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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3448 Reported in Senate (RS)]

                                                       Calendar No. 438

104th CONGRESS

  2d Session

                               H. R. 3448

                          [Report No. 104-281]

_______________________________________________________________________

                                 AN ACT

To provide tax relief for small businesses, to protect jobs, to create 
 opportunities, to increase the take home pay of workers, to amend the 
   Portal-to-Portal Act of 1947 relating to the payment of wages to 
employees who use employer owned vehicles, and to amend the Fair Labor 
Standards Act of 1938 to increase the minimum wage rate and to prevent 
   job loss by providing flexibility to employers in complying with 
         minimum wage and overtime requirements under that Act.

_______________________________________________________________________

                             June 18, 1996

                       Reported with an amendment

                                                       Calendar No. 438
104th CONGRESS
  2d Session
                                H. R. 3448

                          [Report No. 104-281]

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 24, 1996

                                Received

                              June 6, 1996

          Read twice and referred to the Committee on Finance

                             June 18, 1996

                Reported by Mr. Roth, with an amendment
  [Omit the part struck through and insert the part printed in italic]

_______________________________________________________________________

                                 AN ACT

 
To provide tax relief for small businesses, to protect jobs, to create 
 opportunities, to increase the take home pay of workers, to amend the 
   Portal-to-Portal Act of 1947 relating to the payment of wages to 
employees who use employer owned vehicles, and to amend the Fair Labor 
Standards Act of 1938 to increase the minimum wage rate and to prevent 
   job loss by providing flexibility to employers in complying with 
         minimum wage and overtime requirements under that Act.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Business Job 
Protection Act of 1996''.
<DELETED>    (b) Table of Contents.--</DELETED>

       <DELETED>TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS

<DELETED>Sec. 1101. Amendment of 1986 Code.
<DELETED>Sec. 1102. Underpayments of estimated tax.
                  <DELETED>Subtitle A--Expensing; Etc.

<DELETED>Sec. 1111. Increase in expense treatment for small businesses.
<DELETED>Sec. 1112. Treatment of employee tips.
<DELETED>Sec. 1113. Treatment of storage of product samples.
<DELETED>Sec. 1114. Treatment of certain charitable risk pools.
<DELETED>Sec. 1115. Treatment of dues paid to agricultural or 
                            horticultural organizations.
<DELETED>Sec. 1116. Clarification of employment tax status of certain 
                            fishermen; information reporting.
     <DELETED>Subtitle B--Extension of Certain Expiring Provisions

<DELETED>Sec. 1201. Work opportunity tax credit.
<DELETED>Sec. 1202. Employer-provided educational assistance programs.
<DELETED>Sec. 1203. FUTA exemption for alien agricultural workers.
       <DELETED>Subtitle C--Provisions Relating to S Corporations

<DELETED>Sec. 1301. S corporations permitted to have 75 shareholders.
<DELETED>Sec. 1302. Electing small business trusts.
<DELETED>Sec. 1303. Expansion of post-death qualification for certain 
                            trusts.
<DELETED>Sec. 1304. Financial institutions permitted to hold safe 
                            harbor debt.
<DELETED>Sec. 1305. Rules relating to inadvertent terminations and 
                            invalid elections.
<DELETED>Sec. 1306. Agreement to terminate year.
<DELETED>Sec. 1307. Expansion of post-termination transition period.
<DELETED>Sec. 1308. S corporations permitted to hold subsidiaries.
<DELETED>Sec. 1309. Treatment of distributions during loss years.
<DELETED>Sec. 1310. Treatment of S corporations under subchapter C.
<DELETED>Sec. 1311. Elimination of certain earnings and profits.
<DELETED>Sec. 1312. Carryover of disallowed losses and deductions under 
                            at-risk rules allowed.
<DELETED>Sec. 1313. Adjustments to basis of inherited S stock to 
                            reflect certain items of income.
<DELETED>Sec. 1314. S corporations eligible for rules applicable to 
                            real property subdivided for sale by 
                            noncorporate taxpayers.
<DELETED>Sec. 1315. Effective date.
              <DELETED>Subtitle D--Pension Simplification

           <DELETED>Chapter 1--Simplified Distribution Rules

<DELETED>Sec. 1401. Repeal of 5-year income averaging for lump-sum 
                            distributions.
<DELETED>Sec. 1402. Repeal of $5,000 exclusion of employees' death 
                            benefits.
<DELETED>Sec. 1403. Simplified method for taxing annuity distributions 
                            under certain employer plans.
<DELETED>Sec. 1404. Required distributions.
         <DELETED>Csubchapter a--simple savings plansion Plans
<DELETED>Sec. 1421. Establishment of savings incentive match plans for 
                            employees of small employers.
<DELETED>Sec. 1422. Esubchapter b--other provisions(k) arrangements.
<DELETED>Sec. 1426. Tax-exempt organizations eligible under section 
                            401(k).
            <DELETED>Chapter 3--Nondiscrimination Provisions

<DELETED>Sec. 1431. Definition of highly compensated employees; repeal 
                            of family aggregation.
<DELETED>Sec. 1432. Modification of additional participation 
                            requirements.
<DELETED>Sec. 1433. Nondiscrimination rules for qualified cash or 
                            deferred arrangements and matching 
                            contributions.
<DELETED>Sec. 1434. Definition of compensation for section 415 
                            purposes.
              <DELETED>Chapter 4--Miscellaneous Provisions

<DELETED>Sec. 1441. Plans covering self-employed individuals.
<DELETED>Sec. 1442. Elimination of special vesting rule for 
                            multiemployer plans.
<DELETED>Sec. 1443. Distributions under rural cooperative plans.
<DELETED>Sec. 1444. Treatment of governmental plans under section 415.
<DELETED>Sec. 1445. Uniform retirement age.
<DELETED>Sec. 1446. Contributions on behalf of disabled employees.
<DELETED>Sec. 1447. Treatment of deferred compensation plans of State 
                            and local governments and tax-exempt 
                            organizations.
<DELETED>Sec. 1448. Trust requirement for deferred compensation plans 
                            of State and local governments.
<DELETED>Sec. 1449. Transition rule for computing maximum benefits 
                            under section 415 limitations.
<DELETED>Sec. 1450. Modifications of section 403(b).
<DELETED>Sec. 1451. Waiver of minimum period for joint and survivor 
                            annuity explanation before annuity starting 
                            date.
<DELETED>Sec. 1452. Repeal of limitation in case of defined benefit 
                            plan and defined contribution plan for same 
                            employee; excess distributions.
<DELETED>Sec. 1453. Tax on prohibited transactions.
<DELETED>Sec. 1454. Treatment of leased employees.
<DELETED>Sec. 1455. Uniform penalty provisions to apply to certain 
                            pension reporting requirements.
<DELETED>Sec. 1456. Retirement benefits of ministers not subject to tax 
                            on net earnings from self-employment.
<DELETED>Sec. 1457. Date for adoption of plan amendments.
              <DELETED>Subtitle E--Foreign Simplification

<DELETED>Sec. 1501. Repeal of inclusion of certain earnings invested in 
                            excess passive assets.
                  <DELETED>Subtitle F--Revenue Offsets

<DELETED>Sec. 1601. Termination of Puerto Rico and possession tax 
                            credit.
<DELETED>Sec. 1602. Repeal of exclusion for interest on loans used to 
                            acquire employer securities.
<DELETED>Sec. 1603. Certain amounts derived from foreign corporations 
                            treated as unrelated business taxable 
                            income.
<DELETED>Sec. 1604. Depreciation under income forecast method.
<DELETED>Sec. 1605. Repeal of exclusion for punitive damages and for 
                            damages not attributable to physical 
                            injuries or sickness.
<DELETED>Sec. 1606. Repeal of diesel fuel tax rebate to purchasers of 
                            diesel-powered automobiles and light 
                            trucks.
               <DELETED>Subtitle G--Technical Corrections

<DELETED>Sec. 1701. Coordination with other subtitles.
<DELETED>Sec. 1702. Amendments related to Revenue Reconciliation Act of 
                            1990.
<DELETED>Sec. 1703. Amendments related to Revenue Reconciliation Act of 
                            1993.
<DELETED>Sec. 1704. Miscellaneous provisions.
                  <DELETED>TITLE II--PAYMENT OF WAGES

<DELETED>Section 1. Short title.
<DELETED>Sec. 2. Proper compensation for use of employer vehicles.
<DELETED>Sec. 3. Effective date.
<DELETED>Sec. 4. Minimum wage increase.
<DELETED>Sec. 5. Fair Labor Standards Act Amendments.

  <DELETED>TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS</DELETED>

<DELETED>SEC. 1101. AMENDMENT OF 1986 CODE.</DELETED>

<DELETED>    Except as otherwise expressly provided, whenever in this 
title an amendment or repeal is expressed in terms of an amendment to, 
or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.</DELETED>

<DELETED>SEC. 1102. UNDERPAYMENTS OF ESTIMATED TAX.</DELETED>

<DELETED>    No addition to the tax shall be made under section 6654 or 
6655 of the Internal Revenue Code of 1986 (relating to failure to pay 
estimated tax) with respect to any underpayment of an installment 
required to be paid before the date of the enactment of this Act to the 
extent such underpayment was created or increased by any provision of 
this title.</DELETED>

             <DELETED>Subtitle A--Expensing; Etc.</DELETED>

<DELETED>SEC. 1111. INCREASE IN EXPENSE TREATMENT FOR SMALL 
              BUSINESSES.</DELETED>

<DELETED>    (a) General Rule.--Paragraph (1) of section 179(b) 
(relating to dollar limitation) is amended to read as 
follows:</DELETED>
        <DELETED>    ``(1) Dollar limitation.--The aggregate cost which 
        may be taken into account under subsection (a) for any taxable 
        year shall not exceed the following applicable 
        amount:</DELETED>

        <DELETED>``If the taxable year</DELETED>
                                                         The applicable
        <DELETED>  begins in:</DELETED>
                                                             amount is:
                <DELETED>  1996......................          $18,500 
                <DELETED>  1997......................           19,000 
                <DELETED>  1998......................           20,000 
                <DELETED>  1999......................           21,000 
                <DELETED>  2000......................           22,000 
                <DELETED>  2001......................           23,000 
                <DELETED>  2002......................           23,500 
                <DELETED>  2003 or thereafter........        25,000.''.
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 
1995.</DELETED>

<DELETED>SEC. 1112. TREATMENT OF EMPLOYEE TIPS.</DELETED>

<DELETED>    (a) Employee Cash Tips.--</DELETED>
        <DELETED>    (1) Reporting requirement not considered.--
        Subparagraph (A) of section 45B(b)(1) (relating to excess 
        employer social security tax) is amended by inserting 
        ``(without regard to whether such tips are reported under 
        section 6053)'' after ``section 3121(q)''.</DELETED>
        <DELETED>    (2) Taxes paid.--Subsection (d) of section 13443 
        of the Revenue Reconciliation Act of 1993 is amended by 
        inserting ``, with respect to services performed before, on, or 
        after such date'' after ``1993''.</DELETED>
        <DELETED>    (3) Effective date.--The amendments made by this 
        subsection shall take effect as if included in the amendments 
        made by, and the provisions of, section 13443 of the Revenue 
        Reconciliation Act of 1993.</DELETED>
<DELETED>    (b) Tips for Employees Delivering Food or Beverages.--
</DELETED>
        <DELETED>    (1) In general.--Paragraph (2) of section 45B(b) 
        is amended to read as follows:</DELETED>
        <DELETED>    ``(2) Only tips received for food or beverages 
        taken into account.--In applying paragraph (1), there shall be 
        taken into account only tips received from customers in 
        connection with the delivering or serving of food or beverages 
        for consumption if the tipping of employees delivering or 
        serving food or beverages by customers is 
        customary.''</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to tips received for services 
        performed after December 31, 1996.</DELETED>

<DELETED>SEC. 1113. TREATMENT OF STORAGE OF PRODUCT SAMPLES.</DELETED>

<DELETED>    (a) In General.--Paragraph (2) of section 280A(c) is 
amended by striking ``inventory'' and inserting ``inventory or product 
samples''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 
1995.</DELETED>

<DELETED>SEC. 1114. TREATMENT OF CERTAIN CHARITABLE RISK 
              POOLS.</DELETED>

<DELETED>    (a) General Rule.--Section 501 (relating to exemption from 
tax on corporations, certain trusts, etc.) is amended by redesignating 
subsection (n) as subsection (o) and by inserting after subsection (m) 
the following new subsection:</DELETED>
<DELETED>    ``(n) Charitable Risk Pools.--</DELETED>
        <DELETED>    ``(1) In general.--For purposes of this title--
        </DELETED>
                <DELETED>    ``(A) a qualified charitable risk pool 
                shall be treated as an organization organized and 
                operated exclusively for charitable purposes, 
                and</DELETED>
                <DELETED>    ``(B) subsection (m) shall not apply to a 
                qualified charitable risk pool.</DELETED>
        <DELETED>    ``(2) Qualified charitable risk pool.--For 
        purposes of this subsection, the term `qualified charitable 
        risk pool' means any organization--</DELETED>
                <DELETED>    ``(A) which is organized and operated 
                solely to pool insurable risks of its members (other 
                than risks related to medical malpractice) and to 
                provide information to its members with respect to loss 
                control and risk management,</DELETED>
                <DELETED>    ``(B) which is comprised solely of members 
                that are organizations described in subsection (c)(3) 
                and exempt from tax under subsection (a), and</DELETED>
                <DELETED>    ``(C) which meets the organizational 
                requirements of paragraph (3).</DELETED>
        <DELETED>    ``(3) Organizational requirements.--An 
        organization (hereinafter in this subsection referred to as the 
        `risk pool') meets the organizational requirements of this 
        paragraph if--</DELETED>
                <DELETED>    ``(A) such risk pool is organized as a 
                nonprofit organization under State law provisions 
                authorizing risk pooling arrangements for charitable 
                organizations,</DELETED>
                <DELETED>    ``(B) such risk pool is exempt from any 
                income tax imposed by the State (or will be so exempt 
                after such pool qualifies as an organization exempt 
                from tax under this title),</DELETED>
                <DELETED>    ``(C) such risk pool has obtained at least 
                $1,000,000 in startup capital from nonmember charitable 
                organizations,</DELETED>
                <DELETED>    ``(D) such risk pool is controlled by a 
                board of directors elected by its members, 
                and</DELETED>
                <DELETED>    ``(E) the organizational documents of such 
                risk pool require that--</DELETED>
                        <DELETED>    ``(i) each member of such pool 
                        shall at all times be an organization described 
                        in subsection (c)(3) and exempt from tax under 
                        subsection (a),</DELETED>
                        <DELETED>    ``(ii) any member which receives a 
                        final determination that it no longer qualifies 
                        as an organization described in subsection 
                        (c)(3) shall immediately notify the pool of 
                        such determination and the effective date of 
                        such determination, and</DELETED>
                        <DELETED>    ``(iii) each policy of insurance 
                        issued by the risk pool shall provide that such 
                        policy will not cover the insured with respect 
                        to events occurring after the date such final 
                        determination was issued to the 
                        insured.</DELETED>
        <DELETED>An organization shall not cease to qualify as a 
        qualified charitable risk pool solely by reason of the failure 
        of any of its members to continue to be an organization 
        described in subsection (c)(3) if, within a reasonable period 
        of time after such pool is notified as required under 
        subparagraph (C)(ii), such pool takes such action as may be 
        reasonably necessary to remove such member from such 
        pool.</DELETED>
        <DELETED>    ``(4) Other definitions.--For purposes of this 
        subsection--</DELETED>
                <DELETED>    ``(A) Startup capital.--The term `startup 
                capital' means any capital contributed to, and any 
                program-related investments (within the meaning of 
                section 4944(c)) made in, the risk pool before such 
                pool commences operations.</DELETED>
                <DELETED>    ``(B) Nonmember charitable organization.--
                The term `nonmember charitable organization' means any 
                organization which is described in subsection (c)(3) 
                and exempt from tax under subsection (a) and which is 
                not a member of the risk pool and does not benefit 
                (directly or indirectly) from the insurance coverage 
                provided by the pool to its members.''</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to taxable years beginning after the date of the enactment 
of this Act.</DELETED>

<DELETED>SEC. 1115. TREATMENT OF DUES PAID TO AGRICULTURAL OR 
              HORTICULTURAL ORGANIZATIONS.</DELETED>

<DELETED>    (a) General Rule.--Section 512 (defining unrelated 
business taxable income) is amended by adding at the end thereof the 
following new subsection:</DELETED>
<DELETED>    ``(d) Treatment of Dues of Agricultural or Horticultural 
Organizations.--</DELETED>
        <DELETED>    ``(1) In general.--If--</DELETED>
                <DELETED>    ``(A) an agricultural or horticultural 
                organization described in section 501(c)(5) requires 
                annual dues to be paid in order to be a member of such 
                organization, and</DELETED>
                <DELETED>    ``(B) the amount of such required annual 
                dues does not exceed $100,</DELETED>
        <DELETED>in no event shall any portion of such dues be treated 
        as derived by such organization from an unrelated trade or 
        business by reason of any benefits or privileges to which 
        members of such organization are entitled.</DELETED>
        <DELETED>    ``(2) Indexation of $100 amount.--In the case of 
        any taxable year beginning in a calendar year after 1995, the 
        $100 amount in paragraph (1) shall be increased by an amount 
        equal to--</DELETED>
                <DELETED>    ``(A) $100, multiplied by</DELETED>
                <DELETED>    ``(B) the cost-of-living adjustment 
                determined under section 1(f)(3) for the calendar year 
                in which the taxable year begins, by substituting 
                `calendar year 1994' for `calendar year 1992' in 
                subparagraph (B) thereof.</DELETED>
        <DELETED>    ``(3) Dues.--For purposes of this subsection, the 
        term `dues' includes any payment required to be made in order 
        to be recognized by the organization as a member of the 
        organization.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 
1994.</DELETED>

<DELETED>SEC. 1116. CLARIFICATION OF EMPLOYMENT TAX STATUS OF CERTAIN 
              FISHERMEN; INFORMATION REPORTING.</DELETED>

<DELETED>    (a) Clarification of Employment Tax Status.--</DELETED>
        <DELETED>    (1) Amendments of internal revenue code of 1986.--
        </DELETED>
                <DELETED>    (A) Determination of size of crew.--
                Subsection (b) of section 3121 (defining employment) is 
                amended by adding at the end thereof the following new 
                sentence:</DELETED>
<DELETED>``For purposes of paragraph (20), the operating crew of a boat 
shall be treated as normally made up of fewer than 10 individuals if 
the average size of the operating crew on trips made during the 
preceding 4 calendar quarters consisted of fewer than 10 
individuals.''.</DELETED>
                <DELETED>    (B) Certain cash remuneration permitted.--
                Subparagraph (A) of section 3121(b)(20) is amended to 
                read as follows:</DELETED>
                <DELETED>    ``(A) such individual does not receive any 
                cash remuneration other than as provided in 
                subparagraph (B) and other than cash remuneration--
                </DELETED>
                        <DELETED>    ``(i) which does not exceed $100 
                        per trip;</DELETED>
                        <DELETED>    ``(ii) which is contingent on a 
                        minimum catch; and</DELETED>
                        <DELETED>    ``(iii) which is paid solely for 
                        additional duties (such as mate, engineer, or 
                        cook) for which additional cash remuneration is 
                        traditional in the industry,''.</DELETED>
                <DELETED>    (C) Conforming amendment.--Section 
                6050A(a) is amended by striking ``and'' at the end of 
                paragraph (3), by striking the period at the end of 
                paragraph (4) and inserting ``; and'', and by adding at 
                the end thereof the following new paragraph:</DELETED>
        <DELETED>    ``(5) any cash remuneration described in section 
        3121(b)(20)(A).''.</DELETED>
        <DELETED>    (2) Amendment of social security act.--</DELETED>
                <DELETED>    (A) Determination of size of crew.--
                Subsection (a) of section 210 of the Social Security 
                Act is amended by adding at the end thereof the 
                following new sentence:</DELETED>
<DELETED>``For purposes of paragraph (20), the operating crew of a boat 
shall be treated as normally made up of fewer than 10 individuals if 
the average size of the operating crew on trips made during the 
preceding 4 calendar quarters consisted of fewer than 10 
individuals.''.</DELETED>
                <DELETED>    (B) Certain cash remuneration permitted.--
                Subparagraph (A) of section 210(a)(20) of such Act is 
                amended to read as follows:</DELETED>
                <DELETED>    ``(A) such individual does not receive any 
                additional compensation other than as provided in 
                subparagraph (B) and other than cash remuneration--
                </DELETED>
                        <DELETED>    ``(i) which does not exceed $100 
                        per trip;</DELETED>
                        <DELETED>    ``(ii) which is contingent on a 
                        minimum catch; and</DELETED>
                        <DELETED>    ``(iii) which is paid solely for 
                        additional duties (such as mate, engineer, or 
                        cook) for which additional cash remuneration is 
                        traditional in the industry,''.</DELETED>
        <DELETED>    (3) Effective date.--</DELETED>
                <DELETED>    (A) In general.--The amendments made by 
                this subsection shall apply to remuneration paid after 
                December 31, 1996.</DELETED>
                <DELETED>    (B) Special rule.--The amendments made by 
                this subsection (other than paragraph (1)(C)) shall 
                also apply to remuneration paid after December 31, 
                1984, and before January 1, 1997, unless the payor 
                treated such remuneration (when paid) as being subject 
                to tax under chapter 21 of the Internal Revenue Code of 
                1986.</DELETED>
<DELETED>    (b) Information Reporting.--</DELETED>
        <DELETED>    (1) In general.--Subpart B of part III of 
        subchapter A of chapter 68 (relating to information concerning 
        transactions with other persons) is amended by adding at the 
        end the following new section:</DELETED>

<DELETED>``SEC. 6050Q. RETURNS RELATING TO CERTAIN PURCHASES OF 
              FISH.</DELETED>

<DELETED>    ``(a) Requirement of Reporting.--Every person--</DELETED>
        <DELETED>    ``(1) who is engaged in the trade or business of 
        purchasing fish for resale from any person engaged in the trade 
        or business of catching fish; and</DELETED>
        <DELETED>    ``(2) who makes payments in cash in the course of 
        such trade or business to such a person of $600 or more during 
        any calendar year for the purchase of fish,</DELETED>
<DELETED>shall make a return (at such times as the Secretary may 
prescribe) described in subsection (b) with respect to each person to 
whom such a payment was made during such calendar year.</DELETED>
<DELETED>    ``(b) Return.--A return is described in this subsection if 
such return--</DELETED>
        <DELETED>    ``(1) is in such form as the Secretary may 
        prescribe, and</DELETED>
        <DELETED>    ``(2) contains--</DELETED>
                <DELETED>    ``(A) the name, address, and TIN of each 
                person to whom a payment described in subsection (a)(2) 
                was made during the calendar year;</DELETED>
                <DELETED>    ``(B) the aggregate amount of such 
                payments made to such person during such calendar year 
                and the date and amount of each such payment, 
                and</DELETED>
                <DELETED>    ``(C) such other information as the 
                Secretary may require.</DELETED>
<DELETED>    ``(c) Statement To Be Furnished With Respect to Whom 
Information is Required.--Every person required to make a return under 
subsection (a) shall furnish to each person whose name is required to 
be set forth in such return a written statement showing--</DELETED>
        <DELETED>    ``(1) the name and address of the person required 
        to make such a return, and</DELETED>
        <DELETED>    ``(2) the aggregate amount of payments to the 
        person required to be shown on the return.</DELETED>
<DELETED>The written statement required under the preceding sentence 
shall be furnished to the person on or before January 31 of the year 
following the calendar year for which the return under subsection (a) 
is required to be made.</DELETED>
<DELETED>    ``(d) Definitions.--For purposes of this 
section:</DELETED>
        <DELETED>    ``(1) Cash.--The term `cash' has the meaning given 
        such term by section 6050I(d).</DELETED>
        <DELETED>    ``(2) Fish.--The term `fish' includes other forms 
        of aquatic life.''.</DELETED>
        <DELETED>    (2) Technical amendments.--</DELETED>
                <DELETED>    (A) Subparagraph (A) of section 6724(d)(1) 
                is amended by striking ``or'' at the end of clause 
                (vi), by striking ``and'' at the end of clause (vii) 
                and inserting ``or'', and by adding at the end the 
                following new clause:</DELETED>
                        <DELETED>    ``(viii) section 6050Q (relating 
                        to returns relating to certain purchases of 
                        fish), and''.</DELETED>
                <DELETED>    (B) Paragraph (2) of section 6724(d) is 
                amended by redesignating subparagraphs (Q) through (T) 
                as subparagraphs (R) through (U), respectively, and by 
                inserting after subparagraph (P) the following new 
                subparagraph:</DELETED>
                <DELETED>    ``(Q) section 6050Q(c) (relating to 
                returns relating to certain purchases of 
                fish),''.</DELETED>
                <DELETED>    (C) The table of sections for subpart B of 
                part III of subchapter A of chapter 68 is amended by 
                adding at the end the following new item:</DELETED>

<DELETED>``Sec. 6050Q. Returns relating to certain purchases of 
                            fish.''.
        <DELETED>    (3) Effective date.--The amendments made by this 
        subsection shall apply to payments made after December 31, 
        1996.</DELETED>

<DELETED>Subtitle B--Extension of Certain Expiring Provisions</DELETED>

<DELETED>SEC. 1201. WORK OPPORTUNITY TAX CREDIT.</DELETED>

<DELETED>    (a) Amount of Credit.--Subsection (a) of section 51 
(relating to amount of credit) is amended by striking ``40 percent'' 
and inserting ``35 percent''.</DELETED>
<DELETED>    (b) Members of Targeted Groups.--Subsection (d) of section 
51 is amended to read as follows:</DELETED>
<DELETED>    ``(d) Members of Targeted Groups.--For purposes of this 
subpart--</DELETED>
        <DELETED>    ``(1) In general.--An individual is a member of a 
        targeted group if such individual is--</DELETED>
                <DELETED>    ``(A) a qualified IV-A 
                recipient,</DELETED>
                <DELETED>    ``(B) a qualified veteran,</DELETED>
                <DELETED>    ``(C) a qualified ex-felon,</DELETED>
                <DELETED>    ``(D) a high-risk youth,</DELETED>
                <DELETED>    ``(E) a vocational rehabilitation 
                referral, or</DELETED>
                <DELETED>    ``(F) a qualified summer youth 
                employee.</DELETED>
        <DELETED>    ``(2) Qualified iv-a recipient.--</DELETED>
                <DELETED>    ``(A) In general.--The term `qualified IV-
                A recipient' means any individual who is certified by 
                the designated local agency as being a member of a 
                family receiving assistance under a IV-A program for at 
                least a 9-month period ending during the 9-month period 
                ending on the hiring date.</DELETED>
                <DELETED>    ``(B) IV-A program.--For purposes of this 
                paragraph, the term `IV-A program' means any program 
                providing assistance under a State plan approved under 
                part A of title IV of the Social Security Act (relating 
                to assistance for needy families with minor children) 
                and any successor of such program.</DELETED>
        <DELETED>    ``(3) Qualified veteran.--</DELETED>
                <DELETED>    ``(A) In general.--The term `qualified 
                veteran' means any veteran who is certified by the 
                designated local agency as being--</DELETED>
                        <DELETED>    ``(i) a member of a family 
                        receiving assistance under a IV-A program (as 
                        defined in paragraph (2)(B)) for at least a 9-
                        month period ending during the 12-month period 
                        ending on the hiring date, or</DELETED>
                        <DELETED>    ``(ii) a member of a family 
                        receiving assistance under a food stamp program 
                        under the Food Stamp Act of 1977 for at least a 
                        3-month period ending during the 12-month 
                        period ending on the hiring date.</DELETED>
                <DELETED>    ``(B) Veteran.--For purposes of 
                subparagraph (A), the term `veteran' means any 
                individual who is certified by the designated local 
                agency as--</DELETED>
                        <DELETED>    ``(i)(I) having served on active 
                        duty (other than active duty for training) in 
                        the Armed Forces of the United States for a 
                        period of more than 180 days, or</DELETED>
                        <DELETED>    ``(II) having been discharged or 
                        released from active duty in the Armed Forces 
                        of the United States for a service-connected 
                        disability, and</DELETED>
                        <DELETED>    ``(ii) not having any day during 
                        the 60-day period ending on the hiring date 
                        which was a day of extended active duty in the 
                        Armed Forces of the United States.</DELETED>
                <DELETED>For purposes of clause (ii), the term 
                `extended active duty' means a period of more than 90 
                days during which the individual was on active duty 
                (other than active duty for training).</DELETED>
        <DELETED>    ``(4) Qualified ex-felon.--The term `qualified ex-
        felon' means any individual who is certified by the designated 
        local agency--</DELETED>
                <DELETED>    ``(A) as having been convicted of a felony 
                under any statute of the United States or any 
                State,</DELETED>
                <DELETED>    ``(B) as having a hiring date which is not 
                more than 1 year after the last date on which such 
                individual was so convicted or was released from 
                prison, and</DELETED>
                <DELETED>    ``(C) as being a member of a family which 
                had an income during the 6 months immediately preceding 
                the earlier of the month in which such income 
                determination occurs or the month in which the hiring 
                date occurs, which, on an annual basis, would be 70 
                percent or less of the Bureau of Labor Statistics lower 
                living standard.</DELETED>
        <DELETED>Any determination under subparagraph (C) shall be 
        valid for the 45-day period beginning on the date such 
        determination is made.</DELETED>
        <DELETED>    ``(5) High-risk youth.--</DELETED>
                <DELETED>    ``(A) In general.--The term `high-risk 
                youth' means any individual who is certified by the 
                designated local agency--</DELETED>
                        <DELETED>    ``(i) as having attained age 18 
                        but not age 25 on the hiring date, 
                        and</DELETED>
                        <DELETED>    ``(ii) as having his principal 
                        place of abode within an empowerment zone or 
                        enterprise community.</DELETED>
                <DELETED>    ``(B) Youth must continue to reside in 
                zone.--In the case of a high-risk youth, the term 
                `qualified wages' shall not include wages paid or 
                incurred for services performed while such youth's 
                principal place of abode is outside an empowerment zone 
                or enterprise community.</DELETED>
        <DELETED>    ``(6) Vocational rehabilitation referral.--The 
        term `vocational rehabilitation referral' means any individual 
        who is certified by the designated local agency as--</DELETED>
                <DELETED>    ``(A) having a physical or mental 
                disability which, for such individual, constitutes or 
                results in a substantial handicap to employment, 
                and</DELETED>
                <DELETED>    ``(B) having been referred to the employer 
                upon completion of (or while receiving) rehabilitative 
                services pursuant to--</DELETED>
                        <DELETED>    ``(i) an individualized written 
                        rehabilitation plan under a State plan for 
                        vocational rehabilitation services approved 
                        under the Rehabilitation Act of 1973, 
                        or</DELETED>
                        <DELETED>    ``(ii) a program of vocational 
                        rehabilitation carried out under chapter 31 of 
                        title 38, United States Code.</DELETED>
        <DELETED>    ``(7) Qualified summer youth employee.--</DELETED>
                <DELETED>    ``(A) In general.--The term `qualified 
                summer youth employee' means any individual--</DELETED>
                        <DELETED>    ``(i) who performs services for 
                        the employer between May 1 and September 
                        15,</DELETED>
                        <DELETED>    ``(ii) who is certified by the 
                        designated local agency as having attained age 
                        16 but not 18 on the hiring date (or if later, 
                        on May 1 of the calendar year 
                        involved),</DELETED>
                        <DELETED>    ``(iii) who has not been an 
                        employee of the employer during any period 
                        prior to the 90-day period described in 
                        subparagraph (B)(i), and</DELETED>
                        <DELETED>    ``(iv) who is certified by the 
                        designated local agency as having his principal 
                        place of abode within an empowerment zone or 
                        enterprise community.</DELETED>
                <DELETED>    ``(B) Special rules for determining amount 
                of credit.--For purposes of applying this subpart to 
                wages paid or incurred to any qualified summer youth 
                employee--</DELETED>
                        <DELETED>    ``(i) subsection (b)(2) shall be 
                        applied by substituting `any 90-day period 
                        between May 1 and September 15' for `the 1-year 
                        period beginning with the day the individual 
                        begins work for the employer', and</DELETED>
                        <DELETED>    ``(ii) subsection (b)(3) shall be 
                        applied by substituting `$3,000' for 
                        `$6,000'.</DELETED>
                <DELETED>The preceding sentence shall not apply to an 
                individual who, with respect to the same employer, is 
                certified as a member of another targeted group after 
                such individual has been a qualified summer youth 
                employee.</DELETED>
                <DELETED>    ``(C) Youth must continue to reside in 
                zone.--Paragraph (5)(B) shall apply for purposes of 
                this paragraph.</DELETED>
        <DELETED>    ``(8) Hiring date.--The term `hiring date' means 
        the day the individual is hired by the employer.</DELETED>
        <DELETED>    ``(9) Designated local agency.--The term 
        `designated local agency' means a State employment security 
        agency established in accordance with the Act of June 6, 1933, 
        as amended (29 U.S.C. 49-49n).</DELETED>
        <DELETED>    ``(10) Special rules for certifications.--
        </DELETED>
                <DELETED>    ``(A) In general.--An individual shall not 
                be treated as a member of a targeted group unless--
                </DELETED>
                        <DELETED>    ``(i) on or before the day on 
                        which such individual begins work for the 
                        employer, the employer has received a 
                        certification from a designated local agency 
                        that such individual is a member of a targeted 
                        group, or</DELETED>
                        <DELETED>    ``(ii)(I) on or before the day the 
                        individual is offered employment with the 
                        employer, a pre-screening notice is completed 
                        by the employer with respect to such 
                        individual, and</DELETED>
                        <DELETED>    ``(II) not later than the 14th day 
                        after the individual begins work for the 
                        employer, the employer submits such notice, 
                        signed by the employer and the individual under 
                        penalties of perjury, to the designated local 
                        agency as part of a written request for such a 
                        certification from such agency.</DELETED>
                <DELETED>For purposes of this paragraph, the term `pre-
                screening notice' means a document (in such form as the 
                Secretary shall prescribe) which contains information 
                provided by the individual on the basis of which the 
                employer believes that the individual is a member of a 
                targeted group.</DELETED>
                <DELETED>    ``(B) Incorrect certifications.--If--
                </DELETED>
                        <DELETED>    ``(i) an individual has been 
                        certified by a designated local agency as a 
                        member of a targeted group, and</DELETED>
                        <DELETED>    ``(ii) such certification is 
                        incorrect because it was based on false 
                        information provided by such 
                        individual,</DELETED>
                <DELETED>the certification shall be revoked and wages 
                paid by the employer after the date on which notice of 
                revocation is received by the employer shall not be 
                treated as qualified wages.</DELETED>
                <DELETED>    ``(C) Explanation of denial of request.--
                If a designated local agency denies a request for 
                certification of membership in a targeted group, such 
                agency shall provide to the person making such request 
                a written explanation of the reasons for such 
                denial.''.</DELETED>
<DELETED>    (c) Minimum Employment Period.--Paragraph (3) of section 
51(i) (relating to certain individuals ineligible) is amended to read 
as follows:</DELETED>
        <DELETED>    ``(3) Individuals not meeting minimum employment 
        period.--No wages shall be taken into account under subsection 
        (a) with respect to any individual unless such individual 
        either--</DELETED>
                <DELETED>    ``(A) is employed by the employer at least 
                180 days (20 days in the case of a qualified summer 
                youth employee), or</DELETED>
                <DELETED>    ``(B) has completed at least 500 hours 
                (120 hours in the case of a qualified summer youth 
                employee) of services performed for the 
                employer.''.</DELETED>
<DELETED>    (d) Termination.--Paragraph (4) of section 51(c) (relating 
to wages defined) is amended to read as follows:</DELETED>
        <DELETED>    ``(4) Termination.--The term `wages' shall not 
        include any amount paid or incurred to an individual who begins 
        work for the employer--</DELETED>
                <DELETED>    ``(A) after December 31, 1994, and before 
                July 1, 1996, or</DELETED>
                <DELETED>    ``(B) after June 30, 1997.''.</DELETED>
<DELETED>    (e) Redesignation of Credit.--</DELETED>
        <DELETED>    (1) Sections 38(b)(2) and 51(a) are each amended 
        by striking ``targeted jobs credit'' and inserting ``work 
        opportunity credit''.</DELETED>
        <DELETED>    (2) The subpart heading for subpart F of part IV 
        of subchapter A of chapter 1 is amended by striking ``Targeted 
        Jobs Credit'' and inserting ``Work Opportunity 
        Credit''.</DELETED>
        <DELETED>    (3) The table of subparts for such part IV is 
        amended by striking ``targeted jobs credit'' and inserting 
        ``work opportunity credit''.</DELETED>
        <DELETED>    (4) The heading for paragraph (3) of section 
        1396(c) is amended by striking ``targeted jobs credit'' and 
        inserting ``work opportunity credit''.</DELETED>
<DELETED>    (f) Technical Amendment.--Paragraph (1) of section 51(c) 
is amended by striking ``, subsection (d)(8)(D),''.</DELETED>
<DELETED>    (g) Effective Date.--The amendments made by this section 
shall apply to individuals who begin work for the employer after June 
30, 1996.</DELETED>

<DELETED>SEC. 1202. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE 
              PROGRAMS.</DELETED>

<DELETED>    (a) Extension.--Subsection (d) of section 127 (relating to 
educational assistance programs) is amended by striking ``December 31, 
1994'' and inserting ``December 31, 1996''.</DELETED>
<DELETED>    (b) Limitation to Education Below Graduate Level.--The 
last sentence of section 127(c)(1) is amended by inserting before the 
period ``or at the graduate level''.</DELETED>
<DELETED>    (c) Effective Dates.--</DELETED>
        <DELETED>    (1) Extension.--The amendment made by subsection 
        (a) shall apply to taxable years beginning after December 31, 
        1994.</DELETED>
        <DELETED>    (2) Limitation.--The amendment made by subsection 
        (b) shall apply to taxable years beginning after December 31, 
        1995.</DELETED>
        <DELETED>    (3) Expedited procedures.--The Secretary of the 
        Treasury shall establish expedited procedures for the refund of 
        any overpayment of taxes imposed by chapter 24 of the Internal 
        Revenue Code of 1986 which is attributable to amounts excluded 
        from gross income during 1995 or 1996 under section 127 of such 
        Code, including procedures waiving the requirement that an 
        employer obtain an employee's signature where the employer 
        demonstrates to the satisfaction of the Secretary that any 
        refund collected by the employer on behalf of the employee will 
        be paid to the employee.</DELETED>

<DELETED>SEC. 1203. FUTA EXEMPTION FOR ALIEN AGRICULTURAL 
              WORKERS.</DELETED>

<DELETED>    (a) In General.--Subparagraph (B) of section 3306(c)(1) 
(defining employment) is amended by striking ``before January 1, 
1995,''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to services performed after December 31, 1994.</DELETED>

  <DELETED>Subtitle C--Provisions Relating to S Corporations</DELETED>

<DELETED>SEC. 1301. S CORPORATIONS PERMITTED TO HAVE 75 
              SHAREHOLDERS.</DELETED>

<DELETED>    Subparagraph (A) of section 1361(b)(1) (defining small 
business corporation) is amended by striking ``35 shareholders'' and 
inserting ``75 shareholders''.</DELETED>

<DELETED>SEC. 1302. ELECTING SMALL BUSINESS TRUSTS.</DELETED>

<DELETED>    (a) General Rule.--Subparagraph (A) of section 1361(c)(2) 
(relating to certain trusts permitted as shareholders) is amended by 
inserting after clause (iv) the following new clause:</DELETED>
                        <DELETED>    ``(v) An electing small business 
                        trust.''.</DELETED>
<DELETED>    (b) Current Beneficiaries Treated as Shareholders.--
Subparagraph (B) of section 1361(c)(2) is amended by adding at the end 
the following new clause:</DELETED>
                        <DELETED>    ``(v) In the case of a trust 
                        described in clause (v) of subparagraph (A), 
                        each potential current beneficiary of such 
                        trust shall be treated as a shareholder; except 
                        that, if for any period there is no potential 
                        current beneficiary of such trust, such trust 
                        shall be treated as the shareholder during such 
                        period.''.</DELETED>
<DELETED>    (c) Electing Small Business Trust Defined.--Section 1361 
(defining S corporation) is amended by adding at the end the following 
new subsection:</DELETED>
<DELETED>    ``(e) Electing Small Business Trust Defined.--</DELETED>
        <DELETED>    ``(1) Electing small business trust.--For purposes 
        of this section--</DELETED>
                <DELETED>    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `electing small business 
                trust' means any trust if--</DELETED>
                        <DELETED>    ``(i) such trust does not have as 
                        a beneficiary any person other than (I) an 
                        individual, (II) an estate, or (III) an 
                        organization described in paragraph (2), (3), 
                        (4), or (5) of section 170(c) which holds a 
                        contingent interest and is not a potential 
                        current beneficiary,</DELETED>
                        <DELETED>    ``(ii) no interest in such trust 
                        was acquired by purchase, and</DELETED>
                        <DELETED>    ``(iii) an election under this 
                        subsection applies to such trust.</DELETED>
                <DELETED>    ``(B) Certain trusts not eligible.--The 
                term `electing small business trust' shall not 
                include--</DELETED>
                        <DELETED>    ``(i) any qualified subchapter S 
                        trust (as defined in subsection (d)(3)) if an 
                        election under subsection (d)(2) applies to any 
                        corporation the stock of which is held by such 
                        trust, and</DELETED>
                        <DELETED>    ``(ii) any trust exempt from tax 
                        under this subtitle.</DELETED>
                <DELETED>    ``(C) Purchase.--For purposes of 
                subparagraph (A), the term `purchase' means any 
                acquisition if the basis of the property acquired is 
                determined under section 1012.</DELETED>
        <DELETED>    ``(2) Potential current beneficiary.--For purposes 
        of this section, the term `potential current beneficiary' 
        means, with respect to any period, any person who at any time 
        during such period is entitled to, or at the discretion of any 
        person may receive, a distribution from the principal or income 
        of the trust. If a trust disposes of all of the stock which it 
        holds in an S corporation, then, with respect to such 
        corporation, the term `potential current beneficiary' does not 
        include any person who first met the requirements of the 
        preceding sentence during the 60-day period ending on the date 
        of such disposition.</DELETED>
        <DELETED>    ``(3) Election.--An election under this subsection 
        shall be made by the trustee. Any such election shall apply to 
        the taxable year of the trust for which made and all subsequent 
        taxable years of such trust unless revoked with the consent of 
        the Secretary.</DELETED>
        <DELETED>    ``(4) Cross reference.--</DELETED>

                              <DELETED>  ``For special treatment of 
electing small business trusts, see section 641(d).''.

<DELETED>    (d) Taxation of Electing Small Business Trusts.--Section 
641 (relating to imposition of tax on trusts) is amended by adding at 
the end the following new subsection:</DELETED>
<DELETED>    ``(d) Special Rules for Taxation of Electing Small 
Business Trusts.--</DELETED>
        <DELETED>    ``(1) In general.--For purposes of this chapter--
        </DELETED>
                <DELETED>    ``(A) the portion of any electing small 
                business trust which consists of stock in 1 or more S 
                corporations shall be treated as a separate trust, 
                and</DELETED>
                <DELETED>    ``(B) the amount of the tax imposed by 
                this chapter on such separate trust shall be determined 
                with the modifications of paragraph (2).</DELETED>
        <DELETED>    ``(2) Modifications.--For purposes of paragraph 
        (1), the modifications of this paragraph are the 
        following:</DELETED>
                <DELETED>    ``(A) Except as provided in section 1(h), 
                the amount of the tax imposed by section 1(e) shall be 
                determined by using the highest rate of tax set forth 
                in section 1(e).</DELETED>
                <DELETED>    ``(B) The exemption amount under section 
                55(d) shall be zero.</DELETED>
                <DELETED>    ``(C) The only items of income, loss, 
                deduction, or credit to be taken into account are the 
                following:</DELETED>
                        <DELETED>    ``(i) The items required to be 
                        taken into account under section 
                        1366.</DELETED>
                        <DELETED>    ``(ii) Any gain or loss from the 
                        disposition of stock in an S 
                        corporation.</DELETED>
                        <DELETED>    ``(iii) To the extent provided in 
                        regulations, State or local income taxes or 
                        administrative expenses to the extent allocable 
                        to items described in clauses (i) and 
                        (ii).</DELETED>
                <DELETED>No deduction or credit shall be allowed for 
                any amount not described in this paragraph, and no item 
                described in this paragraph shall be apportioned to any 
                beneficiary.</DELETED>
                <DELETED>    ``(D) No amount shall be allowed under 
                paragraph (1) or (2) of section 1211(b).</DELETED>
        <DELETED>    ``(3) Treatment of remainder of trust and 
        distributions.--For purposes of determining--</DELETED>
                <DELETED>    ``(A) the amount of the tax imposed by 
                this chapter on the portion of any electing small 
                business trust not treated as a separate trust under 
                paragraph (1), and</DELETED>
                <DELETED>    ``(B) the distributable net income of the 
                entire trust,</DELETED>
        <DELETED>the items referred to in paragraph (2)(C) shall be 
        excluded. Except as provided in the preceding sentence, this 
        subsection shall not affect the taxation of any distribution 
        from the trust.</DELETED>
        <DELETED>    ``(4) Treatment of unused deductions where 
        termination of separate trust.--If a portion of an electing 
        small business trust ceases to be treated as a separate trust 
        under paragraph (1), any carryover or excess deduction of the 
        separate trust which is referred to in section 642(h) shall be 
        taken into account by the entire trust.</DELETED>
        <DELETED>    ``(5) Electing small business trust.--For purposes 
        of this subsection, the term `electing small business trust' 
        has the meaning given such term by section 
        1361(e)(1).''.</DELETED>
<DELETED>    (e) Technical Amendment.--Paragraph (1) of section 1366(a) 
is amended by inserting ``, or of a trust or estate which terminates,'' 
after ``who dies''.</DELETED>

<DELETED>SEC. 1303. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN 
              TRUSTS.</DELETED>

<DELETED>    Subparagraph (A) of section 1361(c)(2) (relating to 
certain trusts permitted as shareholders) is amended--</DELETED>
        <DELETED>    (1) by striking ``60-day period'' each place it 
        appears in clauses (ii) and (iii) and inserting ``2-year 
        period'', and</DELETED>
        <DELETED>    (2) by striking the last sentence in clause 
        (ii).</DELETED>

<DELETED>SEC. 1304. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE 
              HARBOR DEBT.</DELETED>

<DELETED>    Clause (iii) of section 1361(c)(5)(B) (defining straight 
debt) is amended by striking ``or a trust described in paragraph (2)'' 
and inserting ``a trust described in paragraph (2), or a person which 
is actively and regularly engaged in the business of lending 
money''.</DELETED>

<DELETED>SEC. 1305. RULES RELATING TO INADVERTENT TERMINATIONS AND 
              INVALID ELECTIONS.</DELETED>

<DELETED>    (a) General Rule.--Subsection (f) of section 1362 
(relating to inadvertent terminations) is amended to read as 
follows:</DELETED>
<DELETED>    ``(f) Inadvertent Invalid Elections or Terminations.--If--
</DELETED>
        <DELETED>    ``(1) an election under subsection (a) by any 
        corporation--</DELETED>
                <DELETED>    ``(A) was not effective for the taxable 
                year for which made (determined without regard to 
                subsection (b)(2)) by reason of a failure to meet the 
                requirements of section 1361(b) or to obtain 
                shareholder consents, or</DELETED>
                <DELETED>    ``(B) was terminated under paragraph (2) 
                or (3) of subsection (d),</DELETED>
        <DELETED>    ``(2) the Secretary determines that the 
        circumstances resulting in such ineffectiveness or termination 
        were inadvertent,</DELETED>
        <DELETED>    ``(3) no later than a reasonable period of time 
        after discovery of the circumstances resulting in such 
        ineffectiveness or termination, steps were taken--</DELETED>
                <DELETED>    ``(A) so that the corporation is a small 
                business corporation, or</DELETED>
                <DELETED>    ``(B) to acquire the required shareholder 
                consents, and</DELETED>
        <DELETED>    ``(4) the corporation, and each person who was a 
        shareholder in the corporation at any time during the period 
        specified pursuant to this subsection, agrees to make such 
        adjustments (consistent with the treatment of the corporation 
        as an S corporation) as may be required by the Secretary with 
        respect to such period,</DELETED>
<DELETED>then, notwithstanding the circumstances resulting in such 
ineffectiveness or termination, such corporation shall be treated as an 
S corporation during the period specified by the 
Secretary.''.</DELETED>
<DELETED>    (b) Late Elections, Etc.--Subsection (b) of section 1362 
is amended by adding at the end the following new paragraph:</DELETED>
        <DELETED>    ``(5) Authority to treat late elections, etc., as 
        timely.--If--</DELETED>
                <DELETED>    ``(A) an election under subsection (a) is 
                made for any taxable year (determined without regard to 
                paragraph (3)) after the date prescribed by this 
                subsection for making such election for such taxable 
                year or no such election is made for any taxable year, 
                and</DELETED>
                <DELETED>    ``(B) the Secretary determines that there 
                was reasonable cause for the failure to timely make 
                such election,</DELETED>
        <DELETED>the Secretary may treat such an election as timely 
        made for such taxable year (and paragraph (3) shall not 
        apply).''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by subsection (a) 
and (b) shall apply with respect to elections for taxable years 
beginning after December 31, 1982.</DELETED>

<DELETED>SEC. 1306. AGREEMENT TO TERMINATE YEAR.</DELETED>

<DELETED>    Paragraph (2) of section 1377(a) (relating to pro rata 
share) is amended to read as follows:</DELETED>
        <DELETED>    ``(2) Election to terminate year.--</DELETED>
                <DELETED>    ``(A) In general.--Under regulations 
                prescribed by the Secretary, if any shareholder 
                terminates the shareholder's interest in the 
                corporation during the taxable year and all affected 
                shareholders and the corporation agree to the 
                application of this paragraph, paragraph (1) shall be 
                applied to the affected shareholders as if the taxable 
                year consisted of 2 taxable years the first of which 
                ends on the date of the termination.</DELETED>
                <DELETED>    ``(B) Affected shareholders.--For purposes 
                of subparagraph (A), the term `affected shareholders' 
                means the shareholder whose interest is terminated and 
                all shareholders to whom such shareholder has 
                transferred shares during the taxable year. If such 
                shareholder has transferred shares to the corporation, 
                the term `affected shareholders' shall include all 
                persons who are shareholders during the taxable 
                year.''.</DELETED>

<DELETED>SEC. 1307. EXPANSION OF POST-TERMINATION TRANSITION 
              PERIOD.</DELETED>

<DELETED>    (a) In General.--Paragraph (1) of section 1377(b) 
(relating to post-termination transition period) is amended by striking 
``and'' at the end of subparagraph (A), by redesignating subparagraph 
(B) as subparagraph (C), and by inserting after subparagraph (A) the 
following new subparagraph:</DELETED>
                <DELETED>    ``(B) the 120-day period beginning on the 
                date of any determination pursuant to an audit of the 
                taxpayer which follows the termination of the 
                corporation's election and which adjusts a subchapter S 
                item of income, loss, or deduction of the corporation 
                arising during the S period (as defined in section 
                1368(e)(2)), and''.</DELETED>
<DELETED>    (b) Determination Defined.--Paragraph (2) of section 
1377(b) is amended by striking subparagraphs (A) and (B), by 
redesignating subparagraph (C) as subparagraph (B), and by inserting 
before subparagraph (B) (as so redesignated) the following new 
subparagraph:</DELETED>
                <DELETED>    ``(A) a determination as defined in 
                section 1313(a), or''.</DELETED>
<DELETED>    (c) Repeal of Special Audit Provisions for Subchapter S 
Items.--</DELETED>
        <DELETED>    (1) General rule.--Subchapter D of chapter 63 
        (relating to tax treatment of subchapter S items) is hereby 
        repealed.</DELETED>
        <DELETED>    (2) Consistent treatment required.--Section 6037 
        (relating to return of S corporation) is amended by adding at 
        the end the following new subsection:</DELETED>
<DELETED>    ``(c) Shareholder's Return Must Be Consistent With 
Corporate Return or Secretary Notified of Inconsistency.--</DELETED>
        <DELETED>    ``(1) In general.--A shareholder of an S 
        corporation shall, on such shareholder's return, treat a 
        subchapter S item in a manner which is consistent with the 
        treatment of such item on the corporate return.</DELETED>
        <DELETED>    ``(2) Notification of inconsistent treatment.--
        </DELETED>
                <DELETED>    ``(A) In general.--In the case of any 
                subchapter S item, if--</DELETED>
                        <DELETED>    ``(i)(I) the corporation has filed 
                        a return but the shareholder's treatment on his 
                        return is (or may be) inconsistent with the 
                        treatment of the item on the corporate return, 
                        or</DELETED>
                        <DELETED>    ``(II) the corporation has not 
                        filed a return, and</DELETED>
                        <DELETED>    ``(ii) the shareholder files with 
                        the Secretary a statement identifying the 
                        inconsistency,</DELETED>
                <DELETED>paragraph (1) shall not apply to such 
                item.</DELETED>
                <DELETED>    ``(B) Shareholder receiving incorrect 
                information.--A shareholder shall be treated as having 
                complied with clause (ii) of subparagraph (A) with 
                respect to a subchapter S item if the shareholder--
                </DELETED>
                        <DELETED>    ``(i) demonstrates to the 
                        satisfaction of the Secretary that the 
                        treatment of the subchapter S item on the 
                        shareholder's return is consistent with the 
                        treatment of the item on the schedule furnished 
                        to the shareholder by the corporation, 
                        and</DELETED>
                        <DELETED>    ``(ii) elects to have this 
                        paragraph apply with respect to that 
                        item.</DELETED>
        <DELETED>    ``(3) Effect of failure to notify.--In any case--
        </DELETED>
                <DELETED>    ``(A) described in subparagraph (A)(i)(I) 
                of paragraph (2), and</DELETED>
                <DELETED>    ``(B) in which the shareholder does not 
                comply with subparagraph (A)(ii) of paragraph 
                (2),</DELETED>
        <DELETED>any adjustment required to make the treatment of the 
        items by such shareholder consistent with the treatment of the 
        items on the corporate return shall be treated as arising out 
        of mathematical or clerical errors and assessed according to 
        section 6213(b)(1). Paragraph (2) of section 6213(b) shall not 
        apply to any assessment referred to in the preceding 
        sentence.</DELETED>
        <DELETED>    ``(4) Subchapter s item.--For purposes of this 
        subsection, the term `subchapter S item' means any item of an S 
        corporation to the extent that regulations prescribed by the 
        Secretary provide that, for purposes of this subtitle, such 
        item is more appropriately determined at the corporation level 
        than at the shareholder level.</DELETED>
        <DELETED>    ``(5) Addition to tax for failure to comply with 
        section.--</DELETED>

                              <DELETED>  ``For addition to tax in the 
case of a shareholder's negligence in connection with, or disregard of, 
the requirements of this section, see part II of subchapter A of 
chapter 68.''.
        <DELETED>    (3) Conforming amendments.--</DELETED>
                <DELETED>    (A) Section 1366 is amended by striking 
                subsection (g).</DELETED>
                <DELETED>    (B) Subsection (b) of section 6233 is 
                amended to read as follows:</DELETED>
<DELETED>    ``(b) Similar Rules in Certain Cases.--If a partnership 
return is filed for any taxable year but it is determined that there is 
no entity for such taxable year, to the extent provided in regulations, 
rules similar to the rules of subsection (a) shall apply.''.</DELETED>
                <DELETED>    (C) The table of subchapters for chapter 
                63 is amended by striking the item relating to 
                subchapter D.</DELETED>

<DELETED>SEC. 1308. S CORPORATIONS PERMITTED TO HOLD 
              SUBSIDIARIES.</DELETED>

<DELETED>    (a) In General.--Paragraph (2) of section 1361(b) 
(defining ineligible corporation) is amended by striking subparagraph 
(A) and by redesignating subparagraphs (B), (C), (D), and (E) as 
subparagraphs (A), (B), (C), and (D), respectively.</DELETED>
<DELETED>    (b) Treatment of Certain Wholly Owned S Corporation 
Subsidiaries.--Section 1361(b) (defining small business corporation) is 
amended by adding at the end the following new paragraph:</DELETED>
        <DELETED>    ``(3) Treatment of certain wholly owned 
        subsidiaries.--</DELETED>
                <DELETED>    ``(A) In general.--For purposes of this 
                title--</DELETED>
                        <DELETED>    ``(i) a corporation which is a 
                        qualified subchapter S subsidiary shall not be 
                        treated as a separate corporation, 
                        and</DELETED>
                        <DELETED>    ``(ii) all assets, liabilities, 
                        and items of income, deduction, and credit of a 
                        qualified subchapter S subsidiary shall be 
                        treated as assets, liabilities, and such items 
                        (as the case may be) of the S 
                        corporation.</DELETED>
                <DELETED>    ``(B) Qualified subchapter s subsidiary.--
                For purposes of this paragraph, the term `qualified 
                subchapter S subsidiary' means any domestic corporation 
                which is not an ineligible corporation (as defined in 
                paragraph (2)), if--</DELETED>
                        <DELETED>    ``(i) 100 percent of the stock of 
                        such corporation is held by the S corporation, 
                        and</DELETED>
                        <DELETED>    ``(ii) the S corporation elects to 
                        treat such corporation as a qualified 
                        subchapter S subsidiary.</DELETED>
                <DELETED>    ``(C) Treatment of terminations of 
                qualified subchapter s subsidiary status.--For purposes 
                of this title, if any corporation which was a qualified 
                subchapter S subsidiary ceases to meet the requirements 
                of subparagraph (B), such corporation shall be treated 
                as a new corporation acquiring all of its assets (and 
                assuming all of its liabilities) immediately before 
                such cessation from the S corporation in exchange for 
                its stock.''.</DELETED>
<DELETED>    (c) Certain Dividends Not Treated as Passive Investment 
Income.--Paragraph (3) of section 1362(d) is amended by adding at the 
end the following new subparagraph:</DELETED>
                <DELETED>    ``(F) Treatment of certain dividends.--If 
                an S corporation holds stock in a C corporation meeting 
                the requirements of section 1504(a)(2), the term 
                `passive investment income' shall not include dividends 
                from such C corporation to the extent such dividends 
                are attributable to the earnings and profits of such C 
                corporation derived from the active conduct of a trade 
                or business.''.</DELETED>
<DELETED>    (d) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Subsection (c) of section 1361 is amended by 
        striking paragraph (6).</DELETED>
        <DELETED>    (2) Subsection (b) of section 1504 (defining 
        includible corporation) is amended by adding at the end the 
        following new paragraph:</DELETED>
        <DELETED>    ``(8) An S corporation.''.</DELETED>

<DELETED>SEC. 1309. TREATMENT OF DISTRIBUTIONS DURING LOSS 
              YEARS.</DELETED>

<DELETED>    (a) Adjustments for Distributions Taken Into Account 
Before Losses.--</DELETED>
        <DELETED>    (1) Subparagraph (A) of section 1366(d)(1) 
        (relating to losses and deductions cannot exceed shareholder's 
        basis in stock and debt) is amended by striking ``paragraph 
        (1)'' and inserting ``paragraphs (1) and (2)(A)''.</DELETED>
        <DELETED>    (2) Subsection (d) of section 1368 (relating to 
        certain adjustments taken into account) is amended by adding at 
        the end the following new sentence:</DELETED>
<DELETED>``In the case of any distribution made during any taxable 
year, the adjusted basis of the stock shall be determined with regard 
to the adjustments provided in paragraph (1) of section 1367(a) for the 
taxable year.''.</DELETED>
<DELETED>    (b) Accumulated Adjustments Account.--Paragraph (1) of 
section 1368(e) (relating to accumulated adjustments account) is 
amended by adding at the end the following new subparagraph:</DELETED>
        <DELETED>    ``(C) Net loss for year disregarded.--</DELETED>
                <DELETED>    ``(i) In general.--In applying this 
                section to distributions made during any taxable year, 
                the amount in the accumulated adjustments account as of 
                the close of such taxable year shall be determined 
                without regard to any net negative adjustment for such 
                taxable year.</DELETED>
                <DELETED>    ``(ii) Net negative adjustment.--For 
                purposes of clause (i), the term `net negative 
                adjustment' means, with respect to any taxable year, 
                the excess (if any) of--</DELETED>
                        <DELETED>    ``(I) the reductions in the 
                        account for the taxable year (other than for 
                        distributions), over</DELETED>
                        <DELETED>    ``(II) the increases in such 
                        account for such taxable year.''.</DELETED>
<DELETED>    (c) Conforming Amendments.--Subparagraph (A) of section 
1368(e)(1) is amended--</DELETED>
        <DELETED>    (1) by striking ``as provided in subparagraph 
        (B)'' and inserting ``as otherwise provided in this 
        paragraph'', and</DELETED>
        <DELETED>    (2) by striking ``section 1367(b)(2)(A)'' and 
        inserting ``section 1367(a)(2)''.</DELETED>

<DELETED>SEC. 1310. TREATMENT OF S CORPORATIONS UNDER SUBCHAPTER 
              C.</DELETED>

<DELETED>    Subsection (a) of section 1371 (relating to application of 
subchapter C rules) is amended to read as follows:</DELETED>
<DELETED>    ``(a) Application of Subchapter C Rules.--Except as 
otherwise provided in this title, and except to the extent inconsistent 
with this subchapter, subchapter C shall apply to an S corporation and 
its shareholders.''.</DELETED>

<DELETED>SEC. 1311. ELIMINATION OF CERTAIN EARNINGS AND 
              PROFITS.</DELETED>

<DELETED>    (a) In General.--If--</DELETED>
        <DELETED>    (1) a corporation was an electing small business 
        corporation under subchapter S of chapter 1 of the Internal 
        Revenue Code of 1986 for any taxable year beginning before 
        January 1, 1983, and</DELETED>
        <DELETED>    (2) such corporation is an S corporation under 
        subchapter S of chapter 1 of such Code for its first taxable 
        year beginning after December 31, 1996,</DELETED>
<DELETED>the amount of such corporation's accumulated earnings and 
profits (as of the beginning of such first taxable year) shall be 
reduced by an amount equal to the portion (if any) of such accumulated 
earnings and profits which were accumulated in any taxable year 
beginning before January 1, 1983, for which such corporation was an 
electing small business corporation under such subchapter S.</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Paragraph (3) of section 1362(d), as amended 
        by section 1308, is amended--</DELETED>
                <DELETED>    (A) by striking ``subchapter c'' in the 
                paragraph heading and inserting 
                ``accumulated'',</DELETED>
                <DELETED>    (B) by striking ``subchapter C'' in 
                subparagraph (A)(i)(I) and inserting ``accumulated'', 
                and</DELETED>
                <DELETED>    (C) by striking subparagraph (B) and 
                redesignating the following subparagraphs 
                accordingly.</DELETED>
        <DELETED>    (2)(A) Subsection (a) of section 1375 is amended 
        by striking ``subchapter C'' in paragraph (1) and inserting 
        ``accumulated''.</DELETED>
        <DELETED>    (B) Paragraph (3) of section 1375(b) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(3) Passive investment income, etc.--The terms 
        `passive investment income' and `gross receipts' have the same 
        respective meanings as when used in paragraph (3) of section 
        1362(d).''.</DELETED>
        <DELETED>    (C) The section heading for section 1375 is 
        amended by striking ``subchapter c'' and inserting 
        ``accumulated''.</DELETED>
        <DELETED>    (D) The table of sections for part III of 
        subchapter S of chapter 1 is amended by striking ``subchapter 
        C'' in the item relating to section 1375 and inserting 
        ``accumulated''.</DELETED>
        <DELETED>    (3) Clause (i) of section 1042(c)(4)(A) is amended 
        by striking ``section 1362(d)(3)(D)'' and inserting ``section 
        1362(d)(3)(C)''.</DELETED>

<DELETED>SEC. 1312. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS UNDER 
              AT-RISK RULES ALLOWED.</DELETED>

<DELETED>    Paragraph (3) of section 1366(d) (relating to carryover of 
disallowed losses and deductions to post-termination transition period) 
is amended by adding at the end the following new 
subparagraph:</DELETED>
                <DELETED>    ``(D) At-risk limitations.--To the extent 
                that any increase in adjusted basis described in 
                subparagraph (B) would have increased the shareholder's 
                amount at risk under section 465 if such increase had 
                occurred on the day preceding the commencement of the 
                post-termination transition period, rules similar to 
                the rules described in subparagraphs (A) through (C) 
                shall apply to any losses disallowed by reason of 
                section 465(a).''.</DELETED>

<DELETED>SEC. 1313. ADJUSTMENTS TO BASIS OF INHERITED S STOCK TO 
              REFLECT CERTAIN ITEMS OF INCOME.</DELETED>

<DELETED>    (a) In General.--Subsection (b) of section 1367 (relating 
to adjustments to basis of stock of shareholders, etc.) is amended by 
adding at the end the following new paragraph:</DELETED>
        <DELETED>    ``(4) Adjustments in case of inherited stock.--
        </DELETED>
                <DELETED>    ``(A) In general.--If any person acquires 
                stock in an S corporation by reason of the death of a 
                decedent or by bequest, devise, or inheritance, section 
                691 shall be applied with respect to any item of income 
                of the S corporation in the same manner as if the 
                decedent had held directly his pro rata share of such 
                item.</DELETED>
                <DELETED>    ``(B) Adjustments to basis.--The basis 
                determined under section 1014 of any stock in an S 
                corporation shall be reduced by the portion of the 
                value of the stock which is attributable to items 
                constituting income in respect of the 
                decedent.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply in the case of decedents dying after the date of the 
enactment of this Act.</DELETED>

<DELETED>SEC. 1314. S CORPORATIONS ELIGIBLE FOR RULES APPLICABLE TO 
              REAL PROPERTY SUBDIVIDED FOR SALE BY NONCORPORATE 
              TAXPAYERS.</DELETED>

<DELETED>    (a) In General.--Subsection (a) of section 1237 (relating 
to real property subdivided for sale) is amended by striking ``other 
than a corporation'' in the material preceding paragraph (1) and 
inserting ``other than a C corporation''.</DELETED>
<DELETED>    (b) Conforming Amendment.--Subparagraph (A) of section 
1237(a)(2) is amended by inserting ``an S corporation which included 
the taxpayer as a shareholder,'' after ``controlled by the 
taxpayer,''.</DELETED>

<DELETED>SEC. 1315. EFFECTIVE DATE.</DELETED>

<DELETED>    (a) In General.--Except as otherwise provided in this 
subtitle, the amendments made by this subtitle shall apply to taxable 
years beginning after December 31, 1996.</DELETED>
<DELETED>    (b) Treatment of Certain Elections Under Prior Law.--For 
purposes of section 1362(g) of the Internal Revenue Code of 1986 
(relating to election after termination), any termination under section 
1362(d) of such Code in a taxable year beginning before January 1, 
1997, shall not be taken into account.</DELETED>

         <DELETED>Subtitle D--Pension Simplification</DELETED>

      <DELETED>CHAPTER 1--SIMPLIFIED DISTRIBUTION RULES</DELETED>

<DELETED>SEC. 1401. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM 
              DISTRIBUTIONS.</DELETED>

<DELETED>    (a) In General.--Subsection (d) of section 402 (relating 
to taxability of beneficiary of employees' trust) is amended to read as 
follows:</DELETED>
<DELETED>    ``(d) Taxability of Beneficiary of Certain Foreign Situs 
Trusts.--For purposes of subsections (a), (b), and (c), a stock bonus, 
pension, or profit-sharing trust which would qualify for exemption from 
tax under section 501(a) except for the fact that it is a trust created 
or organized outside the United States shall be treated as if it were a 
trust exempt from tax under section 501(a).''.</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Subparagraph (D) of section 402(e)(4) 
        (relating to other rules applicable to exempt trusts) is 
        amended to read as follows:</DELETED>
                <DELETED>    ``(D) Lump-sum distribution.--For purposes 
                of this paragraph--</DELETED>
                        <DELETED>    ``(i) In general.--The term `lump 
                        sum distribution' means the distribution or 
                        payment within one taxable year of the 
                        recipient of the balance to the credit of an 
                        employee which becomes payable to the 
                        recipient--</DELETED>
                                <DELETED>    ``(I) on account of the 
                                employee's death,</DELETED>
                                <DELETED>    ``(II) after the employee 
                                attains age 59</DELETED>\<DELETED>1/
                                2</DELETED>\<DELETED>,</DELETED>
                                <DELETED>    ``(III) on account of the 
                                employee's separation from service, 
                                or</DELETED>
                                <DELETED>    ``(IV) after the employee 
                                has become disabled (within the meaning 
                                of section 72(m)(7)),</DELETED>
                        <DELETED>from a trust which forms a part of a 
                        plan described in section 401(a) and which is 
                        exempt from tax under section 501 or from a 
                        plan described in section 403(a). Subclause 
                        (III) of this clause shall be applied only with 
                        respect to an individual who is an employee 
                        without regard to section 401(c)(1), and 
                        subclause (IV) shall be applied only with 
                        respect to an employee within the meaning of 
                        section 401(c)(1). For purposes of this clause, 
                        a distribution to two or more trusts shall be 
                        treated as a distribution to one recipient. For 
                        purposes of this paragraph, the balance to the 
                        credit of the employee does not include the 
                        accumulated deductible employee contributions 
                        under the plan (within the meaning of section 
                        72(o)(5)).</DELETED>
                        <DELETED>    ``(ii) Aggregation of certain 
                        trusts and plans.--For purposes of determining 
                        the balance to the credit of an employee under 
                        clause (i)--</DELETED>
                                <DELETED>    ``(I) all trusts which are 
                                part of a plan shall be treated as a 
                                single trust, all pension plans 
                                maintained by the employer shall be 
                                treated as a single plan, all profit-
                                sharing plans maintained by the 
                                employer shall be treated as a single 
                                plan, and all stock bonus plans 
                                maintained by the employer shall be 
                                treated as a single plan, and</DELETED>
                                <DELETED>    ``(II) trusts which are 
                                not qualified trusts under section 
                                401(a) and annuity contracts which do 
                                not satisfy the requirements of section 
                                404(a)(2) shall not be taken into 
                                account.</DELETED>
                        <DELETED>    ``(iii) Community property laws.--
                        The provisions of this paragraph shall be 
                        applied without regard to community property 
                        laws.</DELETED>
                        <DELETED>    ``(iv) Amounts subject to 
                        penalty.--This paragraph shall not apply to 
                        amounts described in subparagraph (A) of 
                        section 72(m)(5) to the extent that section 
                        72(m)(5) applies to such amounts.</DELETED>
                        <DELETED>    ``(v) Balance to credit of 
                        employee not to include amounts payable under 
                        qualified domestic relations order.--For 
                        purposes of this paragraph, the balance to the 
                        credit of an employee shall not include any 
                        amount payable to an alternate payee under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)).</DELETED>
                        <DELETED>    ``(vi) Transfers to cost-of-living 
                        arrangement not treated as distribution.--For 
                        purposes of this paragraph, the balance to the 
                        credit of an employee under a defined 
                        contribution plan shall not include any amount 
                        transferred from such defined contribution plan 
                        to a qualified cost-of-living arrangement 
                        (within the meaning of section 415(k)(2)) under 
                        a defined benefit plan.</DELETED>
                        <DELETED>    ``(vii) Lump-sum distributions of 
                        alternate payees.--If any distribution or 
                        payment of the balance to the credit of an 
                        employee would be treated as a lump-sum 
                        distribution, then, for purposes of this 
                        paragraph, the payment under a qualified 
                        domestic relations order (within the meaning of 
                        section 414(p)) of the balance to the credit of 
                        an alternate payee who is the spouse or former 
                        spouse of the employee shall be treated as a 
                        lump-sum distribution. For purposes of this 
                        clause, the balance to the credit of the 
                        alternate payee shall not include any amount 
                        payable to the employee.''.</DELETED>
        <DELETED>    (2) Section 402(c) (relating to rules applicable 
        to rollovers from exempt trusts) is amended by striking 
        paragraph (10).</DELETED>
        <DELETED>    (3) Paragraph (1) of section 55(c) (defining 
        regular tax) is amended by striking ``shall not include any tax 
        imposed by section 402(d) and''.</DELETED>
        <DELETED>    (4) Paragraph (8) of section 62(a) (relating to 
        certain portion of lump-sum distributions from pension plans 
        taxed under section 402(d)) is hereby repealed.</DELETED>
        <DELETED>    (5) Section 401(a)(28)(B) (relating to 
        coordination with distribution rules) is amended by striking 
        clause (v).</DELETED>
        <DELETED>    (6) Subparagraph (B)(ii) of section 401(k)(10) 
        (relating to distributions that must be lump-sum distributions) 
        is amended to read as follows:</DELETED>
                        <DELETED>    ``(ii) Lump-sum distribution.--For 
                        purposes of this subparagraph, the term `lump-
                        sum distribution' has the meaning given such 
                        term by section 402(e)(4)(D) (without regard to 
                        subclauses (I), (II), (III), and (IV) of clause 
                        (i) thereof).''.</DELETED>
        <DELETED>    (7) Section 406(c) (relating to termination of 
        status as deemed employee not to be treated as separation from 
        service for purposes of limitation of tax) is hereby 
        repealed.</DELETED>
        <DELETED>    (8) Section 407(c) (relating to termination of 
        status as deemed employee not to be treated as separation from 
        service for purposes of limitation of tax) is hereby 
        repealed.</DELETED>
        <DELETED>    (9) Section 691(c) (relating to deduction for 
        estate tax) is amended by striking paragraph (5).</DELETED>
        <DELETED>    (10) Paragraph (1) of section 871(b) (relating to 
        imposition of tax) is amended by striking ``section 1, 55, or 
        402(d)(1)'' and inserting ``section 1 or 55''.</DELETED>
        <DELETED>    (11) Subsection (b) of section 877 (relating to 
        alternative tax) is amended by striking ``section 1, 55, or 
        402(d)(1)'' and inserting ``section 1 or 55''.</DELETED>
        <DELETED>    (12) Section 4980A(c)(4) is amended--</DELETED>
                <DELETED>    (A) by striking ``to which an election 
                under section 402(d)(4)(B) applies'' and inserting 
                ``(as defined in section 402(e)(4)(D)) with respect to 
                which the individual elects to have this paragraph 
                apply'',</DELETED>
                <DELETED>    (B) by adding at the end the following new 
                flush sentence:</DELETED>
        <DELETED>``An individual may elect to have this paragraph apply 
        to only one lump-sum distribution.'', and</DELETED>
                <DELETED>    (C) by striking the heading and 
                inserting:</DELETED>
        <DELETED>    ``(4) Special one-time election.--''.</DELETED>
        <DELETED>    (13) Section 402(e) is amended by striking 
        paragraph (5).</DELETED>
<DELETED>    (c) Effective Dates.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to taxable years beginning after December 
        31, 1998.</DELETED>
        <DELETED>    (2) Retention of certain transition rules.--
        Notwithstanding any other provision of this section, the 
        amendments made by this section shall not apply to any 
        distribution for which the taxpayer elects the benefits of 
        section 1122 (h)(3) or (h)(5) of the Tax Reform Act of 1986. 
        For purposes of the preceding sentence, the rules of sections 
        402(c)(10) and 402(d) of the Internal Revenue Code of 1986 (as 
        in effect before the amendments made by this Act) shall 
        apply.</DELETED>

<DELETED>SEC. 1402. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH 
              BENEFITS.</DELETED>

<DELETED>    (a) In General.--Subsection (b) of section 101 is hereby 
repealed.</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Subsection (c) of section 101 is amended by 
        striking ``subsection (a) or (b)'' and inserting ``subsection 
        (a)''.</DELETED>
        <DELETED>    (2) Sections 406(e) and 407(e) are each amended by 
        striking paragraph (2) and by redesignating paragraph (3) as 
        paragraph (2).</DELETED>
        <DELETED>    (3) Section 7701(a)(20) is amended by striking ``, 
        for the purpose of applying the provisions of section 101(b) 
        with respect to employees' death benefits''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply with respect to decedents dying after the date of the 
enactment of this Act.</DELETED>

