HOUSE OF REPRESENTATIVES

547

1995 T56.13

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

apply—

‘‘(1) to any employee stock ownership plan

of the Corporation,

‘‘(2) to underwriting syndicates holding

shares for resale, or

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

for others, to commercial banks, brokerdealers, clearing corporations, or other

nominees.

‘‘(c) No director, officer, or employee of the

Corporation may acquire any securities, or

any right to acquire securities, of the

Corporation—

‘‘(1) in the public offering of securities of

the Corporation in the implementation of

the privatization,

‘‘(2) pursuant to any agreement, arrangement, or understanding entered into before

the privatization date, or

‘‘(3) before the election of directors of the

Corporation under section 1503(d) on any

terms more favorable than those offered to

the general public.’’.

(c) EXEMPTION FROM LIABILITY.—Chapter 25

(as amended by subsection (b)) is amended by

adding at the end the following new section:

‘‘SEC. 1505. EXEMPTION FROM LIABILITY.

‘‘(a) IN GENERAL.—No director, officer, employee, or agent of the Corporation shall be

liable, for money damages or otherwise, to

any party if, with respect to the subject matter of the action, suit, or proceeding, such

person was fulfilling a duty, in connection

with any action taken in connection with

the privatization, which such person in good

faith reasonably believed to be required by

law or vested in such person.

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

subject to the Securities Act of 1933 and the

Securities Exchange Act of 1934. The exemption set forth in subsection (a) shall not

apply to claims arising under such Acts or

under the Constitution or laws of any State,

territory, or possession of the United States

relating to transactions in securities, which

claims are in connection with a public offering implementing the privatization.’’.

(d) RESOLUTION OF CERTAIN ISSUES.—Chapter 25 (as amended by subsection (c)) is

amended by adding at the end the following

new section:

‘‘SEC. 1506. RESOLUTION OF CERTAIN ISSUES.

‘‘(a) CORPORATION ACTIONS.—Notwithstanding any provision of any agreement to

which the Corporation is a party, the Corporation shall not be considered to be in

breach, default, or violation of any such

agreement because of any provision of this

chapter or any action the Corporation is required to take under this chapter.

‘‘(b) RIGHT TO SUE WITHDRAWN.—The

United States hereby withdraws any stated

or implied consent for the United States, or

any agent or officer of the United States, to

be sued by any person for any legal, equitable, or other relief with respect to any

claim arising out of, or resulting from, acts

or omissions under this chapter.’’.

(e) APPLICATION OF PRIVATIZATION PROCEEDS.—Chapter 25 (as amended by subsection (d)) is amended by adding at the end

the following new section:

‘‘SEC. 1507. APPLICATION OF PRIVATIZATION

PROCEEDS.

‘‘The proceeds from the privatization shall

be included in the budget baseline required

by the Balanced Budget and Emergency Deficit Control Act of 1985 and shall be counted

as an offset to direct spending for purposes of

section 252 of such Act, notwithstanding section 257(e) of such Act.’’.

(f) CONFORMING AMENDMENT.—The table of

contents for chapter 25 is amended by inserting after the item for section 1502 the following:

‘‘Sec. 1503. Establishment of Private Corporation.

‘‘Sec. 1504. Ownership Limitations.

‘‘Sec. 1505. Exemption from Liability.

‘‘Sec. 1506. Resolution of Certain Issues.

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

(g) Section 193 (42 U.S.C. 2243) is amended

by adding at the end the following:

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

United States Enrichment Corporation results in the Corporation being—

‘‘(1) owned, controlled, or dominated by a

foreign corporation or a foreign government,

or

‘‘(2) otherwise inimical to the common defense or security of the United States,

any license held by the Corporation under

sections 53 and 63 shall be terminated.’’.

(h) PERIOD FOR CONGRESSIONAL REVIEW.—

Section 1502(d) (42 U.S.C. 2297d–1(d)) is

amended by striking ‘‘less than 60 days after

notification of the Congress’’ and inserting

‘‘less than 60 days after the date of the report to Congress by the Comptroller General

under subsection (c)’’.

SEC. 707. PERIODIC CERTIFICATION OF COMPLIANCE.

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

amended by striking ‘‘ANNUAL APPLICATION

FOR CERTIFICATE OF COMPLIANCE.—The Corporation shall apply at least annually to the

Nuclear Regulatory Commission for a certificate of compliance under paragraph (1).’’

and inserting ‘‘PERIODIC APPLICATION FOR

CERTIFICATE OF COMPLIANCE.—The Corporation shall apply to the Nuclear Regulatory

Commission for a certificate of compliance

under paragraph (1) periodically, as determined by the Nuclear Regulatory Commission, but not less than every 5 years.’’.

SEC. 708. LICENSING OF OTHER TECHNOLOGIES.

Subsection (a) of section 1702 (42 U.S.C.

2297f–1(a)) is amended by striking ‘‘other

than’’ and inserting ‘‘including’’.

SEC. 709. CONFORMING AMENDMENTS.

(a) REPEALS IN ATOMIC ENERGY ACT OF 1954

AS OF THE PRIVATIZATION DATE.—

(1) REPEALS.—As of the privatization date

(as defined in section 1201(13) of the Atomic

Energy Act of 1954), the following sections

(as in effect on such privatization date) of

the Atomic Energy Act of 1954 are repealed:

(A) Section 1202.

(B) Sections 1301 through 1304.

(C) Sections 1306 through 1316.

(D) Sections 1404 and 1405.

(E) Section 1601.

(F) Sections 1603 through 1607.

(2) CONFORMING AMENDMENT.—The table of

contents of such Act is amended by repealing

the items referring to sections repealed by

paragraph (1).

(b) STATUTORY MODIFICATIONS.—As of such

privatization date, the following shall take

effect:

(1) For purposes of title I of the Atomic

Energy Act of 1954, all references in such Act

to the ‘‘United States Enrichment Corporation’’ shall be deemed to be references to the

corporation established pursuant to section

1503 of the Atomic Energy Act of 1954 (as

added by section 6(a)).

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

of 1992 (42 U.S.C. 2296b–7(1)) is amended by

striking ‘‘the United States’’ and all that

follows through the period and inserting

‘‘the corporation referred to in section

1201(4) of the Atomic Energy Act of 1954.’’.

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

Code, is amended by striking subparagraph

(N), as added by section 902(b) of Public Law

102–486.

(c) REVISION OF SECTION 1305.—As of such

privatization date, section 1305 of the Atomic

Energy Act of 1954 (42 U.S.C 2297b–4) is

amended—

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

(d), and

(2) in subsection (e)—

(A) by striking the subsection designation

and heading,

(B) by redesignating paragraphs (1) and (2)

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

and (b) and by moving the margins 2-ems to

the left,

(C) by striking paragraph (3), and

(D) by redesignating paragraph (4) (as

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

and by moving the margins 2-ems to the left.

It was decided in the Yeas ....... 119 ! negative ....................... Nays ...... 313

T56.13 [Roll No. 292]

AYES—119

Abercrombie

Ackerman

Andrews

Baldacci

Barcia

Bevill

Bonior

Borski

Boucher

Browder

Brown (FL)

Brown (OH)

Clay

Clayton

Clement

Clyburn

Coleman

Collins (IL)

Collins (MI)

Conyers

Cramer

Danner

de la Garza

DeLauro

Dingell

Dixon

Durbin

Edwards

Engel

Eshoo

Evans

Farr

Fattah

Fazio

Filner

Flake

Foglietta

Ford

Frank (MA)

Frost

Gejdenson

Gephardt

Gonzalez

Gordon

Gutierrez

Hastings (FL)

Hefner

Hinchey

Holden

Jackson-Lee

Jefferson

Johnson (SD)

Johnson, E. B.

Johnston

Kennedy (RI)

Kennelly

Lantos

Levin

Lewis (GA)

Lofgren

Lowey

Maloney

Manton

Markey

Martinez

Mascara

Matsui

McHale

Meek

Menendez

Miller (CA)

Mineta

Mink

Moakley

Moran

Nadler

Neal

Oberstar

Obey

Olver

Owens

Pallone

Payne (NJ)

Peterson (MN)

Pomeroy

Rahall

Reed

Richardson

Rose

Rush

Sabo

Sanders

Sawyer

Schroeder

Schumer

Serrano

Slaughter

Spratt

Stokes

Studds

Stupak

Tanner

Thompson

Thornton

Torres

Torricelli

Towns

Traficant

Tucker

Velazquez

Vento

Volkmer

Ward

Waxman

Wise

Woolsey

Wyden

Wynn

Yates

NOES—313

Allard

Archer

Armey

Bachus

Baesler

Baker (CA)

Baker (LA)

Ballenger

Barr

Barrett (NE)

Barrett (WI)

Bartlett

Barton

Bass

Bateman

Becerra

Beilenson

Bentsen

Bereuter

Berman

Bilbray

Bilirakis

Bishop

Bliley

Blute

Boehlert

Boehner

Bonilla

Bono

Brewster

Brown (CA)

Brownback

Bryant (TN)

Bryant (TX)

Bunn

Bunning

Burr

Burton

Buyer

Callahan

Calvert

Camp

Canady

Cardin

Castle

Chabot

Chambliss

Chapman

Chenoweth

Christensen

Chrysler

Clinger

Coble

Coburn

Collins (GA)

Combest

Condit

Cooley

Costello

Cox

Coyne

Crane

Crapo

Cremeans

Cubin

Cunningham

Davis

Deal

DeFazio

DeLay

Dellums

Deutsch

Diaz-Balart

Dickey

Dicks

Doggett

Dooley

Doolittle

Dornan

Doyle

Dreier

Duncan

Dunn

Ehlers

Ehrlich

Emerson

English

Ensign

Everett

Ewing

Fawell

Fields (LA)

Fields (TX)

Flanagan

Foley

Forbes

Fowler

Fox

Franks (CT)

Franks (NJ)

Frelinghuysen

Frisa

Funderburk

Furse

Gallegly

Ganske

Gekas

Geren

Gibbons

Gilchrest

Gillmor

Gilman

Goodlatte

Goodling

Goss

Graham

Green
JOURNAL OF THE

548

T56.13 APRIL 5

Greenwood

Gunderson

Gutknecht

Hall (OH)

Hall (TX)

Hamilton

Hancock

Hansen

Harman

Hastert

Hastings (WA)

Hayes

Hayworth

Hefley

Heineman

Herger

Hilleary

Hilliard

Hobson

Hoekstra

Hoke

Horn

Hostettler

Houghton

Hoyer

Hunter

Hutchinson

Hyde

Inglis

Istook

Jacobs

Johnson (CT)

Johnson, Sam

Jones

Kanjorski

Kaptur

Kasich

Kelly

Kennedy (MA)

Kildee

Kim

King

Kingston

Kleczka

Klink

Klug

Knollenberg

Kolbe

LaFalce

LaHood

Largent

Latham

LaTourette

Laughlin

Lazio

Leach

Lewis (CA)

Lewis (KY)

Lightfoot

Lincoln

Linder

Lipinski

Livingston

LoBiondo

Longley

Lucas

Luther

Manzullo

Martini

McCarthy

McCollum

McCrery

McDade

McDermott

McHugh

McInnis

McIntosh

McKeon

McKinney

McNulty

Meehan

Metcalf

Meyers

Mfume

Mica

Miller (FL)

Minge

Molinari

Mollohan

Montgomery

Moorhead

Morella

Murtha

Myers

Myrick

Nethercutt

Neumann

Ney

Norwood

Nussle

Ortiz

Orton

Oxley

Packard

Parker

Pastor

Paxon

Payne (VA)

Peterson (FL)

Petri

Pickett

Pombo

Porter

Portman

Poshard

Pryce

Quillen

Quinn

Radanovich

Ramstad

Rangel

Regula

Riggs

Rivers

Roberts

Roemer

Rogers

Rohrabacher

Ros-Lehtinen

Roth

Roukema

Roybal-Allard

Royce

Salmon

Sanford

Saxton

Scarborough

Schaefer

Schiff

Scott

Seastrand

Sensenbrenner

Shadegg

Shaw

Shays

Shuster

Sisisky

Skaggs

Skeen

Skelton

Smith (MI)

Smith (NJ)

Smith (TX)

Smith (WA)

Solomon

Souder

Spence

Stark

Stearns

Stenholm

Stockman

Stump

Talent

Tate

Tauzin

Taylor (MS)

Taylor (NC)

Tejeda

Thomas

Thornberry

Thurman

Tiahrt

Torkildsen

Upton

Visclosky

Vucanovich

Waldholtz

Walker

Walsh

Wamp

Waters

Watt (NC)

Watts (OK)

Weldon (FL)

Weldon (PA)

Weller

White

Whitfield

Wicker

Williams

Wilson

Wolf

Young (AK)

Young (FL)

Zeliff

Zimmer

NOT VOTING—2

Pelosi Reynolds

So the amendment in the nature of a

substitute was not agreed to.

After some further time,

The SPEAKER pro tempore, Mr.

DREIER, assumed the Chair.

When Mr. BOEHNER, Chairman, pursuant to House Resolution 128, reported

the bill back to the House with an

amendment adopted by the Committee.

The previous question having been

ordered by said resolution.

The following amendment, reported

from the Committee of the Whole

House on the state of the Union, was

agreed to:

Strike out all after the enacting clause and

insert:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Tax Fairness and Deficit Reduction Act of 1995’’.

TITLE I—DISCRETIONARY SAVINGS

SEC. 1001. SHORT TITLE.

This title may be cited as the ‘‘Discretionary Spending Reduction and Control Act

of 1995’’.

SEC. 1002. DISCRETIONARY SPENDING LIMITS.

(a) LIMITS.—Section 601(a)(2) of the Congressional Budget Act of 1974 is amended by

striking subparagraphs (A), (B), (C), (D), and

(F), by redesignating subparagraph (E) as

subparagraph (A) and by striking ‘‘and’’ at

the end of that subparagraph, and by inserting after subparagraph (A) the following new

subparagraphs:

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

discretionary category: $502,994,000,000 in new

budget authority and $537,946,000,000 in outlays;

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

discretionary category: $497,816,000,000 in new

budget authority and $531,793,000,000 in outlays;

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

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

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

outlays;

‘‘(E) with respect to fiscal year 1999, for the

discretionary category: $491,586,000,000 in new

budget authority and $522,063,000,000 in outlays; and

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

discretionary category: $492,282,000,000 in new

budget authority and $521,690,000,000 in outlays;’’.

(b) COMMITTEE ALLOCATIONS AND ENFORCEMENT.—Section 602 of the Congressional

Budget Act of 1974 is amended—

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

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

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

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

TO 2000’’ and by striking ‘‘1992 through 1995’’

and inserting ‘‘1995 through 2000’’.

(c) FIVE-YEAR BUDGET RESOLUTIONS.—Section 606 of the Congressional Budget Act of

1974 is amended—

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

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

1998, 1999, or 2000’’; and

(2) in subsection (d)(1), by striking ‘‘1992,

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

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

and (ii)’’.

(d) EFFECTIVE DATE.—Section 607 of the

Congressional Budget Act of 1974 is amended

by striking ‘‘1991 to 1998’’ and inserting ‘‘1995

to 2000’’.

(e) SEQUESTRATION REGARDING CRIME

TRUST FUND.—(1) Section 251A(b)(1) of the

Balanced Budget and Emergency Deficit

Control Act of 1985 is amended by striking

subparagraphs (B), (C), and (D) and its last

two sentences and inserting the following:

‘‘(B) For fiscal year 1996, $1,827,000,000.

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

‘‘(D) For fiscal year 1998, $3,840,000,000.

‘‘(E) For fiscal year 1999, $4,415,000,000.

‘‘(F) For fiscal year 2000, $4,874,000,000.

‘‘The appropriate levels of new budget authority are as follows: for fiscal year 1996,

$3,357,000,000; for fiscal year 1997,

$3,915,000,000; for fiscal year 1998,

$4,306,000,000; for fiscal year 1999,

$5,089,000,000; and for fiscal year 2000,

$5,089,000,000.’’.

(2) The last two sentences of section 310002

of the Violent Crime Control and Law Enforcement Act of 1994 (42 U.S.C. 14212) are repealed.

SEC. 1003. GENERAL STATEMENT AND DEFINITIONS.

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

the Balanced Budget and Emergency Deficit

Control Act of 1985 is amended by striking

the first sentence and inserting the following: ‘‘This part provides for the enforcement of deficit reduction through discretionary spending limits and pay-as-you-go

requirements for fiscal years 1995 through

2000.’’.

(b) DEFINITIONS.—Section 250(c) of the Balanced Budget and Emergency Deficit Control

Act of 1985 is amended—

(1) by striking paragraph (4) and inserting

the following:

‘‘(4) The term ‘category’ means all discretionary appropriations.’’;

(2) by striking paragraph (6) and inserting

the following:

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

new budget authority, unobligated balances,

direct spending authority, and obligation

limitations.’’;

(3) in paragraph (9), by striking ‘‘1992’’ and

inserting ‘‘1995’’;

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

inserting ‘‘2000’’; and

(5) by striking paragraph (17) and by redesignating paragraphs (18) through (21) as paragraphs (17) through (20), respectively.

SEC. 1004. ENFORCING DISCRETIONARY SPENDING LIMITS.

Section 251 of the Balanced Budget and

Emergency Deficit Control Act of 1985 is

amended—

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

striking ‘‘1991–1998’’ and inserting ‘‘1995–

2000’’;

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

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

1998’’ and inserting ‘‘1995, 1996, 1997, 1998, 1999,

or 2000’’ and by striking ‘‘through 1998’’ and

inserting ‘‘through 2000’’;

(3) in subsection (b)(1), by striking subparagraphs (B) and (C) and by striking ‘‘the

following:’’ and all that follows through

‘‘The adjustments’’ and inserting ‘‘the following: the adjustments’’;

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

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

inserting ‘‘1995, 1996, 1997, 1998, 1999, or 2000’’

and by striking ‘‘through 1998’’ and inserting

‘‘through 2000’’;

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

(C) of subsection (b)(2);

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

clauses (i), (ii), and (iii) and by striking ‘‘(iv)

if, for fiscal years 1994, 1995, 1996, 1997, and

1998’’ and inserting ‘‘If, for fiscal years 1995,

1996, 1997, 1998, 1999, and 2000’’; and

(7) in subsection (b)(2)(F), strike everything after ‘‘the adjustment in outlays’’ and

insert ‘‘for a category for a fiscal year shall

not exceed 0.5 percent of the adjusted discretionary spending limit on outlays for that

fiscal year in fiscal year 1996, 1997, 1998, 1999,

or 2000.’’.

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

Section 252 of the Balanced Budget and

Emergency Deficit Control Act of 1985 is

amended—

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

striking ‘‘1992–1998’’ and inserting ‘‘1995–

2000’’;

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

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

and

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

through 1998’’ and inserting ‘‘1995 through

2000’’ and by striking ‘‘through 1995’’ and inserting ‘‘through 2000’’.

SEC. 1006. REPORTS AND ORDERS.

Section 254 of the Balanced Budget and

Emergency Deficit Control Act of 1985 is

amended—

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

and inserting ‘‘2000’’; and

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

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

SEC. 1007. TECHNICAL CORRECTION.

Section 258 of the Balanced Budget and

Emergency Deficit Control Act of 1985, entitled ‘‘Modification of Presidential Order’’, is

repealed.

SEC. 1008. EFFECTIVE DATE.

(a) EXPIRATION.—Section 275(b) of the Balanced Budget and Emergency Deficit Control

Act of 1985 is amended by striking ‘‘1995’’ and

inserting ‘‘2000’’.

(b) EXPIRATION.—Section 14002(c)(3) of the

Omnibus Budget Reconciliation Act of 1993 (2

U.S.C. 900 note; 2 U.S.C. 665 note) is repealed.
HOUSE OF REPRESENTATIVES

549

1995 T56.13

SEC. 1009. SPECIAL RULE ON INTERRELATIONSHIP BETWEEN CHANGES IN DISCRETIONARY SPENDING LIMITS AND

PAY-AS-YOU-GO REQUIREMENTS.

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

and Emergency Deficit Control Act of 1985 is

amended by adding at the end the following

new subsection:

‘‘(f) SPECIAL RULE ON INTERRELATIONSHIP

BETWEEN SECTIONS 251, 251A, and 252.—Whenever the Committee on the Budget of the

House of Representatives or the Senate reports legislation that decreases the discretionary spending limits for budget authority

and outlays for a fiscal year set forth in section 601(a)(2) of the Congressional Budget

Act of 1974 or in section 251A(b) of the Balanced Budget and Emergency Deficit Control

Act of 1985, or both, then, for purposes of

subsection (b), an amount equal to that decrease in the discretionary spending limit

for outlays shall be treated as direct spending legislation decreasing the deficit for that

fiscal year.’’.

(2) Section 310(a) of the Congressional

Budget Act of 1974 is amended by striking

‘‘or’’ at the end of paragraph (3), by redesignating paragraph (4) as paragraph (5) and by

striking ‘‘and (3)’’ in such redesignated paragraph (5) and inserting ‘‘(3), and (4)’’, and by

inserting after paragraph (3) the following

new paragraph:

‘‘(4) carry out section 252(f) of the Balanced

Budget and Emergency Deficit Control Act

of 1985; or’’.

(b) For purposes of section 252(f) of the Balanced Budget and Emergency Deficit Control

Act of 1985 (as amended by subsection

(a)(1))—

(1) this Act shall be deemed to be legislation reported by the Committee on the Budget of the House of Representatives; and

(2)(A) reductions in the discretionary

spending limit for outlays set forth in section 601(a)(2) of the Congressional Budget

Act of 1974 for fiscal years 1999 and 2000 under

section 1002 shall be measured as reductions

from the discretionary spending limit for

outlays for fiscal year 1998 as in effect immediately before the enactment of this Act; and

(B) reductions in the discretionary spending limit for outlays set forth in section

251A(b) of the Balanced Budget and Emergency Deficit Control Act of 1985 for fiscal

years 1999 and 2000 under section 1002 shall be

measured as reductions from the level for

outlays for fiscal year 1999 and 2000, as the

case may be, referred to in the last two sentences of section 251A(b)(1) as in effect immediately before the enactment of this Act.

(c) In the final sequestration report of the

Director of the Office of Management and

Budget for fiscal year 1996—

(1) all adjustments required by section

251(b)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985 made after

the sequestration preview report for fiscal

year 1996 shall be made to the discretionary

spending limits set forth in 601(a)(2) of the

Congressional Budget Act of 1974 as amended

by section 1002; and

(2) all statutory changes in the discretionary spending limits set forth in 601(a)(2)

of the Congressional Budget Act of 1974 made

after issuance of the sequestration preview

report for fiscal year 1996 of the Director of

the Office of Management and Budget and

before the date of enactment of this Act

shall be made to those limits as amended by

section 1002.

TITLE II—EXTENSION OF AUTHORITY OF

FEDERAL COMMUNICATIONS COMMISSION TO USE COMPETITIVE BIDDING

SEC. 2001. EXTENSION OF AUTHORITY.

Section 309(j)(11) of the Communications

Act of 1934 (47 U.S.C. 309(j)(11)) is amended by

striking ‘‘September 30, 1998’’ and inserting

‘‘September 30, 2000’’.

TITLE III—PRIVATIZATION OF THE

UNITED STATES ENRICHMENT CORPORATION

SEC. 3001. SHORT TITLE AND REFERENCE.

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

as the ‘‘USEC Privatization Act’’.

(b) REFERENCE.—Except as otherwise expressly provided, whenever in this title an

amendment or repeal is expressed in terms of

an amendment to, or repeal of, a section or

other provision, the reference shall be considered to be made to a section or other provision of the Atomic Energy Act of 1954 (42

U.S.C. 2011 et seq.).

SEC. 3002. PRODUCTION FACILITY.

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

is amended by striking ‘‘or the construction

and operation of a uranium enrichment production facility using Atomic Vapor Laser

Isotope Separation technology’’.

SEC. 3003. DEFINITIONS.

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

(1) in paragraph (4), by inserting before the

period the following: ‘‘and any successor corporation established through privatization of

the Corporation’’;

(2) by redesignating paragraphs (10)

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

respectively, and by inserting after paragraph (9) the following new paragraphs:

‘‘(10) The term ‘low-level radioactive

waste’ has the meaning given such term in

section 102(9) of the Low-Level Radioactive

Waste Policy Amendments Act of 1985 (42

U.S.C. 2021b(9)).

‘‘(11) The term ‘mixed waste’ has the meaning given such term in section 1004(41) of the

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

‘‘(12) The term ‘privatization’ means the

transfer of ownership of the Corporation to

private investors pursuant to chapter 25.

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

the date on which 100 percent of ownership of

the Corporation has been transferred to private investors.’’;

(3) by inserting after paragraph (17) (as redesignated) the following new paragraph:

‘‘(18) The term ‘transition date’ means

July 1, 1993.’’; and

(4) by redesignating the unredesignated

paragraph (14) as paragraph (19).

SEC. 3004. EMPLOYEES OF THE CORPORATION.

(a) PARAGRAPH (2).—Paragraphs (1) and (2)

of section 1305(e) (42 U.S.C. 2297b–4(e)(1)(2))

are amended to read as follows:

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

subsection to ensure that the privatization

of the Corporation shall not result in any adverse effects on the pension benefits of employees at facilities that are operated, directly or under contract, in the performance

of the functions vested in the Corporation.

‘‘(2) APPLICABILITY OF EXISTING COLLECTIVE

BARGAINING AGREEMENT.—The Corporation

shall abide by the terms of the collective

bargaining agreement in effect on the privatization date at each individual facility.’’.

(b) PARAGRAPH (4).—Paragraph (4) of section 1305(e) (42 U.S.C. 2297b–4(e)(4)) is

amended—

(1) by striking ‘‘AND DETAILEES’’ in the

heading;

(2) by striking the first sentence;

(3) in the second sentence, by inserting

‘‘from other Federal employment’’ after

‘‘transfer to the Corporation’’; and

(4) by striking the last sentence.

SEC. 3005. MARKETING AND CONTRACTING AUTHORITY.

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

(42 U.S.C. 2297c(a)) is amended effective on

the privatization date (as defined in section

1201(13) of the Atomic Energy Act of 1954)—

(1) by amending the subsection heading to

read ‘‘MARKETING AUTHORITY.—’’; and

(2) by striking the first sentence.

(b) TRANSFER OF CONTRACTS.—Section

1401(b) (42 U.S.C. 2297c(b)) is amended—

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

end the following: ‘‘The privatization of the

Corporation shall not affect the terms of, or

the rights or obligations of the parties to,

any such power purchase contract.’’; and

(2) by adding at the end the following:

‘‘(3) EFFECT OF TRANSFER.—

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

paragraph (1), all rights, privileges, and benefits under such contracts, agreements, and

leases, including the right to amend, modify,

extend, revise, or terminate any of such contracts, agreements, or leases were irrevocably assigned to the Corporation for its exclusive benefit.

‘‘(B) Notwithstanding the transfer pursuant to paragraph (1), the United States shall

remain obligated to the parties to the contracts, agreements, and leases transferred

pursuant to paragraph (1) for the performance of the obligations of the United States

thereunder during the term thereof. The Corporation shall reimburse the United States

for any amount paid by the United States in

respect of such obligations arising after the

privatization date to the extent such amount

is a legal and valid obligation of the Corporation then due.

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

material amendment, modification, extension, revision, replacement, or termination

of any contract, agreement, or lease transferred under paragraph (1), the United States

shall be released from further obligation

under such contract, agreement, or lease, except that such action shall not release the

United States from obligations arising under

such contract, agreement, or lease prior to

such time.’’.

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

1) is amended to read as follows:

‘‘SEC. 1402. PRICING.

‘‘The Corporation shall establish prices for

its products, materials, and services provided

to customers on a basis that will allow it to

attain the normal business objectives of a

profitmaking corporation.’’.

(d) LEASING OF GASEOUS DIFFUSION FACILITIES OF DEPARTMENT.—Effective on the privatization date (as defined in section 1201(13)

of the Atomic Energy Act of 1954), section

1403 (42 U.S.C. 2297c–2) is amended by adding

at the end the following:

‘‘(h) LOW-LEVEL RADIOACTIVE WASTE AND

MIXED WASTE.—

‘‘(1) RESPONSIBILITY OF THE DEPARTMENT;

COSTS.—

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

waste and mixed waste generated by the Corporation as a result of the operation of the

facilities and related property leased by the

Corporation pursuant to subsection (a) or as

a result of treatment of such wastes at a location other than the facilities and related

property leased by the Corporation pursuant

to subsection (a) the Department, at the request of the Corporation, shall—

‘‘(i) accept for treatment or disposal of all

such wastes for which treatment or disposal

technologies and capacities exist, whether

within the Department or elsewhere; and

‘‘(ii) accept for storage (or ultimately

treatment or disposal) all such wastes for

which treatment and disposal technologies

or capacities do not exist, pending development of such technologies or availability of

such capacities for such wastes.

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

that the Department accepts for treatment,

storage, or disposal pursuant to subparagraph (A) shall, for the purpose of any permits, licenses, authorizations, agreements,

or orders involving the Department and

other Federal agencies or State or local governments, be deemed to be generated by the

Department and the Department shall handle such wastes in accordance with any such

permits, licenses, authorizations, agree-
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ments, or orders. The Department shall obtain any additional permits, licenses, or authorizations necessary to handle such

wastes, shall amend any such agreements or

orders as necessary to handle such wastes,

and shall handle such wastes in accordance

therewith.

‘‘(C) The Corporation shall reimburse the

Department for the treatment, storage, or

disposal of low-level radioactive waste or

mixed waste pursuant to subparagraph (A) in

an amount equal to the Department’s costs

but in no event greater than an amount

equal to that which would be charged by

commercial, State, regional, or interstate

compact entities for treatment, storage, or

disposal of such waste.

‘‘(2) AGREEMENTS WITH OTHER PERSONS.—

The Corporation may also enter into agreements for the treatment, storage, or disposal

of low-level radioactive waste and mixed

waste generated by the Corporation as a result of the operation of the facilities and related property leased by the Corporation

pursuant to subsection (a) with any person

other than the Department that is authorized by applicable laws and regulations to

treat, store, or dispose of such wastes.’’.

(e) LIABILITIES.—

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

2297c–5(a)) is amended—

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

‘‘TRANSITION’’ in the heading; and

(B) by adding at the end the following: ‘‘As

of the privatization date, all liabilities attributable to the operation of the Corporation from the transition date to the privatization date shall be direct liabilities of the

United States.’’.

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

2297c–5(b)) is amended—

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

‘‘TRANSITION’’ in the heading; and

(B) by adding at the end the following: ‘‘As

of the privatization date, any judgment entered against the Corporation imposing liability arising out of the operation of the

Corporation from the transition date to the

privatization date shall be considered a judgment against the United States.’’.

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

2297c–5(d)) is amended—

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

‘‘TRANSITION’’ in the heading; and

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

inserting ‘‘the privatization date (or, in the

event the privatization date does not occur,

the transition date)’’.

(f) TRANSFER OF URANIUM.—Title II (42

U.S.C. 2297 et seq.) is amended by redesignating section 1408 as section 1409 and by inserting after section 1407 the following:

‘‘SEC. 1408. TRANSFER OF URANIUM.

‘‘The Secretary may, before the privatization date, transfer to the Corporation without charge raw uranium, low-enriched uranium, and highly enriched uranium.’’.

SEC. 3006. PRIVATIZATION OF THE CORPORATION.

(a) ESTABLISHMENT OF PRIVATE CORPORATION.—Chapter 25 (42 U.S.C. 2297d et seq.) is

amended by adding at the end the following

new section:

‘‘SEC. 1503. ESTABLISHMENT OF PRIVATE CORPORATION.

‘‘(a) ESTABLISHMENT.—

‘‘(1) IN GENERAL.—In order to facilitate privatization, the Corporation may provide for

the establishment of a private corporation

organized under the laws of any of the several States. Such corporation shall have

among its purposes the following:

‘‘(A) To help maintain a reliable and economical domestic source of uranium enrichment services.

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

provided in its corporate charter.

