I

106TH CONGRESS

2D SESSION H. R. 5542

To amend the Internal Revenue Code of 1986 to provide tax relief.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 25, 2000

Mr. ARMEY introduced the following bill; which was referred to the Committee

on Ways and Means, and in addition to the Committees on Education

and the Workforce, Banking and Financial Services, and the Budget, for

a period to be subsequently determined by the Speaker, in each case for

consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to provide

tax relief.

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

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

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

5 ‘‘Taxpayer Relief Act of 2000’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 (c) TABLE OF CONTENTS.—

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

TITLE I—FSC REPEAL AND EXTRATERRITORIAL INCOME

EXCLUSION

Sec. 101. Repeal of foreign sales corporation rules.

Sec. 102. Treatment of extraterritorial income.

Sec. 103. Technical and conforming amendments.

Sec. 104. Effective date.

TITLE II—SMALL BUSINESS TAX RELIEF

Sec. 201. Extension of work opportunity tax credit.

Sec. 202. Increase in amortizable reforestation expenditures, etc.

Sec. 203. Increase in expense treatment for small businesses.

Sec. 204. Increased deduction for meal expenses.

Sec. 205. Increased deductibility of business meal expenses for individuals subject to Federal limitations on hours of service.

Sec. 206. Repeal of modification of installment method.

Sec. 207. Income averaging not to increase alternative minimum tax liability;

income averaging for fishermen.

Sec. 208. Repeal of occupational taxes relating to distilled spirits, wine, and

beer.

Sec. 209. Exclusion from gross income for certain forgiven mortgage obligations.

Sec. 210. Clarification of cash accounting rules for small business.

Sec. 211. Amendments relating to demand deposit accounts at depository institutions.

TITLE III—HEALTH INSURANCE AND LONG-TERM CARE

INSURANCE PROVISIONS

Sec. 301. Deduction for 100 percent of health insurance costs of self-employed

individuals.

Sec. 302. Deduction for health and long-term care insurance costs of individuals not participating in employer-subsidized health plans.

Sec. 303. 2-year extension of availability of medical savings accounts.

Sec. 304. Additional consumer protections for long-term care insurance.

Sec. 305. Deduction for providing long-term care in the home to household

members.

TITLE IV—PENSION AND INDIVIDUAL RETIREMENT

ARRANGEMENT PROVISIONS

Sec. 400. Short title.

Subtitle A—Individual Retirement Accounts

Sec. 401. Modification of IRA contribution limits.

Sec. 402. Deemed IRAs under employer plans.
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Sec. 403. Tax-free distributions from individual retirement accounts for charitable purposes.

Sec. 404. Modification of AGI limits for Roth IRAs.

Subtitle B—Expanding Coverage

Sec. 411. Increase in benefit and contribution limits.

Sec. 412. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 413. Modification of top-heavy rules.

Sec. 414. Elective deferrals not taken into account for purposes of deduction

limits.

Sec. 415. Repeal of coordination requirements for deferred compensation plans

of State and local governments and tax-exempt organizations.

Sec. 416. Elimination of user fee for requests to IRS regarding pension plans.

Sec. 417. Deduction limits.

Sec. 418. Option to treat elective deferrals as after-tax Roth contributions.

Subtitle C—Enhancing Fairness for Women

Sec. 421. Catch-up contributions for individuals age 50 or over.

Sec. 422. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 423. Faster vesting of certain employer matching contributions.

Sec. 424. Simplify and update the minimum distribution rules.

Sec. 425. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.

Sec. 426. Provisions relating to hardship distributions.

Sec. 427. Waiver of tax on nondeductible contributions for domestic or similar

workers.

Subtitle D—Increasing Portability for Participants

Sec. 431. Rollovers allowed among various types of plans.

Sec. 432. Rollovers of IRAs into workplace retirement plans.

Sec. 433. Rollovers of after-tax contributions.

Sec. 434. Hardship exception to 60-day rule.

Sec. 435. Treatment of forms of distribution.

Sec. 436. Rationalization of restrictions on distributions.

Sec. 437. Purchase of service credit in governmental defined benefit plans.

Sec. 438. Employers may disregard rollovers for purposes of cash-out amounts.

Sec. 439. Minimum distribution and inclusion requirements for section 457

plans.

Subtitle E—Strengthening Pension Security and Enforcement

Sec. 441. Repeal of 155 percent of current liability funding limit.

Sec. 442. Maximum contribution deduction rules modified and applied to all defined benefit plans.

Sec. 443. Excise tax relief for sound pension funding.

Sec. 444. Excise tax on failure to provide notice by defined benefit plans significantly reducing future benefit accruals.

Sec. 445. Treatment of multiemployer plans under section 415.

Sec. 446. Protection of investment of employee contributions to 401(k) plans.

Sec. 447. Periodic pension benefits statements.

Sec. 448. Prohibited allocations of stock in S corporation ESOP.

Subtitle F—Reducing Regulatory Burdens
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Sec. 451. Modification of timing of plan valuations.

Sec. 452. ESOP dividends may be reinvested without loss of dividend deduction.

Sec. 453. Repeal of transition rule relating to certain highly compensated employees.

Sec. 454. Employees of tax-exempt entities.

Sec. 455. Clarification of treatment of employer-provided retirement advice.

Sec. 456. Reporting simplification.

Sec. 457. Improvement of employee plans compliance resolution system.

Sec. 458. Repeal of the multiple use test.

Sec. 459. Flexibility in nondiscrimination, coverage, and line of business rules.

Sec. 460. Extension to all governmental plans of moratorium on application of

certain nondiscrimination rules applicable to State and local

plans.

Sec. 461. Notice and consent period regarding distributions.

Sec. 462. Annual report dissemination.

Sec. 463. Technical corrections to SAVER Act.

Sec. 464. Study of pension coverage.

Subtitle G—Other ERISA Provisions

Sec. 471. Missing participants.

Sec. 472. Reduced PBGC premium for new plans of small employers.

Sec. 473. Reduction of additional PBGC premium for new and small plans.

Sec. 474. Authorization for PBGC to pay interest on premium overpayment refunds.

Sec. 475. Substantial owner benefits in terminated plans.

Sec. 476. Multiemployer plan benefits guarantee.

Sec. 477. Civil penalties for breach of fiduciary responsibility.

Sec. 478. Benefit suspension notice.

Subtitle H—Plan Amendments

Sec. 481. Provisions relating to plan amendments.

TITLE V—SCHOOL CONSTRUCTION PROVISIONS

Sec. 501. Additional increase in arbitrage rebate exception for governmental

bonds used to finance educational facilities.

Sec. 502. Modification of arbitrage rebate rules applicable to public school construction bonds.

Sec. 503. Modification of special arbitrage rule for certain funds.

Sec. 504. Treatment of qualified public educational facility bonds as exempt facility bonds.

Sec. 505. Expansion of qualified zone academy bond program.

TITLE VI—COMMUNITY REVITALIZATION

Subtitle A—Tax Incentives for Renewal Communities

Sec. 601. Designation of and tax incentives for renewal communities.

Sec. 602. Work opportunity credit for hiring youth residing in renewal communities.

Subtitle B—Extension and Expansion of Empowerment Zone Incentives

Sec. 611. Authority to designate 9 additional empowerment zones.

Sec. 612. Extension of empowerment zone treatment through 2009.
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Sec. 613. 20 percent employment credit for all empowerment zones

Sec. 614. Increased expensing under section 179.

Sec. 615. Higher limits on tax-exempt empowerment zone facility bonds.

Sec. 616. Nonrecognition of gain on rollover of empowerment zone investments.

Sec. 617. Increased exclusion of gain on sale of empowerment zone stock.

Subtitle C—New Markets Tax Credit

Sec. 621. New markets tax credit.

Subtitle D—Improvements in Low-Income Housing Credit

Sec. 631. Modification of State ceiling on low-income housing credit.

Sec. 632. Modification of criteria for allocating housing credits among projects.

Sec. 633. Additional responsibilities of housing credit agencies.

Sec. 634. Modifications to rules relating to basis of building which is eligible

for credit.

Sec. 635. Other modifications.

Sec. 636. Carryforward rules.

Sec. 637. Effective date.

Subtitle E—Other Community Renewal and New Markets Assistance

Sec. 641. Transfer of unoccupied and substandard HUD-held housing to local

governments and community development corporations.

Sec. 642. Transfer of HUD assets in revitalization areas.

Sec. 643. Risk-sharing demonstration.

Sec. 644. Prevention and treatment of substance abuse; services provided

through religious organizations.

Subtitle F—Other Provisions

Sec. 651. Acceleration of phase-in of increase in volume cap on private activity

bonds.

Sec. 652. Modifications to expensing of environmental remediation costs.

Sec. 653. Extension of DC homebuyer tax credit.

TITLE VII—ADMINISTRATIVE, MISCELLANEOUS, AND TECHNICAL

PROVISIONS

Subtitle A—Administrative Provisions

Sec. 701. Exemption of certain reporting requirements.

Sec. 702. Extension of deadlines for IRS compliance with certain notice requirements.

Sec. 703. Extension of authority for undercover operations.

Sec. 704. Confidentiality of certain documents relating to closing and similar

agreements and to agreements with foreign governments.

Sec. 705. Increase in threshold for Joint Committee reports on refunds and

credits.

Sec. 706. Treatment of missing children with respect to certain tax benefits.

Sec. 707. Amendments to statutes referencing yield on 52-week Treasury bills.

Sec. 708. Adjustments for Consumer Price Index error.

Sec. 709. Prevention of duplication of loss through assumption of liabilities giving rise to a deduction.

Subtitle B—Miscellaneous Provisions
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Sec. 710. Repeal of 4.3-cent motor fuel excise taxes on railroads and inland waterway transportation which remain in general fund.

Sec. 711. Repeal of reduction of deductions for mutual life insurance companies.

Sec. 712. Repeal of policyholders surplus account provisions.

Sec. 713. Credit to holders of qualified Amtrak bonds.

Sec. 714. Farm, fishing, and ranch risk management accounts.

Sec. 715. Extension of enhanced deduction for corporate donations of computer

technology.

Sec. 716. Relief from Federal tax liability arising with respect to certain claims

against the Department of Agriculture for discrimination in

farm credit and benefit programs.

Sec. 717. Expansion of credit for adoption expenses.

Sec. 718. Study concerning United States insurance companies with certain offshore reinsurance affiliates.

Sec. 719. Treatment of Indian tribal governments under Federal Unemployment Tax Act.

Subtitle C—Technical Corrections

Sec. 721. Amendments related to Ticket to Work and Work Incentives Improvement Act of 1999.

Sec. 722. Amendments related to Tax and Trade Relief Extension Act of 1998.

Sec. 723. Amendments related to Internal Revenue Service Restructuring and

Reform Act of 1998.

Sec. 724. Amendments related to Taxpayer Relief Act of 1997.

Sec. 725. Amendments related to Balanced Budget Act of 1997.

Sec. 726. Amendments related to Small Business Job Protection Act of 1996.

Sec. 727. Amendment related to Revenue Reconciliation Act of 1990.

Sec. 728. Other technical corrections.

Sec. 729. Clerical changes.

Subtitle D—Pay-Go Adjustments

Sec. 731. Avoidance of a Pay-Go sequestration for fiscal year 2001.

1 TITLE I—FSC REPEAL AND

2 EXTRATERRITORIAL INCOME

3 EXCLUSION

4 SEC. 101. REPEAL OF FOREIGN SALES CORPORATION

5 RULES.

6 Subpart C of part III of subchapter N of chapter 1

7 (relating to taxation of foreign sales corporations) is here8 by repealed.
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1 SEC. 102. TREATMENT OF EXTRATERRITORIAL INCOME.

2 (a) IN GENERAL.—Part III of subchapter B of chap3 ter 1 (relating to items specifically excluded from gross

4 income) is amended by inserting before section 115 the

5 following new section:

6 ‘‘SEC. 114. EXTRATERRITORIAL INCOME.

7 ‘‘(a) EXCLUSION.—Gross income does not include

8 extraterritorial income.

9 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply to

10 extraterritorial income which is not qualifying foreign

11 trade income as determined under subpart E of part III

12 of subchapter N.

13 ‘‘(c) DISALLOWANCE OF DEDUCTIONS.—

14 ‘‘(1) IN GENERAL.—Any deduction of a tax15 payer allocated under paragraph (2) to

16 extraterritorial income of the taxpayer excluded from

17 gross income under subsection (a) shall not be al18 lowed.

19 ‘‘(2) ALLOCATION.—Any deduction of the tax20 payer properly apportioned and allocated to the

21 extraterritorial income derived by the taxpayer from

22 any transaction shall be allocated on a proportionate

23 basis between—

24 ‘‘(A) the extraterritorial income derived

25 from such transaction which is excluded from

26 gross income under subsection (a), and
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1 ‘‘(B) the extraterritorial income derived

2 from such transaction which is not so excluded.

3 ‘‘(d) DENIAL OF CREDITS FOR CERTAIN FOREIGN

4 TAXES.—Notwithstanding any other provision of this

5 chapter, no credit shall be allowed under this chapter for

6 any income, war profits, and excess profits taxes paid or

7 accrued to any foreign country or possession of the United

8 States with respect to extraterritorial income which is ex9 cluded from gross income under subsection (a).

10 ‘‘(e) EXTRATERRITORIAL INCOME.—For purposes of

11 this section, the term ‘extraterritorial income’ means the

12 gross income of the taxpayer attributable to foreign trad13 ing gross receipts (as defined in section 942) of the tax14 payer.’’.

15 (b) QUALIFYING FOREIGN TRADE INCOME.—Part III

16 of subchapter N of chapter 1 is amended by inserting after

17 subpart D the following new subpart:

18 ‘‘Subpart E—Qualifying Foreign Trade Income

‘‘Sec. 941. Qualifying foreign trade income.

‘‘Sec. 942. Foreign trading gross receipts.

‘‘Sec. 943. Other definitions and special rules.

19 ‘‘SEC. 941. QUALIFYING FOREIGN TRADE INCOME.

20 ‘‘(a) QUALIFYING FOREIGN TRADE INCOME.—For

21 purposes of this subpart and section 114—

22 ‘‘(1) IN GENERAL.—The term ‘qualifying for23 eign trade income’ means, with respect to any trans-
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1 action, the amount of gross income which, if ex2 cluded, will result in a reduction of the taxable in3 come of the taxpayer from such transaction equal to

4 the greatest of—

5 ‘‘(A) 30 percent of the foreign sale and

6 leasing income derived by the taxpayer from

7 such transaction,

8 ‘‘(B) 1.2 percent of the foreign trading

9 gross receipts derived by the taxpayer from the

10 transaction, or

11 ‘‘(C) 15 percent of the foreign trade in12 come derived by the taxpayer from the trans13 action.

14 In no event shall the amount determined under sub15 paragraph (B) exceed 200 percent of the amount de16 termined under subparagraph (C).

17 ‘‘(2) ALTERNATIVE COMPUTATION.—A taxpayer

18 may compute its qualifying foreign trade income

19 under a subparagraph of paragraph (1) other than

20 the subparagraph which results in the greatest

21 amount of such income.

22 ‘‘(3) LIMITATION ON USE OF FOREIGN TRADING

23 GROSS RECEIPTS METHOD.—If any person computes

24 its qualifying foreign trade income from any trans25 action with respect to any property under paragraph
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1 (1)(B), the qualifying foreign trade income of such

2 person (or any related person) with respect to any

3 other transaction involving such property shall be

4 zero.

5 ‘‘(4) RULES FOR MARGINAL COSTING.—The

6 Secretary shall prescribe regulations setting forth

7 rules for the allocation of expenditures in computing

8 foreign trade income under paragraph (1)(C) in

9 those cases where a taxpayer is seeking to establish

10 or maintain a market for qualifying foreign trade

11 property.

12 ‘‘(5) PARTICIPATION IN INTERNATIONAL BOY13 COTTS, ETC.—Under regulations prescribed by the

14 Secretary, the qualifying foreign trade income of a

15 taxpayer for any taxable year shall be reduced (but

16 not below zero) by the sum of—

17 ‘‘(A) an amount equal to such income mul18 tiplied by the international boycott factor deter19 mined under section 999, and

20 ‘‘(B) any illegal bribe, kickback, or other

21 payment (within the meaning of section 162(c))

22 paid by or on behalf of the taxpayer directly or

23 indirectly to an official, employee, or agent in

24 fact of a government.
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1 ‘‘(b) FOREIGN TRADE INCOME.—For purposes of

2 this subpart—

3 ‘‘(1) IN GENERAL.—The term ‘foreign trade in4 come’ means the taxable income of the taxpayer at5 tributable to foreign trading gross receipts of the

6 taxpayer.

7 ‘‘(2) SPECIAL RULE FOR COOPERATIVES.—In

8 any case in which an organization to which part I

9 of subchapter T applies which is engaged in the

10 marketing of agricultural or horticultural products

11 sells qualifying foreign trade property, in computing

12 the taxable income of such cooperative, there shall

13 not be taken into account any deduction allowable

14 under subsection (b) or (c) of section 1382 (relating

15 to patronage dividends, per-unit retain allocations,

16 and nonpatronage distributions).

17 ‘‘(c) FOREIGN SALE AND LEASING INCOME.—For

18 purposes of this section—

19 ‘‘(1) IN GENERAL.—The term ‘foreign sale and

20 leasing income’ means, with respect to any

21 transaction—

22 ‘‘(A) foreign trade income properly allo23 cable to activities which—

24 ‘‘(i) are described in paragraph

25 (2)(A)(i) or (3) of section 942(b), and
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1 ‘‘(ii) are performed by the taxpayer

2 (or any person acting under a contract

3 with such taxpayer) outside the United

4 States, or

5 ‘‘(B) foreign trade income derived by the

6 taxpayer in connection with the lease or rental

7 of qualifying foreign trade property for use by

8 the lessee outside the United States.

9 ‘‘(2) SPECIAL RULES FOR LEASED PROP10 ERTY.—

11 ‘‘(A) SALES INCOME.—The term ‘foreign

12 sale and leasing income’ includes any foreign

13 trade income derived by the taxpayer from the

14 sale of property described in paragraph (1)(B).

15 ‘‘(B) LIMITATION IN CERTAIN CASES.—Ex16 cept as provided in regulations, in the case of

17 property which—

18 ‘‘(i) was manufactured, produced,

19 grown, or extracted by the taxpayer, or

20 ‘‘(ii) was acquired by the taxpayer

21 from a related person for a price which

22 was not determined in accordance with the

23 rules of section 482,

24 the amount of foreign trade income which may

25 be treated as foreign sale and leasing income
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1 under paragraph (1)(B) or subparagraph (A) of

2 this paragraph with respect to any transaction

3 involving such property shall not exceed the

4 amount which would have been determined if

5 the taxpayer had acquired such property for the

6 price determined in accordance with the rules of

7 section 482.

8 ‘‘(3) SPECIAL RULES.—

9 ‘‘(A) EXCLUDED PROPERTY.—Foreign sale

10 and leasing income shall not include any income

11 properly allocable to excluded property de12 scribed in subparagraph (B) of section

13 943(a)(3) (relating to intangibles).

14 ‘‘(B) ONLY DIRECT EXPENSES TAKEN

15 INTO ACCOUNT.—For purposes of this sub16 section, any expense other than a directly allo17 cable expense shall not be taken into account in

18 computing foreign trade income.

19 ‘‘SEC. 942. FOREIGN TRADING GROSS RECEIPTS.

20 ‘‘(a) FOREIGN TRADING GROSS RECEIPTS.—

21 ‘‘(1) IN GENERAL.—Except as otherwise pro22 vided in this section, for purposes of this subpart,

23 the term ‘foreign trading gross receipts’ means the

24 gross receipts of the taxpayer which are—
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1 ‘‘(A) from the sale, exchange, or other dis2 position of qualifying foreign trade property,

3 ‘‘(B) from the lease or rental of qualifying

4 foreign trade property for use by the lessee out5 side the United States,

6 ‘‘(C) for services which are related and

7 subsidiary to—

8 ‘‘(i) any sale, exchange, or other dis9 position of qualifying foreign trade prop10 erty by such taxpayer, or

11 ‘‘(ii) any lease or rental of qualifying

12 foreign trade property described in sub13 paragraph (B) by such taxpayer,

14 ‘‘(D) for engineering or architectural serv15 ices for construction projects located (or pro16 posed for location) outside the United States, or

17 ‘‘(E) for the performance of managerial

18 services for a person other than a related per19 son in furtherance of the production of foreign

20 trading gross receipts described in subpara21 graph (A), (B), or (C).

22 Subparagraph (E) shall not apply to a taxpayer for

23 any taxable year unless at least 50 percent of its for24 eign trading gross receipts (determined without re25 gard to this sentence) for such taxable year is de-
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1 rived from activities described in subparagraph (A),

2 (B), or (C).

3 ‘‘(2) CERTAIN RECEIPTS EXCLUDED ON BASIS

4 OF USE; SUBSIDIZED RECEIPTS EXCLUDED.—The

5 term ‘foreign trading gross receipts’ shall not in6 clude receipts of a taxpayer from a transaction if—

7 ‘‘(A) the qualifying foreign trade property

8 or services—

9 ‘‘(i) are for ultimate use in the United

10 States, or

11 ‘‘(ii) are for use by the United States

12 or any instrumentality thereof and such

13 use of qualifying foreign trade property or

14 services is required by law or regulation, or

15 ‘‘(B) such transaction is accomplished by a

16 subsidy granted by the government (or any in17 strumentality thereof) of the country or posses18 sion in which the property is manufactured,

19 produced, grown, or extracted.

20 ‘‘(3) ELECTION TO EXCLUDE CERTAIN RE21 CEIPTS.—The term ‘foreign trading gross receipts’

22 shall not include gross receipts of a taxpayer from

23 a transaction if the taxpayer elects not to have such

24 receipts taken into account for purposes of this sub25 part.
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1 ‘‘(b) FOREIGN ECONOMIC PROCESS REQUIRE2 MENTS.—

3 ‘‘(1) IN GENERAL.—Except as provided in sub4 section (c), a taxpayer shall be treated as having for5 eign trading gross receipts from any transaction only

6 if economic processes with respect to such trans7 action take place outside the United States as re8 quired by paragraph (2).

9 ‘‘(2) REQUIREMENT.—

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

11 this paragraph are met with respect to the

12 gross receipts of a taxpayer derived from any

13 transaction if—

14 ‘‘(i) such taxpayer (or any person act15 ing under a contract with such taxpayer)

16 has participated outside the United States

17 in the solicitation (other than advertising),

18 the negotiation, or the making of the con19 tract relating to such transaction, and

20 ‘‘(ii) the foreign direct costs incurred

21 by the taxpayer attributable to the trans22 action equal or exceed 50 percent of the

23 total direct costs attributable to the trans24 action.
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1 ‘‘(B) ALTERNATIVE 85-PERCENT TEST.—A

2 taxpayer shall be treated as satisfying the re3 quirements of subparagraph (A)(ii) with respect

4 to any transaction if, with respect to each of at

5 least 2 subparagraphs of paragraph (3), the

6 foreign direct costs incurred by such taxpayer

7 attributable to activities described in such sub8 paragraph equal or exceed 85 percent of the

9 total direct costs attributable to activities de10 scribed in such subparagraph.

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

12 paragraph—

13 ‘‘(i) TOTAL DIRECT COSTS.—The term

14 ‘total direct costs’ means, with respect to

15 any transaction, the total direct costs in16 curred by the taxpayer attributable to ac17 tivities described in paragraph (3) per18 formed at any location by the taxpayer or

19 any person acting under a contract with

20 such taxpayer.

21 ‘‘(ii) FOREIGN DIRECT COSTS.—The

22 term ‘foreign direct costs’ means, with re23 spect to any transaction, the portion of the

24 total direct costs which are attributable to
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1 activities performed outside the United

2 States.

3 ‘‘(3) ACTIVITIES RELATING TO QUALIFYING

4 FOREIGN TRADE PROPERTY.—The activities de5 scribed in this paragraph are any of the following

6 with respect to qualifying foreign trade property—

7 ‘‘(A) advertising and sales promotion,

8 ‘‘(B) the processing of customer orders

9 and the arranging for delivery,

10 ‘‘(C) transportation outside the United

11 States in connection with delivery to the cus12 tomer,

13 ‘‘(D) the determination and transmittal of

14 a final invoice or statement of account or the

15 receipt of payment, and

16 ‘‘(E) the assumption of credit risk.

17 ‘‘(4) ECONOMIC PROCESSES PERFORMED BY

18 RELATED PERSONS.—A taxpayer shall be treated as

19 meeting the requirements of this subsection with re20 spect to any sales transaction involving any property

21 if any related person has met such requirements in

22 such transaction or any other sales transaction in23 volving such property.

24 ‘‘(c) EXCEPTION FROM FOREIGN ECONOMIC PROC25 ESS REQUIREMENT.—
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1 ‘‘(1) IN GENERAL.—The requirements of sub2 section (b) shall be treated as met for any taxable

3 year if the foreign trading gross receipts of the tax4 payer for such year do not exceed $5,000,000.

5 ‘‘(2) RECEIPTS OF RELATED PERSONS AGGRE6 GATED.—All related persons shall be treated as one

7 person for purposes of paragraph (1), and the limi8 tation under paragraph (1) shall be allocated among

9 such persons in a manner provided in regulations

10 prescribed by the Secretary.

11 ‘‘(3) SPECIAL RULE FOR PASS-THRU ENTI12 TIES.—In the case of a partnership, S corporation,

13 or other pass-thru entity, the limitation under para14 graph (1) shall apply with respect to the partner15 ship, S corporation, or entity and with respect to

16 each partner, shareholder, or other owner.

17 ‘‘SEC. 943. OTHER DEFINITIONS AND SPECIAL RULES.

18 ‘‘(a) QUALIFYING FOREIGN TRADE PROPERTY.—For

19 purposes of this subpart—

20 ‘‘(1) IN GENERAL.—The term ‘qualifying for21 eign trade property’ means property—

22 ‘‘(A) manufactured, produced, grown, or

23 extracted within or outside the United States,

24 ‘‘(B) held primarily for sale, lease, or rent25 al, in the ordinary course of trade or business
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1 for direct use, consumption, or disposition out2 side the United States, and

3 ‘‘(C) not more than 50 percent of the fair

4 market value of which is attributable to—

5 ‘‘(i) articles manufactured, produced,

6 grown, or extracted outside the United

7 States, and

8 ‘‘(ii) direct costs for labor (determined

9 under the principles of section 263A) per10 formed outside the United States.

11 For purposes of subparagraph (C), the fair market

12 value of any article imported into the United States

13 shall be its appraised value, as determined by the

14 Secretary under section 402 of the Tariff Act of

15 1930 (19 U.S.C. 1401a) in connection with its im16 portation, and the direct costs for labor under clause

17 (ii) do not include costs that would be treated under

18 the principles of section 263A as direct labor costs

19 attributable to articles described in clause (i).

20 ‘‘(2) U.S. TAXATION TO ENSURE CONSISTENT

21 TREATMENT.—Property which (without regard to

22 this paragraph) is qualifying foreign trade property

23 and which is manufactured, produced, grown, or ex24 tracted outside the United States shall be treated as
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1 qualifying foreign trade property only if it is manu2 factured, produced, grown, or extracted by—

3 ‘‘(A) a domestic corporation,

4 ‘‘(B) an individual who is a citizen or resi5 dent of the United States,

6 ‘‘(C) a foreign corporation with respect to

7 which an election under subsection (e) (relating

8 to foreign corporations electing to be subject to

9 United States taxation) is in effect, or

10 ‘‘(D) a partnership or other pass-thru enti11 ty all of the partners or owners of which are de12 scribed in subparagraph (A), (B), or (C).

13 Except as otherwise provided by the Secretary,

14 tiered partnerships or pass-thru entities shall be

15 treated as described in subparagraph (D) if each of

16 the partnerships or entities is directly or indirectly

17 wholly owned by persons described in subparagraph

18 (A), (B), or (C).

19 ‘‘(3) EXCLUDED PROPERTY.—The term ‘quali20 fying foreign trade property’ shall not include—

21 ‘‘(A) property leased or rented by the tax22 payer for use by any related person,

23 ‘‘(B) patents, inventions, models, designs,

24 formulas, or processes whether or not patented,

25 copyrights (other than films, tapes, records, or
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1 similar reproductions, and other than computer

2 software (whether or not patented), for com3 mercial or home use), goodwill, trademarks,

4 trade brands, franchises, or other like property,

5 ‘‘(C) oil or gas (or any primary product

6 thereof),

7 ‘‘(D) products the transfer of which is pro8 hibited or curtailed to effectuate the policy set

9 forth in paragraph (2)(C) of section 3 of Public

10 Law 96–72, or

11 ‘‘(E) any unprocessed timber which is a

12 softwood.

13 For purposes of subparagraph (E), the term ‘un14 processed timber’ means any log, cant, or similar

15 form of timber.

16 ‘‘(4) PROPERTY IN SHORT SUPPLY.—If the

17 President determines that the supply of any prop18 erty described in paragraph (1) is insufficient to

19 meet the requirements of the domestic economy, the

20 President may by Executive order designate the

21 property as in short supply. Any property so des22 ignated shall not be treated as qualifying foreign

23 trade property during the period beginning with the

24 date specified in the Executive order and ending

25 with the date specified in an Executive order setting
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1 forth the President’s determination that the prop2 erty is no longer in short supply.

3 ‘‘(b) OTHER DEFINITIONS AND RULES.—For pur4 poses of this subpart—

5 ‘‘(1) TRANSACTION.—

6 ‘‘(A) IN GENERAL.—The term ‘transaction’

7 means—

8 ‘‘(i) any sale, exchange, or other dis9 position,

10 ‘‘(ii) any lease or rental, and

11 ‘‘(iii) any furnishing of services.

12 ‘‘(B) GROUPING OF TRANSACTIONS.—To

13 the extent provided in regulations, any provision

14 of this subpart which, but for this subpara15 graph, would be applied on a transaction-by16 transaction basis may be applied by the tax17 payer on the basis of groups of transactions

18 based on product lines or recognized industry or

19 trade usage. Such regulations may permit dif20 ferent groupings for different purposes.

21 ‘‘(2) UNITED STATES DEFINED.—The term

22 ‘United States’ includes the Commonwealth of Puer23 to Rico. The preceding sentence shall not apply for

24 purposes of determining whether a corporation is a

25 domestic corporation.
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1 ‘‘(3) RELATED PERSON.—A person shall be re2 lated to another person if such persons are treated

3 as a single employer under subsection (a) or (b) of

4 section 52 or subsection (m) or (o) of section 414,

5 except that determinations under subsections (a)

6 and (b) of section 52 shall be made without regard

7 to section 1563(b).

8 ‘‘(4) GROSS AND TAXABLE INCOME.—Section

9 114 shall not be taken into account in determining

10 the amount of gross income or foreign trade income

11 from any transaction.

12 ‘‘(c) SOURCE RULE.—Under regulations, in the case

13 of qualifying foreign trade property manufactured, pro14 duced, grown, or extracted within the United States, the

15 amount of income of a taxpayer from any sales transaction

16 with respect to such property which is treated as from

17 sources without the United States shall not exceed—

18 ‘‘(1) in the case of a taxpayer computing its

19 qualifying foreign trade income under section

20 941(a)(1)(B), the amount of the taxpayer’s foreign

21 trade income which would (but for this subsection)

22 be treated as from sources without the United

23 States if the foreign trade income were reduced by

24 an amount equal to 4 percent of the foreign trading

25 gross receipts with respect to the transaction, and
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1 ‘‘(2) in the case of a taxpayer computing its

2 qualifying foreign trade income under section

3 941(a)(1)(C), 50 percent of the amount of the tax4 payer’s foreign trade income which would (but for

5 this subsection) be treated as from sources without

6 the United States.

7 ‘‘(d) TREATMENT OF WITHHOLDING TAXES.—

8 ‘‘(1) IN GENERAL.—For purposes of section

9 114(d), any withholding tax shall not be treated as

10 paid or accrued with respect to extraterritorial in11 come which is excluded from gross income under

12 section 114(a). For purposes of this paragraph, the

13 term ‘withholding tax’ means any tax which is im14 posed on a basis other than residence and for which

15 credit is allowable under section 901 or 903.

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

17 apply to any taxpayer with respect to extraterritorial

18 income from any transaction if the taxpayer com19 putes its qualifying foreign trade income with re20 spect to the transaction under section 941(a)(1)(A).

21 ‘‘(e) ELECTION TO BE TREATED AS DOMESTIC COR22 PORATION.—

23 ‘‘(1) IN GENERAL.—An applicable foreign cor24 poration may elect to be treated as a domestic cor25 poration for all purposes of this title if such corpora-
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1 tion waives all benefits to such corporation granted

2 by the United States under any treaty. No election

3 under section 1362(a) may be made with respect to

4 such corporation.

5 ‘‘(2) APPLICABLE FOREIGN CORPORATION.—

6 For purposes of paragraph (1), the term ‘applicable

7 foreign corporation’ means any foreign corporation

8 if—

9 ‘‘(A) such corporation manufactures, pro10 duces, grows, or extracts property in the ordi11 nary course of such corporation’s trade or busi12 ness, or

13 ‘‘(B) substantially all of the gross receipts

14 of such corporation are foreign trading gross

15 receipts.

16 ‘‘(3) PERIOD OF ELECTION.—

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

18 provided in this paragraph, an election under

19 paragraph (1) shall apply to the taxable year

20 for which made and all subsequent taxable

21 years unless revoked by the taxpayer. Any rev22 ocation of such election shall apply to taxable

23 years beginning after such revocation.

24 ‘‘(B) TERMINATION.—If a corporation

25 which made an election under paragraph (1) for
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1 any taxable year fails to meet the requirements

2 of subparagraph (A) or (B) of paragraph (2)

3 for any subsequent taxable year, such election

4 shall not apply to any taxable year beginning

5 after such subsequent taxable year.

6 ‘‘(C) EFFECT OF REVOCATION OR TERMI7 NATION.—If a corporation which made an elec8 tion under paragraph (1) revokes such election

9 or such election is terminated under subpara10 graph (B), such corporation (and any successor

11 corporation) may not make such election for

12 any of the 5 taxable years beginning with the

13 first taxable year for which such election is not

14 in effect as a result of such revocation or termi15 nation.

16 ‘‘(4) SPECIAL RULES.—

17 ‘‘(A) REQUIREMENTS.—This subsection

18 shall not apply to an applicable foreign corpora19 tion if such corporation fails to meet the re20 quirements (if any) which the Secretary may

21 prescribe to ensure that the taxes imposed by

22 this chapter on such corporation are paid.

23 ‘‘(B) EFFECT OF ELECTION, REVOCATION,

24 AND TERMINATION.—
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1 ‘‘(i) ELECTION.—For purposes of sec2 tion 367, a foreign corporation making an

3 election under this subsection shall be

4 treated as transferring (as of the first day

5 of the first taxable year to which the elec6 tion applies) all of its assets to a domestic

7 corporation in connection with an exchange

8 to which section 354 applies.

9 ‘‘(ii) REVOCATION AND TERMI10 NATION.—For purposes of section 367,

11 if—

12 ‘‘(I) an election is made by a cor13 poration under paragraph (1) for any

14 taxable year, and

15 ‘‘(II) such election ceases to

16 apply for any subsequent taxable year,

17 such corporation shall be treated as a domestic

18 corporation transferring (as of the 1st day of

19 the first such subsequent taxable year to which

20 such election ceases to apply) all of its property

21 to a foreign corporation in connection with an

22 exchange to which section 354 applies.

23 ‘‘(C) ELIGIBILITY FOR ELECTION.—The

24 Secretary may by regulation designate one or
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1 more classes of corporations which may not

2 make the election under this subsection.

3 ‘‘(f) RULES RELATING TO ALLOCATIONS OF QUALI4 FYING FOREIGN TRADE INCOME FROM SHARED PART5 NERSHIPS.—

6 ‘‘(1) IN GENERAL.—If—

7 ‘‘(A) a partnership maintains a separate

8 account for transactions (to which this subpart

9 applies) with each partner,

10 ‘‘(B) distributions to each partner with re11 spect to such transactions are based on the

12 amounts in the separate account maintained

13 with respect to such partner, and

14 ‘‘(C) such partnership meets such other re15 quirements as the Secretary may by regulations

16 prescribe,

17 then such partnership shall allocate to each partner

18 items of income, gain, loss, and deduction (including

19 qualifying foreign trade income) from any trans20 action to which this subpart applies on the basis of

21 such separate account.

22 ‘‘(2) SPECIAL RULES.—For purposes of this

23 subpart, in the case of a partnership to which para24 graph (1) applies—
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1 ‘‘(A) any partner’s interest in the partner2 ship shall not be taken into account in deter3 mining whether such partner is a related person

4 with respect to any other partner, and

5 ‘‘(B) the election under section 942(a)(3)

6 shall be made separately by each partner with

7 respect to any transaction for which the part8 nership maintains separate accounts for each

9 partner.

10 ‘‘(g) EXCLUSION FOR PATRONS OF AGRICULTURAL

11 AND HORTICULTURAL COOPERATIVES.—Any amount de12 scribed in paragraph (1) or (3) of section 1385(a)—

13 ‘‘(1) which is received by a person from an or14 ganization to which part I of subchapter T applies

15 which is engaged in the marketing of agricultural or

16 horticultural products, and

17 ‘‘(2) which is allocable to qualifying foreign

18 trade income and designated as such by the organi19 zation in a written notice mailed to its patrons dur20 ing the payment period described in section 1382(d),

21 shall be treated as qualifying foreign trade income of such

22 person for purposes of section 114. The taxable income

23 of the organization shall not be reduced under section

24 1382 by reason of any amount to which the preceding sen25 tence applies.
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1 ‘‘(h) SPECIAL RULE FOR DISCS.—Section 114 shall

2 not apply to any taxpayer for any taxable year if, at any

3 time during the taxable year, the taxpayer is a member

4 of any controlled group of corporations (as defined in sec5 tion 927(d)(4), as in effect before the date of the enact6 ment of this subsection) of which a DISC is a member.’’

7 SEC. 103. TECHNICAL AND CONFORMING AMENDMENTS.

8 (1) The second sentence of section

9 56(g)(4)(B)(i) is amended by inserting before the

10 period ‘‘or under section 114’’.

11 (2) Section 275(a) is amended—

12 (A) by striking ‘‘or’’ at the end of para13 graph (4)(A), by striking the period at the end

14 of paragraph (4)(B) and inserting ‘‘, or’’, and

15 by adding at the end of paragraph (4) the fol16 lowing new subparagraph:

17 ‘‘(C) such taxes are paid or accrued with

18 respect to qualifying foreign trade income (as

19 defined in section 941).’’; and

20 (B) by adding at the end the following the

21 following new sentence: ‘‘A rule similar to the

22 rule of section 943(d) shall apply for purposes

23 of paragraph (4)(C).’’.

24 (3) Paragraph (3) of section 864(e) is

25 amended—
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1 (A) by striking ‘‘For purposes of’’ and in2 serting:

3 ‘‘(A) IN GENERAL.—For purposes of’’; and

4 (B) by adding at the end the following new

5 subparagraph:

6 ‘‘(B) ASSETS PRODUCING EXEMPT

7 EXTRATERRITORIAL INCOME.—For purposes of

8 allocating and apportioning any interest ex9 pense, there shall not be taken into account any

10 qualifying foreign trade property (as defined in

11 section 943(a)) which is held by the taxpayer

12 for lease or rental in the ordinary course of

13 trade or business for use by the lessee outside

14 the United States (as defined in section

15 943(b)(2)).’’.

16 (4) Section 903 is amended by striking

17 ‘‘164(a)’’ and inserting ‘‘114, 164(a),’’.

18 (5) Section 999(c)(1) is amended by inserting

19 ‘‘941(a)(5),’’ after ‘‘908(a),’’.

20 (6) The table of sections for part III of sub21 chapter B of chapter 1 is amended by inserting be22 fore the item relating to section 115 the following

23 new item:

‘‘Sec. 114. Extraterritorial income.’’.

24 (7) The table of subparts for part III of sub25 chapter N of chapter 1 is amended by striking the
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1 item relating to subpart E and inserting the fol2 lowing new item:

‘‘Subpart E. Qualifying foreign trade income.’’.

3 (8) The table of subparts for part III of sub4 chapter N of chapter 1 is amended by striking the

5 item relating to subpart C.

6 SEC. 104. EFFECTIVE DATE.

7 (a) IN GENERAL.—The amendments made by this

8 title shall apply to transactions after September 30, 2000.

9 (b) NO NEW FSCS; TERMINATION OF INACTIVE

10 FSCS.—

11 (1) NO NEW FSCS.—No corporation may elect

12 after September 30, 2000, to be a FSC (as defined

13 in section 922 of the Internal Revenue Code of

14 1986, as in effect before the amendments made by

15 this Act).

16 (2) TERMINATION OF INACTIVE FSCS.—If a

17 FSC has no foreign trade income (as defined in sec18 tion 923(b) of such Code, as so in effect) for any pe19 riod of 5 consecutive taxable years beginning after

20 December 31, 2001, such FSC shall cease to be

21 treated as a FSC for purposes of such Code for any

22 taxable year beginning after such period.

23 (c) TRANSITION PERIOD FOR EXISTING FOREIGN

24 SALES CORPORATIONS.—
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1 (1) IN GENERAL.—In the case of a FSC (as so

2 defined) in existence on September 30, 2000, and at

3 all times thereafter, the amendments made by this

4 Act shall not apply to any transaction in the ordi5 nary course of trade or business involving a FSC

6 which occurs—

7 (A) before January 1, 2002; or

8 (B) after December 31, 2001, pursuant to

9 a binding contract—

10 (i) which is between the FSC (or any

11 related person) and any person which is

12 not a related person; and

13 (ii) which is in effect on September

14 30, 2000, and at all times thereafter.

15 For purposes of this paragraph, a binding contract

16 shall include a purchase option, renewal option, or

17 replacement option which is included in such con18 tract and which is enforceable against the seller or

19 lessor.

20 (2) ELECTION TO HAVE AMENDMENTS APPLY

21 EARLIER.—A taxpayer may elect to have the amend22 ments made by this Act apply to any transaction by

23 a FSC or any related person to which such amend24 ments would apply but for the application of para25 graph (1). Such election shall be effective for the
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1 taxable year for which made and all subsequent tax2 able years, and, once made, may be revoked only

3 with the consent of the Secretary of the Treasury.

4 (3) EXCEPTION FOR OLD EARNINGS AND PROF5 ITS OF CERTAIN CORPORATIONS.—

6 (A) IN GENERAL.—In the case of a foreign

7 corporation to which this paragraph applies—

8 (i) earnings and profits of such cor9 poration accumulated in taxable years end10 ing before October 1, 2000, shall not be in11 cluded in the gross income of the persons

12 holding stock in such corporation by rea13 son of section 943(e)(4)(B)(i), and

14 (ii) rules similar to the rules of

15 clauses (ii), (iii), and (iv) of section

16 953(d)(4)(B) shall apply with respect to

17 such earnings and profits.

18 The preceding sentence shall not apply to earn19 ings and profits acquired in a transaction after

20 September 30, 2000, to which section 381 ap21 plies unless the distributor or transferor cor22 poration was immediately before the transaction

23 a foreign corporation to which this paragraph

24 applies.
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1 (B) EXISTING FSCS.—This paragraph shall

2 apply to any controlled foreign corporation (as

3 defined in section 957) if—

4 (i) such corporation is a FSC (as so

5 defined) in existence on September 30,

6 2000,

7 (ii) such corporation is eligible to

8 make the election under section 943(e) by

9 reason of being described in paragraph

10 (2)(B) of such section, and

11 (iii) such corporation makes such elec12 tion not later than for its first taxable year

13 beginning after December 31, 2001.

14 (C) OTHER CORPORATIONS.—This para15 graph shall apply to any controlled foreign cor16 poration (as defined in section 957), and such

17 corporation shall (notwithstanding any provi18 sion of section 943(e)) be treated as an applica19 ble foreign corporation for purposes of section

20 943(e), if—

21 (i) such corporation is in existence on

22 September 30, 2000,

23 (ii) as of such date, such corporation

24 is wholly owned (directly or indirectly) by

25 a domestic corporation (determined with-
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1 out regard to any election under section

2 943(e)),

3 (iii) for each of the 3 taxable years

4 preceding the first taxable year to which

5 the election under section 943(e) by such

6 controlled foreign corporation applies—

7 (I) all of the gross income of

8 such corporation is subpart F income

9 (as defined in section 952), including

10 by reason of section 954(b)(3)(B),

11 and

12 (II) in the ordinary course of

13 such corporation’s trade or business,

14 such corporation regularly sold (or

15 paid commissions) to a FSC which on

16 September 30, 2000, was a related

17 person to such corporation,

18 (iv) such corporation has never made

19 an election under section 922(a)(2) (as in

20 effect before the date of the enactment of

21 this paragraph) to be treated as a FSC,

22 and

23 (v) such corporation makes the elec24 tion under section 943(e) not later than
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1 for its first taxable year beginning after

2 December 31, 2001.

3 The preceding sentence shall cease to apply as

4 of the date that the domestic corporation re5 ferred to in clause (ii) ceases to wholly own (di6 rectly or indirectly) such controlled foreign cor7 poration.

8 (4) RELATED PERSON.—For purposes of this

9 subsection, the term ‘‘related person’’ has the mean10 ing given to such term by section 943(b)(3).

11 (5) SECTION REFERENCES.—Except as other12 wise expressly provided, any reference in this sub13 section to a section or other provision shall be con14 sidered to be a reference to a section or other provi15 sion of the Internal Revenue Code of 1986, as

16 amended by this title.

17 (d) SPECIAL RULES RELATING TO LEASING TRANS18 ACTIONS.—

19 (1) SALES INCOME.—If foreign trade income in

20 connection with the lease or rental of property de21 scribed in section 927(a)(1)(B) of such Code (as in

22 effect before the amendments made by this Act) is

23 treated as exempt foreign trade income for purposes

24 of section 921(a) of such Code (as so in effect), such

25 property shall be treated as property described in
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1 section 941(c)(1)(B) of such Code (as added by this

2 Act) for purposes of applying section 941(c)(2) of

3 such Code (as so added) to any subsequent trans4 action involving such property to which the amend5 ments made by this Act apply.

6 (2) LIMITATION ON USE OF GROSS RECEIPTS

7 METHOD.—If any person computed its foreign trade

8 income from any transaction with respect to any

9 property on the basis of a transfer price determined

10 under the method described in section 925(a)(1) of

11 such Code (as in effect before the amendments made

12 by this Act), then the qualifying foreign trade in13 come (as defined in section 941(a) of such Code, as

14 in effect after such amendment) of such person (or

15 any related person) with respect to any other trans16 action involving such property (and to which the

17 amendments made by this Act apply) shall be zero.

18 TITLE II—SMALL BUSINESS TAX

19 RELIEF

20 SEC. 201. EXTENSION OF WORK OPPORTUNITY TAX CREDIT.

21 (a) IN GENERAL.—Section 51(c)(4)(B) is amended

22 by striking ‘‘December 31, 2001’’ and inserting ‘‘June 30,

23 2004’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to individuals who begin work for

3 the employer after December 31, 2001.

4 SEC. 202. INCREASE IN AMORTIZABLE REFORESTATION EX5 PENDITURES, ETC.

6 (a) INCREASE IN DOLLAR LIMITATION.—Paragraph

7 (1) of section 194(b) (relating to amortization of reforest8 ation expenditures) is amended by striking ‘‘$10,000

9 ($5,000’’ and inserting ‘‘$25,000 ($12,500’’.

10 (b) TEMPORARY SUSPENSION OF INCREASED DOL11 LAR LIMITATION.—

12 (1) IN GENERAL.—Subsection (b) of section

13 194 (relating to amortization of reforestation ex14 penditures) is amended by adding at the end the fol15 lowing new paragraph:

16 ‘‘(5) SUSPENSION OF DOLLAR LIMITATION.—

17 Paragraph (1) shall not apply to taxable years be18 ginning after December 31, 2000, and before Janu19 ary 1, 2004.’’.

20 (2) CONFORMING AMENDMENT.—Paragraph (1)

21 of section 48(b) is amended by striking ‘‘section

22 194(b)(1)’’ and inserting ‘‘section 194(b)(1) and

23 without regard to section 194(b)(5)’’.
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1 (c) CAPITAL GAIN TREATMENT UNDER SECTION

2 631(b) TO APPLY TO OUTRIGHT SALES BY LAND

3 OWNER.—

4 (1) IN GENERAL.—The first sentence of section

5 631(b) (relating to disposal of timber with a re6 tained economic interest) is amended by striking

7 ‘‘retains an economic interest in such timber’’ and

8 inserting ‘‘either retains an economic interest in

9 such timber or makes an outright sale of such tim10 ber’’.

11 (2) CONFORMING AMENDMENT.—The third sen12 tence of section 631(b) is amended by striking ‘‘The

13 date of disposal’’ and inserting ‘‘In the case of dis14 posal of timber with a retained economic interest,

15 the date of disposal’’.

16 (d) EFFECTIVE DATES.—

17 (1) SUBSECTIONS (a) AND (b).—The amend18 ments made by subsections (a) and (b) shall apply

19 to taxable years beginning after December 31, 2000.

20 (2) SUBSECTION (c).—The amendment made by

21 subsection (c) shall apply to sales after the date of

22 the enactment of this Act.
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1 SEC. 203. INCREASE IN EXPENSE TREATMENT FOR SMALL

2 BUSINESSES.

3 (a) IN GENERAL.—Paragraph (1) of section 179(b)

4 (relating to dollar limitation) is amended to read as fol5 lows:

6 ‘‘(1) DOLLAR LIMITATION.—The aggregate cost

7 which may be taken into account under subsection

8 (a) for any taxable year shall not exceed $35,000.’’.

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

10 this section shall apply to taxable years beginning after

11 December 31, 2000.

12 SEC. 204. INCREASED DEDUCTION FOR MEAL EXPENSES.

13 (a) IN GENERAL.—Paragraph (1) of section 274(n)

14 (relating to only 50 percent of meal and entertainment

15 expenses allowed as deduction) is amended by striking ‘‘50

16 percent’’ in the text and inserting ‘‘the allowable percent17 age’’.

18 (b) ALLOWABLE PERCENTAGE.—Subsection (n) of

19 section 274 is amended by redesignating paragraphs (2)

20 and (3) as paragraphs (3) and (4), respectively, and by

21 inserting after paragraph (1) the following new paragraph:

22 ‘‘(2) ALLOWABLE PERCENTAGE.—For purposes

23 of paragraph (1), the allowable percentage is—

24 ‘‘(A) in the case of amounts for items de25 scribed in paragraph (1)(B), 50 percent, and
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1 ‘‘(B) in the case of expenses for food or

2 beverages, 70 percent.’’.

3 (c) CONFORMING AMENDMENT.—The heading for

4 subsection (n) of section 274 is amended by striking ‘‘50

5 PERCENT’’ and inserting ‘‘LIMITED PERCENTAGES’’.

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

7 this section shall apply to taxable years beginning after

8 December 31, 2000.

9 SEC. 205. INCREASED DEDUCTIBILITY OF BUSINESS MEAL

10 EXPENSES FOR INDIVIDUALS SUBJECT TO

11 FEDERAL LIMITATIONS ON HOURS OF SERV12 ICE.

13 (a) IN GENERAL.—Paragraph (4) of section 274(n)

14 (relating to limited percentages of meal and entertainment

15 expenses allowed as deduction), as redesignated by section

16 204, is amended to read as follows:

17 ‘‘(4) SPECIAL RULE FOR INDIVIDUALS SUBJECT

18 TO FEDERAL HOURS OF SERVICE.—In the case of

19 any expenses for food or beverages consumed while

20 away from home (within the meaning of section

21 162(a)(2)) by an individual during, or incident to,

22 the period of duty subject to the hours of service

23 limitations of the Department of Transportation,

24 paragraph (2)(B) shall be applied by substituting

25 ‘80 percent’ for ‘70 percent’.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 206. REPEAL OF MODIFICATION OF INSTALLMENT

5 METHOD.

6 (a) IN GENERAL.—Subsection (a) of section 536 of

7 the Ticket to Work and Work Incentives Improvement Act

8 of 1999 (relating to modification of installment method

9 and repeal of installment method for accrual method tax10 payers) is repealed effective with respect to sales and other

11 dispositions occurring on or after the date of the enact12 ment of such Act.

13 (b) APPLICABILITY.—The Internal Revenue Code of

14 1986 shall be applied and administered as if that sub15 section (and the amendments made by that subsection)

16 had not been enacted.

17 SEC. 207. INCOME AVERAGING NOT TO INCREASE ALTER18 NATIVE MINIMUM TAX LIABILITY; INCOME

19 AVERAGING FOR FISHERMEN.

20 (a) IN GENERAL.—Section 55(c) (defining regular

21 tax) is amended by redesignating paragraph (2) as para22 graph (3) and by inserting after paragraph (1) the fol23 lowing:

24 ‘‘(2) COORDINATION WITH INCOME AVERAGING

25 FOR FARMERS AND FISHERMEN.—Solely for pur-
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1 poses of this section, section 1301 (relating to aver2 aging of farm and fishing income) shall not apply in

3 computing the regular tax.’’.

4 (b) ALLOWING INCOME AVERAGING FOR FISHER5 MEN.—

6 (1) IN GENERAL.—Section 1301(a) is amended

7 by striking ‘‘farming business’’ and inserting ‘‘farm8 ing business or fishing business’’.

9 (2) DEFINITION OF ELECTED FARM INCOME.—

10 (A) IN GENERAL.—Clause (i) of section

11 1301(b)(1)(A) is amended by inserting ‘‘or fish12 ing business’’ before the semicolon.

13 (B) CONFORMING AMENDMENT.—Subpara14 graph (B) of section 1301(b)(1) is amended by

15 inserting ‘‘or fishing business’’ after ‘‘farming

16 business’’ both places it occurs.

17 (3) DEFINITION OF FISHING BUSINESS.—Sec18 tion 1301(b) is amended by adding at the end the

19 following new paragraph:

20 ‘‘(4) FISHING BUSINESS.—The term ‘fishing

21 business’ means the conduct of commercial fishing

22 as defined in section 3 of the Magnuson-Stevens

23 Fishery Conservation and Management Act (16

24 U.S.C. 1802).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 208. REPEAL OF OCCUPATIONAL TAXES RELATING TO

5 DISTILLED SPIRITS, WINE, AND BEER.

6 (a) REPEAL OF OCCUPATIONAL TAXES.—

7 (1) IN GENERAL.—The following provisions of

8 part II of subchapter A of chapter 51 (relating to

9 occupational taxes) are hereby repealed:

10 (A) Subpart A (relating to proprietors of

11 distilled spirits plants, bonded wine cellars,

12 etc.).

13 (B) Subpart B (relating to brewer).

14 (C) Subpart D (relating to wholesale deal15 ers) (other than sections 5114 and 5116).

16 (D) Subpart E (relating to retail dealers)

17 (other than section 5124).

18 (E) Subpart G (relating to general provi19 sions) (other than sections 5142, 5143, 5145,

20 and 5146).

21 (2) NONBEVERAGE DOMESTIC DRAWBACK.—

22 Section 5131 is amended by striking ‘‘, on payment

23 of a special tax per annum,’’.

24 (3) INDUSTRIAL USE OF DISTILLED SPIRITS.—

25 Section 5276 is hereby repealed.
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1 (b) CONFORMING AMENDMENTS.—

2 (1)(A) The heading for part II of subchapter A

3 of chapter 51 and the table of subparts for such

4 part are amended to read as follows:

5 ‘‘PART II—MISCELLANEOUS PROVISIONS

‘‘Subpart A. Manufacturers of stills.

‘‘Subpart B. Nonbeverage domestic drawback claimants.

‘‘Subpart C. Recordkeeping by dealers.

‘‘Subpart D. Other provisions.’’.

6 (B) The table of parts for such subchapter A

7 is amended by striking the item relating to part II

8 and inserting the following new item:

‘‘Part II. Miscellaneous provisions.’’.

9 (2) Subpart C of part II of such subchapter

10 (relating to manufacturers of stills) is redesignated

11 as subpart A.

12 (3)(A) Subpart F of such part II (relating to

13 nonbeverage domestic drawback claimants), as

14 amended by paragraph (5), is redesignated as sub15 part B and sections 5131 through 5134 are redesig16 nated as sections 5111 through 5114, respectively.

17 (B) The table of sections for such subpart B,

18 as so redesignated, is amended—

19 (i) by redesignating the items relating to

20 sections 5131 through 5134 as relating to sec21 tions 5111 through 5114, respectively, and
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•HR 5542 IH

1 (ii) by striking ‘‘and rate of tax’’ in the

2 item relating to section 5111, as so redesig3 nated.

4 (C) Section 5111, as redesignated by subpara5 graph (A), is amended—

6 (i) by striking ‘‘AND RATE OF TAX’’ in

7 the section heading,

8 (ii) by striking ‘‘(a) ELIGIBILITY FOR

9 DRAWBACK.—’’, and

10 (iii) by striking subsection (b).

11 (4) Part II of subchapter A of chapter 51 is

12 amended by adding after subpart B, as redesignated

13 by paragraph (3), the following new subpart:

14 ‘‘Subpart C—Recordkeeping by Dealers

‘‘Sec. 5121. Recordkeeping by wholesale dealers.

‘‘Sec. 5122. Recordkeeping by retail dealers.

‘‘Sec. 5123. Preservation and inspection of records, and entry of

premises for inspection.’’.

15 (5)(A) Section 5114 (relating to records) is

16 moved to subpart C of such part II and inserted

17 after the table of sections for such subpart.

18 (B) Section 5114 is amended—

19 (i) by striking the section heading and in20 serting the following new heading:

21 ‘‘SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.’’,

22 and
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•HR 5542 IH

1 (ii) by redesignating subsection (c) as sub2 section (d) and by inserting after subsection (b)

3 the following new subsection:

4 ‘‘(c) WHOLESALE DEALERS.—For purposes of this

5 part—

6 ‘‘(1) WHOLESALE DEALER IN LIQUORS.—The

7 term ‘wholesale dealer in liquors’ means any dealer

8 (other than a wholesale dealer in beer) who sells, or

9 offers for sale, distilled spirits, wines, or beer, to an10 other dealer.

11 ‘‘(2) WHOLESALE DEALER IN BEER.—The term

12 ‘wholesale dealer in beer’ means any dealer who

13 sells, or offers for sale, beer, but not distilled spirits

14 or wines, to another dealer.

15 ‘‘(3) DEALER.—The term ‘dealer’ means any

16 person who sells, or offers for sale, any distilled spir17 its, wines, or beer.

18 ‘‘(4) PRESUMPTION IN CASE OF SALE OF 20

19 WINE GALLONS OR MORE.—The sale, or offer for

20 sale, of distilled spirits, wines, or beer, in quantities

21 of 20 wine gallons or more to the same person at

22 the same time, shall be presumptive evidence that

23 the person making such sale, or offer for sale, is en24 gaged in or carrying on the business of a wholesale

25 dealer in liquors or a wholesale dealer in beer, as the
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1 case may be. Such presumption may be overcome by

2 evidence satisfactorily showing that such sale, or

3 offer for sale, was made to a person other than a

4 dealer.’’.

5 (C) Paragraph (3) of section 5121(d), as so re6 designated, is amended by striking ‘‘section 5146’’

7 and inserting ‘‘section 5123’’.

8 (6)(A) Section 5124 (relating to records) is

9 moved to subpart C of part II of subchapter A of

10 chapter 51 and inserted after section 5121.

11 (B) Section 5124 is amended—

12 (i) by striking the section heading and in13 serting the following new heading:

14 ‘‘SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.’’,

15 (ii) by striking ‘‘section 5146’’ in sub16 section (c) and inserting ‘‘section 5123’’, and

17 (iii) by redesignating subsection (c) as sub18 section (d) and inserting after subsection (b)

19 the following new subsection:

20 ‘‘(c) RETAIL DEALERS.—For purposes of this

21 section—

22 ‘‘(1) RETAIL DEALER IN LIQUORS.—The term

23 ‘retail dealer in liquors’ means any dealer (other

24 than a retail dealer in beer) who sells, or offers for
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•HR 5542 IH

1 sale, distilled spirits, wines, or beer, to any person

2 other than a dealer.

3 ‘‘(2) RETAIL DEALER IN BEER.—The term ‘re4 tail dealer in beer’ means any dealer who sells, or of5 fers for sale, beer, but not distilled spirits or wines,

6 to any person other than a dealer.

7 ‘‘(3) DEALER.—The term ‘dealer’ has the

8 meaning given such term by section 5121(c)(3).’’.

9 (7) Section 5146 is moved to subpart C of part

10 II of subchapter A of chapter 51, inserted after sec11 tion 5122, and redesignated as section 5123.

12 (8) Part II of subchapter A of chapter 51 is

13 amended by inserting after subpart C the following

14 new subpart:

15 ‘‘Subpart D—Other Provisions

‘‘Sec. 5131. Packaging distilled spirits for industrial uses.

‘‘Sec. 5132. Prohibited purchases by dealers.’’.

16 (9) Section 5116 is moved to subpart D of part

17 II of subchapter A of chapter 51, inserted after the

18 table of sections, redesignated as section 5131, and

19 amended by inserting ‘‘(as defined in section

20 5121(c))’’ after ‘‘dealer’’ in subsection (a).

21 (10) Subpart D of part II of subchapter A of

22 chapter 51 is amended by adding at the end the fol23 lowing new section:
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•HR 5542 IH

1 ‘‘SEC. 5132. PROHIBITED PURCHASES BY DEALERS.

2 ‘‘(a) IN GENERAL.—Except as provided in regula3 tions prescribed by the Secretary, it shall be unlawful for

4 a dealer to purchase distilled spirits from any person other

5 than a wholesale dealer in liquors who is required to keep

6 the records prescribed by section 5121.

7 ‘‘(b) PENALTY AND FORFEITURE.—

‘‘For penalty and forfeiture provisions applicable

to violations of subsection (a), see sections 5687 and

7302.’’.

8 (11) Subsection (b) of section 5002 is

9 amended—

10 (A) by striking ‘‘section 5112(a)’’ and in11 serting ‘‘section 5121(c)(3)’’,

12 (B) by striking ‘‘section 5112’’ and insert13 ing ‘‘section 5121(c)’’, and

14 (C) by striking ‘‘section 5122’’ and insert15 ing ‘‘section 5122(c)’’.

16 (12) Subparagraph (A) of section 5010(c)(2) is

17 amended by striking ‘‘section 5134’’ and inserting

18 ‘‘section 5114’’.

19 (13) Subsection (d) of section 5052 is amended

20 to read as follows:

21 ‘‘(d) BREWER.—For purposes of this chapter, the

22 term ‘brewer’ means any person who brews beer or pro23 duces beer for sale. Such term shall not include any person
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1 who produces only beer exempt from tax under section

2 5053(e).’’.

3 (14) The text of section 5182 is amended to

4 read as follows:

‘‘For provisions requiring recordkeeping by

wholesale liquor dealers, see section 5112, and by

retail liquor dealers, see section 5122.’’.

5 (15) Subsection (b) of section 5402 is amended

6 by striking ‘‘section 5092’’ and inserting ‘‘section

7 5052(d)’’.

8 (16) Section 5671 is amended by striking ‘‘or

9 5091’’.

10 (17)(A) Part V of subchapter J of chapter 51

11 is hereby repealed.

12 (B) The table of parts for such subchapter J is

13 amended by striking the item relating to part V.

14 (18)(A) Sections 5142, 5143, and 5145 are

15 moved to subchapter D of chapter 52, inserted after

16 section 5731, redesignated as sections 5732, 5733,

17 and 5734, respectively, and amended—

18 (i) by striking ‘‘this part’’ each place it ap19 pears and inserting ‘‘this subchapter’’, and

20 (ii) by striking ‘‘this subpart’’ in section

21 5732(c)(2) (as so redesignated) and inserting

22 ‘‘this subchapter’’.
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1 (B) Section 5732, as redesignated by subpara2 graph (A), is amended by striking ‘‘(except the tax

3 imposed by section 5131)’’ each place it appears.

4 (C) Subsection (c) of section 5733, as redesig5 nated by subparagraph (A), is amended by striking

6 paragraph (2) and by redesignating paragraph (3)

7 as paragraph (2).

8 (D) The table of sections for subchapter D of

9 chapter 52 is amended by adding at the end thereof

10 the following:

‘‘Sec. 5732. Payment of tax.

‘‘Sec. 5733. Provisions relating to liability for occupational taxes.

‘‘Sec. 5734. Application of State laws.’’.

11 (E) Section 5731 is amended by striking sub12 section (c) and by redesignating subsection (d) as

13 subsection (c).

