at the end the following:
``(6) any commodities derivative financial instrument held
by a commodities derivatives dealer, unless--
``(A) it is established to the satisfaction of the
Secretary that such instrument has no connection to the
activities of such dealer as a dealer, and
``(B) such instrument is clearly identified in such
dealer's records as being described in subparagraph (A)
before the close of the day on which it was acquired,
originated, or entered into (or such other time as the
Secretary may by regulations prescribe);
``(7) any hedging transaction which is clearly identified
as such before the close of the day on which it was acquired,
originated, or entered into (or such other time as the
Secretary may by regulations prescribe); or
``(8) supplies of a type regularly used or consumed by the
taxpayer in the ordinary course of a trade or business of the
taxpayer.
``(b) Definitions and Special Rules.--
``(1) Commodities derivative financial instruments.--For
purposes of subsection (a)(6)--
``(A) Commodities derivatives dealer.--The term
`commodities derivatives dealer' means a person which
regularly offers to enter into, assume, offset, assign,
or terminate positions in commodities derivative
financial instruments with customers in the ordinary
course of a trade or business.
``(B) Commodities derivative financial
instrument.--
``(i) In general.--The term `commodities
derivative financial instrument' means any
contract or financial instrument with respect
to commodities (other than a share of stock in
a corporation, a beneficial interest in a
partnership or trust, a note, bond, debenture,
or other evidence of indebtedness, or a section
1256 contract (as defined in section 1256(b))
the value or settlement price of which is
calculated by or determined by reference to a
specified index.
``(ii) Specified index.--The term
`specified index' means any one or more or any
combination of--
``(I) a fixed rate, price, or
amount, or
``(II) a variable rate, price, or
amount,
which is based on any current, objectively
determinable financial or economic information
which is not within the control of any of the
parties to the contract or instrument and is
not unique to any of the parties'
circumstances.
``(2) Hedging transaction.--
``(A) In general.--For purposes of this section,
the term `hedging transaction' means any transaction
entered into by the taxpayer in the normal course of
the taxpayer's trade or business primarily--
``(i) to manage risk of price changes or
currency fluctuations with respect to ordinary
property which is held or to be held by the
taxpayer, or
``(ii) to manage risk of interest rate or
price changes or currency fluctuations with
respect to borrowings made or to be made, or
ordinary obligations incurred or to be
incurred, by the taxpayer.
``(B) Treatment of nonidentification or improper
identification of hedging transactions.--
Notwithstanding subsection (a)(7), the Secretary shall
prescribe regulations to properly characterize of any
income, gain, expense, or loss arising from a
transaction--
``(i) which is a hedging transaction but
which was not identified as such in accordance
with subsection (a)(7), or
``(ii) which was so identified but is not a
hedging transaction.
``(3) Regulations.--The Secretary shall prescribe such
regulations as are appropriate to carry out the purposes of
paragraph (6) and (7) of subsection (a) in the case of
transactions involving related parties.''.
(b) Management of Risk.--
(1) Section 475(c)(3) is amended by striking ``reduces''
and inserting ``manages''.
(2) Section 871(h)(4)(C)(iv) is amended by striking ``to
reduce'' and inserting ``to manage''.
(3) Clauses (i) and (ii) of section 988(d)(2)(A) are each
amended by striking ``to reduce'' and inserting ``to manage''.
(4) Paragraph (2) of section 1256(e) is amended to read as
follows:
``(2) Definition of hedging transaction.--For purposes of
this subsection, the term `hedging transaction' means any
hedging transaction (as defined in section 1221(b)(2)(A)) if,
before the close of the day on which such transaction was
entered into (or such earlier time as the Secretary may
prescribe by regulations), the taxpayer clearly identifies such
transaction as being a hedging transaction.''
(c) Effective Date.--The amendments made by this section shall
apply to any instrument held, acquired, or entered into, any
transaction entered into, and supplies held or acquired on or after the
date of enactment of this Act.
SEC. 206. WORTHLESS SECURITIES OF FINANCIAL INSTITUTIONS.
(a) In General.--The first sentence following section 165(g)(3)(B)
(relating to securities of affiliated corporation) is amended to read
as follows: ``In computing gross receipts for purposes of the preceding
sentence, (i) gross receipts from sales or exchanges of stocks and
securities shall be taken into account only to the extent of gains
therefrom, and (ii) gross receipts from royalties, rents, dividends,
interest, annuities, and gains from sales or exchanges of stocks and
securities derived from (or directly related to) the conduct of an
active trade or business of an insurance company subject to tax under
subchapter L or a qualified financial institution (as defined in
subsection (l)(3)) shall be treated as from such sources other than
royalties, rents, dividends, interest, annuities, and gains.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to securities which become worthless in taxable years beginning
after December 31, 1999.
TITLE III--INCENTIVES FOR BUSINESS INVESTMENT AND JOB CREATION
SEC. 301. REDUCTION IN CORPORATE CAPITAL GAIN TAX RATE.
(a) In General.--Section 1201 is amended to read as follows:
``SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.
``(a) General Rule.--If for any taxable year a corporation has a
net capital gain, then, in lieu of the tax imposed by sections 11, 511,
or 831(a) or (b), there is hereby imposed a tax (if such tax is less
than the tax imposed by such sections) which shall consist of the sum
of--
``(1) a tax computed on the taxable income reduced by the
net capital gain, at the rates and in the manner as if this
subsection had not been enacted, plus
``(2) the applicable percentage of the net capital gain
(or, if less, taxable income).
``(b) Applicable Percentage.--For purposes of subsection (a), the
applicable percentage shall be determined in accordance with the
following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2000................................................... 34
2001................................................... 33
2002................................................... 32
2003................................................... 31
2004................................................... 30
2005................................................... 29
2006................................................... 28
2007................................................... 27
2008................................................... 26
2009 and thereafter.................................... 25.
``(c) Cross References.--For computation of the alternative tax--
``(1) in the case of life insurance companies, see section
801(a)(2),
``(2) in the case of regulated investment companies and
their shareholders, see section 852(b)(3)(A) and (D), and
``(3) in the case of real estate investment trusts, see
section 857(b)(3)(A).''
(b) Technical Amendments.--
(1) Paragraphs (1) and (2) of section 1445(e) are each
amended by striking ``35 percent'' and inserting ``the
applicable percentage determined under section 1201(b) for the
calendar year in which the payment is made''.
(2)(A) The second sentence of section 7518(g)(6)(A) is
amended by striking ``34 percent'' and inserting ``the
applicable percentage (within the meaning of section
1201(b))''.
(B) The second sentence of section 607(h)(6)(A) of the
Merchant Marine Act, 1936, is amended by striking ``34
percent'' and inserting ``the applicable percentage (within the
meaning of section 1201(b) of the Internal Revenue Code of
1986)''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 1999.
(2) Withholding.--The amendment made by subsection (b)(1)
shall apply to amounts paid after December 31, 1999.
SEC. 302. REPEAL OF ALTERNATIVE MINIMUM TAX ON CORPORATIONS.
(a) In General.--The last sentence of section 55(a), as amended by
section 121, is amended by striking ``on any taxpayer other than a
corporation''.
(b) Repeal of 90 Percent Limitation on Foreign Tax Credit.--
(1) In general.--Section 59(a) (relating to alternative
minimum tax foreign tax credit) is amended by striking
paragraph (2) and by redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively.
(2) Conforming amendment.--Section 53(d)(1)(B)(i)(II) is
amended by striking ``and if section 59(a)(2) did not apply''.
(c) Limitation on Use of Credit for Prior Year Minimum Tax
Liability.--
(1) In general.--Subsection (c) of section 53, as amended
by section 121, is amended by redesignating paragraph (2) as
paragraph (3) and by inserting after paragraph (1) the
following new paragraph:
``(2) Corporations for taxable years beginning after
2002.--In the case of corporation for any taxable year
beginning after 2002 and before 2008, the limitation under
paragraph (1) shall be increased by the applicable percentage
(determined in accordance with the following table) of the
tentative minimum tax for the taxable year.
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2003........................................... 20
2004........................................... 30
2005........................................... 40
2006 or 2007................................... 50.
In no event shall the limitation determined under this
paragraph be greater than the sum of the tax imposed by section
55 and the regular tax reduced by the sum of the credits
allowed under subparts A, B, D, E, and F of this part.''
(2) Conforming amendment.--Section 55(e) is amended by
striking paragraph (5).
(d) Effective Date.--
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by this section shall apply to taxable
years beginning after December 31, 2002.
(2) Repeal of 90 percent limitation on foreign tax
credit.--The amendments made by subsection (b) shall apply to
taxable years beginning after December 31, 2001.
(3) Subsection (c)(2).--The amendment made by subsection
(c)(2) shall apply to taxable years beginning after December
31, 2007.
TITLE IV--EDUCATION SAVINGS INCENTIVES
SEC. 401. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
(a) Maximum Annual Contributions.--
(1) In general.--Section 530(b)(1)(A)(iii) (defining
education individual retirement account) is amended by striking
``$500'' and inserting ``$2,000''.
(2) Conforming amendment.--Section 4973(e)(1)(A) is amended
by striking ``$500'' and inserting ``$2,000''.
(b) Tax-Free Expenditures for Elementary and Secondary School
Expenses.--
(1) In general.--Section 530(b)(2) (defining qualified
higher education expenses) is amended to read as follows:
``(2) Qualified education expenses.--
``(A) In general.--The term `qualified education
expenses' means--
``(i) qualified higher education expenses
(as defined in section 529(e)(3)), and
``(ii) qualified elementary and secondary
education expenses (as defined in paragraph
(4)).
``(B) Qualified state tuition programs.--Such term
shall include any contribution to a qualified State
tuition program (as defined in section 529(b)) on
behalf of the designated beneficiary (as defined in
section 529(e)(1)); but there shall be no increase in
the investment in the contract for purposes of applying
section 72 by reason of any portion of such
contribution which is not includible in gross income by
reason of subsection (d)(2).''
(2) Qualified elementary and secondary education
expenses.--Section 530(b) (relating to definitions and special
rules) is amended by adding at the end the following new
paragraph:
``(4) Qualified elementary and secondary education
expenses.--
``(A) In general.--The term `qualified elementary
and secondary education expenses' means--
``(i) expenses for tuition, fees, academic
tutoring, special needs services, books,
supplies, computer equipment (including related
software and services), and other equipment
which are incurred in connection with the
enrollment or attendance of the designated
beneficiary of the trust as an elementary or
secondary school student at a public, private,
or religious school, and
``(ii) expenses for room and board,
uniforms, transportation, and supplementary
items and services (including extended day
programs) which are required or provided by a
public, private, or religious school in
connection with such enrollment or attendance.
``(B) Special rule for homeschooling.--Such term
shall include expenses described in subparagraph (A)(i)
in connection with education provided by homeschooling
if the requirements of any applicable State or local
law are met with respect to such education.
``(C) School.--The term `school' means any school
which provides elementary education or secondary
education (kindergarten through grade 12), as
determined under State law.''
(3) Conforming amendments.--Section 530 is amended--
(A) by striking ``higher'' each place it appears in
subsections (b)(1) and (d)(2), and
(B) by striking ``higher'' in the heading for
subsection (d)(2).
(c) Waiver of Age Limitations for Children With Special Needs.--
Section 530(b)(1) (defining education individual retirement account) is
amended by adding at the end the following flush sentence:
``The age limitations in subparagraphs (A)(ii) and (E) and
paragraphs (5) and (6) of subsection (d) shall not apply to any
designated beneficiary with special needs (as determined under
regulations prescribed by the Secretary).''
(d) Entities Permitted To Contribute to Accounts.--Section
530(c)(1) (relating to reduction in permitted contributions based on
adjusted gross income) is amended by striking ``The maximum amount
which a contributor'' and inserting ``In the case of a contributor who
is an individual, the maximum amount the contributor''.
(e) Time When Contributions Deemed Made.--
(1) In general.--Section 530(b) (relating to definitions
and special rules), as amended by subsection (b)(2), is amended
by adding at the end the following new paragraph:
``(5) Time when contributions deemed made.--An individual
shall be deemed to have made a contribution to an education
individual retirement account on the last day of the preceding
taxable year if the contribution is made on account of such
taxable year and is made not later than the time prescribed by
law for filing the return for such taxable year (not including
extensions thereof).''
(2) Extension of time to return excess contributions.--
Subparagraph (C) of section 530(d)(4) (relating to additional
tax for distributions not used for educational expenses) is
amended--
(A) by striking clause (i) and inserting the
following new clause:
``(i) such distribution is made before the
1st day of the 6th month of the taxable year
following the taxable year, and'', and
(B) by striking ``due date of return'' in the
heading and inserting ``certain date''.
(f) Coordination With Hope and Lifetime Learning Credits and
Qualified Tuition Programs.--
(1) In general.--Section 530(d)(2)(C) is amended to read as
follows:
``(C) Coordination with hope and lifetime learning
credits and qualified tuition programs.--For purposes
of subparagraph (A)--
``(i) Credit coordination.--The total
amount of qualified higher education expenses
with respect to an individual for the taxable
year shall be reduced--
``(I) as provided in section
25A(g)(2), and
``(II) by the amount of such
expenses which were taken into account
in determining the credit allowed to
the taxpayer or any other person under
section 25A.
``(ii) Coordination with qualified tuition
programs.--If, with respect to an individual
for any taxable year--
``(I) the aggregate distributions
during such year to which subparagraph
(A) and section 529(c)(3)(B) apply,
exceed
``(II) the total amount of
qualified education expenses (after the
application of clause (i)) for such
year,
the taxpayer shall allocate such expenses among
such distributions for purposes of determining
the amount of the exclusion under subparagraph
(A) and section 529(c)(3)(B).''
(2) Conforming amendments.--
(A) Subsection (e) of section 25A is amended to
read as follows:
``(e) Election Not To Have Section Apply.--A taxpayer may elect not
to have this section apply with respect to the qualified tuition and
related expenses of an individual for any taxable year.''
(B) Section 135(d)(2)(A) is amended by striking
``allowable'' and inserting ``allowed''.
(C) Section 530(d)(2)(D) is amended--
(i) by striking ``or credit'', and
(ii) by striking ``credit or'' in the
heading.
(D) Section 4973(e)(1) is amended by adding ``and''
at the end of subparagraph (A), by striking
subparagraph (B), and by redesignating subparagraph (C)
as subparagraph (B).
(g) Renaming Education Individual Retirement Accounts as Education
Savings Accounts.--
(1) In general.--
(A) Section 530 (as amended by the preceding
provisions of this section) is amended by striking
``education individual retirement account'' each place
it appears and inserting ``education savings account''.
(B) The heading for paragraph (1) of section 530(b)
is amended by striking ``Education individual
retirement account'' and inserting ``Education savings
account''.
(C) The heading for section 530 is amended to read
as follows:
``SEC. 530. EDUCATION SAVINGS ACCOUNTS.''.
(D) The item in the table of contents for part VII
of subchapter F of chapter 1 relating to section 530 is
amended to read as follows:
``Sec. 530. Education savings
accounts.''.
(2) Conforming amendments.--
(A) The following provisions are each amended by
striking ``education individual retirement'' each place
it appears and inserting ``education savings'':
(i) Section 25A(e)(2).
(ii) Section 26(b)(2)(E).
(iii) Section 72(e)(9).
(iv) Section 135(c)(2)(C).
(v) Subsections (a) and (e) of section
4973.
(vi) Subsections (c) and (e) of section
4975.
(vii) Section 6693(a)(2)(D).
(B) The headings for each of the following
provisions are amended by striking ``education
individual retirement accounts'' each place it appears
and inserting ``education savings accounts''.
(i) Section 72(e)(9).
(ii) Section 135(c)(2)(C).
(iii) Section 4973(e).
(iv) Section 4975(c)(5).
(h) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) Subsection (g).--The amendments made by subsection (g)
shall take effect on the date of the enactment of this Act.
SEC. 402. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.
(a) Eligible Educational Institutions Permitted To Maintain
Qualified Tuition Programs.--
(1) In general.--Section 529(b)(1) (defining qualified State
tuition program) is amended by inserting ``or by 1 or more
eligible educational institutions'' after ``maintained by a
State or agency or instrumentality thereof''.
(2) Private qualified tuition programs limited to benefit
plans.--Clause (ii) of section 529(b)(1)(A) is amended by
inserting ``in the case of a program established and maintained
by a State or agency or instrumentality thereof,'' before ``may
make''.
(3) Conforming amendments.--
(A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D),
529, 530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are each
amended by striking ``qualified State tuition'' each
place it appears and inserting ``qualified tuition''.
(B) The headings for sections 72(e)(9) and
135(c)(2)(C) are each amended by striking ``qualified
state tuition'' and inserting ``qualified tuition''.
(C) The headings for sections 529(b) and
530(b)(2)(B) are each amended by striking ``Qualified
state tuition'' and inserting ``Qualified tuition''.
(D) The heading for section 529 is amended by
striking ``state''.
(E) The item relating to section 529 in the table
of sections for part VIII of subchapter F of chapter 1
is amended by striking ``State''.
(b) Exclusion From Gross Income of Education Distributions From
Qualified Tuition Programs.--
(1) In general.--Section 529(c)(3)(B) (relating to
distributions) is amended to read as follows:
``(B) Distributions for qualified higher education
expenses.--
``(i) In general.--For purposes of this
paragraph--
``(I) no amount shall be includible
in gross income under subparagraph (A)
by reason of a distribution which
consists of providing a benefit to the
distributee which, if paid for by the
distributee, would constitute payment
of a qualified higher education
expense, and
``(II) in the case of distributions
not described in subclause (I), the
amount otherwise includible in gross
income under subparagraph (A) shall be
reduced by an amount which bears the
same ratio to the otherwise includible
amount as the qualified higher
education expenses (other than expenses
paid by distributions described in
subclause (I)) bear to the aggregate of
such distributions.
``(ii) Exception for institutional
programs.--In the case of any taxable year
beginning before January 1, 2004, clause (i)
shall not apply with respect to any
distribution during such taxable year under a
qualified tuition program established and
maintained by 1 or more eligible educational
institutions.
``(iii) In-kind distributions.--Any benefit
furnished to a designated beneficiary under a
qualified tuition program shall be treated as a
distribution to the beneficiary for purposes of
this paragraph.
``(iv) Coordination with hope and lifetime
learning credits.--The total amount of
qualified higher education expenses with
respect to an individual for the taxable year
shall be reduced--
``(I) as provided in section
25A(g)(2), and
``(II) by the amount of such
expenses which were taken into account
in determining the credit allowed to
the taxpayer or any other person under
section 25A.
``(v) Coordination with education savings
accounts.--If, with respect to an individual
for any taxable year--
``(I) the aggregate distributions
to which clause (i) and section
530(d)(2)(A) apply, exceed
``(II) the total amount of
qualified higher education expenses
otherwise taken into account under
clause (i) (after the application of
clause (iv)) for such year,
the taxpayer shall allocate such expenses among
such distributions for purposes of determining
the amount of the exclusion under clause (i)
and section 530(d)(2)(A).''
(2) Conforming amendments.--
(A) Section 135(d)(2)(B) is amended by striking
``the exclusion under section 530(d)(2)'' and inserting
``the exclusions under sections 529(c)(3)(B)(i) and
530(d)(2)''.
(B) Section 221(e)(2)(A) is amended by inserting
``529,'' after ``135,''.
(c) Rollover to Different Program for Benefit of Same Designated
Beneficiary.--Section 529(c)(3)(C) (relating to change in
beneficiaries) is amended--
(1) by striking ``transferred to the credit'' in clause (i)
and inserting ``transferred--
``(I) to another qualified tuition
program for the benefit of the
designated beneficiary, or
``(II) to the credit'',
(2) by adding at the end the following new clause:
``(iii) Limitation on certain rollovers.--
Clause (i)(I) shall not apply to any amount
transferred with respect to a designated
beneficiary if, at any time during the 1-year
period ending on the day of such transfer, any
other amount was transferred which was not
includible in gross income by reason of clause
(i)(I).'', and
(3) by inserting ``or programs'' after ``beneficiaries'' in
the heading.
(d) Member of Family Includes First Cousin.--Section 529(e)(2)
(defining member of family) is amended by striking ``and'' at the end
of subparagraph (B), by striking the period at the end of subparagraph
(C) and by inserting ``; and'', and by adding at the end the following
new subparagraph:
``(D) any first cousin of such beneficiary.''
(e) Definition of Qualified Higher Education Expenses.--
(1) In general.--Subparagraph (A) of section 529(e)(3)
(relating to definition of qualified higher education expenses)
is amended to read as follows:
``(A) In general.--The term `qualified higher
education expenses' means--
``(i) tuition and fees required for the
enrollment or attendance of a designated
beneficiary at an eligible educational
institution for courses of instruction of such
beneficiary at such institution, and
``(ii) expenses for books, supplies, and
equipment which are incurred in connection with
such enrollment or attendance, but not to
exceed the allowance for books and supplies
included in the cost of attendance (as defined
in section 472 of the Higher Education Act of
1965 (20 U.S.C. 1087ll), as in effect on the
date of enactment of the Financial Freedom Act
of 1999) as determined by the eligible
educational institution.''.
(2) Exception for education involving sports, etc..--
Paragraph (3) of section 529(e) (relating to qualified higher
education expenses) is amended by adding at the end the
following new subparagraph:
``(C) Exception for education involving sports,
etc..--The term `qualified higher education expenses'
shall not include expenses with respect to any course
or other education involving sports, games, or hobbies
unless such course or other education is part of the
beneficiary's degree program or is taken to acquire or
improve job skills of the beneficiary.''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) Qualified higher education expenses.--The amendments
made by subsection (e) shall apply to amounts paid for
education furnished after December 31, 1999.
SEC. 403. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE NATIONAL
HEALTH SERVICE CORPS SCHOLARSHIP PROGRAM, THE F. EDWARD
HEBERT ARMED FORCES HEALTH PROFESSIONS SCHOLARSHIP AND
FINANCIAL ASSISTANCE PROGRAM, AND CERTAIN OTHER PROGRAMS.
(a) In General.--Section 117(c) (relating to the exclusion from
gross income amounts received as a qualified scholarship) is amended--
(1) by striking ``Subsections (a)'' and inserting the
following:
``(1) In general.--Except as provided in paragraph (2),
subsections (a)'', and
(2) by adding at the end the following new paragraph:
``(2) Exceptions.--Paragraph (1) shall not apply to any
amount received by an individual under--
``(A) the National Health Service Corps Scholarship
program under section 338A(g)(1)(A) of the Public
Health Service Act,
``(B) the Armed Forces Health Professions
Scholarship and Financial Assistance program under
subchapter I of chapter 105 of title 10, United States
Code,
``(C) the National Institutes of Health
Undergraduate Scholarship program under section 487D of
the Public Health Service Act, or
``(D) any State program determined by the Secretary
to have substantially similar objectives as such
programs.''
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by subsection (a) shall apply to amounts
received in taxable years beginning after December 31, 1993.
(2) State programs.--Section 117(c)(2)(D) of the Internal
Revenue Code of 1986 (as added by the amendments made by
subsection (a)) shall apply to amounts received in taxable
years beginning after December 31, 1999.
SEC. 404. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION FOR
GOVERNMENTAL BONDS USED TO FINANCE EDUCATIONAL
FACILITIES.
(a) In General.--Section 148(f)(4)(D)(vii) (relating to increase in
exception for bonds financing public school capital expenditures) is
amended by striking ``$5,000,000'' the second place it appears and
inserting ``$10,000,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to obligations issued in calendar years beginning after December
31, 1999.
SEC. 405. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE TO PUBLIC
SCHOOL CONSTRUCTION BONDS.
(a) In General.--Subparagraph (C) of section 148(f)(4) is amended
by adding at the end the following new clause:
``(xviii) 4-year spending requirement for
public school construction issue.--
``(I) In general.--In the case of a
public school construction issue, the
spending requirements of clause (ii)
shall be treated as met if at least 10
percent of the available construction
proceeds of the construction issue are
spent for the governmental purposes of
the issue within the 1-year period
beginning on the date the bonds are
issued, 30 percent of such proceeds are
spent for such purposes within the 2-
year period beginning on such date, 60
percent of such proceeds are spent for
such purposes within the 3-year period
beginning on such date, and 100 percent
of such proceeds are spent for such
purposes within the 4-year period
beginning on such date.
``(II) Public school construction
issue.--For purposes of this clause,
the term `public school construction
issue' means any construction issue if
no bond which is part of such issue is
a private activity bond and all of the
available construction proceeds of such
issue are to be used for the
construction (as defined in clause
(iv)) of public school facilities to
provide education or training below the
postsecondary level or for the
acquisition of land that is
functionally related and subordinate to
such facilities.
``(III) Other rules to apply.--
Rules similar to the rules of the
preceding provisions of this
subparagraph which apply to clause (ii)
also apply to this clause.''.
(b) Effective Date.--The amendment made by this section shall apply
to obligations issued after December 31, 1999.
SEC. 406. REPEAL OF 60-MONTH LIMITATION ON DEDUCTION FOR INTEREST ON
EDUCATION LOANS.
(a) In General.--Section 221 (relating to interest on education
loans) is amended by striking subsection (d) and by redesignating
subsections (e), (f), and (g) as subsections (d), (e), and (f),
respectively.
(b) Conforming Amendment.--Subsection (e) of section 6050S is
amended by striking ``section 221(e)(1)'' and inserting ``section
221(d)(1)''.
(c) Effective Date.--The amendments made by this section shall
apply to loan interest payments made after December 31, 1999, in
taxable years ending after such date.
TITLE V--HEALTH CARE PROVISIONS
SEC. 501. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF
INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED
HEALTH PLANS.
(a) In General.--Part VII of subchapter B of chapter 1 is amended
by redesignating section 222 as section 223 and by inserting after
section 221 the following new section:
``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS.
``(a) In General.--In the case of an individual, there shall be
allowed as a deduction an amount equal to the applicable percentage of
the amount paid during the taxable year for insurance which constitutes
medical care for the taxpayer, the taxpayer's spouse, and dependents.
``(b) Applicable Percentage.--For purposes of subsection (a), the
applicable percentage shall be determined in accordance with the
following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2001................................................... 25
2002................................................... 40
2003, 2004, 2005, and 2006............................. 50
2007................................................... 75
2008 and thereafter.................................... 100.
``(c) Limitation Based on Other Coverage.--
``(1) Coverage under certain subsidized employer plans.--
``(A) In general.--Subsection (a) shall not apply
to any taxpayer for any calendar month for which the
taxpayer participates in any health plan maintained by
any employer of the taxpayer or of the spouse of the
taxpayer if 50 percent or more of the cost of coverage
under such plan (determined under section 4980B) is
paid or incurred by the employer.
``(B) Employer contributions to cafeteria plans,
flexible spending arrangements, and medical savings
accounts.--Employer contributions to a cafeteria plan,
a flexible spending or similar arrangement, or a
medical savings account which are excluded from gross
income under section 106 shall be treated for purposes
of subparagraph (A) as paid by the employer.
``(C) Aggregation of plans of employer.--A health
plan which is not otherwise described in subparagraph
(A) shall be treated as described in such subparagraph
if such plan would be so described if all health plans
of persons treated as a single employer under
subsections (b), (c), (m), or (o) of section 414 were
treated as one health plan.
``(D) Separate application to health insurance and
long-term care insurance.--Subparagraphs (A) and (C)
shall be applied separately with respect to--
``(i) plans which include primarily
coverage for qualified long-term care services
or are qualified long-term care insurance
contracts, and
``(ii) plans which do not include such
coverage and are not such contracts.
``(2) Coverage under certain federal programs.--
``(A) In general.--Subsection (a) shall not apply
to any amount paid for any coverage for an individual
for any calendar month if, as of the first day of such
month, the individual is covered under any medical care
program described in--
``(i) title XVIII, XIX, or XXI of the
Social Security Act,
``(ii) chapter 55 of title 10, United
States Code,
``(iii) chapter 17 of title 38, United
States Code,
``(iv) chapter 89 of title 5, United States
Code, or
``(v) the Indian Health Care Improvement
Act.
``(B) Exceptions.--
``(i) Qualified long-term care.--
Subparagraph (A) shall not apply to amounts
paid for coverage under a qualified long-term
care insurance contract.
``(ii) Continuation coverage of fehbp.--
Subparagraph (A)(iv) shall not apply to
coverage which is comparable to continuation
coverage under section 4980B.
``(d) Long-Term Care Deduction Limited to Qualified Long-Term Care
Insurance Contracts.--In the case of a qualified long-term care
insurance contract, only eligible long-term care premiums (as defined
in section 213(d)(10)) may be taken into account under subsection (a).
``(e) Special Rules.--
``(1) Coordination with deduction for health insurance
costs of self-employed individuals.--The amount taken into
account by the taxpayer in computing the deduction under
section 162(l) shall not be taken into account under this
section.
``(2) Coordination with medical expense deduction.--The
amount taken into account by the taxpayer in computing the
deduction under this section shall not be taken into account
under section 213.''
(b) Deduction Allowed Whether or Not Taxpayer Itemizes Other
Deductions.--Subsection (a) of section 62 is amended by inserting after
paragraph (17) the following new item:
``(18) Health and long-term care insurance costs.--The
deduction allowed by section 222.''
(c) Clerical Amendment.--The table of sections for part VII of
subchapter B of chapter 1 is amended by striking the last item and
inserting the following new items:
``Sec. 222. Health and long-term care
insurance costs.
``Sec. 223. Cross reference.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 502. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER
CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.
(a) Cafeteria Plans.--Subsection (f) of section 125 (defining
qualified benefits) is amended by inserting before the period at the
end ``unless such product is a qualified long-term care insurance
contract (as defined in section 7702B)''.
(b) Flexible Spending Arrangements.--Section 106 (relating to
contributions by employer to accident and health plans) is amended by
striking subsection (c).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 503. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.
(a) Repeal of Limitations on Number of Medical Savings Accounts.--
(1) In general.--Subsections (i) and (j) of section 220 are
hereby repealed.
(2) Conforming amendment.--Paragraph (1) of section 220(c)
is amended by striking subparagraph (D).
(b) All Employers May Offer Medical Savings Accounts.--
(1) In general.--Subclause (I) of section 220(c)(1)(A)(iii)
(defining eligible individual) is amended by striking ``and
such employer is a small employer''.
(2) Conforming amendments.--
(A) Paragraph (1) of section 220(c) is amended by
striking subparagraph (C).
(B) Subsection (c) of section 220 is amended by
striking paragraph (4) and by redesignating paragraph
(5) as paragraph (4).
(c) Increase in Amount of Deduction Allowed for Contributions to
Medical Savings Accounts.--
(1) In general.--Paragraph (2) of section 220(b) is amended
to read as follows:
``(2) Monthly limitation.--The monthly limitation for any
month is the amount equal to \1/12\ of the annual deductible
(as of the first day of such month) of the individual's
coverage under the high deductible health plan.''.
(2) Conforming amendment.--Clause (ii) of section
220(d)(1)(A) is amended by striking ``75 percent of''.
(d) Both Employers and Employees May Contribute to Medical Savings
Accounts.--Paragraph (5) of section 220(b) is amended to read as
follows:
``(5) Coordination with exclusion for employer
contributions.--The limitation which would (but for this
paragraph) apply under this subsection to the taxpayer for any
taxable year shall be reduced (but not below zero) by the
amount which would (but for section 106(b)) be includible in
the taxpayer's gross income for such taxable year.''.
(e) Reduction of Permitted Deductibles Under High Deductible Health
Plans.--
(1) In general.--Subparagraph (A) of section 220(c)(2)
(defining high deductible health plan) is amended--
(A) by striking ``$1,500'' in clause (i) and
inserting ``$1,000'', and
(B) by striking ``$3,000'' in clause (ii) and
inserting ``$2,000''.
(2) Conforming amendment.--Subsection (g) of section 220 is
amended to read as follows:
``(g) Cost-of-Living Adjustment.--
``(1) In general.--In the case of any taxable year
beginning in a calendar year after 1998, each dollar amount in
subsection (c)(2) 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
such taxable year begins by substituting `calendar year
1997' for `calendar year 1992' in subparagraph (B)
thereof.
``(2) Special rules.--In the case of the $1,000 amount in
subsection (c)(2)(A)(i) and the $2,000 amount in subsection
(c)(2)(A)(ii), paragraph (1)(B) shall be applied by
substituting `calendar year 1999' for `calendar year 1997'.
``(3) Rounding.--If any increase under paragraph (1) or (2)
is not a multiple of $50, such increase shall be rounded to the
nearest multiple of $50.
(f) Medical Savings Accounts May Be Offered Under Cafeteria
Plans.--Subsection (f) of section 125 is amended by striking
``106(b),''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 504. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY
FAMILY MEMBER IN TAXPAYER'S HOME.
(a) In General.--Section 151 (relating to allowance of deductions
for personal exemptions) is amended by adding at the end redesignating
subsection (e) as subsection (f) and by inserting after subsection (d)
the following new subsection:
``(e) Additional Exemption for Certain Elderly Family Members
Residing With Taxpayer.--
``(1) In general.--An exemption of the exemption amount for
each qualified family member of the taxpayer.
``(2) Qualified family member.--For purposes of this
subsection, the term `qualified family member' means, with
respect to any taxable year, any individual--
``(A) who is an ancestor of the taxpayer or of the
taxpayer's spouse or who is the spouse of any such
ancestor,
``(B) who is a member for the entire taxable year
of a household maintained by the taxpayer, and
``(C) who has been certified, before the due date
for filing the return of tax for the taxable year
(without extensions), by a physician (as defined in
section 1861(r)(1) of the Social Security Act) as being
an individual with long-term care needs described in
paragraph (3) for a period--
``(i) which is at least 180 consecutive
days, and
``(ii) a portion of which occurs within the
taxable year.
Such term shall not include any individual otherwise
meeting the requirements of the preceding sentence
unless within the 39\1/2\ month period ending on such
due date (or such other period as the Secretary
prescribes) a physician (as so defined) has certified
that such individual meets such requirements.
``(3) Individuals with long-term care needs.--An individual
is described in this paragraph if the individual--
``(A) is unable to perform (without substantial
assistance from another individual) at least 2
activities of daily living (as defined in section
7702B(c)(2)(B)) due to a loss of functional capacity,
or
``(B) requires substantial supervision to protect
such individual from threats to health and safety due
to severe cognitive impairment and is unable to
perform, without reminding or cuing assistance, at
least 1 activity of at least 1 activity of daily living
(as so defined) or to the extent provided in
regulations prescribed by the Secretary (in
consultation with the Secretary of Health and Human
Services), is unable to engage in age appropriate
activities.
``(4) Special rules.--Rules similar to the rules of
paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall
apply for purposes of this subsection.''
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 505. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG
CREDIT.
(a) In General.--Subclause (I) of section 45C(b)(2)(A)(ii) is
amended to read as follows:
``(I) after the date that the
application is filed for designation
under such section 526, and''.
(b) Conforming Amendment.--Clause (i) of section 45C(b)(2)(A) is
amended by inserting ``which is'' before ``being'' and by inserting
before the comma at the end ``and which is designated under section 526
of such Act''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after December 31, 1999.
SEC. 506. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS
PNEUMONIAE TO LIST OF TAXABLE VACCINES.
(a) In General.--Section 4132(a)(1) (defining taxable vaccine) is
amended by adding at the end the following new subparagraph:
``(L) Any conjugate vaccine against streptococcus
pneumoniae.''
(b) Effective Date.--
(1) Sales.--The amendment made by this section shall apply
to vaccine sales beginning on the day after the date on which
the Centers for Disease Control makes a final recommendation
for routine administration to children of any conjugate vaccine
against streptococcus pneumoniae.
(2) Deliveries.--For purposes of paragraph (1), in the case
of sales on or before the date described in such paragraph for
which delivery is made after such date, the delivery date shall
be considered the sale date.
(c) Report.--Not later than 1 year after the date of the enactment
of this Act, the Comptroller General of the United States shall prepare
and submit a report to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate on the
operation of the Vaccine Injury Compensation Trust Fund and on the
adequacy of such Fund to meet future claims made under the Vaccine
Injury Compensation Program.
TITLE VI--ESTATE TAX RELIEF
Subtitle A--Repeal of Estate, Gift, and Generation-Skipping Taxes;
Repeal of Step Up in Basis At Death
SEC. 601. REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING TAXES.
(a) In General.--Subtitle B is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a) shall apply
to the estates of decedents dying, and gifts and generation-skipping
transfers made, after December 31, 2008.
SEC. 602. TERMINATION OF STEP UP IN BASIS AT DEATH.
(a) Termination of Application of Section 1014.--Section 1014
(relating to basis of property acquired from a decedent) is amended by
adding at the end the following:
``(f) Termination.--In the case of a decedent dying after December
31, 2008, this section shall not apply to property for which basis is
provided by section 1022.''
(b) Conforming Amendment.--Subsection (a) of section 1016 (relating
to adjustments to basis) is amended by striking ``and'' at the end of
paragraph (26), by striking the period at the end of paragraph (27) and
inserting ``; and'', and by adding at the end the following:
``(28) to the extent provided in section 1022 (relating to
basis for certain property acquired from a decedent dying after
December 31, 2008).''
SEC. 603. CARRYOVER BASIS AT DEATH.
(a) General Rule.--Part II of subchapter O of chapter 1 (relating
to basis rules of general application) is amended by inserting after
section 1021 the following:
``SEC. 1022. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED FROM A
DECEDENT DYING AFTER DECEMBER 31, 2008.
``(a) Carryover Basis.--Except as otherwise provided in this
section, the basis of carryover basis property in the hands of a person
acquiring such property from a decedent shall be determined under
section 1015.