<DELETED>SEC. 1403. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS 
              UNDER CERTAIN EMPLOYER PLANS.</DELETED>

<DELETED>    (a) General Rule.--Subsection (d) of section 72 (relating 
to annuities; certain proceeds of endowment and life insurance 
contracts) is amended to read as follows:</DELETED>
<DELETED>    ``(d) Special Rules for Qualified Employer Retirement 
Plans.--</DELETED>
        <DELETED>    ``(1) Simplified method of taxing annuity 
        payments.--</DELETED>
                <DELETED>    ``(A) In general.--In the case of any 
                amount received as an annuity under a qualified 
                employer retirement plan--</DELETED>
                        <DELETED>    ``(i) subsection (b) shall not 
                        apply, and</DELETED>
                        <DELETED>    ``(ii) the investment in the 
                        contract shall be recovered as provided in this 
                        paragraph.</DELETED>
                <DELETED>    ``(B) Method of recovering investment in 
                contract.--</DELETED>
                        <DELETED>    ``(i) In general.--Gross income 
                        shall not include so much of any monthly 
                        annuity payment under a qualified employer 
                        retirement plan as does not exceed the amount 
                        obtained by dividing--</DELETED>
                                <DELETED>    ``(I) the investment in 
                                the contract (as of the annuity 
                                starting date), by</DELETED>
                                <DELETED>    ``(II) the number of 
                                anticipated payments determined under 
                                the table contained in clause (iii) 
                                (or, in the case of a contract to which 
                                subsection (c)(3)(B) applies, the 
                                number of monthly annuity payments 
                                under such contract).</DELETED>
                        <DELETED>    ``(ii) Certain rules made 
                        applicable.--Rules similar to the rules of 
                        paragraphs (2) and (3) of subsection (b) shall 
                        apply for purposes of this paragraph.</DELETED>
                        <DELETED>    ``(iii) Number of anticipated 
                        payments.--</DELETED>

<DELETED>
                <DELETED>         ``If the age of 
                    the</DELETED>
                                                                       
                <DELETED>           primary annuitant 
                    on</DELETED>
                                                             The number
                <DELETED>           the annuity 
                    starting</DELETED>
                                                         of anticipated
                <DELETED>           date 
                    is:</DELETED>
                                                           payments is:
                        <DELETED>       Not more than              360 
                            55.
                        <DELETED>       More than 55               310 
                            but not more than 60.
                        <DELETED>       More than 60               260 
                            but not more than 65.
                        <DELETED>       More than 65               210 
                            but not more than 70.
                        <DELETED>       More than 70.              160.
                <DELETED>    ``(C) Adjustment for refund feature not 
                applicable.--For purposes of this paragraph, investment 
                in the contract shall be determined under subsection 
                (c)(1) without regard to subsection (c)(2).</DELETED>
                <DELETED>    ``(D) Special rule where lump sum paid in 
                connection with commencement of annuity payments.--If, 
                in connection with the commencement of annuity payments 
                under any qualified employer retirement plan, the 
                taxpayer receives a lump sum payment--</DELETED>
                        <DELETED>    ``(i) such payment shall be 
                        taxable under subsection (e) as if received 
                        before the annuity starting date, and</DELETED>
                        <DELETED>    ``(ii) the investment in the 
                        contract for purposes of this paragraph shall 
                        be determined as if such payment had been so 
                        received.</DELETED>
                <DELETED>    ``(E) Exception.--This paragraph shall not 
                apply in any case where the primary annuitant has 
                attained age 75 on the annuity starting date unless 
                there are fewer than 5 years of guaranteed payments 
                under the annuity.</DELETED>
                <DELETED>    ``(F) Adjustment where annuity payments 
                not on monthly basis.--In any case where the annuity 
                payments are not made on a monthly basis, appropriate 
                adjustments in the application of this paragraph shall 
                be made to take into account the period on the basis of 
                which such payments are made.</DELETED>
                <DELETED>    ``(G) Qualified employer retirement 
                plan.--For purposes of this paragraph, the term 
                `qualified employer retirement plan' means any plan or 
                contract described in paragraph (1), (2), or (3) of 
                section 4974(c).</DELETED>
        <DELETED>    ``(2) Treatment of employee contributions under 
        defined contribution plans.--For purposes of this section, 
        employee contributions (and any income allocable thereto) under 
        a defined contribution plan may be treated as a separate 
        contract.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply in cases where the annuity starting date is after the 90th 
day after the date of the enactment of this Act.</DELETED>

<DELETED>SEC. 1404. REQUIRED DISTRIBUTIONS.</DELETED>

<DELETED>    (a) In General.--Section 401(a)(9)(C) (defining required 
beginning date) is amended to read as follows:</DELETED>
                <DELETED>    ``(C) Required beginning date.--For 
                purposes of this paragraph--</DELETED>
                        <DELETED>    ``(i) In general.--The term 
                        `required beginning date' means April 1 of the 
                        calendar year following the later of--
                        </DELETED>
                                <DELETED>    ``(I) the calendar year in 
                                which the employee attains age 
                                70</DELETED>\<DELETED>1/
                                2</DELETED>\<DELETED>, or</DELETED>
                                <DELETED>    ``(II) the calendar year 
                                in which the employee 
                                retires.</DELETED>
                        <DELETED>    ``(ii) Exception.--Subclause (II) 
                        of clause (i) shall not apply--</DELETED>
                                <DELETED>    ``(I) except as provided 
                                in section 409(d), in the case of an 
                                employee who is a 5-percent owner (as 
                                defined in section 416) with respect to 
                                the plan year ending in the calendar 
                                year in which the employee attains age 
                                70</DELETED>\<DELETED>1/
                                2</DELETED>\<DELETED>, or</DELETED>
                                <DELETED>    ``(II) for purposes of 
                                section 408 (a)(6) or (b)(3).</DELETED>
                        <DELETED>    ``(iii) Actuarial adjustment.--In 
                        the case of an employee to whom clause (i)(II) 
                        applies who retires in a calendar year after 
                        the calendar year in which the employee attains 
                        age 70</DELETED>\<DELETED>1/
                        2</DELETED>\<DELETED>, the employee's accrued 
                        benefit shall be actuarially increased to take 
                        into account the period after age 
                        70</DELETED>\<DELETED>1/2</DELETED>\ 
                        <DELETED>in which the employee was not 
                        receiving any benefits under the 
                        plan.</DELETED>
                        <DELETED>    ``(iv) Exception for governmental 
                        and church plans.--Clauses (ii) and (iii) shall 
                        not apply in the case of a governmental plan or 
                        church plan. For purposes of this clause, the 
                        term `church plan' means a plan maintained by a 
                        church for church employees, and the term 
                        `church' means any church (as defined in 
                        section 3121(w)(3)(A)) or qualified church-
                        controlled organization (as defined in section 
                        3121(w)(3)(B)).''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to years beginning after December 31, 1996.</DELETED>

    <DELETED>CHAPTER 2--INCREASED ACCESS TO PENSION PLANS</DELETED>

         <DELETED>Subchapter A--Simple Savings Plans</DELETED>

<DELETED>SEC. 1421. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS FOR 
              EMPLOYEES OF SMALL EMPLOYERS.</DELETED>

<DELETED>    (a) In General.--Section 408 (relating to individual 
retirement accounts) is amended by redesignating subsection (p) as 
subsection (q) and by inserting after subsection (o) the following new 
subsection:</DELETED>
<DELETED>    ``(p) Simple Retirement Accounts.--</DELETED>
        <DELETED>    ``(1) In general.--For purposes of this title, the 
        term `simple retirement account' means an individual retirement 
        plan (as defined in section 7701(a)(37))--</DELETED>
                <DELETED>    ``(A) with respect to which the 
                requirements of paragraphs (3), (4), and (5) are met; 
                and</DELETED>
                <DELETED>    ``(B) with respect to which the only 
                contributions allowed are contributions under a 
                qualified salary reduction arrangement.</DELETED>
        <DELETED>    ``(2) Qualified salary reduction arrangement.--
        </DELETED>
                <DELETED>    ``(A) In general.--For purposes of this 
                subsection, the term `qualified salary reduction 
                arrangement' means a written arrangement of an eligible 
                employer under which--</DELETED>
                        <DELETED>    ``(i) an employee eligible to 
                        participate in the arrangement may elect to 
                        have the employer make payments--</DELETED>
                                <DELETED>    ``(I) as elective employer 
                                contributions to a simple retirement 
                                account on behalf of the employee, 
                                or</DELETED>
                                <DELETED>    ``(II) to the employee 
                                directly in cash,</DELETED>
                        <DELETED>    ``(ii) the amount which an 
                        employee may elect under clause (i) for any 
                        year is required to be expressed as a 
                        percentage of compensation and may not exceed a 
                        total of $6,000 for any year,</DELETED>
                        <DELETED>    ``(iii) the employer is required 
                        to make a matching contribution to the simple 
                        retirement account for any year in an amount 
                        equal to so much of the amount the employee 
                        elects under clause (i)(I) as does not exceed 
                        the applicable percentage of compensation for 
                        the year, and</DELETED>
                        <DELETED>    ``(iv) no contributions may be 
                        made other than contributions described in 
                        clause (i) or (iii).</DELETED>
                <DELETED>    ``(B) Employer may elect 2-percent 
                nonelective contribution.--An employer shall be treated 
                as meeting the requirements of subparagraph (A)(iii) 
                for any year if, in lieu of the contributions described 
                in such clause, the employer elects to make nonelective 
                contributions of 2 percent of compensation for each 
                employee who is eligible to participate in the 
                arrangement and who has at least $5,000 of compensation 
                from the employer for the year. If an employer makes an 
                election under this subparagraph for any year, the 
                employer shall notify employees of such election within 
                a reasonable period of time before the 30-day period 
                for such year under paragraph (5)(C).</DELETED>
                <DELETED>    ``(C) Definitions.--For purposes of this 
                subsection--</DELETED>
                        <DELETED>    ``(i) Eligible employer.--The term 
                        `eligible employer' means an employer who 
                        employs 100 or fewer employees on any day 
                        during the year.</DELETED>
                        <DELETED>    ``(ii) Applicable percentage.--
                        </DELETED>
                                <DELETED>    ``(I) In general.--The 
                                term `applicable percentage' means 3 
                                percent.</DELETED>
                                <DELETED>    ``(II) Election of lower 
                                percentage.--An employer may elect to 
                                apply a lower percentage (not less than 
                                1 percent) for any year for all 
                                employees eligible to participate in 
                                the plan for such year if the employer 
                                notifies the employees of such lower 
                                percentage within a reasonable period 
                                of time before the 30-day election 
                                period for such year under paragraph 
                                (5)(C). An employer may not elect a 
                                lower percentage under this subclause 
                                for any year if that election would 
                                result in the applicable percentage 
                                being lower than 3 percent in more than 
                                2 of the years in the 5-year period 
                                ending with such year.</DELETED>
                                <DELETED>    ``(III) Special rule for 
                                years arrangement not in effect.--If 
                                any year in the 5-year period described 
                                in subclause (II) is a year prior to 
                                the first year for which any qualified 
                                salary reduction arrangement is in 
                                effect with respect to the employer (or 
                                any predecessor), the employer shall be 
                                treated as if the level of the employer 
                                matching contribution was at 3 percent 
                                of compensation for such prior 
                                year.</DELETED>
                <DELETED>    ``(D) Arrangement may be only plan of 
                employer.--</DELETED>
                        <DELETED>    ``(i) In general.--An arrangement 
                        shall not be treated as a qualified salary 
                        reduction arrangement for any year if the 
                        employer (or any predecessor employer) 
                        maintained a qualified plan with respect to 
                        which contributions were made, or benefits were 
                        accrued, for service in any year in the period 
                        beginning with the year such arrangement became 
                        effective and ending with the year for which 
                        the determination is being made.</DELETED>
                        <DELETED>    ``(ii) Qualified plan.--For 
                        purposes of this subparagraph, the term 
                        `qualified plan' means a plan, contract, 
                        pension, or trust described in subparagraph (A) 
                        or (B) of section 219(g)(5).</DELETED>
                <DELETED>    ``(E) Cost-of-living adjustment.--The 
                Secretary shall adjust the $6,000 amount under 
                subparagraph (A)(ii) at the same time and in the same 
                manner as under section 415(d), except that the base 
                period taken into account shall be the calendar quarter 
                ending September 30, 1995, and any increase under this 
                subparagraph which is not a multiple of $500 shall be 
                rounded to the next lower multiple of $500.</DELETED>
        <DELETED>    ``(3) Vesting requirements.--The requirements of 
        this paragraph are met with respect to a simple retirement 
        account if the employee's rights to any contribution to the 
        simple retirement account are nonforfeitable. For purposes of 
        this paragraph, rules similar to the rules of subsection (k)(4) 
        shall apply.</DELETED>
        <DELETED>    ``(4) Participation requirements.--</DELETED>
                <DELETED>    ``(A) In general.--The requirements of 
                this paragraph are met with respect to any simple 
                retirement account for a year only if, under the 
                qualified salary reduction arrangement, all employees 
                of the employer who--</DELETED>
                        <DELETED>    ``(i) received at least $5,000 in 
                        compensation from the employer during any 2 
                        preceding years, and</DELETED>
                        <DELETED>    ``(ii) are reasonably expected to 
                        receive at least $5,000 in compensation during 
                        the year,</DELETED>
                <DELETED>are eligible to make the election under 
                paragraph (2)(A)(i) or receive the nonelective 
                contribution described in paragraph (2)(B).</DELETED>
                <DELETED>    ``(B) Excludable employees.--An employer 
                may elect to exclude from the requirement under 
                subparagraph (A) employees described in section 
                410(b)(3).</DELETED>
        <DELETED>    ``(5) Administrative requirements.--The 
        requirements of this paragraph are met with respect to any 
        simplified retirement account if, under the qualified salary 
        reduction arrangement--</DELETED>
                <DELETED>    ``(A) an employer must--</DELETED>
                        <DELETED>    ``(i) make the elective employer 
                        contributions under paragraph (2)(A)(i) not 
                        later than the close of the 30-day period 
                        following the last day of the month with 
                        respect to which the contributions are to be 
                        made, and</DELETED>
                        <DELETED>    ``(ii) make the matching 
                        contributions under  paragraph  (2)(A)(iii)  or 
                        the nonelective contributions under paragraph 
                        (2)(B) not  later than the date described in 
                        section 404(m)(2)(B),</DELETED>
                <DELETED>    ``(B) an employee may elect to terminate 
                participation in such arrangement at any time during 
                the year, except that if an employee so terminates, the 
                arrangement may provide that the employee may not elect 
                to resume participation until the beginning of the next 
                year, and</DELETED>
                <DELETED>    ``(C) each employee eligible to 
                participate may elect, during the 30-day period before 
                the beginning of any year (and the 30-day period before 
                the first day such employee is eligible to 
                participate), to participate in the arrangement, or to 
                modify the amounts subject to such arrangement, for 
                such year.</DELETED>
        <DELETED>    ``(6) Definitions.--For purposes of this 
        subsection--</DELETED>
                <DELETED>    ``(A) Compensation.--</DELETED>
                        <DELETED>    ``(i) In general.--The term 
                        `compensation' means amounts described in 
                        paragraphs (3) and (8) of section 
                        6051(a).</DELETED>
                        <DELETED>    ``(ii) Self-employed.--In the case 
                        of an employee described in subparagraph (B), 
                        the term `compensation' means net earnings from 
                        self-employment determined under section 
                        1402(a) without regard to any contribution 
                        under this subsection.</DELETED>
                <DELETED>    ``(B) Employee.--The term `employee' 
                includes an employee as defined in section 
                401(c)(1).</DELETED>
                <DELETED>    ``(C) Year.--The term `year' means the 
                calendar year.''.</DELETED>
<DELETED>    (b) Tax Treatment of Simple Retirement Accounts.--
</DELETED>
        <DELETED>    (1) Deductibility of contributions by employees.--
        </DELETED>
                <DELETED>    (A) Section 219(b) (relating to maximum 
                amount of deduction) is amended by adding at the end 
                the following new paragraph:</DELETED>
        <DELETED>    ``(4) Special rule for simple retirement 
        accounts.--This section shall not apply with respect to any 
        amount contributed to a simple retirement account established 
        under section 408(p).''.</DELETED>
                <DELETED>    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
                of clause (iv) and by adding at the end the following 
                new clause:</DELETED>
                        <DELETED>    ``(vi) any simple retirement 
                        account (within the meaning of section 408(p)), 
                        or''.</DELETED>
        <DELETED>    (2) Deductibility of employer contributions.--
        Section 404 (relating to deductions for contributions of an 
        employer to pension, etc. plans) is amended by adding at the 
        end the following new subsection:</DELETED>
<DELETED>    ``(m) Special Rules for Simple Retirement Accounts.--
</DELETED>
        <DELETED>    ``(1) In general.--Employer contributions to a 
        simple retirement account shall be treated as if they are made 
        to a plan subject to the requirements of this 
        section.</DELETED>
        <DELETED>    ``(2) Timing.--</DELETED>
                <DELETED>    ``(A) Deduction.--Contributions described 
                in paragraph (1) shall be deductible in the taxable 
                year of the employer with or within which the calendar 
                year for which the contributions were made 
                ends.</DELETED>
                <DELETED>    ``(B) Contributions after end of year.--
                For purposes of this subsection, contributions shall be 
                treated as made for a taxable year if they are made on 
                account of the taxable year and are made not later than 
                the time prescribed by law for filing the return for 
                the taxable year (including extensions 
                thereof).''.</DELETED>
        <DELETED>    (3) Contributions and distributions.--</DELETED>
                <DELETED>    (A) Section 402 (relating to taxability of 
                beneficiary of employees' trust) is amended by adding 
                at the end the following new subsection:</DELETED>
<DELETED>    ``(k) Treatment of Simple Retirement Accounts.--Rules 
similar to the rules of paragraphs (1) and (3) of subsection (h) shall 
apply to contributions and distributions with respect to a simple 
retirement account under section 408(p).''.</DELETED>
                <DELETED>    (B) Section 408(d)(3) is amended by adding 
                at the end the following new subparagraph:</DELETED>
                <DELETED>    ``(G) Simple retirement accounts.--This 
                paragraph shall not apply to any amount paid or 
                distributed out of a simple retirement account (as 
                defined in section 408(p)) unless--</DELETED>
                        <DELETED>    ``(i) it is paid into another 
                        simple retirement account, or</DELETED>
                        <DELETED>    ``(ii) in the case of any payment 
                        or distribution to which section 72(t)(8) does 
                        not apply, it is paid into an individual 
                        retirement plan.''.</DELETED>
                <DELETED>    (C) Clause (i) of section 457(c)(2)(B) is 
                amended by striking ``section 402(h)(1)(B)'' and 
                inserting ``section 402(h)(1)(B) or (k)''.</DELETED>
        <DELETED>    (4) Penalties.--</DELETED>
                <DELETED>    (A) Early withdrawals.--Section 72(t) 
                (relating to additional tax in early distributions), as 
                amended by this Act, is amended by adding at the end 
                the following new paragraph:</DELETED>
        <DELETED>    ``(6) Special rules for simple retirement 
        accounts.--In the case of any amount received from a simple 
        retirement account (within the meaning of section 408(p)) 
        during the 2-year period beginning on the date such individual 
        first participated in any qualified salary reduction 
        arrangement maintained by the individual's employer under 
        section 408(p)(2), paragraph (1) shall be applied by 
        substituting `25 percent' for `10 percent'.''.</DELETED>
                <DELETED>    (B) Failure to report.--Section 6693 is 
                amended by redesignating subsection (c) as subsection 
                (d) and by inserting after subsection (b) the following 
                new subsection:</DELETED>
<DELETED>    ``(c) Penalties Relating to Simple Retirement Accounts.--
</DELETED>
        <DELETED>    ``(1) Employer penalties.--An employer who fails 
        to provide 1 or more notices required by section 408(l)(2)(C) 
        shall pay a penalty of $50 for each day on which such failures 
        continue.</DELETED>
        <DELETED>    ``(2) Trustee penalties.--A trustee who fails--
        </DELETED>
                <DELETED>    ``(A) to provide 1 or more statements 
                required by the last sentence of section 408(i) shall 
                pay a penalty of $50 for each day on which such 
                failures continue, or</DELETED>
                <DELETED>    ``(B) to provide 1 or more summary 
                descriptions required by section 408(l)(2)(B) shall pay 
                a penalty of $50 for each day on which such failures 
                continue.</DELETED>
        <DELETED>    ``(3) Reasonable cause exception.--No penalty 
        shall be imposed under this subsection with respect to any 
        failure which the taxpayer shows was due to reasonable 
        cause.''.</DELETED>
        <DELETED>    (5) Reporting requirements.--</DELETED>
                <DELETED>    (A) Section 408(l) is amended by adding at 
                the end the following new paragraph:</DELETED>
        <DELETED>    ``(2) Simple retirement accounts.--</DELETED>
                <DELETED>    ``(A) No employer reports.--Except as 
                provided in this paragraph, no report shall be required 
                under this section by an employer maintaining a 
                qualified salary reduction arrangement under subsection 
                (p).</DELETED>
                <DELETED>    ``(B) Summary description.--The trustee of 
                any simple retirement account established pursuant to a 
                qualified salary reduction arrangement under subsection 
                (p) shall provide to the employer maintaining the 
                arrangement, each year a description containing the 
                following information:</DELETED>
                        <DELETED>    ``(i) The name and address of the 
                        employer and the trustee.</DELETED>
                        <DELETED>    ``(ii) The requirements for 
                        eligibility for participation.</DELETED>
                        <DELETED>    ``(iii) The benefits provided with 
                        respect to the arrangement.</DELETED>
                        <DELETED>    ``(iv) The time and method of 
                        making elections with respect to the 
                        arrangement.</DELETED>
                        <DELETED>    ``(v) The procedures for, and 
                        effects of, withdrawals (including rollovers) 
                        from the arrangement.</DELETED>
                <DELETED>    ``(C) Employee notification.--The employer 
                shall notify each employee immediately before the 
                period for which an election described in subsection 
                (p)(5)(C) may be made of the employee's opportunity to 
                make such election. Such notice shall include a copy of 
                the description described in subparagraph 
                (B).''.</DELETED>
                <DELETED>    (B) Section 408(l) is amended by striking 
                ``An employer'' and inserting the following:</DELETED>
        <DELETED>    ``(1) In general.--An employer''.</DELETED>
        <DELETED>    (6) Reporting requirements.--Section 408(i) is 
        amended by adding at the end the following new flush 
        sentence:</DELETED>
<DELETED>``In the case of a simple retirement account under subsection 
(p), only one report under this subsection shall be required to be 
submitted each calendar year to the Secretary (at the time provided 
under paragraph (2)) but, in addition to the report under this 
subsection, there shall be furnished, within 30 days after each 
calendar year, to the individual on whose behalf the account is 
maintained a statement with respect to the account balance as of the 
close of, and the account activity during, such calendar 
year.''.</DELETED>
        <DELETED>    (7) Exemption from top-heavy plan rules.--Section 
        416(g)(4) (relating to special rules for top-heavy plans) is 
        amended by adding at the end the following new 
        subparagraph:</DELETED>
                <DELETED>    ``(G) Simple retirement accounts.--The 
                term `top-heavy plan' shall not include a simple 
                retirement account under section 408(p).''.</DELETED>
        <DELETED>    (8) Employment taxes.--</DELETED>
                <DELETED>    (A) Paragraph (5) of section 3121(a) is 
                amended by striking ``or'' at the end of subparagraph 
                (F), by inserting ``or'' at the end of subparagraph 
                (G), and by adding at the end the following new 
                subparagraph:</DELETED>
                <DELETED>    ``(H) under an arrangement to which 
                section 408(p) applies, other than any elective 
                contributions under paragraph (2)(A)(i) 
                thereof,''.</DELETED>
        <DELETED>    (B) Section 209(a)(4) of the Social Security Act 
        is amended by inserting ``, or (J) under an arrangement to 
        which section 408(p) of such Code applies, other than any 
        elective contributions under paragraph (2)(A)(i) thereof'' 
        before the semicolon at the end thereof.</DELETED>
        <DELETED>    (C) Paragraph (5) of section 3306(b) is amended by 
        striking ``or'' at the end of subparagraph (F), by inserting 
        ``or'' at the end of subparagraph (G), and by adding at the end 
        the following new subparagraph:</DELETED>
                <DELETED>    ``(H) under an arrangement to which 
                section 408(p) applies, other than any elective 
                contributions under paragraph (2)(A)(i) 
                thereof,''.</DELETED>
        <DELETED>    (D) Paragraph (12) of section 3401(a) is amended 
        by adding the following new subparagraph:</DELETED>
                <DELETED>    ``(D) under an arrangement to which 
                section 408(p) applies; or''.</DELETED>
        <DELETED>    (9) Conforming amendments.--</DELETED>
                <DELETED>    (A) Section 280G(b)(6) is amended by 
                striking ``or'' at the end of subparagraph (B), by 
                striking the period at the end of subparagraph (C) and 
                inserting ``, or'' and by adding after subparagraph (C) 
                the following new subparagraph:</DELETED>
                <DELETED>    ``(D) a simple retirement account 
                described in section 408(p).''.</DELETED>
                <DELETED>    (B) Section 402(g)(3) is amended by 
                striking ``and'' at the end of subparagraph (B), by 
                striking the period at the end of subparagraph (C) and 
                inserting ``, and'', and by adding after subparagraph 
                (C) the following new subparagraph:</DELETED>
                <DELETED>    ``(D) any elective employer contribution 
                under section 408(p)(2)(A)(i).''.</DELETED>
                <DELETED>    (C) Subsections (b), (c), (m)(4)(B), and 
                (n)(3)(B) of section 414 are each amended by inserting 
                ``408(p),'' after ``408(k),''.</DELETED>
                <DELETED>    (D) Section 4972(d)(1)(A) is amended by 
                striking ``and'' at the end of clause (ii), by striking 
                the period at the end of clause (iii) and inserting ``, 
                and'', and by adding after clause (iii) the following 
                new clause:</DELETED>
                        <DELETED>    ``(iv) any simple retirement 
                        account (within the meaning of section 
                        408(p)).''.</DELETED>
<DELETED>    (c) Repeal of Salary Reduction Simplified Employee 
Pensions.--Section 408(k)(6) is amended by adding at the end the 
following new subparagraph:</DELETED>
                <DELETED>    ``(H) Termination.--This paragraph shall 
                not apply to years beginning after December 31, 1996. 
                The preceding sentence shall not apply to a simplified 
                employee pension if the terms of such pension, as in 
                effect on December 31, 1996, provide that an employee 
                may make the election described in subparagraph 
                (A).''.</DELETED>
<DELETED>    (d) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 
1996.</DELETED>

<DELETED>SEC. 1422. EXTENSION OF SIMPLE PLAN TO 401(k) 
              ARRANGEMENTS.</DELETED>

<DELETED>    (a) Alternative Method of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements) is amended by adding at the end the following new 
paragraph:</DELETED>
        <DELETED>    ``(11) Adoption of simple plan to meet 
        nondiscrimination tests.--</DELETED>
                <DELETED>    ``(A) In general.--A cash or deferred 
                arrangement maintained by an eligible employer shall be 
                treated as meeting the requirements of paragraph 
                (3)(A)(ii) if such arrangement meets--</DELETED>
                        <DELETED>    ``(i) the contribution 
                        requirements of subparagraph (B),</DELETED>
                        <DELETED>    ``(ii) the exclusive benefit 
                        requirements of subparagraph (C), and</DELETED>
                        <DELETED>    ``(iii) the vesting requirements 
                        of section 408(p)(3).</DELETED>
                <DELETED>    ``(B) Contribution requirements.--
                </DELETED>
                        <DELETED>    ``(i) In general.--The 
                        requirements of this subparagraph are met if, 
                        under the arrangement--</DELETED>
                                <DELETED>    ``(I) an employee may 
                                elect to have the employer make 
                                elective contributions for the year on 
                                behalf of the employee to a trust under 
                                the plan in an amount which is 
                                expressed as a percentage of 
                                compensation of the employee but which 
                                in no event exceeds $6,000,</DELETED>
                                <DELETED>    ``(II) the employer is 
                                required to make a matching 
                                contribution to the trust for the year 
                                in an amount equal to so much of the 
                                amount the employee elects under 
                                subclause (I) as does not exceed 3 
                                percent of compensation for the year, 
                                and</DELETED>
                                <DELETED>    ``(III) no other 
                                contributions may be made other than 
                                contributions described in subclause 
                                (I) or (II).</DELETED>
                        <DELETED>    ``(ii) Employer may elect 2-
                        percent nonelective contribution.--An employer 
                        shall be treated as meeting the requirements of 
                        clause (i)(II) for any year if, in lieu of the 
                        contributions described in such clause, the 
                        employer elects (pursuant to the terms of the 
                        arrangement) to make nonelective contributions 
                        of 2 percent of compensation for each employee 
                        who is eligible to participate in the 
                        arrangement and who has at least $5,000 of 
                        compensation from the employer for the year. If 
                        an employer makes an election under this 
                        subparagraph for any year, the employer shall 
                        notify employees of such election within a 
                        reasonable period of time before the 30th day 
                        before the beginning of such year.</DELETED>
                <DELETED>    ``(C) Exclusive benefit.--The requirements 
                of this subparagraph are met for any year to which this 
                paragraph applies if no contributions were made, or 
                benefits were accrued, for services during such year 
                under any qualified plan of the employer on behalf of 
                any employee eligible to participate in the cash or 
                deferred arrangement, other than contributions 
                described in subparagraph (B).</DELETED>
                <DELETED>    ``(D) Definitions and special rule.--
                </DELETED>
                        <DELETED>    ``(i) Definitions.--For purposes 
                        of this paragraph, any term used in this 
                        paragraph which is also used in section 408(p) 
                        shall have the meaning given such term by such 
                        section.</DELETED>
                        <DELETED>    ``(ii) Coordination with top-heavy 
                        rules.--A plan meeting the requirements of this 
                        paragraph for any year shall not be treated as 
                        a top-heavy plan under section 416 for such 
                        year.''.</DELETED>
<DELETED>    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions) is amended 
by redesignating paragraph (10) as paragraph (11) and by adding after 
paragraph (9) the following new paragraph:</DELETED>
        <DELETED>    ``(10) Alternative method of satisfying tests.--A 
        defined contribution plan shall be treated as meeting the 
        requirements of paragraph (2) with respect to matching 
        contributions if the plan--</DELETED>
                <DELETED>    ``(A) meets the contribution requirements 
                of subparagraph (B) of subsection (k)(11),</DELETED>
                <DELETED>    ``(B) meets the exclusive benefit 
                requirements of subsection (k)(11)(C), and</DELETED>
                <DELETED>    ``(C) meets the vesting requirements of 
                section 408(p)(3).''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to plan years beginning after December 31, 1996.</DELETED>

           <DELETED>Subchapter B--Other Provisions</DELETED>

<DELETED>SEC. 1426. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 
              401(k).</DELETED>

<DELETED>    (a) In General.--Subparagraph (B) of section 401(k)(4) is 
amended to read as follows:</DELETED>
                <DELETED>    ``(B) Eligibility of state and local 
                governments and tax-exempt organizations.--</DELETED>
                        <DELETED>    ``(i) Tax-exempts eligible.--
                        Except as provided in clause (ii), any 
                        organization exempt from tax under this 
                        subtitle may include a qualified cash or 
                        deferred arrangement as part of a plan 
                        maintained by it.</DELETED>
                        <DELETED>    ``(ii) Governments ineligible.--A 
                        cash or deferred arrangement shall not be 
                        treated as a qualified cash or deferred 
                        arrangement if it is part of a plan maintained 
                        by a State or local government or political 
                        subdivision thereof, or any agency or 
                        instrumentality thereof. This clause shall not 
                        apply to a rural cooperative plan or to a plan 
                        of an employer described in clause 
                        (iii).</DELETED>
                        <DELETED>    ``(iii) Treatment of indian tribal 
                        governments.--An employer which is an Indian 
                        tribal government (as defined in section 
                        7701(a)(40)), a subdivision of an Indian tribal 
                        government (determined in accordance with 
                        section 7871(d)), an agency or instrumentality 
                        of an Indian tribal government or subdivision 
                        thereof, or a corporation chartered under 
                        Federal, State, or tribal law which is owned in 
                        whole or in part by any of the foregoing shall 
                        be treated as an organization exempt from tax 
                        under this subtitle for purposes of clause 
                        (i).''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply to plan years beginning after December 31, 1996, but shall 
not apply to any cash or deferred arrangement to which clause (i) of 
section 1116(f)(2)(B) of the Tax Reform Act of 1986 applies.</DELETED>

       <DELETED>CHAPTER 3--NONDISCRIMINATION PROVISIONS</DELETED>

<DELETED>SEC. 1431. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL 
              OF FAMILY AGGREGATION.</DELETED>

<DELETED>    (a) In General.--Paragraph (1) of section 414(q) (defining 
highly compensated employee) is amended to read as follows:</DELETED>
        <DELETED>    ``(1) In general.--The term `highly compensated 
        employee' means any employee who--</DELETED>
                <DELETED>    ``(A) was a 5-percent owner at any time 
                during the year or the preceding year, or</DELETED>
                <DELETED>    ``(B) for the preceding year--</DELETED>
                        <DELETED>    ``(i) had compensation from the 
                        employer in excess of $80,000, and</DELETED>
                        <DELETED>    ``(ii) was in the top-paid group 
                        of the employer.</DELETED>
        <DELETED>The Secretary shall adjust the $80,000 amount under 
        subparagraph (B) at the same time and in the same manner as 
        under section 415(d), except that the base period shall be the 
        calendar quarter ending September 30, 1996.''.</DELETED>
<DELETED>    (b) Repeal of Family Aggregation Rules.--</DELETED>
        <DELETED>    (1) In general.--Paragraph (6) of section 414(q) 
        is hereby repealed.</DELETED>
        <DELETED>    (2) Compensation limit.--Paragraph (17)(A) of 
        section 401(a) is amended by striking the last 
        sentence.</DELETED>
        <DELETED>    (3) Deduction.--Subsection (l) of section 404 is 
        amended by striking the last sentence.</DELETED>
<DELETED>    (c) Conforming Amendments.--</DELETED>
        <DELETED>    (1)(A) Subsection (q) of section 414 is amended by 
        striking paragraphs (2), (5), (8), and (12) and by 
        redesignating paragraphs (3), (4), (7), (9), (10), and (11) as 
        paragraphs (2) through (7), respectively.</DELETED>
        <DELETED>    (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 
        408(k)(2)(C), and 416(i)(1)(D) are each amended by striking 
        ``section 414(q)(7)'' and inserting ``section 
        414(q)(4)''.</DELETED>
        <DELETED>    (C) Section 416(i)(1)(A) is amended by striking 
        ``section 414(q)(8)'' and inserting ``section 
        414(r)(9)''.</DELETED>
        <DELETED>    (2)(A) Section 414(r) is amended by adding at the 
        end the following new paragraph:</DELETED>
        <DELETED>    ``(9) Excluded employees.--For purposes of this 
        subsection, the following employees shall be 
        excluded:</DELETED>
                <DELETED>    ``(A) Employees who have not completed 6 
                months of service.</DELETED>
                <DELETED>    ``(B) Employees who normally work less 
                than 17</DELETED>\<DELETED>1/2</DELETED>\ 
                <DELETED>hours per week.</DELETED>
                <DELETED>    ``(C) Employees who normally work not more 
                than 6 months during any year.</DELETED>
                <DELETED>    ``(D) Employees who have not attained the 
                age of 21.</DELETED>
                <DELETED>    ``(E) Except to the extent provided in 
                regulations, employees who are included in a unit of 
                employees covered by an agreement which the Secretary 
                of Labor finds to be a collective bargaining agreement 
                between employee representatives and the 
                employer.</DELETED>
        <DELETED>Except as provided by the Secretary, the employer may 
        elect to apply subparagraph (A), (B), (C), or (D) by 
        substituting a shorter period of service, smaller number of 
        hours or months, or lower age for the period of service, number 
        of hours or months, or age (as the case may be) specified in 
        such subparagraph.''.</DELETED>
        <DELETED>    (B) Subparagraph (A) of section 414(r)(2) is 
        amended by striking ``subsection (q)(8)'' and inserting 
        ``paragraph (9)''.</DELETED>
        <DELETED>    (3) Section 1114(c)(4) of the Tax Reform Act of 
        1986 is amended by adding at the end the following new 
        sentence: ``Any reference in this paragraph to section 414(q) 
        shall be treated as a reference to such section as in effect on 
        the day before the date of the enactment of the Small Business 
        Job Protection Act of 1996.''.</DELETED>
<DELETED>    (d) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to years beginning after December 31, 1996, 
        except that in determining whether an employee is a highly 
        compensated employee for years beginning in 1997, such 
        amendments shall be treated as having been in effect for years 
        beginning in 1996.</DELETED>
        <DELETED>    (2) Family aggregation.--The amendments made by 
        subsection (b) shall apply to years beginning after December 
        31, 1996.</DELETED>

<DELETED>SEC. 1432. MODIFICATION OF ADDITIONAL PARTICIPATION 
              REQUIREMENTS.</DELETED>

<DELETED>    (a) General Rule.--Section 401(a)(26)(A) (relating to 
additional participation requirements) is amended to read as 
follows:</DELETED>
                <DELETED>    ``(A) In general.--In the case of a trust 
                which is a part of a defined benefit plan, such trust 
                shall not constitute a qualified trust under this 
                subsection unless on each day of the plan year such 
                trust benefits at least the lesser of--</DELETED>
                        <DELETED>    ``(i) 50 employees of the 
                        employer, or</DELETED>
                        <DELETED>    ``(ii) the greater of--</DELETED>
                                <DELETED>    ``(I) 40 percent of all 
                                employees of the employer, or</DELETED>
                                <DELETED>    ``(II) 2 employees (or if 
                                there is only 1 employee, such 
                                employee).''.</DELETED>
<DELETED>    (b) Separate Line of Business Test.--Section 401(a)(26)(G) 
(relating to separate line of business) is amended by striking 
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to years beginning after December 31, 1996.</DELETED>

<DELETED>SEC. 1433. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR 
              DEFERRED ARRANGEMENTS AND MATCHING 
              CONTRIBUTIONS.</DELETED>

<DELETED>    (a) Alternative Methods of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements), as amended by section 1422, is amended by adding at the 
end the following new paragraph:</DELETED>
        <DELETED>    ``(12) Alternative methods of meeting 
        nondiscrimination requirements.--</DELETED>
                <DELETED>    ``(A) In general.--A cash or deferred 
                arrangement shall be treated as meeting the 
                requirements of paragraph (3)(A)(ii) if such 
                arrangement--</DELETED>
                        <DELETED>    ``(i) meets the contribution 
                        requirements of subparagraph (B) or (C), 
                        and</DELETED>
                        <DELETED>    ``(ii) meets the notice 
                        requirements of subparagraph (D).</DELETED>
                <DELETED>    ``(B) Matching contributions.--</DELETED>
                        <DELETED>    ``(i) In general.--The 
                        requirements of this subparagraph are met if, 
                        under the arrangement, the employer makes 
                        matching contributions on behalf of each 
                        employee who is not a highly compensated 
                        employee in an amount equal to--</DELETED>
                                <DELETED>    ``(I) 100 percent of the 
                                elective contributions of the employee 
                                to the extent such elective 
                                contributions do not exceed 3 percent 
                                of the employee's compensation, 
                                and</DELETED>
                                <DELETED>    ``(II) 50 percent of the 
                                elective contributions of the employee 
                                to the extent that such elective 
                                contributions exceed 3 percent but do 
                                not exceed 5 percent of the employee's 
                                compensation.</DELETED>
                        <DELETED>    ``(ii) Rate for highly compensated 
                        employees.--The requirements of this 
                        subparagraph are not met if, under the 
                        arrangement, the rate of matching contribution 
                        with respect to any elective contribution of a 
                        highly compensated employee at any rate of 
                        elective contribution is greater than that with 
                        respect to an employee who is not a highly 
                        compensated employee.</DELETED>
                        <DELETED>    ``(iii) Alternative plan 
                        designs.--If the rate of any matching 
                        contribution with respect to any rate of 
                        elective contribution is not equal to the 
                        percentage required under clause (i), an 
                        arrangement shall not be treated as failing to 
                        meet the requirements of clause (i) if--
                        </DELETED>
                                <DELETED>    ``(I) the rate of an 
                                employer's matching contribution does 
                                not increase as an employee's rate of 
                                elective contributions increase, 
                                and</DELETED>
                                <DELETED>    ``(II) the aggregate 
                                amount of matching contributions at 
                                such rate of elective contribution is 
                                at least equal to the aggregate amount 
                                of matching contributions which would 
                                be made if matching contributions were 
                                made on the basis of the percentages 
                                described in clause (i).</DELETED>
                <DELETED>    ``(C) Nonelective contributions.--The 
                requirements of this subparagraph are met if, under the 
                arrangement, the employer is required, without regard 
                to whether the employee makes an elective contribution 
                or employee contribution, to make a contribution to a 
                defined contribution plan on behalf of each employee 
                who is not a highly compensated employee and who is 
                eligible to participate in the arrangement in an amount 
                equal to at least 3 percent of the employee's 
                compensation.</DELETED>
                <DELETED>    ``(D) Notice requirement.--An arrangement 
                meets the requirements of this paragraph if, under the 
                arrangement, each employee eligible to participate is, 
                within a reasonable period before any year, given 
                written notice of the employee's rights and obligations 
                under the arrangement which--</DELETED>
                        <DELETED>    ``(i) is sufficiently accurate and 
                        comprehensive to appraise the employee of such 
                        rights and obligations, and</DELETED>
                        <DELETED>    ``(ii) is written in a manner 
                        calculated to be understood by the average 
                        employee eligible to participate.</DELETED>
                <DELETED>    ``(E) Other requirements.--</DELETED>
                        <DELETED>    ``(i) Withdrawal and vesting 
                        restrictions.--An arrangement shall not be 
                        treated as meeting the requirements of 
                        subparagraph (B) or (C) of this paragraph 
                        unless the requirements of subparagraphs (B) 
                        and (C) of paragraph (2) are met with respect 
                        to all employer contributions (including 
                        matching contributions) taken into account in 
                        determining whether the requirements of 
                        subparagraphs (B) and (C) of this paragraph are 
                        met.</DELETED>
                        <DELETED>    ``(ii) Social security and similar 
                        contributions not taken into account.--An 
                        arrangement shall not be treated as meeting the 
                        requirements of subparagraph (B) or (C) unless 
                        such requirements are met without regard to 
                        subsection (l), and, for purposes of subsection 
                        (l), employer contributions under subparagraph 
                        (B) or (C) shall not be taken into 
                        account.</DELETED>
                <DELETED>    ``(F) Other plans.--An arrangement shall 
                be treated as meeting the requirements under 
                subparagraph (A)(i) if any other plan maintained by the 
                employer meets such requirements with respect to 
                employees eligible under the arrangement.''.</DELETED>
<DELETED>    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions), as amended 
by this Act, is amended by redesignating paragraph (11) as paragraph 
(12) and by adding after paragraph (10) the following new 
paragraph:</DELETED>
        <DELETED>    ``(11) Alternative method of satisfying tests.--
        </DELETED>
                <DELETED>    ``(A) In general.--A defined contribution 
                plan shall be treated as meeting the requirements of 
                paragraph (2) with respect to matching contributions if 
                the plan--</DELETED>
                        <DELETED>    ``(i) meets the contribution 
                        requirements of subparagraph (B) or (C) of 
                        subsection (k)(12),</DELETED>
                        <DELETED>    ``(ii) meets the notice 
                        requirements of subsection (k)(12)(D), 
                        and</DELETED>
                        <DELETED>    ``(iii) meets the requirements of 
                        subparagraph (B).</DELETED>
                <DELETED>    ``(B) Limitation on matching 
                contributions.--The requirements of this subparagraph 
                are met if--</DELETED>
                        <DELETED>    ``(i) matching contributions on 
                        behalf of any employee may not be made with 
                        respect to an employee's contributions or 
                        elective deferrals in excess of 6 percent of 
                        the employee's compensation,</DELETED>
                        <DELETED>    ``(ii) the rate of an employer's 
                        matching contribution does not increase as the 
                        rate of an employee's contributions or elective 
                        deferrals increase, and</DELETED>
                        <DELETED>    ``(iii) the matching contribution 
                        with respect to any highly compensated employee 
                        at any rate of an employee contribution or rate 
                        of elective deferral is not greater than that 
                        with respect to an employee who is not a highly 
                        compensated employee.''.</DELETED>
<DELETED>    (c) Year for Computing Nonhighly Compensated Employee 
Percentage.--</DELETED>
        <DELETED>    (1) Cash or deferred arrangements.--Clause (ii) of 
        section 401(k)(3)(A) is amended--</DELETED>
                <DELETED>    (A) by striking ``such year'' and 
                inserting ``the plan year'',</DELETED>
                <DELETED>    (B) by striking ``for such plan year'' and 
                inserting ``for the preceding plan year'', 
                and</DELETED>
                <DELETED>    (C) by adding at the end the following new 
                sentence: ``An arrangement may apply this clause by 
                using the plan year rather than the preceding plan year 
                if the employer so elects, except that if such an 
                election is made, it may not be changed except as 
                provided by the Secretary.''.</DELETED>
        <DELETED>    (2) Matching and employee contributions.--Section 
        401(m)(2)(A) is amended--</DELETED>
                <DELETED>    (A) by inserting ``for such plan year'' 
                after ``highly compensated employees'',</DELETED>
                <DELETED>    (B) by inserting ``for the preceding plan 
                year'' after ``eligible employees'' each place it 
                appears in clause (i) and clause (ii), and</DELETED>
                <DELETED>    (C) by adding at the end the following 
                flush sentence: ``This subparagraph may be applied by 
                using the plan year rather than the preceding plan year 
                if the employer so elects, except that if such an 
                election is made, it may not be changed except as 
                provided the Secretary.''.</DELETED>
<DELETED>    (d) Special Rule for Determining Average Deferral 
Percentage for First Plan Year, Etc.--</DELETED>
        <DELETED>    (1) Paragraph (3) of section 401(k) is amended by 
        adding at the end the following new subparagraph:</DELETED>
                <DELETED>    ``(E) For purposes of this paragraph, in 
                the case of the first plan year of any plan (other than 
                a successor plan), the amount taken into account as the 
                actual deferral percentage of nonhighly compensated 
employees for the preceding plan year shall be--</DELETED>
                        <DELETED>    ``(i) 3 percent, or</DELETED>
                        <DELETED>    ``(ii) if the employer makes an 
                        election under this subclause, the actual 
                        deferral percentage of nonhighly compensated 
                        employees determined for such first plan 
                        year.''.</DELETED>
        <DELETED>    (2) Paragraph (3) of section 401(m) is amended by 
        adding at the end the following: ``Rules similar to the rules 
        of subsection (k)(3)(E) shall apply for purposes of this 
        subsection.''.</DELETED>
<DELETED>    (e) Distribution of Excess Contributions and Excess 
Aggregate Contributions.--</DELETED>
        <DELETED>    (1) Subparagraph (C) of section 401(k)(8) 
        (relating to arrangement not disqualified if excess 
        contributions distributed) is amended by striking ``on the 
        basis of the respective portions of the excess contributions 
        attributable to each of such employees'' and inserting ``on the 
        basis of the amount of contributions by, or on behalf of, each 
        of such employees''.</DELETED>
        <DELETED>    (2) Subparagraph (C) of section 401(m)(6) 
        (relating to method of distributing excess aggregate 
        contributions) is amended by striking ``on the basis of the 
        respective portions of such amounts attributable to each of 
        such employees'' and inserting ``on the basis of the amount of 
        contributions on behalf of, or by, each such 
        employee''.</DELETED>
<DELETED>    (f) Effective Dates.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to years beginning after December 31, 
        1998.</DELETED>
        <DELETED>    (2) Exceptions.--The amendments made by 
        subsections (c), (d), and (e) shall apply to years beginning 
        after December 31, 1996.</DELETED>

<DELETED>SEC. 1434. DEFINITION OF COMPENSATION FOR SECTION 415 
              PURPOSES.</DELETED>

<DELETED>    (a) General Rule.--Section 415(c)(3) (defining 
participant's compensation) is amended by adding at the end the 
following new subparagraph:</DELETED>
                <DELETED>    ``(D) Certain deferrals included.--The 
                term `participant's compensation' shall include--
                </DELETED>
                        <DELETED>    ``(i) any elective deferral (as 
                        defined in section 402(g)(3)), and</DELETED>
                        <DELETED>    ``(ii) any amount which is 
                        contributed by the employer at the election of 
                        the employee and which is not includible in the 
                        gross income of the employee under section 125 
                        or 457.''.</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Section 414(q)(4), as redesignated by section 
        1431, is amended to read as follows:</DELETED>
        <DELETED>    ``(4) Compensation.--For purposes of this 
        subsection, the term `compensation' has the meaning given such 
        term by section 415(c)(3).''.</DELETED>
        <DELETED>    (2) Section 414(s)(2) is amended by inserting 
        ``not'' after ``elect'' in the text and heading 
        thereof.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to years beginning after December 31, 1997.</DELETED>

         <DELETED>CHAPTER 4--MISCELLANEOUS PROVISIONS</DELETED>

<DELETED>SEC. 1441. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.</DELETED>

<DELETED>    (a) Aggregation Rules.--Section 401(d) (relating to 
additional requirements for qualification of trusts and plans 
benefiting owner-employees) is amended to read as follows:</DELETED>
<DELETED>    ``(d) Contribution Limit on Owner-Employees.--A trust 
forming part of a pension or profit-sharing plan which provides 
contributions or benefits for employees some or all of whom are owner-
employees shall constitute a qualified trust under this section only 
if, in addition to meeting the requirements of subsection (a), the plan 
provides that contributions on behalf of any owner-employee may be made 
only with respect to the earned income of such owner-employee which is 
derived from the trade or business with respect to which such plan is 
established.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendments made by this section 
shall apply to years beginning after December 31, 1996.</DELETED>

<DELETED>SEC. 1442. ELIMINATION OF SPECIAL VESTING RULE FOR 
              MULTIEMPLOYER PLANS.</DELETED>

<DELETED>    (a) In General.--Paragraph (2) of section 411(a) (relating 
to minimum vesting standards) is amended--</DELETED>
        <DELETED>    (1) by striking ``subparagraph (A), (B), or (C)'' 
        and inserting ``subparagraph (A) or (B)''; and</DELETED>
        <DELETED>    (2) by striking subparagraph (C).</DELETED>
<DELETED>    (b) Effective Date.--The amendments made by this section 
shall apply to plan years beginning on or after the earlier of--
</DELETED>
        <DELETED>    (1) the later of--</DELETED>
                <DELETED>    (A) January 1, 1997, or</DELETED>
                <DELETED>    (B) the date on which the last of the 
                collective bargaining agreements pursuant to which the 
                plan is maintained terminates (determined without 
                regard to any extension thereof after the date of the 
                enactment of this Act), or</DELETED>
        <DELETED>    (2) January 1, 1999.</DELETED>
<DELETED>Such amendments shall not apply to any individual who does not 
have more than 1 hour of service under the plan on or after the 1st day 
of the 1st plan year to which such amendments apply.</DELETED>

<DELETED>SEC. 1443. DISTRIBUTIONS UNDER RURAL COOPERATIVE 
              PLANS.</DELETED>

<DELETED>    (a) Distributions for Hardship or After a Certain Age.--
Section 401(k)(7) is amended by adding at the end the following new 
subparagraph:</DELETED>
                <DELETED>    ``(C) Special rule for certain 
                distributions.--A rural cooperative plan which includes 
                a qualified cash or deferred arrangement shall not be 
                treated as violating the requirements of section 401(a) 
                or of paragraph (2) merely by reason of a hardship 
                distribution or a distribution to a participant after 
                attainment of age 59</DELETED>\<DELETED>1/
                2</DELETED>\<DELETED>. For purposes of this section, 
                the term `hardship distribution' means a distribution 
                described in paragraph (2)(B)(i)(IV) (without regard to 
                the limitation of its application to profit-sharing or 
                stock bonus plans).''.</DELETED>
<DELETED>    (b) Public Utility Districts.--Clause (i) of section 
401(k)(7)(B) (defining rural cooperative) is amended to read as 
follows:</DELETED>
                        <DELETED>    ``(i) any organization which--
                        </DELETED>
                                <DELETED>    ``(I) is engaged primarily 
                                in providing electric service on a 
                                mutual or cooperative basis, 
                                or</DELETED>
                                <DELETED>    ``(II) is engaged 
                                primarily in providing electric service 
                                to the public in its area of service 
                                and which is exempt from tax under this 
                                subtitle or which is a State or local 
                                government (or an agency or 
                                instrumentality thereof), other than a 
                                municipality (or an agency or 
                                instrumentality thereof),''.</DELETED>
<DELETED>    (c) Effective Dates.--</DELETED>
        <DELETED>    (1) Distributions.--The amendments made by 
        subsection (a) shall apply to distributions after the date of 
        the enactment of this Act.</DELETED>
        <DELETED>    (2) Rural cooperative.--The amendments made by 
        subsection (b) shall apply to plan years beginning after 
        December 31, 1996.</DELETED>

<DELETED>SEC. 1444. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 
              415.</DELETED>

<DELETED>    (a) Compensation Limit.--Subsection (b) of section 415 is 
amended by adding immediately after paragraph (10) the following new 
paragraph:</DELETED>
        <DELETED>    ``(11) Special limitation rule for governmental 
        plans.--In the case of a governmental plan (as defined in 
        section 414(d)), subparagraph (B) of paragraph (1) shall not 
        apply.''.</DELETED>
<DELETED>    (b) Treatment of Certain Excess Benefit Plans.--</DELETED>
        <DELETED>    (1) In general.--Section 415 is amended by adding 
        at the end the following new subsection:</DELETED>
<DELETED>    ``(m) Treatment of Qualified Governmental Excess Benefit 
Arrangements.--</DELETED>
        <DELETED>    ``(1) Governmental plan not affected.--In 
        determining whether a governmental plan (as defined in section 
        414(d)) meets the requirements of this section, benefits 
        provided under a qualified governmental excess benefit 
        arrangement shall not be taken into account. Income accruing to 
        a governmental plan (or to a trust that is maintained solely 
        for the purpose of providing benefits under a qualified 
        governmental excess benefit arrangement) in respect of a 
        qualified governmental excess benefit arrangement shall 
        constitute income derived from the exercise of an essential 
        governmental function upon which such governmental plan (or 
        trust) shall be exempt from tax under section 115.</DELETED>
        <DELETED>    ``(2) Taxation of participant.--For purposes of 
        this chapter--</DELETED>
                <DELETED>    ``(A) the taxable year or years for which 
                amounts in respect of a qualified governmental excess 
                benefit arrangement are includible in gross income by a 
                participant, and</DELETED>
                <DELETED>    ``(B) the treatment of such amounts when 
                so includible by the participant,</DELETED>
        <DELETED>shall be determined as if such qualified governmental 
        excess benefit arrangement were treated as a plan for the 
        deferral of compensation which is maintained by a corporation 
        not exempt from tax under this chapter and which does not meet 
        the requirements for qualification under section 401.</DELETED>
        <DELETED>    ``(3) Qualified governmental excess benefit 
        arrangement.--For purposes of this subsection, the term 
        `qualified governmental excess benefit arrangement' means a 
        portion of a governmental plan if--</DELETED>
                <DELETED>    ``(A) such portion is maintained solely 
                for the purpose of providing to participants in the 
                plan that part of the participant's annual benefit 
                otherwise payable under the terms of the plan that 
                exceeds the limitations on benefits imposed by this 
                section,</DELETED>
                <DELETED>    ``(B) under such portion no election is 
                provided at any time to the participant (directly or 
                indirectly) to defer compensation, and</DELETED>
                <DELETED>    ``(C) benefits described in subparagraph 
                (A) are not paid from a trust forming a part of such 
                governmental plan unless such trust is maintained 
                solely for the purpose of providing such 
                benefits.''.</DELETED>
        <DELETED>    (2) Coordination with section 457.--Subsection (e) 
        of section 457 is amended by adding at the end the following 
        new paragraph:</DELETED>
        <DELETED>    ``(14) Treatment of qualified governmental excess 
        benefit arrangements.--Subsections (b)(2) and (c)(1) shall not 
        apply to any qualified governmental excess benefit arrangement 
        (as defined in section 415(m)(3)), and benefits provided under 
        such an arrangement shall not be taken into account in 
        determining whether any other plan is an eligible deferred 
        compensation plan.''.</DELETED>
        <DELETED>    (3) Conforming amendment.--Paragraph (2) of 
        section 457(f) is amended by striking ``and'' at the end of 
        subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, and'', and by inserting 
        immediately thereafter the following new 
        subparagraph:</DELETED>
                <DELETED>    ``(E) a qualified governmental excess 
                benefit arrangement described in section 
                415(m).''.</DELETED>
<DELETED>    (c) Exemption for Survivor and Disability Benefits.--
Paragraph (2) of section 415(b) is amended by adding at the end the 
following new subparagraph:</DELETED>
                <DELETED>    ``(I) Exemption for survivor and 
                disability benefits provided under governmental 
                plans.--Subparagraph (C) of this paragraph and 
                paragraph (5) shall not apply to--</DELETED>
                        <DELETED>    ``(i) income received from a 
                        governmental plan (as defined in section 
                        414(d)) as a pension, annuity, or similar 
                        allowance as the result of the recipient 
                        becoming disabled by reason of personal 
                        injuries or sickness, or</DELETED>
                        <DELETED>    ``(ii) amounts received from a 
                        governmental plan by the beneficiaries, 
                        survivors, or the estate of an employee as the 
                        result of the death of the 
                        employee.''.</DELETED>
<DELETED>    (d) Revocation of Grandfather Election.--</DELETED>
        <DELETED>    (1) In general.--Subparagraph (C) of section 
        415(b)(10) is amended by adding at the end the following new 
        clause:</DELETED>
                        <DELETED>    ``(ii) Revocation of election.--An 
                        election under clause (i) may be revoked not 
                        later than the last day of the third plan year 
                        beginning after the date of the enactment of 
                        this clause. The revocation shall apply to all 
                        plan years to which the election applied and to 
                        all subsequent plan years. Any amount paid by a 
                        plan in a taxable year ending after the 
                        revocation shall be includible in income in 
                        such taxable year under the rules of this 
                        chapter in effect for such taxable year, except 
                        that, for purposes of applying the limitations 
                        imposed by this section, any portion of such 
                        amount which is attributable to any taxable 
                        year during which the election was in effect 
                        shall be treated as received in such taxable 
                        year.''.</DELETED>
        <DELETED>    (2) Conforming amendment.--Subparagraph (C) of 
        section 415(b)(10) is amended by striking ``This'' and 
        inserting:</DELETED>
                        <DELETED>    ``(i) In general.--
                        This''.</DELETED>
<DELETED>    (e) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by 
        subsections (a), (b), and (c) shall apply to years beginning 
        after December 31, 1994. The amendments made by subsection (d) 
        shall apply with respect to revocations adopted after the date 
        of the enactment of this Act.</DELETED>
        <DELETED>    (2) Treatment for years beginning before january 
        1, 1995.--Nothing in the amendments made by this section shall 
        be construed to infer that a governmental plan (as defined in 
        section 414(d) of the Internal Revenue Code of 1986) fails to 
        satisfy the requirements of section 415 of such Code for any 
        taxable year beginning before January 1, 1995.</DELETED>

<DELETED>SEC. 1445. UNIFORM RETIREMENT AGE.</DELETED>

<DELETED>    (a) Discrimination Testing.--Paragraph (5) of section 
401(a) (relating to special rules relating to nondiscrimination 
requirements) is amended by adding at the end the following new 
subparagraph:</DELETED>
                <DELETED>    ``(F) Social security retirement age.--For 
                purposes of testing for discrimination under paragraph 
                (4)--</DELETED>
                        <DELETED>    ``(i) the social security 
                        retirement age (as defined in section 
                        415(b)(8)) shall be treated as a uniform 
                        retirement age, and</DELETED>
                        <DELETED>    ``(ii) subsidized early retirement 
                        benefits and joint and survivor annuities shall 
                        not be treated as being unavailable to 
                        employees on the same terms merely because such 
                        benefits or annuities are based in whole or in 
                        part on an employee's social security 
                        retirement age (as so defined).''</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply to years beginning after December 31, 1996.</DELETED>

<DELETED>SEC. 1446. CONTRIBUTIONS ON BEHALF OF DISABLED 
              EMPLOYEES.</DELETED>

<DELETED>    (a) All Disabled Participants Receiving Contributions.--
Section 415(c)(3)(C) is amended by adding at the end the following: 
``If a defined contribution plan provides for the continuation of 
contributions on behalf of all participants described in clause (i) for 
a fixed or determinable period, this subparagraph shall be applied 
without regard to clauses (ii) and (iii).''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply to years beginning after December 31, 1996.</DELETED>

<DELETED>SEC. 1447. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE 
              AND LOCAL GOVERNMENTS AND TAX-EXEMPT 
              ORGANIZATIONS.</DELETED>

<DELETED>    (a) Special Rules for Plan Distributions.--Paragraph (9) 
of section 457(e) (relating to other definitions and special rules) is 
amended to read as follows:</DELETED>
        <DELETED>    ``(9) Benefits not treated as made available by 
        reason of certain elections, etc.--</DELETED>
                <DELETED>    ``(A) Total amount payable is $3,500 or 
                less.--The total amount payable to a participant under 
                the plan shall not be treated as made available merely 
                because the participant may elect to receive such 
                amount (or the plan may distribute such amount without 
                the participant's consent) if--</DELETED>
                        <DELETED>    ``(i) such amount does not exceed 
                        $3,500, and</DELETED>
                        <DELETED>    ``(ii) such amount may be 
                        distributed only if--</DELETED>
                                <DELETED>    ``(I) no amount has been 
                                deferred under the plan with respect to 
                                such participant during the 2-year 
                                period ending on the date of the 
                                distribution, and</DELETED>
                                <DELETED>    ``(II) there has been no 
                                prior distribution under the plan to 
                                such participant to which this 
                                subparagraph applied.</DELETED>
                <DELETED>A plan shall not be treated as failing to meet 
                the distribution requirements of subsection (d) by 
                reason of a distribution to which this subparagraph 
                applies.</DELETED>
                <DELETED>    ``(B) Election to defer commencement of 
                distributions.--The total amount payable to a 
                participant under the plan shall not be treated as made 
                available merely because the participant may elect to 
                defer commencement of distributions under the plan if--
                </DELETED>
                        <DELETED>    ``(i) such election is made after 
                        amounts may be available under the plan in 
                        accordance with subsection (d)(1)(A) and before 
                        commencement of such distributions, 
                        and</DELETED>
                        <DELETED>    ``(ii) the participant may make 
                        only 1 such election.''.</DELETED>
<DELETED>    (b) Cost-of-Living Adjustment of Maximum Deferral 
Amount.--Subsection (e) of section 457, as amended by section 
1444(b)(2) (relating to governmental plans), is amended by adding at 
the end the following new paragraph:</DELETED>
        <DELETED>    ``(15) Cost-of-living adjustment of maximum 
        deferral amount.--The Secretary shall adjust the $7,500 amount 
        specified in subsections (b)(2) and (c)(1) at the same time and 
        in the same manner as under section 415(d), except that the 
        base period shall be the calendar quarter ending September 30, 
        1994, and any increase under this paragraph which is not a 
        multiple of $500 shall be rounded to the next lowest multiple 
        of $500.''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 
1996.</DELETED>

<DELETED>SEC. 1448. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS 
              OF STATE AND LOCAL GOVERNMENTS.</DELETED>

<DELETED>    (a) In General.--Section 457 is amended by adding at the 
end the following new subsection:</DELETED>
<DELETED>    ``(g) Governmental Plans Must Maintain Set-Asides for 
Exclusive Benefit of Participants.--</DELETED>
        <DELETED>    ``(1) In general.--A plan maintained by an 
        eligible employer described in subsection (e)(1)(A) shall not 
        be treated as an eligible deferred compensation plan unless all 
        assets and income of the plan described in subsection (b)(6) 
        are held in trust for the exclusive benefit of participants and 
        their beneficiaries.</DELETED>
        <DELETED>    ``(2) Taxability of trusts and participants.--For 
        purposes of this title--</DELETED>
                <DELETED>    ``(A) a trust described in paragraph (1) 
                shall be treated as an organization exempt from 
                taxation under section 501(a), and</DELETED>
                <DELETED>    ``(B) notwithstanding any other provision 
                of this title, amounts in the trust shall be includible 
                in the gross income of participants and beneficiaries 
                only to the extent, and at the time, provided in this 
                section.</DELETED>
        <DELETED>    ``(3) Custodial accounts and contracts.--For 
        purposes of this subsection, custodial accounts and contracts 
        described in section 401(f) shall be treated as trusts under 
        rules similar to the rules under section 401(f).''.</DELETED>
<DELETED>    (b) Conforming Amendment.--Paragraph (6) of section 457(b) 
is amended by inserting ``except as provided in subsection (g),'' 
before ``which provides that''.</DELETED>
<DELETED>    (c) Effective Dates.--</DELETED>
        <DELETED>    (1) In general.--Except as provided in paragraph 
        (2), the amendments made by this section shall apply to assets 
        and income described in section 457(b)(6) of the Internal 
        Revenue Code of 1986 held by a plan on and after the date of 
        the enactment of this Act.</DELETED>
        <DELETED>    (2) Transition rule.--In the case of assets and 
        income described in paragraph (1) held by a plan on the date of 
the enactment of this Act, a trust need not be established by reason of 
the amendments made by this section before January 1, 1999.</DELETED>

<DELETED>SEC. 1449. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS 
              UNDER SECTION 415 LIMITATIONS.</DELETED>

<DELETED>    (a) In General.--Subparagraph (A) of section 767(d)(3) of 
the Uruguay Round Agreements Act is amended to read as 
follows:</DELETED>
                <DELETED>    ``(A) Exception.--A plan that was adopted 
                and in effect before December 8, 1994, shall not be 
                required to apply the amendments made by subsection (b) 
                with respect to benefits accrued before the earlier 
                of--</DELETED>
                        <DELETED>    ``(i) the later of the date a plan 
                        amendment applying such amendment is adopted or 
                        made effective, or</DELETED>
                        <DELETED>    ``(ii) the first day of the first 
                        limitation year beginning after December 31, 
                        1999.</DELETED>
                <DELETED>Determinations under section 415(b)(2)(E) of 
                the Internal Revenue Code of 1986 before such earlier 
                date shall be made with respect to such benefits on the 
                basis of such section as in effect on December 7, 1994 
                (except that the modification made by section 1449(b) 
                of the Small Business Job Protection Act of 1996 shall 
                be taken into account), and the provisions of the plan 
                as in effect on December 7, 1994, but only if such 
                provisions of the plan meet the requirements of such 
                section (as so in effect).''.</DELETED>
<DELETED>    (b) Modification of Certain Assumptions for Adjusting 
Benefits of Defined Benefit Plans for Early Retirees.--Subparagraph (E) 
of section 415(b)(2) (relating to limitation on certain assumptions) is 
amended--</DELETED>
        <DELETED>    (1) by striking ``Except as provided in clause 
        (ii), for purposes of adjusting any benefit or limitation under 
        subparagraph (B) or (C),'' in clause (i) and inserting ``For 
        purposes of adjusting any limitation under subparagraph (C) 
        and, except as provided in clause (ii), for purposes of 
        adjusting any benefit under subparagraph (B),'', and</DELETED>
        <DELETED>    (2) by striking ``For purposes of adjusting the 
        benefit or limitation of any form of benefit subject to section 
        417(e)(3),'' in clause (ii) and inserting ``For purposes of 
        adjusting any benefit under subparagraph (B) for any form of 
        benefit subject to section 417(e)(3),''.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall take effect as if included in the provisions of section 767 of 
the Uruguay Round Agreements Act.</DELETED>
<DELETED>    (d) Transitional Rule.--In the case of a plan that was 
adopted and in effect before December 8, 1994, if--</DELETED>
        <DELETED>    (1) a plan amendment was adopted or made effective 
        on or before the date of the enactment of this Act applying the 
        amendments made by section 767 of the Uruguay Round Agreements 
        Act, and</DELETED>
        <DELETED>    (2) within 1 year after the date of the enactment 
        of this Act, a plan amendment is adopted which repeals the 
        amendment referred to in paragraph (1),</DELETED>
<DELETED>the amendment referred to in paragraph (1) shall not be taken 
into account in applying section 767(d)(3)(A) of the Uruguay Round 
Agreements Act, as amended by subsection (a).</DELETED>

<DELETED>SEC. 1450. MODIFICATIONS OF SECTION 403(b).</DELETED>

<DELETED>    (a) Multiple Salary Reduction Agreements Permitted.--
</DELETED>
        <DELETED>    (1) General rule.--For purposes of section 403(b) 
        of the Internal Revenue Code of 1986, the frequency that an 
        employee is permitted to enter into a salary reduction 
        agreement, the salary to which such an agreement may apply, and 
        the ability to revoke such an agreement shall be determined 
        under the rules applicable to cash or deferred elections under 
        section 401(k) of such Code.</DELETED>
        <DELETED>    (2) Effective date.--This subsection shall apply 
        to taxable years beginning after December 31, 1995.</DELETED>
<DELETED>    (b) Treatment of Indian Tribal Governments.--</DELETED>
        <DELETED>    (1) In general.--In the case of any contract 
        purchased in a plan year beginning before January 1, 1995, 
        section 403(b) of the Internal Revenue Code of 1986 shall be 
        applied as if any reference to an employer described in section 
        501(c)(3) of the Internal Revenue Code of 1986 which is exempt 
        from tax under section 501 of such Code included a reference to 
        an employer which is an Indian tribal government (as defined by 
        section 7701(a)(40) of such Code), a subdivision of an Indian 
        tribal government (determined in accordance with section 
        7871(d) of such Code), an agency or instrumentality of an 
        Indian tribal government or subdivision thereof, or a 
        corporation chartered under Federal, State, or tribal law which 
        is owned in whole or in part by any of the foregoing.</DELETED>
        <DELETED>    (2) Rollovers.--Solely for purposes of applying 
        section 403(b)(8) of such Code to a contract to which paragraph 
        (1) applies, a qualified cash or deferred arrangement under 
        section 401(k) of such Code shall be treated as if it were a 
        plan or contract described in clause (ii) of section 
        403(b)(8)(A) of such Code.</DELETED>
<DELETED>    (c) Elective Deferrals.--</DELETED>
        <DELETED>    (1) In general.--Subparagraph (E) of section 
        403(b)(1) is amended to read as follows:</DELETED>
                <DELETED>    ``(E) in the case of a contract purchased 
                under a salary reduction agreement, the contract meets 
                the requirements of section 401(a)(30),''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by this 
        subsection shall apply to years beginning after December 31, 
        1995, except a contract shall not be required to meet any 
        change in any requirement by reason of such amendment before 
        the 90th day after the date of the enactment of this 
        Act.</DELETED>

<DELETED>SEC. 1451. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR 
              ANNUITY EXPLANATION BEFORE ANNUITY STARTING 
              DATE.</DELETED>

<DELETED>    (a) General Rule.--For purposes of section 417(a)(3)(A) of 
the Internal Revenue Code of 1986 (relating to plan to provide written 
explanations), the minimum period prescribed by the Secretary of the 
Treasury between the date that the explanation referred to in such 
section is provided and the annuity starting date shall not apply 
if waived by the participant and, if applicable, the participant's 
spouse.</DELETED>
<DELETED>    (b) Effective Date.--Subsection (a) shall apply to plan 
years beginning after December 31, 1996.</DELETED>

<DELETED>SEC. 1452. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT 
              PLAN AND DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE; 
              EXCESS DISTRIBUTIONS.</DELETED>

<DELETED>    (a) In General.--Section 415(e) is repealed.</DELETED>
<DELETED>    (b) Excess Distributions.--Section 4980A is amended by 
adding at the end the following new subsection:</DELETED>
<DELETED>    ``(g) Limitation on Application.--This section shall not 
apply to distributions during years beginning after December 31, 1995, 
and before January 1, 1999, and such distributions shall be treated as 
made first from amounts not described in subsection (f).''.</DELETED>
<DELETED>    (c) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Paragraph (1) of section 415(a) is amended--
        </DELETED>
                <DELETED>    (A) by adding ``or'' at the end of 
                subparagraph (A),</DELETED>
                <DELETED>    (B) by striking ``, or'' at the end of 
                subparagraph (B) and inserting a period, and</DELETED>
                <DELETED>    (C) by striking subparagraph 
                (C).</DELETED>
        <DELETED>    (2) Subparagraph (B) of section 415(b)(5) is 
        amended by striking ``and subsection (e)''.</DELETED>
        <DELETED>    (3) Paragraph (1) of section 415(f) is amended by 
        striking ``subsections (b), (c), and (e)'' and inserting 
        ``subsections (b) and (c)''.</DELETED>
        <DELETED>    (4) Subsection (g) of section 415 is amended by 
        striking ``subsections (e) and (f)'' in the last sentence and 
        inserting ``subsection (f)''.</DELETED>
        <DELETED>    (5) Clause (i) of section 415(k)(2)(A) is amended 
        to read as follows:</DELETED>
                        <DELETED>    ``(i) any contribution made 
                        directly by an employee under such an 
                        arrangement shall not be treated as an annual 
                        addition for purposes of subsection (c), 
                        and''.</DELETED>
        <DELETED>    (6) Clause (ii) of section 415(k)(2)(A) is amended 
        by striking ``subsections (c) and (e)'' and inserting 
        ``subsection (c)''.</DELETED>
        <DELETED>    (7) Section 416 is amended by striking subsection 
        (h).</DELETED>
<DELETED>    (d) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--Except as provided in paragraph 
        (2), the amendments made by this section shall apply to 
        limitation years beginning after December 31, 1998.</DELETED>
        <DELETED>    (2) Excess distributions.--The amendment made by 
        subsection (b) shall apply to years beginning after December 
        31, 1995.</DELETED>

<DELETED>SEC. 1453. TAX ON PROHIBITED TRANSACTIONS.</DELETED>

<DELETED>    (a) In General.--Section 4975(a) is amended by striking 
``5 percent'' and inserting ``10 percent''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply to prohibited transactions occurring after the date of the 
enactment of this Act.</DELETED>

<DELETED>SEC. 1454. TREATMENT OF LEASED EMPLOYEES.</DELETED>

<DELETED>    (a) General Rule.--Subparagraph (C) of section 414(n)(2) 
(defining leased employee) is amended to read as follows:</DELETED>
                <DELETED>    ``(C) such services are performed under 
                primary direction or control by the 
                recipient.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to years beginning after December 31, 1996, but shall not 
apply to any relationship determined under an Internal Revenue Service 
ruling issued before the date of the enactment of this Act pursuant to 
section 414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect 
on the day before such date) not to involve a leased 
employee.</DELETED>

<DELETED>SEC. 1455. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN 
              PENSION REPORTING REQUIREMENTS.</DELETED>

