**DESCRIPTION OF TAX TECHNICAL CORRECTIONS**

**IN THE "TAXPAYER RELIEF ACT OF 1998"**

Scheduled for Markup

by the

HOUSE COMMITTEE ON WAYS AND MEANS

on September 17, 1998

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

September 15, 1998

JCX-61-98

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**CONTENTS**

INTRODUCTION		

DESCRIPTION OF TAX TECHNICAL CORRECTIONS		

	A.	Technical Corrections to the 1998 Act		

		1.	Burden of proof		

		2.	Relief for innocent spouses		

		3.	Interest netting		

		4.	Effective date for elimination of 18-month holding period for capital			gains		

	B.	Technical Corrections to the 1997 Act		

		1.	Treatment of interest on qualified education loans		

		2.	Capital gains distributions of charitable remainder trusts		

		3.	Gifts may not be revalued for estate tax purposes after expiration of	limitations		

		4.	Coordinate Vaccine Injury Compensation Trust Fund expenditure			purposes with list of taxable vaccines		

		5.	Abatement of interest by reason of Presidentially declared disasters		

		6.	Treatment of certain corporate distributions		

		7.	Treatment of net operating losses arising from certain eligible			losses		

		8.	Determination of unborrowed cash value under COLI pro rata			interest disallowance rules		

		9.	Payment of taxes by commercially acceptable means		

	C.	Technical Corrections to the 1984 Act		

		1.	Casualty loss deduction		

	D.	Disclosure of Tax Return Information to Department of Agriculture		

	E.	Technical Corrections to the Transportation Equity Act for the 21st	Century		

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**INTRODUCTION**

	This document,(1) prepared by the staff of the Joint Committee on Taxation, provides adescription of the Chairman's mark with respect to tax technical corrections proposals.  TheHouse Committee on Ways and Means has scheduled a markup of tax provisions on September17, 1998.

	References to the "1998 Act" are to the Internal Revenue Service Restructuring andReform Act of 1998 (P.L. 105-206); references to the "1997 Act" are to the Taxpayer Relief Actof 1997 (P.L. 105-34); and references to the "1984 Act" are to the Tax Reform Act of 1984 (P.L.99-514).   Except as otherwise provided, the provisions described in this document generally areeffective as if included in the originally enacted related legislation.

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**DESCRIPTION OF TAX TECHNICAL CORRECTIONS**

**A.  Technical Corrections to the 1998 Act**

**1.  Burden of proof (sec. 3001 of the 1998 Act and sec. 7491 (a)(2)(C) of the Code)**

**Present Law**

	The Treasury Secretary has the burden of proof in any court proceeding with respect to afactual issue if the taxpayer introduces credible evidence with respect to any factual issuerelevant to ascertaining the taxpayer's tax liability, provided specified conditions are satisfied(sec. 7491).  One of these is that corporations, trusts, and partnerships must meet certain networth limitations.  These net worth limitations do not apply to individuals or to estates.

**Explanation of Provision**

	The provision removes the net worth limitation from certain revocable trusts for the sameperiod of time that the trust would have been treated as part of the estate had the trust made theelection under section 645 to be treated as part of the estate.

**2.  Relief for innocent spouses (sec. 3201 of the 1998 Act and secs. 2024(a) and 6015(e) of theCode)**

**Present Law**

	A taxpayer who is no longer married to, is separated from, or has been living apart for atleast 12 months from the person with whom he or she originally joined in filing a joint Federalincome tax return may elect to limit his or her liability for a deficiency arising from such jointreturn to the amount of the deficiency that is attributable to items that are allocable to suchelecting spouse.  The election is limited to deficiency situations and only affects the amount ofthe deficiency for which the electing spouse is liable.  Thus, the election cannot be used togenerate a refund, to direct a refund to one spouse or the other, or to allocate responsibility forpayment where a balance due is reported on, but not paid with, a joint return.

	In addition to the election to limit the liability for deficiencies, a taxpayer may be eligiblefor innocent spouse relief.  Innocent spouse relief allows certain taxpayers who joined in thefiling of a joint return to be relieved of liability for an understatement of tax that is attributable toitems of the other spouse to the extent that the taxpayer did not know or have reason to know ofthe understatement.  The Secretary is also authorized to provide equitable relief in situationswhere, taking into account all of the facts and circumstances, it is inequitable to hold anindividual responsible for all or a part of any unpaid tax or deficiency arising from a joint return. Under certain circumstances, it is possible that a refund could be obtained under this authority.

