Calendar No. 124

106TH CONGRESS

1ST SESSION S. 1134

[Report No. 106–54]

A BILL

To amend the Internal Revenue Code of 1986 to

counts, and for other purposes.imum annual amount of contributions to such acsecondary school expenses, to increase the maxvidual retirement accounts for elementary andallow tax-free expenditures from education indiMAY 26, 1999

Read twice and placed on the calendar
II

Calendar No. 124

106TH CONGRESS

1ST SESSION S. 1134

[Report No. 106–54]

To amend the Internal Revenue Code of 1986 to allow tax-free expenditures

from education individual retirement accounts for elementary and secondary school expenses, to increase the maximum annual amount of

contributions to such accounts, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 26, 1999

Mr. ROTH, from the Committee on Finance, reported the following original

bill; which was read twice and placed on the calendar

A BILL

To amend the Internal Revenue Code of 1986 to allow taxfree expenditures from education individual retirement

accounts for elementary and secondary school expenses,

to increase the maximum annual amount of contributions

to such accounts, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;

2 TABLE OF CONTENTS.

3 (a) SHORT TITLE.—This Act may be cited as the

4 ‘‘Affordable Education Act of 1999’’.

5 (b) AMENDMENT OF 1986 CODE.—Except as other6 wise expressly provided, whenever in this Act an amend7 ment or repeal is expressed in terms of an amendment

8 to, or repeal of, a section or other provision, the reference

9 shall be considered to be made to a section or other provi10 sion of the Internal Revenue Code of 1986.

11 (c) TABLE OF CONTENTS.—The table of contents for

12 this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I—EDUCATION SAVINGS INCENTIVES

Sec. 101. Modifications to education individual retirement accounts.

Sec. 102. Modifications to qualified tuition programs.

TITLE II—EDUCATIONAL ASSISTANCE

Sec. 201. Extension of exclusion for employer-provided educational assistance.

Sec. 202. Elimination of 60-month limit on student loan interest deduction.

Sec. 203. Exclusion of certain amounts received under the National Public

Health Service Corps Scholarship Program and the F. Edward

He ́bert Armed Forces Health Professions Scholarship and Financial Assistance Program.

TITLE III—LIBERALIZATION OF TAX-EXEMPT FINANCING RULES

FOR PUBLIC SCHOOL CONSTRUCTION

Sec. 301. Additional increase in arbitrage rebate exception for governmental

bonds used to finance educational facilities.

Sec. 302. Treatment of qualified public educational facility bonds as exempt facility bonds.

Sec. 303. Federal guarantee of school construction bonds by Federal Housing

Finance Board.

TITLE IV—REVENUE PROVISIONS

Sec. 401. Modification to foreign tax credit carryback and carryover periods.

Sec. 402. Limitation on use of non-accrual experience method of accounting.
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Sec. 403. Returns relating to cancellations of indebtedness by organizations

lending money.

Sec. 404. Extension of Internal Revenue Service user fees.

Sec. 405. Property subject to a liability treated in same manner as assumption

of liability.

Sec. 406. Charitable split-dollar life insurance, annuity, and endowment contracts.

Sec. 407. Transfer of excess defined benefit plan assets for retiree health benefits.

Sec. 408. Limitations on welfare benefit funds of 10 or more employer plans.

Sec. 409. Modification of installment method and repeal of installment method

for accrual method taxpayers.

Sec. 410. Inclusion of certain vaccines against streptococcus pneumoniae to list

of taxable vaccines.

1 TITLE I—EDUCATION SAVINGS

2 INCENTIVES

3 SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RE4 TIREMENT ACCOUNTS.

5 (a) MAXIMUM ANNUAL CONTRIBUTIONS.—

6 (1) IN GENERAL.—Section 530(b)(1)(A)(iii)

7 (defining education individual retirement account) is

8 amended by striking ‘‘$500’’ and inserting ‘‘the con9 tribution limit for such taxable year’’.

10 (2) CONTRIBUTION LIMIT.—Section 530(b) (re11 lating to definitions and special rules) is amended by

12 adding at the end the following new paragraph:

13 ‘‘(4) CONTRIBUTION LIMIT.—The term ‘con14 tribution limit’ means $500 ($2,000 in the case of

15 any taxable year beginning after December 31,

16 1999, and ending before January 1, 2004).’’

17 (3) CONFORMING AMENDMENT.—Section

18 4973(e)(1)(A) is amended by striking ‘‘$500’’ and
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1 inserting ‘‘the contribution limit (as defined in sec2 tion 530(b)(4)) for such taxable year’’.

3 (b) TAX-FREE EXPENDITURES FOR ELEMENTARY

4 AND SECONDARY SCHOOL EXPENSES.—

5 (1) IN GENERAL.—Section 530(b)(2) (defining

6 qualified higher education expenses) is amended to

7 read as follows:

8 ‘‘(2) QUALIFIED EDUCATION EXPENSES.—

9 ‘‘(A) IN GENERAL.—The term ‘qualified

10 education expenses’ means—

11 ‘‘(i) qualified higher education ex12 penses (as defined in section 529(e)(3)),

13 and

14 ‘‘(ii) qualified elementary and sec15 ondary education expenses (as defined in

16 paragraph (5)).

17 Such expenses shall be reduced as provided in

18 section 25A(g)(2).

19 ‘‘(B) QUALIFIED STATE TUITION PRO20 GRAMS.—Such term shall include any contribu21 tion to a qualified State tuition program (as de22 fined in section 529(b)) on behalf of the des23 ignated beneficiary (as defined in section

24 529(e)(1)); but there shall be no increase in the

25 investment in the contract for purposes of ap-
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1 plying section 72 by reason of any portion of

2 such contribution which is not includible in

3 gross income by reason of subsection (d)(2).’’

4 (2) QUALIFIED ELEMENTARY AND SECONDARY

5 EDUCATION EXPENSES.—Section 530(b) (relating to

6 definitions and special rules), as amended by sub7 section (a)(2), is amended by adding at the end the

8 following new paragraph:

9 ‘‘(5) QUALIFIED ELEMENTARY AND SECONDARY

10 EDUCATION EXPENSES.—

11 ‘‘(A) IN GENERAL.—The term ‘qualified el12 ementary and secondary education expenses’

13 means—

14 ‘‘(i) expenses for tuition, fees, aca15 demic tutoring, special needs services,

16 books, supplies, computer equipment (in17 cluding related software and services), and

18 other equipment which are incurred in con19 nection with the enrollment or attendance

20 of the designated beneficiary of the trust

21 as an elementary or secondary school stu22 dent at a public, private, or religious

23 school, and

24 ‘‘(ii) expenses for room and board,

25 uniforms, transportation, and supple-
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1 mentary items and services (including ex2 tended day programs) which are required

3 or provided by a public, private, or reli4 gious school in connection with such enroll5 ment or attendance.

6 ‘‘(B) SPECIAL RULE FOR

7 HOMESCHOOLING.—Such term shall include ex8 penses described in subparagraph (A)(i) in con9 nection with education provided by

10 homeschooling if the requirements of any appli11 cable State or local law are met with respect to

12 such education.

13 ‘‘(C) SCHOOL.—The term ‘school’ means

14 any school which provides elementary education

15 or secondary education (kindergarten through

16 grade 12), as determined under State law.’’

