`[Journal of the House of Representatives, 1995]
[Wednesday, April 5, 1995 (56), Para 56.13 Roll No. 292]
[Pages 547-574]
[From the U.S. Government Publishing Office, www.gpo.gov]

para.56.13                   [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

[[Page 548]]


     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.

[[Page 549]]

     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

[[Page 550]]

     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, broker-dealers, 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:

[[Page 551]]

     ``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.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  After December 31, 1997.'';
 

       (B) in the matter relating to a Member or employee for 
     Congressional employee service by striking


 
 
 
                                           ``7\1/2\............  After December 31, 1969.''
 

     and inserting the following:


 
 
 
                                           ``7\1/2\............  January 1, 1970, to December 31, 1995.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  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.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  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


 
 
 
                                           ``7\1/2\............  After December 31, 1974.''
 

     and inserting the following:


 
 
 
                                           ``7\1/2\............  January 1, 1975, to December 31, 1995.
                                           ``9.................  January 1, 1996, to December 31, 1996.
                                           ``9\1/2\............  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.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  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


 
 
 
 

[[Page 552]]

                                           ``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.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  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.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  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.
                                           ``8\1/2\............  January 1, 1996, to December 31, 1996.
                                           ``9.................  January 1, 1997, to December 31, 1997.
                                           ``9\1/2\............  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..............................  8\1/2\................  January 1, 1996, to December 31, 1996.
                                          ``9...................  January 1, 1997, to December 31, 1997.
                                          ``9\1/2\..............  After December 31, 1997.
``Congressional employee................  8\1/2\................  January 1, 1996, to December 31, 1996.
                                          ``9...................  January 1, 1997, to December 31, 1997.
                                          ``9\1/2\..............  After December 31, 1997.
``Member................................  8\1/2\................  January 1, 1996, to December 31, 1996.
                                          ``9...................  January 1, 1997, to December 31, 1997.
                                          ``9\1/2\..............  After December 31, 1997.
``Law enforcement officer...............  9.....................  January 1, 1996, to December 31, 1996.
                                          ``9\1/2\..............  January 1, 1997, to December 31, 1997.
                                          ``10..................  After December 31, 1997.
``Firefighter...........................  9.....................  January 1, 1996, to December 31, 1996.
                                          ``9\1/2\..............  January 1, 1997, to December 31, 1997.
                                          ``10..................  After December 31, 1997.
``Air traffic controller................  9.....................  January 1, 1996, to December 31, 1996.
                                          ``9\1/2\..............  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:

     ``Sec. 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:

     ``Sec. 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.

[[Page 553]]

       ``(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 2\1/2\ 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.

[[Page 554]]

Sec. 6213. Certain exchanges of life insurance contracts for long-term 
              care insurance contracts not taxable.
Sec. 6214. Exclusion from gross income for amounts withdrawn from 
              certain retirement plans for long-term care insurance.

           Part III--Treatment of Accelerated Death Benefits

Sec. 6221. Treatment of accelerated death benefits by recipient.
Sec. 6222. Tax treatment of companies issuing qualified accelerated 
              death benefit riders.

  Part IV--Inclusion in Gross Income of Excess Long-term Care Benefits

Sec. 6231. Inclusion in income of excess long-term care benefits.
Sec. 6232. Reporting requirements.

             Subtitle C--Job Creation and Wage Enhancement

                      Part I--Capital Gains Reform


      SUBPART A--CAPITAL GAINS REDUCTION FOR TAXPAYERS OTHER THAN 
                              CORPORATIONS

Sec. 6301. Capital gains deduction.
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.--

[[Page 555]]

       ``(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 70\1/2\.--
     Contributions to an ADS account may be made even after the 
     individual for whom the account is maintained has attained 
     age 70\1/2\.
       ``(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 59\1/2\,
       ``(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

[[Page 556]]

     `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 yea  
                                                     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.

[[Page 557]]

       ``(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 long-term 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.

[[Page 558]]

     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

[[Page 559]]

     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 long-term 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

[[Page 560]]

     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 `pass-thru 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 ``long-term 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 long-term 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

[[Page 561]]

       (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

[[Page 562]]

     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''.

[[Page 563]]

       (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 mid-point 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 non-NCR 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,''.

[[Page 564]]

       (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

[[Page 565]]

     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.--

[[Page 566]]

       (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 giftThe 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 thThe applicable
                                                             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.

[[Page 567]]

       ``(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, $1,583.33\1/3\,
       ``(III) for the taxable year beginning after 1997 and 
     before 1999, $1,916.66\2/3\,
       ``(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:

[[Page 568]]

     ``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)''

[[Page 569]]

     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--

[[Page 570]]

       (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:

[[Page 571]]

       ``(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)''.

[[Page 572]]

       (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 
     look-back 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

[[Page 573]]

     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, `7\1/2\' 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 `8\1/2\';
       ``(B) in calendar year 1997, be deemed to read `9';
       ``(C) after calendar year 1997, be deemed to read `9\1/2\';
       (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,

[[Page 574]]

       ``(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 one-fifth of a quorum, so a recorded vote 
was ordered.
  The vote was taken by electronic device.

It was decided in the

Yeas

168

<3-line {>

negative

Nays

265`