<DELETED>    (a) Penalties.--</DELETED>
        <DELETED>    (1) Statements.--Paragraph (1) of section 6724(d) 
        is amended by striking ``and'' at the end of subparagraph (A), 
        by striking the period at the end of subparagraph (B) and 
        inserting ``, and'', and by inserting after subparagraph (B) 
        the following new subparagraph:</DELETED>
                <DELETED>    ``(C) any statement of the amount of 
                payments to another person required to be made to the 
                Secretary under--</DELETED>
                        <DELETED>    ``(i) section 408(i) (relating to 
                        reports with respect to individual retirement 
                        accounts or annuities), or</DELETED>
                        <DELETED>    ``(ii) section 6047(d) (relating 
                        to reports by employers, plan administrators, 
                        etc.).''.</DELETED>
        <DELETED>    (2) Reports.--Paragraph (2) of section 6724(d), as 
        amended by section 1116, is amended by striking ``or'' at the 
        end of subparagraph (T), by striking the period at the end of 
        subparagraph (U) and inserting a comma, and by inserting after 
        subparagraph (U) the following new subparagraphs:</DELETED>
                <DELETED>    ``(V) section 408(i) (relating to reports 
                with respect to individual retirement plans) to any 
                person other than the Secretary with respect to the 
                amount of payments made to such person, or</DELETED>
                <DELETED>    ``(W) section 6047(d) (relating to reports 
                by plan administrators) to any person other than the 
                Secretary with respect to the amount of payments made 
                to such person.''.</DELETED>
<DELETED>    (b) Modification of Reportable Designated Distributions.--
</DELETED>
        <DELETED>    (1) Section 408.--Subsection (i) of section 408 
        (relating to individual retirement account reports) is amended 
        by inserting ``aggregating $10 or more in any calendar year'' 
        after ``distributions''.</DELETED>
        <DELETED>    (2) Section 6047.--Paragraph (1) of section 
        6047(d) (relating to reports by employers, plan administrators, 
        etc.) is amended by adding at the end the following new 
        sentence: ``No return or report may be required under the 
        preceding sentence with respect to distributions to any person 
        during any year unless such distributions aggregate $10 or 
        more.''.</DELETED>
<DELETED>    (c) Qualifying Rollover Distributions.--Section 6652(i) is 
amended--</DELETED>
        <DELETED>    (1) by striking ``the $10'' and inserting 
        ``$100'', and</DELETED>
        <DELETED>    (2) by striking ``$5,000'' and inserting 
        ``$50,000''.</DELETED>
<DELETED>    (d) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Paragraph (1) of section 6047(f) is amended to 
        read as follows:</DELETED>

                              <DELETED>  ``(1) For provisions relating 
to penalties for failures to file returns and reports required under 
this section, see sections 6652(e), 6721, and 6722.''.
        <DELETED>    (2) Subsection (e) of section 6652 is amended by 
        adding at the end the following new sentence: ``This subsection 
        shall not apply to any return or statement which is an 
        information return described in section 6724(d)(1)(C)(ii) or a 
        payee statement described in section 
        6724(d)(2)(W).''.</DELETED>
        <DELETED>    (3) Subsection (a) of section 6693 is amended by 
        adding at the end the following new sentence: ``This subsection 
        shall not apply to any report which is an information return 
        described in section 6724(d)(1)(C)(i) or a payee statement 
        described in section 6724(d)(2)(V).''.</DELETED>
<DELETED>    (e) Effective Date.--The amendments made by this section 
shall apply to returns, reports, and other statements the due date for 
which (determined without regard to extensions) is after December 31, 
1996.</DELETED>

<DELETED>SEC. 1456. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO TAX 
              ON NET EARNINGS FROM SELF-EMPLOYMENT.</DELETED>

<DELETED>    (a) In General.--Section 1402(a)(8) (defining net earning 
from self-employment) is amended by inserting ``, but shall not include 
in such net earnings from self-employment the rental value of any 
parsonage (whether or not excludable under section 107) provided after 
the individual retires, or any other retirement benefit received by 
such individual from a church plan (as defined in section 414(e)) after 
the individual retires'' before the semicolon at the end.</DELETED>
<DELETED>    (b) Effective Date.--The amendments made by this section 
shall apply to years beginning before, on, or after December 31, 
1994.</DELETED>

<DELETED>SEC. 1457. DATE FOR ADOPTION OF PLAN AMENDMENTS.</DELETED>

<DELETED>    If any amendment made by this subtitle requires an 
amendment to any plan or annuity contract, such amendment shall not be 
required to be made before the first day of the first plan year 
beginning on or after January 1, 1997, if--</DELETED>
        <DELETED>    (1) during the period after such amendment takes 
        effect and before such first plan year, the plan or contract is 
        operated in accordance with the requirements of such amendment, 
        and</DELETED>
        <DELETED>    (2) such amendment applies retroactively to such 
        period.</DELETED>
<DELETED>In the case of a governmental plan (as defined in section 
414(d) of the Internal Revenue Code of 1986), this section shall be 
applied by substituting ``1999'' for ``1997''.</DELETED>

         <DELETED>Subtitle E--Foreign Simplification</DELETED>

<DELETED>SEC. 1501. REPEAL OF INCLUSION OF CERTAIN EARNINGS INVESTED IN 
              EXCESS PASSIVE ASSETS.</DELETED>

<DELETED>    (a) In General.--</DELETED>
        <DELETED>    (1) Repeal of inclusion.--Paragraph (1) of section 
        951(a) (relating to amounts included in gross income of United 
        States shareholders) is amended by striking subparagraph (C), 
        by striking ``; and'' at the end of subparagraph (B) and 
        inserting a period, and by adding ``and'' at the end of 
        subparagraph (A).</DELETED>
        <DELETED>    (2) Repeal of inclusion amount.--Section 956A 
        (relating to earnings invested in excess passive assets) is 
        repealed.</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Paragraph (1) of section 956(b) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(1) Applicable earnings.--For purposes of this 
        section, the term `applicable earnings' means, with respect to 
        any controlled foreign corporation, the sum of--</DELETED>
                <DELETED>    ``(A) the amount (not including a deficit) 
                referred to in section 316(a)(1), and</DELETED>
                <DELETED>    ``(B) the amount referred to in section 
                316(a)(2),</DELETED>
        <DELETED>but reduced by distributions made during the taxable 
        year.''.</DELETED>
        <DELETED>    (2) Paragraph (3) of section 956(b) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(3) Special rule where corporation ceases to be 
        controlled foreign corporation.--If any foreign corporation 
        ceases to be a controlled foreign corporation during any 
        taxable year--</DELETED>
                <DELETED>    ``(A) the determination of any United 
                States shareholder's pro rata share shall be made on 
                the basis of stock owned (within the meaning of section 
                958(a)) by such shareholder on the last day during the 
                taxable year on which the foreign corporation is a 
                controlled foreign corporation,</DELETED>
                <DELETED>    ``(B) the average referred to in 
                subsection (a)(1)(A) for such taxable year shall be 
                determined by only taking into account quarters ending 
                on or before such last day, and</DELETED>
                <DELETED>    ``(C) in determining applicable earnings, 
                the amount taken into account by reason of being 
                described in paragraph (2) of section 316(a) shall be 
                the portion of the amount so described which is 
                allocable (on a pro rata basis) to the part of such 
                year during which the corporation is a controlled 
                foreign corporation.''.</DELETED>
        <DELETED>    (3) Subsection (a) of section 959 (relating to 
        exclusion from gross income of previously taxed earnings and 
        profits) is amended by adding ``or'' at the end of paragraph 
        (1), by striking ``or'' at the end of paragraph (2), and by 
        striking paragraph (3).</DELETED>
        <DELETED>    (4) Subsection (a) of section 959 is amended by 
        striking ``paragraphs (2) and (3)'' in the last sentence and 
        inserting ``paragraph (2)''.</DELETED>
        <DELETED>    (5) Subsection (c) of section 959 is amended by 
        adding at the end the following flush sentence:</DELETED>
<DELETED>``References in this subsection to section 951(a)(1)(C) and 
subsection (a)(3) shall be treated as references to such provisions as 
in effect on the day before the date of the enactment of the Small 
Business Job Protection Act of 1996.''.</DELETED>
        <DELETED>    (6) Paragraph (1) of section 959(f) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(1) In general.--For purposes of this section, 
        amounts that would be included under subparagraph (B) of 
        section 951(a)(1) (determined without regard to this section) 
        shall be treated as attributable first to earnings described in 
        subsection (c)(2), and then to earnings described in subsection 
        (c)(3).''.</DELETED>
        <DELETED>    (7) Paragraph (2) of section 959(f) is amended by 
        striking ``subparagraphs (B) and (C) of section 951(a)(1)'' and 
        inserting ``section 951(a)(1)(B)''.</DELETED>
        <DELETED>    (8) Subsection (b) of section 989 is amended by 
        striking ``subparagraph (B) or (C) of section 951(a)(1)'' and 
        inserting ``section 951(a)(1)(B)''.</DELETED>
        <DELETED>    (9) Paragraph (9) of section 1297(b) is amended by 
        striking ``subparagraph (B) or (C) of section 951(a)(1)'' and 
        inserting ``section 951(a)(1)(B)''.</DELETED>
        <DELETED>    (10) Subsections (d)(3)(B) and (e)(2)(B)(ii) of 
        section 1297 are each amended by striking ``or section 
        956A''.</DELETED>
<DELETED>    (c) Clerical Amendment.--The table of sections for subpart 
F of part III of subchapter N of chapter 1 is amended by striking the 
item relating to section 956A.</DELETED>
<DELETED>    (d) Effective Date.--The amendments made by this section 
shall apply to taxable years of foreign corporations beginning after 
December 31, 1996, and to taxable years of United States shareholders 
within which or with which such taxable years of foreign corporations 
end.</DELETED>

             <DELETED>Subtitle F--Revenue Offsets</DELETED>

<DELETED>SEC. 1601. TERMINATION OF PUERTO RICO AND POSSESSION TAX 
              CREDIT.</DELETED>

<DELETED>    (a) In General.--Section 936 is amended by adding at the 
end the following new subsection:</DELETED>
<DELETED>    ``(j) Termination.--</DELETED>
        <DELETED>    ``(1) In general.--Except as otherwise provided in 
        this subsection, this section shall not apply to any taxable 
        year beginning after December 31, 1995.</DELETED>
        <DELETED>    ``(2) Transition rules for active business income 
        credit.--Except as provided in paragraph (3)--</DELETED>
                <DELETED>    ``(A) Economic activity credit.--In the 
                case of an existing credit claimant--</DELETED>
                        <DELETED>    ``(i) with respect to a possession 
                        other than Puerto Rico, and</DELETED>
                        <DELETED>    ``(ii) to which subsection 
                        (a)(4)(B) does not apply,</DELETED>
                <DELETED>the credit determined under subsection 
                (a)(1)(A) shall be allowed for taxable years beginning 
                after December 31, 1995, and before January 1, 
                2002.</DELETED>
                <DELETED>    ``(B) Special rule for reduced credit.--
                </DELETED>
                        <DELETED>    ``(i) In general.--In the case of 
                        an existing credit claimant to which subsection 
                        (a)(4)(B) applies, the credit determined under 
                        subsection (a)(1)(A) shall be allowed for 
                        taxable years beginning after December 31, 
                        1995, and before January 1, 1998.</DELETED>
                        <DELETED>    ``(ii) Election irrevocable after 
                        1997.--An election under subsection 
                        (a)(4)(B)(iii) which is in effect for the 
                        taxpayer's last taxable year beginning before 
                        1997 may not be revoked unless it is revoked 
                        for the taxpayer's first taxable year beginning 
                        in 1997 and all subsequent taxable 
                        years.</DELETED>
                <DELETED>    ``(C) Economic activity credit for puerto 
                rico.--</DELETED>

                              <DELETED>  ``For economic activity credit 
for Puerto Rico, see section 30A.
        <DELETED>    ``(3) Additional restricted credit.--</DELETED>
                <DELETED>    ``(A) In general.--In the case of an 
                existing credit claimant--</DELETED>
                        <DELETED>    ``(i) the credit under subsection 
                        (a)(1)(A) shall be allowed for the period 
                        beginning with the first taxable year after the 
                        last taxable year to which subparagraph (A) or 
                        (B) of paragraph (2), whichever is appropriate, 
                        applied and ending with the last taxable year 
                        beginning before January 1, 2006, except 
                        that</DELETED>
                        <DELETED>    ``(ii) the aggregate amount of 
                        taxable income taken into account under 
                        subsection (a)(1)(A) for any such taxable year 
                        shall not exceed the adjusted base period 
                        income of such claimant.</DELETED>
                <DELETED>    ``(B) Coordination with subsection 
                (a)(4).--The amount of income described in subsection 
                (a)(1)(A) which is taken into account in applying 
                subsection (a)(4) shall be such income as reduced under 
                this paragraph.</DELETED>
        <DELETED>    ``(4) Adjusted base period income.--For purposes 
        of paragraph (3)--</DELETED>
                <DELETED>    ``(A) In general.--The term `adjusted base 
                period income' means the average of the inflation-
                adjusted possession incomes of the corporation for each 
                base period year.</DELETED>
                <DELETED>    ``(B) Inflation-adjusted possession 
                income.--For purposes of subparagraph (A), the 
                inflation-adjusted possession income of any corporation 
                for any base period year shall be an amount equal to 
                the sum of--</DELETED>
                        <DELETED>    ``(i) the possession income of 
                        such corporation for such base period year, 
                        plus</DELETED>
                        <DELETED>    ``(ii) such possession income 
                        multiplied by the inflation adjustment 
                        percentage for such base period year.</DELETED>
                <DELETED>    ``(C) Inflation adjustment percentage.--
                For purposes of subparagraph (B), the inflation 
                adjustment percentage for any base period year means 
                the percentage (if any) by which--</DELETED>
                        <DELETED>    ``(i) the CPI for 1995, 
                        exceeds</DELETED>
                        <DELETED>    ``(ii) the CPI for the calendar 
                        year in which the base period year for which 
                        the determination is being made ends.</DELETED>
                <DELETED>For purposes of the preceding sentence, the 
                CPI for any calendar year is the CPI (as defined in 
                section 1(f)(5)) for such year under section 
                1(f)(4).</DELETED>
                <DELETED>    ``(D) Increase in inflation adjustment 
                percentage for growth during base years.--The inflation 
                adjustment percentage (determined under subparagraph 
                (C) without regard to this subparagraph) for each of 
                the 5 taxable years referred to in paragraph (5)(A) 
                shall be increased by--</DELETED>
                        <DELETED>    ``(i) 5 percentage points in the 
                        case of a taxable year ending during the 1-year 
                        period ending on October 13, 1995;</DELETED>
                        <DELETED>    ``(ii) 10.25 percentage points in 
                        the case of a taxable year ending during the 1-
                        year period ending on October 13, 
                        1994;</DELETED>
                        <DELETED>    ``(iii) 15.76 percentage points in 
                        the case of a taxable year ending during the 1-
                        year period ending on October 13, 
                        1993;</DELETED>
                        <DELETED>    ``(iv) 21.55 percentage points in 
                        the case of a taxable year ending during the 1-
                        year period ending on October 13, 1992; 
                        and</DELETED>
                        <DELETED>    ``(v) 27.63 percentage points in 
                        the case of a taxable year ending during the 1-
                        year period ending on October 13, 
                        1991.</DELETED>
        <DELETED>    ``(5) Base period year.--For purposes of this 
        subsection--</DELETED>
                <DELETED>    ``(A) In general.--The term `base period 
                year' means each of 3 taxable years which are among the 
                5 most recent taxable years of the corporation ending 
                before October 14, 1995, determined by disregarding--
                </DELETED>
                        <DELETED>    ``(i) one taxable year for which 
                        the corporation had the largest inflation-
                        adjusted possession income, and</DELETED>
                        <DELETED>    ``(ii) one taxable year for which 
                        the corporation had the smallest inflation-
                        adjusted possession income.</DELETED>
                <DELETED>    ``(B) Corporations not having significant 
                possession income throughout 5-year period.--</DELETED>
                        <DELETED>    ``(i) In general.--If a 
                        corporation does not have significant 
                        possession income for each of the most recent 5 
                        taxable years ending before October 14, 1995, 
                        then, in lieu of applying subparagraph (A), the 
                        term `base period year' means only those 
                        taxable years (of such 5 taxable years) for 
                        which the corporation has significant 
                        possession income; except that, if such 
                        corporation has significant possession income 
                        for 4 of such 5 taxable years, the rule of 
                        subparagraph (A)(ii) shall apply.</DELETED>
                        <DELETED>    ``(ii) Special rule.--If there is 
                        no year (of such 5 taxable years) for which a 
                        corporation has significant possession income--
                        </DELETED>
                                <DELETED>    ``(I) the term `base 
                                period year' means the first taxable 
                                year ending on or after October 14, 
                                1995, but</DELETED>
                                <DELETED>    ``(II) the amount of 
                                possession income for such year which 
                                is taken into account under paragraph 
                                (4) shall be the amount which would be 
                                determined if such year were a short 
                                taxable year ending on September 30, 
                                1995.</DELETED>
                        <DELETED>    ``(iii) Significant possession 
                        income.--For purposes of this subparagraph, the 
                        term `significant possession income' means 
                        possession income which exceeds 2 percent of 
                        the possession income of the taxpayer for the 
                        taxable year (of the period of 6 taxable years 
                        ending with the first taxable year ending on or 
                        after October 14, 1995) having the greatest 
                        possession income.</DELETED>
                <DELETED>    ``(C) Election to use one base period 
                year.--</DELETED>
                        <DELETED>    ``(i) In general.--At the election 
                        of the taxpayer, the term `base period year' 
                        means--</DELETED>
                                <DELETED>    ``(I) only the last 
                                taxable year of the corporation ending 
                                in calendar year 1992, or</DELETED>
                                <DELETED>    ``(II) a deemed taxable 
                                year which includes the first ten 
                                months of calendar year 1995.</DELETED>
                        <DELETED>    ``(ii) Base period income for 
                        1995.--In determining the adjusted base period 
                        income of the corporation for the deemed 
                        taxable year under clause (i)(II), the 
                        possession income shall be annualized and shall 
                        be determined without regard to any 
                        extraordinary item.</DELETED>
                        <DELETED>    ``(iii) Election.--An election 
                        under this subparagraph by any possession 
                        corporation may be made only for the 
                        corporation's first taxable year beginning 
                        after December 31, 1995, for which it is a 
                        possession corporation. The rules of subclauses 
                        (II) and (III) of subsection (a)(4)(B)(iii) 
                        shall apply to the election under this 
                        subparagraph.</DELETED>
                <DELETED>    ``(D) Acquisitions and dispositions.--
                Rules similar to the rules of subparagraphs (A) and (B) 
                of section 41(f)(3) shall apply for purposes of this 
                subsection.</DELETED>
        <DELETED>    ``(6) Possession income.--For purposes of this 
        subsection, the term `possession income' means, with respect to 
        any possession, the income referred to in subsection (a)(1)(A) 
        determined with respect to that possession. In no event shall 
        possession income be treated as being less than zero.</DELETED>
        <DELETED>    ``(7) Short years.--If the current year or a base 
        period year is a short taxable year, the application of this 
        subsection shall be made with such annualizations as the 
        Secretary shall prescribe.</DELETED>
        <DELETED>    ``(8) Special rules for certain possessions.--
        </DELETED>
                <DELETED>    ``(A) In general.--In the case of an 
                existing credit claimant with respect to an applicable 
                possession, this section (other than the preceding 
                paragraphs of this subsection) shall apply to such 
                claimant with respect to such applicable possession for 
                taxable years beginning after December 31, 1995, and 
                before January 1, 2006.</DELETED>
                <DELETED>    ``(B) Applicable possession.--For purposes 
                of this paragraph, the term `applicable possession' 
                means Guam, American Samoa, and the Commonwealth of the 
                Northern Mariana Islands.</DELETED>
        <DELETED>    ``(9) Existing credit claimant.--For purposes of 
        this subsection--</DELETED>
                <DELETED>    ``(A) In general.--The term `existing 
                credit claimant' means a corporation--</DELETED>
                        <DELETED>    ``(i) which was actively 
                        conducting a trade or business in a possession 
                        on October 13, 1995, and</DELETED>
                        <DELETED>    ``(ii) with respect to which an 
                        election under this section is in effect for 
                        the corporation's taxable year which includes 
                        October 13, 1995.</DELETED>
                <DELETED>    ``(B) New lines of business prohibited.--
                If, after October 13, 1995, a corporation which would 
                (but for this subparagraph) be an existing credit 
                claimant adds a substantial new line of business, such 
                corporation shall cease to be treated as an existing 
                credit claimant as of the close of the taxable year 
                ending before the date of such addition.</DELETED>
                <DELETED>    ``(C) Binding contract exception.--If, on 
                October 13, 1995, and at all times thereafter, there is 
                in effect with respect to a corporation a binding 
                contract for the acquisition of assets to be used in, 
                or for the sale of assets to be produced from, a trade 
                or business, the corporation shall be treated for 
                purposes of this paragraph as actively conducting such 
                trade or business on October 13, 1995. The preceding 
                sentence shall not apply if such trade or business is 
                not actively conducted before January 1, 
                1996.</DELETED>
        <DELETED>    ``(10) Separate application to each possession.--
        For purposes of determining--</DELETED>
                <DELETED>    ``(A) whether a taxpayer is an existing 
                credit claimant, and</DELETED>
                <DELETED>    ``(B) the amount of the credit allowed 
                under this section,</DELETED>
        <DELETED>this subsection (and so much of this section as 
        relates to this subsection) shall be applied separately with 
        respect to each possession.''.</DELETED>
<DELETED>    (b) Economic Activity Credit for Puerto Rico.--</DELETED>
        <DELETED>    (1) In general.--Subpart B of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new section:</DELETED>

<DELETED>``SEC. 30A. PUERTO RICAN ECONOMIC ACTIVITY CREDIT.</DELETED>

<DELETED>    ``(a) Allowance of Credit.--</DELETED>
        <DELETED>    ``(1) In general.--Except as otherwise provided in 
        this section, if the conditions of both paragraph (1) and 
        paragraph (2) of subsection (b) are satisfied with respect to a 
        qualified domestic corporation, there shall be allowed as a 
        credit against the tax imposed by this chapter an amount equal 
        to the portion of the tax which is attributable to the taxable 
        income, from sources without the United States, from--
        </DELETED>
                <DELETED>    ``(A) the active conduct of a trade or 
                business within Puerto Rico, or</DELETED>
                <DELETED>    ``(B) the sale or exchange of 
                substantially all of the assets used by the taxpayer in 
                the active conduct of such trade or business.</DELETED>
        <DELETED>In the case of any taxable year beginning after 
        December 31, 2001, the aggregate amount of taxable income taken 
        into account under the preceding sentence (and in applying 
        subsection (d)) shall not exceed the adjusted base period 
        income of such corporation, as determined in the same manner as 
        under section 936(j).</DELETED>
        <DELETED>    ``(2) Qualified domestic corporation.--For 
        purposes of paragraph (1), the term `qualified domestic 
        corporation' means a domestic corporation--</DELETED>
                <DELETED>    ``(A) which is an existing credit claimant 
                with respect to Puerto Rico, and</DELETED>
                <DELETED>    ``(B) with respect to which section 
                936(a)(4)(B) does not apply for the taxable 
                year.</DELETED>
        <DELETED>    ``(3) Separate application.--For purposes of 
        determining--</DELETED>
                <DELETED>    ``(A) whether a taxpayer is an existing 
                credit claimant with respect to Puerto Rico, 
                and</DELETED>
                <DELETED>    ``(B) the amount of the credit allowed 
                under this section,</DELETED>
        <DELETED>this section (and so much of section 936 as relates to 
        this section) shall be applied separately with respect to 
        Puerto Rico.</DELETED>
<DELETED>    ``(b) Conditions Which Must Be Satisfied.--The conditions 
referred to in subsection (a) are--</DELETED>
        <DELETED>    ``(1) 3-year period.--If 80 percent or more of the 
        gross income of the qualified domestic corporation for the 3-
        year period immediately preceding the close of the taxable year 
        (or for such part of such period immediately preceding the 
        close of such taxable year as may be applicable) was derived 
        from sources within a possession (determined without regard to 
        section 904(f)).</DELETED>
        <DELETED>    ``(2) Trade or business.--If 75 percent or more of 
        the gross income of the qualified domestic corporation for such 
        period or such part thereof was derived from the active conduct 
        of a trade or business within a possession.</DELETED>
<DELETED>    ``(c) Credit Not Allowed Against Certain Taxes.--The 
credit provided by subsection (a) shall not be allowed against the tax 
imposed by--</DELETED>
        <DELETED>    ``(1) section 59A (relating to environmental 
        tax),</DELETED>
        <DELETED>    ``(2) section 531 (relating to the tax on 
        accumulated earnings),</DELETED>
        <DELETED>    ``(3) section 541 (relating to personal holding 
        company tax), or</DELETED>
        <DELETED>    ``(4) section 1351 (relating to recoveries of 
        foreign expropriation losses).</DELETED>
<DELETED>    ``(d) Limitations on Credit for Active Business Income.--
The amount of the credit determined under subsection (a) for any 
taxable year shall not exceed the sum of the following 
amounts:</DELETED>
        <DELETED>    ``(1) 60 percent of the sum of--</DELETED>
                <DELETED>    ``(A) the aggregate amount of the 
                qualified domestic corporation's qualified possession 
                wages for such taxable year, plus</DELETED>
                <DELETED>    ``(B) the allocable employee fringe 
                benefit expenses of the qualified domestic corporation 
                for such taxable year.</DELETED>
        <DELETED>    ``(2) The sum of--</DELETED>
                <DELETED>    ``(A) 15 percent of the deprecation 
                allowances for the taxable year with respect to short-
                life qualified tangible property,</DELETED>
                <DELETED>    ``(B) 40 percent of the depreciation 
                allowances for the taxable year with respect to medium-
                life qualified tangible property, and</DELETED>
                <DELETED>    ``(C) 65 percent of the depreciation 
                allowances for the taxable year with respect to long-
                life qualified tangible property.</DELETED>
        <DELETED>    ``(3) If the qualified domestic corporation does 
        not have an election to use the method described in section 
        936(h)(5)(C)(ii) (relating to profit split) in effect for the 
        taxable year, the amount of the qualified possession income 
        taxes for the taxable year allocable to nonsheltered 
        income.</DELETED>
<DELETED>    ``(e) Administrative Provisions.--For purposes of this 
title--</DELETED>
        <DELETED>    ``(1) the provisions of section 936 (including any 
        applicable election thereunder) shall apply in the same manner 
        as if the credit under this section were a credit under section 
        936(a)(1)(A) for a domestic corporation to which section 
        936(a)(4)(A) applies,</DELETED>
        <DELETED>    ``(2) the credit under this section shall be 
        treated in the same manner as the credit under section 936, 
        and</DELETED>
        <DELETED>    ``(3) a corporation to which this section applies 
        shall be treated in the same manner as if it were a corporation 
        electing the application of section 936.</DELETED>
<DELETED>    ``(f) Definitions.--For purposes of this section, any term 
used in this section which is also used in section 936 shall have the 
same meaning given such term by section 936.</DELETED>
<DELETED>    ``(g) Application of Section.--This section shall apply to 
taxable years beginning after December 31, 1995, and before January 1, 
2006.''.</DELETED>
        <DELETED>    (2) Conforming amendments.--</DELETED>
                <DELETED>    (A) Paragraph (1) of section 55(c) is 
                amended by striking ``and the section 936 credit 
                allowable under section 27(b)'' and inserting ``, the 
                section 936 credit allowable under section 27(b), and 
                the Puerto Rican economic activity credit under section 
                30A''.</DELETED>
                <DELETED>    (B) Subclause (I) of section 
                56(g)(4)(C)(ii) is amended--</DELETED>
                        <DELETED>    (i) by inserting ``30A,'' before 
                        ``936'', and</DELETED>
                        <DELETED>    (ii) by striking ``and (i)'' and 
                        inserting ``, (i), and (j)''.</DELETED>
                <DELETED>    (C) Clause (iii) of section 56(g)(4)(C) is 
                amended by adding at the end the following new 
                subclause:</DELETED>
                                <DELETED>    ``(VI) Application to 
                                section 30a corporations.--References 
                                in this clause to section 936 shall be 
                                treated as including references to 
                                section 30A.''.</DELETED>
                <DELETED>    (D) Subsection (b) of section 59 is 
                amended by striking ``section 936,'' and all that 
                follows and inserting ``section 30A or 936, alternative 
                minimum taxable income shall not include any income 
                with respect to which a credit is determined under 
                section 30A or 936.''.</DELETED>
                <DELETED>    (E) The table of sections for subpart B of 
                part IV of subchapter A of chapter 1 is amended by 
                adding at the end the following new item:</DELETED>

<DELETED>``Sec. 30A. Puerto Rican economic activity credit.''.
                <DELETED>    (F)(i) The heading for subpart B of part 
                IV of subchapter A of chapter 1 is amended to read as 
                follows:</DELETED>

            <DELETED>``Subpart B--Other Credits''.</DELETED>

                <DELETED>    (ii) The table of subparts for part IV of 
                subchapter A of chapter 1 is amended by striking the 
                item relating to subpart B and inserting the following 
                new item:</DELETED>

<DELETED>``Subpart B. Other credits.''.
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 
1995.</DELETED>

<DELETED>SEC. 1602. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO 
              ACQUIRE EMPLOYER SECURITIES.</DELETED>

<DELETED>    (a) In General.--Section 133 (relating to interest on 
certain loans used to acquire employer securities) is hereby 
repealed.</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Subparagraph (B) of section 291(e)(1) is 
        amended by striking clause (iv) and by redesignating clause (v) 
        as clause (iv).</DELETED>
        <DELETED>    (2) Section 812 is amended by striking subsection 
        (g).</DELETED>
        <DELETED>    (3) Paragraph (5) of section 852(b) is amended by 
        striking subparagraph (C).</DELETED>
        <DELETED>    (4) Paragraph (2) of section 4978(b) is amended by 
        striking subparagraph (A) and all that follows and inserting 
        the following:</DELETED>
                <DELETED>    ``(A) first from qualified securities to 
                which section 1042 applied acquired during the 3-year 
                period ending on the date of the disposition, beginning 
                with the securities first so acquired, and</DELETED>
                <DELETED>    ``(B) then from any other employer 
                securities.</DELETED>
        <DELETED>If subsection (d) applies to a disposition, the 
        disposition shall be treated as made from employer securities 
        in the opposite order of the preceding sentence.''.</DELETED>
        <DELETED>    (5)(A) Section 4978B (relating to tax on 
        disposition of employer securities to which section 133 
        applied) is hereby repealed.</DELETED>
        <DELETED>    (B) The table of sections for chapter 43 is 
        amended by striking the item relating to section 
        4978B.</DELETED>
        <DELETED>    (6) Subsection (e) of section 6047 is amended by 
        striking paragraphs (1), (2), and (3) and inserting the 
        following new paragraphs:</DELETED>
        <DELETED>    ``(1) any employer maintaining, or the plan 
        administrator (within the meaning of section 414(g)) of, an 
        employee stock ownership plan which holds stock with respect to 
        which section 404(k) applies to dividends paid on such stock, 
        or</DELETED>
        <DELETED>    ``(2) both such employer or plan 
        administrator,''.</DELETED>
        <DELETED>    (7) Subsection (f) of section 7872 is amended by 
        striking paragraph (12).</DELETED>
        <DELETED>    (8) The table of sections for part III of 
        subchapter B of chapter 1 is amended by striking the item 
        relating to section 133.</DELETED>
<DELETED>    (c) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to loans made after October 13, 
        1995.</DELETED>
        <DELETED>    (2) Refinancings.--The amendments made by this 
        section shall not apply to loans made after October 13, 1995, 
        to refinance securities acquisition loans (determined without 
        regard to section 133(b)(1)(B) of the Internal Revenue Code of 
        1986, as in effect on the day before the date of the enactment 
        of this Act) made on or before such date or to refinance loans 
        described in this paragraph if--</DELETED>
                <DELETED>    (A) the refinancing loans meet the 
                requirements of section 133 of such Code (as so in 
                effect),</DELETED>
                <DELETED>    (B) immediately after the refinancing the 
                principal amount of the loan resulting from the 
                refinancing does not exceed the principal amount of the 
                refinanced loan (immediately before the refinancing), 
                and</DELETED>
                <DELETED>    (C) the term of such refinancing loan does 
                not extend beyond the last day of the term of the 
                original securities acquisition loan.</DELETED>
        <DELETED>For purposes of this paragraph, the term ``securities 
        acquisition loan'' includes a loan from a corporation to an 
        employee stock ownership plan described in section 133(b)(3) of 
        such Code (as so in effect).</DELETED>
        <DELETED>    (3) Exception.--Any loan made pursuant to a 
        binding written contract in effect on October 13, 1995, and at 
        all times thereafter before such loan is made, shall be treated 
        for purposes of paragraphs (1) and (2) as a loan made before 
        such date.</DELETED>

<DELETED>SEC. 1603. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS 
              TREATED AS UNRELATED BUSINESS TAXABLE INCOME.</DELETED>

<DELETED>    (a) General Rule.--Subsection (b) of section 512 (relating 
to modifications) is amended by adding at the end the following new 
paragraph:</DELETED>
        <DELETED>    ``(17) Treatment of certain amounts derived from 
        foreign corporations.--</DELETED>
                <DELETED>    ``(A) In general.--Notwithstanding 
                paragraph (1), any amount included in gross income 
                under section 951(a)(1)(A) shall be included as an item 
                of gross income derived from an unrelated trade or 
                business to the extent the amount so included is 
                attributable to insurance income (as defined in section 
                953) which, if derived directly by the organization, 
                would be treated as gross income from an unrelated 
                trade or business. There shall be allowed all 
                deductions directly connected with amounts included in 
                gross income under the preceding sentence.</DELETED>
                <DELETED>    ``(B) Exception.--Subparagraph (A) shall 
                not apply to income attributable to a policy of 
                insurance or reinsurance with respect to which the 
                person (directly or indirectly) insured is--</DELETED>
                        <DELETED>    ``(i) such organization,</DELETED>
                        <DELETED>    ``(ii) an affiliate of such 
                        organization which is exempt from tax under 
                        section 501(a), or</DELETED>
                        <DELETED>    ``(iii) a director or officer of, 
                        or an individual who (directly or indirectly) 
                        performs services for, such organization or 
                        affiliate but only if the insurance covers 
                        primarily risks associated with the performance 
                        of services in connection with such 
                        organization or affiliate.</DELETED>
                <DELETED>For purposes of this subparagraph, the 
                determination as to whether an entity is an affiliate 
                of an organization shall be made under rules similar to 
                the rules of section 168(h)(4)(B).</DELETED>
                <DELETED>    ``(C) Regulations.--The Secretary shall 
                prescribe such regulations as may be necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations for the application of 
                this paragraph in the case of income paid through 1 or 
                more entities or between 2 or more chains of 
                entities.''.</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by this section 
shall apply to amounts included in gross income in any taxable year 
beginning after December 31, 1995.</DELETED>

<DELETED>SEC. 1604. DEPRECIATION UNDER INCOME FORECAST 
              METHOD.</DELETED>

<DELETED>    (a) General Rule.--Section 167 (relating to depreciation) 
is amended by redesignating subsection (g) as subsection (h) and by 
inserting after subsection (f) the following new subsection:</DELETED>
<DELETED>    ``(g) Depreciation Under Income Forecast Method.--
</DELETED>
        <DELETED>    ``(1) In general.--If the depreciation deduction 
        allowable under this section to any taxpayer with respect to 
        any property is determined under the income forecast method or 
        any similar method--</DELETED>
                <DELETED>    ``(A) the income from the property to be 
                taken into account in determining the depreciation 
                deduction under such method shall be equal to the 
                amount of income earned in connection with the property 
                before the close of the 10th taxable year following the 
                taxable year in which the property was placed in 
                service,</DELETED>
                <DELETED>    ``(B) the adjusted basis of the property 
                shall only include amounts with respect to which the 
                requirements of section 461(h) are satisfied,</DELETED>
                <DELETED>    ``(C) the depreciation deduction under 
                such method for the 10th taxable year beginning after 
                the taxable year in which the property was placed in 
                service shall be equal to the adjusted basis of such 
                property as of the beginning of such 10th taxable year, 
                and</DELETED>
                <DELETED>    ``(D) such taxpayer shall pay (or be 
                entitled to receive) interest computed under the look-
                back method of paragraph (2) for any recomputation 
                year.</DELETED>
        <DELETED>    ``(2) Look-back method.--The interest computed 
        under the look-back method of this paragraph for any 
        recomputation year shall be determined by--</DELETED>
                <DELETED>    ``(A) first determining the depreciation 
                deductions under this section with respect to such 
                property which would have been allowable for prior 
                taxable years if the determination of the amounts so 
                allowable had been made on the basis of the sum of the 
                following (instead of the estimated income from such 
                property)--</DELETED>
                        <DELETED>    ``(i) the actual income earned in 
                        connection with such property for periods 
                        before the close of the recomputation year, 
                        and</DELETED>
                        <DELETED>    ``(ii) an estimate of the future 
                        income to be earned in connection with such 
                        property for periods after the recomputation 
                        year and before the close of the 10th taxable 
                        year following the taxable year in which the 
                        property was placed in service,</DELETED>
                <DELETED>    ``(B) second, determining (solely for 
                purposes of computing such interest) the overpayment or 
                underpayment of tax for each such prior taxable year 
                which would result solely from the application of 
                subparagraph (A), and</DELETED>
                <DELETED>    ``(C) then using the adjusted overpayment 
                rate (as defined in section 460(b)(7)), compounded 
                daily, on the overpayment or underpayment determined 
                under subparagraph (B).</DELETED>
        <DELETED>For purposes of the preceding sentence, any cost 
        incurred after the property is placed in service (which is not 
        treated as a separate property under paragraph (5)) shall be 
        taken into account by discounting (using the Federal mid-term 
        rate determined under section 1274(d) as of the time such cost 
        is incurred) such cost to its value as of the date the property 
        is placed in service. The taxpayer may elect with respect to 
        any property to have the preceding sentence not apply to such 
        property.</DELETED>
        <DELETED>    ``(3) Exception from look-back method.--Paragraph 
        (1)(D) shall not apply with respect to any property which, when 
        placed in service by the taxpayer, had a basis of $100,000 or 
        less.</DELETED>
        <DELETED>    ``(4) Recomputation year.--For purposes of this 
        subsection, except as provided in regulations, the term 
        `recomputation year' means, with respect to any property, the 
        3d and the 10th taxable years beginning after the taxable year 
        in which the property was placed in service, unless the actual 
        income earned in connection with the property for the period 
        before the close of such 3d or 10th taxable year is within 10 
        percent of the income earned in connection with the property 
        for such period which was taken into account under paragraph 
        (1)(A).</DELETED>
        <DELETED>    ``(5) Special rules.--</DELETED>
                <DELETED>    ``(A) Certain costs treated as separate 
                property.--For purposes of this subsection, the 
                following costs shall be treated as separate 
                properties:</DELETED>
                        <DELETED>    ``(i) Any costs incurred with 
                        respect to any property after the 10th taxable 
                        year beginning after the taxable year in which 
                        the property was placed in service.</DELETED>
                        <DELETED>    ``(ii) Any costs incurred after 
                        the property is placed in service and before 
                        the close of such 10th taxable year if such 
                        costs are significant and give rise to a 
                        significant increase in the income from the 
                        property which was not included in the 
                        estimated income from the property.</DELETED>
                <DELETED>    ``(B) Syndication income from television 
                series.--In the case of property which is an episode in 
                a television series, income from syndicating such 
                series shall not be required to be taken into account 
                under this subsection before the earlier of--</DELETED>
                        <DELETED>    ``(i) the 4th taxable year 
                        beginning after the date the first episode in 
                        such series is placed in service, or</DELETED>
                        <DELETED>    ``(ii) the earliest taxable year 
                        in which the taxpayer has an arrangement 
                        relating to the future syndication of such 
                        series.</DELETED>
                <DELETED>    ``(C) Special rules for financial 
                exploitation of characters, etc.--For purposes of this 
                subsection, in the case of television and motion 
                picture films, the income from the property shall 
                include income from the exploitation of characters, 
                designs, scripts, scores, and other incidental income 
                associated with such films, but only to the extent that 
                such income is earned in connection with the ultimate 
                use of such items by, or the ultimate sale of 
                merchandise to, persons who are not related persons 
                (within the meaning of section 267(b)) to the 
                taxpayer.</DELETED>
                <DELETED>    ``(D) Collection of interest.--For 
                purposes of subtitle F (other than sections 6654 and 
                6655), any interest required to be paid by the taxpayer 
                under paragraph (1) for any recomputation year shall be 
                treated as an increase in the tax imposed by this 
                chapter for such year.</DELETED>
                <DELETED>    ``(E) Determinations.--For purposes of 
                paragraph (2), determinations of the amount of income 
                earned in connection with any property shall be made in 
                the same manner as for purposes of applying the income 
                forecast method; except that any income from the 
                disposition of such property shall be taken into 
                account.</DELETED>
                <DELETED>    ``(F) Treatment of pass-thru entities.--
                Rules similar to the rules of section 460(b)(4) shall 
                apply for purposes of this subsection.''.</DELETED>
<DELETED>    (b) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--The amendment made by subsection 
        (a) shall apply to property placed in service after September 
        13, 1995.</DELETED>
        <DELETED>    (2) Binding contracts.--The amendment made by 
        subsection (a) shall not apply to any property produced or 
        acquired by the taxpayer pursuant to a written contract which 
        was binding on September 13, 1995, and at all times thereafter 
        before such production or acquisition.</DELETED>

<DELETED>SEC. 1605. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR 
              DAMAGES NOT ATTRIBUTABLE TO PHYSICAL INJURIES OR 
              SICKNESS.</DELETED>

<DELETED>    (a) In General.--Paragraph (2) of section 104(a) (relating 
to compensation for injuries or sickness) is amended to read as 
follows:</DELETED>
        <DELETED>    ``(2) the amount of any damages (other than 
        punitive damages) received (whether by suit or agreement and 
        whether as lump sums or as periodic payments) on account of 
        personal physical injuries or physical sickness;''.</DELETED>
<DELETED>    (b) Emotional Distress as Such Treated as Not Physical 
Injury or Physical Sickness.--Section 104(a) is amended by striking the 
last sentence and inserting the following new sentence: ``For purposes 
of paragraph (2), emotional distress shall not be treated as a physical 
injury or physical sickness. The preceding sentence shall not apply to 
an amount of damages not in excess of the amount paid for medical care 
(described in subparagraph (A) or (B) of section 213(d)(1)) 
attributable to emotional distress.''.</DELETED>
<DELETED>    (c) Application of Prior Law for States in Which Only 
Punitive Damages May Be Awarded in Wrongful Death Actions.--Section 104 
is amended by redesignating subsection (c) as subsection (d) and by 
inserting after subsection (b) the following new subsection:</DELETED>
<DELETED>    ``(c) Application of Prior Law in Certain Cases.--The 
phrase `(other than punitive damages)' shall not apply to punitive 
damages awarded in a civil action--</DELETED>
        <DELETED>    ``(1) which is a wrongful death action, 
        and</DELETED>
        <DELETED>    ``(2) with respect to which applicable State law 
        (as in effect on September 13, 1995 and without regard to any 
        modification after such date) provides, or has been construed 
        to provide by a court of competent jurisdiction pursuant to a 
        decision issued on or before September 13, 1995, that only 
        punitive damages may be awarded in such an action.</DELETED>
<DELETED>This subsection shall cease to apply to any civil action filed 
on or after the first date on which the applicable State law ceases to 
provide (or is no longer construed to provide) the treatment described 
in paragraph (2).''.</DELETED>
<DELETED>    (d) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--Except as provided in paragraph 
        (2), the amendments made by this section shall apply to amounts 
        received after June 30, 1996, in taxable years ending after 
        such date.</DELETED>
        <DELETED>    (2) Exception.--The amendments made by this 
        section shall not apply to any amount received under a written 
        binding agreement, court decree, or mediation award in effect 
        on (or issued on or before) September 13, 1995.</DELETED>

<DELETED>SEC. 1606. REPEAL OF DIESEL FUEL TAX REBATE TO PURCHASERS OF 
              DIESEL-POWERED AUTOMOBILES AND LIGHT TRUCKS.</DELETED>

<DELETED>    (a) In General.--Section 6427 (relating to fuels not used 
for taxable purposes) is amended by striking subsection (g).</DELETED>
<DELETED>    (b) Conforming Amendments.--</DELETED>
        <DELETED>    (1) Paragraph (3) of section 34(a) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(3) under section 6427 with respect to fuels 
        used for nontaxable purposes or resold during the taxable year 
        (determined without regard to section 6427(k)).''.</DELETED>
        <DELETED>    (2) Paragraphs (1) and (2)(A) of section 6427(i) 
        are each amended--</DELETED>
                <DELETED>    (A) by striking ``(g),'', and</DELETED>
                <DELETED>    (B) by striking ``(or a qualified diesel 
                powered highway vehicle purchased)'' each place it 
                appears.</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to vehicles purchased after the date of the enactment of 
this Act.</DELETED>

          <DELETED>Subtitle G--Technical Corrections</DELETED>

<DELETED>SEC. 1701. COORDINATION WITH OTHER SUBTITLES.</DELETED>

<DELETED>    For purposes of applying the amendments made by any 
subtitle of this title other than this subtitle, the provisions of this 
subtitle shall be treated as having been enacted immediately before the 
provisions of such other subtitles.</DELETED>

<DELETED>SEC. 1702. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 
              1990.</DELETED>

<DELETED>    (a) Amendments Related to Subtitle A.--</DELETED>
        <DELETED>    (1) Subparagraph (B) of section 59(j)(3) is 
        amended by striking ``section 1(i)(3)(B)'' and inserting 
        ``section 1(g)(3)(B)''.</DELETED>
        <DELETED>    (2) Clause (i) of section 151(d)(3)(C) is amended 
        by striking ``joint of a return'' and inserting ``joint 
        return''.</DELETED>
<DELETED>    (b) Amendments Related to Subtitle B.--</DELETED>
        <DELETED>    (1) Paragraph (1) of section 11212(e) of the 
        Revenue Reconciliation Act of 1990 is amended by striking 
        ``Paragraph (1) of section 6724(d)'' and inserting 
        ``Subparagraph (B) of section 6724(d)(1)''.</DELETED>
        <DELETED>    (2)(A) Subparagraph (B) of section 4093(c)(2), as 
        in effect before the amendments made by the Revenue 
        Reconciliation Act of 1993, is amended by inserting before the 
        period ``unless such fuel is sold for exclusive use by a State 
        or any political subdivision thereof''.</DELETED>
        <DELETED>    (B) Paragraph (4) of section 6427(l), as in effect 
        before the amendments made by the Revenue Reconciliation Act of 
        1993, is amended by inserting before the period ``unless such 
        fuel was used by a State or any political subdivision 
        thereof''.</DELETED>
        <DELETED>    (3) Paragraph (1) of section 6416(b) is amended by 
        striking ``chapter 32 or by section 4051'' and inserting 
        ``chapter 31 or 32''.</DELETED>
        <DELETED>    (4) Section 7012 is amended--</DELETED>
                <DELETED>    (A) by striking ``production or 
                importation of gasoline'' in paragraph (3) and 
                inserting ``taxes on gasoline and diesel fuel'', 
                and</DELETED>
                <DELETED>    (B) by striking paragraph (4) and 
                redesignating paragraphs (5) and (6) as paragraphs (4) 
                and (5), respectively.</DELETED>
        <DELETED>    (5) Subsection (c) of section 5041 is amended by 
        striking paragraph (6) and by inserting the following new 
        paragraphs:</DELETED>
        <DELETED>    ``(6) Credit for transferee in bond.--If--
        </DELETED>
                <DELETED>    ``(A) wine produced by any person would be 
                eligible for any credit under paragraph (1) if removed 
                by such person during the calendar year,</DELETED>
                <DELETED>    ``(B) wine produced by such person is 
                removed during such calendar year by any other person 
                (hereafter in this paragraph referred to as the 
                `transferee') to whom such wine was transferred in bond 
                and who is liable for the tax imposed by this section 
                with respect to such wine, and</DELETED>
                <DELETED>    ``(C) such producer holds title to such 
                wine at the time of its removal and provides to the 
                transferee such information as is necessary to properly 
                determine the transferee's credit under this 
                paragraph,</DELETED>
        <DELETED>then, the transferee (and not the producer) shall be 
        allowed the credit under paragraph (1) which would be allowed 
        to the producer if the wine removed by the transferee had been 
        removed by the producer on that date.</DELETED>
        <DELETED>    ``(7) Regulations.--The Secretary may prescribe 
        such regulations as may be necessary to carry out the purposes 
        of this subsection, including regulations--</DELETED>
                <DELETED>    ``(A) to prevent the credit provided in 
                this subsection from benefiting any person who produces 
                more than 250,000 wine gallons during a calendar year, 
                and</DELETED>
                <DELETED>    ``(B) to assure proper reduction of such 
                credit for persons producing more than 150,000 wine 
                gallons of wine during a calendar year.''.</DELETED>
        <DELETED>    (6) Paragraph (3) of section 5061(b) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(3) section 5041(f),''.</DELETED>
        <DELETED>    (7) Section 5354 is amended by inserting ``(taking 
        into account the appropriate amount of credit with respect to 
        such wine under section 5041(c))'' after ``any one 
        time''.</DELETED>
<DELETED>    (c) Amendments Related to Subtitle C.--</DELETED>
        <DELETED>    (1) Paragraph (4) of section 56(g) is amended by 
        redesignating subparagraphs (I) and (J) as subparagraphs (H) 
        and (I), respectively.</DELETED>
        <DELETED>    (2) Subparagraph (B) of section 6724(d)(1) is 
        amended--</DELETED>
                <DELETED>    (A) by striking ``or'' at the end of 
                clause (xii), and</DELETED>
                <DELETED>    (B) by striking the period at the end of 
                clause (xiii) and inserting ``, or''.</DELETED>
        <DELETED>    (3) Subsection (g) of section 6302 is amended by 
        inserting ``, 22,'' after ``chapters 21''.</DELETED>
        <DELETED>    (4) The earnings and profits of any insurance 
        company to which section 11305(c)(3) of the Revenue 
        Reconciliation Act of 1990 applies shall be determined without 
        regard to any deduction allowed under such section; except 
        that, for purposes of applying sections 56 and 902, and subpart 
        F of part III of subchapter N of chapter 1 of the Internal 
        Revenue Code of 1986, such deduction shall be taken into 
        account.</DELETED>
        <DELETED>    (5) Subparagraph (D) of section 6038A(e)(4) is 
        amended--</DELETED>
                <DELETED>    (A) by striking ``any transaction to which 
                the summons relates'' and inserting ``any affected 
                taxable year'', and</DELETED>
                <DELETED>    (B) by adding at the end thereof the 
                following new sentence: ``For purposes of this 
                subparagraph, the term `affected taxable year' means 
                any taxable year if the determination of the amount of 
                tax imposed for such taxable year is affected by the 
                treatment of the transaction to which the summons 
                relates.''.</DELETED>
        <DELETED>    (6) Subparagraph (A) of section 6621(c)(2) is 
        amended by adding at the end thereof the following new flush 
        sentence:</DELETED>
                <DELETED>``The preceding sentence shall be applied 
                without regard to any such letter or notice which is 
                withdrawn by the Secretary.''.</DELETED>
        <DELETED>    (7) Clause (i) of section 6621(c)(2)(B) is amended 
        by striking ``this subtitle'' and inserting ``this 
        title''.</DELETED>
<DELETED>    (d) Amendments Related to Subtitle D.--</DELETED>
        <DELETED>    (1) Notwithstanding section 11402(c) of the 
        Revenue Reconciliation Act of 1990, the amendment made by 
        section 11402(b)(1) of such Act shall apply to taxable years 
        ending after December 31, 1989.</DELETED>
        <DELETED>    (2) Clause (ii) of section 143(m)(4)(C) is 
        amended--</DELETED>
                <DELETED>    (A) by striking ``any month of the 10-year 
                period'' and inserting ``any year of the 4-year 
                period'',</DELETED>
                <DELETED>    (B) by striking ``succeeding months'' and 
                inserting ``succeeding years'', and</DELETED>
                <DELETED>    (C) by striking ``over the remainder of 
                such period (or, if lesser, 5 years)'' and inserting 
                ``to zero over the succeeding 5 years''.</DELETED>
<DELETED>    (e) Amendments Related to Subtitle E.--</DELETED>
        <DELETED>    (1)(A) Clause (ii) of section 56(d)(1)(B) is 
        amended to read as follows:</DELETED>
                        <DELETED>    ``(ii) appropriate adjustments in 
                        the application of section 172(b)(2) shall be 
                        made to take into account the limitation of 
                        subparagraph (A).''.</DELETED>
        <DELETED>    (B) For purposes of applying sections 56(g)(1) and 
        56(g)(3) of the Internal Revenue Code of 1986 with respect to 
        taxable years beginning in 1991 and 1992, the reference in such 
        sections to the alternative tax net operating loss deduction 
        shall be treated as including a reference to the deduction 
        under section 56(h) of such Code as in effect before the 
        amendments made by section 1915 of the Energy Policy Act of 
        1992.</DELETED>
        <DELETED>    (2) Clause (i) of section 613A(c)(3)(A) is amended 
        by striking ``the table contained in''.</DELETED>
        <DELETED>    (3) Section 6501 is amended--</DELETED>
                <DELETED>    (A) by striking subsection (m) (relating 
                to deficiency attributable to election under section 
                44B) and by redesignating subsections (n) and (o) as 
                subsections (m) and (n), respectively, and</DELETED>
                <DELETED>    (B) by striking ``section 40(f) or 51(j)'' 
                in subsection (m) (as redesignated by subparagraph (A)) 
                and inserting ``section 40(f), 43, or 
                51(j)''.</DELETED>
        <DELETED>    (4) Subparagraph (C) of section 38(c)(2) (as in 
        effect on the day before the date of the enactment of the 
        Revenue Reconciliation Act of 1990) is amended by inserting 
        before the period at the end of the first sentence the 
        following: ``and without regard to the deduction under section 
        56(h)''.</DELETED>
        <DELETED>    (5) The amendment made by section 1913(b)(2)(C)(i) 
        of the Energy Policy Act of 1992 shall apply to taxable years 
        beginning after December 31, 1990.</DELETED>
<DELETED>    (f) Amendments Related to Subtitle F.--</DELETED>
        <DELETED>    (1)(A) Section 2701(a)(3) is amended by adding at 
        the end thereof the following new subparagraph:</DELETED>
                <DELETED>    ``(C) Valuation of qualified payments 
                where no liquidation, etc. rights.--In the case of an 
                applicable retained interest which is described in 
                subparagraph (B)(i) but not subparagraph (B)(ii), the 
                value of the distribution right shall be determined 
                without regard to this section.''.</DELETED>
        <DELETED>    (B) Section 2701(a)(3)(B) is amended by inserting 
        ``certain'' before ``qualified'' in the heading 
        thereof.</DELETED>
        <DELETED>    (C) Sections 2701 (d)(1) and (d)(4) are each 
        amended by striking ``subsection (a)(3)(B)'' and inserting 
        ``subsection (a)(3) (B) or (C)''.</DELETED>
        <DELETED>    (2) Clause (i) of section 2701(a)(4)(B) is amended 
        by inserting ``(or, to the extent provided in regulations, the 
        rights as to either income or capital)'' after ``income and 
        capital''.</DELETED>
        <DELETED>    (3)(A) Section 2701(b)(2) is amended by adding at 
        the end thereof the following new subparagraph:</DELETED>
                <DELETED>    ``(C) Applicable family member.--For 
                purposes of this subsection, the term `applicable 
                family member' includes any lineal descendant of any 
                parent of the transferor or the transferor's 
                spouse.''.</DELETED>
        <DELETED>    (B) Section 2701(e)(3) is amended--</DELETED>
                <DELETED>    (i) by striking subparagraph (B), 
                and</DELETED>
                <DELETED>    (ii) by striking so much of paragraph (3) 
                as precedes ``shall be treated as holding'' and 
                inserting:</DELETED>
        <DELETED>    ``(3) Attribution of indirect holdings and 
        transfers.--An individual''.</DELETED>
        <DELETED>    (C) Section 2704(c)(3) is amended by striking 
        ``section 2701(e)(3)(A)'' and inserting ``section 
        2701(e)(3)''.</DELETED>
        <DELETED>    (4) Clause (i) of section 2701(c)(1)(B) is amended 
        to read as follows:</DELETED>
                        <DELETED>    ``(i) a right to distributions 
                        with respect to any interest which is junior to 
                        the rights of the transferred 
                        interest,''.</DELETED>
        <DELETED>    (5)(A) Clause (i) of section 2701(c)(3)(C) is 
        amended to read as follows:</DELETED>
                        <DELETED>    ``(i) In general.--Payments under 
                        any interest held by a transferor which 
                        (without regard to this subparagraph) are 
                        qualified payments shall be treated as 
                        qualified payments unless the transferor elects 
                        not to treat such payments as qualified 
                        payments. Payments described in the preceding 
                        sentence which are held by an applicable family 
                        member shall be treated as qualified payments 
                        only if such member elects to treat such 
                        payments as qualified payments.''.</DELETED>
        <DELETED>    (B) The first sentence of section 
        2701(c)(3)(C)(ii) is amended to read as follows: ``A transferor 
        or applicable family member holding any distribution right 
        which (without regard to this subparagraph) is not a qualified 
        payment may elect to treat such right as a qualified payment, 
        to be paid in the amounts and at the times specified in such 
        election.''.</DELETED>
        <DELETED>    (C) The time for making an election under the 
        second sentence of section 2701(c)(3)(C)(i) of the Internal 
        Revenue Code of 1986 (as amended by subparagraph (A)) shall not 
        expire before the due date (including extensions) for filing 
        the transferor's return of the tax imposed by section 2501 of 
        such Code for the first calendar year ending after the date of 
        enactment.</DELETED>
        <DELETED>    (6) Section 2701(d)(3)(A)(iii) is amended by 
        striking ``the period ending on the date of''.</DELETED>
        <DELETED>    (7) Subclause (I) of section 2701(d)(3)(B)(ii) is 
        amended by inserting ``or the exclusion under section 
        2503(b),'' after ``section 2523,''.</DELETED>
        <DELETED>    (8) Section 2701(e)(5) is amended--</DELETED>
                <DELETED>    (A) by striking ``such contribution to 
                capital or such redemption, recapitalization, or other 
                change'' in subparagraph (A) and inserting ``such 
                transaction'', and</DELETED>
                <DELETED>    (B) by striking ``the transfer'' in 
                subparagraph (B) and inserting ``such 
                transaction''.</DELETED>
        <DELETED>    (9) Section 2701(d)(4) is amended by adding at the 
        end thereof the following new subparagraph:</DELETED>
                <DELETED>    ``(C) Transfer to transferors.--In the 
                case of a taxable event described in paragraph 
                (3)(A)(ii) involving a transfer of an applicable 
                retained interest from an applicable family member to a 
                transferor, this subsection shall continue to apply to 
                the transferor during any period the transferor holds 
                such interest.''.</DELETED>
        <DELETED>    (10) Section 2701(e)(6) is amended by inserting 
        ``or to reflect the application of subsection (d)'' before the 
        period at the end thereof.</DELETED>
        <DELETED>    (11)(A) Section 2702(a)(3)(A) is amended--
        </DELETED>
                <DELETED>    (i) by striking ``to the extent'' and 
                inserting ``if'' in clause (i),</DELETED>
                <DELETED>    (ii) by striking ``or'' at the end of 
                clause (i),</DELETED>
                <DELETED>    (iii) by striking the period at the end of 
                clause (ii) and inserting ``, or'', and</DELETED>
                <DELETED>    (iv) by adding at the end thereof the 
                following new clause:</DELETED>
                        <DELETED>    ``(iii) to the extent that 
                        regulations provide that such transfer is not 
                        inconsistent with the purposes of this 
                        section.''.</DELETED>
        <DELETED>    (B)(i) Section 2702(a)(3) is amended by striking 
        ``incomplete transfer'' each place it appears and inserting 
        ``incomplete gift''.</DELETED>
        <DELETED>    (ii) The heading for section 2702(a)(3)(B) is 
        amended by striking ``Incomplete transfer'' and inserting 
        ``Incomplete gift''.</DELETED>
<DELETED>    (g) Amendments Related to Subtitle G.--</DELETED>
        <DELETED>    (1)(A) Subsection (a) of section 1248 is amended--
        </DELETED>
                <DELETED>    (i) by striking ``, or if a United States 
                person receives a distribution from a foreign 
                corporation which, under section 302 or 331, is treated 
                as an exchange of stock'' in paragraph (1), 
                and</DELETED>
                <DELETED>    (ii) by adding at the end thereof the 
                following new sentence: ``For purposes of this section, 
                a United States person shall be treated as having sold 
                or exchanged any stock if, under any provision of this 
                subtitle, such person is treated as realizing gain from 
                the sale or exchange of such stock.''.</DELETED>
        <DELETED>    (B) Paragraph (1) of section 1248(e) is amended by 
        striking ``, or receives a distribution from a domestic 
        corporation which, under section 302 or 331, is treated as an 
        exchange of stock''.</DELETED>
        <DELETED>    (C) Subparagraph (B) of section 1248(f)(1) is 
        amended by striking ``or 361(c)(1)'' and inserting ``355(c)(1), 
        or 361(c)(1)''.</DELETED>
        <DELETED>    (D) Paragraph (1) of section 1248(i) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(1) In general.--If any shareholder of a 10-
        percent corporate shareholder of a foreign corporation 
        exchanges stock of the 10-percent corporate shareholder for 
        stock of the foreign corporation, such 10-percent corporate 
        shareholder shall recognize gain in the same manner as if the 
        stock of the foreign corporation received in such exchange had 
        been--</DELETED>
                <DELETED>    ``(A) issued to the 10-percent corporate 
                shareholder, and</DELETED>
                <DELETED>    ``(B) then distributed by the 10-percent 
                corporate shareholder to such shareholder in redemption 
                or liquidation (whichever is appropriate).</DELETED>
        <DELETED>The amount of gain recognized by such 10-percent 
        corporate shareholder under the preceding sentence shall not 
        exceed the amount treated as a dividend under this 
        section.''.</DELETED>
        <DELETED>    (2) Section 897 is amended by striking subsection 
        (f).</DELETED>
        <DELETED>    (3) Paragraph (13) of section 4975(d) is amended 
        by striking ``section 408(b)'' and inserting ``section 
        408(b)(12)''.</DELETED>
        <DELETED>    (4) Clause (iii) of section 56(g)(4)(D) is  
        amended by inserting ``, but only with respect to taxable years 
        beginning after December 31, 1989'' before the period at the 
        end thereof.</DELETED>
        <DELETED>    (5)(A) Paragraph (11) of section 11701(a) of the 
        Revenue Reconciliation Act of 1990 (and the amendment made by 
        such paragraph) are hereby repealed, and section 7108(r)(2) of 
        the Revenue Reconciliation Act of 1989 shall be applied as if 
        such paragraph (and amendment) had never been 
        enacted.</DELETED>
        <DELETED>    (B) Subparagraph (A) shall not apply to any 
        building if the owner of such building establishes to the 
        satisfaction of the Secretary of the Treasury or his delegate 
        that such owner reasonably relied on the amendment made by such 
        paragraph (11).</DELETED>
<DELETED>    (h) Amendments Related to Subtitle H.--</DELETED>
        <DELETED>    (1)(A) Clause (vi) of section 168(e)(3)(B) is 
        amended by striking ``or'' at the end of subclause (I), by 
        striking the period at the end of subclause (II) and inserting 
        ``, or'', and by adding at the end thereof the following new 
        subclause:</DELETED>
                                <DELETED>    ``(III) is described in 
                                section 48(l)(3)(A)(ix) (as in effect 
                                on the day before the date of the 
                                enactment of the Revenue Reconciliation 
                                Act of 1990).''.</DELETED>
        <DELETED>    (B) Subparagraph (B) of section 168(e)(3) 
        (relating to 5-year property) is amended by adding at the end 
        the following flush sentence:</DELETED>
                <DELETED>``Nothing in any provision of law shall be 
                construed to treat property as not being described in 
                clause (vi)(I) (or the corresponding provisions of 
                prior law) by reason of being public utility property 
                (within the meaning of section 48(a)(3)).''.</DELETED>
        <DELETED>    (C) Subparagraph (K) of section 168(g)(4) is 
        amended by striking ``section 48(a)(3)(A)(iii)'' and inserting 
        ``section 48(l)(3)(A)(ix) (as in effect on the day before the 
        date of the enactment of the Revenue Reconciliation Act of 
        1990)''.</DELETED>
        <DELETED>    (2) Clause (ii) of section 172(b)(1)(E) is amended 
        by striking ``subsection (m)'' and inserting ``subsection 
        (h)''.</DELETED>
        <DELETED>    (3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II), 
        and 832(b)(5)(D)(ii)(II) are each amended by striking 
        ``243(b)(5)'' and inserting ``243(b)(2)''.</DELETED>
        <DELETED>    (4) Subparagraph (A) of section 243(b)(3) is 
        amended by inserting ``of'' after ``In the case''.</DELETED>
        <DELETED>    (5) The subsection heading for subsection (a) of 
        section 280F is amended by striking ``Investment Tax Credit 
        and''.</DELETED>
        <DELETED>    (6) Clause (i) of section 1504(c)(2)(B) is amended 
        by inserting ``section'' before ``243(b)(2)''.</DELETED>
        <DELETED>    (7) Paragraph (3) of section 341(f) is amended by 
        striking ``351, 361, 371(a), or 374(a)'' and inserting ``351, 
        or 361''.</DELETED>
        <DELETED>    (8) Paragraph (2) of section 243(b) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(2) Affiliated group.--For purposes of this 
        subsection:</DELETED>
                <DELETED>    ``(A) In general.--The term `affiliated 
                group' has the meaning given such term by section 
                1504(a), except that for such purposes sections 
                1504(b)(2), 1504(b)(4), and 1504(c) shall not 
                apply.</DELETED>
                <DELETED>    ``(B) Group must be consistent in foreign 
                tax treatment.--The requirements of paragraph (1)(A) 
                shall not be treated as being met with respect to any 
                dividend received by a corporation if, for any taxable 
                year which includes the day on which such dividend is 
                received--</DELETED>
                        <DELETED>    ``(i) 1 or more members of the 
                        affiliated group referred to in paragraph 
                        (1)(A) choose to any extent to take the 
                        benefits of section 901, and</DELETED>
                        <DELETED>    ``(ii) 1 or more other members of 
                        such group claim to any extent a deduction for 
                        taxes otherwise creditable under section 
                        901.''.</DELETED>
        <DELETED>    (9) The amendment made by section 11813(b)(17) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        the material stricken by such amendment included the closing 
        parenthesis after ``section 48(a)(5)''.</DELETED>
        <DELETED>    (10) Paragraph (1) of section 179(d) is amended by 
        striking ``in a trade or business'' and inserting ``a trade or 
        business''.</DELETED>
        <DELETED>    (11) Subparagraph (E) of section 50(a)(2) is 
        amended by striking ``section 48(a)(5)(A)'' and inserting 
        ``section 48(a)(5)''.</DELETED>
        <DELETED>    (12) The amendment made by section 
        11801(c)(9)(G)(ii) of the Revenue Reconciliation Act of 1990 
        shall be applied as if it struck ``Section 422A(c)(2)'' and 
        inserted ``Section 422(c)(2)''.</DELETED>
        <DELETED>    (13) Subparagraph (B) of section 424(c)(3) is 
        amended by striking ``a qualified stock option, an incentive 
        stock option, an option granted under an employee stock 
        purchase plan, or a restricted stock option'' and inserting 
        ``an incentive stock option or an option granted under an 
        employee stock purchase plan''.</DELETED>
        <DELETED>    (14) Subparagraph (E) of section 1367(a)(2) is 
        amended by striking ``section 613A(c)(13)(B)'' and inserting 
        ``section 613A(c)(11)(B)''.</DELETED>
        <DELETED>    (15) Subparagraph (B) of section 460(e)(6) is 
        amended by striking ``section 167(k)'' and inserting ``section 
        168(e)(2)(A)(ii)''.</DELETED>
        <DELETED>    (16) Subparagraph (C) of section 172(h)(4) is 
        amended by striking ``subsection (b)(1)(M)'' and inserting 
        ``subsection (b)(1)(E)''.</DELETED>
        <DELETED>    (17) Section 6503 is amended--</DELETED>
                <DELETED>    (A) by redesignating the subsection 
                relating to extension in case of certain summonses as 
                subsection (j), and</DELETED>
                <DELETED>    (B) by redesignating the subsection 
                relating to cross references as subsection 
                (k).</DELETED>
        <DELETED>    (18) Paragraph (4) of section 1250(e) is hereby 
        repealed.</DELETED>
<DELETED>    (i) Effective Date.--Except as otherwise expressly 
provided--</DELETED>
        <DELETED>    (1) the amendments made by this section shall be 
        treated as amendments to the Internal Revenue Code of 1986 as 
        amended by the Revenue Reconciliation Act of 1993; 
        and</DELETED>
        <DELETED>    (2) any amendment made by this section shall apply 
        to periods before the date of the enactment of this section in 
        the same manner as if it had been included in the provision of 
        the Revenue Reconciliation Act of 1990 to which such amendment 
        relates.</DELETED>

<DELETED>SEC. 1703. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 
              1993.</DELETED>

<DELETED>    (a) Amendment Related to Section 13114.--Paragraph (2) of 
section 1044(c) is amended to read as follows:</DELETED>
        <DELETED>    ``(2) Purchase.--The taxpayer shall be considered 
        to have purchased any property if, but for subsection (d), the 
        unadjusted basis of such property would be its cost within the 
        meaning of section 1012.''.</DELETED>
<DELETED>    (b) Amendments Related to Section 13142.--</DELETED>
        <DELETED>    (1) Subparagraph (B) of section 13142(b)(6) of the 
        Revenue Reconciliation Act of 1993 is amended to read as 
        follows:</DELETED>
                <DELETED>    ``(B) Full-time students, waiver 
                authority, and prohibited discrimination.--The 
                amendments made by paragraphs (2), (3), and (4) shall 
                take effect on the date of the enactment of this 
                Act.''.</DELETED>
        <DELETED>    (2) Subparagraph (C) of section 13142(b)(6) of 
        such Act is amended by striking ``paragraph (2)'' and inserting 
        ``paragraph (5)''.</DELETED>
<DELETED>    (c) Amendment Related to Section 13161.--</DELETED>
        <DELETED>    (1) In general.--Subsection (e) of section 4001 
        (relating to inflation adjustment) is amended to read as 
        follows:</DELETED>
<DELETED>    ``(e) Inflation Adjustment.--</DELETED>
        <DELETED>    ``(1) In general.--The $30,000 amount in 
        subsection (a) and section 4003(a) shall be increased by an 
        amount equal to--</DELETED>
                <DELETED>    ``(A) $30,000, multiplied by</DELETED>
                <DELETED>    ``(B) the cost-of-living adjustment under 
                section 1(f)(3) for the calendar year in which the 
                vehicle is sold, determined by substituting `calendar 
                year 1990' for `calendar year 1992' in subparagraph (B) 
                thereof.</DELETED>
        <DELETED>    ``(2) Rounding.--If any amount as adjusted under 
        paragraph (1) is not a multiple of $2,000, such amount shall be 
        rounded to the next lowest multiple of $2,000.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect on the date of the enactment of 
        this Act.</DELETED>
<DELETED>    (d) Amendment Related to Section 13201.--Clause (ii) of 
section 135(b)(2)(B) is amended by inserting before the period at the 
end thereof the following: ``, determined by substituting `calendar 
year 1989' for `calendar year 1992' in subparagraph (B) 
thereof''.</DELETED>
<DELETED>    (e) Amendments Related to Section 13203.--Subsection (a) 
of section 59 is amended--</DELETED>
        <DELETED>    (1) by striking ``the amount determined under 
        section 55(b)(1)(A)'' in paragraph (1)(A) and (2)(A)(i) and 
        inserting ``the pre-credit tentative minimum tax'',</DELETED>
        <DELETED>    (2) by striking ``specified in section 
        55(b)(1)(A)'' in paragraph (1)(C) and inserting ``specified in 
        subparagraph (A)(i) or (B)(i) of section 55(b)(1) (whichever 
        applies)'',</DELETED>
        <DELETED>    (3) by striking ``which would be determined under 
        section 55(b)(1)(A)'' in paragraph (2)(A)(ii) and inserting 
        ``which would be the pre-credit tentative minimum tax'', 
        and</DELETED>
        <DELETED>    (4) by adding at the end thereof the following new 
        paragraph:</DELETED>
        <DELETED>    ``(3) Pre-credit tentative minimum tax.--For 
        purposes of this subsection, the term `pre-credit tentative 
        minimum tax' means--</DELETED>
                <DELETED>    ``(A) in the case of a taxpayer other than 
                a corporation, the amount determined under the first 
                sentence of section 55(b)(1)(A)(i), or</DELETED>
                <DELETED>    ``(B) in the case of a corporation, the 
                amount determined under section 
                55(b)(1)(B)(i).''.</DELETED>
<DELETED>    (f) Amendment Related to Section 13221.--Sections 1201(a) 
and 1561(a) are each amended by striking ``last sentence'' each place 
it appears and inserting ``last 2 sentences''.</DELETED>
<DELETED>    (g) Amendments Related to Section 13222.--</DELETED>
        <DELETED>    (1) Subparagraph (B) of section 6033(e)(1) is 
        amended by adding at the end thereof the following new 
        clause:</DELETED>
                        <DELETED>    ``(iii) Coordination with section 
                        527(f).--This subsection shall not apply to any 
                        amount on which tax is imposed by reason of 
                        section 527(f).''.</DELETED>
        <DELETED>    (2) Clause (i) of section 6033(e)(1)(B) is amended 
        by striking ``this subtitle'' and inserting ``section 
        501''.</DELETED>
<DELETED>    (h) Amendment Related to Section 13225.--Paragraph (3) of 
section 6655(g) is amended by striking all that follows ```3rd month''' 
in the sentence following subparagraph (C) and inserting ``, subsection 
(e)(2)(A) shall be applied by substituting `2 months' for `3 months' in 
clause (i)(I), the election under clause (i) of subsection (e)(2)(C) 
may be made separately for each installment, and clause (ii) of 
subsection (e)(2)(C) shall not apply.''.</DELETED>
<DELETED>    (i) Amendments Related to Section 13231.--</DELETED>
        <DELETED>    (1) Subparagraph (G) of section 904(d)(3) is 
        amended by striking ``section 951(a)(1)(B)'' and inserting 
        ``subparagraph (B) or (C) of section 951(a)(1)''.</DELETED>
        <DELETED>    (2) Paragraph (1) of section 956A(b) is amended to 
        read as follows:</DELETED>
        <DELETED>    ``(1) the amount (not including a deficit) 
        referred to in section 316(a)(1) to the extent such amount was 
        accumulated in prior taxable years beginning after September 
        30, 1993, and''.</DELETED>
        <DELETED>    (3) Subsection (f) of section 956A is amended by 
        inserting before the period at the end thereof: ``and 
        regulations coordinating the provisions of subsections 
        (c)(3)(A) and (d)''.</DELETED>
        <DELETED>    (4) Subsection (b) of section 958 is amended by 
        striking ``956(b)(2)'' each place it appears and inserting 
        ``956(c)(2)''.</DELETED>
        <DELETED>    (5)(A) Subparagraph (A) of section 1297(d)(2) is 
        amended by striking ``The adjusted basis of any asset'' and 
        inserting ``The amount taken into account under section 
        1296(a)(2) with respect to any asset''.</DELETED>
        <DELETED>    (B) The paragraph heading of paragraph (2) of 
        section 1297(d) is amended to read as follows:</DELETED>
        <DELETED>    ``(2) Amount taken into account.--''.</DELETED>
        <DELETED>    (6) Subsection (e) of section 1297 is amended by 
        inserting ``For purposes of this part--'' after the subsection 
        heading.</DELETED>
<DELETED>    (j) Amendment Related to Section 13241.--Subparagraph (B) 
of section 40(e)(1) is amended to read as follows:</DELETED>
                <DELETED>    ``(B) for any period before January 1, 
                2001, during which the rates of tax under section 
                4081(a)(2)(A) are 4.3 cents per gallon.''.</DELETED>
<DELETED>    (k) Amendment Related to Section 13261.--Clause (iii) of 
section 13261(g)(2)(A) of the Revenue Reconciliation Act of 1993 is 
amended by striking ``by the taxpayer'' and inserting ``by the taxpayer 
or a related person''.</DELETED>
<DELETED>    (l) Amendment Related to Section 13301.--Subparagraph (B) 
of section 1397B(d)(5) is amended by striking ``preceding''.</DELETED>
<DELETED>    (m) Clerical Amendments.--</DELETED>
        <DELETED>    (1) Subsection (d) of section 39 is amended--
        </DELETED>
                <DELETED>    (A) by striking ``45'' in the heading of 
                paragraph (5) and inserting ``45A'', and</DELETED>
                <DELETED>    (B) by striking ``45'' in the heading of 
                paragraph (6) and inserting ``45B''.</DELETED>
        <DELETED>    (2) Subparagraph (A) of section 108(d)(9) is 
        amended by striking ``paragraph (3)(B)'' and inserting 
        ``paragraph (3)(C)''.</DELETED>
        <DELETED>    (3) Subparagraph (C) of section 143(d)(2) is 
        amended by striking the period at the end thereof and inserting 
        a comma.</DELETED>
        <DELETED>    (4) Clause (ii) of section 163(j)(6)(E) is amended 
        by striking ``which is a'' and inserting ``which 
        is''.</DELETED>
        <DELETED>    (5) Subparagraph (A) of section 1017(b)(4) is 
        amended by striking ``subsection (b)(2)(D)'' and inserting 
        ``subsection (b)(2)(E)''.</DELETED>
        <DELETED>    (6) So much of section 1245(a)(3) as precedes 
        subparagraph (A) thereof is amended to read as 
        follows:</DELETED>
        <DELETED>    ``(3) Section 1245 property.--For purposes of this 
        section, the term `section 1245 property' means any property 
        which is or has been property of a character subject to the 
        allowance for depreciation provided in section 167 and is 
        either--''.</DELETED>
        <DELETED>    (7) Paragraph (2) of section 1394(e) is amended--
        </DELETED>
                <DELETED>    (A) by striking ``(i)'' and inserting 
                ``(A)'', and</DELETED>
                <DELETED>    (B) by striking ``(ii)'' and inserting 
                ``(B)''.</DELETED>
        <DELETED>    (8) Subsection (m) of section 6501 (as 
        redesignated by section 1602) is amended by striking ``or 
        51(j)'' and inserting ``45B, or 51(j)''.</DELETED>
        <DELETED>    (9)(A) The section 6714 added by section 
        13242(b)(1) of the Revenue Reconciliation Act of 1993 is hereby 
        redesignated as section 6715.</DELETED>
        <DELETED>    (B) The table of sections for part I of subchapter 
        B of chapter 68 is amended by striking ``6714'' in the item 
        added by such section 13242(b)(2) of such Act and inserting 
        ``6715''.</DELETED>
        <DELETED>    (10) Paragraph (2) of section 9502(b) is amended 
        by inserting ``and before'' after ``1982,''.</DELETED>
        <DELETED>    (11) Subsection (a)(3) of section 13206 of the 
        Revenue Reconciliation Act of 1993 is amended by striking 
        ``this section'' and inserting ``this subsection''.</DELETED>
        <DELETED>    (12) Paragraph (1) of section 13215(c) of the 
        Revenue Reconciliation Act of 1993 is amended by striking 
        ``Public Law 92-21'' and inserting ``Public Law 98-
        21''.</DELETED>
        <DELETED>    (13) Paragraph (2) of section 13311(e) of the 
        Revenue Reconciliation Act of 1993 is amended by striking 
        ``section 1393(a)(3)'' and inserting ``section 
        1393(a)(2)''.</DELETED>
        <DELETED>    (14) Subparagraph (B) of section 117(d)(2) is 
        amended by striking ``section 132(f)'' and inserting ``section 
        132(h)''.</DELETED>
<DELETED>    (n) Effective Date.--Any amendment made by this section 
shall take effect as if included in the provision of the Revenue 
Reconciliation Act of 1993 to which such amendment relates.</DELETED>

