**SUMMARY OF REVENUE PROVISIONSCONTAINED IN LEGISLATION ENACTEDDURING THE 105TH CONGRESS**
**Prepared by the Staff**

**of the**

**JOINT COMMITTEE ON TAXATION**

**November 19, 1998**

**JCX-75-98**
****
**SUMMARY CONTENTS**

**INTRODUCTION**

**PART ONE: AIRPORT AND AIRWAY TRUST FUND EXTENSION ACT OF 1997 (H.R. 668)**

**PART TWO: TAXPAYER RELIEF ACT OF 1997 (H.R. 2014)**
**PART THREE: REVENUE PROVISIONS OF THE BALANCED BUDGET ACT OF 1997 (H.R. 2015)**

**PART FOUR: TAXPAYER BROWSING PROTECTION ACT (H.R. 1226)**

**PART FIVE: EXTENSION OF HIGHWAY TRUST FUND (S. 1519)**

**PART SIX: REVENUE PROVISIONS OF THE TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY (TITLE IX OF H.R. 2400)**

**PART SEVEN: INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 (H.R. 2676)**

**PART EIGHT: TAX AND TRADE RELIEF EXTENSION ACT OF 1998 (DIVISION J OF H.R. 4328, THE OMNIBUS CONSOLIDATED AND EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT, 1999)**

**PART NINE: RICKY RAY HEMOPHILIA RELIEF FUND ACT OF 1998 (SEC. 103(h) OF H.R. 1023)**

**APPENDIX: TOPICAL INDEX TO REVENUE PROVISIONS ENACTED DURING THE 105TH CONGRESS**

**CONTENTS**

**INTRODUCTION**

**PART ONE: AIRPORT AND AIRWAY TRUST FUND EXTENSION ACT OF 1997 (H.R. 668)**

			1.	Reinstate air transportation excise taxes	

			2.	Transfer revenues to the Airport Trust Fund	

			3.	Modify Treasury Department excise tax deposit regulations	

**PART TWO: TAXPAYER RELIEF ACT OF 1997 (H.R. 2014)**

	TITLE I.--CHILD TAX CREDIT: HEALTH CARE FOR CHILDREN	

			1.	Child tax credit	

			2.	Expand definition of high-risk individuals with respect to tax-exempt state-sponsored organizations providing health coverage	

	TITLE II.--EDUCATION TAX INCENTIVES	

			1.	HOPE tax credit and Lifetime Learning tax credit for higher education tuition expenses	

			2.	Deduction for student loan interest	

			3.	Tax treatment of qualified State tuition programs and education IRAs; exclusion for certain distributions from education IRAs used to pay qualified higher education expenses	

			4.	Treatment of cancellation of certain student loans	

			5.	Penalty-free withdrawals from IRAs for higher education expenses	

			6.	Employer-provided educational assistance	

			7.	Modification of $150 million limit on qualified 501(c)(3) bonds other than hospital bonds	

			8.	Enhanced deduction for corporate contributions of computer technology and equipment	

			9.	Expansion of arbitrage rebate exception for certain bonds	

			10.	Tax credit for holders of qualified zone academy bonds	

	TITLE III.--SAVINGS AND INVESTMENT INCENTIVES	

			1.	Individual retirement arrangements	

			2.	Capital gains provisions	

	TITLE IV.--ALTERNATIVE MINIMUM TAX PROVISIONS	

			1.	Repeal alternative minimum tax for small businesses and repeal the depreciation adjustment	

			2.	Repeal AMT installment method adjustment for farmers	

	TITLE V.--ESTATE, GIFT, AND GENERATION-SKIPPING TAX PROVISIONS	

			1.	Increase in estate and gift tax unified credit	

			2.	Indexing of certain other estate and gift tax provisions	

			3.	Estate tax exclusion for qualified family-owned businesses	

			4.	Reduction in estate tax for certain land subject to permanent 				conservation easement	

			5.	Installment payments of estate tax attributable to closely held businesses	

			6.	Estate tax recapture from cash leases of specially-valued property	

			7.	Clarify eligibility for extension of time for payment of estate tax	

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

			9.	Repeal of throwback rules applicable to certain domestic trusts	

			10.	Modification of generation-skipping transfer tax for transfers to individual with deceased parents	

	TITLE VI.--EXTENSION OF CERTAIN EXPIRING TAX PROVISIONS	

			1.	Research tax credit	

			2.	Contributions of stock to private foundations	

			3.	Work opportunity tax credit	

			4.	Orphan drug tax credit	

	TITLE VII.--DISTRICT OF COLUMBIA TAX INCENTIVES	

			1.	Designation of D.C. Enterprise Zone	

			2.	Empowerment zone wage credit, expensing, and tax-exempt financing	

			3.	Zero-percent capital gains rate	

			4.	First-time homebuyer tax credit	

	TITLE VIII.--WELFARE-TO-WORK TAX CREDIT	

	TITLE IX.--MISCELLANEOUS PROVISIONS	

			1.	Excise tax provisions	

			2.	Disaster relief provisions	

			3.	Employment tax provisions	

			4.	Small business provisions	

			5.	Other provisions	

	TITLE X.--REVENUE-INCREASE PROVISIONS	

			1.	Financial product provisions	

			2.	Corporate organizations and reorganizations	

			3.	Other corporate provisions	

			4.	Administrative provisions	

			5.	Excise tax provisions	

			6.	Provisions relating to exempt organizations	

			7.	Foreign provisions	

			8.	Pension and employee benefit revenue-increase provisions	

			9.	Other revenue-increase provisions	

	TITLE XI.--FOREIGN TAX PROVISIONS	

			1.	Simplify foreign tax credit limitation for individuals	

			2.	Simplify translation of foreign taxes	

			3.	Election to use simplified foreign tax credit limitation for alternative minimum tax purposes	

			4.	Simplify treatment of personal transactions in foreign currency	

			5.	Simplify foreign tax credit limitation for dividends from 10/50 companies	

			6.	General provisions affecting treatment of controlled foreign corporations	

			7.	Modification of passive foreign investment company provisions to eliminate overlap with subpart F, to allow mark-to-market election, and to require measurement based on value for PFIC asset test	

			8.	Simplify formation and operation of international joint ventures	

			9.	Modification of reporting threshold for stock ownership of a foreign corporation	

			10.	Transition rule for certain trusts	

			11.	Simplify stock and securities trading safe harbor	

			12.	Clarification of determination of foreign taxes deemed paid	

			13.	Clarification of foreign tax credit limitation for financial services income	

			14.	Eligibility of licenses of computer software for foreign sales corporation benefits
		15.	Increase dollar limitation on section 911 exclusion	
			16.	Treatment of certain securities positions under the subpart F investment in U.S. property rules	

			17.	Exception from foreign personal holding company income under				subpart F for active financing income	

			18.	Treat service income of nonresident alien individuals earned on foreign ships as foreign source income and disregard U.S. presence of such individuals	

	TITLE XII.--SIMPLIFICATION PROVISIONS RELATING TO INDIVIDUALS AND BUSINESSES	

			1.	Individual simplification provisions	

			2.	Business simplification provisions	

			3.	Partnership simplification provisions	

			4.	REIT simplification	

			5.	Repeal of 30-percent requirement of regulated investment companies	

			6.	Taxpayer protections	

	TITLE XIII.--ESTATE, GIFT, AND TRUST SIMPLIFICATION PROVISIONS	

	TITLE XIV.--EXCISE TAX AND OTHER SIMPLIFICATION PROVISIONS	

			1.	Excise tax simplification	

			2.	Tax-exempt bond provisions	

			3.	Tax court provisions	

			4.	Other provisions	

	TITLE XV.--PENSION AND EMPLOYEE BENEFIT PROVISIONS	

	TITLE XVI.--TECHNICAL CORRECTIONS PROVISIONS	

**PART THREE: REVENUE PROVISIONS OF THE BALANCED BUDGET ACT OF 1997 (H.R. 2015)**

		A.  Taxation of Medicare+Choice Medical Savings Accounts	

		B.  Tax Treatment of Hospitals Which Participate in Provider-Sponsored Organizations	

		C.	Provision of Employer Identification Numbers by Medicare Providers	

		D.	Disclosure of Tax Return Information for Verification of Employment Status of Medicare Beneficiaries and the Spouse of a Medicare Beneficiary	

	E.	Employment Tax Provisions	

		1.	Exemption from service performed by election workers from the Federal Unemployment Tax	

		2.	Treatment of certain services performed by inmates	

		3.	Exemption of service performed for an elementary or secondary school operated primarily for religious purposes from the Federal			unemployment tax	

		F.	Authorization of Appropriations for Enforcement Initiatives Related to the Earned Income Credit	

	G.	Increase in Excise Tax on Tobacco Products	

**PART FOUR: TAXPAYER BROWSING PROTECTION ACT (H.R. 1226)**

**PART FIVE: EXTENSION OF HIGHWAY TRUST FUND (S. 1519)**

**PART SIX: REVENUE PROVISIONS OF THE TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY (TITLE IX OF H.R. 2400)**

	I.	HIGHWAY-RELATED TAXES AND TRUST FUND	

		A.	Extension and Modification of Highway-Related Taxes	

			1.	Highway-related taxes and exemptions	

		2.	Motor fuels refund procedure	

			3.	Requirement that motor fuels terminals offer dyed fuel	

		B.	Highway Trust Fund Provisions	

	II.	OTHER TRUST FUND PROVISIONS	

	A.	Aquatic Resources Trust Fund	

	B.	National Recreational Trails Trust Fund	

	III.	ADDITIONAL REVENUE PROVISIONS	

		A.	Rail Fuels Excise Tax	

		B.	Income Tax Provisions	

			1.	Tax treatment of parking and transit benefits	

			2.	Purposes for which Amtrak NOL monies may be used in non-Amtrak States	

**PART SEVEN: INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 (H.R. 2676)**

	TITLE I. REORGANIZATION OF STRUCTURE AND MANAGEMENT OF THE IRS	

		A.	IRS Restructuring and Creation of IRS Oversight Board	

			1.	IRS restructuring and mission	

			2.	Establishment and duties of IRS Oversight Board	

		B.	Appointment and Duties of IRS Commissioner and Chief Counsel		and Other Personnel	

			1.	IRS Commissioner and other personnel	

			2.	IRS Chief Counsel	

		C.	Structure and Funding of the Employee Plans and Exempt Organizations Division ("EP/EO")	

		D.	Taxpayer Advocate and Taxpayer Assistance Orders	

		E.	Treasury Office of Inspector General; IRS Office of the Chief Inspector	

		F.	Prohibition on Executive Branch Influence Over Taxpayer Audits	

		G.	IRS Personnel Flexibilities	

	TITLE II.  ELECTRONIC FILING	

		A.	Electronic Filing of Tax and Information Returns	

		B.	Due Date for Certain Information Returns	

		C.	Paperless Electronic Filing	

		D.	Return-Free Tax System	

		E.	Access to Account Information	

	TITLE III.  TAXPAYER PROTECTION AND RIGHTS	

		A.	Burden of Proof	

		B.	Proceedings by Taxpayers	

			1.	Expansion of authority to award costs and certain fees	

			2.	Civil damages for collection actions	

			3.	Increase in size of cases permitted on small case calendar	

			4.	Actions for refund with respect to certain estates which have elected the installment method of payment	

			5.	Review of an adverse IRS determination of a bond issue's tax-exempt status	

			6.	Civil action for release of erroneous lien	

		C.	Relief for Innocent Spouses and for Taxpayers Unable to Manage Their Financial Affairs Due to Disabilities	

			1.	Relief for innocent spouses	

			2.	Suspension of statute of limitations on filing refund claims during periods of disability	

		D.	Provisions Relating to Interest and Penalties	

			1.	Elimination of interest differential on overlapping periods of interest on income tax overpayments and underpayments	

			2.	Increase in overpayment rate payable to taxpayers other than corporations	

			3.	Mitigation of penalty for individual's failure to pay during period of installment agreement	

			4.	Mitigation of failure to deposit penalty	

			5.	Suspension of interest and certain penalties if Secretary fails to contact individual taxpayer	

			6.	Procedural requirements for imposition of penalties and additions to tax	

			7.	Personal delivery of notice of penalty under section 6672	

			8.	Notice of interest charges	

			9.	Abatement of interest on underpayments by taxpayers in Presidentially declared disaster areas	

		E.	Protections for Taxpayers Subject to Audit or Collection Activities	

			1.	Due process in IRS collection actions	

			2.	Examination activities	

				a.	Uniform application of confidentiality privilege to taxpayer communications with federally authorized practitioners	

				b.	Limitation on financial status audit techniques	
				c.	Software trade secrets protection	

				d.	Threat of audit prohibited to coerce tip reporting alternative	commitment agreements	
				e.	Taxpayers allowed motion to quash all third-party summonses	

				f.	Service of summonses to third-party recordkeepers permitted by mail	
				g.	Notice of IRS contact of third parties	

			3.	Collection activities	

				a.	Approval process for liens, levies, and seizures	

				b.	Modifications to certain levy exemption amounts					
c.	Release of levy upon agreement that amount is uncollectible	
				d.	Levy prohibited during pendency of refund proceedings	

				e.	Approval required for jeopardy and termination assessments and jeopardy levies	

				f.	Increase in amount of certain property on which lien not			valid
				g.	Waiver of early withdrawal tax for IRS levies on employer-				sponsored retirement plans or IRAs	
				h.	Prohibition of sales of seized property at less than minimum bid	
				i.	Accounting of sales of seized property					
j.	Uniform asset disposal mechanism

				k.	Codification of IRS administrative procedures for seizure of taxpayer's property	
				l.	Procedures for seizure of residences and businesses	

			4 .	Provisions relating to examination and collection activities	

				a.	Procedures relating to extensions of statute of limitations by agreement	

				b.	Offers-in-compromise	

				c.	Notice of deficiency to specify deadlines for filing Tax Court petition	
				d.	Refund or credit of overpayments before final determination	
				e.	IRS procedures relating to appeal of examinations and collections	

				f.	Application of certain fair debt collection practices	

				g.	Guaranteed availability of installment agreements	

				h.	Prohibition on requests to taxpayers to waive rights to bring actions	

		F.	Disclosures to Taxpayers	

			1.	Explanation of joint and several liability	

			2.	Explanation of taxpayers' rights in interviews with the IRS	

			3.	Disclosure of criteria for examination selection	

4.	Explanation of the appeals and collection process	
			5.	Explanation of reason for refund disallowance	

			6.	Statements to taxpayers with installment agreements	

			7.	Notification of change in tax matters partner	

			8.	Conditions under which taxpayers' returns may be disclosed	

			9.	Disclosure of Chief Counsel advice	

		G.	Low-Income Taxpayer Clinics	

		H.	Other Provisions		

			1.	Cataloging complaints	

			2.	Archive of records of Internal Revenue Service	

			3.	Payment of taxes	

			4.	Clarification of authority of Secretary relating to the making of elections	
			5.	IRS employee contacts	

			6.	Use of pseudonyms by IRS employees	
			7.	Illegal tax protestor designations	

			8.	Provision of confidential information to Congress by whistleblowers	

			9.	Listing of local IRS telephone numbers and addresses	

			10.	Identification of return preparers	

			11.	Offset of past-due, legally enforceable State income tax obligations against overpayments	
			12.	Reporting requirements relating to education tax credits	
		I.	Studies	

			1.	Administration of penalties and interest	
			2.	Confidentiality of tax return information	
			3.	Noncompliance with internal revenue laws by taxpayers	