14 (19) Subsection (c) of section 6071 is amended

15 by striking ‘‘section 5142’’ and inserting ‘‘section

16 5732’’.

17 (20) Paragraph (1) of section 7652(g) is

18 amended—

19 (A) by striking ‘‘subpart F’’ and inserting

20 ‘‘subpart B’’, and

21 (B) by striking ‘‘section 5131(a)’’ and in22 serting ‘‘section 5111(a)’’.
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1 (21) The table of sections for subchapter D of

2 chapter 51 is amended by striking the item relating

3 to section 5276.

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

5 this section shall take effect on July 1, 2001, but shall

6 not apply to taxes imposed for periods before such date.

7 SEC. 209. EXCLUSION FROM GROSS INCOME FOR CERTAIN

8 FORGIVEN MORTGAGE OBLIGATIONS.

9 (a) IN GENERAL.—Paragraph (1) of section 108(a)

10 (relating to exclusion from gross income) is amended by

11 striking ‘‘or’’ at the end of both subparagraphs (A) and

12 (C), by striking the period at the end of subparagraph (D)

13 and inserting ‘‘, or’’, and by inserting after subparagraph

14 (D) the following new subparagraph:

15 ‘‘(E) in the case of an individual, the in16 debtedness discharged is qualified residential in17 debtedness.’’.

18 (b) QUALIFIED RESIDENTIAL INDEBTEDNESS.—Sec19 tion 108 (relating to discharge of indebtedness) is amend20 ed by adding at the end the following new subsection:

21 ‘‘(h) QUALIFIED RESIDENTIAL INDEBTEDNESS.—

22 ‘‘(1) LIMITATIONS.—The amount excluded

23 under subparagraph (E) of subsection (a)(1) with

24 respect to any qualified residential indebtedness

25 shall not exceed the excess (if any) of—
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1 ‘‘(A) the outstanding principal amount of

2 such indebtedness (immediately before the dis3 charge), over

4 ‘‘(B) the sum of—

5 ‘‘(i) the amount realized from the sale

6 of the real property securing such indebt7 edness reduced by the cost of such sale,

8 and

9 ‘‘(ii) the outstanding principal amount

10 of any other indebtedness secured by such

11 property.

12 ‘‘(2) QUALIFIED RESIDENTIAL INDEBTED13 NESS.—

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

15 residential indebtedness’ means indebtedness

16 which—

17 ‘‘(i) was incurred or assumed by the

18 taxpayer in connection with real property

19 used as the principal residence (within the

20 meaning of section 121) of the taxpayer

21 and is secured by such real property,

22 ‘‘(ii) was incurred or assumed to ac23 quire, construct, reconstruct, or substan24 tially improve such real property, and
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•HR 5542 IH

1 ‘‘(iii) with respect to which such tax2 payer makes an election to have this para3 graph apply.

4 ‘‘(B) REFINANCED INDEBTEDNESS.—Such

5 term shall include indebtedness resulting from

6 the refinancing of indebtedness under subpara7 graph (A)(ii), but only to the extent the amount

8 of the indebtedness resulting from such refi9 nancing does not exceed the amount of the refi10 nanced indebtedness.

11 ‘‘(C) EXCEPTIONS.—Such term shall not

12 include qualified farm indebtedness or qualified

13 real property business indebtedness.’’.

14 (c) CONFORMING AMENDMENTS.—

15 (1) Paragraph (2) of section 108(a) is

16 amended—

17 (A) in subparagraph (A) by striking ‘‘and

18 (D)’’ and inserting ‘‘(D), and (E)’’, and

19 (B) by amending subparagraph (B) to read

20 as follows:

21 ‘‘(B) INSOLVENCY EXCLUSION TAKES

22 PRECEDENCE OVER QUALIFIED FARM EXCLU23 SION, QUALIFIED REAL PROPERTY BUSINESS

24 EXCLUSION, AND QUALIFIED RESIDENTIAL IN25 DEBTEDNESS EXCLUSION.—Subparagraphs (C),
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1 (D), and (E) of paragraph (1) shall not apply

2 to a discharge to the extent the taxpayer is in3 solvent.’’.

4 (2) Paragraph (1) of section 108(b) is amended

5 by striking ‘‘or (C)’’ and inserting ‘‘(C), or (E)’’.

6 (3) Subsection (c) of section 121 is amended by

7 adding at the end the following new paragraph:

8 ‘‘(3) SPECIAL RULE RELATING TO DISCHARGE

9 OF INDEBTEDNESS.—The amount of gain which

10 (but for this paragraph) would be excluded from

11 gross income under subsection (a) with respect to a

12 principal residence shall be reduced by the amount

13 excluded from gross income under section

14 108(a)(1)(E) with respect to such residence.’’.

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

16 this section shall apply to discharges after December 31,

17 2000.

18 SEC. 210. CLARIFICATION OF CASH ACCOUNTING RULES

19 FOR SMALL BUSINESS.

20 (a) CASH ACCOUNTING PERMITTED.—Section 446

21 (relating to general rule for methods of accounting) is

22 amended by adding at the end the following new sub23 section:
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1 ‘‘(g) SMALL BUSINESS TAXPAYERS PERMITTED TO

2 USE CASH ACCOUNTING METHOD WITHOUT LIMITA3 TION.—

4 ‘‘(1) IN GENERAL.—Notwithstanding any other

5 provision of this title, an eligible taxpayer shall not

6 be required to use an accrual method of accounting

7 for any taxable year.

8 ‘‘(2) ELIGIBLE TAXPAYER.—For purposes of

9 this subsection—

10 ‘‘(A) IN GENERAL.—A taxpayer is an eligi11 ble taxpayer with respect to any taxable year if,

12 for all prior taxable years beginning after Octo13 ber 31, 1999, the taxpayer (or any predecessor)

14 met the gross receipts test of subparagraph

15 (B).

16 ‘‘(B) GROSS RECEIPTS TEST.—A taxpayer

17 meets the gross receipts test of this subpara18 graph for any prior taxable year if the average

19 annual gross receipts of the taxpayer (or any

20 predecessor) for the 3-taxable-year period end21 ing with such prior taxable year does not exceed

22 $2,500,000. The rules of paragraphs (2) and

23 (3) of section 448(c) shall apply for purposes of

24 the preceding sentence.’’
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1 (b) CLARIFICATION OF INVENTORY RULES FOR

2 SMALL BUSINESS.—Section 471 (relating to general rule

3 for inventories) is amended by redesignating subsection (c)

4 as subsection (d) and by inserting after subsection (b) the

5 following new subsection:

6 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED

7 TO USE INVENTORIES.—

8 ‘‘(1) IN GENERAL.—An eligible taxpayer shall

9 not be required to use inventories under this section

10 for a taxable year.

11 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING

12 INVENTORIES.—If an eligible taxpayer elects not to

13 use inventories with respect to any property for any

14 taxable year beginning after the date of the enact15 ment of this section, such property shall be treated

16 as a material or supply which is not incidental.

17 ‘‘(3) ELIGIBLE TAXPAYER.—For purposes of

18 this subsection, the term ‘eligible taxpayer’ has the

19 meaning given such term by section 446(g)(2).’’.

20 (c) EFFECTIVE DATES.—

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

22 this section shall apply to taxable years beginning

23 after the date of the enactment of this Act.

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

25 the case of any taxpayer required by the amend-
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1 ments made by this section to change its method of

2 accounting for any taxable year—

3 (A) such change shall be treated as initi4 ated by the taxpayer,

5 (B) such change shall be treated as made

6 with the consent of the Secretary of the Treas7 ury, and

8 (C) the net amount of the adjustments re9 quired to be taken into account by the taxpayer

10 under section 481 of the Internal Revenue Code

11 of 1986 shall be taken into account over a pe12 riod (not greater than 4 taxable years) begin13 ning with such taxable year.

14 SEC. 211. AMENDMENTS RELATING TO DEMAND DEPOSIT

15 ACCOUNTS AT DEPOSITORY INSTITUTIONS.

16 (a) INTEREST-BEARING TRANSACTION ACCOUNTS

17 AUTHORIZED.—

18 (1) FEDERAL RESERVE ACT.—Section 19(i) of

19 the Federal Reserve Act (12 U.S.C. 371a) is amend20 ed by inserting at the end the following: ‘‘Notwith21 standing any other provision of this section, a mem22 ber bank may permit the owner of any deposit, any

23 account which is a deposit, or any account on which

24 interest or dividends are paid to make up to 24

25 transfers per month (or such greater number as the
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1 Board may determine by rule or order), for any pur2 pose, to a demand deposit account of the owner in

3 the same institution. With respect to an escrow ac4 count maintained in connection with a loan, a lender

5 or servicer shall pay interest on such account only

6 if such payments are required by contract between

7 the lender or servicer and the borrower, or a specific

8 statutory provision of the law of the State in which

9 the security property is located requires the lender

10 or servicer to make such payments. Nothing in this

11 subsection shall be construed to prevent an account

12 offered pursuant to this subsection from being con13 sidered a transaction account for purposes of this

14 Act.’’.

15 (2) HOME OWNERS’ LOAN ACT.—

16 (A) IN GENERAL.—Section 5(b)(1) of the

17 Home Owners’ Loan Act (12 U.S.C. 1464

18 (b)(1)) is amended by adding at the end the fol19 lowing new subparagraph:

20 ‘‘(G) TRANSFERS.—Notwithstanding any

21 other provision of this paragraph, a Federal

22 savings association may permit the owner of

23 any deposit or share, any account which is a de24 posit or share, or any account on which interest

25 or dividends are paid to make up to 24 trans-
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1 fers per month (or such greater number as the

2 Board of Governors of the Federal Reserve Sys3 tem may determine by rule or order under sec4 tion 19(i) to be permissible for member banks),

5 for any purpose, to a demand deposit account

6 of the owner in the same institution. With re7 spect to an escrow account maintained in con8 nection with a loan, a lender or servicer shall

9 pay interest on such account only if such pay10 ments are required by contract between the

11 lender or servicer and the borrower, or a spe12 cific statutory provision of the law of the State

13 in which the security property is located re14 quires the lender or servicer to make such pay15 ments. Nothing in this subsection shall be con16 strued to prevent an account offered pursuant

17 to this subsection from being considered a

18 transaction account (as defined in section 19(b)

19 of the Federal Reserve Act) for purposes of the

20 Federal Reserve Act.’’.

21 (B) REPEAL.—Effective on at the end of

22 the 2-year period beginning on the date of en23 actment of this Act, section 5(b)(1) of the

24 Home Owners’ Loan Act (12 U.S.C. 1464
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1 (b)(1)) is amended by striking subparagraph

2 (G).

3 (3) FEDERAL DEPOSIT INSURANCE ACT.—Sec4 tion 18(g) of the Federal Deposit Insurance Act (12

5 U.S.C. 1828(g)) is amended by adding at the end

6 the following new paragraph:

7 ‘‘(3) TRANSFERS.—Notwithstanding any other

8 provision of this subsection, an insured nonmember

9 bank or insured State savings association may per10 mit the owner of any deposit or share, any account

11 which is a deposit or share, or any account on which

12 interest or dividends are paid to make up to 24

13 transfers per month (or such greater number as the

14 Board of Governors of the Federal Reserve System

15 may determine by rule or order under section 19(i)

16 to be permissible for member banks), for any pur17 pose, to a demand deposit account of the owner in

18 the same institution. With respect to an escrow ac19 count maintained in connection with a loan, a lender

20 or servicer shall pay interest on such account only

21 if such payments are required by contract between

22 the lender or servicer and the borrower, or a specific

23 statutory provision of the law of the State in which

24 the security property is located requires the lender

25 or servicer to make such payments. Nothing in this
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1 subsection shall be construed to prevent an account

2 offered pursuant to this subsection from being con3 sidered a transaction account (as defined in section

4 19(b) of the Federal Reserve Act) for purposes of

5 the Federal Reserve Act.’’.

6 (b) REPEAL OF PROHIBITION ON PAYMENT OF IN7 TEREST ON DEMAND DEPOSITS.—

8 (1) FEDERAL RESERVE ACT.—Section 19(i) of

9 the Federal Reserve Act (12 U.S.C. 371a) is amend10 ed to read as follows:

11 ‘‘(i) [Repealed]’’.

12 (2) HOME OWNERS’ LOAN ACT.—The 1st sen13 tence of section 5(b)(1)(B) of the Home Owners’

14 Loan Act (12 U.S.C. 1464(b)(1)(B)) is amended by

15 striking ‘‘savings association may not—’’ and all

16 that follows through ‘‘(ii) permit any’’ and inserting

17 ‘‘savings association may not permit any’’.

18 (3) FEDERAL DEPOSIT INSURANCE ACT.—Sec19 tion 18(g) of the Federal Deposit Insurance Act (12

20 U.S.C. 1828(g)) is amended to read as follows:

21 ‘‘(g) [Repealed]’’.

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

23 subsection (b) shall take effect at the end of the 2-year

24 period beginning on the date of the enactment of this Act.
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1 TITLE III—HEALTH INSURANCE

2 AND LONG-TERM CARE IN3 SURANCE PROVISIONS

4 SEC. 301. DEDUCTION FOR 100 PERCENT OF HEALTH IN5 SURANCE COSTS OF SELF-EMPLOYED INDI6 VIDUALS.

7 (a) IN GENERAL.—Paragraph (1) of section 162(l)

8 is amended to read as follows:

9 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

10 of an individual who is an employee within the

11 meaning of section 401(c)(1), there shall be allowed

12 as a deduction under this section an amount equal

13 to 100 percent of the amount paid during the tax14 able year for insurance which constitutes medical

15 care for the taxpayer and the taxpayer’s spouse and

16 dependents.’’.

17 (b) CLARIFICATION OF LIMITATIONS ON OTHER COV18 ERAGE.—The first sentence of section 162(l)(2)(B) is

19 amended to read as follows: ‘‘Paragraph (1) shall not

20 apply to any taxpayer for any calendar month for which

21 the taxpayer participates in any subsidized health plan

22 maintained by any employer (other than an employer de23 scribed in section 401(c)(4)) of the taxpayer or the spouse

24 of the taxpayer.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 302. DEDUCTION FOR HEALTH AND LONG-TERM CARE

5 INSURANCE COSTS OF INDIVIDUALS NOT

6 PARTICIPATING IN EMPLOYER-SUBSIDIZED

7 HEALTH PLANS.

8 (a) IN GENERAL.—Part VII of subchapter B of chap9 ter 1 is amended by redesignating section 222 as section

10 223 and by inserting after section 221 the following new

11 section:

12 ‘‘SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE

13 COSTS.

14 ‘‘(a) IN GENERAL.—In the case of an individual,

15 there shall be allowed as a deduction an amount equal to

16 the applicable percentage of the amount paid during the

17 taxable year for insurance which constitutes medical care

18 for the taxpayer and the taxpayer’s spouse and depend19 ents.

20 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

21 subsection (a), the applicable percentage shall be deter22 mined in accordance with the following table:

‘‘For taxable years beginning The applicable

in calendar year— percentage is—

2001, 2002, and 2003 ............................................................. 25

2004 ......................................................................................... 35

2005 ......................................................................................... 65

2006 and thereafter ................................................................. 100.
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1 ‘‘(c) LIMITATION BASED ON OTHER COVERAGE.—

2 ‘‘(1) COVERAGE UNDER CERTAIN SUBSIDIZED

3 EMPLOYER PLANS.—

4 ‘‘(A) IN GENERAL.—Subsection (a) shall

5 not apply to any taxpayer for any calendar

6 month for which the taxpayer participates in

7 any health plan maintained by any employer of

8 the taxpayer or of the spouse of the taxpayer if

9 for such month 50 percent or more of the cost

10 of coverage under such plan (determined under

11 section 4980B and without regard to payments

12 made with respect to any coverage described in

13 subsection (e)) is paid or incurred by the em14 ployer.

15 ‘‘(B) EMPLOYER CONTRIBUTIONS TO CAF16 ETERIA PLANS, FLEXIBLE SPENDING ARRANGE17 MENTS, AND MEDICAL SAVINGS ACCOUNTS.—

18 Employer contributions to a cafeteria plan, a

19 flexible spending or similar arrangement, or a

20 medical savings account which are excluded

21 from gross income under section 106 shall be

22 treated for purposes of subparagraph (A) as

23 paid by the employer.

24 ‘‘(C) AGGREGATION OF PLANS OF EM25 PLOYER.—A health plan which is not otherwise
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1 described in subparagraph (A) shall be treated

2 as described in such subparagraph if such plan

3 would be so described if all health plans of per4 sons treated as a single employer under sub5 section (b), (c), (m), or (o) of section 414 were

6 treated as one health plan.

7 ‘‘(D) SEPARATE APPLICATION TO HEALTH

8 INSURANCE AND LONG-TERM CARE INSUR9 ANCE.—Subparagraphs (A) and (C) shall be

10 applied separately with respect to—

11 ‘‘(i) plans which include primarily cov12 erage for qualified long-term care services

13 or are qualified long-term care insurance

14 contracts, and

15 ‘‘(ii) plans which do not include such

16 coverage and are not such contracts.

17 ‘‘(2) COVERAGE UNDER CERTAIN FEDERAL

18 PROGRAMS.—

19 ‘‘(A) IN GENERAL.—Subsection (a) shall

20 not apply to any amount paid for any coverage

21 for an individual for any calendar month if, as

22 of the first day of such month, the individual is

23 covered under any medical care program de24 scribed in—
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1 ‘‘(i) title XVIII, XIX, or XXI of the

2 Social Security Act,

3 ‘‘(ii) chapter 55 of title 10, United

4 States Code,

5 ‘‘(iii) chapter 17 of title 38, United

6 States Code,

7 ‘‘(iv) chapter 89 of title 5, United

8 States Code, or

9 ‘‘(v) the Indian Health Care Improve10 ment Act.

11 ‘‘(B) EXCEPTIONS.—

12 ‘‘(i) QUALIFIED LONG-TERM CARE.—

13 Subparagraph (A) shall not apply to

14 amounts paid for coverage under a quali15 fied long-term care insurance contract.

16 ‘‘(ii) CONTINUATION COVERAGE OF

17 FEHBP.—Subparagraph (A)(iv) shall not

18 apply to coverage which is comparable to

19 continuation coverage under section

20 4980B.

21 ‘‘(d) LONG-TERM CARE DEDUCTION LIMITED TO

22 QUALIFIED LONG-TERM CARE INSURANCE CON23 TRACTS.—In the case of a qualified long-term care insur24 ance contract, only eligible long-term care premiums (as
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1 defined in section 213(d)(10)) may be taken into account

2 under subsection (a).

3 ‘‘(e) DEDUCTION NOT AVAILABLE FOR PAYMENT OF

4 ANCILLARY COVERAGE PREMIUMS.—Any amount paid as

5 a premium for insurance which provides for—

6 ‘‘(1) coverage for accidents, disability, dental

7 care, vision care, or a specified illness, or

8 ‘‘(2) making payments of a fixed amount per

9 day (or other period) by reason of being hospitalized,

10 shall not be taken into account under subsection (a).

11 ‘‘(f ) SPECIAL RULES.—

12 ‘‘(1) COORDINATION WITH DEDUCTION FOR

13 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN14 DIVIDUALS.—The amount taken into account by the

15 taxpayer in computing the deduction under section

16 162(l) shall not be taken into account under this

17 section.

18 ‘‘(2) COORDINATION WITH MEDICAL EXPENSE

19 DEDUCTION.—The amount taken into account by

20 the taxpayer in computing the deduction under this

21 section shall not be taken into account under section

22 213.

23 ‘‘(g) REGULATIONS.—The Secretary shall prescribe

24 such regulations as may be appropriate to carry out this

25 section, including regulations requiring employers to re-
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1 port to their employees and the Secretary such informa2 tion as the Secretary determines to be appropriate.’’.

3 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX4 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

5 of section 62 is amended by inserting after paragraph (17)

6 the following new item:

7 ‘‘(18) HEALTH AND LONG-TERM CARE INSUR8 ANCE COSTS.—The deduction allowed by section

9 222.’’.

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

11 for part VII of subchapter B of chapter 1 is amended by

12 striking the last item and inserting the following new

13 items:

‘‘Sec. 222. Health and long-term care insurance costs.

‘‘Sec. 223. Cross reference.’’.

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

15 this section shall apply to taxable years beginning after

16 December 31, 2000.

17 SEC. 303. 2-YEAR EXTENSION OF AVAILABILITY OF MED18 ICAL SAVINGS ACCOUNTS.

19 (a) IN GENERAL.—Paragraphs (2) and (3)(B) of sec20 tion 220(i) (defining cut-off year) are each amended by

21 striking ‘‘2000’’ each place it appears and inserting

22 ‘‘2002’’.

23 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (2) of section 220(j) is

2 amended—

3 (A) by striking ‘‘1998 or 1999’’ each place

4 it appears and inserting ‘‘1998, 1999, 2000, or

5 2001’’, and

6 (B) by striking ‘‘600,000 (750,000 in the

7 case of 1999)’’ and inserting ‘‘750,000

8 (600,000 in the case of 1998)’’.

9 (2) Subparagraph (A) of section 220(j)(4) is

10 amended by striking ‘‘, 1998, and 1999’’ and insert11 ing ‘‘and of each calendar year after 1997 and be12 fore 2002’’.

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

14 this section shall take effect on the date of the enactment

15 of this Act.

16 SEC. 304. ADDITIONAL CONSUMER PROTECTIONS FOR

17 LONG-TERM CARE INSURANCE.

18 (a) ADDITIONAL PROTECTIONS APPLICABLE TO

19 LONG-TERM CARE INSURANCE.—Subparagraph (A) of

20 section 7702B(g)(2) (relating to requirements of model

21 regulation and Act) is amended to read as follows:

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

23 this paragraph are met with respect to any con24 tract if such contract meets—
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1 ‘‘(i) MODEL REGULATION.—The fol2 lowing requirements of the model regula3 tion:

4 ‘‘(I) Section 6A (relating to guar5 anteed renewal or noncancellability),

6 and the requirements of section 6B of

7 the model Act relating to such section

8 6A.

9 ‘‘(II) Section 6B (relating to pro10 hibitions on limitations and exclu11 sions).

12 ‘‘(III) Section 6C (relating to ex13 tension of benefits).

14 ‘‘(IV) Section 6D (relating to

15 continuation or conversion of cov16 erage).

17 ‘‘(V) Section 6E (relating to dis18 continuance and replacement of poli19 cies).

20 ‘‘(VI) Section 7 (relating to unin21 tentional lapse).

22 ‘‘(VII) Section 8 (relating to dis23 closure), other than section 8F there24 of.
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1 ‘‘(VIII) Section 11 (relating to

2 prohibitions against post-claims un3 derwriting).

4 ‘‘(IX) Section 12 (relating to

5 minimum standards).

6 ‘‘(X) Section 13 (relating to re7 quirement to offer inflation protec8 tion), except that any requirement for

9 a signature on a rejection of inflation

10 protection shall permit the signature

11 to be on an application or on a sepa12 rate form.

13 ‘‘(XI) Section 25 (relating to pro14 hibition against preexisting conditions

15 and probationary periods in replace16 ment policies or certificates).

17 ‘‘(XII) The provisions of section

18 26 relating to contingent nonforfeiture

19 benefits, if the policyholder declines

20 the offer of a nonforfeiture provision

21 described in paragraph (4).

22 ‘‘(ii) MODEL ACT.—The following re23 quirements of the model Act:

24 ‘‘(I) Section 6C (relating to pre25 existing conditions).
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1 ‘‘(II) Section 6D (relating to

2 prior hospitalization).

3 ‘‘(III) The provisions of section 8

4 relating to contingent nonforfeiture

5 benefits, if the policyholder declines

6 the offer of a nonforfeiture provision

7 described in paragraph (4).

8 ‘‘(B) DEFINITIONS.—For purposes of this

9 paragraph—

10 ‘‘(i) MODEL PROVISIONS.—The terms

11 ‘model regulation’ and ‘model Act’ mean

12 the long-term care insurance model regula13 tion, and the long-term care insurance

14 model Act, respectively, promulgated by

15 the National Association of Insurance

16 Commissioners (as adopted as of Sep17 tember 2000).

18 ‘‘(ii) COORDINATION.—Any provision

19 of the model regulation or model Act listed

20 under clause (i) or (ii) of subparagraph

21 (A) shall be treated as including any other

22 provision of such regulation or Act nec23 essary to implement the provision.

24 ‘‘(iii) DETERMINATION.—For pur25 poses of this section and section 4980C,
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1 the determination of whether any require2 ment of a model regulation or the model

3 Act has been met shall be made by the

4 Secretary.’’

5 (b) EXCISE TAX.—Paragraph (1) of section

6 4980C(c) (relating to requirements of model provisions)

7 is amended to read as follows:

8 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—

9 ‘‘(A) MODEL REGULATION.—The following

10 requirements of the model regulation must be

11 met:

12 ‘‘(i) Section 9 (relating to required

13 disclosure of rating practices to con14 sumer).’’

15 ‘‘(ii) Section 14 (relating to applica16 tion forms and replacement coverage).

17 ‘‘(iii) Section 15 (relating to reporting

18 requirements), except that the issuer shall

19 also report at least annually the number of

20 claims denied during the reporting period

21 for each class of business (expressed as a

22 percentage of claims denied), other than

23 claims denied for failure to meet the wait24 ing period or because of any applicable

25 preexisting condition.
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1 ‘‘(iv) Section 22 (relating to filing re2 quirements for marketing).

3 ‘‘(v) Section 23 (relating to standards

4 for marketing), including inaccurate com5 pletion of medical histories, other than

6 paragraphs (1), (6), and (9) of section

7 23C, except that—

8 ‘‘(I) in addition to such require9 ments, no person shall, in selling or

10 offering to sell a qualified long-term

11 care insurance contract, misrepresent

12 a material fact; and

13 ‘‘(II) no such requirements shall

14 include a requirement to inquire or

15 identify whether a prospective appli16 cant or enrollee for long-term care in17 surance has accident and sickness in18 surance.

19 ‘‘(vi) Section 24 (relating to suit20 ability).

21 ‘‘(vii) Section 29 (relating to standard

22 format outline of coverage).

23 ‘‘(viii) Section 30 (relating to require24 ment to deliver shopper’s guide).
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1 The requirements referred to in clause (vi) shall

2 not include those portions of the personal work3 sheet described in Appendix B relating to con4 sumer protection requirements not imposed by

5 section 4980C or 7702B.

6 ‘‘(B) MODEL ACT.—The following require7 ments of the model Act must be met:

8 ‘‘(i) Section 6F (relating to right to

9 return), except that such section shall also

10 apply to denials of applications and any re11 fund shall be made within 30 days of the

12 return or denial.

13 ‘‘(ii) Section 6G (relating to outline of

14 coverage).

15 ‘‘(iii) Section 6H (relating to require16 ments for certificates under group plans).

17 ‘‘(iv) Section 6I (relating to policy

18 summary).

19 ‘‘(v) Section 6J (relating to monthly

20 reports on accelerated death benefits).

21 ‘‘(vi) Section 7 (relating to incontest22 ability period).

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

24 paragraph, the terms ‘model regulation’ and
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1 ‘model Act’ have the meanings given such terms

2 by section 7702B(g)(2)(B).’’

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

4 this section shall apply to policies issued more than 1 year

5 after the date of the enactment of this Act.

6 SEC. 305. DEDUCTION FOR PROVIDING LONG-TERM CARE

7 IN THE HOME TO HOUSEHOLD MEMBERS.

8 (a) IN GENERAL.—Part VII of subchapter B of chap9 ter 1 is amended by redesignating section 223 as section

10 224 and by inserting after section 222 the following new

11 section:

12 ‘‘SEC. 223. PROVISION OF LONG-TERM CARE IN THE HOME

13 TO HOUSEHOLD MEMBERS.

14 ‘‘(a) DEDUCTION ALLOWED.—

15 ‘‘(1) IN GENERAL.—There shall be allowed as a

16 deduction for the taxable year an amount equal to

17 the applicable amount multiplied by the number of

18 qualified family members of the taxpayer for the

19 taxable year.

20 ‘‘(2) APPLICABLE AMOUNT.—For purposes of

21 paragraph (1), the applicable amount for a taxable

22 year shall be the amount determined in accordance

23 with the following table:

‘‘For taxable years The applicable

beginning in: amount is:

2001 ............................................................................. $3,000

2002 ............................................................................. $4,000

2003 ............................................................................. $5,000
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2004 ............................................................................. $6,000

2005 ............................................................................. $7,000

2006 ............................................................................. $8,000

2007 ............................................................................. $9,000

2008 and thereafter ..................................................... $10,000.

1 ‘‘(b) LIMITATIONS.—

2 ‘‘(1) REDUCTION FOR AMOUNTS RECEIVED

3 UNDER LONG-TERM CARE INSURANCE POLICY.—The

4 amount of the deduction allowable under subsection

5 (a) with respect to a qualified family member shall

6 be reduced (but not below zero) by the amount re7 ceived for the taxable year under a long-term care

8 insurance policy (whether or not such policy is a

9 qualified long-term care insurance contract under

10 section 7702B) with respect to which the insured is

11 the qualified family member.

12 ‘‘(2) PHASEOUT.—The amount of the deduction

13 allowable under subsection (a) (after the application

14 of paragraph (1)) shall be reduced in the same man15 ner as the exemption amount is reduced under sec16 tion 151(d)(3).

17 ‘‘(c) QUALIFIED FAMILY MEMBER.—For purposes of

18 this section—

19 ‘‘(1) IN GENERAL.—The term ‘qualified family

20 member’ means, with respect to any taxable year,

21 any individual—

22 ‘‘(A) who is—

23 ‘‘(i) the taxpayer’s spouse, or
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1 ‘‘(ii) an individual who bears a rela2 tionship to the taxpayer described in any

3 of paragraphs (1) through (8) of section

4 152(a),

5 ‘‘(B) who is a member for the entire tax6 able year of the household maintained by the

7 taxpayer,

8 ‘‘(C) whose gross income for the calendar

9 year in which the taxable year of the taxpayer

10 begins is less than the sum of—

11 ‘‘(i) the exemption amount (as defined

12 in section 151(d)), and

13 ‘‘(ii) the standard deduction, and

14 ‘‘(D) who has been certified, before the due

15 date for filing the return of tax for the taxable

16 year (without extensions), by a physician (as

17 defined in section 1861(r)(1) of the Social Se18 curity Act) as being an individual described in

19 paragraph (3) for a period—

20 ‘‘(i) which is at least 180 consecutive

21 days, and

22 ‘‘(ii) a portion of which occurs within

23 the taxable year.

24 ‘‘(2) SPECIAL RULES.—
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1 ‘‘(A) FREQUENCY OF CERTIFICATION.—

2 The term ‘qualified family member’ shall not

3 include any individual otherwise meeting the re4 quirements of paragraph (1)(D) unless the certification is made within the 391 5 ⁄2 month period

6 ending on the due date (or such other period as

7 the Secretary prescribes).

8 ‘‘(B) GROSS INCOME TEST NOT TO APPLY

9 TO CERTAIN INDIVIDUALS.—Paragraph (1)(C)

10 shall not apply to—

11 ‘‘(i) the spouse of the taxpayer,

12 ‘‘(ii) any child of the taxpayer de13 scribed in section 151(c)(1)(B), and

14 ‘‘(iii) any gross income which is not

15 taken into account under paragraph (1)(B)

16 of section 151(c) by reason of paragraph

17 (5) thereof.

18 ‘‘(3) INDIVIDUALS WITH LONG-TERM CARE

19 NEEDS.—An individual is described in this para20 graph if the individual meets any of the following re21 quirements:

22 ‘‘(A) The individual is at least 6 years of

23 age and—

24 ‘‘(i) is unable to perform (without

25 substantial assistance from another indi-
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1 vidual) at least 3 activities of daily living

2 (as defined in section 7702B(c)(2)(B)) due

3 to a loss of functional capacity, or

4 ‘‘(ii) requires substantial supervision

5 to protect such individual from threats to

6 health and safety due to severe cognitive

7 impairment, and

8 ‘‘(I) is unable to perform, with9 out reminding or cuing assistance, at

10 least 1 activity of daily living (as so

11 defined), or

12 ‘‘(II) to the extent provided in

13 regulations prescribed by the Sec14 retary (in consultation with the Sec15 retary of Health and Human Serv16 ices), is unable to engage in age ap17 propriate activities.

18 ‘‘(B) The individual is at least 2 but not

19 6 years of age and is unable due to a loss of

20 functional capacity to perform (without sub21 stantial assistance from another individual) at

22 least 2 of the following activities: eating, trans23 ferring, or mobility.

24 ‘‘(C) The individual is under 2 years of age

25 and requires specific durable medical equipment
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1 by reason of a severe health condition or re2 quires a skilled practitioner trained to address

3 the individual’s condition to be available if the

4 individual’s parents or guardians are absent.

5 ‘‘(d) SPECIAL RULES.—

6 ‘‘(1) IDENTIFICATION REQUIREMENT.—No de7 duction shall be allowed under this section to a tax8 payer with respect to any qualified family member

9 unless the taxpayer includes the name and taxpayer

10 identification number of such member, and the iden11 tification number of the physician certifying such

12 member, on the return of tax for the taxable year.

13 ‘‘(2) TAXABLE YEAR MUST BE FULL TAXABLE

14 YEAR.—No deduction shall be allowable under this

15 section in the case of a taxable year covering a pe16 riod of less than 12 months, except that in the case

17 of a taxable year closed by the death of a taxpayer

18 a ratable portion of the deduction shall be allowable.

19 ‘‘(3) SPECIAL RULES.—Rules similar to the

20 rules of paragraphs (1), (2), (3), (4), and (5) of sec21 tion 21(e) shall apply for purposes of this sub22 section.’’.

23 (b) DEDUCTION ALLOWABLE WHETHER OR NOT

24 TAXPAYER ITEMIZES OTHER DEDUCTIONS.—
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1 (1) Subsection (b) of section 63 is amended by

2 striking ‘‘and’’ at the end of paragraph (1), by strik3 ing the period at the end of paragraph (2) and in4 serting ‘‘, and’’, and by adding at the end the fol5 lowing new paragraph:

6 ‘‘(3) the deduction allowed by section 223.’’

7 (2) Subsection (d) of section 63 is amended by

8 striking ‘‘and’’ at the end of paragraph (1), by strik9 ing the period at the end of paragraph (2) and in10 serting ‘‘, and’’, and by adding at the end the fol11 lowing new paragraph:

12 ‘‘(3) the deduction allowed by section 223.’’

13 (c) CONFORMING AMENDMENTS.—

14 (1) Section 6213(g)(2) is amended by striking

15 ‘‘and’’ at the end of subparagraph (K), by striking

16 the period at the end of subparagraph (L) and in17 serting ‘‘, and’’, and by inserting after subparagraph

18 (L) the following new subparagraph:

19 ‘‘(M) an omission of a correct TIN or phy20 sician identification number required under sec21 tion 223(d)(1) (relating to deduction for provi22 sion of long-term care in the home to household

23 members) to be included on a return.’’
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1 (2) The table of sections for part VII of sub2 chapter B of chapter 1 is amended by striking the

3 last item and inserting the following new items:

‘‘Sec. 223. Provision of long-term care in the home to household

members.

‘‘Sec. 224. Cross reference.’’

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

5 this section shall apply to taxable years beginning after

6 December 31, 2000.

7 TITLE IV—PENSION AND INDI8 VIDUAL RETIREMENT AR9 RANGEMENT PROVISIONS

10 SEC. 400. SHORT TITLE.

11 This title may be cited as the ‘‘Retirement Savings

12 and Pension Coverage Act of 2000’’.

13 Subtitle A—Individual Retirement

14 Accounts

15 SEC. 401. MODIFICATION OF IRA CONTRIBUTION LIMITS.

16 (a) INCREASE IN CONTRIBUTION LIMIT.—

17 (1) IN GENERAL.—Paragraph (1)(A) of section

18 219(b) (relating to maximum amount of deduction)

19 is amended by striking ‘‘$2,000’’ and inserting ‘‘the

20 deductible amount’’.

21 (2) DEDUCTIBLE AMOUNT.—Section 219(b) is

22 amended by adding at the end the following new

23 paragraph:
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1 ‘‘(5) DEDUCTIBLE AMOUNT.—For purposes of

2 paragraph (1)(A)—

3 ‘‘(A) IN GENERAL.—The deductible

4 amount shall be determined in accordance with

5 the following table:

‘‘For taxable years The deductible

beginning in: amount is:

2001 ............................................................................. $3,000

2002 ............................................................................. $4,000

2003 and thereafter ..................................................... $5,000.

6 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI7 VIDUALS 50 OR OLDER.—

8 ‘‘(i) IN GENERAL.—In the case of an

9 individual who has attained the age of 50

10 before the close of the taxable year, the de11 ductible amount for such taxable year (de12 termined without regard to this subpara13 graph) shall be increased by the applicable

14 catch-up amount.

15 ‘‘(ii) APPLICABLE CATCH-UP

16 AMOUNT.—For purposes of clause (i), the

17 applicable catch-up amount shall be the

18 amount determined in accordance with the

19 following table:

‘‘For taxable years The applicable catch-up

beginning in: amount is:

2001 ............................................................................. $500

2002 ............................................................................. $1,000

2003 and thereafter ..................................................... $1,500.

20 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—
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1 ‘‘(i) IN GENERAL.—In the case of any

2 taxable year beginning in a calendar year

3 after 2003, the $5,000 amount under sub4 paragraph (A) and the $1,500 amount

5 under subparagraph (B) shall each be in6 creased by an amount equal to—

7 ‘‘(I) such dollar amount, multi8 plied by

9 ‘‘(II) the cost-of-living adjust10 ment determined under section 1(f)(3)

11 for the calendar year in which the tax12 able year begins, determined by sub13 stituting ‘calendar year 2002’ for ‘cal14 endar year 1992’ in subparagraph (B)

15 thereof.

16 ‘‘(ii) ROUNDING RULES.—If any

17 amount after adjustment under clause (i)

18 is not a multiple of $500, such amount

19 shall be rounded to the next lower multiple

20 of $500.’’.

21 (b) INCREASE IN AGI LIMITS FOR ACTIVE PARTICI22 PANTS.—

23 (1) JOINT RETURNS.—The table in clause (i) of

24 section 219(g)(3)(B) (relating to applicable dollar

25 amount) is amended to read as follows:
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‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................. $56,000

2002 ............................................................................. $60,000

2003 ............................................................................. $64,000

2004 ............................................................................. $68,000

2005 ............................................................................. $72,000

2006 ............................................................................. $76,000

2007 or thereafter ........................................................ $80,000.’’.

1 (2) OTHER TAXPAYERS.—Section 219(g)(3)(B)

2 (relating to applicable dollar amount) is amended by

3 striking clauses (ii) and (iii) and inserting the fol4 lowing:

5 ‘‘(ii) In the case of any other tax6 payer:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................. $36,000

2002 ............................................................................. $40,000

2003 ............................................................................. $44,000

2004 ............................................................................. $48,000

2005 or thereafter ........................................................ $50,000.’’.

7 (c) CONFORMING AMENDMENTS.—

8 (1) Section 408(a)(1) is amended by striking

9 ‘‘in excess of $2,000 on behalf of any individual’’

10 and inserting ‘‘on behalf of any individual in excess

11 of the amount in effect for such taxable year under

12 section 219(b)(1)(A)’’.

13 (2) Section 408(b)(2)(B) is amended by strik14 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

15 effect under section 219(b)(1)(A)’’.
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1 (3) Section 408(b) is amended by striking

2 ‘‘$2,000’’ in the matter following paragraph (4) and

3 inserting ‘‘the dollar amount in effect under section

4 219(b)(1)(A)’’.

5 (4) Section 408(j) is amended by striking

6 ‘‘$2,000’’.

7 (5) Section 408(p)(8) is amended by striking

8 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

9 under section 219(b)(1)(A)’’.

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

11 this section shall apply to taxable years beginning after

12 December 31, 2000.

13 SEC. 402. DEEMED IRAS UNDER EMPLOYER PLANS.

14 (a) IN GENERAL.—Section 408 (relating to individual

15 retirement accounts) is amended by redesignating sub16 section (q) as subsection (r) and by inserting after sub17 section (p) the following new subsection:

18 ‘‘(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER

19 PLANS.—

20 ‘‘(1) GENERAL RULE.—If—

21 ‘‘(A) a qualified employer plan elects to

22 allow employees to make voluntary employee

23 contributions to a separate account or annuity

24 established under the plan, and
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1 ‘‘(B) under the terms of the qualified em2 ployer plan, such account or annuity meets the

3 applicable requirements of this section or sec4 tion 408A for an individual retirement account

5 or annuity,

6 then such account or annuity shall be treated for

7 purposes of this title in the same manner as an indi8 vidual retirement plan and not as a qualified em9 ployer plan (and contributions to such account or

10 annuity as contributions to an individual retirement

11 plan and not to the qualified employer plan). For

12 purposes of subparagraph (B), the requirements of

13 subsection (a)(5) shall not apply.

14 ‘‘(2) SPECIAL RULES FOR QUALIFIED EM15 PLOYER PLANS.—For purposes of this title, a quali16 fied employer plan shall not fail to meet any require17 ment of this title solely by reason of establishing and

18 maintaining a program described in paragraph (1).

19 ‘‘(3) DEFINITIONS.—For purposes of this

20 subsection—

21 ‘‘(A) QUALIFIED EMPLOYER PLAN.—The

22 term ‘qualified employer plan’ has the meaning

23 given such term by section 72(p)(4); except

24 such term shall only include an eligible deferred

25 compensation plan (as defined in section
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1 457(b)) which is maintained by an eligible em2 ployer described in section 457(e)(1)(A).

3 ‘‘(B) VOLUNTARY EMPLOYEE CONTRIBU4 TION.—The term ‘voluntary employee contribu5 tion’ means any contribution (other than a

6 mandatory contribution within the meaning of

7 section 411(c)(2)(C))—

8 ‘‘(i) which is made by an individual as

9 an employee under a qualified employer

10 plan which allows employees to elect to

11 make contributions described in paragraph

12 (1), and

13 ‘‘(ii) with respect to which the indi14 vidual has designated the contribution as a

15 contribution to which this subsection ap16 plies.’’.

17 (b) AMENDMENT OF ERISA.—

18 (1) IN GENERAL.—Section 4 of the Employee

19 Retirement Income Security Act of 1974 (29 U.S.C.

20 1003) is amended by adding at the end the following

21 new subsection:

22 ‘‘(c) If a pension plan allows an employee to elect to

23 make voluntary employee contributions to accounts and

24 annuities as provided in section 408(q) of the Internal

25 Revenue Code of 1986, such accounts and annuities (and
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1 contributions thereto) shall not be treated as part of such

2 plan (or as a separate pension plan) for purposes of any

3 provision of this title other than section 403(c), 404, or

4 405 (relating to exclusive benefit, and fiduciary and co5 fiduciary responsibilities).’’.

6 (2) CONFORMING AMENDMENT.—Section 4(a)

7 of such Act (29 U.S.C. 1003(a)) is amended by in8 serting ‘‘or (c)’’ after ‘‘subsection (b)’’.

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

10 this section shall apply to plan years beginning after De11 cember 31, 2001.

12 SEC. 403. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE13 TIREMENT ACCOUNTS FOR CHARITABLE

14 PURPOSES.

15 (a) IN GENERAL.—Subsection (d) of section 408 (re16 lating to individual retirement accounts) is amended by

17 adding at the end the following new paragraph:

18 ‘‘(8) DISTRIBUTIONS FOR CHARITABLE PUR19 POSES.—

20 ‘‘(A) IN GENERAL.—In the case of a quali21 fied charitable distribution, no amount shall be

22 includible in the gross income of the account

23 holder or beneficiary.

24 ‘‘(B) QUALIFIED CHARITABLE DISTRIBU25 TION.—For purposes of this paragraph, the
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1 term ‘qualified charitable distribution’ means

2 any distribution from an individual retirement

3 account—

4 ‘‘(i) which is made on or after the

5 date that the individual for whose benefit

6 the account is maintained has attained age

701 7 ⁄2, and

8 ‘‘(ii) which is a charitable contribution

9 (as defined in section 170(c)) made di10 rectly from the account to an organization

11 or entity described in section 170(c).

12 ‘‘(C) DENIAL OF DEDUCTION.—The

13 amount allowable as a deduction to the tax14 payer for the taxable year under section 170

15 (before the application of section 170(b)) for

16 qualified charitable distributions shall be re17 duced (but not below zero) by the sum of the

18 amounts of the qualified charitable distributions

19 during such year which (but for this paragraph)

20 would have been includible in the gross income

21 of the taxpayer for such year.’’.

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

23 subsection (a) shall apply to taxable years beginning after

24 December 31, 2000.
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1 SEC. 404. MODIFICATION OF AGI LIMITS FOR ROTH IRAS.

2 (a) INCREASE IN AGI LIMIT FOR ROTH IRA CON3 TRIBUTIONS.—

4 (1) IN GENERAL.—Section 408A(c)(3)(C)(ii)

5 (relating to limits based on modified adjusted gross

6 income) is amended to read as follows:

7 ‘‘(ii) the applicable dollar amount is—

8 ‘‘(I) in the case of a taxpayer fil9 ing a joint return, $190,000, and

10 ‘‘(II) in the case of any other

11 taxpayer, $95,000.’’.

12 (2) PHASEOUT AMOUNT.—Clause (ii) of section

13 408A(c)(3)(A) is amended to read as follows:

14 ‘‘(ii) $15,000 ($30,000 in the case of

15 a joint return).’’.

16 (b) INCREASE IN AGI LIMIT FOR ROTH IRA CON17 VERSIONS.—Section 408A(c)(3)(B) (relating to rollover

18 from IRA) is amended by striking ‘‘relates’’ and all that

19 follows and inserting ‘‘relates, the taxpayer’s adjusted

20 gross income exceeds $100,000 ($200,000 in the case of

21 a joint return).’’.

22 (c) CONFORMING AMENDMENT.—Section 408A(c)(3)

23 is amended by striking subparagraph (D).

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

25 this section shall apply to taxable years beginning after

26 December 31, 2000.
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1 Subtitle B—Expanding Coverage

2 SEC. 411. INCREASE IN BENEFIT AND CONTRIBUTION LIM3 ITS.

4 (a) DEFINED BENEFIT PLANS.—

5 (1) DOLLAR LIMIT.—

6 (A) Subparagraph (A) of section 415(b)(1)

7 (relating to limitation for defined benefit plans)

8 is amended by striking ‘‘$90,000’’ and inserting

9 ‘‘$160,000’’.

10 (B) Subparagraphs (C) and (D) of section

11 415(b)(2) are each amended by striking

12 ‘‘$90,000’’ each place it appears in the head13 ings and the text and inserting ‘‘$160,000’’.

14 (C) Paragraph (7) of section 415(b) (relat15 ing to benefits under certain collectively bar16 gained plans) is amended by striking ‘‘the

17 greater of $68,212 or one-half the amount oth18 erwise applicable for such year under paragraph

19 (1)(A) for ‘$90,000’ ’’ and inserting ‘‘one-half

20 the amount otherwise applicable for such year

21 under paragraph (1)(A) for ‘$160,000’ ’’.

22 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

23 BEFORE AGE 62.—Subparagraph (C) of section

24 415(b)(2) is amended by striking ‘‘the social security

25 retirement age’’ each place it appears in the heading
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1 and text and inserting ‘‘age 62’’ and by striking the

2 second sentence.

3 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

4 AFTER AGE 65.—Subparagraph (D) of section

5 415(b)(2) is amended by striking ‘‘the social security

6 retirement age’’ each place it appears in the heading

7 and text and inserting ‘‘age 65’’.

8 (4) COST-OF-LIVING ADJUSTMENTS.—Sub9 section (d) of section 415 (related to cost-of-living

10 adjustments) is amended—

11 (A) by striking ‘‘$90,000’’ in paragraph

12 (1)(A) and inserting ‘‘$160,000’’; and

13 (B) in paragraph (3)(A)—

14 (i) by striking ‘‘$90,000’’ in the head15 ing and inserting ‘‘$160,000’’; and

16 (ii) by striking ‘‘October 1, 1986’’ and

17 inserting ‘‘July 1, 2000’’.

18 (5) CONFORMING AMENDMENTS.—

19 (A) Section 415(b)(2) is amended by strik20 ing subparagraph (F).

21 (B) Section 415(b)(9) is amended to read

22 as follows:

23 ‘‘(9) SPECIAL RULE FOR COMMERCIAL AIR24 LINE PILOTS.—In the case of any participant

25 who is a commercial airline pilot, if, as of the
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1 time of the participant’s retirement, regulations

2 prescribed by the Federal Aviation Administra3 tion require an individual to separate from serv4 ice as a commercial airline pilot after attaining

5 any age occurring on or after age 60 and before

6 age 62, paragraph (2)(C) shall be applied by

7 substituting such age for age 62.’’.

8 (C) Section 415(b)(10)(C)(i) is amended

9 by striking ‘‘applied without regard to para10 graph (2)(F)’’.

11 (b) DEFINED CONTRIBUTION PLANS.—

12 (1) DOLLAR LIMIT.—Subparagraph (A) of sec13 tion 415(c)(1) (relating to limitation for defined con14 tribution plans) is amended by striking ‘‘$30,000’’

15 and inserting ‘‘$40,000’’.

16 (2) COST-OF-LIVING ADJUSTMENTS.—Sub17 section (d) of section 415 (related to cost-of-living

18 adjustments) is amended—

19 (A) by striking ‘‘$30,000’’ in paragraph

20 (1)(C) and inserting ‘‘$40,000’’; and

21 (B) in paragraph (3)(D)—

22 (i) by striking ‘‘$30,000’’ in the head23 ing and inserting ‘‘$40,000’’; and

24 (ii) by striking ‘‘October 1, 1993’’ and

25 inserting ‘‘July 1, 2000’’.
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1 (3) CONFORMING AMENDMENTS.—

2 (A) IN GENERAL.—Section 664(g)(3)(E)

3 (relating to plan requirements) is amended by

4 striking ‘‘limitations under section 415(c)(1)‘‘

5 and inserting ‘‘applicable limitation under para6 graph (7)’’.

7 (B) APPLICABLE LIMITATION.—Section

8 664(g) (relating to qualified gratuitous transfer

9 of qualified employer securities) is amended by

10 adding at the end the following new paragraph:

11 ‘‘(7) APPLICABLE LIMITATION.—

12 ‘‘(A) IN GENERAL.—For purposes of para13 graph (3)(E), the applicable limitation under

14 this paragraph with respect to a participant is

15 an amount equal to the lesser of—

16 ‘‘(i) $30,000, or

17 ‘‘(ii) 25 percent of the participant’s

18 compensation (as defined in section

19 415(c)(3)).

20 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—The

21 Secretary shall adjust annually the $30,000

22 amount under subparagraph (A)(i) at the same

23 time and in the same manner as under section

24 415(d), except that the base period shall be the

25 calendar quarter beginning October 1, 1993,
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1 and any increase under this subparagraph

2 which is not a multiple of $5,000 shall be

3 rounded to the next lowest multiple of $5,000.’’.

4 (c) QUALIFIED TRUSTS.—

5 (1) COMPENSATION LIMIT.—Sections

6 401(a)(17), 404(l), 408(k), and 505(b)(7) are each

7 amended by striking ‘‘$150,000’’ each place it ap8 pears and inserting ‘‘$200,000’’.

9 (2) BASE PERIOD AND ROUNDING OF COST-OF10 LIVING ADJUSTMENT.—Subparagraph (B) of section

11 401(a)(17) is amended—

12 (A) by striking ‘‘October 1, 1993’’ and in13 serting ‘‘July 1, 2000’’; and

14 (B) by striking ‘‘$10,000’’ both places it

15 appears and inserting ‘‘$5,000’’.

16 (d) ELECTIVE DEFERRALS.—

17 (1) IN GENERAL.—Paragraph (1) of section

18 402(g) (relating to limitation on exclusion for elec19 tive deferrals) is amended to read as follows:

20 ‘‘(1) IN GENERAL.—

21 ‘‘(A) LIMITATION.—Notwithstanding sub22 sections (e)(3) and (h)(1)(B), the elective defer23 rals of any individual for any taxable year shall

24 be included in such individual’s gross income to

25 the extent the amount of such deferrals for the
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1 taxable year exceeds the applicable dollar

2 amount.

3 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—For

4 purposes of subparagraph (A), the applicable

5 dollar amount shall be the amount determined

6 in accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................. $11,000

2002 ............................................................................. $12,000

2003 ............................................................................. $13,000

2004 ............................................................................. $14,000

2005 or thereafter ........................................................ $15,000.’’.

7 (2) COST-OF-LIVING ADJUSTMENT.—Paragraph

8 (5) of section 402(g) is amended to read as follows:

9 ‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the

10 case of taxable years beginning after December 31,

11 2005, the Secretary shall adjust the $15,000

12 amount under paragraph (1)(B) at the same time

13 and in the same manner as under section 415(d),

14 except that the base period shall be the calendar

15 quarter beginning July 1, 2004, and any increase

16 under this paragraph which is not a multiple of

17 $500 shall be rounded to the next lowest multiple of

18 $500.’’.

19 (3) CONFORMING AMENDMENTS.—

20 (A) Section 402(g) (relating to limitation

21 on exclusion for elective deferrals), as amended
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1 by paragraphs (1) and (2), is further amended

2 by striking paragraph (4) and redesignating

3 paragraphs (5), (6), (7), (8), and (9) as para4 graphs (4), (5), (6), (7), and (8), respectively.

5 (B) Paragraph (2) of section 457(c) is

6 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in7 serting ‘‘402(g)(7)(A)(iii)’’.

8 (C) Clause (iii) of section 501(c)(18)(D) is

9 amended by striking ‘‘(other than paragraph

10 (4) thereof)’’.

11 (e) DEFERRED COMPENSATION PLANS OF STATE

12 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI13 ZATIONS.—

14 (1) IN GENERAL.—Section 457 (relating to de15 ferred compensation plans of State and local govern16 ments and tax-exempt organizations) is amended—

17 (A) in subsections (b)(2)(A) and (c)(1) by

18 striking ‘‘$7,500’’ each place it appears and in19 serting ‘‘the applicable dollar amount’’; and

20 (B) in subsection (b)(3)(A) by striking

21 ‘‘$15,000’’ and inserting ‘‘twice the dollar

22 amount in effect under subsection (b)(2)(A)’’.

23 (2) APPLICABLE DOLLAR AMOUNT; COST-OF24 LIVING ADJUSTMENT.—Paragraph (15) of section

25 457(e) is amended to read as follows:
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1 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

2 ‘‘(A) IN GENERAL.—The applicable dollar

3 amount shall be the amount determined in ac4 cordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................. $11,000

2002 ............................................................................. $12,000

2003 ............................................................................. $13,000

2004 ............................................................................. $14,000

2005 or thereafter ........................................................ $15,000.

5 ‘‘(B) COST-OF-LIVING ADJUSTMENTS.—In

6 the case of taxable years beginning after De7 cember 31, 2005, the Secretary shall adjust the

8 $15,000 amount under subparagraph (A) at the

9 same time and in the same manner as under

10 section 415(d), except that the base period shall

11 be the calendar quarter beginning July 1, 2004,

12 and any increase under this paragraph which is

13 not a multiple of $500 shall be rounded to the

14 next lowest multiple of $500.’’.

15 (f) SIMPLE RETIREMENT ACCOUNTS.—

16 (1) LIMITATION.—Clause (ii) of section

17 408(p)(2)(A) (relating to general rule for qualified

18 salary reduction arrangement) is amended by strik19 ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar

20 amount’’.
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1 (2) APPLICABLE DOLLAR AMOUNT.—Subpara2 graph (E) of 408(p)(2) is amended to read as fol3 lows:

4 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST5 OF-LIVING ADJUSTMENT.—

6 ‘‘(i) IN GENERAL.—For purposes of

7 subparagraph (A)(ii), the applicable dollar

8 amount shall be the amount determined in

9 accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ...................................................................... $7,000

2002 ...................................................................... $8,000

2003 ...................................................................... $9,000

2004 or thereafter ................................................ $10,000.

10 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

11 In the case of a year beginning after De12 cember 31, 2004, the Secretary shall ad13 just the $10,000 amount under clause (i)

14 at the same time and in the same manner

15 as under section 415(d), except that the

16 base period taken into account shall be the

17 calendar quarter beginning July 1, 2003,

18 and any increase under this subparagraph

19 which is not a multiple of $500 shall be

20 rounded to the next lower multiple of

21 $500.’’.

22 (3) CONFORMING AMENDMENTS.—
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1 (A) Subclause (I) of section

2 401(k)(11)(B)(i) is amended by striking

3 ‘‘$6,000’’ and inserting ‘‘the amount in effect

4 under section 408(p)(2)(A)(ii)’’.

5 (B) Section 401(k)(11) is amended by

6 striking subparagraph (E).

7 (g) ROUNDING RULE RELATING TO DEFINED BEN8 EFIT PLANS AND DEFINED CONTRIBUTION PLANS.—

9 Paragraph (4) of section 415(d) is amended to read as

10 follows:

11 ‘‘(4) ROUNDING.—

12 ‘‘(A) $160,000 AMOUNT.—Any increase

13 under subparagraph (A) of paragraph (1) which

14 is not a multiple of $5,000 shall be rounded to

15 the next lowest multiple of $5,000.

16 ‘‘(B) $40,000 AMOUNT.—Any increase

17 under subparagraph (C) of paragraph (1) which

18 is not a multiple of $1,000 shall be rounded to

19 the next lowest multiple of $1,000.’’.

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

21 this section shall apply to years beginning after December

22 31, 2000.
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1 SEC. 412. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART2 NERS, AND SOLE PROPRIETORS.

3 (a) IN GENERAL.—Subparagraph (B) of section

4 4975(f)(6) (relating to exemptions not to apply to certain

5 transactions) is amended by adding at the end the fol6 lowing new clause:

7 ‘‘(iii) LOAN EXCEPTION.—For pur8 poses of subparagraph (A)(i), the term

9 ‘owner-employee’ shall only include a per10 son described in subclause (II) or (III) of

11 clause (i).’’.

12 (b) AMENDMENT OF ERISA.—Section 408(d)(2) of

13 the Employee Retirement Income Security Act of 1974

14 (29 U.S.C. 1108(d)(2)) is amended by adding at the end

15 the following new subparagraph:

16 ‘‘(C) For purposes of paragraph (1)(A), the term

17 ‘owner-employee’ shall only include a person described in

18 clause (ii) or (iii) of subparagraph (A).’’.

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

20 this section shall apply to years beginning after December

21 31, 2000.

22 SEC. 413. MODIFICATION OF TOP-HEAVY RULES.

23 (a) SIMPLIFICATION OF DEFINITION OF KEY EM24 PLOYEE.—

25 (1) IN GENERAL.—Section 416(i)(1)(A) (defin26 ing key employee) is amended—
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1 (A) by striking ‘‘or any of the 4 preceding

2 plan years’’ in the matter preceding clause (i);

3 (B) by striking clause (i) and inserting the

4 following:

5 ‘‘(i) an officer of the employer having

6 an annual compensation greater than

7 $115,000,’’;

8 (C) by striking clause (ii) and redesig9 nating clauses (iii) and (iv) as clauses (ii) and

10 (iii), respectively; and

11 (D) by striking the second sentence in the

12 matter following clause (iii), as redesignated by

13 subparagraph (C).

14 (2) COST-OF-LIVING ADJUSTMENT.—Section

15 416(i)(1) is amended by adding at the end the fol16 lowing new subparagraph:

17 ‘‘(E) COST-OF-LIVING ADJUSTMENT.—In

18 the case of a year beginning after December 31,

19 2001, the Secretary shall adjust the $115,000

20 amount under subparagraph (A)(i) at the same

21 time and in the same manner as under section

22 415(d), except that the base period taken into

23 account shall be the calendar quarter beginning

24 July 1, 2000, and any increase under this sub25 paragraph which is not a multiple of $5,000
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1 shall be rounded to the next lower multiple of

2 $5,000.’’.

3 (3) CONFORMING AMENDMENT.—Section

4 416(i)(1)(B)(iii) is amended by striking ‘‘and sub5 paragraph (A)(ii)’’.

6 (b) MATCHING CONTRIBUTIONS TAKEN INTO AC7 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

8 Section 416(c)(2)(A) (relating to defined contribution

9 plans) is amended by adding at the end the following:

10 ‘‘Employer matching contributions (as defined in section

11 401(m)(4)(A)) shall be taken into account for purposes

12 of this subparagraph.’’.

13 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

14 DETERMINATION DATE TAKEN INTO ACCOUNT.—

15 (1) IN GENERAL.—Paragraph (3) of section

16 416(g) is amended to read as follows:

17 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE18 FORE DETERMINATION DATE TAKEN INTO AC19 COUNT.—

20 ‘‘(A) IN GENERAL.—For purposes of

21 determining—

22 ‘‘(i) the present value of the cumu23 lative accrued benefit for any employee, or

24 ‘‘(ii) the amount of the account of any

25 employee,
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1 such present value or amount shall be increased

2 by the aggregate distributions made with re3 spect to such employee under the plan during

4 the 1-year period ending on the determination

5 date. The preceding sentence shall also apply to

6 distributions under a terminated plan which if

7 it had not been terminated would have been re8 quired to be included in an aggregation group.

9 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV10 ICE DISTRIBUTION.—In the case of any dis11 tribution made for a reason other than separa12 tion from service, death, or disability, subpara13 graph (A) shall be applied by substituting ‘5-

14 year period’ for ‘1-year period’.’’.

15 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

16 Subparagraph (E) of section 416(g)(4) is

17 amended—

18 (A) by striking ‘‘LAST 5 YEARS’’ in the

19 heading and inserting ‘‘LAST YEAR BEFORE DE20 TERMINATION DATE’’; and

21 (B) by striking ‘‘5-year period’’ and insert22 ing ‘‘1-year period’’.

23 (d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph

24 (4) of section 416(g) (relating to other special rules for
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1 top-heavy plans) is amended by adding at the end the fol2 lowing new subparagraph:

3 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

4 USING ALTERNATIVE METHODS OF MEETING

5 NONDISCRIMINATION REQUIREMENTS.—The

6 term ‘top-heavy plan’ shall not include a plan

7 which consists solely of—

8 ‘‘(i) a cash or deferred arrangement

9 which meets the requirements of section

10 401(k)(12), and

11 ‘‘(ii) matching contributions with re12 spect to which the requirements of section

13 401(m)(11) are met.

14 If, but for this subparagraph, a plan would be

15 treated as a top-heavy plan because it is a

16 member of an aggregation group which is a top17 heavy group, contributions under the plan may

18 be taken into account in determining whether

19 any other plan in the group meets the require20 ments of subsection (c)(2).’’.

21 (e) FROZEN PLAN EXEMPT FROM MINIMUM BEN22 EFIT REQUIREMENT.—Subparagraph (C) of section

23 416(c)(1) (relating to defined benefit plans) is amended—

24 (A) by striking ‘‘clause (ii)’’ in clause (i)

25 and inserting ‘‘clause (ii) or (iii)’’; and
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1 (B) by adding at the end the following:

2 ‘‘(iii) EXCEPTION FOR FROZEN

3 PLAN.—For purposes of determining an

4 employee’s years of service with the em5 ployer, any service with the employer shall

6 be disregarded to the extent that such

7 service occurs during a plan year when the

8 plan benefits (within the meaning of sec9 tion 410(b)) no key employee or former

10 key employee.’’.

11 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec12 tion 416(i)(1)(B) (defining 5-percent owner) is amended

13 by adding at the end the following new clause:

14 ‘‘(iv) FAMILY ATTRIBUTION DIS15 REGARDED.—Solely for purposes of apply16 ing this paragraph (and not for purposes

17 of any provision of this title which incor18 porates by reference the definition of a key

19 employee or 5-percent owner under this

20 paragraph), section 318 shall be applied

21 without regard to subsection (a)(1) thereof

22 in determining whether any person is a 5-

23 percent owner.’’.
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1 (g) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 414. ELECTIVE DEFERRALS NOT TAKEN INTO AC5 COUNT FOR PURPOSES OF DEDUCTION LIM6 ITS.

7 (a) IN GENERAL.—Section 404 (relating to deduction

8 for contributions of an employer to an employees’ trust

9 or annuity plan and compensation under a deferred pay10 ment plan) is amended by adding at the end the following

11 new subsection:

12 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC13 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

14 deferrals (as defined in section 402(g)(3)) shall not be

15 subject to any limitation contained in paragraph (3), (7),

16 or (9) of subsection (a), and such elective deferrals shall

17 not be taken into account in applying any such limitation

18 to any other contributions.’’.

