HR 2574 IH

To amend the Internal Revenue Code of 1986 to provide comprehensive tax relief for American families and businesses to encourage family stability, economic growth, and tax simplification.

July 20, 1999

Mr. MALONEY of Connecticut (for himself, Mr. ROEMER, Mr. DOOLEY of California, Mr. SMITH of Washington, Mr. WEYGAND, Mr. SHERMAN, Ms. HOOLEY of Oregon, Ms. STABENOW, Mr. ETHERIDGE, Mr. GONZALEZ, Mr. MOORE, AND Mr. STUPAK) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide comprehensive tax relief for American families and businesses to encourage family stability, economic growth, and tax simplification.

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 `Pro-Family, Pro-Growth, Pro-Reform Tax Reduction Act of 1999'.

(b) TABLE OF CONTENTS-

Sec. 1. Short title; etc.

TITLE I--CAPITAL GAINS

Sec. 101. Repeal of application of alternative minimum tax to stock transferred pursuant to incentive stock options.

TITLE II--EDUCATION

Sec. 201. Extension of exclusion for employer-provided educational assistance; exclusion to apply to assistance provided for graduate education.

Sec. 202. Employer-provided workplace literacy tax credit.

Sec. 203. Credit for information technology training program expenses.

Sec. 204. Teacher Technology Access Act.

Sec. 205. Teacher Technology Training Act.

Sec. 206. Increase in Hope and Lifetime Learning tax credits.

Sec. 207. Tax treatment of student loan forgiveness.

Sec. 208. 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. 209. Elimination of 60-month limit on student loan interest deduction.

Sec. 210. Credit for school construction bonds in high-growth areas.

Sec. 211. Credit for school modernization bonds in distressed areas.

TITLE III--EMPLOYMENT

Sec. 301. Extension of Work Opportunity Credit and Welfare-to-Work credit.

TITLE IV--ENERGY

Sec. 401. Credit for certain energy-efficient property used in business.

Sec. 402. Extension of credit for qualified electric vehicles.

Sec. 403. Modifications to credit for electricity produced from certain renewable resources.

Sec. 404. Credit for certain nonbusiness energy property.

Sec. 405. Extension of wind and biomass tax credit.

Sec. 406. Kerosene Tax Equalizer Act.

TITLE V--ENVIRONMENT

Sec. 501. Better America Bonds tax credit.

Sec. 502. Permanent extension of brownfields tax deduction at 100 percent.

Sec. 503. Restoration of deduction for demolition of certain structures.

Sec. 504. Increase in land donation tax deduction from 30 percent to 50 percent.

Sec. 505. Temporary suspension of maximum amount of amortizable reforestation expenditures.

TITLE VI--ESTATE TAX REDUCTION

Sec. 601. Repeal of limitation on estate tax deduction for family-owned business interests.

Sec. 602. Unified credit increased by unused unified credit of predeceased spouse.

TITLE VII--FAMILY ENHANCEMENT

Sec. 701. Nonrefundable personal credits allowed against alternative minimum tax.

Sec. 702. Elimination of marriage penalty in standard deduction.

Sec. 703. Expansion of dependent care tax credit.

Sec. 704. Employer-provided child care services.

TITLE VIII--HEALTH CARE

Sec. 801. Credit for taxpayers with long-term care needs.

Sec. 802. Credit for employer health care costs.

Sec. 803. Emergency Medical Services Enhancement Act.

Sec. 804. Deduction for health insurance costs for self-employed individuals.

TITLE IX--HOUSING

Sec. 901. Extension of first-time District of Columbia home buyer tax credit.

Sec. 902. Increase in State ceiling in low-income housing tax credit.

TITLE X--RESEARCH AND BUSINESS

Sec. 1001. Increase in expense treatment for small businesses.

Sec. 1002. Medical innovation tax credit.

Sec. 1003. Permanent extension of research credit.

TITLE XI--RETIREMENT SECURITY

Sec. 1101. Adjustment in monthly exempt amount for purposes of the social security earnings test.

Sec. 1102. Small business credit for pension plan start-up costs.

Sec. 1103. Increase in taxpayer IRA contributions.

TITLE XII--NATIONAL COMMISSION ON TAX SIMPLIFICATION AND REFORM

Sec. 1201. Establishment.

Sec. 1202. Functions.

Sec. 1203. Administration.

Sec. 1204. General.

TITLE XIII--AMOUNT OF REVENUES RESERVED FOR SOCIAL SECURITY AND MEDICARE

Sec. 1301. Amount of revenues reserved for Social Security and Medicare.

TITLE I--CAPITAL GAINS

SEC. 101. REPEAL OF APPLICATION OF ALTERNATIVE MINIMUM TAX TO STOCK TRANSFERRED PURSUANT TO INCENTIVE STOCK OPTIONS.

(a) IN GENERAL- Subsection (b) of section 56 of the Internal Revenue Code of 1986 (relating to adjustments in computing alternative minimum taxable income) is amended by striking paragraph (3).

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply with respect to options exercised after December 31, 1999.

TITLE II--EDUCATION

SEC. 201. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE; EXCLUSION TO APPLY TO ASSISTANCE PROVIDED FOR GRADUATE EDUCATION.

(a) EXTENSION- Subsection (d) of section 127 of the Internal Revenue Code of 1986 is hereby repealed.

(b) EXCLUSION TO APPLY TO GRADUATE STUDENTS- The last sentence of section 127(c)(1) of such Code is amended by striking `hobbies' and all that follows and inserting `hobbies.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to courses beginning after June 30, 1999.

SEC. 202. EMPLOYER-PROVIDED WORKPLACE LITERACY TAX CREDIT.

(a) GENERAL RULE- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end thereof the following new section:

`SEC. 45D. EXPENDITURES TO PROVIDE LANGUAGE TRAINING TO EMPLOYEES.

`(a) GENERAL RULE- For purposes of section 38, the amount of the language training credit determined under this section for the taxable year is 10 percent of the qualified language training expenses paid or incurred by the taxpayer during the taxable year.

`(b) DOLLAR LIMIT PER EMPLOYEE- The maximum credit determined under this section with respect to each employee shall not exceed $525.

`(c) QUALIFIED LANGUAGE TRAINING EXPENSES- For purposes of this section--

`(1) IN GENERAL- Except as otherwise provided in this subsection, the term `qualified language training expenses' means--

`(A) amounts paid or incurred by the taxpayer with respect to expenses incurred by or on behalf of an employee for qualified language training of such employee (including but not limited to tuition, fees, and similar payments, books and supplies), and

`(B) the following expenses paid or incurred by the taxpayer--

`(i) wages (as defined in section 41(b)(2)(D)) paid or incurred by the taxpayer to an employee for services consisting of providing qualified language training to employees of the taxpayer, and

`(ii) expenses of books and supplies used in connection with the provision of such training,

but only if such expenses are incurred pursuant to a program which meets the requirements of paragraphs (2) and (3) of section 127.

`(2) ONLY DOMESTIC EMPLOYMENT QUALIFIED- Amounts may be taken into account under paragraph (1) with respect to any employee receiving qualified language training only if--

`(A) the employee is a citizen or resident of the United States and has attained age 18, and

`(B) substantially all of the services performed by such employee during the taxable year for the taxpayer are performed in the United States or any possession of the United States.

`(d) QUALIFIED LANGUAGE TRAINING- For purposes of this section, the term `qualified language training' means--

`(1) training in English language and literacy to individuals with limited English proficiency, and

`(2) remedial training in English language and literacy.

`(e) EXCLUSION FROM EMPLOYEE'S INCOME- Amounts taken into account in determining the credit under this section shall not be includible in the gross income of the employee.'.

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT- Subsection (b) of section 38 of such Code is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end thereof the following new paragraph:

`(13) the language training credit determined under section 45D(a).'.

(c) DENIAL OF DOUBLE BENEFIT- Section 280C of such Code is amended by adding at the end thereof the following new subsection:

`(d) CREDIT FOR LITERACY ENHANCEMENT EXPENSES- No deduction shall be allowed for that portion of the qualified literacy education expenses (as defined in section 45D(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45D(a).'

(d) CREDIT ALLOWABLE AGAINST MINIMUM TAX- Subsection (c) of section 38 of such Code is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:

`(3) LANGUAGE TRAINING CREDIT ALLOWED AGAINST MINIMUM TAX-

`(A) IN GENERAL- The amount determined under paragraph (1)(A) shall be reduced by the portion of the language training credit not used against the normal limitation.

`(B) PORTION OF LANGUAGE TRAINING CREDIT NOT USED AGAINST NORMAL LIMITATION- For purposes of subparagraph (A), the portion of the language training credit not used against the normal limitation is the excess (if any) of--

`(i) the portion of the credit allowable under subsection (a) which is attributable to the language training credit, over

`(ii) the limitation of paragraph (1) (determined without regard to this paragraph) reduced by the portion of the credit under subsection (a) which is not so attributable.'

(e) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end thereof the following new section:

`Sec. 45D. Expenditures to provide language training to employees.'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 203. CREDIT FOR INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by adding at the end the following:

`SEC. 45E. INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES.

`(a) GENERAL RULE- For purposes of section 38, in the case of an employer, the information technology training program credit determined under this section is an amount equal to 20 percent of information technology

training program expenses paid or incurred by the taxpayer during the taxable year.

`(b) ADDITIONAL CREDIT PERCENTAGE FOR CERTAIN PROGRAMS- The percentage under subsection (a) shall be increased by 5 percentage points for information technology training program expenses paid or incurred by the taxpayer with respect to a program operated--

`(1) in an empowerment zone or enterprise community designated under part I of subchapter U,

`(2) in a school district in which at least 50 percent of the students attending schools in such district are eligible for free or reduced-cost lunches under the school lunch program established under the National School Lunch Act,

`(3) in an area designated as a disaster area by the Secretary of Agriculture or by the President under the Disaster Relief and Emergency Assistance Act in the taxable year or the 4 preceding taxable years,

`(4) in a rural enterprise community designated under section 766 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1999,

`(5) in an area designated by the Secretary of Agriculture as a Rural Economic Area Partnership Zone, or

`(6) by an employer who has 200 or fewer employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year.

`(c) LIMITATION- The amount of information technology training program expenses with respect to an individual which may be taken into account under subsection (a) for the taxable year shall not exceed $6,000.

`(d) INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES- For purposes of this section--

`(1) IN GENERAL- The term `information technology training program expenses' means expenses paid or incurred by reason of the participation of the employer in any information technology training program.

`(2) INFORMATION TECHNOLOGY TRAINING PROGRAM- The term `information technology training program' means a program--

`(A) for the training of computer programmers, systems analysts, and computer scientists or engineers (as such occupations are defined by the Bureau of Labor Statistics),

`(B) involving a partnership of--

`(i) employers, and

`(ii) State training programs, school districts, university systems, or certified commercial information technology training providers, and

`(C) at least 50 percent of the costs of which are paid or incurred by the employers.

`(3) CERTIFIED COMMERCIAL INFORMATION TECHNOLOGY TRAINING PROVIDER- The term `certified commercial information technology training providers' means a private sector provider of educational products and services utilized for training in information technology which is certified with respect to--

`(A) the curriculum that is used for the training, or

`(B) the technical knowledge of the instructors of such provider,

by 1 or more software publishers or hardware manufacturers the products of which are a subject of the training.

`(e) DENIAL OF DOUBLE BENEFIT- No deduction or credit under any other provision of this chapter shall be allowed with respect to information technology training program expenses (determined without regard to the limitation under subsection (c)).

`(f) ALLOCATIONS- For purposes of this section, rules similar to the rules of section 41(f)(2) shall apply.'

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT- Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit) is amended by striking `plus' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, plus', and by adding at the end the following:

`(14) the information technology training program credit determined under section 45E.'

(c) NO CARRYBACKS- Subsection (d) of section 39 of the Internal Revenue Code of 1986 (relating to carryback and carryforward of unused credits) is amended by adding at the end the following:

`(9) NO CARRYBACK OF SECTION 45E CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the information technology training program credit determined under section 45E may be carried back to a taxable year ending before the date of the enactment of section 45E.'

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`Sec. 45E. Information technology training program expenses.'

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

SEC. 204. TEACHER TECHNOLOGY ACCESS ACT.

(a) FINDINGS- The Congress finds the following:

(1) There is a need for widespread commitment to provide each child with a high quality education that will prepare that child to successfully compete in a global marketplace.

(2) The technological transformation of our schools will go to waste if elementary and secondary teachers are not provided with the support they need to effectively integrate technologies into their teaching.

(3) Teachers should be provided with the tools and time required to master a variety of technological skills, redesign their lesson plans around technology-enhanced resources, and take on a complex new role in the technologically transformed classroom.

(4) Teachers receive little support for these fundamental changes, and most teachers are left largely

on their own as they struggle to integrate technology into their curricula.

(5) Just as our Nation's businesses are provided with a variety of tax incentives to improve their business operations in order to strengthen the American economy, so also it is necessary and appropriate that our Nation's secondary and elementary teachers are afforded similar opportunities in order to fulfill our commitment to providing every child with a high quality education.

(b) CREDIT FOR ACQUISITION OF COMPUTER HARDWARE AND SOFTWARE BY ELEMENTARY AND SECONDARY TEACHERS-

(1) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25A the following new section:

`SEC. 25B. ACQUISITION OF COMPUTER HARDWARE AND SOFTWARE BY ELEMENTARY AND SECONDARY TEACHERS.

`(a) ALLOWANCE OF CREDIT- In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this chapter for a taxable year an amount equal to the qualified computer expenditures made by such individual for the taxable year.

`(b) LIMITATION- No amount shall be allowed as a credit under subsection (a) for a taxable year if such amount, when added to all previous amounts allowed as a credit under subsection (a) for any taxable year, exceeds $2,000.

`(c) DEFINITIONS- For purposes of subsection (a)--

`(1) QUALIFIED COMPUTER EXPENDITURES-

`(A) IN GENERAL- The term `qualified computer expenditures' means the amount paid or incurred for the acquisition of a computer, related peripheral equipment, and computer software. Such term shall not include computer software that is primarily used for entertainment or amusement.

`(B) COMPUTER, RELATED PERIPHERAL EQUIPMENT- The terms `computer' and `related peripheral equipment' have the meanings given to such terms by section 168(i)(2)(B).

`(C) COMPUTER SOFTWARE- The term `computer software' has the meaning given to such term by section 197(e)(3)(B), except that such term shall include educational software available only to educators.

`(2) ELIGIBLE INDIVIDUAL- The term `eligible individual' means an individual who is a teacher in the classroom in an elementary or secondary school.

`(d) DENIAL OF DOUBLE BENEFIT- No deduction or credit shall be allowed under any other provision of this chapter for any amount allowed as a credit under this section.

`(e) TERMINATION- Subsection (a) shall not apply to expenditures made after December 31, 2004.'.

(2) CLERICAL AMENDMENT- The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25A the following new item:

`Sec. 25B. Acquisition of computer hardware and software by elementary and secondary teachers.'.

(3) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 205. TEACHER TECHNOLOGY TRAINING ACT.

(a) IN GENERAL- Subsection (c) of section 25A of the Internal Revenue Code of 1986 (relating to lifetime learning credit) is amended by adding at the end the following new paragraph:

`(3) SPECIAL RULE FOR TECHNOLOGY TRAINING FOR ELEMENTARY AND SECONDARY TEACHERS- If any portion of the qualified tuition and related expenses to which this subsection applies--

`(A) is paid or incurred by an individual who is a teacher in the classroom in an elementary or secondary school, and

`(B) is incurred before January 1, 2005--

`(i) for the enrollment or attendance of such individual in a course of instruction on basic or advanced computer functions or computer software (including educational software offered by a single institution) approved for such individual by such local educational agency, and

`(ii) for purposes of integrating materials covered by such course into the courses taught in the elementary or secondary classroom,

paragraph (1) shall be applied with respect to such portion by substituting `50 percent' for `20 percent'.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to expenses paid after December 31, 1999, for education furnished in academic periods beginning after such date.

SEC. 206. INCREASE IN HOPE AND LIFETIME LEARNING TAX CREDITS.

(a) INCREASE IN MAXIMUM CREDIT-

(1) HOPE SCHOLARSHIP CREDIT- Paragraph (1) of section 25A(b) of the Internal Revenue Code of 1986 is amended by striking `$1,000' each place it appears and inserting `$2,500'.

(2) LIFETIME LEARNING CREDIT- Paragraph (1) of section 25A(c) of such Code is amended by striking `$10,000 ($5,000' and inserting `$13,000 ($6,500'.

(b) HOPE CREDIT TO APPLY TO ALL 4 YEARS- Paragraph (2) of section 25A(b) is amended by striking `2' each place it appears and inserting `4'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 207. TAX TREATMENT OF STUDENT LOAN FORGIVENESS.

(a) IN GENERAL- Section 108(f) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

`(4) WILLIAM D. FORD FEDERAL DIRECT LOANS- For purposes of this subsection, the term `student loan' includes loans made under the William D. Ford Federal Direct Loan Program if loan repayment and forgiveness are contingent on the borrower's income level.'

(b) EFFECTIVE DATE- The amendment made by this section shall apply to loans canceled after December 31, 1999.

SEC. 208. 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) of the Internal Revenue Code of 1986 (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. 209. ELIMINATION OF 60-MONTH LIMIT ON STUDENT LOAN INTEREST DEDUCTION.

(a) IN GENERAL- Section 221 of the Internal Revenue Code of 1986 (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- Section 6050(e) of the Internal Revenue Code of 1986 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 with respect to any loan interest paid after December 31, 1999.

SEC. 210. CREDIT FOR SCHOOL CONSTRUCTION BONDS IN HIGH-GROWTH AREAS.

(a) IN GENERAL- Part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to credits against tax) is amended by inserting after subpart G the following new subpart:

`Subpart H--Credit to Holders of Qualified Public School Construction Bonds

`Sec. 54. Credit to holders of qualified public school construction bonds.