			4.	Payments for informants	

TITLE IV.  CONGRESSIONAL ACCOUNTABILITY FOR THE IRS	

		A.	Review of Requests for GAO Investigations of the IRS	

		B.	Joint Congressional Review and Coordinated Oversight Reports	

		C.	Funding for Century Date Change	 

		D.	Tax Law Complexity Analysis	

	TITLE V.  ADDITIONAL PROVISIONS	

		A.	Elimination of 18-Month Holding Period for Capital Gains	

		B.	Deductibility of Meals Provided for the Convenience of the Employer	

	TITLE VI.  TAX TECHNICAL CORRECTIONS	

	TITLE VII.  REVENUE OFFSETS	

		A.	Employer Deductions for Vacation and Severance Pay	

		B.	Freeze Grandfathered Status of Stapled REITs	

		C.	Make Certain Trade Receivables Ineligible for Mark-to-Market Treatment	

		D.  Exclusion of Minimum Required Distributions from AGI for Roth IRA Conversions	

	TITLE IX.  CORRECTIONS TO THE TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY	

**PART EIGHT: TAX AND TRADE RELIEF EXTENSION ACT OF 1988(DIVISION J OF H.R. 4328, THE OMNIBUS CONSOLIDATED AND EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT, 1999)**

		A.	Emergency Tax Relief for Farmers	

			1.	Income averaging for farmers	

			2.	Farm production flexibility contract payments	

			3.	Net operating loss carrybacks	

		B.	Extension of Expiring Tax and Trade Provisions	

		C.	Other Revenue Provisions	

			1.	Personal credits fully allowed against regular tax liability during 1998	

			2.	Increase deduction for health insurance expenses of self-employed individuals	

			3.	Modification of individual estimated tax safe harbor	

			4.	Volume limits on private activity bonds	

			5.	Treasury study on depreciation	

			6.	State election to exempt student employees from Social Security	

		D.	Revenue Offset Provisions	

			1.	Treatment of certain deductible liquidating distributions of regulated investment companies ("RICs") and real estate investment trusts ("REITS")	
			2.	Vaccine excise tax	
			3.	Mathematical error procedure	

			4.	Restrict NOL carryback rules for specified liability losses	

		E.	Tax Technical Corrections Provisions	

		F.	Revenue Offset for Medicare Home Health Provision	

			1.	Treatment of certain prizes	

**PART NINE: RICKY RAY HEMOPHILIA RELIEF FUND ACT OF 1998(SEC. 103(h) OF H.R. 1023)**

**APPENDIX: TOPICAL INDEX TO REVENUE PROVISIONS ENACTED DURING THE	105TH CONGRESS** [NOT INCLUDED IN ON-LINE VERSION]	

**INTRODUCTION**

	This document,(1) prepared by the staff of the Joint Committee on Taxation, provides asummary of the revenue provisions contained in legislation enacted during the 105th Congress. This summary is prepared for the convenience of the Members and the general public.

	Part One of this document is a summary of the provisions contained in the Airport andAirway Trust Fund Extension Act of 1997 (H.R. 668, Public Law 105-2), enacted on February28, 1997.  Part Two is a summary of the Taxpayer Relief Act of 1997 (H.R. 2014, Public Law105-34), enacted on August 5, 1997.  Part Three is a summary of the revenue provisionscontained in the Balanced Budget Act of 1997 (H.R. 2015, Public Law 105-33), enacted onAugust 5, 1997.  Part Four is a summary of the Taxpayer Browsing Protection Act (H.R. 1226,Public Law 105-35), enacted on August 5, 1997.  Part Five is a summary of the extension of theHighway Trust Fund (S. 1519, Public Law 105-130), enacted on December 1, 1997.  Part Six is asummary of the revenue provisions in the Transportation Equity Act for the 21st Century (TitleIX of H.R. 2400, Public Law 105-178), enacted on June 9, 1998.  Part Seven is a summary of theInternal Revenue Service Restructuring and Reform Act of 1998 (H.R. 2676, Public Law 105-206), enacted on July 22, 1998.  Part Eight is a summary of the Tax and Trade Relief ExtensionAct of 1998, which was contained in Division J of the Omnibus Consolidated and EmergencySupplemental Appropriations Act, 1999 (H.R. 4328, Public Law 105-277), enacted on October21, 1998.  Part Nine is a summary of the revenue provision contained in the Ricky RayHemophilia Relief Fund Act of 1998 (sec. 103(h) of H.R. 1023, Public Law 105-369), enacted onNovember 12, 1998.  A topical index is contained in Appendix A **[not included in on-line version]**.

**PART ONE: AIRPORT AND AIRWAY TRUST FUND EXTENSION ACT OF 1997(H.R. 668)(2)**

**1.  Reinstate air transportation excise taxes**

	The Airport and Airway Trust Fund Extension Act of 1997 ("the Airport and AirwayAct") reinstated the air transportation excise taxes that expired after December 31, 1996, duringthe period beginning seven days after the date of enactment and ending after September 30, 1997. These taxes included commercial aviation, passenger ticket, and freight waybill taxes and thenoncommercial aviation gasoline and jet fuels taxes.  See, also, Part Two, which further extendedand modified the aviation excise taxes, and Part Eight, which describes subsequent changes toconform to new Trust Fund expenditure authority.

**2.  Transfer revenues to the Airport Trust Fund**

	The Airport and Airway Act authorized the Treasury Department to transfer to theAirport Trust Fund receipts attributable to excise taxes described above that were imposed oncommercial and general aviation.  This reauthorization permitted transfer of receipts attributableto taxes imposed both during the period August 27, 1996, through December 31, 1996, andduring the period beginning seven days after the date of enactment.

**3.  Modify Treasury Department excise tax deposit regulations**

	The provisions of Treasury Department regulations providing an exception to penaltiesfor underpayment of estimated excise taxes based on a look-back period were made inapplicablewhen tax was not imposed throughout the look-back period.  In such a case, taxpayers maycontinue to use an alternative safe harbor that provides that no underpayment penalty is imposedas long as the taxpayer has paid at least 95 percent of the current quarter's liability.

**PART TWO: TAXPAYER RELIEF ACT OF 1997 (H.R. 2014)(3)**

**TITLE I.--CHILD TAX CREDIT; HEALTH CARE FOR CHILDREN**

**1.  Child tax credit**

Size of credit.--The Taxpayer Relief Act of 1997 (the "1997 Act") provided a $500 ($400for taxable year 1998) credit for each qualifying child of a taxpayer under the age of 17.  Aqualifying child is defined as an individual for whom the taxpayer can claim a dependencyexemption and who is a son or daughter of the taxpayer (or descendent of either), a stepson orstepdaughter of the taxpayer or an eligible foster child of the taxpayer.

	Phaseout of credit.--For taxpayers with modified adjusted gross income (AGI) in excessof certain thresholds, the otherwise allowable child credit is phased out at a rate of $50 for each$1,000 of modified AGI (or fraction thereof) in excess of the threshold.  For married taxpayersfiling joint returns, the threshold is $110,000.  For taxpayers filing single or head of householdreturns, the threshold is $75,000.  For married taxpayers filing separate returns, the threshold is$55,000.  These thresholds are not indexed for inflation.

	Maximum allowable child credit.-The child credit, together with the other nonrefundablecredits, generally may not exceed the amount by which the individual's regular tax exceeds thetentative minimum tax.(4)

Refundable child credit.-For a taxpayer with three or more children, the child credit maybe refundable up to the amount by which the taxpayer's social security taxes exceeds the amountof the earned income tax credit.

Supplemental child credit.-In the case of a taxpayer whose credits (including the earnedincome credit) exceed the sum of the regular income tax and the social security taxes, the childcredit may be deemed to be an additional earned income credit.  This provision does not changethe individual's total credits.

Effective date.--Generally, the child tax credit was effective for taxable years beginningafter December 31, 1997.

**2.  Expand definition of high-risk individuals with respect to tax-exempt State-sponsoredorganizations providing health coverage**

	Present law provides tax-exempt status to any membership organization that isestablished by a State exclusively to provide coverage for medical care on a nonprofit basis tocertain high-risk individuals, provided certain criteria are satisfied.  The 1997 Act expanded thedefinition of high-risk individuals to include the spouse or any child of an individual who meetsthe prior-law definition of a high-risk individual, subject to certain requirements.  The provisionwas effective for taxable years beginning after December 31, 1997.

**TITLE II.--EDUCATION TAX INCENTIVES**

**1.  HOPE tax credit and Lifetime Learning tax credit for higher education tuition expenses**(5)

HOPE credit.--Individual taxpayers are allowed to claim a nonrefundable HOPE creditagainst Federal income taxes up to $1,500 per student for qualified tuition and fees paid duringthe year on behalf of a student (i.e., the taxpayer, the taxpayer's spouse, or a dependent) who isenrolled in a post-secondary degree or certificate program at an eligible institution on at least ahalf-time basis.  The credit rate is 100 percent on the first $1,000 of qualified tuition and fees and50 percent on the next $1,000 of qualified tuition and fees.  The HOPE credit is available onlyfor the first two years of a student's post-secondary education.  For taxable years beginning after2001, the $1,500 maximum HOPE credit amount will be indexed for inflation.  The HOPE creditamount that a taxpayer may otherwise claim is phased out for taxpayers with modified AGIbetween $40,000 and $50,000 ($80,000 and $100,000 for joint returns).

	The HOPE credit is computed on a per-student basis (i.e., a HOPE credit may becomputed separately for each eligible student in a taxpayer's family).  If a parent claims a childas a dependent, then only the parent may claim the HOPE credit with respect to such child, andany qualified expenses paid by the child are deemed to be paid by the parent. 

	For a taxable year, a taxpayer may elect with respect to an eligible student the HOPEcredit, the 20-percent Lifetime Learning credit (as provided for by the Act), or the exclusion fromgross income for certain distributions from an education IRA (also as provided for by the Act).

	The HOPE credit is available for expenses paid after December 31, 1997, for educationfurnished in academic periods beginning after such date.

	See, also, the provisions relating to reporting requirements for education tax credits inPart Seven, below.

Lifetime Learning credit.--The 1997 Act provided that individual taxpayers are allowedto claim a nonrefundable Lifetime Learning credit against Federal income taxes equal to 20percent of qualified tuition and fees paid during the taxable year on behalf of the taxpayer, thetaxpayer's spouse, and any dependent.  The student must be enrolled at an eligible educationalinstitution but need not be enrolled on at least a half-time basis.  Instead, the student is eligiblefor the Lifetime Learning credit so long as he or she is taking undergraduate or graduate-levelclasses to acquire or improve job skills (assuming that the other requirements for the credit aresatisfied).  For expenses paid before January 1, 2003, up to $5,000 of qualified tuition and feesper taxpayer return will be eligible for the Lifetime Learning credit (i.e., the maximum credit pertaxpayer return will be $1,000).  For expenses paid after December 31, 2002, up to $10,000 ofqualified tuition and fees per taxpayer return will be eligible for the Lifetime Learning credit(i.e., the maximum credit per taxpayer return will be $2,000).  The Lifetime Learning creditamount that a taxpayer may otherwise claim is phased out over the same income phase-out rangethat applies for purposes of the HOPE credit.

	The Lifetime Learning credit is computed on a per-taxpayer return basis (i.e., the creditdoes not vary based on the number of students in a taxpayer's family).  However, in contrast tothe HOPE credit, the Lifetime Learning credit may be claimed for an unlimited number oftaxable years.  If a parent claims a child as a dependent, then only the parent may claim theLifetime Learning credit with respect to such child, and any qualified tuition and fees paid by thechild are deemed to be paid by the parent.

	The Lifetime Learning credit is available for expenses paid after June 30, 1998, foreducation furnished in academic periods beginning after such date.

	See, also, the provisions relating to reporting requirements for education tax credits inPart Seven, below.

**2.  Deduction for student loan interest**

	Under the 1997 Act, certain individuals who are legally obligated to pay interest onqualified education loans may claim an above-the-line deduction for such interest expenses, up toa maximum deduction of $2,500 per year.  The maximum deduction is phased in over four years,with a $1,000 maximum deduction in 1998, $1,500 in 1999, $2,000 in 2000, and $2,500 in 2001. The maximum deduction amount is not indexed for inflation.  In addition,  the deduction isphased out ratably for individual taxpayers with modified AGI of $40,000 to $55,000 ($60,000 to$75,000 for joint returns); such income ranges will be indexed for inflation occurring after theyear 2002, rounded down to the closest multiple of $5,000.

	The deduction is allowed only with respect to interest paid on a qualified education loanduring the first 60 months in which interest payments are required.  A qualified education loangenerally is defined as any indebtedness incurred solely to pay for the qualified higher educationexpenses of the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer.  Qualifiedhigher education expenses generally include tuition, fees, room and board, and related expenses,reduced by certain educational benefits that are excludable from gross income (e.g., amountsexcluded under section 135, excludable distributions from an education IRA, section 117scholarship or fellowship grants, and section 127 employer-provided educational assistance). Such expenses must be paid or incurred within a reasonable period before or after theindebtedness is incurred, and must be attributable to a period when the student is at least a half-time student.

	Any person in a trade or business or any governmental agency that receives $600 or morein qualified education loan interest from an individual during a calendar year must provide aninformation report on such interest to the IRS and to the payor.

	The provision is effective for interest payments due and paid after December 31, 1997, onany qualified education loan.

**3.  Tax treatment of qualified State tuition programs and education IRAs; exclusion forcertain distributions from education IRAs used to pay qualified higher education expenses**

Qualified State tuition programs.--The 1997 Act expanded section 529--which providestax-exempt status and deferral of tax on earnings of qualified State tuition programs--to includeState programs under which individuals prepay (or save) not only for post-secondary tuition,fees, books, and supplies, but also for future room and board expenses of a designatedbeneficiary.  The 1997 Act also expanded the definition of eligible educational institutions forpurposes of  section 529 and the definition of the term "member of the family" for purposes ofallowing tax-free rollovers of credits or account balances in qualified State tuition programs. The 1997 Act also included provisions clarifying the estate and gift tax treatment ofcontributions to qualified State tuition programs or education IRAs (described below).

	Under the 1997 Act, to the extent that a distribution from a qualified State tuitionprogram is used to pay for qualified tuition and fees at an eligible post-secondary institution, thenthe student (or his or her parent) may be able to claim the HOPE credit or Lifetime Learningcredit provided for by the 1997 Act with respect to such tuition and fees (depending on whetherthe income limitations and other requirements of the HOPE credit or Lifetime Learning credit aresatisfied).  The modifications to section 529 generally were effective after December 31, 1997.

Education IRAs.--The 1997 Act provided that taxpayers may establish education IRAs,meaning trusts or custodial accounts created exclusively for the purpose of paying qualifiedhigher education expenses of a named beneficiary.  Annual contributions to education IRAs maynot exceed $500 per beneficiary, and may not be made after the designated beneficiary reachesage 18.   The contribution limit is phased out for taxpayers with modified adjusted gross income("AGI") between $95,000 and $110,000 (between $150,000 and $160,000 in the case of amarried couple filing a joint return).  No contribution may be made by any person to aneducation IRA during any year in which any contributions are made by anyone to a qualifiedState tuition program on behalf of the same beneficiary.

	Until a distribution is made from an education IRA, earnings on contributions to theaccount are not subject to tax.  In addition, the 1997 Act provided that distributions from aneducation IRA are excludable from gross income to the extent that the distribution does notexceed qualified higher education expenses incurred by the beneficiary during the year thedistribution is made, regardless of whether the student is enrolled in classes on a full-time, half-time, or less than half-time basis.  However, certain room and board expenses are qualifiedhigher education expenses only if the student incurring such expenses is enrolled at an eligibleeducational institution on at least a half-time basis.  The earnings portion of an education IRAdistribution not used to pay qualified higher education expenses is includible in the gross incomeof the distributee and generally is subject to an additional 10-percent tax penalty.  Any balanceremaining in an education IRA will be deemed to be distributed within 30 days after the date thedesignated beneficiary reaches age 30.  However, prior to the beneficiary reaching age 30, theAct allows tax-free (and penalty-free) rollovers of account balances from an education IRAbenefiting one family member to an education IRA benefiting another family member.  Theprovisions governing education IRAs apply to taxable years beginning after December 31, 1997.