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

20 this section shall apply to years beginning after December

21 31, 2000.
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1 SEC. 415. REPEAL OF COORDINATION REQUIREMENTS FOR

2 DEFERRED COMPENSATION PLANS OF STATE

3 AND LOCAL GOVERNMENTS AND TAX-EX4 EMPT ORGANIZATIONS.

5 (a) IN GENERAL.—Subsection (c) of section 457 (re6 lating to deferred compensation plans of State and local

7 governments and tax-exempt organizations), as amended

8 by section 411, is amended to read as follows:

9 ‘‘(c) LIMITATION.—The maximum amount of the

10 compensation of any one individual which may be deferred

11 under subsection (a) during any taxable year shall not ex12 ceed the amount in effect under subsection (b)(2)(A) (as

13 modified by any adjustment provided under subsection

14 (b)(3)).’’.

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

16 subsection (a) shall apply to years beginning after Decem17 ber 31, 2000.

18 SEC. 416. ELIMINATION OF USER FEE FOR REQUESTS TO

19 IRS REGARDING PENSION PLANS.

20 (a) ELIMINATION OF CERTAIN USER FEES.—The

21 Secretary of the Treasury or the Secretary’s delegate shall

22 not require payment of user fees under the program estab23 lished under section 10511 of the Revenue Act of 1987

24 for requests to the Internal Revenue Service for deter25 mination letters with respect to the qualified status of a

26 pension benefit plan maintained solely by one or more eli-
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1 gible employers or any trust which is part of the plan.

2 The preceding sentence shall not apply to any request—

3 (1) made after the later of—

4 (A) the fifth plan year the pension benefit

5 plan is in existence; or

6 (B) the end of any remedial amendment

7 period with respect to the plan beginning within

8 the first 5 plan years; or

9 (2) made by the sponsor of any prototype or

10 similar plan which the sponsor intends to market to

11 participating employers.

12 (b) PENSION BENEFIT PLAN.—For purposes of this

13 section, the term ‘‘pension benefit plan’’ means a pension,

14 profit-sharing, stock bonus, annuity, or employee stock

15 ownership plan.

16 (c) ELIGIBLE EMPLOYER.—For purposes of this sec17 tion, the term ‘‘eligible employer’’ has the same meaning

18 given such term in section 408(p)(2)(C)(i)(I) of the Inter19 nal Revenue Code of 1986. The determination of whether

20 an employer is an eligible employer under this section shall

21 be made as of the date of the request described in sub22 section (a).

23 (d) DETERMINATION OF AVERAGE FEES

24 CHARGED.—For purposes of any determination of average
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1 fees charged, any request to which subsection (a) applies

2 shall not be taken into account.

3 (e) EFFECTIVE DATE.—The provisions of this section

4 shall apply with respect to requests made after December

5 31, 2000.

6 SEC. 417. DEDUCTION LIMITS.

7 (a) MODIFICATION OF LIMITS.—

8 (1) STOCK BONUS AND PROFIT SHARING

9 TRUSTS.—

10 (A) IN GENERAL.—Subclause (I) of section

11 404(a)(3)(A)(i) (relating to stock bonus and

12 profit sharing trusts) is amended by striking

13 ‘‘15 percent’’ and inserting ‘‘25 percent’’.

14 (B) CONFORMING AMENDMENT.—Subpara15 graph (C) of section 404(h)(1) is amended by

16 striking ‘‘15 percent’’ each place it appears and

17 inserting ‘‘25 percent’’.

18 (2) DEFINED CONTRIBUTION PLANS.—

19 (A) IN GENERAL.—Clause (v) of section

20 404(a)(3)(A) (relating to stock bonus and profit

21 sharing trusts) is amended to read as follows:

22 ‘‘(v) DEFINED CONTRIBUTION PLANS

23 SUBJECT TO THE FUNDING STANDARDS.—

24 Except as provided by the Secretary, a de25 fined contribution plan which is subject to
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1 the funding standards of section 412 shall

2 be treated in the same manner as a stock

3 bonus or profit-sharing plan for purposes

4 of this subparagraph.’’.

5 (B) CONFORMING AMENDMENTS.—

6 (i) Section 404(a)(1)(A) is amended

7 by inserting ‘‘(other than a trust to which

8 paragraph (3) applies)’’ after ‘‘pension

9 trust’’.

10 (ii) Section 404(h)(2) is amended by

11 striking ‘‘stock bonus or profit-sharing

12 trust’’ and inserting ‘‘trust subject to sub13 section (a)(3)(A)’’.

14 (iii) The heading of section 404(h)(2)

15 is amended by striking ‘‘STOCK BONUS

16 AND PROFIT-SHARING TRUST’’ and insert17 ing ‘‘CERTAIN TRUSTS’’.

18 (b) COMPENSATION.—

19 (1) IN GENERAL.—Section 404(a) (relating to

20 general rule) is amended by adding at the end the

21 following:

22 ‘‘(12) DEFINITION OF COMPENSATION.—For

23 purposes of paragraphs (3), (7), (8), and (9), the

24 term ‘compensation’ shall include amounts treated
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1 as participant’s compensation under subparagraph

2 (C) or (D) of section 415(c)(3).’’.

3 (2) CONFORMING AMENDMENTS.—

4 (A) Subparagraph (B) of section 404(a)(3)

5 is amended by striking the last sentence there6 of.

7 (B) Clause (i) of section 4972(c)(6)(B) is

8 amended by striking ‘‘(within the meaning of

9 section 404(a))’’ and inserting ‘‘(within the

10 meaning of section 404(a) and as adjusted

11 under section 404(a)(12))’’.

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

13 this section shall apply to years beginning after December

14 31, 2000.

15 SEC. 418. OPTION TO TREAT ELECTIVE DEFERRALS AS

16 AFTER-TAX ROTH CONTRIBUTIONS.

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

18 D of chapter 1 (relating to deferred compensation, etc.)

19 is amended by inserting after section 402 the following

20 new section:

21 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER22 RALS AS ROTH CONTRIBUTIONS.

23 ‘‘(a) GENERAL RULE.—If an applicable retirement

24 plan includes a qualified Roth contribution program—
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1 ‘‘(1) any designated Roth contribution made by

2 an employee pursuant to the program shall be treat3 ed as an elective deferral for purposes of this chap4 ter, except that such contribution shall not be ex5 cludable from gross income, and

6 ‘‘(2) such plan (and any arrangement which is

7 part of such plan) shall not be treated as failing to

8 meet any requirement of this chapter solely by rea9 son of including such program.

10 ‘‘(b) QUALIFIED ROTH CONTRIBUTION PROGRAM.—

11 For purposes of this section—

12 ‘‘(1) IN GENERAL.—The term ‘qualified Roth

13 contribution program’ means a program under which

14 an employee may elect to make designated Roth con15 tributions in lieu of all or a portion of elective defer16 rals the employee is otherwise eligible to make under

17 the applicable retirement plan.

18 ‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A

19 program shall not be treated as a qualified Roth

20 contribution program unless the applicable retire21 ment plan—

22 ‘‘(A) establishes separate accounts (‘des23 ignated Roth accounts’) for the designated Roth

24 contributions of each employee and any earn25 ings properly allocable to the contributions, and
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1 ‘‘(B) maintains separate recordkeeping

2 with respect to each account.

3 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES4 IGNATED ROTH CONTRIBUTIONS.—For purposes of this

5 section—

6 ‘‘(1) DESIGNATED ROTH CONTRIBUTION.—The

7 term ‘designated Roth contribution’ means any elec8 tive deferral which—

9 ‘‘(A) is excludable from gross income of an

10 employee without regard to this section, and

11 ‘‘(B) the employee designates (at such time

12 and in such manner as the Secretary may pre13 scribe) as not being so excludable.

14 ‘‘(2) DESIGNATION LIMITS.—The amount of

15 elective deferrals which an employee may designate

16 under paragraph (1) shall not exceed the excess (if

17 any) of—

18 ‘‘(A) the maximum amount of elective de19 ferrals excludable from gross income of the em20 ployee for the taxable year (without regard to

21 this section), over

22 ‘‘(B) the aggregate amount of elective de23 ferrals of the employee for the taxable year

24 which the employee does not designate under

25 paragraph (1).
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1 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

2 ‘‘(A) IN GENERAL.—A rollover contribu3 tion of any payment or distribution from a des4 ignated Roth account which is otherwise allow5 able under this chapter may be made only if the

6 contribution is to—

7 ‘‘(i) another designated Roth account

8 of the individual from whose account the

9 payment or distribution was made, or

10 ‘‘(ii) a Roth IRA of such individual.

11 ‘‘(B) COORDINATION WITH LIMIT.—Any

12 rollover contribution to a designated Roth ac13 count under subparagraph (A) shall not be

14 taken into account for purposes of paragraph

15 (1).

16 ‘‘(d) DISTRIBUTION RULES.—For purposes of this

17 title—

18 ‘‘(1) EXCLUSION.—Any qualified distribution

19 from a designated Roth account shall not be includ20 ible in gross income.

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

22 of this subsection—

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

24 distribution’ has the meaning given such term
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1 by section 408A(d)(2)(A) (without regard to

2 clause (iv) thereof).

3 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU4 SION PERIOD.—A payment or distribution from

5 a designated Roth account shall not be treated

6 as a qualified distribution if such payment or

7 distribution is made within the 5-taxable-year

8 period beginning with the earlier of—

9 ‘‘(i) the first taxable year for which

10 the individual made a designated Roth con11 tribution to any designated Roth account

12 established for such individual under the

13 same applicable retirement plan, or

14 ‘‘(ii) if a rollover contribution was

15 made to such designated Roth account

16 from a designated Roth account previously

17 established for such individual under an18 other applicable retirement plan, the first

19 taxable year for which the individual made

20 a designated Roth contribution to such

21 previously established account.

22 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER23 RALS AND CONTRIBUTIONS AND EARNINGS

24 THEREON.—The term ‘qualified distribution’

25 shall not include any distribution of any excess
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1 deferral under section 402(g)(2) or any excess

2 contribution under section 401(k)(8), and any

3 income on the excess deferral or contribution.

4 ‘‘(3) TREATMENT OF DISTRIBUTIONS OF CER5 TAIN EXCESS DEFERRALS.—Notwithstanding section

6 72, if any excess deferral under section 402(g)(2) at7 tributable to a designated Roth contribution is not

8 distributed on or before the 1st April 15 following

9 the close of the taxable year in which such excess de10 ferral is made, the amount of such excess deferral

11 shall—

12 ‘‘(A) not be treated as investment in the

13 contract, and

14 ‘‘(B) be included in gross income for the

15 taxable year in which such excess is distributed.

16 ‘‘(4) AGGREGATION RULES.—Section 72 shall

17 be applied separately with respect to distributions

18 and payments from a designated Roth account and

19 other distributions and payments from the plan.

20 ‘‘(e) OTHER DEFINITIONS.—For purposes of this

21 section—

22 ‘‘(1) APPLICABLE RETIREMENT PLAN.—The

23 term ‘applicable retirement plan’ means—
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1 ‘‘(A) an employees’ trust described in sec2 tion 401(a) which is exempt from tax under

3 section 501(a), and

4 ‘‘(B) a plan under which amounts are con5 tributed by an individual’s employer for an an6 nuity contract described in section 403(b).

7 ‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective

8 deferral’ means any elective deferral described in

9 subparagraph (A) or (C) of section 402(g)(3).’’.

10 (b) EXCESS DEFERRALS.—Section 402(g) (relating

11 to limitation on exclusion for elective deferrals) is

12 amended—

13 (1) by adding at the end of paragraph (1)(A)

14 (as added by section 201(d)(1)) the following new

15 sentence: ‘‘The preceding sentence shall not apply to

16 the portion of such excess as does not exceed the

17 designated Roth contributions of the individual for

18 the taxable year.’’; and

19 (2) by inserting ‘‘(or would be included but for

20 the last sentence thereof)’’ after ‘‘paragraph (1)’’ in

21 paragraph (2)(A).

22 (c) ROLLOVERS.—Subparagraph (B) of section

23 402(c)(8) is amended by adding at the end the following:

24 ‘‘If any portion of an eligible rollover distribu25 tion is attributable to payments or distributions
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1 from a designated Roth account (as defined in

2 section 402A), an eligible retirement plan with

3 respect to such portion shall include only an4 other designated Roth account and a Roth

5 IRA.’’.

6 (d) REPORTING REQUIREMENTS.—

7 (1) W–2 INFORMATION.—Section 6051(a)(8) is

8 amended by inserting ‘‘, including the amount of

9 designated Roth contributions (as defined in section

10 402A)’’ before the comma at the end.

11 (2) INFORMATION.—Section 6047 is amended

12 by redesignating subsection (f) as subsection (g) and

13 by inserting after subsection (e) the following new

14 subsection:

15 ‘‘(f) DESIGNATED ROTH CONTRIBUTIONS.—The Sec16 retary shall require the plan administrator of each applica17 ble retirement plan (as defined in section 402A) to make

18 such returns and reports regarding designated Roth con19 tributions (as defined in section 402A) to the Secretary,

20 participants and beneficiaries of the plan, and such other

21 persons as the Secretary may prescribe.’’.

22 (e) CONFORMING AMENDMENTS.—

23 (1) Section 408A(e) is amended by adding after

24 the first sentence the following new sentence: ‘‘Such
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1 term includes a rollover contribution described in

2 section 402A(c)(3)(A).’’.

3 (2) The table of sections for subpart A of part

4 I of subchapter D of chapter 1 is amended by insert5 ing after the item relating to section 402 the fol6 lowing new item:

‘‘Sec. 402A. Optional treatment of elective deferrals as Roth contributions.’’.

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

8 this section shall apply to taxable years beginning after

9 December 31, 2000.

10 Subtitle C—Enhancing Fairness

11 For Women

12 SEC. 421. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

13 AGE 50 OR OVER.

14 (a) IN GENERAL.—Section 414 (relating to defini15 tions and special rules) is amended by adding at the end

16 the following new subsection:

17 ‘‘(v) CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

18 AGE 50 OR OVER.—

19 ‘‘(1) IN GENERAL.—An applicable employer

20 plan shall not be treated as failing to meet any re21 quirement of this title solely because the plan per22 mits an eligible participant to make additional elec23 tive deferrals in any plan year.
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1 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

2 DEFERRALS.—

3 ‘‘(A) IN GENERAL.—A plan shall not per4 mit additional elective deferrals under para5 graph (1) for any year in an amount greater

6 than the lesser of—

7 ‘‘(i) the applicable deferral amount, or

8 ‘‘(ii) the excess (if any) of—

9 ‘‘(I) the participant’s compensa10 tion for the year, over

11 ‘‘(II) any other elective deferrals

12 of the participant for such year which

13 are made without regard to this sub14 section.

15 ‘‘(B) APPLICABLE DEFERRAL AMOUNT;

16 COST-OF-LIVING ADJUSTMENT.—

17 ‘‘(i) IN GENERAL.—For purposes of

18 subparagraph (A)(i), the applicable defer19 ral amount shall be the amount determined

20 in accordance with the following table:

‘‘For taxable years The applicable

beginning in deferral amount:

calendar year:

2001 ...................................................................... $1,000

2002 ...................................................................... $2,000

2003 ...................................................................... $3,000

2004 ...................................................................... $4,000

2005 or thereafter ................................................ $5,000.
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1 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

2 In the case of a year beginning after De3 cember 31, 2005, the Secretary shall ad4 just the $5,000 amount under clause (i) at

5 the same time and in the same manner as

6 under section 415(d), except that the base

7 period taken into account shall be the cal8 endar quarter beginning July 1, 2004, and

9 any increase under this subparagraph

10 which is not a multiple of $500 shall be

11 rounded to the next lower multiple of

12 $500.

13 ‘‘(3) TREATMENT OF CONTRIBUTIONS.—In the

14 case of any contribution to a plan under paragraph

15 (1), such contribution shall not, with respect to the

16 year in which the contribution is made—

17 ‘‘(A) be subject to any otherwise applicable

18 limitation contained in section 402(g),

19 402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii),

20 415, or 457, or

21 ‘‘(B) be taken into account in applying

22 such limitations to other contributions or bene23 fits under such plan or any other such plan.

24 ‘‘(4) APPLICATION OF NONDISCRIMINATION

25 RULES.—
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1 ‘‘(A) IN GENERAL.—An applicable em2 ployer plan shall not be treated as failing to

3 meet the nondiscrimination requirements under

4 section 401(a)(4) with respect to benefits,

5 rights, and features if the plan allows all eligi6 ble participants to make the same election with

7 respect to the additional elective deferrals under

8 this subsection.

9 ‘‘(B) AGGREGATION.—For purposes of

10 subparagraph (A), all plans maintained by em11 ployers who are treated as a single employer

12 under subsection (b), (c), (m), or (o) of section

13 414 shall be treated as 1 plan.

14 ‘‘(5) ELIGIBLE PARTICIPANT.—For purposes of

15 this subsection, the term ‘eligible participant’ means,

16 with respect to any plan year, a participant in a

17 plan—

18 ‘‘(A) who has attained the age of 50 before

19 the close of the plan year, and

20 ‘‘(B) with respect to whom no other elec21 tive deferrals may (without regard to this sub22 section) be made to the plan for the plan year

23 by reason of the application of any limitation or

24 other restriction described in paragraph (3) or
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1 any comparable limitation contained in the

2 terms of the plan.

3 ‘‘(6) OTHER DEFINITIONS AND RULES.—For

4 purposes of this subsection—

5 ‘‘(A) APPLICABLE EMPLOYER PLAN.—The

6 term ‘applicable employer plan’ means—

7 ‘‘(i) an employees’ trust described in

8 section 401(a) which is exempt from tax

9 under section 501(a),

10 ‘‘(ii) a plan under which amounts are

11 contributed by an individual’s employer for

12 an annuity contract described in section

13 403(b),

14 ‘‘(iii) an eligible deferred compensa15 tion plan under section 457 of an eligible

16 employer as defined in section

17 457(e)(1)(A), and

18 ‘‘(iv) an arrangement meeting the re19 quirements of section 408 (k) or (p).

20 ‘‘(B) ELECTIVE DEFERRAL.—The term

21 ‘elective deferral’ has the meaning given such

22 term by subsection (u)(2)(C).

23 ‘‘(C) EXCEPTION FOR SECTION 457

24 PLANS.—This subsection shall not apply to an

25 applicable employer plan described in subpara-
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1 graph (A)(iii) for any year to which section

2 457(b)(3) applies.’’.

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

4 this section shall apply to contributions in taxable years

5 beginning after December 31, 2000.

6 SEC. 422. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

7 EMPLOYEES TO DEFINED CONTRIBUTION

8 PLANS.

9 (a) EQUITABLE TREATMENT.—

10 (1) IN GENERAL.—Subparagraph (B) of section

11 415(c)(1) (relating to limitation for defined con12 tribution plans) is amended by striking ‘‘25 percent’’

13 and inserting ‘‘100 percent’’.

14 (2) APPLICATION TO SECTION 403(b).—Section

15 403(b) is amended—

16 (A) by striking ‘‘the exclusion allowance

17 for such taxable year’’ in paragraph (1) and in18 serting ‘‘the applicable limit under section

19 415’’;

20 (B) by striking paragraph (2); and

21 (C) by inserting ‘‘or any amount received

22 by a former employee after the fifth taxable

23 year following the taxable year in which such

24 employee was terminated’’ before the period at
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1 the end of the second sentence of paragraph

2 (3).

3 (3) CONFORMING AMENDMENTS.—

4 (A) Subsection (f) of section 72 is amend5 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

6 inserting ‘‘section 403(b)(2)(D)(iii), as in effect

7 before the enactment of the Retirement Savings

8 and Pension Coverage Act of 2000)’’.

9 (B) Section 404(a)(10)(B) is amended by

10 striking ‘‘, the exclusion allowance under sec11 tion 403(b)(2),’’.

12 (C) Section 415(a)(2) is amended by strik13 ing ‘‘, and the amount of the contribution for

14 such portion shall reduce the exclusion allow15 ance as provided in section 403(b)(2)’’.

16 (D) Section 415(c)(3) is amended by add17 ing at the end the following new subparagraph:

18 ‘‘(E) ANNUITY CONTRACTS.—In the case

19 of an annuity contract described in section

20 403(b), the term ‘participant’s compensation’

21 means the participant’s includible compensation

22 determined under section 403(b)(3).’’.

23 (E) Section 415(c) is amended by striking

24 paragraph (4).
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1 (F) Section 415(c)(7) is amended to read

2 as follows:

3 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

4 PLANS NOT TREATED AS EXCEEDING LIMIT.—

5 ‘‘(A) IN GENERAL.—Notwithstanding any

6 other provision of this subsection, at the elec7 tion of a participant who is an employee of a

8 church or a convention or association of church9 es, including an organization described in sec10 tion 414(e)(3)(B)(ii), contributions and other

11 additions for an annuity contract or retirement

12 income account described in section 403(b) with

13 respect to such participant, when expressed as

14 an annual addition to such participant’s ac15 count, shall be treated as not exceeding the lim16 itation of paragraph (1) if such annual addition

17 is not in excess of $10,000.

18 ‘‘(B) $40,000 AGGREGATE LIMITATION.—

19 The total amount of additions with respect to

20 any participant which may be taken into ac21 count for purposes of this subparagraph for all

22 years may not exceed $40,000.

23 ‘‘(C) ANNUAL ADDITION.—For purposes of

24 this paragraph, the term ‘annual addition’ has
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1 the meaning given such term by paragraph

2 (2).’’.

3 (G) Subparagraph (B) of section 402(g)(7)

4 (as redesignated by section 201(d)(3)(A)) is

5 amended by inserting before the period at the

6 end the following: ‘‘(as in effect before the en7 actment of the Retirement Savings and Pension

8 Coverage Act of 2000)’’.

9 (3) EFFECTIVE DATE.—The amendments made

10 by this subsection shall apply to years beginning

11 after December 31, 2000.

12 (b) SPECIAL RULES FOR SECTIONS 403(b) AND

13 408.—

14 (1) IN GENERAL.—Subsection (k) of section

15 415 is amended by adding at the end the following

16 new paragraph:

17 ‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND

18 408.—For purposes of this section, any annuity con19 tract described in section 403(b) for the benefit of

20 a participant shall be treated as a defined contribu21 tion plan maintained by each employer with respect

22 to which the participant has the control required

23 under subsection (b) or (c) of section 414 (as modi24 fied by subsection (h)). For purposes of this section,

25 any contribution by an employer to a simplified em-
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1 ployee pension plan for an individual for a taxable

2 year shall be treated as an employer contribution to

3 a defined contribution plan for such individual for

4 such year.’’.

5 (2) EFFECTIVE DATE.—

6 (A) IN GENERAL.—The amendment made

7 by paragraph (1) shall apply to limitation years

8 beginning after December 31, 1999.

9 (B) EXCLUSION ALLOWANCE.—Effective

10 for limitation years beginning in 2000, in the

11 case of any annuity contract described in sec12 tion 403(b) of the Internal Revenue Code of

13 1986, the amount of the contribution disquali14 fied by reason of section 415(g) of such Code

15 shall reduce the exclusion allowance as provided

16 in section 403(b)(2) of such Code.

17 (3) MODIFICATION OF 403(b) EXCLUSION AL18 LOWANCE TO CONFORM TO 415 MODIFICATION.—The

19 Secretary of the Treasury shall modify the regula20 tions regarding the exclusion allowance under section

21 403(b)(2) of the Internal Revenue Code of 1986 to

22 render void the requirement that contributions to a

23 defined benefit pension plan be treated as previously

24 excluded amounts for purposes of the exclusion al25 lowance. For taxable years beginning after Decem-
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1 ber 31, 1999, such regulations shall be applied as if

2 such requirement were void.

3 (c) DEFERRED COMPENSATION PLANS OF STATE

4 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI5 ZATIONS.—

6 (1) IN GENERAL.—Subparagraph (B) of section

7 457(b)(2) (relating to salary limitation on eligible

8 deferred compensation plans) is amended by striking

‘‘331 9 ⁄3 percent’’ and inserting ‘‘100 percent’’.

10 (2) EFFECTIVE DATE.—The amendment made

11 by this subsection shall apply to years beginning

12 after December 31, 2000.

13 SEC. 423. FASTER VESTING OF CERTAIN EMPLOYER

14 MATCHING CONTRIBUTIONS.

15 (a) IN GENERAL.—Section 411(a) (relating to min16 imum vesting standards) is amended—

17 (1) in paragraph (2), by striking ‘‘A plan’’ and

18 inserting ‘‘Except as provided in paragraph (12), a

19 plan’’; and

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

21 ‘‘(12) FASTER VESTING FOR MATCHING CON22 TRIBUTIONS.—In the case of matching contributions

23 (as defined in section 401(m)(4)(A)), paragraph (2)

24 shall be applied—
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1 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

2 in subparagraph (A), and

3 ‘‘(B) by substituting the following table for

4 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 ................................................................................... 20

3 ................................................................................... 40

4 ................................................................................... 60

5 ................................................................................... 80

6 ................................................................................... 100.’’.

5 (b) AMENDMENT OF ERISA.—Section 203(a) of the

6 Employee Retirement Income Security Act of 1974 (29

7 U.S.C. 1053(a)) is amended—

8 (1) in paragraph (2), by striking ‘‘A plan’’ and

9 inserting ‘‘Except as provided in paragraph (4), a

10 plan’’, and

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

12 ‘‘(4) In the case of matching contributions (as

13 defined in section 401(m)(4)(A) of the Internal Rev14 enue Code of 1986), paragraph (2) shall be

15 applied—

16 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

17 in subparagraph (A), and

18 ‘‘(B) by substituting the following table for

19 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 ................................................................................... 20

3 ................................................................................... 40

4 ................................................................................... 60
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5 ................................................................................... 80

6 ................................................................................... 100.’’.

1 (c) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to contributions for plan years beginning

5 after December 31, 2000.

6 (2) COLLECTIVE BARGAINING AGREEMENTS.—

7 In the case of a plan maintained pursuant to one or

8 more collective bargaining agreements between em9 ployee representatives and one or more employers

10 ratified by the date of the enactment of this Act, the

11 amendments made by this section shall not apply to

12 contributions on behalf of employees covered by any

13 such agreement for plan years beginning before the

14 earlier of—

15 (A) the later of—

16 (i) the date on which the last of such

17 collective bargaining agreements termi18 nates (determined without regard to any

19 extension thereof on or after such date of

20 the enactment); or

21 (ii) January 1, 2001; or

22 (B) January 1, 2005.

23 (3) SERVICE REQUIRED.—With respect to any

24 plan, the amendments made by this section shall not
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1 apply to any employee before the date that such em2 ployee has 1 hour of service under such plan in any

3 plan year to which the amendments made by this

4 section apply.

5 SEC. 424. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU6 TION RULES.

7 (a) SIMPLIFICATION AND FINALIZATION OF MIN8 IMUM DISTRIBUTION REQUIREMENTS.—

9 (1) IN GENERAL.—The Secretary of the Treas10 ury shall—

11 (A) simplify and finalize the regulations re12 lating to minimum distribution requirements

13 under sections 401(a)(9), 408(a)(6) and (b)(3),

14 403(b)(10), and 457(d)(2) of the Internal Rev15 enue Code of 1986; and

16 (B) modify such regulations to—

17 (i) reflect current life expectancy; and

18 (ii) revise the required distribution

19 methods so that, under reasonable assump20 tions, the amount of the required minimum

21 distribution does not decrease over a par22 ticipant’s life expectancy.

23 (2) FRESH START.—Notwithstanding subpara24 graph (D) of section 401(a)(9) of such Code, during

25 the first year that regulations are in effect under
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1 this subsection, required distributions for future

2 years may be redetermined to reflect changes under

3 such regulations. Such redetermination shall include

4 the opportunity to choose a new designated bene5 ficiary and to elect a new method of calculating life

6 expectancy.

7 (3) DATE FOR REGULATIONS.—Not later than

8 December 31, 2001, the Secretary shall issue final

9 regulations described in paragraph (1) and such reg10 ulations shall apply without regard to whether an in11 dividual had previously begun receiving minimum

12 distributions.

13 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

14 BEGUN BEFORE DEATH OCCURS.—

15 (1) IN GENERAL.—Subparagraph (B) of section

16 401(a)(9) is amended by striking clause (i) and re17 designating clauses (ii), (iii), and (iv) as clauses (i),

18 (ii), and (iii), respectively.

19 (2) CONFORMING CHANGES.—

20 (A) Clause (i) of section 401(a)(9)(B) (as

21 so redesignated) is amended—

22 (i) by striking ‘‘FOR OTHER CASES’’ in

23 the heading; and

24 (ii) by striking ‘‘the distribution of the

25 employee’s interest has begun in accord-
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1 ance with subparagraph (A)(ii)’’ and in2 serting ‘‘his entire interest has been dis3 tributed to him’’.

4 (B) Clause (ii) of section 401(a)(9)(B) (as

5 so redesignated) is amended by striking ‘‘clause

6 (ii)’’ and inserting ‘‘clause (i)’’.

7 (C) Clause (iii) of section 401(a)(9)(B) (as

8 so redesignated) is amended—

9 (i) by striking ‘‘clause (iii)(I)’’ and in10 serting ‘‘clause (ii)(I)’’;

11 (ii) by striking ‘‘clause (iii)(III)’’ in

12 subclause (I) and inserting ‘‘clause

13 (ii)(III)’’;

14 (iii) by striking ‘‘the date on which

15 the employee would have attained age

701 16 ⁄2,’’ in subclause (I) and inserting

17 ‘‘April 1 of the calendar year following the

18 calendar year in which the spouse attains

701 19 ⁄2,’’; and

20 (iv) by striking ‘‘the distributions to

21 such spouse begin,’’ in subclause (II) and

22 inserting ‘‘his entire interest has been dis23 tributed to him,’’.

24 (3) EFFECTIVE DATE.—
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1 (A) IN GENERAL.—Except as provided in

2 subparagraph (B), the amendments made by

3 this subsection shall apply to years beginning

4 after December 31, 2000.

5 (B) DISTRIBUTIONS TO SURVIVING

6 SPOUSE.—

7 (i) IN GENERAL.—In the case of an

8 employee described in clause (ii), distribu9 tions to the surviving spouse of the em10 ployee shall not be required to commence

11 prior to the date on which such distribu12 tions would have been required to begin

13 under section 401(a)(9)(B) of the Internal

14 Revenue Code of 1986 (as in effect on the

15 day before the date of the enactment of

16 this Act).

17 (ii) CERTAIN EMPLOYEES.—An em18 ployee is described in this clause if such

19 employee dies before—

20 (I) the date of the enactment of

21 this Act, and

22 (II) the required beginning date

23 (within the meaning of section

24 401(a)(9)(C) of the Internal Revenue

25 Code of 1986) of the employee.
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1 (c) REDUCTION IN EXCISE TAX.—

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

3 4974 is amended by striking ‘‘50 percent’’ and in4 serting ‘‘10 percent’’.

5 (2) EFFECTIVE DATE.—The amendment made

6 by this subsection shall apply to years beginning

7 after December 31, 2000.

8 SEC. 425. CLARIFICATION OF TAX TREATMENT OF DIVISION

9 OF SECTION 457 PLAN BENEFITS UPON DI10 VORCE.

11 (a) IN GENERAL.—Section 414(p)(11) (relating to

12 application of rules to governmental and church plans) is

13 amended—

14 (1) by inserting ‘‘or an eligible deferred com15 pensation plan (within the meaning of section

16 457(b))’’ after ‘‘subsection (e))’’; and

17 (2) in the heading, by striking ‘‘GOVERN18 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER19 TAIN OTHER PLANS’’.

20 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE21 MENTS.—Paragraph (10) of section 414(p) is amended by

22 striking ‘‘and section 409(d)’’ and inserting ‘‘section

23 409(d), and section 457(d)’’.

24 (c) TAX TREATMENT OF PAYMENTS FROM A SEC25 TION 457 PLAN.—Subsection (p) of section 414 is amend-
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1 ed by redesignating paragraph (12) as paragraph (13) and

2 inserting after paragraph (11) the following new para3 graph:

4 ‘‘(12) TAX TREATMENT OF PAYMENTS FROM A

5 SECTION 457 PLAN.—If a distribution or payment

6 from an eligible deferred compensation plan de7 scribed in section 457(b) is made pursuant to a

8 qualified domestic relations order, rules similar to

9 the rules of section 402(e)(1)(A) shall apply to such

10 distribution or payment.’’.

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

12 this section shall apply to transfers, distributions, and

13 payments made after December 31, 2000.

14 SEC. 426. PROVISIONS RELATING TO HARDSHIP DISTRIBU15 TIONS.

16 (a) SAFE HARBOR RELIEF.—

17 (1) IN GENERAL.—The Secretary of the Treas18 ury shall revise the regulations relating to hardship

19 distributions under section 401(k)(2)(B)(i)(IV) of

20 the Internal Revenue Code of 1986 to provide that

21 the period an employee is prohibited from making

22 elective and employee contributions in order for a

23 distribution to be deemed necessary to satisfy finan24 cial need shall be equal to 6 months.
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1 (2) EFFECTIVE DATE.—The revised regulations

2 under this subsection shall apply to years beginning

3 after December 31, 2000.

4 (b) HARDSHIP DISTRIBUTIONS NOT TREATED AS

5 ELIGIBLE ROLLOVER DISTRIBUTIONS.—

6 (1) MODIFICATION OF DEFINITION OF ELIGI7 BLE ROLLOVER.—Section 402(c)(4)(C) (relating to

8 eligible rollover distribution) is amended by striking

9 ‘‘described in section 401(k)(2)(B)(i)(IV)’’ and in10 serting ‘‘under the terms of the plan’’.

11 (2) EFFECTIVE DATE.—The amendment made

12 by this subsection shall apply to distributions made

13 after December 31, 2001, unless a plan adminis14 trator elects to apply such amendment to distribu15 tions made after December 31, 2000.

16 SEC. 427. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBU17 TIONS FOR DOMESTIC OR SIMILAR WORKERS.

18 (a) IN GENERAL.—Section 4972(c)(6) (relating to

19 exceptions to nondeductible contributions), as amended by

20 section 442(b), is amended by striking ‘‘or’’ at the end

21 of subparagraph (A), by striking the period and inserting

22 ‘‘, or’’ at the end of subparagraph (B), and by inserting

23 after subparagraph (B) the following new subparagraph:

24 ‘‘(C) so much of the contributions to a

25 qualified employer plan which are not deduct-
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1 ible when contributed solely because such con2 tributions are not made in connection with a

3 trade or business of the employer.’’.

4 (b) EXCLUSION OF CERTAIN CONTRIBUTIONS.—Sec5 tion 4972(c)(6), as amended by subsection (a), is amended

6 by adding at the end the following new sentence: ‘‘Sub7 paragraph (C) shall not apply to contributions made on

8 behalf of the employer or a member of the employer’s fam9 ily (as defined in section 447(e)(1)).’’.

10 (c) NO INFERENCE.—Nothing in the amendments

11 made by this section shall be construed to infer the proper

12 treatment of nondeductible contributions under the laws

13 in effect before such amendments.

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

15 this section shall apply to taxable years beginning after

16 December 31, 2000.

17 Subtitle D—Increasing Portability

18 For Participants

19 SEC. 431. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

20 OF PLANS.

21 (a) ROLLOVERS FROM AND TO SECTION 457

22 PLANS.—

23 (1) ROLLOVERS FROM SECTION 457 PLANS.—
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1 (A) IN GENERAL.—Section 457(e) (relat2 ing to other definitions and special rules) is

3 amended by adding at the end the following:

4 ‘‘(16) ROLLOVER AMOUNTS.—

5 ‘‘(A) GENERAL RULE.—In the case of an

6 eligible deferred compensation plan established

7 and maintained by an employer described in

8 subsection (e)(1)(A), if—

9 ‘‘(i) any portion of the balance to the

10 credit of an employee in such plan is paid

11 to such employee in an eligible rollover dis12 tribution (within the meaning of section

13 402(c)(4) without regard to subparagraph

14 (C) thereof),

15 ‘‘(ii) the employee transfers any por16 tion of the property such employee receives

17 in such distribution to an eligible retire18 ment plan described in section

19 402(c)(8)(B), and

20 ‘‘(iii) in the case of a distribution of

21 property other than money, the amount so

22 transferred consists of the property distrib23 uted,
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1 then such distribution (to the extent so trans2 ferred) shall not be includible in gross income

3 for the taxable year in which paid.

4 ‘‘(B) CERTAIN RULES MADE APPLICA5 BLE.—The rules of paragraphs (2) through (7)

6 and (9) of section 402(c) and section 402(f)

7 shall apply for purposes of subparagraph (A).

8 ‘‘(C) REPORTING.—Rollovers under this

9 paragraph shall be reported to the Secretary in

10 the same manner as rollovers from qualified re11 tirement plans (as defined in section

12 4974(c)).’’.

13 (B) DEFERRAL LIMIT DETERMINED WITH14 OUT REGARD TO ROLLOVER AMOUNTS.—Section

15 457(b)(2) (defining eligible deferred compensa16 tion plan) is amended by inserting ‘‘(other than

17 rollover amounts)’’ after ‘‘taxable year’’.

18 (C) DIRECT ROLLOVER.—Paragraph (1) of

19 section 457(d) is amended by striking ‘‘and’’ at

20 the end of subparagraph (A), by striking the

21 period at the end of subparagraph (B) and in22 serting ‘‘, and’’, and by inserting after subpara23 graph (B) the following:

24 ‘‘(C) in the case of a plan maintained by

25 an employer described in subsection (e)(1)(A),
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1 the plan meets requirements similar to the re2 quirements of section 401(a)(31).

3 Any amount transferred in a direct trustee-to-trust4 ee transfer in accordance with section 401(a)(31)

5 shall not be includible in gross income for the tax6 able year of transfer.’’.

7 (D) WITHHOLDING.—

8 (i) Paragraph (12) of section 3401(a)

9 is amended by adding at the end the fol10 lowing:

11 ‘‘(E) under or to an eligible deferred com12 pensation plan which, at the time of such pay13 ment, is a plan described in section 457(b)

14 maintained by an employer described in section

15 457(e)(1)(A), or’’.

16 (ii) Paragraph (3) of section 3405(c)

17 is amended to read as follows:

18 ‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For

19 purposes of this subsection, the term ‘eligible roll20 over distribution’ has the meaning given such term

21 by section 402(f)(2)(A).’’.

22 (iii) LIABILITY FOR WITHHOLDING.—

23 Subparagraph (B) of section 3405(d)(2) is

24 amended by striking ‘‘or’’ at the end of

25 clause (ii), by striking the period at the
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1 end of clause (iii) and inserting ‘‘, or’’, and

2 by adding at the end the following:

3 ‘‘(iv) section 457(b) and which is

4 maintained by an eligible employer de5 scribed in section 457(e)(1)(A).’’.

6 (2) ROLLOVERS TO SECTION 457 PLANS.—

7 (A) IN GENERAL.—Section 402(c)(8)(B)

8 (defining eligible retirement plan) is amended

9 by striking ‘‘and’’ at the end of clause (iii), by

10 striking the period at the end of clause (iv) and

11 inserting ‘‘, and’’, and by inserting after clause

12 (iv) the following new clause:

13 ‘‘(v) an eligible deferred compensation

14 plan described in section 457(b) which is

15 maintained by an eligible employer de16 scribed in section 457(e)(1)(A).’’.

17 (B) SEPARATE ACCOUNTING.—Section

18 402(c) is amended by adding at the end the fol19 lowing new paragraph:

20 ‘‘(11) SEPARATE ACCOUNTING.—Unless a plan

21 described in clause (v) of paragraph (8)(B) agrees to

22 separately account for amounts rolled into such plan

23 from eligible retirement plans not described in such

24 clause, the plan described in such clause may not ac-
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1 cept transfers or rollovers from such retirement

2 plans.’’.

3 (C) 10 PERCENT ADDITIONAL TAX.—Sub4 section (t) of section 72 (relating to 10-percent

5 additional tax on early distributions from quali6 fied retirement plans) is amended by adding at

7 the end the following new paragraph:

8 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC9 TION 457 PLANS.—For purposes of this subsection,

10 a distribution from an eligible deferred compensation

11 plan (as defined in section 457(b)) of an eligible em12 ployer described in section 457(e)(1)(A) shall be

13 treated as a distribution from a qualified retirement

14 plan described in 4974(c)(1) to the extent that such

15 distribution is attributable to an amount transferred

16 to an eligible deferred compensation plan from a

17 qualified retirement plan (as defined in section

18 4974(c)).’’.

19 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

20 403(b) PLANS.—

21 (1) ROLLOVERS FROM SECTION 403(b)

22 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll23 over amounts) is amended by striking ‘‘such dis24 tribution’’ and all that follows and inserting ‘‘such
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1 distribution to an eligible retirement plan described

2 in section 402(c)(8)(B), and’’.

3 (2) ROLLOVERS TO SECTION 403(b) PLANS.—

4 Section 402(c)(8)(B) (defining eligible retirement

5 plan), as amended by subsection (a), is amended by

6 striking ‘‘and’’ at the end of clause (iv), by striking

7 the period at the end of clause (v) and inserting ‘‘,

8 and’’, and by inserting after clause (v) the following

9 new clause:

10 ‘‘(vi) an annuity contract described in

11 section 403(b).’’.

12 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

13 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

14 402(f) (relating to written explanation to recipients of dis15 tributions eligible for rollover treatment) is amended by

16 striking ‘‘and’’ at the end of subparagraph (C), by striking

17 the period at the end of subparagraph (D) and inserting

18 ‘‘, and’’, and by adding at the end the following new sub19 paragraph:

20 ‘‘(E) of the provisions under which dis21 tributions from the eligible retirement plan re22 ceiving the distribution may be subject to re23 strictions and tax consequences which are dif24 ferent from those applicable to distributions

25 from the plan making such distribution.’’.
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1 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat2 ing to rollover where spouse receives distribution after

3 death of employee) is amended by striking ‘‘; except that’’

4 and all that follows up to the end period.

5 (e) CONFORMING AMENDMENTS.—

6 (1) Section 72(o)(4) is amended by striking

7 ‘‘and 408(d)(3)’’ and inserting ‘‘403(b)(8),

8 408(d)(3), and 457(e)(16)’’.

9 (2) Section 219(d)(2) is amended by striking

10 ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

11 457(e)(16)’’.

12 (3) Section 401(a)(31)(B) is amended by strik13 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

14 403(b)(8), and 457(e)(16)’’.

15 (4) Subparagraph (A) of section 402(f)(2) is

16 amended by striking ‘‘or paragraph (4) of section

17 403(a)’’ and inserting ‘‘, paragraph (4) of section

18 403(a), subparagraph (A) of section 403(b)(8), or

19 subparagraph (A) of section 457(e)(16)’’.

20 (5) Paragraph (1) of section 402(f) is amended

21 by striking ‘‘from an eligible retirement plan’’.

22 (6) Subparagraphs (A) and (B) of section

23 402(f)(1) are amended by striking ‘‘another eligible

24 retirement plan’’ and inserting ‘‘an eligible retire25 ment plan’’.
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1 (7) Subparagraph (B) of section 403(b)(8) is

2 amended to read as follows:

3 ‘‘(B) CERTAIN RULES MADE APPLICA4 BLE.—The rules of paragraphs (2) through (7)

5 and (9) of section 402(c) and section 402(f)

6 shall apply for purposes of subparagraph (A),

7 except that section 402(f) shall be applied to

8 the payor in lieu of the plan administrator.’’.

9 (8) Section 408(a)(1) is amended by striking

10 ‘‘or 403(b)(8),’’ and inserting ‘‘403(b)(8), or

11 457(e)(16)’’.

12 (9) Subparagraphs (A) and (B) of section

13 415(b)(2) are each amended by striking ‘‘and

14 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

15 457(e)(16)’’.

16 (10) Section 415(c)(2) is amended by striking

17 ‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and

18 457(e)(16)’’.

19 (11) Section 4973(b)(1)(A) is amended by

20 striking ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

21 457(e)(16)’’.

22 (f) EFFECTIVE DATE; SPECIAL RULES.—

23 (1) EFFECTIVE DATE.—Except as provided in

24 paragraph (2), the amendments made by this section
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1 shall apply to distributions after December 31,

2 2000.

3 (2) REASONABLE NOTICE.—No penalty shall be

4 imposed on a plan for the failure to provide the in5 formation required by the amendment made by sub6 section (c) with respect to any distribution made be7 fore January 1, 2002, if the administrator of such

8 plan makes a reasonable attempt to comply with

9 such requirement.

10 (3) SPECIAL RULE.—Notwithstanding any other

11 provision of law, subsections (h)(3) and (h)(5) of

12 section 1122 of the Tax Reform Act of 1986 shall

13 not apply to any distribution from an eligible retire14 ment plan (as defined in clause (iii) or (iv) of section

15 402(c)(8)(B) of the Internal Revenue Code of 1986)

16 on behalf of an individual if there was a rollover to

17 such plan on behalf of such individual which is per18 mitted solely by reason of any amendment made by

19 this section.

20 SEC. 432. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE21 MENT PLANS.

22 (a) IN GENERAL.—Subparagraph (A) of section

23 408(d)(3) (relating to rollover amounts) is amended by

24 adding ‘‘or’’ at the end of clause (i), by striking clauses

25 (ii) and (iii), and by adding at the end the following:
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1 ‘‘(ii) the entire amount received (in2 cluding money and any other property) is

3 paid into an eligible retirement plan for

4 the benefit of such individual not later

5 than the 60th day after the date on which

6 the payment or distribution is received, ex7 cept that the maximum amount which may

8 be paid into such plan may not exceed the

9 portion of the amount received which is in10 cludible in gross income (determined with11 out regard to this paragraph).

12 For purposes of clause (ii), the term ‘eligible re13 tirement plan’ means an eligible retirement plan

14 described in clause (iii), (iv), (v), or (vi) of sec15 tion 402(c)(8)(B).’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) Paragraph (1) of section 403(b) is amended

18 by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting

19 ‘‘section 408(d)(3)(A)(ii)’’.

20 (2) Clause (i) of section 408(d)(3)(D) is amend21 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

22 or (ii)’’.

23 (3) Subparagraph (G) of section 408(d)(3) is

24 amended to read as follows:
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1 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In

2 the case of any payment or distribution out of

3 a simple retirement account (as defined in sub4 section (p)) to which section 72(t)(6) applies,

5 this paragraph shall not apply unless such pay6 ment or distribution is paid into another simple

7 retirement account.’’.

8 (c) EFFECTIVE DATE; SPECIAL RULE.—

9 (1) EFFECTIVE DATE.—The amendments made

10 by this section shall apply to distributions after De11 cember 31, 2000.

12 (2) SPECIAL RULE.—Notwithstanding any other

13 provision of law, subsections (h)(3) and (h)(5) of

14 section 1122 of the Tax Reform Act of 1986 shall

15 not apply to any distribution from an eligible retire16 ment plan (as defined in clause (iii) or (iv) of section

17 402(c)(8)(B) of the Internal Revenue Code of 1986)

18 on behalf of an individual if there was a rollover to

19 such plan on behalf of such individual which is per20 mitted solely by reason of the amendments made by

21 this section.

22 SEC. 433. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

23 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Para24 graph (2) of section 402(c) (relating to maximum amount

25 which may be rolled over) is amended by adding at the
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1 end the following: ‘‘The preceding sentence shall not apply

2 to such distribution to the extent—

3 ‘‘(A) such portion is transferred in a direct

4 trustee-to-trustee transfer to a qualified trust

5 which is part of a plan which is a defined con6 tribution plan and which agrees to separately

7 account for amounts so transferred, including

8 separately accounting for the portion of such

9 distribution which is includible in gross income

10 and the portion of such distribution which is

11 not so includible, or

12 ‘‘(B) such portion is transferred to an eli13 gible retirement plan described in clause (i) or

14 (ii) of paragraph (8)(B).’’.

15 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE

16 ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec17 tion 401(a)(31) (relating to limitation) is amended by add18 ing at the end the following: ‘‘The preceding sentence shall

19 not apply to such distribution if the plan to which such

20 distribution is transferred—

21 ‘‘(i) agrees to separately account for

22 amounts so transferred, including sepa23 rately accounting for the portion of such

24 distribution which is includible in gross in-
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1 come and the portion of such distribution

2 which is not so includible, or

3 ‘‘(ii) is an eligible retirement plan de4 scribed in clause (i) or (ii) of section

5 402(c)(8)(B).’’.

6 (c) RULES FOR APPLYING SECTION 72 TO IRAS.—

7 Paragraph (3) of section 408(d) (relating to special rules

8 for applying section 72) is amended by inserting at the

9 end the following:

10 ‘‘(H) APPLICATION OF SECTION 72.—

11 ‘‘(i) IN GENERAL.—If—

12 ‘‘(I) a distribution is made from

13 an individual retirement plan, and

14 ‘‘(II) a rollover contribution is

15 made to an eligible retirement plan

16 described in section 402(c)(8)(B)(iii),

17 (iv), (v), or (vi) with respect to all or

18 part of such distribution,

19 then, notwithstanding paragraph (2), the

20 rules of clause (ii) shall apply for purposes

21 of applying section 72.

22 ‘‘(ii) APPLICABLE RULES.—In the

23 case of a distribution described in clause

24 (i)—
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1 ‘‘(I) section 72 shall be applied

2 separately to such distribution,

3 ‘‘(II) notwithstanding the pro

4 rata allocation of income on, and in5 vestment in, the contract to distribu6 tions under section 72, the portion of

7 such distribution rolled over to an eli8 gible retirement plan described in

9 clause (i) shall be treated as from in10 come on the contract (to the extent of

11 the aggregate income on the contract

12 from all individual retirement plans of

13 the distributee), and

14 ‘‘(III) appropriate adjustments

15 shall be made in applying section 72

16 to other distributions in such taxable

17 year and subsequent taxable years.’’.

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

19 this section shall apply to distributions made after Decem20 ber 31, 2001.

21 SEC. 434. HARDSHIP EXCEPTION TO 60-DAY RULE.

22 (a) EXEMPT TRUSTS.—Paragraph (3) of section

23 402(c) (relating to transfer must be made within 60 days

24 of receipt) is amended to read as follows:
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1 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60

2 DAYS OF RECEIPT.—

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

4 subparagraph (B), paragraph (1) shall not

5 apply to any transfer of a distribution made

6 after the 60th day following the day on which

7 the distributee received the property distrib8 uted.

9 ‘‘(B) HARDSHIP EXCEPTION.—The Sec10 retary may waive the 60-day requirement under

11 subparagraph (A) where the failure to waive

12 such requirement would be against equity or

13 good conscience, including casualty, disaster, or

14 other events beyond the reasonable control of

15 the individual subject to such requirement.’’.

16 (b) IRAS.—Paragraph (3) of section 408(d) (relating

17 to rollover contributions), as amended by section 433, is

18 amended by adding after subparagraph (H) the following

19 new subparagraph:

20 ‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—

21 The Secretary may waive the 60-day require22 ment under subparagraphs (A) and (D) where

23 the failure to waive such requirement would be

24 against equity or good conscience, including

25 casualty, disaster, or other events beyond the
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1 reasonable control of the individual subject to

2 such requirement.’’.

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

4 this section shall apply to distributions after December 31,

5 2000.

6 SEC. 435. TREATMENT OF FORMS OF DISTRIBUTION.

7 (a) PLAN TRANSFERS.—

8 (1) AMENDMENT OF INTERNAL REVENUE

9 CODE.—Paragraph (6) of section 411(d) (relating to

10 accrued benefit not to be decreased by amendment)

11 is amended by adding at the end the following:

12 ‘‘(D) PLAN TRANSFERS.—

13 ‘‘(i) IN GENERAL.—A defined con14 tribution plan (in this subparagraph re15 ferred to as the ‘transferee plan’) shall not

16 be treated as failing to meet the require17 ments of this subsection merely because

18 the transferee plan does not provide some

19 or all of the forms of distribution pre20 viously available under another defined

21 contribution plan (in this subparagraph re22 ferred to as the ‘transferor plan’) to the

23 extent that—

24 ‘‘(I) the forms of distribution

25 previously available under the trans-
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1 feror plan applied to the account of a

2 participant or beneficiary under the

3 transferor plan that was transferred

4 from the transferor plan to the trans5 feree plan pursuant to a direct trans6 fer rather than pursuant to a distribu7 tion from the transferor plan,

8 ‘‘(II) the terms of both the trans9 feror plan and the transferee plan au10 thorize the transfer described in sub11 clause (I),

12 ‘‘(III) the transfer described in

13 subclause (I) was made pursuant to a

14 voluntary election by the participant

15 or beneficiary whose account was

16 transferred to the transferee plan,

17 ‘‘(IV) the election described in

18 subclause (III) was made after the

19 participant or beneficiary received a

20 notice describing the consequences of

21 making the election, and

22 ‘‘(V) the transferee plan allows

23 the participant or beneficiary de24 scribed in subclause (III) to receive

25 any distribution to which the partici-
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1 pant or beneficiary is entitled under

2 the transferee plan in the form of a

3 single sum distribution.

4 ‘‘(ii) SPECIAL RULE FOR MERGERS;

5 ETC.—Clause (i) shall apply to plan merg6 ers and other transactions having the ef7 fect of a direct transfer, including consoli8 dations of benefits attributable to different

9 employers within a multiple employer plan.

10 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU11 TION.—Except to the extent provided in regula12 tions, a defined contribution plan shall not be

13 treated as failing to meet the requirements of

14 this section merely because of the elimination of

15 a form of distribution previously available there16 under. This subparagraph shall not apply to the

17 elimination of a form of distribution with re18 spect to any participant unless—

19 ‘‘(i) a single sum payment is available

20 to such participant at the same time or

21 times as the form of distribution being

22 eliminated, and

23 ‘‘(ii) such single sum payment is

24 based on the same or greater portion of
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1 the participant’s account as the form of

2 distribution being eliminated.’’.

3 (2) AMENDMENT OF ERISA.—Section 204(g) of

4 the Employee Retirement Income Security Act of

5 1974 (29 U.S.C. 1054(g)) is amended by adding at

6 the end the following:

7 ‘‘(4)(A) A defined contribution plan (in this subpara8 graph referred to as the ‘transferee plan’) shall not be

9 treated as failing to meet the requirements of this sub10 section merely because the transferee plan does not pro11 vide some or all of the forms of distribution previously

12 available under another defined contribution plan (in this

13 subparagraph referred to as the ‘transferor plan’) to the

14 extent that—

15 ‘‘(i) the forms of distribution previously avail16 able under the transferor plan applied to the account

17 of a participant or beneficiary under the transferor

18 plan that was transferred from the transferor plan

19 to the transferee plan pursuant to a direct transfer

20 rather than pursuant to a distribution from the

21 transferor plan;

22 ‘‘(ii) the terms of both the transferor plan and

23 the transferee plan authorize the transfer described

24 in clause (i);
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1 ‘‘(iii) the transfer described in clause (i) was

2 made pursuant to a voluntary election by the partici3 pant or beneficiary whose account was transferred to

4 the transferee plan;

5 ‘‘(iv) the election described in clause (iii) was

6 made after the participant or beneficiary received a

7 notice describing the consequences of making the

8 election; and

9 ‘‘(v) the transferee plan allows the participant

10 or beneficiary described in clause (iii) to receive any

11 distribution to which the participant or beneficiary is

12 entitled under the transferee plan in the form of a

13 single sum distribution.

14 ‘‘(B) Subparagraph (A) shall apply to plan mergers

15 and other transactions having the effect of a direct trans16 fer, including consolidations of benefits attributable to dif17 ferent employers within a multiple employer plan.

18 ‘‘(5) Except to the extent provided in regulations pro19 mulgated by the Secretary of the Treasury, a defined con20 tribution plan shall not be treated as failing to meet the

21 requirements of this subsection merely because of the

22 elimination of a form of distribution previously available

23 thereunder. This paragraph shall not apply to the elimi24 nation of a form of distribution with respect to any partici25 pant unless—
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1 ‘‘(A) a single sum payment is available to such

2 participant at the same time or times as the form

3 of distribution being eliminated; and

4 ‘‘(B) such single sum payment is based on the

5 same or greater portion of the participant’s account

6 as the form of distribution being eliminated.’’.

7 (3) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to years beginning

9 after December 31, 2000.

10 (b) REGULATIONS.—

11 (1) AMENDMENT OF INTERNAL REVENUE

12 CODE.—Paragraph (6)(B) of section 411(d) (relat13 ing to accrued benefit not to be decreased by amend14 ment) is amended by inserting after the second sen15 tence the following new sentence: ‘‘The Secretary

16 shall by regulations provide that this subparagraph

17 shall not apply to any plan amendment which re18 duces or eliminates benefits or subsidies which cre19 ate significant burdens or complexities for the plan

20 and plan participants and does not adversely affect

21 the rights of any participant in a more than de mini22 mis manner.’’.

23 (2) AMENDMENT OF ERISA.—Section 204(g)(2)

24 of the Employee Retirement Income Security Act of

25 1974 (29 U.S.C. 1054(g)(2)) is amended by insert-
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1 ing before the last sentence the following new sen2 tence: ‘‘The Secretary of the Treasury shall by regu3 lations provide that this paragraph shall not apply

4 to any plan amendment which reduces or eliminates

5 benefits or subsidies which create significant bur6 dens or complexities for the plan and plan partici7 pants and does not adversely affect the rights of any

8 participant in a more than de minimis manner.’’.

9 (3) SECRETARY DIRECTED.—Not later than

10 December 31, 2002, the Secretary of the Treasury

11 is directed to issue regulations under section

12 411(d)(6) of the Internal Revenue Code of 1986 and

13 section 204(g) of the Employee Retirement Income

14 Security Act of 1974, including the regulations re15 quired by the amendment made by this subsection.

16 Such regulations shall apply to plan years beginning

17 after December 31, 2002, or such earlier date as is

18 specified by the Secretary of the Treasury.

19 SEC. 436. RATIONALIZATION OF RESTRICTIONS ON DIS20 TRIBUTIONS.

21 (a) MODIFICATION OF SAME DESK EXCEPTION.—

22 (1) SECTION 401(k).—

23 (A) Section 401(k)(2)(B)(i)(I) (relating to

24 qualified cash or deferred arrangements) is
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1 amended by striking ‘‘separation from service’’

2 and inserting ‘‘severance from employment’’.

3 (B) Subparagraph (A) of section

4 401(k)(10) (relating to distributions upon ter5 mination of plan or disposition of assets or sub6 sidiary) is amended to read as follows:

7 ‘‘(A) IN GENERAL.—An event described in

8 this subparagraph is the termination of the

9 plan without establishment or maintenance of

10 another defined contribution plan (other than

11 an employee stock ownership plan as defined in

12 section 4975(e)(7)).’’.

13 (C) Section 401(k)(10) is amended—

14 (i) in subparagraph (B)—

15 (I) by striking ‘‘An event’’ in

16 clause (i) and inserting ‘‘A termi17 nation’’; and

18 (II) by striking ‘‘the event’’ in

19 clause (i) and inserting ‘‘the termi20 nation’’;

21 (ii) by striking subparagraph (C); and

22 (iii) by striking ‘‘OR DISPOSITION OF

23 ASSETS OR SUBSIDIARY’’ in the heading.

24 (2) SECTION 403(b).—
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1 (A) Paragraphs (7)(A)(ii) and (11)(A) of

2 section 403(b) are each amended by striking

3 ‘‘separates from service’’ and inserting ‘‘has a

4 severance from employment’’.

5 (B) The heading for paragraph (11) of

6 section 403(b) is amended by striking ‘‘SEPARA7 TION FROM SERVICE’’ and inserting ‘‘SEVER8 ANCE FROM EMPLOYMENT’’.

9 (3) SECTION 457.—Clause (ii) of section

10 457(d)(1)(A) is amended by striking ‘‘is separated

11 from service’’ and inserting ‘‘has a severance from

12 employment’’.

13 (b) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to distributions after December 31,

15 2000.

16 SEC. 437. PURCHASE OF SERVICE CREDIT IN GOVERN17 MENTAL DEFINED BENEFIT PLANS.

18 (a) 403(b) PLANS.—Subsection (b) of section 403 is

19 amended by adding at the end the following new para20 graph:

21 ‘‘(13) TRUSTEE-TO-TRUSTEE TRANSFERS TO

22 PURCHASE PERMISSIVE SERVICE CREDIT.—No

23 amount shall be includible in gross income by reason

24 of a direct trustee-to-trustee transfer to a defined
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1 benefit governmental plan (as defined in section

2 414(d)) if such transfer is—

3 ‘‘(A) for the purchase of permissive service

4 credit (as defined in section 415(n)(3)(A))

5 under such plan, or

6 ‘‘(B) a repayment to which section 415

7 does not apply by reason of subsection (k)(3)

8 thereof.’’.

9 (b) 457 PLANS.—Subsection (e) of section 457 is

10 amended by adding after paragraph (16) the following

11 new paragraph:

12 ‘‘(17) TRUSTEE-TO-TRUSTEE TRANSFERS TO

13 PURCHASE PERMISSIVE SERVICE CREDIT.—No

14 amount shall be includible in gross income by reason

15 of a direct trustee-to-trustee transfer to a defined

16 benefit governmental plan (as defined in section

17 414(d)) if such transfer is—

18 ‘‘(A) for the purchase of permissive service

19 credit (as defined in section 415(n)(3)(A))

20 under such plan, or

21 ‘‘(B) a repayment to which section 415

22 does not apply by reason of subsection (k)(3)

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

2 this section shall apply to trustee-to-trustee transfers after

3 December 31, 2000.

4 SEC. 438. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

5 PURPOSES OF CASH-OUT AMOUNTS.

6 (a) QUALIFIED PLANS.—

7 (1) AMENDMENT OF INTERNAL REVENUE

8 CODE.—Section 411(a)(11) (relating to restrictions

9 on certain mandatory distributions) is amended by

10 adding at the end the following:

11 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON12 TRIBUTIONS.—A plan shall not fail to meet the

13 requirements of this paragraph if, under the

14 terms of the plan, the present value of the non15 forfeitable accrued benefit is determined with16 out regard to that portion of such benefit which

17 is attributable to rollover contributions (and

18 earnings allocable thereto). For purposes of this

19 subparagraph, the term ‘rollover contributions’

20 means any rollover contribution under sections

21 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

22 and 457(e)(16).’’.

23 (2) AMENDMENT OF ERISA.—Section 203(e) of

24 the Employee Retirement Income Security Act of
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1 1974 (29 U.S.C. 1053(c)) is amended by adding at

2 the end the following:

3 ‘‘(4) A plan shall not fail to meet the requirements

4 of this subsection if, under the terms of the plan, the

5 present value of the nonforfeitable accrued benefit is de6 termined without regard to that portion of such benefit

7 which is attributable to rollover contributions (and earn8 ings allocable thereto). For purposes of this subparagraph,

9 the term ‘rollover contributions’ means any rollover con10 tribution under sections 402(c), 403(a)(4), 403(b)(8),

11 408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue

12 Code of 1986.’’.

13 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

14 Clause (i) of section 457(e)(9)(A) is amended by striking

15 ‘‘such amount’’ and inserting ‘‘the portion of such amount

16 which is not attributable to rollover contributions (as de17 fined in section 411(a)(11)(D))’’.

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

19 this section shall apply to distributions after December 31,

20 2000.

21 SEC. 439. MINIMUM DISTRIBUTION AND INCLUSION RE22 QUIREMENTS FOR SECTION 457 PLANS.

23 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—

24 Paragraph (2) of section 457(d) (relating to distribution

25 requirements) is amended to read as follows:
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1 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE2 MENTS.—A plan meets the minimum distribution re3 quirements of this paragraph if such plan meets the

4 requirements of section 401(a)(9).’’.

5 (b) INCLUSION IN GROSS INCOME.—

6 (1) YEAR OF INCLUSION.—Subsection (a) of

7 section 457 (relating to year of inclusion in gross in8 come) is amended to read as follows:

9 ‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—

10 ‘‘(1) IN GENERAL.—Any amount of compensa11 tion deferred under an eligible deferred compensa12 tion plan, and any income attributable to the

13 amounts so deferred, shall be includible in gross in14 come only for the taxable year in which such com15 pensation or other income—

16 ‘‘(A) is paid to the participant or other

17 beneficiary, in the case of a plan of an eligible

18 employer described in subsection (e)(1)(A), and

19 ‘‘(B) is paid or otherwise made available to

20 the participant or other beneficiary, in the case

21 of a plan of an eligible employer described in

22 subsection (e)(1)(B).

23 ‘‘(2) SPECIAL RULE FOR ROLLOVER

24 AMOUNTS.—To the extent provided in section
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1 72(t)(9), section 72(t) shall apply to any amount in2 cludible in gross income under this subsection.’’.