`Sec. 54A. Qualified public school construction bonds.

`SEC. 54. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL CONSTRUCTION BONDS.

`(a) ALLOWANCE OF CREDIT- In the case of a taxpayer who holds a qualified public school construction bond on the credit allowance date of such bond which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year the amount determined under subsection (b).

`(b) AMOUNT OF CREDIT-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any qualified public school construction bond is the amount equal to the product of--

`(A) the credit rate determined by the Secretary under paragraph (2) for the month in which such bond was issued, multiplied by

`(B) the face amount of the bond held by the taxpayer on the credit allowance date.

`(2) DETERMINATION- During each calendar month, the Secretary shall determine a credit rate which shall apply to bonds issued during the following calendar month. The credit rate for any month is the percentage which the Secretary estimates will on average permit the issuance of qualified public school construction bonds without discount and without interest cost to the issuer.

`(c) LIMITATION BASED ON AMOUNT OF TAX-

`(1) IN GENERAL- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

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

`(B) the sum of the credits allowable under this part (other than subpart C thereof, relating to refundable credits).

`(2) CARRYOVER OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(d) DEFINITIONS- For purposes of this subpart--

`(1) CREDIT ALLOWANCE DATE- The term `credit allowance date' means, with respect to any issue, the last day of the 1-year period beginning on

the date of issuance of such issue and the last day of each successive 1-year period thereafter.

`(2) BOND- The term `bond' includes any obligation.

`(3) STATE- The term `State' includes the District of Columbia and any possession of the United States.

`(4) PUBLIC SCHOOL FACILITY- The term `public school facility' shall not include any stadium or other facility primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public.

`(e) CREDIT INCLUDED IN GROSS INCOME- Gross income includes the amount of the credit allowed to the taxpayer under this section and the amount so included shall be treated as interest income.

`(f) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any qualified public school construction bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.

`SEC. 54A. QUALIFIED PUBLIC SCHOOL CONSTRUCTION BONDS.

`(a) QUALIFIED PUBLIC SCHOOL CONSTRUCTION BOND- For purposes of this subpart--

`(1) IN GENERAL- The term `qualified public school construction bond' means any bond issued as part of an issue if--

`(A) 95 percent or more of the proceeds of such issue are to be used for the construction, rehabilitation, or repair of a public school facility,

`(B) the bond is issued by a State or local government within the jurisdiction of which such school is located,

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

`(D) the term of each bond which is part of such issue does not exceed 15 years.

`(2) TEMPORARY PERIOD EXCEPTION- A bond shall not be treated as failing to meet the requirement of paragraph (1)(A) solely by reason of the fact that the proceeds of the issue of which such bond is a part are invested for a reasonable temporary period (but not more than 36 months) until such proceeds are needed for the purpose for which such issue was issued. Any earnings on such proceeds during such period shall be treated as proceeds of the issue for purposes of applying paragraph (1)(A).

`(b) LIMITATION ON AMOUNT OF BONDS DESIGNATED- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) by any issuer shall not exceed the limitation amount allocated under subsection (d) for such calendar year to such issuer.

`(c) NATIONAL LIMITATION ON AMOUNT OF BONDS DESIGNATED- There is a national qualified school construction bond limitation for each calendar year. Such limitation is--

`(1) $3,600,000,000 for 2000,

`(2) $3,600,000,000 for 2001, and

`(3) except as provided in subsection (e), zero after 2001.

`(d) ALLOCATION OF LIMITATION AMONG STATES-

`(1) IN GENERAL- The Secretary shall allocate the national qualified school construction bond limitation for any calendar year among the States with projected enrollment increases. The amount allocated to a State under the preceding sentence shall be allocated by the State education agency to issuers within such State and such allocations may be made only if there is an approved State application.

`(2) ALLOCATION FORMULA-

`(A) IN GENERAL- The national qualified school construction bond limitation shall be allocated among the States with projected enrollment increases in proportion to their respective shares of the national projected enrollment increase.

`(B) PROJECTED ENROLLMENT INCREASE- The amount of projected enrollment increase for the United States or any State is the amount of the increase (as projected by the Secretary of Education using data as of January 1, 1998) in enrollment in public elementary and secondary schools in the United States or in such State (as the case may be) during the 10-year period beginning with 1997.

`(3) APPROVED STATE APPLICATION- For purposes of paragraph (1), the term `approved State application' means an application which is approved by the Secretary of Education and which includes--

`(A) the results of a recent publicly-available survey (undertaken by the State with the involvement of local education officials, members of the public, and experts in school construction and management) of such State's needs for public school facilities, including descriptions of--

`(i) health and safety problems at such facilities,

`(ii) the capacity of public schools in the State to house projected enrollments, and

`(iii) the extent to which the public schools in the State offer the physical infrastructure needed to provide a high-quality education to all students, and

`(B) a description of how the State will allocate to local educational agencies, or otherwise use, its allocation under this subsection to address the needs identified under subparagraph (A), including a description of how it will--

`(i) give priority to localities experiencing the largest increases in enrollment,

`(ii) use its allocation under this subsection to assist localities that lack the fiscal capacity to issue bonds on their own, and

`(iii) ensure that its allocation under this subsection is used only to supplement, and not supplant, the amount of school construction, rehabilitation, and repair in the State that would have occurred in the absence of such allocation.

Any allocation under paragraph (1) by a State education agency shall be binding if such agency reasonably determined that the allocation was in accordance with the plan approved under this paragraph.

`(e) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(1) the amount allocated under subsection (d) to any State, exceeds

`(2) the amount of bonds issued during such year which are designated under subsection (a) pursuant to such allocation,

the limitation amount under such subsection for such State for the following calendar year shall be increased by the amount of such excess. The subsection shall not apply if such following calendar year is after 2003.'

(b) REPORTING- Subsection (d) of section 6049 of such Code (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

`(8) REPORTING OF CREDIT ON QUALIFIED PUBLIC SCHOOL CONSTRUCTION BONDS-

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 54(e) and such amounts shall be treated as paid on the credit allowance date (as defined in section 54(d)(1)).

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A) of this paragraph, subsection (b)(4) of this section shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i).

`(C) REGULATORY AUTHORITY- The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'

(c) CLERICAL AMENDMENT- The table of subparts for part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Subpart H. Credit to holders of qualified public school construction bonds.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to obligations issued after December 31, 1999.

SEC. 211. CREDIT FOR SCHOOL MODERNIZATION BONDS IN DISTRESSED AREAS.

(a) IN GENERAL- Chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

`Subchapter X--Public School Modernization Provisions

`Part I. Credit to holders of qualified public school modernization bonds.

`Part II. Qualified school construction bonds.

`Part III. Incentives for education zones.

`PART I--CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS

`Sec. 1400F. Credit to holders of qualified public school modernization bonds.

`SEC. 1400F. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS.

`(a) ALLOWANCE OF CREDIT- In the case of a taxpayer who holds a qualified public school modernization bond on a credit allowance date of such bond which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond.

`(b) AMOUNT OF CREDIT-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a qualified public school modernization bond is 25 percent of the annual credit determined with respect to such bond.

`(2) ANNUAL CREDIT- The annual credit determined with respect to any qualified public school modernization bond is the product of--

`(A) the applicable credit rate, multiplied by

`(B) the outstanding face amount of the bond.

`(3) APPLICABLE CREDIT RATE- For purposes of paragraph (1), the applicable credit rate with respect to an issue is the rate equal to an average market yield (as of the day before the date of issuance of the issue) on outstanding long-term corporate debt obligations (determined under regulations prescribed by the Secretary).

`(4) SPECIAL RULE FOR ISSUANCE AND REDEMPTION- In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed.

`(c) LIMITATION BASED ON AMOUNT OF TAX-

`(1) IN GENERAL- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

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

`(B) the sum of the credits allowable under part IV of subchapter A (other than subpart C thereof, relating to refundable credits).

`(2) CARRYOVER OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(d) QUALIFIED PUBLIC SCHOOL MODERNIZATION BOND; CREDIT ALLOWANCE DATE- For purposes of this section--

`(1) QUALIFIED PUBLIC SCHOOL MODERNIZATION BOND- The term `qualified public school modernization bond' means--

`(A) a qualified zone academy bond, and

`(B) a qualified school construction bond.

`(2) CREDIT ALLOWANCE DATE- The term `credit allowance date' means--

`(A) March 15,

`(B) June 15,

`(C) September 15, and

`(D) December 15.

Such term includes the last day on which the bond is outstanding.

`(e) OTHER DEFINITIONS- For purposes of this subchapter--

`(1) LOCAL EDUCATIONAL AGENCY- The term `local educational agency' has the meaning given to such term by section 14101 of the Elementary and Secondary Education Act of 1965. Such term includes the local educational agency that serves the District of Columbia but does not include any other State agency.

`(2) BOND- The term `bond' includes any obligation.

`(3) STATE- The term `State' includes the District of Columbia and any possession of the United States.

`(4) PUBLIC SCHOOL FACILITY- The term `public school facility' shall not include--

`(A) any stadium or other facility primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public, or

`(B) any facility which is not owned by a State or local government or any agency or instrumentality of a State or local government.

`(f) CREDIT INCLUDED IN GROSS INCOME- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (c)) and the amount so included shall be treated as interest income.

`(g) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any qualified public school modernization bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.

`(h) CREDITS MAY BE STRIPPED- Under regulations prescribed by the Secretary--

`(1) IN GENERAL- There may be a separation (including at issuance) of the ownership of a qualified public school modernization bond and the entitlement to the credit under this section with respect to such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

`(2) CERTAIN RULES TO APPLY- In the case of a separation described in paragraph (1), the rules of section 1286 shall apply to the qualified public school modernization bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

`(i) TREATMENT FOR ESTIMATED TAX PURPOSES- Solely for purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a qualified public school modernization bonds on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.

`(j) CREDIT MAY BE TRANSFERRED- Nothing in any law or rule of law shall be construed to limit the transferability of the credit allowed by this section through sale and repurchase agreements.

`(k) REPORTING- Issuers of qualified public school modernization bonds shall submit reports similar to the reports required under section 149(e).

`(l) TERMINATION- This section shall not apply to any bond issued after September 30, 2004.

`PART II--QUALIFIED SCHOOL CONSTRUCTION BONDS

`Sec. 1400G. Qualified school construction bonds.

`SEC. 1400G. QUALIFIED SCHOOL CONSTRUCTION BONDS.

`(a) QUALIFIED SCHOOL CONSTRUCTION BOND- For purposes of this subchapter, the term `qualified school construction bond' means any bond issued as part of an issue if--

`(1) 95 percent or more of the proceeds of such issue are to be used for the construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue,

`(2) the bond is issued by a State or local government within the jurisdiction of which such school is located,

`(3) the issuer designates such bond for purposes of this section, and

`(4) the term of each bond which is part of such issue does not exceed 15 years.

`(b) LIMITATION ON AMOUNT OF BONDS DESIGNATED- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) by any issuer shall not exceed the sum of--

`(1) the limitation amount allocated under subsection (d) for such calendar year to such issuer, and

`(2) if such issuer is a large local educational agency (as defined in subsection (e)(4)) or is issuing on behalf of such an agency, the limitation amount allocated under subsection (e) for such calendar year to such agency.

`(c) NATIONAL LIMITATION ON AMOUNT OF BONDS DESIGNATED- There is a national qualified school construction bond limitation for each calendar year. Such limitation is--

`(1) $11,000,000,000 for 2000,

`(2) $11,000,000,000 for 2001, and

`(3) except as provided in subsection (f), zero after 2001.

`(d) HALF OF LIMITATION ALLOCATED AMONG STATES-

`(1) IN GENERAL- One-half of the limitation applicable under subsection (c) for any calendar year shall be allocated among the States under paragraph (2) by the Secretary. The limitation amount allocated to a State under the preceding sentence shall be allocated by the State to issuers within such State and such allocations may be made only if there is an approved State application.

`(2) ALLOCATION FORMULA- The amount to be allocated under paragraph (1) for any calendar year shall be allocated among the States in proportion to the respective amounts each such State received for Basic Grants under subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for the most recent fiscal year ending before such calendar year. For purposes of the preceding sentence, Basic Grants attributable to large local educational agencies (as defined in subsection (e)) shall be disregarded.

`(3) MINIMUM ALLOCATIONS TO STATES-

`(A) IN GENERAL- The Secretary shall adjust the allocations under this subsection for any calendar year for each State to the extent necessary to ensure that the sum of--

`(i) the amount allocated to such State under this subsection for such year, and

`(ii) the aggregate amounts allocated under subsection (e) to large local educational agencies in such State for such year,

is not less than an amount equal to such State's minimum percentage of the amount to be allocated under paragraph (1) for the calendar year.

`(B) MINIMUM PERCENTAGE- A State's minimum percentage for any calendar year is the minimum percentage described in section 1124(d) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6334(d)) for such State for the most recent fiscal year ending before such calendar year.

`(4) ALLOCATIONS TO CERTAIN POSSESSIONS- The amount to be allocated under paragraph (1) to any possession of the United States other than Puerto Rico shall be the amount which would have been allocated if all allocations under paragraph (1) were made on the basis of respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). In making other allocations, the amount to be allocated under paragraph (1) shall be reduced by the aggregate amount allocated under this paragraph to possessions of the United States.

`(5) ALLOCATIONS FOR INDIAN SCHOOLS- In addition to the amounts otherwise allocated under this subsection, $200,000,000 for calendar year 2000, and $200,000,000 for calendar year 2001, shall be allocated by the Secretary of the Interior for purposes of the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. In the case of amounts allocated under the preceding sentence, Indian tribal governments (as defined in section 7871) shall be treated as qualified issuers for purposes of this subchapter.

`(6) APPROVED STATE APPLICATION- For purposes of paragraph (1), the term `approved State application' means an application which is approved by the Secretary of Education and which includes--

`(A) the results of a recent publicly-available survey (undertaken by the State with the involvement of local education officials, members of the public, and experts in school construction and management) of such State's needs for public school facilities, including descriptions of--

`(i) health and safety problems at such facilities,

`(ii) the capacity of public schools in the State to house projected enrollments, and

`(iii) the extent to which the public schools in the State offer the physical infrastructure needed to provide a high-quality education to all students, and

`(B) a description of how the State will allocate to local educational agencies, or otherwise use, its allocation under this subsection to address the needs identified under subparagraph (A), including a description of how it will--

`(i) give highest priority to localities with the greatest needs, as demonstrated by inadequate school facilities coupled with a low level of resources to meet those needs,

`(ii) use its allocation under this subsection to assist localities that lack the fiscal capacity to issue bonds on their own, and

`(iii) ensure that its allocation under this subsection is used only to supplement, and not supplant, the amount of school construction, rehabilitation, and repair in the State that would have occurred in the absence of such allocation.

Any allocation under paragraph (1) by a State shall be binding if such State reasonably determined that the allocation was in accordance with the plan approved under this paragraph.

`(e) HALF OF LIMITATION ALLOCATED AMONG LARGEST SCHOOL DISTRICTS-

`(1) IN GENERAL- One-half of the limitation applicable under subsection (c) for any calendar year shall be allocated under paragraph (2) by the Secretary among local educational agencies which are large local educational agencies for such year. No qualified school construction bond may be issued by reason of an allocation to a large local educational agency under the preceding sentence unless such agency has an approved local application.

`(2) ALLOCATION FORMULA- The amount to be allocated under paragraph (1) for any calendar

year shall be allocated among large local educational agencies in proportion to the respective amounts each such agency received for Basic Grants under subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for the most recent fiscal year ending before such calendar year.

`(3) ALLOCATION OF UNUSED LIMITATION TO STATE- The amount allocated under this subsection to a large local educational agency for any calendar year may be reallocated by such agency to the State in which such agency is located for such calendar year. Any amount reallocated to a State under the preceding sentence may be allocated as provided in subsection (d)(1).

`(4) LARGE LOCAL EDUCATIONAL AGENCY- For purposes of this section, the term `large local educational agency' means, with respect to a calendar year, any local educational agency if such agency is--

`(A) among the 100 local educational agencies with the largest numbers of children aged 5 through 17 from families living below the poverty level, as determined by the Secretary using the most recent data available from the Department of Commerce that are satisfactory to the Secretary, or

`(B) 1 of not more than 25 local educational agencies (other than those described in subparagraph (A)) that the Secretary of Education determines (based on the most recent data available satisfactory to the Secretary) are in particular need of assistance, based on a low level of resources for school construction, a high level of enrollment growth, or such other factors as the Secretary deems appropriate.

`(5) APPROVED LOCAL APPLICATION- For purposes of paragraph (1), the term `approved local application' means an application which is approved by the Secretary of Education and which includes--

`(A) the results of a recent publicly-available survey (undertaken by the local educational agency or the State with the involvement of school officials, members of the public, and experts in school construction and management) of such agency's needs for public school facilities, including descriptions of--

`(i) the overall condition of the local educational agency's school facilities, including health and safety problems,

`(ii) the capacity of the agency's schools to house projected enrollments, and

`(iii) the extent to which the agency's schools offer the physical infrastructure needed to provide a high-quality education to all students,

`(B) a description of how the local educational agency will use its allocation under this subsection to address the needs identified under subparagraph (A), and

`(C) a description of how the local educational agency will ensure that its allocation under this subsection is used only to supplement, and not supplant, the amount of school construction, rehabilitation, or repair in the locality that would have occurred in the absence of such allocation.

A rule similar to the rule of the last sentence of subsection (d)(6) shall apply for purposes of this paragraph.

`(f) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(1) the amount allocated under subsection (d) to any State, exceeds

`(2) the amount of bonds issued during such year which are designated under subsection (a) pursuant to such allocation,

the limitation amount under such subsection for such State for the following calendar year shall be increased by the amount of such excess. A similar rule shall apply to the amounts allocated under subsection (d)(5) or (e).

