SUMMARY AS OF:
3/6/2000--Introduced.
TABLE OF CONTENTS:
- Title I: Small Business Provisions
- Title II: Pension Provisions
- Subtitle A: Expanding Coverage
- Subtitle B: Enhancing Fairness for Women
- Subtitle C: Increasing Portability for Participants
- Subtitle D: Strengthening Pension Security and Enforcement
- Subtitle E: Reducing Regulatory Burdens
- Subtitle F: Plan Amendments
- Title III: Estate Tax Relief
- Subtitle A: Reductions of Estate and Gift Tax Rates
- Subtitle B: Unified Credit Replaced With Unified Exemption Amount
- Subtitle C: Modifications of Generation-Skipping Transfer Tax
- Subtitle D: Conservation Easements
- Title IV: Tax Relief for Distressed Communities and Industries
- Subtitle A: American Community Renewal Act of 2000
- Subtitle B: Timber Incentives
- Title V: Real Estate Provisions
- Subtitle A: Improvements in Low-Income Housing Credit
- Subtitle B: Private Activity Bond Volume Cap
- Subtitle C: Exclusion from Gross Income for Certain Forgiven Mortgage
- Obligations
Small Business Tax Fairness Act of 2000 - Title I: Small Business
Provisions - Amends the Internal Revenue Code (the Code) to increase a
self-employed individual's deduction for the health insurance costs of self and
family to 100 percent. Denies such deduction only for any month the individual
actually participates in an employer-subsidized health plan (currently, for any
month the individual is eligible to participate).
(Sec. 102) Increases to $30,000 the aggregate cost taken into account for the
option to expense certain depreciable business assets of small businesses.
(Sec. 103) Increases from 50 percent to: (1) 60 percent in 2000 and 55
percent for taxable years beginning in 2001 the deduction for meal and
entertainment expenses; and (2) 80 percent the deduction of business meal
expenses for individuals subject to Federal limitations on hours of service.
(Sec. 105) Amends the Code to: (1) extend income averaging to income from the
trade or business of catching, taking, or harvesting fish intended to enter
commerce through sale, barter, or trade; and (2) disregard income averaging for
farmers and commercial fishermen in computing the regular alternative minimum
tax.
(Sec. 106) Repeals specified occupational taxes relating to distilled
spirits, wine, and beer. Revises the record-keeping requirements for wholesale
and retail liquor dealers. Makes it unlawful for any liquor dealer (except one
selling beer exclusively) to purchase distilled spirits from any person but a
wholesale liquor dealer (excluding a wholesale dealer exclusively in beer)
subject to specified record-keeping requirements.
(Sec. 107) Amends the Code (as amended by the Ticket to Work and Work
Incentives Improvement Act of 1999) to repeal revisions to the Code (made by the
Act) which repealed the use of the installment method of accounting for accrual
method taxpayers and modified the pledge rules of installment obligations.
Title II: Pension Provisions - Subtitle A: Expanding Coverage -
Increases limits on benefits and contributions under qualified pension plans.
(Sec. 202) Amends the Code with regard to the tax on prohibited transactions,
and in particular certain transactions involving trusts which are part of an
owner-employee plan, and which are not exempted from the tax. Limits the meaning
of owner-employee, with respect to any non-exempt loan of any part of the corpus
or income of a plan to an owner-employee or family member (subchapter S owner,
partner, or sole proprietor), to: (1) a participant or beneficiary of an
individual retirement plan; or (2) an employer or association of employees which
establishes such a plan.
(Sec. 203) Modifies top-heavy rules. Redefines certain key employees to: (1)
eliminate the ten employees each of whom earns over $30,000 per year and owns
the largest interests in the employer; and (2) include an officer of the
employer earning more than $150,000 per year. Provides that employer matching
contributions shall be taken into account for minimum contribution requirements.
Declares that aggregate distributions during the last year (or, for in-service
distributions, during the past five years) shall be taken into account when
determining: (1) the present value of the cumulated accrued benefit for any
employee; or (2) the amount of any employee's account.
Excludes from the meaning of top-heavy plan any plan which consists solely
of: (1) a cash or deferred arrangement using certain alternative methods of
meeting nondiscrimination requirements; and (2) matching contributions which
meet certain requirements of a specified additional alternative method of
satisfying nondiscrimination tests.