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

‘‘(A) enrich uranium, provide for uranium

to be enriched by others, or acquire enriched

uranium (including low-enriched uranium

derived from highly enriched uranium);

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

those research and development activities

related to uranium enrichment and related

processes and activities the corporation considers necessary or advisable to maintain

itself as a commercial enterprise operating

on a profitable and efficient basis;

‘‘(C) enter into transactions regarding uranium, enriched uranium, or depleted uranium with—

‘‘(i) persons licensed under section 53, 63,

103, or 104 in accordance with the licenses

held by those persons;

‘‘(ii) persons in accordance with, and within the period of, an agreement for cooperation arranged under section 123; or

‘‘(iii) persons otherwise authorized by law

to enter into such transactions;

‘‘(D) enter into contracts with persons licensed under section 53, 63, 103, or 104, for as

long as the corporation considers necessary

or desirable, to provide uranium or uranium

enrichment and related services;

‘‘(E) enter into contracts to provide uranium or uranium enrichment and related

services in accordance with, and within the

period of, an agreement for cooperation arranged under section 123 or as otherwise authorized by law; and

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

are permitted by the law of the jurisdiction

of incorporation of the corporation.

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

implementing the privatization, the Corporation may transfer some or all of its assets and obligations to the corporation established pursuant to this section,

including—

‘‘(A) all of the Corporation’s assets, including all contracts, agreements, and leases, including all uranium enrichment contracts

and power purchase contracts;

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

any bank or other financial institution;

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

and obligations, accruing subsequent to the

privatization date, under the power purchase

contracts covered by section 1401(b)(2)(B);

and

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

and obligations, accruing subsequent to the

privatization date, under the lease agreement between the Department and the Corporation executed by the Department and

the Corporation pursuant to section 1403.

‘‘(4) MERGER OR CONSOLIDATION.—For purposes of implementing the privatization, the

Corporation may merge or consolidate with

the corporation established pursuant to subsection (a)(1) if such action is contemplated

by the plan for privatization approved by the

President under section 1502(b). The Board

shall have exclusive authority to approve

such merger or consolidation and to take all

further actions necessary to consummate

such merger or consolidation, and no action

by or in respect of shareholders shall be required. The merger or consolidation shall be

effected in accordance with, and have the effects of a merger or consolidation under, the

laws of the jurisdiction of incorporation of

the surviving corporation, and all rights and

benefits provided under this title to the Corporation shall apply to the surviving corporation as if it were the Corporation.

‘‘(b) OSHA REQUIREMENTS.—For purposes

of the regulation of radiological and nonradiological hazards under the Occupational

Safety and Health Act of 1970, the corporation established pursuant to subsection (a)(1)

shall be treated in the same manner as other

employers licensed by the Nuclear Regulatory Commission. Any interagency agreement entered into between the Nuclear Regulatory Commission and the Occupational

Safety and Health Administration governing

the scope of their respective regulatory authorities shall apply to the corporation as if

the corporation were a Nuclear Regulatory

Commission licensee.

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

‘‘(1) NOT FEDERAL AGENCY.—The corporation established pursuant to subsection (a)(1)

shall not be an agency, instrumentality, or

establishment of the United States Government and shall not be a Government corporation or Government-controlled corporation.

‘‘(2) NO RECOURSE AGAINST UNITED STATES.—

Obligations of the corporation established

pursuant to subsection (a)(1) shall not be obligations of, or guaranteed as to principal or

interest by, the Corporation or the United

States, and the obligations shall so plainly

state.

‘‘(3) NO CLAIMS COURT JURISDICTION.—No action under section 1491 of title 28, United

States Code, shall be allowable against the

United States based on the actions of the

corporation established pursuant to subsection (a)(1).

‘‘(d) BOARD OF DIRECTOR’S ELECTION AFTER

PUBLIC OFFERING.—In the event that the privatization is implemented by means of a

public offering, an election of the members

of the board of directors of the Corporation

by the shareholders shall be conducted before the end of the 1-year period beginning

the date shares are first offered to the public

pursuant to such public offering.

‘‘(e) ADEQUATE PROCEEDS.—The Secretary

of Energy shall not allow the privatization of

the Corporation unless before the sale date

the Secretary determines that the estimated

sum of the gross proceeds from the sale of

the Corporation will be an adequate

amount.’’.

(b) OWNERSHIP LIMITATIONS.—Chapter 25 (as

amended by subsection (a)) is amended by

adding at the end the following new section:

‘‘SEC. 1504. OWNERSHIP LIMITATIONS.

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

that the privatization is implemented by

means of a public offering, during a period of

3 years beginning on the privatization date,

no person, directly or indirectly, may acquire or hold securities representing more

than 10 percent of the total votes of all outstanding voting securities of the Corporation.

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

apply—

‘‘(1) to any employee stock ownership plan

of the Corporation,

‘‘(2) to underwriting syndicates holding

shares for resale, or

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

for others, to commercial banks, brokerdealers, clearing corporations, or other

nominees.

‘‘(c) No director, officer, or employee of the

Corporation may acquire any securities, or

any right to acquire securities, of the

Corporation—

‘‘(1) in the public offering of securities of

the Corporation in the implementation of

the privatization,

‘‘(2) pursuant to any agreement, arrangement, or understanding entered into before

the privatization date, or

‘‘(3) before the election of directors of the

Corporation under section 1503(d) on any

terms more favorable than those offered to

the general public.’’.

(c) EXEMPTION FROM LIABILITY.—Chapter 25

(as amended by subsection (b)) is amended by

adding at the end the following new section:
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‘‘SEC. 1505. EXEMPTION FROM LIABILITY.

‘‘(a) IN GENERAL.—No director, officer, employee, or agent of the Corporation shall be

liable, for money damages or otherwise, to

any party if, with respect to the subject matter of the action, suit, or proceeding, such

person was fulfilling a duty, in connection

with any action taken in connection with

the privatization, which such person in good

faith reasonably believed to be required by

law or vested in such person.

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

subject to the Securities Act of 1933 and the

Securities Exchange Act of 1934. The exemption set forth in subsection (a) shall not

apply to claims arising under such Acts or

under the Constitution or laws of any State,

territory, or possession of the United States

relating to transactions in securities, which

claims are in connection with a public offering implementing the privatization.’’.

(d) RESOLUTION OF CERTAIN ISSUES.—Chapter 25 (as amended by subsection (c)) is

amended by adding at the end the following

new section:

‘‘SEC. 1506. RESOLUTION OF CERTAIN ISSUES.

‘‘(a) CORPORATION ACTIONS.—Notwithstanding any provision of any agreement to

which the Corporation is a party, the Corporation shall not be considered to be in

breach, default, or violation of any such

agreement because of any provision of this

chapter or any action the Corporation is required to take under this chapter.

‘‘(b) RIGHT TO SUE WITHDRAWN.—The

United States hereby withdraws any stated

or implied consent for the United States, or

any agent or officer of the United States, to

be sued by any person for any legal, equitable, or other relief with respect to any

claim arising out of, or resulting from, acts

or omissions under this chapter.’’.

(e) APPLICATION OF PRIVATIZATION PROCEEDS.—Chapter 25 (as amended by subsection (d)) is amended by adding at the end

the following new section:

‘‘SEC. 1507. APPLICATION OF PRIVATIZATION

PROCEEDS.

‘‘The proceeds from the privatization shall

be included in the budget baseline required

by the Balanced Budget and Emergency Deficit Control Act of 1985 and shall be counted

as an offset to direct spending for purposes of

section 252 of such Act, notwithstanding section 257(e) of such Act.’’.

(f) CONFORMING AMENDMENT.—The table of

contents for chapter 25 is amended by inserting after the item for section 1502 the following:

‘‘Sec. 1503. Establishment of Private Corporation.

‘‘Sec. 1504. Ownership Limitations.

‘‘Sec. 1505. Exemption from Liability.

‘‘Sec. 1506. Resolution of Certain Issues.

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

(g) Section 193 (42 U.S.C. 2243) is amended

by adding at the end the following:

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

United States Enrichment Corporation results in the Corporation being—

‘‘(1) owned, controlled, or dominated by a

foreign corporation or a foreign government,

or

‘‘(2) otherwise inimical to the common defense or security of the United States,

any license held by the Corporation under

sections 53 and 63 shall be terminated.’’.

(h) PERIOD FOR CONGRESSIONAL REVIEW.—

Section 1502(d) (42 U.S.C. 2297d–1(d)) is

amended by striking ‘‘less than 60 days after

notification of the Congress’’ and inserting

‘‘less than 60 days after the date of the report to Congress by the Comptroller General

under subsection (c)’’.

SEC. 3007. PERIODIC CERTIFICATION OF COMPLIANCE.

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

amended by striking ‘‘ANNUAL APPLICATION

FOR CERTIFICATE OF COMPLIANCE.—The Corporation shall apply at least annually to the

Nuclear Regulatory Commission for a certificate of compliance under paragraph (1).’’

and inserting ‘‘PERIODIC APPLICATION FOR

CERTIFICATE OF COMPLIANCE.—The Corporation shall apply to the Nuclear Regulatory

Commission for a certificate of compliance

under paragraph (1) periodically, as determined by the Nuclear Regulatory Commission, but not less than every 5 years.’’.

SEC. 3008. LICENSING OF OTHER TECHNOLOGIES.

Subsection (a) of section 1702 (42 U.S.C.

2297f–1(a)) is amended by striking ‘‘other

than’’ and inserting ‘‘including’’.

SEC. 3009. CONFORMING AMENDMENTS.

(a) REPEALS IN ATOMIC ENERGY ACT OF 1954

AS OF THE PRIVATIZATION DATE.—

(1) REPEALS.—As of the privatization date

(as defined in section 1201(13) of the Atomic

Energy Act of 1954), the following sections

(as in effect on such privatization date) of

the Atomic Energy Act of 1954 are repealed:

(A) Section 1202.

(B) Sections 1301 through 1304.

(C) Sections 1306 through 1316.

(D) Sections 1404 and 1405.

(E) Section 1601.

(F) Sections 1603 through 1607.

(2) CONFORMING AMENDMENT.—The table of

contents of such Act is amended by repealing

the items referring to sections repealed by

paragraph (1).

(b) STATUTORY MODIFICATIONS.—As of such

privatization date, the following shall take

effect:

(1) For purposes of title I of the Atomic

Energy Act of 1954, all references in such Act

to the ‘‘United States Enrichment Corporation’’ shall be deemed to be references to the

corporation established pursuant to section

1503 of the Atomic Energy Act of 1954 (as

added by section 6(a)).

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

of 1992 (42 U.S.C. 2296b–7(1)) is amended by

striking ‘‘the United States’’ and all that

follows through the period and inserting

‘‘the corporation referred to in section

1201(4) of the Atomic Energy Act of 1954.’’.

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

Code, is amended by striking subparagraph

(N), as added by section 902(b) of Public Law

102–486.

(c) REVISION OF SECTION 1305.—As of such

privatization date, section 1305 of the Atomic

Energy Act of 1954 (42 U.S.C 2297b–4) is

amended—

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

(d), and

(2) in subsection (e)—

(A) by striking the subsection designation

and heading,

(B) by redesignating paragraphs (1) and (2)

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

and (b) and by moving the margins 2-ems to

the left,

(C) by striking paragraph (3), and

(D) by redesignating paragraph (4) (as

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

and by moving the margins 2-ems to the left.

TITLE IV—RETIREMENT

SEC. 4001. SHORT TITLE; TABLE OF CONTENTS.

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

as the ‘‘Congressional and Federal Employee

Retirement Equalization Act’’.

(b) TABLE OF CONTENTS.—The table of contents for this title is as follows:

Sec. 4001. Short title; table of contents.

Sec. 4002. Amendment of title 5, United

States Code.

Sec. 4003. Individual contributions.

Sec. 4004. Average pay.

Sec. 4005. Accrual rates.

Sec. 4006. Elimination of Members’ option to

elect not to participate in

FERS.

SEC. 4002. AMENDMENT OF TITLE 5, UNITED

STATES CODE.

Except as otherwise expressly provided,

whenever in this title an amendment or repeal is expressed in terms of an amendment

to, or repeal of, a section or other provision,

the reference shall be considered to be made

to a section or other provision of title 5,

United States Code.

SEC. 4003. INDIVIDUAL CONTRIBUTIONS.

(a) CSRS.—

(1) IN GENERAL.—The table under section

8334(c) is amended—

(A) in the matter relating to an employee

by striking

‘‘7 ............. After December 31, 1969.’’

and inserting the following:

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

‘‘81

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

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

‘‘91

⁄2 ......... After December 31, 1997.’’;

(B) in the matter relating to a Member or

employee for Congressional employee service

by striking

‘‘71⁄2 ......... After December 31, 1969.’’

and inserting the following:

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

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

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

‘‘91⁄2 ......... After December 31, 1997.’’;

(C) in the matter relating to a Member for

Member service by striking

‘‘8 ............. After December 31, 1969.’’

and inserting the following:

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

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

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

‘‘91⁄2 ......... After December 31, 1997.’’;

(D) in the matter relating to a law enforcement officer for law enforcement service and

firefighter for firefighter service by striking

‘‘71⁄2 ......... After December 31, 1974.’’

and inserting the following:

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

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

‘‘91

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

‘‘10 ........... After December 31, 1997.’’;

(E) in the matter relating to a bankruptcy

judge by striking

‘‘8 ............. After December 31, 1983.’’

and inserting the following:

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

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

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

‘‘91⁄2 ......... After December 31, 1997.’’;

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

United States Court of Appeals for the

Armed Forces for service as a judge of that

court by striking
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‘‘8 ............. On and after the date of the enactment of the

Department of Defense Authorization Act,

1984.’’

and inserting the following:

‘‘8 ............. The date of the enactment of the Department of

Defense Authorization Act, 1984, to December

31, 1995. ‘‘81

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

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

‘‘91

⁄2 ......... After December 31, 1997.’’;

(G) in the matter relating to a United

States magistrate by striking

‘‘8 ............. After September 30, 1987.’’

and inserting the following:

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

‘‘81

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

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

‘‘91

⁄2 ......... After December 31, 1997.’’; and

(H) in the matter relating to a Claims

Court judge by striking

‘‘8 ............. After September 30, 1988.’’

and inserting the following:

‘‘8 ............. October 1, 1988, to December 31, 1995.

‘‘81

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

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

‘‘91

⁄2 ......... After December 31, 1997.’’.

(2) DEDUCTIONS.—The first sentence of section 8334(a)(1) is amended to read as follows:

‘‘The employing agency shall deduct and

withhold from the basic pay of an employee,

Member, Congressional employee, law enforcement officer, firefighter, bankruptcy

judge, judge of the United States Court of

Appeals for the Armed Forces, United States

magistrate, or Claims Court judge, as the

case may be, the percentage of basic pay applicable under subsection (c).’’.

(3) GOVERNMENT CONTRIBUTIONS.—

(A) IN GENERAL.—Section 8334(a) is amended by adding at the end the following:

‘‘(3) The amount to be contributed under

the second sentence of paragraph (1) with respect to any service period occurring during

any calendar year after 1995 shall be determined as if the percentage then applicable

under subsection (c) were the percentage

that was applicable for calendar year 1995

plus 3 percent.’’.

(B) TECHNICAL AMENDMENT.—The second

sentence of section 8334(a)(1) is amended by

striking the period at the end and inserting

‘‘, subject to paragraph (3).’’.

(4) OTHER SERVICE.—

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

amended—

(i) in paragraph (1)(A) by inserting ‘‘and

subject to paragraph (5),’’ after ‘‘Except as

provided in subparagraph (B),’’; and

(ii) by adding at the end the following:

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

military service after December 31, 1995, the

percentage of basic pay under section 204 of

title 37 payable under paragraph (1) shall be

equal to the same percentage as would be applicable under section 8334(c) for that same

period for service as an ‘employee’, subject

to paragraph (1)(B).’’.

(B) VOLUNTEER SERVICE.—Section 8334(l) is

amended—

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

at the end and inserting ‘‘, subject to paragraph (4).’’; and

(ii) by adding at the end the following:

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

service after December 31, 1995, the percentage of the readjustment allowance or stipend

(as the case may be) payable under paragraph (1) shall be equal to the same percentage as would be applicable under section

8334(c) for that same period for service as an

‘employee’.’’.

(b) FERS.—

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

by striking paragraph (2) and inserting the

following:

‘‘(2) The percentage to be deducted and

withheld from basic pay for any pay period

shall be equal to—

‘‘(A) the applicable percentage under paragraph (3), minus

‘‘(B) the percentage then in effect under

section 3101(a) of the Internal Revenue Code

of 1986 (relating to rate of tax for old-age,

survivors, and disability insurance).

‘‘(3) The applicable percentage under this

paragraph, for civilian service after December 31, 1995, shall be as follows:

Percentage

of basic

pay

Service period

‘‘Employee 81

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

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

‘‘91

⁄2 ......... After December 31, 1997.

‘‘Congressional

employee.

81

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

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

‘‘91

⁄2 ......... After December 31, 1997. ‘‘Member .. 81

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

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

‘‘91

⁄2 ......... After December 31, 1997. ‘‘Law en- forcement

officer.

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

‘‘91

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

‘‘10 ........... After December 31, 1997.

‘‘Firefighter 9 ............... January 1, 1996, to December 31, 1996. ‘‘91

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

‘‘10 ........... After December 31, 1997. ‘‘Air traffic

controller.

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

‘‘91

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

‘‘10 ........... After December 31, 1997.’’.

(2) OTHER SERVICE.—

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

amended—

(i) in paragraph (1)(A) by inserting ‘‘and

subject to paragraph (6),’’ after ‘‘Except as

provided in subparagraph (B),’’; and

(ii) by adding at the end the following:

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

military service after December 31, 1995, the

percentage of basic pay under section 204 of

title 37 payable under paragraph (1) shall be

equal to the same percentage as would be applicable under section 8422(a)(3) for that

same period for service as an ‘employee’,

subject to paragraph (1)(B).’’.

(B) VOLUNTEER SERVICE.—Section 8422(f) is

amended—

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

at the end and inserting ‘‘, subject to paragraph (4).’’; and

(ii) by adding at the end the following:

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

service after December 31, 1995, the percentage of the readjustment allowance or stipend

(as the case may be) payable under paragraph (1) shall be equal to the same percentage as would be applicable under section

8422(a)(3) for that same period for service as

an employee.’’.

(c) EXEMPTION.—

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

United States Code, is amended by adding at

the end the following:

‘‘(3) For purposes of applying chapters 83

and 84 of title 5 with respect to any officer or

employee of the Postal Service, section 4003

of the Congressional and Federal Employee

Retirement Equalization Act shall be treated

as if it had not been enacted.’’.

(2) TECHNICAL AMENDMENT.—The second

sentence of section 1005(d)(1) of title 39,

United States Code, is amended by striking

the period and inserting ‘‘, subject to paragraph (3).’’.

(d) EFFECTIVE DATE.—This section shall

take effect on January 1, 1996.

SEC. 4004. AVERAGE PAY.

(a) CSRS.—

(1) IN GENERAL.—Subchapter III of chapter

83 is amended by inserting after section 8339

the following:

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

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

purposes of computing any annuity or survivor annuity under this subchapter, eligibility for which is based on a separation occurring after December 31, 1995, ‘average pay’

shall, if the separation occurs—

‘‘(1) during calendar year 1996, have the

meaning given such term by subsection

(b)(1); or

‘‘(2) after calendar year 1996, have the

meaning given such term by subsection

(b)(2).

‘‘(b) For purposes of this section—

‘‘(1) the meaning given the term ‘average

pay’ by this paragraph shall be the meaning

such term would have under section 8331(4) if

‘4 consecutive years’ were substituted for ‘3

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

‘‘(2) the meaning given the term ‘average

pay’ by this paragraph shall be the meaning

such term would have under section 8331(4) if

‘5 consecutive years’ were substituted for ‘3

consecutive years’ and ‘5 years’ were substituted for ‘3 years’.

‘‘(c) Nothing in this section shall be considered to apply with respect to any annuity

or survivor annuity eligibility for which is

based on a separation occurring before January 1, 1996.

‘‘(d) The Office of Personnel Management

shall prescribe such regulations as may be

necessary to carry out this section.’’.

(2) TECHNICAL AMENDMENTS.—

(A) Section 8331(4) is amended by striking

‘‘effect;’’ and inserting ‘‘effect, subject to

section 8339a;’’.

(B) The table of sections for chapter 83 is

amended by inserting after the item relating

to section 8339 the following:

‘‘8339a. Special rules relating to average

pay.’’.

(b) FERS.—

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

inserting after section 8461 the following:

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

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

purposes of computing any annuity or survivor annuity under this chapter, eligibility

for which is based on a separation occurring

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

if the separation occurs—

‘‘(1) during calendar year 1996, have the

meaning given such term by subsection

(b)(1); or

‘‘(2) after calendar year 1996, have the

meaning given such term by subsection

(b)(2).

‘‘(b) For purposes of this section—

‘‘(1) the meaning given the term ‘average

pay’ by this paragraph shall be the meaning

such term would have under section 8401(3) if

‘4 consecutive years’ were substituted for ‘3

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

‘‘(2) the meaning given the term ‘average

pay’ by this paragraph shall be the meaning

such term would have under section 8401(3) if

‘5 consecutive years’ were substituted for ‘3

consecutive years’ and ‘5 years’ were substituted for ‘3 years’.

‘‘(c) Nothing in this section shall be considered to apply with respect to any annuity

or survivor annuity eligibility for which is

based on a separation occurring before January 1, 1996.
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1995 T56.13

‘‘(d) The Office of Personnel Management

shall prescribe such regulations as may be

necessary to carry out this section.’’.

(2) TECHNICAL AMENDMENTS.—

(A) Section 8401(3) is amended by striking

‘‘effect;’’ and inserting ‘‘effect, subject to

section 8461a;’’.

(B) The table of sections for chapter 84 is

amended by inserting after the item relating

to section 8461 the following:

‘‘8461a. Special rules relating to average

pay.’’.

(c) REGULATIONS.—The Office of Personnel

Management shall prescribe such regulations

as may be necessary to carry out the purposes of this section, including regulations

to provide that section 302(a)(6) of the Federal Employees’ Retirement System Act of

1986 (5 U.S.C. 8331 note) shall be carried out

in a manner consistent with the amendments

made by this section.

SEC. 4005. ACCRUAL RATES.

(a) CSRS.—

(1) MEMBERS.—

(A) IN GENERAL.—Section 8339(c) is amended by striking all that follows ‘‘with respect

to—’’ and inserting the following:

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

is or was performed before January 1, 1996;

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

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

subsection; and

‘‘(B) is or was performed before January 1,

1996; and

‘‘(3) so much of his Congressional employee

service as is or was performed before January 1, 1996;

by multiplying 21⁄2 percent of his average pay

by the years of that service.’’.

(B) TECHNICAL AMENDMENT.—Section

8332(d) is amended by striking ‘‘section

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

(2) CONGRESSIONAL EMPLOYEES.—Section

8339(b) is amended—

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

computed with respect to’’; and

(B) by inserting ‘‘as is or was performed before January 1, 1996,’’ before ‘‘by multiplying’’.

(b) FERS.—

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

by striking ‘‘shall’’ and inserting ‘‘shall, to

the extent that such service is or was performed before January 1, 1996,’’.

(2) CONGRESSIONAL EMPLOYEES.—Section

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

inserting ‘‘shall, to the extent that such

service is or was performed before January 1,

1996,’’.

(3) PROVISIONS RELATING TO THE 1.1 PERCENT

ACCRUAL RATE.—Section 8415(g) is amended—

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

‘‘an employee or Member under paragraph

(2),’’;

(B) in paragraph (2) by inserting ‘‘or Member’’ after ‘‘in the case of an employee’’ and

by striking ‘‘Congressional employee,’’; and

(C) by adding at the end the following:

‘‘(3) Notwithstanding any other provision

of this subsection—

‘‘(A) this subsection shall not apply in the

case of a Member or Congressional employee

whose separation (on which entitlement to

annuity is based) occurs before January 1,

1996; and

‘‘(B) in the case of a Member or Congressional employee to whom this subsection applies, the 1.1 percent accrual rate shall apply

only with respect to any period of service

other than a period with respect to which

the 1.7 percent accrual rate applies under

subsection (b) or (c).’’.

SEC. 4006. ELIMINATION OF MEMBERS’ OPTION

TO ELECT NOT TO PARTICIPATE IN

FERS.

(a) IN GENERAL.—Section 8401(20) is amended by striking ‘‘2106,’’ and all that follows

through the semicolon and inserting ‘‘2106;’’.

(b) EFFECTIVE DATE; SAVINGS PROVISION.—

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

take effect on January 1, 1996.

(2) SAVINGS PROVISION.—The amendment

made by subsection (a) shall not affect any

election made before such subsection takes

effect.

TITLE V—MEDICARE SAVINGS

EXTENSIONS

SEC. 5001. SHORT TITLE.

This title may be cited as the ‘‘Medicare

Presidential Budget Savings Extension Act

of 1995’’.

Subtitle A—Provisions Relating to Part A of

the Medicare Program

SEC. 5101. MAINTAINING SAVINGS RESULTING

FROM TEMPORARY FREEZE ON PAYMENT INCREASES FOR SKILLED

NURSING FACILITY SERVICES.

(a) BASING UPDATES TO PER DIEM COST LIMITS ON LIMITS FOR FISCAL YEAR 1993.—

(1) IN GENERAL.—The last sentence of section 1888(a) of the Social Security Act (42

U.S.C. 1395yy(a)) is amended by adding at the

end the following: ‘‘(except that such updates may not take into account any

changes in the routine service costs of

skilled nursing facilities occurring during

cost reporting periods which began during

fiscal year 1994 or fiscal year 1995).’’.

(2) NO EXCEPTIONS PERMITTED BASED ON

AMENDMENT.—The Secretary of Health and

Human Services shall not consider the

amendment made by paragraph (1) in making any adjustments pursuant to section

1888(c) of the Social Security Act.

(b) PAYMENTS DETERMINED ON PROSPECTIVE

BASIS.—Any change made by the Secretary

of Health and Human Services in the amount

of any prospective payment paid to a skilled

nursing facility under section 1888(d) of the

Social Security Act for cost reporting periods beginning on or after October 1, 1995,

may not take into account any changes in

the costs of services occurring during cost

reporting periods which began during fiscal

year 1994 or fiscal year 1995.

Subtitle B—Provisions Relating to Part B of

the Medicare Program

SEC. 5201. SETTING THE PART B PREMIUM AT 25

PERCENT OF PROGRAM EXPENDITURES PERMANENTLY.

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

Social Security Act (42 U.S.C. 1395r(a)(3)) is

amended by striking ‘‘The monthly premium’’ and all that follows through ‘‘November 1.’’ and inserting the following: ‘‘The

monthly premium shall be equal to 50 percent of the monthly actuarial rate for enrollees age 65 and over, as determined according

to paragraph (1), for that succeeding calendar year.’’.

(b) CONFORMING AMENDMENTS.—Section

1839 of such Act (42 U.S.C. 1395r) is

amended—

(1) in subsection (a)(2), by striking ‘‘(b) and

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

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

by striking ‘‘and the derivation of the dollar

amounts specified in this paragraph’’; and

(3) in subsection (e)—

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

and all that follows through ‘‘(B)’’,

(B) by striking paragraph (2), and

(C) by redesignating clauses (i) through (v)

as paragraphs (1) through (5).

Subtitle C—Provisions Relating to Parts A

and B of the Medicare Program

SEC. 5301. PERMANENT EXTENSION OF CERTAIN

SECONDARY PAYER PROVISIONS.

(a) DATA MATCH.—

(1) Section 1862(b)(5)(C) of the Social Security Act (42 U.S.C. 1395y(b)(5)(C)) is amended

by striking clause (iii).

(2) Section 6103(l)(12) of the Internal Revenue Code of 1986 is amended by striking subparagraph (F).

(b) APPLICATION TO DISABLED INDIVIDUALS

IN LARGE GROUP HEALTH PLANS.—

(1) IN GENERAL.—Section 1862(b)(1)(B) of the

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

is amended—

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

and inserting ‘‘clause (iii)’’,

(B) by striking clause (iii), and

(C) by redesignating clause (iv) as clause

(iii).

(2) CONFORMING AMENDMENTS.—Paragraphs

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

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

section 1839(b) of such Act (42 U.S.C. 1395r(b))

are each amended by striking

‘‘1862(b)(1)(B)(iv)’’ each place it appears and

inserting ‘‘1862(b)(1)(B)(iii)’’.

(c) PERIOD OF APPLICATION TO INDIVIDUALS

WITH END STAGE RENAL DISEASE.—Section

1862(b)(1)(C) of the Social Security Act (42

U.S.C. 1395y(b)(1)(C)) is amended—

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

month’’ each place it appears and inserting

‘‘18-month’’, and

(2) by striking the second sentence.

SEC. 5302. MAINTAINING SAVINGS RESULTING

FROM TEMPORARY FREEZE ON PAYMENT INCREASES FOR HOME

HEALTH SERVICES.

(a) BASING UPDATES TO PER VISIT COST

LIMITS ON LIMITS FOR FISCAL YEAR 1993.—

Section 1861(v)(1)(L)(iii) of the Social Security Act (42 U.S.C. 1395x(v)(1)(L)(iii)) is

amended by adding at the end the following

sentence: ‘‘In establishing limits under this

subparagraph, the Secretary may not take

into account any changes in the costs of the

provision of services furnished by home

health agencies with respect to cost reporting periods which began on or after July 1,

1994, and before July 1, 1996.’’.

(b) NO EXCEPTIONS PERMITTED BASED ON

AMENDMENT.—The Secretary of Health and

Human Services shall not consider the

amendment made by subsection (a) in making any exemptions and exceptions pursuant

to section 1861(v)(1)(L)(ii) of the Social Security Act.

TITLE VI—CONTRACT WITH AMERICA TAX

RELIEF ACT OF 1995

SEC. 6001. SHORT TITLE; AMENDMENT OF 1986

CODE.

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

as the ‘‘Contract With America Tax Relief

Act of 1995’’.

(b) AMENDMENT OF 1986 CODE.—Except as

otherwise expressly provided, whenever in

this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a

section or other provision of the Internal

Revenue Code of 1986.

(c) TABLE OF CONTENTS.—

TITLE V—CONTRACT WITH AMERICA TAX

RELIEF ACT OF 1995

Sec. 6001. Short title; amendment of 1986

Code.

Subtitle A—American Dream Restoration

Sec. 6101. Family tax credit.

Sec. 6102. Credit to reduce marriage penalty.

Sec. 6103. Establishment of American Dream

Savings Accounts.

Sec. 6104. Spousal IRA computed on basis of

compensation of both spouses.

Subtitle B—Senior Citizens’ Equity

PART I—REPEAL OF INCREASE IN TAX ON

SOCIAL SECURITY BENEFITS

Sec. 6201. Repeal of increase in tax on social

security benefits.

PART II—TREATMENT OF LONG-TERM CARE

INSURANCE AND SERVICES

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

Sec. 6212. Qualified long-term care services

treated as medical care.
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T56.13 APRIL 5

Sec. 6213. Certain exchanges of life insurance contracts for long-term

care insurance contracts not

taxable.

Sec. 6214. Exclusion from gross income for

amounts withdrawn from certain retirement plans for longterm care insurance.

PART III—TREATMENT OF ACCELERATED

DEATH BENEFITS

Sec. 6221. Treatment of accelerated death

benefits by recipient.

Sec. 6222. Tax treatment of companies

issuing qualified accelerated

death benefit riders.

PART IV—INCLUSION IN GROSS INCOME OF

EXCESS LONG-TERM CARE BENEFITS

Sec. 6231. Inclusion in income of excess longterm care benefits.

Sec. 6232. Reporting requirements.

Subtitle C—Job Creation and Wage

Enhancement

PART I—CAPITAL GAINS REFORM

SUBPART A—CAPITAL GAINS REDUCTION FOR

TAXPAYERS OTHER THAN CORPORATIONS

Sec. 6301. Capital gains deduction.

Sec. 6302. Indexing of certain assets acquired

after December 31, 1994, for purposes of determining gain.

SUBPART B—CAPITAL GAINS REDUCTION FOR

CORPORATIONS

Sec. 6311. Reduction of alternative capital

gain tax for corporations.

SUBPART C—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE OR EXCHANGE

OF PRINCIPAL RESIDENCE

Sec. 6316. Capital loss deduction allowed

with respect to sale or exchange of principal residence.

PART II—COST RECOVERY PROVISIONS

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

after December 31, 1994.

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

PART III—ALTERNATIVE MINIMUM TAX RELIEF

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

PART IV—TAXPAYER DEBT BUY-DOWN

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

Sec. 6342. Public debt reduction trust fund.

Sec. 6343. Taxpayer-generated sequestration

of Federal spending to reduce

the public debt.

PART V—SMALL BUSINESS INCENTIVES

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

Sec. 6352. Increase in expense treatment for

small businesses.

Sec. 6353. Clarification of treatment of home

office use for administrative

and management activities.

Sec. 6354. Treatment of storage of product

samples.

Subtitle D—Family Reinforcement

Sec. 6401. Credit for adoption expenses.