`(g) SPECIAL RULES RELATING TO ARBITRAGE-

`(1) IN GENERAL- A bond shall not be treated as failing to meet the requirement of subsection (a)(1) solely by reason of the fact that the proceeds of the issue of which such bond is a part are invested for a temporary period (but not more than 36 months) until such proceeds are needed for the purpose for which such issue was issued.

`(2) BINDING COMMITMENT REQUIREMENT- Paragraph (1) shall apply to an issue only if, as of the date of issuance, there is a reasonable expectation that--

`(A) at least 10 percent of the proceeds of the issue will be spent within the 6-month period beginning on such date for the purpose for which such issue was issued, and

`(B) the remaining proceeds of the issue will be spent with due diligence for such purpose.

`(3) EARNINGS ON PROCEEDS- Any earnings on proceeds during the temporary period shall be treated as proceeds of the issue for purposes of applying subsection (a)(1) and paragraph (1) of this subsection.

`PART III--INCENTIVES FOR EDUCATION ZONES

`Sec. 1400H. Qualified zone academy bonds.

`Sec. 1400I. Corporate contributions to specialized training centers.

`SEC. 1400H. QUALIFIED ZONE ACADEMY BONDS.

`(a) QUALIFIED ZONE ACADEMY BOND- For purposes of this subchapter--

`(1) IN GENERAL- The term `qualified zone academy bond' means any bond issued as part of an issue if--

`(A) 95 percent or more of the proceeds of such issue are to be used for a qualified purpose with respect to a qualified zone academy established by a local educational agency,

`(B) the bond is issued by a State or local government within the jurisdiction of which such academy is located,

`(C) the issuer--

`(i) designates such bond for purposes of this section,

`(ii) certifies that it has written assurances that the private business contribution requirement of paragraph (2) will be met with respect to such academy, and

`(iii) certifies that it has the written approval of the local educational agency for such bond issuance, and

`(D) the term of each bond which is part of such issue does not exceed 15 years.

Rules similar to the rules of section 1400G(g) shall apply for purposes of paragraph (1).

`(2) PRIVATE BUSINESS CONTRIBUTION REQUIREMENT-

`(A) IN GENERAL- For purposes of paragraph (1), the private business contribution requirement of this paragraph is met with respect to any issue if the local educational agency that established the qualified zone academy has written commitments from private entities to make qualified contributions having a present value (as of the date of issuance of the issue) of not less than 10 percent of the proceeds of the issue.

`(B) QUALIFIED CONTRIBUTIONS- For purposes of subparagraph (A), the term `qualified contribution' means any contribution (of a type and quality acceptable to the local educational agency) of--

`(i) equipment for use in the qualified zone academy (including state-of-the-art technology and vocational equipment),

`(ii) technical assistance in developing curriculum or in training teachers in order to promote appropriate market driven technology in the classroom,

`(iii) services of employees as volunteer mentors,

`(iv) internships, field trips, or other educational opportunities outside the academy for students, or

`(v) any other property or service specified by the local educational agency.

`(3) QUALIFIED ZONE ACADEMY- The term `qualified zone academy' means any public school (or academic program within a public school) which is established by and operated under the supervision of a local educational agency to provide education or training below the postsecondary level if--

`(A) such public school or program (as the case may be) is designed in cooperation with business to enhance the academic curriculum, increase graduation and employment rates, and better prepare students for the rigors of college and the increasingly complex workforce,

`(B) students in such public school or program (as the case may be) will be subject to the same academic standards and assessments as other students educated by the local educational agency,

`(C) the comprehensive education plan of such public school or program is approved by the local educational agency, and

`(D)(i) such public school is located in an empowerment zone or enterprise community (including any such zone or community designated after the date of the enactment of this section), or

`(ii) there is a reasonable expectation (as of the date of issuance of the bonds) that at least 35 percent of the students attending such school or participating in such program (as the case may be) will be eligible for free or reduced-cost lunches under the school lunch program established under the National School Lunch Act.

`(4) QUALIFIED PURPOSE- The term `qualified purpose' means, with respect to any qualified zone academy--

`(A) constructing, rehabilitating, or repairing the public school facility in which the academy is established,

`(B) acquiring the land on which such facility is to be constructed with part of the proceeds of such issue,

`(C) providing equipment for use at such academy,

`(D) developing course materials for education to be provided at such academy, and

`(E) training teachers and other school personnel in such academy.

`(b) LIMITATIONS ON AMOUNT OF BONDS DESIGNATED-

`(1) IN GENERAL- There is a national zone academy bond limitation for each calendar year. Such limitation is--

`(A) $400,000,000 for 1998,

`(B) $400,000,000 for 1999,

`(C) $1,000,000,000 for 2000,

`(D) $1,400,000,000 for 2001, and

`(E) except as provided in paragraph (3), zero after 2001.

`(2) ALLOCATION OF LIMITATION-

`(A) ALLOCATION AMONG STATES-

`(i) 1998 and 1999 LIMITATIONS- The national zone academy bond limitations for calendar years 1998 and 1999 shall be allocated by the Secretary among the States on the basis of their respective populations of individuals below the poverty line (as defined by the Office of Management and Budget).

`(ii) LIMITATION AFTER 1999- The national zone academy bond limitation for any calendar year after 1999 shall be allocated by the Secretary among the States in the manner prescribed by section 1400G(d); except that in making the allocation under this clause, the Secretary shall take into account--

`(I) Basic Grants attributable to large local educational agencies (as defined in section 1400G(e)).

`(II) the national zone academy bond limitation.

`(B) ALLOCATION TO LOCAL EDUCATIONAL AGENCIES- The limitation amount allocated to a State under subparagraph (A) shall be allocated by the State education agency to qualified zone academies within such State.

`(C) DESIGNATION SUBJECT TO LIMITATION AMOUNT- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (a) with respect to any qualified zone academy shall not exceed the limitation amount allocated to such academy under subparagraph (B) for such calendar year.

`(3) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(A) the limitation amount under this subsection for any State, exceeds

`(B) the amount of bonds issued during such year which are designated under subsection (a) (or the corresponding provisions of prior law) with respect to qualified zone academies within such State,

the limitation amount under this subsection for such State for the following calendar year shall be increased by the amount of such excess.

`SEC. 1400I. CORPORATE CONTRIBUTIONS TO SPECIALIZED TRAINING CENTERS.

`(a) GENERAL RULE- For purposes of section 38, in the case of a corporation, the specialized training center credit determined under this section is an amount equal to 50 percent of the amount of the designated qualified contributions made by the taxpayer during the taxable year to a specialized training center.

`(b) DEFINITIONS- For purposes of this section--

`(1) SPECIALIZED TRAINING CENTER- The term `specialized training center' means any qualified zone academy (as defined in section 1400H(a)(3))--

`(A) which is located in an empowerment zone or enterprise community, or

`(B) which is located in proximity to such a zone or community and a significant number of the students attending such academy have their principal place of abode in such zone or community.

`(2) DESIGNATED QUALIFIED CONTRIBUTIONS- The term `designated qualified contribution' means any contribution--

`(A) which is made pursuant to an agreement under which the taxpayer participates in the design of the academic program of the specialized training center, and

`(B) which is designated under subsection (c).

`(c) DESIGNATION OF CONTRIBUTIONS-

`(1) LIMITATION ON AMOUNT DESIGNATED- The maximum amount of contributions made which may be designated under this subsection with respect to all specialized training centers located in an empowerment zone or enterprise community shall not exceed--

`(A) $8,000,000 in the case of an empowerment zone, and

`(B) $2,000,000 in the case of an enterprise community.

`(2) DESIGNATIONS- Designations under this subsection shall be made (in consultation with the local educational agency) by the local government agency responsible for implementing the strategic plan described in section 1391(f)(2) for the empowerment zone or enterprise community.

`(d) VALUE OF CONTRIBUTIONS- The amount of any designated qualified contribution which may be taken into account under this section shall be--

`(1) the amount of such contribution which would be allowed as a deduction under section 170 without regard to section 280C(d), or

`(2) in the case of a contribution of services performed on the premises of a specialized training center by an employee of the taxpayer, the amount of wages (as defined in section 3306(b) but without regard to any dollar limitation contained in such section) paid by the taxpayer for such services.'

(b) REPORTING- Subsection (d) of section 6049 of such Code (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

`(8) REPORTING OF CREDIT ON QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS-

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 1400F(f) and such amounts shall be treated as paid on the credit allowance date (as defined in section 1400F(d)(2)).

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A) of this paragraph, subsection (b)(4) of this section shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i).

`(C) REGULATORY AUTHORITY- The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'

(c) CONFORMING AMENDMENTS RELATED TO CREDIT FOR CORPORATE CONTRIBUTIONS TO SPECIALIZED TRAINING CENTERS-

(1) DENIAL OF DOUBLE BENEFIT- Section 280C of such Code is amended by adding at the end the following new subsection:

`(d) CREDIT FOR CORPORATE CONTRIBUTIONS TO SPECIALIZED TRAINING CENTERS- No deduction shall be allowed for that portion of the designated qualified contributions (as defined in section 1400I(b)) made during the taxable year which is equal to the credit determined for

the taxable year under section 1400I(a). Paragraph (3) of subsection (b) shall apply for purposes of this subsection.'

(2) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT-

(A) Section 38(b) of such Code is amended--

(i) by striking `plus' at the end of paragraph (11),

(ii) by striking the period at the end of paragraph (12) and inserting `, plus', and

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

`(13) in the case of a corporation, the specialized training center credit determined under section 1400I(a).'

(B) Subsection (d) of section 39 of such Code (relating to carryback and carryforward of unused credits) is amended by adding at the end the following new paragraph:

`(9) NO CARRYBACK OF SECTION 1400I CREDIT BEFORE JANUARY 1, 2000- No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 1400I may be carried back to a taxable year beginning before January 1, 2000.'.

(d) OTHER CONFORMING AMENDMENTS-

(1) Subchapter U of chapter 1 of such Code is amended by striking part IV, by redesignating part V as part IV, and by redesignating section 1397F as section 1397E.

(2) The table of subchapters for chapter 1 of such Code is amended by adding at the end the following new item:

`Subchapter X. Public school modernization provisions.'

(3) The table of parts of subchapter U of chapter 1 of such Code is amended by striking the last 2 items and inserting the following item:

`Part IV. Regulations.'

(e) EFFECTIVE DATES-

(1) IN GENERAL- Except as otherwise provided in this subsection, the amendments made by this section shall apply to obligations issued after December 31, 1999.

(2) CREDIT FOR CORPORATE CONTRIBUTIONS TO SPECIALIZED TRAINING CENTERS- Section 1400I of the Internal Revenue Code of 1986 (as added by this section) shall apply to taxable years beginning after December 31, 1999.

(3) REPEAL OF RESTRICTION ON ZONE ACADEMY BOND HOLDERS- In the case of bonds to which section 1397E of the Internal Revenue Code of 1986 (as in effect before the date of the enactment of this Act) applies, the limitation of such section to eligible taxpayers (as defined in subsection (d)(6) of such section) shall not apply after the date of the enactment of this Act.

(f) APPLICATION OF CERTAIN LABOR STANDARDS ON CONSTRUCTION PROJECTS FINANCED UNDER PUBLIC SCHOOL MODERNIZATION PROGRAM- Section 439 of the General Education Provisions Act (relating to labor standards) is amended--

(1) by inserting `(a)' before `All laborers and mechanics', and

(2) by adding at the end the following:

`(b)(1) For purposes of this section, the term `applicable program' also includes the qualified zone academy bond provisions enacted by section 226 of the Taxpayer Relief Act of 1997 and the program established by section 2 of the Public School Modernization Act of 1999.

`(2) A State or local government participating in a program described in paragraph (1) shall--

`(A) in the awarding of contracts, give priority to contractors with substantial numbers of employees residing in the local education area to be served by the school being constructed; and

`(B) include in the construction contract for such school a requirement that the contractor give priority in hiring new workers to individuals residing in such local education area.

`(3) In the case of a program described in paragraph (1), nothing in this subsection or subsection (a) shall be construed to deny any tax credit allowed under such program. If amounts are required to be withheld from contractors to pay wages to which workers are entitled, such amounts shall be treated as expended for construction purposes in determining whether the requirements of such program are met.'.

(g) EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES-

(1) IN GENERAL- Section 134 of the Workforce Investment Act of 1998 (29 U.S.C. 2864) is amended by adding at the end the following:

`(f) LOCAL EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL FACILITIES-

`(1) IN GENERAL- In order to provide training services related to construction or reconstruction of

public school facilities receiving funding assistance under an applicable program, each State shall establish a specialized program of training meeting the following requirements:

`(A) The specialized program provides training for jobs in the construction industry.

`(B) The program is designed to provide trained workers for projects for the construction or reconstruction of public school facilities receiving funding assistance under an applicable program.

`(C) The program is designed to ensure that skilled workers (residing in the area to be served by the school facilities) will be available for the construction or reconstruction work.

`(2) COORDINATION- The specialized program established under paragraph (1) shall be integrated with other activities under this Act, with the activities carried out under the National Apprenticeship Act of 1937 by the State Apprenticeship Council or through the Bureau of Apprenticeship and Training in the Department of Labor, as appropriate, and with activities carried out under the Carl D. Perkins Vocational and Technical Education Act of 1998. Nothing in this subsection shall be construed to require services duplicative of those referred to in the preceding sentence.

`(3) APPLICABLE PROGRAM- In this subsection, the term `applicable program' has the meaning given the term in section 439(b) of the General Education Provisions Act (relating to labor standards).'.

(2) STATE PLAN- Section 112(b)(17)(A) of the Workforce Investment Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is amended--

(A) in clause (iii), by striking `and' at the end;

(B) by redesignating clause (iv) as clause (v); and

(C) by inserting after clause (iii) the following:

`(iv) how the State will establish and carry out a specialized program of training under section 134(f); and'.

TITLE III--EMPLOYMENT

SEC. 301. EXTENSION OF WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

(a) WORK OPPORTUNITY CREDIT- Subparagraph (B) of section 51(c)(4) of the Internal Revenue Code of 1986 (relating to termination) is amended by striking `June 30, 1999' and inserting `June 30, 2004'.

(b) WELFARE-TO-WORK CREDIT- Subparagraph (f) of section 51A of such Code (relating to temporary incentives for employing long-term family assistance recipients) is amended by striking `June 30, 1999' and inserting `June 30, 2004'.

TITLE IV--ENERGY

SEC. 401. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROPERTY USED IN BUSINESS.

(a) IN GENERAL- Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 48 the following new section:

`SEC. 48A. ENERGY CREDIT.

`(a) IN GENERAL- For purposes of section 46, the energy credit for any taxable year is the sum of--

`(1) the amount equal to the energy percentage of the basis of each energy property placed in service during such taxable year, and

`(2) the credit amount for each qualified hybrid vehicle placed in service during the taxable year.

`(b) ENERGY PERCENTAGE-

`(1) IN GENERAL- The energy percentage shall be determined in accordance with the following table:

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Column A--Description                                                                                                       Column B--Energy Percentage Column C--Period              

In the case of:                                                                                                              The energy percentage is:   For the period:               

                                                                                                                                                         Beginning on:    Ending on:   

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Solar energy property (other than elected solar hot water property and photovoltaic property) and geothermal energy property 10 percent                   1/1/2000         no end date 

Elected solar hot water property                                                                                             15 percent                   1/1/2000        12/31/2004   

Photovoltaic property                                                                                                        15 percent                   1/1/2000        12/31/2006   

20 percent energy-efficient building property                                                                                20 percent                   1/1/2000        12/31/2003   

10 percent energy-efficient building property                                                                                10 percent                   1/1/2000        12/31/2001   

Combined heat and power system property                                                                                      8 percent                    1/1/2000        12/31/2002.  

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`(2) PERIODS FOR WHICH PERCENTAGE NOT SPECIFIED- In the case of any energy property, the energy percentage shall be zero for any period for which an energy percentage is not specified for such property under paragraph (1).

`(3) COORDINATION WITH REHABILITATION- The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.

`(4) TRANSITIONAL RULES- Rules similar to the rules of section 48(m) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection.

`(c) MAXIMUM CREDIT FOR CERTAIN PROPERTY- In the case of property described in the following table, the amount of the current year business credit under subsection (a) for the taxable year for each item of such property with respect to a building shall not exceed the amount specified for such property in such table:

----------------------------------------------------------------------------------------------------------------------------------------

Description of property:                                                                           Maximum allowable credit amount is:  

----------------------------------------------------------------------------------------------------------------------------------------

Elected solar hot water property                                                                       $1,000.                          

Photovoltaic property with respect to which the energy percentage is greater than 10 percent           $2,000.                          

20 percent energy-efficient building property:                                                                                          

fuel cell described in subsection (e)(3)(A)                                                            $500 per each kw/hr of capacity. 

natural gas heat pump described in subsection (e)(3)(D)                                                $1,000.                          

20 percent energy-efficient building property (other than a fuel cell and a natural gas heat pump)     $500.                            

10 percent energy-efficient building property                                                          $250.                            

----------------------------------------------------------------------------------------------------------------------------------------

`(d) ENERGY PROPERTY DEFINED-

`(1) IN GENERAL- For purposes of this subpart, the term `energy property' means any property--

`(A) which is--

`(i) solar energy property,

`(ii) geothermal energy property,

`(iii) 20 percent energy-efficient building property,

`(iv) 10 percent energy-efficient building property, or

`(v) combined heat and power system property,

`(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

`(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,

`(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and

`(D) which meets the performance and quality standards (if any), and the certification requirements (if any), which--

`(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy or the Administrator of the Environmental Protection Agency, as appropriate), and

`(ii) are in effect at the time of the acquisition of the property.

`(2) EXCEPTION- Such term shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). The preceding sentence shall not apply to combined heat and power system property.

`(e) DEFINITIONS RELATING TO TYPES OF ENERGY PROPERTY- For purposes of this section--

`(1) SOLAR ENERGY PROPERTY-

`(A) IN GENERAL- The term `solar energy property' means equipment which uses solar energy--

`(i) to generate electricity,

`(ii) to heat or cool (or provide hot water for use in) a structure, or

`(iii) to provide solar process heat.

