IIA

104TH CONGRESS

1ST SESSION H. R. 1215

IN THE SENATE OF THE UNITED STATES

APRIL 6 (legislative day, APRIL 5), 1995

Received; read twice and referred to the Committee on Finance

AN ACT

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.

4 This Act may be cited as the ‘‘Tax Fairness and

5 Deficit Reduction Act of 1995’’.
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1 TITLE I—DISCRETIONARY

2 SAVINGS

3 SEC. 1001. SHORT TITLE.

4 This title may be cited as the ‘‘Discretionary Spend5 ing Reduction and Control Act of 1995’’.

6 SEC. 1002. DISCRETIONARY SPENDING LIMITS.

7 (a) LIMITS.—Section 601(a)(2) of the Congressional

8 Budget Act of 1974 is amended by striking subparagraphs

9 (A), (B), (C), (D), and (F), by redesignating subpara10 graph (E) as subparagraph (A) and by striking ‘‘and’’ at

11 the end of that subparagraph, and by inserting after sub12 paragraph (A) the following new subparagraphs:

13 ‘‘(B) with respect to fiscal year 1996, for

14 the discretionary category: $502,994,000,000 in

15 new budget authority and $537,946,000,000 in

16 outlays;

17 ‘‘(C) with respect to fiscal year 1997, for

18 the discretionary category: $497,816,000,000 in

19 new budget authority and $531,793,000,000 in

20 outlays;

21 ‘‘(D) with respect to fiscal year 1998, for

22 the discretionary category: $489,046,000,000 in

23 new budget authority and $523,703,000,000 in

24 outlays;
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1 ‘‘(E) with respect to fiscal year 1999, for

2 the discretionary category: $491,586,000,000 in

3 new budget authority and $522,063,000,000 in

4 outlays; and

5 ‘‘(F) with respect to fiscal year 2000, for

6 the discretionary category: $492,282,000,000 in

7 new budget authority and $521,690,000,000 in

8 outlays;’’.

9 (b) COMMITTEE ALLOCATIONS AND ENFORCE10 MENT.—Section 602 of the Congressional Budget Act of

11 1974 is amended—

12 (1) in subsection (c), by striking ‘‘1995’’ and

13 inserting ‘‘2000’’ and by striking its last sentence;

14 and

15 (2) in subsection (d), by striking ‘‘1992 TO

16 1995’’ in the side heading and inserting ‘‘1995 TO

17 2000’’ and by striking ‘‘1992 through 1995’’ and in18 serting ‘‘1995 through 2000’’.

19 (c) FIVE-YEAR BUDGET RESOLUTIONS.—Section

20 606 of the Congressional Budget Act of 1974 is amend21 ed—

22 (1) in subsection (a), by striking ‘‘1992, 1993,

23 1994, or 1995’’ and inserting ‘‘1995, 1996, 1997,

24 1998, 1999, or 2000’’; and
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1 (2) in subsection (d)(1), by striking ‘‘1992,

2 1993, 1994, and 1995’’ and inserting ‘‘1995, 1996,

3 1997, 1998, 1999, and 2000’’, and by striking ‘‘(i)

4 and (ii)’’.

5 (d) EFFECTIVE DATE.—Section 607 of the Congres6 sional Budget Act of 1974 is amended by striking ‘‘1991

7 to 1998’’ and inserting ‘‘1995 to 2000’’.

8 (e) SEQUESTRATION REGARDING CRIME TRUST

9 FUND.—(1) Section 251A(b)(1) of the Balanced Budget

10 and Emergency Deficit Control Act of 1985 is amended

11 by striking subparagraphs (B), (C), and (D) and its last

12 two sentences and inserting the following:

13 ‘‘(B) For fiscal year 1996,

14 $1,827,000,000.

15 ‘‘(C) For fiscal year 1997, $3,082,000,000.

16 ‘‘(D) For fiscal year 1998,

17 $3,840,000,000.

18 ‘‘(E) For fiscal year 1999,

19 $4,415,000,000.

20 ‘‘(F) For fiscal year 2000,

21 $4,874,000,000.

22 ‘‘The appropriate levels of new budget authority are

23 as follows: for fiscal year 1996, $3,357,000,000; for

24 fiscal year 1997, $3,915,000,000; for fiscal year

25 1998, $4,306,000,000; for fiscal year 1999,
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1 $5,089,000,000; and for fiscal year 2000,

2 $5,089,000,000.’’.

3 (2) The last two sentences of section 310002 of the

4 Violent Crime Control and Law Enforcement Act of 1994

5 (42 U.S.C. 14212) are repealed.

6 SEC. 1003. GENERAL STATEMENT AND DEFINITIONS.

7 (a) GENERAL STATEMENT.—Section 250(b) of the

8 Balanced Budget and Emergency Deficit Control Act of

9 1985 is amended by striking the first sentence and insert10 ing the following: ‘‘This part provides for the enforcement

11 of deficit reduction through discretionary spending limits

12 and pay-as-you-go requirements for fiscal years 1995

13 through 2000.’’.

14 (b) DEFINITIONS.—Section 250(c) of the Balanced

15 Budget and Emergency Deficit Control Act of 1985 is

16 amended—

17 (1) by striking paragraph (4) and inserting the

18 following:

19 ‘‘(4) The term ‘category’ means all discre20 tionary appropriations.’’;

21 (2) by striking paragraph (6) and inserting the

22 following:

23 ‘‘(6) The term ‘budgetary resources’ means new

24 budget authority, unobligated balances, direct spend25 ing authority, and obligation limitations.’’;
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1 (3) in paragraph (9), by striking ‘‘1992’’ and

2 inserting ‘‘1995’’;

3 (4) in paragraph (14), by striking ‘‘1995’’ and

4 inserting ‘‘2000’’; and

5 (5) by striking paragraph (17) and by redesig6 nating paragraphs (18) through (21) as paragraphs

7 (17) through (20), respectively.

8 SEC. 1004. ENFORCING DISCRETIONARY SPENDING LIMITS.

9 Section 251 of the Balanced Budget and Emergency

10 Deficit Control Act of 1985 is amended—

11 (1) in the side heading of subsection (a), by

12 striking ‘‘1991–1998’’ and inserting ‘‘1995–2000’’;

13 (2) in the first sentence of subsection (b)(1), by

14 striking ‘‘1992, 1993, 1994, 1995, 1996, 1997 or

15 1998’’ and inserting ‘‘1995, 1996, 1997, 1998,

16 1999, or 2000’’ and by striking ‘‘through 1998’’ and

17 inserting ‘‘through 2000’’;

18 (3) in subsection (b)(1), by striking subpara19 graphs (B) and (C) and by striking ‘‘the following:’’

20 and all that follows through ‘‘The adjustments’’ and

21 inserting ‘‘the following: the adjustments’’;

22 (4) in subsection (b)(2), by striking ‘‘1991,

23 1992, 1993, 1994, 1995, 1996, 1997, or 1998’’ and

24 inserting ‘‘1995, 1996, 1997, 1998, 1999, or 2000’’
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1 and by striking ‘‘through 1998’’ and inserting

2 ‘‘through 2000’’;

3 (5) by striking subparagraphs (A), (B), and (C)

4 of subsection (b)(2);

5 (6) in subsection (b)(2)(E), by striking clauses

6 (i), (ii), and (iii) and by striking ‘‘(iv) if, for fiscal

7 years 1994, 1995, 1996, 1997, and 1998’’ and in8 serting ‘‘If, for fiscal years 1995, 1996, 1997, 1998,

9 1999, and 2000’’; and

10 (7) in subsection (b)(2)(F), strike everything

11 after ‘‘the adjustment in outlays’’ and insert ‘‘for a

12 category for a fiscal year shall not exceed 0.5 per13 cent of the adjusted discretionary spending limit on

14 outlays for that fiscal year in fiscal year 1996, 1997,

15 1998, 1999, or 2000.’’.

16 SEC. 1005. ENFORCING PAY-AS-YOU-GO.

17 Section 252 of the Balanced Budget and Emergency

18 Deficit Control Act of 1985 is amended—

19 (1) in the side heading of subsection (a), by

20 striking ‘‘1992–1998’’ and inserting ‘‘1995–2000’’;

21 (2) in subsection (d), by striking ‘‘1998’’ each

22 place it appears and inserting ‘‘2000’’; and

23 (3) in subsection (e), by striking ‘‘1991 through

24 1998’’ and inserting ‘‘1995 through 2000’’ and by
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1 striking ‘‘through 1995’’ and inserting ‘‘through

2 2000’’.

3 SEC. 1006. REPORTS AND ORDERS.

4 Section 254 of the Balanced Budget and Emergency

5 Deficit Control Act of 1985 is amended—

6 (1) in subsection (d)(2), by striking ‘‘1998’’

7 and inserting ‘‘2000’’; and

8 (2) in subsection (g), by striking ‘‘1998’’ each

9 place it appears and inserting ‘‘2000’’.

10 SEC. 1007. TECHNICAL CORRECTION.

11 Section 258 of the Balanced Budget and Emergency

12 Deficit Control Act of 1985, entitled ‘‘Modification of

13 Presidential Order’’, is repealed.

14 SEC. 1008. EFFECTIVE DATE.

15 (a) EXPIRATION.—Section 275(b) of the Balanced

16 Budget and Emergency Deficit Control Act of 1985 is

17 amended by striking ‘‘1995’’ and inserting ‘‘2000’’.

18 (b) EXPIRATION.—Section 14002(c)(3) of the Omni19 bus Budget Reconciliation Act of 1993 (2 U.S.C. 900

20 note; 2 U.S.C. 665 note) is repealed.
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1 SEC. 1009. SPECIAL RULE ON INTERRELATIONSHIP BE2 TWEEN CHANGES IN DISCRETIONARY SPEND3 ING LIMITS AND PAY-AS-YOU-GO REQUIRE4 MENTS.

5 (a)(1) Section 252 of the Balanced Budget and

6 Emergency Deficit Control Act of 1985 is amended by

7 adding at the end the following new subsection:

8 ‘‘(f) SPECIAL RULE ON INTERRELATIONSHIP BE9 TWEEN SECTIONS 251, 251A, and 252.—Whenever the

10 Committee on the Budget of the House of Representatives

11 or the Senate reports legislation that decreases the discre12 tionary spending limits for budget authority and outlays

13 for a fiscal year set forth in section 601(a)(2) of the Con14 gressional Budget Act of 1974 or in section 251A(b) of

15 the Balanced Budget and Emergency Deficit Control Act

16 of 1985, or both, then, for purposes of subsection (b), an

17 amount equal to that decrease in the discretionary spend18 ing limit for outlays shall be treated as direct spending

19 legislation decreasing the deficit for that fiscal year.’’.

20 (2) Section 310(a) of the Congressional Budget Act

21 of 1974 is amended by striking ‘‘or’’ at the end of para22 graph (3), by redesignating paragraph (4) as paragraph

23 (5) and by striking ‘‘and (3)’’ in such redesignated para24 graph (5) and inserting ‘‘(3), and (4)’’, and by inserting

25 after paragraph (3) the following new paragraph:
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1 ‘‘(4) carry out section 252(f) of the Balanced

2 Budget and Emergency Deficit Control Act of 1985;

3 or’’.

4 (b) For purposes of section 252(f) of the Balanced

5 Budget and Emergency Deficit Control Act of 1985 (as

6 amended by subsection (a)(1))—

7 (1) this Act shall be deemed to be legislation re8 ported by the Committee on the Budget of the

9 House of Representatives; and

10 (2)(A) reductions in the discretionary spending

11 limit for outlays set forth in section 601(a)(2) of the

12 Congressional Budget Act of 1974 for fiscal years

13 1999 and 2000 under section 1002 shall be meas14 ured as reductions from the discretionary spending

15 limit for outlays for fiscal year 1998 as in effect im16 mediately before the enactment of this Act; and

17 (B) reductions in the discretionary spending

18 limit for outlays set forth in section 251A(b) of the

19 Balanced Budget and Emergency Deficit Control

20 Act of 1985 for fiscal years 1999 and 2000 under

21 section 1002 shall be measured as reductions from

22 the level for outlays for fiscal year 1999 and 2000,

23 as the case may be, referred to in the last two sen24 tences of section 251A(b)(1) as in effect immediately

25 before the enactment of this Act.
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1 (c) In the final sequestration report of the Director

2 of the Office of Management and Budget for fiscal year

3 1996—

4 (1) all adjustments required by section

5 251(b)(2) of the Balanced Budget and Emergency

6 Deficit Control Act of 1985 made after the seques7 tration preview report for fiscal year 1996 shall be

8 made to the discretionary spending limits set forth

9 in 601(a)(2) of the Congressional Budget Act of

10 1974 as amended by section 1002; and

11 (2) all statutory changes in the discretionary

12 spending limits set forth in 601(a)(2) of the Con13 gressional Budget Act of 1974 made after issuance

14 of the sequestration preview report for fiscal year

15 1996 of the Director of the Office of Management

16 and Budget and before the date of enactment of this

17 Act shall be made to those limits as amended by sec18 tion 1002.
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1 TITLE II—EXTENSION OF AU2 THORITY OF FEDERAL COM3 MUNICATIONS COMMISSION

4 TO USE COMPETITIVE BID5 DING

6 SEC. 2001. EXTENSION OF AUTHORITY.

7 Section 309(j)(11) of the Communications Act of

8 1934 (47 U.S.C. 309(j)(11)) is amended by striking ‘‘Sep9 tember 30, 1998’’ and inserting ‘‘September 30, 2000’’.

10 TITLE III—PRIVATIZATION OF

11 THE UNITED STATES ENRICH12 MENT CORPORATION

13 SEC. 3001. SHORT TITLE AND REFERENCE.

14 (a) SHORT TITLE.—This title may be cited as the

15 ‘‘USEC Privatization Act’’.

16 (b) REFERENCE.—Except as otherwise expressly pro17 vided, whenever in this title an amendment or repeal is

18 expressed in terms of an amendment to, or repeal of, a

19 section or other provision, the reference shall be consid20 ered to be made to a section or other provision of the

21 Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.).

22 SEC. 3002. PRODUCTION FACILITY.

23 Paragraph v. of section 11 (42 U.S.C. 2014 v.) is

24 amended by striking ‘‘or the construction and operation
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1 of a uranium enrichment production facility using Atomic

2 Vapor Laser Isotope Separation technology’’.

3 SEC. 3003. DEFINITIONS.

4 Section 1201 (42 U.S.C. 2297) is amended—

5 (1) in paragraph (4), by inserting before the pe6 riod the following: ‘‘and any successor corporation

7 established through privatization of the Corpora8 tion’’;

9 (2) by redesignating paragraphs (10) through

10 (13) as paragraphs (14) through (17), respectively,

11 and by inserting after paragraph (9) the following

12 new paragraphs:

13 ‘‘(10) The term ‘low-level radioactive waste’ has

14 the meaning given such term in section 102(9) of

15 the Low-Level Radioactive Waste Policy Amend16 ments Act of 1985 (42 U.S.C. 2021b(9)).

17 ‘‘(11) The term ‘mixed waste’ has the meaning

18 given such term in section 1004(41) of the Solid

19 Waste Disposal Act (42 U.S.C. 6903(41)).

20 ‘‘(12) The term ‘privatization’ means the trans21 fer of ownership of the Corporation to private inves22 tors pursuant to chapter 25.

23 ‘‘(13) The term ‘privatization date’ means the

24 date on which 100 percent of ownership of the Cor25 poration has been transferred to private investors.’’;
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1 (3) by inserting after paragraph (17) (as redes2 ignated) the following new paragraph:

3 ‘‘(18) The term ‘transition date’ means July 1,

4 1993.’’; and

5 (4) by redesignating the unredesignated para6 graph (14) as paragraph (19).

7 SEC. 3004. EMPLOYEES OF THE CORPORATION.

8 (a) PARAGRAPH (2).—Paragraphs (1) and (2) of sec9 tion 1305(e) (42 U.S.C. 2297b–4(e)(1)(2)) are amended

10 to read as follows:

11 ‘‘(1) IN GENERAL.—It is the purpose of this

12 subsection to ensure that the privatization of the

13 Corporation shall not result in any adverse effects

14 on the pension benefits of employees at facilities that

15 are operated, directly or under contract, in the per16 formance of the functions vested in the Corporation.

17 ‘‘(2) APPLICABILITY OF EXISTING COLLECTIVE

18 BARGAINING AGREEMENT.—The Corporation shall

19 abide by the terms of the collective bargaining agree20 ment in effect on the privatization date at each indi21 vidual facility.’’.

22 (b) PARAGRAPH (4).—Paragraph (4) of section

23 1305(e) (42 U.S.C. 2297b–4(e)(4)) is amended—

24 (1) by striking ‘‘AND DETAILEES’’ in the head25 ing;
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1 (2) by striking the first sentence;

2 (3) in the second sentence, by inserting ‘‘from

3 other Federal employment’’ after ‘‘transfer to the

4 Corporation’’; and

5 (4) by striking the last sentence.

6 SEC. 3005. MARKETING AND CONTRACTING AUTHORITY.

7 (a) MARKETING AUTHORITY.—Section 1401(a) (42

8 U.S.C. 2297c(a)) is amended effective on the privatization

9 date (as defined in section 1201(13) of the Atomic Energy

10 Act of 1954)—

11 (1) by amending the subsection heading to read

12 ‘‘MARKETING AUTHORITY.—’’; and

13 (2) by striking the first sentence.

14 (b) TRANSFER OF CONTRACTS.—Section 1401(b) (42

15 U.S.C. 2297c(b)) is amended—

16 (1) in paragraph (2)(B), by adding at the end

17 the following: ‘‘The privatization of the Corporation

18 shall not affect the terms of, or the rights or obliga19 tions of the parties to, any such power purchase con20 tract.’’; and

21 (2) by adding at the end the following:

22 ‘‘(3) EFFECT OF TRANSFER.—

23 ‘‘(A) As a result of the transfer pursuant

24 to paragraph (1), all rights, privileges, and ben25 efits under such contracts, agreements, and
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1 leases, including the right to amend, modify, ex2 tend, revise, or terminate any of such contracts,

3 agreements, or leases were irrevocably assigned

4 to the Corporation for its exclusive benefit.

5 ‘‘(B) Notwithstanding the transfer pursu6 ant to paragraph (1), the United States shall

7 remain obligated to the parties to the contracts,

8 agreements, and leases transferred pursuant to

9 paragraph (1) for the performance of the obli10 gations of the United States thereunder during

11 the term thereof. The Corporation shall reim12 burse the United States for any amount paid by

13 the United States in respect of such obligations

14 arising after the privatization date to the extent

15 such amount is a legal and valid obligation of

16 the Corporation then due.

17 ‘‘(C) After the privatization date, upon any

18 material amendment, modification, extension,

19 revision, replacement, or termination of any

20 contract, agreement, or lease transferred under

21 paragraph (1), the United States shall be re22 leased from further obligation under such con23 tract, agreement, or lease, except that such ac24 tion shall not release the United States from
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1 obligations arising under such contract, agree2 ment, or lease prior to such time.’’.

3 (c) PRICING.—Section 1402 (42 U.S.C. 2297c–1) is

4 amended to read as follows:

5 ‘‘SEC. 1402. PRICING.

6 ‘‘The Corporation shall establish prices for its prod7 ucts, materials, and services provided to customers on a

8 basis that will allow it to attain the normal business objec9 tives of a profitmaking corporation.’’.

10 (d) LEASING OF GASEOUS DIFFUSION FACILITIES OF

11 DEPARTMENT.—Effective on the privatization date (as de12 fined in section 1201(13) of the Atomic Energy Act of

13 1954), section 1403 (42 U.S.C. 2297c–2) is amended by

14 adding at the end the following:

15 ‘‘(h) LOW-LEVEL RADIOACTIVE WASTE AND MIXED

16 WASTE.—

17 ‘‘(1) RESPONSIBILITY OF THE DEPARTMENT;

18 COSTS.—

19 ‘‘(A) With respect to low-level radioactive

20 waste and mixed waste generated by the Cor21 poration as a result of the operation of the fa22 cilities and related property leased by the Cor23 poration pursuant to subsection (a) or as a re24 sult of treatment of such wastes at a location

25 other than the facilities and related property
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1 leased by the Corporation pursuant to sub2 section (a) the Department, at the request of

3 the Corporation, shall—

4 ‘‘(i) accept for treatment or disposal

5 of all such wastes for which treatment or

6 disposal technologies and capacities exist,

7 whether within the Department or else8 where; and

9 ‘‘(ii) accept for storage (or ultimately

10 treatment or disposal) all such wastes for

11 which treatment and disposal technologies

12 or capacities do not exist, pending develop13 ment of such technologies or availability of

14 such capacities for such wastes.

15 ‘‘(B) All low-level wastes and mixed wastes

16 that the Department accepts for treatment,

17 storage, or disposal pursuant to subparagraph

18 (A) shall, for the purpose of any permits, li19 censes, authorizations, agreements, or orders

20 involving the Department and other Federal

21 agencies or State or local governments, be

22 deemed to be generated by the Department and

23 the Department shall handle such wastes in ac24 cordance with any such permits, licenses, au25 thorizations, agreements, or orders. The De-
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1 partment shall obtain any additional permits, li2 censes, or authorizations necessary to handle

3 such wastes, shall amend any such agreements

4 or orders as necessary to handle such wastes,

5 and shall handle such wastes in accordance

6 therewith.

7 ‘‘(C) The Corporation shall reimburse the

8 Department for the treatment, storage, or dis9 posal of low-level radioactive waste or mixed

10 waste pursuant to subparagraph (A) in an

11 amount equal to the Department’s costs but in

12 no event greater than an amount equal to that

13 which would be charged by commercial, State,

14 regional, or interstate compact entities for

15 treatment, storage, or disposal of such waste.

16 ‘‘(2) AGREEMENTS WITH OTHER PERSONS.—

17 The Corporation may also enter into agreements for

18 the treatment, storage, or disposal of low-level radio19 active waste and mixed waste generated by the Cor20 poration as a result of the operation of the facilities

21 and related property leased by the Corporation pur22 suant to subsection (a) with any person other than

23 the Department that is authorized by applicable laws

24 and regulations to treat, store, or dispose of such

25 wastes.’’.
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1 (e) LIABILITIES.—

2 (1) Subsection (a) of section 1406 (42 U.S.C.

3 2297c–5(a)) is amended—

4 (A) by inserting ‘‘AND PRIVATIZATION’’

5 after ‘‘TRANSITION’’ in the heading; and

6 (B) by adding at the end the following:

7 ‘‘As of the privatization date, all liabilities at8 tributable to the operation of the Corporation

9 from the transition date to the privatization

10 date shall be direct liabilities of the United

11 States.’’.

12 (2) Subsection (b) of section 1406 (42 U.S.C.

13 2297c–5(b)) is amended—

14 (A) by inserting ‘‘AND PRIVATIZATION’’

15 after ‘‘TRANSITION’’ in the heading; and

16 (B) by adding at the end the following:

17 ‘‘As of the privatization date, any judgment en18 tered against the Corporation imposing liability

19 arising out of the operation of the Corporation

20 from the transition date to the privatization

21 date shall be considered a judgment against the

22 United States.’’.

23 (3) Subsection (d) of section 1406 (42 U.S.C.

