--H.R.2488--
H.R.2488
One Hundred Sixth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the sixth day of January, one thousand nine hundred and ninety-nine
An Act
To provide for reconciliation pursuant to sections 105 and 211 of the
concurrent resolution on the budget for fiscal year 2000.
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 `Taxpayer Refund and Relief
Act of 1999'.
(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided,
whenever in this Act an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the reference shall
be considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) SECTION 15 NOT TO APPLY- No amendment made by this Act shall be
treated as a change in a rate of tax for purposes of section 15 of the
Internal Revenue Code of 1986.
(d) TABLE OF CONTENTS- The table of contents for this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--BROAD-BASED AND FAMILY TAX RELIEF
Subtitle A--Reduction in Individual Income Taxes
Sec. 101. Reduction in individual income taxes.
Subtitle B--Family Tax Relief
Sec. 111. Elimination of marriage penalty in standard deduction.
Sec. 112. Exclusion for foster care payments to apply to payments by
qualified placement agencies.
Sec. 113. Expansion of adoption credit.
Sec. 114. Modification of dependent care credit.
Sec. 115. Marriage penalty relief for earned income credit.
Subtitle C--Repeal of Alternative Minimum Tax on Individuals
Sec. 121. Repeal of alternative minimum tax on individuals.
TITLE II--RELIEF FROM TAXATION ON SAVINGS AND INVESTMENTS
Subtitle A--Capital Gains Tax Relief
Sec. 201. Reduction in individual capital gain tax rates.
Sec. 202. Indexing of certain assets acquired after December 31, 1999,
for purposes of determining gain.
Sec. 203. Capital gains tax rates applied to capital gains of designated
settlement funds.
Sec. 204. Special rule for members of uniformed services and Foreign
Service, and other employees, in determining exclusion of gain from sale of
principal residence.
Sec. 205. Tax treatment of income and loss on derivatives.
Sec. 206. Worthless securities of financial institutions.
Subtitle B--Individual Retirement Arrangements
Sec. 211. Modification of deduction limits for IRA contributions.
Sec. 212. Modification of income limits on contributions and rollovers
to Roth IRAs.
Sec. 213. Deemed IRAs under employer plans.
Sec. 214. Catchup contributions to IRAs by individuals age 50 or
over.
TITLE III--ALTERNATIVE MINIMUM TAX REFORM
Sec. 301. Modification of alternative minimum tax on corporations.
Sec. 302. Repeal of 90 percent limitation on foreign tax credit.
TITLE IV--EDUCATION SAVINGS INCENTIVES
Sec. 401. Modifications to education individual retirement
accounts.
Sec. 402. Modifications to qualified tuition programs.
Sec. 403. Exclusion of certain amounts received under the National
Health Service Corps Scholarship Program, the F. Edward Hebert Armed Forces
Health Professions Scholarship and Financial Assistance Program, and certain
other programs.
Sec. 404. Extension of exclusion for employer-provided educational
assistance.
Sec. 405. Additional increase in arbitrage rebate exception for
governmental bonds used to finance educational facilities.
Sec. 406. Modification of arbitrage rebate rules applicable to public
school construction bonds.
Sec. 407. Elimination of 60-month limit and increase in income
limitation on student loan interest deduction.
Sec. 408. 2-percent floor on miscellaneous itemized deductions not to
apply to qualified professional development expenses of elementary and
secondary school teachers.
TITLE V--HEALTH CARE PROVISIONS
Sec. 501. Deduction for health and long-term care insurance costs of
individuals not participating in employer-subsidized health plans.
Sec. 502. Long-term care insurance permitted to be offered under
cafeteria plans and flexible spending arrangements.
Sec. 503. Additional personal exemption for taxpayer caring for elderly
family member in taxpayer's home.
Sec. 504. Expanded human clinical trials qualifying for orphan drug
credit.
Sec. 505. Inclusion of certain vaccines against streptococcus pneumoniae
to list of taxable vaccines; reduction in per dose tax rate.
Sec. 506. Drug benefits for medicare beneficiaries.
TITLE VI--ESTATE TAX RELIEF
Subtitle A--Repeal of Estate, Gift, and Generation-Skipping Taxes; Repeal of
Step Up in Basis At Death
Sec. 601. Repeal of estate, gift, and generation-skipping taxes.
Sec. 602. Termination of step up in basis at death.
Sec. 603. Carryover basis at death.
Subtitle B--Reductions of Estate and Gift Tax Rates Prior to Repeal
Sec. 611. Additional reductions of estate and gift tax rates.
Subtitle C--Unified Credit Replaced With Unified Exemption Amount
Sec. 621. Unified credit against estate and gift taxes replaced with
unified exemption amount.
Subtitle D--Modifications of Generation-Skipping Transfer Tax
Sec. 631. Deemed allocation of gst exemption to lifetime transfers to
trusts; retroactive allocations.
Sec. 632. Severing of trusts.
Sec. 633. Modification of certain valuation rules.
Sec. 634. Relief provisions.
Subtitle E--Conservation Easements
Sec. 641. Expansion of estate tax rule for conservation easements.
TITLE VII--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 1999
Sec. 702. Designation of and tax incentives for renewal
communities.
Sec. 703. Extension of expensing of environmental remediation costs to
renewal communities.
Sec. 704. Extension of work opportunity tax credit for renewal
communities.
Sec. 705. Conforming and clerical amendments.
Subtitle B--Farming Incentive
Sec. 711. Production flexibility contract payments.
Subtitle C--Oil and Gas Incentives
Sec. 721. 5-year net operating loss carryback for losses attributable to
operating mineral interests of independent oil and gas producers.
Sec. 722. Deduction for delay rental payments.
Sec. 723. Election to expense geological and geophysical
expenditures.
Sec. 724. Temporary suspension of limitation based on 65 percent of
taxable income.
Sec. 725. Determination of small refiner exception to oil depletion
deduction.
Subtitle D--Timber Incentives
Sec. 731. Temporary suspension of maximum amount of amortizable
reforestation expenditures.
Sec. 732. Capital gain treatment under section 631(b) to apply to
outright sales by land owner.
TITLE VIII--RELIEF FOR SMALL BUSINESSES
Sec. 801. Deduction for 100 percent of health insurance costs of
self-employed individuals.
Sec. 802. Increase in expense treatment for small businesses.
Sec. 803. Repeal of Federal unemployment surtax.
Sec. 804. Increased deduction for meal expenses; increased deductibility
of business meal expenses for individuals subject to Federal limitations on
hours of service.
Sec. 805. Income averaging for farmers and fishermen not to increase
alternative minimum tax liability.
Sec. 806. Farm, fishing, and ranch risk management accounts.
Sec. 807. Exclusion of investment securities income from passive income
test for bank S corporations.
Sec. 808. Treatment of qualifying director shares.
TITLE IX--INTERNATIONAL TAX RELIEF
Sec. 901. Interest allocation rules.
Sec. 902. Look-thru rules to apply to dividends from noncontrolled
section 902 corporations.
Sec. 903. Clarification of treatment of pipeline transportation
income.
Sec. 904. Subpart F treatment of income from transmission of high
voltage electricity.
Sec. 905. Recharacterization of overall domestic loss.
Sec. 906. Treatment of military property of foreign sales
corporations.
Sec. 907. Treatment of certain dividends of regulated investment
companies.
Sec. 908. Repeal of special rules for applying foreign tax credit in
case of foreign oil and gas income.
Sec. 909. Advance pricing agreements treated as confidential taxpayer
information.
Sec. 910. Increase in dollar limitation on section 911 exclusion.
Sec. 911. Airline mileage awards to certain foreign persons.
TITLE X--PROVISIONS RELATING TO TAX-EXEMPT ORGANIZATIONS
Sec.1001.Exemption from income tax for State-created organizations
providing property and casualty insurance for property for which such
coverage is otherwise unavailable.
Sec.1002.Modification of special arbitrage rule for certain funds.
Sec.1003.Exemption procedure from taxes on self-dealing.
Sec.1004.Expansion of declaratory judgment remedy to tax-exempt
organizations.
Sec.1005.Modifications to section 512(b)(13).
Sec.1006.Mileage reimbursements to charitable volunteers excluded from
gross income.
Sec.1007.Charitable contribution deduction for certain expenses incurred
in support of Native Alaskan subsistence whaling.
Sec.1008.Simplification of lobbying expenditure limitation.
Sec.1009.Tax-free distributions from individual retirement accounts for
charitable purposes.
TITLE XI--REAL ESTATE PROVISIONS
Subtitle A--Improvements in Low-Income Housing Credit
Sec.1101.Modification of State ceiling on low-income housing
credit.
Sec.1102.Modification of criteria for allocating housing credits among
projects.
Sec.1103.Additional responsibilities of housing credit agencies.
Sec.1104.Modifications to rules relating to basis of building which is
eligible for credit.
Sec.1105.Other modifications.
Sec.1106.Carryforward rules.
Subtitle B--Provisions Relating to Real Estate Investment Trusts
Part I--Treatment of Income and Services Provided by Taxable REIT
Subsidiaries
Sec.1111.Modifications to asset diversification test.
Sec.1112.Treatment of income and services provided by taxable REIT
subsidiaries.
Sec.1113.Taxable REIT subsidiary.
Sec.1114.Limitation on earnings stripping.
Sec.1115.100 percent tax on improperly allocated amounts.
Part II--Health Care REITs
Sec.1121.Health care REITs.
Part III--Conformity With Regulated Investment Company Rules
Sec.1131.Conformity with regulated investment company rules.
Part IV--Clarification of Exception From Impermissible Tenant Service
Income
Sec.1141.Clarification of exception for independent operators.
Part V--Modification of Earnings and Profits Rules
Sec.1151.Modification of earnings and profits rules.
Subtitle C--Modification of At-Risk Rules for Publicly Traded Nonrecourse
Debt
Sec.1161.Treatment under at-risk rules of publicly traded nonrecourse
debt.
Subtitle D--Treatment of Certain Contributions to Capital of Retailers
Sec.1171.Exclusion from gross income for certain contributions to the
capital of certain retailers.
Subtitle E--Private Activity Bond Volume Cap
Sec.1181.Acceleration of phase-in of increase in volume cap on private
activity bonds.
Subtitle F--Deduction for Renovating Historic Homes
Sec.1191.Deduction for renovating historic homes.
TITLE XII--PROVISIONS RELATING TO PENSIONS
Subtitle A--Expanding Coverage
Sec.1201.Increase in benefit and contribution limits.
Sec.1202.Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec.1203.Modification of top-heavy rules.
Sec.1204.Elective deferrals not taken into account for purposes of
deduction limits.
Sec.1205.Repeal of coordination requirements for deferred compensation
plans of State and local governments and tax-exempt organizations.
Sec.1206.Elimination of user fee for requests to IRS regarding pension
plans.
Sec.1207.Deduction limits.
Sec.1208.Option to treat elective deferrals as after-tax
contributions.
Sec.1209.Reduced PBGC premium for new plans of small employers.
Sec.1210.Reduction of additional PBGC premium for new and small
plans.
Subtitle B--Enhancing Fairness for Women
Sec.1221.Catchup contributions for individuals age 50 or over.
Sec.1222.Equitable treatment for contributions of employees to defined
contribution plans.
Sec.1223.Faster vesting of certain employer matching
contributions.
Sec.1224.Simplify and update the minimum distribution rules.
Sec.1225.Clarification of tax treatment of division of section 457 plan
benefits upon divorce.
Sec.1226.Modification of safe harbor relief for hardship withdrawals
from cash or deferred arrangements.
Subtitle C--Increasing Portability for Participants
Sec.1231.Rollovers allowed among various types of plans.
Sec.1232.Rollovers of IRAs into workplace retirement plans.
Sec.1233.Rollovers of after-tax contributions.
Sec.1234.Hardship exception to 60-day rule.
Sec.1235.Treatment of forms of distribution.
Sec.1236.Rationalization of restrictions on distributions.
Sec.1237.Purchase of service credit in governmental defined benefit
plans.
Sec.1238.Employers may disregard rollovers for purposes of cash-out
amounts.
Sec.1239.Minimum distribution and inclusion requirements for section 457
plans.
Subtitle D--Strengthening Pension Security and Enforcement
Sec.1241.Repeal of 150 percent of current liability funding limit.
Sec.1242.Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec.1243.Missing participants.
Sec.1244.Excise tax relief for sound pension funding.
Sec.1245.Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit accruals.
Sec.1246.Protection of investment of employee contributions to 401(k)
plans.
Sec.1247.Treatment of multiemployer plans under section 415.
Subtitle E--Reducing Regulatory Burdens
Sec.1251.Modification of timing of plan valuations.
Sec.1252.ESOP dividends may be reinvested without loss of dividend
deduction.
Sec.1253.Repeal of transition rule relating to certain highly
compensated employees.
Sec.1254.Employees of tax-exempt entities.
Sec.1255.Clarification of treatment of employer-provided retirement
advice.
Sec.1256.Reporting simplification.
Sec.1257.Improvement of employee plans compliance resolution
system.
Sec.1258.Substantial owner benefits in terminated plans.
Sec.1259.Modification of exclusion for employer provided transit
passes.
Sec.1260.Repeal of the multiple use test.
Sec.1261.Flexibility in nondiscrimination, coverage, and line of
business rules.
Sec.1262.Extension to international organizations of moratorium on
application of certain nondiscrimination rules applicable to State and local
plans.
Subtitle F--Plan Amendments
Sec.1271.Provisions relating to plan amendments.
TITLE XIII--MISCELLANEOUS PROVISIONS
Subtitle A--Provisions Primarily Affecting Individuals
Sec.1301.Consistent treatment of survivor benefits for public safety
officers killed in the line of duty.
Sec.1302.Expansion of dc homebuyer tax credit.
Sec.1303.No Federal income tax on amounts and lands received by
Holocaust victims or their heirs.
Subtitle B--Provisions Primarily Affecting Businesses
Sec.1311.Distributions from publicly traded partnerships treated as
qualifying income of regulated investment companies.
Sec.1312.Special passive activity rule for publicly traded partnerships
to apply to regulated investment companies.
Sec.1313.Large electric trucks, vans, and buses eligible for deduction
for clean-fuel vehicles in lieu of credit.
Sec.1314.Modifications to special rules for nuclear decommissioning
costs.
Sec.1315.Consolidation of life insurance companies with other
corporations.
Sec.1316.Modification of active business definition under section
355.
Sec.1317.Expansion of exemption from personal holding company tax for
lending or finance companies.
Sec.1318.Extension of expensing of environmental remediation
costs.
Subtitle C--Provisions Relating to Excise Taxes
Sec.1321.Consolidation of Hazardous Substance Superfund and Leaking
Underground Storage Tank Trust Fund.
Sec.1322.Repeal of certain motor fuel excise taxes on fuel used by
railroads and on inland waterway transportation.
Sec.1323.Repeal of excise tax on fishing tackle boxes.
Sec.1324.Clarification of excise tax imposed on arrow components.
Sec.1325.Exemption from ticket taxes for certain transportation provided
by small seaplanes.
Sec.1326.Modification of rural airport definition.
Subtitle D--Other Provisions
Sec.1331.Tax-exempt financing of qualified highway infrastructure
construction.
Sec.1332.Tax treatment of Alaska Native Settlement Trusts.
Sec.1333.Increase in threshold for Joint Committee reports on refunds
and credits.
Sec.1334.Credit for clinical testing research expenses attributable to
certain qualified academic institutions including teaching hospitals.
Sec.1335.Payment of dividends on stock of cooperatives without reducing
patronage dividends.
Subtitle E--Tax Court Provisions
Sec.1341.Tax court filing fee in all cases commenced by filing
petition.
Sec.1342.Expanded use of Tax Court practice fee.
Sec.1343.Confirmation of authority of Tax Court to apply doctrine of
equitable recoupment.
TITLE XIV--EXTENSIONS OF EXPIRING PROVISIONS
Sec.1401.Research credit.
Sec.1402.Subpart F exemption for active financing income.
Sec.1403.Taxable income limit on percentage depletion for marginal
production.
Sec.1404.Work opportunity credit and welfare-to-work credit.
Sec.1405.Extension and modification of credit for producing electricity
from certain renewable resources.
TITLE XV--REVENUE OFFSETS
Sec.1501.Returns relating to cancellations of indebtedness by
organizations lending money.
Sec.1502.Extension of Internal Revenue Service user fees.
Sec.1503.Limitations on welfare benefit funds of 10 or more employer
plans.
Sec.1504.Increase in elective withholding rate for nonperiodic
distributions from deferred compensation plans.
Sec.1505.Controlled entities ineligible for REIT status.
Sec.1506.Treatment of gain from constructive ownership
transactions.
Sec.1507.Transfer of excess defined benefit plan assets for retiree
health benefits.
Sec.1508.Modification of installment method and repeal of installment
method for accrual method taxpayers.
Sec.1509.Limitation on use of nonaccrual experience method of
accounting.
Sec.1510.Charitable split-dollar life insurance, annuity, and endowment
contracts.
Sec.1511.Restriction on use of real estate investment trusts to avoid
estimated tax payment requirements.
Sec.1512.Modification of anti-abuse rules related to assumption of
liability.
Sec.1513.Allocation of basis on transfers of intangibles in certain
nonrecognition transactions.
Sec.1514.Distributions to a corporate partner of stock in another
corporation.
Sec.1515.Prohibited allocations of S corporation stock held by an
ESOP.
TITLE XVI--COMPLIANCE WITH BUDGET ACT
Sec.1601.Compliance with Budget Act.
TITLE I--BROAD-BASED AND FAMILY TAX RELIEF
Subtitle A--Reduction in Individual Income Taxes
SEC. 101. REDUCTION IN INDIVIDUAL INCOME TAXES.
(a) REGULAR INCOME TAX RATES-
(1) IN GENERAL- Subsection (f) of section 1 is amended by adding at the
end the following new paragraph:
`(8) RATE REDUCTIONS- The following adjustments shall apply in
prescribing the tables under paragraph (1):
`(A) REDUCTION IN LOWEST RATE- With respect to taxable years beginning
after December 31, 2000, the rate applicable to the lowest income bracket
shall be--
`(i) 14.5 percent in the case of taxable years beginning during 2001
or 2002, and
`(ii) 14.0 percent in the case of taxable years beginning after
2002.
`(B) REDUCTION IN OTHER RATES- With respect to taxable years beginning
after December 31, 2004, each rate (other than the rate referred to in
subparagraph (A)) shall be reduced by 1 percentage point.
`(C) PHASEOUT OF MARRIAGE PENALTY IN LOWEST BRACKET-
`(i) IN GENERAL- With respect to taxable years beginning after
December 31, 2004--
`(I) the maximum taxable income in the lowest rate bracket in the
table contained in subsection (a) (and the minimum taxable income in
the next higher taxable income bracket in such table) shall be the
applicable percentage of the maximum taxable income in the lowest rate
bracket in the table contained in subsection (c) (after any other
adjustment under this subsection), and
`(II) the comparable taxable income amounts in the table contained
in subsection (d) shall be 1/2 of the amounts determined under
subclause (I).
`(ii) APPLICABLE PERCENTAGE- For purposes of clause (i), the
applicable percentage shall be determined in accordance with the
following table:
`For taxable years beginning
--The applicable
in calendar year--
--percentage is--
--173.7
--176.1
--188.1
--200.0.
`(D) INCREASE IN MAXIMUM TAXABLE INCOME IN LOWEST BRACKET FOR OTHER
INDIVIDUALS-
`(i) IN GENERAL- With respect to taxable years beginning after
December 31, 2005, the maximum taxable income in the lowest rate bracket
in the tables contained in subsections (b) and (c), after any other
adjustment under this subsection (and the minimum taxable income in the
next higher taxable income bracket in such tables, as so adjusted) shall
be increased by $3,000.
`(ii) COST-OF-LIVING ADJUSTMENT- In the case of any taxable year
beginning in any calendar year after 2006, the $3,000 amount in clause
(i) shall be increased by an amount equal to--
`(I) such dollar amount, multiplied by
`(II) the cost-of living adjustment determined under paragraph (3)
for the calendar year in which the taxable year begins, determined by
substituting `calendar year 2005' for `calendar year 1992' in
subparagraph (B) thereof.'.
`(iii) Any increase under clause (ii) shall be added to the amount
it is increasing before such amount is rounded under paragraph
(6).
`(9) POST-2001 RATE REDUCTIONS CONTINGENT ON NO INCREASE IN INTEREST ON
TOTAL UNITED STATES DEBT-
`(A) IN GENERAL- If the calendar year preceding any adjustment year is
not a debt reduction calendar year, then--
`(i) such adjustment shall not take effect until the calendar year
following the adjustment year, and
`(ii) this subparagraph shall apply to such following calendar year
as if it were an adjustment year.
For purposes of this subparagraph, the term `adjustment year' means,
with respect to any adjustment under subparagraph (A), (B), or (D) of
paragraph (8), the first calendar year for which such adjustment takes
effect without regard to this paragraph.
`(B) DEBT REDUCTION CALENDAR YEAR- For purposes of this paragraph, the
term `debt reduction calendar year' means any calendar year after 2000 if
the Secretary of the Treasury (after consultation with the chairman of the
Federal Reserve Board) determines by August 31 of such calendar year that
the United States interest expense for the 12-month period ending on July
31 of such calendar year is not more than $1,000,000,000 greater than the
United States interest expense for the 12-month period ending on July 31
of the preceding calendar year.
`(C) UNITED STATES INTEREST EXPENSE- For purposes of this paragraph,
the term `United States interest expense' means interest on obligations
which are subject to the public debt limit in section 3101 of title 31,
United States Code.'.
(2) TECHNICAL AMENDMENTS-
(A) Subparagraph (B) of section 1(f)(2) is amended by inserting
`except as provided in paragraph (8),' before `by not changing'.
(B) Subparagraph (C) of section 1(f)(2) is amended by inserting `and
the reductions under paragraph (8) in the rates of tax' before the
period.
(C) The heading for subsection (f) of section 1 is amended by
inserting `RATE REDUCTIONS;' before `ADJUSTMENTS'.
(D) Section 1(g)(7)(B)(ii)(II) is amended by striking `15 percent' and
inserting `the percentage applicable to the lowest income bracket in
subsection (c)'.
(E) Subparagraphs (A)(ii)(I) and (B)(i) of section 1(h)(1) are each
amended by striking `28 percent' and inserting `27 percent'.
(F) Section 531 is amended by striking `39.6 percent of the
accumulated taxable income' and inserting `the product of the accumulated
taxable income and the percentage applicable to the highest income bracket
in section 1(c)'.
(G) Section 541 is amended by striking `39.6 percent of the
undistributed personal holding company income' and inserting `the product
of the undistributed personal holding company income and the percentage
applicable to the highest income bracket in section 1(c)'.
(H) Section 3402(p)(1)(B) is amended by striking `specified is 7, 15,
28, or 31 percent' and all that follows and inserting `specified
is--
`(ii) a percentage applicable to one of the three lowest income
brackets in section 1(c), or
`(iii) such other percentage as is permitted under regulations
prescribed by the Secretary.'.
(I) Section 3402(p)(2) is amended by striking `15 percent of such
payment' and inserting `the product of such payment and the percentage
applicable to the lowest income bracket in section 1(c)'.
(j) Section 3402(q)(1) is amended by striking `28 percent of such
payment' and inserting `the product of such payment and the percentage
applicable to the next to the lowest income bracket in section
1(c)'.
(K) Section 3402(r)(3) is amended by striking `31 percent' and
inserting `the rate applicable to the third income bracket in such
section'.
(L) Section 3406(a)(1) is amended by striking `31 percent of such
payment' and inserting `the product of such payment and the percentage
applicable to the third income bracket in section 1(c)'.
(b) MINIMUM TAX RATES- Subparagraph (A) of section 55(b)(1) is amended by
adding at the end the following new clause:
`(iv) RATE REDUCTION- In the case of taxable years beginning after
December 31, 2004, each rate in clause (i) shall be reduced by 1
percentage point.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
Subtitle B--Family Tax Relief
SEC. 111. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.
(a) IN GENERAL- Paragraph (2) of section 63(c) (relating to standard
deduction) is amended--
(1) by striking `$5,000' in subparagraph (A) and inserting `200 percent
of the dollar amount in effect under subparagraph (C) for the taxable
year',
(2) by adding `or' at the end of subparagraph (B),
(3) by striking `in the case of' and all that follows in subparagraph
(C) and inserting `in any other case.', and
(4) by striking subparagraph (D).
(b) PHASE-IN- Subsection (c) of section 63 is amended by adding at the end
the following new paragraph:
`(7) PHASE-IN OF INCREASE IN BASIC STANDARD DEDUCTION- In the case of
taxable years beginning before January 1, 2005--
`(A) paragraph (2)(A) shall be applied by substituting for `200
percent'--
`(i) `172.8 percent' in the case of taxable years beginning during
2001,
`(ii) `180.1 percent' in the case of taxable years beginning during
2002,
`(iii) `187.0 percent' in the case of taxable years beginning during
2003, and
`(iv) `193.5 percent' in the case of taxable years beginning during
2004, and
`(B) the basic standard deduction for a married individual filing a
separate return shall be one-half of the amount applicable under paragraph
(2)(A).
If any amount determined under subparagraph (A) is not a multiple of
$50, such amount shall be rounded to the next lowest multiple of
$50.'.
(c) TECHNICAL AMENDMENTS-
(1) Subparagraph (B) of section 1(f)(6) is amended by striking `(other
than with' and all that follows through `shall be applied' and inserting
`(other than with respect to sections 63(c)(4) and 151(d)(4)(A)) shall be
applied'.
(2) Paragraph (4) of section 63(c) is amended by adding at the end the
following flush sentence:
`The preceding sentence shall not apply to the amount referred to in
paragraph (2)(A).'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 112. EXCLUSION FOR FOSTER CARE PAYMENTS TO APPLY TO PAYMENTS BY
QUALIFIED PLACEMENT AGENCIES.
(a) IN GENERAL- The matter preceding subparagraph (B) of section 131(b)(1)
(defining qualified foster care payment) is amended to read as follows:
`(1) IN GENERAL- The term `qualified foster care payment' means any
payment made pursuant to a foster care program of a State or political
subdivision thereof--
`(i) the State or political subdivision thereof, or
`(ii) a qualified foster care placement agency, and'.
(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE INDIVIDUALS PLACED BY
QUALIFIED PLACEMENT AGENCIES- Subparagraph (B) of section 131(b)(2) (defining
qualified foster individual) is amended to read as follows:
`(B) a qualified foster care placement agency.'.
(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY DEFINED- Subsection (b) of
section 131 is amended by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
`(3) QUALIFIED FOSTER CARE PLACEMENT AGENCY- The term `qualified foster
care placement agency' means any placement agency which is licensed or
certified by--
`(A) a State or political subdivision thereof, or
`(B) an entity designated by a State or political subdivision
thereof,
for the foster care program of such State or political subdivision to
make foster care payments to providers of foster care.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 113. EXPANSION OF ADOPTION CREDIT.
(a) IN GENERAL- Section 23(a)(1) (relating to allowance of credit) is
amended to read as follows:
`(1) IN GENERAL- In the case of an individual, there shall be allowed as
a credit against the tax imposed by this chapter--
`(A) in the case of an adoption of a child other than a child with
special needs, the amount of the qualified adoption expenses paid or
incurred by the taxpayer, and
`(B) in the case of an adoption of a child with special needs,
$10,000.'.
(b) DOLLAR LIMITATION- Section 23(b)(1) is amended--
(1) by striking `($6,000, in the case of a child with special needs)',
and
(2) by striking `subsection (a)' and inserting `subsection
(a)(1)'.
(c) YEAR CREDIT ALLOWED- Section 23(a)(2) is amended by adding at the end
the following new flush sentence:
`In the case of the adoption of a child with special needs, the credit
allowed under paragraph (1) shall be allowed for the taxable year in which
the adoption becomes final.'.
(d) DEFINITION OF ELIGIBLE CHILD-
(1) IN GENERAL- Section 23(d)(2) is amended to read as follows:
`(2) ELIGIBLE CHILD- The term `eligible child' means any individual
who--
`(A) has not attained age 18, or
`(B) is physically or mentally incapable of caring for
himself.'.
(2) CLARIFICATION OF TERMINATION- Section 23 is amended by adding at the
end the following new subsection:
`(i) TERMINATION FOR CHILDREN WITHOUT SPECIAL NEEDS- Except in the case of
a child with special needs, this section shall not apply to expenses paid or
incurred after December 31, 2001.'.
(e) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 114. MODIFICATION OF DEPENDENT CARE CREDIT.
(a) INCREASE IN PERCENTAGE OF EMPLOYMENT-RELATED EXPENSES TAKEN INTO
ACCOUNT- Subsection (a)(2) of section 21 (relating to expenses for household
and dependent care services necessary for gainful employment) is amended--
(1) by striking `30 percent' and inserting `35 percent (40 percent in
the case of taxable years beginning after December 31, 2005)',
(2) by striking `$2,000' and inserting `$1,000', and
(3) by striking `$10,000' and inserting `$30,000'.
(b) INDEXING OF LIMIT ON EMPLOYMENT-RELATED EXPENSES- Section 21(c)
(relating to dollar limit on amount creditable) is amended to read as
follows:
`(c) DOLLAR LIMIT ON AMOUNT CREDITABLE-
`(1) IN GENERAL- The amount of the employment-related expenses incurred
during any taxable year which may be taken into account under subsection (a)
shall not exceed--
`(A) an amount equal to 50 percent of the amount determined under
subparagraph (B) if there is one qualifying individual with respect to the
taxpayer for such taxable year, or
`(B) $4,800 if there are two or more qualifying individuals with
respect to the taxpayer for such taxable year.
The amount determined under subparagraph (A) or (B) (whichever is
applicable) shall be reduced by the aggregate amount excludable from gross
income under section 129 for the taxable year.
`(2) COST-OF-LIVING ADJUSTMENT-
`(A) IN GENERAL- In the case of a taxable year beginning after 2001,
the $4,800 amount under paragraph (1)(B) 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 the calendar year in which the taxable year begins, determined by
substituting `calendar year 2000' for `calendar year 1992' in
subparagraph (B) thereof.
`(B) ROUNDING RULES- If any amount after adjustment under subparagraph
(A) is not a multiple of $50, such amount shall be rounded to the next
lower multiple of $50.'.
(c) MINIMUM DEPENDENT CARE CREDIT ALLOWED FOR STAY-AT-HOME PARENTS-
Section 21(e) (relating to special rules) is amended by adding at the end the
following:
`(11) MINIMUM CREDIT ALLOWED FOR STAY-AT-HOME PARENTS-
`(A) IN GENERAL- 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, such taxpayer shall be deemed to have
employment-related expenses for the taxable year with respect to each such
qualifying individual in an amount equal to the sum of--
`(i) $200 for each month in such taxable year during which such
qualifying individual is under the age of 1, and
`(ii) the amount of employment-related expenses otherwise incurred
for such qualifying individual for the taxable year (determined under
this section without regard to this paragraph).
`(B) ELECTION TO NOT APPLY THIS PARAGRAPH- This paragraph shall not
apply with respect to any qualifying individual for any taxable year if
the taxpayer elects to not have this paragraph apply to such qualifying
individual for such taxable year.'.
(1) IN GENERAL- The amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
(2) SUBSECTION (C)- The amendment made by subsection (c) shall apply to
taxable years beginning after December 31, 2005.
SEC. 115. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT.
(a) IN GENERAL- Paragraph (2) of section 32(b) (relating to percentages
and amounts) is amended--
(1) by striking `AMOUNTS- The earned' and inserting `AMOUNTS-
`(A) IN GENERAL- Subject to subparagraph (B), the earned',
and
(2) by adding at the end the following new subparagraph:
`(B) JOINT RETURNS- In the case of a joint return, the phaseout amount
determined under subparagraph (A) shall be increased by $2,000.'.
(b) INFLATION ADJUSTMENT- Paragraph (1)(B) of section 32(j) (relating to
inflation adjustments) is amended to read as follows:
`(B) the cost-of-living adjustment determined under section 1(f)(3)
for the calendar year in which the taxable year begins,
determined--
`(i) in the case of amounts in subsections (b)(1)(A) and (i)(1), by
substituting `calendar year 1995' for `calendar year 1992' in
subparagraph (B) thereof, and
`(ii) in the case of the $2,000 amount in subsection (b)(1)(B), by
substituting `calendar year 2005' for `calendar year 1992' in
subparagraph (B) of such section 1.'.
(c) ROUNDING- Section 32(j)(2)(A) (relating to rounding) is amended by
striking `subsection (b)(2)' and inserting `subsection (b)(2)(A) (after being
increased under subparagraph (B) thereof)'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2005.
Subtitle C--Repeal of Alternative Minimum Tax on
Individuals
SEC. 121. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDIVIDUALS.
(a) IN GENERAL- Subsection (a) of section 55 is amended by adding at the
end the following new flush sentence:
`For purposes of this title, the tentative minimum tax on any taxpayer
other than a corporation for any taxable year beginning after December 31,
2007, shall be zero.'.
(b) REDUCTION OF TAX ON INDIVIDUALS PRIOR TO REPEAL- Section 55 is amended
by adding at the end the following new subsection:
`(f) PHASEOUT OF TAX ON INDIVIDUALS-
`(1) IN GENERAL- The tax imposed by this section on a taxpayer other
than a corporation for any taxable year beginning after December 31, 2004,
and before January 1, 2008, shall be the applicable percentage of the tax
which would be imposed but for this subsection.
`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the
applicable percentage shall be determined in accordance with the following
table:
`For taxable years beginning
--The applicable
--percentage is--
2005
--80
2006
--70
2007
--60.'.
(c) NONREFUNDABLE PERSONAL CREDITS FULLY ALLOWED AGAINST REGULAR TAX
LIABILITY-
(1) IN GENERAL- Subsection (a) of section 26 (relating to limitation
based on amount of tax) is amended to read as follows:
`(a) LIMITATION BASED ON AMOUNT OF TAX- The aggregate amount of credits
allowed by this subpart for the taxable year shall not exceed the taxpayer's
regular tax liability for the taxable year.'.
(2) CHILD CREDIT- Subsection (d) of section 24 is amended by striking
paragraph (2) and by redesignating paragraph (3) as paragraph (2).
(d) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY-
Subsection (c) of section 53 is amended to read as follows:
`(1) IN GENERAL- Except as otherwise provided in this subsection, the
credit allowable under subsection (a) for any taxable year shall not exceed
the excess (if any) of--
`(A) the regular tax liability of the taxpayer for such taxable year
reduced by the sum of the credits allowable under subparts A, B, D, E, and
F of this part, over
`(B) the tentative minimum tax for the taxable year.
`(2) TAXABLE YEARS BEGINNING AFTER 2007- In the case of any taxable year
beginning after 2007, the credit allowable under subsection (a) to a
taxpayer other than a corporation for any taxable year shall not exceed 90
percent of the excess (if any) of--
`(A) regular tax liability of the taxpayer for such taxable year,
over
`(B) the sum of the credits allowable under subparts A, B, D, E, and F
of this part.'.
(e) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1998.
TITLE II--RELIEF FROM TAXATION ON SAVINGS AND INVESTMENTS
Subtitle A--Capital Gains Tax Relief
SEC. 201. REDUCTION IN INDIVIDUAL CAPITAL GAIN TAX RATES.
(1) Sections 1(h)(1)(B) and 55(b)(3)(B) are each amended by striking `10
percent' and inserting `8 percent'.
(2) The following sections are each amended by striking `20 percent' and
inserting `18 percent':
(D) The second sentence of section 7518(g)(6)(A).
(E) The second sentence of section 607(h)(6)(A) of the Merchant Marine
Act, 1936.
(3) Sections 1(h)(1)(D) and 55(b)(3)(D) are each amended by striking `25
percent' and inserting `23 percent'.
(b) CONFORMING AMENDMENTS-
(1) Section 311 of the Taxpayer Relief Act of 1997 is amended by
striking subsection (e).
(2) Section 1(h) is amended--
(A) by striking paragraphs (2), (9), and (13),
(B) by redesignating paragraphs (3) through (8) as paragraphs (2)
through (7), respectively, and
(C) by redesignating paragraphs (10), (11), and (12) as paragraphs
(8), (9), and (10), respectively.
(3) Paragraph (3) of section 55(b) is amended by striking `In the case
of taxable years beginning after December 31, 2000, rules similar to the
rules of section 1(h)(2) shall apply for purposes of subparagraphs (B) and
(C).'.
(4) Paragraph (7) of section 57(a) is amended--
(A) by striking `42 percent' and inserting `28 percent', and
(B) by striking the last sentence.
(1) IN GENERAL- Except as otherwise provided by this subsection, the
amendments made by this section shall apply to taxable years beginning after
December 31, 1998.
(2) WITHHOLDING- The amendment made by subsection (a)(2)(C) shall apply
to amounts paid after the date of the enactment of this Act.
SEC. 202. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER DECEMBER 31, 1999, FOR
PURPOSES OF DETERMINING GAIN.
(a) IN GENERAL- Part II of subchapter O of chapter 1 (relating to basis
rules of general application) is amended by inserting after section 1021 the
following new section:
`SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER DECEMBER 31, 1999, FOR
PURPOSES OF DETERMINING GAIN.
`(1) INDEXED BASIS SUBSTITUTED FOR ADJUSTED BASIS- Solely for purposes
of determining gain on the sale or other disposition by a taxpayer (other
than a corporation) of an indexed asset which has been held for more than 1
year, the indexed basis of the asset shall be substituted for its adjusted
basis.
`(2) EXCEPTION FOR DEPRECIATION, ETC- The deductions for depreciation,
depletion, and amortization shall be determined without regard to the
application of paragraph (1) to the taxpayer or any other person.
`(3) EXCEPTION FOR PRINCIPAL RESIDENCES- Paragraph (1) shall not apply
to any disposition of the principal residence (within the meaning of section
121) of the taxpayer .
`(1) IN GENERAL- For purposes of this section, the term `indexed asset'
means--
`(A) common stock in a C corporation (other than a foreign
corporation), and
which is a capital asset or property used in the trade or business (as
defined in section 1231(b)).
`(2) STOCK IN CERTAIN FOREIGN CORPORATIONS INCLUDED- For purposes of
this section--
`(A) IN GENERAL- The term `indexed asset' includes common stock in a
foreign corporation which is regularly traded on an established securities
market.
`(B) EXCEPTION- Subparagraph (A) shall not apply to--
`(i) stock of a foreign investment company (within the meaning of
section 1246(b)),
`(ii) stock in a passive foreign investment company (as defined in
section 1296),
`(iii) stock in a foreign corporation held by a United States person
who meets the requirements of section 1248(a)(2), and
`(iv) stock in a foreign personal holding company (as defined in
section 552).
`(C) TREATMENT OF AMERICAN DEPOSITORY RECEIPTS- An American depository
receipt for common stock in a foreign corporation shall be treated as
common stock in such corporation.
`(c) INDEXED BASIS- For purposes of this section--
`(1) GENERAL RULE- The indexed basis for any asset is--
`(A) the adjusted basis of the asset, increased by
`(B) the applicable inflation adjustment.
`(2) APPLICABLE INFLATION ADJUSTMENT- The applicable inflation
adjustment for any asset is an amount equal to--
`(A) the adjusted basis of the asset, multiplied by
`(B) the percentage (if any) by which--
`(i) the chain-type price index for GDP for the last calendar
quarter ending before the asset is disposed of, exceeds
`(ii) the chain-type price index for GDP for the last calendar
quarter ending before the asset was acquired by the
taxpayer.
The percentage under subparagraph (B) shall be rounded to the nearest
1/10 of 1 percentage point.
`(3) CHAIN-TYPE PRICE INDEX FOR GDP- The chain-type price index for GDP
for any calendar quarter is such index for such quarter (as shown in the
last revision thereof released by the Secretary of Commerce before the close
of the following calendar quarter).
`(d) SUSPENSION OF HOLDING PERIOD WHERE DIMINISHED RISK OF LOSS; TREATMENT
OF SHORT SALES-
`(1) IN GENERAL- If the taxpayer (or a related person) enters into any
transaction which substantially reduces the risk of loss from holding any
asset, such asset shall not be treated as an indexed asset for the period of
such reduced risk.
`(A) IN GENERAL- In the case of a short sale of an indexed asset with
a short sale period in excess of 1 year, for purposes of this title, the
amount realized shall be an amount equal to the amount realized
(determined without regard to this paragraph) increased by the applicable
inflation adjustment. In applying subsection (c)(2) for purposes of the
preceding sentence, the date on which the property is sold short shall be
treated as the date of acquisition and the closing date for the sale shall
be treated as the date of disposition.
`(B) SHORT SALE PERIOD- For purposes of subparagraph (A), the short
sale period begins on the day that the property is sold and ends on the
closing date for the sale.
`(e) TREATMENT OF REGULATED INVESTMENT COMPANIES AND REAL ESTATE
INVESTMENT TRUSTS-
`(1) ADJUSTMENTS AT ENTITY LEVEL-
`(A) IN GENERAL- Except as otherwise provided in this paragraph, the
adjustment under subsection (a) shall be allowed to any qualified
investment entity (including for purposes of determining the earnings and
profits of such entity).
`(B) EXCEPTION FOR CORPORATE SHAREHOLDERS- Under
regulations--
`(i) in the case of a distribution by a qualified investment entity
(directly or indirectly) to a corporation--
`(I) the determination of whether such distribution is a dividend
shall be made without regard to this section, and
`(II) the amount treated as gain by reason of the receipt of any
capital gain dividend shall be increased by the percentage by which
the entity's net capital gain for the taxable year (determined without
regard to this section) exceeds the entity's net capital gain for such
year determined with regard to this section, and
`(ii) there shall be other appropriate adjustments (including deemed
distributions) so as to ensure that the benefits of this section are not
allowed (directly or indirectly) to corporate shareholders of qualified
investment entities.
For purposes of the preceding sentence, any amount includible in gross
income under section 852(b)(3)(D) shall be treated as a capital gain
dividend and an S corporation shall not be treated as a
corporation.
`(C) EXCEPTION FOR QUALIFICATION PURPOSES- This section shall not
apply for purposes of sections 851(b) and 856(c).
`(D) EXCEPTION FOR CERTAIN TAXES IMPOSED AT ENTITY LEVEL-
`(i) TAX ON FAILURE TO DISTRIBUTE ENTIRE GAIN- If any amount is
subject to tax under section 852(b)(3)(A) for any taxable year, the
amount on which tax is imposed under such section shall be increased by
the percentage determined under subparagraph (B)(i)(II). A similar rule
shall apply in the case of any amount subject to tax under paragraph (2)
or (3) of section 857(b) to the extent attributable to the excess of the
net capital gain over the deduction for dividends paid determined with
reference to capital gain dividends only. The first sentence of this
clause shall not apply to so much of the amount subject to tax under
section 852(b)(3)(A) as is designated by the company under section
852(b)(3)(D).
`(ii) OTHER TAXES- This section shall not apply for purposes of
determining the amount of any tax imposed by paragraph (4), (5), or (6)
of section 857(b).
`(2) ADJUSTMENTS TO INTERESTS HELD IN ENTITY-
`(A) REGULATED INVESTMENT COMPANIES- Stock in a regulated investment
company (within the meaning of section 851) shall be an indexed asset for
any calendar quarter in the same ratio as--
`(i) the average of the fair market values of the indexed assets
held by such company at the close of each month during such quarter,
bears to
`(ii) the average of the fair market values of all assets held by
such company at the close of each such month.
`(B) REAL ESTATE INVESTMENT TRUSTS- Stock in a real estate investment
trust (within the meaning of section 856) shall be an indexed asset for
any calendar quarter in the same ratio as--
`(i) the fair market value of the indexed assets held by such trust
at the close of such quarter, bears to
`(ii) the fair market value of all assets held by such trust at the
close of such quarter.
`(C) RATIO OF 80 PERCENT OR MORE- If the ratio for any calendar
quarter determined under subparagraph (A) or (B) would (but for this
subparagraph) be 80 percent or more, such ratio for such quarter shall be
100 percent.
`(D) RATIO OF 20 PERCENT OR LESS- If the ratio for any calendar
quarter determined under subparagraph (A) or (B) would (but for this
subparagraph) be 20 percent or less, such ratio for such quarter shall be
zero.
`(E) LOOK-THRU OF PARTNERSHIPS- For purposes of this paragraph, a
qualified investment entity which holds a partnership interest shall be
treated (in lieu of holding a partnership interest) as holding its
proportionate share of the assets held by the partnership.
`(3) TREATMENT OF RETURN OF CAPITAL DISTRIBUTIONS- Except as otherwise
provided by the Secretary, a distribution with respect to stock in a
qualified investment entity which is not a dividend and which results in a
reduction in the adjusted basis of such stock shall be treated as allocable
to stock acquired by the taxpayer in the order in which such stock was
acquired.
`(4) QUALIFIED INVESTMENT ENTITY- For purposes of this subsection, the
term `qualified investment entity' means--
`(A) a regulated investment company (within the meaning of section
851), and
`(B) a real estate investment trust (within the meaning of section
856).
`(f) OTHER PASS-THRU ENTITIES-
`(A) IN GENERAL- In the case of a partnership, the adjustment made
under subsection (a) at the partnership level shall be passed through to
the partners.
`(B) SPECIAL RULE IN THE CASE OF SECTION 754 ELECTIONS- In the case of
a transfer of an interest in a partnership with respect to which the
election provided in section 754 is in effect--
`(i) the adjustment under section 743(b)(1) shall, with respect to
the transferor partner, be treated as a sale of the partnership assets
for purposes of applying this section, and
`(ii) with respect to the transferee partner, the partnership's
holding period for purposes of this section in such assets shall be
treated as beginning on the date of such adjustment.
`(2) S CORPORATIONS- In the case of an S corporation, the adjustment
made under subsection (a) at the corporate level shall be passed through to
the shareholders. This section shall not apply for purposes of determining
the amount of any tax imposed by section 1374 or 1375.
`(3) COMMON TRUST FUNDS- In the case of a common trust fund, the
adjustment made under subsection (a) at the trust level shall be passed
through to the participants.
`(4) INDEXING ADJUSTMENT DISREGARDED IN DETERMINING LOSS ON SALE OF
INTEREST IN ENTITY- Notwithstanding the preceding provisions of this
subsection, for purposes of determining the amount of any loss on a sale or
exchange of an interest in a partnership, S corporation, or common trust
fund, the adjustment made under subsection (a) shall not be taken into
account in determining the adjusted basis of such interest.
`(g) DISPOSITIONS BETWEEN RELATED PERSONS-
`(1) IN GENERAL- This section shall not apply to any sale or other
disposition of property between related persons except to the extent that
the basis of such property in the hands of the transferee is a substituted
basis.
`(2) RELATED PERSONS DEFINED- For purposes of this section, the term
`related persons' means--
`(A) persons bearing a relationship set forth in section 267(b),
and
`(B) persons treated as single employer under subsection (b) or (c) of
section 414.
`(h) TRANSFERS TO INCREASE INDEXING ADJUSTMENT- If any person transfers
cash, debt, or any other property to another person and the principal purpose
of such transfer is to secure or increase an adjustment under subsection (a),
the Secretary may disallow part or all of such adjustment or increase.
`(i) SPECIAL RULES- For purposes of this section--
`(1) TREATMENT OF IMPROVEMENTS, ETC- If there is an addition to the
adjusted basis of any tangible property or of any stock in a corporation
during the taxable year by reason of an improvement to such property or a
contribution to capital of such corporation--
`(A) such addition shall never be taken into account under subsection
(c)(1)(A) if the aggregate amount thereof during the taxable year with
respect to such property or stock is less than $1,000, and
`(B) such addition shall be treated as a separate asset acquired at
the close of such taxable year if the aggregate amount thereof during the
taxable year with respect to such property or stock is $1,000 or
more.
A rule similar to the rule of the preceding sentence shall apply to any
other portion of an asset to the extent that separate treatment of such
portion is appropriate to carry out the purposes of this section.
`(2) ASSETS WHICH ARE NOT INDEXED ASSETS THROUGHOUT HOLDING PERIOD- The
applicable inflation adjustment shall be appropriately reduced for periods
during which the asset was not an indexed asset.
`(3) TREATMENT OF CERTAIN DISTRIBUTIONS- A distribution with respect to
stock in a corporation which is not a dividend shall be treated as a
disposition.
`(4) ACQUISITION DATE WHERE THERE HAS BEEN PRIOR APPLICATION OF
SUBSECTION (a)(1) WITH RESPECT TO THE TAXPAYER- If there has been a prior
application of subsection (a)(1) to an asset while such asset was held by
the taxpayer, the date of acquisition of such asset by the taxpayer shall be
treated as not earlier than the date of the most recent such prior
application.
`(5) COLLAPSIBLE CORPORATIONS- The application of section 341(a)
(relating to collapsible corporations) shall be determined without regard to
this section.
`(j) REGULATIONS- The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.'.
(b) CLERICAL AMENDMENT- The table of sections for part II of subchapter O
of chapter 1 is amended by inserting after the item relating to section 1021
the following new item:
`Sec. 1022. Indexing of certain assets acquired after December 31, 1999, for
purposes of determining gain.'.
(1) IN GENERAL- The amendments made by this section shall apply to the
disposition of any property the holding period of which begins after
December 31, 1999.
(2) CERTAIN TRANSACTIONS BETWEEN RELATED PERSONS- The amendments made by
this section shall not apply to the disposition of any property acquired
after December 31, 1999, from a related person (as defined in section
1022(g)(2) of the Internal Revenue Code of 1986, as added by this section)
if--
(A) such property was so acquired for a price less than the property's
fair market value, and
(B) the amendments made by this section did not apply to such property
in the hands of such related person.
(d) ELECTION TO RECOGNIZE GAIN ON ASSETS HELD ON JANUARY 1, 2000- For
purposes of the Internal Revenue Code of 1986--
(1) IN GENERAL- A taxpayer other than a corporation may elect to
treat--
(A) any readily tradable stock (which is an indexed asset) held by
such taxpayer on January 1, 2000, and not sold before the next business
day after such date, as having been sold on such next business day for an
amount equal to its closing market price on such next business day (and as
having been reacquired on such next business day for an amount equal to
such closing market price), and
(B) any other indexed asset held by the taxpayer on January 1, 2000,
as having been sold on such date for an amount equal to its fair market
value on such date (and as having been reacquired on such date for an
amount equal to such fair market value).
(2) TREATMENT OF GAIN OR LOSS-
(A) Any gain resulting from an election under paragraph (1) shall be
treated as received or accrued on the date the asset is treated as sold
under paragraph (1) and shall be recognized notwithstanding any provision
of the Internal Revenue Code of 1986.
(B) Any loss resulting from an election under paragraph (1) shall not
be allowed for any taxable year.
(3) ELECTION- An election under paragraph (1) shall be made in such
manner as the Secretary of the Treasury or his delegate may prescribe and
shall specify the assets for which such election is made. Such an election,
once made with respect to any asset, shall be irrevocable.
(4) READILY TRADABLE STOCK- For purposes of this subsection, the term
`readily tradable stock' means any stock which, as of January 1, 2000, is
readily tradable on an established securities market or otherwise.
SEC. 203. CAPITAL GAINS TAX RATES APPLIED TO CAPITAL GAINS OF DESIGNATED
SETTLEMENT FUNDS.
(a) IN GENERAL- Paragraph (1) of section 468B(b) (relating to taxation of
designated settlement funds) is amended by inserting `(subject to section
1(h))' after `maximum rate'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 204. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND FOREIGN
SERVICE, AND OTHER EMPLOYEES, IN DETERMINING EXCLUSION OF GAIN FROM SALE OF
PRINCIPAL RESIDENCE.
(a) IN GENERAL- Subsection (d) of section 121 (relating to exclusion of
gain from sale of principal residence) is amended by adding at the end the
following new paragraphs:
`(9) MEMBERS OF UNIFORMED SERVICES AND FOREIGN SERVICE-
`(A) IN GENERAL- The running of the 5-year period described in
subsection (a) shall be suspended with respect to an individual during any
time that such individual or such individual's spouse is serving on
qualified official extended duty as a member of the uniformed services or
of the Foreign Service.
`(B) QUALIFIED OFFICIAL EXTENDED DUTY- For purposes of this
paragraph--
`(i) IN GENERAL- The term `qualified official extended duty' means
any period of extended duty as a member of the uniformed services or a
member of the Foreign Service during which the member serves at a duty
station which is at least 50 miles from such property or is under
Government orders to reside in Government quarters.
`(ii) UNIFORMED SERVICES- The term `uniformed services' has the
meaning given such term by section 101(a)(5) of title 10, United States
Code, as in effect on the date of the enactment of the Taxpayer Refund
and Relief Act of 1999.
`(iii) FOREIGN SERVICE OF THE UNITED STATES- The term `member of the
Foreign Service' has the meaning given the term `member of the Service'
by paragraph (1), (2), (3), (4), or (5) of section 103 of the Foreign
Service Act of 1980, as in effect on the date of the enactment of the
Taxpayer Refund and Relief Act of 1999.
`(iv) EXTENDED DUTY- The term `extended duty' means any period of
active duty pursuant to a call or order to such duty for a period in
excess of 90 days or for an indefinite period.
`(A) IN GENERAL- The running of the 5-year period described in
subsection (a) shall be suspended with respect to an individual during any
time that such individual or such individual's spouse is serving as an
employee for a period in excess of 90 days in an assignment by such
employee's employer outside the United States.
`(B) LIMITATIONS AND SPECIAL RULES-
`(i) MAXIMUM PERIOD OF SUSPENSION- The suspension under subparagraph
(A) with respect to a principal residence shall not exceed (in the
aggregate) 5 years.
`(ii) MEMBERS OF UNIFORMED SERVICES AND FOREIGN SERVICE-
Subparagraph (A) shall not apply to an individual to whom paragraph (9)
applies.
`(iii) SELF-EMPLOYED INDIVIDUAL NOT CONSIDERED AN EMPLOYEE- For
purposes of this paragraph, the term `employee' does not include an
individual who is an employee within the meaning of section 401(c)(1)
(relating to self-employed individuals).'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
sales and exchanges after the date of the enactment of this Act.
SEC. 205. TAX TREATMENT OF INCOME AND LOSS ON DERIVATIVES.
(a) IN GENERAL- Section 1221 (defining capital assets) is amended--
(1) by striking `For purposes' and inserting the following:
`(a) IN GENERAL- For purposes',
(2) by striking the period at the end of paragraph (5) and inserting a
semicolon, and
(3) by adding at the end the following:
`(6) any commodities derivative financial instrument held by a
commodities derivatives dealer, unless--
`(A) it is established to the satisfaction of the Secretary that such
instrument has no connection to the activities of such dealer as a dealer,
and
`(B) such instrument is clearly identified in such dealer's records as
being described in subparagraph (A) before the close of the day on which
it was acquired, originated, or entered into (or such other time as the
Secretary may by regulations prescribe);
`(7) any hedging transaction which is clearly identified as such before
the close of the day on which it was acquired, originated, or entered into
(or such other time as the Secretary may by regulations prescribe); or
`(8) supplies of a type regularly used or consumed by the taxpayer in
the ordinary course of a trade or business of the taxpayer.
`(b) DEFINITIONS AND SPECIAL RULES-
`(1) COMMODITIES DERIVATIVE FINANCIAL INSTRUMENTS- For purposes of
subsection (a)(6)--
`(A) COMMODITIES DERIVATIVES DEALER- The term `commodities derivatives
dealer' means a person which regularly offers to enter into, assume,
offset, assign, or terminate positions in commodities derivative financial
instruments with customers in the ordinary course of a trade or
business.
`(B) COMMODITIES DERIVATIVE FINANCIAL INSTRUMENT-
`(i) IN GENERAL- The term `commodities derivative financial
instrument' means any contract or financial instrument with respect to
commodities (other than a share of stock in a corporation, a beneficial
interest in a partnership or trust, a note, bond, debenture, or other
evidence of indebtedness, or a section 1256 contract (as defined in
section 1256(b)), the value or settlement price of which is calculated
by or determined by reference to a specified index.
`(ii) SPECIFIED INDEX- The term `specified index' means any one or
more or any combination of--
`(I) a fixed rate, price, or amount, or
`(II) a variable rate, price, or amount,
which is based on any current, objectively determinable financial or
economic information with respect to commodities which is not within the
control of any of the parties to the contract or instrument and is not
unique to any of the parties' circumstances.
`(2) HEDGING TRANSACTION-
`(A) IN GENERAL- For purposes of this section, the term `hedging
transaction' means any transaction entered into by the taxpayer in the
normal course of the taxpayer's trade or business primarily--
`(i) to manage risk of price changes or currency fluctuations with
respect to ordinary property which is held or to be held by the
taxpayer,
`(ii) to manage risk of interest rate or price changes or currency
fluctuations with respect to borrowings made or to be made, or ordinary
obligations incurred or to be incurred, by the taxpayer, or
`(iii) to manage such other risks as the Secretary may prescribe in
regulations.
`(B) TREATMENT OF NONIDENTIFICATION OR IMPROPER IDENTIFICATION OF
HEDGING TRANSACTIONS- Notwithstanding subsection (a)(7), the Secretary
shall prescribe regulations to properly characterize any income, gain,
expense, or loss arising from a transaction--
`(i) which is a hedging transaction but which was not identified as
such in accordance with subsection (a)(7), or
`(ii) which was so identified but is not a hedging
transaction.
`(3) REGULATIONS- The Secretary shall prescribe such regulations as are
appropriate to carry out the purposes of paragraph (6) and (7) of subsection
(a) in the case of transactions involving related parties.'.
(1) Section 475(c)(3) is amended by striking `reduces' and inserting
`manages'.
(2) Section 871(h)(4)(C)(iv) is amended by striking `to reduce' and
inserting `to manage'.
(3) Clauses (i) and (ii) of section 988(d)(2)(A) are each amended by
striking `to reduce' and inserting `to manage'.
(4) Paragraph (2) of section 1256(e) is amended to read as
follows:
`(2) DEFINITION OF HEDGING TRANSACTION- For purposes of this subsection,
the term `hedging transaction' means any hedging transaction (as defined in
section 1221(b)(2)(A)) if, before the close of the day on which such
transaction was entered into (or such earlier time as the Secretary may
prescribe by regulations), the taxpayer clearly identifies such transaction
as being a hedging transaction.'.
(c) CONFORMING AMENDMENTS-
(1) Each of the following sections are amended by striking `section
1221' and inserting `section 1221(a)':
(A) Section 170(e)(3)(A).
(B) Section 170(e)(4)(B).
(C) Section 367(a)(3)(B)(i).
(F) Section 1092(a)(3)(B)(ii)(II).
(G) Subparagraphs (C) and (D) of section 1231(b)(1).
(H) Section 1234(a)(3)(A).
(2) Each of the following sections are amended by striking `section
1221(1)' and inserting `section 1221(a)(1)':
(A) Section 198(c)(1)(A)(i).