``(b) Carryover Basis Property Defined.--
``(1) In general.--For purposes of this section, the term
`carryover basis property' means any property--
``(A) which is acquired from or passed from a
decedent who died after December 31, 2008, and
``(B) which is not excluded pursuant to paragraph
(2).
The property taken into account under subparagraph (A) shall be
determined under section 1014(b) without regard to subparagraph
(A) of the last sentence of paragraph (9) thereof.
``(2) Certain property not carryover basis property.--The
term `carryover basis property' does not include--
``(A) any item of gross income in respect of a
decedent described in section 691,
``(B) property which was acquired from the decedent
by the surviving spouse of the decedent, the value of
which would have been deductible from the value of the
taxable estate of the decedent under section 2056, as
in effect on the day before the date of enactment of
the Financial Freedom Act of 1999, and
``(C) any includible property of the decedent if
the aggregate adjusted fair market value of such
property does not exceed $2,000,000.
For purposes of this paragraph and paragraph (3), the term
`adjusted fair market value' means, with respect to any
property, fair market value reduced by any indebtedness secured
by such property.
``(3) Phasein of carryover basis if includible property
exceeds $1,300,000.--
``(A) In general.--If the adjusted fair market
value of the includible property of the decedent
exceeds $1,300,000, but does not exceed $2,000,000, the
amount of the increase in the basis of such property
which would (but for this paragraph) result under
section 1014 shall be reduced by the amount which bears
the same ratio to such increase as such excess bears to
$700,000.
``(B) Allocation of reduction.--The reduction under
subparagraph (A) shall be allocated among only the
includible property having net appreciation and shall
be allocated in proportion to the respective amounts of
such net appreciation. For purposes of the preceding
sentence, the term `net appreciation' means the excess
of the adjusted fair market value over the decedent's
adjusted basis immediately before such decedent's
death.
``(4) Includible property.--
``(A) In general.--For purposes of this subsection,
the term `includible property' means property which
would be included in the gross estate of the decedent
under any of the following provisions as in effect on
the day before the date of the enactment of the
Financial Freedom Act of 1999:
``(i) Section 2033.
``(ii) Section 2038.
``(iii) Section 2040.
``(iv) Section 2041.
``(v) Section 2042(a)(1).
``(B) Exclusion of property acquired by spouse.--
Such term shall not include property described in
paragraph (2)(B).
``(c) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the purposes of this section.''
(b) Miscellaneous Amendments Related To Carryover Basis.--
(1) Capital gain treatment for inherited art work or
similar property.--
(A) In general.--Subparagraph (C) of section
1221(3) (defining capital asset) is amended by
inserting ``(other than by reason of section 1022)''
after ``is determined''.
(B) Coordination with section 170.--Paragraph (1)
of section 170(e) (relating to certain contributions of
ordinary income and capital gain property) is amended
by adding at the end the following: ``For purposes of
this paragraph, the determination of whether property
is a capital asset shall be made without regard to the
exception contained in section 1221(3)(C) for basis
determined under section 1022.''
(2) Definition of Executor.--Section 7701(a) (relating to
definitions) is amended by adding at the end the following:
``(47) Executor.--The term `executor' means the executor or
administrator of the decedent, or, if there is no executor or
administrator appointed, qualified, and acting within the
United States, then any person in actual or constructive
possession of any property of the decedent.''
(3) Clerical amendment.--The table of sections for part II
of subchapter O of chapter 1 is amended by adding at the end
the following new item:
``Sec. 1022. Carryover basis for certain
property acquired from a
decedent dying after December
31, 2008.''
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying after December 31, 2008.
Subtitle B--Reductions of Estate and Gift Tax Rates Prior to Repeal
SEC. 611. ADDITIONAL REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) Maximum Rate of Tax Reduced to 50 Percent.--The table contained
in section 2001(c)(1) is amended by striking the 2 highest brackets and
inserting the following:
Over $2,500,000................
$1,025,800, plus 50% of the
excess over
$2,500,000.''
(b) Repeal of Phaseout of Graduated Rates.--Subsection (c) of
section 2001 is amended by striking paragraph (2).
(c) Additional Reductions of Rates of Tax.--Subsection (c) of
section 2001, as amended by subsection (b), is amended by adding at the
end the following new paragraph:
``(2) Phasedown of tax.--In the case of estates of
decedents dying, and gifts made, during any calendar year after
2001 and before 2009--
``(A) In general.--Except as provided in
subparagraph (C), the tentative tax under this
subsection shall be determined by using a table
prescribed by the Secretary (in lieu of using the table
contained in paragraph (1)) which is the same as such
table; except that--
``(i) each of the rates of tax shall be
reduced by the number of percentage points
determined under subparagraph (B), and
``(ii) the amounts setting forth the tax
shall be adjusted to the extent necessary to
reflect the adjustments under clause (i).
``(B) Percentage points of reduction.--
The number of
``For calendar year:
percentage points is:
2002................................... 1
2003................................... 2
2004................................... 3
2005................................... 5
2006................................... 7
2007................................... 9
2008................................... 11.
``(C) Coordination with income tax rates.--The
reductions under subparagraph (A)--
``(i) shall not reduce any rate under
paragraph (1) below the lowest rate in section
1(c), and
``(ii) shall not reduce the highest rate
under paragraph (1) below the highest rate in
section 1(c).
``(D) Coordination with credit for state death
taxes.--Rules similar to the rules of subparagraph (A)
shall apply to the table contained in section 2011(b)
except that the Secretary shall prescribe percentage
point reductions which maintain the proportionate
relationship (as in effect before any reduction under
this paragraph) between the credit under section 2011
and the tax rates under subsection (c).''
(d) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall apply to estates of decedents
dying, and gifts made, after December 31, 2000.
(2) Subsection (c).--The amendment made by subsection (c)
shall apply to estates of decedents dying, and gifts made,
after December 31, 2001.
Subtitle C--Unified Credit Replaced With Unified Exemption Amount
SEC. 621. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH
UNIFIED EXEMPTION AMOUNT.
(a) In General.--
(1) Estate tax.--Part IV of subchapter A of chapter 11 is
amended by inserting after section 2051 the following new
section:
``SEC. 2052. EXEMPTION.
``(a) In general.--For purposes of the tax imposed by section 2001,
the value of the taxable estate shall be determined by deducting from
the value of the gross estate an amount equal to the excess (if any)
of--
``(1) the exemption amount for the calendar year in which
the decedent died, over
``(2) the sum of--
``(A) the aggregate amount allowed as an exemption
under section 2521 with respect to gifts made by the
decedent after December 31, 2000, and
``(B) the aggregate amount of gifts made by the
decedent for which credit was allowed by section 2505
(as in effect on the day before the date of the
enactment of the Financial Freedom Act of 1999).
Gifts which are includible in the gross estate of the decedent shall
not be taken into account in determining the amounts under paragraph
(2).
``(b) Exemption Amount.--For purposes of subsection (a), the term
`exemption amount' means the amount determined in accordance with the
following table:
``In the case of
The exemption
calendar year:
amount is:
2001............................... $675,000
2002 and 2003...................... $700,000
2004............................... $850,000
2005............................... $950,000
2006 or thereafter................. $1,000,000.''
(2) Gift tax.--Subchapter C of chapter 12 (relating to
deductions) is amended by inserting before section 2522 the
following new section:
``SEC. 2521. EXEMPTION.
``(a) In General.--In computing taxable gifts for any calendar
year, there shall be allowed as a deduction in the case of a citizen or
resident of the United States an amount equal to the excess of--
``(1) the exemption amount determined under section 2052
for such calendar year, over
``(2) the sum of--
``(A) the aggregate amount allowed as an exemption
under this section for all preceding calendar years
after 2000, and
``(B) the aggregate amount of gifts for which
credit was allowed by section 2505 (as in effect on the
day before the date of the enactment of the Financial
Freedom Act of 1999).''
(b) Repeal of Unified Credits.--
(1) Section 2010 (relating to unified credit against estate
tax) is hereby repealed.
(2) Section 2505 (relating to unified credit against gift
tax) is hereby repealed.
(c) Conforming Amendments.--
(1)(A) Subparagraph (B) of section 2001(b)(1) is amended by
inserting before the comma ``reduced by the amount of described
in section 2052(a)(2)''.
(B) Subsection (b) of section 2001 is amended by adding at
the end the following new sentence: ``For purposes of paragraph
(2), the amount of the tax payable under chapter 12 shall be
determined without regard to the credit provided by section
2505 (as in effect on the day before the date of the enactment
of the Financial Freedom Act of 1999).''
(2) Subsection (f) of section 2011 is amended by striking
``, reduced by the amount of the unified credit provided by
section 2010''.
(3) Subsection (a) of section 2012 is amended by striking
``and the unified credit provided by section 2010''.
(4) Subsection (b) of section 2013 is amended by inserting
before the period at the end of the first sentence ``and
increased by the exemption allowed under section 2052 or
2106(a)(4) (or the corresponding provisions of prior law) in
determining the taxable estate of the transferor for purposes
of the estate tax''.
(5) Subparagraph (A) of section 2013(c)(1) is amended by
striking ``2010,''.
(6) Paragraph (2) of section 2014(b) is amended by striking
``2010,''.
(7) Clause (ii) of section 2056A(b)(12)(C) is amended to
read as follows:
``(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of the
credit allowable under section 2010 (as in
effect on the day before the date of the
enactment of the Financial Freedom Act of 1999)
or the exemption allowable under section 2052
with respect to the decedent as such a credit
or exemption (as the case may be) allowable to
such surviving spouse for purposes of
determining the amount of the exemption
allowable under section 2521 with respect to
taxable gifts made by the surviving spouse
during the year in which the spouse becomes a
citizen or any subsequent year,''.
(8) Section 2102 is amended by striking subsection (c).
(9) Subsection (a) of section 2106 is amended by adding at
the end the following new paragraph:
``(4) Exemption.--
``(A) In general.--An exemption of $60,000.
``(B) Residents of possessions of the United
States.--In the case of a decedent who is considered to
be a nonresident not a citizen of the United States
under section 2209, the exemption under this paragraph
shall be the greater of--
``(i) $60,000, or
``(ii) that proportion of $175,000 which
the value of that part of the decedent's gross
estate which at the time of his death is
situated in the United States bears to the
value of his entire gross estate wherever
situated.
``(C) Special rules.--
``(i) Coordination with treaties.--To the
extent required under any treaty obligation of
the United States, the exemption allowed under
this paragraph shall be equal to the amount
which bears the same ratio to the exemption
amount under section 2052 (for the calendar
year in which the decedent died) as the value
of the part of the decedent's gross estate
which at the time of his death is situated in
the United States bears to the value of his
entire gross estate wherever situated. For
purposes of the preceding sentence, property
shall not be treated as situated in the United
States if such property is exempt from the tax
imposed by this subchapter under any treaty
obligation of the United States.
``(ii) Coordination with gift tax exemption
and unified credit.--If an exemption has been
allowed under section 2521 (or a credit has
been allowed under section 2505 as in effect on
the day before the date of the enactment of the
Financial Freedom Act of 1999) with respect to
any gift made by the decedent, each dollar
amount contained in subparagraph (A) or (B) or
the exemption amount applicable under clause
(i) of this subparagraph (whichever applies)
shall be reduced by the exemption so allowed
under 2521 (or, in the case of such a credit,
by the amount of the gift for which the credit
was so allowed).''
(10) Subsection (c) of section 2107 is amended--
(A) by striking paragraph (1) and by redesignating
paragraphs (2) and (3) as paragraphs (1) and (2),
respectively, and
(B) by striking the second sentence of paragraph
(2) (as so redesignated).
(11) Section 2206 is amended by striking ``the taxable
estate'' in the first sentence and inserting ``the sum of the
taxable estate and the amount of the exemption allowed under
section 2052 or 2106(a)(4) in computing the taxable estate''.
(12) Section 2207 is amended by striking ``the taxable
estate'' in the first sentence and inserting ``the sum of the
taxable estate and the amount of the exemption allowed under
section 2052 or 2106(a)(4) in computing the taxable estate''.
(13) Subparagraph (B) of section 2207B(a)(1) is amended to
read as follows:
``(B) the sum of the taxable estate and the amount
of the exemption allowed under section 2052 or
2106(a)(4) in computing the taxable estate.''
(14) Subsection (a) of section 2503 is amended by striking
``section 2522'' and inserting ``section 2521''.
(15) Paragraph (1) of section 6018(a) is amended by
striking ``$600,000'' and inserting ``the exemption amount
under section 2052 for the calendar year which includes the
date of death''.
(16) Subparagraph (A) of section 6601(j)(2) is amended to
read as follows:
``(A) the amount of the tax which would be imposed
by chapter 11 on an amount of taxable estate equal to
the excess of $1,000,000 over the exemption amount
allowable under section 2052, or''.
(17) The table of sections for part II of subchapter A of
chapter 11 is amended by striking the item relating to section
2010.
(18) The table of sections for subchapter A of chapter 12
is amended by striking the item relating to section 2505.
(d) Effective Date.--The amendments made by this section--
(1) insofar as they relate to the tax imposed by chapter 11
of the Internal Revenue Code of 1986, shall apply to estates of
decedents dying after December 31, 2000, and
(2) insofar as they relate to the tax imposed by chapter 12
of such Code, shall apply to gifts made after December 31,
2000.
Subtitle D--Modifications of Generation-Skipping Transfer Tax
SEC. 631. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO
TRUSTS; RETROACTIVE ALLOCATIONS.
(a) In General.--Section 2632 (relating to special rules for
allocation of GST exemption) is amended by redesignating subsection (c)
as subsection (e) and by inserting after subsection (b) the following
new subsections:
``(c) Deemed Allocation to Certain Lifetime Transfers to GST
Trusts.--
``(1) In general.--If any individual makes an indirect skip
during such individual's lifetime, any unused portion of such
individual's GST exemption shall be allocated to the property
transferred to the extent necessary to make the inclusion ratio
for such property zero. If the amount of the indirect skip
exceeds such unused portion, the entire unused portion shall be
allocated to the property transferred.
``(2) Unused portion.--For purposes of paragraph (1), the
unused portion of an individual's GST exemption is that portion
of such exemption which has not previously been--
``(A) allocated by such individual,
``(B) treated as allocated under subsection (b)
with respect to a direct skip occurring during or
before the calendar year in which the indirect skip is
made, or
``(C) treated as allocated under paragraph (1) with
respect to a prior indirect skip.
``(3) Definitions.--
``(A) Indirect skip.--For purposes of this
subsection, the term `indirect skip' means any transfer
of property (other than a direct skip) subject to the
tax imposed by chapter 12 made to a GST trust.
``(B) GST trust.--The term `GST trust' means a
trust that could have a generation-skipping transfer
with respect to the transferor unless--
``(i) the trust instrument provides that
more than 25 percent of the trust corpus must
be distributed to or may be withdrawn by 1 or
more individuals who are non-skip persons--
``(I) before the date that the
individual attains age 46,
``(II) on or before 1 or more dates
specified in the trust instrument that
will occur before the date that such
individual attains age 46, or
``(III) upon the occurrence of an
event that, in accordance with
regulations prescribed by the
Secretary, may reasonably be expected
to occur before the date that such
individual attains age 46;
``(ii) the trust instrument provides that
more than 25 percent of the trust corpus must
be distributed to or may be withdrawn by 1 or
more individuals who are non-skip persons and
who are living on the date of death of another
person identified in the instrument (by name or
by class) who is more than 10 years older than
such individuals;
``(iii) the trust instrument provides that,
if 1 or more individuals who are non-skip
persons die on or before a date or event
described in clause (i) or (ii), more than 25
percent of the trust corpus either must be
distributed to the estate or estates of 1 or
more of such individuals or is subject to a
general power of appointment exercisable by 1
or more of such individuals;
``(iv) the trust is a trust any portion of
which would be included in the gross estate of
a non-skip person (other than the transferor)
if such person died immediately after the
transfer;
``(v) the trust is a charitable lead
annuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
``(vi) the trust is a trust with respect to
which a deduction was allowed under section
2522 for the amount of an interest in the form
of the right to receive annual payments of a
fixed percentage of the net fair market value
of the trust property (determined yearly) and
which is required to pay principal to a non-
skip person if such person is alive when the
yearly payments for which the deduction was
allowed terminate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to be
includible in the gross estate of a non-skip person or
subject to a right of withdrawal by reason of such
person holding a right to withdraw so much of such
property as does not exceed the amount referred to in
section 2503(b) with respect to any transferor, and it
shall be assumed that powers of appointment held by
non-skip persons will not be exercised.
``(4) Automatic allocations to certain gst trusts.--For
purposes of this subsection, an indirect skip to which section
2642(f) applies shall be deemed to have been made only at the
close of the estate tax inclusion period. The fair market value
of such transfer shall be the fair market value of the trust
property at the close of the estate tax inclusion period.
``(5) Applicability and effect.--
``(A) In general.--An individual--
``(i) may elect to have this subsection not
apply to--
``(I) an indirect skip, or
``(II) any or all transfers made by
such individual to a particular trust,
and
``(ii) may elect to treat any trust as a
GST trust for purposes of this subsection with
respect to any or all transfers made by such
individual to such trust.
``(B) Elections.--
``(i) Elections with respect to indirect
skips.--An election under subparagraph
(A)(i)(I) shall be deemed to be timely if filed
on a timely filed gift tax return for the
calendar year in which the transfer was made or
deemed to have been made pursuant to paragraph
(4) or on such later date or dates as may be
prescribed by the Secretary.
``(ii) Other elections.--An election under
clause (i)(II) or (ii) of subparagraph (A) may
be made on a timely filed gift tax return for
the calendar year for which the election is to
become effective.
``(d) Retroactive Allocations.--
``(1) In general.--If--
``(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been
made,
``(B) such person--
``(i) is a lineal descendant of a
grandparent of the transferor or of a
grandparent of the transferor's spouse or
former spouse, and
``(ii) is assigned to a generation below
the generation assignment of the transferor,
and
``(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor's unused GST exemption to any previous transfer or
transfers to the trust on a chronological basis.
``(2) Special rules.--If the allocation under paragraph (1)
by the transferor is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for gifts made
within the calendar year within which the non-skip person's
death occurred--
``(A) the value of such transfer or transfers for
purposes of section 2642(a) shall be determined as if
such allocation had been made on a timely filed gift
tax return for each calendar year within which each
transfer was made,
``(B) such allocation shall be effective
immediately before such death, and
``(C) the amount of the transferor's unused GST
exemption available to be allocated shall be determined
immediately before such death.
``(3) Future interest.--For purposes of this subsection, a
person has a future interest in a trust if the trust may permit
income or corpus to be paid to such person on a date or dates
in the future.''.
(b) Conforming Amendment.--Paragraph (2) of section 2632(b) is
amended by striking ``with respect to a direct skip'' and inserting
``or subsection (c)(1)''.
(c) Effective Dates.--
(1) Deemed allocation.--Section 2632(c) of the Internal
Revenue Code of 1986 (as added by subsection (a)), and the
amendment made by subsection (b), shall apply to transfers
subject to chapter 11 or 12 made after December 31, 1999, and
to estate tax inclusion periods ending after December 31, 1999.
(2) Retroactive allocations.--Section 2632(d) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to deaths of non-skip persons occurring after the
date of the enactment of this Act.
SEC. 632. SEVERING OF TRUSTS.
(a) In General.--Subsection (a) of section 2642 (relating to
inclusion ratio) is amended by adding at the end the following new
paragraph:
``(3) Severing of trusts.--
``(A) In general.--If a trust is severed in a
qualified severance, the trusts resulting from such
severance shall be treated as separate trusts
thereafter for purposes of this chapter.
``(B) Qualified severance.--For purposes of
subparagraph (A)--
``(i) In general.--The term `qualified
severance' means the division of a single trust
and the creation (by any means available under
the governing instrument or under local law) of
2 or more trusts if--
``(I) the single trust was divided
on a fractional basis, and
``(II) the terms of the new trusts,
in the aggregate, provide for the same
succession of interests of
beneficiaries as are provided in the
original trust.
``(ii) Trusts with inclusion ratio greater
than zero.--If a trust has an inclusion ratio
of greater than zero and less than 1, a
severance is a qualified severance only if the
single trust is divided into 2 trusts, one of
which receives a fractional share of the total
value of all trust assets equal to the
applicable fraction of the single trust
immediately before the severance. In such case,
the trust receiving such fractional share shall
have an inclusion ratio of zero and the other
trust shall have an inclusion ratio of 1.
``(iii) Regulations.--The term `qualified
severance' includes any other severance
permitted under regulations prescribed by the
Secretary.
``(C) Timing and manner of severances.--A severance
pursuant to this paragraph may be made at any time. The
Secretary shall prescribe by forms or regulations the
manner in which the qualified severance shall be
reported to the Secretary.''.
(b) Effective Date.--The amendment made by this section shall apply
to severances after the date of the enactment of this Act.
SEC. 633. MODIFICATION OF CERTAIN VALUATION RULES.
(a) Gifts for Which Gift Tax Return Filed or Deemed Allocation
Made.--Paragraph (1) of section 2642(b) (relating to valuation rules,
etc.) is amended to read as follows:
``(1) Gifts for which gift tax return filed or deemed
allocation made.--If the allocation of the GST exemption to any
transfers of property is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for such transfer
or is deemed to be made under section 2632 (b)(1) or (c)(1)--
``(A) the value of such property for purposes of
subsection (a) shall be its value as finally determined
for purposes of chapter 12 (within the meaning of
section 2001(f)(2)), or, in the case of an allocation
deemed to have been made at the close of an estate tax
inclusion period, its value at the time of the close of
the estate tax inclusion period, and
``(B) such allocation shall be effective on and
after the date of such transfer, or, in the case of an
allocation deemed to have been made at the close of an
estate tax inclusion period, on and after the close of
such estate tax inclusion period.''.
(b) Transfers at Death.--Subparagraph (A) of section 2642(b)(2) is
amended to read as follows:
``(A) Transfers at death.--If property is
transferred as a result of the death of the transferor,
the value of such property for purposes of subsection
(a) shall be its value as finally determined for
purposes of chapter 11; except that, if the
requirements prescribed by the Secretary respecting
allocation of post-death changes in value are not met,
the value of such property shall be determined as of
the time of the distribution concerned.''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in the amendments made by section 1431 of the Tax
Reform Act of 1986.
SEC. 634. RELIEF PROVISIONS.
(a) In General.--Section 2642 is amended by adding at the end the
following new subsection:
``(g) Relief Provisions.--
``(1) Relief for late elections.--
``(A) In general.--The Secretary shall by
regulation prescribe such circumstances and procedures
under which extensions of time will be granted to
make--
``(i) an allocation of GST exemption
described in paragraph (1) or (2) of subsection
(b), and
``(ii) an election under subsection (b)(3)
or (c)(5) of section 2632.
Such regulations shall include procedures for
requesting comparable relief with respect to transfers
made before the date of enactment of this paragraph.
``(B) Basis for determinations.--In determining
whether to grant relief under this paragraph, the
Secretary shall take into account all relevant
circumstances, including evidence of intent contained
in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant. For
purposes of determining whether to grant relief under
this paragraph, the time for making the allocation (or
election) shall be treated as if not expressly
prescribed by statute.
``(2) Substantial compliance.--An allocation of GST
exemption under section 2632 that demonstrates an intent to
have the lowest possible inclusion ratio with respect to a
transfer or a trust shall be deemed to be an allocation of so
much of the transferor's unused GST exemption as produces the
lowest possible inclusion ratio. In determining whether there
has been substantial compliance, all relevant circumstances
shall be taken into account, including evidence of intent
contained in the trust instrument or instrument of transfer and
such other factors as the Secretary deems relevant.''.
(b) Effective Dates.--
(1) Relief for late elections.--Section 2642(g)(1) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to requests pending on, or filed after, the date of
the enactment of this Act.
(2) Substantial compliance.--Section 2642(g)(2) of such
Code (as so added) shall take effect on the date of the
enactment of this Act and shall apply to allocations made prior
to such date for purposes of determining the tax consequences
of generation-skipping transfers with respect to which the
period of time for filing claims for refund has not expired. No
negative implication is intended with respect to the
availability of relief for late elections or the application of
a rule of substantial compliance prior to the enactment of this
amendment.
TITLE VII--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 1999
SEC. 701. SHORT TITLE.
This subtitle may be cited as the ``American Community Renewal Act
of 1999''.
SEC. 702. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL COMMUNITIES.
(a) In General.--Chapter 1 is amended by adding at the end the
following new subchapter:
``Subchapter X--Renewal Communities
``Part I. Designation.
``Part II. Renewal community capital
gain; renewal community
business.
``Part III. Family development accounts.
``Part IV. Additional incentives.
``PART I--DESIGNATION
``Sec. 1400E. Designation of renewal
communities.
``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
``(a) Designation.--
``(1) Definitions.--For purposes of this title, the term
`renewal community' means any area--
``(A) which is nominated by one or more local
governments and the State or States in which it is
located for designation as a renewal community
(hereinafter in this section referred to as a
`nominated area'); and
``(B) which the Secretary of Housing and Urban
Development designates as a renewal community, after
consultation with--
``(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury; the Director
of the Office of Management and Budget; and the
Administrator of the Small Business
Administration; and
``(ii) in the case of an area on an Indian
reservation, the Secretary of the Interior.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and
Urban Development may designate not more than 20
nominated areas as renewal communities.
``(B) Minimum designation in rural areas.--Of the
areas designated under paragraph (1), at least 4 must
be areas--
``(i) which are within a local government
jurisdiction or jurisdictions with a population
of less than 50,000,
``(ii) which are outside of a metropolitan
statistical area (within the meaning of section
143(k)(2)(B)), or
``(iii) which are determined by the
Secretary of Housing and Urban Development,
after consultation with the Secretary of
Commerce, to be rural areas.
``(3) Areas designated based on degree of poverty, etc.--
``(A) In general.--Except as otherwise provided in
this section, the nominated areas designated as renewal
communities under this subsection shall be those
nominated areas with the highest average ranking with
respect to the criteria described in subparagraphs (B),
(C), and (D) of subsection (c)(3). For purposes of the
preceding sentence, an area shall be ranked within each
such criterion on the basis of the amount by which the
area exceeds such criterion, with the area which
exceeds such criterion by the greatest amount given the
highest ranking.
``(B) Exception where inadequate course of action,
etc.--An area shall not be designated under
subparagraph (A) if the Secretary of Housing and Urban
Development determines that the course of action
described in subsection (d)(2) with respect to such
area is inadequate.
``(C) Priority for empowerment zones and enterprise
communities with respect to first half of
designations.--With respect to the first 10
designations made under this section--
``(i) all shall be chosen from nominated
areas which are empowerment zones or enterprise
communities (and are otherwise eligible for
designation under this section); and
``(ii) 2 shall be areas described in
paragraph (2)(B).
``(4) Limitation on designations.--
``(A) Publication of regulations.--The Secretary of
Housing and Urban Development shall prescribe by
regulation no later than 4 months after the date of the
enactment of this section, after consultation with the
officials described in paragraph (1)(B)--
``(i) the procedures for nominating an area
under paragraph (1)(A);
``(ii) the parameters relating to the size
and population characteristics of a renewal
community; and
``(iii) the manner in which nominated areas
will be evaluated based on the criteria
specified in subsection (d).
``(B) Time limitations.--The Secretary of Housing
and Urban Development may designate nominated areas as
renewal communities only during the 24-month period
beginning on the first day of the first month following
the month in which the regulations described in
subparagraph (A) are prescribed.
``(C) Procedural rules.--The Secretary of Housing
and Urban Development shall not make any designation of
a nominated area as a renewal community under paragraph
(2) unless--
``(i) the local governments and the States
in which the nominated area is located have the
authority--
``(I) to nominate such area for
designation as a renewal community;
``(II) to make the State and local
commitments described in subsection
(d); and
``(III) to provide assurances
satisfactory to the Secretary of
Housing and Urban Development that such
commitments will be fulfilled,
``(ii) a nomination regarding such area is
submitted in such a manner and in such form,
and contains such information, as the Secretary
of Housing and Urban Development shall by
regulation prescribe; and
``(iii) the Secretary of Housing and Urban
Development determines that any information
furnished is reasonably accurate.
``(5) Nomination process for indian reservations.--For
purposes of this subchapter, in the case of a nominated area on
an Indian reservation, the reservation governing body (as
determined by the Secretary of the Interior) shall be treated
as being both the State and local governments with respect to
such area.
``(b) Period for Which Designation Is in Effect.--
``(1) In general.--Any designation of an area as a renewal
community shall remain in effect during the period beginning on
the date of the designation and ending on the earliest of--
``(A) December 31, 2007,
``(B) the termination date designated by the State
and local governments in their nomination, or
``(C) the date the Secretary of Housing and Urban
Development revokes such designation.
``(2) Revocation of designation.--The Secretary of Housing
and Urban Development may revoke the designation under this
section of an area if such Secretary determines that the local
government or the State in which the area is located--
``(A) has modified the boundaries of the area, or
``(B) is not complying substantially with, or fails
to make progress in achieving, the State or local
commitments, respectively, described in subsection (d).
``(c) Area and Eligibility Requirements.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate a nominated area as a renewal
community under subsection (a) only if the area meets the
requirements of paragraphs (2) and (3) of this subsection.
``(2) Area requirements.--A nominated area meets the
requirements of this paragraph if--
``(A) the area is within the jurisdiction of one or
more local governments;
``(B) the boundary of the area is continuous; and
``(C) the area--
``(i) has a population, of at least--
``(I) 4,000 if any portion of such
area (other than a rural area described
in subsection (a)(2)(B)(i)) is located
within a metropolitan statistical area
(within the meaning of section
143(k)(2)(B)) which has a population of
50,000 or greater; or
``(II) 1,000 in any other case; or
``(ii) is entirely within an Indian
reservation (as determined by the Secretary of
the Interior).
``(3) Eligibility requirements.--A nominated area meets the
requirements of this paragraph if the State and the local
governments in which it is located certify (and the Secretary
of Housing and Urban Development, after such review of
supporting data as he deems appropriate, accepts such
certification) that--
``(A) the area is one of pervasive poverty,
unemployment, and general distress;
``(B) the unemployment rate in the area, as
determined by the most recent available data, was at
least 1\1/2\ times the national unemployment rate for
the period to which such data relate;
``(C) the poverty rate for each population census
tract within the nominated area is at least 20 percent;
and
``(D) in the case of an urban area, at least 70
percent of the households living in the area have
incomes below 80 percent of the median income of
households within the jurisdiction of the local
government (determined in the same manner as under
section 119(b)(2) of the Housing and Community
Development Act of 1974).
``(4) Consideration of high incidence of crime.--The
Secretary of Housing and Urban Development shall take into
account, in selecting nominated areas for designation as
renewal communities under this section, the extent to which
such areas have a high incidence of crime.
``(5) Consideration of communities identified in gao
study.--The Secretary of Housing and Urban Development shall
take into account, in selecting nominated areas for designation
as renewal communities under this section, if the area has
census tracts identified in the May 12, 1998, report of the
Government Accounting Office regarding the identification of
economically distressed areas.
``(d) Required State and Local Commitments.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate any nominated area as a renewal
community under subsection (a) only if--
``(A) the local government and the State in which
the area is located agree in writing that, during any
period during which the area is a renewal community,
such governments will follow a specified course of
action which meets the requirements of paragraph (2)
and is designed to reduce the various burdens borne by
employers or employees in such area; and
``(B) the economic growth promotion requirements of
paragraph (3) are met.
``(2) Course of action.--
``(A) In general.--A course of action meets the
requirements of this paragraph if such course of action
is a written document, signed by a State (or local
government) and neighborhood organizations, which
evidences a partnership between such State or
government and community-based organizations and which
commits each signatory to specific and measurable
goals, actions, and timetables. Such course of action
shall include at least five of the following:
``(i) A reduction of tax rates or fees
applying within the renewal community.
``(ii) An increase in the level of
efficiency of local services within the renewal
community.
``(iii) Crime reduction strategies, such as
crime prevention (including the provision of
such services by nongovernmental entities).
``(iv) Actions to reduce, remove, simplify,
or streamline governmental requirements
applying within the renewal community.
``(v) Involvement in the program by private
entities, organizations, neighborhood
organizations, and community groups,
particularly those in the renewal community,
including a commitment from such private
entities to provide jobs and job training for,
and technical, financial, or other assistance
to, employers, employees, and residents from
the renewal community.
``(vi) State or local income tax benefits
for fees paid for services performed by a
nongovernmental entity which were formerly
performed by a governmental entity.
``(vii) The gift (or sale at below fair
market value) of surplus real property (such as
land, homes, and commercial or industrial
structures) in the renewal community to
neighborhood organizations, community
development corporations, or private companies.
``(B) Recognition of past efforts.--For purposes of
this section, in evaluating the course of action agreed
to by any State or local government, the Secretary of
Housing and Urban Development shall take into account
the past efforts of such State or local government in
reducing the various burdens borne by employers and
employees in the area involved.
``(3) Economic growth promotion requirements.--The economic
growth promotion requirements of this paragraph are met with
respect to a nominated area if the local government and the
State in which such area is located certify in writing that
such government and State, respectively, have repealed or
otherwise will not enforce within the area, if such area is
designated as a renewal community--
``(A) licensing requirements for occupations that
do not ordinarily require a professional degree;
``(B) zoning restrictions on home-based businesses
which do not create a public nuisance;
``(C) permit requirements for street vendors who do
not create a public nuisance;
``(D) zoning or other restrictions that impede the
formation of schools or child care centers; and
``(E) franchises or other restrictions on
competition for businesses providing public services,
including but not limited to taxicabs, jitneys, cable
television, or trash hauling,
except to the extent that such regulation of businesses and
occupations is necessary for and well-tailored to the
protection of health and safety.
``(e) Coordination With Treatment of Empowerment Zones and
Enterprise Communities.--For purposes of this title, if there are in
effect with respect to the same area both--
``(1) a designation as a renewal community; and
``(2) a designation as an empowerment zone or enterprise
community,
both of such designations shall be given full effect with respect to
such area.
``(f) Definitions and Special Rules.--For purposes of this
subchapter--
``(1) Governments.--If more than one government seeks to
nominate an area as a renewal community, any reference to, or
requirement of, this section shall apply to all such
governments.
``(2) State.--The term `State' includes Puerto Rico, the
Virgin Islands of the United States, Guam, American Samoa, the
Northern Mariana Islands, and any other possession of the
United States.
``(3) Local government.--The term `local government'
means--
``(A) any county, city, town, township, parish,
village, or other general purpose political subdivision
of a State;
``(B) any combination of political subdivisions
described in subparagraph (A) recognized by the
Secretary of Housing and Urban Development; and
``(C) the District of Columbia.
``(4) Application of rules relating to census tracts and
census data.--The rules of sections 1392(b)(4) and 1393(a)(9)
shall apply.
``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS
``Sec. 1400F. Renewal community capital
gain.
``Sec. 1400G. Renewal community business
defined.
``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
``(a) General Rule.--Gross income does not include any qualified
capital gain recognized on the sale or exchange of a qualified
community asset held for more than 5 years.
``(b) Qualified Community Asset.--For purposes of this section--
``(1) In general.--The term `qualified community asset'
means--
``(A) any qualified community stock;
``(B) any qualified community partnership interest;
and
``(C) any qualified community business property.
``(2) Qualified community stock.--
``(A) In general.--Except as provided in
subparagraph (B), the term `qualified community stock'
means any stock in a domestic corporation if--
``(i) such stock is acquired by the
taxpayer after December 31, 2000, and before
January 1, 2008, at its original issue
(directly or through an underwriter) from the
corporation solely in exchange for cash;
``(ii) as of the time such stock was
issued, such corporation was a renewal
community business (or, in the case of a new
corporation, such corporation was being
organized for purposes of being a renewal
community business); and
``(iii) during substantially all of the
taxpayer's holding period for such stock, such
corporation qualified as a renewal community
business.
``(B) Redemptions.--A rule similar to the rule of
section 1202(c)(3) shall apply for purposes of this
paragraph.
``(3) Qualified community partnership interest.--The term
`qualified community partnership interest' means any capital or
profits interest in a domestic partnership if--
``(A) such interest is acquired by the taxpayer
after December 31, 2000, and before January 1, 2008;
``(B) as of the time such interest was acquired,
such partnership was a renewal community business (or,
in the case of a new partnership, such partnership was
being organized for purposes of being a renewal
community business); and
``(C) during substantially all of the taxpayer's
holding period for such interest, such partnership
qualified as a renewal community business.
A rule similar to the rule of paragraph (2)(B) shall apply for
purposes of this paragraph.
``(4) Qualified community business property.--
``(A) In general.--The term `qualified community
business property' means tangible property if--
``(i) such property was acquired by the
taxpayer by purchase (as defined in section
179(d)(2)) after December 31, 2000, and before
January 1, 2008;
``(ii) the original use of such property in
the renewal community commences with the
taxpayer; and
``(iii) during substantially all of the
taxpayer's holding period for such property,
substantially all of the use of such property
was in a renewal community business of the
taxpayer.
``(B) Special rule for substantial improvements.--
The requirements of clauses (i) and (ii) of
subparagraph (A) shall be treated as satisfied with
respect to--
``(i) property which is substantially
improved (within the meaning of section
1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2008; and
``(ii) any land on which such property is
located.
``(c) Certain Rules To Apply.--Rules similar to the rules of
paragraphs (5), (6), and (7) of subsection (b), and subsections (e),
(f), and (g), of section 1400B shall apply for purposes of this
section.
``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
``For purposes of this part, the term `renewal community business'
means any entity or proprietorship which would be a qualified business
entity or qualified proprietorship under section 1397B if--
``(1) references to renewal communities were substituted
for references to empowerment zones in such section; and
``(2) `80 percent' were substituted for `50 percent' in
subsections (b)(2) and (c)(1) of such section.
