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`(A) 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 such tentative tax is to be computed were $1,000,000, or'.

(12) The table of sections for part II of subchapter A of chapter 11 of such Code is amended by striking the item relating to section 2010.

(13) The table of sections for subchapter A of chapter 12 of such Code is amended by striking the item relating to section 2505.

(d) EFFECTIVE DATE- The amendments made by this section--

(1) insofar as they relate to the tax imposed by chapter 11 of the Internal Revenue Code of 1986, shall apply to estates of decedents dying after December 31, 2000, and

(2) insofar as they relate to the tax imposed by chapter 12 of such Code, shall apply to gifts made after December 31, 2000.

SEC. 116. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.

(a) IN GENERAL- Section 2632 of the Internal Revenue Code of 1986 (relating to special rules for allocation of GST exemption) is amended by redesignating subsection (c) as subsection (e) and by inserting after subsection (b) the following new subsections:

`(c) DEEMED ALLOCATION TO CERTAIN LIFETIME TRANSFERS TO GST TRUSTS-

`(1) IN GENERAL- If any individual makes an indirect skip during such individual's lifetime, any unused portion of such individual's GST exemption shall be allocated to the property transferred to the extent necessary to make the inclusion ratio for such property zero. If the amount of the indirect skip exceeds such unused portion, the entire unused portion shall be allocated to the property transferred.

`(2) UNUSED PORTION- For purposes of paragraph (1), the unused portion of an individual's GST exemption is that portion of such exemption which has not previously been--

`(A) allocated by such individual,

`(B) treated as allocated under subsection (b) with respect to a direct skip occurring during or before the calendar year in which the indirect skip is made, or

`(C) treated as allocated under paragraph (1) with respect to a prior indirect skip.

`(3) DEFINITIONS-

`(A) INDIRECT SKIP- For purposes of this subsection, the term `indirect skip' means any transfer of property (other than a direct skip) subject to the tax imposed by chapter 12 made to a GST trust.

`(B) GST TRUST- The term `GST trust' means a trust that could have a generation-skipping transfer with respect to the transferor unless--

`(i) the trust instrument provides that more than 25 percent of the trust corpus must be distributed to or may be withdrawn by one or more individuals who are non-skip persons--

`(I) before the date that the individual attains age 46,

`(II) on or before one or more dates specified in the trust instrument that will occur before the date that such individual attains age 46, or

`(III) upon the occurrence of an event that, in accordance with regulations prescribed by the Secretary, may reasonably be expected to occur before the date that such individual attains age 46;

`(ii) the trust instrument provides that more than 25 percent of the trust corpus must be distributed to or may be withdrawn by one or more individuals who are non-skip persons and who are living on the date of death of another person identified in the instrument (by name or by class) who is more than 10 years older than such individuals;

`(iii) the trust instrument provides that, if one or more individuals who are non-skip persons die on or before a date or event described in clause (i) or (ii), more than 25 percent of the trust corpus either must be distributed to the estate or estates of one or more of such individuals or is subject to a general power of appointment exercisable by one or more of such individuals;

`(iv) the trust is a trust any portion of which would be included in the gross estate of a non-skip person (other than the transferor) if such person died immediately after the transfer;

`(v) the trust is a charitable lead annuity trust (within the meaning of section 2642(e)(3)(A)) or a charitable remainder annuity trust or a charitable remainder

unitrust (within the meaning of section 664(d)); or

`(vi) the trust is a trust with respect to which a deduction was allowed under section 2522 for the amount of an interest in the form of the right to receive annual payments of a fixed percentage of the net fair market value of the trust property (determined yearly) and which is required to pay principal to a non-skip person if such person is alive when the yearly payments for which the deduction was allowed terminate.

For purposes of this subparagraph, the value of transferred property shall not be considered to be includible in the gross estate of a non-skip person or subject to a right of withdrawal by reason of such person holding a right to withdraw so much of such property as does not exceed the amount referred to in section 2503(b) with respect to any transferor, and it shall be assumed that powers of appointment held by non-skip persons will not be exercised.

`(4) AUTOMATIC ALLOCATIONS TO CERTAIN GST TRUSTS- For purposes of this subsection, an indirect skip to which section 2642(f) applies shall be deemed to have been made only at the close of the estate tax inclusion period. The fair market value of such transfer shall be the fair market value of the trust property at the close of the estate tax inclusion period.

`(5) APPLICABILITY AND EFFECT-

`(A) IN GENERAL- An individual--

`(i) may elect to have this subsection not apply to--

`(I) an indirect skip, or

`(II) any or all transfers made by such individual to a particular trust, and

`(ii) may elect to treat any trust as a GST trust for purposes of this subsection with respect to any or all transfers made by such individual to such trust.