3 (2) CONFORMING AMENDMENTS.—

4 (A) So much of paragraph (9) of section

5 457(e) as precedes subparagraph (A) is amend6 ed to read as follows:

7 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

8 PLANS NOT TREATED AS MADE AVAILABLE BY REA9 SON OF CERTAIN ELECTIONS, ETC.—In the case of

10 an eligible deferred compensation plan of an em11 ployer described in subsection (e)(1)(B)—’’.

12 (B) Section 457(d) is amended by adding

13 at the end the following new paragraph:

14 ‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—

15 An eligible deferred compensation plan of an em16 ployer described in subsection (e)(1)(A) shall not be

17 treated as failing to meet the requirements of this

18 subsection solely by reason of making a distribution

19 described in subsection (e)(9)(A).’’.

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

21 this section shall apply to distributions after December 31,

22 2000.
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1 Subtitle E—Strengthening Pension

2 Security and Enforcement

3 SEC. 441. REPEAL OF 155 PERCENT OF CURRENT LIABILITY

4 FUNDING LIMIT.

5 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

6 Section 412(c)(7) (relating to full-funding limitation) is

7 amended—

8 (1) by striking ‘‘the applicable percentage’’ in

9 subparagraph (A)(i)(I) and inserting ‘‘in the case of

10 plan years beginning before January 1, 2004, the

11 applicable percentage’’; and

12 (2) by amending subparagraph (F) to read as

13 follows:

14 ‘‘(F) APPLICABLE PERCENTAGE.—For

15 purposes of subparagraph (A)(i)(I), the applica16 ble percentage shall be determined in accord17 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2001 ............................................................................. 160

2002 ............................................................................. 165

2003 ............................................................................. 170.’’.

18 (b) AMENDMENT OF ERISA.—Section 302(c)(7) of

19 the Employee Retirement Income Security Act of 1974

20 (29 U.S.C. 1082(c)(7)) is amended—

21 (1) by striking ‘‘the applicable percentage’’ in

22 subparagraph (A)(i)(I) and inserting ‘‘in the case of
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1 plan years beginning before January 1, 2004, the

2 applicable percentage’’; and

3 (2) by amending subparagraph (F) to read as

4 follows:

5 ‘‘(F) APPLICABLE PERCENTAGE.—For

6 purposes of subparagraph (A)(i)(I), the applica7 ble percentage shall be determined in accord8 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2001 ............................................................................. 160

2002 ............................................................................. 165

2003 ............................................................................. 170.’’.

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

10 this section shall apply to plan years beginning after De11 cember 31, 2000.

12 SEC. 442. MAXIMUM CONTRIBUTION DEDUCTION RULES

13 MODIFIED AND APPLIED TO ALL DEFINED

14 BENEFIT PLANS.

15 (a) IN GENERAL.—Subparagraph (D) of section

16 404(a)(1) (relating to special rule in case of certain plans)

17 is amended to read as follows:

18 ‘‘(D) SPECIAL RULE IN CASE OF CERTAIN

19 PLANS.—

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

21 defined benefit plan, except as provided in

22 regulations, the maximum amount deduct23 ible under the limitations of this paragraph
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1 shall not be less than the unfunded termi2 nation liability (determined as if the pro3 posed termination date referred to in sec4 tion 4041(b)(2)(A)(i)(II) of the Employee

5 Retirement Income Security Act of 1974

6 were the last day of the plan year).

7 ‘‘(ii) PLANS WITH LESS THAN 100

8 PARTICIPANTS.—For purposes of this sub9 paragraph, in the case of a plan which has

10 less than 100 participants for the plan

11 year, termination liability shall not include

12 the liability attributable to benefit in13 creases for highly compensated employees

14 (as defined in section 414(q)) resulting

15 from a plan amendment which is made or

16 becomes effective, whichever is later, within

17 the last 2 years before the termination

18 date.

19 ‘‘(iii) RULE FOR DETERMINING NUM20 BER OF PARTICIPANTS.—For purposes of

21 determining whether a plan has more than

22 100 participants, all defined benefit plans

23 maintained by the same employer (or any

24 member of such employer’s controlled

25 group (within the meaning of section
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1 412(l)(8)(C))) shall be treated as one plan,

2 but only employees of such member or em3 ployer shall be taken into account.

4 ‘‘(iv) PLANS MAINTAINED BY PROFES5 SIONAL SERVICE EMPLOYERS.—Clause (i)

6 shall not apply to a plan described in sec7 tion 4021(b)(13) of the Employee Retire8 ment Income Security Act of 1974.’’.

9 (b) CONFORMING AMENDMENT.—Paragraph (6) of

10 section 4972(c) is amended to read as follows:

11 ‘‘(6) EXCEPTIONS.—In determining the amount

12 of nondeductible contributions for any taxable year,

13 there shall not be taken into account so much of the

14 contributions to one or more defined contribution

15 plans which are not deductible when contributed

16 solely because of section 404(a)(7) as does not ex17 ceed the greater of—

18 ‘‘(A) the amount of contributions not in

19 excess of 6 percent of compensation (within the

20 meaning of section 404(a)) paid or accrued

21 (during the taxable year for which the contribu22 tions were made) to beneficiaries under the

23 plans, or

24 ‘‘(B) the sum of—
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1 ‘‘(i) the amount of contributions de2 scribed in section 401(m)(4)(A), plus

3 ‘‘(ii) the amount of contributions de4 scribed in section 402(g)(3)(A).

5 For purposes of this paragraph, the deductible limits

6 under section 404(a)(7) shall first be applied to

7 amounts contributed to a defined benefit plan and

8 then to amounts described in subparagraph (B).’’.

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

10 this section shall apply to plan years beginning after De11 cember 31, 2000.

12 SEC. 443. EXCISE TAX RELIEF FOR SOUND PENSION FUND13 ING.

14 (a) IN GENERAL.—Subsection (c) of section 4972

15 (relating to nondeductible contributions) is amended by

16 adding at the end the following new paragraph:

17 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

18 determining the amount of nondeductible contribu19 tions for any taxable year, an employer may elect for

20 such year not to take into account any contributions

21 to a defined benefit plan except to the extent that

22 such contributions exceed the full-funding limitation

23 (as defined in section 412(c)(7), determined without

24 regard to subparagraph (A)(i)(I) thereof). For pur25 poses of this paragraph, the deductible limits under
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1 section 404(a)(7) shall first be applied to amounts

2 contributed to defined contribution plans and then

3 to amounts described in this paragraph. If an em4 ployer makes an election under this paragraph for a

5 taxable year, paragraph (6) shall not apply to such

6 employer for such taxable year.’’.

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

8 this section shall apply to years beginning after December

9 31, 2000.

10 SEC. 444. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

11 DEFINED BENEFIT PLANS SIGNIFICANTLY

12 REDUCING FUTURE BENEFIT ACCRUALS.

13 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

14 (1) IN GENERAL.—Chapter 43 (relating to

15 qualified pension, etc., plans) is amended by adding

16 at the end the following new section:

17 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

18 BENEFIT ACCRUALS TO SATISFY NOTICE RE19 QUIREMENTS.

20 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

21 a tax on the failure of any applicable pension plan to meet

22 the requirements of subsection (e) with respect to any ap23 plicable individual.

24 ‘‘(b) AMOUNT OF TAX.—
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1 ‘‘(1) IN GENERAL.—The amount of the tax im2 posed by subsection (a) on any failure with respect

3 to any applicable individual shall be $100 for each

4 day in the noncompliance period with respect to such

5 failure.

6 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

7 of this section, the term ‘noncompliance period’

8 means, with respect to any failure, the period begin9 ning on the date the failure first occurs and ending

10 on the date the notice to which the failure relates is

11 provided or the failure is otherwise corrected.

12 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

13 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

14 DISCOVERED AND REASONABLE DILIGENCE EXER15 CISED.—No tax shall be imposed by subsection (a)

16 on any failure during any period for which it is es17 tablished to the satisfaction of the Secretary that

18 any person subject to liability for the tax under sub19 section (d) did not know that the failure existed and

20 exercised reasonable diligence to meet the require21 ments of subsection (e).

22 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR23 RECTED WITHIN 30 DAYS.—No tax shall be imposed

24 by subsection (a) on any failure if—
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1 ‘‘(A) any person subject to liability for the

2 tax under subsection (d) exercised reasonable

3 diligence to meet the requirements of subsection

4 (e), and

5 ‘‘(B) such person provides the notice de6 scribed in subsection (e) during the 30-day pe7 riod beginning on the first date such person

8 knew, or exercising reasonable diligence would

9 have known, that such failure existed.

10 ‘‘(3) OVERALL LIMITATION FOR UNINTEN11 TIONAL FAILURES.—

12 ‘‘(A) IN GENERAL.—If the person subject

13 to liability for tax under subsection (d) exer14 cised reasonable diligence to meet the require15 ments of subsection (e), the tax imposed by

16 subsection (a) for failures during the taxable

17 year of the employer (or, in the case of a multi18 employer plan, the taxable year of the trust

19 forming part of the plan) shall not exceed

20 $500,000. For purposes of the preceding sen21 tence, all multiemployer plans of which the

22 same trust forms a part shall be treated as 1

23 plan.

24 ‘‘(B) TAXABLE YEARS IN THE CASE OF

25 CERTAIN CONTROLLED GROUPS.—For purposes
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1 of this paragraph, if all persons who are treated

2 as a single employer for purposes of this section

3 do not have the same taxable year, the taxable

4 years taken into account shall be determined

5 under principles similar to the principles of sec6 tion 1561.

7 ‘‘(4) WAIVER BY SECRETARY.—In the case of a

8 failure which is due to reasonable cause and not to

9 willful neglect, the Secretary may waive part or all

10 of the tax imposed by subsection (a) to the extent

11 that the payment of such tax would be excessive or

12 otherwise inequitable relative to the failure involved.

13 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia14 ble for the tax imposed by subsection (a):

15 ‘‘(1) In the case of a plan other than a multi16 employer plan, the employer.

17 ‘‘(2) In the case of a multiemployer plan, the

18 plan.

19 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI20 CANTLY REDUCING BENEFIT ACCRUALS.—

21 ‘‘(1) IN GENERAL.—If an applicable pension

22 plan is amended to provide for a significant reduc23 tion in the rate of future benefit accrual, the plan

24 administrator shall provide written notice to each
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1 applicable individual (and to each employee organi2 zation representing applicable individuals).

3 ‘‘(2) NOTICE.—The notice required by para4 graph (1) shall be written in a manner calculated to

5 be understood by the average plan participant and

6 shall provide sufficient information (as determined

7 in accordance with regulations prescribed by the

8 Secretary) to allow applicable individuals to under9 stand the effect of the plan amendment. The Sec10 retary may provide a simplified form of notice for,

11 or exempt from any notice requirement, a plan—

12 ‘‘(A) which has fewer than 100 partici13 pants who have accrued a benefit under the

14 plan, or

15 ‘‘(B) which offers participants the option

16 to choose between the new benefit formula and

17 the old benefit formula.

18 ‘‘(3) TIMING OF NOTICE.—Except as provided

19 in regulations, the notice required by paragraph (1)

20 shall be provided within a reasonable time before the

21 effective date of the plan amendment.

22 ‘‘(4) DESIGNEES.—Any notice under paragraph

23 (1) may be provided to a person designated, in writ24 ing, by the person to which it would otherwise be

25 provided.
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1 ‘‘(5) NOTICE BEFORE ADOPTION OF AMEND2 MENT.—A plan shall not be treated as failing to

3 meet the requirements of paragraph (1) merely be4 cause notice is provided before the adoption of the

5 plan amendment if no material modification of the

6 amendment occurs before the amendment is adopt7 ed.

8 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur9 poses of this section—

10 ‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap11 plicable individual’ means, with respect to any plan

12 amendment—

13 ‘‘(A) each participant in the plan, and

14 ‘‘(B) any beneficiary who is an alternate

15 payee (within the meaning of section 414(p)(8))

16 under an applicable qualified domestic relations

17 order (within the meaning of section

18 414(p)(1)(A)),

19 whose rate of future benefit accrual under the

20 plan may reasonably be expected to be signifi21 cantly reduced by such plan amendment.

22 ‘‘(2) APPLICABLE PENSION PLAN.—The term

23 ‘applicable pension plan’ means—

24 ‘‘(A) any defined benefit plan, or
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1 ‘‘(B) an individual account plan which is

2 subject to the funding standards of section 412.

3 Such term shall not include a governmental plan

4 (within the meaning of section 414(d)) or a church

5 plan (within the meaning of section 414(e)) with re6 spect to which the election provided by section

7 410(d) has not been made.

8 ‘‘(3) EARLY RETIREMENT.—A plan amendment

9 which eliminates or significantly reduces any early

10 retirement benefit or retirement-type subsidy (within

11 the meaning of section 411(d)(6)(B)(i)) shall be

12 treated as having the effect of significantly reducing

13 the rate of future benefit accrual.

14 ‘‘(g) NEW TECHNOLOGIES.—The Secretary may by

15 regulations allow any notice under paragraph (1) or (2)

16 of subsection (e) to be provided by using new tech17 nologies.’’

18 (2) CLERICAL AMENDMENT.—The table of sec19 tions for chapter 43 is amended by adding at the

20 end the following new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

21 (b) AMENDMENT OF ERISA.—Section 204(h) of the

22 Employee Retirement Income Security Act of 1974 (29

23 U.S.C. 1054(h)) is amended by adding at the end the fol24 lowing new paragraphs:
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1 ‘‘(3)(A) An applicable pension plan to which para2 graph (1) applies shall not be treated as meeting the re3 quirements of such paragraph unless, in addition to any

4 notice required to be provided to an individual or organiza5 tion under such paragraph, the plan administrator pro6 vides the notice described in subparagraph (B) to each ap7 plicable individual (and to each employee organization rep8 resenting applicable individuals).

9 ‘‘(B) The notice required by subparagraph (A) shall

10 be written in a manner calculated to be understood by the

11 average plan participant and shall provide sufficient infor12 mation (as determined in accordance with regulations pre13 scribed by the Secretary of the Treasury) to allow applica14 ble individuals to understand the effect of the plan amend15 ment. The Secretary of the Treasury may provide a sim16 plified form of notice for, or exempt from any notice re17 quirement, a plan—

18 ‘‘(i) which has fewer than 100 participants who

19 have accrued a benefit under the plan, or

20 ‘‘(ii) which offers participants the option to

21 choose between the new benefit formula and the old

22 benefit formula.

23 ‘‘(C) Except as provided in regulations prescribed by

24 the Secretary of the Treasury, the notice required by sub-
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1 paragraph (A) shall be provided within a reasonable time

2 before the effective date of the plan amendment.

3 ‘‘(D) Any notice under subparagraph (A) may be pro4 vided to a person designated, in writing, by the person

5 to which it would otherwise be provided.

6 ‘‘(E) A plan shall not be treated as failing to meet

7 the requirements of subparagraph (A) merely because no8 tice is provided before the adoption of the plan amendment

9 if no material modification of the amendment occurs be10 fore the amendment is adopted.

11 ‘‘(F) The Secretary of the Treasury may by regula12 tions allow any notice under subparagraph (A) or (B) to

13 be provided by using new technologies.

14 ‘‘(4) For purposes of paragraph (3)—

15 ‘‘(A) The term ‘applicable individual’ means,

16 with respect to any plan amendment—

17 ‘‘(i) each participant in the plan; and

18 ‘‘(ii) any beneficiary who is an alternate

19 payee (within the meaning of section

20 206(d)(3)(K)) under an applicable qualified do21 mestic relations order (within the meaning of

22 section 206(d)(3)(B)(i)),

23 whose rate of future benefit accrual under the plan

24 may reasonably be expected to be significantly re25 duced by such plan amendment.
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1 ‘‘(B) The term ‘applicable pension plan’

2 means—

3 ‘‘(i) any defined benefit plan; or

4 ‘‘(ii) an individual account plan which is

5 subject to the funding standards of section 412

6 of the Internal Revenue Code of 1986.

7 ‘‘(C) A plan amendment which eliminates or

8 significantly reduces any early retirement benefit or

9 retirement-type subsidy (within the meaning of sub10 section (g)(2)(A)) shall be treated as having the ef11 fect of significantly reducing the rate of future ben12 efit accrual.’’.

13 (c) EFFECTIVE DATES.—

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

15 this section shall apply to plan amendments taking

16 effect on or after the date of the enactment of this

17 Act.

18 (2) TRANSITION.—Until such time as the Sec19 retary of the Treasury issues regulations under sec20 tions 4980F(e)(2) and (3) of the Internal Revenue

21 Code of 1986 and section 204(h)(3) of the Employee

22 Retirement Income Security Act of 1974 (as added

23 by the amendments made by this section), a plan

24 shall be treated as meeting the requirements of such
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1 sections if it makes a good faith effort to comply

2 with such requirements.

3 (3) SPECIAL NOTICE RULES.—

4 (A) IN GENERAL.—The period for pro5 viding any notice required by the amendments

6 made by this section shall not end before the

7 date which is 3 months after the date of the en8 actment of this Act.

9 (B) REASONABLE NOTICE.—The amend10 ments made by this section shall not apply to

11 any plan amendment taking effect on or after

12 the date of the enactment of this Act if, before

13 October 25, 2000, notice was provided to par14 ticipants and beneficiaries adversely affected by

15 the plan amendment (or their representatives)

16 which was reasonably expected to notify them

17 of the nature and effective date of the plan

18 amendment.

19 (d) STUDY.—The Secretary of the Treasury shall

20 prepare a report on the effects of conversions of tradi21 tional defined benefit plans to cash balance or hybrid for22 mula plans. Such study shall examine the effect of such

23 conversions on longer service participants, including the

24 incidence and effects of ‘‘wear away’’ provisions under

25 which participants earn no additional benefits for a period
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1 of time after the conversion. As soon as practicable, but

2 not later than 60 days after the date of the enactment

3 of this Act, the Secretary shall submit such report, to4 gether with recommendations thereon, to the Committee

5 on Ways and Means and the Committee on Education and

6 the Workforce of the House of Representatives and the

7 Committee on Finance and the Committee on Health,

8 Education, Labor, and Pensions of the Senate.

9 SEC. 445. TREATMENT OF MULTIEMPLOYER PLANS UNDER

10 SECTION 415.

11 (a) COMPENSATION LIMIT.—

12 (1) IN GENERAL.—Paragraph (11) of section

13 415(b) (relating to limitation for defined benefit

14 plans) is amended to read as follows:

15 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN16 MENTAL AND MULTIEMPLOYER PLANS.—In the case

17 of a governmental plan (as defined in section

18 414(d)) or a multiemployer plan (as defined in sec19 tion 414(f)), subparagraph (B) of paragraph (1)

20 shall not apply.’’.

21 (2) CONFORMING AMENDMENT.—Section

22 415(b)(7) (relating to benefits under certain collec23 tively bargained plans) is amended by inserting

24 ‘‘(other than a multiemployer plan)’’ after ‘‘defined
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1 benefit plan’’ in the matter preceding subparagraph

2 (A).

3 (b) COMBINING AND AGGREGATION OF PLANS.—

4 (1) COMBINING OF PLANS.—Subsection (f) of

5 section 415 (relating to combining of plans) is

6 amended by adding at the end the following:

7 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

8 PLANS.—Notwithstanding paragraph (1) and sub9 section (g), a multiemployer plan (as defined in sec10 tion 414(f)) shall not be combined or aggregated—

11 ‘‘(A) with any other plan which is not a

12 multiemployer plan for purposes of applying

13 subsection (b)(1)(B) to such other plan, or

14 ‘‘(B) with any other multiemployer plan

15 for purposes of applying the limitations estab16 lished in this section.’’.

17 (2) CONFORMING AMENDMENT FOR AGGREGA18 TION OF PLANS.—Subsection (g) of section 415 (re19 lating to aggregation of plans) is amended by strik20 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro21 vided in subsection (f)(3), the Secretary’’.

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

23 this section shall apply to years beginning after December

24 31, 2000.
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1 SEC. 446. PROTECTION OF INVESTMENT OF EMPLOYEE

2 CONTRIBUTIONS TO 401(K) PLANS.

3 (a) IN GENERAL.—Section 1524(b) of the Taxpayer

4 Relief Act of 1997 is amended to read as follows:

5 ‘‘(b) EFFECTIVE DATE.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by this section

8 shall apply to elective deferrals for plan years begin9 ning after December 31, 1998.

10 ‘‘(2) NONAPPLICATION TO PREVIOUSLY AC11 QUIRED PROPERTY.—The amendments made by this

12 section shall not apply to any elective deferral which

13 is invested in assets consisting of qualifying em14 ployer securities, qualifying employer real property,

15 or both, if such assets were acquired before January

16 1, 1999.’’.

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

18 this section shall apply as if included in the provision of

19 the Taxpayer Relief Act of 1997 to which it relates.

20 SEC. 447. PERIODIC PENSION BENEFITS STATEMENTS.

21 (a) IN GENERAL.—Section 105(a) of the Employee

22 Retirement Income Security Act of 1974 (29 U.S.C. 1025

23 (a)) is amended to read as follows:

24 ‘‘(a)(1) Except as provided in paragraph (2)—

25 ‘‘(A) the administrator of an individual account

26 plan shall furnish a pension benefit statement—
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1 ‘‘(i) to a plan participant at least once an2 nually, and

3 ‘‘(ii) to a plan beneficiary upon written re4 quest, and

5 ‘‘(B) the administrator of a defined benefit plan

6 shall furnish a pension benefit statement—

7 ‘‘(i) at least once every 3 years to each

8 participant with a nonforfeitable accrued ben9 efit who is employed by the employer maintain10 ing the plan at the time the statement is fur11 nished to participants, and

12 ‘‘(ii) to a plan participant or plan bene13 ficiary of the plan upon written request.

14 ‘‘(2) Notwithstanding paragraph (1), the adminis15 trator of a plan to which more than 1 unaffiliated em16 ployer is required to contribute shall only be required to

17 furnish a pension benefit statement under paragraph (1)

18 upon the written request of a participant or beneficiary

19 of the plan.

20 ‘‘(3) A pension benefit statement under paragraph

21 (1)—

22 ‘‘(A) shall indicate, on the basis of the latest

23 available information—

24 ‘‘(i) the total benefits accrued, and
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1 ‘‘(ii) the nonforfeitable pension benefits, if

2 any, which have accrued, or the earliest date on

3 which benefits will become nonforfeitable,

4 ‘‘(B) shall be written in a manner calculated to

5 be understood by the average plan participant, and

6 ‘‘(C) may be provided in written, electronic, tel7 ephonic, or other appropriate form.

8 ‘‘(4)(A) In the case of a defined benefit plan, the re9 quirements of paragraph (1)(B)(i) shall be treated as met

10 with respect to a participant if the administrator provides

11 the participant at least once each year with notice of the

12 availability of the pension benefit statement and the ways

13 in which the participant may obtain such statement. Such

14 notice shall be provided in written, electronic, telephonic,

15 or other appropriate form, and may be included with other

16 communications to the participant if done in a manner

17 reasonably designed to attract the attention of the partici18 pant.

19 ‘‘(B) The Secretary may provide that years in which

20 no employee or former employee benefits (within the

21 meaning of section 410(b) of the Internal Revenue Code

22 of 1986) under the plan need not be taken into account

23 in determining the 3-year period under paragraph

24 (1)(B)(i).’’.

25 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 105 of the Employee Retirement In2 come Security Act of 1974 (29 U.S.C. 1025) is

3 amended by striking subsection (d).

4 (2) Section 105(b) of such Act (29 U.S.C.

5 1025(b)) is amended to read as follows:

6 ‘‘(b) In no case shall a participant or beneficiary of

7 a plan be entitled to more than one statement described

8 in subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is appli9 cable, in any 12-month period.’’.

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

11 this section shall apply to plan years beginning after De12 cember 31, 2001.

13 SEC. 448. PROHIBITED ALLOCATIONS OF STOCK IN S COR14 PORATION ESOP.

15 (a) IN GENERAL.—Section 409 (relating to qualifica16 tions for tax credit employee stock ownership plans) is

17 amended by redesignating subsection (p) as subsection (q)

18 and by inserting after subsection (o) the following new

19 subsection:

20 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

21 AN S CORPORATION.—

22 ‘‘(1) IN GENERAL.—An employee stock owner23 ship plan holding employer securities consisting of

24 stock in an S corporation shall provide that no por25 tion of the assets of the plan attributable to (or allo-
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1 cable in lieu of) such employer securities may, dur2 ing a nonallocation year, accrue (or be allocated di3 rectly or indirectly under any plan of the employer

4 meeting the requirements of section 401(a)) for the

5 benefit of any disqualified person.

6 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

7 ‘‘(A) IN GENERAL.—If a plan fails to meet

8 the requirements of paragraph (1), the plan

9 shall be treated as having distributed to any

10 disqualified person the amount allocated to the

11 account of such person in violation of para12 graph (1) at the time of such allocation.

13 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

14 ‘‘(3) NONALLOCATION YEAR.—For purposes of

15 this subsection—

16 ‘‘(A) IN GENERAL.—The term ‘nonalloca17 tion year’ means any plan year of an employee

18 stock ownership plan if, at any time during

19 such plan year—

20 ‘‘(i) such plan holds employer securi21 ties consisting of stock in an S corpora22 tion, and
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1 ‘‘(ii) disqualified persons own at least

2 50 percent of the number of shares of

3 stock in the S corporation.

4 ‘‘(B) ATTRIBUTION RULES.—For purposes

5 of subparagraph (A)—

6 ‘‘(i) IN GENERAL.—The rules of sec7 tion 318(a) shall apply for purposes of de8 termining ownership, except that—

9 ‘‘(I) in applying paragraph (1)

10 thereof, the members of an individ11 ual’s family shall include members of

12 the family described in paragraph

13 (4)(D), and

14 ‘‘(II) paragraph (4) thereof shall

15 not apply.

16 ‘‘(ii) DEEMED-OWNED SHARES.—Not17 withstanding the employee trust exception

18 in section 318(a)(2)(B)(i), an individual

19 shall be treated as owning deemed-owned

20 shares of the individual.

21 Solely for purposes of applying paragraph (5),

22 this subparagraph shall be applied after the at23 tribution rules of paragraph (5) have been ap24 plied.
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1 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

2 this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘disqualified

4 person’ means any person if—

5 ‘‘(i) the aggregate number of deemed6 owned shares of such person and the mem7 bers of such person’s family is at least 20

8 percent of the number of deemed-owned

9 shares of stock in the S corporation, or

10 ‘‘(ii) in the case of a person not de11 scribed in clause (i), the number of

12 deemed-owned shares of such person is at

13 least 10 percent of the number of deemed14 owned shares of stock in such corporation.

15 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

16 In the case of a disqualified person described in

17 subparagraph (A)(i), any member of such per18 son’s family with deemed-owned shares shall be

19 treated as a disqualified person if not otherwise

20 treated as a disqualified person under subpara21 graph (A).

22 ‘‘(C) DEEMED-OWNED SHARES.—

23 ‘‘(i) IN GENERAL.—The term

24 ‘deemed-owned shares’ means, with respect

25 to any person—
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1 ‘‘(I) the stock in the S corpora2 tion constituting employer securities

3 of an employee stock ownership plan

4 which is allocated to such person

5 under the plan, and

6 ‘‘(II) such person’s share of the

7 stock in such corporation which is

8 held by such plan but which is not al9 located under the plan to participants.

10 ‘‘(ii) PERSON’S SHARE OF

11 UNALLOCATED STOCK.—For purposes of

12 clause (i)(II), a person’s share of

13 unallocated S corporation stock held by

14 such plan is the amount of the unallocated

15 stock which would be allocated to such per16 son if the unallocated stock were allocated

17 to all participants in the same proportions

18 as the most recent stock allocation under

19 the plan.

20 ‘‘(D) MEMBER OF FAMILY.—For purposes

21 of this paragraph, the term ‘member of the

22 family’ means, with respect to any individual—

23 ‘‘(i) the spouse of the individual,

24 ‘‘(ii) an ancestor or lineal descendant

25 of the individual or the individual’s spouse,
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1 ‘‘(iii) a brother or sister of the indi2 vidual or the individual’s spouse and any

3 lineal descendant of the brother or sister,

4 and

5 ‘‘(iv) the spouse of any individual de6 scribed in clause (ii) or (iii).

7 A spouse of an individual who is legally sepa8 rated from such individual under a decree of di9 vorce or separate maintenance shall not be

10 treated as such individual’s spouse for purposes

11 of this subparagraph.

12 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

13 purposes of paragraphs (3) and (4), in the case of

14 a person who owns synthetic equity in the S corpora15 tion, except to the extent provided in regulations, the

16 shares of stock in such corporation on which such

17 synthetic equity is based shall be treated as out18 standing stock in such corporation and deemed19 owned shares of such person if such treatment of

20 synthetic equity of 1 or more such persons results

21 in—

22 ‘‘(A) the treatment of any person as a dis23 qualified person, or

24 ‘‘(B) the treatment of any year as a non25 allocation year.
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1 For purposes of this paragraph, synthetic equity

2 shall be treated as owned by a person in the same

3 manner as stock is treated as owned by a person

4 under the rules of paragraphs (2) and (3) of section

5 318(a). If, without regard to this paragraph, a per6 son is treated as a disqualified person or a year is

7 treated as a nonallocation year, this paragraph shall

8 not be construed to result in the person or year not

9 being so treated.

10 ‘‘(6) DEFINITIONS.—For purposes of this

11 subsection—

12 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

13 PLAN.—The term ‘employee stock ownership

14 plan’ has the meaning given such term by sec15 tion 4975(e)(7).

16 ‘‘(B) EMPLOYER SECURITIES.—The term

17 ‘employer security’ has the meaning given such

18 term by section 409(l).

19 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn20 thetic equity’ means any stock option, warrant,

21 restricted stock, deferred issuance stock right,

22 or similar interest or right that gives the holder

23 the right to acquire or receive stock of the S

24 corporation in the future. Except to the extent

25 provided in regulations, synthetic equity also in-
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1 cludes a stock appreciation right, phantom

2 stock unit, or similar right to a future cash

3 payment based on the value of such stock or

4 appreciation in such value.

5 ‘‘(7) REGULATIONS.—The Secretary shall pre6 scribe such regulations as may be necessary to carry

7 out the purposes of this subsection.’’.

8 (b) COORDINATION WITH SECTION 4975(e)(7).—The

9 last sentence of section 4975(e)(7) (defining employee

10 stock ownership plan) is amended by inserting ‘‘, section

11 409(p),’’ after ‘‘409(n)’’.

12 (c) EXCISE TAX.—

13 (1) APPLICATION OF TAX.—Subsection (a) of

14 section 4979A (relating to tax on certain prohibited

15 allocations of employer securities) is amended—

16 (A) by striking ‘‘or’’ at the end of para17 graph (1); and

18 (B) by striking all that follows paragraph

19 (2) and inserting the following:

20 ‘‘(3) there is any allocation of employer securi21 ties which violates the provisions of section 409(p),

22 or a nonallocation year described in subsection

23 (e)(2)(C) with respect to an employee stock owner24 ship plan, or
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1 ‘‘(4) any synthetic equity is owned by a dis2 qualified person in any nonallocation year,

3 there is hereby imposed a tax on such allocation or owner4 ship equal to 50 percent of the amount involved.’’.

5 (2) LIABILITY.—Section 4979A(c) (defining li6 ability for tax) is amended to read as follows:

7 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

8 section shall be paid—

9 ‘‘(1) in the case of an allocation referred to in

10 paragraph (1) or (2) of subsection (a), by—

11 ‘‘(A) the employer sponsoring such plan, or

12 ‘‘(B) the eligible worker-owned cooperative,

13 which made the written statement described in sec14 tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as

15 the case may be), and

16 ‘‘(2) in the case of an allocation or ownership

17 referred to in paragraph (3) or (4) of subsection (a),

18 by the S corporation the stock in which was so allo19 cated or owned.’’.

20 (3) DEFINITIONS.—Section 4979A(e) (relating

21 to definitions) is amended to read as follows:

22 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur23 poses of this section—

24 ‘‘(1) DEFINITIONS.—Except as provided in

25 paragraph (2), terms used in this section have the
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1 same respective meanings as when used in sections

2 409 and 4978.

3 ‘‘(2) SPECIAL RULES RELATING TO TAX IM4 POSED BY REASON OF PARAGRAPH (3) OR (4) OF

5 SUBSECTION (a).—

6 ‘‘(A) PROHIBITED ALLOCATIONS.—The

7 amount involved with respect to any tax im8 posed by reason of subsection (a)(3) is the

9 amount allocated to the account of any person

10 in violation of section 409(p)(1).

11 ‘‘(B) SYNTHETIC EQUITY.—The amount

12 involved with respect to any tax imposed by rea13 son of subsection (a)(4) is the value of the

14 shares on which the synthetic equity is based.

15 ‘‘(C) SPECIAL RULE DURING FIRST NON16 ALLOCATION YEAR.—For purposes of subpara17 graph (A), the amount involved for the first

18 nonallocation year of any employee stock owner19 ship plan shall be determined by taking into ac20 count the total value of all the deemed-owned

21 shares of all disqualified persons with respect to

22 such plan.

23 ‘‘(D) STATUTE OF LIMITATIONS.—The

24 statutory period for the assessment of any tax

25 imposed by this section by reason of paragraph
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1 (3) or (4) of subsection (a) shall not expire be2 fore the date which is 3 years from the later

3 of—

4 ‘‘(i) the allocation or ownership re5 ferred to in such paragraph giving rise to

6 such tax, or

7 ‘‘(ii) the date on which the Secretary

8 is notified of such allocation or owner9 ship.’’.

10 (d) EFFECTIVE DATES.—

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

12 this section shall apply to plan years beginning after

13 December 31, 2001.

14 (2) EXCEPTION FOR CERTAIN PLANS.—In the

15 case of any—

16 (A) employee stock ownership plan estab17 lished after July 11, 2000; or

18 (B) employee stock ownership plan estab19 lished on or before such date if employer securi20 ties held by the plan consist of stock in a cor21 poration with respect to which an election under

22 section 1362(a) of the Internal Revenue Code

23 of 1986 is not in effect on such date,

24 the amendments made by this section shall apply to

25 plan years ending after July 11, 2000.
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1 Subtitle F—Reducing Regulatory

2 Burdens

3 SEC. 451. MODIFICATION OF TIMING OF PLAN VALUATIONS.

4 (a) IN GENERAL.—Paragraph (9) of section 412(c)

5 (relating to annual valuation) is amended to read as fol6 lows:

7 ‘‘(9) ANNUAL VALUATION.—

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

9 section, a determination of experience gains and

10 losses and a valuation of the plan’s liability

11 shall be made not less frequently than once

12 every year, except that such determination shall

13 be made more frequently to the extent required

14 in particular cases under regulations prescribed

15 by the Secretary.

16 ‘‘(B) VALUATION DATE.—

17 ‘‘(i) CURRENT YEAR.—Except as pro18 vided in clause (ii), the valuation referred

19 to in subparagraph (A) shall be made as of

20 a date within the plan year to which the

21 valuation refers or within one month prior

22 to the beginning of such year.

23 ‘‘(ii) ELECTION TO USE PRIOR YEAR

24 VALUATION.—The valuation referred to in

25 subparagraph (A) may be made as of a
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1 date within the plan year prior to the year

2 to which the valuation refers if—

3 ‘‘(I) an election is in effect under

4 this clause with respect to the plan,

5 and

6 ‘‘(II) as of such date, the value

7 of the assets of the plan are not less

8 than 125 percent of the plan’s current

9 liability (as defined in paragraph

10 (7)(B)).

11 ‘‘(iii) ADJUSTMENTS.—Information

12 under clause (ii) shall, in accordance with

13 regulations, be actuarially adjusted to re14 flect significant differences in participants.

15 ‘‘(iv) ELECTION.—An election under

16 clause (ii), once made, shall be irrevocable

17 without the consent of the Secretary.’’.

18 (b) AMENDMENT OF ERISA.—Paragraph (9) of sec19 tion 302(c) of the Employee Retirement Income Security

20 Act of 1974 (29 U.S.C. 1053(c)) is amended—

21 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

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

23 ‘‘(B)(i) Except as provided in clause (ii), the valu24 ation referred to in subparagraph (A) shall be made as
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1 of a date within the plan year to which the valuation refers

2 or within one month prior to the beginning of such year.

3 ‘‘(ii) The valuation referred to in subparagraph (A)

4 may be made as of a date within the plan year prior to

5 the year to which the valuation refers if—

6 ‘‘(I) an election is in effect under this clause

7 with respect to the plan; and

8 ‘‘(II) as of such date, the value of the assets of

9 the plan are not less than 125 percent of the plan’s

10 current liability (as defined in paragraph (7)(B)).

11 ‘‘(iii) Information under clause (ii) shall, in accord12 ance with regulations, be actuarially adjusted to reflect

13 significant differences in participants.

14 ‘‘(iv) An election under clause (ii), once made, shall

15 be irrevocable without the consent of the Secretary of the

16 Treasury.’’.

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

18 this section shall apply to plan years beginning after De19 cember 31, 2000.

20 SEC. 452. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

21 LOSS OF DIVIDEND DEDUCTION.

22 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

23 applicable dividends) is amended by striking ‘‘or’’ at the

24 end of clause (ii), by redesignating clause (iii) as clause
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1 (iv), and by inserting after clause (ii) the following new

2 clause:

3 ‘‘(iii) is, at the election of such par4 ticipants or their beneficiaries—

5 ‘‘(I) payable as provided in clause

6 (i) or (ii), or

7 ‘‘(II) paid to the plan and rein8 vested in qualifying employer securi9 ties, or’’.

10 (b) STANDARD FOR DISALLOWANCE.—Section

11 404(k)(5)(A) (relating to disallowance of deduction) is

12 amended by inserting ‘‘avoidance or’’ before ‘‘evasion’’.

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

14 this section shall apply to taxable years beginning after

15 December 31, 2000.

16 SEC. 453. REPEAL OF TRANSITION RULE RELATING TO CER17 TAIN HIGHLY COMPENSATED EMPLOYEES.

18 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

19 of the Tax Reform Act of 1986 is hereby repealed.

20 (b) EFFECTIVE DATE.—The repeal made by sub21 section (a) shall apply to plan years beginning after De22 cember 31, 2000.

23 SEC. 454. EMPLOYEES OF TAX-EXEMPT ENTITIES.

24 (a) IN GENERAL.—The Secretary of the Treasury

25 shall modify Treasury Regulations section 1.410(b)–6(g)
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1 to provide that employees of an organization described in

2 section 403(b)(1)(A)(i) of the Internal Revenue Code of

3 1986 who are eligible to make contributions under section

4 403(b) of such Code pursuant to a salary reduction agree5 ment may be treated as excludable with respect to a plan

6 under section 401(k) or (m) of such Code that is provided

7 under the same general arrangement as a plan under such

8 section 401(k), if—

9 (1) no employee of an organization described in

10 section 403(b)(1)(A)(i) of such Code is eligible to

11 participate in such section 401(k) plan or section

12 401(m) plan; and

13 (2) 95 percent of the employees who are not

14 employees of an organization described in section

15 403(b)(1)(A)(i) of such Code are eligible to partici16 pate in such plan under such section 401(k) or (m).

17 (b) EFFECTIVE DATE.—The modification required by

18 subsection (a) shall apply as of the same date set forth

19 in section 1426(b) of the Small Business Job Protection

20 Act of 1996.

21 SEC. 455. CLARIFICATION OF TREATMENT OF EMPLOYER22 PROVIDED RETIREMENT ADVICE.

23 (a) IN GENERAL.—Subsection (a) of section 132 (re24 lating to exclusion from gross income) is amended by

25 striking ‘‘or’’ at the end of paragraph (5), by striking the
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1 period at the end of paragraph (6) and inserting ‘‘, or’’,

2 and by adding at the end the following new paragraph:

3 ‘‘(7) qualified retirement planning services.’’.

4 (b) QUALIFIED RETIREMENT PLANNING SERVICES

5 DEFINED.—Section 132 is amended by redesignating sub6 section (m) as subsection (n) and by inserting after sub7 section (l) the following:

8 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV9 ICES.—

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, the term ‘qualified retirement planning serv12 ices’ means any retirement planning advice or infor13 mation provided to an employee and his spouse by

14 an employer maintaining a qualified employer plan.

15 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

16 (a)(7) shall apply in the case of highly compensated

17 employees only if such services are available on sub18 stantially the same terms to each member of the

19 group of employees normally provided education and

20 information regarding the employer’s qualified em21 ployer plan.

22 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur23 poses of this subsection, the term ‘qualified employer

24 plan’ means a plan, contract, pension, or account de25 scribed in section 219(g)(5).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 456. REPORTING SIMPLIFICATION.

5 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

6 OWNERS AND THEIR SPOUSES.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury shall modify the requirements for filing annual

9 returns with respect to one-participant retirement

10 plans to ensure that such plans with assets of

11 $250,000 or less as of the close of the plan year

12 need not file a return for that year.

13 (2) ONE-PARTICIPANT RETIREMENT PLAN DE14 FINED.—For purposes of this subsection, the term

15 ‘‘one-participant retirement plan’’ means a retire16 ment plan that—

17 (A) on the first day of the plan year—

18 (i) covered only the employer (and the

19 employer’s spouse) and the employer

20 owned the entire business (whether or not

21 incorporated); or

22 (ii) covered only one or more partners

23 (and their spouses) in a business partner24 ship (including partners in an S or C cor25 poration);
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1 (B) meets the minimum coverage require2 ments of section 410(b) of the Internal Revenue

3 Code of 1986 without being combined with any

4 other plan of the business that covers the em5 ployees of the business;

6 (C) does not provide benefits to anyone ex7 cept the employer (and the employer’s spouse)

8 or the partners (and their spouses);

9 (D) does not cover a business that is a

10 member of an affiliated service group, a con11 trolled group of corporations, or a group of

12 businesses under common control; and

13 (E) does not cover a business that leases

14 employees.

15 (3) OTHER DEFINITIONS.—Terms used in para16 graph (2) which are also used in section 414 of the

17 Internal Revenue Code of 1986 shall have the re18 spective meanings given such terms by such section.

19 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

20 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

21 of plan years beginning after December 31, 2001, the Sec22 retary of the Treasury shall provide for the filing of a sim23 plified annual return for any retirement plan which covers

24 less than 25 employees on the first day of a plan year
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1 and meets the requirements described in subparagraphs

2 (B), (D), and (E) of subsection (a)(2).

3 (c) EFFECTIVE DATE.—The provisions of this section

4 shall take effect on January 1, 2001.

5 SEC. 457. IMPROVEMENT OF EMPLOYEE PLANS COMPLI6 ANCE RESOLUTION SYSTEM.

7 The Secretary of the Treasury shall continue to up8 date and improve the Employee Plans Compliance Resolu9 tion System (or any successor program) giving special at10 tention to—

11 (1) increasing the awareness and knowledge of

12 small employers concerning the availability and use

13 of the program;

14 (2) taking into account special concerns and

15 circumstances that small employers face with respect

16 to compliance and correction of compliance failures;

17 (3) extending the duration of the self-correction

18 period under the Administrative Policy Regarding

19 Self-Correction for significant compliance failures;

20 (4) expanding the availability to correct insig21 nificant compliance failures under the Administra22 tive Policy Regarding Self-Correction during audit;

23 and

24 (5) assuring that any tax, penalty, or sanction

25 that is imposed by reason of a compliance failure is
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1 not excessive and bears a reasonable relationship to

2 the nature, extent, and severity of the failure.

3 SEC. 458. REPEAL OF THE MULTIPLE USE TEST.

4 (a) IN GENERAL.—Paragraph (9) of section 401(m)

5 is amended to read as follows:

6 ‘‘(9) REGULATIONS.—The Secretary shall pre7 scribe such regulations as may be necessary to carry

8 out the purposes of this subsection and subsection

9 (k), including regulations permitting appropriate ag10 gregation of plans and contributions.’’.

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

12 this section shall apply to years beginning after December

13 31, 2000.

14 SEC. 459. FLEXIBILITY IN NONDISCRIMINATION, COV15 ERAGE, AND LINE OF BUSINESS RULES.

16 (a) NONDISCRIMINATION.—

17 (1) IN GENERAL.—The Secretary of the Treas18 ury shall, by regulation, provide that a plan shall be

19 deemed to satisfy the requirements of section

20 401(a)(4) of the Internal Revenue Code of 1986 if

21 such plan satisfies the facts and circumstances test

22 under section 401(a)(4) of such Code, as in effect

23 before January 1, 1994, but only if—
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1 (A) the plan satisfies conditions prescribed

2 by the Secretary to appropriately limit the

3 availability of such test; and

4 (B) the plan is submitted to the Secretary

5 for a determination of whether it satisfies such

6 test.

7 Subparagraph (B) shall only apply to the extent pro8 vided by the Secretary.

9 (2) EFFECTIVE DATES.—

10 (A) REGULATIONS.—The regulation re11 quired by paragraph (1) shall apply to years be12 ginning after December 31, 2002.

13 (B) CONDITIONS OF AVAILABILITY.—Any

14 condition of availability prescribed by the Sec15 retary under paragraph (1)(A) shall not apply

16 before the first year beginning not less than

17 120 days after the date on which such condition

18 is prescribed.

19 (b) COVERAGE TEST.—

20 (1) IN GENERAL.—Section 410(b)(1) (relating

21 to minimum coverage requirements) is amended by

22 adding at the end the following:

23 ‘‘(D) In the case that the plan fails to

24 meet the requirements of subparagraphs (A),

25 (B) and (C), the plan—
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1 ‘‘(i) satisfies subparagraph (B), as in

2 effect immediately before the enactment of

3 the Tax Reform Act of 1986,

4 ‘‘(ii) is submitted to the Secretary for

5 a determination of whether it satisfies the

6 requirement described in clause (i), and

7 ‘‘(iii) satisfies conditions prescribed by

8 the Secretary by regulation that appro9 priately limit the availability of this sub10 paragraph.

11 Clause (ii) shall apply only to the extent pro12 vided by the Secretary.’’.

13 (2) EFFECTIVE DATES.—

14 (A) IN GENERAL.—The amendment made

15 by paragraph (1) shall apply to years beginning

16 after December 31, 2002.

17 (B) CONDITIONS OF AVAILABILITY.—Any

18 condition of availability prescribed by the Sec19 retary under regulations prescribed by the Sec20 retary under section 410(b)(1)(D) of the Inter21 nal Revenue Code of 1986 shall not apply be22 fore the first year beginning not less than 120

23 days after the date on which such condition is

24 prescribed.
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1 (c) LINE OF BUSINESS RULES.—The Secretary of

2 the Treasury shall, on or before December 31, 2002, mod3 ify the existing regulations issued under section 414(r) of

4 the Internal Revenue Code of 1986 in order to expand

5 (to the extent that the Secretary determines appropriate)

6 the ability of a pension plan to demonstrate compliance

7 with the line of business requirements based upon the

8 facts and circumstances surrounding the design and oper9 ation of the plan, even though the plan is unable to satisfy

10 the mechanical tests currently used to determine compli11 ance.

12 SEC. 460. EXTENSION TO ALL GOVERNMENTAL PLANS OF

13 MORATORIUM ON APPLICATION OF CERTAIN

14 NONDISCRIMINATION RULES APPLICABLE TO

15 STATE AND LOCAL PLANS.

16 (a) IN GENERAL.—

17 (1) Subparagraph (G) of section 401(a)(5) and

18 subparagraph (H) of section 401(a)(26) are each

19 amended by striking ‘‘section 414(d))’’ and all that

20 follows and inserting ‘‘section 414(d)).’’.

21 (2) Subparagraph (G) of section 401(k)(3) and

22 paragraph (2) of section 1505(d) of the Taxpayer

23 Relief Act of 1997 are each amended by striking

24 ‘‘maintained by a State or local government or polit-
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1 ical subdivision thereof (or agency or instrumentality

2 thereof)’’.

3 (b) CONFORMING AMENDMENTS.—

4 (1) The heading for subparagraph (G) of sec5 tion 401(a)(5) is amended to read as follows: ‘‘GOV6 ERNMENTAL PLANS’’.

7 (2) The heading for subparagraph (H) of sec8 tion 401(a)(26) is amended to read as follows: ‘‘EX9 CEPTION FOR GOVERNMENTAL PLANS’’.

10 (3) Subparagraph (G) of section 401(k)(3) is

11 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

12 after ‘‘(G)’’.

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

14 this section shall apply to years beginning after December

15 31, 2000.

16 SEC. 461. NOTICE AND CONSENT PERIOD REGARDING DIS17 TRIBUTIONS.

18 (a) EXPANSION OF PERIOD.—

19 (1) AMENDMENT OF INTERNAL REVENUE

20 CODE.—

21 (A) IN GENERAL.—Subparagraph (A) of

22 section 417(a)(6) is amended by striking ‘‘90-

23 day’’ and inserting ‘‘180-day’’.

24 (B) MODIFICATION OF REGULATIONS.—

25 The Secretary of the Treasury shall modify the
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1 regulations under sections 402(f), 411(a)(11),

2 and 417 of the Internal Revenue Code of 1986

3 to substitute ‘‘180 days’’ for ‘‘90 days’’ each

4 place it appears in Treasury Regulations sec5 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–

6 1(b).

7 (2) AMENDMENT OF ERISA.—Section

8 205(c)(7)(A) of the Employee Retirement Income

9 Security Act of 1974 (29 U.S.C. 1055(c)(7)(A)) is

10 amended by striking ‘‘90-day’’ and inserting ‘‘180-

11 day’’.

12 (3) EFFECTIVE DATE.—The amendments made

13 by paragraph (1)(A) and (2) and the modifications

14 required by paragraph (1)(B) shall apply to years

15 beginning after December 31, 2000.

16 (b) CONSENT REGULATION INAPPLICABLE TO CER17 TAIN DISTRIBUTIONS.—

18 (1) IN GENERAL.—The Secretary of the Treas19 ury shall modify the regulations under section

20 411(a)(11) of the Internal Revenue Code of 1986 to

21 provide that the description of a participant’s right,

22 if any, to defer receipt of a distribution shall also de23 scribe the consequences of failing to defer such re24 ceipt.
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1 (2) EFFECTIVE DATE.—The modifications re2 quired by paragraph (1) shall apply to years begin3 ning after December 31, 2000.

4 (c) DISCLOSURE OF OPTIONAL FORMS OF BENE5 FITS.—

6 (1) REGULATIONS.—

7 (A) IN GENERAL.—The Secretary of the

8 Treasury shall, not later than December 31,

9 2001, issue final regulations under section

10 417(a)(3) of the Internal Revenue Code of 1986

11 which provide that if—

12 (i) a defined benefit plan offers both

13 a qualified joint and survivor annuity and

14 a single sum optional form of benefit, and

15 (ii) the distributable amount under

16 such single sum option is less than the

17 present value (determined in accordance

18 with section 417(e) of such Code) of the

19 qualified joint and survivor annuity com20 mencing as of the same annuity starting

21 date,

22 the written explanation required by section

23 417(a)(3)(A) of such Code shall include suffi24 cient information to allow the participant to un-
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1 derstand the difference between the amount of

2 the single sum and such present value.

3 (B) UNMARRIED PARTICIPANTS.—If the

4 plan offers an unmarried participant one or

5 more annuity options that are substantially

6 more valuable than the qualified joint and sur7 vivor annuity offered by the plan, the compari8 son required under subparagraph (A) shall be

9 made between the single sum option and the

10 most valuable of the other annuity options of11 fered by the plan.

12 (C) FORM.—Any information required

13 under this paragraph shall be provided in a

14 manner calculated to be reasonably understood

15 by the average plan participant.

16 (2) EFFECTIVE DATE.—Regulations issued

17 under paragraph (1) shall only apply to distributions

18 made not earlier than 6 months after the date such

19 regulations are issued.

20 SEC. 462. ANNUAL REPORT DISSEMINATION.

21 (a) REPORT AVAILABLE THROUGH ELECTRONIC

22 MEANS.—Section 104(b)(3) of the Employee Retirement

23 Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is

24 amended by adding at the end the following new sentence:

25 ‘‘The requirement to furnish information under the pre-
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1 vious sentence shall be satisfied if the administrator makes

2 such information reasonably available through electronic

3 means or other new technology.’’.

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

5 this section shall apply to reports for years beginning after

6 December 31, 1999.

7 SEC. 463. TECHNICAL CORRECTIONS TO SAVER ACT.

8 Section 517 of the Employee Retirement Income Se9 curity Act of 1974 (29 U.S.C. 1147) is amended—

10 (1) in subsection (a), by striking ‘‘2001 and

11 2005 on or after September 1 of each year involved’’

12 and inserting ‘‘2001, 2005, and 2009 in the month

13 of September of each year involved’’;

14 (2) in subsection (b), by adding at the end the

15 following new sentence: ‘‘To effectuate the purposes

16 of this paragraph, the Secretary may enter into a co17 operative agreement, pursuant to the Federal Grant

18 and Cooperative Agreement Act of 1977 (31 U.S.C.

19 6301 et seq.), with the American Savings Education

20 Council.’’;

21 (3) in subsection (e)(2)—

22 (A) by striking ‘‘Committee on Labor and

23 Human Resources’’ in subparagraph (D) and

24 inserting ‘‘Committee on Health, Education,

25 Labor, and Pensions’’;
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1 (B) by striking subparagraph (F) and in2 serting the following:

3 ‘‘(F) the Chairman and Ranking Member

4 of the Subcommittee on Labor, Health and

5 Human Services, and Education of the Com6 mittee on Appropriations of the House of Rep7 resentatives and the Chairman and Ranking

8 Member of the Subcommittee on Labor, Health

9 and Human Services, and Education of the

10 Committee on Appropriations of the Senate;’’;

11 (C) by redesignating subparagraph (G) as

12 subparagraph (J); and

13 (D) by inserting after subparagraph (F)

14 the following new subparagraphs:

15 ‘‘(G) the Chairman and Ranking Member

16 of the Committee on Finance of the Senate;

17 ‘‘(H) the Chairman and Ranking Member

18 of the Committee on Ways and Means of the

19 House of Representatives;

20 ‘‘(I) the Chairman and Ranking Member

21 of the Subcommittee on Employer-Employee

22 Relations of the Committee on Education and

23 the Workforce of the House of Representatives;

24 and’’;

25 (4) in subsection (e)(3)(A)—
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1 (A) by striking ‘‘There shall be no more

2 than 200 additional participants.’’ and inserting

3 ‘‘The participants in the National Summit shall

4 also include additional participants appointed

5 under this subparagraph.’’;

6 (B) by striking ‘‘one-half shall be ap7 pointed by the President,’’ in clause (i) and in8 serting ‘‘not more than 100 participants shall

9 be appointed under this clause by the Presi10 dent,’’, and by striking ‘‘and’’ at the end of

11 clause (i);

12 (C) by striking ‘‘one-half shall be ap13 pointed by the elected leaders of Congress’’ in

14 clause (ii) and inserting ‘‘not more than 100

15 participants shall be appointed under this

16 clause by the elected leaders of Congress’’, and

17 by striking the period at the end of clause (ii)

18 and inserting ‘‘; and’’;

19 (D) by adding at the end the following new

20 clause:

21 ‘‘(iii) The President, in consultation

22 with the elected leaders of Congress re23 ferred to in subsection (a), may appoint

24 under this clause additional participants to

25 the National Summit. The number of such
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1 additional participants appointed under

2 this clause may not exceed the lesser of 3

3 percent of the total number of all addi4 tional participants appointed under this

5 paragraph, or 10. Such additional partici6 pants shall be appointed from persons

7 nominated by the organization referred to

8 in subsection (b)(2) which is made up of

9 private sector businesses and associations

10 partnered with Government entities to pro11 mote long term financial security in retire12 ment through savings and with which the

13 Secretary is required thereunder to consult

14 and cooperate and shall not be Federal,

15 State, or local government employees.’’;

16 (5) in subsection (e)(3)(B), by striking ‘‘Janu17 ary 31, 1998’’ in subparagraph (B) and inserting

18 ‘‘May 1, 2001, May 1, 2005, and May 1, 2009, for

19 each of the subsequent summits, respectively’’;

20 (6) in subsection (f)(1)(C), by inserting ‘‘, no

21 later than 90 days prior to the date of the com22 mencement of the National Summit,’’ after ‘‘com23 ment’’ in paragraph (1)(C);
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1 (7) in subsection (g), by inserting ‘‘, in con2 sultation with the congressional leaders specified in

3 subsection (e)(2),’’ after ‘‘report’’;

4 (8) in subsection (i)—

5 (A) by striking ‘‘beginning on or after Oc6 tober 1, 1997’’ in paragraph (1) and inserting

7 ‘‘2001, 2005, and 2009’’; and

8 (B) by adding at the end the following new

9 paragraph:

10 ‘‘(3) RECEPTION AND REPRESENTATION AU11 THORITY.—The Secretary is hereby granted recep12 tion and representation authority limited specifically

13 to the events at the National Summit. The Secretary

14 shall use any private contributions accepted in con15 nection with the National Summit prior to using

16 funds appropriated for purposes of the National

17 Summit pursuant to this paragraph.’’; and

18 (9) in subsection (k)—

19 (A) by striking ‘‘shall enter into a contract

20 on a sole-source basis’’ and inserting ‘‘may

21 enter into a contract on a sole-source basis’’;

22 and

23 (B) by striking ‘‘fiscal year 1998’’ and in24 serting ‘‘fiscal years 2001, 2005, and 2009’’.
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1 SEC. 464. STUDY OF PENSION COVERAGE.

2 Not later than 5 years after the date of the enact3 ment of this Act, the Secretary of the Treasury shall sub4 mit a report to the Committee on Ways and Means of the

5 House of Representatives and the Committee on Finance

6 of the Senate a report on the effect of the provisions of

7 the Retirement Savings and Pension Coverage Act of 2000

8 on pension coverage, including—

9 (1) any expansion of coverage for low- and mid10 dle-income workers;

11 (2) levels of pension benefits;

12 (3) quality of pension coverage;

13 (4) worker’s access to and participation in

14 plans; and

15 (5) retirement security.

16 Subtitle G—Other ERISA

17 Provisions

18 SEC. 471. MISSING PARTICIPANTS.

19 (a) IN GENERAL.—Section 4050 of the Employee Re20 tirement Income Security Act of 1974 (29 U.S.C. 1350)

21 is amended by redesignating subsection (c) as subsection

22 (e) and by inserting after subsection (b) the following new

23 subsection:

24 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

25 shall prescribe rules similar to the rules in subsection (a)
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1 for multiemployer plans covered by this title that termi2 nate under section 4041A.

3 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

4 ‘‘(1) TRANSFER TO CORPORATION.—The plan

5 administrator of a plan described in paragraph (4)

6 may elect to transfer a missing participant’s benefits

7 to the corporation upon termination of the plan.

8 ‘‘(2) INFORMATION TO THE CORPORATION.—To

9 the extent provided in regulations, the plan adminis10 trator of a plan described in paragraph (4) shall,

11 upon termination of the plan, provide the corpora12 tion information with respect to benefits of a miss13 ing participant if the plan transfers such benefits—

14 ‘‘(A) to the corporation, or

15 ‘‘(B) to an entity other than the corpora16 tion or a plan described in paragraph (4)(B)(ii).

17 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben18 efits of a missing participant were transferred to the

19 corporation under paragraph (1), the corporation

20 shall, upon location of the participant or beneficiary,

21 pay to the participant or beneficiary the amount

22 transferred (or the appropriate survivor benefit)

23 either—

24 ‘‘(A) in a single sum (plus interest), or
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1 ‘‘(B) in such other form as is specified in

2 regulations of the corporation.

3 ‘‘(4) PLANS DESCRIBED.—A plan is described

4 in this paragraph if—

5 ‘‘(A) the plan is a pension plan (within the

6 meaning of section 3(2))—

7 ‘‘(i) to which the provisions of this

8 section do not apply (without regard to

9 this subsection), and

10 ‘‘(ii) which is not a plan described in

11 paragraphs (2) through (11) of section

12 4021(b), and

13 ‘‘(B) at the time the assets are to be dis14 tributed upon termination, the plan—

15 ‘‘(i) has missing participants, and

16 ‘‘(ii) has not provided for the transfer

17 of assets to pay the benefits of all missing

18 participants to another pension plan (with19 in the meaning of section 3(2)).

20 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

21 Subsections (a)(1) and (a)(3) shall not apply to a

22 plan described in paragraph (4).’’.

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

24 this section shall apply to distributions made after final

25 regulations implementing subsections (c) and (d) of sec-
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1 tion 4050 of the Employee Retirement Income Security

2 Act of 1974 (as added by subsection (a)), respectively, are

3 prescribed.

4 SEC. 472. REDUCED PBGC PREMIUM FOR NEW PLANS OF

5 SMALL EMPLOYERS.

6 (a) IN GENERAL.—Subparagraph (A) of section

7 4006(a)(3) of the Employee Retirement Income Security

8 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—

9 (1) in clause (i), by inserting ‘‘other than a new

10 single-employer plan (as defined in subparagraph

11 (F)) maintained by a small employer (as so de12 fined),’’ after ‘‘single-employer plan,’’,

13 (2) in clause (iii), by striking the period at the

14 end and inserting ‘‘, and’’, and

15 (3) by adding at the end the following new

16 clause:

17 ‘‘(iv) in the case of a new single-employer plan

18 (as defined in subparagraph (F)) maintained by a

19 small employer (as so defined) for the plan year, $5

20 for each individual who is a participant in such plan

21 during the plan year.’’.

22 (b) DEFINITION OF NEW SINGLE-EMPLOYER

23 PLAN.—Section 4006(a)(3) of the Employee Retirement

24 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is
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1 amended by adding at the end the following new subpara2 graph:

3 ‘‘(F)(i) For purposes of this paragraph, a single-em4 ployer plan maintained by a contributing sponsor shall be

5 treated as a new single-employer plan for each of its first

6 5 plan years if, during the 36-month period ending on the

7 date of the adoption of such plan, the sponsor or any

8 member of such sponsor’s controlled group (or any prede9 cessor of either) did not establish or maintain a plan to

10 which this title applies with respect to which benefits were

11 accrued for substantially the same employees as are in the

12 new single-employer plan.

13 ‘‘(ii)(I) For purposes of this paragraph, the term

14 ‘small employer’ means an employer which on the first day

15 of any plan year has, in aggregation with all members of

16 the controlled group of such employer, 100 or fewer em17 ployees.

18 ‘‘(II) In the case of a plan maintained by two or more

19 contributing sponsors that are not part of the same con20 trolled group, the employees of all contributing sponsors

21 and controlled groups of such sponsors shall be aggregated

22 for purposes of determining whether any contributing

23 sponsor is a small employer.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to plans established after Decem3 ber 31, 2000.

4 SEC. 473. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR

5 NEW AND SMALL PLANS.

6 (a) NEW PLANS.—Subparagraph (E) of section

7 4006(a)(3) of the Employee Retirement Income Security

8 Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by

9 adding at the end the following new clause:

10 ‘‘(v) In the case of a new defined benefit plan, the

11 amount determined under clause (ii) for any plan year

12 shall be an amount equal to the product of the amount

13 determined under clause (ii) and the applicable percent14 age. For purposes of this clause, the term ‘applicable per15 centage’ means—

16 ‘‘(I) 0 percent, for the first plan year.

17 ‘‘(II) 20 percent, for the second plan year.

18 ‘‘(III) 40 percent, for the third plan year.

19 ‘‘(IV) 60 percent, for the fourth plan year.

20 ‘‘(V) 80 percent, for the fifth plan year.

21 For purposes of this clause, a defined benefit plan (as de22 fined in section 3(35)) maintained by a contributing spon23 sor shall be treated as a new defined benefit plan for each

24 of its first 5 plan years if, during the 36-month period

25 ending on the date of the adoption of the plan, the sponsor
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1 and each member of any controlled group including the

2 sponsor (or any predecessor of either) did not establish

3 or maintain a plan to which this title applies with respect

4 to which benefits were accrued for substantially the same

5 employees as are in the new plan.’’.

6 (b) SMALL PLANS.—Paragraph (3) of section

7 4006(a) of the Employee Retirement Income Security Act

8 of 1974 (29 U.S.C. 1306(a)), as amended by section

9 472(b), is amended—

10 (1) by striking ‘‘The’’ in subparagraph (E)(i)

11 and inserting ‘‘Except as provided in subparagraph

12 (G), the’’, and

13 (2) by inserting after subparagraph (F) the fol14 lowing new subparagraph:

15 ‘‘(G)(i) In the case of an employer who has 25 or

16 fewer employees on the first day of the plan year, the addi17 tional premium determined under subparagraph (E) for

18 each participant shall not exceed $5 multiplied by the

19 number of participants in the plan as of the close of the

20 preceding plan year.