Exempts from the minimum benefit requirement, and determination of any
employee's years of service with an employer, any service with an employer
occurring during a plan year when the plan benefits no current or former
employee (frozen plan).
Declares that, with respect to top-heavy plans, determination of constructive
stock ownership by a five-percent owner shall disregard family attribution
requirements.
(Sec. 204) Exempts elective deferrals of employer contributions not
includable in an employee's gross income from specified limitations on an
employer's deductions for such contributions to an employees' trust or annuity
plan and compensation under a deferred payment plan.
(Sec. 205) Repeals coordination requirements for deferred compensation plans
of State and local governments and tax-exempt organizations.
(Sec. 206) Eliminates the user fee for requests to the Internal Revenue
Service (IRS) for determination letters with respect to the qualified status of
any pension plan maintained solely by one or more eligible employers or any
trust which is a part of the plan.
(Sec. 207) Subjects participant's compensation to specified limits on
deductions for employer contributions.
(Sec. 208) Establishes an option to treat employee elective deferrals as
qualified plus contributions (which shall not, however, be excludable from gross
income).
Subtitle B: Enhancing Fairness for Women - Amends the Code to allow
eligible participants age 50 or over to make additional elective deferrals
(catch-up contributions) in any plan year according to a schedule of percentage
increments (from ten percent to 40 percent) between 2001 and 2004 and
thereafter.
(Sec. 222) Increases from 25 percent to 100 percent of compensation (up to
$30,000) the maximum allowable annual addition to a participant's plan account.
(Sec. 223) Provides for faster vesting of certain employer matching
contributions.
(Sec. 224) Directs the Secretary of the Treasury (Secretary) to simplify and
finalize the regulations relating to specified minimum distribution
requirements, and modify them to: (1) reflect current life expectancy; and (2)
revise the required distribution methods so that, under reasonable assumptions,
the amount of the required minimum distribution does not decrease over a
participant's life expectancy.
(Sec. 225) Amends the Code to provide for distribution or payment (division
of benefits) from an eligible deferred compensation plan upon divorce.
(Sec. 226) Directs the Secretary to revise the hardship distribution
regulations to provide that six months is the period an employee is prohibited
from making elective and employee contributions in order for a distribution to
be deemed necessary to satisfy financial need (safe harbor relief for hardship
withdrawals from cash or deferred arrangements).
Subtitle C: Increasing Portability for Participants - Amends the Code
to provide for rollovers among various specified kinds of plans. Revises the
requirements for tax-exempt rollovers of individual retirement accounts (IRAs)
into eligible (workplace) retirement plans.
(Sec. 233) Exempts from certain limitations on the amount of a tax-exempt
rollover from an exempt trust: (1) any portion of a distribution transferred in
a direct trustee-to-trustee transfer to a qualified trust in a defined
contribution plan, which is also separately accounted for; and (2) any portion
transferred to an eligible retirement plan.
(Sec. 234) Provides a hardship exception to the requirement that a tax-exempt
rollover be made within 60 days after distribution.
(Sec. 235) Amends the Code to revise the treatment of a plan as failing to
meet minimum vesting standards if a participant's accrued benefit is decreased
by amendment of the plan. Declares that a defined contribution plan shall not be
treated as failing to meet such requirements merely because the transferee plan
does not provide some or all of the forms of distribution previously available
under another defined contribution plan in specified circumstances.
(Sec. 236) Revises certain restrictions on distributions from qualified cash
or deferred arrangements. Eliminates a corporation's disposition of assets or of
an interest in a subsidiary as events for which lump-sum distributions are
covered (while retaining termination of a plan as a covered event). Changes
separation from service to severance from employment as a threshold event for
the covered distribution of amounts from a qualified cash or deferred
arrangement.
(Sec. 237) Excludes from gross income any amount transferred to a defined
benefit governmental plan in a direct trustee-to-trustee transfer if it is for:
(1) purchase of a permissive service credit; or (2) a repayment of cash-outs to
which certain limitations on contributions do not apply.
(Sec. 238) Amends the Code with respect to restrictions on certain mandatory
distributions to allow employers to disregard rollover contributions when
determining the present value of nonforfeitable accrued benefits for cash-out
purposes.
(Sec. 239) Amends the Code, with respect to deferred compensation plans of
State and local governments and tax-exempt organizations, to repeal certain
additional minimum distribution requirements. Revises requirements for inclusion
of deferred compensation in a participant's gross income to limit the taxable
year: (1) to the taxable year in which the compensation or income is paid to the
participant in the case of a State or local government; and (2) to the taxable
year in which the compensation or income is paid or otherwise made available to
the participant or other beneficiary in the case of a tax-exempt organization.