**4.  Treatment of cancellation of certain student loans**

	The 1997 Act provided that an individual's gross income does not include forgiveness ofloans made by educational organizations and certain tax-exempt organizations if the proceeds ofsuch loans are used to pay costs of attendance at an educational institution or to refinanceoutstanding student loans and the student is not employed by the lender organization.  Theexclusion applies only if the forgiveness is contingent on the student's working for a certainperiod of time in certain professions for any of a broad class of employers. In addition, thestudent's work must fulfill a public service requirement. The provision applies to discharges ofindebtedness after August 5, 1997.

**5.  Penalty-free withdrawals from IRAs for higher education expenses**

	The 1997 Act permitted penalty-free withdrawals from individual retirementarrangements (IRAs) for qualified higher education expenses (including those related to graduatelevel courses) of the taxpayer, the taxpayer's spouse, or any child, or grandchild of the individualor the individual's spouse.  This provision was effective for distributions made after December31, 1997, which respect to expenses paid after such date for education furnished in academicperiods beginning after such date.

**6.  Employer-provided educational assistance**

	The 1997 Act extended the exclusion from gross income for employer-providededucational assistance for undergraduate education through May 31, 2000. 

**7.  Modification of $150 million limit on qualified 501(c)(3) bonds other than hospital bonds**

	The 1997 Act repealed the $150 million limit on qualified 501(c)(3) bonds issued by aState or local government after August 5, 1997, to finance capital expenditures incurred aftersuch date.

**8.  Enhanced deduction for corporate contributions of computer technology and equipment**

	The 1997 Act permitted C corporations that donate computer technology and equipmentthat is not more than two years old for educational purposes in any of grades K-12 to claim anaugmented charitable contribution deduction.  The provision is effective for contributions madein taxable years beginning after 1997 and before January 1, 2001.

**9.  Expansion of arbitrage rebate exception for certain bonds**

	Under present and prior law, an exception to the arbitrage rebate rules applies for bondsissued by governmental units having general taxing powers if the governmental unit issues $5million or less of governmental bonds during the calendar year ("the small issue exception"). The 1997 Act provided that up to $5 million dollars of bonds of State or local governments usedto finance public school capital expenditures incurred after December 31, 1997, are excludedfrom application of the limit for the small issue exception.  Thus, small issuers continue tobenefit from the small issue exception from arbitrage rebate if they issue no more than $10million in governmental bonds per calendar year and no more than $5 million of the bonds isused to finance expenditures other than for public school capital expenditures.  The provision iseffective for bonds issued after December 31, 1997.

**10.  Tax credit for holders of qualified zone academy bonds**

	Under the 1997 Act, certain financial institutions that hold "qualified zone academybonds" are entitled to a nonrefundable tax credit in an amount equal to a credit rate (set by theTreasury Department) multiplied by the face amount of the bond.  "Qualified zone academybonds" are any bond issued by a State or local government, provided that: (1) at least 95 percentof the proceeds are used for the purpose of renovating,  providing equipment to, developingcourse materials for use at, or training teachers and other school personnel in a "qualified zoneacademy" and (2) private entities have promised to contribute to the qualified zone academycertain property or services with a value equal to at least 10 percent of the bond proceeds.  Aschool is a "qualified zone academy" if: (1) the school is a public school that provides educationand training below the college level; (2) the school operates a special academic program incooperation with businesses to enhance the academic curriculum and increase graduation andemployment rates; and (3) either (a) the school is located in an empowerment zone or enterprisecommunity (including empowerment zones designated or authorized to be designated under theAct), or (b) it is reasonably expected that at least 35 percent of the students at the school will beeligible for free or reduced-cost lunches under the school lunch program established under theNational School Lunch Act.

	A total of $400 million of "qualified zone academy bonds" may be issued in each of 1998and 1999.  The $800 million aggregate bond cap is allocated to the States according to theirrespective populations of individuals below the poverty line.  Each State, in turn, allocates thecredit to qualified zone academies within such State.

	The provision is effective for bonds issued after 1997.

**TITLE III.--SAVINGS AND INVESTMENT INCENTIVES**

**1.  Individual retirement arrangements**

	The 1997 Act increased the income ranges over which the $2,000 IRA deduction limit isphased out for individuals who are active participants in an employer-sponsored retirement plan. Under the 1997 Act, in 1998, the phase out ranges are increased to $50,000 to $60,000 of AGIfor married couples and to $30,000 to $40,00 of AGI for single taxpayers.  The income limits areincreased each year thereafter until they are double the present-law limits; i.e., until the phase-outrange is $80,000 to $100,000 for married taxpayers and $50,000 to $60,000 for single taxpayers.

	The 1997 Act permitted deductible contributions for spouses of individuals who are in anemployer-sponsored retirement plan.  The deduction is phased out for taxpayers with AGIbetween $150,000 and $160,000.

	The 1997 Act created a new, tax-free nondeductible IRA called the "Roth IRA" forindividuals with AGI between $95,000 and $110,000 and married couples with AGI between$150,000 and $160,000.  Distributions from a Roth IRA are tax free if made more than five yearsafter a Roth IRA has been established and if the distribution is (1) made after age 59-1/2, death,or disability, or (2) for first-time homebuyer expenses (up to $10,000).  No more than $2,000 peryear can be contributed to all an individual's IRAs.  See, also, the provisions relating to RothIRAs in Part Seven, below.

	The 1997 Act permitted IRAs to invest in certain gold coins and bullion.

	The 1997 Act permitted penalty-free withdrawals from IRAs for first-time homebuyerexpenses (up to $10,000) and higher education expenses. 

**2.  Capital gains provisions**

	The 1997 Act reduced the maximum capital gains rate for individuals to 20 percent (10percent for taxpayers in the 15-percent bracket), effective May 7, 1997.  Real estate depreciationrecapture generally is taxed at a maximum rate of 25 percent.  The prior-law maximum 28-percent rate was retained for collectibles and, effective July 29, 1997, for assets held between oneyear and 18 months. Beginning in 2001, assets held for five years will get lower rates (8 percentfor 15-percent bracket taxpayers in 2001 and 18 percent for others in 2006).  See, also, theprovisions relating to capital gains in Part Seven, below, eliminating the 18-month holdingperiod for capital gains.

	The 1997 Act provided a $250,000 gain exclusion from the sale of a principal residence($500,000 in the case of a joint return), effective on May 7, 1997.

	The 1997 Act allowed the tax-free rollover of gain from certain small business stock toother small business stock, effective on August 5, 1997.

**TITLE IV.--ALTERNATIVE MINIMUM TAX PROVISIONS**

**1.  Repeal alternative minimum tax for small businesses and repeal the deprecationadjustment**

	For taxable years beginning after 1997, the 1997 Act repealed the corporate alternativeminimum tax for small businesses (i.e., generally those with average gross receipts of less than$7.5 million).

	In addition, for property placed in service after 1998, the 1997 Act conformed thedepreciable lives used for purposes of the alternative minimum tax to the depreciable lives usedfor purposes of the present-law regular tax.

**2.  Repeal AMT installment method adjustment for farmers**

	The 1997 Act repealed the installment sales adjustment applicable to the alternativeminimum tax, generally for sales after 1987.  Thus, qualified farmers are eligible to use theinstallment sales method of accounting for both regular tax and alternative minimum taxpurposes.

**TITLE V.--ESTATE, GIFT, AND GENERATION-SKIPPING TAX PROVISIONS**

**1.  Increase in estate and gift tax unified credit**

	Under the 1997 Act, the exemption equivalent of the estate and gift tax unified credit wasincreased as follows: the effective exemption is $625,000 for decedents dying and gifts made in1998; $650,000 in 1999; $675,000 in 2000 and 2001; $700,000 in 2002 and 2003; $850,000 in2004; $950,000 in 2005; and $1 million in 2006 and thereafter.  These amounts are not indexedfor inflation.

**2.  Indexing of certain other estate and gift tax provisions**

	After 1998, the $10,000 annual exclusion for gifts, the $750,000 ceiling on special usevaluation, the $1,000,000 generation-skipping transfer tax exemption, and the $1,000,000 ceilingon the value of a closely-held business eligible for the special low interest rate are indexedannually for inflation.

**3.  Estate tax deduction for qualified family-owned businesses**

	Under the 1997 Act, for estate tax purposes, an executor may elect a deduction equal tothe value of certain qualified "family-owned business interests" if such interests comprise morethan 50 percent of a decedent's estate and certain other requirements are met.  The deduction forfamily-owned business interests may be taken only to the extent that the deduction for family-owned business interests, plus the amount effectively exempted by the unified credit, does notexceed $1.3 million.  The provision was effective for decedents dying after December 31, 1997.

**4.  Reduction in estate tax for certain land subject to permanent conservation easement**

	An executor may elect to exclude from the taxable estate 40 percent of the value of anyland subject to a qualified conservation easement that meets the following requirements: (1) theland is located within 25 miles of a metropolitan area or a national park or wilderness area, orwithin 10 miles of an Urban National Forest; (2) the land has been owned by the decedent or amember of the decedent's family at all times during the three-year period ending on the date ofthe decedent's death; and (3) a qualified conservation contribution of a qualified real propertyinterest was granted by the decedent, the decedent's estate, or a member of the decedent's family. The maximum exclusion for land subject to a qualified conservation easement is limited to$100,000 in 1998, $200,000 in 1999, $300,000 in 2000, $400,000 in 2001, and $500,000 in 2002and thereafter.  The exclusion for land subject to a qualified conservation easement may be takenin addition to the maximum deduction for qualified family-owned business interests (i.e., there isno coordination between the two provisions).  Debt-financed property is eligible for thisprovision to the extent of the net equity in the property.  

**5.  Installment payments of estate tax attributable to closely held businesses**

	For estate taxes that are deferred under section 6166, the tax attributable to the first$1,000,000 in taxable value of the closely held business (i.e., the first $1,000,000 in value inexcess of the effective exemption provided by the unified credit and any other exclusions) issubject to interest at a rate of two percent.  The remainder of such taxes is subject to interest at arate equal to 45 percent of the rate applicable to underpayments of tax, and all taxes paid undersection 6166 are made nondeductible.  The provision was effective for decedents dying afterDecember 31, 1997.  Taxpayers currently deferring taxes under section 6166 may make a one-time election to receive similar treatment.

**6.  Estate tax recapture from cash leases of specially-valued property**

	The cash lease of specially-valued real property by a lineal descendant of the decedent toa member of the lineal descendant's family, who continues to operate the farm or closely heldbusiness, does not cause the qualified use of such property to cease for purposes of imposing theadditional estate tax under section 2032A(c), effective with respect to leases entered into afterDecember 31, 1976.

**7.  Clarify eligibility for extension of time for payment of estate tax**

	Taxpayers are given access to the courts to resolve disputes over an estate's eligibility forthe section 6166 election by authorizing the U.S. Tax Court to provide declaratory judgmentsregarding initial or continuing eligibility for deferral under section 6166, effective with respect toestates of decedents dying after August 5, 1997.

**8.  Gifts may not be revalued for estate tax purposes after expiration of statute oflimitations**

	A gift that has been adequately disclosed for which the three-year statute of limitationsperiod has passed cannot be revalued for purposes of determining the applicable estate taxbracket and available unified credit, effective for gifts made after August 5, 1997.

**9.  Repeal of throwback rules applicable to certain domestic trusts**

	Amounts distributed by certain domestic trusts are exempted from the throwback rules. The throwback rules continue to apply with respect to (1) foreign trusts, (2) domestic trusts thatwere once treated as foreign trusts (except as provided in Treasury regulations), and (3) domestictrusts created before March 1, 1984, that would be treated as multiple trusts under section 643(f)of the Code.  In addition, precontribution gain on property sold by certain domestic trusts nolonger is subject to section 644 (i.e., taxed at the contributor's marginal tax rates).  The provisionwas effective for taxable years beginning after August 5, 1997.

**10.  Modification of generation-skipping transfer tax for transfers to individuals withdeceased parents**

	The prior-law "predeceased parent exception" was extended to transfers to collateralheirs, provided that the decedent has no living lineal descendants at the time of the transfer, andto taxable terminations and taxable distributions, provided that the parent of the relevantbeneficiary was dead at the earliest time that the transfer (from which the beneficiary's interest inthe property was established) was subject to estate or gift tax.   The provision was effective forgeneration-skipping transfers made after December 31, 1997.

**TITLE VI.--EXTENSION OF CERTAIN EXPIRING TAX PROVISIONS**

**1.  Research tax credit**

	The 1997 Act extended the research tax credit (which provides a 20-percent tax credit forqualified research expenses in excess of a taxpayer's research credit base amount) for 13 months--i.e., generally for the period June 1, 1997, through June 30, 1998.  See, also, the provisionscontained in Part Eight, below, providing for a subsequent extension of the research tax creditthrough June 30, 1999.

**2.  Contributions of stock to private foundations**

	The special rule contained in section 170(e)(5) that permits a fair-market value deductionfor contributions of qualified appreciated stock to private foundations was extended for theperiod June 1, 1997, through June 30, 1998.  See, also, the provisions contained in Part Eight,below, providing for a permanent extension of the deduction.

**3.  Work opportunity tax credit**

	The 1997 Act provided a nine-month extension of the work opportunity tax credit.  It alsoprovided a credit percentage of 25 percent for employment of less than 400 hours of employmentand 40 percent for employment of 400 or more hours, reduces the period employees must beemployed to qualify for the credit, and makes other changes.  The Act was generally effective forwages paid to qualified individuals who begin work for an employer after September 30, 1997,and before July 1, 1998.  See, also, the provision contained in Part Eight, below, providing asubsequent extension of the work opportunity tax credit through June 30, 1999.

**4.  Orphan drug tax credit**

	The orphan drug tax credit provides a 50-percent tax credit for qualified clinical testingexpenses incurred in testing certain drugs for rare diseases or conditions.  The 1997 Actpermanently extended the orphan drug tax credit, effective for expenses paid or incurred afterMay 31, 1997.

**TITLE VII.--DISTRICT OF COLUMBIA TAX INCENTIVES**

**1.  Designation of D.C. Enterprise Zone**

	The 1997 Act designated certain economically depressed census tracts within the Districtof Columbia as the "D.C. Enterprise Zone," within which businesses and individual residents areeligible for special tax incentives.  The census tracts that compose the D.C. Enterprise Zone forpurposes of the wage credit, expensing, and tax-exempt financing incentives include all censustracts that presently are part of the D.C. enterprise community and census tracts within theDistrict of Columbia where the poverty rate is not less than 20 percent. The D.C. Enterprise Zonedesignation generally remains in effect for five years for the period from January 1, 1998,through December 31, 2002.

**2.  Empowerment zone wage credit, expensing, and tax-exempt financing**

	The 1997 Act made the following tax incentives that are available under present law inempowerment zones generally available in the D.C. Enterprise Zone: (1) a 20-percent wagecredit for the first $15,000 of wages paid to D.C. residents who work in the D.C. EnterpriseZone; (2) an additional $20,000 of expensing under Code section 179 for qualified zoneproperty; and (3) special tax-exempt financing for certain zone facilities.