``PART III--FAMILY DEVELOPMENT ACCOUNTS
``Sec. 1400H. Family development accounts
for renewal community EITC
recipients.
``Sec. 1400I. Demonstration program to
provide matching contributions
to family development accounts
in certain renewal communities.
``Sec. 1400J. Designation of earned
income tax credit payments for
deposit to family development
account.
``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL COMMUNITY EITC
RECIPIENTS.
``(a) Allowance of Deduction.--
``(1) In general.--There shall be allowed as a deduction--
``(A) in the case of a qualified individual, the
amount paid in cash for the taxable year by such
individual to any family development account for such
individual's benefit; and
``(B) in the case of any person other than a
qualified individual, the amount paid in cash for the
taxable year by such person to any family development
account for the benefit of a qualified individual but
only if the amount so paid is designated for purposes
of this section by such individual.
No deduction shall be allowed under this paragraph for any
amount deposited in a family development account under section
1400I (relating to demonstration program to provide matching
amounts in renewal communities).
``(2) Limitation.--
``(A) In general.--The amount allowable as a
deduction to any individual for any taxable year by
reason of paragraph (1)(A) shall not exceed the lesser
of--
``(i) $2,000, or
``(ii) an amount equal to the compensation
includible in the individual's gross income for
such taxable year.
``(B) Persons donating to family development
accounts of others.--The amount which may be designated
under paragraph (1)(B) by any qualified individual for
any taxable year of such individual shall not exceed
$1,000.
``(3) Special rules for certain married individuals.--Rules
similar to rules of section 219(c) shall apply to the
limitation in paragraph (2)(A).
``(4) Coordination with iras.--No deduction shall be
allowed under this section for any taxable year to any person
by reason of a payment to an account for the benefit of a
qualified individual if any amount is paid for such taxable
year into an individual retirement account (including a Roth
IRA) for the benefit of such individual.
``(5) Rollovers.--No deduction shall be allowed under this
section with respect to any rollover contribution.
``(b) Tax Treatment of Distributions.--
``(1) Inclusion of amounts in gross income.--Except as
otherwise provided in this subsection, any amount paid or
distributed out of a family development account shall be
included in gross income by the payee or distributee, as the
case may be.
``(2) Exclusion of qualified family development
distributions.--Paragraph (1) shall not apply to any qualified
family development distribution.
``(c) Qualified Family Development Distribution.--For purposes of
this section--
``(1) In general.--The term `qualified family development
distribution' means any amount paid or distributed out of a
family development account which would otherwise be includible
in gross income, to the extent that such payment or
distribution is used exclusively to pay qualified family
development expenses for the holder of the account or the
spouse or dependent (as defined in section 152) of such holder.
``(2) Qualified family development expenses.--The term
`qualified family development expenses' means any of the
following:
``(A) Qualified higher education expenses.
``(B) Qualified first-time homebuyer costs.
``(C) Qualified business capitalization costs.
``(D) Qualified medical expenses.
``(E) Qualified rollovers.
``(3) Qualified higher education expenses.--
``(A) In general.--The term `qualified higher
education expenses' has the meaning given such term by
section 72(t)(7), determined by treating postsecondary
vocational educational schools as eligible educational
institutions.
``(B) Postsecondary vocational education school.--
The term `postsecondary vocational educational school'
means an area vocational education school (as defined
in subparagraph (C) or (D) of section 521(4) of the
Carl D. Perkins Vocational and Applied Technology
Education Act (20 U.S.C. 2471(4))) which is in any
State (as defined in section 521(33) of such Act), as
such sections are in effect on the date of the
enactment of this section.
``(C) Coordination with other benefits.--The amount
of qualified higher education expenses for any taxable
year shall be reduced as provided in section 25A(g)(2).
``(4) Qualified first-time homebuyer costs.--The term
`qualified first-time homebuyer costs' means qualified
acquisition costs (as defined in section 72(t)(8) without
regard to subparagraph (B) thereof) with respect to a principal
residence (within the meaning of section 121) for a qualified
first-time homebuyer (as defined in section 72(t)(8)).
``(5) Qualified business capitalization costs.--
``(A) In general.--The term `qualified business
capitalization costs' means qualified expenditures for
the capitalization of a qualified business pursuant to
a qualified plan.
``(B) Qualified expenditures.--The term `qualified
expenditures' means expenditures included in a
qualified plan, including capital, plant, equipment,
working capital, and inventory expenses.
``(C) Qualified business.--The term `qualified
business' means any trade or business other than any
trade or business--
``(i) which consists of the operation of
any facility described in section 144(c)(6)(B),
or
``(ii) which contravenes any law.
``(D) Qualified plan.--The term `qualified plan'
means a business plan which meets such requirements as
the Secretary may specify.
``(6) Qualified medical expenses.--The term `qualified
medical expenses' means any amount paid during the taxable
year, not compensated for by insurance or otherwise, for
medical care (as defined in section 213(d)) of the taxpayer,
his spouse, or his dependent (as defined in section 152).
``(7) Qualified rollovers.--The term `qualified rollover'
means any amount paid from a family development account of a
taxpayer into another such account established for the benefit
of--
``(A) such taxpayer, or
``(B) any qualified individual who is--
``(i) the spouse of such taxpayer, or
``(ii) any dependent (as defined in section
152) of the taxpayer.
Rules similar to the rules of section 408(d)(3) shall apply for
purposes of this paragraph.
``(d) Tax Treatment of Accounts.--
``(1) In general.--Any family development account is exempt
from taxation under this subtitle unless such account has
ceased to be a family development account by reason of
paragraph (2). Notwithstanding the preceding sentence, any such
account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business income of
charitable, etc., organizations). Notwithstanding any other
provision of this title (including chapters 11 and 12), the
basis of any person in such an account is zero.
``(2) Loss of exemption in case of prohibited
transactions.--For purposes of this section, rules similar to
the rules of section 408(e) shall apply.
``(3) Other rules to apply.--Rules similar to the rules of
paragraphs (4), (5), and (6) of section 408(d) shall apply for
purposes of this section.
``(e) Family Development Account.--For purposes of this title, the
term `family development account' means a trust created or organized in
the United States for the exclusive benefit of a qualified individual
or his beneficiaries, but only if the written governing instrument
creating the trust meets the following requirements:
``(1) Except in the case of a qualified rollover (as
defined in subsection (c)(7))--
``(A) no contribution will be accepted unless it is
in cash; and
``(B) contributions will not be accepted for the
taxable year in excess of $3,000 (determined without
regard to any contribution made under section 1400I
(relating to demonstration program to provide matching
amounts in renewal communities)).
``(2) The requirements of paragraphs (2) through (6) of
section 408(a) are met.
``(f) Qualified Individual.--For purposes of this section, the term
`qualified individual' means, for any taxable year, an individual--
``(1) who is a bona fide resident of a renewal community
throughout the taxable year; and
``(2) to whom a credit was allowed under section 32 for the
preceding taxable year.
``(g) Other Definitions and Special Rules.--
``(1) Compensation.--The term `compensation' has the
meaning given such term by section 219(f)(1).
``(2) Married individuals.--The maximum deduction under
subsection (a) shall be computed separately for each
individual, and this section shall be applied without regard to
any community property laws.
``(3) Time when contributions deemed made.--For purposes of
this section, a taxpayer shall be deemed to have made a
contribution to a family development account on the last day of
the preceding taxable year if the contribution is made on
account of such taxable year and is made not later than the
time prescribed by law for filing the return for such taxable
year (not including extensions thereof).
``(4) Employer payments; custodial accounts.--Rules similar
to the rules of sections 219(f)(5) and 408(h) shall apply for
purposes of this section.
``(5) Reports.--The trustee of a family development account
shall make such reports regarding such account to the Secretary
and to the individual for whom the account is maintained with
respect to contributions (and the years to which they relate),
distributions, and such other matters as the Secretary may
require under regulations. The reports required by this
paragraph--
``(A) shall be filed at such time and in such
manner as the Secretary prescribes in such regulations;
and
``(B) shall be furnished to individuals--
``(i) not later than January 31 of the
calendar year following the calendar year to
which such reports relate; and
``(ii) in such manner as the Secretary
prescribes in such regulations.
``(6) Investment in collectibles treated as
distributions.--Rules similar to the rules of section 408(m)
shall apply for purposes of this section.
``(h) Penalty for Distributions Not Used for Qualified Family
Development Expenses.--
``(1) In general.--If any amount is distributed from a
family development account and is not used exclusively to pay
qualified family development expenses for the holder of the
account or the spouse or dependent (as defined in section 152)
of such holder, the tax imposed by this chapter for the taxable
year of such distribution shall be increased by the sum of--
``(A) 100 percent of the portion of such amount
which is includible in gross income and is attributable
to amounts contributed under section 1400I (relating to
demonstration program to provide matching amounts in
renewal communities); and
``(B) 10 percent of the portion of such amount
which is includible in gross income and is not
described in subparagraph (A).
For purposes of this subsection, distributions which are
includable in gross income shall be treated as attributable to
amounts contributed under section 1400I to the extent thereof.
For purposes of the preceding sentence, all family development
accounts of an individual shall be treated as one account.
``(2) Exception for certain distributions.--Paragraph (1)
shall not apply to distributions which are--
``(A) made on or after the date on which the
account holder attains age 59\1/2\,
``(B) made to a beneficiary (or the estate of the
account holder) on or after the death of the account
holder, or
``(C) attributable to the account holder's being
disabled within the meaning of section 72(m)(7).
``(i) Application of Section.--This section shall apply to amounts
paid to a family development account for any taxable year beginning
after December 31, 2000, and before January 1, 2008.
``SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE MATCHING CONTRIBUTIONS
TO FAMILY DEVELOPMENT ACCOUNTS IN CERTAIN RENEWAL
COMMUNITIES.
``(a) Designation.--
``(1) Definitions.--For purposes of this section, the term
`FDA matching demonstration area' means any renewal community--
``(A) which is nominated under this section by each
of the local governments and States which nominated
such community for designation as a renewal community
under section 1400E(a)(1)(A); and
``(B) which the Secretary of Housing and Urban
Development designates as an FDA matching demonstration
area after consultation with--
``(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury, the Director
of the Office of Management and Budget, and the
Administrator of the Small Business
Administration; and
``(ii) in the case of a community on an
Indian reservation, the Secretary of the
Interior.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and
Urban Development may designate not more than 5 renewal
communities as FDA matching demonstration areas.
``(B) Minimum designation in rural areas.--Of the
areas designated under subparagraph (A), at least 2
must be areas described in section 1400E(a)(2)(B).
``(3) Limitations on designations.--
``(A) Publication of regulations.--The Secretary of
Housing and Urban Development shall prescribe by
regulation no later than 4 months after the date of the
enactment of this section, after consultation with the
officials described in paragraph (1)(B)--
``(i) the procedures for nominating a
renewal community under paragraph (1)(A)
(including procedures for coordinating such
nomination with the nomination of an area for
designation as a renewal community under
section 1400E); and
``(ii) the manner in which nominated
renewal communities will be evaluated for
purposes of this section.
``(B) Time limitations.--The Secretary of Housing
and Urban Development may designate renewal communities
as FDA matching demonstration areas only during the 24-
month period beginning on the first day of the first
month following the month in which the regulations
described in subparagraph (A) are prescribed.
``(4) Designation based on degree of poverty, etc.--The
rules of section 1400E(a)(3) shall apply for purposes of
designations of FDA matching demonstration areas under this
section.
``(b) Period for Which Designation Is in Effect.--Any designation
of a renewal community as an FDA matching demonstration area shall
remain in effect during the period beginning on the date of such
designation and ending on the date on which such area ceases to be a
renewal community.
``(c) Matching Contributions to Family Development Accounts.--
``(1) In general.--Not less than once each taxable year,
the Secretary shall deposit (to the extent provided in
appropriation Acts) into a family development account of each
qualified individual (as defined in section 1400H(f))--
``(A) who is a resident throughout the taxable year
of an FDA matching demonstration area; and
``(B) who requests (in such form and manner as the
Secretary prescribes) such deposit for the taxable
year,
an amount equal to the sum of the amounts deposited into all of
the family development accounts of such individual during such
taxable year (determined without regard to any amount
contributed under this section).
``(2) Limitations.--
``(A) Annual limit.--The Secretary shall not
deposit more than $1000 under paragraph (1) with
respect to any individual for any taxable year.
``(B) Aggregate limit.--The Secretary shall not
deposit more than $2000 under paragraph (1) with
respect to any individual for all taxable years.
``(3) Exclusion from income.--Except as provided in section
1400H, gross income shall not include any amount deposited into
a family development account under paragraph (1).
``(d) Notice of Program.--The Secretary shall provide appropriate
notice to residents of FDA matching demonstration areas of the
availability of the benefits under this section.
``(e) Termination.--No amount may be deposited under this section
for any taxable year beginning after December 31, 2007.
``SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CREDIT PAYMENTS FOR
DEPOSIT TO FAMILY DEVELOPMENT ACCOUNT.
``(a) In General.--With respect to the return of any qualified
individual (as defined in section 1400H(f)) for the taxable year of the
tax imposed by this chapter, such individual may designate that a
specified portion (not less than $1) of any overpayment of tax for such
taxable year which is attributable to the earned income tax credit
shall be deposited by the Secretary into a family development account
of such individual. The Secretary shall so deposit such portion
designated under this subsection.
``(b) Manner and Time of Designation.--A designation under
subsection (a) may be made with respect to any taxable year--
``(1) at the time of filing the return of the tax imposed
by this chapter for such taxable year, or
``(2) at any other time (after the time of filing the
return of the tax imposed by this chapter for such taxable
year) specified in regulations prescribed by the Secretary.
Such designation shall be made in such manner as the Secretary
prescribes by regulations.
``(c) Portion Attributable to Earned Income Tax Credit.--For
purposes of subsection (a), an overpayment for any taxable year shall
be treated as attributable to the earned income tax credit to the
extent that such overpayment does not exceed the credit allowed to the
taxpayer under section 32 for such taxable year.
``(d) Overpayments Treated as Refunded.--For purposes of this
title, any portion of an overpayment of tax designated under subsection
(a) shall be treated as being refunded to the taxpayer as of the last
date prescribed for filing the return of tax imposed by this chapter
(determined without regard to extensions) or, if later, the date the
return is filed.
``(e) Termination.--This section shall not apply to any taxable
year beginning after December 31, 2007.
``PART IV--ADDITIONAL INCENTIVES
``Sec. 1400K. Commercial revitalization
deduction.
``Sec. 1400L. Increase in expensing under
section 179.
``SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.
``(a) General Rule.--At the election of the taxpayer, either--
``(1) one-half of any qualified revitalization expenditures
chargeable to capital account with respect to any qualified
revitalization building shall be allowable as a deduction for
the taxable year in which the building is placed in service, or
``(2) a deduction for all such expenditures shall be
allowable ratably over the 120-month period beginning with the
month in which the building is placed in service.
The deduction provided by this section with respect to such expenditure
shall be in lieu of any depreciation deduction otherwise allowable on
account of such expenditure.
``(b) Qualified Revitalization Buildings and Expenditures.--For
purposes of this section--
``(1) Qualified revitalization building.--The term
`qualified revitalization building' means any building (and its
structural components) if--
``(A) such building is located in a renewal
community and is placed in service after December 31,
2000;
``(B) a commercial revitalization deduction amount
is allocated to the building under subsection (d); and
``(C) depreciation (or amortization in lieu of
depreciation) is allowable with respect to the building
(without regard to this section).
``(2) Qualified revitalization expenditure.--
``(A) In general.--The term `qualified
revitalization expenditure' means any amount properly
chargeable to capital account--
``(i) for property for which depreciation
is allowable under section 168 (without regard
to this section) and which is--
``(I) nonresidential real property;
or
``(II) an addition or improvement
to property described in subclause (I);
``(ii) in connection with the construction
of any qualified revitalization building which
was not previously placed in service or in
connection with the substantial rehabilitation
(within the meaning of section 47(c)(1)(C)) of
a building which was placed in service before
the beginning of such rehabilitation; and
``(iii) for land (including land which is
functionally related to such property and
subordinate thereto).
``(B) Dollar limitation.--The aggregate amount
which may be treated as qualified revitalization
expenditures with respect to any qualified
revitalization building for any taxable year shall not
exceed the excess of--
``(i) $10,000,000, reduced by
``(ii) any such expenditures with respect
to the building taken into account by the
taxpayer or any predecessor in determining the
amount of the deduction under this section for
all preceding taxable years.
``(C) Certain expenditures not included.--The term
`qualified revitalization expenditure' does not
include--
``(i) Acquisition costs.--The costs of
acquiring any building or interest therein and
any land in connection with such building to
the extent that such costs exceed 30 percent of
the qualified revitalization expenditures
determined without regard to this clause.
``(ii) Credits.--Any expenditure which the
taxpayer may take into account in computing any
credit allowable under this title unless the
taxpayer elects to take the expenditure into
account only for purposes of this section.
``(c) When Expenditures Taken Into Account.--Qualified
revitalization expenditures with respect to any qualified
revitalization building shall be taken into account for the taxable
year in which the qualified revitalization building is placed in
service. For purposes of the preceding sentence, a substantial
rehabilitation of a building shall be treated as a separate building.
``(d) Limitation on Aggregate Deductions Allowable With Respect to
Buildings Located in a State.--
``(1) In general.--The amount of the deduction determined
under this section for any taxable year with respect to any
building shall not exceed the commercial revitalization
deduction amount (in the case of an amount determined under
subsection (a)(2), the present value of such amount as
determined under the rules of section 42(b)(2)(C) by
substituting `100 percent' for `72 percent' in clause (ii)
thereof) allocated to such building under this subsection by
the commercial revitalization agency. Such allocation shall be
made at the same time and in the same manner as under
paragraphs (1) and (7) of section 42(h).
``(2) Commercial revitalization deduction amount for
agencies.--
``(A) In general.--The aggregate commercial
revitalization deduction amount which a commercial
revitalization agency may allocate for any calendar
year is the amount of the State commercial
revitalization deduction ceiling determined under this
paragraph for such calendar year for such agency.
``(B) State commercial revitalization deduction
ceiling.--The State commercial revitalization deduction
ceiling applicable to any State--
``(i) for each calendar year after 2000 and
before 2008 is $6,000,000 for each renewal
community in the State; and
``(ii) zero for each calendar year
thereafter.
``(C) Commercial revitalization agency.--For
purposes of this section, the term `commercial
revitalization agency' means any agency authorized by a
State to carry out this section.
``(e) Responsibilities of Commercial Revitalization Agencies.--
``(1) Plans for allocation.--Notwithstanding any other
provision of this section, the commercial revitalization
deduction amount with respect to any building shall be zero
unless--
``(A) such amount was allocated pursuant to a
qualified allocation plan of the commercial
revitalization agency which is approved (in accordance
with rules similar to the rules of section 147(f)(2)
(other than subparagraph (B)(ii) thereof)) by the
governmental unit of which such agency is a part; and
``(B) such agency notifies the chief executive
officer (or its equivalent) of the local jurisdiction
within which the building is located of such allocation
and provides such individual a reasonable opportunity
to comment on the allocation.
``(2) Qualified allocation plan.--For purposes of this
subsection, the term `qualified allocation plan' means any
plan--
``(A) which sets forth selection criteria to be
used to determine priorities of the commercial
revitalization agency which are appropriate to local
conditions;
``(B) which considers--
``(i) the degree to which a project
contributes to the implementation of a
strategic plan that is devised for a renewal
community through a citizen participation
process;
``(ii) the amount of any increase in
permanent, full-time employment by reason of
any project; and
``(iii) the active involvement of residents
and nonprofit groups within the renewal
community; and
``(C) which provides a procedure that the agency
(or its agent) will follow in monitoring compliance
with this section.
``(f) Regulations.--For purposes of this section, the Secretary
shall, by regulations, provide for the application of rules similar to
the rules of section 49 and subsections (a) and (b) of section 50.
``(g) Termination.--This section shall not apply to any building
placed in service after December 31, 2007.
``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
``(a) General Rule.--In the case of a renewal community business
(as defined in section 1400G), for purposes of section 179--
``(1) the limitation under section 179(b)(1) shall be
increased by the lesser of--
``(A) $35,000; or
``(B) the cost of section 179 property which is
qualified renewal property placed in service during the
taxable year; and
``(2) the amount taken into account under section 179(b)(2)
with respect to any section 179 property which is qualified
renewal property shall be 50 percent of the cost thereof.
``(b) Recapture.--Rules similar to the rules under section
179(d)(10) shall apply with respect to any qualified renewal property
which ceases to be used in a renewal community by a renewal community
business.
``(c) Qualified Renewal Property.--For purposes of this section--
``(1) In general.--The term `qualified renewal property'
means any property to which section 168 applies (or would apply
but for section 179) if--
``(A) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after
December 31, 2000, and before January 1, 2008; and
``(B) such property would be qualified zone
property (as defined in section 1397C) if references to
renewal communities were substituted for references to
empowerment zones in section 1397C.
``(2) Certain rules to apply.--The rules of subsections
(a)(2) and (b) of section 1397C shall apply for purposes of
this section.''.
SEC. 703. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS TO
RENEWAL COMMUNITIES.
(a) Extension.--Paragraph (2) of section 198(c) (defining targeted
area) is amended by redesignating subparagraph (C) as subparagraph (D)
and by inserting after subparagraph (B) the following new subparagraph:
``(C) Renewal communities included.--Except as
provided in subparagraph (B), such term shall include a
renewal community (as defined in section 1400E) with
respect to expenditures paid or incurred after December
31, 2000.''.
(b) Extension of Termination Date for Renewal Communities.--
Subsection (h) of section 198 is amended by inserting before the period
``(December 31, 2007, in the case of a renewal community, as defined in
section 1400E).''.
SEC. 704. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR RENEWAL
COMMUNITIES
(a) Extension.--Subsection (c) of section 51 (relating to
termination) is amended by adding at the end the following new
paragraph:
``(5) Extension of credit for renewal communities.--
``(A) In general.--In the case of an individual who
begins work for the employer after the date contained
in paragraph (4)(B), for purposes of section 38--
``(i) in lieu of applying subsection (a),
the amount of the work opportunity credit
determined under this section for the taxable
year shall be equal to--
``(I) 15 percent of the qualified
first-year wages for such year; and
``(II) 30 percent of the qualified
second-year wages for such year;
``(ii) subsection (b)(3) shall be applied
by substituting `$10,000' for `$6,000';
``(iii) paragraph (4)(B) shall be applied
by substituting for the date contained therein
the last day for which the designation under
section 1400E of the renewal community referred
to in subparagraph (B)(i) is in effect; and
``(iv) rules similar to the rules of
section 51A(b)(5)(C) shall apply.
``(B) Qualified first- and second-year wages.--For
purposes of subparagraph (A)--
``(i) In general.--The term `qualified
wages' means, with respect to each 1-year
period referred to in clause (ii) or (iii), as
the case may be, the wages paid or incurred by
the employer during the taxable year to any
individual but only if--
``(I) the employer is engaged in a
trade or business in a renewal
community throughout such 1-year
period;
``(II) the principal place of abode
of such individual is in such renewal
community throughout such 1-year
period; and
``(III) substantially all of the
services which such individual performs
for the employer during such 1-year
period are performed in such renewal
community.
``(ii) Qualified first-year wages.--The
term `qualified first-year wages' means, with
respect to any individual, qualified wages
attributable to service rendered during the 1-
year period beginning with the day the
individual begins work for the employer.
``(iii) Qualified second-year wages.--The
term `qualified second-year wages' means, with
respect to any individual, qualified wages
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
individual determined under clause (ii).''.
(b) Congruent Treatment of Renewal Communities and Enterprise Zones
for Purposes of Youth Residence Requirements.--
(1) High-risk youth.--Subparagraphs (A)(ii) and (B) of
section 51(d)(5) are each amended by striking ``empowerment
zone or enterprise community'' and inserting ``empowerment
zone, enterprise community, or renewal community''.
(2) Qualified summer youth employee.--Clause (iv) of
section 51(d)(7)(A) is amended by striking ``empowerment zone
or enterprise community'' and inserting ``empowerment zone,
enterprise community, or renewal community''.
(3) Headings.--Paragraphs (5)(B) and (7)(C) of section
51(d) are each amended by inserting ``or community'' in the
heading after ``zone''.
(4) Effective date.--The amendments made by this subsection
shall apply to individuals who begin work for the employer
after December 31, 2000.
SEC. 705. CONFORMING AND CLERICAL AMENDMENTS.
(a) Deduction for Contributions to Family Development Accounts
Allowable Whether or Not Taxpayer Itemizes.--Subsection (a) of section
62 (relating to adjusted gross income defined) is amended by inserting
after paragraph (18) the following new paragraph:
``(19) Family development accounts.--The deduction allowed
by section 1400H(a)(1).''.
(b) Tax on Excess Contributions.--
(1) Tax imposed.--Subsection (a) of section 4973 is amended
by striking ``or'' at the end of paragraph (3), adding ``or''
at the end of paragraph (4), and inserting after paragraph (4)
the following new paragraph:
``(5) a family development account (within the meaning of
section 1400H(e)),''.
(2) Excess contributions.--Section 4973 is amended by
adding at the end the following new subsection:
``(g) Family Development Accounts.--For purposes of this section,
in the case of family development accounts, the term `excess
contributions' means the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed for the taxable year
to the accounts (other than a qualified rollover, as
defined in section 1400H(c)(7), or a contribution under
section 1400I), over
``(B) the amount allowable as a deduction under
section 1400H for such contributions; and
``(2) the amount determined under this subsection for the
preceding taxable year reduced by the sum of--
``(A) the distributions out of the accounts for the
taxable year which were included in the gross income of
the payee under section 1400H(b)(1);
``(B) the distributions out of the accounts for the
taxable year to which rules similar to the rules of
section 408(d)(5) apply by reason of section
1400H(d)(3); and
``(C) the excess (if any) of the maximum amount
allowable as a deduction under section 1400H for the
taxable year over the amount contributed to the account
for the taxable year (other than a contribution under
section 1400I).
For purposes of this subsection, any contribution which is distributed
from the family development account in a distribution to which rules
similar to the rules of section 408(d)(4) apply by reason of section
1400H(d)(3) shall be treated as an amount not contributed.''.
(c) Tax on Prohibited Transactions.--Section 4975 is amended--
(1) by adding at the end of subsection (c) the following
new paragraph:
``(6) Special rule for family development accounts.--An
individual for whose benefit a family development account is
established and any contributor to such account shall be exempt
from the tax imposed by this section with respect to any
transaction concerning such account (which would otherwise be
taxable under this section) if, with respect to such
transaction, the account ceases to be a family development
account by reason of the application of section 1400H(d)(2) to
such account.''; and
(2) in subsection (e)(1), by striking ``or'' at the end of
subparagraph (E), by redesignating subparagraph (F) as
subparagraph (G), and by inserting after subparagraph (E) the
following new subparagraph:
``(F) a family development account described in
section 1400H(e), or''.
(d) Information Relating to Certain Trusts and Annuity Plans.--
Subsection (c) of section 6047 is amended--
(1) by inserting ``or section 1400H'' after ``section
219''; and
(2) by inserting ``, of any family development account
described in section 1400H(e),'', after ``section 408(a)''.
(e) Inspection of Applications for Tax Exemption.--Clause (i) of
section 6104(a)(1)(B) is amended by inserting ``a family development
account described in section 1400H(e),'' after ``section 408(a),''.
(f) Failure To Provide Reports on Family Development Accounts.--
Paragraph (2) of section 6693(a) is amended by striking ``and'' at the
end of subparagraph (C), by striking the period and inserting ``, and''
at the end of subparagraph (D), and by adding at the end the following
new subparagraph:
``(E) section 1400H(g)(6) (relating to family
development accounts).''.
(g) Conforming Amendments Regarding Commercial Revitalization
Deduction.--
(1) Section 172 is amended by redesignating subsection (j)
as subsection (k) and by inserting after subsection (i) the
following new subsection:
``(j) No carryback of section 1400k Deduction Before Date of
Enactment.--No portion of the net operating loss for any taxable year
which is attributable to any commercial revitalization deduction
determined under section 1400K may be carried back to a taxable year
ending before the date of the enactment of section 1400K.''.
(2) Subparagraph (B) of section 48(a)(2) is amended by
inserting ``or commercial revitalization'' after
``rehabilitation'' each place it appears in the text and
heading.
(3) Subparagraph (C) of section 469(i)(3) is amended--
(A) by inserting ``or section 1400K'' after
``section 42''; and
(B) by inserting ``and commercial revitalization
deduction'' after ``credit'' in the heading.
(h) Clerical Amendments.--The table of subchapters for chapter 1 is
amended by adding at the end the following new item:
``Subchapter X. Renewal Communities.''.
SEC. 706. EVALUATION AND REPORTING REQUIREMENTS.
Not later than the close of the fourth calendar year after the year
in which the Secretary of Housing and Urban Development first
designates an area as a renewal community under section 1400E of the
Internal Revenue Code of 1986, and at the close of each fourth calendar
year thereafter, such Secretary shall prepare and submit to the
Congress a report on the effects of such designations in stimulating
the creation of new jobs, particularly for disadvantaged workers and
long-term unemployed individuals, and promoting the revitalization of
economically distressed areas.
Subtitle B--Farming Incentive
SEC. 711. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.
Any option to accelerate the receipt of any payment under a
production flexibility contract which is payable under the Federal
Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7200 et seq.),
as in effect on the date of the enactment of this Act, shall be
disregarded in determining the taxable year for which such payment is
properly includible in gross income for purposes of the Internal
Revenue Code of 1986.
Subtitle C--Oil and Gas Incentive
SEC. 721. 5-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE
TO OPERATING MINERAL INTERESTS OF INDEPENDENT OIL AND GAS
PRODUCERS.
(a) In General.--Paragraph (1) of section 172(b) (relating to years
to which loss may be carried) is amended by adding at the end the
following new subparagraph:
``(H) Losses on operating mineral interests of
independent oil and gas producers.--In the case of a
taxpayer--
``(i) which has an eligible oil and gas
loss (as defined in subsection (j)) for a
taxable year, and
``(ii) which is not an integrated oil
company (as defined in section 291(b)(4)),
such eligible oil and gas loss shall be a net operating
loss carryback to each of the 5 taxable years preceding
the taxable year of such loss.''
(b) Eligible Oil and Gas Loss.--Section 172 is amended by
redesignating subsection (j) as subsection (k) and by inserting after
subsection (i) the following new subsection:
``(j) Eligible Oil and Gas Loss.--For purposes of this section--
``(1) In general.--The term `eligible oil and gas loss'
means the lesser of--
``(A) the amount which would be the net operating
loss for the taxable year if only income and deductions
attributable to operating mineral interests (as defined
in section 614(d)) in oil and gas wells are taken into
account, or
``(B) the amount of the net operating loss for such
taxable year.
``(2) Coordination with subsection (b)(2).--For purposes of
applying subsection (b)(2), an eligible oil and gas loss for
any taxable year shall be treated in a manner similar to the
manner in which a specified liability loss is treated.
``(3) Election.--Any taxpayer entitled to a 5-year
carryback under subsection (b)(1)(H) from any loss year may
elect to have the carryback period with respect to such loss
year determined without regard to subsection (b)(1)(H).''
(c) Effective Date.--The amendments made by this section shall
apply to net operating losses for taxable years beginning after
December 31, 1998.
Subtitle D--Timber Incentive
SEC. 731. INCREASE IN MAXIMUM PERMITTED AMORTIZATION OF REFORESTATION
EXPENDITURES.
(a) In General.--Paragraph (1) of section 194(b) (relating to
amortization of reforestation expenditures) is amended by striking
``$10,000 ($5,000'' and inserting ``$25,000 ($12,500''.
(b) Effective Date.--The amendment made by this section shall apply
to additions to capital account made in taxable years beginning after
December 31, 1998.
Subtitle E--Steel Industry Incentive
SEC. 741. MINIMUM TAX RELIEF FOR STEEL INDUSTRY.
(a) In General.--Subsection (c) of section 53 (as amended by
section 302) is amended by adding at the end the following new
paragraph:
``(4) Steel companies.--In the case of a qualified
corporation (as defined in section 212(g)(1) of the Tax
Reform Act of 1986), in lieu of applying paragraph (2),
the limitation under paragraph (1) for any taxable year
beginning after December 31, 1998, shall be increased
(subject to the rule of the last sentence of paragraph
(2)) by 90 percent of the tentative minimum tax.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1998.
TITLE VIII--RELIEF FOR SMALL BUSINESSES
SEC. 801. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-
EMPLOYED INDIVIDUALS.
(a) In General.--Paragraph (1) of section 162(l) is amended to read
as follows:
``(1) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to 100 percent of the amount paid during the
taxable year for insurance which constitutes medical care for
the taxpayer, his spouse, and dependents.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1999.
SEC. 802. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) In General.--Paragraph (1) of section 179(b) (relating to
dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $30,000.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1999.
SEC. 803. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.
(a) In General.--Section 3301 (relating to rate of Federal
unemployment tax) is amended--
(1) by striking ``2007'' and inserting ``2004'', and
(2) by striking ``2008'' and inserting ``2005''.
(b) Effective Date.--The amendment made by this section shall apply
to calendar years beginning after the date of the enactment of this
Act.
SEC. 804. RESTORATION OF 80 PERCENT DEDUCTION FOR MEAL EXPENSES.
(a) In General.--Paragraph (1) of section 274(n) (relating to only
50 percent of meal and entertainment expenses allowed as deduction) is
amended by striking ``50 percent'' in the text and inserting ``the
allowable percentage''.
(b) Allowable Percentages.--Subsection (n) of section 274 is
amended by redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (2) the following
new paragraph:
``(2) Allowable percentage.--For purposes of paragraph (1),
the allowable percentage is--
``(A) in the case of amounts for items described in
paragraph (1)(B), 50 percent, and
``(B) in the case of expenses for food or
beverages, the percentage determined in accordance with
the following table:
``For taxable years beginning
The allowable
in calendar year--
percentage is--
2000 through 2003...................... 50
2004................................... 55
2005................................... 60
2006................................... 65
2007................................... 70
2008................................... 75
2009 and thereafter.................... 80.''
(b) Conforming Amendments.--
(1) The heading for subsection (n) of section 274 is
amended by striking ``50 Percent'' and inserting ``Limited
Percentages''.
(2) Subparagraph (A) of section 274(n)(4), as redesignated
by subsection (a), is amended by striking ``50 percent'' and
inserting ``the allowable percentage''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
TITLE IX--INTERNATIONAL TAX RELIEF
SEC. 901. INTEREST ALLOCATION RULES.
(a) Election to Allocate Interest on a Worldwide Basis.--Subsection
(e) of section 864 (relating to rules for allocating interest, etc.) is
amended by redesignating paragraphs (6) and (7) as paragraphs (7) and
(8), respectively, and by inserting after paragraph (5) the following
new paragraph:
``(6) Election to allocate interest on a worldwide basis.--
``(A) In general.--Except as provided in this
paragraph, this subsection (other than paragraph (7))
shall be applied by treating each worldwide affiliated
group for which an election under this paragraph is in
effect as an affiliated group.
``(B) Worldwide affiliated group.--For purposes of
this paragraph, the term `worldwide affiliated group'
means the group of corporations which consists of--
``(i) all corporations in an affiliated
group (as defined in paragraph (5)), and
``(ii) all foreign corporations (other than
a FSC, as defined in section 922(a)) with
respect to which corporations described in
clause (i) own stock meeting the ownership
requirements of section 957(a) (without regard
to stock considered as owned under section
958(b)).
``(C) Allocation.--
``(i) In general.--For purposes of
paragraph (1), only the applicable percentage
of the interest expense and assets of a foreign
corporation described in subparagraph (B)(ii)
shall be taken into account.
``(ii) Applicable percentage.--For purposes
of this paragraph, the term `applicable
percentage' means, with respect to any foreign
corporation, the percentage equal to the ratio
which the value of the stock in such
corporation taken into account under
subparagraph (B)(ii) bears to the aggregate
value of all stock in such corporation.
``(D) Treatment of foreign interest expense.--
Interest expense of members of an electing worldwide
affiliated group which is allocated to foreign source
income under this subsection shall be reduced (but not
below zero) by the applicable percentage of the
interest expense incurred by any foreign corporation in
the electing worldwide affiliated group to the extent
such interest would have been allocated and apportioned
to foreign source income of such corporation if this
subsection were applied to a group consisting of all
the foreign corporations in such affiliated group.
``(E) Election.--An election under this paragraph
with respect to any worldwide affiliated group may be
made only by the common parent of the affiliated group
referred to in subparagraph (B)(i) and may be made only
for the first taxable year beginning after December 31,
2001, in which a worldwide affiliated group exists
which includes such affiliated group and at least 1
corporation described in subparagraph (B)(ii). Such an
election, once made, shall apply to such parent and all
other corporations which are included in such worldwide
affiliated group for such taxable year and all
subsequent years unless revoked with the consent of the
Secretary.''.
(b) Election to Allocate Interest Within Financial Institution
Groups and Subsidiary Groups.--Section 864 is amended by redesignating
subsection (f) as subsection (g) and by inserting after subsection (e)
the following new subsection:
``(f) Election To Apply Subsection (e) on Basis of Financial
Institution Group and Subsidiary Groups.--
``(1) In general.--Subsection (e) (other than paragraph (7)
thereof) shall be applied--
``(A) as if the electing financial institution
group were a separate affiliated group, and
``(B) for purposes of allocating interest expense
with respect to qualified indebtedness of members of an
electing subsidiary group, as if each electing
subsidiary group were a separate affiliated group.
Subsection (e) shall apply to any such electing group in the
same manner as subsection (e) applies to the pre-election
affiliated group of which such electing group is a part.