24 2297c–5(d)) is amended—
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1 (A) by inserting ‘‘AND PRIVATIZATION’’

2 after ‘‘TRANSITION’’ in the heading; and

3 (B) by striking ‘‘the transition date’’ and

4 inserting ‘‘the privatization date (or, in the

5 event the privatization date does not occur, the

6 transition date)’’.

7 (f) TRANSFER OF URANIUM.—Title II (42 U.S.C.

8 2297 et seq.) is amended by redesignating section 1408

9 as section 1409 and by inserting after section 1407 the

10 following:

11 ‘‘SEC. 1408. TRANSFER OF URANIUM.

12 ‘‘The Secretary may, before the privatization date,

13 transfer to the Corporation without charge raw uranium,

14 low-enriched uranium, and highly enriched uranium.’’.

15 SEC. 3006. PRIVATIZATION OF THE CORPORATION.

16 (a) ESTABLISHMENT OF PRIVATE CORPORATION.—

17 Chapter 25 (42 U.S.C. 2297d et seq.) is amended by add18 ing at the end the following new section:

19 ‘‘SEC. 1503. ESTABLISHMENT OF PRIVATE CORPORATION.

20 ‘‘(a) ESTABLISHMENT.—

21 ‘‘(1) IN GENERAL.—In order to facilitate pri22 vatization, the Corporation may provide for the es23 tablishment of a private corporation organized under

24 the laws of any of the several States. Such corpora25 tion shall have among its purposes the following:
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1 ‘‘(A) To help maintain a reliable and eco2 nomical domestic source of uranium enrichment

3 services.

4 ‘‘(B) To undertake any and all activities as

5 provided in its corporate charter.

6 ‘‘(2) AUTHORITIES.—The corporation estab7 lished pursuant to paragraph (1) shall be authorized

8 to—

9 ‘‘(A) enrich uranium, provide for uranium

10 to be enriched by others, or acquire enriched

11 uranium (including low-enriched uranium de12 rived from highly enriched uranium);

13 ‘‘(B) conduct, or provide for conducting,

14 those research and development activities relat15 ed to uranium enrichment and related processes

16 and activities the corporation considers nec17 essary or advisable to maintain itself as a com18 mercial enterprise operating on a profitable and

19 efficient basis;

20 ‘‘(C) enter into transactions regarding ura21 nium, enriched uranium, or depleted uranium

22 with—

23 ‘‘(i) persons licensed under section 53,

24 63, 103, or 104 in accordance with the li25 censes held by those persons;
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1 ‘‘(ii) persons in accordance with, and

2 within the period of, an agreement for co3 operation arranged under section 123; or

4 ‘‘(iii) persons otherwise authorized by

5 law to enter into such transactions;

6 ‘‘(D) enter into contracts with persons li7 censed under section 53, 63, 103, or 104, for

8 as long as the corporation considers necessary

9 or desirable, to provide uranium or uranium en10 richment and related services;

11 ‘‘(E) enter into contracts to provide ura12 nium or uranium enrichment and related serv13 ices in accordance with, and within the period

14 of, an agreement for cooperation arranged

15 under section 123 or as otherwise authorized by

16 law; and

17 ‘‘(F) take any and all such other actions as

18 are permitted by the law of the jurisdiction of

19 incorporation of the corporation.

20 ‘‘(3) TRANSFER OF ASSETS.—For purposes of

21 implementing the privatization, the Corporation may

22 transfer some or all of its assets and obligations to

23 the corporation established pursuant to this section,

24 including—
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1 ‘‘(A) all of the Corporation’s assets, includ2 ing all contracts, agreements, and leases, in3 cluding all uranium enrichment contracts and

4 power purchase contracts;

5 ‘‘(B) all funds in accounts of the Corpora6 tion held by the Treasury or on deposit with

7 any bank or other financial institution;

8 ‘‘(C) all of the Corporation’s rights, duties,

9 and obligations, accruing subsequent to the pri10 vatization date, under the power purchase con11 tracts covered by section 1401(b)(2)(B); and

12 ‘‘(D) all of the Corporation’s rights, duties,

13 and obligations, accruing subsequent to the pri14 vatization date, under the lease agreement be15 tween the Department and the Corporation exe16 cuted by the Department and the Corporation

17 pursuant to section 1403.

18 ‘‘(4) MERGER OR CONSOLIDATION.—For pur19 poses of implementing the privatization, the Cor20 poration may merge or consolidate with the corpora21 tion established pursuant to subsection (a)(1) if such

22 action is contemplated by the plan for privatization

23 approved by the President under section 1502(b).

24 The Board shall have exclusive authority to approve

25 such merger or consolidation and to take all further
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1 actions necessary to consummate such merger or

2 consolidation, and no action by or in respect of

3 shareholders shall be required. The merger or con4 solidation shall be effected in accordance with, and

5 have the effects of a merger or consolidation under,

6 the laws of the jurisdiction of incorporation of the

7 surviving corporation, and all rights and benefits

8 provided under this title to the Corporation shall

9 apply to the surviving corporation as if it were the

10 Corporation.

11 ‘‘(b) OSHA REQUIREMENTS.—For purposes of the

12 regulation of radiological and nonradiological hazards

13 under the Occupational Safety and Health Act of 1970,

14 the corporation established pursuant to subsection (a)(1)

15 shall be treated in the same manner as other employers

16 licensed by the Nuclear Regulatory Commission. Any

17 interagency agreement entered into between the Nuclear

18 Regulatory Commission and the Occupational Safety and

19 Health Administration governing the scope of their respec20 tive regulatory authorities shall apply to the corporation

21 as if the corporation were a Nuclear Regulatory Commis22 sion licensee.

23 ‘‘(c) LEGAL STATUS OF PRIVATE CORPORATION.—

24 ‘‘(1) NOT FEDERAL AGENCY.—The corporation

25 established pursuant to subsection (a)(1) shall not
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1 be an agency, instrumentality, or establishment of

2 the United States Government and shall not be a

3 Government corporation or Government-controlled

4 corporation.

5 ‘‘(2) NO RECOURSE AGAINST UNITED

6 STATES.—Obligations of the corporation established

7 pursuant to subsection (a)(1) shall not be obliga8 tions of, or guaranteed as to principal or interest by,

9 the Corporation or the United States, and the obli10 gations shall so plainly state.

11 ‘‘(3) NO CLAIMS COURT JURISDICTION.—No ac12 tion under section 1491 of title 28, United States

13 Code, shall be allowable against the United States

14 based on the actions of the corporation established

15 pursuant to subsection (a)(1).

16 ‘‘(d) BOARD OF DIRECTOR’S ELECTION AFTER PUB17 LIC OFFERING.—In the event that the privatization is im18 plemented by means of a public offering, an election of

19 the members of the board of directors of the Corporation

20 by the shareholders shall be conducted before the end of

21 the 1-year period beginning the date shares are first of22 fered to the public pursuant to such public offering.

23 ‘‘(e) ADEQUATE PROCEEDS.—The Secretary of En24 ergy shall not allow the privatization of the Corporation

25 unless before the sale date the Secretary determines that
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1 the estimated sum of the gross proceeds from the sale of

2 the Corporation will be an adequate amount.’’.

3 (b) OWNERSHIP LIMITATIONS.—Chapter 25 (as

4 amended by subsection (a)) is amended by adding at the

5 end the following new section:

6 ‘‘SEC. 1504. OWNERSHIP LIMITATIONS.

7 ‘‘(a) SECURITIES LIMITATION.—In the event that the

8 privatization is implemented by means of a public offering,

9 during a period of 3 years beginning on the privatization

10 date, no person, directly or indirectly, may acquire or hold

11 securities representing more than 10 percent of the total

12 votes of all outstanding voting securities of the Corpora13 tion.

14 ‘‘(b) APPLICATION.—Subsection (a) shall not apply—

15 ‘‘(1) to any employee stock ownership plan of

16 the Corporation,

17 ‘‘(2) to underwriting syndicates holding shares

18 for resale, or

19 ‘‘(3) in the case of shares beneficially held for

20 others, to commercial banks, broker-dealers, clearing

21 corporations, or other nominees.

22 ‘‘(c) No director, officer, or employee of the Corpora23 tion may acquire any securities, or any right to acquire

24 securities, of the Corporation—
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1 ‘‘(1) in the public offering of securities of the

2 Corporation in the implementation of the privatiza3 tion,

4 ‘‘(2) pursuant to any agreement, arrangement,

5 or understanding entered into before the privatiza6 tion date, or

7 ‘‘(3) before the election of directors of the Cor8 poration under section 1503(d) on any terms more

9 favorable than those offered to the general public.’’.

10 (c) EXEMPTION FROM LIABILITY.—Chapter 25 (as

11 amended by subsection (b)) is amended by adding at the

12 end the following new section:

13 ‘‘SEC. 1505. EXEMPTION FROM LIABILITY.

14 ‘‘(a) IN GENERAL.—No director, officer, employee, or

15 agent of the Corporation shall be liable, for money dam16 ages or otherwise, to any party if, with respect to the sub17 ject matter of the action, suit, or proceeding, such person

18 was fulfilling a duty, in connection with any action taken

19 in connection with the privatization, which such person in

20 good faith reasonably believed to be required by law or

21 vested in such person.

22 ‘‘(b) EXCEPTION.—The privatization shall be subject

23 to the Securities Act of 1933 and the Securities Exchange

24 Act of 1934. The exemption set forth in subsection (a)

25 shall not apply to claims arising under such Acts or under
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1 the Constitution or laws of any State, territory, or posses2 sion of the United States relating to transactions in secu3 rities, which claims are in connection with a public offer4 ing implementing the privatization.’’.

5 (d) RESOLUTION OF CERTAIN ISSUES.—Chapter 25

6 (as amended by subsection (c)) is amended by adding at

7 the end the following new section:

8 ‘‘SEC. 1506. RESOLUTION OF CERTAIN ISSUES.

9 ‘‘(a) CORPORATION ACTIONS.—Notwithstanding any

10 provision of any agreement to which the Corporation is

11 a party, the Corporation shall not be considered to be in

12 breach, default, or violation of any such agreement be13 cause of any provision of this chapter or any action the

14 Corporation is required to take under this chapter.

15 ‘‘(b) RIGHT TO SUE WITHDRAWN.—The United

16 States hereby withdraws any stated or implied consent for

17 the United States, or any agent or officer of the United

18 States, to be sued by any person for any legal, equitable,

19 or other relief with respect to any claim arising out of,

20 or resulting from, acts or omissions under this chapter.’’.

21 (e) APPLICATION OF PRIVATIZATION PROCEEDS.—

22 Chapter 25 (as amended by subsection (d)) is amended

23 by adding at the end the following new section:
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1 ‘‘SEC. 1507. APPLICATION OF PRIVATIZATION PROCEEDS.

2 ‘‘The proceeds from the privatization shall be in3 cluded in the budget baseline required by the Balanced

4 Budget and Emergency Deficit Control Act of 1985 and

5 shall be counted as an offset to direct spending for pur6 poses of section 252 of such Act, notwithstanding section

7 257(e) of such Act.’’.

8 (f) CONFORMING AMENDMENT.—The table of con9 tents for chapter 25 is amended by inserting after the item

10 for section 1502 the following:

‘‘Sec. 1503. Establishment of Private Corporation.

‘‘Sec. 1504. Ownership Limitations.

‘‘Sec. 1505. Exemption from Liability.

‘‘Sec. 1506. Resolution of Certain Issues.

‘‘Sec. 1507. Application of Privatization Proceeds.’’.

11 (g) Section 193 (42 U.S.C. 2243) is amended by add12 ing at the end the following:

13 ‘‘(f) LIMITATION.—If the privatization of the United

14 States Enrichment Corporation results in the Corporation

15 being—

16 ‘‘(1) owned, controlled, or dominated by a for17 eign corporation or a foreign government, or

18 ‘‘(2) otherwise inimical to the common defense

19 or security of the United States,

20 any license held by the Corporation under sections 53 and

21 63 shall be terminated.’’.

22 (h) PERIOD FOR CONGRESSIONAL REVIEW.—Section

23 1502(d) (42 U.S.C. 2297d–1(d)) is amended by striking
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1 ‘‘less than 60 days after notification of the Congress’’ and

2 inserting ‘‘less than 60 days after the date of the report

3 to Congress by the Comptroller General under subsection

4 (c)’’.

5 SEC. 3007. PERIODIC CERTIFICATION OF COMPLIANCE.

6 Section 1701(c)(2) (42 U.S.C. 2297f(c)(2)) is

7 amended by striking ‘‘ANNUAL APPLICATION FOR CER8 TIFICATE OF COMPLIANCE.—The Corporation shall apply

9 at least annually to the Nuclear Regulatory Commission

10 for a certificate of compliance under paragraph (1).’’ and

11 inserting ‘‘PERIODIC APPLICATION FOR CERTIFICATE OF

12 COMPLIANCE.—The Corporation shall apply to the Nu13 clear Regulatory Commission for a certificate of compli14 ance under paragraph (1) periodically, as determined by

15 the Nuclear Regulatory Commission, but not less than

16 every 5 years.’’.

17 SEC. 3008. LICENSING OF OTHER TECHNOLOGIES.

18 Subsection (a) of section 1702 (42 U.S.C. 2297f–

19 1(a)) is amended by striking ‘‘other than’’ and inserting

20 ‘‘including’’.

21 SEC. 3009. CONFORMING AMENDMENTS.

22 (a) REPEALS IN ATOMIC ENERGY ACT OF 1954 AS

23 OF THE PRIVATIZATION DATE.—

24 (1) REPEALS.—As of the privatization date (as

25 defined in section 1201(13) of the Atomic Energy
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1 Act of 1954), the following sections (as in effect on

2 such privatization date) of the Atomic Energy Act of

3 1954 are repealed:

4 (A) Section 1202.

5 (B) Sections 1301 through 1304.

6 (C) Sections 1306 through 1316.

7 (D) Sections 1404 and 1405.

8 (E) Section 1601.

9 (F) Sections 1603 through 1607.

10 (2) CONFORMING AMENDMENT.—The table of

11 contents of such Act is amended by repealing the

12 items referring to sections repealed by paragraph

13 (1).

14 (b) STATUTORY MODIFICATIONS.—As of such privat15 ization date, the following shall take effect:

16 (1) For purposes of title I of the Atomic En17 ergy Act of 1954, all references in such Act to the

18 ‘‘United States Enrichment Corporation’’ shall be

19 deemed to be references to the corporation estab20 lished pursuant to section 1503 of the Atomic En21 ergy Act of 1954 (as added by section 6(a)).

22 (2) Section 1018(1) of the Energy Policy Act of

23 1992 (42 U.S.C. 2296b–7(1)) is amended by strik24 ing ‘‘the United States’’ and all that follows through

25 the period and inserting ‘‘the corporation referred to
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1 in section 1201(4) of the Atomic Energy Act of

2 1954.’’.

3 (3) Section 9101(3) of title 31, United States

4 Code, is amended by striking subparagraph (N), as

5 added by section 902(b) of Public Law 102–486.

6 (c) REVISION OF SECTION 1305.—As of such privat7 ization date, section 1305 of the Atomic Energy Act of

8 1954 (42 U.S.C 2297b–4) is amended—

9 (1) by repealing subsections (a), (b), (c), and

10 (d), and

11 (2) in subsection (e)—

12 (A) by striking the subsection designation

13 and heading,

14 (B) by redesignating paragraphs (1) and

15 (2) (as added by section 4(a)) as subsections

16 (a) and (b) and by moving the margins 2-ems

17 to the left,

18 (C) by striking paragraph (3), and

19 (D) by redesignating paragraph (4) (as

20 amended by section 4(b)) as subsection (c), and

21 by moving the margins 2-ems to the left.
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1 TITLE IV—RETIREMENT

2 SEC. 4001. SHORT TITLE; TABLE OF CONTENTS.

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

4 ‘‘Congressional and Federal Employee Retirement Equali5 zation Act’’.

6 (b) TABLE OF CONTENTS.—The table of contents for

7 this title is as follows:

Sec. 4001. Short title; table of contents.

Sec. 4002. Amendment of title 5, United States Code.

Sec. 4003. Individual contributions.

Sec. 4004. Average pay.

Sec. 4005. Accrual rates.

Sec. 4006. Elimination of Members’ option to elect not to participate in FERS.

8 SEC. 4002. AMENDMENT OF TITLE 5, UNITED STATES CODE.

9 Except as otherwise expressly provided, whenever in

10 this title an amendment or repeal is expressed in terms

11 of an amendment to, or repeal of, a section or other provi12 sion, the reference shall be considered to be made to a

13 section or other provision of title 5, United States Code.

14 SEC. 4003. INDIVIDUAL CONTRIBUTIONS.

15 (a) CSRS.—

16 (1) IN GENERAL.—The table under section

17 8334(c) is amended—

18 (A) in the matter relating to an employee

19 by striking

‘‘7 ........ After December 31,

1969.’’

20 and inserting the following:
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‘‘7 ........ January 1, 1970, to December 31, 1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’;

1 (B) in the matter relating to a Member or

2 employee for Congressional employee service by

3 striking

‘‘71⁄2 ..... After December 31,

1969.’’

4 and inserting the following:

‘‘71⁄2 ..... January 1, 1970, to December 31, 1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’;

5 (C) in the matter relating to a Member for

6 Member service by striking

‘‘8 ........ After December 31,

1969.’’

7 and inserting the following:

‘‘8 ........ January 1, 1970, to December 31, 1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’;
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1 (D) in the matter relating to a law enforce2 ment officer for law enforcement service and

3 firefighter for firefighter service by striking

‘‘71⁄2 ..... After December 31,

1974.’’

4 and inserting the following:

‘‘71⁄2 ..... January 1, 1975, to December 31, 1995.

‘‘9 ........ January 1, 1996, to December 31, 1996.

‘‘91⁄2 ..... January 1, 1997, to December 31, 1997.

‘‘10 ...... After December 31,

1997.’’;

5 (E) in the matter relating to a bankruptcy

6 judge by striking

‘‘8 ........ After December 31,

1983.’’

7 and inserting the following:

‘‘8 ........ January 1, 1984, to December 31, 1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’;

8 (F) in the matter relating to a judge of the

9 United States Court of Appeals for the Armed

10 Forces for service as a judge of that court by

11 striking
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‘‘8 ........ On and after the date of

the enactment of the

Department of Defense Authorization

Act, 1984.’’

1 and inserting the following:

‘‘8 ........ The date of the enactment of the Department of Defense Authorization Act, 1984,

to December 31,

1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’;

2 (G) in the matter relating to a United

3 States magistrate by striking

‘‘8 ........ After September 30,

1987.’’

4 and inserting the following:

‘‘8 ........ October 1, 1987, to December 31, 1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’; and

5 (H) in the matter relating to a Claims

6 Court judge by striking

‘‘8 ........ After September 30,

1988.’’

7 and inserting the following:
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‘‘8 ........ October 1, 1988, to December 31, 1995.

‘‘81⁄2 ..... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.’’.

1 (2) DEDUCTIONS.—The first sentence of section

2 8334(a)(1) is amended to read as follows: ‘‘The em3 ploying agency shall deduct and withhold from the

4 basic pay of an employee, Member, Congressional

5 employee, law enforcement officer, firefighter, bank6 ruptcy judge, judge of the United States Court of

7 Appeals for the Armed Forces, United States mag8 istrate, or Claims Court judge, as the case may be,

9 the percentage of basic pay applicable under sub10 section (c).’’.

11 (3) GOVERNMENT CONTRIBUTIONS.—

12 (A) IN GENERAL.—Section 8334(a) is

13 amended by adding at the end the following:

14 ‘‘(3) The amount to be contributed under the second

15 sentence of paragraph (1) with respect to any service pe16 riod occurring during any calendar year after 1995 shall

17 be determined as if the percentage then applicable under

18 subsection (c) were the percentage that was applicable for

19 calendar year 1995 plus 3 percent.’’.

20 (B) TECHNICAL AMENDMENT.—The sec21 ond sentence of section 8334(a)(1) is amended
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1 by striking the period at the end and inserting

2 ‘‘, subject to paragraph (3).’’.

3 (4) OTHER SERVICE.—

4 (A) MILITARY SERVICE.—Section 8334(j)

5 is amended—

6 (i) in paragraph (1)(A) by inserting

7 ‘‘and subject to paragraph (5),’’ after ‘‘Ex8 cept as provided in subparagraph (B),’’;

9 and

10 (ii) by adding at the end the follow11 ing:

12 ‘‘(5) Effective with respect to any period of military

13 service after December 31, 1995, the percentage of basic

14 pay under section 204 of title 37 payable under paragraph

15 (1) shall be equal to the same percentage as would be ap16 plicable under section 8334(c) for that same period for

17 service as an ‘employee’, subject to paragraph (1)(B).’’.

18 (B) VOLUNTEER SERVICE.—Section

19 8334(l) is amended—

20 (i) in paragraph (1) by striking the

21 period at the end and inserting ‘‘, subject

22 to paragraph (4).’’; and

23 (ii) by adding at the end the follow24 ing:
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1 ‘‘(4) Effective with respect to any period of service

2 after December 31, 1995, the percentage of the readjust3 ment allowance or stipend (as the case may be) payable

4 under paragraph (1) shall be equal to the same percentage

5 as would be applicable under section 8334(c) for that same

6 period for service as an ‘employee’.’’.

7 (b) FERS.—

8 (1) IN GENERAL.—Section 8422(a) is amended

9 by striking paragraph (2) and inserting the follow10 ing:

11 ‘‘(2) The percentage to be deducted and withheld

12 from basic pay for any pay period shall be equal to—

13 ‘‘(A) the applicable percentage under paragraph

14 (3), minus

15 ‘‘(B) the percentage then in effect under section

16 3101(a) of the Internal Revenue Code of 1986 (re17 lating to rate of tax for old-age, survivors, and dis18 ability insurance).

19 ‘‘(3) The applicable percentage under this paragraph,

20 for civilian service after December 31, 1995, shall be as

21 follows:

Percentage of

basic

pay

Service period

‘‘Employee ................................................. 81⁄2 ....... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.
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Percentage of

basic

pay

Service period

‘‘91⁄2 ..... After December 31,

1997.

‘‘Congressional employee .......................... 81⁄2 ....... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.

‘‘Member ................................................... 81⁄2 ....... January 1, 1996, to December 31, 1996.

‘‘9 ........ January 1, 1997, to December 31, 1997.

‘‘91⁄2 ..... After December 31,

1997.

‘‘Law enforcement officer ......................... 9 .......... January 1, 1996, to December 31, 1996.

‘‘91⁄2 ..... January 1, 1997, to December 31, 1997.

‘‘10 ...... After December 31,

1997.

‘‘Firefighter ............................................... 9 .......... January 1, 1996, to December 31, 1996.

‘‘91⁄2 ..... January 1, 1997, to December 31, 1997.

‘‘10 ...... After December 31,

1997.

‘‘Air traffic controller ............................... 9 .......... January 1, 1996, to December 31, 1996.

‘‘91⁄2 ..... January 1, 1997, to December 31, 1997.

‘‘10 ...... After December 31,

1997.’’.