17 (3) SPECIAL RULES FOR APPLYING EXCLUSION

18 TO ELEMENTARY AND SECONDARY EXPENSES.—Sec19 tion 530(d)(2) (relating to distributions for qualified

20 higher education expenses) is amended by adding at

21 the end the following new subparagraph:

22 ‘‘(E) SPECIAL RULES FOR ELEMENTARY

23 AND SECONDARY EXPENSES.—

24 ‘‘(i) IN GENERAL.—The aggregate

25 amount of qualified elementary and sec-
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1 ondary education expenses taken into ac2 count for purposes of this paragraph with

3 respect to any education individual retire4 ment account for all taxable years shall not

5 exceed the sum of the aggregate contribu6 tions to such account for taxable years be7 ginning after December 31, 1999, and be8 fore January 1, 2004, and earnings on

9 such contributions.

10 ‘‘(ii) SPECIAL OPERATING RULES.—

11 For purposes of clause (i)—

12 ‘‘(I) the trustee of an education

13 individual retirement account shall

14 keep separate accounts with respect to

15 contributions and earnings described

16 in clause (i), and

17 ‘‘(II) if there are distributions in

18 excess of qualified elementary and sec19 ondary education expenses for any

20 taxable year, such excess distributions

21 shall be allocated first to contributions

22 and earnings not described in clause

23 (i).’’

24 (4) CONFORMING AMENDMENTS.—Section 530

25 is amended—
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1 (A) by striking ‘‘higher’’ each place it ap2 pears in subsections (b)(1) and (d)(2), and

3 (B) by striking ‘‘HIGHER’’ in the heading

4 for subsection (d)(2).

5 (c) WAIVER OF AGE LIMITATIONS FOR CHILDREN

6 WITH SPECIAL NEEDS.—Section 530(b)(1) (defining edu7 cation individual retirement account) is amended by add8 ing at the end the following flush sentence:

9 ‘‘The age limitations in the preceding sentence and

10 paragraphs (5) and (6) of subsection (d) shall not

11 apply to any designated beneficiary with special

12 needs (as determined under regulations prescribed

13 by the Secretary).’’

14 (d) ENTITIES PERMITTED TO CONTRIBUTE TO AC15 COUNTS.—Section 530(c)(1) (relating to reduction in per16 mitted contributions based on adjusted gross income) is

17 amended by striking ‘‘The maximum amount which a con18 tributor’’ and inserting ‘‘In the case of a contributor who

19 is an individual, the maximum amount the contributor’’.

20 (e) TIME WHEN CONTRIBUTIONS DEEMED MADE.—

21 (1) IN GENERAL.—Section 530(b) (relating to

22 definitions and special rules), as amended by sub23 section (b)(2), is amended by adding at the end the

24 following new paragraph:
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1 ‘‘(6) TIME WHEN CONTRIBUTIONS DEEMED

2 MADE.—An individual shall be deemed to have made

3 a contribution to an education individual retirement

4 account on the last day of the preceding taxable year

5 if the contribution is made on account of such tax6 able year and is made not later than the time pre7 scribed by law for filing the return for such taxable

8 year (not including extensions thereof).’’

9 (2) EXTENSION OF TIME TO RETURN EXCESS

10 CONTRIBUTIONS.—Subparagraph (C) of section

11 530(d)(4) (relating to additional tax for distribu12 tions not used for educational expenses) is

13 amended—

14 (A) by striking clause (i) and inserting the

15 following new clause:

16 ‘‘(i) such distribution is made before

17 the 1st day of the 6th month of the taxable

18 year following the taxable year, and’’, and

19 (B) by striking ‘‘DUE DATE OF RETURN’’

20 in the heading and inserting ‘‘JUNE’’.

21 (f) COORDINATION WITH HOPE AND LIFETIME

22 LEARNING CREDITS AND QUALIFIED TUITION PRO23 GRAMS.—

24 (1) IN GENERAL.—Section 530(d)(2)(C) is

25 amended to read as follows:
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1 ‘‘(C) COORDINATION WITH HOPE AND

2 LIFETIME LEARNING CREDITS AND QUALIFIED

3 TUITION PROGRAMS.—

4 ‘‘(i) CREDIT COORDINATION.—

5 ‘‘(I) IN GENERAL.—Except as

6 provided in subclause (II), subpara7 graph (A) shall not apply for any tax8 able year to any qualified higher edu9 cation expenses with respect to any

10 individual if a credit is allowed under

11 section 25A with respect to such ex12 penses for such taxable year.

13 ‘‘(II) SPECIAL COORDINATION

14 RULE.—In the case of any taxable

15 year beginning after December 31,

16 1999, and before January 1, 2004,

17 subclause (I) shall not apply, but the

18 total amount of qualified higher edu19 cation expenses otherwise taken into

20 account under subparagraph (A) with

21 respect to an individual for such tax22 able year shall be reduced (after the

23 application of the reduction provided

24 in section 25A(g)(2)) by the amount

25 of such expenses which were taken
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1 into account in determining the credit

2 allowed to the taxpayer or any other

3 person under section 25A with respect

4 to such expenses.

5 ‘‘(ii) COORDINATION WITH QUALIFIED

6 TUITION PROGRAMS.—If the aggregate dis7 tributions to which subparagraph (A) and

8 section 529(c)(3)(B) apply exceed the total

9 amount of qualified higher education ex10 penses otherwise taken into account under

11 subparagraph (A) (after the application of

12 clause (i)) with respect to an individual for

13 any taxable year, the taxpayer shall allo14 cate such expenses among such distribu15 tions for purposes of determining the

16 amount of the exclusion under subpara17 graph (A) and section 529(c)(3)(B).’’

18 (2) CONFORMING AMENDMENTS.—

19 (A) Subsection (e) of section 25A is

20 amended to read as follows:

21 ‘‘(e) ELECTION NOT TO HAVE SECTION APPLY.—A

22 taxpayer may elect not to have this section apply with re23 spect to the qualified tuition and related expenses of an

24 individual for any taxable year.’’
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1 (B) Section 135(d)(2)(A) is amended by

2 striking ‘‘allowable’’ and inserting ‘‘allowed’’.

3 (C) Section 530(b)(2)(A) is amended by

4 striking ‘‘, reduced as provided in section

5 25A(g)(2)’’.

6 (D) Section 530(d)(2)(D) is amended—

7 (i) by striking ‘‘or credit’’, and

8 (ii) by striking ‘‘CREDIT OR’’ in the

9 heading.

10 (E) Section 4973(e)(1) is amended by add11 ing ‘‘and’’ at the end of subparagraph (A), by

12 striking subparagraph (B), and by redesig13 nating subparagraph (C) as subparagraph (B).

14 (g) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to taxable years beginning after

16 December 31, 1999.

17 SEC. 102. MODIFICATIONS TO QUALIFIED TUITION PRO18 GRAMS.

19 (a) ELIGIBLE EDUCATIONAL INSTITUTIONS PER20 MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—

21 (1) IN GENERAL.—Section 529(b)(1) (defining

22 qualified State tuition program) is amended by in23 serting ‘‘or by 1 or more eligible educational institu24 tions’’ after ‘‘maintained by a State or agency or in25 strumentality thereof ’’.
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1 (2) PRIVATE QUALIFIED TUITION PROGRAMS

2 LIMITED TO BENEFIT PLANS.—Clause (ii) of section

3 529(b)(1)(A) is amended by inserting ‘‘in the case of

4 a program established and maintained by a State or

5 agency or instrumentality thereof,’’ before ‘‘may

6 make’’.