**Explanation of Provision**

	The provision clarifies that the ability to obtain a credit or refund of Federal income tax islimited to situations where the taxpayer qualifies for innocent spouse relief or where theSecretary exercises his authority to provide equitable relief. 

**3.  Interest netting (sec. 3301 (c)(2) of the 1998 Act)**

**Present Law**

	For calendar quarters beginning after July 22, 1998, a net interest rate of zero applieswhere interest is payable and allowable on equivalent amounts of overpayment andunderpayment of any tax imposed by the Internal Revenue Code.  In addition, the net interest rateof zero will apply to periods on or before July 22, 1998, providing (1) the statute of limitationshas not expired with respect to either the underpayment or overpayment, (2) the taxpayeridentifies the periods of underpayment and overpayment where interest is payable and allowablefor which the net interest rate of zero would apply, and (3) on or before December 31, 1999, thetaxpayer asks the Secretary to apply the net zero rate. 

**Explanation of Provision**

	The provision restores language originally included in the Senate amendment thatclarifies that the statute of limitations must not have expired with regard to either a taxunderpayment or overpayment for the net zero rate to apply.

**4.  Effective date for elimination of 18-month holding period for capital gains (sec. 5001 ofthe 1998 Act and sec. 1(h) of the Code)**

**Present Law
	The 1998 Act repealed the provision in the 1997 Act providing a maximum 28-percentrate for the long-term capital gain attributable to property held more than one year but not morethan 18 months.  Instead, the 1998 Act treated this gain in the same manner as gain from propertyheld more than 18 months.  The provision in the 1998 Act is effective for amounts properly takeninto account after December 31, 1997.  For gains taken into account by a pass-thru entity, such asa partnership, S corporation, trust, estate, RIC or REIT, the date that the entity properly took thegain into account is the appropriate date in applying this provision.  Thus, for example, amountsproperly taken into account by a pass-thru entity in 1997 with respect to property held more thanone year but not more than 18 months which are included in income on an individual's 1998return are taken into account in computing 28-percent rate gain.

**Explanation of Provision**
	Under the provision, in the case of a capital gain distribution made (or, treated under theRIC or REIT provisions of the Code, as made) by a RIC or REIT after 1997, no amount will betaken into account in computing 28-percent rate gain by reason of property being held more thanone year but not more than 18 months, other than amounts taken into account by the RIC orREIT from other pass-thru entities in which the RIC or REIT holds an interest.  A similar ruleapplies to amounts properly taken into account by a RIC or REIT by reason of holding, directlyor indirectly, an interest in another RIC or REIT to which the rule in the preceding sentenceapplies.  Thus, for example, if a RIC sold stock held more than 1 year but not more than 18months on November 15, 1997, for a gain, and makes a capital gain distribution in 1998, the gainis not taken into account in computing 28-percent rate gain for purposes of determining thetaxation of the 1998 distribution.  If, however,  gain was taken into account by a RIC by reasonof holding an interest in a calendar year 1997 partnership, the gain will not be recharacterized byreason of this provision.

	The provision also corrects a cross reference.

**B. Technical Corrections to the 1997 Act**

**1.  Treatment of interest on qualified education loans (sec. 202 of the 1997 Act and secs. 221and 163(h) of the Code)**

**Present Law
	Present law, as modified by the 1997 Act, provides that certain individuals who have paidinterest on qualified education loans may claim an above-the-line deduction for such interestexpense, up to a maximum dollar amount per year ($1,000 for taxable years beginning in 1998),subject to certain requirements.  Present law also provides that in the case of a taxpayer otherthan a corporation, no deduction is allowed for personal interest.  For this purpose, personalinterest means any interest allowable as a deduction, other than certain types of interest listed inthe statute.  This provision does not specifically provide that otherwise deductible qualifiededucation loan interest is not treated as personal interest.

**Explanation of Provision
	The provision clarifies that otherwise deductible qualified education loan interest is nottreated as nondeductible personal interest.