<DELETED>SEC. 1704. MISCELLANEOUS PROVISIONS.</DELETED>

<DELETED>    (a) Application of Amendments Made by Title XII of Omnibus 
Budget Reconciliation Act of 1990.--Except as otherwise expressly 
provided, whenever in title XII of the Omnibus Budget Reconciliation 
Act of 1990 an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.</DELETED>
<DELETED>    (b) Treatment of Certain Amounts Under Hedge Bond Rules.--
</DELETED>
        <DELETED>    (1) Clause (iii) of section 149(g)(3)(B) is 
        amended to read as follows:</DELETED>
                        <DELETED>    ``(iii) Amounts held pending 
                        reinvestment or redemption.--Amounts held for 
                        not more than 30 days pending reinvestment or 
                        bond redemption shall be treated as invested in 
                        bonds described in clause (i).''.</DELETED>
        <DELETED>    (2) The amendment made by paragraph (1) shall take 
        effect as if included in the amendments made by section 7651 of 
        the Omnibus Budget Reconciliation Act of 1989.</DELETED>
<DELETED>    (c) Treatment of Certain Distributions Under Section 
1445.--</DELETED>
        <DELETED>    (1) In general.--Paragraph (3) of section 1445(e) 
        is amended by adding at the end thereof the following new 
        sentence: ``Rules similar to the rules of the preceding 
        provisions of this paragraph shall apply in the case of any 
        distribution to which section 301 applies and which is not made 
        out of the earnings and profits of such a domestic 
        corporation.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to distributions after the date of 
        the enactment of this Act.</DELETED>
<DELETED>    (d) Treatment of Certain Credits Under Section 469.--
</DELETED>
        <DELETED>    (1) In general.--Subparagraph (B) of section 
        469(c)(3) is amended by adding at the end thereof the following 
        new sentence: ``If the preceding sentence applies to the net 
        income from any property for any taxable year, any credits 
        allowable under subpart B (other than section 27(a)) or D of 
        part IV of subchapter A for such taxable year which are 
        attributable to such property shall be treated as credits not 
        from a passive activity to the extent the amount of such 
        credits does not exceed the regular tax liability of the 
        taxpayer for the taxable year which is allocable to such net 
        income.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to taxable years beginning after 
        December 31, 1986.</DELETED>
<DELETED>    (e) Treatment of Dispositions Under Passive Loss Rules.--
</DELETED>
        <DELETED>    (1) In general.--Subparagraph (A) of section 
        469(g)(1) is amended to read as follows:</DELETED>
                <DELETED>    ``(A) In general.--If all gain or loss 
                realized on such disposition is recognized, the excess 
                of--</DELETED>
                        <DELETED>    ``(i) any loss from such activity 
                        for such taxable year (determined after the 
                        application of subsection (b)), over</DELETED>
                        <DELETED>    ``(ii) any net income or gain for 
                        such taxable year from all other passive 
                        activities (determined after the application of 
                        subsection (b)),</DELETED>
                <DELETED>shall be treated as a loss which is not from a 
                passive activity.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to taxable years beginning after 
        December 31, 1986.</DELETED>
<DELETED>    (f) Miscellaneous Amendments to Foreign Provisions.--
</DELETED>
        <DELETED>    (1) Coordination of unified estate tax credit with 
        treaties.--Subparagraph (A) of section 2102(c)(3) is amended by 
        adding at the end thereof the following new sentence: ``For 
        purposes of the preceding sentence, property shall not be 
        treated as situated in the United States if such property is 
        exempt from the tax imposed by this subchapter under any treaty 
        obligation of the United States.''.</DELETED>
        <DELETED>    (2) Treatment of certain interest paid to related 
        person.--</DELETED>
                <DELETED>    (A) Subparagraph (B) of section 163(j)(1) 
                is amended by inserting before the period at the end 
                thereof the following: ``(and clause (ii) of paragraph 
                (2)(A) shall not apply for purposes of applying this 
                subsection to the amount so treated)''.</DELETED>
                <DELETED>    (B) Subsection (j) of section 163 is 
                amended by redesignating paragraph (7) as paragraph (8) 
                and by inserting after paragraph (6) the following new 
                paragraph:</DELETED>
        <DELETED>    ``(7) Coordination with passive loss rules, etc.--
        This subsection shall be applied before sections 465 and 
        469.''.</DELETED>
                <DELETED>    (C) The amendments made by this paragraph 
                shall apply as if included in the amendments made by 
                section 7210(a) of the Revenue Reconciliation Act of 
                1989.</DELETED>
        <DELETED>    (3) Treatment of interest allocable to effectively 
        connected income.--</DELETED>
                <DELETED>    (A) In general.--</DELETED>
                        <DELETED>    (i) Subparagraph (B) of section 
                        884(f)(1) is amended by striking ``to the 
                        extent'' and all that follows down through 
                        ``subparagraph (A)'' and inserting ``to the 
                        extent that the allocable interest exceeds the 
                        interest described in subparagraph 
                        (A)''.</DELETED>
                        <DELETED>    (ii) The second sentence of 
                        section 884(f)(1) is amended by striking 
                        ``reasonably expected'' and all that follows 
                        down through the period at the end thereof and 
                        inserting ``reasonably expected to be allocable 
                        interest.''</DELETED>
                        <DELETED>    (iii) Paragraph (2) of section 
                        884(f) is amended to read as follows:</DELETED>
        <DELETED>    ``(2) Allocable interest.--For purposes of this 
        subsection, the term `allocable interest' means any interest 
        which is allocable to income which is effectively connected (or 
        treated as effectively connected) with the conduct of a trade 
        or business in the United States.''.</DELETED>
                <DELETED>    (B) Effective date.--The amendments made 
                by subparagraph (A) shall take effect as if included in 
                the amendments made by section 1241(a) of the Tax 
                Reform Act of 1986.</DELETED>
        <DELETED>    (4) Clarification of source rule.--</DELETED>
                <DELETED>    (A) In general.--Paragraph (2) of section 
                865(b) is amended by striking ``863(b)'' and inserting 
                ``863''.</DELETED>
                <DELETED>    (B) Effective date.--The amendment made by 
                subparagraph (A) shall take effect as if included in 
                the amendments made by section 1211 of the Tax Reform 
                Act of 1986.</DELETED>
        <DELETED>    (5) Repeal of obsolete provisions.--</DELETED>
                <DELETED>    (A) Paragraph (1) of section 6038(a) is 
                amended by striking ``, and'' at the end of 
                subparagraph (E) and inserting a period, and by 
                striking subparagraph (F).</DELETED>
                <DELETED>    (B) Subsection (b) of section 6038A is 
                amended by adding ``and'' at the end of paragraph (2), 
                by striking ``, and'' at the end of paragraph (3) and 
                inserting a period, and by striking paragraph 
                (4).</DELETED>
<DELETED>    (g) Treatment of Assignment of Interest in Certain Bond-
Financed Facilities.--</DELETED>
        <DELETED>    (1) In general.--Subparagraph (A) of section 
        1317(3) of the Tax Reform Act of 1986 is amended by adding at 
        the end thereof the following new sentence: ``A facility shall 
        not fail to be treated as described in this subparagraph by 
        reason of an assignment (or an agreement to an assignment) by 
        the governmental unit on whose behalf the bonds are issued of 
        any part of its interest in the property financed by such bonds 
        to another governmental unit.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in such section 
        1317 on the date of the enactment of the Tax Reform Act of 
        1986.</DELETED>
<DELETED>    (h) Clarification of Treatment of Medicare Entitlement 
Under COBRA Provisions.--</DELETED>
        <DELETED>    (1) In general.--</DELETED>
                <DELETED>    (A) Subclause (V) of section 
                4980B(f)(2)(B)(i) is amended to read as 
                follows:</DELETED>
                                <DELETED>    ``(V) Medicare entitlement 
                                followed by qualifying event.--In the 
                                case of a qualifying event described in 
                                paragraph (3)(B) that occurs less than 
                                18 months after the date the covered 
                                employee became entitled to benefits 
                                under title XVIII of the Social 
                                Security Act, the period of coverage 
                                for qualified beneficiaries other than 
                                the covered employee shall not 
                                terminate under this clause before the 
                                close of the 36-month period beginning 
                                on the date the covered employee became 
                                so entitled.''.</DELETED>
                <DELETED>    (B) Clause (v) of section 602(2)(A) of the 
                Employee Retirement Income Security Act of 1974 is 
                amended to read as follows:</DELETED>
                        <DELETED>    ``(v) Medicare entitlement 
                        followed by qualifying event.--In the case of a 
                        qualifying event described in section 603(2) 
                        that occurs less than 18 months after the date 
                        the covered employee became entitled to 
                        benefits under title XVIII of the Social 
                        Security Act, the period of coverage for 
                        qualified beneficiaries other than the covered 
                        employee shall not terminate under this 
                        subparagraph before the close of the 36-month 
                        period beginning on the date the covered 
                        employee became so entitled.''.</DELETED>
                <DELETED>    (C) Clause (iv) of section 2202(2)(A) of 
                the Public Health Service Act is amended to read as 
                follows:</DELETED>
                        <DELETED>    ``(iv) Medicare entitlement 
                        followed by qualifying event.--In the case of a 
                        qualifying event described in section 2203(2) 
                        that occurs less than 18 months after the date 
                        the covered employee became entitled to 
                        benefits under title XVIII of the Social 
                        Security Act, the period of coverage for 
                        qualified beneficiaries other than the covered 
                        employee shall not terminate under this 
                        subparagraph before the close of the 36-month 
                        period beginning on the date the covered 
                        employee became so entitled.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendments made by this 
        subsection shall apply to plan years beginning after December 
        31, 1989.</DELETED>
<DELETED>    (i) Treatment of Certain REMIC Inclusions.--</DELETED>
        <DELETED>    (1) In general.--Subsection (a) of section 860E is 
        amended by adding at the end thereof the following new 
        paragraph:</DELETED>
        <DELETED>    ``(6) Coordination with minimum tax.--For purposes 
        of part VI of subchapter A of this chapter--</DELETED>
                <DELETED>    ``(A) the reference in section 55(b)(2) to 
                taxable income shall be treated as a reference to 
                taxable income determined without regard to this 
                subsection,</DELETED>
                <DELETED>    ``(B) the alternative minimum taxable 
                income of any holder of a residual interest in a REMIC 
                for any taxable year shall in no event be less than the 
                excess inclusion for such taxable year, and</DELETED>
                <DELETED>    ``(C) any excess inclusion shall be 
                disregarded for purposes of computing the alternative 
                tax net operating loss deduction.</DELETED>
        <DELETED>The preceding sentence shall not apply to any 
        organization to which section 593 applies, except to the extent 
        provided in regulations prescribed by the Secretary under 
        paragraph (2).''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in the 
        amendments made by section 671 of the Tax Reform Act of 1986 
        unless the taxpayer elects to apply such amendment only to 
        taxable years beginning after the date of the enactment of this 
        Act.</DELETED>
<DELETED>    (j) Exemption From Harbor Maintenance Tax for Certain 
Passengers.--</DELETED>
        <DELETED>    (1) In general.--Subparagraph (D) of section 
        4462(b)(1) (relating to special rule for Alaska, Hawaii, and 
        possessions) is amended by inserting before the period the 
        following: ``, or passengers transported on United States flag 
        vessels operating solely within the State waters of Alaska or 
        Hawaii and adjacent international waters''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in the 
        amendments made by section 1402(a) of the Harbor Maintenance 
        Revenue Act of 1986.</DELETED>
<DELETED>    (k) Amendments Related to Revenue Provisions of Energy 
Policy Act of 1992.--</DELETED>
        <DELETED>    (1) Effective with respect to taxable years 
        beginning after December 31, 1990, subclause (II) of section 
        53(d)(1)(B)(iv) is amended to read as follows:</DELETED>
                                <DELETED>    ``(II) the adjusted net 
                                minimum tax for any taxable year is the 
                                amount of the net minimum tax for such 
                                year increased in the manner provided 
                                in clause (iii).''.</DELETED>
        <DELETED>    (2) Subsection (g) of section 179A is redesignated 
        as subsection (f).</DELETED>
        <DELETED>    (3) Subparagraph (E) of section 6724(d)(3) is 
        amended by striking ``section 6109(f)'' and inserting ``section 
        6109(h)''.</DELETED>
        <DELETED>    (4)(A) Subsection (d) of section 30 is amended--
        </DELETED>
                <DELETED>    (i) by inserting ``(determined without 
                regard to subsection (b)(3))'' before the period at the 
                end of paragraph (1) thereof, and</DELETED>
                <DELETED>    (ii) by adding at the end thereof the 
                following new paragraph:</DELETED>
        <DELETED>    ``(4) Election to not take credit.--No credit 
        shall be allowed under subsection (a) for any vehicle if the 
        taxpayer elects to not have this section apply to such 
        vehicle.''.</DELETED>
        <DELETED>    (B) Subsection (m) of section 6501 (as 
        redesignated by section 1602) is amended by striking ``section 
        40(f)'' and inserting ``section 30(d)(4), 40(f)''.</DELETED>
        <DELETED>    (5) Subclause (III) of section 501(c)(21)(D)(ii) 
        is amended by striking ``section 101(6)'' and inserting 
        ``section 101(7)'' and by striking ``1752(6)'' and inserting 
        ``1752(7)''.</DELETED>
        <DELETED>    (6) Paragraph (1) of section 1917(b) of the Energy 
        Policy Act of 1992 shall be applied as if ``at a rate'' 
        appeared instead of ``at the rate'' in the material proposed to 
        be stricken.</DELETED>
        <DELETED>    (7) Paragraph (2) of section 1921(b) of the Energy 
        Policy Act of 1992 shall be applied as if a comma appeared 
        after ``(2)'' in the material proposed to be 
        stricken.</DELETED>
        <DELETED>    (8) Subsection (a) of section 1937 of the Energy 
        Policy Act of 1992 shall be applied as if ``Subpart B'' 
        appeared instead of ``Subpart C''.</DELETED>
<DELETED>    (l) Treatment of Qualified Football Coaches Plan.--
</DELETED>
        <DELETED>    (1) In general.--Subparagraph (F) of section 3(37) 
        of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1002(37)(F)) is amended by redesignating clause (ii) as 
        clause (iii) and by inserting after clause (i) the following 
        new clause:</DELETED>
<DELETED>    ``(ii) For purposes of the Internal Revenue Code of 1986--
</DELETED>
        <DELETED>    ``(I) clause (i) shall apply, and</DELETED>
        <DELETED>    ``(II) a qualified football coaches plan shall be 
        treated as a multiemployer collectively bargained 
        plan.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to years beginning after December 22, 
        1987.</DELETED>
<DELETED>    (m) Determination of Unrecovered Investment in Annuity 
Contract.--</DELETED>
        <DELETED>    (1) In general.--Subparagraph (A) of section 
        72(b)(4) is amended by inserting ``(determined without regard 
        to subsection (c)(2))'' after ``contract''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in the 
        amendments made by section 1122(c) of the Tax Reform Act of 
        1986.</DELETED>
<DELETED>    (n) Modifications to Election To Include Child's Income on 
Parent's Return.--</DELETED>
        <DELETED>    (1) Eligibility for election.--Clause (ii) of 
        section 1(g)(7)(A) (relating to election to include certain 
        unearned income of child on parent's return) is amended to read 
        as follows:</DELETED>
                        <DELETED>    ``(ii) such gross income is more 
                        than the amount described in paragraph 
                        (4)(A)(ii)(I) and less than 10 times the amount 
                        so described,''.</DELETED>
        <DELETED>    (2) Computation of tax.--Subparagraph (B) of 
        section 1(g)(7) (relating to income included on parent's 
        return) is amended--</DELETED>
                <DELETED>    (A) by striking ``$1,000'' in clause (i) 
                and inserting ``twice the amount described in paragraph 
                (4)(A)(ii)(I)'', and</DELETED>
                <DELETED>    (B) by amending subclause (II) of clause 
                (ii) to read as follows:</DELETED>
                                <DELETED>    ``(II) for each such 
                                child, 15 percent of the lesser of the 
                                amount described in paragraph 
                                (4)(A)(ii)(I) or the excess of the 
                                gross income of such child over the 
                                amount so described, and''.</DELETED>
        <DELETED>    (3) Minimum tax.--Subparagraph (B) of section 
        59(j)(1) is amended by striking ``$1,000'' and inserting 
        ``twice the amount in effect for the taxable year under section 
        63(c)(5)(A)''.</DELETED>
        <DELETED>    (4) Effective date.--The amendments made by this 
        subsection shall apply to taxable years beginning after 
        December 31, 1995.</DELETED>
<DELETED>    (o) Treatment of Certain Veterans' Reemployment Rights.--
</DELETED>
        <DELETED>    (1) In general.--Section 414 is amended by adding 
        at the end the following new subsection:</DELETED>
<DELETED>    ``(u) Special Rules Relating to Veterans' Reemployment 
Rights Under USERRA.--</DELETED>
        <DELETED>    ``(1) Treatment of certain contributions made 
        pursuant to veterans' reemployment rights.--If any contribution 
        is made by an employer or an employee under an individual 
        account plan with respect to an employee, or by an employee to 
        a defined benefit plan that provides for employee 
        contributions, and such contribution is required by reason of 
        such employee's rights under chapter 43 of title 38, United 
        States Code, resulting from qualified military service, then--
        </DELETED>
                <DELETED>    ``(A) such contribution shall not be 
                subject to any otherwise applicable limitation 
                contained in section 402(g), 402(h), 403(b), 404(a), 
                404(h), 408, 415, or 457, and shall not be taken into 
                account in applying such limitations to other 
                contributions or benefits under such plan or any other 
                plan, with respect to the year in which the 
                contribution is made,</DELETED>
                <DELETED>    ``(B) such contribution shall be subject 
                to the limitations referred to in subparagraph (A) with 
                respect to the year to which the contribution relates 
                (in accordance with rules prescribed by the Secretary), 
                and</DELETED>
                <DELETED>    ``(C) such plan shall not be treated as 
                failing to meet the requirements of section 401(a)(4), 
                401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12), 401(m), 
                403(b)(12), 408(k)(3), 408(k)(6), 408(p), 410(b), or 
                416 by reason of the making of (or the right to make) 
                such contribution.</DELETED>
        <DELETED>For purposes of the preceding sentence, any elective 
        deferral or employee contribution made under paragraph (2) 
        shall be treated as required by reason of the employee's rights 
        under such chapter 43.</DELETED>
        <DELETED>    ``(2) Reemployment rights under userra with 
        respect to elective deferrals.--</DELETED>
                <DELETED>    ``(A) In general.--For purposes of this 
                subchapter and section 457, if an employee is entitled 
                to the benefits of chapter 43 of title 38, United 
                States Code, with respect to any plan which provides 
                for elective deferrals, the employer sponsoring the 
                plan shall be treated as meeting the requirements of 
                such chapter 43 with respect to such elective deferrals 
                only if such employer--</DELETED>
                        <DELETED>    ``(i) permits such employee to 
                        make additional elective deferrals under such 
                        plan (in the amount determined under 
                        subparagraph (B) or such lesser amount as 
is elected by the employee) during the period which begins on the date 
of the reemployment of such employee with such employer and has the 
same length as the lesser of--</DELETED>
                                <DELETED>    ``(I) the product of 3 and 
                                the period of qualified military 
                                service which resulted in such rights, 
                                and</DELETED>
                                <DELETED>    ``(II) 5 years, 
                                and</DELETED>
                        <DELETED>    ``(ii) makes a matching 
                        contribution with respect to any additional 
                        elective deferral made pursuant to clause (i) 
                        which would have been required had such 
                        deferral actually been made during the period 
                        of such qualified military service.</DELETED>
                <DELETED>    ``(B) Amount of makeup required.--The 
                amount determined under this subparagraph with respect 
                to any plan is the maximum amount of the elective 
                deferrals that the individual would have been permitted 
                to make under the plan in accordance with the 
                limitations referred to in paragraph (1)(A) during the 
                period of qualified military service if the individual 
                had continued to be employed by the employer during 
                such period and received compensation as determined 
                under paragraph (7). Proper adjustment shall be made to 
                the amount determined under the preceding sentence for 
                any elective deferrals actually made during the period 
                of such qualified military service.</DELETED>
                <DELETED>    ``(C) Elective deferral.--For purposes of 
                this paragraph, the term `elective deferral' has the 
                meaning given such term by section 402(g)(3); except 
                that such term shall include any deferral of 
                compensation under an eligible deferred compensation 
                plan (as defined in section 457(b)).</DELETED>
                <DELETED>    ``(D) After-tax employee contributions.--
                References in subparagraphs (A) and (B) to elective 
                deferrals shall be treated as including references to 
                employee contributions.</DELETED>
        <DELETED>    ``(3) Certain retroactive adjustments not 
        required.--For purposes of this subchapter and subchapter E, no 
        provision of chapter 43 of title 38, United States Code, shall 
        be construed as requiring--</DELETED>
                <DELETED>    ``(A) any crediting of earnings to an 
                employee with respect to any contribution before such 
                contribution is actually made, or</DELETED>
                <DELETED>    ``(B) any allocation of any forfeiture 
                with respect to the period of qualified military 
                service.</DELETED>
        <DELETED>    ``(4) Loan repayment suspensions permitted.--If 
        any plan suspends the obligation to repay any loan made to an 
        employee from such plan for any part of any period during which 
        such employee is performing service in the uniformed services 
        (as defined in chapter 43 of title 38, United States Code), 
        whether or not qualified military service, such suspension 
        shall not be taken into account for purposes of section 72(p), 
        401(a), or 4975(d)(1).</DELETED>
        <DELETED>    ``(5) Qualified military service.--For purposes of 
        this subsection, the term `qualified military service' means 
        any service in the uniformed services (as defined in chapter 43 
        of title 38, United States Code) by any individual if such 
        individual is entitled to reemployment rights under such 
        chapter with respect to such service.</DELETED>
        <DELETED>    ``(6) Individual account plan.--For purposes of 
        this subsection, the term `individual account plan' means any 
        defined contribution plan (including any tax-sheltered annuity 
        plan under section 403(b), any simplified employee pension 
        under section 408(k), any qualified salary reduction 
        arrangement under section 408(p), and any eligible deferred 
        compensation plan (as defined in section 457(b)).</DELETED>
        <DELETED>    ``(7) Compensation.--For purposes of sections 
        403(b)(3), 415(c)(3), and 457(e)(5), an employee who is in 
        qualified military service shall be treated as receiving 
        compensation from the employer during such period of qualified 
        military service equal to--</DELETED>
                <DELETED>    ``(A) the compensation the employee would 
                have received during such period if the employee were 
                not in qualified military service, determined based on 
                the rate of pay the employee would have received from 
                the employer but for absence during the period of 
                qualified military service, or</DELETED>
                <DELETED>    ``(B) if the compensation the employee 
                would have received during such period was not 
                reasonably certain, the employee's average compensation 
                from the employer during the 12-month period 
                immediately preceding the qualified military service 
                (or, if shorter, the period of employment immediately 
                preceding the qualified military service).</DELETED>
        <DELETED>    ``(8) USERRA requirements for qualified retirement 
        plans.--For purposes of this subchapter and section 457, an 
        employer sponsoring a retirement plan shall be treated as 
        meeting the requirements of chapter 43 of title 38, United 
        States Code, only if each of the following requirements is 
        met:</DELETED>
                <DELETED>    ``(A) An individual reemployed under such 
                chapter is treated with respect to such plan as not 
                having incurred a break in service with the employer 
                maintaining the plan by reason of such individual's 
                period of qualified military service.</DELETED>
                <DELETED>    ``(B) Each period of qualified military 
                service served by an individual is, upon reemployment 
                under such chapter, deemed with respect to such plan to 
                constitute service with the employer maintaining the 
                plan for the purpose of determining the 
                nonforfeitability of the individual's accrued benefits 
                under such plan and for the purpose of determining the 
                accrual of benefits under such plan.</DELETED>
                <DELETED>    ``(C) An individual reemployed under such 
                chapter is entitled to accrued benefits that are 
                contingent on the making of, or derived from, employee 
                contributions or elective deferrals only to the extent 
                the individual makes payment to the plan with respect 
                to such contributions or deferrals. No such payment may 
                exceed the amount the individual would have been 
                permitted or required to contribute had the individual 
                remained continuously employed by the employer 
                throughout the period of qualified military service. 
                Any payment to such plan shall be made during the 
                period beginning with the date of reemployment and 
                whose duration is 3 times the period of the qualified 
                military service (but not greater than 5 
                years).</DELETED>
        <DELETED>    ``(9) Plans not subject to title 38.--This 
        subsection shall not apply to any retirement plan to which 
        chapter 43 of title 38, United States Code, does not 
        apply.</DELETED>
        <DELETED>    ``(10) References.--For purposes of this section, 
        any reference to chapter 43 of title 38, United States Code, 
        shall be treated as a reference to such chapter as in effect on 
        December 12, 1994 (without regard to any subsequent 
        amendment).''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by this 
        subsection shall be effective as of December 12, 
        1994.</DELETED>
<DELETED>    (p) Reporting of Real Estate Transactions.--</DELETED>
        <DELETED>    (1) In general.--Paragraph (3) of section 6045(e) 
        (relating to prohibition of separate charge for filing return) 
        is amended by adding at the end the following new sentence: 
        ``Nothing in this paragraph shall be construed to prohibit the 
        real estate reporting person from taking into account its cost 
        of complying with such requirement in establishing its charge 
        (other than a separate charge for complying with such 
        requirement) to any customer for performing services in the 
        case of a real estate transaction.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in section 
        1015(e)(2)(A) of the Technical and Miscellaneous Revenue Act of 
        1988.</DELETED>
<DELETED>    (q) Clarification of Denial of Deduction for Stock 
Redemption Expenses.</DELETED>
        <DELETED>    (1) In general.--Paragraph (1) of section 162(k) 
        is amended by striking ``the redemption of its stock'' and 
        inserting ``the reacquisition of its stock or of the stock of 
        any related person (as defined in section 
        465(b)(3)(C))''.</DELETED>
        <DELETED>    (2) Certain deductions permitted.--Subparagraph 
        (A) of section 162(k)(2) is amended by striking ``or'' at the 
        end of clause (i), by redesignating clause (ii) as clause 
        (iii), and by inserting after clause (i) the following new 
        clause:</DELETED>
                        <DELETED>    ``(ii) deduction for amounts which 
                        are properly allocable to indebtedness and 
                        amortized over the term of such indebtedness, 
                        or''.</DELETED>
        <DELETED>    (3) Clerical amendment.--The subsection heading 
        for subsection (k) of section 162 is amended by striking 
        ``Redemption'' and inserting ``Reacquisition''.</DELETED>
        <DELETED>    (4) Effective date.--</DELETED>
                <DELETED>    (A) In general.--Except as provided in 
                subparagraph (B), the amendments made by this 
                subsection shall apply to amounts paid or incurred 
                after September 13, 1995, in taxable years ending after 
                such date.</DELETED>
                <DELETED>    (B) Paragraph (2).--The amendment made by 
                paragraph (2) shall take effect as if included in the 
                amendment made by section 613 of the Tax Reform Act of 
                1986.</DELETED>
<DELETED>    (r) Clerical Amendment to Section 404.--</DELETED>
        <DELETED>    (1) In general.--Paragraph (1) of section 404(j) 
        is amended by striking ``(10)'' and inserting 
        ``(9)''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in the 
        amendments made by section 713(d)(4)(A) of the Deficit 
        Reduction Act of 1984.</DELETED>
<DELETED>    (s) Passive Income Not To Include FSC Income, Etc.--
</DELETED>
        <DELETED>    (1) In general.--Paragraph (2) of section 1296(b) 
        is amended by striking ``or'' at the end of subparagraph (B), 
        by striking the period at the end of subparagraph (C) and 
        inserting ``, or'', and by inserting after subparagraph (C) the 
        following new subparagraph:</DELETED>
                <DELETED>    ``(D) which is foreign trade income of a 
                FSC or export trade income of an export trade 
                corporation (as defined in section 971).''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall take effect as if included in the 
        amendments made by section 1235 of the Tax Reform Act of 
        1986.</DELETED>
<DELETED>    (t) Miscellaneous Clerical Amendments.--</DELETED>
        <DELETED>    (1) Subclause (II) of section 56(g)(4)(C)(ii) is 
        amended by striking ``of the subclause'' and inserting ``of 
        subclause''.</DELETED>
        <DELETED>    (2) Paragraph (2) of section 72(m) is amended by 
        inserting ``and'' at the end of subparagraph (A), by striking 
        subparagraph (B), and by redesignating subparagraph (C) as 
        subparagraph (B).</DELETED>
        <DELETED>    (3) Paragraph (2) of section 86(b) is amended by 
        striking ``adusted'' and inserting ``adjusted''.</DELETED>
        <DELETED>    (4)(A) The heading for section 112 is amended by 
        striking ``combat pay'' and inserting ``combat zone 
        compensation''.</DELETED>
        <DELETED>    (B) The item relating to section 112 in the table 
        of sections for part III of subchapter B of chapter 1 is 
        amended by striking ``combat pay'' and inserting ``combat zone 
        compensation''.</DELETED>
        <DELETED>    (C) Paragraph (1) of section 3401(a) is amended by 
        striking ``combat pay'' and inserting ``combat zone 
        compensation''.</DELETED>
        <DELETED>    (5) Clause (i) of section 172(h)(3)(B) is amended 
        by striking the comma at the end thereof and inserting a 
        period.</DELETED>
        <DELETED>    (6) Clause (ii) of section 543(a)(2)(B) is amended 
        by striking ``section 563(c)'' and inserting ``section 
        563(d)''.</DELETED>
        <DELETED>    (7) Paragraph (1) of section 958(a) is amended by 
        striking ``sections 955(b)(1) (A) and (B), 955(c)(2)(A)(ii), 
        and 960(a)(1)'' and inserting ``section 960(a)(1)''.</DELETED>
        <DELETED>    (8) Subsection (g) of section 642 is amended by 
        striking ``under 2621(a)(2)'' and inserting ``under section 
        2621(a)(2)''.</DELETED>
        <DELETED>    (9) Section 1463 is amended by striking ``this 
        subsection'' and inserting ``this section''.</DELETED>
        <DELETED>    (10) Subsection (k) of section 3306 is amended by 
        inserting a period at the end thereof.</DELETED>
        <DELETED>    (11) The item relating to section 4472 in the 
        table of sections for subchapter B of chapter 36 is amended by 
        striking ``and special rules''.</DELETED>
        <DELETED>    (12) Paragraph (3) of section 5134(c) is amended 
        by striking ``section 6662(a)'' and inserting ``section 
        6665(a)''.</DELETED>
        <DELETED>    (13) Paragraph (2) of section 5206(f) is amended 
        by striking ``section 5(e)'' and inserting ``section 
        105(e)''.</DELETED>
        <DELETED>    (14) Paragraph (1) of section 6050B(c) is amended 
        by striking ``section 85(c)'' and inserting ``section 
        85(b)''.</DELETED>
        <DELETED>    (15) Subsection (k) of section 6166 is amended by 
        striking paragraph (6).</DELETED>
        <DELETED>    (16) Subsection (e) of section 6214 is amended to 
        read as follows:</DELETED>
<DELETED>    ``(e) Cross Reference.--</DELETED>

                              <DELETED>    ``For provision giving Tax 
Court jurisdiction to order a refund of an overpayment and to award 
sanctions, see section 6512(b)(2).''.
        <DELETED>    (17) The section heading for section 6043 is 
        amended by striking the semicolon and inserting a 
        comma.</DELETED>
        <DELETED>    (18) The item relating to section 6043 in the 
        table of sections for subpart B of part III of subchapter A of 
        chapter 61 is amended by striking the semicolon and inserting a 
        comma.</DELETED>
        <DELETED>    (19) The table of sections for part I of 
        subchapter A of chapter 68 is amended by striking the item 
        relating to section 6662.</DELETED>
        <DELETED>    (20)(A) Section 7232 is amended--</DELETED>
                <DELETED>    (i) by striking ``lubricating oil,'' in 
                the heading, and</DELETED>
                <DELETED>    (ii) by striking ``lubricating oil,'' in 
                the text.</DELETED>
        <DELETED>    (B) The table of sections for part II of 
        subchapter A of chapter 75 is amended by striking ``lubricating 
        oil,'' in the item relating to section 7232.</DELETED>
        <DELETED>    (21) Paragraph (1) of section 6701(a) of the 
        Omnibus Budget Reconciliation Act of 1989 is amended by 
        striking ``subclause (IV)'' and inserting ``subclause 
        (V)''.</DELETED>
        <DELETED>    (22) Clause (ii) of section 7304(a)(2)(D) of such 
        Act is amended by striking ``subsection (c)(2)'' and inserting 
        ``subsection (c)''.</DELETED>
        <DELETED>    (23) Paragraph (1) of section 7646(b) of such Act 
        is amended by striking ``section 6050H(b)(1)'' and inserting 
        ``section 6050H(b)(2)''.</DELETED>
        <DELETED>    (24) Paragraph (10) of section 7721(c) of such Act 
        is amended by striking ``section 6662(b)(2)(C)(ii)'' and 
        inserting ``section 6661(b)(2)(C)(ii)''.</DELETED>
        <DELETED>    (25) Subparagraph (A) of section 7811(i)(3) of 
        such Act is amended by inserting ``the first place it appears'' 
        before ``in clause (i)''.</DELETED>
        <DELETED>    (26) Paragraph (10) of section 7841(d) of such Act 
        is amended by striking ``section 381(a)'' and inserting 
        ``section 381(c)''.</DELETED>
        <DELETED>    (27) Paragraph (2) of section 7861(c) of such Act 
        is amended by inserting ``the second place it appears'' before 
        ``and inserting''.</DELETED>
        <DELETED>    (28) Paragraph (1) of section 460(b) is amended by 
        striking ``the look-back method of paragraph (3)'' and 
        inserting ``the look-back method of paragraph (2)''.</DELETED>
        <DELETED>    (29) Subparagraph (C) of section 50(a)(2) is 
        amended by striking ``subsection (c)(4)'' and inserting 
        ``subsection (d)(5)''.</DELETED>
        <DELETED>    (30) Subparagraph (B) of section 172(h)(4) is 
        amended by striking the material following the heading and 
        preceding clause (i) and inserting ``For purposes of subsection 
        (b)(2)--''.</DELETED>
        <DELETED>    (31) Subparagraph (A) of section 355(d)(7) is 
        amended by inserting ``section'' before ``267(b)''.</DELETED>
        <DELETED>    (32) Subparagraph (C) of section 420(e)(1) is 
        amended by striking ``mean'' and inserting ``means''.</DELETED>
        <DELETED>    (33) Paragraph (4) of section 537(b) is amended by 
        striking ``section 172(i)'' and inserting ``section 
        172(f)''.</DELETED>
        <DELETED>    (34) Subparagraph (B) of section 613(e)(1) is 
        amended by striking the comma at the end thereof and inserting 
        a period.</DELETED>
        <DELETED>    (35) Paragraph (4) of section 856(a) is amended by 
        striking ``section 582(c)(5)'' and inserting ``section 
        582(c)(2)''.</DELETED>
        <DELETED>    (36) Sections 904(f)(2)(B)(i) and 
        907(c)(4)(B)(iii) are each amended by inserting ``(as in effect 
        on the day before the date of the enactment of the Revenue 
        Reconciliation Act of 1990)'' after ``section 
        172(h)''.</DELETED>
        <DELETED>    (37) Subsection (b) of section 936 is amended by 
        striking ``subparagraphs (D)(ii)(I)'' and inserting 
        ``subparagraphs (D)(ii)''.</DELETED>
        <DELETED>    (38) Subsection (c) of section 2104 is amended by 
        striking ``subparagraph (A), (C), or (D) of section 861(a)(1)'' 
        and inserting ``section 861(a)(1)(A)''.</DELETED>
        <DELETED>    (39) Subparagraph (A) of section 280A(c)(1) is 
        amended to read as follows:</DELETED>
                <DELETED>    ``(A) as the principal place of business 
                for any trade or business of the taxpayer,''.</DELETED>
        <DELETED>    (40) Section 6038 is amended by redesignating the 
        subsection relating to cross references as subsection 
        (f).</DELETED>
        <DELETED>    (41) Clause (iv) of section 6103(e)(1)(A) is 
        amended by striking all that follows ``provisions of'' and 
        inserting ``section 1(g) or 59(j);''.</DELETED>
        <DELETED>    (42) The subsection (f) of section 6109 of the 
        Internal Revenue Code of 1986 which was added by section 
        2201(d) of Public Law 101-624 is redesignated as subsection 
        (g).</DELETED>
        <DELETED>    (43) Subsection (b) of section 7454 is amended by 
        striking ``section 4955(e)(2)'' and inserting ``section 
        4955(f)(2)''.</DELETED>
        <DELETED>    (44) Subsection (d) of section 11231 of the 
        Revenue Reconciliation Act of 1990 shall be applied as if 
        ``comma'' appeared instead of ``period'' and as if the 
        paragraph (9) proposed to be added ended with a 
        comma.</DELETED>
        <DELETED>    (45) Paragraph (1) of section 11303(b) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if 
        ``paragraph'' appeared instead of ``subparagraph'' in the 
        material proposed to be stricken.</DELETED>
        <DELETED>    (46) Subsection (f) of section 11701 of the 
        Revenue Reconciliation Act of 1990 is amended by inserting 
        ``(relating to definitions)'' after ``section 
        6038(e)''.</DELETED>
        <DELETED>    (47) Subsection (i) of section 11701 of the 
        Revenue Reconciliation Act of 1990 shall be applied as if 
        ``subsection'' appeared instead of ``section'' in the material 
        proposed to be stricken.</DELETED>
        <DELETED>    (48) Subparagraph (B) of section 11801(c)(2) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        ``section 56(g)'' appeared instead of ``section 
        59(g)''.</DELETED>
        <DELETED>    (49) Subparagraph (C) of section 11801(c)(8) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        ``reorganizations'' appeared instead of ``reorganization'' in 
        the material proposed to be stricken.</DELETED>
        <DELETED>    (50) Subparagraph (H) of section 11801(c)(9) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        ``section 1042(c)(1)(B)'' appeared instead of ``section 
        1042(c)(2)(B)''.</DELETED>
        <DELETED>    (51) Subparagraph (F) of section 11801(c)(12) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        ``and (3)'' appeared instead of ``and (E)''.</DELETED>
        <DELETED>    (52) Subparagraph (A) of section 11801(c)(22) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        ``chapters 21'' appeared instead of ``chapter 21'' in the 
        material proposed to be stricken.</DELETED>
        <DELETED>    (53) Paragraph (3) of section 11812(b) of the 
        Revenue Reconciliation Act of 1990 shall be applied by not 
        executing the amendment therein to the heading of section 
        42(d)(5)(B).</DELETED>
        <DELETED>    (54) Clause (i) of section 11813(b)(9)(A) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if a 
        comma appeared after ``(3)(A)(ix)'' in the material proposed to 
        be stricken.</DELETED>
        <DELETED>    (55) Subparagraph (F) of section 11813(b)(13) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        ``tax'' appeared after ``investment'' in the material proposed 
        to be stricken.</DELETED>
        <DELETED>    (56) Paragraph (19) of section 11813(b) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if 
        ``Paragraph (20) of section 1016(a), as redesignated by section 
        11801,'' appeared instead of ``Paragraph (21) of section 
        1016(a)''.</DELETED>
        <DELETED>    (57) Paragraph (5) section 8002(a) of the Surface 
        Transportation Revenue Act of 1991 shall be applied as if 
        ``4481(e)'' appeared instead of ``4481(c)''.</DELETED>
        <DELETED>    (58) Section 7872 is amended--</DELETED>
                <DELETED>    (A) by striking ``foregone'' each place it 
                appears in subsections (a) and (e)(2) and inserting 
                ``forgone'', and</DELETED>
                <DELETED>    (B) by striking ``Foregone'' in the 
                heading for subsection (e) and the heading for 
                paragraph (2) of subsection (e) and inserting 
                ``Forgone''.</DELETED>
        <DELETED>    (59) Paragraph (7) of section 7611(h) is amended 
        by striking ``approporiate'' and inserting 
        ``appropriate''.</DELETED>
        <DELETED>    (60) The heading of paragraph (3) of section 
        419A(c) is amended by striking ``severence'' and inserting 
        ``severance''.</DELETED>
        <DELETED>    (61) Clause (ii) of section 807(d)(3)(B) is 
        amended by striking ``Commissoners' '' and inserting 
        ``Commissioners' ''.</DELETED>
        <DELETED>    (62) Subparagraph (B) of section 1274A(c)(1) is 
        amended by striking ``instument'' and inserting 
        ``instrument''.</DELETED>
        <DELETED>    (63) Subparagraph (B) of section 724(d)(3) by 
        striking ``Subparagaph'' and inserting 
        ``Subparagraph''.</DELETED>
        <DELETED>    (64) The last sentence of paragraph (2) of section 
        42(c) is amended by striking ``of 1988''.</DELETED>
        <DELETED>    (65) Paragraph (1) of section 9707(d) is amended 
        by striking ``diligence,'' and inserting 
        ``diligence''.</DELETED>
        <DELETED>    (66) Subsection (c) of section 4977 is amended by 
        striking ``section 132(i)(2)'' and inserting ``section 
        132(h)''.</DELETED>
        <DELETED>    (67) The last sentence of section 401(a)(20) is 
        amended by striking ``section 211'' and inserting ``section 
        521''.</DELETED>
        <DELETED>    (68) Subparagraph (A) of section 402(g)(3) is 
        amended by striking ``subsection (a)(8)'' and inserting 
        ``subsection (e)(3)''.</DELETED>
        <DELETED>    (69) The last sentence of section 403(b)(10) is 
        amended by striking ``an direct'' and inserting ``a 
        direct''.</DELETED>
        <DELETED>    (70) Subparagraph (A) of section 4973(b)(1) is 
        amended by striking ``sections 402(c)'' and inserting ``section 
        402(c)''.</DELETED>
        <DELETED>    (71) Paragraph (12) of section 3405(e) is amended 
        by striking ``(b)(3)'' and inserting ``(b)(2)''.</DELETED>
        <DELETED>    (72) Paragraph (41) of section 521(b) of the 
        Unemployment Compensation Amendments of 1992 shall be applied 
        as if ``section'' appeared instead of ``sections'' in the 
        material proposed to be stricken.</DELETED>
        <DELETED>    (73) Paragraph (27) of section 521(b) of the 
        Unemployment Compensation Amendments of 1992 shall be applied 
        as if ``Section 691(c)(5)'' appeared instead of ``Section 
        691(c)''.</DELETED>
        <DELETED>    (74) Paragraph (5) of section 860F(a) is amended 
        by striking ``paragraph (1)'' and inserting ``paragraph 
        (2)''.</DELETED>
        <DELETED>    (75) Paragraph (1) of section 415(k) is amended by 
        adding ``or'' at the end of subparagraph (C), by striking 
        subparagraphs (D) and (E), and by redesignating subparagraph 
        (F) as subparagraph (D).</DELETED>
        <DELETED>    (76) Paragraph (2) of section 404(a) is amended by 
        striking ``(18),''.</DELETED>
        <DELETED>    (77) Clause (ii) of section 72(p)(4)(A) is amended 
        to read as follows:</DELETED>
                        <DELETED>    ``(ii) Special rule.--The term 
                        `qualified employer plan' shall not include any 
                        plan which was (or was determined to be) a 
                        qualified employer plan or a government 
                        plan.''.</DELETED>
        <DELETED>    (78) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i) 
        are each amended by striking ``section 6662(d)(2)(C)(ii)'' and 
        inserting ``section 6662(d)(2)(C)(iii)''.</DELETED>
        <DELETED>    (79) Subsection (a) of section 164 is amended by 
        striking the paragraphs relating to the generation-skipping tax 
        and the environmental tax imposed by section 59A and by 
        inserting after paragraph (3) the following new 
        paragraphs:</DELETED>
        <DELETED>    ``(4) The GST tax imposed on income 
        distributions.</DELETED>
        <DELETED>    ``(5) The environmental tax imposed by section 
        59A.''.</DELETED>
<DELETED>    (u) Certain Property Not Treated as Section 179 
Property.--</DELETED>
        <DELETED>    (1) In general.--Paragraph (1) of section 179(d) 
        is amended by adding at the end thereof the following new 
        sentence: ``Such term shall not include any property described 
        in section 50(b) and shall not include air conditioning or 
        heating units and horses.''.</DELETED>
        <DELETED>    (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to property placed in service after 
        May 14, 1996.</DELETED>
    (b) Table of Contents.--

            TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS

Sec. 1101. Amendment of 1986 Code.
Sec. 1102. Underpayments of estimated tax.

                      Subtitle A--Expensing; Etc.

Sec. 1111. Increase in expense treatment for small businesses.
Sec. 1112. Treatment of employee tips.
Sec. 1113. Treatment of dues paid to agricultural or horticultural 
                            organizations.
Sec. 1114. Clarification of employment tax status of certain fishermen.
Sec. 1115. Modifications of tax-exempt bond rules for first-time 
                            farmers.
Sec. 1116. Newspaper distributors treated as direct sellers.
Sec. 1117. Application of involuntary conversion rules to 
                            presidentially declared disasters.
Sec. 1118. Class life for gas station convenience stores and similar 
                            structures.
Sec. 1119. Treatment of abandonment of lessor improvements at 
                            termination of lease.
Sec. 1120. Deductibility of business meal expenses for certain seafood 
                            processing facilities.
Sec. 1121. Clarification of tax treatment of hard cider.
Sec. 1122. Special rules relating to determination whether individuals 
                            are employees for purposes of employment 
                            taxes.

          Subtitle B--Extension of Certain Expiring Provisions

Sec. 1201. Work opportunity tax credit.
Sec. 1202. Employer-provided educational assistance programs.
Sec. 1203. Research credit.
Sec. 1204. Orphan drug tax credit.
Sec. 1205. Contributions of stock to private foundations.
Sec. 1206. Extension of binding contract date for biomass and coal 
                            facilities.
Sec. 1207. Moratorium for excise tax on diesel fuel sold for use or 
                            used in diesel-powered motorboats.

           Subtitle C--Provisions Relating to S Corporations

Sec. 1301. S corporations permitted to have 75 shareholders.
Sec. 1302. Electing small business trusts.
Sec. 1303. Expansion of post-death qualification for certain trusts.
Sec. 1304. Financial institutions permitted to hold safe harbor debt.
Sec. 1305. Rules relating to inadvertent terminations and invalid 
                            elections.
Sec. 1306. Agreement to terminate year.
Sec. 1307. Expansion of post-termination transition period.
Sec. 1308. S corporations permitted to hold subsidiaries.
Sec. 1309. Treatment of distributions during loss years.
Sec. 1310. Treatment of S corporations under subchapter C.
Sec. 1311. Elimination of certain earnings and profits.
Sec. 1312. Carryover of disallowed losses and deductions under at-risk 
                            rules allowed.
Sec. 1313. Adjustments to basis of inherited S stock to reflect certain 
                            items of income.
Sec. 1314. S corporations eligible for rules applicable to real 
                            property subdivided for sale by 
                            noncorporate taxpayers.
Sec. 1315. Financial institutions.
Sec. 1316. Certain exempt organizations allowed to be shareholders.
Sec. 1317. Effective date.

                   Subtitle D--Pension Simplification

                Chapter 1--Simplified Distribution Rules

Sec. 1401. Repeal of 5-year income averaging for lump-sum 
                            distributions.
Sec. 1402. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 1403. Simplified method for taxing annuity distributions under 
                            certain employer plans.
Sec. 1404. Required distributions.

            Chapter 2--Increased Access to Retirement Plans

                   subchapter a--simple savings plans
Sec. 1421. Establishment of savings incentive match plans for employees 
                            of small employers.
Sec. 1422. Extension subchapter b--other provisionsgements.
Sec. 1426. Tax-exempt organizations eligible under section 401(k).
Sec. 1427. Homemakers eligible for full IRA deduction.

                Chapter 3--Nondiscrimination Provisions

Sec. 1431. Definition of highly compensated employees; repeal of family 
                            aggregation.
Sec. 1432. Modification of additional participation requirements.
Sec. 1433. Nondiscrimination rules for qualified cash or deferred 
                            arrangements and matching contributions.
Sec. 1434. Definition of compensation for section 415 purposes.

                  Chapter 4--Miscellaneous Provisions

Sec. 1441. Plans covering self-employed individuals.
Sec. 1442. Elimination of special vesting rule for multiemployer plans.
Sec. 1443. Distributions under rural cooperative plans.
Sec. 1444. Treatment of governmental plans under section 415.
Sec. 1445. Uniform retirement age.
Sec. 1446. Contributions on behalf of disabled employees.
Sec. 1447. Treatment of deferred compensation plans of State and local 
                            governments and tax-exempt organizations.
Sec. 1448. Trust requirement for deferred compensation plans of State 
                            and local governments.
Sec. 1449. Transition rule for computing maximum benefits under section 
                            415 limitations.
Sec. 1450. Modifications of section 403(b).
Sec. 1451. Waiver of minimum period for joint and survivor annuity 
                            explanation before annuity starting date.
Sec. 1452. Repeal of limitation in case of defined benefit plan and 
                            defined contribution plan for same 
                            employee; excess distributions.
Sec. 1453. Tax on prohibited transactions.
Sec. 1454. Treatment of leased employees.
Sec. 1455. Uniform penalty provisions to apply to certain pension 
                            reporting requirements.
Sec. 1456. Retirement benefits of ministers not subject to tax on net 
                            earnings from self-employment.
Sec. 1457. Model forms for spousal consent and qualified domestic 
                            relations forms.
Sec. 1458. Treatment of length of service awards to volunteers 
                            performing fire fighting or prevention 
                            services, emergency medical services, or 
                            ambulance services.
Sec. 1459. Date for adoption of plan amendments.

                      Subtitle E--Revenue Offsets

                       Part I--General Provisions

Sec. 1601. Modifications of Puerto Rico and possession tax credit.
Sec. 1602. Repeal of exclusion for interest on loans used to acquire 
                            employer securities.
Sec. 1603. Repeal of exclusion for punitive damages.
Sec. 1604. Extension and phasedown of luxury passenger automobile tax.
Sec. 1605. Termination of future tax-exempt bond financing for local 
                            furnishers of electricity and gas.
Sec. 1606. Repeal of financial institution transition rule to interest 
                            allocation rules.
Sec. 1607. Extension of airport and airway trust fund excise taxes.
Sec. 1608. Basis adjustment to property held by corporation where stock 
                            in corporation is replacement property 
                            under involuntary conversion rules.
Sec. 1609. Extension of withholding to certain gambling winnings.
Sec. 1610. Treatment of certain insurance contracts on retired lives.
Sec. 1611. Treatment of contributions in aid of construction.

          Part II--Financial Asset Securitization Investments

Sec. 1621. Financial asset securitization investment trusts.

           Part III--Treatment of Individuals Who Expatriate

Sec. 1631. Revision of tax rules on expatriation.
Sec. 1632. Information on individuals expatriating.
Sec. 1633. Report on tax compliance by United States citizens and 
                            residents living abroad.

                   Subtitle F--Technical Corrections

Sec. 1701. Coordination with other subtitles.
Sec. 1702. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 1703. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 1704. Miscellaneous provisions.

                      Subtitle G--Other Provisions

Sec. 1801. Exemption from diesel fuel dyeing requirements with respect 
                            to certain States.
Sec. 1802. Treatment of certain university accounts.
Sec. 1803. Modifications to excise tax on ozone-depleting chemicals.
Sec. 1804. Tax-exempt bonds for sale of Alaska Power Administration 
                            facility.
Sec. 1805. Nonrecognition treatment for certain transfers by common 
                            trust funds to regulated investment 
                            companies.
Sec. 1806. Qualified State tuition programs.

                       TITLE II--PAYMENT OF WAGES

Section 1. Short title.
Sec. 2. Proper compensation for use of employer vehicles.
Sec. 3. Effective date.
Sec. 4. Minimum wage increase.
Sec. 5. Fair Labor Standards Act Amendments.

            TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS

SEC. 1101. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 1102. UNDERPAYMENTS OF ESTIMATED TAX.

    No addition to the tax shall be made under section 6654 or 6655 of 
the Internal Revenue Code of 1986 (relating to failure to pay estimated 
tax) with respect to any underpayment of an installment required to be 
paid before the date of the enactment of this Act to the extent such 
underpayment was created or increased by any provision of this title.

                      Subtitle A--Expensing; Etc.

SEC. 1111. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

    (a) General Rule.--Paragraph (1) of section 179(b) (relating to 
dollar limitation) is amended to read as follows:
            ``(1) Dollar limitation.--The aggregate cost which may be 
        taken into account under subsection (a) for any taxable year 
        shall not exceed the following applicable amount:

        ``If the taxable year
                                                         The applicable
          begins in:
                                                             amount is:
                  1997...............................           18,000 
                  1998...............................           18,500 
                  1999...............................           19,000 
                  2000...............................           20,000 
                  2001...............................           24,000 
                  2002...............................           24,000 
                  2003 or thereafter.................         25,000.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1996.

SEC. 1112. TREATMENT OF EMPLOYEE TIPS.

    (a) Employee Cash Tips.--
            (1) Reporting requirement not considered.--Subparagraph (A) 
        of section 45B(b)(1) (relating to excess employer social 
        security tax) is amended by inserting ``(without regard to 
        whether such tips are reported under section 6053)'' after 
        ``section 3121(q)''.
            (2) Taxes paid.--Subsection (d) of section 13443 of the 
        Revenue Reconciliation Act of 1993 is amended by inserting ``, 
        with respect to services performed before, on, or after such 
        date'' after ``1993''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect as if included in the amendments made by, and 
        the provisions of, section 13443 of the Revenue Reconciliation 
        Act of 1993.
    (b) Tips for Employees Delivering Food or Beverages.--
            (1) In general.--Paragraph (2) of section 45B(b) is amended 
        to read as follows:
            ``(2) Only tips received for food or beverages taken into 
        account.--In applying paragraph (1), there shall be taken into 
        account only tips received from customers in connection with 
        the delivering or serving of food or beverages for consumption 
        if the tipping of employees delivering or serving food or 
        beverages by customers is customary.''
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to tips received for services performed after 
        December 31, 1996.

SEC. 1113. TREATMENT OF DUES PAID TO AGRICULTURAL OR HORTICULTURAL 
              ORGANIZATIONS.

    (a) General Rule.--Section 512 (defining unrelated business taxable 
income) is amended by adding at the end the following new subsection:
    ``(d) Treatment of Dues of Agricultural or Horticultural 
Organizations.--
            ``(1) In general.--If--
                    ``(A) an agricultural or horticultural organization 
                described in section 501(c)(5) requires annual dues to 
                be paid in order to be a member of such organization, 
                and
                    ``(B) the amount of such required annual dues does 
                not exceed $100,
        in no event shall any portion of such dues be treated as 
        derived by such organization from an unrelated trade or 
        business by reason of any benefits or privileges to which 
        members of such organization are entitled.
            ``(2) Indexation of $100 amount.--In the case of any 
        taxable year beginning in a calendar year after 1995, the $100 
        amount in paragraph (1) shall be increased by an amount equal 
        to--
                    ``(A) $100, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1994' for `calendar year 1992' in subparagraph (B) 
                thereof.
            ``(3) Dues.--For purposes of this subsection, the term 
        `dues' means any payment (whether or not designated as dues) 
        which is required to be made in order to be recognized by the 
        organization as a member of the organization.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1994.

SEC. 1114. CLARIFICATION OF EMPLOYMENT TAX STATUS OF CERTAIN FISHERMEN.

    (a) Clarification of Employment Tax Status.--
            (1) Amendments of internal revenue code of 1986.--
                    (A) Determination of size of crew.--Subsection (b) 
                of section 3121 (defining employment) is amended by 
                adding at the end the following new sentence:
``For purposes of paragraph (20), the operating crew of a boat shall be 
treated as normally made up of fewer than 10 individuals if the average 
size of the operating crew on trips made during the preceding 4 
calendar quarters consisted of fewer than 10 individuals.''.
                    (B) Certain cash remuneration permitted.--
                Subparagraph (A) of section 3121(b)(20) is amended to 
                read as follows:
                    ``(A) such individual does not receive any cash 
                remuneration other than as provided in subparagraph (B) 
                and other than cash remuneration--
                            ``(i) which does not exceed $100 per trip;
                            ``(ii) which is contingent on a minimum 
                        catch; and
                            ``(iii) which is paid solely for additional 
                        duties (such as mate, engineer, or cook) for 
                        which additional cash remuneration is 
                        traditional in the industry,''.
                    (C) Conforming amendment.--Section 6050A(a) is 
                amended by striking ``and'' at the end of paragraph 
                (3), by striking the period at the end of paragraph (4) 
                and inserting ``; and'', and by adding at the end the 
                following new paragraph:
            ``(5) any cash remuneration described in section 
        3121(b)(20)(A).''.
            (2) Amendment of social security act.--
                    (A) Determination of size of crew.--Subsection (a) 
                of section 210 of the Social Security Act is amended by 
                adding at the end the following new sentence:
``For purposes of paragraph (20), the operating crew of a boat shall be 
treated as normally made up of fewer than 10 individuals if the average 
size of the operating crew on trips made during the preceding 4 
calendar quarters consisted of fewer than 10 individuals.''.
                    (B) Certain cash remuneration permitted.--
                Subparagraph (A) of section 210(a)(20) of such Act is 
                amended to read as follows:
                    ``(A) such individual does not receive any 
                additional compensation other than as provided in 
                subparagraph (B) and other than cash remuneration--
                            ``(i) which does not exceed $100 per trip;
                            ``(ii) which is contingent on a minimum 
                        catch; and
                            ``(iii) which is paid solely for additional 
                        duties (such as mate, engineer, or cook) for 
                        which additional cash remuneration is 
                        traditional in the industry,''.
    (b) Effective Date.--The amendments made by this section shall 
apply to remuneration paid after December 31, 1994.

SEC. 1115. MODIFICATIONS OF TAX-EXEMPT BOND RULES FOR FIRST-TIME 
              FARMERS.

    (a) Acquisition From Related Person Allowed.--Section 147(c)(2) 
(relating to exception for first-time farmers) is amended by adding at 
the end the following new subparagraph:
                    ``(G) Acquisition from related person.--For 
                purposes of this paragraph and section 144(a), the 
                acquisition by a first-time farmer of land or personal 
                property from a related person (within the meaning of 
                section 144(a)(3)) shall not be treated as an 
                acquisition from a related person, if--
                            ``(i) the acquisition price is for the fair 
                        market value of such land or property, and
                            ``(ii) subsequent to such acquisition, the 
                        related person does not have a financial 
                        interest in the farming operation with respect 
                        to which the bond proceeds are to be used.''
    (b) Substantial Farmland Amount Doubled.--Clause (i) of section 
147(c)(2)(E) (defining substantial farmland) is amended by striking 
``15 percent'' and inserting ``30 percent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 1116. NEWSPAPER DISTRIBUTORS TREATED AS DIRECT SELLERS.

    (a) In General.--Section 3508(b)(2)(A) is amended by striking 
``or'' at the end of clause (i), by inserting ``or'' at the end of 
clause (ii), and by inserting after clause (ii) the following new 
clause:
                            ``(iii) is engaged in the trade or business 
                        of the delivering or distribution of newspapers 
                        or shopping news (including any services 
                        directly related to such trade or business),''.
    (b) Effective Date.--The amendments made by this section shall 
apply to services performed after December 31, 1995.

SEC. 1117. APPLICATION OF INVOLUNTARY CONVERSION RULES TO 
              PRESIDENTIALLY DECLARED DISASTERS.

    (a) In General.--Section 1033(h) is amended by redesignating 
paragraphs (2) and (3) as paragraphs (3) and (4) and by inserting after 
paragraph (1) the following new paragraph:
            ``(2) Trade or business and investment property.--If a 
        taxpayer's property held for productive use in a trade or 
        business or for investment is compulsorily or involuntarily 
        converted as a result of a Presidentially declared disaster, 
        tangible property of a type held for productive use in a trade 
        or business shall be treated for purposes of subsection (a) as 
        property similar or related in service or use to the property 
        so converted.''.
    (b) Conforming Amendments.--Section 1033(h) is amended--
            (1) by striking ``residence'' in paragraph (3) (as 
        redesignated by subsection (a)) and inserting ``property'',
            (2) by striking ``Principal Residences'' in the heading and 
        inserting ``Property'', and
            (3) by striking ``(1) In general.--'' and inserting ``(1) 
        Principal residences.--''.
    (c) Effective Date.--The amendments made by this section shall 
apply to disasters declared after December 31, 1994, in taxable years 
ending after such date.

SEC. 1118. CLASS LIFE FOR GAS STATION CONVENIENCE STORES AND SIMILAR 
              STRUCTURES.

    (a) In General.--Section 168(e)(3)(E) (classifying certain property 
as 15-year property) is amended by striking ``and'' at the end of 
clause (i), by striking the period at the end of clause (ii) and 
inserting ``, and'', and by adding at the end the following new clause:
                            ``(iii) any section 1250 property which is 
                        a retail motor fuels outlet (whether or not 
                        food or other convenience items are sold at the 
                        outlet).''
    (b) Conforming Amendment.--Subparagraph (B) of section 168(g)(3) is 
amended by inserting after the item relating to subparagraph (E)(ii) in 
the table contained therein the following new item:

                              ``(E)(iii)................. 20''.

    (c) Effective Date.--The amendments made by this section shall 
apply to property which is placed in service on or after the date of 
the enactment of this Act and to which section 168 of the Internal 
Revenue Code of 1986 applies after the amendment made by section 201 of 
the Tax Reform Act of 1986. A taxpayer may elect (in such form and 
manner as the Secretary of the Treasury may prescribe) to have such 
amendments apply with respect to any property placed in service before 
such date and to which such section so applies.

SEC. 1119. TREATMENT OF ABANDONMENT OF LESSOR IMPROVEMENTS AT 
              TERMINATION OF LEASE.

    (a) In General.--Paragraph (8) of section 168(i) is amended to read 
as follows:
            ``(8) Treatment of leasehold improvements.--
                    ``(A) In general.--In the case of any building 
                erected (or improvements made) on leased property, if 
                such building or improvement is property to which this 
                section applies, the depreciation deduction shall be 
                determined under the provisions of this section.
                    ``(B) Treatment of lessor improvements which are 
                abandoned at termination of lease.--An improvement--
                            ``(i) which is made by the lessor of leased 
                        property for the lessee of such property, and
                            ``(ii) which is irrevocably disposed of or 
                        abandoned by the lessor at the termination of 
                        the lease by such lessee,
                shall be treated for purposes of determining gain or 
                loss under this title as disposed of by the lessor when 
                so disposed of or abandoned.''
    (b) Effective Date.--Subparagraph (B) of section 168(i)(8) of the 
Internal Revenue Code of 1986, as added by the amendment made by 
subsection (a), shall apply to improvements disposed of or abandoned 
after June 12, 1996.

SEC. 1120. DEDUCTIBILITY OF BUSINESS MEAL EXPENSES FOR CERTAIN SEAFOOD 
              PROCESSING FACILITIES.

    (a) In General.--Subparagraph (E) of section 274(n)(2) is amended 
by striking ``or'' at the end of clause (iii), by striking the period 
at the end of clause (iv) and inserting ``, or'', and by inserting 
after clause (iv) the following new clause:
                            ``(v) provided at a remote seafood 
                        processing facility located in the United 
                        States north of 53 degrees north latitude.''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 1121. CLARIFICATION OF TAX TREATMENT OF HARD CIDER.

    (a) Hard Cider Containing Not More Than 7 Percent Alcohol Taxed as 
Wine.--Subsection (b) of section 5041 (relating to imposition and rate 
of tax) is amended by striking ``and'' at the end of paragraph (4), by 
striking the period at the end of paragraph (5) and inserting ``; 
and'', and by adding at the end the following new paragraph:
            ``(6) On hard cider derived primarily from apples or apple 
        concentrate and water, containing no other fruit product, and 
        containing at least one-half of 1 percent and not more than 7 
        percent of alcohol by volume, 22.6 cents per wine gallon.''
    (b) Exclusion From Small Producer Credit.--Paragraph (1) of section 
5041(c) (relating to credit for small domestic producers) is amended by 
striking ``subsection (b)(4)'' and inserting ``paragraphs (4) and (6) 
of subsection (b)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1997.

SEC. 1122. SPECIAL RULES RELATING TO DETERMINATION WHETHER INDIVIDUALS 
              ARE EMPLOYEES FOR PURPOSES OF EMPLOYMENT TAXES.

    (a) In General.--Section 530 of the Revenue Act of 1978 is amended 
by adding at the end the following new subsection:
    ``(e) Special Rules for Application of Section.--
            ``(1) Notice requirements.--
                    ``(A) Written agreement required between taxpayer 
                and individual.--The provisions of subsection (a)(1) 
                shall not apply with respect to a taxpayer and any 
                individual unless such taxpayer and individual sign a 
                statement (at such time and in such form as the 
                Secretary may prescribe) which provides that such 
                individual will not be treated as an employee of the 
                taxpayer for purposes of employment taxes.
                    ``(B) Notice of availability of section.--An 
                officer or employee of the Internal Revenue Service 
                shall, before or at the commencement of any audit 
                relating to the employment status of one or more 
                individuals who perform services for the taxpayer, 
                provide the taxpayer with a written notice of the 
                provisions of this section.
            ``(2) Rules relating to statutory standards.--For purposes 
        of subsection (a)(2)--
                    ``(A) a taxpayer may not rely on an audit commenced 
                after December 31, 1996, for purposes of subparagraph 
                (B) thereof unless such audit included an examination 
                for employment tax purposes of whether the individual 
                involved (or any individual holding a position 
                substantially similar to the position held by the 
                individual involved) should be treated as an employee 
                of the taxpayer,
                    ``(B) in no event shall the significant segment 
                requirement of subparagraph (C) thereof be construed to 
                require a reasonable showing of the practice of more 
                than 25 percent of the industry (determined by not 
                taking into account the taxpayer), and
                    ``(C) in applying the long-standing recognized 
                practice requirement of subparagraph (C) thereof--
                            ``(i) such requirement shall not be 
                        construed as requiring the practice to have 
                        continued for more than 10 years, and
                            ``(ii) a practice shall not fail to be 
                        treated as long-standing merely because such 
                        practice began after 1978.
            ``(3) Availability of safe harbors.--Nothing in this 
        section shall be construed to provide that subsection (a) only 
        applies where the individual involved is otherwise an employee 
        of the taxpayer.
            ``(4) Burden of proof.--
                    ``(A) In general.--If--
                            ``(i) a taxpayer establishes a prima facie 
                        case that it was reasonable not to treat an 
                        individual as an employee for purposes of this 
                        section, and
                            ``(ii) the taxpayer has fully cooperated 
                        with reasonable requests from the Secretary of 
                        the Treasury or his delegate,
                then the burden of proof with respect to such treatment 
                shall be on the Secretary.
                    ``(B) Exception for other reasonable basis.--In the 
                case of any issue involving whether the taxpayer had a 
                reasonable basis not to treat an individual as an 
                employee for purposes of this section, subparagraph (A) 
shall only apply for purposes of determining whether the taxpayer meets 
the requirements of subparagraph (A), (B), or (C) of subsection 
(a)(2).''
    (b) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        apply to periods after December 31, 1996.
            (2) Notice requirements.--
                    (A) Written agreement.--In the case of individuals 
                who first perform services for a taxpayer before 
                January 1, 1997, the requirements of section 
                530(e)(1)(A) of the Revenue Act of 1978 (as added by 
                subsection (a)) shall not apply before January 1, 1998, 
                unless the taxpayer elects to apply such requirements 
                before such date.
                    (B) Notice by internal revenue service.--Section 
                530(e)(1)(B) of the Revenue Act of 1978 (as added by 
                subsection (a)) shall apply to audits which commence 
                after December 31, 1996.
            (3) Burden of proof.--
                    (A) In general.--Section 530(e)(4) of the Revenue 
                Act of 1978 (as added by subsection (a)) shall apply to 
                disputes involving periods after December 31, 1996.
                    (B) No inference.--Nothing in the amendments made 
                by this section shall be construed to infer the proper 
                treatment of the burden of proof with respect to 
                disputes involving periods before January 1, 1997.

          Subtitle B--Extension of Certain Expiring Provisions

SEC. 1201. WORK OPPORTUNITY TAX CREDIT.

