Union Calendar No. 40

104TH CONGRESS

1ST SESSION H. R. 1215

[Report No. 104–84]

A BILL

strengthen the American family and create jobs.

To amend the Internal Revenue Code of 1986 to

MARCH 21, 1995

Committed to the Committee of the Whole House on the

State of the Union and ordered to be printed
IB

Union Calendar No. 40

104TH CONGRESS

1ST SESSION H. R. 1215

[Report No. 104–84]

To amend the Internal Revenue Code of 1986 to strengthen the American

family and create jobs.

IN THE HOUSE OF REPRESENTATIVES

MARCH 13, 1995

Mr. ARCHER introduced the following bill; which was referred to the

Committee on Ways and Means

MARCH 21, 1995

Committed to the Committee of the Whole House on the State of the Union

and ordered to be printed

A BILL

To amend the Internal Revenue Code of 1986 to strengthen

the American family and create jobs.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

5 ‘‘Contract With America Tax Relief Act of 1995’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.

7 (c) TABLE OF CONTENTS.—

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

TITLE I—AMERICAN DREAM RESTORATION

Sec. 101. Family tax credit.

Sec. 102. Credit to reduce marriage penalty.

Sec. 103. Establishment of American dream savings accounts.

Sec. 104. Spousal IRA computed on basis of compensation of both spouses.

TITLE II—SENIOR CITIZENS’ EQUITY

Subtitle A—Repeal of Increase in Tax on Social Security Benefits

Sec. 201. Repeal of increase in tax on Social Security benefits.

Subtitle B—Treatment of Long-term Care Insurance and Services

Sec. 211. Treatment of long-term care insurance.

Sec. 212. Qualified long-term care services treated as medical care.

Sec. 213. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 214. Exclusion from gross income for amounts withdrawn from certain retirement plans for long-term care insurance.

Subtitle C—Treatment of Accelerated Death Benefits

Sec. 221. Treatment of accelerated death benefits by recipient.

Sec. 222. Tax treatment of companies issuing qualified accelerated death benefit riders.

Subtitle D—Inclusion in Gross Income of Excess Long-term Care Benefits

Sec. 231. Inclusion in income of excess long-term care benefits.

Sec. 232. Reporting requirements.

TITLE III—JOB CREATION AND WAGE ENHANCEMENT

Subtitle A—Capital Gains Reform

PART I—CAPITAL GAINS REDUCTION FOR TAXPAYERS OTHER THAN

CORPORATIONS

Sec. 301. Capital gains deduction.
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Sec. 302. Indexing of certain assets acquired after December 31, 1994, for purposes of determining gain.

PART II—CAPITAL GAINS REDUCTION FOR CORPORATIONS

Sec. 311. Reduction of alternative capital gain tax for corporations.

PART III—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE

OR EXCHANGE OF PRINCIPAL RESIDENCE

Sec. 316. Capital loss deduction allowed with respect to sale or exchange of

principal residence.

Subtitle B—Cost Recovery Provisions

Sec. 321. Depreciation adjustment for certain property placed in service after

December 31, 1994.

Sec. 322. Treatment of abandonment of lessor improvements at termination of

lease.

Subtitle C—Alternative Minimum Tax Relief

Sec. 331. Phaseout of application of alternative minimum tax to corporations.

Subtitle D—Public Debt Reduction Checkoff and Trust Fund

Sec. 341. Designation of amounts for reduction of public debt.

Sec. 342. Public Debt Reduction Trust Fund.

Subtitle E—Small Business Incentives

Sec. 351. Cost-of-living adjustments relating to estate and gift tax provisions.

Sec. 352. Increase in expense treatment for small businesses.

Sec. 353. Clarification of treatment of home office use for administrative and

management activities.

Sec. 354. Treatment of storage of product samples.

TITLE IV—FAMILY REINFORCEMENT

Sec. 401. Credit for adoption expenses.

Sec. 402. Credit for taxpayers with certain persons requiring custodial care in

their households.

TITLE V—SOCIAL SECURITY EARNINGS TEST

Sec. 501. Adjustments in monthly exempt amount for purposes of the Social

Security earnings test.

TITLE VI—TECHNICAL CORRECTIONS

Sec. 601. Coordination with other titles.

Sec. 602. Amendments related to Revenue Reconciliation Act of 1990.

Sec. 603. Amendments related to Revenue Reconciliation Act of 1993.

Sec. 604. Miscellaneous provisions.
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1 TITLE I—AMERICAN DREAM

2 RESTORATION

3 SEC. 101. FAMILY TAX CREDIT.

4 (a) IN GENERAL.—Subpart A of part IV of sub5 chapter A of chapter 1 is amended by inserting after sec6 tion 22 the following new section:

7 ‘‘SEC. 23. FAMILY TAX CREDIT.

8 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al9 lowed as a credit against the tax imposed by this chapter

10 for the taxable year an amount equal to $500 multiplied

11 by the number of qualifying children of the taxpayer.

12 ‘‘(b) LIMITATION.—The amount of credit which

13 would (but for this subsection) be allowed by subsection

14 (a) shall be reduced (but not below zero) by an amount

15 which bears the same ratio to such amount of credit as—

16 ‘‘(1) the excess (if any) of the taxpayer’s ad17 justed gross income (determined without regard to

18 sections 911, 931, and 933) over $200,000, bears to

19 ‘‘(2) an amount equal to 100 times the dollar

20 amount in effect under subsection (a) for the taxable

21 year.

22 ‘‘(c) QUALIFYING CHILD.—For purposes of this sec23 tion—

24 ‘‘(1) IN GENERAL.—The term ‘qualifying child’

25 means any individual if—
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1 ‘‘(A) the taxpayer is allowed a deduction

2 under section 151 with respect to such individ3 ual for such taxable year,

4 ‘‘(B) such individual has not attained the

5 age of 18 as of the close of the calendar year

6 in which the taxable year of the taxpayer be7 gins, and

8 ‘‘(C) such individual bears a relationship to

9 the taxpayer described in section 32(c)(3)(B)

10 (determined without regard to clause (ii) there11 of).

12 ‘‘(2) EXCEPTION FOR CERTAIN NONCITIZENS.—

13 The term ‘qualifying child’ shall not include any in14 dividual who would not be a dependent if the first

15 sentence of section 152(b)(3) were applied without

16 regard to all that follows ‘resident of the United

17 States’.

18 ‘‘(d) INFLATION ADJUSTMENTS.—

19 ‘‘(1) IN GENERAL.—In the case of a taxable

20 year beginning in a calendar year after 1996, the

21 $500 and $200,000 amounts contained in sub22 sections (a) and (b) shall each be increased by an

23 amount equal to—

24 ‘‘(A) such dollar amount, multiplied by
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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for the calendar

3 year in which the taxable year begins, deter4 mined by substituting ‘calendar year 1995’ for

5 ‘calendar year 1992’ in subparagraph (B)

6 thereof.

7 ‘‘(2) ROUNDING.—If any amount as adjusted

8 under paragraph (1) is not a multiple of $50, such

9 amount shall be rounded to the nearest multiple of

10 $50.

11 ‘‘(e) CERTAIN OTHER RULES APPLY.—Rules similar

12 to the rules of subsections (d) and (e) of section 32 shall

13 apply for purposes of this section.’’

14 (b) CONFORMING AMENDMENT.—The table of sec15 tions for subpart A of part IV of subchapter A of chapter

16 1 is amended by inserting after the item relating to section

17 22 the following new item:

‘‘Sec. 23. Family tax credit.’’

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

19 this section shall apply to taxable years beginning after

20 December 31, 1995.

21 SEC. 102. CREDIT TO REDUCE MARRIAGE PENALTY.

22 (a) IN GENERAL.—Subpart A of part IV of sub23 chapter A of chapter 1 is amended by inserting after sec24 tion 23 the following new section:
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1 ‘‘SEC. 24. CREDIT TO REDUCE MARRIAGE PENALTY.

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a joint

3 return for the taxable year, there shall be allowed as a

4 credit against the tax imposed by this chapter for such

5 taxable year an amount equal to the marriage penalty re6 duction credit.

7 ‘‘(b) LIMITATIONS.—

8 ‘‘(1) DOLLAR LIMITATION.—The amount of

9 credit allowed by subsection (a) for the taxable year

10 shall not exceed $145.

11 ‘‘(2) CREDIT DISALLOWED FOR INDIVIDUALS

12 CLAIMING SECTION 911, ETC.—No credit shall be al13 lowed under this section for any taxable year if ei14 ther spouse claims the benefits of section 911, 931,

15 or 933 for such taxable year.

16 ‘‘(c) MARRIAGE PENALTY REDUCTION CREDIT.—For

17 purposes of this section—

18 ‘‘(1) IN GENERAL.—The marriage penalty re19 duction credit is an amount equal to the excess (if

20 any) of—

21 ‘‘(A) the joint tax amount of the taxpayer,

22 over

23 ‘‘(B) the sum of the unmarried tax

24 amounts for each spouse.

25 ‘‘(2) UNMARRIED TAX AMOUNT.—For purposes

26 of paragraph (1), the unmarried tax amount, with
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1 respect to an individual, is the amount of tax which

2 would be imposed by section 1(c) if such individual’s

3 taxable income were equal to the excess (if any) of—

4 ‘‘(A) such individual’s qualified earned in5 come for the taxable year, over

6 ‘‘(B) the sum of—

7 ‘‘(i) an amount equal to the basic

8 standard deduction under section

9 63(c)(2)(C) for the taxable year, plus

10 ‘‘(ii) the exemption amount (as de11 fined in section 151(d)) for such taxable

12 year.

13 ‘‘(3) JOINT TAX AMOUNT.—For purposes of

14 paragraph (1), the joint tax amount is the amount

15 of tax which would be imposed by section 1(a) if the

16 taxpayer’s taxable income were equal to the excess

17 (if any) of—

18 ‘‘(A) the taxpayer’s qualified earned in19 come for the taxable year, over

20 ‘‘(B) the sum of—

21 ‘‘(i) an amount equal to the basic

22 standard deduction under section

23 63(c)(2)(A) for the taxable year, plus
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1 ‘‘(ii) an amount equal to twice the ex2 emption amount (as so defined) for such

3 taxable year.

4 ‘‘(d) QUALIFIED EARNED INCOME.—For purposes of

5 this section—

6 ‘‘(1) IN GENERAL.—The term ‘qualified earned

7 income’ means an amount equal to the excess (if

8 any) of—

9 ‘‘(A) the earned income for the taxable

10 year, over

11 ‘‘(B) an amount equal to the sum of the

12 deductions described in paragraphs (1), (2),

13 (6), (7), and (12) of section 62(a) to the extent

14 that such deductions are properly allocable to

15 or chargeable against earned income for such

16 taxable year.

17 The amount of qualified earned income shall be de18 termined without regard to any community property

19 laws.

20 ‘‘(2) EARNED INCOME.—For purposes of para21 graph (1)—

22 ‘‘(A) IN GENERAL.—The term ‘earned in23 come’ means income which is earned income

24 within the meaning of section 401(c)(2)(C) or

25 911(d)(2) (determined without regard to the
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1 phrase ‘not in excess of 30 percent of his share

2 of the net profits of such trade or business’ in

3 subparagraph (B) thereof).

4 ‘‘(B) EXCEPTION.—Such term shall not in5 clude any amount—

6 ‘‘(i) not includible in gross income,

7 ‘‘(ii) received as a pension or annuity,

8 ‘‘(iii) paid or distributed out of an in9 dividual retirement plan (within the mean10 ing of section 7701(a)(37)),

11 ‘‘(iv) received as deferred compensa12 tion, or

13 ‘‘(v) received for services performed

14 by an individual in the employ of the

15 spouse (within the meaning of section

16 3121(b)(3)(A)).

17 ‘‘(e) AMOUNT OF CREDIT TO BE DETERMINED

18 UNDER TABLES.—

19 ‘‘(1) IN GENERAL.—The amount of the credit

20 allowed by this section shall be determined under ta21 bles prescribed by the Secretary.

22 ‘‘(2) REQUIREMENTS FOR TABLES.—The tables

23 prescribed under paragraph (1) shall reflect the pro24 visions of subsection (c) and shall round to the near-
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1 est $25 any amount of credit which is less than the

2 maximum credit under subsection (b)(1).’’

3 (b) CLERICAL AMENDMENT.—The table of sections

4 for subpart A of part IV of subchapter A of chapter 1

5 is amended by inserting after the item relating to section

6 23 the following new item:

‘‘Sec. 24. Credit to reduce marriage penalty.’’

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

8 this section shall apply to taxable years beginning after

9 December 31, 1995.

10 SEC. 103. ESTABLISHMENT OF AMERICAN DREAM SAVINGS

11 ACCOUNTS.

12 (a) IN GENERAL.—Subpart A of part I of subchapter

13 D of chapter 1 (relating to pension, profit-sharing, stock

14 bonus plans, etc.) is amended by inserting after section

15 408 the following new section:

16 ‘‘SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.

17 ‘‘(a) GENERAL RULE.—Except as provided in this

18 section, an American Dream Savings Account shall be

19 treated for purposes of this title in the same manner as

20 an individual retirement plan.

21 ‘‘(b) AMERICAN DREAM SAVINGS ACCOUNT.—For

22 purposes of this title, the term ‘American Dream Savings

23 Account’ or ‘ADS account’ means an individual retirement

24 plan which is designated at the time of the establishment

25 of the plan as an American Dream Savings Account. Such
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1 designation shall be made in such manner as the Secretary

2 may prescribe.

3 ‘‘(c) CONTRIBUTION RULES.—

4 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

5 shall be allowed under section 219 for a contribution

6 to an ADS account.

7 ‘‘(2) CONTRIBUTION LIMIT.—

8 ‘‘(A) IN GENERAL.—The aggregate

9 amount of contributions (other than rollover

10 contributions) for any taxable year to all ADS

11 accounts maintained for the benefit of an indi12 vidual shall not exceed the lesser of—

13 ‘‘(i) $2,000, or

14 ‘‘(ii) an amount equal to the com15 pensation includible in the individual’s

16 gross income for such taxable year.

17 ‘‘(B) $4,000 LIMITATION FOR CERTAIN AD18 DITIONAL MARRIED INDIVIDUALS.—

19 ‘‘(i) IN GENERAL.—In the case of an

20 individual to whom this subparagraph ap21 plies for the taxable year, the limitation of

22 subparagraph (A)(ii) shall be equal to the

23 sum of—
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1 ‘‘(I) the compensation includible

2 in such individual’s gross income for

3 the taxable year, plus

4 ‘‘(II) the compensation includible

5 in the gross income of such individ6 ual’s spouse for the taxable year re7 duced by the amount of the limitation

8 under subparagraph (A) applicable to

9 such spouse for such taxable year.

10 ‘‘(ii) INDIVIDUALS TO WHOM CLAUSE

11 (i) APPLIES.—Clause (i) shall apply to any

12 individual if—

13 ‘‘(I) such individual files a joint

14 return for the taxable year, and

15 ‘‘(II) the amount of compensa16 tion (if any) includible in such individ17 ual’s gross income for the taxable year

18 is less than the compensation includ19 ible in the gross income of such indi20 vidual’s spouse for the taxable year.

21 ‘‘(C) ADJUSTMENT FOR INFLATION.—

22 ‘‘(i) IN GENERAL.—In the case of a

23 taxable year beginning in a calendar year

24 after 1996, the $2,000 amount contained
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1 in subparagraph (A) shall be increased by

2 an amount equal to—

3 ‘‘(I) such dollar amount, multi4 plied by

5 ‘‘(II) the cost-of-living adjust6 ment under section 1(f)(3) for the cal7 endar year in which the taxable year

8 begins, determined by substituting

9 ‘calendar year 1995’ for ‘calendar

10 year 1992’ in subparagraph (B) there11 of.

12 ‘‘(ii) ROUNDING.—If any amount as

13 adjusted under clause (i) is not a multiple

14 of $50, such amount shall be rounded to

15 the nearest multiple of $50.

16 ‘‘(D) TAX ON EXCESS CONTRIBUTIONS.—

17 Section 4973 shall be applied separately with

18 respect to individual retirement plans which are

19 ADS accounts and individual retirement plans

20 which are not ADS accounts; except that, for

21 purposes of applying such section with respect

22 to individual retirement plans which are ADS

23 accounts, excess contributions shall be consid24 ered to be any amounts in excess of the limita25 tion under subsection (c)(2)(A).
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1 ‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE

701 2 ⁄2.—Contributions to an ADS account may be

3 made even after the individual for whom the account

is maintained has attained age 701 4 ⁄2.

5 ‘‘(4) MANDATORY DISTRIBUTION RULES NOT

6 TO APPLY, ETC.—

7 ‘‘(A) IN GENERAL.—Except as provided in

8 subparagraph (B), subsections (a)(6) and (b)(3)

9 of section 408 (relating to required distribu10 tions) and section 4974 (relating to excise tax

11 on certain accumulations in qualified retirement

12 plans) shall not apply to any ADS account.

13 ‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules

14 similar to the rules of section 401(a)(9) (other

15 than subparagraph (A) thereof) shall apply for

16 purposes of this section.

17 ‘‘(5) LIMITATIONS ON ROLLOVER CONTRIBU18 TIONS.—No rollover contribution may be made to an

19 ADS account unless—

20 ‘‘(A) such contribution is from another

21 ADS account, or

22 ‘‘(B) such contribution is from an individ23 ual retirement plan (other than an ADS ac24 count) and is made before January 1, 1998.
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1 ‘‘(d) DISTRIBUTION RULES.—For purposes of this

2 title—

3 ‘‘(1) GENERAL RULES.—

4 ‘‘(A) EXCLUSION FROM GROSS INCOME.—

5 No portion of a qualified distribution from an

6 ADS account shall be includible in gross in7 come.

8 ‘‘(B) EXCEPTION FROM PENALTY TAX.—

9 Section 72(t) shall not apply to—

10 ‘‘(i) any qualified distribution from an

11 ADS account, and

12 ‘‘(ii) any qualified special purpose dis13 tribution (whether or not a qualified dis14 tribution) from an ADS account.

15 ‘‘(2) QUALIFIED DISTRIBUTION.—For purposes

16 of this subsection—

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

18 distribution’ means any payment or distribu19 tion—

20 ‘‘(i) made on or after the date on

which the individual attains age 591 21 ⁄2,

22 ‘‘(ii) made to a beneficiary (or to the

23 estate of the individual) on or after the

24 death of the individual,
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1 ‘‘(iii) attributable to the individual’s

2 being disabled (within the meaning of sec3 tion 72(m)(7)), or

4 ‘‘(iv) which is a qualified special pur5 pose distribution.

6 ‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—

7 No payment or distribution shall be treated as

8 a qualified distribution if—

9 ‘‘(i) it is made within the 5-taxable

10 year period beginning with the 1st taxable

11 year for which the individual made a con12 tribution to an ADS account (or such indi13 vidual’s spouse made a contribution to an

14 ADS account) established for such individ15 ual, or

16 ‘‘(ii) in the case of a payment or dis17 tribution properly allocable to a rollover

18 contribution (or income allocable thereto),

19 it is made within 5 years after the date on

20 which such rollover contribution was made,

21 as determined under regulations prescribed

22 by the Secretary.

23 Clause (ii) shall not apply to a rollover con24 tribution from an ADS account.
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1 ‘‘(3) INCOME INCLUSION FOR ROLLOVERS FROM

2 NON-ADS ACCOUNTS.—In the case of any amount

3 paid or distributed out of an individual retirement

4 plan (other than an ADS account) which is paid into

5 an ADS account (established for the benefit of the

6 payee or distributee, as the case may be) before the

7 close of the 60th day after the day on which the

8 payment or distribution is received—

9 ‘‘(A) sections 72(t) and 408(d)(3) shall not

10 apply, and

11 ‘‘(B) any amount required to be included

12 in gross income by reason of this paragraph

13 shall be so included ratably over the 4-taxable

14 year period beginning with the taxable year in

15 which the payment or distribution is made.

16 ‘‘(e) QUALIFIED SPECIAL PURPOSE DISTRIBU17 TION.—

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘qualified special purpose distribution’

20 means any payments or distributions from an ADS

21 account to the individual for whose benefit such ac22 count is established—

23 ‘‘(A) if such payments or distributions are

24 qualified first-time homebuyer distributions, or
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1 ‘‘(B) to the extent such payments or dis2 tributions do not exceed—

3 ‘‘(i) the qualified higher education ex4 penses of the taxpayer for the taxable year

5 in which received, and

6 ‘‘(ii) the qualified medical expenses of

7 the taxpayer for the taxable year in which

8 received.

9 ‘‘(2) QUALIFIED FIRST-TIME HOMEBUYER DIS10 TRIBUTIONS.—

11 ‘‘(A) IN GENERAL.—For purposes of this

12 subsection, the term ‘qualified first-time home13 buyer distribution’ means any payment or dis14 tribution received by an individual to the extent

15 such payment or distribution is used by the in16 dividual before the close of the 60th day after

17 the day on which such payment or distribution

18 is received to pay qualified acquisition costs

19 with respect to a principal residence for such

20 individual as a first-time homebuyer.

21 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

22 For purposes of this paragraph, the term

23 ‘qualified acquisition costs’ means the costs of

24 acquiring, constructing, or reconstructing a res25 idence. Such term includes any usual or reason-
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1 able settlement, financing, or other closing

2 costs.

3 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

4 DEFINITIONS.—For purposes of this para5 graph—

6 ‘‘(i) FIRST-TIME HOMEBUYER.—The

7 term ‘first-time homebuyer’ means any in8 dividual if such individual (and, if married,

9 such individual’s spouse) had no present

10 ownership interest in a principal residence

11 during the 3-year period ending on the

12 date of acquisition of the principal resi13 dence to which this paragraph applies.

14 ‘‘(ii) PRINCIPAL RESIDENCE.—The

15 term ‘principal residence’ has the same

16 meaning as when used in section 1034.

17 ‘‘(iii) DATE OF ACQUISITION.—The

18 term ‘date of acquisition’ means the date—

19 ‘‘(I) on which a binding contract

20 to acquire the principal residence to

21 which subparagraph (A) applies is en22 tered into, or

23 ‘‘(II) on which a binding contract

24 to construct or reconstruct such a

25 principal residence is entered into.
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1 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC2 QUISITION.—If any payment or distribution out

3 of an ADS account fails to meet the require4 ments of subparagraph (A) solely by reason of

5 a delay or cancellation of the purchase, con6 struction, or reconstruction of the residence, the

7 amount of the payment or distribution may be

8 contributed to an ADS account as provided in

9 subsection (d)(3)(A)(i) of section 408 (deter10 mined by substituting ‘120th day’ for ‘60th

11 day’ in such subsection), except that—

12 ‘‘(i) subsection (d)(3)(B) of such sec13 tion shall not be applied to such contribu14 tion, and

15 ‘‘(ii) such amount shall not be taken

16 into account in determining whether sub17 section (d)(3)(A)(i) of such section applies

18 to any other amount.

19 ‘‘(3) QUALIFIED HIGHER EDUCATION EX20 PENSES.—For purposes of this subsection—

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

22 higher education expenses’ means tuition, fees,

23 books, supplies, and equipment required for the

24 enrollment or attendance of—

25 ‘‘(i) the taxpayer,
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1 ‘‘(ii) the taxpayer’s spouse, or

2 ‘‘(iii) the taxpayer’s child (as defined

3 in section 151(c)(3)) or grandchild,

4 at an eligible educational institution (as defined

5 in section 135(c)(3)).

6 ‘‘(B) COORDINATION WITH SAVINGS BOND

7 PROVISIONS.—The amount of qualified higher

8 education expenses for any taxable year shall be

9 reduced by any amount excludable from gross

10 income under section 135.

11 ‘‘(4) QUALIFIED MEDICAL EXPENSES.—

12 ‘‘(A) IN GENERAL.—For purposes of this

13 subsection, the term ‘qualified medical ex14 penses’ means any amounts paid during the

15 taxable year, not compensated for by insurance

16 or otherwise, for medical care (as defined in

17 section 213(d)) of the taxpayer, his spouse, or

18 a dependent (as defined in section 152).

19 ‘‘(B) LONG-TERM CARE INSURANCE PRE20 MIUMS TREATED AS MEDICAL EXPENSES.—For

21 purposes of subparagraph (A), section

22 213(d)(1)(C) shall not apply but the term

23 ‘qualified medical expenses’ shall include pre24 miums for long-term care insurance (as defined
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1 in section 7702B(b)) for coverage of the tax2 payer or his spouse.

3 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec4 tion—

5 ‘‘(1) ROLLOVER CONTRIBUTIONS.—The term

6 ‘rollover contributions’ means contributions de7 scribed in sections 402(c), 403(a)(4), 403(b)(8), or

8 408(d)(3).

9 ‘‘(2) COMPENSATION.—The term ‘compensa10 tion’ has the meaning given such term by section

11 219(f).’’

12 (b) TERMINATION OF NONDEDUCTIBLE IRA CON13 TRIBUTIONS.—

14 (1) Section 408(o) is amended by adding at the

15 end the following new paragraph:

16 ‘‘(5) TERMINATION.—This subsection shall not

17 apply to any designated nondeductible contribution

18 for any taxable year beginning after December 31,

19 1995.’’