**3.  Zero-percent capital gains rate**

	The 1997 Act provided a zero-percent capital gains rate for capital gains from the sale ofcertain qualified D.C. Zone assets held for more than five years.  For purposes of the zero-percent capital gains rate, the D.C. Enterprise Zone is defined to include all census tracts withinthe District of Columbia where the poverty rate is not less than 10 percent.  

**4.  First-time homebuyer tax credit**

	The 1997 Act allowed first-time homebuyers of a principal residence in the District a taxcredit of up to $5,000 of the amount of the purchase price, except that the credit phases out forindividual taxpayers with adjusted gross income between $70,000 and $90,000 ($110,000-$130,000 for joint filers).  The credit is available with respect to property purchased after August4, 1997, and before January 1, 2001.

**TITLE VIII.--WELFARE-TO-WORK TAX CREDIT**

	The 1997 Act provided to employers a tax credit on the first $20,000 of eligible wagespaid to qualified long-term family assistance (AFDC or its successor program) recipients duringthe first two years of employment.  The credit is 35 percent of the first $10,000 of eligible wagesin the first year of employment and 50 percent of the first $10,000 of eligible wages in thesecond year of employment.  The maximum credit is $8,500 per qualified employee.  Theprovision is effective for wages paid or incurred to a qualified individual who begins work for anemployer on or after January 1, 1998 and before May 1, 1999.  See, also, the provisions in PartEight, below, providing for a subsequent extension of the welfare to work tax credit through June30, 1999.

**TITLE IX.--MISCELLANEOUS PROVISIONS**

**1.  Excise tax provisions**

Repeal excise tax on diesel fuel used in recreational motorboats.--The 1997 Act repealedthe 24.3-cents-per-gallon excise tax on diesel fuel used in recreational motorboats.  Imposition ofthis tax previously had been suspended through December 31, 1997.

Continued application of tax on imported recycled halon-1211.--The 1997 Act repealedthe prior-law exemption from the excise tax on ozone-depleting chemicals for imported recycledhalon-1211, effective on August 5, 1997.

Transfer 4.3-cents-per-gallon General Fund highway fuels tax to Highway Trust Fund..--The 1997 Act provided for transfer of the 4.3-cents-per-gallon General Fund excise taxes ongasoline, diesel fuel, special motor fuels, and kerosene to the Highway Trust Fund, effective afterSeptember 30, 1997.  Provisions were included to ensure that this transfer had no effect on directspending under the Budget Act.  Certain tax deposit rules were modified for 1998.  See, also, theprovisions described in Part Five, below.

Tax certain alternative fuels based on energy equivalency to gasoline.--The 1997 Actadjusted the excise tax rate on propane, methanol derived from natural gas, and liquefied naturalgas to reflect the relative Btu content of these fuels to gasoline, effective on October 1, 1997.

Certain gasoline "chain retailers" treated as wholesale distributors.--The 1997 Actextended eligibility to file excise tax refund claims on behalf of certain exempt gasoline users toretailers selling the fuel from 10 or more commonly controlled outlets.  This provides treatmentto these retail dealers comparable to that previously provided only to wholesale distributors.  Theprovision was effective after September 30, 1997.

Exemption of electric and other clean-fuel vehicles from luxury automobileclassification.--The 1997 Act modified the threshold above which the luxury excise tax onautomobiles will apply for each of two identified classes of automobiles.  First, for an automobilethat is not a clean-burning fuel vehicle to which retrofit parts and components are installed tomake the vehicle a clean-burning vehicle, the threshold is $30,000, as adjusted for inflation underprior law, plus an amount equal to the increment to the retail value of the automobile attributableto the retrofit parts and components installed.  In the case of a passenger vehicle designed to bepropelled primarily by electricity and built by an original equipment manufacturer, the thresholdapplicable for any year is modified to equal 150 percent of $30,000, with the result increased forinflation occurring after 1990.

Reduce rate of alcohol excise tax on certain hard ciders.--The 1997 Act reduced the taxrate on still apple cider having an alcohol content of less than 7 percent to 22.6 cents per gallonfor those persons who produce more than 100,000 gallons of "hard cider" during a calendar year,effective on October 1, 1997.

Study feasibility of moving collection point for distilled spirits excise tax.--The $13.50per proof gallon distilled spirits excise tax is imposed when these beverages are removed from adistillery (or imported).  The 1997 Act directed the Secretary of the Treasury to study and reportto Congress on compliance and budgetary effects of various options for changing the point wherethis tax is imposed.

Codify rules on use of semi-generic names on wine labels.--The 1997 Act codified theTreasury regulatory list of semi-generic wine names (i.e., names having geographic significance)that may be used by U.S. wine producers and the conditions in which those names may be usedfor wines not originating in the historical area to which the name relates, effective on August 5,1997.

Uniform rate of excise tax on vaccines.--The 1997 Act replaced the prior-law excise taxeson vaccines, that differ by vaccine, with a single rate tax of $0.75 per dose on any listed vaccinecomponent. In addition, the Act added three new taxable vaccines to the list of taxable vaccines: (1) HIB (hemophilus influenza type B); (2) Hepatitis B; and (3) varicella (chickenpox), generallyeffective on August 5, 1997.  See, also Part Eight, below, for subsequent modifications to thevaccine excise tax.

**2.  Disaster relief provisions**

Authority to postpone certain tax-related deadlines on account of Presidentially declareddisasters.--The 1997 Act provided Treasury with the authority to postpone certain tax-relateddeadlines by reason of a Presidentially declared disaster, effective with respect to any period forperforming an act that had not expired before August 5, 1997.

Use of certain appraisals to establish amount of disaster loss.--The 1997 Act provided thatthe Treasury Department may issue guidance providing that an appraisal for the purpose ofobtaining a Federal loan or Federal loan guarantee as the result of a Presidentially declareddisaster may be used to establish the amount of the disaster loss, effective on August 5, 1997.

Treatment of livestock sold on account of weather-related conditions.--Present law allowstaxpayers, in certain circumstances, to defer gain recognized on the sale of livestock sold onaccount of drought.  The 1997 Act expanded these exceptions to livestock sold on account offlood or other weather-related conditions.  The provisions were effective for sales and exchangesafter 1996.

Mortgage bond financing for residences located in Presidentially declared disaster

areas.--Qualified mortgage bonds are private activity tax-exempt bonds issued by States andlocal governments acting as conduits to provide mortgage loans to first-time home buyers whosatisfy specified income limits and who purchase homes that cost less than statutory maximums.The 1997 Act allowed waivers of the first-time homebuyer requirement, the income limits, andthe purchase price limits for loans to finance homes in certain Presidentially declared disasterareas.  The waiver applied only during the two-year period following the date of disasterdeclaration.  The provision applies to loans financed with bonds issued after December 31, 1996,and before January 1, 1999.

Abatement of interest by reason of Presidentially declared disaster.--The 1997 Actrequired the IRS to abate interest for individual taxpayers in Presidentially declared disaster areasunder specified circumstances for disasters in 1997, effective with respect to disasters declaredafter December 31, 1996.  See, also, the provision relating to abatement of interest in disasterareas in Part Seven, below.

**3.  Employment tax provisions**

	The 1997 Act clarified the standards to be used in determining whether securities brokersare employees for Federal tax purposes.  The Act provided that certain termination paymentsreceived by former insurance salesmen are not subject to SECA taxes.  The 1997 Act imposed amoratorium on the issuance of IRS regulations relating to the definition of limited partner forSECA tax purposes until July 1, 1998.

	The 1997 Act established a demonstration project for combined Federal/Stateemployment tax reporting.

**4.  Small business provisions**

EFTPS.--The 1997 Act delayed the imposition of penalties for certain failures to makepayments electronically through the Electronic Funds Transfer Payment System ("EFTPS")through June 30, 1998.  The Internal Revenue Service further extended the delay through June 30, 1999, by administrative action.

Home office deduction: clarification of definition of principal place of business.--The1997 Act enhanced the ability of taxpayers who work at home to claim deductions for homeoffice expenses by expanding the definition of "principal place of business" to include a homeoffice that is used by the taxpayer to conduct administrative or management activities of thebusiness, provided that there is no other fixed location where the taxpayer conducts substantialadministrative or management activities of the business.  As under prior law, deductions areallowed for a home office only if the office is exclusively used on a regular basis as a place ofbusiness and, in the case of an employee, only if such exclusive use is for the convenience of theemployer.

	The provision is effective for taxable years beginning after December 31, 1998.

	Increase in self-employed health deduction.--The 1997 Act increased the deduction forhealth insurance of self-employed individuals as follows: 40 percent in 1997, 45 percent in 1998and 1999, 50 percent in 2000 and 2001, 60 percent in 2002, 80 percent in 2003 through 2005, 90percent in 2006, and 100 percent in 2007 and thereafter.  See, also, the provisions in Part Eight,below, accelerating the increases in the deduction for health insurance of self-employedindividuals.

**5.  Other provisions**

Shrinkage estimates for inventory accounting.--Under the 1997 Act, a method of keepinginventories will not be considered unsound, or to fail to clearly reflect income, solely because itincludes an adjustment for the shrinkage estimated to occur through year-end, based oninventories taken other than at year-end.  Safe harbor methods of estimating inventory shrinkagewill be established by Treasury regulation; a safe harbor method specific to retail trade wasdescribed in the Conference Report.  The provision was effective for taxable years ending afterAugust 5, 1997.

Treatment of workmen's compensation liability under rules for certain personal injuryliability assignments.--The 1997 Act extended the exclusion for qualified assignments underCode section 130 to amounts assigned for assuming a liability to pay compensation under anyworkmen's compensation act.  The provision was effective for workmen's compensation claimsfiled after August 5, 1997.

Tax-exempt status for certain State workmen's compensation act companies.--The 1997Act clarified the tax-exempt status of any organization that: (1) is created by State law, (2) isorganized and operated exclusively to provide workmen's compensation insurance and relatedcoverage that is incidental to workmen's compensation insurance, and (3) meets certainadditional requirements.  Among these additional requirements are requirements that: (1) theState must either extend its full faith and credit to the initial debt of the organization or providethe initial operating capital of such organization, and (2) the assets of the organization mustrevert to the State upon dissolution or State law must not permit the dissolution of theorganization.  The provision was effective for taxable years beginning after December 31, 1997. No inference was intended that organizations described in the provision were not tax-exemptunder prior law.

Election for 1987 partnerships to continue exception from treatment of publicly tradedpartnerships as corporations.--Under the 1997 Act, in the case of an existing 1987 publicly tradedpartnership that elects under the provision to be subject to a tax on gross income from the activeconduct of a trade or business, the rule of present law treating a publicly traded partnership as acorporation does not apply.  The tax is 3.5 percent of the partnership's gross income from theactive conduct of a trade or business.  The provision was effective for taxable years beginningafter December 31, 1997.

Exclusion from UBIT for certain corporate sponsorship payments.--The 1997 Actprovided an exclusion from the unrelated business income tax (UBIT) for qualified sponsorshippayments received by tax-exempt organizations (and State colleges and universities).  "Qualifiedsponsorship payments" are defined as any payment made by a person engaged in a trade orbusiness with respect to which the person will receive no substantial return benefit other than theuse or acknowledgment of the name or logo (or product lines) of the person's trade or business inconnection with the organization's activities.  Such a use or acknowledgment does not includeadvertising of such person's products or services--meaning qualitative or comparative language,price information or other indications of savings or value, or an endorsement or other inducementto purchase, sell, or use such products or services.  The safe-harbor exclusion provided by theAct for "qualified sponsorship payments" does not apply to payments that entitle the payor to theuse or acknowledgment of the payor's trade or business name or logo (or product lines) in tax-exempt organization periodicals (or to payments made in connection with certain convention ortrade show activities), which continue to be governed by present-law rules to determine whetherthe payment is subject to the UBIT.

	The provision applies to qualified sponsorship payments solicited or received afterDecember 31, 1997.

Timeshare associations.--The 1997 Act permitted timeshare associations to be taxedsimilarly to homeowner's associations, except the tax rate on their association income is 32percent, effective for taxable years beginning after December 31, 1996.

Exception from real estate reporting requirements for certain sales of principalresidences.--The 1997 Act provided that sales of personal residences with a gross sales price of$500,000 or less ($250,000 or less in the case of a seller who is not married) are excluded fromthe real estate transaction reporting requirement, provided the seller represents that any gain onthe sale will be exempt from Federal income tax.

Increased deduction for business meals for individuals operating under Department ofTransportation hours of service limitation.--The deductible percentage of the cost of food andbeverages consumed while away from home by an individual during, or incident to, a period ofduty subject to the hours of service limitations of the Department of Transportation is graduallyincreased from 50 to 80 percent.  The percentage allowable increases in 5-percent incrementsevery other year beginning in 1998.

Deductibility of meals provided for the convenience of the employer.--The 1997 Actclarified the tax treatment of meals provided for the convenience of the employer, effective fortaxable years beginning after December 31, 1997.  See, also, the provision in Part Seven, below, 

Increase in standard mileage rate for purposes of computing charitable deduction.--The1997 Act increased from 12 cents per mile to 14 cents per mile the standard mileage rate used forpurposes of computing the charitable deduction, effective for taxable years beginning afterDecember 31, 1997.

Expensing of environmental remediation costs ("brownfields").--The 1997 Act allowedtaxpayers to elect to treat certain environmental remediation expenditures that would otherwisebe chargeable to capital account as deductible in the year paid or incurred.  The expenditure mustbe incurred in connection with the abatement or control of hazardous substances at a qualifiedcontaminated site.  A "qualified contaminated site" generally is any property that: (1) is held foruse in a trade or business, for the production of income, or as inventory; (2) is certified by theappropriate State environmental agency to be located within a targeted area; and (3) contains (orpotentially contains) a hazardous substance (so-called "brownfields").  Targeted areas include:(1) empowerment zones and enterprise communities as designated under prior law and under theAct (including any supplemental empowerment zone designated on December 21, 1994); (2)sites announced before February 1997, as being subject to one of the 76 EnvironmentalProtection Agency (EPA) Brownfields Pilots; (3) any population census tract with a poverty rateof 20 percent or more; and (4) certain industrial and commercial areas that are adjacent to censustracts with a poverty rate of 20 percent or more.  The provision applied to eligible expendituresincurred in taxable years ending after August 5, 1997, and before January 1, 2001.

Modify limits on depreciation of luxury automobiles for certain clean-burning fuel andelectric vehicles.--The 1997 Act modified the limitation on depreciation in the case of qualifiedclean-burning fuel vehicles and certain electric vehicles.  With respect to qualified clean-burningfuel vehicles, the 1997 Act generally has the effect of only subjecting the cost of the vehiclebefore modification to the limitations.  In the case of a passenger vehicle designed to bepropelled primarily by electricity and built by an original equipment manufacturer, the prior-lawbase-year limitation amounts were tripled.  The provision is effective for property placed inservice after August 5, 1997, and before January 1, 2005.

Modification of advance refunding rules for certain tax-exempt bonds issued by theVirgin Islands.--Under the 1997 Act, one additional advance refunding was allowed for bondsissued by the Virgin Islands that were advance refunded before June 9, 1997, effective on changeof the Virgin Islands debt provisions to repeal a then-existing priority first lien requirement.

Deferral of gain on certain sales of farm product refiners and processors.--The 1997 Actextended the deferral provided under section 1042 to the sale of stock of a qualified refiner orprocessor to an eligible farmer's cooperative.  The provision was effective for sales afterDecember 31, 1997.  This provision was (1) identified as a limited tax benefit subject to the LineItem Veto Act, (2) cancelled by the President pursuant to his authority under the Line Item VetoAct, and (3) reinstated when the U.S. Supreme Court ruled that the Line Item Veto Act wasunconstitutional.