7 (3) CONFORMING AMENDMENTS.—

8 (A) Sections 72(e)(9), 135(c)(2)(C),

9 135(d)(1)(D), 529, 530(b)(2)(B), 4973(e), and

10 6693(a)(2)(C) are each amended by striking

11 ‘‘qualified State tuition’’ each place it appears

12 and inserting ‘‘qualified tuition’’.

13 (B) The headings for sections 72(e)(9) and

14 135(c)(2)(C) are each amended by striking

15 ‘‘QUALIFIED STATE TUITION’’ and inserting

16 ‘‘QUALIFIED TUITION’’.

17 (C) The headings for sections 529(b) and

18 530(b)(2)(B) are each amended by striking

19 ‘‘QUALIFIED STATE TUITION’’ and inserting

20 ‘‘QUALIFIED TUITION’’.

21 (D) The heading for section 529 is amend22 ed by striking ‘‘STATE’’.

23 (E) The item relating to section 529 in the

24 table of sections for part VIII of subchapter F

25 of chapter 1 is amended by striking ‘‘State’’.
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1 (b) EXCLUSION FROM GROSS INCOME OF EDU2 CATION DISTRIBUTIONS FROM QUALIFIED TUITION PRO3 GRAMS.—

4 (1) IN GENERAL.—Section 529(c)(3)(B) (relat5 ing to distributions) is amended to read as follows:

6 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED

7 HIGHER EDUCATION EXPENSES.—

8 ‘‘(i) IN GENERAL.—For purposes of

9 this paragraph—

10 ‘‘(I) no amount shall be includ11 ible in gross income under subpara12 graph (A) by reason of a distribution

13 which consists of providing a benefit

14 to the distributee which, if paid for by

15 the distributee, would constitute pay16 ment of a qualified higher education

17 expense, and

18 ‘‘(II) the amount which (deter19 mined without regard to subclause

20 (I)) would be includible in gross in21 come under subparagraph (A) by rea22 son of any other distribution shall not

23 be so includible in an amount which

24 bears the same ratio to the amount

25 which would be so includible as the
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1 qualified higher education expenses

2 bear to such aggregate distributions.

3 ‘‘(ii) NONAPPLICATION OF CLAUSE.—

4 In the case of any taxable year beginning

5 before January 1, 2004, clause (i) shall

6 not apply with respect to any distribution

7 in such taxable year under a qualified tui8 tion program established and maintained

9 by 1 or more eligible educational institu10 tions.

11 ‘‘(iii) IN-KIND DISTRIBUTIONS.—Any

12 benefit furnished to a designated bene13 ficiary under a qualified tuition program

14 shall be treated as a distribution to the

15 beneficiary for purposes of this paragraph.

16 ‘‘(iv) COORDINATION WITH HOPE AND

17 LIFETIME LEARNING CREDITS.—

18 ‘‘(I) IN GENERAL.—Except as

19 provided in subclause (II), clause (i)

20 shall not apply for any taxable year to

21 any qualified higher education ex22 penses with respect to any individual

23 if a credit is allowed under section

24 25A with respect to such expenses for

25 such taxable year.
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1 ‘‘(II) SPECIAL COORDINATION

2 RULE.—In the case of any taxable

3 year beginning after December 31,

4 1999, and before January 1, 2004,

5 subclause (I) shall not apply, but the

6 total amount of qualified higher edu7 cation expenses otherwise taken into

8 account under clause (i) with respect

9 to an individual for such taxable year

10 shall be reduced (after the application

11 of the reduction provided in section

12 25A(g)(2)) by the amount of such ex13 penses which were taken into account

14 in determining the credit allowed to

15 the taxpayer or any other person

16 under section 25A with respect to

17 such expenses.

18 ‘‘(v) COORDINATION WITH EDUCATION

19 IRAS.—If the aggregate distributions to

20 which clause (i) and section 530(d)(2)(A)

21 apply exceed the total amount of qualified

22 higher education expenses otherwise taken

23 into account under clause (i) (after the ap24 plication of clause (iv)) with respect to an

25 individual for any taxable year, the tax-
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1 payer shall allocate such expenses among

2 such distributions for purposes of deter3 mining the amount of the exclusion under

4 clause (i) and section 530(d)(2)(A).’’

5 (2) CONFORMING AMENDMENTS.—

6 (A) Section 135(d)(2)(B) is amended by

7 striking ‘‘section 530(d)(2)’’ and inserting ‘‘sec8 tions 529(c)(3)(B)(i) and 530(d)(2)’’.

9 (B) Section 221(e)(2)(A) is amended by

10 inserting ‘‘529,’’ after ‘‘135,’’.

11 (c) BENEFICIARY MAY CHANGE PROGRAM.—Section

12 529(c)(3)(C) (relating to change in beneficiaries) is

13 amended—

14 (1) by striking ‘‘transferred to the credit’’ in

15 clause (i) and inserting ‘‘transferred—

16 ‘‘(I) to another qualified tuition

17 program for the benefit of the des18 ignated beneficiary, or

19 ‘‘(II) to the credit’’,

20 (2) by adding at the end the following new

21 clause:

22 ‘‘(iii) LIMITATION ON CERTAIN ROLL23 OVERS.—Clause (i)(I) shall only apply to

24 the first 3 transfers with respect to a des25 ignated beneficiary.’’, and
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1 (3) by inserting ‘‘OR PROGRAMS’’ after ‘‘BENE2 FICIARIES’’ in the heading.

3 (d) MEMBER OF FAMILY INCLUDES FIRST COUS4 IN.—Section 529(e)(2) (defining member of family) is

5 amended by striking ‘‘and’’ at the end of subparagraph

6 (B), by striking the period at the end of subparagraph

7 (C) and by inserting ‘‘; and’’, and by adding at the end

8 the following new subparagraph:

9 ‘‘(D) any first cousin of such beneficiary.’’

10 (e) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years beginning after

12 December 31, 1999.

13 TITLE II—EDUCATIONAL

14 ASSISTANCE

15 SEC. 201. EXTENSION OF EXCLUSION FOR EMPLOYER-PRO16 VIDED EDUCATIONAL ASSISTANCE.

17 (a) IN GENERAL.—Section 127(d) (relating to termi18 nation of exclusion for educational assistance programs)

19 is amended by striking ‘‘May 31, 2000’’ and inserting

20 ‘‘June 30, 2004’’.

21 (b) REPEAL OF LIMITATION ON GRADUATE EDU22 CATION.—

23 (1) IN GENERAL.—The last sentence of section

24 127(c)(1) is amended by striking ‘‘, and such term

25 also does not include any payment for, or the provi-
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1 sion of any benefits with respect to, any graduate

2 level course of a kind normally taken by an indi3 vidual pursuing a program leading to a law, busi4 ness, medical, or other advanced academic or profes5 sional degree’’.

6 (2) EFFECTIVE DATE.—The amendment made

7 by paragraph (1) shall apply with respect to ex8 penses relating to courses beginning after December

9 31, 1999.