**2.  Capital gain distributions of charitable remainder trusts (sec. 311 of the 1997 Act andsec. 5001 of the 1998 Act and sec. 1(h) of the Code)**

**Present Law**

	Under present law, the income beneficiary of a charitable remainder trust ("CRT")includes the trust's capital gain in income when the gains are distributed to the beneficiary (sec.664(b)(2)).  Internal Revenue Service Notice 98-20 provides guidance with respect to thecategorization of long-term capital gain distributions from a CRT under the capital gain rulesenacted by the 1997 Act.  Under the Notice, long-term capital gains properly taken into accountby the trust before January 1, 1997, are treated as falling in the 20-percent group of gain (i.e.,gain not in the 28-percent rate gain or unrecaptured sec. 1250 gain).  Long-term capital gains properly taken into account by the trust after December 31, 1996, and before May 7, 1997, areincluded in 28-percent rate gain.  Long-term capital gains properly taken into account by the trustafter May 6, 1997, are treated as falling into the category which would apply if the trust itselfwere subject to tax. 

**Explanation of Provision**

	The provision provides that, in the case of  a capital gain distribution by a CRT afterDecember 31, 1997,  with respect to amounts properly taken into account by the trust during1997, amounts will not be included in the 28-percent rate gain category solely by reason of being properly taken into account by the trust before May 7, 1997, or by reason of the propertybeing held not more than 18 months.  Thus, for example, the sale of stock by a CRT on February1, 1997, will not be taken into account in determining 28-percent rate gain where the gain isdistributed after 1997.

**Effective Date**
	The provision applies to taxable years beginning after December  31, 1997.

**3.  Gifts may not be revalued for estate tax purposes after expiration of statute oflimitations (sec. 506 of the 1997 Act and sec. 2001(f)(2) of the Code)**

**Present Law**

Basic structure of Federal estate and gift taxes.--The Federal estate and gift taxes areunified so that a single progressive rate schedule is applied to an individual's cumulative gifts andbequests.  The tax on gifts made in a particular year is computed by determining the tax on thesum of the taxable gifts made in that year and in all prior years and then subtracting the tax on theprior years taxable gifts and the unified credit.  Similarly, the estate tax is computed bydetermining the tax on the sum of the taxable estate and prior taxable gifts and then subtractingthe tax on taxable gifts and the unified credit.

	This structure raises two different, but related, issues: (1) what is the period beyondwhich additional gift taxes cannot be assessed or collected -- generically referred to as the"statute of limitations" -- and (2) what is the period beyond which the amount of prior transferscannot be revalued for the purpose of determining the amount of tax on subsequent transfers.

Gift tax statute of limitations.--Section 6501(a) provides the general rule that any tax(including gift and estate tax) must be assessed within 3 years after the return is filed by thetaxpayer.  Under section 6501(e)(2), the period for assessments of gift or estate tax is increased tosix years where there is more than a 25 percent omission in the amount of the gross estate or totalgifts disclosed on the gift  or estate tax return.

Revaluation of gifts for gift tax purposes.--Under a  rule applicable to the computation ofthe gift tax (sec. 2504(c)), the value of gifts made in prior years is the value that was used todetermine the prior year's gift tax if the statute of limitations for assessment of gift tax on theprior gifts has expired.  In addition, section  6501(c)(9)  provides that the value of any item whichis required to be disclosed on a gift tax return may not be redetermined by the Commissionerafter the expiration of  the statute of limitations.

	The legislative history of that section that stated that: "This rule is applicable even wherethe value of the gift as shown on the return does not result in any gift tax being owed (e.g.,through use of the unified credit)...."   That legislative history further stated that, in order torevalue a gift that has been adequately disclosed on a gift tax return, the IRS must issue a finalnotice of redetermination of value (a "final notice") within the statute of limitations applicable tothe gift for gift tax purposes (generally, three years).  That legislative history continued by statingthat the Congress anticipated that the IRS will develop an administrative appeals processwhereby a taxpayer can challenge a redetermination of value by the IRS prior to issuance of afinal notice.  In the event the taxpayer and the IRS cannot agree on the value of a gift, the 1997Act provided the U.S. Tax Court with jurisdiction to issue a declaratory judgment on the value ofa gift (section 7477).  A taxpayer who is mailed a final notice may challenge the redeterminedvalue of the gift (as contained in the final notice) by filing a motion for a declaratory judgmentwith the Tax Court.  The motion must be filed on or before 90 days from the date that the finalnotice was mailed.  The statute of limitations is tolled during the pendency of the Tax Courtproceeding.

	Revaluation of gifts for estate tax purposes.--Similarly, a gift cannot be revalued forpurposes of determining the applicable estate tax bracket and available unified credit if (1) thestatute of limitations has expired and (2) the value of the gift is shown or disclosed on gift taxreturn or is disclosed in a statement attached to the gift tax return (section 2001(f)).