``(2) Electing financial institution group.--For purposes
of this subsection--
``(A) In general.--The term `electing financial
institution group' means any group of corporations if--
``(i) such group consists only of all of
the financial corporations in the pre-election
affiliated group, and
``(ii) an election under this paragraph is
in effect for such group of corporations.
``(B) Financial corporation.--The term `financial
corporation' means any corporation if at least 80
percent of its gross income is income described in
section 904(d)(2)(C)(ii) and the regulations
thereunder. To the extent provided in regulations
prescribed by the Secretary, such term includes a bank
holding company (within the meaning of section 2(a) of
the Bank Holding Company Act of 1956).
``(C) Effect of certain transactions.--Rules
similar to the rules of paragraph (3)(D) shall apply to
transactions between any member of the electing
financial institution group and any member of the pre-
election affiliated group (other than a member of the
electing financial institution group).
``(D) Election.--An election under this paragraph
with respect to any financial institution group may be
made only by the common parent of the pre-election
affiliated group. Such an election, once made, shall
apply only to the taxable year for which made.
``(3) Electing subsidiary groups.--
``(A) In general.--The term `electing subsidiary
group' means any group of corporations if--
``(i) such group consists only of
corporations in the pre-election affiliated
group,
``(ii) such group includes--
``(I) a domestic corporation (which
is not the common parent of the pre-
election affiliated group or a member
of an electing financial institution
group) which incurs interest expense
with respect to qualified indebtedness,
and
``(II) every other corporation
(other than a member of an electing
financial institution group) which is
in the pre-election affiliated group
and which would be a member of an
affiliated group having such domestic
corporation as the common parent, and
``(iii) an election under this paragraph is
in effect for such group.
``(B) Equalization rule.--All interest expense of a
pre-election affiliated group (other than subgroup
interest expense) shall be treated as allocated to
foreign source income to the extent such expense does
not exceed the excess (if any) of--
``(i) the interest expense of the pre-
election affiliated group (including subgroup
interest expense) which would (but for any
election under this paragraph) be allocated to
foreign source income, over
``(ii) the subgroup interest expense
allocated to foreign source income.
For purposes of the preceding sentence, the subgroup
interest expense is the interest expense to which
subsection (e) applies separately by reason of
paragraph (1)(B).
``(C) Qualified indebtedness.--For purposes of this
subsection, the term `qualified indebtedness' means any
indebtedness of a domestic corporation--
``(i) which is held by an unrelated person,
and
``(ii) which is not guaranteed (or
otherwise supported) by any corporation which
is a member of the pre-election affiliated
group other than a corporation which is a
member of the electing subsidiary group.
For purposes of this subparagraph, the term `unrelated
person' means any person not bearing a relationship
specified in section 267(b) or 707(b)(1) to the
corporation.
``(D) Effect of certain transactions on qualified
indebtedness.--In the case of a corporation which is a
member of an electing subsidiary group, to the extent
that such corporation--
``(i) distributes dividends or makes other
distributions with respect to its stock after
the date of the enactment of this paragraph to
any member of the pre-election affiliated group
(other than to a member of the electing
subsidiary group) in excess of the greater of--
``(I) its average annual dividend
(expressed as a percentage of current
earnings and profits) during the 5-
taxable-year period ending with the
taxable year preceding the taxable
year, or
``(II) 25 percent of its average
annual earnings and profits for such 5
taxable year period, or
``(ii) deals with any person in any manner
not clearly reflecting the income of the
corporation (as determined under principles
similar to the principles of section 482),
an amount of qualified indebtedness equal to the excess
distribution or the understatement or overstatement of
income, as the case may be, shall be recharacterized
(for the taxable year and subsequent taxable years) for
purposes of this subsection as indebtedness which is
not qualified indebtedness. If a corporation has not
been in existence for 5 taxable years, this
subparagraph shall be applied with respect to the
period it was in existence.
``(E) Election.--An election under this paragraph
with respect to any electing subsidiary group may be
made only by the common parent of the pre-election
affiliated group. Such an election, once made, shall
apply only to the taxable year for which made. No
election may be made under this paragraph if the effect
of the election would be to have the same member of the
pre-election affiliated group included in more than 1
electing subsidiary group.
``(4) Pre-election affiliated group.--For purposes of this
subsection, the term `pre-election affiliated group' means,
with respect to a corporation, the affiliated group or electing
worldwide affiliated group of which such corporation would (but
for an election under this subsection) be a member for purposes
of applying subsection (e).
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out this subsection
and subsection (e), including regulations--
``(A) providing for the direct allocation of
interest expense in other circumstances where such
allocation would be appropriate to carry out the
purposes of this subsection,
``(B) preventing assets or interest expense from
being taken into account more than once, and
``(C) dealing with changes in members of any group
(through acquisitions or otherwise) treated under this
subsection as an affiliated group for purposes of
subsection (e).''
(c) Insurance Companies Included in Affiliated Groups.--Paragraph
(5) of section 864(e) is amended to read as follows:
``(5) Affiliated group.--The term `affiliated group' has
the meaning given such term by section 1504 (determined without
regard to paragraphs (2) and (4) of section 1504(b)).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 902. LOOK-THRU RULES TO APPLY TO DIVIDENDS FROM NONCONTROLLED
SECTION 902 CORPORATIONS.
(a) In General.--Section 904(d)(4) (relating to application of
look-thru rules to dividends from noncontrolled section 902
corporations) is amended to read as follows:
``(4) Look-thru applies to dividends from noncontrolled
section 902 corporations.--
``(A) In general.--For purposes of this subsection,
any dividend from a noncontrolled section 902
corporation with respect to the taxpayer shall be
treated as income in a separate category in proportion
to the ratio of--
``(i) the portion of earnings and profits
attributable to income in such category, to
``(ii) the total amount of earnings and
profits.
``(B) Special rules.--For purposes of this
paragraph--
``(i) In general.--Rules similar to the
rules of paragraph (3)(F) shall apply; except
that the term `separate category' shall include
the category of income described in paragraph
(1)(I).
``(ii) Earnings and profits.--
``(I) In general.--The rules of
section 316 shall apply.
``(II) Regulations.--The Secretary
may prescribe regulations regarding the
treatment of distributions out of
earnings and profits for periods before
the taxpayer's acquisition of the stock
to which the distributions relate.
``(iii) Dividends not allocable to separate
category.--The portion of any dividend from a
noncontrolled section 902 corporation which is
not treated as income in a separate category
under subparagraph (A) shall be treated as a
dividend to which subparagraph (A) does not
apply.
``(iv) Look-thru with respect to
carryforwards of credit.--Rules similar to
subparagraph (A) also shall apply to any
carryforward under subsection (c) from a
taxable year beginning before January 1, 2002,
of tax allocable to a dividend from a
noncontrolled section 902 corporation with
respect to the taxpayer.''
(b) Conforming Amendments.--
(1) Subparagraph (E) of section 904(d)(1), as in effect
both before and after the amendments made by section 1105 of
the Taxpayer Relief Act of 1997, is hereby repealed.
(2) Section 904(d)(2)(C)(iii), as so in effect, is amended
by striking subclause (II) and by redesignating subclause (III)
as subclause (II).
(3) The last sentence of section 904(d)(2)(D), as so in
effect, is amended to read as follows: ``Such term does not
include any financial services income.''
(4) Section 904(d)(2)(E) is amended by striking clauses
(ii) and (iv) and by redesignating clause (iii) as clause (ii).
(5) Section 904(d)(3)(F) is amended by striking ``(D), or
(E)'' and inserting ``or (D)''.
(6) Section 864(d)(5)(A)(i) is amended by striking
``(C)(iii)(III)'' and inserting ``(C)(iii)(II)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE TRANSPORTATION INCOME.
(a) In General.--Section 954(g)(1) (defining foreign base company
oil related income) is amended by striking ``or'' at the end of
subparagraph (A), by striking the period at the end of subparagraph (B)
and inserting ``, or'', and by inserting after subparagraph (B) the
following new subparagraph:
``(C) the pipeline transportation of oil or gas
within such foreign country.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of controlled foreign corporations beginning after
December 31, 2001, and taxable years of United States shareholders with
or within which such taxable years of controlled foreign corporations
end.
SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANSMISSION OF HIGH
VOLTAGE ELECTRICITY.
(a) In General.--Paragraph (2) of section 954(e) (relating to
foreign base company services income) is amended by striking ``or'' at
the end of subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, or'', and by inserting after
subparagraph (B) the following new subparagraph:
``(C) the transmission of high voltage
electricity.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of controlled foreign corporations beginning after
December 31, 2001, and taxable years of United States shareholders with
or within which such taxable years of controlled foreign corporations
end.
SEC. 905. RECHARACTERIZATION OF OVERALL DOMESTIC LOSS.
(a) General Rule.--Section 904 is amended by redesignating
subsections (g), (h), (i), (j), and (k) as subsections (h), (i), (j),
(k), and (l), respectively, and by inserting after subsection (f) the
following new subsection:
``(g) Recharacterization of Overall Domestic Loss.--
``(1) General rule.--For purposes of this subpart and
section 936, in the case of any taxpayer who sustains an
overall domestic loss for any taxable year beginning after
December 31, 2004, that portion of the taxpayer's taxable
income from sources within the United States for each
succeeding taxable year which is equal to the lesser of--
``(A) the amount of such loss (to the extent not
used under this paragraph in prior taxable years), or
``(B) 50 percent of the taxpayer's taxable income
from sources within the United States for such
succeeding taxable year,
shall be treated as income from sources without the United
States (and not as income from sources within the United
States).
``(2) Overall domestic loss defined.--For purposes of this
subsection--
``(A) In general.--The term `overall domestic loss'
means any domestic loss to the extent such loss offsets
taxable income from sources without the United States
for the taxable year or for any preceding taxable year
by reason of a carryback. For purposes of the preceding
sentence, the term `domestic loss' means the amount by
which the gross income for the taxable year from
sources within the United States is exceeded by the sum
of the deductions properly apportioned or allocated
thereto (determined without regard to any carryback
from a subsequent taxable year).
``(B) Taxpayer must have elected foreign tax credit
for year of loss.--The term `overall domestic loss'
shall not include any loss for any taxable year unless
the taxpayer chose the benefits of this subpart for
such taxable year.
``(3) Characterization of subsequent income.--
``(A) In general.--Any income from sources within
the United States that is treated as income from
sources without the United States under paragraph (1)
shall be allocated among and increase the income
categories in proportion to the loss from sources
within the United States previously allocated to those
income categories.
``(B) Income category.--For purposes of this
paragraph, the term `income category' has the meaning
given such term by subsection (f)(5)(E)(i).
``(4) Coordination with subsection (f).--The Secretary
shall prescribe such regulations as may be necessary to
coordinate the provisions of this subsection with the
provisions of subsection (f).''
(b) Conforming Amendments.--
(1) Section 535(d)(2) is amended by striking ``section
904(g)(6)'' and inserting ``section 904(h)(6)''.
(2) Subparagraph (A) of section 936(a)(2) is amended by
striking ``section 904(f)'' and inserting ``subsections (f) and
(g) of section 904''.
(c) Effective Date.--The amendments made by this section shall
apply to losses for taxable years beginning after December 31, 2004.
SEC. 906. TREATMENT OF MILITARY PROPERTY OF FOREIGN SALES CORPORATIONS.
(a) In General.--Section 923(a) (defining exempt foreign trade
income) is amended by striking paragraph (5) and by redesignating
paragraph (6) as paragraph (5).
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2001.
SEC. 907. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED INVESTMENT
COMPANIES.
(a) Treatment of Certain Dividends.--
(1) Nonresident alien individuals.--Section 871 (relating
to tax on nonresident alien individuals) is amended by
redesignating subsection (k) as subsection (l) and by inserting
after subsection (j) the following new subsection:
``(k) Exemption for Certain Dividends of Regulated Investment
Companies.--
``(1) Interest-related dividends.--
``(A) In general.--Except as provided in
subparagraph (B), no tax shall be imposed under
paragraph (1)(A) of subsection (a) on any interest-
related dividend received from a regulated investment
company.
``(B) Exceptions.--Subparagraph (A) shall not
apply--
``(i) to any interest-related dividend
received from a regulated investment company by
a person to the extent such dividend is
attributable to interest (other than interest
described in subparagraph (E) (i) or (iii))
received by such company on indebtedness issued
by such person or by any corporation or
partnership with respect to which such person
is a 10-percent shareholder,
``(ii) to any interest-related dividend
with respect to stock of a regulated investment
company unless the person who would otherwise
be required to deduct and withhold tax from
such dividend under chapter 3 receives a
statement (which meets requirements similar to
the requirements of subsection (h)(5)) that the
beneficial owner of such stock is not a United
States person, and
``(iii) to any interest-related dividend
paid to any person within a foreign country (or
any interest-related dividend payment addressed
to, or for the account of, persons within such
foreign country) during any period described in
subsection (h)(6) with respect to such country.
Clause (iii) shall not apply to any dividend with
respect to any stock the holding period of which begins
on or before the date of the publication of the
Secretary's determination under subsection (h)(6).
``(C) Interest-related dividend.--For purposes of
this paragraph, an interest-related dividend is any
dividend (or part thereof) which is designated by the
regulated investment company as an interest-related
dividend in a written notice mailed to its shareholders
not later than 60 days after the close of its taxable
year. If the aggregate amount so designated with
respect to a taxable year of the company (including
amounts so designated with respect to dividends paid
after the close of the taxable year described in
section 855) is greater than the qualified net interest
income of the company for such taxable year, the
portion of each distribution which shall be an
interest-related dividend shall be only that portion of
the amounts so designated which such qualified net
interest income bears to the aggregate amount so
designated.
``(D) Qualified net interest income.--For purposes
of subparagraph (C), the term `qualified net interest
income' means the qualified interest income of the
regulated investment company reduced by the deductions
properly allocable to such income.
``(E) Qualified interest income.--For purposes of
subparagraph (D), the term `qualified interest income'
means the sum of the following amounts derived by the
regulated investment company from sources within the
United States:
``(i) Any amount includible in gross income
as original issue discount (within the meaning
of section 1273) on an obligation payable 183
days or less from the date of original issue
(without regard to the period held by the
company).
``(ii) Any interest includible in gross
income (including amounts recognized as
ordinary income in respect of original issue
discount or market discount or acquisition
discount under part V of subchapter P and such
other amounts as regulations may provide) on an
obligation which is in registered form; except
that this clause shall not apply to--
``(I) any interest on an obligation
issued by a corporation or partnership
if the regulated investment company is
a 10-percent shareholder in such
corporation or partnership, and
``(II) any interest which is
treated as not being portfolio interest
under the rules of subsection (h)(4).
``(iii) Any interest referred to in
subsection (i)(2)(A) (without regard to the
trade or business of the regulated investment
company).
``(iv) Any interest-related dividend
includable in gross income with respect to
stock of another regulated investment company.
Such term includes any interest derived by the
regulated investment company from sources outside the
United States other than interest that is subject to a
tax imposed by a foreign jurisdiction if the amount of
such tax is reduced (or eliminated) by a treaty with
the United States.
``(F) 10-percent shareholder.--For purposes of this
paragraph, the term `10-percent shareholder' has the
meaning given such term by subsection (h)(3)(B).
``(2) Short-term capital gain dividends.--
``(A) In general.--Except as provided in
subparagraph (B), no tax shall be imposed under
paragraph (1)(A) of subsection (a) on any short-term
capital gain dividend received from a regulated
investment company.
``(B) Exception for aliens taxable under subsection
(a)(2).--Subparagraph (A) shall not apply in the case
of any nonresident alien individual subject to tax
under subsection (a)(2).
``(C) Short-term capital gain dividend.--For
purposes of this paragraph, a short-term capital gain
dividend is any dividend (or part thereof) which is
designated by the regulated investment company as a
short-term capital gain dividend in a written notice
mailed to its shareholders not later than 60 days after
the close of its taxable year. If the aggregate amount
so designated with respect to a taxable year of the
company (including amounts so designated with respect
to dividends paid after the close of the taxable year
described in section 855) is greater than the qualified
short-term gain of the company for such taxable year,
the portion of each distribution which shall be a
short-term capital gain dividend shall be only that
portion of the amounts so designated which such
qualified short-term gain bears to the aggregate amount
so designated.
``(D) Qualified short-term gain.--For purposes of
subparagraph (C), the term `qualified short-term gain'
means the excess of the net short-term capital gain of
the regulated investment company for the taxable year
over the net long-term capital loss (if any) of such
company for such taxable year. For purposes of this
subparagraph--
``(i) the net short-term capital gain of
the regulated investment company shall be
computed by treating any short-term capital
gain dividend includible in gross income with
respect to stock of another regulated
investment company as a short-term capital
gain, and
``(ii) the excess of the net short-term
capital gain for a taxable year over the net
long-term capital loss for a taxable year (to
which an election under section 4982(e)(4) does
not apply) shall be determined without regard
to any net capital loss or net short-term
capital loss attributable to transactions after
October 31 of such year, and any such net
capital loss or net short-term capital loss
shall be treated as arising on the 1st day of
the next taxable year.
To the extent provided in regulations, clause (ii)
shall apply also for purposes of computing the taxable
income of the regulated investment company.''
(2) Foreign corporations.--Section 881 (relating to tax on
income of foreign corporations not connected with United States
business) is amended by redesignating subsection (e) as
subsection (f) and by inserting after subsection (d) the
following new subsection:
``(e) Tax Not To Apply to Certain Dividends of Regulated Investment
Companies.--
``(1) Interest-related dividends.--
``(A) In general.--Except as provided in
subparagraph (B), no tax shall be imposed under
paragraph (1) of subsection (a) on any interest-related
dividend (as defined in section 871(k)(1)) received
from a regulated investment company.
``(B) Exception.--Subparagraph (A) shall not
apply--
``(i) to any dividend referred to in
section 871(k)(1)(B), and
``(ii) to any interest-related dividend
received by a controlled foreign corporation
(within the meaning of section 957(a)) to the
extent such dividend is attributable to
interest received by the regulated investment
company from a person who is a related person
(within the meaning of section 864(d)(4)) with
respect to such controlled foreign corporation.
``(C) Treatment of dividends received by controlled
foreign corporations.--The rules of subsection
(c)(5)(A) shall apply to any interest-related dividend
received by a controlled foreign corporation (within
the meaning of section 957(a)) to the extent such
dividend is attributable to interest received by the
regulated investment company which is described in
clause (ii) of section 871(k)(1)(E) (and not described
in clause (i) or (iii) of such section).
``(2) Short-term capital gain dividends.--No tax shall be
imposed under paragraph (1) of subsection (a) on any short-term
capital gain dividend (as defined in section 871(k)(2))
received from a regulated investment company.''
(3) Withholding taxes.--
(A) Section 1441(c) (relating to exceptions) is
amended by adding at the end the following new
paragraph:
``(12) Certain dividends received from regulated investment
companies.--
``(A) In general.--No tax shall be required to be
deducted and withheld under subsection (a) from any
amount exempt from the tax imposed by section
871(a)(1)(A) by reason of section 871(k).
``(B) Special rule.--For purposes of subparagraph
(A), clause (i) of section 871(k)(1)(B) shall not apply
to any dividend unless the regulated investment company
knows that such dividend is a dividend referred to in
such clause. A similar rule shall apply with respect to
the exception contained in section 871(k)(2)(B).''
(B) Section 1442(a) (relating to withholding of tax
on foreign corporations) is amended--
(i) by striking ``and the reference in
section 1441(c)(10)'' and inserting ``the
reference in section 1441(c)(10)'', and
(ii) by inserting before the period at the
end the following: ``, and the references in
section 1441(c)(12) to sections 871(a) and
871(k) shall be treated as referring to
sections 881(a) and 881(e) (except that for
purposes of applying subparagraph (A) of
section 1441(c)(12), as so modified, clause
(ii) of section 881(e)(1)(B) shall not apply to
any dividend unless the regulated investment
company knows that such dividend is a dividend
referred to in such clause)''.
(b) Estate Tax Treatment of Interest in Certain Regulated
Investment Companies.--Section 2105 (relating to property without the
United States for estate tax purposes) is amended by adding at the end
the following new subsection:
``(d) Stock in a RIC.--
``(1) In general.--For purposes of this subchapter, stock
in a regulated investment company (as defined in section 851)
owned by a nonresident not a citizen of the United States shall
not be deemed property within the United States in the
proportion that, at the end of the quarter of such investment
company's taxable year immediately preceding a decedent's date
of death (or at such other time as the Secretary may designate
in regulations), the assets of the investment company that were
qualifying assets with respect to the decedent bore to the
total assets of the investment company.
``(2) Qualifying assets.--For purposes of this subsection,
qualifying assets with respect to a decedent are assets that,
if owned directly by the decedent, would have been--
``(A) amounts, deposits, or debt obligations
described in subsection (b) of this section,
``(B) debt obligations described in the last
sentence of section 2104(c), or
``(C) other property not within the United
States.''
(c) Treatment of Regulated Investment Companies Under Section
897.--
(1) Paragraph (1) of section 897(h) is amended by striking
``REIT'' each place it appears and inserting ``qualified
investment entity''.
(2) Paragraphs (2) and (3) of section 897(h) are amended to
read as follows:
``(2) Sale of stock in domestically controlled entity not
taxed.--The term `United States real property interest' does
not include any interest in a domestically controlled qualified
investment entity.
``(3) Distributions by domestically controlled qualified
investment entities.--In the case of a domestically controlled
qualified investment entity, rules similar to the rules of
subsection (d) shall apply to the foreign ownership percentage
of any gain.''
(3) Subparagraphs (A) and (B) of section 897(h)(4) are
amended to read as follows:
``(A) Qualified investment entity.--The term
`qualified investment entity' means any real estate
investment trust and any regulated investment company.
``(B) Domestically controlled.--The term
`domestically controlled qualified investment entity'
means any qualified investment entity in which at all
times during the testing period less than 50 percent in
value of the stock was held directly or indirectly by
foreign persons.''
(4) Subparagraphs (C) and (D) of section 897(h)(4) are each
amended by striking ``REIT'' and inserting ``qualified
investment entity''.
(5) The subsection heading for subsection (h) of section
897 is amended by striking ``REITS'' and inserting ``Certain
Investment Entities''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
dividends with respect to taxable years of regulated investment
companies beginning after December 31, 2004.
(2) Estate tax treatment.--The amendment made by subsection
(b) shall apply to estates of decedents dying after December
31, 2004.
(3) Certain other provisions.--The amendments made by
subsection (c) (other than paragraph (1) thereof) shall take
effect on January 1, 2005.
SEC. 908. REPEAL OF SPECIAL RULES FOR APPLYING FOREIGN TAX CREDIT IN
CASE OF FOREIGN OIL AND GAS INCOME.
(a) In General.--Section 907 (relating to special rules in case of
foreign oil and gas income) is repealed.
(b) Conforming Amendments.--
(1) Each of the following provisions are amended by
striking ``907,'':
(A) Section 245(a)(10).
(B) Section 865(h)(1)(B).
(C) Section 904(d)(1).
(D) Section 904(g)(10)(A).
(2) Section 904(f)(5)(E)(iii) is amended by inserting ``,
as in effect before its repeal by the Financial Freedom Act of
1999'' after ``section 907(c)(4)(B)''.
(3) Section 954(g)(1) is amended by inserting ``, as in
effect before its repeal by the Financial Freedom Act of 1999''
after ``907(c)''.
(4) Section 6501(i) is amended--
(A) by striking ``, or under section 907(f)
(relating to carryback and carryover of disallowed oil
and gas extraction taxes)'', and
(B) by striking ``or 907(f)''.
(5) The table of sections for subpart A of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 907.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
SEC. 909. STUDY OF PROPER TREATMENT OF EUROPEAN UNION UNDER SAME
COUNTRY EXCEPTIONS.
(a) Study.--The Secretary of the Treasury or the Secretary's
delegate shall conduct a study on the feasibility of treating all
countries included in the European Union as 1 country for purposes of
applying the same country exceptions under subpart F of part III of
subchapter N of chapter 1 of the Internal Revenue Code of 1986.
(b) Report.--Not later than 6 months after the date of the
enactment of this Act, the Secretary of the Treasury shall report to
the Committee on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate the results of the study conducted
under subsection (a), including recommendations (if any) for
legislation.
SEC. 910. APPLICATION OF DENIAL OF FOREIGN TAX CREDIT WITH RESPECT TO
CERTAIN FOREIGN COUNTRIES.
(a) In General.--Clause (ii) of section 901(j)(2)(B) (relating to
denial of foreign tax credit, etc., with respect to certain foreign
countries) is amended by inserting before the period ``or, if earlier,
ending on the date that the President determines that the application
of this subsection to such foreign country is no longer in the national
interests of the United States''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 911. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDENTIAL TAXPAYER
INFORMATION.
(a) In General.--
(1) Treatment as return information.--Paragraph (2) of
section 6103(b) (defining return information) is amended by
striking ``and'' at the end of subparagraph (A), by inserting
``and'' at the end of subparagraph (B), and by inserting after
subparagraph (B) the following new subparagraph:
``(C) any advance pricing agreement entered into by
a taxpayer and the Secretary and any background
information related to such agreement or any
application for an advance pricing agreement,''.
(2) Exception from public inspection as written
determination.--Paragraph (1) of section 6110(b) (defining
written determination) is amended by adding at the end the
following new sentence: ``Such term shall not include any
advance pricing agreement entered into by a taxpayer and the
Secretary and any background information related to such
agreement or any application for an advance pricing
agreement.''.
(3) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act.
(b) Annual Report Regarding Advance Pricing Agreements.--
(1) In general.--Not later than 90 days after the end of
each calendar year, the Secretary of the Treasury shall prepare
and publish a report regarding advance pricing agreements.
(2) Contents of report.--The report shall include the
following for the calendar year to which such report relates:
(A) Information about the structure, composition,
and operation of the advance pricing agreement program
office.
(B) A copy of each model advance pricing agreement.
(C) The number of--
(i) applications filed during such calendar
year for advanced pricing agreements;
(ii) advance pricing agreements executed
cumulatively to date and during such calendar
year;
(iii) renewals of advanced pricing
agreements issued;
(iv) pending requests for advance pricing
agreements;
(v) pending renewals of advance pricing
agreements;
(vi) for each of the items in clauses (ii)
through (v), the number that are unilateral,
bilateral, and multilateral, respectively;
(vii) advance pricing agreements revoked or
canceled, and the number of withdrawals from
the advance pricing agreement program; and
(viii) advanced pricing agreements
finalized or renewed by industry.
(D) General descriptions of--
(i) the nature of the relationships between
the related organizations, trades, or
businesses covered by advance pricing
agreements;
(ii) the covered transactions and the
business functions performed and risks assumed
by such organizations, trades, or businesses;
(iii) the related organizations, trades, or
businesses whose prices or results are tested
to determine compliance with transfer pricing
methodologies prescribed in advanced pricing
agreements;
(iv) methodologies used to evaluate tested
parties and transactions and the circumstances
leading to the use of those methodologies;
(v) critical assumptions made and sources
of comparables used;
(vi) comparable selection criteria and the
rationale used in determining such criteria;
(vii) the nature of adjustments to
comparables or tested parties;
(viii) the nature of any ranges agreed to,
including information regarding when no range
was used and why, when interquartile ranges
were used, and when there was a statistical
narrowing of the comparables;
(ix) adjustment mechanisms provided to
rectify results that fall outside of the agreed
upon advance pricing agreement range;
(x) the various term lengths for advance
pricing agreements, including rollback years,
and the number of advance pricing agreements
with each such term length;
(xi) the nature of documentation required;
and
(xii) approaches for sharing of currency or
other risks.
(E) Statistics regarding the amount of time taken
to complete new and renewal advance pricing agreements.
(3) Confidentiality.--The reports required by this
subsection shall be treated as authorized by the Internal
Revenue Code of 1986 for purposes of section 6103 of such Code,
but the reports shall not include information--
(A) which would not be permitted to be disclosed
under section 6110(c) of such Code if such report were
a written determination as defined in section 6110 of
such Code, or
(B) which can be associated with, or otherwise
identify, directly or indirectly, a particular
taxpayer.
(4) First report.--The report for calendar year 1999 shall
include prior calendar years after 1990.
(c) User Fee.--Section 7527, as added by title XV of this Act, is
amended by redesignating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new subsection:
``(c) Advance Pricing Agreements.--
``(1) In general.--In addition to any fee otherwise imposed
under this section, the fee imposed for requests for advance
pricing agreements shall be increased by $500.
``(2) Reduced fee for small businesses.--The Secretary
shall provide an appropriate reduction in the amount imposed by
reason of paragraph (1) for requests for advance pricing
agreements for small businesses.''
(d) Regulations.--The Secretary of the Treasury or the Secretary's
delegate shall prescribe such regulations as may be necessary or
appropriate to carry out the purposes of section 6103(b)(2)(C), and the
last sentence of section 6110(b)(1), of the Internal Revenue Code of
1986, as added by this section.
SEC. 912. INCREASE IN DOLLAR LIMITATION ON SECTION 911 EXCLUSION.
(a) General Rule.--The table contained in clause (i) of section
911(b)(2)(D) is amended to read as follows:
``For calendar year-- The exclusion amount is--
2000.......................................... $76,000
2001.......................................... 78,000
2002.......................................... 80,000
2003.......................................... 83,000
2004.......................................... 86,000
2005.......................................... 89,000
2006.......................................... 92,000
2007 and thereafter........................... 95,000.''
(b) Conforming Amendment.--Clause (ii) of section 911(b)(2)(D) is
amended by striking ``$80,000'' and inserting ``$95,000''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
TITLE X--PROVISIONS RELATING TO TAX-EXEMPT ORGANIZATIONS
SEC. 1001. EXEMPTION FROM INCOME TAX FOR STATE-CREATED ORGANIZATIONS
PROVIDING PROPERTY AND CASUALTY INSURANCE FOR PROPERTY
FOR WHICH SUCH COVERAGE IS OTHERWISE UNAVAILABLE.
(a) In General.--Subsection (c) of section 501 (relating to
exemption from tax on corporations, certain trusts, etc.) is amended by
adding at the end the following new paragraph:
``(28)(A) Any association created before January 1, 1999,
by State law and organized and operated exclusively to provide
property and casualty insurance coverage for property located
within the State for which the State has determined that
coverage in the authorized insurance market is limited or
unavailable at reasonable rates, if--
``(i) no part of the net earnings of which inures
to the benefit of any private shareholder or
individual,
``(ii) except as provided in clause (v), no part of
the assets of which may be used for, or diverted to,
any purpose other than--
``(I) to satisfy, in whole or in part, the
liability of the association for, or with
respect to, claims made on policies written by
the association,
``(II) to invest in investments authorized
by applicable law, or
``(III) to pay reasonable and necessary
administration expenses in connection with the
establishment and operation of the association
and the processing of claims against the
association,
``(iii) the State law governing the association
permits the association to levy assessments on property
and casualty insurance policyholders with insurable
interests in property located in the State to fund
deficits of the association, including the creation of
reserves,
``(iv) the plan of operation of the association is
subject to approval by the chief executive officer or
other executive branch official of the State, by the
State legislature, or both, and
``(v) the assets of the association revert upon
dissolution to the State, the State's designee, or an
entity designated by the State law governing the
association, or State law does not permit the
dissolution of the association.
``(B)(i) An entity described in clause (ii) shall be
disregarded as a separate entity and treated as part of the
association described in subparagraph (A) from which it
receives remittances described in clause (ii) if an election is
made within 30 days after the date that such association is
determined to be exempt from tax.
``(ii) An entity is described in this clause if it is an
entity or fund created before January 1, 1999, pursuant to
State law and organized and operated exclusively to receive,
hold, and invest remittances from an association described in
subparagraph (A) and exempt from tax under subsection (a) and
to make disbursements to pay claims on insurance contracts
issued by such association.
``(C) Subparagraph (A) shall not apply to an association
for any taxable year if the association's surplus income for
such year exceeds 15 percent of the total coverage in force
under insurance contracts issued by such association and
outstanding as of the close of the taxable year.''
(b) Transitional Rule.--No income or gain shall be recognized by an
association as a result of a change in status to that of an association
described by section 501(c)(28) of the Internal Revenue Code of 1986,
as amended by subsection (a).
(c) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1999.
SEC. 1002. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN FUNDS.
(a) In General.--Paragraph (1) of section 648 of the Tax Reform Act
of 1984 is amended to read as follows:
``(1) such securities or obligations are held in a fund--
``(A) which, except to the extent of the investment
earnings on such securities or obligations, cannot be
used, under State constitutional or statutory
restrictions continuously in effect since October 9,
1969, through the date of issue of the bond issue, to
pay debt service on the bond issue or to finance the
facilities that are to be financed with the proceeds of
the bonds, or
``(B) 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,''.
(b) Conforming Amendment.--Paragraph (3) of such section is amended
by striking ``the investment earnings of'' and inserting
``distributions from''.
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 2000.
SEC. 1003. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND
ENDOWMENT CONTRACTS.
(a) In General.--Subsection (f) of section 170 (relating to
disallowance of deduction in certain cases and special rules) is
amended by adding at the end the following new paragraph:
``(10) Split-dollar life insurance, annuity, and endowment
contracts.--
``(A) In general.--Nothing in this section or in
section 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2),
or 2522 shall be construed to allow a deduction, and no
deduction shall be allowed, for any transfer to or for
the use of an organization described in subsection (c)
if in connection with such transfer--
``(i) the organization directly or
indirectly pays, or has previously paid, any
premium on any personal benefit contract with
respect to the transferor, or
``(ii) there is an understanding or
expectation that any person will directly or
indirectly pay any premium on any personal
benefit contract with respect to the
transferor.
``(B) Personal benefit contract.--For purposes of
subparagraph (A), the term `personal benefit contract'
means, with respect to the transferor, any life
insurance, annuity, or endowment contract if any direct
or indirect beneficiary under such contract is the
transferor, any member of the transferor's family, or
any other person (other than an organization described
in subsection (c)) designated by the transferor.
``(C) Application to charitable remainder trusts.--
In the case of a transfer to a trust referred to in
subparagraph (E), references in subparagraphs (A) and
(F) to an organization described in subsection (c)
shall be treated as a reference to such trust.
``(D) Exception for certain annuity contracts.--If,
in connection with a transfer to or for the use of an
organization described in subsection (c), such
organization incurs an obligation to pay a charitable
gift annuity (as defined in section 501(m)) and such
organization purchases any annuity contract to fund
such obligation, persons receiving payments under the
charitable gift annuity shall not be treated for
purposes of subparagraph (B) as indirect beneficiaries
under such contract if--
``(i) such organization possesses all of
the incidents of ownership under such contract,
``(ii) such organization is entitled to all
the payments under such contract, and
``(iii) the timing and amount of payments
under such contract are substantially the same
as the timing and amount of payments to each
such person under such obligation (as such
obligation is in effect at the time of such
transfer).
``(E) Exception for certain contracts held by
charitable remainder trusts.--A person shall not be
treated for purposes of subparagraph (B) as an indirect
beneficiary under any life insurance, annuity, or
endowment contract held by a charitable remainder
annuity trust or a charitable remainder unitrust (as
defined in section 664(d)) solely by reason of being
entitled to any payment referred to in paragraph (1)(A)
or (2)(A) of section 664(d) if--
``(i) such trust possesses all of the
incidents of ownership under such contract, and
``(ii) such trust is entitled to all the
payments under such contract.
``(F) Excise tax on premiums paid.--
``(i) In general.--There is hereby imposed
on any organization described in subsection (c)
an excise tax equal to the premiums paid by
such organization on any life insurance,
annuity, or endowment contract if the payment
of premiums on such contract is in connection
with a transfer for which a deduction is not
allowable under subparagraph (A), determined
without regard to when such transfer is made.
``(ii) Payments by other persons.--For
purposes of clause (i), payments made by any
other person pursuant to an understanding or
expectation referred to in subparagraph (A)
shall be treated as made by the organization.
``(iii) Reporting.--Any organization on
which tax is imposed by clause (i) with respect
to any premium shall file an annual return
which includes--
``(I) the amount of such premiums
paid during the year and the name and
TIN of each beneficiary under the
contract to which the premium relates,
and
``(II) such other information as
the Secretary may require.
The penalties applicable to returns required
under section 6033 shall apply to returns
required under this clause. Returns required
under this clause shall be furnished at such
time and in such manner as the Secretary shall
by forms or regulations require.
``(iv) Certain rules to apply.--The tax
imposed by this subparagraph shall be treated
as imposed by chapter 42 for purposes of this
title other than subchapter B of chapter 42.
``(G) Special rule where state requires
specification of charitable gift annuitant in
contract.--In the case of an obligation to pay a
charitable gift annuity referred to in subparagraph (D)
which is entered into under the laws of a State which
requires, in order for the charitable gift annuity to
be exempt from insurance regulation by such State, that
each beneficiary under the charitable gift annuity be
named as a beneficiary under an annuity contract issued
by an insurance company authorized to transact business
in such State, the requirements of clauses (i) and (ii)
of subparagraph (D) shall be treated as met if--
``(i) such State law requirement was in
effect on February 8, 1999,
``(ii) each such beneficiary under the
charitable gift annuity is a bona fide resident
of such State at the time the obligation to pay
a charitable gift annuity is entered into, and
``(iii) the only persons entitled to
payments under such contract are persons
entitled to payments as beneficiaries under
such obligation on the date such obligation is
entered into.
``(H) Member of family.--For purposes of this
paragraph, an individual's family consists of the
individual's grandparents, the grandparents of such
individual's spouse, the lineal descendants of such
grandparents, and any spouse of such a lineal
descendant.
``(I) Regulations.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this paragraph, including
regulations to prevent the avoidance of such
purposes.''
(b) Effective Date.--
(1) In general.--Except as otherwise provided in this
section, the amendment made by this section shall apply to
transfers made after February 8, 1999.