20 (2) Section 219(f) of is amended by striking

21 paragraph (7).

22 (c) EXCESS DISTRIBUTIONS TAX NOT TO APPLY.—

23 Subparagraph (B) of section 4980A(e)(1) is amended by

24 inserting ‘‘other than an ADS account (as defined in sec25 tion 408A(b))’’ after ‘‘retirement plan’’.
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1 (d) CLERICAL AMENDMENT.—The table of sections

2 for subpart A of part I of subchapter D of chapter 1 is

3 amended by inserting after the item relating to section

4 408 the following new item:

‘‘Sec. 408A. American Dream Savings Accounts.’’

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

6 this section shall apply to taxable years beginning after

7 December 31, 1995.

8 SEC. 104. SPOUSAL IRA COMPUTED ON BASIS OF COM9 PENSATION OF BOTH SPOUSES.

10 (a) IN GENERAL.—Subsection (c) of section 219 (re11 lating to special rules for certain married individuals) is

12 amended to read as follows:

13 ‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI14 VIDUALS.—

15 ‘‘(1) IN GENERAL.—In the case of an individual

16 to whom this paragraph applies for the taxable year,

17 the limitation of subsection (b)(1) shall be equal to

18 the lesser of—

19 ‘‘(A) $2,000, or

20 ‘‘(B) the sum of—

21 ‘‘(i) the compensation includible in

22 such individual’s gross income for the tax23 able year, plus

24 ‘‘(ii) the compensation includible in

25 the gross income of such individual’s
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1 spouse for the taxable year reduced by the

2 amount allowable as a deduction under

3 subsection (a) to such spouse for such tax4 able year.

5 ‘‘(2) INDIVIDUALS TO WHOM PARAGRAPH (1)

6 APPLIES.—Paragraph (1) shall apply to any individ7 ual if—

8 ‘‘(A) such individual files a joint return for

9 the taxable year, and

10 ‘‘(B) the amount of compensation (if any)

11 includible in such individual’s gross income for

12 the taxable year is less than the compensation

13 includible in the gross income of such individ14 ual’s spouse for the taxable year.’’

15 (b) TECHNICAL AMENDMENT.—Paragraph (2) of

16 section 219(f) (relating to other definitions and special

17 rules) is amended by striking ‘‘subsections (b) and (c)’’

18 and inserting ‘‘subsection (b)’’.

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

20 this section shall apply to taxable years beginning after

21 December 31, 1995.
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1 TITLE II—SENIOR CITIZENS’

2 EQUITY

3 Subtitle A—Repeal of Increase in

4 Tax on Social Security Benefits

5 SEC. 201. REPEAL OF INCREASE IN TAX ON SOCIAL SECU6 RITY BENEFITS.

7 (a) IN GENERAL.—Subsection (a) of section 86 (re8 lating to social security and tier 1 railroad retirement ben9 efits) is amended by adding at the end the following new

10 paragraph:

11 ‘‘(3) PHASEOUT OF ADDITIONAL AMOUNT.—In

12 the case of any taxable year beginning in a calendar

13 year after 1995 and before 2000, paragraph (2)

14 shall be applied by substituting the percentage deter15 mined under the following table for ‘85 percent’ each

16 place it appears:

‘‘In the case of a taxable year

beginning in calendar year: The percentage is:

1996 .......................................................................... 75 percent

1997 .......................................................................... 65 percent

1998 .......................................................................... 60 percent

1999 .......................................................................... 55 percent.’’

17 (b) TERMINATION OF ADDITIONAL AMOUNT.—Para18 graph (2) of section 86(a) is amended by adding at the

19 end the following new flush sentence:

20 ‘‘This paragraph shall not apply to any taxable year

21 beginning after December 31, 1999.’’

22 (c) CONFORMING AMENDMENTS.—
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1 (1) Subparagraph (A) of section 871(a)(3) is

2 amended—

3 (A) by striking ‘‘85 percent’’ and inserting

4 ‘‘50 percent’’, and

5 (B) by inserting before the last sentence

6 the following new flush sentence:

7 ‘‘In the case of any taxable year beginning in a cal8 endar year after 1995 and before 2000, subpara9 graph (A) shall be applied by substituting the per10 centage determined for such calendar year under

11 section 86(a)(3) for ‘50 percent’.’’

12 (2)(A) Subparagraph (A) of section 121(e)(1)

13 of the Social Security Amendments of 1983 (Public

14 Law 98–21) is amended—

15 (i) by striking ‘‘(A) There’’ and inserting

16 ‘‘There’’;

17 (ii) by striking ‘‘(i)’’ immediately following

18 ‘‘amounts equivalent to’’; and

19 (iii) by striking ‘‘, less (ii)’’ and all that

20 follows and inserting a period.

21 (B) Paragraph (1) of section 121(e) of such Act

22 is amended by striking subparagraph (B).

23 (C) Paragraph (3) of section 121(e) of such Act

24 is amended by striking subparagraph (B) and by re25 designating subparagraph (C) as subparagraph (B).
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1 (D) Paragraph (2) of section 121(e) of such

2 Act is amended in the first sentence by striking

3 ‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph (1)’’.

4 (d) EFFECTIVE DATE.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the amendments made by this section

7 shall apply to taxable years beginning after Decem8 ber 31, 1995.

9 (2) SUBSECTION (c)(2).—The amendments

10 made by subsection (c)(2) shall apply to tax liabil11 ities for taxable years beginning after December 31,

12 1995.

13 Subtitle B—Treatment of Long14 term Care Insurance and Services

15 SEC. 211. TREATMENT OF LONG-TERM CARE INSURANCE.

16 (a) GENERAL RULE.—Chapter 79 (relating to defini17 tions) is amended by inserting after section 7702A the fol18 lowing new section:

19 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR20 ANCE.

21 ‘‘(a) IN GENERAL.—For purposes of this title—

22 ‘‘(1) a long-term care insurance contract shall

23 be treated as an accident and health insurance con24 tract,
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1 ‘‘(2) amounts (other than policyholder divi2 dends, as defined in section 808, or premium re3 funds) received under a long-term care insurance

4 contract shall be treated as amounts received for

5 personal injuries and sickness and shall be treated

6 as reimbursement for expenses actually incurred for

7 medical care (as defined in section 213(d)),

8 ‘‘(3) any plan of an employer providing cov9 erage under a long-term care insurance contract

10 shall be treated as an accident and health plan with

11 respect to such coverage,

12 ‘‘(4) except as provided in subsection (d)(3),

13 amounts paid for a long-term care insurance con14 tract providing the benefits described in subsection

15 (b)(2)(A) shall be treated as payments made for in16 surance for purposes of section 213(d)(1)(D), and

17 ‘‘(5) a long-term care insurance contract shall

18 be treated as a guaranteed renewable contract sub19 ject to the rules of section 816(e).

20 ‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—

21 For purposes of this title—

22 ‘‘(1) IN GENERAL.—The term ‘long-term care

23 insurance contract’ means any insurance contract

24 if—
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1 ‘‘(A) the only insurance protection pro2 vided under such contract is coverage of quali3 fied long-term care services,

4 ‘‘(B) such contract does not pay or reim5 burse expenses incurred for services or items to

6 the extent that such expenses are reimbursable

7 under title XVIII of the Social Security Act or

8 would be so reimbursable but for the applica9 tion of a deductible or coinsurance amount,

10 ‘‘(C) such contract is guaranteed renew11 able,

12 ‘‘(D) such contract does not provide for a

13 cash surrender value or other money that can

14 be—

15 ‘‘(i) paid, assigned, or pledged as col16 lateral for a loan, or

17 ‘‘(ii) borrowed,

18 other than as provided in subparagraph (E) or

19 paragraph (2)(C), and

20 ‘‘(E) all refunds of premiums, and all pol21 icyholder dividends or similar amounts, under

22 such contract are to be applied as a reduction

23 in future premiums or to increase future bene24 fits.

25 ‘‘(2) SPECIAL RULES.—
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1 ‘‘(A) PER DIEM, ETC. PAYMENTS PER2 MITTED.—A contract shall not fail to be de3 scribed in subparagraph (A) or (B) of para4 graph (1) by reason of payments being made on

5 a per diem or other periodic basis without re6 gard to the expenses incurred during the period

7 to which the payments relate.

8 ‘‘(B) SPECIAL RULES RELATING TO MEDI9 CARE.—

10 ‘‘(i) Paragraph (1)(B) shall not apply

11 to expenses which are reimbursable under

12 title XVIII of the Social Security Act only

13 as a secondary payor.

14 ‘‘(ii) No provision of law shall be con15 strued or applied so as to prohibit the of16 fering of a long-term care insurance con17 tract on the basis that the contract coordi18 nates its benefits with those provided

19 under such title.

20 ‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

21 (1)(E) shall not apply to any refund on the

22 death of the insured, or on a complete surren23 der or cancellation of the contract, which can24 not exceed the aggregate premiums paid under

25 the contract. Any refund on a complete surren-
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1 der or cancellation of the contract shall be in2 cludible in gross income to the extent that any

3 deduction or exclusion was allowable with re4 spect to the premiums.

5 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

6 purposes of this section—

7 ‘‘(1) IN GENERAL.—The term ‘qualified long8 term care services’ means necessary diagnostic, pre9 ventive, therapeutic, curing, treating, mitigating, and

10 rehabilitative services, and maintenance or personal

11 care services, which—

12 ‘‘(A) are required by a chronically ill indi13 vidual, and

14 ‘‘(B) are provided pursuant to a plan of

15 care prescribed by a licensed health care practi16 tioner.

17 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

18 ‘‘(A) IN GENERAL.—The term ‘chronically

19 ill individual’ means any individual who has

20 been certified by a licensed health care practi21 tioner as—

22 ‘‘(i) being unable to perform (without

23 substantial assistance from another indi24 vidual) at least 2 activities of daily living

25 for a period of at least 90 days due to a
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1 loss of functional capacity or to cognitive

2 impairment, or

3 ‘‘(ii) having a level of disability simi4 lar (as determined by the Secretary in con5 sultation with the Secretary of Health and

6 Human Services) to the level of disability

7 described in clause (i).

8 Such term shall not include any individual oth9 erwise meeting the requirements of the preced10 ing sentence unless within the preceding 12-

11 month period a licensed health care practitioner

12 has certified that such individual meets such re13 quirements.

14 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

15 purposes of subparagraph (A), each of the fol16 lowing is an activity of daily living:

17 ‘‘(i) Eating.

18 ‘‘(ii) Toileting.

19 ‘‘(iii) Transferring.

20 ‘‘(iv) Bathing.

21 ‘‘(v) Dressing.

22 ‘‘(vi) Continence.

23 Nothing in this section shall be construed to re24 quire a contract to take into account all of the

25 preceding activities of daily living.
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1 ‘‘(3) MAINTENANCE OR PERSONAL CARE SERV2 ICES.—The term ‘maintenance or personal care serv3 ices’ means any care the primary purpose of which

4 is the provision of needed assistance with any of the

5 disabilities as a result of which the individual is a

6 chronically ill individual (including the protection

7 from threats to health and safety due to severe cog8 nitive impairment).

9 ‘‘(4) LICENSED HEALTH CARE PRACTI10 TIONER.—The term ‘licensed health care practi11 tioner’ means any physician (as defined in section

12 1861(r)(1) of the Social Security Act) and any reg13 istered professional nurse, licensed social worker, or

14 other individual who meets such requirements as

15 may be prescribed by the Secretary.

16 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

17 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

18 provided in regulations prescribed by the Secretary, in the

19 case of any long-term care insurance coverage (whether

20 or not qualified) provided by a rider on a life insurance

21 contract—

22 ‘‘(1) IN GENERAL.—This section shall apply as

23 if the portion of the contract providing such cov24 erage is a separate contract.
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1 ‘‘(2) APPLICATION OF 7702.—Section

2 7702(c)(2) (relating to the guideline premium limi3 tation) shall be applied by increasing the guideline

4 premium limitation with respect to a life insurance

5 contract, as of any date—

6 ‘‘(A) by the sum of any charges (but not

7 premium payments) against the life insurance

8 contract’s cash surrender value (within the

9 meaning of section 7702(f)(2)(A)) for such cov10 erage made to that date under the contract, less

11 ‘‘(B) any such charges the imposition of

12 which reduces the premiums paid for the con13 tract (within the meaning of section

14 7702(f)(1)).

15 ‘‘(3) APPLICATION OF SECTION 213.—No deduc16 tion shall be allowed under section 213(a) for

17 charges against the life insurance contract’s cash

18 surrender value described in paragraph (2), unless

19 such charges are includible in income as a result of

20 the application of section 72(e)(10) and the rider is

21 a long-term care insurance contract under sub22 section (b).

23 ‘‘(4) PORTION DEFINED.—For purposes of this

24 subsection, the term ‘portion’ means only the terms

25 and benefits under a life insurance contract that are
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1 in addition to the terms and benefits under the con2 tract without regard to the coverage under a long3 term care insurance contract.’’

4 (b) RESERVE METHOD.—Clause (iii) of section

5 807(d)(3)(A) is amended by inserting ‘‘(other than a long6 term care insurance contract, as defined in section

7 7702B(b))’’ after ‘‘insurance contract’’.

8 (c) LONG-TERM CARE INSURANCE NOT PERMITTED

9 UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR10 RANGEMENTS.—

11 (1) CAFETERIA PLANS.—Section 125(f) is

12 amended by adding at the end the following new

13 sentence: ‘‘Such term shall not include any long14 term care insurance contract (as defined in section

15 7702B(b)).’’

16 (2) FLEXIBLE SPENDING ARRANGEMENTS.—

17 The text of section 106 (relating to contributions by

18 employer to accident and health plans) is amended

19 to read as follows:

20 ‘‘(a) GENERAL RULE.—Except as provided in sub21 section (b), gross income of an employee does not include

22 employer-provided coverage under an accident or health

23 plan.
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1 ‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS

2 PROVIDED THROUGH FLEXIBLE SPENDING ARRANGE3 MENTS.—

4 ‘‘(1) IN GENERAL.—Effective on and after Jan5 uary 1, 1996, gross income of an employee shall in6 clude employer-provided coverage for qualified long7 term care services (as defined in section 7702B(c))

8 to the extent that such coverage is provided through

9 a flexible spending or similar arrangement.

10 ‘‘(2) FLEXIBLE SPENDING ARRANGEMENT.—

11 For purposes of this subsection, a flexible spending

12 arrangement is a benefit program which provides

13 employees with coverage under which—

14 ‘‘(A) specified incurred expenses may be

15 reimbursed (subject to reimbursement maxi16 mums and other reasonable conditions), and

17 ‘‘(B) the maximum amount of reimburse18 ment which is reasonably available to a partici19 pant for such coverage is less than 500 percent

20 of the value of such coverage.

21 In the case of an insured plan, the maximum

22 amount reasonably available shall be determined on

23 the basis of the underlying coverage.’’
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1 (d) CONTINUATION COVERAGE EXCISE TAX NOT TO

2 APPLY.—Subsection (f) of section 4980B is amended by

3 adding at the end the following new paragraph:

4 ‘‘(9) CONTINUATION OF LONG-TERM CARE COV5 ERAGE NOT REQUIRED.—A group health plan shall

6 not be treated as failing to meet the requirements of

7 this subsection solely by reason of failing to provide

8 coverage under any long-term care insurance con9 tract (as defined in section 7702B(b)).’’

10 (e) AMOUNTS PAID TO RELATIVES TREATED AS NOT

11 PAID FOR MEDICAL CARE.—Section 213(d) is amended

12 by adding at the end the following new paragraph:

13 ‘‘(10) CERTAIN PAYMENTS TO RELATIVES

14 TREATED AS NOT PAID FOR MEDICAL CARE.—An

15 amount paid for a qualified long-term care service

16 (as defined in section 7702B(c)) provided to an indi17 vidual shall be treated as not paid for medical care

18 if such service is provided—

19 ‘‘(A) by a relative (directly or through a

20 partnership, corporation, or other entity) unless

21 the relative is a licensed professional with re22 spect to such services, or

23 ‘‘(B) by a corporation or partnership which

24 is related (within the meaning of section 267(b)

25 or 707(b)) to the individual.
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1 For purposes of this paragraph, the term ‘relative’

2 means an individual bearing a relationship to the in3 dividual which is described in any of paragraphs (1)

4 through (8) of section 152(a). This paragraph shall

5 not apply for purposes of section 105(b) with respect

6 to reimbursements through insurance.’’

7 (f) CLERICAL AMENDMENT.—The table of sections

8 for chapter 79 is amended by inserting after the item re9 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance.’’.

10 (g) EFFECTIVE DATE.—

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

12 this section shall apply to contracts issued after De13 cember 31, 1995.

14 (2) CONTINUATION OF EXISTING POLICIES.—In

15 the case of any contract issued before January 1,

16 1996, which met the long-term care insurance re17 quirements of the State in which the contract was

18 sitused at the time the contract was issued—

19 (A) such contract shall be treated for pur20 poses of the Internal Revenue Code of 1986 as

21 a long-term care insurance contract (as defined

22 in section 7702B(b) of such Code), and

23 (B) services provided under, or reimbursed

24 by, such contract shall be treated for such pur-
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1 poses as qualified long-term care services (as

2 defined in section 7702B(c) of such Code).

3 (3) EXCHANGES OF EXISTING POLICIES.—If,

4 after the date of enactment of this Act and before

5 January 1, 1996, a contract providing for long-term

6 care insurance coverage is exchanged solely for a

7 long-term care insurance contract (as defined in sec8 tion 7702B(b) of such Code), no gain or loss shall

9 be recognized on the exchange. If, in addition to a

10 long-term care insurance contract, money or other

11 property is received in the exchange, then any gain

12 shall be recognized to the extent of the sum of the

13 money and the fair market value of the other prop14 erty received. For purposes of this paragraph, the

15 cancellation of a contract providing for long-term

16 care insurance coverage and reinvestment of the can17 cellation proceeds in a long-term care insurance con18 tract within 60 days thereafter shall be treated as

19 an exchange.

20 (4) ISSUANCE OF CERTAIN RIDERS PER21 MITTED.—For purposes of applying sections 101(f),

22 7702, and 7702A of the Internal Revenue Code of

23 1986 to any contract—
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1 (A) the issuance of a rider which is treated

2 as a long-term care insurance contract under

3 section 7702B, and

4 (B) the addition of any provision required

5 to conform any other long-term care rider to be

6 so treated,

7 shall not be treated as a modification or material

8 change of such contract.

9 SEC. 212. QUALIFIED LONG-TERM CARE SERVICES TREAT10 ED AS MEDICAL CARE.

11 (a) GENERAL RULE.—Paragraph (1) of section

12 213(d) (defining medical care) is amended by striking

13 ‘‘or’’ at the end of subparagraph (B), by redesignating

14 subparagraph (C) as subparagraph (D), and by inserting

15 after subparagraph (B) the following new subparagraph:

16 ‘‘(C) for qualified long-term care services

17 (as defined in section 7702B(c)), or’’.

18 (b) TECHNICAL AMENDMENTS.—

19 (1) Subparagraph (D) of section 213(d)(1) (as

20 redesignated by subsection (a)) is amended by strik21 ing ‘‘subparagraphs (A) and (B)’’ and inserting

22 ‘‘subparagraphs (A), (B), and (C)’’.

23 (2)(A) Paragraph (1) of section 213(d) is

24 amended by adding at the end the following new

25 flush sentence:
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1 ‘‘In the case of a long-term care insurance contract

2 (as defined in section 7702B(b)), only eligible long3 term care premiums (as defined in paragraph (11))

4 shall be taken into account under subparagraph

5 (D).’’

6 (B) Subsection (d) of section 213 is amended

7 by adding at the end the following new paragraph:

8 ‘‘(11) ELIGIBLE LONG-TERM CARE PRE9 MIUMS.—

10 ‘‘(A) IN GENERAL.—For purposes of this

11 section, the term ‘eligible long-term care pre12 miums’ means the amount paid during a tax13 able year for any long-term care insurance con14 tract (as defined in section 7702B(b)) covering

15 an individual, to the extent such amount does

16 not exceed the limitation determined under the

17 following table:

‘‘In the case of an individual

with an attained age before the The limitation

close of the taxable year of: is:

40 or less ................................................... $200

More than 40 but not more than 50 ......... 375

More than 50 but not more than 60 ......... 750

More than 60 but not more than 70 ......... 2,000

More than 70 ............................................. 2,500.

18 ‘‘(B) INDEXING.—

19 ‘‘(i) IN GENERAL.—In the case of any

20 taxable year beginning in a calendar year

21 after 1996, each dollar amount contained
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1 in subparagraph (A) shall be increased by

2 the medical care cost adjustment of such

3 amount for such calendar year. If any in4 crease determined under the preceding sen5 tence is not a multiple of $10, such in6 crease shall be rounded to the nearest mul7 tiple of $10.

8 ‘‘(ii) MEDICAL CARE COST ADJUST9 MENT.—For purposes of clause (i), the

10 medical care cost adjustment for any cal11 endar year is the percentage (if any) by

12 which—

13 ‘‘(I) the medical care component

14 of the Consumer Price Index (as de15 fined in section 1(f)(5)) for August of

16 the preceding calendar year, exceeds

17 ‘‘(II) such component for August

18 of 1995.

19 The Secretary shall, in consultation with

20 the Secretary of Health and Human Serv21 ices, prescribe an adjustment which the

22 Secretary determines is more appropriate

23 for purposes of this paragraph than the

24 adjustment described in the preceding sen25 tence, and the adjustment so prescribed
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1 shall apply in lieu of the adjustment de2 scribed in the preceding sentence.’’

3 (3) Paragraph (6) of section 213(d) is amend4 ed—

5 (A) by striking ‘‘subparagraphs (A) and

6 (B)’’ and inserting ‘‘subparagraphs (A), (B),

7 and (C)’’, and

8 (B) by striking ‘‘paragraph (1)(C)’’ in sub9 paragraph (A) and inserting ‘‘paragraph

10 (1)(D)’’.

11 (4) Paragraph (7) of section 213(d) is amended

12 by striking ‘‘subparagraphs (A) and (B)’’ and insert13 ing ‘‘subparagraphs (A), (B), and (C)’’.

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

15 this section shall apply to taxable years beginning after

16 December 31, 1995.

17 SEC. 213. CERTAIN EXCHANGES OF LIFE INSURANCE CON18 TRACTS FOR LONG-TERM CARE INSURANCE

19 CONTRACTS NOT TAXABLE.

20 (a) IN GENERAL.—Subsection (a) of section 1035

21 (relating to certain exchanges of insurance contracts) is

22 amended by striking the period at the end of paragraph

23 (3) and inserting ‘‘; or’’, and by adding at the end the

24 following new paragraph:
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1 ‘‘(4) a contract of life insurance or an endow2 ment or annuity contract for a long-term care insur3 ance contract (as defined in section 7702B(b)).’’

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

5 this section shall apply to taxable years beginning after

6 December 31, 1995.

7 SEC. 214. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

8 WITHDRAWN FROM CERTAIN RETIREMENT

9 PLANS FOR LONG-TERM CARE INSURANCE.

10 (a) IN GENERAL.—Part III of subchapter B of chap11 ter 1 (relating to items specifically excluded from gross

12 income) is amended by redesignating section 137 as sec13 tion 138 and by inserting after section 136 the following

14 new section:

15 ‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT

16 PLANS FOR LONG-TERM CARE INSURANCE.

17 ‘‘(a) GENERAL RULE.—The amount which would

18 (but for this section) be includible in the gross income of

19 an individual for the taxable year by reason of eligible dis20 tributions during the taxable year shall be reduced (but

21 not below zero) by the aggregate premiums paid by such

22 individual during such taxable year for any long-term care

23 insurance contract (as defined in section 7702B(b)) for

24 coverage of such individual or the spouse of such

25 individual.
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1 ‘‘(b) ELIGIBLE DISTRIBUTION.—For purposes of this

2 section, the term ‘eligible distribution’ means any distribu3 tion or payment to an individual from—

4 ‘‘(1) an individual retirement plan of such indi5 vidual,

6 ‘‘(2) amounts attributable to employer contribu7 tions made pursuant to elective deferrals described

8 in subparagraph (A) or (C) of section 402(g)(3) or

9 section 501(c)(18)(D)(iii), or

10 ‘‘(3) amounts deferred under section 457(a).’’

11 (b) CONFORMING AMENDMENTS.—

12 (1) Section 401(k)(2)(B)(i) is amended by

13 striking ‘‘or’’ at the end of subclause (III), by strik14 ing ‘‘and’’ at the end of subclause (IV) and inserting

15 ‘‘or’’, and by inserting after subclause (IV) the fol16 lowing new subclause:

17 ‘‘(V) the date distributions for

18 premiums for a long-term care insur19 ance contract (as defined in section

20 7702B(b)) for coverage of such indi21 vidual or the spouse of such individual

22 are made, and’’.

23 (2) Section 403(b)(11) is amended by striking

24 ‘‘or’’ at the end of subparagraph (A), by striking the

25 period at the end of subparagraph (B) and inserting
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1 ‘‘, or’’, and by inserting after subparagraph (B) the

2 following new subparagraph:

3 ‘‘(C) for the payment of premiums for a

4 long-term care insurance contract (as defined in

5 section 7702B(b)) for coverage of the employee

6 or the spouse of the employee.’’