    (a) Amount of Credit.--Subsection (a) of section 51 (relating to 
amount of credit) is amended by striking ``40 percent'' and inserting 
``35 percent''.
    (b) Members of Targeted Groups.--Subsection (d) of section 51 is 
amended to read as follows:
    ``(d) Members of Targeted Groups.--For purposes of this subpart--
            ``(1) In general.--An individual is a member of a targeted 
        group if such individual is--
                    ``(A) a qualified IV-A recipient,
                    ``(B) a qualified veteran,
                    ``(C) a qualified ex-felon,
                    ``(D) a high-risk youth,
                    ``(E) a vocational rehabilitation referral,
                    ``(F) a qualified summer youth employee, or
                    ``(G) a qualified food stamp recipient.
            ``(2) Qualified iv-a recipient.--
                    ``(A) In general.--The term `qualified IV-A 
                recipient' means any individual who is certified by the 
                designated local agency as being a member of a family 
                receiving assistance under a IV-A program for at least 
                a 9-month period ending during the 9-month period 
                ending on the hiring date.
                    ``(B) IV-A program.--For purposes of this 
                paragraph, the term `IV-A program' means any program 
                providing assistance under a State plan approved under 
                part A of title IV of the Social Security Act (relating 
                to assistance for needy families with minor children) 
                and any successor of such program.
            ``(3) Qualified veteran.--
                    ``(A) In general.--The term `qualified veteran' 
                means any veteran who is certified by the designated 
                local agency as being--
                            ``(i) a member of a family receiving 
                        assistance under a IV-A program (as defined in 
                        paragraph (2)(B)) for at least a 9-month period 
                        ending during the 12-month period ending on the 
                        hiring date, or
                            ``(ii) a member of a family receiving 
                        assistance under a food stamp program under the 
                        Food Stamp Act of 1977 for at least a 3-month 
                        period ending during the 12-month period ending 
                        on the hiring date.
                    ``(B) Veteran.--For purposes of subparagraph (A), 
                the term `veteran' means any individual who is 
                certified by the designated local agency as--
                            ``(i)(I) having served on active duty 
                        (other than active duty for training) in the 
                        Armed Forces of the United States for a period 
                        of more than 180 days, or
                            ``(II) having been discharged or released 
                        from active duty in the Armed Forces of the 
                        United States for a service-connected 
                        disability, and
                            ``(ii) not having any day during the 60-day 
                        period ending on the hiring date which was a 
                        day of extended active duty in the Armed Forces 
                        of the United States.
                For purposes of clause (ii), the term `extended active 
                duty' means a period of more than 90 days during which 
                the individual was on active duty (other than active 
                duty for training).
            ``(4) Qualified ex-felon.--The term `qualified ex-felon' 
        means any individual who is certified by the designated local 
        agency--
                    ``(A) as having been convicted of a felony under 
                any statute of the United States or any State,
                    ``(B) as having a hiring date which is not more 
                than 1 year after the last date on which such 
                individual was so convicted or was released from 
                prison, and
                    ``(C) as being a member of a family which had an 
                income during the 6 months immediately preceding the 
                earlier of the month in which such income determination 
                occurs or the month in which the hiring date occurs, 
                which, on an annual basis, would be 70 percent or less 
                of the Bureau of Labor Statistics lower living 
                standard.
        Any determination under subparagraph (C) shall be valid for the 
        45-day period beginning on the date such determination is made.
            ``(5) High-risk youth.--
                    ``(A) In general.--The term `high-risk youth' means 
                any individual who is certified by the designated local 
                agency--
                            ``(i) as having attained age 18 but not age 
                        25 on the hiring date, and
                            ``(ii) as having his principal place of 
                        abode within an empowerment zone or enterprise 
                        community.
                    ``(B) Youth must continue to reside in zone.--In 
                the case of a high-risk youth, the term `qualified 
                wages' shall not include wages paid or incurred for 
                services performed while such youth's principal place 
                of abode is outside an empowerment zone or enterprise 
                community.
            ``(6) Vocational rehabilitation referral.--The term 
        `vocational rehabilitation referral' means any individual who 
        is certified by the designated local agency as--
                    ``(A) having a physical or mental disability which, 
                for such individual, constitutes or results in a 
                substantial handicap to employment, and
                    ``(B) having been referred to the employer upon 
                completion of (or while receiving) rehabilitative 
                services pursuant to--
                            ``(i) an individualized written 
                        rehabilitation plan under a State plan for 
                        vocational rehabilitation services approved 
                        under the Rehabilitation Act of 1973, or
                            ``(ii) a program of vocational 
                        rehabilitation carried out under chapter 31 of 
                        title 38, United States Code.
            ``(7) Qualified summer youth employee.--
                    ``(A) In general.--The term `qualified summer youth 
                employee' means any individual--
                            ``(i) who performs services for the 
                        employer between May 1 and September 15,
                            ``(ii) who is certified by the designated 
                        local agency as having attained age 16 but not 
                        18 on the hiring date (or if later, on May 1 of 
                        the calendar year involved),
                            ``(iii) who has not been an employee of the 
                        employer during any period prior to the 90-day 
                        period described in subparagraph (B)(i), and
                            ``(iv) who is certified by the designated 
                        local agency as having his principal place of 
                        abode within an empowerment zone or enterprise 
                        community.
                    ``(B) Special rules for determining amount of 
                credit.--For purposes of applying this subpart to wages 
                paid or incurred to any qualified summer youth 
                employee--
                            ``(i) subsection (b)(2) shall be applied by 
                        substituting `any 90-day period between May 1 
                        and September 15' for `the 1-year period 
                        beginning with the day the individual begins 
                        work for the employer', and
                            ``(ii) subsection (b)(3) shall be applied 
                        by substituting `$3,000' for `$6,000'.
                The preceding sentence shall not apply to an individual 
                who, with respect to the same employer, is certified as 
                a member of another targeted group after such 
                individual has been a qualified summer youth employee.
                    ``(C) Youth must continue to reside in zone.--
                Paragraph (5)(B) shall apply for purposes of 
                subparagraph (A)(iv).
            ``(8) Qualified food stamp recipient.--
                    ``(A) In general.--The term `qualified food stamp 
                recipient' means any individual who is certified by the 
                designated local agency--
                            ``(i) as having attained age 18 but not age 
                        25 on the hiring date, and
                            ``(ii) as being a member of a family 
                        receiving assistance under a food stamp program 
                        under the Food Stamp Act of 1977 for the 3-
month period ending on the hiring date.
                    ``(B) Participation information.--Notwithstanding 
                any other provision of law, the Secretary of the 
                Treasury and the Secretary of Agriculture shall enter 
                into an agreement to provide information to designated 
                local agencies with respect to participation in the 
                food stamp program.
            ``(9) Hiring date.--The term `hiring date' means the day 
        the individual is hired by the employer.
            ``(10) Designated local agency.--The term `designated local 
        agency' means a State employment security agency established in 
        accordance with the Act of June 6, 1933, as amended (29 U.S.C. 
        49-49n).
            ``(11) Special rules for certifications.--
                    ``(A) In general.--An individual shall not be 
                treated as a member of a targeted group unless--
                            ``(i) on or before the day on which such 
                        individual begins work for the employer, the 
                        employer has received a certification from a 
                        designated local agency that such individual is 
                        a member of a targeted group, or
                            ``(ii)(I) on or before the day the 
                        individual is offered employment with the 
                        employer, a pre-screening notice is completed 
                        by the employer with respect to such 
                        individual, and
                            ``(II) not later than the 21st day after 
                        the individual begins work for the employer, 
                        the employer submits such notice, signed by the 
                        employer and the individual under penalties of 
                        perjury, to the designated local agency as part 
                        of a written request for such a certification 
                        from such agency.
                For purposes of this paragraph, the term `pre-screening 
                notice' means a document (in such form as the Secretary 
                shall prescribe) which contains information provided by 
                the individual on the basis of which the employer 
                believes that the individual is a member of a targeted 
                group.
                    ``(B) Incorrect certifications.--If--
                            ``(i) an individual has been certified by a 
                        designated local agency as a member of a 
                        targeted group, and
                            ``(ii) such certification is incorrect 
                        because it was based on false information 
                        provided by such individual,
                the certification shall be revoked and wages paid by 
                the employer after the date on which notice of 
                revocation is received by the employer shall not be 
                treated as qualified wages.
                    ``(C) Explanation of denial of request.--If a 
                designated local agency denies a request for 
                certification of membership in a targeted group, such 
                agency shall provide to the person making such request 
                a written explanation of the reasons for such denial.''
    (c) Minimum Employment Period.--Paragraph (3) of section 51(i) 
(relating to certain individuals ineligible) is amended to read as 
follows:
            ``(3) Individuals not meeting minimum employment period.--
        No wages shall be taken into account under subsection (a) with 
        respect to any individual unless such individual either--
                    ``(A) is employed by the employer at least 180 days 
                (20 days in the case of a qualified summer youth 
                employee), or
                    ``(B) has completed at least 375 hours (120 hours 
                in the case of a qualified summer youth employee) of 
                services performed for the employer.''
    (d) Termination.--Paragraph (4) of section 51(c) (relating to wages 
defined) is amended to read as follows:
            ``(4) Termination.--The term `wages' shall not include any 
        amount paid or incurred to an individual who begins work for 
        the employer--
                    ``(A) after December 31, 1994, and before October 
                1, 1996, or
                    ``(B) after September 30, 1997.''
    (e) Redesignation of Credit.--
            (1) Sections 38(b)(2) and 51(a) are each amended by 
        striking ``targeted jobs credit'' and inserting ``work 
        opportunity credit''.
            (2) The subpart heading for subpart F of part IV of 
        subchapter A of chapter 1 is amended by striking ``Targeted 
        Jobs Credit'' and inserting ``Work Opportunity Credit''.
            (3) The table of subparts for such part IV is amended by 
        striking ``targeted jobs credit'' and inserting ``work 
        opportunity credit''.
            (4) The heading for paragraph (3) of section 1396(c) is 
        amended by striking ``targeted jobs credit'' and inserting 
        ``work opportunity credit''.
    (f) Technical Amendment.--Paragraph (1) of section 51(c) is amended 
by striking ``, subsection (d)(8)(D),''.
    (g) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after September 
30, 1996.

SEC. 1202. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE PROGRAMS.

    (a) Extension.--Subsection (d) of section 127 (relating to 
educational assistance programs) is amended by striking ``December 31, 
1994'' and inserting ``December 31, 1996''.
    (b) Effective Dates.--
            (1) Extension.--The amendment made by subsection (a) shall 
        apply to taxable years beginning after December 31, 1994.
            (2) Expedited procedures.--The Secretary of the Treasury 
        shall establish expedited procedures for the refund of any 
        overpayment of taxes imposed by the Internal Revenue Code of 
        1986 which is attributable to amounts excluded from gross 
        income during 1995 or 1996 under section 127 of such Code, 
        including procedures waiving the requirement that an employer 
        obtain an employee's signature where the employer demonstrates 
        to the satisfaction of the Secretary that any refund collected 
        by the employer on behalf of the employee will be paid to the 
        employee.

SEC. 1203. RESEARCH CREDIT.

    (a) In General.--Subsection (h) of section 41 (relating to credit 
for research activities) is amended to read as follows:
    ``(h) Termination.--
            ``(1) In general.--This section shall not apply to any 
        amount paid or incurred--
                    ``(A) after June 30, 1995, and before July 1, 1996, 
                or
                    ``(B) after June 30, 1997.''
            ``(2) Computation of base amount.--In the case of any 
        taxable year with respect to which this section applies to a 
        number of days which is less than the total number of days in 
        such taxable year, the base amount with respect to such taxable 
        year shall be the amount which bears the same ratio to the base 
        amount for such year (determined without regard to this 
        paragraph) as the number of days in such taxable year to which 
        this section applies bears to the total number of days in such 
        taxable year.''
    (b) Base Amount for Start-Up Companies.--Clause (i) of section 
41(c)(3)(B) (relating to start-up companies) is amended to read as 
follows:
                            ``(i)  Taxpayers to which subparagraph 
                        applies.--The fixed-base percentage shall be 
                        determined under this subparagraph if--
                                    ``(I) the first taxable year in 
                                which a taxpayer had both gross 
                                receipts and qualified research 
                                expenses begins after December 31, 
                                1983, or
                                    ``(II) there are fewer than 3 
                                taxable years beginning after December 
                                31, 1983, and before January 1, 1989, 
                                in which the taxpayer had both gross 
                                receipts and qualified research 
                                expenses.''
    (c) Election of Alternative Incremental Credit.--Subsection (c) of 
section 41 is amended by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6), respectively, and by inserting after paragraph 
(3) the following new paragraph:
            ``(4) Election of alternative incremental credit.--
                    ``(A) In general.--At the election of the taxpayer, 
                the credit determined under subsection (a)(1) shall be 
                equal to the sum of--
                            ``(i) 1.65 percent of so much of the 
                        qualified research expenses for the taxable 
                        year as exceeds 1 percent of the average 
                        described in subsection (c)(1)(B) but does not 
                        exceed 1.5 percent of such average,
                            ``(ii) 2.2 percent of so much of such 
                        expenses as exceeds 1.5 percent of such average 
                        but does not exceed 2 percent of such average, 
                        and
                            ``(iii) 2.75 percent of so much of such 
                        expenses as exceeds 2 percent of such average.
                    ``(B) Election.--An election under this paragraph 
                may be made only for the first taxable year of the 
                taxpayer beginning after June 30, 1996. Such an 
                election shall apply to the taxable year for which made 
                and all succeeding taxable years unless revoked with 
                the consent of the Secretary.''
    (d) Increased Credit for Contract Research Expenses With Respect to 
Certain Research Consortia.--Paragraph (3) of section 41(b) is amended 
by adding at the end the following new subparagraph:
                    ``(C) Amounts paid to certain research consortia.--
                            ``(i) In general.--Subparagraph (A) shall 
                        be applied by substituting `75 percent' for `65 
                        percent' with respect to amounts paid or 
incurred by the taxpayer to a qualified research consortium for 
qualified research on behalf of the taxpayer and 1 or more unrelated 
taxpayers. For purposes of the preceding sentence, all persons treated 
as a single employer under subsection (a) or (b) of section 52 shall be 
treated as related taxpayers.
                            ``(ii) Qualified research consortium.--The 
                        term `qualified research consortium' means any 
                        organization which--
                                    ``(I) is described in section 
                                501(c)(3) or 501(c)(6) and is exempt 
                                from tax under section 501(a),
                                    ``(II) is organized and operated 
                                primarily to conduct scientific 
                                research, and
                                    ``(III) is not a private 
                                foundation.''
    (e)  Conforming Amendment.--Subparagraph (D) of section 28(b)(1) is 
amended by inserting ``, and before July 1, 1996, and periods after 
June 30, 1997'' after ``June 30, 1995''.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        ending after June 30, 1996.
            (2) Subsections (c) and (d).--The amendments made by 
        subsections (c) and (d) shall apply to taxable years beginning 
        after June 30, 1996.

SEC. 1204. ORPHAN DRUG TAX CREDIT.

    (a) Recategorized as a Business Credit.--
            (1) In general.--Section 28 (relating to clinical testing 
        expenses for certain drugs for rare diseases or conditions) is 
        transferred to subpart D of part IV of subchapter A of chapter 
        1, inserted after section 45B, and redesignated as section 45C.
            (2) Conforming amendment.--Subsection (b) of section 38 
        (relating to general business credit) is amended by striking 
        ``plus'' at the end of paragraph (10), by striking the period 
        at the end of paragraph (11) and inserting ``, plus'', and by 
        adding at the end the following new paragraph:
            ``(12) the orphan drug credit determined under section 
        45C(a).''
            (3) Clerical amendments.--
                    (A) The table of sections for subpart B of such 
                part IV is amended by striking the item relating to 
                section 28.
                    (B) The table of sections for subpart D of such 
                part IV is amended by adding at the end the following 
                new item:

        ``Sec. 45C. Clinical testing expenses for certain drugs for 
                            rare diseases or conditions.''
    (b) Credit Termination.--Subsection (e) of section 45C, as 
redesignated by subsection (a)(1), is amended to read as follows:
    ``(e) Termination.--This section shall not apply to any amount paid 
or incurred--
                    ``(A) after December 31, 1994, and before July 1, 
                1996, or
                    ``(B) after June 30, 1997.''
    (c) No Pre-July 1, 1996 Carrybacks.--Subsection (d) of section 39 
(relating to carryback and carryforward of unused credits) is amended 
by adding at the end the following new paragraph:
            ``(7) No carryback of section 45c credit before july 1, 
        1996.--No portion of the unused business credit for any taxable 
        year which is attributable to the orphan drug credit determined 
        under section 45C may be carried back to a taxable year ending 
        before July 1, 1996.''
    (d) Additional Conforming Amendments.--
            (1) Section 45C(a), as redesignated by subsection (a)(1), 
        is amended by striking ``There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year'' 
        and inserting ``For purposes of section 38, the credit 
        determined under this section for the taxable year is''.
            (2) Section 45C(d), as so redesignated, is amended by 
        striking paragraph (2) and by redesignating paragraphs (3), 
        (4), and (5) as paragraphs (2), (3), and (4).
            (3) Section 29(b)(6)(A) is amended by striking ``sections 
        27 and 28'' and inserting ``section 27''.
            (4) Section 30(b)(3)(A) is amended by striking ``sections 
        27, 28, and 29'' and inserting ``sections 27 and 29''.
            (5) Section 53(d)(1)(B) is amended--
                    (A) by striking ``or not allowed under section 28 
                solely by reason of the application of section 
                28(d)(2)(B),'' in clause (iii), and
                    (B) by striking ``or not allowed under section 28 
                solely by reason of the application of section 
                28(d)(2)(B)'' in clause (iv)(II).
            (6) Section 55(c)(2) is amended by striking ``28(d)(2),''.
            (7) Section 280C(b) is amended--
                    (A) by striking ``section 28(b)'' in paragraph (1) 
                and inserting ``section 45C(b)'',
                    (B) by striking ``section 28'' in paragraphs (1) 
                and (2)(A) and inserting ``section 45C(b)'', and
                    (C) by striking ``subsection (d)(2) thereof'' in 
                paragraphs (1) and (2)(A) and inserting ``section 
                38(c)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years ending after June 
30, 1996.

SEC. 1205. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.

    (a) In General.--Subparagraph (D) of section 170(e)(5) (relating to 
special rule for contributions of stock for which market quotations are 
readily available) is amended to read as follows:
                    ``(D) Termination.--This paragraph shall not apply 
                to contributions made--
                    ``(A) after December 31, 1994, and before July 1, 
                1996, or
                    ``(B) after June 30, 1997.''
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after June 30, 1996.

SEC. 1206. EXTENSION OF BINDING CONTRACT DATE FOR BIOMASS AND COAL 
              FACILITIES.

    (a) In General.--Subparagraph (A) of section 29(g)(1) (relating to 
extension of certain facilities) is amended by striking ``January 1, 
1997'' and inserting ``January 1, 1998'' and by striking ``January 1, 
1996'' and inserting ``the date which is 6 months after the date of the 
enactment of the Small Business Job Protection Act of 1996''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 1207. MORATORIUM FOR EXCISE TAX ON DIESEL FUEL SOLD FOR USE OR 
              USED IN DIESEL-POWERED MOTORBOATS.

    (a) In General.--Subparagraph (D) of section 4041(a)(1) (relating 
to the imposition of tax on diesel fuel and special motor fuels) is 
amended by redesignating clauses (i) and (ii) as clauses (ii) and 
(iii), respectively, and by inserting before clause (ii) (as 
redesignated) the following new clause:
                            ``(i) no tax shall be imposed by subsection 
                        (a) or (d)(1) during the period after June 30, 
                        1996, and before July 1, 1997,''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on July 1, 1996.

           Subtitle C--Provisions Relating to S Corporations

SEC. 1301. S CORPORATIONS PERMITTED TO HAVE 75 SHAREHOLDERS.

    Subparagraph (A) of section 1361(b)(1) (defining small business 
corporation) is amended by striking ``35 shareholders'' and inserting 
``75 shareholders''.

SEC. 1302. ELECTING SMALL BUSINESS TRUSTS.

    (a) General Rule.--Subparagraph (A) of section 1361(c)(2) (relating 
to certain trusts permitted as shareholders) is amended by inserting 
after clause (iv) the following new clause:
                            ``(v) An electing small business trust.''.
    (b) Current Beneficiaries Treated as Shareholders.--Subparagraph 
(B) of section 1361(c)(2) is amended by adding at the end the following 
new clause:
                            ``(v) In the case of a trust described in 
                        clause (v) of subparagraph (A), each potential 
                        current beneficiary of such trust shall be 
                        treated as a shareholder; except that, if for 
                        any period there is no potential current 
                        beneficiary of such trust, such trust shall be 
                        treated as the shareholder during such 
                        period.''.
    (c) Electing Small Business Trust Defined.--Section 1361 (defining 
S corporation) is amended by adding at the end the following new 
subsection:
    ``(e) Electing Small Business Trust Defined.--
            ``(1) Electing small business trust.--For purposes of this 
        section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `electing small business 
                trust' means any trust if--
                            ``(i) such trust does not have as a 
                        beneficiary any person other than (I) an 
                        individual, (II) an estate, or (III) an 
                        organization described in paragraph (2), (3), 
                        (4), or (5) of section 170(c) which holds a 
                        contingent interest and is not a potential 
                        current beneficiary,
                            ``(ii) no interest in such trust was 
                        acquired by purchase, and
                            ``(iii) an election under this subsection 
                        applies to such trust.
                    ``(B) Certain trusts not eligible.--The term 
                `electing small business trust' shall not include--
                            ``(i) any qualified subchapter S trust (as 
                        defined in subsection (d)(3)) if an election 
under subsection (d)(2) applies to any corporation the stock of which 
is held by such trust, and
                            ``(ii) any trust exempt from tax under this 
                        subtitle.
                    ``(C) Purchase.--For purposes of subparagraph (A), 
                the term `purchase' means any acquisition if the basis 
                of the property acquired is determined under section 
                1012.
            ``(2) Potential current beneficiary.--For purposes of this 
        section, the term `potential current beneficiary' means, with 
        respect to any period, any person who at any time during such 
        period is entitled to, or at the discretion of any person may 
        receive, a distribution from the principal or income of the 
        trust. If a trust disposes of all of the stock which it holds 
        in an S corporation, then, with respect to such corporation, 
        the term `potential current beneficiary' does not include any 
        person who first met the requirements of the preceding sentence 
        during the 60-day period ending on the date of such 
        disposition.
            ``(3) Election.--An election under this subsection shall be 
        made by the trustee. Any such election shall apply to the 
        taxable year of the trust for which made and all subsequent 
        taxable years of such trust unless revoked with the consent of 
        the Secretary.
            ``(4) Cross reference.--

                                ``For special treatment of electing 
small business trusts, see section 641(d).''.

    (d) Taxation of Electing Small Business Trusts.--Section 641 
(relating to imposition of tax on trusts) is amended by adding at the 
end the following new subsection:
    ``(d) Special Rules for Taxation of Electing Small Business 
Trusts.--
            ``(1) In general.--For purposes of this chapter--
                    ``(A) the portion of any electing small business 
                trust which consists of stock in 1 or more S 
                corporations shall be treated as a separate trust, and
                    ``(B) the amount of the tax imposed by this chapter 
                on such separate trust shall be determined with the 
                modifications of paragraph (2).
            ``(2) Modifications.--For purposes of paragraph (1), the 
        modifications of this paragraph are the following:
                    ``(A) Except as provided in section 1(h), the 
                amount of the tax imposed by section 1(e) shall be 
                determined by using the highest rate of tax set forth 
                in section 1(e).
                    ``(B) The exemption amount under section 55(d) 
                shall be zero.
                    ``(C) The only items of income, loss, deduction, or 
                credit to be taken into account are the following:
                            ``(i) The items required to be taken into 
                        account under section 1366.
                            ``(ii) Any gain or loss from the 
                        disposition of stock in an S corporation.
                            ``(iii) To the extent provided in 
                        regulations, State or local income taxes or 
                        administrative expenses to the extent allocable 
                        to items described in clauses (i) and (ii).
                No deduction or credit shall be allowed for any amount 
                not described in this paragraph, and no item described 
                in this paragraph shall be apportioned to any 
                beneficiary.
                    ``(D) No amount shall be allowed under paragraph 
                (1) or (2) of section 1211(b).
            ``(3) Treatment of remainder of trust and distributions.--
        For purposes of determining--
                    ``(A) the amount of the tax imposed by this chapter 
                on the portion of any electing small business trust not 
                treated as a separate trust under paragraph (1), and
                    ``(B) the distributable net income of the entire 
                trust,
        the items referred to in paragraph (2)(C) shall be excluded. 
        Except as provided in the preceding sentence, this subsection 
        shall not affect the taxation of any distribution from the 
        trust.
            ``(4) Treatment of unused deductions where termination of 
        separate trust.--If a portion of an electing small business 
        trust ceases to be treated as a separate trust under paragraph 
        (1), any carryover or excess deduction of the separate trust 
        which is referred to in section 642(h) shall be taken into 
        account by the entire trust.
            ``(5) Electing small business trust.--For purposes of this 
        subsection, the term `electing small business trust' has the 
        meaning given such term by section 1361(e)(1).''.
    (e) Technical Amendment.--Paragraph (1) of section 1366(a) is 
amended by inserting ``, or of a trust or estate which terminates,'' 
after ``who dies''.

SEC. 1303. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN TRUSTS.

    Subparagraph (A) of section 1361(c)(2) (relating to certain trusts 
permitted as shareholders) is amended--
            (1) by striking ``60-day period'' each place it appears in 
        clauses (ii) and (iii) and inserting ``2-year period'', and
            (2) by striking the last sentence in clause (ii).

SEC. 1304. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE HARBOR DEBT.

    Clause (iii) of section 1361(c)(5)(B) (defining straight debt) is 
amended by striking ``or a trust described in paragraph (2)'' and 
inserting ``a trust described in paragraph (2), or a person which is 
actively and regularly engaged in the business of lending money''.

SEC. 1305. RULES RELATING TO INADVERTENT TERMINATIONS AND INVALID 
              ELECTIONS.

    (a) General Rule.--Subsection (f) of section 1362 (relating to 
inadvertent terminations) is amended to read as follows:
    ``(f) Inadvertent Invalid Elections or Terminations.--If--
            ``(1) an election under subsection (a) by any corporation--
                    ``(A) was not effective for the taxable year for 
                which made (determined without regard to subsection 
                (b)(2)) by reason of a failure to meet the requirements 
                of section 1361(b) or to obtain shareholder consents, 
                or
                    ``(B) was terminated under paragraph (2) or (3) of 
                subsection (d),
            ``(2) the Secretary determines that the circumstances 
        resulting in such ineffectiveness or termination were 
        inadvertent,
            ``(3) no later than a reasonable period of time after 
        discovery of the circumstances resulting in such 
        ineffectiveness or termination, steps were taken--
                    ``(A) so that the corporation is a small business 
                corporation, or
                    ``(B) to acquire the required shareholder consents, 
                and
            ``(4) the corporation, and each person who was a 
        shareholder in the corporation at any time during the period 
        specified pursuant to this subsection, agrees to make such 
        adjustments (consistent with the treatment of the corporation 
        as an S corporation) as may be required by the Secretary with 
        respect to such period,
then, notwithstanding the circumstances resulting in such 
ineffectiveness or termination, such corporation shall be treated as an 
S corporation during the period specified by the Secretary.''.
    (b) Late Elections, Etc.--Subsection (b) of section 1362 is amended 
by adding at the end the following new paragraph:
            ``(5) Authority to treat late elections, etc., as timely.--
        If--
                    ``(A) an election under subsection (a) is made for 
                any taxable year (determined without regard to 
                paragraph (3)) after the date prescribed by this 
                subsection for making such election for such taxable 
                year or no such election is made for any taxable year, 
                and
                    ``(B) the Secretary determines that there was 
                reasonable cause for the failure to timely make such 
                election,
        the Secretary may treat such an election as timely made for 
        such taxable year (and paragraph (3) shall not apply).''.
    (c) Effective Date.--The amendments made by subsection (a) and (b) 
shall apply with respect to elections for taxable years beginning after 
December 31, 1982.

SEC. 1306. AGREEMENT TO TERMINATE YEAR.

    Paragraph (2) of section 1377(a) (relating to pro rata share) is 
amended to read as follows:
            ``(2) Election to terminate year.--
                    ``(A) In general.--Under regulations prescribed by 
                the Secretary, if any shareholder terminates the 
                shareholder's interest in the corporation during the 
                taxable year and all affected shareholders and the 
                corporation agree to the application of this paragraph, 
                paragraph (1) shall be applied to the affected 
                shareholders as if the taxable year consisted of 2 
                taxable years the first of which ends on the date of 
                the termination.
                    ``(B) Affected shareholders.--For purposes of 
                subparagraph (A), the term `affected shareholders' 
                means the shareholder whose interest is terminated and 
                all shareholders to whom such shareholder has 
                transferred shares during the taxable year. If such 
                shareholder has transferred shares to the corporation, 
                the term `affected shareholders' shall include all 
                persons who are shareholders during the taxable 
                year.''.

SEC. 1307. EXPANSION OF POST-TERMINATION TRANSITION PERIOD.

    (a) In General.--Paragraph (1) of section 1377(b) (relating to 
post-termination transition period) is amended by striking ``and'' at 
the end of subparagraph (A), by redesignating subparagraph (B) as 
subparagraph (C), and by inserting after subparagraph (A) the following 
new subparagraph:
                    ``(B) the 120-day period beginning on the date of 
                any determination pursuant to an audit of the taxpayer 
                which follows the termination of the corporation's 
                election and which adjusts a subchapter S item of 
                income, loss, or deduction of the corporation arising 
                during the S period (as defined in section 1368(e)(2)), 
                and''.
    (b) Determination Defined.--Paragraph (2) of section 1377(b) is 
amended by striking subparagraphs (A) and (B), by redesignating 
subparagraph (C) as subparagraph (B), and by inserting before 
subparagraph (B) (as so redesignated) the following new subparagraph:
                    ``(A) a determination as defined in section 
                1313(a), or''.
    (c) Repeal of Special Audit Provisions for Subchapter S Items.--
            (1) General rule.--Subchapter D of chapter 63 (relating to 
        tax treatment of subchapter S items) is hereby repealed.
            (2) Consistent treatment required.--Section 6037 (relating 
        to return of S corporation) is amended by adding at the end the 
        following new subsection:
    ``(c) Shareholder's Return Must Be Consistent With Corporate Return 
or Secretary Notified of Inconsistency.--
            ``(1) In general.--A shareholder of an S corporation shall, 
        on such shareholder's return, treat a subchapter S item in a 
        manner which is consistent with the treatment of such item on 
        the corporate return.
            ``(2) Notification of inconsistent treatment.--
                    ``(A) In general.--In the case of any subchapter S 
                item, if--
                            ``(i)(I) the corporation has filed a return 
                        but the shareholder's treatment on his return 
                        is (or may be) inconsistent with the treatment 
                        of the item on the corporate return, or
                            ``(II) the corporation has not filed a 
                        return, and
                            ``(ii) the shareholder files with the 
                        Secretary a statement identifying the 
                        inconsistency,
                paragraph (1) shall not apply to such item.
                    ``(B) Shareholder receiving incorrect 
                information.--A shareholder shall be treated as having 
                complied with clause (ii) of subparagraph (A) with 
                respect to a subchapter S item if the shareholder--
                            ``(i) demonstrates to the satisfaction of 
                        the Secretary that the treatment of the 
                        subchapter S item on the shareholder's return 
                        is consistent with the treatment of the item on 
                        the schedule furnished to the shareholder by 
                        the corporation, and
                            ``(ii) elects to have this paragraph apply 
                        with respect to that item.
            ``(3) Effect of failure to notify.--In any case--
                    ``(A) described in subparagraph (A)(i)(I) of 
                paragraph (2), and
                    ``(B) in which the shareholder does not comply with 
                subparagraph (A)(ii) of paragraph (2),
        any adjustment required to make the treatment of the items by 
        such shareholder consistent with the treatment of the items on 
        the corporate return shall be treated as arising out of 
        mathematical or clerical errors and assessed according to 
        section 6213(b)(1). Paragraph (2) of section 6213(b) shall not 
        apply to any assessment referred to in the preceding sentence.
            ``(4) Subchapter s item.--For purposes of this subsection, 
        the term `subchapter S item' means any item of an S corporation 
        to the extent that regulations prescribed by the Secretary 
        provide that, for purposes of this subtitle, such item is more 
        appropriately determined at the corporation level than at the 
        shareholder level.
            ``(5) Addition to tax for failure to comply with section.--

                                ``For addition to tax in the case of a 
shareholder's negligence in connection with, or disregard of, the 
requirements of this section, see part II of subchapter A of chapter 
68.''.
            (3) Conforming amendments.--
                    (A) Section 1366 is amended by striking subsection 
                (g).
                    (B) Subsection (b) of section 6233 is amended to 
                read as follows:
    ``(b) Similar Rules in Certain Cases.--If a partnership return is 
filed for any taxable year but it is determined that there is no entity 
for such taxable year, to the extent provided in regulations, rules 
similar to the rules of subsection (a) shall apply.''.
                    (C) The table of subchapters for chapter 63 is 
                amended by striking the item relating to subchapter D.

SEC. 1308. S CORPORATIONS PERMITTED TO HOLD SUBSIDIARIES.

    (a) In General.--Paragraph (2) of section 1361(b) (defining 
ineligible corporation) is amended by striking subparagraph (A) and by 
redesignating subparagraphs (B), (C), (D), and (E) as subparagraphs 
(A), (B), (C), and (D), respectively.
    (b) Treatment of Certain Wholly Owned S Corporation Subsidiaries.--
Section 1361(b) (defining small business corporation) is amended by 
adding at the end the following new paragraph:
            ``(3) Treatment of certain wholly owned subsidiaries.--
                    ``(A) In general.--For purposes of this title--
                            ``(i) a corporation which is a qualified 
                        subchapter S subsidiary shall not be treated as 
                        a separate corporation, and
                            ``(ii) all assets, liabilities, and items 
                        of income, deduction, and credit of a qualified 
                        subchapter S subsidiary shall be treated as 
                        assets, liabilities, and such items (as the 
                        case may be) of the S corporation.
                    ``(B) Qualified subchapter s subsidiary.--For 
                purposes of this paragraph, the term `qualified 
                subchapter S subsidiary' means any domestic corporation 
                which is not an ineligible corporation (as defined in 
                paragraph (2)), if--
                            ``(i) 100 percent of the stock of such 
                        corporation is held by the S corporation, and
                            ``(ii) the S corporation elects to treat 
                        such corporation as a qualified subchapter S 
                        subsidiary.
                    ``(C) Treatment of terminations of qualified 
                subchapter s subsidiary status.--For purposes of this 
                title, if any corporation which was a qualified 
                subchapter S subsidiary ceases to meet the requirements 
                of subparagraph (B), such corporation shall be treated 
                as a new corporation acquiring all of its assets (and 
                assuming all of its liabilities) immediately before 
                such cessation from the S corporation in exchange for 
                its stock.
                    ``(D) Election after termination.--If a 
                corporation's status as a qualified subchapter S 
                subsidiary terminates, such corporation (and any 
                successor corporation) shall not be eligible to make--
                            ``(i) an election under subparagraph 
                        (B)(ii) to be treated as a qualified subchapter 
                        S subsidiary, or
                            ``(ii) an election under section 1362(a) to 
                        be treated as an S corporation,
                before its 5th taxable year which begins after the 1st 
                taxable year for which such termination was effective, 
                unless the Secretary consents to such election.''
    (c) Certain Dividends Not Treated as Passive Investment Income.--
Paragraph (3) of section 1362(d) is amended by adding at the end the 
following new subparagraph:
                    ``(F) Treatment of certain dividends.--If an S 
                corporation holds stock in a C corporation meeting the 
                requirements of section 1504(a)(2), the term `passive 
                investment income' shall not include dividends from 
                such C corporation to the extent such dividends are 
                attributable to the earnings and profits of such C 
                corporation derived from the active conduct of a trade 
                or business.''.
    (d) Conforming Amendments.--
            (1) Subsection (c) of section 1361 is amended by striking 
        paragraph (6).
            (2) Subsection (b) of section 1504 (defining includible 
        corporation) is amended by adding at the end the following new 
        paragraph:
            ``(8) An S corporation.''.

SEC. 1309. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.

    (a) Adjustments for Distributions Taken Into Account Before 
Losses.--
            (1) Subparagraph (A) of section 1366(d)(1) (relating to 
        losses and deductions cannot exceed shareholder's basis in 
        stock and debt) is amended by striking ``paragraph (1)'' and 
        inserting ``paragraphs (1) and (2)(A)''.
            (2) Subsection (d) of section 1368 (relating to certain 
        adjustments taken into account) is amended by adding at the end 
        the following new sentence:
``In the case of any distribution made during any taxable year, the 
adjusted basis of the stock shall be determined with regard to the 
adjustments provided in paragraph (1) of section 1367(a) for the 
taxable year.''.
    (b) Accumulated Adjustments Account.--Paragraph (1) of section 
1368(e) (relating to accumulated adjustments account) is amended by 
adding at the end the following new subparagraph:
            ``(C) Net loss for year disregarded.--
                    ``(i) In general.--In applying this section to 
                distributions made during any taxable year, the amount 
                in the accumulated adjustments account as of the close 
                of such taxable year shall be determined without regard 
                to any net negative adjustment for such taxable year.
                    ``(ii) Net negative adjustment.--For purposes of 
                clause (i), the term `net negative adjustment' means, 
                with respect to any taxable year, the excess (if any) 
                of--
                            ``(I) the reductions in the account for the 
                        taxable year (other than for distributions), 
                        over
                            ``(II) the increases in such account for 
                        such taxable year.''.
    (c) Conforming Amendments.--Subparagraph (A) of section 1368(e)(1) 
is amended--
            (1) by striking ``as provided in subparagraph (B)'' and 
        inserting ``as otherwise provided in this paragraph'', and
            (2) by striking ``section 1367(b)(2)(A)'' and inserting 
        ``section 1367(a)(2)''.

SEC. 1310. TREATMENT OF S CORPORATIONS UNDER SUBCHAPTER C.

    Subsection (a) of section 1371 (relating to application of 
subchapter C rules) is amended to read as follows:
    ``(a) Application of Subchapter C Rules.--Except as otherwise 
provided in this title, and except to the extent inconsistent with this 
subchapter, subchapter C shall apply to an S corporation and its 
shareholders.''.

SEC. 1311. ELIMINATION OF CERTAIN EARNINGS AND PROFITS.

    (a) In General.--If--
            (1) a corporation was an electing small business 
        corporation under subchapter S of chapter 1 of the Internal 
        Revenue Code of 1986 for any taxable year beginning before 
        January 1, 1983, and
            (2) such corporation is an S corporation under subchapter S 
        of chapter 1 of such Code for its first taxable year beginning 
        after December 31, 1996,
the amount of such corporation's accumulated earnings and profits (as 
of the beginning of such first taxable year) shall be reduced by an 
amount equal to the portion (if any) of such accumulated earnings and 
profits which were accumulated in any taxable year beginning before 
January 1, 1983, for which such corporation was an electing small 
business corporation under such subchapter S.
    (b) Conforming Amendments.--
            (1) Paragraph (3) of section 1362(d), as amended by section 
        1308, is amended--
                    (A) by striking ``subchapter c'' in the paragraph 
                heading and inserting ``accumulated'',
                    (B) by striking ``subchapter C'' in subparagraph 
                (A)(i)(I) and inserting ``accumulated'', and
                    (C) by striking subparagraph (B) and redesignating 
                the following subparagraphs accordingly.
            (2)(A) Subsection (a) of section 1375 is amended by 
        striking ``subchapter C'' in paragraph (1) and inserting 
        ``accumulated''.
            (B) Paragraph (3) of section 1375(b) is amended to read as 
        follows:
            ``(3) Passive investment income, etc.--The terms `passive 
        investment income' and `gross receipts' have the same 
        respective meanings as when used in paragraph (3) of section 
        1362(d).''.
            (C) The section heading for section 1375 is amended by 
        striking ``subchapter c'' and inserting ``accumulated''.
            (D) The table of sections for part III of subchapter S of 
        chapter 1 is amended by striking ``subchapter C'' in the item 
        relating to section 1375 and inserting ``accumulated''.
            (3) Clause (i) of section 1042(c)(4)(A) is amended by 
        striking ``section 1362(d)(3)(D)'' and inserting ``section 
        1362(d)(3)(C)''.

SEC. 1312. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS UNDER AT-RISK 
              RULES ALLOWED.

    Paragraph (3) of section 1366(d) (relating to carryover of 
disallowed losses and deductions to post-termination transition period) 
is amended by adding at the end the following new subparagraph:
                    ``(D) At-risk limitations.--To the extent that any 
                increase in adjusted basis described in subparagraph 
                (B) would have increased the shareholder's amount at 
                risk under section 465 if such increase had occurred on 
                the day preceding the commencement of the post-
                termination transition period, rules similar to the 
                rules described in subparagraphs (A) through (C) shall 
                apply to any losses disallowed by reason of section 
                465(a).''.

SEC. 1313. ADJUSTMENTS TO BASIS OF INHERITED S STOCK TO REFLECT CERTAIN 
              ITEMS OF INCOME.

    (a) In General.--Subsection (b) of section 1367 (relating to 
adjustments to basis of stock of shareholders, etc.) is amended by 
adding at the end the following new paragraph:
            ``(4) Adjustments in case of inherited stock.--
                    ``(A) In general.--If any person acquires stock in 
                an S corporation by reason of the death of a decedent 
                or by bequest, devise, or inheritance, section 691 
                shall be applied with respect to any item of income of 
                the S corporation in the same manner as if the decedent 
                had held directly his pro rata share of such item.
                    ``(B) Adjustments to basis.--The basis determined 
                under section 1014 of any stock in an S corporation 
                shall be reduced by the portion of the value of the 
                stock which is attributable to items constituting 
                income in respect of the decedent.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply in the case of decedents dying after the date of the enactment of 
this Act.

SEC. 1314. S CORPORATIONS ELIGIBLE FOR RULES APPLICABLE TO REAL 
              PROPERTY SUBDIVIDED FOR SALE BY NONCORPORATE TAXPAYERS.

    (a) In General.--Subsection (a) of section 1237 (relating to real 
property subdivided for sale) is amended by striking ``other than a 
corporation'' in the material preceding paragraph (1) and inserting 
``other than a C corporation''.
    (b) Conforming Amendment.--Subparagraph (A) of section 1237(a)(2) 
is amended by inserting ``an S corporation which included the taxpayer 
as a shareholder,'' after ``controlled by the taxpayer,''.

SEC. 1315. FINANCIAL INSTITUTIONS.

    Subparagraph (A) of section 1361(b)(2) (defining ineligible 
corporation), as redesignated by section 1308(a), is amended to read as 
follows:
                    ``(A) a financial institution which uses the 
                reserve method of accounting for bad debts described in 
                section 585 or 593,''.

SEC. 1316. CERTAIN EXEMPT ORGANIZATIONS ALLOWED TO BE SHAREHOLDERS.

    (a) Eligibility To Be Shareholders.--
            (1) In general.--Subparagraph (B) of section 1361(b)(1) 
        (defining small business corporation) is amended to read as 
        follows:
                    ``(B) have as a shareholder a person (other than an 
                estate, a trust described in subsection (c)(2), or an 
                organization described in subsection (c)(7)) who is not 
                an individual,''.
            (2) Eligible exempt organizations.--Section 1361(c) 
        (relating to special rules for applying subsection (b)) is 
        amended by adding at the end the following new paragraph:
            ``(7) Certain exempt organizations permitted as 
        shareholders.--For purposes of subsection (b)(1)(B), an 
        organization which is--
                    ``(A) described in section 401(a) or 501(c)(3), and
                    ``(B) exempt from taxation under section 501(a),
        may be a shareholder in an S corporation.''
    (b) Contributions of S Corporation Stock.--Section 170(e)(1) 
(relating to certain contributions of ordinary income and capital gain 
property) is amended by adding at the end the following new sentence: 
``For purposes of applying this paragraph in the case of a charitable 
contribution of stock in an S corporation, rules similar to the rules 
of section 751 shall apply in determining whether gain on such stock 
would have been long-term capital gain if such stock were sold by the 
taxpayer.''
    (c) Treatment of Income.--Section 512 (relating to unrelated 
business taxable income), as amended by section 1113, is amended by 
adding at the end the following new subsection:
    ``(e) Special Rules Applicable to S Corporations.--
            ``(1) In general.--If an organization described in section 
        1361(c)(7) holds stock in an S corporation--
                    ``(A) such interest shall be treated as an interest 
                in an unrelated trade or business; and
                    ``(B) notwithstanding any other provision of this 
                part, all items of income, loss, deduction or credit 
                taken into account under section 1366(a) and any gain 
                or loss on the disposition of the stock in the S 
                corporation shall be taken into account in computing 
                the unrelated business taxable income of such 
                organization.
            ``(2) Disposition gain.--For purposes of paragraph (1), 
        gain on the sale or other disposition of C corporation stock 
        which was an S corporation at any time the organization held 
        such stock shall be treated as gain from the disposition of 
        stock in an S corporation to the extent of any gain which the 
        organization would have realized if it had sold the stock for 
        fair market value as of the last day of the corporation's last 
        taxable year as an S corporation.''
    (d) Certain Benefits not Applicable to S Corporations.--
            (1) Contribution to esops.--Paragraph (9) of section 404(a) 
        (relating to certain contributions to employee ownership plans) 
        is amended by inserting at the end the following new 
        subparagraph:
                    ``(C) S corporations.--This paragraph shall not 
                apply to an S corporation.''
            (2) Dividends on employer securities.--Paragraph (1) of 
        section 404(k) (relating to deduction for dividends on certain 
        employer securities) is amended by striking ``a corporation'' 
        and inserting ``a C corporation''.
            (3) Exchange treatment.--Subparagraph (A) of section 
        1042(c)(1) (defining qualified securities) is amended by 
        striking ``domestic corporation'' and inserting ``domestic C 
        corporation''.
    (e) Conforming Amendment.--Clause (i) of section 1361(e)(1)(A), as 
added by section 1302, is amended by striking ``which holds a 
contingent interest and is not a potential current beneficiary''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

SEC. 1317. EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided in this subtitle, the 
amendments made by this subtitle shall apply to taxable years beginning 
after December 31, 1996.
    (b) Treatment of Certain Elections Under Prior Law.--For purposes 
of section 1362(g) of the Internal Revenue Code of 1986 (relating to 
election after termination), any termination under section 1362(d) of 
such Code in a taxable year beginning before January 1, 1997, shall not 
be taken into account.

                   Subtitle D--Pension Simplification

                CHAPTER 1--SIMPLIFIED DISTRIBUTION RULES

SEC. 1401. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM 
              DISTRIBUTIONS.

    (a) In General.--Subsection (d) of section 402 (relating to 
taxability of beneficiary of employees' trust) is amended to read as 
follows:
    ``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension, 
or profit-sharing trust which would qualify for exemption from tax 
under section 501(a) except for the fact that it is a trust created or 
organized outside the United States shall be treated as if it were a 
trust exempt from tax under section 501(a).''.
    (b) Conforming Amendments.--
            (1) Subparagraph (D) of section 402(e)(4) (relating to 
        other rules applicable to exempt trusts) is amended to read as 
        follows:
                    ``(D) Lump-sum distribution.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `lump sum 
                        distribution' means the distribution or payment 
                        within one taxable year of the recipient of the 
                        balance to the credit of an employee which 
                        becomes payable to the recipient--
                                    ``(I) on account of the employee's 
                                death,
                                    ``(II) after the employee attains 
                                age 59\1/2\,
                                    ``(III) on account of the 
                                employee's separation from service, or
                                    ``(IV) after the employee has 
                                become disabled (within the meaning of 
                                section 72(m)(7)),
                        from a trust which forms a part of a plan 
                        described in section 401(a) and which is exempt 
                        from tax under section 501 or from a plan 
                        described in section 403(a). Subclause (III) of 
                        this clause shall be applied only with respect 
                        to an individual who is an employee without 
                        regard to section 401(c)(1), and subclause (IV) 
                        shall be applied only with respect to an 
                        employee within the meaning of section 
                        401(c)(1). For purposes of this clause, a 
                        distribution to two or more trusts shall be 
                        treated as a distribution to one recipient. For 
                        purposes of this paragraph, the balance to the 
                        credit of the employee does not include the 
                        accumulated deductible employee contributions 
                        under the plan (within the meaning of section 
                        72(o)(5)).
                            ``(ii) Aggregation of certain trusts and 
                        plans.--For purposes of determining the balance 
                        to the credit of an employee under clause (i)--
                                    ``(I) all trusts which are part of 
                                a plan shall be treated as a single 
                                trust, all pension plans maintained by 
the employer shall be treated as a single plan, all profit-sharing 
plans maintained by the employer shall be treated as a single plan, and 
all stock bonus plans maintained by the employer shall be treated as a 
single plan, and
                                    ``(II) trusts which are not 
                                qualified trusts under section 401(a) 
                                and annuity contracts which do not 
                                satisfy the requirements of section 
                                404(a)(2) shall not be taken into 
                                account.
                            ``(iii) Community property laws.--The 
                        provisions of this paragraph shall be applied 
                        without regard to community property laws.
                            ``(iv) Amounts subject to penalty.--This 
                        paragraph shall not apply to amounts described 
                        in subparagraph (A) of section 72(m)(5) to the 
                        extent that section 72(m)(5) applies to such 
                        amounts.
                            ``(v) Balance to credit of employee not to 
                        include amounts payable under qualified 
                        domestic relations order.--For purposes of this 
                        paragraph, the balance to the credit of an 
                        employee shall not include any amount payable 
                        to an alternate payee under a qualified 
                        domestic relations order (within the meaning of 
                        section 414(p)).
                            ``(vi) Transfers to cost-of-living 
                        arrangement not treated as distribution.--For 
                        purposes of this paragraph, the balance to the 
                        credit of an employee under a defined 
                        contribution plan shall not include any amount 
                        transferred from such defined contribution plan 
                        to a qualified cost-of-living arrangement 
                        (within the meaning of section 415(k)(2)) under 
                        a defined benefit plan.
                            ``(vii) Lump-sum distributions of alternate 
                        payees.--If any distribution or payment of the 
                        balance to the credit of an employee would be 
                        treated as a lump-sum distribution, then, for 
                        purposes of this paragraph, the payment under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)) of the balance to 
                        the credit of an alternate payee who is the 
                        spouse or former spouse of the employee shall 
                        be treated as a lump-sum distribution. For 
                        purposes of this clause, the balance to the 
                        credit of the alternate payee shall not include 
                        any amount payable to the employee.''.
            (2) Section 402(c) (relating to rules applicable to 
        rollovers from exempt trusts) is amended by striking paragraph 
        (10).
            (3) Paragraph (1) of section 55(c) (defining regular tax) 
        is amended by striking ``shall not include any tax imposed by 
        section 402(d) and''.
            (4) Paragraph (8) of section 62(a) (relating to certain 
        portion of lump-sum distributions from pension plans taxed 
        under section 402(d)) is hereby repealed.
            (5) Section 401(a)(28)(B) (relating to coordination with 
        distribution rules) is amended by striking clause (v).
            (6) Subparagraph (B)(ii) of section 401(k)(10) (relating to 
        distributions that must be lump-sum distributions) is amended 
        to read as follows:
                            ``(ii) Lump-sum distribution.--For purposes 
                        of this subparagraph, the term `lump-sum 
                        distribution' has the meaning given such term 
                        by section 402(e)(4)(D) (without regard to 
                        subclauses (I), (II), (III), and (IV) of clause 
                        (i) thereof).''.
            (7) Section 406(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (8) Section 407(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (9) Section 691(c) (relating to deduction for estate tax) 
        is amended by striking paragraph (5).
            (10) Paragraph (1) of section 871(b) (relating to 
        imposition of tax) is amended by striking ``section 1, 55, or 
        402(d)(1)'' and inserting ``section 1 or 55''.
            (11) Subsection (b) of section 877 (relating to alternative 
        tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and 
        inserting ``section 1 or 55''.
            (12) Section 4980A(c)(4) is amended--
                    (A) by striking ``to which an election under 
                section 402(d)(4)(B) applies'' and inserting ``(as 
                defined in section 402(e)(4)(D)) with respect to which 
                the individual elects to have this paragraph apply'',
                    (B) by adding at the end the following new flush 
                sentence:
        ``An individual may elect to have this paragraph apply to only 
        one lump-sum distribution.'', and
                    (C) by striking the heading and inserting:
            ``(4) Special one-time election.--''.
            (13) Section 402(e) is amended by striking paragraph (5).
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1999.
            (2) Retention of certain transition rules.--The amendments 
        made by this section shall not apply to any distribution for 
        which the taxpayer is eligible to elect the benefits of section 
        1122 (h)(3) or (h)(5) of the Tax Reform Act of 1986. 
        Notwithstanding the preceding sentence, individuals who elect 
        such benefits after December 31, 1999, shall not be eligible 
        for 5-year averaging under section 402(d) of the Internal 
        Revenue Code of 1986 (as in effect immediately before such 
        amendments).

SEC. 1402. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS.

    (a) In General.--Subsection (b) of section 101 is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subsection (c) of section 101 is amended by striking 
        ``subsection (a) or (b)'' and inserting ``subsection (a)''.
            (2) Sections 406(e) and 407(e) are each amended by striking 
        paragraph (2) and by redesignating paragraph (3) as paragraph 
        (2).
            (3) Section 7701(a)(20) is amended by striking ``, for the 
        purpose of applying the provisions of section 101(b) with 
        respect to employees' death benefits''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to decedents dying after the date of the enactment 
of this Act.

SEC. 1403. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER 
              CERTAIN EMPLOYER PLANS.

    (a) General Rule.--Subsection (d) of section 72 (relating to 
annuities; certain proceeds of endowment and life insurance contracts) 
is amended to read as follows:
    ``(d) Special Rules for Qualified Employer Retirement Plans.--
            ``(1) Simplified method of taxing annuity payments.--
                    ``(A) In general.--In the case of any amount 
                received as an annuity under a qualified employer 
                retirement plan--
                            ``(i) subsection (b) shall not apply, and
                            ``(ii) the investment in the contract shall 
                        be recovered as provided in this paragraph.
                    ``(B) Method of recovering investment in 
                contract.--
                            ``(i) In general.--Gross income shall not 
                        include so much of any monthly annuity payment 
                        under a qualified employer retirement plan as 
                        does not exceed the amount obtained by 
                        dividing--
                                    ``(I) the investment in the 
                                contract (as of the annuity starting 
                                date), by
                                    ``(II) the number of anticipated 
                                payments determined under the table 
                                contained in clause (iii) (or, in the 
                                case of a contract to which subsection 
                                (c)(3)(B) applies, the number of 
                                monthly annuity payments under such 
                                contract).
                            ``(ii) Certain rules made applicable.--
                        Rules similar to the rules of paragraphs (2) 
                        and (3) of subsection (b) shall apply for 
                        purposes of this paragraph.
                            ``(iii) Number of anticipated payments.--

                         ``If the age of the
                                                                       
                           primary annuitant on
                                                             The number
                           the annuity starting
                                                         of anticipated
                           date is:
                                                           payments is:
                               Not more than 55......              360 
                               More than 55 but not                310 
                            more than 60.
                               More than 60 but not                260 
                            more than 65.
                               More than 65 but not                210 
                            more than 70.
                               More than 70..........              160.
                    ``(C) Adjustment for refund feature not 
                applicable.--For purposes of this paragraph, investment 
                in the contract shall be determined under subsection 
                (c)(1) without regard to subsection (c)(2).
                    ``(D) Special rule where lump sum paid in 
                connection with commencement of annuity payments.--If, 
                in connection with the commencement of annuity payments 
                under any qualified employer retirement plan, the 
                taxpayer receives a lump sum payment--
                            ``(i) such payment shall be taxable under 
                        subsection (e) as if received before the 
                        annuity starting date, and
                            ``(ii) the investment in the contract for 
                        purposes of this paragraph shall be determined 
                        as if such payment had been so received.
                    ``(E) Exception.--This paragraph shall not apply in 
                any case where the primary annuitant has attained age 
                75 on the annuity starting date unless there are fewer 
                than 5 years of guaranteed payments under the annuity.
                    ``(F) Adjustment where annuity payments not on 
                monthly basis.--In any case where the annuity payments 
                are not made on a monthly basis, appropriate 
                adjustments in the application of this paragraph shall 
                be made to take into account the period on the basis of 
                which such payments are made.
                    ``(G) Qualified employer retirement plan.--For 
                purposes of this paragraph, the term `qualified 
                employer retirement plan' means any plan or contract 
                described in paragraph (1), (2), or (3) of section 
                4974(c).
            ``(2) Treatment of employee contributions under defined 
        contribution plans.--For purposes of this section, employee 
        contributions (and any income allocable thereto) under a 
        defined contribution plan may be treated as a separate 
        contract.''.
    (b) Effective Date.--The amendment made by this section shall apply 
in cases where the annuity starting date is after the 90th day after 
the date of the enactment of this Act.

SEC. 1404. REQUIRED DISTRIBUTIONS.

    (a) In General.--Section 401(a)(9)(C) (defining required beginning 
date) is amended to read as follows:
                    ``(C) Required beginning date.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `required 
                        beginning date' means April 1 of the calendar 
                        year following the later of--
                                    ``(I) the calendar year in which 
                                the employee attains age 70\1/2\, or
                                    ``(II) the calendar year in which 
                                the employee retires.
                            ``(ii) Exception.--Subclause (II) of clause 
                        (i) shall not apply--
                                    ``(I) except as provided in section 
                                409(d), in the case of an employee who 
                                is a 5-percent owner (as defined in 
                                section 416) with respect to the plan 
                                year ending in the calendar year in 
                                which the employee attains age 70\1/2\, 
                                or
                                    ``(II) for purposes of section 408 
                                (a)(6) or (b)(3).
                            ``(iii) Actuarial adjustment.--In the case 
                        of an employee to whom clause (i)(II) applies 
                        who retires in a calendar year after the 
                        calendar year in which the employee attains age 
                        70\1/2\, the employee's accrued benefit shall 
                        be actuarially increased to take into account 
                        the period after age 70\1/2\ in which the 
                        employee was not receiving any benefits under 
                        the plan.
                            ``(iv) Exception for governmental and 
                        church plans.--Clauses (ii) and (iii) shall not 
                        apply in the case of a governmental plan or 
                        church plan. For purposes of this clause, the 
                        term `church plan' means a plan maintained by a 
                        church for church employees, and the term 
                        `church' means any church (as defined in 
                        section 3121(w)(3)(A)) or qualified church-
                        controlled organization (as defined in section 
                        3121(w)(3)(B)).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1996.

            CHAPTER 2--INCREASED ACCESS TO RETIREMENT PLANS

                   Subchapter A--Simple Savings Plans

SEC. 1421. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES 
              OF SMALL EMPLOYERS.

    (a) In General.--Section 408 (relating to individual retirement 
accounts) is amended by redesignating subsection (p) as subsection (q) 
and by inserting after subsection (o) the following new subsection:
    ``(p) Simple Retirement Accounts.--
            ``(1) In general.--For purposes of this title, the term 
        `simple retirement account' means an individual retirement plan 
        (as defined in section 7701(a)(37))--
                    ``(A) with respect to which the requirements of 
                paragraphs (3), (4), and (5) are met; and
                    ``(B) with respect to which the only contributions 
                allowed are contributions under a qualified salary 
                reduction arrangement.
            ``(2) Qualified salary reduction arrangement.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified salary reduction arrangement' means 
                a written arrangement of an eligible employer under 
                which--
                            ``(i) an employee eligible to participate 
                        in the arrangement may elect to have the 
                        employer make payments--
                                    ``(I) as elective employer 
                                contributions to a simple retirement 
                                account on behalf of the employee, or
                                    ``(II) to the employee directly in 
                                cash,
                            ``(ii) the amount which an employee may 
                        elect under clause (i) for any year is required 
                        to be expressed as a percentage of compensation 
                        and may not exceed a total of $6,000 for any 
                        year,
                            ``(iii) the employer is required to make a 
                        matching contribution to the simple retirement 
                        account for any year in an amount equal to so 
                        much of the amount the employee elects under 
                        clause (i)(I) as does not exceed the applicable 
                        percentage of compensation for the year, and
                            ``(iv) no contributions may be made other 
                        than contributions described in clause (i) or 
                        (iii).
                    ``(B) Employer may elect 2-percent nonelective 
                contribution.--
                            ``(i) In general.--An employer shall be 
                        treated as meeting the requirements of 
                        subparagraph (A)(iii) for any year if, in lieu 
                        of the contributions described in such clause, 
                        the employer elects to make nonelective 
                        contributions of 2 percent of compensation for 
                        each employee who is eligible to participate in 
                        the arrangement and who has at least $5,000 of 
                        compensation from the employer for the year. If 
                        an employer makes an election under this 
                        subparagraph for any year, the employer shall 
                        notify employees of such election within a 
                        reasonable period of time before the 60-day 
                        period for such year under paragraph (5)(C).
                            ``(ii) Compensation limitation.--The 
                        compensation taken into account under clause 
                        (i) for any year shall not exceed the 
                        limitation in effect for such year under 
                        section 401(a)(17).
                    ``(C) Definitions.--For purposes of this 
                subsection--
                            ``(i) Eligible employer.--
                                    ``(I) In general.--The term 
                                `eligible employer' means, with respect 
                                to any year, an employer which had no 
                                more than 100 employees who received at 
                                least $5,000 of compensation from the 
                                employer for the preceding year.
                                    ``(II) 2-year grace period.--An 
                                eligible employer who establishes and 
                                maintains a plan under this subsection 
                                for 1 or more years and who fails to be 
                                an eligible employer for any subsequent 
                                year shall be treated as an eligible 
                                employer for the 2 years following the 
                                last year the employer was an eligible 
                                employer. If such failure is due to any 
                                acquisition, disposition, or similar 
                                transaction involving an eligible 
                                employer, the preceding sentence shall 
                                apply only in accordance with rules 
                                similar to the rules of section 
                                410(b)(6)(C)(i).
                            ``(ii) Applicable percentage.--
                                    ``(I) In general.--The term 
                                `applicable percentage' means 3 
                                percent.
                                    ``(II) Election of lower 
                                percentage.--An employer may elect to 
                                apply a lower percentage (not less than 
                                1 percent) for any year for all 
                                employees eligible to participate in 
                                the plan for such year if the employer 
                                notifies the employees of such lower 
                                percentage within a reasonable period 
                                of time before the 60-day election 
                                period for such year under paragraph 
                                (5)(C). An employer may not elect a 
                                lower percentage under this subclause 
                                for any year if that election would 
                                result in the applicable percentage 
                                being lower than 3 percent in more than 
                                2 of the years in the 5-year period 
                                ending with such year.
                                    ``(III) Special rule for years 
                                arrangement not in effect.--If any year 
                                in the 5-year period described in 
                                subclause (II) is a year prior to the 
                                first year for which any qualified 
                                salary reduction arrangement is in 
                                effect with respect to the employer (or 
                                any predecessor), the employer shall be 
                                treated as if the level of the employer 
                                matching contribution was at 3 percent 
of compensation for such prior year.
                    ``(D) Arrangement may be only plan of employer.--
                            ``(i) In general.--An arrangement shall not 
                        be treated as a qualified salary reduction 
                        arrangement for any year if the employer (or 
                        any predecessor employer) maintained a 
                        qualified plan with respect to which 
                        contributions were made, or benefits were 
                        accrued, for service in any year in the period 
                        beginning with the year such arrangement became 
                        effective and ending with the year for which 
                        the determination is being made.
                            ``(ii) Qualified plan.--For purposes of 
                        this subparagraph, the term `qualified plan' 
                        means a plan, contract, pension, or trust 
                        described in subparagraph (A) or (B) of section 
                        219(g)(5).
                    ``(E) Cost-of-living adjustment.--The Secretary 
                shall adjust the $6,000 amount under subparagraph 
                (A)(ii) at the same time and in the same manner as 
                under section 415(d), except that the base period taken 
                into account shall be the calendar quarter ending 
                September 30, 1996, and any increase under this 
                subparagraph which is not a multiple of $500 shall be 
                rounded to the next lower multiple of $500.
            ``(3) Vesting requirements.--The requirements of this 
        paragraph are met with respect to a simple retirement account 
        if the employee's rights to any contribution to the simple 
        retirement account are nonforfeitable. For purposes of this 
        paragraph, rules similar to the rules of subsection (k)(4) 
        shall apply.
            ``(4) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any simple retirement 
                account for a year only if, under the qualified salary 
                reduction arrangement, all employees of the employer 
                who--
                            ``(i) received at least $5,000 in 
                        compensation from the employer during any 2 
                        preceding years, and
                            ``(ii) are reasonably expected to receive 
                        at least $5,000 in compensation during the 
                        year,
                are eligible to make the election under paragraph 
                (2)(A)(i) or receive the nonelective contribution 
                described in paragraph (2)(B).
                    ``(B) Excludable employees.--An employer may elect 
                to exclude from the requirement under subparagraph (A) 
                employees described in section 410(b)(3).
            ``(5) Administrative requirements.--The requirements of 
        this paragraph are met with respect to any simplified 
        retirement account if, under the qualified salary reduction 
        arrangement--
                    ``(A) an employer must--
                            ``(i) make the elective employer 
                        contributions under paragraph (2)(A)(i) not 
                        later than the close of the 30-day period 
                        following the last day of the month with 
                        respect to which the contributions are to be 
                        made, and
                            ``(ii) make the matching contributions 
                        under paragraph (2)(A)(iii) or the nonelective 
                        contributions under paragraph (2)(B) not later 
                        than the date described in section 
                        404(m)(2)(B),
                    ``(B) an employee may elect to terminate 
                participation in such arrangement at any time during 
                the year, except that if an employee so terminates, the 
                arrangement may provide that the employee may not elect 
                to resume participation until the beginning of the next 
                year, and
                    ``(C) each employee eligible to participate may 
                elect, during the 60-day period before the beginning of 
                any year (and the 60-day period before the first day 
                such employee is eligible to participate), to 
                participate in the arrangement, or to modify the 
                amounts subject to such arrangement, for such year.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Compensation.--
                            ``(i) In general.--The term `compensation' 
                        means amounts described in paragraphs (3) and 
                        (8) of section 6051(a).
                            ``(ii) Self-employed.--In the case of an 
                        employee described in subparagraph (B), the 
                        term `compensation' means net earnings from 
                        self-employment determined under section 
                        1402(a) without regard to any contribution 
                        under this subsection.
                    ``(B) Employee.--The term `employee' includes an 
                employee as defined in section 401(c)(1).
                    ``(C) Year.--The term `year' means the calendar 
                year.
            ``(7) Use of designated financial institution.--A plan 
        shall not be treated as failing to satisfy the requirements of 
        this subsection or any other provision of this title merely 
        because the employer makes all contributions to the individual 
        retirement accounts or annuities of a designated trustee or 
        issuer. The preceding sentence shall not apply unless each plan 
        participant is notified in writing (either separately or as 
        part of the notice under subsection (l)(2)(C)) that the 
        participant's balance may be transferred without cost or 
        penalty to another individual account or annuity in accordance 
        with section 408(d)(3)(G).''
    (b) Tax Treatment of Simple Retirement Accounts.--
            (1) Deductibility of contributions by employees.--
                    (A) Section 219(b) (relating to maximum amount of 
                deduction) is amended by adding at the end the 
                following new paragraph:
            ``(4) Special rule for simple retirement accounts.--This 
        section shall not apply with respect to any amount contributed 
        to a simple retirement account established under section 
        408(p).''.
                    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
                of clause (iv) and by adding at the end the following 
                new clause:
                            ``(vi) any simple retirement account 
                        (within the meaning of section 408(p)), or''.
            (2) Deductibility of employer contributions.--Section 404 
        (relating to deductions for contributions of an employer to 
        pension, etc. plans) is amended by adding at the end the 
        following new subsection:
    ``(m) Special Rules for Simple Retirement Accounts.--
            ``(1) In general.--Employer contributions to a simple 
        retirement account shall be treated as if they are made to a 
        plan subject to the requirements of this section.
            ``(2) Timing.--
                    ``(A) Deduction.--Contributions described in 
                paragraph (1) shall be deductible in the taxable year 
                of the employer with or within which the calendar year 
                for which the contributions were made ends.
                    ``(B) Contributions after end of year.--For 
                purposes of this subsection, contributions shall be 
                treated as made for a taxable year if they are made on 
                account of the taxable year and are made not later than 
                the time prescribed by law for filing the return for 
                the taxable year (including extensions thereof).''.
            (3) Contributions and distributions.--
                    (A) Section 402 (relating to taxability of 
                beneficiary of employees' trust) is amended by adding 
                at the end the following new subsection:
    ``(k) Treatment of Simple Retirement Accounts.--Rules similar to 
the rules of paragraphs (1) and (3) of subsection (h) shall apply to 
contributions and distributions with respect to a simple retirement 
account under section 408(p).''.
                    (B) Section 408(d)(3) is amended by adding at the 
                end the following new subparagraph:
                    ``(G) Simple retirement accounts.--This paragraph 
                shall not apply to any amount paid or distributed out 
                of a simple retirement account (as defined in section 
                408(p)) unless--
                            ``(i) it is paid into another simple 
                        retirement account, or
                            ``(ii) in the case of any payment or 
                        distribution to which section 72(t)(6) does not 
                        apply, it is paid into an individual retirement 
                        plan.''.
                    (C) Clause (i) of section 457(c)(2)(B) is amended 
                by striking ``section 402(h)(1)(B)'' and inserting 
                ``section 402(h)(1)(B) or (k)''.
            (4) Penalties.--
                    (A) Early withdrawals.--Section 72(t) (relating to 
                additional tax in early distributions) is amended by 
                adding at the end the following new paragraph:
            ``(6) Special rules for simple retirement accounts.--In the 
        case of any amount received from a simple retirement account 
        (within the meaning of section 408(p)) during the 2-year period 
        beginning on the date such individual first participated in any 
        qualified salary reduction arrangement maintained by the 
        individual's employer under section 408(p)(2), paragraph (1) 
        shall be applied by substituting `25 percent' for `10 
        percent'.''.
                    (B) Failure to report.--Section 6693 is amended by 
                redesignating subsection (c) as subsection (d) and by 
                inserting after subsection (b) the following new 
                subsection:
    ``(c) Penalties Relating to Simple Retirement Accounts.--
            ``(1) Employer penalties.--An employer who fails to provide 
        1 or more notices required by section 408(l)(2)(C) shall pay a 
        penalty of $50 for each day on which such failures continue.
            ``(2) Trustee penalties.--A trustee who fails--
                    ``(A) to provide 1 or more statements required by 
                the last sentence of section 408(i) shall pay a penalty 
                of $50 for each day on which such failures continue, or
                    ``(B) to provide 1 or more summary descriptions 
                required by section 408(l)(2)(B) shall pay a penalty of 
                $50 for each day on which such failures continue.
            ``(3) Reasonable cause exception.--No penalty shall be 
        imposed under this subsection with respect to any failure which 
        the taxpayer shows was due to reasonable cause.''.
            (5) Reporting requirements.--
                    (A) Section 408(l) is amended by adding at the end 
                the following new paragraph:
            ``(2) Simple retirement accounts.--
                    ``(A) No employer reports.--Except as provided in 
                this paragraph, no report shall be required under this 
                section by an employer maintaining a qualified salary 
                reduction arrangement under subsection (p).
                    ``(B) Summary description.--The trustee of any 
                simple retirement account established pursuant to a 
                qualified salary reduction arrangement under subsection 
                (p) shall provide to the employer maintaining the 
                arrangement, each year a description containing the 
                following information:
                            ``(i) The name and address of the employer 
                        and the trustee.
                            ``(ii) The requirements for eligibility for 
                        participation.
                            ``(iii) The benefits provided with respect 
                        to the arrangement.
                            ``(iv) The time and method of making 
                        elections with respect to the arrangement.
                            ``(v) The procedures for, and effects of, 
                        withdrawals (including rollovers) from the 
                        arrangement.
                    ``(C) Employee notification.--The employer shall 
                notify each employee immediately before the period for 
                which an election described in subsection (p)(5)(C) may 
                be made of the employee's opportunity to make such 
                election. Such notice shall include a copy of the 
                description described in subparagraph (B).''.
                    (B) Section 408(l) is amended by striking ``An 
                employer'' and inserting the following:
            ``(1) In general.--An employer''.
            (6) Reporting requirements.--Section 408(i) is amended by 
        adding at the end the following new flush sentence:
``In the case of a simple retirement account under subsection (p), only 
one report under this subsection shall be required to be submitted each 
calendar year to the Secretary (at the time provided under paragraph 
(2)) but, in addition to the report under this subsection, there shall 
be furnished, within 30 days after each calendar year, to the 
individual on whose behalf the account is maintained a statement with 
respect to the account balance as of the close of, and the account 
activity during, such calendar year.''.
            (7) Exemption from top-heavy plan rules.--Section 416(g)(4) 
        (relating to special rules for top-heavy plans) is amended by 
        adding at the end the following new subparagraph:
                    ``(G) Simple retirement accounts.--The term `top-
                heavy plan' shall not include a simple retirement 
                account under section 408(p).''.
            (8) Employment taxes.--
                    (A) Paragraph (5) of section 3121(a) is amended by 
                striking ``or'' at the end of subparagraph (F), by 
                inserting ``or'' at the end of subparagraph (G), and by 
                adding at the end the following new subparagraph:
                    ``(H) under an arrangement to which section 408(p) 
                applies, other than any elective contributions under 
                paragraph (2)(A)(i) thereof,''.
                    (B) Section 209(a)(4) of the Social Security Act is 
                amended by inserting ``; or (J) under an arrangement to 
                which section 408(p) of such Code applies, other than 
                any elective contributions under paragraph (2)(A)(i) 
                thereof'' before the semicolon at the end thereof.
                    (C) Paragraph (5) of section 3306(b) is amended by 
                striking ``or'' at the end of subparagraph (F), by 
                inserting ``or'' at the end of subparagraph (G), and by 
                adding at the end the following new subparagraph:
                    ``(H) under an arrangement to which section 408(p) 
                applies, other than any elective contributions under 
                paragraph (2)(A)(i) thereof,''.
                    (D) Paragraph (12) of section 3401(a) is amended by 
                adding the following new subparagraph:
                    ``(D) under an arrangement to which section 408(p) 
                applies; or''.
            (9) Conforming amendments.--
                    (A) Section 280G(b)(6) is amended by striking 
                ``or'' at the end of subparagraph (B), by striking the 
                period at the end of subparagraph (C) and inserting ``, 
                or'' and by adding after subparagraph (C) the following 
                new subparagraph:
                    ``(D) a simple retirement account described in 
                section 408(p).''.
                    (B) Section 402(g)(3) is amended by striking 
                ``and'' at the end of subparagraph (B), by striking the 
                period at the end of subparagraph (C) and inserting ``, 
                and'', and by adding after subparagraph (C) the 
                following new subparagraph:
                    ``(D) any elective employer contribution under 
                section 408(p)(2)(A)(i).''.
                    (C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) 
                of section 414 are each amended by inserting 
                ``408(p),'' after ``408(k),''.
                    (D) Section 4972(d)(1)(A) is amended by striking 
                ``and'' at the end of clause (ii), by striking the 
                period at the end of clause (iii) and inserting ``, 
                and'', and by adding after clause (iii) the following 
                new clause:
                            ``(iv) any simple retirement account 
                        (within the meaning of section 408(p)).''.
    (c) Repeal of Salary Reduction Simplified Employee Pensions.--
Section 408(k)(6) is amended by adding at the end the following new 
subparagraph:
                    ``(H) Termination.--This paragraph shall not apply 
                to years beginning after December 31, 1996. The 
                preceding sentence shall not apply to a simplified 
                employee pension if the terms of such pension, as in 
                effect on December 31, 1996, provide that an employee 
                may make the election described in subparagraph (A).''.
    (d) Modifications of ERISA.--
            (1) Reporting requirements.--Section 101 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1021) is 
        amended by redesignating subsection (g) as subsection (h) and 
        by inserting after subsection (f) the following new subsection:
    ``(g) Simple Retirement Accounts.--
            ``(1) No employer reports.--Except as provided in this 
        subsection, no report shall be required under this section by 
        an employer maintaining a qualified salary reduction 
        arrangement under section 408(p) of the Internal Revenue Code 
        of 1986.
            ``(2) Summary description.--The trustee of any simple 
        retirement account established pursuant to a qualified salary 
        reduction arrangement under section 408(p) of such Code shall 
        provide to the employer maintaining the arrangement each year a 
        description containing the following information:
                    ``(A) The name and address of the employer and the 
                trustee.
                    ``(B) The requirements for eligibility for 
                participation.
                    ``(C) The benefits provided with respect to the 
                arrangement.
                    ``(D) The time and method of making elections with 
                respect to the arrangement.
                    ``(E) The procedures for, and effects of, 
                withdrawals (including rollovers) from the arrangement.
            ``(3) Employee notification.--The employer shall notify 
        each employee immediately before the period for which an 
        election described in section 408(p)(5)(C) of such Code may be 
        made of the employee's opportunity to make such election. Such 
        notice shall include a copy of the description described in 
        paragraph (2).''
            (2) Fiduciary duties.--Section 404(c) of such Act (29 
        U.S.C. 1104(c)) is amended by inserting ``(1)'' after ``(c)'', 
        by redesignating paragraphs (1) and (2) as subparagraphs (A) 
        and (B), respectively, and by adding at the end the following 
        new paragraph:
            ``(2) In the case of a simple retirement account 
        established pursuant to a qualified salary reduction 
        arrangement under section 408(p) of the Internal Revenue Code 
        of 1986, a participant or beneficiary shall, for purposes of 
        paragraph (1), be treated as exercising control over the assets 
        in the account upon the earliest of--
                    ``(A) an affirmative election with respect to the 
                initial investment of any contribution,
                    ``(B) a rollover to any other simple retirement 
                account or individual retirement plan, or
                    ``(C) one year after the simple retirement account 
                is established.
        No reports, other than those required under section 101(g), 
        shall be required with respect to a simple retirement account 
        established pursuant to such a qualified salary reduction 
        arrangement.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 1422. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.

    (a) Alternative Method of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements) is amended by adding at the end the following new 
paragraph:
            ``(11) Adoption of simple plan to meet nondiscrimination 
        tests.--
                    ``(A) In general.--A cash or deferred arrangement 
                maintained by an eligible employer shall be treated as 
                meeting the requirements of paragraph (3)(A)(ii) if 
                such arrangement meets--
                            ``(i) the contribution requirements of 
                        subparagraph (B),
                            ``(ii) the exclusive plan requirements of 
                        subparagraph (C), and
                            ``(iii) the vesting requirements of section 
                        408(p)(3).
                    ``(B) Contribution requirements.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the 
                        arrangement--
                                    ``(I) an employee may elect to have 
                                the employer make elective 
                                contributions for the year on behalf of 
                                the employee to a trust under the plan 
                                in an amount which is expressed as a 
                                percentage of compensation of the 
                                employee but which in no event exceeds 
                                $6,000,
                                    ``(II) the employer is required to 
                                make a matching contribution to the 
                                trust for the year in an amount equal 
                                to so much of the amount the employee 
                                elects under subclause (I) as does not 
                                exceed 3 percent of compensation for 
                                the year, and
                                    ``(III) no other contributions may 
                                be made other than contributions 
                                described in subclause (I) or (II).
                            ``(ii) Employer may elect 2-percent 
                        nonelective contribution.--An employer shall be 
                        treated as meeting the requirements of clause 
                        (i)(II) for any year if, in lieu of the 
                        contributions described in such clause, the 
                        employer elects (pursuant to the terms of the 
                        arrangement) to make nonelective contributions 
                        of 2 percent of compensation for each employee 
                        who is eligible to participate in the 
                        arrangement and who has at least $5,000 of 
                        compensation from the employer for the year. If 
                        an employer makes an election under this 
                        subparagraph for any year, the employer shall 
                        notify employees of such election within a 
                        reasonable period of time before the 60th day 
                        before the beginning of such year.
                    ``(C) Exclusive plan requirement.--The requirements 
                of this subparagraph are met for any year to which this 
                paragraph applies if no contributions were made, or 
                benefits were accrued, for services during such year 
                under any qualified plan of the employer on behalf of 
                any employee eligible to participate in the cash or 
                deferred arrangement, other than contributions 
                described in subparagraph (B).
                    ``(D) Definitions and special rule.--
                            ``(i) Definitions.--For purposes of this 
                        paragraph, any term used in this paragraph 
                        which is also used in section 408(p) shall have 
                        the meaning given such term by such section.
                            ``(ii) Coordination with top-heavy rules.--
                        A plan meeting the requirements of this 
                        paragraph for any year shall not be treated as 
                        a top-heavy plan under section 416 for such 
                        year.''.
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions) is amended 
by redesignating paragraph (10) as paragraph (11) and by adding after 
paragraph (9) the following new paragraph:
            ``(10) Alternative method of satisfying tests.--A defined 
        contribution plan shall be treated as meeting the requirements 
        of paragraph (2) with respect to matching contributions if the 
        plan--
                    ``(A) meets the contribution requirements of 
                subparagraph (B) of subsection (k)(11),
                    ``(B) meets the exclusive plan requirements of 
                subsection (k)(11)(C), and
                    ``(C) meets the vesting requirements of section 
                408(p)(3).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1996.