(B) Section 263A(b)(2)(A).
(C) Clauses (i) and (iii) of section 267(f)(3)(B).
(E) Section 543(a)(1)(D)(i).
(H) Section 856(c)(2)(D).
(I) Section 856(c)(3)(C).
(K) Section 856(j)(2)(B).
(L) Section 857(b)(4)(B)(i).
(M) Section 857(b)(6)(B)(iii).
(N) Section 864(c)(4)(B)(iii).
(O) Section 864(d)(3)(A).
(P) Section 864(d)(6)(A).
(Q) Section 954(c)(1)(B)(iii).
(R) Section 995(b)(1)(C).
(S) Section 1017(b)(3)(E)(i).
(T) Section 1362(d)(3)(C)(ii).
(U) Section 4662(c)(2)(C).
(W) Section 7704(d)(1)(D).
(X) Section 7704(d)(1)(G).
(3) Section 818(b)(2) is amended by striking `section 1221(2)' and
inserting `section 1221(a)(2)'.
(4) Section 1397B(e)(2) is amended by striking `section 1221(4)' and
inserting `section 1221(a)(4)'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to any
instrument held, acquired, or entered into, any transaction entered into, and
supplies held or acquired on or after the date of the enactment of this
Act.
SEC. 206. WORTHLESS SECURITIES OF FINANCIAL INSTITUTIONS.
(a) IN GENERAL- The first sentence following section 165(g)(3)(B)
(relating to securities of affiliated corporation) is amended to read as
follows: `In computing gross receipts for purposes of the preceding sentence,
(i) gross receipts from sales or exchanges of stocks and securities shall be
taken into account only to the extent of gains therefrom, and (ii) gross
receipts from royalties, rents, dividends, interest, annuities, and gains from
sales or exchanges of stocks and securities derived from (or directly related
to) the conduct of an active trade or business of an insurance company subject
to tax under subchapter L or a qualified financial institution (as defined in
subsection (l)(3)) shall be treated as from such sources other than royalties,
rents, dividends, interest, annuities, and gains.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
securities which become worthless in taxable years beginning after December
31, 1999.
Subtitle B--Individual Retirement Arrangements
SEC. 211. MODIFICATION OF DEDUCTION LIMITS FOR IRA CONTRIBUTIONS.
(a) INCREASE IN CONTRIBUTION LIMIT-
(1) IN GENERAL- Paragraph (1)(A) of section 219(b) (relating to maximum
amount of deduction) is amended by striking `$2,000' and inserting `the
deductible amount'.
(2) DEDUCTIBLE AMOUNT- Section 219(b) is amended by adding at the end
the following new paragraph:
`(5) DEDUCTIBLE AMOUNT- For purposes of paragraph (1)(A)--
`(A) IN GENERAL- The deductible amount shall be determined in
accordance with the following table:
`For taxable years
The deductible
beginning in:
amount is:
2001, 2002, and 2003
$3,000
2004 and 2005
$4,000
2006 and thereafter
$5,000.
`(B) COST-OF-LIVING ADJUSTMENT-
`(i) IN GENERAL- In the case of any taxable year beginning in a
calendar year after 2006, the $5,000 amount under subparagraph (A) 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 the calendar year in which the taxable year begins,
determined by substituting `calendar year 2005' for `calendar year
1992' in subparagraph (B) thereof.
`(ii) ROUNDING RULES- If any amount after adjustment under clause
(i) is not a multiple of $100, such amount shall be rounded to the next
lower multiple of $100.'.
(b) CONFORMING AMENDMENTS-
(1) Section 408(a)(1) is amended by striking `in excess of $2,000 on
behalf of any individual' and inserting `on behalf of any individual in
excess of the amount in effect for such taxable year under section
219(b)(1)(A)'.
(2) Section 408(b)(2)(B) is amended by striking `$2,000' and inserting
`the dollar amount in effect under section 219(b)(1)(A)'.
(3) Section 408(b) is amended by striking `$2,000' in the matter
following paragraph (4) and inserting `the dollar amount in effect under
section 219(b)(1)(A)'.
(4) Section 408(j) is amended by striking `$2,000'.
(5) Section 408(p)(8) is amended by striking `$2,000' and inserting `the
dollar amount in effect under section 219(b)(1)(A)'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 212. MODIFICATION OF INCOME LIMITS ON CONTRIBUTIONS AND ROLLOVERS TO
ROTH IRAS.
(a) REPEAL OF AGI LIMIT ON CONTRIBUTIONS- Section 408A(c)(3) (relating to
limits based on modified adjusted gross income) is amended--
(1) by striking clause (ii) of subparagraph (A) and inserting:
(2) by striking clause (ii) of subparagraph (C) and inserting:
`(ii) the applicable dollar amount is--
`(I) $200,000 in the case of a taxpayer filing a joint return,
and
`(II) $100,000 in the case of any other taxpayer.'.
(b) INCREASE IN AGI LIMIT FOR ROLLOVER CONTRIBUTIONS- Section
408A(c)(3)(B) (relating to rollover from IRA) is amended to read as
follows:
`(B) ROLLOVER FROM IRA- A taxpayer shall not be allowed to make a
qualified rollover contribution from an individual retirement plan other
than a Roth IRA during any taxable year if, for the taxable year of the
distribution to which the contribution relates, the taxpayer's adjusted
gross income exceeds $100,000 ($200,000 in the case of a taxpayer filing a
joint return).'.
(c) EFFECTIVE DATES- The amendments made by this section shall apply to
taxable years beginning after December 31, 2002.
SEC. 213. DEEMED IRAS UNDER EMPLOYER PLANS.
(a) IN GENERAL- Section 408 (relating to individual retirement accounts)
is amended by redesignating subsection (q) as subsection (r) and by inserting
after subsection (p) the following new subsection:
`(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER PLANS-
`(A) a qualified employer plan elects to allow employees to make
voluntary employee contributions to a separate account or annuity
established under the plan, and
`(B) under the terms of the qualified employer plan, such account or
annuity meets the applicable requirements of this section or section 408A
for an individual retirement account or annuity,
then such account or annuity shall be treated for purposes of this title
in the same manner as an individual retirement plan (and contributions to
such account or annuity as contributions to an individual retirement plan).
For purposes of subparagraph (B), the requirements of subsection (a)(5)
shall not apply.
`(2) SPECIAL RULES FOR QUALIFIED EMPLOYER PLANS- For purposes of this
title--
`(A) a qualified employer plan shall not fail to meet any requirement
of this title solely by reason of establishing and maintaining a program
described in paragraph (1), and
`(B) any account or annuity described in paragraph (1), and any
contribution to the account or annuity, shall not be subject to any
requirement of this title applicable to a qualified employer plan or taken
into account in applying any such requirement to any other contributions
under the plan.
`(3) DEFINITIONS- For purposes of this subsection--
`(A) QUALIFIED EMPLOYER PLAN- The term `qualified employer plan' has
the meaning given such term by section 72(p)(4).
`(B) VOLUNTARY EMPLOYEE CONTRIBUTION- The term `voluntary employee
contribution' means any contribution (other than a mandatory contribution
within the meaning of section 411(c)(2)(C))--
`(i) which is made by an individual as an employee under a qualified
employer plan which allows employees to elect to make contributions
described in paragraph (1), and
`(ii) with respect to which the individual has designated the
contribution as a contribution to which this subsection
applies.'.
(1) IN GENERAL- Section 4 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1003) is amended by adding at the end the following new
subsection:
`(c) If a pension plan allows an employee to elect to make voluntary
employee contributions to accounts and annuities as provided in section 408(q)
of the Internal Revenue Code of 1986, such accounts and annuities (and
contributions thereto) shall not be treated as part of such plan (or as a
separate pension plan) for purposes of any provision of this title other than
section 403(c), 404, or 405 (relating to exclusive benefit, and fiduciary and
co-fiduciary responsibilities).'.
(2) CONFORMING AMENDMENT- Section 4(a) of such Act (29 U.S.C. 1003(a))
is amended by inserting `or (c)' after `subsection (b)'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
plan years beginning after December 31, 1999.
SEC. 214. CATCHUP CONTRIBUTIONS TO IRAS BY INDIVIDUALS AGE 50 OR OVER.
(a) IN GENERAL- Section 219(b), as amended by section 211, is amended by
adding at the end the following new paragraph:
`(6) CATCHUP CONTRIBUTIONS-
`(A) IN GENERAL- In the case of an individual who has attained the age
of 50 before the close of the taxable year, the dollar amount in effect
under paragraph (1)(A) for such taxable year shall be equal to the
applicable percentage of such amount determined without regard to this
paragraph.
`(B) APPLICABLE PERCENTAGE- For purposes of this paragraph, the
applicable percentage shall be determined in accordance with the following
table:
`For taxable years
The applicable
beginning in:
percentage is:
2001
110 percent
2002
120 percent
2003
130 percent
2004
140 percent
2005 and thereafter
150 percent.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
contributions in taxable years beginning after December 31, 2000.
TITLE III--ALTERNATIVE MINIMUM TAX REFORM
SEC. 301. MODIFICATION OF ALTERNATIVE MINIMUM TAX ON CORPORATIONS.
(a) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY-
Subsection (c) of section 53, as amended by section 121, is amended by
redesignating paragraph (2) as paragraph (3) and by inserting after paragraph
(1) the following new paragraph:
`(2) CORPORATIONS FOR TAXABLE YEARS BEGINNING AFTER 2004- In the case of
a corporation for any taxable year beginning after 2004, the limitation
under paragraph (1) shall be increased by the lesser of--
`(A) 50 percent of the tentative minimum tax for the taxable year,
or
`(B) the excess (if any) of the tentative minimum tax for the taxable
year over the regular tax for the taxable year.'.
(b) REPEAL OF 90 PERCENT LIMITATION ON NOL DEDUCTION- Section 56(d)(1)(A)
is amended by striking `90 percent' and inserting `90 percent (100 percent in
the case of a corporation)'.
(1) SUBSECTION (a)- The amendment made by subsection (a) shall apply to
taxable years beginning after December 31, 2004.
(2) SUBSECTION (b)- The amendment made by subsection (b) shall apply to
taxable years beginning after December 31, 2001.
SEC. 302. REPEAL OF 90 PERCENT LIMITATION ON FOREIGN TAX CREDIT.
(a) IN GENERAL- Section 59(a) (relating to alternative minimum tax foreign
tax credit) is amended by striking paragraph (2) and by redesignating
paragraphs (3) and (4) as paragraphs (2) and (3), respectively.
(b) CONFORMING AMENDMENT- Section 53(d)(1)(B)(i)(II) is amended by
striking `and if section 59(a)(2) did not apply'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
TITLE IV--EDUCATION SAVINGS INCENTIVES
SEC. 401. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
(a) MAXIMUM ANNUAL CONTRIBUTIONS-
(1) IN GENERAL- Section 530(b)(1)(A)(iii) (defining education individual
retirement account) is amended by striking `$500' and inserting
`$2,000'.
(2) CONFORMING AMENDMENT- Section 4973(e)(1)(A) is amended by striking
`$500' and inserting `$2,000'.
(b) TAX-FREE EXPENDITURES FOR ELEMENTARY AND SECONDARY SCHOOL EXPENSES-
(1) IN GENERAL- Section 530(b)(2) (defining qualified higher education
expenses) is amended to read as follows:
`(2) QUALIFIED EDUCATION EXPENSES-
`(A) IN GENERAL- The term `qualified education expenses'
means--
`(i) qualified higher education expenses (as defined in section
529(e)(3)), and
`(ii) qualified elementary and secondary education expenses (as
defined in paragraph (4)).
`(B) QUALIFIED STATE TUITION PROGRAMS- Such term shall include any
contribution to a qualified State tuition program (as defined in section
529(b)) on behalf of the designated beneficiary (as defined in section
529(e)(1)); but there shall be no increase in the investment in the
contract for purposes of applying section 72 by reason of any portion of
such contribution which is not includible in gross income by reason of
subsection (d)(2).'.
(2) QUALIFIED ELEMENTARY AND SECONDARY EDUCATION EXPENSES- Section
530(b) (relating to definitions and special rules) is amended by adding at
the end the following new paragraph:
`(4) QUALIFIED ELEMENTARY AND SECONDARY EDUCATION EXPENSES-
`(A) IN GENERAL- The term `qualified elementary and secondary
education expenses' means--
`(i) expenses for tuition, fees, academic tutoring, special needs
services, books, supplies, computer equipment (including related
software and services), and other equipment which are incurred in
connection with the enrollment or attendance of the designated
beneficiary of the trust as an elementary or secondary school student at
a public, private, or religious school, and
`(ii) expenses for room and board, uniforms, transportation, and
supplementary items and services (including extended day programs) which
are required or provided by a public, private, or religious school in
connection with such enrollment or attendance.
`(B) SPECIAL RULE FOR HOMESCHOOLING- Such term shall include expenses
described in subparagraph (A)(i) in connection with education provided by
homeschooling if the requirements of any applicable State or local law are
met with respect to such education.
`(C) SCHOOL- The term `school' means any school which provides
elementary education or secondary education (kindergarten through grade
12), as determined under State law.'.
(3) CONFORMING AMENDMENTS- Section 530 is amended--
(A) by striking `higher' each place it appears in subsections (b)(1)
and (d)(2), and
(B) by striking `HIGHER' in the heading for subsection
(d)(2).
(c) WAIVER OF AGE LIMITATIONS FOR CHILDREN WITH SPECIAL NEEDS- Section
530(b)(1) (defining education individual retirement account) is amended by
adding at the end the following flush sentence:
`The age limitations in subparagraphs (A)(ii) and (E) and paragraphs (5)
and (6) of subsection (d) shall not apply to any designated beneficiary with
special needs (as determined under regulations prescribed by the
Secretary).'.
(d) ENTITIES PERMITTED TO CONTRIBUTE TO ACCOUNTS- Section 530(c)(1)
(relating to reduction in permitted contributions based on adjusted gross
income) is amended by striking `The maximum amount which a contributor' and
inserting `In the case of a contributor who is an individual, the maximum
amount the contributor'.
(e) TIME WHEN CONTRIBUTIONS DEEMED MADE-
(1) IN GENERAL- Section 530(b) (relating to definitions and special
rules), as amended by subsection (b)(2), is amended by adding at the end the
following new paragraph:
`(5) TIME WHEN CONTRIBUTIONS DEEMED MADE- An individual shall be deemed
to have made a contribution to an education individual retirement account on
the last day of the preceding taxable year if the contribution is made on
account of such taxable year and is made not later than the time prescribed
by law for filing the return for such taxable year (not including extensions
thereof).'.
(2) EXTENSION OF TIME TO RETURN EXCESS CONTRIBUTIONS- Subparagraph (C)
of section 530(d)(4) (relating to additional tax for distributions not used
for educational expenses) is amended--
(A) by striking clause (i) and inserting the following new
clause:
`(i) such distribution is made before the first day of the sixth
month of the taxable year following the taxable year, and',
and
(B) by striking `DUE DATE OF RETURN' in the heading and inserting
`CERTAIN DATE'.
(f) COORDINATION WITH HOPE AND LIFETIME LEARNING CREDITS AND QUALIFIED
TUITION PROGRAMS-
(1) IN GENERAL- Section 530(d)(2)(C) is amended to read as
follows:
`(C) COORDINATION WITH HOPE AND LIFETIME LEARNING CREDITS AND
QUALIFIED TUITION PROGRAMS- For purposes of subparagraph (A)--
`(i) CREDIT COORDINATION- The total amount of qualified higher
education expenses with respect to an individual for the taxable year
shall be reduced--
`(I) as provided in section 25A(g)(2), and
`(II) by the amount of such expenses which were taken into account
in determining the credit allowed to the taxpayer or any other person
under section 25A.
`(ii) COORDINATION WITH QUALIFIED TUITION PROGRAMS- If, with respect
to an individual for any taxable year--
`(I) the aggregate distributions during such year to which
subparagraph (A) and section 529(c)(3)(B) apply, exceed
`(II) the total amount of qualified education expenses (after the
application of clause (i)) for such year,
the taxpayer shall allocate such expenses among such distributions
for purposes of determining the amount of the exclusion under
subparagraph (A) and section 529(c)(3)(B).'.
(2) CONFORMING AMENDMENTS-
(A) Subsection (e) of section 25A is amended to read as
follows:
`(e) ELECTION NOT TO HAVE SECTION APPLY- A taxpayer may elect not to have
this section apply with respect to the qualified tuition and related expenses
of an individual for any taxable year.'.
(B) Section 135(d)(2)(A) is amended by striking `allowable' and
inserting `allowed'.
(C) Section 530(d)(2)(D) is amended--
(i) by striking `or credit', and
(ii) by striking `CREDIT OR' in the heading.
(D) Section 4973(e)(1) is amended by adding `and' at the end of
subparagraph (A), by striking subparagraph (B), and by redesignating
subparagraph (C) as subparagraph (B).
(g) RENAMING EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS AS EDUCATION SAVINGS
ACCOUNTS-
(A) Section 530 (as amended by the preceding provisions of this
section) is amended by striking `education individual retirement account'
each place it appears and inserting `education savings account'.
(B) The heading for paragraph (1) of section 530(b) is amended by
striking `EDUCATION INDIVIDUAL RETIREMENT ACCOUNT' and inserting
`EDUCATION SAVINGS ACCOUNT'.
(C) The heading for section 530 is amended to read as
follows:
`SEC. 530. EDUCATION SAVINGS ACCOUNTS.'.
(D) The item in the table of contents for part VII of subchapter F of
chapter 1 relating to section 530 is amended to read as follows:
`Sec. 530. Education savings accounts.'.
(2) CONFORMING AMENDMENTS-
(A) The following provisions are each amended by striking `education
individual retirement' each place it appears and inserting `education
savings':
(ii) Section 26(b)(2)(E).
(iv) Section 135(c)(2)(C).
(v) Subsections (a) and (e) of section 4973.
(vi) Subsections (c) and (e) of section 4975.
(vii) Section 6693(a)(2)(D).
(B) The headings for each of the following provisions are amended by
striking `EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS' each place it appears
and inserting `EDUCATION SAVINGS ACCOUNTS'.
(ii) Section 135(c)(2)(C).
(1) IN GENERAL- Except as provided in paragraph (2), the amendments made
by this section shall apply to taxable years beginning after December 31,
2000.
(2) SUBSECTION (g)- The amendments made by subsection (g) shall take
effect on the date of the enactment of this Act.
SEC. 402. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.
(a) SHORT TITLE- This section may be cited as the `Collegiate Learning and
Student Savings (CLASS) Act'.
(b) ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO MAINTAIN QUALIFIED
TUITION PROGRAMS-
(1) IN GENERAL- Section 529(b)(1) (defining qualified State tuition
program) is amended by inserting `or by one or more eligible educational
institutions' after `maintained by a State or agency or instrumentality
thereof'.
(2) PRIVATE QUALIFIED TUITION PROGRAMS LIMITED TO BENEFIT PLANS- Clause
(ii) of section 529(b)(1)(A) is amended by inserting `in the case of a
program established and maintained by a State or agency or instrumentality
thereof,' before `may make'.
(3) CONFORMING AMENDMENTS-
(A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 530(b)(2)(B),
4973(e), and 6693(a)(2)(C) are each amended by striking `qualified State
tuition' each place it appears and inserting `qualified tuition'.
(B) The headings for sections 72(e)(9) and 135(c)(2)(C) are each
amended by striking `QUALIFIED STATE TUITION' and inserting `QUALIFIED
TUITION'.
(C) The headings for sections 529(b) and 530(b)(2)(B) are each amended
by striking `QUALIFIED STATE TUITION' and inserting `QUALIFIED
TUITION'.
(D) The heading for section 529 is amended by striking
`state'.
(E) The item relating to section 529 in the table of sections for part
VIII of subchapter F of chapter 1 is amended by striking `State'.
(c) EXCLUSION FROM GROSS INCOME OF EDUCATION DISTRIBUTIONS FROM QUALIFIED
TUITION PROGRAMS-
(1) IN GENERAL- Section 529(c)(3)(B) (relating to distributions) is
amended to read as follows:
`(B) DISTRIBUTIONS FOR QUALIFIED HIGHER EDUCATION EXPENSES- For
purposes of this paragraph--
`(i) IN-KIND DISTRIBUTIONS- No amount shall be includible in gross
income under subparagraph (A) by reason of a distribution which consists
of providing a benefit to the distributee which, if paid for by the
distributee, would constitute payment of a qualified higher education
expense.
`(ii) CASH DISTRIBUTIONS- In the case of distributions not described
in clause (i), if--
`(I) such distributions do not exceed the qualified higher
education expenses (reduced by expenses described in clause (i)), no
amount shall be includible in gross income, and
`(II) in any other case, the amount otherwise includible in gross
income shall be reduced by an amount which bears the same ratio to
such amount as such expenses bear to such
distributions.
`(iii) EXCEPTION FOR INSTITUTIONAL PROGRAMS- In the case of any
taxable year beginning before January 1, 2004, clauses (i) and (ii)
shall not apply with respect to any distribution during such taxable
year under a qualified tuition program established and maintained by one
or more eligible educational institutions.
`(iv) TREATMENT AS DISTRIBUTIONS- Any benefit furnished to a
designated beneficiary under a qualified tuition program shall be
treated as a distribution to the beneficiary for purposes of this
paragraph.
`(v) COORDINATION WITH HOPE AND LIFETIME LEARNING CREDITS- The total
amount of qualified higher education expenses with respect to an
individual for the taxable year shall be reduced--
`(I) as provided in section 25A(g)(2), and
`(II) by the amount of such expenses which were taken into account
in determining the credit allowed to the taxpayer or any other person
under section 25A.
`(vi) COORDINATION WITH EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS-
If, with respect to an individual for any taxable year--
`(I) the aggregate distributions to which clauses (i) and (ii) and
section 530(d)(2)(A) apply, exceed
`(II) the total amount of qualified higher education expenses
otherwise taken into account under clauses (i) and (ii) (after the
application of clause (v)) for such year,
the taxpayer shall allocate such expenses among such distributions
for purposes of determining the amount of the exclusion under clauses
(i) and (ii) and section 530(d)(2)(A).'.
(2) CONFORMING AMENDMENTS-
(A) Section 135(d)(2)(B) is amended by striking `the exclusion under
section 530(d)(2)' and inserting `the exclusions under sections
529(c)(3)(B)(i) and 530(d)(2)'.
(B) Section 221(e)(2)(A) is amended by inserting `529,' after
`135,'.
(d) ROLLOVER TO DIFFERENT PROGRAM FOR BENEFIT OF SAME DESIGNATED
BENEFICIARY- Section 529(c)(3)(C) (relating to change in beneficiaries) is
amended--
(1) by striking `transferred to the credit' in clause (i) and inserting
`transferred--
`(I) to another qualified tuition program for the benefit of the
designated beneficiary, or
(2) by adding at the end the following new clause:
`(iii) LIMITATION ON CERTAIN ROLLOVERS- Clause (i)(I) shall not
apply to any amount transferred with respect to a designated beneficiary
if, at any time during the 1-year period ending on the day of such
transfer, any other amount was transferred with respect to such
beneficiary which was not includible in gross income by reason of clause
(i)(I).', and
(3) by inserting `OR PROGRAMS' after `BENEFICIARIES' in the
heading.
(e) MEMBER OF FAMILY INCLUDES FIRST COUSIN- Section 529(e)(2) (defining
member of family) is amended by striking `and' at the end of subparagraph (B),
by striking the period at the end of subparagraph (C) and by inserting `;
and', and by adding at the end the following new subparagraph:
`(D) any first cousin of such beneficiary.'.
(f) DEFINITION OF QUALIFIED HIGHER EDUCATION EXPENSES-
(1) IN GENERAL- Subparagraph (A) of section 529(e)(3) (relating to
definition of qualified higher education expenses) is amended to read as
follows:
`(A) IN GENERAL- The term `qualified higher education expenses'
means--
`(i) tuition and fees required for the enrollment or attendance of a
designated beneficiary at an eligible educational institution for
courses of instruction of such beneficiary at such institution,
and
`(ii) expenses for books, supplies, and equipment which are incurred
in connection with such enrollment or attendance, but not to exceed the
allowance for books and supplies included in the cost of attendance (as
defined in section 472 of the Higher Education Act of 1965 (20 U.S.C.
1087ll), as in effect on the date of the enactment of the Taxpayer
Refund and Relief Act of 1999) as determined by the eligible educational
institution.'.
(2) EXCEPTION FOR EDUCATION INVOLVING SPORTS, ETC- Paragraph (3) of
section 529(e) (relating to qualified higher education expenses) is amended
by adding at the end the following new subparagraph:
`(C) EXCEPTION FOR EDUCATION INVOLVING SPORTS, ETC- The term
`qualified higher education expenses' shall not include expenses with
respect to any course or other education involving sports, games, or
hobbies unless such course or other education is part of the beneficiary's
degree program or is taken to acquire or improve job skills of the
beneficiary.'.
(1) IN GENERAL- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
(2) QUALIFIED HIGHER EDUCATION EXPENSES- The amendments made by
subsection (f) shall apply to amounts paid for courses beginning after
December 31, 1999.
SEC. 403. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE NATIONAL HEALTH
SERVICE CORPS SCHOLARSHIP PROGRAM, THE F. EDWARD HEBERT ARMED FORCES HEALTH
PROFESSIONS SCHOLARSHIP AND FINANCIAL ASSISTANCE PROGRAM, AND CERTAIN OTHER
PROGRAMS.
(a) IN GENERAL- Section 117(c) (relating to the exclusion from gross
income amounts received as a qualified scholarship) is amended--
(1) by striking `Subsections (a)' and inserting the following:
`(1) IN GENERAL- Except as provided in paragraph (2), subsections (a)',
and
(2) by adding at the end the following new paragraph:
`(2) EXCEPTIONS- Paragraph (1) shall not apply to any amount received by
an individual under--
`(A) the National Health Service Corps Scholarship program under
section 338A(g)(1)(A) of the Public Health Service Act,
`(B) the Armed Forces Health Professions Scholarship and Financial
Assistance program under subchapter I of chapter 105 of title 10, United
States Code,
`(C) the National Institutes of Health Undergraduate Scholarship
program under section 487D of the Public Health Service Act, or
`(D) any State program determined by the Secretary to have
substantially similar objectives as such programs.'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendments made
by subsection (a) shall apply to amounts received in taxable years beginning
after December 31, 1993.
(2) STATE PROGRAMS- Section 117(c)(2)(D) of the Internal Revenue Code of
1986 (as added by the amendments made by subsection (a)) shall apply to
amounts received in taxable years beginning after December 31, 1999.
SEC. 404. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED EDUCATIONAL
ASSISTANCE.
Section 127(d) (relating to termination of exclusion for educational
assistance programs) is amended by striking `May 31, 2000' and inserting
`December 31, 2003'.
SEC. 405. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION FOR GOVERNMENTAL
BONDS USED TO FINANCE EDUCATIONAL FACILITIES.
(a) IN GENERAL- Section 148(f)(4)(D)(vii) (relating to increase in
exception for bonds financing public school capital expenditures) is amended
by striking `$5,000,000' the second place it appears and inserting
`$10,000,000'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
obligations issued in calendar years beginning after December 31, 1999.
SEC. 406. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE TO PUBLIC SCHOOL
CONSTRUCTION BONDS.
(a) IN GENERAL- Subparagraph (C) of section 148(f)(4) is amended by adding
at the end the following new clause:
`(xviii) 4-YEAR SPENDING REQUIREMENT FOR PUBLIC SCHOOL CONSTRUCTION
ISSUE-
`(I) IN GENERAL- In the case of a public school construction
issue, the spending requirements of clause (ii) shall be treated as
met if at least 10 percent of the available construction proceeds of
the construction issue are spent for the governmental purposes of the
issue within the 1-year period beginning on the date the bonds are
issued, 30 percent of such proceeds are spent for such purposes within
the 2-year period beginning on such date, 60 percent of such proceeds
are spent for such purposes within the 3-year period beginning on such
date, and 100 percent of such proceeds are spent for such purposes
within the 4-year period beginning on such date.
`(II) PUBLIC SCHOOL CONSTRUCTION ISSUE- For purposes of this
clause, the term `public school construction issue' means any
construction issue if no bond which is part of such issue is a private
activity bond and all of the available construction proceeds of such
issue are to be used for the construction (as defined in clause (iv))
of public school facilities to provide education or training below the
postsecondary level or for the acquisition of land that is
functionally related and subordinate to such
facilities.
`(III) OTHER RULES TO APPLY- Rules similar to the rules of the
preceding provisions of this subparagraph which apply to clause (ii)
also apply to this clause.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
obligations issued after December 31, 1999.
SEC. 407. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN INCOME LIMITATION ON
STUDENT LOAN INTEREST DEDUCTION.
(a) ELIMINATION OF 60-MONTH LIMIT-
(1) IN GENERAL- Section 221 (relating to interest on education loans) is
amended by striking subsection (d) and by redesignating subsections (e),
(f), and (g) as subsections (d), (e), and (f), respectively.
(2) CONFORMING AMENDMENT- Section 6050S(e) is amended by striking
`section 221(e)(1)' and inserting `section 221(d)(1)'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
with respect to any loan interest paid after December 31, 1999, in taxable
years ending after such date.
(b) INCREASE IN INCOME LIMITATION-
(1) IN GENERAL- Section 221(b)(2)(B) (relating to amount of reduction)
is amended by striking clauses (i) and (ii) and inserting the
following:
`(I) the taxpayer's modified adjusted gross income for such
taxable year, over
`(II) $45,000 ($90,000 in the case of a joint return), bears
to
(2) CONFORMING AMENDMENT- Section 221(g)(1) is amended by striking
`$40,000 and $60,000 amounts' and inserting `$45,000 and $90,000
amounts'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to taxable years ending after December 31, 1999.
SEC. 408. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED DEDUCTIONS NOT TO APPLY
TO QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES OF ELEMENTARY AND SECONDARY
SCHOOL TEACHERS.
(a) IN GENERAL- Section 67(b) (defining miscellaneous itemized deductions)
is amended by striking `and' at the end of paragraph (11), by striking the
period at the end of paragraph (12) and inserting `, and', and by adding at
the end the following new paragraph:
`(13) any deduction allowable for the qualified professional development
expenses of an eligible teacher.'.
(b) DEFINITIONS- Section 67 (relating to 2-percent floor on miscellaneous
itemized deductions) is amended by adding at the end the following new
subsection:
`(g) QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES OF ELIGIBLE TEACHERS- For
purposes of subsection (b)(13)--
`(1) QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES-
`(A) IN GENERAL- The term `qualified professional development
expenses' means expenses in an amount not to exceed $1,000 for any taxable
year--
`(i) for tuition, fees, books, supplies, equipment, and
transportation required for the enrollment or attendance of an
individual in a qualified course of instruction, and
`(ii) with respect to which a deduction is allowable under section
162 (determined without regard to this section).
`(B) QUALIFIED COURSE OF INSTRUCTION- The term `qualified course of
instruction' means a course of instruction which--
`(I) at an institution of higher education (as defined in section
481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect
on the date of the enactment of this subsection), or
`(II) a professional conference, and
`(ii) is part of a program of professional development which is
approved and certified by the appropriate local educational agency as
furthering the individual's teaching skills.
`(C) LOCAL EDUCATIONAL AGENCY- The term `local educational agency' has
the meaning given such term by section 14101 of the Elementary and Secondary
Education Act of 1965, as so in effect.
`(A) IN GENERAL- The term `eligible teacher' means an individual who
is a kindergarten through grade 12 classroom teacher, instructor,
counselor, aide, or principal in an elementary or secondary
school.
`(B) ELEMENTARY OR SECONDARY SCHOOL- The terms `elementary school' and
`secondary school' have the meanings given such terms by section 14101 of
the Elementary and Secondary Education Act of 1965 (20 U.S.C. 8801), as so
in effect.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000, and ending before January 1,
2005.
TITLE V--HEALTH CARE PROVISIONS
SEC. 501. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF
INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH PLANS.
(a) IN GENERAL- Part VII of subchapter B of chapter 1 is amended by
redesignating section 222 as section 223 and by inserting after section 221
the following new section:
`SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS.
`(a) IN GENERAL- In the case of an individual, there shall be allowed as a
deduction an amount equal to the applicable percentage of the amount paid
during the taxable year for insurance which constitutes medical care for the
taxpayer and the taxpayer's spouse and dependents.
`(b) APPLICABLE PERCENTAGE- For purposes of subsection (a), the applicable
percentage shall be determined in accordance with the following table:
`For taxable years beginning
--The applicable
in calendar year--
--percentage is--
--25
--35
--65
--100.
`(c) LIMITATION BASED ON OTHER COVERAGE-
`(1) COVERAGE UNDER CERTAIN SUBSIDIZED EMPLOYER PLANS-
`(A) IN GENERAL- Subsection (a) shall not apply to any taxpayer for
any calendar month for which the taxpayer participates in any health plan
maintained by any employer of the taxpayer or of the spouse of the
taxpayer if 50 percent or more of the cost of coverage under such plan
(determined under section 4980B and without regard to payments made with
respect to any coverage described in subsection (e)) is paid or incurred
by the employer.
`(B) EMPLOYER CONTRIBUTIONS TO CAFETERIA PLANS, FLEXIBLE SPENDING
ARRANGEMENTS, AND MEDICAL SAVINGS ACCOUNTS- Employer contributions to a
cafeteria plan, a flexible spending or similar arrangement, or a medical
savings account which are excluded from gross income under section 106
shall be treated for purposes of subparagraph (A) as paid by the
employer.
`(C) AGGREGATION OF PLANS OF EMPLOYER- A health plan which is not
otherwise described in subparagraph (A) shall be treated as described in
such subparagraph if such plan would be so described if all health plans
of persons treated as a single employer under subsection (b), (c), (m), or
(o) of section 414 were treated as one health plan.
`(D) SEPARATE APPLICATION TO HEALTH INSURANCE AND LONG-TERM CARE
INSURANCE- Subparagraphs (A) and (C) shall be applied separately with
respect to--
`(i) plans which include primarily coverage for qualified long-term
care services or are qualified long-term care insurance contracts,
and
`(ii) plans which do not include such coverage and are not such
contracts.
`(2) COVERAGE UNDER CERTAIN FEDERAL PROGRAMS-
`(A) IN GENERAL- Subsection (a) shall not apply to any amount paid for
any coverage for an individual for any calendar month if, as of the first
day of such month, the individual is covered under any medical care
program described in--
`(i) title XVIII, XIX, or XXI of the Social Security
Act,
`(ii) chapter 55 of title 10, United States Code,
`(iii) chapter 17 of title 38, United States Code,
`(iv) chapter 89 of title 5, United States Code, or
`(v) the Indian Health Care Improvement Act.
`(i) QUALIFIED LONG-TERM CARE- Subparagraph (A) shall not apply to
amounts paid for coverage under a qualified long-term care insurance
contract.
`(ii) CONTINUATION COVERAGE OF FEHBP- Subparagraph (A)(iv) shall not
apply to coverage which is comparable to continuation coverage under
section 4980B.
`(d) LONG-TERM CARE DEDUCTION LIMITED TO QUALIFIED LONG-TERM CARE
INSURANCE CONTRACTS- In the case of a qualified long-term care insurance
contract, only eligible long-term care premiums (as defined in section
213(d)(10)) may be taken into account under subsection (a).
`(e) DEDUCTION NOT AVAILABLE FOR PAYMENT OF ANCILLARY COVERAGE PREMIUMS-
Any amount paid as a premium for insurance which provides for--
`(1) coverage for accidents, disability, dental care, vision care, or a
specified illness, or
`(2) making payments of a fixed amount per day (or other period) by
reason of being hospitalized.
shall not be taken into account under subsection (a).
`(1) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS- The amount taken into account by the taxpayer in
computing the deduction under section 162(l) shall not be taken into account
under this section.
`(2) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- The amount taken into
account by the taxpayer in computing the deduction under this section shall
not be taken into account under section 213.
`(g) REGULATIONS- The Secretary shall prescribe such regulations as may be
appropriate to carry out this section, including regulations requiring
employers to report to their employees and the Secretary such information as
the Secretary determines to be appropriate.'.
(b) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES OTHER DEDUCTIONS-
Subsection (a) of section 62 is amended by inserting after paragraph (17) the
following new item:
`(18) HEALTH AND LONG-TERM CARE INSURANCE COSTS- The deduction allowed
by section 222.'.
(c) CLERICAL AMENDMENT- The table of sections for part VII of subchapter B
of chapter 1 is amended by striking the last item and inserting the following
new items:
`Sec. 222. Health and long-term care insurance costs.
`Sec. 223. Cross reference.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 502. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER CAFETERIA
PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.
(1) IN GENERAL- Subsection (f) of section 125 (defining qualified
benefits) is amended by inserting before the period at the end `; except
that such term shall include the payment of premiums for any qualified
long-term care insurance contract (as defined in section 7702B) to the
extent the amount of such payment does not exceed the eligible long-term
care premiums (as defined in section 213(d)(10)) for such contract'.
(b) FLEXIBLE SPENDING ARRANGEMENTS- Section 106 (relating to contributions
by employer to accident and health plans) is amended by striking subsection
(c).
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
SEC. 503. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY
FAMILY MEMBER IN TAXPAYER'S HOME.
(a) IN GENERAL- Section 151 (relating to allowance of deductions for
personal exemptions) is amended by redesignating subsection (e) as subsection
(f) and by inserting after subsection (d) the following new subsection:
`(e) ADDITIONAL EXEMPTION FOR CERTAIN ELDERLY FAMILY MEMBERS RESIDING WITH
TAXPAYER-
`(1) IN GENERAL- An exemption of the exemption amount for each qualified
family member of the taxpayer.
`(2) QUALIFIED FAMILY MEMBER- For purposes of this subsection, the term
`qualified family member' means, with respect to any taxable year, any
individual--
`(A) who is an ancestor of the taxpayer or of the taxpayer's spouse or
who is the spouse of any such ancestor,
`(B) who is a member for the entire taxable year of a household
maintained by the taxpayer, and
`(C) who has been certified, before the due date for filing the return
of tax for the taxable year (without extensions), by a physician (as
defined in section 1861(r)(1) of the Social Security Act) as being an
individual with long-term care needs described in paragraph (3) for a
period--
`(i) which is at least 180 consecutive days, and
`(ii) a portion of which occurs within the taxable year.
Such term shall not include any individual otherwise meeting the
requirements of the preceding sentence unless within the 39 1/2 month period
ending on such due date (or such other period as the Secretary prescribes) a
physician (as so defined) has certified that such individual meets such
requirements.
`(3) INDIVIDUALS WITH LONG-TERM CARE NEEDS- An individual is described
in this paragraph if the individual--
`(A) is unable to perform (without substantial assistance from another
individual) at least two activities of daily living (as defined in section
7702B(c)(2)(B)) due to a loss of functional capacity, or
`(B) requires substantial supervision to protect such individual from
threats to health and safety due to severe cognitive impairment and is
unable to perform, without reminding or cuing assistance, at least one
activity of daily living (as so defined) or to the extent provided in
regulations prescribed by the Secretary (in consultation with the
Secretary of Health and Human Services), is unable to engage in age
appropriate activities.
`(4) SPECIAL RULES- Rules similar to the rules of paragraphs (1), (2),
(3), (4), and (5) of section 21(e) shall apply for purposes of this
subsection.'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 504. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG
CREDIT.
(a) IN GENERAL- Subclause (I) of section 45C(b)(2)(A)(ii) is amended to
read as follows:
`(I) after the date that the application is filed for designation
under such section 526, and'.
(b) CONFORMING AMENDMENT- Clause (i) of section 45C(b)(2)(A) is amended by
inserting `which is' before `being' and by inserting before the comma at the
end `and which is designated under section 526 of such Act'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
amounts paid or incurred after December 31, 1999.
SEC. 505. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO
LIST OF TAXABLE VACCINES; REDUCTION IN PER DOSE TAX RATE.
(a) INCLUSION OF VACCINES-
(1) IN GENERAL- Section 4132(a)(1) (defining taxable vaccine) is amended
by adding at the end the following new subparagraph:
`(L) Any conjugate vaccine against streptococcus
pneumoniae.'.
(A) SALES- The amendment made by this subsection shall apply to
vaccine sales beginning on the day after the date on which the Centers for
Disease Control makes a final recommendation for routine administration to
children of any conjugate vaccine against streptococcus pneumoniae, but
shall not take effect if subsection (c) does not take effect.
(B) DELIVERIES- For purposes of subparagraph (A), in the case of sales
on or before the date described in such subparagraph for which delivery is
made after such date, the delivery date shall be considered the sale
date.
(b) REDUCTION IN PER DOSE TAX RATE-
(1) IN GENERAL- Section 4131(b)(1) (relating to amount of tax) is
amended by striking `75 cents' and inserting `50 cents'.
(A) SALES- The amendment made by this subsection shall apply to
vaccine sales after December 31, 2004, but shall not take effect if
subsection (c) does not take effect.
(B) DELIVERIES- For purposes of subparagraph (A), in the case of sales
on or before the date described in such subparagraph for which delivery is
made after such date, the delivery date shall be considered the sale
date.
(3) LIMITATION ON CERTAIN CREDITS OR REFUNDS- For purposes of applying
section 4132(b) of the Internal Revenue Code of 1986 with respect to any
claim for credit or refund filed after August 31, 2004, the amount of tax
taken into account shall not exceed the tax computed under the rate in
effect on January 1, 2005.
(c) VACCINE TAX AND TRUST FUND AMENDMENTS-
(1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program
Modification Act (and the amendments made by such sections) are hereby
repealed.
(2) Subparagraph (A) of section 9510(c)(1) is amended by striking
`August 5, 1997' and inserting `October 21, 1998'.
(3) The amendments made by this subsection shall take effect as if
included in the provisions of the Tax and Trade Relief Extension Act of 1998
to which they relate.
SEC. 506. DRUG BENEFITS FOR MEDICARE BENEFICIARIES.
(a) IN GENERAL- Section 213 (relating to medical, dental, etc., expenses)
is amended by redesignating subsection (e) as subsection (f) and by inserting
after subsection (d) the following new subsection:
`(e) DRUG BENEFITS FOR MEDICARE BENEFICIARIES-
`(1) DEDUCTION FOR CERTAIN FORMER PRESCRIPTION DRUGS-
`(A) IN GENERAL- Subsection (b) shall not apply to amounts paid for
eligible former prescription drugs for a medicare beneficiary who is the
taxpayer or the taxpayer's spouse or dependent (as defined in section
152).
`(B) ELIGIBLE FORMER PRESCRIPTION DRUG- For purposes of subparagraph
(A), the term `eligible former prescription drug' means any drug or
biological which is not a prescribed drug at the time purchased by the
taxpayer but was a prescribed drug at any prior time during the calendar
year in which so purchased or during the 2 preceding calendar
years.
`(2) ADJUSTED GROSS INCOME THRESHOLD NOT TO APPLY TO PRESCRIPTION DRUG
INSURANCE COVERAGE FOR MEDICARE BENEFICIARIES IF CERTAIN CONDITIONS MET- The
7.5 percent adjusted gross income threshold in subsection (a) shall not
apply to the expenses paid during the taxable year for prescription drug
insurance coverage for a medicare beneficiary who is the taxpayer or the
taxpayer's spouse or dependent (as defined in section 152) if--
`(A) the Secretary certifies that, throughout such taxable year, the
conditions specified in paragraph (3) are met, and
`(B) the charge for such coverage is either separately stated in the
contract or furnished to the policyholder by the insurance company in a
separate statement.
`(3) CONDITIONS- For purposes of paragraph (2), the conditions specified
in this paragraph are met if all of the following are in effect:
`(A) ASSISTANCE FOR PRESCRIPTION DRUGS FOR LOW-INCOME MEDICARE
BENEFICIARIES-
`(i) Low-income assistance is available to enable the purchase of
coverage of prescription drugs as described in subparagraph (B) or (C)
for medicare beneficiaries with incomes under 135 percent of the
applicable Federal poverty level, with such assistance phasing out for
beneficiaries with incomes between 135 percent and 150 percent of such
level.
`(ii) The Federal Government provides funding for the costs of such
assistance.
`(B) AUTHORIZING MEDIGAP COVERAGE SOLELY OF PRESCRIPTION DRUGS- At
least one of the benefit packages authorized to be offered under a
medicare supplemental policy under the Social Security Act is a package
which provides solely for the coverage of costs of prescription
drugs.
`(C) STRUCTURAL MEDICARE REFORM- Coverage for outpatient prescription
drugs for medicare beneficiaries is provided only through integrated
comprehensive health plans which offer current medicare covered services
and maximum limitations on out-of-pocket spending and such comprehensive
plans sponsored by the Health Care Financing Administration compete on the
same basis as private plans.
`(D) DEDUCTION FOR ELIGIBLE FORMER PRESCRIPTION DRUGS- The treatment
under paragraph (1) of expenses paid for eligible former prescription
drugs applies for such taxable year.
`(4) DEFINITION AND SPECIAL RULE-
`(A) MEDICARE BENEFICIARY- For purposes of this subsection, the term
`medicare beneficiary' means an individual who is entitled to benefits
under part A, or enrolled under part B or C, of title XVIII of the Social
Security Act.
`(B) COORDINATION WITH OTHER EXPENSES- Expenses to which the 7.5
percent adjusted gross income threshold in subsection (a) does not apply
by reason of paragraph (1) and (2) shall not be taken into account in
applying such threshold to other expenses.'.
(b) DEDUCTION FOR PRESCRIPTION DRUG INSURANCE COVERAGE ALLOWED WHETHER OR
NOT TAXPAYER ITEMIZES OTHER DEDUCTIONS- Subsection (a) of section 62 (defining
adjusted gross income) is amended by inserting after paragraph (18) the
following new paragraph:
`(19) PRESCRIPTION DRUG INSURANCE COVERAGE FOR MEDICARE BENEFICIARIES-
The deduction allowed by section 213(a) to the extent of the expenses to
which the 7.5 percent adjusted gross income threshold in subsection (a) does
not apply by reason of paragraph (2) of section 213(e).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2002.
TITLE VI--ESTATE TAX RELIEF
Subtitle A--Repeal of Estate, Gift, and Generation-Skipping Taxes;
Repeal of Step Up in Basis At Death
SEC. 601. REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING TAXES.
(a) IN GENERAL- Subtitle B is hereby repealed.
(b) EFFECTIVE DATE- The repeal made by subsection (a) shall apply to the
estates of decedents dying, and gifts and generation-skipping transfers made,
after December 31, 2008.
SEC. 602. TERMINATION OF STEP UP IN BASIS AT DEATH.
(a) TERMINATION OF APPLICATION OF SECTION 1014- Section 1014 (relating to
basis of property acquired from a decedent) is amended by adding at the end
the following:
`(f) TERMINATION- In the case of a decedent dying after December 31, 2008,
this section shall not apply to property for which basis is provided by
section 1023.'.
(b) CONFORMING AMENDMENT- Subsection (a) of section 1016 (relating to
adjustments to basis) is amended by striking `and' at the end of paragraph
(26), by striking the period at the end of paragraph (27) and inserting `;
and', and by adding at the end the following:
`(28) to the extent provided in section 1023 (relating to basis for
certain property acquired from a decedent dying after December 31,
2008).'.
SEC. 603. CARRYOVER BASIS AT DEATH.
(a) GENERAL RULE- Part II of subchapter O of chapter 1 (relating to basis
rules of general application) is amended by inserting after section 1022, as
added by section 202, the following:
`SEC. 1023. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED FROM A DECEDENT
DYING AFTER DECEMBER 31, 2008.
`(a) CARRYOVER BASIS- Except as otherwise provided in this section, the
basis of carryover basis property in the hands of a person acquiring such
property from a decedent shall be determined under section 1015.
`(b) CARRYOVER BASIS PROPERTY DEFINED-
`(1) IN GENERAL- For purposes of this section, the term `carryover basis
property' means any property--
`(A) which is acquired from or passed from a decedent who died after
December 31, 2008, and
`(B) which is not excluded pursuant to paragraph (2).
The property taken into account under subparagraph (A) shall be
determined under section 1014(b) without regard to subparagraph (A) of the
last sentence of paragraph (9) thereof.
`(2) CERTAIN PROPERTY NOT CARRYOVER BASIS PROPERTY- The term `carryover
basis property' does not include--
`(A) any item of gross income in respect of a decedent described in
section 691,
`(B) property which was acquired from the decedent by the surviving
spouse of the decedent but only if the value of such property would have
been deductible from the value of the taxable estate of the decedent under
section 2056, as in effect on the day before the date of the enactment of
the Taxpayer Refund and Relief Act of 1999, and
`(C) any includible property of the decedent if the aggregate adjusted
fair market value of such property does not exceed $2,000,000.
For purposes of this subsection, the term `adjusted fair market value'
means, with respect to any property, fair market value reduced by any
indebtedness secured by such property.
`(3) LIMITATION ON EXCEPTION FOR PROPERTY ACQUIRED BY SURVIVING SPOUSE-
The adjusted fair market value of property which is not carryover basis
property by reason of paragraph (2)(B) shall not exceed $3,000,000. The
executor shall allocate the limitation under the preceding sentence among
such property.
`(4) PHASEIN OF CARRYOVER BASIS IF PROPERTY EXCEEDS $1,300,000-
`(A) IN GENERAL- If the aggregate adjusted fair market value of the
includible property of the decedent exceeds $1,300,000, but does not
exceed $2,000,000, the amount of the increase in the basis of includible
property which would (but for this paragraph) result under section 1014
shall be reduced by the amount which bears the same ratio to such increase
as such excess bears to $700,000.
`(B) ALLOCATION OF REDUCTION- The reduction under subparagraph (A)
shall be allocated among only the excepted includible property having net
appreciation and shall be allocated in proportion to the respective
amounts of such net appreciation. For purposes of the preceding sentence,
the term `net appreciation' means the excess of the adjusted fair market
value over the decedent's adjusted basis immediately before such
decedent's death.
`(5) INCLUDIBLE PROPERTY-
`(A) IN GENERAL- For purposes of this subsection, the term `includible
property' means property which would be included in the gross estate of
the decedent under any of the following provisions as in effect on the day
before the date of the enactment of the Taxpayer Refund and Relief Act of
1999:
`(B) EXCLUSION OF PROPERTY ACQUIRED BY SPOUSE- Such term shall not
include property which is not carryover basis property by reason of
paragraph (2)(B).
`(c) REGULATIONS- The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section.'.
(b) MISCELLANEOUS AMENDMENTS RELATED TO CARRYOVER BASIS-
(1) CAPITAL GAIN TREATMENT FOR INHERITED ART WORK OR SIMILAR
PROPERTY-
(A) IN GENERAL- Subparagraph (C) of section 1221(3) (defining capital
asset) is amended by inserting `(other than by reason of section 1023)'
after `is determined'.
(B) COORDINATION WITH SECTION 170- Paragraph (1) of section 170(e)
(relating to certain contributions of ordinary income and capital gain
property) is amended by adding at the end the following: `For purposes of
this paragraph, the determination of whether property is a capital asset
shall be made without regard to the exception contained in section
1221(3)(C) for basis determined under section 1023.'.
(2) DEFINITION OF EXECUTOR- Section 7701(a) (relating to definitions) is
amended by adding at the end the following:
`(47) EXECUTOR- The term `executor' means the executor or administrator
of the decedent, or, if there is no executor or administrator appointed,
qualified, and acting within the United States, then any person in actual or
constructive possession of any property of the decedent.'.
(3) CLERICAL AMENDMENT- The table of sections for part II of subchapter
O of chapter 1 is amended by adding at the end the following new item:
`Sec. 1023. Carryover basis for certain property acquired from a decedent
dying after December 31, 2008.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
estates of decedents dying after December 31, 2008.
Subtitle B--Reductions of Estate and Gift Tax Rates Prior to
Repeal
SEC. 611. ADDITIONAL REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) MAXIMUM RATE OF TAX REDUCED TO 50 PERCENT-
(1) IN GENERAL- The table contained in section 2001(c)(1) is amended by
striking the two highest brackets and inserting the following:
`Over $2,500,000
$1,025,800, plus 50% of the excess over $2,500,000.'.
(2) PHASE-IN OF REDUCED RATE- Subsection (c) of section 2001 is amended
by adding at the end the following new paragraph:
`(3) PHASE-IN OF REDUCED RATE- In the case of decedents dying, and gifts
made, during 2001, the last item in the table contained in paragraph (1)
shall be applied by substituting `53%' for `50%'.'.
(b) REPEAL OF PHASEOUT OF GRADUATED RATES- Subsection (c) of section 2001
is amended by striking paragraph (2) and redesignating paragraph (3), as added
by subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS OF RATES OF TAX- Subsection (c) of section 2001,
as so amended, is amended by adding at the end the following new paragraph:
`(3) PHASEDOWN OF TAX- In the case of estates of decedents dying, and
gifts made, during any calendar year after 2004 and before 2009--
`(A) IN GENERAL- Except as provided in subparagraph (C), the tentative
tax under this subsection shall be determined by using a table prescribed
by the Secretary (in lieu of using the table contained in paragraph (1))
which is the same as such table; except that--
`(i) each of the rates of tax shall be reduced by the number of
percentage points determined under subparagraph (B), and
`(ii) the amounts setting forth the tax shall be adjusted to the
extent necessary to reflect the adjustments under clause
(i).
`(B) PERCENTAGE POINTS OF REDUCTION-
--The number of
`For calendar year:
--percentage points is:
--1.0
--2.0
--3.0
--4.0
--5.5
--7.5.
`(C) COORDINATION WITH INCOME TAX RATES- The reductions under
subparagraph (A)--
`(i) shall not reduce any rate under paragraph (1) below the lowest
rate in section 1(c), and
`(ii) shall not reduce the highest rate under paragraph (1) below
the highest rate in section 1(c).
`(D) COORDINATION WITH CREDIT FOR STATE DEATH TAXES- Rules similar to
the rules of subparagraph (A) shall apply to the table contained in
section 2011(b) except that the Secretary shall prescribe percentage point
reductions which maintain the proportionate relationship (as in effect
before any reduction under this paragraph) between the credit under
section 2011 and the tax rates under subsection (c).'.
(1) SUBSECTIONS (a) AND (b)- The amendments made by subsections (a) and
(b) shall apply to estates of decedents dying, and gifts made, after
December 31, 2000.
(2) SUBSECTION (c)- The amendment made by subsection (c) shall apply to
estates of decedents dying, and gifts made, after December 31, 2004.
Subtitle C--Unified Credit Replaced With Unified Exemption
Amount
SEC. 621. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH UNIFIED
EXEMPTION AMOUNT.
(1) ESTATE TAX- Part IV of subchapter A of chapter 11 is amended by
inserting after section 2051 the following new section:
`SEC. 2052. EXEMPTION.
`(a) IN GENERAL- For purposes of the tax imposed by section 2001, the
value of the taxable estate shall be determined by deducting from the value of
the gross estate an amount equal to the excess (if any) of--
`(1) the exemption amount for the calendar year in which the decedent
died, over
`(A) the aggregate amount allowed as an exemption under section 2521
with respect to gifts made by the decedent after December 31, 2000,
and
`(B) the aggregate amount of gifts made by the decedent for which
credit was allowed by section 2505 (as in effect on the day before the
date of the enactment of the Taxpayer Refund and Relief Act of
1999).
Gifts which are includible in the gross estate of the decedent shall not
be taken into account in determining the amounts under paragraph (2).
`(b) EXEMPTION AMOUNT- For purposes of subsection (a), the term `exemption
amount' means the amount determined in accordance with the following table:
`In the case of
--The exemption
calendar year:
--amount is:
2001
--$675,000
2002 and 2003
--$700,000
2004
--$850,000
2005
--$950,000
2006 or thereafter
--$1,000,000.'.
(2) GIFT TAX- Subchapter C of chapter 12 (relating to deductions) is
amended by inserting before section 2522 the following new section:
`SEC. 2521. EXEMPTION.
`In computing taxable gifts for any calendar year, there shall be allowed
as a deduction in the case of a citizen or resident of the United States an
amount equal to the excess of--
`(1) the exemption amount determined under section 2052 for such
calendar year, over
`(A) the aggregate amount allowed as an exemption under this section
for all preceding calendar years after 2000, and
`(B) the aggregate amount of gifts for which credit was allowed by
section 2505 (as in effect on the day before the date of the enactment of
the Taxpayer Refund and Relief Act of 1999).'.
(b) REPEAL OF UNIFIED CREDITS-
(1) Section 2010 (relating to unified credit against estate tax) is
hereby repealed.
(2) Section 2505 (relating to unified credit against gift tax) is hereby
repealed.
(c) CONFORMING AMENDMENTS-
(1) Subparagraph (B) of section 2001(b)(1) is amended by inserting
before the comma `reduced by the amount described in section
2052(a)(2)(B)'.
(2)(A) Subsection (b) of section 2011 is amended--
(i) by striking `adjusted' in the table, and
(ii) by striking the last sentence.
(B) Subsection (f) of section 2011 is amended by striking `, reduced by
the amount of the unified credit provided by section 2010'.
(3) Subsection (a) of section 2012 is amended by striking `and the
unified credit provided by section 2010'.
(4)(A) Subsection (b) of section 2013 is amended by inserting before the
period at the end of the first sentence `and increased by the exemption
allowed under section 2052 or 2106(a)(4) (or the corresponding provisions of
prior law) in determining the taxable estate of the transferor for purposes
of the estate tax'.
(B) Subparagraph (A) of section 2013(c)(1) is amended by striking
`2010,'.
(5) Paragraph (2) of section 2014(b) is amended by striking
`2010,'.
(6) Clause (ii) of section 2056A(b)(12)(C) is amended to read as
follows:
`(ii) to treat any reduction in the tax imposed by paragraph (1)(A)
by reason of the credit allowable under section 2010 (as in effect on
the day before the date of the enactment of the Taxpayer Refund and
Relief Act of 1999) or the exemption allowable under section 2052 with
respect to the decedent as a credit under section 2505 (as so in effect)
or exemption under section 2521 (as the case may be) allowable to such
surviving spouse for purposes of determining the amount of the exemption
allowable under section 2521 with respect to taxable gifts made by the
surviving spouse during the year in which the spouse becomes a citizen
or any subsequent year,'.
(7) Paragraph (3) of section 2057(a) is amended to read as
follows:
`(3) COORDINATION WITH EXEMPTION AMOUNT-
`(A) IN GENERAL- Except as provided in subparagraph (B), if this
section applies to an estate, the exemption amount under section 2052
shall be $625,000.
`(B) INCREASE IN EXEMPTION AMOUNT IF DEDUCTION IS LESS THAN $675,000-
If the deduction allowed by this section is less than $675,000, the amount
of the exemption amount under section 2052 shall be increased (but not
above the amount which would apply to the estate without regard to this
section) by the excess of $675,000 over the amount of the deduction
allowed.'.