**Explanation of Provision**

	The provision clarifies the rules relating to revaluations of prior transfers for computationof the estate tax to provide that the value of a prior transfer cannot be redetermined if the transferwas disclosed on a gift tax return, or in a statement attached to the gift tax return, in a manner toadequately apprise the Treasury Secretary of the nature the transfer even if there was no gift taximposes on that transfer.  In addition, the provision removes the revaluation rule in section6501(c)(9) since the substance of that rule also is  provided in sections 2001(f) and 2504(c).

**4.  Coordinate Vaccine Injury Compensation Trust Fund expenditure purposes with list oftaxable vaccines (sec. 904 of the 1997 Act and sec. 9510(c) of the Code)**

**Present Law**

	A manufacturer's excise tax is imposed on certain vaccines routinely recommended foradministration to children (sec. 4131).  The tax is imposed at a rate of $0.75 per dose on anylisted vaccine component.  Taxable vaccine components are vaccines against diphtheria, tetanus,pertussis, measles, mumps, rubella,  polio, HIB (haemophilus influenza type B), hepatitis B, andvaricella (chicken pox).

	Amounts equal to net revenues from this excise tax are deposited in the Vaccine InjuryCompensation Trust Fund ("vaccine Trust Fund") to finance compensation awards under theFederal Vaccine Injury Compensation Program for individuals who suffer certain injuriesfollowing administration of the taxable vaccines.  Present law provides that payments from theVaccine Trust Fund may be made only for vaccines eligible under the program as of December22, 1987 (sec. 9510(c)(1)).  Thus, payments may not be made for injuries related to the HIB,hepatitis B or varicella vaccines.

**Explanation of Provision**

	The provision provides that payments are permitted from the Vaccine Trust Fund forinjuries related to the administration of the HIB, hepatitis B, and varicella vaccines.

**5.  Abatement of interest by reason of Presidentially declared disaster (sec. 915 of the 1997Act and sec. 6404(h) of the Code)**

**Present Law
	The Taxpayer Relief Act of 1997 ("1997 Act") provided that, if the Secretary of theTreasury extends the filing date of an individual tax return for 1997 for individuals living in anarea that has been declared a disaster area by the President during 1997, no interest shall becharged as a result of the failure of an individual taxpayer to file an individual tax return, or paythe taxes shown on such return, during the extension.

	The Internal Revenue Service Restructuring and Reform Act of 1998 ("1998 Act")contains a similar rule applicable to all taxpayers for tax years beginning after 1997 for disastersdeclared after 1997.  The status of disasters declared in 1998 but that relate to the 1997 tax yearis unclear.

**Explanation of Provision**

	The provision amends the 1997 Act rule so that it is available for disasters declared in1997 or in 1998 with respect to the 1997 tax year.

**6.  Treatment of certain corporate distributions (sec. 1012 of the 1997 Act and secs. 351(c)and 368(a)(2)(H) of the Code)**

**Present Law**

	The 1997 Act (sec. 1012(a)) requires a distributing corporation to recognize corporatelevel gain on the distribution of stock of a controlled corporation under section 355 of  the Codeif, pursuant to a plan or series of related transactions, one or more persons acquire a 50-percent orgreater interest (defined as 50 percent or more of the voting power or value of the stock) of eitherthe distributing or controlled corporation (Code sec. 355(e)).  Certain transactions are exceptedfrom the definition of acquisition for this purpose.  Under the technical corrections included inthe Internal Revenue Service Restructuring and Reform Act of 1998,  in the case of acquisitionsunder section 355(e)(3)(A)(iv), the acquisition of stock in the distributing corporation or anycontrolled corporation is disregarded to the extent that the percentage of stock owned directly orindirectly in such corporation by each person owning stock in such corporation immediatelybefore the acquisition does not decrease. (2)

	In the case of a 50-percent or more acquisition of either the distributing corporation or thecontrolled corporation, the amount of gain recognized is the amount that the distributingcorporation would have recognized had the stock of the controlled corporation been sold for fairmarket value on the date of the distribution.  No adjustment to the basis of the stock or assets ofeither corporation is allowed by reason of the recognition of the gain.(3)****

	The 1997 Act (as amended by the technical corrections contained in the Internal RevenueService Restructuring and Reform Act of 1998) also modified certain rules for determiningcontrol immediately after a distribution in the case of certain divisive transactions in which acontrolled corporation is distributed and the transaction meets the requirements of section 355. In such cases, under section 351 and modified section 368(a)(2)(H) with respect toreorganizations under section 368(a)(1)(D), the fact that the shareholders of the distributingcorporation dispose of part or all of the distributed stock shall not be taken into account.