1 (2) OTHER SERVICE.—

2 (A) MILITARY SERVICE.—Section 8422(e)

3 is amended—

4 (i) in paragraph (1)(A) by inserting

5 ‘‘and subject to paragraph (6),’’ after ‘‘Ex6 cept as provided in subparagraph (B),’’;

7 and
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1 (ii) by adding at the end the follow2 ing:

3 ‘‘(6) Effective with respect to any period of military

4 service after December 31, 1995, the percentage of basic

5 pay under section 204 of title 37 payable under paragraph

6 (1) shall be equal to the same percentage as would be ap7 plicable under section 8422(a)(3) for that same period for

8 service as an ‘employee’, subject to paragraph (1)(B).’’.

9 (B) VOLUNTEER SERVICE.—Section

10 8422(f) is amended—

11 (i) in paragraph (1) by striking the

12 period at the end and inserting ‘‘, subject

13 to paragraph (4).’’; and

14 (ii) by adding at the end the follow15 ing:

16 ‘‘(4) Effective with respect to any period of service

17 after December 31, 1995, the percentage of the readjust18 ment allowance or stipend (as the case may be) payable

19 under paragraph (1) shall be equal to the same percentage

20 as would be applicable under section 8422(a)(3) for that

21 same period for service as an employee.’’.

22 (c) EXEMPTION.—

23 (1) IN GENERAL.—Section 1005(d) of title 39,

24 United States Code, is amended by adding at the

25 end the following:
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1 ‘‘(3) For purposes of applying chapters 83 and 84

2 of title 5 with respect to any officer or employee of the

3 Postal Service, section 4003 of the Congressional and

4 Federal Employee Retirement Equalization Act shall be

5 treated as if it had not been enacted.’’.

6 (2) TECHNICAL AMENDMENT.—The second sen7 tence of section 1005(d)(1) of title 39, United States

8 Code, is amended by striking the period and insert9 ing ‘‘, subject to paragraph (3).’’.

10 (d) EFFECTIVE DATE.—This section shall take effect

11 on January 1, 1996.

12 SEC. 4004. AVERAGE PAY.

13 (a) CSRS.—

14 (1) IN GENERAL.—Subchapter III of chapter

15 83 is amended by inserting after section 8339 the

16 following:

17 ‘‘§ 8339a. Special rules relating to average pay

18 ‘‘(a) Notwithstanding section 8331(4), for purposes

19 of computing any annuity or survivor annuity under this

20 subchapter, eligibility for which is based on a separation

21 occurring after December 31, 1995, ‘average pay’ shall,

22 if the separation occurs—

23 ‘‘(1) during calendar year 1996, have the mean24 ing given such term by subsection (b)(1); or
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1 ‘‘(2) after calendar year 1996, have the mean2 ing given such term by subsection (b)(2).

3 ‘‘(b) For purposes of this section—

4 ‘‘(1) the meaning given the term ‘average pay’

5 by this paragraph shall be the meaning such term

6 would have under section 8331(4) if ‘4 consecutive

7 years’ were substituted for ‘3 consecutive years’ and

8 ‘4 years’ were substituted for ‘3 years’; and

9 ‘‘(2) the meaning given the term ‘average pay’

10 by this paragraph shall be the meaning such term

11 would have under section 8331(4) if ‘5 consecutive

12 years’ were substituted for ‘3 consecutive years’ and

13 ‘5 years’ were substituted for ‘3 years’.

14 ‘‘(c) Nothing in this section shall be considered to

15 apply with respect to any annuity or survivor annuity eligi16 bility for which is based on a separation occurring before

17 January 1, 1996.

18 ‘‘(d) The Office of Personnel Management shall pre19 scribe such regulations as may be necessary to carry out

20 this section.’’.

21 (2) TECHNICAL AMENDMENTS.—

22 (A) Section 8331(4) is amended by strik23 ing ‘‘effect;’’ and inserting ‘‘effect, subject to

24 section 8339a;’’.
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1 (B) The table of sections for chapter 83 is

2 amended by inserting after the item relating to

3 section 8339 the following:

‘‘8339a. Special rules relating to average pay.’’.

4 (b) FERS.—

5 (1) IN GENERAL.—Chapter 84 is amended by

6 inserting after section 8461 the following:

7 ‘‘§ 8461a. Special rules relating to average pay

8 ‘‘(a) Notwithstanding section 8401(3), for purposes

9 of computing any annuity or survivor annuity under this

10 chapter, eligibility for which is based on a separation oc11 curring after December 31, 1995, ‘average pay’ shall, if

12 the separation occurs—

13 ‘‘(1) during calendar year 1996, have the mean14 ing given such term by subsection (b)(1); or

15 ‘‘(2) after calendar year 1996, have the mean16 ing given such term by subsection (b)(2).

17 ‘‘(b) For purposes of this section—

18 ‘‘(1) the meaning given the term ‘average pay’

19 by this paragraph shall be the meaning such term

20 would have under section 8401(3) if ‘4 consecutive

21 years’ were substituted for ‘3 consecutive years’ and

22 ‘4 years’ were substituted for ‘3 years’; and

23 ‘‘(2) the meaning given the term ‘average pay’

24 by this paragraph shall be the meaning such term

25 would have under section 8401(3) if ‘5 consecutive
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1 years’ were substituted for ‘3 consecutive years’ and

2 ‘5 years’ were substituted for ‘3 years’.

3 ‘‘(c) Nothing in this section shall be considered to

4 apply with respect to any annuity or survivor annuity eligi5 bility for which is based on a separation occurring before

6 January 1, 1996.

7 ‘‘(d) The Office of Personnel Management shall pre8 scribe such regulations as may be necessary to carry out

9 this section.’’.

10 (2) TECHNICAL AMENDMENTS.—

11 (A) Section 8401(3) is amended by strik12 ing ‘‘effect;’’ and inserting ‘‘effect, subject to

13 section 8461a;’’.

14 (B) The table of sections for chapter 84 is

15 amended by inserting after the item relating to

16 section 8461 the following:

‘‘8461a. Special rules relating to average pay.’’.

17 (c) REGULATIONS.—The Office of Personnel Man18 agement shall prescribe such regulations as may be nec19 essary to carry out the purposes of this section, including

20 regulations to provide that section 302(a)(6) of the Fed21 eral Employees’ Retirement System Act of 1986 (5 U.S.C.

22 8331 note) shall be carried out in a manner consistent

23 with the amendments made by this section.

24 SEC. 4005. ACCRUAL RATES.

25 (a) CSRS.—
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1 (1) MEMBERS.—

2 (A) IN GENERAL.—Section 8339(c) is

3 amended by striking all that follows ‘‘with re4 spect to—’’ and inserting the following:

5 ‘‘(1) so much of his service as a Member as is

6 or was performed before January 1, 1996;

7 ‘‘(2) so much of his military service as—

8 ‘‘(A) is creditable for the purpose of this

9 subsection; and

10 ‘‘(B) is or was performed before January

11 1, 1996; and

12 ‘‘(3) so much of his Congressional employee

13 service as is or was performed before January 1,

14 1996;

by multiplying 21 15 ⁄2 percent of his average pay by the years

16 of that service.’’.

17 (B) TECHNICAL AMENDMENT.—Section

18 8332(d) is amended by striking ‘‘section

19 8339(c)(1)’’ and inserting ‘‘section 8339(c)’’.

20 (2) CONGRESSIONAL EMPLOYEES.—Section

21 8339(b) is amended—

22 (A) by inserting ‘‘so much of’’ after ‘‘is

23 computed with respect to’’; and
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1 (B) by inserting ‘‘as is or was performed

2 before January 1, 1996,’’ before ‘‘by multiply3 ing’’.

4 (b) FERS.—

5 (1) MEMBERS.—Section 8415(b) is amended by

6 striking ‘‘shall’’ and inserting ‘‘shall, to the extent

7 that such service is or was performed before Janu8 ary 1, 1996,’’.

9 (2) CONGRESSIONAL EMPLOYEES.—Section

10 8415(c) is amended by striking ‘‘shall’’ and inserting

11 ‘‘shall, to the extent that such service is or was per12 formed before January 1, 1996,’’.

13 (3) PROVISIONS RELATING TO THE 1.1 PER14 CENT ACCRUAL RATE.—Section 8415(g) is amend15 ed—

16 (A) in paragraph (1) by striking ‘‘an em17 ployee under paragraph (2),’’ and inserting ‘‘an

18 employee or Member under paragraph (2),’’;

19 (B) in paragraph (2) by inserting ‘‘or

20 Member’’ after ‘‘in the case of an employee’’

21 and by striking ‘‘Congressional employee,’’; and

22 (C) by adding at the end the following:

23 ‘‘(3) Notwithstanding any other provision of this sub24 section—
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1 ‘‘(A) this subsection shall not apply in the case

2 of a Member or Congressional employee whose sepa3 ration (on which entitlement to annuity is based) oc4 curs before January 1, 1996; and

5 ‘‘(B) in the case of a Member or Congressional

6 employee to whom this subsection applies, the 1.1

7 percent accrual rate shall apply only with respect to

8 any period of service other than a period with re9 spect to which the 1.7 percent accrual rate applies

10 under subsection (b) or (c).’’.

11 SEC. 4006. ELIMINATION OF MEMBERS’ OPTION TO ELECT

12 NOT TO PARTICIPATE IN FERS.

13 (a) IN GENERAL.—Section 8401(20) is amended by

14 striking ‘‘2106,’’ and all that follows through the semi15 colon and inserting ‘‘2106;’’.

16 (b) EFFECTIVE DATE; SAVINGS PROVISION.—

17 (1) EFFECTIVE DATE.—Subsection (a) shall

18 take effect on January 1, 1996.

19 (2) SAVINGS PROVISION.—The amendment

20 made by subsection (a) shall not affect any election

21 made before such subsection takes effect.
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1 TITLE V—MEDICARE SAVINGS

2 EXTENSIONS

3 SEC. 5001. SHORT TITLE.

4 This title may be cited as the ‘‘Medicare Presidential

5 Budget Savings Extension Act of 1995’’.

6 Subtitle A—Provisions Relating to

7 Part A of the Medicare Program

8 SEC. 5101. MAINTAINING SAVINGS RESULTING FROM TEM9 PORARY FREEZE ON PAYMENT INCREASES

10 FOR SKILLED NURSING FACILITY SERVICES.

11 (a) BASING UPDATES TO PER DIEM COST LIMITS ON

12 LIMITS FOR FISCAL YEAR 1993.—

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

14 1888(a) of the Social Security Act (42 U.S.C.

15 1395yy(a)) is amended by adding at the end the fol16 lowing: ‘‘(except that such updates may not take

17 into account any changes in the routine service costs

18 of skilled nursing facilities occurring during cost re19 porting periods which began during fiscal year 1994

20 or fiscal year 1995).’’.

21 (2) NO EXCEPTIONS PERMITTED BASED ON

22 AMENDMENT.—The Secretary of Health and Human

23 Services shall not consider the amendment made by

24 paragraph (1) in making any adjustments pursuant

25 to section 1888(c) of the Social Security Act.
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1 (b) PAYMENTS DETERMINED ON PROSPECTIVE

2 BASIS.—Any change made by the Secretary of Health and

3 Human Services in the amount of any prospective pay4 ment paid to a skilled nursing facility under section

5 1888(d) of the Social Security Act for cost reporting peri6 ods beginning on or after October 1, 1995, may not take

7 into account any changes in the costs of services occurring

8 during cost reporting periods which began during fiscal

9 year 1994 or fiscal year 1995.

10 Subtitle B—Provisions Relating to

11 Part B of the Medicare Program

12 SEC. 5201. SETTING THE PART B PREMIUM AT 25 PERCENT

13 OF PROGRAM EXPENDITURES PERMA14 NENTLY.

15 (a) IN GENERAL.—Section 1839(a)(3) of the Social

16 Security Act (42 U.S.C. 1395r(a)(3)) is amended by strik17 ing ‘‘The monthly premium’’ and all that follows through

18 ‘‘November 1.’’ and inserting the following: ‘‘The monthly

19 premium shall be equal to 50 percent of the monthly actu20 arial rate for enrollees age 65 and over, as determined ac21 cording to paragraph (1), for that succeeding calendar

22 year.’’.

23 (b) CONFORMING AMENDMENTS.—Section 1839 of

24 such Act (42 U.S.C. 1395r) is amended—
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1 (1) in subsection (a)(2), by striking ‘‘(b) and

2 (e)’’ and inserting ‘‘(b), (c), (e), and (f)’’;

3 (2) in the last sentence of subsection (a)(3), by

4 striking ‘‘and the derivation of the dollar amounts

5 specified in this paragraph’’; and

6 (3) in subsection (e)—

7 (A) by striking ‘‘(1)(A) Notwithstanding’’

8 and all that follows through ‘‘(B)’’,

9 (B) by striking paragraph (2), and

10 (C) by redesignating clauses (i) through

11 (v) as paragraphs (1) through (5).

12 Subtitle C—Provisions Relating to

13 Parts A and B of the Medicare

14 Program

15 SEC. 5301. PERMANENT EXTENSION OF CERTAIN SECOND16 ARY PAYER PROVISIONS.

17 (a) DATA MATCH.—

18 (1) Section 1862(b)(5)(C) of the Social Security

19 Act (42 U.S.C. 1395y(b)(5)(C)) is amended by strik20 ing clause (iii).

21 (2) Section 6103(l)(12) of the Internal Revenue

22 Code of 1986 is amended by striking subparagraph

23 (F).

24 (b) APPLICATION TO DISABLED INDIVIDUALS IN

25 LARGE GROUP HEALTH PLANS.—
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1 (1) IN GENERAL.—Section 1862(b)(1)(B) of

2 the Social Security Act (42 U.S.C. 1395y(b)(1)(B))

3 is amended—

4 (A) in clause (i), by striking ‘‘clause (iv)’’

5 and inserting ‘‘clause (iii)’’,

6 (B) by striking clause (iii), and

7 (C) by redesignating clause (iv) as clause

8 (iii).

9 (2) CONFORMING AMENDMENTS.—Paragraphs

10 (1) through (3) of section 1837(i) of such Act (42

11 U.S.C. 1395p(i)) and the second sentence of section

12 1839(b) of such Act (42 U.S.C. 1395r(b)) are each

13 amended by striking ‘‘1862(b)(1)(B)(iv)’’ each place

14 it appears and inserting ‘‘1862(b)(1)(B)(iii)’’.

15 (c) PERIOD OF APPLICATION TO INDIVIDUALS WITH

16 END STAGE RENAL DISEASE.—Section 1862(b)(1)(C) of

17 the Social Security Act (42 U.S.C. 1395y(b)(1)(C)) is

18 amended—

19 (1) in the first sentence, by striking ‘‘12-

20 month’’ each place it appears and inserting ‘‘18-

21 month’’, and

22 (2) by striking the second sentence.
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1 SEC. 5302. MAINTAINING SAVINGS RESULTING FROM TEM2 PORARY FREEZE ON PAYMENT INCREASES

3 FOR HOME HEALTH SERVICES.

4 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

5 LIMITS FOR FISCAL YEAR 1993.—Section

6 1861(v)(1)(L)(iii) of the Social Security Act (42 U.S.C.

7 1395x(v)(1)(L)(iii)) is amended by adding at the end the

8 following sentence: ‘‘In establishing limits under this sub9 paragraph, the Secretary may not take into account any

10 changes in the costs of the provision of services furnished

11 by home health agencies with respect to cost reporting pe12 riods which began on or after July 1, 1994, and before

13 July 1, 1996.’’.

14 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND15 MENT.—The Secretary of Health and Human Services

16 shall not consider the amendment made by subsection (a)

17 in making any exemptions and exceptions pursuant to sec18 tion 1861(v)(1)(L)(ii) of the Social Security Act.

19 TITLE VI—CONTRACT WITH

20 AMERICA TAX RELIEF ACT OF

21 1995

22 SEC. 6001. SHORT TITLE; AMENDMENT OF 1986 CODE.

23 (a) SHORT TITLE.—This title may be cited as the

24 ‘‘Contract With America Tax Relief Act of 1995’’.

25 (b) AMENDMENT OF 1986 CODE.—Except as other26 wise expressly provided, whenever in this title an amend-
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1 ment or repeal is expressed in terms of an amendment

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 (c) TABLE OF CONTENTS.—

TITLE V—CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995

Sec. 6001. Short title; amendment of 1986 Code.

Subtitle A—American Dream Restoration

Sec. 6101. Family tax credit.

Sec. 6102. Credit to reduce marriage penalty.

Sec. 6103. Establishment of American Dream Savings Accounts.

Sec. 6104. Spousal IRA computed on basis of compensation of both spouses.

Subtitle B—Senior Citizens’ Equity

PART I—REPEAL OF INCREASE IN TAX ON SOCIAL SECURITY BENEFITS

Sec. 6201. Repeal of increase in tax on social security benefits.

PART II—TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES

Sec. 6211. Treatment of long-term care insurance.

Sec. 6212. Qualified long-term care services treated as medical care.

Sec. 6213. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 6214. Exclusion from gross income for amounts withdrawn from certain

retirement plans for long-term care insurance.

PART III—TREATMENT OF ACCELERATED DEATH BENEFITS

Sec. 6221. Treatment of accelerated death benefits by recipient.

Sec. 6222. Tax treatment of companies issuing qualified accelerated death benefit riders.

PART IV—INCLUSION IN GROSS INCOME OF EXCESS LONG-TERM CARE

BENEFITS

Sec. 6231. Inclusion in income of excess long-term care benefits.

Sec. 6232. Reporting requirements.

Subtitle C—Job Creation and Wage Enhancement

PART I—CAPITAL GAINS REFORM

SUBPART A—CAPITAL GAINS REDUCTION FOR TAXPAYERS OTHER THAN

CORPORATIONS

Sec. 6301. Capital gains deduction.
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Sec. 6302. Indexing of certain assets acquired after December 31, 1994, for

purposes of determining gain.

SUBPART B—CAPITAL GAINS REDUCTION FOR CORPORATIONS

Sec. 6311. Reduction of alternative capital gain tax for corporations.

SUBPART C—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE

OR EXCHANGE OF PRINCIPAL RESIDENCE

Sec. 6316. Capital loss deduction allowed with respect to sale or exchange of

principal residence.

PART II—COST RECOVERY PROVISIONS

Sec. 6321. Depreciation adjustment for certain property placed in service after

December 31, 1994.

Sec. 6322. Treatment of abandonment of lessor improvements at termination of

lease.

PART III—ALTERNATIVE MINIMUM TAX RELIEF

Sec. 6331. Phaseout of application of alternative minimum tax to corporations.

PART IV—TAXPAYER DEBT BUY-DOWN

Sec. 6341. Designation of amounts for reduction of public debt.

Sec. 6342. Public debt reduction trust fund.

Sec. 6343. Taxpayer-generated sequestration of Federal spending to reduce the

public debt.

PART V—SMALL BUSINESS INCENTIVES

Sec. 6351. Cost-of-living adjustments relating to estate and gift tax provisions.

Sec. 6352. Increase in expense treatment for small businesses.

Sec. 6353. Clarification of treatment of home office use for administrative and

management activities.

Sec. 6354. Treatment of storage of product samples.

Subtitle D—Family Reinforcement

Sec. 6401. Credit for adoption expenses.

Sec. 6402. Credit for taxpayers with certain persons requiring custodial care in

their households.

Subtitle E—Social Security Earnings Test

Sec. 6501. Adjustments in monthly exempt amount for purposes of the social

security earnings test.

Subtitle F—Technical Corrections

Sec. 6601. Coordination with other subtitles.

Sec. 6602. Amendments related to Revenue Reconciliation Act of 1990.

Sec. 6603. Amendments related to Revenue Reconciliation Act of 1993.

Sec. 6604. Miscellaneous provisions.
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1 Subtitle A—American Dream

2 Restoration

3 SEC. 6101. 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

23 section—

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. 6102. 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 his

15 spouse (within the meaning of section

16 3121(b)(3)(B)).

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. 6103. 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. 6104. 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 Subtitle B—Senior Citizens’ Equity

2 PART I—REPEAL OF INCREASE IN TAX ON

3 SOCIAL SECURITY BENEFITS

4 SEC. 6201. REPEAL OF INCREASE IN TAX ON SOCIAL SECU5 RITY BENEFITS.

6 (a) IN GENERAL.—Subsection (a) of section 86 (re7 lating to social security and tier 1 railroad retirement ben8 efits) is amended by adding at the end the following new

9 paragraph:

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

11 the case of any taxable year beginning in a calendar

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

13 shall be applied by substituting the percentage deter14 mined under the following table for ‘85 percent’ each

15 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.’’

16 (b) TERMINATION OF ADDITIONAL AMOUNT.—Para17 graph (2) of section 86(a) is amended by adding at the

18 end the following new flush sentence:

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

20 beginning after December 31, 1999.’’

21 (c) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (3) of section 871(a) is amend2 ed—

3 (A) by striking ‘‘85 percent’’ in subpara4 graph (A) and inserting ‘‘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 PART II—TREATMENT OF LONG-TERM CARE

14 INSURANCE AND SERVICES

15 SEC. 6211. 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. 6212. 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. 6213. 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. 6214. EXCLUSION FROM GROSS INCOME FOR

8 AMOUNTS WITHDRAWN FROM CERTAIN RE9 TIREMENT PLANS FOR LONG-TERM CARE IN10 SURANCE.

11 (a) IN GENERAL.—Part III of subchapter B of chap12 ter 1 (relating to items specifically excluded from gross

13 income) is amended by redesignating section 137 as sec14 tion 138 and by inserting after section 136 the following

15 new section:

16 ‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT

17 PLANS FOR LONG-TERM CARE INSURANCE.

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

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

20 an individual for the taxable year by reason of eligible dis21 tributions during the taxable year shall be reduced (but

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

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

24 insurance contract (as defined in section 7702B(b)) for
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1 coverage of such individual or the spouse of such individ2 ual.

3 ‘‘(b) ELIGIBLE DISTRIBUTION.—For purposes of this

4 section, the term ‘eligible distribution’ means any distribu5 tion or payment to an individual from—

6 ‘‘(1) an individual retirement plan of such indi7 vidual,

8 ‘‘(2) amounts attributable to employer contribu9 tions made pursuant to elective deferrals described

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

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

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

13 (b) CONFORMING AMENDMENTS.—

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

15 striking ‘‘or’’ at the end of subclause (III), by strik16 ing ‘‘and’’ at the end of subclause (IV) and inserting

17 ‘‘or’’, and by inserting after subclause (IV) the fol18 lowing new subclause:

19 ‘‘(V) the date distributions for

20 premiums for a long-term care insur21 ance contract (as defined in section

22 7702B(b)) for coverage of such indi23 vidual or the spouse of such individual

24 are made, and’’.
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1 (2) Section 403(b)(11) is amended by striking

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

3 period at the end of subparagraph (B) and inserting

4 ‘‘, or’’, and by inserting after subparagraph (B) the

5 following new subparagraph:

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

7 long-term care insurance contract (as defined in

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

9 or the spouse of the employee.’’

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

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

12 by striking ‘‘and’’ at the end of clause (iii) and in13 serting ‘‘or’’, and by inserting after clause (iii) the

14 following new clause:

15 ‘‘(iv) the date distributions for pre16 miums for a long-term care insurance con17 tract (as defined in section 7702B(b)) for

18 coverage of such individual or the spouse

19 of such individual are made, and’’.