Subtitle D: Strengthening Pension Security and Enforcement - Amends
the Code, with respect to the full-funding limitation, to repeal the current
liability funding limit percentage in the case of plan years beginning in 1999
or 2000. Sets the applicable percentage of current liability at 160 percent in
2001, 165 percent in 2002, 170 percent in 2003, and nothing afterwards.
(Sec. 242) Revises the special rule for an employer's maximum deductible
contribution to change the minimum amount, for plans with more than 100
participants, from the unfunded current liability to the unfunded termination
liability. Excludes from termination liability, for plans with under 100
participants, any liability attributable to benefit increases for highly
compensated employees resulting from a plan amendment made or effective within
the last two years before the termination date.
(Sec. 243) Amends the Code with respect to the excise tax on nondeductible
contributions to a qualified employer plan. Allows an employer, in determining
the amount of nondeductible contributions, to elect not to take into account any
contributions to a defined benefit plan except to the extent they exceed the
full-funding limitation.
(Sec. 244) Establishes an excise tax (of $100 per applicable individual per
day) on a defined benefit plan for failing to give notice to participants of any
plan amendment providing for a significant reduction in the rate of future
benefit accrual.
Subtitle E: Reducing Regulatory Burdens - Amends the Code, with
respect to annual valuation of a plan's liability, to require actual valuation
only once every three years of a plan whose assets are at least 125 percent of
its current liability. Permits use of prior year valuations for any two
consecutive plan years, so long as an actual valuation takes place in the third
year.
(Sec. 262) Amends the Code to allow the reinvestment in qualifying employer
securities of any employee stock ownership plan dividend paid by a C
corporation, without loss of the corporation's deduction from gross income.
(Sec. 263) Amend the Tax Reform Act of 1986 to repeal, as of December 31,
2000, the transition rule relating to certain highly compensated employees.
(Sec. 264) Directs the Secretary to modify Treasury Regulations to provide
that employees of tax-exempt organizations who are eligible to make
contributions under a salary reduction agreement may be treated as excludable
from a 401 (k) plan or 401 (m) plan if: (1) no such employee is eligible to
participate in such 401(k) plan or 401(m) plan; and (2) 95 percent of other
employees are eligible to participate in such a plan.
(Sec. 265) Amends the Code to make a fringe benefit exclusion from gross
income of any qualified retirement planning services provided to an employee and
his spouse by an employer maintaining a qualified employer plan.
(Sec. 266) Directs the Secretary to modify the annual return filing
requirements for one-participant retirement plans (covering only the employer
and spouse where the employer owns the entire business, or only one or more
partners and spouses in a business partnership) to ensure that any plans with
assets of $250,000 or less as of the close of the plan year need not file a
return for that year.
(Sec. 267) Directs the Secretary to continue to update and improve the
Employee Plans Compliance Resolution System (or any successor program), giving
special attention to certain tasks.
(Sec. 268) Amends Code provisions regarding a tax exclusion for cash
reimbursements to repeal the requirement that a voucher or similar item which
may be exchanged for a transit pass is not readily available for direct
distribution.
(Sec. 269) Repeals the Secretary's mandate, with respect to the
nondiscrimination test for matching contributions and employee contributions, to
prescribe regulations to prevent the multiple use of the alternative limitation
for any highly compensated employee.
(Sec. 270) Directs the Secretary to provide that a plan shall be deemed to
satisfy nondiscrimination requirements if it satisfies the facts and
circumstances test as in effect before January 1, 1994, but only if: (1) it
satisfies conditions prescribed by the Secretary to appropriately limit the
availability of such test; and (2) it is submitted to the Secretary for a
determination of whether it satisfies such test.
Revises minimum coverage requirements to allow a plan that otherwise fails to
meet such requirements to constitute a qualified plan if it meets certain
requirements that were in effect immediately before enactment of the Tax Reform
Act of 1986. (Such requirements stated that the plan must at least benefit
employees qualifying under a classification set up by the employer and found by
the Secretary not to be discriminatory in favor of employees who are officers,
shareholders, or highly compensated.)