21 ‘‘(ii) For purposes of clause (i), whether an employer

22 has 25 or fewer employees on the first day of the plan

23 year is determined taking into consideration all of the em24 ployees of all members of the contributing sponsor’s con25 trolled group. In the case of a plan maintained by two
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1 or more contributing sponsors, the employees of all con2 tributing sponsors and their controlled groups shall be ag3 gregated for purposes of determining whether the 25-or4 fewer-employees limitation has been satisfied.’’.

5 (c) EFFECTIVE DATES.—

6 (1) SUBSECTION (a).—The amendments made

7 by subsection (a) shall apply to plans established

8 after December 31, 2000.

9 (2) SUBSECTION (b).—The amendments made

10 by subsection (b) shall apply to plan years beginning

11 after December 31, 2000.

12 SEC. 474. AUTHORIZATION FOR PBGC TO PAY INTEREST ON

13 PREMIUM OVERPAYMENT REFUNDS.

14 (a) IN GENERAL.—Section 4007(b) of the Employ15 ment Retirement Income Security Act of 1974 (29 U.S.C.

16 1307(b)) is amended—

17 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’,

18 and

19 (2) by inserting at the end the following new

20 paragraph:

21 ‘‘(2) The corporation is authorized to pay, subject to

22 regulations prescribed by the corporation, interest on the

23 amount of any overpayment of premium refunded to a des24 ignated payor. Interest under this paragraph shall be cal25 culated at the same rate and in the same manner as inter-
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1 est is calculated for underpayments under paragraph

2 (1).’’.

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

4 subsection (a) shall apply to interest accruing for periods

5 beginning not earlier than the date of the enactment of

6 this Act.

7 SEC. 475. SUBSTANTIAL OWNER BENEFITS IN TERMINATED

8 PLANS.

9 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

10 Section 4022(b)(5) of the Employee Retirement Income

11 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended

12 to read as follows:

13 ‘‘(5)(A) For purposes of this paragraph, the term

14 ‘majority owner’ means an individual who, at any time

15 during the 60-month period ending on the date the deter16 mination is being made—

17 ‘‘(i) owns the entire interest in an unincor18 porated trade or business,

19 ‘‘(ii) in the case of a partnership, is a partner

20 who owns, directly or indirectly, 50 percent or more

21 of either the capital interest or the profits interest

22 in such partnership, or

23 ‘‘(iii) in the case of a corporation, owns, directly

24 or indirectly, 50 percent or more in value of either
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1 the voting stock of that corporation or all the stock

2 of that corporation.

3 For purposes of clause (iii), the constructive ownership

4 rules of section 1563(e) of the Internal Revenue Code of

5 1986 shall apply (determined without regard to section

6 1563(e)(3)(C)).

7 ‘‘(B) In the case of a participant who is a majority

8 owner, the amount of benefits guaranteed under this sec9 tion shall equal the product of—

10 ‘‘(i) a fraction (not to exceed 1) the numerator

11 of which is the number of years from the later of the

12 effective date or the adoption date of the plan to the

13 termination date, and the denominator of which is

14 10, and

15 ‘‘(ii) the amount of benefits that would be guar16 anteed under this section if the participant were not

17 a majority owner.’’.

18 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

19 (1) Section 4044(a)(4)(B) of the Employee Re20 tirement Income Security Act of 1974 (29 U.S.C.

21 1344(a)(4)(B)) is amended by striking ‘‘section

22 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.

23 (2) Section 4044(b) of such Act (29 U.S.C.

24 1344(b)) is amended—
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1 (A) by striking ‘‘(5)’’ in paragraph (2) and

2 inserting ‘‘(4), (5),’’, and

3 (B) by redesignating paragraphs (3)

4 through (6) as paragraphs (4) through (7), re5 spectively, and by inserting after paragraph (2)

6 the following new paragraph:

7 ‘‘(3) If assets available for allocation under

8 paragraph (4) of subsection (a) are insufficient to

9 satisfy in full the benefits of all individuals who are

10 described in that paragraph, the assets shall be allo11 cated first to benefits described in subparagraph (A)

12 of that paragraph. Any remaining assets shall then

13 be allocated to benefits described in subparagraph

14 (B) of that paragraph. If assets allocated to such

15 subparagraph (B) are insufficient to satisfy in full

16 the benefits described in that subparagraph, the as17 sets shall be allocated pro rata among individuals on

18 the basis of the present value (as of the termination

19 date) of their respective benefits described in that

20 subparagraph.’’.

21 (c) CONFORMING AMENDMENTS.—

22 (1) Section 4021 of the Employee Retirement

23 Income Security Act of 1974 (29 U.S.C. 1321) is

24 amended—
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1 (A) in subsection (b)(9), by striking ‘‘as

2 defined in section 4022(b)(6)’’, and

3 (B) by adding at the end the following new

4 subsection:

5 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub6 stantial owner’ means an individual who, at any time dur7 ing the 60-month period ending on the date the determina8 tion is being made—

9 ‘‘(1) owns the entire interest in an unincor10 porated trade or business,

11 ‘‘(2) in the case of a partnership, is a partner

12 who owns, directly or indirectly, more than 10 per13 cent of either the capital interest or the profits inter14 est in such partnership, or

15 ‘‘(3) in the case of a corporation, owns, directly

16 or indirectly, more than 10 percent in value of either

17 the voting stock of that corporation or all the stock

18 of that corporation.

19 For purposes of paragraph (3), the constructive ownership

20 rules of section 1563(e) of the Internal Revenue Code of

21 1986 shall apply (determined without regard to section

22 1563(e)(3)(C)).’’.

23 (2) Section 4043(c)(7) of such Act (29 U.S.C.

24 1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’

25 and inserting ‘‘section 4021(d)’’.
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1 (d) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to plan terminations—

5 (A) under section 4041(c) of the Employee

6 Retirement Income Security Act of 1974 (29

7 U.S.C. 1341(c)) with respect to which notices

8 of intent to terminate are provided under sec9 tion 4041(a)(2) of such Act (29 U.S.C.

10 1341(a)(2)) after December 31, 2000, and

11 (B) under section 4042 of such Act (29

12 U.S.C. 1342) with respect to which proceedings

13 are instituted by the corporation after such

14 date.

15 (2) CONFORMING AMENDMENTS.—The amend16 ments made by subsection (c) shall take effect on

17 January 1, 2001.

18 SEC. 476. MULTIEMPLOYER PLAN BENEFITS GUARANTEE.

19 (a) IN GENERAL.—Section 4022A(c) of the Employee

20 Retirement Income Security Act of 1974 (29 U.S.C.

21 1322A(c)) is amended—

22 (1) by striking ‘‘$5’’ each place it appears in

23 paragraph (1) and inserting ‘‘$11’’,

24 (2) by striking ‘‘$15’’ in paragraph (1) and in25 serting ‘‘$33’’, and
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1 (3) by striking paragraphs (2), (5), and (6) and

2 by redesignating paragraphs (3) and (4) as para3 graphs (2) and (3), respectively.

4 (b) CONFORMING AMENDMENT.—Section 4244(e)(4)

5 of such Act (29 U.S.C. 1424(e)(4)) is amended by striking

6 ‘‘and without regard to section 4022A(c)(2)’’.

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

8 this section shall apply to benefits payable after the date

9 of the enactment of this Act, except that such amendments

10 shall not apply to any multiemployer plan that has re11 ceived financial assistance (within the meaning of section

12 4261 of the Employee Retirement Income Security Act of

13 1974) within the 1-year period ending on the date of the

14 enactment of this Act.

15 SEC. 477. CIVIL PENALTIES FOR BREACH OF FIDUCIARY

16 RESPONSIBILITY.

17 (a) IMPOSITION AND AMOUNT OF PENALTY MADE

18 DISCRETIONARY.—Section 502(l)(1) of the Employee Re19 tirement Income Security Act of 1974 (29 U.S.C.

20 1132(l)(1)) is amended—

21 (1) by striking ‘‘shall’’ and inserting ‘‘may’’,

22 and

23 (2) by striking ‘‘equal to’’ and inserting ‘‘not

24 greater than’’.
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1 (b) APPLICABLE RECOVERY AMOUNT.—Section

2 502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended

3 to read as follows:

4 ‘‘(2) For purposes of paragraph (1), the term ‘appli5 cable recovery amount’ means any amount which is recov6 ered from any fiduciary or other person (or from any other

7 person on behalf of any such fiduciary or other person)

8 with respect to a breach or violation described in para9 graph (1) on or after the 30th day following receipt by

10 such fiduciary or other person of written notice from the

11 Secretary of the violation, whether paid voluntarily or by

12 order of a court in a judicial proceeding instituted by the

13 Secretary under subsection (a)(2) or (a)(5). The Secretary

14 may, in the Secretary’s sole discretion, extend the 30-day

15 period described in the preceding sentence.’’.

16 (c) OTHER RULES.—Section 502(l) of the Employee

17 Retirement Income Security Act of 1974 (29 U.S.C.

18 1132(l)) is amended by adding at the end the following

19 new paragraph:

20 ‘‘(5) A person shall be jointly and severally liable for

21 the penalty described in paragraph (1) to the same extent

22 that such person is jointly and severally liable for the ap23 plicable recovery amount on which the penalty is based.

24 ‘‘(6) No penalty shall be assessed under this sub25 section unless the person against whom the penalty is as-
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1 sessed is given notice and opportunity for a hearing with

2 respect to the violation and applicable recovery amount.’’.

3 (d) EFFECTIVE DATES.—

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

5 this section shall apply to any breach of fiduciary re6 sponsibility or other violation of part 4 of subtitle B

7 of title I of the Employee Retirement Income Secu8 rity Act of 1974 occurring on or after the date of

9 enactment of this Act.

10 (2) TRANSITION RULE.—In applying the

11 amendment made by subsection (b) (relating to ap12 plicable recovery amount), a breach or other viola13 tion occurring before the date of enactment of this

14 Act which continues after the 180th day after such

15 date (and which may have been discontinued at any

16 time during its existence) shall be treated as having

17 occurred after such date of enactment.

18 SEC. 478. BENEFIT SUSPENSION NOTICE.

19 (a) MODIFICATION OF REGULATION.—The Secretary

20 of Labor shall modify the regulation under section

21 203(a)(3)(B) of the Employee Retirement Income Secu22 rity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide

23 that the notification required by such regulation—
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1 (1) in the case of an employee who returns to

2 work for a former employer after commencement of

3 payment of benefits under the plan shall—

4 (A) be made during the first calendar

5 month or payroll period in which the plan with6 holds payments, and

7 (B) if a reduced rate of future benefit ac8 cruals will apply to the returning employee (as

9 of the first date of participation in the plan by

10 the employee after returning to work), include

11 a statement that the rate of future benefit ac12 cruals will be reduced, and

13 (2) in the case of any employee who is not de14 scribed in paragraph (1)—

15 (A) may be included in the summary plan

16 description for the plan furnished in accordance

17 with section 104(b) of such Act (29 U.S.C.

18 1024(b)), rather than in a separate notice, and

19 (B) need not include a copy of the relevant

20 plan provisions.

21 (b) EFFECTIVE DATE.—The modification made

22 under this section shall apply to plan years beginning after

23 December 31, 2000.
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1 Subtitle H—Plan Amendments

2 SEC. 481. PROVISIONS RELATING TO PLAN AMENDMENTS.

3 (a) IN GENERAL.—If this section applies to any plan

4 or contract amendment—

5 (1) such plan or contract shall be treated as

6 being operated in accordance with the terms of the

7 plan during the period described in subsection

8 (b)(2)(A); and

9 (2) except as provided by the Secretary of the

10 Treasury, such plan shall not fail to meet the re11 quirements of section 411(d)(6) of the Internal Rev12 enue Code of 1986 or section 204(g) of the Em13 ployee Retirement Income Security Act of 1974 by

14 reason of such amendment.

15 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

16 (1) IN GENERAL.—This section shall apply to

17 any amendment to any plan or annuity contract

18 which is made—

19 (A) pursuant to any amendment made by

20 this title, or pursuant to any regulation issued

21 under this title; and

22 (B) on or before the last day of the first

23 plan year beginning on or after January 1,

24 2003.
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1 In the case of a governmental plan (as defined in

2 section 414(d) of the Internal Revenue Code of

3 1986), this paragraph shall be applied by sub4 stituting ‘‘2005’’ for ‘‘2003’’.

5 (2) CONDITIONS.—This section shall not apply

6 to any amendment unless—

7 (A) during the period—

8 (i) beginning on the date the legisla9 tive or regulatory amendment described in

10 paragraph (1)(A) takes effect (or in the

11 case of a plan or contract amendment not

12 required by such legislative or regulatory

13 amendment, the effective date specified by

14 the plan); and

15 (ii) ending on the date described in

16 paragraph (1)(B) (or, if earlier, the date

17 the plan or contract amendment is adopt18 ed),

19 the plan or contract is operated as if such plan

20 or contract amendment were in effect; and

21 (B) such plan or contract amendment ap22 plies retroactively for such period.
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1 TITLE V—SCHOOL

2 CONSTRUCTION PROVISIONS

3 SEC. 501. ADDITIONAL INCREASE IN ARBITRAGE REBATE

4 EXCEPTION FOR GOVERNMENTAL BONDS

5 USED TO FINANCE EDUCATIONAL FACILI6 TIES.

7 (a) IN GENERAL.—Section 148(f )(4)(D)(vii) (relat8 ing to increase in exception for bonds financing public

9 school capital expenditures) is amended by striking

10 ‘‘$5,000,000’’ the second place it appears and inserting

11 ‘‘$10,000,000’’.

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

13 subsection (a) shall apply to obligations issued after De14 cember 31, 2000.

15 SEC. 502. MODIFICATION OF ARBITRAGE REBATE RULES

16 APPLICABLE TO PUBLIC SCHOOL CONSTRUC17 TION BONDS.

18 (a) IN GENERAL.—Subparagraph (C) of section

19 148(f )(4) is amended by adding at the end the following

20 new clause:

21 ‘‘(xviii) 4-YEAR SPENDING REQUIRE22 MENT FOR PUBLIC SCHOOL CONSTRUCTION

23 ISSUE.—

24 ‘‘(I) IN GENERAL.—In the case

25 of a public school construction issue,
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1 the spending requirements of clause

2 (ii) shall be treated as met if at least

3 10 percent of the available construc4 tion proceeds of the construction issue

5 are spent for the governmental pur6 poses of the issue within the 1-year

7 period beginning on the date the

8 bonds are issued, 30 percent of such

9 proceeds are spent for such purposes

10 within the 2-year period beginning on

11 such date, 60 percent of such pro12 ceeds are spent for such purposes

13 within the 3-year period beginning on

14 such date, and 100 percent of such

15 proceeds are spent for such purposes

16 within the 4-year period beginning on

17 such date.

18 ‘‘(II) PUBLIC SCHOOL CON19 STRUCTION ISSUE.—For purposes of

20 this clause, the term ‘public school

21 construction issue’ means any con22 struction issue if no bond which is

23 part of such issue is a private activity

24 bond and all of the available construc25 tion proceeds of such issue are to be
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1 used for the construction (as defined

2 in clause (iv)) of public school facili3 ties to provide education or training

4 below the postsecondary level or for

5 the acquisition of land that is func6 tionally related and subordinate to

7 such facilities.

8 ‘‘(III) OTHER RULES TO

9 APPLY.—Rules similar to the rules of

10 the preceding provisions of this sub11 paragraph which apply to clause (ii)

12 also apply to this clause.’’.

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

14 this section shall apply to obligations issued after Decem15 ber 31, 2000.

16 SEC. 503. MODIFICATION OF SPECIAL ARBITRAGE RULE

17 FOR CERTAIN FUNDS.

18 (a) IN GENERAL.—Paragraph (1) of section 648 of

19 the Tax Reform Act of 1984 is amended to read as fol20 lows:

21 ‘‘(1) such securities or obligations are held in a

22 fund—

23 ‘‘(A) which, except to the extent of the in24 vestment earnings on such securities or obliga25 tions, cannot be used, under State constitu-
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1 tional or statutory restrictions continuously in

2 effect since October 9, 1969, through the date

3 of issue of the bond issue, to pay debt service

4 on the bond issue or to finance the facilities

5 that are to be financed with the proceeds of the

6 bonds, or

7 ‘‘(B) the annual distributions from which

8 cannot exceed 7 percent of the average fair

9 market value of the assets held in such fund ex10 cept to the extent distributions are necessary to

11 pay debt service on the bond issue,’’.

12 (b) CONFORMING AMENDMENT.—Paragraph (3) of

13 such section is amended by striking ‘‘the investment earn14 ings of’’ and inserting ‘‘distributions from’’.

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

16 this section shall take effect on January 1, 2001.

17 SEC. 504. TREATMENT OF QUALIFIED PUBLIC EDU18 CATIONAL FACILITY BONDS AS EXEMPT FA19 CILITY BONDS.

20 (a) TREATMENT AS EXEMPT FACILITY BOND.—Sub21 section (a) of section 142 (relating to exempt facility

22 bond) is amended by striking ‘‘or’’ at the end of paragraph

23 (11), by striking the period at the end of paragraph (12)

24 and inserting ‘‘, or’’, and by adding at the end the fol25 lowing:
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1 ‘‘(13) qualified public educational facilities.’’

2 (b) QUALIFIED PUBLIC EDUCATIONAL FACILI3 TIES.—Section 142 (relating to exempt facility bond) is

4 amended by adding at the end the following new sub5 section:

6 ‘‘(k) QUALIFIED PUBLIC EDUCATIONAL FACILI7 TIES.—

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

9 (a)(13), the term ‘qualified public educational facil10 ity’ means any school facility which is—

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

12 a public secondary school, and

13 ‘‘(B) owned by a private, for-profit cor14 poration pursuant to a public-private partner15 ship agreement with a State or local edu16 cational agency described in paragraph (2).

17 ‘‘(2) PUBLIC-PRIVATE PARTNERSHIP AGREE18 MENT DESCRIBED.—A public-private partnership

19 agreement is described in this paragraph if it is an

20 agreement—

21 ‘‘(A) under which the corporation agrees—

22 ‘‘(i) to do 1 or more of the following:

23 construct, rehabilitate, refurbish, or equip

24 a school facility, and
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1 ‘‘(ii) at the end of the term of the

2 agreement, to transfer the school facility to

3 such agency for no additional consider4 ation, and

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

6 term of the issue to be used to provide the

7 school facility.

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

9 subsection, the term ‘school facility’ means—

10 ‘‘(A) school buildings,

11 ‘‘(B) functionally related and subordinate

12 facilities and land with respect to such build13 ings, including any stadium or other facility pri14 marily used for school events, and

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

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

17 use in the facility.

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

19 subsection, the terms ‘elementary school’ and ‘sec20 ondary school’ have the meanings given such terms

21 by section 14101 of the Elementary and Secondary

22 Education Act of 1965 (20 U.S.C. 8801), as in ef23 fect on the date of the enactment of this subsection.

24 ‘‘(5) ANNUAL AGGREGATE FACE AMOUNT OF

25 TAX-EXEMPT FINANCING.—
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1 ‘‘(A) IN GENERAL.—An issue shall not be

2 treated as an issue described in subsection

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

4 issued by the State pursuant thereto (when

5 added to the aggregate face amount of bonds

6 previously so issued during the calendar year)

7 exceeds an amount equal to the greater of—

8 ‘‘(i) $10 multiplied by the State popu9 lation, or

10 ‘‘(ii) $5,000,000.

11 ‘‘(B) ALLOCATION RULES.—

12 ‘‘(i) IN GENERAL.—Except as other13 wise provided in this subparagraph, the

14 State may allocate in a calendar year the

15 amount described in subparagraph (A) for

16 such year in such manner as the State de17 termines appropriate.

18 ‘‘(ii) RULES FOR CARRYFORWARD OF

19 UNUSED AMOUNT.—With respect to any

20 calendar year, a State may make an elec21 tion under rules similar to the rules of sec22 tion 146(f), except that the sole

23 carryforward purpose with respect to such

24 election is the issuance of exempt facility

25 bonds described in section 142(a)(13).’’
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1 (c) EXEMPTION FROM GENERAL STATE VOLUME

2 CAPS.—Paragraph (3) of section 146(g) (relating to ex3 ception for certain bonds) is amended—

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

5 or (13)’’, and

6 (2) by striking ‘‘and environmental enhance7 ments of hydroelectric generating facilities’’ and in8 serting ‘‘environmental enhancements of hydro9 electric generating facilities, and qualified public

10 educational facilities’’.

11 (d) EXEMPTION FROM LIMITATION ON USE FOR

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

13 rules not to apply to mortgage revenue bonds, qualified

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

15 amended by adding at the end the following new para16 graph:

17 ‘‘(3) EXEMPT FACILITY BONDS FOR QUALIFIED

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

19 apply to any exempt facility bond issued as part of

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

21 qualified public-private schools).’’

22 (e) CONFORMING AMENDMENT.—The heading of sec23 tion 147(h) is amended by striking ‘‘MORTGAGE REVENUE

24 BONDS, QUALIFIED STUDENT LOAN BONDS, AND QUALI-
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1 FIED 501(c)(3) BONDS’’ in the heading and inserting

2 ‘‘CERTAIN BONDS’’.

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

4 this section shall apply to obligations issued after Decem5 ber 31, 2000.

6 SEC. 505. EXPANSION OF QUALIFIED ZONE ACADEMY BOND

7 PROGRAM.

8 (a) IN GENERAL.—So much of part IV of subchapter

9 U of chapter 1 (relating to incentives for education zones)

10 as precedes subsection (d) of section 1397E is amended

11 to read as follows:

12 ‘‘PART IV—EDUCATION BOND PROVISIONS

‘‘Sec. 1397E. Credit to holders of qualified zone academy bonds.

‘‘Sec. 1397F. Qualified zone academy bond defined.

‘‘Sec. 1397G. Authorization of additional qualified zone academy

bonds without targeting and private partnership requirements.

13 ‘‘SEC. 1397E. CREDIT TO HOLDERS OF QUALIFIED ZONE

14 ACADEMY BONDS.

15 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli16 gible taxpayer who holds a qualified zone academy bond

17 on a credit allowance date of such bond which occurs dur18 ing the taxable year, there shall be allowed as a credit

19 against the tax imposed by this chapter for such taxable

20 year an amount equal to the sum of the credits determined

21 under subsection (b) with respect to credit allowance dates

22 during such year on which the taxpayer holds such bond.
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1 ‘‘(b) AMOUNT OF CREDIT.—

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

3 determined under this subsection with respect to any

4 credit allowance date for a qualified zone academy

5 bond is 25 percent of the annual credit determined

6 with respect to such bond.

7 ‘‘(2) ANNUAL CREDIT.—The annual credit de8 termined with respect to any qualified zone academy

9 bond is the product of—

10 ‘‘(A) the applicable credit rate, multiplied

11 by

12 ‘‘(B) the outstanding face amount of the

13 bond.

14 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes

15 of paragraph (1), the applicable credit rate with re16 spect to an issue is the rate equal to an average

17 market yield (as of the day before the day that the

18 issue is sold) on outstanding long-term corporate

19 debt obligations (determined under regulations pre20 scribed by the Secretary).

21 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE22 DEMPTION.—In the case of a bond which is issued

23 during the 3-month period ending on a credit allow24 ance date, the amount of the credit determined

25 under this subsection with respect to such credit al-
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1 lowance date shall be a ratable portion of the credit

2 otherwise determined based on the portion of the 3-

3 month period during which the bond is outstanding.

4 A similar rule shall apply when the bond is re5 deemed.

6 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—

7 ‘‘(1) IN GENERAL.—The credit allowed under

8 subsection (a) for any taxable year shall not exceed

9 the excess of—

10 ‘‘(A) the sum of the regular tax liability

11 (as defined in section 26(b)) plus the tax im12 posed by section 55, over

13 ‘‘(B) the sum of the credits allowable

14 under part IV of subchapter A (other than sub15 part C thereof, relating to refundable credits).

16 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the

17 credit allowable under subsection (a) exceeds the

18 limitation imposed by paragraph (1) for such taxable

19 year, such excess shall be carried to the succeeding

20 taxable year and added to the credit allowable under

21 subsection (a) for such taxable year.

22 ‘‘(d) DEFINITIONS.—For purposes of this section—

23 ‘‘(1) QUALIFIED ZONE ACADEMY BOND.—The

24 term ‘qualified zone academy bond’ has the meaning

25 given to such term by section 1397F; except that
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1 such term shall also include any bond treated as a

2 qualified zone academy bond under section 1397G.

3 Such term shall not include any bond which is part

4 of an issue unless such issue meets the requirements

5 of subsection (g).

6 ‘‘(2) CREDIT ALLOWANCE DATE.—The term

7 ‘credit allowance date’ means—

8 ‘‘(A) March 15,

9 ‘‘(B) June 15,

10 ‘‘(C) September 15, and

11 ‘‘(D) December 15.

12 Such term includes the last day on which the bond

13 is outstanding.

14 ‘‘(3) ELIGIBLE TAXPAYER.—The term ‘eligible

15 taxpayer’ means—

16 ‘‘(A) a bank (within the meaning of section

17 581),

18 ‘‘(B) an insurance company to which sub19 chapter L applies,

20 ‘‘(C) a corporation actively engaged in the

21 business of lending money, and

22 ‘‘(D) any other C corporation.

23 ‘‘(e) OTHER DEFINITIONS.—For purposes of this

24 subchapter—
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1 ‘‘(1) LOCAL EDUCATIONAL AGENCY.—The term

2 ‘local educational agency’ has the meaning given to

3 such term by section 14101 of the Elementary and

4 Secondary Education Act of 1965. Such term in5 cludes the local educational agency that serves the

6 District of Columbia, but does not include any other

7 State agency.

8 ‘‘(2) BOND.—The term ‘bond’ includes any ob9 ligation.

10 ‘‘(3) STATE.—The term ‘State’ includes the

11 District of Columbia and any possession of the

12 United States.

13 ‘‘(4) PUBLIC SCHOOL FACILITY.—The term

14 ‘public school facility’ shall not include—

15 ‘‘(A) any stadium or other facility pri16 marily used for athletic contests or exhibitions

17 or other events for which admission is charged

18 to the general public, or

19 ‘‘(B) any facility which is not owned by a

20 State or local government or any agency or in21 strumentality of a State or local government.

22 ‘‘(5) PERMITTED PURPOSE.—The term ‘per23 mitted purpose’ means—

24 ‘‘(A) in the case of a bond which is a quali25 fied zone academy bond without regard to sec-
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1 tion 1397G, any qualified purpose (as defined

2 in section 1397F(a)(4)), and

3 ‘‘(B) in the case of a bond which is a

4 qualified zone academy bond solely by reason of

5 section 1397G, the purpose described in section

6 1397G(a)(2).

7 ‘‘(f) SPECIAL RULES.—

8 ‘‘(1) ONLY CERTAIN REFINANCINGS PER9 MITTED.—A refinancing of indebtedness (other than

10 a qualified zone academy bond) shall be treated as

11 a qualified zone academy bond only if such indebted12 ness was originally incurred by the issuer—

13 ‘‘(A) after the date of the enactment of

14 this section,

15 ‘‘(B) for a term of not more than 1 year,

16 ‘‘(C) to finance an expenditure which is a

17 permitted purpose to be financed by a qualified

18 zone academy bond, and

19 ‘‘(D) in anticipation of being refinanced

20 with proceeds of a qualified zone academy bond.

21 ‘‘(2) SINKING FUNDS.—Rules similar to the

22 rules under section 148 on replacement proceeds

23 shall apply for purposes of this section. Such re24 placement proceeds shall be invested in noninterest-
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1 bearing State and Local Government Series obliga2 tions issued by the Secretary.

3 ‘‘(g) SPECIAL RULES RELATING TO ARBITRAGE.—

4 ‘‘(1) IN GENERAL.—Except as otherwise pro5 vided in this subsection, an issue shall be treated as

6 meeting the requirements of this subsection if the

7 issue meets the spending requirements of subclause

8 (I) of section 148(f)(4)(C)(xviii).

9 ‘‘(2) RULES REGARDING COMPLIANCE DURING

10 4-YEAR PERIOD.—If an issue fails to meet such

11 spending requirements during the 4-year period be12 ginning on the date of issuance, the issuer shall pay

13 to the United States amounts which would be re14 quired to be paid to the United States under section

15 148(f)(2) were such issue required to meet the re16 quirements of such section. Rules similar to the

17 rules of clause (iii) of section 148(f)(4)(C) shall

18 apply for purposes of the preceding sentence.

19 ‘‘(3) RULES REGARDING CONTINUING COMPLI20 ANCE AFTER 4-YEAR DETERMINATION.—If at least

21 95 percent of the proceeds of the issue is not ex22 pended for 1 or more permitted purposes within the

23 4-year period beginning on the date of issuance, an

24 issue shall be treated as continuing to meet the re25 quirements of this subsection if the issuer uses all
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1 unspent proceeds of the issue to redeem bonds of the

2 issue within 90 days after the end of such 4-year pe3 riod.

4 ‘‘(4) SMALL ISSUER EXCEPTION.—Paragraph

5 (1) shall not apply to an issue issued by a govern6 mental unit with general taxing powers if the re7 quirements of paragraphs (2) and (3) of section

8 148(f) would be treated as met by reason of sub9 paragraph (D) of section 148(f)(4) if such issue

10 were treated as a tax-exempt bond and taken into

11 account under such subparagraph, and such issue

12 shall be so treated for purposes of determining

13 whether such requirements are met with respect to

14 tax-exempt bonds.

15 ‘‘(h) RECAPTURE OF PORTION OF CREDIT WHERE

16 CESSATION OF COMPLIANCE.—

17 ‘‘(1) IN GENERAL.—If any bond which when

18 issued purported to be a qualified zone academy

19 bond ceases to be a qualified zone academy bond,

20 the issuer shall pay to the United States (at the

21 time required by the Secretary) an amount equal to

22 the sum of—

23 ‘‘(A) the aggregate of the credits allowable

24 under this section with respect to such bond

25 (determined without regard to subsection (c))
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1 for taxable years ending during the calendar

2 year in which such cessation occurs and the 2

3 preceding calendar years, and

4 ‘‘(B) interest at the underpayment rate

5 under section 6621 on the amount determined

6 under subparagraph (A) for each calendar year

7 for the period beginning on the first day of

8 such calendar year.

9 ‘‘(2) FAILURE TO PAY.—If the issuer fails to

10 timely pay the amount required by paragraph (1)

11 with respect to such bond, the tax imposed by this

12 chapter on each holder of any such bond which is

13 part of such issue shall be increased (for the taxable

14 year of the holder in which such cessation occurs) by

15 the aggregate decrease in the credits allowed under

16 this section to such holder for taxable years begin17 ning in such 3 calendar years which would have re18 sulted solely from denying any credit under this sec19 tion with respect to such issue for such taxable

20 years.

21 ‘‘(3) SPECIAL RULES.—

22 ‘‘(A) TAX BENEFIT RULE.—The tax for

23 the taxable year shall be increased under para24 graph (2) only with respect to credits allowed

25 by reason of this section which were used to re-
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1 duce tax liability. In the case of credits not so

2 used to reduce tax liability, the carryforwards

3 and carrybacks under section 39 shall be appro4 priately adjusted.

5 ‘‘(B) NO CREDITS AGAINST TAX.—Any in6 crease in tax under paragraph (2) shall not be

7 treated as a tax imposed by this chapter for

8 purposes of determining —

9 ‘‘(i) the amount of any credit allow10 able under this part, or

11 ‘‘(ii) the amount of the tax imposed

12 by section 55.

13 ‘‘(i) CREDIT INCLUDED IN GROSS INCOME.—Gross

14 income includes the amount of the credit allowed to the

15 taxpayer under this section (determined without regard to

16 subsection (c)) and the amount so included shall be treat17 ed as interest income.

18 ‘‘(j) TREATMENT FOR ESTIMATED TAX PURPOSES.—

19 Solely for purposes of sections 6654 and 6655, the credit

20 allowed by this section to a taxpayer by reason of holding

21 a qualified zone academy bond on a credit allowance date

22 shall be treated as if it were a payment of estimated tax

23 made by the taxpayer on such date.
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1 ‘‘(k) REPORTING.—Issuers of qualified zone academy

2 bonds shall submit reports similar to the reports required

3 under section 149(e).

4 ‘‘(l) TERMINATION.—This section shall not apply to

5 any bond issued after December 31, 2005.

6 ‘‘SEC. 1397F. QUALIFIED ZONE ACADEMY BONDS.’’

7 (b) EXTENSION OF QUALIFIED ZONE ACADEMY

8 BOND PROVISIONS.—

9 (1) Subsections (d) and (e) of section 1397E

10 (as in effect on the day before the date of the enact11 ment of this Act) are hereby moved and inserted

12 after the section heading for section 1397F (as

13 added by subsection (a)) and redesignated as sub14 sections (a) and (b).

15 (2) Subsection (b) of section 1397F (as so re16 designated) is amended to read as follows:

17 ‘‘(b) LIMITATIONS ON AMOUNT OF BONDS DES18 IGNATED.—

19 ‘‘(1) IN GENERAL.—There is a national zone

20 academy bond limitation for each calendar year.

21 Such limitation is—

22 ‘‘(A) $400,000,000 for 1998,

23 ‘‘(B) $400,000,000 for 1999,

24 ‘‘(C) $400,000,000 for 2000,

25 ‘‘(D) $400,000,000 for 2001,
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1 ‘‘(E) $400,000,000 for 2002,

2 ‘‘(F) $400,000,000 for 2003, and

3 ‘‘(G) except as provided in paragraph (3),

4 zero after 2003.

5 ‘‘(2) ALLOCATION OF LIMITATION.—

6 ‘‘(A) IN GENERAL.—The national zone

7 academy bond limitation for a calendar year

8 shall be allocated by the Secretary among the

9 States on the basis of their respective popu10 lations of individuals below the poverty line (as

11 defined by the Office of Management and

12 Budget). The limitation amount allocated to a

13 State under the preceding sentence shall be al14 located by the State to qualified zone academies

15 within such State.

16 ‘‘(B) DESIGNATION SUBJECT TO LIMITA17 TION AMOUNT.—The maximum aggregate face

18 amount of bonds issued during any calendar

19 year which may be designated under subsection

20 (a) with respect to any qualified zone academy

21 shall not exceed the limitation amount allocated

22 to such academy under subparagraph (A) for

23 such calendar year.

24 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If

25 for any calendar year—
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1 ‘‘(A) the limitation amount under this sub2 section for any State, exceeds

3 ‘‘(B) the amount of bonds issued during

4 such year which are designated under sub5 section (a) (or the corresponding provisions of

6 prior law) with respect to qualified zone acad7 emies within such State,

8 the limitation amount under this subsection for such

9 State for the following calendar year shall be in10 creased by the amount of such excess. Any

11 carryforward of a limitation amount may be carried

12 only to the first 2 years (3 years for carryforwards

13 from 1998 or 1999) following the unused limitation

14 year. For purposes of the preceding sentence, a limi15 tation amount shall be treated as used on a first-in

16 first-out basis.’’

17 (3) Subsection (a) of section 1397F (as so re18 designated) is amended—

19 (A) by striking ‘‘For purposes of this sec20 tion—’’ in the material preceding paragraph (1)

21 and inserting ‘‘For purposes of this part—’’,

22 (B) by striking ‘‘an eligible local’’ in para23 graphs (1)(A) and (3)(A) (as redesignated by

24 this paragraph) and inserting ‘‘a local’’,
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1 (C) by striking ‘‘the maximum term per2 mitted under paragraph (3)’’ in paragraph

3 (1)(D) and inserting ‘‘15 years’’, and

4 (D) by striking paragraphs (3) and (6)

5 and by redesignating paragraphs (4) and (5) as

6 paragraphs (3) and (4), respectively.

7 (4) Paragraph (3) of section 1397F(a) (as so

8 redesignated) is amended—

9 (A) by striking ‘‘(4)’’ and all that follows

10 through ‘‘The term’’ and inserting the fol11 lowing:

12 ‘‘(4) QUALIFIED ZONE ACADEMY.—The term’’,

13 (B) by striking subparagraph (B),

14 (C) by redesignating clauses (i) through

15 (iv) as subparagraphs (A) through (D), respec16 tively, and

17 (D) by redesignating subclauses (I) and

18 (II) of subparagraph (D) (as so redesignated)

19 as clauses (i) and (ii), respectively.

20 (c) AUTHORIZATION OF ADDITIONAL QUALIFIED

21 ZONE ACADEMY BONDS WITHOUT TARGETING AND PRI22 VATE PARTNERSHIP REQUIREMENTS.—Part IV of sub23 chapter U of chapter 1 is amended by adding at the end

24 the following new section:
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1 ‘‘SEC. 1397G. AUTHORIZATION OF ADDITIONAL QUALIFIED

2 ZONE ACADEMY BONDS WITHOUT TAR3 GETING AND PRIVATE PARTNERSHIP RE4 QUIREMENTS.

5 ‘‘(a) IN GENERAL.—For purposes of this part, the

6 term ‘qualified zone academy bond’ also includes any bond

7 issued by a State or local government as part of an issue

8 if—

9 ‘‘(1) the issuer designates such bond for pur10 pose of this section, and

11 ‘‘(2) the requirements of subparagraphs (A),

12 (B), and (D) of paragraph (1) of section 1397F(a)

13 are met with respect to such issue, determined—

14 ‘‘(A) by treating any public school facility

15 as being a qualified zone academy ,and

16 ‘‘(B) by applying paragraph (4) thereof as

17 if the only qualified purpose were constructing,

18 rehabilitating, or repairing a public school facil19 ity or acquiring the land which is functionally

20 related and subordinate to the public school fa21 cility which is to be constructed with part of the

22 proceeds of such issue.

23 ‘‘(b) LIMITATION ON AMOUNT OF BONDS DES24 IGNATED.—The maximum aggregate face amount of

25 bonds issued during any calendar year which may be des26 ignated under subsection (a) by any issuer shall not exceed
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1 the limitation amount allocated under subsection (d) for

2 such calendar year to such issuer.

3 ‘‘(c) NATIONAL LIMITATION ON AMOUNT OF BONDS

4 DESIGNATED.—There is a national additional qualified

5 zone academy bond limitation for each calendar year. Such

6 limitation is—

7 ‘‘(1) $5,000,000,000 for 2001,

8 ‘‘(2) $5,000,000,000 for 2002, and

9 ‘‘(3) $5,000,000,000 for 2003,

10 ‘‘(4) except as provided in subsection (e), zero

11 after 2003.

12 ‘‘(d) LIMITATION ALLOCATED AMONG STATES.—

13 ‘‘(1) IN GENERAL.—

14 ‘‘(A) ALLOCATION ON THE BASIS OF POPU15 LATION.—50 percent of the limitation applica16 ble under subsection (c) for any calendar year

17 shall be allocated before such calendar year by

18 the Secretary among the States on the basis of

19 their respective populations.

20 ‘‘(B) ALLOCATION ON THE BASIS OF POV21 ERTY.—50 percent of the limitation applicable

22 under subsection (c) for any calendar year shall

23 be allocated before such calendar year by the

24 Secretary among the States on the basis of

25 their respective populations of individuals below
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1 the poverty line (as defined by the Office of

2 Management and Budget).

3 ‘‘(C) MINIMUM ALLOCATIONS TO SMALL

4 STATES.—The Secretary shall adjust the alloca5 tions under this subsection for any calendar

6 year for each State to the extent necessary to

7 ensure that the amount allocated to such State

8 under this subsection for such year is not less

9 than $25,000,000.

10 ‘‘(D) USE OF CENSUS DATA.—Determina11 tions under this subsection shall be made on the

12 basis of the most recently available census data.

13 ‘‘(2) ALLOCATION WITHIN THE STATE.—

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

15 provided in subparagraph (B), the limitation al16 located to any State may be allocated among

17 governmental units in such State having au18 thority to issue such bonds as provided by State

19 law (or, in absence of State law, by the Gov20 ernor of such State).

21 ‘‘(B) MINIMUM ALLOCATIONS TO LARGE

22 LOCAL EDUCATIONAL AGENCIES.—In no event

23 may the limitation for any calendar year allo24 cated to any large local educational agency in a

25 State be less than the sum of—
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1 ‘‘(i) an amount which bears the same

2 ratio to 50 percent of such limitation as

3 the population within the area under the

4 jurisdiction of such agency bears to the

5 population of the entire State, and

6 ‘‘(ii) an amount which bears the same

7 ratio to 50 percent of such limitation as

8 the population within the area under the

9 jurisdiction of such agency below the pov10 erty line (as defined by the Office of Man11 agement and Budget) bears to such popu12 lation of the entire State.

13 ‘‘(3) ALLOCATIONS FOR INDIAN SCHOOLS.—In

14 addition to the amounts otherwise allocated under

15 this subsection, $200,000,000 (in the aggregate for

16 calendar years 2001, 2002, and 2003) shall be allo17 cated by the Secretary (after consultation with the

18 Secretary of the Interior) for purposes of the con19 struction, rehabilitation, and repair of schools oper20 ated by or on behalf of an Indian tribal government

21 (within the meaning of section 7871). In the case of

22 amounts allocated under the preceding sentence, In23 dian tribal governments (as so defined) shall be

24 treated as qualified issuers for purposes of this part.

25 ‘‘(4) REQUIRED STATE ALLOCATION PLANS.—
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1 ‘‘(A) IN GENERAL.—Notwithstanding any

2 other provision of this section, the limitation for

3 any State shall be zero unless the limitation is

4 allocated within such State pursuant to a quali5 fied allocation plan.

6 ‘‘(B) QUALIFIED ALLOCATION PLAN.—For

7 purposes of subparagraph (A), the term ‘quali8 fied allocation plan’ means any plan which—

9 ‘‘(i) identifies the State’s needs for

10 public school facilities (including descrip11 tions of the capacity of public schools in

12 the State to house projected enrollments),

13 particular financing difficulties being en14 countered by local school districts in the

15 State, and health and safety problems at

16 existing facilities, and

17 ‘‘(ii) describes how the State will allo18 cate to local educational agencies, or other19 wise use, its allocation under this section

20 to address the needs identified under

21 clause (i), including a description of how it

22 will—

23 ‘‘(I) ensure that the needs of

24 rural, urban, and suburban areas will

25 be recognized,
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1 ‘‘(II) ensure that the needs of lo2 calities with the greatest needs, as

3 demonstrated by inadequate school fa4 cilities coupled with low level of re5 sources, will be met, and

6 ‘‘(III) give priority to the role of

7 charter schools in achieving State

8 educational objectives.

9 ‘‘(C) APPLICATION OF PARAGRAPH.—This

10 paragraph shall apply to allocations after more

11 than 6 months after the date of the enactment

12 of this paragraph.

13 ‘‘(5) LARGE LOCAL EDUCATIONAL AGENCY.—

14 For purposes of this section, the term ‘large local

15 educational agency’ means, with respect to a cal16 endar year, any local educational agency with at

17 least 40,000 children who have attained age 5 but

18 not age 18 for the most recent fiscal year ending be19 fore such calendar year.

20 ‘‘(e) CARRYOVER OF UNUSED LIMITATION.—

21 ‘‘(1) IN GENERAL.—If for any calendar year—

22 ‘‘(A) the amount allocated under sub23 section (d) to any State, exceeds
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1 ‘‘(B) the amount of bonds issued during

2 such year which are designated under sub3 section (a) pursuant to such allocation,

4 the limitation amount under such subsection for

5 such State for the following calendar year shall be

6 increased by the amount of such excess.

7 ‘‘(2) 2-YEAR CARRYFORWARD.—Any

8 carryforward of a limitation amount may be carried

9 only to the first 2 years following the unused limita10 tion year. For purposes of the preceding sentence, a

11 limitation amount shall be treated as used on a first12 in first-out basis.

13 ‘‘(3) ALLOCATIONS FOR INDIAN SCHOOLS.—

14 Rules similar to paragraphs (1) and (2) shall apply

15 to the amounts allocated under subsection (d)(3); ex16 cept that 2003 shall be treated as the unused limita17 tion year.’’

18 (d) REPORTING.—Subsection (d) of section 6049 (re19 lating to returns regarding payments of interest) is

20 amended by adding at the end the following new para21 graph:

22 ‘‘(8) REPORTING OF CREDIT ON QUALIFIED

23 ZONE ACADEMY BONDS.—

24 ‘‘(A) IN GENERAL.—For purposes of sub25 section (a), the term ‘interest’ includes amounts
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1 includible in gross income under section

2 1397E(i) and such amounts shall be treated as

3 paid on the credit allowance date (as defined in

4 section 1397E(d)(2)).

5 ‘‘(B) REPORTING TO CORPORATIONS,

6 ETC.—Except as otherwise provided in regula7 tions, in the case of any interest described in

8 subparagraph (A) of this paragraph, subsection

9 (b)(4) of this section shall be applied without

10 regard to subparagraphs (A), (H), (I), (J), (K),

11 and (L)(i).

12 ‘‘(C) REGULATORY AUTHORITY.—The Sec13 retary may prescribe such regulations as are

14 necessary or appropriate to carry out the pur15 poses of this paragraph, including regulations

16 which require more frequent or more detailed

17 reporting.’’

18 (e) CONFORMING AMENDMENTS.—

19 (1) Subsections (f), (g), and (h) of section

20 1397E (as in effect on the day before the date of

21 the enactment of this Act) are hereby repealed.

22 (2) Subchapter U of chapter 1 of such Code is

23 amended by redesignating section 1397F (as in ef24 fect on the day before the date of the enactment of

25 this Act) as section 1397H.
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1 (3) The table of parts of subchapter U of chap2 ter 1 of such Code is amended by striking the item

3 relating to part IV and inserting the following item:

‘‘Part IV. Education bond provisions.’’

4 (f) EFFECTIVE DATES.—

5 (1) IN GENERAL.—Except as otherwise pro6 vided in this subsection, the amendments made by

7 this section shall apply to obligations issued after

8 December 31, 2000.

9 (2) MODIFICATION OF RESTRICTION ON ZONE

10 ACADEMY BOND HOLDERS.—In the case of bonds to

11 which section 1397E of the Internal Revenue Code

12 of 1986 (as in effect before the date of the enact13 ment of this Act) applies, the limitation of such sec14 tion to corporations actively engaged in the business

15 of lending money shall not apply after the date of

16 the enactment of this Act.

17 TITLE VI—COMMUNITY

18 REVITALIZATION

19 Subtitle A—Tax Incentives for

20 Renewal Communities

21 SEC. 601. DESIGNATION OF AND TAX INCENTIVES FOR RE22 NEWAL COMMUNITIES.

23 (a) IN GENERAL.—Chapter 1 is amended by adding

24 at the end the following new subchapter:
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1 ‘‘Subchapter X—Renewal Communities

‘‘Part I. Designation.

‘‘Part II. Renewal community capital gain; renewal community

business.

‘‘Part III. Additional incentives.

2 ‘‘PART I—DESIGNATION

‘‘Sec. 1400E. Designation of renewal communities.

3 ‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

4 ‘‘(a) DESIGNATION.—

5 ‘‘(1) DEFINITIONS.—For purposes of this title,

6 the term ‘renewal community’ means any area—

7 ‘‘(A) which is nominated by 1 or more

8 local governments and the State or States in

9 which it is located for designation as a renewal

10 community (hereafter in this section referred to

11 as a ‘nominated area’), and

12 ‘‘(B) which the Secretary of Housing and

13 Urban Development designates as a renewal

14 community, after consultation with—

15 ‘‘(i) the Secretaries of Agriculture,

16 Commerce, Labor, and the Treasury; the

17 Director of the Office of Management and

18 Budget, and the Administrator of the

19 Small Business Administration, and

20 ‘‘(ii) in the case of an area on an In21 dian reservation, the Secretary of the Inte22 rior.
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1 ‘‘(2) NUMBER OF DESIGNATIONS.—

2 ‘‘(A) IN GENERAL.—Not more than 40

3 nominated areas may be designated as renewal

4 communities.

5 ‘‘(B) MINIMUM DESIGNATION IN RURAL

6 AREAS.—Of the areas designated under para7 graph (1), at least 12 must be areas—

8 ‘‘(i) which are within a local govern9 ment jurisdiction or jurisdictions with a

10 population of less than 50,000,

11 ‘‘(ii) which are outside of a metropoli12 tan statistical area (within the meaning of

13 section 143(k)(2)(B)), or

14 ‘‘(iii) which are determined by the

15 Secretary of Housing and Urban Develop16 ment, after consultation with the Secretary

17 of Commerce, to be rural areas.

18 One of such 12 areas shall be an area within

19 Mississippi, to be designated by the State of

20 Mississippi, that includes at least 1 census tract

21 within Madison County, Mississippi.

22 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

23 OF POVERTY, ETC.—

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

25 provided in this section, the nominated areas
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1 designated as renewal communities under this

2 subsection shall be those nominated areas with

3 the highest average ranking with respect to the

4 criteria described in subparagraphs (B), (C),

5 and (D) of subsection (c)(3). For purposes of

6 the preceding sentence, an area shall be ranked

7 within each such criterion on the basis of the

8 amount by which the area exceeds such cri9 terion, with the area which exceeds such cri10 terion by the greatest amount given the highest

11 ranking.

12 ‘‘(B) EXCEPTION WHERE INADEQUATE

13 COURSE OF ACTION, ETC.—An area shall not be

14 designated under subparagraph (A) if the Sec15 retary of Housing and Urban Development de16 termines that the course of action described in

17 subsection (d)(2) with respect to such area is

18 inadequate.

19 ‘‘(C) PREFERENCE FOR ENTERPRISE COM20 MUNITIES AND EMPOWERMENT ZONES.—With

21 respect to the first 20 designations made under

22 this section, a preference shall be provided to

23 those nominated areas which are enterprise

24 communities or empowerment zones (and are
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1 otherwise eligible for designation under this sec2 tion).

3 ‘‘(4) LIMITATION ON DESIGNATIONS.—

4 ‘‘(A) PUBLICATION OF REGULATIONS.—

5 The Secretary of Housing and Urban Develop6 ment shall prescribe by regulation no later than

7 4 months after the date of the enactment of

8 this section, after consultation with the officials

9 described in paragraph (1)(B)—

10 ‘‘(i) the procedures for nominating an

11 area under paragraph (1)(A),

12 ‘‘(ii) the parameters relating to the

13 size and population characteristics of a re14 newal community, and

15 ‘‘(iii) the manner in which nominated

16 areas will be evaluated based on the cri17 teria specified in subsection (d).

18 ‘‘(B) TIME LIMITATIONS.—The Secretary

19 of Housing and Urban Development may des20 ignate nominated areas as renewal communities

21 only during the period beginning on the first

22 day of the first month following the month in

23 which the regulations described in subpara24 graph (A) are prescribed and ending on Decem25 ber 31, 2001.
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1 ‘‘(C) PROCEDURAL RULES.—The Secretary

2 of Housing and Urban Development shall not

3 make any designation of a nominated area as a

4 renewal community under paragraph (2)

5 unless—

6 ‘‘(i) the local governments and the

7 States in which the nominated area is lo8 cated have the authority—

9 ‘‘(I) to nominate such area for

10 designation as a renewal community,

11 ‘‘(II) to make the State and local

12 commitments described in subsection

13 (d), and

14 ‘‘(III) to provide assurances sat15 isfactory to the Secretary of Housing

16 and Urban Development that such

17 commitments will be fulfilled,

18 ‘‘(ii) a nomination regarding such

19 area is submitted in such a manner and in

20 such form, and contains such information,

21 as the Secretary of Housing and Urban

22 Development shall by regulation prescribe,

23 and

24 ‘‘(iii) the Secretary of Housing and

25 Urban Development determines that any
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1 information furnished is reasonably accu2 rate.

3 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES4 ERVATIONS.—For purposes of this subchapter, in

5 the case of a nominated area on an Indian reserva6 tion, the reservation governing body (as determined

7 by the Secretary of the Interior) shall be treated as

8 being both the State and local governments with re9 spect to such area.

10 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF11 FECT.—

12 ‘‘(1) IN GENERAL.—Any designation of an area

13 as a renewal community shall remain in effect dur14 ing the period beginning on January 1, 2002, and

15 ending on the earliest of—

16 ‘‘(A) December 31, 2009,

17 ‘‘(B) the termination date designated by

18 the State and local governments in their nomi19 nation, or

20 ‘‘(C) the date the Secretary of Housing

21 and Urban Development revokes such designa22 tion.

23 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec24 retary of Housing and Urban Development may re25 voke the designation under this section of an area if
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1 such Secretary determines that the local government

2 or the State in which the area is located—

3 ‘‘(A) has modified the boundaries of the

4 area, or

5 ‘‘(B) is not complying substantially with,

6 or fails to make progress in achieving, the State

7 or local commitments, respectively, described in

8 subsection (d).

9 ‘‘(3) EARLIER TERMINATION OF CERTAIN BEN10 EFITS IF EARLIER TERMINATION OF DESIGNA11 TION.—If the designation of an area as a renewal

12 community terminates before December 31, 2009,

13 the day after the date of such termination shall be

14 substituted for ‘January 1, 2010’ each place it ap15 pears in sections 1400F and 1400J with respect to

16 such area.

17 ‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS.—

18 ‘‘(1) IN GENERAL.—The Secretary of Housing

19 and Urban Development may designate a nominated

20 area as a renewal community under subsection (a)

21 only if the area meets the requirements of para22 graphs (2) and (3) of this subsection.

23 ‘‘(2) AREA REQUIREMENTS.—A nominated area

24 meets the requirements of this paragraph if—
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1 ‘‘(A) the area is within the jurisdiction of

2 one or more local governments,

3 ‘‘(B) the boundary of the area is contin4 uous, and

5 ‘‘(C) the area—

6 ‘‘(i) has a population of not more than

7 200,000 and at least—

8 ‘‘(I) 4,000 if any portion of such

9 area (other than a rural area de10 scribed in subsection (a)(2)(B)(i)) is

11 located within a metropolitan statis12 tical area (within the meaning of sec13 tion 143(k)(2)(B)) which has a popu14 lation of 50,000 or greater, or

15 ‘‘(II) 1,000 in any other case, or

16 ‘‘(ii) is entirely within an Indian res17 ervation (as determined by the Secretary of

18 the Interior).

19 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi20 nated area meets the requirements of this paragraph

21 if the State and the local governments in which it

22 is located certify in writing (and the Secretary of

23 Housing and Urban Development, after such review

24 of supporting data as he deems appropriate, accepts

25 such certification) that—
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1 ‘‘(A) the area is one of pervasive poverty,

2 unemployment, and general distress;

3 ‘‘(B) the unemployment rate in the area,

4 as determined by the most recent available

data, was at least 11 5 ⁄2 times the national unem6 ployment rate for the period to which such data

7 relate;

8 ‘‘(C) the poverty rate for each population

9 census tract within the nominated area is at

10 least 20 percent; and

11 ‘‘(D) in the case of an urban area, at least

12 70 percent of the households living in the area

13 have incomes below 80 percent of the median

14 income of households within the jurisdiction of

15 the local government (determined in the same

16 manner as under section 119(b)(2) of the

17 Housing and Community Development Act of

18 1974).

19 ‘‘(4) CONSIDERATION OF OTHER FACTORS.—

20 The Secretary of Housing and Urban Development,

21 in selecting any nominated area for designation as

22 a renewal community under this section—

23 ‘‘(A) shall take into account—

24 ‘‘(i) the extent to which such area has

25 a high incidence of crime, or
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1 ‘‘(ii) if such area has census tracts

2 identified in the May 12, 1998, report of

3 the General Accounting Office regarding

4 the identification of economically distressed

5 areas, and

6 ‘‘(B) with respect to 1 of the areas to be

7 designated under subsection (a)(2)(B), may, in

8 lieu of any criteria described in paragraph (3),

9 take into account the existence of outmigration

10 from the area.

11 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT12 MENTS.—

13 ‘‘(1) IN GENERAL.—The Secretary of Housing

14 and Urban Development may designate any nomi15 nated area as a renewal community under subsection

16 (a) only if—

17 ‘‘(A) the local government and the State in

18 which the area is located agree in writing that,

19 during any period during which the area is a

20 renewal community, such governments will fol21 low a specified course of action which meets the

22 requirements of paragraph (2) and is designed

23 to reduce the various burdens borne by employ24 ers or employees in such area, and
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1 ‘‘(B) the economic growth promotion re2 quirements of paragraph (3) are met.

3 ‘‘(2) COURSE OF ACTION.—

4 ‘‘(A) IN GENERAL.—A course of action

5 meets the requirements of this paragraph if

6 such course of action is a written document,

7 signed by a State (or local government) and

8 neighborhood organizations, which evidences a

9 partnership between such State or government

10 and community-based organizations and which

11 commits each signatory to specific and measur12 able goals, actions, and timetables. Such course

13 of action shall include at least 4 of the fol14 lowing:

15 ‘‘(i) A reduction of tax rates or fees

16 applying within the renewal community.

17 ‘‘(ii) An increase in the level of effi18 ciency of local services within the renewal

19 community.

20 ‘‘(iii) Crime reduction strategies, such

21 as crime prevention (including the provi22 sion of crime prevention services by non23 governmental entities).

24 ‘‘(iv) Actions to reduce, remove, sim25 plify, or streamline governmental require-
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1 ments applying within the renewal commu2 nity.

3 ‘‘(v) Involvement in the program by

4 private entities, organizations, neighbor5 hood organizations, and community

6 groups, particularly those in the renewal

7 community, including a commitment from

8 such private entities to provide jobs and

9 job training for, and technical, financial, or

10 other assistance to, employers, employees,

11 and residents from the renewal community.

12 ‘‘(vi) The gift (or sale at below fair

13 market value) of surplus real property

14 (such as land, homes, and commercial or

15 industrial structures) in the renewal com16 munity to neighborhood organizations,

17 community development corporations, or

18 private companies.

19 ‘‘(B) RECOGNITION OF PAST EFFORTS.—

20 For purposes of this section, in evaluating the

21 course of action agreed to by any State or local

22 government, the Secretary of Housing and

23 Urban Development shall take into account the

24 past efforts of such State or local government
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1 in reducing the various burdens borne by em2 ployers and employees in the area involved.

3 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE4 MENTS.—The economic growth promotion require5 ments of this paragraph are met with respect to a

6 nominated area if the local government and the

7 State in which such area is located certify in writing

8 that such government and State (respectively) have

9 repealed or reduced, will not enforce, or will reduce

10 within the nominated area at least 4 of the fol11 lowing:

12 ‘‘(A) Licensing requirements for occupa13 tions that do not ordinarily require a profes14 sional degree.

15 ‘‘(B) Zoning restrictions on home-based

16 businesses which do not create a public nui17 sance.

18 ‘‘(C) Permit requirements for street ven19 dors who do not create a public nuisance.

20 ‘‘(D) Zoning or other restrictions that im21 pede the formation of schools or child care cen22 ters.

23 ‘‘(E) Franchises or other restrictions on

24 competition for businesses providing public
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1 services, including taxicabs, jitneys, cable tele2 vision, or trash hauling.

3 This paragraph shall not apply to the extent that

4 such regulation of businesses and occupations is nec5 essary for and well-tailored to the protection of

6 health and safety.

7 ‘‘(e) COORDINATION WITH TREATMENT OF EM8 POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—

9 For purposes of this title, the designation under section

10 1391 of any area as an empowerment zone or enterprise

11 community shall cease to be in effect as of the date that

12 the designation of any portion of such area as a renewal

13 community takes effect.

14 ‘‘(f ) DEFINITIONS AND SPECIAL RULES.—For pur15 poses of this subchapter—

16 ‘‘(1) GOVERNMENTS.—If more than one govern17 ment seeks to nominate an area as a renewal com18 munity, any reference to, or requirement of, this sec19 tion shall apply to all such governments.

20 ‘‘(2) LOCAL GOVERNMENT.—The term ‘local

21 government’ means—

22 ‘‘(A) any county, city, town, township, par23 ish, village, or other general purpose political

24 subdivision of a State, and
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1 ‘‘(B) any combination of political subdivi2 sions described in subparagraph (A) recognized

3 by the Secretary of Housing and Urban Devel4 opment.

5 ‘‘(3) APPLICATION OF RULES RELATING TO

6 CENSUS TRACTS.—The rules of section 1392(b)(4)

7 shall apply.

8 ‘‘(4) CENSUS DATA.—Population and poverty

9 rate shall be determined by using 1990 census data.

10 ‘‘(g) PRIORITY FOR DISTRICT OF COLUMBIA NOMI11 NATED AREA.—For purposes of this subchapter—

12 ‘‘(1) IN GENERAL.—One nominated area within

13 the District of Columbia shall be treated for pur14 poses of subsection (a)(3) as having the highest av15 erage with respect to the criteria described in sub16 paragraphs (B), (C), and (D) of subsection (c)(3).

17 ‘‘(2) DATE OF DESIGNATION.—Notwithstanding

18 subsection (b)(1), the designation of a nominated

19 area within the District of Columbia as a renewal

20 community shall take effect on January 1, 2003.

21 ‘‘(3) NOMINATION.—The District of Columbia

22 shall be treated as being both a State and local gov23 ernment with respect to such area.
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1 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;

2 RENEWAL COMMUNITY BUSINESS

‘‘Sec. 1400F. Renewal community capital gain.

‘‘Sec. 1400G. Renewal community business defined.

3 ‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

4 ‘‘(a) GENERAL RULE.—Gross income does not in5 clude any qualified capital gain from the sale or exchange

6 of a qualified community asset held for more than 5 years.

7 ‘‘(b) QUALIFIED COMMUNITY ASSET.—For purposes

8 of this section—

9 ‘‘(1) IN GENERAL.—The term ‘qualified com10 munity asset’ means—

11 ‘‘(A) any qualified community stock,

12 ‘‘(B) any qualified community partnership

13 interest, and

14 ‘‘(C) any qualified community business

15 property.

16 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

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

18 subparagraph (B), the term ‘qualified commu19 nity stock’ means any stock in a domestic cor20 poration if—

21 ‘‘(i) such stock is acquired by the tax22 payer after December 31, 2001, and before

23 January 1, 2010, at its original issue (di-
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1 rectly or through an underwriter) from the

2 corporation solely in exchange for cash,

3 ‘‘(ii) as of the time such stock was

4 issued, such corporation was a renewal

5 community business (or, in the case of a

6 new corporation, such corporation was

7 being organized for purposes of being a re8 newal community business), and

9 ‘‘(iii) during substantially all of the

10 taxpayer’s holding period for such stock,

11 such corporation qualified as a renewal

12 community business.

13 ‘‘(B) REDEMPTIONS.—A rule similar to

14 the rule of section 1202(c)(3) shall apply for

15 purposes of this paragraph.

16 ‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN17 TEREST.—The term ‘qualified community partner18 ship interest’ means any capital or profits interest in

19 a domestic partnership if—

20 ‘‘(A) such interest is acquired by the tax21 payer after December 31, 2001, and before

22 January 1, 2010, from the partnership solely in

23 exchange for cash,

24 ‘‘(B) as of the time such interest was ac25 quired, such partnership was a renewal commu-
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1 nity business (or, in the case of a new partner2 ship, such partnership was being organized for

3 purposes of being a renewal community busi4 ness), and

5 ‘‘(C) during substantially all of the tax6 payer’s holding period for such interest, such

7 partnership qualified as a renewal community

8 business.

9 A rule similar to the rule of paragraph (2)(B) shall

10 apply for purposes of this paragraph.

11 ‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP12 ERTY.—

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

14 community business property’ means tangible

15 property if—

16 ‘‘(i) such property was acquired by

17 the taxpayer by purchase (as defined in

18 section 179(d)(2)) after December 31,

19 2001, and before January 1, 2010,

20 ‘‘(ii) the original use of such property

21 in the renewal community commences with

22 the taxpayer, and

23 ‘‘(iii) during substantially all of the

24 taxpayer’s holding period for such prop25 erty, substantially all of the use of such
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1 property was in a renewal community busi2 ness of the taxpayer.

3 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM4 PROVEMENTS.—The requirements of clauses (i)

5 and (ii) of subparagraph (A) shall be treated as

6 satisfied with respect to—

7 ‘‘(i) property which is substantially

8 improved by the taxpayer before January

9 1, 2010, and

10 ‘‘(ii) any land on which such property

11 is located.

12 The determination of whether a property is sub13 stantially improved shall be made under clause

14 (ii) of section 1400B(b)(4)(B), except that ‘De15 cember 31, 2001’ shall be substituted for ‘De16 cember 31, 1997’ in such clause.

17 ‘‘(c) QUALIFIED CAPITAL GAIN.—For purposes of

18 this section—

19 ‘‘(1) IN GENERAL.—Except as otherwise pro20 vided in this subsection, the term ‘qualified capital

21 gain‘ means any gain recognized on the sale or ex22 change of—

23 ‘‘(A) a capital asset, or

24 ‘‘(B) property used in the trade or busi25 ness (as defined in section 1231(b)).
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1 ‘‘(2) GAIN BEFORE 2002 OR AFTER 2014 NOT

2 QUALIFIED.—The term ‘qualified capital gain’ shall

3 not include any gain attributable to periods before

4 January 1, 2002, or after December 31, 2014.

5 ‘‘(3) CERTAIN RULES TO APPLY.—Rules similar

6 to the rules of paragraphs (3), (4), and (5) of sec7 tion 1400B(e) shall apply for purposes of this sub8 section.