Above-the-line deduction for certain expenses.--The 1997 Act provided that employeebusiness expenses relating to service as an official of a State or local government (or politicalsubdivision thereof) are deductible in computing AGI, provided the official is compensated inwhole or in part on a fee basis.  The provision was effective with respect to expenses paid orincurred in taxable years beginning after December 31, 1986.

Survivor benefits of public safety officers killed in the line of duty.--The 1997 Actprovided an exclusion from gross income for certain survivor benefits paid on account of thedeath of a public safety officer killed in the line of duty.  The provision was effective foramounts received in taxable years beginning after December 31, 1996, with respect toindividuals dying after that date.

Temporary suspension of income limitations on percentage depletion for production frommarginal wells.--The 1997 Act suspended the 100-percent-of-net-income property limitation withrespect to oil and gas produced from marginal properties during taxable years beginning afterDecember 31, 1997, and before January 1, 2000.

Purchasing of receivables by tax-exempt hospital cooperative service organizations.--The1997 Act clarified that, for purposes of section 501(e), billing and collection services include thepurchase of patron accounts receivable on a recourse basis.  The provision was effective fortaxable years beginning after December 31, 1996.

Designation of additional empowerment zones; modification of empowerment zone andenterprise community criteria

*a.  Two additional empowerment zones with same tax incentives as previously designatedempowerment zones*

	Under the 1997 Act, the Secretary of HUD was authorized to designate two additionalempowerment zones located in urban areas (thereby increasing to eight the total number ofempowerment zones located in urban areas) with respect to which the same tax incentives (i.e.,the wage credit, additional expensing, and special tax-exempt financing) generally apply as areavailable within the empowerment zones authorized by the Omnibus Budget Reconciliation Actof 1993 (OBRA 1993).  The wage credit available in the two new urban empowerment zones wasmodified slightly to provide that the percentage of wages taken into account for purposes ofdetermining the wage credit is 20 percent for 2000-2004, 15 percent for 2005, 10 percent for2006, and 5 percent for 2007.  No wage credit is available in the two new urban empowermentzones after 2007.  The two additional empowerment zones are subject to the same eligibilitycriteria that applies to the original six urban empowerment zones.  The designations do not takeeffect before January 1, 2000, and generally remain in effect for 10 years.

*b.  Designation of additional empowerment zones*

	The 1997 Act authorized the Secretaries of HUD and Agriculture to designate anadditional 20 empowerment zones (no more than 15 in urban areas and no more than five in ruralareas).  With respect to these additional empowerment zones, the present-law eligibility criteriawere expanded slightly.

	Within the 20 additional empowerment zones, qualified "enterprise zone businesses" areeligible to receive up to $20,000 of additional section 179 expensing and to utilize specialtax-exempt financing benefits.  The "brownfields" tax incentive provided under the Act also isavailable within all designated empowerment zones.  Businesses within the 20 additionalempowerment zones are not, however, eligible to receive the present-law wage credit availablewithin the 11 other designated empowerment zones.

	The 20 additional empowerment zones are required to be designated before 1999, and thedesignations generally will remain in effect for 10 years.

*c.  Modification of definition of enterprise zone business*

	The 1997 Act provided that an entity may qualify as an "enterprise zone business" if (inaddition to the other present-law criteria) at least 50 percent of the total gross income of suchentity is derived from the active conduct of a qualified business within an empowerment zone orenterprise community.  In addition, the 1997 Act made certain other modifications to thedefinition of an "enterprise zone business."  This modified "enterprise zone business" definitionapplies to all previously designated empowerment zones and enterprise communities, the twourban empowerment zones designated under the 1997 Act, as well as to the 20 additionalempowerment zones authorized to be designated pursuant to the 1997 Act.  The modifications tothe definition of "enterprise zone business" were effective for taxable years beginning on or afterAugust 5, 1997.

*d.  Tax-exempt financing rules*

	The 1997 Act allowed "new empowerment zone facility bonds" to be issued for qualifiedenterprise zone businesses in the 20 additional empowerment zones.  These bonds are not subjectto the State private activity bond volume caps or the special limits on issue size applicable toqualified enterprise zone facility bonds. The maximum amount of these bonds that can be issuedis limited to $60 million per rural zone, $130 million per urban zone with a population of lessthan 100,000, and $230 million per urban zone with a population of 100,000 or more.

The 1997 Act also made certain modifications to the special tax-exempt bond financingavailable under present-law rules in empowerment zones and enterprise communities.  Thechanges to the tax-exempt financing rules were effective for qualified enterprise zone facilitybonds and the new empowerment zone facility bonds issued after August 5, 1997.

*e.  Special rules for Alaska and Hawaii*

	The 1997 Act modified the prior-law empowerment zone and enterprise communitydesignation criteria so any zones or communities designated in the States of Alaska or Hawaiiwill not be subject to the general size limitations, nor will such zones or communities be subjectto the general poverty-rate criteria.  Instead, nominated areas in either State are eligible fordesignation as an empowerment zone or enterprise community if, for each census tract or blockgroup within such area, at least 20 percent of the families have incomes which are 50 percent orless of the State-wide median family income.  Such zones and communities are subject to thepopulation limitations under  section 1392(a)(1).  The provision was effective on August 5, 1997.

Income averaging for farmers.--Under the 1997 Act, an individual taxpayer generally isallowed to elect to compute his or her current year regular tax liability by averaging, over theprior three-year period, all or a portion of his or her taxable income from the trade of business offarming.  The provision applies to taxable years beginning after December 31, 1997, and beforeJanuary 1, 2001.  See, also, the provisions in Part Eight, which made permanent the rulesproviding for income averaging for farmers.

Elective carryback of existing net operating losses of the National Railroad PassengerCorporation (Amtrak).--Under the 1997 Act, Amtrak is allowed a tax refund based on thecarryback of its net operating losses against the tax attributes of  its predecessor railroads. Theavailability of the provision is conditioned on Amtrak (1) agreeing to make payments of onepercent of the amount it receives to each of  the non-Amtrak States to offset certaintransportation related expenditures and (2) using the balance for certain qualified expenses.  Themaximum refund payable to Amtrak under this provision is limited to $2,323,000,000.  One halfof the refund is treated as a payment of estimated tax by Amtrak for each of the first two taxableyears ending after August 5, 1997.  However, no refund could be made as a result of thisprovision earlier than the date of enactment of S. 738 ("Amtrak Reform and Accountability Actof 1997"), which authorizes reforms of Amtrak.  S. 738 was enacted on December 2, 1997 (P.L.105-134).  See, also, the provision relating to Amtrak NOL monies in Part Six, below.

**TITLE X.--REVENUE-INCREASE PROVISIONS**

**1.  Financial product provisions**

Require recognition of gain on certain appreciated positions in personal property.--The1997 Act required recognition of gain (but not loss) upon a constructive sale of any appreciatedposition in stock, a partnership interest or certain debt instruments.  A constructive sale occurswhen a taxpayer enters into a short against the box sale, an offsetting notional principal contractor certain other transactions.  The provision is generally effective for constructive sales enteredinto after June 8, 1997.

Election of mark-to-market for securities traders.--The 1997 Act allowed securitiestraders and commodities traders and dealers to elect mark-to-market accounting similar to thatcurrently required for securities dealers.  The election applies to taxable years ending afterAugust 5, 1997.

Limitation on exception for investment companies under section 351.--The 1997 Actexpanded the definition of an "investment company" for purposes of the exception for suchcompanies from the general rules allowing tax-free contributions of property to corporations andpartnerships.  Under the 1997 Act, an investment company  includes a company more than 80percent of the assets of which consist of securities and other high-quality investment assets.  Theprovision is effective for transfers after June 8, 1997, with an exception for transfers pursuant tocertain binding contracts in effect on that date.

Treatment of certain transactions as exchanges.--The 1997 Act provided that redemptionsof debt issued by natural persons and debt issued before July 2, 1982, is treated as an exchangeand, accordingly, any gain or loss on that redemption would be capital gain or loss effective fordebt issued or purchased after June 8, 1997.   In addition, the 1997 Act treated as capital gains orlosses the gains or losses arising from the cancellation, lapse, expiration, or other terminationafter September 4, 1997, of a right or obligation with respect to all types of property that are (oron acquisition would be) capital assets in the hands of the taxpayer.  Lastly, the 1997 Actprovided that a taxpayer that enters into a short sale of property (and, to the extent provided inTreasury regulations, any option with respect to property, any offsetting notional principalcontract with respect to property, any futures or forward contract to deliver property, or withrespect to any similar transaction or position) that becomes substantially worthless after August5, 1997, shall recognize gain as if the short sale (or other property) were closed (or sold) whenthe property becomes substantially worthless.

Determination of original issue discount where pooled debt obligations subject toacceleration.--The 1997 Act required a reasonable assumption for interest income accruals withrespect to a pool of debt instruments the payments on which may be affected by reason ofprepayments.  Thus, if a taxpayer holds a pool of credit card receivables that require interest to bepaid if the borrowers do not pay their accounts by a specified date, the taxpayer would berequired to accrue interest on such pool based upon a reasonable assumption regarding the timingof the payments of the accounts in the pool.  Similar rules apply under present law with respectto the accrual of original issue discount with respect to REMICs.  The provision was effective fortaxable years beginning after August 5, 1997.

Deny interest deduction on certain debt instruments.--The 1997 Act denied interestdeductions on certain corporate instruments payable in stock of the issuer or a related party,including instruments a substantial portion of the principal or interest on which is mandatorily(or at the option of the issuer or a related party) payable or convertible into such stock, ordetermined by reference to the value of such stock, or that are part of an arrangement designed toresult in such payment of the instrument with or by reference to such stock. 

	The provision was effective for instruments issued after June 8, 1997,  but does not applyto such instruments (1) issued pursuant to a written agreement which was binding on such dateand at all times thereafter, (2) described in a ruling request submitted to the Internal RevenueService on or before such date, or (3) described in a public announcement or filing with theSecurities and Exchange Commission on or before such date.

**2.  Corporate organizations and reorganizations**

Require gain recognition for certain extraordinary dividends.--Under the 1997 Act, acorporate shareholder recognizes gain immediately with respect to any redemption treated as adividend when the nontaxed portion of the dividend exceeds the basis of the shares surrendered,if the redemption is treated as a dividend due to options being counted as stock ownership. Inaddition, the provision requires immediate gain recognition whenever the basis of stock withrespect to which any extraordinary dividend was received is reduced below zero.

	The provision generally was effective for distributions after May 3, 1995, unless madepursuant to the terms of a written binding contract in effect on May 3, 1995 and at all timesthereafter before such distribution, or a tender offer outstanding on May 3, 1995.  In certain typesof cases, September 13, 1995, is substituted for May 3, 1995.

Require gain recognition on certain distributions of controlled corporation stock.--The1997 Act restricted certain otherwise tax-free "spin-off" transactions after April 16, 1997, undersection 355 of the Code, in which a distributing corporation distributes stock of a controlledcorporation to shareholders.  Corporate level gain is recognized on a spin-off which is part of aplan or series of related transactions in which there is an acquisition of 50-percent or more of thevote or value of stock of either the distributing corporation or the controlled corporation. Thegain is recognized immediately before the distribution, in 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. 

	In addition, distributions within an affiliated group of corporations, in connection withsuch an acquisition transaction, are not treated as tax-free spin-offs.  The Treasury Departmentalso has additional regulatory authority to adjust the basis of stock in intra-group spin-offdistributions generally.

	For certain transfers of property to a corporation as part of a spin-off after August 5,1997,  the prior law requirement that shareholders of the contributing corporation own 80 percentof the voting power and 80 percent of each other class of stock after the distribution is modifiedto a requirement of greater-than-50 percent of the vote and value of the stock. 

	The provision was generally effective for distributions after April 16, 1997.  

	The provision does not apply to a distribution after April 16, 1997, that is part of anacquisition that would otherwise cause gain recognition to the distributing or controlledcorporation under the 1997 Act if such acquisition is: (1) made pursuant to a written agreementwhich was binding on April 16, 1997, and at all times thereafter; (2) described in a ruling requestsubmitted to the Internal Revenue Service on or before such date; or (3) described on or beforesuch date in a public announcement or in a filing with the Securities and Exchange Commission("SEC") required solely by reason of the acquisition or transfer.  Any written agreement, rulingrequest, or public announcement or SEC filing is not within the scope of these transitionprovisions unless it identifies the acquiror of the distributing corporation or of any controlledcorporation,  whichever is applicable. 

Reform tax treatment of certain corporate stock transfers.--The 1997 Act modified certainrules that apply if one corporation purchases stock of a related corporation and the transaction istreated as a distribution. A special rule applies to transactions involving acquisitions by foreigncorporations, limiting the earnings and profits of the acquiring foreign corporation that are takeninto account.

	The provision was effective for distributions or acquisitions after June 8, 1997, exceptthat the provision does not apply to any such distribution or acquisition (1) made pursuant to awritten agreement which was binding on such date and at all times thereafter, (2) described in aruling request submitted to the Internal Revenue Service on or before such date, or (3) describedin a public announcement or filing with the Securities and Exchange Commission on or beforesuch date.

Modify holding period for dividends-received deduction.--The 1997 Act modified the46-day holding period for the dividends-received deduction (or 91-day period for certaindividends on preferred stock) to require that the holding period be met with respect to eachdividend received.  Present law restrictions against diminishing risk of loss likewise apply toeach dividend under the provision.

	The provision generally was effective for dividends paid or accrued after September 4,1997.  However, the provision does not apply to certain dividends received within two years ofAugust 5, 1997, if (1) the dividend is paid with respect to stock held on June 8, 1997, and at alltimes thereafter until the dividend is received, and (2) certain other requirements arecontinuously met with respect to identified risk-reduction positions.

**3.  Other corporate provisions**

Corporate tax shelter registration.--The 1997 Act required that certain confidentialcorporate tax shelters register with the Treasury and made parallel changes to the substantialunderstatement penalty.

Treat certain preferred stock as "boot".--The 1997 Act required certain preferred stockthat is received in otherwise tax-free transactions to be treated as taxable "boot." Thus, when ataxpayer exchanges appreciated property for this preferred stock in a transaction that otherwisequalifies as tax-free, gain is recognized.

	The provision was effective for transactions after June 8, 1997, but does not apply to suchtransactions (1) made pursuant to a written agreement which was binding on such date and at alltimes thereafter, (2) described in a ruling request submitted to the Internal Revenue Service on orbefore such date, or (3) described in a public announcement or filing with the Securities andExchange Commission on or before such date.

**4.  Administrative provisions**

Payments to attorneys.--The 1997 Act required the reporting to the IRS of certainpayments made to attorneys, effective for payments made after December 31, 1997.

Payments to corporations performing services for Federal agencies.--The 1997 Actlowered the information reporting threshold with respect to information reporting on personsreceiving contract payments from certain Federal agencies, effective for any return the due datefor which is after November 3, 1997.

Veterans Administration disclosure.--The 1997 Act provided for the continuation ofauthorization for the disclosure of tax return information for purposes of the administration ofcertain veterans programs.

Continuous levy.--The 1997 Act established continuous levy by the IRS and limits theexemptions from levy, effective for levies issued after August 5, 1997.

Consistency rule for beneficiaries of trusts and estates.--The 1997 Act required abeneficiary of an estate or trust to file its return in a manner that is consistent with theinformation received from the estate or trust, unless the beneficiary identifies the inconsistency.

**5.  Excise tax provisions**

Extend and modify the Airport and Airway Trust Fund excise taxes.--The 1997 Actextended the prior-law Airport and Airway Trust Fund excise taxes (commercial passengerticket, commercial cargo shipping invoice, and noncommercial aviation fuels) for 10 years withmodifications, through September 30, 2007.

