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`(ii) 125 percent of current liability (as defined in section 412(c)(7)(B)).

The determination under this paragraph shall be made as of the most recent valuation date of the plan preceding the qualified transfer.

`(2) COORDINATION WITH SECTION 412- In the case of a qualified transfer--

`(A) any asset transferred in a plan year on or before the valuation date for such year (and any income allocable thereto) shall, for purposes of section 412, be treated as assets in the plan as of the valuation date for such year, and

`(B) the plan shall be treated as having a net experience loss under section 412(b)(2)(B)(iv) in an amount equal to the amount of such transfer and for which amortization charges begin for the first plan year after the plan year in which such transfer occurs, except that such section shall be applied to such amount by substituting `10 plan years' for `5 plan years'.'

`SEC. 104. REPEAL OF ALTERNATIVE MINIMUM TAX .

Part VI of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.

SEC. 105. REPEAL OF CREDITS.

Part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.

SEC. 106. REPEAL OF ESTATE AND GIFT TAXES AND OBSOLETE INCOME TAX PROVISIONS.

(a) Repeal of Estate and Gift Taxes-

(1) IN GENERAL- Subtitle B of the Internal Revenue Code of 1986 is hereby repealed.

(2) EFFECTIVE DATE- The repeal made by paragraph (1) shall apply to the estates of decedents dying, and gifts and generation-skipping transfers made, after December 31, 1996.

(b) Repeal of Obsolete Income Tax Provisions-

(1) IN GENERAL- Except as provided in paragraph (2), chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.

(2) EXCEPTIONS- Paragraph (1) shall not apply to--

(A) sections 1, 11, and 63 of such Code, as amended by this Act,

(B) those provisions of chapter 1 of such Code which are necessary for determining whether or not--

(i) retirement distributions are includible in the gross income of employees, or

(ii) an organization is exempt from tax under such chapter, and

(C) subchapter D of such chapter 1 (relating to deferred compensation).

SEC. 107. EFFECTIVE DATE.

Except as otherwise provided in this subtitle, the amendments made by this subtitle shall apply to taxable years beginning after December 31, 1996.

Subtitle B--Supermajority Required for Tax Changes

SEC. 111. SUPERMAJORITY REQUIRED.

(a) IN GENERAL- It shall not be in order in the House of Representatives or the Senate to consider any bill, joint resolution, amendment thereto, or conference report thereon that includes any provision that--

(1) increases any Federal income tax rate,

(2) creates any additional Federal income tax rate,

(3) reduces the standard deduction, or

(4) provides any exclusion, deduction, credit or other benefit which results in a reduction in Federal revenues.

(b) WAIVER OR SUSPENSION- This section may be waived or suspended in the House of Representatives or the Senate only by the affirmative vote of three-fifths of the Members, duly chosen and sworn.

TITLE II--SPENDING RESTRAINT AND BUDGET PROCESS REFORM

Subtitle A--Balanced Budget by Fiscal Year 2002

SEC. 201. MAXIMUM SPENDING AMOUNTS.

Section 601(a)(1) of the Congressional Budget Act of 1974 is amended to read as follows:

`(1) MAXIMUM SPENDING AMOUNT- The term `maximum spending amount' means--

`(A) with respect to fiscal year 1998, $1,653,000,000,000 in outlays;

`(B) with respect to fiscal year 1999, $1,687,000,000,000 in outlays;

`(C) with respect to fiscal year 2000, $1,748,000,000,000 in outlays;

`(D) with respect to fiscal year 2001, $1,799,000,000,000 in outlays; and

`(E) with respect to fiscal year 2002, $1,851,000,000,000 in outlays.'.

SEC. 202. ENFORCING MAXIMUM SPENDING SEQUESTRATION.

(a) SEQUESTRATION- Section 253(a) of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended to read as follows:

`(a) SEQUESTRATION- Within 15 days after Congress adjourns to end a session (other than the One Hundred Third Congress), and on the same day as sequestration (if any) under sections 251 and 252, but after any sequestration required by those sections, there shall be a sequestration (if necessary) to reduce total Federal spending to the maximum permissible level as set forth in section 601(a)(1) of the Congressional Budget Act of 1974.'.

(b) CONFORMING AMENDMENT TO HEADING- The section heading of section 253 of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended to read as follows:

`SEC. 253. ENFORCING MAXIMUM SPENDING LIMITS.'.

(c) ADDITIONAL CONFORMING AMENDMENTS- Section 253 of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended--

(1) by repealing subsections (b), (g), and (h), and by redesignating subsections (c), (d), (e), and (f), as subsections (b), (c), (d), and (e), respectively;

(2) in subsection (b) (as redesignated), by amending the first sentence to read as follows: `To reduce total Federal spending to the maximum permissible level for a budget year, 20 percent of the required outlay reductions shall be obtained from non-exempt defense accounts (accounts designated as function 050 in the President's fiscal year 1998 budget submission) and 80 percent from non-exempt, non-defense accounts (all other non-exempt accounts).';

(3) in subsection (c) (as redesignated), by striking `subsection (c)' and inserting `subsection (b)'; and

(4) in subsection (e) (as redesignated), by striking `(b), (c), (d), and (e)' and inserting `(b), (c), and (d)' and by striking `(d) or (e)' and inserting `(c) or `(d)'.