10 SEC. 202. ELIMINATION OF 60-MONTH LIMIT ON STUDENT

11 LOAN INTEREST DEDUCTION.

12 (a) IN GENERAL.—Section 221 (relating to interest

13 on education loans) is amended by striking subsection (d)

14 and by redesignating subsections (e), (f), and (g) as sub15 sections (d), (e), and (f), respectively.

16 (b) CONFORMING AMENDMENT.—Section 6050S(e)

17 is amended by striking ‘‘section 221(e)(1)’’ and inserting

18 ‘‘section 221(d)(1)’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply with respect to any loan interest

21 paid after December 31, 1999.
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1 SEC. 203. EXCLUSION OF CERTAIN AMOUNTS RECEIVED

2 UNDER THE NATIONAL PUBLIC HEALTH

3 SERVICE CORPS SCHOLARSHIP PROGRAM

4 AND THE F. EDWARD HEBERT ARMED

5 FORCES HEALTH PROFESSIONS SCHOLAR6 SHIP AND FINANCIAL ASSISTANCE PROGRAM.

7 (a) IN GENERAL.—Section 117(c) (relating to the ex8 clusion from gross income amounts received as a qualified

9 scholarship) is amended—

10 (1) by striking ‘‘Subsections (a)’’ and inserting

11 the following:

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), subsections (a)’’, and

14 (2) by adding at the end the following new

15 paragraph:

16 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not

17 apply to any amount received by an individual

18 under—

19 ‘‘(A) the National Public Health Service

20 Corps Scholarship Program under section

21 338A(g)(1)(A) of the Public Health Service

22 Act, or

23 ‘‘(B) the Armed Forces Health Professions

24 Scholarship and Financial Assistance program

25 under subchapter I of chapter 105 of title 10,

26 United States Code.’’
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply to amounts received in taxable

3 years beginning after December 31, 1993.

4 TITLE III—LIBERALIZATION OF

5 TAX-EXEMPT FINANCING

6 RULES FOR PUBLIC SCHOOL

7 CONSTRUCTION

8 SEC. 301. ADDITIONAL INCREASE IN ARBITRAGE REBATE

9 EXCEPTION FOR GOVERNMENTAL BONDS

10 USED TO FINANCE EDUCATIONAL FACILI11 TIES.

12 (a) IN GENERAL.—Section 148(f)(4)(D)(vii) (relat13 ing to increase in exception for bonds financing public

14 school capital expenditures) is amended by striking

15 ‘‘$5,000,000’’ the second place it appears and inserting

16 ‘‘$10,000,000’’.

17 (b) EFFECTIVE DATE.—The amendment made by

18 subsection (a) shall apply to obligations issued in calendar

19 years beginning after December 31, 1999.

20 SEC. 302. TREATMENT OF QUALIFIED PUBLIC EDU21 CATIONAL FACILITY BONDS AS EXEMPT FA22 CILITY BONDS.

23 (a) TREATMENT AS EXEMPT FACILITY BOND.—Sub24 section (a) of section 142 (relating to exempt facility

25 bond) is amended by striking ‘‘or’’ at the end of paragraph
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1 (11), by striking the period at the end of paragraph (12)

2 and inserting ‘‘, or’’, and by adding at the end the fol3 lowing new paragraph:

4 ‘‘(13) qualified public educational facilities.’’

5 (b) QUALIFIED PUBLIC EDUCATIONAL FACILI6 TIES.—Section 142 (relating to exempt facility bond) is

7 amended by adding at the end the following new sub8 section:

9 ‘‘(k) QUALIFIED PUBLIC EDUCATIONAL FACILI10 TIES.—

11 ‘‘(1) IN GENERAL.—For purposes of subsection

12 (a)(13), the term ‘qualified public educational facil13 ity’ means any school facility which is—

14 ‘‘(A) part of a public elementary school or

15 a public secondary school, and

16 ‘‘(B) owned by a private, for-profit cor17 poration pursuant to a public-private partner18 ship agreement with a State or local edu19 cational agency described in paragraph (2).

20 ‘‘(2) PUBLIC-PRIVATE PARTNERSHIP AGREE21 MENT DESCRIBED.—A public-private partnership

22 agreement is described in this paragraph if it is an

23 agreement—

24 ‘‘(A) under which the corporation agrees—
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1 ‘‘(i) to do 1 or more of the following:

2 construct, rehabilitate, refurbish, or equip

3 a school facility, and

4 ‘‘(ii) at the end of the term of the

5 agreement, to transfer the school facility to

6 such agency for no additional consider7 ation, and

8 ‘‘(B) the term of which does not exceed the

9 term of the issue to be used to provide the

10 school facility.

11 ‘‘(3) SCHOOL FACILITY.—For purposes of this

12 subsection, the term ‘school facility’ means—

13 ‘‘(A) school buildings,

14 ‘‘(B) functionally related and subordinate

15 facilities and land with respect to such build16 ings, including any stadium or other facility pri17 marily used for school events, and

18 ‘‘(C) any property, to which section 168

19 applies (or would apply but for section 179), for

20 use in the facility.

21 ‘‘(4) PUBLIC SCHOOLS.—For purposes of this

22 subsection, the terms ‘elementary school’ and ‘sec23 ondary school’ have the meanings given such terms

24 by section 14101 of the Elementary and Secondary
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1 Education Act of 1965 (20 U.S.C. 8801), as in ef2 fect on the date of the enactment of this subsection.

3 ‘‘(5) ANNUAL AGGREGATE FACE AMOUNT OF

4 TAX-EXEMPT FINANCING.—

5 ‘‘(A) IN GENERAL.—An issue shall not be

6 treated as an issue described in subsection

7 (a)(13) if the aggregate face amount of bonds

8 issued by the State pursuant thereto (when

9 added to the aggregate face amount of bonds

10 previously so issued during the calendar year)

11 exceeds an amount equal to the greater of—

12 ‘‘(i) $10 multiplied by the State popu13 lation, or

14 ‘‘(ii) $5,000,000.

15 ‘‘(B) ALLOCATION RULES.—

16 ‘‘(i) IN GENERAL.—Except as other17 wise provided in this subparagraph, the

18 State may allocate the amount described in

19 subparagraph (A) for any calendar year in

20 such manner as the State determines ap21 propriate.

22 ‘‘(ii) RULES FOR CARRYFORWARD OF

23 UNUSED LIMITATION.—A State may elect

24 to carry forward an unused limitation for

25 any calendar year for 3 calendar years fol-
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1 lowing the calendar year in which the un2 used limitation arose under rules similar to

3 the rules of section 146(f), except that the

4 only purpose for which the carryforward

5 may be elected is the issuance of exempt

6 facility bonds described in subsection

7 (a)(13).’’

8 (c) EXEMPTION FROM GENERAL STATE VOLUME

9 CAPS.—Paragraph (3) of section 146(g) (relating to ex10 ception for certain bonds) is amended—

11 (1) by striking ‘‘or (12)’’ and inserting ‘‘(12),

12 or (13)’’, and

13 (2) by striking ‘‘and environmental enhance14 ments of hydroelectric generating facilities’’ and in15 serting ‘‘environmental enhancements of hydro16 electric generating facilities, and qualified public

17 educational facilities’’.