                     Subchapter B--Other Provisions

SEC. 1426. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).

    (a) In General.--Subparagraph (B) of section 401(k)(4) is amended 
to read as follows:
                    ``(B) Eligibility of state and local governments 
                and tax-exempt organizations.--
                            ``(i) Tax-exempts eligible.--Except as 
                        provided in clause (ii), any organization 
                        exempt from tax under this subtitle may include 
                        a qualified cash or deferred arrangement as 
                        part of a plan maintained by it.
                            ``(ii) Governments ineligible.--A cash or 
                        deferred arrangement shall not be treated as a 
                        qualified cash or deferred arrangement if it is 
                        part of a plan maintained by a State or local 
                        government or political subdivision thereof, or 
                        any agency or instrumentality thereof. This 
                        clause shall not apply to a rural cooperative 
                        plan or to a plan of an employer described in 
                        clause (iii).
                            ``(iii) Treatment of indian tribal 
                        governments.--An employer which is an Indian 
                        tribal government (as defined in section 
                        7701(a)(40)), a subdivision of an Indian tribal 
                        government (determined in accordance with 
                        section 7871(d)), an agency or instrumentality 
                        of an Indian tribal government or subdivision 
                        thereof, or a corporation chartered under 
                        Federal, State, or tribal law which is owned in 
                        whole or in part by any of the foregoing may 
                        include a qualified cash or deferred 
                        arrangement as part of a plan maintained by the 
                        employer.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1996, but shall not apply to 
any cash or deferred arrangement to which clause (i) of section 
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.

SEC. 1427. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUCTION.

    (a) Spousal IRA Computed on Basis of Compensation of Both 
Spouses.--Subsection (c) of section 219 (relating to special rules for 
certain married individuals) is amended to read as follows:
    ``(c) Special Rules for Certain Married Individuals.--
            ``(1) In general.--In the case of an individual to whom 
        this paragraph applies for the taxable year, the limitation of 
        paragraph (1) of subsection (b) shall be equal to the lesser 
        of--
                    ``(A) the dollar amount in effect under subsection 
                (b)(1)(A) for the taxable year, or
                    ``(B) the sum of--
                            ``(i) the compensation includible in such 
                        individual's gross income for the taxable year, 
                        plus
                            ``(ii) the compensation includible in the 
                        gross income of such individual's spouse for 
                        the taxable year reduced by the amount allowed 
                        as a deduction under subsection (a) to such 
                        spouse for such taxable year.
            ``(2) Individuals to whom paragraph (1) applies.--Paragraph 
        (1) shall apply to any individual if--
                    ``(A) such individual files a joint return for the 
                taxable year, and
                    ``(B) the amount of compensation (if any) 
                includible in such individual's gross income for the 
                taxable year is less than the compensation includible 
                in the gross income of such individual's spouse for the 
                taxable year.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 219(f) (relating to other 
        definitions and special rules) is amended by striking 
        ``subsections (b) and (c)'' and inserting ``subsection (b)''.
            (2) Section 219(g)(1) is amended by striking ``(c)(2)'' and 
        inserting ``(c)(1)(A)''.
            (3) Section 408(d)(5) is amended by striking ``$2,250'' and 
        inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

                CHAPTER 3--NONDISCRIMINATION PROVISIONS

SEC. 1431. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL OF FAMILY 
              AGGREGATION.

    (a) In General.--Paragraph (1) of section 414(q) (defining highly 
compensated employee) is amended to read as follows:
            ``(1) In general.--The term `highly compensated employee' 
        means any employee who--
                    ``(A) was a 5-percent owner at any time during the 
                year or the preceding year, or
                    ``(B) for the preceding year had compensation from 
                the employer in excess of $80,000.
        The Secretary shall adjust the $80,000 amount under 
        subparagraph (B) at the same time and in the same manner as 
        under section 415(d), except that the base period shall be the 
        calendar quarter ending September 30, 1996.''.
    (b) Repeal of Family Aggregation Rules.--
            (1) In general.--Paragraph (6) of section 414(q) is hereby 
        repealed.
            (2) Compensation limit.--Paragraph (17)(A) of section 
        401(a) is amended by striking the last sentence.
            (3) Deduction.--Subsection (l) of section 404 is amended by 
        striking the last sentence.
    (c) Conforming Amendments.--
            (1)(A) Subsection (q) of section 414 is amended by striking 
        paragraphs (2), (4), (5), (8), and (12) and by redesignating 
        paragraphs (3), (7), (9), (10), and (11) as paragraphs (2) 
        through (6), respectively.
            (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C), 
        and 416(i)(1)(D) are each amended by striking ``section 
        414(q)(7)'' and inserting ``section 414(q)(3)''.
            (C) Section 416(i)(1)(A) is amended by striking ``section 
        414(q)(8)'' and inserting ``section 414(r)(9)''.
            (2)(A) Section 414(r) is amended by adding at the end the 
        following new paragraph:
            ``(9) Excluded employees.--For purposes of paragraph 
        (2)(A), the following employees shall be excluded:
                    ``(A) Employees who have not completed 6 months of 
                service.
                    ``(B) Employees who normally work less than 17\1/2\ 
                hours per week.
                    ``(C) Employees who normally work not more than 6 
                months during any year.
                    ``(D) Employees who have not attained the age of 
                21.
                    ``(E) Except to the extent provided in regulations, 
                employees who are included in a unit of employees 
                covered by an agreement which the Secretary of Labor 
                finds to be a collective bargaining agreement between 
                employee representatives and the employer.
        Except as provided by the Secretary, the employer may elect to 
        apply subparagraph (A), (B), (C), or (D) by substituting a 
        shorter period of service, smaller number of hours or months, 
        or lower age for the period of service, number of hours or 
        months, or age (as the case may be) specified in such 
        subparagraph.''.
            (B) Subparagraph (A) of section 414(r)(2) is amended by 
        striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
            (3) Section 1114(c)(4) of the Tax Reform Act of 1986 is 
        amended by adding at the end the following new sentence: ``Any 
        reference in this paragraph to section 414(q) shall be treated 
        as a reference to such section as in effect on the day before 
        the date of the enactment of the Small Business Job Protection 
        Act of 1996.''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to years beginning after December 31, 1996, except that 
        in determining whether an employee is a highly compensated 
        employee for years beginning in 1997, such amendments shall be 
        treated as having been in effect for years beginning in 1996.
            (2) Family aggregation.--The amendments made by subsection 
        (b) shall apply to years beginning after December 31, 1996.

SEC. 1432. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.

    (a) General Rule.--Section 401(a)(26)(A) (relating to additional 
participation requirements) is amended to read as follows:
                    ``(A) In general.--In the case of a trust which is 
                a part of a defined benefit plan, such trust shall not 
                constitute a qualified trust under this subsection 
                unless on each day of the plan year such trust benefits 
                at least the lesser of--
                            ``(i) 50 employees of the employer, or
                            ``(ii) the greater of--
                                    ``(I) 40 percent of all employees 
                                of the employer, or
                                    ``(II) 2 employees (or if there is 
                                only 1 employee, such employee).''.
    (b) Separate Line of Business Test.--Section 401(a)(26)(G) 
(relating to separate line of business) is amended by striking 
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 1433. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED 
              ARRANGEMENTS AND MATCHING CONTRIBUTIONS.

    (a) Alternative Methods of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements), as amended by section 1422, is amended by adding at the 
end the following new paragraph:
            ``(12) Alternative methods of meeting nondiscrimination 
        requirements.--
                    ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C), and
                            ``(ii) meets the notice requirements of 
                        subparagraph (D).
                    ``(B) Matching contributions.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the arrangement, 
                        the employer makes matching contributions on 
                        behalf of each employee who is not a highly 
                        compensated employee in an amount equal to--
                                    ``(I) 100 percent of the elective 
                                contributions of the employee to the 
                                extent such elective contributions do 
                                not exceed 3 percent of the employee's 
                                compensation, and
                                    ``(II) 50 percent of the elective 
                                contributions of the employee to the 
                                extent that such elective contributions 
                                exceed 3 percent but do not exceed 5 
                                percent of the employee's compensation.
                            ``(ii) Rate for highly compensated 
                        employees.--The requirements of this 
                        subparagraph are not met if, under the 
                        arrangement, the rate of matching contribution 
                        with respect to any elective contribution of a 
                        highly compensated employee at any rate of 
                        elective contribution is greater than that with 
                        respect to an employee who is not a highly 
                        compensated employee.
                            ``(iii) Alternative plan designs.--If the 
                        rate of any matching contribution with respect 
                        to any rate of elective contribution is not 
                        equal to the percentage required under clause 
                        (i), an arrangement shall not be treated as 
                        failing to meet the requirements of clause (i) 
                        if--
                                    ``(I) the rate of an employer's 
                                matching contribution does not increase 
                                as an employee's rate of elective 
                                contributions increase, and
                                    ``(II) the aggregate amount of 
                                matching contributions at such rate of 
                                elective contribution is at least equal 
                                to the aggregate amount of matching 
                                contributions which would be made if 
                                matching contributions were made on the 
                                basis of the percentages described in 
                                clause (i).
                    ``(C) Nonelective contributions.--The requirements 
                of this subparagraph are met if, under the arrangement, 
                the employer is required, without regard to whether the 
                employee makes an elective contribution or employee 
                contribution, to make a contribution to a defined 
                contribution plan on behalf of each employee who is not 
                a highly compensated employee and who is eligible to 
                participate in the arrangement in an amount equal to at 
                least 3 percent of the employee's compensation.
                    ``(D) Notice requirement.--An arrangement meets the 
                requirements of this paragraph if, under the 
                arrangement, each employee eligible to participate is, 
                within a reasonable period before any year, given 
                written notice of the employee's rights and obligations 
                under the arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to appraise the employee of such 
                        rights and obligations, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee eligible 
                        to participate.
                    ``(E) Other requirements.--
                            ``(i) Withdrawal and vesting 
                        restrictions.--An arrangement shall not be 
                        treated as meeting the requirements 
of subparagraph (B) or (C) of this paragraph unless the requirements of 
subparagraphs (B) and (C) of paragraph (2) are met with respect to all 
employer contributions (including matching contributions) taken into 
account in determining whether the requirements of subparagraphs (B) 
and (C) of this paragraph are met.
                            ``(ii) Social security and similar 
                        contributions not taken into account.--An 
                        arrangement shall not be treated as meeting the 
                        requirements of subparagraph (B) or (C) unless 
                        such requirements are met without regard to 
                        subsection (l), and, for purposes of subsection 
                        (l), employer contributions under subparagraph 
                        (B) or (C) shall not be taken into account.
                    ``(F) Other plans.--An arrangement shall be treated 
                as meeting the requirements under subparagraph (A)(i) 
                if any other plan maintained by the employer meets such 
                requirements with respect to employees eligible under 
                the arrangement.''.
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions), as amended 
by this section 1422(b), is amended by redesignating paragraph (11) as 
paragraph (12) and by adding after paragraph (10) the following new 
paragraph:
            ``(11) Alternative method of satisfying tests.--
                    ``(A) In general.--A defined contribution plan 
                shall be treated as meeting the requirements of 
                paragraph (2) with respect to matching contributions if 
                the plan--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C) of subsection 
                        (k)(12),
                            ``(ii) meets the notice requirements of 
                        subsection (k)(12)(D), and
                            ``(iii) meets the requirements of 
                        subparagraph (B).
                    ``(B) Limitation on matching contributions.--The 
                requirements of this subparagraph are met if--
                            ``(i) matching contributions on behalf of 
                        any employee may not be made with respect to an 
                        employee's contributions or elective deferrals 
                        in excess of 6 percent of the employee's 
                        compensation,
                            ``(ii) the rate of an employer's matching 
                        contribution does not increase as the rate of 
                        an employee's contributions or elective 
                        deferrals increase, and
                            ``(iii) the matching contribution with 
                        respect to any highly compensated employee at 
                        any rate of an employee contribution or rate of 
                        elective deferral is not greater than that with 
                        respect to an employee who is not a highly 
                        compensated employee.''.
    (c) Year for Computing Nonhighly Compensated Employee Percentage.--
            (1) Cash or deferred arrangements.--Section 401(k)(3)(A) is 
        amended--
                    (A) by striking ``such year'' in clause (ii) and 
                inserting ``the plan year'',
                    (B) by striking ``for such plan year'' in clause 
                (ii) and inserting ``for the preceding plan year'', and
                    (C) by adding at the end the following new 
                sentence: ``An arrangement may apply clause (ii) by 
                using the plan year rather than the preceding plan year 
                if the employer so elects, except that if such an 
                election is made, it may not be changed except as 
                provided by the Secretary.''.
            (2) Matching and employee contributions.--Section 
        401(m)(2)(A) is amended--
                    (A) by inserting ``for such plan year'' after 
                ``highly compensated employees'',
                    (B) by inserting ``for the preceding plan year'' 
                after ``eligible employees'' each place it appears in 
                clause (i) and clause (ii), and
                    (C) by adding at the end the following flush 
                sentence:
                ``This subparagraph may be applied by using the plan 
                year rather than the preceding plan year if the 
                employer so elects, except that if such an election is 
                made, it may not be changed except as provided the 
                Secretary.''.
    (d) Special Rule for Determining Average Deferral Percentage for 
First Plan Year, Etc.--
            (1) Paragraph (3) of section 401(k) is amended by adding at 
        the end the following new subparagraph:
                    ``(E) For purposes of this paragraph, in the case 
                of the first plan year of any plan (other than a 
                successor plan), the amount taken into account as the 
                actual deferral percentage of nonhighly compensated 
employees for the preceding plan year shall be--
                            ``(i) 3 percent, or
                            ``(ii) if the employer makes an election 
                        under this subclause, the actual deferral 
                        percentage of nonhighly compensated employees 
                        determined for such first plan year.''.
            (2) Paragraph (3) of section 401(m) is amended by adding at 
        the end the following: ``Rules similar to the rules of 
        subsection (k)(3)(E) shall apply for purposes of this 
        subsection.''.
    (e) Distribution of Excess Contributions and Excess Aggregate 
Contributions.--
            (1) Subparagraph (C) of section 401(k)(8) (relating to 
        arrangement not disqualified if excess contributions 
        distributed) is amended by striking ``on the basis of the 
        respective portions of the excess contributions attributable to 
        each of such employees'' and inserting ``on the basis of the 
        amount of contributions by, or on behalf of, each of such 
        employees''.
            (2) Subparagraph (C) of section 401(m)(6) (relating to 
        method of distributing excess aggregate contributions) is 
        amended by striking ``on the basis of the respective portions 
        of such amounts attributable to each of such employees'' and 
        inserting ``on the basis of the amount of contributions on 
        behalf of, or by, each such employee''.
    (f) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to years beginning after December 31, 1998.
            (2) Exceptions.--The amendments made by subsections (c), 
        (d), and (e) shall apply to years beginning after December 31, 
        1996.

SEC. 1434. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.

    (a) General Rule.--Section 415(c)(3) (defining participant's 
compensation) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Certain deferrals included.--The term 
                `participant's compensation' shall include--
                            ``(i) any elective deferral (as defined in 
                        section 402(g)(3)), and
                            ``(ii) any amount which is contributed or 
                        deferred by the employer at the election of the 
                        employee and which is not includible in the 
                        gross income of the employee by reason of 
                        section 125 or 457.''.
    (b) Conforming Amendments.--
            (1) Section 414(q)(3), as redesignated by section 1431, is 
        amended to read as follows:
            ``(4) Compensation.--For purposes of this subsection, the 
        term `compensation' has the meaning given such term by section 
        415(c)(3).''.
            (2) Section 414(s)(2) is amended by inserting ``not'' after 
        ``elect'' in the text and heading thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1997.

                  CHAPTER 4--MISCELLANEOUS PROVISIONS

SEC. 1441. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.

    (a) Aggregation Rules.--Section 401(d) (relating to additional 
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
    ``(d) Contribution Limit on Owner-Employees.--A trust forming part 
of a pension or profit-sharing plan which provides contributions or 
benefits for employees some or all of whom are owner-employees shall 
constitute a qualified trust under this section only if, in addition to 
meeting the requirements of subsection (a), the plan provides that 
contributions on behalf of any owner-employee may be made only with 
respect to the earned income of such owner-employee which is derived 
from the trade or business with respect to which such plan is 
established.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 1442. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.

    (a) Amendments to 1986 Code.--Paragraph (2) of section 411(a) 
(relating to minimum vesting standards) is amended--
            (1) by striking ``subparagraph (A), (B), or (C)'' and 
        inserting ``subparagraph (A) or (B)''; and
            (2) by striking subparagraph (C).
    (b) Amendments to ERISA.--Paragraph (2) of section 203(a) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is 
amended--
            (1) by striking ``subparagraph (A), (B), or (C)'' and 
        inserting ``subparagraph (A) or (B)''; and
            (2) by striking subparagraph (C).
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the earlier of--
            (1) the later of--
                    (A) January 1, 1997, or
                    (B) the date on which the last of the collective 
                bargaining agreements pursuant to which the plan is 
                maintained terminates (determined without regard to any 
                extension thereof after the date of the enactment of 
                this Act), or
            (2) January 1, 1999.
Such amendments shall not apply to any individual who does not have 
more than 1 hour of service under the plan on or after the 1st day of 
the 1st plan year to which such amendments apply.

SEC. 1443. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.

    (a) Distributions for Hardship or After a Certain Age.--Section 
401(k)(7) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule for certain distributions.--A 
                rural cooperative plan which includes a qualified cash 
                or deferred arrangement shall not be treated as 
                violating the requirements of section 401(a) or of 
                paragraph (2) merely by reason of a hardship 
                distribution or a distribution to a participant after 
                attainment of age 59\1/2\. For purposes of this 
                section, the term `hardship distribution' means a 
                distribution described in paragraph (2)(B)(i)(IV) 
                (without regard to the limitation of its application to 
                profit-sharing or stock bonus plans).''.
    (b) Public Utility Districts.--Clause (i) of section 401(k)(7)(B) 
(defining rural cooperative) is amended to read as follows:
                            ``(i) any organization which--
                                    ``(I) is engaged primarily in 
                                providing electric service on a mutual 
                                or cooperative basis, or
                                    ``(II) is engaged primarily in 
                                providing electric service to the 
                                public in its area of service and which 
                                is exempt from tax under this subtitle 
                                or which is a State or local government 
                                (or an agency or instrumentality 
                                thereof), other than a municipality (or 
                                an agency or instrumentality 
                                thereof),''.
    (c) Effective Dates.--
            (1) Distributions.--The amendments made by subsection (a) 
        shall apply to distributions after the date of the enactment of 
        this Act.
            (2) Public utility districts.--The amendments made by 
        subsection (b) shall apply to plan years beginning after 
        December 31, 1996.

SEC. 1444. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.

    (a) Compensation Limit.--Subsection (b) of section 415 is amended 
by adding immediately after paragraph (10) the following new paragraph:
            ``(11) Special limitation rule for governmental plans.--In 
        the case of a governmental plan (as defined in section 414(d)), 
        subparagraph (B) of paragraph (1) shall not apply.''.
    (b) Treatment of Certain Excess Benefit Plans.--
            (1) In general.--Section 415 is amended by adding at the 
        end the following new subsection:
    ``(m) Treatment of Qualified Governmental Excess Benefit 
Arrangements.--
            ``(1) Governmental plan not affected.--In determining 
        whether a governmental plan (as defined in section 414(d)) 
        meets the requirements of this section, benefits provided under 
        a qualified governmental excess benefit arrangement shall not 
        be taken into account. Income accruing to a governmental plan 
        (or to a trust that is maintained solely for the purpose of 
        providing benefits under a qualified governmental excess 
        benefit arrangement) in respect of a qualified governmental 
        excess benefit arrangement shall constitute income derived from 
        the exercise of an essential governmental function upon which 
        such governmental plan (or trust) shall be exempt from tax 
        under section 115.
            ``(2) Taxation of participant.--For purposes of this 
        chapter--
                    ``(A) the taxable year or years for which amounts 
                in respect of a qualified governmental excess benefit 
                arrangement are includible in gross income by a 
                participant, and
                    ``(B) the treatment of such amounts when so 
                includible by the participant,
        shall be determined as if such qualified governmental excess 
        benefit arrangement were treated as a plan for the deferral of 
        compensation which is maintained by a corporation not exempt 
        from tax under this chapter and which does not meet the 
        requirements for qualification under section 401.
            ``(3) Qualified governmental excess benefit arrangement.--
        For purposes of this subsection, the term `qualified 
        governmental excess benefit arrangement' means a portion of a 
        governmental plan if--
                    ``(A) such portion is maintained solely for the 
                purpose of providing to participants in the plan that 
                part of the participant's annual benefit otherwise 
payable under the terms of the plan that exceeds the limitations on 
benefits imposed by this section,
                    ``(B) under such portion no election is provided at 
                any time to the participant (directly or indirectly) to 
                defer compensation, and
                    ``(C) benefits described in subparagraph (A) are 
                not paid from a trust forming a part of such 
                governmental plan unless such trust is maintained 
                solely for the purpose of providing such benefits.''.
            (2) Coordination with section 457.--Subsection (e) of 
        section 457 is amended by adding at the end the following new 
        paragraph:
            ``(14) Treatment of qualified governmental excess benefit 
        arrangements.--Subsections (b)(2) and (c)(1) shall not apply to 
        any qualified governmental excess benefit arrangement (as 
        defined in section 415(m)(3)), and benefits provided under such 
        an arrangement shall not be taken into account in determining 
        whether any other plan is an eligible deferred compensation 
        plan.''.
            (3) Conforming amendment.--Paragraph (2) of section 457(f) 
        is amended by striking ``and'' at the end of subparagraph (C), 
        by striking the period at the end of subparagraph (D) and 
        inserting ``, and'', and by inserting immediately thereafter 
        the following new subparagraph:
                    ``(E) a qualified governmental excess benefit 
                arrangement described in section 415(m).''.
    (c) Exemption for Survivor and Disability Benefits.--Paragraph (2) 
of section 415(b) is amended by adding at the end the following new 
subparagraph:
                    ``(I) Exemption for survivor and disability 
                benefits provided under governmental plans.--
                Subparagraph (C) of this paragraph and paragraph (5) 
                shall not apply to--
                            ``(i) income received from a governmental 
                        plan (as defined in section 414(d)) as a 
                        pension, annuity, or similar allowance as the 
                        result of the recipient becoming disabled by 
                        reason of personal injuries or sickness, or
                            ``(ii) amounts received from a governmental 
                        plan by the beneficiaries, survivors, or the 
                        estate of an employee as the result of the 
                        death of the employee.''.
    (d) Revocation of Grandfather Election.--
            (1) In general.--Subparagraph (C) of section 415(b)(10) is 
        amended by adding at the end the following new clause:
                            ``(ii) Revocation of election.--An election 
                        under clause (i) may be revoked not later than 
                        the last day of the third plan year beginning 
                        after the date of the enactment of this clause. 
                        The revocation shall apply to all plan years to 
                        which the election applied and to all 
                        subsequent plan years. Any amount paid by a 
                        plan in a taxable year ending after the 
                        revocation shall be includible in income in 
                        such taxable year under the rules of this 
                        chapter in effect for such taxable year, except 
                        that, for purposes of applying the limitations 
                        imposed by this section, any portion of such 
                        amount which is attributable to any taxable 
                        year during which the election was in effect 
                        shall be treated as received in such taxable 
                        year.''.
            (2) Conforming amendment.--Subparagraph (C) of section 
        415(b)(10) is amended by striking ``This'' and inserting:
                            ``(i) In general.--This''.
    (e) Effective Date.--
            (1) In general.--The amendments made by subsections (a), 
        (b), and (c) shall apply to years beginning after December 31, 
        1994. The amendments made by subsection (d) shall apply with 
        respect to revocations adopted after the date of the enactment 
        of this Act.
            (2) Treatment for years beginning before january 1, 1995.--
        Nothing in the amendments made by this section shall be 
        construed to imply that a governmental plan (as defined in 
        section 414(d) of the Internal Revenue Code of 1986) fails to 
        satisfy the requirements of section 415 of such Code for any 
        taxable year beginning before January 1, 1995.

SEC. 1445. UNIFORM RETIREMENT AGE.

    (a) Discrimination Testing.--Paragraph (5) of section 401(a) 
(relating to special rules relating to nondiscrimination requirements) 
is amended by adding at the end the following new subparagraph:
                    ``(F) Social security retirement age.--For purposes 
                of testing for discrimination under paragraph (4)--
                            ``(i) the social security retirement age 
                        (as defined in section 415(b)(8)) shall be 
                        treated as a uniform retirement age, and
                            ``(ii) subsidized early retirement benefits 
                        and joint and survivor annuities shall not be 
                        treated as being unavailable to employees on 
                        the same terms merely because such benefits or 
                        annuities are based in whole or in part on an 
                        employee's social security retirement age (as 
                        so defined).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1996.

SEC. 1446. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.

    (a) All Disabled Participants Receiving Contributions.--Section 
415(c)(3)(C) is amended by adding at the end the following: ``If a 
defined contribution plan provides for the continuation of 
contributions on behalf of all participants described in clause (i) for 
a fixed or determinable period, this subparagraph shall be applied 
without regard to clauses (ii) and (iii).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1996.

SEC. 1447. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL 
              GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

    (a) Special Rules for Plan Distributions.--Paragraph (9) of section 
457(e) (relating to other definitions and special rules) is amended to 
read as follows:
            ``(9) Benefits not treated as made available by reason of 
        certain elections, etc.--
                    ``(A) Total amount payable is $3,500 or less.--The 
                total amount payable to a participant under the plan 
                shall not be treated as made available merely because 
                the participant may elect to receive such amount (or 
                the plan may distribute such amount without the 
                participant's consent) if--
                            ``(i) such amount does not exceed $3,500, 
                        and
                            ``(ii) such amount may be distributed only 
                        if--
                                    ``(I) no amount has been deferred 
                                under the plan with respect to such 
                                participant during the 2-year period 
                                ending on the date of the distribution, 
                                and
                                    ``(II) there has been no prior 
                                distribution under the plan to such 
                                participant to which this subparagraph 
                                applied.
                A plan shall not be treated as failing to meet the 
                distribution requirements of subsection (d) by reason 
                of a distribution to which this subparagraph applies.
                    ``(B) Election to defer commencement of 
                distributions.--The total amount payable to a 
                participant under the plan shall not be treated as made 
                available merely because the participant may elect to 
                defer commencement of distributions under the plan if--
                            ``(i) such election is made after amounts 
                        may be available under the plan in accordance 
                        with subsection (d)(1)(A) and before 
                        commencement of such distributions, and
                            ``(ii) the participant may make only 1 such 
                        election.''.
    (b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457, as amended by section 1444(b)(2) 
(relating to governmental plans), is amended by adding at the end the 
following new paragraph:
            ``(15) Cost-of-living adjustment of maximum deferral 
        amount.--The Secretary shall adjust the $7,500 amount specified 
        in subsections (b)(2) and (c)(1) at the same time and in the 
        same manner as under section 415(d), except that the base 
        period shall be the calendar quarter ending September 30, 1994, 
        and any increase under this paragraph which is not a multiple 
        of $500 shall be rounded to the next lowest multiple of 
        $500.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 1448. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS OF STATE 
              AND LOCAL GOVERNMENTS.

    (a) In General.--Section 457 is amended by adding at the end the 
following new subsection:
    ``(g) Governmental Plans Must Maintain Set-Asides for Exclusive 
Benefit of Participants.--
            ``(1) In general.--A plan maintained by an eligible 
        employer described in subsection (e)(1)(A) shall not be treated 
        as an eligible deferred compensation plan unless all assets and 
        income of the plan described in subsection (b)(6) are held in 
        trust for the exclusive benefit of participants and their 
beneficiaries.
            ``(2) Taxability of trusts and participants.--For purposes 
        of this title--
                    ``(A) a trust described in paragraph (1) shall be 
                treated as an organization exempt from taxation under 
                section 501(a), and
                    ``(B) notwithstanding any other provision of this 
                title, amounts in the trust shall be includible in the 
                gross income of participants and beneficiaries only to 
                the extent, and at the time, provided in this section.
            ``(3) Custodial accounts and contracts.--For purposes of 
        this subsection, custodial accounts and contracts described in 
        section 401(f) shall be treated as trusts under rules similar 
        to the rules under section 401(f).''.
    (b) Conforming Amendment.--Paragraph (6) of section 457(b) is 
amended by inserting ``except as provided in subsection (g),'' before 
``which provides that''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to assets and 
        income described in section 457(b)(6) of the Internal Revenue 
        Code of 1986 held by a plan on and after the date of the 
        enactment of this Act.
            (2) Transition rule.--In the case of a plan in existence on 
        the date of the enactment of this Act, a trust need not be 
        established by reason of the amendments made by this section 
        before January 1, 1999.

SEC. 1449. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS UNDER SECTION 
              415 LIMITATIONS.

    (a) In General.--Subparagraph (A) of section 767(d)(3) of the 
Uruguay Round Agreements Act is amended to read as follows:
                    ``(A) Exception.--A plan that was adopted and in 
                effect before December 8, 1994, shall not be required 
                to apply the amendments made by subsection (b) with 
                respect to benefits accrued before the earlier of--
                            ``(i) the later of the date a plan 
                        amendment applying the amendments made by 
                        subsection (b) is adopted or made effective, or
                            ``(ii) the first day of the first 
                        limitation year beginning after December 31, 
                        1999.
                Determinations under section 415(b)(2)(E) of the 
                Internal Revenue Code of 1986 before such earlier date 
                shall be made with respect to such benefits on the 
                basis of such section as in effect on December 7, 1994 
                (except that the modification made by section 1449(b) 
                of the Small Business Job Protection Act of 1996 shall 
                be taken into account), and the provisions of the plan 
                as in effect on December 7, 1994, but only if such 
                provisions of the plan meet the requirements of such 
                section (as so in effect).''.
    (b) Modification of Certain Assumptions for Adjusting Benefits of 
Defined Benefit Plans for Early Retirees.--Subparagraph (E) of section 
415(b)(2) (relating to limitation on certain assumptions) is amended--
            (1) by striking ``Except as provided in clause (ii), for 
        purposes of adjusting any benefit or limitation under 
        subparagraph (B) or (C),'' in clause (i) and inserting ``For 
        purposes of adjusting any limitation under subparagraph (C) 
        and, except as provided in clause (ii), for purposes of 
        adjusting any benefit under subparagraph (B),'', and
            (2) by striking ``For purposes of adjusting the benefit or 
        limitation of any form of benefit subject to section 
        417(e)(3),'' in clause (ii) and inserting ``For purposes of 
        adjusting any benefit under subparagraph (B) for any form of 
        benefit subject to section 417(e)(3),''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of section 767 of the Uruguay 
Round Agreements Act.
    (d) Transitional Rule.--In the case of a plan that was adopted and 
in effect before December 8, 1994, if--
            (1) a plan amendment was adopted or made effective on or 
        before the date of the enactment of this Act applying the 
        amendments made by section 767 of the Uruguay Round Agreements 
        Act, and
            (2) within 1 year after the date of the enactment of this 
        Act, a plan amendment is adopted which repeals the amendment 
        referred to in paragraph (1),
the amendment referred to in paragraph (1) shall not be taken into 
account in applying section 767(d)(3)(A) of the Uruguay Round 
Agreements Act, as amended by subsection (a).

SEC. 1450. MODIFICATIONS OF SECTION 403(b).

    (a) Multiple Salary Reduction Agreements Permitted.--
            (1) General rule.--For purposes of section 403(b) of the 
        Internal Revenue Code of 1986, the frequency that an employee 
        is permitted to enter into a salary reduction agreement, the 
        salary to which such an agreement may apply, and the ability to 
revoke such an agreement shall be determined under the rules applicable 
to cash or deferred elections under section 401(k) of such Code.
            (2) Constructive receipt.--Section 402(e)(3) is amended by 
        inserting ``or which is part of a salary reduction agreement 
        under section 403(b)'' after ``section 401(k)(2))''.
            (3) Effective date.--This subsection shall apply to taxable 
        years beginning after December 31, 1995.
    (b) Treatment of Indian Tribal Governments.--
            (1) In general.--Subparagraph (A) of section 403(b)(1) 
        (relating to taxability of beneficiary under annuity purchased 
        by section 501(c)(3) organization or public school) is amended 
        by striking ``or'' at the end of clause (i), by inserting 
        ``or'' at the end of clause (ii), and by adding at the end the 
        following new clause:
                            ``(iii) for an employee by an employer 
                        which is an Indian tribal government (as 
                        defined in section 7701(a)(40)), a subdivision 
                        of an Indian tribal government (determined in 
                        accordance with section 7871(d)), an agency or 
                        instrumentality of an Indian tribal government 
                        or subdivision thereof, or a corporation 
                        chartered under Federal, State, or tribal law 
                        which is owned in whole or part by any of the 
                        foregoing,''.
            (2) Conforming amendment.--The heading for section 403(b) 
        is amended by striking ``or Public School'' and inserting ``, 
        Public School, or Indian Tribe''.
            (3) Effective dates.--
                    (A) In general.--The amendments made by this 
                section shall apply to plan years beginning after 
                December 31, 1996.
                    (B) Transition rules.--
                            (i) In general.--In the case of any 
                        contract purchased in a plan year beginning 
                        before January 1, 1997, section 403(b) of the 
                        Internal Revenue Code of 1986 shall be applied 
                        as if any reference to an employer described in 
                        section 501(c)(3) of the Internal Revenue Code 
                        of 1986 which is exempt from tax under section 
                        501 of such Code included a reference to an 
                        employer which is an Indian tribal government 
                        (as defined by section 7701(a)(40) of such 
                        Code), a subdivision of an Indian tribal 
                        government (determined in accordance with 
                        section 7871(d) of such Code), an agency or 
                        instrumentality of an Indian tribal government 
                        or subdivision thereof, or a corporation 
                        chartered under Federal, State, or tribal law 
                        which is owned in whole or in part by any of 
                        the foregoing.
                            (ii) Rollovers.--Solely for purposes of 
                        applying section 403(b)(8) of such Code to a 
                        contract to which clause (i) applies, a 
                        qualified cash or deferred arrangement under 
                        section 401(k) of such Code shall be treated as 
                        if it were a plan or contract described in 
                        clause (ii) of section 403(b)(8)(A) of such 
                        Code.
    (c) Elective Deferrals.--
            (1) In general.--Subparagraph (E) of section 403(b)(1) is 
        amended to read as follows:
                    ``(E) in the case of a contract purchased under a 
                salary reduction agreement, the contract meets the 
                requirements of section 401(a)(30),''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 1995, except 
        a contract shall not be required to meet any change in any 
        requirement by reason of such amendment before the 90th day 
        after the date of the enactment of this Act.

SEC. 1451. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR ANNUITY 
              EXPLANATION BEFORE ANNUITY STARTING DATE.

    (a) General Rule.--For purposes of section 417(a)(3)(A) of the 
Internal Revenue Code of 1986 (relating to plan to provide written 
explanations), the minimum period prescribed by the Secretary of the 
Treasury between the date that the explanation referred to in such 
section is provided and the annuity starting date shall not apply if 
waived by the participant and, if applicable, the participant's spouse.
    (b) Effective Date.--Subsection (a) shall apply to plan years 
beginning after December 31, 1996.

SEC. 1452. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT PLAN AND 
              DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE; EXCESS 
              DISTRIBUTIONS.

    (a) In General.--Section 415(e) is repealed.
    (b) Excess Distributions.--Section 4980A is amended by adding at 
the end the following new subsection:
    ``(g) Limitation on Application.--This section shall not apply to 
distributions during years beginning after December 31, 1996, and 
before January 1, 2000, and such distributions shall be treated as made 
first from amounts not described in subsection (f).''.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 415(a) is amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (A),
                    (B) by striking ``, or'' at the end of subparagraph 
                (B) and inserting a period, and
                    (C) by striking subparagraph (C).
            (2) Subparagraph (B) of section 415(b)(5) is amended by 
        striking ``and subsection (e)''.
            (3) Paragraph (1) of section 415(f) is amended by striking 
        ``subsections (b), (c), and (e)'' and inserting ``subsections 
        (b) and (c)''.
            (4) Subsection (g) of section 415 is amended by striking 
        ``subsections (e) and (f)'' in the last sentence and inserting 
        ``subsection (f)''.
            (5) Clause (i) of section 415(k)(2)(A) is amended to read 
        as follows:
                            ``(i) any contribution made directly by an 
                        employee under such an arrangement shall not be 
                        treated as an annual addition for purposes of 
                        subsection (c), and''.
            (6) Clause (ii) of section 415(k)(2)(A) is amended by 
        striking ``subsections (c) and (e)'' and inserting ``subsection 
        (c)''.
            (7) Section 416 is amended by striking subsection (h).
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to limitation years 
        beginning after December 31, 1999.
            (2) Excess distributions.--The amendment made by subsection 
        (b) shall apply to years beginning after December 31, 1996.

SEC. 1453. TAX ON PROHIBITED TRANSACTIONS.

    (a) In General.--Section 4975(a) is amended by striking ``5 
percent'' and inserting ``10 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to prohibited transactions occurring after the date of the enactment of 
this Act.

SEC. 1454. TREATMENT OF LEASED EMPLOYEES.

    (a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining 
leased employee) is amended to read as follows:
                    ``(C) such services are performed under primary 
                direction or control by the recipient.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1996, but shall not apply 
to any relationship determined under an Internal Revenue Service ruling 
issued before the date of the enactment of this Act pursuant to section 
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the 
day before such date) not to involve a leased employee.

SEC. 1455. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN PENSION 
              REPORTING REQUIREMENTS.

    (a) Penalties.--
            (1) Statements.--Paragraph (1) of section 6724(d) is 
        amended by striking ``and'' at the end of subparagraph (A), by 
        striking the period at the end of subparagraph (B) and 
        inserting ``, and'', and by inserting after subparagraph (B) 
        the following new subparagraph:
                    ``(C) any statement of the amount of payments to 
                another person required to be made to the Secretary 
                under--
                            ``(i) section 408(i) (relating to reports 
                        with respect to individual retirement accounts 
                        or annuities), or
                            ``(ii) section 6047(d) (relating to reports 
                        by employers, plan administrators, etc.).''.
            (2) Reports.--Paragraph (2) of section 6724(d) is amended 
        by striking ``or'' at the end of subparagraph (S), by striking 
        the period at the end of subparagraph (T) and inserting a 
        comma, and by inserting after subparagraph (T) the following 
        new subparagraphs:
                    ``(U) section 408(i) (relating to reports with 
                respect to individual retirement plans) to any person 
                other than the Secretary with respect to the amount of 
                payments made to such person, or
                    ``(V) section 6047(d) (relating to reports by plan 
                administrators) to any person other than the Secretary 
                with respect to the amount of payments made to such 
                person.''.
    (b) Modification of Reportable Designated Distributions.--
            (1) Section 408.--Subsection (i) of section 408 (relating 
        to individual retirement account reports) is amended by 
        inserting ``aggregating $10 or more in any calendar year'' 
        after ``distributions''.
            (2) Section 6047.--Paragraph (1) of section 6047(d) 
        (relating to reports by employers, plan administrators, etc.) 
is amended by adding at the end the following new sentence: ``No return 
or report may be required under the preceding sentence with respect to 
distributions to any person during any year unless such distributions 
aggregate $10 or more.''.
    (c) Qualifying Rollover Distributions.--Section 6652(i) is 
amended--
            (1) by striking ``the $10'' and inserting ``$100'', and
            (2) by striking ``$5,000'' and inserting ``$50,000''.
    (d) Conforming Amendments.--
            (1) Paragraph (1) of section 6047(f) is amended to read as 
        follows:

                                ``(1) For provisions relating to 
penalties for failures to file returns and reports required under this 
section, see sections 6652(e), 6721, and 6722.''.
            (2) Subsection (e) of section 6652 is amended by adding at 
        the end the following new sentence: ``This subsection shall not 
        apply to any return or statement which is an information return 
        described in section 6724(d)(1)(C)(ii) or a payee statement 
        described in section 6724(d)(2)(V).''.
            (3) Subsection (a) of section 6693 is amended by adding at 
        the end the following new sentence: ``This subsection shall not 
        apply to any report which is an information return described in 
        section 6724(d)(1)(C)(i) or a payee statement described in 
        section 6724(d)(2)(U).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to returns, reports, and other statements the due date for which 
(determined without regard to extensions) is after December 31, 1996.

SEC. 1456. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO TAX ON NET 
              EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Section 1402(a)(8) (defining net earning from 
self-employment) is amended by inserting ``, but shall not include in 
such net earnings from self-employment the rental value of any 
parsonage or any parsonage allowance (whether or not excludable under 
section 107) provided after the individual retires, or any other 
retirement benefit received by such individual from a church plan (as 
defined in section 414(e)) after the individual retires'' before the 
semicolon at the end.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning before, on, or after December 31, 1994.

SEC. 1457. MODEL FORMS FOR SPOUSAL CONSENT AND QUALIFIED DOMESTIC 
              RELATIONS FORMS.

    (a) Development of Forms.--Not later than January 1, 1997, the 
Secretary of the Treasury shall develop--
            (1) a model form for the spousal consent required under 
        section 417(a)(2) of the Internal Revenue Code of 1986 and 
        section 205(c)(2) of the Employee Retirement Income Security 
        Act of 1974 which--
                    (A) is written in a manner calculated to be 
                understood by the average person, and
                    (B) discloses in plain form--
                            (i) whether the waiver to which the spouse 
                        consents is irrevocable, and
                            (ii) whether such waiver may be revoked by 
                        a qualified domestic relations order, and
            (2) a model form for a qualified domestic relations order 
        described in section 414(p)(1)(A) of such Code and section 
        206(d)(3)(B)(i) of such Act which--
                    (A) meets the requirements contained in such 
                sections, and
                    (B) the provisions of which focus attention on the 
                need to consider the treatment of any lump sum payment, 
                qualified joint and survivor annuity, or qualified 
                preretirement survivor annuity.
    (b) Publicity.--The Secretary of the Treasury shall include 
publicity for the model forms developed under subsection (a) in the 
pension outreach efforts undertaken by the Secretary.

SEC. 1458. TREATMENT OF LENGTH OF SERVICE AWARDS TO VOLUNTEERS 
              PERFORMING FIRE FIGHTING OR PREVENTION SERVICES, 
              EMERGENCY MEDICAL SERVICES, OR AMBULANCE SERVICES.

    (a) In General.--Paragraph (11) of section 457(e) (relating to 
deferred compensation plans of State and local governments and tax-
exempt organizations) is amended to read as follows:
            ``(11) Certain plans excluded.--
                    ``(A) In general.--The following plans shall be 
                treated as not providing for the deferral of 
                compensation:
                            ``(i) Any bona fide vacation leave, sick 
                        leave, compensatory time, severance pay, 
                        disability pay, or death benefit plan.
                            ``(ii) Any plan paying solely length of 
                        service awards to bona fide volunteers (or 
                        their beneficiaries) on account of qualified 
                        services performed by such volunteers.
                    ``(B) Special rules applicable to length of service 
                award plans.--
                            ``(i) Bona fide volunteer.--An individual 
                        shall be treated as a bona fide volunteer for 
                        purposes of subparagraph (A)(ii) if the only 
                        compensation received by such individual for 
                        performing qualified services is in the form 
                        of--
                                    ``(I) reimbursement for (or a 
                                reasonable allowance for) reasonable 
                                expenses incurred in the performance of 
                                such services, or
                                    ``(II) reasonable benefits 
                                (including length of service awards), 
                                and nominal fees for such services, 
                                customarily paid by eligible employers 
                                in connection with the performance of 
                                such services by volunteers.
                            ``(ii) Limitation on accruals.--A plan 
                        shall not be treated as described in 
                        subparagraph (A)(ii) if the aggregate amount of 
                        length of service awards accruing with respect 
                        to any year of service for any bona fide 
                        volunteer exceeds $3,000.
                    ``(C) Qualified services.--For purposes of this 
                paragraph, the term `qualified services' means fire 
                fighting and prevention services, emergency medical 
                services, and ambulance services.''
    (b) Exemption From Social Security Taxes.--
            (1) Subsection (a)(5) of section 3121, as amended by 
        section 1421, is amended by striking ``(or)'' at the end of 
        subparagraph (G), by inserting ``or'' at the end of 
        subparagraph (H), and by adding at the end the following new 
        subparagraph:
                    ``(I) under a plan described in section 
                457(e)(11)(A)(ii) and maintained by an eligible 
                employer (as defined in section 457(e)(1)).''.
            (2) Section 209(a)(4) of the Social Security Act is amended 
        by inserting ``; or (K) under a plan described in section 
        457(e)(11)(A)(ii) of the Internal Revenue Code of 1986 and 
        maintained by an eligible employer (as defined in section 
        457(e)(1) of such Code)'' before the semicolon at the end 
        thereof.
    (c) Effective Date.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply to accruals of length of service awards after 
        December 31, 1996.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to remuneration paid after December 31, 1996.

SEC. 1459. DATE FOR ADOPTION OF PLAN AMENDMENTS.

    If any amendment made by this subtitle requires an amendment to any 
plan or annuity contract, such amendment shall not be required to be 
made before the first day of the first plan year beginning on or after 
January 1, 1997, if--
            (1) during the period after such amendment takes effect and 
        before such first plan year, the plan or contract is operated 
        in accordance with the requirements of such amendment, and
            (2) such amendment applies retroactively to such period.
In the case of a governmental plan (as defined in section 414(d) of the 
Internal Revenue Code of 1986), this section shall be applied by 
substituting ``1999'' for ``1997''.

                      Subtitle E--Revenue Offsets

                       PART I--GENERAL PROVISIONS

SEC. 1601. MODIFICATIONS OF PUERTO RICO AND POSSESSION TAX CREDIT.

    (a) In General.--Section 936 is amended by adding at the end the 
following new subsection:
    ``(j) Termination of QPSII and Reduced Credit; Reduction in 
Economic Activity Credit.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, this section shall not apply to any taxable year 
        beginning after December 31, 1995.
            ``(2) Special rules for active business income credit.--
        Except as provided in paragraph (3)--
                    ``(A) Economic activity credit.--In the case of an 
                existing credit claimant--
                            ``(i) with respect to a possession other 
                        than Puerto Rico, and
                            ``(ii) to which subsection (a)(4)(B) does 
                        not apply,
                the credit determined under subsection (a)(1)(A) shall 
                be allowed for taxable years beginning after December 
                31, 1995, except that in the case of taxable years 
                beginning after December 31, 2005, subsection 
                (a)(4)(A)(i) shall be applied by substituting `40 
                percent' for `60 percent'.
                    ``(B) Reduced credit.--
                            ``(i) In general.--In the case of an 
                        existing credit claimant to which subsection 
                        (a)(4)(B) applies, the credit determined under 
                        subsection (a)(1)(A) shall be allowed for 
                        taxable years beginning after December 31, 
                        1995, and before January 1, 2006.
                            ``(ii) Election irrevocable after 1997.--An 
                        election under subsection (a)(4)(B)(iii) which 
                        is in effect for the taxpayer's last taxable 
year beginning before 1997 may not be revoked unless it is revoked for 
the taxpayer's first taxable year beginning in 1997 and all subsequent 
taxable years.
                    ``(C) Economic activity credit for puerto rico.--

                                ``For economic activity credit for 
Puerto Rico, see section 30A.
            ``(3) Additional restriction on credit.--
                    ``(A) In general.--In the case of an existing 
                credit claimant, the aggregate amount of taxable income 
                taken into account under subsection (a)(1)(A) shall not 
                exceed the adjusted base period income of such 
                claimant--
                            ``(i) in the case of the credit described 
                        in paragraph (2)(A), for any taxable year 
                        beginning after December 31, 2001, and
                            ``(ii) in the case of the credit described 
                        in paragraph (2)(B), for any taxable year 
                        beginning after December 31, 1997.
                    ``(B) Coordination with subsection (a)(4).--The 
                amount of income described in subsection (a)(1)(A) 
                which is taken into account in applying subsection 
                (a)(4) shall be such income as reduced under this 
                paragraph.
            ``(4) Adjusted base period income.--For purposes of 
        paragraph (3)--
                    ``(A) In general.--The term `adjusted base period 
                income' means the average of the inflation-adjusted 
                possession incomes of the corporation for each base 
                period year.
                    ``(B) Inflation-adjusted possession income.--For 
                purposes of subparagraph (A), the inflation-adjusted 
                possession income of any corporation for any base 
                period year shall be an amount equal to the sum of--
                            ``(i) the possession income of such 
                        corporation for such base period year, plus
                            ``(ii) such possession income multiplied by 
                        the inflation adjustment percentage for such 
                        base period year.
                    ``(C) Inflation adjustment percentage.--For 
                purposes of subparagraph (B), the inflation adjustment 
                percentage for any base period year means the 
                percentage (if any) by which--
                            ``(i) the CPI for 1995, exceeds
                            ``(ii) the CPI for the calendar year in 
                        which the base period year for which the 
                        determination is being made ends.
                For purposes of the preceding sentence, the CPI for any 
                calendar year is the CPI (as defined in section 
                1(f)(5)) for such year under section 1(f)(4).
                    ``(D) Increase in inflation adjustment percentage 
                for growth during base years.--The inflation adjustment 
                percentage (determined under subparagraph (C) without 
                regard to this subparagraph) for each of the 5 taxable 
                years referred to in paragraph (5)(A) shall be 
                increased by--
                            ``(i) 5 percentage points in the case of a 
                        taxable year ending during the 1-year period 
                        ending on October 13, 1995;
                            ``(ii) 10.25 percentage points in the case 
                        of a taxable year ending during the 1-year 
                        period ending on October 13, 1994;
                            ``(iii) 15.76 percentage points in the case 
                        of a taxable year ending during the 1-year 
                        period ending on October 13, 1993;
                            ``(iv) 21.55 percentage points in the case 
                        of a taxable year ending during the 1-year 
                        period ending on October 13, 1992; and
                            ``(v) 27.63 percentage points in the case 
                        of a taxable year ending during the 1-year 
                        period ending on October 13, 1991.
            ``(5) Base period year.--For purposes of this subsection--
                    ``(A) In general.--The term `base period year' 
                means each of 3 taxable years which are among the 5 
                most recent taxable years of the corporation ending 
                before October 14, 1995, determined by disregarding--
                            ``(i) one taxable year for which the 
                        corporation had the largest inflation-adjusted 
                        possession income, and
                            ``(ii) one taxable year for which the 
                        corporation had the smallest inflation-adjusted 
                        possession income.
                    ``(B) Corporations not having significant 
                possession income throughout 5-year period.--
                            ``(i) In general.--If a corporation does 
                        not have significant possession income for each 
                        of the most recent 5 taxable years ending 
                        before October 14, 1995, then, in lieu of 
                        applying subparagraph (A), the term `base 
                        period year' means only those taxable years (of 
such 5 taxable years) for which the corporation has significant 
possession income; except that, if such corporation has significant 
possession income for 4 of such 5 taxable years, the rule of 
subparagraph (A)(ii) shall apply.
                            ``(ii) Special rule.--If there is no year 
                        (of such 5 taxable years) for which a 
                        corporation has significant possession income--
                                    ``(I) the term `base period year' 
                                means the first taxable year ending on 
                                or after October 14, 1995, but
                                    ``(II) the amount of possession 
                                income for such year which is taken 
                                into account under paragraph (4) shall 
                                be the amount which would be determined 
                                if such year were a short taxable year 
                                ending on September 30, 1995.
                            ``(iii) Significant possession income.--For 
                        purposes of this subparagraph, the term 
                        `significant possession income' means 
                        possession income which exceeds 2 percent of 
                        the possession income of the taxpayer for the 
                        taxable year (of the period of 6 taxable years 
                        ending with the first taxable year ending on or 
                        after October 14, 1995) having the greatest 
                        possession income.
                    ``(C) Election to use one base period year.--
                            ``(i) In general.--At the election of the 
                        taxpayer, the term `base period year' means--
                                    ``(I) only the last taxable year of 
                                the corporation ending in calendar year 
                                1992, or
                                    ``(II) a deemed taxable year which 
                                includes the first ten months of 
                                calendar year 1995.
                            ``(ii) Base period income for 1995.--In 
                        determining the adjusted base period income of 
                        the corporation for the deemed taxable year 
                        under clause (i)(II), the possession income 
                        shall be annualized and shall be determined 
                        without regard to any extraordinary item.
                            ``(iii) Election.--An election under this 
                        subparagraph by any possession corporation may 
                        be made only for the corporation's first 
                        taxable year beginning after December 31, 1995, 
                        for which it is a possession corporation. The 
                        rules of subclauses (II) and (III) of 
                        subsection (a)(4)(B)(iii) shall apply to the 
                        election under this subparagraph.
                    ``(D) Acquisitions and dispositions.--Rules similar 
                to the rules of subparagraphs (A) and (B) of section 
                41(f)(3) shall apply for purposes of this subsection.
            ``(6) Possession income.--For purposes of this subsection, 
        the term `possession income' means, with respect to any 
        possession, the income referred to in subsection (a)(1)(A) 
        determined with respect to that possession. In no event shall 
        possession income be treated as being less than zero.
            ``(7) Short years.--If the current year or a base period 
        year is a short taxable year, the application of this 
        subsection shall be made with such annualizations as the 
        Secretary shall prescribe.
            ``(8) Special rules for certain possessions.--
                    ``(A) In general.--In the case of an existing 
                credit claimant with respect to an applicable 
                possession--
                            ``(i) this section (other than the 
                        preceding paragraphs of this subsection) shall 
                        apply to such claimant with respect to such 
                        applicable possession for taxable years 
                        beginning after December 31, 1995, and before 
                        January 1, 2006, and
                            ``(ii) this section (including the 
                        preceding paragraphs of this subsection) shall 
                        apply to such claimant with respect to such 
                        applicable possession for taxable years 
                        beginning after December 31, 2005.
                    ``(B) Applicable possession.--For purposes of this 
                paragraph, the term `applicable possession' means Guam, 
                American Samoa, and the Commonwealth of the Northern 
                Mariana Islands.
            ``(9) Existing credit claimant.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `existing credit 
                claimant' means a corporation--
                            ``(i) which was actively conducting a trade 
                        or business in a possession on October 13, 
                        1995, and
                            ``(ii) with respect to which an election 
                        under this section is in effect for the 
                        corporation's taxable year which includes 
                        October 13, 1995.
                    ``(B) New lines of business prohibited.--If, after 
                October 13, 1995, a corporation which would (but for 
                this subparagraph) be an existing credit claimant adds 
                a substantial new line of business, such corporation 
                shall cease to be treated as an existing credit 
                claimant as of the close of the taxable year ending 
                before the date of such addition.
                    ``(C) Binding contract exception.--If, on October 
                13, 1995, and at all times thereafter, there is in 
                effect with respect to a corporation a binding contract 
                for the acquisition of assets to be used in, or for the 
                sale of assets to be produced from, a trade or 
                business, the corporation shall be treated for purposes 
                of this paragraph as actively conducting such trade or 
                business on October 13, 1995. The preceding sentence 
                shall not apply if such trade or business is not 
                actively conducted before January 1, 1996.
            ``(10) Separate application to each possession.--For 
        purposes of determining--
                    ``(A) whether a taxpayer is an existing credit 
                claimant, and
                    ``(B) the amount of the credit allowed under this 
                section,
        this subsection (and so much of this section as relates to this 
        subsection) shall be applied separately with respect to each 
        possession.''.
    (b) Economic Activity Credit for Puerto Rico.--
            (1) In general.--Subpart B of part IV of subchapter A of 
        chapter 1 is amended by adding at the end the following new 
        section:

``SEC. 30A. PUERTO RICAN ECONOMIC ACTIVITY CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--Except as otherwise provided in this 
        section, if the conditions of both paragraph (1) and paragraph 
        (2) of subsection (b) are satisfied with respect to a qualified 
        domestic corporation, there shall be allowed as a credit 
        against the tax imposed by this chapter an amount equal to the 
        portion of the tax which is attributable to the taxable income, 
        from sources without the United States, from--
                    ``(A) the active conduct of a trade or business 
                within Puerto Rico, or
                    ``(B) the sale or exchange of substantially all of 
                the assets used by the taxpayer in the active conduct 
                of such trade or business.
        In the case of any taxable year beginning after December 31, 
        2001, the aggregate amount of taxable income taken into account 
        under the preceding sentence (and in applying subsection (d)) 
        shall not exceed the adjusted base period income of such 
        corporation, as determined in the same manner as under section 
        936(j).
            ``(2) Qualified domestic corporation.--For purposes of 
        paragraph (1), the term `qualified domestic corporation' means 
        a domestic corporation--
                    ``(A) which is an existing credit claimant with 
                respect to Puerto Rico, and
                    ``(B) with respect to which section 936(a)(4)(B) 
                does not apply for the taxable year.
            ``(3) Separate application.--For purposes of determining--
                    ``(A) whether a taxpayer is an existing credit 
                claimant with respect to Puerto Rico, and
                    ``(B) the amount of the credit allowed under this 
                section,
        this section (and so much of section 936 as relates to this 
        section) shall be applied separately with respect to Puerto 
        Rico.
    ``(b) Conditions Which Must Be Satisfied.--The conditions referred 
to in subsection (a) are--
            ``(1) 3-year period.--If 80 percent or more of the gross 
        income of the qualified domestic corporation for the 3-year 
        period immediately preceding the close of the taxable year (or 
        for such part of such period immediately preceding the close of 
        such taxable year as may be applicable) was derived from 
        sources within a possession of the United States (determined 
        without regard to section 904(f)).
            ``(2) Trade or business.--If 75 percent or more of the 
        gross income of the qualified domestic corporation for such 
        period or such part thereof was derived from the active conduct 
        of a trade or business within a possession of the United 
        States.
    ``(c) Credit Not Allowed Against Certain Taxes.--The credit 
provided by subsection (a) shall not be allowed against the tax imposed 
by--
            ``(1) section 59A (relating to environmental tax),
            ``(2) section 531 (relating to the tax on accumulated 
        earnings),
            ``(3) section 541 (relating to personal holding company 
        tax), or
            ``(4) section 1351 (relating to recoveries of foreign 
        expropriation losses).
    ``(d) Limitations on Credit.--The amount of the credit determined 
under subsection (a) for any taxable year shall not exceed the sum of 
the following amounts:
            ``(1) 60 percent (40 percent in the case of taxable years 
        beginning after December 31, 2005) of the sum of--
                    ``(A) the aggregate amount of the qualified 
                domestic corporation's qualified possession wages for 
                such taxable year, plus
                    ``(B) the allocable employee fringe benefit 
                expenses of the qualified domestic corporation for such 
                taxable year.
            ``(2) The sum of--
                    ``(A) 15 percent of the depreciation allowances for 
                the taxable year with respect to short-life qualified 
                tangible property,
                    ``(B) 40 percent of the depreciation allowances for 
                the taxable year with respect to medium-life qualified 
                tangible property, and
                    ``(C) 65 percent of the depreciation allowances for 
                the taxable year with respect to long-life qualified 
                tangible property.
            ``(3) If the qualified domestic corporation does not have 
        an election to use the method described in section 
        936(h)(5)(C)(ii) (relating to profit split) in effect for the 
        taxable year, the amount of the qualified possession income 
        taxes for the taxable year allocable to nonsheltered income.
    ``(e) Administrative Provisions.--For purposes of this title (other 
than section 27)--
            ``(1) the provisions of section 936 (including any 
        applicable election thereunder) shall apply in the same manner 
        as if the credit under this section were a credit under section 
        936(a)(1)(A) for a domestic corporation to which section 
        936(a)(4)(A) applies,
            ``(2) the credit under this section shall be treated in the 
        same manner as the credit under section 936, and
            ``(3) a corporation to which this section applies shall be 
        treated in the same manner as if it were a corporation electing 
        the application of section 936.
    ``(f) Definitions.--For purposes of this section, any term used in 
this section which is also used in section 936 shall have the same 
meaning given such term by section 936.
    ``(g) Application of Section.--This section shall apply to taxable 
years beginning after December 31, 1995.''
            (2) Conforming amendments.--
                    (A) Paragraph (1) of section 55(c) is amended by 
                striking ``and the section 936 credit allowable under 
section 27(b)'' and inserting ``, the section 936 credit allowable 
under section 27(b), and the Puerto Rican economic activity credit 
under section 30A''.
                    (B) Subclause (I) of section 56(g)(4)(C)(ii) is 
                amended--
                            (i) by inserting ``30A,'' before ``936'', 
                        and
                            (ii) by striking ``and (i)'' and inserting 
                        ``, (i), and (j)''.
                    (C) Clause (iii) of section 56(g)(4)(C) is amended 
                by adding at the end the following new subclause:
                                    ``(VI) Application to section 30a 
                                corporations.--References in this 
                                clause to section 936 shall be treated 
                                as including references to section 
                                30A.''.
                    (D)(i) Subsection (b) of section 59 is amended by 
                striking ``section 936,'' and all that follows and 
                inserting ``section 30A or 936, alternative minimum 
                taxable income shall not include any income with 
                respect to which a credit is determined under section 
                30A or 936.''.
                    (ii) The heading for section 59(b) is amended by 
                inserting ``30A or'' before ``936''.
                    (E) The table of sections for subpart B of part IV 
                of subchapter A of chapter 1 is amended by adding at 
                the end the following new item:

``Sec. 30A. Puerto Rican economic activity credit.''.
                    (F)(i) The heading for subpart B of part IV of 
                subchapter A of chapter 1 is amended to read as 
                follows:

                     ``Subpart B--Other Credits''.

                    (ii) The table of subparts for part IV of 
                subchapter A of chapter 1 is amended by striking the 
                item relating to subpart B and inserting the following 
                new item:

``Subpart B. Other credits.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1995.
            (2) Special rule for qualified possession source investment 
        income.--The amendments made by this section shall not apply to 
        qualified possession source investment income received or 
        accrued before July 1, 1996, without regard to the taxable year 
        in which received or accrued.

SEC. 1602. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO ACQUIRE 
              EMPLOYER SECURITIES.

    (a) In General.--Section 133 (relating to interest on certain loans 
used to acquire employer securities) is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 291(e)(1) is amended by 
        striking clause (iv) and by redesignating clause (v) as clause 
        (iv).
            (2) Section 812 is amended by striking subsection (g).
            (3) Paragraph (5) of section 852(b) is amended by striking 
        subparagraph (C).
            (4) Paragraph (2) of section 4978(b) is amended by striking 
        subparagraph (A) and all that follows and inserting the 
        following:
                    ``(A) first from qualified securities to which 
                section 1042 applied acquired during the 3-year period 
                ending on the date of the disposition, beginning with 
                the securities first so acquired, and
                    ``(B) then from any other employer securities.
        If subsection (d) applies to a disposition, the disposition 
        shall be treated as made from employer securities in the 
        opposite order of the preceding sentence.''.
            (5)(A) Section 4978B (relating to tax on disposition of 
        employer securities to which section 133 applied) is hereby 
        repealed.
            (B) The table of sections for chapter 43 is amended by 
        striking the item relating to section 4978B.
            (6) Subsection (e) of section 6047 is amended by striking 
        paragraphs (1), (2), and (3) and inserting the following new 
        paragraphs:
            ``(1) any employer maintaining, or the plan administrator 
        (within the meaning of section 414(g)) of, an employee stock 
        ownership plan which holds stock with respect to which section 
        404(k) applies to dividends paid on such stock, or
            ``(2) both such employer or plan administrator,''.
            (7) Subsection (f) of section 7872 is amended by striking 
        paragraph (12).
            (8) The table of sections for part III of subchapter B of 
        chapter 1 is amended by striking the item relating to section 
        133.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to loans made after the date of the enactment of this 
        Act.
            (2) Refinancings.--The amendments made by this section 
        shall not apply to loans made after the date of the enactment 
        of this Act to refinance securities acquisition loans 
        (determined without regard to section 133(b)(1)(B) of the 
        Internal Revenue Code of 1986, as in effect on the day before 
        the date of the enactment of this Act) made on or before such 
        date or to refinance loans described in this paragraph if--
                    (A) the refinancing loans meet the requirements of 
                section 133 of such Code (as so in effect),
                    (B) immediately after the refinancing the principal 
                amount of the loan resulting from the refinancing does 
                not exceed the principal amount of the refinanced loan 
                (immediately before the refinancing), and
                    (C) the term of such refinancing loan does not 
                extend beyond the last day of the term of the original 
                securities acquisition loan.
        For purposes of this paragraph, the term ``securities 
        acquisition loan'' includes a loan from a corporation to an 
        employee stock ownership plan described in section 133(b)(3) of 
        such Code (as so in effect).
            (3) Exception.--Any loan made pursuant to a binding written 
        contract in effect before June 10, 1996, and at all times 
        thereafter before such loan is made, shall be treated for 
        purposes of paragraphs (1) and (2) as a loan made on or before 
        the date of the enactment of this Act.

SEC. 1603. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES.

    (a) In General.--Paragraph (2) of section 104(a) (relating to 
compensation for injuries or sickness) is amended to read as follows:
            ``(2) the amount of any damages (other than punitive 
        damages) received (whether by suit or agreement and whether as 
        lump sums or as periodic payments) on account of personal 
        injuries or sickness;''.
    (b) Application of Prior Law for States in Which Only Punitive 
Damages May Be Awarded in Wrongful Death Actions.--Section 104 is 
amended by redesignating subsection (c) as subsection (d) and by 
inserting after subsection (b) the following new subsection:
    ``(c) Application of Prior Law in Certain Cases.--Notwithstanding 
subsection (a)(2), gross income shall not include punitive damages 
awarded in a civil action--
            ``(1) which is a wrongful death action, and
            ``(2) with respect to which applicable State law (as in 
        effect on September 13, 1995 and without regard to any 
        modification after such date) provides, or has been construed 
        to provide by a court of competent jurisdiction pursuant to a 
        decision issued on or before September 13, 1995, that only 
        punitive damages may be awarded in such an action.
This subsection shall cease to apply to any civil action filed on or 
after the first date on which the applicable State law ceases to 
provide (or is no longer construed to provide) the treatment described 
in paragraph (2).''.
    (c) Conforming Amendment.--Section 104(a) is amended by striking 
the last sentence.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts received 
        after June 30, 1996, in taxable years ending after such date.
            (2) Exception.--The amendments made by this section shall 
        not apply to any amount received under a written binding 
        agreement, court decree, or mediation award in effect on (or 
        issued on or before) September 13, 1995.

SEC. 1604. EXTENSION AND PHASEDOWN OF LUXURY PASSENGER AUTOMOBILE TAX.

    (a) Extension.--Subsection (f) of section 4001 is amended by 
striking ``1999'' and inserting ``2002''.
    (b) Phasedown.--Section 4001 is amended by redesignating subsection 
(f) (as amended by subsection (a) of this section) as subsection (g) 
and by inserting after subsection (e) the following new subsection:
    ``(f) Phasedown.--For sales occurring after June 30 in calendar 
year 1996, and in calendar years after 1996 and before 2003, subsection 
(a) shall be applied by substituting for `10 percent' the percentage 
determined in accordance with the following table:

``If the calendar year is:
                                                     The percentage is:
  1996...............................................  9 percent       
  1997...............................................  8 percent       
  1998...............................................  7 percent       
  1999...............................................  6 percent       
  2000...............................................  5 percent       
  2001...............................................  4 percent       
  2002...............................................  3 percent.''    
    (c) Effective Date.--The amendments made by this section shall take 
effect on July 1, 1996.

SEC. 1605. TERMINATION OF FUTURE TAX-EXEMPT BOND FINANCING FOR LOCAL 
              FURNISHERS OF ELECTRICITY AND GAS.

    Section 142(f) (relating to local furnishing of electric energy or 
gas) is amended by adding at the end the following new paragraphs:
            ``(3) Termination of future financing.--For purposes of 
        this section, no bond may be issued as part of an issue 
        described in subsection (a)(8) with respect to a facility for 
        the local furnishing of electric energy or gas on or after the 
date of the enactment of this paragraph unless--
                    ``(A) the facility will--
                            ``(i) be used by a person who is engaged in 
                        the local furnishing of that energy source on 
                        such date, and
                            ``(ii) be used to provide service within 
                        the area served by such person on such date, or
                    ``(B) the facility will be used by a successor in 
                interest to such person for the same use and within the 
                same service area as described in subparagraph (A).
            ``(4) Election to terminate tax-exempt bond financing by 
        certain furnishers.--
                    ``(A) In general.--In the case of a facility 
                financed with bonds issued before the date of the 
                enactment of this paragraph which would cease to be 
                tax-exempt by reason of the failure to meet the local 
                furnishing requirement of subsection (a)(8) as a result 
                of a service area expansion, such bonds shall not cease 
                to be tax-exempt bonds (and section 150(b)(4) shall not 
                apply) if the person engaged in such local furnishing 
                by such facility makes an election described in 
                subparagraph (B).
                    ``(B) Election.--An election is described in this 
                subparagraph if it is an election made in such manner 
                as the Secretary prescribes, and such person (or its 
                predecessor in interest) agrees that--
                            ``(i) such election is made with respect to 
                        all facilities for the local furnishing of 
                        electric energy or gas, or both, by such 
                        person,
                            ``(ii) no bond exempt from tax under 
                        section 103 and described in subsection (a)(8) 
                        may be issued on or after the date of the 
                        enactment of this paragraph with respect to all 
                        such facilities of such person,
                            ``(iii) any expansion of the service area--
                                    ``(I) is not financed with the 
                                proceeds of any exempt facility bond 
                                described in subsection (a)(8), and
                                    ``(II) is not treated as a 
                                nonqualifying use under the rules of 
                                paragraph (2), and
                            ``(iv) all outstanding bonds used to 
                        finance the facilities for such person are 
                        redeemed not later than 6 months after the 
                        later of--
                                    ``(I) the earliest date on which 
                                such bonds may be redeemed, or
                                    ``(II) the date of the election.
                    ``(C) Related persons.--For purposes of this 
                paragraph, the term `person' includes a group of 
                related persons (within the meaning of section 
                144(a)(3)) which includes such person.''

SEC. 1606. REPEAL OF FINANCIAL INSTITUTION TRANSITION RULE TO INTEREST 
              ALLOCATION RULES.

    (a) In General.--Paragraph (5) of section 1215(c) of the Tax Reform 
Act of 1986 (Public Law 99-514, 100 Stat. 2548) is hereby repealed.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 1607. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND EXCISE TAXES.

    (a) Fuel Tax.--
            (1) Subparagraph (A) of section 4091(b)(3) is amended to 
        read as follows:
                    ``(A) The rate of tax specified in paragraph (1) 
                shall be 4.3 cents per gallon--
                            ``(i) after December 31, 1995, and before 
                        the date which is 7 days after the date of the 
                        enactment of the Small Business Job Protection 
                        Act of 1996, and
                            ``(ii) after December 31, 1996.''
            (2) Section 4081(d) is amended--
                    (A) by adding at the end the following new 
                paragraph:
            ``(3) Aviation gasoline.--After December 31, 1996, the rate 
        of tax specified in subsection (a)(2)(A)(i) on aviation 
        gasoline shall be 4.3 cents per gallon.'', and
                    (B) by inserting ``(other than the tax on aviation 
                gasoline)'' after ``subsection (a)(2)(A)''.
            (3) Section 4041(c)(5) is amended by inserting ``, and 
        during the period beginning on the date which is 7 days after 
        the date of the enactment of the Small Business Job Protection 
        Act of 1996 and ending on December 31, 1996'' after ``December 
        31, 1995''.
    (b) Ticket Taxes.--Sections 4261(g) and 4271(d) are each amended by 
striking ``January 1, 1996'' and inserting ``January 1, 1996, and to 
transportation beginning on or after the date which is 7 days after the 
date of the enactment of the Small Business Job Protection Act of 1996 
and before January 1, 1997''.
    (c) Transfers to Airport and Airway Trust Fund.--
            (1) Subsection (b) of section 9502 is amended by striking 
        ``January 1, 1996'' each place it appears and inserting 
        ``January 1, 1997''.
            (2) Paragraph (3) of section 9502(f) is amended to read as 
        follows:
            ``(3) Termination.--Notwithstanding the preceding 
        provisions of this subsection, the Airport and Airway Trust 
        Fund financing rate shall be zero with respect to--
                    ``(A) taxes imposed after December 31, 1995, and 
                before the date which is 7 days after the date of the 
                enactment of the Small Business Job Protection Act of 
                1996, and
                    ``(B) taxes imposed after December 31, 1996.''
            (3) Subsection (d) of section 9502 is amended by adding at 
        the end the following new paragraph:
            ``(5) Transfers from airport and airway trust fund on 
        account of refunds of taxes on transportation by air.--The 
        Secretary of the Treasury shall pay from time to time from the 
        Airport and Airway Trust Fund into the general fund of the 
        Treasury amounts equivalent to the amounts paid after December 
        31, 1995, under section 6402 (relating to authority to make 
        credits or refunds) or section 6415 (relating to credits or 
        refunds to persons who collected certain taxes) in respect of 
        taxes under sections 4261 and 4271.''
    (d) Excise Tax Exemption for Certain Emergency Medical 
Transportation by Air Ambulance.--Subsection (f) of section 4261 
(relating to imposition of tax on transportation by air) is amended to 
read as follows:
    ``(f) Exemption for Air Ambulances Providing Certain Emergency 
Medical Transportation.--No tax shall be imposed under this section or 
section 4271 on any air transportation for the purpose of providing 
emergency medical services--
            ``(1) by helicopter, or
            ``(2) by a fixed-wing aircraft equipped for and exclusively 
        dedicated to acute care emergency medical services.''
    (e) Exemption for Certain Helicopter Uses.--Subsection (e) of 
section 4261 is amended by adding at the end the following new 
sentence: ``In the case of helicopter transportation described in 
paragraph (1), this subsection shall be applied by treating each flight 
segment as a distinct flight.''
    (f) Floor Stocks Taxes on Aviation Fuel.--
            (1) Imposition of tax.--In the case of aviation fuel on 
        which tax was imposed under section 4091 of the Internal 
        Revenue Code of 1986 before the tax-increase date described in 
        paragraph (3)(A)(i) and which is held on such date by any 
        person, there is hereby imposed a floor stocks tax of 17.5 
        cents per gallon.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding aviation 
                fuel on a tax-increase date to which the tax imposed by 
                paragraph (1) applies shall be liable for such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) with respect to any tax-increase date shall be paid 
                on or before the first day of the 7th month beginning 
                after such tax-increase date.
            (3) Definitions.--For purposes of this subsection--
                    (A) Tax increase date.--The term ``tax-increase 
                date'' means the date which is 7 days after the date of 
                the enactment of this Act.
                    (B) Aviation fuel.--The term ``aviation fuel'' has 
                the meaning given such term by section 4093 of such 
                Code.
                    (C) Held by a person.--Aviation fuel shall be 
                considered as ``held by a person'' if title thereto has 
                passed to such person (whether or not delivery to the 
                person has been made).
                    (D) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or his delegate.
            (4) Exception for exempt uses.--The tax imposed by 
        paragraph (1) shall not apply to aviation fuel held by any 
        person on any tax-increase date exclusively for any use for 
        which a credit or refund of the entire tax imposed by section 
        4091 of such Code is allowable for aviation fuel purchased on 
        or after such tax-increase date for such use.
            (5) Exception for certain amounts of fuel.--
                    (A) In general.--No tax shall be imposed by 
                paragraph (1) on aviation fuel held on any tax-increase 
                date by any person if the aggregate amount of aviation 
                fuel held by such person on such date does not exceed 
                2,000 gallons. The preceding sentence shall apply only 
                if such person submits to the Secretary (at the time 
                and in the manner required by the Secretary) such 
                information as the Secretary shall require for purposes 
                of this paragraph.
                    (B) Exempt fuel.--For purposes of subparagraph (A), 
                there shall not be taken into account fuel held by any 
                person which is exempt from the tax imposed by 
                paragraph (1) by reason of paragraph (4).
                    (C) Controlled groups.--For purposes of this 
                paragraph--
                            (i) Corporations.--
                                    (I) In general.--All persons 
                                treated as a controlled group shall be 
                                treated as 1 person.
                                    (II) Controlled group.--The term 
                                ``controlled group'' has the meaning 
                                given to such term by subsection (a) of 
                                section 1563 of such Code; except that 
                                for such purposes the phrase ``more 
                                than 50 percent'' shall be substituted 
                                for the phrase ``at least 80 percent'' 
                                each place it appears in such 
                                subsection.
                            (ii) Nonincorporated persons under common 
                        control.--Under regulations prescribed by the 
                        Secretary, principles similar to the principles 
                        of clause (i) shall apply to a group of persons 
                        under common control where 1 or more of such 
                        persons is not a corporation.
            (6) Other law applicable.--All provisions of law, including 
        penalties, applicable with respect to the taxes imposed by 
        section 4091 of such Code shall, insofar as applicable and not 
        inconsistent with the provisions of this subsection, apply with 
        respect to the floor stock taxes imposed by paragraph (1) to 
        the same extent as if such taxes were imposed by such section 
        4091.
    (g) Effective Date.--The amendments made by this section shall take 
effect 7 days after the date of the enactment of this Act, except that 
the amendment made by subsection (b) shall not apply to any amount paid 
on or before such date.