(8)(A) Subparagraph (B) of section 2101(b)(1) is amended by inserting
before the comma `reduced by the aggregate amount of gifts for which credit
was allowed by section 2505 (as in effect on the day before the date of the
enactment of the Taxpayer Refund and Relief Act of 1999)'
(B) Subsection (b) of section 2101 is amended by striking the last
sentence.
(9) Section 2102 is amended by striking subsection (c).
(10) Subsection (a) of section 2106 is amended by adding at the end the
following new paragraph:
`(A) IN GENERAL- An exemption of $60,000.
`(B) RESIDENTS OF POSSESSIONS OF THE UNITED STATES- In the case of a
decedent who is considered to be a nonresident not a citizen of the United
States under section 2209, the exemption under this paragraph shall be the
greater of--
`(ii) that proportion of $175,000 which the value of that part of
the decedent's gross estate which at the time of his death is situated
in the United States bears to the value of his entire gross estate
wherever situated.
`(i) COORDINATION WITH TREATIES- To the extent required under any
treaty obligation of the United States, the exemption allowed under this
paragraph shall be equal to the amount which bears the same ratio to the
exemption amount under section 2052 (for the calendar year in which the
decedent died) as the value of the part of the decedent's gross estate
which at the time of his death is situated in the United States bears to
the value of his entire gross estate wherever situated. For purposes of
the preceding sentence, property shall not be treated as situated in the
United States if such property is exempt from the tax imposed by this
subchapter under any treaty obligation of the United States.
`(ii) COORDINATION WITH GIFT TAX EXEMPTION AND UNIFIED CREDIT- If an
exemption has been allowed under section 2521 (or a credit has been
allowed under section 2505 as in effect on the day before the date of
the enactment of the Taxpayer Refund and Relief Act of 1999) with
respect to any gift made by the decedent, each dollar amount contained
in subparagraph (A) or (B) or the exemption amount applicable under
clause (i) of this subparagraph (whichever applies) shall be reduced by
the exemption so allowed under 2521 (or, in the case of such a credit,
by the amount of the gift for which the credit was so
allowed).'.
(11)(A) Subsection (a) of section 2107 is amended by adding at the end
the following new paragraph:
`(3) LIMITATION ON EXEMPTION AMOUNT- Subparagraphs (B) and (C) of
section 2106(a)(4) shall not apply in applying section 2106 for purposes of
this section.'.
(B) Subsection (c) of section 2107 is amended--
(i) by striking paragraph (1) and by redesignating paragraphs (2)
and (3) as paragraphs (1) and (2), respectively, and
(ii) by striking the second sentence of paragraph (2) (as so
redesignated).
(12) Section 2206 is amended by striking `the taxable estate' in the
first sentence and inserting `the sum of the taxable estate and the amount
of the exemption allowed under section 2052 or 2106(a)(4) in computing the
taxable estate'.
(13) Section 2207 is amended by striking `the taxable estate' in the
first sentence and inserting `the sum of the taxable estate and the amount
of the exemption allowed under section 2052 or 2106(a)(4) in computing the
taxable estate'.
(14) Subparagraph (B) of section 2207B(a)(1) is amended to read as
follows:
`(B) the sum of the taxable estate and the amount of the exemption
allowed under section 2052 or 2106(a)(4) in computing the taxable
estate.'.
(15) Subsection (a) of section 2503 is amended by striking `section
2522' and inserting `section 2521'.
(16) Paragraph (1) of section 6018(a) is amended by striking `the
applicable exclusion amount in effect under section 2010(c)' and inserting
`the exemption amount under section 2052'.
(17) Subparagraph (A) of section 6601(j)(2) is amended to read as
follows:
`(A) the amount of the tax which would be imposed by chapter 11 on an
amount of taxable estate equal to $1,000,000, or'.
(18) The table of sections for part II of subchapter A of chapter 11 is
amended by striking the item relating to section 2010.
(19) The table of sections for part IV of subchapter A of chapter 11 is
amended by inserting after the item relating to section 2051 the following
new item:
`Sec. 2052. Exemption.'.
(20) The table of sections for subchapter A of chapter 12 is amended by
striking the item relating to section 2505.
(21) The table of sections for subchapter C of chapter 12 is amended by
inserting before the item relating to section 2522 the following new
item:
`Sec. 2521. Exemption.'.
(d) EFFECTIVE DATE- The amendments made by this section--
(1) insofar as they relate to the tax imposed by chapter 11 of the
Internal Revenue Code of 1986, shall apply to estates of decedents dying
after December 31, 2000, and
(2) insofar as they relate to the tax imposed by chapter 12 of such
Code, shall apply to gifts made after December 31, 2000.
Subtitle D--Modifications of Generation-Skipping Transfer
Tax
SEC. 631. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO
TRUSTS; RETROACTIVE ALLOCATIONS.
(a) IN GENERAL- Section 2632 (relating to special rules for allocation of
GST exemption) is amended by redesignating subsection (c) as subsection (e)
and by inserting after subsection (b) the following new subsections:
`(c) DEEMED ALLOCATION TO CERTAIN LIFETIME TRANSFERS TO GST TRUSTS-
`(1) IN GENERAL- If any individual makes an indirect skip during such
individual's lifetime, any unused portion of such individual's GST exemption
shall be allocated to the property transferred to the extent necessary to
make the inclusion ratio for such property zero. If the amount of the
indirect skip exceeds such unused portion, the entire unused portion shall
be allocated to the property transferred.
`(2) UNUSED PORTION- For purposes of paragraph (1), the unused portion
of an individual's GST exemption is that portion of such exemption which has
not previously been--
`(A) allocated by such individual,
`(B) treated as allocated under subsection (b) with respect to a
direct skip occurring during or before the calendar year in which the
indirect skip is made, or
`(C) treated as allocated under paragraph (1) with respect to a prior
indirect skip.
`(A) INDIRECT SKIP- For purposes of this subsection, the term
`indirect skip' means any transfer of property (other than a direct skip)
subject to the tax imposed by chapter 12 made to a GST trust.
`(B) GST TRUST- The term `GST trust' means a trust that could have a
generation-skipping transfer with respect to the transferor
unless--
`(i) the trust instrument provides that more than 25 percent of the
trust corpus must be distributed to or may be withdrawn by 1 or more
individuals who are non-skip persons--
`(I) before the date that the individual attains age
46,
`(II) on or before 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.
`(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-
`(A) a non-skip person has an interest or a future interest in a trust
to which any transfer has been made,
`(i) is a lineal descendant of a grandparent of the transferor or of
a grandparent of the transferor's spouse or former spouse,
and
`(ii) is assigned to a generation below the generation assignment of
the transferor, and
`(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such transferor's
unused GST exemption to any previous transfer or transfers to the trust on a
chronological basis.
`(2) SPECIAL RULES- If the allocation under paragraph (1) by the
transferor is made on a gift tax return filed on or before the date
prescribed by section 6075(b) for gifts made within the calendar year within
which the non-skip person's death occurred--
`(A) the value of such transfer or transfers for purposes of section
2642(a) shall be determined as if such allocation had been made on a
timely filed gift tax return for each calendar year within which each
transfer was made,
`(B) such allocation shall be effective immediately before such death,
and
`(C) the amount of the transferor's unused GST exemption available to
be allocated shall be determined immediately before such death.
`(3) FUTURE INTEREST- For purposes of this subsection, a person has a
future interest in a trust if the trust may permit income or corpus to be
paid to such person on a date or dates in the future.'.
(b) CONFORMING AMENDMENT- Paragraph (2) of section 2632(b) is amended by
striking `with respect to a direct skip' and inserting `or subsection
(c)(1)'.
(1) DEEMED ALLOCATION- Section 2632(c) of the Internal Revenue Code of
1986 (as added by subsection (a)), and the amendment made by subsection (b),
shall apply to transfers subject to chapter 11 or 12 made after December 31,
1999, and to estate tax inclusion periods ending after December 31,
1999.
(2) RETROACTIVE ALLOCATIONS- Section 2632(d) of the Internal Revenue
Code of 1986 (as added by subsection (a)) shall apply to deaths of non-skip
persons occurring after the date of the enactment of this Act.
SEC. 632. SEVERING OF TRUSTS.
(a) IN GENERAL- Subsection (a) of section 2642 (relating to inclusion
ratio) is amended by adding at the end the following new paragraph:
`(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 the date of the enactment of this Act.
SEC. 633. MODIFICATION OF CERTAIN VALUATION RULES.
(a) GIFTS FOR WHICH GIFT TAX RETURN FILED OR DEEMED ALLOCATION MADE-
Paragraph (1) of section 2642(b) (relating to valuation rules, etc.) is
amended to read as follows:
`(1) GIFTS FOR WHICH GIFT TAX RETURN FILED OR DEEMED ALLOCATION MADE- If
the allocation of the GST exemption to any transfers of property is made on
a gift tax return filed on or before the date prescribed by section 6075(b)
for such transfer or is deemed to be made under section 2632 (b)(1) or
(c)(1)--
`(A) the value of such property for purposes of subsection (a) shall
be its value as finally determined for purposes of chapter 12 (within the
meaning of section 2001(f)(2)), or, in the case of an allocation deemed to
have been made at the close of an estate tax inclusion period, its value
at the time of the close of the estate tax inclusion period, and
`(B) such allocation shall be effective on and after the date of such
transfer, or, in the case of an allocation deemed to have been made at the
close of an estate tax inclusion period, on and after the close of such
estate tax inclusion period.'.
(b) TRANSFERS AT DEATH- Subparagraph (A) of section 2642(b)(2) is amended
to read as follows:
`(A) TRANSFERS AT DEATH- If property is transferred as a result of the
death of the transferor, the value of such property for purposes of
subsection (a) shall be its value as finally determined for purposes of
chapter 11; except that, if the requirements prescribed by the Secretary
respecting allocation of post-death changes in value are not met, the
value of such property shall be determined as of the time of the
distribution concerned.'.
(c) EFFECTIVE DATE- The amendments made by this section shall take effect
as if included in the amendments made by section 1431 of the Tax Reform Act of
1986.
SEC. 634. RELIEF PROVISIONS.
(a) IN GENERAL- Section 2642 is amended by adding at the end the following
new subsection:
`(1) RELIEF FOR LATE ELECTIONS-
`(A) IN GENERAL- The Secretary shall by regulation prescribe such
circumstances and procedures under which extensions of time will be
granted to make--
`(i) an allocation of GST exemption described in paragraph (1) or
(2) of subsection (b), and
`(ii) an election under subsection (b)(3) or (c)(5) of section
2632.
Such regulations shall include procedures for requesting comparable
relief with respect to transfers made before the date of 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.'.
(1) RELIEF FOR LATE ELECTIONS- Section 2642(g)(1) of the Internal
Revenue Code of 1986 (as added by subsection (a)) shall apply to requests
pending on, or filed after, the date of the enactment of this Act.
(2) SUBSTANTIAL COMPLIANCE- Section 2642(g)(2) of such Code (as so
added) shall take effect on the date of the enactment of this Act and shall
apply to allocations made prior to such date for purposes of determining the
tax consequences of generation-skipping transfers with respect to which the
period of time for filing claims for refund has not expired. No implication
is intended with respect to the availability of relief for late elections or
the application of a rule of substantial compliance prior to the enactment
of this amendment.
Subtitle E--Conservation Easements
SEC. 641. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASEMENTS.
(a) WHERE LAND IS LOCATED-
(1) IN GENERAL- Clause (i) of section 2031(c)(8)(A) (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) (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 VII--TAX RELIEF FOR DISTRESSED COMMUNITIES AND
INDUSTRIES
Subtitle A--American Community Renewal Act of 1999
SEC. 701. SHORT TITLE.
This subtitle may be cited as the `American Community Renewal Act of
1999'.
SEC. 702. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL COMMUNITIES.
(a) IN GENERAL- Chapter 1 is amended by adding at the end the following
new subchapter:
`Subchapter X--Renewal Communities
`Part I. Designation.
`Part II. Renewal community capital gain; renewal community business.
`Part III. Family development accounts.
`Part IV. Additional incentives.
`PART I--DESIGNATION
`Sec. 1400E. Designation of renewal communities.
`SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
`(1) DEFINITIONS- For purposes of this title, the term `renewal
community' means any area--
`(A) which is nominated by one or more local governments and the State
or States in which it is located for designation as a renewal community
(hereinafter in this section referred to as a `nominated area');
and
`(B) which the Secretary of Housing and Urban Development designates
as a renewal community, after consultation with--
`(i) the Secretaries of Agriculture, Commerce, Labor, and the
Treasury; the Director of the Office of Management and Budget; and the
Administrator of the Small Business Administration; and
`(ii) in the case of an area on an Indian reservation, the Secretary
of the Interior.
`(2) Number of designations-
`(A) IN GENERAL- The Secretary of Housing and Urban Development may
designate not more than 20 nominated areas as renewal
communities.
`(B) MINIMUM DESIGNATION IN RURAL AREAS- Of the areas designated under
paragraph (1), at least four must be areas--
`(i) which are within a local government jurisdiction or
jurisdictions with a population of less than 50,000,
`(ii) which are outside of a metropolitan statistical area (within
the meaning of section 143(k)(2)(B)), or
`(iii) which are determined by the Secretary of Housing and Urban
Development, after consultation with the Secretary of Commerce, to be
rural areas.
`(3) AREAS DESIGNATED BASED ON DEGREE OF POVERTY, ETC-
`(A) IN GENERAL- Except as otherwise provided in this section, the
nominated areas designated as renewal communities under this subsection
shall be those nominated areas with the highest average ranking with
respect to the criteria described in subparagraphs (B), (C), and (D) of
subsection (c)(3). For purposes of the preceding sentence, an area shall
be ranked within each such criterion on the basis of the amount by which
the area exceeds such criterion, with the area which exceeds such
criterion by the greatest amount given the highest ranking.
`(B) EXCEPTION WHERE INADEQUATE COURSE OF ACTION, ETC- An area shall
not be designated under subparagraph (A) if the Secretary of Housing and
Urban Development determines that the course of action described in
subsection (d)(2) with respect to such area is inadequate.
`(C) PRIORITY FOR EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES WITH
RESPECT TO FIRST HALF OF DESIGNATIONS- With respect to the first 10
designations made under this section--
`(i) all shall be chosen from nominated areas which are empowerment
zones or enterprise communities (and are otherwise eligible for
designation under this section); and
`(ii) two shall be areas described in paragraph (2)(B).
`(4) Limitation on designations-
`(A) PUBLICATION OF REGULATIONS- The Secretary of Housing and Urban
Development shall prescribe by regulation no later than 4 months after the
date of the enactment of this section, after consultation with the
officials described in paragraph (1)(B)--
`(i) the procedures for nominating an area under paragraph
(1)(A);
`(ii) the parameters relating to the size and population
characteristics of a renewal community; and
`(iii) the manner in which nominated areas will be evaluated based
on the criteria specified in subsection (d).
`(B) TIME LIMITATIONS- The Secretary of Housing and Urban Development
may designate nominated areas as renewal communities only during the
24-month period beginning on the first day of the first month following
the month in which the regulations described in subparagraph (A) are
prescribed.
`(C) PROCEDURAL RULES- The Secretary of Housing and Urban Development
shall not make any designation of a nominated area as a renewal community
under paragraph (2) unless--
`(i) the local governments and the States in which the nominated
area is located have the authority--
`(I) to nominate such area for designation as a renewal
community;
`(II) to make the State and local commitments described in
subsection (d); and
`(III) to provide assurances satisfactory to the Secretary of
Housing and Urban Development that such commitments will be
fulfilled,
`(ii) a nomination regarding such area is submitted in such a manner
and in such form, and contains such information, as the Secretary of
Housing and Urban Development shall by regulation prescribe;
and
`(iii) the Secretary of Housing and Urban Development determines
that any information furnished is reasonably accurate.
`(5) NOMINATION PROCESS FOR INDIAN RESERVATIONS- For purposes of this
subchapter, in the case of a nominated area on an Indian reservation, the
reservation governing body (as determined by the Secretary of the Interior)
shall be treated as being both the State and local governments with respect
to such area.
`(b) Period for Which Designation Is in Effect-
`(1) IN GENERAL- Any designation of an area as a renewal community shall
remain in effect during the period beginning on the date of the designation
and ending on the earliest of--
`(B) the termination date designated by the State and local
governments in their nomination, or
`(C) the date the Secretary of Housing and Urban Development revokes
such designation.
`(2) REVOCATION OF DESIGNATION- The Secretary of Housing and Urban
Development may revoke the designation under this section of an area if such
Secretary determines that the local government or the State in which the
area is located--
`(A) has modified the boundaries of the area, or
`(B) is not complying substantially with, or fails to make progress in
achieving, the State or local commitments, respectively, described in
subsection (d).
`(c) Area and Eligibility Requirements-
`(1) IN GENERAL- The Secretary of Housing and Urban Development may
designate a nominated area as a renewal community under subsection (a) only
if the area meets the requirements of paragraphs (2) and (3) of this
subsection.
`(2) AREA REQUIREMENTS- A nominated area meets the requirements of this
paragraph if--
`(A) the area is within the jurisdiction of one or more local
governments;
`(B) the boundary of the area is continuous; and
`(i) has a population, of at least--
`(I) 4,000 if any portion of such area (other than a rural area
described in subsection (a)(2)(B)(i)) is located within a metropolitan
statistical area (within the meaning of section 143(k)(2)(B)) which
has a population of 50,000 or greater; or
`(II) 1,000 in any other case; or
`(ii) is entirely within an Indian reservation (as determined by the
Secretary of the Interior).
`(3) ELIGIBILITY REQUIREMENTS- A nominated area meets the requirements
of this paragraph if the State and the local governments in which it is
located certify (and the Secretary of Housing and Urban Development, after
such review of supporting data as he deems appropriate, accepts such
certification) that--
`(A) the area is one of pervasive poverty, unemployment, and general
distress;
`(B) the unemployment rate in the area, as determined by the most
recent available data, was at least 1 1/2 times the national unemployment
rate for the period to which such data relate;
`(C) the poverty rate for each population census tract within the
nominated area is at least 20 percent; and
`(D) in the case of an urban area, at least 70 percent of the
households living in the area have incomes below 80 percent of the median
income of households within the jurisdiction of the local government
(determined in the same manner as under section 119(b)(2) of the Housing
and Community Development Act of 1974).
`(4) CONSIDERATION OF HIGH INCIDENCE OF CRIME- The Secretary of Housing
and Urban Development shall take into account, in selecting nominated areas
for designation as renewal communities under this section, the extent to
which such areas have a high incidence of crime.
`(5) CONSIDERATION OF COMMUNITIES IDENTIFIED IN GAO STUDY- The Secretary
of Housing and Urban Development shall take into account, in selecting
nominated areas for designation as renewal communities under this section,
if the area has census tracts identified in the May 12, 1998, report of the
Government Accounting Office regarding the identification of economically
distressed areas.
`(d) Required State and Local Commitments-
`(1) IN GENERAL- The Secretary of Housing and Urban Development may
designate any nominated area as a renewal community under subsection (a)
only if--
`(A) the local government and the State in which the area is located
agree in writing that, during any period during which the area is a
renewal community, such governments will follow a specified course of
action which meets the requirements of paragraph (2) and is designed to
reduce the various burdens borne by employers or employees in such area;
and
`(B) the economic growth promotion requirements of paragraph (3) are
met.
`(A) IN GENERAL- A course of action meets the requirements of this
paragraph if such course of action is a written document, signed by a
State (or local government) and neighborhood organizations, which
evidences a partnership between such State or government and
community-based organizations and which commits each signatory to specific
and measurable goals, actions, and timetables. Such course of action shall
include at least five of the following:
`(i) A reduction of tax rates or fees applying within the renewal
community.
`(ii) An increase in the level of efficiency of local services
within the renewal community.
`(iii) Crime reduction strategies, such as crime prevention
(including the provision of such services by nongovernmental
entities).
`(iv) Actions to reduce, remove, simplify, or streamline
governmental requirements applying within the renewal
community.
`(v) Involvement in the program by private entities, organizations,
neighborhood organizations, and community groups, particularly those in
the renewal community, including a commitment from such private entities
to provide jobs and job training for, and technical, financial, or other
assistance to, employers, employees, and residents from the renewal
community.
`(vi) State or local income tax benefits for fees paid for services
performed by a nongovernmental entity which were formerly performed by a
governmental entity.
`(vii) The gift (or sale at below fair market value) of surplus real
property (such as land, homes, and commercial or industrial structures)
in the renewal community to neighborhood organizations, community
development corporations, or private companies.
`(B) RECOGNITION OF PAST EFFORTS- For purposes of this section, in
evaluating the course of action agreed to by any State or local
government, the Secretary of Housing and Urban Development shall take into
account the past efforts of such State or local government in reducing the
various burdens borne by employers and employees in the area
involved.
`(3) ECONOMIC GROWTH PROMOTION REQUIREMENTS- The economic growth
promotion requirements of this paragraph are met with respect to a nominated
area if the local government and the State in which such area is located
certify in writing that such government and State, respectively, have
repealed or otherwise will not enforce within the area, if such area is
designated as a renewal community--
`(A) licensing requirements for occupations that do not ordinarily
require a professional degree;
`(B) zoning restrictions on home-based businesses which do not create
a public nuisance;
`(C) permit requirements for street vendors who do not create a public
nuisance;
`(D) zoning or other restrictions that impede the formation of schools
or child care centers; and
`(E) franchises or other restrictions on competition for businesses
providing public services, including but not limited to taxicabs, jitneys,
cable television, or trash hauling,
except to the extent that such regulation of businesses and occupations
is necessary for and well-tailored to the protection of health and
safety.
`(e) COORDINATION WITH TREATMENT OF EMPOWERMENT ZONES AND ENTERPRISE
COMMUNITIES- For purposes of this title, if there are in effect with respect
to the same area both--
`(1) a designation as a renewal community; and
`(2) a designation as an empowerment zone or enterprise community,
both of such designations shall be given full effect with respect to such
area.
`(f) DEFINITIONS AND SPECIAL RULES- For purposes of this subchapter--
`(1) GOVERNMENTS- If more than one government seeks to nominate an area
as a renewal community, any reference to, or requirement of, this section
shall apply to all such governments.
`(2) STATE- The term `State' includes Puerto Rico, the Virgin Islands of
the United States, Guam, American Samoa, the Northern Mariana Islands, and
any other possession of the United States.
`(3) LOCAL GOVERNMENT- The term `local government' means--
`(A) any county, city, town, township, parish, village, or other
general purpose political subdivision of a State;
`(B) any combination of political subdivisions described in
subparagraph (A) recognized by the Secretary of Housing and Urban
Development; and
`(C) the District of Columbia.
`(4) APPLICATION OF RULES RELATING TO CENSUS TRACTS AND CENSUS DATA- The
rules of sections 1392(b)(4) and 1393(a)(9) shall apply.
`PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY
BUSINESS
`Sec. 1400F. Renewal community capital gain.
`Sec. 1400G. Renewal community business defined.
`SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
`(a) GENERAL RULE- Gross income does not include any qualified capital
gain recognized on the sale or exchange of a qualified community asset held
for more than 5 years.
`(b) QUALIFIED COMMUNITY ASSET- For purposes of this section--
`(1) IN GENERAL- The term `qualified community asset' means--
`(A) any qualified community stock;
`(B) any qualified community partnership interest; and
`(C) any qualified community business property.
`(2) QUALIFIED COMMUNITY STOCK-
`(A) IN GENERAL- Except as provided in subparagraph (B), the term
`qualified community stock' means any stock in a domestic corporation
if--
`(i) such stock is acquired by the taxpayer after December 31, 2000,
and before January 1, 2008, at its original issue (directly or through
an underwriter) from the corporation solely in exchange for
cash;
`(ii) as of the time such stock was issued, such corporation was a
renewal community business (or, in the case of a new corporation, such
corporation was being organized for purposes of being a renewal
community business); and
`(iii) during substantially all of the taxpayer's holding period for
such stock, such corporation qualified as a renewal community
business.
`(B) REDEMPTIONS- A rule similar to the rule of section 1202(c)(3)
shall apply for purposes of this paragraph.
`(3) QUALIFIED COMMUNITY PARTNERSHIP INTEREST- The term `qualified
community partnership interest' means any capital or profits interest in a
domestic partnership if--
`(A) such interest is acquired by the taxpayer after December 31,
2000, and before January 1, 2008;
`(B) as of the time such interest was acquired, such partnership was a
renewal community business (or, in the case of a new partnership, such
partnership was being organized for purposes of being a renewal community
business); and
`(C) during substantially all of the taxpayer's holding period for
such interest, such partnership qualified as a renewal community
business.
A rule similar to the rule of paragraph (2)(B) shall apply for purposes
of this paragraph.
`(4) QUALIFIED COMMUNITY BUSINESS PROPERTY-
`(A) IN GENERAL- The term `qualified community business property'
means tangible property if--
`(i) such property was acquired by the taxpayer by purchase (as
defined in section 179(d)(2)) after December 31, 2000, and before
January 1, 2008;
`(ii) the original use of such property in the renewal community
commences with the taxpayer; and
`(iii) during substantially all of the taxpayer's holding period for
such property, substantially all of the use of such property was in a
renewal community business of the taxpayer.
`(B) SPECIAL RULE FOR SUBSTANTIAL IMPROVEMENTS- The requirements of
clauses (i) and (ii) of subparagraph (A) shall be treated as satisfied
with respect to--
`(i) property which is substantially improved (within the meaning of
section 1400B(b)(4)(B)(ii)) by the taxpayer before January 1, 2008;
and
`(ii) any land on which such property is located.
`(c) CERTAIN RULES TO APPLY- Rules similar to the rules of paragraphs (5),
(6), and (7) of subsection (b), and subsections (e), (f), and (g), of section
1400B shall apply for purposes of this section.
`SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
`For purposes of this part, the term `renewal community business' means
any entity or proprietorship which would be a qualified business entity or
qualified proprietorship under section 1397B if--
`(1) references to renewal communities were substituted for references
to empowerment zones in such section; and
`(2) `80 percent' were substituted for `50 percent' in subsections
(b)(2) and (c)(1) of such section.
`PART III--FAMILY DEVELOPMENT ACCOUNTS
`Sec. 1400H. Family development accounts for renewal community EITC
recipients.
`Sec. 1400I. Designation of earned income tax credit payments for deposit to
family development account.
`SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL COMMUNITY EITC
RECIPIENTS.
`(a) ALLOWANCE OF DEDUCTION-
`(1) IN GENERAL- There shall be allowed as a deduction--
`(A) in the case of a qualified individual, the amount paid in cash
for the taxable year by such individual to any family development account
for such individual's benefit; and
`(B) in the case of any person other than a qualified individual, the
amount paid in cash for the taxable year by such person to any family
development account for the benefit of a qualified individual but only if
the amount so paid is designated for purposes of this section by such
individual.
`(A) IN GENERAL- The amount allowable as a deduction to any individual
for any taxable year by reason of paragraph (1)(A) shall not exceed the
lesser of--
`(ii) an amount equal to the compensation includible in the
individual's gross income for such taxable year.
`(B) PERSONS DONATING TO FAMILY DEVELOPMENT ACCOUNTS OF OTHERS- The
amount which may be designated under paragraph (1)(B) by any qualified
individual for any taxable year of such individual shall not exceed
$1,000.
`(3) SPECIAL RULES FOR CERTAIN MARRIED INDIVIDUALS- Rules similar to
rules of section 219(c) shall apply to the limitation in paragraph
(2)(A).
`(4) COORDINATION WITH IRAS- No deduction shall be allowed under this
section for any taxable year to any person by reason of a payment to an
account for the benefit of a qualified individual if any amount is paid for
such taxable year into an individual retirement account (including a Roth
IRA) for the benefit of such individual.
`(5) ROLLOVERS- No deduction shall be allowed under this section with
respect to any rollover contribution.
`(b) TAX TREATMENT OF DISTRIBUTIONS-
`(1) INCLUSION OF AMOUNTS IN GROSS INCOME- Except as otherwise provided
in this subsection, any amount paid or distributed out of a family
development account shall be included in gross income by the payee or
distributee, as the case may be.
`(2) EXCLUSION OF QUALIFIED FAMILY DEVELOPMENT DISTRIBUTIONS- Paragraph
(1) shall not apply to any qualified family development distribution.
`(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBUTION- For purposes of this
section--
`(1) IN GENERAL- The term `qualified family development distribution'
means any amount paid or distributed out of a family development account
which would otherwise be includible in gross income, to the extent that such
payment or distribution is used exclusively to pay qualified family
development expenses for the holder of the account or the spouse or
dependent (as defined in section 152) of such holder.
`(2) QUALIFIED FAMILY DEVELOPMENT EXPENSES- The term `qualified family
development expenses' means any of the following:
`(A) Qualified higher education expenses.
`(B) Qualified first-time homebuyer costs.
`(C) Qualified business capitalization costs.
`(D) Qualified medical expenses.
`(E) Qualified rollovers.
`(3) QUALIFIED HIGHER EDUCATION EXPENSES-
`(A) IN GENERAL- The term `qualified higher education expenses' has
the meaning given such term by section 72(t)(7), determined by treating
postsecondary vocational educational schools as eligible educational
institutions.
`(B) POSTSECONDARY VOCATIONAL EDUCATION SCHOOL- The term
`postsecondary vocational educational school' means an area vocational
education school (as defined in subparagraph (C) or (D) of section 521(4)
of the Carl D. Perkins Vocational and Applied Technology Education Act (20
U.S.C. 2471(4))) which is in any State (as defined in section 521(33) of
such Act), as such sections are in effect on the date of the enactment of
this section.
`(C) COORDINATION WITH OTHER BENEFITS- The amount of qualified higher
education expenses for any taxable year shall be reduced as provided in
section 25A(g)(2).
`(4) QUALIFIED FIRST-TIME HOMEBUYER COSTS- The term `qualified
first-time homebuyer costs' means qualified acquisition costs (as defined in
section 72(t)(8) without regard to subparagraph (B) thereof) with respect to
a principal residence (within the meaning of section 121) for a qualified
first-time homebuyer (as defined in section 72(t)(8)).
`(5) QUALIFIED BUSINESS CAPITALIZATION COSTS-
`(A) IN GENERAL- The term `qualified business capitalization costs'
means qualified expenditures for the capitalization of a qualified
business pursuant to a qualified plan.
`(B) QUALIFIED EXPENDITURES- The term `qualified expenditures' means
expenditures included in a qualified plan, including capital, plant,
equipment, working capital, and inventory expenses.
`(C) QUALIFIED BUSINESS- The term `qualified business' means any trade
or business other than any trade or business--
`(i) which consists of the operation of any facility described in
section 144(c)(6)(B), or
`(ii) which contravenes any law.
`(D) QUALIFIED PLAN- The term `qualified plan' means a business plan
which meets such requirements as the Secretary may specify.
`(6) QUALIFIED MEDICAL EXPENSES- The term `qualified medical expenses'
means any amount paid during the taxable year, not compensated for by
insurance or otherwise, for medical care (as defined in section 213(d)) of
the taxpayer, his spouse, or his dependent (as defined in section
152).
`(7) QUALIFIED ROLLOVERS- The term `qualified rollover' means any amount
paid from a family development account of a taxpayer into another such
account established for the benefit of--
`(B) any qualified individual who is--
`(i) the spouse of such taxpayer, or
`(ii) any dependent (as defined in section 152) of the
taxpayer.
Rules similar to the rules of section 408(d)(3) shall apply for purposes
of this paragraph.
`(d) TAX TREATMENT OF ACCOUNTS-
`(1) IN GENERAL- Any family development account is exempt from taxation
under this subtitle unless such account has ceased to be a family
development account by reason of paragraph (2). Notwithstanding the
preceding sentence, any such account is subject to the taxes imposed by
section 511 (relating to imposition of tax on unrelated business income of
charitable, etc., organizations). Notwithstanding any other provision of
this title (including chapters 11 and 12), the basis of any person in such
an account is zero.
`(2) LOSS OF EXEMPTION IN CASE OF PROHIBITED TRANSACTIONS- For purposes
of this section, rules similar to the rules of section 408(e) shall
apply.
`(3) OTHER RULES TO APPLY- Rules similar to the rules of paragraphs (4),
(5), and (6) of section 408(d) shall apply for purposes of this
section.
`(e) FAMILY DEVELOPMENT ACCOUNT- For purposes of this title, the term
`family development account' means a trust created or organized in the United
States for the exclusive benefit of a qualified individual or his
beneficiaries, but only if the written governing instrument creating the trust
meets the following requirements:
`(1) Except in the case of a qualified rollover (as defined in
subsection (c)(7))--
`(A) no contribution will be accepted unless it is in cash;
and
`(B) contributions will not be accepted for the taxable year in excess
of $3,000.
`(2) The requirements of paragraphs (2) through (6) of section 408(a)
are met.
`(f) QUALIFIED INDIVIDUAL- For purposes of this section, the term
`qualified individual' means, for any taxable year, an individual--
`(1) who is a bona fide resident of a renewal community throughout the
taxable year; and
`(2) to whom a credit was allowed under section 32 for the preceding
taxable year.
`(g) OTHER DEFINITIONS AND SPECIAL RULES-
`(1) COMPENSATION- The term `compensation' has the meaning given such
term by section 219(f)(1).
`(2) MARRIED INDIVIDUALS- The maximum deduction under subsection (a)
shall be computed separately for each individual, and this section shall be
applied without regard to any community property laws.
`(3) TIME WHEN CONTRIBUTIONS DEEMED MADE- For purposes of this section,
a taxpayer shall be deemed to have made a contribution to a family
development account on the last day of the preceding taxable year if the
contribution is made on account of such taxable year and is made not later
than the time prescribed by law for filing the return for such taxable year
(not including extensions thereof).
`(4) EMPLOYER PAYMENTS; CUSTODIAL ACCOUNTS- Rules similar to the rules
of sections 219(f)(5) and 408(h) shall apply for purposes of this
section.
`(5) REPORTS- The trustee of a family development account shall make
such reports regarding such account to the Secretary and to the individual
for whom the account is maintained with respect to contributions (and the
years to which they relate), distributions, and such other matters as the
Secretary may require under regulations. The reports required by this
paragraph--
`(A) shall be filed at such time and in such manner as the Secretary
prescribes in such regulations; and
`(B) shall be furnished to individuals--
`(i) not later than January 31 of the calendar year following the
calendar year to which such reports relate; and
`(ii) in such manner as the Secretary prescribes in such
regulations.
`(6) INVESTMENT IN COLLECTIBLES TREATED AS DISTRIBUTIONS- Rules similar
to the rules of section 408(m) shall apply for purposes of this
section.
`(h) PENALTY FOR DISTRIBUTIONS NOT USED FOR QUALIFIED FAMILY DEVELOPMENT
EXPENSES-
`(1) IN GENERAL- If any amount is distributed from a family development
account and is not used exclusively to pay qualified family development
expenses for the holder of the account or the spouse or dependent (as
defined in section 152) of such holder, the tax imposed by this chapter for
the taxable year of such distribution shall be increased by 10 percent of
the portion of such amount which is includible in gross income.
`(2) EXCEPTION FOR CERTAIN DISTRIBUTIONS- Paragraph (1) shall not apply
to distributions which are--
`(A) made on or after the date on which the account holder attains age
59 1/2 ,
`(B) made to a beneficiary (or the estate of the account holder) on or
after the death of the account holder, or
`(C) attributable to the account holder's being disabled within the
meaning of section 72(m)(7).
`(i) APPLICATION OF SECTION- This section shall apply to amounts paid to a
family development account for any taxable year beginning after December 31,
2000, and before January 1, 2008.
`SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CREDIT PAYMENTS FOR DEPOSIT TO
FAMILY DEVELOPMENT ACCOUNT.
`(a) IN GENERAL- With respect to the return of any qualified individual
(as defined in section 1400H(f)) for the taxable year of the tax imposed by
this chapter, such individual may designate that a specified portion (not less
than $1) of any overpayment of tax for such taxable year which is attributable
to the earned income tax credit shall be deposited by the Secretary into a
family development account of such individual. The Secretary shall so deposit
such portion designated under this subsection.
`(b) MANNER AND TIME OF DESIGNATION- A designation under subsection (a)
may be made with respect to any taxable year--
`(1) at the time of filing the return of the tax imposed by this chapter
for such taxable year, or
`(2) at any other time (after the time of filing the return of the tax
imposed by this chapter for such taxable year) specified in regulations
prescribed by the Secretary.
Such designation shall be made in such manner as the Secretary prescribes
by regulations.
`(c) PORTION ATTRIBUTABLE TO EARNED INCOME TAX CREDIT- For purposes of
subsection (a), an overpayment for any taxable year shall be treated as
attributable to the earned income tax credit to the extent that such
overpayment does not exceed the credit allowed to the taxpayer under section
32 for such taxable year.
`(d) OVERPAYMENTS TREATED AS REFUNDED- For purposes of this title, any
portion of an overpayment of tax designated under subsection (a) shall be
treated as being refunded to the taxpayer as of the last date prescribed for
filing the return of tax imposed by this chapter (determined without regard to
extensions) or, if later, the date the return is filed.
`(e) TERMINATION- This section shall not apply to any taxable year
beginning after December 31, 2007.
`PART IV--ADDITIONAL INCENTIVES
`Sec. 1400K. Commercial revitalization deduction.
`Sec. 1400L. Increase in expensing under section 179.
`SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.
`(a) GENERAL RULE- At the election of the taxpayer, either--
`(1) one-half of any qualified revitalization expenditures chargeable to
capital account with respect to any qualified revitalization building shall
be allowable as a deduction for the taxable year in which the building is
placed in service, or
`(2) a deduction for all such expenditures shall be allowable ratably
over the 120-month period beginning with the month in which the building is
placed in service.
The deduction provided by this section with respect to such expenditure
shall be in lieu of any depreciation deduction otherwise allowable on account
of such expenditure.
`(b) QUALIFIED REVITALIZATION BUILDINGS AND EXPENDITURES- For purposes of
this section--
`(1) QUALIFIED REVITALIZATION BUILDING- The term `qualified
revitalization building' means any building (and its structural components)
if--
`(A) such building is located in a renewal community and is placed in
service after December 31, 2000;
`(B) a commercial revitalization deduction amount is allocated to the
building under subsection (d); and
`(C) depreciation (or amortization in lieu of depreciation) is
allowable with respect to the building (without regard to this
section).
`(2) QUALIFIED REVITALIZATION EXPENDITURE-
`(A) IN GENERAL- The term `qualified revitalization expenditure' means
any amount properly chargeable to capital account--
`(i) for property for which depreciation is allowable under section
168 (without regard to this section) and which is--
`(I) nonresidential real property; or
`(II) an addition or improvement to property described in
subclause (I);
`(ii) in connection with the construction of any qualified
revitalization building which was not previously placed in service or in
connection with the substantial rehabilitation (within the meaning of
section 47(c)(1)(C)) of a building which was placed in service before
the beginning of such rehabilitation; and
`(iii) for land (including land which is functionally related to
such property and subordinate thereto).
`(B) DOLLAR LIMITATION- The aggregate amount which may be treated as
qualified revitalization expenditures with respect to any qualified
revitalization building for any taxable year shall not exceed the excess
of--
`(i) $10,000,000, reduced by
`(ii) any such expenditures with respect to the building taken into
account by the taxpayer or any predecessor in determining the amount of
the deduction under this section for all preceding taxable
years.
`(C) CERTAIN EXPENDITURES NOT INCLUDED- The term `qualified
revitalization expenditure' does not include--
`(i) ACQUISITION COSTS- The costs of acquiring any building or
interest therein and any land in connection with such building to the
extent that such costs exceed 30 percent of the qualified revitalization
expenditures determined without regard to this clause.
`(ii) CREDITS- Any expenditure which the taxpayer may take into
account in computing any credit allowable under this title unless the
taxpayer elects to take the expenditure into account only for purposes
of this section.
`(c) WHEN EXPENDITURES TAKEN INTO ACCOUNT- Qualified revitalization
expenditures with respect to any qualified revitalization building shall be
taken into account for the taxable year in which the qualified revitalization
building is placed in service. For purposes of the preceding sentence, a
substantial rehabilitation of a building shall be treated as a separate
building.
`(d) LIMITATION ON AGGREGATE DEDUCTIONS ALLOWABLE WITH RESPECT TO
BUILDINGS LOCATED IN A STATE-
`(1) IN GENERAL- The amount of the deduction determined under this
section for any taxable year with respect to any building shall not exceed
the commercial revitalization deduction amount (in the case of an amount
determined under subsection (a)(2), the present value of such amount as
determined under the rules of section 42(b)(2)(C) by substituting `100
percent' for `72 percent' in clause (ii) thereof) allocated to such building
under this subsection by the commercial revitalization agency. Such
allocation shall be made at the same time and in the same manner as under
paragraphs (1) and (7) of section 42(h).
`(2) COMMERCIAL REVITALIZATION DEDUCTION AMOUNT FOR AGENCIES-
`(A) IN GENERAL- The aggregate commercial revitalization deduction
amount which a commercial revitalization agency may allocate for any
calendar year is the amount of the State commercial revitalization
deduction ceiling determined under this paragraph for such calendar year
for such agency.
`(B) STATE COMMERCIAL REVITALIZATION DEDUCTION CEILING- The State
commercial revitalization deduction ceiling applicable to any
State--
`(i) for each calendar year after 2000 and before 2008 is $6,000,000
for each renewal community in the State; and
`(ii) zero for each calendar year thereafter.
`(C) COMMERCIAL REVITALIZATION AGENCY- For purposes of this section,
the term `commercial revitalization agency' means any agency authorized by
a State to carry out this section.
`(e) RESPONSIBILITIES OF COMMERCIAL REVITALIZATION AGENCIES-
`(1) PLANS FOR ALLOCATION- Notwithstanding any other provision of this
section, the commercial revitalization deduction amount with respect to any
building shall be zero unless--
`(A) such amount was allocated pursuant to a qualified allocation plan
of the commercial revitalization agency which is approved (in accordance
with rules similar to the rules of section 147(f)(2) (other than
subparagraph (B)(ii) thereof)) by the governmental unit of which such
agency is a part; and
`(B) such agency notifies the chief executive officer (or its
equivalent) of the local jurisdiction within which the building is located
of such allocation and provides such individual a reasonable opportunity
to comment on the allocation.
`(2) QUALIFIED ALLOCATION PLAN- For purposes of this subsection, the
term `qualified allocation plan' means any plan--
`(A) which sets forth selection criteria to be used to determine
priorities of the commercial revitalization agency which are appropriate
to local conditions;
`(i) the degree to which a project contributes to the implementation
of a strategic plan that is devised for a renewal community through a
citizen participation process;
`(ii) the amount of any increase in permanent, full-time employment
by reason of any project; and
`(iii) the active involvement of residents and nonprofit groups
within the renewal community; and
`(C) which provides a procedure that the agency (or its agent) will
follow in monitoring compliance with this section.
`(f) REGULATIONS- For purposes of this section, the Secretary shall, by
regulations, provide for the application of rules similar to the rules of
section 49 and subsections (a) and (b) of section 50.
`(g) TERMINATION- This section shall not apply to any building placed in
service after December 31, 2007.
`SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
`(a) GENERAL RULE- In the case of a renewal community business (as defined
in section 1400G), for purposes of section 179--
`(1) the limitation under section 179(b)(1) shall be increased by the
lesser of--
`(B) the cost of section 179 property which is qualified renewal
property placed in service during the taxable year; and
`(2) the amount taken into account under section 179(b)(2) with respect
to any section 179 property which is qualified renewal property shall be 50
percent of the cost thereof.
`(b) RECAPTURE- Rules similar to the rules under section 179(d)(10) shall
apply with respect to any qualified renewal property which ceases to be used
in a renewal community by a renewal community business.
`(c) QUALIFIED RENEWAL PROPERTY- For purposes of this section--
`(1) IN GENERAL- The term `qualified renewal property' means any
property to which section 168 applies (or would apply but for section 179)
if--
`(A) such property was acquired by the taxpayer by purchase (as
defined in section 179(d)(2)) after December 31, 2000, and before January
1, 2008; and
`(B) such property would be qualified zone property (as defined in
section 1397C) if references to renewal communities were substituted for
references to empowerment zones in section 1397C.
`(2) CERTAIN RULES TO APPLY- The rules of subsections (a)(2) and (b) of
section 1397C shall apply for purposes of this section.'.
SEC. 703. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS TO
RENEWAL COMMUNITIES.
(a) EXTENSION- Paragraph (2) of section 198(c) (defining targeted area) is
amended by redesignating subparagraph (C) as subparagraph (D) and by inserting
after subparagraph (B) the following new subparagraph:
`(C) RENEWAL COMMUNITIES INCLUDED- Except as provided in subparagraph
(B), such term shall include a renewal community (as defined in section
1400E) with respect to expenditures paid or incurred after December 31,
2000.'.
(b) EXTENSION OF TERMINATION DATE FOR RENEWAL COMMUNITIES- Subsection (h)
of section 198 is amended by inserting before the period `(December 31, 2007,
in the case of a renewal community, as defined in section 1400E).'.
SEC. 704. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR RENEWAL
COMMUNITIES.
(a) EXTENSION- Subsection (c) of section 51 (relating to termination) is
amended by adding at the end the following new paragraph:
`(5) EXTENSION OF CREDIT FOR RENEWAL COMMUNITIES-
`(A) IN GENERAL- In the case of an individual who begins work for the
employer after the date contained in paragraph (4)(B), for purposes of
section 38--
`(i) in lieu of applying subsection (a), the amount of the work
opportunity credit determined under this section for the taxable year
shall be equal to--
`(I) 15 percent of the qualified first-year wages for such year;
and
`(II) 30 percent of the qualified second-year wages for such
year;
`(ii) subsection (b)(3) shall be applied by substituting `$10,000'
for `$6,000';
`(iii) paragraph (4)(B) shall be applied by substituting for the
date contained therein the last day for which the designation under
section 1400E of the renewal community referred to in subparagraph
(B)(i) is in effect; and
`(iv) rules similar to the rules of section 51A(b)(5)(C) shall
apply.
`(B) QUALIFIED FIRST- AND SECOND-YEAR WAGES- For purposes of
subparagraph (A)--
`(i) IN GENERAL- The term `qualified wages' means, with respect to
each 1-year period referred to in clause (ii) or (iii), as the case may
be, the wages paid or incurred by the employer during the taxable year
to any individual but only if--
`(I) the employer is engaged in a trade or business in a renewal
community throughout such 1-year period;
`(II) the principal place of abode of such individual is in such
renewal community throughout such 1-year period; and
`(III) substantially all of the services which such individual
performs for the employer during such 1-year period are performed in
such renewal community.
`(ii) QUALIFIED FIRST-YEAR WAGES- The term `qualified first-year
wages' means, with respect to any individual, qualified wages
attributable to service rendered during the 1-year period beginning with
the day the individual begins work for the employer.
`(iii) QUALIFIED SECOND-YEAR WAGES- The term `qualified second-year
wages' means, with respect to any individual, qualified wages
attributable to service rendered during the 1-year period beginning on
the day after the last day of the 1-year period with respect to such
individual determined under clause (ii).'.
(b) CONGRUENT TREATMENT OF RENEWAL COMMUNITIES AND ENTERPRISE ZONES FOR
PURPOSES OF YOUTH RESIDENCE REQUIREMENTS-
(1) HIGH-RISK YOUTH- Subparagraphs (A)(ii) and (B) of section 51(d)(5)
are each amended by striking `empowerment zone or enterprise community' and
inserting `empowerment zone, enterprise community, or renewal
community'.
(2) QUALIFIED SUMMER YOUTH EMPLOYEE- Clause (iv) of section 51(d)(7)(A)
is amended by striking `empowerment zone or enterprise community' and
inserting `empowerment zone, enterprise community, or renewal
community'.
(3) HEADINGS- Paragraphs (5)(B) and (7)(C) of section 51(d) are each
amended by inserting `OR COMMUNITY' in the heading after `ZONE'.
(4) EFFECTIVE DATE- The amendments made by this subsection shall apply
to individuals who begin work for the employer after December 31,
2000.
SEC. 705. CONFORMING AND CLERICAL AMENDMENTS.
(a) DEDUCTION FOR CONTRIBUTIONS TO FAMILY DEVELOPMENT ACCOUNTS ALLOWABLE
WHETHER OR NOT TAXPAYER ITEMIZES- Subsection (a) of section 62 (relating to
adjusted gross income defined) is amended by inserting after paragraph (19)
the following new paragraph:
`(20) FAMILY DEVELOPMENT ACCOUNTS- The deduction allowed by section
1400H(a)(1).'.
(b) TAX ON EXCESS CONTRIBUTIONS-
(1) TAX IMPOSED- Subsection (a) of section 4973 is amended by striking
`or' at the end of paragraph (3), adding `or' at the end of paragraph (4),
and inserting after paragraph (4) the following new paragraph:
`(5) a family development account (within the meaning of section
1400H(e)),'.
(2) EXCESS CONTRIBUTIONS- Section 4973 is amended by adding at the end
the following new subsection:
`(g) FAMILY DEVELOPMENT ACCOUNTS- For purposes of this section, in the
case of family development accounts, the term `excess contributions' means the
sum of--
`(1) the excess (if any) of--
`(A) the amount contributed for the taxable year to the accounts
(other than a qualified rollover, as defined in section 1400H(c)(7)),
over
`(B) the amount allowable as a deduction under section 1400H for such
contributions; and
`(2) the amount determined under this subsection for the preceding
taxable year reduced by the sum of--
`(A) the distributions out of the accounts for the taxable year which
were included in the gross income of the payee under section
1400H(b)(1);
`(B) the distributions out of the accounts for the taxable year to
which rules similar to the rules of section 408(d)(5) apply by reason of
section 1400H(d)(3); and
`(C) the excess (if any) of the maximum amount allowable as a
deduction under section 1400H for the taxable year over the amount
contributed to the account for the taxable year.
For purposes of this subsection, any contribution which is distributed
from the family development account in a distribution to which rules similar
to the rules of section 408(d)(4) apply by reason of section 1400H(d)(3) shall
be treated as an amount not contributed.'.
(c) TAX ON PROHIBITED TRANSACTIONS- Section 4975 is amended--
(1) by adding at the end of subsection (c) the following new
paragraph:
`(6) SPECIAL RULE FOR FAMILY DEVELOPMENT ACCOUNTS- An individual for
whose benefit a family development account is established and any
contributor to such account shall be exempt from the tax imposed by this
section with respect to any transaction concerning such account (which would
otherwise be taxable under this section) if, with respect to such
transaction, the account ceases to be a family development account by reason
of the application of section 1400H(d)(2) to such account.'; and
(2) in subsection (e)(1), by striking `or' at the end of subparagraph
(E), by redesignating subparagraph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following new subparagraph:
`(F) a family development account described in section 1400H(e),
or'.
(d) INFORMATION RELATING TO CERTAIN TRUSTS AND ANNUITY PLANS- Subsection
(c) of section 6047 is amended--
(1) by inserting `or section 1400H' after `section 219'; and
(2) by inserting `, of any family development account described in
section 1400H(e),', after `section 408(a)'.
(e) INSPECTION OF APPLICATIONS FOR TAX EXEMPTION- Clause (i) of section
6104(a)(1)(B) is amended by inserting `a family development account described
in section 1400H(e),' after `section 408(a),'.
(f) FAILURE TO PROVIDE REPORTS ON FAMILY DEVELOPMENT ACCOUNTS- Paragraph
(2) of section 6693(a) is amended by striking `and' at the end of subparagraph
(C), by striking the period and inserting `, and' at the end of subparagraph
(D), and by adding at the end the following new subparagraph:
`(E) section 1400H(g)(6) (relating to family development
accounts).'.
(g) CONFORMING AMENDMENTS REGARDING COMMERCIAL REVITALIZATION
DEDUCTION-
(1) Section 172 is amended by redesignating subsection (j) as subsection
(k) and by inserting after subsection (i) the following new
subsection:
`(j) NO CARRYBACK OF SECTION 1400K DEDUCTION BEFORE DATE OF THE ENACTMENT-
No portion of the net operating loss for any taxable year which is
attributable to any commercial revitalization deduction determined under
section 1400K may be carried back to a taxable year ending before the date of
the enactment of section 1400K.'.
(2) Subparagraph (B) of section 48(a)(2) is amended by inserting `or
commercial revitalization' after `rehabilitation' each place it appears in
the text and heading.
(3) Subparagraph (C) of section 469(i)(3) is amended--
(A) by inserting `or section 1400K' after `section 42'; and
(B) by inserting `AND COMMERCIAL REVITALIZATION DEDUCTION' after
`CREDIT' in the heading.
(h) CLERICAL AMENDMENTS- The table of subchapters for chapter 1 is amended
by adding at the end the following new item:
`Subchapter X. Renewal Communities.'.
Subtitle B--Farming Incentive
SEC. 711. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.
Any option to accelerate the receipt of any payment under a production
flexibility contract which is payable under the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7200 et seq.), as in effect on
the date of the enactment of this Act, shall be disregarded in determining the
taxable year for which such payment is properly includible in gross income for
purposes of the Internal Revenue Code of 1986.
Subtitle C--Oil and Gas Incentives
SEC. 721. 5-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE TO
OPERATING MINERAL INTERESTS OF INDEPENDENT OIL AND GAS PRODUCERS.
(a) IN GENERAL- Paragraph (1) of section 172(b) (relating to years to
which loss may be carried) is amended by adding at the end the following new
subparagraph:
`(H) LOSSES ON OPERATING MINERAL INTERESTS OF INDEPENDENT OIL AND GAS
PRODUCERS- In the case of a taxpayer--
`(i) which has an eligible oil and gas loss (as defined in
subsection (j)) for a taxable year, and
`(ii) which is not an integrated oil company (as defined in section
291(b)(4)),
such eligible oil and gas loss shall be a net operating loss carryback
to each of the 5 taxable years preceding the taxable year of such
loss.'.
(b) ELIGIBLE OIL AND GAS LOSS- Section 172 is amended by redesignating
subsection (j) as subsection (k) and by inserting after subsection (i) the
following new subsection:
`(j) ELIGIBLE OIL AND GAS LOSS- For purposes of this section--
`(1) IN GENERAL- The term `eligible oil and gas loss' means the lesser
of--
`(A) the amount which would be the net operating loss for the taxable
year if only income and deductions attributable to operating mineral
interests (as defined in section 614(d)) in oil and gas wells are taken
into account, or
`(B) the amount of the net operating loss for such taxable
year.
`(2) COORDINATION WITH SUBSECTION (b)(2)- For purposes of applying
subsection (b)(2), an eligible oil and gas loss for any taxable year shall
be treated in a manner similar to the manner in which a specified liability
loss is treated.
`(3) ELECTION- Any taxpayer entitled to a 5-year carryback under
subsection (b)(1)(H) from any loss year may elect to have the carryback
period with respect to such loss year determined without regard to
subsection (b)(1)(H).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to net
operating losses for taxable years beginning after December 31, 1998.
SEC. 722. DEDUCTION FOR DELAY RENTAL PAYMENTS.
(a) IN GENERAL- Section 263 (relating to capital expenditures) is amended
by adding after subsection (i) the following new subsection:
`(j) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL AND GAS WELLS-
`(1) IN GENERAL- Notwithstanding subsection (a), a taxpayer may elect to
treat delay rental payments incurred in connection with the development of
oil or gas within the United States (as defined in section 638) as payments
which are not chargeable to capital account. Any payments so treated shall
be allowed as a deduction in the taxable year in which paid or
incurred.
`(2) DELAY RENTAL PAYMENTS- For purposes of paragraph (1), the term
`delay rental payment' means an amount paid for the privilege of deferring
development of an oil or gas well.'.
(b) CONFORMING AMENDMENT- Section 263A(c)(3) is amended by inserting
`263(j),' after `263(i),'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
amounts paid or incurred in taxable years beginning after December 31,
1999.
SEC. 723. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.
(a) IN GENERAL- Section 263 (relating to capital expenditures) is amended
by adding after subsection (j) the following new subsection:
`(k) GEOLOGICAL AND GEOPHYSICAL EXPENDITURES FOR DOMESTIC OIL AND GAS
WELLS- Notwithstanding subsection (a), a taxpayer may elect to treat
geological and geophysical expenses incurred in connection with the
exploration for, or development of, oil or gas within the United States (as
defined in section 638) as expenses which are not chargeable to capital
account. Any expenses so treated shall be allowed as a deduction in the
taxable year in which paid or incurred.'.
(b) CONFORMING AMENDMENT- Section 263A(c)(3) is amended by inserting
`263(k),' after `263(j),'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
costs paid or incurred in taxable years beginning after December 31, 1999.
SEC. 724. TEMPORARY SUSPENSION OF LIMITATION BASED ON 65 PERCENT OF TAXABLE
INCOME.
(a) IN GENERAL- Subsection (d) of section 613A (relating to limitation on
percentage depletion in case of oil and gas wells) is amended by adding at the
end the following new paragraph:
`(6) TEMPORARY SUSPENSION OF TAXABLE INCOME LIMIT- Paragraph (1) shall
not apply to taxable years beginning after December 31, 1998, and before
January 1, 2005, including with respect to amounts carried under the second
sentence of paragraph (1) to such taxable years.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1998.
SEC. 725. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL DEPLETION
DEDUCTION.
(a) IN GENERAL- Paragraph (4) of section 613A(d) (relating to certain
refiners excluded) is amended to read as follows:
`(4) CERTAIN REFINERS EXCLUDED- If the taxpayer or a related person
engages in the refining of crude oil, subsection (c) shall not apply to the
taxpayer for a taxable year if the average daily refinery runs of the
taxpayer and the related person for the taxable year exceed 50,000 barrels.
For purposes of this paragraph, the average daily refinery runs for any
taxable year shall be determined by dividing the aggregate refinery runs for
the taxable year by the number of days in the taxable year.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
Subtitle D--Timber Incentives
SEC. 731. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF AMORTIZABLE
REFORESTATION EXPENDITURES.
(a) INCREASE IN DOLLAR LIMITATION- Paragraph (1) of section 194(b)
(relating to amortization of reforestation expenditures) is amended by
striking `$10,000 ($5,000' and inserting `$25,000 ($12,500'.
(b) TEMPORARY SUSPENSION OF INCREASED DOLLAR LIMITATION- Subsection (b) of
section 194(b) (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) 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, 1999.
SEC. 732. CAPITAL GAIN TREATMENT UNDER SECTION 631(b) TO APPLY TO OUTRIGHT
SALES BY LAND OWNER.