Directs the Secretary to modify certain existing regulations with respect to
employers operating separate lines of business to expand the ability of a
pension plan to demonstrate compliance with the line of business requirements
based upon the facts and circumstances surrounding the design and operation of
the plan, even though the plan is unable to satisfy the mechanical tests
currently used to determine compliance.
(Sec. 271) Amends the Taxpayer Relief Act of 1997 to extend to international
organizations the moratorium on application of certain nondiscrimination rules
applicable to State and local governmental plans.
(Sec. 272) Increases from 90 to 180 days certain notice and consent periods
regarding distributions. Directs the Secretary to modify certain consent
regulations to provide that the description of a participant's right, if any, to
defer receipt of a distribution shall also describe the consequences of failing
to defer such receipt.
Subtitle F: Plan Amendments - Prescribes application requirements for
plan or contract amendments.
Title III: Estate Tax Relief - Subtitle A: Reductions of Estate and
Gift Tax Rates - Amends the Code to repeal the two highest estate tax
brackets and replace them with a top bracket of "Over $2,500,000", for which the
estate tax rate shall be $1,025,800, plus 50 percent of the excess over
$2,500,000. Repeals the phase out of graduated rates and the unified credit.
Requires additional reductions in estate and gift tax rates of one percent
for calendar 2003 and two percent for calendar 2004 and thereafter.
(Sec. 302) Declares that it is the sense of Congress that the death tax
relief in this Act is considered a first step in the effort to repeal this tax.
Subtitle B: Unified Credit Replaced With Unified Exemption Amount -
Repeals the unified credits against the estate and gift taxes, and replaces them
with a unified exemption amount, determined by specified formulae involving
amounts ranging from $675,000 in calendar year 2001 up to $1 million in calendar
year 2006 and thereafter. Grants up to a $60,000 exemption to the estate of a
nonresident, non-U.S. citizen, with specified variations for residents of U.S.
possessions.
Subtitle C: Modifications of Generation-Skipping Transfer Tax -
Declares that, if any individual makes an indirect skip during such individual's
lifetime, any unused portion of such individual's generation-skipping transfer
(GST) exemption shall be allocated to the property transferred to the extent
necessary to make the inclusion ratio for such property zero. Requires
allocation to the property transferred of the entire unused portion if the
amount of the indirect skip exceeds such unused portion.
(Sec. 322) Declares that, if a trust is severed in a qualified severance, the
trusts resulting from such severance shall be treated as separate trusts
thereafter.
(Sec. 323) Revises valuation rules for gifts for which a gift tax return was
filed or deemed allocation made. Provides that, if an allocation of the GST
exemption to any transfers of property is deemed to have been made at the close
of an estate tax inclusion period, the value of the property shall be its value
at such time.
(Sec. 324) Directs the Secretary to prescribe circumstances and procedures
under which extensions of time will be granted to make an allocation of GST
exemption or an election not to apply specified allocation requirements to
certain lifetime direct skips, indirect skips, or transfers to a particular
trust.
Subtitle D: Conservation Easements - Redefines land subject to a
qualified conservation easement, for estate tax purposes, to mean land, on the
decedent's date of death, located in or within: (1) 50 miles (currently, 25
miles) of a metropolitan area; (2) 50 miles (currently, 25 miles) of a national
park or wilderness area; or (3) 25 miles (currently, ten miles) of an Urban
National Forest.
Title IV: Tax Relief for Distressed Communities and Industries -
Subtitle A: American Community Renewal Act of 2000 - American Community
Renewal Act of 2000 - Amends the Code to authorize the Secretary of Housing and
Urban Development to designate (upon local or State nomination) up to 15 renewal
communities, of which at least three shall be in rural areas.
Requires for nomination purposes that: (1) the area be experiencing high
rates of poverty and unemployment and general distress; and (2) State and local
governments enter into written contracts with community organizations to promote
specified economic growth and employment activities.
Excludes from gross income capital gains on the sale or exchange of a
qualified community asset (stock, business property, or partnership interest)
held for more than five years.
Allows a specified deduction for amounts paid into a family development
account on behalf of an individual or another qualified individual who is a
renewal community resident. Excludes from gross income account distributions
used for qualified family development expenses (postsecondary education,
first-home purchase, business capitalization, medical, and rollovers).
Provides a penalty (with exceptions) in addition to inclusion as gross income
for nonqualifying distributions.