9 ‘‘(d) CERTAIN RULES TO APPLY.—For purposes of

10 this section, rules similar to the rules of paragraphs (5),

11 (6), and (7) of subsection (b), and subsections (f ) and

12 (g), of section 1400B shall apply; except that for such pur13 poses section 1400B(g)(2) shall be applied by substituting

14 ‘January 1, 2002’ for ‘January 1, 1998’ and ‘December

15 31, 2014’ for ‘December 31, 2007’.

16 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

17 such regulations as may be appropriate to carry out the

18 purposes of this section, including regulations to prevent

19 the avoidance of the purposes of this section.

20 ‘‘SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.

21 ‘‘For purposes of this subchapter, the term ‘renewal

22 community business’ means any entity or proprietorship

23 which would be a qualified business entity or qualified pro24 prietorship under section 1397C if references to renewal
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1 communities were substituted for references to empower2 ment zones in such section.

3 ‘‘PART III—ADDITIONAL INCENTIVES

‘‘Sec. 1400H. Renewal community employment credit.

‘‘Sec. 1400I. Commercial revitalization deduction.

‘‘Sec. 1400J. Increase in expensing under section 179.

4 ‘‘SEC. 1400H. RENEWAL COMMUNITY EMPLOYMENT CREDIT.

5 ‘‘(a) IN GENERAL.—Subject to the modification in

6 subsection (b), a renewal community shall be treated as

7 an empowerment zone for purposes of section 1396 with

8 respect to wages paid or incurred after December 31,

9 2001.

10 ‘‘(b) MODIFICATION.—In applying section 1396 with

11 respect to renewal communities—

12 ‘‘(1) the applicable percentage shall be 15 per13 cent, and

14 ‘‘(2) subsection (c) thereof shall be applied by

15 substituting ‘$10,000’ for ‘$15,000’ each place it ap16 pears.

17 ‘‘SEC. 1400I. COMMERCIAL REVITALIZATION DEDUCTION.

18 ‘‘(a) GENERAL RULE.—At the election of the tax19 payer, either—

20 ‘‘(1) one-half of any qualified revitalization ex21 penditures chargeable to capital account with respect

22 to any qualified revitalization building shall be allow23 able as a deduction for the taxable year in which the

24 building is placed in service, or
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1 ‘‘(2) a deduction for all such expenditures shall

2 be allowable ratably over the 120-month period be3 ginning with the month in which the building is

4 placed in service.

5 ‘‘(b) QUALIFIED REVITALIZATION BUILDINGS AND

6 EXPENDITURES.—For purposes of this section—

7 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

8 The term ‘qualified revitalization building’ means

9 any building (and its structural components) if—

10 ‘‘(A) the building is placed in service by

11 the taxpayer in a renewal community and the

12 original use of the building begins with the tax13 payer, or

14 ‘‘(B) in the case of such building not de15 scribed in subparagraph (A), such building—

16 ‘‘(i) is substantially rehabilitated

17 (within the meaning of section

18 47(c)(1)(C)) by the taxpayer, and

19 ‘‘(ii) is placed in service by the tax20 payer after the rehabilitation in a renewal

21 community.

22 ‘‘(2) QUALIFIED REVITALIZATION EXPENDI23 TURE.—

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

25 revitalization expenditure’ means any amount
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1 properly chargeable to capital account for prop2 erty for which depreciation is allowable under

3 section 168 (without regard to this section) and

4 which is—

5 ‘‘(i) nonresidential real property (as

6 defined in section 168(e)), or

7 ‘‘(ii) section 1250 property (as defined

8 in section 1250(c)) which is functionally

9 related and subordinate to property de10 scribed in clause (i).

11 ‘‘(B) CERTAIN EXPENDITURES NOT IN12 CLUDED.—

13 ‘‘(i) ACQUISITION COST.—In the case

14 of a building described in paragraph

15 (1)(B), the cost of acquiring the building

16 or interest therein shall be treated as a

17 qualified revitalization expenditure only to

18 the extent that such cost does not exceed

19 30 percent of the aggregate qualified revi20 talization expenditures (determined with21 out regard to such cost) with respect to

22 such building.

23 ‘‘(ii) CREDITS.—The term ‘qualified

24 revitalization expenditure’ does not include

25 any expenditure which the taxpayer may
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1 take into account in computing any credit

2 allowable under this title unless the tax3 payer elects to take the expenditure into

4 account only for purposes of this section.

5 ‘‘(c) DOLLAR LIMITATION.—The aggregate amount

6 which may be treated as qualified revitalization expendi7 tures with respect to any qualified revitalization building

8 shall not exceed the lesser of—

9 ‘‘(1) $10,000,000, or

10 ‘‘(2) the commercial revitalization expenditure

11 amount allocated to such building under this section

12 by the commercial revitalization agency for the State

13 in which the building is located.

14 ‘‘(d) COMMERCIAL REVITALIZATION EXPENDITURE

15 AMOUNT.—

16 ‘‘(1) IN GENERAL.—The aggregate commercial

17 revitalization expenditure amount which a commer18 cial revitalization agency may allocate for any cal19 endar year is the amount of the State commercial

20 revitalization expenditure ceiling determined under

21 this paragraph for such calendar year for such agen22 cy.

23 ‘‘(2) STATE COMMERCIAL REVITALIZATION EX24 PENDITURE CEILING.—The State commercial revi-
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1 talization expenditure ceiling applicable to any

2 State—

3 ‘‘(A) for each calendar year after 2001 and

4 before 2010 is $12,000,000 for each renewal

5 community in the State, and

6 ‘‘(B) for each calendar year thereafter is

7 zero.

8 ‘‘(3) COMMERCIAL REVITALIZATION AGENCY.—

9 For purposes of this section, the term ‘commercial

10 revitalization agency’ means any agency authorized

11 by a State to carry out this section.

12 ‘‘(4) TIME AND MANNER OF ALLOCATIONS.—

13 Allocations under this section shall be made at the

14 same time and in the same manner as under para15 graphs (1) and (7) of section 42(h).

16 ‘‘(e) RESPONSIBILITIES OF COMMERCIAL REVITAL17 IZATION AGENCIES.—

18 ‘‘(1) PLANS FOR ALLOCATION.—Notwith19 standing any other provision of this section, the

20 commercial revitalization expenditure amount with

21 respect to any building shall be zero unless—

22 ‘‘(A) such amount was allocated pursuant

23 to a qualified allocation plan of the commercial

24 revitalization agency which is approved (in ac25 cordance with rules similar to the rules of sec-
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1 tion 147(f )(2) (other than subparagraph (B)(ii)

2 thereof)) by the governmental unit of which

3 such agency is a part; and

4 ‘‘(B) such agency notifies the chief execu5 tive officer (or its equivalent) of the local juris6 diction within which the building is located of

7 such allocation and provides such individual a

8 reasonable opportunity to comment on the allo9 cation.

10 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur11 poses of this subsection, the term ‘qualified alloca12 tion plan’ means any plan—

13 ‘‘(A) which sets forth selection criteria to

14 be used to determine priorities of the commer15 cial revitalization agency which are appropriate

16 to local conditions,

17 ‘‘(B) which considers—

18 ‘‘(i) the degree to which a project con19 tributes to the implementation of a stra20 tegic plan that is devised for a renewal

21 community through a citizen participation

22 process,

23 ‘‘(ii) the amount of any increase in

24 permanent, full-time employment by reason

25 of any project, and
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1 ‘‘(iii) the active involvement of resi2 dents and nonprofit groups within the re3 newal community, and

4 ‘‘(C) which provides a procedure that the

5 agency (or its agent) will follow in monitoring

6 compliance with this section.

7 ‘‘(f) SPECIAL RULES.—

8 ‘‘(1) DEDUCTION IN LIEU OF DEPRECIATION.—

9 The deduction provided by this section for qualified

10 revitalization expenditures shall—

11 ‘‘(A) with respect to the deduction deter12 mined under subsection (a)(1), be in lieu of any

13 depreciation deduction otherwise allowable on

14 account of one-half of such expenditures, and

15 ‘‘(B) with respect to the deduction deter16 mined under subsection (a)(2), be in lieu of any

17 depreciation deduction otherwise allowable on

18 account of all of such expenditures.

19 ‘‘(2) BASIS ADJUSTMENT, ETC.—For purposes

20 of sections 1016 and 1250, the deduction under this

21 section shall be treated in the same manner as a de22 preciation deduction. For purposes of section

23 1250(b)(5), the straight line method of adjustment

24 shall be determined without regard to this section.
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1 ‘‘(3) SUBSTANTIAL REHABILITATIONS TREATED

2 AS SEPARATE BUILDINGS.—A substantial rehabilita3 tion (within the meaning of section 47(c)(1)(C)) of

4 a building shall be treated as a separate building for

5 purposes of subsection (a).

6 ‘‘(4) CLARIFICATION OF ALLOWANCE OF DE7 DUCTION UNDER MINIMUM TAX.—Notwithstanding

8 section 56(a)(1), the deduction under this section

9 shall be allowed in determining alternative minimum

10 taxable income under section 55.

11 ‘‘(g) TERMINATION.—This section shall not apply to

12 any building placed in service after December 31, 2009.

13 ‘‘SEC. 1400J. INCREASE IN EXPENSING UNDER SECTION 179.

14 ‘‘(a) IN GENERAL.—For purposes of section

15 1397A—

16 ‘‘(1) a renewal community shall be treated as

17 an empowerment zone,

18 ‘‘(2) a renewal community business shall be

19 treated as an enterprise zone business, and

20 ‘‘(3) qualified renewal property shall be treated

21 as qualified zone property.

22 ‘‘(b) QUALIFIED RENEWAL PROPERTY.—For pur23 poses of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified renewal

2 property’ means any property to which section 168

3 applies (or would apply but for section 179) if—

4 ‘‘(A) such property was acquired by the

5 taxpayer by purchase (as defined in section

6 179(d)(2)) after December 31, 2001, and be7 fore January 1, 2010, and

8 ‘‘(B) such property would be qualified zone

9 property (as defined in section 1397D) if ref10 erences to renewal communities were sub11 stituted for references to empowerment zones in

12 section 1397D.

13 ‘‘(2) CERTAIN RULES TO APPLY.—The rules of

14 subsections (a)(2) and (b) of section 1397D shall

15 apply for purposes of this section.’’.

16 (b) EXCEPTION FOR COMMERCIAL REVITALIZATION

17 DEDUCTION FROM PASSIVE LOSS RULES.—

18 (1) Paragraph (3) of section 469(i) is amended

19 by redesignating subparagraphs (C), (D), and (E) as

20 subparagraphs (D), (E), and (F), respectively, and

21 by inserting after subparagraph (B) the following

22 new subparagraph:

23 ‘‘(C) EXCEPTION FOR COMMERCIAL REVI24 TALIZATION DEDUCTION.—Subparagraph (A)

25 shall not apply to any portion of the passive ac-
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1 tivity loss for any taxable year which is attrib2 utable to the commercial revitalization deduc3 tion under section 1400I.’’.

4 (2) Subparagraph (E) of section 469(i)(3), as

5 redesignated by subparagraph (A), is amended to

6 read as follows:

7 ‘‘(E) ORDERING RULES TO REFLECT EX8 CEPTIONS AND SEPARATE PHASE-OUTS.—If

9 subparagraph (B), (C), or (D) applies for a tax10 able year, paragraph (1) shall be applied—

11 ‘‘(i) first to the portion of the passive

12 activity loss to which subparagraph (C)

13 does not apply,

14 ‘‘(ii) second to the portion of the pas15 sive activity credit to which subparagraph

16 (B) or (D) does not apply,

17 ‘‘(iii) third to the portion of such

18 credit to which subparagraph (B) applies,

19 ‘‘(iv) fourth to the portion of such loss

20 to which subparagraph (C) applies, and

21 ‘‘(v) then to the portion of such credit

22 to which subparagraph (D) applies.’’.

23 (3)(A) Subparagraph (B) of section 469(i)(6) is

24 amended by striking ‘‘or’’ at the end of clause (i),

25 by striking the period at the end of clause (ii) and
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1 inserting ‘‘, or’’, and by adding at the end the fol2 lowing new clause:

3 ‘‘(iii) any deduction under section

4 1400I (relating to commercial revitaliza5 tion deduction).’’.

6 (B) The heading for such subparagraph (B) is

7 amended by striking ‘‘OR REHABILITATION CREDIT’’

8 and inserting ‘‘, REHABILITATION CREDIT, OR COM9 MERCIAL REVITALIZATION DEDUCTION’’.

10 (c) AUDIT AND REPORT.—Not later than January 31

11 of 2004, 2007, and 2010, the Comptroller General of the

12 United States shall, pursuant to an audit of the renewal

13 community program established under section 1400E of

14 the Internal Revenue Code of 1986 (as added by sub15 section (a)) and the empowerment zone and enterprise

16 community program under subchapter U of chapter 1 of

17 such Code, report to Congress on such program and its

18 effect on poverty, unemployment, and economic growth

19 within the designated renewal communities, empowerment

20 zones, and enterprise communities.

21 (d) CLERICAL AMENDMENT.—The table of sub22 chapters for chapter 1 is amended by adding at the end

23 the following new item:
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1 ‘‘Subchapter X. Renewal Communities.’’.

2 SEC. 602. WORK OPPORTUNITY CREDIT FOR HIRING YOUTH

3 RESIDING IN RENEWAL COMMUNITIES.

4 (a) HIGH-RISK YOUTH.—Subparagraphs (A)(ii) and

5 (B) of section 51(d)(5) are each amended by striking ‘‘em6 powerment zone or enterprise community’’ and inserting

7 ‘‘empowerment zone, enterprise community, or renewal

8 community’’.

9 (b) QUALIFIED SUMMER YOUTH EMPLOYEE.—

10 Clause (iv) of section 51(d)(7)(A) is amended by striking

11 ‘‘empowerment zone or enterprise community’’ and insert12 ing ‘‘empowerment zone, enterprise community, or re13 newal community’’.

14 (c) HEADINGS.—Paragraphs (5)(B) and (7)(C) of

15 section 51(d) are each amended by inserting ‘‘OR COMMU16 NITY’’ in the heading after ‘‘ZONE’’.

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

18 this section shall apply to individuals who begin work for

19 the employer after December 31, 2001.
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1 Subtitle B—Extension and Expan2 sion of Empowerment Zone In3 centives

4 SEC. 611. AUTHORITY TO DESIGNATE 9 ADDITIONAL EM5 POWERMENT ZONES.

6 Section 1391 is amended by adding at the end the

7 following new subsection:

8 ‘‘(h) ADDITIONAL DESIGNATIONS PERMITTED.—

9 ‘‘(1) IN GENERAL.—In addition to the areas

10 designated under subsections (a) and (g), the appro11 priate Secretaries may designate in the aggregate an

12 additional 9 nominated areas as empowerment zones

13 under this section, subject to the availability of eligi14 ble nominated areas. Of that number, not more than

15 seven may be designated in urban areas and not

16 more than 2 may be designated in rural areas.

17 ‘‘(2) PERIOD DESIGNATIONS MAY BE MADE AND

18 TAKE EFFECT.—A designation may be made under

19 this subsection after the date of the enactment of

20 this subsection and before January 1, 2002. Subject

21 to subparagraphs (B) and (C) of subsection (d)(1),

22 such designations shall remain in effect during the

23 period beginning on January 1, 2002, and ending on

24 December 31, 2009.
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1 ‘‘(3) MODIFICATIONS TO ELIGIBILITY CRITERIA,

2 ETC.—The rules of subsection (g)(3) shall apply to

3 designations under this subsection.’’.

4 SEC. 612. EXTENSION OF EMPOWERMENT ZONE TREAT5 MENT THROUGH 2009.

6 Subparagraph (A) of section 1391(d)(1) (relating to

7 period for which designation is in effect) is amended to

8 read as follows:

9 ‘‘(A)(i) in the case of an empowerment

10 zone, December 31, 2009, or

11 ‘‘(ii) in the case of an enterprise commu12 nity, the close of the 10th calendar year begin13 ning on or after such date of designation,’’.

14 SEC. 613. 20 PERCENT EMPLOYMENT CREDIT FOR ALL EM15 POWERMENT ZONES

16 (a) 20 PERCENT CREDIT.—Subsection (b) of section

17 1396 (relating to empowerment zone employment credit)

18 is amended to read as follows:

19 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

20 this section, the applicable percentage is 20 percent.’’.

21 (b) ALL EMPOWERMENT ZONES ELIGIBLE FOR

22 CREDIT.—Section 1396 is amended by striking subsection

23 (e).

24 (c) CONFORMING AMENDMENT.—Subsection (d) of

25 section 1400 is amended to read as follows:
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1 ‘‘(d) SPECIAL RULE FOR APPLICATION OF EMPLOY2 MENT CREDIT.—With respect to the DC Zone, section

3 1396(d)(1)(B) (relating to empowerment zone employ4 ment credit) shall be applied by substituting ‘the District

5 of Columbia’ for ‘such empowerment zone’.’’.

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

7 this section shall apply to wages paid or incurred after

8 December 31, 2001.

9 SEC. 614. INCREASED EXPENSING UNDER SECTION 179.

10 (a) IN GENERAL.—Subparagraph (A) of section

11 1397A(a)(1) is amended by striking ‘‘$20,000’’ and in12 serting ‘‘$35,000’’.

13 (b) EXPENSING FOR PROPERTY USED IN DEVELOP14 ABLE SITES.—Section 1397A is amended by striking sub15 section (c).

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

17 this section shall apply to taxable years beginning after

18 December 31, 2001.

19 SEC. 615. HIGHER LIMITS ON TAX-EXEMPT EMPOWERMENT

20 ZONE FACILITY BONDS.

21 (a) IN GENERAL.—Paragraph (3) of section 1394(f)

22 (relating to bonds for empowerment zones designated

23 under section 1391(g)) is amended to read as follows:

24 ‘‘(3) EMPOWERMENT ZONE FACILITY BOND.—

25 For purposes of this subsection, the term ‘empower-
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1 ment zone facility bond’ means any bond which

2 would be described in subsection (a) if—

3 ‘‘(A) in the case of obligations issued be4 fore January 1, 2002, only empowerment zones

5 designated under section 1391(g) were taken

6 into account under sections 1397C and 1397D,

7 and

8 ‘‘(B) in the case of obligations issued after

9 December 31, 2001, all empowerment zones

10 (other than the District of Columbia) were

11 taken into account under sections 1397C and

12 1397D.’’.

13 (b) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to obligations issued after Decem15 ber 31, 2001.

16 SEC. 616. NONRECOGNITION OF GAIN ON ROLLOVER OF

17 EMPOWERMENT ZONE INVESTMENTS.

18 (a) IN GENERAL.—Part III of subchapter U of chap19 ter 1 is amended—

20 (1) by redesignating subpart C as subpart D;

21 (2) by redesignating sections 1397B and 1397C

22 as sections 1397C and 1397D, respectively; and

23 (3) by inserting after subpart B the following

24 new subpart:
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1 ‘‘Subpart C—Nonrecognition of Gain on Rollover of

2 Empowerment Zone Investments

‘‘Sec. 1397B. Nonrecognition of Gain on Rollover of Empowerment Zone Investments.

3 ‘‘SEC. 1397B. NONRECOGNITION OF GAIN ON ROLLOVER OF

4 EMPOWERMENT ZONE INVESTMENTS.

5 ‘‘(a) NONRECOGNITION OF GAIN.—In the case of any

6 sale of a qualified empowerment zone asset held by the

7 taxpayer for more than 1 year and with respect to which

8 such taxpayer elects the application of this section, gain

9 from such sale shall be recognized only to the extent that

10 the amount realized on such sale exceeds—

11 ‘‘(1) the cost of any qualified empowerment

12 zone asset (with respect to the same zone as the

13 asset sold) purchased by the taxpayer during the 60-

14 day period beginning on the date of such sale, re15 duced by

16 ‘‘(2) any portion of such cost previously taken

17 into account under this section.

18 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section—

20 ‘‘(1) QUALIFIED EMPOWERMENT ZONE

21 ASSET.—

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

23 empowerment zone asset’ means any property
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1 which would be a qualified community asset (as

2 defined in section 1400F) if in section 1400F—

3 ‘‘(i) references to empowerment zones

4 were substituted for references to renewal

5 communities,

6 ‘‘(ii) references to enterprise zone

7 businesses (as defined in section 1397C)

8 were substituted for references to renewal

9 community businesses, and

10 ‘‘(iii) the date of the enactment of this

11 paragraph were substituted for ‘December

12 31, 2001’ each place it appears.

13 ‘‘(B) TREATMENT OF DC ZONE.—The Dis14 trict of Columbia Enterprise Zone shall not be

15 treated as an empowerment zone for purposes

16 of this section.

17 ‘‘(2) CERTAIN GAIN NOT ELIGIBLE FOR ROLL18 OVER.—This section shall not apply to—

19 ‘‘(A) any gain which is treated as ordinary

20 income for purposes of this subtitle, and

21 ‘‘(B) any gain which is attributable to real

22 property, or an intangible asset, which is not an

23 integral part of an enterprise zone business.

24 ‘‘(3) PURCHASE.—A taxpayer shall be treated

25 as having purchased any property if, but for para-
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1 graph (4), the unadjusted basis of such property in

2 the hands of the taxpayer would be its cost (within

3 the meaning of section 1012).

4 ‘‘(4) BASIS ADJUSTMENTS.—If gain from any

5 sale is not recognized by reason of subsection (a),

6 such gain shall be applied to reduce (in the order ac7 quired) the basis for determining gain or loss of any

8 qualified empowerment zone asset which is pur9 chased by the taxpayer during the 60-day period de10 scribed in subsection (a). This paragraph shall not

11 apply for purposes of section 1202.

12 ‘‘(5) HOLDING PERIOD.—For purposes of deter13 mining whether the nonrecognition of gain under

14 subsection (a) applies to any qualified empowerment

15 zone asset which is sold—

16 ‘‘(A) the taxpayer’s holding period for such

17 asset and the asset referred to in subsection

18 (a)(1) shall be determined without regard to

19 section 1223, and

20 ‘‘(B) only the first year of the taxpayer’s

21 holding period for the asset referred to in sub22 section (a)(1) shall be taken into account for

23 purposes of paragraphs (2)(A)(iii), (3)(C), and

24 (4)(A)(iii) of section 1400F(b).’’.

25 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (23) of section 1016(a) is

2 amended—

3 (A) by striking ‘‘or 1045’’ and inserting

4 ‘‘1045, or 1397B’’, and

5 (B) by striking ‘‘or 1045(b)(4)’’ and in6 serting ‘‘1045(b)(4), or 1397B(b)(4)’’.

7 (2) Paragraph (15) of section 1223 is amended

8 to read as follows:

9 ‘‘(15) Except for purposes of sections

10 1202(a)(2), 1202(c)(2)(A), 1400B(b), and

11 1400F(b), in determining the period for which the

12 taxpayer has held property the acquisition of which

13 resulted under section 1045 or 1397B in the non14 recognition of any part of the gain realized on the

15 sale of other property, there shall be included the pe16 riod for which such other property has been held as

17 of the date of such sale.’’.

18 (3) Paragraph (2) of section 1394(b) is

19 amended—

20 (A) by striking ‘‘section 1397C’’ and in21 serting ‘‘section 1397D’’, and

22 (B) by striking ‘‘section 1397C(a)(2)’’ and

23 inserting ‘‘section 1397D(a)(2)’’.

24 (4) Paragraph (3) of section 1394(b) is

25 amended—
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1 (A) by striking ‘‘section 1397B’’ each place

2 it appears and inserting ‘‘section 1397C’’, and

3 (B) by striking ‘‘section 1397B(d)’’ and in4 serting ‘‘section 1397C(d)’’.

5 (5) Sections 1400(e) and 1400B(c) are each

6 amended by striking ‘‘section 1397B’’ each place it

7 appears and inserting ‘‘section 1397C’’.

8 (6) The table of subparts for part III of sub9 chapter U of chapter 1 is amended by striking the

10 last item and inserting the following new items:

‘‘Subpart C. Nonrecognition of gain on rollover of empowerment

zone investments.

‘‘Subpart D. General provisions.’’.

11 (7) The table of sections for subpart D of such

12 part III is amended to read as follows:

‘‘Sec. 1397C. Enterprise zone business defined.

‘‘Sec. 1397D. Qualified zone property defined.’’.

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

14 this section shall apply to qualified empowerment zone as15 sets acquired after the date of the enactment of this Act.

16 SEC. 617. INCREASED EXCLUSION OF GAIN ON SALE OF EM17 POWERMENT ZONE STOCK.

18 (a) IN GENERAL.—Subsection (a) of section 1202 is

19 amended to read as follows:

20 ‘‘(a) EXCLUSION.—

21 ‘‘(1) IN GENERAL.—In the case of a taxpayer

22 other than a corporation, gross income shall not in-
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1 clude 50 percent of any gain from the sale or ex2 change of qualified small business stock held for

3 more than 5 years.

4 ‘‘(2) EMPOWERMENT ZONE BUSINESSES.—

5 ‘‘(A) IN GENERAL.—In the case of quali6 fied small business stock acquired after the date

7 of the enactment of this paragraph in a cor8 poration which is a qualified business entity (as

9 defined in section 1397C(b)) during substan10 tially all of the taxpayer’s holding period for

11 such stock, paragraph (1) shall be applied by

12 substituting ‘60 percent’ for ‘50 percent’.

13 ‘‘(B) CERTAIN RULES TO APPLY.—Rules

14 similar to the rules of paragraphs (5) and (7)

15 of section 1400B(b) shall apply for purposes of

16 this paragraph.

17 ‘‘(C) GAIN AFTER 2014 NOT QUALIFIED.—

18 Subparagraph (A) shall not apply to gain at19 tributable to periods after December 31, 2014.

20 ‘‘(D) TREATMENT OF DC ZONE.—The Dis21 trict of Columbia Enterprise Zone shall not be

22 treated as an empowerment zone for purposes

23 of this paragraph.’’.
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1 (b) CONFORMING AMENDMENT.—Paragraph (8) of

2 section 1(h) is amended by striking ‘‘means’’ and all that

3 follows and inserting ‘‘means the excess of—

4 ‘‘(A) the gain which would be excluded

5 from gross income under section 1202 but for

6 the percentage limitation in section 1202(a),

7 over

8 ‘‘(B) the gain excluded from gross income

9 under section 1202.’’.

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

11 this section shall apply to stock acquired after the date

12 of the enactment of this Act.

13 Subtitle C—New Markets Tax

14 Credit

15 SEC. 621. NEW MARKETS TAX CREDIT.

16 (a) IN GENERAL.—Subpart D of part IV of sub17 chapter A of chapter 1 (relating to business-related cred18 its) is amended by adding at the end the following new

19 section:

20 ‘‘SEC. 45D. NEW MARKETS TAX CREDIT.

21 ‘‘(a) ALLOWANCE OF CREDIT.—

22 ‘‘(1) IN GENERAL.—For purposes of section 38,

23 in the case of a taxpayer who holds a qualified eq24 uity investment on a credit allowance date of such

25 investment which occurs during the taxable year, the
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1 new markets tax credit determined under this sec2 tion for such taxable year is an amount equal to the

3 applicable percentage of the amount paid to the

4 qualified community development entity for such in5 vestment at its original issue.

6 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

7 of paragraph (1), the applicable percentage is—

8 ‘‘(A) 5 percent with respect to the first 3

9 credit allowance dates, and

10 ‘‘(B) 6 percent with respect to the remain11 der of the credit allowance dates.

12 ‘‘(3) CREDIT ALLOWANCE DATE.—For purposes

13 of paragraph (1), the term ‘credit allowance date’

14 means, with respect to any qualified equity

15 investment—

16 ‘‘(A) the date on which such investment is

17 initially made, and

18 ‘‘(B) each of the 6 anniversary dates of

19 such date thereafter.

20 ‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur21 poses of this section—

22 ‘‘(1) IN GENERAL.—The term ‘qualified equity

23 investment’ means any equity investment in a quali24 fied community development entity if—
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1 ‘‘(A) such investment is acquired by the

2 taxpayer at its original issue (directly or

3 through an underwriter) solely in exchange for

4 cash,

5 ‘‘(B) substantially all of such cash is used

6 by the qualified community development entity

7 to make qualified low-income community invest8 ments, and

9 ‘‘(C) such investment is designated for

10 purposes of this section by the qualified com11 munity development entity.

12 Such term shall not include any equity investment

13 issued by a qualified community development entity

14 more than 5 years after the date that such entity re15 ceives an allocation under subsection (f). Any alloca16 tion not used within such 5-year period may be re17 allocated by the Secretary under subsection (f).

18 ‘‘(2) LIMITATION.—The maximum amount of

19 equity investments issued by a qualified community

20 development entity which may be designated under

21 paragraph (1)(C) by such entity shall not exceed the

22 portion of the limitation amount allocated under

23 subsection (f) to such entity.

24 ‘‘(3) SAFE HARBOR FOR DETERMINING USE OF

25 CASH.—The requirement of paragraph (1)(B) shall
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1 be treated as met if at least 85 percent of the aggre2 gate gross assets of the qualified community devel3 opment entity are invested in qualified low-income

4 community investments.

5 ‘‘(4) TREATMENT OF SUBSEQUENT PUR6 CHASERS.—The term ‘qualified equity investment’

7 includes any equity investment which would (but for

8 paragraph (1)(A)) be a qualified equity investment

9 in the hands of the taxpayer if such investment was

10 a qualified equity investment in the hands of a prior

11 holder.

12 ‘‘(5) REDEMPTIONS.—A rule similar to the rule

13 of section 1202(c)(3) shall apply for purposes of this

14 subsection.

15 ‘‘(6) EQUITY INVESTMENT.—The term ‘equity

16 investment’ means—

17 ‘‘(A) any stock (other than nonqualified

18 preferred stock as defined in section 351(g)(2))

19 in an entity which is a corporation, and

20 ‘‘(B) any capital interest in an entity

21 which is a partnership.

22 ‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT ENTI23 TY.—For purposes of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified com2 munity development entity’ means any domestic cor3 poration or partnership if—

4 ‘‘(A) the primary mission of the entity is

5 serving, or providing investment capital for,

6 low-income communities or low-income persons,

7 ‘‘(B) the entity maintains accountability to

8 residents of low-income communities through

9 their representation on any governing board of

10 the entity or on any advisory board to the enti11 ty, and

12 ‘‘(C) the entity is certified by the Secretary

13 for purposes of this section as being a qualified

14 community development entity.

15 ‘‘(2) SPECIAL RULES FOR CERTAIN ORGANIZA16 TIONS.—The requirements of paragraph (1) shall be

17 treated as met by—

18 ‘‘(A) any specialized small business invest19 ment company (as defined in section

20 1044(c)(3)), and

21 ‘‘(B) any community development financial

22 institution (as defined in section 103 of the

23 Community Development Banking and Finan24 cial Institutions Act of 1994 (12 U.S.C. 4702)).
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1 ‘‘(d) QUALIFIED LOW-INCOME COMMUNITY INVEST2 MENTS.—For purposes of this section—

3 ‘‘(1) IN GENERAL.—The term ‘qualified low-in4 come community investment’ means—

5 ‘‘(A) any equity investment in, or loan to,

6 any qualified active low-income community busi7 ness,

8 ‘‘(B) the purchase from another commu9 nity development entity of any loan made by

10 such entity which is a qualified low-income com11 munity investment,

12 ‘‘(C) financial counseling and other serv13 ices specified in regulations prescribed by the

14 Secretary to businesses located in, and resi15 dents of, low-income communities, and

16 ‘‘(D) any equity investment in, or loan to,

17 any qualified community development entity.

18 ‘‘(2) QUALIFIED ACTIVE LOW-INCOME COMMU19 NITY BUSINESS.—

20 ‘‘(A) IN GENERAL.—For purposes of para21 graph (1), the term ‘qualified active low-income

22 community business’ means, with respect to any

23 taxable year, any corporation (including a non24 profit corporation) or partnership if for such

25 year—
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1 ‘‘(i) at least 50 percent of the total

2 gross income of such entity is derived from

3 the active conduct of a qualified business

4 within any low-income community,

5 ‘‘(ii) a substantial portion of the use

6 of the tangible property of such entity

7 (whether owned or leased) is within any

8 low-income community,

9 ‘‘(iii) a substantial portion of the serv10 ices performed for such entity by its em11 ployees are performed in any low-income

12 community,

13 ‘‘(iv) less than 5 percent of the aver14 age of the aggregate unadjusted bases of

15 the property of such entity is attributable

16 to collectibles (as defined in section

17 408(m)(2)) other than collectibles that are

18 held primarily for sale to customers in the

19 ordinary course of such business, and

20 ‘‘(v) less than 5 percent of the aver21 age of the aggregate unadjusted bases of

22 the property of such entity is attributable

23 to nonqualified financial property (as de24 fined in section 1397C(e)).
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1 ‘‘(B) PROPRIETORSHIP.—Such term shall

2 include any business carried on by an individual

3 as a proprietor if such business would meet the

4 requirements of subparagraph (A) were it incor5 porated.

6 ‘‘(C) PORTIONS OF BUSINESS MAY BE

7 QUALIFIED ACTIVE LOW-INCOME COMMUNITY

8 BUSINESS.—The term ‘qualified active low-in9 come community business’ includes any trades

10 or businesses which would qualify as a qualified

11 active low-income community business if such

12 trades or businesses were separately incor13 porated.

14 ‘‘(3) QUALIFIED BUSINESS.—For purposes of

15 this subsection, the term ‘qualified business’ has the

16 meaning given to such term by section 1397C(d); ex17 cept that—

18 ‘‘(A) in lieu of applying paragraph (2)(B)

19 thereof, the rental to others of real property lo20 cated in any low-income community shall be

21 treated as a qualified business if there are sub22 stantial improvements located on such property,

23 and

24 ‘‘(B) paragraph (3) thereof shall not apply.
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1 ‘‘(e) LOW-INCOME COMMUNITY.—For purposes of

2 this section—

3 ‘‘(1) IN GENERAL.—The term ‘low-income com4 munity’ means any population census tract if—

5 ‘‘(A) the poverty rate for such tract is at

6 least 20 percent, or

7 ‘‘(B)(i) in the case of a tract not located

8 within a metropolitan area, the median family

9 income for such tract does not exceed 80 per10 cent of statewide median family income, or

11 ‘‘(ii) in the case of a tract located within

12 a metropolitan area, the median family income

13 for such tract does not exceed 80 percent of the

14 greater of statewide median family income or

15 the metropolitan area median family income.

16 ‘‘(2) TARGETED AREAS.—The Secretary may

17 designate any area within any census tract as a low18 income community if—

19 ‘‘(A) the boundary of such area is contin20 uous,

21 ‘‘(B) the area would satisfy the require22 ments of paragraph (1) if it were a census

23 tract, and

24 ‘‘(C) an inadequate access to investment

25 capital exists in such area.
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1 ‘‘(3) AREAS NOT WITHIN CENSUS TRACTS.—In

2 the case of an area which is not tracted for popu3 lation census tracts, the equivalent county divisions

4 (as defined by the Bureau of the Census for pur5 poses of defining poverty areas) shall be used for

6 purposes of determining poverty rates and median

7 family income.

8 ‘‘(f) NATIONAL LIMITATION ON AMOUNT OF INVEST9 MENTS DESIGNATED.—

10 ‘‘(1) IN GENERAL.—There is a new markets tax

11 credit limitation for each calendar year. Such limita12 tion is—

13 ‘‘(A) $1,000,000,000 for 2001,

14 ‘‘(B) $1,500,000,000 for 2002 and 2003,

15 ‘‘(C) $2,000,000,000 for 2004 and 2005,

16 and

17 ‘‘(D) $3,500,000,000 for 2006 and 2007.

18 ‘‘(2) ALLOCATION OF LIMITATION.—The limita19 tion under paragraph (1) shall be allocated by the

20 Secretary among qualified community development

21 entities selected by the Secretary. In making alloca22 tions under the preceding sentence, the Secretary

23 shall give priority to any entity—
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1 ‘‘(A) with a record of having successfully

2 provided capital or technical assistance to dis3 advantaged businesses or communities, or

4 ‘‘(B) which intends to satisfy the require5 ment under subsection (b)(1)(B) by making

6 qualified low-income community investments in

7 1 or more businesses in which persons unre8 lated to such entity (within the meaning of sec9 tion 267(b) or 707(b)(1)) hold the majority eq10 uity interest.

11 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If

12 the new markets tax credit limitation for any cal13 endar year exceeds the aggregate amount allocated

14 under paragraph (2) for such year, such limitation

15 for the succeeding calendar year shall be increased

16 by the amount of such excess. No amount may be

17 carried under the preceding sentence to any calendar

18 year after 2014.

19 ‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—

20 ‘‘(1) IN GENERAL.—If, at any time during the

21 7-year period beginning on the date of the original

22 issue of a qualified equity investment in a qualified

23 community development entity, there is a recapture

24 event with respect to such investment, then the tax

25 imposed by this chapter for the taxable year in
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1 which such event occurs shall be increased by the

2 credit recapture amount.

3 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur4 poses of paragraph (1), the credit recapture amount

5 is an amount equal to the sum of—

6 ‘‘(A) the aggregate decrease in the credits

7 allowed to the taxpayer under section 38 for all

8 prior taxable years which would have resulted if

9 no credit had been determined under this sec10 tion with respect to such investment, plus

11 ‘‘(B) interest at the underpayment rate es12 tablished under section 6621 on the amount de13 termined under subparagraph (A) for each

14 prior taxable year for the period beginning on

15 the due date for filing the return for the prior

16 taxable year involved.

17 No deduction shall be allowed under this chapter for

18 interest described in subparagraph (B).

19 ‘‘(3) RECAPTURE EVENT.—For purposes of

20 paragraph (1), there is a recapture event with re21 spect to an equity investment in a qualified commu22 nity development entity if—

23 ‘‘(A) such entity ceases to be a qualified

24 community development entity,
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1 ‘‘(B) the proceeds of the investment cease

2 to be used as required of subsection (b)(1)(B),

3 or

4 ‘‘(C) such investment is redeemed by such

5 entity.

6 ‘‘(4) SPECIAL RULES.—

7 ‘‘(A) TAX BENEFIT RULE.—The tax for

8 the taxable year shall be increased under para9 graph (1) only with respect to credits allowed

10 by reason of this section which were used to re11 duce tax liability. In the case of credits not so

12 used to reduce tax liability, the carryforwards

13 and carrybacks under section 39 shall be appro14 priately adjusted.

15 ‘‘(B) NO CREDITS AGAINST TAX.—Any in16 crease in tax under this subsection shall not be

17 treated as a tax imposed by this chapter for

18 purposes of determining the amount of any

19 credit under this chapter or for purposes of sec20 tion 55.

21 ‘‘(h) BASIS REDUCTION.—The basis of any qualified

22 equity investment shall be reduced by the amount of any

23 credit determined under this section with respect to such

24 investment. This subsection shall not apply for purposes

25 of sections 1202, 1400B, and 1400F.
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1 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be appropriate to carry out this

3 section, including regulations—

4 ‘‘(1) which limit the credit for investments

5 which are directly or indirectly subsidized by other

6 Federal tax benefits (including the credit under sec7 tion 42 and the exclusion from gross income under

8 section 103),

9 ‘‘(2) which prevent the abuse of the purposes of

10 this section,

11 ‘‘(3) which provide rules for determining wheth12 er the requirement of subsection (b)(1)(B) is treated

13 as met,

14 ‘‘(4) which impose appropriate reporting re15 quirements, and

16 ‘‘(5) which apply the provisions of this section

17 to newly formed entities.’’.

18 (b) CREDIT MADE PART OF GENERAL BUSINESS

19 CREDIT.—

20 (1) IN GENERAL.—Subsection (b) of section 38

21 is amended by striking ‘‘plus’’ at the end of para22 graph (11), by striking the period at the end of

23 paragraph (12) and inserting ‘‘, plus’’, and by add24 ing at the end the following new paragraph:
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1 ‘‘(13) the new markets tax credit determined

2 under section 45D(a).’’.

3 (2) LIMITATION ON CARRYBACK.—Subsection

4 (d) of section 39 is amended by adding at the end

5 the following new paragraph:

6 ‘‘(9) NO CARRYBACK OF NEW MARKETS TAX

7 CREDIT BEFORE JANUARY 1, 2001.—No portion of

8 the unused business credit for any taxable year

9 which is attributable to the credit under section 45D

10 may be carried back to a taxable year ending before

11 January 1, 2001.’’.

12 (c) DEDUCTION FOR UNUSED CREDIT.—Subsection

13 (c) of section 196 is amended by striking ‘‘and’’ at the

14 end of paragraph (7), by striking the period at the end

15 of paragraph (8) and inserting ‘‘, and’’, and by adding

16 at the end the following new paragraph:

17 ‘‘(9) the new markets tax credit determined

18 under section 45D(a).’’.

19 (d) CLERICAL AMENDMENT.—The table of sections

20 for subpart D of part IV of subchapter A of chapter 1

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

‘‘Sec. 45D. New markets tax credit.’’.

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

23 this section shall apply to investments made after Decem24 ber 31, 2000.
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1 (f) GUIDANCE ON ALLOCATION OF NATIONAL LIMI2 TATION.—Not later than 120 days after the date of the

3 enactment of this Act, the Secretary of the Treasury or

4 the Secretary’s delegate shall issue guidance which

5 specifies—

6 (1) how entities shall apply for an allocation

7 under section 45D(f)(2) of the Internal Revenue

8 Code of 1986, as added by this section;

9 (2) the competitive procedure through which

10 such allocations are made; and

11 (3) the actions that such Secretary or delegate

12 shall take to ensure that such allocations are prop13 erly made to appropriate entities.

14 (g) AUDIT AND REPORT.—Not later than January 31

15 of 2004, 2007, and 2010, the Comptroller General of the

16 United States shall, pursuant to an audit of the new mar17 kets tax credit program established under section 45D of

18 the Internal Revenue Code of 1986 (as added by sub19 section (a)), report to Congress on such program, includ20 ing all qualified community development entities that re21 ceive an allocation under the new markets credit under

22 such section.
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1 Subtitle D—Improvements in Low2 Income Housing Credit

3 SEC. 631. MODIFICATION OF STATE CEILING ON LOW-IN4 COME HOUSING CREDIT.

5 (a) IN GENERAL.—Clauses (i) and (ii) of section

6 42(h)(3)(C) (relating to State housing credit ceiling) are

7 amended to read as follows:

8 ‘‘(i) the unused State housing credit

9 ceiling (if any) of such State for the pre10 ceding calendar year,

11 ‘‘(ii) the greater of—

12 ‘‘(I) $1.75 ($1.50 for 2001) mul13 tiplied by the State population, or

14 ‘‘(II) $2,000,000,’’.

15 (b) ADJUSTMENT OF STATE CEILING FOR IN16 CREASES IN COST-OF-LIVING.—Paragraph (3) of section

17 42(h) (relating to housing credit dollar amount for agen18 cies) is amended by adding at the end the following new

19 subparagraph:

20 ‘‘(H) COST-OF-LIVING ADJUSTMENT.—

21 ‘‘(i) IN GENERAL.—In the case of a

22 calendar year after 2002, the $2,000,000

23 and $1.75 amounts in subparagraph (C)

24 shall each be increased by an amount equal

25 to—
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1 ‘‘(I) such dollar amount, multi2 plied by

3 ‘‘(II) the cost-of-living adjust4 ment determined under section 1(f)(3)

5 for such calendar year by substituting

6 ‘calendar year 2001’ for ‘calendar

7 year 1992’ in subparagraph (B) there8 of.

9 ‘‘(ii) ROUNDING.—

10 ‘‘(I) In the case of the

11 $2,000,000 amount, any increase

12 under clause (i) which is not a mul13 tiple of $5,000 shall be rounded to the

14 next lowest multiple of $5,000.

15 ‘‘(II) In the case of the $1.75

16 amount, any increase under clause (i)

17 which is not a multiple of 5 cents

18 shall be rounded to the next lowest

19 multiple of 5 cents.’’.

20 (c) CONFORMING AMENDMENTS.—

21 (1) Section 42(h)(3)(C), as amended by sub22 section (a), is amended—

23 (A) by striking ‘‘clause (ii)’’ in the matter

24 following clause (iv) and inserting ‘‘clause (i)’’;

25 and
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1 (B) by striking ‘‘clauses (i)’’ in the matter

2 following clause (iv) and inserting ‘‘clauses

3 (ii)’’.

4 (2) Section 42(h)(3)(D)(ii) is amended—

5 (A) by striking ‘‘subparagraph (C)(ii)’’ and

6 inserting ‘‘subparagraph (C)(i)’’; and

7 (B) by striking ‘‘clauses (i)’’ in subclause

8 (II) and inserting ‘‘clauses (ii)’’.

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

10 this section shall apply to calendar years after 2000.

11 SEC. 632. MODIFICATION OF CRITERIA FOR ALLOCATING

12 HOUSING CREDITS AMONG PROJECTS.

13 (a) SELECTION CRITERIA.—Subparagraph (C) of

14 section 42(m)(1) (relating to certain selection criteria

15 must be used) is amended—

16 (1) by inserting ‘‘, including whether the project

17 includes the use of existing housing as part of a

18 community revitalization plan’’ before the comma at

19 the end of clause (iii); and

20 (2) by striking clauses (v), (vi), and (vii) and

21 inserting the following new clauses:

22 ‘‘(v) tenant populations with special

23 housing needs,

24 ‘‘(vi) public housing waiting lists,
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1 ‘‘(vii) tenant populations of individ2 uals with children, and

3 ‘‘(viii) projects intended for eventual

4 tenant ownership.’’.

5 (b) PREFERENCE FOR COMMUNITY REVITALIZATION

6 PROJECTS LOCATED IN QUALIFIED CENSUS TRACTS.—

7 Clause (ii) of section 42(m)(1)(B) is amended by striking

8 ‘‘and’’ at the end of subclause (I), by adding ‘‘and’’ at

9 the end of subclause (II), and by inserting after subclause

10 (II) the following new subclause:

11 ‘‘(III) projects which are located

12 in qualified census tracts (as defined

13 in subsection (d)(5)(C)) and the devel14 opment of which contributes to a con15 certed community revitalization

16 plan,’’.

17 SEC. 633. ADDITIONAL RESPONSIBILITIES OF HOUSING

18 CREDIT AGENCIES.

19 (a) MARKET STUDY; PUBLIC DISCLOSURE OF RA20 TIONALE FOR NOT FOLLOWING CREDIT ALLOCATION

21 PRIORITIES.—Subparagraph (A) of section 42(m)(1) (re22 lating to responsibilities of housing credit agencies) is

23 amended by striking ‘‘and’’ at the end of clause (i), by

24 striking the period at the end of clause (ii) and inserting
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1 a comma, and by adding at the end the following new

2 clauses:

3 ‘‘(iii) a comprehensive market study

4 of the housing needs of low-income individ5 uals in the area to be served by the project

6 is conducted before the credit allocation is

7 made and at the developer’s expense by a

8 disinterested party who is approved by

9 such agency, and

10 ‘‘(iv) a written explanation is available

11 to the general public for any allocation of

12 a housing credit dollar amount which is

13 not made in accordance with established

14 priorities and selection criteria of the hous15 ing credit agency.’’.

16 (b) SITE VISITS.—Clause (iii) of section 42(m)(1)(B)

17 (relating to qualified allocation plan) is amended by insert18 ing before the period ‘‘and in monitoring for noncompli19 ance with habitability standards through regular site vis20 its’’.

21 SEC. 634. MODIFICATIONS TO RULES RELATING TO BASIS

22 OF BUILDING WHICH IS ELIGIBLE FOR CRED23 IT.

24 (a) ADJUSTED BASIS TO INCLUDE PORTION OF CER25 TAIN BUILDINGS USED BY LOW-INCOME INDIVIDUALS
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1 WHO ARE NOT TENANTS AND BY PROJECT EMPLOY2 EES.—Paragraph (4) of section 42(d) (relating to special

3 rules relating to determination of adjusted basis) is

4 amended—

5 (1) by striking ‘‘subparagraph (B)’’ in subpara6 graph (A) and inserting ‘‘subparagraphs (B) and

7 (C)’’;

8 (2) by redesignating subparagraph (C) as sub9 paragraph (D); and

10 (3) by inserting after subparagraph (B) the fol11 lowing new subparagraph:

12 ‘‘(C) INCLUSION OF BASIS OF PROPERTY

13 USED TO PROVIDE SERVICES FOR CERTAIN

14 NONTENANTS.—

15 ‘‘(i) IN GENERAL.—The adjusted

16 basis of any building located in a qualified

17 census tract (as defined in paragraph

18 (5)(C)) shall be determined by taking into

19 account the adjusted basis of property (of

20 a character subject to the allowance for de21 preciation and not otherwise taken into ac22 count) used throughout the taxable year in

23 providing any community service facility.

24 ‘‘(ii) LIMITATION.—The increase in

25 the adjusted basis of any building which is
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1 taken into account by reason of clause (i)

2 shall not exceed 10 percent of the eligible

3 basis of the qualified low-income housing

4 project of which it is a part. For purposes

5 of the preceding sentence, all community

6 service facilities which are part of the same

7 qualified low-income housing project shall

8 be treated as one facility.

9 ‘‘(iii) COMMUNITY SERVICE FACIL10 ITY.—For purposes of this subparagraph,

11 the term ‘community service facility’

12 means any facility designed to serve pri13 marily individuals whose income is 60 per14 cent or less of area median income (within

15 the meaning of subsection (g)(1)(B)).’’.

16 (b) CERTAIN NATIVE AMERICAN HOUSING ASSIST17 ANCE DISREGARDED IN DETERMINING WHETHER BUILD18 ING IS FEDERALLY SUBSIDIZED FOR PURPOSES OF THE

19 LOW-INCOME HOUSING CREDIT.—Subparagraph (E) of

20 section 42(i)(2) (relating to determination of whether

21 building is federally subsidized) is amended—

22 (1) in clause (i), by inserting ‘‘or the Native

23 American Housing Assistance and Self-Determina24 tion Act of 1996 (25 U.S.C. 4101 et seq.) (as in ef-
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1 fect on October 1, 1997)’’ after ‘‘this subpara2 graph)’’; and

3 (2) in the subparagraph heading, by inserting

4 ‘‘OR NATIVE AMERICAN HOUSING ASSISTANCE’’ after

5 ‘‘HOME ASSISTANCE’’.

6 SEC. 635. OTHER MODIFICATIONS.

7 (a) ALLOCATION OF CREDIT LIMIT TO CERTAIN

8 BUILDINGS.—

9 (1) The first sentence of section 42(h)(1)(E)(ii)

10 is amended by striking ‘‘(as of’’ the first place it ap11 pears and inserting ‘‘(as of the later of the date

12 which is 6 months after the date that the allocation

13 was made or’’.

14 (2) The last sentence of section 42(h)(3)(C) is

15 amended by striking ‘‘project which’’ and inserting

16 ‘‘project which fails to meet the 10 percent test

17 under paragraph (1)(E)(ii) on a date after the close

18 of the calendar year in which the allocation was

19 made or which’’.

20 (b) DETERMINATION OF WHETHER BUILDINGS ARE

21 LOCATED IN HIGH COST AREAS.—The first sentence of

22 section 42(d)(5)(C)(ii)(I) is amended—

23 (1) by inserting ‘‘either’’ before ‘‘in which 50

24 percent’’; and
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1 (2) by inserting before the period ‘‘or which has

2 a poverty rate of at least 25 percent’’.

3 SEC. 636. CARRYFORWARD RULES.

4 (a) IN GENERAL.—Clause (ii) of section 42(h)(3)(D)

5 (relating to unused housing credit carryovers allocated

6 among certain States) is amended by striking ‘‘the excess’’

7 and all that follows and inserting ‘‘the excess (if any) of—

8 ‘‘(I) the unused State housing

9 credit ceiling for the year preceding

10 such year, over

11 ‘‘(II) the aggregate housing cred12 it dollar amount allocated for such

13 year.’’.

14 (b) CONFORMING AMENDMENT.—The second sen15 tence of section 42(h)(3)(C) (relating to State housing

16 credit ceiling) is amended by striking ‘‘clauses (i) and

17 (iii)’’ and inserting ‘‘clauses (i) through (iv)’’.

18 SEC. 637. EFFECTIVE DATE.

19 Except as otherwise provided in this title, the amend20 ments made by this title shall apply to—

21 (1) housing credit dollar amounts allocated

22 after December 31, 2000; and

23 (2) buildings placed in service after such date

24 to the extent paragraph (1) of section 42(h) of the

25 Internal Revenue Code of 1986 does not apply to
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1 any building by reason of paragraph (4) thereof, but

2 only with respect to bonds issued after such date.

3 Subtitle E—Other Community Re4 newal and New Markets Assist5 ance

6 SEC. 641. TRANSFER OF UNOCCUPIED AND SUBSTANDARD

7 HUD-HELD HOUSING TO LOCAL GOVERN8 MENTS AND COMMUNITY DEVELOPMENT

9 CORPORATIONS.

10 Section 204 of the Departments of Veterans Affairs

11 and Housing and Urban Development, and Independent

12 Agencies Appropriations Act, 1997 (12 U.S.C. 1715z–

13 11a) is amended—

14 (1) by striking ‘‘FLEXIBLE AUTHORITY.—’’ and

15 inserting ‘‘DISPOSITION OF HUD-OWNED PROP16 ERTIES. (a) FLEXIBLE AUTHORITY FOR MULTI17 FAMILY PROJECTS.—’’; and

18 (2) by adding at the end the following new sub19 section:

20 ‘‘(b) TRANSFER OF UNOCCUPIED AND SUBSTANDARD

21 HOUSING TO LOCAL GOVERNMENTS AND COMMUNITY

22 DEVELOPMENT CORPORATIONS.—

23 ‘‘(1) TRANSFER AUTHORITY.—Notwithstanding

24 the authority under subsection (a) and the last sen25 tence of section 204(g) of the National Housing Act
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1 (12 U.S.C. 1710(g)), the Secretary of Housing and

2 Urban Development shall transfer ownership of any

3 qualified HUD property, subject to the requirements

4 of this section, to a unit of general local government

5 having jurisdiction for the area in which the prop6 erty is located or to a community development cor7 poration which operates within such a unit of gen8 eral local government in accordance with this sub9 section, but only to the extent that units of general

10 local government and community development cor11 porations consent to transfer and the Secretary de12 termines that such transfer is practicable.

13 ‘‘(2) QUALIFIED HUD PROPERTIES.—For pur14 poses of this subsection, the term ‘qualified HUD

15 property’ means any property for which, as of the

16 date that notification of the property is first made

17 under paragraph (3)(B), not less than 6 months

18 have elapsed since the later of the date that the

19 property was acquired by the Secretary or the date

20 that the property was determined to be unoccupied

21 or substandard, that is owned by the Secretary and

22 is—

23 ‘‘(A) an unoccupied multifamily housing

24 project;
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1 ‘‘(B) a substandard multifamily housing

2 project; or

3 ‘‘(C) an unoccupied single family property

4 that—

5 ‘‘(i) has been determined by the Sec6 retary not to be an eligible asset under sec7 tion 204(h) of the National Housing Act

8 (12 U.S.C. 1710(h)); or

9 ‘‘(ii) is an eligible asset under such

10 section 204(h), but—

11 ‘‘(I) is not subject to a specific

12 sale agreement under such section;

13 and

14 ‘‘(II) has been determined by the

15 Secretary to be inappropriate for con16 tinued inclusion in the program under

17 such section 204(h) pursuant to para18 graph (10) of such section.

19 ‘‘(3) TIMING.—The Secretary shall establish

20 procedures that provide for—

21 ‘‘(A) time deadlines for transfers under

22 this subsection;

23 ‘‘(B) notification to units of general local

24 government and community development cor-
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1 porations of qualified HUD properties in their

2 jurisdictions;

3 ‘‘(C) such units and corporations to ex4 press interest in the transfer under this sub5 section of such properties;

6 ‘‘(D) a right of first refusal for transfer of

7 qualified HUD properties to units of general

8 local government and community development

9 corporations, under which—

10 ‘‘(i) the Secretary shall establish a pe11 riod during which the Secretary may not

12 transfer such properties except to such

13 units and corporations;

14 ‘‘(ii) the Secretary shall offer qualified

15 HUD properties that are single family

16 properties for purchase by units of general

17 local government at a cost of $1 for each

18 property, but only to the extent that the

19 costs to the Federal Government of dis20 posal at such price do not exceed the costs

21 to the Federal Government of disposing of

22 property subject to the procedures for sin23 gle family property established by the Sec24 retary pursuant to the authority under the
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1 last sentence of section 204(g) of the Na2 tional Housing Act (12 U.S.C. 1710(g));

3 ‘‘(iii) the Secretary may accept an

4 offer to purchase a property made by a

5 community development corporation only if

6 the offer provides for purchase on a cost

7 recovery basis; and

8 ‘‘(iv) the Secretary shall accept an

9 offer to purchase such a property that is

10 made during such period by such a unit or

11 corporation and that complies with the re12 quirements of this paragraph;

13 ‘‘(E) a written explanation, to any unit of

14 general local government or community develop15 ment corporation making an offer to purchase

16 a qualified HUD property under this subsection

17 that is not accepted, of the reason that such

18 offer was not acceptable.

19 ‘‘(4) OTHER DISPOSITION.—With respect to

20 any qualified HUD property, if the Secretary does

21 not receive an acceptable offer to purchase the prop22 erty pursuant to the procedure established under

23 paragraph (3), the Secretary shall dispose of the

24 property to the unit of general local government in

25 which property is located or to community develop-
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1 ment corporations located in such unit of general

2 local government on a negotiated, competitive bid, or

3 other basis, on such terms as the Secretary deems

4 appropriate.

5 ‘‘(5) SATISFACTION OF INDEBTEDNESS.—Be6 fore transferring ownership of any qualified HUD

7 property pursuant to this subsection, the Secretary

8 shall satisfy any indebtedness incurred in connection

9 with the property to be transferred, by canceling the

10 indebtedness.

11 ‘‘(6) DETERMINATION OF STATUS OF PROP12 ERTIES.—To ensure compliance with the require13 ments of this subsection, the Secretary shall take the

14 following actions:

15 ‘‘(A) UPON ENACTMENT.—Upon the enact16 ment of this subsection, the Secretary shall

17 promptly assess each residential property owned

18 by the Secretary to determine whether such

19 property is a qualified HUD property.

20 ‘‘(B) UPON ACQUISITION.—Upon acquiring

21 any residential property, the Secretary shall

22 promptly determine whether the property is a

23 qualified HUD property.

24 ‘‘(C) UPDATES.—The Secretary shall peri25 odically reassess the residential properties
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1 owned by the Secretary to determine whether

2 any such properties have become qualified

3 HUD properties.

4 ‘‘(7) TENANT LEASES.—This subsection shall

5 not affect the terms or the enforceability of any con6 tract or lease entered into with respect to any resi7 dential property before the date that such property

8 becomes a qualified HUD property.

9 ‘‘(8) USE OF PROPERTY.—Property transferred

10 under this subsection shall be used only for appro11 priate neighborhood revitalization efforts, including

12 homeownership, rental units, commercial space, and

13 parks, consistent with local zoning regulations, local

14 building codes, and subdivision regulations and re15 strictions of record.

16 ‘‘(9) INAPPLICABILITY TO PROPERTIES MADE

17 AVAILABLE FOR HOMELESS.—Notwithstanding any

18 other provision of this subsection, this subsection

19 shall not apply to any properties that the Secretary

20 determines are to be made available for use by the

21 homeless pursuant to subpart E of part 291 of title

22 24, Code of Federal Regulations, during the period

23 that the properties are so available.

24 ‘‘(10) PROTECTION OF EXISTING CONTRACTS.—

25 This subsection may not be construed to alter, af-
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1 fect, or annul any legally binding obligations entered

2 into with respect to a qualified HUD property before

3 the property becomes a qualified HUD property.

4 ‘‘(11) DEFINITIONS.—For purposes of this sub5 section, the following definitions shall apply:

6 ‘‘(A) COMMUNITY DEVELOPMENT COR7 PORATION.—The term ‘community development

8 corporation’ means a nonprofit organization

9 whose primary purpose is to promote commu10 nity development by providing housing opportu11 nities for low-income families.

12 ‘‘(B) COST RECOVERY BASIS.—The term

13 ‘cost recovery basis’ means, with respect to any

14 sale of a residential property by the Secretary,

15 that the purchase price paid by the purchaser

16 is equal to or greater than the sum of: (i) the

17 appraised value of the property, as determined

18 in accordance with such requirements as the

19 Secretary shall establish; and (ii) the costs in20 curred by the Secretary in connection with such

21 property during the period beginning on the

22 date on which the Secretary acquires title to the

23 property and ending on the date on which the

24 sale is consummated.
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1 ‘‘(C) MULTIFAMILY HOUSING PROJECT.—

2 The term ‘multifamily housing project’ has the

3 meaning given the term in section 203 of the

4 Housing and Community Development Amend5 ments of 1978.

6 ‘‘(D) RESIDENTIAL PROPERTY.—The term

7 ‘residential property’ means a property that is

8 a multifamily housing project or a single family

9 property.

10 ‘‘(E) SECRETARY.—The term ‘Secretary’

11 means the Secretary of Housing and Urban De12 velopment.

13 ‘‘(F) SEVERE PHYSICAL PROBLEMS.—The

14 term ‘severe physical problems’ means, with re15 spect to a dwelling unit, that the unit—

16 ‘‘(i) lacks hot or cold piped water, a

17 flush toilet, or both a bathtub and a show18 er in the unit, for the exclusive use of that

19 unit;

20 ‘‘(ii) on not less than three separate

21 occasions during the preceding winter

22 months, was uncomfortably cold for a pe23 riod of more than 6 consecutive hours due

24 to a malfunction of the heating system for

25 the unit;
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1 ‘‘(iii) has no functioning electrical

2 service, exposed wiring, any room in which

3 there is not a functioning electrical outlet,

4 or has experienced three or more blown

5 fuses or tripped circuit breakers during the

6 preceding 90-day period;

7 ‘‘(iv) is accessible through a public

8 hallway in which there are no working

9 light fixtures, loose or missing steps or

10 railings, and no elevator; or

11 ‘‘(v) has severe maintenance problems,

12 including water leaks involving the roof,

13 windows, doors, basement, or pipes or

14 plumbing fixtures, holes or open cracks in

15 walls or ceilings, severe paint peeling or

16 broken plaster, and signs of rodent infesta17 tion.

18 ‘‘(G) SINGLE FAMILY PROPERTY.—The

19 term ‘single family property’ means a 1- to 4-

20 family residence.

21 ‘‘(H) SUBSTANDARD.—The term ‘sub22 standard’ means, with respect to a multifamily

23 housing project, that 25 percent or more of the

24 dwelling units in the project have severe phys25 ical problems.
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1 ‘‘(I) UNIT OF GENERAL LOCAL GOVERN2 MENT.—The term ‘unit of general local govern3 ment’ has the meaning given such term in sec4 tion 102(a) of the Housing and Community De5 velopment Act of 1974.

6 ‘‘(J) UNOCCUPIED.—The term ‘unoccu7 pied’ means, with respect to a residential prop8 erty, that the unit of general local government

9 having jurisdiction over the area in which the

10 project is located has certified in writing that

11 the property is not inhabited.

12 ‘‘(12) REGULATIONS.—

13 ‘‘(A) INTERIM.—Not later than 30 days

14 after the date of the enactment of this sub15 section, the Secretary shall issue such interim

16 regulations as are necessary to carry out this

17 subsection.

18 ‘‘(B) FINAL.—Not later than 60 days after

19 the date of the enactment of this subsection,

20 the Secretary shall issue such final regulations

21 as are necessary to carry out this subsection.’’.

22 SEC. 642. TRANSFER OF HUD ASSETS IN REVITALIZATION

23 AREAS.

24 In carrying out the program under section 204(h) of

25 the National Housing Act (12 U.S.C. 1710(h)), upon the
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1 request of the chief executive officer of a county or the

2 government of appropriate jurisdiction and not later than

3 60 days after such request is made, the Secretary of Hous4 ing and Urban Development shall designate as a revital5 ization area all portions of such county that meet the cri6 teria for such designation under paragraph (3) of such

7 section.