(a) IN GENERAL- Subsection (b) of section 631 (relating to disposal of
timber with a retained economic interest) is amended--
(1) by inserting `AND OUTRIGHT SALES OF TIMBER' after ECONOMIC INTEREST'
in the subsection heading, and
(2) by adding before the last sentence the following new sentence: `The
requirement in the first sentence of this subsection to retain an economic
interest in timber shall not apply to an outright sale of such timber by the
owner thereof if such owner owned the land (at the time of such sale) from
which the timber is cut.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
sales after the date of the enactment of this Act.
TITLE VIII--RELIEF FOR SMALL BUSINESSES
SEC. 801. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS.
(a) IN GENERAL- Paragraph (1) of section 162(l) is amended to read as
follows:
`(1) ALLOWANCE OF DEDUCTION- In the case of an individual who is an
employee within the meaning of section 401(c)(1), there shall be allowed as
a deduction under this section an amount equal to 100 percent of the amount
paid during the taxable year for insurance which constitutes medical care
for the taxpayer and the taxpayer's spouse and dependents.'.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COVERAGE- The first sentence of
section 162(l)(2)(B) is amended to read as follows: `Paragraph (1) shall not
apply to any taxpayer for any calendar month for which the taxpayer
participates in any subsidized health plan maintained by any employer (other
than an employer described in section 401(c)(4)) of the taxpayer or the spouse
of the taxpayer.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 802. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) IN GENERAL- Paragraph (1) of section 179(b) (relating to dollar
limitation) is amended to read as follows:
`(1) DOLLAR LIMITATION- The aggregate cost which may be taken into
account under subsection (a) for any taxable year shall not exceed
$30,000.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 803. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.
(a) IN GENERAL- Section 3301 (relating to rate of Federal unemployment
tax) is amended--
(1) by striking `2007' and inserting `2004', and
(2) by striking `2008' and inserting `2005'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
calendar years beginning after the date of the enactment of this Act.
SEC. 804. INCREASED DEDUCTION FOR MEAL EXPENSES; INCREASED DEDUCTIBILITY OF
BUSINESS MEAL EXPENSES FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS ON HOURS
OF SERVICE.
(a) IN GENERAL- Paragraph (1) of section 274(n) (relating to only 50
percent of meal and entertainment expenses allowed as deduction) is amended by
striking `50 percent' in the text and inserting `the allowable percentage'.
(b) ALLOWABLE PERCENTAGES- Subsection (n) of section 274 is amended by
redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,
and by inserting after paragraph (2) the following new paragraph:
`(2) ALLOWABLE PERCENTAGE- For purposes of paragraph (1), the allowable
percentage is--
`(A) in the case of amounts for items described in paragraph (1)(B),
50 percent, and
`(B) in the case of expenses for food or beverages, the percentage
determined in accordance with the following table:
`For taxable years beginning
--The allowable
in calendar year--
--percentage is--
--50
--55
--60.'.
(c) INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS ON HOURS OF SERVICE- The
table in section 274(n)(4)(B) (relating to special rule for individuals
subject to Federal hours of service), as redesignated by subsection (b), is
amended--
(1) by striking `or 2007', and
(2) by striking `2008' and inserting `2007'.
(d) CONFORMING AMENDMENTS-
(1) The heading for subsection (n) of section 274 is amended by striking
`50 PERCENT' and inserting `LIMITED PERCENTAGES'.
(2) Subparagraph (A) of section 274(n)(4), as redesignated by subsection
(b), is amended by striking `50 percent' and inserting `the allowable
percentage'.
(e) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 805. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO INCREASE
ALTERNATIVE MINIMUM TAX LIABILITY.
(a) IN GENERAL- Section 55(c) (defining regular tax) is amended by
redesignating paragraph (2) as paragraph (3) and by inserting after paragraph
(1) the following:
`(2) COORDINATION WITH INCOME AVERAGING FOR FARMERS AND FISHERMEN-
Solely for purposes of this section, section 1301 (relating to averaging of
farm and fishing income) shall not apply in computing the regular
tax.'.
(b) ALLOWING INCOME AVERAGING FOR FISHERMEN-
(1) IN GENERAL- Section 1301(a) is amended by striking `farming
business' and inserting `farming business or fishing business,'.
(2) DEFINITION OF ELECTED FARM INCOME-
(A) IN GENERAL- Clause (i) of section 1301(b)(1)(A) is amended by
inserting `or fishing business' before the semicolon.
(B) CONFORMING AMENDMENT- Subparagraph (B) of section 1301(b)(1) is
amended by inserting `or fishing business' after `farming business' both
places it occurs.
(3) DEFINITION OF FISHING BUSINESS- Section 1301(b) is amended by adding
at the end the following new paragraph:
`(4) FISHING BUSINESS- The term `fishing business' means the conduct of
commercial fishing as defined in section 3 of the Magnuson-Stevens Fishery
Conservation and Management Act (16 U.S.C. 1802).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 806. FARM, FISHING, AND RANCH RISK MANAGEMENT ACCOUNTS.
(a) IN GENERAL- Subpart C of part II of subchapter E of chapter 1
(relating to taxable year for which deductions taken) is amended by inserting
after section 468B the following:
`SEC. 468C. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.
`(a) DEDUCTION ALLOWED- In the case of an individual engaged in an
eligible farming business or commercial fishing, there shall be allowed as a
deduction for any taxable year the amount paid in cash by the taxpayer during
the taxable year to a Farm, Fishing, and Ranch Risk Management Account
(hereinafter referred to as the `FFARRM Account').
`(1) CONTRIBUTIONS- The amount which a taxpayer may pay into the FFARRM
Account for any taxable year shall not exceed 20 percent of so much of the
taxable income of the taxpayer (determined without regard to this section)
which is attributable (determined in the manner applicable under section
1301) to any eligible farming business or commercial fishing.
`(2) DISTRIBUTIONS- Distributions from a FFARRM Account may not be used
to purchase, lease, or finance any new fishing vessel, add capacity to any
fishery, or otherwise contribute to the overcapitalization of any fishery.
The Secretary of Commerce shall implement regulations to enforce this
paragraph.
`(c) ELIGIBLE BUSINESSES- For purposes of this section--
`(1) ELIGIBLE FARMING BUSINESS- The term `eligible farming business'
means any farming business (as defined in section 263A(e)(4)) which is not a
passive activity (within the meaning of section 469(c)) of the
taxpayer.
`(2) COMMERCIAL FISHING- The term `commercial fishing' has the meaning
given such term by section (3) of the Magnuson-Stevens Fishery Conservation
and Management Act (16 U.S.C. 1802) but only if such fishing is not a
passive activity (within the meaning of section 469(c)) of the
taxpayer.
`(d) FFARRM ACCOUNT- For purposes of this section--
`(1) IN GENERAL- The term `FFARRM Account' means a trust created or
organized in the United States for the exclusive benefit of the taxpayer,
but only if the written governing instrument creating the trust meets the
following requirements:
`(A) No contribution will be accepted for any taxable year in excess
of the amount allowed as a deduction under subsection (a) for such
year.
`(B) The trustee is a bank (as defined in section 408(n)) or another
person who demonstrates to the satisfaction of the Secretary that the
manner in which such person will administer the trust will be consistent
with the requirements of this section.
`(C) The assets of the trust consist entirely of cash or of
obligations which have adequate stated interest (as defined in section
1274(c)(2)) and which pay such interest not less often than
annually.
`(D) All income of the trust is distributed currently to the
grantor.
`(E) The assets of the trust will not be commingled with other
property except in a common trust fund or common investment fund.
`(2) ACCOUNT TAXED AS GRANTOR TRUST- The grantor of a FFARRM Account
shall be treated for purposes of this title as the owner of such Account and
shall be subject to tax thereon in accordance with subpart E of part I of
subchapter J of this chapter (relating to grantors and others treated as
substantial owners).
`(e) INCLUSION OF AMOUNTS DISTRIBUTED-
`(1) IN GENERAL- Except as provided in paragraph (2), there shall be
includible in the gross income of the taxpayer for any taxable year--
`(A) any amount distributed from a FFARRM Account of the taxpayer
during such taxable year, and
`(B) any deemed distribution under--
`(i) subsection (f)(1) (relating to deposits not distributed within
5 years),
`(ii) subsection (f)(2) (relating to cessation in eligible farming
business), and
`(iii) subparagraph (A) or (B) of subsection (f)(3) (relating to
prohibited transactions and pledging account as security).
`(2) EXCEPTIONS- Paragraph (1)(A) shall not apply to--
`(A) any distribution to the extent attributable to income of the
Account, and
`(B) the distribution of any contribution paid during a taxable year
to a FFARRM Account to the extent that such contribution exceeds the
limitation applicable under subsection (b) if requirements similar to the
requirements of section 408(d)(4) are met.
For purposes of subparagraph (A), distributions shall be treated as
first attributable to income and then to other amounts.
`(1) TAX ON DEPOSITS IN ACCOUNT WHICH ARE NOT DISTRIBUTED WITHIN 5
YEARS-
`(A) IN GENERAL- If, at the close of any taxable year, there is a
nonqualified balance in any FFARRM Account--
`(i) there shall be deemed distributed from such Account during such
taxable year an amount equal to such balance, and
`(ii) the taxpayer's tax imposed by this chapter for such taxable
year shall be increased by 10 percent of such deemed
distribution.
The preceding sentence shall not apply if an amount equal to such
nonqualified balance is distributed from such Account to the taxpayer
before the due date (including extensions) for filing the return of tax
imposed by this chapter for such year (or, if earlier, the date the
taxpayer files such return for such year).
`(B) NONQUALIFIED BALANCE- For purposes of subparagraph (A), the term
`nonqualified balance' means any balance in the Account on the last day of
the taxable year which is attributable to amounts deposited in such
Account before the 4th preceding taxable year.
`(C) ORDERING RULE- For purposes of this paragraph, distributions from
a FFARRM Account (other than distributions of current income) shall be
treated as made from deposits in the order in which such deposits were
made, beginning with the earliest deposits.
`(2) CESSATION IN ELIGIBLE BUSINESS- At the close of the first
disqualification period after a period for which the taxpayer was engaged in
an eligible farming business or commercial fishing, there shall be deemed
distributed from the FFARRM Account of the taxpayer an amount equal to the
balance in such Account (if any) at the close of such disqualification
period. For purposes of the preceding sentence, the term `disqualification
period' means any period of 2 consecutive taxable years for which the
taxpayer is not engaged in an eligible farming business or commercial
fishing.
`(3) CERTAIN RULES TO APPLY- Rules similar to the following rules shall
apply for purposes of this section:
`(A) Section 220(f)(8) (relating to treatment on death).
`(B) Section 408(e)(2) (relating to loss of exemption of account where
individual engages in prohibited transaction).
`(C) Section 408(e)(4) (relating to effect of pledging account as
security).
`(D) Section 408(g) (relating to community property laws).
`(E) Section 408(h) (relating to custodial accounts).
`(4) TIME WHEN PAYMENTS DEEMED MADE- For purposes of this section, a
taxpayer shall be deemed to have made a payment to a FFARRM Account on the
last day of a taxable year if such payment is made on account of such
taxable year and is made on or before the due date (without regard to
extensions) for filing the return of tax for such taxable year.
`(5) INDIVIDUAL- For purposes of this section, the term `individual'
shall not include an estate or trust.
`(6) DEDUCTION NOT ALLOWED FOR SELF-EMPLOYMENT TAX- The deduction
allowable by reason of subsection (a) shall not be taken into account in
determining an individual's net earnings from self-employment (within the
meaning of section 1402(a)) for purposes of chapter 2.
`(g) REPORTS- The trustee of a FFARRM Account shall make such reports
regarding such Account to the Secretary and to the person for whose benefit
the Account is maintained with respect to contributions, distributions, and
such other matters as the Secretary may require under regulations. The reports
required by this subsection shall be filed at such time and in such manner and
furnished to such persons at such time and in such manner as may be required
by such regulations.'.
(b) TAX ON EXCESS CONTRIBUTIONS-
(1) Subsection (a) of section 4973 (relating to tax on excess
contributions to certain tax-favored accounts and annuities) is amended by
striking `or' at the end of paragraph (3), by redesignating paragraph (4) as
paragraph (5), and by inserting after paragraph (3) the following:
`(4) a FFARRM Account (within the meaning of section 468C(d)),
or'.
(2) Section 4973 is amended by adding at the end the following:
`(g) EXCESS CONTRIBUTIONS TO FFARRM ACCOUNTS- For purposes of this
section, in the case of a FFARRM Account (within the meaning of section
468C(d)), the term `excess contributions' means the amount by which the amount
contributed for the taxable year to the Account exceeds the amount which may
be contributed to the Account under section 468C(b) for such taxable year. For
purposes of this subsection, any contribution which is distributed out of the
FFARRM Account in a distribution to which section 468C(e)(2)(B) applies shall
be treated as an amount not contributed.'.
(3) The section heading for section 4973 is amended to read as
follows:
`SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, ANNUITIES, ETC.'.
(4) The table of sections for chapter 43 is amended by striking the item
relating to section 4973 and inserting the following:
`Sec. 4973. Excess contributions to certain accounts, annuities, etc.'.
(c) TAX ON PROHIBITED TRANSACTIONS-
(1) Subsection (c) of section 4975 (relating to tax on prohibited
transactions) is amended by adding at the end the following:
`(6) SPECIAL RULE FOR FFARRM ACCOUNTS- A person for whose benefit a
FFARRM Account (within the meaning of section 468C(d)) is established shall
be exempt from the tax imposed by this section with respect to any
transaction concerning such account (which would otherwise be taxable under
this section) if, with respect to such transaction, the account ceases to be
a FFARRM Account by reason of the application of section 468C(f)(3)(A) to
such account.'.
(2) Paragraph (1) of section 4975(e) is amended by redesignating
subparagraphs (E) and (F) as subparagraphs (F) and (G), respectively, and by
inserting after subparagraph (D) the following:
`(E) a FFARRM Account described in section 468C(d),'.
(d) FAILURE TO PROVIDE REPORTS ON FFARRM ACCOUNTS- Paragraph (2) of
section 6693(a) (relating to failure to provide reports on certain tax-favored
accounts or annuities) is amended by redesignating subparagraphs (C) and (D)
as subparagraphs (D) and (E), respectively, and by inserting after
subparagraph (B) the following:
`(C) section 468C(g) (relating to FFARRM Accounts),'.
(e) CLERICAL AMENDMENT- The table of sections for subpart C of part II of
subchapter E of chapter 1 is amended by inserting after the item relating to
section 468B the following:
`Sec. 468C. Farm, Fishing and Ranch Risk Management Accounts.'.
(f) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 807. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM PASSIVE INCOME TEST
FOR BANK S CORPORATIONS.
(a) IN GENERAL- Section 1362(d)(3)(C) (defining passive investment income)
is amended by adding at the end the following:
`(v) EXCEPTION FOR BANKS; ETC- In the case of a bank (as defined in
section 581), a bank holding company (as defined in section
246A(c)(3)(B)(ii)), or a qualified subchapter S subsidiary bank, the
term `passive investment income' shall not include--
`(I) interest income earned by such bank, bank holding company, or
qualified subchapter S subsidiary bank, or
`(II) dividends on assets required to be held by such bank, bank
holding company, or qualified subchapter S subsidiary bank to conduct
a banking business, including stock in the Federal Reserve Bank, the
Federal Home Loan Bank, or the Federal Agricultural Mortgage Bank or
participation certificates issued by a Federal Intermediate Credit
Bank.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 808. TREATMENT OF QUALIFYING DIRECTOR SHARES.
(a) IN GENERAL- Section 1361 is amended by adding at the end the
following:
`(f) TREATMENT OF QUALIFYING DIRECTOR SHARES-
`(1) IN GENERAL- For purposes of this subchapter--
`(A) qualifying director shares shall not be treated as a second class
of stock, and
`(B) no person shall be treated as a shareholder of the corporation by
reason of holding qualifying director shares.
`(2) QUALIFYING DIRECTOR SHARES DEFINED- For purposes of this
subsection, the term `qualifying director shares' means any shares of stock
in a bank (as defined in section 581) or in a bank holding company
registered as such with the Federal Reserve System--
`(i) which are held by an individual solely by reason of status as a
director of such bank or company or its controlled subsidiary;
and
`(ii) which are subject to an agreement pursuant to which the holder
is required to dispose of the shares of stock upon termination of the
holder's status as a director at the same price as the individual
acquired such shares of stock.
`(3) DISTRIBUTIONS- A distribution (not in part or full payment in
exchange for stock) made by the corporation with respect to qualifying
director shares shall be includible as ordinary income of the holder and
deductible to the corporation as an expense in computing taxable income
under section 1363(b) in the year such distribution is received.'.
(b) CONFORMING AMENDMENTS-
(1) Section 1361(b)(1) is amended by inserting `, except as provided in
subsection (f),' before `which does not'.
(2) Section 1366(a) is amended by adding at the end the following:
`(3) ALLOCATION WITH RESPECT TO QUALIFYING DIRECTOR SHARES- The holders
of qualifying director shares (as defined in section 1361(f)) shall not,
with respect to such shares of stock, be allocated any of the items
described in paragraph (1).'.
(3) Section 1373(a) is amended by striking `and' at the end of paragraph
(1), by striking the period at the end of paragraph (2) and inserting `,
and', and adding at the end the following:
`(3) no amount of an expense deductible under this subchapter by reason
of section 1361(f)(3) shall be apportioned or allocated to such
income.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
TITLE IX--INTERNATIONAL TAX RELIEF
SEC. 901. INTEREST ALLOCATION RULES.
(a) ELECTION TO ALLOCATE INTEREST ON A WORLDWIDE BASIS- Subsection (e) of
section 864 (relating to rules for allocating interest, etc.) is amended by
redesignating paragraphs (6) and (7) as paragraphs (7) and (8), respectively,
and by inserting after paragraph (5) the following new paragraph:
`(6) ELECTION TO ALLOCATE INTEREST ON A WORLDWIDE BASIS-
`(A) IN GENERAL- Except as provided in this paragraph, this subsection
shall be applied by treating a worldwide affiliated group for which an
election under this paragraph is in effect as an affiliated group solely
for purposes of allocating and apportioning interest expense of each
domestic corporation which is a member of such group.
`(B) WORLDWIDE AFFILIATED GROUP- For purposes of this paragraph, the
term `worldwide affiliated group' means the group of corporations which
consists of--
`(i) all corporations in an affiliated group (as defined in section
1504 without regard to paragraphs (2) and (4) of section 1504(b)),
and
`(ii) all foreign corporations (other than a FSC, as defined in
section 922(a)) with respect to which corporations described in clause
(i) own stock meeting the ownership requirements of section
957(a).
For purposes of clause (ii), ownership shall be determined under
section 958; except that paragraphs (3) and (4) of section 318(a) shall
not apply for purposes of section 958(b).
`(C) TREATMENT OF WORLDWIDE AFFILIATED GROUP- For purposes of applying
paragraph (1), the taxable income of the domestic members of a worldwide
affiliated group from sources outside the United States shall be
determined by allocating and apportioning the interest expense of such
domestic members to such income in an amount equal to the excess (if any)
of--
`(i) the total interest expense of the worldwide affiliated group
multiplied by the ratio which the foreign assets of the worldwide
affiliated group bears to all the assets of the worldwide affiliated
group, over
`(ii) the interest expense of all foreign corporations which are
members of the worldwide affiliated group to the extent such interest
expense of such foreign corporations would have been allocated and
apportioned to foreign source income if this subsection were applied to
a group consisting of all the foreign corporations in such worldwide
affiliated group.
`(D) ASSETS AND INTEREST EXPENSE OF FOREIGN CORPORATIONS-
`(i) IN GENERAL- For purposes of subparagraph (C), only the
applicable percentage of the interest expense and assets of a foreign
corporation described in subparagraph (B)(ii) shall be taken into
account.
`(ii) APPLICABLE PERCENTAGE- For purposes of this paragraph, the
term `applicable percentage' means, with respect to any foreign
corporation, the percentage equal to the ratio which the value of the
stock in such corporation taken into account under subparagraph (B)(ii)
(without regard to stock considered as owned under section 958(b)) bears
to the aggregate value of all stock in such corporation.
`(E) ELECTION- An election under this paragraph with respect to any
worldwide affiliated group may be made only by the common parent of the
affiliated group referred to in subparagraph (B)(i) and may be made only
for the first taxable year beginning after December 31, 2001, in which a
worldwide affiliated group exists which includes such affiliated group and
at least one corporation described in subparagraph (B)(ii). Such an
election, once made, shall apply to such common parent and all other
corporations which are members of such worldwide affiliated group for such
taxable year and all subsequent years unless revoked with the consent of
the Secretary.'.
(b) ELECTION TO ALLOCATE INTEREST WITHIN FINANCIAL INSTITUTION GROUPS AND
SUBSIDIARY GROUPS- Section 864 is amended by redesignating subsection (f) as
subsection (g) and by inserting after subsection (e) the following new
subsection:
`(f) ELECTION TO APPLY SUBSECTION (e) ON BASIS OF FINANCIAL INSTITUTION
GROUP AND SUBSIDIARY GROUPS-
`(1) IN GENERAL- In the case of a worldwide affiliated group for which
an election under subsection (e)(6) is in effect, subsection (e) shall be
applied--
`(A) by treating an electing financial institution group as if it were
a separate worldwide affiliated group, and
`(B) by treating each electing subsidiary group as if it were a
separate worldwide affiliated group for purposes of allocating interest
expense with respect to qualified indebtedness of members of an electing
subsidiary group.
Subsection (e) shall apply to any such electing group in the same manner
as subsection (e) applies to the pre-election worldwide affiliated group of
which such electing group is a part.
`(2) ELECTING FINANCIAL INSTITUTION GROUP- For purposes of this
subsection--
`(A) IN GENERAL- The term `electing financial institution group' means
any group of corporations if--
`(i) such group consists only of all of the financial corporations
in the pre-election worldwide affiliated group, and
`(ii) an election under this paragraph is in effect for such group
of corporations.
`(B) FINANCIAL CORPORATION-
`(i) IN GENERAL- The term `financial corporation' means any
corporation if at least 80 percent of its gross income is income
described in section 904(d)(2)(C)(ii) and the regulations thereunder
which is derived from transactions with unrelated persons.
`(ii) INCOME FROM RELATED FINANCIAL CORPORATIONS- Dividend income,
and income described in section 904(d)(2)(C)(ii) and the regulations
thereunder, which is derived directly or indirectly from a financial
corporation (as defined in clause (i) without regard to this clause)
which is not an unrelated person shall be treated as income described in
clause (i).
`(iii) BANK HOLDING COMPANIES- To the extent provided in regulations
prescribed by the Secretary, a bank holding company (within the meaning
of section 2(a) of the Bank Holding Company Act of 1956) shall be
treated as a corporation meeting the requirements of clause
(i).
`(iv) ANTIABUSE RULE- For purposes of this subparagraph, there shall
be disregarded any item of income or gain from a transaction or series
of transactions a principal purpose of which is the qualification of any
corporation as a financial corporation.
`(C) EFFECT OF CERTAIN TRANSACTIONS- Rules similar to the rules of
paragraph (3)(D) shall apply to transactions between any member of the
electing financial institution group and any member of the pre-election
worldwide affiliated group (other than a member of the electing financial
institution group).
`(D) ELECTION- An election under this paragraph with respect to any
financial institution group may be made only by the common parent of the
pre-election worldwide affiliated group and may be made only for the first
taxable year beginning after December 31, 2001, in which such affiliated
group includes one or more financial corporations described in
subparagraph (B). Such an election, once made, shall apply to such taxable
year and all subsequent years unless revoked with the consent of the
Secretary.
`(3) ELECTING SUBSIDIARY GROUPS-
`(A) IN GENERAL- The term `electing subsidiary group' means any group
of corporations if--
`(i) such group consists only of corporations in the pre-election
worldwide affiliated group,
`(ii) such group includes--
`(I) a domestic corporation (which is not the common parent of the
pre-election worldwide affiliated group or a member of an electing
financial institution group) which incurs interest expense with
respect to qualified indebtedness, and
`(II) every other corporation (other than a member of an electing
financial institution group) which is in the pre-election worldwide
affiliated group and which would be a member of an affiliated group
having such domestic corporation as the common parent,
and
`(iii) an election under this paragraph is in effect for such
group.
`(B) EQUALIZATION RULE- All interest expense of a domestic corporation
which is a member of a pre-election worldwide affiliated group (other than
subsidiary group interest expense) shall be treated as allocated to
foreign source income to the extent such expense does not exceed the
excess (if any) of--
`(i) the interest expense of the pre-election worldwide affiliated
group (including subsidiary group interest expense) which would (but for
any election under this paragraph) be allocated to foreign source
income, over
`(ii) the subsidiary group interest expense allocated to foreign
source income.
For purposes of the preceding sentence, the subsidiary group interest
expense is the interest expense to which subsection (e) applies separately
by reason of paragraph (1)(B).
`(C) QUALIFIED INDEBTEDNESS- For purposes of this subsection, the term
`qualified indebtedness' means any indebtedness of a domestic
corporation--
`(i) which is held by an unrelated person, and
`(ii) which is not guaranteed (or otherwise supported) by any
corporation which is a member of the pre-election worldwide affiliated
group other than a corporation which is a member of the electing
subsidiary group.
`(D) EFFECT OF CERTAIN TRANSACTIONS ON QUALIFIED INDEBTEDNESS- In the
case of a corporation which is a member of an electing subsidiary group,
to the extent that such corporation--
`(i) distributes dividends or makes other distributions with respect
to its stock after the date of the enactment of this paragraph to any
member of the pre-election worldwide affiliated group (other than to a
member of the electing subsidiary group) in excess of the greater
of--
`(I) its average annual dividend (expressed as a percentage of
current earnings and profits) during the 5-taxable-year period ending
with the taxable year preceding the taxable year, or
`(II) 25 percent of its average annual earnings and profits for
such 5 taxable year period, or
`(ii) deals with any person in any manner not clearly reflecting the
income of the corporation (as determined under principles similar to the
principles of section 482),
except as provided by the Secretary, an amount of qualified
indebtedness equal to the excess distribution or the understatement or
overstatement of income, as the case may be, shall be recharacterized (for
the taxable year and subsequent taxable years) for purposes of this
subsection as indebtedness which is not qualified indebtedness. If a
corporation has not been in existence for 5 taxable years, this
subparagraph shall be applied with respect to the period it was in
existence.
`(E) ELECTION- An election under this paragraph with respect to any
electing subsidiary group may be made only by the common parent of the
pre-election worldwide affiliated group. Such an election, once made,
shall apply to the taxable year for which made and the 4 succeeding
taxable years unless revoked with the consent of the Secretary. No
election may be made under this paragraph if the effect of the election
would be to have the same member of the pre-election worldwide affiliated
group included in more than one electing subsidiary group.
`(4) PRE-ELECTION WORLDWIDE AFFILIATED GROUP- For purposes of this
subsection, the term `pre-election worldwide affiliated group' means, with
respect to a corporation, the worldwide affiliated group of which such
corporation would (but for an election under this subsection) be a member
for purposes of applying subsection (e).
`(5) UNRELATED PERSON- For purposes of this subsection, the term
`unrelated person' means any person not bearing a relationship specified in
section 267(b) or 707(b)(1) to the corporation.
`(6) REGULATIONS- The Secretary shall prescribe such regulations as may
be appropriate to carry out this subsection and subsection (e), including
regulations--
`(A) providing for the direct allocation of interest expense in other
circumstances where such allocation would be appropriate to carry out the
purposes of this subsection,
`(B) preventing assets or interest expense from being taken into
account more than once, and
`(C) dealing with changes in members of any group (through
acquisitions or otherwise) treated under this subsection as an affiliated
group for purposes of subsection (e).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
SEC. 902. LOOK-THRU RULES TO APPLY TO DIVIDENDS FROM NONCONTROLLED SECTION
902 CORPORATIONS.
(a) IN GENERAL- Section 904(d)(4) (relating to application of look-thru
rules to dividends from noncontrolled section 902 corporations) is amended to
read as follows:
`(4) LOOK-THRU APPLIES TO DIVIDENDS FROM NONCONTROLLED SECTION 902
CORPORATIONS-
`(A) IN GENERAL- For purposes of this subsection, any dividend from a
noncontrolled section 902 corporation with respect to the taxpayer shall
be treated as income in a separate category in proportion to the ratio
of--
`(i) the portion of earnings and profits attributable to income in
such category, to
`(ii) the total amount of earnings and profits.
`(B) SPECIAL RULES- For purposes of this paragraph--
`(i) IN GENERAL- Rules similar to the rules of paragraph (3)(F)
shall apply; except that the term `separate category' shall include the
category of income described in paragraph (1)(I).
`(ii) EARNINGS AND PROFITS-
`(I) IN GENERAL- The rules of section 316 shall
apply.
`(II) REGULATIONS- The Secretary may prescribe regulations
regarding the treatment of distributions out of earnings and profits
for periods before the taxpayer's acquisition of the stock to which
the distributions relate.
`(iii) DIVIDENDS NOT ALLOCABLE TO SEPARATE CATEGORY- The portion of
any dividend from a noncontrolled section 902 corporation which is not
treated as income in a separate category under subparagraph (A) shall be
treated as a dividend to which subparagraph (A) does not
apply.
`(iv) LOOK-THRU WITH RESPECT TO CARRYFORWARDS OF CREDIT- Rules
similar to subparagraph (A) also shall apply to any carryforward under
subsection (c) from a taxable year beginning before January 1, 2002, of
tax allocable to a dividend from a noncontrolled section 902 corporation
with respect to the taxpayer.'.
(b) CONFORMING AMENDMENTS-
(1) Subparagraph (E) of section 904(d)(1), as in effect both before and
after the amendments made by section 1105 of the Taxpayer Relief Act of
1997, is hereby repealed.
(2) Section 904(d)(2)(C)(iii), as so in effect, is amended by striking
subclause (II) and by redesignating subclause (III) as subclause (II).
(3) The last sentence of section 904(d)(2)(D), as so in effect, is
amended to read as follows: `Such term does not include any financial
services income.'.
(4) Section 904(d)(2)(E) is amended by striking clauses (ii) and (iv)
and by redesignating clause (iii) as clause (ii).
(5) Section 904(d)(3)(F) is amended by striking `(D), or (E)' and
inserting `or (D)'.
(6) Section 864(d)(5)(A)(i) is amended by striking `(C)(iii)(III)' and
inserting `(C)(iii)(II)'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2001.
SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE TRANSPORTATION INCOME.
(a) IN GENERAL- Section 954(g)(1) (defining foreign base company oil
related income) is amended by striking `or' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and inserting `, or', and
by inserting after subparagraph (B) the following new subparagraph:
`(C) the pipeline transportation of oil or gas within such foreign
country.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years of controlled foreign corporations beginning after December 31,
2001, and taxable years of United States shareholders with or within which
such taxable years of controlled foreign corporations end.
SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANSMISSION OF HIGH VOLTAGE
ELECTRICITY.
(a) IN GENERAL- Paragraph (2) of section 954(e) (relating to foreign base
company services income) is amended by striking `or' at the end of
subparagraph (A), by striking the period at the end of subparagraph (B) and
inserting `, or', and by inserting after subparagraph (B) the following new
subparagraph:
`(C) the transmission of high voltage electricity.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years of controlled foreign corporations beginning after December 31,
2001, and taxable years of United States shareholders with or within which
such taxable years of controlled foreign corporations end.
SEC. 905. RECHARACTERIZATION OF OVERALL DOMESTIC LOSS.
(a) GENERAL RULE- Section 904 is amended by redesignating subsections (g),
(h), (i), (j), and (k) as subsections (h), (i), (j), (k), and (l),
respectively, and by inserting after subsection (f) the following new
subsection:
`(g) RECHARACTERIZATION OF OVERALL DOMESTIC LOSS-
`(1) GENERAL RULE- For purposes of this subpart and section 936, in the
case of any taxpayer who sustains an overall domestic loss for any taxable
year beginning after December 31, 2005, that portion of the taxpayer's
taxable income from sources within the United States for each succeeding
taxable year which is equal to the lesser of--
`(A) the amount of such loss (to the extent not used under this
paragraph in prior taxable years), or
`(B) 50 percent of the taxpayer's taxable income from sources within
the United States for such succeeding taxable year,
shall be treated as income from sources without the United States (and
not as income from sources within the United States).
`(2) OVERALL DOMESTIC LOSS DEFINED- For purposes of this
subsection--
`(A) IN GENERAL- The term `overall domestic loss' means any domestic
loss to the extent such loss offsets taxable income from sources without
the United States for the taxable year or for any preceding taxable year
by reason of a carryback. For purposes of the preceding sentence, the term
`domestic loss' means the amount by which the gross income for the taxable
year from sources within the United States is exceeded by the sum of the
deductions properly apportioned or allocated thereto (determined without
regard to any carryback from a subsequent taxable year).
`(B) TAXPAYER MUST HAVE ELECTED FOREIGN TAX CREDIT FOR YEAR OF LOSS-
The term `overall domestic loss' shall not include any loss for any
taxable year unless the taxpayer chose the benefits of this subpart for
such taxable year.
`(3) CHARACTERIZATION OF SUBSEQUENT INCOME-
`(A) IN GENERAL- Any income from sources within the United States that
is treated as income from sources without the United States under
paragraph (1) shall be allocated among and increase the income categories
in proportion to the loss from sources within the United States previously
allocated to those income categories.
`(B) INCOME CATEGORY- For purposes of this paragraph, the term `income
category' has the meaning given such term by subsection
(f)(5)(E)(i).
`(4) COORDINATION WITH SUBSECTION (f)- The Secretary shall prescribe
such regulations as may be necessary to coordinate the provisions of this
subsection with the provisions of subsection (f).'.
(b) CONFORMING AMENDMENTS-
(1) Section 535(d)(2) is amended by striking `section 904(g)(6)' and
inserting `section 904(h)(6)'.
(2) Subparagraph (A) of section 936(a)(2) is amended by striking
`section 904(f)' and inserting `subsections (f) and (g) of section
904'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
losses for taxable years beginning after December 31, 2005.
SEC. 906. TREATMENT OF MILITARY PROPERTY OF FOREIGN SALES CORPORATIONS.
(a) IN GENERAL- Section 923(a) (defining exempt foreign trade income) is
amended by striking paragraph (5) and by redesignating paragraph (6) as
paragraph (5).
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 2001.
SEC. 907. TREATMENT OF CERTAIN DIVIDENDS OF REGULATED INVESTMENT
COMPANIES.
(a) TREATMENT OF CERTAIN DIVIDENDS-
(1) NONRESIDENT ALIEN INDIVIDUALS- Section 871 (relating to tax on
nonresident alien individuals) is amended by redesignating subsection (k) as
subsection (l) and by inserting after subsection (j) the following new
subsection:
`(k) EXEMPTION FOR CERTAIN DIVIDENDS OF REGULATED INVESTMENT COMPANIES-
`(1) INTEREST-RELATED DIVIDENDS-
`(A) IN GENERAL- Except as provided in subparagraph (B), no tax shall
be imposed under paragraph (1)(A) of subsection (a) on any
interest-related dividend received from a regulated investment
company.
`(B) EXCEPTIONS- Subparagraph (A) shall not apply--
`(i) to any interest-related dividend received from a regulated
investment company by a person to the extent such dividend is
attributable to interest (other than interest described in clause (i),
(iii), or the last sentence of subparagraph (E)) received by such
company on indebtedness issued by such person or by any corporation or
partnership with respect to which such person is a 10-percent
shareholder,
`(ii) to any interest-related dividend with respect to stock of a
regulated investment company unless the person who would otherwise be
required to deduct and withhold tax from such dividend under chapter 3
receives a statement (which meets requirements similar to the
requirements of subsection (h)(5)) that the beneficial owner of such
stock is not a United States person, and
`(iii) to any interest-related dividend paid to any person within a
foreign country (or any interest-related dividend payment addressed to,
or for the account of, persons within such foreign country) during any
period described in subsection (h)(6) with respect to such
country.
Clause (iii) shall not apply to any dividend with respect to any stock
the holding period of which begins on or before the date of the
publication of the Secretary's determination under subsection
(h)(6).
`(C) INTEREST-RELATED DIVIDEND- For purposes of this paragraph, an
interest-related dividend is any dividend (or part thereof) which is
designated by the regulated investment company as an interest-related
dividend in a written notice mailed to its shareholders not later than 60
days after the close of its taxable year. If the aggregate amount so
designated with respect to a taxable year of the company (including
amounts so designated with respect to dividends paid after the close of
the taxable year described in section 855) is greater than the qualified
net interest income of the company for such taxable year, the portion of
each distribution which shall be an interest-related dividend shall be
only that portion of the amounts so designated which such qualified net
interest income bears to the aggregate amount so designated.
`(D) QUALIFIED NET INTEREST INCOME- For purposes of subparagraph (C),
the term `qualified net interest income' means the qualified interest
income of the regulated investment company reduced by the deductions
properly allocable to such income.
`(E) QUALIFIED INTEREST INCOME- For purposes of subparagraph (D), the
term `qualified interest income' means the sum of the following amounts
derived by the regulated investment company from sources within the United
States:
`(i) Any amount includible in gross income as original issue
discount (within the meaning of section 1273) on an obligation payable
183 days or less from the date of original issue (without regard to the
period held by the company).
`(ii) Any interest includible in gross income (including amounts
recognized as ordinary income in respect of original issue discount or
market discount or acquisition discount under part V of subchapter P and
such other amounts as regulations may provide) on an obligation which is
in registered form; except that this clause shall not apply
to--
`(I) any interest on an obligation issued by a corporation or
partnership if the regulated investment company is a 10-percent
shareholder in such corporation or partnership, and
`(II) any interest which is treated as not being portfolio
interest under the rules of subsection (h)(4).
`(iii) Any interest referred to in subsection (i)(2)(A) (without
regard to the trade or business of the regulated investment
company).
`(iv) Any interest-related dividend includable in gross income with
respect to stock of another regulated investment company.
Such term includes any interest derived by the regulated investment
company from sources outside the United States other than interest that is
subject to a tax imposed by a foreign jurisdiction if the amount of such
tax is reduced (or eliminated) by a treaty with the United
States.
`(F) 10-PERCENT SHAREHOLDER- For purposes of this paragraph, the term
`10-percent shareholder' has the meaning given such term by subsection
(h)(3)(B).
`(2) SHORT-TERM CAPITAL GAIN DIVIDENDS-
`(A) IN GENERAL- Except as provided in subparagraph (B), no tax shall
be imposed under paragraph (1)(A) of subsection (a) on any short-term
capital gain dividend received from a regulated investment
company.
`(B) EXCEPTION FOR ALIENS TAXABLE UNDER SUBSECTION (a)(2)-
Subparagraph (A) shall not apply in the case of any nonresident alien
individual subject to tax under subsection (a)(2).
`(C) SHORT-TERM CAPITAL GAIN DIVIDEND- For purposes of this paragraph,
a short-term capital gain dividend is any dividend (or part thereof) which
is designated by the regulated investment company as a short-term capital
gain dividend in a written notice mailed to its shareholders not later
than 60 days after the close of its taxable year. If the aggregate amount
so designated with respect to a taxable year of the company (including
amounts so designated with respect to dividends paid after the close of
the taxable year described in section 855) is greater than the qualified
short-term gain of the company for such taxable year, the portion of each
distribution which shall be a short-term capital gain dividend shall be
only that portion of the amounts so designated which such qualified
short-term gain bears to the aggregate amount so designated.
`(D) QUALIFIED SHORT-TERM GAIN- For purposes of subparagraph (C), the
term `qualified short-term gain' means the excess of the net short-term
capital gain of the regulated investment company for the taxable year over
the net long-term capital loss (if any) of such company for such taxable
year. For purposes of this subparagraph--
`(i) the net short-term capital gain of the regulated investment
company shall be computed by treating any short-term capital gain
dividend includible in gross income with respect to stock of another
regulated investment company as a short-term capital gain,
and
`(ii) the excess of the net short-term capital gain for a taxable
year over the net long-term capital loss for a taxable year (to which an
election under section 4982(e)(4) does not apply) shall be determined
without regard to any net capital loss or net short-term capital loss
attributable to transactions after October 31 of such year, and any such
net capital loss or net short-term capital loss shall be treated as
arising on the first day of the next taxable year.
To the extent provided in regulations, clause (ii) shall apply also
for purposes of computing the taxable income of the regulated investment
company.'.
(2) FOREIGN CORPORATIONS- Section 881 (relating to tax on income of
foreign corporations not connected with United States business) is amended
by redesignating subsection (e) as subsection (f) and by inserting after
subsection (d) the following new subsection:
`(e) TAX NOT TO APPLY TO CERTAIN DIVIDENDS OF REGULATED INVESTMENT
COMPANIES-
`(1) INTEREST-RELATED DIVIDENDS-
`(A) IN GENERAL- Except as provided in subparagraph (B), no tax shall
be imposed under paragraph (1) of subsection (a) on any interest-related
dividend (as defined in section 871(k)(1)) received from a regulated
investment company.
`(B) EXCEPTION- Subparagraph (A) shall not apply--
`(i) to any dividend referred to in section 871(k)(1)(B),
and
`(ii) to any interest-related dividend received by a controlled
foreign corporation (within the meaning of section 957(a)) to the extent
such dividend is attributable to interest received by the regulated
investment company from a person who is a related person (within the
meaning of section 864(d)(4)) with respect to such controlled foreign
corporation.
`(C) TREATMENT OF DIVIDENDS RECEIVED BY CONTROLLED FOREIGN
CORPORATIONS- The rules of subsection (c)(5)(A) shall apply to any
interest-related dividend received by a controlled foreign corporation
(within the meaning of section 957(a)) to the extent such dividend is
attributable to interest received by the regulated investment company
which is described in clause (ii) of section 871(k)(1)(E) (and not
described in clause (i), (iii), or the last sentence of such
section).
`(2) SHORT-TERM CAPITAL GAIN DIVIDENDS- No tax shall be imposed under
paragraph (1) of subsection (a) on any short-term capital gain dividend (as
defined in section 871(k)(2)) received from a regulated investment
company.'.
(A) Section 1441(c) (relating to exceptions) is amended by adding at
the end the following new paragraph:
`(12) CERTAIN DIVIDENDS RECEIVED FROM REGULATED INVESTMENT
COMPANIES-
`(A) IN GENERAL- No tax shall be required to be deducted and withheld
under subsection (a) from any amount exempt from the tax imposed by
section 871(a)(1)(A) by reason of section 871(k).
`(B) SPECIAL RULE- For purposes of subparagraph (A), clause (i) of
section 871(k)(1)(B) shall not apply to any dividend unless the regulated
investment company knows that such dividend is a dividend referred to in
such clause. A similar rule shall apply with respect to the exception
contained in section 871(k)(2)(B).'.
(B) Section 1442(a) (relating to withholding of tax on foreign
corporations) is amended--
(i) by striking `and the reference in section 1441(c)(10)' and
inserting `the reference in section 1441(c)(10)', and
(ii) by inserting before the period at the end the following: `, and
the references in section 1441(c)(12) to sections 871(a) and 871(k)
shall be treated as referring to sections 881(a) and 881(e) (except that
for purposes of applying subparagraph (A) of section 1441(c)(12), as so
modified, clause (ii) of section 881(e)(1)(B) shall not apply to any
dividend unless the regulated investment company knows that such
dividend is a dividend referred to in such clause)'.
(b) ESTATE TAX TREATMENT OF INTEREST IN CERTAIN REGULATED INVESTMENT
COMPANIES- Section 2105 (relating to property without the United States for
estate tax purposes) is amended by adding at the end the following new
subsection:
`(1) IN GENERAL- For purposes of this subchapter, stock in a regulated
investment company (as defined in section 851) owned by a nonresident not a
citizen of the United States shall not be deemed property within the United
States in the proportion that, at the end of the quarter of such investment
company's taxable year immediately preceding a decedent's date of death (or
at such other time as the Secretary may designate in regulations), the
assets of the investment company that were qualifying assets with respect to
the decedent bore to the total assets of the investment company.
`(2) QUALIFYING ASSETS- For purposes of this subsection, qualifying
assets with respect to a decedent are assets that, if owned directly by the
decedent, would have been--
`(A) amounts, deposits, or debt obligations described in subsection
(b) of this section,
`(B) debt obligations described in the last sentence of section
2104(c), or
`(C) other property not within the United States.'.
(c) TREATMENT OF REGULATED INVESTMENT COMPANIES UNDER SECTION 897-
(1) Paragraph (1) of section 897(h) is amended by striking `REIT' each
place it appears and inserting `qualified investment entity'.
(2) Paragraphs (2) and (3) of section 897(h) are amended to read as
follows:
`(2) SALE OF STOCK IN DOMESTICALLY CONTROLLED ENTITY NOT TAXED- The term
`United States real property interest' does not include any interest in a
domestically controlled qualified investment entity.
`(3) DISTRIBUTIONS BY DOMESTICALLY CONTROLLED QUALIFIED INVESTMENT
ENTITIES- In the case of a domestically controlled qualified investment
entity, rules similar to the rules of subsection (d) shall apply to the
foreign ownership percentage of any gain.'.
(3) Subparagraphs (A) and (B) of section 897(h)(4) are amended to read
as follows:
`(A) QUALIFIED INVESTMENT ENTITY- The term `qualified investment
entity' means any real estate investment trust and any regulated
investment company.
`(B) DOMESTICALLY CONTROLLED- The term `domestically controlled
qualified investment entity' means any qualified investment entity in
which at all times during the testing period less than 50 percent in value
of the stock was held directly or indirectly by foreign
persons.'.
(4) Subparagraphs (C) and (D) of section 897(h)(4) are each amended by
striking `REIT' and inserting `qualified investment entity'.
(5) The subsection heading for subsection (h) of section 897 is amended
by striking `REITS' and inserting `CERTAIN INVESTMENT ENTITIES'.
(1) IN GENERAL- Except as otherwise provided in this subsection, the
amendments made by this section shall apply to dividends with respect to
taxable years of regulated investment companies beginning after December 31,
2004.
(2) ESTATE TAX TREATMENT- The amendment made by subsection (b) shall
apply to estates of decedents dying after December 31, 2004.
(3) CERTAIN OTHER PROVISIONS- The amendments made by subsection (c)
(other than paragraph (1) thereof) shall take effect on January 1,
2005.
SEC. 908. REPEAL OF SPECIAL RULES FOR APPLYING FOREIGN TAX CREDIT IN CASE OF
FOREIGN OIL AND GAS INCOME.
(a) IN GENERAL- Section 907 (relating to special rules in case of foreign
oil and gas income) is repealed.
(b) CONFORMING AMENDMENTS-
(1) Each of the following provisions are amended by striking
`907,':
(B) Section 865(h)(1)(B).
(D) Section 904(g)(10)(A).
(2) Section 904(f)(5)(E)(iii) is amended by inserting `, as in effect
before its repeal by the Taxpayer Refund and Relief Act of 1999' after
`section 907(c)(4)(B)'.
(3) Section 954(g)(1) is amended by inserting `, as in effect before its
repeal by the Taxpayer Refund and Relief Act of 1999' after `907(c)'.
(4) Section 6501(i) is amended--
(A) by striking `, or under section 907(f) (relating to carryback and
carryover of disallowed oil and gas extraction taxes)', and
(B) by striking `or 907(f)'.
(5) The table of sections for subpart A of part III of subchapter N of
chapter 1 is amended by striking the item relating to section 907.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2007.
SEC. 909. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDENTIAL TAXPAYER
INFORMATION.
(1) TREATMENT AS RETURN INFORMATION- Paragraph (2) of section 6103(b)
(defining return information) is amended by striking `and' at the end of
subparagraph (A), by inserting `and' at the end of subparagraph (B), and by
inserting after subparagraph (B) the following new subparagraph:
`(C) any advance pricing agreement entered into by a taxpayer and the
Secretary and any background information related to such agreement or any
application for an advance pricing agreement,'.
(2) EXCEPTION FROM PUBLIC INSPECTION AS WRITTEN DETERMINATION- Paragraph
(1) of section 6110(b) (defining written determination) is amended by adding
at the end the following new sentence: `Such term shall not include any
advance pricing agreement entered into by a taxpayer and the Secretary and
any background information related to such agreement or any application for
an advance pricing agreement.'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall take
effect on the date of the enactment of this Act.
(b) ANNUAL REPORT REGARDING ADVANCE PRICING AGREEMENTS-
(1) IN GENERAL- Not later than 90 days after the end of each calendar
year, the Secretary of the Treasury shall prepare and publish a report
regarding advance pricing agreements.
(2) CONTENTS OF REPORT- The report shall include the following for the
calendar year to which such report relates:
(A) Information about the structure, composition, and operation of the
advance pricing agreement program office.
(B) A copy of each model advance pricing agreement.
(i) applications filed during such calendar year for advanced
pricing agreements;
(ii) advance pricing agreements executed cumulatively to date and
during such calendar year;
(iii) renewals of advanced pricing agreements issued;
(iv) pending requests for advance pricing agreements;
(v) pending renewals of advance pricing agreements;
(vi) for each of the items in clauses (ii) through (v), the number
that are unilateral, bilateral, and multilateral,
respectively;
(vii) advance pricing agreements revoked or canceled, and the number
of withdrawals from the advance pricing agreement program;
and
(viii) advanced pricing agreements finalized or renewed by
industry.
(D) General descriptions of--
(i) the nature of the relationships between the related
organizations, trades, or businesses covered by advance pricing
agreements;
(ii) the covered transactions and the business functions performed
and risks assumed by such organizations, trades, or
businesses;
(iii) the related organizations, trades, or businesses whose prices
or results are tested to determine compliance with transfer pricing
methodologies prescribed in advanced pricing agreements;
(iv) methodologies used to evaluate tested parties and transactions
and the circumstances leading to the use of those
methodologies;
(v) critical assumptions made and sources of comparables
used;
(vi) comparable selection criteria and the rationale used in
determining such criteria;
(vii) the nature of adjustments to comparables or tested
parties;
(viii) the nature of any ranges agreed to, including information
regarding when no range was used and why, when interquartile ranges were
used, and when there was a statistical narrowing of the
comparables;
(ix) adjustment mechanisms provided to rectify results that fall
outside of the agreed upon advance pricing agreement range;
(x) the various term lengths for advance pricing agreements,
including rollback years, and the number of advance pricing agreements
with each such term length;
(xi) the nature of documentation required; and
(xii) approaches for sharing of currency or other risks.
(E) Statistics regarding the amount of time taken to complete new and
renewal advance pricing agreements.
(F) A detailed description of the Secretary of the Treasury's efforts
to ensure compliance with existing advance pricing agreements.
(3) CONFIDENTIALITY- The reports required by this subsection shall be
treated as authorized by the Internal Revenue Code of 1986 for purposes of
section 6103 of such Code, but the reports shall not include
information--
(A) which would not be permitted to be disclosed under section 6110(c)
of such Code if such report were a written determination as defined in
section 6110 of such Code, or
(B) which can be associated with, or otherwise identify, directly or
indirectly, a particular taxpayer.
(4) FIRST REPORT- The report for calendar year 1999 shall include prior
calendar years after 1990.
(c) USER FEE- Section 7527, as added by title XV of this Act, is amended
by redesignating subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
`(c) ADVANCE PRICING AGREEMENTS-
`(1) IN GENERAL- In addition to any fee otherwise imposed under this
section, the fee imposed for requests for advance pricing agreements shall
be increased by $500.
`(2) REDUCED FEE FOR SMALL BUSINESSES- The Secretary shall provide an
appropriate reduction in the amount imposed by reason of paragraph (1) for
requests for advance pricing agreements for small businesses.'.
(d) REGULATIONS- The Secretary of the Treasury or the Secretary's delegate
shall prescribe such regulations as may be necessary or appropriate to carry
out the purposes of section 6103(b)(2)(C), and the last sentence of section
6110(b)(1), of the Internal Revenue Code of 1986, as added by this section.
SEC. 910. INCREASE IN DOLLAR LIMITATION ON SECTION 911 EXCLUSION.
(a) GENERAL RULE- The table contained in clause (i) of section
911(b)(2)(D) is amended to read as follows:
`For calendar year--
The exclusion amount is--
2000
$76,000
2001
78,000
2002
80,000
2003
83,000
2004
86,000
2005
89,000
2006
92,000
2007 and thereafter
95,000.'.
(b) CONFORMING AMENDMENT- Clause (ii) of section 911(b)(2)(D) is amended
by striking `$80,000' and inserting `$95,000'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 911. AIRLINE MILEAGE AWARDS TO CERTAIN FOREIGN PERSONS.
(a) IN GENERAL- Paragraph (3) of section 4261(e) is amended by
redesignating subparagraph (C) as subparagraph (D) and by inserting after
subparagraph (B) the following new subparagraph:
`(C) MILEAGE AWARDS ISSUED TO INDIVIDUALS RESIDING OUTSIDE THE UNITED
STATES- The tax imposed by subsection (a) shall not apply to amounts
attributable to mileage awards credited to individuals whose mailing
addresses on record with the person providing the right to air
transportation are outside the United States.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
amounts paid after December 31, 2004.
TITLE X--PROVISIONS RELATING TO TAX-EXEMPT ORGANIZATIONS
SEC. 1001. EXEMPTION FROM INCOME TAX FOR STATE-CREATED ORGANIZATIONS
PROVIDING PROPERTY AND CASUALTY INSURANCE FOR PROPERTY FOR WHICH SUCH COVERAGE
IS OTHERWISE UNAVAILABLE.
(a) IN GENERAL- Subsection (c) of section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by adding at the end the
following new paragraph:
`(28)(A) Any association created before January 1, 1999, by State law
and organized and operated exclusively to provide property and casualty
insurance coverage for property located within the State for which the State
has determined that coverage in the authorized insurance market is limited
or unavailable at reasonable rates, if--
`(i) no part of the net earnings of which inures to the benefit of any
private shareholder or individual,
`(ii) except as provided in clause (v), no part of the assets of which
may be used for, or diverted to, any purpose other than--
`(I) to satisfy, in whole or in part, the liability of the
association for, or with respect to, claims made on policies written by
the association,
`(II) to invest in investments authorized by applicable
law,
`(III) to pay reasonable and necessary administration expenses in
connection with the establishment and operation of the association and
the processing of claims against the association, or
`(IV) to make remittances pursuant to State law to be used by the
State to provide for the payment of claims on policies written by the
association, purchase reinsurance covering losses under such policies,
or to support governmental programs to prepare for or mitigate the
effects of natural catastrophic events,
`(iii) the State law governing the association permits the association
to levy assessments on insurance companies authorized to sell property and
casualty insurance in the State, or on property and casualty insurance
policyholders with insurable interests in property located in the State to
fund deficits of the association, including the creation of
reserves,
`(iv) the plan of operation of the association is subject to approval
by the chief executive officer or other official of the State, by the
State legislature, or both, and
`(v) the assets of the association revert upon dissolution to the
State, the State's designee, or an entity designated by the State law
governing the association, or State law does not permit the dissolution of
the association.
`(B)(i) An entity described in clause (ii) shall be disregarded as a
separate entity and treated as part of the association described in
subparagraph (A) from which it receives remittances described in clause (ii)
if an election is made within 30 days after the date that such association
is determined to be exempt from tax.
`(ii) An entity is described in this clause if it is an entity or fund
created before January 1, 1999, pursuant to State law and organized and
operated exclusively to receive, hold, and invest remittances from an
association described in subparagraph (A) and exempt from tax under
subsection (a), to make disbursements to pay claims on insurance contracts
issued by such association, and to make disbursements to support
governmental programs to prepare for or mitigate the effects of natural
catastrophic events.'.
(b) UNRELATED BUSINESS TAXABLE INCOME- Subsection (a) of section 512
(relating to unrelated business taxable income) is amended by adding at the
end the following new paragraph:
`(6) SPECIAL RULE APPLICABLE TO ORGANIZATIONS DESCRIBED IN SECTION
501(C)(28)- In the case of an organization described in section 501(c)(28),
the term `unrelated business taxable income' means taxable income for a
taxable year computed without the application of section 501(c)(28) if at
the end of the immediately preceding taxable year the organization's net
equity exceeded 15 percent of the total coverage in force under insurance
contracts issued by the organization and outstanding at the end of such
preceding year.'.
(c) TRANSITIONAL RULE- No income or gain shall be recognized by an
association as a result of a change in status to that of an association
described by section 501(c)(28) of the Internal Revenue Code of 1986, as
amended by subsection (a).
(d) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
taxable years beginning after December 31, 1999.
SEC. 1002. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN FUNDS.
(a) IN GENERAL- Paragraph (1) of section 648 of the Tax Reform Act of 1984
is amended to read as follows:
`(1) such securities or obligations are held in a fund--
`(A) which, except to the extent of the investment earnings on such
securities or obligations, cannot be used, under State constitutional or
statutory restrictions continuously in effect since October 9, 1969,
through the date of issue of the bond issue, to pay debt service on the
bond issue or to finance the facilities that are to be financed with the
proceeds of the bonds, or
`(B) the annual distributions from which cannot exceed 7 percent of
the average fair market value of the assets held in such fund except to
the extent distributions are necessary to pay debt service on the bond
issue,'.
(b) CONFORMING AMENDMENT- Paragraph (3) of such section is amended by
striking `the investment earnings of' and inserting `distributions from'.
(c) EFFECTIVE DATE- The amendments made by this section shall take effect
on January 1, 2000.
SEC. 1003. EXEMPTION PROCEDURE FROM TAXES ON SELF-DEALING.
(a) IN GENERAL- Subsection (d) of section 4941 (relating to taxes on
self-dealing) is amended by adding at the end the following new paragraph:
`(3) SPECIAL EXEMPTION- The Secretary shall establish an exemption
procedure for purposes of this subsection. Pursuant to such procedure, the
Secretary may grant a conditional or unconditional exemption of any
disqualified person or transaction or class of disqualified persons or
transactions, from all or part of the restrictions imposed by paragraph (1).
The Secretary may not grant an exemption under this paragraph unless he
finds that such exemption is--
`(A) administratively feasible,
`(B) in the interests of the private foundation, and
`(C) protective of the rights of the private foundation.
Before granting an exemption under this paragraph, the Secretary shall
require adequate notice to be given to interested persons and shall publish
notice in the Federal Register of the pendency of such exemption and shall
afford interested persons an opportunity to present views.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
transactions occurring after the date of the enactment of this Act.
SEC. 1004. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-EXEMPT
ORGANIZATIONS.
(a) IN GENERAL- Subsection (a) of section 7428 (relating to creation of
remedy) is amended--
(1) in subparagraph (B) by inserting after `509(a))' the following: `or
as a private operating foundation (as defined in section 4942(j)(3))',
and
(2) by amending subparagraph (C) to read as follows:
`(C) with respect to the initial qualification or continuing
qualification of an organization as an organization described in section
501(c) (other than paragraph (3)) which is exempt from tax under section
501(a), or'.