	The effective date (Act section 1012(d)(1)) states that the relevant  provisions of the 1997Act apply to distributions after April 16, 1997, pursuant to a plan (or series of relatedtransactions) which involves an acquisition occurring after such date (unless certain transitionprovisions apply).

**Explanation of Provision**

	The provision clarifies the computation of the "control immediately after" requirement ofsection 351(c) and section 368(a)(2)(H)  in the case of certain divisive transactions in which acorporation contributes assets to a controlled corporation and then distributes the stock of thecontrolled corporation in a transaction that meets the requirements of section 355 (or so much ofsection 356 as relates to section 355).  In such cases, not only the fact that the shareholders of thedistributing corporation dispose of part or all of the distributed stock,  but also the fact that thecorporation whose stock was distributed issues additional stock, shall not be taken into account.

**Effective Date**

	The provision generally is effective for distributions after April 16, 1997, as if included inthe 1997 Act.

**7.  Treatment of net operating losses arising from certain eligible losses (sec. 1082 of the1997 Act and sec. 172 of the Code)**

**Present Law**

	The 1997 Act changed the general net operating loss ("NOL") carryback period of ataxpayer from three years to two years.  The three-year carryback period was retained in the caseof an NOL attributable to an eligible loss.  An eligible loss is defined as (1) a casualty or theftloss of an individual taxpayer, or (2) a loss incurred in a Presidentially declared disaster area by ataxpayer engaged in a farming business or a small business.  Other special rules apply to realestate investment trusts (REITs) (no carrybacks), specified liability losses (10-year carryback),and excess interest losses (no carrybacks).

**Explanation of Provision**

	The provision coordinates the use of eligible losses with the general rule for NOLs in thesame manner as a loss arising from a specified liability loss.  Thus, an eligible loss for any year istreated as a separate net operating loss and is taken into account after the remaining portion of thenet operating loss for the taxable year.							

**8.  Determination of unborrowed policy cash value under COLI pro rata interestdisallowance rules (sec.  1084 of the 1997 Act and sec. 264(f) of the Code)**

**Present Law
	In the case of a taxpayer other than a natural person, no deduction is allowed for theportion of the taxpayer's interest expense that is allocable to unborrowed policy cash surrendervalues with respect to any life insurance policy or annuity or endowment contract issued afterJune 8, 1997.  Interest expense is allocable to unborrowed policy cash values based on the ratioof (1) the taxpayer's average unborrowed policy cash values of life insurance policies andannuity and endowment contracts, issued after June 8, 1997, to (2) the sum of (a) in the case ofassets that are life insurance policies or annuity or endowment contracts, the average unborrowedpolicy cash values and (b) in the case of other assets the average adjusted bases for all such otherassets of the taxpayer.  The unborrowed policy cash values means the cash surrender value of thepolicy or contract determined without regard to any surrender charge, reduced by the amount ofany loan with respect to the policy or contract.  The cash surrender value is to be determinedwithout regard to any other contractual or noncontractual arrangement that artificially depressesthe unborrowed policy cash value of a contract.

**Explanation of Provision**

	The provision clarifies the meaning of "unborrowed policy cash value" under section264(f)(3), with respect to any life insurance, annuity or endowment contract.  The technicalcorrection clarifies that under section 264(f)(3), if the cash surrender value (determined withoutregard to any surrender charges) with respect to any policy or contract does not reasonablyapproximate its actual value, then the amount taken into account for this purpose is the greater of(1) the amount of the insurance company's liability with respect to the policy or contract, asdetermined for purposes of the annual statement approved by the National Association orInsurance Commissioners, (2) the amount of the insurance company's reserve with respect to thepolicy or contract for purposes of such annual statement; or such other amount as is determinedby the Treasury Secretary.  No inference is intended that such amounts may not be taken intoaccount in determining the cash surrender value of a policy or contract in such circumstances forpurposes of any other provision of the Code.

**9.  Payment of taxes by commercially acceptable means (sec. 1205 of the 1997 Act and sec.6311 (d)(2) of the Code)**

**Present Law
	The Code generally permits the payment of taxes by commercially acceptable means(such as credit cards) (sec. 6311(d)).  The Secretary may not pay any fee or provide any otherconsideration in connection with this provision.  This fee prohibition may have an unintendedimpact on Treasury contracts for the provision of services unrelated to the payment of incometaxes by commercially acceptable means.