Sec. 6402. Credit for taxpayers with certain

persons requiring custodial care

in their households.

Subtitle E—Social Security Earnings Test

Sec. 6501. Adjustments in monthly exempt

amount for purposes of the social security earnings test.

Subtitle F—Technical Corrections

Sec. 6601. Coordination with other subtitles.

Sec. 6602. Amendments related to Revenue

Reconciliation Act of 1990.

Sec. 6603. Amendments related to Revenue

Reconciliation Act of 1993.

Sec. 6604. Miscellaneous provisions.

Subtitle A—American Dream Restoration

SEC. 6101. FAMILY TAX CREDIT.

(a) IN GENERAL.—Subpart A of part IV of

subchapter A of chapter 1 is amended by inserting after section 22 the following new

section:

‘‘SEC. 23. FAMILY TAX CREDIT.

‘‘(a) ALLOWANCE OF CREDIT.—There shall be

allowed as a credit against the tax imposed

by this chapter for the taxable year an

amount equal to $500 multiplied by the number of qualifying children of the taxpayer.

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

which would (but for this subsection) be allowed by subsection (a) shall be reduced (but

not below zero) by an amount which bears

the same ratio to such amount of credit as—

‘‘(1) the excess (if any) of the taxpayer’s

adjusted gross income (determined without

regard to sections 911, 931, and 933) over

$200,000, bears to

‘‘(2) an amount equal to 100 times the dollar amount in effect under subsection (a) for

the taxable year.

‘‘(c) QUALIFYING CHILD.—For purposes of

this section—

‘‘(1) IN GENERAL.—The term ‘qualifying

child’ means any individual if—

‘‘(A) the taxpayer is allowed a deduction

under section 151 with respect to such individual for such taxable year,

‘‘(B) such individual has not attained the

age of 18 as of the close of the calendar year

in which the taxable year of the taxpayer begins, and

‘‘(C) such individual bears a relationship to

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

(determined without regard to clause (ii)

thereof).

‘‘(2) EXCEPTION FOR CERTAIN NONCITIZENS.—

The term ‘qualifying child’ shall not include

any individual who would not be a dependent

if the first sentence of section 152(b)(3) were

applied without regard to all that follows

‘resident of the United States’.

‘‘(d) INFLATION ADJUSTMENTS.—

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

year beginning in a calendar year after 1996,

the $500 and $200,000 amounts contained in

subsections (a) and (b) shall each be increased by an amount equal to—

‘‘(A) such dollar amount, multiplied by

‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar

year in which the taxable year begins, determined by substituting ‘calendar year 1995’

for ‘calendar year 1992’ in subparagraph (B)

thereof.

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

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

such amount shall be rounded to the nearest

multiple of $50.

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

similar to the rules of subsections (d) and (e)

of section 32 shall apply for purposes of this

section.’’

(b) CONFORMING AMENDMENT.—The table of

sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 22 the

following new item:

‘‘Sec. 23. Family tax credit.’’

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6102. CREDIT TO REDUCE MARRIAGE PENALTY.

(a) IN GENERAL.—Subpart A of part IV of

subchapter A of chapter 1 is amended by inserting after section 23 the following new

section:

‘‘SEC. 24. CREDIT TO REDUCE MARRIAGE PENALTY.

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

a joint return for the taxable year, there

shall be allowed as a credit against the tax

imposed by this chapter for such taxable

year an amount equal to the marriage penalty reduction credit.

‘‘(b) LIMITATIONS.—

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

credit allowed by subsection (a) for the taxable year shall not exceed $145.

‘‘(2) CREDIT DISALLOWED FOR INDIVIDUALS

CLAIMING SECTION 911, ETC.—No credit shall be

allowed under this section for any taxable

year if either spouse claims the benefits of

section 911, 931, or 933 for such taxable year.

‘‘(c) MARRIAGE PENALTY REDUCTION CREDIT.—For purposes of this section—

‘‘(1) IN GENERAL.—The marriage penalty reduction credit is an amount equal to the excess (if any) of—

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

over

‘‘(B) the sum of the unmarried tax

amounts for each spouse.

‘‘(2) UNMARRIED TAX AMOUNT.—For purposes of paragraph (1), the unmarried tax

amount, with respect to an individual, is the

amount of tax which would be imposed by

section 1(c) if such individual’s taxable income were equal to the excess (if any) of—

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

‘‘(B) the sum of—

‘‘(i) an amount equal to the basic standard

deduction under section 63(c)(2)(C) for the

taxable year, plus

‘‘(ii) the exemption amount (as defined in

section 151(d)) for such taxable year.

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

paragraph (1), the joint tax amount is the

amount of tax which would be imposed by

section 1(a) if the taxpayer’s taxable income

were equal to the excess (if any) of—

‘‘(A) the taxpayer’s qualified earned income for the taxable year, over

‘‘(B) the sum of—

‘‘(i) an amount equal to the basic standard

deduction under section 63(c)(2)(A) for the

taxable year, plus

‘‘(ii) an amount equal to twice the exemption amount (as so defined) for such taxable

year.

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

‘‘(1) IN GENERAL.—The term ‘qualified

earned income’ means an amount equal to

the excess (if any) of—

‘‘(A) the earned income for the taxable

year, over

‘‘(B) an amount equal to the sum of the deductions described in paragraphs (1), (2), (6),

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

that such deductions are properly allocable

to or chargeable against earned income for

such taxable year.

The amount of qualified earned income shall

be determined without regard to any community property laws.

‘‘(2) EARNED INCOME.—For purposes of paragraph (1)—

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

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

911(d)(2) (determined without regard to the

phrase ‘not in excess of 30 percent of his

share of the net profits of such trade or business’ in subparagraph (B) thereof).

‘‘(B) EXCEPTION.—Such term shall not include any amount—

‘‘(i) not includible in gross income,

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

‘‘(iii) paid or distributed out of an individual retirement plan (within the meaning

of section 7701(a)(37)),

‘‘(iv) received as deferred compensation, or

‘‘(v) received for services performed by an

individual in the employ of his spouse (within the meaning of section 3121(b)(3)(B)).

‘‘(e) AMOUNT OF CREDIT TO BE DETERMINED

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

allowed by this section shall be determined

under tables prescribed by the Secretary.

‘‘(2) REQUIREMENTS FOR TABLES.—The tables prescribed under paragraph (1) shall reflect the provisions of subsection (c) and

shall round to the nearest $25 any amount of

credit which is less than the maximum credit under subsection (b)(1).’’

(b) CLERICAL AMENDMENT.—The table of

sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 23 the

following new item:

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

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6103. ESTABLISHMENT OF AMERICAN

DREAM SAVINGS ACCOUNTS.

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

subchapter D of chapter 1 (relating to pension, profit-sharing, stock bonus plans, etc.)

is amended by inserting after section 408 the

following new section:

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

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

this section, an American Dream Savings

Account shall be treated for purposes of this

title in the same manner as an individual retirement plan.

‘‘(b) AMERICAN DREAM SAVINGS ACCOUNT.—

For purposes of this title, the term ‘American Dream Savings Account’ or ‘ADS account’ means an individual retirement plan

which is designated at the time of the establishment of the plan as an American Dream

Savings Account. Such designation shall be

made in such manner as the Secretary may

prescribe.

‘‘(c) CONTRIBUTION RULES.—

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

shall be allowed under section 219 for a contribution to an ADS account.

‘‘(2) CONTRIBUTION LIMIT.—

‘‘(A) IN GENERAL.—The aggregate amount

of contributions (other than rollover contributions) for any taxable year to all ADS

accounts maintained for the benefit of an individual shall not exceed the lesser of—

‘‘(i) $2,000, or

‘‘(ii) an amount equal to the compensation

includible in the individual’s gross income

for such taxable year.

‘‘(B) $4,000 LIMITATION FOR CERTAIN ADDITIONAL MARRIED INDIVIDUALS.—

‘‘(i) IN GENERAL.—In the case of an individual to whom this subparagraph applies for

the taxable year, the limitation of subparagraph (A)(ii) shall be equal to the sum of—

‘‘(I) the compensation includible in such

individual’s gross income for the taxable

year, plus

‘‘(II) the compensation includible in the

gross income of such individual’s spouse for

the taxable year reduced by the amount of

the limitation under subparagraph (A) applicable to such spouse for such taxable year.

‘‘(ii) INDIVIDUALS TO WHOM CLAUSE (i) APPLIES.—Clause (i) shall apply to any individual if—

‘‘(I) such individual files a joint return for

the taxable year, and

‘‘(II) the amount of compensation (if any)

includible in such individual’s gross income

for the taxable year is less than the compensation includible in the gross income of

such individual’s spouse for the taxable year.

‘‘(C) ADJUSTMENT FOR INFLATION.—

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

year beginning in a calendar year after 1996,

the $2,000 amount contained in subparagraph

(A) shall be increased by an amount equal

to—

‘‘(I) such dollar amount, multiplied by

‘‘(II) the cost-of-living adjustment under

section 1(f)(3) for the calendar year in which

the taxable year begins, determined by substituting ‘calendar year 1995’ for ‘calendar

year 1992’ in subparagraph (B) thereof.

‘‘(ii) ROUNDING.—If any amount as adjusted

under clause (i) is not a multiple of $50, such

amount shall be rounded to the nearest multiple of $50.

‘‘(D) TAX ON EXCESS CONTRIBUTIONS.—Section 4973 shall be applied separately with respect to individual retirement plans which

are ADS accounts and individual retirement

plans which are not ADS accounts; except

that, for purposes of applying such section

with respect to individual retirement plans

which are ADS accounts, excess contributions shall be considered to be any amounts

in excess of the limitation under subsection

(c)(2)(A).

‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE

701⁄2.—Contributions to an ADS account may

be made even after the individual for whom

the account is maintained has attained age

701⁄2.

‘‘(4) MANDATORY DISTRIBUTION RULES NOT TO

APPLY, ETC.—

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

subparagraph (B), subsections (a)(6) and

(b)(3) of section 408 (relating to required distributions) and section 4974 (relating to excise tax on certain accumulations in qualified retirement plans) shall not apply to any

ADS account.

‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules

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

than subparagraph (A) thereof) shall apply

for purposes of this section.

‘‘(5) LIMITATIONS ON ROLLOVER CONTRIBUTIONS.—No rollover contribution may be

made to an ADS account unless—

‘‘(A) such contribution is from another

ADS account, or

‘‘(B) such contribution is from an individual retirement plan (other than an ADS

account) and is made before January 1, 1998.

‘‘(d) DISTRIBUTION RULES.—For purposes of

this title—

‘‘(1) GENERAL RULES.—

‘‘(A) EXCLUSION FROM GROSS INCOME.—No

portion of a qualified distribution from an

ADS account shall be includible in gross income.

‘‘(B) EXCEPTION FROM PENALTY TAX.—Section 72(t) shall not apply to—

‘‘(i) any qualified distribution from an ADS

account, and

‘‘(ii) any qualified special purpose distribution (whether or not a qualified distribution)

from an ADS account.

‘‘(2) QUALIFIED DISTRIBUTION.—For purposes

of this subsection—

‘‘(A) IN GENERAL.—The term ‘qualified distribution’ means any payment or

distribution—

‘‘(i) made on or after the date on which the

individual attains age 591⁄2,

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

of the individual) on or after the death of the

individual,

‘‘(iii) attributable to the individual’s being

disabled (within the meaning of section

72(m)(7)), or

‘‘(iv) which is a qualified special purpose

distribution.

‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—No

payment or distribution shall be treated as a

qualified distribution if—

‘‘(i) it is made within the 5-taxable year period beginning with the 1st taxable year for

which the individual made a contribution to

an ADS account (or such individual’s spouse

made a contribution to an ADS account) established for such individual, or

‘‘(ii) in the case of a payment or distribution properly allocable to a rollover contribution (or income allocable thereto), it is

made within 5 years after the date on which

such rollover contribution was made, as determined under regulations prescribed by the

Secretary.

Clause (ii) shall not apply to a rollover contribution from an ADS account.

‘‘(3) INCOME INCLUSION FOR ROLLOVERS FROM

NON-ADS ACCOUNTS.—In the case of any

amount paid or distributed out of an individual retirement plan (other than an ADS

account) which is paid into an ADS account

(established for the benefit of the payee or

distributee, as the case may be) before the

close of the 60th day after the day on which

the payment or distribution is received—

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

apply, and

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

gross income by reason of this paragraph

shall be so included ratably over the 4-taxable year period beginning with the taxable

year in which the payment or distribution is

made.

‘‘(e) QUALIFIED SPECIAL PURPOSE DISTRIBUTION.—

‘‘(1) IN GENERAL.—For purposes of this section, the term ‘qualified special purpose distribution’ means any payments or distributions from an ADS account to the individual

for whose benefit such account is

established—

‘‘(A) if such payments or distributions are

qualified first-time homebuyer distributions,

or

‘‘(B) to the extent such payments or distributions do not exceed—

‘‘(i) the qualified higher education expenses of the taxpayer for the taxable year

in which received, and

‘‘(ii) the qualified medical expenses of the

taxpayer for the taxable year in which received.

‘‘(2) QUALIFIED FIRST-TIME HOMEBUYER DISTRIBUTIONS.—

‘‘(A) IN GENERAL.—For purposes of this subsection, the term ‘qualified first-time homebuyer distribution’ means any payment or

distribution received by an individual to the

extent such payment or distribution is used

by the individual before the close of the 60th

day after the day on which such payment or

distribution is received to pay qualified acquisition costs with respect to a principal

residence for such individual as a first-time

homebuyer.

‘‘(B) QUALIFIED ACQUISITION COSTS.—For

purposes of this paragraph, the term ‘qualified acquisition costs’ means the costs of acquiring, constructing, or reconstructing a

residence. Such term includes any usual or

reasonable settlement, financing, or other

closing costs.

‘‘(C) FIRST-TIME HOMEBUYER; OTHER DEFINITIONS.—For purposes of this paragraph—

‘‘(i) FIRST-TIME HOMEBUYER.—The term

‘first-time homebuyer’ means any individual

if such individual (and, if married, such individual’s spouse) had no present ownership interest in a principal residence during the 3-

year period ending on the date of acquisition

of the principal residence to which this paragraph applies.

‘‘(ii) PRINCIPAL RESIDENCE.—The term

‘principal residence’ has the same meaning

as when used in section 1034.

‘‘(iii) DATE OF ACQUISITION.—The term ‘date

of acquisition’ means the date—

‘‘(I) on which a binding contract to acquire

the principal residence to which subparagraph (A) applies is entered into, or

‘‘(II) on which a binding contract to construct or reconstruct such a principal residence is entered into.

‘‘(D) SPECIAL RULE WHERE DELAY IN ACQUISITION.—If any payment or distribution out of

an ADS account fails to meet the requirements of subparagraph (A) solely by reason

of a delay or cancellation of the purchase,

construction, or reconstruction of the residence, the amount of the payment or distribution may be contributed to an ADS account as provided in subsection (d)(3)(A)(i) of

section 408 (determined by substituting
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T56.13 APRIL 5

‘120th day’ for ‘60th day’ in such subsection),

except that—

‘‘(i) subsection (d)(3)(B) of such section

shall not be applied to such contribution,

and

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

account in determining whether subsection

(d)(3)(A)(i) of such section applies to any

other amount.

‘‘(3) QUALIFIED HIGHER EDUCATION EXPENSES.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘qualified

higher education expenses’ means tuition,

fees, books, supplies, and equipment required

for the enrollment or attendance of—

‘‘(i) the taxpayer,

‘‘(ii) the taxpayer’s spouse, or

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

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

at an eligible educational institution (as defined in section 135(c)(3)).

‘‘(B) COORDINATION WITH SAVINGS BOND PROVISIONS.—The amount of qualified higher

education expenses for any taxable year

shall be reduced by any amount excludable

from gross income under section 135.

‘‘(4) QUALIFIED MEDICAL EXPENSES.—

‘‘(A) IN GENERAL.—For purposes of this subsection, the term ‘qualified medical expenses’ means any amounts paid during the

taxable year, not compensated for by insurance or otherwise, for medical care (as defined in section 213(d)) of the taxpayer, his

spouse, or a dependent (as defined in section

152).

‘‘(B) LONG-TERM CARE INSURANCE PREMIUMS

TREATED AS MEDICAL EXPENSES.—For purposes of subparagraph (A), section

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

‘qualified medical expenses’ shall include

premiums for long-term care insurance (as

defined in section 7702B(b)) for coverage of

the taxpayer or his spouse.

‘‘(f) OTHER DEFINITIONS.—For purposes of

this section—

‘‘(1) ROLLOVER CONTRIBUTIONS.—The term

‘rollover contributions’ means contributions

described in sections 402(c), 403(a)(4),

403(b)(8), or 408(d)(3).

‘‘(2) COMPENSATION.—The term ‘compensation’ has the meaning given such term by

section 219(f).’’

(b) TERMINATION OF NONDEDUCTIBLE IRA

CONTRIBUTIONS.—

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

the end the following new paragraph:

‘‘(5) TERMINATION.—This subsection shall

not apply to any designated nondeductible

contribution for any taxable year beginning

after December 31, 1995.’’

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

paragraph (7).

(c) EXCESS DISTRIBUTIONS TAX NOT TO

APPLY.—Subparagraph (B) of section

4980A(e)(1) is amended by inserting ‘‘other

than an ADS account (as defined in section

408A(b))’’ after ‘‘retirement plan’’.

(d) CLERICAL AMENDMENT.—The table of

sections for subpart A of part I of subchapter

D of chapter 1 is amended by inserting after

the item relating to section 408 the following

new item:

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

(e) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6104. SPOUSAL IRA COMPUTED ON BASIS OF

COMPENSATION OF BOTH SPOUSES.

(a) IN GENERAL.—Subsection (c) of section

219 (relating to special rules for certain married individuals) is amended to read as follows:

‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED

INDIVIDUALS.—

‘‘(1) IN GENERAL.—In the case of an individual to whom this paragraph applies for

the taxable year, the limitation of subsection (b)(1) shall be equal to the lesser of—

‘‘(A) $2,000, or

‘‘(B) the sum of—

‘‘(i) the compensation includible in such

individual’s gross income for the taxable

year, plus

‘‘(ii) the compensation includible in the

gross income of such individual’s spouse for

the taxable year reduced by the amount allowable as a deduction under subsection (a)

to such spouse for such taxable year.

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

APPLIES.—Paragraph (1) shall apply to any

individual if—

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

the taxable year, and

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

includible in such individual’s gross income

for the taxable year is less than the compensation includible in the gross income of

such individual’s spouse for the taxable

year.’’

(b) TECHNICAL AMENDMENT.—Paragraph (2)

of section 219(f) (relating to other definitions

and special rules) is amended by striking

‘‘subsections (b) and (c)’’ and inserting ‘‘subsection (b)’’.

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

Subtitle B—Senior Citizens’ Equity

PART I—REPEAL OF INCREASE IN TAX ON

SOCIAL SECURITY BENEFITS

SEC. 6201. REPEAL OF INCREASE IN TAX ON SOCIAL SECURITY BENEFITS.

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

86 (relating to social security and tier 1 railroad retirement benefits) is amended by adding at the end the following new paragraph:

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

the case of any taxable year beginning in a

calendar year after 1995 and before 2000, paragraph (2) shall be applied by substituting the

percentage determined under the following

table for ‘85 percent’ each place it appears:

‘‘In the case of a taxable

year beginning in calendar year:

The percentage is:

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

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

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

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

(b) TERMINATION OF ADDITIONAL AMOUNT.—

Paragraph (2) of section 86(a) is amended by

adding at the end the following new flush

sentence:

‘‘This paragraph shall not apply to any taxable year beginning after December 31, 1999.’’

(c) CONFORMING AMENDMENTS.—

(1) Paragraph (3) of section 871(a) is

amended—

(A) by striking ‘‘85 percent’’ in subparagraph (A) and inserting ‘‘50 percent’’, and

(B) by inserting before the last sentence

the following new flush sentence:

‘‘In the case of any taxable year beginning in

a calendar year after 1995 and before 2000,

subparagraph (A) shall be applied by substituting the percentage determined for such

calendar year under section 86(a)(3) for ‘50

percent’.’’

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

of the Social Security Amendments of 1983

(Public Law 98–21) is amended—

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

‘‘There’’;

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

‘‘amounts equivalent to’’; and

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

follows and inserting a period.

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

Act is amended by striking subparagraph

(B).

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

Act is amended by striking subparagraph (B)

and by redesignating subparagraph (C) as

subparagraph (B).

(D) Paragraph (2) of section 121(e) of such

Act is amended in the first sentence by

striking ‘‘paragraph (1)(A)’’ and inserting

‘‘paragraph (1)’’.

(d) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in

paragraph (2), the amendments made by this

section shall apply to taxable years beginning after December 31, 1995.

(2) SUBSECTION (c)(2).—The amendments

made by subsection (c)(2) shall apply to tax

liabilities for taxable years beginning after

December 31, 1995.

PART II—TREATMENT OF LONG-TERM

CARE INSURANCE AND SERVICES

SEC. 6211. TREATMENT OF LONG-TERM CARE INSURANCE.

(a) GENERAL RULE.—Chapter 79 (relating to

definitions) is amended by inserting after

section 7702A the following new section:

‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE

INSURANCE.

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

title—

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

shall be treated as an accident and health insurance contract,

‘‘(2) amounts (other than policyholder dividends, as defined in section 808, or premium

refunds) received under a long-term care insurance contract shall be treated as amounts

received for personal injuries and sickness

and shall be treated as reimbursement for

expenses actually incurred for medical care

(as defined in section 213(d)),

‘‘(3) any plan of an employer providing coverage under a long-term care insurance contract shall be treated as an accident and

health plan with respect to such coverage,

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

amounts paid for a long-term care insurance

contract providing the benefits described in

subsection (b)(2)(A) shall be treated as payments made for insurance for purposes of

section 213(d)(1)(D), and

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

shall be treated as a guaranteed renewable

contract subject to the rules of section

816(e).

‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—For purposes of this title—

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

insurance contract’ means any insurance

contract if—

‘‘(A) the only insurance protection provided under such contract is coverage of

qualified long-term care services,

‘‘(B) such contract does not pay or reimburse expenses incurred for services or items

to the extent that such expenses are reimbursable under title XVIII of the Social Security Act or would be so reimbursable but

for the application of a deductible or coinsurance amount,

‘‘(C) such contract is guaranteed renewable,

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

cash surrender value or other money that

can be—

‘‘(i) paid, assigned, or pledged as collateral

for a loan, or

‘‘(ii) borrowed,

other than as provided in subparagraph (E)

or paragraph (2)(C), and

‘‘(E) all refunds of premiums, and all policyholder dividends or similar amounts,

under such contract are to be applied as a reduction in future premiums or to increase future benefits.

‘‘(2) SPECIAL RULES.—

‘‘(A) PER DIEM, ETC. PAYMENTS PERMITTED.—A contract shall not fail to be described in subparagraph (A) or (B) of paragraph (1) by reason of payments being made

on a per diem or other periodic basis without

regard to the expenses incurred during the

period to which the payments relate.
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1995 T56.13

‘‘(B) SPECIAL RULES RELATING TO MEDICARE.—

‘‘(i) Paragraph (1)(B) shall not apply to expenses which are reimbursable under title

XVIII of the Social Security Act only as a

secondary payor.

‘‘(ii) No provision of law shall be construed

or applied so as to prohibit the offering of a

long-term care insurance contract on the

basis that the contract coordinates its benefits with those provided under such title.

‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

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

death of the insured, or on a complete surrender or cancellation of the contract, which

cannot exceed the aggregate premiums paid

under the contract. Any refund on a complete surrender or cancellation of the contract shall be includible in gross income to

the extent that any deduction or exclusion

was allowable with respect to the premiums.

‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘qualified longterm care services’ means necessary diagnostic, preventive, therapeutic, curing,

treating, mitigating, and rehabilitative services, and maintenance or personal care services, which—

‘‘(A) are required by a chronically ill individual, and

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

care prescribed by a licensed health care

practitioner.

‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

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

ill individual’ means any individual who has

been certified by a licensed health care practitioner as—

‘‘(i) being unable to perform (without substantial assistance from another individual)

at least 2 activities of daily living for a period of at least 90 days due to a loss of functional capacity or to cognitive impairment,

or

‘‘(ii) having a level of disability similar (as

determined by the Secretary in consultation

with the Secretary of Health and Human

Services) to the level of disability described

in clause (i).

Such term shall not include any individual

otherwise meeting the requirements of the

preceding sentence unless within the preceding 12-month period a licensed health

care practitioner has certified that such individual meets such requirements.

‘‘(B) ACTIVITIES OF DAILY LIVING.—For purposes of subparagraph (A), each of the following is an activity of daily living:

‘‘(i) Eating.

‘‘(ii) Toileting.

‘‘(iii) Transferring.

‘‘(iv) Bathing.

‘‘(v) Dressing.

‘‘(vi) Continence.

Nothing in this section shall be construed to

require a contract to take into account all of

the preceding activities of daily living.

‘‘(3) MAINTENANCE OR PERSONAL CARE SERVICES.—The term ‘maintenance or personal

care services’ means any care the primary

purpose of which is the provision of needed

assistance with any of the disabilities as a

result of which the individual is a chronically ill individual (including the protection

from threats to health and safety due to severe cognitive impairment).

‘‘(4) LICENSED HEALTH CARE PRACTITIONER.—

The term ‘licensed health care practitioner’

means any physician (as defined in section

1861(r)(1) of the Social Security Act) and any

registered professional nurse, licensed social

worker, or other individual who meets such

requirements as may be prescribed by the

Secretary.

‘‘(d) TREATMENT OF COVERAGE PROVIDED AS

PART OF A LIFE INSURANCE CONTRACT.—Except as otherwise provided in regulations

prescribed by the Secretary, in the case of

any long-term care insurance coverage

(whether or not qualified) provided by a rider

on a life insurance contract—

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

as if the portion of the contract providing

such coverage is a separate contract.

‘‘(2) APPLICATION OF 7702.—Section 7702(c)(2)

(relating to the guideline premium limitation) shall be applied by increasing the

guideline premium limitation with respect

to a life insurance contract, as of any date—

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

premium payments) against the life insurance contract’s cash surrender value (within

the meaning of section 7702(f)(2)(A)) for such

coverage made to that date under the contract, less

‘‘(B) any such charges the imposition of

which reduces the premiums paid for the

contract (within the meaning of section

7702(f)(1)).

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

charges against the life insurance contract’s

cash surrender value described in paragraph

(2), unless such charges are includible in income as a result of the application of section

72(e)(10) and the rider is a long-term care insurance contract under subsection (b).

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

this subsection, the term ‘portion’ means

only the terms and benefits under a life insurance contract that are in addition to the

terms and benefits under the contract without regard to the coverage under a long-term

care insurance contract.’’

(b) RESERVE METHOD.—Clause (iii) of section 807(d)(3)(A) is amended by inserting

‘‘(other than a long-term care insurance contract, as defined in section 7702B(b))’’ after

‘‘insurance contract’’.

(c) LONG-TERM CARE INSURANCE NOT PERMITTED UNDER CAFETERIA PLANS OR FLEXIBLE

SPENDING ARRANGEMENTS.—

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

amended by adding at the end the following

new sentence: ‘‘Such term shall not include

any long-term care insurance contract (as

defined in section 7702B(b)).’’

(2) FLEXIBLE SPENDING ARRANGEMENTS.—

The text of section 106 (relating to contributions by employer to accident and health

plans) is amended to read as follows:

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

subsection (b), gross income of an employee

does not include employer-provided coverage

under an accident or health plan.

‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS PROVIDED THROUGH FLEXIBLE SPENDING

ARRANGEMENTS.—

‘‘(1) IN GENERAL.—Effective on and after

January 1, 1996, gross income of an employee

shall include employer-provided coverage for

qualified long-term care services (as defined

in section 7702B(c)) to the extent that such

coverage is provided through a flexible

spending or similar arrangement.

‘‘(2) FLEXIBLE SPENDING ARRANGEMENT.—

For purposes of this subsection, a flexible

spending arrangement is a benefit program

which provides employees with coverage

under which—

‘‘(A) specified incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable conditions), and

‘‘(B) the maximum amount of reimbursement which is reasonably available to a participant for such coverage is less than 500

percent of the value of such coverage.

In the case of an insured plan, the maximum

amount reasonably available shall be determined on the basis of the underlying coverage.’’

(d) CONTINUATION COVERAGE EXCISE TAX

NOT TO APPLY.—Subsection (f) of section

4980B is amended by adding at the end the

following new paragraph:

‘‘(9) CONTINUATION OF LONG-TERM CARE COVERAGE NOT REQUIRED.—A group health plan

shall not be treated as failing to meet the requirements of this subsection solely by reason of failing to provide coverage under any

long-term care insurance contract (as defined in section 7702B(b)).’’

(e) AMOUNTS PAID TO RELATIVES TREATED

AS NOT PAID FOR MEDICAL CARE.—Section

213(d) is amended by adding at the end the

following new paragraph:

‘‘(10) CERTAIN PAYMENTS TO RELATIVES

TREATED AS NOT PAID FOR MEDICAL CARE.—An

amount paid for a qualified long-term care

service (as defined in section 7702B(c)) provided to an individual shall be treated as not

paid for medical care if such service is

provided—

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

partnership, corporation, or other entity)

unless the relative is a licensed professional

with respect to such services, or

‘‘(B) by a corporation or partnership which

is related (within the meaning of section

267(b) or 707(b)) to the individual.

For purposes of this paragraph, the term

‘relative’ means an individual bearing a relationship to the individual which is described

in any of paragraphs (1) through (8) of section 152(a). This paragraph shall not apply

for purposes of section 105(b) with respect to

reimbursements through insurance.’’

(f) CLERICAL AMENDMENT.—The table of

sections for chapter 79 is amended by inserting after the item relating to section 7702A

the following new item:

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

(g) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by

this section shall apply to contracts issued

after December 31, 1995.

(2) CONTINUATION OF EXISTING POLICIES.—In

the case of any contract issued before January 1, 1996, which met the long-term care insurance requirements of the State in which

the contract was sitused at the time the contract was issued—

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

a long-term care insurance contract (as defined in section 7702B(b) of such Code), and

(B) services provided under, or reimbursed

by, such contract shall be treated for such

purposes as qualified long-term care services

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

(3) EXCHANGES OF EXISTING POLICIES.—If,

after the date of enactment of this Act and

before January 1, 1996, a contract providing

for long-term care insurance coverage is exchanged solely for a long-term care insurance contract (as defined in section 7702B(b)

of such Code), no gain or loss shall be recognized on the exchange. If, in addition to a

long-term care insurance contract, money or

other property is received in the exchange,

then any gain shall be recognized to the extent of the sum of the money and the fair

market value of the other property received.

For purposes of this paragraph, the cancellation of a contract providing for long-term

care insurance coverage and reinvestment of

the cancellation proceeds in a long-term care

insurance contract within 60 days thereafter

shall be treated as an exchange.

(4) ISSUANCE OF CERTAIN RIDERS PERMITTED.—For purposes of applying sections

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

Code of 1986 to any contract—

(A) the issuance of a rider which is treated

as a long-term care insurance contract under

section 7702B, and

(B) the addition of any provision required

to conform any other long-term care rider to

be so treated,

shall not be treated as a modification or material change of such contract.
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SEC. 6212. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

(a) GENERAL RULE.—Paragraph (1) of section 213(d) (defining medical care) is amended by striking ‘‘or’’ at the end of subparagraph (B), by redesignating subparagraph (C)

as subparagraph (D), and by inserting after

subparagraph (B) the following new subparagraph:

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

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

(b) TECHNICAL AMENDMENTS.—

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

redesignated by subsection (a)) is amended

by striking ‘‘subparagraphs (A) and (B)’’ and

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

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

amended by adding at the end the following

new flush sentence:

‘‘In the case of a long-term care insurance

contract (as defined in section 7702B(b)), only

eligible long-term care premiums (as defined

in paragraph (11)) shall be taken into account under subparagraph (D).’’

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

by adding at the end the following new paragraph:

‘‘(11) ELIGIBLE LONG-TERM CARE PREMIUMS.—

‘‘(A) IN GENERAL.—For purposes of this section, the term ‘eligible long-term care premiums’ means the amount paid during a taxable year for any long-term care insurance

contract (as defined in section 7702B(b)) covering an individual, to the extent such

amount does not exceed the limitation determined under the following table:

‘‘In the case of an individual

with an attained

age before the

The limitation

close of the taxable

year of:

is:

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

More than 40 but

not more than 50 ... 375

More than 50 but

not more than 60 .... 750

More than 60 but

not more than 70 ... 2,000

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

‘‘(B) INDEXING.—

‘‘(i) IN GENERAL.—In the case of any taxable year beginning in a calendar year after

1996, each dollar amount contained in subparagraph (A) shall be increased by the medical care cost adjustment of such amount for

such calendar year. If any increase determined under the preceding sentence is not a

multiple of $10, such increase shall be rounded to the nearest multiple of $10.