20 (4) The table of sections for part III of sub21 chapter B of chapter 1 is amended by striking the

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

2 this section shall apply to payments and distributions after

3 December 31, 1995.

4 PART III—TREATMENT OF ACCELERATED DEATH

5 BENEFITS

6 SEC. 6221. TREATMENT OF ACCELERATED DEATH BENE7 FITS BY RECIPIENT.

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

9 death benefits) is amended by adding at the end the fol10 lowing new subsection:

11 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

12 DEATH BENEFITS.—

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, the following amounts shall be treated as an

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

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

18 is a terminally ill individual.

19 ‘‘(B) Any amount received under a life in20 surance contract on the life of an insured who

21 is a chronically ill individual (as defined in sec22 tion 7702B(c)(2)) but only if such amount is

23 received under a rider or other provision of

24 such contract which is treated as a long-term

25 care insurance contract under section 7702B.
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1 ‘‘(2) TREATMENT OF VIATICAL SETTLE2 MENTS.—

3 ‘‘(A) IN GENERAL.—In the case of a life

4 insurance contract on the life of an insured de5 scribed in paragraph (1), if—

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

7 sold to any viatical settlement provider, or

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

9 is assigned to such a provider,

10 the amount paid for such sale or assignment

11 shall be treated as an amount paid under the

12 life insurance contract by reason of the death of

13 such insured.

14 ‘‘(B) VIATICAL SETTLEMENT PROVIDER.—

15 The term ‘viatical settlement provider’ means

16 any person regularly engaged in the trade or

17 business of purchasing, or taking assignments

18 of, life insurance contracts on the lives of

19 insureds described in paragraph (1) if—

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

21 purposes in the State in which the insured

22 resides, or

23 ‘‘(ii) in the case of an insured who re24 sides in a State not requiring the licensing

25 of such persons for such purposes, such
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1 person meets the requirements of sections

2 8 and 9 of the Viatical Settlements Model

3 Act of the National Association of Insur4 ance Commissioners.

5 ‘‘(3) DEFINITIONS.—For purposes of this sub6 section—

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

8 term ‘terminally ill individual’ means an indi9 vidual who has been certified by a physician as

10 having an illness or physical condition which

11 can reasonably be expected to result in death in

12 24 months or less after the date of the certifi13 cation.

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

15 has the meaning given to such term by section

16 1861(r)(1) of the Social Security Act (42

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

18 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI19 CIES.—This subsection shall not apply in the case of

20 any amount paid to any taxpayer other than the in21 sured if such taxpayer has an insurable interest with

22 respect to the life of the insured by reason of the in23 sured being a director, officer, or employee of the

24 taxpayer or by reason of the insured being finan-
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1 cially interested in any trade or business carried on

2 by the taxpayer.

3 ‘‘(5) CROSS REFERENCE.—

‘‘For inclusion in gross income of excess benefits,

see section 91.’’

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

5 subsection (a) shall apply to amounts received after De6 cember 31, 1995.

7 SEC. 6222. TAX TREATMENT OF COMPANIES ISSUING

8 QUALIFIED ACCELERATED DEATH BENEFIT

9 RIDERS.

10 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID11 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat12 ing to other definitions and special rules) is amended by

13 adding at the end the following new subsection:

14 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

15 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

16 this part—

17 ‘‘(1) IN GENERAL.—Any reference to a life in18 surance contract shall be treated as including a ref19 erence to a qualified accelerated death benefit rider

20 on such contract.

21 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE22 FIT RIDERS.—For purposes of this subsection, the

23 term ‘qualified accelerated death benefit rider’

24 means any rider on a life insurance contract if the
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1 only payments under the rider are payments meeting

2 the requirements of section 101(g).

3 ‘‘(3) EXCEPTION FOR LONG-TERM CARE RID4 ERS.—Paragraph (1) shall not apply to any rider

5 which is treated as a long-term care insurance con6 tract under section 7702B.’’

7 (b) EFFECTIVE DATE.—

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

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

10 (2) ISSUANCE OF RIDER NOT TREATED AS MA11 TERIAL CHANGE.—For purposes of applying sections

12 101(f), 7702, and 7702A of the Internal Revenue

13 Code of 1986 to any contract—

14 (A) the issuance of a qualified accelerated

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

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

17 (B) the addition of any provision required

18 to conform an accelerated death benefit rider to

19 the requirements of such section 818(g),

20 shall not be treated as a modification or material

21 change of such contract.
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1 PART IV—INCLUSION IN GROSS INCOME OF

2 EXCESS LONG-TERM CARE BENEFITS

3 SEC. 6231. INCLUSION IN INCOME OF EXCESS LONG-TERM

4 CARE BENEFITS.

5 (a) IN GENERAL.—Part II of subchapter B of chap6 ter 1 (relating to items specifically included in gross in7 come) is amended by adding at the end the following new

8 section:

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

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

11 provision of this title, gross income shall include the

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

13 taxpayer during the taxable year.

14 ‘‘(b) EXCEPTION FOR TERMINALLY ILL INDIVID15 UALS.—Subsection (a) shall not apply to any long-term

16 care benefit paid by reason of an insured who is a termi17 nally ill individual (as defined in section 101(g)) as of the

18 date the benefit is received.

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

20 purposes of this section—

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

22 care benefits’ means the excess (if any) of—

23 ‘‘(A) the value of the long-term care bene24 fits received by the taxpayer during the taxable

25 year, over
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1 ‘‘(B) the exclusion amount applicable to

2 such benefits.

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

4 ‘long-term care benefits’ means—

5 ‘‘(A) payments and other benefits under

6 long-term care insurance contracts (as defined

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

8 from gross income by reason of section

9 7702B(a)(2), and

10 ‘‘(B) payments which are excludable from

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

12 ‘‘(3) EXCLUSION AMOUNT.—

13 ‘‘(A) IN GENERAL.—In the case of long14 term care benefits received by the taxpayer dur15 ing the taxable year by reason of the taxpayer

16 being a chronically ill individual, the term ‘ex17 clusion amount’ means the aggregate of $200

18 for each day during such year on which the in19 dividual is a chronically ill individual. In the

20 case of individuals who are married to each

21 other and who are both chronically ill individ22 uals, the preceding sentence shall be applied

23 separately with respect to each spouse.

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

25 long-term care benefits received during the tax-
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1 able year by a taxpayer by reason of another in2 dividual being a chronically ill individual, the

3 term ‘exclusion amount’ means so much of such

4 other individual’s exclusion amount (for such

5 other individual’s taxable year which begins in

6 the calendar year in which the taxpayer’s tax7 able year begins) as is allocated by such other

8 individual to the taxpayer. Such an allocation

9 shall be made at the time and in the manner

10 prescribed by the Secretary; and once made,

11 shall be irrevocable.

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

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

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

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

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

17 $200 amount contained in subsection (c)(3)(A) shall be

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

19 amounts are increased pursuant to section 213(d)(11).’’

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

21 for such part II is amended by adding at the end the fol22 lowing new item:

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

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

24 this section shall apply to taxable years beginning after

25 December 31, 1995.
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1 SEC. 6232. REPORTING REQUIREMENTS.

2 (a) IN GENERAL.—Subpart B of part III of sub3 chapter A of chapter 61 is amended by adding at the end

4 the following new section:

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

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

7 who pays long-term care benefits shall make a return, ac8 cording to the forms or regulations prescribed by the Sec9 retary, setting forth—

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

11 paid by such person to any individual during any

12 calendar year, and

13 ‘‘(2) the name, address, and TIN of such indi14 vidual.

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

16 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—

17 Every person required to make a return under subsection

18 (a) shall furnish to each individual whose name is required

19 to be set forth in such return a written statement show20 ing—

21 ‘‘(1) the name of the person making the pay22 ments, and

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

24 benefits paid to the individual which are required to

25 be shown on such return.
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1 The written statement required under the preceding sen2 tence shall be furnished to the individual on or before Jan3 uary 31 of the year following the calendar year for which

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

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

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

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

8 (b) PENALTIES.—

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

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

11 as clauses (x) through (xv), respectively, and by in12 serting after clause (viii) the following new clause:

13 ‘‘(ix) section 6050Q (relating to cer14 tain long-term care benefits),’’.

15 (2) Paragraph (2) of section 6724(d) is amend16 ed by redesignating subparagraphs (Q) through (T)

17 as subparagraphs (R) through (U), respectively, and

18 by inserting after subparagraph (P) the following

19 new subparagraph:

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

21 long-term care benefits),’’.

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

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

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

‘‘Sec. 6050Q. Certain long-term care benefits.’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to benefits paid after December

3 31, 1995.

4 Subtitle C—Job Creation and Wage

5 Enhancement

6 PART I—CAPITAL GAINS REFORM

7 Subpart A—Capital Gains Reduction for Taxpayers

8 Other Than Corporations

9 SEC. 6301. CAPITAL GAINS DEDUCTION.

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

11 1 (relating to treatment of capital gains), as amended by

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

13 1201 the following new section:

14 ‘‘SEC. 1202. CAPITAL GAINS DEDUCTION.

15 ‘‘(a) GENERAL RULE.—If for any taxable year a tax16 payer other than a corporation has a net capital gain, 50

17 percent of such gain shall be a deduction from gross

18 income.

19 ‘‘(b) ESTATES AND TRUSTS.—In the case of an es20 tate or trust, the deduction shall be computed by excluding

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

22 sales or exchanges of capital assets which, under sections

23 652 and 662 (relating to inclusions of amounts in gross

24 income of beneficiaries of trusts), is includible by the in-
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1 come beneficiaries as gain derived from the sale or ex2 change of capital assets.

3 ‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL

4 GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—

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

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

7 amount which the taxpayer takes into account as invest8 ment income under section 163(d)(4)(B)(iii).

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

10 ‘‘(1) IN GENERAL.—At the election of the tax11 payer, the rate of tax imposed by section 1 on the

12 excess of—

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

14 capital gain for the taxable year without regard

15 to the application of section 1222(12) to collect16 ibles specified in such election, over

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

18 shall not exceed 28 percent.

19 ‘‘(2) ELECTION.—Any election under this sub20 section, and any specification therein, once made,

21 shall be irrevocable.

22 ‘‘(3) COORDINATION WITH INDEXING.—Any col23 lectible specified in such an election shall be treated

24 as not being an indexed asset for purposes of section

25 1022.
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1 ‘‘(e) TRANSITIONAL RULE.—

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

3 year which includes January 1, 1995—

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

5 net capital gain under subsection (a) shall not

6 exceed the net capital gain determined by only

7 taking into account gains and losses properly

8 taken into account for the portion of the tax9 able year on or after January 1, 1995, and

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

11 exceeds the amount taken into account under

12 subsection (a), the rate of tax imposed by sec13 tion 1 on such excess shall not exceed 28 per14 cent.

15 ‘‘(2) SPECIAL RULES FOR PASS-THRU ENTI16 TIES.—

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

18 (1) with respect to any pass-thru entity, the de19 termination of when gains and losses are prop20 erly taken into account shall be made at the en21 tity level.

22 ‘‘(B) PASS-THRU ENTITY DEFINED.—For

23 purposes of subparagraph (A), the term ‘pass24 thru entity’ means—

25 ‘‘(i) a regulated investment company,
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1 ‘‘(ii) a real estate investment trust,

2 ‘‘(iii) an S corporation,

3 ‘‘(iv) a partnership,

4 ‘‘(v) an estate or trust, and

5 ‘‘(vi) a common trust fund.’’

6 (b) DEDUCTION ALLOWABLE IN COMPUTING AD7 JUSTED GROSS INCOME.—Subsection (a) of section 62 is

8 amended by inserting after paragraph (15) the following

9 new paragraph:

10 ‘‘(16) LONG-TERM CAPITAL GAINS.—The de11 duction allowed by section 1202.’’

12 (c) TREATMENT OF COLLECTIBLES.—

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

14 inserting after paragraph (11) the following new

15 paragraph:

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

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

18 the sale or exchange of a collectible shall be

19 treated as a short-term capital gain or loss (as

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

21 such asset was held. The preceding sentence

22 shall apply only to the extent the gain or loss

23 is taken into account in computing taxable in24 come.
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1 ‘‘(B) TREATMENT OF CERTAIN SALES OF

2 INTEREST IN PARTNERSHIP, ETC.—For pur3 poses of subparagraph (A), any gain from the

4 sale or exchange of an interest in a partnership,

5 S corporation, or trust which is attributable to

6 unrealized appreciation in the value of collect7 ibles held by such entity shall be treated as gain

8 from the sale or exchange of a collectible. Rules

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

10 for purposes of the preceding sentence.

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

12 paragraph, the term ‘collectible’ means any cap13 ital asset which is a collectible (as defined in

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

15 thereof).’’

16 (2) CHARITABLE DEDUCTION NOT AF17 FECTED.—

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

19 amended by adding at the end the following

20 new sentence: ‘‘For purposes of this paragraph,

21 section 1222 shall be applied without regard to

22 paragraph (12) thereof (relating to special rule

23 for collectibles).’’

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

25 amended by inserting before the period at the
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1 end the following: ‘‘and section 1222 shall be

2 applied without regard to paragraph (12) there3 of (relating to special rule for collectibles)’’.

4 (d) TECHNICAL AND CONFORMING CHANGES.—

5 (1)(A) Section 13113 of the Revenue Reconcili6 ation Act of 1993 (relating to 50-percent exclusion

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

8 amendments made by such section, are hereby re9 pealed; and the Internal Revenue Code of 1986 shall

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

11 never been enacted.

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

13 qualified small business stock (as defined in section

14 1202 of such Code, as in effect on the day before

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

16 date of enactment—

17 (i) the provisions repealed by subparagraph

18 (A) shall continue to apply to any disposition by

19 such taxpayer of such stock held on such date,

20 and

21 (ii) the amendments made by this section

22 and section 6302 shall not apply to such stock;

23 except that losses from the sale or exchange of

24 such stock shall be taken into account as pro-
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1 vided in the amendments made by paragraph

2 (13) of this subsection.

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

4 year period beginning on the date of the enactment

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

6 (2) Section 1 is amended by striking subsection

7 (h).

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

9 by striking ‘‘the amount of gain’’ in the material fol10 lowing subparagraph (B)(ii) and inserting ‘‘50 percent (25 11 ⁄35 in the case of a corporation) of the

12 amount of gain’’.

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

14 amended to read as follows:

15 ‘‘(2) CAPITAL GAINS AND LOSSES.—

16 ‘‘(A) LOSSES OF TAXPAYERS OTHER THAN

17 CORPORATIONS.—In the case of a taxpayer

18 other than a corporation, the amount deductible

19 on account of losses from sales or exchanges of

20 capital assets shall not exceed the amount in21 cludible on account of gains from sales or ex22 changes of capital assets.

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

24 The deduction under section 1202 shall not be

25 allowed.’’
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1 (B) Subparagraph (B) of section 172(d)(4) is

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

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

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

5 amended by striking all that follows ‘‘long-term cap6 ital gain,’’ and inserting ‘‘the maximum rate on net

7 capital gain under section 1201 or the deduction

8 under section 1202 (whichever is appropriate) shall

9 be taken into account.’’

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

11 to read as follows:

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

13 amount otherwise allowable as a deduction under

14 this subsection consists of gain from the sale or ex15 change of capital assets held for more than 1 year,

16 proper adjustment shall be made for any deduction

17 allowable to the estate or trust under section 1202

18 (relating to deduction for excess of capital gains over

19 capital losses). In the case of a trust, the deduction

20 allowed by this subsection shall be subject to section

21 681 (relating to unrelated business income).’’

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

23 by adding at the end thereof the following new sen24 tence: ‘‘The deduction under section 1202 (relating
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1 to deduction of excess of capital gains over capital

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

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

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

5 by inserting before the period ‘‘, and (ii) the deduc6 tion under section 1202 (relating to capital gains de7 duction) shall not be taken into account’’.

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

9 by striking ‘‘sections 1(h), 1201, and 1211’’ and in10 serting ‘‘sections 1201, 1202, and 1211’’.

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

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

13 be determined without regard to section 1202 (relat14 ing to deduction for capital gains) and’’ after ‘‘ex15 cept that’’.

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

17 amended by striking subparagraph (A), by redesig18 nating subparagraph (B) as subparagraph (A), and

19 by inserting after subparagraph (A) (as so redesig20 nated) the following new subparagraph:

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

22 a taxpayer other than a corporation, taxable in23 come from sources outside the United States

24 shall include gain from the sale or exchange of
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1 capital assets only to the extent of foreign

2 source capital gain net income.’’

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

4 so redesignated, is amended—

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

6 and inserting the following:

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

8 corporation—’’, and

9 (ii) by striking in clause (i) ‘‘in lieu of ap10 plying subparagraph (A),’’.

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

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

13 the following new subparagraph:

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

15 rate differential portion of foreign source net

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

17 net capital gain from sources within the United

18 States over net capital gain, as the case may

19 be, is the same proportion of such amount as

20 the excess of the highest rate of tax specified in

21 section 11(b) over the alternative rate of tax

22 under section 1201(a) bears to the alternative

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

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

25 by striking the last sentence.
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1 (13)(A) Paragraph (2) of section 1211(b) is

2 amended to read as follows:

3 ‘‘(2) the sum of—

4 ‘‘(A) the excess of the net short-term cap5 ital loss over the net long-term capital gain, and

6 ‘‘(B) one-half of the excess of the net long7 term capital loss over the net short-term capital

8 gain.’’

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

10 1212(b) as precedes subparagraph (B) thereof is

11 amended to read as follows:

12 ‘‘(2) SPECIAL RULES.—

13 ‘‘(A) ADJUSTMENTS.—

14 ‘‘(i) For purposes of determining the

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

16 there shall be treated as short-term capital

17 gain in the taxable year an amount equal

18 to the lesser of—

19 ‘‘(I) the amount allowed for the

20 taxable year under paragraph (1) or

21 (2) of section 1211(b), or

22 ‘‘(II) the adjusted taxable income

23 for such taxable year.

24 ‘‘(ii) For purposes of determining the

25 excess referred to in paragraph (1)(B),
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1 there shall be treated as short-term capital

2 gain in the taxable year an amount equal

3 to the sum of—

4 ‘‘(I) the amount allowed for the

5 taxable year under paragraph (1) or

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

7 taxable income for such taxable year,

8 whichever is the least, plus

9 ‘‘(II) the excess of the amount

10 described in subclause (I) over the net

11 short-term capital loss (determined

12 without regard to this subsection) for

13 such year.’’

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

15 amended by adding at the end the following

16 new paragraph:

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

18 amount which, under paragraph (1) and section

19 1211(b) (as in effect for taxable years beginning be20 fore January 1, 1996), is treated as a capital loss

21 in the first taxable year beginning after December

22 31, 1995, paragraph (1) and section 1211(b) (as so

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

24 1211(b) as in effect for taxable years beginning

25 after December 31, 1995, shall not apply) to the ex-
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1 tent such amount exceeds the total of any net cap2 ital gains (determined without regard to this sub3 section) of taxable years beginning after December

4 31, 1995.’’

5 (14) Paragraph (1) of section 1402(i) is amend6 ed by inserting ‘‘, and the deduction provided by sec7 tion 1202 shall not apply’’ before the period at the

8 end thereof.

9 (15) Subsection (e) of section 1445 is amend10 ed—

11 (A) in paragraph (1) by striking ‘‘35 per12 cent (or, to the extent provided in regulations,

13 28 percent)’’ and inserting ‘‘25 percent (or, to

14 the extent provided in regulations, 19.8 per15 cent)’’, and

16 (B) in paragraph (2) by striking ‘‘35 per17 cent’’ and inserting ‘‘25 percent’’.

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

19 7518(g)(6)(A) is amended—

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

21 which section 1(h) or 1201(a) applies’’, and

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

23 and inserting ‘‘19.8 percent (25 percent’’.
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1 (B) The second sentence of section

2 607(h)(6)(A) of the Merchant Marine Act, 1936 is

3 amended—

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

5 which section 1(h) or 1201(a) of such Code ap6 plies’’, and

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

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

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

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

11 inserting after the item relating to section 1201 the follow12 ing new item:

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

13 (f) EFFECTIVE DATE.—

14 (1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, the amendments made by

16 this section shall apply to taxable years ending after

17 December 31, 1994.

18 (2) CONTRIBUTIONS.—The amendment made

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

20 or after January 1, 1995.

21 (3) USE OF LONG-TERM LOSSES.—The amend22 ments made by subsection (d)(13) shall apply to tax23 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. 6302. INDEXING OF CERTAIN ASSETS ACQUIRED

5 AFTER DECEMBER 31, 1994, FOR PURPOSES

6 OF DETERMINING 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

12 treated—

13 (1) for purposes of subsection (c)(1) of this sec14 tion and section 1022 of such Code, as having a

15 holding period which begins on January 1, 1995,

16 and

17 (2) for purposes of section 1022(c)(2)(B)(ii) of

18 such Code, as having been acquired on January 1,

19 1995.

20 Subsection (d) shall not apply to property to which this

21 subsection applies.
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1 Subpart B—Capital Gains Reduction for

2 Corporations

3 SEC. 6311. REDUCTION OF ALTERNATIVE CAPITAL GAIN

4 TAX 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 Subpart C—Capital Loss Deduction Allowed With

2 Respect to Sale or Exchange of Principal Residence

3 SEC. 6316. CAPITAL LOSS DEDUCTION ALLOWED WITH RE4 SPECT TO SALE OR EXCHANGE OF PRINCIPAL

5 RESIDENCE.

6 (a) IN GENERAL.—Subsection (c) of section 165 (re7 lating to limitation on losses of individuals) is amended

8 by striking ‘‘and’’ at the end of paragraph (2), by striking

9 the period at the end of paragraph (3) and inserting ‘‘;

10 and’’, and by adding at the end the following new para11 graph:

12 ‘‘(4) losses arising from the sale or exchange of

13 the principal residence (within the meaning of sec14 tion 1034) of the taxpayer.’’

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

16 subsection (a) shall apply to sales and exchanges after De17 cember 31, 1994, in taxable years ending after such date.

18 PART II—COST RECOVERY PROVISIONS

19 SEC. 6321. DEPRECIATION ADJUSTMENT FOR CERTAIN

20 PROPERTY PLACED IN SERVICE AFTER DE21 CEMBER 31, 1994.

22 (a) IN GENERAL.—Section 168 (relating to acceler23 ated cost recovery system) is amended by adding at the

24 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 not be 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. 6322. 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 PART III—ALTERNATIVE MINIMUM TAX RELIEF

2 SEC. 6331. PHASEOUT OF APPLICATION OF ALTERNATIVE

3 MINIMUM TAX TO CORPORATIONS.

4 (a) TERMINATION.—Subsection (a) of section 55 is

5 amended by adding at the end the following new flush

6 sentence:

7 ‘‘In the case of a corporation, the tentative minimum tax

8 for any taxable year beginning after December 31, 2000,

9 shall be zero.’’