**Explanation of Provision**

	The provision clarifies that the prohibition on paying any fees or providing any otherconsideration applies to the use of credit or debit cards for the payment of income taxes.

**C.  Technical Corrections to the 1984 Act**

**1.  Casualty loss deduction (sec. 711(c) of the 1984 Act and secs. 172(d)(4), 67(b)(3), 68(c)(3),and 873(b) of the Code)**

**Present Law**

	The Tax Reform Act of 1984 ("1984 Act") deleted casualty and theft losses from propertyconnected with a nonbusiness transaction entered into for profit from the list of losses set forth insection 165(c)(3).  This amendment was made in order to provide that these losses weredeductible in full and not subject to the $100 per casualty limitation or the 10-percent adjustedgross income floor applicable to personal casualty losses.  However, the amendmentinadvertently eliminated the deduction for these losses from the computation of the net operatingloss.  Also, the Tax Reform Act of 1986 provided that casualty losses described in section165(c)(3) are not  miscellaneous itemized deductions subject to the 2-percent adjusted grossincome floor, and the Revenue Reconciliation Act of 1990 provided that these losses are nottreated as itemized deductions in computing the overall limitation on itemized deductions.  Thelosses of  nonresident aliens are limited to deductions described in section 165(c)(3).  Because ofthe change made by the 1984 Act, the reference to section 165(c)(3) does not include casualtyand theft losses from nonbusiness transactions entered into for profit.

**Explanation of Provision**
****The provision provides that all deductions for nonbusiness casualty and theft losses aretaken into account in computing the net operating loss.  Also, these deductions are not treated asmiscellaneous itemized deductions subject to the 2-percent adjusted gross income floor, or asitemized deductions subject to the overall limitation on itemized deductions, and are allowed tononresident aliens.

**Effective Dates**
	The provision relating to the net operating loss and the deduction for nonresident aliensapplies to taxable years beginning after December 31, 1983.

	The provision relating to miscellaneous itemized deductions applies to taxable yearsbeginning after December 31, 1986.

	The provision relating to the overall limitation on itemized deductions applies to taxableyears beginning after December 31, 1990.

**D.  Disclosure of Tax Return Information to the Department of Agriculture(sec. 6103 (j) of the Code)**

**Present Law**

	Tax return information generally may not be disclosed, except as specifically provided bystatute.  Disclosure is permitted to the Bureau of the Census for specified purposes, whichincluded the responsibility of structuring, conducting, and preparing the census of agriculture(sec. 6103(j)(1)).   The Census of Agriculture Act of 1997 (P.L. 105-113) transferred thisresponsibility from the Bureau of the Census to the Department of Agriculture.

**Explanation of Provision**

	The provision permits the continuation of disclosure of tax return information for thepurpose of structuring, conducting, and preparing the census of agriculture by authorizing theDepartment of Agriculture to receive this information.

**Effective Date**

	The provision is effective on the date of enactment of this technical correction.

**E.  Technical Corrections to the Transportation Equity Act for the 21st Century (sec. 9004 of the Act and sec. 9503(f) of the Code)**

**Present Law
	The Transportation Equity Act for the 21st Century ("Transportation Equity Act") (P.L.105-178) extended the Highway Trust Fund and accompanying highway excise taxes.  TheTransportation Equity Act also changed the budgetary treatment of Highway Trust Fundexpenditures, including repeal of a provision that balances maintained in the Highway TrustFund pending expenditure earn interest from the General Fund of the Treasury.

**Explanation of Provision**
	The provision clarifies that the Secretary of the Treasury is not required to investHighway Trust Fund balances in interest-bearing obligations (because any interest paid to theTrust Fund by the General Fund would be immediately returned to the General Fund).

1.   This document may be cited as follows: Joint Committee on Taxation; *Description ofTax Technical Corrections in the "Taxpayer Relief Act of 1998"* (JCX-61-98), September 15,1998.
2.   This exception (as certain other exceptions) does not apply if the stock held before theacquisition was acquired pursuant to a plan (or series of related transactions) to acquire a 50-percent or greater interest in the distributing or a controlled corporation.
3.   The 1997 Act does not limit the otherwise applicable Treasury regulatory authorityunder section 336(e) of the Code. Nor does it limit the otherwise applicable provisions ofsection1367 with respect to the effect on shareholder stock basis of gain recognized by an S corporationunder this provision.**************