‘‘(ii) MEDICAL CARE COST ADJUSTMENT.—For

purposes of clause (i), the medical care cost

adjustment for any calendar year is the percentage (if any) by which—

‘‘(I) the medical care component of the

Consumer Price Index (as defined in section

1(f)(5)) for August of the preceding calendar

year, exceeds

‘‘(II) such component for August of 1995.

The Secretary shall, in consultation with the

Secretary of Health and Human Services,

prescribe an adjustment which the Secretary

determines is more appropriate for purposes

of this paragraph than the adjustment described in the preceding sentence, and the

adjustment so prescribed shall apply in lieu

of the adjustment described in the preceding

sentence.’’

(3) Paragraph (6) of section 213(d) is

amended—

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

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

and (C)’’, and

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

(1)(D)’’.

(4) Paragraph (7) of section 213(d) is amended by striking ‘‘subparagraphs (A) and (B)’’

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

(C)’’.

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6213. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR LONG-TERM

CARE INSURANCE CONTRACTS NOT

TAXABLE.

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

1035 (relating to certain exchanges of insurance contracts) is amended by striking the

period at the end of paragraph (3) and inserting ‘‘; or’’, and by adding at the end the following new paragraph:

‘‘(4) a contract of life insurance or an endowment or annuity contract for a long-term

care insurance contract (as defined in section 7702B(b)).’’

(b) EFFECTIVE DATE.—The amendment

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6214. EXCLUSION FROM GROSS INCOME FOR

AMOUNTS WITHDRAWN FROM CERTAIN RETIREMENT PLANS FOR

LONG-TERM CARE INSURANCE.

(a) IN GENERAL.—Part III of subchapter B

of chapter 1 (relating to items specifically

excluded from gross income) is amended by

redesignating section 137 as section 138 and

by inserting after section 136 the following

new section:

‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT PLANS FOR LONG-TERM

CARE INSURANCE.

‘‘(a) GENERAL RULE.—The amount which

would (but for this section) be includible in

the gross income of an individual for the taxable year by reason of eligible distributions

during the taxable year shall be reduced (but

not below zero) by the aggregate premiums

paid by such individual during such taxable

year for any long-term care insurance contract (as defined in section 7702B(b)) for coverage of such individual or the spouse of such

individual.

‘‘(b) ELIGIBLE DISTRIBUTION.—For purposes

of this section, the term ‘eligible distribution’ means any distribution or payment to

an individual from—

‘‘(1) an individual retirement plan of such

individual,

‘‘(2) amounts attributable to employer contributions made pursuant to elective deferrals described in subparagraph (A) or (C) of

section 402(g)(3) or section 501(c)(18)(D)(iii),

or

‘‘(3) amounts deferred under section

457(a).’’

(b) CONFORMING AMENDMENTS.—

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

striking ‘‘or’’ at the end of subclause (III), by

striking ‘‘and’’ at the end of subclause (IV)

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

subclause (IV) the following new subclause:

‘‘(V) the date distributions for premiums

for a long-term care insurance contract (as

defined in section 7702B(b)) for coverage of

such individual or the spouse of such individual are made, and’’.

(2) Section 403(b)(11) is amended by striking ‘‘or’’ at the end of subparagraph (A), by

striking the period at the end of subparagraph (B) and inserting ‘‘, or’’, and by inserting after subparagraph (B) the following new

subparagraph:

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

long-term care insurance contract (as defined in section 7702B(b)) for coverage of the

employee or the spouse of the employee.’’

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

amended by striking ‘‘or’’ at the end of

clause (ii), by striking ‘‘and’’ at the end of

clause (iii) and inserting ‘‘or’’, and by inserting after clause (iii) the following new

clause:

‘‘(iv) the date distributions for premiums

for a long-term care insurance contract (as

defined in section 7702B(b)) for coverage of

such individual or the spouse of such individual are made, and’’.

(4) The table of sections for part III of subchapter B of chapter 1 is amended by striking the last item and inserting the following

new items:

‘‘Sec. 137. Distributions from certain retirement plans for long-term care

insurance.

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

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to payments

and distributions after December 31, 1995.

PART III—TREATMENT OF ACCELERATED

DEATH BENEFITS

SEC. 6221. TREATMENT OF ACCELERATED DEATH

BENEFITS BY RECIPIENT.

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

certain death benefits) is amended by adding

at the end the following new subsection:

‘‘(g) TREATMENT OF CERTAIN ACCELERATED

DEATH BENEFITS.—

‘‘(1) IN GENERAL.—For purposes of this section, the following amounts shall be treated

as an amount paid by reason of the death of

an insured:

‘‘(A) Any amount received under a life insurance contract on the life of an insured

who is a terminally ill individual.

‘‘(B) Any amount received under a life insurance contract on the life of an insured

who is a chronically ill individual (as defined

in section 7702B(c)(2)) but only if such

amount is received under a rider or other

provision of such contract which is treated

as a long-term care insurance contract under

section 7702B.

‘‘(2) TREATMENT OF VIATICAL SETTLEMENTS.—

‘‘(A) IN GENERAL.—In the case of a life insurance contract on the life of an insured described in paragraph (1), if—

‘‘(i) any portion of such contract is sold to

any viatical settlement provider, or

‘‘(ii) any portion of the death benefit is assigned to such a provider,

the amount paid for such sale or assignment

shall be treated as an amount paid under the

life insurance contract by reason of the

death of such insured.

‘‘(B) VIATICAL SETTLEMENT PROVIDER.—The

term ‘viatical settlement provider’ means

any person regularly engaged in the trade or

business of purchasing, or taking assignments of, life insurance contracts on the

lives of insureds described in paragraph (1)

if—

‘‘(i) such person is licensed for such purposes in the State in which the insured resides, or

‘‘(ii) in the case of an insured who resides

in a State not requiring the licensing of such

persons for such purposes, such person meets

the requirements of sections 8 and 9 of the

Viatical Settlements Model Act of the National Association of Insurance Commissioners.

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

subsection—

‘‘(A) TERMINALLY ILL INDIVIDUAL.—The

term ‘terminally ill individual’ means an individual who has been certified by a physician as having an illness or physical condition which can reasonably be expected to result in death in 24 months or less after the

date of the certification.

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

the meaning given to such term by section

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

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

‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLICIES.—This subsection shall not apply in the

case of any amount paid to any taxpayer

other than the insured if such taxpayer has

an insurable interest with respect to the life-
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1995 T56.13

of the insured by reason of the insured being

a director, officer, or employee of the taxpayer or by reason of the insured being financially interested in any trade or business

carried on by the taxpayer.

‘‘(5) CROSS REFERENCE.—

‘‘For inclusion in gross income of excess

benefits, see section 91.’’

(b) EFFECTIVE DATE.—The amendment

made by subsection (a) shall apply to

amounts received after December 31, 1995.

SEC. 6222. TAX TREATMENT OF COMPANIES

ISSUING QUALIFIED ACCELERATED

DEATH BENEFIT RIDERS.

(a) QUALIFIED ACCELERATED DEATH BENEFIT

RIDERS TREATED AS LIFE INSURANCE.—Section 818 (relating to other definitions and

special rules) is amended by adding at the

end the following new subsection:

‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT RIDERS TREATED AS LIFE INSURANCE.—

For purposes of this part—

‘‘(1) IN GENERAL.—Any reference to a life

insurance contract shall be treated as including a reference to a qualified accelerated

death benefit rider on such contract.

‘‘(2) QUALIFIED ACCELERATED DEATH BENEFIT

RIDERS.—For purposes of this subsection, the

term ‘qualified accelerated death benefit

rider’ means any rider on a life insurance

contract if the only payments under the

rider are payments meeting the requirements of section 101(g).

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

rider which is treated as a long-term care insurance contract under section 7702B.’’

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendment made by

this section shall take effect on January 1,

1996.

(2) ISSUANCE OF RIDER NOT TREATED AS MATERIAL CHANGE.—For purposes of applying

sections 101(f), 7702, and 7702A of the Internal

Revenue Code of 1986 to any contract—

(A) the issuance of a qualified accelerated

death benefit rider (as defined in section

818(g) of such Code (as added by this Act)),

and

(B) the addition of any provision required

to conform an accelerated death benefit

rider to the requirements of such section

818(g),

shall not be treated as a modification or material change of such contract.

PART IV—INCLUSION IN GROSS INCOME

OF EXCESS LONG-TERM CARE BENEFITS

SEC. 6231. INCLUSION IN INCOME OF EXCESS

LONG-TERM CARE BENEFITS.

(a) IN GENERAL.—Part II of subchapter B of

chapter 1 (relating to items specifically included in gross income) is amended by adding at the end the following new section:

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

‘‘(a) GENERAL RULE.—Notwithstanding any

other provision of this title, gross income

shall include the amount of excess long-term

care benefits received by the taxpayer during

the taxable year.

‘‘(b) EXCEPTION FOR TERMINALLY ILL INDIVIDUALS.—Subsection (a) shall not apply to

any long-term care benefit paid by reason of

an insured who is a terminally ill individual

(as defined in section 101(g)) as of the date

the benefit is received.

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

For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘excess longterm care benefits’ means the excess (if any)

of—

‘‘(A) the value of the long-term care benefits received by the taxpayer during the taxable year, over

‘‘(B) the exclusion amount applicable to

such benefits.

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

‘long-term care benefits’ means—

‘‘(A) payments and other benefits under

long-term care insurance contracts (as defined in section 7702B(b)) to the extent excludable from gross income by reason of section 7702B(a)(2), and

‘‘(B) payments which are excludable from

gross income by reason of section 101(g).

‘‘(3) EXCLUSION AMOUNT.—

‘‘(A) IN GENERAL.—In the case of long-term

care benefits received by the taxpayer during

the taxable year by reason of the taxpayer

being a chronically ill individual, the term

‘exclusion amount’ means the aggregate of

$200 for each day during such year on which

the individual is a chronically ill individual.

In the case of individuals who are married to

each other and who are both chronically ill

individuals, the preceding sentence shall be

applied separately with respect to each

spouse.

‘‘(B) OTHER TAXPAYERS.—In the case of

long-term care benefits received during the

taxable year by a taxpayer by reason of another individual being a chronically ill individual, the term ‘exclusion amount’ means

so much of such other individual’s exclusion

amount (for such other individual’s taxable

year which begins in the calendar year in

which the taxpayer’s taxable year begins) as

is allocated by such other individual to the

taxpayer. Such an allocation shall be made

at the time and in the manner prescribed by

the Secretary; and once made, shall be irrevocable.

‘‘(d) CHRONICALLY ILL INDIVIDUAL.—For

purposes of this section, the term ‘chronically ill individual’ has the meaning given

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

‘‘(e) INFLATION ADJUSTMENT OF $200 BENEFIT LIMIT.—In the case of a calendar year

after 1996, the $200 amount contained in subsection (c)(3)(A) shall be increased at the

same time and in the same manner as

amounts are increased pursuant to section

213(d)(11).’’

(b) CLERICAL AMENDMENT.—The table of

sections for such part II is amended by adding at the end the following new item:

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

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6232. REPORTING REQUIREMENTS.

(a) IN GENERAL.—Subpart B of part III of

subchapter A of chapter 61 is amended by

adding at the end the following new section:

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

‘‘(a) REQUIREMENT OF REPORTING.—Any

person who pays long-term care benefits

shall make a return, according to the forms

or regulations prescribed by the Secretary,

setting forth—

‘‘(1) the aggregate amount of such benefits

paid by such person to any individual during

any calendar year, and

‘‘(2) the name, address, and TIN of such individual.

‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS

REQUIRED.—Every person required to make a

return under subsection (a) shall furnish to

each individual whose name is required to be

set forth in such return a written statement

showing—

‘‘(1) the name of the person making the

payments, and

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

care benefits paid to the individual which

are required to be shown on such return.

The written statement required under the

preceding sentence shall be furnished to the

individual on or before January 31 of the

year following the calendar year for which

the return under subsection (a) was required

to be made.

‘‘(c) LONG-TERM CARE BENEFITS.—For purposes of this section, the term ‘long-term

care benefit’ has the meaning given such

term by section 91(c).’’

(b) PENALTIES.—

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

amended by redesignating clauses (ix)

through (xiv) as clauses (x) through (xv), respectively, and by inserting after clause

(viii) the following new clause:

‘‘(ix) section 6050Q (relating to certain

long-term care benefits),’’.

(2) Paragraph (2) of section 6724(d) is

amended by redesignating subparagraphs (Q)

through (T) as subparagraphs (R) through

(U), respectively, and by inserting after subparagraph (P) the following new subparagraph:

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

long-term care benefits),’’.

(c) CLERICAL AMENDMENT.—The table of

sections for subpart B of part III of subchapter A of chapter 61 is amended by adding

at the end the following new item:

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

(d) EFFECTIVE DATE.—The amendments

made by this section shall apply to benefits

paid after December 31, 1995.

Subtitle C—Job Creation and Wage

Enhancement

PART I—CAPITAL GAINS REFORM

Subpart A—Capital Gains Reduction for

Taxpayers Other Than Corporations

SEC. 6301. CAPITAL GAINS DEDUCTION.

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

chapter 1 (relating to treatment of capital

gains), as amended by subsection (d)(1), is

amended by inserting after section 1201 the

following new section:

‘‘SEC. 1202. CAPITAL GAINS DEDUCTION.

‘‘(a) GENERAL RULE.—If for any taxable

year a taxpayer other than a corporation has

a net capital gain, 50 percent of such gain

shall be a deduction from gross income.

‘‘(b) ESTATES AND TRUSTS.—In the case of

an estate or trust, the deduction shall be

computed by excluding the portion (if any) of

the gains for the taxable year from sales or

exchanges of capital assets which, under sections 652 and 662 (relating to inclusions of

amounts in gross income of beneficiaries of

trusts), is includible by the income beneficiaries as gain derived from the sale or exchange of capital assets.

‘‘(c) COORDINATION WITH TREATMENT OF

CAPITAL GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—For purposes of this section, the net capital gain for any taxable

year shall be reduced (but not below zero) by

the amount which the taxpayer takes into

account as investment income under section

163(d)(4)(B)(iii).

‘‘(d) SPECIAL RULE FOR COLLECTIBLES.—

‘‘(1) IN GENERAL.—At the election of the

taxpayer, the rate of tax imposed by section

1 on the excess of—

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

capital gain for the taxable year without regard to the application of section 1222(12) to

collectibles specified in such election, over

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

shall not exceed 28 percent.

‘‘(2) ELECTION.—Any election under this

subsection, and any specification therein,

once made, shall be irrevocable.

‘‘(3) COORDINATION WITH INDEXING.—Any

collectible specified in such an election shall

be treated as not being an indexed asset for

purposes of section 1022.

‘‘(e) TRANSITIONAL RULE.—

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

year which includes January 1, 1995—

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

net capital gain under subsection (a) shall

not exceed the net capital gain determined

by only taking into account gains and losses

properly taken into account for the portion
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T56.13 APRIL 5

of the taxable year on or after January 1,

1995, and

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

exceeds the amount taken into account

under subsection (a), the rate of tax imposed

by section 1 on such excess shall not exceed

28 percent.

‘‘(2) SPECIAL RULES FOR PASS-THRU ENTITIES.—

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

(1) with respect to any pass-thru entity, the

determination of when gains and losses are

properly taken into account shall be made at

the entity level.

‘‘(B) PASS-THRU ENTITY DEFINED.—For purposes of subparagraph (A), the term ‘passthru entity’ means—

‘‘(i) a regulated investment company,

‘‘(ii) a real estate investment trust,

‘‘(iii) an S corporation,

‘‘(iv) a partnership,

‘‘(v) an estate or trust, and

‘‘(vi) a common trust fund.’’

(b) DEDUCTION ALLOWABLE IN COMPUTING

ADJUSTED GROSS INCOME.—Subsection (a) of

section 62 is amended by inserting after

paragraph (15) the following new paragraph:

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

(c) TREATMENT OF COLLECTIBLES.—

(1) IN GENERAL.—Section 1222 is amended

by inserting after paragraph (11) the following new paragraph:

‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—

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

the sale or exchange of a collectible shall be

treated as a short-term capital gain or loss

(as the case may be), without regard to the

period such asset was held. The preceding

sentence shall apply only to the extent the

gain or loss is taken into account in computing taxable income.

‘‘(B) TREATMENT OF CERTAIN SALES OF INTEREST IN PARTNERSHIP, ETC.—For purposes

of subparagraph (A), any gain from the sale

or exchange of an interest in a partnership,

S corporation, or trust which is attributable

to unrealized appreciation in the value of

collectibles held by such entity shall be

treated as gain from the sale or exchange of

a collectible. Rules similar to the rules of

section 751(f) shall apply for purposes of the

preceding sentence.

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

paragraph, the term ‘collectible’ means any

capital asset which is a collectible (as defined in section 408(m) without regard to

paragraph (3) thereof).’’

(2) CHARITABLE DEDUCTION NOT AFFECTED.—

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

amended by adding at the end the following

new sentence: ‘‘For purposes of this paragraph, section 1222 shall be applied without

regard to paragraph (12) thereof (relating to

special rule for collectibles).’’

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

amended by inserting before the period at

the end the following: ‘‘and section 1222 shall

be applied without regard to paragraph (12)

thereof (relating to special rule for collectibles)’’.

(d) TECHNICAL AND CONFORMING CHANGES.—

(1)(A) Section 13113 of the Revenue Reconciliation Act of 1993 (relating to 50-percent

exclusion for gain from certain small business stock), and the amendments made by

such section, are hereby repealed; and the Internal Revenue Code of 1986 shall be applied

as if such section (and amendments) had

never been enacted.

(B) At the election of a taxpayer who holds

qualified small business stock (as defined in

section 1202 of such Code, as in effect on the

day before the date of the enactment of this

Act) as of such date of enactment—

(i) the provisions repealed by subparagraph

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

such date, and

(ii) the amendments made by this section

and section 6302 shall not apply to such

stock; except that losses from the sale or exchange of such stock shall be taken into account as provided in the amendments made

by paragraph (13) of this subsection.

Such an election may be made only during

the 1-year period beginning on the date of

the enactment of this Act and, once made,

shall be irrevocable.

(2) Section 1 is amended by striking subsection (h).

(3) Paragraph (1) of section 170(e) is amended by striking ‘‘the amount of gain’’ in the

material following subparagraph (B)(ii) and

inserting ‘‘50 percent (25⁄35 in the case of a

corporation) of the amount of gain’’.

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

amended to read as follows:

‘‘(2) CAPITAL GAINS AND LOSSES.—

‘‘(A) LOSSES OF TAXPAYERS OTHER THAN

CORPORATIONS.—In the case of a taxpayer

other than a corporation, the amount deductible on account of losses from sales or

exchanges of capital assets shall not exceed

the amount includible on account of gains

from sales or exchanges of capital assets.

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

deduction under section 1202 shall not be allowed.’’

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

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

and inserting ‘‘paragraphs (1), (2)(B), and

(3)’’.

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

amended by striking all that follows ‘‘longterm capital gain,’’ and inserting ‘‘the maximum rate on net capital gain under section

1201 or the deduction under section 1202

(whichever is appropriate) shall be taken

into account.’’

(6) Paragraph (4) of section 642(c) is amended to read as follows:

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

amount otherwise allowable as a deduction

under this subsection consists of gain from

the sale or exchange of capital assets held

for more than 1 year, proper adjustment

shall be made for any deduction allowable to

the estate or trust under section 1202 (relating to deduction for excess of capital gains

over capital losses). In the case of a trust,

the deduction allowed by this subsection

shall be subject to section 681 (relating to

unrelated business income).’’

(7) Paragraph (3) of section 643(a) is amended by adding at the end thereof the following

new sentence: ‘‘The deduction under section

1202 (relating to deduction of excess of capital gains over capital losses) shall not be

taken into account.’’

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

amended by inserting ‘‘(i)’’ before ‘‘there

shall’’ and by inserting before the period ‘‘,

and (ii) the deduction under section 1202 (relating to capital gains deduction) shall not

be taken into account’’.

(9) Paragraph (4) of section 691(c) is amended by striking ‘‘sections 1(h), 1201, and 1211’’

and inserting ‘‘sections 1201, 1202, and 1211’’.

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

is amended by inserting ‘‘such gains and

losses shall be determined without regard to

section 1202 (relating to deduction for capital

gains) and’’ after ‘‘except that’’.

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

amended by striking subparagraph (A), by

redesignating subparagraph (B) as subparagraph (A), and by inserting after subparagraph (A) (as so redesignated) the following

new subparagraph:

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

taxpayer other than a corporation, taxable

income from sources outside the United

States shall include gain from the sale or exchange of capital assets only to the extent of

foreign source capital gain net income.’’

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

so redesignated, is amended—

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

and inserting the following:

‘‘(A) CORPORATIONS.—In the case of a corporation—’’, and

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

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

amended by striking subparagraphs (D) and

(E) and inserting the following new subparagraph:

‘‘(D) RATE DIFFERENTIAL PORTION.—The

rate differential portion of foreign source net

capital gain, net capital gain, or the excess

of net capital gain from sources within the

United States over net capital gain, as the

case may be, is the same proportion of such

amount as the excess of the highest rate of

tax specified in section 11(b) over the alternative rate of tax under section 1201(a) bears

to the alternative rate of tax under section

1201(a).’’

(12) Subsection (d) of section 1044 is amended by striking the last sentence.

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

amended to read as follows:

‘‘(2) the sum of—

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

and

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

capital gain.’’

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

1212(b) as precedes subparagraph (B) thereof

is amended to read as follows:

‘‘(2) SPECIAL RULES.—

‘‘(A) ADJUSTMENTS.—

‘‘(i) For purposes of determining the excess

referred to in paragraph (1)(A), there shall be

treated as short-term capital gain in the taxable year an amount equal to the lesser of—

‘‘(I) the amount allowed for the taxable

year under paragraph (1) or (2) of section

1211(b), or

‘‘(II) the adjusted taxable income for such

taxable year.

‘‘(ii) For purposes of determining the excess referred to in paragraph (1)(B), there

shall be treated as short-term capital gain in

the taxable year an amount equal to the sum

of—

‘‘(I) the amount allowed for the taxable

year under paragraph (1) or (2) of section

1211(b) or the adjusted taxable income for

such taxable year, whichever is the least,

plus

‘‘(II) the excess of the amount described in

subclause (I) over the net short-term capital

loss (determined without regard to this subsection) for such year.’’

(C) Subsection (b) of section 1212 is amended by adding at the end the following new

paragraph:

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

any amount which, under paragraph (1) and

section 1211(b) (as in effect for taxable years

beginning before January 1, 1996), is treated

as a capital loss in the first taxable year beginning after December 31, 1995, paragraph

(1) and section 1211(b) (as so in effect) shall

apply (and paragraph (1) and section 1211(b)

as in effect for taxable years beginning after

December 31, 1995, shall not apply) to the extent such amount exceeds the total of any

net capital gains (determined without regard

to this subsection) of taxable years beginning after December 31, 1995.’’

(14) Paragraph (1) of section 1402(i) is

amended by inserting ‘‘, and the deduction

provided by section 1202 shall not apply’’ before the period at the end thereof.

(15) Subsection (e) of section 1445 is

amended—

(A) in paragraph (1) by striking ‘‘35 percent

(or, to the extent provided in regulations, 28

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

the extent provided in regulations, 19.8 percent)’’, and
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1995 T56.13

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

(16)(A) The second sentence of section

7518(g)(6)(A) is amended—

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

which section 1(h) or 1201(a) applies’’, and

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

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

(B) The second sentence of section

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

is amended—

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

which section 1(h) or 1201(a) of such Code applies’’, and

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

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

(e) CLERICAL AMENDMENT.—The table of

sections for part I of subchapter P of chapter

1 is amended by inserting after the item relating to section 1201 the following new item:

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

(f) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments

made by this section shall apply to taxable

years ending after December 31, 1994.

(2) CONTRIBUTIONS.—The amendment made

by subsection (d)(3) shall apply to contributions on or after January 1, 1995.

(3) USE OF LONG-TERM LOSSES.—The amendments made by subsection (d)(13) shall apply

to taxable years beginning after December

31, 1995.

(4) WITHHOLDING.—The amendment made

by subsection (d)(15) shall apply only to

amounts paid after the date of the enactment of this Act.

SEC. 6302. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER DECEMBER 31, 1994,

FOR PURPOSES OF DETERMINING

GAIN.

(a) IN GENERAL.—Part II of subchapter O of

chapter 1 (relating to basis rules of general

application) is amended by inserting after

section 1021 the following new section:

‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER DECEMBER 31, 1994,

FOR PURPOSES OF DETERMINING

GAIN.

‘‘(a) GENERAL RULE.—

‘‘(1) INDEXED BASIS SUBSTITUTED FOR ADJUSTED BASIS.—Solely for purposes of determining gain on the sale or other disposition

by a taxpayer (other than a corporation) of

an indexed asset which has been held for

more than 3 years, the indexed basis of the

asset shall be substituted for its adjusted

basis.

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

The deductions for depreciation, depletion,

and amortization shall be determined without regard to the application of paragraph (1)

to the taxpayer or any other person.

‘‘(b) INDEXED ASSET.—

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

‘‘(A) common stock in a C corporation

(other than a foreign corporation), and

‘‘(B) tangible property,

which is a capital asset or property used in

the trade or business (as defined in section

1231(b)).

‘‘(2) STOCK IN CERTAIN FOREIGN CORPORATIONS INCLUDED.—For purposes of this

section—

‘‘(A) IN GENERAL.—The term ‘indexed asset’

includes common stock in a foreign corporation which is regularly traded on an established securities market.

‘‘(B) EXCEPTION.—Subparagraph (A) shall

not apply to—

‘‘(i) stock of a foreign investment company

(within the meaning of section 1246(b)),

‘‘(ii) stock in a passive foreign investment

company (as defined in section 1296),

‘‘(iii) stock in a foreign corporation held by

a United States person who meets the requirements of section 1248(a)(2), and

‘‘(iv) stock in a foreign personal holding

company (as defined in section 552).

‘‘(C) TREATMENT OF AMERICAN DEPOSITORY

RECEIPTS.—An American depository receipt

for common stock in a foreign corporation

shall be treated as common stock in such

corporation.

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

section—

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

any asset is—

‘‘(A) the adjusted basis of the asset, increased by

‘‘(B) the applicable inflation adjustment.

‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—

The applicable inflation adjustment for any

asset is an amount equal to—

‘‘(A) the adjusted basis of the asset, multiplied by

‘‘(B) the percentage (if any) by which—

‘‘(i) the gross domestic product deflator for

the last calendar quarter ending before the

asset is disposed of, exceeds

‘‘(ii) the gross domestic product deflator

for the last calendar quarter ending before

the asset was acquired by the taxpayer.

The percentage under subparagraph (B) shall

be rounded to the nearest 1⁄10 of 1 percentage

point.

‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—

The gross domestic product deflator for any

calendar quarter is the implicit price

deflator for the gross domestic product for

such quarter (as shown in the last revision

thereof released by the Secretary of Commerce before the close of the following calendar quarter).

‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE

DIMINISHED RISK OF LOSS; TREATMENT OF

SHORT SALES.—

‘‘(1) IN GENERAL.—If the taxpayer (or a related person) enters into any transaction

which substantially reduces the risk of loss

from holding any asset, such asset shall not

be treated as an indexed asset for the period

of such reduced risk.

‘‘(2) SHORT SALES.—

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

sale of an indexed asset with a short sale period in excess of 3 years, for purposes of this

title, the amount realized shall be an

amount equal to the amount realized (determined without regard to this paragraph) increased by the applicable inflation adjustment. In applying subsection (c)(2) for purposes of the preceding sentence, the date on

which the property is sold short shall be

treated as the date of acquisition and the

closing date for the sale shall be treated as

the date of disposition.

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

subparagraph (A), the short sale period begins on the day that the property is sold and

ends on the closing date for the sale.

‘‘(e) TREATMENT OF REGULATED INVESTMENT

COMPANIES AND REAL ESTATE INVESTMENT

TRUSTS.—

‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.—

‘‘(A) IN GENERAL.—Except as otherwise provided in this paragraph, the adjustment

under subsection (a) shall be allowed to any

qualified investment entity (including for

purposes of determining the earnings and

profits of such entity).

‘‘(B) EXCEPTION FOR CORPORATE SHAREHOLDERS.—Under regulations—

‘‘(i) in the case of a distribution by a qualified investment entity (directly or indirectly) to a corporation—

‘‘(I) the determination of whether such distribution is a dividend shall be made without

regard to this section, and

‘‘(II) the amount treated as gain by reason

of the receipt of any capital gain dividend

shall be increased by the percentage by

which the entity’s net capital gain for the

taxable year (determined without regard to

this section) exceeds the entity’s net capital

gain for such year determined with regard to

this section, and

‘‘(ii) there shall be other appropriate adjustments (including deemed distributions)

so as to ensure that the benefits of this section are not allowed (directly or indirectly)

to corporate shareholders of qualified investment entities.

For purposes of the preceding sentence, any

amount includible in gross income under section 852(b)(3)(D) shall be treated as a capital

gain dividend and an S corporation shall not

be treated as a corporation.

‘‘(C) EXCEPTION FOR QUALIFICATION PURPOSES.—This section shall not apply for purposes of sections 851(b) and 856(c).

‘‘(D) EXCEPTION FOR CERTAIN TAXES IMPOSED AT ENTITY LEVEL.—

‘‘(i) TAX ON FAILURE TO DISTRIBUTE ENTIRE

GAIN.—If any amount is subject to tax under

section 852(b)(3)(A) for any taxable year, the

amount on which tax is imposed under such

section shall be increased by the percentage

determined under subparagraph (B)(i)(II). A

similar rule shall apply in the case of any

amount subject to tax under paragraph (2) or

(3) of section 857(b) to the extent attributable to the excess of the net capital gain

over the deduction for dividends paid determined with reference to capital gain dividends only. The first sentence of this clause

shall not apply to so much of the amount

subject to tax under section 852(b)(3)(A) as is

designated by the company under section

852(b)(3)(D).

‘‘(ii) OTHER TAXES.—This section shall not

apply for purposes of determining the

amount of any tax imposed by paragraph (4),

(5), or (6) of section 857(b).

‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN

ENTITY.—

‘‘(A) REGULATED INVESTMENT COMPANIES.—

Stock in a regulated investment company

(within the meaning of section 851) shall be

an indexed asset for any calendar quarter in

the same ratio as—

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

of the indexed assets held by such company

at the close of each month during such quarter, bears to

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

of all assets held by such company at the

close of each such month.

‘‘(B) REAL ESTATE INVESTMENT TRUSTS.—

Stock in a real estate investment trust

(within the meaning of section 856) shall be

an indexed asset for any calendar quarter in

the same ratio as—

‘‘(i) the fair market value of the indexed

assets held by such trust at the close of such

quarter, bears to

‘‘(ii) the fair market value of all assets

held by such trust at the close of such quarter.

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

ratio for any calendar quarter determined

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

this subparagraph) be 80 percent or more,

such ratio for such quarter shall be 100 percent.

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

ratio for any calendar quarter determined

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

this subparagraph) be 20 percent or less, such

ratio for such quarter shall be zero.

‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For

purposes of this paragraph, a qualified investment entity which holds a partnership

interest shall be treated (in lieu of holding a

partnership interest) as holding its proportionate share of the assets held by the partnership.

‘‘(3) TREATMENT OF RETURN OF CAPITAL DISTRIBUTIONS.—Except as otherwise provided

by the Secretary, a distribution with respect

to stock in a qualified investment entity

which is not a dividend and which results in

a reduction in the adjusted basis of such

stock shall be treated as allocable to stock
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T56.13 APRIL 5

acquired by the taxpayer in the order in

which such stock was acquired.

‘‘(4) QUALIFIED INVESTMENT ENTITY.—For

purposes of this subsection, the term ‘qualified investment entity’ means—

‘‘(A) a regulated investment company

(within the meaning of section 851), and

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

the meaning of section 856).

‘‘(f) OTHER PASS-THRU ENTITIES.—

‘‘(1) PARTNERSHIPS.—

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

(a) at the partnership level shall be passed

through to the partners.