18 (d) EXEMPTION FROM LIMITATION ON USE FOR

19 LAND ACQUISITION.—Section 147(h) (relating to certain

20 rules not to apply to mortgage revenue bonds, qualified

21 student loan bonds, and qualified 501(c)(3) bonds) is

22 amended by adding at the end the following new para23 graph:

24 ‘‘(3) EXEMPT FACILITY BONDS FOR QUALIFIED

25 PUBLIC-PRIVATE SCHOOLS.—Subsection (c) shall not
26

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1 apply to any exempt facility bond issued as part of

2 an issue described in section 142(a)(13) (relating to

3 qualified public educational facilities).’’

4 (e) CONFORMING AMENDMENT.—The heading for

5 section 147(h) is amended by striking ‘‘MORTGAGE REV6 ENUE BONDS, QUALIFIED STUDENT LOAN BONDS, AND

7 QUALIFIED 501(c)(3) BONDS’’ and inserting ‘‘CERTAIN

8 BONDS’’.

9 (f) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to bonds issued after December

11 31, 1999.

12 SEC. 303. FEDERAL GUARANTEE OF SCHOOL CONSTRUC13 TION BONDS BY FEDERAL HOUSING FINANCE

14 BOARD.

15 (a) IN GENERAL.—Section 149(b)(3) (relating to ex16 ceptions) is amended by adding at the end the following

17 new subparagraph:

18 ‘‘(E) CERTAIN GUARANTEED SCHOOL CON19 STRUCTION BONDS.—Any bond issued as part

20 of an issue 95 percent or more of the net pro21 ceeds of which are used for public school con22 struction shall not be treated as federally guar23 anteed for any calendar year by reason of any

24 guarantee by the Federal Housing Finance

25 Board (through any Federal Home Loan Bank)
27

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1 under the Federal Home Loan Bank Act (12

2 U.S.C. 1421 et seq.), as in effect on the date

3 of the enactment of this subparagraph, to the

4 extent the face amount of such bond, when

5 added to the aggregate face amount of such

6 bonds previously so guaranteed for such year,

7 does not exceed $500,000,000.’’

8 (b) EFFECTIVE DATE.—The amendment made by

9 this section shall apply to bonds issued after December

10 31, 1999.

11 TITLE IV—REVENUE

12 PROVISIONS

13 SEC. 401. MODIFICATION TO FOREIGN TAX CREDIT

14 CARRYBACK AND CARRYOVER PERIODS.

15 (a) IN GENERAL.—Section 904(c) (relating to limita16 tion on credit) is amended—

17 (1) by striking ‘‘in the second preceding taxable

18 year,’’, and

19 (2) by striking ‘‘or fifth’’ and inserting ‘‘fifth,

20 sixth, or seventh’’.

21 (b) EFFECTIVE DATE.—The amendment made by

22 subsection (a) shall apply to credits arising in taxable

23 years beginning after December 31, 2001.
28

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1 SEC. 402. LIMITATION ON USE OF NON-ACCRUAL EXPERI2 ENCE METHOD OF ACCOUNTING.

3 (a) IN GENERAL.—Section 448(d)(5) (relating to

4 special rule for services) is amended—

5 (1) by inserting ‘‘in fields described in para6 graph (2)(A)’’ after ‘‘services by such person’’, and

7 (2) by inserting ‘‘CERTAIN PERSONAL’’ before

8 ‘‘SERVICES’’ in the heading.

9 (b) EFFECTIVE DATE.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to taxable years ending after

12 the date of the enactment of this Act.

13 (2) CHANGE IN METHOD OF ACCOUNTING.—In

14 the case of any taxpayer required by the amend15 ments made by this section to change its method of

16 accounting for its first taxable year ending after the

17 date of the enactment of this Act—

18 (A) such change shall be treated as initi19 ated by the taxpayer,

20 (B) such change shall be treated as made

21 with the consent of the Secretary of the Treas22 ury, and

23 (C) the net amount of the adjustments re24 quired to be taken into account by the taxpayer

25 under section 481 of the Internal Revenue Code

26 of 1986 shall be taken into account over a pe-
29

•S 1134 PCS

1 riod (not greater than 4 taxable years) begin2 ning with such first taxable year.

3 SEC. 403. RETURNS RELATING TO CANCELLATIONS OF IN4 DEBTEDNESS BY ORGANIZATIONS LENDING

5 MONEY.

6 (a) IN GENERAL.—Paragraph (2) of section

7 6050P(c) (relating to definitions and special rules) is

8 amended by striking ‘‘and’’ at the end of subparagraph

9 (B), by striking the period at the end of subparagraph

10 (C) and inserting ‘‘, and’’, and by inserting after subpara11 graph (C) the following new subparagraph:

12 ‘‘(D) any organization a significant trade

13 or business of which is the lending of money.’’

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall apply to discharges of indebtedness

16 after December 31, 1999.

17 SEC. 404. EXTENSION OF INTERNAL REVENUE SERVICE

18 USER FEES.

19 (a) IN GENERAL.—Chapter 77 (relating to miscella20 neous provisions) is amended by adding at the end the

21 following new section:

22 ‘‘SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.

23 ‘‘(a) GENERAL RULE.—The Secretary shall establish

24 a program requiring the payment of user fees for—
30

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1 ‘‘(1) requests to the Internal Revenue Service

2 for ruling letters, opinion letters, and determination

3 letters, and

4 ‘‘(2) other similar requests.

5 ‘‘(b) PROGRAM CRITERIA.—

6 ‘‘(1) IN GENERAL.—The fees charged under the

7 program required by subsection (a)—

8 ‘‘(A) shall vary according to categories (or

9 subcategories) established by the Secretary,

10 ‘‘(B) shall be determined after taking into

11 account the average time for (and difficulty of)

12 complying with requests in each category (and

13 subcategory), and

14 ‘‘(C) shall be payable in advance.

15 ‘‘(2) EXEMPTIONS, ETC.—The Secretary shall

16 provide for such exemptions (and reduced fees)

17 under such program as the Secretary determines to

18 be appropriate.

19 ‘‘(3) AVERAGE FEE REQUIREMENT.—The aver20 age fee charged under the program required by sub21 section (a) shall not be less than the amount deter22 mined 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.
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1 ‘‘(c) TERMINATION.—No fee shall be imposed under

2 this section with respect to requests made after September

3 30, 2009.’’

4 (b) CONFORMING AMENDMENTS.—

5 (1) The table of sections for chapter 77 is

6 amended by adding at the end the following new

7 item:

‘‘Sec. 7527. Internal Revenue Service user fees.’’

8 (2) Section 10511 of the Revenue Act of 1987

9 is repealed.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to requests made after the date

12 of the enactment of this Act.

13 SEC. 405. PROPERTY SUBJECT TO A LIABILITY TREATED IN

14 SAME MANNER AS ASSUMPTION OF LIABIL15 ITY.

16 (a) REPEAL OF PROPERTY SUBJECT TO A LIABILITY

17 TEST.—

18 (1) SECTION 357.—Section 357(a)(2) (relating

19 to assumption of liability) is amended by striking ‘‘,

20 or acquires from the taxpayer property subject to a

21 liability’’.