7 (3) Subparagraph (A) of section 457(d)(1) is

8 amended by striking ‘‘or’’ at the end of clause (ii),

9 by striking ‘‘and’’ at the end of clause (iii) and in10 serting ‘‘or’’, and by inserting after clause (iii) the

11 following new clause:

12 ‘‘(iv) the date distributions for pre13 miums for a long-term care insurance con14 tract (as defined in section 7702B(b)) for

15 coverage of such individual or the spouse

16 of such individual are made, and’’.

17 (4) The table of sections for part III of sub18 chapter B of chapter 1 is amended by striking the

19 last item and inserting the following new items:

‘‘Sec. 137. Distributions from certain retirement plans for longterm care insurance.

‘‘Sec. 138. Cross references to other Acts.’’

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

21 this section shall apply to payments and distributions after

22 December 31, 1995.
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1 Subtitle C—Treatment of

2 Accelerated Death Benefits

3 SEC. 221. TREATMENT OF ACCELERATED DEATH BENEFITS

4 BY RECIPIENT.

5 (a) IN GENERAL.—Section 101 (relating to certain

6 death benefits) is amended by adding at the end the fol7 lowing new subsection:

8 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

9 DEATH BENEFITS.—

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, the following amounts shall be treated as an

12 amount paid by reason of the death of an insured:

13 ‘‘(A) Any amount received under a life in14 surance contract on the life of an insured who

15 is a terminally ill individual.

16 ‘‘(B) Any amount received under a life in17 surance contract on the life of an insured who

18 is a chronically ill individual (as defined in sec19 tion 7702B(c)(2)) but only if such amount is

20 received under a rider or other provision of

21 such contract which is treated as a long-term

22 care insurance contract under section 7702B.

23 ‘‘(2) TREATMENT OF VIATICAL SETTLE24 MENTS.—
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1 ‘‘(A) IN GENERAL.—In the case of a life

2 insurance contract on the life of an insured de3 scribed in paragraph (1), if—

4 ‘‘(i) any portion of such contract is

5 sold to any viatical settlement provider, or

6 ‘‘(ii) any portion of the death benefit

7 is assigned to such a provider,

8 the amount paid for such sale or assignment

9 shall be treated as an amount paid under the

10 life insurance contract by reason of the death of

11 such insured.

12 ‘‘(B) VIATICAL SETTLEMENT PROVIDER.—

13 The term ‘viatical settlement provider’ means

14 any person regularly engaged in the trade or

15 business of purchasing, or taking assignments

16 of, life insurance contracts on the lives of

17 insureds described in paragraph (1) if—

18 ‘‘(i) such person is licensed for such

19 purposes in the State in which the insured

20 resides, or

21 ‘‘(ii) in the case of an insured who re22 sides in a State not requiring the licensing

23 of such persons for such purposes, such

24 person meets the requirements of sections

25 8 and 9 of the Viatical Settlements Model
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1 Act of the National Association of Insur2 ance Commissioners.

3 ‘‘(3) DEFINITIONS.—For purposes of this sub4 section—

5 ‘‘(A) TERMINALLY ILL INDIVIDUAL.—The

6 term ‘terminally ill individual’ means an indi7 vidual who has been certified by a physician as

8 having an illness or physical condition which

9 can reasonably be expected to result in death in

10 24 months or less after the date of the certifi11 cation.

12 ‘‘(B) PHYSICIAN.—The term ‘physician’

13 has the meaning given to such term by section

14 1861(r)(1) of the Social Security Act (42

15 U.S.C. 1395x(r)(1)).

16 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI17 CIES.—This subsection shall not apply in the case of

18 any amount paid to any taxpayer other than the in19 sured if such taxpayer has an insurable interest with

20 respect to the life of the insured by reason of the in21 sured being a director, officer, or employee of the

22 taxpayer or by reason of the insured being finan23 cially interested in any trade or business carried on

24 by the taxpayer.
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1 ‘‘(5) CROSS REFERENCE.—

‘‘For inclusion in gross income of excess benefits,

see section 91.’’

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

3 subsection (a) shall apply to amounts received after De4 cember 31, 1995.

5 SEC. 222. TAX TREATMENT OF COMPANIES ISSUING QUALI6 FIED ACCELERATED DEATH BENEFIT RID7 ERS.

8 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID9 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat10 ing to other definitions and special rules) is amended by

11 adding at the end the following new subsection:

12 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

13 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

14 this part—

15 ‘‘(1) IN GENERAL.—Any reference to a life in16 surance contract shall be treated as including a ref17 erence to a qualified accelerated death benefit rider

18 on such contract.

19 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE20 FIT RIDERS.—For purposes of this subsection, the

21 term ‘qualified accelerated death benefit rider’

22 means any rider on a life insurance contract if the

23 only payments under the rider are payments meeting

24 the requirements of section 101(g).
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1 ‘‘(3) EXCEPTION FOR LONG-TERM CARE RID2 ERS.—Paragraph (1) shall not apply to any rider

3 which is treated as a long-term care insurance con4 tract under section 7702B.’’

5 (b) EFFECTIVE DATE.—

6 (1) IN GENERAL.—The amendment made by

7 this section shall take effect on January 1, 1996.

8 (2) ISSUANCE OF RIDER NOT TREATED AS MA9 TERIAL CHANGE.—For purposes of applying sections

10 101(f), 7702, and 7702A of the Internal Revenue

11 Code of 1986 to any contract—

12 (A) the issuance of a qualified accelerated

13 death benefit rider (as defined in section 818(g)

14 of such Code (as added by this Act)), and

15 (B) the addition of any provision required

16 to conform an accelerated death benefit rider to

17 the requirements of such section 818(g),

18 shall not be treated as a modification or material

19 change of such contract.
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1 Subtitle D—Inclusion in Gross In2 come of Excess Long-term Care

3 Benefits

4 SEC. 231. INCLUSION IN INCOME OF EXCESS LONG-TERM

5 CARE BENEFITS.

6 (a) IN GENERAL.—Part II of subchapter B of chap7 ter 1 (relating to items specifically included in gross in8 come) is amended by adding at the end the following new

9 section:

10 ‘‘SEC. 91. EXCESS LONG-TERM CARE BENEFITS.

11 ‘‘(a) GENERAL RULE.—Notwithstanding any other

12 provision of this title, gross income shall include the

13 amount of excess long-term care benefits received by the

14 taxpayer during the taxable year.

15 ‘‘(b) EXCEPTION FOR TERMINALLY ILL INDIVID16 UALS.—Subsection (a) shall not apply to any long-term

17 care benefit paid by reason of an insured who is a termi18 nally ill individual (as defined in section 101(g)) as of the

19 date the benefit is received.

20 ‘‘(c) EXCESS LONG-TERM CARE BENEFITS.—For

21 purposes of this section—

22 ‘‘(1) IN GENERAL.—The term ‘excess long-term

23 care benefits’ means the excess (if any) of—
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1 ‘‘(A) the value of the long-term care bene2 fits received by the taxpayer during the taxable

3 year, over

4 ‘‘(B) the exclusion amount applicable to

5 such benefits.

6 ‘‘(2) LONG-TERM CARE BENEFITS.—The term

7 ‘long-term care benefits’ means—

8 ‘‘(A) payments and other benefits under

9 long-term care insurance contracts (as defined

10 in section 7702B(b)) to the extent excludable

11 from gross income by reason of section

12 7702B(a)(2), and

13 ‘‘(B) payments which are excludable from

14 gross income by reason of section 101(g).

15 ‘‘(3) EXCLUSION AMOUNT.—

16 ‘‘(A) IN GENERAL.—In the case of long17 term care benefits received by the taxpayer dur18 ing the taxable year by reason of the taxpayer

19 being a chronically ill individual, the term ‘ex20 clusion amount’ means the aggregate of $200

21 for each day during such year on which the in22 dividual is a chronically ill individual. In the

23 case of individuals who are married to each

24 other and who are both chronically ill individ-
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1 uals, the preceding sentence shall be applied

2 separately with respect to each spouse.

3 ‘‘(B) OTHER TAXPAYERS.—In the case of

4 long-term care benefits received during the tax5 able year by a taxpayer by reason of another in6 dividual being a chronically ill individual, the

7 term ‘exclusion amount’ means so much of such

8 other individual’s exclusion amount (for such

9 other individual’s taxable year which begins in

10 the calendar year in which the taxpayer’s tax11 able year begins) as is allocated by such other

12 individual to the taxpayer. Such an allocation

13 shall be made at the time and in the manner

14 prescribed by the Secretary; and once made,

15 shall be irrevocable.

16 ‘‘(d) CHRONICALLY ILL INDIVIDUAL.—For purposes

17 of this section, the term ‘chronically ill individual’ has the

18 meaning given to such term by section 7702B(c)(2).

19 ‘‘(e) INFLATION ADJUSTMENT OF $200 BENEFIT

20 LIMIT.—In the case of a calendar year after 1996, the

21 $200 amount contained in subsection (c)(3)(A) shall be

22 increased at the same time and in the same manner as

23 amounts are increased pursuant to section 213(d)(11).’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 for such part II is amended by adding at the end the fol3 lowing new item:

‘‘Sec. 91. Excess long-term care benefits.’’

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

5 this section shall apply to taxable years beginning after

6 December 31, 1995.

7 SEC. 232. REPORTING REQUIREMENTS.

8 (a) IN GENERAL.—Subpart B of part III of sub9 chapter A of chapter 61 is amended by adding at the end

10 the following new section:

11 ‘‘SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.

12 ‘‘(a) REQUIREMENT OF REPORTING.—Any person

13 who pays long-term care benefits shall make a return, ac14 cording to the forms or regulations prescribed by the Sec15 retary, setting forth—

16 ‘‘(1) the aggregate amount of such benefits

17 paid by such person to any individual during any

18 calendar year, and

19 ‘‘(2) the name, address, and TIN of such indi20 vidual.

21 ‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS

22 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—

23 Every person required to make a return under subsection

24 (a) shall furnish to each individual whose name is required
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1 to be set forth in such return a written statement show2 ing—

3 ‘‘(1) the name of the person making the pay4 ments, and

5 ‘‘(2) the aggregate amount of long-term care

6 benefits paid to the individual which are required to

7 be shown on such return.

8 The written statement required under the preceding sen9 tence shall be furnished to the individual on or before Jan10 uary 31 of the year following the calendar year for which

11 the return under subsection (a) was required to be made.

12 ‘‘(c) LONG-TERM CARE BENEFITS.—For purposes of

13 this section, the term ‘long-term care benefit’ has the

14 meaning given such term by section 91(c).’’

15 (b) PENALTIES.—

16 (1) Subparagraph (B) of section 6724(d)(1) is

17 amended by redesignating clauses (ix) through (xiv)

18 as clauses (x) through (xv), respectively, and by in19 serting after clause (viii) the following new clause:

20 ‘‘(ix) section 6050Q (relating to cer21 tain long-term care benefits),’’.

22 (2) Paragraph (2) of section 6724(d) is amend23 ed by redesignating subparagraphs (Q) through (T)

24 as subparagraphs (R) through (U), respectively, and
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1 by inserting after subparagraph (P) the following

2 new subparagraph:

3 ‘‘(Q) section 6050Q(b) (relating to certain

4 long-term care benefits),’’.

5 (c) CLERICAL AMENDMENT.—The table of sections

6 for subpart B of part III of subchapter A of chapter 61

7 is amended by adding at the end the following new item:

‘‘Sec. 6050Q. Certain long-term care benefits.’’

8 (d) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to benefits paid after December

10 31, 1995.

11 TITLE III—JOB CREATION AND

12 WAGE ENHANCEMENT

13 Subtitle A—Capital Gains Reform

14 PART I—CAPITAL GAINS REDUCTION FOR

15 TAXPAYERS OTHER THAN CORPORATIONS

16 SEC. 301. CAPITAL GAINS DEDUCTION.

17 (a) IN GENERAL.—Part I of subchapter P of chapter

18 1 (relating to treatment of capital gains), as amended by

19 subsection (d)(1), is amended by inserting after section

20 1201 the following new section:

21 ‘‘SEC. 1202. CAPITAL GAINS DEDUCTION.

22 ‘‘(a) GENERAL RULE.—If for any taxable year a tax23 payer other than a corporation has a net capital gain, 50

24 percent of such gain shall be a deduction from gross in25 come.
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1 ‘‘(b) ESTATES AND TRUSTS.—In the case of an es2 tate or trust, the deduction shall be computed by excluding

3 the portion (if any) of the gains for the taxable year from

4 sales or exchanges of capital assets which, under sections

5 652 and 662 (relating to inclusions of amounts in gross

6 income of beneficiaries of trusts), is includible by the in7 come beneficiaries as gain derived from the sale or ex8 change of capital assets.

9 ‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL

10 GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—

11 For purposes of this section, the net capital gain for any

12 taxable year shall be reduced (but not below zero) by the

13 amount which the taxpayer takes into account as invest14 ment income under section 163(d)(4)(B)(iii).

15 ‘‘(d) SPECIAL RULE FOR COLLECTIBLES.—

16 ‘‘(1) IN GENERAL.—At the election of the tax17 payer, the rate of tax imposed by section 1 shall not

18 exceed 28 percent on the excess of—

19 ‘‘(A) the amount which would be the net

20 capital gain for the taxable year without regard

21 to the application of section 1222(12) to collect22 ibles specified in such election, over

23 ‘‘(B) the net capital gain for such year.
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1 ‘‘(2) ELECTION.—Any election under this sub2 section, and any specification therein, once made,

3 shall be irrevocable.

4 ‘‘(3) COORDINATION WITH INDEXING.—Any col5 lectible specified in such an election shall be treated

6 as not being an indexed asset for purposes of section

7 1022.

8 ‘‘(e) TRANSITIONAL RULE.—

9 ‘‘(1) IN GENERAL.—In the case of a taxable

10 year which includes January 1, 1995—

11 ‘‘(A) the amount taken into account as the

12 net capital gain under subsection (a) shall not

13 exceed the net capital gain determined by only

14 taking into account gains and losses properly

15 taken into account for the portion of the tax16 able year on or after January 1, 1995, and

17 ‘‘(B) if the net capital gain for such year

18 exceeds the amount taken into account under

19 subsection (a), the rate of tax imposed by sec20 tion 1 on such excess shall not exceed 28 per21 cent.

22 ‘‘(2) SPECIAL RULES FOR PASS-THRU ENTI23 TIES.—

24 ‘‘(A) IN GENERAL.—In applying paragraph

25 (1) with respect to any pass-thru entity, the de-
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1 termination of when gains and losses are prop2 erly taken into account shall be made at the en3 tity level.

4 ‘‘(B) PASS-THRU ENTITY DEFINED.—For

5 purposes of subparagraph (A), the term ‘pass6 thru entity’ means—

7 ‘‘(i) a regulated investment company,

8 ‘‘(ii) a real estate investment trust,

9 ‘‘(iii) an S corporation,

10 ‘‘(iv) a partnership,

11 ‘‘(v) an estate or trust, and

12 ‘‘(vi) a common trust fund.’’

13 (b) DEDUCTION ALLOWABLE IN COMPUTING AD14 JUSTED GROSS INCOME.—Subsection (a) of section 62 is

15 amended by inserting after paragraph (15) the following

16 new paragraph:

17 ‘‘(16) LONG-TERM CAPITAL GAINS.—The de18 duction allowed by section 1202.’’

19 (c) TREATMENT OF COLLECTIBLES.—

20 (1) IN GENERAL.—Section 1222 is amended by

21 inserting after paragraph (11) the following new

22 paragraph:

23 ‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—

24 ‘‘(A) IN GENERAL.—Any gain or loss from

25 the sale or exchange of a collectible shall be
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1 treated as a short-term capital gain or loss (as

2 the case may be), without regard to the period

3 such asset was held. The preceding sentence

4 shall apply only to the extent the gain or loss

5 is taken into account in computing taxable in6 come.

7 ‘‘(B) TREATMENT OF CERTAIN SALES OF

8 INTEREST IN PARTNERSHIP, ETC.—For pur9 poses of subparagraph (A), any gain from the

10 sale or exchange of an interest in a partnership,

11 S corporation, or trust which is attributable to

12 unrealized appreciation in the value of collect13 ibles held by such entity shall be treated as gain

14 from the sale or exchange of a collectible. Rules

15 similar to the rules of section 751(f) shall apply

16 for purposes of the preceding sentence.

17 ‘‘(C) COLLECTIBLE.—For purposes of this

18 paragraph, the term ‘collectible’ means any cap19 ital asset which is a collectible (as defined in

20 section 408(m) without regard to paragraph (3)

21 thereof).’’

22 (2) CHARITABLE DEDUCTION NOT AF23 FECTED.—

24 (A) Paragraph (1) of section 170(e) is

25 amended by adding at the end the following
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1 new sentence: ‘‘For purposes of this paragraph,

2 section 1222 shall be applied without regard to

3 paragraph (12) thereof (relating to special rule

4 for collectibles).’’

5 (B) Clause (iv) of section 170(b)(1)(C) is

6 amended by inserting before the period at the

7 end the following: ‘‘and section 1222 shall be

8 applied without regard to paragraph (12) there9 of (relating to special rule for collectibles)’’.

10 (d) TECHNICAL AND CONFORMING CHANGES.—

11 (1)(A) Section 13113 of the Revenue Reconcili12 ation Act of 1993 (relating to 50-percent exclusion

13 for gain from certain small business stock), and the

14 amendments made by such section, are hereby re15 pealed; and the Internal Revenue Code of 1986 shall

16 be applied as if such section (and amendments) had

17 never been enacted.

18 (B) At the election of a taxpayer who holds

19 qualified small business stock (as defined in section

20 1202 of such Code, as in effect on the day before

21 the date of the enactment of this Act) as of such

22 date of enactment—

23 (i) the provisions repealed by subparagraph

24 (A) shall continue to apply to any disposition by
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1 such taxpayer of such stock held on such date,

2 and

3 (ii) the amendments made by this section

4 and section 1002 shall not apply to such stock;

5 except that losses from the sale or exchange of

6 such stock shall be taken into account as pro7 vided in the amendments made by paragraph

8 (13) of this subsection.

9 Such an election may be made only during the 1-

10 year period beginning on the date of the enactment

11 of this Act and, once made, shall be irrevocable.

12 (2) Section 1 is amended by striking subsection

13 (h).

14 (3) Paragraph (1) of section 170(e) is amended

15 by striking ‘‘the amount of gain’’ in the material fol16 lowing subparagraph (B)(ii) and inserting ‘‘50 percent (25 17 ⁄35 in the case of a corporation) of the

18 amount of gain’’.

19 (4)(A) Paragraph (2) of section 172(d) is

20 amended to read as follows:

21 ‘‘(2) CAPITAL GAINS AND LOSSES.—

22 ‘‘(A) LOSSES OF TAXPAYERS OTHER THAN

23 CORPORATIONS.—In the case of a taxpayer

24 other than a corporation, the amount deductible

25 on account of losses from sales or exchanges of
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1 capital assets shall not exceed the amount in2 cludible on account of gains from sales or ex3 changes of capital assets.

4 ‘‘(B) DEDUCTION UNDER SECTION 1202.—

5 The deduction under section 1202 shall not be

6 allowed.’’

7 (B) Subparagraph (B) of section 172(d)(4) is

8 amended by striking ‘‘paragraphs (1) and (3)’’ and

9 inserting ‘‘paragraphs (1), (2)(B), and (3)’’.

10 (5) The last sentence of section 453A(c)(3) is

11 amended by striking all that follows ‘‘long-term cap12 ital gain,’’ and inserting ‘‘the maximum rate on net

13 capital gain under section 1201 or the deduction

14 under section 1202 (whichever is appropriate) shall

15 be taken into account.’’

16 (6) Paragraph (4) of section 642(c) is amended

17 to read as follows:

18 ‘‘(4) ADJUSTMENTS.—To the extent that the

19 amount otherwise allowable as a deduction under

20 this subsection consists of gain from the sale or ex21 change of capital assets held for more than 1 year,

22 proper adjustment shall be made for any deduction

23 allowable to the estate or trust under section 1202

24 (relating to deduction for excess of capital gains over

25 capital losses). In the case of a trust, the deduction
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1 allowed by this subsection shall be subject to section

2 681 (relating to unrelated business income).’’

3 (7) Paragraph (3) of section 643(a) is amended

4 by adding at the end thereof the following new sen5 tence: ‘‘The deduction under section 1202 (relating

6 to deduction of excess of capital gains over capital

7 losses) shall not be taken into account.’’

8 (8) Subparagraph (C) of section 643(a)(6) is

9 amended by inserting ‘‘(i)’’ before ‘‘there shall’’ and

10 by inserting before the period ‘‘, and (ii) the deduc11 tion under section 1202 (relating to capital gains de12 duction) shall not be taken into account’’.

13 (9) Paragraph (4) of section 691(c) is amended

14 by striking ‘‘sections 1(h), 1201, and 1211’’ and in15 serting ‘‘sections 1201, 1202, and 1211’’.

16 (10) The second sentence of section 871(a)(2)

17 is amended by inserting ‘‘such gains and losses shall

18 be determined without regard to section 1202 (relat19 ing to deduction for capital gains) and’’ after ‘‘ex20 cept that’’.

21 (11)(A) Paragraph (2) of section 904(b) is

22 amended by striking subparagraph (A), by redesig23 nating subparagraph (B) as subparagraph (A), and

24 by inserting after subparagraph (A) (as so redesig25 nated) the following new subparagraph:
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1 ‘‘(B) OTHER TAXPAYERS.—In the case of

2 a taxpayer other than a corporation, taxable in3 come from sources outside the United States

4 shall include gain from the sale or exchange of

5 capital assets only to the extent of foreign

6 source capital gain net income.’’

7 (B) Subparagraph (A) of section 904(b)(2), as

8 so redesignated, is amended—

9 (i) by striking all that precedes clause (i)

10 and inserting the following:

11 ‘‘(A) CORPORATIONS.—In the case of a

12 corporation—’’, and

13 (ii) by striking in clause (i) ‘‘in lieu of ap14 plying subparagraph (A),’’.

15 (C) Paragraph (3) of section 904(b) is amended

16 by striking subparagraphs (D) and (E) and inserting

17 the following new subparagraph:

18 ‘‘(D) RATE DIFFERENTIAL PORTION.—The

19 rate differential portion of foreign source net

20 capital gain, net capital gain, or the excess of

21 net capital gain from sources within the United

22 States over net capital gain, as the case may

23 be, is the same proportion of such amount as

24 the excess of the highest rate of tax specified in

25 section 11(b) over the alternative rate of tax
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1 under section 1201(a) bears to the alternative

2 rate of tax under section 1201(a).’’

3 (12) Subsection (d) of section 1044 is amended

4 by striking the last sentence.

5 (13)(A) Paragraph (2) of section 1211(b) is

6 amended to read as follows:

7 ‘‘(2) the sum of—

8 ‘‘(A) the excess of the net short-term cap9 ital loss over the net long-term capital gain, and

10 ‘‘(B) one-half of the excess of the net long11 term capital loss over the net short-term capital

12 gain.’’

13 (B) So much of paragraph (2) of section

14 1212(b) as precedes subparagraph (B) thereof is

15 amended to read as follows:

16 ‘‘(2) SPECIAL RULES.—

17 ‘‘(A) ADJUSTMENTS.—

18 ‘‘(i) For purposes of determining the

19 excess referred to in paragraph (1)(A),

20 there shall be treated as short-term capital

21 gain in the taxable year an amount equal

22 to the lesser of—

23 ‘‘(I) the amount allowed for the

24 taxable year under paragraph (1) or

25 (2) of section 1211(b), or
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1 ‘‘(II) the adjusted taxable income

2 for such taxable year.

3 ‘‘(ii) For purposes of determining the

4 excess referred to in paragraph (1)(B),

5 there shall be treated as short-term capital

6 gain in the taxable year an amount equal

7 to the sum of—

8 ‘‘(I) the amount allowed for the

9 taxable year under paragraph (1) or

10 (2) of section 1211(b) or the adjusted

11 taxable income for such taxable year,

12 whichever is the least, plus

13 ‘‘(II) the excess of the amount

14 described in subclause (I) over the net

15 short-term capital loss (determined

16 without regard to this subsection) for

17 such year.’’

18 (C) Subsection (b) of section 1212 is

19 amended by adding at the end the following

20 new paragraph:

21 ‘‘(3) TRANSITIONAL RULE.—In the case of any

22 amount which, under paragraph (1) and section

23 1211(b) (as in effect for taxable years beginning be24 fore January 1, 1996), is treated as a capital loss

25 in the first taxable year beginning after December
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1 31, 1995, paragraph (1) and section 1211(b) (as so

2 in effect) shall apply (and paragraph (1) and section

3 1211(b) as in effect for taxable years beginning

4 after December 31, 1995, shall not apply) to the ex5 tent such amount exceeds the total of any net cap6 ital gains (determined without regard to this sub7 section) of taxable years beginning after December

8 31, 1995.’’

9 (14) Paragraph (1) of section 1402(i) is amend10 ed by inserting ‘‘, and the deduction provided by sec11 tion 1202 shall not apply’’ before the period at the

12 end thereof.