(2) Excise tax.--Except as provided in paragraph (3) of
this subsection, section 170(f)(10)(F) of the Internal Revenue
Code of 1986 (as added by this section) shall apply to premiums
paid after the date of the enactment of this Act.
(3) Reporting.--Clause (iii) of such section 170(f)(10)(F)
shall apply to premiums paid after February 8, 1999 (determined
as if the tax imposed by such section applies to premiums paid
after such date).
SEC. 1004. EXEMPTION PROCEDURE FROM TAXES ON SELF-DEALING.
(a) In General.--Subsection (d) of section 4941 (relating to taxes
on self-dealing) is amended by adding at the end the following new
paragraph:
``(3) Special exemption.--The Secretary shall establish an
exemption procedure for purposes of this subsection. Pursuant
to such procedure, the Secretary may grant a conditional or
unconditional exemption of any disqualified person or
transaction or class of disqualified persons or transactions,
from all or part of the restrictions imposed by paragraph (1).
The Secretary may not grant an exemption under this paragraph
unless he finds that such exemption is--
``(A) administratively feasible,
``(B) in the interests of the private foundation,
and
``(C) protective of the rights of the private
foundation.
Before granting an exemption under this paragraph, the
Secretary shall require adequate notice to be given to
interested persons and shall publish notice in the Federal
Register of the pendency of such exemption and shall afford
interested persons an opportunity to present views.''.
(b) Effective Date.--The amendment made by this section shall apply
to transactions occurring after the date of the enactment of this Act.
SEC. 1005. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-EXEMPT
ORGANIZATIONS.
(a) In General.--Subsection (a) of section 7428 (relating to
creation of remedy) is amended--
(1) in subparagraph (B) by inserting after ``509(a))'' the
following: ``or as a private operating foundation (as defined
in section 4942(j)(3))'', and
(2) by amending subparagraph (C) to read as follows:
``(C) with respect to the initial qualification or
continuing qualification of an organization as an
organization described in section 501(c) (other than
paragraph (3)) which is exempt from tax under section
501(a), or''.
(b) Court Jurisdiction.--Subsection (a) of section 7428 is amended
in the material following paragraph (2) by striking ``United States Tax
Court, the United States Claims Court, or the district court of the
United States for the District of Columbia'' and inserting the
following: ``United States Tax Court (in the case of any such
determination or failure) or the United States Claims Court or the
district court of the United States for the District of Columbia (in
the case of a determination or failure with respect to an issue
referred to in subparagraph (A) or (B) of paragraph (1)),''.
(c) Effective Date.--The amendments made by this section shall
apply to pleadings filed with respect to determinations (or requests
for determinations) made after the date of the enactment of this Act.
SEC. 1006. MODIFICATIONS TO SECTION 512(B)(13).
(a) In General.--Paragraph (13) of section 512(b) is amended by
redesignating subparagraph (E) as subparagraph (F) and by inserting
after subparagraph (D) the following new paragraph:
``(E) Paragraph to apply only to excess payments.--
``(i) In general.--Subparagraph (A) shall
apply only to the portion of a specified
payment received by the controlling
organization that exceeds the amount which
would have been paid 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
such excess.''
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to payments received or accrued after December 31, 1999.
(2) Payments subject to binding contract transition rule.--
If the amendments made by section 1041 of the Taxpayer Relief
Act of 1997 do not apply to any amount received or accrued
after the date of the enactment of this Act under any contract
described in subsection (b)(2) of such section, such amendments
also shall not apply to amounts received or accrued under such
contract before January 1, 2000.
TITLE XI--REAL ESTATE PROVISIONS
Subtitle A--Provisions Relating to Real Estate Investment Trusts
PART I--TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT
SUBSIDIARIES
SEC. 1101. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.
(a) In General.--Subparagraph (B) of section 856(c)(4) is amended
to read as follows:
``(B)(i) not more than 25 percent of the value of
its total assets is represented by securities (other
than those includible under subparagraph (A)), and
``(ii) except with respect to a taxable REIT
subsidiary and securities includible under subparagraph
(A)--
``(I) not more than 5 percent of the value
of its total assets is represented by
securities of any 1 issuer,
``(II) the trust does not hold securities
possessing more than 10 percent of the total
voting power of the outstanding securities of
any 1 issuer, and
``(III) the trust does not hold securities
having a value of more than 10 percent of the
total value of the outstanding securities of
any 1 issuer.''
(b) Exception for Straight Debt Securities.--Subsection (c) of
section 856 is amended by adding at the end the following new
paragraph:
``(7) Straight debt safe harbor in applying paragraph
(4).--Securities of an issuer which are straight debt (as
defined in section 1361(c)(5) without regard to subparagraph
(B)(iii) thereof) shall not be taken into account in applying
paragraph (4)(B)(ii)(III) if--
``(A) the only securities of such issuer which are
held by the trust or a taxable REIT subsidiary of the
trust are straight debt (as so defined), or
``(B) the issuer is a partnership and the trust
holds at least a 20 percent profits interest in the
partnership.''
SEC. 1102. TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT
SUBSIDIARIES.
(a) Income From Taxable REIT Subsidiaries Not Treated as
Impermissible Tenant Service Income.--Clause (i) of section
856(d)(7)(C) (relating to exceptions to impermissible tenant service
income) is amended by inserting ``or through a taxable REIT subsidiary
of such trust'' after ``income''.
(b) Certain Income From Taxable REIT Subsidiaries Not Excluded From
Rents From Real Property.--
(1) In general.--Subsection (d) of section 856 (relating to
rents from real property defined) is amended by adding at the
end the following new paragraphs:
``(8) Special rule for taxable reit subsidiaries.--For
purposes of this subsection, amounts paid to a real estate
investment trust by a taxable REIT subsidiary of such trust
shall not be excluded from rents from real property by reason
of paragraph (2)(B) if the requirements of subparagraph (A) or
(B) are met.
``(A) Limited rental exception.--The requirements
of this subparagraph are met with respect to any
property if at least 90 percent of the leased space of
the property is rented to persons other than taxable
REIT subsidiaries of such trust and other than persons
described in section 856(d)(2)(B). The preceding
sentence shall apply only to the extent that the
amounts paid to the trust as rents from real property
(as defined in paragraph (1) without regard to
paragraph (2)(B)) from such property are substantially
comparable to such rents made by the other tenants of
the trust's property for comparable space.
``(B) Exception for certain lodging facilities.--
The requirements of this subparagraph are met with
respect to an interest in real property which is a
qualified lodging facility leased by the trust to a
taxable REIT subsidiary of the trust if the property is
operated on behalf of such subsidiary by a person who
is an eligible independent contractor.
``(9) Eligible independent contractor.--For purposes of
paragraph (8)(B)--
``(A) In general.--The term `eligible independent
contractor' means, with respect to any qualified
lodging facility, any independent contractor if, at the
time such contractor enters into a management agreement
or other similar service contract with the taxable REIT
subsidiary to operate the facility, such contractor (or
any related person) is actively engaged in the trade or
business of operating qualified lodging facilities for
any person who is not a related person with respect to
the real estate investment trust or the taxable REIT
subsidiary.
``(B) Special rules.--Solely for purposes of this
paragraph and paragraph (8)(B), a person shall not fail
to be treated as an independent contractor with respect
to any qualified lodging facility by reason of any of
the following:
``(i) The taxable REIT subsidiary bears the
expenses for the operation of the facility
pursuant to the management agreement or other
similar service contract.
``(ii) The taxable REIT subsidiary receives
the revenues from the operation of such
facility, net of expenses for such operation
and fees payable to the operator pursuant to
such agreement or contract.
``(iii) The real estate investment trust
receives income from such person with respect
to another property that is attributable to a
lease of such other property to such person
that was in effect as on the later of--
``(I) January 1, 1999, or
``(II) the earliest date that any
taxable REIT subsidiary of such trust
entered into a management agreement or
other similar service contract with
such person with respect to such
qualified lodging facility.
``(C) Renewals, etc., of existing leases.--For
purposes of subparagraph (B)(iii)--
``(i) a lease shall be treated as in effect
on January 1, 1999, without regard to its
renewal after such date, so long as such
renewal is pursuant to the terms of such lease
as in effect on whichever of the dates under
subparagraph (B)(iii) is the latest, and
``(ii) a lease of a property entered into
after whichever of the dates under subparagraph
(B)(iii) is the latest shall be treated as in
effect on such date if--
``(I) on such date, a lease of such
property from the trust was in effect,
and
``(II) under the terms of the new
lease, such trust receives a
substantially similar or lesser benefit
in comparison to the lease referred to
in subclause (I).
``(D) Qualified lodging facility.--For purposes of
this paragraph--
``(i) In general.--The term `qualified
lodging facility' means any lodging facility
unless wagering activities are conducted at or
in connection with such facility by any person
who is engaged in the business of accepting
wagers and who is legally authorized to engage
in such business at or in connection with such
facility.
``(ii) Lodging facility.--The term `lodging
facility' means a hotel, motel, or other
establishment more than one-half of the
dwelling units in which are used on a transient
basis.
``(iii) Customary amenities and
facilities.--The term `lodging facility'
includes customary amenities and facilities
operated as part of, or associated with, the
lodging facility so long as such amenities and
facilities are customary for other properties
of a comparable size and class owned by other
owners unrelated to such real estate investment
trust.
``(E) Operate includes manage.--References in this
paragraph to operating a property shall be treated as
including a reference to managing the property.
``(F) Related person.--Persons shall be treated as
related to each other if such persons are treated as a
single employer under subsection (a) or (b) of section
52.''.
(2) Conforming amendment.--Subparagraph (B) of section
856(d)(2) is amended by inserting ``except as provided in
paragraph (8),'' after ``(B)''.
SEC. 1103. TAXABLE REIT SUBSIDIARY.
(a) In General.--Section 856 is amended by adding at the end the
following new subsection:
``(l) Taxable REIT Subsidiary.--For purposes of this part--
``(1) In general.--The term `taxable REIT subsidiary'
means, with respect to a real estate investment trust, a
corporation (other than a real estate investment trust) if--
``(A) such trust directly or indirectly owns stock
in such corporation, and
``(B) such trust and such corporation jointly elect
that such corporation shall be treated as a taxable
REIT subsidiary of such trust for purposes of this
part.
Such an election, once made, shall be irrevocable unless both
such trust and corporation consent to its revocation. Such
election, and any revocation thereof, may be made without the
consent of the Secretary.
``(2) 35 percent ownership in another taxable reit
subsidiary.--The term `taxable REIT subsidiary' includes, with
respect to any real estate investment trust, any corporation
(other than a real estate investment trust) with respect to
which a taxable REIT subsidiary of such trust owns directly or
indirectly--
``(A) securities possessing more than 35 percent of
the total voting power of the outstanding securities of
such corporation, or
``(B) securities having a value of more than 35
percent of the total value of the outstanding
securities of such corporation.
The preceding sentence shall not apply to a qualified REIT
subsidiary (as defined in subsection (i)(2)). The rule of
section 856(c)(7) shall apply for purposes of subparagraph (B).
``(3) Exceptions.--The term `taxable REIT subsidiary' shall
not include--
``(A) any corporation which directly or indirectly
operates or manages a lodging facility or a health care
facility, and
``(B) any corporation which directly or indirectly
provides to any other person (under a franchise,
license, or otherwise) rights to any brand name under
which any lodging facility or health care facility is
operated.
Subparagraph (B) shall not apply to rights provided to an
eligible independent contractor to operate or manage a lodging
facility if such rights are held by such corporation as a
franchisee, licensee, or in a similar capacity and such lodging
facility is either owned by such corporation or is leased to
such corporation from the real estate investment trust.
``(4) Definitions.--For purposes of paragraph (3)--
``(A) Lodging facility.--The term `lodging
facility' has the meaning given to such term by
paragraph (9)(D)(ii).
``(B) Health care facility.--The term `health care
facility' has the meaning given to such term by
subsection (e)(6)(D)(ii).''.
(b) Conforming Amendment.--Paragraph (2) of section 856(i) is
amended by adding at the end the following new sentence: ``Such term
shall not include a taxable REIT subsidiary.''
SEC. 1104. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163(j) (relating to limitation on
deduction for interest on certain indebtedness) 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 interest paid or accrued (directly or
indirectly) by a taxable REIT subsidiary (as defined in
section 856(l)) of a real estate investment trust to
such trust.''.
SEC. 1105. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.
(a) In General.--Subsection (b) of section 857 (relating to method
of taxation of real estate investment trusts and holders of shares or
certificates of beneficial interest) is amended by redesignating
paragraphs (7) and (8) as paragraphs (8) and (9), respectively, and by
inserting after paragraph (6) the following new paragraph:
``(7) Income from redetermined rents, redetermined
deductions, and excess interest.--
``(A) Imposition of tax.--There is hereby imposed
for each taxable year of the real estate investment
trust a tax equal to 100 percent of redetermined rents,
redetermined deductions, and excess interest.
``(B) Redetermined rents.--
``(i) In general.--The term `redetermined
rents' means rents from real property (as
defined in subsection 856(d)) the amount of
which would (but for subparagraph (E)) be
reduced on distribution, apportionment, or
allocation under section 482 to clearly reflect
income as a result of services furnished or
rendered by a taxable REIT subsidiary of the
real estate investment trust to a tenant of
such trust.
``(ii) Exception for certain services.--
Clause (i) shall not apply to amounts received
directly or indirectly by a real estate
investment trust for services described in
paragraph (1)(B) or (7)(C)(i) of section
856(d).
``(iii) Exception for de minimis amounts.--
Clause (i) shall not apply to amounts described
in section 856(d)(7)(A) with respect to a
property to the extent such amounts do not
exceed the one percent threshold described in
section 856(d)(7)(B) with respect to such
property.
``(iv) Exception for comparably priced
services.--Clause (i) shall not apply to any
service rendered by a taxable REIT subsidiary
of a real estate investment trust to a tenant
of such trust if--
``(I) such subsidiary renders a
significant amount of similar services
to persons other than such trust and
tenants of such trust who are unrelated
(within the meaning of section
856(d)(8)(F)) to such subsidiary,
trust, and tenants, but
``(II) only to the extent the
charge for such service so rendered is
substantially comparable to the charge
for the similar services rendered to
persons referred to in subclause (I).
``(v) Exception for certain separately
charged services.--Clause (i) shall not apply
to any service rendered by a taxable REIT
subsidiary of a real estate investment trust to
a tenant of such trust if--
``(I) the rents paid to the trust
by tenants (leasing at least 25 percent
of the net leasable space in the
trust's property) who are not receiving
such service from such subsidiary are
substantially comparable to the rents
paid by tenants leasing comparable
space who are receiving such service
from such subsidiary, and
``(II) the charge for such service
from such subsidiary is separately
stated.
``(vi) Exception for certain services based
on subsidiary's income from the services.--
Clause (i) shall not apply to any service
rendered by a taxable REIT subsidiary of a real
estate investment trust to a tenant of such
trust if the gross income of such subsidiary
from such service is not less than 150 percent
of such subsidiary's direct cost in furnishing
or rendering the service.
``(vii) Exceptions granted by secretary.--
The Secretary may waive the tax otherwise
imposed by subparagraph (A) if the trust
establishes to the satisfaction of the
Secretary that rents charged to tenants were
established on an arms' length basis even
though a taxable REIT subsidiary of the trust
provided services to such tenants.
``(C) Redetermined deductions.--The term
`redetermined deductions' means deductions (other than
redetermined rents) of a taxable REIT subsidiary of a
real estate investment trust if the amount of such
deductions would (but for subparagraph (E)) be
increased on distribution, apportionment, or allocation
under section 482 to clearly reflect income as between
such subsidiary and such trust.
``(D) Excess interest.--The term `excess interest'
means any deductions for interest payments by a taxable
REIT subsidiary of a real estate investment trust to
such trust to the extent that the interest payments are
in excess of a rate that is commercially reasonable.
``(E) Coordination with section 482.--The
imposition of tax under subparagraph (A) shall be in
lieu of any distribution, apportionment, or allocation
under section 482.
``(F) Regulatory authority.--The Secretary shall
prescribe such regulations as may be necessary or
appropriate to carry out the purposes of this
paragraph. Until the Secretary prescribes such
regulations, real estate investment trusts and their
taxable REIT subsidiaries may base their allocations on
any reasonable method.''.
(b) Amount Subject to Tax Not Required To Be Distributed.--
Subparagraph (E) of section 857(b)(2) (relating to real estate
investment trust taxable income) is amended by striking ``paragraph
(5)'' and inserting ``paragraphs (5) and (7)''.
SEC. 1106. EFFECTIVE DATE.
(a) In General.--The amendments made by this part shall apply to
taxable years beginning after December 31, 2000.
(b) Transitional Rules Related to Section 1101.--
(1) Existing arrangements.--
(A) In general.--Except as otherwise provided in
this paragraph, the amendment made by section 1101
shall not apply to a real estate investment trust with
respect to--
(i) securities of a corporation held
directly or indirectly by such trust on July
12, 1999,
(ii) securities of a corporation held by an
entity on July 12, 1999, if such trust acquires
control of such entity pursuant to a written
binding contract in effect on such date and at
all times thereafter before such acquisition,
(iii) securities received by such trust (or
a successor) in exchange for, or with respect
to, securities described in clause (i) or (ii)
in a transaction in which gain or loss is not
recognized, and
(iv) securities acquired directly or
indirectly by such trust as part of a
reorganization (as defined in section 368(a)(1)
of the Internal Revenue Code of 1986) with
respect to such trust if such securities are
described in clause (i), (ii), or (iii) with
respect to any other real estate investment
trust.
(B) New trade or business or substantial new
assets.--Subparagraph (A) shall cease to apply to
securities of a corporation as of the first day after
July 12, 1999, on which such corporation engages in a
substantial new line of business, or acquires any
substantial asset, other than--
(i) pursuant to a binding contract in
effect on such date and at all times thereafter
before the acquisition of such asset,
(ii) in a transaction in which gain or loss
is not recognized by reason of section 1031 or
1033 of the Internal Revenue Code of 1986, or
(iii) in a reorganization (as so defined)
with another corporation the securities of
which are described in paragraph (1)(A) of this
subsection.
(2) Tax-free conversion.--If--
(A) at the time of an election for a corporation to
become a taxable REIT subsidiary, the amendment made by
section 1101 does not apply to such corporation by
reason of paragraph (1), and
(B) such election first takes effect before January
1, 2004,
such election shall be treated as a reorganization qualifying
under section 368(a)(1)(A) of such Code.
PART II--HEALTH CARE REITS
SEC. 1111. HEALTH CARE REITS.
(a) Special Foreclosure Rule for Health Care Properties.--
Subsection (e) of section 856 (relating to special rules for
foreclosure property) is amended by adding at the end the following new
paragraph:
``(6) Special rule for qualified health care properties.--
For purposes of this subsection--
``(A) Acquisition at expiration of lease.--The term
`foreclosure property' shall include any qualified
health care property acquired by a real estate
investment trust as the result of the termination of a
lease of such property (other than a termination by
reason of a default, or the imminence of a default, on
the lease).
``(B) Grace period.--In the case of a qualified
health care property which is foreclosure property
solely by reason of subparagraph (A), in lieu of
applying paragraphs (2) and (3)--
``(i) the qualified health care property
shall cease to be foreclosure property as of
the close of the second taxable year after the
taxable year in which such trust acquired such
property, and
``(ii) if the real estate investment trust
establishes to the satisfaction of the
Secretary that an extension of the grace period
in clause (i) is necessary to the orderly
leasing or liquidation of the trust's interest
in such qualified health care property, the
Secretary may grant 1 or more extensions of the
grace period for such qualified health care
property.
Any such extension shall not extend the grace period
beyond the close of the 6th year after the taxable year
in which such trust acquired such qualified health care
property.
``(C) Income from independent contractors.--For
purposes of applying paragraph (4)(C) with respect to
qualified health care property which is foreclosure
property by reason of subparagraph (A) or paragraph
(1), income derived or received by the trust from an
independent contractor shall be disregarded to the
extent such income is attributable to--
``(i) any lease of property in effect on
the date the real estate investment trust
acquired the qualified health care property
(without regard to its renewal after such date
so long as such renewal is pursuant to the
terms of such lease as in effect on such date),
or
``(ii) any lease of property entered into
after such date if--
``(I) on such date, a lease of such
property from the trust was in effect,
and
``(II) under the terms of the new
lease, such trust receives a
substantially similar or lesser benefit
in comparison to the lease referred to
in subclause (I).
``(D) Qualified health care property.--
``(i) In general.--The term `qualified
health care property' means any real property
(including interests therein), and any personal
property incident to such real property,
which--
``(I) is a health care facility, or
``(II) is necessary or incidental
to the use of a health care facility.
``(ii) Health care facility.--For purposes
of clause (i), the term `health care facility'
means a hospital, nursing facility, assisted
living facility, congregate care facility,
qualified continuing care facility (as defined
in section 7872(g)(4)), or other licensed
facility which extends medical or nursing or
ancillary services to patients and which,
immediately before the termination, expiration,
default, or breach of the lease of or mortgage
secured by such facility, was operated by a
provider of such services which was eligible
for participation in the medicare program under
title XVIII of the Social Security Act with
respect to such facility.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
PART III--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES
SEC. 1121. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.
(a) Distribution Requirement.--Clauses (i) and (ii) of section
857(a)(1)(A) (relating to requirements applicable to real estate
investment trusts) are each amended by striking ``95 percent (90
percent for taxable years beginning before January 1, 1980)'' and
inserting ``90 percent''.
(b) Imposition of Tax.--Clause (i) of section 857(b)(5)(A)
(relating to imposition of tax in case of failure to meet certain
requirements) is amended by striking ``95 percent (90 percent in the
case of taxable years beginning before January 1, 1980)'' and inserting
``90 percent''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
PART IV--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE
INCOME
SEC. 1131. CLARIFICATION OF EXCEPTION FOR INDEPENDENT OPERATORS.
(a) In General.--Paragraph (3) of section 856(d) (relating to
independent contractor defined) is amended by adding at the end the
following flush sentence:
``In the event that any class of stock of either the real
estate investment trust or such person is regularly traded on
an established securities market, only persons who own,
directly or indirectly, more than 5 percent of such class of
stock shall be taken into account as owning any of the stock of
such class for purposes of applying the 35 percent limitation
set forth in subparagraph (B) (but all of the outstanding stock
of such class shall be considered outstanding in order to
compute the denominator for purpose of determining the
applicable percentage of ownership).''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
PART V--MODIFICATION OF EARNINGS AND PROFITS RULES
SEC. 1141. MODIFICATION OF EARNINGS AND PROFITS RULES.
(a) Rules for Determining Whether Regulated Investment Company Has
Earnings and Profits From Non-RIC Year.--Subsection (c) of section 852
is amended by adding at the end the following new paragraph:
``(3) Distributions to meet requirements of subsection
(a)(2)(B).--Any distribution which is made in order to comply
with the requirements of subsection (a)(2)(B)--
``(A) shall be treated for purposes of this
subsection and subsection (a)(2)(B) as made from the
earliest earnings and profits accumulated in any
taxable year to which the provisions of this part did
not apply rather than the most recently accumulated
earnings and profits, and
``(B) to the extent treated under subparagraph (A)
as made from accumulated earnings and profits, shall
not be treated as a distribution for purposes of
subsection (b)(2)(D) and section 855.''.
(b) Clarification of Application of REIT Spillover Dividend Rules
to Distributions To Meet Qualification Requirement.--Subparagraph (B)
of section 857(d)(3) is amended by inserting before the period ``and
section 858''.
(c) Application of Deficiency Dividend Procedures.--Paragraph (1)
of section 852(e) is amended by adding at the end the following new
sentence: ``If the determination under subparagraph (A) is solely as a
result of the failure to meet the requirements of subsection (a)(2),
the preceding sentence shall also apply for purposes of applying
subsection (a)(2) to the non-RIC year.''
(d) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
PART VI--STUDY RELATING TO TAXABLE REIT SUBSIDIARIES
SEC. 1151. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.
The Commissioner of the Internal Revenue shall conduct a study to
determine how many taxable REIT subsidiaries are in existence and the
aggregate amount of taxes paid by such subsidiaries. The Secretary
shall submit a report to the Congress describing the results of such
study.
Subtitle B--Modification of At-Risk Rules for Publicly Traded
Securities
SEC. 1161. TREATMENT UNDER AT-RISK RULES OF PUBLICLY TRADED NONRECOURSE
DEBT.
(a) In General.--Subparagraph (A) of section 465(b)(6) (relating to
qualified nonrecourse financing treated as amount at risk) is amended
by striking ``share of'' and all that follows and inserting ``share
of--
``(i) any qualified nonrecourse financing
which is secured by real property used in such
activity, and
``(ii) any other financing which--
``(I) would (but for subparagraph
(B)(ii)) be qualified nonrecourse
financing,
``(II) is qualified publicly traded
debt, and
``(III) is not borrowed by the
taxpayer from a person described in
subclause (I), (II), or (III) of
section 49(a)(1)(D)(iv).''
(b) Qualified Publicly Traded Debt.--Paragraph (6) of section
465(b) is amended by adding at the end the following new subparagraph:
``(F) Qualified publicly traded debt.--For purposes
of subparagraph (A), the term `qualified publicly
traded debt' means any debt instrument which is readily
tradable on an established securities market. Such term
shall not include any debt instrument which has a yield
to maturity which equals or exceeds the limitation in
section 163(i)(1)(B).''
(c) Effective Date.--The amendments made by this section shall
apply to debt instruments issued after December 31, 1999.
Subtitle C--Treatment of Construction Allowances and Certain
Contributions To Capital of Retailers
SEC. 1171. EXCLUSION FROM GROSS INCOME OF QUALIFIED LESSEE CONSTRUCTION
ALLOWANCES NOT LIMITED FOR CERTAIN RETAILERS TO SHORT-
TERM LEASES.
(a) In General.--Subsection (a) section 110 (relating to qualified
lessee construction allowances for short-term leases) is amended by
adding at the end the following new sentence: ``Paragraph (1) shall not
apply if the lessee is a qualified retail business (as defined by
section 118(d)(3)).''.
(b) Effective Date.--The amendment made by this section shall apply
to leases entered into after December 31, 1999.
SEC. 1172. EXCLUSION FROM GROSS INCOME FOR CERTAIN CONTRIBUTIONS TO THE
CAPITAL OF CERTAIN RETAILERS.
(a) In General.--Section 118 (relating to contributions to the
capital of a corporation) is amended by redesignating subsections (d)
and (e) as subsections (e) and (f), respectively, and by inserting
after subsection (c) the following new subsection:
``(d) Safe Harbor for Contributions to Certain Retailers.--
``(1) General rule.--For purposes of this section, the term
`contribution to the capital of the taxpayer' includes any
amount of money or other property received by the taxpayer if--
``(A) the taxpayer has entered into an agreement to
operate (or cause to be operated) a qualified retail
business at a particular location for a period of at
least 15 years,
``(B)(i) immediately after the receipt of such
money or other property, the taxpayer owns the land and
the structure to be used by the taxpayer in carrying on
a qualified retail business at such location, or
``(ii) the taxpayer uses such amount to acquire
ownership of at least such land and structure,
``(C) such amount meets the requirements of the
expenditure rule of paragraph (2), and
``(D) the contributor of such amount does not hold
a beneficial interest in any property located on the
premises of such qualified retail business other than
de minimis amounts of property associated with the
operation of property adjacent to such premises.
``(2) Expenditure rule.--An amount meets the requirements
of this paragraph if--
``(A) an amount equal to such amount is expended
for the acquisition of land or for acquisition or
construction of other property described in section
1231(b)--
``(i) which was the purpose motivating the
contribution, and
``(ii) which is used predominantly in a
qualified retail business at the location
referred to in paragraph (1)(A),
``(B) the expenditure referred to in subparagraph
(A) occurs before the end of the second taxable year
after the year in which such amount was received, and
``(C) accurate records are kept of the amounts
contributed and expenditures made on the basis of the
project for which the contribution was made and on the
basis of the year of the contribution expenditure.
``(3) Definition of qualified retail business.--
``(A) In general.--Except as provided in
subparagraph (B), the term `qualified retail business'
means a trade or business of selling tangible personal
property to the general public if the premises on which
such trade or business is conducted is in close
proximity to property that the contributor of the
amount referred to in paragraph (1) is developing or
operating for profit (or, in the case of a contributor
which is a governmental entity, is attempting to
revitalize).
``(B) Services.--A trade or business shall not fail
to be treated as a qualified retail business by reason
of sales of services if such sales are incident to the
sale of tangible personal property or if the services
are de minimis in amount.
``(4) Special rules.--
``(A) Leases.--For purposes of paragraph (1)(B)(i),
property shall be treated as owned by the taxpayer if
the taxpayer is the lessee of such property under a
lease having a term of at least 30 years and on which
only nominal rent is required.
``(B) Controlled groups.--For purposes of this
subsection, all persons treated as a single employer
under subsection (a) or (b) of section 52 shall be
treated as 1 person.
``(5) Disallowance of deductions and credits; adjusted
basis.--Notwithstanding any other provision of this subtitle,
no deduction or credit shall be allowed for, or by reason of,
any amount received by the taxpayer which constitutes a
contribution to capital to which this subsection applies. The
adjusted basis of any property acquired with the contributions
to which this subsection applies shall be reduced by the amount
of the contributions to which this subsection applies.
``(6) Regulations.--The Secretary shall prescribe such
regulations are appropriate to prevent the abuse of the
purposes of the subsection, including regulations which
allocate income and deductions (or adjust the amount excludable
under this subsection) in cases in which--
``(A) payments in excess of fair market value are
paid to the contributor by the taxpayer, or
``(B) the contributor and the taxpayer are related
parties.''
(b) Conforming Amendment.--Subsection (e) of section 118 (as
redesignated by subsection (a)) is amended by adding at the end the
following flush sentence:
``Rules similar to the rules of the preceding sentence shall apply to
any amount treated as a contribution to the capital of the taxpayer
under subsection (d).''
(c) Effective Date.--The amendments made by this section shall
apply to amounts received after December 31, 1999.
TITLE XII--PROVISIONS RELATING TO PENSIONS
Subtitle A--Expanding Coverage
SEC. 1201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating
to limitation for defined benefit plans) is amended by
striking ``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each
amended by striking ``$90,000'' each place it appears in the
headings and the text and inserting ``$160,000''.
(C) Paragraph (7) of section 415(b) (relating to benefits
under certain collectively bargained plans) is amended by
striking ``the greater of $68,212 or one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$90,000''' and inserting ``one-half the amount otherwise
applicable for such year under paragraph (1)(A) for
`$160,000'''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears in
the heading and text and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears in
the heading and text and inserting ``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) in paragraph (1)(A) by striking ``$90,000'' and
inserting ``$160,000'', and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading
and inserting ``$160,000'', and
(ii) by striking ``October 1, 1986'' and
inserting ``July 1, 2000''.
(5) Conforming amendment.--Section 415(b)(2) is amended by
striking subparagraph (F).
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``$30,000'' and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) in paragraph (1)(C) by striking ``$30,000'' and
inserting ``$40,000'', and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading
and inserting ``$40,000'', and
(ii) by striking ``October 1, 1993'' and
inserting ``July 1, 2000''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking ``$150,000''
each place it appears and inserting ``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting
``July 1, 2000'', and
(B) by striking ``$10,000'' both places it appears
and inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g) (relating
to limitation on exclusion for elective deferrals) is amended
to read as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding subsections
(e)(3) and (h)(1)(B), the elective deferrals of any
individual for any taxable year shall be included in
such individual's gross income to the extent the amount
of such deferrals for the taxable year exceeds the
applicable dollar amount.
``(B) Applicable dollar amount.--For purposes of
subparagraph (A), the applicable dollar amount shall be
the amount determined in accordance with the following
table:
``Taxable year:
Applicable dollar amount:
2001................................... $11,000
2002................................... $12,000
2003................................... $13,000
2004................................... $14,000
2005 or thereafter..................... $15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2005, the Secretary shall
adjust the $15,000 amount under paragraph (1)(B) at the same
time and in the same manner as under section 415(d); except
that the base period shall be the calendar quarter beginning
July 1, 2004, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on
exclusion for elective deferrals), as amended by
paragraphs (1) and (2), is further amended by striking
paragraph (4) and redesignating paragraphs (5), (6),
(7), (8), and (9) as paragraphs (4), (5), (6), (7), and
(8), respectively.
(B) Paragraph (2) of section 457(c) is amended by
striking ``402(g)(8)(A)(iii)'' and inserting
``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ``(other than paragraph (4)
thereof)''.
(e) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred
compensation plans of State and local governments and tax-
exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking
``$7,500'' each place it appears and inserting ``the
applicable dollar amount'', and
(B) in subsection (b)(3)(A) by striking ``$15,000''
and inserting ``twice the dollar amount in effect under
subsection (b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living adjustment.--
Paragraph (15) of section 457(e) is amended to read as follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar amount
shall be the amount determined in accordance with the
following table:
``Taxable year:
Applicable dollar amount:
2001................................... $11,000
2002................................... $12,000
2003................................... $13,000
2004................................... $14,000
2005 or thereafter................. $15,000.
``(B) Cost-of-living adjustments.--In the case of
taxable years beginning after December 31, 2005, the
Secretary shall adjust the $15,000 amount specified in
the table in subparagraph (A) at the same time and in
the same manner as under section 415(d), except that
the base period shall be the calendar quarter beginning
July 1, 2004, and any increase under this paragraph
which is not a multiple of $500 shall be rounded to the
next lowest multiple of $500.''.
(f) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``$6,000'' and inserting
``the applicable dollar amount''.
(2) Applicable dollar amount.--Subparagraph (E) of
408(p)(2) is amended to read as follows:
``(E) Applicable dollar amount; cost-of-living
adjustment.--
``(i) In general.--For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
``Year:
Applicable dollar amount:
2001......................... $7,000
2002......................... $8,000
2003......................... $9,000
2004 or thereafter........... $10,000.
``(ii) Cost-of-living adjustment.--In the
case of a year beginning after December 31,
2004, the Secretary shall adjust the $10,000
amount under clause (i) at the same time and in
the same manner as under section 415(d), except
that the base period taken into account shall
be the calendar quarter beginning July 1, 2003,
and any increase under this subparagraph which
is not a multiple of $500 shall be rounded to
the next lower multiple of $500.''.
(3) Conforming amendments.--
(A) Clause (I) of section 401(k)(11)(B)(i) is
amended by striking ``$6,000'' and inserting ``the
amount in effect under section 408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking
subparagraph (E).
(g) Rounding Rule Relating to Defined Benefit Plans and Defined
Contribution Plans.--Paragraph (4) of section 415(d) is amended to read
as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under
subparagraph (A) of paragraph (1) which is not a
multiple of $5,000 shall be rounded to the next lowest
multiple of $5,000.
``(B) $40,000 amount.--Any increase under
subparagraph (C) of paragraph (1) which is not a
multiple of $1,000 shall be rounded to the next lowest
multiple of $1,000.''.
(h) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified by the date of enactment of this Act, the
amendments made by this section shall not apply to
contributions or benefits pursuant to any such agreement for
years beginning before the earlier of--
(A) the later of--
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof on or after such date of enactment), or
(ii) January 1, 2001, or
(B) January 1, 2005.
SEC. 1202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) In General.--Subparagraph (B) of section 4975(f)(6) (relating
to exemptions not to apply to certain transactions) is amended by
adding at the end the following new clause:
``(iii) Loan exception.--For purposes of
subparagraph (A)(i), the term `owner-employee'
shall only include a person described in
subclause (II) or (III) of clause (i).''
(b) Effective Date.--The amendment made by this section shall apply
to loans made after December 31, 2000.
SEC. 1203. MODIFICATION OF TOP-HEAVY RULES.
(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan
years'' in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
``(i) an officer of the employer having an
annual compensation greater than $150,000,'',
(C) by striking clause (ii) and redesignating
clauses (iii) and (iv) as clauses (ii) and (iii),
respectively, and
(D) by striking the second sentence in the matter
following clause (iii), as redesignated by subparagraph
(C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined
contribution plans) is amended by adding at the end the following:
``Employer matching contributions (as defined in section 401(m)(4)(A))
shall be taken into account for purposes of this subparagraph.''.
(c) Distributions During Last Year Before Determination Date Taken
Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is amended
to read as follows:
``(3) Distributions during last year before determination
date taken into account.--
``(A) In general.--For purposes of determining--
``(i) the present value of the cumulative
accrued benefit for any employee, or
``(ii) the amount of the account of any
employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such
employee under the plan during the 1-year period ending
on the determination date. The preceding sentence shall
also apply to distributions under a terminated plan
which if it had not been terminated would have been
required to be included in an aggregation group.
``(B) 5-year period in case of in-service
distribution.--In the case of any distribution made for
a reason other than separation from service, death, or
disability, subparagraph (A) shall be applied by
substituting `5-year period' for `1-year period'.''.
(2) Benefits not taken into account.--Subparagraph (E) of
section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) by striking ``5-year period'' and inserting
``1-year period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of section 416(g)
(relating to other special rules for top-heavy plans) is amended by
adding at the end the following new subparagraph:
``(H) Cash or deferred arrangements using
alternative methods of meeting nondiscrimination
requirements.--The term `top-heavy plan' shall not
include a plan which consists solely of--
``(i) a cash or deferred arrangement which
meets the requirements of section 401(k)(12),
and
``(ii) matching contributions with respect
to which the requirements of section 401(m)(11)
are met.
If, but for this subparagraph, a plan would be treated
as a top-heavy plan because it is a member of an
aggregation group which is a top-heavy group,
contributions under the plan may be taken into account
in determining whether any other plan in the group
meets the requirements of subsection (c)(2).''