‘‘(B) SPECIAL RULE IN THE CASE OF SECTION

754 ELECTIONS.—In the case of a transfer of an

interest in a partnership with respect to

which the election provided in section 754 is

in effect—

‘‘(i) the adjustment under section 743(b)(1)

shall, with respect to the transferor partner,

be treated as a sale of the partnership assets

for purposes of applying this section, and

‘‘(ii) with respect to the transferee partner,

the partnership’s holding period for purposes

of this section in such assets shall be treated

as beginning on the date of such adjustment.

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

corporation, the adjustment made under subsection (a) at the corporate level shall be

passed through to the shareholders. This section shall not apply for purposes of determining the amount of any tax imposed by

section 1374 or 1375.

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

common trust fund, the adjustment made

under subsection (a) at the trust level shall

be passed through to the participants.

‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

DETERMINING LOSS ON SALE OF INTEREST IN ENTITY.—Notwithstanding the preceding provisions of this subsection, for purposes of determining the amount of any loss on a sale

or exchange of an interest in a partnership,

S corporation, or common trust fund, the adjustment made under subsection (a) shall not

be taken into account in determining the adjusted basis of such interest.

‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.—

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

apply to any sale or other disposition of

property between related persons except to

the extent that the basis of such property in

the hands of the transferee is a substituted

basis.

‘‘(2) RELATED PERSONS DEFINED.—For purposes of this section, the term ‘related persons’ means—

‘‘(A) persons bearing a relationship set

forth in section 267(b), and

‘‘(B) persons treated as single employer

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

‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUSTMENT.—If any person transfers cash,

debt, or any other property to another person and the principal purpose of such transfer is to secure or increase an adjustment

under subsection (a), the Secretary may disallow part or all of such adjustment or increase.

‘‘(i) SPECIAL RULES.—For purposes of this

section—

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

there is an addition to the adjusted basis of

any tangible property or of any stock in a

corporation during the taxable year by reason of an improvement to such property or a

contribution to capital of such corporation—

‘‘(A) such addition shall never be taken

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

aggregate amount thereof during the taxable

year with respect to such property or stock

is less than $1,000, and

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

separate asset acquired at the close of such

taxable year if the aggregate amount thereof

during the taxable year with respect to such

property or stock is $1,000 or more.

A rule similar to the rule of the preceding

sentence shall apply to any other portion of

an asset to the extent that separate treatment of such portion is appropriate to carry

out the purposes of this section.

‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

THROUGHOUT HOLDING PERIOD.—The applicable inflation ratio shall be appropriately reduced for periods during which the asset was

not an indexed asset.

‘‘(3) TREATMENT OF CERTAIN DISTRIBUTIONS.—A distribution with respect to stock

in a corporation which is not a dividend shall

be treated as a disposition.

‘‘(4) ACQUISITION DATE WHERE THERE HAS

BEEN PRIOR APPLICATION OF SUBSECTION (a)(1)

WITH RESPECT TO THE TAXPAYER.—If there has

been a prior application of subsection (a)(1)

to an asset while such asset was held by the

taxpayer, the date of acquisition of such

asset by the taxpayer shall be treated as not

earlier than the date of the most recent such

prior application.

‘‘(5) COLLAPSIBLE CORPORATIONS.—The application of section 341(a) (relating to collapsible corporations) shall be determined

without regard to this section.

‘‘(j) REGULATIONS.—The Secretary shall

prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.’’

(b) CLERICAL AMENDMENT.—The table of

sections for part II of subchapter O of chapter 1 is amended by inserting after the item

relating to section 1021 the following new

item:

‘‘Sec. 1022. Indexing of certain assets acquired after December 31, 1994,

for purposes of determining

gain.’’

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by

this section shall apply to the disposition of

any property the holding period of which begins after December 31, 1994.

(2) CERTAIN TRANSACTIONS BETWEEN RELATED PERSONS.—The amendments made by

this section shall not apply to the disposition of any property acquired after December

31, 1994, from a related person (as defined in

section 1022(g)(2) of the Internal Revenue

Code of 1986, as added by this section) if—

(A) such property was so acquired for a

price less than the property’s fair market

value, and

(B) the amendments made by this section

did not apply to such property in the hands

of such related person.

(d) ELECTION TO RECOGNIZE GAIN ON ASSETS

HELD ON JANUARY 1, 1995.—For purposes of

the Internal Revenue Code of 1986—

(1) IN GENERAL.—A taxpayer other than a

corporation may elect to treat—

(A) any readily tradable stock (which is an

indexed asset) held by such taxpayer on January 1, 1995, and not sold before the next

business day after such date, as having been

sold on such next business day for an amount

equal to its closing market price on such

next business day (and as having been reacquired on such next business day for an

amount equal to such closing market price),

and

(B) any other indexed asset held by the

taxpayer on January 1, 1995, as having been

sold on such date for an amount equal to its

fair market value on such date (and as having been reacquired on such date for an

amount equal to such fair market value).

(2) TREATMENT OF GAIN OR LOSS.—

(A) Any gain resulting from an election

under paragraph (1) shall be treated as received or accrued on the date the asset is

treated as sold under paragraph (1) and shall

be recognized notwithstanding any provision

of the Internal Revenue Code of 1986.

(B) Any loss resulting from an election

under paragraph (1) shall not be allowed for

any taxable year.

(3) ELECTION.—An election under paragraph

(1) shall be made in such manner as the Secretary may prescribe and shall specify the

assets for which such election is made. Such

an election, once made with respect to any

asset, shall be irrevocable.

(4) READILY TRADABLE STOCK.—For purposes of this subsection, the term ‘‘readily

tradable stock’’ means any stock which, as

of January 1, 1995, is readily tradable on an

established securities market or otherwise.

(e) TREATMENT OF PRINCIPAL RESIDENCES.—

Property held and used by the taxpayer on

January 1, 1995, as his principal residence

(within the meaning of section 1034 of the Internal Revenue Code of 1986) shall be

treated—

(1) for purposes of subsection (c)(1) of this

section and section 1022 of such Code, as having a holding period which begins on January 1, 1995, and

(2) for purposes of section 1022(c)(2)(B)(ii) of

such Code, as having been acquired on January 1, 1995.

Subsection (d) shall not apply to property to

which this subsection applies.

Subpart B—Capital Gains Reduction for

Corporations

SEC. 6311. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX FOR CORPORATIONS.

(a) IN GENERAL.—Section 1201 is amended

to read as follows:

‘‘SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.

‘‘(a) GENERAL RULE.—If for any taxable

year a corporation has a net capital gain,

then, in lieu of the tax imposed by sections

11, 511, and 831 (a) and (b) (whichever is applicable), there is hereby imposed a tax (if such

tax is less than the tax imposed by such sections) which shall consist of the sum of—

‘‘(1) a tax computed on the taxable income

reduced by the amount of the net capital

gain, at the rates and in the manner as if

this subsection had not been enacted, plus

‘‘(2) a tax of 25 percent of the net capital

gain.

‘‘(b) TRANSITIONAL RULE.—

‘‘(1) IN GENERAL.—In the case of any taxable year ending after December 31, 1994, and

beginning before January 1, 1996, subsection

(a)(2) shall be applied as if it read as follows:

‘‘ ‘(2)(A) a tax of 25 percent of the lesser

of—

‘‘ ‘(i) the net capital gain for the taxable

year, or

‘‘ ‘(ii) the net capital gain taking into account only gain or loss properly taken into

account for the portion of the taxable year

after December 31, 1994, plus

‘‘ ‘(B) a tax of 35 percent of the excess (if

any) of—

‘‘ ‘(i) the net capital gain for the taxable

year, over

‘‘ ‘(ii) the amount of net capital gain taken

into account under subparagraph (A).’

‘‘(2) SPECIAL RULE FOR PASS-THRU ENTITIES.—Section 1202(e)(2) shall apply for purposes of paragraph (1).

‘‘(c) CROSS REFERENCES.—

‘‘For computation of the alternative tax—

‘‘(1) in the case of life insurance companies,

see section 801(a)(2),

‘‘(2) in the case of regulated investment

companies and their shareholders, see section 852(b)(3)(A) and (D), and

‘‘(3) in the case of real estate investment

trusts, see section 857(b)(3)(A).’’

(b) TECHNICAL AMENDMENT.—Clause (iii) of

section 852(b)(3)(D) is amended by striking

‘‘65 percent’’ and inserting ‘‘75 percent’’.
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1995 T56.13

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years ending after December 31, 1994.

Subpart C—Capital Loss Deduction Allowed

With Respect to Sale or Exchange of Principal Residence

SEC. 6316. CAPITAL LOSS DEDUCTION ALLOWED

WITH RESPECT TO SALE OR EXCHANGE OF PRINCIPAL RESIDENCE.

(a) IN GENERAL.—Subsection (c) of section

165 (relating to limitation on losses of individuals) is amended by striking ‘‘and’’ at the

end of paragraph (2), by striking the period

at the end of paragraph (3) and inserting ‘‘;

and’’, and by adding at the end the following

new paragraph:

‘‘(4) losses arising from the sale or exchange of the principal residence (within the

meaning of section 1034) of the taxpayer.’’

(b) EFFECTIVE DATE.—The amendment

made by subsection (a) shall apply to sales

and exchanges after December 31, 1994, in

taxable years ending after such date.

PART II—COST RECOVERY PROVISIONS

SEC. 6321. DEPRECIATION ADJUSTMENT FOR

CERTAIN PROPERTY PLACED IN

SERVICE AFTER DECEMBER 31, 1994.

(a) IN GENERAL.—Section 168 (relating to

accelerated cost recovery system) is amended by adding at the end thereof the following

new subsection:

‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW

EQUIVALENT OF EXPENSING FOR CERTAIN

PROPERTY PLACED IN SERVICE AFTER DECEMBER 31, 1994.—

‘‘(1) IN GENERAL.—In the case of tangible

property placed in service after December 31,

1994, the deduction under this section with

respect to such property—

‘‘(A) shall be determined by substituting

‘150 percent’ for ‘200 percent’ in subsection

(b)(1) in the case of property to which the 200

percent declining balance method would otherwise apply, and

‘‘(B) for any taxable year after the taxable

year during which the property is placed in

service shall be—

‘‘(i) the amount determined under this section for such taxable year without regard to

this subparagraph, multiplied by

‘‘(ii) the applicable neutral cost recovery

ratio for such taxable year.

‘‘(2) APPLICABLE NEUTRAL COST RECOVERY

RATIO.—For purposes of paragraph (1)—

‘‘(A) IN GENERAL.—The applicable neutral

cost recovery ratio for the property for any

taxable year is the number determined by—

‘‘(i) dividing—

‘‘(I) the gross domestic product deflator for

the calendar quarter which includes the midpoint of the taxable year, by

‘‘(II) the gross domestic product deflator

for the calendar quarter which includes the

mid-point of the taxable year in which the

property was placed in service by the taxpayer, and

‘‘(ii) then multiplying the number determined under clause (i) by the number equal

to 1.035 to the nth power where ‘n’ is the

number of full years (as of the close of the

taxable year referred to in clause (i)(I)) after

the date such property was placed in service.

The applicable neutral cost recovery ratio

shall never be less than 1. The applicable

neutral cost recovery ratio shall be rounded

to the nearest 1⁄1000.

‘‘(B) SPECIAL RULE FOR CERTAIN PROPERTY.—In the case of property described in

paragraph (2) or (3) of subsection (b) or in

subsection (g), the applicable neutral cost recovery ratio shall be determined without regard to subparagraph (A)(ii).

‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—

For purposes of paragraph (2), the gross domestic product deflator for any calendar

quarter is the implicit price deflator for the

gross domestic product for such quarter (as

shown in the last revision thereof released

by the Secretary of Commerce before the

close of the following calendar quarter).

‘‘(4) COORDINATION WITH INDEXING OF BASIS

FOR PURPOSES OF DETERMINING GAIN.—Section

1022 shall not apply to any property to which

this subsection applies.

‘‘(5) ELECTION NOT TO HAVE SUBSECTION

APPLY.—This subsection shall not apply to

any property if the taxpayer elects not to

have this subsection apply to such property.

Such an election, once made, shall be irrevocable.

‘‘(6) CHURNING TRANSACTIONS.—This subsection shall not apply to any property if

this section would not apply to such property were—

‘‘(A) subsection (f)(5)(A)(ii) applied by substituting ‘1995’ for ‘1987’ and ‘1994’ for ‘1986’,

and

‘‘(B) subsection (f)(5)(B) not applied.

‘‘(7) ADDITIONAL DEDUCTION NOT TO AFFECT

BASIS OR RECAPTURE.—The additional

amount determined under this section by

reason of this subsection shall not be taken

into account in determining the adjusted

basis of any property or of any interest in a

pass-thru entity (as defined in section

1202(e)(2)) which holds such property and

shall not be treated as a deduction for depreciation for purposes of sections 1245 and

1250.’’

(b) MINIMUM TAX TREATMENT.—

(1) Paragraph (1) of section 56(a) is amended by adding at the end thereof the following

new subparagraph:

‘‘(E) USE OF NEUTRAL COST RECOVERY

RATIO.—This paragraph shall not apply to

property to which section 168(k) applies.’’

(2) Clause (i) of section 56(g)(4)(A) is

amended by striking ‘‘(a)(1)(A)’’ and inserting ‘‘(a)(1)’’.

(3) Subparagraph (C) of section 56(g)(4) is

amended by adding at the end the following

new clause:

‘‘(v) NEUTRAL COST RECOVERY DEDUCTION.—

Clause (i) shall not apply to the additional

deduction allowable by reason of section

168(k).’’

(c) TECHNICAL AMENDMENTS.—

(1) Clause (i) of section 280F(a)(1)(B) is

amended by adding at the end the following

new sentence: ‘‘For purposes of this clause,

the unrecovered basis of any passenger automobile shall be treated as including the additional amount determined under section 168

by reason of subsection (k) thereof to the extent not allowed as a deduction by reason of

this paragraph for any taxable year in the

recovery period.’’

(2) Subparagraph (B) of section 382(h)(2) is

amended by adding at the end the following

new sentence: ‘‘The amount of the net unrealized built-in loss shall be increased by the

amount of the additional deduction allowable by reason of section 168(k) which is

treated under the preceding sentence as a

recognized built-in loss.’’

(3) Subsection (a) of section 465 is amended

by adding at the end the following new paragraph:

‘‘(4) TREATMENT OF NEUTRAL COST RECOVERY DEDUCTION.—

‘‘(A) IN GENERAL.—None of the additional

deduction allowable by reason of section

168(k) for the taxable year shall be disallowed under paragraph (1) unless there is a

disallowed non-NCR loss for such year.

‘‘(B) PROPORTIONATE DISALLOWANCE.—

‘‘(i) IN GENERAL.—If there is a disallowed

non-NCR loss for the taxable year, only the

disallowed portion of the additional deduction allowable by reason of section 168(k)

shall not be allowed under paragraph (1).

‘‘(ii) DISALLOWED PORTION.—For purposes of

clause (i), the disallowed portion is the percentage which the disallowed non-NCR loss’s

allocable share of non-NCR depreciation is of

total non-NCR depreciation.

‘‘(iii) ALLOCABLE SHARE.—For purposes of

clause (ii), a disallowed non-NCR loss’s allocable share of non-NCR depreciation is the

amount which bears the same ratio to the

amount of the loss as the amount of nonNCR depreciation for the taxable year bears

to the total amount of deductions for such

taxable year.

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

paragraph—

‘‘(i) DISALLOWED NON-NCR LOSS.—The term

‘disallowed non-NCR loss’ means, for any

taxable year, the amount of the loss from

the activity which would be disallowed under

paragraph (1) if such loss were determined

without regard to the additional deduction

allowable by reason of section 168(k).

‘‘(ii) NON-NCR DEPRECIATION.—The term

‘non-NCR depreciation’ means the amount

allowable as a deduction under section 168

without regard to subsection (k) thereof.’’

(4) Subparagraph (A) of section 1503(e)(1) is

amended by inserting before the comma

‘‘and shall be determined without regard to

section 168(k)’’.

(d) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years ending after December 31, 1994.

SEC. 6322. TREATMENT OF ABANDONMENT OF

LESSOR IMPROVEMENTS AT TERMINATION OF LEASE.

(a) IN GENERAL.—Paragraph (8) of section

168(i) is amended to read as follows:

‘‘(8) TREATMENT OF LEASEHOLD IMPROVEMENTS.—

‘‘(A) IN GENERAL.—In the case of any building erected (or improvements made) on

leased property, if such building or improvement is property to which this section applies, the depreciation deduction shall be determined under the provisions of this section.

‘‘(B) TREATMENT OF LESSOR IMPROVEMENTS

WHICH ARE ABANDONED AT TERMINATION OF

LEASE.—An improvement—

‘‘(i) which is made by the lessor of leased

property for the lessee of such property, and

‘‘(ii) which is irrevocably disposed of or

abandoned by the lessor at the termination

of the lease by such lessee,

shall be treated for purposes of determining

gain or loss under this title as disposed of by

the lessor when so disposed of or abandoned.’’

(b) EFFECTIVE DATE.—Subparagraph (B) of

section 168(i)(8) of the Internal Revenue Code

of 1986, as added by the amendment made by

subsection (a), shall apply to improvements

disposed of or abandoned after March 13,

1995.

PART III—ALTERNATIVE MINIMUM TAX

RELIEF

SEC. 6331. PHASEOUT OF APPLICATION OF ALTERNATIVE MINIMUM TAX TO CORPORATIONS.

(a) TERMINATION.—Subsection (a) of section

55 is amended by adding at the end the following new flush sentence:

‘‘In the case of a corporation, the tentative

minimum tax for any taxable year beginning

after December 31, 2000, shall be zero.’’

(b) EARLIER TERMINATION OF CERTAIN ADJUSTMENTS FOR ALL TAXPAYERS.—

(1) DEPRECIATION.—Clause (i) of section

56(a)(1)(A) is amended by inserting ‘‘and before March 14, 1995,’’ after ‘‘December 31,

1986,’’.

(2) MINING EXPLORATION AND DEVELOPMENT

COSTS.—Paragraph (2) of section 56(a) is

amended by inserting ‘‘and before January 1,

1996,’’ after ‘‘December 31, 1986,’’.

(3) LONG-TERM CONTRACTS.—Paragraph (3)

of section 56(a) is amended by inserting ‘‘and

before January 1, 1996,’’ after ‘‘March 1,

1986,’’.

(4) POLLUTION CONTROL FACILITIES.—Paragraph (5) of section 56(a) is amended by inserting ‘‘and before January 1, 1996,’’ after

‘‘December 31, 1986,’’.
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(5) INSTALLMENT SALES.—Paragraph (6) of

section 56(a) is amended by inserting ‘‘and

before January 1, 1996,’’ after ‘‘March 1,

1986,’’.

(c) EARLIER TERMINATION OF CIRCULATION

AND RESEARCH AND EXPERIMENTAL EXPENDITURE ADJUSTMENT FOR INDIVIDUALS.—Subparagraph (A) of section 56(b)(2) is amended

by inserting ‘‘and before January 1, 1996,’’

after ‘‘December 31, 1986,’’.

(d) EARLIER TERMINATION OF CERTAIN ADJUSTMENTS FOR CORPORATIONS.—

(1) MERCHANT MARINE CAPITAL CONSTRUCTION FUNDS.—Paragraph (2) of section 56(c) is

amended—

(A) by inserting ‘‘and before January 1,

1996,’’ after ‘‘December 31, 1986,’’ each place

it appears, and

(B) by striking the last sentence and inserting the following new flush sentence:

‘‘For purposes of this paragraph, any withdrawal of deposit or earnings from the fund

shall be treated as allocable to deposits

made, and earnings received or accrued, in

the order in which made, received, or accrued.’’

(2) SECTION 833(b) DEDUCTION.—Paragraph (3)

of section 56(c) is amended by adding at the

end the following new sentence: ‘‘This paragraph shall not apply to any taxable year beginning after December 31, 1995.’’

(3) CERTAIN EARNINGS AND PROFITS ITEMS.—

(A) Subparagraph (B) of section 56(g)(4) is

amended by adding at the end the following

new clause:

‘‘(iii) TERMINATION.—This subparagraph

shall not apply to any taxable year beginning after December 31, 1995.’’

(B) Subparagraph (C) of section 56(g)(4) is

amended by adding at the end the following

new clause:

‘‘(vi) TERMINATION.—This subparagraph

shall not apply to any taxable year beginning after December 31, 1995.’’

(4) INTANGIBLE DRILLING COSTS.—Clause (i)

of section 56(g)(4)(D) is amended by adding at

the end the following new sentence: ‘‘This

clause shall not apply to any taxable year

beginning after December 31, 1995.’’

(5) CERTAIN AMORTIZATION PROVISIONS.—

Clause (ii) of section 56(g)(4)(D) is amended

by adding at the end the following new sentence: ‘‘This clause shall not apply to any

expenditure paid or incurred after December

31, 1995.’’

(6) LIFO INVENTORY ADJUSTMENTS.—Clause

(iii) of section 56(g)(4)(D) is amended by adding at the end the following new sentence:

‘‘This clause shall not apply to any adjustment arising in a taxable year beginning

after December 31, 1995.’’

(7) INSTALLMENT SALES.—Clause (iv) of section 56(g)(4)(D) is amended by adding at the

end the following new sentence: ‘‘This clause

shall not apply to any disposition after December 31, 1995.’’

(8) DEBT POOLS.—Subparagraph (E) of section 56(g)(4) is amended by adding at the end

the following new sentence: ‘‘This subparagraph shall not apply to any exchange after

December 31, 1995.’’

(9) DEPLETION.—Subparagraph (F) of section 56(g)(4) is amended by adding at the end

the following new clause:

‘‘(iii) TERMINATION.—This subparagraph

shall not apply to any deduction for depletion for any taxable year beginning after December 31, 1995.’’

(10) OWNERSHIP CHANGES.—Subparagraph

(G) of section 56(g)(4) is amended by adding

at the end the following new sentence: ‘‘This

subparagraph shall not apply to any ownership change after December 31, 1995.’’

(e) EARLIER TERMINATION OF ITEMS OF TAX

PREFERENCE.—

(1) DEPLETION.—Paragraph (1) of section

57(a) is amended by adding at the end the following new sentence: ‘‘This paragraph shall

not apply to any taxable year beginning

after December 31, 1995.’’

(2) INTANGIBLE DRILLING COSTS.—Paragraph

(2) of section 57(a) is amended by adding at

the end the following new subparagraph:

‘‘(F) TERMINATION.—This paragraph shall

not apply to any taxable year beginning

after December 31, 1995.’’

(3) RESERVES FOR LOSSES ON BAD DEBTS.—

Paragraph (4) of section 57(a) is amended by

adding at the end the following new sentence: ‘‘This paragraph shall not apply to

any taxable year beginning after December

31, 1995.’’

(4) TAX-EXEMPT INTEREST.—Paragraph (5)

of section 57(a) is amended by adding at the

end the following new subparagraph:

‘‘(D) TERMINATION FOR CORPORATIONS.—In

the case of a corporation (other than a corporation referred to in section 56(g)(6)), this

paragraph shall not apply to interest accruing for periods after December 31, 1995.’’

(f) NET OPERATING LOSS DEDUCTION.—Paragraph (1) of section 56(d) is amended by inserting ‘‘(100 percent in the case of taxable

years beginning after December 31, 1995)’’

after ‘‘90 percent’’ each place it appears.

(g) LOSSES.—

(1) Section 58 is amended by adding at the

end the following new subsection:

‘‘(d) TERMINATION.—This section shall not

apply to any loss incurred for any taxable

year beginning after December 31, 1995.’’

(2) Subsection (h) of section 59 is amended

by inserting ‘‘469,’’ after ‘‘465,’’.

(h) FOREIGN TAX CREDIT.—Paragraph (2) of

section 59(a) is amended by adding at the end

the following new subparagraph:

‘‘(D) TERMINATION.—This paragraph shall

not apply to any taxable year beginning

after December 31, 1995.’’

(i) LIMITATION ON USE OF CREDIT FOR PRIOR

YEAR MINIMUM TAX LIABILITY.—

(1) IN GENERAL.—Subsection (c) of section

53 is amended to read as follows:

‘‘(c) LIMITATION.—The credit allowable

under subsection (a) for any taxable year

shall not exceed the lesser of—

‘‘(1) the excess (if any) of—

‘‘(A) the regular tax liability of the taxpayer for such taxable year reduced by the

sum of the credits allowable under subparts

A, B, D, E, and F of this part, over

‘‘(B) the tentative minimum tax for the

taxable year, or

‘‘(2) 90 percent of the amount determined

under paragraph (1)(A).’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall apply to taxable

years beginning after December 31, 1995.

PART IV—TAXPAYER DEBT BUY-DOWN

SEC. 6341. DESIGNATION OF AMOUNTS FOR REDUCTION OF PUBLIC DEBT.

(a) IN GENERAL.—Subchapter A of chapter

61 of the Internal Revenue Code of 1986 (relating to returns and records) is amended by

adding at the end the following new part:

‘‘PART IX—DESIGNATION FOR REDUCTION

OF PUBLIC DEBT

‘‘Sec. 6097. Designation.

‘‘SEC. 6097. DESIGNATION.

‘‘(a) IN GENERAL.—Every individual with

adjusted income tax liability for any taxable

year may designate that a portion of such liability (not to exceed 10 percent thereof)

shall be used to reduce the public debt.

‘‘(b) MANNER AND TIME OF DESIGNATION.—A

designation under subsection (a) may be

made with respect to any taxable year only

at the time of filing the return of tax imposed by chapter 1 for the taxable year. The

designation shall be made on the first page

of the return or on the page bearing the taxpayer’s signature.

‘‘(c) ADJUSTED INCOME TAX LIABILITY.—For

purposes of this section, the term ‘adjusted

income tax liability’ means income tax liability (as defined in section 6096(b)) reduced

by any amount designated under section 6096

(relating to designation of income tax payments to Presidential Election Campaign

Fund).’’

(b) CLERICAL AMENDMENT.—The table of

parts for such subchapter A is amended by

adding at the end the following new item:

‘‘Part IX. Designation for reduction of public

debt.’’

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years ending after the date of the enactment

of this Act.

SEC. 6342. PUBLIC DEBT REDUCTION TRUST

FUND.

(a) IN GENERAL.—Subchapter A of chapter

98 of the Internal Revenue Code of 1986 (relating to trust fund code) is amended by adding at the end the following new section:

‘‘SEC. 9512. PUBLIC DEBT REDUCTION TRUST

FUND.

‘‘(a) CREATION OF TRUST FUND.—There is

established in the Treasury of the United

States a trust fund to be known as the ‘Public Debt Reduction Trust Fund’, consisting

of any amount appropriated or credited to

the Trust Fund as provided in this section or

section 9602(b).

‘‘(b) TRANSFERS TO TRUST FUND.—There

are hereby appropriated to the Public Debt

Reduction Trust Fund amounts equivalent

to the amounts designated under section 6097

(relating to designation for public debt reduction).

‘‘(c) EXPENDITURES.—Amounts in the Public Debt Reduction Trust Fund shall be used

by the Secretary of the Treasury for purposes of paying at maturity, or to redeem or

buy before maturity, any obligation of the

Federal Government included in the public

debt (other than an obligation held by the

Federal Old-Age and Survivors Insurance

Trust Fund, the Civil Service Retirement

and Disability Fund, or the Department of

Defense Military Retirement Fund). Any obligation which is paid, redeemed, or bought

with amounts from the Public Debt Reduction Trust Fund shall be canceled and retired

and may not be reissued.’’

(b) CLERICAL AMENDMENT.—The table of

sections for such subchapter is amended by

adding at the end the following new item:

‘‘Sec. 9512. Public Debt Reduction Trust

Fund.’’

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to amounts

received after the date of the enactment of

this Act.

SEC. 6343. TAXPAYER-GENERATED SEQUESTRATION OF FEDERAL SPENDING TO REDUCE THE PUBLIC DEBT.

(a) SEQUESTRATION TO REDUCE THE PUBLIC

DEBT.—Part C of the Balanced Budget and

Emergency Deficit Control Act of 1985 is

amended by adding after section 253 the following new section:

‘‘SEC. 253A. SEQUESTRATION TO REDUCE THE

PUBLIC DEBT.

‘‘(a) SEQUESTRATION.—Notwithstanding

sections 255 and 256, within 15 days after Congress adjourns to end a session, and on the

same day as a sequestration (if any) under

sections 251, 252, and 253, but after any sequestration of budget-year budgetary resources required by those sections, there

shall be a sequestration equivalent to the estimated aggregate amount designated under

section 6097 of the Internal Revenue Code of

1986 for the calendar year two years before

the year in which that session of Congress

started, as estimated by the Department of

the Treasury on October 1 in the year after

the applicable tax year and as modified by

the total of (1) any amounts by which net
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discretionary spending is reduced by legislation below the discretionary spending limits

enacted after the enactment of this section

related to the fiscal year subject to the sequestration or, in the absence of such limits,

any net reduction below discretionary outlays for fiscal year 1995 and (2) the net deficit

change that has resulted from all direct

spending legislation enacted after the enactment of this section related to the fiscal

year subject to the sequestration, as estimated by OMB. Within 5 days after the enactment of any such direct spending legislation, OMB shall estimate the change in

spending resulting from that legislation for

the 5-fiscal-year period beginning with the

first fiscal year for which that legislation becomes effective and transmit a report to the

House of Representatives and the Senate

containing that estimate. Only the estimated deficit reduction included in the 5-

year estimate made at the time the legislation is enacted shall be used for purposes of

determining whether there shall be a sequestration under this subsection. Notwithstanding the preceding two sentences, any

estimates of direct spending made by OMB

under this subsection for any legislation

that first takes effect in fiscal year 1995,

1996, or 1997 shall include estimates of the direct spending effects through fiscal year 2002

and those estimates shall be used for purposes of determining whether there shall be

a sequestration under this subsection. If the

reduction in spending under paragraphs (1)

and (2) for a fiscal year is greater than the

estimated aggregate amount designated

under section 6097 of the Internal Revenue

Code of 1986 respecting that fiscal year, then

there shall be no sequestration under this

section.

‘‘(b) APPLICABILITY.—

‘‘(1) IN GENERAL.—Except as provided by

paragraph (2), each account of the United

States shall be reduced by a dollar amount

calculated by multiplying the level of budgetary resources in that account at that time

by the uniform percentage necessary to

carry out subsection (a). All obligational authority reduced under this section shall be

done in a manner that makes such reductions permanent.

‘‘(2) EXEMPT ACCOUNTS.—(A) No order

issued under this part may—

‘‘(i) reduce benefits payable to the old-age

and survivors insurance program established

under title II of the Social Security Act;

‘‘(ii) reduce payments for net interest (all

of major functional category 900); or

‘‘(iii) make any reduction in the following

accounts:

‘‘Federal Deposit Insurance Corporation,

Bank Insurance Fund;

‘‘Federal Deposit Insurance Corporation,

FSLIC Resolution Fund;

‘‘Federal Deposit Insurance Corporation,

Savings Association Insurance Fund;

‘‘National Credit Union Administration,

credit union share insurance fund; or

‘‘Resolution Trust Corporation.