13 (15) Subsection (e) of section 1445 is amend14 ed—

15 (A) in paragraph (1) by striking ‘‘35 per16 cent (or, to the extent provided in regulations,

17 28 percent)’’ and inserting ‘‘25 percent (or, to

18 the extent provided in regulations, 19.8 per19 cent)’’, and

20 (B) in paragraph (2) by striking ‘‘35 per21 cent’’ and inserting ‘‘25 percent’’.

22 (16)(A) The second sentence of section

23 7518(g)(6)(A) is amended—

24 (i) by striking ‘‘during a taxable year to

25 which section 1(h) or 1201(a) applies’’, and
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1 (ii) by striking ‘‘28 percent (34 percent’’

2 and inserting ‘‘19.8 percent (25 percent’’.

3 (B) The second sentence of section

4 607(h)(6)(A) of the Merchant Marine Act, 1936 is

5 amended—

6 (i) by striking ‘‘during a taxable year to

7 which section 1(h) or 1201(a) of such Code ap8 plies’’, and

9 (ii) by striking ‘‘28 percent (34 percent’’

10 and inserting ‘‘19.8 percent (25 percent’’.

11 (e) CLERICAL AMENDMENT.—The table of sections

12 for part I of subchapter P of chapter 1 is amended by

13 inserting after the item relating to section 1201 the follow14 ing new item:

‘‘Sec. 1202. Capital gains deduction.’’

15 (f) EFFECTIVE DATE.—

16 (1) IN GENERAL.—Except as otherwise pro17 vided in this subsection, the amendments made by

18 this section shall apply to taxable years ending after

19 December 31, 1994.

20 (2) CONTRIBUTIONS.—The amendment made

21 by subsection (d)(3) shall apply to contributions on

22 or after January 1, 1995.

23 (3) USE OF LONG-TERM LOSSES.—The amend24 ments made by subsection (d)(13) shall apply to tax25 able years beginning after December 31, 1995.
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1 (4) WITHHOLDING.—The amendment made by

2 subsection (d)(15) shall apply only to amounts paid

3 after the date of the enactment of this Act.

4 SEC. 302. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER

5 DECEMBER 31, 1994, FOR PURPOSES OF DE6 TERMINING GAIN.

7 (a) IN GENERAL.—Part II of subchapter O of chap8 ter 1 (relating to basis rules of general application) is

9 amended by inserting after section 1021 the following new

10 section:

11 ‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED

12 AFTER DECEMBER 31, 1994, FOR PURPOSES

13 OF DETERMINING GAIN.

14 ‘‘(a) GENERAL RULE.—

15 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD16 JUSTED BASIS.—Solely for purposes of determining

17 gain on the sale or other disposition by a taxpayer

18 (other than a corporation) of an indexed asset which

19 has been held for more than 3 years, the indexed

20 basis of the asset shall be substituted for its ad21 justed basis.

22 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.—

23 The deductions for depreciation, depletion, and am24 ortization shall be determined without regard to the
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1 application of paragraph (1) to the taxpayer or any

2 other person.

3 ‘‘(b) INDEXED ASSET.—

4 ‘‘(1) IN GENERAL.—For purposes of this sec5 tion, the term ‘indexed asset’ means—

6 ‘‘(A) common stock in a C corporation

7 (other than a foreign corporation), and

8 ‘‘(B) tangible property,

9 which is a capital asset or property used in the trade

10 or business (as defined in section 1231(b)).

11 ‘‘(2) STOCK IN CERTAIN FOREIGN CORPORA12 TIONS INCLUDED.—For purposes of this section—

13 ‘‘(A) IN GENERAL.—The term ‘indexed

14 asset’ includes common stock in a foreign cor15 poration which is regularly traded on an estab16 lished securities market.

17 ‘‘(B) EXCEPTION.—Subparagraph (A)

18 shall not apply to—

19 ‘‘(i) stock of a foreign investment

20 company (within the meaning of section

21 1246(b)),

22 ‘‘(ii) stock in a passive foreign invest23 ment company (as defined in section

24 1296),
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1 ‘‘(iii) stock in a foreign corporation

2 held by a United States person who meets

3 the requirements of section 1248(a)(2),

4 and

5 ‘‘(iv) stock in a foreign personal hold6 ing company (as defined in section 552).

7 ‘‘(C) TREATMENT OF AMERICAN DEPOSI8 TORY RECEIPTS.—An American depository re9 ceipt for common stock in a foreign corporation

10 shall be treated as common stock in such cor11 poration.

12 ‘‘(c) INDEXED BASIS.—For purposes of this sec13 tion—

14 ‘‘(1) GENERAL RULE.—The indexed basis for

15 any asset is—

16 ‘‘(A) the adjusted basis of the asset, in17 creased by

18 ‘‘(B) the applicable inflation adjustment.

19 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—

20 The applicable inflation adjustment for any asset is

21 an amount equal to—

22 ‘‘(A) the adjusted basis of the asset, multi23 plied by

24 ‘‘(B) the percentage (if any) by which—
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1 ‘‘(i) the gross domestic product

2 deflator for the last calendar quarter end3 ing before the asset is disposed of, exceeds

4 ‘‘(ii) the gross domestic product

5 deflator for the last calendar quarter end6 ing before the asset was acquired by the

7 taxpayer.

8 The percentage under subparagraph (B) shall be

rounded to the nearest 1 9 ⁄10 of 1 percentage point.

10 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—

11 The gross domestic product deflator for any cal12 endar quarter is the implicit price deflator for the

13 gross domestic product for such quarter (as shown

14 in the last revision thereof released by the Secretary

15 of Commerce before the close of the following cal16 endar quarter).

17 ‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI18 MINISHED RISK OF LOSS; TREATMENT OF SHORT

19 SALES.—

20 ‘‘(1) IN GENERAL.—If the taxpayer (or a relat21 ed person) enters into any transaction which sub22 stantially reduces the risk of loss from holding any

23 asset, such asset shall not be treated as an indexed

24 asset for the period of such reduced risk.

25 ‘‘(2) SHORT SALES.—
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1 ‘‘(A) IN GENERAL.—In the case of a short

2 sale of an indexed asset with a short sale period

3 in excess of 3 years, for purposes of this title,

4 the amount realized shall be an amount equal

5 to the amount realized (determined without re6 gard to this paragraph) increased by the appli7 cable inflation adjustment. In applying sub8 section (c)(2) for purposes of the preceding sen9 tence, the date on which the property is sold

10 short shall be treated as the date of acquisition

11 and the closing date for the sale shall be treat12 ed as the date of disposition.

13 ‘‘(B) SHORT SALE PERIOD.—For purposes

14 of subparagraph (A), the short sale period be15 gins on the day that the property is sold and

16 ends on the closing date for the sale.

17 ‘‘(e) TREATMENT OF REGULATED INVESTMENT

18 COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.—

19 ‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.—

20 ‘‘(A) IN GENERAL.—Except as otherwise

21 provided in this paragraph, the adjustment

22 under subsection (a) shall be allowed to any

23 qualified investment entity (including for pur24 poses of determining the earnings and profits of

25 such entity).
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1 ‘‘(B) EXCEPTION FOR CORPORATE SHARE2 HOLDERS.—Under regulations—

3 ‘‘(i) in the case of a distribution by a

4 qualified investment entity (directly or in5 directly) to a corporation—

6 ‘‘(I) the determination of whether

7 such distribution is a dividend shall be

8 made without regard to this section,

9 and

10 ‘‘(II) the amount treated as gain

11 by reason of the receipt of any capital

12 gain dividend shall be increased by the

13 percentage by which the entity’s net

14 capital gain for the taxable year (de15 termined without regard to this sec16 tion) exceeds the entity’s net capital

17 gain for such year determined with re18 gard to this section, and

19 ‘‘(ii) there shall be other appropriate

20 adjustments (including deemed distribu21 tions) so as to ensure that the benefits of

22 this section are not allowed (directly or in23 directly) to corporate shareholders of quali24 fied investment entities.
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1 For purposes of the preceding sentence, any

2 amount includible in gross income under section

3 852(b)(3)(D) shall be treated as a capital gain

4 dividend and an S corporation shall not be

5 treated as a corporation.

6 ‘‘(C) EXCEPTION FOR QUALIFICATION

7 PURPOSES.—This section shall not apply for

8 purposes of sections 851(b) and 856(c).

9 ‘‘(D) EXCEPTION FOR CERTAIN TAXES IM10 POSED AT ENTITY LEVEL.—

11 ‘‘(i) TAX ON FAILURE TO DISTRIBUTE

12 ENTIRE GAIN.—If any amount is subject to

13 tax under section 852(b)(3)(A) for any

14 taxable year, the amount on which tax is

15 imposed under such section shall be in16 creased by the percentage determined

17 under subparagraph (B)(i)(II). A similar

18 rule shall apply in the case of any amount

19 subject to tax under paragraph (2) or (3)

20 of section 857(b) to the extent attributable

21 to the excess of the net capital gain over

22 the deduction for dividends paid deter23 mined with reference to capital gain divi24 dends only. The first sentence of this

25 clause shall not apply to so much of the
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1 amount subject to tax under section

2 852(b)(3)(A) as is designated by the com3 pany under section 852(b)(3)(D).

4 ‘‘(ii) OTHER TAXES.—This section

5 shall not apply for purposes of determining

6 the amount of any tax imposed by para7 graph (4), (5), or (6) of section 857(b).

8 ‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN

9 ENTITY.—

10 ‘‘(A) REGULATED INVESTMENT COMPA11 NIES.—Stock in a regulated investment com12 pany (within the meaning of section 851) shall

13 be an indexed asset for any calendar quarter in

14 the same ratio as—

15 ‘‘(i) the average of the fair market

16 values of the indexed assets held by such

17 company at the close of each month during

18 such quarter, bears to

19 ‘‘(ii) the average of the fair market

20 values of all assets held by such company

21 at the close of each such month.

22 ‘‘(B) REAL ESTATE INVESTMENT

23 TRUSTS.—Stock in a real estate investment

24 trust (within the meaning of section 856) shall
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1 be an indexed asset for any calendar quarter in

2 the same ratio as—

3 ‘‘(i) the fair market value of the in4 dexed assets held by such trust at the close

5 of such quarter, bears to

6 ‘‘(ii) the fair market value of all as7 sets held by such trust at the close of such

8 quarter.

9 ‘‘(C) RATIO OF 80 PERCENT OR MORE.—If

10 the ratio for any calendar quarter determined

11 under subparagraph (A) or (B) would (but for

12 this subparagraph) be 80 percent or more, such

13 ratio for such quarter shall be 100 percent.

14 ‘‘(D) RATIO OF 20 PERCENT OR LESS.—If

15 the ratio for any calendar quarter determined

16 under subparagraph (A) or (B) would (but for

17 this subparagraph) be 20 percent or less, such

18 ratio for such quarter shall be zero.

19 ‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For

20 purposes of this paragraph, a qualified invest21 ment entity which holds a partnership interest

22 shall be treated (in lieu of holding a partnership

23 interest) as holding its proportionate share of

24 the assets held by the partnership.
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1 ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS2 TRIBUTIONS.—Except as otherwise provided by the

3 Secretary, a distribution with respect to stock in a

4 qualified investment entity which is not a dividend

5 and which results in a reduction in the adjusted

6 basis of such stock shall be treated as allocable to

7 stock acquired by the taxpayer in the order in which

8 such stock was acquired.

9 ‘‘(4) QUALIFIED INVESTMENT ENTITY.—For

10 purposes of this subsection, the term ‘qualified in11 vestment entity’ means—

12 ‘‘(A) a regulated investment company

13 (within the meaning of section 851), and

14 ‘‘(B) a real estate investment trust (within

15 the meaning of section 856).

16 ‘‘(f) OTHER PASS-THRU ENTITIES.—

17 ‘‘(1) PARTNERSHIPS.—

18 ‘‘(A) IN GENERAL.—In the case of a part19 nership, the adjustment made under subsection

20 (a) at the partnership level shall be passed

21 through to the partners.

22 ‘‘(B) SPECIAL RULE IN THE CASE OF SEC23 TION 754 ELECTIONS.—In the case of a transfer

24 of an interest in a partnership with respect to
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1 which the election provided in section 754 is in

2 effect—

3 ‘‘(i) the adjustment under section

4 743(b)(1) shall, with respect to the trans5 feror partner, be treated as a sale of the

6 partnership assets for purposes of applying

7 this section, and

8 ‘‘(ii) with respect to the transferee

9 partner, the partnership’s holding period

10 for purposes of this section in such assets

11 shall be treated as beginning on the date

12 of such adjustment.

13 ‘‘(2) S CORPORATIONS.—In the case of an S

14 corporation, the adjustment made under subsection

15 (a) at the corporate level shall be passed through to

16 the shareholders. This section shall not apply for

17 purposes of determining the amount of any tax im18 posed by section 1374 or 1375.

19 ‘‘(3) COMMON TRUST FUNDS.—In the case of a

20 common trust fund, the adjustment made under sub21 section (a) at the trust level shall be passed through

22 to the participants.

23 ‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

24 DETERMINING LOSS ON SALE OF INTEREST IN EN25 TITY.—Notwithstanding the preceding provisions of
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1 this subsection, for purposes of determining the

2 amount of any loss on a sale or exchange of an in3 terest in a partnership, S corporation, or common

4 trust fund, the adjustment made under subsection

5 (a) shall not be taken into account in determining

6 the adjusted basis of such interest.

7 ‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.—

8 ‘‘(1) IN GENERAL.—This section shall not apply

9 to any sale or other disposition of property between

10 related persons except to the extent that the basis

11 of such property in the hands of the transferee is a

12 substituted basis.

13 ‘‘(2) RELATED PERSONS DEFINED.—For pur14 poses of this section, the term ‘related persons’

15 means—

16 ‘‘(A) persons bearing a relationship set

17 forth in section 267(b), and

18 ‘‘(B) persons treated as single employer

19 under subsection (b) or (c) of section 414.

20 ‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST21 MENT.—If any person transfers cash, debt, or any other

22 property to another person and the principal purpose of

23 such transfer is to secure or increase an adjustment under

24 subsection (a), the Secretary may disallow part or all of

25 such adjustment or increase.
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1 ‘‘(i) SPECIAL RULES.—For purposes of this section—

2 ‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If

3 there is an addition to the adjusted basis of any tan4 gible property or of any stock in a corporation dur5 ing the taxable year by reason of an improvement to

6 such property or a contribution to capital of such

7 corporation—

8 ‘‘(A) such addition shall never be taken

9 into account under subsection (c)(1)(A) if the

10 aggregate amount thereof during the taxable

11 year with respect to such property or stock is

12 less than $1,000, and

13 ‘‘(B) such addition shall be treated as a

14 separate asset acquired at the close of such tax15 able year if the aggregate amount thereof dur16 ing the taxable year with respect to such prop17 erty or stock is $1,000 or more.

18 A rule similar to the rule of the preceding sentence

19 shall apply to any other portion of an asset to the

20 extent that separate treatment of such portion is ap21 propriate to carry out the purposes of this section.

22 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

23 THROUGHOUT HOLDING PERIOD.—The applicable in24 flation ratio shall be appropriately reduced for peri25 ods during which the asset was not an indexed asset.
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1 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU2 TIONS.—A distribution with respect to stock in a

3 corporation which is not a dividend shall be treated

4 as a disposition.

5 ‘‘(4) ACQUISITION DATE WHERE THERE HAS

6 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1)

7 WITH RESPECT TO THE TAXPAYER.—If there has

8 been a prior application of subsection (a)(1) to an

9 asset while such asset was held by the taxpayer, the

10 date of acquisition of such asset by the taxpayer

11 shall be treated as not earlier than the date of the

12 most recent such prior application.

13 ‘‘(5) COLLAPSIBLE CORPORATIONS.—The appli14 cation of section 341(a) (relating to collapsible cor15 porations) shall be determined without regard to this

16 section.

17 ‘‘(j) REGULATIONS.—The Secretary shall prescribe

18 such regulations as may be necessary or appropriate to

19 carry out the purposes of this section.’’

20 (b) CLERICAL AMENDMENT.—The table of sections

21 for part II of subchapter O of chapter 1 is amended by

22 inserting after the item relating to section 1021 the follow23 ing new item:

‘‘Sec. 1022. Indexing of certain assets acquired after December

31, 1994, for purposes of determining gain.’’

24 (c) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to the disposition of any

3 property the holding period of which begins after

4 December 31, 1994.

5 (2) CERTAIN TRANSACTIONS BETWEEN RELAT6 ED PERSONS.—The amendments made by this sec7 tion shall not apply to the disposition of any prop8 erty acquired after December 31, 1994, from a re9 lated person (as defined in section 1022(g)(2) of the

10 Internal Revenue Code of 1986, as added by this

11 section) if—

12 (A) such property was so acquired for a

13 price less than the property’s fair market value,

14 and

15 (B) the amendments made by this section

16 did not apply to such property in the hands of

17 such related person.

18 (d) ELECTION TO RECOGNIZE GAIN ON ASSETS

19 HELD ON JANUARY 1, 1995.—For purposes of the Inter20 nal Revenue Code of 1986—

21 (1) IN GENERAL.—A taxpayer other than a cor22 poration may elect to treat—

23 (A) any readily tradable stock (which is an

24 indexed asset) held by such taxpayer on Janu25 ary 1, 1995, and not sold before the next busi-
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1 ness day after such date, as having been sold

2 on such next business day for an amount equal

3 to its closing market price on such next busi4 ness day (and as having been reacquired on

5 such next business day for an amount equal to

6 such closing market price), and

7 (B) any other indexed asset held by the

8 taxpayer on January 1, 1995, as having been

9 sold on such date for an amount equal to its

10 fair market value on such date (and as having

11 been reacquired on such date for an amount

12 equal to such fair market value).

13 (2) TREATMENT OF GAIN OR LOSS.—

14 (A) Any gain resulting from an election

15 under paragraph (1) shall be treated as received

16 or accrued on the date the asset is treated as

17 sold under paragraph (1) and shall be recog18 nized notwithstanding any provision of the In19 ternal Revenue Code of 1986.

20 (B) Any loss resulting from an election

21 under paragraph (1) shall not be allowed for

22 any taxable year.

23 (3) ELECTION.—An election under paragraph

24 (1) shall be made in such manner as the Secretary

25 may prescribe and shall specify the assets for which
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1 such election is made. Such an election, once made

2 with respect to any asset, shall be irrevocable.

3 (4) READILY TRADABLE STOCK.—For purposes

4 of this subsection, the term ‘‘readily tradable stock’’

5 means any stock which, as of January 1, 1995, is

6 readily tradable on an established securities market

7 or otherwise.

8 (e) TREATMENT OF PRINCIPAL RESIDENCES.—Prop9 erty held and used by the taxpayer on January 1, 1995,

10 as his principal residence (within the meaning of section

11 1034 of the Internal Revenue Code of 1986) shall be treat12 ed—

13 (1) for purposes of subsection (c)(1) of this sec14 tion, as having a holding period which begins after

15 December 31, 1994, and

16 (2) for purposes of section 1022(c)(2)(B)(ii) of

17 such Code, as having been acquired on January 1,

18 1995.

19 Subsection (d) shall not apply to property to which this

20 subsection applies.
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1 PART II—CAPITAL GAINS REDUCTION FOR

2 CORPORATIONS

3 SEC. 311. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX

4 FOR CORPORATIONS.

5 (a) IN GENERAL.—Section 1201 is amended to read

6 as follows:

7 ‘‘SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.

8 ‘‘(a) GENERAL RULE.—If for any taxable year a cor9 poration has a net capital gain, then, in lieu of the tax

10 imposed by sections 11, 511, and 831 (a) and (b) (which11 ever is applicable), there is hereby imposed a tax (if such

12 tax is less than the tax imposed by such sections) which

13 shall consist of the sum of—

14 ‘‘(1) a tax computed on the taxable income re15 duced by the amount of the net capital gain, at the

16 rates and in the manner as if this subsection had

17 not been enacted, plus

18 ‘‘(2) a tax of 25 percent of the net capital gain.

19 ‘‘(b) TRANSITIONAL RULE.—

20 ‘‘(1) IN GENERAL.—In the case of any taxable

21 year ending after December 31, 1994, and beginning

22 before January 1, 1996, subsection (a)(2) shall be

23 applied as if it read as follows:

24 ‘‘ ‘(2)(A) a tax of 25 percent of the lesser of—

25 ‘‘ ‘(i) the net capital gain for the taxable

26 year, or
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1 ‘‘ ‘(ii) the net capital gain taking into ac2 count only gain or loss properly taken into ac3 count for the portion of the taxable year after

4 December 31, 1994, plus

5 ‘‘ ‘(B) a tax of 35 percent of the excess (if any)

6 of—

7 ‘‘ ‘(i) the net capital gain for the taxable

8 year, over

9 ‘‘ ‘(ii) the amount of net capital gain taken

10 into account under subparagraph (A).’

11 ‘‘(2) SPECIAL RULE FOR PASS-THRU ENTI12 TIES.—Section 1202(e)(2) shall apply for purposes

13 of paragraph (1).

14 ‘‘(c) CROSS REFERENCES.—

‘‘For computation of the alternative tax—

‘‘(1) in the case of life insurance companies, see

section 801(a)(2),

‘‘(2) in the case of regulated investment companies and their shareholders, see section 852(b)(3)(A)

and (D), and

‘‘(3) in the case of real estate investment trusts,

see section 857(b)(3)(A).’’

15 (b) TECHNICAL AMENDMENT.—Clause (iii) of section

16 852(b)(3)(D) is amended by striking ‘‘65 percent’’ and in17 serting ‘‘75 percent’’.

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

19 this section shall apply to taxable years ending after De20 cember 31, 1994.
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1 PART III—CAPITAL LOSS DEDUCTION ALLOWED

2 WITH RESPECT TO SALE OR EXCHANGE OF

3 PRINCIPAL RESIDENCE

4 SEC. 316. CAPITAL LOSS DEDUCTION ALLOWED WITH RE5 SPECT TO SALE OR EXCHANGE OF PRINCIPAL

6 RESIDENCE.

7 (a) IN GENERAL.—Subsection (c) of section 165 (re8 lating to limitation on losses of individuals) is amended

9 by striking ‘‘and’’ at the end of paragraph (2), by striking

10 the period at the end of paragraph (3) and inserting ‘‘;

11 and’’, and by adding at the end the following new para12 graph:

13 ‘‘(4) losses arising from the sale or exchange of

14 the principal residence (within the meaning of sec15 tion 1034) of the taxpayer.’’

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

17 subsection (a) shall apply to sales and exchanges after De18 cember 31, 1994, in taxable years ending after such date.

19 Subtitle B—Cost Recovery

20 Provisions

21 SEC. 321. DEPRECIATION ADJUSTMENT FOR CERTAIN

22 PROPERTY PLACED IN SERVICE AFTER DE23 CEMBER 31, 1994.

24 (a) IN GENERAL.—Section 168 (relating to acceler25 ated cost recovery system) is amended by adding at the

26 end thereof the following new subsection:
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1 ‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA2 LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED

3 IN SERVICE AFTER DECEMBER 31, 1994.—

4 ‘‘(1) IN GENERAL.—In the case of tangible

5 property placed in service after December 31, 1994,

6 the deduction under this section with respect to such

7 property—

8 ‘‘(A) shall be determined by substituting

9 ‘150 percent’ for ‘200 percent’ in subsection

10 (b)(1) in the case of property to which the 200

11 percent declining balance method would other12 wise apply, and

13 ‘‘(B) for any taxable year after the taxable

14 year during which the property is placed in

15 service shall be—

16 ‘‘(i) the amount determined under this

17 section for such taxable year without re18 gard to this subparagraph, multiplied by

19 ‘‘(ii) the applicable neutral cost recov20 ery ratio for such taxable year.

21 ‘‘(2) APPLICABLE NEUTRAL COST RECOVERY

22 RATIO.—For purposes of paragraph (1)—

23 ‘‘(A) IN GENERAL.—The applicable neutral

24 cost recovery ratio for the property for any tax25 able year is the number determined by—
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1 ‘‘(i) dividing—

2 ‘‘(I) the gross domestic product

3 deflator for the calendar quarter

4 which includes the mid-point of the

5 taxable year, by

6 ‘‘(II) the gross domestic product

7 deflator for the calendar quarter

8 which includes the mid-point of the

9 taxable year in which the property

10 was placed in service by the taxpayer,

11 and

12 ‘‘(ii) then multiplying the number de13 termined under clause (i) by the number

14 equal to 1.035 to the nth power where ‘n’

15 is the number of full years (as of the close

16 of the taxable year referred to in clause

17 (i)(I)) after the date such property was

18 placed in service.

19 The applicable neutral cost recovery ratio shall

20 never be less than 1. The applicable neutral

21 cost recovery ratio shall be rounded to the nearest 1 22 ⁄1000.

23 ‘‘(B) SPECIAL RULE FOR CERTAIN PROP24 ERTY.—In the case of property described in

25 paragraph (2) or (3) of subsection (b) or in
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1 subsection (g), the applicable neutral cost recov2 ery ratio shall be determined without regard to

3 subparagraph (A)(ii).

4 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—

5 For purposes of paragraph (2), the gross domestic

6 product deflator for any calendar quarter is the im7 plicit price deflator for the gross domestic product

8 for such quarter (as shown in the last revision there9 of released by the Secretary of Commerce before the

10 close of the following calendar quarter).