22 (2) SECTION 358.—Section 358(d)(1) (relating

23 to assumption of liability) is amended by striking

24 ‘‘or acquired from the taxpayer property subject to

25 a liability’’.
32

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1 (3) SECTION 368.—

2 (A) Section 368(a)(1)(C) is amended by

3 striking ‘‘, or the fact that property acquired is

4 subject to a liability,’’.

5 (B) The last sentence of section

6 368(a)(2)(B) is amended by striking ‘‘, and the

7 amount of any liability to which any property

8 acquired from the acquiring corporation is sub9 ject,’’.

10 (b) CLARIFICATION OF ASSUMPTION OF LIABIL11 ITY.—

12 (1) IN GENERAL.—Section 357 is amended by

13 adding at the end the following new subsection:

14 ‘‘(d) DETERMINATION OF AMOUNT OF LIABILITY AS15 SUMED.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, section 358(d), section 362(d), section

18 368(a)(1)(C), and section 368(a)(2)(B), except as

19 provided in regulations—

20 ‘‘(A) a recourse liability (or portion there21 of) shall be treated as having been assumed if,

22 as determined on the basis of all facts and cir23 cumstances, the transferee has agreed to, and is

24 expected to, satisfy such liability (or portion),
33

•S 1134 PCS

1 whether or not the transferor has been relieved

2 of such liability, and

3 ‘‘(B) except to the extent provided in para4 graph (2), a nonrecourse liability shall be treat5 ed as having been assumed by the transferee of

6 any asset subject to such liability.

7 ‘‘(2) EXCEPTION FOR NONRECOURSE LIABIL8 ITY.—The amount of the nonrecourse liability treat9 ed as described in paragraph (1)(B) shall be reduced

10 by the lesser of—

11 ‘‘(A) the amount of such liability which an

12 owner of other assets not transferred to the

13 transferee and also subject to such liability has

14 agreed with the transferee to, and is expected

15 to, satisfy, or

16 ‘‘(B) the fair market value of such other

17 assets (determined without regard to section

18 7701(g)).

19 ‘‘(3) REGULATIONS.—The Secretary shall pre20 scribe such regulations as may be necessary to carry

21 out the purposes of this subsection and section

22 362(d). The Secretary may also prescribe regula23 tions which provide that the manner in which a li24 ability is treated as assumed under this subsection
34

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1 is applied, where appropriate, elsewhere in this

2 title.’’

3 (2) LIMITATION ON BASIS INCREASE ATTRIB4 UTABLE TO ASSUMPTION OF LIABILITY.—Section

5 362 is amended by adding at the end the following

6 new subsection:

7 ‘‘(d) LIMITATION ON BASIS INCREASE ATTRIB8 UTABLE TO ASSUMPTION OF LIABILITY.—

9 ‘‘(1) IN GENERAL.—In no event shall the basis

10 of any property be increased under subsection (a) or

11 (b) above the fair market value of such property (de12 termined without regard to section 7701(g)) by rea13 son of any gain recognized to the transferor as a re14 sult of the assumption of a liability.

15 ‘‘(2) TREATMENT OF GAIN NOT SUBJECT TO

16 TAX.—Except as provided in regulations, if—

17 ‘‘(A) gain is recognized to the transferor as

18 a result of an assumption of a nonrecourse li19 ability by a transferee which is also secured by

20 assets not transferred to such transferee, and

21 ‘‘(B) no person is subject to tax under this

22 title on such gain,

23 then, for purposes of determining basis under sub24 sections (a) and (b), the amount of gain recognized

25 by the transferor as a result of the assumption of
35

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1 the liability shall be determined as if the liability as2 sumed by the transferee equaled such transferee’s

3 ratable portion of such liability determined on the

4 basis of the relative fair market values (determined

5 without regard to section 7701(g)) of all of the as6 sets subject to such liability.’’

7 (c) APPLICATION TO PROVISIONS OTHER THAN SUB8 CHAPTER C.—

9 (1) SECTION 584.—Section 584(h)(3) is

10 amended—

11 (A) by striking ‘‘, and the fact that any

12 property transferred by the common trust fund

13 is subject to a liability,’’ in subparagraph (A),

14 and

15 (B) by striking clause (ii) of subparagraph

16 (B) and inserting:

17 ‘‘(ii) ASSUMED LIABILITIES.—For

18 purposes of clause (i), the term ‘assumed

19 liabilities’ means any liability of the com20 mon trust fund assumed by any regulated

21 investment company in connection with the

22 transfer referred to in paragraph (1)(A).

23 ‘‘(C) ASSUMPTION.—For purposes of this

24 paragraph, in determining the amount of any li-
36

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1 ability assumed, the rules of section 357(d)

2 shall apply.’’

3 (2) SECTION 1031.—The last sentence of section

4 1031(d) is amended—

5 (A) by striking ‘‘assumed a liability of the

6 taxpayer or acquired from the taxpayer prop7 erty subject to a liability’’ and inserting ‘‘as8 sumed (as determined under section 357(d)) a

9 liability of the taxpayer’’, and

10 (B) by striking ‘‘or acquisition (in the

11 amount of the liability)’’.

12 (d) CONFORMING AMENDMENTS.—

13 (1) Section 351(h)(1) is amended by striking ‘‘,

14 or acquires property subject to a liability,’’.

15 (2) Section 357 is amended by striking ‘‘or ac16 quisition’’ each place it appears in subsection (a) or

17 (b).

18 (3) Section 357(b)(1) is amended by striking

19 ‘‘or acquired’’.

20 (4) Section 357(c)(1) is amended by striking ‘‘,

21 plus the amount of the liabilities to which the prop22 erty is subject,’’.

23 (5) Section 357(c)(3) is amended by striking

24 ‘‘or to which the property transferred is subject’’.
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1 (6) Section 358(d)(1) is amended by striking

2 ‘‘or acquisition (in the amount of the liability)’’.

3 (e) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to transfers after October 19,

5 1998.

6 SEC. 406. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE,

7 ANNUITY, AND ENDOWMENT CONTRACTS.

8 (a) IN GENERAL.—Subsection (f) of section 170 (re9 lating to disallowance of deduction in certain cases and

10 special rules) is amended by adding at the end the fol11 lowing new paragraph:

12 ‘‘(10) SPLIT-DOLLAR LIFE INSURANCE, ANNU13 ITY, AND ENDOWMENT CONTRACTS.—

14 ‘‘(A) IN GENERAL.—Nothing in this sec15 tion or in section 545(b)(2), 556(b)(2), 642(c),

16 2055, 2106(a)(2), or 2522 shall be construed to

17 allow a deduction, and no deduction shall be al18 lowed, for any transfer to or for the use of an

19 organization described in subsection (c) if in

20 connection with such transfer—

21 ‘‘(i) the organization directly or indi22 rectly pays, or has previously paid, any

23 premium on any personal benefit contract

24 with respect to the transferor, or
38

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1 ‘‘(ii) there is an understanding or ex2 pectation that any person will directly or

3 indirectly pay any premium on any per4 sonal benefit contract with respect to the

5 transferor.