‘‘(B) The following budget accounts, activities within accounts, or income shall be exempt from sequestration—

‘‘(i) all payments to trust funds from excise taxes or other receipts or collections

properly creditable to those trust funds;

‘‘(ii) offsetting receipts and collections;

‘‘(iii) all payments from one Federal direct

spending budget account to another Federal

budget account; all intragovernmental funds

including those from which funding is derived primarily from other Government accounts, except to the extent that such funds

are augmented by direct appropriations for

the fiscal year for which the order is in effect; and those obligations of discretionary

accounts or activities that are financed by

intragovernmental payments from another

discretionary account or activity;

‘‘(iv) expenses to the extent they result

from private donations, bequests, or voluntary contributions to the Government;

‘‘(v) nonbudgetary activities, including but

not limited to—

‘‘(I) credit liquidating and financing accounts;

‘‘(II) the Pension Benefit Guarantee Corporation Trust Funds;

‘‘(III) the Thrift Savings Fund;

‘‘(IV) the Federal Reserve System; and

‘‘(V) appropriations for the District of Columbia to the extent they are appropriations

of locally raised funds;

‘‘(vi) payments resulting from Government

insurance, Government guarantees, or any

other form of contingent liability, to the extent those payments result from contractual

or other legally binding commitments of the

Government at the time of any sequestration;

‘‘(vii) the following accounts, which largely fulfill requirements of the Constitution or

otherwise make payments to which the Government is committed—

‘‘Administration of Territories, Northern

Mariana Islands Covenant grants (14–0412–0–

1–806);

‘‘Bureau of Indian Affairs, miscellaneous

payments to Indians (14–2303–0–1–452);

‘‘Bureau of Indian Affairs, miscellaneous

trust funds, tribal trust funds (14–9973–0–7–

999);

‘‘Claims, defense;

‘‘Claims, judgments, and relief act (20–1895–

0–1–806);

‘‘Compact of Free Association, economic

assistance pursuant to Public Law 99–658 (14–

0415–0–1–806);

‘‘Compensation of the President (11–0001–0–

1–802);

‘‘Customs Service, miscellaneous permanent appropriations (20–9992–0–2–852);

‘‘Eastern Indian land claims settlement

fund (14–2202–0–1–806);

‘‘Farm Credit System Financial Assistance

Corporation, interest payments (20–1850–0–1–

351);

‘‘Internal Revenue collections of Puerto

Rico (20–5737–0–2–852);

‘‘Panama Canal Commission, operating expenses and capital outlay (95–5190–0–2–403);

‘‘Payments of Vietnam and USS Pueblo

prisoner-of-war claims (15–0104–0–1–153);

‘‘Payments to copyright owners (03–5175–0–

2–376);

‘‘Payments to the United States territories, fiscal assistance (14–0418–0–1–801);

‘‘Salaries of Article III judges;

‘‘Soldier’s and Airmen’s Home, payment of

claims (84–8930–0–7–705);

‘‘Washington Metropolitan Area Transit

Authority, interest payments (46–0300–0–1–

401).

‘‘(viii) the following noncredit special, revolving, or trust-revolving funds—

‘‘Coinage profit fund (20–5811–0–2–803);

‘‘Exchange Stabilization Fund (20–4444–0–3–

155);

‘‘Foreign Military Sales trust fund (11–

82232–0–7–155); and

‘‘(ix)(I) any amount paid as regular unemployment compensation by a State from its

account in the Unemployment Trust Fund

(established by section 904(a) of the Social

Security Act);

‘‘(II) any advance made to a State from the

Federal unemployment account (established

by section 904(g) of such Act) under title XII

of such Act and any advance appropriated to

the Federal unemployment account pursuant

to section 1203 of such Act; and

‘‘(III) any payment made from the Federal

Employees Compensation Account (as established under section 909 of such Act) for the

purpose of carrying out chapter 85 of title 5,

United States Code, and funds appropriated

or transferred to or otherwise deposited in

such Account.

‘‘(3) FEDERAL ADMINISTRATIVE EXPENSES.—

‘‘(A) Administrative expenses incurred by

the departments and agencies, including

independent agencies, of the Federal Government in connection with any program,

project, activity, or account shall be subject

to reduction pursuant to any sequestration

order, without regard to the exemptions

under paragraph (2) and regardless of whether the program, project, activity, or account

is self-supporting and does not receive appropriations.

‘‘(B) Payments made by the Federal Government to reimburse or match administrative costs incurred by a State or political

subdivision under or in connection with any

program, project, activity, or account shall

not be considered administrative expenses of

the Federal Government for purposes of this

section, and shall be subject to sequestration

to the extent (and only to the extent) that

other payments made by the Federal Government under or in connection with that program, project, activity, or account are subject to that reduction or sequestration; except that Federal payments made to a State

as reimbursement of administrative costs incurred by that State under or in connection

with the unemployment compensation programs specified in paragraph (2)(ix) shall be

subject to reduction or sequestration under

this part notwithstanding the exemption

otherwise granted to such programs under

that paragraph.’’.

(b) REPORTS.—Section 254 of the Balanced

Budget and Emergency Deficit Control Act

of 1985 is amended—

(1) in subsection (a), by inserting after the

item relating to the GAO compliance report

the following:

‘‘October 1... Department of Treasury

report to Congress estimating amount of income tax designated pursuant to section 6097

of the Internal Revenue Code of 1986.’’;

(2) in subsection (d)(1), by inserting ‘‘, and

sequestration to reduce the public debt,’’;

(3) in subsection (d), by redesignating paragraph (5) as paragraph (6) and by inserting

after paragraph (4) the following new paragraph:

‘‘(5) SEQUESTRATION TO REDUCE THE PUBLIC

DEBT REPORTS.—The preview reports shall set

forth for the budget year estimates for each

of the following:

‘‘(A) The aggregate amount designated

under section 6097 of the Internal Revenue

Code of 1986 for the calendar year two years

before the year in which the budget year begins.

‘‘(B) The amount of reductions required

under section 253A and the deficit remaining

after those reductions have been made.

‘‘(C) The sequestration percentage necessary to achieve the required reduction in

accounts under section 253A(b).’’; and

(4) in subsection (g), by redesignating paragraphs (4) and (5) as paragraphs (5) and (6),

respectively, and by inserting after paragraph (3) the following new paragraph:

‘‘(4) SEQUESTRATION TO REDUCE THE PUBLIC

DEBT REPORTS.—The final reports shall contain all of the information contained in the

public debt taxation designation report required on October 1.’’.

(c) EFFECTIVE DATE.—Notwithstanding section 275(b) of the Balanced Budget and Emergency Deficit Control Act of 1985, the expiration date set forth in that section shall not

apply to the amendments made by this section. The amendments made by this section

shall cease to have any effect after the first

fiscal year during which there is no public

debt.

PART V—SMALL BUSINESS INCENTIVES

SEC. 6351. COST-OF-LIVING ADJUSTMENTS RELATING TO ESTATE AND GIFT TAX

PROVISIONS.

(a) INCREASE IN UNIFIED ESTATE AND GIFT

TAX CREDIT.—
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T56.13 APRIL 5

(1) ESTATE TAX CREDIT.—

(A) Subsection (a) of section 2010 (relating

to unified credit against estate tax) is

amended by striking ‘‘$192,800’’ and inserting

‘‘the applicable credit amount’’.

(B) Section 2010 is amended by redesignating subsection (c) as subsection (d) and by

inserting after subsection (b) the following

new subsection:

‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes of this section—

‘‘(1) IN GENERAL.—The applicable credit

amount is the amount of the tentative tax

which would be determined under the rate

schedule set forth in section 2001(c) if the

amount with respect to which such tentative

tax is to be computed were the applicable exclusion amount determined in accordance

with the following table:

‘‘In the case of estates of

decedents dying, and

gifts made, during:

The applicable

exclusion amount is:

1996 ........................... $700,000

1997 ........................... $725,000

1998 or thereafter ...... $750,000.

‘‘(2) COST-OF-LIVING ADJUSTMENTS.—In the

case of any decedent dying, and gift made, in

a calendar year after 1998, the $750,000

amount set forth in paragraph (1) shall be increased by an amount equal to—

‘‘(A) $750,000, multiplied by

‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar

year by substituting ‘calendar year 1997’ for

‘calendar year 1992’ in subparagraph (B)

thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10,000,

such amount shall be rounded to the nearest

multiple of $10,000.’’

(C) Paragraph (1) of section 6018(a) is

amended by striking ‘‘$600,000’’ and inserting

‘‘the applicable exclusion amount in effect

under section 2010(c) (as adjusted under paragraph (2) thereof) for the calendar year

which includes the date of death’’.

(D) Paragraph (2) of section 2001(c) is

amended by striking ‘‘$21,040,000’’ and inserting ‘‘the amount at which the average tax

rate under this section is 55 percent’’.

(E) Subparagraph (A) of section 2102(c)(3) is

amended by striking ‘‘$192,800’’ and inserting

‘‘the applicable credit amount in effect

under section 2010(c) for the calendar year

which includes the date of death’’.

(2) UNIFIED GIFT TAX CREDIT.—Paragraph (1)

of section 2505(a) is amended by striking

‘‘$192,800’’ and inserting ‘‘the applicable credit amount in effect under section 2010(c) for

such calendar year’’.

(3) EFFECTIVE DATE.—The amendments

made by this subsection shall apply to the

estates of decedents dying, and gifts made,

after December 31, 1995.

(b) ALTERNATE VALUATION OF CERTAIN

FARM, ETC., REAL PROPERTY.—Subsection (a)

of section 2032A is amended by adding at the

end the following new paragraph:

‘‘(3) INFLATION ADJUSTMENT.—In the case of

estates of decedents dying in a calendar year

after 1998, the $750,000 amount contained in

paragraph (2) shall be increased by an

amount equal to—

‘‘(A) $750,000, multiplied by

‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar

year by substituting ‘calendar year 1997’ for

‘calendar year 1992’ in subparagraph (B)

thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10,000,

such amount shall be rounded to the nearest

multiple of $10,000.’’

(c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b) of section 2503 is amended—

(1) by striking the subsection heading and

inserting the following:

‘‘(b) EXCLUSIONS FROM GIFTS.—

‘‘(1) IN GENERAL.—’’,

(2) by moving the text 2 ems to the right,

and

(3) by adding at the end the following new

paragraph:

‘‘(2) INFLATION ADJUSTMENT.—In the case of

gifts made in a calendar year after 1998, the

$10,000 amount contained in paragraph (1)

shall be increased by an amount equal to—

‘‘(A) $10,000, multiplied by

‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar

year by substituting ‘calendar year 1997’ for

‘calendar year 1992’ in subparagraph (B)

thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $1,000,

such amount shall be rounded to the nearest

multiple of $1,000.’’

(d) EXEMPTION FROM GENERATION-SKIPPING

TAX.—Section 2631 (relating to GST exemption) is amended by adding at the end the

following new subsection:

‘‘(c) INFLATION ADJUSTMENT.—In the case

of an individual who dies in any calendar

year after 1998, the $1,000,000 amount contained in subsection (a) shall be increased by

an amount equal to—

‘‘(1) $1,000,000, multiplied by

‘‘(2) the cost-of-living adjustment determined under section 1(f)(3) for such calendar

year by substituting ‘calendar year 1997’ for

‘calendar year 1992’ in subparagraph (B)

thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10,000,

such amount shall be rounded to the nearest

multiple of $10,000.’’

(e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT INTEREST RATE ON EXTENSION OF TIME

FOR PAYMENT OF ESTATE TAX ON CLOSELY

HELD BUSINESS.—

(1) Subparagraph (A) of section 6601(j)(2) is

amended by striking ‘‘$345,800’’ and inserting

‘‘the applicable limitation amount’’.

(2) Subsection (j) of section 6601 is amended

by redesignating paragraph (3) as paragraph

(4) and by inserting after paragraph (2) the

following new paragraph:

‘‘(3) APPLICABLE LIMITATION AMOUNT.—

‘‘(A) IN GENERAL.—For purposes of paragraph (2), the applicable limitation amount

is the amount of the tentative tax which

would be determined under the rate schedule

set forth in section 2001(c) if the amount

with respect to which such tentative tax is

to be computed were $1,000,000.

‘‘(B) INFLATION ADJUSTMENT.—In the case

of estates of decedents dying in a calendar

year after 1998, the $1,000,000 amount contained in subparagraph (A) shall be increased

by an amount equal to—

‘‘(i) $1,000,000, multiplied by

‘‘(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar

year by substituting ‘calendar year 1997’ for

‘calendar year 1992’ in subparagraph (B)

thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10,000,

such amount shall be rounded to the nearest

multiple of $10,000.’’

SEC. 6352. INCREASE IN EXPENSE TREATMENT

FOR SMALL BUSINESSES.

(a) GENERAL RULE.—Paragraph (1) of section 179(b) (relating to dollar limitation) is

amended to read as follows:

‘‘(1) DOLLAR LIMITATION.—The aggregate

cost which may be taken into account under

subsection (a) for any taxable year shall not

exceed the following applicable amount:

‘‘If the taxable year The applicable

begins in: amount is:

1996 ........................... $22,500

1997 ........................... 27,500

1998 ........................... 32,500

1999 or thereafter ...... 35,000.’’

(b) EFFECTIVE DATE.—The amendment

made by subsection (a) shall apply to taxable

years beginning after December 31, 1995.

SEC. 6353. CLARIFICATION OF TREATMENT OF

HOME OFFICE USE FOR ADMINISTRATIVE AND MANAGEMENT ACTIVITIES.

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

280A(c) is amended by adding at the end the

following new sentence: ‘‘For purposes of

subparagraph (A), the term ‘principal place

of business’ includes a place of business

which is used by the taxpayer for the administrative or management activities of any

trade or business of the taxpayer if there is

no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business.’’

(b) EFFECTIVE DATE.—The amendment

made by subsection (a) shall apply to taxable

years beginning after December 31, 1995.

SEC. 6354. TREATMENT OF STORAGE OF PRODUCT SAMPLES.

(a) IN GENERAL.—Paragraph (2) of section

280A(c) is amended by striking ‘‘inventory’’

and inserting ‘‘inventory or product samples’’.

(b) EFFECTIVE DATE.—The amendment

made by subsection (a) shall apply to taxable

years beginning after December 31, 1995.

Subtitle D—Family Reinforcement

SEC. 6401. CREDIT FOR ADOPTION EXPENSES.

(a) IN GENERAL.—Subpart A of part IV of

subchapter A of chapter 1 is amended by inserting after section 25 the following new

section:

‘‘SEC. 25A. ADOPTION EXPENSES.

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

an individual, there shall be allowed as a

credit against the tax imposed by this chapter for the taxable year the amount of the

qualified adoption expenses paid or incurred

by the taxpayer during such taxable year.

‘‘(b) LIMITATIONS.—

‘‘(1) DOLLAR LIMITATION.—The aggregate

amount of qualified adoption expenses which

may be taken into account under subsection

(a) with respect to the adoption of a child

shall not exceed $5,000.

‘‘(2) INCOME LIMITATION.—The amount allowable as a credit under subsection (a) for

any taxable year shall be reduced (but not

below zero) by an amount which bears the

same ratio to the amount so allowable (determined without regard to this paragraph

but with regard to paragraph (1)) as—

‘‘(A) the amount (if any) by which the taxpayer’s adjusted gross income (determined

without regard to sections 911, 931, and 933)

exceeds $60,000, bears to

‘‘(B) $40,000.

‘‘(3) DENIAL OF DOUBLE BENEFIT.—

‘‘(A) IN GENERAL.—No credit shall be allowed under subsection (a) for any expense

for which a deduction or credit is allowable

under any other provision of this chapter.

‘‘(B) GRANTS.—No credit shall be allowed

under subsection (a) for any expense to the

extent that funds for such expense are received under any Federal, State, or local

program. The preceding sentence shall not

apply to expenses for the adoption of a child

with special needs.

‘‘(c) DEFINITIONS.—For purposes of this

section—

‘‘(1) QUALIFIED ADOPTION EXPENSES.—

‘‘(A) IN GENERAL.—The term ‘qualified

adoption expenses’ means reasonable and

necessary adoption fees, court costs, attorney fees, and other expenses—

‘‘(i) which are directly related to, and the

principal purpose of which is for, the legal

adoption of an eligible child by the taxpayer,

and

‘‘(ii) which are not incurred in violation of

State or Federal law or in carrying out any

surrogate parenting arrangement.
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1995 T56.13

‘‘(B) EXPENSES FOR ADOPTION OF SPOUSE’S

CHILD NOT ELIGIBLE.—The term ‘qualified

adoption expenses’ shall not include any expenses in connection with the adoption by an

individual of a child who is the child of such

individual’s spouse.

‘‘(2) ELIGIBLE CHILD.—The term ‘eligible

child’ means any individual—

‘‘(A) who has not attained age 18 as of the

time of the adoption, or

‘‘(B) who is physically or mentally incapable of caring for himself.

‘‘(3) CHILD WITH SPECIAL NEEDS.—The term

‘child with special needs’ means any child

if—

‘‘(A) a State has determined that the child

cannot or should not be returned to the

home of his parents, and

‘‘(B) such State has determined that there

exists with respect to the child a specific factor or condition (such as his ethnic background, age, or membership in a minority or

sibling group, or the presence of factors such

as medical conditions or physical, mental, or

emotional handicaps) because of which it is

reasonable to conclude that such child cannot be placed with adoptive parents without

providing adoption assistance.

‘‘(d) MARRIED COUPLES MUST FILE JOINT

RETURNS, ETC.—Rules similar to the rules of

paragraphs (2), (3), and (4) of section 21(e)

shall apply for purposes of this section.’’

(b) CONFORMING AMENDMENT.—The table of

sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25 the

following new item:

‘‘Sec. 25A. Adoption expenses.’’.

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

SEC. 6402. CREDIT FOR TAXPAYERS WITH CERTAIN PERSONS REQUIRING CUSTODIAL CARE IN THEIR HOUSEHOLDS.

(a) IN GENERAL.—Subpart A of part IV of

subchapter A of chapter 1 is amended by inserting after section 25A the following new

section:

‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PERSONS REQUIRING CUSTODIAL CARE IN THEIR HOUSEHOLDS.

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

an individual who maintains a household

which includes as a member one or more

qualified persons, there shall be allowed as a

credit against the tax imposed by this chapter for the taxable year an amount equal to

$500 for each such person.

‘‘(b) QUALIFIED PERSON.—For purposes of

this section, the term ‘qualified person’

means any individual—

‘‘(1) who is a father or mother of the taxpayer, his spouse, or his former spouse or

who is an ancestor of such a father or mother,

‘‘(2) who is physically or mentally incapable of caring for himself,

‘‘(3) who has as his principal place of abode

for more than half of the taxable year the

home of the taxpayer, and

‘‘(4) whose name and TIN are included on

the taxpayer’s return for the taxable year.

For purposes of paragraph (1), a stepfather or

stepmother shall be treated as a father or

mother.

‘‘(c) SPECIAL RULES.—For purposes of this

section, rules similar to the rules of paragraphs (1), (2), (3), and (4) of section 21(e)

shall apply.’’

(b) CLERICAL AMENDMENT.—The table of

sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25A the

following new item:

‘‘Sec. 25B. Credit for taxpayers with certain

persons requiring custodial care

in their households.’’

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply to taxable

years beginning after December 31, 1995.

Subtitle E—Social Security Earnings Test

SEC. 6501. ADJUSTMENTS IN MONTHLY EXEMPT

AMOUNT FOR PURPOSES OF THE SOCIAL SECURITY EARNINGS TEST.

(a) INCREASE IN MONTHLY EXEMPT AMOUNT

FOR INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.—Section 203(f)(8)(D) of the

Social Security Act (42 U.S.C. 403(f)(8)(D)) is

amended to read as follows:

‘‘(D)(i) Notwithstanding any other provision of this subsection, the exempt amount

which is applicable to an individual who has

attained retirement age (as defined in section 216(1)) before the close of the taxable

year involved shall be—

‘‘(I) for the taxable year beginning after

1995 and before 1997, $1,250.00,

‘‘(II) for the taxable year beginning after

1996 and before 1998, $1,583.331⁄3,

‘‘(III) for the taxable year beginning after

1997 and before 1999, $1,916.662⁄3,

‘‘(IV) for the taxable year beginning after

1998 and before 2000, $2,250.00, and

‘‘(V) for the taxable year beginning after

1999 and before 2001, $2,500.00.

‘‘(ii) For purposes of subparagraph

(B)(ii)(II), the increase in the exempt amount

provided under clause (i)(V) shall be deemed

to have resulted from a determination which

shall be deemed to have been made under

subparagraph (A) in 1999.’’.

(b) CONFORMING AMENDMENT.—The second

sentence of section 223(d)(4) of such Act (42

U.S.C. 423(d)(4)) is amended by striking ‘‘the

exempt amount under section 203(f)(8) which

is applicable to individuals described in subparagraph (D) thereof’’ and inserting the following: ‘‘an amount equal to the exempt

amount which would have been applicable

under section 203(f)(8), to individuals described in subparagraph (D) thereof, if section 6501 of the Contract With America Tax

Relief Act of 1995 had not been enacted’’.

(c) EFFECTIVE DATE.—The amendments

made by this section shall apply with respect

to taxable years beginning after 1995.

Subtitle F—Technical Corrections

SEC. 6601. COORDINATION WITH OTHER SUBTITLES.

For purposes of applying the amendments

made by any subtitle of this title other than

this subtitle, the provisions of this subtitle

shall be treated as having been enacted immediately before the provisions of such other

subtitles.

SEC. 6602. AMENDMENTS RELATED TO REVENUE

RECONCILIATION ACT OF 1990.

(a) AMENDMENTS RELATED TO SUBTITLE A.—

(1) Subparagraph (B) of section 59(j)(3) is

amended by striking ‘‘section 1(i)(3)(B)’’ and

inserting ‘‘section 1(g)(3)(B)’’.

(2) Clause (i) of section 151(d)(3)(C) is

amended by striking ‘‘joint of a return’’ and

inserting ‘‘joint return’’.

(b) AMENDMENTS RELATED TO SUBTITLE B.—

(1) Paragraph (1) of section 11212(e) of the

Revenue Reconciliation Act of 1990 is amended by striking ‘‘Paragraph (1) of section

6724(d)’’ and inserting ‘‘Subparagraph (B) of

section 6724(d)(1)’’.

(2)(A) Subparagraph (B) of section

4093(c)(2), as in effect before the amendments

made by the Revenue Reconciliation Act of

1993, is amended by inserting before the period ‘‘unless such fuel is sold for exclusive

use by a State or any political subdivision

thereof’’.

(B) Paragraph (4) of section 6427(l), as in effect before the amendments made by the

Revenue Reconciliation Act of 1993, is

amended by inserting before the period ‘‘unless such fuel was used by a State or any political subdivision thereof’’.

(3) Paragraph (1) of section 6416(b) is

amended by striking ‘‘chapter 32 or by section 4051’’ and inserting ‘‘chapter 31 or 32’’.

(4) Section 7012 is amended—

(A) by striking ‘‘production or importation

of gasoline’’ in paragraph (3) and inserting

‘‘taxes on gasoline and diesel fuel’’, and

(B) by striking paragraph (4) and redesignating paragraphs (5) and (6) as paragraphs

(4) and (5), respectively.

(5) Subsection (c) of section 5041 is amended by striking paragraph (6) and by inserting

the following new paragraphs:

‘‘(6) CREDIT FOR TRANSFEREE IN BOND.—If—

‘‘(A) wine produced by any person would be

eligible for any credit under paragraph (1) if

removed by such person during the calendar

year,

‘‘(B) wine produced by such person is removed during such calendar year by any

other person (hereafter in this paragraph referred to as the ‘transferee’) to whom such

wine was transferred in bond and who is liable for the tax imposed by this section with

respect to such wine, and

‘‘(C) such producer holds title to such wine

at the time of its removal and provides to

the transferee such information as is necessary to properly determine the transferee’s

credit under this paragraph,

then, the transferee (and not the producer)

shall be allowed the credit under paragraph

(1) which would be allowed to the producer if

the wine removed by the transferee had been

removed by the producer on that date.

‘‘(7) REGULATIONS.—The Secretary may

prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations—

‘‘(A) to prevent the credit provided in this

subsection from benefiting any person who

produces more than 250,000 wine gallons during a calendar year, and

‘‘(B) to assure proper reduction of such

credit for persons producing more than

150,000 wine gallons of wine during a calendar

year.’’

(6) Paragraph (3) of section 5061(b) is

amended to read as follows:

‘‘(3) section 5041(f),’’.

(7) Section 5354 is amended by inserting

‘‘(taking into account the appropriate

amount of credit with respect to such wine

under section 5041(c))’’ after ‘‘any one time’’.

(c) AMENDMENTS RELATED TO SUBTITLE C.—

(1) Paragraph (4) of section 56(g) is amended by redesignating subparagraphs (I) and (J)

as subparagraphs (H) and (I), respectively.

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

amended—

(A) by striking ‘‘or’’ at the end of clause

(xii), and

(B) by striking the period at the end of

clause (xiii) and inserting ‘‘, or’’.

(3) Subsection (g) of section 6302 is amended by inserting ‘‘, 22,’’ after ‘‘chapters 21’’.

(4) The earnings and profits of any insurance company to which section 11305(c)(3) of

the Revenue Reconciliation Act of 1990 applies shall be determined without regard to

any deduction allowed under such section;

except that, for purposes of applying sections

56 and 902, and subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986, such deduction shall be

taken into account.

(5) Subparagraph (D) of section 6038A(e)(4)

is amended—

(A) by striking ‘‘any transaction to which

the summons relates’’ and inserting ‘‘any affected taxable year’’, and

(B) by adding at the end thereof the following new sentence: ‘‘For purposes of this

subparagraph, the term ‘affected taxable

year’ means any taxable year if the determination of the amount of tax imposed for

such taxable year is affected by the treatment of the transaction to which the summons relates.’’.

(6) Subparagraph (A) of section 6621(c)(2) is

amended by adding at the end thereof the

following new flush sentence:
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T56.13 APRIL 5

‘‘The preceding sentence shall be applied

without regard to any such letter or notice

which is withdrawn by the Secretary.’’.

(7) Clause (i) of section 6621(c)(2)(B) is

amended by striking ‘‘this subtitle’’ and inserting ‘‘this title’’.

(d) AMENDMENTS RELATED TO SUBTITLE D.—

(1) Notwithstanding section 11402(c) of the

Revenue Reconciliation Act of 1990, the

amendment made by section 11402(b)(1) of

such Act shall apply to taxable years ending

after December 31, 1989.

(2) Clause (ii) of section 143(m)(4)(C) is

amended—

(A) by striking ‘‘any month of the 10-year

period’’ and inserting ‘‘any year of the 4-year

period’’,

(B) by striking ‘‘succeeding months’’ and

inserting ‘‘succeeding years’’, and

(C) by striking ‘‘over the remainder of such

period (or, if lesser, 5 years)’’ and inserting

‘‘to zero over the succeeding 5 years’’.

(e) AMENDMENTS RELATED TO SUBTITLE E.—

(1)(A) Clause (ii) of section 56(d)(1)(B) is

amended to read as follows:

‘‘(ii) appropriate adjustments in the application of section 172(b)(2) shall be made to

take into account the limitation of subparagraph (A).’’

(B) For purposes of applying sections

56(g)(1) and 56(g)(3) of the Internal Revenue

Code of 1986 with respect to taxable years beginning in 1991 and 1992, the reference in

such sections to the alternative tax net operating loss deduction shall be treated as including a reference to the deduction under

section 56(h) of such Code as in effect before

the amendments made by section 1915 of the

Energy Policy Act of 1992.

(2) Clause (i) of section 613A(c)(3)(A) is

amended by striking ‘‘the table contained

in’’.

(3) Section 6501 is amended—

(A) by striking subsection (m) (relating to

deficiency attributable to election under section 44B) and by redesignating subsections

(n) and (o) as subsections (m) and (n), respectively, and

(B) by striking ‘‘section 40(f) or 51(j)’’ in

subsection (m) (as redesignated by subparagraph (A)) and inserting ‘‘section 40(f), 43, or

51(j)’’.

(4) Subparagraph (C) of section 38(c)(2) (as

in effect on the day before the date of the enactment of the Revenue Reconciliation Act

of 1990) is amended by inserting before the

period at the end of the first sentence the

following: ‘‘and without regard to the deduction under section 56(h)’’.

(5) The amendment made by section

1913(b)(2)(C)(i) of the Energy Policy Act of

1992 shall apply to taxable years beginning

after December 31, 1990.

(f) AMENDMENTS RELATED TO SUBTITLE F.—

(1)(A) Section 2701(a)(3) is amended by adding at the end thereof the following new subparagraph:

‘‘(C) VALUATION OF QUALIFIED PAYMENTS

WHERE NO LIQUIDATION, ETC. RIGHTS.—In the

case of an applicable retained interest which

is described in subparagraph (B)(i) but not

subparagraph (B)(ii), the value of the distribution right shall be determined without

regard to this section.’’

(B) Section 2701(a)(3)(B) is amended by inserting ‘‘CERTAIN’’ before ‘‘QUALIFIED’’ in the

heading thereof.

(C) Sections 2701 (d)(1) and (d)(4) are each

amended by striking ‘‘subsection (a)(3)(B)’’

and inserting ‘‘subsection (a)(3) (B) or (C)’’.

(2) Clause (i) of section 2701(a)(4)(B) is

amended by inserting ‘‘(or, to the extent provided in regulations, the rights as to either

income or capital)’’ after ‘‘income and capital’’.

(3)(A) Section 2701(b)(2) is amended by adding at the end thereof the following new subparagraph:

‘‘(C) APPLICABLE FAMILY MEMBER.—For purposes of this subsection, the term ‘applicable

family member’ includes any lineal descendant of any parent of the transferor or the

transferor’s spouse.’’

(B) Section 2701(e)(3) is amended—

(i) by striking subparagraph (B), and

(ii) by striking so much of paragraph (3) as

precedes ‘‘shall be treated as holding’’ and

inserting:

‘‘(3) ATTRIBUTION OF INDIRECT HOLDINGS AND

TRANSFERS.—An individual’’.

(C) Section 2704(c)(3) is amended by striking ‘‘section 2701(e)(3)(A)’’ and inserting

‘‘section 2701(e)(3)’’.

(4) Clause (i) of section 2701(c)(1)(B) is

amended to read as follows:

‘‘(i) a right to distributions with respect to

any interest which is junior to the rights of

the transferred interest,’’.

(5)(A) Clause (i) of section 2701(c)(3)(C) is

amended to read as follows:

‘‘(i) IN GENERAL.—Payments under any interest held by a transferor which (without

regard to this subparagraph) are qualified

payments shall be treated as qualified payments unless the transferor elects not to

treat such payments as qualified payments.

Payments described in the preceding sentence which are held by an applicable family

member shall be treated as qualified payments only if such member elects to treat

such payments as qualified payments.’’

(B) The first sentence of section

2701(c)(3)(C)(ii) is amended to read as follows:

‘‘A transferor or applicable family member

holding any distribution right which (without regard to this subparagraph) is not a

qualified payment may elect to treat such

right as a qualified payment, to be paid in

the amounts and at the times specified in

such election.’’.

(C) The time for making an election under

the second sentence of section 2701(c)(3)(C)(i)

of the Internal Revenue Code of 1986 (as

amended by subparagraph (A)) shall not expire before the due date (including extensions) for filing the transferor’s return of the

tax imposed by section 2501 of such Code for

the first calendar year ending after the date

of enactment.

(6) Section 2701(d)(3)(A)(iii) is amended by

striking ‘‘the period ending on the date of’’.

(7) Subclause (I) of section 2701(d)(3)(B)(ii)

is amended by inserting ‘‘or the exclusion

under section 2503(b),’’ after ‘‘section 2523,’’.

(8) Section 2701(e)(5) is amended—

(A) by striking ‘‘such contribution to capital or such redemption, recapitalization, or

other change’’ in subparagraph (A) and inserting ‘‘such transaction’’, and

(B) by striking ‘‘the transfer’’ in subparagraph (B) and inserting ‘‘such transaction’’.

(9) Section 2701(d)(4) is amended by adding

at the end thereof the following new subparagraph:

‘‘(C) TRANSFER TO TRANSFERORS.—In the

case of a taxable event described in paragraph (3)(A)(ii) involving a transfer of an applicable retained interest from an applicable

family member to a transferor, this subsection shall continue to apply to the transferor during any period the transferor holds

such interest.’’

(10) Section 2701(e)(6) is amended by inserting ‘‘or to reflect the application of subsection (d)’’ before the period at the end

thereof.

(11)(A) Section 2702(a)(3)(A) is amended—

(i) by striking ‘‘to the extent’’ and inserting ‘‘if’’ in clause (i),

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

(i),

(iii) by striking the period at the end of

clause (ii) and inserting ‘‘, or’’, and

(iv) by adding at the end thereof the following new clause:

‘‘(iii) to the extent that regulations provide that such transfer is not inconsistent

with the purposes of this section.’’

(B)(i) Section 2702(a)(3) is amended by

striking ‘‘incomplete transfer’’ each place it

appears and inserting ‘‘incomplete gift’’.

(ii) The heading for section 2702(a)(3)(B) is

amended by striking ‘‘INCOMPLETE TRANSFER’’ and inserting ‘‘INCOMPLETE GIFT’’.

(g) AMENDMENTS RELATED TO SUBTITLE G.—

(1)(A) Subsection (a) of section 1248 is

amended—

(i) by striking ‘‘, or if a United States person receives a distribution from a foreign

corporation which, under section 302 or 331,

is treated as an exchange of stock’’ in paragraph (1), and

(ii) by adding at the end thereof the following new sentence: ‘‘For purposes of this

section, a United States person shall be

treated as having sold or exchanged any

stock if, under any provision of this subtitle,

such person is treated as realizing gain from

the sale or exchange of such stock.’’.

(B) Paragraph (1) of section 1248(e) is

amended by striking ‘‘, or receives a distribution from a domestic corporation

which, under section 302 or 331, is treated as

an exchange of stock’’.