SEC. 1608. BASIS ADJUSTMENT TO PROPERTY HELD BY CORPORATION WHERE STOCK 
              IN CORPORATION IS REPLACEMENT PROPERTY UNDER INVOLUNTARY 
              CONVERSION RULES.

    (a) In General.--Subsection (b) of section 1033 is amended to read 
as follows:
    ``(b) Basis of Property Acquired Through Involuntary Conversion.--
            ``(1) Conversions described in subsection (a)(1).--If the 
        property was acquired as the result of a compulsory or 
        involuntary conversion described in subsection (a)(1), the 
        basis shall be the same as in the case of the property so 
        converted--
                    ``(A) decreased in the amount of any money received 
                by the taxpayer which was not expended in accordance 
                with the provisions of law (applicable to the year in 
                which such conversion was made) determining the taxable 
                status of the gain or loss upon such conversion, and
                    ``(B) increased in the amount of gain or decreased 
                in the amount of loss to the taxpayer recognized upon 
                such conversion under the law applicable to the year in 
                which such conversion was made.
            ``(2) Conversions described in subsection (a)(2).--In the 
        case of property purchased by the taxpayer in a transaction 
        described in subsection (a)(2) which resulted in the 
        nonrecognition of any part of the gain realized as the result 
        of a compulsory or involuntary conversion, the basis shall be 
        the cost of such property decreased in the amount of the gain 
        not so recognized; and if the property purchased consists of 
        more than 1 piece of property, the basis determined under this 
        sentence shall be allocated to the purchased properties in 
        proportion to their respective costs.
            ``(3) Property held by corporation the stock of which is 
        replacement property.--
                    ``(A) In general.--If the basis of stock in a 
                corporation is decreased under paragraph (2), an amount 
                equal to such decrease shall also be applied to reduce 
                the basis of property held by the corporation at the 
                time the taxpayer acquired control (as defined in 
                subsection (a)(2)(E)) of such corporation.
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                to the extent that it would (but for this subparagraph) 
                require a reduction in the aggregate adjusted bases of 
                the property of the corporation below the taxpayer's 
                adjusted basis of the stock in the corporation 
                (determined immediately after such basis is decreased 
under paragraph (2)).
                    ``(C) Allocation of basis reduction.--The decrease 
                required under subparagraph (A) shall be allocated--
                            ``(i) first to property which is similar or 
                        related in service or use to the converted 
                        property,
                            ``(ii) second to depreciable property (as 
                        defined in section 1017(b)(3)(B)) not described 
                        in clause (i), and
                            ``(iii) then to other property.
                    ``(D) Special rules.--
                            ``(i) Reduction not to exceed adjusted 
                        basis of property.--No reduction in the basis 
                        of any property under this paragraph shall 
                        exceed the adjusted basis of such property 
                        (determined without regard to such reduction).
                            ``(ii) Allocation of reduction among 
                        properties.--If more than 1 property is 
                        described in a clause of subparagraph (C), the 
                        reduction under this paragraph shall be 
                        allocated among such property in proportion to 
                        the adjusted bases of such property (as so 
                        determined).''
    (b) Effective Date.--The amendment made by this section shall apply 
to involuntary conversions occurring after the date of the enactment of 
this Act.

SEC. 1609. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING WINNINGS.

    (a) Repeal of Exemption for Bingo and Keno.--Paragraph (5) of 
section 3402(q) is amended to read as follows:
            ``(5) Exemption for slot machines.--The tax imposed under 
        paragraph (1) shall not apply to winnings from a slot 
        machine.''.
    (b) Threshold Amount.--Paragraph (3) of section 3402(q) is 
amended--
            (1) by striking ``(B) and (C)'' in subparagraph (A) and 
        inserting ``(B), (C), and (D)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(D) Bingo and keno.--Proceeds of more than $5,000 
                from a wager placed in a bingo or keno game.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the 30th day after the date of the enactment of this Act.

SEC. 1610. TREATMENT OF CERTAIN INSURANCE CONTRACTS ON RETIRED LIVES.

    (a) General Rule.--
            (1) Paragraph (2) of section 817(d) (defining variable 
        contract) is amended by striking ``or'' at the end of 
        subparagraph (A), by striking ``and'' at the end of 
        subparagraph (B) and inserting ``or'', and by inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) provides for funding of insurance on retired 
                lives as described in section 807(c)(6), and''.
            (2) Paragraph (3) of section 817(d) is amended by striking 
        ``or'' at the end of subparagraph (A), by striking the period 
        at the end of subparagraph (B) and inserting ``, or'', and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) in the case of funds held under a contract 
                described in paragraph (2)(C), the amounts paid in, or 
                the amounts paid out, reflect the investment return and 
                the market value of the segregated asset account.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 1611. TREATMENT OF CONTRIBUTIONS IN AID OF CONSTRUCTION.

    (a) Treatment of Contributions in Aid of Construction.--
            (1) In general.--Section 118 (relating to contributions to 
        the capital of a corporation) is amended--
                    (A) by redesignating subsection (c) as subsection 
                (e), and
                    (B) by inserting after subsection (b) the following 
                new subsections:
    ``(c) Special Rules for Water and Sewerage Disposal Utilities.--
            ``(1) General rule.--For purposes of this section, the term 
        `contribution to the capital of the taxpayer' includes any 
        amount of money or other property received from any person 
        (whether or not a shareholder) by a regulated public utility 
        which provides water or sewerage disposal services if--
                    ``(A) such amount is a contribution in aid of 
                construction,
                    ``(B) in the case of contribution of property other 
                than water or sewerage disposal facilities, such amount 
                meets the requirements of the expenditure rule of 
                paragraph (2), and
                    ``(C) such amount (or any property acquired or 
                constructed with such amount) is not included in the 
                taxpayer's rate base for ratemaking purposes.
            ``(2) Expenditure rule.--An amount meets the requirements 
        of this paragraph if--
                    ``(A) an amount equal to such amount is expended 
                for the acquisition or construction of tangible 
                property described in section 1231(b)--
                            ``(i) which is the property for which the 
                        contribution was made or is of the same type as 
                        such property, and
                            ``(ii) which is used predominantly in the 
                        trade or business of furnishing water or 
                        sewerage disposal services,
                    ``(B) the expenditure referred to in subparagraph 
                (A) occurs before the end of the second taxable year 
                after the year in which such amount was received, and
                    ``(C) accurate records are kept of the amounts 
                contributed and expenditures made, the expenditures to 
                which contributions are allocated, and the year in 
                which the contributions and expenditures are received 
                and made.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Contribution in aid of construction.--The 
                term `contribution in aid of construction' shall be 
                defined by regulations prescribed by the Secretary, 
                except that such term shall not include amounts paid as 
                service charges for starting or stopping services.
                    ``(B) Predominantly.--The term `predominantly' 
                means 80 percent or more.
                    ``(C) Regulated public utility.--The term 
                `regulated public utility' has the meaning given such 
                term by section 7701(a)(33), except that such term 
                shall not include any utility which is not required to 
                provide water or sewerage disposal services to members 
                of the general public in its service area.
            ``(4) Disallowance of deductions and credits; adjusted 
        basis.--Notwithstanding any other provision of this subtitle, 
        no deduction or credit shall be allowed for, or by reason of, 
        any expenditure which constitutes a contribution in aid of 
        construction to which this subsection applies. The adjusted 
        basis of any property acquired with contributions in aid of 
        construction to which this subsection applies shall be zero.
    ``(d) Statute of Limitations.--If the taxpayer for any taxable year 
treats an amount as a contribution to the capital of the taxpayer 
described in subsection (c), then--
            ``(1) the statutory period for the assessment of any 
        deficiency attributable to any part of such amount shall not 
        expire before the expiration of 3 years from the date the 
        Secretary is notified by the taxpayer (in such manner as the 
        Secretary may prescribe) of--
                    ``(A) the amount of the expenditure referred to in 
                subparagraph (A) of subsection (c)(2),
                    ``(B) the taxpayer's intention not to make the 
                expenditures referred to in such subparagraph, or
                    ``(C) a failure to make such expenditure within the 
                period described in subparagraph (B) of subsection 
                (c)(2), and
            ``(2) such deficiency may be assessed before the expiration 
        of such 3-year period notwithstanding the provisions of any 
        other law or rule of law which would otherwise prevent such 
        assessment.''.
            (2) Conforming amendment.--Section 118(b) is amended by 
        inserting ``except as provided in subsection (c),'' before 
        ``the term''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts received after June 12, 1996.
    (b) Recovery Method and Period for Water Utility Property.--
            (1) Requirement to use straight line method.--Section 
        168(b)(3) is amended by adding at the end the following new 
        subparagraph:
                    ``(F) Water utility property described in 
                subsection (e)(5).''.
            (2) 25-year recovery period.--The table contained in 
        section 168(c)(1) is amended by inserting the following item 
        after the item relating to 20-year property:

    ``Water utility property......................          25 years''.
            (3) Water utility property.--
                    (A) In general.--Section 168(e) is amended by 
                adding at the end the following new paragraph:
            ``(5) Water utility property.--The term `water utility 
        property' means property--
                    ``(A) which is an integral part of the gathering, 
                treatment, or commercial distribution of water, and 
                which, without regard to this paragraph, would be 20-
                year property, and
                    ``(B) any municipal sewer.''.
                    (B) Conforming amendments.--Section 168 is 
                amended--
                            (i) by striking subparagraph (F) of 
                        subsection (e)(3), and
                            (ii) by striking the item relating to 
                        subparagraph (F) in the table in subsection 
                        (g)(3).
            (4) Alternative system.--Clause (iv) of section 
        168(g)(2)(C) is amended by inserting ``or water utility 
        property'' after ``tunnel bore''.
            (5) Effective date.--The amendments made by this subsection 
        shall apply to property placed in service after June 12, 1996, 
        other than property placed in service pursuant to a binding 
        contract in effect before June 10, 1996, and at all times 
        thereafter before the property is placed in service.

          PART II--FINANCIAL ASSET SECURITIZATION INVESTMENTS

SEC. 1621. FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS.

    (a) In General.--Subchapter M of chapter 1 is amended by adding at 
the end the following new part:

       ``PART V--FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS

                              ``Sec. 860H. Taxation of a FASIT; other 
                                        general rules.
                              ``Sec. 860I. Gain recognition on 
                                        contributions to and 
                                        distributions from a FASIT and 
                                        in other cases.
                              ``Sec. 860J. Non-FASIT losses not to 
                                        offset certain FASIT 
                                        inclusions.
                              ``Sec. 860K. Treatment of transfers of 
                                        high-yield interests to 
                                        disqualified holders.
                              ``Sec. 860L. Definitions and other 
                                        special rules.

``SEC. 860H. TAXATION OF A FASIT; OTHER GENERAL RULES.

    ``(a) Taxation of FASIT.--A FASIT as such shall not be subject to 
taxation under this subtitle (and shall not be treated as a trust, 
partnership, corporation, or taxable mortgage pool).
    ``(b) Taxation of Holder of Ownership Interest.--In determining the 
taxable income of the holder of the ownership interest in a FASIT--
            ``(1) all assets, liabilities, and items of income, gain, 
        deduction, loss, and credit of a FASIT shall be treated as 
        assets, liabilities, and such items (as the case may be) of 
        such holder,
            ``(2) the constant yield method (including the rules of 
        section 1272(a)(6)) shall be applied under an accrual method of 
        accounting in determining all interest, acquisition discount, 
        original issue discount, and market discount and all premium 
        deductions or adjustments with respect to all debt instruments 
        of the FASIT,
            ``(3) there shall not be taken into account any item of 
        income, gain, or deduction allocable to a prohibited 
        transaction, and
            ``(4) interest accrued by the FASIT which is exempt from 
        tax imposed by this subtitle shall, when taken into account by 
        such holder, be treated as ordinary income.
For purposes of this subtitle, securities treated as held by such 
holder under paragraph (1) shall be treated as held for investment.
    ``(c) Treatment of Regular Interests.--For purposes of this title--
            ``(1) a regular interest in a FASIT, if not otherwise a 
        debt instrument, shall be treated as a debt instrument,
            ``(2) section 163(e)(5) shall not apply to such an 
        interest, and
            ``(3) amounts includible in gross income with respect to 
        such an interest shall be determined under an accrual method of 
        accounting.

``SEC. 860I. GAIN RECOGNITION ON CONTRIBUTIONS TO AND DISTRIBUTIONS 
              FROM A FASIT AND IN OTHER CASES.

    ``(a) Treatment of Property Acquired by FASIT.--
            ``(1) Property acquired from holder of ownership interest 
        or related person.--If property is sold or contributed to a 
        FASIT by the holder of the ownership interest in such FASIT (or 
        by a related person) gain (if any) shall be recognized to such 
        holder (or person) in an amount equal to the excess (if any) of 
        such property's value under subsection (d) on the date of such 
        sale or contribution over its adjusted basis on such date.
            ``(2) Property acquired other than from holder of ownership 
        interest or related person.--Property which is acquired by a 
        FASIT other than in a transaction to which paragraph (1) 
        applies shall be treated--
                    ``(A) as having been acquired by the holder of the 
                ownership interest in the FASIT for an amount equal to 
                the FASIT's adjusted basis in such property as of the 
                date such property is acquired by the FASIT, and
                    ``(B) as having been sold by such holder to the 
                FASIT at its value under subsection (d) on such date.
    ``(b) Gain Recognition on Property Outside FASIT Which Supports 
Regular Interests.--If property held by the holder of the ownership 
interest in a FASIT (or by any person related to such holder) supports 
any regular interest in such FASIT--
            ``(1) gain shall be recognized to such holder in the same 
        manner as if such holder had sold such property at its value 
        under subsection (d) on the earliest date such property 
        supports such an interest, and
            ``(2) such property shall be treated as held by such FASIT 
        for purposes of this part.
    ``(c) Deferral of Gain Recognition.--The Secretary may prescribe 
regulations which--
            ``(1) provide that gain otherwise recognized under 
        subsection (a) or (b) shall not be recognized before the 
        earliest date on which such property supports any regular 
        interest in such FASIT or any indebtedness of the holder of the 
        ownership interest (or of any person related to such holder), 
        and
            ``(2) provide such adjustments to the other provisions of 
        this part to the extent appropriate in the context of the 
        treatment provided under paragraph (1).
    ``(d) Valuation.--For purposes of this section--
            ``(1) In general.--The value of any property under this 
        subsection shall be--
                    ``(A) in the case of a debt instrument which is not 
                traded on an established securities market, the sum of 
                the present values of the reasonably expected payments 
                under such instrument determined (in the manner 
                provided by regulations prescribed by the Secretary)--
                            ``(i) as of the date of the event resulting 
                        in the gain recognition under this section, and
                            ``(ii) by using a discount rate equal to 
                        120 percent of the applicable Federal rate (as 
                        defined in section 1274(d)), or such other 
                        discount rate specified in such regulations, 
                        compounded semiannually, and
                    ``(B) in the case of any other property, its fair 
                market value.
            ``(2) Special rule for revolving loan accounts.--For 
        purposes of paragraph (1)--
                    ``(A) each extension of credit (other than the 
                accrual of interest) on a revolving loan account shall 
                be treated as a separate debt instrument, and
                    ``(B) payments on such extensions of credit having 
                substantially the same terms shall be applied to such 
                extensions beginning with the earliest such extension.
    ``(e) Special Rules.--
            ``(1) Nonrecognition rules not to apply.--Gain required to 
        be recognized under this section shall be recognized 
        notwithstanding any other provision of this subtitle.
            ``(2) Basis adjustments.--The basis of any property on 
        which gain is recognized under this section shall be increased 
        by the amount of gain so recognized.

``SEC. 860J. NON-FASIT LOSSES NOT TO OFFSET CERTAIN FASIT INCLUSIONS.

    ``(a) In General.--The taxable income of the holder of the 
ownership interest or any high-yield interest in a FASIT for any 
taxable year shall in no event be less than such holder's taxable 
income determined solely with respect to such interests.
    ``(b) Coordination With Section 172.--Any increase in the taxable 
income of any holder of the ownership interest or a high-yield interest 
in a FASIT for any taxable year by reason of subsection (a) shall be 
disregarded--
            ``(1) in determining under section 172 the amount of any 
        net operating loss for such taxable year, and
            ``(2) in determining taxable income for such taxable year 
        for purposes of the 2nd sentence of section 172(b)(2).
    ``(c) Coordination With Minimum Tax.--For purposes of part VI of 
subchapter A of this chapter--
            ``(1) the reference in section 55(b)(2) to taxable income 
        shall be treated as a reference to taxable income determined 
        without regard to this section,
            ``(2) the alternative minimum taxable income of any holder 
        of the ownership interest or a high-yield interest in a FASIT 
        for any taxable year shall in no event be less than such 
        holder's taxable income determined solely with respect to such 
        interests, and
            ``(3) any increase in taxable income under this section 
        shall be disregarded for purposes of computing the alternative 
        tax net operating loss deduction.

``SEC. 860K. TREATMENT OF TRANSFERS OF HIGH-YIELD INTERESTS TO 
              DISQUALIFIED HOLDERS.

    ``(a) General Rule.--In the case of any high-yield interest which 
is held by a disqualified holder--
            ``(1) the gross income of such holder shall not include any 
        income (other than gain) attributable to such interest, and
            ``(2) amounts not includible in the gross income of such 
        holder by reason of paragraph (1) shall be included (at the 
        time otherwise includible under paragraph (1)) in the gross 
        income of the most recent holder of such interest which is not 
        a disqualified holder.
    ``(b) Exceptions.--Rules similar to the rules of paragraphs (4) and 
(7) of section 860E(e) shall apply to the tax imposed by reason of 
subsection (a).
    ``(c) Disqualified Holder.--For purposes of this section, the term 
`disqualified holder' means any holder other than--
            ``(1) an eligible corporation (as defined in section 
        860L(a)(2)), or
            ``(2) a FASIT.
    ``(d) Treatment of Interests Held By Securities Dealers.--
            ``(1) In general.--Subsection (a) shall not apply to any 
        high-yield interest held by a disqualified holder if such 
        holder is a dealer in securities who acquired such interest 
        exclusively for sale to customers in the ordinary course of 
        business (and not for investment).
            ``(2) Change in dealer status.--
                    ``(A) In general.--In the case of a dealer in 
                securities which is not an eligible corporation (as 
                defined in section 860L(a)(2)), if--
                            ``(i) such dealer ceases to be a dealer in 
                        securities, or
                            ``(ii) such dealer commences holding the 
                        high-yield interest for investment,
                there is hereby imposed (in addition to other taxes) an 
                excise tax equal to the product of the highest rate of 
                tax specified in section 11(b)(1) and the income of 
                such dealer attributable to such interest for periods 
                after the date of such cessation or commencement.
                    ``(B) Holding for 31 days or less.--For purposes of 
                subparagraph (A)(ii), a dealer shall not be treated as 
                holding an interest for investment before the 32d day 
                after the date such dealer acquired such interest 
                unless such interest is so held as part of a plan to 
                avoid the purposes of this paragraph.
                    ``(C) Administrative provisions.--The deficiency 
                procedures of subtitle F shall apply to the tax imposed 
                by this paragraph.
    ``(e) Treatment of High-Yield Interests in Pass-Thru Entities.--
            ``(1) In general.--If a pass-thru entity (as defined in 
        section 860E(e)(6)) issues a debt or equity interest--
                    ``(A) which is supported by any regular interest in 
                a FASIT, and
                    ``(B) which has an original yield to maturity which 
                is greater than each of--
                            ``(i) the sum determined under clauses (i) 
                        and (ii) of section 163(i)(1)(B) with respect 
                        to such debt or equity interest, and
                            ``(ii) the yield to maturity to such entity 
                        on such regular interest (determined as of the 
                        date such entity acquired such interest),
        there is hereby imposed on the pass-thru entity a tax (in 
        addition to other taxes) equal to the product of the highest 
        rate of tax specified in section 11(b)(1) and the income of the 
        holder of such debt or equity interest which is properly 
        attributable to such regular interest. For purposes of the 
        preceding sentence, the yield to maturity of any equity 
        interest shall be determined under regulations prescribed by 
        the Secretary.
            ``(2) Exception.--The Secretary may provide that paragraph 
        (1) shall not apply to arrangements not having as a principal 
        purpose the avoidance of the purposes of this subsection.

``SEC. 860L. DEFINITIONS AND OTHER SPECIAL RULES.

    ``(a) FASIT.--
            ``(1) In general.--For purposes of this title, the terms 
        `financial asset securitization investment trust' and `FASIT' 
        mean any entity--
                    ``(A) for which an election to be treated as a 
                FASIT applies for the taxable year,
                    ``(B) all of the interests in which are regular 
                interests or the ownership interest,
                    ``(C) which has only 1 ownership interest and such 
                ownership interest is held directly by an eligible 
                corporation,
                    ``(D) as of the close of the 3rd month beginning 
                after the day of its formation and at all times 
                thereafter, substantially all of the assets of which 
                (including assets treated as held by the entity under 
                section 860I(c)(2)) consist of permitted assets, and
                    ``(E) which is not described in section 851(a).
        A rule similar to the rule of the last sentence of section 
        860D(a) shall apply for purposes of this paragraph.
            ``(2) Eligible corporation.--For purposes of paragraph 
        (1)(C), the term `eligible corporation' means any domestic C 
        corporation other than--
                    ``(A) a corporation which is exempt from, or is not 
                subject to, tax under this chapter,
                    ``(B) an entity described in section 851(a) or 
                856(a),
                    ``(C) a REMIC, and
                    ``(D) an organization to which part I of subchapter 
                T applies.
            ``(3) Election.--An entity (otherwise meeting the 
        requirements of paragraph (1)) may elect to be treated as a 
        FASIT. Except as provided in paragraph (5), such an election 
        shall apply to the taxable year for which made and all 
        subsequent taxable years unless revoked with the consent of the 
        Secretary.
            ``(4) Termination.--If any entity ceases to be a FASIT at 
        any time during the taxable year, such entity shall not be 
        treated as a FASIT for such taxable year or any succeeding 
        taxable year.
            ``(5) Inadvertent terminations, etc.--Rules similar to the 
        rules of section 860D(b)(2)(B) shall apply to inadvertent 
        failures to qualify or remain qualified as a FASIT.
    ``(b) Interests in FASIT.--For purposes of this part--
            ``(1) Regular interest.--
                    ``(A) In general.--The term `regular interest' 
                means any interest which is issued by a FASIT after the 
                startup date with fixed terms and which is designated 
                as a regular interest if--
                            ``(i) such interest unconditionally 
                        entitles the holder to receive a specified 
                        principal amount (or other similar amount),
                            ``(ii) except as otherwise provided by the 
                        Secretary--
                                    ``(I) in the case of a FASIT which 
                                would be treated as a REMIC if an 
                                election under section 860D(b) had been 
                                made, interest payments (or other 
                                similar amounts), if any, with respect 
                                to such interest at or before maturity 
                                meet the requirements applicable under 
                                clause (i) or (ii) of section 
                                860G(a)(1)(B), or
                                    ``(II) in the case of any other 
                                FASIT, interest payments (or other 
                                similar amounts), if any, with respect 
                                to such interest are determined based 
                                on a fixed rate, a current rate which 
                                is reasonably expected to measure 
                                contemporaneous variations in the cost 
                                of newly borrowed funds in the currency 
                                in which the regular interest is 
                                denominated, or any combination of such 
                                rates,
                            ``(iii) such interest does not have a 
                        stated maturity (including options to renew) 
                        greater than 30 years (or such longer period as 
                        may be permitted by regulations),
                            ``(iv) the issue price of such interest 
                        does not exceed 125 percent of its stated 
                        principal amount, and
                            ``(v) the yield to maturity on such 
                        interest is less than the sum determined under 
                        section 163(i)(1)(B) with respect to such 
                        interest.
                An interest shall not fail to meet the requirements of 
                clause (i) merely because the timing (but not the 
                amount) of the principal payments (or other similar 
                amounts) may be contingent on the extent that payments 
                on debt instruments held by the FASIT are made in 
                advance of anticipated payments and on the amount of 
                income from permitted assets.
                    ``(B) High-yield interests.--
                            ``(i) In general.--The term `regular 
                        interest' includes any high-yield interest.
                            ``(ii) High-yield interest.--The term 
                        `high-yield interest' means any interest which 
                        would be described in subparagraph (A) but for 
                        failing to meet the requirements of one or more 
                        of clauses (i), (iv), or (v) thereof.
            ``(2) Ownership interest.--The term `ownership interest' 
        means the interest issued by a FASIT after the startup day 
        which is designated as an ownership interest and which is not a 
        regular interest.
    ``(c) Permitted Assets.--For purposes of this part--
            ``(1) In general.--The term `permitted asset' means--
                    ``(A) cash or cash equivalents,
                    ``(B) any debt instrument (as defined in section 
                1275(a)(1)) under which interest payments (or other 
                similar amounts), if any, at or before maturity meet 
                the requirements applicable under clause (i) or (ii) of 
                section 860G(a)(1)(B),
                    ``(C) foreclosure property,
                    ``(D) any asset--
                            ``(i) which is an interest rate or foreign 
                        currency notional principal contract, letter of 
                        credit, insurance, guarantee against payment 
                        defaults, or other similar instrument permitted 
                        by the Secretary, and
                            ``(ii) which is reasonably required to 
                        guarantee or hedge against the FASIT's risks 
                        associated with being the obligor on interests 
                        issued by the FASIT,
                    ``(E) contract rights to acquire debt instruments 
                described in subparagraph (B) or assets described in 
                subparagraph (D), and
                    ``(F) any regular interest in another FASIT.
            ``(2) Debt issued by holder of ownership interest not 
        permitted asset.--The term `permitted asset' shall not include 
        any debt instrument issued by the holder of the ownership 
        interest in the FASIT or by any person related to such holder 
        or any direct or indirect interest in such a debt instrument. 
        The preceding sentence shall not apply to cash equivalents and 
        to any other investment specified in regulations prescribed by 
        the Secretary.
            ``(3) Foreclosure property.--The term `foreclosure 
        property' means property--
                    ``(A) which would be foreclosure property under 
                section 856(e) (determined without regard to paragraph 
                (5) thereof) if acquired by a real estate investment 
                trust, and
                    ``(B) which is acquired in connection with the 
                default or imminent default of a debt instrument held 
                by the FASIT unless the security interest in such 
                property was created for the principal purpose of 
                permitting the FASIT to invest in such property.
        Solely for purposes of subsection (a)(1), the determination of 
        whether any property is foreclosure property shall be made 
        without regard to section 856(e)(4).
    ``(d) Startup Day.--For purposes of this part--
            ``(1) In general.--The term `startup day' means the date 
        designated in the election under subsection (a)(3) as the 
        startup day of the FASIT. Such day shall be the beginning of 
        the first taxable year of the FASIT.
            ``(2) Treatment of property held on startup day.--All 
        property held (or treated as held under section 860I(c)(2)) by 
        an entity as of the startup day shall be treated as contributed 
        to such entity on such day by the holder of the ownership 
        interest in such entity.
    ``(e) Tax on Prohibited Transactions.--
            ``(1) In general.--There is hereby imposed for each taxable 
        year of a FASIT a tax equal to 100 percent of the net income 
        derived from prohibited transactions. Such tax shall be paid by 
        the holder of the ownership interest in the FASIT.
            ``(2) Prohibited transactions.--For purposes of this part, 
        the term `prohibited transaction' means--
                    ``(A) the receipt of any income derived from any 
                asset that is not a permitted asset,
                    ``(B) except as provided in paragraph (3), the 
                disposition of any permitted asset,
                    ``(C) the receipt of any income derived from any 
                loan originated by the FASIT, and
                    ``(D) the receipt of any income representing a fee 
                or other compensation for services (other than any fee 
                received as compensation for a waiver, amendment, or 
                consent under permitted assets (other than foreclosure 
                property) held by the FASIT).
            ``(3) Exception for income from certain dispositions.--
                    ``(A) In general.--Paragraph (2)(B) shall not apply 
                to a disposition which would not be a prohibited 
                transaction (as defined in section 860F(a)(2)) by 
                reason of--
                            ``(i) clause (ii), (iii), or (iv) of 
                        section 860F(a)(2)(A), or
                            ``(ii) section 860F(a)(5),
                if the FASIT were treated as a REMIC and debt 
                instruments described in subsection (c)(1)(B) were 
                treated as qualified mortgages.
                    ``(B) Substitution of debt instruments; reduction 
                of over-collateralization.--Paragraph (2)(B) shall not 
                apply to--
                            ``(i) the substitution of a debt instrument 
                        described in subsection (c)(1)(B) for another 
                        debt instrument which is a permitted asset, or
                            ``(ii) the distribution of a debt 
                        instrument contributed by the holder of the 
                        ownership interest to such holder in order to 
                        reduce over-collateralization of the FASIT,
                but only if a principal purpose of acquiring the debt 
                instrument which is disposed of was not the recognition 
                of gain (or the reduction of a loss) as a result of an 
                increase in the market value of the debt instrument 
                after its acquisition by the FASIT.
                    ``(C) Liquidation of class of regular interests.--
                Paragraph (2)(B) shall not apply to the complete 
                liquidation of any class of regular interests.
            ``(4) Net income.--For purposes of this subsection, net 
        income shall be determined in accordance with section 
        860F(a)(3).
    ``(f) Coordination With Wash Sales Rules.--Rules similar to the 
rules of section 860F(d) shall apply to the ownership interest in a 
FASIT.
    ``(g) Related Person.--For purposes of this part, a person 
(hereinafter in this subsection referred to as the `related person') is 
related to any person if--
            ``(1) the related person bears a relationship to such 
        person specified in section 267(b) or section 707(b)(1), or
            ``(2) the related person and such person are engaged in 
        trades or businesses under common control (within the meaning 
        of subsections (a) and (b) of section 52).
For purposes of paragraph (1), in applying section 267(b) or 707(b)(1), 
`20 percent' shall be substituted for `50 percent'.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
part, including regulations to prevent the abuse of the purposes of 
this part through transactions which are not primarily related to 
securitization of debt instruments by a FASIT.''.
    (b) Technical Amendments.--
            (1) Paragraph (2) of section 26(b) is amended by striking 
        ``and'' at the end of subparagraph (M), by striking the period 
        at the end of subparagraph (N) and inserting ``, and'', and by 
        adding at the end the following new subparagraph:
                    ``(O) section 860K (relating to treatment of 
                transfers of high-yield interests to disqualified 
                holders).''.
            (2) Paragraph (6) of section 56(g) is amended by striking 
        ``or REMIC'' and inserting ``REMIC, or FASIT''.
            (3) Clause (ii) of section 382(l)(4)(B) is amended by 
        striking ``or a REMIC to which part IV of subchapter M 
        applies'' and inserting ``a REMIC to which part IV of 
        subchapter M applies, or a FASIT to which part V of subchapter 
        M applies''.
            (4) Paragraph (1) of section 582(c) is amended by inserting 
        ``, and any regular or ownership interest in a FASIT,'' after 
        ``REMIC''.
            (5) Subparagraph (E) of section 856(c)(6) is amended by 
        adding at the end the following new sentence: ``The principles 
        of the preceding provisions of this subparagraph shall apply to 
        regular and ownership interests in a FASIT.''.
            (6) Subparagraph (C) of section 1202(e)(4) is amended by 
        striking ``or REMIC'' and inserting ``REMIC, or FASIT''.
            (7) Clause (xi) of section 7701(a)(19)(C) is amended to 
        read as follows:
                            ``(xi) any regular or residual interest in 
                        a REMIC, and any regular or ownership interest 
                        in a FASIT, but only in the proportion which 
                        the assets of such REMIC or FASIT consist of 
                        property described in any of the preceding 
                        clauses of this subparagraph; except that if 95 
                        percent or more of the assets of such REMIC or 
                        FASIT are assets described in clauses (i) 
                        through (x), the entire interest in the REMIC 
                        or FASIT shall qualify.''.
            (8) Subparagraph (A) of section 7701(i)(2) is amended by 
        inserting ``or a FASIT'' after ``a REMIC''.
    (c) Clerical Amendment.--The table of parts for subchapter M of 
chapter 1 is amended by adding at the end the following new item:

                              ``Part V. Financial asset securitization 
                                        investment trusts.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.
    (e) Treatment of Existing Securitization Entities.--
            (1) In general.--In the case of the holder of the ownership 
        interest in a pre-effective date FASIT--
                    (A) gain shall not be recognized under section 
                860L(d)(2) of the Internal Revenue Code of 1986 on 
                property deemed contributed to the FASIT, and
                    (B) gain shall not be recognized under section 860I 
                of such Code on property contributed to such FASIT,
        until such property (or portion thereof) ceases to be properly 
        allocable to a pre-FASIT interest.
            (2) Allocation of property to pre-fasit interest.--For 
        purposes of paragraph (1), property shall be allocated to a 
        pre-FASIT interest in such manner as the Secretary of the 
        Treasury may prescribe, except that all property in a FASIT 
        shall be treated as properly allocable to pre-FASIT interests 
        if the fair market value of all such property does not exceed 
        107 percent of the aggregate principal amount of all 
        outstanding pre-FASIT interests.
            (3) Definitions.--For purposes of this subsection--
                    (A) Pre-effective date fasit.--The term ``pre-
                effective date FASIT'' means any FASIT if the entity 
                (with respect to which the election under section 
                860L(a)(3) of such Code was made) was in existence on 
                June 10, 1996.
                    (B) Pre-fasit interest.--The term ``pre-FASIT 
                interest'' means any interest in the entity referred to 
                in subparagraph (A) which was issued before the startup 
                day (other than any interest held by the holder of the 
                ownership interest in the FASIT).

           PART III--TREATMENT OF INDIVIDUALS WHO EXPATRIATE

SEC. 1631. REVISION OF TAX RULES ON EXPATRIATION.

    (a) In General.--Subpart A of part II of subchapter N of chapter 1 
is amended by inserting after section 877 the following new section:

``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

    ``(a) General Rules.--For purposes of this subtitle--
            ``(1) Mark to market.--Except as provided in subsection 
        (f), all property of a covered expatriate to which this section 
        applies shall be treated as sold on the expatriation date for 
        its fair market value.
            ``(2) Recognition of gain or loss.--In the case of any sale 
        under paragraph (1)--
                    ``(A) notwithstanding any other provision of this 
                title, any gain arising from such sale shall be taken 
                into account for the taxable year of the sale unless 
                such gain is excluded from gross income under part III 
                of subchapter B, and
                    ``(B) any loss arising from such sale shall be 
                taken into account for the taxable year of the sale to 
                the extent otherwise provided by this title, except 
                that section 1091 shall not apply (and section 1092 
                shall apply) to any such loss.
            ``(3) Exclusion for certain gain.--The amount which would 
        (but for this paragraph) be includible in the gross income of 
        any individual by reason of this section shall be reduced (but 
        not below zero) by $600,000. For purposes of this paragraph, 
        allocable expatriation gain taken into account under subsection 
        (f)(2) shall be treated in the same manner as an amount 
        required to be includible in gross income.
            ``(4) Election to continue to be taxed as united states 
        citizen.--
                    ``(A) In general.--If an expatriate elects the 
                application of this paragraph--
                            ``(i) this section (other than this 
                        paragraph) shall not apply to the expatriate, 
                        but
                            ``(ii) the expatriate shall be subject to 
                        tax under this title, with respect to property 
                        to which this section would apply but for such 
                        election, in the same manner as if the 
                        individual were a United States citizen.
                    ``(B) Limitation on amount of estate, gift, and 
                generation-skipping transfer taxes.--The aggregate 
                amount of taxes imposed under subtitle B with respect 
                to any transfer of property by reason of an election 
                under subparagraph (A) shall not exceed the amount of 
                income tax which would be due if the property were sold 
                for its fair market value immediately before the time 
                of the transfer or death (taking into account the rules 
                of paragraph (2)).
                    ``(C) Requirements.--Subparagraph (A) shall not 
                apply to an individual unless the individual--
                            ``(i) provides security for payment of tax 
                        in such form and manner, and in such amount, as 
                        the Secretary may require,
                            ``(ii) consents to the waiver of any right 
                        of the individual under any treaty of the 
                        United States which would preclude assessment 
                        or collection of any tax which may be imposed 
                        by reason of this paragraph, and
                            ``(iii) complies with such other 
                        requirements as the Secretary may prescribe.
                    ``(D) Election.--An election under subparagraph (A) 
                shall apply to all property to which this section would 
                apply but for the election and, once made, shall be 
                irrevocable. Such election shall also apply to property 
                the basis of which is determined in whole or in part by 
                reference to the property with respect to which the 
                election was made.
    ``(b) Election To Defer Tax.--
            ``(1) In general.--If the taxpayer elects the application 
        of this subsection with respect to any property--
                    ``(A) no amount shall be required to be included in 
                gross income under subsection (a)(1) with respect to 
                the gain from such property for the taxable year of the 
                sale, but
                    ``(B) the taxpayer's tax for the taxable year in 
                which such property is disposed of shall be increased 
                by the deferred tax amount with respect to the 
                property.
        Except to the extent provided in regulations, subparagraph (B) 
        shall apply to a disposition whether or not gain or loss is 
        recognized in whole or in part on the disposition.
            ``(2) Deferred tax amount.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `deferred tax amount' means, with respect to 
                any property, an amount equal to the sum of--
                            ``(i) the difference between the amount of 
                        tax paid for the taxable year described in 
                        paragraph (1)(A) and the amount which would 
                        have been paid for such taxable year if the 
                        election under paragraph (1) had not applied to 
                        such property, plus
                            ``(ii) an amount of interest on the amount 
                        described in clause (i) determined for the 
                        period--
                                    ``(I) beginning on the 91st day 
                                after the expatriation date, and
                                    ``(II) ending on the due date for 
                                the taxable year described in paragraph 
                                (1)(B),
                        by using the rates and method applicable under 
                        section 6621 for underpayments of tax for such 
                        period.
                For purposes of clause (ii), the due date is the date 
                prescribed by law (determined without regard to 
                extension) for filing the return of the tax imposed by 
                this chapter for the taxable year.
                    ``(B) Allocation of losses.--For purposes of 
                subparagraph (A), any losses described in subsection 
                (a)(2)(B) shall be allocated ratably among the gains 
                described in subsection (a)(2)(A).
            ``(3) Security.--
                    ``(A) In general.--No election may be made under 
                paragraph (1) with respect to any property unless 
                adequate security is provided with respect to such 
                property.
                    ``(B) Adequate security.--For purposes of 
                subparagraph (A), security with respect to any property 
                shall be treated as adequate security if--
                            ``(i) it is a bond in an amount equal to 
                        the deferred tax amount under paragraph (2)(A) 
                        for the property, or
                            ``(ii) the taxpayer otherwise establishes 
                        to the satisfaction of the Secretary that the 
                        security is adequate.
            ``(4) Waiver of certain rights.--No election may be made 
        under paragraph (1) unless the taxpayer consents to the waiver 
        of any right under any treaty of the United States which would 
        preclude assessment or collection of any tax imposed by reason 
        of this section.
            ``(5) Dispositions.--For purposes of this subsection, a 
        taxpayer making an election under this subsection with respect 
        to any property shall be treated as having disposed of such 
        property--
                    ``(A) immediately before death if such property is 
                held at such time, and
                    ``(B) at any time the security provided with 
                respect to the property fails to meet the requirements 
                of paragraph (3) and the taxpayer does not correct such 
                failure within the time specified by the Secretary.
            ``(6) Elections.--An election under paragraph (1) shall 
        only apply to property described in the election and, once 
        made, is irrevocable. An election may be under paragraph (1) 
        with respect to an interest in a trust with respect to which 
        gain is required to be recognized under subsection (f)(1).
    ``(c) Covered Expatriate.--For purposes of this section--
            ``(1) In general.--The term `covered expatriate' means an 
        expatriate--
                    ``(A) whose average annual net income tax (as 
                defined in section 38(c)(1)) for the period of 5 
                taxable years ending before the expatriation date is 
                greater than $100,000, or
                    ``(B) whose net worth as of such date is $500,000 
                or more.
        If the expatriation date is after 1996, such $100,000 and 
        $500,000 amounts shall be increased by an amount equal to such 
        dollar amount multiplied by the cost-of-living adjustment 
        determined under section 1(f)(3) for such calendar year by 
        substituting `1995' for `1992' in subparagraph (B) thereof. Any 
        increase under the preceding sentence shall be rounded to the 
        nearest multiple of $1,000.
            ``(2) Exceptions.--An individual shall not be treated as a 
        covered expatriate if--
                    ``(A) the individual--
                            ``(i) became at birth a citizen of the 
                        United States and a citizen of another country 
                        and, as of the expatriation date, continues to 
                        be a citizen of, and is taxed as a resident of, 
                        such other country, and
                            ``(ii) has been a resident of the United 
                        States (as defined in section 
                        7701(b)(1)(A)(ii)) for not more than 8 taxable 
                        years during the 15-taxable year period ending 
                        with the taxable year during which the 
                        expatriation date occurs, or
                    ``(B)(i) the individual's relinquishment of United 
                States citizenship occurs before such individual 
                attains age 18\1/2\, and
                    ``(ii) the individual has been a resident of the 
                United States (as so defined) for not more than 5 
                taxable years before the date of relinquishment.
    ``(d) Property to Which Section Applies.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided by the 
        Secretary, this section shall apply to--
                    ``(A) any interest in property held by a covered 
                expatriate on the expatriation date the gain from which 
                would be includible in the gross income of the 
                expatriate if such interest had been sold for its fair 
                market value on such date in a transaction in which 
                gain is recognized in whole or in part, and
                    ``(B) any other interest in a trust to which 
                subsection (f) applies.
            ``(2) Exceptions.--This section shall not apply to the 
        following property:
                    ``(A) United states real property interests.--Any 
                United States real property interest (as defined in 
                section 897(c)(1)), other than stock of a United States 
                real property holding corporation which does not, on 
                the expatriation date, meet the requirements of section 
                897(c)(2).
                    ``(B) Interest in certain retirement plans.--
                            ``(i) In general.--Any interest in a 
                        qualified retirement plan (as defined in 
                        section 4974(c)), other than any interest 
                        attributable to contributions which are in 
                        excess of any limitation or which violate any 
                        condition for tax-favored treatment.
                            ``(ii) Foreign pension plans.--
                                    ``(I) In general.--Under 
                                regulations prescribed by the 
                                Secretary, interests in foreign pension 
                                plans or similar retirement 
                                arrangements or programs.
                                    ``(II) Limitation.--The value of 
                                property which is treated as not sold 
                                by reason of this subparagraph shall 
                                not exceed $500,000.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Expatriate.--The term `expatriate' means--
                    ``(A) any United States citizen who relinquishes 
                his citizenship, or
                    ``(B) any long-term resident of the United States 
                who--
                            ``(i) ceases to be a lawful permanent 
                        resident of the United States (within the 
                        meaning of section 7701(b)(6)), or
                            ``(ii) commences to be treated as a 
                        resident of a foreign country under the 
                        provisions of a tax treaty between the United 
                        States and the foreign country and who does not 
                        waive the benefits of such treaty applicable to 
                        residents of the foreign country.
            ``(2) Expatriation date.--The term `expatriation date' 
        means--
                    ``(A) the date an individual relinquishes United 
                States citizenship, or
                    ``(B) in the case of a long-term resident of the 
                United States, the date of the event described in 
                clause (i) or (ii) of paragraph (1)(B).
            ``(3) Relinquishment of citizenship.--A citizen shall be 
        treated as relinquishing his United States citizenship on the 
        earliest of--
                    ``(A) the date the individual renounces his United 
                States nationality before a diplomatic or consular 
                officer of the United States pursuant to paragraph (5) 
                of section 349(a) of the Immigration and Nationality 
                Act (8 U.S.C. 1481(a)(5)),
                    ``(B) the date the individual furnishes to the 
                United States Department of State a signed statement of 
                voluntary relinquishment of United States nationality 
                confirming the performance of an act of expatriation 
                specified in paragraph (1), (2), (3), or (4) of section 
                349(a) of the Immigration and Nationality Act (8 U.S.C. 
                1481(a)(1)-(4)),
                    ``(C) the date the United States Department of 
                State issues to the individual a certificate of loss of 
                nationality, or
                    ``(D) the date a court of the United States cancels 
                a naturalized citizen's certificate of naturalization.
        Subparagraph (A) or (B) shall not apply to any individual 
        unless the renunciation or voluntary relinquishment is 
        subsequently approved by the issuance to the individual of a 
        certificate of loss of nationality by the United States 
        Department of State.
            ``(4) Long-term resident.--
                    ``(A) In general.--The term `long-term resident' 
                means any individual (other than a citizen of the 
                United States) who is a lawful permanent resident of 
                the United States in at least 8 taxable years during 
                the period of 15 taxable years ending with the taxable 
                year during which the expatriation date occurs. For 
                purposes of the preceding sentence, an individual shall 
                not be treated as a lawful permanent resident for any 
                taxable year if such individual is treated as a 
                resident of a foreign country for the taxable year 
                under the provisions of a tax treaty between the United 
                States and the foreign country and does not waive the 
                benefits of such treaty applicable to residents of the 
                foreign country.
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), there shall not be taken into account--
                            ``(i) any taxable year during which any 
                        prior sale is treated under subsection (a)(1) 
                        as occurring, or
                            ``(ii) any taxable year prior to the 
                        taxable year referred to in clause (i).
    ``(f) Special Rules Applicable to Beneficiaries' Interests in 
Trust.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        an individual is determined under paragraph (3) to hold an 
        interest in a trust--
                    ``(A) the individual shall not be treated as having 
                sold such interest,
                    ``(B) such interest shall be treated as a separate 
                share in the trust, and
                    ``(C)(i) such separate share shall be treated as a 
                separate trust consisting of the assets allocable to 
                such share,
                    ``(ii) the separate trust shall be treated as 
                having sold its assets immediately before the 
                expatriation date for their fair market value and as 
                having distributed all of its assets to the individual 
                as of such time, and
                    ``(iii) the individual shall be treated as having 
                recontributed the assets to the separate trust.
        Subsection (a)(2) shall apply to any income, gain, or loss of 
        the individual arising from a distribution described in 
        subparagraph (C)(ii).
            ``(2) Special rules for interests in qualified trusts.--
                    ``(A) In general.--If the trust interest described 
                in paragraph (1) is an interest in a qualified trust--
                            ``(i) paragraph (1) and subsection (a) 
                        shall not apply, and
                            ``(ii) in addition to any other tax imposed 
                        by this title, there is hereby imposed on each 
                        distribution with respect to such interest a 
                        tax in the amount determined under subparagraph 
                        (B).
                    ``(B) Amount of tax.--The amount of tax under 
                subparagraph (A)(ii) shall be equal to the lesser of--
                            ``(i) the highest rate of tax imposed by 
                        section 1(e) for the taxable year in which the 
                        expatriation date occurs, multiplied by the 
                        amount of the distribution, or
                            ``(ii) the balance in the deferred tax 
                        account immediately before the distribution 
                        determined without regard to any increases 
                        under subparagraph (C)(ii) after the 30th day 
                        preceding the distribution.
                    ``(C) Deferred tax account.--For purposes of 
                subparagraph (B)(ii)--
                            ``(i) Opening balance.--The opening balance 
                        in a deferred tax account with respect to any 
                        trust interest is an amount equal to the tax 
                        which would have been imposed on the allocable 
                        expatriation gain with respect to the trust 
                        interest if such gain had been included in 
                        gross income under subsection (a).
                            ``(ii) Increase for interest.--The balance 
                        in the deferred tax account shall be increased 
                        by the amount of interest determined (on the 
                        balance in the account at the time the interest 
                        accrues), for periods after the 90th day after 
                        the expatriation date, by using the rates and 
                        method applicable under section 6621 for 
                        underpayments of tax for such periods.
                            ``(iii) Decrease for taxes previously 
                        paid.--The balance in the tax deferred account 
                        shall be reduced--
                                    ``(I) by the amount of taxes 
                                imposed by subparagraph (A) on any 
                                distribution to the person holding the 
                                trust interest, and
                                    ``(II) in the case of a person 
                                holding a nonvested interest, to the 
                                extent provided in regulations, by the 
                                amount of taxes imposed by subparagraph 
                                (A) on distributions from the trust 
                                with respect to nonvested interests not 
                                held by such person.
                    ``(D) Allocable expatriation gain.--For purposes of 
                this paragraph, the allocable expatriation gain with 
                respect to any beneficiary's interest in a trust is the 
                amount of gain which would be allocable to such 
                beneficiary's vested and nonvested interests in the 
                trust if the beneficiary held directly all assets 
                allocable to such interests.
                    ``(E) Tax deducted and withheld.--
                            ``(i) In general.--The tax imposed by 
                        subparagraph (A)(ii) shall be deducted and 
                        withheld by the trustees from the distribution 
                        to which it relates.
                            ``(ii) Exception where failure to waive 
                        treaty rights.--If an amount may not be 
                        deducted and withheld under clause (i) by 
                        reason of the distributee failing to waive any 
                        treaty right with respect to such 
                        distribution--
                                    ``(I) the tax imposed by 
                                subparagraph (A)(ii) shall be imposed 
                                on the trust and each trustee shall be 
                                personally liable for the amount of 
                                such tax, and
                                    ``(II) any other beneficiary of the 
                                trust shall be entitled to recover from 
                                the distributee the amount of such tax 
                                imposed on the other beneficiary.
                    ``(F) Disposition.--If a trust ceases to be a 
                qualified trust at any time, a covered expatriate 
                disposes of an interest in a qualified trust, or a 
                covered expatriate holding an interest in a qualified 
                trust dies, then, in lieu of the tax imposed by 
                subparagraph (A)(ii), there is hereby imposed a tax 
                equal to the lesser of--
                            ``(i) the tax determined under paragraph 
                        (1) as if the expatriation date were the date 
                        of such cessation, disposition, or death, 
                        whichever is applicable, or
                            ``(ii) the balance in the tax deferred 
                        account immediately before such date.
                Such tax shall be imposed on the trust and each trustee 
                shall be personally liable for the amount of such tax 
                and any other beneficiary of the trust shall be 
                entitled to recover from the covered expatriate or the 
                estate the amount of such tax imposed on the other 
                beneficiary.
                    ``(G) Definitions and special rule.--For purposes 
                of this paragraph--
                            ``(i) Qualified trust.--The term `qualified 
                        trust' means a trust--
                                    ``(I) which is organized under, and 
                                governed by, the laws of the United 
                                States or a State, and
                                    ``(II) with respect to which the 
                                trust instrument requires that at least 
                                1 trustee of the trust be an individual 
                                citizen of the United States or a 
                                domestic corporation.
                            ``(ii) Vested interest.--The term `vested 
                        interest' means any interest which, as of the 
                        expatriation date, is vested in the 
                        beneficiary.
                            ``(iii) Nonvested interest.--The term 
                        `nonvested interest' means, with respect to any 
                        beneficiary, any interest in a trust which is 
                        not a vested interest. Such interest shall be 
                        determined by assuming the maximum exercise of 
                        discretion in favor of the beneficiary and the 
                        occurrence of all contingencies in favor of the 
                        beneficiary.
                            ``(iv) Adjustments.--The Secretary may 
                        provide for such adjustments to the bases of 
                        assets in a trust or a deferred tax account, 
                        and the timing of such adjustments, in order to 
                        ensure that gain is taxed only once.
            ``(3) Determination of beneficiaries' interest in trust.--
                    ``(A) Determinations under paragraph (1).--For 
                purposes of paragraph (1), a beneficiary's interest in 
                a trust shall be based upon all relevant facts and 
                circumstances, including the terms of the trust 
                instrument and any letter of wishes or similar 
                document, historical patterns of trust distributions, 
                and the existence of and functions performed by a trust 
                protector or any similar advisor.
                    ``(B) Other determinations.--For purposes of this 
                section--
                            ``(i) Constructive ownership.--If a 
                        beneficiary of a trust is a corporation, 
                        partnership, trust, or estate, the 
                        shareholders, partners, or beneficiaries shall 
                        be deemed to be the trust beneficiaries for 
                        purposes of this section.
                            ``(ii) Taxpayer return position.--A 
                        taxpayer shall clearly indicate on its income 
                        tax return--
                                    ``(I) the methodology used to 
                                determine that taxpayer's trust 
                                interest under this section, and
                                    ``(II) if the taxpayer knows (or 
                                has reason to know) that any other 
                                beneficiary of such trust is using a 
                                different methodology to determine such 
                                beneficiary's trust interest under this 
                                section.
    ``(g) Termination of Deferrals, Etc.--On the date any property held 
by an individual is treated as sold under subsection (a), 
notwithstanding any other provision of this title--
            ``(1) any period during which recognition of income or gain 
        is deferred shall terminate, and
            ``(2) any extension of time for payment of tax shall cease 
        to apply and the unpaid portion of such tax shall be due and 
        payable at the time and in the manner prescribed by the 
        Secretary.
    ``(h) Imposition of Tentative Tax.--
            ``(1) In general.--If an individual is required to include 
        any amount in gross income under subsection (a) for any taxable 
        year, there is hereby imposed, immediately before the 
        expatriation date, a tax in an amount equal to the amount of 
        tax which would be imposed if the taxable year were a short 
        taxable year ending on the expatriation date.
            ``(2) Due date.--The due date for any tax imposed by 
        paragraph (1) shall be the 90th day after the expatriation 
        date.
            ``(3) Treatment of tax.--Any tax paid under paragraph (1) 
        shall be treated as a payment of the tax imposed by this 
        chapter for the taxable year to which subsection (a) applies.
            ``(4) Deferral of tax.--The provisions of subsection (b) 
        shall apply to the tax imposed by this subsection to the extent 
        attributable to gain includible in gross income by reason of 
        this section.
    ``(i) Coordination With Estate and Gift Taxes.--If subsection (a) 
applies to property held by an individual for any taxable year and--
            ``(1) such property is includible in the gross estate of 
        such individual solely by reason of section 2107, or
            ``(2) section 2501 applies to a transfer of such property 
        by such individual solely by reason of section 2501(a)(3),
then there shall be allowed as a credit against the additional tax 
imposed by section 2101 or 2501, whichever is applicable, solely by 
reason of section 2107 or 2501(a)(3) an amount equal to the increase in 
the tax imposed by this chapter for such taxable year by reason of this 
section.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) to prevent double taxation by ensuring that--
                    ``(A) appropriate adjustments are made to basis to 
                reflect gain recognized by reason of subsection (a) and 
                the exclusion provided by subsection (a)(3), and
                    ``(B) any gain by reason of a deemed sale under 
                subsection (a) of an interest in a corporation, 
                partnership, trust, or estate is reduced to reflect 
                that portion of such gain which is attributable to an 
                interest in a trust which a shareholder, partner, or 
                beneficiary is treated as holding directly under 
                subsection (f)(3)(B)(i), and
            ``(2) which provide for the proper allocation of the 
        exclusion under subsection (a)(3) to property to which this 
        section applies.
    ``(k) Cross Reference.--

                                ``For income tax treatment of 
individuals who terminate United States citizenship, see section 
7701(a)(47).''.
    (b) Inclusion in Income of Gifts and Inheritances From Covered 
Expatriates.--Section 102 (relating to gifts, etc. not included in 
gross income) is amended by adding at the end the following new 
subsection:
    ``(d) Gifts and Inheritances From Covered Expatriates.--Subsection 
(a) shall not exclude from gross income the value of any property 
acquired by gift, bequest, devise, or inheritance from a covered 
expatriate after the expatriation date. For purposes of this 
subsection, any term used in this subsection which is also used in 
section 877A shall have the same meaning as when used in section 
877A.''.
    (c) Definition of Termination of United States Citizenship.--
Section 7701(a) is amended by adding at the end the following new 
paragraph:
            ``(47) Termination of united states citizenship.--An 
        individual shall not cease to be treated as a United States 
        citizen before the date on which the individual's citizenship 
        is treated as relinquished under section 877A(e)(3).''.
    (d) Conforming Amendments.--
            (1) Section 877 is amended by adding at the end the 
        following new subsection:
    ``(f) Application.--This section shall not apply to any individual 
who relinquishes (within the meaning of section 877A(e)(3)) United 
States citizenship on or after February 6, 1995.''.
            (2) Section 2107(c) is amended by adding at the end the 
        following new paragraph:
            ``(3) Cross reference.--For credit against the tax imposed 
        by subsection (a) for expatriation tax, see section 877A(i).''.
            (3) Section 2501(a)(3) is amended by adding at the end the 
        following new flush sentence:
        ``For credit against the tax imposed under this section by 
        reason of this paragraph, see section 877A(i).''.
            (4) Paragraph (10) of section 7701(b) is amended by adding 
        at the end the following new sentence: ``This paragraph shall 
        not apply to any long-term resident of the United States who is 
        an expatriate (as defined in section 877A(e)(1)).''.
    (e) Clerical Amendment.--The table of sections for subpart A of 
part II of subchapter N of chapter 1 is amended by inserting after the 
item relating to section 877 the following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.
    (f) Effective Date.--
            (1) In general.--Except as provided in this subsection, the 
        amendments made by this section shall apply to expatriates 
        (within the meaning of section 877A(e) of the Internal Revenue 
        Code of 1986, as added by this section) whose expatriation date 
        (as so defined) occurs on or after February 6, 1995.
            (2) Gifts and bequests.--Section 102(d) of the Internal 
        Revenue Code of 1986 (as added by subsection (b)) shall apply 
        to amounts received from expatriates (as so defined) whose 
        expatriation date (as so defined) occurs on and after February 
        6, 1995.
            (3) Special rules relating to certain acts occurring before 
        february 6, 1995.--In the case of an individual who took an act 
        of expatriation specified in paragraph (1), (2), (3), or (4) of 
        section 349(a) of the Immigration and Nationality Act (8 U.S.C. 
        1481(a) (1)-(4)) before February 6, 1995, but whose 
        expatriation date (as so defined) occurs after February 6, 
        1995--
                    (A) the amendment made by subsection (c) shall not 
                apply,
                    (B) the amendment made by subsection (d)(1) shall 
                not apply for any period prior to the expatriation 
                date, and
                    (C) the other amendments made by this section shall 
                apply as of the expatriation date.
            (4) Due date for tentative tax.--The due date under section 
        877A(h)(2) of such Code shall in no event occur before the 90th 
        day after the date of the enactment of this Act.

SEC. 1632. INFORMATION ON INDIVIDUALS EXPATRIATING.

    (a) In General.--Subpart A of part III of subchapter A of chapter 
61 is amended by inserting after section 6039E the following new 
section:

``SEC. 6039F. INFORMATION ON INDIVIDUALS EXPATRIATING.

    ``(a) Requirement.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any expatriate (within the meaning of section 877A(e)(1)) 
        shall provide a statement which includes the information 
        described in subsection (b).
            ``(2) Timing.--
                    ``(A) Citizens.--In the case of an expatriate 
                described in section 877(e)(1)(A), such statement shall 
                be--
                            ``(i) provided not later than the 
                        expatriation date (within the meaning of 
                        section 877A(e)(2)), and
                            ``(ii) provided to the person or court 
                        referred to in section 877A(e)(3).
                    ``(B) Noncitizens.--In the case of an expatriate 
                described in section 877A(e)(1)(B), such statement 
                shall be provided to the Secretary with the return of 
                tax imposed by chapter 1 for the taxable year during 
                which the event described in such section occurs.
    ``(b) Information To Be Provided.--Information required under 
subsection (a) shall include--
            ``(1) the taxpayer's TIN,
            ``(2) the mailing address of such individual's principal 
        foreign residence,
            ``(3) the foreign country in which such individual is 
        residing,
            ``(4) the foreign country of which such individual is a 
        citizen,
            ``(5) in the case of an individual having a net worth of at 
        least the dollar amount applicable under section 877A(c)(1)(B), 
        information detailing the assets and liabilities of such 
        individual, and
            ``(6) such other information as the Secretary may 
        prescribe.
    ``(c) Penalty.--Any individual failing to provide a statement 
required under subsection (a) shall be subject to a penalty for each 
year during any portion of which such failure continues in an amount 
equal to the greater of--
            ``(1) 5 percent of the additional tax required to be paid 
        under section 877A for such year, or
            ``(2) $1,000,
unless it is shown that such failure is due to reasonable cause and not 
to willful neglect.
    ``(d) Information To Be Provided to Secretary.--Notwithstanding any 
other provision of law--
            ``(1) any Federal agency or court which collects (or is 
        required to collect) the statement under subsection (a) shall 
        provide to the Secretary--
                    ``(A) a copy of any such statement, and
                    ``(B) the name (and any other identifying 
                information) of any individual refusing to comply with 
                the provisions of subsection (a),
            ``(2) the Secretary of State shall provide to the Secretary 
        a copy of each certificate as to the loss of American 
        nationality under section 358 of the Immigration and 
        Nationality Act which is approved by the Secretary of State, 
        and
            ``(3) the Federal agency primarily responsible for 
        administering the immigration laws shall provide to the 
        Secretary the name of each lawful permanent resident of the 
        United States (within the meaning of section 7701(b)(6)) whose 
        status as such has been revoked or has been administratively or 
        judicially determined to have been abandoned.
Notwithstanding any other provision of law, not later than 30 days 
after the close of each calendar quarter, the Secretary shall publish 
in the Federal Register the name of each individual relinquishing 
United States citizenship (within the meaning of section 877A(e)(3)) 
with respect to whom the Secretary receives information under the 
preceding sentence during such quarter.
    ``(e) Exemption.--The Secretary may by regulations exempt any class 
of individuals from the requirements of this section if the Secretary 
determines that applying this section to such individuals is not 
necessary to carry out the purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by inserting after the item relating to section 6039E the 
following new item:

``Sec. 6039F. Information on individuals expatriating.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to individuals to whom section 877A of the Internal Revenue Code 
of 1986 applies and whose expatriation date (as defined in section 
877A(e)(2)) occurs on or after February 6, 1995, except that no 
statement shall be required by such amendments before the 90th day 
after the date of the enactment of this Act.

SEC. 1633. REPORT ON TAX COMPLIANCE BY UNITED STATES CITIZENS AND 
              RESIDENTS LIVING ABROAD.

    Not later than 90 days after the date of the enactment of this Act, 
the Secretary of the Treasury shall prepare and submit to the Committee 
on Ways and Means of the House of Representatives and the Committee on 
Finance of the Senate a report--
            (1) describing the compliance with subtitle A of the 
        Internal Revenue Code of 1986 by citizens and lawful permanent 
        residents of the United States (within the meaning of section 
        7701(b)(6) of such Code) residing outside the United States, 
        and
            (2) recommending measures to improve such compliance 
        (including improved coordination between executive branch 
        agencies).

                   Subtitle F--Technical Corrections

SEC. 1701. COORDINATION WITH OTHER SUBTITLES.

    For purposes of applying the amendments made by any subtitle of 
this title other than this subtitle, the provisions of this subtitle 
shall be treated as having been enacted immediately before the 
provisions of such other subtitles.

SEC. 1702. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 1990.

    (a) Amendments Related to Subtitle A.--
            (1) Subparagraph (B) of section 59(j)(3) is amended by 
        striking ``section 1(i)(3)(B)'' and inserting ``section 
        1(g)(3)(B)''.
            (2) Clause (i) of section 151(d)(3)(C) is amended by 
        striking ``joint of a return'' and inserting ``joint return''.
    (b) Amendments Related to Subtitle B.--
            (1) Paragraph (1) of section 11212(e) of the Revenue 
        Reconciliation Act of 1990 is amended by striking ``Paragraph 
        (1) of section 6724(d)'' and inserting ``Subparagraph (B) of 
        section 6724(d)(1)''.
            (2)(A) Subparagraph (B) of section 4093(c)(2), as in effect 
        before the amendments made by the Revenue Reconciliation Act of 
        1993, is amended by inserting before the period ``unless such 
        fuel is sold for exclusive use by a State or any political 
        subdivision thereof''.
            (B) Paragraph (4) of section 6427(l), as in effect before 
        the amendments made by the Revenue Reconciliation Act of 1993, 
        is amended by inserting before the period ``unless such fuel 
        was used by a State or any political subdivision thereof''.
            (3) Paragraph (1) of section 6416(b) is amended by striking 
        ``chapter 32 or by section 4051'' and inserting ``chapter 31 or 
        32''.
            (4) Section 7012 is amended--
                    (A) by striking ``production or importation of 
                gasoline'' in paragraph (3) and inserting ``taxes on 
                gasoline and diesel fuel'', and
                    (B) by striking paragraph (4) and redesignating 
                paragraphs (5) and (6) as paragraphs (4) and (5), 
                respectively.
            (5) Subsection (c) of section 5041 is amended by striking 
        paragraph (6) and by inserting the following new paragraphs:
            ``(6) Credit for transferee in bond.--If--
                    ``(A) wine produced by any person would be eligible 
                for any credit under paragraph (1) if removed by such 
                person during the calendar year,
                    ``(B) wine produced by such person is removed 
                during such calendar year by any other person 
                (hereafter in this paragraph referred to as the 
                `transferee') to whom such wine was transferred in bond 
                and who is liable for the tax imposed by this section 
                with respect to such wine, and
                    ``(C) such producer holds title to such wine at the 
                time of its removal and provides to the transferee such 
                information as is necessary to properly determine the 
                transferee's credit under this paragraph,
        then, the transferee (and not the producer) shall be allowed 
        the credit under paragraph (1) which would be allowed to the 
        producer if the wine removed by the transferee had been removed 
        by the producer on that date.
            ``(7) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including regulations--
                    ``(A) to prevent the credit provided in this 
                subsection from benefiting any person who produces more 
                than 250,000 wine gallons of wine during a calendar 
                year, and
                    ``(B) to assure proper reduction of such credit for 
                persons producing more than 150,000 wine gallons of 
                wine during a calendar year.''.
            (6) Paragraph (3) of section 5061(b) is amended to read as 
        follows:
            ``(3) section 5041(f),''.
            (7) Section 5354 is amended by inserting ``(taking into 
        account the appropriate amount of credit with respect to such 
        wine under section 5041(c))'' after ``any one time''.
    (c) Amendments Related to Subtitle C.--
            (1) Paragraph (4) of section 56(g) is amended by 
        redesignating subparagraphs (I) and (J) as subparagraphs (H) 
        and (I), respectively.
            (2) Subparagraph (B) of section 6724(d)(1) is amended--
                    (A) by striking ``or'' at the end of clause (xii), 
                and
                    (B) by striking the period at the end of clause 
                (xiii) and inserting ``, or''.
            (3) Subsection (g) of section 6302 is amended by inserting 
        ``, 22,'' after ``chapters 21''.
            (4) The earnings and profits of any insurance company to 
        which section 11305(c)(3) of the Revenue Reconciliation Act of 
        1990 applies shall be determined without regard to any 
        deduction allowed under such section; except that, for purposes 
        of applying sections 56 and 902, and subpart F of part III of 
        subchapter N of chapter 1 of the Internal Revenue Code of 1986, 
        such deduction shall be taken into account.
            (5) Subparagraph (D) of section 6038A(e)(4) is amended--
                    (A) by striking ``any transaction to which the 
                summons relates'' and inserting ``any affected taxable 
                year'', and
                    (B) by adding at the end thereof the following new 
                sentence: ``For purposes of this subparagraph, the term 
                `affected taxable year' means any taxable year if the 
                determination of the amount of tax imposed for such 
                taxable year is affected by the treatment of the 
                transaction to which the summons relates.''.
            (6) Subparagraph (A) of section 6621(c)(2) is amended by 
        adding at the end thereof the following new flush sentence:
                ``The preceding sentence shall be applied without 
                regard to any such letter or notice which is withdrawn 
                by the Secretary.''.
            (7) Clause (i) of section 6621(c)(2)(B) is amended by 
        striking ``this subtitle'' and inserting ``this title''.
    (d) Amendments Related to Subtitle D.--
            (1) Notwithstanding section 11402(c) of the Revenue 
        Reconciliation Act of 1990, the amendment made by section 
        11402(b)(1) of such Act shall apply to taxable years ending 
        after December 31, 1989.
            (2) Clause (ii) of section 143(m)(4)(C) is amended--
                    (A) by striking ``any month of the 10-year period'' 
                and inserting ``any year of the 4-year period'',
                    (B) by striking ``succeeding months'' and inserting 
                ``succeeding years'', and
                    (C) by striking ``over the remainder of such period 
                (or, if lesser, 5 years)'' and inserting ``to zero over 
                the succeeding 5 years''.
    (e) Amendments Related to Subtitle E.--
            (1)(A) Clause (ii) of section 56(d)(1)(B) is amended to 
        read as follows:
                            ``(ii) appropriate adjustments in the 
                        application of section 172(b)(2) shall be made 
                        to take into account the limitation of 
                        subparagraph (A).''.
            (B) For purposes of applying sections 56(g)(1) and 56(g)(3) 
        of the Internal Revenue Code of 1986 with respect to taxable 
        years beginning in 1991 and 1992, the reference in such 
        sections to the alternative tax net operating loss deduction 
        shall be treated as including a reference to the deduction 
        under section 56(h) of such Code as in effect before the 
        amendments made by section 1915 of the Energy Policy Act of 
        1992.
            (2) Clause (i) of section 613A(c)(3)(A) is amended by 
        striking ``the table contained in''.
            (3) Section 6501 is amended--
                    (A) by striking subsection (m) (relating to 
                deficiency attributable to election under section 44B) 
                and by redesignating subsections (n) and (o) as 
                subsections (m) and (n), respectively, and
                    (B) by striking ``section 40(f) or 51(j)'' in 
                subsection (m) (as redesignated by subparagraph (A)) 
                and inserting ``section 40(f), 43, or 51(j)''.
            (4) Subparagraph (C) of section 38(c)(2) (as in effect on 
        the day before the date of the enactment of the Revenue 
        Reconciliation Act of 1990) is amended by inserting before the 
        period at the end of the first sentence the following: ``and 
        without regard to the deduction under section 56(h)''.
            (5) The amendment made by section 1913(b)(2)(C)(i) of the 
        Energy Policy Act of 1992 shall apply to taxable years 
        beginning after December 31, 1990.
    (f) Amendments Related to Subtitle F.--
            (1)(A) Section 2701(a)(3) is amended by adding at the end 
        thereof the following new subparagraph:
                    ``(C) Valuation of qualified payments where no 
                liquidation, etc. rights.--In the case of an applicable 
                retained interest which is described in subparagraph 
                (B)(i) but not subparagraph (B)(ii), the value of the 
                distribution right shall be determined without regard 
                to this section.''.
            (B) Section 2701(a)(3)(B) is amended by inserting 
        ``certain'' before ``qualified'' in the heading thereof.
            (C) Sections 2701 (d)(1) and (d)(4) are each amended by 
        striking ``subsection (a)(3)(B)'' and inserting ``subsection 
        (a)(3) (B) or (C)''.
            (2) Clause (i) of section 2701(a)(4)(B) is amended by 
        inserting ``(or, to the extent provided in regulations, the 
        rights as to either income or capital)'' after ``income and 
        capital''.
            (3)(A) Section 2701(e)(3) is amended--
                    (i) by striking subparagraph (B), and
                    (ii) by striking so much of paragraph (3) as 
                precedes ``shall be treated as holding'' and inserting:
            ``(3) Attribution of indirect holdings and transfers.--An 
        individual''.
            (B) Section 2704(c)(3) is amended by striking ``section 
        2701(e)(3)(A)'' and inserting ``section 2701(e)(3)''.
            (4) Clause (i) of section 2701(c)(1)(B) is amended to read 
        as follows:
                            ``(i) a right to distributions with respect 
                        to any interest which is junior to the rights 
                        of the transferred interest,''.
            (5)(A) Clause (i) of section 2701(c)(3)(C) is amended to 
        read as follows:
                            ``(i) In general.--Payments under any 
                        interest held by a transferor which (without 
                        regard to this subparagraph) are qualified 
                        payments shall be treated as qualified payments 
                        unless the transferor elects not to treat such 
                        payments as qualified payments. Payments 
                        described in the preceding sentence which are 
                        held by an applicable family member shall be 
                        treated as qualified payments only if such 
                        member elects to treat such payments as 
                        qualified payments.''.
            (B) The first sentence of section 2701(c)(3)(C)(ii) is 
        amended to read as follows: ``A transferor or applicable family 
        member holding any distribution right which (without regard to 
        this subparagraph) is not a qualified payment may elect to 
        treat such right as a qualified payment, to be paid in the 
        amounts and at the times specified in such election.''.
            (C) The time for making an election under the second 
        sentence of section 2701(c)(3)(C)(i) of the Internal Revenue 
        Code of 1986 (as amended by subparagraph (A)) shall not expire 
        before the due date (including extensions) for filing the 
        transferor's return of the tax imposed by section 2501 of such 
        Code for the first calendar year ending after the date of 
        enactment.
            (6) Section 2701(d)(3)(A)(iii) is amended by striking ``the 
        period ending on the date of''.
            (7) Subclause (I) of section 2701(d)(3)(B)(ii) is amended 
        by inserting ``or the exclusion under section 2503(b),'' after 
        ``section 2523,''.
            (8) Section 2701(e)(5) is amended--
                    (A) by striking ``such contribution to capital or 
                such redemption, recapitalization, or other change'' in 
                subparagraph (A) and inserting ``such transaction'', 
                and
                    (B) by striking ``the transfer'' in subparagraph 
                (B) and inserting ``such transaction''.
            (9) Section 2701(d)(4) is amended by adding at the end 
        thereof the following new subparagraph:
                    ``(C) Transfer to transferors.--In the case of a 
                taxable event described in paragraph (3)(A)(ii) 
                involving a transfer of an applicable retained interest 
                from an applicable family member to a transferor, this 
                subsection shall continue to apply to the transferor 
                during any period the transferor holds such 
                interest.''.
            (10) Section 2701(e)(6) is amended by inserting ``or to 
        reflect the application of subsection (d)'' before the period 
        at the end thereof.
            (11)(A) Section 2702(a)(3)(A) is amended--
                    (i) by striking ``to the extent'' and inserting 
                ``if'' in clause (i),
                    (ii) by striking ``or'' at the end of clause (i),
                    (iii) by striking the period at the end of clause 
                (ii) and inserting ``, or'', and
                    (iv) by adding at the end thereof the following new 
                clause:
                            ``(iii) to the extent that regulations 
                        provide that such transfer is not inconsistent 
                        with the purposes of this section.''.
            (B)(i) Section 2702(a)(3) is amended by striking 
        ``incomplete transfer'' each place it appears and inserting 
        ``incomplete gift''.
            (ii) The heading for section 2702(a)(3)(B) is amended by 
        striking ``Incomplete transfer'' and inserting ``Incomplete 
        gift''.
    (g) Amendments Related to Subtitle G.--
            (1)(A) Subsection (a) of section 1248 is amended--
                    (i) by striking ``, or if a United States person 
                receives a distribution from a foreign corporation 
                which, under section 302 or 331, is treated as an 
                exchange of stock'' in paragraph (1), and
                    (ii) by adding at the end thereof the following new 
                sentence: ``For purposes of this section, a United 
                States person shall be treated as having sold or 
                exchanged any stock if, under any provision of this 
                subtitle, such person is treated as realizing gain from 
                the sale or exchange of such stock.''.
            (B) Paragraph (1) of section 1248(e) is amended by striking 
        ``, or receives a distribution from a domestic corporation 
        which, under section 302 or 331, is treated as an exchange of 
        stock''.
            (C) Subparagraph (B) of section 1248(f)(1) is amended by 
        striking ``or 361(c)(1)'' and inserting ``355(c)(1), or 
        361(c)(1)''.
            (D) Paragraph (1) of section 1248(i) is amended to read as 
        follows:
            ``(1) In general.--If any shareholder of a 10-percent 
        corporate shareholder of a foreign corporation exchanges stock 
        of the 10-percent corporate shareholder for stock of the 
        foreign corporation, such 10-percent corporate shareholder 
        shall recognize gain in the same manner as if the stock of the 
        foreign corporation received in such exchange had been--
                    ``(A) issued to the 10-percent corporate 
                shareholder, and
                    ``(B) then distributed by the 10-percent corporate 
                shareholder to such shareholder in redemption or 
                liquidation (whichever is appropriate).
        The amount of gain recognized by such 10-percent corporate 
        shareholder under the preceding sentence shall not exceed the 
        amount treated as a dividend under this section.''.
            (2) Section 897 is amended by striking subsection (f).
            (3) Paragraph (13) of section 4975(d) is amended by 
        striking ``section 408(b)'' and inserting ``section 
        408(b)(12)''.
            (4) Clause (iii) of section 56(g)(4)(D) is  amended by 
        inserting ``, but only with respect to taxable years beginning 
        after December 31, 1989'' before the period at the end thereof.
            (5)(A) Paragraph (11) of section 11701(a) of the Revenue 
        Reconciliation Act of 1990 (and the amendment made by such 
        paragraph) are hereby repealed, and section 7108(r)(2) of the 
        Revenue Reconciliation Act of 1989 shall be applied as if such 
        paragraph (and amendment) had never been enacted.
            (B) Subparagraph (A) shall not apply to any building if the 
        owner of such building establishes to the satisfaction of the 
        Secretary of the Treasury or his delegate that such owner 
        reasonably relied on the amendment made by such paragraph (11).
    (h) Amendments Related to Subtitle H.--
            (1)(A) Clause (vi) of section 168(e)(3)(B) is amended by 
        striking ``or'' at the end of subclause (I), by striking the 
        period at the end of subclause (II) and inserting ``, or'', and 
        by adding at the end thereof the following new subclause:
                                    ``(III) is described in section 
                                48(l)(3)(A)(ix) (as in effect on the 
                                day before the date of the enactment of 
                                the Revenue Reconciliation Act of 
                                1990).''.
            (B) Subparagraph (B) of section 168(e)(3) (relating to 5-
        year property) is amended by adding at the end the following 
        flush sentence:
                ``Nothing in any provision of law shall be construed to 
                treat property as not being described in clause (vi)(I) 
                (or the corresponding provisions of prior law) by 
                reason of being public utility property (within the 
                meaning of section 48(a)(3)).''.
            (C) Subparagraph (K) of section 168(g)(4) is amended by 
        striking ``section 48(a)(3)(A)(iii)'' and inserting ``section 
        48(l)(3)(A)(ix) (as in effect on the day before the date of the 
        enactment of the Revenue Reconciliation Act of 1990)''.
            (2) Clause (ii) of section 172(b)(1)(E) is amended by 
        striking ``subsection (m)'' and inserting ``subsection (h)''.
            (3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II), and 
        832(b)(5)(D)(ii)(II) are each amended by striking ``243(b)(5)'' 
        and inserting ``243(b)(2)''.
            (4) Subparagraph (A) of section 243(b)(3) is amended by 
        inserting ``of'' after ``In the case''.
            (5) The subsection heading for subsection (a) of section 
        280F is amended by striking ``Investment Tax Credit and''.
            (6) Clause (i) of section 1504(c)(2)(B) is amended by 
        inserting ``section'' before ``243(b)(2)''.
            (7) Paragraph (3) of section 341(f) is amended by striking 
        ``351, 361, 371(a), or 374(a)'' and inserting ``351, or 361''.
            (8) Paragraph (2) of section 243(b) is amended to read as 
        follows:
            ``(2) Affiliated group.--For purposes of this subsection:
                    ``(A) In general.--The term `affiliated group' has 
                the meaning given such term by section 1504(a), except 
                that for such purposes sections 1504(b)(2), 1504(b)(4), 
                and 1504(c) shall not apply.
                    ``(B) Group must be consistent in foreign tax 
                treatment.--The requirements of paragraph (1)(A) shall 
                not be treated as being met with respect to any 
                dividend received by a corporation if, for any taxable 
                year which includes the day on which such dividend is 
                received--
                            ``(i) 1 or more members of the affiliated 
                        group referred to in paragraph (1)(A) choose to 
                        any extent to take the benefits of section 901, 
                        and
                            ``(ii) 1 or more other members of such 
                        group claim to any extent a deduction for taxes 
                        otherwise creditable under section 901.''.
            (9) The amendment made by section 11813(b)(17) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if the 
        material stricken by such amendment included the closing 
        parenthesis after ``section 48(a)(5)''.
            (10) Paragraph (1) of section 179(d) is amended by striking 
        ``in a trade or business'' and inserting ``a trade or 
        business''.
            (11) Subparagraph (E) of section 50(a)(2) is amended by 
        striking ``section 48(a)(5)(A)'' and inserting ``section 
        48(a)(5)''.
            (12) The amendment made by section 11801(c)(9)(G)(ii) of 
        the Revenue Reconciliation Act of 1990 shall be applied as if 
        it struck ``Section 422A(c)(2)'' and inserted ``Section 
        422(c)(2)''.
            (13) Subparagraph (B) of section 424(c)(3) is amended by 
        striking ``a qualified stock option, an incentive stock option, 
        an option granted under an employee stock purchase plan, or a 
        restricted stock option'' and inserting ``an incentive stock 
        option or an option granted under an employee stock purchase 
        plan''.
            (14) Subparagraph (E) of section 1367(a)(2) is amended by 
        striking ``section 613A(c)(13)(B)'' and inserting ``section 
        613A(c)(11)(B)''.
            (15) Subparagraph (B) of section 460(e)(6) is amended by 
        striking ``section 167(k)'' and inserting ``section 
        168(e)(2)(A)(ii)''.
            (16) Subparagraph (C) of section 172(h)(4) is amended by 
        striking ``subsection (b)(1)(M)'' and inserting ``subsection 
        (b)(1)(E)''.
            (17) Section 6503 is amended--
                    (A) by redesignating the subsection relating to 
                extension in case of certain summonses as subsection 
                (j), and
                    (B) by redesignating the subsection relating to 
                cross references as subsection (k).
            (18) Paragraph (4) of section 1250(e) is hereby repealed.
            (19) Paragraph (1) of section 179(d) is amended by adding 
        at the end the following new sentence: ``Such term shall not 
        include any property described in section 50(b) and shall not 
        include air conditioning or heating units.''.
    (i) Effective Date.--Except as otherwise expressly provided--
            (1) the amendments made by this section shall be treated as 
        amendments to the Internal Revenue Code of 1986 as amended by 
        the Revenue Reconciliation Act of 1993; and
            (2) any amendment made by this section shall apply to 
        periods before the date of the enactment of this section in the 
        same manner as if it had been included in the provision of the 
        Revenue Reconciliation Act of 1990 to which such amendment 
        relates.