6 ‘‘(B) PERSONAL BENEFIT CONTRACT.—

7 For purposes of subparagraph (A), the term

8 ‘personal benefit contract’ means, with respect

9 to the transferor, any life insurance, annuity, or

10 endowment contract if any direct or indirect

11 beneficiary under such contract is the trans12 feror, any member of the transferor’s family, or

13 any other person (other than an organization

14 described in subsection (c)) designated by the

15 transferor.

16 ‘‘(C) APPLICATION TO CHARITABLE RE17 MAINDER TRUSTS.—In the case of a transfer to

18 a trust referred to in subparagraph (E), ref19 erences in subparagraphs (A) and (F) to an or20 ganization described in subsection (c) shall be

21 treated as a reference to such trust.

22 ‘‘(D) EXCEPTION FOR CERTAIN ANNUITY

23 CONTRACTS.—If, in connection with a transfer

24 to or for the use of an organization described

25 in subsection (c), such organization incurs an
39

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1 obligation to pay a charitable gift annuity (as

2 defined in section 501(m)) and such organiza3 tion purchases any annuity contract to fund

4 such obligation, persons receiving payments

5 under the charitable gift annuity shall not be

6 treated for purposes of subparagraph (B) as in7 direct beneficiaries under such contract if—

8 ‘‘(i) such organization possesses all of

9 the incidents of ownership under such con10 tract,

11 ‘‘(ii) such organization is entitled to

12 all the payments under such contract, and

13 ‘‘(iii) the timing and amount of pay14 ments under such contract are substan15 tially the same as the timing and amount

16 of payments to each such person under

17 such obligation (as such obligation is in ef18 fect at the time of such transfer).

19 ‘‘(E) EXCEPTION FOR CERTAIN CON20 TRACTS HELD BY CHARITABLE REMAINDER

21 TRUSTS.—A person shall not be treated for pur22 poses of subparagraph (B) as an indirect bene23 ficiary under any life insurance, annuity, or en24 dowment contract held by a charitable remain25 der annuity trust or a charitable remainder
40

•S 1134 PCS

1 unitrust (as defined in section 664(d)) solely by

2 reason of being entitled to any payment re3 ferred to in paragraph (1)(A) or (2)(A) of sec4 tion 664(d) if—

5 ‘‘(i) such trust possesses all of the in6 cidents of ownership under such contract,

7 and

8 ‘‘(ii) such trust is entitled to all the

9 payments under such contract.

10 ‘‘(F) EXCISE TAX ON PREMIUMS PAID.—

11 ‘‘(i) IN GENERAL.—There is hereby

12 imposed on any organization described in

13 subsection (c) an excise tax equal to the

14 premiums paid by such organization on

15 any life insurance, annuity, or endowment

16 contract if the payment of premiums on

17 such contract is in connection with a trans18 fer for which a deduction is not allowable

19 under subparagraph (A), determined with20 out regard to when such transfer is made.

21 ‘‘(ii) PAYMENTS BY OTHER PER22 SONS.—For purposes of clause (i), pay23 ments made by any other person pursuant

24 to an understanding or expectation re-
41

•S 1134 PCS

1 ferred to in subparagraph (A) shall be

2 treated as made by the organization.

3 ‘‘(iii) REPORTING.—Any organization

4 on which tax is imposed by clause (i) with

5 respect to any premium shall file an an6 nual return which includes—

7 ‘‘(I) the amount of such pre8 miums paid during the year and the

9 name and TIN of each beneficiary

10 under the contract to which the pre11 mium relates, and

12 ‘‘(II) such other information as

13 the Secretary may require.

14 The penalties applicable to returns re15 quired under section 6033 shall apply to

16 returns required under this clause. Returns

17 required under this clause shall be fur18 nished at such time and in such manner as

19 the Secretary shall by forms or regulations

20 require.

21 ‘‘(iv) CERTAIN RULES TO APPLY.—

22 The tax imposed by this subparagraph

23 shall be treated as imposed by chapter 42

24 for purposes of this title other than sub25 chapter B of chapter 42.
42

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1 ‘‘(G) SPECIAL RULE WHERE STATE RE2 QUIRES SPECIFICATION OF CHARITABLE GIFT

3 ANNUITANT IN CONTRACT.—In the case of an

4 obligation to pay a charitable gift annuity re5 ferred to in subparagraph (D) which is entered

6 into under the laws of a State which requires,

7 in order for the charitable gift annuity to be ex8 empt from insurance regulation by such State,

9 that each beneficiary under the charitable gift

10 annuity be named as a beneficiary under an an11 nuity contract issued by an insurance company

12 authorized to transact business in such State,

13 the requirements of clauses (i) and (ii) of sub14 paragraph (D) shall be treated as met if—

15 ‘‘(i) such State law requirement was

16 in effect on February 8, 1999,

17 ‘‘(ii) each such beneficiary under the

18 charitable gift annuity is a bona fide resi19 dent of such State at the time the obliga20 tion to pay a charitable gift annuity is en21 tered into, and

22 ‘‘(iii) the only persons entitled to pay23 ments under such contract are persons en24 titled to payments as beneficiaries under
43

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1 such obligation on the date such obligation

2 is entered into.

3 ‘‘(H) REGULATIONS.—The Secretary shall

4 prescribe such regulations as may be necessary

5 or appropriate to carry out the purposes of this

6 paragraph, including regulations to prevent the

7 avoidance of such purposes.’’

8 (b) EFFECTIVE DATE.—

9 (1) IN GENERAL.—Except as otherwise pro10 vided in this section, the amendment made by this

11 section shall apply to transfers made after February

12 8, 1999.

13 (2) EXCISE TAX.—Except as provided in para14 graph (3) of this subsection, section 170(f)(10)(F)

15 of the Internal Revenue Code of 1986 (as added by

16 this section) shall apply to premiums paid after the

17 date of the enactment of this Act.

18 (3) REPORTING.—Clause (iii) of such section

19 170(f)(10)(F) shall apply to premiums paid after

20 February 8, 1999 (determined as if the tax imposed

21 by such section applies to premiums paid after such

22 date).

23 SEC. 407. TRANSFER OF EXCESS DEFINED BENEFIT PLAN

24 ASSETS FOR RETIREE HEALTH BENEFITS.

25 (a) EXTENSION.—
44

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1 (1) IN GENERAL.—Section 420(b)(5) (relating

2 to expiration) is amended by striking ‘‘in any tax3 able year beginning after December 31, 2000’’ and

4 inserting ‘‘made after September 30, 2009’’.

5 (2) CONFORMING AMENDMENTS.—

6 (A) Section 101(e)(3) of the Employee Re7 tirement Income Security Act of 1974 (29

8 U.S.C. 1021(e)(3)) is amended by striking

9 ‘‘1995’’ and inserting ‘‘2001’’.

10 (B) Section 403(c)(1) of such Act (29 U.S.C.

11 1103(c)(1)) is amended by striking ‘‘1995’’ and in12 serting ‘‘2001’’.

13 (C) Paragraph (13) of section 408(b) of such

14 Act (29 U.S.C. 1108(b)(13)) is amended—

15 (i) by striking ‘‘in a taxable year beginning

16 before January 1, 2001’’ and inserting ‘‘made

17 before October 1, 2009’’, and

18 (ii) by striking ‘‘1995’’ and inserting

19 ‘‘2001’’.