11 ‘‘(4) COORDINATION WITH INDEXING OF BASIS

12 FOR PURPOSES OF DETERMINING GAIN.—Section

13 1022 shall not apply to any property to which this

14 subsection applies.

15 ‘‘(5) ELECTION NOT TO HAVE SUBSECTION

16 APPLY.—This subsection shall not apply to any

17 property if the taxpayer elects not to have this sub18 section apply to such property. Such an election,

19 once made, shall be irrevocable.

20 ‘‘(6) CHURNING TRANSACTIONS.—This sub21 section shall not apply to any property if this section

22 would not apply to such property were—

23 ‘‘(A) subsection (f)(5)(A)(ii) applied by

24 substituting ‘1995’ for ‘1987’ and ‘1994’ for

25 ‘1986’, and
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1 ‘‘(B) subsection (f)(5)(B) not applied.

2 ‘‘(7) ADDITIONAL DEDUCTION NOT TO AFFECT

3 BASIS OR RECAPTURE.—The additional amount de4 termined under this section by reason of this sub5 section shall not be taken into account in determin6 ing the adjusted basis of any property or of any in7 terest in a pass-thru entity (as defined in section

8 1202(e)(2)) which holds such property and shall not

9 be treated as a deduction for depreciation for pur10 poses of sections 1245 and 1250.’’

11 (b) MINIMUM TAX TREATMENT.—

12 (1) Paragraph (1) of section 56(a) is amended

13 by adding at the end thereof the following new sub14 paragraph:

15 ‘‘(E) USE OF NEUTRAL COST RECOVERY

16 RATIO.—This paragraph shall not apply to

17 property to which section 168(k) applies.’’

18 (2) Clause (i) of section 56(g)(4)(A) is amended

19 by striking ‘‘(a)(1)(A)’’ and inserting ‘‘(a)(1)’’.

20 (3) Subparagraph (C) of section 56(g)(4) is

21 amended by adding at the end the following new

22 clause:

23 ‘‘(v) NEUTRAL COST RECOVERY DE24 DUCTION.—Clause (i) shall not apply to
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1 the additional deduction allowable by rea2 son of section 168(k).’’

3 (c) TECHNICAL AMENDMENTS.—

4 (1) Clause (i) of section 280F(a)(1)(B) is

5 amended by adding at the end the following new

6 sentence: ‘‘For purposes of this clause, the unre7 covered basis of any passenger automobile shall be

8 treated as including the additional amount deter9 mined under section 168 by reason of subsection (k)

10 thereof to the extent not allowed as a deduction by

11 reason of this paragraph for any taxable year in the

12 recovery period.’’

13 (2) Subparagraph (B) of section 382(h)(2) is

14 amended by adding at the end the following new

15 sentence: ‘‘The amount of the net unrealized built16 in loss shall be increased by the amount of the addi17 tional deduction allowable by reason of section

18 168(k) which is treated under the preceding sen19 tence as a recognized built-in loss.’’

20 (3) Subsection (a) of section 465 is amended by

21 adding at the end the following new paragraph:

22 ‘‘(4) TREATMENT OF NEUTRAL COST RECOVERY

23 DEDUCTION.—

24 ‘‘(A) IN GENERAL.—None of the additional

25 deduction allowable by reason of section 168(k)
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1 for the taxable year shall be disallowed under

2 paragraph (1) unless there is a disallowed non3 NCR loss for such year.

4 ‘‘(B) PROPORTIONATE DISALLOWANCE.—

5 ‘‘(i) IN GENERAL.—If there is a dis6 allowed non-NCR loss for the taxable year,

7 only the disallowed portion of the addi8 tional deduction allowable by reason of sec9 tion 168(k) shall be not allowed under

10 paragraph (1).

11 ‘‘(ii) DISALLOWED PORTION.—For

12 purposes of clause (i), the disallowed por13 tion is the percentage which the disallowed

14 non-NCR loss’s allocable share of non15 NCR depreciation is of total non-NCR de16 preciation.

17 ‘‘(iii) ALLOCABLE SHARE.—For pur18 poses of clause (ii), a disallowed non-NCR

19 loss’s allocable share of non-NCR deprecia20 tion is the amount which bears the same

21 ratio to the amount of the loss as the

22 amount of non-NCR depreciation for the

23 taxable year bears to the total amount of

24 deductions for such taxable year.
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1 ‘‘(C) DEFINITIONS.—For purposes of this

2 paragraph—

3 ‘‘(i) DISALLOWED NON-NCR LOSS.—

4 The term ‘disallowed non-NCR loss’

5 means, for any taxable year, the amount of

6 the loss from the activity which would be

7 disallowed under paragraph (1) if such loss

8 were determined without regard to the ad9 ditional deduction allowable by reason of

10 section 168(k).

11 ‘‘(ii) NON-NCR DEPRECIATION.—The

12 term ‘non-NCR depreciation’ means the

13 amount allowable as a deduction under

14 section 168 without regard to subsection

15 (k) thereof.’’

16 (4) Subparagraph (A) of section 1503(e)(1) is

17 amended by inserting before the comma ‘‘and shall

18 be determined without regard to section 168(k)’’.

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

20 this section shall apply to taxable years ending after De21 cember 31, 1994.

22 SEC. 322. TREATMENT OF ABANDONMENT OF LESSOR IM23 PROVEMENTS AT TERMINATION OF LEASE.

24 (a) IN GENERAL.—Paragraph (8) of section 168(i)

25 is amended to read as follows:
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1 ‘‘(8) TREATMENT OF LEASEHOLD IMPROVE2 MENTS.—

3 ‘‘(A) IN GENERAL.—In the case of any

4 building erected (or improvements made) on

5 leased property, if such building or improve6 ment is property to which this section applies,

7 the depreciation deduction shall be determined

8 under the provisions of this section.

9 ‘‘(B) TREATMENT OF LESSOR IMPROVE10 MENTS WHICH ARE ABANDONED AT TERMI11 NATION OF LEASE.—An improvement—

12 ‘‘(i) which is made by the lessor of

13 leased property for the lessee of such prop14 erty, and

15 ‘‘(ii) which is irrevocably disposed of

16 or abandoned by the lessor at the termi17 nation of the lease by such lessee,

18 shall be treated for purposes of determining

19 gain or loss under this title as disposed of by

20 the lessor when so disposed of or abandoned.’’

21 (b) EFFECTIVE DATE.—Subparagraph (B) of section

22 168(i)(8) of the Internal Revenue Code of 1986, as added

23 by the amendment made by subsection (a), shall apply to

24 improvements disposed of or abandoned after March 13,

25 1995.
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1 Subtitle C—Alternative Minimum

2 Tax Relief

3 SEC. 331. PHASEOUT OF APPLICATION OF ALTERNATIVE

4 MINIMUM TAX TO CORPORATIONS.

5 (a) TERMINATION.—Subsection (a) of section 55 is

6 amended by adding at the end the following new flush sen7 tence:

8 ‘‘In the case of a corporation, the tentative minimum tax

9 for any taxable year beginning after December 31, 2000,

10 shall be zero.’’

11 (b) EARLIER TERMINATION OF CERTAIN ADJUST12 MENTS FOR ALL TAXPAYERS.—

13 (1) DEPRECIATION.—Paragraph (1) of section

14 56(a) is amended by inserting ‘‘and before March

15 14, 1995,’’ after ‘‘December 31, 1986,’’.

16 (2) MINING EXPLORATION AND DEVELOPMENT

17 COSTS.—Paragraph (2) of section 56(a) is amended

18 by inserting ‘‘and before January 1, 1996,’’ after

19 ‘‘December 31, 1986,’’.

20 (3) LONG-TERM CONTRACTS.—Paragraph (3) of

21 section 56(a) is amended by inserting ‘‘and before

22 January 1, 1996,’’ after ‘‘March 1, 1986,’’.

23 (4) POLLUTION CONTROL FACILITIES.—Para24 graph (5) of section 56(a) is amended by inserting
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1 ‘‘and before January 1, 1996,’’ after ‘‘December 31,

2 1986,’’.

3 (5) INSTALLMENT SALES.—Paragraph (6) of

4 section 56(a) is amended by inserting ‘‘and before

5 January 1, 1996,’’ after ‘‘March 1, 1986,’’.

6 (c) EARLIER TERMINATION OF CIRCULATION AND

7 RESEARCH AND EXPERIMENTAL EXPENDITURE ADJUST8 MENT FOR INDIVIDUALS.—Subparagraph (A) of section

9 56(b)(2) is amended by inserting ‘‘and before January 1,

10 1996,’’ after ‘‘December 31, 1986,’’.

11 (d) EARLIER TERMINATION OF CERTAIN ADJUST12 MENTS FOR CORPORATIONS.—

13 (1) MERCHANT MARINE CAPITAL CONSTRUC14 TION FUNDS.—Paragraph (2) of section 56(c) is

15 amended—

16 (A) by inserting ‘‘and before January 1,

17 1996,’’ after ‘‘December 31, 1986,’’ each place

18 it appears, and

19 (B) by striking the last sentence and in20 serting the following new flush sentence:

21 ‘‘For purposes of this paragraph, any withdrawal of

22 deposit or earnings from the fund shall be treated as

23 allocable to deposits made, and earnings received or

24 accrued, in the order in which made, received, or ac25 crued.’’
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1 (2) SECTION 833(b) DEDUCTION.—Paragraph

2 (3) of section 56(c) is amended by adding at the end

3 the following new sentence: ‘‘This paragraph shall

4 not apply to any taxable year beginning after De5 cember 31, 1995.’’

6 (3) CERTAIN EARNINGS AND PROFITS ITEMS.—

7 (A) Subparagraph (B) of section 56(g)(4)

8 is amended by adding at the end the following

9 new clause:

10 ‘‘(iii) TERMINATION.—This subpara11 graph shall not apply to any taxable year

12 beginning after December 31, 1995.’’

13 (B) Subparagraph (C) of section 56(g)(4)

14 is amended by adding at the end the following

15 new clause:

16 ‘‘(v) TERMINATION.—This subpara17 graph shall not apply to any taxable year

18 beginning after December 31, 1995.’’

19 (4) INTANGIBLE DRILLING COSTS.—Clause (i)

20 of section 56(g)(4)(D) is amended by adding at the

21 end the following new sentence: ‘‘This clause shall

22 not apply to any taxable year beginning after De23 cember 31, 1995.’’

24 (5) CERTAIN AMORTIZATION PROVISIONS.—

25 Clause (ii) of section 56(g)(4)(D) is amended by
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1 adding at the end the following new sentence: ‘‘This

2 clause shall not apply to any expenditure paid or in3 curred after December 31, 1995.’’

4 (6) LIFO INVENTORY ADJUSTMENTS.—Clause

5 (iii) of section 56(g)(4)(D) is amended by adding at

6 the end the following new sentence: ‘‘This clause

7 shall not apply to any adjustment arising in a tax8 able year beginning after December 31, 1995.’’

9 (7) INSTALLMENT SALES.—Clause (iv) of sec10 tion 56(g)(4)(D) is amended by adding at the end

11 the following new sentence: ‘‘This clause shall not

12 apply to any disposition after December 31, 1995.’’

13 (8) DEBT POOLS.—Subparagraph (E) of section

14 56(g)(4) is amended by adding at the end the follow15 ing new sentence: ‘‘This subparagraph shall not

16 apply to any exchange after December 31, 1995.’’

17 (9) DEPLETION.—Subparagraph (F) of section

18 56(g)(4) is amended by adding at the end the follow19 ing new clause:

20 ‘‘(iii) TERMINATION.—This subpara21 graph shall not apply to any deduction for

22 depletion for any taxable year beginning

23 after December 31, 1995.’’

24 (10) OWNERSHIP CHANGES.—Subparagraph

25 (G) of section 56(g)(4) is amended by adding at the
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1 end the following new sentence: ‘‘This subparagraph

2 shall not apply to any ownership change after De3 cember 31, 1995.’’

4 (e) EARLIER TERMINATION OF ITEMS OF TAX PREF5 ERENCE.—

6 (1) DEPLETION.—Paragraph (1) of section

7 57(a) is amended by adding at the end the following

8 new sentence: ‘‘This paragraph shall not apply to

9 any taxable year beginning after December 31,

10 1995.’’

11 (2) INTANGIBLE DRILLING COSTS.—Paragraph

12 (2) of section 57(a) is amended by adding at the end

13 the following new subparagraph:

14 ‘‘(F) TERMINATION.—This paragraph shall

15 not apply to any taxable year beginning after

16 December 31, 1995.’’

17 (3) RESERVES FOR LOSSES ON BAD DEBTS.—

18 Paragraph (4) of section 57(a) is amended by add19 ing at the end the following new sentence: ‘‘This

20 paragraph shall not apply to any taxable year begin21 ning after December 31, 1995.’’

22 (4) TAX-EXEMPT INTEREST.—Paragraph (5) of

23 section 57(a) is amended by adding at the end the

24 following new subparagraph:
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1 ‘‘(D) TERMINATION FOR CORPORATIONS.—

2 In the case of a corporation (other than a cor3 poration referred to in section 56(g)(6)), this

4 paragraph shall not apply to interest accruing

5 for periods after December 31, 1995.’’

6 (f) NET OPERATING LOSS DEDUCTION.—Paragraph

7 (1) of section 56(d) is amended by inserting ‘‘(100 percent

8 in the case of taxable years beginning after December 31,

9 1995)’’ after ‘‘90 percent’’ each place it appears.

10 (g) LOSSES.—

11 (1) Section 58 is amended by adding at the end

12 the following new subsection:

13 ‘‘(d) TERMINATION.—This section shall not apply to

14 any loss incurred for any taxable year beginning after De15 cember 31, 1995.’’

16 (2) Subsection (h) of section 59 is amended by

17 inserting ‘‘469,’’ after ‘‘465,’’.

18 (h) FOREIGN TAX CREDIT.—Paragraph (2) of section

19 59(a) is amended by adding at the end the following new

20 subparagraph:

21 ‘‘(D) TERMINATION.—This paragraph

22 shall not apply to any taxable year beginning

23 after December 31, 1995.’’

24 (i) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR

25 MINIMUM TAX LIABILITY.—
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1 (1) IN GENERAL.—Subsection (c) of section 53

2 is amended to read as follows:

3 ‘‘(c) LIMITATION.—The credit allowable under sub4 section (a) for any taxable year shall not exceed the lesser

5 of—

6 ‘‘(1) the excess (if any) of—

7 ‘‘(A) the regular tax liability of the tax8 payer for such taxable year reduced by the sum

9 of the credits allowable under subparts A, B, D,

10 E, and F of this part, over

11 ‘‘(B) the tentative minimum tax for the

12 taxable year, or

13 ‘‘(2) 90 percent of the amount determined

14 under paragraph (1)(A).’’

15 (2) EFFECTIVE DATE.—The amendment made

16 by paragraph (1) shall apply to taxable years begin17 ning after December 31, 1995.

18 Subtitle D—Public Debt Reduction

19 Checkoff and Trust Fund

20 SEC. 341. DESIGNATION OF AMOUNTS FOR REDUCTION OF

21 PUBLIC DEBT.

22 (a) IN GENERAL.—Subchapter A of chapter 61 of the

23 Internal Revenue Code of 1986 (relating to returns and

24 records) is amended by adding at the end the following

25 new part:
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1 ‘‘PART IX—DESIGNATION FOR REDUCTION OF

2 PUBLIC DEBT

‘‘Sec. 6097. Designation.

3 ‘‘SEC. 6097. DESIGNATION.

4 ‘‘(a) IN GENERAL.—Every individual with adjusted

5 income tax liability for any taxable year may designate

6 that a portion of such liability (not to exceed 10 percent

7 thereof) shall be used to reduce the public debt.

8 ‘‘(b) MANNER AND TIME OF DESIGNATION.—A des9 ignation under subsection (a) may be made with respect

10 to any taxable year only at the time of filing the return

11 of tax imposed by chapter 1 for the taxable year. The des12 ignation shall be made on the first page of the return or

13 on the page bearing the taxpayer’s signature.

14 ‘‘(c) ADJUSTED INCOME TAX LIABILITY.—For pur15 poses of this section, the term ‘adjusted income tax liabil16 ity’ means income tax liability (as defined in section

17 6096(b)) reduced by any amount designated under section

18 6096 (relating to designation of income tax payments to

19 Presidential Election Campaign Fund).’’

20 (b) CLERICAL AMENDMENT.—The table of parts for

21 such subchapter A is amended by adding at the end the

22 following new item:

‘‘Part IX. Designation for reduction of public debt.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years ending after the

3 date of the enactment of this Act.

4 SEC. 342. PUBLIC DEBT REDUCTION TRUST FUND.

5 (a) IN GENERAL.—Subchapter A of chapter 98 of the

6 Internal Revenue Code of 1986 (relating to trust fund

7 code) is amended by adding at the end the following new

8 section:

9 ‘‘SEC. 9512. PUBLIC DEBT REDUCTION TRUST FUND.

10 ‘‘(a) CREATION OF TRUST FUND.—There is estab11 lished in the Treasury of the United States a trust fund

12 to be known as the ‘Public Debt Reduction Trust Fund’,

13 consisting of any amount appropriated or credited to the

14 Trust Fund as provided in this section or section 9602(b).

15 ‘‘(b) TRANSFERS TO TRUST FUND.—There are here16 by appropriated to the Public Debt Reduction Trust Fund

17 amounts equivalent to the amounts designated under sec18 tion 6097 (relating to designation for public debt reduc19 tion).

20 ‘‘(c) EXPENDITURES.—Amounts in the Public Debt

21 Reduction Trust Fund shall be used by the Secretary of

22 the Treasury for purposes of paying at maturity, or to

23 redeem or buy before maturity, any obligation of the Fed24 eral Government included in the public debt (other than

25 an obligation held by the Federal Old-Age and Survivors
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1 Insurance Trust Fund, the Civil Service Retirement and

2 Disability Fund, or the Department of Defense Military

3 Retirement Fund). Any obligation which is paid, re4 deemed, or bought with amounts from the Public Debt Re5 duction Trust Fund shall be canceled and retired and may

6 not be reissued.’’

7 (b) CLERICAL AMENDMENT.—The table of sections

8 for such subchapter is amended by adding at the end the

9 following new item:

‘‘Sec. 9512. Public Debt Reduction Trust Fund.’’

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

11 this section shall apply to amounts received after the date

12 of the enactment of this Act.

13 Subtitle E—Small Business

14 Incentives

15 SEC. 351. COST-OF-LIVING ADJUSTMENTS RELATING TO ES16 TATE AND GIFT TAX PROVISIONS.

17 (a) INCREASE IN UNIFIED ESTATE AND GIFT TAX

18 CREDIT.—

19 (1) ESTATE TAX CREDIT.—

20 (A) Subsection (a) of section 2010 (relat21 ing to unified credit against estate tax) is

22 amended by striking ‘‘$192,800’’ and inserting

23 ‘‘the applicable credit amount’’.

24 (B) Section 2010 is amended by redesig25 nating subsection (c) as subsection (d) and by
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1 inserting after subsection (b) the following new

2 subsection:

3 ‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes

4 of this section—

5 ‘‘(1) IN GENERAL.—The applicable credit

6 amount is the amount of the tentative tax which

7 would be determined under the rate schedule set

8 forth in section 2001(c) if the amount with respect

9 to which such tentative tax is to be computed were

10 the applicable exclusion amount determined in ac11 cordance with the following table:

‘‘In the case of estates of decedents The applicable

dying, and gifts made, during: exclusion amount is:

1996 ....................................................................... $700,000

1997 ....................................................................... $725,000

1998 or thereafter ................................................. $750,000.

12 ‘‘(2) COST-OF-LIVING ADJUSTMENTS.—In the

13 case of any decedent dying, and gift made, in a cal14 endar year after 1998, the $750,000 amount set

15 forth in paragraph (1) shall be increased by an

16 amount equal to—

17 ‘‘(A) $750,000, multiplied by

18 ‘‘(B) the cost-of-living adjustment deter19 mined under section 1(f)(3) for such calendar

20 year by substituting ‘calendar year 1997’ for

21 ‘calendar year 1992’ in subparagraph (B)

22 thereof.
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1 If any amount as adjusted under the preceding sen2 tence is not a multiple of $10,000, such amount

3 shall be rounded to the nearest multiple of

4 $10,000.’’

5 (C) Paragraph (1) of section 6018(a) is

6 amended by striking ‘‘$600,000’’ and inserting

7 ‘‘the applicable exclusion amount in effect

8 under section 2010(c) (as adjusted under para9 graph (2) thereof) for the calendar year which

10 includes the date of death’’.

11 (D) Paragraph (2) of section 2001(c) is

12 amended by striking ‘‘$21,040,000’’ and insert13 ing ‘‘the amount at which the average tax rate

14 under this section is 55 percent’’.

15 (E) Subparagraph (A) of section

16 2102(c)(3) is amended by striking ‘‘$192,800’’

17 and inserting ‘‘the applicable credit amount in

18 effect under section 2010(c) for the calendar

19 year which includes the date of death’’.

20 (2) UNIFIED GIFT TAX CREDIT.—Paragraph

21 (1) of section 2505(a) is amended by striking

22 ‘‘$192,800’’ and inserting ‘‘the applicable credit

23 amount in effect under section 2010(c) for such cal24 endar year’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to the estates of dece3 dents dying, and gifts made, after December 31,

4 1995.

5 (b) ALTERNATE VALUATION OF CERTAIN FARM,

6 ETC., REAL PROPERTY.—Subsection (a) of section 2032A

7 is amended by adding at the end the following new para8 graph:

9 ‘‘(3) INFLATION ADJUSTMENT.—In the case of

10 estates of decedents dying in a calendar year after

11 1998, the $750,000 amount contained in paragraph

12 (2) shall be increased by an amount equal to—

13 ‘‘(A) $750,000, multiplied by

14 ‘‘(B) the cost-of-living adjustment deter15 mined under section 1(f)(3) for such calendar

16 year by substituting ‘calendar year 1997’ for

17 ‘calendar year 1992’ in subparagraph (B)

18 thereof.

19 If any amount as adjusted under the preceding sen20 tence is not a multiple of $10,000, such amount

21 shall be rounded to the nearest multiple of

22 $10,000.’’

23 (c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b)

24 of section 2503 is amended—
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1 (1) by striking the subsection heading and in2 serting the following:

3 ‘‘(b) EXCLUSIONS FROM GIFTS.—

4 ‘‘(1) IN GENERAL.—’’,

5 (2) by moving the text 2 ems to the right, and

6 (3) by adding at the end the following new

7 paragraph:

8 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

9 gifts made in a calendar year after 1998, the

10 $10,000 amount contained in paragraph (1) shall be

11 increased by an amount equal to—

12 ‘‘(A) $10,000, multiplied by

13 ‘‘(B) the cost-of-living adjustment deter14 mined under section 1(f)(3) for such calendar

15 year by substituting ‘calendar year 1997’ for

16 ‘calendar year 1992’ in subparagraph (B)

17 thereof.

18 If any amount as adjusted under the preceding sen19 tence is not a multiple of $1,000, such amount shall

20 be rounded to the nearest multiple of $1,000.’’

21 (d) EXEMPTION FROM GENERATION-SKIPPING

22 TAX.—Section 2631 (relating to GST exemption) is

23 amended by adding at the end the following new sub24 section:
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1 ‘‘(c) INFLATION ADJUSTMENT.—In the case of an in2 dividual who dies in any calendar year after 1998, the

3 $1,000,000 amount contained in subsection (a) shall be

4 increased by an amount equal to—

5 ‘‘(1) $1,000,000, multiplied by

6 ‘‘(2) the cost-of-living adjustment determined

7 under section 1(f)(3) for such calendar year by sub8 stituting ‘calendar year 1997’ for ‘calendar year

9 1992’ in subparagraph (B) thereof.

10 If any amount as adjusted under the preceding sentence

11 is not a multiple of $10,000, such amount shall be round12 ed to the nearest multiple of $10,000.’’

13 (e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT IN14 TEREST RATE ON EXTENSION OF TIME FOR PAYMENT OF

15 ESTATE TAX ON CLOSELY HELD BUSINESS.—

16 (1) Subparagraph (A) of section 6601(j)(2) is

17 amended by striking ‘‘$345,800’’ and inserting ‘‘the

18 applicable limitation amount’’.

19 (2) Subsection (j) of section 6601 is amended

20 by redesignating paragraph (3) as paragraph (4)

21 and by inserting after paragraph (2) the following

22 new paragraph:

23 ‘‘(3) APPLICABLE LIMITATION AMOUNT.—

24 ‘‘(A) IN GENERAL.—For purposes of para25 graph (2), the applicable limitation amount is
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1 the amount of the tentative tax which would be

2 determined under the rate schedule set forth in

3 section 2001(c) if the amount with respect to

4 which such tentative tax is to be computed were

5 $1,000,000.

6 ‘‘(B) INFLATION ADJUSTMENT.—In the

7 case of estates of decedents dying in a calendar

8 year after 1998, the $1,000,000 amount con9 tained in subparagraph (A) shall be increased

10 by an amount equal to—

11 ‘‘(i) $1,000,000, multiplied by

12 ‘‘(ii) the cost-of-living adjustment de13 termined under section 1(f)(3) for such

14 calendar year by substituting ‘calendar

15 year 1997’ for ‘calendar year 1992’ in sub16 paragraph (B) thereof.