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined benefit
plans) is amended--
(A) in clause (i), by striking ``clause (ii)'' and
inserting ``clause (ii) or (iii)'', and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For
purposes of determining an employee's years of
service with the employer, any service with the
employer shall be disregarded to the extent
that such service occurs during a plan year
when the plan benefits (within the meaning of
section 410(b)) no employee or former
employee.''.
(f) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 1204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF
DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or annuity plan and
compensation under a deferred payment plan) is amended by adding at the
end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for Purposes of
Deduction Limits.--Elective deferrals (as defined in section 402(g)(3))
shall not be subject to any limitation contained in paragraph (3), (7),
or (9) of subsection (a), and such elective deferrals shall not be
taken into account in applying any such limitation to any other
contributions.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2000.
SEC. 1205. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.
(a) In General.--Subparagraph (A) of section 4006(a)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)(A)) is amended--
(1) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by a
small employer (as so defined),'' after ``single-employer
plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(iv) in the case of a new single-employer plan (as
defined in subparagraph (F)) maintained by a small employer (as
so defined) for the plan year, $5 for each individual who is a
participant in such plan during the plan year.''.
(b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)) is amended by adding at the end the following new
subparagraph:
``(F)(i) For purposes of this paragraph, a single-employer plan
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the
sponsor or any member of such sponsor's controlled group (or any
predecessor of either) had not established or maintained a plan to
which this title applies with respect to which benefits were accrued
for substantially the same employees as are in the new single-employer
plan.
``(ii)(I) For purposes of this paragraph, the term `small employer'
means an employer which on the first day of any plan year has, in
aggregation with all members of the controlled group of such employer,
100 or fewer employees.
``(II) In the case of a plan maintained by 2 or more contributing
sponsors that are not part of the same controlled group, the employees
of all contributing sponsors and controlled groups of such sponsors
shall be aggregated for purposes of determining whether any
contributing sponsor is a small employer.''.
(c) Effective Date.--The amendments made by this section shall
apply to plans established after December 31, 2000.
SEC. 1206. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL
PLANS.
(a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)(E)) is amended by adding at the end the following new
clause:
``(v) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an amount equal
to the product of the amount determined under clause (ii) and the
applicable percentage. For purposes of this clause, the term
`applicable percentage' means--
``(I) 0 percent, for the first plan year.
``(II) 20 percent, for the second plan year.
``(III) 40 percent, for the third plan year.
``(IV) 60 percent, for the fourth plan year.
``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in
section 3(35)) maintained by a contributing sponsor shall be treated as
a new defined benefit plan for its first 5 plan years if, during the
36-month period ending on the date of the adoption of the plan, the
sponsor and each member of any controlled group including the sponsor
(or any predecessor of either) did not establish or maintain a plan to
which this title applies with respect to which benefits were accrued
for substantially the same employees as are in the new plan.''.
(b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)) is amended--
(1) in subparagraph (E)(i) by striking ``The'' and
inserting ``Except as provided in subparagraph (G), the'', and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(i) In the case of an employer who has 25 or fewer employees
on the first day of the plan year, the additional premium determined
under subparagraph (E) for each participant shall not exceed $5
multiplied by the number of participants in the plan as of the close of
the preceding plan year.
``(ii) For purposes of clause (i), whether an employer has 25 or
fewer employees on the first day of the plan year is determined taking
into consideration all of the employees of all members of the
contributing sponsor's controlled group. In the case of a plan
maintained by 2 or more contributing sponsors, the employees of all
contributing sponsors and their controlled groups shall be aggregated
for purposes of determining whether 25-or-fewer-employees limitation
has been satisfied.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans established after December 31, 2000.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2000.
SEC. 1207. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED
COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND
TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 1201(e), is amended to
read as follows:
``(c) Limitation.--The maximum amount of the compensation of any
one individual which may be deferred under subsection (a) during any
taxable year shall not exceed the amount in effect under subsection
(b)(2)(A) (as modified by any adjustment provided under subsection
(b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 2000.
SEC. 1208. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING
PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require payment of user
fees under the program established under section 7527 of the Internal
Revenue Code of 1986 for requests to the Internal Revenue Service for
determination letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible employers or any
trust which is part of the plan. The preceding sentence shall not apply
to any request made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating employers.
(b) Pension Benefit Plan.--For purposes of this section, the term
``pension benefit plan'' means a pension, profit-sharing, stock bonus,
annuity, or employee stock ownership plan.
(c) Eligible Employer.--For purposes of this section, the term
``eligible employer'' has the same meaning given such term in section
408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986. The
determination of whether an employer is an eligible employer under this
section shall be made as of the date of the request described in
subsection (a).
(d) Effective Date.--The provisions of this section shall apply
with respect to requests made after December 31, 2000.
SEC. 1209. DEDUCTION LIMITS.
(a) In General.--Section 404(a) (relating to general rule) is
amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), (8), and (9), the term `compensation'
shall include amounts treated as participant's compensation
under subparagraph (C) or (D) of section 415(c)(3).''.
(b) Conforming Amendment.--Subparagraph (B) of section 404(a)(3) is
amended by striking the last sentence thereof.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 1210. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of chapter 1
(relating to deferred compensation, etc.) is amended by inserting after
section 402 the following new section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan includes a
qualified plus contribution program--
``(1) any designated plus contribution made by an employee
pursuant to the program shall be treated as an elective
deferral for purposes of this chapter, except that such
contribution shall not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement
of this chapter solely by reason of including such program.
``(b) Qualified Plus Contribution Program.--For purposes of this
section--
``(1) In general.--The term `qualified plus contribution
program' means a program under which an employee may elect to
make designated plus contributions in lieu of all or a portion
of elective deferrals the employee is otherwise eligible to
make under the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified plus contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated
plus accounts') for the designated plus contributions
of each employee and any earnings properly allocable to
the contributions, and
``(B) maintains separate recordkeeping with respect
to each account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term `designated
plus contribution' means any elective deferral which--
``(A) is excludable from gross income of an
employee without regard to this section, and
``(B) the employee designates (at such time and in
such manner as the Secretary may prescribe) as not
being so excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals
excludable from gross income of the employee for the
taxable year (without regard to this section), over
``(B) the aggregate amount of elective deferrals of
the employee for the taxable year which the employee
does not designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any
payment or distribution from a designated plus account
which is otherwise allowable under this chapter may be
made only if the contribution is to--
``(i) another designated plus account of
the individual from whose account the payment
or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover
contribution to a designated plus account under
subparagraph (A) shall not be taken into account for
purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified
distribution' has the meaning given such term by
section 408A(d)(2)(A) (without regard to clause (iv)
thereof).
``(B) Distributions within nonexclusion period.--A
payment or distribution from a designated plus account
shall not be treated as a qualified distribution if
such payment or distribution is made within the 5-
taxable-year period beginning with the earlier of--
``(i) the 1st taxable year for which the
individual made a designated plus contribution
to any designated plus account established for
such individual under the same applicable
retirement plan, or
``(ii) if a rollover contribution was made
to such designated plus account from a
designated plus account previously established
for such individual under another applicable
retirement plan, the 1st taxable year for which
the individual made a designated plus
contribution to such previously established
account.
``(C) Distributions of excess deferrals and
earnings.--The term `qualified distribution' shall not
include any distribution of any excess deferral under
section 402(g)(2) and any income on the excess
deferral.
``(3) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated plus account and other distributions and payments
from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section
401(a) which is exempt from tax under section 501(a),
and
``(B) a plan under which amounts are contributed by
an individual's employer for an annuity contract
described in section 403(b).
``(2) Elective deferral.--The term `elective deferral'
means any elective deferral described in subparagraph (A) or
(C) of section 402(g)(3).''
(b) Excess Deferrals.--Section 402(g) (relating to limitation on
exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new
sentence: ``The preceding sentence shall not apply to so much
of such excess as does not exceed the designated plus
contributions of the individual for the taxable year.'', and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph
(2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is amended by
adding at the end the following:
``If any portion of an eligible rollover distribution
is attributable to payments or distributions from a
designated plus account (as defined in section 402A),
an eligible retirement plan with respect to such
portion shall include only another designated plus
account and a Roth IRA.''
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated plus
contributions (as defined in section 402A)'' before the comma
at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f) Designated Plus Contributions.--The Secretary shall require
the plan administrator of each applicable retirement plan (as defined
in section 402A) to make such returns and reports regarding designated
plus contributions (as so defined) to the Secretary, participants and
beneficiaries of the plan, and such other persons as the Secretary may
prescribe.''
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 402 the following new item:
``Sec. 402A. Optional treatment of elective deferrals as plus
contributions.''
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 1211. INCREASE IN MINIMUM DEFINED BENEFIT LIMIT UNDER SECTION 415.
(a) In General.--Paragraph (4) of section 415(b) (relating to total
annual benefits not in excess of $10,000) is amended to read as
follows:
``(4) Total annual benefits not in excess of $40,000.--
``(A) In general.--Notwithstanding the preceding
provisions of this subsection, the benefits payable
with respect to a participant under any defined benefit
plan shall be deemed not to exceed the limitation of
this subsection if the retirement benefits payable with
respect to such participant under such plan and under
all other defined benefit plans of the employer do not
exceed applicable limit which applies to the plan year,
or the applicable limit which applies to prior plan
years.
``(B) Applicable limit.--For purposes of
subparagraph (A), the applicable limit is--
``(i) $10,000 for plan years beginning
before 2001,
``(ii) $20,000 for plan years beginning
during 2001,
``(iii) $30,000 for plan years beginning
during 2002, and
``(iv) $40,000 for plan years beginning
after 2002.''
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2000.
Subtitle B--Enhancing Fairness for Women
SEC. 1221. ADDITIONAL SALARY REDUCTION CATCH-UP CONTRIBUTIONS.
(a) Limitation on Exclusion for Elective Deferrals.--
(1) In general.--Subsection (g) of section 402 (as amended
by section 1201(d)) is further amended by adding at the end the
following:
``(9) Catch-up contributions for those approaching
retirement.--
``(A) In general.--In the case of an individual who
is at least age 50 as of the end of any taxable year,
the limitation of paragraph (1) for such year, after
the application of paragraph (7), shall be increased by
the applicable catch-up amount.
``(B) Applicable catch-up amount.--For purposes of
subparagraph (A), the applicable catch-up amount shall
be the amount determined in accordance with the
following table:
``Taxable year:
Applicable catch-up amount:
2001................................... $1,000
2002................................... $2,000
2003................................... $3,000
2004................................... $4,000
2005 or thereafter..................... $5,000.''.
(2) Cost-of-living adjustments.--Paragraph (4) of section
402(g) (relating to cost-of-living adjustment), as amended by
section 1201(d), is further amended by inserting ``and the
$5,000 dollar amount in paragraph (9)'' after ``paragraph
(1)(B)''.
(b) Simple Retirement Accounts.--Paragraph (2) of section 408(p)
(relating to qualified salary reduction arrangement) is amended by
inserting at the end of the following new subparagraph:
``(F) Catch-up contributions for those approaching
retirement.--In the case of an individual who is at
least age 50 as of the end of any taxable year, the
limitation of subparagraph (A)(ii) for such year shall
be increased by the applicable catch-up amount. For
purposes of the preceding sentence, the applicable
catch-up amount is the amount in effect under section
402(g)(9) for such taxable year.''.
(c) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--Subsection (e) of section 457 (relating to
other definitions and special rules) is amended by adding after
paragraph (16) the following new paragraph:
``(17) Catch-up amounts.--In the case of an individual who
is at least age 50 as of the end of any taxable year, the
limitation of subsection (b)(2)(A) for such year shall be
increased by the applicable catch-up amount (as in effect under
section 402(g)(9) for such taxable year), except that this
paragraph shall not apply to any taxable year to which
subsection (b)(3) applies.''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 1222. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO
DEFINED CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``25 percent'' and inserting ``100
percent''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for such
taxable year'' in paragraph (1) and inserting ``the
applicable limit under section 415'',
(B) by striking paragraph (2), and
(C) by inserting ``or any amount received by a
former employee after the 5th taxable year following
the taxable year in which such employee was
terminated'' before the period at the end of the second
sentence of paragraph (3).
(3) Conforming amendments.--
(A) Subsection (f) of section 72 is amended by
striking ``section 403(b)(2)(D)(iii))'' and inserting
``section 403(b)(2)(D)(iii), as in effect on December
31, 2000)''.
(B) Section 404(a)(10)(B) is amended by striking
``, the exclusion allowance under section 403(b)(2),''.
(C) Section 415(a)(2) is amended by striking ``,
and the amount of the contribution for such portion
shall reduce the exclusion allowance as provided in
section 403(b)(2)''.
(D) Section 415(c)(3) is amended by adding at the
end the following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term
`participant's compensation' means the participant's
includible compensation determined under section
403(b)(3).''.
(E) Section 415(c) is amended by striking paragraph
(4).
(F) Section 415(c)(7) is amended to read as
follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other
provision of this subsection, at the election of a
participant who is an employee of a church or a
convention or association of churches, including an
organization described in section 414(e)(3)(B)(ii),
contributions and other additions for an annuity
contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the
limitation of paragraph (1) if such annual addition is
not in excess of $10,000.
``(B) $40,000 aggregate limitation.--The total
amount of additions with respect to any participant
which may be taken into account for purposes of this
subparagraph for all years may not exceed $40,000.
``(C) Annual addition.--For purposes of this
paragraph, the term `annual addition' has the meaning
given such term by paragraph (2).''.
(G) Subparagraph (B) of section 402(g)(7) (as
amended by section 1201(d)) is amended by inserting
before the period at the end the following: ``(as in
effect on the date of the enactment of the Financial
Freedom Act of 1999)''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended
by adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be
treated as a defined contribution plan maintained by each
employer with respect to which the participant has the control
required under subsection (b) or (c) of section 414 (as
modified by subsection (h)). For purposes of this section, any
contribution by an employer to a simplified employee pension
plan for an individual for a taxable year shall be treated as
an employer contribution to a defined contribution plan for
such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by paragraph
(1) shall apply to limitation years beginning after
December 31, 1999.
(B) Exclusion allowance.--Effective for limitation
years beginning in 2000, in the case of any annuity
contract described in section 403(b) of the Internal
Revenue Code of 1986, the amount of the contribution
disqualified by reason of section 415(g) of such Code
shall reduce the exclusion allowance as provided in
section 403(b)(2) of such Code.
(c) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred
compensation plans) is amended by striking ``33\1/3\ percent''
and inserting ``100 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 1223. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.
(a) In General.--Section 411(a) (relating to minimum vesting
standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan'', and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the
table contained in subparagraph (B):
The nonforfeitable
``Years of service:
percentage is:
2.................................. 20
3.................................. 40
4.................................. 60
5.................................. 80
6 or more.......................... 100.''.
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan years
beginning after December 31, 2000.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified by the date of the enactment of this Act,
the amendments made by this section shall not apply to plan
years beginning before the earlier of--
(A) the later of--
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof on or after such date of enactment), or
(ii) January 1, 2001, or
(B) January 1, 2005.
(3) Service required.--With respect to any plan, the
amendments made by this section shall not apply to any employee
before the date that such employee has 1 hour of service under
such plan in any plan year to which the amendments made by this
section apply.
SEC. 1224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating
to minimum distribution requirements under sections
401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and
457(d)(2) of the Internal Revenue Code of 1986, and
(B) modify such regulations to--
(i) reflect current life expectancy, and
(ii) revise the required distribution
methods so that, under reasonable assumptions,
the amount of the required minimum distribution
does not decrease over a participant's life
expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated beneficiary
and to elect a new method of calculating life expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years without
regard to whether an individual had previously begun receiving
minimum distributions.
(b) Repeal of Rule Where Distributions Had Begun Before Death
Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses (ii),
(iii), and (iv) as clauses (i), (ii), and (iii), respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``for other cases'' in the
heading, and
(ii) by striking ``the distribution of the
employee's interest has begun in accordance
with subparagraph (A)(ii)'' and inserting ``his
entire interest has been distributed to him,''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)''
and inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and
inserting ``clause (ii)(I)'',
(ii) in subclause (I) by striking ``clause
(iii)(III)'' and inserting ``clause
(ii)(III)'',
(iii) in subclause (I) by striking ``the
date on which the employee would have attained
the age 70\1/2\,'' and inserting ``April 1 of
the calendar year following the calendar year
in which the spouse attains 70\1/2\,'', and
(iv) in subclause (II) by striking ``the
distributions to such spouse begin,'' and
inserting ``his entire interest has been
distributed to him,''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(c) Reduction in Excise Tax.--
(1) In general.--Subsection (a) of section 4974 is amended
by striking ``50 percent'' and inserting ``10 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 1225. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457
PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to application of
rules to governmental and church plans) is amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))'', and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph (10) of
section 414(p) is amended by striking ``and section 409(d)'' and
inserting ``section 409(d), and section 457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--Subsection
(p) of section 414 is amended by redesignating paragraph (12) as
paragraph (13) and inserting after paragraph (11) the following new
paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made pursuant
to a qualified domestic relations order, rules similar to the
rules of section 402(e)(1)(A) shall apply to such distribution
or payment.''.
(d) Effective Date.--The amendments made by this section shall
apply to transfers, distributions, and payments made after December 31,
2000.
Subtitle C--Increasing Portability for Participants
SEC. 1231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) Rollovers From and to Section 457 Plans.--
(1) Rollovers from section 457 plans.--
(A) In general.--Section 457(e) (relating to other
definitions and special rules) is amended by adding at
the end the following:
``(16) Rollover amounts.--
``(A) General rule.--In the case of an eligible
deferred compensation plan established and maintained
by an employer described in subsection (e)(1)(A), if--
``(i) any portion of the balance to the
credit of an employee in such plan is paid to
such employee in an eligible rollover
distribution (within the meaning of section
402(c)(4) without regard to subparagraph (C)
thereof),
``(ii) the employee transfers any portion
of the property such employee receives in such
distribution to an eligible retirement plan
described in section 402(c)(8)(B), and
``(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property
distributed,
then such distribution (to the extent so transferred)
shall not be includible in gross income for the taxable
year in which paid.
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) (other than paragraph
(4)(C)) and (9) of section 402(c) and section 402(f)
shall apply for purposes of subparagraph (A).
``(C) Reporting.--Rollovers under this paragraph
shall be reported to the Secretary in the same manner
as rollovers from qualified retirement plans (as
defined in section 4974(c)).''.
(B) Deferral limit determined without regard to
rollover amounts.--Section 457(b)(2) (defining eligible
deferred compensation plan) is amended by inserting
``(other than rollover amounts)'' after ``taxable
year''.
(C) Direct rollover.--Paragraph (1) of section
457(d) 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
inserting after subparagraph (B) the following:
``(C) in the case of a plan maintained by an
employer described in subsection (e)(1)(A), the plan
meets requirements similar to the requirements of
section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee transfer
in accordance with section 401(a)(31) shall not be includible
in gross income for the taxable year of transfer.''.
(D) Withholding.--
(i) Paragraph (12) of section 3401(a) is
amended by adding at the end the following:
``(E) under or to an eligible deferred compensation
plan which, at the time of such payment, is a plan
described in section 457(b) maintained by an employer
described in section 457(e)(1)(A); or''.
(ii) Paragraph (3) of section 3405(c) is
amended to read as follows:
``(3) Eligible rollover distribution.--For purposes of this
subsection, the term `eligible rollover distribution' has the
meaning given such term by section 402(f)(2)(A).''.
(iii) Liability for withholding.--
Subparagraph (B) of section 3405(d)(2) is
amended by striking ``or'' at the end of clause
(ii), by striking the period at the end of
clause (iii) and inserting ``, or'', and by
adding at the end the following:
``(iv) section 457(b).''.
(2) Rollovers to section 457 plans.--
(A) In general.--Section 402(c)(8)(B) (defining
eligible retirement plan) is amended by striking
``and'' at the end of clause (iii), by striking the
period at the end of clause (iv) and inserting ``,
and'', and by inserting after clause (iv) the following
new clause:
``(v) an eligible deferred compensation
plan described in section 457(b) of an employer
described in section 457(e)(1)(A).''.
(B) Separate accounting.--Section 402(c) is amended
by adding at the end the following new paragraph:
``(11) Separate accounting.--Unless a plan described in
clause (v) of paragraph (8)(B) agrees to separately account for
amounts rolled into such plan from eligible retirement plans
not described in such clause, the plan described in such clause
may not accept transfers or rollovers from such retirement
plans.''.
(C) 10 percent additional tax.--Subsection (t) of
section 72 (relating to 10-percent additional tax on
early distributions from qualified retirement plans) is
amended by adding at the end the following new
paragraph:
``(9) Special rule for rollovers to section 457 plans.--For
purposes of this subsection, a distribution from an eligible
deferred compensation plan (as defined in section 457(b)) of an
employer described in section 457(e)(1)(A) shall be treated as
a distribution from a qualified retirement plan described in
4974(c)(1) to the extent that such distribution is attributable
to an amount transferred to an eligible deferred compensation
plan from a qualified retirement plan (as defined in section
4974(c)).''.
(b) Allowance of Rollovers From and to 403(b) Plans.--
(1) Rollovers from section 403(b) plans.--Section
403(b)(8)(A)(ii) (relating to rollover amounts) is amended by
striking ``such distribution'' and all that follows and
inserting ``such distribution to an eligible retirement plan
described in section 402(c)(8)(B), and''.
(2) Rollovers to section 403(b) plans.--Section
402(c)(8)(B) (defining eligible retirement plan), as amended by
subsection (a), is amended by striking ``and'' at the end of
clause (iv), by striking the period at the end of clause (v)
and inserting
``, and'', and by inserting after clause (v) the following new
clause:
``(vi) an annuity contract described in
section 403(b).''
(c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to
recipients of distributions eligible for rollover treatment) 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:
``(E) of the provisions under which distributions
from the eligible retirement plan receiving the
distribution may be subject to restrictions and tax
consequences which are different from those applicable
to distributions from the plan making such
distribution.''.
(d) Spousal Rollovers.--Section 402(c)(9) (relating to rollover
where spouse receives distribution after death of employee) is amended
by striking ``; except that'' and all that follows up to the end
period.
(e) Conforming Amendments.--
(1) Section 72(o)(4) is amended by striking ``and
408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and
457(e)(16)''.
(2) Section 219(d)(2) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(3) Section 401(a)(31)(B) is amended by striking ``and
403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and
457(e)(16)''.
(4) Subparagraph (A) of section 402(f)(2) is amended by
striking ``or paragraph (4) of section 403(a)'' and inserting
``, paragraph (4) of section 403(a), subparagraph (A) of
section 403(b)(8), or subparagraph (A) of section 457(e)(16)''.
(5) Paragraph (1) of section 402(f) is amended by striking
``from an eligible retirement plan''.
(6) Subparagraphs (A) and (B) of section 402(f)(1) are
amended by striking ``another eligible retirement plan'' and
inserting ``an eligible retirement plan''.
(7) Subparagraph (B) of section 403(b)(8) is amended to
read as follows:
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) and (9) of section 402(c)
and section 402(f) shall apply for purposes of
subparagraph (A), except that section 402(f) shall be
applied to the payor in lieu of the plan
administrator.''.
(8) Section 408(a)(1) is amended by striking ``or
403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
(9) Subparagraphs (A) and (B) of section 415(b)(2) are each
amended by striking ``and 408(d)(3)'' and inserting
``403(b)(8), 408(d)(3), and 457(e)(16)''.
(10) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
(11) Section 4973(b)(1)(A) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(f) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from an
eligible retirement plan (as defined in clause (iii) or (iv) of
section 402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such plan on
behalf of such individual which is permitted solely by reason
of any amendment made by this section.
SEC. 1232. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) In General.--Subparagraph (A) of section 408(d)(3) (relating to
rollover amounts) is amended by adding ``or'' at the end of clause (i),
by striking clauses (ii) and (iii), and by adding at the end the
following:
``(ii) the entire amount received
(including money and any other property) is
paid into an eligible retirement plan for the
benefit of such individual not later than the
60th day after the date on which the payment or
distribution is received, except that the
maximum amount which may be paid into such plan
may not exceed the portion of the amount
received which is includible in gross income
(determined without regard to this paragraph).
For purposes of clause (ii), the term `eligible
retirement plan' has the meaning given such term by
clauses (iii), (iv), (v), and (vi) of section
402(c)(8)(B).''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 403(b) is amended by striking
``section 408(d)(3)(A)(iii)'' and inserting ``section
408(d)(3)(A)(ii)''.
(2) Clause (i) of section 408(d)(3)(D) is amended by
striking ``(i), (ii), or (iii)'' and inserting ``(i) or (ii)''.
(3) Subparagraph (G) of section 408(d)(3) is amended to
read as follows:
``(G) Simple retirement accounts.--In the case of
any payment or distribution out of a simple retirement
account (as defined in subsection (p)) to which section
72(t)(6) applies, this paragraph shall not apply unless
such payment or distribution is paid into another
simple retirement account.''.
(c) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from an
eligible retirement plan (as defined in clause (iii) or (iv) of
section 402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such plan on
behalf of such individual which is permitted solely by reason
of the amendments made by this section.
SEC. 1233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) Rollovers From Exempt Trusts.--Paragraph (2) of section 402(c)
(relating to maximum amount which may be rolled over) is amended by
adding at the end the following: ``The preceding sentence shall not
apply to such distribution to the extent--
``(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust which
is part of a plan which is a defined contribution plan
and which agrees to separately account for amounts so
transferred, including separately accounting for the
portion of such distribution which is includible in
gross income and the portion of such distribution which
is not so includible, or
``(B) such portion is transferred to an eligible
retirement plan described in clause (i) or (ii) of
paragraph (8)(B).''.
(b) Optional Direct Transfer of Eligible Rollover Distributions.--
Subparagraph (B) of section 401(a)(31) (relating to limitation) is
amended by adding at the end the following: ``The preceding sentence
shall not apply to such distribution if the plan to which such
distribution is transferred--
``(i) agrees to separately account for
amounts so transferred, including separately
accounting for the portion of such distribution
which is includible in gross income and the
portion of such distribution which is not so
includible, or
``(ii) is an eligible retirement plan
described in clause (i) or (ii) of section
402(c)(8)(B).''.
(c) Rules for Applying Section 72 to IRAs.--Paragraph (3) of
section 408(d) (relating to special rules for applying section 72) is
amended by inserting at the end the following:
``(H) Application of section 72.--
``(i) In general.--If--
``(I) a distribution is made from
an individual retirement plan, and
``(II) a rollover contribution is
made to an eligible retirement plan
described in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all
or part of such distribution,
then, notwithstanding paragraph (2), the rules
of clause (ii) shall apply for purposes of
applying section 72.
``(ii) Applicable rules.--In the case of a
distribution described in clause (i)--
``(I) section 72 shall be applied
separately to such distribution,
``(II) notwithstanding the pro rata
allocation of income on, and investment
in the contract, to distributions under
section 72, the portion of such
distribution rolled over to an eligible
retirement plan described in clause (i)
shall be treated as from income on the
contract (to the extent of the
aggregate income on the contract from
all individual retirement plans of the
distributee), and
``(III) appropriate adjustments
shall be made in applying section 72 to
other distributions in such taxable
year and subsequent taxable years.''
(d) Effective Date.--The amendments made by this section shall
apply to distributions made after December 31, 2000.
SEC. 1234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) Exempt Trusts.--Paragraph (3) of section 402(c) (relating to
transfer must be made within 60 days of receipt) is amended to read as
follows:
``(3) Transfer must be made within 60 days of receipt.--
``(A) In general.--Except as provided in
subparagraph (B), paragraph (1) shall not apply to any
transfer of a distribution made after the 60th day
following the day on which the distributee received the
property distributed.
``(B) Hardship exception.--The Secretary may waive
the 60-day requirement under subparagraph (A) where the
failure to waive such requirement would be against
equity or good conscience, including casualty,
disaster, or other events beyond the reasonable control
of the individual subject to such requirement.''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to rollover
contributions) is amended by adding after subparagraph (H) the
following new subparagraph:
``(I) Waiver of 60-day requirement.--The Secretary
may waive the 60-day requirement under subparagraphs
(A) and (D) where the failure to waive such requirement
would be against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to such
requirement.''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
SEC. 1235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) In general.--Paragraph (6) of section 411(d) (relating
to accrued benefit not to be decreased by amendment) is amended
by adding at the end the following:
``(D) Plan transfers.--
``(i) A defined contribution plan (in this
subparagraph referred to as the `transferee
plan') shall not be treated as failing to meet
the requirements of this subsection merely
because the transferee plan does not provide
some or all of the forms of distribution
previously available under another defined
contribution plan (in this subparagraph
referred to as the `transferor plan') to the
extent that--
``(I) the forms of distribution
previously available under the
transferor plan applied to the account
of a participant or beneficiary under
the transferor plan that was
transferred from the transferor plan to
the transferee plan pursuant to a
direct transfer rather than pursuant to
a distribution from the transferor
plan;
``(II) the terms of both the
transferor plan and the transferee plan
authorize the transfer described in
subclause (I);
``(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan;
``(IV) the election described in
subclause (III) was made after the
participant or beneficiary received a
notice describing the consequences of
making the election;
``(V) if the transferor plan
provides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the
transfer is made with the consent of
the participant's spouse (if any), and
such consent meets requirements similar
to the requirements imposed by section
417(a)(2); and
``(VI) the transferee plan allows
the participant or beneficiary
described in subclause (III) to receive
any distribution to which the
participant or beneficiary is entitled
under the transferee plan in the form
of a single sum distribution.
``(ii) Clause (i) shall apply to plan
mergers and other transactions having the
effect of a direct transfer, including
consolidations of benefits attributable to
different employers within a multiple employer
plan.
``(E) Elimination of form of distribution.--Except
to the extent provided in regulations, a defined
contribution plan shall not be treated as failing to
meet the requirements of this section merely because of
the elimination of a form of distribution previously
available thereunder. This subparagraph shall not apply
to the elimination of a form of distribution with
respect to any participant unless--
``(i) a single sum payment is available to
such participant at the same time or times as
the form of distribution being eliminated; and
``(ii) such single sum payment is based on
the same or greater portion of the
participant's account as the form of
distribution being eliminated.''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Regulations.--
(1) In general.--The last sentence of paragraph (6)(B) of
section 411(d) (relating to accrued benefit not to be decreased
by amendment) is amended to read as follows: ``The Secretary
may by regulations provide that this subparagraph shall not
apply to any plan amendment that does not adversely affect the
rights of participants in a material manner.''.
(2) Secretary directed.--Not later than December 31, 2001,
the Secretary of the Treasury is directed to issue final
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986. Such regulations shall apply to plan years
beginning after December 31, 2001, or such earlier date as is
specified by the Secretary of the Treasury.
SEC. 1236. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is amended by
striking ``separation from service'' and inserting
``severance from employment''.
(B) Subparagraph (A) of section 401(k)(10)
(relating to distributions upon termination of plan or
disposition of assets or subsidiary) is amended to read
as follows:
``(A) In general.--An event described in this
subparagraph is the termination of the plan without
establishment or maintenance of another defined
contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7)).''.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking ``An event'' in
clause (i) and inserting ``A
termination'', and
(II) by striking ``the event'' in
clause (i) and inserting ``the
termination'',
(ii) by striking subparagraph (C), and
(iii) by striking ``or disposition of
assets or subsidiary'' in the heading.
(2) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of section
403(b) are each amended by striking ``separates from
service'' and inserting ``has a severance from
employment''.
(B) The heading for paragraph (11) of section
403(b) is amended by striking ``separation from
service'' and inserting ``severance from employment''.
(3) Section 457.--Clause (ii) of section 457(d)(1)(A) is
amended by striking ``is separated from service'' and inserting
``has a severance from employment''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
SEC. 1237. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT
PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 is amended by
adding at the end the following new paragraph:
``(13) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross income
by reason of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service credit
(as defined in section 415(n)(3)(A)) under such plan,
or
``(B) a repayment to which section 415 does not
apply by reason of subsection (k)(3) thereof.''.
(b) 457 Plans.--
(1) Subsection (e) of section 457 is amended by adding
after paragraph (17) the following new paragraph:
``(18) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross income
by reason of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service credit
(as defined in section 415(n)(3)(A)) under such plan,
or
``(B) a repayment to which section 415 does not
apply by reason of subsection (k)(3) thereof.''.
(2) Section 457(b)(2) is amended by striking ``(other than
rollover amounts)'' and inserting ``(other than rollover
amounts and amounts received in a transfer referred to in
subsection (e)(16))''.
(c) Effective Date.--The amendments made by this section shall
apply to trustee-to-trustee transfers after December 31, 2000.
SEC. 1238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT
AMOUNTS.
(a) In General.--Section 411(a)(11) (relating to restrictions on
certain mandatory distributions) is amended by adding at the end the
following:
``(D) Special rule for rollover contributions.--A
plan shall not fail to meet the requirements of this
paragraph if, under the terms of the plan, the present
value of the nonforfeitable accrued benefit is
determined without regard to that portion of such
benefit which is attributable to rollover contributions
(and earnings allocable thereto). For purposes of this
subparagraph, the term `rollover contributions' means
any rollover contribution under sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(b) Eligible Deferred Compensation Plans.--Clause (i) of section
457(e)(9)(A) is amended by striking ``such amount'' and inserting ``the
portion of such amount which is not attributable to rollover
contributions (as defined in section 411(a)(11)(D))''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
SEC. 1239. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR SECTION
457 PLANS.
(a) Minimum Distribution Requirements.--Paragraph (2) of section
457(d) (relating to distribution requirements) is amended to read as
follows:
``(2) Minimum distribution requirements.--A plan meets the
minimum distribution requirements of this paragraph if such
plan meets the requirements of section 401(a)(9).''
(b) Inclusion in Gross Income.--
(1) Year of inclusion.--Subsection (a) of section 457
(relating to year of inclusion in gross income) is amended to
read as follows:
``(a) Year of inclusion in gross income.--
``(1) In general.--Any amount of compensation deferred
under an eligible deferred compensation plan, and any income
attributable to the amounts so deferred, shall be includible in
gross income only for the taxable year in which such
compensation or other income--
``(A) is paid to the participant or other
beneficiary, in the case of a plan of an eligible
employer described in subsection (e)(1)(A), and
``(B) is paid or otherwise made available to the
participant or other beneficiary, in the case of a plan
of an eligible employer described in subsection
(e)(1)(B).
``(2) Special rule for rollover amounts.--To the extent
provided in section 72(t)(9), section 72(t) shall apply to any
amount includible in gross income under this subsection.''.
(2) Conforming amendment.--So much of paragraph (9) of
section 457(e) as precedes subparagraph (A) is amended to read
as follows:
``(9) Benefits of tax exempt organization plans not treated
as made available by reason of certain elections, etc.--In the
case of an eligible deferred compensation plan of an employer
described in subsection (e)(1)(B)--''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2000.
Subtitle D--Strengthening Pension Security and Enforcement
SEC. 1241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) In General.--Section 412(c)(7) (relating to full-funding
limitation) is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2004, the applicable
percentage'', and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of
subparagraph (A)(i)(I), the applicable percentage shall
be determined in accordance with the following table:
``In the case of any plan year
The applicable
beginning in--
percentage is--
2001................................... 160
2002................................... 165
2003................................... 170.''.
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 1242. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND APPLIED TO
ALL DEFINED BENEFIT PLANS.
(a) In General.--Subparagraph (D) of section 404(a)(1) (relating to
special rule in case of certain plans) is amended to read as follows:
``(D) Special rule in case of certain plans.--
``(i) In general.--In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deductible
under the limitations of this paragraph shall
not be less than the unfunded termination
liability (determined as if the proposed
termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retirement
Income Security Act of 1974 were the last day
of the plan year).
``(ii) Plans with less than 100
participants.--For purposes of this
subparagraph, in the case of a plan which has
less than 100 participants for the plan year,
termination liability shall not include the
liability attributable to benefit increases for
highly compensated employees (as defined in
section 414(q)) resulting from a plan amendment
which is made or becomes effective, whichever
is later, within the last 2 years before the
termination date.
``(iii) Rule for determining number of
participants.--For purposes of determining
whether a plan has more than 100 participants,
all defined benefit plans maintained by the
same employer (or any member of such employer's
controlled group (within the meaning of section
412(l)(8)(C))) shall be treated as 1 plan, but
only employees of such member or employer shall
be taken into account.
``(iv) Plans established and maintain by
professional service employers.--Clause (i)
shall not apply to a plan described in section
4021(b)(13) of the Employee Retirement Income
Security Act of 1974.''.
(b) Conforming Amendment.--Paragraph (6) of section 4972(c) is
amended to read as follows:
``(6) Exceptions.--In determining the amount of
nondeductible contributions for any taxable year, there shall
not be taken into account so much of the contributions to 1 or
more defined contribution plans which are not deductible when
contributed solely because of section 404(a)(7) as does not
exceed the greater of--
``(A) the amount of contributions not in excess of
6 percent of compensation (within the meaning of
section 404(a)) paid or accrued (during the taxable
year for which the contributions were made) to
beneficiaries under the plans, or
``(B) the sum of--
``(i) the amount of contributions described
in section 401(m)(4)(A), plus
``(ii) the amount of contributions
described in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts contributed
to a defined benefit plan and then to amounts described in
subparagraph (B).''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 1243. MISSING PARTICIPANTS.
(a) In General.--Section 4050 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating
subsection (c) as subsection (e) and by inserting after subsection (b)
the following:
``(c) Multiemployer Plans.--The corporation shall prescribe rules
similar to the rules in subsection (a) for multiemployer plans covered
by this title that terminate under section 4041A.