	The commercial passenger taxes were modified, as follows:

	(1)  The prior-law 10-percent ad valorem tax rate was replaced with a combination advalorem and flight segment dollar rate tax.  The revised rates are --
October 1, 1997 - September 30, 19989% of fare plus $1per domestic flight segmentOctober 1, 1998 - September 30, 19998% of fare plus $2 per domestic flight segmentOctober 1, 1999 - December 31, 19997.5% of fare plus $2.25 per domestic flight segment
	After December 31, 1999, the ad valorem rate remains at 7.5 percent, but the domesticflight segment rate will increase to $2.50 (calendar year 2000), $2.75 (calendar year 2001), and$3 (calendar year 2002).  After 2002, the $3 rate is indexed to the consumer price index.

	(2)  The $6 per passenger international departure tax was increased to $12 per passengerand that rate was extended to international arrivals as well. (The $6 rate was retained for theinternational portion of certain domestic flights between the continental United States and Alaskaor Hawaii.)  The new rates are indexed to the consumer price index after 1998.

	(3)  A special rule was provided reducing the tax rate for flight segments to or from certain small, rural airports to 7.5 percent, with no domestic flight segment tax being imposed onthose flight segments.

	Additionally, clarification was provided that the ad valorem portion of the tax (at the 7.5-percent rate) applies to payments to airlines for frequent flyer and similar awards from banks andcredit card companies, merchants, frequent flyer program partners (e.g., other airlines, hotels, orrental car companies), and other businesses.

	Air carriers were made liable for payment of the Airport and Airway Trust Fund excisetaxes.

	Certain tax deposits rules were modified for 1997 and 1998.

	These provisions generally apply to transportation beginning after September 30, 1997. See, also, the provisions in Part One, above.

Extend diesel fuel excise tax rules to kerosene.--The 1997 Act provided that kerosenegenerally will be taxed the same as diesel fuel. Thus, when kerosene is removed from pipelineterminals, it either will be taxed (at 24.4 cents per gallon) or dyed (if destined for nontaxableuse).  Exceptions were provided allowing undyed kerosene to be sold without tax for certainaviation and industrial uses.  Additionally, ultimate vendors are allowed to claim expeditedrefunds for undyed kerosene sold for use in space heaters.  To ensure availability of dyedkerosene, eligibility of terminals to store untaxed fuel is conditioned on offering dyed fuel tocustomers.  The provision was effective after June 30, 1998.  See, also, Part Six, below,describing a provision which suspended the dyeing mandate for two years.

Reinstate Leaking Underground Storage Trust Fund excise tax.--The 1997 Act reinstatedan expired 0.1-cent-per-gallon excise tax on gasoline, diesel fuel, special motor fuels, aviationfuels, and inland waterway fuels for a 7-1/2 year period beginning on October 1, 1997, throughMarch 31, 2005.  Revenues from this tax will be deposited in the Leaking Underground StorageTank Trust Fund to finance cleanup of damage resulting from underground petroleum storagetanks.

Application of communications excise tax to prepaid telephone cards.--The 1997 Actclarified that any amounts paid to communications service providers (in cash or in kind) for theright to award or otherwise distribute free or reduced-rate telephone service (i.e., local or tolltelephone service) are treated as amounts paid for taxable communication services, subject to the3-percent ad valorem tax rate.

Modify treatment of tires under the heavy vehicle retail excise tax.--The 1997 Actsubstituted a credit for tire tax paid for a prior-law tax deduction in calculating the 12-percentretail excise on heavy highway vehicles.  The provision was effective after December 31, 1997.

**6.  Provisions relating to exempt organizations**

Extend UBIT rules to second-tier subsidiaries and amend control test.--The 1997 Actmodified section 512(b)(13) (which treats otherwise excluded rent, royalty, annuity, and interestincome as unrelated business taxable income if such income is received or accrued from certaincontrolled subsidiaries of a tax-exempt organization).  The 1997 Act provided that  "control" forthis purpose generally means ownership by vote or value of more than 50 percent of theownership interests in the entity.  In addition, the 1997 Act applied the constructive ownershiprules of section 318 for purposes section 512(b)(13).  The provision generally applies to taxableyears beginning after August 5, 1997.  However, the provision does not apply to paymentsreceived or accrued during the first two taxable years beginning on or after August 5, 1997, ifsuch payments are received or accrued pursuant to a binding written contract in effect on June 8,1997, and at all times thereafter before such payment, but not pursuant to any contract provisionthat permits optional accelerated payments.

Repeal grandfather rule with respect to pension business of certain insurers.--The 1997Act repealed the grandfather rules applicable to that portion of the business of the TeachersInsurance Annuity Association-College Retirement Equities Fund which is attributable topension business and to that portion of the business of Mutual of America which is attributable topension business.  Special rules relating to the change in method of accounting and the basis ofassets apply, and reserve weakening after June 8, 1997, is treated as occurring in 1998.  Theprovision applies for taxable years beginning after December 31, 1997.

**7.  Foreign provisions**

Inclusion of income from notional principal contracts and stock lending transactionsunder subpart F.--The 1997 Act added to the definition of foreign personal holding companyincome for subpart F purposes net income from all types of notional principal contracts andpayments in lieu of dividends derived from equity securities lending transactions.  The 1997 Actprovided an expanded dealer exception from the definition of foreign personal holding companyincome.

Restrict like-kind exchange rules for certain personal property.-Under present law, nogain or loss is recognized if property held for productive use in a trade or business or forinvestment is exchanged for property of a "like-kind" which is to be held for productive use in atrade or business or for investment. In general, any kind of real estate is treated as of a like-kindwith other real property as long as the properties are both located either within or both outsidethe United States.

	The 1997 Act provided that personal property predominantly used within the UnitedStates and personal property predominantly used outside the United States are not "like-kind"properties.  The provision is effective for exchanges after June 8, 1997, unless the exchange ispursuant to a binding contract in effect on such date and all times thereafter.

Impose holding period requirement for claiming foreign tax credits with respect todividends.--The 1997 Act disallowed the foreign tax credits normally available with respect to adividend from a foreign corporation or regulated investment company if the shareholder has notheld the stock for 16 days in the case of common stock and 46 days in the case of preferred stock.

Limitation on treaty benefits for payments to hybrid entities.--The 1997 Act limited theavailability of a reduced rate of withholding tax under an income tax treaty in the case of incomederived through a hybrid entity in order to prevent tax avoidance.

Interest on underpayment reduced by foreign tax credit carryback.--The 1997 Actprovided that, if an underpayment for a taxable year is reduced or eliminated by a foreign taxcredit carryback from a subsequent taxable year, such carryback does not affect the computationof interest on the underpayment for the period ending with the filing date for such subsequenttaxable year in which the foreign taxes were paid or accrued.

Determination of period of limitations relating to foreign tax credits.--The 1997 Actprovided that, in the case of a claim relating to an overpayment attributable to foreign tax credits,the limitations period is determined by reference to the year in which the foreign taxes were paidor accrued.

Repeal special exception to foreign tax credit limitation for alternative minimum taxpurposes.--Under present law, the combination of the taxpayer's net operating loss carryover andforeign tax credits cannot reduce the taxpayer's alternative minimum tax liability by more than90 percent of the amount determined without these items.  The Omnibus Budget ReconciliationAct of 1989 ("1989 Act") provided a special exception to the limitation on the use of the foreigntax credit against the tentative minimum tax.  The 1997 Act repealed this special exception fortaxable years beginning after August 5, 1997.

**8.  Pension and employee benefit revenue-increase provisions**

	The 1997 Act contained several revenue-increasing provisions relating to pension andemployee benefits. These provisions: (1) increase the amount of benefits that may be cashed outof a retirement plan from $3,500 to $5,000, effective for plan years beginning after August 5,1997; (2) repeal the 15-percent excise tax applicable to excess plan distributions and excessretirement plan accumulations, effective for estates of decedents dying after December 31, 1996;(3) increase the penalty tax on prohibited transactions from 10 percent to 15 percent, effectivewith respect to prohibited transactions occurring after August 5, 1997; (4) revise the basisrecovery rules related to retirement plan payments, effective with respect to annuity starting datesbeginning after December 31, 1997; and (5) permit employees to elect cash compensation in lieuof nontaxable parking benefits, effective for taxable years beginning after December 31, 1997.

**9.  Other revenue-increase provisions**

Phase out suspense accounts for certain large farm corporations.--The 1997 Act repealedthe ability of a family farm corporation to establish a suspense account when it is required tochange from the cash method to an accrual method of accounting.  Thus, any family farmcorporation required to change to an accrual method of accounting would restore the section 481adjustment applicable to the change in gross income ratably over a 10-year period beginning withthe year of change.  

	In addition, any taxpayer with an existing suspense account is required to restore theaccount into income ratably over a 20-year period beginning in the first taxable year beginningafter June 8, 1997.  The amount required to be restored to income for a taxable year pursuant tothe 20-year spread period shall not exceed the net operating loss of the corporation for the year(in the case of a corporation with a net operating loss) or 50 percent of the net income of thetaxpayer for the year (for corporations with taxable income).  The 1997 Act repealed therequirement that a corporation restores a portion of its suspense account as its gross receiptsdecreases.

Modify net operating loss ("NOL") carryback and carryforward rules.--The 1997 Actlimited the NOL carryback period to two years (from three years) and extended the NOLcarryforward period to 20 years (from 15 years). The three-year carryback is retained for NOLsattributable to casualty losses of individuals and NOLs of farmers and small businessesattributable to losses incurred in Presidentially declared disaster areas.  The provision waseffective for NOLs arising in taxable years beginning after August 5, 1997.

Expand the limitations on deductibility of premiums and interest with respect to lifeinsurance, endowment and annuity contracts.--Under the 1997 Act, the  premium deductionlimitation with respect to life insurance contracts is modified to provide that no deduction ispermitted for premiums paid on any life insurance, annuity or endowment contract, if thetaxpayer is directly or indirectly a beneficiary under the contract.  Also, generally, no deductionis allowed for interest paid or accrued on any indebtedness with respect to life insurance policy,or endowment or annuity contract, covering the life of any individual.  In addition, 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.  The provisionsapply generally with respect to contracts issued after June 8, 1997.

Allocation of basis of properties distributed to a partner by a partnership.--The 1997 Actmodified the basis allocation rules for distributee partners, so that the basis of distributedproperty generally is allocated in proportion to the fair market values of the property.  Theprovision applied to partnership distributions after August 5, 1997.

Treatment of inventory items of a partnership.--The 1997 Act eliminated the requirementthat inventory be substantially appreciated in order to give rise to ordinary income under therules relating to sales and exchanges of partnership interests.  The provision was effective forsales and exchanges, and distributions after August 5, 1997, with an exception for writtenbinding contracts in effect on June 8, 1997.

Treatment of appreciated property contributed to a partnership.--The 1997 Act extendedfrom five years to seven years the period in which a partner recognizes pre-contribution gain withrespect to property contributed to a partnership.  The provision was effective for propertycontributed to a partnership after June 8, 1997.  An exception was provided for propertycontributed to a partnership pursuant to a written binding contract in effect on June 8, 1997.

Earned income credit compliance provisions

*a.  Deny EIC eligibility for prior acts of recklessness or fraud*

	Under the 1997 Act, a taxpayer who fraudulently claims the earned income credit (EIC) isineligible to claim the EIC for a subsequent period of 10 years.  In addition, a taxpayer whoerroneously claims the EIC due to reckless or intentional disregard of rules or regulations isineligible to claim the EIC for a subsequent period of two years.  These sanctions apply inaddition to any other penalty imposed under present law.  The determination of fraud or ofreckless or intentional disregard of rules or regulations are made in a deficiency proceeding(which provides for judicial review).  The provision is effective for taxable years beginning afterDecember 31, 1996.

*b.  Recertification required when taxpayer found to be ineligible for EIC in past*

	Under the 1997 Act, a taxpayer who has been denied the EIC as a result of deficiencyprocedures is ineligible to claim the EIC in subsequent years unless evidence of eligibility for thecredit is provided by the taxpayer.  To demonstrate current eligibility, the taxpayer is required tomeet evidentiary requirements established by the Secretary of the Treasury.  Failure to providethis information when claiming the EIC is treated as a mathematical or clerical error.  If ataxpayer is recertified as eligible for the credit, the taxpayer is not required to provide thisinformation in the future unless the IRS again denies the EIC as a result of a deficiencyprocedure.  Ineligibility for the EIC under the provision is subject to review by the courts.  Theprovision is effective for taxable years beginning after December 31, 1996.

*c.  Due diligence requirements for paid preparers*

	Under the 1997 Act, return preparers are required to fulfill certain due diligencerequirements with respect to returns they prepare claiming the EIC.  The penalty for failure tomeet these requirements is $100.  This penalty is in addition to any other penalty imposed underpresent law.  The provision is effective for taxable years beginning after December 31, 1996.

*d.  Modify the definition of AGI used to phaseout the EIC*

	Under present law, the EIC is phased out above certain income levels.  For individualswith earned income (or AGI, if greater) in excess of the beginning of the phaseout range, themaximum credit amount is reduced by the phaseout rate multiplied by the amount of earnedincome (or AGI, if greater) in excess of the beginning of the phaseout range.  The 1997 Actmodified the definition of AGI used for phasing out the credit by adding two items of nontaxableincome and changing the percentage of certain losses disregarded.  The two items added are:  (1)tax-exempt interest, and (2) nontaxable distributions from pensions, annuities, and individualretirement arrangements (but only if not rolled over into similar vehicles during the applicablerollover period).  The 1997 Act also increased the amount of net losses from businesses,computed separately with respect to sole proprietorships (other than farming), soleproprietorships in farming, and other businesses disregarded from 50 percent to 75 percent.  Theprovision was effective for taxable years beginning after December 31, 1997.

Eligibility for income forecast method.--The 1997 Act limited the types of property towhich the income forecast method may be applied.  Under the 1997 Act, the income forecastmethod is available to motion picture films, television films and taped shows, books, patents,master sound recordings, copyrights, and other such property as designated by the Secretary ofthe Treasury.  In addition, consumer durables subject to rent-to-own contracts are provided athree-year recovery period and a four-year class life for MACRS purposes (and would not beeligible for the income forecast method).  Such property generally is described in Rev. Proc. 95-38, 1995-34 I.R.B. 25.  The provisions generally are effective for property placed in service afterAugust 5, 1997.

Modify the exception to the related party rule of section 1033 for individuals to onlyprovide an exception for de minimis amounts.--Under section 1033, gain realized by a taxpayerfrom certain involuntary conversions of property is deferred to the extent the taxpayer purchasesproperty similar or related in service or use to the converted property within a specifiedreplacement period of time.  Corporations are not entitled to defer gain under section 1033 if thereplacement property or stock is purchased from a related person. 

	The 1997 Act expanded the denial of the application of section 1033 to any othertaxpayer (including an individual) that acquires replacement property from a related party unlessthe taxpayer has aggregate realized gain of $100,000 or less for the taxable year with respect toconverted property with aggregate realized gains.  The provision applies to involuntaryconversions occurring after June 8, 1997.

Repeal of installment sale accounting for certain manufacturers.--The 1997 Act repealeda provision that permits the use of the installment method of accounting for certain sales bymanufacturers to dealers effective for taxable years beginning August 5, 1998.

Extension of Federal unemployment surtax.--The 1997 Act extended the temporarysurtax rate through December 31, 2007.  It also increased the limit from 0.25 percent to 0.50percent of covered wages on the Federal Unemployment Account (FUA) in the UnemploymentTrust Fund.  The provision is effective for labor performed on or after January 1, 1999.