17 If any amount as adjusted under the preceding

18 sentence is not a multiple of $10,000, such

19 amount shall be rounded to the nearest multiple

20 of $10,000.’’

21 SEC. 352. INCREASE IN EXPENSE TREATMENT FOR SMALL

22 BUSINESSES.

23 (a) GENERAL RULE.—Paragraph (1) of section

24 179(b) (relating to dollar limitation) is amended to read

25 as follows:
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1 ‘‘(1) DOLLAR LIMITATION.—The aggregate cost

2 which may be taken into account under subsection

3 (a) for any taxable year shall not exceed the follow4 ing applicable amount:

‘‘If the taxable year The applicable

begins in: amount is:

1996 ....................................................................... $22,500

1997 ....................................................................... 27,500

1998 ....................................................................... 32,500

1999 or thereafter ................................................. 35,000.’’

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

6 subsection (a) shall apply to taxable years beginning after

7 December 31, 1995.

8 SEC. 353. CLARIFICATION OF TREATMENT OF HOME OF9 FICE USE FOR ADMINISTRATIVE AND MAN10 AGEMENT ACTIVITIES.

11 (a) IN GENERAL.—Paragraph (1) of section 280A(c)

12 is amended by adding at the end the following new sen13 tence:

14 ‘‘For purposes of subparagraph (A), the term ‘prin15 cipal place of business’ includes a place of business

16 which is used by the taxpayer for the administrative

17 or management activities of any trade or business of

18 the taxpayer if there is no other fixed location of

19 such trade or business where the taxpayer conducts

20 substantial administrative or management activities

21 of such trade or business.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 354. TREATMENT OF STORAGE OF PRODUCT SAMPLES.

5 (a) IN GENERAL.—Paragraph (2) of section 280A(c)

6 is amended by striking ‘‘inventory’’ and inserting ‘‘inven7 tory or product samples’’.

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

9 subsection (a) shall apply to taxable years beginning after

10 December 31, 1995.

11 TITLE IV—FAMILY

12 REINFORCEMENT

13 SEC. 401. CREDIT FOR ADOPTION EXPENSES.

14 (a) IN GENERAL.—Subpart A of part IV of sub15 chapter A of chapter 1 is amended by inserting after sec16 tion 25 the following new section:

17 ‘‘SEC. 25A. ADOPTION EXPENSES.

18 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in19 dividual, there shall be allowed as a credit against the tax

20 imposed by this chapter for the taxable year the amount

21 of the qualified adoption expenses paid or incurred by the

22 taxpayer during such taxable year.

23 ‘‘(b) LIMITATIONS.—

24 ‘‘(1) DOLLAR LIMITATION.—The aggregate

25 amount of qualified adoption expenses which may be
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1 taken into account under subsection (a) with respect

2 to the adoption of a child shall not exceed $5,000.

3 ‘‘(2) INCOME LIMITATION.—The amount allow4 able as a credit under subsection (a) for any taxable

5 year shall be reduced (but not below zero) by an

6 amount which bears the same ratio to the amount

7 so allowable (determined without regard to this

8 paragraph but with regard to paragraph (1)) as—

9 ‘‘(A) the amount (if any) by which the tax10 payer’s adjusted gross income (determined

11 without regard to sections 911, 931, and 933)

12 exceeds $60,000, bears to

13 ‘‘(B) $40,000.

14 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—

15 ‘‘(A) IN GENERAL.—No credit shall be al16 lowed under subsection (a) for any expense for

17 which a deduction or credit is allowable under

18 any other provision of this chapter.

19 ‘‘(B) GRANTS.—No credit shall be allowed

20 under subsection (a) for any expense to the ex21 tent that funds for such expense are received

22 under any Federal, State, or local program.

23 The preceding sentence shall not apply to ex24 penses for the adoption of a child with special

25 needs.
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1 ‘‘(c) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) QUALIFIED ADOPTION EXPENSES.—

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

4 adoption expenses’ means reasonable and nec5 essary adoption fees, court costs, attorney fees,

6 and other expenses—

7 ‘‘(i) which are directly related to, and

8 the principal purpose of which is for, the

9 legal adoption of an eligible child by the

10 taxpayer, and

11 ‘‘(ii) which are not incurred in viola12 tion of State or Federal law or in carrying

13 out any surrogate parenting arrangement.

14 ‘‘(B) EXPENSES FOR ADOPTION OF

15 SPOUSE’S CHILD NOT ELIGIBLE.—The term

16 ‘qualified adoption expenses’ shall not include

17 any expenses in connection with the adoption by

18 an individual of a child who is the child of such

19 individual’s spouse.

20 ‘‘(2) ELIGIBLE CHILD.—The term ‘eligible

21 child’ means any individual—

22 ‘‘(A) who has not attained age 18 as of the

23 time of the adoption, or

24 ‘‘(B) who is physically or mentally incapa25 ble of caring for himself.
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1 ‘‘(3) CHILD WITH SPECIAL NEEDS.—The term

2 ‘child with special needs’ means any child if—

3 ‘‘(A) a State has determined that the child

4 cannot or should not be returned to the home

5 of his parents, and

6 ‘‘(B) such State has determined that there

7 exists with respect to the child a specific factor

8 or condition (such as his ethnic background,

9 age, or membership in a minority or sibling

10 group, or the presence of factors such as medi11 cal conditions or physical, mental, or emotional

12 handicaps) because of which it is reasonable to

13 conclude that such child cannot be placed with

14 adoptive parents without providing adoption as15 sistance.

16 ‘‘(d) MARRIED COUPLES MUST FILE JOINT RE17 TURNS, ETC.—Rules similar to the rules of paragraphs

18 (2), (3), and (4) of section 21(e) shall apply for purposes

19 of this section.’’

20 (b) CONFORMING AMENDMENT.—The table of sec21 tions for subpart A of part IV of subchapter A of chapter

22 1 is amended by inserting after the item relating to section

23 25 the following new item:

‘‘Sec. 25A. Adoption expenses.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 402. CREDIT FOR TAXPAYERS WITH CERTAIN PER5 SONS REQUIRING CUSTODIAL CARE IN THEIR

6 HOUSEHOLDS.

7 (a) IN GENERAL.—Subpart A of part IV of sub8 chapter A of chapter 1 is amended by inserting after sec9 tion 25A the following new section:

10 ‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PER11 SONS REQUIRING CUSTODIAL CARE IN THEIR

12 HOUSEHOLDS.

13 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in14 dividual who maintains a household which includes as a

15 member one or more qualified persons, there shall be al16 lowed as a credit against the tax imposed by this chapter

17 for the taxable year an amount equal to $500 for each

18 such person.

19 ‘‘(b) QUALIFIED PERSON.—For purposes of this sec20 tion, the term ‘qualified person’ means any individual—

21 ‘‘(1) who is a father or mother of the taxpayer,

22 his spouse, or his former spouse or who is an ances23 tor of such a father or mother,

24 ‘‘(2) who is physically or mentally incapable of

25 caring for himself,
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1 ‘‘(3) who has as his principal place of abode for

2 more than half of the taxable year the home of the

3 taxpayer, and

4 ‘‘(4) whose name and TIN are included on the

5 taxpayer’s return for the taxable year.

6 For purposes of paragraph (1), a stepfather or stepmother

7 shall be treated as a father or mother.

8 ‘‘(c) SPECIAL RULES.—For purposes of this section,

9 rules similar to the rules of paragraphs (1), (2), (3), and

10 (4) of section 21(e) shall apply.’’

11 (b) CLERICAL AMENDMENT.—The table of sections

12 for subpart A of part IV of subchapter A of chapter 1

13 is amended by inserting after the item relating to section

14 25A the following new item:

‘‘Sec. 25B. Credit for taxpayers with certain persons requiring

custodial care in their households.’’

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

16 this section shall apply to taxable years beginning after

17 December 31, 1995.

18 TITLE V—SOCIAL SECURITY

19 EARNINGS TEST

20 SEC. 501. ADJUSTMENTS IN MONTHLY EXEMPT AMOUNT

21 FOR PURPOSES OF THE SOCIAL SECURITY

22 EARNINGS TEST.

23 (a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR

24 INDIVIDUALS WHO HAVE ATTAINED RETIREMENT
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1 AGE.—Section 203(f)(8)(D) of the Social Security Act (42

2 U.S.C. 403(f)(8)(D)) is amended to read as follows:

3 ‘‘(D)(i) Notwithstanding any other provision of

4 this subsection, the exempt amount which is applica5 ble to an individual who has attained retirement age

6 (as defined in section 216(1)) before the close of the

7 taxable year involved shall be—

8 ‘‘(I) for the taxable year beginning after

9 1995 and before 1997, $1,250.00,

10 ‘‘(II) for the taxable year beginning after

1996 and before 1998, $1,583.331 11 ⁄3,

12 ‘‘(III) for the taxable year beginning after

1997 and before 1999, $1,916.662 13 ⁄3,

14 ‘‘(IV) for the taxable year beginning after

15 1998 and before 2000, $2,250.00, and

16 ‘‘(V) for the taxable year beginning after

17 1999 and before 2001, $2,500.00.

18 ‘‘(ii) For purposes of subparagraph (B)(ii)(II),

19 the increase in the exempt amount provided under

20 clause (i)(V) shall be deemed to have resulted from

21 a determination which shall be deemed to have been

22 made under subparagraph (A) in 1999.’’.

23 (b) CONFORMING AMENDMENT.—The second sen24 tence of section 223(d)(4) of such Act (42 U.S.C.

25 423(d)(4)) is amended by striking ‘‘the exempt amount
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1 under section 203(f)(8) which is applicable to individuals

2 described in subparagraph (D) thereof’’ and inserting the

3 following: ‘‘an amount equal to the exempt amount which

4 would have been applicable under section 203(f)(8), to in5 dividuals described in subparagraph (D) thereof, if section

6 501 of the Contract With America Tax Relief Act of 1995

7 had not been enacted’’.

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

9 this section shall apply with respect to taxable years begin10 ning after 1995.

11 TITLE VI—TECHNICAL

12 CORRECTIONS

13 SEC. 601. COORDINATION WITH OTHER TITLES.

14 For purposes of applying the amendments made by

15 any title of this Act other than this title, the provisions

16 of this title shall be treated as having been enacted imme17 diately before the provisions of such other titles.

18 SEC. 602. AMENDMENTS RELATED TO REVENUE REC19 ONCILIATION ACT OF 1990.

20 (a) AMENDMENTS RELATED TO SUBTITLE A.—

21 (1) Subparagraph (B) of section 59(j)(3) is

22 amended by striking ‘‘section 1(i)(3)(B)’’ and insert23 ing ‘‘section 1(g)(3)(B)’’.
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1 (2) Clause (i) of section 151(d)(3)(C) is amend2 ed by striking ‘‘joint of a return’’ and inserting

3 ‘‘joint return’’.

4 (b) AMENDMENTS RELATED TO SUBTITLE B.—

5 (1) Paragraph (1) of section 11212(e) of the

6 Revenue Reconciliation Act of 1990 is amended by

7 striking ‘‘Paragraph (1) of section 6724(d)’’ and in8 serting ‘‘Subparagraph (B) of section 6724(d)(1)’’.

9 (2)(A) Subparagraph (B) of section 4093(c)(2),

10 as in effect before the amendments made by the

11 Revenue Reconciliation Act of 1993, is amended by

12 inserting before the period ‘‘unless such fuel is sold

13 for exclusive use by a State or any political subdivi14 sion thereof’’.

15 (B) Paragraph (4) of section 6427(l), as in ef16 fect before the amendments made by the Revenue

17 Reconciliation Act of 1993, is amended by inserting

18 before the period ‘‘unless such fuel was used by a

19 State or any political subdivision thereof’’.

20 (3) Paragraph (1) of section 6416(b) is amend21 ed by striking ‘‘chapter 32 or by section 4051’’ and

22 inserting ‘‘chapter 31 or 32’’.

23 (4) Section 7012 is amended—
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1 (A) by striking ‘‘production or importation

2 of gasoline’’ in paragraph (3) and inserting

3 ‘‘taxes on gasoline and diesel fuel’’, and

4 (B) by striking paragraph (4) and redesig5 nating paragraphs (5) and (6) as paragraphs

6 (4) and (5), respectively.

7 (5) Subsection (c) of section 5041 is amended

8 by striking paragraph (6) and by inserting the fol9 lowing new paragraphs:

10 ‘‘(6) CREDIT FOR TRANSFEREE IN BOND.—If—

11 ‘‘(A) wine produced by any person would

12 be eligible for any credit under paragraph (1)

13 if removed by such person during the calendar

14 year,

15 ‘‘(B) wine produced by such person is re16 moved during such calendar year by any other

17 person (hereafter in this paragraph referred to

18 as the ‘transferee’) to whom such wine was

19 transferred in bond and who is liable for the tax

20 imposed by this section with respect to such

21 wine, and

22 ‘‘(C) such producer holds title to such wine

23 at the time of its removal and provides to the

24 transferee such information as is necessary to
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1 properly determine the transferee’s credit under

2 this paragraph,

3 then, the transferee (and not the producer) shall be

4 allowed the credit under paragraph (1) which would

5 be allowed to the producer if the wine removed by

6 the transferee had been removed by the producer on

7 that date.

8 ‘‘(7) REGULATIONS.—The Secretary may pre9 scribe such regulations as may be necessary to carry

10 out the purposes of this subsection, including regula11 tions—

12 ‘‘(A) to prevent the credit provided in this

13 subsection from benefiting any person who pro14 duces more than 250,000 wine gallons during a

15 calendar year, and

16 ‘‘(B) to assure proper reduction of such

17 credit for persons producing more than 150,000

18 wine gallons of wine during a calendar year.’’.

19 (6) Paragraph (3) of section 5061(b) is amend20 ed to read as follows:

21 ‘‘(3) section 5041(f),’’.

22 (7) Section 5354 is amended by inserting ‘‘(tak23 ing into account the appropriate amount of credit

24 with respect to such wine under section 5041(c))’’

25 after ‘‘any one time’’.
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1 (c) AMENDMENTS RELATED TO SUBTITLE C.—

2 (1) Paragraph (4) of section 56(g) is amended

3 by redesignating subparagraphs (I) and (J) as sub4 paragraphs (H) and (I), respectively.

5 (2) Subparagraph (B) of section 6724(d)(1) is

6 amended—

7 (A) by striking ‘‘or’’ at the end of clause

8 (xii), and

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

10 clause (xiii) and inserting ‘‘, or’’.

11 (3) Subsection (g) of section 6302 is amended

12 by inserting ‘‘, 22,’’ after ‘‘chapters 21’’.

13 (4) The earnings and profits of any insurance

14 company to which section 11305(c)(3) of the Reve15 nue Reconciliation Act of 1990 applies shall be de16 termined without regard to any deduction allowed

17 under such section; except that, for purposes of ap18 plying sections 56 and 902, and subpart F of part

19 III of subchapter N of chapter 1 of the Internal

20 Revenue Code of 1986, such deduction shall be

21 taken into account.

22 (5) Subparagraph (D) of section 6038A(e)(4) is

23 amended—
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1 (A) by striking ‘‘any transaction to which

2 the summons relates’’ and inserting ‘‘any af3 fected taxable year’’, and

4 (B) by adding at the end thereof the fol5 lowing new sentence: ‘‘For purposes of this sub6 paragraph, the term ‘affected taxable year’

7 means any taxable year if the determination of

8 the amount of tax imposed for such taxable

9 year is affected by the treatment of the trans10 action to which the summons relates.’’.

11 (6) Subparagraph (A) of section 6621(c)(2) is

12 amended by adding at the end thereof the following

13 new flush sentence:

14 ‘‘The preceding sentence shall be applied with15 out regard to any such letter or notice which is

16 withdrawn by the Secretary.’’.

17 (7) Clause (i) of section 6621(c)(2)(B) is

18 amended by striking ‘‘this subtitle’’ and inserting

19 ‘‘this title’’.

20 (d) AMENDMENTS RELATED TO SUBTITLE D.—

21 (1) Notwithstanding section 11402(c) of the

22 Revenue Reconciliation Act of 1990, the amendment

23 made by section 11402(b)(1) of such Act shall apply

24 to taxable years ending after December 31, 1989.
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1 (2) Clause (ii) of section 143(m)(4)(C) is

2 amended—

3 (A) by striking ‘‘any month of the 10-year

4 period’’ and inserting ‘‘any year of the 4-year

5 period’’,

6 (B) by striking ‘‘succeeding months’’ and

7 inserting ‘‘succeeding years’’, and

8 (C) by striking ‘‘over the remainder of

9 such period (or, if lesser, 5 years)’’ and insert10 ing ‘‘to zero over the succeeding 5 years’’.

11 (e) AMENDMENTS RELATED TO SUBTITLE E.—

12 (1)(A) Clause (ii) of section 56(d)(1)(B) is

13 amended to read as follows:

14 ‘‘(ii) appropriate adjustments in the

15 application of section 172(b)(2) shall be

16 made to take into account the limitation of

17 subparagraph (A).’’

18 (B) For purposes of applying sections 56(g)(1)

19 and 56(g)(3) of the Internal Revenue Code of 1986

20 with respect to taxable years beginning in 1991 and

21 1992, the reference in such sections to the alter22 native tax net operating loss deduction shall be

23 treated as including a reference to the deduction

24 under section 56(h) of such Code as in effect before
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1 the amendments made by section 1915 of the En2 ergy Policy Act of 1992.

3 (2) Clause (i) of section 613A(c)(3)(A) is

4 amended by striking ‘‘the table contained in’’.

5 (3) Section 6501 is amended—

6 (A) by striking subsection (m) (relating to

7 deficiency attributable to election under section

8 44B) and by redesignating subsections (n) and

9 (o) as subsections (m) and (n), respectively, and

10 (B) by striking ‘‘section 40(f) or 51(j)’’ in

11 subsection (m) (as redesignated by subpara12 graph (A)) and inserting ‘‘section 40(f), 43, or

13 51(j)’’.

14 (4) Subparagraph (C) of section 38(c)(2) (as in

15 effect on the day before the date of the enactment

16 of the Revenue Reconciliation Act of 1990) is

17 amended by inserting before the period at the end

18 of the first sentence the following: ‘‘and without re19 gard to the deduction under section 56(h)’’.

20 (5) The amendment made by section

21 1913(b)(2)(C)(i) of the Energy Policy Act of 1992

22 shall apply to taxable years beginning after Decem23 ber 31, 1990.

24 (f) AMENDMENTS RELATED TO SUBTITLE F.—
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1 (1)(A) Section 2701(a)(3) is amended by add2 ing at the end thereof the following new subpara3 graph:

4 ‘‘(C) VALUATION OF QUALIFIED PAYMENTS

5 WHERE NO LIQUIDATION, ETC. RIGHTS.—In the

6 case of an applicable retained interest which is

7 described in subparagraph (B)(i) but not sub8 paragraph (B)(ii), the value of the distribution

9 right shall be determined without regard to this

10 section.’’

11 (B) Section 2701(a)(3)(B) is amended by in12 serting ‘‘CERTAIN’’ before ‘‘QUALIFIED’’ in the head13 ing thereof.

14 (C) Sections 2701 (d)(1) and (d)(4) are each

15 amended by striking ‘‘subsection (a)(3)(B)’’ and in16 serting ‘‘subsection (a)(3) (B) or (C)’’.

17 (2) Clause (i) of section 2701(a)(4)(B) is

18 amended by inserting ‘‘(or, to the extent provided in

19 regulations, the rights as to either income or cap20 ital)’’ after ‘‘income and capital’’.

21 (3)(A) Section 2701(b)(2) is amended by add22 ing at the end thereof the following new subpara23 graph:

24 ‘‘(C) APPLICABLE FAMILY MEMBER.—For

25 purposes of this subsection, the term ‘applicable
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1 family member’ includes any lineal descendant

2 of any parent of the transferor or the transfer3 or’s spouse.’’

4 (B) Section 2701(e)(3) is amended—

5 (i) by striking subparagraph (B), and

6 (ii) by striking so much of paragraph (3)

7 as precedes ‘‘shall be treated as holding’’ and

8 inserting:

9 ‘‘(3) ATTRIBUTION OF INDIRECT HOLDINGS

10 AND TRANSFERS.—An individual’’.

11 (C) Section 2704(c)(3) is amended by striking

12 ‘‘section 2701(e)(3)(A)’’ and inserting ‘‘section

13 2701(e)(3)’’.

14 (4) Clause (i) of section 2701(c)(1)(B) is

15 amended to read as follows:

16 ‘‘(i) a right to distributions with re17 spect to any interest which is junior to the

18 rights of the transferred interest,’’.

19 (5)(A) Clause (i) of section 2701(c)(3)(C) is

20 amended to read as follows:

21 ‘‘(i) IN GENERAL.—Payments under

22 any interest held by a transferor which

23 (without regard to this subparagraph) are

24 qualified payments shall be treated as

25 qualified payments unless the transferor
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1 elects not to treat such payments as quali2 fied payments. Payments described in the

3 preceding sentence which are held by an

4 applicable family member shall be treated

5 as qualified payments only if such member

6 elects to treat such payments as qualified

7 payments.’’

8 (B) The first sentence of section

9 2701(c)(3)(C)(ii) is amended to read as follows: ‘‘A

10 transferor or applicable family member holding any

11 distribution right which (without regard to this sub12 paragraph) is not a qualified payment may elect to

13 treat such right as a qualified payment, to be paid

14 in the amounts and at the times specified in such

15 election.’’.

16 (C) The time for making an election under the

17 second sentence of section 2701(c)(3)(C)(i) of the

18 Internal Revenue Code of 1986 (as amended by sub19 paragraph (A)) shall not expire before the due date

20 (including extensions) for filing the transferor’s re21 turn of the tax imposed by section 2501 of such

22 Code for the first calendar year ending after the

23 date of enactment.

24 (6) Section 2701(d)(3)(A)(iii) is amended by

25 striking ‘‘the period ending on the date of’’.
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1 (7) Subclause (I) of section 2701(d)(3)(B)(ii) is

2 amended by inserting ‘‘or the exclusion under sec3 tion 2503(b),’’ after ‘‘section 2523,’’.

4 (8) Section 2701(e)(5) is amended—

5 (A) by striking ‘‘such contribution to cap6 ital or such redemption, recapitalization, or

7 other change’’ in subparagraph (A) and insert8 ing ‘‘such transaction’’, and

9 (B) by striking ‘‘the transfer’’ in subpara10 graph (B) and inserting ‘‘such transaction’’.

11 (9) Section 2701(d)(4) is amended by adding at

12 the end thereof the following new subparagraph:

13 ‘‘(C) TRANSFER TO TRANSFERORS.—In

14 the case of a taxable event described in para15 graph (3)(A)(ii) involving a transfer of an ap16 plicable retained interest from an applicable

17 family member to a transferor, this subsection

18 shall continue to apply to the transferor during

19 any period the transferor holds such interest.’’

20 (10) Section 2701(e)(6) is amended by insert21 ing ‘‘or to reflect the application of subsection (d)’’

22 before the period at the end thereof.

23 (11)(A) Section 2702(a)(3)(A) is amended—

24 (i) by striking ‘‘to the extent’’ and insert25 ing ‘‘if’’ in clause (i),
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1 (ii) by striking ‘‘or’’ at the end of clause

2 (i),

3 (iii) by striking the period at the end of

4 clause (ii) and inserting ‘‘, or’’, and

5 (iv) by adding at the end thereof the fol6 lowing new clause:

7 ‘‘(iii) to the extent that regulations

8 provide that such transfer is not inconsist9 ent with the purposes of this section.’’

10 (B)(i) Section 2702(a)(3) is amended by strik11 ing ‘‘incomplete transfer’’ each place it appears and

12 inserting ‘‘incomplete gift’’.

13 (ii) The heading for section 2702(a)(3)(B) is

14 amended by striking ‘‘INCOMPLETE TRANSFER’’ and

15 inserting ‘‘INCOMPLETE GIFT’’.

16 (g) AMENDMENTS RELATED TO SUBTITLE G.—

17 (1)(A) Subsection (a) of section 1248 is

18 amended—

19 (i) by striking ‘‘, or if a United States per20 son receives a distribution from a foreign cor21 poration which, under section 302 or 331, is

22 treated as an exchange of stock’’ in paragraph

23 (1), and

24 (ii) by adding at the end thereof the follow25 ing new sentence: ‘‘For purposes of this section,
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1 a United States person shall be treated as hav2 ing sold or exchanged any stock if, under any

3 provision of this subtitle, such person is treated

4 as realizing gain from the sale or exchange of

5 such stock.’’.

6 (B) Paragraph (1) of section 1248(e) is amend7 ed by striking ‘‘, or receives a distribution from a

8 domestic corporation which, under section 302 or

9 331, is treated as an exchange of stock’’.

10 (C) Subparagraph (B) of section 1248(f)(1) is

11 amended by striking ‘‘or 361(c)(1)’’ and inserting

12 ‘‘355(c)(1), or 361(c)(1)’’.