(C) Subparagraph (B) of section 1248(f)(1) is

amended by striking ‘‘or 361(c)(1)’’ and inserting ‘‘355(c)(1), or 361(c)(1)’’.

(D) Paragraph (1) of section 1248(i) is

amended to read as follows:

‘‘(1) IN GENERAL.—If any shareholder of a

10-percent corporate shareholder of a foreign

corporation exchanges stock of the 10-percent corporate shareholder for stock of the

foreign corporation, such 10-percent corporate shareholder shall recognize gain in

the same manner as if the stock of the foreign corporation received in such exchange

had been—

‘‘(A) issued to the 10-percent corporate

shareholder, and

‘‘(B) then distributed by the 10-percent corporate shareholder to such shareholder in redemption or liquidation (whichever is appropriate).

The amount of gain recognized by such 10-

percent corporate shareholder under the preceding sentence shall not exceed the amount

treated as a dividend under this section.’’

(2) Section 897 is amended by striking subsection (f).

(3) Paragraph (13) of section 4975(d) is

amended by striking ‘‘section 408(b)’’ and inserting ‘‘section 408(b)(12)’’.

(4) Clause (iii) of section 56(g)(4)(D) is

amended by inserting ‘‘, but only with respect to taxable years beginning after December 31, 1989’’ before the period at the end

thereof.

(5)(A) Paragraph (11) of section 11701(a) of

the Revenue Reconciliation Act of 1990 (and

the amendment made by such paragraph) are

hereby repealed, and section 7108(r)(2) of the

Revenue Reconciliation Act of 1989 shall be

applied as if such paragraph (and amendment) had never been enacted.

(B) Subparagraph (A) shall not apply to

any building if the owner of such building establishes to the satisfaction of the Secretary

of the Treasury or his delegate that such

owner reasonably relied on the amendment

made by such paragraph (11).

(h) AMENDMENTS RELATED TO SUBTITLE H.—

(1)(A) Clause (vi) of section 168(e)(3)(B) is

amended by striking ‘‘or’’ at the end of subclause (I), by striking the period at the end

of subclause (II) and inserting ‘‘, or’’, and by

adding at the end thereof the following new

subclause:

‘‘(III) is described in section 48(l)(3)(A)(ix)

(as in effect on the day before the date of the

enactment of the Revenue Reconciliation

Act of 1990).’’

(B) Subparagraph (K) of section 168(g)(4) is

amended by striking ‘‘section 48(a)(3)(A)(iii)’’
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1995 T56.13

and inserting ‘‘section 48(l)(3)(A)(ix) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of

1990)’’.

(2) Clause (ii) of section 172(b)(1)(E) is

amended by striking ‘‘subsection (m)’’ and

inserting ‘‘subsection (h)’’.

(3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II),

and 832(b)(5)(D)(ii)(II) are each amended by

striking ‘‘243(b)(5)’’ and inserting ‘‘243(b)(2)’’.

(4) Subparagraph (A) of section 243(b)(3) is

amended by inserting ‘‘of’’ after ‘‘In the

case’’.

(5) The subsection heading for subsection

(a) of section 280F is amended by striking

‘‘INVESTMENT TAX CREDIT AND’’.

(6) Clause (i) of section 1504(c)(2)(B) is

amended by inserting ‘‘section’’ before

‘‘243(b)(2)’’.

(7) Paragraph (3) of section 341(f) is amended by striking ‘‘351, 361, 371(a), or 374(a)’’ and

inserting ‘‘351, or 361’’.

(8) Paragraph (2) of section 243(b) is amended to read as follows:

‘‘(2) AFFILIATED GROUP.—For purposes of

this subsection:

‘‘(A) IN GENERAL.—The term ‘affiliated

group’ has the meaning given such term by

section 1504(b), except that for such purposes

sections 1504(b)(2), 1504(b)(4), and 1504(c) shall

not apply.

‘‘(B) GROUP MUST BE CONSISTENT IN FOREIGN

TAX TREATMENT.—The requirements of paragraph (1)(A) shall not be treated as being met

with respect to any dividend received by a

corporation if, for any taxable year which includes the day on which such dividend is

received—

‘‘(i) 1 or more members of the affiliated

group referred to in paragraph (1)(A) choose

to any extent to take the benefits of section

901, and

‘‘(ii) 1 or more other members of such

group claim to any extent a deduction for

taxes otherwise creditable under section

901.’’

(9) The amendment made by section

11813(b)(17) of the Revenue Reconciliation

Act of 1990 shall be applied as if the material

stricken by such amendment included the

closing parenthesis after ‘‘section 48(a)(5)’’.

(10) Paragraph (1) of section 179(d) is

amended—

(A) by striking ‘‘in a trade or business’’

and inserting ‘‘a trade or business’’, and

(B) by adding at the end thereof the following new sentence: ‘‘Such term shall not

include any property described in section

50(b) and shall not include air conditioning

or heating units and horses.’’

(11) Subparagraph (E) of section 50(a)(2) is

amended by striking ‘‘section 48(a)(5)(A)’’

and inserting ‘‘section 48(a)(5)’’.

(12) The amendment made by section

11801(c)(9)(G)(ii) of the Revenue Reconciliation Act of 1990 shall be applied as if it

struck ‘‘Section 422A(c)(2)’’ and inserted

‘‘Section 422(c)(2)’’.

(13) Subparagraph (B) of section 424(c)(3) is

amended by striking ‘‘a qualified stock option, an incentive stock option, an option

granted under an employee stock purchase

plan, or a restricted stock option’’ and inserting ‘‘an incentive stock option or an option granted under an employee stock purchase plan’’.

(14) Subparagraph (E) of section 1367(a)(2)

is amended by striking ‘‘section

613A(c)(13)(B)’’ and inserting ‘‘section

613A(c)(11)(B)’’.

(15) Subparagraph (B) of section 460(e)(6) is

amended by striking ‘‘section 167(k)’’ and inserting ‘‘section 168(e)(2)(A)(ii)’’.

(16) Subparagraph (C) of section 172(h)(4) is

amended by striking ‘‘subsection (b)(1)(M)’’

and inserting ‘‘subsection (b)(1)(E)’’.

(17) Section 6503 is amended—

(A) by redesignating the subsection relating to extension in case of certain summonses as subsection (j), and

(B) by redesignating the subsection relating to cross references as subsection (k).

(18) Paragraph (4) of section 1250(e) is hereby repealed.

(i) EFFECTIVE DATE.—Except as otherwise

expressly provided—

(1) the amendments made by this section

shall be treated as amendments to the Internal Revenue Code of 1986 as amended by the

Revenue Reconciliation Act of 1993; and

(2) any amendment made by this section

shall apply to periods before the date of the

enactment of this section in the same manner as if it had been included in the provision

of the Revenue Reconciliation Act of 1990 to

which such amendment relates.

SEC. 6603. AMENDMENTS RELATED TO REVENUE

RECONCILIATION ACT OF 1993.

(a) AMENDMENT RELATED TO SECTION

13114.—Paragraph (2) of section 1044(c) is

amended to read as follows:

‘‘(2) PURCHASE.—The taxpayer shall be considered to have purchased any property if,

but for subsection (d), the unadjusted basis

of such property would be its cost within the

meaning of section 1012.’’

(b) AMENDMENTS RELATED TO SECTION

13142.—

(1) Subparagraph (B) of section 13142(b)(6)

of the Revenue Reconciliation Act of 1993 is

amended to read as follows:

‘‘(B) FULL-TIME STUDENTS, WAIVER AUTHORITY, AND PROHIBITED DISCRIMINATION.—The

amendments made by paragraphs (2), (3), and

(4) shall take effect on the date of the enactment of this Act.’’

(2) Subparagraph (C) of section 13142(b)(6)

of such Act is amended by striking ‘‘paragraph (2)’’ and inserting ‘‘paragraph (5)’’.

(c) AMENDMENT RELATED TO SECTION

13161.—

(1) IN GENERAL.—Subsection (e) of section

4001 (relating to inflation adjustment) is

amended to read as follows:

‘‘(e) INFLATION ADJUSTMENT.—

‘‘(1) IN GENERAL.—The $30,000 amount in

subsection (a) and section 4003(a) shall be increased by an amount equal to—

‘‘(A) $30,000, multiplied by

‘‘(B) the cost-of-living adjustment under

section 1(f)(3) for the calendar year in which

the vehicle is sold, determined by substituting ‘calendar year 1990’ for ‘calendar

year 1992’ in subparagraph (B) thereof.

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

under paragraph (1) is not a multiple of

$2,000, such amount shall be rounded to the

next lowest multiple of $2,000.’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall take effect on

the date of the enactment of this Act.

(d) AMENDMENT RELATED TO SECTION

13201.—Clause (ii) of section 135(b)(2)(B) is

amended by inserting before the period at

the end thereof the following: ‘‘, determined

by substituting ‘calendar year 1989’ for ‘calendar year 1992’ in subparagraph (B) thereof’’.

(e) AMENDMENTS RELATED TO SECTION

13203.—Subsection (a) of section 59 is

amended—

(1) by striking ‘‘the amount determined

under section 55(b)(1)(A)’’ in paragraph (1)(A)

and (2)(A)(i) and inserting ‘‘the pre-credit

tentative minimum tax’’,

(2) by striking ‘‘specified in section

55(b)(1)(A)’’ in paragraph (1)(C) and inserting

‘‘specified in subparagraph (A)(i) or (B)(i) of

section 55(b)(1) (whichever applies)’’,

(3) by striking ‘‘which would be determined

under section 55(b)(1)(A)’’ in paragraph

(2)(A)(ii) and inserting ‘‘which would be the

pre-credit tentative minimum tax’’, and

(4) by adding at the end thereof the following new paragraph:

‘‘(3) PRE-CREDIT TENTATIVE MINIMUM TAX.—

For purposes of this subsection, the term

‘pre-credit tentative minimum tax’ means—

‘‘(A) in the case of a taxpayer other than a

corporation, the amount determined under

the first sentence of section 55(b)(1)(A)(i), or

‘‘(B) in the case of a corporation, the

amount determined under section

55(b)(1)(B)(i).’’

(f) AMENDMENT RELATED TO SECTION

13221.—Sections 1201(a) and 1561(a) are each

amended by striking ‘‘last sentence’’ each

place it appears and inserting ‘‘last 2 sentences’’.

(g) AMENDMENTS RELATED TO SECTION

13222.—

(1) Subparagraph (B) of section 6033(e)(1) is

amended by adding at the end thereof the

following new clause:

‘‘(iii) COORDINATION WITH SECTION 527(f).—

This subsection shall not apply to any

amount on which tax is imposed by reason of

section 527(f).’’.

(2) Clause (i) of section 6033(e)(1)(B) is

amended by striking ‘‘this subtitle’’ and inserting ‘‘section 501’’.

(h) AMENDMENT RELATED TO SECTION

13225.—Paragraph (3) of section 6655(g) is

amended by striking all that follows ‘‘‘3rd

month’’’ in the sentence following subparagraph (C) and inserting ‘‘, subsection

(e)(2)(A) shall be applied by substituting ‘2

months’ for ‘3 months’ in clause (i)(I), the

election under clause (i) of subsection

(e)(2)(C) may be made separately for each installment, and clause (ii) of subsection

(e)(2)(C) shall not apply.’’.

(i) AMENDMENTS RELATED TO SECTION

13231.—

(1) Subparagraph (G) of section 904(d)(3) is

amended by striking ‘‘section 951(a)(1)(B)’’

and inserting ‘‘subparagraph (B) or (C) of

section 951(a)(1)’’.

(2) Paragraph (1) of section 956A(b) is

amended to read as follows:

‘‘(1) the amount (not including a deficit)

referred to in section 316(a)(1) to the extent

such amount was accumulated in prior taxable years beginning after September 30,

1993, and’’.

(3) Subsection (f) of section 956A is amended by inserting before the period at the end

thereof: ‘‘and regulations coordinating the

provisions of subsections (c)(3)(A) and (d)’’.

(4) Subsection (b) of section 958 is amended

by striking ‘‘956(b)(2)’’ each place it appears

and inserting ‘‘956(c)(2)’’.

(5)(A) Subparagraph (A) of section

1297(d)(2) is amended by striking ‘‘The adjusted basis of any asset’’ and inserting ‘‘The

amount taken into account under section

1296(a)(2) with respect to any asset’’.

(B) The paragraph heading of paragraph (2)

of section 1297(d) is amended to read as follows:

‘‘(2) AMOUNT TAKEN INTO ACCOUNT.—’’.

(6) Subsection (e) of section 1297 is amended by inserting ‘‘For purposes of this part—

’’ after the subsection heading.

(j) AMENDMENT RELATED TO SECTION

13241.—Subparagraph (B) of section 40(e)(1) is

amended to read as follows:

‘‘(B) for any period before January 1, 2001,

during which the rates of tax under section

4081(a)(2)(A) are 4.3 cents per gallon.’’

(k) AMENDMENT RELATED TO SECTION

13261.—Clause (iii) of section 13261(g)(2)(A) of

the Revenue Reconciliation Act of 1993 is

amended by striking ‘‘by the taxpayer’’ and

inserting ‘‘by the taxpayer or a related person’’.

(l) AMENDMENT RELATED TO SECTION

13301.—Subparagraph (B) of section

1397B(d)(5) is amended by striking ‘‘preceding’’.

(m) CLERICAL AMENDMENTS.—

(1) Subsection (d) of section 39 is

amended—
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T56.13 APRIL 5

(A) by striking ‘‘45’’ in the heading of paragraph (5) and inserting ‘‘45A’’, and

(B) by striking ‘‘45’’ in the heading of paragraph (6) and inserting ‘‘45B’’.

(2) Subparagraph (A) of section 108(d)(9) is

amended by striking ‘‘paragraph (3)(B)’’ and

inserting ‘‘paragraph (3)(C)’’.

(3) Subparagraph (C) of section 143(d)(2) is

amended by striking the period at the end

thereof and inserting a comma.

(4) Clause (ii) of section 163(j)(6)(E) is

amended by striking ‘‘which is a’’ and inserting ‘‘which is’’.

(5) Subparagraph (A) of section 1017(b)(4) is

amended by striking ‘‘subsection (b)(2)(D)’’

and inserting ‘‘subsection (b)(2)(E)’’.

(6) So much of section 1245(a)(3) as precedes

subparagraph (A) thereof is amended to read

as follows:

‘‘(3) SECTION 1245 PROPERTY.—For purposes

of this section, the term ‘section 1245 property’ means any property which is or has

been property of a character subject to the

allowance for depreciation provided in section 167 and is either—’’.

(7) Paragraph (2) of section 1394(e) is

amended—

(A) by striking ‘‘(i)’’ and inserting ‘‘(A)’’,

and

(B) by striking ‘‘(ii)’’ and inserting ‘‘(B)’’.

(8) Subsection (m) of section 6501 (as redesignated by section 6602) is amended by striking ‘‘or 51(j)’’ and inserting ‘‘45B, or 51(j)’’.

(9)(A) The section 6714 added by section

13242(b)(1) of the Revenue Reconciliation Act

of 1993 is hereby redesignated as section 6715.

(B) The table of sections for part I of subchapter B of chapter 68 is amended by striking ‘‘6714’’ in the item added by such section

13242(b)(2) of such Act and inserting ‘‘6715’’.

(10) Paragraph (2) of section 9502(b) is

amended by inserting ‘‘and before’’ after

‘‘1982,’’.

(11) Subsection (a)(3) of section 13206 of the

Revenue Reconciliation Act of 1993 is amended by striking ‘‘this section’’ and inserting

‘‘this subsection’’.

(12) Paragraph (1) of section 13215(c) of the

Revenue Reconciliation Act of 1993 is amended by striking ‘‘Public Law 92–21’’ and inserting ‘‘Public Law 98–21’’.

(13) Paragraph (2) of section 13311(e) of the

Revenue Reconciliation Act of 1993 is amended by striking ‘‘section 1393(a)(3)’’ and inserting ‘‘section 1393(a)(2)’’.

(14) Subparagraph (B) of section 117(d)(2) is

amended by striking ‘‘section 132(f)’’ and inserting ‘‘section 132(h)’’.

(n) EFFECTIVE DATE.—Any amendment

made by this section shall take effect as if

included in the provision of the Revenue

Reconciliation Act of 1993 to which such

amendment relates.

SEC. 6604. MISCELLANEOUS PROVISIONS.

(a) APPLICATION OF AMENDMENTS MADE BY

TITLE XII OF OMNIBUS BUDGET RECONCILIATION ACT OF 1990.—Except as otherwise expressly provided, whenever in title XII of the

Omnibus Budget Reconciliation Act of 1990

an amendment or repeal is expressed in

terms of an amendment to, or repeal of, a

section or other provision, the reference

shall be considered to be made to a section

or other provision of the Internal Revenue

Code of 1986.

(b) TREATMENT OF CERTAIN AMOUNTS UNDER

HEDGE BOND RULES.—

(1) Clause (iii) of section 149(g)(3)(B) is

amended to read as follows:

‘‘(iii) AMOUNTS HELD PENDING REINVESTMENT OR REDEMPTION.—Amounts held for not

more than 30 days pending reinvestment or

bond redemption shall be treated as invested

in bonds described in clause (i).’’

(2) The amendment made by paragraph (1)

shall take effect as if included in the amendments made by section 7651 of the Omnibus

Budget Reconciliation Act of 1989.

(c) TREATMENT OF CERTAIN DISTRIBUTIONS

UNDER SECTION 1445.—

(1) IN GENERAL.—Paragraph (3) of section

1445(e) is amended by adding at the end

thereof the following new sentence: ‘‘Rules

similar to the rules of the preceding provisions of this paragraph shall apply in the

case of any distribution to which section 301

applies and which is not made out of the

earnings and profits of such a domestic corporation.’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall apply to distributions after the date of the enactment of

this Act.

(d) TREATMENT OF CERTAIN CREDITS UNDER

SECTION 469.—

(1) IN GENERAL.—Subparagraph (B) of section 469(c)(3) is amended by adding at the end

thereof the following new sentence: ‘‘If the

preceding sentence applies to the net income

from any property for any taxable year, any

credits allowable under subpart B (other

than section 27(a)) or D of part IV of subchapter A for such taxable year which are attributable to such property shall be treated

as credits not from a passive activity to the

extent the amount of such credits does not

exceed the regular tax liability of the taxpayer for the taxable year which is allocable

to such net income.’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall apply to taxable

years beginning after December 31, 1986.

(e) TREATMENT OF DISPOSITIONS UNDER

PASSIVE LOSS RULES.—

(1) IN GENERAL.—Subparagraph (A) of section 469(g)(1) is amended to read as follows:

‘‘(A) IN GENERAL.—If all gain or loss realized on such disposition is recognized, the excess of—

‘‘(i) any loss from such activity for such

taxable year (determined after the application of subsection (b)), over

‘‘(ii) any net income or gain for such taxable year from all other passive activities

(determined after the application of subsection (b)),

shall be treated as a loss which is not from

a passive activity.’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall apply to taxable

years beginning after December 31, 1986.

(f) MISCELLANEOUS AMENDMENTS TO FOREIGN PROVISIONS.—

(1) COORDINATION OF UNIFIED ESTATE TAX

CREDIT WITH TREATIES.—Subparagraph (A) of

section 2102(c)(3) is amended by adding at the

end thereof the following new sentence: ‘‘For

purposes of the preceding sentence, property

shall not be treated as situated in the United

States if such property is exempt from the

tax imposed by this subchapter under any

treaty obligation of the United States.’’

(2) TREATMENT OF CERTAIN INTEREST PAID

TO RELATED PERSON.—

(A) IN GENERAL.—Subparagraph (B) of section 163(j)(1) is amended by inserting before

the period at the end thereof the following:

‘‘(and clause (ii) of paragraph (2)(A) shall not

apply for purposes of applying this subsection to the amount so treated)’’.

(B) EFFECTIVE DATE.—The amendment

made by subparagraph (A) shall apply as if

included in the amendments made by section

7210(a) of the Revenue Reconciliation Act of

1989.

(3) TREATMENT OF INTEREST ALLOCABLE TO

EFFECTIVELY CONNECTED INCOME.—

(A) IN GENERAL.—

(i) Subparagraph (B) of section 884(f)(1) is

amended by striking ‘‘to the extent’’ and all

that follows down through ‘‘subparagraph

(A)’’ and inserting ‘‘to the extent that the allocable interest exceeds the interest described in subparagraph (A)’’.

(ii) The second sentence of section 884(f)(1)

is amended by striking ‘‘reasonably expected’’ and all that follows down through

the period at the end thereof and inserting

‘‘reasonably expected to be allocable interest.’’

(iii) Paragraph (2) of section 884(f) is

amended to read as follows:

‘‘(2) ALLOCABLE INTEREST.—For purposes of

this subsection, the term ‘allocable interest’

means any interest which is allocable to income which is effectively connected (or

treated as effectively connected) with the

conduct of a trade or business in the United

States.’’

(B) EFFECTIVE DATE.—The amendments

made by subparagraph (A) shall take effect

as if included in the amendments made by

section 1241(a) of the Tax Reform Act of 1986.

(4) CLARIFICATION OF SOURCE RULE.—

(A) IN GENERAL.—Paragraph (2) of section

865(b) is amended by striking ‘‘863(b)’’ and inserting ‘‘863’’.

(B) EFFECTIVE DATE.—The amendment

made by subparagraph (A) shall take effect

as if included in the amendments made by

section 1211 of the Tax Reform Act of 1986.

(5) REPEAL OF OBSOLETE PROVISIONS.—

(A) Paragraph (1) of section 6038(a) is

amended by striking ‘‘, and’’ at the end of

subparagraph (E) and inserting a period, and

by striking subparagraph (F).

(B) Subsection (b) of section 6038A is

amended by adding ‘‘and’’ at the end of paragraph (2), by striking ‘‘, and’’ at the end of

paragraph (3) and inserting a period, and by

striking paragraph (4).

(g) TREATMENT OF ASSIGNMENT OF INTEREST

IN CERTAIN BOND-FINANCED FACILITIES.—

(1) IN GENERAL.—Subparagraph (A) of section 1317(3) of the Tax Reform Act of 1986 is

amended by adding at the end thereof the

following new sentence: ‘‘A facility shall not

fail to be treated as described in this subparagraph by reason of an assignment (or an

agreement to an assignment) by the governmental unit on whose behalf the bonds are

issued of any part of its interest in the property financed by such bonds to another governmental unit.’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall take effect as if

included in such section 1317 on the date of

the enactment of the Tax Reform Act of 1986.

(h) CLARIFICATION OF TREATMENT OF MEDICARE ENTITLEMENT UNDER COBRA PROVISIONS.—

(1) IN GENERAL.—

(A) Subclause (V) of section

4980B(f)(2)(B)(i) is amended to read as follows:

‘‘(V) MEDICARE ENTITLEMENT FOLLOWED BY

QUALIFYING EVENT.—In the case of a qualifying event described in paragraph (3)(B)

that occurs less than 18 months after the

date the covered employee became entitled

to benefits under title XVIII of the Social

Security Act, the period of coverage for

qualified beneficiaries other than the covered employee shall not terminate under this

clause before the close of the 36-month period beginning on the date the covered employee became so entitled.’’

(B) Clause (v) of section 602(2)(A) of the

Employee Retirement Income Security Act

of 1974 is amended to read as follows:

‘‘(v) MEDICARE ENTITLEMENT FOLLOWED BY

QUALIFYING EVENT.—In the case of a qualifying event described in section 603(2) that

occurs less than 18 months after the date the

covered employee became entitled to benefits under title XVIII of the Social Security

Act, the period of coverage for qualified

beneficiaries other than the covered employee shall not terminate under this subparagraph before the close of the 36-month

period beginning on the date the covered employee became so entitled.’’

(C) Clause (iv) of section 2202(2)(A) of the

Public Health Service Act is amended to

read as follows:
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1995 T56.13

‘‘(iv) MEDICARE ENTITLEMENT FOLLOWED BY

QUALIFYING EVENT.—In the case of a qualifying event described in section 2203(2) that

occurs less than 18 months after the date the

covered employee became entitled to benefits under title XVIII of the Social Security

Act, the period of coverage for qualified

beneficiaries other than the covered employee shall not terminate under this subparagraph before the close of the 36-month

period beginning on the date the covered employee became so entitled.’’

(2) EFFECTIVE DATE.—The amendments

made by this subsection shall apply to plan

years beginning after December 31, 1989.

(i) TREATMENT OF CERTAIN REMIC INCLUSIONS.—

(1) IN GENERAL.—Subsection (a) of section

860E is amended by adding at the end thereof

the following new paragraph:

‘‘(6) COORDINATION WITH MINIMUM TAX.—For

purposes of part VI of subchapter A of this

chapter—

‘‘(A) the reference in section 55(b)(2) to taxable income shall be treated as a reference to

taxable income determined without regard

to this subsection,

‘‘(B) the alternative minimum taxable income of any holder of a residual interest in

a REMIC for any taxable year shall in no

event be less than the excess inclusion for

such taxable year, and

‘‘(C) any excess inclusion shall be disregarded for purposes of computing the alternative tax net operating loss deduction.

The preceding sentence shall not apply to

any organization to which section 593 applies, except to the extent provided in regulations prescribed by the Secretary under

paragraph (2).’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall take effect as if

included in the amendments made by section

671 of the Tax Reform Act of 1986 unless the

taxpayer elects to apply such amendment

only to taxable years beginning after the

date of the enactment of this Act.

(j) EXEMPTION FROM HARBOR MAINTENANCE

TAX FOR CERTAIN PASSENGERS.—

(1) IN GENERAL.—Subparagraph (D) of section 4462(b)(1) (relating to special rule for

Alaska, Hawaii, and possessions) is amended

by inserting before the period the following:

‘‘, or passengers transported on United

States flag vessels operating solely within

the State waters of Alaska or Hawaii and adjacent international waters’’.

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall take effect as if

included in the amendments made by section

1402(a) of the Harbor Maintenance Revenue

Act of 1986.

(k) AMENDMENTS RELATED TO REVENUE

PROVISIONS OF ENERGY POLICY ACT OF 1992.—

(1) Effective with respect to taxable years

beginning after December 31, 1990, subclause

(II) of section 53(d)(1)(B)(iv) is amended to

read as follows:

‘‘(II) the adjusted net minimum tax for any

taxable year is the amount of the net minimum tax for such year increased in the

manner provided in clause (iii).’’

(2) Subsection (g) of section 179A is redesignated as subsection (f).

(3) Subparagraph (E) of section 6724(d)(3) is

amended by striking ‘‘section 6109(f)’’ and inserting ‘‘section 6109(h)’’.

(4)(A) Subsection (d) of section 30 is

amended—

(i) by inserting ‘‘(determined without regard to subsection (b)(3))’’ before the period

at the end of paragraph (1) thereof, and

(ii) by adding at the end thereof the following new paragraph:

‘‘(4) ELECTION TO NOT TAKE CREDIT.—No

credit shall be allowed under subsection (a)

for any vehicle if the taxpayer elects to not

have this section apply to such vehicle.’’

(B) Subsection (m) of section 6501 (as redesignated by section 6602) is amended by striking ‘‘section 40(f)’’ and inserting ‘‘section

30(d)(4), 40(f)’’.

(5) Subclause (III) of section

501(c)(21)(D)(ii) is amended by striking ‘‘section 101(6)’’ and inserting ‘‘section 101(7)’’

and by striking ‘‘1752(6)’’ and inserting

‘‘1752(7)’’.

(6) Paragraph (1) of section 1917(b) of the

Energy Policy Act of 1992 shall be applied as

if ‘‘at a rate’’ appeared instead of ‘‘at the

rate’’ in the material proposed to be stricken.

(7) Paragraph (2) of section 1921(b) of the

Energy Policy Act of 1992 shall be applied as

if a comma appeared after ‘‘(2)’’ in the material proposed to be stricken.

(8) Subsection (a) of section 1937 of the Energy Policy Act of 1992 shall be applied as if

‘‘Subpart B’’ appeared instead of ‘‘Subpart

C’’.

(l) TREATMENT OF QUALIFIED FOOTBALL

COACHES PLAN.—

(1) IN GENERAL.—Section 1022 of title II of

the Employee Retirement Income Security

Act of 1974 is amended by adding at the end

thereof the following new subsection:

‘‘(l) QUALIFIED FOOTBALL COACHES PLAN.—

For purposes of determining the qualified

plan status of a qualified football coaches

plan, section 3(37)(F) shall be treated as part

of this title and a qualified football coaches

plan shall be treated as a multiemployer collectively bargained plan for purposes of the

Internal Revenue Code of 1986.’’

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall apply to years

beginning after the date of the enactment of

Public Law 100–202.

(m) DETERMINATION OF UNRECOVERED INVESTMENT IN ANNUITY CONTRACT.—

(1) IN GENERAL.—Subparagraph (A) of section 72(b)(4) is amended by inserting ‘‘(determined without regard to subsection (c)(2))’’

after ‘‘contract’’.

(2) EFFECTIVE DATE.—The amendment

made by paragraph (1) shall take effect as if

included in the amendments made by section

1122(c) of the Tax Reform Act of 1986.

(n) MODIFICATIONS TO ELECTION TO INCLUDE

CHILD’S INCOME ON PARENT’S RETURN.—

(1) ELIGIBILITY FOR ELECTION.—Clause (ii)

of section 1(g)(7)(A) (relating to election to

include certain unearned income of child on

parent’s return) is amended to read as follows:

‘‘(ii) such gross income is more than the

amount described in paragraph (4)(A)(ii)(I)

and less than 10 times the amount so described,’’.

(2) COMPUTATION OF TAX.—Subparagraph

(B) of section 1(g)(7) (relating to income included on parent’s return) is amended—

(A) by striking ‘‘$1,000’’ in clause (i) and inserting ‘‘twice the amount described in paragraph (4)(A)(ii)(I)’’, and

(B) by amending subclause (II) of clause (ii)

to read as follows:

‘‘(II) for each such child, 15 percent of the

lesser of the amount described in paragraph

(4)(A)(ii)(I) or the excess of the gross income

of such child over the amount so described,

and’’.

(3) MINIMUM TAX.—Subparagraph (B) of section 59(j)(1) is amended by striking ‘‘$1,000’’

and inserting ‘‘twice the amount in effect for

the taxable year under section 63(c)(5)(A)’’.

(4) EFFECTIVE DATE.—The amendments

made by this subsection shall apply to taxable years beginning after December 31, 1994.

(o) MISCELLANEOUS CLERICAL AMENDMENTS.—

(1) Subclause (II) of section 56(g)(4)(C)(ii) is

amended by striking ‘‘of the subclause’’ and

inserting ‘‘of subclause’’.

(2) Paragraph (2) of section 72(m) is amended by inserting ‘‘and’’ at the end of subparagraph (A), by striking subparagraph (B), and

by redesignating subparagraph (C) as subparagraph (B).

(3) Paragraph (2) of section 86(b) is amended by striking ‘‘adusted’’ and inserting ‘‘adjusted’’.

(4)(A) The heading for section 112 is amended by striking ‘‘combat pay’’ and inserting

‘‘combat zone compensation’’.

(B) The item relating to section 112 in the

table of sections for part III of subchapter B

of chapter 1 is amended by striking ‘‘combat

pay’’ and inserting ‘‘combat zone compensation’’.

(C) Paragraph (1) of section 3401(a) is

amended by striking ‘‘combat pay’’ and inserting ‘‘combat zone compensation’’.

(5) Clause (i) of section 172(h)(3)(B) is

amended by striking the comma at the end

thereof and inserting a period.

(6) Clause (ii) of section 543(a)(2)(B) is

amended by striking ‘‘section 563(c)’’ and inserting ‘‘section 563(d)’’.

(7) Paragraph (1) of section 958(a) is amended by striking ‘‘sections 955(b)(1) (A) and (B),

955(c)(2)(A)(ii), and 960(a)(1)’’ and inserting

‘‘section 960(a)(1)’’.

(8) Subsection (g) of section 642 is amended

by striking ‘‘under 2621(a)(2)’’ and inserting

‘‘under section 2621(a)(2)’’.

(9) Section 1463 is amended by striking

‘‘this subsection’’ and inserting ‘‘this section’’.

(10) Subsection (k) of section 3306 is amended by inserting a period at the end thereof.

(11) The item relating to section 4472 in the

table of sections for subchapter B of chapter

36 is amended by striking ‘‘and special

rules’’.

(12) Paragraph (2) of section 4978(b) is

amended by striking the period at the end of

subparagraph (A) and inserting a comma,

and by striking the period and quotation

marks at the end of subparagraph (B) and inserting a comma.