20 (b) APPLICATION OF MINIMUM COST REQUIRE21 MENTS.—

22 (1) IN GENERAL.—Section 420(c)(3) is amend23 ed to read as follows:

24 ‘‘(3) MINIMUM COST REQUIREMENTS.—
45

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1 ‘‘(A) IN GENERAL.—The requirements of

2 this paragraph are met if each group health

3 plan or arrangement under which applicable

4 health benefits are provided provides that the

5 applicable employer cost for each taxable year

6 during the cost maintenance period shall not be

7 less than the higher of the applicable employer

8 costs for each of the 2 taxable years imme9 diately preceding the taxable year of the quali10 fied transfer.

11 ‘‘(B) APPLICABLE EMPLOYER COST.—For

12 purposes of this paragraph, the term ‘applicable

13 employer cost’ means, with respect to any tax14 able year, the amount determined by dividing—

15 ‘‘(i) the qualified current retiree

16 health liabilities of the employer for such

17 taxable year determined—

18 ‘‘(I) without regard to any reduc19 tion under subsection (e)(1)(B), and

20 ‘‘(II) in the case of a taxable

21 year in which there was no qualified

22 transfer, in the same manner as if

23 there had been such a transfer at the

24 end of the taxable year, by
46

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1 ‘‘(ii) the number of individuals to

2 whom coverage for applicable health bene3 fits was provided during such taxable year.

4 ‘‘(C) ELECTION TO COMPUTE COST SEPA5 RATELY.—An employer may elect to have this

6 paragraph applied separately with respect to in7 dividuals eligible for benefits under title XVIII

8 of the Social Security Act at any time during

9 the taxable year and with respect to individuals

10 not so eligible.

11 ‘‘(D) COST MAINTENANCE PERIOD.—For

12 purposes of this paragraph, the term ‘cost

13 maintenance period’ means the period of 5 tax14 able years beginning with the taxable year in

15 which the qualified transfer occurs. If a taxable

16 year is in 2 or more overlapping cost mainte17 nance periods, this paragraph shall be applied

18 by taking into account the highest applicable

19 employer cost required to be provided under

20 subparagraph (A) for such taxable year.’’

21 (2) CONFORMING AMENDMENTS.—

22 (A) Section 420(b)(1)(C)(iii) is amended

23 by striking ‘‘benefits’’ and inserting ‘‘cost’’.

24 (B) Section 420(e)(1)(D) is amended by

25 striking ‘‘and shall not be subject to the min-
47

•S 1134 PCS

1 imum benefit requirements of subsection

2 (c)(3)’’ and inserting ‘‘or in calculating applica3 ble employer cost under subsection (c)(3)(B)’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to qualified transfers occurring

6 after December 31, 2000, and before October 1, 2009.

7 SEC. 408. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10

8 OR MORE EMPLOYER PLANS.

9 (a) BENEFITS TO WHICH EXCEPTION APPLIES.—

10 Section 419A(f)(6)(A) (relating to exception for 10 or

11 more employer plans) is amended to read as follows:

12 ‘‘(A) IN GENERAL.—This subpart shall not

13 apply to a welfare benefit fund which is part of

14 a 10 or more employer plan if the only benefits

15 provided through the fund are 1 or more of the

16 following:

17 ‘‘(i) Medical benefits.

18 ‘‘(ii) Disability benefits.

19 ‘‘(iii) Group term life insurance bene20 fits which do not provide for any cash sur21 render value or other money that can be

22 paid, assigned, borrowed, or pledged for

23 collateral for a loan.
48

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1 The preceding sentence shall not apply to any

2 plan which maintains experience-rating arrange3 ments with respect to individual employers.’’

4 (b) LIMITATION ON USE OF AMOUNTS FOR OTHER

5 PURPOSES.—Section 4976(b) (defining disqualified ben6 efit) is amended by adding at the end the following new

7 paragraph:

8 ‘‘(5) SPECIAL RULE FOR 10 OR MORE EM9 PLOYER PLANS EXEMPTED FROM PREFUNDING LIM10 ITS.—For purposes of paragraph (1)(C), if—

11 ‘‘(A) subpart D of part I of subchapter D

12 of chapter 1 does not apply by reason of section

13 419A(f)(6) to contributions to provide 1 or

14 more welfare benefits through a welfare benefit

15 fund under a 10 or more employer plan, and

16 ‘‘(B) any portion of the welfare benefit

17 fund attributable to such contributions is used

18 for a purpose other than that for which the con19 tributions were made,

20 then such portion shall be treated as reverting to the

21 benefit of the employers maintaining the fund.’’

22 (c) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to contributions paid or accrued

24 after the date of the enactment of this Act, in taxable

25 years ending after such date.
49

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1 SEC. 409. MODIFICATION OF INSTALLMENT METHOD AND

2 REPEAL OF INSTALLMENT METHOD FOR AC3 CRUAL METHOD TAXPAYERS.

4 (a) REPEAL OF INSTALLMENT METHOD FOR AC5 CRUAL BASIS TAXPAYERS.—

6 (1) IN GENERAL.—Subsection (a) of section

7 453 (relating to installment method) is amended to

8 read as follows:

9 ‘‘(a) USE OF INSTALLMENT METHOD.—

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided in this section, income from an installment

12 sale shall be taken into account for purposes of this

13 title under the installment method.

14 ‘‘(2) ACCRUAL METHOD TAXPAYER.—The in15 stallment method shall not apply to income from an

16 installment sale if such income would be reported

17 under an accrual method of accounting without re18 gard to this section. The preceding sentence shall

19 not apply to a disposition described in subparagraph

20 (A) or (B) of subsection (l)(2).’’

21 (2) CONFORMING AMENDMENTS.—Sections

22 453(d)(1), 453(i)(1), and 453(k) are each amended

23 by striking ‘‘(a)’’ each place it appears and inserting

24 ‘‘(a)(1)’’.

25 (b) MODIFICATION OF PLEDGE RULES.—Paragraph

26 (4) of section 453A(d) (relating to pledges, etc., of install-
50

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1 ment obligations) is amended by adding at the end the

2 following: ‘‘A payment shall be treated as directly secured

3 by an interest in an installment obligation to the extent

4 an arrangement allows the taxpayer to satisfy all or a por5 tion of the indebtedness with the installment obligation.’’

6 (c) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to sales or other dispositions occur8 ring on or after the date of the enactment of this Act.

9 SEC. 410. INCLUSION OF CERTAIN VACCINES AGAINST

10 STREPTOCOCCUS PNEUMONIAE TO LIST OF

11 TAXABLE VACCINES.

12 (a) IN GENERAL.—Section 4132(a)(1) (defining tax13 able vaccine) is amended by adding at the end the fol14 lowing new subparagraph:

15 ‘‘(L) Any conjugate vaccine against strep16 tococcus pneumoniae.’’

17 (b) EFFECTIVE DATE.—

18 (1) SALES.—The amendment made by this sec19 tion shall apply to vaccine sales beginning on the

20 day after the date on which the Centers for Disease

21 Control makes a final recommendation for routine

22 administration to children of any conjugate vaccine

23 against streptococcus pneumoniae.

24 (2) DELIVERIES.—For purposes of paragraph

25 (1), in the case of sales on or before the date de-
51

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1 scribed in such paragraph for which delivery is made

2 after such date, the delivery date shall be considered

3 the sale date.