Authorizes: (1) designation of earned income tax credit payments for family
development account deposit; (2) a commercial building revitalization tax
deduction; (3) increased first year expensing for renewal community businesses;
(4) extension of environmental remediation cost expensing and the work
opportunity credit for renewal communities; and (5) similar tax treatment of
renewal communities and enterprise zones for specified youth residence
requirements.
(Sec. 405) Permits a deduction for contributions to a family development
account whether or not a taxpayer itemizes.
Makes conforming amendments to provisions respecting: (1) tax on excess
contributions and prohibited transactions; (2) trust and annuity information;
(3) tax exemption applications; and (4) the commercial revitalization credit.
Subtitle B: Timber Incentives - Amends the Code, with respect to the
deductible amortization of reforestation expenditures, to increase the
limitation on the aggregate amount of amortizable basis acquired during the
taxable year from $10,000 to $25,000 (and from $5,000 to $12,500 in the case of
a separate return by a married individual), but suspends the application of such
limitation between December 31, 1999, and January 1, 2004.
Title V: Real Estate Provisions - Subtitle A: Improvements in
Low-Income Housing Credit - Amends the Code, with respect to the low-income
housing credit, to revise the formula for the State housing credit ceiling.
Replaces the set multiplicand of $1.25 (to be multiplied by the State
population) with a graduated applicable multiplicand rising from $1.35 for
calendar year 2001 to $1.65 for calendar year 2004 and thereafter, and a maximum
product of $2 million. Provides for cost-of-living adjustments to the State
ceiling.
(Sec. 502) Revises the housing priority selection criteria a housing credit
agency must use to develop a qualified plan for allocating housing credit dollar
amounts among projects. Requires such criteria to include: (1) whether the
project would use existing housing as part of a community revitalization plan;
(2) tenant populations of individuals with children; and (3) projects intended
for eventual tenant ownership. Drops from such criteria participation of local
tax-exempt organizations. Requires a qualified allocation plan to: (1) give
preference in making allocations to projects located in qualified census tracts
whose development contributes to a concerted community revitalization plan; and
(2) provide a procedure for agency monitoring for noncompliance with
habitability standards through regular site visits.
(Sec. 503) Requires housing credit agencies to: (1) provide for a
comprehensive market study (by a disinterested party, at the developer's
expense) of the housing needs of low-income individuals in the area to be served
by the project before the credit allocation is made; and (2) make public a
written explanation for any allocation of a housing credit dollar amount not
made in accordance with the agency's established priorities and selection
criteria.
(Sec. 504) Revises special rules for the determination of the adjusted basis
of buildings eligible for the low-income housing credit. Requires adjusted basis
to include property used throughout the taxable year in providing any community
service facility designed to serve primarily individuals (even if they are not
tenants) whose income is 60 percent or less of area median income.
Declares that assistance under the Native American Housing Assistance and
Self-Determination Act of 1996 shall be disregarded in determining whether a
building is federally subsidized for purposes of the low-income housing credit.
(Sec. 505) Revises the definition of a qualified building (placed in service
not later than the second calendar year following a housing credit dollar amount
allocation) with respect to which the amount of a low-income housing credit may
exceed the credit amount allocated to the building.
Sets an alternative date for valuation of the taxpayer's actual basis in the
project of which the building is a part (where the actual basis is more than ten
percent of the taxpayer's reasonably expected basis). Allows the valuation of
the actual basis to be as of the later of the date which is six months after the
date that the allocation was made or (as currently) the close of the calendar
year in which the allocation is made. Revises the formula for determination of
the amount of State housing credit ceiling returned in a calendar year to
include the dollar amount previously allocated to a project which fails to meet
the ten percent test on a date after the close of the calendar year in which the
allocation was made.
Revises special rules for the increased basis of a building located in
certain high cost areas to redefine a qualified census tract to include, as an
alternative to existing criteria, a tract with a poverty rate of at least 25
percent.
(Sec. 506) Revises the formula for determining unused housing credit
carryovers allocated among certain States.
Subtitle B: Private Activity Bond Volume Cap - Provides for an
accelerated phase-in of specified increases in the volume cap on private
activity bonds.
Subtitle C: Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations - Excludes from gross income the discharge of qualified
residential indebtedness. Limits such exclusion to the excess (if any) of the
outstanding principal amount of such indebtedness (immediately before discharge)
over the sum of any sales proceeds and any other outstanding principal
indebtedness secured by such property.