10 (b) EARLIER TERMINATION OF CERTAIN ADJUST11 MENTS FOR ALL TAXPAYERS.—

12 (1) DEPRECIATION.—Clause (i) of section

13 56(a)(1)(A) is amended by inserting ‘‘and before

14 March 14, 1995,’’ after ‘‘December 31, 1986,’’.

15 (2) MINING EXPLORATION AND DEVELOPMENT

16 COSTS.—Paragraph (2) of section 56(a) is amended

17 by inserting ‘‘and before January 1, 1996,’’ after

18 ‘‘December 31, 1986,’’.

19 (3) LONG-TERM CONTRACTS.—Paragraph (3) of

20 section 56(a) is amended by inserting ‘‘and before

21 January 1, 1996,’’ after ‘‘March 1, 1986,’’.

22 (4) POLLUTION CONTROL FACILITIES.—Para23 graph (5) of section 56(a) is amended by inserting

24 ‘‘and before January 1, 1996,’’ after ‘‘December 31,

25 1986,’’.
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1 (5) INSTALLMENT SALES.—Paragraph (6) of

2 section 56(a) is amended by inserting ‘‘and before

3 January 1, 1996,’’ after ‘‘March 1, 1986,’’.

4 (c) EARLIER TERMINATION OF CIRCULATION AND

5 RESEARCH AND EXPERIMENTAL EXPENDITURE ADJUST6 MENT FOR INDIVIDUALS.—Subparagraph (A) of section

7 56(b)(2) is amended by inserting ‘‘and before January 1,

8 1996,’’ after ‘‘December 31, 1986,’’.

9 (d) EARLIER TERMINATION OF CERTAIN ADJUST10 MENTS FOR CORPORATIONS.—

11 (1) MERCHANT MARINE CAPITAL CONSTRUC12 TION FUNDS.—Paragraph (2) of section 56(c) is

13 amended—

14 (A) by inserting ‘‘and before January 1,

15 1996,’’ after ‘‘December 31, 1986,’’ each place

16 it appears, and

17 (B) by striking the last sentence and in18 serting the following new flush sentence:

19 ‘‘For purposes of this paragraph, any withdrawal of

20 deposit or earnings from the fund shall be treated as

21 allocable to deposits made, and earnings received or

22 accrued, in the order in which made, received, or

23 accrued.’’

24 (2) SECTION 833(b) DEDUCTION.—Paragraph

25 (3) of section 56(c) is amended by adding at the end
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1 the following new sentence: ‘‘This paragraph shall

2 not apply to any taxable year beginning after De3 cember 31, 1995.’’

4 (3) CERTAIN EARNINGS AND PROFITS ITEMS.—

5 (A) Subparagraph (B) of section 56(g)(4)

6 is amended by adding at the end the following

7 new clause:

8 ‘‘(iii) TERMINATION.—This subpara9 graph shall not apply to any taxable year

10 beginning after December 31, 1995.’’

11 (B) Subparagraph (C) of section 56(g)(4)

12 is amended by adding at the end the following

13 new clause:

14 ‘‘(vi) TERMINATION.—This subpara15 graph shall not apply to any taxable year

16 beginning after December 31, 1995.’’

17 (4) INTANGIBLE DRILLING COSTS.—Clause (i)

18 of section 56(g)(4)(D) is amended by adding at the

19 end the following new sentence: ‘‘This clause shall

20 not apply to any taxable year beginning after De21 cember 31, 1995.’’

22 (5) CERTAIN AMORTIZATION PROVISIONS.—

23 Clause (ii) of section 56(g)(4)(D) is amended by

24 adding at the end the following new sentence: ‘‘This
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1 clause shall not apply to any expenditure paid or in2 curred after December 31, 1995.’’

3 (6) LIFO INVENTORY ADJUSTMENTS.—Clause

4 (iii) of section 56(g)(4)(D) is amended by adding at

5 the end the following new sentence: ‘‘This clause

6 shall not apply to any adjustment arising in a tax7 able year beginning after December 31, 1995.’’

8 (7) INSTALLMENT SALES.—Clause (iv) of sec9 tion 56(g)(4)(D) is amended by adding at the end

10 the following new sentence: ‘‘This clause shall not

11 apply to any disposition after December 31, 1995.’’

12 (8) DEBT POOLS.—Subparagraph (E) of section

13 56(g)(4) is amended by adding at the end the follow14 ing new sentence: ‘‘This subparagraph shall not

15 apply to any exchange after December 31, 1995.’’

16 (9) DEPLETION.—Subparagraph (F) of section

17 56(g)(4) is amended by adding at the end the follow18 ing new clause:

19 ‘‘(iii) TERMINATION.—This subpara20 graph shall not apply to any deduction for

21 depletion for any taxable year beginning

22 after December 31, 1995.’’

23 (10) OWNERSHIP CHANGES.—Subparagraph

24 (G) of section 56(g)(4) is amended by adding at the

25 end the following new sentence: ‘‘This subparagraph
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1 shall not apply to any ownership change after De2 cember 31, 1995.’’

3 (e) EARLIER TERMINATION OF ITEMS OF TAX PREF4 ERENCE.—

5 (1) DEPLETION.—Paragraph (1) of section

6 57(a) is amended by adding at the end the following

7 new sentence: ‘‘This paragraph shall not apply to

8 any taxable year beginning after December 31,

9 1995.’’

10 (2) INTANGIBLE DRILLING COSTS.—Paragraph

11 (2) of section 57(a) is amended by adding at the end

12 the following new subparagraph:

13 ‘‘(F) TERMINATION.—This paragraph shall

14 not apply to any taxable year beginning after

15 December 31, 1995.’’

16 (3) RESERVES FOR LOSSES ON BAD DEBTS.—

17 Paragraph (4) of section 57(a) is amended by add18 ing at the end the following new sentence: ‘‘This

19 paragraph shall not apply to any taxable year begin20 ning after December 31, 1995.’’

21 (4) TAX-EXEMPT INTEREST.—Paragraph (5) of

22 section 57(a) is amended by adding at the end the

23 following new subparagraph:

24 ‘‘(D) TERMINATION FOR CORPORATIONS.—

25 In the case of a corporation (other than a cor-
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1 poration referred to in section 56(g)(6)), this

2 paragraph shall not apply to interest accruing

3 for periods after December 31, 1995.’’

4 (f) NET OPERATING LOSS DEDUCTION.—Paragraph

5 (1) of section 56(d) is amended by inserting ‘‘(100 percent

6 in the case of taxable years beginning after December 31,

7 1995)’’ after ‘‘90 percent’’ each place it appears.

8 (g) LOSSES.—

9 (1) Section 58 is amended by adding at the end

10 the following new subsection:

11 ‘‘(d) TERMINATION.—This section shall not apply to

12 any loss incurred for any taxable year beginning after De13 cember 31, 1995.’’

14 (2) Subsection (h) of section 59 is amended by

15 inserting ‘‘469,’’ after ‘‘465,’’.

16 (h) FOREIGN TAX CREDIT.—Paragraph (2) of section

17 59(a) is amended by adding at the end the following new

18 subparagraph:

19 ‘‘(D) TERMINATION.—This paragraph

20 shall not apply to any taxable year beginning

21 after December 31, 1995.’’

22 (i) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR

23 MINIMUM TAX LIABILITY.—

24 (1) IN GENERAL.—Subsection (c) of section 53

25 is amended to read as follows:
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1 ‘‘(c) LIMITATION.—The credit allowable under sub2 section (a) for any taxable year shall not exceed the lesser

3 of—

4 ‘‘(1) the excess (if any) of—

5 ‘‘(A) the regular tax liability of the tax6 payer for such taxable year reduced by the sum

7 of the credits allowable under subparts A, B, D,

8 E, and F of this part, over

9 ‘‘(B) the tentative minimum tax for the

10 taxable year, or

11 ‘‘(2) 90 percent of the amount determined

12 under paragraph (1)(A).’’

13 (2) EFFECTIVE DATE.—The amendment made

14 by paragraph (1) shall apply to taxable years begin15 ning after December 31, 1995.

16 PART IV—TAXPAYER DEBT BUY-DOWN

17 SEC. 6341. DESIGNATION OF AMOUNTS FOR REDUCTION OF

18 PUBLIC DEBT.

19 (a) IN GENERAL.—Subchapter A of chapter 61 of the

20 Internal Revenue Code of 1986 (relating to returns and

21 records) is amended by adding at the end the following

22 new part:

23 ‘‘PART IX—DESIGNATION FOR REDUCTION OF

24 PUBLIC DEBT

‘‘Sec. 6097. Designation.
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1 ‘‘SEC. 6097. DESIGNATION.

2 ‘‘(a) IN GENERAL.—Every individual with adjusted

3 income tax liability for any taxable year may designate

4 that a portion of such liability (not to exceed 10 percent

5 thereof) shall be used to reduce the public debt.

6 ‘‘(b) MANNER AND TIME OF DESIGNATION.—A des7 ignation under subsection (a) may be made with respect

8 to any taxable year only at the time of filing the return

9 of tax imposed by chapter 1 for the taxable year. The des10 ignation shall be made on the first page of the return or

11 on the page bearing the taxpayer’s signature.

12 ‘‘(c) ADJUSTED INCOME TAX LIABILITY.—For pur13 poses of this section, the term ‘adjusted income tax liabil14 ity’ means income tax liability (as defined in section

15 6096(b)) reduced by any amount designated under section

16 6096 (relating to designation of income tax payments to

17 Presidential Election Campaign Fund).’’

18 (b) CLERICAL AMENDMENT.—The table of parts for

19 such subchapter A is amended by adding at the end the

20 following new item:

‘‘Part IX. Designation for reduction of public debt.’’

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

22 this section shall apply to taxable years ending after the

23 date of the enactment of this Act.
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1 SEC. 6342. PUBLIC DEBT REDUCTION TRUST FUND.

2 (a) IN GENERAL.—Subchapter A of chapter 98 of the

3 Internal Revenue Code of 1986 (relating to trust fund

4 code) is amended by adding at the end the following new

5 section:

6 ‘‘SEC. 9512. PUBLIC DEBT REDUCTION TRUST FUND.

7 ‘‘(a) CREATION OF TRUST FUND.—There is estab8 lished in the Treasury of the United States a trust fund

9 to be known as the ‘Public Debt Reduction Trust Fund’,

10 consisting of any amount appropriated or credited to the

11 Trust Fund as provided in this section or section 9602(b).

12 ‘‘(b) TRANSFERS TO TRUST FUND.—There are here13 by appropriated to the Public Debt Reduction Trust Fund

14 amounts equivalent to the amounts designated under sec15 tion 6097 (relating to designation for public debt reduc16 tion).

17 ‘‘(c) EXPENDITURES.—Amounts in the Public Debt

18 Reduction Trust Fund shall be used by the Secretary of

19 the Treasury for purposes of paying at maturity, or to

20 redeem or buy before maturity, any obligation of the Fed21 eral Government included in the public debt (other than

22 an obligation held by the Federal Old-Age and Survivors

23 Insurance Trust Fund, the Civil Service Retirement and

24 Disability Fund, or the Department of Defense Military

25 Retirement Fund). Any obligation which is paid, re26 deemed, or bought with amounts from the Public Debt Re-
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1 duction Trust Fund shall be canceled and retired and may

2 not be reissued.’’

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

4 for such subchapter is amended by adding at the end the

5 following new item:

‘‘Sec. 9512. Public Debt Reduction Trust Fund.’’

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

7 this section shall apply to amounts received after the date

8 of the enactment of this Act.

9 SEC. 6343. TAXPAYER-GENERATED SEQUESTRATION OF

10 FEDERAL SPENDING TO REDUCE THE PUBLIC

11 DEBT.

12 (a) SEQUESTRATION TO REDUCE THE PUBLIC

13 DEBT.—Part C of the Balanced Budget and Emergency

14 Deficit Control Act of 1985 is amended by adding after

15 section 253 the following new section:

16 ‘‘SEC. 253A. SEQUESTRATION TO REDUCE THE PUBLIC

17 DEBT.

18 ‘‘(a) SEQUESTRATION.—Notwithstanding sections

19 255 and 256, within 15 days after Congress adjourns to

20 end a session, and on the same day as a sequestration

21 (if any) under sections 251, 252, and 253, but after any

22 sequestration of budget-year budgetary resources required

23 by those sections, there shall be a sequestration equivalent

24 to the estimated aggregate amount designated under sec25 tion 6097 of the Internal Revenue Code of 1986 for the
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1 calendar year two years before the year in which that ses2 sion of Congress started, as estimated by the Department

3 of the Treasury on October 1 in the year after the applica4 ble tax year and as modified by the total of (1) any

5 amounts by which net discretionary spending is reduced

6 by legislation below the discretionary spending limits en7 acted after the enactment of this section related to the

8 fiscal year subject to the sequestration or, in the absence

9 of such limits, any net reduction below discretionary out10 lays for fiscal year 1995 and (2) the net deficit change

11 that has resulted from all direct spending legislation en12 acted after the enactment of this section related to the

13 fiscal year subject to the sequestration, as estimated by

14 OMB. Within 5 days after the enactment of any such di15 rect spending legislation, OMB shall estimate the change

16 in spending resulting from that legislation for the 5-fiscal17 year period beginning with the first fiscal year for which

18 that legislation becomes effective and transmit a report

19 to the House of Representatives and the Senate containing

20 that estimate. Only the estimated deficit reduction in21 cluded in the 5-year estimate made at the time the legisla22 tion is enacted shall be used for purposes of determining

23 whether there shall be a sequestration under this sub24 section. Notwithstanding the preceding two sentences, any

25 estimates of direct spending made by OMB under this
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1 subsection for any legislation that first takes effect in fis2 cal year 1995, 1996, or 1997 shall include estimates of

3 the direct spending effects through fiscal year 2002 and

4 those estimates shall be used for purposes of determining

5 whether there shall be a sequestration under this sub6 section. If the reduction in spending under paragraphs (1)

7 and (2) for a fiscal year is greater than the estimated ag8 gregate amount designated under section 6097 of the In9 ternal Revenue Code of 1986 respecting that fiscal year,

10 then there shall be no sequestration under this section.

11 ‘‘(b) APPLICABILITY.—

12 ‘‘(1) IN GENERAL.—Except as provided by

13 paragraph (2), each account of the United States

14 shall be reduced by a dollar amount calculated by

15 multiplying the level of budgetary resources in that

16 account at that time by the uniform percentage nec17 essary to carry out subsection (a). All obligational

18 authority reduced under this section shall be done in

19 a manner that makes such reductions permanent.

20 ‘‘(2) EXEMPT ACCOUNTS.—(A) No order issued

21 under this part may—

22 ‘‘(i) reduce benefits payable to the old-age

23 and survivors insurance program established

24 under title II of the Social Security Act;
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1 ‘‘(ii) reduce payments for net interest (all

2 of major functional category 900); or

3 ‘‘(iii) make any reduction in the following

4 accounts:

5 ‘‘Federal Deposit Insurance Corpora6 tion, Bank Insurance Fund;

7 ‘‘Federal Deposit Insurance Corpora8 tion, FSLIC Resolution Fund;

9 ‘‘Federal Deposit Insurance Corpora10 tion, Savings Association Insurance Fund;

11 ‘‘National Credit Union Administra12 tion, credit union share insurance fund; or

13 ‘‘Resolution Trust Corporation.

14 ‘‘(B) The following budget accounts, activities

15 within accounts, or income shall be exempt from se16 questration—

17 ‘‘(i) all payments to trust funds from ex18 cise taxes or other receipts or collections prop19 erly creditable to those trust funds;

20 ‘‘(ii) offsetting receipts and collections;

21 ‘‘(iii) all payments from one Federal direct

22 spending budget account to another Federal

23 budget account; all intragovernmental funds in24 cluding those from which funding is derived pri25 marily from other Government accounts, except
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1 to the extent that such funds are augmented

2 by direct appropriations for the fiscal year for

3 which the order is in effect; and those obliga4 tions of discretionary accounts or activities that

5 are financed by intragovernmental payments

6 from another discretionary account or activity;

7 ‘‘(iv) expenses to the extent they result

8 from private donations, bequests, or voluntary

9 contributions to the Government;

10 ‘‘(v) nonbudgetary activities, including but

11 not limited to—

12 ‘‘(I) credit liquidating and financing

13 accounts;

14 ‘‘(II) the Pension Benefit Guarantee

15 Corporation Trust Funds;

16 ‘‘(III) the Thrift Savings Fund;

17 ‘‘(IV) the Federal Reserve System;

18 and

19 ‘‘(V) appropriations for the District of

20 Columbia to the extent they are appropria21 tions of locally raised funds;

22 ‘‘(vi) payments resulting from Government

23 insurance, Government guarantees, or any other

24 form of contingent liability, to the extent those

25 payments result from contractual or other le-
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1 gally binding commitments of the Government

2 at the time of any sequestration;

3 ‘‘(vii) the following accounts, which largely

4 fulfill requirements of the Constitution or other5 wise make payments to which the Government

6 is committed—

7 ‘‘Administration of Territories, North8 ern Mariana Islands Covenant grants (14–

9 0412–0–1–806);

10 ‘‘Bureau of Indian Affairs, miscellane11 ous payments to Indians (14–2303–0–1–

12 452);

13 ‘‘Bureau of Indian Affairs, miscellane14 ous trust funds, tribal trust funds (14–

15 9973–0–7–999);

16 ‘‘Claims, defense;

17 ‘‘Claims, judgments, and relief act

18 (20–1895–0–1–806);

19 ‘‘Compact of Free Association, eco20 nomic assistance pursuant to Public Law

21 99–658 (14–0415–0–1–806);

22 ‘‘Compensation of the President (11–

23 0001–0–1–802);
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1 ‘‘Customs Service, miscellaneous per2 manent appropriations (20–9992–0–2–

3 852);

4 ‘‘Eastern Indian land claims settle5 ment fund (14–2202–0–1–806);

6 ‘‘Farm Credit System Financial As7 sistance Corporation, interest payments

8 (20–1850–0–1–351);

9 ‘‘Internal Revenue collections of Puer10 to Rico (20–5737–0–2–852);

11 ‘‘Panama Canal Commission, operat12 ing expenses and capital outlay (95–5190–

13 0–2–403);

14 ‘‘Payments of Vietnam and USS

15 Pueblo prisoner-of-war claims (15–0104–

16 0–1–153);

17 ‘‘Payments to copyright owners (03–

18 5175–0–2–376);

19 ‘‘Payments to the United States terri20 tories, fiscal assistance (14–0418–0–1–

21 801);

22 ‘‘Salaries of Article III judges;

23 ‘‘Soldier’s and Airmen’s Home, pay24 ment of claims (84–8930–0–7–705);
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1 ‘‘Washington Metropolitan Area Tran2 sit Authority, interest payments (46–

3 0300–0–1–401).

4 ‘‘(viii) the following noncredit special, re5 volving, or trust-revolving funds—

6 ‘‘Coinage profit fund (20–5811–0–2–

7 803);

8 ‘‘Exchange Stabilization Fund (20–

9 4444–0–3–155);

10 ‘‘Foreign Military Sales trust fund

11 (11–82232–0–7–155); and

12 ‘‘(ix)(I) any amount paid as regular

13 unemployment compensation by a State

14 from its account in the Unemployment

15 Trust Fund (established by section 904(a)

16 of the Social Security Act);

17 ‘‘(II) any advance made to a State

18 from the Federal unemployment account

19 (established by section 904(g) of such Act)

20 under title XII of such Act and any ad21 vance appropriated to the Federal unem22 ployment account pursuant to section 1203

23 of such Act; and

24 ‘‘(III) any payment made from the

25 Federal Employees Compensation Account
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1 (as established under section 909 of such

2 Act) for the purpose of carrying out chap3 ter 85 of title 5, United States Code, and

4 funds appropriated or transferred to or

5 otherwise deposited in such Account.

6 ‘‘(3) FEDERAL ADMINISTRATIVE EXPENSES.—

7 ‘‘(A) Administrative expenses incurred by

8 the departments and agencies, including inde9 pendent agencies, of the Federal Government in

10 connection with any program, project, activity,

11 or account shall be subject to reduction pursu12 ant to any sequestration order, without regard

13 to the exemptions under paragraph (2) and re14 gardless of whether the program, project, activ15 ity, or account is self-supporting and does not

16 receive appropriations.

17 ‘‘(B) Payments made by the Federal Gov18 ernment to reimburse or match administrative

19 costs incurred by a State or political subdivision

20 under or in connection with any program,

21 project, activity, or account shall not be consid22 ered administrative expenses of the Federal

23 Government for purposes of this section, and

24 shall be subject to sequestration to the extent

25 (and only to the extent) that other payments
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1 made by the Federal Government under or in

2 connection with that program, project, activity,

3 or account are subject to that reduction or se4 questration; except that Federal payments

5 made to a State as reimbursement of adminis6 trative costs incurred by that State under or in

7 connection with the unemployment compensa8 tion programs specified in paragraph (2)(ix)

9 shall be subject to reduction or sequestration

10 under this part notwithstanding the exemption

11 otherwise granted to such programs under that

12 paragraph.’’.

13 (b) REPORTS.—Section 254 of the Balanced Budget

14 and Emergency Deficit Control Act of 1985 is amended—

15 (1) in subsection (a), by inserting after the item

16 relating to the GAO compliance report the following:

17 ‘‘October 1 . . . Department of Treasury report to

18 Congress estimating amount of income tax designated

19 pursuant to section 6097 of the Internal Revenue Code

20 of 1986.’’;

21 (2) in subsection (d)(1), by inserting ‘‘, and se22 questration to reduce the public debt,’’;

23 (3) in subsection (d), by redesignating para24 graph (5) as paragraph (6) and by inserting after

25 paragraph (4) the following new paragraph:
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1 ‘‘(5) SEQUESTRATION TO REDUCE THE PUBLIC

2 DEBT REPORTS.—The preview reports shall set forth

3 for the budget year estimates for each of the follow4 ing:

5 ‘‘(A) The aggregate amount designated

6 under section 6097 of the Internal Revenue

7 Code of 1986 for the calendar year two years

8 before the year in which the budget year begins.

9 ‘‘(B) The amount of reductions required

10 under section 253A and the deficit remaining

11 after those reductions have been made.

12 ‘‘(C) The sequestration percentage nec13 essary to achieve the required reduction in ac14 counts under section 253A(b).’’; and

15 (4) in subsection (g), by redesignating para16 graphs (4) and (5) as paragraphs (5) and (6), re17 spectively, and by inserting after paragraph (3) the

18 following new paragraph:

19 ‘‘(4) SEQUESTRATION TO REDUCE THE PUBLIC

20 DEBT REPORTS.—The final reports shall contain all

21 of the information contained in the public debt tax22 ation designation report required on October 1.’’.

23 (c) EFFECTIVE DATE.—Notwithstanding section

24 275(b) of the Balanced Budget and Emergency Deficit

25 Control Act of 1985, the expiration date set forth in that
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1 section shall not apply to the amendments made by this

2 section. The amendments made by this section shall cease

3 to have any effect after the first fiscal year during which

4 there is no public debt.