13 (D) Paragraph (1) of section 1248(i) is amend14 ed to read as follows:

15 ‘‘(1) IN GENERAL.—If any shareholder of a 10-

16 percent corporate shareholder of a foreign corpora17 tion exchanges stock of the 10-percent corporate

18 shareholder for stock of the foreign corporation,

19 such 10-percent corporate shareholder shall recog20 nize gain in the same manner as if the stock of the

21 foreign corporation received in such exchange had

22 been—

23 ‘‘(A) issued to the 10-percent corporate

24 shareholder, and
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1 ‘‘(B) then distributed by the 10-percent

2 corporate shareholder to such shareholder in re3 demption or liquidation (whichever is appro4 priate).

5 The amount of gain recognized by such 10-percent

6 corporate shareholder under the preceding sentence

7 shall not exceed the amount treated as a dividend

8 under this section.’’

9 (2) Section 897 is amended by striking sub10 section (f).

11 (3) Paragraph (13) of section 4975(d) is

12 amended by striking ‘‘section 408(b)’’ and inserting

13 ‘‘section 408(b)(12)’’.

14 (4) Clause (iii) of section 56(g)(4)(D) is amend15 ed by inserting ‘‘, but only with respect to taxable

16 years beginning after December 31, 1989’’ before

17 the period at the end thereof.

18 (5)(A) Paragraph (11) of section 11701(a) of

19 the Revenue Reconciliation Act of 1990 (and the

20 amendment made by such paragraph) are hereby re21 pealed, and section 7108(r)(2) of the Revenue Rec22 onciliation Act of 1989 shall be applied as if such

23 paragraph (and amendment) had never been en24 acted.
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1 (B) Subparagraph (A) shall not apply to any

2 building if the owner of such building establishes to

3 the satisfaction of the Secretary of the Treasury or

4 his delegate that such owner reasonably relied on the

5 amendment made by such paragraph (11).

6 (h) AMENDMENTS RELATED TO SUBTITLE H.—

7 (1)(A) Clause (vi) of section 168(e)(3)(B) is

8 amended by striking ‘‘or’’ at the end of subclause

9 (I), by striking the period at the end of subclause

10 (II) and inserting ‘‘, or’’, and by adding at the end

11 thereof the following new subclause:

12 ‘‘(III) is described in section

13 48(l)(3)(A)(ix) (as in effect on the

14 day before the date of the enactment

15 of the Revenue Reconciliation Act of

16 1990).’’

17 (B) Subparagraph (K) of section 168(g)(4) is

18 amended by striking ‘‘section 48(a)(3)(A)(iii)’’ and

19 inserting ‘‘section 48(l)(3)(A)(ix) (as in effect on the

20 day before the date of the enactment of the Revenue

21 Reconciliation Act of 1990)’’.

22 (2) Clause (ii) of section 172(b)(1)(E) is

23 amended by striking ‘‘subsection (m)’’ and inserting

24 ‘‘subsection (h)’’.
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1 (3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II),

2 and 832(b)(5)(D)(ii)(II) are each amended by strik3 ing ‘‘243(b)(5)’’ and inserting ‘‘243(b)(2)’’.

4 (4) Subparagraph (A) of section 243(b)(3) is

5 amended by inserting ‘‘of’’ after ‘‘In the case’’.

6 (5) The subsection heading for subsection (a) of

7 section 280F is amended by striking ‘‘INVESTMENT

8 TAX CREDIT AND’’.

9 (6) Clause (i) of section 1504(c)(2)(B) is

10 amended by inserting ‘‘section’’ before ‘‘243(b)(2)’’.

11 (7) Paragraph (3) of section 341(f) is amended

12 by striking ‘‘351, 361, 371(a), or 374(a)’’ and in13 serting ‘‘351, or 361’’.

14 (8) Paragraph (2) of section 243(b) is amended

15 to read as follows:

16 ‘‘(2) AFFILIATED GROUP.—For purposes of this

17 subsection:

18 ‘‘(A) IN GENERAL.—The term ‘affiliated

19 group’ has the meaning given such term by sec20 tion 1504(b), except that for such purposes sec21 tions 1504(b)(2), 1504(b)(4), and 1504(c) shall

22 not apply.

23 ‘‘(B) GROUP MUST BE CONSISTENT IN

24 FOREIGN TAX TREATMENT.—The requirements

25 of paragraph (1)(A) shall not be treated as
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1 being met with respect to any dividend received

2 by a corporation if, for any taxable year which

3 includes the day on which such dividend is re4 ceived—

5 ‘‘(i) 1 or more members of the affili6 ated group referred to in paragraph (1)(A)

7 choose to any extent to take the benefits of

8 section 901, and

9 ‘‘(ii) 1 or more other members of such

10 group claim to any extent a deduction for

11 taxes otherwise creditable under section

12 901.’’

13 (9) The amendment made by section

14 11813(b)(17) of the Revenue Reconciliation Act of

15 1990 shall be applied as if the material stricken by

16 such amendment included the closing parenthesis

17 after ‘‘section 48(a)(5)’’.

18 (10) Paragraph (1) of section 179(d) is amend19 ed—

20 (A) by striking ‘‘in a trade or business’’

21 and inserting ‘‘a trade or business’’, and

22 (B) by adding at the end thereof the fol23 lowing new sentence: ‘‘Such term shall not in24 clude any property described in section 50(b)
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1 and shall not include air conditioning or heating

2 units and horses.’’

3 (11) Subparagraph (E) of section 50(a)(2) is

4 amended by striking ‘‘section 48(a)(5)(A)’’ and in5 serting ‘‘section 48(a)(5)’’.

6 (12) The amendment made by section

7 11801(c)(9)(G)(ii) of the Revenue Reconciliation Act

8 of 1990 shall be applied as if it struck ‘‘Section

9 422A(c)(2)’’ and inserted ‘‘Section 422(c)(2)’’.

10 (13) Subparagraph (B) of section 424(c)(3) is

11 amended by striking ‘‘a qualified stock option, an in12 centive stock option, an option granted under an em13 ployee stock purchase plan, or a restricted stock op14 tion’’ and inserting ‘‘an incentive stock option or an

15 option granted under an employee stock purchase

16 plan’’.

17 (14) Subparagraph (E) of section 1367(a)(2) is

18 amended by striking ‘‘section 613A(c)(13)(B)’’ and

19 inserting ‘‘section 613A(c)(11)(B)’’.

20 (15) Subparagraph (B) of section 460(e)(6) is

21 amended by striking ‘‘section 167(k)’’ and inserting

22 ‘‘section 168(e)(2)(A)(ii)’’.

23 (16) Subparagraph (C) of section 172(h)(4) is

24 amended by striking ‘‘subsection (b)(1)(M)’’ and in25 serting ‘‘subsection (b)(1)(E)’’.
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1 (17) Section 6503 is amended—

2 (A) by redesignating the subsection relat3 ing to extension in case of certain summonses

4 as subsection (j), and

5 (B) by redesignating the subsection relat6 ing to cross references as subsection (k).

7 (18) Paragraph (4) of section 1250(e) is hereby

8 repealed.

9 (i) EFFECTIVE DATE.—Except as otherwise expressly

10 provided—

11 (1) the amendments made by this section shall

12 be treated as amendments to the Internal Revenue

13 Code of 1986 as amended by the Revenue Reconcili14 ation Act of 1993; and

15 (2) any amendment made by this section shall

16 apply to periods before the date of the enactment of

17 this section in the same manner as if it had been in18 cluded in the provision of the Revenue Reconciliation

19 Act of 1990 to which such amendment relates.

20 SEC. 603. AMENDMENTS RELATED TO REVENUE REC21 ONCILIATION ACT OF 1993.

22 (a) AMENDMENT RELATED TO SECTION 13114.—

23 Paragraph (2) of section 1044(c) is amended to read as

24 follows:
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1 ‘‘(2) PURCHASE.—The taxpayer shall be consid2 ered to have purchased any property if, but for sub3 section (d), the unadjusted basis of such property

4 would be its cost within the meaning of section

5 1012.’’

6 (b) AMENDMENTS RELATED TO SECTION 13142.—

7 (1) Subparagraph (B) of section 13142(b)(6) of

8 the Revenue Reconciliation Act of 1993 is amended

9 to read as follows:

10 ‘‘(B) FULL-TIME STUDENTS, WAIVER AU11 THORITY, AND PROHIBITED DISCRIMINATION.—

12 The amendments made by paragraphs (2), (3),

13 and (4) shall take effect on the date of the en14 actment of this Act.’’

15 (2) Subparagraph (C) of section 13142(b)(6) of

16 such Act is amended by striking ‘‘paragraph (2)’’

17 and inserting ‘‘paragraph (5)’’.

18 (c) AMENDMENT RELATED TO SECTION 13161.—

19 (1) IN GENERAL.—Subsection (e) of section

20 4001 (relating to inflation adjustment) is amended

21 to read as follows:

22 ‘‘(e) INFLATION ADJUSTMENT.—

23 ‘‘(1) IN GENERAL.—The $30,000 amount in

24 subsection (a) and section 4003(a) shall be increased

25 by an amount equal to—
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1 ‘‘(A) $30,000, multiplied by

2 ‘‘(B) the cost-of-living adjustment under

3 section 1(f)(3) for the calendar year in which

4 the vehicle is sold, determined by substituting

5 ‘calendar year 1990’ for ‘calendar year 1992’ in

6 subparagraph (B) thereof.

7 ‘‘(2) ROUNDING.—If any amount as adjusted

8 under paragraph (1) is not a multiple of $2,000,

9 such amount shall be rounded to the next lowest

10 multiple of $2,000.’’

11 (2) EFFECTIVE DATE.—The amendment made

12 by paragraph (1) shall take effect on the date of the

13 enactment of this Act.

14 (d) AMENDMENT RELATED TO SECTION 13201.—

15 Clause (ii) of section 135(b)(2)(B) is amended by insert16 ing before the period at the end thereof the following: ‘‘,

17 determined by substituting ‘calendar year 1989’ for ‘cal18 endar year 1992’ in subparagraph (B) thereof’’.

19 (e) AMENDMENTS RELATED TO SECTION 13203.—

20 Subsection (a) of section 59 is amended—

21 (1) by striking ‘‘the amount determined under

22 section 55(b)(1)(A)’’ in paragraph (1)(A) and

23 (2)(A)(i) and inserting ‘‘the pre-credit tentative min24 imum tax’’,
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1 (2) by striking ‘‘specified in section

2 55(b)(1)(A)’’ in paragraph (1)(C) and inserting

3 ‘‘specified in subparagraph (A)(i) or (B)(i) of section

4 55(b)(1) (whichever applies)’’,

5 (3) by striking ‘‘which would be determined

6 under section 55(b)(1)(A)’’ in paragraph (2)(A)(ii)

7 and inserting ‘‘which would be the pre-credit ten8 tative minimum tax’’, and

9 (4) by adding at the end thereof the following

10 new paragraph:

11 ‘‘(3) PRE-CREDIT TENTATIVE MINIMUM TAX.—

12 For purposes of this subsection, the term ‘pre-credit

13 tentative minimum tax’ means—

14 ‘‘(A) in the case of a taxpayer other than

15 a corporation, the amount determined under the

16 first sentence of section 55(b)(1)(A)(i), or

17 ‘‘(B) in the case of a corporation, the

18 amount determined under section

19 55(b)(1)(B)(i).’’

20 (f) AMENDMENT RELATED TO SECTION 13221.—

21 Sections 1201(a) and 1561(a) are each amended by strik22 ing ‘‘last sentence’’ each place it appears and inserting

23 ‘‘last 2 sentences’’.

24 (g) AMENDMENTS RELATED TO SECTION 13222.—
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1 (1) Subparagraph (B) of section 6033(e)(1) is

2 amended by adding at the end thereof the following

3 new clause:

4 ‘‘(iii) COORDINATION WITH SECTION

5 527(f).—This subsection shall not apply to

6 any amount on which tax is imposed by

7 reason of section 527(f).’’.

8 (2) Clause (i) of section 6033(e)(1)(B) is

9 amended by striking ‘‘this subtitle’’ and inserting

10 ‘‘section 501’’.

11 (h) AMENDMENT RELATED TO SECTION 13225.—

12 Paragraph (3) of section 6655(g) is amended by striking

13 all that follows ‘‘ ‘3rd month’ ’’ in the sentence following

14 subparagraph (C) and inserting ‘‘, subsection (e)(2)(A)

15 shall be applied by substituting ‘2 months’ for ‘3 months’

16 in clause (i)(I), the election under clause (i) of subsection

17 (e)(2)(C) may be made separately for each installment,

18 and clause (ii) of subsection (e)(2)(C) shall not apply.’’.

19 (i) AMENDMENTS RELATED TO SECTION 13231.—

20 (1) Subparagraph (G) of section 904(d)(3) is

21 amended by striking ‘‘section 951(a)(1)(B)’’ and in22 serting ‘‘subparagraph (B) or (C) of section

23 951(a)(1)’’.

24 (2) Paragraph (1) of section 956A(b) is amend25 ed to read as follows:
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1 ‘‘(1) the amount (not including a deficit) re2 ferred to in section 316(a)(1) to the extent such

3 amount was accumulated in prior taxable years be4 ginning after September 30, 1993, and’’.

5 (3) Subsection (f) of section 956A is amended

6 by inserting before the period at the end thereof:

7 ‘‘and regulations coordinating the provisions of sub8 sections (c)(3)(A) and (d)’’.

9 (4) Subsection (b) of section 958 is amended by

10 striking ‘‘956(b)(2)’’ each place it appears and in11 serting ‘‘956(c)(2)’’.

12 (5)(A) Subparagraph (A) of section 1297(d)(2)

13 is amended by striking ‘‘The adjusted basis of any

14 asset’’ and inserting ‘‘The amount taken into ac15 count under section 1296(a)(2) with respect to any

16 asset’’.

17 (B) The paragraph heading of paragraph (2) of

18 section 1297(d) is amended to read as follows:

19 ‘‘(2) AMOUNT TAKEN INTO ACCOUNT.—’’.

20 (6) Subsection (e) of section 1297 is amended

21 by inserting ‘‘For purposes of this part—’’ after the

22 subsection heading.

23 (j) AMENDMENT RELATED TO SECTION 13241.—

24 Subparagraph (B) of section 40(e)(1) is amended to read

25 as follows:
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1 ‘‘(B) for any period before January 1,

2 2001, during which the rates of tax under sec3 tion 4081(a)(2)(A) are 4.3 cents per gallon.’’

4 (k) AMENDMENT RELATED TO SECTION 13261.—

5 Clause (iii) of section 13261(g)(2)(A) of the Revenue Rec6 onciliation Act of 1993 is amended by striking ‘‘by the

7 taxpayer’’ and inserting ‘‘by the taxpayer or a related per8 son’’.

9 (l) AMENDMENT RELATED TO SECTION 13301.—

10 Subparagraph (B) of section 1397B(d)(5) is amended by

11 striking ‘‘preceding’’.

12 (m) CLERICAL AMENDMENTS.—

13 (1) Subsection (d) of section 39 is amended—

14 (A) by striking ‘‘45’’ in the heading of

15 paragraph (5) and inserting ‘‘45A’’, and

16 (B) by striking ‘‘45’’ in the heading of

17 paragraph (6) and inserting ‘‘45B’’.

18 (2) Subparagraph (A) of section 108(d)(9) is

19 amended by striking ‘‘paragraph (3)(B)’’ and insert20 ing ‘‘paragraph (3)(C)’’.

21 (3) Subparagraph (C) of section 143(d)(2) is

22 amended by striking the period at the end thereof

23 and inserting a comma.

24 (4) Clause (ii) of section 163(j)(6)(E) is amend25 ed by striking ‘‘which is a’’ and inserting ‘‘which is’’.
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1 (5) Subparagraph (A) of section 1017(b)(4) is

2 amended by striking ‘‘subsection (b)(2)(D)’’ and in3 serting ‘‘subsection (b)(2)(E)’’.

4 (6) So much of section 1245(a)(3) as precedes

5 subparagraph (A) thereof is amended to read as fol6 lows:

7 ‘‘(3) SECTION 1245 PROPERTY.—For purposes

8 of this section, the term ‘section 1245 property’

9 means any property which is or has been property

10 of a character subject to the allowance for deprecia11 tion provided in section 167 and is either—’’.

12 (7) Paragraph (2) of section 1394(e) is amend13 ed—

14 (A) by striking ‘‘(i)’’ and inserting ‘‘(A)’’,

15 and

16 (B) by striking ‘‘(ii)’’ and inserting ‘‘(B)’’.

17 (8) Subsection (m) of section 6501 (as redesig18 nated by section 602) is amended by striking ‘‘or

19 51(j)’’ and inserting ‘‘45B, or 51(j)’’.

20 (9)(A) The section 6714 added by section

21 13242(b)(1) of the Revenue Reconciliation Act of

22 1993 is hereby redesignated as section 6715.

23 (B) The table of sections for part I of sub24 chapter B of chapter 68 is amended by striking
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1 ‘‘6714’’ in the item added by such section

2 13242(b)(2) of such Act and inserting ‘‘6715’’.

3 (10) Paragraph (2) of section 9502(b) is

4 amended by inserting ‘‘and before’’ after ‘‘1982,’’.

5 (11) Subsection (a)(3) of section 13206 of the

6 Revenue Reconciliation Act of 1993 are each amend7 ed by striking ‘‘this section’’ and inserting ‘‘this sub8 section’’.

9 (12) Paragraph (1) of section 13215(c) of the

10 Revenue Reconciliation Act of 1993 is amended by

11 striking ‘‘Public Law 92–21’’ and inserting ‘‘Public

12 Law 98–21’’.

13 (13) Paragraph (2) of section 13311(e) of the

14 Revenue Reconciliation Act of 1993 is amended by

15 striking ‘‘section 1393(a)(3)’’ and inserting ‘‘section

16 1393(a)(2)’’.

17 (14) Subparagraph (B) of section 117(d)(2) is

18 amended by striking ‘‘section 132(f)’’ and inserting

19 ‘‘section 132(h)’’.

20 (n) EFFECTIVE DATE.—Any amendment made by

21 this section shall take effect as if included in the provision

22 of the Revenue Reconciliation Act of 1993 to which such

23 amendment relates.
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1 SEC. 604. MISCELLANEOUS PROVISIONS.

2 (a) APPLICATION OF AMENDMENTS MADE BY TITLE

3 XII OF OMNIBUS BUDGET RECONCILIATION ACT OF

4 1990.—Except as otherwise expressly provided, whenever

5 in title XII of the Omnibus Budget Reconciliation Act of

6 1990 an amendment or repeal is expressed in terms of

7 an amendment to, or repeal of, a section or other provi8 sion, the reference shall be considered to be made to a

9 section or other provision of the Internal Revenue Code

10 of 1986.

11 (b) TREATMENT OF CERTAIN AMOUNTS UNDER

12 HEDGE BOND RULES.—

13 (1) Clause (iii) of section 149(g)(3)(B) is

14 amended to read as follows:

15 ‘‘(iii) AMOUNTS HELD PENDING REIN16 VESTMENT OR REDEMPTION.—Amounts

17 held for not more than 30 days pending re18 investment or bond redemption shall be

19 treated as invested in bonds described in

20 clause (i).’’

21 (2) The amendment made by paragraph (1)

22 shall take effect as if included in the amendments

23 made by section 7651 of the Omnibus Budget Rec24 onciliation Act of 1989.

25 (c) TREATMENT OF CERTAIN DISTRIBUTIONS

26 UNDER SECTION 1445.—
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1 (1) IN GENERAL.—Paragraph (3) of section

2 1445(e) is amended by adding at the end thereof

3 the following new sentence: ‘‘Rules similar to the

4 rules of the preceding provisions of this paragraph

5 shall apply in the case of any distribution to which

6 section 301 applies and which is not made out of the

7 earnings and profits of such a domestic corpora8 tion.’’

9 (2) EFFECTIVE DATE.—The amendment made

10 by paragraph (1) shall apply to distributions after

11 the date of the enactment of this Act.

12 (d) TREATMENT OF CERTAIN CREDITS UNDER SEC13 TION 469.—

14 (1) IN GENERAL.—Subparagraph (B) of section

15 469(c)(3) is amended by adding at the end thereof

16 the following new sentence: ‘‘If the preceding sen17 tence applies to the net income from any property

18 for any taxable year, any credits allowable under

19 subpart B (other than section 27(a)) or D of part

20 IV of subchapter A for such taxable year which are

21 attributable to such property shall be treated as

22 credits not from a passive activity to the extent the

23 amount of such credits does not exceed the regular

24 tax liability of the taxpayer for the taxable year

25 which is allocable to such net income.’’
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall apply to taxable years begin3 ning after December 31, 1986.

4 (e) TREATMENT OF DISPOSITIONS UNDER PASSIVE

5 LOSS RULES.—

6 (1) IN GENERAL.—Subparagraph (A) of section

7 469(g)(1) is amended to read as follows:

8 ‘‘(A) IN GENERAL.—If all gain or loss real9 ized on such disposition is recognized, the ex10 cess of—

11 ‘‘(i) any loss from such activity for

12 such taxable year (determined after the ap13 plication of subsection (b)), over

14 ‘‘(ii) any net income or gain for such

15 taxable year from all other passive activi16 ties (determined after the application of

17 subsection (b)),

18 shall be treated as a loss which is not from a

19 passive activity.’’

20 (2) EFFECTIVE DATE.—The amendment made

21 by paragraph (1) shall apply to taxable years begin22 ning after December 31, 1986.

23 (f) MISCELLANEOUS AMENDMENTS TO FOREIGN

24 PROVISIONS.—
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1 (1) COORDINATION OF UNIFIED ESTATE TAX

2 CREDIT WITH TREATIES.—Subparagraph (A) of sec3 tion 2102(c)(3) is amended by adding at the end

4 thereof the following new sentence: ‘‘For purposes

5 of the preceding sentence, property shall not be

6 treated as situated in the United States if such

7 property is exempt from the tax imposed by this

8 subchapter under any treaty obligation of the United

9 States.’’

10 (2) TREATMENT OF CERTAIN INTEREST PAID

11 TO RELATED PERSON.—

12 (A) IN GENERAL.—Subparagraph (B) of

13 section 163(j)(1) is amended by inserting before

14 the period at the end thereof the following:

15 ‘‘(and clause (ii) of paragraph (2)(A) shall not

16 apply for purposes of applying this subsection

17 to the amount so treated)’’.

18 (B) EFFECTIVE DATE.—The amendment

19 made by subparagraph (A) shall apply as if in20 cluded in the amendments made by section

21 7210(a) of the Revenue Reconciliation Act of

22 1989.

23 (3) TREATMENT OF INTEREST ALLOCABLE TO

24 EFFECTIVELY CONNECTED INCOME.—

25 (A) IN GENERAL.—
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1 (i) Subparagraph (B) of section

2 884(f)(1) is amended by striking ‘‘to the

3 extent’’ and all that follows down through

4 ‘‘subparagraph (A)’’ and inserting ‘‘to the

5 extent that the allocable interest exceeds

6 the interest described in subparagraph

7 (A)’’.

8 (ii) The second sentence of section

9 884(f)(1) is amended by striking ‘‘reason10 ably expected’’ and all that follows down

11 through the period at the end thereof and

12 inserting ‘‘reasonably expected to be alloca13 ble interest.’’

14 (iii) Paragraph (2) of section 884(f) is

15 amended to read as follows:

16 ‘‘(2) ALLOCABLE INTEREST.—For purposes of

17 this subsection, the term ‘allocable interest’ means

18 any interest which is allocable to income which is ef19 fectively connected (or treated as effectively con20 nected) with the conduct of a trade or business in

21 the United States.’’

22 (B) EFFECTIVE DATE.—The amendments

23 made by subparagraph (A) shall take effect as

24 if included in the amendments made by section

25 1241(a) of the Tax Reform Act of 1986.
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1 (4) CLARIFICATION OF SOURCE RULE.—

2 (A) IN GENERAL.—Paragraph (2) of sec3 tion 865(b) is amended by striking ‘‘863(b)’’

4 and inserting ‘‘863’’.

5 (B) EFFECTIVE DATE.—The amendment

6 made by subparagraph (A) shall take effect as

7 if included in the amendments made by section

8 1211 of the Tax Reform Act of 1986.

9 (5) REPEAL OF OBSOLETE PROVISIONS.—

10 (A) Paragraph (1) of section 6038(a) is

11 amended by striking ‘‘, and’’ at the end of sub12 paragraph (E) and inserting a period, and by

13 striking subparagraph (F).

14 (B) Subsection (b) of section 6038A is

15 amended by adding ‘‘and’’ at the end of para16 graph (2), by striking ‘‘, and’’ at the end of

17 paragraph (3) and inserting a period, and by

18 striking paragraph (4).

19 (g) TREATMENT OF ASSIGNMENT OF INTEREST IN

20 CERTAIN BOND-FINANCED FACILITIES.—

21 (1) IN GENERAL.—Subparagraph (A) of section

22 1317(3) of the Tax Reform Act of 1986 is amended

23 by adding at the end thereof the following new sen24 tence: ‘‘A facility shall not fail to be treated as de25 scribed in this subparagraph by reason of an assign-
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1 ment (or an agreement to an assignment) by the

2 governmental unit on whose behalf the bonds are is3 sued of any part of its interest in the property fi4 nanced by such bonds to another governmental

5 unit.’’