`(B) ELECTED SOLAR WATER HEATING PROPERTY-

`(i) IN GENERAL- The term `elected solar water heating property' means property which is solar energy property by reason of subparagraph (A)(ii) and for which an election under this subparagraph is in effect.

`(ii) ELECTION- For purposes of clause (i) and the energy percentage specified in the table in subsection (b)(1), a taxpayer may elect to treat property described in clause (i) as elected solar water heating property.

`(C) PHOTOVOLTAIC PROPERTY- The term `photovoltaic property' means solar energy property which uses a solar photovoltaic process to generate electricity.

`(D) SWIMMING POOLS, ETC., USED AS STORAGE MEDIUM- The term `solar energy property' shall not include a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage.

`(E) SOLAR PANELS- No solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as solar energy property solely because it constitutes a structural component of the structure on which it is installed.

`(2) GEOTHERMAL ENERGY PROPERTY- The term `geothermal energy property' means equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage.

`(3) 20 PERCENT ENERGY-EFFICIENT BUILDING PROPERTY- The term `20 percent energy-efficient building property' means--

`(A) a fuel cell that--

`(i) generates electricity and heat using an electrochemical process,

`(ii) has an electricity-only generation efficiency greater than 35 percent, and

`(iii) has a minimum generating capacity of 5 kilowatts,

`(B) an electric heat pump hot water heater that yields an energy factor of 1.7 or greater,

`(C) an electric heat pump that has a heating system performance factor (HSPF) of 9 or greater and a cooling seasonal energy efficiency ratio (SEER) of 15 or greater,

`(D) a natural gas heat pump that has a coefficient of performance of not less than 1.25 for heating and not less than 0.70 for cooling,

`(E) a central air conditioner that has a cooling seasonal energy efficiency ratio (SEER) of 15 or greater, and

`(F) an advanced natural gas water heater that has an energy factor of at least 0.80.

`(4) 10 PERCENT ENERGY-EFFICIENT BUILDING PROPERTY- The term `10 percent energy-efficient building property' means--

`(A) an electric heat pump that has a heating system performance factor (HSPF) of 7.5 or greater and a cooling seasonal energy efficiency ratio (SEER) of 13.5 or greater,

`(B) a central air conditioner that has a cooling seasonal energy efficiency ratio (SEER) of 13.5 or greater, and

`(C) an advanced natural gas water heater that has an energy factor of at least 0.65.

`(5) COMBINED HEAT AND POWER SYSTEM PROPERTY-

`(A) IN GENERAL- The term `combined heat and power system property' means property comprising a system--

`(i) which uses the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of useful thermal energy (including heating and cooling applications),

`(ii) which has an electrical capacity of more than 50 kilowatts or a mechanical energy capacity of more than 67 horsepower or an equivalent combination of electrical and mechanical energy capacities,

`(iii) which produces--

`(I) at least 20 percent of its total useful energy in the form of thermal energy, and

`(II) at least 20 percent of its total useful energy in the form of electrical or mechanical power (or a combination thereof), and

`(iv) the energy efficiency percentage of which exceeds 60 percent (70 percent in the case of a system with an electrical capacity in excess of 50 megawatts or a mechanical energy capacity in excess of 67,000 horsepower, or an equivalent combination of electrical and mechanical energy capacities).

`(B) SPECIAL RULES-

`(i) ENERGY EFFICIENCY PERCENTAGE- For purposes of subparagraph (A)(iv), the energy efficiency percentage of a system is the fraction--

`(I) the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and

`(II) the denominator of which is the lower heating value of the primary fuel source for the system.

`(ii) DETERMINATIONS MADE ON BTU BASIS- The energy efficiency percentage and the percentages under subparagraph (A)(iii) shall be determined on a Btu basis.

`(iii) INPUT AND OUTPUT PROPERTY NOT INCLUDED- The term `combined heat and power system property' does not include property used to transport the energy source to the facility or to distribute energy produced by the facility.

`(iv) ACCOUNTING RULE FOR PUBLIC UTILITY PROPERTY- In the case that combined heat and power system property is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), the taxpayer may only claim the credit under subsection (a)(1) if, with respect to such property, the taxpayer uses a normalization method of accounting.

`(v) DEPRECIATION- No credit shall be allowed for any combined heat and power system property unless the taxpayer elects to treat such property for purposes of section 168 as having a class life of not less than 22 years.

`(f) QUALIFIED HYBRID VEHICLES- For purposes of subsection (a)(2)--

`(1) CREDIT AMOUNT-

`(A) IN GENERAL- The credit amount for each qualified hybrid vehicle with a rechargeable energy storage system that provides the applicable percentage of the maximum available power shall be the amount specified in the following table:

---------------------------------------------------------

    `Applicable percentage             Credit amount is: 

Greater than or equal to-- Less than--                   

---------------------------------------------------------

                 5 percent 10 percent              $ 500 

                10 percent 20 percent             $1,000 

                20 percent 30 percent             $1,500 

                30 percent                        $2,000 

---------------------------------------------------------

`(B) INCREASE IN CREDIT AMOUNT FOR REGENERATIVE BRAKING SYSTEM- In the case of a qualified hybrid vehicle that actively employs a regenerative braking system which supplies to the rechargeable energy storage system the applicable percentage of the energy available from braking in a typical 60 miles per hour to 0 miles per hour braking event, the credit amount determined under subparagraph (A) shall be increased by the amount specified in the following table:

------------------------------------------------------------------

    `Applicable percentage             Credit amount increase is: 

Greater than or equal to-- Less than--                            

------------------------------------------------------------------

                20 percent 40 percent                       $ 250 

                40 percent 60 percent                       $ 500 

                60 percent                                 $1,000 

------------------------------------------------------------------

`(2) QUALIFIED HYBRID VEHICLE- The term `qualified hybrid vehicle means an automobile that meets all applicable regulatory requirements and that can draw propulsion energy from both of the following on-board sources of stored energy:

`(A) A consumable fuel.

`(B) A rechargeable energy storage system.

`(3) MAXIMUM AVAILABLE POWER- The term `maximum available power' means the maximum value of the sum of the heat engine and electric drive system power or other non-heat energy conversion devices available for a driver's command for maximum acceleration at vehicle speeds under 75 miles per hour.

`(4) AUTOMOBILE- The term `automobile' has the meaning given such term by section 4064(b)(1) (without regard to subparagraphs (B) and (C) thereof). A vehicle shall not fail to be treated as an automobile solely by reason of weight if such vehicle is rated at 8,500 pounds gross vehicle weight rating or less.

`(5) DOUBLE BENEFIT; PROPERTY USED OUTSIDE UNITED STATES, ETC., NOT QUALIFIED- No credit shall be allowed under subsection (a)(2) with respect to--

`(A) any property for which a credit is allowed under section 25C or 30,

`(B) any property referred to in section 50(b), and

`(C) the portion of the cost of any property taken into account under section 179 or 179A.

`(6) REGULATIONS-

`(A) TREASURY- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.

`(B) ENVIRONMENTAL PROTECTION AGENCY-

`(A) TREASURY- The Administrator of the Environmental Protection Agency shall prescribe such regulations as may be necessary or appropriate to specify the testing and calculation procedures that would be used to determine whether a vehicle meets the qualifications for a credit under this subsection.

`(7) TERMINATION- Paragraph (2) shall not apply with respect to any vehicle placed in service during a calendar year ending before January 1, 2003, or after December 31, 2006.

`(g) SPECIAL RULES- For purposes of this section--

`(1) SPECIAL RULE FOR PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING OR INDUSTRIAL DEVELOPMENT BONDS-

`(A) REDUCTION OF BASIS- For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by--

`(i) subsidized energy financing, or

`(ii) the proceeds of a private activity bond (within the meaning of section 141) the interest on which is exempt from tax under section 103,

the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).

`(B) DETERMINATION OF FRACTION- For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction--

`(i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and

`(ii) the denominator of which is the basis of the property.

`(C) SUBSIDIZED ENERGY FINANCING- For purposes of subparagraph (A), the term `subsidized energy financing' means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.

`(2) BUSINESS USE- The rule similar to the rule of section 25(B)(d)(5)(B) shall apply for purposes of determining the business use of a vehicle.

`(3) CERTAIN PROGRESS EXPENDITURE RULES MADE APPLICABLE- Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

`(4) DOUBLE BENEFIT- Property which would, but for this paragraph, be eligible for credit under more than one provision of this section shall be eligible only under one such provision, the provision specified by the taxpayer.'.

(b) CONFORMING AMENDMENTS-

(1) Section 48 of such Code is amended to read as follows:

`SEC. 48. REFORESTATION CREDIT.

`(a) IN GENERAL- For purposes of section 46, the reforestation credit for any taxable year is 10 percent of the portion of the amortizable basis of any qualified timber property which was acquired during such taxable year and which is taken into account under section 194 (after the application of section 194(b)(1)).

`(b) DEFINITIONS- For purposes of this subpart, the terms `amortizable basis' and `qualified timber property' have the respective meanings given to such terms by section 194.'.

(2) Subsection (d) of section 39 of such Code is amended by adding at the end the following new paragraph:

`(10) NO CARRYBACK OF ENERGY CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the energy credit determined under section 48A may be carried back to a taxable year ending before the date of the enactment of section 48A.'.

(3) Paragraph (3) of section 50(c) of such Code is amended by adding at the end the following flush sentence:

`In the case of the energy credit, the preceding sentence shall apply only to so much of such credit as relates to solar energy property and geothermal property (as such terms are defined in section 48A(e)).'.

(4) Subclause (III) of section 29(b)(3)(A)(i) of such Code is amended by striking `section 48(a)(4)(C)' and inserting `section 48A(g)(1)(C)'.

(5) Subparagraph (E) of section 50(a)(2) of such Code is amended by striking `section 48(a)(5)' and inserting `section 48A(g)(3)'.

(6) Subparagraph (B) of section 168(e)(3) of such Code is amended--

(A) in clause (vi)(I)--

(i) by striking `section 48(a)(3)' and inserting `paragraphs (1) and (2) of section 48A(e)', and

(ii) by striking `clause (i)' and inserting `paragraph (1)(A)', and

(B) in the last sentence by striking `section 48(a)(3)' and inserting `section 48A(d)(2)'.

(7) Subparagraph (E) of section 168(e)(3) of such Code is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting `, and', and by inserting after clause (iii) the following new clause:

`(iv) any combined heat and power system property (as defined in section 48A(e)(5)) for which a credit is allowed

under section 48A and which, but for this clause, would have a recovery period of less than 15 years.'.

(8) The table contained in subparagraph (B) of section 168(g)(3) of such Code is amended by adding at the end the following:

`(E)(iv)

--22'.

(c) CLERICAL AMENDMENT- The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 48 and inserting the following new items:

`Sec. 48. Reforestation credit.

`Sec. 48A. Energy credit.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to periods after December 31, 1999, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

SEC. 402. EXTENSION OF CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

(a) EXTENSION OF CREDIT FOR QUALIFIED ELECTRIC VEHICLES- Subsection (f) of section 30 of the Internal Revenue Code of 1986 (relating to termination) is amended by striking `December 31, 2004' and inserting `December 31, 2006'.

(b) REPEAL OF PHASEOUT- Subsection (b) of section 30 of such Code (relating to limitations) is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).

(c) NO DOUBLE BENEFIT-

(1) Subsection (d) of section 30 of such Code (relating to special rules) is amended by adding at the end the following new paragraph:

`(5) No credit shall be allowed under subsection (a) with respect to any vehicle if the taxpayer claims a credit for such vehicle under section 25C(a)(1)(B) or 48A(f).'.

(2) Paragraph (3) of section 30(d) of such Code (relating to property used outside United States, etc., not qualified) is amended by striking `section 50(b)' and inserting `section 25C, 48A, or 50(b)'.

(3) Paragraph (5) of section 179A(e) of such Code (relating to property used outside United States, etc., not qualified) is amended by striking `section 50(b)' and inserting `section 25C, 48A, or 50(b)'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 403. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES.

(a) EXTENSION- Paragraph (3) of section 45(c) of the Internal Revenue Code of 1986 (relating to qualified facility) is amended by striking `July 1, 1999' and inserting `July 1, 2004'.

(b) QUALIFIED FACILITIES INCLUDE ALL BIOMASS FACILITIES-

(1) IN GENERAL- Paragraph (1) of section 45(c) of such Code (relating to definition of qualified energy resources) is amended by striking `and' at the end of subparagraph (A), by striking the period at the end of subparagraph (B), and by inserting after subparagraph (B) the following:

`(C) biomass (other than closed-loop biomass).'.

(2) BIOMASS DEFINED- Paragraph (2) of section 45(c) of such Code is amended to read as follows:

`(2) BIOMASS-

`(A) IN GENERAL- The term `biomass' means--

`(i) closed-loop biomass, and

`(ii) any solid, nonhazardous, cellulosic waste material, which is segregated from other waste materials, and which is derived from--

`(I) any of the following forest-related resources: mill residues, precommercial thinnings, slash, and brush, but not including old-growth timber,

`(II) waste pallets, crates, and dunnage, and landscape or right-of-way tree trimmings, but not including unsegregated municipal solid waste (garbage) and post-consumer wastepaper, or

`(III) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.

`(B) CLOSED-LOOP BIOMASS- The term `closed-loop biomass' means any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.'.

(c) ELECTRICITY PRODUCED FROM BIOMASS CO-FIRED IN COAL PLANTS-

(1) CREDIT AMOUNT- Paragraph (1) of section 45(a) of such Code (relating to general rule) is amended by inserting `(1.0 cents in the case of electricity produced from biomass co-fired in a facility which produces electricity from coal) after `1.5 cents'.

(2) QUALIFIED FACILITY- Paragraph (3) of section 45(c) of such Code (relating to definitions) is amended by striking the period at the end and inserting the following: `, and any facility using biomass other than closed loop biomass to produce electricity which is owned by the taxpayer and which is originally placed in service after June 30, 1999.'.

(3) ADJUSTMENT FOR INFLATION-

(A) IN GENERAL- Paragraph (2) of section 45(b) of such Code (relating to credit and phaseout adjustment based on inflation) is amended by striking `1.5 cent amount' and inserting `1.5 and 1.0 cent amounts'.

(B) BASE YEAR FOR INFLATION ADJUSTMENT FACTOR- Subparagraph (B) of section 45(d)(2) of such Code (relating to inflation adjustment factor) is amended by adding at the end the following new sentence: `In the case of the 1.0 cents amount in subsection (a), the first

sentence of this subparagraph shall be applied by substituting `1999' for `1992'.'.

(d) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES UNDER CERTAIN CONTRACTS- Subsection (b) of section 45 of such Code (relating to limitations and adjustments) is amended by adding at the end the following new paragraph:

`(4) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES UNDER CERTAIN CONTRACTS-

`(A) IN GENERAL- The credit determined under subsection (a) shall not apply to electricity--

`(i) produced at a qualified facility placed in service by the taxpayer after June 30, 1999, and

`(ii) sold to a utility pursuant to a contract originally entered into before January 1, 1987 (whether or not amended or restated after that date).

`(B) EXCEPTION- Subparagraph (A) shall not apply if--

`(i) the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii),

`(ii) such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of--

`(I) the average annual quantity of electricity sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998, or

`(II) the estimate of the annual electricity production set forth in the contract, or, if there is no such estimate, the greatest annual quantity of electricity sold to the utility under the contract in any of the calendar years 1996, 1997, or 1998, and

`(iii) such amendment provides that energy and capacity in excess of the limitation in clause (ii) may be--

`(I) sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or

`(II) sold to a third party subject to a mutually agreed upon advance notice to the utility.

For purposes of this subparagraph, avoided cost prices shall be determined as provided for in section 292.304(d)(1) of title 18, Code of Federal Regulations, or any successor regulation.'.

(e) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided by paragraph (2), the amendments made by this section shall apply to taxable years ending after June 30, 1999.

(2) ADJUSTMENT FOR INFLATION- The amendments made by subsection (c)(3) shall apply to taxable years ending after December 31, 1999.

SEC. 404. CREDIT FOR CERTAIN NONBUSINESS ENERGY PROPERTY.

(a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25A the following new section:

`SEC. 25C. NONBUSINESS ENERGY PROPERTY.

`(a) ALLOWANCE OF CREDIT-

`(1) IN GENERAL- In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--

`(A) the applicable percentage of residential energy property expenditures made by the taxpayer during such year,

`(B) the credit amount (determined under section 48A(f)) for each vehicle purchased during the taxable year which is a qualified hybrid vehicle (as defined in section 48A(f)(2)), and

`(C) the credit amount specified in the following table for a new, highly energy-efficient principal residence:

Credit Amount:

30 percent property

$1,000.

40 percent property

$1,500.

50 percent property

$2,000.

`(2) APPLICABLE PERCENTAGE-

`(A) IN GENERAL- The applicable percentage shall be determined in accordance with the following table:

------------------------------------------------------------------------------------------------------------

`Column A--Description                        Column B-- Applicable Percentage Column C--Period             

In the case of:                               The applicable percentage is:    For the period:              

                                                                               Beginning on:    Ending on:  

------------------------------------------------------------------------------------------------------------

20 percent energy-efficient building property 20 percent                        1/1/2000        12/31/2003  

10 percent energy-efficient building property 10 percent                        1/1/2000        12/31/2001  

Solar water heating property                  15 percent                        1/1/2000        12/31/2006  

Photovoltaic property                         15 percent                        1/1/2000        12/31/2006. 

------------------------------------------------------------------------------------------------------------

`(B) PERIODS FOR WHICH PERCENTAGE NOT SPECIFIED- In the case of any residential energy property, the applicable percentage shall be zero for any period for which an applicable percentage is not specified for such property under subparagraph (A).