5 PART V—SMALL BUSINESS INCENTIVES

6 SEC. 6351. COST-OF-LIVING ADJUSTMENTS RELATING TO

7 ESTATE AND GIFT TAX PROVISIONS.

8 (a) INCREASE IN UNIFIED ESTATE AND GIFT TAX

9 CREDIT.—

10 (1) ESTATE TAX CREDIT.—

11 (A) Subsection (a) of section 2010 (relat12 ing to unified credit against estate tax) is

13 amended by striking ‘‘$192,800’’ and inserting

14 ‘‘the applicable credit amount’’.

15 (B) Section 2010 is amended by redesig16 nating subsection (c) as subsection (d) and by

17 inserting after subsection (b) the following new

18 subsection:

19 ‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes

20 of this section—

21 ‘‘(1) IN GENERAL.—The applicable credit

22 amount is the amount of the tentative tax which

23 would be determined under the rate schedule set

24 forth in section 2001(c) if the amount with respect

25 to which such tentative tax is to be computed were
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1 the applicable exclusion amount determined in ac2 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.

3 ‘‘(2) COST-OF-LIVING ADJUSTMENTS.—In the

4 case of any decedent dying, and gift made, in a cal5 endar year after 1998, the $750,000 amount set

6 forth in paragraph (1) shall be increased by an

7 amount equal to—

8 ‘‘(A) $750,000, multiplied by

9 ‘‘(B) the cost-of-living adjustment deter10 mined under section 1(f)(3) for such calendar

11 year by substituting ‘calendar year 1997’ for

12 ‘calendar year 1992’ in subparagraph (B)

13 thereof.

14 If any amount as adjusted under the preceding sen15 tence is not a multiple of $10,000, such amount

16 shall be rounded to the nearest multiple of

17 $10,000.’’

18 (C) Paragraph (1) of section 6018(a) is

19 amended by striking ‘‘$600,000’’ and inserting

20 ‘‘the applicable exclusion amount in effect

21 under section 2010(c) (as adjusted under para22 graph (2) thereof) for the calendar year which

23 includes the date of death’’.
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1 (D) Paragraph (2) of section 2001(c) is

2 amended by striking ‘‘$21,040,000’’ and insert3 ing ‘‘the amount at which the average tax rate

4 under this section is 55 percent’’.

5 (E) Subparagraph (A) of section

6 2102(c)(3) is amended by striking ‘‘$192,800’’

7 and inserting ‘‘the applicable credit amount in

8 effect under section 2010(c) for the calendar

9 year which includes the date of death’’.

10 (2) UNIFIED GIFT TAX CREDIT.—Paragraph

11 (1) of section 2505(a) is amended by striking

12 ‘‘$192,800’’ and inserting ‘‘the applicable credit

13 amount in effect under section 2010(c) for such cal14 endar year’’.

15 (3) EFFECTIVE DATE.—The amendments made

16 by this subsection shall apply to the estates of dece17 dents dying, and gifts made, after December 31,

18 1995.

19 (b) ALTERNATE VALUATION OF CERTAIN FARM,

20 ETC., REAL PROPERTY.—Subsection (a) of section 2032A

21 is amended by adding at the end the following new para22 graph:

23 ‘‘(3) INFLATION ADJUSTMENT.—In the case of

24 estates of decedents dying in a calendar year after
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1 1998, the $750,000 amount contained in paragraph

2 (2) shall be increased by an amount equal to—

3 ‘‘(A) $750,000, multiplied by

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(f)(3) for such calendar

6 year by substituting ‘calendar year 1997’ for

7 ‘calendar year 1992’ in subparagraph (B)

8 thereof.

9 If any amount as adjusted under the preceding sen10 tence is not a multiple of $10,000, such amount

11 shall be rounded to the nearest multiple of

12 $10,000.’’

13 (c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b)

14 of section 2503 is amended—

15 (1) by striking the subsection heading and in16 serting the following:

17 ‘‘(b) EXCLUSIONS FROM GIFTS.—

18 ‘‘(1) IN GENERAL.—’’,

19 (2) by moving the text 2 ems to the right, and

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

21 paragraph:

22 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

23 gifts made in a calendar year after 1998, the

24 $10,000 amount contained in paragraph (1) shall be

25 increased by an amount equal to—
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1 ‘‘(A) $10,000, multiplied by

2 ‘‘(B) the cost-of-living adjustment deter3 mined under section 1(f)(3) for such calendar

4 year by substituting ‘calendar year 1997’ for

5 ‘calendar year 1992’ in subparagraph (B)

6 thereof.

7 If any amount as adjusted under the preceding sen8 tence is not a multiple of $1,000, such amount shall

9 be rounded to the nearest multiple of $1,000.’’

10 (d) EXEMPTION FROM GENERATION-SKIPPING

11 TAX.—Section 2631 (relating to GST exemption) is

12 amended by adding at the end the following new sub13 section:

14 ‘‘(c) INFLATION ADJUSTMENT.—In the case of an in15 dividual who dies in any calendar year after 1998, the

16 $1,000,000 amount contained in subsection (a) shall be

17 increased by an amount equal to—

18 ‘‘(1) $1,000,000, multiplied by

19 ‘‘(2) the cost-of-living adjustment determined

20 under section 1(f)(3) for such calendar year by sub21 stituting ‘calendar year 1997’ for ‘calendar year

22 1992’ in subparagraph (B) thereof.

23 If any amount as adjusted under the preceding sentence

24 is not a multiple of $10,000, such amount shall be round25 ed to the nearest multiple of $10,000.’’
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1 (e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT IN2 TEREST RATE ON EXTENSION OF TIME FOR PAYMENT OF

3 ESTATE TAX ON CLOSELY HELD BUSINESS.—

4 (1) Subparagraph (A) of section 6601(j)(2) is

5 amended by striking ‘‘$345,800’’ and inserting ‘‘the

6 applicable limitation amount’’.

7 (2) Subsection (j) of section 6601 is amended

8 by redesignating paragraph (3) as paragraph (4)

9 and by inserting after paragraph (2) the following

10 new paragraph:

11 ‘‘(3) APPLICABLE LIMITATION AMOUNT.—

12 ‘‘(A) IN GENERAL.—For purposes of para13 graph (2), the applicable limitation amount is

14 the amount of the tentative tax which would be

15 determined under the rate schedule set forth in

16 section 2001(c) if the amount with respect to

17 which such tentative tax is to be computed were

18 $1,000,000.

19 ‘‘(B) INFLATION ADJUSTMENT.—In the

20 case of estates of decedents dying in a calendar

21 year after 1998, the $1,000,000 amount con22 tained in subparagraph (A) shall be increased

23 by an amount equal to—

24 ‘‘(i) $1,000,000, multiplied by
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1 ‘‘(ii) the cost-of-living adjustment de2 termined under section 1(f)(3) for such

3 calendar year by substituting ‘calendar

4 year 1997’ for ‘calendar year 1992’ in sub5 paragraph (B) thereof.

6 If any amount as adjusted under the preceding

7 sentence is not a multiple of $10,000, such

8 amount shall be rounded to the nearest multiple

9 of $10,000.’’

10 SEC. 6352. INCREASE IN EXPENSE TREATMENT FOR SMALL

11 BUSINESSES.

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

13 179(b) (relating to dollar limitation) is amended to read

14 as follows:

15 ‘‘(1) DOLLAR LIMITATION.—The aggregate cost

16 which may be taken into account under subsection

17 (a) for any taxable year shall not exceed the follow18 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.’’

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

20 subsection (a) shall apply to taxable years beginning after

21 December 31, 1995.
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1 SEC. 6353. CLARIFICATION OF TREATMENT OF HOME OF2 FICE USE FOR ADMINISTRATIVE AND MAN3 AGEMENT ACTIVITIES.

4 (a) IN GENERAL.—Paragraph (1) of section 280A(c)

5 is amended by adding at the end the following new sen6 tence: ‘‘For purposes of subparagraph (A), the term ‘prin7 cipal place of business’ includes a place of business which

8 is used by the taxpayer for the administrative or manage9 ment activities of any trade or business of the taxpayer

10 if there is no other fixed location of such trade or business

11 where the taxpayer conducts substantial administrative or

12 management activities of such trade or business.’’

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

14 subsection (a) shall apply to taxable years beginning after

15 December 31, 1995.

16 SEC. 6354. TREATMENT OF STORAGE OF PRODUCT SAM17 PLES.

18 (a) IN GENERAL.—Paragraph (2) of section 280A(c)

19 is amended by striking ‘‘inventory’’ and inserting ‘‘inven20 tory or product samples’’.

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

22 subsection (a) shall apply to taxable years beginning after

23 December 31, 1995.
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1 Subtitle D—Family Reinforcement

2 SEC. 6401. CREDIT FOR ADOPTION EXPENSES.

3 (a) IN GENERAL.—Subpart A of part IV of sub4 chapter A of chapter 1 is amended by inserting after sec5 tion 25 the following new section:

6 ‘‘SEC. 25A. ADOPTION EXPENSES.

7 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in8 dividual, there shall be allowed as a credit against the tax

9 imposed by this chapter for the taxable year the amount

10 of the qualified adoption expenses paid or incurred by the

11 taxpayer during such taxable year.

12 ‘‘(b) LIMITATIONS.—

13 ‘‘(1) DOLLAR LIMITATION.—The aggregate

14 amount of qualified adoption expenses which may be

15 taken into account under subsection (a) with respect

16 to the adoption of a child shall not exceed $5,000.

17 ‘‘(2) INCOME LIMITATION.—The amount allow18 able as a credit under subsection (a) for any taxable

19 year shall be reduced (but not below zero) by an

20 amount which bears the same ratio to the amount

21 so allowable (determined without regard to this

22 paragraph but with regard to paragraph (1)) as—

23 ‘‘(A) the amount (if any) by which the tax24 payer’s adjusted gross income (determined
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1 without regard to sections 911, 931, and 933)

2 exceeds $60,000, bears to

3 ‘‘(B) $40,000.

4 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—

5 ‘‘(A) IN GENERAL.—No credit shall be al6 lowed under subsection (a) for any expense for

7 which a deduction or credit is allowable under

8 any other provision of this chapter.

9 ‘‘(B) GRANTS.—No credit shall be allowed

10 under subsection (a) for any expense to the ex11 tent that funds for such expense are received

12 under any Federal, State, or local program.

13 The preceding sentence shall not apply to ex14 penses for the adoption of a child with special

15 needs.

16 ‘‘(c) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) QUALIFIED ADOPTION EXPENSES.—

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

19 adoption expenses’ means reasonable and nec20 essary adoption fees, court costs, attorney fees,

21 and other expenses—

22 ‘‘(i) which are directly related to, and

23 the principal purpose of which is for, the

24 legal adoption of an eligible child by the

25 taxpayer, and
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1 ‘‘(ii) which are not incurred in viola2 tion of State or Federal law or in carrying

3 out any surrogate parenting arrangement.

4 ‘‘(B) EXPENSES FOR ADOPTION OF

5 SPOUSE’S CHILD NOT ELIGIBLE.—The term

6 ‘qualified adoption expenses’ shall not include

7 any expenses in connection with the adoption by

8 an individual of a child who is the child of such

9 individual’s spouse.

10 ‘‘(2) ELIGIBLE CHILD.—The term ‘eligible

11 child’ means any individual—

12 ‘‘(A) who has not attained age 18 as of the

13 time of the adoption, or

14 ‘‘(B) who is physically or mentally incapa15 ble of caring for himself.

16 ‘‘(3) CHILD WITH SPECIAL NEEDS.—The term

17 ‘child with special needs’ means any child if—

18 ‘‘(A) a State has determined that the child

19 cannot or should not be returned to the home

20 of his parents, and

21 ‘‘(B) such State has determined that there

22 exists with respect to the child a specific factor

23 or condition (such as his ethnic background,

24 age, or membership in a minority or sibling

25 group, or the presence of factors such as medi-
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1 cal conditions or physical, mental, or emotional

2 handicaps) because of which it is reasonable to

3 conclude that such child cannot be placed with

4 adoptive parents without providing adoption as5 sistance.

6 ‘‘(d) MARRIED COUPLES MUST FILE JOINT RE7 TURNS, ETC.—Rules similar to the rules of paragraphs

8 (2), (3), and (4) of section 21(e) shall apply for purposes

9 of this section.’’

10 (b) CONFORMING AMENDMENT.—The table of sec11 tions for subpart A of part IV of subchapter A of chapter

12 1 is amended by inserting after the item relating to section

13 25 the following new item:

‘‘Sec. 25A. Adoption expenses.’’.

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

15 this section shall apply to taxable years beginning after

16 December 31, 1995.

17 SEC. 6402. CREDIT FOR TAXPAYERS WITH CERTAIN PER18 SONS REQUIRING CUSTODIAL CARE IN THEIR

19 HOUSEHOLDS.

20 (a) IN GENERAL.—Subpart A of part IV of sub21 chapter A of chapter 1 is amended by inserting after sec22 tion 25A the following new section:
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1 ‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PER2 SONS REQUIRING CUSTODIAL CARE IN THEIR

3 HOUSEHOLDS.

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in5 dividual who maintains a household which includes as a

6 member one or more qualified persons, there shall be al7 lowed as a credit against the tax imposed by this chapter

8 for the taxable year an amount equal to $500 for each

9 such person.

10 ‘‘(b) QUALIFIED PERSON.—For purposes of this sec11 tion, the term ‘qualified person’ means any individual—

12 ‘‘(1) who is a father or mother of the taxpayer,

13 his spouse, or his former spouse or who is an ances14 tor of such a father or mother,

15 ‘‘(2) who is physically or mentally incapable of

16 caring for himself,

17 ‘‘(3) who has as his principal place of abode for

18 more than half of the taxable year the home of the

19 taxpayer, and

20 ‘‘(4) whose name and TIN are included on the

21 taxpayer’s return for the taxable year.

22 For purposes of paragraph (1), a stepfather or stepmother

23 shall be treated as a father or mother.

24 ‘‘(c) SPECIAL RULES.—For purposes of this section,

25 rules similar to the rules of paragraphs (1), (2), (3), and

26 (4) of section 21(e) shall apply.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

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

3 is amended by inserting after the item relating to section

4 25A the following new item:

‘‘Sec. 25B. Credit for taxpayers with certain persons requiring

custodial care in their households.’’

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

6 this section shall apply to taxable years beginning after

7 December 31, 1995.

8 Subtitle E—Social Security

9 Earnings Test

10 SEC. 6501. ADJUSTMENTS IN MONTHLY EXEMPT AMOUNT

11 FOR PURPOSES OF THE SOCIAL SECURITY

12 EARNINGS TEST.

13 (a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR

14 INDIVIDUALS WHO HAVE ATTAINED RETIREMENT

15 AGE.—Section 203(f)(8)(D) of the Social Security Act (42

16 U.S.C. 403(f)(8)(D)) is amended to read as follows:

17 ‘‘(D)(i) Notwithstanding any other provision of

18 this subsection, the exempt amount which is applica19 ble to an individual who has attained retirement age

20 (as defined in section 216(1)) before the close of the

21 taxable year involved shall be—

22 ‘‘(I) for the taxable year beginning after

23 1995 and before 1997, $1,250.00,
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1 ‘‘(II) for the taxable year beginning after

1996 and before 1998, $1,583.331 2 ⁄3,

3 ‘‘(III) for the taxable year beginning after

1997 and before 1999, $1,916.662 4 ⁄3,

5 ‘‘(IV) for the taxable year beginning after

6 1998 and before 2000, $2,250.00, and

7 ‘‘(V) for the taxable year beginning after

8 1999 and before 2001, $2,500.00.

9 ‘‘(ii) For purposes of subparagraph (B)(ii)(II),

10 the increase in the exempt amount provided under

11 clause (i)(V) shall be deemed to have resulted from

12 a determination which shall be deemed to have been

13 made under subparagraph (A) in 1999.’’.

14 (b) CONFORMING AMENDMENT.—The second sen15 tence of section 223(d)(4) of such Act (42 U.S.C.

16 423(d)(4)) is amended by striking ‘‘the exempt amount

17 under section 203(f)(8) which is applicable to individuals

18 described in subparagraph (D) thereof’’ and inserting the

19 following: ‘‘an amount equal to the exempt amount which

20 would have been applicable under section 203(f)(8), to in21 dividuals described in subparagraph (D) thereof, if section

22 6501 of the Contract With America Tax Relief Act of

23 1995 had not been enacted’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to taxable years begin3 ning after 1995.

4 Subtitle F—Technical Corrections

5 SEC. 6601. COORDINATION WITH OTHER SUBTITLES.

6 For purposes of applying the amendments made by

7 any subtitle of this title other than this subtitle, the provi8 sions of this subtitle shall be treated as having been en9 acted immediately before the provisions of such other sub10 titles.

11 SEC. 6602. AMENDMENTS RELATED TO REVENUE REC12 ONCILIATION ACT OF 1990.

13 (a) AMENDMENTS RELATED TO SUBTITLE A.—

14 (1) Subparagraph (B) of section 59(j)(3) is

15 amended by striking ‘‘section 1(i)(3)(B)’’ and insert16 ing ‘‘section 1(g)(3)(B)’’.

17 (2) Clause (i) of section 151(d)(3)(C) is amend18 ed by striking ‘‘joint of a return’’ and inserting

19 ‘‘joint return’’.

20 (b) AMENDMENTS RELATED TO SUBTITLE B.—

21 (1) Paragraph (1) of section 11212(e) of the

22 Revenue Reconciliation Act of 1990 is amended by

23 striking ‘‘Paragraph (1) of section 6724(d)’’ and in24 serting ‘‘Subparagraph (B) of section 6724(d)(1)’’.
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1 (2)(A) Subparagraph (B) of section 4093(c)(2),

2 as in effect before the amendments made by the

3 Revenue Reconciliation Act of 1993, is amended by

4 inserting before the period ‘‘unless such fuel is sold

5 for exclusive use by a State or any political subdivi6 sion thereof’’.

7 (B) Paragraph (4) of section 6427(l), as in ef8 fect before the amendments made by the Revenue

9 Reconciliation Act of 1993, is amended by inserting

10 before the period ‘‘unless such fuel was used by a

11 State or any political subdivision thereof’’.

12 (3) Paragraph (1) of section 6416(b) is amend13 ed by striking ‘‘chapter 32 or by section 4051’’ and

14 inserting ‘‘chapter 31 or 32’’.

15 (4) Section 7012 is amended—

16 (A) by striking ‘‘production or importation

17 of gasoline’’ in paragraph (3) and inserting

18 ‘‘taxes on gasoline and diesel fuel’’, and

19 (B) by striking paragraph (4) and redesig20 nating paragraphs (5) and (6) as paragraphs

21 (4) and (5), respectively.

22 (5) Subsection (c) of section 5041 is amended

23 by striking paragraph (6) and by inserting the fol24 lowing new paragraphs:

25 ‘‘(6) CREDIT FOR TRANSFEREE IN BOND.—If—
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1 ‘‘(A) wine produced by any person would

2 be eligible for any credit under paragraph (1)

3 if removed by such person during the calendar

4 year,

5 ‘‘(B) wine produced by such person is re6 moved during such calendar year by any other

7 person (hereafter in this paragraph referred to

8 as the ‘transferee’) to whom such wine was

9 transferred in bond and who is liable for the tax

10 imposed by this section with respect to such

11 wine, and

12 ‘‘(C) such producer holds title to such wine

13 at the time of its removal and provides to the

14 transferee such information as is necessary to

15 properly determine the transferee’s credit under

16 this paragraph,

17 then, the transferee (and not the producer) shall be

18 allowed the credit under paragraph (1) which would

19 be allowed to the producer if the wine removed by

20 the transferee had been removed by the producer on

21 that date.

22 ‘‘(7) REGULATIONS.—The Secretary may pre23 scribe such regulations as may be necessary to carry

24 out the purposes of this subsection, including regula25 tions—
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1 ‘‘(A) to prevent the credit provided in this

2 subsection from benefiting any person who pro3 duces more than 250,000 wine gallons during a

4 calendar year, and

5 ‘‘(B) to assure proper reduction of such

6 credit for persons producing more than 150,000

7 wine gallons of wine during a calendar year.’’

8 (6) Paragraph (3) of section 5061(b) is amend9 ed to read as follows:

10 ‘‘(3) section 5041(f),’’.

11 (7) Section 5354 is amended by inserting ‘‘(tak12 ing into account the appropriate amount of credit

13 with respect to such wine under section 5041(c))’’

14 after ‘‘any one time’’.

15 (c) AMENDMENTS RELATED TO SUBTITLE C.—

16 (1) Paragraph (4) of section 56(g) is amended

17 by redesignating subparagraphs (I) and (J) as sub18 paragraphs (H) and (I), respectively.

19 (2) Subparagraph (B) of section 6724(d)(1) is

20 amended—

21 (A) by striking ‘‘or’’ at the end of clause

22 (xii), and

23 (B) by striking the period at the end of

24 clause (xiii) and inserting ‘‘, or’’.
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1 (3) Subsection (g) of section 6302 is amended

2 by inserting ‘‘, 22,’’ after ‘‘chapters 21’’.

3 (4) The earnings and profits of any insurance

4 company to which section 11305(c)(3) of the Reve5 nue Reconciliation Act of 1990 applies shall be de6 termined without regard to any deduction allowed

7 under such section; except that, for purposes of ap8 plying sections 56 and 902, and subpart F of part

9 III of subchapter N of chapter 1 of the Internal

10 Revenue Code of 1986, such deduction shall be

11 taken into account.

12 (5) Subparagraph (D) of section 6038A(e)(4) is

13 amended—

14 (A) by striking ‘‘any transaction to which

15 the summons relates’’ and inserting ‘‘any af16 fected taxable year’’, and

17 (B) by adding at the end thereof the fol18 lowing new sentence: ‘‘For purposes of this sub19 paragraph, the term ‘affected taxable year’

20 means any taxable year if the determination of

21 the amount of tax imposed for such taxable

22 year is affected by the treatment of the trans23 action to which the summons relates.’’.
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1 (6) Subparagraph (A) of section 6621(c)(2) is

2 amended by adding at the end thereof the following

3 new flush sentence:

4 ‘‘The preceding sentence shall be applied with5 out regard to any such letter or notice which is

6 withdrawn by the Secretary.’’.

7 (7) Clause (i) of section 6621(c)(2)(B) is

8 amended by striking ‘‘this subtitle’’ and inserting

9 ‘‘this title’’.

10 (d) AMENDMENTS RELATED TO SUBTITLE D.—

11 (1) Notwithstanding section 11402(c) of the

12 Revenue Reconciliation Act of 1990, the amendment

13 made by section 11402(b)(1) of such Act shall apply

14 to taxable years ending after December 31, 1989.

15 (2) Clause (ii) of section 143(m)(4)(C) is

16 amended—

17 (A) by striking ‘‘any month of the 10-year

18 period’’ and inserting ‘‘any year of the 4-year

19 period’’,

20 (B) by striking ‘‘succeeding months’’ and

21 inserting ‘‘succeeding years’’, and

22 (C) by striking ‘‘over the remainder of

23 such period (or, if lesser, 5 years)’’ and insert24 ing ‘‘to zero over the succeeding 5 years’’.

25 (e) AMENDMENTS RELATED TO SUBTITLE E.—
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1 (1)(A) Clause (ii) of section 56(d)(1)(B) is

2 amended to read as follows:

3 ‘‘(ii) appropriate adjustments in the

4 application of section 172(b)(2) shall be

5 made to take into account the limitation of

6 subparagraph (A).’’