(b) COURT JURISDICTION- Subsection (a) of section 7428 is amended in the
material following paragraph (2) by striking `United States Tax Court, the
United States Claims Court, or the district court of the United States for the
District of Columbia' and inserting the following: `United States Tax Court
(in the case of any such determination or failure) or the United States Claims
Court or the district court of the United States for the District of Columbia
(in the case of a determination or failure with respect to an issue referred
to in subparagraph (A) or (B) of paragraph (1)),'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
pleadings filed with respect to determinations (or requests for
determinations) made after the date of the enactment of this Act.
SEC. 1005. MODIFICATIONS TO SECTION 512(b)(13).
(a) IN GENERAL- Paragraph (13) of section 512(b) is amended by
redesignating subparagraph (E) as subparagraph (F) and by inserting after
subparagraph (D) the following new paragraph:
`(E) PARAGRAPH TO APPLY ONLY TO EXCESS PAYMENTS-
`(i) IN GENERAL- Subparagraph (A) shall apply only to the portion of
a specified payment received by the controlling organization that
exceeds the amount which would have been paid if such payment met the
requirements prescribed under section 482.
`(ii) ADDITION TO TAX FOR VALUATION MISSTATEMENTS- The tax imposed
by this chapter on the controlling organization shall be increased by an
amount equal to 20 percent of such excess.'.
(1) IN GENERAL- The amendment made by this section shall apply to
payments received or accrued after December 31, 1999.
(2) PAYMENTS SUBJECT TO BINDING CONTRACT TRANSITION RULE- If the
amendments made by section 1041 of the Taxpayer Relief Act of 1997 do not
apply to any amount received or accrued after the date of the enactment of
this Act under any contract described in subsection (b)(2) of such section,
such amendments also shall not apply to amounts received or accrued under
such contract before January 1, 2000.
SEC. 1006. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS EXCLUDED FROM
GROSS INCOME.
(a) IN GENERAL- Part III of subchapter B of chapter 1 is amended by
inserting after section 138 the following new section:
`SEC. 138A. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.
`(a) IN GENERAL- Gross income of an individual does not include amounts
received, from an organization described in section 170(c), as reimbursement
of operating expenses with respect to use of a passenger automobile for the
benefit of such organization for which a deduction would otherwise be
allowable under section 170. The preceding sentence shall apply only to the
extent that such reimbursement would be deductible under section 274(d)
(determined by applying the standard business mileage rate established
pursuant to section 274(d)) if the organization were not so described and such
individual were an employee of such organization.
`(b) NO DOUBLE BENEFIT- Subsection (a) shall not apply with respect to any
expenses if the individual claims a deduction or credit for such expenses
under any other provision of this title.
`(c) EXEMPTION FROM REPORTING REQUIREMENTS- Section 6041 shall not apply
with respect to reimbursements excluded from income under subsection (a).'.
(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter B
of chapter 1 is amended by inserting after the item relating to section 138
the following new items:
`Sec. 138A. Reimbursement for use of passenger automobile for charity.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 1007. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN EXPENSES INCURRED
IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE WHALING.
(a) IN GENERAL- Section 170 (relating to charitable, etc., contributions
and gifts) is amended by redesignating subsection (m) as subsection (n) and by
inserting after subsection (l) the following new subsection:
`(m) EXPENSES PAID BY CERTAIN WHALING CAPTAINS IN SUPPORT OF NATIVE
ALASKAN SUBSISTENCE WHALING-
`(1) IN GENERAL- In the case of an individual who is recognized by the
Alaska Eskimo Whaling Commission as a whaling captain charged with the
responsibility of maintaining and carrying out sanctioned whaling activities
and who engages in such activities during the taxable year, the amount
described in paragraph (2) (to the extent such amount does not exceed $7,500
for the taxable year) shall be treated for purposes of this section as a
charitable contribution.
`(A) IN GENERAL- The amount described in this paragraph is the
aggregate of the reasonable and necessary whaling expenses paid by the
taxpayer during the taxable year in carrying out sanctioned whaling
activities.
`(B) WHALING EXPENSES- For purposes of subparagraph (A), the term
`whaling expenses' includes expenses for--
`(i) the acquisition and maintenance of whaling boats, weapons, and
gear used in sanctioned whaling activities,
`(ii) the supplying of food for the crew and other provisions for
carrying out such activities, and
`(iii) storage and distribution of the catch from such
activities.
`(3) SANCTIONED WHALING ACTIVITIES- For purposes of this subsection, the
term `sanctioned whaling activities' means subsistence bowhead whale hunting
activities conducted pursuant to the management plan of the Alaska Eskimo
Whaling Commission.'.
(b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to
taxable years beginning after December 31, 1999.
SEC. 1008. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.
(a) REPEAL OF GRASSROOTS EXPENDITURE LIMIT- Paragraph (1) of section
501(h) (relating to expenditures by public charities to influence legislation)
is amended to read as follows:
`(1) GENERAL RULE- In the case of an organization to which this
subsection applies, exemption from taxation under subsection (a) shall be
denied because a substantial part of the activities of such organization
consists of carrying on propaganda, or otherwise attempting, to influence
legislation, but only if such organization normally makes lobbying
expenditures in excess of the lobbying ceiling amount for such organization
for each taxable year.'.
(b) CONFORMING AMENDMENTS-
(1) Section 501(h)(2) is amended by striking subparagraphs (C) and
(D).
(2) Section 4911(b) is amended to read as follows:
`(b) EXCESS LOBBYING EXPENDITURES- For purposes of this section, the term
`excess lobbying expenditures' means, for a taxable year, the amount by which
the lobbying expenditures made by the organization during the taxable year
exceed the lobbying nontaxable amount for such organization for such taxable
year.'.
(3) Section 4911(c) is amended by striking paragraphs (3) and (4).
(4) Paragraph (1)(A) of section 4911(f) is amended by striking `limits
of section 501(h)(1) have' and inserting `limit of section 501(h)(1)
has'.
(5) Paragraph (1)(C) of section 4911(f) is amended by striking `limits
of section 501(h)(1) are' and inserting `limit of section 501(h)(1)
is'.
(6) Paragraphs (4)(A) and (4)(B) of section 4911(f) are each amended by
striking `limits of section 501(h)(1)' and inserting `limit of section
501(h)(1)'.
(7) Paragraph (8) of section 6033(b) (relating to certain organizations
described in section 501(c)(3)) is amended by inserting `and' at the end of
subparagraph (A) and by striking subparagraphs (C) and (D).
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 1009. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR
CHARITABLE PURPOSES.
(a) IN GENERAL- Subsection (d) of section 408 (relating to individual
retirement accounts) is amended by adding at the end the following new
paragraph:
`(8) DISTRIBUTIONS FOR CHARITABLE PURPOSES-
`(A) IN GENERAL- In the case of a qualified charitable distribution
from an individual retirement account to an organization described in
section 170(c), no amount shall be includible in the gross income of the
distributee.
`(B) QUALIFIED CHARITABLE DISTRIBUTION- For purposes of this
paragraph, the term `qualified charitable distribution' means any
distribution from an individual retirement account--
`(i) which is made on or after the date that the individual for
whose benefit the account is maintained has attained age 70 1/2 ,
and
`(ii) which is a charitable contribution (as defined in section
170(c)) made directly from the account to an organization or entity
described in section 170(c).
`(C) DENIAL OF DEDUCTION- The amount allowable as a deduction to the
taxpayer for the taxable year under section 170 for qualified charitable
distributions shall be reduced (but not below zero) by the sum of the
amounts of the qualified charitable distributions during such year which
(but for this paragraph) would have been includible in the gross income of
the taxpayer for such year.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
taxable years beginning after December 31, 2002.
TITLE XI--REAL ESTATE PROVISIONS
Subtitle A--Improvements in Low-Income Housing Credit
SEC. 1101. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING CREDIT.
(a) IN GENERAL- Clauses (i) and (ii) of section 42(h)(3)(C) (relating to
State housing credit ceiling) are amended to read as follows:
`(i) the unused State housing credit ceiling (if any) of such State
for the preceding calendar year,
`(I) the applicable amount under subparagraph (H) multiplied by
the State population, or
(b) APPLICABLE AMOUNT- Paragraph (3) of section 42(h) (relating to housing
credit dollar amount for agencies) is amended by adding at the end the
following new subparagraph:
`(H) APPLICABLE AMOUNT OF STATE CEILING- For purposes of subparagraph
(C)(ii), the applicable amount shall be determined under the following
table:
`For calendar year:
--The applicable amount is:
--$1.35
-- 1.45
-- 1.55
-- 1.65
-- 1.75.'.
(c) ADJUSTMENT OF STATE CEILING FOR INCREASES IN COST-OF-LIVING- Paragraph
(3) of section 42(h) (relating to housing credit dollar amount for agencies),
as amended by subsection (c), is amended by adding at the end the following
new subparagraph:
`(I) COST-OF-LIVING ADJUSTMENT-
`(i) IN GENERAL- In the case of a calendar year after 2004, the
$2,000,000 in subparagraph (C) and the $1.75 amount in subparagraph (H)
shall each 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 2003'
for `calendar year 1992' in subparagraph (B) thereof.
`(I) In the case of the amount in subparagraph (C), any increase
under clause (i) which is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
`(II) In the case of the amount in subparagraph (H), any increase
under clause (i) which is not a multiple of 5 cents shall be rounded
to the next lowest multiple of 5 cents.'.
(d) CONFORMING AMENDMENTS-
(1) Section 42(h)(3)(C), as amended by subsection (a), is
amended--
(A) by striking `clause (ii)' in the matter following clause (iv) and
inserting `clause (i)', and
(B) by striking `clauses (i)' in the matter following clause (iv) and
inserting `clauses (ii)'.
(2) Section 42(h)(3)(D)(ii) is amended--
(A) by striking `subparagraph (C)(ii)' and inserting `subparagraph
(C)(i)', and
(B) by striking `clauses (i)' in subclause (II) and inserting `clauses
(ii)'.
(e) EFFECTIVE DATE- The amendments made by this section shall apply to
calendar years after 2000 but shall not take effect if sections 1102 and 1103
do not take effect.
SEC. 1102. MODIFICATION OF CRITERIA FOR ALLOCATING HOUSING CREDITS AMONG
PROJECTS.
(a) SELECTION CRITERIA- Subparagraph (C) of section 42(m)(1) (relating to
certain selection criteria must be used) is amended--
(1) by inserting `, including whether the project includes the use of
existing housing as part of a community revitalization plan' before the
comma at the end of clause (iii), and
(2) by striking clauses (v), (vi), and (vii) and inserting the following
new clauses:
`(v) tenant populations with special housing needs,
`(vi) public housing waiting lists,
`(vii) tenant populations of individuals with children,
and
`(viii) projects intended for eventual tenant
ownership.'.
(b) PREFERENCE FOR COMMUNITY REVITALIZATION PROJECTS LOCATED IN QUALIFIED
CENSUS TRACTS- Clause (ii) of section 42(m)(1)(B) is amended by striking `and'
at the end of subclause (I), by adding `and' at the end of subclause (II), and
by inserting after subclause (II) the following new subclause:
`(III) projects which are located in qualified census tracts (as
defined in subsection (d)(5)(C)) and the development of which
contributes to a concerted community revitalization
plan,'.
SEC. 1103. ADDITIONAL RESPONSIBILITIES OF HOUSING CREDIT AGENCIES.
(a) MARKET STUDY; PUBLIC DISCLOSURE OF RATIONALE FOR NOT FOLLOWING CREDIT
ALLOCATION PRIORITIES- Subparagraph (A) of section 42(m)(1) (relating to
responsibilities of housing credit agencies) is amended by striking `and' at
the end of clause (i), by striking the period at the end of clause (ii) and
inserting a comma, and by adding at the end the following new clauses:
`(iii) a comprehensive market study of the housing needs of
low-income individuals in the area to be served by the project is
conducted before the credit allocation is made and at the developer's
expense by a disinterested party who is approved by such agency,
and
`(iv) a written explanation is available to the general public for
any allocation of a housing credit dollar amount which is not made in
accordance with established priorities and selection criteria of the
housing credit agency.'.
(b) SITE VISITS- Clause (iii) of section 42(m)(1)(B) (relating to
qualified allocation plan) is amended by inserting before the period `and in
monitoring for noncompliance with habitability standards through regular site
visits'.
SEC. 1104. MODIFICATIONS TO RULES RELATING TO BASIS OF BUILDING WHICH IS
ELIGIBLE FOR CREDIT.
(a) ADJUSTED BASIS TO INCLUDE PORTION OF CERTAIN BUILDINGS USED BY
LOW-INCOME INDIVIDUALS WHO ARE NOT TENANTS AND BY PROJECT EMPLOYEES- Paragraph
(4) of section 42(d) (relating to special rules relating to determination of
adjusted basis) is amended--
(1) by striking `subparagraph (B)' in subparagraph (A) and inserting
`subparagraphs (B) and (C)',
(2) by redesignating subparagraph (C) as subparagraph (D), and
(3) by inserting after subparagraph (B) the following new
subparagraph:
`(C) INCLUSION OF BASIS OF PROPERTY USED TO PROVIDE SERVICES FOR
CERTAIN NONTENANTS-
`(i) IN GENERAL- The adjusted basis of any building located in a
qualified census tract (as defined in paragraph (5)(C)) shall be
determined by taking into account the adjusted basis of property (of a
character subject to the allowance for depreciation and not otherwise
taken into account) used throughout the taxable year in providing any
community service facility.
`(ii) LIMITATION- The increase in the adjusted basis of any building
which is taken into account by reason of clause (i) shall not exceed 10
percent of the eligible basis of the qualified low-income housing
project of which it is a part. For purposes of the preceding sentence,
all community service facilities which are part of the same qualified
low-income housing project shall be treated as one facility.
`(iii) COMMUNITY SERVICE FACILITY- For purposes of this
subparagraph, the term `community service facility' means any facility
designed to serve primarily individuals whose income is 60 percent or
less of area median income (within the meaning of subsection
(g)(1)(B)).'.
(b) CERTAIN NATIVE AMERICAN HOUSING ASSISTANCE DISREGARDED IN DETERMINING
WHETHER BUILDING IS FEDERALLY SUBSIDIZED FOR PURPOSES OF THE LOW-INCOME
HOUSING CREDIT- Subparagraph (E) of section 42(i)(2) (relating to
determination of whether building is federally subsidized) is amended--
(1) in clause (i), by inserting `or the Native American Housing
Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.) (as
in effect on October 1, 1997)' after `this subparagraph)', and
(2) in the subparagraph heading, by inserting `OR NATIVE AMERICAN
HOUSING ASSISTANCE' after `HOME ASSISTANCE'.
SEC. 1105. OTHER MODIFICATIONS.
(a) ALLOCATION OF CREDIT LIMIT TO CERTAIN BUILDINGS-
(1) The first sentence of section 42(h)(1)(E)(ii) is amended by striking
`(as of' the first place it appears and inserting `(as of the later of the
date which is 6 months after the date that the allocation was made
or'.
(2) The last sentence of section 42(h)(3)(C) is amended by striking
`project which' and inserting `project which fails to meet the 10 percent
test under paragraph (1)(E)(ii) on a date after the close of the calendar
year in which the allocation was made or which'.
(b) DETERMINATION OF WHETHER BUILDINGS ARE LOCATED IN HIGH COST AREAS- The
first sentence of section 42(d)(5)(C)(ii)(I) is amended--
(1) by inserting `either' before `in which 50 percent', and
(2) by inserting before the period `or which has a poverty rate of at
least 25 percent'.
SEC. 1106. CARRYFORWARD RULES.
(a) IN GENERAL- Clause (ii) of section 42(h)(3)(D) (relating to unused
housing credit carryovers allocated among certain States) is amended by
striking `the excess' and all that follows and inserting `the excess (if any)
of--
`(I) the unused State housing credit ceiling for the year
preceding such year, over
`(II) the aggregate housing credit dollar amount allocated for
such year.'.
(b) CONFORMING AMENDMENT- The second sentence of section 42(h)(3)(C)
(relating to State housing credit ceiling) is amended by striking `clauses (i)
and (iii)' and inserting `clauses (i) through (iv)'.
SEC. 1107. EFFECTIVE DATE.
Except as otherwise provided in this subtitle, the amendments made by this
subtitle shall apply to--
(1) housing credit dollar amounts allocated after December 31, 1999,
and
(2) buildings placed in service after such date to the extent paragraph
(1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to
any building by reason of paragraph (4) thereof, but only with respect to
bonds issued after such date.
Subtitle B--Provisions Relating to Real Estate Investment
Trusts
PART I--TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT
SUBSIDIARIES
SEC. 1111. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.
(a) IN GENERAL- Subparagraph (B) of section 856(c)(4) is amended to read
as follows:
`(B)(i) not more than 25 percent of the value of its total assets is
represented by securities (other than those includible under subparagraph
(A)), and
`(ii) except with respect to a taxable REIT subsidiary and securities
includible under subparagraph (A)--
`(I) not more than 5 percent of the value of its total assets is
represented by securities of any one issuer,
`(II) the trust does not hold securities possessing more than 10
percent of the total voting power of the outstanding securities of any
one issuer, and
`(III) the trust does not hold securities having a value of more
than 10 percent of the total value of the outstanding securities of any
one issuer.'.
(b) EXCEPTION FOR STRAIGHT DEBT SECURITIES- Subsection (c) of section 856
is amended by adding at the end the following new paragraph:
`(7) STRAIGHT DEBT SAFE HARBOR IN APPLYING PARAGRAPH (4)- Securities of
an issuer which are straight debt (as defined in section 1361(c)(5) without
regard to subparagraph (B)(iii) thereof) shall not be taken into account in
applying paragraph (4)(B)(ii)(III) if--
`(A) the issuer is an individual, or
`(B) the only securities of such issuer which are held by the trust or
a taxable REIT subsidiary of the trust are straight debt (as so defined),
or
`(C) the issuer is a partnership and the trust holds at least a 20
percent profits interest in the partnership.'.
SEC. 1112. TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT
SUBSIDIARIES.
(a) INCOME FROM TAXABLE REIT SUBSIDIARIES NOT TREATED AS IMPERMISSIBLE
TENANT SERVICE INCOME- Clause (i) of section 856(d)(7)(C) (relating to
exceptions to impermissible tenant service income) is amended by inserting `or
through a taxable REIT subsidiary of such trust' after `income'.
(b) CERTAIN INCOME FROM TAXABLE REIT SUBSIDIARIES NOT EXCLUDED FROM RENTS
FROM REAL PROPERTY-
(1) IN GENERAL- Subsection (d) of section 856 (relating to rents from
real property defined) is amended by adding at the end the following new
paragraphs:
`(8) SPECIAL RULE FOR TAXABLE REIT SUBSIDIARIES- For purposes of this
subsection, amounts paid to a real estate investment trust by a taxable REIT
subsidiary of such trust shall not be excluded from rents from real property
by reason of paragraph (2)(B) if the requirements of either of the following
subparagraphs are met:
`(A) LIMITED RENTAL EXCEPTION- The requirements of this subparagraph
are met with respect to any property if at least 90 percent of the leased
space of the property is rented to persons other than taxable REIT
subsidiaries of such trust and other than persons described in section
856(d)(2)(B). The preceding sentence shall apply only to the extent that
the amounts paid to the trust as rents from real property (as defined in
paragraph (1) without regard to paragraph (2)(B)) from such property are
substantially comparable to such rents made by the other tenants of the
trust's property for comparable space.
`(B) EXCEPTION FOR CERTAIN LODGING FACILITIES- The requirements of
this subparagraph are met with respect to an interest in real property
which is a qualified lodging facility leased by the trust to a taxable
REIT subsidiary of the trust if the property is operated on behalf of such
subsidiary by a person who is an eligible independent contractor.
`(9) ELIGIBLE INDEPENDENT CONTRACTOR- For purposes of paragraph
(8)(B)--
`(A) IN GENERAL- The term `eligible independent contractor' means,
with respect to any qualified lodging facility, any independent contractor
if, at the time such contractor enters into a management agreement or
other similar service contract with the taxable REIT subsidiary to operate
the facility, such contractor (or any related person) is actively engaged
in the trade or business of operating qualified lodging facilities for any
person who is not a related person with respect to the real estate
investment trust or the taxable REIT subsidiary.
`(B) SPECIAL RULES- Solely for purposes of this paragraph and
paragraph (8)(B), a person shall not fail to be treated as an independent
contractor with respect to any qualified lodging facility by reason of any
of the following:
`(i) The taxable REIT subsidiary bears the expenses for the
operation of the facility pursuant to the management agreement or other
similar service contract.
`(ii) The taxable REIT subsidiary receives the revenues from the
operation of such facility, net of expenses for such operation and fees
payable to the operator pursuant to such agreement or
contract.
`(iii) The real estate investment trust receives income from such
person with respect to another property that is attributable to a lease
of such other property to such person that was in effect as of the later
of--
`(II) the earliest date that any taxable REIT subsidiary of such
trust entered into a management agreement or other similar service
contract with such person with respect to such qualified lodging
facility.
`(C) RENEWALS, ETC., OF EXISTING LEASES- For purposes of subparagraph
(B)(iii)--
`(i) a lease shall be treated as in effect on January 1, 1999,
without regard to its renewal after such date, so long as such renewal
is pursuant to the terms of such lease as in effect on whichever of the
dates under subparagraph (B)(iii) is the latest, and
`(ii) a lease of a property entered into after whichever of the
dates under subparagraph (B)(iii) is the latest shall be treated as in
effect on such date if--
`(I) on such date, a lease of such property from the trust was in
effect, and
`(II) under the terms of the new lease, such trust receives a
substantially similar or lesser benefit in comparison to the lease
referred to in subclause (I).
`(D) QUALIFIED LODGING FACILITY- For purposes of this
paragraph--
`(i) IN GENERAL- The term `qualified lodging facility' means any
lodging facility unless wagering activities are conducted at or in
connection with such facility by any person who is engaged in the
business of accepting wagers and who is legally authorized to engage in
such business at or in connection with such facility.
`(ii) LODGING FACILITY- The term `lodging facility' means a hotel,
motel, or other establishment more than one-half of the dwelling units
in which are used on a transient basis.
`(iii) CUSTOMARY AMENITIES AND FACILITIES- The term `lodging
facility' includes customary amenities and facilities operated as part
of, or associated with, the lodging facility so long as such amenities
and facilities are customary for other properties of a comparable size
and class owned by other owners unrelated to such real estate investment
trust.
`(E) OPERATE INCLUDES MANAGE- References in this paragraph to
operating a property shall be treated as including a reference to managing
the property.
`(F) RELATED PERSON- Persons shall be treated as related to each other
if such persons are treated as a single employer under subsection (a) or
(b) of section 52.'.
(2) CONFORMING AMENDMENT- Subparagraph (B) of section 856(d)(2) is
amended by inserting `except as provided in paragraph (8),' after
`(B)'.
(3) DETERMINING RENTS FROM REAL PROPERTY-
(A)(i) Paragraph (1) of section 856(d) is amended by striking
`adjusted bases' each place it occurs and inserting `fair market
values'.
(ii) The amendment made by this subparagraph shall apply to taxable
years beginning after December 31, 2000.
(B)(i) Clause (i) of section 856(d)(2)(B) is amended by striking
`number' and inserting `value'.
(ii) The amendment made by this subparagraph shall apply to amounts
received or accrued in taxable years beginning after December 31, 2000,
except for amounts paid pursuant to leases in effect on July 12, 1999, or
pursuant to a binding contract in effect on such date and at all times
thereafter.
SEC. 1113. TAXABLE REIT SUBSIDIARY.
(a) IN GENERAL- Section 856 is amended by adding at the end the following
new subsection:
`(l) TAXABLE REIT SUBSIDIARY- For purposes of this part--
`(1) IN GENERAL- The term `taxable REIT subsidiary' means, with respect
to a real estate investment trust, a corporation (other than a real estate
investment trust) if--
`(A) such trust directly or indirectly owns stock in such corporation,
and
`(B) such trust and such corporation jointly elect that such
corporation shall be treated as a taxable REIT subsidiary of such trust
for purposes of this part.
Such an election, once made, shall be irrevocable unless both such trust
and corporation consent to its revocation. Such election, and any revocation
thereof, may be made without the consent of the Secretary.
`(2) 35 PERCENT OWNERSHIP IN ANOTHER TAXABLE REIT SUBSIDIARY- The term
`taxable REIT subsidiary' includes, with respect to any real estate
investment trust, any corporation (other than a real estate investment
trust) with respect to which a taxable REIT subsidiary of such trust owns
directly or indirectly--
`(A) securities possessing more than 35 percent of the total voting
power of the outstanding securities of such corporation, or
`(B) securities having a value of more than 35 percent of the total
value of the outstanding securities of such corporation.
The preceding sentence shall not apply to a qualified REIT subsidiary
(as defined in subsection (i)(2)). The rule of section 856(c)(7) shall apply
for purposes of subparagraph (B).
`(3) EXCEPTIONS- The term `taxable REIT subsidiary' shall not
include--
`(A) any corporation which directly or indirectly operates or manages
a lodging facility or a health care facility, and
`(B) any corporation which directly or indirectly provides to any
other person (under a franchise, license, or otherwise) rights to any
brand name under which any lodging facility or health care facility is
operated.
Subparagraph (B) shall not apply to rights provided to an eligible
independent contractor to operate or manage a lodging facility if such
rights are held by such corporation as a franchisee, licensee, or in a
similar capacity and such lodging facility is either owned by such
corporation or is leased to such corporation from the real estate investment
trust.
`(4) DEFINITIONS- For purposes of paragraph (3)--
`(A) LODGING FACILITY- The term `lodging facility' has the meaning
given to such term by paragraph (9)(D)(ii).
`(B) HEALTH CARE FACILITY- The term `health care facility' has the
meaning given to such term by subsection (e)(6)(D)(ii).'.
(b) CONFORMING AMENDMENT- Paragraph (2) of section 856(i) is amended by
adding at the end the following new sentence: `Such term shall not include a
taxable REIT subsidiary.'.
SEC. 1114. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163(j) (relating to limitation on deduction for
interest on certain indebtedness) is amended by striking `and' at the end of
subparagraph (A), by striking the period at the end of subparagraph (B) and
inserting `, and', and by adding at the end the following new subparagraph:
`(C) any interest paid or accrued (directly or indirectly) by a
taxable REIT subsidiary (as defined in section 856(l)) of a real estate
investment trust to such trust.'.
SEC. 1115. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.
(a) IN GENERAL- Subsection (b) of section 857 (relating to method of
taxation of real estate investment trusts and holders of shares or
certificates of beneficial interest) is amended by redesignating paragraphs
(7) and (8) as paragraphs (8) and (9), respectively, and by inserting after
paragraph (6) the following new paragraph:
`(7) INCOME FROM REDETERMINED RENTS, REDETERMINED DEDUCTIONS, AND EXCESS
INTEREST-
`(A) IMPOSITION OF TAX- There is hereby imposed for each taxable year
of the real estate investment trust a tax equal to 100 percent of
redetermined rents, redetermined deductions, and excess interest.
`(i) IN GENERAL- The term `redetermined rents' means rents from real
property (as defined in subsection 856(d)) the amount of which would
(but for subparagraph (E)) be reduced on distribution, apportionment, or
allocation under section 482 to clearly reflect income as a result of
services furnished or rendered by a taxable REIT subsidiary of the real
estate investment trust to a tenant of such trust.
`(ii) EXCEPTION FOR CERTAIN SERVICES- Clause (i) shall not apply to
amounts received directly or indirectly by a real estate investment
trust for services described in paragraph (1)(B) or (7)(C)(i) of section
856(d).
`(iii) EXCEPTION FOR DE MINIMIS AMOUNTS- Clause (i) shall not apply
to amounts described in section 856(d)(7)(A) with respect to a property
to the extent such amounts do not exceed the one percent threshold
described in section 856(d)(7)(B) with respect to such
property.
`(iv) EXCEPTION FOR COMPARABLY PRICED SERVICES- Clause (i) shall not
apply to any service rendered by a taxable REIT subsidiary of a real
estate investment trust to a tenant of such trust if--
`(I) such subsidiary renders a significant amount of similar
services to persons other than such trust and tenants of such trust
who are unrelated (within the meaning of section 856(d)(8)(F)) to such
subsidiary, trust, and tenants, but
`(II) only to the extent the charge for such service so rendered
is substantially comparable to the charge for the similar services
rendered to persons referred to in subclause (I).
`(v) EXCEPTION FOR CERTAIN SEPARATELY CHARGED SERVICES- Clause (i)
shall not apply to any service rendered by a taxable REIT subsidiary of
a real estate investment trust to a tenant of such trust
if--
`(I) the rents paid to the trust by tenants (leasing at least 25
percent of the net leasable space in the trust's property) who are not
receiving such service from such subsidiary are substantially
comparable to the rents paid by tenants leasing comparable space who
are receiving such service from such subsidiary, and
`(II) the charge for such service from such subsidiary is
separately stated.
`(vi) EXCEPTION FOR CERTAIN SERVICES BASED ON SUBSIDIARY'S INCOME
FROM THE SERVICES- Clause (i) shall not apply to any service rendered by
a taxable REIT subsidiary of a real estate investment trust to a tenant
of such trust if the gross income of such subsidiary from such service
is not less than 150 percent of such subsidiary's direct cost in
furnishing or rendering the service.
`(vii) EXCEPTIONS GRANTED BY SECRETARY- The Secretary may waive the
tax otherwise imposed by subparagraph (A) if the trust establishes to
the satisfaction of the Secretary that rents charged to tenants were
established on an arms' length basis even though a taxable REIT
subsidiary of the trust provided services to such tenants.
`(C) REDETERMINED DEDUCTIONS- The term `redetermined deductions' means
deductions (other than redetermined rents) of a taxable REIT subsidiary of
a real estate investment trust if the amount of such deductions would (but
for subparagraph (E)) be decreased on distribution, apportionment, or
allocation under section 482 to clearly reflect income as between such
subsidiary and such trust.
`(D) EXCESS INTEREST- The term `excess interest' means any deductions
for interest payments by a taxable REIT subsidiary of a real estate
investment trust to such trust to the extent that the interest payments
are in excess of a rate that is commercially reasonable.
`(E) COORDINATION WITH SECTION 482- The imposition of tax under
subparagraph (A) shall be in lieu of any distribution, apportionment, or
allocation under section 482.
`(F) REGULATORY AUTHORITY- The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes
of this paragraph. Until the Secretary prescribes such regulations, real
estate investment trusts and their taxable REIT subsidiaries may base
their allocations on any reasonable method.'.
(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE DISTRIBUTED- Subparagraph (E)
of section 857(b)(2) (relating to real estate investment trust taxable income)
is amended by striking `paragraph (5)' and inserting `paragraphs (5) and
(7)'.
SEC. 1116. EFFECTIVE DATE.
(a) IN GENERAL- The amendments made by this part shall apply to taxable
years beginning after December 31, 2000.
(b) TRANSITIONAL RULES RELATED TO SECTION 1111-
(1) EXISTING ARRANGEMENTS-
(A) IN GENERAL- Except as otherwise provided in this paragraph, the
amendment made by section 1111 shall not apply to a real estate investment
trust with respect to--
(i) securities of a corporation held directly or indirectly by such
trust on July 12, 1999,
(ii) securities of a corporation held by an entity on July 12, 1999,
if such trust acquires control of such entity pursuant to a written
binding contract in effect on such date and at all times thereafter
before such acquisition,
(iii) securities received by such trust (or a successor) in exchange
for, or with respect to, securities described in clause (i) or (ii) in a
transaction in which gain or loss is not recognized, and
(iv) securities acquired directly or indirectly by such trust as
part of a reorganization (as defined in section 368(a)(1) of the
Internal Revenue Code of 1986) with respect to such trust if such
securities are described in clause (i), (ii), or (iii) with respect to
any other real estate investment trust.
(B) NEW TRADE OR BUSINESS OR SUBSTANTIAL NEW ASSETS- Subparagraph (A)
shall cease to apply to securities of a corporation as of the first day
after July 12, 1999, on which such corporation engages in a substantial
new line of business, or acquires any substantial asset, other
than--
(i) pursuant to a binding contract in effect on such date and at all
times thereafter before the acquisition of such asset,
(ii) in a transaction in which gain or loss is not recognized by
reason of section 1031 or 1033 of the Internal Revenue Code of 1986,
or
(iii) in a reorganization (as so defined) with another corporation
the securities of which are described in paragraph (1)(A) of this
subsection.
(C) LIMITATION ON TRANSITION RULES- Subparagraph (A) shall cease to
apply to securities of a corporation held, acquired, or received, directly
or indirectly, by a real estate investment trust as of the first day after
July 12, 1999, on which such trust acquires any additional securities of
such corporation other than--
(i) pursuant to a binding contract in effect on July 12, 1999, and
at all times thereafter, or
(ii) in a reorganization (as so defined) with another corporation
the securities of which are described in paragraph (1)(A) of this
subsection.
(2) TAX-FREE CONVERSION- If--
(A) at the time of an election for a corporation to become a taxable
REIT subsidiary, the amendment made by section 1021 does not apply to such
corporation by reason of paragraph (1), and
(B) such election first takes effect before January 1, 2004,
such election shall be treated as a reorganization qualifying under
section 368(a)(1)(A) of such Code.
PART II--HEALTH CARE REITS
SEC. 1121. HEALTH CARE REITS.
(a) SPECIAL FORECLOSURE RULE FOR HEALTH CARE PROPERTIES- Subsection (e) of
section 856 (relating to special rules for foreclosure property) is amended by
adding at the end the following new paragraph:
`(6) SPECIAL RULE FOR QUALIFIED HEALTH CARE PROPERTIES- For purposes of
this subsection--
`(A) ACQUISITION AT EXPIRATION OF LEASE- The term `foreclosure
property' shall include any qualified health care property acquired by a
real estate investment trust as the result of the termination of a lease
of such property (other than a termination by reason of a default, or the
imminence of a default, on the lease).
`(B) GRACE PERIOD- In the case of a qualified health care property
which is foreclosure property solely by reason of subparagraph (A), in
lieu of applying paragraphs (2) and (3)--
`(i) the qualified health care property shall cease to be
foreclosure property as of the close of the second taxable year after
the taxable year in which such trust acquired such property,
and
`(ii) if the real estate investment trust establishes to the
satisfaction of the Secretary that an extension of the grace period in
clause (i) is necessary to the orderly leasing or liquidation of the
trust's interest in such qualified health care property, the Secretary
may grant one or more extensions of the grace period for such qualified
health care property.
Any such extension shall not extend the grace period beyond the close
of the 6th year after the taxable year in which such trust acquired such
qualified health care property.
`(C) INCOME FROM INDEPENDENT CONTRACTORS- For purposes of applying
paragraph (4)(C) with respect to qualified health care property which is
foreclosure property by reason of subparagraph (A) or paragraph (1),
income derived or received by the trust from an independent contractor
shall be disregarded to the extent such income is attributable
to--
`(i) any lease of property in effect on the date the real estate
investment trust acquired the qualified health care property (without
regard to its renewal after such date so long as such renewal is
pursuant to the terms of such lease as in effect on such date),
or
`(ii) any lease of property entered into after such date
if--
`(I) on such date, a lease of such property from the trust was in
effect, and
`(II) under the terms of the new lease, such trust receives a
substantially similar or lesser benefit in comparison to the lease
referred to in subclause (I).
`(D) QUALIFIED HEALTH CARE PROPERTY-
`(i) IN GENERAL- The term `qualified health care property' means any
real property (including interests therein), and any personal property
incident to such real property, which--
`(I) is a health care facility, or
`(II) is necessary or incidental to the use of a health care
facility.
`(ii) HEALTH CARE FACILITY- For purposes of clause (i), the term
`health care facility' means a hospital, nursing facility, assisted
living facility, congregate care facility, qualified continuing care
facility (as defined in section 7872(g)(4)), or other licensed facility
which extends medical or nursing or ancillary services to patients and
which, immediately before the termination, expiration, default, or
breach of the lease of or mortgage secured by such facility, was
operated by a provider of such services which was eligible for
participation in the medicare program under title XVIII of the Social
Security Act with respect to such facility.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 2000.
PART III--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES
SEC. 1131. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.
(a) DISTRIBUTION REQUIREMENT- Clauses (i) and (ii) of section 857(a)(1)(A)
(relating to requirements applicable to real estate investment trusts) are
each amended by striking `95 percent (90 percent for taxable years beginning
before January 1, 1980)' and inserting `90 percent'.
(b) IMPOSITION OF TAX- Clause (i) of section 857(b)(5)(A) (relating to
imposition of tax in case of failure to meet certain requirements) is amended
by striking `95 percent (90 percent in the case of taxable years beginning
before January 1, 1980)' and inserting `90 percent'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
PART IV--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE
INCOME
SEC. 1141. CLARIFICATION OF EXCEPTION FOR INDEPENDENT OPERATORS.
(a) IN GENERAL- Paragraph (3) of section 856(d) (relating to independent
contractor defined) is amended by adding at the end the following flush
sentence:
`In the event that any class of stock of either the real estate
investment trust or such person is regularly traded on an established
securities market, only persons who own, directly or indirectly, more than 5
percent of such class of stock shall be taken into account as owning any of
the stock of such class for purposes of applying the 35 percent limitation
set forth in subparagraph (B) (but all of the outstanding stock of such
class shall be considered outstanding in order to compute the denominator
for purpose of determining the applicable percentage of ownership).'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 2000.
PART V--MODIFICATION OF EARNINGS AND PROFITS RULES
SEC. 1151. MODIFICATION OF EARNINGS AND PROFITS RULES.
(a) RULES FOR DETERMINING WHETHER REGULATED INVESTMENT COMPANY HAS
EARNINGS AND PROFITS FROM NON-RIC YEAR- Subsection (c) of section 852 is
amended by adding at the end the following new paragraph:
`(3) DISTRIBUTIONS TO MEET REQUIREMENTS OF SUBSECTION (a)(2)(B)- Any
distribution which is made in order to comply with the requirements of
subsection (a)(2)(B)--
`(A) shall be treated for purposes of this subsection and subsection
(a)(2)(B) as made from the earliest earnings and profits accumulated in
any taxable year to which the provisions of this part did not apply rather
than the most recently accumulated earnings and profits, and
`(B) to the extent treated under subparagraph (A) as made from
accumulated earnings and profits, shall not be treated as a distribution
for purposes of subsection (b)(2)(D) and section 855.'.
(b) CLARIFICATION OF APPLICATION OF REIT SPILLOVER DIVIDEND RULES TO
DISTRIBUTIONS TO MEET QUALIFICATION REQUIREMENT- Subparagraph (B) of section
857(d)(3) is amended by inserting before the period `and section 858'.
(c) APPLICATION OF DEFICIENCY DIVIDEND PROCEDURES- Paragraph (1) of
section 852(e) is amended by adding at the end the following new sentence: `If
the determination under subparagraph (A) is solely as a result of the failure
to meet the requirements of subsection (a)(2), the preceding sentence shall
also apply for purposes of applying subsection (a)(2) to the non-RIC
year.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
Subtitle C--Modification of At-Risk Rules for Publicly Traded
Nonrecourse Debt
SEC. 1161. TREATMENT UNDER AT-RISK RULES OF PUBLICLY TRADED NONRECOURSE
DEBT.
(a) IN GENERAL- Subparagraph (A) of section 465(b)(6) (relating to
qualified nonrecourse financing treated as amount at risk) is amended by
striking `share of' and all that follows and inserting `share of--
`(i) any qualified nonrecourse financing which is secured by real
property used in such activity, and
`(ii) any other financing which--
`(I) would (but for subparagraph (B)(ii)) be qualified nonrecourse
financing,
`(II) is qualified publicly traded debt, and
`(III) is not borrowed by the taxpayer from a person described in
subclause (I), (II), or (III) of section
49(a)(1)(D)(iv).'.
(b) QUALIFIED PUBLICLY TRADED DEBT- Paragraph (6) of section 465(b) is
amended by adding at the end the following new subparagraph:
`(F) QUALIFIED PUBLICLY TRADED DEBT- For purposes of subparagraph (A),
the term `qualified publicly traded debt' means any debt instrument which
is readily tradable on an established securities market. Such term shall
not include any debt instrument which has a yield to maturity which equals
or exceeds the limitation in section 163(i)(1)(B).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
debt instruments issued after December 31, 1999.
Subtitle D--Treatment of Certain Contributions to Capital of
Retailers
SEC. 1171. EXCLUSION FROM GROSS INCOME FOR CERTAIN CONTRIBUTIONS TO THE
CAPITAL OF CERTAIN RETAILERS.
(a) IN GENERAL- Section 118 (relating to contributions to the capital of a
corporation) is amended by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively, and by inserting after subsection (c)
the following new subsection:
`(d) SAFE HARBOR FOR CONTRIBUTIONS TO CERTAIN RETAILERS-
`(1) GENERAL RULE- For purposes of this section, the term `contribution
to the capital of the taxpayer' includes any amount of money or other
property received by the taxpayer if--
`(A) the taxpayer has entered into an agreement to operate (or cause
to be operated) a qualified retail business at a particular location for a
period of at least 15 years,
`(B)(i) immediately after the receipt of such money or other property,
the taxpayer owns the land and the structure to be used by the taxpayer in
carrying on a qualified retail business at such location, or
`(ii) the taxpayer uses such amount to acquire ownership of at least
such land and structure,
`(C) such amount meets the requirements of the expenditure rule of
paragraph (2), and
`(D) the contributor of such amount does not hold a beneficial
interest in any property located on the premises of such qualified retail
business other than de minimis amounts of property associated with the
operation of property adjacent to such premises.
`(2) EXPENDITURE RULE- An amount meets the requirements of this
paragraph if--
`(A) an amount equal to such amount is expended for the acquisition of
land or for acquisition or construction of other property described in
section 1231(b)--
`(i) which was the purpose motivating the contribution,
and
`(ii) which is used predominantly in a qualified retail business at
the location referred to in paragraph (1)(A),
`(B) the expenditure referred to in subparagraph (A) occurs before the
end of the second taxable year after the year in which such amount was
received, and
`(C) accurate records are kept of the amounts contributed and
expenditures made on the basis of the project for which the contribution
was made and on the basis of the year of the contribution
expenditure.
`(3) DEFINITION OF QUALIFIED RETAIL BUSINESS-
`(A) IN GENERAL- Except as provided in subparagraph (B), the term
`qualified retail business' means a trade or business of selling tangible
personal property to the general public if the premises on which such
trade or business is conducted is in close proximity to property that the
contributor of the amount referred to in paragraph (1) is developing or
operating for profit (or, in the case of a contributor which is a
governmental entity, is attempting to revitalize).
`(B) SERVICES- A trade or business shall not fail to be treated as a
qualified retail business by reason of sales of services if such sales are
incident to the sale of tangible personal property or if the services are
de minimis in amount.
`(A) LEASES- For purposes of paragraph (1)(B)(i), property shall be
treated as owned by the taxpayer if the taxpayer is the lessee of such
property under a lease having a term of at least 30 years and on which
only nominal rent is required.
`(B) CONTROLLED GROUPS- For purposes of this subsection, all persons
treated as a single employer under subsection (a) or (b) of section 52
shall be treated as one person.
`(5) DISALLOWANCE OF DEDUCTIONS AND CREDITS; ADJUSTED BASIS-
Notwithstanding any other provision of this subtitle, no deduction or credit
shall be allowed for, or by reason of, any amount received by the taxpayer
which constitutes a contribution to capital to which this subsection
applies. The adjusted basis of any property acquired with the contributions
to which this subsection applies shall be reduced by the amount of the
contributions to which this subsection applies.
`(6) REGULATIONS- The Secretary shall prescribe such regulations are
appropriate to prevent the abuse of the purposes of the subsection,
including regulations which allocate income and deductions (or adjust the
amount excludable under this subsection) in cases in which--
`(A) payments in excess of fair market value are paid to the
contributor by the taxpayer, or
`(B) the contributor and the taxpayer are related parties.'.
(b) CONFORMING AMENDMENT- Subsection (e) of section 118 (as redesignated
by subsection (a)) is amended by adding at the end the following flush
sentence:
`Rules similar to the rules of the preceding sentence shall apply to any
amount treated as a contribution to the capital of the taxpayer under
subsection (d).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
amounts received after December 31, 1999.
Subtitle E--Private Activity Bond Volume Cap
SEC. 1181. ACCELERATION OF PHASE-IN OF INCREASE IN VOLUME CAP ON PRIVATE
ACTIVITY BONDS.
(a) IN GENERAL- The table contained in section 146(d)(2) (relating to per
capita limit; aggregate limit) is amended to read as follows:
-------------------------------------------------------
Per Capita Limit Aggregate Limit
-------------------------------------------------------
2000 $55.00 165,000,000
2001 60.00 180,000,000
2002 65.00 195,000,000
2003 70.00 210,000,000
2004 and thereafter 75.00 225,000,000.'.
-------------------------------------------------------
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
calendar years beginning after 1999.
Subtitle F--Deduction for Renovating Historic Homes
SEC. 1191. DEDUCTION FOR RENOVATING HISTORIC HOMES.
(a) IN GENERAL- Part VII of subchapter B of chapter 1 (relating to
additional itemized deductions for individuals) is amended by redesignating
section 223 as section 224 and by inserting after section 222 the following
new section:
`SEC. 223. HISTORIC HOMEOWNERSHIP REHABILITATION DEDUCTION.
`(a) GENERAL RULE- In the case of an individual, there shall be allowed as
a deduction an amount equal to 50 percent of the qualified rehabilitation
expenditures made by the taxpayer with respect to a qualified historic
home.
`(b) DOLLAR LIMITATION- The deduction allowed by subsection (a) with
respect to any residence of a taxpayer shall not exceed $50,000 ($25,000 in
the case of a married individual filing a separate return).
`(c) QUALIFIED REHABILITATION EXPENDITURE- For purposes of this
section--
`(1) IN GENERAL- The term `qualified rehabilitation expenditure' means
any amount properly chargeable to capital account--
`(A) in connection with the certified rehabilitation of a qualified
historic home, and
`(B) for property for which depreciation would be allowable under
section 168 if the qualified historic home were used in a trade or
business.
`(2) CERTAIN EXPENDITURES NOT INCLUDED-
`(A) EXTERIOR- Such term shall not include any expenditure in
connection with the rehabilitation of a building unless at least 5 percent
of the total expenditures made in the rehabilitation process are allocable
to the rehabilitation of the exterior of such building.
`(B) OTHER RULES TO APPLY- Rules similar to the rules of clauses (ii)
and (iii) of section 47(c)(2)(B) shall apply.
`(3) MIXED USE OR MULTIFAMILY BUILDING- If only a portion of a building
is used as the principal residence of the taxpayer, only qualified
rehabilitation expenditures which are properly allocable to such portion
shall be taken into account under this section.
`(d) CERTIFIED REHABILITATION- For purposes of this section:
`(1) IN GENERAL- Except as otherwise provided in this subsection, the
term `certified rehabilitation' has the meaning given such term by section
47(c)(2)(C).
`(2) FACTORS TO BE CONSIDERED IN THE CASE OF TARGETED AREA RESIDENCES,
ETC-
`(A) IN GENERAL- For purposes of applying section 47(c)(2)(C) under
this section with respect to the rehabilitation of a building to which
this paragraph applies, consideration shall be given to--
`(i) the feasibility of preserving existing architectural and design
elements of the interior of such building,
`(ii) the risk of further deterioration or demolition of such
building in the event that certification is denied because of the
failure to preserve such interior elements, and
`(iii) the effects of such deterioration or demolition on
neighboring historic properties.
`(B) BUILDINGS TO WHICH THIS PARAGRAPH APPLIES- This paragraph shall
apply with respect to any building--
`(i) any part of which is a targeted area residence within the
meaning of section 143(j)(1), or
`(ii) which is located within an enterprise community or empowerment
zone as designated under section 1391,
but shall not apply with respect to any building which is listed in
the National Register.
`(3) APPROVED STATE PROGRAM- The term `certified rehabilitation'
includes a certification made by--
`(A) a State Historic Preservation Officer who administers a State
Historic Preservation Program approved by the Secretary of the Interior
pursuant to section 101(b)(1) of the National Historic Preservation Act,
as in effect on July 21, 1999, or
`(B) a local government, certified pursuant to section 101(c)(1) of
the National Historic Preservation Act, as in effect on July 21, 1999, and
authorized by a State Historic Preservation Officer, or the Secretary of
the Interior where there is no approved State program),
subject to such terms and conditions as may be specified by the
Secretary of the Interior for the rehabilitation of buildings within the
jurisdiction of such officer (or local government) for purposes of this
section.
`(e) DEFINITIONS AND SPECIAL RULES- For purposes of this section--
`(1) QUALIFIED HISTORIC HOME- The term `qualified historic home' means a
certified historic structure--
`(A) which has been substantially rehabilitated, and
`(B) which (or any portion of which)--
`(i) is owned by the taxpayer, and
`(ii) is used (or will, within a reasonable period, be used) by such
taxpayer as his principal residence.
`(2) SUBSTANTIALLY REHABILITATED- The term `substantially rehabilitated'
has the meaning given such term by section 47(c)(1)(C); except that, in the
case of any building described in subsection (d)(2), clause (i)(I) of
section 47(c)(1)(C) shall not apply.
`(3) PRINCIPAL RESIDENCE- The term `principal residence' has the same
meaning as when used in section 121.
`(4) CERTIFIED HISTORIC STRUCTURE-
`(A) IN GENERAL- The term `certified historic structure' means any
building (and its structural components) which--
`(i) is listed in the National Register, or
`(ii) is located in a registered historic district (as defined in
section 47(c)(3)(B)) within which only qualified census tracts (or
portions thereof) are located, and is certified by the Secretary of the
Interior to the Secretary as being of historic significance to the
district.
`(B) CERTAIN STRUCTURES INCLUDED- Such term includes any building (and
its structural components) which is designated as being of historic
significance under a statute of a State or local government, if such
statute is certified by the Secretary of the Interior to the Secretary as
containing criteria which will substantially achieve the purpose of
preserving and rehabilitating buildings of historic significance.
`(C) QUALIFIED CENSUS TRACTS- For purposes of subparagraph
(A)(ii)--
`(i) IN GENERAL- The term `qualified census tract' means a census
tract in which the median family income is less than twice the statewide
median family income.
`(ii) DATA USED- The determination under clause (i) shall be made on
the basis of the most recent decennial census for which data are
available.
`(5) REHABILITATION NOT COMPLETE BEFORE CERTIFICATION- A rehabilitation
shall not be treated as complete before the date of the certification
referred to in subsection (d).
`(6) LESSEES- A taxpayer who leases his principal residence shall, for
purposes of this section, be treated as the owner thereof if the remaining
term of the lease (as of the date determined under regulations prescribed by
the Secretary) is not less than such minimum period as the regulations
require.
`(7) TENANT-STOCKHOLDER IN COOPERATIVE HOUSING CORPORATION- If the
taxpayer holds stock as a tenant-stockholder (as defined in section 216) in
a cooperative housing corporation (as defined in such section), such
stockholder shall be treated as owning the house or apartment which the
taxpayer is entitled to occupy as such stockholder.
`(8) ALLOCATION OF EXPENDITURES RELATING TO EXTERIOR OF BUILDING
CONTAINING COOPERATIVE OR CONDOMINIUM UNITS- The percentage of the total
expenditures made in the rehabilitation of a building containing cooperative
or condominium residential units allocated to the rehabilitation of the
exterior of the building shall be attributed proportionately to each
cooperative or condominium residential unit in such building for which a
deduction under this section is claimed.
`(f) WHEN EXPENDITURES TAKEN INTO ACCOUNT- Qualified rehabilitation
expenditures shall be treated for purposes of this section as made on the date
the rehabilitation is completed.
`(1) IN GENERAL- If, before the end of the 5-year period beginning on
the date on which the rehabilitation of the building is completed--
`(A) the taxpayer disposes of such taxpayer's interest in such
building, or
`(B) such building ceases to be used as the principal residence of the
taxpayer,
the taxpayer's gross income for the taxable year in which such
disposition or cessation occurs shall be increased by the recapture
percentage of the deduction allowed under this section for all prior taxable
years with respect to such rehabilitation.
`(2) RECAPTURE PERCENTAGE- For purposes of paragraph (1), the recapture
percentage shall be determined in accordance with the following table:
`If the disposition or cessation occurs within--
The recapture percentage is--
(i) One full year after the taxpayer becomes entitled to the
deduction
100
(ii) One full year after the close of the period described in clause
(i)
80
(iii) One full year after the close of the period described in clause
(ii)
60
(iv) One full year after the close of the period described in clause
(iii)
40
(v) One full year after the close of the period described in clause
(iv)
20.'.
`(h) BASIS ADJUSTMENTS- For purposes of this subtitle, if a deduction 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
deduction so allowed.
`(i) DENIAL OF DOUBLE BENEFIT- No deduction shall be allowed under this
section for any amount for which credit is allowed under section 47.
`(j) REGULATIONS- The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this section, including regulations
where less than all of a building is used as a principal residence and where
more than one taxpayer use the same dwelling unit as their principal
residence.'.
(b) CONFORMING AMENDMENTS-
(1) Clause (i) of section 56(b)(1)(A) is amended by inserting before the
comma `other than the deduction under section 223 (relating to historic
homeownership rehabilitation deduction)'.
(2) Subsection (a) of section 1016 is amended by striking `and' at the
end of paragraph (27), by striking the period at the end of paragraph (28)
and inserting `, and', and by adding at the end the following new
item:
`(29) to the extent provided in section 223(h).'.
(c) CLERICAL AMENDMENT- The table of sections for part VII of subchapter B
of chapter 1 is amended by striking the item relating to section 223 and
inserting the following new items:
`Sec. 223. Historic homeownership rehabilitation deduction.
`Sec. 224. Cross reference.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
expenses paid or incurred in taxable years beginning after December 31,
1999.
TITLE XII--PROVISIONS RELATING TO PENSIONS
Subtitle A--Expanding Coverage
SEC. 1201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) DEFINED BENEFIT PLANS-
(A) Subparagraph (A) of section 415(b)(1) (relating to limitation for
defined benefit plans) is amended by striking `$90,000' and inserting
`$160,000'.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each amended by
striking `$90,000' each place it appears in the headings and the text and
inserting `$160,000'.
(C) Paragraph (7) of section 415(b) (relating to benefits under
certain collectively bargained plans) is amended by striking `the greater
of $68,212 or one-half the amount otherwise applicable for such year under
paragraph (1)(A) for `$90,000' and inserting `one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$160,000'.
(2) LIMIT REDUCED WHEN BENEFIT BEGINS BEFORE AGE 62- Subparagraph (C) of
section 415(b)(2) is amended by striking `the social security retirement
age' each place it appears in the heading and text and inserting `age
62'.
(3) LIMIT INCREASED WHEN BENEFIT BEGINS AFTER AGE 65- Subparagraph (D)
of section 415(b)(2) is amended by striking `the social security retirement
age' each place it appears in the heading and text and inserting `age
65'.
(4) COST-OF-LIVING ADJUSTMENTS- Subsection (d) of section 415 (related
to cost-of-living adjustments) is amended--
(A) by striking `$90,000' in paragraph (1)(A) and inserting
`$160,000', and
(B) in paragraph (3)(A)--
(i) by striking `$90,000' in the heading and inserting `$160,000',
and
(ii) by striking `October 1, 1986' and inserting `July 1,
2000'.
(5) CONFORMING AMENDMENT- Section 415(b)(2) is amended by striking
subparagraph (F).
(b) DEFINED CONTRIBUTION PLANS-
(1) DOLLAR LIMIT- Subparagraph (A) of section 415(c)(1) (relating to
limitation for defined contribution plans) is amended by striking `$30,000'
and inserting `$40,000'.
(2) COST-OF-LIVING ADJUSTMENTS- Subsection (d) of section 415 (related
to cost-of-living adjustments) is amended--
(A) by striking `$30,000' in paragraph (1)(C) and inserting `$40,000',
and
(B) in paragraph (3)(D)--
(i) by striking `$30,000' in the heading and inserting `$40,000',
and
(ii) by striking `October 1, 1993' and inserting `July 1,
2000'.
(1) COMPENSATION LIMIT- Sections 401(a)(17), 404(l), 408(k), and
505(b)(7) are each amended by striking `$150,000' each place it appears and
inserting `$200,000'.
(2) BASE PERIOD AND ROUNDING OF COST-OF-LIVING ADJUSTMENT- Subparagraph
(B) of section 401(a)(17) is amended--
(A) by striking `October 1, 1993' and inserting `July 1, 2000',
and
(B) by striking `$10,000' both places it appears and inserting
`$5,000'.
(1) IN GENERAL- Paragraph (1) of section 402(g) (relating to limitation
on exclusion for elective deferrals) is amended to read as follows:
`(A) LIMITATION- Notwithstanding subsections (e)(3) and (h)(1)(B), the
elective deferrals of any individual for any taxable year shall be
included in such individual's gross income to the extent the amount of
such deferrals for the taxable year exceeds the applicable dollar
amount.
`(B) APPLICABLE DOLLAR AMOUNT- For purposes of subparagraph (A), the
applicable dollar amount shall be the amount determined in accordance with
the following table:
`For taxable years
--The applicable
beginning in
-- dollar amount:
calendar year:
--$11,000
--$12,000
--$13,000
--$14,000
--$15,000.'.
(2) COST-OF-LIVING ADJUSTMENT- Paragraph (5) of section 402(g) is
amended to read as follows:
`(5) COST-OF-LIVING ADJUSTMENT- In the case of taxable years beginning
after December 31, 2005, the Secretary shall adjust the $15,000 amount under
paragraph (1)(B) at the same time and in the same manner as under section
415(d), except that the base period shall be the calendar quarter beginning
July 1, 2004, and any increase under this paragraph which is not a multiple
of $500 shall be rounded to the next lowest multiple of $500.'.
(3) CONFORMING AMENDMENTS-
(A) Section 402(g) (relating to limitation on exclusion for elective
deferrals), as amended by paragraphs (1) and (2), is further amended by
striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8),
and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is amended by striking
`402(g)(8)(A)(iii)' and inserting `402(g)(7)(A)(iii)'.
(C) Clause (iii) of section 501(c)(18)(D) is amended by striking
`(other than paragraph (4) thereof)'.
(e) DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND
TAX-EXEMPT ORGANIZATIONS-
(1) IN GENERAL- Section 457 (relating to deferred compensation plans of
State and local governments and tax-exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking `$7,500' each
place it appears and inserting `the applicable dollar amount',
and
(B) in subsection (b)(3)(A) by striking `$15,000' and inserting `twice
the dollar amount in effect under subsection (b)(2)(A)'.
(2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIVING ADJUSTMENT- Paragraph (15)
of section 457(e) is amended to read as follows:
`(15) APPLICABLE DOLLAR AMOUNT-
`(A) IN GENERAL- The applicable dollar amount shall be the amount
determined in accordance with the following table:
`For taxable years
--The applicable
beginning in
-- dollar amount:
calendar year:
--$11,000
--$12,000
--$13,000
--$14,000
2005 or thereafter
--$15,000.