`(b) MAXIMUM CREDIT-

`(1) IN GENERAL- In the case of property described in the following table, the amount of the credit allowed under subsection (a)(1)(A) for the taxable year for each item of such property with respect to a dwelling unit shall not exceed the amount specified for such property in such table:

-------------------------------------------------------------------------------------------------------------------------------------

`Description of property item:                                                                  Maximum allowable credit amount is:  

-------------------------------------------------------------------------------------------------------------------------------------

20 percent energy-efficient building property (other than a fuel cell or natural gas heat pump)     $500.                            

20 percent energy-efficient building property:                                                                                       

fuel cell described in section 48A(e)(3)(A)                                                         $500 per each kw/hr of capacity. 

natural gas heat pump described in section 48A(e)(3)(D)                                             $1,000.                          

10 percent energy-efficient building property                                                       $250.                            

Solar water heating property                                                                        $1,000.                          

Photovoltaic property                                                                               $2,000.                          

-------------------------------------------------------------------------------------------------------------------------------------

`(2) COORDINATION OF LIMITATIONS- If a credit is allowed to the taxpayer for any taxable year

by reason of an acquisition of a new, highly energy-efficient principal residence, no other credit shall be allowed under subsection (a)(1)(A) with respect to such residence during the 1-taxable year period beginning with such taxable year.

`(c) DEFINITIONS- For purposes of this section--

`(1) RESIDENTIAL ENERGY PROPERTY EXPENDITURES- The term `residential energy property expenditures' means expenditures made by the taxpayer for qualified energy property installed on or in connection with a dwelling unit which--

`(A) is located in the United States, and

`(B) is used by the taxpayer as a residence.

Such term includes expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property.

`(2) QUALIFIED ENERGY PROPERTY-

`(A) IN GENERAL- The term `qualified energy property' means--

`(i) energy-efficient building property,

`(ii) solar water heating property, and

`(iii) photovoltaic property.

`(B) SWIMMING POOL, ETC., USED AS STORAGE MEDIUM; SOLAR PANELS- For purposes of this paragraph, the provisions of subparagraphs (D) and (E) section 48A(e)(1) shall apply.

`(3) ENERGY-EFFICIENT BUILDING PROPERTY- The term `energy-efficient building property' has the meaning given to such term by paragraphs (3) and (4) of section 48A(e).

`(4) SOLAR WATER HEATING PROPERTY- The term `solar water heating property' means property which, when installed in connection with a structure, uses solar energy for the purpose of providing hot water for use within such structure.

`(5) PHOTOVOLTAIC PROPERTY- The term `photovoltaic property' has the meaning given to such term by section 48A(e)(1)(C).

`(6) NEW, HIGHLY ENERGY-EFFICIENT PRINCIPAL RESIDENCE-

`(A) IN GENERAL- Property is a new, highly energy-efficient principal residence if--

`(i) such property is located in the United States,

`(ii) the original use of such property commences with the taxpayer and is, at the time of such use, the principal residence of the taxpayer, and

`(iii) such property is certified before such use commences as being 50 percent property, 40 percent property, or 30 percent property.

`(B) 50, 40, OR 30 PERCENT PROPERTY-

`(i) IN GENERAL- For purposes of subparagraph (A), property is 50 percent property, 40 percent property, or 30 percent property if the projected energy usage of such property is reduced by 50 percent, 40 percent, or 30 percent, respectively, compared to the energy usage of a reference house that complies with minimum standard practice, such as the 1998 International Energy Conservation Code of the International Code Council, as determined according to the requirements specified in clause (ii).

`(ii) PROCEDURES-

`(I) IN GENERAL- For purposes of clause (i), energy usage shall be demonstrated either by a component-based approach or a performance-based approach.

`(II) COMPONENT APPROACH- Compliance by the component approach is achieved when all of the components of the house comply with the requirements of prescriptive packages established by the Secretary of Energy, in consultation with the Administrator of the Environmental Protection Agency, such that they are equivalent to the results of using the performance-based approach of subclause (III) to achieve the required reduction in energy usage.

`(III) PERFORMANCE-BASED APPROACH- Performance-based compliance shall be demonstrated in terms of the required percentage reductions in projected energy use. Computer software used in support of performance-based compliance must meet all of the procedures and methods for calculating energy savings reductions that are promulgated by the Secretary of Energy. Such regulations on the specifications for software shall be based in the 1998 California Residential Alternative Calculation Method Approval Manual, except that the calculation procedures shall be developed such that the same energy efficiency measures qualify a home for tax credits regardless of whether the home uses a gas or oil furnace or boiler, or an electric heat pump.

`(IV) APPROVAL OF SOFTWARE SUBMISSIONS- The Secretary of Energy shall approve software submissions that comply with the calculation requirements of subclause (III).

`(C) DETERMINATIONS OF COMPLIANCE- A determination of compliance made for the purposes of this paragraph shall be filed with the Secretary of Energy within 1 year of the date of such determination and shall include the TIN of the certifier, the address of the building in compliance, and the identity of the person for whom such determination was performed. Determinations of compliance filed with the Secretary of Energy shall be available for inspection by the Secretary.

`(D) COMPLIANCE-

`(i) IN GENERAL- The Secretary of Energy in consultation with the Secretary of the Treasury shall establish requirements for certification and compliance procedures after examining the requirements for energy consultants and home energy ratings providers specified by the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems.

`(ii) INDIVIDUALS QUALIFIED TO DETERMINE COMPLIANCE- Individuals qualified to determine compliance shall be only those individuals who are recognized by an organization certified by the Secretary of Energy for such purposes.

`(D) PRINCIPAL RESIDENCE- The term `principal residence' has the same meaning as when used in section 121, except that the period for which a building is treated as the principal residence of the taxpayer shall also include the 60-day period ending on the 1st day on which it would (but for this subparagraph) first be treated as his principal residence.

`(d) SPECIAL RULES- For purposes of this section--

`(1) DOLLAR AMOUNTS IN CASE OF JOINT OCCUPANCY- In the case of any dwelling unit which if jointly occupied and used during any calendar year as a residence by 2 or more individuals the following shall apply:

`(A) The amount of the credit allowable under subsection (a) by reason of expenditures made during such calendar year by any of such individuals with respect to such dwelling unit shall be determined by treating all of such individuals as 1 taxpayer whose taxable year is such calendar year.

`(B) There shall be allowable with respect to such expenditures to each of such individuals, a credit under subsection (a) for the taxable year in which such calendar year ends in an amount which bears the same ratio to the amount determined under subparagraph (A) as the amount of such expenditures made by such individual during such calendar year bears to the aggregate of such expenditures made by all of such individuals during such calendar year.

`(2) TENANT-STOCKHOLDER IN COOPERATIVE HOUSING CORPORATION- In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having made his tenant-stockholder's proportionate share (as defined in section 216(b)(3)) of any expenditures of such corporation.

`(3) CONDOMINIUMS-

`(A) IN GENERAL- In the case of an individual who is a member of a condominium management association with respect to a condominium which he owns, such individual shall be treated as having made his proportionate share of any expenditures of such association.

`(B) CONDOMINIUM MANAGEMENT ASSOCIATION- For purposes of this paragraph, the term `condominium management association' means an organization which meets the requirements of paragraph (1) of section 528(c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.

`(4) JOINT OWNERSHIP OF ENERGY ITEMS-

`(A) IN GENERAL- Any expenditure otherwise qualifying as a residential energy property expenditure shall not be treated as failing to so qualify merely because such expenditure was made with respect to 2 or more dwelling units.

`(B) LIMITS APPLIED SEPARATELY- In the case of any expenditure described in subparagraph (A), the amount of the credit allowable under subsection (a) shall (subject to paragraph (1)) be computed separately with respect to the amount of the expenditure made for each dwelling unit.

`(5) ALLOCATION IN CERTAIN CASES-

`(A) IN GENERAL- Except as provided in subparagraph (B), if less than 80 percent of the use of an item is for nonbusiness purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness purposes shall be taken into account. For purposes of this paragraph, use for a swimming pool shall be treated as use which is not for nonbusiness purposes.

`(B) SPECIAL RULE FOR VEHICLES- For purposes of this section and section 48A, a vehicle shall be treated as used entirely for business or nonbusiness purposes if the majority of the use of such vehicle is for business or nonbusiness purposes, as the case may be.

`(6) DOUBLE BENEFIT; PROPERTY USED OUTSIDE UNITED STATES, ETC., NOT QUALIFIED- No credit shall be allowed under subsection (a)(1)(B) with respect to--

`(A) any property for which a credit is allowed under section 30 or 48A,

`(B) any property referred to in section 50(b), and

`(C) the portion of the cost of any property taken into account under section 179 or 179A.

`(7) WHEN EXPENDITURE MADE; AMOUNT OF EXPENDITURE-

`(A) IN GENERAL- Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.

`(B) EXPENDITURES PART OF BUILDING CONSTRUCTION- In the case of an expenditure in connection with the construction of a structure, such expenditure shall be treated as made

when the original use of the constructed structure by the taxpayer begins.

`(C) AMOUNT- The amount of any expenditure shall be the cost thereof.

`(8) PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING-

`(A) REDUCTION OF EXPENDITURES- For purposes of determining the amount of residential energy property expenditures made by any individual with respect to any dwelling unit, there shall not be taken in to account expenditures which are made from subsidized energy financing (as defined in section 48A(g)(1)).

`(B) DOLLAR LIMITS REDUCED- The dollar amounts in the table contained in subsection (b)(1) with respect to each property purchased for such dwelling unit for any taxable year of such taxpayer shall be reduced proportionately by an amount equal to the sum of--

`(i) the amount of the expenditures made by the taxpayer during such taxable year with respect to such dwelling unit and not taken into account by reason of subparagraph (A), and

`(ii) the amount of any Federal, State, or local grant received by the taxpayer during such taxable year which is used to make residential energy property expenditures with respect to the dwelling unit and is not included in the gross income of such taxpayer.

`(e) BASIS ADJUSTMENTS- For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.'.

(b) CONFORMING AMENDMENTS-

(1) Subsection (a) of section 1016 of such Code 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 new paragraph:

`(28) to the extent provided in section 25C(e), in the case of amounts with respect to which a credit has been allowed under section 25C.'.

(2) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25A the following new item:

`Sec. 25C. Nonbusiness energy property.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to expenditures after December 31, 1999.

SEC. 405. EXTENSION OF WIND AND BIOMASS TAX CREDIT.

(a) IN GENERAL- Paragraph (3) of section 45(c) of the Internal Revenue Code of 1986 (defining qualified facility) is amended to read as follows:

`(3) QUALIFIED FACILITY- The term `qualified facility' means any facility owned by the taxpayer which is originally placed in service--

`(A) in the case of a facility using wind to produce electricity, after December 31, 1993, and before July 1, 2004, and

`(B) in the case of a facility using closed-loop biomass to produce electricity, after December 31, 1992, and before July 1, 1999.'.

(b) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES UNDER CERTAIN CONTRACTS- Subsection (b) of section 45 of such Code is amended by adding at the end the following new paragraph:

`(4) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES UNDER CERTAIN CONTRACTS-

`(A) IN GENERAL- The credit determined under subsection (a) shall not apply to electricity--

`(i) produced at a qualified facility placed in service by the taxpayer after June 30, 1999, and

`(ii) sold to a utility pursuant to a contract originally entered into before January 1, 1987 (whether or not amended or restated after that date).

`(B) EXCEPTION- Subparagraph (A) shall not apply if--

`(i) the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii);

`(ii) such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of--

`(I) the average annual quantity of electricity sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998, or

`(II) the estimate of the annual electricity production set forth in the contract, or, if there is no such estimate, the greatest annual quantity of electricity sold to the utility under the contract in any of the calendar years 1996, 1997, or 1998; and

`(iii) such amendment provides that energy and capacity in excess of the limitation in clause (ii) may be--

`(I) sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or

`(II) sold to a third party subject to a mutually agreed upon advance notice to the utility.

For purposes of this subparagraph, avoided cost prices shall be determined as provided for in 18 CFR 292.304(d)(1) or any successor regulation.'.

SEC. 406. KEROSENE TAX EQUALIZER ACT.

(a) VENDOR REFUNDS OF FEDERAL EXCISE TAXES ON UNDYED KEROSENE USED IN UNVENTED HEATERS FOR HOME HEATING PURPOSES-

(1) IN GENERAL- Subparagraph (B) of section 6427(l)(5) of the Internal Revenue Code of 1986 (relating to sales of kerosene not for use in motor fuel) 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 adding at the end the following new clause:

`(iii) in a qualified residential sale (as defined in subparagraph (D)).'

(2) QUALIFIED RESIDENTIAL SALE- Paragraph (5) of section 6427(l) of such Code is amended by adding at the end the following new subparagraph:

`(D) QUALIFIED RESIDENTIAL SALE- For purposes of subparagraph (B)(iii), the term `qualified residential sale' means any sale of kerosene if--

`(i) the kerosene is delivered into a storage tank (of at least 50 but not more than 200 gallons) located at a residence for use as a fuel in an unvented heater used for heating the residence, and

`(ii) the vendor reasonably believes that the kerosene is being so used.

Such term shall not include any sale which is more than 30 days after the date of the submission to Congress of a study conducted by the Secretary which finds that kerosene which is dyed pursuant to section 4082 may be burned in unvented residential heaters without endangering the health or safety of the residents.'

(3) REFUNDS- Subparagraph (A) of section 6427(f)(4) of such Code is amended by adding at the end the following new sentence: `In a case to which subsection (l)(5)(B)(iii) applies, clause (ii) shall be applied by substituting `1 month' for `1 week' and paragraph (3)(B) shall be applied by substituting `45 days' for `20 days'.'

(4) EFFECTIVE DATE- The amendments made by this section shall apply to sales after the date of the enactment of this Act.

(b) STUDY OF SAFETY OF USING DYED KEROSENE IN UNVENTED RESIDENTIAL HEATERS- The Secretary of the Treasury or such Secretary's delegate shall conduct a study of whether kerosene which has been dyed for Federal tax purposes may be used as a fuel in unvented residential heaters without endangering the health or safety of the residents. The results of such study shall be submitted to each House of Congress not later than January 1, 2000.

TITLE V--ENVIRONMENT

SEC. 501. BETTER AMERICA BONDS TAX CREDIT.

(a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

`SEC. 30B. CREDIT TO HOLDERS OF BETTER AMERICA BONDS.

`(a) ALLOWANCE OF CREDIT- In the case of a taxpayer who holds a Better America Bond on a credit allowance date of such bond which occurs during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for such taxable year an amount equal to the sum of the credits determined under subsection (b) with respect to credit allowance dates during such year on which the taxpayer holds such bond.

`(b) AMOUNT OF CREDIT-

`(1) IN GENERAL- The amount of the credit determined under this subsection with respect to any credit allowance date for a Better America Bond is 25 percent of the annual credit determined with respect to such bond.

`(2) ANNUAL CREDIT- The annual credit determined with respect to any Better America Bond is the product of--

`(A) the applicable credit rate, multiplied by

`(B) the outstanding face amount of the bond.

`(3) APPLICABLE CREDIT RATE- For purposes of paragraph (1), the applicable credit rate with respect to an issue is the rate equal to an average market yield (as of the day before the date of issuance of the issue) on outstanding long-term corporate debt obligations (determined under regulations prescribed by the Secretary).

`(4) SPECIAL RULE FOR ISSUANCE AND REDEMPTION- In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this subsection with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed.

`(c) BETTER AMERICA BOND- For purposes of this section--

`(1) IN GENERAL- The term `Better America Bond' means any bond issued as part of an issue if--

`(A) 95 percent or more of the proceeds of such issue are to be used for any qualified purpose,

`(B) the bond is issued by a State or local government within the jurisdiction of which the qualified purpose of the issue is to be carried out,

`(C) the issuer designates such bond for purposes of this section,

`(D) the term of each bond which is part of such issue does not exceed 15 years,

`(E) the requirements of section 147(f) are met with respect to such issue, and

`(F) except in the case of the proceeds of such issue which are to be used for the qualified purpose described in paragraph (2)(A)(iv), the payment of the principal of such issue is secured by taxes of general applicability imposed by a general purpose governmental unit.

`(2) QUALIFIED PURPOSE-

`(A) IN GENERAL- The term `qualified purpose' means any of the following:

`(i) The acquisition of land for use as open space, wetlands, public parks, or greenways, and the provision of visitor facilities (such as campgrounds and hiking or biking trails) for land so used, but only if--

`(I) such land and facilities are to be owned by the issuer or a qualified owner, and

`(II) the initial owner of such land and facilities records pursuant to State law a qualified restrictive covenant with respect to such land and facilities.

`(ii) The remediation of land acquired under clause (i) (or other publicly owned land) to enhance water quality by--

`(I) restoring hydrology or planting trees or other vegetation,

`(II) undertaking reasonable measures to control erosion,

`(III) restoring wetlands, or

`(IV) remediating conditions caused by the prior disposal of toxic or other waste.

`(iii) The acquisition by the issuer or any qualified owner of any restriction on privately owned open land which prevents commercial development and any substantial change in the use or character of the land if such restriction would, if contributed by the owner of the open land to a qualified organization (as defined in section 170(h)(3)), be a qualified conservation contribution (as defined in section 170(h)).

`(iv) The environmental assessment and remediation of real property owned by any State or local government if--

`(I) such property was acquired by such government as a result of being abandoned by the prior owner, and

`(II) such property is located in an area at or on which there has been a release (or threat of release) or disposal of any hazardous substance (as defined in section 198).

`(B) REMEDIATION OF NATIONAL PRIORITIES LISTED SITES NOT QUALIFIED PURPOSE- Subparagraph (A)(ii) shall not apply to remediation of any site which is on, or proposed for, the national priorities list under section 105(a)(8)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

`(C) QUALIFIED OWNER- For purposes of this paragraph, the term `qualified owner' means any organization described in section 501(c)(3) whose exempt purpose includes environmental protection.