``(d) Plans Not Otherwise Subject to Title.--
``(1) Transfer to corporation.--The plan administrator of a
plan described in paragraph (4) may elect to transfer a missing
participant's benefits to the corporation upon termination of
the plan.
``(2) Information to the corporation.--To the extent
provided in regulations, the plan administrator of a plan
described in paragraph (4) shall, upon termination of the plan,
provide the corporation information with respect to benefits of
a missing participant if the plan transfers such benefits--
``(A) to the corporation, or
``(B) to an entity other than the corporation or a
plan described in paragraph (4)(B)(ii).
``(3) Payment by the corporation.--If benefits of a missing
participant were transferred to the corporation under paragraph
(1), the corporation shall, upon location of the participant or
beneficiary, pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit) either--
``(A) in a single sum (plus interest), or
``(B) in such other form as is specified in
regulations of the corporation.
``(4) Plans described.--A plan is described in this
paragraph if--
``(A) the plan is a pension plan (within the
meaning of section 3(2))--
``(i) to which the provisions of this
section do not apply (without regard to this
subsection), and
``(ii) which is not a plan described in
paragraphs (2) through (11) of section 4021(b),
and
``(B) at the time the assets are to be distributed
upon termination, the plan--
``(i) has missing participants, and
``(ii) has not provided for the transfer of
assets to pay the benefits of all missing
participants to another pension plan (within
the meaning of section 3(2)).
``(5) Certain provisions not to apply.--Subsections (a)(1)
and (a)(3) shall not apply to a plan described in paragraph
(4).''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made after final regulations implementing subsections
(c) and (d) of section 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are prescribed.
SEC. 1244. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating to
nondeductible contributions) is amended by adding at the end the
following new paragraph:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year, an
employer may elect for such year not to take into account any
contributions to a defined benefit plan except to the extent
that such contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without regard to
subparagraph (A)(i)(I) thereof). For purposes of this
paragraph, the deductible limits under section 404(a)(7) shall
first be applied to amounts contributed to defined contribution
plans and then to amounts described in this paragraph. If an
employer makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer for such
taxable year.''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 1245. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT
PLANS SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.
(a) In General.--Chapter 43 of subtitle D (relating to qualified
pension, etc., plans) is amended by adding at the end the following new
section:
``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO
SATISFY NOTICE REQUIREMENTS.
``(a) Imposition of Tax.--There is hereby imposed a tax on the
failure of any applicable pension plan to meet the requirements of
subsection (e) with respect to any applicable individual.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(2) Noncompliance period.--For purposes of this section,
the term `noncompliance period' means, with respect to any
failure, the period beginning on the date the failure first
occurs and ending on the date the failure is corrected.
``(c) Limitations on Amount of Tax.--
``(1) Overall limitation for unintentional failures.--In
the case of failures that are due to reasonable cause and not
to willful neglect, the tax imposed by subsection (a) for
failures during the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000. For
purposes of the preceding sentence, all multiemployer plans of
which the same trust forms a part shall be treated as 1 plan.
For purposes of this paragraph, if not all persons who are
treated as a single employer for purposes of this section have
the same taxable year, the taxable years taken into account
shall be determined under principles similar to the principles
of section 1561.
``(2) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax would
be excessive relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for the tax
imposed by subsection (a):
``(1) In the case of a plan other than a multiemployer
plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice Requirements for Plans Significantly Reducing Benefit
Accruals.--
``(1) In general.--If an applicable pension plan is amended
to provide for a significant reduction in the rate of future
benefit accrual, the plan administrator shall provide written
notice to each applicable individual (and to each employee
organization representing applicable individuals).
``(2) Notice.--The notice required by paragraph (1) shall
be written in a manner calculated to be understood by the
average plan participant and shall provide sufficient
information (as determined in accordance with regulations
prescribed by the Secretary) to allow applicable individuals to
understand the effect of the plan amendment.
``(3) Timing of notice.--Except as provided in regulations,
the notice required by paragraph (1) shall be provided within a
reasonable time before the effective date of the plan
amendment.
``(4) Designees.--Any notice under paragraph (1) may be
provided to a person designated, in writing, by the person to
which it would otherwise be provided.
``(5) Notice before adoption of amendment.--A plan shall
not be treated as failing to meet the requirements of paragraph
(1) merely because notice is provided before the adoption of
the plan amendment if no material modification of the amendment
occurs before the amendment is adopted.
``(f) Applicable Individual; Applicable Pension Plan.--For purposes
of this section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) any participant in the plan, and
``(B) any beneficiary who is an alternate payee
(within the meaning of section 414(p)(8)) under an
applicable qualified domestic relations order (within
the meaning of section 414(p)(1)(A)),
who may reasonably be expected to be affected by such plan
amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) any defined benefit plan, or
``(B) an individual account plan which is subject
to the funding standards of section 412,
which had 100 or more participants who had accrued a benefit,
or with respect to whom contributions were made, under the plan
(whether or not vested) as of the last day of the plan year
preceding the plan year in which the plan amendment becomes
effective.''
(b) Clerical Amendment.--The table of sections for chapter 43 of
subtitle D is amended by adding at the end the following new item:
``Sec. 4980F. Failure of applicable plans reducing benefit accruals to
satisfy notice requirements.''
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan amendments taking effect on or after the date of
the enactment of this Act.
(2) Transition.--Until such time as the Secretary of the
Treasury issues regulations under sections 4980F(e)(2) and (3)
of the Internal Revenue Code of 1986 (as added by the amendment
made by subsection (a)), a plan shall be treated as meeting the
requirements of such section if it makes a good faith effort to
comply with such requirements.
(3) Special rule.--The period for providing any notice
required by the amendments made by this section shall not end
before the date which is 3 months after the date of the
enactment of this Act.
Subtitle E--Reducing Regulatory Burdens
SEC. 1251. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended to read
as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2000.
SEC. 1252. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--Section 412(c)(9) (relating to annual valuation)
is amended--
(1) by striking ``For purposes'' and inserting the
following:
``(A) In general.--For purposes'', and
(2) by adding at the end the following:
``(B) Election to use prior year valuation.--
``(i) In general.--Except as provided in
clause (ii), if, for any plan year--
``(I) an election is in effect
under this subparagraph with respect to
a plan, and
``(II) the assets of the plan are
not less than 125 percent of the plan's
current liability (as defined in
paragraph (7)(B)), determined as of the
valuation date for the preceding plan
year,
then this section shall be applied using the
information available as of such valuation
date.
``(ii) Exceptions.--
``(I) Actual valuation every 3
years.--Clause (i) shall not apply for
more than 2 consecutive plan years and
valuation shall be under subparagraph
(A) with respect to any plan year to
which clause (i) does not apply by
reason of this clause.
``(II) Regulations.--Subclause (I)
shall not apply to the extent that more
frequent valuations are required under
the regulations under subparagraph (A).
``(iii) Adjustments.--Information under
clause (i) shall, in accordance with
regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) Election.--An election under this
subparagraph, once made, shall be irrevocable
without the consent of the Secretary.''.
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 1253. FLEXIBILITY AND NONDISCRIMINATION AND LINE OF BUSINESS
RULES.
The Secretary of the Treasury shall, on or before December 31,
2000, modify the existing regulations issued under section 401(a)(4)
and section 414(r) of the Internal Revenue Code of 1986 in order to
expand (to the extent that the Secretary determines appropriate) the
ability of a pension plan to demonstrate compliance with the
nondiscrimination and line of business requirements based upon the
facts and circumstances surrounding the design and operation of the
plan, even though the plan is unable to satisfy the mechanical tests
currently used to determine compliance.
SEC. 1254. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.
(a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1322(b)(5)) is amended to read as follows:
``(5)(A) For purposes of this paragraph, the term `majority owner'
means an individual who, at any time during the 60-month period ending
on the date the determination is being made--
``(i) owns the entire interest in an unincorporated trade
or business,
``(ii) in the case of a partnership, is a partner who owns,
directly or indirectly, 50 percent or more of either the
capital interest or the profits interest in such partnership,
or
``(iii) in the case of a corporation, owns, directly or
indirectly, 50 percent or more in value of either the voting
stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of
section 1563(e) of the Internal Revenue Code of 1986 shall apply
(determined without regard to section 1563(e)(3)(C)).
``(B) In the case of a participant who is a majority owner, the
amount of benefits guaranteed under this section shall equal the
product of--
``(i) a fraction (not to exceed 1) the numerator of which
is the number of years from the later of the effective date or
the adoption date of the plan to the termination date, and the
denominator of which is 10, and
``(ii) the amount of benefits that would be guaranteed
under this section if the participant were not a majority
owner.''.
(b) Modification of Allocation of Assets.--
(1) Section 4044(a)(4)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by
striking ``section 4022(b)(5)'' and inserting ``section
4022(b)(5)(B)''.
(2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is
amended--
(A) by striking ``(5)'' in paragraph (2) and
inserting ``(4), (5),'', and
(B) by redesignating paragraphs (3) through (6) as
paragraphs (4) through (7), respectively, and by
inserting after paragraph (2) the following:
``(3) If assets available for allocation under paragraph
(4) of subsection (a) are insufficient to satisfy in full the
benefits of all individuals who are described in that
paragraph, the assets shall be allocated first to benefits
described in subparagraph (A) of that paragraph. Any remaining
assets shall then be allocated to benefits described in
subparagraph (B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full the
benefits described in that subparagraph, the assets shall be
allocated pro rata among individuals on the basis of the
present value (as of the termination date) of their respective
benefits described in that subparagraph.''.
(c) Conforming Amendments.--
(1) Section 4021 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1321) is amended--
(A) in subsection (b)(9), by striking ``as defined
in section 4022(b)(6)'', and
(B) by adding at the end the following:
``(d) For purposes of subsection (b)(9), the term `substantial
owner' means an individual who, at any time during the 60-month period
ending on the date the determination is being made--
``(1) owns the entire interest in an unincorporated trade
or business,
``(2) in the case of a partnership, is a partner who owns,
directly or indirectly, more than 10 percent of either the
capital interest or the profits interest in such partnership,
or
``(3) in the case of a corporation, owns, directly or
indirectly, more than 10 percent in value of either the voting
stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of
section 1563(e) of the Internal Revenue Code of 1986 shall apply
(determined without regard to section 1563(e)(3)(C)).''.
(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is
amended by striking ``section 4022(b)(6)'' and inserting ``section
4021(d)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan
terminations--
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1341(c)) with respect to which notices of intent to
terminate are provided under section 4041(a)(2) of such
Act (29 U.S.C. 1341(a)(2)) after December 31, 2000, and
(B) under section 4042 of such Act (29 U.S.C. 1342)
with respect to which proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on the date of enactment of
this Act.
SEC. 1255. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND
DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause (ii), by
redesignating clause (iii) as clause (iv), and by inserting after
clause (ii) the following new clause:
``(iii) is, at the election of such
participants or their beneficiaries--
``(I) payable as provided in clause
(i) or (ii), or
``(II) paid to the plan and
reinvested in qualifying employer
securities, or''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 1256. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) In general.--Subparagraph (A) of section 417(a)(6) is
amended by striking ``90-day'' and inserting ``180-day''.
(2) Modification of regulations.--The Secretary of the
Treasury shall modify the regulations under sections 402(f),
411(a)(11), and 417 of the Internal Revenue Code of 1986 to
substitute ``180 days'' for ``90 days'' each place it appears
in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c),
and 1.417(e)-1(b).
(3) Effective date.--The amendments made by paragraph (1)
and the modifications required by paragraph (2) shall apply to
years beginning after December 31, 2000.
(b) Consent Regulation Inapplicable to Certain Distributions.--
(1) In general.--The Secretary of the Treasury shall modify
the regulations under section 411(a)(11) of the Internal
Revenue Code of 1986 to provide that the description of a
participant's right, if any, to defer receipt of a distribution
shall also describe the consequences of failing to defer such
receipt.
(2) Effective date.--The modifications required by
paragraph (1) shall apply to years beginning after December 31,
2000.
SEC. 1257. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY
COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c) of the Tax Reform
Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a) shall apply
to plan years beginning on or after January 1, 2000.
SEC. 1258. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that employees of
an organization described in section 403(b)(1)(A)(i) of the Internal
Revenue Code of 1986 who are eligible to make contributions under
section 403(b) pursuant to a salary reduction agreement may be treated
as excludable with respect to a plan under section 401(k), or section
401(m) of such Code that is provided under the same general arrangement
as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in such
section 401(k) plan or section 401(m) plan, and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such Code
are eligible to participate in such section 401(k) plan or
section 401(m) plan.
(b) Effective Date.--The modification required by subsection (a)
shall apply as of the same date set forth in section 1426(b) of the
Small Business Job Protection Act of 1996.
SEC. 1259. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT
ADVICE.
(a) In General.--Subsection (a) of section 132 (relating to
exclusion from gross income) is amended by striking ``or'' at the end
of paragraph (5), by striking the period at the end of paragraph (6)
and inserting ``, or'', and by adding at the end the following new
paragraph:
``(7) qualified retirement planning services.''.
(b) Qualified Retirement Planning Services Defined.--Section 132 is
amended by redesignating subsection (m) as subsection (n) and by
inserting after subsection (l) the following:
``(m) Qualified Retirement Planning Services.--
``(1) In general.--For purposes of this section, the term
`qualified retirement planning services' means any retirement
planning service provided to an employee and his spouse by an
employer maintaining a retirement plan.
``(2) Nondiscrimination rule.--Subsection (a)(7) shall
apply in the case of highly compensated employees only if such
services are available on substantially the same terms to each
member of the group of employees normally provided education
and information regarding the employer's pension plan.''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2000.
SEC. 1260. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any plan or contract
amendment--
(1) such plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A), and
(2) such plan shall not fail to meet the requirements of
section 411(d)(6) of the Internal Revenue Code of 1986 by
reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act, or
pursuant to any regulation issued under this Act, and
(B) on or before the last day of the first plan
year beginning on or after January 1, 2003.
In the case of a government plan (as defined in section 414(d)
of the Internal Revenue Code of 1986, this paragraph shall be
applied by substituting ``2005'' for ``2003''.
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative
or regulatory amendment described in paragraph
(1)(A) takes effect (or in the case of a plan
or contract amendment not required by such
legislative or regulatory amendment, the
effective date specified by the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan or
contract amendment were in effect, and
(B) such plan or contract amendment applies
retroactively for such period.
SEC. 1261. MODEL PLANS FOR SMALL BUSINESSES.
(a) In General.--Not later than December 31, 2000, the Secretary of
the Treasury is directed to issue at least one model defined
contribution plan and at least one model defined benefit plan that fit
the needs of small businesses and that shall be treated as meeting the
requirements of section 401(a) of the Internal Revenue Code of 1986
with respect to the form of the plan. To the extent that the
requirements of section 401(a) of such Code are modified after the
issuance of such plans, the Secretary of the Treasury shall, in a
timely manner, issue model amendments that, if adopted in a timely
manner by an employer that has a model plan in effect, shall cause such
model plan to be treated as meeting the requirements of section 401(a)
of such Code, as modified, with respect to the form of the plan.
(b) Prototype Plan Alternative.--The Secretary of the Treasury may
satisfy the requirements of subsection (a) through the enhancement and
simplification of the Secretary's programs for prototype plans in such
a manner as to achieve the purposes of subsection (a).
SEC. 1262. SIMPLIFIED ANNUAL FILING REQUIREMENT FOR PLANS WITH FEWER
THAN 25 EMPLOYEES.
(a) In General.--In the case of a retirement plan which covers less
than 25 employees on the 1st day of the plan year and meets the
requirements described in subsection (b), the Secretary of the Treasury
shall provide for the filing of a simplified annual return that is
substantially similar to the annual return required to be filed by a
one-participant retirement plan.
(b) Requirements.--A plan meets the requirements of this subsection
if it--
(1) meets the minimum coverage requirements of section
410(b) of the Internal Revenue Code of 1986 without being
combined with any other plan of the business that covers the
employees of the business,
(2) does not cover a business that is a member of an
affiliated service group, a controlled group of corporations,
or a group of businesses under common control, and
(3) does not cover a business that leases employees.
SEC. 1263. INTERMEDIATE SANCTIONS FOR INADVERTENT FAILURES.
The Secretary of the Treasury shall continue to update and improve
the Employee Plans Compliance Resolution System (or any successor
program) giving special attention to--
(1) increasing the awareness and knowledge of small
employers concerning the availability and use of the program,
(2) taking into account special concerns and circumstances
that small employers face with respect to compliance and
correction of compliance failures,
(3) extending the duration of the self-correction period
under the Administrative Policy Regarding Self-Correction for
significant compliance failures,
(4) expanding the availability to correct insignificant
compliance failures under the Administrative Policy Regarding
Self-Correction during audit, and
(5) assuring that any tax, penalty, or sanction that is
imposed by reason of a compliance failure is not excessive and
bears a reasonable relationship to the nature, extent, and
severity of the failure.
TITLE XIII--MISCELLANEOUS PROVISIONS
Subtitle A--Provisions Primarily Affecting Individuals
SEC. 1301. EXCLUSION FOR FOSTER CARE PAYMENTS TO APPLY TO PAYMENTS BY
QUALIFIED PLACEMENT AGENCIES.
(a) In General.--The matter preceding subparagraph (B) of section
131(b)(1) (defining qualified foster care payment) is amended to read
as follows:
``(1) In general.--The term `qualified foster care payment'
means any payment made pursuant to a foster care program of a
State or political subdivision thereof--
``(A) which is paid by--
``(i) a State or political subdivision
thereof, or
``(ii) a qualified foster care placement
agency, and''.
(b) Qualified Foster Individuals To Include Individuals Placed by
Qualified Placement Agencies.--Subparagraph (B) of section 131(b)(2)
(defining qualified foster individual) is amended to read as follows:
``(B) a qualified foster care placement agency.''
(c) Qualified Foster Care Placement Agency Defined.--Subsection (b)
of section 131 is amended by redesignating paragraph (3) as paragraph
(4) and by inserting after paragraph (2) the following new paragraph:
``(3) Qualified foster care placement agency.--The term
`qualified foster care placement agency' means any placement
agency which is licensed or certified by--
``(A) a State or political subdivision thereof, or
``(B) an entity designated by a State or political
subdivision thereof,
for the foster care program of such State or political
subdivision to make foster care payments to providers of foster
care.''
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 1302. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS EXCLUDED
FROM GROSS INCOME.
(A) In General.--Part III of subchapter B of chapter 1 is amended
by inserting after section 138 the following new section:
``SEC. 138A. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.
``(a) In General.--Gross income of an individual does not include
amounts received, from an organization described in section 170(c), as
reimbursement of operating expenses with respect to use of a passenger
automobile for the benefit of such organization. The preceding sentence
shall apply only to the extent that such reimbursement would be
deductible under section 274(d) (determined by applying the standard
business mileage rate established pursuant to section 274(d)) if the
organization were not so described and such individual were an employee
of such organization.
``(b) No Double Benefit.--Subsection (a) shall not apply with
respect to any expenses if the individual claims a deduction or credit
for such expenses under any other provision of this title.
``(c) Exemption From Reporting Requirements.--Section 6041 shall
not apply with respect to reimbursements excluded from income under
subsection (a).''
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 is amended by inserting after the item
relating to section 138 the following new items:
``Sec. 138A. Reimbursement for use of
passenger automobile for
charity.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 1303. W-2 TO INCLUDE EMPLOYER SOCIAL SECURITY TAXES.
(a) In General.--Subsection (a) of section 6051 (relating to
receipts for employees) is amended by striking ``and'' at the end of
paragraph (10), by striking the period at the end of paragraph (11) and
inserting a comma, and by inserting after paragraph (11) the following
new paragraphs:
``(12) the amount of tax imposed by section 3111(a), and
``(13) the amount of tax imposed by section 3111(b).''
(b) Effective Date.--The amendment made by this section shall apply
with respect to remuneration paid after December 31, 1999.
Subtitle B--Provisions Primarily Affecting Businesses
SEC. 1311. DISTRIBUTIONS FROM PUBLICLY TRADED PARTNERSHIPS TREATED AS
QUALIFYING INCOME OF REGULATED INVESTMENT COMPANIES.
(a) In General.--Paragraph (2) of section 851(b) (defining
regulated investment company) is amended by inserting ``income derived
from an interest in a publicly traded partnership (as defined in
section 7704(b)),'' after ``dividends, interest,''.
(b) Source Flow-Through Rule Not To Apply.--The last sentence of
section 851(b) is amended by inserting ``(other than a publicly traded
partnership (as defined in section 7704(b)))'' after ``derived from a
partnership''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 1312. SPECIAL PASSIVE ACTIVITY RULE FOR PUBLICLY TRADED
PARTNERSHIPS TO APPLY TO REGULATED INVESTMENT COMPANIES.
(a) In General.--Subsection (k) of section 469 (relating to
separate application of section in case of publicly traded
partnerships) is amended by adding at the end the following new
paragraph:
``(4) Application to regulated investment companies.--For
purposes of this section, a regulated investment company (as
defined in section 851) holding an interest in a publicly
traded partnership shall be treated as a taxpayer described in
subsection (a)(2) with respect to items attributable to such
interest.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 1313. LARGE ELECTRIC TRUCKS, VANS, AND BUSES ELIGIBLE FOR
DEDUCTION FOR CLEAN-FUEL VEHICLES IN LIEU OF CREDIT.
(a) In General.--Paragraph (1) of section 30(c) (relating to credit
for qualified electric vehicles) is amended by adding at the end the
following new flush sentence:
``Such term shall not include any vehicle described in
subclause (I) or (II) of section 179A(b)(1)(A)(iii).''
(b) Effective Date.--The amendment made by this section shall apply
to property placed in service after December 31, 1999.
SEC. 1314. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR DECOMMISSIONING
COSTS.
(a) Repeal of Limitation on Deposits Into Fund Based on Cost of
Service.--Subsection (b) of section 468A is amended to read as follows:
``(b) Limitation on Amounts Paid Into Fund.--The amount which a
taxpayer may pay into the Fund for any taxable year shall not exceed
the ruling amount applicable to such taxable year.''
(b) Clarification of Treatment of Fund Transfers.--Subsection (e)
of section 468A is amended by adding at the end the following new
paragraph:
``(8) Treatment of fund transfers.--If, in connection with
the transfer of the taxpayer's interest in a nuclear
powerplant, the taxpayer transfers the Fund with respect to
such powerplant to the transferee of such interest and the
transferee elects to continue the application of this section
to such Fund--
``(A) the transfer of such Fund shall not cause
such Fund to be disqualified from the application of
this section, and
``(B) no amount shall be treated as distributed
from such Fund, or be includible in gross income, by
reason of such transfer.''
(c) Transfers of Balances in Nonqualified Funds.--Section 468A is
amended by redesignating subsections (f) and (g) as subsections (g) and
(h), respectively, and by inserting after subsection (e) the following
new subsection:
``(f) Transfers of Balances in Nonqualified Funds Into Qualified
Funds.--
``(1) In general.--Notwithstanding subsection (b), any
taxpayer maintaining a Fund to which this section applies with
respect to a nuclear powerplant may transfer into such Fund
amounts held in any nonqualified fund of such taxpayer with
respect to such powerplant.
``(2) Maximum amount permitted to be transferred.--The
amount permitted to be transferred under paragraph (1) shall
not exceed the balance in the nonqualified fund as of December
31, 1998.
``(3) Deduction for amounts transferred.--
``(A) In general.--The deduction allowed by
subsection (a) for any transfer permitted by this
subsection shall be allowed ratably over the remaining
estimated useful life (within the meaning of subsection
(d)(2)(A)) of the nuclear powerplant, beginning with
the later of the taxable year during which the transfer
is made or the taxpayer's first taxable year beginning
after December 31, 2001.
``(B) Denial of deduction for previously deducted
amounts.--No deduction shall be allowed for any
transfer under this subsection of an amount for which a
deduction was allowed when such amount was paid into
the nonqualified fund. For purposes of the preceding
sentence, a ratable portion of each transfer shall be
treated as being from previously deducted amounts to
the extent thereof.
``(C) Transfers of qualified funds.--If--
``(i) any transfer permitted by this
subsection is made to any Fund to which this
section applies, and
``(ii) such Fund is transferred thereafter,
any deduction under this subsection for taxable years
ending after the date that such Fund is transferred
shall be allowed to the transferee and not to the
transferor. The preceding sentence shall not apply if
the transferor is an organization exempt from tax
imposed by this chapter.
``(4) New ruling amount required.--Paragraph (1) shall not
apply to any transfer unless the taxpayer requests from the
Secretary a new schedule of ruling amounts in connection with
such transfer.
``(5) Nonqualified fund.--For purposes of this subsection,
the term `nonqualified fund' means, with respect to any nuclear
powerplant, any fund in which amounts are irrevocably set aside
pursuant to the requirements of any State or Federal agency
exclusively for the purpose of funding the decommissioning of
such powerplant.
``(6) No basis in qualified funds.--Notwithstanding any
other provision of law, the basis of any Fund to which this
section applies shall not be increased by reason of any
transfer permitted by this subsection.''
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 1315. CONSOLIDATION OF LIFE INSURANCE COMPANIES WITH OTHER
CORPORATIONS.
(a) In General.--Section 1504(b) (defining includible corporation)
is amended by striking paragraph (2).
(b) Conforming Amendments.--
(1) Subsection (c) of section 1503 is amended by striking
paragraph (2) (relating to losses of recent nonlife
affiliates).
(2) Section 1504 is amended by striking subsection (c) and
by redesignating subsections (d), (e), and (f) as subsections
(c), (d), and (e), respectively.
(3) Section 1503(c)(1) (relating to special rule for
application of certain losses against income of insurance
companies taxed under section 801) is amended by striking ``an
election under section 1504(c)(2) is in effect for the taxable
year and''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
(d) No Carryback Before January 1, 2005.--To the extent that a
consolidated net operating loss is allowed or increased by reason of
the amendments made by this section, such loss may not be carried back
to a taxable year beginning before January 1, 2005.
(e) Nontermination of Group.--No affiliated group shall terminate
solely as a result of the amendments made by this section.
(f) Waiver of 5-Year Waiting Period.--Under regulations prescribed
by the Secretary of the Treasury or his delegate, an automatic waiver
from the 5-year waiting period for reconsolidation provided in section
1504(a)(3) of such Code shall be granted to any corporation which was
previously an includible corporation but was subsequently deemed a
nonincludible corporation as a result of becoming a subsidiary of a
corporation which was not an includible corporation solely by operation
of section 1504(c)(2) of such Code (as in effect on the day before the
date of enactment of this Act).
Subtitle C--Provisions Relating to Excise Taxes
SEC. 1321. CONSOLIDATION OF HAZARDOUS SUBSTANCE SUPERFUND AND LEAKING
UNDERGROUND STORAGE TANK TRUST FUND.
(a) In General.--Subchapter A of chapter 98 (relating to trust fund
code) is amended by striking sections 9507 and 9508 and inserting the
following new section:
``SEC. 9507. ENVIRONMENTAL REMEDIATION TRUST FUND.
``(a) Creation of Trust Fund.--There is established in the Treasury
of the United States a trust fund to be known as the `Environmental
Remediation Trust Fund' consisting of such amounts as may be--
``(1) appropriated to the Environmental Remediation Trust
Fund as provided in this section,
``(2) appropriated to the Environmental Remediation Trust
Fund pursuant to section 517(b) of the Superfund Revenue Act of
1986, or
``(3) credited to the Environmental Remediation Trust Fund
as provided in section 9602(b).
``(b) Transfers to Environmental Remediation Trust Fund.--
``(1) In general.--There are hereby appropriated to the
Environmental Remediation Trust Fund amounts equivalent to--
``(A) the taxes received in the Treasury under--
``(i) section 59A, 4611, 4661, or 4671
(relating to environmental taxes),
``(ii) section 4041(d) (relating to
additional taxes on motor fuels),
``(iii) section 4081 (relating to tax on
gasoline, diesel fuel, and kerosene) to the
extent attributable to the Environmental
Remediation Trust Fund financing rate under
such section,
``(iv) section 4091 (relating to tax on
aviation fuel) to the extent attributable to
the Environmental Remediation Trust Fund
financing rate under such section, and
``(v) section 4042 (relating to tax on fuel
used in commercial transportation on inland
waterways) to the extent attributable to the
Environmental Remediation Trust Fund financing
rate under such section,
``(B) amounts recovered on behalf of the
Environmental Remediation Trust Fund under the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (hereinafter in this section
referred to as `CERCLA'),
``(C) all moneys recovered or collected under
section 311(b)(6)(B) of the Clean Water Act,
``(D) penalties assessed under title I of CERCLA,
``(E) punitive damages under section 107(c)(3) of
CERCLA, and
``(F) amounts received in the Treasury and
collected under section 9003(h)(6) of the Solid Waste
Disposal Act.
``(2) Limitation on transfers.--
``(A) In general.--Except as provided in
subparagraph (B), no amount may be appropriated or
credited to the Environmental Remediation Trust Fund on
and after the date of any expenditure from any such
Trust Fund which is not permitted by this section. The
determination of whether an expenditure is so permitted
shall be made without regard to--
``(i) any provision of law which is not
contained or referenced in this title or in a
revenue Act, and
``(ii) whether such provision of law is a
subsequently enacted provision or directly or
indirectly seeks to waive the application of
this paragraph.
``(B) Exception for prior obligations.--
Subparagraph (A) shall not apply to any expenditure to
liquidate any contract entered into (or for any amount
otherwise obligated) in accordance with the provisions
of this section.''
``(c) Expenditures From Environmental Remediation Trust Fund.--
``(1) In general.--Amounts in the Environmental Remediation
Trust Fund shall be available, as provided in appropriation
Acts, only for purposes of making expenditures--
``(A) to carry out the purposes of--
``(i) paragraphs (1), (2), (5), and (6) of
section 111(a) of CERCLA as in effect on July
12, 1999,
``(ii) section 111(c) of CERCLA (as so in
effect), other than paragraphs (1) and (2)
thereof, and
``(iii) section 111(m) of CERCLA (as so in
effect), or
``(B) to carry out section 9003(h) of the Solid
Waste Disposal Act as in effect on July 12, 1999.
``(2) Exception for certain transfers, etc., of hazardous
substances.--No amount in the Environmental Remediation Trust
Fund or derived from the Environmental Remediation Trust Fund
shall be available or used for the transfer or disposal of
hazardous waste carried out pursuant to a cooperative agreement
between the Administrator of the Environmental Protection
Agency and a State if the following conditions apply--
``(A) the transfer or disposal, if made on December
13, 1985, would not comply with a State or local
requirement,
``(B) the transfer is to a facility for which a
final permit under section 3005(a) of the Solid Waste
Disposal Act was issued after January 1, 1983, and
before November 1, 1984, and
``(C) the transfer is from a facility identified as
the McColl Site in Fullerton, California.
``(3) Transfers from trust fund for certain repayments and
credits.--
``(A) In general.--The Secretary shall pay from
time to time from the Environmental Remediation Trust
Fund into the general fund of the Treasury amounts
equivalent to--
``(i) amounts paid under--
``(I) section 6420 (relating to
amounts paid in respect of gasoline
used on farms),
``(II) section 6421 (relating to
amounts paid in respect of gasoline
used for certain nonhighway purposes or
by local transit systems), and
``(III) section 6427 (relating to
fuels not used for taxable purposes),
and
``(ii) credits allowed under section 34,
with respect to the taxes imposed by section 4041(d) or
by sections 4081 and 4091 (to the extent attributable
to the Leaking Underground Storage Tank Trust Fund
financing rate or the Environmental Remediation Trust
Fund financing rate under such sections).
``(B) Transfers based on estimates.--Transfers
under subparagraph (A) shall be made on the basis of
estimates by the Secretary, and proper adjustments
shall be made in amounts subsequently transferred to
the extent prior estimates were in excess of or less
than the amounts required to be transferred.
``(d) Liability of United States Limited to Amount in Trust Fund.--
``(1) General rule.--Any claim filed against the
Environmental Remediation Trust Fund may be paid only out of
the Environmental Remediation Trust Fund.
``(2) Coordination with other provisions.--Nothing in
CERCLA or the Superfund Amendments and Reauthorization Act of
1986 (or in any amendment made by either of such Acts) shall
authorize the payment by the United States Government of any
amount with respect to any such claim out of any source other
than the Environmental Remediation Trust Fund.
``(3) Order in which unpaid claims are to be paid.--If at
any time the Environmental Remediation Trust Fund has
insufficient funds to pay all of the claims payable out of the
Environmental Remediation Trust Fund at such time, such claims
shall, to the extent permitted under paragraph (1), be paid in
full in the order in which they were finally determined.''
(b) Conforming Amendments.--
(1) Subsections (c) and (d) of section 4611 are each
amended by striking ``Hazardous Substance Superfund'' each
place it appears and inserting ``Environmental Remediation
Trust Fund''.
(2) Subsection (c) of section 4661 is amended by striking
``Hazardous Substance Superfund'' and inserting ``Environmental
Remediation Trust Fund''.
(3) Sections 4041(d), 4042(b), 4081(a)(2)(B), 4081(d)(3),
4091(b), 4092(b), 6421(f), and 6427(l) are each amended by
striking ``Leaking Underground Storage Tank'' each place it
appears (other than the headings) and inserting ``Environmental
Remediation''.
(4) The heading for subsection (d) of section 4041 is
amended by striking ``Leaking Underground Storage Tank'' and
inserting ``Environmental Remediation''.
(5) The headings for subsections (a)(2)(B) and (d)(3) of
section 4081 and section 4091(b)(2) are each amended by
striking ``Leaking underground storage tank'' and inserting
``Environmental remediation''.
(c) Effective Date.--The amendments made by this section shall take
effect on October 1, 1999.
(d) Environmental Remediation Trust Fund Treated as Continuation of
Old Trust Funds.--The Environmental Remediation Trust Fund established
by the amendments made by this section shall be treated for all
purposes of law as a continuation of both the Hazardous Substance
Superfund and the Leaking Underground Storage Tank Trust Fund. Any
reference in any law to the Hazardous Substance Superfund or the
Leaking Underground Storage Tank Trust Fund shall be deemed to include
(wherever appropriate) a reference to the Environmental Remediation
Trust Fund established by such amendments.
SEC. 1322. REPEAL OF CERTAIN MOTOR FUEL EXCISE TAXES ON FUEL USED BY
RAILROADS AND ON INLAND WATERWAY TRANSPORTATION.
(a) Repeal of Leaking Underground Storage Tank Trust Fund Taxes on
Fuel Used in Trains.--
(1) In general.--Paragraph (1) of section 4041(d) is
amended by adding at the end the following new sentence: ``The
preceding sentence shall not apply to any sale for use, or use,
of fuel in a diesel-powered train.''
(2) Conforming amendments.--
(A) Paragraph (3) of section 6421(f) is amended by
striking ``with respect to--'' and all that follows
through ``so much of'' and inserting ``with respect to
so much of''.
(B) Paragraph (3) of section 6427(l) is amended by
striking ``with respect to--'' and all that follows
through ``so much of'' and inserting ``with respect to
so much of''.
(b) Repeal of 4.3-Cent Motor Fuel Excise Taxes on Railroads and
Inland Waterway Transportation Which Remain in General Fund.--
(1) Taxes on trains.--
(A) In general.--Subparagraph (A) of section
4041(a)(1) is amended by striking ``or a diesel-powered
train'' each place it appears and by striking ``or
train''.
(B) Conforming amendments.--
(i) Subparagraph (C) of section 4041(a)(1)
is amended by striking clause (ii) and by
redesignating clause (iii) as clause (ii).
(ii) Subparagraph (C) of section 4041(b)(1)
is amended by striking all that follows
``section 6421(e)(2)'' and inserting a period.
(iii) Paragraph (3) of section 4083(a) is
amended by striking ``or a diesel-powered
train''.
(iv) Section 6421(f) is amended by striking
paragraph (3).
(v) Section 6427(l) is amended by striking
paragraph (3).
(2) Fuel used on inland waterways.--
(A) In general.--Paragraph (1) of section 4042(b)
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
subparagraph (C).
(B) Conforming amendment.--Paragraph (2) of section
4042(b) is amended by striking subparagraph (C).
(c) Effective Date.--The amendments made by this subsection shall
take effect on October 1, 1999 (October 1, 2003, in the case of the
amendments made by subsection (b)), but shall not take effect if
section 1321 does not take effect.
SEC. 1323. REPEAL OF EXCISE TAX ON FISHING TACKLE BOXES.
(a) In General.--Paragraph (6) of section 4162(a) (defining sport
fishing equipment) is amended by striking subparagraph (C) and by
redesignating subparagraphs (D) through (J) as subparagraphs (C)
through (I), respectively.
(b) Effective Date.--The amendment made by this section shall apply
to articles sold by the manufacturer, producer, or importer more than
30 days after the date of the enactment of this Act.
Subtitle D--Other Provisions
SEC. 1331. INCREASE IN VOLUME CAP ON PRIVATE ACTIVITY BONDS.
(a) In General.--Subsection (d) of section 146 (relating to volume
cap) is amended by striking paragraph (2), by redesignating paragraphs
(3) and (4) as paragraphs (2) and (3), respectively, and by striking
paragraph (1) and inserting the following new paragraph:
``(1) In general.--The State ceiling applicable to any
State for any calendar year shall be the greater of--
``(A) an amount equal to $75 multiplied by the
State population, or
``(B) $225,000,000.
Subparagraph (B) shall not apply to any possession of the
United States.''.
(b) Conforming Amendment.--Sections 25(f)(3) and 42(h)(3)(E)(iii)
are each amended by striking ``section 146(d)(3)(C)'' and inserting
``section 146(d)(2)(C)''.
(c) Effective Date.--The amendments made by this section shall
apply to calendar years after 1999.
SEC. 1332. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.