Additional requirements for charitable remainder trusts.--Under the 1997 Act, a trustcannot be a charitable remainder annuity trust if the annuity for any year is greater than 50percent of the initial fair market value of the trust's assets or be a charitable remainder unitrust ifthe percentage of assets that are required to be distributed at least annually is greater than 50percent effective for transfers to a trust made after June 18, 1997.  In addition, the 1997 Actrequired that the value of the charitable remainder with respect to any transfer to a qualifiedcharitable remainder annuity trust or charitable remainder unitrust be at least 10 percent of thenet fair market value of such property transferred in trust on the date of the contribution to thetrust, effective for transfers to a trust made after July 28, 1997.  The 1997 Act contained specialrules that deal with revocations and reformations of trusts that do not meet the 10-percentrequirement.  In addition, the 10-percent requirement does not apply to trusts created by will orother testamentary instrument if the settler dies before January 1, 1999, and the will or othertestamentary instrument is not changed after July 28, 1997, or the settlor is under a mentaldisability on that date.  Finally, the 1997 Act provided that additional contributions made afterJuly 28, 1997, to a charitable remainder unitrust created before July 29, 1997, that does not meetthe 10-percent requirement with respect to the additional contribution, is treated, under Treasuryregulations, as if those contributions were made to a new trust that does not affect the status ofthe original unitrust as a charitable remainder trust.

Modify general  business credit carryback and carryforward rules.--The 1997 Act reducedthe carryback period for the general business credit to one year (from three years) and extendedthe carryforward period to 20 years (from 15 years).  The provision was effective for creditsarising in taxable years beginning after December 31, 1997.

Using Federal case registry of child support orders for tax enforcement purposes.--ThePersonal Responsibility and Work Opportunity Reconciliation Act of 1996 mandated the creationof a Federal Case Registry of Child Support Orders (the FCR) by October 1, 1998.  AlthoughHHS has not yet issued final regulations, the FCR is required to include the names, and the Statecase identification numbers, of individuals who are owed or who owe child support or for whompaternity is being established.  It also may include the social security numbers (SSNs) of theseindividuals.  Not later than October 1, 1999, the Secretary of the Treasury will have access to theFederal Case Registry of Child Support Orders.  Also, by October 1, 1999, the data elements onthe State Case Registry will include the SSNs of children covered by cases in the Registry, andthe States will provide the SSNs of these children to the FCR.  The provision is effective onOctober 1, 1999.

Expanded SSA records for tax enforcement.--Under the Family Support Act of 1988,States must require each parent to furnish their social security number (SSN) for birth records. Parents can apply directly to the Social Security Administration (SSA) for an SSN for their child;or, in most states, they may apply for the child's SSN when obtaining a birth certificate.  On anindividual's SSN application, the SSA currently requires the mother's maiden name but not herSSN.  Under the 1997 Act, SSA is required to obtain social security numbers (SSNs) of bothparents on minor children's applications for SSNs.  The SSA will provide this information to theIRS as part of the Data Master File ("DM-1 file").  The provision was effective February 1, 1998.

Treatment of amounts received under the work requirements of the PersonalResponsibility and Work Opportunity Act of 1996.--The 1997 Act provided that workfarepayments are not wages for purposes of the earned income credit.  No inference was intendedwith respect to whether workfare payments otherwise qualify as wages for purposes of incomeand employment taxes or as wages for purposes of an employer's eligibility for the workopportunity tax credit and the welfare-to-work tax credit.  Also, no inference was intended withrespect to whether workfare payments are wages for purposes of the earned income credit beforeenactment of this provision.

Modification of estimated tax requirements.--Under present law, an individual with anAGI of more than $150,000 as shown on the return for the preceding taxable year generally doesnot have an underpayment of estimated tax if he or she makes timely estimated tax payments atleast equal to: (1) 110 percent of the tax shown on the return of the individual for the precedingyear (the "110 percent of last year's liability safe harbor") or (2) 90 percent of the tax shown onthe return for the current year.

	The 1997 Act changed the 110 percent of last year's liability safe harbor to be a 100percent of last year's liability safe harbor for taxable years beginning in 1998, a 105 percent oflast year's liability safe harbor for taxable years beginning in 1999, 2000, and 2001, and a 112percent of last year's liability safe harbor for taxable years beginning in 2002.  In addition, noestimated tax penalties will be imposed under section 6654 or 6655 for any period before January1, 1998, for any payment the due date of which is before January 16, 1998, with respect to anunderpayment to the extent the underpayment is created or increased by a provision of the 1997Act.  See, also, the provision modifying the individual estimated tax safe harbor rules in PartEight, below.

**TITLE XI.--FOREIGN TAX PROVISIONS**

**1.  Simplify foreign tax credit limitation for individuals**

	The 1997 Act exempted individuals with no more than $300 ($600 in the case of marriedpersons filing jointly) of creditable foreign taxes, and no foreign source income other thanpassive income, from the foreign tax credit limitation rules, effective for taxable years beginningafter December 31, 1997.

**2.  Simplify translation of foreign taxes**

	The 1997 Act generally provided for accrual-basis taxpayers to translate foreign taxes atthe average exchange rate for the taxable year to which such taxes relate.  The 1997 Act alsoprovided that, in cases where the foreign taxes actually are paid more than two years after suchaccrual, taxes eligible for the direct foreign tax credit are taken into account for the year to whichthey relate and taxes eligible for the indirect foreign tax credit are taken into account for the yearin which paid; in all such cases, the taxes subsequently paid are translated at the exchange ratefor the time of payment.  The provision is effective for taxes that relate to taxable yearsbeginning after December 31, 1997.

**3.  Election to use simplified foreign tax credit limitation for alternative minimum taxpurposes**

	The 1997 Act permitted taxpayers to elect to use as their AMT foreign tax creditlimitation fraction the ratio of foreign source regular taxable income to entire alternativeminimum taxable income, rather than the ratio of foreign source alternative minimum taxableincome to entire alternative minimum taxable income, effective for taxable years beginning afterDecember 31, 1997.

**4.  Simplify treatment of personal transactions in foreign currency**

	The 1997 Act applied nonrecognition treatment to any exchange gain that results from anindividual's acquisition of foreign currency and disposition of it in a personal transaction,provided that such gain does not exceed $200, effective for taxable years beginning afterDecember 31, 1997.

**5.  Simplify foreign tax credit limitation for dividends from 10/50 companies**

	Under the 1997 Act, dividends paid by a so-called 10/50 company out of earnings andprofits for taxable years beginning after 2002 will be subject to look-through treatment forforeign tax credit limitation purposes (i.e., such dividends are characterized based on thecharacter of the underlying income of the company).  In the case of dividends paid by 10/50companies out of earnings and profits for taxable years beginning before 2003, a single foreigntax credit limitation generally will apply to such dividends received by the taxpayer from all10/50 companies (other than any 10/50 company that qualifies as a passive foreign investmentcompany).  The provision is effective for taxable years beginning after December 31, 2002.

**6.  General provisions affecting treatment of controlled foreign corporations**

	The 1997 Act made several modifications to the treatment of controlled foreigncorporations and lower-tier controlled foreign corporations.  In addition, the 1997 Act extendedthe application of the indirect foreign tax credit to taxes paid or accrued by fourth- through sixth-tier controlled foreign corporations.

**7.  Modification of passive foreign investment company provisions to eliminate overlapwith subpart F, to allow mark-to-market election, and to require measurement based onvalue for PFIC asset test**

	Under the 1997 Act, a shareholder that is subject to the subpart F rules with respect tostock of a passive foreign investment company that also is a controlled foreign corporation is notsubject also to the passive foreign investment company provisions with respect to the same stock. In addition, the Act allows a shareholder of a passive foreign investment company to make amark-to-market election with respect to the stock of the passive foreign investment company,provided that such stock is marketable.  Finally, the 1997 Act requires that the measurement ofassets for purposes of the PFIC asset test be based on value in the case of publicly-tradedcorporations. 

**8.  Simplify formation and operation of international joint ventures**

	The 1997 Act repealed the excise tax that applies to transfers of appreciated property byU.S. persons to certain foreign entities.  The 1997 Act also required enhanced informationreporting by U.S. persons with respect to their interests in foreign partnerships.

**9.  Modification of reporting threshold for stock ownership of a foreign corporation**

	The 1997 Act increased the stock ownership threshold that results in an informationreporting obligation with respect to a foreign corporation from 5 percent to 10 percent.

**10.  Transition rule for certain trusts**

	The 1997 Act granted regulatory authority to allow nongrantor trusts that had beentreated as U.S. trusts prior to the enactment of the Small Business Job Protection Act of 1996 toelect to continue to be treated as U.S. trusts.

**11.  Simplify stock and securities trading safe harbor**

	The 1997 Act modified the "safe harbor" from U.S. net income taxation for foreignpersons that trade in stocks or securities for their own accounts.  The 1997 Act eliminated thesafe harbor's requirement for both partnerships and foreign corporations that the entity's principaloffice not be within the United States.

**12.  Clarification of determination of foreign taxes deemed paid**

	The 1997 Act clarified that, for purposes of the indirect foreign tax credit, a foreigncorporation's foreign tax pool does not include any taxes that are attributable to dividendsdistributed by the foreign corporation in prior taxable years.

**13.  Clarification of foreign tax credit limitation for financial services income**

	The 1997 Act clarified that the exclusion from passive income for income that is treatedas high-taxed income does not apply for purposes of the separate foreign tax credit limitationapplicable to financial services income.

**14.  Eligibility of licenses of computer software for foreign sales corporation benefits**

	The 1997 Act provided that computer software licensed for reproduction abroad is notexcluded from the definition of export property for purposes of the foreign sales corporationprovisions.  Accordingly, computer software that is exported with a right to reproduce is eligiblefor the benefits of the foreign sales corporation provisions.

**15.  Increase dollar limitation on section 911 exclusion**

	Under the 1997 Act, the $70,000 limitation on the exclusion for foreign earned income isincreased to $80,000, in increments of $2,000 each year beginning in 1998, and is indexed forinflation beginning in 2008.

**16.  Treatment of certain securities positions under the subpart F investment in U.S.property rules**

	The 1997 Act provided two additional exceptions from the definition of U.S. property forpurposes of the subpart F rules.  These exceptions cover collateral or margin deposit andrepurchase agreement transactions entered into by a securities or commodities dealer in theordinary course of its business.

**17.  Exception from foreign personal holding company income under subpart F for activefinancing income**

	The 1997 Act provided a temporary exception from foreign personal holding companyincome for subpart F purposes for certain income that is derived in the active conduct of aninsurance, banking, financing or similar business.  This temporary exception was applicable onlyfor taxable years beginning in 1998.  This provision was (1) identified as a limited tax benefitsubject to the Line Item Veto Act, (2) canceled by the President pursuant to his authority underthe Line Item Veto Act, and (3) reinstated when the Supreme Court ruled that the Line Item VetoAct was unconstitutional.  See, also, the provision contained in Part Eight, below, providing for amodified version of this exception that will apply to taxable years beginning in 1999.

**18.  Treat service income of nonresident alien individuals earned on foreign ships as foreignsource income and disregard U.S. presence of such individuals**

	The 1997 Act generally treated income of a nonresident alien individual, who is presentin the United States as a member of the regular crew of a foreign vessel, from the performance ofpersonal services in connection with the international operation of a ship as income from foreignsources exempt from U.S. income and withholding tax.  The 1997 Act further provided that anyday that such an individual is present in the U.S. as a crew member is disregarded for purposes ofdetermining whether the individual is treated as a U.S. resident for tax purposes, unless theindividual otherwise engages in trade or business in the United States on such day.

**TITLE XII.--SIMPLIFICATION PROVISIONS RELATING TO INDIVIDUALS AND BUSINESSES**

**1.  Individual simplification provisions**

Increased standard deduction for dependent children.--The 1997 Act increased thestandard deduction for a taxpayer with respect to whom a dependency exemption is allowed onanother taxpayer's return to the lesser of: (1) the standard deduction for individual taxpayers or(2) the greater of: (a) $500 (indexed for inflation as under prior law), or (b) the individual'searned income plus $250, effective for taxable years beginning after December 31, 1997.  The$250 amount is indexed for inflation after 1998.  In addition, the 1997 Act increased the AMTexemption amount for a child under age 14 to the lesser of (1) $33,750 or (2) the sum of thechild's earned income plus $5,000, effective for taxable years beginning after December 31,1997.  The $5,000 amount is indexed for inflation after 1998.

Estimated tax for individuals.--The 1997 Act increased the de minimis threshold forestimated tax payments from $500 to $1000 per year for individuals, effective for taxable yearsbeginning after December 31, 1997.

Rural mail carriers.--The 1997 Act simplified the treatment of certain reimbursedexpenses of rural letter carriers' vehicles.

Travel expenses of certain Federal employees.--The 1997 Act simplified the tax treatmentof travel expenses of Federal employees participating in a Federal criminal investigation.

Payment of taxes by credit card.--The 1997 Act permitted the payment of taxes bycommercially acceptable means (such as credit cards).  The 1997 Act prohibited the payment ofany credit card fees by the Treasury.

**2.  Business simplification provisions**

Modifications to look-back method for long-term contracts.--The 1997 Act provided twosafe harbors such that a taxpayer may elect not to apply the look-back method for de minimischanges in estimated income from a long-term contract.  In addition, the 1997 Act provided that,for purposes of the look-back method, only one rate of interest is to apply for each accrualperiod.   The provisions apply to contracts completed in taxable years ending after August 5,1997.

Minimum tax treatment of certain property and casualty insurance companies.--The 1997Act provided that a property and casualty insurance company that elects for regular tax purposesto be taxed only on taxable investment income determines its adjusted current earnings under thealternative minimum tax without regard to any amount not taken into account in determining itsgross investment income.  The provision was effective for taxable years beginning afterDecember 31, 1997.

Treatment of construction allowances provided to lessees.--The 1997 Act provided thatthe gross income of a lessee does not include amounts received in cash (or treated as a rentreduction) from a lessor under a short-term lease of retail space for the purpose of the lessee'sconstruction or improvement of qualified long-term real property for use in the lessee's trade orbusiness at such retail space. 

	In addition, the lessor must treat the amounts expended on the construction allowance asnonresidential real property owner by the lessor.  Reporting requirements are provided to ensurethat both the lessor and lessee treat such amounts as nonresidential real property. The provisionapplies to leases entered into after August 5, 1997.

**3.  Partnership simplification provisions**

Simplified flow-through for electing large partnerships.--The 1997 Act modified the taxtreatment of an electing large partnership (generally, any partnership that elects under theprovision, if the number of partners in the preceding taxable year is 100 or more) and its partners.The provision provides that each partner takes into account separately the partner's distributiveshare of certain items of partnership income, gain, loss, deduction and credit.  The provisionsgenerally apply to partnership taxable years beginning after December 31, 1997.

Simplified audit procedures for electing large partnerships.--The 1997 Act created a newaudit system for electing large partnerships (generally, any partnership that elects under thereporting provisions, if the number of partners in the preceding taxable year is 100 or more). Partnership adjustments generally flow through to the partners for the year in which theadjustment takes effect.  In lieu of flowing an adjustment through to its partners, the partnershipmay elect to pay an imputed underpayment.  The provision applies to partnership taxable yearsbeginning after December 31, 1997.

Due date for furnishing information to partners of electing large partnerships.--The 1997Act provided that an electing large partnership must furnish information returns to partners bythe first March 15 following the close of the partnership's taxable year.  Electing largepartnerships are those partnerships subject to the simplified reporting and audit rules (generally,any partnership that elects under the reporting provision, if the number of partners in thepreceding taxable year is 100 or more).  The provision is effective for partnership taxable yearsbeginning after December 31, 1997.