`(B) ELECTIONS-

`(i) ELECTIONS WITH RESPECT TO INDIRECT SKIPS- An election under subparagraph (A)(i)(I) shall be deemed to be timely if filed on a timely filed gift tax return for the calendar year in which the transfer was made or deemed to have been made pursuant to paragraph (4) or on such later date or dates as may be prescribed by the Secretary.

`(ii) OTHER ELECTIONS- An election under clause (i)(II) or (ii) of subparagraph (A) may be made on a timely filed gift tax return for the calendar year for which the election is to become effective.

`(d) RETROACTIVE ALLOCATIONS-

`(1) IN GENERAL- If--

`(A) a non-skip person has an interest or a future interest in a trust to which any transfer has been made,

`(B) such person--

`(i) is a lineal descendant of a grandparent of the transferor or of a grandparent of the transferor's spouse or former spouse, and

`(ii) is assigned to a generation below the generation assignment of the transferor, and

`(C) such person predeceases the transferor,

then the transferor may make an allocation of any of such transferor's unused GST exemption to any previous transfer or transfers to the trust on a chronological basis.

`(2) SPECIAL RULES- If the allocation under paragraph (1) by the transferor is made on a gift tax return filed on or before the date prescribed by section 6075(b) for gifts made within the calendar year within which the non-skip person's death occurred--

`(A) the value of such transfer or transfers for purposes of section 2642(a) shall be determined as if such allocation had been made on a timely filed gift tax return for each calendar year within which each transfer was made,

`(B) such allocation shall be effective immediately before such death , and

`(C) the amount of the transferor's unused GST exemption available to be allocated shall be determined immediately before such death .

`(3) FUTURE INTEREST- For purposes of this subsection, a person has a future interest in a trust if the trust may permit income or corpus to be paid to such person on a date or dates in the future.'.

(b) CONFORMING AMENDMENT- Paragraph (2) of section 2632(b) of the Internal Revenue Code of 1986 is amended by striking `with respect to a direct skip' and inserting `or subsection (c)(1)'.

(c) EFFECTIVE DATES-

(1) DEEMED ALLOCATION- Section 2632(c) of the Internal Revenue Code of 1986 (as added by subsection (a)), and the amendment made by subsection (b), shall apply to transfers subject to chapter 11 or 12 made after December 31, 1999, and to estate tax inclusion periods ending after December 31, 1999.

(2) RETROACTIVE ALLOCATIONS- Section 2632(d) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to deaths of non-skip persons occurring after December 31, 1999.

SEC. 117. SEVERING OF TRUSTS.

(a) IN GENERAL- Subsection (a) of section 2642 of the Internal Revenue Code of 1986 (relating to inclusion ratio) is amended by adding at the end the following new paragraph:

`(3) SEVERING OF TRUSTS-

`(A) IN GENERAL- If a trust is severed in a qualified severance, the trusts resulting from such severance shall be treated as separate trusts thereafter for purposes of this chapter.

`(B) QUALIFIED SEVERANCE- For purposes of subparagraph (A)--

`(i) IN GENERAL- The term `qualified severance' means the division of a single trust and the creation (by any means available under the governing instrument or under local law) of two or more trusts if--

`(I) the single trust was divided on a fractional basis, and

`(II) the terms of the new trusts, in the aggregate, provide for the same succession of interests of beneficiaries as are provided in the original trust.

`(ii) TRUSTS WITH INCLUSION RATIO GREATER THAN ZERO- If a trust has an inclusion ratio of greater than zero and less than 1, a severance is a qualified severance only if the single trust is divided into two trusts, one of which receives a fractional share of the total value of all trust assets equal to the applicable fraction of the single trust immediately before the severance. In such case, the trust receiving such fractional share shall have an inclusion ratio of zero and the other trust shall have an inclusion ratio of 1.

`(iii) REGULATIONS- The term `qualified severance' includes any other severance permitted under regulations prescribed by the Secretary.

`(C) TIMING AND MANNER OF SEVERANCES- A severance pursuant to this paragraph may be made at any time. The Secretary shall prescribe by forms or regulations the manner in which the qualified severance shall be reported to the Secretary.'.

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

SEC. 118. MODIFICATION OF CERTAIN VALUATION RULES.