`(B) COST-OF-LIVING ADJUSTMENTS- In the case of taxable years
beginning after December 31, 2005, the Secretary shall adjust the $15,000
amount specified in the table in subparagraph (A) at the same time and in
the same manner as under section 415(d), except that the base period shall
be the calendar quarter beginning July 1, 2004, and any increase under
this paragraph which is not a multiple of $500 shall be rounded to the
next lowest multiple of $500.'.
(f) SIMPLE RETIREMENT ACCOUNTS-
(1) LIMITATION- Clause (ii) of section 408(p)(2)(A) (relating to general
rule for qualified salary reduction arrangement) is amended by striking
`$6,000' and inserting `the applicable dollar amount'.
(2) APPLICABLE DOLLAR AMOUNT- Subparagraph (E) of 408(p)(2) is amended
to read as follows:
`(E) APPLICABLE DOLLAR AMOUNT; COST-OF-LIVING ADJUSTMENT-
`(i) IN GENERAL- For purposes of subparagraph (A)(ii), the
applicable dollar amount shall be the amount determined in accordance
with the following table:
`For taxable years
--The applicable
beginning in
-- dollar amount:
calendar year:
2001
--$7,000
2002
--$8,000
2003
--$9,000
2004 or thereafter
--$10,000.
`(ii) COST-OF-LIVING ADJUSTMENT- In the case of a year beginning
after December 31, 2004, the Secretary shall adjust the $10,000 amount
under clause (i) at the same time and in the same manner as under
section 415(d), except that the base period taken into account shall be
the calendar quarter beginning July 1, 2003, and any increase under this
subparagraph which is not a multiple of $500 shall be rounded to the
next lower multiple of $500.'.
(3) CONFORMING AMENDMENTS-
(A) Clause (I) of section 401(k)(11)(B)(i) is amended by striking
`$6,000' and inserting `the amount in effect under section
408(p)(2)(A)(ii)'.
(B) Section 401(k)(11) is amended by striking subparagraph
(E).
(g) ROUNDING RULE RELATING TO DEFINED BENEFIT PLANS AND DEFINED
CONTRIBUTION PLANS- Paragraph (4) of section 415(d) is amended to read as
follows:
`(A) $160,000 AMOUNT- Any increase under subparagraph (A) of paragraph
(1) which is not a multiple of $5,000 shall be rounded to the next lowest
multiple of $5,000.
`(B) $40,000 AMOUNT- Any increase under subparagraph (C) of paragraph
(1) which is not a multiple of $1,000 shall be rounded to the next lowest
multiple of $1,000.'.
(h) EFFECTIVE DATE- The amendments made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) AMENDMENT TO 1986 CODE- Subparagraph (B) of section 4975(f)(6)
(relating to exemptions not to apply to certain transactions) is amended by
adding at the end the following new clause:
`(iii) LOAN EXCEPTION- For purposes of subparagraph (A)(i), the term
`owner-employee' shall only include a person described in subclause (II)
or (III) of clause (i).'.
(b) AMENDMENT TO ERISA- Section 408(d)(2) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) is amended by adding at the
end the following new subparagraph:
`(C) For purposes of paragraph (1)(A), the term `owner-employee' shall
only include a person described in clause (ii) or (iii) of subparagraph
(A).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
loans made after December 31, 2000.
SEC. 1203. MODIFICATION OF TOP-HEAVY RULES.
(a) SIMPLIFICATION OF DEFINITION OF KEY EMPLOYEE-
(1) IN GENERAL- Section 416(i)(1)(A) (defining key employee) is
amended--
(A) by striking `or any of the 4 preceding plan years' in the matter
preceding clause (i),
(B) by striking clause (i) and inserting the following:
`(i) an officer of the employer having an annual compensation
greater than $150,000,',
(C) by striking clause (ii) and redesignating clauses (iii) and (iv)
as clauses (ii) and (iii), respectively, and
(D) by striking the second sentence in the matter following clause
(iii), as redesignated by subparagraph (C).
(2) CONFORMING AMENDMENT- Section 416(i)(1)(B)(iii) is amended by
striking `and subparagraph (A)(ii)'.
(b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT FOR MINIMUM CONTRIBUTION
REQUIREMENTS- Section 416(c)(2)(A) (relating to defined contribution plans) is
amended by adding at the end the following: `Employer matching contributions
(as defined in section 401(m)(4)(A)) shall be taken into account for purposes
of this subparagraph.'.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE DETERMINATION DATE TAKEN INTO
ACCOUNT-
(1) IN GENERAL- Paragraph (3) of section 416(g) is amended to read as
follows:
`(3) DISTRIBUTIONS DURING LAST YEAR BEFORE DETERMINATION DATE TAKEN INTO
ACCOUNT-
`(A) IN GENERAL- For purposes of determining--
`(i) the present value of the cumulative accrued benefit for any
employee, or
`(ii) the amount of the account of any employee,
such present value or amount shall be increased by the aggregate
distributions made with respect to such employee under the plan during the
1-year period ending on the determination date. The preceding sentence
shall also apply to distributions under a terminated plan which if it had
not been terminated would have been required to be included in an
aggregation group.
`(B) 5-YEAR PERIOD IN CASE OF IN-SERVICE DISTRIBUTION- In the case of
any distribution made for a reason other than separation from service,
death, or disability, subparagraph (A) shall be applied by substituting
`5-year period' for `1-year period'.'.
(2) BENEFITS NOT TAKEN INTO ACCOUNT- Subparagraph (E) of section
416(g)(4) is amended--
(A) by striking `LAST 5 YEARS' in the heading and inserting `LAST YEAR
BEFORE DETERMINATION DATE', and
(B) by striking `5-year period' and inserting `1-year
period'.
(d) DEFINITION OF TOP-HEAVY PLANS- Paragraph (4) of section 416(g)
(relating to other special rules for top-heavy plans) is amended by adding at
the end the following new subparagraph:
`(H) CASH OR DEFERRED ARRANGEMENTS USING ALTERNATIVE METHODS OF
MEETING NONDISCRIMINATION REQUIREMENTS- The term `top-heavy plan' shall
not include a plan which consists solely of--
`(i) a cash or deferred arrangement which meets the requirements of
section 401(k)(12), and
`(ii) matching contributions with respect to which the requirements
of section 401(m)(11) are met.
If, but for this subparagraph, a plan would be treated as a top-heavy
plan because it is a member of an aggregation group which is a top-heavy
group, contributions under the plan may be taken into account in
determining whether any other plan in the group meets the requirements of
subsection (c)(2).'.
(e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT REQUIREMENT- Subparagraph (C)
of section 416(c)(1) (relating to defined benefit plans) is amended--
(A) by striking `clause (ii)' in clause (i) and inserting `clause (ii)
or (iii)', and
(B) by adding at the end the following:
`(iii) EXCEPTION FOR FROZEN PLAN- For purposes of determining an
employee's years of service with the employer, any service with the
employer shall be disregarded to the extent that such service occurs
during a plan year when the plan benefits (within the meaning of section
410(b)) no employee or former employee.'.
(f) ELIMINATION OF FAMILY ATTRIBUTION- Section 416(i)(1)(B) (defining
5-percent owner) is amended by adding at the end the following new clause:
`(iv) FAMILY ATTRIBUTION DISREGARDED- Solely for purposes of
applying this paragraph (and not for purposes of any provision of this
title which incorporates by reference the definition of a key employee
or 5-percent owner under this paragraph), section 318 shall be applied
without regard to subsection (a)(1) thereof in determining whether any
person is a 5-percent owner.'.
(g) EFFECTIVE DATE- The amendments made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF
DEDUCTION LIMITS.
(a) IN GENERAL- Section 404 (relating to deduction for contributions of an
employer to an employees' trust or annuity plan and compensation under a
deferred payment plan) is amended by adding at the end the following new
subsection:
`(n) ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF DEDUCTION
LIMITS- Elective deferrals (as defined in section 402(g)(3)) shall not be
subject to any limitation contained in paragraph (3), (7), or (9) of
subsection (a), and such elective deferrals shall not be taken into account in
applying any such limitation to any other contributions.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) IN GENERAL- Subsection (c) of section 457 (relating to deferred
compensation plans of State and local governments and tax-exempt
organizations), as amended by section 1201, is amended to read as follows:
`(c) LIMITATION- The maximum amount of the compensation of any one
individual which may be deferred under subsection (a) during any taxable year
shall not exceed the amount in effect under subsection (b)(2)(A) (as modified
by any adjustment provided under subsection (b)(3)).'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
years beginning after December 31, 2000.
SEC. 1206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING PENSION
PLANS.
(a) ELIMINATION OF CERTAIN USER FEES- The Secretary of the Treasury or the
Secretary's delegate shall not require payment of user fees under the program
established under section 7527 of the Internal Revenue Code of 1986 for
requests to the Internal Revenue Service for determination letters with
respect to the qualified status of a pension benefit plan maintained solely by
one or more eligible employers or any trust which is part of the plan. The
preceding sentence shall not apply to any request--
(1) made after the 5th plan year the pension benefit plan is in
existence, or
(2) made by the sponsor of any prototype or similar plan which the
sponsor intends to market to participating employers.
(b) PENSION BENEFIT PLAN- For purposes of this section, the term `pension
benefit plan' means a pension, profit-sharing, stock bonus, annuity, or
employee stock ownership plan.
(c) ELIGIBLE EMPLOYER- For purposes of this section, the term `eligible
employer' has the same meaning given such term in section 408(p)(2)(C)(i)(I)
of the Internal Revenue Code of 1986. The determination of whether an employer
is an eligible employer under this section shall be made as of the date of the
request described in subsection (a).
(d) EFFECTIVE DATE- The provisions of this section shall apply with
respect to requests made after December 31, 2000.
SEC. 1207. DEDUCTION LIMITS.
(a) IN GENERAL- Section 404(a) (relating to general rule) is amended by
adding at the end the following:
`(12) DEFINITION OF COMPENSATION- For purposes of paragraphs (3), (7),
(8), and (9), the term `compensation' shall include amounts treated as
participant's compensation under subparagraph (C) or (D) of section
415(c)(3).'.
(b) CONFORMING AMENDMENT- Subparagraph (B) of section 404(a)(3) is amended
by striking the last sentence thereof.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) IN GENERAL- Subpart A of part I of subchapter D of chapter 1 (relating
to deferred compensation, etc.) is amended by inserting after section 402 the
following new section:
`SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
`(a) GENERAL RULE- If an applicable retirement plan includes a qualified
plus contribution program--
`(1) any designated plus contribution made by an employee pursuant to
the program shall be treated as an elective deferral for purposes of this
chapter, except that such contribution shall not be excludable from gross
income, and
`(2) such plan (and any arrangement which is part of such plan) shall
not be treated as failing to meet any requirement of this chapter solely by
reason of including such program.
`(b) QUALIFIED PLUS CONTRIBUTION PROGRAM- For purposes of this
section--
`(1) IN GENERAL- The term `qualified plus contribution program' means a
program under which an employee may elect to make designated plus
contributions in lieu of all or a portion of elective deferrals the employee
is otherwise eligible to make under the applicable retirement plan.
`(2) SEPARATE ACCOUNTING REQUIRED- A program shall not be treated as a
qualified plus contribution program unless the applicable retirement
plan--
`(A) establishes separate accounts (`designated plus accounts') for
the designated plus contributions of each employee and any earnings
properly allocable to the contributions, and
`(B) maintains separate recordkeeping with respect to each
account.
`(c) DEFINITIONS AND RULES RELATING TO DESIGNATED PLUS CONTRIBUTIONS- For
purposes of this section--
`(1) DESIGNATED PLUS CONTRIBUTION- The term `designated plus
contribution' means any elective deferral which--
`(A) is excludable from gross income of an employee without regard to
this section, and
`(B) the employee designates (at such time and in such manner as the
Secretary may prescribe) as not being so excludable.
`(2) DESIGNATION LIMITS- The amount of elective deferrals which an
employee may designate under paragraph (1) shall not exceed the excess (if
any) of--
`(A) the maximum amount of elective deferrals excludable from gross
income of the employee for the taxable year (without regard to this
section), over
`(B) the aggregate amount of elective deferrals of the employee for
the taxable year which the employee does not designate under paragraph
(1).
`(3) ROLLOVER CONTRIBUTIONS-
`(A) IN GENERAL- A rollover contribution of any payment or
distribution from a designated plus account which is otherwise allowable
under this chapter may be made only if the contribution is to--
`(i) another designated plus account of the individual from whose
account the payment or distribution was made, or
`(ii) a Roth IRA of such individual.
`(B) COORDINATION WITH LIMIT- Any rollover contribution to a
designated plus account under subparagraph (A) shall not be taken into
account for purposes of paragraph (1).
`(d) DISTRIBUTION RULES- For purposes of this title--
`(1) EXCLUSION- Any qualified distribution from a designated plus
account shall not be includible in gross income.
`(2) QUALIFIED DISTRIBUTION- For purposes of this subsection--
`(A) IN GENERAL- The term `qualified distribution' has the meaning
given such term by section 408A(d)(2)(A) (without regard to clause (iv)
thereof).
`(B) DISTRIBUTIONS WITHIN NONEXCLUSION PERIOD- A payment or
distribution from a designated plus account shall not be treated as a
qualified distribution if such payment or distribution is made within the
5-taxable-year period beginning with the earlier of--
`(i) the first taxable year for which the individual made a
designated plus contribution to any designated plus account established
for such individual under the same applicable retirement plan,
or
`(ii) if a rollover contribution was made to such designated plus
account from a designated plus account previously established for such
individual under another applicable retirement plan, the first taxable
year for which the individual made a designated plus contribution to
such previously established account.
`(C) DISTRIBUTIONS OF EXCESS DEFERRALS AND EARNINGS- The term
`qualified distribution' shall not include any distribution of any excess
deferral under section 402(g)(2) and any income on the excess
deferral.
`(3) AGGREGATION RULES- Section 72 shall be applied separately with
respect to distributions and payments from a designated plus account and
other distributions and payments from the plan.
`(e) OTHER DEFINITIONS- For purposes of this section--
`(1) APPLICABLE RETIREMENT PLAN- The term `applicable retirement plan'
means--
`(A) an employees' trust described in section 401(a) which is exempt
from tax under section 501(a), and
`(B) a plan under which amounts are contributed by an individual's
employer for an annuity contract described in section 403(b).
`(2) ELECTIVE DEFERRAL- The term `elective deferral' means any elective
deferral described in subparagraph (A) or (C) of section 402(g)(3).'.
(b) EXCESS DEFERRALS- Section 402(g) (relating to limitation on exclusion
for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new sentence:
`The preceding sentence shall not apply to so much of such excess as does
not exceed the designated plus contributions of the individual for the
taxable year.', and
(2) by inserting `(or would be included but for the last sentence
thereof)' after `paragraph (1)' in paragraph (2)(A).
(c) ROLLOVERS- Subparagraph (B) of section 402(c)(8) is amended by adding
at the end the following:
`If any portion of an eligible rollover distribution is attributable
to payments or distributions from a designated plus account (as defined in
section 402A), an eligible retirement plan with respect to such portion
shall include only another designated plus account and a Roth
IRA.'.
(d) REPORTING REQUIREMENTS-
(1) W-2 INFORMATION- Section 6051(a)(8) is amended by inserting `,
including the amount of designated plus contributions (as defined in section
402A)' before the comma at the end.
(2) INFORMATION- Section 6047 is amended by redesignating subsection (f)
as subsection (g) and by inserting after subsection (e) the following new
subsection:
`(f) DESIGNATED PLUS CONTRIBUTIONS- The Secretary shall require the plan
administrator of each applicable retirement plan (as defined in section 402A)
to make such returns and reports regarding designated plus contributions (as
so defined) to the Secretary, participants and beneficiaries of the plan, and
such other persons as the Secretary may prescribe.'.
(e) CONFORMING AMENDMENTS-
(1) Section 408A(e) is amended by adding after the first sentence the
following new sentence: `Such term includes a rollover contribution
described in section 402A(c)(3)(A).'.
(2) The table of sections for subpart A of part I of subchapter D of
chapter 1 is amended by inserting after the item relating to section 402 the
following new item:
`Sec. 402A. Optional treatment of elective deferrals as plus contributions.'.
(f) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 1209. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.
(a) IN GENERAL- Subparagraph (A) of section 4006(a)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is
amended--
(1) in clause (i), by inserting `other than a new single-employer plan
(as defined in subparagraph (F)) maintained by a small employer (as so
defined),' after `single-employer plan,',
(2) in clause (iii), by striking the period at the end and inserting `,
and', and
(3) by adding at the end the following new clause:
`(iv) in the case of a new single-employer plan (as defined in
subparagraph (F)) maintained by a small employer (as so defined) for the
plan year, $5 for each individual who is a participant in such plan during
the plan year.'.
(b) DEFINITION OF NEW SINGLE-EMPLOYER PLAN- Section 4006(a)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is
amended by adding at the end the following new subparagraph:
`(F)(i) For purposes of this paragraph, a single-employer plan maintained
by a contributing sponsor shall be treated as a new single-employer plan for
each of its first 5 plan years if, during the 36-month period ending on the
date of the adoption of such plan, the sponsor or any member of such sponsor's
controlled group (or any predecessor of either) had not established or
maintained a plan to which this title applies with respect to which benefits
were accrued for substantially the same employees as are in the new
single-employer plan.
`(ii)(I) For purposes of this paragraph, the term `small employer' means
an employer which on the first day of any plan year has, in aggregation with
all members of the controlled group of such employer, 100 or fewer
employees.
`(II) In the case of a plan maintained by two or more contributing
sponsors that are not part of the same controlled group, the employees of all
contributing sponsors and controlled groups of such sponsors shall be
aggregated for purposes of determining whether any contributing sponsor is a
small employer.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
plans established after December 31, 2000.
SEC. 1210. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL
PLANS.
(a) NEW PLANS- Subparagraph (E) of section 4006(a)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by
adding at the end the following new clause:
`(v) In the case of a new defined benefit plan, the amount determined
under clause (ii) for any plan year shall be an amount equal to the product of
the amount determined under clause (ii) and the applicable percentage. For
purposes of this clause, the term `applicable percentage' means--
`(I) 0 percent, for the first plan year.
`(II) 20 percent, for the second plan year.
`(III) 40 percent, for the third plan year.
`(IV) 60 percent, for the fourth plan year.
`(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in section
3(35)) maintained by a contributing sponsor shall be treated as a new defined
benefit plan for its first 5 plan years if, during the 36-month period ending
on the date of the adoption of the plan, the sponsor and each member of any
controlled group including the sponsor (or any predecessor of either) did not
establish or maintain a plan to which this title applies with respect to which
benefits were accrued for substantially the same employees as are in the new
plan.'.
(b) SMALL PLANS- Paragraph (3) of section 4006(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)) is amended--
(1) by striking `The' in subparagraph (E)(i) and inserting `Except as
provided in subparagraph (G), the', and
(2) by inserting after subparagraph (F) the following new
subparagraph:
`(G)(i) In the case of an employer who has 25 or fewer employees on the
first day of the plan year, the additional premium determined under
subparagraph (E) for each participant shall not exceed $5 multiplied by the
number of participants in the plan as of the close of the preceding plan
year.
`(ii) For purposes of clause (i), whether an employer has 25 or fewer
employees on the first day of the plan year is determined taking into
consideration all of the employees of all members of the contributing
sponsor's controlled group. In the case of a plan maintained by two or more
contributing sponsors, the employees of all contributing sponsors and their
controlled groups shall be aggregated for purposes of determining whether
25-or-fewer-employees limitation has been satisfied.'.
(1) SUBSECTION (a)- The amendments made by subsection (a) shall apply to
plans established after December 31, 2000.
(2) SUBSECTION (b)- The amendments made by subsection (b) shall apply to
plan years beginning after December 31, 2000.
Subtitle B--Enhancing Fairness for Women
SEC. 1221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER.
(a) IN GENERAL- Section 414 (relating to definitions and special rules) is
amended by adding at the end the following new subsection:
`(v) CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER-
`(1) IN GENERAL- An applicable employer plan shall not be treated as
failing to meet any requirement of this title solely because the plan
permits an eligible participant to make additional elective deferrals in any
plan year.
`(2) LIMITATION ON AMOUNT OF ADDITIONAL DEFERRALS-
`(A) IN GENERAL- A plan shall not permit additional elective deferrals
under paragraph (1) for any year in an amount greater than the lesser
of--
`(i) the applicable percentage of the applicable dollar amount for
such elective deferrals for such year, or
`(ii) the excess (if any) of--
`(I) the participant's compensation for the year,
over
`(II) any other elective deferrals of the participant for such
year which are made without regard to this subsection.
`(B) APPLICABLE PERCENTAGE- For purposes of this paragraph, the
applicable percentage shall be determined in accordance with the following
table:
`For taxable years
The applicable
beginning in:
percentage is:
2001
10 percent
2002
20 percent
2003
30 percent
2004
40 percent
2005 and thereafter
50 percent.
`(3) TREATMENT OF CONTRIBUTIONS- In the case of any contribution to a
plan under paragraph (1)--
`(A) such contribution shall not, with respect to the year in which
the contribution is made--
`(i) be subject to any otherwise applicable limitation contained in
section 402(g), 402(h), 403(b), 404(a), 404(h), 408, 415, or 457,
or
`(ii) be taken into account in applying such limitations to other
contributions or benefits under such plan or any other such plan,
and
`(B) such plan shall not be treated as failing to meet the
requirements of section 401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11),
401(k)(12), 401(m), 403(b)(12), 408(k), 408(p), 408B, 410(b), or 416 by
reason of the making of (or the right to make) such contribution.
`(4) ELIGIBLE PARTICIPANT- For purposes of this subsection, the term
`eligible participant' means, with respect to any plan year, a participant
in a plan--
`(A) who has attained the age of 50 before the close of the plan year,
and
`(B) with respect to whom no other elective deferrals may (without
regard to this subsection) be made to the plan for the plan year by reason
of the application of any limitation or other restriction described in
paragraph (3) or contained in the terms of the plan.
`(5) OTHER DEFINITIONS AND RULES- For purposes of this
subsection--
`(A) APPLICABLE DOLLAR AMOUNT- The term `applicable dollar amount'
means, with respect to any year, the amount in effect under section
402(g)(1)(B), 408(p)(2)(E)(i), or 457(e)(15)(A), whichever is applicable
to an applicable employer plan, for such year.
`(B) APPLICABLE EMPLOYER PLAN- The term `applicable employer plan'
means--
`(i) an employees' trust described in section 401(a) which is exempt
from tax under section 501(a),
`(ii) a plan under which amounts are contributed by an individual's
employer for an annuity contract described in section
403(b),
`(iii) an eligible deferred compensation plan under section 457 of
an eligible employer as defined in section 457(e)(1)(A), and
`(iv) an arrangement meeting the requirements of section 408 (k) or
(p).
`(C) ELECTIVE DEFERRAL- The term `elective deferral' has the meaning
given such term by subsection (u)(2)(C).
`(D) EXCEPTION FOR SECTION 457 PLANS- This subsection shall not apply
to an applicable employer plan described in subparagraph (B)(iii) for any
year to which section 457(b)(3) applies.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
contributions in taxable years beginning after December 31, 2000.
SEC. 1222. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED
CONTRIBUTION PLANS.
(1) IN GENERAL- Subparagraph (B) of section 415(c)(1) (relating to
limitation for defined contribution plans) is amended by striking `25
percent' and inserting `100 percent'.
(2) APPLICATION TO SECTION 403(b)- Section 403(b) is amended--
(A) by striking `the exclusion allowance for such taxable year' in
paragraph (1) and inserting `the applicable limit under section
415',
(B) by striking paragraph (2), and
(C) by inserting `or any amount received by a former employee after
the 5th taxable year following the taxable year in which such employee was
terminated' before the period at the end of the second sentence of
paragraph (3).
(3) CONFORMING AMENDMENTS-
(A) Subsection (f) of section 72 is amended by striking `section
403(b)(2)(D)(iii))' and inserting `section 403(b)(2)(D)(iii), as in effect
before the enactment of the Taxpayer Refund and Relief Act of
1999)'.
(B) Section 404(a)(10)(B) is amended by striking `, the exclusion
allowance under section 403(b)(2),'.
(C) Section 415(a)(2) is amended by striking `, and the amount of the
contribution for such portion shall reduce the exclusion allowance as
provided in section 403(b)(2)'.
(D) Section 415(c)(3) is amended by adding at the end the following
new subparagraph:
`(E) ANNUITY CONTRACTS- In the case of an annuity contract described
in section 403(b), the term `participant's compensation' means the
participant's includible compensation determined under section
403(b)(3).'.
(E) Section 415(c) is amended by striking paragraph (4).
(F) Section 415(c)(7) is amended to read as follows:
`(7) CERTAIN CONTRIBUTIONS BY CHURCH PLANS NOT TREATED AS EXCEEDING
LIMIT-
`(A) IN GENERAL- Notwithstanding any other provision of this
subsection, at the election of a participant who is an employee of a
church or a convention or association of churches, including an
organization described in section 414(e)(3)(B)(ii), contributions and
other additions for an annuity contract or retirement income account
described in section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's account, shall be
treated as not exceeding the limitation of paragraph (1) if such annual
addition is not in excess of $10,000.
`(B) $40,000 AGGREGATE LIMITATION- The total amount of additions with
respect to any participant which may be taken into account for purposes of
this subparagraph for all years may not exceed $40,000.
`(C) ANNUAL ADDITION- For purposes of this paragraph, the term `annual
addition' has the meaning given such term by paragraph (2).'.
(G) Subparagraph (B) of section 402(g)(7) (as redesignated by section
1201) is amended by inserting before the period at the end the following:
`(as in effect before the enactment of the Taxpayer Refund and Relief Act
of 1999)'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to years beginning after December 31, 2000.
(b) SPECIAL RULES FOR SECTIONS 403(b) AND 408-
(1) IN GENERAL- Subsection (k) of section 415 is amended by adding at
the end the following new paragraph:
`(4) SPECIAL RULES FOR SECTIONS 403(b) AND 408- For purposes of this
section, any annuity contract described in section 403(b) for the benefit of
a participant shall be treated as a defined contribution plan maintained by
each employer with respect to which the participant has the control required
under subsection (b) or (c) of section 414 (as modified by subsection (h)).
For purposes of this section, any contribution by an employer to a
simplified employee pension plan for an individual for a taxable year shall
be treated as an employer contribution to a defined contribution plan for
such individual for such year.'.
(A) IN GENERAL- The amendment made by paragraph (1) shall apply to
limitation years beginning after December 31, 1999.
(B) EXCLUSION ALLOWANCE- Effective for limitation years beginning in
2000, in the case of any annuity contract described in section 403(b) of
the Internal Revenue Code of 1986, the amount of the contribution
disqualified by reason of section 415(g) of such Code shall reduce the
exclusion allowance as provided in section 403(b)(2) of such
Code.
(3) MODIFICATION OF 403(b) EXCLUSION ALLOWANCE TO CONFORM TO 415
MODIFICATION- The Secretary of the Treasury shall modify the regulations
regarding the exclusion allowance under section 403(b)(2) of the Internal
Revenue Code of 1986 to render void the requirement that contributions to a
defined benefit pension plan be treated as previously excluded amounts for
purposes of the exclusion allowance. For taxable years beginning after
December 31, 1999, such regulations shall be applied as if such requirement
were void.
(c) DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND
TAX-EXEMPT ORGANIZATIONS-
(1) IN GENERAL- Subparagraph (B) of section 457(b)(2) (relating to
salary limitation on eligible deferred compensation plans) is amended by
striking `33 1/3 percent' and inserting `100 percent'.
(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to
years beginning after December 31, 2000.
SEC. 1223. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE- Section 411(a) (relating to minimum vesting
standards) is amended--
(1) in paragraph (2), by striking `A plan' and inserting `Except as
provided in paragraph (12), a plan', and
(2) by adding at the end the following:
`(12) FASTER VESTING FOR MATCHING CONTRIBUTIONS- In the case of matching
contributions (as defined in section 401(m)(4)(A)), paragraph (2) shall be
applied--
`(A) by substituting `3 years' for `5 years' in subparagraph (A),
and
`(B) by substituting the following table for the table contained in
subparagraph (B):
The nonforfeitable
`Years of service:
percentage is:
2
20
3
40
4
60
5
80
6
100.'.
(b) AMENDMENTS TO ERISA- Section 203(a) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
(1) in paragraph (2), by striking `A plan' and inserting `Except as
provided in paragraph (4), a plan', and
(2) by adding at the end the following:
`(4) FASTER VESTING FOR MATCHING CONTRIBUTIONS- In the case of matching
contributions (as defined in section 401(m)(4)(A) of the Internal Revenue
Code of 1986), paragraph (2) shall be applied--
`(A) by substituting `3 years' for `5 years' in subparagraph (A),
and
`(B) by substituting the following table for the table contained in
subparagraph (B):
The nonforfeitable
`Years of service:
percentage is:
2
20
3
40
4
60
5
80
6
100.'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendments made
by this section shall apply to contributions for plan years beginning after
December 31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS- In the case of a plan maintained
pursuant to one or more collective bargaining agreements between employee
representatives and one or more employers ratified by the date of the
enactment of this Act, the amendments made by this section shall not apply
to contributions on behalf of employees covered by any such agreement for
plan years beginning before the earlier of--
(i) the date on which the last of such collective bargaining
agreements terminates (determined without regard to any extension
thereof on or after such date of the enactment), or
(3) SERVICE REQUIRED- With respect to any plan, the amendments made by
this section shall not apply to any employee before the date that such
employee has 1 hour of service under such plan in any plan year to which the
amendments made by this section apply.
SEC. 1224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) SIMPLIFICATION AND FINALIZATION OF MINIMUM DISTRIBUTION
REQUIREMENTS-
(1) IN GENERAL- The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating to minimum
distribution requirements under sections 401(a)(9), 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2) of the Internal Revenue Code of 1986,
and
(B) modify such regulations to--
(i) reflect current life expectancy, and
(ii) revise the required distribution methods so that, under
reasonable assumptions, the amount of the required minimum distribution
does not decrease over a participant's life expectancy.
(2) FRESH START- Notwithstanding subparagraph (D) of section 401(a)(9)
of such Code, during the first year that regulations are in effect under
this subsection, required distributions for future years may be redetermined
to reflect changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated beneficiary and to elect
a new method of calculating life expectancy.
(3) EFFECTIVE DATE FOR REGULATIONS- Regulations referred to in paragraph
(1) shall be effective for years beginning after December 31, 2000, and
shall apply in such years without regard to whether an individual had
previously begun receiving minimum distributions.
(b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD BEGUN BEFORE DEATH OCCURS-
(1) IN GENERAL- Subparagraph (B) of section 401(a)(9) is amended by
striking clause (i) and redesignating clauses (ii), (iii), and (iv) as
clauses (i), (ii), and (iii), respectively.
(A) Clause (i) of section 401(a)(9)(B) (as so redesignated) is
amended--
(i) by striking `FOR OTHER CASES' in the heading, and
(ii) by striking `the distribution of the employee's interest has
begun in accordance with subparagraph (A)(ii)' and inserting `his entire
interest has been distributed to him,'.
(B) Clause (ii) of section 401(a)(9)(B) (as so redesignated) is
amended by striking `clause (ii)' and inserting `clause (i)'.
(C) Clause (iii) of section 401(a)(9)(B) (as so redesignated) is
amended--
(i) by striking `clause (iii)(I)' and inserting `clause
(ii)(I)',
(ii) by striking `clause (iii)(III)' in subclause (I) and inserting
`clause (ii)(III)',
(iii) by striking `the date on which the employee would have
attained the age 70 1/2 ,' in subclause (I) and inserting `April 1 of
the calendar year following the calendar year in which the spouse
attains 70 1/2 ,', and
(iv) by striking `the distributions to such spouse begin,' in
subclause (II) and inserting `his entire interest has been distributed
to him,'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to years beginning after December 31, 2000.
(c) REDUCTION IN EXCISE TAX-
(1) IN GENERAL- Subsection (a) of section 4974 is amended by striking
`50 percent' and inserting `10 percent'.
(2) EFFECTIVE DATE- The amendment made by this subsection shall apply to
years beginning after December 31, 2000.
SEC. 1225. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 PLAN
BENEFITS UPON DIVORCE.
(a) IN GENERAL- Section 414(p)(11) (relating to application of rules to
governmental and church plans) is amended--
(1) by inserting `or an eligible deferred compensation plan (within the
meaning of section 457(b))' after `subsection (e))', and
(2) in the heading, by striking `GOVERNMENTAL AND CHURCH PLANS' and
inserting `CERTAIN OTHER PLANS'.
(b) WAIVER OF CERTAIN DISTRIBUTION REQUIREMENTS- Paragraph (10) of section
414(p) is amended by striking `and section 409(d)' and inserting `section
409(d), and section 457(d)'.
(c) TAX TREATMENT OF PAYMENTS FROM A SECTION 457 PLAN- Subsection (p) of
section 414 is amended by redesignating paragraph (12) as paragraph (13) and
inserting after paragraph (11) the following new paragraph:
`(12) TAX TREATMENT OF PAYMENTS FROM A SECTION 457 PLAN- If a
distribution or payment from an eligible deferred compensation plan
described in section 457(b) is made pursuant to a qualified domestic
relations order, rules similar to the rules of section 402(e)(1)(A) shall
apply to such distribution or payment.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
transfers, distributions, and payments made after December 31, 2000.
SEC. 1226. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP WITHDRAWALS FROM
CASH OR DEFERRED ARRANGEMENTS.
(a) IN GENERAL- The Secretary of the Treasury shall revise the regulations
relating to hardship distributions under section 401(k)(2)(B)(i)(IV) of the
Internal Revenue Code of 1986 to provide that 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 shall be equal
to 6 months.
(b) EFFECTIVE DATE- The revised regulations under subsection (a) shall
apply to years beginning after December 31, 2000.
Subtitle C--Increasing Portability for Participants
SEC. 1231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) ROLLOVERS FROM AND TO SECTION 457 PLANS-
(1) ROLLOVERS FROM SECTION 457 PLANS-
(A) IN GENERAL- Section 457(e) (relating to other definitions and
special rules) is amended by adding at the end the following:
`(A) GENERAL RULE- In the case of an eligible deferred compensation
plan established and maintained by an employer described in subsection
(e)(1)(A), if--
`(i) any portion of the balance to the credit of an employee in such
plan is paid to such employee in an eligible rollover distribution
(within the meaning of section 402(c)(4) without regard to subparagraph
(C) thereof),
`(ii) the employee transfers any portion of the property such
employee receives in such distribution to an eligible retirement plan
described in section 402(c)(8)(B), and
`(iii) in the case of a distribution of property other than money,
the amount so transferred consists of the property
distributed,
then such distribution (to the extent so transferred) shall not be
includible in gross income for the taxable year in which paid.
`(B) CERTAIN RULES MADE APPLICABLE- The rules of paragraphs (2)
through (7) (other than paragraph (4)(C)) and (9) of section 402(c) and
section 402(f) shall apply for purposes of subparagraph (A).
`(C) REPORTING- Rollovers under this paragraph shall be reported to
the Secretary in the same manner as rollovers from qualified retirement
plans (as defined in section 4974(c)).'.
(B) DEFERRAL LIMIT DETERMINED WITHOUT REGARD TO ROLLOVER AMOUNTS-
Section 457(b)(2) (defining eligible deferred compensation plan) is
amended by inserting `(other than rollover amounts)' after `taxable
year'.
(C) DIRECT ROLLOVER- Paragraph (1) of section 457(d) is amended by
striking `and' at the end of subparagraph (A), by striking the period at
the end of subparagraph (B) and inserting `, and', and by inserting after
subparagraph (B) the following:
`(C) in the case of a plan maintained by an employer described in
subsection (e)(1)(A), the plan meets requirements similar to the
requirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee transfer in
accordance with section 401(a)(31) shall not be includible in gross income
for the taxable year of transfer.'.
(i) Paragraph (12) of section 3401(a) is amended by adding at the
end the following:
`(E) under or to an eligible deferred compensation plan which, at the
time of such payment, is a plan described in section 457(b) maintained by
an employer described in section 457(e)(1)(A); or'.
(ii) Paragraph (3) of section 3405(c) is amended to read as
follows:
`(3) ELIGIBLE ROLLOVER DISTRIBUTION- For purposes of this subsection,
the term `eligible rollover distribution' has the meaning given such term by
section 402(f)(2)(A).'.
(iii) LIABILITY FOR WITHHOLDING- Subparagraph (B) of section
3405(d)(2) is amended by striking `or' at the end of clause (ii), by
striking the period at the end of clause (iii) and inserting `, or', and
by adding at the end the following:
(2) ROLLOVERS TO SECTION 457 PLANS-
(A) IN GENERAL- Section 402(c)(8)(B) (defining eligible retirement
plan) is amended by striking `and' at the end of clause (iii), by striking
the period at the end of clause (iv) and inserting `, and', and by
inserting after clause (iv) the following new clause:
`(v) an eligible deferred compensation plan described in section
457(b) of an employer described in section 457(e)(1)(A).'.
(B) SEPARATE ACCOUNTING- Section 402(c) is amended by adding at the
end the following new paragraph:
`(11) SEPARATE ACCOUNTING- Unless a plan described in clause (v) of
paragraph (8)(B) agrees to separately account for amounts rolled into such
plan from eligible retirement plans not described in such clause, the plan
described in such clause may not accept transfers or rollovers from such
retirement plans.'.
(C) 10 PERCENT ADDITIONAL TAX- Subsection (t) of section 72 (relating
to 10-percent additional tax on early distributions from qualified
retirement plans) is amended by adding at the end the following new
paragraph:
`(9) SPECIAL RULE FOR ROLLOVERS TO SECTION 457 PLANS- For purposes of
this subsection, a distribution from an eligible deferred compensation plan
(as defined in section 457(b)) of an employer described in section
457(e)(1)(A) shall be treated as a distribution from a qualified retirement
plan described in 4974(c)(1) to the extent that such distribution is
attributable to an amount transferred to an eligible deferred compensation
plan from a qualified retirement plan (as defined in section
4974(c)).'.
(b) ALLOWANCE OF ROLLOVERS FROM AND TO 403 (b) PLANS-
(1) ROLLOVERS FROM SECTION 403 (b) PLANS- Section 403(b)(8)(A)(ii)
(relating to rollover amounts) is amended by striking `such distribution'
and all that follows and inserting `such distribution to an eligible
retirement plan described in section 402(c)(8)(B), and'.
(2) ROLLOVERS TO SECTION 403 (b) PLANS- Section 402(c)(8)(B) (defining
eligible retirement plan), as amended by subsection (a), is amended by
striking `and' at the end of clause (iv), by striking the period at the end
of clause (v) and inserting `, and', and by inserting after clause (v) the
following new clause:
`(vi) an annuity contract described in section 403(b).'.
(c) EXPANDED EXPLANATION TO RECIPIENTS OF ROLLOVER DISTRIBUTIONS-
Paragraph (1) of section 402(f) (relating to written explanation to recipients
of distributions eligible for rollover treatment) is amended by striking `and'
at the end of subparagraph (C), by striking the period at the end of
subparagraph (D) and inserting `, and', and by adding at the end the following
new subparagraph:
`(E) of the provisions under which distributions from the eligible
retirement plan receiving the distribution may be subject to restrictions
and tax consequences which are different from those applicable to
distributions from the plan making such distribution.'.
(d) SPOUSAL ROLLOVERS- Section 402(c)(9) (relating to rollover where
spouse receives distribution after death of employee) is amended by striking
`; except that' and all that follows up to the end period.
(e) CONFORMING AMENDMENTS-
(1) Section 72(o)(4) is amended by striking `and 408(d)(3)' and
inserting `403(b)(8), 408(d)(3), and 457(e)(16)'.
(2) Section 219(d)(2) is amended by striking `or 408(d)(3)' and
inserting `408(d)(3), or 457(e)(16)'.
(3) Section 401(a)(31)(B) is amended by striking `and 403(a)(4)' and
inserting `, 403(a)(4), 403(b)(8), and 457(e)(16)'.
(4) Subparagraph (A) of section 402(f)(2) is amended by striking `or
paragraph (4) of section 403(a)' and inserting `, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or subparagraph (A) of
section 457(e)(16)'.
(5) Paragraph (1) of section 402(f) is amended by striking `from an
eligible retirement plan'.
(6) Subparagraphs (A) and (B) of section 402(f)(1) are amended by
striking `another eligible retirement plan' and inserting `an eligible
retirement plan'.
(7) Subparagraph (B) of section 403(b)(8) is amended to read as
follows:
`(B) CERTAIN RULES MADE APPLICABLE- The rules of paragraphs (2)
through (7) and (9) of section 402(c) and section 402(f) shall apply for
purposes of subparagraph (A), except that section 402(f) shall be applied
to the payor in lieu of the plan administrator.'.
(8) Section 408(a)(1) is amended by striking `or 403(b)(8)' and
inserting `, 403(b)(8), or 457(e)(16)'.
(9) Subparagraphs (A) and (B) of section 415(b)(2) are each amended by
striking `and 408(d)(3)' and inserting `403(b)(8), 408(d)(3), and
457(e)(16)'.
(10) Section 415(c)(2) is amended by striking `and 408(d)(3)' and
inserting `408(d)(3), and 457(e)(16)'.
(11) Section 4973(b)(1)(A) is amended by striking `or 408(d)(3)' and
inserting `408(d)(3), or 457(e)(16)'.
(f) EFFECTIVE DATE; SPECIAL RULE-
(1) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
(2) SPECIAL RULE- Notwithstanding any other provision of law,
subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986
shall not apply to any distribution from an eligible retirement plan (as
defined in clause (iii) or (iv) of section 402(c)(8)(B) of the Internal
Revenue Code of 1986) on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is permitted solely by reason
of any amendment made by this section.
SEC. 1232. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) IN GENERAL- Subparagraph (A) of section 408(d)(3) (relating to
rollover amounts) is amended by adding `or' at the end of clause (i), by
striking clauses (ii) and (iii), and by adding at the end the following:
`(ii) the entire amount received (including money and any other
property) is paid into an eligible retirement plan for the benefit of
such individual not later than the 60th day after the date on which the
payment or distribution is received, except that the maximum amount
which may be paid into such plan may not exceed the portion of the
amount received which is includible in gross income (determined without
regard to this paragraph).
For purposes of clause (ii), the term `eligible retirement plan' means
an eligible retirement plan described in clause (iii), (iv), (v), or (vi)
of section 402(c)(8)(B).'.
(b) CONFORMING AMENDMENTS-
(1) Paragraph (1) of section 403(b) is amended by striking `section
408(d)(3)(A)(iii)' and inserting `section 408(d)(3)(A)(ii)'.
(2) Clause (i) of section 408(d)(3)(D) is amended by striking `(i),
(ii), or (iii)' and inserting `(i) or (ii)'.
(3) Subparagraph (G) of section 408(d)(3) is amended to read as
follows:
`(G) SIMPLE RETIREMENT ACCOUNTS- In the case of any payment or
distribution out of a simple retirement account (as defined in subsection
(p)) to which section 72(t)(6) applies, this paragraph shall not apply
unless such payment or distribution is paid into another simple retirement
account.'.
(c) EFFECTIVE DATE; SPECIAL RULE-
(1) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
(2) SPECIAL RULE- Notwithstanding any other provision of law,
subsections (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986
shall not apply to any distribution from an eligible retirement plan (as
defined in clause (iii) or (iv) of section 402(c)(8)(B) of the Internal
Revenue Code of 1986) on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is permitted solely by reason
of the amendments made by this section.
SEC. 1233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS- Paragraph (2) of section 402(c)
(relating to maximum amount which may be rolled over) is amended by adding at
the end the following: `The preceding sentence shall not apply to such
distribution to the extent--
`(A) such portion is transferred in a direct trustee-to-trustee
transfer to a qualified trust which is part of a plan which is a defined
contribution plan and which agrees to separately account for amounts so
transferred, including separately accounting for the portion of such
distribution which is includible in gross income and the portion of such
distribution which is not so includible, or
`(B) such portion is transferred to an eligible retirement plan
described in clause (i) or (ii) of paragraph (8)(B).'.
(b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTIONS-
Subparagraph (B) of section 401(a)(31) (relating to limitation) is amended by
adding at the end the following: `The preceding sentence shall not apply to
such distribution if the plan to which such distribution is transferred--
`(i) agrees to separately account for amounts so transferred,
including separately accounting for the portion of such distribution
which is includible in gross income and the portion of such distribution
which is not so includible, or
`(ii) is an eligible retirement plan described in clause (i) or (ii)
of section 402(c)(8)(B).'.
(c) RULES FOR APPLYING SECTION 72 TO IRAS- Paragraph (3) of section 408(d)
(relating to special rules for applying section 72) is amended by inserting at
the end the following:
`(H) APPLICATION OF SECTION 72-
`(I) a distribution is made from an individual retirement plan,
and
`(II) a rollover contribution is made to an eligible retirement
plan described in section 402(c)(8)(B)(iii), (iv), (v), or (vi) with
respect to all or part of such distribution,
then, notwithstanding paragraph (2), the rules of clause (ii) shall
apply for purposes of applying section 72.
`(ii) APPLICABLE RULES- In the case of a distribution described in
clause (i)--
`(I) section 72 shall be applied separately to such
distribution,
`(II) notwithstanding the pro rata allocation of income on, and
investment in, the contract to distributions under section 72, the
portion of such distribution rolled over to an eligible retirement
plan described in clause (i) shall be treated as from income on the
contract (to the extent of the aggregate income on the contract from
all individual retirement plans of the distributee),
and
`(III) appropriate adjustments shall be made in applying section
72 to other distributions in such taxable year and subsequent taxable
years.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions made after December 31, 2000.
SEC. 1234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) EXEMPT TRUSTS- Paragraph (3) of section 402(c) (relating to transfer
must be made within 60 days of receipt) is amended to read as follows:
`(3) TRANSFER MUST BE MADE WITHIN 60 DAYS OF RECEIPT-
`(A) IN GENERAL- Except as provided in subparagraph (B), paragraph (1)
shall not apply to any transfer of a distribution made after the 60th day
following the day on which the distributee received the property
distributed.
`(B) HARDSHIP EXCEPTION- The Secretary may waive the 60-day
requirement under subparagraph (A) where the failure to waive such
requirement would be against equity or good conscience, including
casualty, disaster, or other events beyond the reasonable control of the
individual subject to such requirement.'.
(b) IRAS- Paragraph (3) of section 408(d) (relating to rollover
contributions), as amended by section 1233, is amended by adding after
subparagraph (H) the following new subparagraph:
`(I) WAIVER OF 60-DAY REQUIREMENT- The Secretary may waive the 60-day
requirement under subparagraphs (A) and (D) where the failure to waive
such requirement would be against equity or good conscience, including
casualty, disaster, or other events beyond the reasonable control of the
individual subject to such requirement.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
SEC. 1235. TREATMENT OF FORMS OF DISTRIBUTION.
(1) AMENDMENT TO INTERNAL REVENUE CODE OF 1986- Paragraph (6) of section
411(d) (relating to accrued benefit not to be decreased by amendment) is
amended by adding at the end the following:
`(i) A defined contribution plan (in this subparagraph referred to
as the `transferee plan') shall not be treated as failing to meet the
requirements of this subsection merely because the transferee plan does
not provide some or all of the forms of distribution previously
available under another defined contribution plan (in this subparagraph
referred to as the `transferor plan') to the extent that--
`(I) the forms of distribution previously available under the
transferor plan applied to the account of a participant or beneficiary
under the transferor plan that was transferred from the transferor
plan to the transferee plan pursuant to a direct transfer rather than
pursuant to a distribution from the transferor plan,
`(II) the terms of both the transferor plan and the transferee
plan authorize the transfer described in subclause (I),
`(III) the transfer described in subclause (I) was made pursuant
to a voluntary election by the participant or beneficiary whose
account was transferred to the transferee plan,
`(IV) the election described in subclause (III) was made after the
participant or beneficiary received a notice describing the
consequences of making the election,
`(V) if the transferor plan provides for an annuity as the normal
form of distribution under the plan in accordance with section 417,
the transfer is made with the consent of the participant's spouse (if
any), and such consent meets requirements similar to the requirements
imposed by section 417(a)(2), and
`(VI) the transferee plan allows the participant or beneficiary
described in clause (iii) to receive any distribution to which the
participant or beneficiary is entitled under the transferee plan in
the form of a single sum distribution.
`(ii) Clause (i) shall apply to plan mergers and other transactions
having the effect of a direct transfer, including consolidations of
benefits attributable to different employers within a multiple employer
plan.
`(E) ELIMINATION OF FORM OF DISTRIBUTION- Except to the extent
provided in regulations, a defined contribution plan shall not be treated
as failing to meet the requirements of this section merely because of the
elimination of a form of distribution previously available thereunder.
This subparagraph shall not apply to the elimination of a form of
distribution with respect to any participant unless--
`(i) a single sum payment is available to such participant at the
same time or times as the form of distribution being eliminated,
and
`(ii) such single sum payment is based on the same or greater
portion of the participant's account as the form of distribution being
eliminated.'.
(2) AMENDMENT TO ERISA- Section 204(g) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1054(g)) is amended by adding at the end the
following:
`(4)(A) A defined contribution plan (in this subparagraph referred to as
the `transferee plan') shall not be treated as failing to meet the
requirements of this subsection merely because the transferee plan does not
provide some or all of the forms of distribution previously available under
another defined contribution plan (in this subparagraph referred to as the
`transferor plan') to the extent that--
`(i) the forms of distribution previously available under the transferor
plan applied to the account of a participant or beneficiary under the
transferor plan that was transferred from the transferor plan to the
transferee plan pursuant to a direct transfer rather than pursuant to a
distribution from the transferor plan;
`(ii) the terms of both the transferor plan and the transferee plan
authorize the transfer described in clause (i);
`(iii) the transfer described in clause (i) was made pursuant to a
voluntary election by the participant or beneficiary whose account was
transferred to the transferee plan;
`(iv) the election described in clause (iii) was made after the
participant or beneficiary received a notice describing the consequences of
making the election;
`(v) if the transferor plan provides for an annuity as the normal form
of distribution under the plan in accordance with section 205, the transfer
is made with the consent of the participant's spouse (if any), and such
consent meets requirements similar to the requirements imposed by section
205(c)(2); and
`(vi) the transferee plan allows the participant or beneficiary
described in clause (iii) to receive any distribution to which the
participant or beneficiary is entitled under the transferee plan in the form
of a single sum distribution.
`(B) Subparagraph (A) shall apply to plan mergers and other transactions
having the effect of a direct transfer, including consolidations of benefits
attributable to different employers within a multiple employer plan.
`(5) ELIMINATION OF FORM OF DISTRIBUTION- Except to the extent provided in
regulations, a defined contribution plan shall not be treated as failing to
meet the requirements of this section merely because of the elimination of a
form of distribution previously available thereunder. This paragraph shall not
apply to the elimination of a form of distribution with respect to any
participant unless--
`(A) a single sum payment is available to such participant at the same
time or times as the form of distribution being eliminated; and
`(B) such single sum payment is based on the same or greater portion of
the participant's account as the form of distribution being
eliminated.'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to years beginning after December 31, 2000.
(1) AMENDMENT TO INTERNAL REVENUE CODE OF 1986- The last sentence of
paragraph (6)(B) of section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended to read as follows: `The Secretary shall
by regulations provide that this subparagraph shall not apply to any plan
amendment that does not adversely affect the rights of participants in a
material manner.'.
(2) AMENDMENT TO ERISA- The last sentence of section 204(g)(2) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)(2)) is
amended to read as follows: `The Secretary of the Treasury shall by
regulations provide that this paragraph shall not apply to any plan
amendment that does not adversely affect the rights of participants in a
material manner.'.
(3) SECRETARY DIRECTED- Not later than December 31, 2001, the Secretary
of the Treasury is directed to issue final regulations under section
411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the
Employee Retirement Income Security Act of 1974, including the regulations
required by the amendments made by this subsection. Such regulations shall
apply to plan years beginning after December 31, 2001, or such earlier date
as is specified by the Secretary of the Treasury.
SEC. 1236. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION-
(A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash or deferred
arrangements) is amended by striking `separation from service' and
inserting `severance from employment'.
(B) Subparagraph (A) of section 401(k)(10) (relating to distributions
upon termination of plan or disposition of assets or subsidiary) is
amended to read as follows:
`(A) IN GENERAL- An event described in this subparagraph is the
termination of the plan without establishment or maintenance of another
defined contribution plan (other than an employee stock ownership plan as
defined in section 4975(e)(7)).'.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking `An event' in clause (i) and inserting `A
termination', and
(II) by striking `the event' in clause (i) and inserting `the
termination',
(ii) by striking subparagraph (C), and
(iii) by striking `OR DISPOSITION OF ASSETS OR SUBSIDIARY' in the
heading.
(A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are each
amended by striking `separates from service' and inserting `has a
severance from employment'.
(B) The heading for paragraph (11) of section 403(b) is amended by
striking `SEPARATION FROM SERVICE' and inserting `SEVERANCE FROM
EMPLOYMENT'.
(3) SECTION 457- Clause (ii) of section 457(d)(1)(A) is amended by
striking `is separated from service' and inserting `has a severance from
employment'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
SEC. 1237. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT
PLANS.
(a) 403(b) PLANS- Subsection (b) of section 403 is amended by adding at
the end the following new paragraph:
`(13) TRUSTEE-TO-TRUSTEE TRANSFERS TO PURCHASE PERMISSIVE SERVICE
CREDIT- No amount shall be includible in gross income by reason of a direct
trustee-to-trustee transfer to a defined benefit governmental plan (as
defined in section 414(d)) if such transfer is--
`(A) for the purchase of permissive service credit (as defined in
section 415(n)(3)(A)) under such plan, or
`(B) a repayment to which section 415 does not apply by reason of
subsection (k)(3) thereof.'.
(1) Subsection (e) of section 457 is amended by adding after paragraph
(16) the following new paragraph:
`(17) TRUSTEE-TO-TRUSTEE TRANSFERS TO PURCHASE PERMISSIVE SERVICE
CREDIT- No amount shall be includible in gross income by reason of a direct
trustee-to-trustee transfer to a defined benefit governmental plan (as
defined in section 414(d)) if such transfer is--
`(A) for the purchase of permissive service credit (as defined in
section 415(n)(3)(A)) under such plan, or
`(B) a repayment to which section 415 does not apply by reason of
subsection (k)(3) thereof.'.
(2) Section 457(b)(2) is amended by striking `(other than rollover
amounts)' and inserting `(other than rollover amounts and amounts received
in a transfer referred to in subsection (e)(17))'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
trustee-to-trustee transfers after December 31, 2000.
SEC. 1238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT
AMOUNTS.
(1) AMENDMENT TO INTERNAL REVENUE CODE OF 1986- Section 411(a)(11)
(relating to restrictions on certain mandatory distributions) is amended by
adding at the end the following:
`(D) SPECIAL RULE FOR ROLLOVER CONTRIBUTIONS- A plan shall not fail to
meet the requirements of this paragraph if, under the terms of the plan,
the present value of the nonforfeitable accrued benefit is determined
without regard to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For purposes of
this subparagraph, the term `rollover contributions' means any rollover
contribution under sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16).'.
(2) AMENDMENT TO ERISA- Section 203(e) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1053(c)) is amended by adding at the end the
following:
`(4) A plan shall not fail to meet the requirements of this subsection if,
under the terms of the plan, the present value of the nonforfeitable accrued
benefit is determined without regard to that portion of such benefit which is
attributable to rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover contributions' means any
rollover contribution under sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code of 1986.'.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS- Clause (i) of section
457(e)(9)(A) is amended by striking `such amount' and inserting `the portion
of such amount which is not attributable to rollover contributions (as defined
in section 411(a)(11)(D))'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
SEC. 1239. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR SECTION 457
PLANS.
(a) MINIMUM DISTRIBUTION REQUIREMENTS- Paragraph (2) of section 457(d)
(relating to distribution requirements) is amended to read as follows:
`(2) MINIMUM DISTRIBUTION REQUIREMENTS- A plan meets the minimum
distribution requirements of this paragraph if such plan meets the
requirements of section 401(a)(9).'.
(b) INCLUSION IN GROSS INCOME-
(1) YEAR OF INCLUSION- Subsection (a) of section 457 (relating to year
of inclusion in gross income) is amended to read as follows:
`(a) YEAR OF INCLUSION IN GROSS INCOME-
`(1) IN GENERAL- Any amount of compensation deferred under an eligible
deferred compensation plan, and any income attributable to the amounts so
deferred, shall be includible in gross income only for the taxable year in
which such compensation or other income--
`(A) is paid to the participant or other beneficiary, in the case of a
plan of an eligible employer described in subsection (e)(1)(A),
and
`(B) is paid or otherwise made available to the participant or other
beneficiary, in the case of a plan of an eligible employer described in
subsection (e)(1)(B).
`(2) SPECIAL RULE FOR ROLLOVER AMOUNTS- To the extent provided in
section 72(t)(9), section 72(t) shall apply to any amount includible in
gross income under this subsection.'.
(2) CONFORMING AMENDMENTS-
(A) So much of paragraph (9) of section 457(e) as precedes
subparagraph (A) is amended to read as follows:
`(9) BENEFITS OF TAX EXEMPT ORGANIZATION PLANS NOT TREATED AS MADE
AVAILABLE BY REASON OF CERTAIN ELECTIONS, ETC- In the case of an eligible
deferred compensation plan of an employer described in subsection
(e)(1)(B)--'.
(B) Section 457(d) is amended by adding at the end the following new
paragraph:
`(3) SPECIAL RULE FOR GOVERNMENT PLAN- An eligible deferred compensation
plan of an employer described in subsection (e)(1)(A) shall not be treated
as failing to meet the requirements of this subsection solely by reason of
making a distribution described in subsection (e)(9)(A).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
distributions after December 31, 2000.
Subtitle D--Strengthening Pension Security and Enforcement
SEC. 1241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) AMENDMENT TO INTERNAL REVENUE CODE OF 1986- Section 412(c)(7)
(relating to full-funding limitation) is amended--
(1) by striking `the applicable percentage' in subparagraph (A)(i)(I)
and inserting `in the case of plan years beginning before January 1, 2004,
the applicable percentage', and
(2) by amending subparagraph (F) to read as follows:
`(F) APPLICABLE PERCENTAGE- For purposes of subparagraph (A)(i)(I),
the applicable percentage shall be determined in accordance with the
following table:
`In the case of any plan year
--The applicable
beginning in--
--percentage is--
--160
--165
--170.'.