8 SEC. 643. RISK-SHARING DEMONSTRATION.

9 Section 249 of the National Housing Act (12 U.S.C.

10 1715z–14) is amended—

11 (1) by striking the section heading and insert12 ing the following:

13 ‘‘RISK-SHARING DEMONSTRATION’’;

14 (2) by striking ‘‘reinsurance’’ each place such

15 term appears and insert ‘‘risk-sharing’’;

16 (3) in subsection (a)—

17 (A) in the first sentence, by inserting ‘‘and

18 with insured community development financial

19 institutions’’ after ‘‘private mortgage insurers’’;

20 (B) in the second sentence—

21 (i) by striking ‘‘two’’ and inserting

22 ‘‘four’’; and

23 (ii) by striking ‘‘March 15, 1988’’ and

24 inserting ‘‘the expiration of the 5-year pe25 riod beginning on the date of the enact-
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1 ment of the Taxpayer Relief Act of 2000’’;

2 and

3 (C) in the third sentence—

4 (i) by striking ‘‘insured’’ and inserting

5 ‘‘for which risk of nonpayment is shared’’;

6 and

7 (ii) by striking ‘‘10 percent’’ and in8 serting ‘‘20 percent’’;

9 (4) in subsection (b)—

10 (A) in the first sentence—

11 (i) by striking ‘‘to provide’’ and in12 serting ‘‘, in providing’’;

13 (ii) by striking ‘‘through’’ and insert14 ing ‘‘, to enter into’’; and

15 (iii) by inserting ‘‘and with insured

16 community development financial institu17 tions’’ before the period at the end;

18 (B) in the second sentence, by inserting

19 ‘‘and insured community development financial

20 institutions’’ after ‘‘private mortgage insurance

21 companies’’;

22 (C) by striking paragraph (1) and insert23 ing the following new paragraph:

24 ‘‘(1) assume a secondary percentage of loss on

25 any mortgage insured pursuant to section 203(b),
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1 234, or 245 covering a one- to four-family dwelling,

2 which percentage of loss shall be set forth in the

3 risk-sharing contract, with the first percentage of

4 loss to be borne by the Secretary;’’; and

5 (D) in paragraph (2)—

6 (i) by striking ‘‘carry out (under ap7 propriate delegation) such’’ and inserting

8 ‘‘perform or delegate underwriting,’’;

9 (ii) by striking ‘‘function as the Sec10 retary pursuant to regulations,’’ and in11 serting ‘‘functions as the Secretary’’; and

12 (iii) by inserting before the period at

13 the end the following: ‘‘and shall set forth

14 in the risk-sharing contract’’;

15 (5) in subsection (c)—

16 (A) in the first sentence—

17 (i) by striking ‘‘of’’ the first place it

18 appears and inserting ‘‘for’’;

19 (ii) by inserting ‘‘received by the Sec20 retary with a private mortgage insurer or

21 insured community development financial

22 institution’’ after ‘‘sharing of premiums’’

23 (iii) by striking ‘‘insurance reserves’’

24 and inserting ‘‘loss reserves’’;
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1 (iv) by striking ‘‘such insurance’’ and

2 inserting ‘‘such risk-sharing contract’’; and

3 (v) by striking ‘‘right’’ and inserting

4 ‘‘rights’’; and

5 (B) in the second sentence—

6 (i) by inserting ‘‘or insured commu7 nity development financial institution’’

8 after ‘‘private mortgage insurance com9 pany’’; and

10 (ii) by striking ‘‘for insurance’’ and

11 inserting ‘‘for risk-sharing’’;

12 (6) in subsection (d), by inserting ‘‘or insured

13 community development financial institution’’ after

14 ‘‘private mortgage insurance company’’; and

15 (7) by adding at the end the following new sub16 section:

17 ‘‘(e) INSURED COMMUNITY DEVELOPMENT FINAN18 CIAL INSTITUTION.—For purposes of this section, the

19 term ‘insured community development financial institu20 tion’ means a community development financial institu21 tion, as such term is defined in section 103 of Reigle Com22 munity Development and Regulatory Improvement Act of

23 1994 (12 U.S.C. 4702) that is an insured depository insti24 tution (as such term is defined in section 3 of the Federal

25 Deposit Insurance Act (12 U.S.C. 1813)) or an insured
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1 credit union (as such term is defined in section 101 of

2 the Federal Credit Union Act (12 U.S.C. 1752)).’’.

3 SEC. 644. PREVENTION AND TREATMENT OF SUBSTANCE

4 ABUSE; SERVICES PROVIDED THROUGH RELI5 GIOUS ORGANIZATIONS.

6 Title V of the Public Health Service Act (42 U.S.C.

7 290aa et seq.) is amended by adding at the end the fol8 lowing part:

9 ‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS

10 ORGANIZATIONS

11 ‘‘SEC. 581. APPLICABILITY TO DESIGNATED PROGRAMS.

12 ‘‘(a) DESIGNATED PROGRAMS.—Subject to sub13 section (b), this part applies to discretionary and formula

14 grant programs administered by the Substance Abuse and

15 Mental Health Services Administration that make awards

16 of financial assistance to public or private entities for the

17 purpose of carrying out activities to prevent or treat sub18 stance abuse (in this part referred to as a ‘designated pro19 gram’). Designated programs include the program under

20 subpart II of part B of title XIX (relating to formula

21 grants to the States).

22 ‘‘(b) LIMITATION.—This part does not apply to any

23 award of financial assistance under a designated program

24 for a purpose other than the purpose specified in sub25 section (a).
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1 ‘‘(c) DEFINITIONS.—For purposes of this part (and

2 subject to subsection (b)):

3 ‘‘(1) The term ‘designated program’ has the

4 meaning given such term in subsection (a).

5 ‘‘(2) The term ‘financial assistance’ means a

6 grant, cooperative agreement, or contract.

7 ‘‘(3) The term ‘program beneficiary’ means an

8 individual who receives program services.

9 ‘‘(4) The term ‘program participant’ means a

10 public or private entity that has received financial

11 assistance under a designated program.

12 ‘‘(5) The term ‘program services’ means treat13 ment for substance abuse, or preventive services re14 garding such abuse, provided pursuant to an award

15 of financial assistance under a designated program.

16 ‘‘(6) The term ‘religious organization’ means a

17 nonprofit religious organization.

18 ‘‘SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PAR19 TICIPANTS.

20 ‘‘(a) IN GENERAL.—Notwithstanding any other pro21 vision of law, a religious organization, on the same basis

22 as any other nonprofit private provider—

23 ‘‘(1) may receive financial assistance under a

24 designated program; and
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1 ‘‘(2) may be a provider of services under a des2 ignated program.

3 ‘‘(b) RELIGIOUS ORGANIZATIONS.—The purpose of

4 this section is to allow religious organizations to be pro5 gram participants on the same basis as any other non6 profit private provider without impairing the religious

7 character of such organizations, and without diminishing

8 the religious freedom of program beneficiaries.

9 ‘‘(c) NONDISCRIMINATION AGAINST RELIGIOUS OR10 GANIZATIONS.—

11 ‘‘(1) ELIGIBILITY AS PROGRAM PARTICI12 PANTS.—Religious organizations are eligible to be

13 program participants on the same basis as any other

14 nonprofit private organization as long as the pro15 grams are implemented consistent with the Estab16 lishment Clause and Free Exercise Clause of the

17 First Amendment to the United States Constitution.

18 Nothing in this Act shall be construed to restrict the

19 ability of the Federal Government, or a State or

20 local government receiving funds under such pro21 grams, to apply to religious organizations the same

22 eligibility conditions in designated programs as are

23 applied to any other nonprofit private organization.

24 ‘‘(2) NONDISCRIMINATION.—Neither the Fed25 eral Government nor a State or local government re-
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1 ceiving funds under designated programs shall dis2 criminate against an organization that is or applies

3 to be a program participant on the basis that the or4 ganization has a religious character.

5 ‘‘(d) RELIGIOUS CHARACTER AND FREEDOM.—

6 ‘‘(1) RELIGIOUS ORGANIZATIONS.—Except as

7 provided in this section, any religious organization

8 that is a program participant shall retain its inde9 pendence from Federal, State, and local government,

10 including such organization’s control over the defini11 tion, development, practice, and expression of its re12 ligious beliefs.

13 ‘‘(2) ADDITIONAL SAFEGUARDS.—Neither the

14 Federal Government nor a State shall require a reli15 gious organization to—

16 ‘‘(A) alter its form of internal governance;

17 or

18 ‘‘(B) remove religious art, icons, scripture,

19 or other symbols,

20 in order to be a program participant.

21 ‘‘(e) EMPLOYMENT PRACTICES.—Nothing in this sec22 tion shall be construed to modify or affect the provisions

23 of any other Federal or State law or regulation that re24 lates to discrimination in employment. A religious organi25 zation’s exemption provided under section 702 of the Civil
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1 Rights Act of 1964 regarding employment practices shall

2 not be affected by its participation in, or receipt of funds

3 from, a designated program.

4 ‘‘(f) RIGHTS OF PROGRAM BENEFICIARIES.—

5 ‘‘(1) IN GENERAL.—If an individual who is a

6 program beneficiary or a prospective program bene7 ficiary objects to the religious character of a pro8 gram participant, within a reasonable period of time

9 after the date of such objection such program partic10 ipant shall refer such individual to, and the appro11 priate Federal, State, or local government that ad12 ministers a designated program or is a program par13 ticipant shall provide to such individual (if otherwise

14 eligible for such services), program services that—

15 ‘‘(A) are from an alternative provider that

16 is accessible to, and has the capacity to provide

17 such services to, such individual; and

18 ‘‘(B) have a value that is not less than the

19 value of the services that the individual would

20 have received from the program participant to

21 which the individual had such objection.

22 Upon referring a program beneficiary to an alter23 native provider, the program participant shall notify

24 the appropriate Federal, State, or local government
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1 agency that administers the program of such refer2 ral.

3 ‘‘(2) NOTICES.—Program participants, public

4 agencies that refer individuals to designated pro5 grams, and the appropriate Federal, State, or local

6 governments that administer designated programs or

7 are program participants shall ensure that notice is

8 provided to program beneficiaries or prospective pro9 gram beneficiaries of their rights under this section.

10 ‘‘(3) ADDITIONAL REQUIREMENTS.—A program

11 participant making a referral pursuant to paragraph

12 (1) shall—

13 ‘‘(A) prior to making such referral, con14 sider any list that the State or local government

15 makes available of entities in the geographic

16 area that provide program services; and

17 ‘‘(B) ensure that the individual makes con18 tact with the alternative provider to which the

19 individual is referred.

20 ‘‘(4) NONDISCRIMINATION.—A religious organi21 zation that is a program participant shall not in pro22 viding program services or engaging in outreach ac23 tivities under designated programs discriminate

24 against a program beneficiary or prospective pro-
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1 gram beneficiary on the basis of religion or religious

2 belief.

3 ‘‘(g) FISCAL ACCOUNTABILITY.—

4 ‘‘(1) IN GENERAL.—Except as provided in para5 graph (2), any religious organization that is a pro6 gram participant shall be subject to the same regula7 tions as other recipients of awards of Federal finan8 cial assistance to account, in accordance with gen9 erally accepted auditing principles, for the use of the

10 funds provided under such awards.

11 ‘‘(2) LIMITED AUDIT.—With respect to the

12 award involved, a religious organization that is a

13 program participant shall segregate Federal

14 amounts provided under award into a separate ac15 count from non-Federal funds. Only the award funds

16 shall be subject to audit by the government.

17 ‘‘(h) COMPLIANCE.—With respect to compliance with

18 this section by an agency, a religious organization may

19 obtain judicial review of agency action in accordance with

20 chapter 7 of title 5, United States Code.

21 ‘‘SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN

22 PURPOSES.

23 ‘‘No funds provided under a designated program shall

24 be expended for sectarian worship, instruction, or pros25 elytization.
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1 ‘‘SEC. 584. EDUCATIONAL REQUIREMENTS FOR PERSONNEL

2 IN DRUG TREATMENT PROGRAMS.

3 ‘‘(a) FINDINGS.—The Congress finds that—

4 ‘‘(1) establishing unduly rigid or uniform edu5 cational qualification for counselors and other per6 sonnel in drug treatment programs may undermine

7 the effectiveness of such programs; and

8 ‘‘(2) such educational requirements for coun9 selors and other personnel may hinder or prevent the

10 provision of needed drug treatment services.

11 ‘‘(b) NONDISCRIMINATION.—In determining whether

12 personnel of a program participant that has a record of

13 successful drug treatment for the preceding three years

14 have satisfied State or local requirements for education

15 and training, a State or local government shall not dis16 criminate against education and training provided to such

17 personnel by a religious organization, so long as such edu18 cation and training includes basic content substantially

19 equivalent to the content provided by nonreligious organi20 zations that the State or local government would credit

21 for purposes of determining whether the relevant require22 ments have been satisfied.’’.
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1 Subtitle F—Other Provisions

2 SEC. 651. ACCELERATION OF PHASE-IN OF INCREASE IN

3 VOLUME CAP ON PRIVATE ACTIVITY BONDS.

4 (a) IN GENERAL.—Paragraphs (1) and (2) of section

5 146(d) (relating to State ceiling) are amended to read as

6 follows:

7 ‘‘(1) IN GENERAL.—The State ceiling applicable

8 to any State for any calendar year shall be the

9 greater of—

10 ‘‘(A) an amount equal to $75 ($62.50 in

11 the case of calendar year 2001) multiplied by

12 the State population, or

13 ‘‘(B) $225,000,000 ($187,500,000 in the

14 case of calendar year 2001).

15 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—In the

16 case of a calendar year after 2002, each of the dollar

17 amounts contained in paragraph (1) shall be in18 creased by an amount equal to—

19 ‘‘(A) such dollar amount, multiplied by

20 ‘‘(B) the cost-of-living adjustment deter21 mined under section 1(f)(3) for such calendar

22 year by substituting ‘calendar year 2001’ for

23 ‘calendar year 1992’ in subparagraph (B)

24 thereof.
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1 If any increase determined under the preceding sen2 tence is not a multiple of $5 ($5,000 in the case of

3 the dollar amount in paragraph (1)(B)), such in4 crease shall be rounded to the nearest multiple

5 thereof.’’.

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

7 this section shall apply to calendar years after 2000.

8 SEC. 652. MODIFICATIONS TO EXPENSING OF ENVIRON9 MENTAL REMEDIATION COSTS.

10 (a) EXPENSING NOT LIMITED TO SITES IN TAR11 GETED AREAS.—Subsection (c) of section 198 is amended

12 to read as follows:

13 ‘‘(c) QUALIFIED CONTAMINATED SITE.—For pur14 poses of this section—

15 ‘‘(1) IN GENERAL.—The term ‘qualified con16 taminated site’ means any area—

17 ‘‘(A) which is held by the taxpayer for use

18 in a trade or business or for the production of

19 income, or which is property described in sec20 tion 1221(a)(1) in the hands of the taxpayer,

21 and

22 ‘‘(B) at or on which there has been a re23 lease (or threat of release) or disposal of any

24 hazardous substance.
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1 ‘‘(2) NATIONAL PRIORITIES LISTED SITES NOT

2 INCLUDED.—Such term shall not include any site

3 which is on, or proposed for, the national priorities

4 list under section 105(a)(8)(B) of the Comprehen5 sive Environmental Response, Compensation, and

6 Liability Act of 1980 (as in effect on the date of the

7 enactment of this section).

8 ‘‘(3) TAXPAYER MUST RECEIVE STATEMENT

9 FROM STATE ENVIRONMENTAL AGENCY.—An area

10 shall be treated as a qualified contaminated site with

11 respect to expenditures paid or incurred during any

12 taxable year only if the taxpayer receives a state13 ment from the appropriate agency of the State in

14 which such area is located that such area meets the

15 requirement of paragraph (1)(B).

16 ‘‘(4) APPROPRIATE STATE AGENCY.—For pur17 poses of paragraph (3), the chief executive officer of

18 each State may, in consultation with the Adminis19 trator of the Environmental Protection Agency, des20 ignate the appropriate State environmental agency

21 within 60 days of the date of the enactment of this

22 section. If the chief executive officer of a State has

23 not designated an appropriate environmental agency

24 within such 60-day period, the appropriate environ25 mental agency for such State shall be designated by
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1 the Administrator of the Environmental Protection

2 Agency.’’.

3 (b) EXTENSION OF TERMINATION DATE.—Sub4 section (h) of section 198 is amended by striking ‘‘2001’’

5 and inserting ‘‘2003’’.

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

7 this section shall apply to expenditures paid or incurred

8 after the date of the enactment of this Act.

9 SEC. 653. EXTENSION OF DC HOMEBUYER TAX CREDIT.

10 Section 1400C(i) (relating to application of section)

11 is amended by striking ‘‘2002’’ and inserting ‘‘2004’’.

12 TITLE VII—ADMINISTRATIVE,

13 MISCELLANEOUS, AND TECH14 NICAL PROVISIONS

15 Subtitle A—Administrative

16 Provisions

17 SEC. 701. EXEMPTION OF CERTAIN REPORTING REQUIRE18 MENTS.

19 Section 3003(a)(1) of the Federal Reports Elimi20 nation and Sunset Act of 1995 (31 U.S.C. 1113 note)

21 shall not apply to any report required to be submitted

22 under any of the following provisions of law:

23 (1) Section 13031(f) of the Consolidated Omni24 bus Budget Reconciliation Act of 1985 (19 U.S.C.

25 58c(f)).
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1 (2) Section 16(c) of the Foreign Trade Zones

2 Act (19 U.S.C. 81p(c)).

3 (3) The following provisions of the Tariff Act of

4 1930:

5 (A) Section 330(c)(1) (19 U.S.C.

6 1330(c)(1)).

7 (B) Section 607(c) (19 U.S.C. 1607(c)).

8 (4) Section 5 of the International Coffee Agree9 ment Act of 1980 (19 U.S.C. 1356n).

10 (5) Section 351(a)(2) of the Trade Expansion

11 Act of 1962 (19 U.S.C. 1981(a)(2)).

12 (6) Section 502 of the Automotive Products

13 Trade Act of 1965 (19 U.S.C. 2032).

14 (7) Section 3131 of the Customs Enforcement

15 Act of 1986 (19 U.S.C. 2081).

16 (8) The following provisions of the Trade Act of

17 1974 (19 U.S.C. 2101 et seq.):

18 (A) Section 102(b)(4)(A)(ii)(I) (19 U.S.C.

19 2112(b)(4)(A)(ii)(I)).

20 (B) Section 102(e)(1) (19 U.S.C.

21 2112(e)(1)).

22 (C) Section 102(e)(2) (19 U.S.C.

23 2112(e)(2)).

24 (D) Section 104(d) (19 U.S.C. 2114(d)).

25 (E) Section 125(e) (19 U.S.C. 2135(e)).
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1 (F) Section 135(e)(1) (19 U.S.C.

2 2155(e)(1)).

3 (G) Section 141(c) (19 U.S.C. 2171(c)).

4 (H) Section 162 (19 U.S.C. 2212).

5 (I) Section 163(b) (19 U.S.C. 2213(b)).

6 (J) Section 163(c) (19 U.S.C. 2213(c)).

7 (K) Section 203(b) (19 U.S.C. 2253(b)).

8 (L) Section 302(b)(2)(C) (19 U.S.C.

9 2412(b)(2)(C)).

10 (M) Section 303 (19 U.S.C. 2413).

11 (N) Section 309 (19 U.S.C. 2419).

12 (O) Section 407(a) (19 U.S.C. 2437(a)).

13 (P) Section 502(f) (19 U.S.C. 2462(f)).

14 (Q) Section 504 (19 U.S.C. 2464).

15 (9) The following provisions of the Trade

16 Agreements Act of 1979 (19 U.S.C. 2501 et seq.):

17 (A) Section 2(b) (19 U.S.C. 2503(b)).

18 (B) Section 3(c) (19 U.S.C. 2504(c)).

19 (C) Section 305(c) (19 U.S.C. 2515(c)).

20 (10) Section 303(g)(1) of the Convention on

21 Cultural Property Implementation Act (19 U.S.C.

22 2602(g)(1)).

23 (11) The following provisions of the Caribbean

24 Basin Economic Recovery Act (19 U.S.C. 2701 et

25 seq.):
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1 (A) Section 212(a)(1)(A) (19 U.S.C.

2 2702(a)(1)(A)).

3 (B) Section 212(a)(2) (19 U.S.C.

4 2702(a)(2)).

5 (12) The following provisions of the Omnibus

6 Trade and Competitiveness Act of 1988 (19 U.S.C.

7 2901 et seq.):

8 (A) Section 1102 (19 U.S.C. 2902).

9 (B) Section 1103 (19 U.S.C. 2903).

10 (C) Section 1206(b) (19 U.S.C. 3006(b)).

11 (13) Section 123(a) of the Customs and Trade

12 Act of 1990 (Public Law 101–382) (19 U.S.C.

13 2083).

14 (14) Section 243(b)(2) of the Caribbean Basin

15 Economic Recovery Expansion Act of 1990 (Public

16 Law 101–382).

17 (15) The following provisions of the Internal

18 Revenue Code of 1986:

19 (A) Section 6103(p)(5).

20 (B) Section 7608.

21 (C) Section 7802(f)(3).

22 (D) Section 8022(3).

23 (E) Section 9602(a).

24 (16) The following provisions relating to the

25 revenue laws of the United States:
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1 (A) Section 1552(c) of the Tax Reform

2 Act of 1986 (100 Stat. 2753).

3 (B) Section 231 of the Deficit Reduction

4 Act of 1984 (26 U.S.C. 801 note).

5 (C) Section 208 of the Tax Treatment Ex6 tension Act of 1977 (26 U.S.C. 911 note).

7 (D) Section 7105 of the Technical and

8 Miscellaneous Revenue Act of 1988 (45 U.S.C.

9 369).

10 (17) Section 4008 of the Employee Retirement

11 Income Security Act of 1974 (29 U.S.C. 1308).

12 (18) Section 426 of the Black Lung Benefits

13 Act (30 U.S.C. 936(b)).

14 (19) Section 7502(g) of title 31, United States

15 Code.

16 (20) The following provisions of the Social Se17 curity Act:

18 (A) Section 215(i)(2)(C)(i) (42 U.S.C.

19 415(i)(2)(C)(i)).

20 (B) Section 221(i)(2) (42 U.S.C.

21 421(i)(2)).

22 (C) Section 221(i)(3) (42 U.S.C.

23 421(i)(3)).

24 (D) Section 233(e)(1) (42 U.S.C.

25 433(e)(1)).
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1 (E) Section 452(a)(10) (42 U.S.C.

2 652(a)(10)).

3 (F) Section 452(g)(3)(B) (42 U.S.C.

4 652(g)(3)(B)).

5 (G) Section 506(a)(1) (42 U.S.C. 706(a)).

6 (H) Section 908 (42 U.S.C. 1108).

7 (I) Section 1114(f) (42 U.S.C. 1314(f)).

8 (J) Section 1120 (42 U.S.C. 1320).

9 (K) Section 1161 (42 U.S.C. 1320c–10).

10 (L) Section 1875(b) (42 U.S.C. 1395ll(b)).

11 (M) Section 1881 (42 U.S.C. 1395rr).

12 (N) Section 1882 (42 U.S.C.

13 1395ss(f)(2)).

14 (21) Section 104(b) of the Social Security Inde15 pendence and Program Improvements Act of 1994

16 (42 USC 904 note).

17 (22) Section 10 of the Railroad Retirement Act

18 of 1937 (45 U.S.C. 231f).

19 (23) The following provisions of the Railroad

20 Retirement Act of 1974:

21 (A) Section 22(a)(1) (45 U.S.C.

22 231u(a)(1)).

23 (B) Section 22(b)(1) (45 U.S.C.

24 231u(b)(1)).
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1 (24) Section 502 of the Railroad Retirement

2 Solvency Act of 1983 (45 U.S.C. 231f-1).

3 (25) Section 47121(c) of title 49, United States

4 Code.

5 (26) The following provisions of the Omnibus

6 Budget Reconciliation Act of 1987 (Public Law

7 100–203; 101 Stat. 1330-182):

8 (A) Section 4007(c)(4) (42 U.S.C. 1395ww

9 note).

10 (B) Section 4079 (42 U.S.C. 1395mm

11 note).

12 (C) Section 4205 (42 U.S.C. 1395i–3

13 note).

14 (D) Section 4215 (42 U.S.C. 1396r note).

15 (27) The following provisions of the Inspector

16 General Act of 1978 (Public Law 95–452):

17 (A) Section 5(b).

18 (B) Section 5(d).

19 (28) The following provisions of the Public

20 Health Service Act:

21 (A) In section 308(a) (42 U.S.C.

22 242m(a)), subparagraphs (A), (B), (C), and

23 (D) of paragraph (1).

24 (B) Section 403 (42 U.S.C. 283).
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1 (29) Section 404 of the Health Services and

2 Centers Amendments of 1978 (42 U.S.C. 242p)

3 (Public Law 95–626).

4 (30) The following provisions of the Older

5 Americans Act of 1965:

6 (A) Section 206(d) (42 U.S.C. 3017(d)).

7 (B) Section 207 (42 U.S.C. 3018).

8 (31) Section 308 of the Age Discrimination Act

9 of 1975 (42 U.S.C. 6106a(b)).

10 (32) Section 509(c)(3) of the Americans with

11 Disabilities Act 0f 1990 (42 U.S.C. 12209(c)(3)).

12 (33) Section 4207(f) of the Omnibus Budget

13 Reconciliation Act of 1990 (42 U.S.C. 1395b–1

14 note).

15 SEC. 702. EXTENSION OF DEADLINES FOR IRS COMPLIANCE

16 WITH CERTAIN NOTICE REQUIREMENTS.

17 (a) ANNUAL INSTALLMENT AGREEMENT NOTICE.—

18 Section 3506 of the Internal Revenue Service Restruc19 turing and Reform Act of 1998 is amended by striking

20 ‘‘July 1, 2000’’ and inserting ‘‘September 1, 2001’’.

21 (b) NOTICE REQUIREMENTS RELATING TO COM22 PUTATION OF PENALTY.—Subsection (c) of section 3306

23 of the Internal Revenue Service Restructuring and Reform

24 Act of 1998 is amended—
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1 (1) by striking ‘‘December 31, 2000’’ and in2 serting ‘‘June 30, 2001’’, and

3 (2) by adding at the end the following: ‘‘In the

4 case of any notice of penalty issued after June 30,

5 2001, and before July 1, 2003, the requirements of

6 section 6751(a) of the Internal Revenue Code of

7 1986 shall be treated as met if such notice contains

8 a telephone number at which the taxpayer can re9 quest a copy of the taxpayer’s assessment and pay10 ment history with respect to such penalty.’’.

11 (c) NOTICE REQUIREMENTS RELATING TO INTEREST

12 IMPOSED.—Subsection (c) of section 3308 of the Internal

13 Revenue Service Restructuring and Reform Act of 1998

14 is amended—

15 (1) by striking ‘‘December 31, 2000’’ and in16 serting ‘‘June 30, 2001’’, and

17 (2) by adding at the end the following: ‘‘In the

18 case of any notice issued after June 30, 2001, and

19 before July 1, 2003, to which section 6631 of the

20 Internal Revenue Code of 1986 applies, the require21 ments of section 6631 of such Code shall be treated

22 as met if such notice contains a telephone number

23 at which the taxpayer can request a copy of the tax24 payer’s payment history relating to interest amounts

25 included in such notice.’’.
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1 SEC. 703. EXTENSION OF AUTHORITY FOR UNDERCOVER

2 OPERATIONS.

3 Paragraph (6), and the last sentence, of section

4 7608(c) are each amended by striking ‘‘January 1, 2001’’

5 and inserting ‘‘January 1, 2006’’.

6 SEC. 704. CONFIDENTIALITY OF CERTAIN DOCUMENTS RE7 LATING TO CLOSING AND SIMILAR AGREE8 MENTS AND TO AGREEMENTS WITH FOREIGN

9 GOVERNMENTS.

10 (a) CLOSING AND SIMILAR AGREEMENTS TREATED

11 AS RETURN INFORMATION.—Paragraph (2) of section

12 6103(b) (defining return information) is amended by

13 striking ‘‘and’’ at the end of subparagraph (B), by insert14 ing ‘‘and’’ at the end of subparagraph (C), and by insert15 ing after subparagraph (C) the following new subpara16 graph:

17 ‘‘(D) any agreement under section 7121,

18 and any similar agreement, and any back19 ground information related to such an agree20 ment or request for such an agreement,’’.

21 (b) AGREEMENTS WITH FOREIGN GOVERNMENTS.—

22 (1) IN GENERAL.—Subchapter B of chapter 61

23 (relating to miscellaneous provisions) is amended by

24 inserting after section 6104 the following new sec25 tion:
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1 ‘‘SEC. 6105. CONFIDENTIALITY OF INFORMATION ARISING

2 UNDER TREATY OBLIGATIONS.

3 ‘‘(a) IN GENERAL.—Tax convention information shall

4 not be disclosed.

5 ‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply—

6 ‘‘(1) to the disclosure of tax convention infor7 mation to persons or authorities (including courts

8 and administrative bodies) which are entitled to such

9 disclosure pursuant to a tax convention,

10 ‘‘(2) to any generally applicable procedural

11 rules regarding applications for relief under a tax

12 convention, or

13 ‘‘(3) in any case not described in paragraphs

14 (1) or (2), to the disclosure of any tax convention

15 information not relating to a particular taxpayer if

16 the Secretary determines, after consultation with

17 each other party to the tax convention, that such

18 disclosure would not impair tax administration.

19 ‘‘(c) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) TAX CONVENTION INFORMATION.—The

21 term ‘tax convention information’ means any—

22 ‘‘(A) agreement entered into with the com23 petent authority of one or more foreign govern24 ments pursuant to a tax convention,

25 ‘‘(B) application for relief under a tax con26 vention,
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1 ‘‘(C) any background information related

2 to such agreement or application,

3 ‘‘(D) document implementing such agree4 ment, and

5 ‘‘(E) any other information exchanged pur6 suant to a tax convention which is treated as

7 confidential or secret under the tax convention.

8 ‘‘(2) TAX CONVENTION.—The term ‘tax conven9 tion’ means—

10 ‘‘(A) any income tax or gift and estate tax

11 convention, or

12 ‘‘(B) any other convention or bilateral

13 agreement (including multilateral conventions

14 and agreements and any agreement with a pos15 session of the United States) providing for the

16 avoidance of double taxation, the prevention of

17 fiscal evasion, nondiscrimination with respect to

18 taxes, the exchange of tax relevant information

19 with the United States, or mutual assistance in

20 tax matters.

21 ‘‘(d) CROSS REFERENCES.—

‘‘For penalties for the unauthorized disclosure of

tax convention information which is return or return information, see sections 7213, 7213A, and

7431.’’.

22 (2) CLERICAL AMENDMENT.—The table of sec23 tions for subchapter B of chapter 61 is amended by
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1 inserting after the item relating to section 6104 the

2 following new item:

‘‘Sec. 6105. Confidentiality of information arising under treaty

obligations.’’.

3 (c) EXCEPTION FROM PUBLIC INSPECTION AS WRIT4 TEN DETERMINATION.—

5 (1) CLOSING AND SIMILAR AGREEMENTS.—

6 Paragraph (1) of section 6110(b) is amended to

7 read as follows:

8 ‘‘(1) WRITTEN DETERMINATION.—

9 ‘‘(A) IN GENERAL.—The term ‘written de10 termination’ means a ruling, determination let11 ter, technical advice memorandum, or Chief

12 Counsel advice.

13 ‘‘(B) EXCEPTIONS.—Such term shall not

14 include any matter referred to in subparagraph

15 (C) or (D) of section 6103(b)(2).’’.

16 (2) AGREEMENTS WITH FOREIGN GOVERN17 MENTS.—Paragraph (1) of section 6110(l) is amend18 ed by inserting ‘‘or 6105’’ after ‘‘6104’’.

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

20 this section shall take effect on the date of the enactment

21 of this Act.
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1 SEC. 705. INCREASE IN THRESHOLD FOR JOINT COM2 MITTEE REPORTS ON REFUNDS AND CRED3 ITS.

4 (a) GENERAL RULE.—Subsections (a) and (b) of sec5 tion 6405 are each amended by striking ‘‘$1,000,000’’ and

6 inserting ‘‘$2,000,000’’.

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

8 subsection (a) shall take effect on the date of the enact9 ment of this Act, except that such amendment shall not

10 apply with respect to any refund or credit with respect

11 to a report that has been made before such date of the

12 enactment under section 6405 of the Internal Revenue

13 Code of 1986.

14 SEC. 706. TREATMENT OF MISSING CHILDREN WITH RE15 SPECT TO CERTAIN TAX BENEFITS.

16 (a) IN GENERAL.—Subsection (c) of section 151 (re17 lating to additional exemption for dependents) is amended

18 by adding at the end the following new paragraph:

19 ‘‘(6) TREATMENT OF MISSING CHILDREN.—

20 ‘‘(A) IN GENERAL.—Solely for the pur21 poses referred to in subparagraph (B), a child

22 of the taxpayer—

23 ‘‘(i) who is presumed by law enforce24 ment authorities to have been kidnapped

25 by someone who is not a member of the

26 family of such child or the taxpayer, and
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1 ‘‘(ii) who was (without regard to this

2 paragraph) the dependent of the taxpayer

3 for the portion of the taxable year before

4 the date of the kidnapping,

5 shall be treated as a dependent of the taxpayer

6 for all taxable years ending during the period

7 that the child is kidnapped.

8 ‘‘(B) PURPOSES.—Subparagraph (A) shall

9 apply solely for purposes of determining—

10 ‘‘(i) the deduction under this section,

11 ‘‘(ii) the credit under section 24 (re12 lating to child tax credit), and

13 ‘‘(iii) whether an individual is a sur14 viving spouse or a head of a household

15 (such terms are defined in section 2).

16 ‘‘(C) COMPARABLE TREATMENT FOR

17 EARNED INCOME CREDIT.—For purposes of sec18 tion 32, an individual—

19 ‘‘(i) who is presumed by law enforce20 ment authorities to have been kidnapped

21 by someone who is not a member of the

22 family of such individual or the taxpayer,

23 and

24 ‘‘(ii) who had, for the taxable year in

25 which the kidnapping occurred, the same
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1 principal place of abode as the taxpayer for

2 more than one-half of the portion of such

3 year before the date of the kidnapping,

4 shall be treated as meeting the requirement of

5 section 32(c)(3)(A)(ii) with respect to a tax6 payer for all taxable years ending during the

7 period that the individual is kidnapped.

8 ‘‘(D) TERMINATION OF TREATMENT.—

9 Subparagraphs (A) and (C) shall cease to apply

10 as of the first taxable year of the taxpayer be11 ginning after the calendar year in which there

12 is a determination that the child is dead (or, if

13 earlier, in which the child would have attained

14 age 18).’’

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

16 this section shall apply to taxable years ending after the

17 date of the enactment of this Act.

18 SEC. 707. AMENDMENTS TO STATUTES REFERENCING

19 YIELD ON 52-WEEK TREASURY BILLS.

20 (a) AMENDMENT TO THE ACT OF FEBRUARY 26,

21 1931.—Section 6 of the Act of February 26, 1931 (40

22 U.S.C. 258e–1) (relating to the interest rate on compensa23 tion owed for takings of property) is amended—

24 (1) in paragraph (1), by striking ‘‘the coupon

25 issue yield equivalent (as determined by the Sec-
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1 retary of the Treasury) of the average accepted auc2 tion price for the last auction of 52 week United

3 States Treasury bills settled immediately before’’

4 and inserting ‘‘the weekly average 1-year constant

5 maturity Treasury yield, as published by the Board

6 of Governors of the Federal Reserve System, for the

7 calendar week preceding’’; and

8 (2) in paragraph (2), by striking ‘‘the coupon

9 issue yield equivalent (as determined by the Sec10 retary of the Treasury) of the average accepted auc11 tion price for the last auction of 52 week United

12 States Treasury bills settled immediately before’’

13 and inserting ‘‘the weekly average 1-year constant

14 maturity Treasury yield, as published by the Board

15 of Governors of the Federal Reserve System, for the

16 calendar week preceding’’.

17 (b) AMENDMENT TO TITLE 18, UNITED STATES

18 CODE.—Section 3612(f)(2)(B) of title 18, United States

19 Code (relating to the interest rate on unpaid criminal fines

20 and penalties of more than $2,500) is amended by striking

21 ‘‘the coupon issue yield equivalent (as determined by the

22 Secretary of the Treasury) of the average accepted auction

23 price for the last auction of fifty-two week United States

24 Treasury bills settled before’’ and inserting ‘the weekly av25 erage 1-year constant maturity Treasury yield, as pub-
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1 lished by the Board of Governors of the Federal Reserve

2 System, for the calendar week preceding.’’.

3 (c) AMENDMENT TO THE INTERNAL REVENUE

4 CODE.—Section 995(f)(4) (relating to the interest rate on

5 tax-deferred liability of shareholders of domestic inter6 national sales corporations) is amended by striking ‘‘the

7 average investment yield of United States Treasury bills

8 with maturities of 52 weeks which were auctioned during

9 the 1-year period’’ and inserting ‘‘the average of the 1-

10 year constant maturity Treasury yields, as published by

11 the Board of Governors of the Federal Reserve System,

12 for the 1-year period’’.

13 (d) AMENDMENTS TO TITLE 28, UNITED STATES

14 CODE.—

15 (1) AMENDMENT TO SECTION 1961.—Section

16 1961(a) of title 28, United States Code (relating to

17 the interest rate on money judgments in civil cases

18 recovered in Federal district court) is amended by

19 striking ‘‘the coupon issue yield equivalent (as deter20 mined by the Secretary of the Treasury) of the aver21 age accepted auction price for the last auction of

22 fifty-two week United States Treasury bills settled

23 immediately prior to’’ and inserting ‘‘the weekly av24 erage 1-year constant maturity Treasury yield, as
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1 published by the Board of Governors of the Federal

2 Reserve System, for the calendar week preceding.’’.

3 (2) AMENDMENT TO SECTION 2516.—Section

4 2516(b) of title 28, United States Code (relating to

5 the interest rate on a judgment against the United

6 States affirmed by the Supreme Court after review

7 on petition of the United States) is amended by

8 striking ‘‘the coupon issue yield equivalent (as deter9 mined by the Secretary of the Treasury) of the aver10 age accepted auction price for the last auction of

11 fifty-two week United States Treasury bills settled

12 immediately before’’ and inserting ‘‘the weekly aver13 age 1-year constant maturity Treasury yield, as pub14 lished by the Board of Governors of the Federal Re15 serve System, for the calendar week preceding’’.

16 SEC. 708. ADJUSTMENTS FOR CONSUMER PRICE INDEX

17 ERROR.

18 (a) DETERMINATIONS BY OMB.—As soon as prac19 ticable after the date of the enactment of this Act, the

20 Director of the Office of Management and Budget shall

21 determine with respect to each applicable Federal benefit

22 program whether the CPI computation error for 1999 has

23 or will result in a shortfall in payments to beneficiaries

24 under such program (as compared to payments that would

25 have been made if the error had not occurred). As soon
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1 as practicable after the date of the enactment of this Act,

2 but not later than 60 days after such date, the Director

3 shall direct the head of the Federal agency which admin4 isters such program to make a payment or payments that,

5 insofar as the Director finds practicable and feasible—

6 (1) are targeted to the amount of the shortfall

7 experienced by individual beneficiaries, and

8 (2) compensate for the shortfall.

9 (b) COORDINATION WITH FEDERAL AGENCIES.—As

10 soon as practicable after the date of the enactment of this

11 Act, each Federal agency that administers an applicable

12 Federal benefit program shall, in accordance with such

13 guidelines as are issued by the Director pursuant to this

14 section, make an initial determination of whether, and the

15 extent to which, the CPI computation error for 1999 has

16 or will result in a shortfall in payments to beneficiaries

17 of an applicable Federal benefit program administered by

18 such agency. Not later than 30 days after such date, the

19 head of such agency shall submit a report to the Director

20 and to each House of the Congress of such determination,

21 together with a complete description of the nature of the

22 shortfall.

23 (c) IMPLEMENTATION PURSUANT TO AGENCY RE24 PORTS.—Upon receipt of the report submitted by a Fed25 eral agency pursuant to subsection (b), the Director shall
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1 review the initial determination of the agency, the agency’s

2 description of the nature of the shortfall, and the com3 pensation payments proposed by the agency. Prior to di4 recting payment of such payments pursuant to subsection

5 (a), the Director shall make appropriate adjustments (if

6 any) in the compensation payments proposed by the agen7 cy that the Director determines are necessary to comply

8 with the requirements of subsection (a) and transmit to

9 the agency a summary report of the review, indicating any

10 adjustments made by the Director. The agency shall make

11 the compensation payments as directed by the Director

12 pursuant to subsection (a) in accordance with the Direc13 tor’s summary report.

14 (d) INCOME DISREGARD UNDER FEDERAL MEANS15 TESTED BENEFIT PROGRAMS.—A payment made under

16 this section to compensate for a shortfall in benefits shall,

17 in accordance with guidelines issued by the Director pur18 suant to this section, be disregarded in determining in19 come under title VIII of the Social Security Act or any

20 applicable Federal benefit program that is means-tested.

21 (e) FUNDING.—Funds otherwise available under each

22 applicable Federal benefit program for making benefit

23 payments under such program are hereby made available

24 for making compensation payments under this section in

25 connection with such program.
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1 (f) NO JUDICIAL REVIEW.—No action taken pursu2 ant to this section shall be subject to judicial review.

3 (g) DIRECTOR’S REPORT.—Not later than April 1,

4 2001, the Director shall submit to each House of the Con5 gress a report on the activities performed by the Director

6 pursuant to this section.

7 (h) DEFINITIONS.—For purposes of this section:

8 (1) APPLICABLE FEDERAL BENEFIT PRO9 GRAM.—The term ‘‘applicable Federal benefit pro10 gram’’ means any program of the Government of the

11 United States providing for regular or periodic pay12 ments or cash assistance paid directly to individual

13 beneficiaries, as determined by the Director of the

14 Office of Management and Budget.

15 (2) FEDERAL AGENCY.—The term ‘‘Federal

16 agency’’ means a department, agency, or instrumen17 tality of the Government of the United States.

18 (3) CPI COMPUTATION ERROR FOR 1999.—The

19 term ‘‘CPI computation error for 1999’’ means the

20 error in the computation of the Consumer Price

21 Index announced by the Bureau of Labor Statistics

22 on September 28, 2000.

23 (i) TAX PROVISIONS.—If any Consumer Price Index

24 (as defined in section 1(f)(5) of the Internal Revenue Code

25 of 1986) reflects the CPI computation error for 1999—
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1 (1) the correct amount of such Index shall (in

2 such manner and to such extent as the Secretary of

3 the Treasury determines to be appropriate) be taken

4 into account for purposes of such Code, and

5 (2) tables prescribed under section 1(f) of such

6 Code to reflect such correct amount shall apply in

7 lieu of any tables that were prescribed based on the

8 erroneous amount.

9 SEC. 709. PREVENTION OF DUPLICATION OF LOSS

10 THROUGH ASSUMPTION OF LIABILITIES GIV11 ING RISE TO A DEDUCTION.

12 (a) IN GENERAL.—Section 358 (relating to basis to

13 distributees) is amended by adding at the end the fol14 lowing new subsection:

15 ‘‘(h) SPECIAL RULES FOR ASSUMPTION OF LIABIL16 ITIES TO WHICH SUBSECTION (d) DOES NOT APPLY.—

17 ‘‘(1) IN GENERAL.—If, after application of the

18 other provisions of this section to an exchange or se19 ries of exchanges, the basis of property to which

20 subsection (a)(1) applies exceeds the fair market

21 value of such property, then such basis shall be re22 duced (but not below such fair market value) by the

23 amount (determined as of the date of the exchange)

24 of any liability—
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1 ‘‘(A) which is assumed in exchange for

2 such property, and

3 ‘‘(B) with respect to which subsection

4 (d)(1) does not apply to the assumption.

5 ‘‘(2) EXCEPTIONS.—Except as provided by the

6 Secretary, paragraph (1) shall not apply to any li7 ability if—

8 ‘‘(A) the trade or business with which the

9 liability is associated is transferred to the per10 son assuming the liability as part of the ex11 change, or

12 ‘‘(B) substantially all of the assets with

13 which the liability is associated are transferred

14 to the person assuming the liability as part of

15 the exchange.

16 ‘‘(3) LIABILITY.—For purposes of this sub17 section, the term ‘liability’ shall include any fixed or

18 contingent obligation to make payment, without re19 gard to whether the obligation is otherwise taken

20 into account for purposes of this title.’’

21 (b) DETERMINATION OF AMOUNT OF LIABILITY AS22 SUMED.—Section 357(d)(1) is amended by inserting ‘‘sec23 tion 358(h),’’ after ‘‘section 358(d),’’.
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1 (c) APPLICATION OF COMPARABLE RULES TO PART2 NERSHIPS AND S CORPORATIONS.—The Secretary of the

3 Treasury or his delegate—

4 (1) shall prescribe rules which provide appro5 priate adjustments under subchapter K of chapter 1

6 of the Internal Revenue Code of 1986 to prevent the

7 acceleration or duplication of losses through the as8 sumption of (or transfer of assets subject to) liabil9 ities described in section 358(h)(3) of such Code (as

10 added by subsection (a)) in transactions involving

11 partnerships, and

12 (2) may prescribe rules which provide appro13 priate adjustments under subchapter S of chapter 1

14 of such Code in transactions described in paragraph

15 (1) involving S corporations rather than partner16 ships.

17 (d) EFFECTIVE DATES.—

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

19 this section shall apply to assumptions of liability

20 after October 18, 1999.

21 (2) RULES.—The rules prescribed under sub22 section (c) shall apply to assumptions of liability

23 after October 18, 1999, or such later date as may

24 be prescribed in such rules.
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1 Subtitle B—Miscellaneous

2 Provisions

3 SEC. 710. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES

4 ON RAILROADS AND INLAND WATERWAY

5 TRANSPORTATION WHICH REMAIN IN GEN6 ERAL FUND.

7 (a) TAXES ON TRAINS.—

8 (1) IN GENERAL.—Subparagraph (A) of section

9 4041(a)(1) is amended by striking ‘‘or a diesel-pow10 ered train’’ each place it appears and by striking ‘‘or

11 train’’.

12 (2) CONFORMING AMENDMENTS.—

13 (A) Subparagraph (C) of section

14 4041(a)(1) is amended by striking clause (ii)

15 and by redesignating clause (iii) as clause (ii).

16 (B) Subparagraph (C) of section

17 4041(b)(1) is amended by striking all that fol18 lows ‘‘section 6421(e)(2)’’ and inserting a pe19 riod.

20 (C) Subsection (d) of section 4041 is

21 amended by redesignating paragraph (3) as

22 paragraph (4) and by inserting after paragraph

23 (2) the following new paragraph:

24 ‘‘(3) DIESEL FUEL USED IN TRAINS.—There is

25 hereby imposed a tax of 0.1 cent per gallon on any
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1 liquid other than gasoline (as defined in section

2 4083)—

3 ‘‘(A) sold by any person to an owner, les4 see, or other operator of a diesel-powered train

5 for use as a fuel in such train, or

6 ‘‘(B) used by any person as a fuel in a die7 sel-powered train unless there was a taxable

8 sale of such fuel under subparagraph (A).

9 No tax shall be imposed by this paragraph on the

10 sale or use of any liquid if tax was imposed on such

11 liquid under section 4081.’’

12 (D) Subsection (e) of section 4082 is

13 amended by striking ‘‘section 4041(a)(1)’’ and

14 inserting ‘‘subsections (d)(3) and (a)(1) of sec15 tion 4041, respectively’’.

16 (E) Paragraph (3) of section 4083(a) is

17 amended by striking ‘‘or a diesel-powered

18 train’’.

19 (F) Paragraph (3) of section 6421(f) is

20 amended to read as follows:

21 ‘‘(3) GASOLINE USED IN TRAINS.—In the case

22 of gasoline used as a fuel in a train, this section

23 shall not apply with respect to the Leaking Under24 ground Storage Tank Trust Fund financing rate

25 under section 4081.’’
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1 (G) Paragraph (3) of section 6427(l) is

2 amended to read as follows:

3 ‘‘(3) REFUND OF CERTAIN TAXES ON FUEL

4 USED IN DIESEL-POWERED TRAINS.—For purposes

5 of this subsection, the term ‘nontaxable use’ includes

6 fuel used in a diesel-powered train. The preceding

7 sentence shall not apply to the tax imposed by sec8 tion 4041(d) and the Leaking Underground Storage

9 Tank Trust Fund financing rate under section 4081

10 except with respect to fuel sold for exclusive use by

11 a State or any political subdivision thereof.’’

12 (b) FUEL USED ON INLAND WATERWAYS.—

13 (1) IN GENERAL.—Paragraph (1) of section

14 4042(b) is amended by adding ‘‘and’’ at the end of

15 subparagraph (A), by striking ‘‘, and’’ at the end of

16 subparagraph (B) and inserting a period, and by

17 striking subparagraph (C).

18 (2) CONFORMING AMENDMENT.—Paragraph (2)

19 of section 4042(b) is amended by striking subpara20 graph (C).

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

22 this section shall take effect on January 1, 2001.
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1 SEC. 711. REPEAL OF REDUCTION OF DEDUCTIONS FOR

2 MUTUAL LIFE INSURANCE COMPANIES.

3 (a) IN GENERAL.—Section 809 (relating to reduc4 tions in certain deductions of mutual life insurance compa5 nies) is hereby repealed.

6 (b) CONFORMING AMENDMENTS RELATED TO RE7 PEAL OF SECTION 809.—

8 (1) Subsections (a)(2)(B) and (b)(1)(B) of sec9 tion 807 are each amended by striking ‘‘the sum of

10 (i)’’ and by striking ‘‘plus (ii) any excess described

11 in section 809(a)(2) for the taxable year,’’.

12 (2)(A) The last sentence of section 807(d)(1) is

13 amended by striking ‘‘(as defined in section

14 809(b)(4)(B))’’.

15 (B) Subsection (d) of section 807 is amended

16 by adding at the end the following new paragraph:

17 ‘‘(6) STATUTORY RESERVES.—For purposes of

18 this subsection, the term ‘statutory reserves’ means

19 the aggregate amount set forth in the annual state20 ment with respect to items described in subsection

21 (c). Such term shall not include any reserve attrib22 utable to a deferred and uncollected premium if the

23 establishment of such reserve is not permitted under

24 section 811(c).’’

25 (3) Subsection (c) of section 808 is amended to

26 read as follows:
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1 ‘‘(c) AMOUNT OF DEDUCTION.—The deduction for

2 policyholder dividends for any taxable year shall be an

3 amount equal to the policyholder dividends paid or accrued

4 during the taxable year.’’

5 (4) Subparagraph (A) of section 812(b)(3) is

6 amended by striking ‘‘sections 808 and 809’’ and in7 serting ‘‘section 808’’.

8 (5) Subsection (c) of section 817 is amended by

9 striking ‘‘(other than section 809)’’.

10 (6) Subsection (c) of section 842 is amended by

11 striking paragraph (3) and by redesignating para12 graph (4) as paragraph (3).

13 (7) The table of sections for subpart C of part

14 I of subchapter L of chapter 1 is amended by strik15 ing the item relating to section 809.

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

17 this section shall apply to taxable years beginning after

18 December 31, 2000.

19 SEC. 712. REPEAL OF POLICYHOLDERS SURPLUS ACCOUNT

20 PROVISIONS.

21 (a) REPEAL.—Section 815 (relating to distributions

22 to shareholders from pre-1984 policyholders surplus ac23 counts) is hereby repealed.

24 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 801 is amended by striking sub2 section (c).

3 (2) The table of sections for subpart D of part

4 I of subchapter L of chapter 1 is amended by strik5 ing the item relating to section 815.

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

7 this section shall apply to taxable years beginning after

8 December 31, 2000.

9 SEC. 713. CREDIT TO HOLDERS OF QUALIFIED AMTRAK

10 BONDS.

11 (a) IN GENERAL.—Part IV of subchapter A of chap12 ter 1 (relating to credits against tax) is amended by add13 ing at the end the following new subpart:

14 ‘‘Subpart H—Nonrefundable Credit for Holders of

15 Qualified Amtrak Bonds

‘‘Sec. 54. Credit to holders of qualified Amtrak bonds.

16 ‘‘SEC. 54. CREDIT TO HOLDERS OF QUALIFIED AMTRAK

17 BONDS.

18 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax19 payer who holds a qualified Amtrak bond on a credit al20 lowance date of such bond which occurs during the taxable

21 year, there shall be allowed as a credit against the tax

22 imposed by this chapter for such taxable year an amount

23 equal to the sum of the credits determined under sub-
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1 section (b) with respect to credit allowance dates during

2 such year on which the taxpayer holds such bond.

3 ‘‘(b) AMOUNT OF CREDIT.—

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

5 determined under this subsection with respect to any

6 credit allowance date for a qualified Amtrak bond is

7 25 percent of the annual credit determined with re8 spect to such bond.

9 ‘‘(2) ANNUAL CREDIT.—The annual credit de10 termined with respect to any qualified Amtrak bond

11 is the product of—

12 ‘‘(A) the applicable credit rate, multiplied

13 by

14 ‘‘(B) the outstanding face amount of the

15 bond.

16 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes

17 of paragraph (2), the applicable credit rate with re18 spect to an issue is the rate equal to an average

19 market yield (as of the day before the date of sale

20 of the issue) on outstanding long-term corporate

21 debt obligations (determined under regulations pre22 scribed by the Secretary).

23 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE24 DEMPTION.—In the case of a bond which is issued

25 during the 3-month period ending on a credit allow-
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1 ance date, the amount of the credit determined

2 under this subsection with respect to such credit al3 lowance date shall be a ratable portion of the credit

4 otherwise determined based on the portion of the 3-

5 month period during which the bond is outstanding.

6 A similar rule shall apply when the bond is re7 deemed.

8 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—

9 ‘‘(1) IN GENERAL.—The credit allowed under

10 subsection (a) for any taxable year shall not exceed

11 the excess of—

12 ‘‘(A) the sum of the regular tax liability

13 (as defined in section 26(b)) plus the tax im14 posed by section 55, over

15 ‘‘(B) the sum of the credits allowable

16 under this part (other than this subpart and

17 subpart C).

18 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the

19 credit allowable under subsection (a) exceeds the

20 limitation imposed by paragraph (1) for such taxable

21 year, such excess shall be carried to the succeeding

22 taxable year and added to the credit allowable under

23 subsection (a) for such taxable year.

24 ‘‘(d) QUALIFIED AMTRAK BOND.—For purposes of

25 this part—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified Amtrak

2 bond’ means any bond issued as part of an issue

3 if—

4 ‘‘(A) 95 percent or more of the proceeds of

5 such issue are to be used for any qualified

6 project,

7 ‘‘(B) the bond is issued by the National

8 Railroad Passenger Corporation,

9 ‘‘(C) the issuer—

10 ‘‘(i) designates such bond for purposes

11 of this section,

12 ‘‘(ii) certifies that it meets the State

13 contribution requirement of paragraph (3)

14 with respect to such project and that it has

15 received the required State contribution

16 payment before the issuance of such bond,

17 and

18 ‘‘(iii) certifies that it has obtained the

19 written approval of the Secretary of Trans20 portation for such project, including a

21 finding by the Inspector General of the De22 partment of Transportation that there is a

23 reasonable likelihood that the proposed

24 program will result in a positive incre25 mental financial contribution to the Na-
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1 tional Railroad Passenger Corporation and

2 that the investment evaluation process in3 cludes a return on investment, leveraging

4 of funds (including State capital and oper5 ating contributions), cost effectiveness,

6 safety improvement, mobility improvement,

7 and feasibility,

8 ‘‘(D) the term of each bond which is part

9 of such issue does not exceed 20 years,

10 ‘‘(E) the payment of principal with respect

11 to such bond is the obligation of the National

12 Railroad Passenger Corporation (regardless of

13 the establishment of the trust account under

14 subsection (j)), and

15 ‘‘(F) the issue meets the requirements of

16 subsection (h).

17 ‘‘(2) TREATMENT OF CHANGES IN USE.—For

18 purposes of paragraph (1)(A), the proceeds of an

19 issue shall not be treated as used for a qualified

20 project to the extent that the issuer takes any action

21 within its control which causes such proceeds not to

22 be used for a qualified project. The Secretary shall

23 prescribe regulations specifying remedial actions that

24 may be taken (including conditions to taking such

25 remedial actions) to prevent an action described in
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1 the preceding sentence from causing a bond to fail

2 to be a qualified Amtrak bond.

3 ‘‘(3) STATE CONTRIBUTION REQUIREMENT.—

4 ‘‘(A) IN GENERAL.—For purposes of para5 graph (1)(C)(ii), the State contribution require6 ment of this paragraph is met with respect to

7 any qualified project if the National Railroad

8 Passenger Corporation has a written binding

9 commitment from 1 or more States to make

10 matching contributions not later than the date

11 of issuance of the issue of not less than 20 per12 cent of the cost of the qualified project.

13 ‘‘(B) USE OF STATE MATCHING CONTRIBU14 TIONS.—The matching contributions described

15 in subparagraph (A) with respect to each quali16 fied project shall be used—

17 ‘‘(i) as necessary to redeem bonds

18 which are a part of the issue with respect

19 to such project, and

20 ‘‘(ii) in the case of any remaining

21 amount, at the election of the National

22 Railroad Passenger Corporation and the

23 contributing State—

24 ‘‘(I) to fund a qualified project,
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1 ‘‘(II) to redeem other qualified

2 Amtrak bonds, or

3 ‘‘(III) for the purposes of sub4 clauses (I) and (II).

5 ‘‘(C) STATE MATCHING CONTRIBUTIONS

6 MAY NOT INCLUDE FEDERAL FUNDS.—For pur7 poses of this paragraph, State matching con8 tributions shall not be derived, directly or indi9 rectly, from Federal funds, including any trans10 fers from the Highway Trust Fund under sec11 tion 9503.

12 ‘‘(D) NO STATE CONTRIBUTION REQUIRE13 MENT FOR CERTAIN QUALIFIED PROJECTS.—

14 With respect to any qualified project described

15 in paragraph (2)(B) or (4) of subsection (e),

16 the State contribution requirement of this para17 graph is zero.

18 ‘‘(4) QUALIFIED PROJECT.—

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

20 project’ means—

21 ‘‘(i) the acquisition, financing, or refi22 nancing of equipment, rolling stock, and

23 other capital improvements for the north24 east rail corridor between Washington,

25 D.C. and Boston, Massachusetts (including
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1 the project described in subsection

2 (e)(2)(B)),

3 ‘‘(ii) the acquisition, financing, or refi4 nancing of equipment, rolling stock, and

5 other capital improvements for the im6 provement of train speeds or safety (or

7 both) on the high-speed rail corridors des8 ignated under section 104(d)(2) of title 23,

9 United States Code, and

10 ‘‘(iii) the acquisition, financing, or re11 financing of equipment, rolling stock, and

12 other capital improvements for other inter13 city passenger rail corridors, including sta14 tion rehabilitation or construction, track or

15 signal improvements, or the elimination of

16 grade crossings.

17 ‘‘(B) REFINANCING RULES.—For purposes

18 of subparagraph (A), a refinancing shall con19 stitute a qualified project only if the indebted20 ness being refinanced (including any obligation

21 directly or indirectly refinanced by such indebt22 edness) was originally incurred by the National

23 Railroad Passenger Corporation—

24 ‘‘(i) after the date of the enactment of

25 this section,
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1 ‘‘(ii) for a term of not more than 3

2 years,

3 ‘‘(iii) to finance or acquire capital im4 provements described in subparagraph (A),

5 and

6 ‘‘(iv) in anticipation of being refi7 nanced with proceeds of a qualified Am8 trak bond.

9 ‘‘(e) LIMITATIONS ON AMOUNT OF BONDS DES10 IGNATED.—

11 ‘‘(1) IN GENERAL.—There is a qualified Am12 trak bond limitation for each fiscal year. Such limi13 tation is—

14 ‘‘(A) $1,000,000,000 for each of the fiscal

15 years 2001 through 2010, and

16 ‘‘(B) except as provided in paragraph (5),

17 zero after fiscal year 2010.

18 ‘‘(2) BONDS FOR RAIL CORRIDORS.—

19 ‘‘(A) IN GENERAL.—Not more than

20 $3,000,000,000 of the limitation under para21 graph (1) may be designated for any 1 rail cor22 ridor described in clause (i) or (ii) of subsection

23 (d)(4)(A).

24 ‘‘(B) SPECIFIC QUALIFIED PROJECT ALLO25 CATION.—Of the amount described in subpara-
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1 graph (A), the Secretary of Transportation

2 shall allocate $92,000,000 for the acquisition

3 and installation of platform facilities, perform4 ance of railroad force account work necessary to

5 complete improvements below street grade, and

6 any other necessary improvements related to

7 construction at the railroad station at the

8 James A. Farley Post Office Building in New

9 York City, New York.

10 ‘‘(3) BONDS FOR OTHER PROJECTS.—Not more

11 than 10 percent of the limitation under paragraph

12 (1) for any fiscal year may be allocated to qualified

13 projects described in subsection (d)(4)(A)(iii).

14 ‘‘(4) BONDS FOR ALASKA RAILROAD.—The Sec15 retary of Transportation may allocate to the Alaska

16 Railroad a portion of the qualified Amtrak limitation

17 for any fiscal year in order to allow the Alaska Rail18 road to issue bonds which meet the requirements of

19 this section for use in financing any project de20 scribed in subsection (d)(4)(A)(iii). For purposes of

21 this section, the Alaska Railroad shall be treated in

22 the same manner as the National Railroad Pas23 senger Corporation.

24 ‘‘(5) CARRYOVER OF UNUSED LIMITATION.—If

25 for any fiscal year—
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1 ‘‘(A) the limitation amount under para2 graph (1), exceeds

3 ‘‘(B) the amount of bonds issued during

4 such year which are designated under sub5 section (d)(1)(C)(i),

6 the limitation amount under paragraph (1) for the

7 following fiscal year (through fiscal year 2014) shall

8 be increased by the amount of such excess.

9 ‘‘(6) PREFERENCE FOR GREATER STATE PAR10 TICIPATION.—In selecting qualified projects for allo11 cation of the qualified Amtrak bond limitation under

12 this subsection, the Secretary of Transportation

13 shall give preference to any project with a State

14 matching contribution rate exceeding 20 percent.

15 ‘‘(f) OTHER DEFINITIONS.—For purposes of this

16 subpart—

17 ‘‘(1) BOND.—The term ‘bond’ includes any ob18 ligation.

19 ‘‘(2) CREDIT ALLOWANCE DATE.—The term

20 ‘credit allowance date’ means—

21 ‘‘(A) March 15,

22 ‘‘(B) June 15,

23 ‘‘(C) September 15, and

24 ‘‘(D) December 15.
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1 Such term includes the last day on which the bond

2 is outstanding.

3 ‘‘(3) STATE.—The term ‘State’ means the sev4 eral States and the District of Columbia, and any

5 subdivision thereof.

6 ‘‘(4) PROGRAM.—The term ‘program’ means 1

7 or more projects implemented over 1 or more years

8 to support the development of intercity passenger

9 rail corridors.

10 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross

11 income includes the amount of the credit allowed to the

12 taxpayer under this section (determined without regard to

13 subsection (c)) and the amount so included shall be treat14 ed as interest income.

15 ‘‘(h) SPECIAL RULES RELATING TO ARBITRAGE.—

16 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

17 an issue shall be treated as meeting the require18 ments of this subsection if as of the date of

19 issuance, the issuer reasonably expects—

20 ‘‘(A) to spend at least 95 percent of the

21 proceeds of the issue for 1 or more qualified

22 projects within the 3-year period beginning on

23 such date,

24 ‘‘(B) to incur a binding commitment with

25 a third party to spend at least 10 percent of the
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1 proceeds of the issue, or to commence construc2 tion, with respect to such projects within the 6-

3 month period beginning on such date, and

4 ‘‘(C) to proceed with due diligence to com5 plete such projects and to spend the proceeds of

6 the issue.

7 ‘‘(2) RULES REGARDING CONTINUING COMPLI8 ANCE AFTER 3-YEAR DETERMINATION.—If at least

9 95 percent of the proceeds of the issue is not ex10 pended for 1 or more qualified projects within the 3-

11 year period beginning on the date of issuance, an

12 issue shall be treated as continuing to meet the re13 quirements of this subsection if either—

14 ‘‘(A) the issuer uses all unspent proceeds

15 of the issue to redeem bonds of the issue within

16 90 days after the end of such 3-year period, or

17 ‘‘(B) the following requirements are met:

18 ‘‘(i) The issuer spends at least 75 per19 cent of the proceeds of the issue for 1 or

20 more qualified projects within the 3-year

21 period beginning on the date of issuance.