`(D) QUALIFIED RESTRICTIVE COVENANT- For purposes of subparagraph (A)(i)(II), the term `qualified restrictive covenant' means, with respect to land or facilities, any covenant which prohibits the person who owns such land or facilities at the end of the term of the bond from selling or otherwise permitting a use of such land or facilities which is not described in subparagraph (A) unless--

`(i) a reasonable period is allowed for a qualified owner to purchase such land or facilities,

`(ii) the purchase price is not greater than the price originally paid in conjunction with the expenditure of bond proceeds, and

`(iii) the purchaser records pursuant to State law a covenant with respect to the purchased land and facilities which protects in perpetuity the use of such land and facilities for a use described in subparagraph (A).

`(3) PUBLIC AVAILABILITY REQUIREMENT, ETC-

`(A) IN GENERAL- The term `Better America Bond' shall not include any bond which is part of an issue if--

`(i) any portion of the proceeds of the issue are to be used for any private business use (as defined in section 141(b)(6)), or

`(ii) the payment of the principal of, or the interest on, any portion of such proceeds is (under the terms of such issue or any underlying arrangement) directly or indirectly secured or to be derived as described in subparagraph (A) or (B) of section 141(b)(2).

`(B) EXCEPTION- Subparagraph (A) shall not apply to proceeds used for a qualified purpose described in paragraph (2)(A)(iv).

`(d) LIMITATION ON AMOUNT OF BONDS DESIGNATED-

`(1) IN GENERAL- The maximum aggregate face amount of bonds issued during any calendar year which may be designated under subsection (c)(1) by any issuer shall not exceed the limitation amount allocated under paragraph (3) for such calendar year to such issuer.

`(2) NATIONAL LIMITATION ON AMOUNT OF BONDS DESIGNATED- There is a national Better America Bond limitation for each calendar year. Such limitation is--

`(A) $1,900,000,000 for each of calendar years 2000, 2001, 2002, 2003, and 2004, and

`(B) except as provided in paragraph (4), zero after 2004.

`(3) ALLOCATION OF LIMITATION AMONG STATES AND LOCAL GOVERNMENTS-

`(A) IN GENERAL- The national Better America Bond limitation for any calendar year

shall be allocated by the EPA Administrator to States and local governments having approved applications. As part of the competitive application process, the Environmental Protection Agency should, when possible, allocate such limitation on a per capita basis.

`(B) APPROVED APPLICATION- For purposes of subparagraph (A), the term `approved application' means an application which is approved by the EPA Administrator and includes such information as the EPA Administrator shall specify.

`(4) CARRYOVER OF UNUSED LIMITATION- If for any calendar year--

`(A) the amount allocated under paragraph (4) to any State or local government, exceeds

`(B) the amount of bonds issued during such year which are designated under subsection (c)(1) pursuant to such allocation,

the limitation amount under paragraph (3) for such State or local government for the following calendar year shall be increased by the amount of such excess.

`(e) LIMITATION BASED ON AMOUNT OF TAX-

`(1) IN GENERAL- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

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

`(B) the sum of the credits allowable under part IV of subchapter A (other than subpart C thereof, relating to refundable credits).

`(2) CARRYOVER OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by paragraph (1) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(f) OTHER DEFINITIONS- For purposes of this section--

`(1) CREDIT ALLOWANCE DATE- The term `credit allowance date' means--

`(A) March 15,

`(B) June 15,

`(C) September 15, and

`(D) December 15.

Such term includes the last day on which the bond is outstanding.

`(2) BOND- The term `bond' includes any obligation.

`(3) STATE- The term `State' includes the District of Columbia, any possession of the United States, and any Indian tribal government (within the meaning of section 7871).

`(4) LOCAL GOVERNMENT- The term `local government' means--

`(A) any county, city, town, township, parish, village, or other general purpose political subdivision of a State, and

`(B) any combination of political subdivisions described in subparagraph (A) recognized by the EPA Administrator.

`(5) EPA ADMINISTRATOR- The term `EPA Administrator' means the Administrator of the Environmental Protection Agency.

`(g) CREDIT INCLUDED IN GROSS INCOME- Gross income includes the amount of the credit allowed to the taxpayer under this section (determined without regard to subsection (e)) and the amount so included shall be treated as interest income.

`(h) SPECIAL RULES RELATING TO ARBITRAGE-

`(1) IN GENERAL- A bond shall not be treated as failing to meet the requirements of subsection (c)(1) solely by reason of the fact that the proceeds of the issue of which such bond is a part are invested for a temporary period (but not more than 36 months) until such proceeds are needed for the purpose for which such issue was issued.

`(2) REASONABLE EXPECTATION AND BINDING COMMITMENT REQUIREMENTS- Paragraph (1) shall apply to an issue only if, as of the date of issuance--

`(A) the issuer reasonably expects that--

`(i) at least 95 percent of the proceeds of the issue will be spent for a qualified purpose within the 3-year period beginning on such date, and

`(ii) property financed with such proceeds will be used for qualified purposes for at least 15 years after being so financed,

`(B) there is a binding commitment with a third party to spend at least 10 percent of the proceeds of the issue for qualified purposes within the 6-month period beginning on such date, and

`(C) the issuer reasonably expects that the remaining proceeds of the issue will be spent with due diligence for qualified purposes.

`(3) EARNINGS ON PROCEEDS- Any earnings on proceeds during the temporary period shall be treated as proceeds of the issue for purposes of applying subsection (c)(1) and paragraph (1) of this subsection.

`(i) DENIAL OF DEDUCTION FOR ENVIRONMENTAL REMEDIATION EXPENDITURES- Expenditures financed by any Better America Bond shall not be allowed as a deduction under section 198.

`(j) OTHER SPECIAL RULES-

`(1) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any Better America Bond is held by a regulated investment company, the credit determined under subsection (a) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.

`(2) CREDITS MAY BE STRIPPED- Under regulations prescribed by the Secretary--

`(A) IN GENERAL- There may be a separation (including at issuance) of the ownership of a Better America Bond and the entitlement to the credit under this section with respect to

such bond. In case of any such separation, the credit under this section shall be allowed to the person who on the credit allowance date holds the instrument evidencing the entitlement to the credit and not to the holder of the bond.

`(B) CERTAIN RULES TO APPLY- In the case of a separation described in subparagraph (A), the rules of section 1286 shall apply to the Better America Bond as if it were a stripped bond and to the credit under this section as if it were a stripped coupon.

`(3) TREATMENT FOR ESTIMATED TAX PURPOSES- Solely for purposes of sections 6654 and 6655, the credit allowed by this section to a taxpayer by reason of holding a Better America Bond on a credit allowance date shall be treated as if it were a payment of estimated tax made by the taxpayer on such date.

`(4) CREDIT MAY BE TRANSFERRED- Nothing in any law or rule of law shall be construed to limit the transferability of the credit allowed by this section through sale and repurchase agreements.

`(5) REPORTING- Issuers of Better America Bonds shall submit reports similar to the reports required under section 149(e).

`(k) RECAPTURE OF PORTION OF CREDIT WHERE CESSATION OF QUALIFIED USE-

`(1) IN GENERAL- If any bond which when issued purported to be a Better America Bond ceases to meet the requirements of subsection (c), the issuer shall pay to the United States (at the time required by the Secretary) an amount equal to the aggregate of the credits allowable under this section (determined without regard to subsection (e)) for taxable years ending during the calendar year in which such cessation occurs and the 2 preceding calendar years.

`(2) FAILURE TO PAY- If the issuer fails to timely pay the amount required by paragraph (1) with respect to any issue, the tax imposed by this chapter on each holder of any bond which is part of such issue shall be increased (for the taxable year of the holder in which such cessation occurs) by the aggregate decrease in the credits allowed under this section to such holder for taxable years beginning in such 3 calendar years which would have resulted solely from denying any credit under this section with respect to such issue for such taxable years.

`(3) SPECIAL RULES-

`(A) TAX BENEFIT RULE- The tax for the taxable year shall be increased under paragraph (2) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted.

`(B) NO CREDITS AGAINST TAX- Any increase in tax under paragraph (2) shall not be treated as a tax imposed by this chapter for purposes of determining--

`(i) the amount of any credit allowable under this part, or

`(ii) the amount of the tax imposed by section 55.

`(l) TERMINATION- This section shall not apply to any bond issued after December 31, 2004.'

(b) REPORTING- Subsection (d) of section 6049 of such Code (relating to returns regarding payments of interest) is amended by adding at the end the following new paragraph:

`(8) REPORTING OF CREDIT ON BETTER AMERICA BONDS-

`(A) IN GENERAL- For purposes of subsection (a), the term `interest' includes amounts includible in gross income under section 30B(g) and such amounts shall be treated as paid on the credit allowance date (as defined in section 30B(f)(1)).

`(B) REPORTING TO CORPORATIONS, ETC- Except as otherwise provided in regulations, in the case of any interest described in subparagraph (A) of this paragraph, subsection (b)(4) of this section shall be applied without regard to subparagraphs (A), (H), (I), (J), (K), and (L)(i).

`(C) REGULATORY AUTHORITY- The Secretary may prescribe such regulations as are necessary or appropriate to carry out the purposes of this paragraph, including regulations which require more frequent or more detailed reporting.'

(c) CONFORMING AMENDMENT- The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 30B. Credit to holders of Better America Bonds.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply to obligations issued after December 31, 1999.

(e) GUIDELINES FOR APPLICATIONS- Not later than January 1, 2000, guidelines specifying the criteria to be used in approving applications under section 30B(d)(3) of the Internal Revenue Code of 1986 (as added by this Act) shall be developed and published by the Administrator of the Environmental Protection Agency in the Federal Register.

SEC. 502. PERMANENT EXTENSION OF BROWNFIELDS TAX DEDUCTION AT 100 PERCENT.

(a) IN GENERAL- Clause (ii) of section 198(c)(1)(A) of the Internal Revenue Code of 1986 (relating to qualified contaminated sites) is amended to read as follows:

`(ii) which is within the United States, and'.

(b) CONFORMING AMENDMENT- Paragraph (2) of section 198(c) of such Code is amended to read as follows:

`(2) NATIONAL PRIORITIES LISTED SITES NOT INCLUDED- Such term shall not include any site which is on, or proposed for, the national priorities list under section 105(a)(8)(B) of the Comprehensive Environmental Response, Compensation, and

Liability Act of 1980 (as in effect on the date of the enactment of this section).'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to expenditures paid or incurred after the date of the enactment of this Act in taxable years ending after such date.

SEC. 503. RESTORATION OF DEDUCTION FOR DEMOLITION OF CERTAIN STRUCTURES.

(a) IN GENERAL- So much of section 280B of the Internal Revenue Code of 1986 (relating to demolition of structures) as precedes paragraph (1) is amended to read as follows:

`SEC. 280B. DEMOLITION OF CERTIFIED HISTORIC STRUCTURES AND HISTORICALLY RESIDENTIAL STRUCTURES.

`(a) IN GENERAL- In the case of the demolition of any certified historic structure or historically residential structure--'.

(b) CERTIFIED HISTORIC STRUCTURE; HISTORICALLY RESIDENTIAL STRUCTURE- Section 280B of such Code is amended by adding at the end the following new subsection:

`(b) CERTIFIED HISTORIC STRUCTURE; RESIDENTIAL STRUCTURE- For purposes of this section--

`(1) CERTIFIED HISTORIC STRUCTURE- The term `certified historic structure' means--

`(A) a certified historic structure (as defined in section 47(c)(3)), and

`(B) any building (and its structural components) which is designated as a certified historic structure by the appropriate agency of a State or local government.

`(2) HISTORICALLY RESIDENTIAL STRUCTURE- The term `historically residential structure' means any building (other than a certified historic structure) and its structural components if the first use of such building after its initial construction was for residential purposes.'

(c) CLERICAL AMENDMENT- The item relating to section 280B in the table of sections for part IX of subchapter B of chapter 1 of such Code is amended to read as follows:

`Sec. 280B. Demolition of certified historic structures and historically residential structures.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply to demolitions commencing after the date of the enactment of this Act.

SEC. 504. INCREASE IN LAND DONATION TAX DEDUCTION FROM 30 PERCENT TO 50 PERCENT.

(a) MODIFICATIONS TO ENCOURAGE CONTRIBUTIONS OF CAPITAL GAIN REAL PROPERTY MADE FOR CONSERVATION PURPOSES AND QUALIFIED CONSERVATION CONTRIBUTIONS-

(1) CONTRIBUTIONS OF CAPITAL GAIN REAL PROPERTY MADE FOR CONSERVATION PURPOSES AND OF QUALIFIED CONSERVATION CONTRIBUTIONS NOT SUBJECT TO SPECIAL LIMITATION ON CONTRIBUTIONS OF CAPITAL GAIN PROPERTY- Subparagraph (C) of section 170(b)(1) of the Internal Revenue Code of 1986 (relating to special limitation with respect to contributions described in subparagraph (A) of capital gain property) is amended by redesignating clause (iv) as clause (v) and by inserting after clause (iii) the following new clause:

`(iv) In the case of charitable contributions described in subparagraph (A) of capital gain property, clauses (i) and (ii) shall not apply to--

`(I) any qualified conservation contribution (as defined in section 170(h)), or

`(II) any other contribution of capital gain property which is real property if the contribution is of the donor's entire interest in such property and is to a qualified organization (as defined in section 170(h)(3)) which is organized for conservation purposes (as defined in section 170(h)(4)(A)) and which provides the taxpayer, at the time of such donation, a letter of intent which contains an acknowledgment of the donee's intent that the property is being acquired for any such conservation purpose.'.

(2) UNLIMITED CARRYOVER FOR CONTRIBUTIONS OF CAPITAL GAIN REAL PROPERTY FOR CONSERVATION PURPOSES AND OF QUALIFIED CONSERVATION CONTRIBUTIONS OF CAPITAL GAIN PROPERTY- Paragraph (1) of section 170(d) of such Code in amended by adding at the end the following new subparagraph:

`(C) UNLIMITED CARRYOVER FOR CONTRIBUTIONS OF CAPITAL GAIN REAL PROPERTY FOR CONSERVATION PURPOSES AND OF QUALIFIED CONSERVATION CONTRIBUTIONS OF CAPITAL GAIN PROPERTY- The 5 taxable year limitation in subparagraph (A) shall not apply to any charitable contribution to which clauses (i) and (ii) of subsection (b)(1)(C) do not apply by reason of clause (iv) thereof. For purposes of this paragraph, the excess described in the material preceding clause (i) of subparagraph (A) shall be treated as attributable to contributions described in the preceding sentence of this subparagraph to the extent of such contributions.'.

(3) EFFECTIVE DATE- The amendment made by this section shall apply to contributions made in taxable years beginning after the date of the enactment of this Act.

(b) MODIFICATION OF RULES RELATING TO ESTATE TAX EXCLUSION FOR LAND SUBJECT TO QUALIFIED CONSERVATION EASEMENT-

(1) REPEAL OF CERTAIN RESTRICTIONS ON WHERE LAND IS LOCATED- Clause (i) of section 2031(c)(8)(A) of the Internal Revenue Code of 1986 is amended to read as follows:

`(i) which is located in the United States or any possession of the United States,'.

(2) REPEAL OF LIMITATION ON EXCLUSION-

(A) IN GENERAL- Paragraph (1) of section 2031(c) of such Code is amended by striking `the lesser of--' and all that follows and inserting `the applicable percentage of the value of land subject to a qualified conservation easement, reduced by the amount of any deduction under section 2055(f) with respect to such land.'

(B) CONFORMING AMENDMENTS-

(i) Subsection (c) of section 2031 of such Code is amended by striking paragraph (3) and by redesignating paragraphs (4) through (10) as paragraphs (3) through (9), respectively.

(ii) Paragraphs (2) and (6) of section 2031(c) of such Code, as redesignated by subparagraph (A), are each amended by striking `paragraph (5)' and inserting `paragraph (4)'.

(iii) Paragraphs (1), (6), and (7)(A)(iii) of section 2031(c) of such Code, as redesignated by subparagraph (A), are each amended by striking `paragraph (6)' and inserting `paragraph (5)'.

(3) DATE FOR DETERMINING VALUE OF LAND AND EASEMENT- Paragraph (2) of section 2032(c) of such Code (defining applicable percentage) is amended by adding at the end the following new sentence: `The values taken into account under the preceding sentence shall be such values as of the date of the contribution referred to in paragraph (7)(B).'

(4) CERTAIN COMMERCIAL RECREATIONAL USES PERMITTED- Subparagraph (B) of section 2031(c)(7) of such Code, as redesignated by subsection (b), is amended to read as follows:

`(B) QUALIFIED CONSERVATION EASEMENT-

`(i) IN GENERAL- The term `qualified conservation easement' means a qualified conservation contribution (as defined in section 170(h)(1)) of a qualified real property interest (as defined in section 170(h)(2)(C)), except that clause (iv) of section 170(h)(4)(A) shall not apply, and the restriction on the use of such interest described in section 170(h)(2)(C) shall include a prohibition on more than a de minimis use for a commercial recreational activity.

`(ii) SPECIAL RULES- For purposes of this paragraph--

`(I) RETAINED RIGHTS- Rights retained in the conservation easement to lease the land for hunting and fishing, so long as such leases are not inconsistent with the conservation purpose of the easement, shall be deemed to be de minimis use.

`(II) PRE-EFFECTIVE DATE EASEMENTS- Easements otherwise qualifying under the provisions of this subsection that were donated on or before the date of the enactment of this subclause, shall be deemed to allow no more than de minimis use for a commercial recreational activity unless by their terms they expressly provide for commercial recreational activity in excess of that otherwise allowed by this subparagraph.

`(III) AUTHORITY TO EXTINGUISH RIGHT OF COMMERCIAL RECREATION ACTIVITY- For purposes of this section, if the executor of an estate and every person in being who has an interest in the land execute an agreement to amend or extinguish any right under the easement of commercial recreation activity in the land so as to ensure that such land is used for no more than de minimis commercial recreational activity, such agreement shall be treated as in effect as of the date of the election described in paragraph (5).'