(d) LOOK-BACK SEQUESTER- Section 253 of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended by adding at the end the following new subsection:

`(f) Look-Back Sequester-

`(1) IN GENERAL- On July 1 of each fiscal year, the Director of OMB shall determine if laws effective during the current fiscal year will cause spending to exceed the maximum spending amount for such fiscal year. If the limit is exceeded, there

shall be a preliminary sequester on July 1 to eliminate the excess.

`(2) PERMANENT SEQUESTER- Budget authority sequestered on July 1 pursuant to paragraph (1) shall be permanently canceled on July 15.

`(3) NO MARGIN- The margin for determining a sequester under this subsection shall be zero.

`(4) SEQUESTRATION PROCEDURES- The provision of subsections (b), (c), and (d) of this section shall apply to a sequester under this subsection.'.

(e) REPORTS- Section 254 of the Balanced Budget and Emergency Deficit Control Act of 1985 is amended--

(1) by striking subsection (c);

(2) in subsection (d)(1), by striking `deficit sequestration' and inserting `total spending sequestration';

(3) in subsection (d) by repealing paragraph (4) and inserting the following new paragraph:

`(4) TOTAL SPENDING SEQUESTRATION REPORTS- The preview reports shall set forth for the budget year estimates for each of the following:

`(A) The amount of reductions required from defense accounts and the reductions required from non-defense accounts.

`(B) The sequestration percentage necessary to achieve the required reduction in defense accounts under section 253(c).

`(C) The reductions required under sections 253(d)(1) and 253(d)(2).

`(D) The sequestration percentage necessary to achieve the required reduction in non-defense accounts under section 253(d)(3).'; and

(4) in subsection (g)(3), by striking `DEFICIT' and inserting `TOTAL SPENDING' in the side heading and in the first sentence by striking `deficit' and inserting `total spending'.

(f) CONFORMING AMENDMENT TO TABLE OF CONTENTS- The item relating to section 253 is amended by striking `Enforcing deficit targets' and inserting `Enforcing maximum spending limits'.

SEC. 203. TOTAL SPENDING POINT OF ORDER.

Section 605(b) of the Congressional Budget Act of 1974 is amended to read as follows:

`(b) TOTAL SPENDING POINT OF ORDER-

`(1) IN GENERAL- It shall not be in order in the House of Representatives or the Senate to consider any bill, joint resolution, amendment thereto, or conference report thereon, that includes any provision that would result in total spending for a fiscal year that exceeds the maximum permissible total spending amount for such fiscal year as set forth in section 601(a)(1).

`(2) WAIVER OF SUSPENSION- This subsection may be waived or suspended in the House of Representatives or the Senate only by the affirmative vote of three-fifths of its Members, duly chosen and sworn.'.

Subtitle B--Zero Based Budgeting and Decennial Sunsetting

SEC. 211. REAUTHORIZATION OF DISCRETIONARY PROGRAMS AND UNEARNED ENTITLEMENTS.

(a) FISCAL YEAR 1998- Effective October 1, 1997, spending authority for each unearned entitlement and high-cost discretionary spending program is terminated unless such spending authority is reauthorized after the date of enactment of this Act.

(b) FISCAL YEAR 1999- Effective October 1, 1998, spending authority for each discretionary spending program (not including high-cost discretionary spending programs) is terminated unless such spending authority is reauthorized after the date of enactment of this Act.

(c) DEFINITIONS- For purposes of this subtitle--

(1) the term `unearned entitlement' means an entitlement not earned by service or paid for in total or in part by assessments or contributions such as Social Security, veterans' benefits, retirement programs, and medicare; and

(2) the term `high-cost discretionary program' means the most expensive one-third of discretionary program within each budget function account.

SEC. 212. POINT OF ORDER.

(a) IN GENERAL- It shall not be in order in the House of Representatives or the Senate to consider any bill, joint resolution, amendment, or conference report that includes any provision that appropriates funds unless such appropriation has been previously authorized by law.

(b) WAIVER OR SUSPENSION- This section may be waived or suspended in the House of Representatives or the Senate only by the affirmative vote of three-fifths of the Members, duly chosen and sworn.

SEC. 213. DECENNIAL SUNSETTING.

(a) FIRST DECENNIAL CENSUS YEAR- Effective on the first day of the fiscal year beginning in the first decennial census year after the year 2001 and each 10 years thereafter, the spending authority described in section 211(a) is terminated unless such spending authority is reauthorized after the last date the spending authority was required to be reauthorized under this subtitle.

(b) SECOND DECENNIAL CENSUS YEAR- Effective on the first day of the fiscal year beginning in the year after the first decennial census year after the year 2001 and each 10 years thereafter, the spending authority described in section 211(b) is terminated unless such spending authority is reauthorized after the last date the spending authority was required to be reauthorized under this subtitle.

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