(b) AMENDMENT TO ERISA- Section 302(c)(7) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) is amended--
(1) by striking `the applicable percentage' in subparagraph (A)(i)(I)
and inserting `in the case of plan years beginning before January 1, 2004,
the applicable percentage', and
(2) by amending subparagraph (F) to read as follows:
`(F) APPLICABLE PERCENTAGE- For purposes of subparagraph (A)(i)(I),
the applicable percentage shall be determined in accordance with the
following table:
`In the case of any plan year
--The applicable
beginning in--
--percentage is--
--160
--165
--170.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
plan years beginning after December 31, 2000.
SEC. 1242. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND APPLIED TO ALL
DEFINED BENEFIT PLANS.
(a) IN GENERAL- Subparagraph (D) of section 404(a)(1) (relating to special
rule in case of certain plans) is amended to read as follows:
`(D) SPECIAL RULE IN CASE OF CERTAIN PLANS-
`(i) IN GENERAL- In the case of any defined benefit plan, except as
provided in regulations, the maximum amount deductible under the
limitations of this paragraph shall not be less than the unfunded
termination liability (determined as if the proposed termination date
referred to in section 4041(b)(2)(A)(i)(II) of the Employee Retirement
Income Security Act of 1974 were the last day of the plan
year).
`(ii) PLANS WITH LESS THAN 100 PARTICIPANTS- For purposes of this
subparagraph, in the case of a plan which has less than 100 participants
for the plan year, termination liability shall not include the liability
attributable to benefit increases for highly compensated employees (as
defined in section 414(q)) resulting from a plan amendment which is made
or becomes effective, whichever is later, within the last 2 years before
the termination date.
`(iii) RULE FOR DETERMINING NUMBER OF PARTICIPANTS- For purposes of
determining whether a plan has more than 100 participants, all defined
benefit plans maintained by the same employer (or any member of such
employer's controlled group (within the meaning of section
412(l)(8)(C))) shall be treated as one plan, but only employees of such
member or employer shall be taken into account.
`(iv) PLANS ESTABLISHED AND MAINTAIN BY PROFESSIONAL SERVICE
EMPLOYERS- Clause (i) shall not apply to a plan described in section
4021(b)(13) of the Employee Retirement Income Security Act of
1974.'.
(b) CONFORMING AMENDMENT- Paragraph (6) of section 4972(c) is amended to
read as follows:
`(6) EXCEPTIONS- In determining the amount of nondeductible
contributions for any taxable year, there shall not be taken into account so
much of the contributions to one or more defined contribution plans which
are not deductible when contributed solely because of section 404(a)(7) as
does not exceed the greater of--
`(A) the amount of contributions not in excess of 6 percent of
compensation (within the meaning of section 404(a)) paid or accrued
(during the taxable year for which the contributions were made) to
beneficiaries under the plans, or
`(i) the amount of contributions described in section 401(m)(4)(A),
plus
`(ii) the amount of contributions described in section
402(g)(3)(A).
For purposes of this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contributed to a defined benefit
plan and then to amounts described in subparagraph (B).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
plan years beginning after December 31, 2000.
SEC. 1243. MISSING PARTICIPANTS.
(a) IN GENERAL- Section 4050 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1350) is amended by redesignating subsection (c) as
subsection (e) and by inserting after subsection (b) the following:
`(c) MULTIEMPLOYER PLANS- The corporation shall prescribe rules similar to
the rules in subsection (a) for multiemployer plans covered by this title that
terminate under section 4041A.
`(d) PLANS NOT OTHERWISE SUBJECT TO TITLE-
`(1) TRANSFER TO CORPORATION- The plan administrator of a plan described
in paragraph (4) may elect to transfer a missing participant's benefits to
the corporation upon termination of the plan.
`(2) INFORMATION TO THE CORPORATION- To the extent provided in
regulations, the plan administrator of a plan described in paragraph (4)
shall, upon termination of the plan, provide the corporation information
with respect to benefits of a missing participant if the plan transfers such
benefits--
`(A) to the corporation, or
`(B) to an entity other than the corporation or a plan described in
paragraph (4)(B)(ii).
`(3) PAYMENT BY THE CORPORATION- If benefits of a missing participant
were transferred to the corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary, pay to the
participant or beneficiary the amount transferred (or the appropriate
survivor benefit) either--
`(A) in a single sum (plus interest), or
`(B) in such other form as is specified in regulations of the
corporation.
`(4) PLANS DESCRIBED- A plan is described in this paragraph if--
`(A) the plan is a pension plan (within the meaning of section
3(2))--
`(i) to which the provisions of this section do not apply (without
regard to this subsection), and
`(ii) which is not a plan described in paragraphs (2) through (11)
of section 4021(b), and
`(B) at the time the assets are to be distributed upon termination,
the plan--
`(i) has missing participants, and
`(ii) has not provided for the transfer of assets to pay the
benefits of all missing participants to another pension plan (within the
meaning of section 3(2)).
`(5) CERTAIN PROVISIONS NOT TO APPLY- Subsections (a)(1) and (a)(3)
shall not apply to a plan described in paragraph (4).'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
distributions made after final regulations implementing subsections (c) and
(d) of section 4050 of the Employee Retirement Income Security Act of 1974 (as
added by subsection (a)), respectively, are prescribed.
SEC. 1244. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) IN GENERAL- Subsection (c) of section 4972 (relating to nondeductible
contributions) is amended by adding at the end the following new paragraph:
`(7) DEFINED BENEFIT PLAN EXCEPTION- In determining the amount of
nondeductible contributions for any taxable year, an employer may elect for
such year not to take into account any contributions to a defined benefit
plan except to the extent that such contributions exceed the full-funding
limitation (as defined in section 412(c)(7), determined without regard to
subparagraph (A)(i)(I) thereof). For purposes of this paragraph, the
deductible limits under section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then to amounts described in
this paragraph. If an employer makes an election under this paragraph for a
taxable year, paragraph (6) shall not apply to such employer for such
taxable year.'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1245. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT PLANS
SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.
(a) AMENDMENT TO 1986 CODE- Chapter 43 of subtitle D (relating to
qualified pension, etc., plans) is amended by adding at the end the following
new section:
`SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO
SATISFY NOTICE REQUIREMENTS.
`(a) IMPOSITION OF TAX- There is hereby imposed a tax on the failure of
any applicable pension plan to meet the requirements of subsection (e) with
respect to any applicable individual.
`(1) IN GENERAL- The amount of the tax imposed by subsection (a) on any
failure with respect to any applicable individual shall be $100 for each day
in the noncompliance period with respect to such failure.
`(2) NONCOMPLIANCE PERIOD- For purposes of this section, the term
`noncompliance period' means, with respect to any failure, the period
beginning on the date the failure first occurs and ending on the date the
failure is corrected.
`(c) LIMITATIONS ON AMOUNT OF TAX-
`(1) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES- In the case of
failures that are due to reasonable cause and not to willful neglect, the
tax imposed by subsection (a) for failures during the taxable year of the
employer (or, in the case of a multiemployer plan, the taxable year of the
trust forming part of the plan) shall not exceed $500,000. For purposes of
the preceding sentence, all multiemployer plans of which the same trust
forms a part shall be treated as one plan. For purposes of this paragraph,
if not all persons who are treated as a single employer for purposes of this
section have the same taxable year, the taxable years taken into account
shall be determined under principles similar to the principles of section
1561.
`(2) WAIVER BY SECRETARY- In the case of a failure which is due to
reasonable cause and not to willful neglect, the Secretary may waive part or
all of the tax imposed by subsection (a) to the extent that the payment of
such tax would be excessive relative to the failure involved.
`(d) LIABILITY FOR TAX- The following shall be liable for the tax imposed
by subsection (a):
`(1) In the case of a plan other than a multiemployer plan, the
employer.
`(2) In the case of a multiemployer plan, the plan.
`(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFICANTLY REDUCING BENEFIT
ACCRUALS-
`(1) IN GENERAL- If an applicable pension plan is amended to provide for
a significant reduction in the rate of future benefit accrual, the plan
administrator shall provide written notice to each applicable individual
(and to each employee organization representing applicable
individuals).
`(2) NOTICE- The notice required by paragraph (1) shall be written in a
manner calculated to be understood by the average plan participant and shall
provide sufficient information (as determined in accordance with regulations
prescribed by the Secretary) to allow applicable individuals to understand
the effect of the plan amendment.
`(3) TIMING OF NOTICE- Except as provided in regulations, the notice
required by paragraph (1) shall be provided within a reasonable time before
the effective date of the plan amendment.
`(4) DESIGNEES- Any notice under paragraph (1) may be provided to a
person designated, in writing, by the person to which it would otherwise be
provided.
`(5) NOTICE BEFORE ADOPTION OF AMENDMENT- A plan shall not be treated as
failing to meet the requirements of paragraph (1) merely because notice is
provided before the adoption of the plan amendment if no material
modification of the amendment occurs before the amendment is adopted.
`(f) APPLICABLE INDIVIDUAL; APPLICABLE PENSION PLAN- For purposes of this
section--
`(1) APPLICABLE INDIVIDUAL- The term `applicable individual' means, with
respect to any plan amendment--
`(A) any participant in the plan, and
`(B) any beneficiary who is an alternate payee (within the meaning of
section 414(p)(8)) under an applicable qualified domestic relations order
(within the meaning of section 414(p)(1)(A)),
who may reasonably be expected to be affected by such plan
amendment.
`(2) APPLICABLE PENSION PLAN- The term `applicable pension plan'
means--
`(A) any defined benefit plan, or
`(B) an individual account plan which is subject to the funding
standards of section 412,
which had 100 or more participants who had accrued a benefit, or with
respect to whom contributions were made, under the plan (whether or not
vested) as of the last day of the plan year preceding the plan year in which
the plan amendment becomes effective. Such term shall not include a
governmental plan (within the meaning of section 414(d)) or a church plan
(within the meaning of section 414(e)) with respect to which the election
provided by section 410(d) has not been made.'.
(b) AMENDMENT TO ERISA- Section 204(h) of the Employee Retirement Income
Security Act or 1974 (29 U.S.C. 1054(h)) is amended by adding at the end the
following new paragraph:
`(3)(A) A plan to which paragraph (1) applies shall not be treated as
meeting the requirements of such paragraph unless, in addition to any notice
required to be provided to an individual or organization under such paragraph,
the plan administrator provides the notice described in subparagraph (B).
`(B) The notice required by subparagraph (A) shall be written in a manner
calculated to be understood by the average plan participant and shall provide
sufficient information (as determined in accordance with regulations
prescribed by the Secretary of the Treasury) to allow individuals to
understand the effect of the plan amendment.
`(C) Except as provided in regulations prescribed by the Secretary of the
Treasury, the notice required by subparagraph (A) shall be provided within a
reasonable time before the effective date of the plan amendment.
`(D) A plan shall not be treated as failing to meet the requirements of
subparagraph (A) merely because notice is provided before the adoption of the
plan amendment if no material modification of the amendment occurs before the
amendment is adopted.'.
(c) CLERICAL AMENDMENT- The table of sections for chapter 43 of subtitle D
is amended by adding at the end the following new item:
`Sec. 4980F. Failure of applicable plans reducing benefit accruals to satisfy
notice requirements.'.
(1) IN GENERAL- The amendments made by this section shall apply to plan
amendments taking effect on or after the date of the enactment of this
Act.
(2) TRANSITION- Until such time as the Secretary of the Treasury issues
regulations under sections 4980F(e)(2) and (3) of the Internal Revenue Code
of 1986 and section 204(h)(3) of the Employee Retirement Income Security Act
of 1974 (as added by the amendments made by this section), a plan shall be
treated as meeting the requirements of such sections if it makes a good
faith effort to comply with such requirements.
(3) SPECIAL RULE- The period for providing any notice required by the
amendments made by this section shall not end before the date which is 3
months after the date of the enactment of this Act.
SEC. 1246. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K)
PLANS.
(a) IN GENERAL- Section 1524(b) of the Taxpayer Relief Act of 1997 is
amended to read as follows:
`(1) IN GENERAL- Except as provided in paragraph (2), the amendments
made by this section shall apply to elective deferrals for plan years
beginning after December 31, 1998.
`(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED PROPERTY- The amendments made
by this section shall not apply to any elective deferral which is invested
in assets consisting of qualifying employer securities, qualifying employer
real property, or both, if such assets were acquired before January 1,
1999.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply as if
included in the provision of the Taxpayer Relief Act of 1997 to which it
relates.
SEC. 1247. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) COMPENSATION LIMIT- Paragraph (11) of section 415(b) (relating to
limitation for defined benefit plans) is amended to read as follows:
`(11) SPECIAL LIMITATION RULE FOR GOVERNMENTAL AND MULTIEMPLOYER PLANS-
In the case of a governmental plan (as defined in section 414(d)) or a
multiemployer plan (as defined in section 414(f)), subparagraph (B) of
paragraph (1) shall not apply.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
years beginning after December 31, 2000.
Subtitle E--Reducing Regulatory Burdens
SEC. 1251. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) IN GENERAL- Section 412(c)(9) (relating to annual valuation) is
amended--
(1) by striking `For purposes' and inserting the following:
`(A) IN GENERAL- For purposes', and
(2) by adding at the end the following:
`(B) ELECTION TO USE PRIOR YEAR VALUATION-
`(i) IN GENERAL- Except as provided in clause (ii), if, for any plan
year--
`(I) an election is in effect under this subparagraph with respect
to a plan, and
`(II) the assets of the plan are not less than 125 percent of the
plan's current liability (as defined in paragraph (7)(B)), determined
as of the valuation date for the preceding plan year,
then this section shall be applied using the information available
as of such valuation date.
`(I) ACTUAL VALUATION EVERY 3 YEARS- Clause (i) shall not apply
for more than 2 consecutive plan years and valuation shall be under
subparagraph (A) with respect to any plan year to which clause (i)
does not apply by reason of this subclause.
`(II) REGULATIONS- Clause (i) shall not apply to the extent that
more frequent valuations are required under the regulations under
subparagraph (A).
`(iii) ADJUSTMENTS- Information under clause (i) shall, in
accordance with regulations, be actuarially adjusted to reflect
significant differences in participants.
`(iv) ELECTION- An election under this subparagraph, once made,
shall be irrevocable without the consent of the Secretary.'.
(b) AMENDMENTS TO ERISA- Paragraph (9) of section 302(c) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is amended--
(1) by inserting `(A)' after `(9)', and
(2) by adding at the end the following:
`(B)(i) Except as provided in clause (ii), if, for any plan year--
`(I) an election is in effect under this subparagraph with respect to a
plan, and
`(II) the assets of the plan are not less than 125 percent of the plan's
current liability (as defined in paragraph (7)(B)), determined as of the
valuation date for the preceding plan year,
then this section shall be applied using the information available as of
such valuation date.
`(ii)(I) Clause (i) shall not apply for more than 2 consecutive plan years
and valuation shall be under subparagraph (A) with respect to any plan year to
which clause (i) does not apply by reason of this subclause.
`(II) Clause (i) shall not apply to the extent that more frequent
valuations are required under the regulations under subparagraph (A).
`(iii) Information under clause (i) shall, in accordance with regulations,
be actuarially adjusted to reflect significant differences in participants.
`(iv) An election under this subparagraph, once made, shall be irrevocable
without the consent of the Secretary of the Treasury.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
plan years beginning after December 31, 2000.
SEC. 1252. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND
DEDUCTION.
(a) IN GENERAL- Section 404(k)(2)(A) (defining applicable dividends) is
amended by striking `or' at the end of clause (ii), by redesignating clause
(iii) as clause (iv), and by inserting after clause (ii) the following new
clause:
`(iii) is, at the election of such participants or their
beneficiaries--
`(I) payable as provided in clause (i) or (ii), or
`(II) paid to the plan and reinvested in qualifying employer
securities, or'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 1253. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY COMPENSATED
EMPLOYEES.
(a) IN GENERAL- Paragraph (4) of section 1114(c) of the Tax Reform Act of
1986 is hereby repealed.
(b) EFFECTIVE DATE- The repeal made by subsection (a) shall apply to plan
years beginning after December 31, 1999.
SEC. 1254. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL- The Secretary of the Treasury shall modify Treasury
Regulations section 1.410(b)-6(g) to provide that employees of an organization
described in section 403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who
are eligible to make contributions under section 403(b) of such Code pursuant
to a salary reduction agreement may be treated as excludable with respect to a
plan under section 401 (k) or (m) of such Code that is provided under the same
general arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in section 403(b)(1)(A)(i)
of such Code is eligible to participate in such section 401(k) plan or
section 401(m) plan, and
(2) 95 percent of the employees who are not employees of an organization
described in section 403(b)(1)(A)(i) of such Code are eligible to
participate in such plan under such section 401 (k) or (m).
(b) EFFECTIVE DATE- The modification required by subsection (a) shall
apply as of the same date set forth in section 1426(b) of the Small Business
Job Protection Act of 1996.
SEC. 1255. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT
ADVICE.
(a) IN GENERAL- Subsection (a) of section 132 (relating to exclusion from
gross income) is amended by striking `or' at the end of paragraph (5), by
striking the period at the end of paragraph (6) and inserting `, or', and by
adding at the end the following new paragraph:
`(7) qualified retirement planning services.'.
(b) QUALIFIED RETIREMENT PLANNING SERVICES DEFINED- Section 132 is amended
by redesignating subsection (m) as subsection (n) and by inserting after
subsection (l) the following:
`(m) QUALIFIED RETIREMENT PLANNING SERVICES-
`(1) IN GENERAL- For purposes of this section, the term `qualified
retirement planning services' means any retirement planning service provided
to an employee and his spouse by an employer maintaining a qualified
employer plan.
`(2) NONDISCRIMINATION RULE- Subsection (a)(7) shall apply in the case
of highly compensated employees only if such services are available on
substantially the same terms to each member of the group of employees
normally provided education and information regarding the employer's
qualified employer plan.
`(3) QUALIFIED EMPLOYER PLAN- For purposes of this subsection, the term
`qualified employer plan' means a plan, contract, pension, or account
described in section 219(g)(5).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1256. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR OWNERS AND THEIR SPOUSES-
(1) IN GENERAL- The Secretary of the Treasury shall modify the
requirements for filing annual returns with respect to one-participant
retirement plans to ensure that such plans with assets of $250,000 or less
as of the close of the plan year need not file a return for that year.
(2) ONE-PARTICIPANT RETIREMENT PLAN DEFINED- For purposes of this
subsection, the term `one-participant retirement plan' means a retirement
plan that--
(A) on the first day of the plan year--
(i) covered only the employer (and the employer's spouse) and the
employer owned the entire business (whether or not incorporated),
or
(ii) covered only one or more partners (and their spouses) in a
business partnership (including partners in an S or C
corporation),
(B) meets the minimum coverage requirements of section 410(b) of the
Internal Revenue Code of 1986 without being combined with any other plan
of the business that covers the employees of the business,
(C) does not provide benefits to anyone except the employer (and the
employer's spouse) or the partners (and their spouses),
(D) does not cover a business that is a member of an affiliated
service group, a controlled group of corporations, or a group of
businesses under common control, and
(E) does not cover a business that leases employees.
(3) OTHER DEFINITIONS- Terms used in paragraph (2) which are also used
in section 414 of the Internal Revenue Code of 1986 shall have the
respective meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR PLANS WITH FEWER THAN 25
EMPLOYEES- In the case of a retirement plan which covers less than 25
employees on the first day of the plan year and meets the requirements
described in subparagraphs (B), (D), and (E) of subsection (a)(2), the
Secretary of the Treasury shall provide for the filing of a simplified annual
return that is substantially similar to the annual return required to be filed
by a one-participant retirement plan.
(c) EFFECTIVE DATE- The provisions of this section shall take effect on
January 1, 2001.
SEC. 1257. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to update and improve the
Employee Plans Compliance Resolution System (or any successor program) giving
special attention to--
(1) increasing the awareness and knowledge of small employers concerning
the availability and use of the program,
(2) taking into account special concerns and circumstances that small
employers face with respect to compliance and correction of compliance
failures,
(3) extending the duration of the self-correction period under the
Administrative Policy Regarding Self-Correction for significant compliance
failures,
(4) expanding the availability to correct insignificant compliance
failures under the Administrative Policy Regarding Self-Correction during
audit, and
(5) assuring that any tax, penalty, or sanction that is imposed by
reason of a compliance failure is not excessive and bears a reasonable
relationship to the nature, extent, and severity of the failure.
SEC. 1258. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE- Section 4022(b)(5) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1322(b)(5)) is
amended to read as follows:
`(5)(A) For purposes of this paragraph, the term `majority owner' means an
individual who, at any time during the 60-month period ending on the date the
determination is being made--
`(i) owns the entire interest in an unincorporated trade or
business,
`(ii) in the case of a partnership, is a partner who owns, directly or
indirectly, 50 percent or more of either the capital interest or the profits
interest in such partnership, or
`(iii) in the case of a corporation, owns, directly or indirectly, 50
percent or more in value of either the voting stock of that corporation or
all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of section
1563(e) of the Internal Revenue Code of 1986 shall apply (determined without
regard to section 1563(e)(3)(C)).
`(B) In the case of a participant who is a majority owner, the amount of
benefits guaranteed under this section shall equal the product of--
`(i) a fraction (not to exceed 1) the numerator of which is the number
of years from the later of the effective date or the adoption date of the
plan to the termination date, and the denominator of which is 10, and
`(ii) the amount of benefits that would be guaranteed under this section
if the participant were not a majority owner.'.
(b) MODIFICATION OF ALLOCATION OF ASSETS-
(1) Section 4044(a)(4)(B) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by striking `section
4022(b)(5)' and inserting `section 4022(b)(5)(B)'.
(2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is amended--
(A) by striking `(5)' in paragraph (2) and inserting `(4), (5),',
and
(B) by redesignating paragraphs (3) through (6) as paragraphs (4)
through (7), respectively, and by inserting after paragraph (2) the
following:
`(3) If assets available for allocation under paragraph (4) of
subsection (a) are insufficient to satisfy in full the benefits of all
individuals who are described in that paragraph, the assets shall be
allocated first to benefits described in subparagraph (A) of that paragraph.
Any remaining assets shall then be allocated to benefits described in
subparagraph (B) of that paragraph. If assets allocated to such subparagraph
(B) are insufficient to satisfy in full the benefits described in that
subparagraph, the assets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination date) of their
respective benefits described in that subparagraph.'.
(c) CONFORMING AMENDMENTS-
(1) Section 4021 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1321) is amended--
(A) in subsection (b)(9), by striking `as defined in section
4022(b)(6)', and
(B) by adding at the end the following:
`(d) For purposes of subsection (b)(9), the term `substantial owner' means
an individual who, at any time during the 60-month period ending on the date
the determination is being made--
`(1) owns the entire interest in an unincorporated trade or
business,
`(2) in the case of a partnership, is a partner who owns, directly or
indirectly, more than 10 percent of either the capital interest or the
profits interest in such partnership, or
`(3) in the case of a corporation, owns, directly or indirectly, more
than 10 percent in value of either the voting stock of that corporation or
all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of section
1563(e) of the Internal Revenue Code of 1986 shall apply (determined without
regard to section 1563(e)(3)(C)).'.
(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is amended by
striking `section 4022(b)(6)' and inserting `section 4021(d)'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendments made
by this section shall apply to plan terminations--
(A) under section 4041(c) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1341(c)) with respect to which notices of intent to
terminate are provided under section 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) after December 31, 2000, and
(B) under section 4042 of such Act (29 U.S.C. 1342) with respect to
which proceedings are instituted by the corporation after such
date.
(2) CONFORMING AMENDMENTS- The amendments made by subsection (c) shall
take effect on the date of the enactment of this Act.
SEC. 1259. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED TRANSIT
PASSES.
(a) IN GENERAL- Section 132(f)(3) (relating to cash reimbursements) is
amended by striking the last sentence.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 1260. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL- Paragraph (9) of section 401(m) is amended to read as
follows:
`(9) REGULATIONS- The Secretary shall prescribe such regulations as may
be necessary to carry out the purposes of this subsection and subsection
(k), including regulations permitting appropriate aggregation of plans and
contributions.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
years beginning after December 31, 2000.
SEC. 1261. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND LINE OF BUSINESS
RULES.
(1) IN GENERAL- The Secretary of the Treasury shall, by regulation,
provide that a plan shall be deemed to satisfy the requirements of section
401(a)(4) of the Internal Revenue Code of 1986 if such plan satisfies the
facts and circumstances test under section 401(a)(4) of such Code, as in
effect before January 1, 1994, but only if--
(A) the plan satisfies conditions prescribed by the Secretary to
appropriately limit the availability of such test, and
(B) the plan is submitted to the Secretary for a determination of
whether it satisfies such test.
Subparagraph (B) shall only apply to the extent provided by the
Secretary.
(A) REGULATIONS- The regulation required by paragraph (1) shall apply
to years beginning after December 31, 2000.
(B) CONDITIONS OF AVAILABILITY- Any condition of availability
prescribed by the Secretary under paragraph (1)(A) shall not apply before
the first year beginning not less than 120 days after the date on which
such condition is prescribed.
(1) IN GENERAL- Section 410(b)(1) (relating to minimum coverage
requirements) is amended by adding at the end the following:
`(D) In the case that the plan fails to meet the requirements of
subparagraphs (A), (B) and (C), the plan--
`(i) satisfies subparagraph (B), as in effect immediately before the
enactment of the Tax Reform Act of 1986,
`(ii) is submitted to the Secretary for a determination of whether
it satisfies the requirement described in clause (i), and
`(iii) satisfies conditions prescribed by the Secretary by
regulation that appropriately limit the availability of this
subparagraph.
Clause (ii) shall apply only to the extent provided by the
Secretary.'.
(A) IN GENERAL- The amendment made by paragraph (1) shall apply to
years beginning after December 31, 2000.
(B) CONDITIONS OF AVAILABILITY- Any condition of availability
prescribed by the Secretary under regulations prescribed by the Secretary
under section 410(b)(1)(D) of the Internal Revenue Code of 1986 shall not
apply before the first year beginning not less than 120 days after the
date on which such condition is prescribed.
(c) LINE OF BUSINESS RULES- The Secretary of the Treasury shall, on or
before December 31, 2000, modify the existing regulations issued under section
414(r) of the Internal Revenue Code of 1986 in order to expand (to the extent
that the Secretary determines appropriate) the ability of a pension plan to
demonstrate compliance with the line of business requirements based upon the
facts and circumstances surrounding the design and operation of the plan, even
though the plan is unable to satisfy the mechanical tests currently used to
determine compliance.
SEC. 1262. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF MORATORIUM ON
APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE TO STATE AND LOCAL
PLANS.
(a) IN GENERAL- Subparagraph (G) of section 401(a)(5), subparagraph (H) of
section 401(a)(26), subparagraph (G) of section 401(k)(3), and paragraph (2)
of section 1505(d) of the Taxpayer Relief Act of 1997 are each amended by
inserting `or by an international organization which is described in section
414(d)' after `or instrumentality thereof)'.
(b) CONFORMING AMENDMENTS-
(1) The headings for subparagraph (G) of section 401(a)(5) and
subparagraph (H) of section 401(a)(26) are each amended by inserting `AND
INTERNATIONAL ORGANIZATION' after `GOVERNMENTAL'.
(2) Subparagraph (G) of section 401(k)(3) is amended by inserting `STATE
AND LOCAL GOVERNMENTAL AND INTERNATIONAL ORGANIZATION PLANS- ' after
`(G)'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
years beginning after December 31, 2000.
Subtitle F--Plan Amendments
SEC. 1271. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL- If this section applies to any plan or contract
amendment--
(1) such plan or contract shall be treated as being operated in
accordance with the terms of the plan during the period described in
subsection (b)(2)(A), and
(2) such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 by reason of such
amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES-
(1) IN GENERAL- This section shall apply to any amendment to any plan or
annuity contract which is made--
(A) pursuant to any amendment made by this title, or pursuant to any
regulation issued under this title, and
(B) on or before the last day of the first plan year beginning on or
after January 1, 2003.
In the case of a government plan (as defined in section 414(d) of the
Internal Revenue Code of 1986), this paragraph shall be applied by
substituting `2005' for `2003'.
(2) CONDITIONS- This section shall not apply to any amendment
unless--
(i) beginning on the date the legislative or regulatory amendment
described in paragraph (1)(A) takes effect (or in the case of a plan or
contract amendment not required by such legislative or regulatory
amendment, the effective date specified by the plan), and
(ii) ending on the date described in paragraph (1)(B) (or, if
earlier, the date the plan or contract amendment is
adopted),
the plan or contract is operated as if such plan or contract amendment
were in effect, and
(B) such plan or contract amendment applies retroactively for such
period.
TITLE XIII--MISCELLANEOUS PROVISIONS
Subtitle A--Provisions Primarily Affecting Individuals
SEC. 1301. CONSISTENT TREATMENT OF SURVIVOR BENEFITS FOR PUBLIC SAFETY
OFFICERS KILLED IN THE LINE OF DUTY.
Subsection (b) of section 1528 of the Taxpayer Relief Act of 1997 (Public
Law 105-34) is amended by striking the period and inserting `, and to amounts
received in taxable years beginning after December 31, 1999, with respect to
individuals dying on or before December 31, 1996.'.
SEC. 1302. EXPANSION OF DC HOMEBUYER TAX CREDIT.
(a) EXPANSION OF INCOME LIMITATION- Section 1400C(b)(1) (relating to
limitation based on modified adjusted gross income) is amended--
(1) by striking `$110,000' in subparagraph (A)(i) and inserting
`$140,000', and
(2) by inserting `($40,000 in the case of a joint return)' after
`$20,000' in subparagraph (B).
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
purchases on or after the date of the enactment of this Act.
SEC. 1303. NO FEDERAL INCOME TAX ON AMOUNTS AND LANDS RECEIVED BY HOLOCAUST
VICTIMS OR THEIR HEIRS.
(a) IN GENERAL- For purposes of the Internal Revenue Code of 1986, gross
income shall not include--
(1) any amount received by an individual (or any heir of the
individual)--
(A) from the Swiss Humanitarian Fund established by the Government of
Switzerland or from any similar fund established by any foreign country,
or
(B) as a result of the settlement of the action entitled `In re
Holocaust Victims' Asset Litigation', (E.D. NY), C.A. No. 96-4849, or as a
result of any similar action; and
(2) the value of any land (including structures thereon) recovered by an
individual (or any heir of the individual) from a government of a foreign
country as a result of a settlement of a claim arising out of the
confiscation of such land in connection with the Holocaust.
(b) EFFECTIVE DATE- This section shall apply to any amount received on or
after the date of the enactment of this Act.
Subtitle B--Provisions Primarily Affecting Businesses
SEC. 1311. DISTRIBUTIONS FROM PUBLICLY TRADED PARTNERSHIPS TREATED AS
QUALIFYING INCOME OF REGULATED INVESTMENT COMPANIES.
(a) IN GENERAL- Paragraph (2) of section 851(b) (defining regulated
investment company) is amended by inserting `income derived from an interest
in a publicly traded partnership (as defined in section 7704(b)),' after
`dividends, interest,'.
(b) SOURCE FLOW-THROUGH RULE NOT TO APPLY- The last sentence of section
851(b) is amended by inserting `(other than a publicly traded partnership (as
defined in section 7704(b)))' after `derived from a partnership'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 1312. SPECIAL PASSIVE ACTIVITY RULE FOR PUBLICLY TRADED PARTNERSHIPS TO
APPLY TO REGULATED INVESTMENT COMPANIES.
(a) IN GENERAL- Subsection (k) of section 469 (relating to separate
application of section in case of publicly traded partnerships) is amended by
adding at the end the following new paragraph:
`(4) APPLICATION TO REGULATED INVESTMENT COMPANIES- For purposes of this
section, a regulated investment company (as defined in section 851) holding
an interest in a publicly traded partnership shall be treated as a taxpayer
described in subsection (a)(2) with respect to items attributable to such
interest.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 2000.
SEC. 1313. LARGE ELECTRIC TRUCKS, VANS, AND BUSES ELIGIBLE FOR DEDUCTION FOR
CLEAN-FUEL VEHICLES IN LIEU OF CREDIT.
(a) IN GENERAL- Paragraph (1) of section 30(c) (relating to credit for
qualified electric vehicles) is amended by adding at the end the following new
flush sentence:
`Such term shall not include any vehicle described in subclause (I) or
(II) of section 179A(b)(1)(A)(iii).'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
property placed in service after December 31, 1999.
SEC. 1314. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR DECOMMISSIONING
COSTS.
(a) REPEAL OF LIMITATION ON DEPOSITS INTO FUND BASED ON COST OF SERVICE-
Subsection (b) of section 468A is amended to read as follows:
`(b) LIMITATION ON AMOUNTS PAID INTO FUND- The amount which a taxpayer may
pay into the Fund for any taxable year shall not exceed the ruling amount
applicable to such taxable year.'.
(b) CLARIFICATION OF TREATMENT OF FUND TRANSFERS- Subsection (e) of
section 468A is amended by adding at the end the following new paragraph:
`(8) TREATMENT OF FUND TRANSFERS- If, in connection with the transfer of
the taxpayer's interest in a nuclear powerplant, the taxpayer transfers the
Fund with respect to such powerplant to the transferee of such interest and
the transferee elects to continue the application of this section to such
Fund--
`(A) the transfer of such Fund shall not cause such Fund to be
disqualified from the application of this section, and
`(B) no amount shall be treated as distributed from such Fund, or be
includible in gross income, by reason of such transfer.'.
(c) TRANSFERS OF BALANCES IN NONQUALIFIED FUNDS- Section 468A is amended
by redesignating subsections (f) and (g) as subsections (g) and (h),
respectively, and by inserting after subsection (e) the following new
subsection:
`(f) TRANSFERS OF BALANCES IN NONQUALIFIED FUNDS INTO QUALIFIED FUNDS-
`(1) IN GENERAL- Notwithstanding subsection (b), any taxpayer
maintaining a Fund to which this section applies with respect to a nuclear
powerplant may transfer into such Fund amounts held in any nonqualified fund
of such taxpayer with respect to such powerplant.
`(2) MAXIMUM AMOUNT PERMITTED TO BE TRANSFERRED- The amount permitted to
be transferred under paragraph (1) shall not exceed the balance in the
nonqualified fund as of December 31, 1998.
`(3) DEDUCTION FOR AMOUNTS TRANSFERRED-
`(A) IN GENERAL- The deduction allowed by subsection (a) for any
transfer permitted by this subsection shall be allowed ratably over the
remaining estimated useful life (within the meaning of subsection
(d)(2)(A)) of the nuclear powerplant, beginning with the later of the
taxable year during which the transfer is made or the taxpayer's first
taxable year beginning after December 31, 2001.
`(B) DENIAL OF DEDUCTION FOR PREVIOUSLY DEDUCTED AMOUNTS- No deduction
shall be allowed for any transfer under this subsection of an amount for
which a deduction was allowed when such amount was paid into the
nonqualified fund. For purposes of the preceding sentence, a ratable
portion of each transfer shall be treated as being from previously
deducted amounts to the extent thereof.
`(C) TRANSFERS OF QUALIFIED FUNDS- If--
`(i) any transfer permitted by this subsection is made to any Fund
to which this section applies, and
`(ii) such Fund is transferred thereafter,
any deduction under this subsection for taxable years ending after the
date that such Fund is transferred shall be allowed to the transferee and
not to the transferor. The preceding sentence shall not apply if the
transferor is an organization exempt from tax imposed by this
chapter.
`(4) NEW RULING AMOUNT REQUIRED- Paragraph (1) shall not apply to any
transfer unless the taxpayer requests from the Secretary a new schedule of
ruling amounts in connection with such transfer.
`(5) NONQUALIFIED FUND- For purposes of this subsection, the term
`nonqualified fund' means, with respect to any nuclear powerplant, any fund
in which amounts are irrevocably set aside pursuant to the requirements of
any State or Federal agency exclusively for the purpose of funding the
decommissioning of such powerplant.
`(6) NO BASIS IN QUALIFIED FUNDS- Notwithstanding any other provision of
law, the basis of any Fund to which this section applies shall not be
increased by reason of any transfer permitted by this subsection.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 1315. CONSOLIDATION OF LIFE INSURANCE COMPANIES WITH OTHER
CORPORATIONS.
(a) IN GENERAL- Section 1504(b) (defining includible corporation) is
amended by striking paragraph (2).
(b) CONFORMING AMENDMENTS-
(1) Subsection (c) of section 1503 is amended by striking paragraph (2)
(relating to losses of recent nonlife affiliates).
(2) Section 1504 is amended by striking subsection (c) and by
redesignating subsections (d), (e), and (f) as subsections (c), (d), and
(e), respectively.
(3) Section 1503(c)(1) (relating to special rule for application of
certain losses against income of insurance companies taxed under section
801) is amended by striking `an election under section 1504(c)(2) is in
effect for the taxable year and'.
(1) IN GENERAL- The amendments made by this section shall apply to
taxable years beginning after December 31, 2000.
(2) LOSSES OF RECENT NONLIFE AFFILIATES- The amendment made by
subsection (b)(1) shall apply to taxable years beginning after December 31,
2005.
(d) NO CARRYBACK BEFORE JANUARY 1, 2006- To the extent that a consolidated
net operating loss is allowed or increased by reason of the amendments made by
this section, such loss may not be carried back to a taxable year beginning
before January 1, 2006.
(e) NONTERMINATION OF GROUP- No affiliated group shall terminate solely as
a result of the amendments made by this section.
(f) WAIVER OF 5-YEAR WAITING PERIOD- Under regulations prescribed by the
Secretary of the Treasury or his delegate, an automatic waiver from the 5-year
waiting period for reconsolidation provided in section 1504(a)(3) of the
Internal Revenue Code of 1986 shall be granted to any corporation which was
previously an includible corporation but was subsequently deemed a
nonincludible corporation as a result of becoming a subsidiary of a
corporation which was not an includible corporation solely by operation of
section 1504(c)(2) of such Code (as in effect on the day before the date of
the enactment of this Act).
SEC. 1316. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER SECTION
355.
(a) IN GENERAL- Section 355(b) (defining active conduct of a trade or
business) is amended by adding at the end the following new paragraph:
`(3) SPECIAL RULES RELATING TO ACTIVE BUSINESS REQUIREMENT-
`(A) IN GENERAL- For purposes of determining whether a corporation
meets the requirement of paragraph (2)(A), all members of such
corporation's separate affiliated group shall be treated as one
corporation. For purposes of the preceding sentence, a corporation's
separate affiliated group is the affiliated group which would be
determined under section 1504(a) if such corporation were the common
parent and section 1504(b) did not apply.
`(B) CONTROL- For purposes of paragraph (2)(D), all distributee
corporations which are members of the same affiliated group (as defined in
section 1504(a) without regard to section 1504(b)) shall be treated as one
distributee corporation.'.
(b) CONFORMING AMENDMENTS-
(1) Subparagraph (A) of section 355(b)(2) is amended to read as
follows:
`(A) it is engaged in the active conduct of a trade or
business,'.
(2) Section 355(b)(2) is amended by striking the last sentence.
(1) IN GENERAL- The amendments made by this section shall apply to
distributions after the date of the enactment of this Act.
(2) TRANSITION RULE- The amendments made by this section shall not apply
to any distribution pursuant to a transaction which is--
(A) made pursuant to an agreement which was binding on such date and
at all times thereafter,
(B) described in a ruling request submitted to the Internal Revenue
Service on or before such date, or
(C) described on or before such date in a public announcement or in a
filing with the Securities and Exchange Commission.
(3) ELECTION TO HAVE AMENDMENTS APPLY- Paragraph (2) shall not apply if
the distributing corporation elects not to have such paragraph apply to
distributions of such corporation. Any such election, once made, shall be
irrevocable.
SEC. 1317. EXPANSION OF EXEMPTION FROM PERSONAL HOLDING COMPANY TAX FOR
LENDING OR FINANCE COMPANIES.
(a) IN GENERAL- Paragraph (6) of section 542(c) (defining personal holding
company) is amended--
(1) by striking `rents,' in subparagraph (B), and
(2) by adding `and' at the end of subparagraph (B),
(3) by striking subparagraph (C), and
(4) by redesignating subparagraph (D) as subparagraph (C).
(b) EXCEPTION FOR LENDING OR FINANCE COMPANIES DETERMINED ON AFFILIATED
GROUP BASIS- Subsection (d) of section 542 is amended by striking paragraphs
(1) and (2) and inserting the following new paragraphs:
`(1) LENDING OR FINANCE BUSINESS DEFINED- For purposes of subsection
(c)(6), the term `lending or finance business' means a business of--
`(B) purchasing or discounting accounts receivable, notes, or
installment obligations,
`(C) engaging in leasing (including entering into leases and
purchasing, servicing, and disposing of leases and leased
assets),
`(D) rendering services or making facilities available in the ordinary
course of a lending or finance business,
`(E) rendering services or making facilities available in connection
with activities described in subparagraphs (A), (B), and (C) carried on by
the corporation rendering services or making facilities available,
or
`(F) rendering services or making facilities available to another
corporation which is engaged in the lending or finance business (within
the meaning of this paragraph), if such services or facilities are related
to the lending or finance business (within such meaning) of such other
corporation and such other corporation and the corporation rendering
services or making facilities available are members of the same affiliated
group (as defined in section 1504).
`(2) EXCEPTION DETERMINED ON AN AFFILIATED GROUP BASIS- In the case of a
lending or finance company which is a member of an affiliated group (as
defined in section 1504), such company shall be treated as meeting the
requirements of subsection (c)(6) if such group (determined by taking into
account only members of such group which are engaged in a lending or finance
business) meets such requirements.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years ending after December 31, 1999.
SEC. 1318. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) EXPANSION OF QUALIFIED CONTAMINATED SITE- Section 198(c) is amended to
read as follows:
`(c) QUALIFIED CONTAMINATED SITE- For purposes of this section--
`(1) IN GENERAL- The term `qualified contaminated site' means any
area--
`(A) which is held by the taxpayer for use in a trade or business or
for the production of income, or which is property described in section
1221(1) in the hands of the taxpayer, and
`(B) at or on which there has been a release (or threat of release) or
disposal of any hazardous substance.
`(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).
`(3) TAXPAYER MUST RECEIVE STATEMENT FROM STATE ENVIRONMENTAL AGENCY- An
area shall be treated as a qualified contaminated site with respect to
expenditures paid or incurred during any taxable year only if the taxpayer
receives a statement from the appropriate agency of the State in which such
area is located that such area meets the requirement of paragraph
(1)(B).
`(4) APPROPRIATE STATE AGENCY- For purposes of paragraph (2), the chief
executive officer of each State may, in consultation with the Administrator
of the Environmental Protection Agency, designate the appropriate State
environmental agency within 60 days of the date of the enactment of this
section. If the chief executive officer of a State has not designated an
appropriate State environmental agency within such 60-day period, the
appropriate environmental agency for such State shall be designated by the
Administrator of the Environmental Protection Agency.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
expenditures paid or incurred after December 31, 1999.
Subtitle C--Provisions Relating to Excise Taxes
SEC. 1321. CONSOLIDATION OF HAZARDOUS SUBSTANCE SUPERFUND AND LEAKING
UNDERGROUND STORAGE TANK TRUST FUND.
(a) IN GENERAL- Subchapter A of chapter 98 (relating to trust fund code)
is amended by striking sections 9507 and 9508 and inserting the following new
section:
`SEC. 9507. ENVIRONMENTAL REMEDIATION TRUST FUND.
`(a) CREATION OF TRUST FUND- There is established in the Treasury of the
United States a trust fund to be known as the `Environmental Remediation Trust
Fund' consisting of such amounts as may be--
`(1) appropriated to the Environmental Remediation Trust Fund as
provided in this section,
`(2) appropriated to the Environmental Remediation Trust Fund pursuant
to section 517(b) of the Superfund Revenue Act of 1986, or
`(3) credited to the Environmental Remediation Trust Fund as provided in
section 9602(b).
`(b) TRANSFERS TO ENVIRONMENTAL REMEDIATION TRUST FUND-
`(1) IN GENERAL- There are hereby appropriated to the Environmental
Remediation Trust Fund amounts equivalent to--
`(A) the taxes received in the Treasury under--
`(i) section 59A, 4611, 4661, or 4671 (relating to environmental
taxes),
`(ii) section 4041(d) (relating to additional taxes on motor
fuels),
`(iii) section 4081 (relating to tax on gasoline, diesel fuel, and
kerosene) to the extent attributable to the Environmental Remediation
Trust Fund financing rate under such section,
`(iv) section 4091 (relating to tax on aviation fuel) to the extent
attributable to the Environmental Remediation Trust Fund financing rate
under such section, and
`(v) section 4042 (relating to tax on fuel used in commercial
transportation on inland waterways) to the extent attributable to the
Environmental Remediation Trust Fund financing rate under such
section,
`(B) amounts recovered on behalf of the Environmental Remediation
Trust Fund under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (hereinafter in this section referred to as
`CERCLA'),
`(C) all moneys recovered or collected under section 311(b)(6)(B) of
the Clean Water Act,
`(D) penalties assessed under title I of CERCLA,
`(E) punitive damages under section 107(c)(3) of CERCLA, and
`(F) amounts received in the Treasury and collected under section
9003(h)(6) of the Solid Waste Disposal Act.
`(2) LIMITATION ON TRANSFERS-
`(A) IN GENERAL- Except as provided in subparagraph (B), no amount may
be appropriated or credited to the Environmental Remediation Trust Fund on
and after the date of any expenditure from any such Trust Fund which is
not permitted by this section. The determination of whether an expenditure
is so permitted shall be made without regard to--
`(i) any provision of law which is not contained or referenced in
this title or in a revenue Act, and
`(ii) whether such provision of law is a subsequently enacted
provision or directly or indirectly seeks to waive the application of
this paragraph.
`(B) EXCEPTION FOR PRIOR OBLIGATIONS- Subparagraph (A) shall not apply
to any expenditure to liquidate any contract entered into (or for any
amount otherwise obligated) in accordance with the provisions of this
section.'.
`(c) EXPENDITURES FROM ENVIRONMENTAL REMEDIATION TRUST FUND-
`(1) IN GENERAL- Amounts in the Environmental Remediation Trust Fund
shall be available, as provided in appropriation Acts, only for purposes of
making expenditures--
`(A) to carry out the purposes of--
`(i) paragraphs (1), (2), (5), and (6) of section 111(a) of CERCLA
as in effect on July 12, 1999,
`(ii) section 111(c) of CERCLA (as so in effect), other than
paragraphs (1) and (2) thereof, and
`(iii) section 111(m) of CERCLA (as so in effect), or
`(B) to carry out section 9003(h) of the Solid Waste Disposal Act as
in effect on July 12, 1999.
`(2) EXCEPTION FOR CERTAIN TRANSFERS, ETC., OF HAZARDOUS SUBSTANCES- No
amount in the Environmental Remediation Trust Fund or derived from the
Environmental Remediation Trust Fund shall be available or used for the
transfer or disposal of hazardous waste carried out pursuant to a
cooperative agreement between the Administrator of the Environmental
Protection Agency and a State if the following conditions apply--
`(A) the transfer or disposal, if made on December 13, 1985, would not
comply with a State or local requirement,
`(B) the transfer is to a facility for which a final permit under
section 3005(a) of the Solid Waste Disposal Act was issued after January
1, 1983, and before November 1, 1984, and
`(C) the transfer is from a facility identified as the McColl Site in
Fullerton, California.
`(3) TRANSFERS FROM TRUST FUND FOR CERTAIN REPAYMENTS AND CREDITS-
`(A) IN GENERAL- The Secretary shall pay from time to time from the
Environmental Remediation Trust Fund into the general fund of the Treasury
amounts equivalent to--
`(i) amounts paid under--
`(I) section 6420 (relating to amounts paid in respect of gasoline
used on farms),
`(II) section 6421 (relating to amounts paid in respect of
gasoline used for certain nonhighway purposes or by local transit
systems), and
`(III) section 6427 (relating to fuels not used for taxable
purposes), and
`(ii) credits allowed under section 34,
with respect to the taxes imposed by section 4041(d) or by sections
4081 and 4091 (to the extent attributable to the Leaking Underground
Storage Tank Trust Fund financing rate or the Environmental Remediation
Trust Fund financing rate under such sections).
`(B) TRANSFERS BASED ON ESTIMATES- Transfers under subparagraph (A)
shall be made on the basis of estimates by the Secretary, and proper
adjustments shall be made in amounts subsequently transferred to the
extent prior estimates were in excess of or less than the amounts required
to be transferred.
`(d) LIABILITY OF UNITED STATES LIMITED TO AMOUNT IN TRUST FUND-
`(1) GENERAL RULE- Any claim filed against the Environmental Remediation
Trust Fund may be paid only out of the Environmental Remediation Trust
Fund.
`(2) COORDINATION WITH OTHER PROVISIONS- Nothing in CERCLA or the
Superfund Amendments and Reauthorization Act of 1986 (or in any amendment
made by either of such Acts) shall authorize the payment by the United
States Government of any amount with respect to any such claim out of any
source other than the Environmental Remediation Trust Fund.
`(3) ORDER IN WHICH UNPAID CLAIMS ARE TO BE PAID- If at any time the
Environmental Remediation Trust Fund has insufficient funds to pay all of
the claims payable out of the Environmental Remediation Trust Fund at such
time, such claims shall, to the extent permitted under paragraph (1), be
paid in full in the order in which they were finally determined.
`(e) SEPARATE ACCOUNTING IF SUPERFUND REAUTHORIZED-
`(1) IN GENERAL- If a Federal law is enacted after September 30, 1999,
which authorizes expenditures out of the Environmental Remediation Trust
Fund for purposes of carrying out provisions of CERCLA not described in
subsection (c)(1)(A), this section shall be applied as if such Fund
consisted of two accounts: a Superfund Account and a Leaking Underground
Storage Tank Account.
`(2) AMOUNTS IN ACCOUNTS-
`(A) LEAKING UNDERGROUND STORAGE TANK ACCOUNT- The Leaking Underground
Storage Tank Account--
`(i) shall consist of amounts which would have been appropriated or
credited to the Leaking Underground Storage Tank Trust Fund but for the
amendments made by section 1321 of the Taxpayer Refund and Relief Act of
1999, and
`(ii) shall be available, as provided in appropriation Acts, for the
purposes for which the Leaking Underground Storage Tank Trust Fund was
available (as in effect on the day before the date of the enactment of
such amendments).
`(B) SUPERFUND ACCOUNT- The Superfund Account--
`(i) shall consist of amounts which would have been appropriated or
credited to the Hazardous Substance Superfund but for such amendments,
and
`(ii) shall be available, as provided in appropriation Acts, for the
purposes for which the Hazardous Substance Superfund was available (as
so in effect).
`(A) LEAKING UNDERGROUND STORAGE TANK ACCOUNT- The balance in the
Leaking Underground Storage Tank Account as of the date of the enactment
of the Federal law referred to in paragraph (1) shall be the sum
of--
`(i) the amount which bears the same ratio to the balance in such
Trust Fund as of such date, bears to the sum of the balances (as of the
close of September 30, 1999) in Leaking Underground Storage Tank Trust
Fund and the Hazardous Substance Superfund, and
`(ii) the aggregate amount appropriated to the Environmental
Remediation Trust Fund after September 30, 1999, by reason of taxes
received in the Treasury.
`(B) SUPERFUND ACCOUNT- The balance in the Superfund Account as of the
date of the enactment of the Federal law referred to in paragraph (1)
shall be the excess of the balance in such Trust Fund as of such date over
the balance of the Leaking Underground Storage Tank Account determined
under subparagraph (A).
`(4) SPECIAL TRANSFER RULE- If the balance in the Environmental
Remediation Trust Fund as of the date of the enactment of the Federal law
referred to in paragraph (1) is less than the required balance for the
Leaking Underground Storage Tank Account, amounts otherwise required to be
deposited in the Superfund Account shall be reduced (to the extent of the
shortfall) and deposited into the Leaking Underground Storage Tank
Account.'.
(b) CONFORMING AMENDMENTS-
(1) Subsections (c) and (e) of section 4611 are each amended by striking
`Hazardous Substance Superfund' each place it appears and inserting
`Environmental Remediation Trust Fund'.
(2) Subsection (c) of section 4661 is amended by striking `Hazardous
Substance Superfund' and inserting `Environmental Remediation Trust
Fund'.
(3) Sections 4041(d), 4042(b), 4081(a)(2)(B), 4081(d)(3), 4091(b),
4092(b), 6421(f), and 6427(l) are each amended by striking `Leaking
Underground Storage Tank' each place it appears (other than the headings)
and inserting `Environmental Remediation'.
(4) The heading for subsection (d) of section 4041 is amended by
striking `LEAKING UNDERGROUND STORAGE TANK' and inserting `ENVIRONMENTAL
REMEDIATION'.
(5) The headings for subsections (a)(2)(B) and (d)(3) of section 4081
and section 4091(b)(2) are each amended by striking `LEAKING UNDERGROUND
STORAGE TANK' and inserting `ENVIRONMENTAL REMEDIATION'.
(c) EFFECTIVE DATE- The amendments made by this section shall take effect
on October 1, 1999.
(d) ENVIRONMENTAL REMEDIATION TRUST FUND TREATED AS CONTINUATION OF OLD
TRUST FUNDS- The Environmental Remediation Trust Fund established by the
amendments made by this section shall be treated for all purposes of law as a
continuation of both the Hazardous Substance Superfund and the Leaking
Underground Storage Tank Trust Fund. Any reference in any law to the Hazardous
Substance Superfund or the Leaking Underground Storage Tank Trust Fund shall
be deemed to include (wherever appropriate) a reference to the Environmental
Remediation Trust Fund established by such amendments.
SEC. 1322. REPEAL OF CERTAIN MOTOR FUEL EXCISE TAXES ON FUEL USED BY
RAILROADS AND ON INLAND WATERWAY TRANSPORTATION.
(a) REPEAL OF LEAKING UNDERGROUND STORAGE TANK TRUST FUND TAXES ON FUEL
USED IN TRAINS-
(1) IN GENERAL- Paragraph (1) of section 4041(d) is amended by adding at
the end the following new sentence: `The preceding sentence shall not apply
to any sale for use, or use, of fuel in a diesel-powered train.'.
(2) CONFORMING AMENDMENTS-
(A) Paragraph (3) of section 6421(f) is amended by striking `with
respect to--' and all that follows through `so much of' and inserting
`with respect to so much of'.
(B) Paragraph (3) of section 6427(l) is amended by striking `with
respect to--' and all that follows through `so much of' and inserting
`with respect to so much of'.
(b) REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND INLAND
WATERWAY TRANSPORTATION WHICH REMAIN IN GENERAL FUND-
(A) IN GENERAL- Subparagraph (A) of section 4041(a)(1) is amended by
striking `or a diesel-powered train' each place it appears and by striking
`or train'.
(B) CONFORMING AMENDMENTS-
(i) Subparagraph (C) of section 4041(a)(1) is amended by striking
clause (ii) and by redesignating clause (iii) as clause
(ii).
(ii) Subparagraph (C) of section 4041(b)(1) is amended by striking
all that follows `section 6421(e)(2)' and inserting a
period.
(iii) Paragraph (3) of section 4083(a) is amended by striking `or a
diesel-powered train'.
(iv) Section 6421(f) is amended by striking paragraph
(3).
(v) Section 6427(l) is amended by striking paragraph
(3).
(2) FUEL USED ON INLAND WATERWAYS-
(A) IN GENERAL- Paragraph (1) of section 4042(b) is amended by adding
`and' at the end of subparagraph (A), by striking `, and' at the end of
subparagraph (B) and inserting a period, and by striking subparagraph
(C).
(B) CONFORMING AMENDMENT- Paragraph (2) of section 4042(b) is amended
by striking subparagraph (C).
(c) EFFECTIVE DATE- The amendments made by this subsection shall take
effect on October 1, 1999 (October 1, 2003, in the case of the amendments made
by subsection (b)), but shall not take effect if section 1321 does not take
effect.
SEC. 1323. REPEAL OF EXCISE TAX ON FISHING TACKLE BOXES.
(a) REPEAL- Paragraph (6) of section 4162(a) (defining sport fishing
equipment) is amended by striking subparagraph (C) and by redesignating
subparagraphs (D) through (J) as subparagraphs (C) through (I),
respectively.
(b) MODIFICATION OF TRANSFER TO AQUATIC RESOURCES TRUST FUND- Section
9503(b)(4)(D) is amended--
(1) by striking `11.5 cents' in clause (i) and inserting `11.7
cents',
(2) by striking `13 cents' in clause (ii) and inserting `13.2 cents',
and
(3) by striking `13.5 cents' in clause (iii) and inserting `13.7
cents'.
(c) EFFECTIVE DATE- The amendments made by this section shall take effect
30 days after the date of the enactment of this Act.
SEC. 1324. CLARIFICATION OF EXCISE TAX IMPOSED ON ARROW COMPONENTS.
(a) IN GENERAL- Paragraph (2) of section 4161(b) (relating to bows and
arrows, etc.) is amended to read as follows:
`(A) IN GENERAL- There is hereby imposed on the sale by the
manufacturer, producer, or importer of any shaft, point, article used to
attach a point to a shaft, nock, or vane of a type used in the manufacture
of any arrow which after its assembly--
`(i) measures 18 inches overall or more in length, or
`(ii) measures less than 18 inches overall in length but is suitable
for use with a bow described in paragraph (1)(A),
a tax equal to 12.4 percent of the price for which so sold.
`(B) REDUCED RATE ON CERTAIN HUNTING POINTS- Subparagraph (A) shall be
applied by substituting `11 percent' for `12.4 percent' in the case of a
point which is designed primarily for use in hunting fish or large
animals.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
articles sold by the manufacturer, producer, or importer after the close of
the first calendar month ending more than 30 days after the date of the
enactment of this Act.
SEC. 1325. EXEMPTION FROM TICKET TAXES FOR CERTAIN TRANSPORTATION PROVIDED
BY SMALL SEAPLANES.
(a) IN GENERAL- Section 4281 (relating to small aircraft on nonestablished
lines) is amended to read as follows:
`SEC. 4281. SMALL AIRCRAFT.
`The taxes imposed by sections 4261 and 4271 shall not apply to--
`(1) transportation by an aircraft having a maximum certificated takeoff
weight of 6,000 pounds or less, except when such aircraft is operated on an
established line, and
`(2) transportation by a seaplane having a maximum certificated takeoff
weight of 6,000 pounds or less with respect to any segment consisting of a
takeoff from, and a landing on, water.
For purposes of the preceding sentence, the term `maximum certificated
takeoff weight' means the maximum such weight contained in the type
certificate or airworthiness certificate.'.
(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter C
of chapter 33 is amended by striking `on nonestablished lines' in the item
relating to section 4281.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
amounts paid for transportation beginning after December 31, 1999, but shall
not apply to any amount paid on or before such date with respect to taxes
imposed by sections 4261 and 4271 of the Internal Revenue Code of 1986.