(a) In General.--Subpart A of part I of subchapter J of chapter 1
(relating to general rules for taxation of trusts and estates) is
amended by adding at the end the following new section:
``SEC. 646. ELECTING ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--Except as otherwise provided in this section,
the provisions of this subchapter and section 1(e) shall apply to all
Settlement Trusts.
``(b) Beneficiaries of Electing Trust Not Taxed on Contributions.--
``(1) In general.--In the case of a Settlement Trust for
which an election under paragraph (2) is in effect for any
taxable year, no amount shall be includible in the gross income
of a beneficiary of the Settlement Trust by reason of a
contribution to the Settlement Trust made during such taxable
year.
``(2) One-time election.--
``(A) In general.--A Settlement Trust may elect to
have the provisions of this section apply to the trust
and its beneficiaries.
``(B) Time and method of election.--An election
under subparagraph (A) shall be made--
``(i) before the due date (including
extensions) for filing the Settlement Trust's
return of tax for the 1st taxable year of the
Settlement Trust ending after December 31,
1999, and
``(ii) by attaching to such return of tax a
statement specifically providing for such
election.
``(C) Period election in effect.--Except as
provided in paragraph (3), an election under
subparagraph (A)--
``(i) shall apply to the 1st taxable year
described in subparagraph (B)(i) and all
subsequent taxable years, and
``(ii) may not be revoked once it is made.
``(c) Special Rules Where Transfer Restrictions Modified.--
``(1) Transfer of beneficial interests.--If, at any time, a
beneficial interest in a Settlement Trust may be disposed of to
a person in a manner which would not be permitted by section
7(h) of the Alaska Native Claims Settlement Act (43 U.S.C.
1606(h)) if the interest were Settlement Common Stock--
``(A) no election may be made under subsection
(b)(2) with respect to such trust, and
``(B) if such an election is in effect as of such
time, such election shall cease to apply for purposes
of subsection (b)(1) as of the 1st day of the taxable
year following the taxable year in which such
disposition is first permitted.
``(2) Stock in corporation.--If--
``(A) the Settlement Common Stock in any Native
Corporation which transferred assets to a Settlement
Trust making an election under subsection (b)(2) may be
disposed of to a person in a manner not permitted by
section 7(h) of the Alaska Native Claims Settlement Act
(43 U.S.C. 1606(h)), and
``(B) at any time after such disposition of stock
is first permitted, such corporation transfers assets
to such trust,
subparagraph (B) of paragraph (1) shall be applied to such
trust on and after the date of the transfer in the same manner
as if the trust permitted dispositions of beneficial interests
in the trust in a manner not permitted by such section 7(h).
``(c) Tax Treatment of Distributions to Beneficiaries.--
``(1) In general.--In the case of a Settlement Trust for
which an election under subsection (b)(2) is in effect for any
taxable year, any distribution to a beneficiary shall be
included in gross income of the beneficiary as ordinary income
to the extent such distribution reduces the earnings and
profits of any Native Corporation making a contribution to such
Trust.
``(2) Earnings and profits.--The earnings and profits of
any Native Corporation making a contribution to a Settlement
Trust shall not be reduced on account thereof at the time of
such contribution, but such earnings and profits shall be
reduced (up to the amount of such contribution) as
distributions are thereafter made by the Settlement Trust which
exceed the sum of--
``(A) such Trust's total undistributed net income
for all prior years during which an election under
subsection (b)(2) is in effect, and
``(B) such Trust's distributable net income.
``(d) Definitions.--For purposes of this section--
``(1) Native corporation.--The term `Native Corporation'
has the meaning given such term by section 3(m) of the Alaska
Native Claims Settlement Act (43 U.S.C. 1602(m)).
``(2) Settlement trust.--The term `Settlement Trust' means
a trust which constitutes a Settlement Trust under section 39
of the Alaska Native Claims Settlement Act (43 U.S.C. 1629e).''
(b) Withholding on Distributions by Electing ANCSA Settlement
Trusts.--Section 3402 is amended by adding at the end the following new
subsection:
``(t) Tax Withholding on Distributions by Electing ANCSA Settlement
Trusts.--
``(1) In general.--Any Settlement Trust (as defined in
section 646(d)) for which an election under section 646(b)(2)
is in effect (in this subsection referred to as an `electing
trust') and which makes a payment to any beneficiary which is
includable in gross income under section 646(c) shall deduct
and withhold from such payment a tax in an amount equal to such
payment's proportionate share of the annualized tax.
``(2) Exception.--The tax imposed by paragraph (1) shall
not apply to any payment to the extent that such payment, when
annualized, does not exceed an amount equal to the amount in
effect under section 6012(a)(1)(A)(i) for taxable years
beginning in the calendar year in which the payment is made.
``(3) Annualized tax.--For purposes of paragraph (1), the
term `annualized tax' means, with respect to any payment, the
amount of tax which would be imposed by section 1(c)
(determined without regard to any rate of tax in excess of 31
percent) on an amount of taxable income equal to the excess
of--
``(A) the annualized amount of such payment, over
``(B) the amount determined under paragraph (2).
``(4) Annualization.--For purposes of this subsection,
amounts shall be annualized in the manner prescribed by the
Secretary.
``(5) Alternate withholding procedures.--At the election of
an electing trust, the tax imposed by this subsection on any
payment made by such trust shall be determined in accordance
with such tables or computational procedures as may be
specified in regulations prescribed by the Secretary (in lieu
of in accordance with paragraphs (2) and (3)).
``(6) Coordination with other sections.--For purposes of
this chapter and so much of subtitle F as relates to this
chapter, payments which are subject to withholding under this
subsection shall be treated as if they were wages paid by an
employer to an employee.''
(c) Reporting.--Section 6041 is amended by adding at the end the
following new subsection:
``(f) Application to Alaska Native Settlement Trusts.--In the case
of any distribution from a Settlement Trust (as defined in section
646(d)) to a beneficiary which is includable in gross income under
section 646(c), this section shall apply, except that--
``(1) this section shall apply to such distribution without
regard to the amount thereof,
``(2) the Settlement Trust shall include on any return or
statement required by this section information as to the
character of such distribution (if applicable) and the amount
of tax imposed by chapter 1 which has been deducted and
withheld from such distribution, and
``(3) the filing of any return or statement required by
this section shall satisfy any requirement to file any other
form or schedule under this title with respect to distributive
share information (including any form or schedule to be
included with the trust's tax return).''
(d) Clerical Amendment.--The table of sections for subpart A of
part I of subchapter J of chapter 1 is amended by adding at the end the
following new item:
``Sec. 646. Electing Alaska Native Settlement Trusts.''
(e) Effective Date.--The amendments made by this section shall
apply to taxable years of Settlement Trusts ending after December 31,
1999, and to contributions to such trusts after such date.
SEC. 1333. INCREASE IN THRESHOLD FOR JOINT COMMITTEE REPORTS ON REFUNDS
AND CREDITS.
(a) General Rule.--Subsections (a) and (b) of section 6405 are each
amended by striking ``$1,000,000'' and inserting ``$2,000,000''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act, except that such
amendment shall not apply with respect to any refund or credit with
respect to a report that has been made before such date of enactment
under section 6405 of the Internal Revenue Code of 1986.
Subtitle E--Tax Court Provisions
SEC. 1341. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING
PETITION.
(a) In General.--Section 7451 (relating to fee for filing a Tax
Court petition) is amended by striking all that follows ``petition''
and inserting a period.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 1342. EXPANDED USE OF TAX COURT PRACTICE FEE.
Subsection (b) of section 7475 (relating to use of fees) is amended
by inserting before the period at the end ``and to provide services to
pro se taxpayers''.
SEC. 1343. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF
EQUITABLE RECOUPMENT.
(a) Confirmation of Authority of Tax Court To Apply Doctrine of
Equitable Recoupment.--Subsection (b) of section 6214 (relating to
jurisdiction over other years and quarters) is amended by adding at the
end the following new sentence: ``Notwithstanding the preceding
sentence, the Tax Court may apply the doctrine of equitable recoupment
to the same extent that it is available in civil tax cases before the
district courts of the United States and the United States Court of
Federal Claims.''.
(b) Effective Date.--The amendments made by this section shall
apply to any action or proceeding in the Tax Court with respect to
which a decision has not become final (as determined under section 7481
of the Internal Revenue Code of 1986) as of the date of the enactment
of this Act.
TITLE XIV--EXTENSIONS OF EXPIRING PROVISIONS
SEC. 1401. RESEARCH CREDIT.
(a) Extension.--
(1) In general.--Paragraph (1) of section 41(h) (relating
to termination) is amended--
(A) by striking ``June 30, 1999'' and inserting
``June 30, 2004'', and
(B) by striking the material following subparagraph
(B).
(2) Technical amendment.--Subparagraph (D) of section
45C(b)(1) is amended by striking ``June 30, 1999'' and
inserting ``June 30, 2004''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred after June 30, 1999.
(b) Increase in Percentages Under Alternative Incremental Credit.--
(1) In general.--Subparagraph (A) of section 41(c)(4) is
amended--
(A) by striking ``1.65 percent'' and inserting
``2.65 percent'',
(B) by striking ``2.2 percent'' and inserting ``3.2
percent'', and
(C) by striking ``2.75 percent'' and inserting
``3.75 percent''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after June 30, 1999.
SEC. 1402. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.
(a) In General.--Sections 953(e)(10) and 954(h)(9) are each
amended--
(1) by striking ``the first taxable year'' and inserting
``taxable years'', and
(2) by striking ``January 1, 2000'' and inserting ``January
1, 2005''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1999.
SEC. 1403. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR MARGINAL
PRODUCTION.
(a) In General.--Subparagraph (H) of section 613A(c)(6) is amended
by striking ``January 1, 2000'' and inserting ``January 1, 2005''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1999.
SEC. 1404. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.
(a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f) (relating
to termination) are each amended by striking ``June 30, 1999'' and
inserting ``June 30, 2001''.
(b) Clarification of First Year of Employment.--Paragraph (2) of
section 51(i) is amended by striking ``during which he was not a member
of a targeted group''.
(c) Electronic Filing of Certification.--Not later than July 1,
2001, the Secretary of the Treasury or the Secretary's delegate shall
provide an electronic format by which employers may submit requests to
designated local agencies (as defined in section 51(d)(11) of the
Internal Revenue Code of 1986) for certifications that individuals are
members of targeted groups for purposes of section 51 of such Code.
(d) Effective Date.--The amendments made by this section shall
apply to individuals who begin work for the employer after June 30,
1999.
TITLE XV--REVENUE OFFSETS
SEC. 1501. RETURNS RELATING TO CANCELLATIONS OF INDEBTEDNESS BY
ORGANIZATIONS LENDING MONEY.
(a) In General.--Paragraph (2) of section 6050P(c) (relating to
definitions and special rules) 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 inserting after
subparagraph (C) the following new subparagraph:
``(D) any organization a significant trade or
business of which is the lending of money.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to discharges of indebtedness after December 31, 1999.
SEC. 1502. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.
(a) In General.--Chapter 77 (relating to miscellaneous provisions)
is amended by adding at the end the following new section:
``SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.
``(a) General Rule.--The Secretary shall establish a program
requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or
subcategories) established by the Secretary,
``(B) shall be determined after taking into account
the average time for (and difficulty of) complying with
requests in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--The Secretary shall provide for
such exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(3) Average fee requirement.--The average fee charged
under the program required by subsection (a) shall not be less
than the amount determined under the following table:
``Category Average Fee
Employee plan ruling and opinion.............. $250
Exempt organization ruling.................... $350
Employee plan determination................... $300
Exempt organization determination............. $275
Chief counsel ruling.......................... $200.
``(c) Termination.--No fee shall be imposed under this section with
respect to requests made after September 30, 2007.''
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 is amended by
adding at the end the following new item:
``Sec. 7527. Internal Revenue Service
user fees.''
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(c) Effective Date.--The amendments made by this section shall
apply to requests made after the date of the enactment of this Act.
SEC. 1503. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10 OR MORE EMPLOYER
PLANS.
(a) Benefits to Which Exception Applies.--Section 419A(f)(6)(A)
(relating to exception for 10 or more employer plans) is amended to
read as follows:
``(A) In general.--This subpart shall not apply to
a welfare benefit fund which is part of a 10 or more
employer plan if the only benefits provided through the
fund are 1 or more of the following:
``(i) Medical benefits.
``(ii) Disability benefits.
``(iii) Group term life insurance benefits
which do not provide for any cash surrender
value or other money that can be paid,
assigned, borrowed, or pledged for collateral
for a loan.
The preceding sentence shall not apply to any plan
which maintains experience-rating arrangements with
respect to individual employers.''
(b) Limitation on Use of Amounts for Other Purposes.--Section
4976(b) (defining disqualified benefit) is amended by adding at the end
the following new paragraph:
``(5) Special rule for 10 or more employer plans exempted
from prefunding limits.--For purposes of paragraph (1)(C), if--
``(A) subpart D of part I of subchapter D of
chapter 1 does not apply by reason of section
419A(f)(6) to contributions to provide 1 or more
welfare benefits through a welfare benefit fund under a
10 or more employer plan, and
``(B) any portion of the welfare benefit fund
attributable to such contributions is used for a
purpose other than that for which the contributions
were made,
then such portion shall be treated as reverting to the benefit
of the employers maintaining the fund.''
(c) Effective Date.--The amendments made by this section shall
apply to contributions paid or accrued after June 9, 1999, in taxable
years ending after such date.
SEC. 1504. INCREASE IN ELECTIVE WITHHOLDING RATE FOR NONPERIODIC
DISTRIBUTIONS FROM DEFERRED COMPENSATION PLANS.
(a) In General.--Section 3405(b)(1) (relating to withholding) is
amended by striking `10 percent' and inserting `15 percent'.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to distributions after December 31, 1999.
SEC. 1505. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.
(a) In General.--Subsection (a) of section 856 (relating to
definition of real estate investment trust) is amended by striking
``and'' at the end of paragraph (6), by redesignating paragraph (7) as
paragraph (8), and by inserting after paragraph (6) the following new
paragraph:
``(7) which is not a controlled entity (as defined in
subsection (l)); and''.
(b) Controlled Entity.--Section 856 is amended by adding at the end
the following new subsection:
``(l) Controlled Entity.--
``(1) In general.--For purposes of subsection (a)(7), an
entity is a controlled entity if, at any time during the
taxable year, one person (other than a qualified entity)--
``(A) in the case of a corporation, owns stock--
``(i) possessing at least 50 percent of the
total voting power of the stock of such
corporation, or
``(ii) having a value equal to at least 50
percent of the total value of the stock of such
corporation,
``(B) in the case of a partnership, owns at least
50 percent of the capital or profits interests in the
partnership, or
``(C) in the case of a trust, owns at least 50
percent of the beneficial interests in the trust.
``(2) Qualified entity.--For purposes of paragraph (1), the
term `qualified entity' means--
``(A) any real estate investment trust, and
``(B) any partnership in which one real estate
investment trust owns at least 50 percent of the
capital and profits interests in the partnership.
``(3) Attribution rules.--For purposes of this paragraphs
(1) and (2)--
``(A) In general.--Rules similar to the rules of
subsections (d)(5) and (h)(3) shall apply.
``(B) Stapled entities.--A group of entities which
are stapled entities (as defined in section 269B(c)(2))
shall be treated as 1 person.
``(4) Exception for certain new reits.--
``(A) In general.--The term `controlled entity'
shall not include an incubator REIT.
``(B) Incubator reit.--A corporation shall be
treated as an incubator REIT for any taxable year
during the eligibility period if it meets all the
following requirements for such year:
``(i) The corporation elects to be treated
as an incubator REIT.
``(ii) The corporation has only voting
common stock outstanding.
``(iii) Not more than 50 percent of the
corporation's real estate assets consist of
mortgages.
``(iv) From not later than the beginning of
the last half of the second taxable year, at
least 10 percent of the corporation's capital
is provided by lenders or equity investors who
are unrelated to the corporation's largest
shareholder.
``(v) The directors of the corporation
adopt a resolution setting forth an intent to
engage in a going public transaction.
No election may be made with respect to any REIT if an
election under this subsection was in effect for any
predecessor of such REIT.
``(C) Eligibility period.--The eligibility period
(for which an incubator REIT election can be made)
begins with the REIT's second taxable year and ends at
the close of the REIT's third taxable year, but,
subject to the following rules, it may be extended for
an additional 2 taxable years if the REIT so elects:
``(i) A REIT cannot elect to extend the
eligibility period unless it agrees that, if it
does not engage in a going public transaction
by the end of the extended eligibility period,
it shall pay Federal income taxes for the 2
years of the extended eligibility period as if
it had not made an incubator REIT election and
had ceased to qualify as a REIT for those 2
taxable years.
``(ii) In the event the corporation ceases
to be treated as a REIT by operation of clause
(i), the corporation shall file any appropriate
amended returns reflecting the change in status
within 3 months of the close of the extended
eligibility period. Interest would be payable
but, unless there was a finding under
subparagraph (D), no substantial underpayment
penalties shall be imposed. The corporation
shall, at the same time, also notify its
shareholders and any other persons whose tax
position is, or may reasonably be expected to
be, affected by the change in status so they
also may file any appropriate amended returns
to conform their tax treatment consistent with
the corporation's loss of REIT status. The
Secretary shall provide appropriate regulations
setting forth transferee liability and other
provisions to ensure collection of tax and the
proper administration of this provision.
``(iii) Clause (i) and (ii) shall not apply
if the corporation allows its incubator REIT
status to lapse at the end of the initial 2-
year eligibility period without engaging in a
going public transaction, provided the
corporation satisfies the requirements of the
closely-held test commencing with its fourth
taxable year. In such a case, the corporation's
directors may still be liable for the penalties
described in subparagraph (D) during the
eligibility period.
``(D) Special penalties.--If the Secretary
determines that an incubator REIT election was filed
for a principal purpose other than as part of a
reasonable plan to undertake a going public
transaction, an excise tax of $20,000 would be imposed
on each of the corporation's directors for each taxable
year for which an election was in effect.
``(E) Going public transaction.--For purposes of
this paragraph, a going public transaction means--
``(i) a public offering of shares of the
stock of the incubator REIT;
``(ii) a transaction, or series of
transactions, that results in the stock of the
incubator REIT being regularly traded on an
established securities market and that results
in at least 50 percent of such stock being held
by shareholders who are unrelated to persons
who held such stock before it began to be so
regularly traded; or
``(iii) any transaction resulting in
ownership of the REIT by 200 or more persons
(excluding the largest single shareholder) who
in the aggregate own at least 50 percent of the
stock of the REIT.
For the purposes of this subparagraph, the rules of
section 318 shall apply in determining the ownership of
stock.
``(F) Definitions.--The term ``established
securities market'' shall have the meaning set forth in
the regulations under section 897.''
(c) Conforming Amendment.--Paragraph (2) of section 856(h) is
amended by striking ``and (6)'' each place it appears and inserting ``,
(6), and (7)''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after July 12, 1999.
(2) Exception for existing controlled entities.--The
amendments made by this section shall not apply to any entity
which is a controlled entity (as defined in section 856(l) of
the Internal Revenue Code of 1986, as added by this section) as
of July 12, 1999, and which has significant business assets or
activities as of such date.
SEC. 1506. TREATMENT OF GAIN FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.
(a) In General.--Part IV of subchapter P of chapter 1 (relating to
special rules for determining capital gains and losses) is amended by
inserting after section 1259 the following new section:
``SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.
``(a) In General.--If the taxpayer has gain from a constructive
ownership transaction with respect to any financial asset and such gain
would (without regard to this section) be treated as a long-term
capital gain--
``(1) such gain shall be treated as ordinary income to the
extent that such gain exceeds the net underlying long-term
capital gain, and
``(2) to the extent such gain is treated as a long-term
capital gain after the application of paragraph (1), the
determination of the capital gain rate (or rates) applicable to
such gain under section 1(h) shall be determined on the basis
of the respective rate (or rates) that would have been
applicable to the net underlying long-term capital gain.
``(b) Interest Charge on Deferral of Gain Recognition.--
``(1) In general.--If any gain is treated as ordinary
income for any taxable year by reason of subsection (a)(1), the
tax imposed by this chapter for such taxable year shall be
increased by the amount of interest determined under paragraph
(2) with respect to each prior taxable year during any portion
of which the constructive ownership transaction was open. Any
amount payable under this paragraph shall be taken into account
in computing the amount of any deduction allowable to the
taxpayer for interest paid or accrued during such taxable year.
``(2) Amount of interest.--The amount of interest
determined under this paragraph with respect to a prior taxable
year is the amount of interest which would have been imposed
under section 6601 on the underpayment of tax for such year
which would have resulted if the gain (which is treated as
ordinary income by reason of subsection (a)(1)) had been
included in gross income in the taxable years in which it
accrued (determined by treating the income as accruing at a
constant rate equal to the applicable Federal rate as in effect
on the day the transaction closed). The period during which
such interest shall accrue shall end on the due date (without
extensions) for the return of tax imposed by this chapter for
the taxable year in which such transaction closed.
``(3) Applicable federal rate.--For purposes of paragraph
(2), the applicable Federal rate is the applicable Federal rate
determined under 1274(d) (compounded semiannually) which would
apply to a debt instrument with a term equal to the period the
transaction was open.
``(4) No credits against increase in tax.--Any increase in
tax under paragraph (1) shall not be treated as tax imposed by
this chapter for purposes of determining--
``(A) the amount of any credit allowable under this
chapter, or
``(B) the amount of the tax imposed by section 55.
``(c) Financial Asset.--For purposes of this section--
``(1) In general.--The term `financial asset' means--
``(A) any equity interest in any pass-thru entity,
and
``(B) to the extent provided in regulations--
``(i) any debt instrument, and
``(ii) any stock in a corporation which is
not a pass-thru entity.
``(2) Pass-thru entity.--For purposes of paragraph (1), the
term `pass-thru entity' means--
``(A) a regulated investment company,
``(B) a real estate investment trust,
``(C) an S corporation,
``(D) a partnership,
``(E) a trust,
``(F) a common trust fund,
``(G) a passive foreign investment company (as
defined in section 1297),
``(H) a foreign personal holding company, and
``(I) a foreign investment company (as defined in
section 1246(b)).
``(d) Constructive Ownership Transaction.--For purposes of this
section--
``(1) In general.--The taxpayer shall be treated as having
entered into a constructive ownership transaction with respect
to any financial asset if the taxpayer--
``(A) holds a long position under a notional
principal contract with respect to the financial asset,
``(B) enters into a forward or futures contract to
acquire the financial asset,
``(C) is the holder of a call option, and is the
grantor of a put option, with respect to the financial
asset and such options have substantially equal strike
prices and substantially contemporaneous maturity
dates, or
``(D) to the extent provided in regulations
prescribed by the Secretary, enters into 1 or more
other transactions (or acquires 1 or more positions)
that have substantially the same effect as a
transaction described in any of the preceding
subparagraphs.
``(2) Exception for positions which are marked to market.--
This section shall not apply to any constructive ownership
transaction if all of the positions which are part of such
transaction are marked to market under any provision of this
title or the regulations thereunder.
``(3) Long position under notional principal contract.--A
person shall be treated as holding a long position under a
notional principal contract with respect to any financial asset
if such person--
``(A) has the right to be paid (or receive credit
for) all or substantially all of the investment yield
(including appreciation) on such financial asset for a
specified period, and
``(B) is obligated to reimburse (or provide credit
for) all or substantially all of any decline in the
value of such financial asset.
``(4) Forward contract.--The term `forward contract' means
any contract to acquire in the future (or provide or receive
credit for the future value of) any financial asset.
``(e) Net Underlying Long-Term Capital Gain.--For purposes of this
section, in the case of any constructive ownership transaction with
respect to any financial asset, the term `net underlying long-term
capital gain' means the aggregate net capital gain that the taxpayer
would have had if--
``(1) the financial asset had been acquired for fair market
value on the date such transaction was opened and sold for fair
market value on the date such transaction was closed, and
``(2) only gains and losses that would have resulted from
the deemed ownership under paragraph (1) were taken into
account.
The amount of the net underlying long-term capital gain with respect to
any financial asset shall be treated as zero unless the amount thereof
is established by clear and convincing evidence.
``(f) Special Rule Where Taxpayer Takes Delivery.--Except as
provided in regulations prescribed by the Secretary, if a constructive
ownership transaction is closed by reason of taking delivery, this
section shall be applied as if the taxpayer had sold all the contracts,
options, or other positions which are part of such transaction for fair
market value on the closing date. The amount of gain recognized under
the preceding sentence shall not exceed the amount of gain treated as
ordinary income under subsection (a). Proper adjustments shall be made
in the amount of any gain or loss subsequently realized for gain
recognized and treated as ordinary income under this subsection.
``(g) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section, including regulations--
``(1) to permit taxpayers to mark to market constructive
ownership transactions in lieu of applying this section, and
``(2) to exclude certain forward contracts which do not
convey substantially all of the economic return with respect to
a financial asset.''
(b) Clerical Amendment.--The table of sections for part IV of
subchapter P of chapter 1 is amended by adding at the end the following
new item:
``Sec. 1260. Gains from constructive
ownership transactions.''.
(c) Effective Date.--The amendments made by this section shall
apply to transactions entered into after July 11, 1999.
SEC. 1507. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR RETIREE
HEALTH BENEFITS.
(a) Extension.--Paragraph (5) of section 420(b) (relating to
expiration) is amended by striking ``in any taxable year beginning
after December 31, 2000'' and inserting ``made after September 30,
2009''.
(b) Application of Minimum Cost Requirements.--
(1) In general.--Paragraph (3) of section 420(c) is amended
to read as follows:
``(3) Minimum cost requirements.--
``(A) In general.--The requirements of this
paragraph are met if each group health plan or
arrangement under which applicable health benefits are
provided provides that the applicable employer cost for
each taxable year during the cost maintenance period
shall not be less than the higher of the applicable
employer costs for each of the 2 taxable years
immediately preceding the taxable year of the qualified
transfer.
``(B) Applicable employer cost.--For purposes of
this paragraph, the term `applicable employer cost'
means, with respect to any taxable year, the amount
determined by dividing--
``(i) the qualified current retiree health
liabilities of the employer for such taxable
year determined--
``(I) without regard to any
reduction under subsection (e)(1)(B),
and
``(II) in the case of a taxable
year in which there was no qualified
transfer, in the same manner as if
there had been such a transfer at the
end of the taxable year, by
``(ii) the number of individuals to whom
coverage for applicable health benefits was
provided during such taxable year.
``(C) Election to compute cost separately.--An
employer may elect to have this paragraph applied
separately with respect to individuals eligible for
benefits under title XVIII of the Social Security Act
at any time during the taxable year and with respect to
individuals not so eligible.
``(D) Cost maintenance period.--For purposes of
this paragraph, the term `cost maintenance period'
means the period of 5 taxable years beginning with the
taxable year in which the qualified transfer occurs. If
a taxable year is in 2 or more overlapping cost
maintenance periods, this paragraph shall be applied by
taking into account the highest applicable employer
cost required to be provided under subparagraph (A) for
such taxable year.''
(2) Conforming amendments.--
(A) Clause (iii) of section 420(b)(1)(C) is amended
by striking ``benefits'' and inserting ``cost''.
(B) Subparagraph (D) of section 420(e)(1) is
amended by striking ``and shall not be subject to the
minimum benefit requirements of subsection (c)(3)'' and
inserting ``or in calculating applicable employer cost
under subsection (c)(3)(B)''.
(c) Effective Date.--The amendments made by this section shall
apply to qualified transfers occurring after the date of the enactment
of this Act.
SEC. 1508. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF INSTALLMENT
METHOD FOR ACCRUAL METHOD TAXPAYERS.
(a) Repeal of Installment Method for Accrual Basis Taxpayers.--
(1) In general.--Subsection (a) of section 453 (relating to
installment method) is amended to read as follows:
``(a) Use of Installment Method.--
``(1) In general.--Except as otherwise provided in this
section, income from an installment sale shall be taken into
account for purposes of this title under the installment
method.
``(2) Accrual method taxpayer.--The installment method
shall not apply to income from an installment sale if such
income would be reported under an accrual method of accounting
without regard to this section. The preceding sentence shall
not apply to a disposition described in subparagraph (A) or (B)
of subsection (l)(2).''
(2) Conforming amendments.--Sections 453(d)(1), 453(i)(1),
and 453(k) are each amended by striking ``(a)'' each place it
appears and inserting ``(a)(1)''.
(b) Modification of Pledge Rules.--Paragraph (4) of section 453A(d)
(relating to pledges, etc., of installment obligations) is amended by
adding at the end the following: ``A payment shall be treated as
directly secured by an interest in an installment obligation to the
extent an arrangement allows the taxpayer to satisfy all or a portion
of the indebtedness with the installment obligation.''
(c) Effective Date.--The amendments made by this section shall
apply to sales or other dispositions occurring on or after the date of
the enactment of this Act.
TITLE XVI--TECHNICAL CORRECTIONS
SEC. 1601. AMENDMENTS RELATED TO TAX AND TRADE RELIEF EXTENSION ACT OF
1998.
(a) Amendment Related to Section 1004(b) of the Act.--Subsection
(d) of section 6104 is amended by adding at the end the following new
paragraph:
``(6) Application to nonexempt charitable trusts and
nonexempt private foundations.--The organizations referred to
in paragraphs (1) and (2) of section 6033(d) shall comply with
the requirements of this subsection relating to annual returns
filed under section 6033 in the same manner as the
organizations referred to in paragraph (1).''
(b) Amendments Related to Section 4003 of the Act.--
(1) Subsection (b) of section 4003 of the Tax and Trade
Relief Extension Act of 1998 is amended by inserting
``(7)(A)(i)(II),'' after ``(5)(A)(ii)(I),''.
(2) Subparagraph (A) of section 9510(c)(1) is amended by
striking ``August 5, 1997'' and inserting ``October 21, 1998''.
(c) Vaccine Tax and Trust Fund.--Sections 1503 and 1504 of the
Vaccine Injury Compensation Program Modification Act (and the
amendments made by such sections) are hereby repealed.
(d) Effective Date.--The amendments made by this section shall take
effect as if included in the provisions of the Tax and Trade Relief
Extension Act of 1998 to which they relate.
SEC. 1602. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE RESTRUCTURING
AND REFORM ACT OF 1998.
(a) Amendment Related to 1103 of the Act.--Paragraph (6) of
section 6103(k) is amended--
(1) by inserting ``and an officer or employee of the Office
of Treasury Inspector General for Tax Administration'' after
``internal revenue officer or employee'', and
(2) by striking ``internal revenue'' in the heading and
inserting ``certain''.
(b) Amendment Related to Section 3509 of the Act.--Subparagraph (A)
of section 6110(g)(5) is amended by inserting ``, any Chief Counsel
advice,'' after ``technical advice memorandum''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in the provisions of the Internal Revenue Service
Restructuring and Reform Act of 1998 to which they relate.
SEC. 1603. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.
(a) Amendment Related to Section 302 of the Act.--The last sentence
of section 3405(e)(1)(B) is amended by inserting ``(other than a Roth
IRA)'' after ``individual retirement plan''.
(b) Amendments Related to Section 1072 of the Act.--
(1) Clause (ii) of section 415(c)(3)(D) and subparagraph
(B) of section 403(b)(3) are each amended by striking ``section
125 or'' and inserting ``section 125, 132(f)(4), or''.
(2) Paragraph (2) of section 414(s) is amended by striking
``section 125, 402(e)(3)'' and inserting ``section 125,
132(f)(4), 402(e)(3)''.
(c) Amendment Related to Section 1454 of the Act.--Subsection (a)
of section 7436 is amended by inserting before the period at the end of
the first sentence ``and the proper amount of employment tax under such
determination''.
(d) Effective Date.--The amendments made by this section shall take
effect as if included in the provisions of the Taxpayer Relief of 1997
to which they relate.
SEC. 1604. OTHER TECHNICAL CORRECTIONS.
(a) Affiliated Corporations in Context of Worthless Securities.--
(1) Subparagraph (A) of section 165(g)(3) is amended to
read as follows:
``(A) the taxpayer owns directly stock in such
corporation meeting the requirements of section
1504(a)(2), and''.
(2) Paragraph (3) of section 165(g) is amended by striking
the last sentence.
(3) The amendments made by this subsection shall apply to
taxable years beginning after December 31, 1984.
(b) Reference to Certain State Plans.--
(1) Subparagraph (B) of section 51(d)(2) is amended--
(A) by striking ``plan approved'' and inserting
``program funded'', and
(B) by striking ``(relating to assistance for needy
families with minor children)''.
(2) The amendment made by paragraph (1) shall take effect
as if included in the amendments made by section 1201 of the
Small Business Job Protection Act of 1996.
(c) Amount of IRA Contribution of Lesser Earning Spouse.--
(1) Clause (ii) of section 219(c)(1)(B) is amended by
striking ``and'' at the end of subclause (I), by redesignating
subclause (II) as subclause (III), and by inserting after
subclause (I) the following new subclause:
``(II) the amount of any designated
nondeductible contribution (as defined
in section 408(o)) on behalf of such
spouse for such taxable year, and''.
(2) The amendment made by paragraph (1) shall apply to
taxable years beginning after December 31, 1999.
(d) Modified Endowment Contracts.--
(1) Paragraph (2) of section 7702A(a) is amended by
inserting ``or this paragraph'' before the period.
(2) Clause (ii) of section 7702A(c)(3)(A) is amended by
striking ``under the contract'' and inserting ``under the old
contract''.
(3) The amendments made by this subsection shall take
effect as if included in the amendments made by section 5012 of
the Technical and Miscellaneous Revenue Act of 1988.
(e) Lump-Sum Distributions.--
(1) Clause (ii) of section 401(k)(10)(B) is amended by
adding at the end the following new sentence: ``Such term
includes a distribution of an annuity contract from--
``(I) a trust which forms a part of
a plan described in section 401(a) and
which is exempt from tax under section
501(a), or
``(II) an annuity plan described in
section 403(a).''
(2) The amendment made by paragraph (1) shall take effect
as if included in section 1401 of the Small Business Job
Protection Act of 1996.
(f) Tentative Carryback Adjustments of Losses From Section 1256
Contracts.--
(1) Subsection (a) of section 6411 is amended by striking
``section 1212(a)(1)'' and inserting ``subsection (a)(1) or (c)
of section 1212''.
(2) The amendment made by paragraph (1) shall take effect
as if included in the amendments made by section 504 of the
Economic Recovery Tax Act of 1981.
SEC. 1605. CLERICAL CHANGES.
(1) Subsection (f) of section 67 is amended by striking
``the last sentence'' and inserting ``the second sentence''.
(2) The heading for paragraph (5) of section 408(d) is
amended to read as follows:
``(5) Distributions of excess contributions after due date
for taxable year and certain excess rollover contributions.--
''.
(3) The heading for subparagraph (B) of section 529(e)(3)
is amended by striking ``under guaranteed plans''.
(4)(A) Subsection (e) of section 678 is amended by striking
``an electing small business corporation'' and inserting ``an S
corporation''.
(B) Clause (v) of section 6103(e)(1)(D) is amended to read
as follows:
``(v) if the corporation was an S
corporation, any person who was a shareholder
during any part of the period covered by such
return during which an election under section
1362(a) was in effect, or''.
(5) Subparagraph (B) of section 995(b)(3) is amended by
striking ``the Military Security Act of 1954 (22 U.S.C. 1934)''
and inserting ``section 38 of the International Security
Assistance and Arms Export Control Act of 1976 (22 U.S.C.
2778)''.
(6) Subparagraph (B) of section 4946(c)(3) is amended by
striking ``the lowest rate of compensation prescribed for GS-16
of the General Schedule under section 5332'' and inserting
``the lowest rate of basic pay for the Senior Executive Service
under section 5382''.
<all>
On motion to recommit with instructions to conference committee Failed by the Yeas and Nays: 205 - 221 (Roll no. 378). (consideration: CR H7274-7275)
Roll Call #378 (House)Conference report agreed to in House: On agreeing to the conference report Agreed to by the Yeas and Nays: 221 - 206 (Roll no. 379).(consideration: CR 7261-7276)
Roll Call #379 (House)Motions to reconsider laid on the table Agreed to without objection.
On agreeing to the conference report Agreed to by the Yeas and Nays: 221 - 206 (Roll no. 379). (consideration: CR 7261-7276)
Roll Call #379 (House)Conference report agreed to in Senate: Senate agreed to conference report by Yea-Nay Vote. 50-49. Record Vote No: 261.(consideration: CR S10290-10303, S10305-10340)
Roll Call #261 (Senate)Senate agreed to conference report by Yea-Nay Vote. 50-49. Record Vote No: 261. (consideration: CR S10290-10303, S10305-10340)
Roll Call #261 (Senate)Message on Senate action sent to the House.
Presented to President.
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Presented to President.
Vetoed by President.(consideration: CR H8613-8621; text of Veto message: CR H8613-8614)
Vetoed by President. (consideration: CR H8613-8621; text of Veto message: CR H8613-8614)
The Chair laid before the House the veto message from the President.
Mr. Archer moved to refer the bill and accompanying veto message to the Committee on Ways and Means.
DEBATE - The House proceeded with one hour of debate on the Archer motion to refer the veto message and accompanying papers to the Committee on Ways and Means.
The previous question on the motion to refer the bill and accompanying veto message was ordered without objection.
On motion to refer the bill and the accompanying veto message to the Committee on Ways and Means. Agreed to by voice vote.
Mr. Cardin moved that the House discharge the Committee on Ways and Means from further consideration of H.R. 2488.
Mr. Terry moved to table the motion. (consideration: CR H10231-10232)
On motion to table motion Agreed to by recorded vote: 215 - 203 (Roll no. 512).
Roll Call #512 (House)Motion to reconsider laid on the table Agreed to without objection.