(5) EXCLUSION APPLICABLE TO SOLD EASEMENTS- Clause (i) of section 2031(c)(7) of such Code, as amended by subsection (d), is amended by adding at the end the following new sentence: `A transfer for value of a qualified real property interest (as defined under section 170(h)(2)(C)) shall not fail to be treated as a qualified conservation easement if such interest would meet the requirements of the preceding sentence were it donated to the purchaser and any reference in this section to a contribution shall be treated as including a reference to such a transfer.'

(6) EFFECTIVE DATE- The amendments made by this section shall take effect as if included in the amendments made by section 508 of the Taxpayer Relief Act of 1997.

SEC. 505. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF AMORTIZABLE REFORESTATION EXPENDITURES.

(a) INCREASE IN DOLLAR LIMITATION- Paragraph (1) of section 194(b) of the Internal Revenue Code of 1986 (relating to amortization of reforestation expenditures) is amended by striking `$10,000 ($5,000' and inserting `$25,000 ($12,500'.

(b) TEMPORARY SUSPENSION OF INCREASED DOLLAR LIMITATION- Subsection (b) of section 194(b) of such Code (relating to amortization of reforestation expenditures) is amended by adding at the end the following new paragraph:

`(5) SUSPENSION OF DOLLAR LIMITATION- Paragraph (1) shall not apply to taxable years beginning after December 31, 1999, and before January 1, 2004.

(c) CONFORMING AMENDMENT- Paragraph (1) of section 48(b) of such Code is amended by striking `section 194(b)(1)' and inserting `section 194(b)(1) and without regard to section 194(b)(5)'.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

TITLE VI--ESTATE TAX REDUCTION

SEC. 601. REPEAL OF LIMITATION ON ESTATE TAX DEDUCTION FOR FAMILY-OWNED BUSINESS INTERESTS.

(a) IN GENERAL- Subsection (a) of section 2057 of the Internal Revenue Code of 1986 (relating to family-owned business interests) is amended to read as follows:

`(a) ALLOWANCE OF DEDUCTION- For purposes of the tax imposed by section 2001, in the case of an estate of a decedent to which this section applies, the value of the taxable estate shall be determined by deducting from the value of the gross estate the adjusted value of the qualified family-owned business interests of the decedent which are described in subsection (b)(2).'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to estates of decedents dying after the date of the enactment of this Act.

SEC. 602. UNIFIED CREDIT INCREASED BY UNUSED UNIFIED CREDIT OF PREDECEASED SPOUSE.

(a) IN GENERAL- Section 2010 of the Internal Revenue Code of 1986 (relating to unified credit against estate tax) is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (a) the following new subsection:

`(c) INCREASE IN CREDIT FOR UNUSED UNIFIED CREDIT OF PREDECEASED SPOUSE-

`(1) IN GENERAL- The amount of the credit allowable under subsection (a) shall be increased by the aggregate of the amounts of the unused predeceased spouse credit.

`(2) UNUSED PREDECEASED SPOUSE CREDIT- For purposes of paragraph (1)--

`(A) IN GENERAL- The term `unused predeceased spouse credit' means, with respect to any predeceased spouse of the decedent, the amount equal to the excess of--

`(i) the maximum amount allowable under subsection (a) to the estate of such spouse, over

`(ii) the tax imposed by section 2001 reduced by the credits against such tax other than the credit allowed by this section.

`(B) LIMITATION BASED ON CREDIT EQUIVALENT OF VALUE OF PROPERTY PASSING TO DECEDENT FROM PREDECEASED SPOUSE- The amount of the unused predeceased spouse credit with respect to any predeceased spouse shall not exceed the credit equivalent of the aggregate value of property acquired from or passing from (within the meaning of section 1014) the predeceased spouse to the decedent.

`(C) CREDIT EQUIVALENT- For purposes of subparagraph (B), the credit equivalent is the amount of the tentative tax which would be determined under the rate schedule set forth in section 2001(c) if the amount with respect to which the tentative tax is to be computed were the aggregate value of the property referred to in subparagraph (B).

`(3) LIMITATION ON AGGREGATE INCREASE WHERE MORE THAN 1 PREDECEASED SPOUSE- In no event may the amount of the increase under paragraph (1) exceed the dollar amount contained in subsection (a).

`(4) PREDECEASED SPOUSE- For purposes of this subsection, the term `predeceased spouse' means, with respect to the decedent, an individual who was married to the decedent on the date of such individual's death.'

(b) GIFT TAX- Section 2505 of such Code is amended by redesignating subsections (b) and (c) as subsections (c) and (d), respectively, and by inserting after subsection (a) the following new subsection:

`(b) INCREASE IN CREDIT FOR UNUSED UNIFIED CREDIT OF PREDECEASED SPOUSE- Rules similar to the rules of section 2010(c) shall apply with respect to calendar years beginning after the date of death of any predeceased spouse of the donor.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to estates of decedents dying, and gifts made, after the date of the enactment of this Act.

TITLE VII--FAMILY ENHANCEMENT

SEC. 701. NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST ALTERNATIVE MINIMUM TAX.

(a) IN GENERAL- Subsection (a) of section 26 of the Internal Revenue Code of 1986 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.'

(b) CONFORMING AMENDMENT- Subsection (d) of section 24 of such Code is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2).

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 702. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.

(a) IN GENERAL- Paragraph (2) of section 63(c) of the Internal Revenue Code of 1986 (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) TECHNICAL AMENDMENT- Subparagraph (B) of section 1(f)(6) of such Code is amended by striking `(other than with' and all that follows through `shall be applied' and inserting `(other than sections 63(c)(4) and 151(d)(4)(A)) shall be applied'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 703. EXPANSION OF DEPENDENT CARE TAX CREDIT.

(a) IN GENERAL- Paragraph (2) of section 21(a) of the Internal Revenue Code of 1986 (relating to expenses for household and dependent care services necessary for gainful employment) is amended to read as follows:

`(2) APPLICABLE PERCENTAGE DEFINED- For purposes of paragraph (1), the term `applicable percentage' means 50 percent reduced (but not below 20 percent) by 1 percentage point for each $1,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $30,000.'

(b) MINIMUM CREDIT ALLOWED FOR STAY-AT-HOME PARENTS- Section 21(e) of such Code (relating to special rules) is amended by adding at the end the following:

`(11) MINIMUM CREDIT ALLOWED FOR STAY-AT-HOME PARENTS- Notwithstanding subsection (d), in the case of any taxpayer with one or more qualifying individuals described in subsection (b)(1)(A) under the age of 1 at any time during the taxable year, such taxpayer shall be deemed to have employment-related expenses with respect to such qualifying individuals in an amount equal to the greater of--

`(A) the amount of employment-related expenses incurred for such qualifying individuals for the taxable year (determined under this section without regard to this paragraph), or

`(B) $125 for each month in such taxable year during which such qualifying individual is under the age of 1.'.

(c) INFLATION ADJUSTMENT OF DOLLAR AMOUNTS-

(1) Section 21 of such Code is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

`(f) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2000, the $30,000 amount contained in subsection (a), the $2,400 amount in subsection (c), and the $125 amount in subsection (e)(11) shall be increased by an amount equal to--

`(1) such dollar amount, multiplied by

`(2) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting `calendar year 1999' for `calendar year 1992' in subparagraph (B) thereof.

If the increase determined under the preceding sentence is not a multiple of $50 ($5 in the case of the amount in subsection (e)(11)), such amount shall be rounded to the next lowest multiple thereof.'

(2) Paragraph (2) of section 21(c) of such Code is amended by striking `$4,800' and inserting `twice the dollar amount applicable under paragraph (1)'.

(3) Paragraph (2) of section 21(d) of such Code is amended by striking `less than--' and all that follows through the end of the first sentence and inserting `less than 1/12 of the amount which applies under subsection (c) to the taxpayer for the taxable year.'

(d) CREDIT ALLOWED BASED ON RESIDENCY IN CERTAIN CASES- Subsection (e) of section 21 of such Code is amended by adding at the end the following new paragraph:

`(12) CREDIT ALLOWED BASED ON RESIDENCY IN CERTAIN CASES- In the case of a taxpayer--

`(A) who does not satisfy the household maintenance test of subsection (a) for any period, but

`(B) whose principal place of abode for such period is also the principal place of abode of any qualifying individual,

then such taxpayer shall be treated as satisfying such test for such period but the amount of credit allowable under this section with respect to such individual shall be determined by allowing only 1/12 of the limitation under subsection (c) for each full month that the requirement of subparagraph (B) is met.'

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 704. EMPLOYER-PROVIDED CHILD CARE SERVICES.

(a) GENERAL RULE- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

`SEC. 45F. EMPLOYER EXPENSES IN PROVIDING DEPENDENT CARE SERVICES.

`(a) GENERAL RULE- For purposes of section 38, the employer day care center credit determined under this section for the taxable year is the amount determined under subsection (b) with respect to each qualified day care center of the taxpayer.

`(b) CREDIT PER FACILITY- For purposes of this section--

`(1) IN GENERAL- The amount determined under this subsection for any taxable year with respect to any qualified day care facility of the taxpayer is 50 percent of the excess (if any) of--

`(A) the expenses paid or incurred by the taxpayer during the taxable year in providing dependent care services at such facility for employees, over

`(B) the aggregate amount received or accrued during the taxable year by the employer for such services.

`(2) DEPRECIATION ALLOWANCES- For purposes of paragraph (1), depreciation allowances under section 167 shall be treated as expenses.

`(c) QUALIFIED DAY CARE CENTER- For purposes of this section, the term `qualified day care center' means any day care center--

`(1) which is operated by the taxpayer exclusively for purposes of providing dependent care services to employees,

`(2) which is located on the business premises of the taxpayer or on a site adjacent to such premises,

`(3) which complies with all applicable laws and regulations of a State or unit of local government, and

`(4) the operation of which is part of a dependent care assistance program (as defined in section 129(d)).'

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT- Subsection (b) of section 38 of such Code is amended by striking `plus' at the end of paragraph (13), by striking the period at the end of paragraph (14) and inserting `, plus', and by adding at the end thereof the following new paragraph:

`(15) the employer day care center credit determined under section 45F(a).'

(c) DENIAL OF DOUBLE BENEFIT- Section 280C of such Code is amended by adding at the end thereof the following new subsection:

`(d) CREDIT FOR EMPLOYER DAY CARE CENTER EXPENSES- No deduction shall be allowed for that portion of the expenses referred to in section 45F(b)(1)(A) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45F(a).'

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45F. Employer expenses in providing dependent care services.'

(e) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

TITLE VIII--HEALTH CARE

SEC. 801. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

(a) ALLOWANCE OF CREDIT-

(1) IN GENERAL- Section 24(a) of the Internal Revenue Code of 1986 (relating to allowance of child tax credit) is amended to read as follows:

`(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--

`(1) $500 multiplied by the number of qualifying children of the taxpayer, plus

`(2) $1,000 multiplied by the number of applicable individuals with respect to whom the taxpayer is an eligible caregiver for the taxable year.

In any case in which the applicable individual and the eligible caregiver are the same individual, the credit allowed by paragraph (2) with respect to such individual shall not exceed the aggregate amount paid by the taxpayer during the taxable year (not compensated for by insurance or otherwise) for qualified long-term care services (as defined in section 7702B(c)) for such individual.'

(2) ADDITIONAL CREDIT FOR TAXPAYER WITH 3 OR MORE SEPARATE CREDIT AMOUNTS- So much of section 24(d) of such Code as precedes paragraph (1)(A) thereof is amended to read as follows:

`(d) ADDITIONAL CREDIT FOR TAXPAYERS WITH 3 OR MORE SEPARATE CREDIT AMOUNTS-

`(1) IN GENERAL- If the sum of the number of qualifying children of the taxpayer and the number of applicable individuals with respect to which the taxpayer is an eligible caregiver is 3 or more for any taxable year, the aggregate credits allowed under subpart C shall be increased by the lesser of--'.

(3) CONFORMING AMENDMENTS-

(A) The heading for section 32(n) of such Code is amended by striking `CHILD' and inserting `FAMILY CARE'.

(B) The heading for section 24 is amended to read as follows:

`SEC. 24. FAMILY CARE CREDIT.'

(C) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 24 and inserting the following new item:

`Sec. 24. Family care credit.'.

(b) DEFINITIONS- Section 24(c) of such Code (defining qualifying child) is amended to read as follows:

`(c) DEFINITIONS- For purposes of this section--

`(1) QUALIFYING CHILD-

`(A) IN GENERAL- The term `qualifying child' means any individual if--

`(i) the taxpayer is allowed a deduction under section 151 with respect to such individual for the taxable year,

`(ii) such individual has not attained the age of 17 as of the close of the calendar year in which the taxable year of the taxpayer begins, and

`(iii) such individual bears a relationship to the taxpayer described in section 32(c)(3)(B).

`(B) EXCEPTION FOR CERTAIN NONCITIZENS- The term `qualifying child' shall not include any individual who would not be a dependent if the first sentence of section 152(b)(3) were applied without regard to all that follows `resident of the United States'.

`(2) APPLICABLE INDIVIDUAL-

`(A) IN GENERAL- The term `applicable individual' means, with respect to any taxable year, any individual 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 subparagraph (B) 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.

`(B) INDIVIDUALS WITH LONG-TERM CARE NEEDS- An individual is described in this subparagraph if the individual meets any of the following requirements:

`(i) The individual is at least 6 years of age and--

`(I) is unable to perform (without substantial assistance from another individual) at least 3 activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or

`(II) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to preform, 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.

`(ii) The individual is at least 2 but not 6 years of age and is unable due to a loss of functional capacity to perform (without substantial assistance from another individual) at least 2 of the following activities: eating, transferring, or mobility.

`(iii) The individual is under 2 years of age and requires specific durable medical equipment by reason of a severe health condition or requires a skilled practitioner trained to address the individual's condition to be available if the individual's parents or guardians are absent.

`(3) ELIGIBLE CAREGIVER-

`(A) IN GENERAL- A taxpayer shall be treated as an eligible caregiver for any taxable year with respect to the following individuals:

`(i) The taxpayer.

`(ii) The taxpayer's spouse.

`(iii) An individual with respect to whom the taxpayer is allowed a deduction under section 151 for the taxable year.

`(iv) An individual who would be described in clause (iii) for the taxable year if section 151(c)(1)(A) were applied by substituting for the exemption amount an amount equal to the sum of the exemption amount, the standard deduction under section 63(c)(2)(C), and any additional standard deduction under section 63(c)(3) which would be applicable to the individual if clause (iii) applied.

`(v) An individual who would be described in clause (iii) for the taxable year if--

`(I) the requirements of clause (iv) are met with respect to the individual, and

`(II) the requirements of subparagraph (B) are met with respect to the individual in lieu of the support test of section 152(a).

`(B) RESIDENCY TEST- The requirements of this subparagraph are met if an individual has as his principal place of abode the home of the taxpayer and--

`(i) in the case of an individual who is an ancestor or descendant of the taxpayer or the taxpayer's spouse, is a member of the taxpayer's household for over half the taxable year, or

`(ii) in the case of any other individual, is a member of the taxpayer's household for the entire taxable year.

`(C) SPECIAL RULES WHERE MORE THAN 1 ELIGIBLE CAREGIVER-

`(i) IN GENERAL- If more than 1 individual is an eligible caregiver with respect to the same applicable individual for taxable years ending with or within the same calendar year, a taxpayer shall be treated as the eligible caregiver if each such individual (other than the taxpayer) files a written declaration (in such form and manner as the Secretary may prescribe) that such individual will not claim such applicable individual for the credit under this section.

`(ii) NO AGREEMENT- If each individual required under clause (i) to file a written declaration under clause (i) does not do so, the individual with the highest modified adjusted gross income (as defined in section 32(c)(5)) shall be treated as the eligible caregiver.

`(iii) MARRIED INDIVIDUALS FILING SEPARATELY- In the case of married individuals filing separately, the determination under this subparagraph as to whether the husband or wife is the eligible caregiver shall be made under the rules of clause (ii) (whether or not 1 of them has filed a written declaration under clause (i)).'.

(c) IDENTIFICATION REQUIREMENTS-

(1) IN GENERAL- Section 24(e) of such Code is amended by adding at the end the following new sentence: `No credit shall be allowed under this section to a taxpayer with respect to any applicable individual unless the taxpayer includes the name and taxpayer identification number of such individual, and the identification number of the physician certifying such individual, on the return of tax for the taxable year.'.

(2) ASSESSMENT- Section 6213(g)(2)(I) of such Code is amended--

(A) by inserting `or physician identification' after `correct TIN', and

(B) by striking `child' and inserting `family care'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 802. CREDIT FOR EMPLOYER HEALTH CARE COSTS.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45G. CREDIT TO EMPLOYERS MAINTAINING SELF-INSURED HEALTH PLAN FOR COST OF PROVIDING HEALTH COVERAGE FOR EMPLOYEES.

`(a) GENERAL RULE- For purposes of section 38, in the case of an eligible employer, the health coverage cost credit determined under this section for the taxable year is an amount equal to 3 percent of the amount paid or incurred by the taxpayer during the taxable year for health coverage for such employer's employees and their spouses and dependents.

`(b) ELIGIBLE EMPLOYER- For purposes of this section, the term `eligible employer' means any employer who, throughout the taxable year, maintains a group health plan for such employer's employees and their spouses and dependents which is not provided through insurance.

`(c) SPECIAL RULES-

`(1) ONLY NONGOVERNMENTAL COVERAGE TAKEN INTO ACCOUNT- Amounts paid or incurred for coverage under Medicare or any other government program shall not be taken into account under subsection (a).

`(2) DENIAL OF DOUBLE BENEFIT- No deduction shall be allowed for that portion of the amount taken into account under subsection (a) (which is otherwise allowable as a deduction for the taxable year) equal to the amount of the credit determined for such taxable year under subsection (a).'