SEC. 1326. MODIFICATION OF RURAL AIRPORT DEFINITION.
(a) IN GENERAL- Clause (ii) of section 4261(e)(1)(B) (defining rural
airport) is amended by striking the period at the end of subclause (II) and
inserting `, or', and by adding at the end the following new subclause:
`(III) is not connected by paved roads to another
airport.'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
calendar years beginning after 1999.
Subtitle D--Other Provisions
SEC. 1331. TAX-EXEMPT FINANCING OF QUALIFIED HIGHWAY INFRASTRUCTURE
CONSTRUCTION.
(a) TREATMENT AS EXEMPT FACILITY BOND- A bond described in subsection (b)
shall be treated as described in section 141(e)(1)(A) of the Internal Revenue
Code of 1986, except that--
(1) section 146 of such Code shall not apply to such bond, and
(2) section 147(c)(1) of such Code shall be applied by substituting `any
portion of' for `25 percent or more'.
(1) IN GENERAL- A bond is described in this subsection if such bond is
issued after December 31, 1999, as part of an issue--
(A) 95 percent or more of the net proceeds of which are to be used to
provide a qualified highway infrastructure project, and
(B) to which there has been allocated a portion of the allocation to
the project under paragraph (2)(C)(ii) which is equal to the aggregate
face amount of bonds to be issued as part of such issue.
(2) QUALIFIED HIGHWAY INFRASTRUCTURE PROJECTS-
(A) IN GENERAL- For purposes of paragraph (1), the term `qualified
highway infrastructure project' means a project--
(i) for the construction or reconstruction of a highway,
and
(ii) designated under subparagraph (B) as an eligible pilot
project.
(B) ELIGIBLE PILOT PROJECT-
(i) IN GENERAL- The Secretary of Transportation, in consultation
with the Secretary of the Treasury, shall select not more than 15
highway infrastructure projects to be pilot projects eligible for
tax-exempt financing.
(ii) ELIGIBILITY CRITERIA- In determining the criteria necessary for
the eligibility of pilot projects, the Secretary of Transportation shall
include the following:
(I) The project must serve the general public.
(II) The project is necessary to evaluate the potential of the
private sector's participation in the provision of the highway
infrastructure of the United States.
(III) The project must be located on publicly-owned
rights-of-way.
(IV) The project must be publicly owned or the ownership of the
highway constructed or reconstructed under the project must revert to
the public.
(V) The project must be consistent with a transportation plan
developed pursuant to section 134(g) or 135(e) of title 23, United
States Code.
(C) AGGREGATE FACE AMOUNT OF TAX-EXEMPT FINANCING-
(i) IN GENERAL- The aggregate face amount of bonds issued pursuant
to this section shall not exceed $15,000,000,000, determined without
regard to any bond the proceeds of which are used exclusively to refund
(other than to advance refund) a bond issued pursuant to this section
(or a bond which is a part of a series of refundings of a bond so
issued) if the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond.
(ii) ALLOCATION- The Secretary of Transportation, in consultation
with the Secretary of the Treasury, shall allocate the amount described
in clause (i) among the eligible pilot projects designated under
subparagraph (B).
(iii) REALLOCATION- If any portion of an allocation under clause
(ii) is unused on the date which is 3 years after such allocation, the
Secretary of Transportation, in consultation with the Secretary of the
Treasury, may reallocate such portion among the remaining eligible pilot
projects.
SEC. 1332. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.
(a) IN GENERAL- Subpart A of part I of subchapter J of chapter 1 (relating
to general rules for taxation of trusts and estates) is amended by adding at
the end the following new section:
`SEC. 646. ELECTING ALASKA NATIVE SETTLEMENT TRUSTS.
`(a) IN GENERAL- Except as otherwise provided in this section, the
provisions of this subchapter and section 1(e) shall apply to all Settlement
Trusts.
`(b) BENEFICIARIES OF ELECTING TRUST NOT TAXED ON CONTRIBUTIONS-
`(1) IN GENERAL- In the case of a Settlement Trust for which an election
under paragraph (2) is in effect for any taxable year, no amount shall be
includible in the gross income of a beneficiary of the Settlement Trust by
reason of a contribution to the Settlement Trust made during such taxable
year.
`(A) IN GENERAL- A Settlement Trust may elect to have the provisions
of this section apply to the trust and its beneficiaries.
`(B) TIME AND METHOD OF ELECTION- An election under subparagraph (A)
shall be made--
`(i) on or before the due date (including extensions) for filing the
Settlement Trust's return of tax for the first taxable year of the
Settlement Trust ending after December 31, 1999, and
`(ii) by attaching to such return of tax a statement specifically
providing for such election.
`(C) PERIOD ELECTION IN EFFECT- Except as provided in paragraph (3),
an election under subparagraph (A)--
`(i) shall apply to the first taxable year described in subparagraph
(B)(i) and all subsequent taxable years, and
`(ii) may not be revoked once it is made.
`(c) SPECIAL RULES WHERE TRANSFER RESTRICTIONS MODIFIED-
`(1) TRANSFER OF BENEFICIAL INTERESTS- If, at any time, a beneficial
interest in a Settlement Trust may be disposed of to a person in a manner
which would not be permitted by section 7(h) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1606(h)) if the interest were Settlement Common
Stock--
`(A) no election may be made under subsection (b)(2) with respect to
such trust, and
`(B) if such an election is in effect as of such time, such election
shall cease to apply for purposes of subsection (b)(1) as of the first day
of the taxable year following the taxable year in which such disposition
is first permitted.
`(2) STOCK IN CORPORATION- If--
`(A) the Settlement Common Stock in any Native Corporation which
transferred assets to a Settlement Trust making an election under
subsection (b)(2) may be disposed of to a person in a manner not permitted
by section 7(h) of the Alaska Native Claims Settlement Act (43 U.S.C.
1606(h)), and
`(B) at any time after such disposition of stock is first permitted,
such corporation transfers assets to such trust,
subparagraph (B) of paragraph (1) shall be applied to such trust on and
after the date of the transfer in the same manner as if the trust permitted
dispositions of beneficial interests in the trust in a manner not permitted
by such section 7(h).
`(c) TAX TREATMENT OF DISTRIBUTIONS TO BENEFICIARIES-
`(1) IN GENERAL- In the case of a Settlement Trust for which an election
under subsection (b)(2) is in effect for any taxable year, any distribution
to a beneficiary shall be included in gross income of the beneficiary as
ordinary income to the extent such distribution reduces the earnings and
profits of any Native Corporation making a contribution to such Trust.
`(2) EARNINGS AND PROFITS- The earnings and profits of any Native
Corporation making a contribution to a Settlement Trust shall not be reduced
on account thereof at the time of such contribution, but such earnings and
profits shall be reduced (up to the amount of such contribution) as
distributions are thereafter made by the Settlement Trust which exceed the
sum of--
`(A) such Trust's total undistributed net income for all prior years
during which an election under subsection (b)(2) is in effect,
and
`(B) such Trust's distributable net income.
`(d) DEFINITIONS- For purposes of this section--
`(1) NATIVE CORPORATION- The term `Native Corporation' has the meaning
given such term by section 3(m) of the Alaska Native Claims Settlement Act
(43 U.S.C. 1602(m)).
`(2) SETTLEMENT TRUST- The term `Settlement Trust' means a trust which
constitutes a Settlement Trust under section 39 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1629e).'.
(b) WITHHOLDING ON DISTRIBUTIONS BY ELECTING ANCSA SETTLEMENT TRUSTS-
Section 3402 is amended by adding at the end the following new subsection:
`(t) TAX WITHHOLDING ON DISTRIBUTIONS BY ELECTING ANCSA SETTLEMENT
TRUSTS-
`(1) IN GENERAL- Any Settlement Trust (as defined in section 646(d)) for
which an election under section 646(b)(2) is in effect (in this subsection
referred to as an `electing trust') and which makes a payment to any
beneficiary which is includable in gross income under section 646(c) shall
deduct and withhold from such payment a tax in an amount equal to such
payment's proportionate share of the annualized tax.
`(2) EXCEPTION- The tax imposed by paragraph (1) shall not apply to any
payment to the extent that such payment, when annualized, does not exceed an
amount equal to the amount in effect under section 6012(a)(1)(A)(i) for
taxable years beginning in the calendar year in which the payment is
made.
`(3) ANNUALIZED TAX- For purposes of paragraph (1), the term `annualized
tax' means, with respect to any payment, the amount of tax which would be
imposed by section 1(c) (determined without regard to any rate of tax in
excess of 31 percent) on an amount of taxable income equal to the excess
of--
`(A) the annualized amount of such payment, over
`(B) the amount determined under paragraph (2).
`(4) ANNUALIZATION- For purposes of this subsection, amounts shall be
annualized in the manner prescribed by the Secretary.
`(5) ALTERNATE WITHHOLDING PROCEDURES- At the election of an electing
trust, the tax imposed by this subsection on any payment made by such trust
shall be determined in accordance with such tables or computational
procedures as may be specified in regulations prescribed by the Secretary
(in lieu of in accordance with paragraphs (2) and (3)).
`(6) COORDINATION WITH OTHER SECTIONS- For purposes of this chapter and
so much of subtitle F as relates to this chapter, payments which are subject
to withholding under this subsection shall be treated as if they were wages
paid by an employer to an employee.'.
(c) REPORTING- Section 6041 is amended by adding at the end the following
new subsection:
`(f) APPLICATION TO ALASKA NATIVE SETTLEMENT TRUSTS- In the case of any
distribution from a Settlement Trust (as defined in section 646(d)) to a
beneficiary which is includable in gross income under section 646(c), this
section shall apply, except that--
`(1) this section shall apply to such distribution without regard to the
amount thereof,
`(2) the Settlement Trust shall include on any return or statement
required by this section information as to the character of such
distribution (if applicable) and the amount of tax imposed by chapter 1
which has been deducted and withheld from such distribution, and
`(3) the filing of any return or statement required by this section
shall satisfy any requirement to file any other form or schedule under this
title with respect to distributive share information (including any form or
schedule to be included with the trust's tax return).'.
(d) CLERICAL AMENDMENT- The table of sections for subpart A of part I of
subchapter J of chapter 1 is amended by adding at the end the following new
item:
`Sec. 646. Electing Alaska Native Settlement Trusts.'.
(e) EFFECTIVE DATE- The amendments made by this section shall apply to
taxable years of Settlement Trusts ending after December 31, 1999, and to
contributions to such trusts after such date.
SEC. 1333. INCREASE IN THRESHOLD FOR JOINT COMMITTEE REPORTS ON REFUNDS AND
CREDITS.
(a) GENERAL RULE- Subsections (a) and (b) of section 6405 are each amended
by striking `$1,000,000' and inserting `$2,000,000'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect
on the date of the enactment of this Act, except that such amendment shall not
apply with respect to any refund or credit with respect to a report that has
been made before such date of the enactment under section 6405 of the Internal
Revenue Code of 1986.
SEC. 1334. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE TO
CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING TEACHING HOSPITALS.
(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1
(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 40 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 (as in effect on the date of the enactment of this
section),
`(ii) the date on which a license for such product is issued under
section 351 of the Public Health Service Act (as so in effect),
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 (as so in
effect).
`(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 by, or affiliated with, an
institution of higher education (as defined 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.
`(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.'.
(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT-
(1) IN GENERAL- Section 38(b) (relating to current year business
credits) 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 the following:
`(13) the medical innovation expenses credit determined under section
41A(a).'.
(2) TRANSITION RULE- Section 39(d) is amended by adding at the end the
following new paragraph:
`(9) 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 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) (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 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. 1335. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES WITHOUT REDUCING
PATRONAGE DIVIDENDS.
(a) IN GENERAL- Subsection (a) of section 1388 (relating to patronage
dividend defined) is amended by adding at the end the following: `For purposes
of paragraph (3), net earnings shall not be reduced by amounts paid during the
year as dividends on capital stock or other proprietary capital interests of
the organization to the extent that the articles of incorporation or bylaws of
such organization or other contract with patrons provide that such dividends
are in addition to amounts otherwise payable to patrons which are derived from
business done with or for patrons during the taxable year.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
distributions in taxable years beginning after the date of the enactment of
this Act.
Subtitle E--Tax Court Provisions
SEC. 1341. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING
PETITION.
(a) IN GENERAL- Section 7451 (relating to fee for filing a Tax Court
petition) is amended by striking all that follows `petition' and inserting a
period.
(b) EFFECTIVE DATE- The amendment made by this section shall take effect
on the date of the enactment of this Act.
SEC. 1342. EXPANDED USE OF TAX COURT PRACTICE FEE.
Subsection (b) of section 7475 (relating to use of fees) is amended by
inserting before the period at the end `and to provide services to pro se
taxpayers'.
SEC. 1343. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF
EQUITABLE RECOUPMENT.
(a) CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF EQUITABLE
RECOUPMENT- Subsection (b) of section 6214 (relating to jurisdiction over
other years and quarters) is amended by adding at the end the following new
sentence: `Notwithstanding the preceding sentence, the Tax Court may apply the
doctrine of equitable recoupment to the same extent that it is available in
civil tax cases before the district courts of the United States and the United
States Court of Federal Claims.'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to any
action or proceeding in the Tax Court with respect to which a decision has not
become final (as determined under section 7481 of the Internal Revenue Code of
1986) as of the date of the enactment of this Act.
TITLE XIV--EXTENSIONS OF EXPIRING PROVISIONS
SEC. 1401. RESEARCH CREDIT.
(1) IN GENERAL- Paragraph (1) of section 41(h) (relating to termination)
is amended--
(A) by striking `June 30, 1999' and inserting `June 30, 2004',
and
(B) by striking the material following subparagraph (B).
(2) TECHNICAL AMENDMENT- Subparagraph (D) of section 45C(b)(1) is
amended by striking `June 30, 1999' and inserting `June 30, 2004'.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to amounts paid or incurred after June 30, 1999.
(b) INCREASE IN PERCENTAGES UNDER ALTERNATIVE INCREMENTAL CREDIT-
(1) IN GENERAL- Subparagraph (A) of section 41(c)(4) is amended--
(A) by striking `1.65 percent' and inserting `2.65 percent',
(B) by striking `2.2 percent' and inserting `3.2 percent',
and
(C) by striking `2.75 percent' and inserting `3.75 percent'.
(2) EFFECTIVE DATE- The amendments made by this subsection shall apply
to taxable years beginning after June 30, 1999.
SEC. 1402. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.
(a) IN GENERAL- Sections 953(e)(10) and 954(h)(9) are each amended--
(1) by striking `the first taxable year' and inserting `taxable years',
and
(2) by striking `January 1, 2000' and inserting `January 1, 2005'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 1403. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR MARGINAL
PRODUCTION.
(a) IN GENERAL- Subparagraph (H) of section 613A(c)(6) is amended by
striking `January 1, 2000' and inserting `January 1, 2005'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to
taxable years beginning after December 31, 1999.
SEC. 1404. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.
(a) TEMPORARY EXTENSION- Sections 51(c)(4)(B) and 51A(f) (relating to
termination) are each amended by striking `June 30, 1999' and inserting
`December 31, 2001'.
(b) CLARIFICATION OF FIRST YEAR OF EMPLOYMENT- Paragraph (2) of section
51(i) is amended by striking `during which he was not a member of a targeted
group'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
individuals who begin work for the employer after June 30, 1999.
SEC. 1405. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING ELECTRICITY
FROM CERTAIN RENEWABLE RESOURCES.
(a) EXTENSION AND MODIFICATION OF PLACED-IN-SERVICE RULES- Paragraph (3)
of section 45(c) is amended to read as follows:
`(A) WIND FACILITY- In the case of a facility using wind to produce
electricity, the term `qualified facility' means any facility owned by the
taxpayer which is originally placed in service after December 31, 1993,
and before July 1, 2003.
`(B) CLOSED-LOOP BIOMASS FACILITY- In the case of a facility using
closed-loop biomass to produce electricity, the term `qualified facility'
means any facility owned by the taxpayer which is originally placed in
service after December 31, 1992, and before July 1, 2003.
`(C) POULTRY WASTE FACILITY- In the case of a facility using poultry
waste to produce electricity, the term `qualified facility' means any
facility of the taxpayer which is originally placed in service after
December 31, 1999, and before July 1, 2003.'.
(b) EXPANSION OF QUALIFIED ENERGY RESOURCES-
(1) IN GENERAL- Section 45(c)(1) (defining 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 inserting `, and', and by adding
at the end the following new subparagraph:
(2) DEFINITION- Section 45(c) is amended by adding at the end the
following new paragraph:
`(4) POULTRY WASTE- The term `poultry waste' means poultry manure and
litter, including wood shavings, straw, rice hulls, and other bedding
material for the disposition of manure.'.
(c) SPECIAL RULES- Section 45(d) (relating to definitions and special
rules) is amended by adding at the end the following new paragraphs:
`(6) CREDIT ELIGIBILITY IN THE CASE OF GOVERNMENT-OWNED FACILITIES USING
POULTRY WASTE- In the case of a facility using poultry waste to produce
electricity and owned by a governmental unit, the person eligible for the
credit under subsection (a) is the lessor or the operator of such
facility.
`(7) 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 described in paragraph (3)(A)
which is 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.'.
(d) EFFECTIVE DATE- The amendments made by this section shall take effect
on the date of the enactment of this Act.
TITLE XV--REVENUE OFFSETS
SEC. 1501. RETURNS RELATING TO CANCELLATIONS OF INDEBTEDNESS BY
ORGANIZATIONS LENDING MONEY.
(a) IN GENERAL- Paragraph (2) of section 6050P(c) (relating to definitions
and special rules) is amended by striking `and' at the end of subparagraph
(B), by striking the period at the end of subparagraph (C) and inserting `,
and', and by inserting after subparagraph (C) the following new
subparagraph:
`(D) any organization a significant trade or business of which is the
lending of money.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
discharges of indebtedness after December 31, 1999.
SEC. 1502. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.
(a) IN GENERAL- Chapter 77 (relating to miscellaneous provisions) is
amended by adding at the end the following new section:
`SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.
`(a) GENERAL RULE- The Secretary shall establish a program requiring the
payment of user fees for--
`(1) requests to the Internal Revenue Service for ruling letters,
opinion letters, and determination letters, and
`(2) other similar requests.
`(1) IN GENERAL- The fees charged under the program required by
subsection (a)--
`(A) shall vary according to categories (or subcategories) established
by the Secretary,
`(B) shall be determined after taking into account the average time
for (and difficulty of) complying with requests in each category (and
subcategory), and
`(C) shall be payable in advance.
`(2) EXEMPTIONS, ETC- The Secretary shall provide for such exemptions
(and reduced fees) under such program as the Secretary determines to be
appropriate.
`(3) AVERAGE FEE REQUIREMENT- The average fee charged under the program
required by subsection (a) shall not be less than the amount determined
under the following table:
`Category:
Average Fee:
Employee plan ruling and opinion
$250
Exempt organization ruling
$350
Employee plan determination
$300
Exempt organization determination
$275
Chief counsel ruling
$200.
`(c) TERMINATION- No fee shall be imposed under this section with respect
to requests made after September 30, 2009.'.
(b) CONFORMING AMENDMENTS-
(1) The table of sections for chapter 77 is amended by adding at the end
the following new item:
`Sec. 7527. Internal Revenue Service user fees.'.
(2) Section 10511 of the Revenue Act of 1987 is repealed.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
requests made after the date of the enactment of this Act.
SEC. 1503. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10 OR MORE EMPLOYER
PLANS.
(a) BENEFITS TO WHICH EXCEPTION APPLIES- Section 419A(f)(6)(A) (relating
to exception for 10 or more employer plans) is amended to read as follows:
`(A) IN GENERAL- This subpart shall not apply to a welfare benefit
fund which is part of a 10 or more employer plan if the only benefits
provided through the fund are one or more of the following:
`(ii) Disability benefits.
`(iii) Group term life insurance benefits which do not provide
directly or indirectly for any cash surrender value or other money that
can be paid, assigned, borrowed, or pledged for collateral for a
loan.
The preceding sentence shall not apply to any plan which maintains
experience-rating arrangements with respect to individual
employers.'.
(b) LIMITATION ON USE OF AMOUNTS FOR OTHER PURPOSES- Section 4976(b)
(defining disqualified benefit) is amended by adding at the end the following
new paragraph:
`(5) SPECIAL RULE FOR 10 OR MORE EMPLOYER PLANS EXEMPTED FROM PREFUNDING
LIMITS- For purposes of paragraph (1)(C), if--
`(A) subpart D of part I of subchapter D of chapter 1 does not apply
by reason of section 419A(f)(6) to contributions to provide one or more
welfare benefits through a welfare benefit fund under a 10 or more
employer plan, and
`(B) any portion of the welfare benefit fund attributable to such
contributions is used for a purpose other than that for which the
contributions were made,
then such portion shall be treated as reverting to the benefit of the
employers maintaining the fund.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
contributions paid or accrued after June 9, 1999, in taxable years ending
after such date.
SEC. 1504. INCREASE IN ELECTIVE WITHHOLDING RATE FOR NONPERIODIC
DISTRIBUTIONS FROM DEFERRED COMPENSATION PLANS.
(a) IN GENERAL- Section 3405(b)(1) (relating to withholding) is amended by
striking `10 percent' and inserting `15 percent'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
distributions after December 31, 2000.
SEC. 1505. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.
(a) IN GENERAL- Subsection (a) of section 856 (relating to definition of
real estate investment trust) is amended by striking `and' at the end of
paragraph (6), by redesignating paragraph (7) as paragraph (8), and by
inserting after paragraph (6) the following new paragraph:
`(7) which is not a controlled entity (as defined in subsection (l));
and'.
(b) CONTROLLED ENTITY- Section 856 is amended by adding at the end the
following new subsection:
`(1) IN GENERAL- For purposes of subsection (a)(7), an entity is a
controlled entity if, at any time during the taxable year, one person (other
than a qualified entity)--
`(A) in the case of a corporation, owns stock--
`(i) possessing at least 50 percent of the total voting power of the
stock of such corporation, or
`(ii) having a value equal to at least 50 percent of the total value
of the stock of such corporation, or
`(B) in the case of a trust, owns beneficial interests in the trust
which would meet the requirements of subparagraph (A) if such interests
were stock.
`(2) QUALIFIED ENTITY- For purposes of paragraph (1), the term
`qualified entity' means--
`(A) any real estate investment trust, and
`(B) any partnership in which one real estate investment trust owns at
least 50 percent of the capital and profits interests in the
partnership.
`(3) ATTRIBUTION RULES- For purposes of this paragraphs (1) and
(2)--
`(A) IN GENERAL- Rules similar to the rules of subsections (d)(5) and
(h)(3) shall apply; except that section 318(a)(3)(C) shall not be applied
under such rules to treat stock owned by a qualified entity as being owned
by a person which is not a qualified entity.
`(B) STAPLED ENTITIES- A group of entities which are stapled entities
(as defined in section 269B(c)(2)) shall be treated as one
person.
`(4) EXCEPTION FOR CERTAIN NEW REITS-
`(A) IN GENERAL- The term `controlled entity' shall not include an
incubator REIT.
`(B) INCUBATOR REIT- A corporation shall be treated as an incubator
REIT for any taxable year during the eligibility period if it meets all
the following requirements for such year:
`(i) The corporation elects to be treated as an incubator
REIT.
`(ii) The corporation has only voting common stock
outstanding.
`(iii) Not more than 50 percent of the corporation's real estate
assets consist of mortgages.
`(iv) From not later than the beginning of the last half of the
second taxable year, at least 10 percent of the corporation's capital is
provided by lenders or equity investors who are unrelated to the
corporation's largest shareholder.
`(v) The corporation annually increases the value of its real estate
assets by at least 10 percent.
`(vi) The directors of the corporation adopt a resolution setting
forth an intent to engage in a going public transaction.
No election may be made with respect to any REIT if an election under
this subsection was in effect for any predecessor of such REIT.
`(i) IN GENERAL- The eligibility period (for which an incubator REIT
election can be made) begins with the REIT's second taxable year and
ends at the close of the REIT's third taxable year, except that the REIT
may, subject to clauses (ii), (iii), and (iv), elect to extend such
period for an additional 2 taxable years.
`(ii) GOING PUBLIC TRANSACTION- A REIT may not elect to extend the
eligibility period under clause (i) unless it enters into an agreement
with the Secretary that if it does not engage in a going public
transaction by the end of the extended eligibility period, it shall pay
Federal income taxes for the 2 years of the extended eligibility period
as if it had not made an incubator REIT election and had ceased to
qualify as a REIT for those 2 taxable years.
`(iii) RETURNS, INTEREST, AND NOTICE-
`(I) RETURNS- In the event the corporation ceases to be treated as
a REIT by operation of clause (ii), the corporation shall file any
appropriate amended returns reflecting the change in status within 3
months of the close of the extended eligibility period.
`(II) INTEREST- Interest shall be payable on any tax imposed by
reason of clause (ii) for any taxable year but, unless there was a
finding under subparagraph (D), no substantial underpayment penalties
shall be imposed.
`(III) NOTICE- The corporation shall, at the same time it files
its returns under subclause (I), notify its shareholders and any other
persons whose tax position is, or may reasonably be expected to be,
affected by the change in status so they also may file any appropriate
amended returns to conform their tax treatment consistent with the
corporation's loss of REIT status.
`(IV) REGULATIONS- The Secretary shall provide appropriate
regulations setting forth transferee liability and other provisions to
ensure collection of tax and the proper administration of this
provision.
`(iv) Clauses (ii) and (iii) shall not apply if the corporation
allows its incubator REIT status to lapse at the end of the initial
2-year eligibility period without engaging in a going public transaction
if the corporation is not a controlled entity as of the beginning of its
fourth taxable year. In such a case, the corporation's directors may
still be liable for the penalties described in subparagraph (D) during
the eligibility period.
`(D) SPECIAL PENALTIES- If the Secretary determines that an incubator
REIT election was filed for a principal purpose other than as part of a
reasonable plan to undertake a going public transaction, an excise tax of
$20,000 shall be imposed on each of the corporation's directors for each
taxable year for which an election was in effect.
`(E) GOING PUBLIC TRANSACTION- For purposes of this paragraph, a going
public transaction means--
`(i) a public offering of shares of the stock of the incubator
REIT;
`(ii) a transaction, or series of transactions, that results in the
stock of the incubator REIT being regularly traded on an established
securities market and that results in at least 50 percent of such stock
being held by shareholders who are unrelated to persons who held such
stock before it began to be so regularly traded; or
`(iii) any transaction resulting in ownership of the REIT by 200 or
more persons (excluding the largest single shareholder) who in the
aggregate own at least 50 percent of the stock of the REIT.
For the purposes of this subparagraph, the rules of paragraph (3)
shall apply in determining the ownership of stock.
`(F) DEFINITIONS- The term `established securities market' shall have
the meaning set forth in the regulations under section 897.'.
(c) CONFORMING AMENDMENT- Paragraph (2) of section 856(h) is amended by
striking `and (6)' each place it appears and inserting `, (6), and (7)'.
(1) IN GENERAL- The amendments made by this section shall apply to
taxable years ending after July 14, 1999.
(2) EXCEPTION FOR EXISTING CONTROLLED ENTITIES- The amendments made by
this section shall not apply to any entity which is a controlled entity (as
defined in section 856(l) of the Internal Revenue Code of 1986, as added by
this section) as of July 14, 1999, which is a real estate investment trust
for the taxable year which includes such date, and which has significant
business assets or activities as of such date. For purposes of the preceding
sentence, an entity shall be treated as such a controlled entity on July 14,
1999, if it becomes such an entity after such date in a transaction--
(A) made pursuant to a written agreement which was binding on such
date and at all times thereafter, or
(B) described on or before such date in a filing with the Securities
and Exchange Commission required solely by reason of the
transaction.
SEC. 1506. TREATMENT OF GAIN FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.
(a) IN GENERAL- Part IV of subchapter P of chapter 1 (relating to special
rules for determining capital gains and losses) is amended by inserting after
section 1259 the following new section:
`SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.
`(a) IN GENERAL- If the taxpayer has gain from a constructive ownership
transaction with respect to any financial asset and such gain would (without
regard to this section) be treated as a long-term capital gain--
`(1) such gain shall be treated as ordinary income to the extent that
such gain exceeds the net underlying long-term capital gain, and
`(2) to the extent such gain is treated as a long-term capital gain
after the application of paragraph (1), the determination of the capital
gain rate (or rates) applicable to such gain under section 1(h) shall be
determined on the basis of the respective rate (or rates) that would have
been applicable to the net underlying long-term capital gain.
`(b) INTEREST CHARGE ON DEFERRAL OF GAIN RECOGNITION-
`(1) IN GENERAL- If any gain is treated as ordinary income for any
taxable year by reason of subsection (a)(1), the tax imposed by this chapter
for such taxable year shall be increased by the amount of interest
determined under paragraph (2) with respect to each prior taxable year
during any portion of which the constructive ownership transaction was open.
Any amount payable under this paragraph shall be taken into account in
computing the amount of any deduction allowable to the taxpayer for interest
paid or accrued during such taxable year.
`(2) AMOUNT OF INTEREST- The amount of interest determined under this
paragraph with respect to a prior taxable year is the amount of interest
which would have been imposed under section 6601 on the underpayment of tax
for such year which would have resulted if the gain (which is treated as
ordinary income by reason of subsection (a)(1)) had been included in gross
income in the taxable years in which it accrued (determined by treating the
income as accruing at a constant rate equal to the applicable Federal rate
as in effect on the day the transaction closed). The period during which
such interest shall accrue shall end on the due date (without extensions)
for the return of tax imposed by this chapter for the taxable year in which
such transaction closed.
`(3) APPLICABLE FEDERAL RATE- For purposes of paragraph (2), the
applicable Federal rate is the applicable Federal rate determined under
1274(d) (compounded semiannually) which would apply to a debt instrument
with a term equal to the period the transaction was open.
`(4) NO CREDITS AGAINST INCREASE IN TAX- Any increase in tax under
paragraph (1) shall not be treated as tax imposed by this chapter for
purposes of determining--
`(A) the amount of any credit allowable under this chapter,
or
`(B) the amount of the tax imposed by section 55.
`(c) FINANCIAL ASSET- For purposes of this section--
`(1) IN GENERAL- The term `financial asset' means--
`(A) any equity interest in any pass-thru entity, and
`(B) to the extent provided in regulations--
`(i) any debt instrument, and
`(ii) any stock in a corporation which is not a pass-thru
entity.
`(2) PASS-THRU ENTITY- For purposes of paragraph (1), the term
`pass-thru entity' means--
`(A) a regulated investment company,
`(B) a real estate investment trust,
`(F) a common trust fund,
`(G) a passive foreign investment company (as defined in section 1297
without regard to subsection (e) thereof),
`(H) a foreign personal holding company,
`(I) a foreign investment company (as defined in section 1246(b)),
and
`(d) CONSTRUCTIVE OWNERSHIP TRANSACTION- For purposes of this section--
`(1) IN GENERAL- The taxpayer shall be treated as having entered into a
constructive ownership transaction with respect to any financial asset if
the taxpayer--
`(A) holds a long position under a notional principal contract with
respect to the financial asset,
`(B) enters into a forward or futures contract to acquire the
financial asset,
`(C) is the holder of a call option, and is the grantor of a put
option, with respect to the financial asset and such options have
substantially equal strike prices and substantially contemporaneous
maturity dates, or
`(D) to the extent provided in regulations prescribed by the
Secretary, enters into one or more other transactions (or acquires one or
more positions) that have substantially the same effect as a transaction
described in any of the preceding subparagraphs.
`(2) EXCEPTION FOR POSITIONS WHICH ARE MARKED TO MARKET- This section
shall not apply to any constructive ownership transaction if all of the
positions which are part of such transaction are marked to market under any
provision of this title or the regulations thereunder.
`(3) LONG POSITION UNDER NOTIONAL PRINCIPAL CONTRACT- A person shall be
treated as holding a long position under a notional principal contract with
respect to any financial asset if such person--
`(A) has the right to be paid (or receive credit for) all or
substantially all of the investment yield (including appreciation) on such
financial asset for a specified period, and
`(B) is obligated to reimburse (or provide credit for) all or
substantially all of any decline in the value of such financial
asset.
`(4) FORWARD CONTRACT- The term `forward contract' means any contract to
acquire in the future (or provide or receive credit for the future value of)
any financial asset.
`(e) NET UNDERLYING LONG-TERM CAPITAL GAIN- For purposes of this section,
in the case of any constructive ownership transaction with respect to any
financial asset, the term `net underlying long-term capital gain' means the
aggregate net capital gain that the taxpayer would have had if--
`(1) the financial asset had been acquired for fair market value on the
date such transaction was opened and sold for fair market value on the date
such transaction was closed, and
`(2) only gains and losses that would have resulted from the deemed
ownership under paragraph (1) were taken into account.
The amount of the net underlying long-term capital gain with respect to
any financial asset shall be treated as zero unless the amount thereof is
established by clear and convincing evidence.
`(f) SPECIAL RULE WHERE TAXPAYER TAKES DELIVERY- Except as provided in
regulations prescribed by the Secretary, if a constructive ownership
transaction is closed by reason of taking delivery, this section shall be
applied as if the taxpayer had sold all the contracts, options, or other
positions which are part of such transaction for fair market value on the
closing date. The amount of gain recognized under the preceding sentence shall
not exceed the amount of gain treated as ordinary income under subsection (a).
Proper adjustments shall be made in the amount of any gain or loss
subsequently realized for gain recognized and treated as ordinary income under
this subsection.
`(g) REGULATIONS- The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section, including
regulations--
`(1) to permit taxpayers to mark to market constructive ownership
transactions in lieu of applying this section, and
`(2) to exclude certain forward contracts which do not convey
substantially all of the economic return with respect to a financial
asset.'.
(b) CLERICAL AMENDMENT- The table of sections for part IV of subchapter P
of chapter 1 is amended by adding at the end the following new item:
`Sec. 1260. Gains from constructive ownership transactions.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
transactions entered into after July 11, 1999.
SEC. 1507. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR RETIREE HEALTH
BENEFITS.
(1) IN GENERAL- Paragraph (5) of section 420(b) (relating to expiration)
is amended by striking `in any taxable year beginning after December 31,
2000' and inserting `made after September 30, 2009'.
(2) CONFORMING AMENDMENTS-
(A) Section 101(e)(3) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1021(e)(3)) is amended by striking `1995' and inserting
`2001'.
(B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is amended by
striking `1995' and inserting `2001'.
(C) Paragraph (13) of section 408(b) of such Act (29 U.S.C.
1108(b)(13)) is amended--
(i) by striking `in a taxable year beginning before January 1, 2001'
and inserting `made before October 1, 2009', and
(ii) by striking `1995' and inserting `2001'.
(b) APPLICATION OF MINIMUM COST REQUIREMENTS-
(1) IN GENERAL- Paragraph (3) of section 420(c) is amended to read as
follows:
`(3) MINIMUM COST REQUIREMENTS-
`(A) IN GENERAL- The requirements of this paragraph are met if each
group health plan or arrangement under which applicable health benefits
are provided provides that the applicable employer cost for each taxable
year during the cost maintenance period shall not be less than the higher
of the applicable employer costs for each of the 2 taxable years
immediately preceding the taxable year of the qualified transfer.
`(B) APPLICABLE EMPLOYER COST- For purposes of this paragraph, the
term `applicable employer cost' means, with respect to any taxable year,
the amount determined by dividing--
`(i) the qualified current retiree health liabilities of the
employer for such taxable year determined--
`(I) without regard to any reduction under subsection (e)(1)(B),
and
`(II) in the case of a taxable year in which there was no
qualified transfer, in the same manner as if there had been such a
transfer at the end of the taxable year, by
`(ii) the number of individuals to whom coverage for applicable
health benefits was provided during such taxable year.
`(C) ELECTION TO COMPUTE COST SEPARATELY- An employer may elect to
have this paragraph applied separately with respect to individuals
eligible for benefits under title XVIII of the Social Security Act at any
time during the taxable year and with respect to individuals not so
eligible.
`(D) COST MAINTENANCE PERIOD- For purposes of this paragraph, the term
`cost maintenance period' means the period of 5 taxable years beginning
with the taxable year in which the qualified transfer occurs. If a taxable
year is in two or more overlapping cost maintenance periods, this
paragraph shall be applied by taking into account the highest applicable
employer cost required to be provided under subparagraph (A) for such
taxable year.'.
(2) CONFORMING AMENDMENTS-
(A) Clause (iii) of section 420(b)(1)(C) is amended by striking
`benefits' and inserting `cost'.
(B) Subparagraph (D) of section 420(e)(1) is amended by striking `and
shall not be subject to the minimum benefit requirements of subsection
(c)(3)' and inserting `or in calculating applicable employer cost under
subsection (c)(3)(B)'.
(1) IN GENERAL- The amendments made by this section shall apply to
qualified transfers occurring after the date of the enactment of this
Act.
(2) TRANSITION RULE- If the cost maintenance period for any qualified
transfer after the date of the enactment of this Act includes any portion of
a benefit maintenance period for any qualified transfer on or before such
date, the amendments made by subsection (b) shall not apply to such portion
of the cost maintenance period (and such portion shall be treated as a
benefit maintenance period).
SEC. 1508. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF INSTALLMENT
METHOD FOR ACCRUAL METHOD TAXPAYERS.
(a) REPEAL OF INSTALLMENT METHOD FOR ACCRUAL BASIS TAXPAYERS-
(1) IN GENERAL- Subsection (a) of section 453 (relating to installment
method) is amended to read as follows:
`(a) USE OF INSTALLMENT METHOD-
`(1) IN GENERAL- Except as otherwise provided in this section, income
from an installment sale shall be taken into account for purposes of this
title under the installment method.
`(2) ACCRUAL METHOD TAXPAYER- The installment method shall not apply to
income from an installment sale if such income would be reported under an
accrual method of accounting without regard to this section. The preceding
sentence shall not apply to a disposition described in subparagraph (A) or
(B) of subsection (l)(2).'.
(2) CONFORMING AMENDMENTS- Sections 453(d)(1), 453(i)(1), and 453(k) are
each amended by striking `(a)' each place it appears and inserting
`(a)(1)'.
(b) MODIFICATION OF PLEDGE RULES- Paragraph (4) of section 453A(d)
(relating to pledges, etc., of installment obligations) is amended by adding
at the end the following: `A payment shall be treated as directly secured by
an interest in an installment obligation to the extent an arrangement allows
the taxpayer to satisfy all or a portion of the indebtedness with the
installment obligation.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
sales or other dispositions occurring on or after the date of the enactment of
this Act.
SEC. 1509. LIMITATION ON USE OF NONACCRUAL EXPERIENCE METHOD OF
ACCOUNTING.
(a) IN GENERAL- Section 448(d)(5) (relating to special rule for services)
is amended--
(1) by inserting `in fields described in paragraph (2)(A)' after
`services by such person', and
(2) by inserting `CERTAIN PERSONAL' before `SERVICES' in the
heading.
(1) IN GENERAL- The amendments made by this section shall apply to
taxable years ending after the date of the enactment of this Act.
(2) CHANGE IN METHOD OF ACCOUNTING- In the case of any taxpayer required
by the amendments made by this section to change its method of accounting
for its first taxable year ending after the date of the enactment of this
Act--
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as made with the consent of the
Secretary of the Treasury, and
(C) the net amount of the adjustments required to be taken into
account by the taxpayer under section 481 of the Internal Revenue Code of
1986 shall be taken into account over a period (not greater than 4 taxable
years) beginning with such first taxable year.
SEC. 1510. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOWMENT
CONTRACTS.
(a) IN GENERAL- Subsection (f) of section 170 (relating to disallowance of
deduction in certain cases and special rules) is amended by adding at the end
the following new paragraph:
`(10) SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOWMENT
CONTRACTS-
`(A) IN GENERAL- Nothing in this section or in section 545(b)(2),
556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall be construed to allow a
deduction, and no deduction shall be allowed, for any transfer to or for
the use of an organization described in subsection (c) if in connection
with such transfer--
`(i) the organization directly or indirectly pays, or has previously
paid, any premium on any personal benefit contract with respect to the
transferor, or
`(ii) there is an understanding or expectation that any person will
directly or indirectly pay any premium on any personal benefit contract
with respect to the transferor.
`(B) PERSONAL BENEFIT CONTRACT- For purposes of subparagraph (A), the
term `personal benefit contract' means, with respect to the transferor,
any life insurance, annuity, or endowment contract if any direct or
indirect beneficiary under such contract is the transferor, any member of
the transferor's family, or any other person (other than an organization
described in subsection (c)) designated by the transferor.
`(C) APPLICATION TO CHARITABLE REMAINDER TRUSTS- In the case of a
transfer to a trust referred to in subparagraph (E), references in
subparagraphs (A) and (F) to an organization described in subsection (c)
shall be treated as a reference to such trust.
`(D) EXCEPTION FOR CERTAIN ANNUITY CONTRACTS- If, in connection with a
transfer to or for the use of an organization described in subsection (c),
such organization incurs an obligation to pay a charitable gift annuity
(as defined in section 501(m)) and such organization purchases any annuity
contract to fund such obligation, persons receiving payments under the
charitable gift annuity shall not be treated for purposes of subparagraph
(B) as indirect beneficiaries under such contract if--
`(i) such organization possesses all of the incidents of ownership
under such contract,
`(ii) such organization is entitled to all the payments under such
contract, and
`(iii) the timing and amount of payments under such contract are
substantially the same as the timing and amount of payments to each such
person under such obligation (as such obligation is in effect at the
time of such transfer).
`(E) EXCEPTION FOR CERTAIN CONTRACTS HELD BY CHARITABLE REMAINDER
TRUSTS- A person shall not be treated for purposes of subparagraph (B) as
an indirect beneficiary under any life insurance, annuity, or endowment
contract held by a charitable remainder annuity trust or a charitable
remainder unitrust (as defined in section 664(d)) solely by reason of
being entitled to any payment referred to in paragraph (1)(A) or (2)(A) of
section 664(d) if--
`(i) such trust possesses all of the incidents of ownership under
such contract, and
`(ii) such trust is entitled to all the payments under such
contract.
`(F) EXCISE TAX ON PREMIUMS PAID-
`(i) IN GENERAL- There is hereby imposed on any organization
described in subsection (c) an excise tax equal to the premiums paid by
such organization on any life insurance, annuity, or endowment contract
if the payment of premiums on such contract is in connection with a
transfer for which a deduction is not allowable under subparagraph (A),
determined without regard to when such transfer is made.
`(ii) PAYMENTS BY OTHER PERSONS- For purposes of clause (i),
payments made by any other person pursuant to an understanding or
expectation referred to in subparagraph (A) shall be treated as made by
the organization.
`(iii) REPORTING- Any organization on which tax is imposed by clause
(i) with respect to any premium shall file an annual return which
includes--
`(I) the amount of such premiums paid during the year and the name
and TIN of each beneficiary under the contract to which the premium
relates, and
`(II) such other information as the Secretary may
require.
The penalties applicable to returns required under section 6033
shall apply to returns required under this clause. Returns required
under this clause shall be furnished at such time and in such manner as
the Secretary shall by forms or regulations require.
`(iv) CERTAIN RULES TO APPLY- The tax imposed by this subparagraph
shall be treated as imposed by chapter 42 for purposes of this title
other than subchapter B of chapter 42.
`(G) SPECIAL RULE WHERE STATE REQUIRES SPECIFICATION OF CHARITABLE
GIFT ANNUITANT IN CONTRACT- In the case of an obligation to pay a
charitable gift annuity referred to in subparagraph (D) which is entered
into under the laws of a State which requires, in order for the charitable
gift annuity to be exempt from insurance regulation by such State, that
each beneficiary under the charitable gift annuity be named as a
beneficiary under an annuity contract issued by an insurance company
authorized to transact business in such State, the requirements of clauses
(i) and (ii) of subparagraph (D) shall be treated as met if--
`(i) such State law requirement was in effect on February 8,
1999,
`(ii) each such beneficiary under the charitable gift annuity is a
bona fide resident of such State at the time the obligation to pay a
charitable gift annuity is entered into, and
`(iii) the only persons entitled to payments under such contract are
persons entitled to payments as beneficiaries under such obligation on
the date such obligation is entered into.
`(H) MEMBER OF FAMILY- For purposes of this paragraph, an individual's
family consists of the individual's grandparents, the grandparents of such
individual's spouse, the lineal descendants of such grandparents, and any
spouse of such a lineal descendant.
`(I) REGULATIONS- The Secretary shall prescribe such regulations as
may be necessary or appropriate to carry out the purposes of this
paragraph, including regulations to prevent the avoidance of such
purposes.'.
(1) IN GENERAL- Except as otherwise provided in this section, the
amendment made by this section shall apply to transfers made after February
8, 1999.
(2) EXCISE TAX- Except as provided in paragraph (3) of this subsection,
section 170(f)(10)(F) of the Internal Revenue Code of 1986 (as added by this
section) shall apply to premiums paid after the date of the enactment of
this Act.
(3) REPORTING- Clause (iii) of such section 170(f)(10)(F) shall apply to
premiums paid after February 8, 1999 (determined as if the tax imposed by
such section applies to premiums paid after such date).
SEC. 1511. RESTRICTION ON USE OF REAL ESTATE INVESTMENT TRUSTS TO AVOID
ESTIMATED TAX PAYMENT REQUIREMENTS.
(a) IN GENERAL- Subsection (e) of section 6655 (relating to estimated tax
by corporations) is amended by adding at the end the following new
paragraph:
`(5) TREATMENT OF CERTAIN REIT DIVIDENDS-
`(A) IN GENERAL- Any dividend received from a closely held real estate
investment trust by any person which owns (after application of
subsections (d)(5) and (l)(3)(B) of section 856) 10 percent or more (by
vote or value) of the stock or beneficial interests in the trust shall be
taken into account in computing annualized income installments under
paragraph (2) in a manner similar to the manner under which partnership
income inclusions are taken into account.
`(B) CLOSELY HELD REIT- For purposes of subparagraph (A), the term
`closely held real estate investment trust' means a real estate investment
trust with respect to which five or fewer persons own (after application
of subsections (d)(5) and (l)(3)(B) of section 856) 50 percent or more (by
vote or value) of the stock or beneficial interests in the
trust.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to
estimated tax payments due on or after September 15, 1999.
SEC. 1512. MODIFICATION OF ANTI-ABUSE RULES RELATED TO ASSUMPTION OF
LIABILITY.
(a) IN GENERAL- Section 357(b)(1) (relating to tax avoidance purpose) is
amended--
(1) by striking `the principal purpose' and inserting `a principal
purpose', and
(2) by striking `on the exchange' in subparagraph (A).
(b) EFFECTIVE DATE- The amendments made by this section shall apply to
assumptions of liability after July 14, 1999.
SEC. 1513. ALLOCATION OF BASIS ON TRANSFERS OF INTANGIBLES IN CERTAIN
NONRECOGNITION TRANSACTIONS.
(a) TRANSFERS TO CORPORATIONS- Section 351 (relating to transfer to
corporation controlled by transferor) is amended by redesignating subsection
(h) as subsection (i) and by inserting after subsection (g) the following new
subsection:
`(h) TREATMENT OF TRANSFERS OF INTANGIBLE PROPERTY-
`(1) TRANSFERS OF LESS THAN ALL SUBSTANTIAL RIGHTS.
`(A) IN GENERAL- A transfer of an interest in intangible property (as
defined in section 936(h)(3)(B)) shall be treated under this section as a
transfer of property even if the transfer is of less than all of the
substantial rights of the transferor in the property.
`(B) ALLOCATION OF BASIS- In the case of a transfer of less than all
of the substantial rights of the transferor in the intangible property,
the transferor's basis immediately before the transfer shall be allocated
among the rights retained by the transferor and the rights transferred on
the basis of their respective fair market values.
`(2) NONRECOGNITION NOT TO APPLY TO INTANGIBLE PROPERTY DEVELOPED FOR
TRANSFEREE- This section shall not apply to a transfer of intangible
property developed by the transferor or any related person if such
development was pursuant to an arrangement with the transferee.'.
(b) TRANSFERS TO PARTNERSHIPS- Subsection (d) of section 721 is amended to
read as follows:
`(d) TRANSFERS OF INTANGIBLE PROPERTY-
`(1) IN GENERAL- Rules similar to the rules of section 351(h) shall
apply for purposes of this section.
`(2) TRANSFERS TO FOREIGN PARTNERSHIPS- For regulatory authority to
treat intangibles transferred to a partnership as sold, see section
367(d)(3).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to
transfers on or after the date of the enactment of this Act.
SEC. 1514. DISTRIBUTIONS TO A CORPORATE PARTNER OF STOCK IN ANOTHER
CORPORATION.
(a) IN GENERAL- Section 732 (relating to basis of distributed property
other than money) is amended by adding at the end the following new
subsection:
`(f) CORRESPONDING ADJUSTMENT TO BASIS OF ASSETS OF A DISTRIBUTED
CORPORATION CONTROLLED BY A CORPORATE PARTNER-
`(A) a corporation (hereafter in this subsection referred to as the
`corporate partner') receives a distribution from a partnership of stock
in another corporation (hereafter in this subsection referred to as the
`distributed corporation'),
`(B) the corporate partner has control of the distributed corporation
immediately after the distribution or at any time thereafter, and
`(C) the partnership's adjusted basis in such stock immediately before
the distribution exceeded the corporate partner's adjusted basis in such
stock immediately after the distribution,
then an amount equal to such excess shall be applied to reduce (in
accordance with subsection (c)) the basis of property held by the
distributed corporation at such time (or, if the corporate partner does not
control the distributed corporation at such time, at the time the corporate
partner first has such control).
`(2) EXCEPTION FOR CERTAIN DISTRIBUTIONS BEFORE CONTROL ACQUIRED-
Paragraph (1) shall not apply to any distribution of stock in the
distributed corporation if--
`(A) the corporate partner does not have control of such corporation
immediately after such distribution, and
`(B) the corporate partner establishes to the satisfaction of the
Secretary that such distribution was not part of a plan or arrangement to
acquire control of the distributed corporation.
`(3) LIMITATIONS ON BASIS REDUCTION-
`(A) IN GENERAL- The amount of the reduction under paragraph (1) shall
not exceed the amount by which the sum of the aggregate adjusted bases of
the property and the amount of money of the distributed corporation
exceeds the corporate partner's adjusted basis in the stock of the
distributed corporation.
`(B) REDUCTION NOT TO EXCEED ADJUSTED BASIS OF PROPERTY- No reduction
under paragraph (1) in the basis of any property shall exceed the adjusted
basis of such property (determined without regard to such
reduction).
`(4) GAIN RECOGNITION WHERE REDUCTION LIMITED- If the amount of any
reduction under paragraph (1) (determined after the application of paragraph
(3)(A)) exceeds the aggregate adjusted bases of the property of the
distributed corporation--
`(A) such excess shall be recognized by the corporate partner as
long-term capital gain, and
`(B) the corporate partner's adjusted basis in the stock of the
distributed corporation shall be increased by such excess.
`(5) CONTROL- For purposes of this subsection, the term `control' means
ownership of stock meeting the requirements of section 1504(a)(2).
`(6) INDIRECT DISTRIBUTIONS- For purposes of paragraph (1), if a
corporation acquires (other than in a distribution from a partnership) stock
the basis of which is determined (by reason of being distributed from a
partnership) in whole or in part by reference to subsection (a)(2) or (b),
the corporation shall be treated as receiving a distribution of such stock
from a partnership.
`(7) SPECIAL RULE FOR STOCK IN CONTROLLED CORPORATION- If the property
held by a distributed corporation is stock in a corporation which the
distributed corporation controls, this subsection shall be applied to reduce
the basis of the property of such controlled corporation. This subsection
shall be reapplied to any property of any controlled corporation which is
stock in a corporation which it controls.
`(8) REGULATIONS- The Secretary shall prescribe such regulations as may
be necessary to carry out the purposes of this subsection, including
regulations to avoid double counting and to prevent the abuse of such
purposes.'.
(1) IN GENERAL- Except as provided in paragraph (2), the amendment made
by this section shall apply to distributions made after July 14, 1999.
(2) PARTNERSHIPS IN EXISTENCE ON JULY 14, 1999- In the case of a
corporation which is a partner in a partnership as of July 14, 1999, the
amendment made by this section shall apply to distributions made to such
partner from such partnership after the date of the enactment of this
Act.
SEC. 1515. PROHIBITED ALLOCATIONS OF S CORPORATION STOCK HELD BY AN
ESOP.
(a) IN GENERAL- Section 409 (relating to qualifications for tax credit
employee stock ownership plans) is amended by redesignating subsection (p) as
subsection (q) and by inserting after subsection (o) the following new
subsection:
`(p) PROHIBITED ALLOCATION OF SECURITIES IN AN S CORPORATION-
`(1) IN GENERAL- An employee stock ownership plan holding employer
securities consisting of stock in an S corporation shall provide that no
portion of the assets of the plan attributable to (or allocable in lieu of)
such employer securities may, during a nonallocation year, accrue (or be
allocated directly or indirectly under any plan of the employer meeting the
requirements of section 401(a)) for the benefit of any disqualified
individual.
`(2) FAILURE TO MEET REQUIREMENTS- If a plan fails to meet the
requirements of paragraph (1)--
`(A) the plan shall be treated as having distributed to any
disqualified individual the amount allocated to the account of such
individual in violation of paragraph (1) at the time of such
allocation,
`(B) the provisions of section 4979A shall apply, and
`(C) the statutory period for the assessment of any tax imposed by
section 4979A shall not expire before the date which is 3 years from the
later of--
`(i) the allocation of employer securities resulting in the failure
under paragraph (1) giving rise to such tax, or
`(ii) the date on which the Secretary is notified of such
failure.
`(3) NONALLOCATION YEAR- For purposes of this subsection--
`(A) IN GENERAL- The term `nonallocation year' means any plan year of
an employee stock ownership plan if, at any time during such plan
year--
`(i) such plan holds employer securities consisting of stock in an S
corporation, and
`(ii) disqualified individuals own at least 50 percent of the number
of outstanding shares of stock in such S corporation.
`(B) ATTRIBUTION RULES- For purposes of subparagraph (A)--
`(i) IN GENERAL- The rules of section 318(a) shall apply for
purposes of determining ownership, except that--
`(I) in applying paragraph (1) thereof, the members of an
individual's family shall include members of the family described in
paragraph (4)(D), and
`(II) paragraph (4) thereof shall not apply.
`(ii) DEEMED-OWNED SHARES- Notwithstanding the employee trust
exception in section 318(a)(2)(B)(i), disqualified individuals shall be
treated as owning deemed-owned shares.
`(4) DISQUALIFIED INDIVIDUAL- For purposes of this subsection--
`(A) IN GENERAL- The term `disqualified individual' means any
individual who is a participant or beneficiary under the employee stock
ownership plan if--
`(i) the aggregate number of deemed-owned shares of such individual
and the members of the individual's family is at least 20 percent of the
number of outstanding shares of stock in the S corporation constituting
employer securities of such plan, or
`(ii) if such individual is not described in clause (i), the number
of deemed-owned shares of such individual is at least 10 percent of the
number of outstanding shares of stock in such corporation.
`(B) TREATMENT OF FAMILY MEMBERS- In the case of a disqualified
individual described in subparagraph (A)(i), any member of the
individual's family with deemed-owned shares shall be treated as a
disqualified individual if not otherwise a disqualified individual under
subparagraph (A).
`(C) DEEMED-OWNED SHARES- For purposes of this paragraph--
`(i) IN GENERAL- The term `deemed-owned shares' means, with respect
to any participant or beneficiary under the employee stock ownership
plan--
`(I) the stock in the S corporation constituting employer
securities of such plan which is allocated to such participant or
beneficiary under the plan, and
`(II) such participant's or beneficiary's share of the stock in
such corporation which is held by such trust but which is not
allocated under the plan to employees.
`(ii) INDIVIDUAL'S SHARE OF UNALLOCATED STOCK- For purposes of
clause (i)(II), an individual's share of unallocated S corporation stock
held by the trust is the amount of the unallocated stock which would be
allocated to such individual if the unallocated stock were allocated to
individuals in the same proportions as the most recent stock allocation
under the plan.
`(D) MEMBER OF FAMILY- For purposes of this paragraph, the term
`member of the family' means, with respect to any individual--
`(i) the spouse of the individual,
`(ii) an ancestor or lineal descendant of the individual or the
individual's spouse,
`(iii) a brother or sister of the individual or the individual's
spouse and any lineal descendant of the brother or sister,
and
`(iv) the spouse of any person described in clause (ii) or
(iii).
`(5) DEFINITIONS- For purposes of this subsection--
`(A) EMPLOYEE STOCK OWNERSHIP PLAN- The term `employee stock ownership
plan' has the meaning given such term by section 4975(e)(7).
`(B) EMPLOYER SECURITIES- The term `employer security' has the meaning
given such term by section 409(l).
`(6) REGULATIONS- The Secretary shall prescribe such regulations as may
be necessary to carry out the purposes of this subsection, including
regulations providing for the treatment of any stock option, restricted
stock, stock appreciation right, phantom stock unit, performance unit, or
similar instrument granted by an S corporation as stock or not
stock.'.
(1) IN GENERAL- Section 4979A(b) (defining prohibited allocation) is
amended by striking `and' at the end of paragraph (1), by striking the
period at the end of paragraph (2) and inserting `, and', and by adding at
the end the following new paragraph:
`(3) any allocation of employer securities which violates the provisions
of section 409(p).'.
(2) LIABILITY- Section 4979A(c) (defining liability for tax) is amended
by adding at the end the following new sentence: `In the case of a
prohibited allocation described in subsection (b)(3), such tax shall be paid
by the S corporation the stock in which was allocated in violation of
section 409(p).'.
(1) IN GENERAL- The amendments made by this section shall apply to plan
years beginning after December 31, 2000.
(2) EXCEPTION FOR CERTAIN PLANS- In the case of any--
(A) employee stock ownership plan established after July 14, 1999,
or
(B) employee stock ownership plan established on or before such date
if employer securities held by the plan consist of stock in a corporation
with respect to which an election under section 1362(a) of the Internal
Revenue Code of 1986 is not in effect on such date,
the amendments made by this section shall apply to plan years ending
after July 14, 1999.
TITLE XVI--COMPLIANCE WITH BUDGET ACT
SEC. 1601. COMPLIANCE WITH BUDGET ACT.
(a) IN GENERAL- Except as provided in subsection (b), all provisions of,
and amendments made by, this Act which are in effect on September 30, 2009,
shall cease to apply as of the close of September 30, 2009.
(b) SUNSET FOR CERTAIN PROVISIONS- The amendments made by sections 101,
111, 121, 201, 202, 211, 214, and 1221 of this Act shall not apply to any
taxable year beginning after December 31, 2008.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
END