6 (2) EFFECTIVE DATE.—The amendment made

7 by paragraph (1) shall take effect as if included in

8 such section 1317 on the date of the enactment of

9 the Tax Reform Act of 1986.

10 (h) CLARIFICATION OF TREATMENT OF MEDICARE

11 ENTITLEMENT UNDER COBRA PROVISIONS.—

12 (1) IN GENERAL.—

13 (A) Subclause (V) of section

14 4980B(f)(2)(B)(i) is amended to read as fol15 lows:

16 ‘‘(V) MEDICARE ENTITLEMENT

17 FOLLOWED BY QUALIFYING EVENT.—

18 In the case of a qualifying event de19 scribed in paragraph (3)(B) that oc20 curs less than 18 months after the

21 date the covered employee became en22 titled to benefits under title XVIII of

23 the Social Security Act, the period of

24 coverage for qualified beneficiaries

25 other than the covered employee shall
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1 not terminate under this clause before

2 the close of the 36-month period be3 ginning on the date the covered em4 ployee became so entitled.’’

5 (B) Clause (v) of section 602(2)(A) of the

6 Employee Retirement Income Security Act of

7 1974 is amended to read as follows:

8 ‘‘(v) MEDICARE ENTITLEMENT FOL9 LOWED BY QUALIFYING EVENT.—In the

10 case of a qualifying event described in sec11 tion 603(2) that occurs less than 18

12 months after the date the covered em13 ployee became entitled to benefits under

14 title XVIII of the Social Security Act, the

15 period of coverage for qualified bene16 ficiaries other than the covered employee

17 shall not terminate under this subpara18 graph before the close of the 36-month pe19 riod beginning on the date the covered em20 ployee became so entitled.’’

21 (C) Clause (iv) of section 2202(2)(A) of

22 the Public Health Service Act is amended to

23 read as follows:

24 ‘‘(iv) MEDICARE ENTITLEMENT FOL25 LOWED BY QUALIFYING EVENT.—In the
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1 case of a qualifying event described in sec2 tion 2203(2) that occurs less than 18

3 months after the date the covered em4 ployee became entitled to benefits under

5 title XVIII of the Social Security Act, the

6 period of coverage for qualified bene7 ficiaries other than the covered employee

8 shall not terminate under this subpara9 graph before the close of the 36-month pe10 riod beginning on the date the covered em11 ployee became so entitled.’’

12 (2) EFFECTIVE DATE.—The amendments made

13 by this subsection shall apply to plan years begin14 ning after December 31, 1989.

15 (i) TREATMENT OF CERTAIN REMIC INCLUSIONS.—

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

17 860E is amended by adding at the end thereof the

18 following new paragraph:

19 ‘‘(6) COORDINATION WITH MINIMUM TAX.—For

20 purposes of part VI of subchapter A of this chap21 ter—

22 ‘‘(A) the reference in section 55(b)(2) to

23 taxable income shall be treated as a reference

24 to taxable income determined without regard to

25 this subsection,
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1 ‘‘(B) the alternative minimum taxable in2 come of any holder of a residual interest in a

3 REMIC for any taxable year shall in no event

4 be less than the excess inclusion for such tax5 able year, and

6 ‘‘(C) any excess inclusion shall be dis7 regarded for purposes of computing the alter8 native tax net operating loss deduction.

9 The preceding sentence shall not apply to any orga10 nization to which section 593 applies, except to the

11 extent provided in regulations prescribed by the Sec12 retary under paragraph (2).’’

13 (2) EFFECTIVE DATE.—The amendment made

14 by paragraph (1) shall take effect as if included in

15 the amendments made by section 671 of the Tax Re16 form Act of 1986 unless the taxpayer elects to apply

17 such amendment only to taxable years beginning

18 after the date of the enactment of this Act.

19 (j) EXEMPTION FROM HARBOR MAINTENANCE TAX

20 FOR CERTAIN PASSENGERS.—

21 (1) IN GENERAL.—Subparagraph (D) of section

22 4462(b)(1) (relating to special rule for Alaska, Ha23 waii, and possessions) is amended by inserting be24 fore the period the following: ‘‘, or passengers trans25 ported on United States flag vessels operating solely
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1 within the State waters of Alaska or Hawaii and ad2 jacent international waters’’.

3 (2) EFFECTIVE DATE.—The amendment made

4 by paragraph (1) shall take effect as if included in

5 the amendments made by section 1402(a) of the

6 Harbor Maintenance Revenue Act of 1986.

7 (k) AMENDMENTS RELATED TO REVENUE PROVI8 SIONS OF ENERGY POLICY ACT OF 1992.—

9 (1) Effective with respect to taxable years be10 ginning after December 31, 1990, subclause (II) of

11 section 53(d)(1)(B)(iv) is amended to read as fol12 lows:

13 ‘‘(II) the adjusted net minimum

14 tax for any taxable year is the amount

15 of the net minimum tax for such year

16 increased in the manner provided in

17 clause (iii).’’

18 (2) Subsection (g) of section 179A is redesig19 nated as subsection (f).

20 (3) Subparagraph (E) of section 6724(d)(3) is

21 amended by striking ‘‘section 6109(f)’’ and inserting

22 ‘‘section 6109(h)’’.

23 (4)(A) Subsection (d) of section 30 is amend24 ed—
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1 (i) by inserting ‘‘(determined without re2 gard to subsection (b)(3))’’ before the period at

3 the end of paragraph (1) thereof, and

4 (ii) by adding at the end thereof the follow5 ing new paragraph:

6 ‘‘(4) ELECTION TO NOT TAKE CREDIT.—No

7 credit shall be allowed under subsection (a) for any

8 vehicle if the taxpayer elects to not have this section

9 apply to such vehicle.’’

10 (B) Subsection (m) of section 6501 (as redesig11 nated by section 101) is amended by striking ‘‘sec12 tion 40(f)’’ and inserting ‘‘section 30(d)(4), 40(f)’’.

13 (5) Subclause (III) of section 501(c)(21)(D)(ii)

14 is amended by striking ‘‘section 101(6)’’ and insert15 ing ‘‘section 101(7)’’ and by striking ‘‘1752(6)’’ and

16 inserting ‘‘1752(7)’’.

17 (6) Paragraph (1) of section 1917(b) of the En18 ergy Policy Act of 1992 shall be applied as if ‘‘at a

19 rate’’ appeared instead of ‘‘at the rate’’ in the mate20 rial proposed to be stricken.

21 (7) Paragraph (2) of section 1921(b) of the En22 ergy Policy Act of 1992 shall be applied as if a

23 comma appeared after ‘‘(2)’’ in the material pro24 posed to be stricken.
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1 (8) Subsection (a) of section 1937 of the En2 ergy Policy Act of 1992 shall be applied as if ‘‘Sub3 part B’’ appeared instead of ‘‘Subpart C’’.

4 (l) TREATMENT OF QUALIFIED FOOTBALL COACHES

5 PLAN.—

6 (1) IN GENERAL.—Section 1022 of title II of

7 the Employee Retirement Income Security Act of

8 1974 is amended by adding at the end thereof the

9 following new subsection:

10 ‘‘(l) QUALIFIED FOOTBALL COACHES PLAN.—For

11 purposes of determining the qualified plan status of a

12 qualified football coaches plan, section 3(37)(F) shall be

13 treated as part of this title and a qualified football coaches

14 plan shall be treated as a multiemployer collectively bar15 gained plan for purposes of the Internal Revenue Code

16 of 1986.’’

17 (2) EFFECTIVE DATE.—The amendment made

18 by paragraph (1) shall apply to years beginning

19 after the date of the enactment of Public Law 100–

20 202.

21 (m) DETERMINATION OF UNRECOVERED INVEST22 MENT IN ANNUITY CONTRACT.—

23 (1) IN GENERAL.—Subparagraph (A) of section

24 72(b)(4) is amended by inserting ‘‘(determined with25 out regard to subsection (c)(2))’’ after ‘‘contract’’.
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall take effect as if included in

3 the amendments made by section 1122(c) of the Tax

4 Reform Act of 1986.

5 (n) MODIFICATIONS TO ELECTION TO INCLUDE

6 CHILD’S INCOME ON PARENT’S RETURN.—

7 (1) ELIGIBILITY FOR ELECTION.—Clause (ii) of

8 section 1(g)(7)(A) (relating to election to include

9 certain unearned income of child on parent’s return)

10 is amended to read as follows:

11 ‘‘(ii) such gross income is more than

12 the amount described in paragraph

13 (4)(A)(ii)(I) and less than 10 times the

14 amount so described,’’.

15 (2) COMPUTATION OF TAX.—Subparagraph (B)

16 of section 1(g)(7) (relating to income included on

17 parent’s return) is amended—

18 (A) by striking ‘‘$1,000’’ in clause (i) and

19 inserting ‘‘twice the amount described in para20 graph (4)(A)(ii)(I)’’, and

21 (B) by amending subclause (II) of clause

22 (ii) to read as follows:

23 ‘‘(II) for each such child, 15 per24 cent of the lesser of the amount de25 scribed in paragraph (4)(A)(ii)(I) or
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1 the excess of the gross income of such

2 child over the amount so described,

3 and’’.

4 (3) MINIMUM TAX.—Subparagraph (B) of sec5 tion 59(j)(1) is amended by striking ‘‘$1,000’’ and

6 inserting ‘‘twice the amount in effect for the taxable

7 year under section 63(c)(5)(A)’’.

8 (4) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to taxable years begin10 ning after December 31, 1994.

11 (o) MISCELLANEOUS CLERICAL AMENDMENTS.—

12 (1) Subclause (II) of section 56(g)(4)(C)(ii) is

13 amended by striking ‘‘of the subclause’’ and insert14 ing ‘‘of subclause’’.

15 (2) Paragraph (2) of section 72(m) is amended

16 by inserting ‘‘and’’ at the end of subparagraph (A),

17 by striking subparagraph (B), and by redesignating

18 subparagraph (C) as subparagraph (B).

19 (3) Paragraph (2) of section 86(b) is amended

20 by striking ‘‘adusted’’ and inserting ‘‘adjusted’’.

21 (4)(A) The heading for section 112 is amended

22 by striking ‘‘COMBAT PAY’’ and inserting ‘‘COM23 BAT ZONE COMPENSATION’’.

24 (B) The item relating to section 112 in the

25 table of sections for part III of subchapter B of
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1 chapter 1 is amended by striking ‘‘combat pay’’ and

2 inserting ‘‘combat zone compensation’’.

3 (C) Paragraph (1) of section 3401(a) is amend4 ed by striking ‘‘combat pay’’ and inserting ‘‘combat

5 zone compensation’’.

6 (5) Clause (i) of section 172(h)(3)(B) is amend7 ed by striking the comma at the end thereof and in8 serting a period.

9 (6) Clause (ii) of section 543(a)(2)(B) is

10 amended by striking ‘‘section 563(c)’’ and inserting

11 ‘‘section 563(d)’’.

12 (7) Paragraph (1) of section 958(a) is amended

13 by striking ‘‘sections 955(b)(1)(A) and (B),

14 955(c)(2)(A)(ii), and 960(a)(1)’’ and inserting ‘‘sec15 tion 960(a)(1)’’.

16 (8) Subsection (g) of section 642 is amended by

17 striking ‘‘under 2621(a)(2)’’ and inserting ‘‘under

18 section 2621(a)(2)’’.

19 (9) Section 1463 is amended by striking ‘‘this

20 subsection’’ and inserting ‘‘this section’’.

21 (10) Subsection (k) of section 3306 is amended

22 by inserting a period at the end thereof.

23 (11) The item relating to section 4472 in the

24 table of sections for subchapter B of chapter 36 is

25 amended by striking ‘‘and special rules’’.
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1 (12) Paragraph (2) of section 4978(b) is

2 amended by striking the period at the end of sub3 paragraph (A) and inserting a comma, and by strik4 ing the period and quotation marks at the end of

5 subparagraph (B) and inserting a comma.

6 (13) Paragraph (3) of section 5134(c) is

7 amended by striking ‘‘section 6662(a)’’ and inserting

8 ‘‘section 6665(a)’’.

9 (14) Paragraph (2) of section 5206(f) is

10 amended by striking ‘‘section 5(e)’’ and inserting

11 ‘‘section 105(e)’’.

12 (15) Paragraph (1) of section 6050B(c) is

13 amended by striking ‘‘section 85(c)’’ and inserting

14 ‘‘section 85(b)’’.

15 (16) Subsection (k) of section 6166 is amended

16 by striking paragraph (6).

17 (17) Subsection (e) of section 6214 is amended

18 to read as follows:

19 ‘‘(e) CROSS REFERENCE.—

‘‘For provision giving Tax Court jurisdiction to

order a refund of an overpayment and to award

sanctions, see section 6512(b)(2).’’

20 (18) The section heading for section 6043 is

21 amended by striking the semicolon and inserting a

22 comma.

23 (19) The item relating to section 6043 in the

24 table of sections for subpart B of part III of sub-
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1 chapter A of chapter 61 is amended by striking the

2 semicolon and inserting a comma.

3 (20) The table of sections for part I of sub4 chapter A of chapter 68 is amended by striking the

5 item relating to section 6662.

6 (21)(A) Section 7232 is amended—

7 (i) by striking ‘‘LUBRICATING OIL,’’ in

8 the heading, and

9 (ii) by striking ‘‘lubricating oil,’’ in the

10 text.

11 (B) The table of sections for part II of sub12 chapter A of chapter 75 is amended by striking ‘‘lu13 bricating oil,’’ in the item relating to section 7232.

14 (22) Paragraph (1) of section 6701(a) of the

15 Omnibus Budget Reconciliation Act of 1989 is

16 amended by striking ‘‘subclause (IV)’’ and inserting

17 ‘‘subclause (V)’’.

18 (23) Clause (ii) of section 7304(a)(2)(D) of

19 such Act is amended by striking ‘‘subsection (c)(2)’’

20 and inserting ‘‘subsection (c)’’.

21 (24) Paragraph (1) of section 7646(b) of such

22 Act is amended by striking ‘‘section 6050H(b)(1)’’

23 and inserting ‘‘section 6050H(b)(2)’’.

24 (25) Paragraph (10) of section 7721(c) of

25 such Act is amended by striking ‘‘section
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1 6662(b)(2)(C)(ii)’’ and inserting ‘‘section

2 6661(b)(2)(C)(ii)’’.

3 (26) Subparagraph (A) of section 7811(i)(3) of

4 such Act is amended by inserting ‘‘the first place it

5 appears’’ before ‘‘in clause (i)’’.

6 (27) Paragraph (10) of section 7841(d) of

7 such Act is amended by striking ‘‘section 381(a)’’

8 and inserting ‘‘section 381(c)’’.

9 (28) Paragraph (2) of section 7861(c) of such

10 Act is amended by inserting ‘‘the second place it ap11 pears’’ before ‘‘and inserting’’.

12 (29) Paragraph (1) of section 460(b) is amend13 ed by striking ‘‘the look-back method of paragraph

14 (3)’’ and inserting ‘‘the look-back method of para15 graph (2)’’.

16 (30) Subparagraph (C) of section 50(a)(2) is

17 amended by striking ‘‘subsection (c)(4)’’ and insert18 ing ‘‘subsection (d)(5)’’.

19 (31) Subparagraph (B) of section 172(h)(4) is

20 amended by striking the material following the head21 ing and preceding clause (i) and inserting ‘‘For pur22 poses of subsection (b)(2)—’’.

23 (32) Subparagraph (A) of section 355(d)(7) is

24 amended by inserting ‘‘section’’ before ‘‘267(b)’’.
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1 (33) Subparagraph (C) of section 420(e)(1) is

2 amended by striking ‘‘mean’’ and inserting ‘‘means’’.

3 (34) Paragraph (4) of section 537(b) is amend4 ed by striking ‘‘section 172(i)’’ and inserting ‘‘sec5 tion 172(f)’’.

6 (35) Subparagraph (B) of section 613(e)(1) is

7 amended by striking the comma at the end thereof

8 and inserting a period.

9 (36) Paragraph (4) of section 856(a) is amend10 ed by striking ‘‘section 582(c)(5)’’ and inserting

11 ‘‘section 582(c)(2)’’.

12 (37) Sections 904(f)(2)(B)(i) and

13 907(c)(4)(B)(iii) are each amended by inserting ‘‘(as

14 in effect on the day before the date of the enactment

15 of the Revenue Reconciliation Act of 1990)’’ after

16 ‘‘section 172(h)’’.

17 (38) Subsection (b) of section 936 is amended

18 by striking ‘‘subparagraphs (D)(ii)(I)’’ and inserting

19 ‘‘subparagraphs (D)(ii)’’.

20 (39) Subsection (c) of section 2104 is amended

21 by striking ‘‘subparagraph (A), (C), or (D) of sec22 tion 861(a)(1)’’ and inserting ‘‘section

23 861(a)(1)(A)’’.

24 (40) Subparagraph (A) of section 280A(c)(1) is

25 amended to read as follows:
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1 ‘‘(A) as the principal place of business for

2 any trade or business of the taxpayer,’’.

3 (41) Section 6038 is amended by redesignating

4 the subsection relating to cross references as sub5 section (f).

6 (42) Clause (iv) of section 6103(e)(1)(A) is

7 amended by striking all that follows ‘‘provisions of’’

8 and inserting ‘‘section 1(g) or 59(j);’’.

9 (43) The subsection (f) of section 6109 of the

10 Internal Revenue Code of 1986 which was added by

11 section 2201(d) of Public Law 101–624 is redesig12 nated as subsection (g).

13 (44) Subsection (b) of section 7454 is amended

14 by striking ‘‘section 4955(e)(2)’’ and inserting ‘‘sec15 tion 4955(f)(2)’’.

16 (45) Subsection (d) of section 11231 of the

17 Revenue Reconciliation Act of 1990 shall be applied

18 as if ‘‘comma’’ appeared instead of ‘‘period’’ and as

19 if the paragraph (9) proposed to be added ended

20 with a comma.

21 (46) Paragraph (1) of section 11303(b) of the

22 Revenue Reconciliation Act of 1990 shall be applied

23 as if ‘‘paragraph’’ appeared instead of ‘‘subpara24 graph’’ in the material proposed to be stricken.
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1 (47) Subsection (f) of section 11701 of the Rev2 enue Reconciliation Act of 1990 is amended by in3 serting ‘‘(relating to definitions)’’ after ‘‘section

4 6038(e)’’.

5 (48) Subsection (i) of section 11701 of the Rev6 enue Reconciliation Act of 1990 shall be applied as

7 if ‘‘subsection’’ appeared instead of ‘‘section’’ in the

8 material proposed to be stricken.

9 (49) Subparagraph (B) of section 11801(c)(2)

10 of the Revenue Reconciliation Act of 1990 shall be

11 applied as if ‘‘section 56(g)’’ appeared instead of

12 ‘‘section 59(g)’’.

13 (50) Subparagraph (C) of section 11801(c)(8)

14 of the Revenue Reconciliation Act of 1990 shall be

15 applied as if ‘‘reorganizations’’ appeared instead of

16 ‘‘reorganization’’ in the material proposed to be

17 stricken.

18 (51) Subparagraph (H) of section 11801(c)(9)

19 of the Revenue Reconciliation Act of 1990 shall be

20 applied as if ‘‘section 1042(c)(1)(B)’’ appeared in21 stead of ‘‘section 1042(c)(2)(B)’’.

22 (52) Subparagraph (F) of section 11801(c)(12)

23 of the Revenue Reconciliation Act of 1990 shall be

24 applied as if ‘‘and (3)’’ appeared instead of ‘‘and

25 (E)’’.
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1 (53) Subparagraph (A) of section 11801(c)(22)

2 of the Revenue Reconciliation Act of 1990 shall be

3 applied as if ‘‘chapters 21’’ appeared instead of

4 ‘‘chapter 21’’ in the material proposed to be strick5 en.

6 (54) Paragraph (3) of section 11812(b) of the

7 Revenue Reconciliation Act of 1990 shall be applied

8 by not executing the amendment therein to the

9 heading of section 42(d)(5)(B).

10 (55) Clause (i) of section 11813(b)(9)(A) of the

11 Revenue Reconciliation Act of 1990 shall be applied

12 as if a comma appeared after ‘‘(3)(A)(ix)’’ in the

13 material proposed to be stricken.

14 (56) Subparagraph (F) of section 11813(b)(13)

15 of the Revenue Reconciliation Act of 1990 shall be

16 applied as if ‘‘tax’’ appeared after ‘‘investment’’ in

17 the material proposed to be stricken.

18 (57) Paragraph (19) of section 11813(b) of the

19 Revenue Reconciliation Act of 1990 shall be applied

20 as if ‘‘Paragraph (20) of section 1016(a), as redesig21 nated by section 11801,’’ appeared instead of ‘‘Para22 graph (21) of section 1016(a)’’.

23 (58) Paragraph (5) section 8002(a) of the Sur24 face Transportation Revenue Act of 1991 shall be
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1 applied as if ‘‘4481(e)’’ appeared instead of

2 ‘‘4481(c)’’.

3 (59) Section 7872 is amended—

4 (A) by striking ‘‘foregone’’ each place it

5 appears in subsections (a) and (e)(2) and in6 serting ‘‘forgone’’, and

7 (B) by striking ‘‘FOREGONE’’ in the head8 ing for subsection (e) and the heading for para9 graph (2) of subsection (e) and inserting ‘‘FOR10 GONE’’.

11 (60) Paragraph (7) of section 7611(h) is

12 amended by striking ‘‘approporiate’’ and inserting

13 ‘‘appropriate’’.

14 (61) The heading of paragraph (3) of section

15 419A(c) is amended by striking ‘‘SEVERENCE’’ and

16 inserting ‘‘SEVERANCE’’.

17 (62) Clause (ii) of section 807(d)(3)(B) is

18 amended by striking ‘‘Commissoners’ ’’ and insert19 ing ‘‘Commissioners’ ’’.

20 (63) Subparagraph (B) of section 1274A(c)(1)

21 is amended by striking ‘‘instument’’ and inserting

22 ‘‘instrument’’.

23 (64) Subparagraph (B) of section 724(d)(3) by

24 striking ‘‘Subparagaph’’ and inserting ‘‘Subpara25 graph’’.
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1 (65) The last sentence of paragraph (2) of sec2 tion 42(c) is amended by striking ‘‘of 1988’’.

3 (66) Paragraph (1) of section 9707(d) is

4 amended by striking ‘‘diligence,’’ and inserting ‘‘dili5 gence’’.

6 (67) Subsection (c) of section 4977 is amended

7 by striking ‘‘section 132(i)(2)’’ and inserting ‘‘sec8 tion 132(h)’’.

9 (68) The last sentence of section 401(a)(20) is

10 amended by striking ‘‘section 211’’ and inserting

11 ‘‘section 521’’.

12 (69) Subparagraph (A) of section 402(g)(3) is

13 amended by striking ‘‘subsection (a)(8)’’ and insert14 ing ‘‘subsection (e)(3)’’.

15 (70) The last sentence of section 403(b)(10) is

16 amended by striking ‘‘an direct’’ and inserting ‘‘a di17 rect’’.

18 (71) Subparagraph (A) of section 4973(b)(1) is

19 amended by striking ‘‘sections 402(c)’’ and inserting

20 ‘‘section 402(c)’’.

21 (72) Paragraph (12) of section 3405(e) is

22 amended by striking ‘‘(b)(3)’’ and inserting

23 ‘‘(b)(2)’’.

24 (73) Paragraph (41) of section 521(b) of the

25 Unemployment Compensation Amendments of 1992
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1 shall be applied as if ‘‘section’’ appeared instead of

2 ‘‘sections’’ in the material proposed to be stricken.

3 (74) Paragraph (27) of section 521(b) of the

4 Unemployment Compensation Amendments of 1992

5 shall be applied as if ‘‘Section 691(c)(5)’’ appeared

6 instead of ‘‘Section 691(c)’’.

7 (75) Paragraph (5) of section 860F(a) is

8 amended by striking ‘‘paragraph (1)’’ and inserting

9 ‘‘paragraph (2)’’.

10 (76) Paragraph (1) of section 415(k) is amend11 ed by adding ‘‘or’’ at the end of subparagraph (C),

12 by striking subparagraphs (D) and (E), and by re13 designating subparagraph (F) as subparagraph (D).

14 (77) Paragraph (2) of section 404(a) is amend15 ed by striking ‘‘(18),’’.

16 (78) Clause (ii) of section 72(p)(4)(A) is

17 amended to read as follows:

18 ‘‘(ii) SPECIAL RULE.—The term

19 ‘qualified employer plan’ shall not include

20 any plan which was (or was determined to

21 be) a qualified employer plan or a govern22 ment plan.’’

23 (79) Sections 461(i)(3)(C) and

24 1274(b)(3)(B)(i) are each amended by striking ‘‘sec-
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1 tion 6662(d)(2)(C)(ii)’’ and inserting ‘‘section

2 6662(d)(2)(C)(iii)’’.

3 (80) Subsection (a) of section 164 is amended

4 by striking the paragraphs relating to the genera5 tion-skipping tax and the environmental tax imposed

6 by section 59A and by inserting after paragraph (3)

7 the following new paragraphs:

8 ‘‘(4) The GST tax imposed on income distribu9 tions.

10 ‘‘(5) The environmental tax imposed by section

11 59A.’’