7 (B) For purposes of applying sections 56(g)(1)

8 and 56(g)(3) of the Internal Revenue Code of 1986

9 with respect to taxable years beginning in 1991 and

10 1992, the reference in such sections to the alter11 native tax net operating loss deduction shall be

12 treated as including a reference to the deduction

13 under section 56(h) of such Code as in effect before

14 the amendments made by section 1915 of the En15 ergy Policy Act of 1992.

16 (2) Clause (i) of section 613A(c)(3)(A) is

17 amended by striking ‘‘the table contained in’’.

18 (3) Section 6501 is amended—

19 (A) by striking subsection (m) (relating to

20 deficiency attributable to election under section

21 44B) and by redesignating subsections (n) and

22 (o) as subsections (m) and (n), respectively, and

23 (B) by striking ‘‘section 40(f) or 51(j)’’ in

24 subsection (m) (as redesignated by subpara-
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1 graph (A)) and inserting ‘‘section 40(f), 43, or

2 51(j)’’.

3 (4) Subparagraph (C) of section 38(c)(2) (as in

4 effect on the day before the date of the enactment

5 of the Revenue Reconciliation Act of 1990) is

6 amended by inserting before the period at the end

7 of the first sentence the following: ‘‘and without re8 gard to the deduction under section 56(h)’’.

9 (5) The amendment made by section

10 1913(b)(2)(C)(i) of the Energy Policy Act of 1992

11 shall apply to taxable years beginning after Decem12 ber 31, 1990.

13 (f) AMENDMENTS RELATED TO SUBTITLE F.—

14 (1)(A) Section 2701(a)(3) is amended by add15 ing at the end thereof the following new subpara16 graph:

17 ‘‘(C) VALUATION OF QUALIFIED PAYMENTS

18 WHERE NO LIQUIDATION, ETC. RIGHTS.—In the

19 case of an applicable retained interest which is

20 described in subparagraph (B)(i) but not sub21 paragraph (B)(ii), the value of the distribution

22 right shall be determined without regard to this

23 section.’’
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1 (B) Section 2701(a)(3)(B) is amended by in2 serting ‘‘CERTAIN’’ before ‘‘QUALIFIED’’ in the head3 ing thereof.

4 (C) Sections 2701 (d)(1) and (d)(4) are each

5 amended by striking ‘‘subsection (a)(3)(B)’’ and in6 serting ‘‘subsection (a)(3) (B) or (C)’’.

7 (2) Clause (i) of section 2701(a)(4)(B) is

8 amended by inserting ‘‘(or, to the extent provided in

9 regulations, the rights as to either income or cap10 ital)’’ after ‘‘income and capital’’.

11 (3)(A) Section 2701(b)(2) is amended by add12 ing at the end thereof the following new subpara13 graph:

14 ‘‘(C) APPLICABLE FAMILY MEMBER.—For

15 purposes of this subsection, the term ‘applicable

16 family member’ includes any lineal descendant

17 of any parent of the transferor or the transfer18 or’s spouse.’’

19 (B) Section 2701(e)(3) is amended—

20 (i) by striking subparagraph (B), and

21 (ii) by striking so much of paragraph (3)

22 as precedes ‘‘shall be treated as holding’’ and

23 inserting:

24 ‘‘(3) ATTRIBUTION OF INDIRECT HOLDINGS

25 AND TRANSFERS.—An individual’’.
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1 (C) Section 2704(c)(3) is amended by striking

2 ‘‘section 2701(e)(3)(A)’’ and inserting ‘‘section

3 2701(e)(3)’’.

4 (4) Clause (i) of section 2701(c)(1)(B) is

5 amended to read as follows:

6 ‘‘(i) a right to distributions with re7 spect to any interest which is junior to the

8 rights of the transferred interest,’’.

9 (5)(A) Clause (i) of section 2701(c)(3)(C) is

10 amended to read as follows:

11 ‘‘(i) IN GENERAL.—Payments under

12 any interest held by a transferor which

13 (without regard to this subparagraph) are

14 qualified payments shall be treated as

15 qualified payments unless the transferor

16 elects not to treat such payments as quali17 fied payments. Payments described in the

18 preceding sentence which are held by an

19 applicable family member shall be treated

20 as qualified payments only if such member

21 elects to treat such payments as qualified

22 payments.’’

23 (B) The first sentence of section

24 2701(c)(3)(C)(ii) is amended to read as follows: ‘‘A

25 transferor or applicable family member holding any
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1 distribution right which (without regard to this sub2 paragraph) is not a qualified payment may elect to

3 treat such right as a qualified payment, to be paid

4 in the amounts and at the times specified in such

5 election.’’.

6 (C) The time for making an election under the

7 second sentence of section 2701(c)(3)(C)(i) of the

8 Internal Revenue Code of 1986 (as amended by sub9 paragraph (A)) shall not expire before the due date

10 (including extensions) for filing the transferor’s re11 turn of the tax imposed by section 2501 of such

12 Code for the first calendar year ending after the

13 date of enactment.

14 (6) Section 2701(d)(3)(A)(iii) is amended by

15 striking ‘‘the period ending on the date of’’.

16 (7) Subclause (I) of section 2701(d)(3)(B)(ii) is

17 amended by inserting ‘‘or the exclusion under sec18 tion 2503(b),’’ after ‘‘section 2523,’’.

19 (8) Section 2701(e)(5) is amended—

20 (A) by striking ‘‘such contribution to cap21 ital or such redemption, recapitalization, or

22 other change’’ in subparagraph (A) and insert23 ing ‘‘such transaction’’, and

24 (B) by striking ‘‘the transfer’’ in subpara25 graph (B) and inserting ‘‘such transaction’’.
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1 (9) Section 2701(d)(4) is amended by adding at

2 the end thereof the following new subparagraph:

3 ‘‘(C) TRANSFER TO TRANSFERORS.—In

4 the case of a taxable event described in para5 graph (3)(A)(ii) involving a transfer of an ap6 plicable retained interest from an applicable

7 family member to a transferor, this subsection

8 shall continue to apply to the transferor during

9 any period the transferor holds such interest.’’

10 (10) Section 2701(e)(6) is amended by insert11 ing ‘‘or to reflect the application of subsection (d)’’

12 before the period at the end thereof.

13 (11)(A) Section 2702(a)(3)(A) is amended—

14 (i) by striking ‘‘to the extent’’ and insert15 ing ‘‘if’’ in clause (i),

16 (ii) by striking ‘‘or’’ at the end of clause

17 (i),

18 (iii) by striking the period at the end of

19 clause (ii) and inserting ‘‘, or’’, and

20 (iv) by adding at the end thereof the fol21 lowing new clause:

22 ‘‘(iii) to the extent that regulations

23 provide that such transfer is not inconsist24 ent with the purposes of this section.’’
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1 (B)(i) Section 2702(a)(3) is amended by strik2 ing ‘‘incomplete transfer’’ each place it appears and

3 inserting ‘‘incomplete gift’’.

4 (ii) The heading for section 2702(a)(3)(B) is

5 amended by striking ‘‘INCOMPLETE TRANSFER’’ and

6 inserting ‘‘INCOMPLETE GIFT’’.

7 (g) AMENDMENTS RELATED TO SUBTITLE G.—

8 (1)(A) Subsection (a) of section 1248 is

9 amended—

10 (i) by striking ‘‘, or if a United States per11 son receives a distribution from a foreign cor12 poration which, under section 302 or 331, is

13 treated as an exchange of stock’’ in paragraph

14 (1), and

15 (ii) by adding at the end thereof the follow16 ing new sentence: ‘‘For purposes of this section,

17 a United States person shall be treated as hav18 ing sold or exchanged any stock if, under any

19 provision of this subtitle, such person is treated

20 as realizing gain from the sale or exchange of

21 such stock.’’.

22 (B) Paragraph (1) of section 1248(e) is amend23 ed by striking ‘‘, or receives a distribution from a

24 domestic corporation which, under section 302 or

25 331, is treated as an exchange of stock’’.
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1 (C) Subparagraph (B) of section 1248(f)(1) is

2 amended by striking ‘‘or 361(c)(1)’’ and inserting

3 ‘‘355(c)(1), or 361(c)(1)’’.

4 (D) Paragraph (1) of section 1248(i) is amend5 ed to read as follows:

6 ‘‘(1) IN GENERAL.—If any shareholder of a 10-

7 percent corporate shareholder of a foreign corpora8 tion exchanges stock of the 10-percent corporate

9 shareholder for stock of the foreign corporation,

10 such 10-percent corporate shareholder shall recog11 nize gain in the same manner as if the stock of the

12 foreign corporation received in such exchange had

13 been—

14 ‘‘(A) issued to the 10-percent corporate

15 shareholder, and

16 ‘‘(B) then distributed by the 10-percent

17 corporate shareholder to such shareholder in re18 demption or liquidation (whichever is appro19 priate).

20 The amount of gain recognized by such 10-percent

21 corporate shareholder under the preceding sentence

22 shall not exceed the amount treated as a dividend

23 under this section.’’

24 (2) Section 897 is amended by striking sub25 section (f).
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1 (3) Paragraph (13) of section 4975(d) is

2 amended by striking ‘‘section 408(b)’’ and inserting

3 ‘‘section 408(b)(12)’’.

4 (4) Clause (iii) of section 56(g)(4)(D) is amend5 ed by inserting ‘‘, but only with respect to taxable

6 years beginning after December 31, 1989’’ before

7 the period at the end thereof.

8 (5)(A) Paragraph (11) of section 11701(a) of

9 the Revenue Reconciliation Act of 1990 (and the

10 amendment made by such paragraph) are hereby re11 pealed, and section 7108(r)(2) of the Revenue Rec12 onciliation Act of 1989 shall be applied as if such

13 paragraph (and amendment) had never been en14 acted.

15 (B) Subparagraph (A) shall not apply to any

16 building if the owner of such building establishes to

17 the satisfaction of the Secretary of the Treasury or

18 his delegate that such owner reasonably relied on the

19 amendment made by such paragraph (11).

20 (h) AMENDMENTS RELATED TO SUBTITLE H.—

21 (1)(A) Clause (vi) of section 168(e)(3)(B) is

22 amended by striking ‘‘or’’ at the end of subclause

23 (I), by striking the period at the end of subclause

24 (II) and inserting ‘‘, or’’, and by adding at the end

25 thereof the following new subclause:
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1 ‘‘(III) is described in section

2 48(l)(3)(A)(ix) (as in effect on the

3 day before the date of the enactment

4 of the Revenue Reconciliation Act of

5 1990).’’

6 (B) Subparagraph (K) of section 168(g)(4) is

7 amended by striking ‘‘section 48(a)(3)(A)(iii)’’ and

8 inserting ‘‘section 48(l)(3)(A)(ix) (as in effect on the

9 day before the date of the enactment of the Revenue

10 Reconciliation Act of 1990)’’.

11 (2) Clause (ii) of section 172(b)(1)(E) is

12 amended by striking ‘‘subsection (m)’’ and inserting

13 ‘‘subsection (h)’’.

14 (3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II),

15 and 832(b)(5)(D)(ii)(II) are each amended by strik16 ing ‘‘243(b)(5)’’ and inserting ‘‘243(b)(2)’’.

17 (4) Subparagraph (A) of section 243(b)(3) is

18 amended by inserting ‘‘of’’ after ‘‘In the case’’.

19 (5) The subsection heading for subsection (a) of

20 section 280F is amended by striking ‘‘INVESTMENT

21 TAX CREDIT AND’’.

22 (6) Clause (i) of section 1504(c)(2)(B) is

23 amended by inserting ‘‘section’’ before ‘‘243(b)(2)’’.
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1 (7) Paragraph (3) of section 341(f) is amended

2 by striking ‘‘351, 361, 371(a), or 374(a)’’ and in3 serting ‘‘351, or 361’’.

4 (8) Paragraph (2) of section 243(b) is amended

5 to read as follows:

6 ‘‘(2) AFFILIATED GROUP.—For purposes of this

7 subsection:

8 ‘‘(A) IN GENERAL.—The term ‘affiliated

9 group’ has the meaning given such term by sec10 tion 1504(b), except that for such purposes sec11 tions 1504(b)(2), 1504(b)(4), and 1504(c) shall

12 not apply.

13 ‘‘(B) GROUP MUST BE CONSISTENT IN

14 FOREIGN TAX TREATMENT.—The requirements

15 of paragraph (1)(A) shall not be treated as

16 being met with respect to any dividend received

17 by a corporation if, for any taxable year which

18 includes the day on which such dividend is re19 ceived—

20 ‘‘(i) 1 or more members of the affili21 ated group referred to in paragraph (1)(A)

22 choose to any extent to take the benefits of

23 section 901, and

24 ‘‘(ii) 1 or more other members of such

25 group claim to any extent a deduction for
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1 taxes otherwise creditable under section

2 901.’’

3 (9) The amendment made by section

4 11813(b)(17) of the Revenue Reconciliation Act of

5 1990 shall be applied as if the material stricken by

6 such amendment included the closing parenthesis

7 after ‘‘section 48(a)(5)’’.

8 (10) Paragraph (1) of section 179(d) is amend9 ed—

10 (A) by striking ‘‘in a trade or business’’

11 and inserting ‘‘a trade or business’’, and

12 (B) by adding at the end thereof the fol13 lowing new sentence: ‘‘Such term shall not in14 clude any property described in section 50(b)

15 and shall not include air conditioning or heating

16 units and horses.’’

17 (11) Subparagraph (E) of section 50(a)(2) is

18 amended by striking ‘‘section 48(a)(5)(A)’’ and in19 serting ‘‘section 48(a)(5)’’.

20 (12) The amendment made by section

21 11801(c)(9)(G)(ii) of the Revenue Reconciliation Act

22 of 1990 shall be applied as if it struck ‘‘Section

23 422A(c)(2)’’ and inserted ‘‘Section 422(c)(2)’’.

24 (13) Subparagraph (B) of section 424(c)(3) is

25 amended by striking ‘‘a qualified stock option, an in-
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1 centive stock option, an option granted under an em2 ployee stock purchase plan, or a restricted stock op3 tion’’ and inserting ‘‘an incentive stock option or an

4 option granted under an employee stock purchase

5 plan’’.

6 (14) Subparagraph (E) of section 1367(a)(2) is

7 amended by striking ‘‘section 613A(c)(13)(B)’’ and

8 inserting ‘‘section 613A(c)(11)(B)’’.

9 (15) Subparagraph (B) of section 460(e)(6) is

10 amended by striking ‘‘section 167(k)’’ and inserting

11 ‘‘section 168(e)(2)(A)(ii)’’.

12 (16) Subparagraph (C) of section 172(h)(4) is

13 amended by striking ‘‘subsection (b)(1)(M)’’ and in14 serting ‘‘subsection (b)(1)(E)’’.

15 (17) Section 6503 is amended—

16 (A) by redesignating the subsection relat17 ing to extension in case of certain summonses

18 as subsection (j), and

19 (B) by redesignating the subsection relat20 ing to cross references as subsection (k).

21 (18) Paragraph (4) of section 1250(e) is hereby

22 repealed.

23 (i) EFFECTIVE DATE.—Except as otherwise expressly

24 provided—
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1 (1) the amendments made by this section shall

2 be treated as amendments to the Internal Revenue

3 Code of 1986 as amended by the Revenue Reconcili4 ation Act of 1993; and

5 (2) any amendment made by this section shall

6 apply to periods before the date of the enactment of

7 this section in the same manner as if it had been in8 cluded in the provision of the Revenue Reconciliation

9 Act of 1990 to which such amendment relates.

10 SEC. 6603. AMENDMENTS RELATED TO REVENUE REC11 ONCILIATION ACT OF 1993.

12 (a) AMENDMENT RELATED TO SECTION 13114.—

13 Paragraph (2) of section 1044(c) is amended to read as

14 follows:

15 ‘‘(2) PURCHASE.—The taxpayer shall be consid16 ered to have purchased any property if, but for sub17 section (d), the unadjusted basis of such property

18 would be its cost within the meaning of section

19 1012.’’

20 (b) AMENDMENTS RELATED TO SECTION 13142.—

21 (1) Subparagraph (B) of section 13142(b)(6) of

22 the Revenue Reconciliation Act of 1993 is amended

23 to read as follows:

24 ‘‘(B) FULL-TIME STUDENTS, WAIVER AU25 THORITY, AND PROHIBITED DISCRIMINATION.—
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1 The amendments made by paragraphs (2), (3),

2 and (4) shall take effect on the date of the en3 actment of this Act.’’

4 (2) Subparagraph (C) of section 13142(b)(6) of

5 such Act is amended by striking ‘‘paragraph (2)’’

6 and inserting ‘‘paragraph (5)’’.

7 (c) AMENDMENT RELATED TO SECTION 13161.—

8 (1) IN GENERAL.—Subsection (e) of section

9 4001 (relating to inflation adjustment) is amended

10 to read as follows:

11 ‘‘(e) INFLATION ADJUSTMENT.—

12 ‘‘(1) IN GENERAL.—The $30,000 amount in

13 subsection (a) and section 4003(a) shall be increased

14 by an amount equal to—

15 ‘‘(A) $30,000, multiplied by

16 ‘‘(B) the cost-of-living adjustment under

17 section 1(f)(3) for the calendar year in which

18 the vehicle is sold, determined by substituting

19 ‘calendar year 1990’ for ‘calendar year 1992’ in

20 subparagraph (B) thereof.

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

22 under paragraph (1) is not a multiple of $2,000,

23 such amount shall be rounded to the next lowest

24 multiple of $2,000.’’
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall take effect on the date of the

3 enactment of this Act.

4 (d) AMENDMENT RELATED TO SECTION 13201.—

5 Clause (ii) of section 135(b)(2)(B) is amended by insert6 ing before the period at the end thereof the following: ‘‘,

7 determined by substituting ‘calendar year 1989’ for ‘cal8 endar year 1992’ in subparagraph (B) thereof’’.

9 (e) AMENDMENTS RELATED TO SECTION 13203.—

10 Subsection (a) of section 59 is amended—

11 (1) by striking ‘‘the amount determined under

12 section 55(b)(1)(A)’’ in paragraph (1)(A) and

13 (2)(A)(i) and inserting ‘‘the pre-credit tentative min14 imum tax’’,

15 (2) by striking ‘‘specified in section

16 55(b)(1)(A)’’ in paragraph (1)(C) and inserting

17 ‘‘specified in subparagraph (A)(i) or (B)(i) of section

18 55(b)(1) (whichever applies)’’,

19 (3) by striking ‘‘which would be determined

20 under section 55(b)(1)(A)’’ in paragraph (2)(A)(ii)

21 and inserting ‘‘which would be the pre-credit ten22 tative minimum tax’’, and

23 (4) by adding at the end thereof the following

24 new paragraph:
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1 ‘‘(3) PRE-CREDIT TENTATIVE MINIMUM TAX.—

2 For purposes of this subsection, the term ‘pre-credit

3 tentative minimum tax’ means—

4 ‘‘(A) in the case of a taxpayer other than

5 a corporation, the amount determined under the

6 first sentence of section 55(b)(1)(A)(i), or

7 ‘‘(B) in the case of a corporation, the

8 amount determined under section

9 55(b)(1)(B)(i).’’

10 (f) AMENDMENT RELATED TO SECTION 13221.—

11 Sections 1201(a) and 1561(a) are each amended by strik12 ing ‘‘last sentence’’ each place it appears and inserting

13 ‘‘last 2 sentences’’.

14 (g) AMENDMENTS RELATED TO SECTION 13222.—

15 (1) Subparagraph (B) of section 6033(e)(1) is

16 amended by adding at the end thereof the following

17 new clause:

18 ‘‘(iii) COORDINATION WITH SECTION

19 527(f).—This subsection shall not apply to

20 any amount on which tax is imposed by

21 reason of section 527(f).’’.

22 (2) Clause (i) of section 6033(e)(1)(B) is

23 amended by striking ‘‘this subtitle’’ and inserting

24 ‘‘section 501’’.
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1 (h) AMENDMENT RELATED TO SECTION 13225.—

2 Paragraph (3) of section 6655(g) is amended by striking

3 all that follows ‘‘ ‘3rd month’ ’’ in the sentence following

4 subparagraph (C) and inserting ‘‘, subsection (e)(2)(A)

5 shall be applied by substituting ‘2 months’ for ‘3 months’

6 in clause (i)(I), the election under clause (i) of subsection

7 (e)(2)(C) may be made separately for each installment,

8 and clause (ii) of subsection (e)(2)(C) shall not apply.’’.

9 (i) AMENDMENTS RELATED TO SECTION 13231.—

10 (1) Subparagraph (G) of section 904(d)(3) is

11 amended by striking ‘‘section 951(a)(1)(B)’’ and in12 serting ‘‘subparagraph (B) or (C) of section

13 951(a)(1)’’.

14 (2) Paragraph (1) of section 956A(b) is amend15 ed to read as follows:

16 ‘‘(1) the amount (not including a deficit) re17 ferred to in section 316(a)(1) to the extent such

18 amount was accumulated in prior taxable years be19 ginning after September 30, 1993, and’’.

20 (3) Subsection (f) of section 956A is amended

21 by inserting before the period at the end thereof:

22 ‘‘and regulations coordinating the provisions of sub23 sections (c)(3)(A) and (d)’’.
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1 (4) Subsection (b) of section 958 is amended by

2 striking ‘‘956(b)(2)’’ each place it appears and in3 serting ‘‘956(c)(2)’’.

4 (5)(A) Subparagraph (A) of section 1297(d)(2)

5 is amended by striking ‘‘The adjusted basis of any

6 asset’’ and inserting ‘‘The amount taken into ac7 count under section 1296(a)(2) with respect to any

8 asset’’.

9 (B) The paragraph heading of paragraph (2) of

10 section 1297(d) is amended to read as follows:

11 ‘‘(2) AMOUNT TAKEN INTO ACCOUNT.—’’.

12 (6) Subsection (e) of section 1297 is amended

13 by inserting ‘‘For purposes of this part—’’ after the

14 subsection heading.

15 (j) AMENDMENT RELATED TO SECTION 13241.—

16 Subparagraph (B) of section 40(e)(1) is amended to read

17 as follows:

18 ‘‘(B) for any period before January 1,

19 2001, during which the rates of tax under sec20 tion 4081(a)(2)(A) are 4.3 cents per gallon.’’

21 (k) AMENDMENT RELATED TO SECTION 13261.—

22 Clause (iii) of section 13261(g)(2)(A) of the Revenue Rec23 onciliation Act of 1993 is amended by striking ‘‘by the

24 taxpayer’’ and inserting ‘‘by the taxpayer or a related

25 person’’.
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1 (l) AMENDMENT RELATED TO SECTION 13301.—

2 Subparagraph (B) of section 1397B(d)(5) is amended by

3 striking ‘‘preceding’’.

4 (m) CLERICAL AMENDMENTS.—

5 (1) Subsection (d) of section 39 is amended—

6 (A) by striking ‘‘45’’ in the heading of

7 paragraph (5) and inserting ‘‘45A’’, and

8 (B) by striking ‘‘45’’ in the heading of

9 paragraph (6) and inserting ‘‘45B’’.