(b) CREDIT MADE PART OF GENERAL BUSINESS CREDIT-

(1) IN GENERAL- Subsection (b) of section 38 of such Code is amended by striking `plus' at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting `, plus', and by adding at the end the following new paragraph:

`(16) in the case of a eligible employer (as defined in section 45G(b)), the health coverage cost credit determined under section 45G(a).'

(2) DENIAL OF CARRYBACKS TO PRE-EFFECTIVE DATE YEARS- Subsection (d) of section 39 of such Code is amended by adding at the end the following new paragraph:

`(11) NO CARRYBACK OF SECTION 45G CREDIT BEFORE ENACTMENT- No portion of the unused business credit for any taxable year which is attributable to the health coverage cost credit determined under section 45G may be carried back to a taxable year beginning on or before the date of the enactment of section 45G.'

(c) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45G. Credit to employers maintaining self-insured health plan for cost of providing health coverage for employees.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 803. EMERGENCY MEDICAL SERVICES ENHANCEMENT ACT.

(a) GENERAL RULE- Subsection (e) of section 150 of the Internal Revenue Code of 1986 is amended to read as follows:

`(e) BONDS OF CERTAIN VOLUNTEER FIRE DEPARTMENTS OR EMERGENCY SERVICE ORGANIZATIONS- For purposes of this part and section 103--

`(1) IN GENERAL- A bond of a volunteer fire or other emergency services organization shall be treated as a bond of a political subdivision of a State if--

`(A) such organization is a qualified volunteer fire or other emergency services organization with respect to an area within the jurisdiction of such political subdivision, and

`(B) such bond is issued as part of an issue 95 percent or more of the net proceeds of which are to be used for the acquisition, construction, reconstruction, or improvement of--

`(i) a firehouse or other building used or to be used by such organization in providing qualified services (including land which is functionally related and subordinate thereto), or

`(ii) a firetruck, ambulance, or other vehicle used or to be used by such organization in providing qualified services.

`(2) QUALIFIED VOLUNTEER FIRE OR OTHER EMERGENCY SERVICES ORGANIZATION- For purposes of this subsection, the term `qualified volunteer fire or other emergency services organization' means, with respect to a political subdivision of a State, any organization--

`(A) which is organized and operated to provide qualified services for persons in an area (within the jurisdiction of such political subdivision) which is not provided with any other qualified services of the type provided by such organization, and

`(B) which is required (by written agreement) by the political subdivision to furnish qualified services in such area.

For purposes of subparagraph (A), other qualified services provided in an area shall be disregarded in determining whether an organization is a qualified volunteer fire or other emergency services organization if such other qualified services are provided by a qualified volunteer fire or other emergency services organization (determined with the application of this sentence) and such organization and the provider of such other services have been continuously providing qualified services to such area since January 1, 1999.

`(3) TREATMENT AS PRIVATE ACTIVITY BONDS ONLY FOR CERTAIN PURPOSES- Bonds which are part of an issue which meets the requirements of paragraph (1) shall not be treated as private activity bonds except for purposes of sections 147(f) and 149(d).

`(4) QUALIFIED SERVICES- For purposes of this subsection, the term `qualified services' means

any firefighting, rescue, or emergency medical services.'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to obligations issued after the date of the enactment of this Act.

SEC. 804. DEDUCTION FOR HEALTH INSURANCE COSTS FOR SELF-EMPLOYED INDIVIDUALS.

(a) IN GENERAL- Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 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, 1998.

TITLE IX--HOUSING

SEC. 901. EXTENSION OF FIRST-TIME DISTRICT OF COLUMBIA HOME BUYER TAX CREDIT.

Subsection (i) of section 1400C of the Internal Revenue Code of 1986 is amended by striking `2001' and inserting `2006'.

SEC. 902. INCREASE STATE CEILING IN LOW-INCOME HOUSING TAX CREDIT.

(a) IN GENERAL- Clause (i) of section 42(h)(3)(C) of the Internal Revenue Code of 1986 (relating to State housing credit ceiling) is amended by striking `$1.25' and inserting `$1.75'.

(b) ADJUSTMENT OF STATE CEILING FOR INCREASES IN COST-OF-LIVING- Paragraph (3) of section 42(h) of such Code (relating to housing credit dollar amount for agencies) is amended by adding at the end the following new subparagraph:

`(H) COST-OF-LIVING ADJUSTMENT-

`(i) IN GENERAL- In the case of a calendar year after 2000, the dollar amount contained in subparagraph (C)(i) shall be increased by an amount equal to--

`(I) such dollar amount, multiplied by

`(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting `calendar year 1999' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any increase under clause (i) is not a multiple of 5 cents, such increase shall be rounded to the next lowest multiple of 5 cents.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to calendar years after 1999.

TITLE X--RESEARCH AND BUSINESS

SEC. 1001. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

(a) GENERAL RULE- Paragraph (1) of section 179(b) of the Internal Revenue Code of 1986 (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 $25,000.'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1999.

SEC. 1002. MEDICAL INNOVATION TAX CREDIT.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by inserting after section 41 the following:

`SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.

`(a) GENERAL RULE- For purposes of section 38, the medical innovation credit determined under this section for the taxable year shall be an amount equal to 20 percent of the excess (if any) of--

`(1) the qualified medical innovation expenses for the taxable year, over

`(2) the medical innovation base period amount.

`(b) QUALIFIED MEDICAL INNOVATION EXPENSES- For purposes of this section--

`(1) IN GENERAL- The term `qualified medical innovation expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year directly or indirectly to any qualified academic institution for clinical testing research activities.

`(2) CLINICAL TESTING RESEARCH ACTIVITIES-

`(A) IN GENERAL- The term `clinical testing research activities' means human clinical testing conducted at any qualified academic institution in the development of any product, which occurs before--

`(i) the date on which an application with respect to such product is approved under section 505(b), 506, or 507 of the Federal Food, Drug, and Cosmetic Act,

`(ii) the date on which a license for such product is issued under section 351 of the Public Health Service Act, or

`(iii) the date classification or approval of such product which is a device intended for human use is given under section 513, 514, or 515 of the Federal Food, Drug, and Cosmetic Act.

`(B) PRODUCT- The term `product' means any drug, biologic, or medical device.

`(3) QUALIFIED ACADEMIC INSTITUTION- The term `qualified academic institution' means any of the following institutions:

`(A) EDUCATIONAL INSTITUTION- A qualified organization described in section 170(b)(1)(A)(iii) which is owned or affiliated with an institution of higher education as described in section 3304(f).

`(B) TEACHING HOSPITAL- A teaching hospital which--

`(i) is publicly supported or owned by an organization described in section 501(c)(3), and

`(ii) is affiliated with an organization meeting the requirements of subparagraph (A).

`(C) FOUNDATION- A medical research organization described in section 501(c)(3) (other than a private foundation) which is affiliated with, or owned by--

`(i) an organization meeting the requirements of subparagraph (A), or

`(ii) a teaching hospital meeting the requirements of subparagraph (B).

`(D) CHARITABLE RESEARCH HOSPITAL- A hospital that is designated as a cancer center by the National Cancer Institute.

`(4) EXCLUSION FOR AMOUNTS FUNDED BY GRANTS, ETC- The term `qualified medical innovation expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity).

`(c) MEDICAL INNOVATION BASE PERIOD AMOUNT- For purposes of this section, the term `medical innovation base period amount' means the average annual qualified medical innovation expenses paid by the taxpayer during the 3-taxable year period ending with the taxable year immediately preceding the first taxable year of the taxpayer beginning after December 31, 1998.

`(d) SPECIAL RULES-

`(1) LIMITATION ON FOREIGN TESTING- No credit shall be allowed under this section with respect to any clinical testing research activities conducted outside the United States.

`(2) CERTAIN RULES MADE APPLICABLE- Rules similar to the rules of subsections (f) and (g) of section 41 shall apply for purposes of this section.

`(3) ELECTION- This section shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year.

`(4) COORDINATION WITH CREDIT FOR INCREASING RESEARCH EXPENDITURES AND WITH CREDIT FOR CLINICAL TESTING EXPENSES FOR CERTAIN DRUGS FOR RARE DISEASES- Any qualified medical innovation expense for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 or 45C for such taxable year.

`(e) TERMINATION- This section shall not apply to any expense paid or incurred after the date specified in section 41(h)(1)(B).'.

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT-

(1) IN GENERAL- Section 38(b) of such Code (relating to current year business credits) is amended by striking `plus' at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting `, plus', and by adding at the end the following:

`(17) the medical innovation expenses credit determined under section 41A(a).'.

(2) TRANSITION RULE- Section 39(d) of such Code is amended by adding at the end the following new paragraph:

`(12) NO CARRYBACK OF SECTION 41A CREDIT BEFORE ENACTMENT- No portion of the unused business credit for any taxable year which is attributable to the medical innovation credit determined under section 41A may be carried back to a taxable year beginning before January 1, 1999.'.

(c) DENIAL OF DOUBLE BENEFIT- Section 280C of such Code is amended by adding at the end the following new subsection:

`(d) CREDIT FOR INCREASING MEDICAL INNOVATION EXPENSES-

`(1) IN GENERAL- No deduction shall be allowed for that portion of the qualified medical innovation expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a).

`(2) CERTAIN RULES TO APPLY- Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.'

(d) DEDUCTION FOR UNUSED PORTION OF CREDIT- Section 196(c) of such Code (defining qualified business credits) is amended by redesignating paragraphs (5) through (8) as paragraphs (6) through (9), respectively, and by inserting after paragraph (4) the following new paragraph:

`(5) the medical innovation expenses credit determined under section 41A(a) (other than such credit determined under the rules of section 280C(d)(2)),'.

(e) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding after the item relating to section 41 the following:

`Sec. 41A. Credit for medical innovation expenses.'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

SEC. 1003. PERMANENT EXTENSION OF RESEARCH CREDIT.

(a) CREDIT MADE PERMANENT-

(1) IN GENERAL- Section 41 of the Internal Revenue Code of 1986 (relating to credit for increasing research activities) is amended by striking subsection (h).

(2) CONFORMING AMENDMENT- Paragraph (1) of section 45C(b) of such Code is amended by striking subparagraph (D).

(b) INCREASE IN ALTERNATIVE INCREMENTAL CREDIT RATES- Subparagraph (A) of section 41(c)(4) of such Code is amended--

(1) by striking `1.65 percent' in clause (i) and inserting `2.65 percent',

(2) by striking `2.2 percent' in clause (ii) and inserting `3.2 percent', and

(3) by striking `2.75 percent' in clause (iii) and inserting `3.75 percent'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred after June 30, 1999.

TITLE XI--RETIREMENT SECURITY

SEC. 1101. ADJUSTMENT IN MONTHLY EXEMPT AMOUNT FOR PURPOSES OF THE SOCIAL SECURITY EARNINGS TEST.

(a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE- Section 203(f)(8)(D) of the Social Security Act (42 U.S.C. 403(f)(8)(D)) is amended--

(1) in clause (iii), by inserting `and' at the end; and

(2) by striking clauses (iv) through (vii) and inserting the following new clause:

`(iv) for each month of any taxable year ending after 1999 and before 2001, $2,500.'.

(b) CONFORMING AMENDMENTS-

(1) Section 203(f)(8)(B)(ii) of such Act (42 U.S.C. 403(f)(8)(B)(ii)) is amended--

(A) by striking `after 2001 and before 2003' and inserting `after 1999 and before 2001'; and

(B) in subclause (II), by striking `2001' and inserting `1998'.

(2) The second sentence of section 223(d)(4)(A) of such Act (42 U.S.C. 423(d)(4)(A)) is amended by inserting `and section 1101 of the Pro-Family, Pro-Growth, Pro-Reform Tax Reduction Act of 1999' after `1996'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply with respect to taxable years beginning after 1999.

SEC. 1102. SMALL BUSINESS CREDIT FOR PENSION PLAN START-UP COSTS.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45H. SMALL EMPLOYER PENSION PLAN START-UP COSTS.

`(a) GENERAL RULE- For purposes of section 38, in the case of an eligible employer, the small employer pension plan start-up cost credit determined under this section for any taxable year is an amount equal to 50 percent of the qualified start-up costs paid or incurred by the taxpayer during the taxable year.

`(b) DOLLAR LIMITATION- The amount of the credit determined under this section for any taxable year shall not exceed--

`(1) $1,000 for the first taxable year ending after the date the employer established the qualified employer plan to which such costs relate,

`(2) $500 for each of the second and third taxable years ending after such date, and

`(3) zero for each taxable year thereafter.

`(c) ELIGIBLE EMPLOYER- For purposes of this section--

`(1) IN GENERAL- The term `eligible employer' has the meaning given such term by section 408(p)(2)(C)(i).

`(2) EMPLOYERS MAINTAINING QUALIFIED PLANS DURING 1998 NOT ELIGIBLE- Such term shall not include an employer if such employer (or any predecessor employer) maintained a qualified plan (as defined in section 408(p)(2)(D)(ii)) with respect to which contributions were made, or benefits were accrued, for service in 1998. If only individuals other than employees described in subparagraph (A) or (B) of section 410(b)(3) are eligible to participate in the qualified employer plan referred to in subsection (d)(1), then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate.

`(d) OTHER DEFINITIONS- For purposes of this section--

`(1) QUALIFIED START-UP COSTS-

`(A) IN GENERAL- The term `qualified start-up costs' means any ordinary and necessary expenses of an eligible employer which--

`(i) are paid or incurred in connection with the establishment of a qualified employer plan in which at least 2 individuals are eligible to participate, and

`(ii) are of a nonrecurring nature.

`(B) PLAN MUST BE ESTABLISHED BEFORE JANUARY 1, 2002- Such term shall not include any expense in connection with a plan established after December 31, 2001.

`(2) QUALIFIED EMPLOYER PLAN- The term `qualified employer plan' has the meaning given to such term by section 4972(d).

`(e) SPECIAL RULES- For purposes of this section--

`(1) AGGREGATION RULES- All persons treated as a single employer under subsection (a) or (b)

of section 52, or subsection (n) or (o) of section 414, shall be treated as 1 person.

`(2) DISALLOWANCE OF DEDUCTION- No deduction shall be allowable under this chapter for any qualified start-up costs for which a credit is determined under subsection (a).

`(3) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.'.

(b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) of such Code (defining current year business credit) is amended by striking `plus' at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting `, plus', and by adding at the end the following new paragraph:

`(18) in the case of an eligible employer (as defined in section 45H(c)), the small employer pension plan start-up cost credit determined under section 45H(a).'.

(c) CONFORMING AMENDMENTS-

(1) Section 39(d) of such Code is amended by adding at the end the following new paragraph:

`(13) NO CARRYBACK OF SMALL EMPLOYER PENSION PLAN START-UP COST CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the small employer pension plan start-up cost credit determined under section 45H may be carried back to a taxable year ending on or before the date of the enactment of section 45H.'.

(2) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45H. Small employer pension plan start-up costs.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to costs paid or incurred in taxable years ending after the date of the enactment of this Act.

SEC. 1103. INCREASE IN TAXPAYER IRA CONTRIBUTIONS.

(a) INCREASE IN MAXIMUM AMOUNT OF DEDUCTION- Subparagraph (A) of section 219(b)(1) of the Internal Revenue Code of 1986 (relating to maximum amount of deduction) is amended by striking `$2,000' and inserting `$5,000'.

(b) CONFORMING AMENDMENTS- Subsections (a)(1), (b)(2), (j), and (p)(8) of section 408 of such Code are each amended by striking `$2,000' each place it appears and inserting `$5,000'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.

TITLE XII--NATIONAL COMMISSION ON TAX SIMPLIFICATION AND REFORM

SEC. 1201. ESTABLISHMENT.

(a) There is established the National Commission on Tax Simplification and Reform. The Commission shall be composed of 15 members appointed or designated by the President and selected as follows:

(1) Five members selected by the President from among officers or employees of the Executive branch, private citizens of the United States, or both. Not more than three of the members selected by the President shall be members of the same political party.

(2) Five members selected by the Majority Leader of the Senate from among members of the Senate, private citizens of the United States, or both. Not more than three of the members selected by the Majority Leader shall be members of the same political party.

(3) Five members selected by the Speaker of the House of Representatives from among members of the House, private citizens of the United States, or both. Not more than three of the members selected by the Speaker shall be members of the same political party.

(b) The President shall designate a Chairman from among the members of the Commission.

SEC. 1202. FUNCTIONS.

(a) The Commission shall review the Internal Revenue Code of 1986, identify areas where such Code is overly complex and can be simplified, analyze potential solutions to such Code's complexities, and make appropriate recommendations to the Secretary of the Treasury, the President, and to Congress.

(b) The Commission shall make its report to the President not later than 1 year after the date of the enactment of this Act.

SEC. 1203. ADMINISTRATION.

(a) The heads of Executive agencies shall, to the extent permitted by law, provide the Commission such information as it may require for the purpose of carrying out its functions.

(b) Members of the Commission shall serve without any additional compensation for their work on the Commission. However, members appointed from among private citizens of the United States may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by law for persons serving intermittently in the government service (5 U.S.C. 5701-5707), to the extent funds are available therefor.

(c) The Commission shall have a staff headed by an Executive Director. Any expenses of the Commission shall be paid from such funds as may be available to the Secretary of the Treasury.

SEC. 1204. GENERAL.

(a) Notwithstanding any Executive order, the responsibilities of the President under the Federal Advisory Committee Act, as amended, except that of reporting annually to the Congress, which are applicable to the Commission, shall be performed by the Secretary of the Treasury in accordance with the guidelines and procedures established by the Administrator of General Services.

(b) The Commission shall terminate thirty days after submitting its report.

TITLE XIII--AMOUNT OF REVENUES RESERVED FOR SOCIAL SECURITY AND MEDICARE

SEC. 1301. AMOUNT OF REVENUES RESERVED FOR SOCIAL SECURITY AND MEDICARE.

This Act reserves 77 percent of the combined on- and off-budget surpluses for the purposes of ensuring Social Security and Medicare solvency and longevity.

END