**Joint Committee on TaxationJCX-31-98May 5, 1998**

**DESCRIPTION OF ROTH FINANCING AMENDMENT TO THE "INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998" AS REPORTED BY THE SENATE COMMITTEE ON FINANCE**

**A.  Foreign Tax Credit Carryback and Carryover Periods (sec. 5002 of the bill)**

Under the bill, the provision is effective with respect to credits arising in taxable yearsending after the date of enactment.  Under the modification, the provision would be effectivewith respect to credits arising in taxable years beginning after December 31, 1998.

**B.  Restrict Special Net Operating Loss Carryback Rules for Specified Liability Losses
**Present Law**

	Under present law, that portion of a net operating loss that qualifies as a "specifiedliability loss" may be carried back 10 years rather than being limited to the general two-yearcarryback period. A specified liability loss includes amounts allowable as a deduction withrespect to product liability, and also certain liabilities that arise under Federal or State law or outof any tort of the taxpayer. In the case of a liability arising out of a Federal or State law, the act(or failure to act) giving rise to the liability must occur at least 3 years before the beginning ofthe taxable year. In the case of a liability arising out of a tort, the liability must arise out of aseries of actions (or failures to act) over an extended period of time a substantial portion of whichoccurred at least 3 years before the beginning of the taxable year. A specified liability loss cannotexceed the amount of the net operating loss, and is only available to taxpayers that used anaccrual method throughout the period that the acts (or failures to act) giving rise to the liabilityoccurred.

**Description of Proposal**

	Under the proposal, specified liability losses would be defined and limited to include (inaddition to product liability losses) only amounts allowable as a deduction that are attributable toa liability that arises under Federal or State law for reclamation of land, decommissioning of anuclear power plant (or any unit thereof), dismantlement of an offshore oil drilling platform,remediation of environmental contamination, or payments arising under a workers' compensationstatute, if the act (or failure to act) giving rise to such liability occurs at least 3 years before thebeginning of the taxable year. No inference regarding the interpretation of the specified liabilityloss carryback rules under current law would be intended by this proposal.

**Effective Date**

	The proposal would be effective for net operating losses arising in taxable yearsbeginning after the date of enactment.

**C.  Modification of Minimum Distribution Requirements to Determine AGI for Roth IRA Conversions**

**Present Law
Under present law, uniform minimum distribution rules generally apply to all types oftax-favored retirement vehicles, including qualified retirement plans and annuities, individualretirement arrangements ("IRAs") other than Roth IRAs, and tax-sheltered annuities (sec 403(b)).

	Under present law, distributions are required to begin no later than the participant'srequired beginning date (sec. 401(a)(9)). The required beginning date means the April 1 of thecalendar year following the later of (1) the calendar year in which the employee attains age 70-1/2, or (2) the calendar year in which the employee retires. In the case of an employee who isa 5-percent owner (as defined in section 416), the required beginning date is April 1 of thecalendar year following the calendar year in which the employee attains age 70-1/2. The InternalRevenue Service has issued extensive Regulations for purposes of calculating minimumdistributions. In general, minimum distributions are includible in gross income in the year ofdistribution.  An excise tax equal to 50 percent of the required distribution applies to the extent arequired distribution is not made.

	Under present law, all or any part of amounts held in a deductible or nondeductible IRAmay be converted into a Roth IRA. Only taxpayers with adjusted gross income ("AGI") of$100,000 or less are eligible to convert an IRA into a Roth IRA. In the case of a marriedtaxpayer, AGI is the combined AGI of the couple. Married taxpayers filing a separate return arenot eligible to make a conversion.

**Description of Proposal**
The proposal would modify the definition of AGI to exclude required minimumdistributions from the taxpayer's AGI solely for purposes of determining eligibility to convertfrom an IRA to a Roth IRA. As under present law, the required minimum distribution would notbe eligible for conversion and would be includible in gross income. 

**Effective Date**
The proposal would be effective for taxable years beginning after December 31, 2004.

**D.  Extension of IRS User Fees**
**Present Law
	The IRS provides written responses to questions of individuals, corporations, andorganizations relating to their tax status or the effects of particular transactions for tax purposesin the form of ruling letters, determination letters, opinion letters, and other similar rulings ordeterminations.   The IRS is directed by statute to establish a user fee program with respect tosuch rulings and determinations.  Pursuant to this statutory authorization, the IRS establishes aschedule of user fees.  The statutory authorization for the IRS user fee program is in effect forrequests made before October 1, 2003 (P.L. 104-117).

**Description of Proposal
	The proposal would extend the IRS user fee program for requests made before October 1,2007.

**Effective Date**

	The proposal would be effective on the date of enactment.********