10 (2) Subparagraph (A) of section 108(d)(9) is

11 amended by striking ‘‘paragraph (3)(B)’’ and insert12 ing ‘‘paragraph (3)(C)’’.

13 (3) Subparagraph (C) of section 143(d)(2) is

14 amended by striking the period at the end thereof

15 and inserting a comma.

16 (4) Clause (ii) of section 163(j)(6)(E) is amend17 ed by striking ‘‘which is a’’ and inserting ‘‘which is’’.

18 (5) Subparagraph (A) of section 1017(b)(4) is

19 amended by striking ‘‘subsection (b)(2)(D)’’ and in20 serting ‘‘subsection (b)(2)(E)’’.

21 (6) So much of section 1245(a)(3) as precedes

22 subparagraph (A) thereof is amended to read as

23 follows:

24 ‘‘(3) SECTION 1245 PROPERTY.—For purposes

25 of this section, the term ‘section 1245 property’
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1 means any property which is or has been property

2 of a character subject to the allowance for deprecia3 tion provided in section 167 and is either—’’.

4 (7) Paragraph (2) of section 1394(e) is amend5 ed—

6 (A) by striking ‘‘(i)’’ and inserting ‘‘(A)’’,

7 and

8 (B) by striking ‘‘(ii)’’ and inserting ‘‘(B)’’.

9 (8) Subsection (m) of section 6501 (as redesig10 nated by section 6602) is amended by striking ‘‘or

11 51(j)’’ and inserting ‘‘45B, or 51(j)’’.

12 (9)(A) The section 6714 added by section

13 13242(b)(1) of the Revenue Reconciliation Act of

14 1993 is hereby redesignated as section 6715.

15 (B) The table of sections for part I of sub16 chapter B of chapter 68 is amended by striking

17 ‘‘6714’’ in the item added by such section

18 13242(b)(2) of such Act and inserting ‘‘6715’’.

19 (10) Paragraph (2) of section 9502(b) is

20 amended by inserting ‘‘and before’’ after ‘‘1982,’’.

21 (11) Subsection (a)(3) of section 13206 of the

22 Revenue Reconciliation Act of 1993 is amended by

23 striking ‘‘this section’’ and inserting ‘‘this sub24 section’’.
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1 (12) Paragraph (1) of section 13215(c) of the

2 Revenue Reconciliation Act of 1993 is amended by

3 striking ‘‘Public Law 92–21’’ and inserting ‘‘Public

4 Law 98–21’’.

5 (13) Paragraph (2) of section 13311(e) of the

6 Revenue Reconciliation Act of 1993 is amended by

7 striking ‘‘section 1393(a)(3)’’ and inserting ‘‘section

8 1393(a)(2)’’.

9 (14) Subparagraph (B) of section 117(d)(2) is

10 amended by striking ‘‘section 132(f)’’ and inserting

11 ‘‘section 132(h)’’.

12 (n) EFFECTIVE DATE.—Any amendment made by

13 this section shall take effect as if included in the provision

14 of the Revenue Reconciliation Act of 1993 to which such

15 amendment relates.

16 SEC. 6604. MISCELLANEOUS PROVISIONS.

17 (a) APPLICATION OF AMENDMENTS MADE BY TITLE

18 XII OF OMNIBUS BUDGET RECONCILIATION ACT OF

19 1990.—Except as otherwise expressly provided, whenever

20 in title XII of the Omnibus Budget Reconciliation Act of

21 1990 an amendment or repeal is expressed in terms of

22 an amendment to, or repeal of, a section or other provi23 sion, the reference shall be considered to be made to a

24 section or other provision of the Internal Revenue Code

25 of 1986.
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1 (b) TREATMENT OF CERTAIN AMOUNTS UNDER

2 HEDGE BOND RULES.—

3 (1) Clause (iii) of section 149(g)(3)(B) is

4 amended to read as follows:

5 ‘‘(iii) AMOUNTS HELD PENDING REIN6 VESTMENT OR REDEMPTION.—Amounts

7 held for not more than 30 days pending re8 investment or bond redemption shall be

9 treated as invested in bonds described in

10 clause (i).’’

11 (2) The amendment made by paragraph (1)

12 shall take effect as if included in the amendments

13 made by section 7651 of the Omnibus Budget Rec14 onciliation Act of 1989.

15 (c) TREATMENT OF CERTAIN DISTRIBUTIONS

16 UNDER SECTION 1445.—

17 (1) IN GENERAL.—Paragraph (3) of section

18 1445(e) is amended by adding at the end thereof

19 the following new sentence: ‘‘Rules similar to the

20 rules of the preceding provisions of this paragraph

21 shall apply in the case of any distribution to which

22 section 301 applies and which is not made out of the

23 earnings and profits of such a domestic corpora24 tion.’’
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall apply to distributions after

3 the date of the enactment of this Act.

4 (d) TREATMENT OF CERTAIN CREDITS UNDER SEC5 TION 469.—

6 (1) IN GENERAL.—Subparagraph (B) of section

7 469(c)(3) is amended by adding at the end thereof

8 the following new sentence: ‘‘If the preceding sen9 tence applies to the net income from any property

10 for any taxable year, any credits allowable under

11 subpart B (other than section 27(a)) or D of part

12 IV of subchapter A for such taxable year which are

13 attributable to such property shall be treated as

14 credits not from a passive activity to the extent the

15 amount of such credits does not exceed the regular

16 tax liability of the taxpayer for the taxable year

17 which is allocable to such net income.’’

18 (2) EFFECTIVE DATE.—The amendment made

19 by paragraph (1) shall apply to taxable years begin20 ning after December 31, 1986.

21 (e) TREATMENT OF DISPOSITIONS UNDER PASSIVE

22 LOSS RULES.—

23 (1) IN GENERAL.—Subparagraph (A) of section

24 469(g)(1) is amended to read as follows:
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1 ‘‘(A) IN GENERAL.—If all gain or loss real2 ized on such disposition is recognized, the ex3 cess of—

4 ‘‘(i) any loss from such activity for

5 such taxable year (determined after the ap6 plication of subsection (b)), over

7 ‘‘(ii) any net income or gain for such

8 taxable year from all other passive activi9 ties (determined after the application of

10 subsection (b)),

11 shall be treated as a loss which is not from a

12 passive activity.’’

13 (2) EFFECTIVE DATE.—The amendment made

14 by paragraph (1) shall apply to taxable years begin15 ning after December 31, 1986.

16 (f) MISCELLANEOUS AMENDMENTS TO FOREIGN

17 PROVISIONS.—

18 (1) COORDINATION OF UNIFIED ESTATE TAX

19 CREDIT WITH TREATIES.—Subparagraph (A) of sec20 tion 2102(c)(3) is amended by adding at the end

21 thereof the following new sentence: ‘‘For purposes

22 of the preceding sentence, property shall not be

23 treated as situated in the United States if such

24 property is exempt from the tax imposed by this
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1 subchapter under any treaty obligation of the United

2 States.’’

3 (2) TREATMENT OF CERTAIN INTEREST PAID

4 TO RELATED PERSON.—

5 (A) IN GENERAL.—Subparagraph (B) of

6 section 163(j)(1) is amended by inserting before

7 the period at the end thereof the following:

8 ‘‘(and clause (ii) of paragraph (2)(A) shall not

9 apply for purposes of applying this subsection

10 to the amount so treated)’’.

11 (B) EFFECTIVE DATE.—The amendment

12 made by subparagraph (A) shall apply as if in13 cluded in the amendments made by section

14 7210(a) of the Revenue Reconciliation Act of

15 1989.

16 (3) TREATMENT OF INTEREST ALLOCABLE TO

17 EFFECTIVELY CONNECTED INCOME.—

18 (A) IN GENERAL.—

19 (i) Subparagraph (B) of section

20 884(f)(1) is amended by striking ‘‘to the

21 extent’’ and all that follows down through

22 ‘‘subparagraph (A)’’ and inserting ‘‘to the

23 extent that the allocable interest exceeds

24 the interest described in subparagraph

25 (A)’’.
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1 (ii) The second sentence of section

2 884(f)(1) is amended by striking ‘‘reason3 ably expected’’ and all that follows down

4 through the period at the end thereof and

5 inserting ‘‘reasonably expected to be alloca6 ble interest.’’

7 (iii) Paragraph (2) of section 884(f) is

8 amended to read as follows:

9 ‘‘(2) ALLOCABLE INTEREST.—For purposes of

10 this subsection, the term ‘allocable interest’ means

11 any interest which is allocable to income which is ef12 fectively connected (or treated as effectively con13 nected) with the conduct of a trade or business in

14 the United States.’’

15 (B) EFFECTIVE DATE.—The amendments

16 made by subparagraph (A) shall take effect as

17 if included in the amendments made by section

18 1241(a) of the Tax Reform Act of 1986.

19 (4) CLARIFICATION OF SOURCE RULE.—

20 (A) IN GENERAL.—Paragraph (2) of sec21 tion 865(b) is amended by striking ‘‘863(b)’’

22 and inserting ‘‘863’’.

23 (B) EFFECTIVE DATE.—The amendment

24 made by subparagraph (A) shall take effect as
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1 if included in the amendments made by section

2 1211 of the Tax Reform Act of 1986.

3 (5) REPEAL OF OBSOLETE PROVISIONS.—

4 (A) Paragraph (1) of section 6038(a) is

5 amended by striking ‘‘, and’’ at the end of sub6 paragraph (E) and inserting a period, and by

7 striking subparagraph (F).

8 (B) Subsection (b) of section 6038A is

9 amended by adding ‘‘and’’ at the end of para10 graph (2), by striking ‘‘, and’’ at the end of

11 paragraph (3) and inserting a period, and by

12 striking paragraph (4).

13 (g) TREATMENT OF ASSIGNMENT OF INTEREST IN

14 CERTAIN BOND-FINANCED FACILITIES.—

15 (1) IN GENERAL.—Subparagraph (A) of section

16 1317(3) of the Tax Reform Act of 1986 is amended

17 by adding at the end thereof the following new sen18 tence: ‘‘A facility shall not fail to be treated as de19 scribed in this subparagraph by reason of an assign20 ment (or an agreement to an assignment) by the

21 governmental unit on whose behalf the bonds are is22 sued of any part of its interest in the property fi23 nanced by such bonds to another governmental

24 unit.’’
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall take effect as if included in

3 such section 1317 on the date of the enactment of

4 the Tax Reform Act of 1986.

5 (h) CLARIFICATION OF TREATMENT OF MEDICARE

6 ENTITLEMENT UNDER COBRA PROVISIONS.—

7 (1) IN GENERAL.—

8 (A) Subclause (V) of section

9 4980B(f)(2)(B)(i) is amended to read as

10 follows:

11 ‘‘(V) MEDICARE ENTITLEMENT

12 FOLLOWED BY QUALIFYING EVENT.—

13 In the case of a qualifying event de14 scribed in paragraph (3)(B) that oc15 curs less than 18 months after the

16 date the covered employee became en17 titled to benefits under title XVIII of

18 the Social Security Act, the period of

19 coverage for qualified beneficiaries

20 other than the covered employee shall

21 not terminate under this clause before

22 the close of the 36-month period be23 ginning on the date the covered em24 ployee became so entitled.’’
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1 (B) Clause (v) of section 602(2)(A) of the

2 Employee Retirement Income Security Act of

3 1974 is amended to read as follows:

4 ‘‘(v) MEDICARE ENTITLEMENT FOL5 LOWED BY QUALIFYING EVENT.—In the

6 case of a qualifying event described in sec7 tion 603(2) that occurs less than 18

8 months after the date the covered em9 ployee became entitled to benefits under

10 title XVIII of the Social Security Act, the

11 period of coverage for qualified bene12 ficiaries other than the covered employee

13 shall not terminate under this subpara14 graph before the close of the 36-month pe15 riod beginning on the date the covered em16 ployee became so entitled.’’

17 (C) Clause (iv) of section 2202(2)(A) of

18 the Public Health Service Act is amended to

19 read as follows:

20 ‘‘(iv) MEDICARE ENTITLEMENT FOL21 LOWED BY QUALIFYING EVENT.—In the

22 case of a qualifying event described in sec23 tion 2203(2) that occurs less than 18

24 months after the date the covered em25 ployee became entitled to benefits under
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1 title XVIII of the Social Security Act, the

2 period of coverage for qualified bene3 ficiaries other than the covered employee

4 shall not terminate under this subpara5 graph before the close of the 36-month pe6 riod beginning on the date the covered em7 ployee became so entitled.’’

8 (2) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to plan years begin10 ning after December 31, 1989.

11 (i) TREATMENT OF CERTAIN REMIC INCLUSIONS.—

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

13 860E is amended by adding at the end thereof the

14 following new paragraph:

15 ‘‘(6) COORDINATION WITH MINIMUM TAX.—For

16 purposes of part VI of subchapter A of this

17 chapter—

18 ‘‘(A) the reference in section 55(b)(2) to

19 taxable income shall be treated as a reference

20 to taxable income determined without regard to

21 this subsection,

22 ‘‘(B) the alternative minimum taxable in23 come of any holder of a residual interest in a

24 REMIC for any taxable year shall in no event
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1 be less than the excess inclusion for such tax2 able year, and

3 ‘‘(C) any excess inclusion shall be dis4 regarded for purposes of computing the alter5 native tax net operating loss deduction.

6 The preceding sentence shall not apply to any orga7 nization to which section 593 applies, except to the

8 extent provided in regulations prescribed by the Sec9 retary under paragraph (2).’’

10 (2) EFFECTIVE DATE.—The amendment made

11 by paragraph (1) shall take effect as if included in

12 the amendments made by section 671 of the Tax Re13 form Act of 1986 unless the taxpayer elects to apply

14 such amendment only to taxable years beginning

15 after the date of the enactment of this Act.

16 (j) EXEMPTION FROM HARBOR MAINTENANCE TAX

17 FOR CERTAIN PASSENGERS.—

18 (1) IN GENERAL.—Subparagraph (D) of section

19 4462(b)(1) (relating to special rule for Alaska, Ha20 waii, and possessions) is amended by inserting be21 fore the period the following: ‘‘, or passengers trans22 ported on United States flag vessels operating solely

23 within the State waters of Alaska or Hawaii and ad24 jacent international waters’’.
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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 1402(a) of the

4 Harbor Maintenance Revenue Act of 1986.

5 (k) AMENDMENTS RELATED TO REVENUE PROVI6 SIONS OF ENERGY POLICY ACT OF 1992.—

7 (1) Effective with respect to taxable years be8 ginning after December 31, 1990, subclause (II) of

9 section 53(d)(1)(B)(iv) is amended to read as

10 follows:

11 ‘‘(II) the adjusted net minimum

12 tax for any taxable year is the amount

13 of the net minimum tax for such year

14 increased in the manner provided in

15 clause (iii).’’

16 (2) Subsection (g) of section 179A is redesig17 nated as subsection (f).

18 (3) Subparagraph (E) of section 6724(d)(3) is

19 amended by striking ‘‘section 6109(f)’’ and inserting

20 ‘‘section 6109(h)’’.

21 (4)(A) Subsection (d) of section 30 is amend22 ed—

23 (i) by inserting ‘‘(determined without re24 gard to subsection (b)(3))’’ before the period at

25 the end of paragraph (1) thereof, and
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1 (ii) by adding at the end thereof the follow2 ing new paragraph:

3 ‘‘(4) ELECTION TO NOT TAKE CREDIT.—No

4 credit shall be allowed under subsection (a) for any

5 vehicle if the taxpayer elects to not have this section

6 apply to such vehicle.’’

7 (B) Subsection (m) of section 6501 (as redesig8 nated by section 6602) is amended by striking ‘‘sec9 tion 40(f)’’ and inserting ‘‘section 30(d)(4), 40(f)’’.

10 (5) Subclause (III) of section 501(c)(21)(D)(ii)

11 is amended by striking ‘‘section 101(6)’’ and insert12 ing ‘‘section 101(7)’’ and by striking ‘‘1752(6)’’ and

13 inserting ‘‘1752(7)’’.

14 (6) Paragraph (1) of section 1917(b) of the En15 ergy Policy Act of 1992 shall be applied as if ‘‘at a

16 rate’’ appeared instead of ‘‘at the rate’’ in the mate17 rial proposed to be stricken.

18 (7) Paragraph (2) of section 1921(b) of the En19 ergy Policy Act of 1992 shall be applied as if a

20 comma appeared after ‘‘(2)’’ in the material pro21 posed to be stricken.

22 (8) Subsection (a) of section 1937 of the En23 ergy Policy Act of 1992 shall be applied as if ‘‘Sub24 part B’’ appeared instead of ‘‘Subpart C’’.
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1 (l) TREATMENT OF QUALIFIED FOOTBALL COACHES

2 PLAN.—

3 (1) IN GENERAL.—Section 1022 of title II of

4 the Employee Retirement Income Security Act of

5 1974 is amended by adding at the end thereof the

6 following new subsection:

7 ‘‘(l) QUALIFIED FOOTBALL COACHES PLAN.—For

8 purposes of determining the qualified plan status of a

9 qualified football coaches plan, section 3(37)(F) shall be

10 treated as part of this title and a qualified football coaches

11 plan shall be treated as a multiemployer collectively bar12 gained plan for purposes of the Internal Revenue Code

13 of 1986.’’

14 (2) EFFECTIVE DATE.—The amendment made

15 by paragraph (1) shall apply to years beginning

16 after the date of the enactment of Public Law 100–

17 202.

18 (m) DETERMINATION OF UNRECOVERED INVEST19 MENT IN ANNUITY CONTRACT.—

20 (1) IN GENERAL.—Subparagraph (A) of section

21 72(b)(4) is amended by inserting ‘‘(determined with22 out regard to subsection (c)(2))’’ after ‘‘contract’’.

23 (2) EFFECTIVE DATE.—The amendment made

24 by paragraph (1) shall take effect as if included in
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1 the amendments made by section 1122(c) of the Tax

2 Reform Act of 1986.

3 (n) MODIFICATIONS TO ELECTION TO INCLUDE

4 CHILD’S INCOME ON PARENT’S RETURN.—

5 (1) ELIGIBILITY FOR ELECTION.—Clause (ii) of

6 section 1(g)(7)(A) (relating to election to include

7 certain unearned income of child on parent’s return)

8 is amended to read as follows:

9 ‘‘(ii) such gross income is more than

10 the amount described in paragraph

11 (4)(A)(ii)(I) and less than 10 times the

12 amount so described,’’.

13 (2) COMPUTATION OF TAX.—Subparagraph (B)

14 of section 1(g)(7) (relating to income included on

15 parent’s return) is amended—

16 (A) by striking ‘‘$1,000’’ in clause (i) and

17 inserting ‘‘twice the amount described in para18 graph (4)(A)(ii)(I)’’, and

19 (B) by amending subclause (II) of clause

20 (ii) to read as follows:

21 ‘‘(II) for each such child, 15 per22 cent of the lesser of the amount de23 scribed in paragraph (4)(A)(ii)(I) or

24 the excess of the gross income of such
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1 child over the amount so described,

2 and’’.

3 (3) MINIMUM TAX.—Subparagraph (B) of sec4 tion 59(j)(1) is amended by striking ‘‘$1,000’’ and

5 inserting ‘‘twice the amount in effect for the taxable

6 year under section 63(c)(5)(A)’’.

7 (4) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to taxable years begin9 ning after December 31, 1994.

10 (o) MISCELLANEOUS CLERICAL AMENDMENTS.—

11 (1) Subclause (II) of section 56(g)(4)(C)(ii) is

12 amended by striking ‘‘of the subclause’’ and insert13 ing ‘‘of subclause’’.

14 (2) Paragraph (2) of section 72(m) is amended

15 by inserting ‘‘and’’ at the end of subparagraph (A),

16 by striking subparagraph (B), and by redesignating

17 subparagraph (C) as subparagraph (B).

18 (3) Paragraph (2) of section 86(b) is amended

19 by striking ‘‘adusted’’ and inserting ‘‘adjusted’’.

20 (4)(A) The heading for section 112 is amended

21 by striking ‘‘COMBAT PAY’’ and inserting ‘‘COM22 BAT ZONE COMPENSATION’’.

23 (B) The item relating to section 112 in the

24 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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HR 1215 RFS

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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HR 1215 RFS

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

22 section 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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HR 1215 RFS

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

17 direct’’.

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.’’

12 Subtitle G—Tax Reduction

13 Contingent on Deficit Reduction

14 SEC. 6701. TAX REDUCTION CONTINGENT ON DEFICIT RE15 DUCTION.

16 Notwithstanding any other provision of this title and

17 any amendment made by this title, no provision of this

18 title shall take effect unless—

19 (1) the concurrent resolution on the budget for

20 fiscal year 1996, as agreed to, provides that the

21 budget of the United States will be in balance by fis22 cal year 2002, and

23 (2) the conference report, as agreed to, on the

24 reconciliation bill for that resolution—
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1 (A) achieves the aggregate amount of defi2 cit reduction to effectuate the reconciliation in3 structions required for the years covered by

4 that resolution necessary to so balance the

5 budget, and

6 (B) contains a statement, based on esti7 mates made by the Director of the Congres8 sional Budget Office, that such conference re9 port does so comply.

10 SEC. 6702. MONITORING.

11 The Committees on the Budget of the House of Rep12 resentatives and the Senate shall each monitor progress

13 on achieving a balanced budget consistent with the most

14 recently agreed to concurrent resolution on the budget for

15 fiscal year 1996 or any subsequent fiscal year (and the

16 reconciliation Act for that resolution) or the most recently

17 agreed to concurrent resolution on the budget that would

18 achieve a balanced budget by fiscal year 2002 (and the

19 reconciliation Act for that resolution). After consultation

20 with the Director of the Congressional Budget Office, each

21 such committee shall submit a report of its findings to

22 its House and the President on or before December 15,

23 1995, and annually thereafter. Each such report shall con24 tain the following:
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1 (1) Estimates of the deficit levels (based on leg2 islation enacted through the date of the report) for

3 each fiscal year through fiscal year 2002.

4 (2) An analysis of the variance (if any) between

5 those estimated deficit levels and the levels set forth

6 in the concurrent resolution on the budget for fiscal

7 year 1996 or the most recently agreed to concurrent

8 resolution on the budget that would achieve a bal9 anced budget by fiscal year 2002.

10 (3) Policy options to achieve the additional lev11 els of deficit reduction necessary to balance the

12 budget of the United States by fiscal year 2002.

13 SEC. 6703. CONGRESSIONAL ACTION.

14 Each House of Congress shall incorporate the policy

15 options included in the report of its Committee on the

16 Budget under section 6702(a)(3) (or other policy options)

17 in developing a concurrent resolution on the budget for

18 any fiscal year that achieves the additional levels of deficit

19 reduction necessary to balance the budget of the United

20 States by fiscal year 2002.

21 SEC. 6704. PRESIDENTIAL ACTION.

22 If the President submits a budget under section

23 1105(a) of title 31, United States Code, that does not pro24 vide for a balanced budget for the United States by fiscal

25 year 2002, then the President shall include with that sub-
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1 mission a complete budget that balances the budget by

2 that fiscal year.

Passed the House of Representatives April 5, 1995.

Attest: ROBIN H. CARLE,

Clerk.

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