22 ‘‘(ii) The issuer has proceeded with

23 due diligence to spend the proceeds of the

24 issue within such 3-year period and con-
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1 tinues to proceed with due diligence to

2 spend such proceeds.

3 ‘‘(iii) The issuer pays to the Federal

4 Government any earnings on the proceeds

5 of the issue that accrue after the end of

6 such 3-year period.

7 ‘‘(iv) Either—

8 ‘‘(I) at least 95 percent of the

9 proceeds of the issue is expended for

10 1 or more qualified projects within the

11 4-year period beginning on the date of

12 issuance, or

13 ‘‘(II) the issuer uses all unspent

14 proceeds of the issue to redeem bonds

15 of the issue within 90 days after the

16 end of such 4-year period.

17 ‘‘(i) RECAPTURE OF PORTION OF CREDIT WHERE

18 CESSATION OF COMPLIANCE.—

19 ‘‘(1) IN GENERAL.—If any bond which when

20 issued purported to be a qualified Amtrak bond

21 ceases to be a qualified Amtrak bond, the issuer

22 shall pay to the United States (at the time required

23 by the Secretary) an amount equal to the sum of—

24 ‘‘(A) the aggregate of the credits allowable

25 under this section with respect to such bond
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1 (determined without regard to subsection (c))

2 for taxable years ending during the calendar

3 year in which such cessation occurs and the 2

4 preceding calendar years, and

5 ‘‘(B) interest at the underpayment rate

6 under section 6621 on the amount determined

7 under subparagraph (A) for each calendar year

8 for the period beginning on the first day of

9 such calendar year.

10 ‘‘(2) FAILURE TO PAY.—If the issuer fails to

11 timely pay the amount required by paragraph (1)

12 with respect to such bond, the tax imposed by this

13 chapter on each holder of any such bond which is

14 part of such issue shall be increased (for the taxable

15 year of the holder in which such cessation occurs) by

16 the aggregate decrease in the credits allowed under

17 this section to such holder for taxable years begin18 ning in such 3 calendar years which would have re19 sulted solely from denying any credit under this sec20 tion with respect to such issue for such taxable

21 years.

22 ‘‘(3) SPECIAL RULES.—

23 ‘‘(A) TAX BENEFIT RULE.—The tax for

24 the taxable year shall be increased under para25 graph (2) only with respect to credits allowed
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1 by reason of this section which were used to re2 duce tax liability. In the case of credits not so

3 used to reduce tax liability, the carryforwards

4 and carrybacks under section 39 shall be appro5 priately adjusted.

6 ‘‘(B) NO CREDITS AGAINST TAX.—Any in7 crease in tax under paragraph (2) shall not be

8 treated as a tax imposed by this chapter for

9 purposes of determining —

10 ‘‘(i) the amount of any credit allow11 able under this part, or

12 ‘‘(ii) the amount of the tax imposed

13 by section 55.

14 ‘‘(j) USE OF TRUST ACCOUNT.—

15 ‘‘(1) IN GENERAL.—The amount of any match16 ing contribution with respect to a qualified project

17 described in subsection (d)(3)(B)(i) or

18 (d)(3)(B)(ii)(II) and the temporary period invest19 ment earnings on proceeds of the issue with respect

20 to such project, and any earnings thereon, shall be

21 held in a trust account by a trustee independent of

22 the National Railroad Passenger Corporation to be

23 used to the extent necessary to redeem bonds which

24 are part of such issue.
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1 ‘‘(2) USE OF REMAINING FUNDS IN TRUST AC2 COUNT.—Upon the repayment of the principal of all

3 qualified Amtrak bonds issued under this section,

4 any remaining funds in the trust account described

5 in paragraph (1) shall be available—

6 ‘‘(A) to the trustee described in paragraph

7 (1), to meet any remaining obligations under

8 any guaranteed investment contract used to se9 cure earnings sufficient to repay the principal

10 of such bonds, and

11 ‘‘(B) to the issuer, for any qualified

12 project.

13 ‘‘(k) OTHER SPECIAL RULES.—

14 ‘‘(1) PARTNERSHIP; S CORPORATION; AND

15 OTHER PASS-THRU ENTITIES.—Under regulations

16 prescribed by the Secretary, in the case of a partner17 ship, trust, S corporation, or other pass-thru entity,

18 rules similar to the rules of section 41(g) shall apply

19 with respect to the credit allowable under subsection

20 (a).

21 ‘‘(2) BONDS HELD BY REGULATED INVEST22 MENT COMPANIES.—If any qualified Amtrak bond is

23 held by a regulated investment company, the credit

24 determined under subsection (a) shall be allowed to
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1 shareholders of such company under procedures pre2 scribed by the Secretary.

3 ‘‘(3) CREDITS MAY BE STRIPPED.—Under regu4 lations prescribed by the Secretary—

5 ‘‘(A) IN GENERAL.—There may be a sepa6 ration (including at issuance) of the ownership

7 of a qualified Amtrak bond and the entitlement

8 to the credit under this section with respect to

9 such bond. In case of any such separation, the

10 credit under this section shall be allowed to the

11 person who on the credit allowance date holds

12 the instrument evidencing the entitlement to

13 the credit and not to the holder of the bond.

14 ‘‘(B) CERTAIN RULES TO APPLY.—In the

15 case of a separation described in subparagraph

16 (A), the rules of section 1286 shall apply to the

17 qualified Amtrak bond as if it were a stripped

18 bond and to the credit under this section as if

19 it were a stripped coupon.

20 ‘‘(4) TREATMENT FOR ESTIMATED TAX PUR21 POSES.—Solely for purposes of sections 6654 and

22 6655, the credit allowed by this section to a tax23 payer by reason of holding a qualified Amtrak bond

24 on a credit allowance date shall be treated as if it
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1 were a payment of estimated tax made by the tax2 payer on such date.

3 ‘‘(5) CREDIT MAY BE TRANSFERRED.—Nothing

4 in any law or rule of law shall be construed to limit

5 the transferability of the credit allowed by this sec6 tion through sale and repurchase agreements.

7 ‘‘(6) REPORTING.—Issuers of qualified Amtrak

8 bonds shall submit reports similar to the reports re9 quired under section 149(e).’’.

10 (b) REPORTING.—Subsection (d) of section 6049 (re11 lating to returns regarding payments of interest), as

12 amended by section 505(d), is amended by adding at the

13 end the following new paragraph:

14 ‘‘(9) REPORTING OF CREDIT ON QUALIFIED AM15 TRAK BONDS.—

16 ‘‘(A) IN GENERAL.—For purposes of sub17 section (a), the term ‘interest’ includes amounts

18 includible in gross income under section 54(g)

19 and such amounts shall be treated as paid on

20 the credit allowance date (as defined in section

21 54(f)(2)).

22 ‘‘(B) REPORTING TO CORPORATIONS,

23 ETC.—Except as otherwise provided in regula24 tions, in the case of any interest described in

25 subparagraph (A) of this paragraph, subsection
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1 (b)(4) of this section shall be applied without

2 regard to subparagraphs (A), (H), (I), (J), (K),

3 and (L)(i).

4 ‘‘(C) REGULATORY AUTHORITY.—The Sec5 retary may prescribe such regulations as are

6 necessary or appropriate to carry out the pur7 poses of this paragraph, including regulations

8 which require more frequent or more detailed

9 reporting.’’.

10 (c) CLERICAL AMENDMENTS.—

11 (1) The table of subparts for part IV of sub12 chapter A of chapter 1 is amended by adding at the

13 end the following new item:

‘‘Subpart H. Nonrefundable Credit for Holders of Qualified Amtrak Bonds.’’.

14 (2) Section 6401(b)(1) is amended by striking

15 ‘‘and G’’ and inserting ‘‘G, and H’’.

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

17 this section shall apply to obligations issued after Sep18 tember 30, 2000.

19 (e) MULTI-YEAR CAPITAL SPENDING PLAN AND

20 OVERSIGHT.—

21 (1) AMTRAK CAPITAL SPENDING PLAN.—

22 (A) IN GENERAL.—The National Railroad

23 Passenger Corporation shall annually submit to

24 the President and Congress a multi-year capital
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1 spending plan, as approved by the Board of Di2 rectors of the Corporation.

3 (B) CONTENTS OF PLAN.—Such plan shall

4 identify the capital investment needs of the

5 Corporation over a period of not less than 5

6 years and the funding sources available to fi7 nance such needs and shall prioritize such

8 needs according to corporate goals and strate9 gies.

10 (C) INITIAL SUBMISSION DATE.—The first

11 plan shall be submitted before the issuance of

12 any qualified Amtrak bonds by the National

13 Railroad Passenger Corporation pursuant to

14 section 54 of the Internal Revenue Code of

15 1986 (as added by this section).

16 (2) OVERSIGHT OF AMTRAK TRUST ACCOUNT

17 AND QUALIFIED PROJECTS.—

18 (A) TRUST ACCOUNT OVERSIGHT.—The

19 Secretary of the Treasury shall annually report

20 to Congress as to whether the amount deposited

21 in the trust account established by the National

22 Railroad Passenger Corporation under section

23 54(i) of such Code (as so added) is sufficient to

24 fully repay at maturity the principal of any out25 standing qualified Amtrak bonds issued pursu-
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1 ant to section 54 of such Code (as so added),

2 together with amounts expected to be deposited

3 into such account, as certified by the National

4 Railroad Passenger Corporation in accordance

5 with procedures prescribed by the Secretary of

6 the Treasury.

7 (B) PROJECT OVERSIGHT.—The National

8 Railroad Passenger Corporation shall contract

9 for an annual independent assessment of the

10 costs and benefits of the qualified projects fi11 nanced by such qualified Amtrak bonds, includ12 ing an assessment of the investment evaluation

13 process of the Corporation. The annual assess14 ment shall be included in the plan submitted

15 under paragraph (1).

16 (C) OVERSIGHT FUNDING.—Not more than

17 0.5 percent of the amounts made available

18 through the issuance of qualified Amtrak bonds

19 by the National Railroad Passenger Corpora20 tion pursuant to section 54 of such Code (as so

21 added) may be used by the National Railroad

22 Passenger Corporation for assessments de23 scribed in subparagraph (B).

24 (f) PROTECTION OF HIGHWAY TRUST FUND.—
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1 (1) CERTIFICATION BY THE SECRETARY OF

2 THE TREASURY.—The issuance of any qualified Am3 trak bonds by the National Railroad Passenger Cor4 poration or the Alaska Railroad pursuant to section

5 54 of the Internal Revenue Code of 1986 (as added

6 by this section) is conditioned on certification by the

7 Secretary of the Treasury, after consultation with

8 the Secretary of Transportation, within 30 days of

9 a request by the issuer, that with respect to funds

10 of the Highway Trust Fund described under para11 graph (2), the issuer either—

12 (A) has not received such funds during fis13 cal years commencing with fiscal year 2001 and

14 ending before the fiscal year the bonds are

15 issued, or

16 (B) has repaid to the Highway Trust Fund

17 any such funds which were received during such

18 fiscal years.

19 (2) APPLICABILITY.—This subsection shall

20 apply to funds received directly, or indirectly from a

21 State or local transit authority, from the Highway

22 Trust Fund established under section 9503 of the

23 Internal Revenue Code of 1986, except for funds au24 thorized to be expended under section 9503(c) of
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1 such Code, as in effect on the date of the enactment

2 of this Act.

3 (3) NO RETROACTIVE EFFECT.—Nothing in

4 this subsection shall adversely affect the entitlement

5 of the holders of qualified Amtrak bonds to the tax

6 credit allowed pursuant to section 54 of the Internal

7 Revenue Code of 1986 (as so added) or to repay8 ment of principal upon maturity.

9 SEC. 714. FARM, FISHING, AND RANCH RISK MANAGEMENT

10 ACCOUNTS.

11 (a) IN GENERAL.—Subpart C of part II of sub12 chapter E of chapter 1 (relating to taxable year for which

13 deductions taken) is amended by inserting after section

14 468B the following new section:

15 ‘‘SEC. 468C. FARM, FISHING, AND RANCH RISK MANAGE16 MENT ACCOUNTS.

17 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi18 vidual engaged in an eligible farming business or commer19 cial fishing, there shall be allowed as a deduction for any

20 taxable year the amount paid in cash by the taxpayer dur21 ing the taxable year to a Farm, Fishing, and Ranch Risk

22 Management Account (hereinafter referred to as the

23 ‘FFARRM Account’).

24 ‘‘(b) LIMITATION.—
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1 ‘‘(1) CONTRIBUTIONS.—The amount which a

2 taxpayer may pay into the FFARRM Account for

3 any taxable year shall not exceed 20 percent of so

4 much of the taxable income of the taxpayer (deter5 mined without regard to this section) which is at6 tributable (determined in the manner applicable

7 under section 1301) to any eligible farming business

8 or commercial fishing.

9 ‘‘(2) DISTRIBUTIONS.—Distributions from a

10 FFARRM Account may not be used to purchase,

11 lease, or finance any new fishing vessel, add capacity

12 to any fishery, or otherwise contribute to the over13 capitalization of any fishery. The Secretary of Com14 merce shall implement regulations to enforce this

15 paragraph.

16 ‘‘(c) ELIGIBLE BUSINESSES.—For purposes of this

17 section—

18 ‘‘(1) ELIGIBLE FARMING BUSINESS.—The term

19 ‘eligible farming business’ means any farming busi20 ness (as defined in section 263A(e)(4)) which is not

21 a passive activity (within the meaning of section

22 469(c)) of the taxpayer.

23 ‘‘(2) COMMERCIAL FISHING.—The term ‘com24 mercial fishing’ has the meaning given such term by

25 section (3) of the Magnuson-Stevens Fishery Con-
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1 servation and Management Act (16 U.S.C. 1802)

2 but only if such fishing is not a passive activity

3 (within the meaning of section 469(c)) of the tax4 payer.

5 ‘‘(d) FFARRM ACCOUNT.—For purposes of this

6 section—

7 ‘‘(1) IN GENERAL.—The term ‘FFARRM Ac8 count’ means a trust created or organized in the

9 United States for the exclusive benefit of the tax10 payer, but only if the written governing instrument

11 creating the trust meets the following requirements:

12 ‘‘(A) No contribution will be accepted for

13 any taxable year in excess of the amount al14 lowed as a deduction under subsection (a) for

15 such year.

16 ‘‘(B) The trustee is a bank (as defined in

17 section 408(n)) or another person who dem18 onstrates to the satisfaction of the Secretary

19 that the manner in which such person will ad20 minister the trust will be consistent with the re21 quirements of this section.

22 ‘‘(C) The assets of the trust consist en23 tirely of cash or of obligations which have ade24 quate stated interest (as defined in section
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1 1274(c)(2)) and which pay such interest not

2 less often than annually.

3 ‘‘(D) All income of the trust is distributed

4 currently to the grantor.

5 ‘‘(E) The assets of the trust will not be

6 commingled with other property except in a

7 common trust fund or common investment

8 fund.

9 ‘‘(2) ACCOUNT TAXED AS GRANTOR TRUST.—

10 The grantor of a FFARRM Account shall be treated

11 for purposes of this title as the owner of such Ac12 count and shall be subject to tax thereon in accord13 ance with subpart E of part I of subchapter J of

14 this chapter (relating to grantors and others treated

15 as substantial owners).

16 ‘‘(e) INCLUSION OF AMOUNTS DISTRIBUTED.—

17 ‘‘(1) IN GENERAL.—Except as provided in para18 graph (2), there shall be includible in the gross in19 come of the taxpayer for any taxable year—

20 ‘‘(A) any amount distributed from a

21 FFARRM Account of the taxpayer during such

22 taxable year, and

23 ‘‘(B) any deemed distribution under—

24 ‘‘(i) subsection (f )(1) (relating to de25 posits not distributed within 5 years),
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1 ‘‘(ii) subsection (f )(2) (relating to ces2 sation in eligible farming business), and

3 ‘‘(iii) subparagraph (B) or (C) of sub4 section (f )(3) (relating to prohibited trans5 actions and pledging account as security).

6 ‘‘(2) EXCEPTIONS.—Paragraph (1)(A) shall not

7 apply to—

8 ‘‘(A) any distribution to the extent attrib9 utable to income of the Account, and

10 ‘‘(B) the distribution of any contribution

11 paid during a taxable year to a FFARRM Ac12 count to the extent that such contribution ex13 ceeds the limitation applicable under subsection

14 (b) if requirements similar to the requirements

15 of section 408(d)(4) are met.

16 For purposes of subparagraph (A), distributions

17 shall be treated as first attributable to income and

18 then to other amounts.

19 ‘‘(f ) SPECIAL RULES.—

20 ‘‘(1) TAX ON DEPOSITS IN ACCOUNT WHICH

21 ARE NOT DISTRIBUTED WITHIN 5 YEARS.—

22 ‘‘(A) IN GENERAL.—If, at the close of any

23 taxable year, there is a nonqualified balance in

24 any FFARRM Account—
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1 ‘‘(i) there shall be deemed distributed

2 from such Account during such taxable

3 year an amount equal to such balance, and

4 ‘‘(ii) the taxpayer’s tax imposed by

5 this chapter for such taxable year shall be

6 increased by 10 percent of such deemed

7 distribution.

8 The preceding sentence shall not apply if an

9 amount equal to such nonqualified balance is

10 distributed from such Account to the taxpayer

11 before the due date (including extensions) for

12 filing the return of tax imposed by this chapter

13 for such year (or, if earlier, the date the tax14 payer files such return for such year).

15 ‘‘(B) NONQUALIFIED BALANCE.—For pur16 poses of subparagraph (A), the term ‘non17 qualified balance’ means any balance in the Ac18 count on the last day of the taxable year which

19 is attributable to amounts deposited in such Ac20 count before the 4th preceding taxable year.

21 ‘‘(C) ORDERING RULE.—For purposes of

22 this paragraph, distributions from a FFARRM

23 Account (other than distributions of current in24 come) shall be treated as made from deposits in
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1 the order in which such deposits were made, be2 ginning with the earliest deposits.

3 ‘‘(2) CESSATION IN ELIGIBLE BUSINESS.—At

4 the close of the first disqualification period after a

5 period for which the taxpayer was engaged in an eli6 gible farming business or commercial fishing, there

7 shall be deemed distributed from the FFARRM Ac8 count of the taxpayer an amount equal to the bal9 ance in such Account (if any) at the close of such

10 disqualification period. For purposes of the pre11 ceding sentence, the term ‘disqualification period’

12 means any period of 2 consecutive taxable years for

13 which the taxpayer is not engaged in an eligible

14 farming business or commercial fishing.

15 ‘‘(3) CERTAIN RULES TO APPLY.—Rules similar

16 to the following rules shall apply for purposes of this

17 section:

18 ‘‘(A) Section 220(f )(8) (relating to treat19 ment on death).

20 ‘‘(B) Section 408(e)(2) (relating to loss of

21 exemption of account where individual engages

22 in prohibited transaction).

23 ‘‘(C) Section 408(e)(4) (relating to effect

24 of pledging account as security).
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1 ‘‘(D) Section 408(g) (relating to commu2 nity property laws).

3 ‘‘(E) Section 408(h) (relating to custodial

4 accounts).

5 ‘‘(4) TIME WHEN PAYMENTS DEEMED MADE.—

6 For purposes of this section, a taxpayer shall be

7 deemed to have made a payment to a FFARRM Ac8 count on the last day of a taxable year if such pay9 ment is made on account of such taxable year and

10 is made on or before the due date (without regard

11 to extensions) for filing the return of tax for such

12 taxable year.

13 ‘‘(5) INDIVIDUAL.—For purposes of this sec14 tion, the term ‘individual’ shall not include an estate

15 or trust.

16 ‘‘(6) DEDUCTION NOT ALLOWED FOR SELF-EM17 PLOYMENT TAX.—The deduction allowable by reason

18 of subsection (a) shall not be taken into account in

19 determining an individual’s net earnings from self20 employment (within the meaning of section 1402(a))

21 for purposes of chapter 2.

22 ‘‘(g) REPORTS.—The trustee of a FFARRM Account

23 shall make such reports regarding such Account to the

24 Secretary and to the person for whose benefit the Account

25 is maintained with respect to contributions, distributions,
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1 and such other matters as the Secretary may require

2 under regulations. The reports required by this subsection

3 shall be filed at such time and in such manner and fur4 nished to such persons at such time and in such manner

5 as may be required by such regulations.’’.

6 (b) TAX ON EXCESS CONTRIBUTIONS.—

7 (1) Subsection (a) of section 4973 (relating to

8 tax on excess contributions to certain tax-favored ac9 counts and annuities) is amended by striking ‘‘or’’

10 at the end of paragraph (3), by redesignating para11 graph (4) as paragraph (5), and by inserting after

12 paragraph (3) the following new paragraph:

13 ‘‘(4) a FFARRM Account (within the meaning

14 of section 468C(d)), or’’.

15 (2) Section 4973 is amended by adding at the

16 end the following new subsection:

17 ‘‘(g) EXCESS CONTRIBUTIONS TO FFARRM AC18 COUNTS.—For purposes of this section, in the case of a

19 FFARRM Account (within the meaning of section

20 468C(d)), the term ‘excess contributions’ means the

21 amount by which the amount contributed for the taxable

22 year to the Account exceeds the amount which may be con23 tributed to the Account under section 468C(b) for such

24 taxable year. For purposes of this subsection, any con25 tribution which is distributed out of the FFARRM Ac-
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1 count in a distribution to which section 468C(e)(2)(B) ap2 plies shall be treated as an amount not contributed.’’.

3 (3) The section heading for section 4973 is

4 amended to read as follows:

5 ‘‘SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN AC6 COUNTS, ANNUITIES, ETC.’’.

7 (4) The table of sections for chapter 43 is

8 amended by striking the item relating to section

9 4973 and inserting the following new item:

‘‘Sec. 4973. Excess contributions to certain accounts, annuities,

etc.’’.

10 (c) TAX ON PROHIBITED TRANSACTIONS.—

11 (1) Subsection (c) of section 4975 (relating to

12 tax on prohibited transactions) is amended by add13 ing at the end the following new paragraph:

14 ‘‘(6) SPECIAL RULE FOR FFARRM ACCOUNTS.—

15 A person for whose benefit a FFARRM Account

16 (within the meaning of section 468C(d)) is estab17 lished shall be exempt from the tax imposed by this

18 section with respect to any transaction concerning

19 such account (which would otherwise be taxable

20 under this section) if, with respect to such trans21 action, the account ceases to be a FFARRM Ac22 count by reason of the application of section

23 468C(f )(3)(A) to such account.’’.
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1 (2) Paragraph (1) of section 4975(e) is amend2 ed by redesignating subparagraphs (E) and (F) as

3 subparagraphs (F) and (G), respectively, and by in4 serting after subparagraph (D) the following new

5 subparagraph:

6 ‘‘(E) a FFARRM Account described in

7 section 468C(d),’’.

8 (d) FAILURE TO PROVIDE REPORTS ON FFARRM

9 ACCOUNTS.—Paragraph (2) of section 6693(a) (relating

10 to failure to provide reports on certain tax-favored ac11 counts or annuities) is amended by redesignating subpara12 graphs (C) and (D) as subparagraphs (D) and (E), re13 spectively, and by inserting after subparagraph (B) the

14 following new subparagraph:

15 ‘‘(C) section 468C(g) (relating to

16 FFARRM Accounts),’’.

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

18 for subpart C of part II of subchapter E of chapter 1 is

19 amended by inserting after the item relating to section

20 468B the following new item:

‘‘Sec. 468C. Farm, Fishing and Ranch Risk Management Accounts.’’.

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

22 this section shall apply to taxable years beginning after

23 December 31, 2000.
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1 SEC. 715. EXTENSION OF ENHANCED DEDUCTION FOR COR2 PORATE DONATIONS OF COMPUTER TECH3 NOLOGY.

4 (a) EXPANSION OF COMPUTER TECHNOLOGY DONA5 TIONS TO PUBLIC LIBRARIES.—

6 (1) IN GENERAL.—Paragraph (6) of section

7 170(e) (relating to special rule for contributions of

8 computer technology and equipment for elementary

9 or secondary school purposes) is amended by strik10 ing ‘‘qualified elementary or secondary educational

11 contribution’’ each place it occurs in the headings

12 and text and inserting ‘‘qualified computer contribu13 tion’’.

14 (2) EXPANSION OF ELIGIBLE DONEES.—Clause

15 (i) of section 170(e)(6)(B) (relating to qualified ele16 mentary or secondary educational contribution) is

17 amended by striking ‘‘or’’ at the end of subclause

18 (I), by adding ‘‘or’’ at the end of subclause (II), and

19 by inserting after subclause (II) the following new

20 subclause:

21 ‘‘(III) a public library (within the

22 meaning of section 213(2)(A) of the

23 Library Services and Technology Act

24 (20 U.S.C. 9122(2)(A)), as in effect

25 on the date of the enactment of the

26 Community Renewal and New Mar-
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1 kets Act of 2000, established and

2 maintained by an entity described in

3 subsection (c)(1),’’.

4 (3) EXTENSION OF DONATION PERIOD.—Clause

5 (ii) of section 170(e)(6)(B) is amended by striking

6 ‘‘2 years’’ and inserting ‘‘3 years’’.

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 170(e)(6)(B)(iv) is amended by

9 striking ‘‘in any grades of the K–12’’.

10 (2) The heading of paragraph (6) of section

11 170(e) is amended by striking ‘‘ELEMENTARY OR

12 SECONDARY SCHOOL PURPOSES’’ and inserting

13 ‘‘EDUCATIONAL PURPOSES’’.

14 (c) EXTENSION OF DEDUCTION.—Section

15 170(e)(6)(F) (relating to termination) is amended by

16 striking ‘‘December 31, 2000’’ and inserting ‘‘December

17 31, 2003’’.

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

19 this section shall apply to contributions made after De20 cember 31, 2000.
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1 SEC. 716. RELIEF FROM FEDERAL TAX LIABILITY ARISING

2 WITH RESPECT TO CERTAIN CLAIMS AGAINST

3 THE DEPARTMENT OF AGRICULTURE FOR

4 DISCRIMINATION IN FARM CREDIT AND BEN5 EFIT PROGRAMS.

6 Notwithstanding any provision of the Internal Rev7 enue Code of 1986, in the case of a person who is certified

8 to be a member of the plaintiff class in the settlement of

9 the consolidated actions entitled ‘‘Pigford, et al. v. Glick10 man’’, No. 97–1978 (D.D.C.) (PLF), and ‘‘Brewington et

11 al. v. Glickman’’, No. 98–1693 (D.D.C.) (PLF), gross in12 come for purposes of subtitle A of such Code shall not

13 include—

14 (1) any cash payment received before, on, or

15 after the date of the enactment of this Act by, or

16 made on behalf of, a person under such settlement,

17 and

18 (2) any amount which (but for this section)

19 would be includible in gross income by reason of the

20 discharge of indebtedness pursuant to such settle21 ment.

22 SEC. 717. EXPANSION OF CREDIT FOR ADOPTION EX23 PENSES.

24 (a) INCREASE IN EXPENSES ALLOWABLE FOR ADOP25 TION.—Paragraph (1) of section 23(b) (relating to dollar

26 limitation) is amended to read as follows:
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1 ‘‘(1) DOLLAR LIMITATION.—

2 ‘‘(A) IN GENERAL.—The aggregate

3 amount of qualified adoption expenses which

4 may be taken into account under subsection (a)

5 for all taxable years with respect to the adop6 tion of a child by the taxpayer shall not exceed

7 the applicable amount.

8 ‘‘(B) APPLICABLE AMOUNT.—For purposes

9 of subparagraph (A)—

10 ‘‘(i) CHILD WITH SPECIAL NEEDS.—

11 In the case of a child with special needs,

12 the applicable amount for a taxable year

13 shall be the amount determined in accord14 ance with the following table:

‘‘For taxable years The applicable

beginning in: amount is:

2001 ............................................................................. $8,000

2002 ............................................................................. $10,000

2003 and thereafter ..................................................... $12,000.

15 ‘‘(ii) OTHER CHILDREN.—In the case

16 of a child who is not a child with special

17 needs, the applicable amount for a taxable

18 year shall be the amount determined in ac19 cordance with the following table:

‘‘For taxable years The applicable

beginning in: amount is:

2001 ............................................................................. $6,000

2002 ............................................................................. $7,000

2003 ............................................................................. $8,000

2004 ............................................................................. $9,000

2005 and thereafter ..................................................... $10,000.’’.
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1 (b) INCREASE IN INCOME LIMITATION.—Clause (i) of

2 section 23(b)(2)(A) (relating to income limitation) is

3 amended by striking ‘‘$75,000’’ and inserting

4 ‘‘$150,000’’.

5 (c) EXTENSION OF SUNSET.—Subparagraph (B) of

6 section 23(d)(2) (relating to eligible child) is amended by

7 striking ‘‘2001’’ and inserting ‘‘2005’’.

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

9 this section shall apply to taxable years beginning after

10 December 31, 2000.

11 SEC. 718. STUDY CONCERNING UNITED STATES INSURANCE

12 COMPANIES WITH CERTAIN OFFSHORE REIN13 SURANCE AFFILIATES.

14 (a) STUDY.—The Secretary of the Treasury shall

15 conduct a study on the extent to which United States tax

16 on investment income of United States insurance compa17 nies is being avoided through the use of affiliated corpora18 tions in Bermuda or other offshore locations. In con19 ducting such study, the Secretary shall—

20 (1) address issues concerning the application of

21 current United States tax law in preventing such

22 avoidance,

23 (2) examine changes to United States tax law

24 which may be needed to prevent such avoidance, and
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1 (3) make such recommendations as the Sec2 retary considers appropriate.

3 (b) SUBMISSION OF STUDY TO CONGRESS.—Not

4 later than December 31, 2001, the Secretary shall submit

5 the study conducted under subsection (a), together with

6 recommendations thereon, to the Committee on Ways and

7 Means of the House of Representatives and the Committee

8 on Finance of the Senate.

9 SEC. 719. TREATMENT OF INDIAN TRIBAL GOVERNMENTS

10 UNDER FEDERAL UNEMPLOYMENT TAX ACT.

11 (a) IN GENERAL.—Section 3306(c)(7) (defining em12 ployment) is amended—

13 (1) by inserting ‘‘or in the employ of an Indian

14 tribe,’’ after ‘‘service performed in the employ of a

15 State, or any political subdivision thereof,’’; and

16 (2) by inserting ‘‘or Indian tribes’’ after ‘‘whol17 ly owned by one or more States or political subdivi18 sions’’.

19 (b) PAYMENTS IN LIEU OF CONTRIBUTIONS.—Sec20 tion 3309 (relating to State law coverage of services per21 formed for nonprofit organizations or governmental enti22 ties) is amended—

23 (1) in subsection (a)(2) by inserting ‘‘, includ24 ing an Indian tribe,’’ after ‘‘the State law shall pro25 vide that a governmental entity’’;
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1 (2) in subsection (b)(3)(B) by inserting ‘‘, or of

2 an Indian tribe’’ after ‘‘of a State or political sub3 division thereof’’;

4 (3) in subsection (b)(3)(E) by inserting ‘‘or

5 tribal’’ after ‘‘the State’’; and

6 (4) in subsection (b)(5) by inserting ‘‘or of an

7 Indian tribe’’ after ‘‘an agency of a State or political

8 subdivision thereof’’.

9 (c) STATE LAW COVERAGE.—Section 3309 (relating

10 to State law coverage of services performed for nonprofit

11 organizations or governmental entities) is amended by

12 adding at the end the following new subsection:

13 ‘‘(d) ELECTION BY INDIAN TRIBE.—The State law

14 shall provide that an Indian tribe may make contributions

15 for employment as if the employment is within the mean16 ing of section 3306 or make payments in lieu of contribu17 tions under this section, and shall provide that an Indian

18 tribe may make separate elections for itself and each sub19 division, subsidiary, or business enterprise wholly owned

20 by such Indian tribe. State law may require a tribe to post

21 a payment bond or take other reasonable measures to as22 sure the making of payments in lieu of contributions under

23 this section. Notwithstanding the requirements of section

24 3306(a)(6), if, within 90 days of having received a notice

25 of delinquency, a tribe fails to make contributions, pay-
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1 ments in lieu of contributions, or payment of penalties or

2 interest (at amounts or rates comparable to those applied

3 to all other employers covered under the State law) as4 sessed with respect to such failure, or if the tribe fails

5 to post a required payment bond, then service for the tribe

6 shall not be excepted from employment under section

7 3306(c)(7) until any such failure is corrected. This sub8 section shall apply to an Indian tribe within the meaning

9 of section 4(e) of the Indian Self-Determination and Edu10 cation Assistance Act (25 U.S.C. 450b(e)).’’.

11 (d) DEFINITIONS.—Section 3306 (relating to defini12 tions) is amended by adding at the end the following new

13 subsection:

14 ‘‘(u) INDIAN TRIBE.—For purposes of this chapter,

15 the term ‘Indian tribe’ has the meaning given to such term

16 by section 4(e) of the Indian Self-Determination and Edu17 cation Assistance Act (25 U.S.C. 450b(e)), and includes

18 any subdivision, subsidiary, or business enterprise wholly

19 owned by such an Indian tribe.’’.

20 (e) EFFECTIVE DATE; TRANSITION RULE.—

21 (1) EFFECTIVE DATE.—The amendments made

22 by this section shall apply to service performed on

23 or after the date of the enactment of this Act.

24 (2) TRANSITION RULE.—For purposes of the

25 Federal Unemployment Tax Act, service performed
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1 in the employ of an Indian tribe (as defined in sec2 tion 3306(u) of the Internal Revenue Code of 1986

3 (as added by this section)) shall not be treated as

4 employment (within the meaning of section 3306 of

5 such Code) if—

6 (A) it is service which is performed before

7 the date of the enactment of this Act and with

8 respect to which the tax imposed under the

9 Federal Unemployment Tax Act has not been

10 paid, and

11 (B) such Indian tribe reimburses a State

12 unemployment fund for unemployment benefits

13 paid for service attributable to such tribe for

14 such period.

15 Subtitle C—Technical Corrections

16 SEC. 721. AMENDMENTS RELATED TO TICKET TO WORK

17 AND WORK INCENTIVES IMPROVEMENT ACT

18 OF 1999.

19 (a) AMENDMENTS RELATED TO SECTION 502 OF

20 THE ACT.—

21 (1) Section 280C(c)(1) is amended by striking

22 ‘‘or credit’’ after ‘‘deduction’’ each place it appears.

23 (2) Section 30A is amended by redesignating

24 subsections (f) and (g) as subsections (g) and (h),
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1 respectively, and by inserting after subsection (e) the

2 following new subsection:

3 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—Any wages or

4 other expenses taken into account in determining the cred5 it under this section may not be taken into account in de6 termining the credit under section 41.’’

7 (b) AMENDMENT RELATED TO SECTION 545 OF THE

8 ACT.—Clause (ii) of section 857(b)(7)(B) is amended to

9 read as follows:

10 ‘‘(ii) EXCEPTION FOR CERTAIN

11 AMOUNTS.—Clause (i) shall not apply to

12 amounts received directly or indirectly by a

13 real estate investment trust—

14 ‘‘(I) for services furnished or ren15 dered by a taxable REIT subsidiary

16 that are described in paragraph

17 (1)(B) of section 856(d), or

18 ‘‘(II) from a taxable REIT sub19 sidiary that are described in para20 graph (7)(C)(ii) of such section.’’

21 (c) CLARIFICATION RELATED TO SECTION 538 OF

22 THE ACT.—The reference to section 332(b)(1) of the In23 ternal Revenue Code of 1986 in Treasury Regulation sec24 tion 1.1502-34 shall be deemed to include a reference to

25 section 732(f) of such Code.
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1 (d) EFFECTIVE DATE.—Subsection (c) and the

2 amendments made by this section shall take effect as if

3 included in the provisions of the Ticket to Work and Work

4 Incentives Improvement Act of 1999 to which they relate.

5 SEC. 722. AMENDMENTS RELATED TO TAX AND TRADE RE6 LIEF EXTENSION ACT OF 1998.

7 (a) AMENDMENT RELATED TO SECTION 1004(b) OF

8 THE ACT.—Subsection (d) of section 6104 is amended by

9 adding at the end the following new paragraph:

10 ‘‘(6) APPLICATION TO NONEXEMPT CHARI11 TABLE TRUSTS AND NONEXEMPT PRIVATE FOUNDA12 TIONS.—The organizations referred to in paragraphs

13 (1) and (2) of section 6033(d) shall comply with the

14 requirements of this subsection relating to annual

15 returns filed under section 6033 in the same manner

16 as the organizations referred to in paragraph (1).’’.

17 (b) AMENDMENT RELATED TO SECTION 4003 OF

18 THE ACT.—Subsection (b) of section 4003 of the Tax and

19 Trade Relief Extension Act of 1998 is amended by insert20 ing ‘‘(7)(A)(i)(II),’’ after ‘‘(5)(A)(ii)(I),’’.

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

22 this section shall take effect as if included in the provisions

23 of the Tax and Trade Relief Extension Act of 1998 to

24 which they relate.
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1 SEC. 723. AMENDMENTS RELATED TO INTERNAL REVENUE

2 SERVICE RESTRUCTURING AND REFORM ACT

3 OF 1998.

4 (a) AMENDMENTS RELATED TO INNOCENT SPOUSE

5 RELIEF.—

6 (1) ELECTION MAY BE MADE ANY TIME AFTER

7 DEFICIENCY ASSERTED.—Subparagraph (B) of sec8 tion 6015(c)(3) is amended by striking ‘‘shall be

9 made’’ and inserting ‘‘may be made at any time

10 after a deficiency for such year is asserted but’’.

11 (2) CLARIFICATION REGARDING DISALLOWANCE

12 OF REFUNDS AND CREDITS UNDER SECTION

13 6015(c).—

14 (A) IN GENERAL.—Section 6015 is amend15 ed by redesignating subsection (g) as subsection

16 (h) and by inserting after subsection (f) the fol17 lowing new subsection:

18 ‘‘(g) CREDITS AND REFUNDS.—

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graphs (2) and (3), notwithstanding any other law

21 or rule of law (other than section 6511, 6512(b),

22 7121, or 7122), credit or refund shall be allowed or

23 made to the extent attributable to the application of

24 this section.

25 ‘‘(2) RES JUDICATA.—In the case of any elec26 tion under subsection (b) or (c), if a decision of a
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1 court in any prior proceeding for the same taxable

2 year has become final, such decision shall be conclu3 sive except with respect to the qualification of the

4 individual for relief which was not an issue in such

5 proceeding. The exception contained in the preceding

6 sentence shall not apply if the court determines that

7 the individual participated meaningfully in such

8 prior proceeding.

9 ‘‘(3) CREDIT AND REFUND NOT ALLOWED

10 UNDER SUBSECTION (c).—No credit or refund shall

11 be allowed as a result of an election under sub12 section (c).’’.

13 (B) CONFORMING AMENDMENT.—Para14 graph (3) of section 6015(e) is amended to read

15 as follows:

16 ‘‘(3) LIMITATION ON TAX COURT JURISDIC17 TION.—If a suit for refund is begun by either indi18 vidual filing the joint return pursuant to section

19 6532—

20 ‘‘(A) the Tax Court shall lose jurisdiction

21 of the individual’s action under this section to

22 whatever extent jurisdiction is acquired by the

23 district court or the United States Court of

24 Federal Claims over the taxable years that are

25 the subject of the suit for refund, and
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1 ‘‘(B) the court acquiring jurisdiction shall

2 have jurisdiction over the petition filed under

3 this subsection.’’.

4 (3) CLARIFICATIONS REGARDING REVIEW BY

5 TAX COURT.—

6 (A) Paragraph (1) of section 6015(e) is

7 amended in the matter preceding subparagraph

8 (A) by inserting after ‘‘individual’’ the fol9 lowing: ‘‘against whom a deficiency has been as10 serted and’’.

11 (B) Subparagraph (A) of section

12 6015(e)(1) is amended to read as follows:

13 ‘‘(A) IN GENERAL.—In addition to any

14 other remedy provided by law, the individual

15 may petition the Tax Court (and the Tax Court

16 shall have jurisdiction) to determine the appro17 priate relief available to the individual under

18 this section if such petition is filed—

19 ‘‘(i) at any time after the earlier of—

20 ‘‘(I) the date the Secretary mails,

21 by certified or registered mail to the

22 taxpayer’s last known address, notice

23 of the Secretary’s final determination

24 of relief available to the individual, or
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1 ‘‘(II) the date which is 6 months

2 after the date such election is filed

3 with the Secretary, and

4 ‘‘(ii) not later than the close of the

5 90th day after the date described in clause

6 (i)(I).’’.

7 (C) Subparagraph (B)(i) of section

8 6015(e)(1) is amended—

9 (i) by striking ‘‘until the expiration of

10 the 90-day period described in subpara11 graph (A)’’ and inserting ‘‘until the close

12 of the 90th day referred to in subpara13 graph (A)(ii)’’, and

14 (ii) by inserting ‘‘under subparagraph

15 (A)’’ after ‘‘filed with the Tax Court’’.

16 (D)(i) Subsection (e) of section 6015 is

17 amended by adding at the end the following

18 new paragraph:

19 ‘‘(5) WAIVER.—An individual who elects the ap20 plication of subsection (b) or (c) (and who agrees

21 with the Secretary’s determination of relief) may

22 waive in writing at any time the restrictions in para23 graph (1)(B) with respect to collection of the out24 standing assessment (whether or not a notice of the
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1 Secretary’s final determination of relief has been

2 mailed).’’.

3 (ii) Paragraph (2) of section 6015(e) is

4 amended to read as follows:

5 ‘‘(2) SUSPENSION OF RUNNING OF PERIOD OF

6 LIMITATIONS.—The running of the period of limita7 tions in section 6502 on the collection of the assess8 ment to which the petition under paragraph (1)(A)

9 relates shall be suspended—

10 ‘‘(A) for the period during which the Sec11 retary is prohibited by paragraph (1)(B) from

12 collecting by levy or a proceeding in court and

13 for 60 days thereafter, and

14 ‘‘(B) if a waiver under paragraph (5) is

15 made, from the date the claim for relief was

16 filed until 60 days after the waiver is filed with

17 the Secretary.’’.

18 (b) AMENDMENTS RELATED TO PROCEDURE AND

19 ADMINISTRATION.—

20 (1) DISPUTES INVOLVING $50,000 OR LESS.—

21 Section 7463 is amended by adding at the end the

22 following new subsection:

23 ‘‘(f) ADDITIONAL CASES IN WHICH PROCEEDINGS

24 MAY BE CONDUCTED UNDER THIS SECTION.—At the op25 tion of the taxpayer concurred in by the Tax Court or a
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1 division thereof before the hearing of the case, proceedings

2 may be conducted under this section (in the same manner

3 as a case described in subsection (a)) in the case of—

4 ‘‘(1) a petition to the Tax Court under section

5 6015(e) in which the amount of relief sought does

6 not exceed $50,000, and

7 ‘‘(2) an appeal under section 6330(d)(1)(A) to

8 the Tax Court of a determination in which the un9 paid tax does not exceed $50,000.’’.

10 (2) AUTHORITY TO ENJOIN COLLECTION AC11 TIONS.—

12 (A) Section 6330(e)(1) is amended by add13 ing at the end the following: ‘‘Notwithstanding

14 the provisions of section 7421(a), the beginning

15 of a levy or proceeding during the time the sus16 pension under this paragraph is in force may be

17 enjoined by a proceeding in the proper court,

18 including the Tax Court. The Tax Court shall

19 have no jurisdiction under this paragraph to en20 join any action or proceeding unless a timely

21 appeal has been filed under subsection (d)(1)

22 and then only in respect of the unpaid tax or

23 proposed levy to which the determination being

24 appealed relates.’’.
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1 (B) Section 7421(a) is amended by insert2 ing ‘‘6330(e)(1),’’ after ‘‘6246(b),’’.

3 (3) CLARIFICATION.—Paragraph (3) of section

4 6331(k) is amended by striking ‘‘(3), (4), and (5)’’

5 and inserting ‘‘(3) and (4)’’.

6 (c) AMENDMENT RELATED TO SECTION 1103 OF

7 THE ACT.—Paragraph (6) of section 6103(k) is

8 amended—

9 (1) by inserting ‘‘and an officer or employee of

10 the Office of Treasury Inspector General for Tax

11 Administration’’ after ‘‘internal revenue officer or

12 employee’’, and

13 (2) by striking ‘‘INTERNAL REVENUE’’ in the

14 heading and inserting ‘‘CERTAIN’’.

15 (d) AMENDMENT RELATED TO SECTION 3401 OF

16 THE ACT.—Section 6330(d)(1)(A) is amended by striking

17 ‘‘to hear’’ and inserting ‘‘with respect to’’.

18 (e) AMENDMENT RELATED TO SECTION 3509 OF

19 THE ACT.—Subparagraph (A) of section 6110(g)(5) is

20 amended by inserting ‘‘, any Chief Counsel advice,’’ after

21 ‘‘technical advice memorandum’’.

22 (f) EFFECTIVE DATES.—The amendments made by

23 subsections (a) and (b) shall take effect on the date of

24 the enactment of this Act. The amendments made by sub25 sections (c), (d), and (e) shall take effect as if included
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1 in the provisions of the Internal Revenue Service Restruc2 turing and Reform Act of 1998 to which they relate.

3 SEC. 724. AMENDMENTS RELATED TO TAXPAYER RELIEF

4 ACT OF 1997.

5 (a) AMENDMENT RELATED TO SECTION 101 OF THE

6 ACT.—Paragraph (4) of section 6211(b) is amended by

7 striking ‘‘sections 32 and 34’’ and inserting ‘‘sections

8 24(d), 32, and 34’’.

9 (b) AMENDMENT RELATED TO SECTION 302 OF THE

10 ACT.—The last sentence of section 3405(e)(1)(B) is

11 amended by inserting ‘‘(other than a Roth IRA)’’ after

12 ‘‘individual retirement plan’’.

13 (c) AMENDMENT TO SECTION 311 OF THE ACT.—

14 Paragraph (3) of section 311(e) of the Taxpayer Relief

15 Act of 1997 (relating to election to recognize gain on as16 sets held on January 1, 2001) is amended by adding at

17 the end the following new sentence: ‘‘Such an election shall

18 not apply to any asset which is disposed of (in a trans19 action in which gain or loss is recognized in whole or in

20 part) before the close of the 1-year period beginning on

21 the date that the asset would have been treated as sold

22 under such election.’’

23 (d) AMENDMENT RELATED TO SECTION 402 OF THE

24 ACT.—The flush sentence at the end of clause (ii) of sec25 tion 56(a)(1)(A) is amended by inserting before ‘‘or to any
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1 other property’’ the following: ‘‘(and the straight line

2 method shall be used for such 1250 property)’’.

3 (e) AMENDMENTS RELATED TO SECTION 1072 OF

4 THE ACT.—

5 (1) Clause (ii) of section 415(c)(3)(D) and sub6 paragraph (B) of section 403(b)(3) are each amend7 ed by striking ‘‘section 125 or’’ and inserting ‘‘sec8 tion 125, 132(f)(4), or’’.

9 (2) Paragraph (2) of section 414(s) is amended

10 by striking ‘‘section 125, 402(e)(3)’’ and inserting

11 ‘‘section 125, 132(f)(4), 402(e)(3)’’.

12 (f) AMENDMENT RELATED TO SECTION 1454 OF THE

13 ACT.—Subsection (a) of section 7436 is amended by in14 serting before the period at the end of the first sentence

15 ‘‘and the proper amount of employment tax under such

16 determination’’.

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

18 this section shall take effect as if included in the provisions

19 of the Taxpayer Relief of 1997 to which they relate.

20 SEC. 725. AMENDMENTS RELATED TO BALANCED BUDGET

21 ACT OF 1997.

22 (a) AMENDMENTS RELATED TO SECTION 9302 OF

23 THE ACT.—

24 (1) Paragraph (1) of section 9302(j) of the Bal25 anced Budget Act of 1997 is amended by striking
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1 ‘‘tobacco products and cigarette papers and tubes’’

2 and inserting ‘‘cigarettes’’.

3 (2)(A) Subsection (h) of section 5702 is amend4 ed to read as follows:

5 ‘‘(h) MANUFACTURER OF CIGARETTE PAPERS AND

6 TUBES.—‘Manufacturer of cigarette papers and tubes’

7 means any person who manufactures cigarette paper, or

8 makes up cigarette paper into tubes, except for his own

9 personal use or consumption.’’

10 (B) Section 5702, as amended by subparagraph

11 (A), is amended by striking subsection (f) and by re12 designating subsections (g) through (p) as sub13 sections (f) through (o), respectively.

14 (3) Subsection (c) of section 5761 is amended

15 by adding at the end the following: ‘‘This subsection

16 and section 5754 shall not apply to any person who

17 relands or receives tobacco products in the quantity

18 allowed entry free of tax and duty under chapter 98

19 of the Harmonized Tariff Schedule of the United

20 States, and such person may voluntarily relinquish

21 to the Secretary at the time of entry any excess of

22 such quantity without incurring the penalty under

23 this subsection. No quantity of tobacco products

24 other than the quantity referred to in the preceding
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1 sentence may be relanded or received as a personal

2 use quantity.’’.

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

4 this section shall take effect as if included in section 9302

5 of the Balanced Budget Act of 1997.

6 SEC. 726. AMENDMENTS RELATED TO SMALL BUSINESS JOB

7 PROTECTION ACT OF 1996.

8 (a) AMENDMENT RELATED TO SECTION 1201 OF

9 THE ACT.—Subparagraph (B) of section 51(d)(2) is

10 amended—

11 (1) by striking ‘‘plan approved’’ and inserting

12 ‘‘program funded’’, and

13 (2) by striking ‘‘(relating to assistance for

14 needy families with minor children)’’.

15 (b) AMENDMENT RELATED TO SECTION 1302 OF

16 THE ACT.—Clause (i) of section 1361(e)(1)(A) is amended

17 by striking ‘‘or’’ before ‘‘(III)’’ and by adding at the end

18 the following: ‘‘or (IV) an organization described in section

19 170(c)(1) which holds a contingent interest in such trust

20 and is not a potential current beneficiary,’’.

21 (c) AMENDMENT RELATED TO SECTION 1401 OF

22 THE ACT.—Clause (ii) of section 401(k)(10)(B) is amend23 ed by adding at the end the following new sentence: ‘‘Such

24 term includes a distribution of an annuity contract from—
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1 ‘‘(I) a trust which forms a part

2 of a plan described in section 401(a)

3 and which is exempt from tax under

4 section 501(a), or

5 ‘‘(II) an annuity plan described

6 in section 403(a).’’.

7 (d) AMENDMENT RELATED TO SECTION 1427 OF

8 THE ACT.—Clause (ii) of section 219(c)(1)(B) is amended

9 by striking ‘‘and’’ at the end of subclause (I), by redesig10 nating subclause (II) as subclause (III), and by inserting

11 after subclause (I) the following new subclause:

12 ‘‘(II) the amount of any des13 ignated nondeductible contribution (as

14 defined in section 408(o)) on behalf of

15 such spouse for such taxable year,

16 and’’.

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

18 this section shall take effect as if included in the provisions

19 of the Small Business Job Protection Act of 1996 to which

20 they relate.

21 SEC. 727. AMENDMENT RELATED TO REVENUE RECONCILI22 ATION ACT OF 1990.

23 (a) AMENDMENT RELATED TO SECTION 11511 OF

24 THE ACT.—Subparagraph (C) of section 43(c)(1) is

25 amended—
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1 (1) by inserting ‘‘(as defined in section

2 193(b))’’ after ‘‘expenses’’, and

3 (2) by striking ‘‘under section 193’’.

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

5 this section shall take effect as if included in section

6 11511 of the Revenue Reconciliation Act of 1990.

7 SEC. 728. OTHER TECHNICAL CORRECTIONS.

8 (a) MODIFIED ENDOWMENT CONTRACTS.—

9 (1) Paragraph (2) of section 7702A(a) is

10 amended by inserting ‘‘or this paragraph’’ before the

11 period.

12 (2) Clause (ii) of section 7702A(c)(3)(A) is

13 amended by striking ‘‘under the contract’’ and in14 serting ‘‘under the old contract’’.

15 (3) The amendments made by this subsection

16 shall take effect as if included in the amendments

17 made by section 5012 of the Technical and Miscella18 neous Revenue Act of 1988.

19 (b) AFFILIATED CORPORATIONS IN CONTEXT OF

20 WORTHLESS SECURITIES.—

21 (1) Subparagraph (A) of section 165(g)(3) is

22 amended to read as follows:

23 ‘‘(A) the taxpayer owns directly stock in

24 such corporation meeting the requirements of

25 section 1504(a)(2), and’’.
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1 (2) Paragraph (3) of section 165(g) is amended

2 by striking the last sentence.

3 (3) The amendments made by this subsection

4 shall apply to taxable years beginning after Decem5 ber 31, 1984.

6 (c) CERTAIN ANNUITIES ISSUED BY TAX-EXEMPT

7 ORGANIZATIONS NOT TREATED AS DEBT INSTRUMENTS

8 UNDER ORIGINAL ISSUE DISCOUNT RULES.—

9 (1) Clause (ii) of section 1275(a)(1)(B) is

10 amended by striking ‘‘subchapter L’’ and inserting

11 ‘‘subchapter L (or by an entity described in section

12 501(c) and exempt from tax under section 501(a)

13 which would be subject to tax under subchapter L

14 were it not so exempt)’’.

15 (2) The amendment made by this subsection

16 shall take effect as if included in the amendments

17 made by section 41 of the Tax Reform Act of 1984.

18 (d) TENTATIVE CARRYBACK ADJUSTMENTS OF

19 LOSSES FROM SECTION 1256 CONTRACTS.—

20 (1) Subsection (a) of section 6411 is amended

21 by striking ‘‘section 1212(a)(1)’’ and inserting ‘‘sub22 section (a)(1) or (c) of section 1212’’.

23 (2) The amendment made by paragraph (1)

24 shall take effect as if included in the amendments
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1 made by section 504 of the Economic Recovery Tax

2 Act of 1981.

3 (e) CORRECTION OF CALCULATION OF AMOUNTS TO

4 BE DEPOSITED IN HIGHWAY TRUST FUND.—

5 (1) Subsection (b) of section 9503 is amended

6 by striking paragraph (5) and redesignating para7 graph (6) as paragraph (5).

8 (2) The amendment made by paragraph (1)

9 shall apply with respect to taxes received in the

10 Treasury after the date of the enactment of this Act.

11 (f) EXPENDITURES FROM VACCINE INJURY COM12 PENSATION TRUST FUND.—Section 9510(c)(1)(A) is

13 amended by striking ‘‘December 31, 1999’’ and inserting

14 ‘‘October 18, 2000’’.

15 SEC. 729. CLERICAL CHANGES.

16 (1) Clause (i) of section 45(d)(7)(A) is amended

17 by striking ‘‘paragraph (3)(A)’’ and inserting ‘‘sub18 section (c)(3)(A)’’.

19 (2) Subsection (f) of section 67 is amended by

20 striking ‘‘the last sentence’’ and inserting ‘‘the sec21 ond sentence’’.

22 (3) The heading for paragraph (5) of section

23 408(d) is amended to read as follows:
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1 ‘‘(5) DISTRIBUTIONS OF EXCESS CONTRIBU2 TIONS AFTER DUE DATE FOR TAXABLE YEAR AND

3 CERTAIN EXCESS ROLLOVER CONTRIBUTIONS.—’’.

4 (4) Paragraph (3) of section 475(g) is amended

5 by striking ‘‘267(b) of’’ and inserting ‘‘267(b) or’’.

6 (5) The heading for subparagraph (B) of sec7 tion 529(e)(3) is amended by striking ‘‘UNDER

8 GUARANTEED PLANS’’.

9 (6) Clause (iii) of section 530(d)(4)(B) is

10 amended by striking ‘‘; or’’ at the end and inserting

11 ‘‘, or’’.

12 (7) Paragraphs (1)(C) and (2)(C) of section

13 664(d) are each amended by striking the period

14 after ‘‘subsection (g))’’.

15 (8)(A) Subsection (e) of section 678 is amended

16 by striking ‘‘an electing small business corporation’’

17 and inserting ‘‘an S corporation’’.

18 (B) Clause (v) of section 6103(e)(1)(D) is

19 amended to read as follows:

20 ‘‘(v) if the corporation was an S cor21 poration, any person who was a share22 holder during any part of the period cov23 ered by such return during which an elec24 tion under section 1362(a) was in effect,

25 or’’.
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1 (9) Paragraph (7) of section 856(c) is amended

2 by striking ‘‘paragraph (4)(B)(ii)(III)’’ and inserting

3 ‘‘paragraph (4)(B)(iii)(III)’’

4 (10) Subparagraph (A) of section 856(l)(4) is

5 amended by striking ‘‘paragraph (9)(D)(ii)’’ and in6 serting ‘‘subsection (d)(9)(D)(ii)’’.

7 (11) Subparagraph (B) of section 871(f)(2) is

8 amended by striking ‘‘19 U.S.C.’’ and inserting ‘‘(19

9 U.S.C.’’.

10 (12) Subparagraph (B) of section 995(b)(3) is

11 amended by striking ‘‘the Military Security Act of

12 1954 (22 U.S.C. 1934)’’ and inserting ‘‘section 38

13 of the International Security Assistance and Arms

14 Export Control Act of 1976 (22 U.S.C. 2778)’’.

15 (13) Section 1391(g)(3)(C) is amended by

16 striking ‘‘paragraph (1)(B)’’ and inserting ‘‘para17 graph (1)’’.

18 (14)(A) Paragraph (2) of section 2035(c) is

19 amended by striking ‘‘paragraph (1)’’ and inserting

20 ‘‘subsection (a)’’.

21 (B) Subsection (d) of section 2035 is amended

22 by inserting ‘‘and paragraph (1) of subsection (c)’’

23 after ‘‘Subsection (a)’’.
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1 (15) Paragraph (5) of section 3121(a) is

2 amended by striking the semicolon at the end of

3 subparagraph (G) and inserting a comma.

4 (16) Subparagraph (B) of section 4946(c)(3) is

5 amended by striking ‘‘the lowest rate of compensa6 tion prescribed for GS–16 of the General Schedule

7 under section 5332’’ and inserting ‘‘the lowest rate

8 of basic pay for the Senior Executive Service under

9 section 5382’’.

10 (17) Subsection (p) of section 6103 is

11 amended—

12 (A) in paragraph (4), in the matter pre13 ceding subparagraph (A)—

14 (i) by striking the second comma after

15 ‘‘(13)’’, and

16 (ii) by striking ‘‘(7)’’ and all that fol17 lows through ‘‘shall, as a condition’’ and

18 inserting ‘‘(7), (8), (9), (12), (15), or (16)

19 or any other person described in subsection

20 (l)(16) shall, as a condition’’, and

21 (B) in paragraph (4)(F)(ii), by striking the

22 second comma after ‘‘(14)’’.

23 (18) Paragraph (5) of section 6166(k) is

24 amended by striking ‘‘2035(d)(4)’’ and inserting

25 ‘‘2035(c)(2)’’.
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1 (19) Subsection (a) of section 6512 is amended

2 by striking ‘‘; and’’ at the end of paragraphs (1),

3 (2), and (5) and inserting ‘‘, and’’.

4 (20) Paragraph (1) of section 6611(g) is

5 amended by striking the comma after ‘‘(b)(3)’’.

6 (21) Subparagraphs (A) and (B) of section

7 6655(e)(5) are amended by striking ‘‘subsections

8 (d)(5) and (l)(3)(B)’’ and inserting ‘‘subsection

9 (d)(5)’’.

10 (22) The subchapter heading for subchapter D

11 of chapter 67 is amended by capitalizing the first

12 letter of the second word.

13 (23)(A) Section 6724(d)(1)(B) is amended by

14 striking clauses (xiv) through (xvii) and inserting

15 the following:

16 ‘‘(xiv) subparagraph (A) or (C) of

17 subsection (c)(4) of section 4093 (relating

18 to information reporting with respect to

19 tax on diesel and aviation fuels),

20 ‘‘(xv) section 4101(d) (relating to in21 formation reporting with respect to fuels

22 taxes),

23 ‘‘(xvi) subparagraph (C) of section

24 338(h)(10) (relating to information re25 quired to be furnished to the Secretary in
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1 case of elective recognition of gain or loss),

2 or

3 ‘‘(xvii) section 264(f)(5)(A)(iv) (relat4 ing to reporting with respect to certain life

5 insurance and annuity contracts), and’’.

6 (B) Section 6010(o)(4)(C) of the Internal Rev7 enue Service Restructuring and Reform Act of 1998

8 is amended by striking ‘‘inserting ‘or’, and by add9 ing at the end’’ and inserting ‘‘inserting ‘, or’, and

10 by adding after subparagraph (Z)’’.

11 (24) Subsection (a) of section 7421 is amended

12 by striking ‘‘6672(b)’’ and inserting ‘‘6672(c)’’.

13 (25) Paragraph (3) of section 7430(c) is

14 amended—

15 (A) in the paragraph heading, by striking

16 ‘‘ATTORNEYS’’ and inserting ‘‘ATTORNEYS’ ’’,

17 and

18 (B) in subparagraph (B), by striking ‘‘at19 torneys fees’’ each place it appears and insert20 ing ‘‘attorneys’ fees’’.

21 (26) Paragraph (2) of section 7603(b) is

22 amended by striking the semicolon at the end of

23 subparagraphs (A), (B), (C), (D), (E), (F), and (G)

24 and inserting a comma.
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1 (27) Clause (ii) of section 7802(b)(2)(B) is

2 amended by striking ‘‘; and’’ at the end and insert3 ing ‘‘, and’’.

4 (28) Paragraph (3) of section 7811(a) is

5 amended by striking ‘‘taxpayer assistance order’’

6 and inserting ‘‘Taxpayer Assistance Order’’.

7 (29) Paragraph (1) of section 7811(d) is

8 amended by striking ‘‘Ombudsman’s’’ and inserting

9 ‘‘National Taxpayer Advocate’s’’.

10 (30) Paragraph (3) of section 7872(f) is

11 amended by striking ‘‘foregoing’’ and inserting ‘‘for12 going’’.

13 Subtitle D—Pay-Go Adjustment

14 SEC. 731. AVOIDANCE OF A PAY-GO SEQUESTRATION FOR

15 FISCAL YEAR 2001.

16 (a) PAY-GO ADJUSTMENTS.—(1) In preparing the

17 final sequestration report required by section 254(f)(3) of

18 the Balanced Budget and Emergency Deficit Control Act

19 of 1985 for fiscal year 2001, in addition to the information

20 required by that section, the Director of the Office of Man21 agement and Budget shall change any balance of direct

22 spending and receipts legislation for fiscal year 2001

23 under section 252 of that Act to zero.

24 (2) Notwithstanding Rule 3 of the Budget

25 Scorekeeping Guidelines set forth in the joint explanatory
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1 statement of the committee of conference accompanying

2 the conference report on the bill H.R. 2015 of the 105th

3 Congress (House Report No. 105–217, filed July 30,

4 1997), the legislation enacted in sections 504 and 505 of

5 the Department of Transportation and Related Agencies

6 Appropriations Act, 2001, section 312 of the Legislative

7 Branch Appropriations Act, 2001, and section 1003 of di8 vision B of H.R. 4516 (106th Congress), as enacted, that

9 would have been estimated by the Office of Management

10 and Budget as changing direct spending or receipts under

11 section 252 of the Balanced Budget and Emergency Def12 icit Control Act of 1985 were it included in an Act other

13 than an appropriations Act shall be treated as direct

14 spending or receipts legislation, as appropriate, under sec15 tion 252 of the Balanced Budget and Emergency Deficit

16 Control Act of 1985.

17 (b) EXEMPTION OF CERTAIN BUDGETARY REPORTS

18 FROM TERMINATION.—Section 3003(a)(1) of the Federal

19 Reports Elimination and Sunset Act of 1995 (31 U.S.C.

20 1113 note) does not apply to any report required to be

21 submitted under any of the following provisions of law:

22 (1) Sections 1105(a), 1106(a) and (b), and

23 1109(a) of title 31, United States Code, and any

24 other law relating to the budget of the United States

25 Government.
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1 (2) The Balanced Budget and Emergency Def2 icit Control Act of 1985 (2 U.S.C. 900 et seq.).

3 (3) Sections 202(e)(1) and (3) of the Congres4 sional Budget Act of 1974 (2 U.S.C. 602(e)(1) and

5 (3)).

6 (4) Section 1014(e) of the Congressional Budg7 et and Impoundment Control Act of 1974 (2 U.S.C.

8 685(e)).

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