(13) Paragraph (3) of section 5134(c) is

amended by striking ‘‘section 6662(a)’’ and

inserting ‘‘section 6665(a)’’.

(14) Paragraph (2) of section 5206(f) is

amended by striking ‘‘section 5(e)’’ and inserting ‘‘section 105(e)’’.

(15) Paragraph (1) of section 6050B(c) is

amended by striking ‘‘section 85(c)’’ and inserting ‘‘section 85(b)’’.

(16) Subsection (k) of section 6166 is amended by striking paragraph (6).

(17) Subsection (e) of section 6214 is amended to read as follows:

‘‘(e) CROSS REFERENCE.—

‘‘For provision giving Tax Court jurisdiction to order a refund of an overpayment and

to award sanctions, see section 6512(b)(2).’’

(18) The section heading for section 6043 is

amended by striking the semicolon and inserting a comma.

(19) The item relating to section 6043 in the

table of sections for subpart B of part III of

subchapter A of chapter 61 is amended by

striking the semicolon and inserting a

comma.

(20) The table of sections for part I of subchapter A of chapter 68 is amended by striking the item relating to section 6662.

(21)(A) Section 7232 is amended—

(i) by striking ‘‘lubricating oil,’’ in the heading, and

(ii) by striking ‘‘lubricating oil,’’ in the

text.

(B) The table of sections for part II of subchapter A of chapter 75 is amended by striking ‘‘lubricating oil,’’ in the item relating to

section 7232.

(22) Paragraph (1) of section 6701(a) of the

Omnibus Budget Reconciliation Act of 1989 is

amended by striking ‘‘subclause (IV)’’ and

inserting ‘‘subclause (V)’’.

(23) Clause (ii) of section 7304(a)(2)(D) of

such Act is amended by striking ‘‘subsection

(c)(2)’’ and inserting ‘‘subsection (c)’’.
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T56.13 APRIL 5

(24) Paragraph (1) of section 7646(b) of such

Act is amended by striking ‘‘section

6050H(b)(1)’’ and inserting ‘‘section

6050H(b)(2)’’.

(25) Paragraph (10) of section 7721(c) of such

Act is amended by striking ‘‘section

6662(b)(2)(C)(ii)’’ and inserting ‘‘section

6661(b)(2)(C)(ii)’’.

(26) Subparagraph (A) of section 7811(i)(3)

of such Act is amended by inserting ‘‘the

first place it appears’’ before ‘‘in clause (i)’’.

(27) Paragraph (10) of section 7841(d) of

such Act is amended by striking ‘‘section

381(a)’’ and inserting ‘‘section 381(c)’’.

(28) Paragraph (2) of section 7861(c) of such

Act is amended by inserting ‘‘the second

place it appears’’ before ‘‘and inserting’’.

(29) Paragraph (1) of section 460(b) is

amended by striking ‘‘the look-back method

of paragraph (3)’’ and inserting ‘‘the lookback method of paragraph (2)’’.

(30) Subparagraph (C) of section 50(a)(2) is

amended by striking ‘‘subsection (c)(4)’’ and

inserting ‘‘subsection (d)(5)’’.

(31) Subparagraph (B) of section 172(h)(4) is

amended by striking the material following

the heading and preceding clause (i) and inserting ‘‘For purposes of subsection (b)(2)—’’.

(32) Subparagraph (A) of section 355(d)(7) is

amended by inserting ‘‘section’’ before

‘‘267(b)’’.

(33) Subparagraph (C) of section 420(e)(1) is

amended by striking ‘‘mean’’ and inserting

‘‘means’’.

(34) Paragraph (4) of section 537(b) is

amended by striking ‘‘section 172(i)’’ and inserting ‘‘section 172(f)’’.

(35) Subparagraph (B) of section 613(e)(1) is

amended by striking the comma at the end

thereof and inserting a period.

(36) Paragraph (4) of section 856(a) is

amended by striking ‘‘section 582(c)(5)’’ and

inserting ‘‘section 582(c)(2)’’.

(37) Sections 904(f)(2)(B)(i) and

907(c)(4)(B)(iii) are each amended by inserting ‘‘(as in effect on the day before the date

of the enactment of the Revenue Reconciliation Act of 1990)’’ after ‘‘section 172(h)’’.

(38) Subsection (b) of section 936 is amended by striking ‘‘subparagraphs (D)(ii)(I)’’ and

inserting ‘‘subparagraphs (D)(ii)’’.

(39) Subsection (c) of section 2104 is amended by striking ‘‘subparagraph (A), (C), or (D)

of section 861(a)(1)’’ and inserting ‘‘section

861(a)(1)(A)’’.

(40) Subparagraph (A) of section 280A(c)(1)

is amended to read as follows:

‘‘(A) as the principal place of business for

any trade or business of the taxpayer,’’.

(41) Section 6038 is amended by redesignating the subsection relating to cross references as subsection (f).

(42) Clause (iv) of section 6103(e)(1)(A) is

amended by striking all that follows ‘‘provisions of’’ and inserting ‘‘section 1(g) or

59(j);’’.

(43) The subsection (f) of section 6109 of the

Internal Revenue Code of 1986 which was

added by section 2201(d) of Public Law 101–624

is redesignated as subsection (g).

(44) Subsection (b) of section 7454 is amended by striking ‘‘section 4955(e)(2)’’ and inserting ‘‘section 4955(f)(2)’’.

(45) Subsection (d) of section 11231 of the

Revenue Reconciliation Act of 1990 shall be

applied as if ‘‘comma’’ appeared instead of

‘‘period’’ and as if the paragraph (9) proposed

to be added ended with a comma.

(46) Paragraph (1) of section 11303(b) of the

Revenue Reconciliation Act of 1990 shall be

applied as if ‘‘paragraph’’ appeared instead of

‘‘subparagraph’’ in the material proposed to

be stricken.

(47) Subsection (f) of section 11701 of the

Revenue Reconciliation Act of 1990 is amended by inserting ‘‘(relating to definitions)’’

after ‘‘section 6038(e)’’.

(48) Subsection (i) of section 11701 of the

Revenue Reconciliation Act of 1990 shall be

applied as if ‘‘subsection’’ appeared instead

of ‘‘section’’ in the material proposed to be

stricken.

(49) Subparagraph (B) of section 11801(c)(2)

of the Revenue Reconciliation Act of 1990

shall be applied as if ‘‘section 56(g)’’ appeared instead of ‘‘section 59(g)’’.

(50) Subparagraph (C) of section 11801(c)(8)

of the Revenue Reconciliation Act of 1990

shall be applied as if ‘‘reorganizations’’ appeared instead of ‘‘reorganization’’ in the

material proposed to be stricken.

(51) Subparagraph (H) of section 11801(c)(9)

of the Revenue Reconciliation Act of 1990

shall be applied as if ‘‘section 1042(c)(1)(B)’’

appeared instead of ‘‘section 1042(c)(2)(B)’’.

(52) Subparagraph (F) of section 11801(c)(12)

of the Revenue Reconciliation Act of 1990

shall be applied as if ‘‘and (3)’’ appeared instead of ‘‘and (E)’’.

(53) Subparagraph (A) of section 11801(c)(22)

of the Revenue Reconciliation Act of 1990

shall be applied as if ‘‘chapters 21’’ appeared

instead of ‘‘chapter 21’’ in the material proposed to be stricken.

(54) Paragraph (3) of section 11812(b) of the

Revenue Reconciliation Act of 1990 shall be

applied by not executing the amendment

therein to the heading of section 42(d)(5)(B).

(55) Clause (i) of section 11813(b)(9)(A) of

the Revenue Reconciliation Act of 1990 shall

be applied as if a comma appeared after

‘‘(3)(A)(ix)’’ in the material proposed to be

stricken.

(56) Subparagraph (F) of section 11813(b)(13)

of the Revenue Reconciliation Act of 1990

shall be applied as if ‘‘tax’’ appeared after

‘‘investment’’ in the material proposed to be

stricken.

(57) Paragraph (19) of section 11813(b) of the

Revenue Reconciliation Act of 1990 shall be

applied as if ‘‘Paragraph (20) of section

1016(a), as redesignated by section 11801,’’ appeared instead of ‘‘Paragraph (21) of section

1016(a)’’.

(58) Paragraph (5) section 8002(a) of the

Surface Transportation Revenue Act of 1991

shall be applied as if ‘‘4481(e)’’ appeared instead of ‘‘4481(c)’’.

(59) Section 7872 is amended—

(A) by striking ‘‘foregone’’ each place it

appears in subsections (a) and (e)(2) and inserting ‘‘forgone’’, and

(B) by striking ‘‘FOREGONE’’ in the heading

for subsection (e) and the heading for paragraph (2) of subsection (e) and inserting

‘‘FORGONE’’.

(60) Paragraph (7) of section 7611(h) is

amended by striking ‘‘approporiate’’ and inserting ‘‘appropriate’’.

(61) The heading of paragraph (3) of section

419A(c) is amended by striking ‘‘SEVERENCE’’

and inserting ‘‘SEVERANCE’’.

(62) Clause (ii) of section 807(d)(3)(B) is

amended by striking ‘‘Commissoners’ ’’ and

inserting ‘‘Commissioners’ ’’.

(63) Subparagraph (B) of section 1274A(c)(1)

is amended by striking ‘‘instument’’ and inserting ‘‘instrument’’.

(64) Subparagraph (B) of section 724(d)(3) by

striking ‘‘Subparagaph’’ and inserting ‘‘Subparagraph’’.

(65) The last sentence of paragraph (2) of

section 42(c) is amended by striking ‘‘of

1988’’.

(66) Paragraph (1) of section 9707(d) is

amended by striking ‘‘diligence,’’ and inserting ‘‘diligence’’.

(67) Subsection (c) of section 4977 is amended by striking ‘‘section 132(i)(2)’’ and inserting ‘‘section 132(h)’’.

(68) The last sentence of section 401(a)(20)

is amended by striking ‘‘section 211’’ and inserting ‘‘section 521’’.

(69) Subparagraph (A) of section 402(g)(3) is

amended by striking ‘‘subsection (a)(8)’’ and

inserting ‘‘subsection (e)(3)’’.

(70) The last sentence of section 403(b)(10)

is amended by striking ‘‘an direct’’ and inserting ‘‘a direct’’.

(71) Subparagraph (A) of section 4973(b)(1)

is amended by striking ‘‘sections 402(c)’’ and

inserting ‘‘section 402(c)’’.

(72) Paragraph (12) of section 3405(e) is

amended by striking ‘‘(b)(3)’’ and inserting

‘‘(b)(2)’’.

(73) Paragraph (41) of section 521(b) of the

Unemployment Compensation Amendments

of 1992 shall be applied as if ‘‘section’’ appeared instead of ‘‘sections’’ in the material

proposed to be stricken.

(74) Paragraph (27) of section 521(b) of the

Unemployment Compensation Amendments

of 1992 shall be applied as if ‘‘Section

691(c)(5)’’ appeared instead of ‘‘Section

691(c)’’.

(75) Paragraph (5) of section 860F(a) is

amended by striking ‘‘paragraph (1)’’ and inserting ‘‘paragraph (2)’’.

(76) Paragraph (1) of section 415(k) is

amended by adding ‘‘or’’ at the end of subparagraph (C), by striking subparagraphs (D)

and (E), and by redesignating subparagraph

(F) as subparagraph (D).

(77) Paragraph (2) of section 404(a) is

amended by striking ‘‘(18),’’.

(78) Clause (ii) of section 72(p)(4)(A) is

amended to read as follows:

‘‘(ii) SPECIAL RULE.—The term ‘qualified

employer plan’ shall not include any plan

which was (or was determined to be) a qualified employer plan or a government plan.’’

(79) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i)

are each amended by striking ‘‘section

6662(d)(2)(C)(ii)’’ and inserting ‘‘section

6662(d)(2)(C)(iii)’’.

(80) Subsection (a) of section 164 is amended by striking the paragraphs relating to the

generation-skipping tax and the environmental tax imposed by section 59A and by inserting after paragraph (3) the following new

paragraphs:

‘‘(4) The GST tax imposed on income distributions.

‘‘(5) The environmental tax imposed by

section 59A.’’

Subtitle G—Tax Reduction Contingent on

Deficit Reduction

SEC. 6701. TAX REDUCTION CONTINGENT ON DEFICIT REDUCTION.

Notwithstanding any other provision of

this title and any amendment made by this

title, no provision of this title shall take effect unless—

(1) the concurrent resolution on the budget

for fiscal year 1996, as agreed to, provides

that the budget of the United States will be

in balance by fiscal year 2002, and

(2) the conference report, as agreed to, on

the reconciliation bill for that resolution—

(A) achieves the aggregate amount of deficit reduction to effectuate the reconciliation instructions required for the years covered by that resolution necessary to so balance the budget, and

(B) contains a statement, based on estimates made by the Director of the Congressional Budget Office, that such conference

report does so comply.

SEC. 6702. MONITORING.

The Committees on the Budget of the

House of Representatives and the Senate

shall each monitor progress on achieving a

balanced budget consistent with the most recently agreed to concurrent resolution on

the budget for fiscal year 1996 or any subsequent fiscal year (and the reconciliation Act

for that resolution) or the most recently

agreed to concurrent resolution on the budget that would achieve a balanced budget by

fiscal year 2002 (and the reconciliation Act

for that resolution). After consultation with

the Director of the Congressional Budget Office, each such committee shall submit a report of its findings to its House and the
HOUSE OF REPRESENTATIVES

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1995 T56.13

President on or before December 15, 1995, and

annually thereafter. Each such report shall

contain the following:

(1) Estimates of the deficit levels (based on

legislation enacted through the date of the

report) for each fiscal year through fiscal

year 2002.

(2) An analysis of the variance (if any) between those estimated deficit levels and the

levels set forth in the concurrent resolution

on the budget for fiscal year 1996 or the most

recently agreed to concurrent resolution on

the budget that would achieve a balanced

budget by fiscal year 2002.

(3) Policy options to achieve the additional

levels of deficit reduction necessary to balance the budget of the United States by fiscal year 2002.

SEC. 6703. CONGRESSIONAL ACTION.

Each House of Congress shall incorporate

the policy options included in the report of

its Committee on the Budget under section

6702(a)(3) (or other policy options) in developing a concurrent resolution on the budget

for any fiscal year that achieves the additional levels of deficit reduction necessary to

balance the budget of the United States by

fiscal year 2002.

SEC. 6704. PRESIDENTIAL ACTION.

If the President submits a budget under

section 1105(a) of title 31, United States

Code, that does not provide for a balanced

budget for the United States by fiscal year

2002, then the President shall include with

that submission a complete budget that balances the budget by that fiscal year.

The bill, as amended, was ordered to

be engrossed and read a third time, was

read a third time by title.

Mr. GEPHARDT moved to recommit

the bill to the Committee on Ways and

Means with instructions to report the

bill back to the House forthwith with

the following amendments:

In paragraph (1) of section 4003(a), strike

all subparagraphs except subparagraph (C)

(and make the necessary conforming grammatical changes).

Strike paragraph (2) of section 4003(a) and

insert the following:

(2) DEDUCTIONS.—Section 8334(a) is amended by adding after paragraph (3) (as added by

paragraph (3)(A) of this subsection) the following:

(4) Effective with respect to service after

December 31, 1995, in the case of a Member,

the employing agency shall (instead of the

percentage otherwise applicable under the

first sentence of paragraph (1)) deduct and

withhold from basic pay of the Member the

percentage of basic pay applicable under subsection (c).’’.

In paragraph (3) of section 8334(a) of title 5,

United States Code (as proposed to be

amended by section 4003(a)(3)(A)) insert ‘‘, in

the case of a Member,’’ after ‘‘shall’’.

Strike paragraph (4) of section 4003(a).

Strike subsection (b) of section 4003 and insert the following:

(b) FERS.—

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

by adding at the end the following:

‘‘(3) In applying the provisions of paragraph (2)(B) in the case of a Member, ‘71⁄2’ in

clause (i) thereof shall, for purposes of applying such provisions with respect to basic pay

for service performed—

‘‘(A) in calendar year 1996, be deemed to

read ‘81⁄2’;

‘‘(B) in calendar year 1997, be deemed to

read ‘9’;

‘‘(C) after calendar year 1997, be deemed to

read ‘91⁄2’;

(2) TECHNICAL AMENDMENT.—Paragraph (1)

of section 8422(a) is amended by striking

‘‘paragraph (2).’’ and inserting ‘‘paragraphs

(2) and (3).’’.

Strike subsection (c) of section 4003 and redesignate subsection (d) thereof accordingly.

In section 8339a(a) of title 5, United States

Code (as proposed to be inserted by section

4004(a)(1)) and section 8461a(a) of such title

(as proposed to be inserted by section

4004(b)(1)), strike ‘‘a separation’’ and insert

‘‘the separation of a Member’’.

In section 4005(a), strike paragraph (2) and

conform paragraph (1) accordingly.

In section 4005(b), strike ‘‘MEMBERS.—’’ in

paragraph (1) and insert ‘‘IN GENERAL.—’’,

strike paragraph (2), and redesignate paragraph (3) as paragraph (2).

In subparagraph (B) of section 4005(b)(2) (as

so redesignated), strike ‘‘and by striking

‘Congressional employee,’’’.

In paragraph (3) of section 8415(g) of title 5,

United States Code, as proposed to be added

by section 4005(b)(2) (as so redesignated),

strike ‘‘or Congressional employee’’ each

place it appears, and strike ‘‘or (c)’’.

Strike title V of the bill.

Strike subtitle A of title VI of the bill

(other than section 6101).

In section 23 of the Internal Revenue Code

of 1986 (as proposed to be added by section

6101)—

(1) insert ‘‘(or, in the case of taxable years

beginning before January 1, 2001, the amount

specified in subsection (e))’’ after ‘‘$500’’,

(2) strike ‘‘$200,000’’ each place it appears

and insert ‘‘$60,000’’,

(3) strike ‘‘100 times’’ in subsection (b)(2) of

such section 23 and insert ‘‘70 times’’,

(4) strike ‘‘1996’’ and ‘‘1995’’ in subsection

(d) of such section 23 and insert ‘‘2001’’ and

‘‘2000’’, respectively, and

(5) redesignate subsection (e) of such section 23 as subsection (f) and insert after subsection (d) the following new subsection:

‘‘(e) PHASE IN OF AMOUNT OF CREDIT.—In

the case of taxable years beginning before

January 1, 2001, subsection (a) shall be applied by substituting for ‘$500’—

‘‘(1) ‘$100’ in the case of taxable years beginning after December 31, 1996, and before

January 1, 1999, and

‘‘(2) ‘$300’ in the case of taxable years beginning after December 31, 1998.

In section 6101(c) of the bill, strike ‘‘1995’’

and insert ‘‘1996’’.

Strike subtitles B, C, D, and E of title VI.

After subtitle A of title VI, insert the following new subtitles:

Subtitle B—Tax Benefit Contingent on

Federal Budget

SEC. 6201. EFFECTIVE DATE OF TAX BENEFIT DELAYED UNTIL FEDERAL BUDGET

PROJECTED TO BE IN BALANCE.

(a) IN GENERAL.—Solely for purposes of

subtitle A, notwithstanding any provision of

subtitle A, and any amendment made by

such subtitle, except as otherwise provided

in this section—

(1) any reference in such subtitle (or in any

amendment made by such subtitle) to 1996

shall be treated as a reference to the calendar year ending in the first successful deficit reduction year, and

(2) any reference in such subtitle (or in any

amendment made by such subtitle) to any

later calendar year shall be treated as a reference to the calendar year which is the

same number of years after such first calendar year as such later year is after 1996.

(b) FIRST SUCCESSFUL DEFICIT REDUCTION

YEAR.—For purposes of this section—

(1) IN GENERAL.—The term ‘‘first successful

deficit reduction year’’ means the first fiscal

year beginning after the date of the enactment of this Act with respect to which there

is an OMB certification before the beginning

of such fiscal year that the budget of the

United States will be in balance by fiscal

year 2002 based upon estimates of enacted

legislation, including the amendments made

by this Act.

(2) OMB CERTIFICATION.—The term ‘‘OMB

certification’’ means a written certification

made solely for purposes of this subtitle by

the Director of the Office of Management

and Budget to the President and the Congress.

(c) CERTIFICATIONS BEFORE 1997.—Subsection (a) shall not apply if there is an OMB

certification made during 1995 or 1996 that

the budget of the United States will be in

balance by fiscal year 2002 based upon estimates of enacted legislation, including the

amendments made by this Act.

SEC. 6202. TERMINATION OF TAX BENEFIT IF

FEDERAL BUDGET DEFICIT REDUCTION TARGETS ARE NOT MET.

(A) TERMINATION OF CREDIT.—No credit

shall be allowed by section 23 of the Internal

Revenue Code of 1986 (added by subtitle A)

for any taxable year beginning after the calendar year in which the first failed deficit

reduction year ends.

(b) FIRST FAILED DEFICIT REDUCTION

YEAR.—For purposes of this section, the

term ‘‘first failed deficit reduction year’’

means the first fiscal year (beginning after

the earliest date on which any amendment

made by subtitle A takes effect) with respect

to which there is an OMB certification during the 3–month period after the close of

such fiscal year that the actual deficit in the

budget of the United States for such fiscal

year was greater than the deficit target for

such fiscal year specified in the following

table:

‘‘In the case of fiscal year:

The deficit target (in

billions) is:

1996 .................................................. $150

1997 .................................................. 125

1998 .................................................. 100

1999 .................................................. 75

2000 .................................................. 50

2001 .................................................. 25

2002 or thereafter ............................ 0.

Subtitle C—Revision of Tax Rules on

Expatriation

SEC. 6301. REVISION OF TAX RULES ON EXPATRIATION.

(a) IN GENERAL.—Subpart A of part II of

subchapter N of chapter 1 of the Internal

Revenue Code of 1986 is amended by inserting

after section 877 the following new section:

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

‘‘(a) GENERAL RULES.—For purposes of this

subtitle—

‘‘(1) CITIZENS.—If any United States citizen

relinquishes his citizenship during a taxable

year, all property held by such citizen at the

time immediately before such relinquishment shall be treated as sold at such time

for its fair market value and any gain or loss

shall be taken into account for such taxable

year.

‘‘(2) CERTAIN RESIDENTS.—If any long-term

resident of the United States ceases to be

subject to tax as a resident of the United

States for any portion of any taxable year,

all property held by such resident at the

time of such cessation shall be treated as

sold at such time for its fair market value

and any gain or loss shall be taken into account for the taxable year which includes

the date of such cessation.

‘‘(b) EXCLUSION FOR CERTAIN GAIN.—The

amount which would (but for this subsection) be includible in the gross income of

any taxpayer by reason of subsection (a)

shall be reduced (but not below zero) by

$600,000.

‘‘(c) PROPERTY TREATED AS HELD.—For purposes of this section, except as otherwise

provided by the Secretary, an individual

shall be treated as holding—

‘‘(1) all property which would be includible

in his gross estate under chapter 11 were

such individual to die at the time the property is treated as sold,
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T56.14 APRIL 5

‘‘(2) any other interest in a trust which the

individual is treated as holding under the

rules of section 679(e) (determined by treating such section as applying to foreign and

domestic trusts), and

‘‘(3) any other interest in property specified by the Secretary as necessary or appropriate to carry out the purposes of this section.

‘‘(d) EXCEPTIONS.—The following property

shall not be treated as sold for purposes of

this section:

‘‘(1) UNITED STATES REAL PROPERTY INTERESTS.—Any United States real property interest (as defined in section 897(c)(1)), other

than stock of a United States real property

holding corporation which does not, on the

date the individual relinquishes his citizenship or ceases to be subject to tax as a resident, meet the requirements of section

897(c)(2).

‘‘(2) INTEREST IN CERTAIN RETIREMENT

PLANS.—

‘‘(A) IN GENERAL.—Any interest in a qualified retirement plan (as defined in section

4974(d)), other than any interest attributable

to contributions which are in excess of any

limitation or which violate any condition for

tax-favored treatment.

‘‘(B) FOREIGN PENSION PLANS.—

‘‘(i) IN GENERAL.—Under regulations prescribed by the Secretary, interests in foreign

pension plans or similar retirement arrangements or programs.

‘‘(ii) LIMITATION.—The value of property

which is treated as not sold by reason of this

subparagraph shall not exceed $500,000.

‘‘(e) DEFINITIONS.—For purposes of this

section—

‘‘(1) RELINQUISHMENT OF CITIZENSHIP.—A

citizen shall be treated as relinquishing his

United States citizenship on the date the

United States Department of State issues to

the individual a certificate of loss of nationality or on the date a court of the United

States cancels a naturalized citizen’s certificate of naturalization.

‘‘(2) LONG-TERM RESIDENT.—

‘‘(A) IN GENERAL.—The term ‘long-term

resident’ means any individual (other than a

citizen of the United States) who is a lawful

permanent resident of the United States and,

as a result of such status, has been subject to

tax as a resident in at least 10 taxable years

during the period of 15 taxable years ending

with the taxable year during which the sale

under subsection (a) is treated as occurring.

‘‘(B) SPECIAL RULE.—For purposes of subparagraph (A), there shall not be taken into

account—

‘‘(i) any taxable year during which any

prior sale is treated under subsection (a) as

occurring, or

‘‘(ii) any taxable year prior to the taxable

year referred to in clause (i).

‘‘(f) TERMINATION OF DEFERRALS, ETC.—On

the date any property held by an individual

is treated as sold under subsection (a)—

‘‘(1) any period deferring recognition of income or gain shall terminate, and

‘‘(2) any extension of time for payment of

tax shall cease to apply and the unpaid portion of such tax shall be due and payable.

‘‘(g) ELECTION BY EXPATRIATING RESIDENTS.—Solely for purposes of determining

gain under subsection (a)—

‘‘(1) IN GENERAL.—At the election of a resident not a citizen of the United States,

property—

‘‘(A) which was held by such resident on

the date the individual first became a resident of the United States during the period

of long-term residency to which the treatment under subsection (a) relates, and

‘‘(B) which is treated as sold under subsection (a),

shall be treated as having a basis on such

date of not less than the fair market value of

such property on such date.

‘‘(2) ELECTION.—Such an election shall

apply to all property described in paragraph

(1), and, once made, shall be irrevocable.

‘‘(h) DEFERRAL OF TAX ON CLOSELY HELD

BUSINESS INTERESTS.—The District Director

may enter into an agreement with any individual which permits such individual to

defer payment for not more than 5 years of

any tax imposed by subsection (a) by reason

of holding any interest in a closely held business (as defined in section 6166(b)) other than

a United States real property interest described in subsection (d)(1).

‘‘(i) REGULATIONS.—The Secretary shall

prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

‘‘(j) CROSS REFERENCE.—

‘‘For termination of United States citizenship

for tax purposes, see section

7701(a)(47).’’

(b) DEFINITION OF TERMINATION OF UNITED

STATES CITIZENSHIP.—Section 7701(a) of such

Code is amended by adding at the end the

following new paragraph:

‘‘(47) TERMINATION OF UNITED STATES CITIZENSHIP.—An individual shall not cease to be

treated as a United States citizen before the

date on which the individual’s citizenship is

treated as relinquished under section

877A(e)(1).’’

(c) CONFORMING AMENDMENTS.—

(1) Section 877 of such Code is amended by

adding at the end of the following new subsection:

‘‘(f) TERMINATION.—This section shall not

apply to any individual who is subject to the

provisions of section 877A.’’

(2) Paragraph (10) of section 7701(b) of such

Code is amended by adding at the end the

following new sentence: ‘‘This paragraph

shall not apply to any individual who is subject to the provisions of section 877A.’’

(d) CLERICAL AMENDMENT.—The table of

sections for subpart A of part II of subchapter N of chapter 1 of such Code is

amended by inserting after the item relating

to section 877 the following new item:

‘‘Sec. 877A. Tax responsibilities of expatriation.’’

(e) EFFECTIVE DATE.—The amendments

made by this section shall apply to—

(1) United States citizens who relinquish

(within the meaning of section 877A(e)(1) of

the Internal Revenue Code of 1986, as added

by this section) United States citizenship on

or after October 1, 1996, and

(2) Long-term residents (as defined in such

section) who cease to be subject to tax as

residents of the United States on or after

such date.

At the end of the bill insert the following

new title:

TITLE VII—HOUSE BUDGET COMMITTEE

TO REPORT NEW DISCRETIONARY

SPENDING LIMITS

SEC. 701. HOUSE BUDGET COMMITTEE TO REPORT NEW DISCRETIONARY SPENDING LIMITS.

Not later than 20 days after the date of the

enactment of this Act, the Committee on the

Budget of the House of Representatives shall

report legislation which provides general discretionary spending limits as follows:

(1) With respect to fiscal year 1996:

$514,998,000,000 in new budget authority and

$547,245,000,000 in outlays.

(2) With respect to fiscal year 1997:

$521,281,000,000 in new budget authority and

$542,111,000,000 in outlays.

(3) With respect to fiscal year 1998:

$528,024,000,000 in new budget authority and

$544,594,000,000 in outlays.

(4) With respect to fiscal year 1999:

$527,051,000,000 in new budget authority and

$543,130,000,000 in outlays.

(5) With respect to fiscal year 2000:

$525,091,000,000 in new budget authority and

$541,082,000,000 in outlays.

Make necessary conforming changes in

title and section designations and in the tables of contents.

By unanimous consent, the previous

question was ordered on the motion to

recommit with instructions.

The question being put, viva voce,

Will the House recommit said bill

with instructions?

The SPEAKER pro tempore, Mr.

DREIER, announced that the nays had

it.

Mr. GEPHARDT demanded a recorded vote on agreeing to said motion,

which demand was supported by onefifth of a quorum, so a recorded vote

was ordered.

The vote was taken by electronic device.

It was decided in the Yeas ....... 168 ! negative ....................... Nays ...... 265

T56.14 [Roll No. 293]

AYES—168

Abercrombie

Ackerman

Andrews

Baldacci

Barcia

Barrett (WI)

Beilenson

Bentsen

Berman

Bevill

Bishop

Bonior

Borski

Boucher

Browder

Brown (FL)

Brown (OH)

Bryant (TX)

Chapman

Clay

Clayton

Clement

Clyburn

Coleman

Collins (IL)

Collins (MI)

Condit

Conyers

Costello

Cramer

Danner

de la Garza

DeLauro

Dellums

Deutsch

Dicks

Dingell

Dixon

Doggett

Doyle

Durbin

Edwards

Engel

Eshoo

Evans

Farr

Fattah

Fazio

Fields (LA)

Filner

Flake

Foglietta

Ford

Frank (MA)

Frost

Furse

Ganske

Gejdenson

Gephardt

Gonzalez

Gordon

Green

Gutierrez

Harman

Hastings (FL)

Hayes

Hefner

Hilliard

Hinchey

Holden

Jackson-Lee

Jacobs

Jefferson

Johnson (SD)

Johnson, E. B.

Johnston

Kennedy (MA)

Kennedy (RI)

Kennelly

Kildee

LaFalce

Lantos

Levin

Lewis (GA)

Lincoln

Lofgren

Lowey

Luther

Maloney

Manton

Markey

Martinez

Mascara

Matsui

McCarthy

McDermott

McHale

McKinney

Meehan

Meek

Menendez

Mfume

Miller (CA)

Mineta

Minge

Mink

Moakley

Moran

Nadler

Neal

Oberstar

Obey

Olver

Ortiz

Owens

Pallone

Pastor

Payne (NJ)

Pelosi

Peterson (MN)

Pomeroy

Poshard

Rahall

Rangel

Reed

Richardson

Rivers

Rose

Roybal-Allard

Rush

Sabo

Sanders

Sawyer

Schroeder

Schumer

Scott

Serrano

Skelton

Slaughter

Spratt

Stokes

Studds

Stupak

Tanner

Taylor (MS)

Tejeda

Thompson

Thornton

Thurman

Torres

Torricelli

Towns

Traficant

Tucker

Velazquez

Vento

Visclosky

Volkmer

Ward

Waters

Watt (NC)

Waxman

Williams

Wise

Woolsey

Wyden

Wynn

Yates

NOES—265

Allard

Archer

Armey

Bachus

Baesler

Baker (CA)

Baker (LA)

Ballenger

Barr

Barrett (NE)

Bartlett

Barton

Bass

Bateman

Becerra

Bereuter

Bilbray

Bilirakis

Bliley

Blute

Boehlert

Boehner

Bonilla

Bono

Brewster

Brown (CA)

Brownback

Bryant (TN)

Bunn

Bunning

Burr

Burton

Buyer