SEC. 1703. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 1993.

    (a) Amendment Related to Section 13114.--Paragraph (2) of section 
1044(c) is amended to read as follows:
            ``(2) Purchase.--The taxpayer shall be considered to have 
        purchased any property if, but for subsection (d), the 
        unadjusted basis of such property would be its cost within the 
        meaning of section 1012.''.
    (b) Amendments Related to Section 13142.--
            (1) Subparagraph (B) of section 13142(b)(6) of the Revenue 
        Reconciliation Act of 1993 is amended to read as follows:
                    ``(B) Full-time students, waiver authority, and 
                prohibited discrimination.--The amendments made by 
                paragraphs (2), (3), and (4) shall take effect on the 
                date of the enactment of this Act.''.
            (2) Subparagraph (C) of section 13142(b)(6) of such Act is 
        amended by striking ``paragraph (2)'' and inserting ``paragraph 
        (5)''.
    (c) Amendment Related to Section 13161.--
            (1) In general.--Subsection (e) of section 4001 (relating 
        to inflation adjustment) is amended to read as follows:
    ``(e) Inflation Adjustment.--
            ``(1) In general.--The $30,000 amount in subsection (a) and 
        section 4003(a) shall be increased by an amount equal to--
                    ``(A) $30,000, multiplied by
                    ``(B) the cost-of-living adjustment under section 
                1(f)(3) for the calendar year in which the vehicle is 
                sold, determined by substituting `calendar year 1990' 
                for `calendar year 1992' in subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $2,000, such amount shall be rounded 
        to the next lowest multiple of $2,000.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.
    (d) Amendment Related to Section 13201.--Clause (ii) of section 
135(b)(2)(B) is amended by inserting before the period at the end 
thereof the following: ``, determined by substituting `calendar year 
1989' for `calendar year 1992' in subparagraph (B) thereof''.
    (e) Amendments Related to Section 13203.--Subsection (a) of section 
59 is amended--
            (1) by striking ``the amount determined under section 
        55(b)(1)(A)'' in paragraph (1)(A) and (2)(A)(i) and inserting 
        ``the pre-credit tentative minimum tax'',
            (2) by striking ``specified in section 55(b)(1)(A)'' in 
        paragraph (1)(C) and inserting ``specified in subparagraph 
        (A)(i) or (B)(i) of section 55(b)(1) (whichever applies)'',
            (3) by striking ``which would be determined under section 
        55(b)(1)(A)'' in paragraph (2)(A)(ii) and inserting ``which 
        would be the pre-credit tentative minimum tax'', and
            (4) by adding at the end thereof the following new 
        paragraph:
            ``(3) Pre-credit tentative minimum tax.--For purposes of 
        this subsection, the term `pre-credit tentative minimum tax' 
        means--
                    ``(A) in the case of a taxpayer other than a 
                corporation, the amount determined under the first 
                sentence of section 55(b)(1)(A)(i), or
                    ``(B) in the case of a corporation, the amount 
                determined under section 55(b)(1)(B)(i).''.
    (f) Amendment Related to Section 13221.--Sections 1201(a) and 
1561(a) are each amended by striking ``last sentence'' each place it 
appears and inserting ``last 2 sentences''.
    (g) Amendments Related to Section 13222.--
            (1) Subparagraph (B) of section 6033(e)(1) is amended by 
        adding at the end thereof the following new clause:
                            ``(iii) Coordination with section 527(f).--
                        This subsection shall not apply to any amount 
                        on which tax is imposed by reason of section 
                        527(f).''.
            (2) Clause (i) of section 6033(e)(1)(B) is amended by 
        striking ``this subtitle'' and inserting ``section 501''.
    (h) Amendment Related to Section 13225.--Paragraph (3) of section 
6655(g) is amended by striking all that follows ```3rd month''' in the 
sentence following subparagraph (C) and inserting ``, subsection 
(e)(2)(A) shall be applied by substituting `2 months' for `3 months' in 
clause (i)(I), the election under clause (i) of subsection (e)(2)(C) 
may be made separately for each installment, and clause (ii) of 
subsection (e)(2)(C) shall not apply.''.
    (i) Amendments Related to Section 13231.--
            (1) Subparagraph (G) of section 904(d)(3) is amended by 
        striking ``section 951(a)(1)(B)'' and inserting ``subparagraph 
        (B) or (C) of section 951(a)(1)''.
            (2) Paragraph (1) of section 956A(b) is amended to read as 
        follows:
            ``(1) the amount (not including a deficit) referred to in 
        section 316(a)(1) to the extent such amount was accumulated in 
        prior taxable years beginning after September 30, 1993, and''.
            (3) Subsection (f) of section 956A is amended by inserting 
        before the period at the end thereof: ``and regulations 
        coordinating the provisions of subsections (c)(3)(A) and (d)''.
            (4) Subsection (b) of section 958 is amended by striking 
        ``956(b)(2)'' each place it appears and inserting 
        ``956(c)(2)''.
            (5)(A) Subparagraph (A) of section 1297(d)(2) is amended by 
        striking ``The adjusted basis of any asset'' and inserting 
        ``The amount taken into account under section 1296(a)(2) with 
        respect to any asset''.
            (B) The paragraph heading of paragraph (2) of section 
        1297(d) is amended to read as follows:
            ``(2) Amount taken into account.--''.
            (6) Subsection (e) of section 1297 is amended by inserting 
        ``For purposes of this part--'' after the subsection heading.
    (j) Amendment Related to Section 13241.--Subparagraph (B) of 
section 40(e)(1) is amended to read as follows:
                    ``(B) for any period before January 1, 2001, during 
                which the rates of tax under section 4081(a)(2)(A) are 
                4.3 cents per gallon.''.
    (k) Amendment Related to Section 13242.--Paragraph (4) of section 
6427(f) is amended by striking ``1995'' and inserting ``1999''.
    (l) Amendment Related to Section 13261.--Clause (iii) of section 
13261(g)(2)(A) of the Revenue Reconciliation Act of 1993 is amended by 
striking ``by the taxpayer'' and inserting ``by the taxpayer or a 
related person''.
    (m) Amendment Related to Section 13301.--Subparagraph (B) of 
section 1397B(d)(5) is amended by striking ``preceding''.
    (n) Clerical Amendments.--
            (1) Subsection (d) of section 39 is amended--
                    (A) by striking ``45'' in the heading of paragraph 
                (5) and inserting ``45A'', and
                    (B) by striking ``45'' in the heading of paragraph 
                (6) and inserting ``45B''.
            (2) Subparagraph (A) of section 108(d)(9) is amended by 
        striking ``paragraph (3)(B)'' and inserting ``paragraph 
        (3)(C)''.
            (3) Subparagraph (C) of section 143(d)(2) is amended by 
        striking the period at the end thereof and inserting a comma.
            (4) Clause (ii) of section 163(j)(6)(E) is amended by 
        striking ``which is a'' and inserting ``which is''.
            (5) Subparagraph (A) of section 1017(b)(4) is amended by 
        striking ``subsection (b)(2)(D)'' and inserting ``subsection 
        (b)(2)(E)''.
            (6) So much of section 1245(a)(3) as precedes subparagraph 
        (A) thereof is amended to read as follows:
            ``(3) Section 1245 property.--For purposes of this section, 
        the term `section 1245 property' means any property which is or 
        has been property of a character subject to the allowance for 
        depreciation provided in section 167 and is either--''.
            (7) Paragraph (2) of section 1394(e) is amended--
                    (A) by striking ``(i)'' and inserting ``(A)'', and
                    (B) by striking ``(ii)'' and inserting ``(B)''.
            (8) Subsection (m) of section 6501 (as redesignated by 
        section 1602) is amended by striking ``or 51(j)'' and inserting 
        ``45B, or 51(j)''.
            (9)(A) The section 6714 added by section 13242(b)(1) of the 
        Revenue Reconciliation Act of 1993 is hereby redesignated as 
        section 6715.
            (B) The table of sections for part I of subchapter B of 
        chapter 68 is amended by striking ``6714'' in the item added by 
        such section 13242(b)(2) of such Act and inserting ``6715''.
            (10) Paragraph (2) of section 9502(b) is amended by 
        inserting ``and before'' after ``1982,''.
            (11) Subsection (a)(3) of section 13206 of the Revenue 
        Reconciliation Act of 1993 is amended by striking ``this 
        section'' and inserting ``this subsection''.
            (12) Paragraph (1) of section 13215(c) of the Revenue 
        Reconciliation Act of 1993 is amended by striking ``Public Law 
        92-21'' and inserting ``Public Law 98-21''.
            (13) Paragraph (2) of section 13311(e) of the Revenue 
        Reconciliation Act of 1993 is amended by striking ``section 
        1393(a)(3)'' and inserting ``section 1393(a)(2)''.
            (14) Subparagraph (B) of section 117(d)(2) is amended by 
        striking ``section 132(f)'' and inserting ``section 132(h)''.
    (o) Effective Date.--Any amendment made by this section shall take 
effect as if included in the provision of the Revenue Reconciliation 
Act of 1993 to which such amendment relates.

SEC. 1704. MISCELLANEOUS PROVISIONS.

    (a) Application of Amendments Made by Title XII of Omnibus Budget 
Reconciliation Act of 1990.--Except as otherwise expressly provided, 
whenever in title XII of the Omnibus Budget Reconciliation Act of 1990 
an amendment or repeal is expressed in terms of an amendment to, or 
repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.
    (b) Treatment of Certain Amounts Under Hedge Bond Rules.--
            (1) Clause (iii) of section 149(g)(3)(B) is amended to read 
        as follows:
                            ``(iii) Amounts held pending reinvestment 
                        or redemption.--Amounts held for not more than 
                        30 days pending reinvestment or bond redemption 
                        shall be treated as invested in bonds described 
                        in clause (i).''.
            (2) The amendment made by paragraph (1) shall take effect 
        as if included in the amendments made by section 7651 of the 
        Omnibus Budget Reconciliation Act of 1989.
    (c) Treatment of Certain Distributions Under Section 1445.--
            (1) In general.--Paragraph (3) of section 1445(e) is 
        amended by adding at the end thereof the following new 
        sentence: ``Rules similar to the rules of the preceding 
        provisions of this paragraph shall apply in the case of any 
        distribution to which section 301 applies and which is not made 
        out of the earnings and profits of such a domestic 
        corporation.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to distributions after the date of the enactment of 
        this Act.
    (d) Treatment of Certain Credits Under Section 469.--
            (1) In general.--Subparagraph (B) of section 469(c)(3) is 
        amended by adding at the end thereof the following new 
        sentence: ``If the preceding sentence applies to the net income 
        from any property for any taxable year, any credits allowable 
        under subpart B (other than section 27(a)) or D of part IV of 
        subchapter A for such taxable year which are attributable to 
        such property shall be treated as credits not from a passive 
        activity to the extent the amount of such credits does not 
        exceed the regular tax liability of the taxpayer for the 
        taxable year which is allocable to such net income.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after December 31, 1986.
    (e) Treatment of Dispositions Under Passive Loss Rules.--
            (1) In general.--Subparagraph (A) of section 469(g)(1) is 
        amended to read as follows:
                    ``(A) In general.--If all gain or loss realized on 
                such disposition is recognized, the excess of--
                            ``(i) any loss from such activity for such 
                        taxable year (determined after the application 
                        of subsection (b)), over
                            ``(ii) any net income or gain for such 
                        taxable year from all other passive activities 
                        (determined after the application of subsection 
                        (b)),
                shall be treated as a loss which is not from a passive 
                activity.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after December 31, 1986.
    (f) Miscellaneous Amendments to Foreign Provisions.--
            (1) Coordination of unified estate tax credit with 
        treaties.--Subparagraph (A) of section 2102(c)(3) is amended by 
        adding at the end thereof the following new sentence: ``For 
        purposes of the preceding sentence, property shall not be 
        treated as situated in the United States if such property is 
        exempt from the tax imposed by this subchapter under any treaty 
        obligation of the United States.''.
            (2) Treatment of certain interest paid to related person.--
                    (A) Subparagraph (B) of section 163(j)(1) is 
                amended by inserting before the period at the end 
                thereof the following: ``(and clause (ii) of paragraph 
                (2)(A) shall not apply for purposes of applying this 
                subsection to the amount so treated)''.
                    (B) Subsection (j) of section 163 is amended by 
                redesignating paragraph (7) as paragraph (8) and by 
                inserting after paragraph (6) the following new 
                paragraph:
            ``(7) Coordination with passive loss rules, etc.--This 
        subsection shall be applied before sections 465 and 469.''.
                    (C) The amendments made by this paragraph shall 
                apply as if included in the amendments made by section 
                7210(a) of the Revenue Reconciliation Act of 1989.
            (3) Treatment of interest allocable to effectively 
        connected income.--
                    (A) In general.--
                            (i) Subparagraph (B) of section 884(f)(1) 
                        is amended by striking ``to the extent'' and 
                        all that follows down through ``subparagraph 
                        (A)'' and inserting ``to the extent that the 
                        allocable interest exceeds the interest 
                        described in subparagraph (A)''.
                            (ii) The second sentence of section 
                        884(f)(1) is amended by striking ``reasonably 
                        expected'' and all that follows down through 
                        the period at the end thereof and inserting 
                        ``reasonably expected to be allocable 
                        interest.''
                            (iii) Paragraph (2) of section 884(f) is 
                        amended to read as follows:
            ``(2) Allocable interest.--For purposes of this subsection, 
        the term `allocable interest' means any interest which is 
        allocable to income which is effectively connected (or treated 
        as effectively connected) with the conduct of a trade or 
        business in the United States.''.
                    (B) Effective date.--The amendments made by 
                subparagraph (A) shall take effect as if included in 
                the amendments made by section 1241(a) of the Tax 
                Reform Act of 1986.
            (4) Clarification of source rule.--
                    (A) In general.--Paragraph (2) of section 865(b) is 
                amended by striking ``863(b)'' and inserting ``863''.
                    (B) Effective date.--The amendment made by 
                subparagraph (A) shall take effect as if included in 
                the amendments made by section 1211 of the Tax Reform 
                Act of 1986.
            (5) Repeal of obsolete provisions.--
                    (A) Paragraph (1) of section 6038(a) is amended by 
                striking ``, and'' at the end of subparagraph (E) and 
                inserting a period, and by striking subparagraph (F).
                    (B) Subsection (b) of section 6038A is amended by 
                adding ``and'' at the end of paragraph (2), by striking 
                ``, and'' at the end of paragraph (3) and inserting a 
                period, and by striking paragraph (4).
    (g) Treatment of Assignment of Interest in Certain Bond-Financed 
Facilities.--
            (1) In general.--Subparagraph (A) of section 1317(3) of the 
        Tax Reform Act of 1986 is amended by adding at the end thereof 
        the following new sentence: ``A facility shall not fail to be 
        treated as described in this subparagraph by reason of an 
        assignment (or an agreement to an assignment) by the 
        governmental unit on whose behalf the bonds are issued of any 
        part of its interest in the property financed by such bonds to 
        another governmental unit.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in such section 1317 on the 
        date of the enactment of the Tax Reform Act of 1986.
    (h) Clarification of Treatment of Medicare Entitlement Under COBRA 
Provisions.--
            (1) In general.--
                    (A) Subclause (V) of section 4980B(f)(2)(B)(i) is 
                amended to read as follows:
                                    ``(V) Medicare entitlement followed 
                                by qualifying event.--In the case of a 
                                qualifying event described in paragraph 
                                (3)(B) that occurs less than 18 months 
                                after the date the covered employee 
                                became entitled to benefits under title 
                                XVIII of the Social Security Act, the 
                                period of coverage for qualified 
                                beneficiaries other than the covered 
                                employee shall not terminate under this 
                                clause before the close of the 36-month 
                                period beginning on the date the 
                                covered employee became so entitled.''.
                    (B) Clause (v) of section 602(2)(A) of the Employee 
                Retirement Income Security Act of 1974 is amended to 
                read as follows:
                            ``(v) Medicare entitlement followed by 
                        qualifying event.--In the case of a qualifying 
                        event described in section 603(2) that occurs 
                        less than 18 months after the date the covered 
                        employee became entitled to benefits under 
                        title XVIII of the Social Security Act, the 
                        period of coverage for qualified beneficiaries 
                        other than the covered employee shall not 
                        terminate under this subparagraph before the 
                        close of the 36-month period beginning on the 
                        date the covered employee became so 
                        entitled.''.
                    (C) Clause (iv) of section 2202(2)(A) of the Public 
                Health Service Act is amended to read as follows:
                            ``(iv) Medicare entitlement followed by 
                        qualifying event.--In the case of a qualifying 
                        event described in section 2203(2) that occurs 
                        less than 18 months after the date the covered 
                        employee became entitled to benefits under 
                        title XVIII of the Social Security Act, the 
                        period of coverage for qualified beneficiaries 
                        other than the covered employee shall not 
                        terminate under this subparagraph before the 
                        close of the 36-month period beginning on the 
                        date the covered employee became so 
                        entitled.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning after December 31, 1989.
    (i) Treatment of Certain REMIC Inclusions.--
            (1) In general.--Subsection (a) of section 860E is amended 
        by adding at the end thereof the following new paragraph:
            ``(6) Coordination with minimum tax.--For purposes of part 
        VI of subchapter A of this chapter--
                    ``(A) the reference in section 55(b)(2) to taxable 
                income shall be treated as a reference to taxable 
                income determined without regard to this subsection,
                    ``(B) the alternative minimum taxable income of any 
                holder of a residual interest in a REMIC for any 
                taxable year shall in no event be less than the excess 
                inclusion for such taxable year, and
                    ``(C) any excess inclusion shall be disregarded for 
                purposes of computing the alternative tax net operating 
                loss deduction.
        The preceding sentence shall not apply to any organization to 
        which section 593 applies, except to the extent provided in 
        regulations prescribed by the Secretary under paragraph (2).''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in the amendments made by 
        section 671 of the Tax Reform Act of 1986 unless the taxpayer 
        elects to apply such amendment only to taxable years beginning 
        after the date of the enactment of this Act.
    (j) Exemption From Harbor Maintenance Tax for Certain Passengers.--
            (1) In general.--Subparagraph (D) of section 4462(b)(1) 
        (relating to special rule for Alaska, Hawaii, and possessions) 
        is amended by inserting before the period the following: ``, or 
        passengers transported on United States flag vessels operating 
        solely within the State waters of Alaska or Hawaii and adjacent 
        international waters''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in the amendments made by 
        section 1402(a) of the Harbor Maintenance Revenue Act of 1986.
    (k) Amendments Related to Revenue Provisions of Energy Policy Act 
of 1992.--
            (1) Effective with respect to taxable years beginning after 
        December 31, 1990, subclause (II) of section 53(d)(1)(B)(iv) is 
        amended to read as follows:
                                    ``(II) the adjusted net minimum tax 
                                for any taxable year is the amount of 
                                the net minimum tax for such year 
                                increased in the manner provided in 
                                clause (iii).''.
            (2) Subsection (g) of section 179A is redesignated as 
        subsection (f).
            (3) Subparagraph (E) of section 6724(d)(3) is amended by 
        striking ``section 6109(f)'' and inserting ``section 6109(h)''.
            (4)(A) Subsection (d) of section 30 is amended--
                    (i) by inserting ``(determined without regard to 
                subsection (b)(3))'' before the period at the end of 
                paragraph (1) thereof, and
                    (ii) by adding at the end thereof the following new 
                paragraph:
            ``(4) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects to not have this section apply to such vehicle.''.
            (B) Subsection (m) of section 6501 (as redesignated by 
        section 1602) is amended by striking ``section 40(f)'' and 
        inserting ``section 30(d)(4), 40(f)''.
            (5) Subclause (III) of section 501(c)(21)(D)(ii) is amended 
        by striking ``section 101(6)'' and inserting ``section 101(7)'' 
        and by striking ``1752(6)'' and inserting ``1752(7)''.
            (6) Paragraph (1) of section 1917(b) of the Energy Policy 
        Act of 1992 shall be applied as if ``at a rate'' appeared 
        instead of ``at the rate'' in the material proposed to be 
        stricken.
            (7) Paragraph (2) of section 1921(b) of the Energy Policy 
        Act of 1992 shall be applied as if a comma appeared after 
        ``(2)'' in the material proposed to be stricken.
            (8) Subsection (a) of section 1937 of the Energy Policy Act 
        of 1992 shall be applied as if ``Subpart B'' appeared instead 
        of ``Subpart C''.
    (l) Treatment of Qualified Football Coaches Plan.--
            (1) In general.--For purposes of the Internal Revenue Code 
        of 1986, a qualified football coaches plan--
                    (A) shall be treated as a multiemployer 
                collectively bargained plan, and
                    (B) notwithstanding section 401(k)(4)(B) of such 
                Code, may include a qualified cash and deferred 
                arrangement under section 401(k) of such Code.
            (2) Qualified football coaches plan.--For purposes of this 
        subsection, the term ``qualified football coaches plan'' means 
        any defined contribution plan which is established and 
        maintained by an organization--
                    (A) which is described in section 501(c) of such 
                Code,
                    (B) the membership of which consists entirely of 
                individuals who primarily coach football as full-time 
                employees of 4-year colleges or universities described 
                in section 170(b)(1)(A)(ii) of such Code, and
                    (C) which was in existence on September 18, 1986.
            (3) Effective date.--This subsection shall apply to years 
        beginning after December 22, 1987.
    (m) Determination of Unrecovered Investment in Annuity Contract.--
            (1) In general.--Subparagraph (A) of section 72(b)(4) is 
        amended by inserting ``(determined without regard to subsection 
        (c)(2))'' after ``contract''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in the amendments made by 
        section 1122(c) of the Tax Reform Act of 1986.
    (n) Modifications to Election To Include Child's Income on Parent's 
Return.--
            (1) Eligibility for election.--Clause (ii) of section 
        1(g)(7)(A) (relating to election to include certain unearned 
        income of child on parent's return) is amended to read as 
        follows:
                            ``(ii) such gross income is more than the 
                        amount described in paragraph (4)(A)(ii)(I) and 
                        less than 10 times the amount so described,''.
            (2) Computation of tax.--Subparagraph (B) of section 
        1(g)(7) (relating to income included on parent's return) is 
        amended--
                    (A) by striking ``$1,000'' in clause (i) and 
                inserting ``twice the amount described in paragraph 
                (4)(A)(ii)(I)'', and
                    (B) by amending subclause (II) of clause (ii) to 
                read as follows:
                                    ``(II) for each such child, 15 
                                percent of the lesser of the amount 
                                described in paragraph (4)(A)(ii)(I) or 
                                the excess of the gross income of such 
                                child over the amount so described, 
                                and''.
            (3) Minimum tax.--Subparagraph (B) of section 59(j)(1) is 
        amended by striking ``$1,000'' and inserting ``twice the amount 
        in effect for the taxable year under section 63(c)(5)(A)''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1995.
    (o) Treatment of Certain Veterans' Reemployment Rights.--
            (1) In general.--Section 414 is amended by adding at the 
        end the following new subsection:
    ``(u) Special Rules Relating to Veterans' Reemployment Rights Under 
USERRA.--
            ``(1) Treatment of certain contributions made pursuant to 
        veterans' reemployment rights.--If any contribution is made by 
        an employer or an employee under an individual account plan 
        with respect to an employee, or by an employee to a defined 
        benefit plan that provides for employee contributions, and such 
        contribution is required by reason of such employee's rights 
        under chapter 43 of title 38, United States Code, resulting 
        from qualified military service, then--
                    ``(A) such contribution shall not be subject to any 
                otherwise applicable limitation contained in section 
                402(g), 402(h), 403(b), 404(a), 404(h), 408, 415, or 
                457, and shall not be taken into account in applying 
                such limitations to other contributions or benefits 
                under such plan or any other plan, with respect to the 
                year in which the contribution is made,
                    ``(B) such contribution shall be subject to the 
                limitations referred to in subparagraph (A) with 
                respect to the year to which the contribution relates 
                (in accordance with rules prescribed by the Secretary), 
                and
                    ``(C) such plan shall not be treated as failing to 
                meet the requirements of section 401(a)(4), 401(a)(26), 
                401(k)(3), 401(k)(11), 401(k)(12), 401(m), 403(b)(12), 
                408(k)(3), 408(k)(6), 408(p), 410(b), or 416 by reason 
                of the making of (or the right to make) such 
                contribution.
        For purposes of the preceding sentence, any elective deferral 
        or employee contribution made under paragraph (2) shall be 
        treated as required by reason of the employee's rights under 
        such chapter 43.
            ``(2) Reemployment rights under userra with respect to 
        elective deferrals.--
                    ``(A) In general.--For purposes of this subchapter 
                and section 457, if an employee is entitled to the 
                benefits of chapter 43 of title 38, United States Code, 
                with respect to any plan which provides for elective 
                deferrals, the employer sponsoring the plan shall be 
                treated as meeting the requirements of such chapter 43 
                with respect to such elective deferrals only if such 
                employer--
                            ``(i) permits such employee to make 
                        additional elective deferrals under such plan 
                        (in the amount determined under subparagraph 
                        (B) or such lesser amount as is elected by the 
employee) during the period which begins on the date of the 
reemployment of such employee with such employer and has the same 
length as the lesser of--
                                    ``(I) the product of 3 and the 
                                period of qualified military service 
                                which resulted in such rights, and
                                    ``(II) 5 years, and
                            ``(ii) makes a matching contribution with 
                        respect to any additional elective deferral 
                        made pursuant to clause (i) which would have 
                        been required had such deferral actually been 
                        made during the period of such qualified 
                        military service.
                    ``(B) Amount of makeup required.--The amount 
                determined under this subparagraph with respect to any 
                plan is the maximum amount of the elective deferrals 
                that the individual would have been permitted to make 
                under the plan in accordance with the limitations 
                referred to in paragraph (1)(A) during the period of 
                qualified military service if the individual had 
                continued to be employed by the employer during such 
                period and received compensation as determined under 
                paragraph (7). Proper adjustment shall be made to the 
                amount determined under the preceding sentence for any 
                elective deferrals actually made during the period of 
                such qualified military service.
                    ``(C) Elective deferral.--For purposes of this 
                paragraph, the term `elective deferral' has the meaning 
                given such term by section 402(g)(3); except that such 
                term shall include any deferral of compensation under 
                an eligible deferred compensation plan (as defined in 
                section 457(b)).
                    ``(D) After-tax employee contributions.--References 
                in subparagraphs (A) and (B) to elective deferrals 
                shall be treated as including references to employee 
                contributions.
            ``(3) Certain retroactive adjustments not required.--For 
        purposes of this subchapter and subchapter E, no provision of 
        chapter 43 of title 38, United States Code, shall be construed 
        as requiring--
                    ``(A) any crediting of earnings to an employee with 
                respect to any contribution before such contribution is 
                actually made, or
                    ``(B) any allocation of any forfeiture with respect 
                to the period of qualified military service.
            ``(4) Loan repayment suspensions permitted.--If any plan 
        suspends the obligation to repay any loan made to an employee 
        from such plan for any part of any period during which such 
        employee is performing service in the uniformed services (as 
        defined in chapter 43 of title 38, United States Code), whether 
        or not qualified military service, such suspension shall not be 
        taken into account for purposes of section 72(p), 401(a), or 
        4975(d)(1).
            ``(5) Qualified military service.--For purposes of this 
        subsection, the term `qualified military service' means any 
        service in the uniformed services (as defined in chapter 43 of 
        title 38, United States Code) by any individual if such 
        individual is entitled to reemployment rights under such 
        chapter with respect to such service.
            ``(6) Individual account plan.--For purposes of this 
        subsection, the term `individual account plan' means any 
        defined contribution plan (including any tax-sheltered annuity 
        plan under section 403(b), any simplified employee pension 
        under section 408(k), any qualified salary reduction 
        arrangement under section 408(p), and any eligible deferred 
        compensation plan (as defined in section 457(b)).
            ``(7) Compensation.--For purposes of sections 403(b)(3), 
        415(c)(3), and 457(e)(5), an employee who is in qualified 
        military service shall be treated as receiving compensation 
        from the employer during such period of qualified military 
        service equal to--
                    ``(A) the compensation the employee would have 
                received during such period if the employee were not in 
                qualified military service, determined based on the 
                rate of pay the employee would have received from the 
                employer but for absence during the period of qualified 
                military service, or
                    ``(B) if the compensation the employee would have 
                received during such period was not reasonably certain, 
                the employee's average compensation from the employer 
                during the 12-month period immediately preceding the 
                qualified military service (or, if shorter, the period 
                of employment immediately preceding the qualified 
                military service).
            ``(8) USERRA requirements for qualified retirement plans.--
        For purposes of this subchapter and section 457, an employer 
        sponsoring a retirement plan shall be treated as meeting the 
        requirements of chapter 43 of title 38, United States Code, 
        only if each of the following requirements is met:
                    ``(A) An individual reemployed under such chapter 
                is treated with respect to such plan as not having 
                incurred a break in service with the employer 
                maintaining the plan by reason of such individual's 
                period of qualified military service.
                    ``(B) Each period of qualified military service 
                served by an individual is, upon reemployment under 
                such chapter, deemed with respect to such plan to 
                constitute service with the employer maintaining the 
                plan for the purpose of determining the 
                nonforfeitability of the individual's accrued benefits 
                under such plan and for the purpose of determining the 
                accrual of benefits under such plan.
                    ``(C) An individual reemployed under such chapter 
                is entitled to accrued benefits that are contingent on 
                the making of, or derived from, employee contributions 
                or elective deferrals only to the extent the individual 
                makes payment to the plan with respect to such 
                contributions or deferrals. No such payment may exceed 
                the amount the individual would have been permitted or 
                required to contribute had the individual remained 
                continuously employed by the employer throughout the 
                period of qualified military service. Any payment to 
                such plan shall be made during the period beginning 
                with the date of reemployment and whose duration is 3 
                times the period of the qualified military service (but 
                not greater than 5 years).
            ``(9) Plans not subject to title 38.--This subsection shall 
        not apply to any retirement plan to which chapter 43 of title 
        38, United States Code, does not apply.
            ``(10) References.--For purposes of this section, any 
        reference to chapter 43 of title 38, United States Code, shall 
        be treated as a reference to such chapter as in effect on 
        December 12, 1994 (without regard to any subsequent 
        amendment).''.
            (2) Effective date.--The amendment made by this subsection 
        shall be effective as of December 12, 1994.
    (p) Reporting of Real Estate Transactions.--
            (1) In general.--Paragraph (3) of section 6045(e) (relating 
        to prohibition of separate charge for filing return) is amended 
        by adding at the end the following new sentence: ``Nothing in 
        this paragraph shall be construed to prohibit the real estate 
        reporting person from taking into account its cost of complying 
        with such requirement in establishing its charge (other than a 
        separate charge for complying with such requirement) to any 
        customer for performing services in the case of a real estate 
        transaction.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in section 1015(e)(2)(A) of 
        the Technical and Miscellaneous Revenue Act of 1988.
    (q) Clarification of Denial of Deduction for Stock Redemption 
Expenses.
            (1) In general.--Paragraph (1) of section 162(k) is amended 
        by striking ``the redemption of its stock'' and inserting ``the 
        reacquisition of its stock or of the stock of any related 
        person (as defined in section 465(b)(3)(C))''.
            (2) Certain deductions permitted.--Subparagraph (A) of 
        section 162(k)(2) is amended by striking ``or'' at the end of 
        clause (i), by redesignating clause (ii) as clause (iii), and 
        by inserting after clause (i) the following new clause:
                            ``(ii) deduction for amounts which are 
                        properly allocable to indebtedness and 
                        amortized over the term of such indebtedness, 
                        or''.
            (3) Clerical amendment.--The subsection heading for 
        subsection (k) of section 162 is amended by striking 
        ``Redemption'' and inserting ``Reacquisition''.
            (4) Effective date.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by this subsection shall apply 
                to amounts paid or incurred after September 13, 1995, 
                in taxable years ending after such date.
                    (B) Paragraph (2).--The amendment made by paragraph 
                (2) shall take effect as if included in the amendment 
                made by section 613 of the Tax Reform Act of 1986.
    (r) Clerical Amendment to Section 404.--
            (1) In general.--Paragraph (1) of section 404(j) is amended 
        by striking ``(10)'' and inserting ``(9)''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in the amendments made by 
        section 713(d)(4)(A) of the Deficit Reduction Act of 1984.
    (s) Passive Income Not To Include FSC Income, Etc.--
            (1) In general.--Paragraph (2) of section 1296(b) is 
        amended by striking ``or'' at the end of subparagraph (B), by 
        striking the period at the end of subparagraph (C) and 
        inserting ``, or'', and by inserting after subparagraph (C) the 
        following new subparagraph:
                    ``(D) which is foreign trade income of a FSC or 
                export trade income of an export trade corporation (as 
                defined in section 971).''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect as if included in the amendments made by 
        section 1235 of the Tax Reform Act of 1986.
    (t) Miscellaneous Clerical Amendments.--
            (1) Subclause (II) of section 56(g)(4)(C)(ii) is amended by 
        striking ``of the subclause'' and inserting ``of subclause''.
            (2) Paragraph (2) of section 72(m) is amended by inserting 
        ``and'' at the end of subparagraph (A), by striking 
        subparagraph (B), and by redesignating subparagraph (C) as 
        subparagraph (B).
            (3) Paragraph (2) of section 86(b) is amended by striking 
        ``adusted'' and inserting ``adjusted''.
            (4)(A) The heading for section 112 is amended by striking 
        ``combat pay'' and inserting ``combat zone compensation''.
            (B) The item relating to section 112 in the table of 
        sections for part III of subchapter B of chapter 1 is amended 
        by striking ``combat pay'' and inserting ``combat zone 
        compensation''.
            (C) Paragraph (1) of section 3401(a) is amended by striking 
        ``combat pay'' and inserting ``combat zone compensation''.
            (5) Clause (i) of section 172(h)(3)(B) is amended by 
        striking the comma at the end thereof and inserting a period.
            (6) Clause (ii) of section 543(a)(2)(B) is amended by 
        striking ``section 563(c)'' and inserting ``section 563(d)''.
            (7) Paragraph (1) of section 958(a) is amended by striking 
        ``sections 955(b)(1) (A) and (B), 955(c)(2)(A)(ii), and 
        960(a)(1)'' and inserting ``section 960(a)(1)''.
            (8) Subsection (g) of section 642 is amended by striking 
        ``under 2621(a)(2)'' and inserting ``under section 
        2621(a)(2)''.
            (9) Section 1463 is amended by striking ``this subsection'' 
        and inserting ``this section''.
            (10) Subsection (k) of section 3306 is amended by inserting 
        a period at the end thereof.
            (11) The item relating to section 4472 in the table of 
        sections for subchapter B of chapter 36 is amended by striking 
        ``and special rules''.
            (12) Paragraph (3) of section 5134(c) is amended by 
        striking ``section 6662(a)'' and inserting ``section 6665(a)''.
            (13) Paragraph (2) of section 5206(f) is amended by 
        striking ``section 5(e)'' and inserting ``section 105(e)''.
            (14) Paragraph (1) of section 6050B(c) is amended by 
        striking ``section 85(c)'' and inserting ``section 85(b)''.
            (15) Subsection (k) of section 6166 is amended by striking 
        paragraph (6).
            (16) Subsection (e) of section 6214 is amended to read as 
        follows:
    ``(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).''.
            (17) The section heading for section 6043 is amended by 
        striking the semicolon and inserting a comma.
            (18) The item relating to section 6043 in the table of 
        sections for subpart B of part III of subchapter A of chapter 
        61 is amended by striking the semicolon and inserting a comma.
            (19) The table of sections for part I of subchapter A of 
        chapter 68 is amended by striking the item relating to section 
        6662.
            (20)(A) Section 7232 is amended--
                    (i) by striking ``lubricating oil,'' in the 
                heading, and
                    (ii) by striking ``lubricating oil,'' in the text.
            (B) The table of sections for part II of subchapter A of 
        chapter 75 is amended by striking ``lubricating oil,'' in the 
        item relating to section 7232.
            (21) Paragraph (1) of section 6701(a) of the Omnibus Budget 
        Reconciliation Act of 1989 is amended by striking ``subclause 
        (IV)'' and inserting ``subclause (V)''.
            (22) Clause (ii) of section 7304(a)(2)(D) of such Act is 
        amended by striking ``subsection (c)(2)'' and inserting 
        ``subsection (c)''.
            (23) Paragraph (1) of section 7646(b) of such Act is 
        amended by striking ``section 6050H(b)(1)'' and inserting 
        ``section 6050H(b)(2)''.
            (24) Paragraph (10) of section 7721(c) of such Act is 
        amended by striking ``section 6662(b)(2)(C)(ii)'' and inserting 
        ``section 6661(b)(2)(C)(ii)''.
            (25) Subparagraph (A) of section 7811(i)(3) of such Act is 
        amended by inserting ``the first place it appears'' before ``in 
        clause (i)''.
            (26) Paragraph (10) of section 7841(d) of such Act is 
        amended by striking ``section 381(a)'' and inserting ``section 
        381(c)''.
            (27) Paragraph (2) of section 7861(c) of such Act is 
        amended by inserting ``the second place it appears'' before 
        ``and inserting''.
            (28) Paragraph (1) of section 460(b) is amended by striking 
        ``the look-back method of paragraph (3)'' and inserting ``the 
        look-back method of paragraph (2)''.
            (29) Subparagraph (C) of section 50(a)(2) is amended by 
        striking ``subsection (c)(4)'' and inserting ``subsection 
        (d)(5)''.
            (30) Subparagraph (B) of section 172(h)(4) is amended by 
        striking the material following the heading and preceding 
        clause (i) and inserting ``For purposes of subsection (b)(2)--
        ''.
            (31) Subparagraph (A) of section 355(d)(7) is amended by 
        inserting ``section'' before ``267(b)''.
            (32) Subparagraph (C) of section 420(e)(1) is amended by 
        striking ``mean'' and inserting ``means''.
            (33) Paragraph (4) of section 537(b) is amended by striking 
        ``section 172(i)'' and inserting ``section 172(f)''.
            (34) Subparagraph (B) of section 613(e)(1) is amended by 
        striking the comma at the end thereof and inserting a period.
            (35) Paragraph (4) of section 856(a) is amended by striking 
        ``section 582(c)(5)'' and inserting ``section 582(c)(2)''.
            (36) Sections 904(f)(2)(B)(i) and 907(c)(4)(B)(iii) are 
        each amended by inserting ``(as in effect on the day before the 
        date of the enactment of the Revenue Reconciliation Act of 
        1990)'' after ``section 172(h)''.
            (37) Subsection (b) of section 936 is amended by striking 
        ``subparagraphs (D)(ii)(I)'' and inserting ``subparagraphs 
        (D)(ii)''.
            (38) Subsection (c) of section 2104 is amended by striking 
        ``subparagraph (A), (C), or (D) of section 861(a)(1)'' and 
        inserting ``section 861(a)(1)(A)''.
            (39) Subparagraph (A) of section 280A(c)(1) is amended to 
        read as follows:
                    ``(A) as the principal place of business for any 
                trade or business of the taxpayer,''.
            (40) Section 6038 is amended by redesignating the 
        subsection relating to cross references as subsection (f).
            (41) Clause (iv) of section 6103(e)(1)(A) is amended by 
        striking all that follows ``provisions of'' and inserting 
        ``section 1(g) or 59(j);''.
            (42) The subsection (f) of section 6109 of the Internal 
        Revenue Code of 1986 which was added by section 2201(d) of 
        Public Law 101-624 is redesignated as subsection (g).
            (43) Subsection (b) of section 7454 is amended by striking 
        ``section 4955(e)(2)'' and inserting ``section 4955(f)(2)''.
            (44) Subsection (d) of section 11231 of the Revenue 
        Reconciliation Act of 1990 shall be applied as if ``comma'' 
        appeared instead of ``period'' and as if the paragraph (9) 
        proposed to be added ended with a comma.
            (45) Paragraph (1) of section 11303(b) of the Revenue 
        Reconciliation Act of 1990 shall be applied as if ``paragraph'' 
        appeared instead of ``subparagraph'' in the material proposed 
        to be stricken.
            (46) Subsection (f) of section 11701 of the Revenue 
        Reconciliation Act of 1990 is amended by inserting ``(relating 
        to definitions)'' after ``section 6038(e)''.
            (47) Subsection (i) of section 11701 of the Revenue 
        Reconciliation Act of 1990 shall be applied as if 
        ``subsection'' appeared instead of ``section'' in the material 
        proposed to be stricken.
            (48) Subparagraph (B) of section 11801(c)(2) of the Revenue 
        Reconciliation Act of 1990 shall be applied as if ``section 
        56(g)'' appeared instead of ``section 59(g)''.
            (49) Subparagraph (C) of section 11801(c)(8) of the Revenue 
        Reconciliation Act of 1990 shall be applied as if 
        ``reorganizations'' appeared instead of ``reorganization'' in 
        the material proposed to be stricken.
            (50) Subparagraph (H) of section 11801(c)(9) of the Revenue 
        Reconciliation Act of 1990 shall be applied as if ``section 
        1042(c)(1)(B)'' appeared instead of ``section 1042(c)(2)(B)''.
            (51) Subparagraph (F) of section 11801(c)(12) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if ``and 
        (3)'' appeared instead of ``and (E)''.
            (52) Subparagraph (A) of section 11801(c)(22) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if 
        ``chapters 21'' appeared instead of ``chapter 21'' in the 
        material proposed to be stricken.
            (53) Paragraph (3) of section 11812(b) of the Revenue 
        Reconciliation Act of 1990 shall be applied by not executing 
        the amendment therein to the heading of section 42(d)(5)(B).
            (54) Clause (i) of section 11813(b)(9)(A) of the Revenue 
        Reconciliation Act of 1990 shall be applied as if a comma 
        appeared after ``(3)(A)(ix)'' in the material proposed to be 
        stricken.
            (55) Subparagraph (F) of section 11813(b)(13) of the 
        Revenue Reconciliation Act of 1990 shall be applied as if 
        ``tax'' appeared after ``investment'' in the material proposed 
        to be stricken.
            (56) Paragraph (19) of section 11813(b) of the Revenue 
        Reconciliation Act of 1990 shall be applied as if ``Paragraph 
        (20) of section 1016(a), as redesignated by section 11801,'' 
        appeared instead of ``Paragraph (21) of section 1016(a)''.
            (57) Paragraph (5) section 8002(a) of the Surface 
        Transportation Revenue Act of 1991 shall be applied as if 
        ``4481(e)'' appeared instead of ``4481(c)''.
            (58) Section 7872 is amended--
                    (A) by striking ``foregone'' each place it appears 
                in subsections (a) and (e)(2) and inserting 
                ``forgone'', and
                    (B) by striking ``Foregone'' in the heading for 
                subsection (e) and the heading for paragraph (2) of 
                subsection (e) and inserting ``Forgone''.
            (59) Paragraph (7) of section 7611(h) is amended by 
        striking ``approporiate'' and inserting ``appropriate''.
            (60) The heading of paragraph (3) of section 419A(c) is 
        amended by striking ``severence'' and inserting ``severance''.
            (61) Clause (ii) of section 807(d)(3)(B) is amended by 
        striking ``Commissoners' '' and inserting ``Commissioners' ''.
            (62) Subparagraph (B) of section 1274A(c)(1) is amended by 
        striking ``instument'' and inserting ``instrument''.
            (63) Subparagraph (B) of section 724(d)(3) by striking 
        ``Subparagaph'' and inserting ``Subparagraph''.
            (64) The last sentence of paragraph (2) of section 42(c) is 
        amended by striking ``of 1988''.
            (65) Paragraph (1) of section 9707(d) is amended by 
        striking ``diligence,'' and inserting ``diligence''.
            (66) Subsection (c) of section 4977 is amended by striking 
        ``section 132(i)(2)'' and inserting ``section 132(h)''.
            (67) The last sentence of section 401(a)(20) is amended by 
        striking ``section 211'' and inserting ``section 521''.
            (68) Subparagraph (A) of section 402(g)(3) is amended by 
        striking ``subsection (a)(8)'' and inserting ``subsection 
        (e)(3)''.
            (69) The last sentence of section 403(b)(10) is amended by 
        striking ``an direct'' and inserting ``a direct''.
            (70) Subparagraph (A) of section 4973(b)(1) is amended by 
        striking ``sections 402(c)'' and inserting ``section 402(c)''.
            (71) Paragraph (12) of section 3405(e) is amended by 
        striking ``(b)(3)'' and inserting ``(b)(2)''.
            (72) Paragraph (41) of section 521(b) of the Unemployment 
        Compensation Amendments of 1992 shall be applied as if 
        ``section'' appeared instead of ``sections'' in the material 
        proposed to be stricken.
            (73) Paragraph (27) of section 521(b) of the Unemployment 
        Compensation Amendments of 1992 shall be applied as if 
        ``Section 691(c)(5)'' appeared instead of ``Section 691(c)''.
            (74) Paragraph (5) of section 860F(a) is amended by 
        striking ``paragraph (1)'' and inserting ``paragraph (2)''.
            (75) Paragraph (1) of section 415(k) is amended by adding 
        ``or'' at the end of subparagraph (C), by striking 
        subparagraphs (D) and (E), and by redesignating subparagraph 
        (F) as subparagraph (D).
            (76) Paragraph (2) of section 404(a) is amended by striking 
        ``(18),''.
            (77) Clause (ii) of section 72(p)(4)(A) is amended to read 
        as follows:
                            ``(ii) Special rule.--The term `qualified 
                        employer plan' shall include any plan which was 
                        (or was determined to be) a qualified employer 
                        plan or a government plan.''.
            (78) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i) are each 
        amended by striking ``section 6662(d)(2)(C)(ii)'' and inserting 
        ``section 6662(d)(2)(C)(iii)''.
            (79) Subsection (a) of section 164 is amended by striking 
        the paragraphs relating to the generation-skipping tax and the 
        environmental tax imposed by section 59A and by inserting after 
        paragraph (3) the following new paragraphs:
            ``(4) The GST tax imposed on income distributions.
            ``(5) The environmental tax imposed by section 59A.''.
            (80) Subclause (I) of section 936(a)(4)(A)(ii) is amended 
        by striking ``deprecation'' and inserting ``depreciation''.

                      Subtitle G--Other Provisions

SEC. 1801. EXEMPTION FROM DIESEL FUEL DYEING REQUIREMENTS WITH RESPECT 
              TO CERTAIN STATES.

    (a) In General.--Section 4082 (relating to exemptions for diesel 
fuel) is amended by redesignating subsections (c) and (d) as 
subsections (d) and (e), respectively, and by inserting after 
subsection (b) the following new subsection:
    ``(c) Exception to Dyeing Requirements.--Paragraph (2) of 
subsection (a) shall not apply with respect to any diesel fuel--
            ``(1) removed, entered, or sold in a State for ultimate 
        sale or use in an area of such State during the period such 
        area is exempted from the fuel dyeing requirements under 
        subsection (i) of section 211 of the Clean Air Act (as in 
        effect on the date of the enactment of this subsection) by the 
        Administrator of the Environmental Protection Agency under 
        paragraph (4) of such subsection (i) (as so in effect), and
            ``(2) the use of which is certified pursuant to regulations 
        issued by the Secretary.''
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to fuel removed, entered, or sold on or after the 
first day of the first calendar quarter beginning after the date of the 
enactment of this Act.

SEC. 1802. TREATMENT OF CERTAIN UNIVERSITY ACCOUNTS.

    (a) In General.--For purposes of subsection (s) of section 3121 of 
the Internal Revenue Code of 1986 (relating to concurrent employment by 
2 or more employers)--
            (1) the following entities shall be deemed to be related 
        corporations that concurrently employ the same individual:
                    (A) a State university which employs health 
                professionals as faculty members at a medical school, 
                and
                    (B) an agency account of a State university which 
                is described in subparagraph (A) and from which there 
                is distributed to such faculty members payments forming 
                a part of the compensation that the State, or such 
                State university, as the case may be, agrees to pay to 
                such faculty members, but only if--
                            (i) such agency account is authorized by 
                        State law and receives the funds for such 
                        payments from a faculty practice plan described 
                        in section 501(c)(3) of such Code and exempt 
                        from tax under section 501(a) of such Code,
                            (ii) such payments are distributed by such 
                        agency account to such faculty members who 
                        render patient care at such medical school, and
                            (iii) such faculty members comprise at 
                        least 30 percent of the membership of such 
                        faculty practice plan, and
            (2) remuneration which is disbursed by such agency account 
        to any such faculty member of the medical school described in 
        paragraph (1)(A) shall be deemed to have been actually 
        disbursed by the State, or such State university, as the case 
        may be, as a common paymaster and not to have been actually 
        disbursed by such agency account.
    (b) Effective Date.--The provisions of subsection (a) shall apply 
to remuneration paid after December 31, 1996.

SEC. 1803. MODIFICATIONS TO EXCISE TAX ON OZONE-DEPLETING CHEMICALS.

    (a) Recycled Halon.--
            (1) In general.--Section 4682(d)(1) (relating to recycling) 
        is amended by inserting ``, or on any recycled halon imported 
        from any country which is a signatory to the Montreal Protocol 
        on Substances that Deplete the Ozone Layer'' before the period 
        at the end.
            (2) Certification system.--The Secretary of the Treasury, 
        after consultation with the Administrator of the Environmental 
        Protection Agency, shall develop a certification system to 
        ensure compliance with the recycling requirement for imported 
        halon under section 4682(d)(1) of the Internal Revenue Code of 
        1986, as amended by paragraph (1).
    (b) Chemicals Used as Propellants in Metered-Dose Inhalers Tax-
Exempt.--Paragraph (4) of section 4682(g) (relating to phase-in of tax 
on certain substances) is amended to read as follows:
            ``(4) Chemicals used as propellants in metered-dose 
        inhalers.--
                    ``(A) Tax-exempt.--
                            ``(i) In general.--No tax shall be imposed 
                        by section 4681 on--
                                    ``(I) any use of any substance as a 
                                propellant in metered-dose inhalers, or
                                    ``(II) any qualified sale by the 
                                manufacturer, producer, or importer of 
                                any substance.
                            ``(ii) Qualified sale.--For purposes of 
                        clause (i), the term `qualified sale' means any 
                        sale by the manufacturer, producer, or importer 
                        of any substance--
                                    ``(I) for use by the purchaser as a 
                                propellant in metered-dose inhalers, or
                                    ``(II) for resale by the purchaser 
                                to a 2d purchaser for such use by the 
                                2d purchaser.
                        The preceding sentence shall apply only if the 
                        manufacturer, producer, and importer, and the 
                        1st and 2d purchasers (if any) meet such 
                        registration requirements as may be prescribed 
                        by the Secretary.
                    ``(B) Overpayments.--If any substance on which tax 
                was paid under this subchapter is used by any person as 
                a propellant in metered-dose inhalers, credit or refund 
                without interest shall be allowed to such person in an 
                amount equal to the excess of--
                            ``(i) the tax paid under this subchapter on 
                        such substance, over
                            ``(ii) the tax (if any) which would be 
                        imposed by section 4681 if such substance were 
                        used for such use by the manufacturer, 
                        producer, or importer thereof on the date of 
                        its use by such person.
                        Amounts payable under the preceding sentence 
                        with respect to uses during the taxable year 
                        shall be treated as described in section 34(a) 
                        for such year unless claim thereof has been 
                        timely filed under this subparagraph.''
    (c) Effective Dates.--
            (1) Recycled halon.--The amendment made by subsection 
        (a)(1) shall take effect on January 1, 1997.
            (2) Metered-dose inhalers.--The amendment made by 
        subsection (b) shall take effect on the 7th day after the date 
        of the enactment of this Act.

SEC. 1804. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER ADMINISTRATION 
              FACILITY.

    Sections 142(f)(3) (as added by section 1605) and 147(d) of the 
Internal Revenue Code of 1986 shall not apply in determining whether 
any private activity bond issued after the date of the enactment of 
this Act and used to finance the acquisition of the Snettisham 
hydroelectric project from the Alaska Power Administration is a 
qualified bond for purposes of such Code.

SEC. 1805. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY COMMON 
              TRUST FUNDS TO REGULATED INVESTMENT COMPANIES.

    (a) General Rule.--Section 584 (relating to common trust funds) is 
amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) Nonrecognition Treatment for Certain Transfers to Regulated 
Investment Companies.--
            ``(1) In general.--If--
                    ``(A) a common trust fund transfers substantially 
                all of its assets to one or more regulated investment 
                companies in exchange solely for stock in the company 
                or companies to which such assets are so transferred, 
                and
                    ``(B) such stock is distributed by such common 
                trust fund to participants in such common trust fund in 
                exchange solely for their interests in such common 
                trust fund,
        no gain or loss shall be recognized by such common trust fund 
        by reason of such transfer or distribution, and no gain or loss 
        shall be recognized by any participant in such common trust 
        fund by reason of such exchange.
            ``(2) Basis rules.--
                    ``(A) Regulated investment company.--The basis of 
                any asset received by a regulated investment company in 
                a transfer referred to in paragraph (1)(A) shall be the 
                same as it would be in the hands of the common trust 
                fund.
                    ``(B) Participants.--The basis of the stock which 
                is received in an exchange referred to in paragraph 
                (1)(B) shall be the same as that of the property 
                exchanged. If stock in more than one regulated 
                investment company is received in such exchange, the 
                basis determined under the preceding sentence shall be 
                allocated among the stock in each such company on the 
                basis of respective fair market values.
            ``(3) Treatment of assumptions of liability.--
                    ``(A) In general.--In determining whether the 
                transfer referred to in paragraph (1)(A) is in exchange 
                solely for stock in one or more regulated investment 
                companies, the assumption by any such company of a 
                liability of the common trust fund, and the fact that 
                any property transferred by the common trust fund is 
                subject to a liability, shall be disregarded.
                    ``(B) Special rule where assumed liabilities exceed 
                basis.--
                            ``(i) In general.--If, in any transfer 
                        referred to in paragraph (1)(A), the assumed 
                        liabilities exceed the aggregate adjusted bases 
                        (in the hands of the common trust fund) of the 
                        assets transferred to the regulated investment 
                        company or companies--
                                    ``(I) notwithstanding paragraph 
                                (1), gain shall be recognized to the 
                                common trust fund on such transfer in 
                                an amount equal to such excess,
                                    ``(II) the basis of the assets 
                                received by the regulated investment 
                                company or companies in such transfer 
                                shall be increased by the amount so 
                                recognized, and
                                    ``(III) any adjustment to the basis 
                                of a participant's interest in the 
                                common trust fund as a result of the 
                                gain so recognized shall be treated as 
                                occurring immediately before the 
                                exchange referred to in paragraph 
                                (1)(B).
                        If the transfer referred to in paragraph (1)(A) 
                        is to two or more regulated investment 
                        companies, the basis increase under subclause 
                        (II) shall be allocated among such companies on 
                        the basis of the respective fair market values 
                        of the assets received by each of such 
                        companies.
                            ``(ii) Assumed liabilities.--For purposes 
                        of clause (i), the term `assumed liabilities' 
                        means the aggregate of--
                                    ``(I) any liability of the common 
                                trust fund assumed by any regulated 
                                investment company in connection with 
                                the transfer referred to in paragraph 
                                (1)(A), and
                                    ``(II) any liability to which 
                                property so transferred is subject.
            ``(4) Common trust fund must meet diversification rules.--
        This subsection shall not apply to any common trust fund which 
        would not meet the requirements of section 368(a)(2)(F)(ii) if 
        it were a corporation. For purposes of the preceding sentence, 
        Government securities shall not be treated as securities of an 
        issuer in applying the 25-percent and 50-percent test and such 
        securities shall not be excluded for purposes of determining 
        total assets under clause (iv) of section 368(a)(2)(F).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to transfers after December 31, 1995.

SEC. 1806. QUALIFIED STATE TUITION PROGRAMS.

    (a) In General.--Subchapter F of chapter 1 (relating to exempt 
organizations) is amended by adding at the end the following new part:

             ``PART VIII--QUALIFIED STATE TUITION PROGRAMS

                              ``Sec. 529. Qualified State tuition 
                                        programs.

``SEC. 529. QUALIFIED STATE TUITION PROGRAMS.

    ``(a) General Rule.--A qualified State tuition program shall be 
exempt from taxation under this subtitle. Notwithstanding the preceding 
sentence, such program shall be subject to the taxes imposed by section 
511 (relating to imposition of tax on unrelated business income of 
charitable organizations).
    ``(b) Qualified State Tuition Program.--For purposes of this 
section--
            ``(1) In general.--The term `qualified State tuition 
        program' means a program established and maintained by a State 
        or agency or instrumentality thereof--
                    ``(A) under which a person--
                            ``(i) may purchase tuition credits or 
                        certificates on behalf of a designated 
                        beneficiary which entitle the beneficiary to 
                        the waiver or payment of qualified higher 
                        education expenses of the beneficiary, or
                            ``(ii) may make contributions to an account 
                        which is established for the sole purpose of 
                        meeting the qualified higher education expenses 
                        of the designated beneficiary of the account, 
                        and
                    ``(B) which meets the other requirements of this 
                subsection.
            ``(2) Cash contributions.--A program shall not be treated 
        as a qualified State tuition program unless it provides that 
        purchases or contributions may only be made in cash.
            ``(3) Refunds.--A program shall not be treated as a 
        qualified State tuition program unless it imposes a more than 
        de minimis penalty on any refund of earnings from the account 
        which are not--
                    ``(A) used for qualified higher education expenses 
                of the designated beneficiary,
                    ``(B) made on account of the death or disability of 
                the designated beneficiary, or
                    ``(C) made on account of a scholarship received by 
                the designated beneficiary to the extent the amount of 
                the refund does not exceed the amount of the 
                scholarship used for qualified higher education 
                expenses.
            ``(4) Separate accounting.--A program shall not be treated 
        as a qualified State tuition program unless it provides 
        separate accounting for each designated beneficiary.
            ``(5) No investment direction.--A program shall not be 
        treated as a qualified State tuition program unless it provides 
        that any contributor to, or designated beneficiary under, such 
        program may not direct the investment of any contributions to 
        the program (or any earnings thereon).
            ``(6) No pledging of interest as security.--A program shall 
        not be treated as a qualified State tuition program if it 
        allows any interest in the program or any portion thereof to be 
        used as security for a loan.
    ``(c) Tax Treatment of Designated Beneficiaries and Contributors.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, no amount shall be includible in gross income of--
                    ``(A) a designated beneficiary under a qualified 
                State tuition program, or
                    ``(B) a contributor to such program on behalf of a 
                designated beneficiary,
        with respect to any contribution to, or earnings under, such 
        program.
            ``(2) Distributions.--
                    ``(A) In general.--Any distribution under a 
                qualified State tuition program shall be includible in 
                the gross income of the distributee in the same manner 
                as provided under section 72 to the extent not excluded 
                from gross income under any other provision of this 
                chapter.
                    ``(B) In-kind distributions.--The furnishing of 
                education to a designated beneficiary under a qualified 
                State tuition program shall be treated as a 
                distribution to the beneficiary.
                    ``(C) Change in beneficiaries.--
                            ``(i) Rollovers.--Subparagraph (A) shall 
                        not apply to that portion of any distribution 
                        which, within 60 days of such distribution, is 
                        transferred to the credit of another designated 
                        beneficiary under a qualified State tuition 
                        program who is a member of the same family as 
                        the designated beneficiary with respect to 
                        which the distribution was made.
                            ``(ii) Change in designated 
                        beneficiaries.--Any change in the designated 
                        beneficiary of an interest in a qualified State 
                        tuition program shall not be treated as a 
                        distribution for purposes of subparagraph (A) 
                        if the new beneficiary is a member of the same 
                        family as the old beneficiary.
                    ``(D) Operating rules.--For purposes of applying 
                section 72--
                            ``(i) all qualified State tuition programs 
                        of which an individual is a designated 
                        beneficiary shall be treated as one program,
                            ``(ii) all distributions during a taxable 
                        year shall be treated as one distribution, and
                            ``(iii) the value of the contract, income 
                        on the contract, and investment in the contract 
                        shall be computed as of the close of the 
                        calendar year in which the taxable year begins.
            ``(3) Gift tax treatment.--Any contribution on behalf of a 
        designated beneficiary to a qualified State tuition program 
        shall be treated as a qualified transfer for purposes of 
        section 2503(e).
    ``(d) Reporting Requirements.--
            ``(1) In general.--If--
                    ``(A) a designated beneficiary is furnished 
                education under a qualified State tuition program 
                during any calendar year, or
                    ``(B) there is a distribution to any individual 
                with respect to an interest in such program during any 
                calendar year,
        each officer or employee having control of the qualified State 
        tuition program or their designee shall make such reports as 
        the Secretary may require regarding such education or 
        distribution to the Secretary and to the designated beneficiary 
        or the individual to whom the distribution was made. Any such 
        report shall include such information as the Secretary may 
        prescribe.
            ``(2) Timing of reports.--Any report required by this 
        subsection--
                    ``(A) shall be filed at such time and in such 
                matter as the Secretary prescribes, and
                    ``(B) shall be furnished to individuals not later 
                than January 31 of the calendar year following the 
                calendar year to which such report relates.
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Designated beneficiary.--The term `designated 
        beneficiary' means--
                    ``(A) the individual designated at the commencement 
                of participation in the qualified State tuition program 
                as the beneficiary of amounts paid (or to be paid) to 
                the program,
                    ``(B) in the case of a change in beneficiaries 
                described in subsection (c)(2)(C)(ii), the individual 
                who is the new beneficiary, and
                    ``(C) in the case of an interest in a qualified 
                State tuition program purchased by a State or local 
                government or an organization described in section 
                501(c)(3) and exempt from taxation under section 501(a) 
                as part of a scholarship program operated by such 
                government or organization, the individual receiving 
                such interest as a scholarship.
            ``(2) Member of family.--The term `member of family' has 
        the same meaning given such term as section 2032A(e)(2).
            ``(3) Qualified higher education expenses.--The term 
        `qualified higher education expenses' means tuition, fees, 
        books, supplies, and equipment required for the enrollment or 
        attendance of a designated beneficiary at an eligible education 
        institution (as defined in section 135(c)(3)).
            ``(4) Application of section 514.--An interest in a 
        qualified State tuition program shall not be treated as debt 
        for purposes of section 514.''
    (b) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after the date of the enactment 
        of this Act.
            (2) Transition rule.--If--
                    (A) a State or agency or instrumentality thereof 
                maintains, on the date of the enactment of this Act, a 
                program under which persons may purchase tuition 
                credits or certificates on behalf of, or make 
                contributions for education expenses of, a designated 
                beneficiary, and
                    (B) such program meets the requirements of a 
                qualified State tuition program before the later of--
                            (i) the date which is 1 year after such 
                        date of enactment, or
                            (ii) the first day of the first calendar 
                        quarter after the close of the first regular 
                        session of the State legislature that begins 
                        after such date of enactment,
                the amendments made by this section shall apply to 
                contributions (and earnings allocable thereto) made 
                before the later of such dates without regard to 
                whether any requirements of such amendments are met 
                with respect to such contributions and earnings. For 
                purposes of subparagraph (B)(ii), if a State has a 2-
                year legislative session, each year of such session 
                shall be deemed to be a separate regular session of the 
                State legislature.

                       TITLE II--PAYMENT OF WAGES

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Employee Commuting Flexibility Act 
of 1996''.

SEC. 2. PROPER COMPENSATION FOR USE OF EMPLOYER VEHICLES.

    Section 4(a) of the Portal-to-Portal Act of 1947 (29 U.S.C. 254(a)) 
is amended by adding at the end the following: ``For purposes of this 
subsection, the use of an employer's vehicle for travel by an employee 
and activities performed by an employee which are incidental to the use 
of such vehicle for commuting shall not be considered part of the 
employee's principal activities if the use of such vehicle for travel 
is within the normal commuting area for the employer's business or 
establishment and the use of the employer's vehicle is subject to an 
agreement on the part of the employer and the employee or 
representative of such employee.''.

SEC. 3. EFFECTIVE DATE.

    The amendment made by section 1 shall take effect on the date of 
the enactment of this Act and shall apply in determining the 
application of section 4 of the Portal-to-Portal Act of 1947 to an 
employee in any civil action brought before such date of enactment but 
pending on such date.

SEC. 4. MINIMUM WAGE INCREASE.

    (a) Short Title.--This section may be cited as the ``Minimum Wage 
Increase Act of 1996''.
    (b) Amendment.--Paragraph (1) of section 6(a) of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 206(a)) is amended to read as follows:
            ``(1) except as otherwise provided in this section, not 
        less than $4.25 an hour during the period ending on June 30, 
        1996, not less than $4.75 an hour during the year beginning on 
        July 1, 1996, and not less than $5.15 an hour after the 
        expiration of such year;''.

SEC. 5. FAIR LABOR STANDARDS ACT AMENDMENTS.

    (a) Computer Professionals.--Section 13(a) of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 213(a)) is amended by striking the 
period at the end of paragraph (16) and inserting ``; or'' and by 
adding after that paragraph the following:
            ``(17) any employee who is a computer systems analyst, 
        computer programmer, software engineer, or other similarly 
        skilled worker, whose primary duty is--
                    ``(A) the application of systems analysis 
                techniques and procedures, including consulting with 
                users, to determine hardware, software, or system 
                functional specifications;
                    ``(B) the design, development, documentation, 
                analysis, creation, testing, or modification of 
                computer systems or programs, including prototypes, 
                based on and related to user or system design 
                specifications;
                    ``(C) the design, documentation, testing, creation, 
                or modification of computer programs related to machine 
                operating systems; or
                    ``(D) a combination of duties described in 
                subparagraphs (A), (B), and (C) the performance of 
                which requires the same level of skills, and
        who, in the case of an employee who is compensated on an hourly 
        basis, is compensated at a rate of not less than $27.63 an 
        hour.''.
    (b) Tip Credit.--The next to last sentence of section 3(m) of the 
Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)) is amended to read 
as follows: ``In determining the wage an employer is required to pay a 
tipped employee, the amount paid such employee by the employee's 
employer shall be an amount equal to--
            ``(1) the cash wage paid such employee which for purposes 
        of such determination shall be not less than the cash wage 
        required to be paid such an employee on the date of the 
        enactment of this paragraph; and
            ``(2) an additional amount on account of the tips received 
        by such employee which amount is equal to the difference 
        between the wage specified in paragraph (1) and the cash wage 
        in effect under section 6(a)(1).
The additional amount on account of tips may not exceed the value of 
the tips actually received by an employee.''.
    (c) Opportunity Wage.--Section 6 of the Fair Labor Standards Act of 
1938 (29 U.S.C. 206) is amended by adding at the end the following:
    ``(g)(1) In lieu of the rate prescribed by subsection (a)(1), any 
employer may pay any employee of such employer, during the first 90 
consecutive calendar days after such employee is initially employed by 
such employer, a wage which is not less than $4.25 an hour.
    ``(2) No employer may take any action to displace employees 
(including partial displacements such as reduction in hours, wages, or 
employment benefits) for purposes of hiring individuals at the wage 
authorized in paragraph (1).
    ``(3) Any employer who violates this subsection shall be considered 
to have violated section 15(a)(3).
    ``(4) This subsection shall only apply to an employee who has not 
attained the age of 20 years.''.

            Passed the House of Representatives May 22, 1996.

            Attest:

                                                ROBIN H. CARLE,

                                                                 Clerk.

                              By Linda Nave,

                                                          Deputy Clerk.
```