(a) GIFTS FOR WHICH GIFT TAX RETURN FILED OR DEEMED ALLOCATION MADE- Paragraph (1) of section 2642(b) of the Internal Revenue Code of 1986 (relating to valuation rules, etc.) is amended to read as follows:

`(1) GIFTS FOR WHICH GIFT TAX RETURN FILED OR DEEMED ALLOCATION MADE- If the allocation of the GST exemption to any transfers of property is made on a gift tax return filed on or before the date prescribed by section 6075(b) for such

transfer or is deemed to be made under section 2632 (b)(1) or (c)(1)--

`(A) the value of such property for purposes of subsection (a) shall be its value as finally determined for purposes of chapter 12 (within the meaning of section 2001(f)(2)), or, in the case of an allocation deemed to have been made at the close of an estate tax inclusion period, its value at the time of the close of the estate tax inclusion period, and

`(B) such allocation shall be effective on and after the date of such transfer, or, in the case of an allocation deemed to have been made at the close of an estate tax inclusion period, on and after the close of such estate tax inclusion period.'.

(b) TRANSFERS AT DEATH - Subparagraph (A) of section 2642(b)(2) of the Internal Revenue Code of 1986 is amended to read as follows:

`(A) TRANSFERS AT DEATH - If property is transferred as a result of the death of the transferor, the value of such property for purposes of subsection (a) shall be its value as finally determined for purposes of chapter 11; except that, if the requirements prescribed by the Secretary respecting allocation of post-death changes in value are not met, the value of such property shall be determined as of the time of the distribution concerned.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to transfers subject to chapter 11 or 12 of the Internal Revenue Code of 1986 made after December 31, 1999.

SEC. 119. RELIEF PROVISIONS.

(a) IN GENERAL- Section 2642 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

`(g) RELIEF PROVISIONS-

`(1) RELIEF FROM LATE ELECTIONS-

`(A) IN GENERAL- The Secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make--

`(i) an allocation of GST exemption described in paragraph (1) or (2) of subsection (b), and

`(ii) an election under subsection (b)(3) or (c)(5) of section 2632.

Such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph.

`(B) BASIS FOR DETERMINATIONS- In determining whether to grant relief under this paragraph, the Secretary shall take into account all relevant circumstances, including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the Secretary deems relevant. For purposes of determining whether to grant relief under this paragraph, the time for making the allocation (or election) shall be treated as if not expressly prescribed by statute.

`(2) SUBSTANTIAL COMPLIANCE- An allocation of GST exemption under section 2632 that demonstrates an intent to have the lowest possible inclusion ratio with respect to a transfer or a trust shall be deemed to be an allocation of so much of the transferor's unused GST exemption as produces the lowest possible inclusion ratio. In determining whether there has been substantial compliance, all relevant circumstances shall be taken into account, including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the Secretary deems relevant.'.

(b) EFFECTIVE DATES-

(1) RELIEF FROM LATE ELECTIONS- Section 2642(g)(1) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to requests pending on, or filed after, December 31, 1999.

(2) SUBSTANTIAL COMPLIANCE- Section 2642(g)(2) of such Code (as so added) shall apply to transfers subject to chapter 11 or 12 of the Internal Revenue Code of 1986 made after December 31, 1999. No implication is intended with respect to the availability of relief from late elections or the application of a rule of substantial compliance on or before such date.

SEC. 120. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASEMENTS.

(a) WHERE LAND IS LOCATED-

(1) IN GENERAL- Clause (i) of section 2031(c)(8)(A) of the Internal Revenue Code of 1986 (defining land subject to a conservation easement) is amended--

(A) by striking `25 miles' both places it appears and inserting `50 miles'; and

(B) striking `10 miles' and inserting `25 miles'.

(2) EFFECTIVE DATE- The amendments made by this subsection shall apply to estates of decedents dying after December 31, 1999.

(b) CLARIFICATION OF DATE FOR DETERMINING VALUE OF LAND AND EASEMENT-

(1) IN GENERAL- Section 2031(c)(2) of the Internal Revenue Code of 1986 (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 (8)(B).'.

(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to estates of decedents dying after December 31, 1997.

TITLE II--STUDY OF COSTS OF REGULATIONS ON FARMERS, RANCHERS, AND FORESTERS

SEC. 201. DEFINITIONS.

In this title:

(1) REGULATION-

(A) IN GENERAL- The term `regulation' means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.

(B) EXCLUSION- The term `regulation' does not include--

(i) the approval or prescription, on a case-by-case or consolidated case basis, for the future of rates, wages, corporations, or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor, or of valuations, costs, or accounting, or practices bearing on activities described in this clause; or

(ii) the granting of an application for a license, registration, or similar authority, granting or recognizing an exemption, granting a variance or petition for relief from a regulatory requirement, or other action relieving a restriction or taking any action necessary to permit new or improved applications of technology.

(2) LICENSE- The term `license' means the whole or part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption, or other form of permission.

SEC. 202. COMPTROLLER GENERAL STUDY OF REGULATIONS.

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