Partnership returns required on magnetic media.--The 1997 Act provided generally thatany partnership is required to provide the tax return of the partnership (Form 1065), as well ascopies of the schedule sent to each partner (Form K-1), to the Internal Revenue Service onmagnetic media.  An exception is provided for partnerships with 100 or fewer partners.  Theprovision is effective for partnership taxable years beginning after December 31, 1997.

Treatment of partnership items of individual retirement arrangements.--The 1997 Actmodified the filing threshold for an IRA with an interest in a partnership that is subject to thepartnership-level audit rules.  A fiduciary of an IRA that receives taxable income from such apartnership of less than $1,000 (before the $1,000 specific deduction) is not required to file anincome tax return if the IRA does not have any other income from an unrelated trade or business. The provision applies to taxable years beginning after December 31, 1997.

Other partnership audit rules.--The 1997 Act contained provisions to simplify thepartnership audit rules enacted in the Tax Equity and Fiscal Responsibility Act of 1982(TEFRA).

Closing of partnership taxable year with respect to deceased partner.--The 1997 Actprovided that the taxable year of a partnership closes with respect to a partner whose entireinterest in the partnership terminates, whether by death, liquidation or otherwise.  The provisionis effective for partnership taxable years beginning after December 31, 1997.

**4.  REIT simplification**

	The 1997 Act modified the following provisions relating to the requirements forqualification as, and the taxation of, a REIT, effective for taxable years beginning after August 5,1997:

Alternative penalties for failure to request information from shareholders.--The 1997 Actreplaced the rule that disqualifies a REIT for any year in which the REIT failed to comply withregulations to ascertain its ownership with an intermediate penalty of $25,000 ($50,000 forintentional violations).  In addition, a REIT that complied with the regulations for ascertaining itsownership, and which did not know, or have reason to know, that it was so closely held as to beclassified as a personal holding company, would not be treated as a personal holding company.

De minimis rule for tenant service income.--The 1997 Act permitted a REIT to render a*de minimis* amount of impermissible services to tenants, or in connection with the managementof property, and still treat amounts received with respect to that property as rent. The value of theimpermissible services could not exceed one percent of the gross income from the property.

Attribution rules applicable to tenant ownership and independent contractors.-- The 1997Act modified the rules relating to attribution to partnerships for purposes of defining qualifiedrent and independent contractor, so that attribution would occur only when a partner owns a 25percent or greater interest in the partnership.

Credit for tax paid by REIT on retained capital gains.-- The 1997 Act permitted a REIT toelect to retain and pay income tax on net long-term capital gains it received during the tax year,just as a RIC is permitted to so elect.

Repeal of 30-percent gross income requirement.--The 1997 Act repealed the rule thatrequires less than 30 percent of a REIT's gross income be derived from gain from the sale orother disposition of stock or securities held for less than one year, certain real property held lessthan four years, and property that is sold or disposed of in a prohibited transaction.

Modification of earnings and profits for determining whether REIT has earnings andprofits from non-REIT year.-- The 1997 Act changed the ordering rule for purposes of therequirement that newly-electing REITs distribute earnings and profits that were accumulated innon-REIT years so that distributions of accumulated earnings and profits generally would betreated as made from the entity's earliest accumulated earnings and profits, rather than the mostrecently accumulated earnings and profits.

Treatment of foreclosure property.--The 1997 Act lengthened the original grace periodfor foreclosure property to three taxable years and permits extension of the grace period for anadditional three years by filing a request to the IRS.  A REIT could revoke an election to treatproperty as foreclosure property for any taxable year.  Further, the 1997 Act conformed thedefinition of independent contractor for purposes of the foreclosure property rule to the definitionof independent contractor for purposes of the general rules.

Payments under hedging  instruments.--The 1997 Act treated income from all hedges thatreduce the interest rate risk of REIT liabilities, not just from interest rate swaps and caps, asqualifying income.

Excess noncash income.--The 1997 Act (1) expanded the class of excess noncash items toinclude income from the cancellation of indebtedness and (2) extended the treatment of originalissue discount and coupon interest as excess noncash items to REITs that use an accrual methodof taxation.

Prohibited transaction safe harbor.--The 1997 Act excluded from the prohibited salesrules property that was involuntarily converted.

Shared appreciation mortgages.--The 1997 Act provided that interest received on a sharedappreciation mortgage is not subject to the tax on prohibited transactions where the propertysubject to the mortgage is sold within four years of the REIT's acquisition of the mortgagepursuant to a bankruptcy plan of the mortgagor unless the REIT that acquired the mortgage knewor had reason to know that the property subject to the mortgage would be sold in a bankruptcyproceeding.

Wholly-owned REIT subsidiaries.--The 1997 Act permitted any corporationwholly-owned by a REIT to be treated as a qualified subsidiary, regardless of whether thecorporation had always been owned by the REIT. Where the REIT acquired an existingcorporation, the Act treats any such corporation as being liquidated as of the time of acquisitionby the REIT and then reincorporated (thus, any of the subsidiary's pre-REIT built-in gain wouldbe subject to tax).  In addition, any pre-REIT earnings and profits of the subsidiary must bedistributed before the end of the REIT's taxable year.

**5.  Repeal of 30-percent requirement of regulated investment companies**

	The 1997 Act repealed the requirement that a regulated investment company ("RIC")must derive less than 30 percent of its gross income from the sale or disposition of certaininvestments (including stock, securities, options, futures, and forward contracts) held less thanthree months (the "short-short test") (sec. 851(b)(3)), effective for taxable years beginning afterAugust 5, 1997.

**6.  Taxpayer protections**

	The 1997 Act provided several additional protections for taxpayers, such as providing areasonable cause exception for additional penalties where one does not now exist, clarifyingseveral aspects of the statute of limitations, and repealing the authority to disclose whether aprospective juror has been audited.

**TITLE XIII.--ESTATE, GIFT, AND TRUST SIMPLIFICATION PROVISIONS**

	The 1997 Act contained a number of simplification provisions relating to Federal estate,gift and trust taxes that are intended to simplify administration of the Internal Revenue Code. These provisions: (1) eliminate gift tax filing requirements for gifts to charities; (2) clarifywaivers of certain rights of recovery; (3) provide that certain trusts created before the enactmentof the Omnibus Budget Reconciliation Act of 1990 are treated as satisfying the withholdingrequirement if the governing instruments require that all trustees be U.S. citizens or domesticcorporations; (4) provide that any debt obligation, the income from which would be eligible forthe exemption for short-term OID under section 871(g)(1)(B)(i) if such income were received bythe decedent on the date of his death, is treated as property located outside of the United States indetermining the U.S. estate tax liability of a nonresident not a U.S. citizen; (5) conform thetreatment of estates and trusts by (a) providing an irrevocable election to treat a qualifiedrevocable trust as part of the decedent's estate for Federal income tax purposes, (b) extending the application of the 65-day rule applicable under present law to trusts to distributionsby estates, and (c) extending the separate share rule to estates; (6) treat an estate and a beneficiaryof that estate as related persons for purposes of sections 267 and 1239, except in the case of asale or exchange in satisfaction of a pecuniary bequest; (7) allow the trustee of a pre-need funeraltrust to elect special tax treatment for such a trust; (8) clarify the treatment of certain transfersmade through a revocable trust within three years of death; (9) clarify that the marital deductionis available with respect to a nonparticipant spouse's interest in an annuity attributable tocommunity property laws where he or she predeceases the participant spouse; (10) provide theTreasury Department with regulatory authority to treat as trusts legal arrangements that havesubstantially the same effect as a trust; (11) provide an opportunity to correct certain failures inan election to specially value certain real property used in farming or other closely heldbusinesses; and (12) waive the requirement of a U.S. trustee for qualified domestic trusts.

**TITLE XIV.--EXCISE TAX AND OTHER SIMPLIFICATION PROVISIONS**

**1.  Excise tax simplification**

	The 1997 Act included a package of excise tax simplification provisions.  

	(1)  Certain de minimis exceptions to the taxes on heavy highway vehicles and luxuryautomobiles for after-market additions were increased from $200 to $1,000.

	(2)  Various changes were made to the excise taxes on distilled spirits, wine, and beer toconform the treatment of the three beverages under various prior-law rules or to conform theCode to changes in the administration of those taxes enacted in recent years.

	(3)  The Internal Revenue Service was provided expanded authority to exempt taxpayersfrom registration requirements of the Code.

	(4)  The prior-law 11-percent excise tax on arrows was replaced by a 12.4-percent tax onfour component parts of arrows, effective after September 30, 1997.

	(5)  The rules governing when modified trucks are "remanufactured" and thus subject tothe retail tax on heavy highway vehicles were clarified.

	(6)  Clarification was provided that skydiving flights are taxed as noncommercial aviationsubject to a fuels tax (rather than to the commercial passenger ticket tax).

	(7)  A provision eliminating double taxation of certain aviation fuel was provided.

	(8)  Certain "deadwood" provisions were deleted from the Code.

**2.  Tax-exempt bond provisions**

Repeal of $100,000 limitation on unspent proceeds under one-year exception fromrebate.--Under the 1997 Act, the $100,000 limit on proceeds that may remain unspent after sixmonths for certain governmental and qualified 501(c)(3) bonds otherwise exempt from the rebaterequirement was deleted. Thus, if at least 95 percent of the proceeds of these bonds is spentwithin six months after their issuance, and the remainder is spent within one year, the six-monthexception is deemed to be satisfied.  The provision applies to bonds issued after August 5, 1997.

Exception from rebate for earnings on bona fide debt service fund under constructionbond rules.--The 1997 Act exempted earnings on bond proceeds invested in bona fide debtservice funds from the arbitrage rebate requirement and the penalty requirement of the 24-monthexception if the spending requirements of that exception are otherwise satisfied.  The provisionapplies to bonds issued after August 5, 1997.

Repeal of debt service-based limitation on investment in certain nonpurposeinvestments.--The 1997 Act repealed the 150-percent of debt service yield restriction.  Theprovision applies to bonds issued after August 5, 1997.

Repeal of expired provisions relating to student loan bonds.--Prior law included twospecial exceptions to the arbitrage rebate and pooled financing temporary period rules for certainqualified student loan bonds. These exceptions applied only to bonds issued before January 1,1989.  These special exceptions were deleted as "deadwood."

**3.  Tax Court provisions**

	The 1997 Act clarified several aspects of the procedures utilized in the Tax Court, andestablishes jurisdiction for the Tax Court to determine employment status.

**4.  Other provisions**

Due date for first quarter estimated tax payments by private foundations.--The 1997 Actprovided that a calendar-year foundation's first-quarter estimated tax payment is due on May 15(which is the same day that its annual return, Form 990-PF, for the preceding year is due).  Theprovision applies to taxable years beginning after August 5, 1997.

Withholding of Puerto Rico taxes for Federal employees.--The 1997 Act provided theauthority for the withholding of Commonwealth income taxes from the wages of Federalemployees.

Certain notices disregarded.--The 1997 Act provided that certain notices are to bedisregarded under the provision increasing the interest rate on large corporate underpayments.

**TITLE XV.--PENSION AND EMPLOYEE BENEFIT PROVISIONS**

	The 1997 Act contained a variety of miscellaneous provisions relating to pensions andother benefits. Several provisions apply to State and local governmental plans, including anexemption from the discrimination rules, a portability provision which permits employeesparticipating in governmental plans to purchase additional service credit for their retirementbenefit, and a provision that provides for an income exclusion for disability payments made topublic safety employees.

	The 1997 Act contained certain rules relating to ESOPs of S corporations, including therepeal of the application of the unrelated business taxable income rules to S corporation incomeallocated to an ESOP. The 1997 Act contained a waiver of the 10-percent tax on nondeductiblecontributions to pension plans in the case of matching and elective deferral contributions,included a requirement that cash or deferred arrangements provide diversification of investments,and increased the 150-percent of current liability full funding limit.

	In addition, the 1997 Act provided tax sanctions with respect to the requirements of TheNewborns' and Mothers' Health Protection Act of 1996 and The Mental Health Parity Act of1996.

	The 1997 Act also contained pension simplification provisions which address a variety ofplan administration issues, including the use of new technologies in retirement plans, theelimination of paperwork burdens on plans, a modification to the antiassignment and alienationrules, and a simplification of the rollover rules applicable to qualified retirement plans.

**TITLE XVI.--TECHNICAL CORRECTIONS PROVISIONS**

	The 1997 Act contained technical, clerical, and conforming amendments to the SmallBusiness Job Protection Act of 1996, the Health Insurance Portability and Accountability Act of1996, the Taxpayer Act of Rights 2, and other recently enacted legislation.

**PART THREE: REVENUE PROVISIONS OF THE BALANCED BUDGET ACT OF 1997 (H.R. 2015)(6)**

**A.  Taxation of Medicare+Choice Medical Savings Accounts**

		Under the Balanced Budget Act of 1997 ("BBA"), individuals who are eligible forMedicare are permitted to choose either the traditional Medicare program or a Medicare+ChoiceMSA plan.(7)  If an individual chooses such a plan, the Secretary of Health and Human Servicesmakes a specified contribution directly into a Medicare+Choice MSA designated by suchindividual. Only contributions by the Secretary of Health and Human Services can be made to aMedicare+Choice MSA and such contributions are not included in the taxable income of theMedicare+Choice MSA holder. Income earned on amounts held in a Medicare+Choice MSA arenot currently includible in taxable income. Withdrawals from a Medicare+Choice MSA areexcludable from taxable income if used for the qualified medical expenses of theMedicare+Choice MSA holder. Medical expenses of the account holder's spouse or dependentsare not treated as qualified medical expenses. Withdrawals from a Medicare+Choice MSA thatare not used for the qualified medical expenses of the account holder are includible in incomeand may be subject to an additional tax.

	The provision is effective for taxable years beginning after December 31, 1998.

**B.  Tax Treatment of Hospitals Which Participate in Provider-Sponsored Organizations**

	The BBA provides that an organization does not fail to be treated as organized andoperated exclusively for a charitable purpose for purposes of Code section 501(c)(3) solelybecause a hospital which is owned and operated by such organization participates in aprovider-sponsored organization ("PSO") (as defined in section 1845(a)(1) of the Social SecurityAct), whether or not such PSO is exempt from tax. Thus, participation by a hospital in a PSO(whether taxable or tax-exempt) is deemed to satisfy the first part of the inquiry under currentIRS ruling practice.(8)

**C.  Provision of Employer Identification Numbers by Medicare Providers**

	The BBA requires that all Medicare providers supply the Secretary of HHS with theemployer identification number ("EIN") of each disclosing entity, each person with an ownershipor control interest, and any subcontractor in which the entity has a direct or indirect 5 percent ormore ownership interest.  The provision is effective 90 days after the Secretary of HHS submitsto the Congress a report on the steps taken to ensure the confidentiality of social security accountnumbers required to be provided to the Secretary of HHS.

**D.  Disclosure of Tax Return Information for Verification of Employment Status ofMedicare Beneficiaries and the Spouse of a Medicare Beneficiary**

	The BBA permanently extended a provision permitting disclosure of taxpayer filingstatus and identity information for the purpose of verifying the employment status of Medicarebeneficiaries and the spouse of a Medicare beneficiary.  The provision was effective on August 5,1997.

**E.  Employment Tax Provisions**

**1.  Exemption from service performed by election workers from the FederalUnemployment Tax**

	The BBA exempted from Federal unemployment tax ("FUTA") service performed as anelection official or election worker. This exemption applies only if the annual wages received bythe individual for such service are less than $1,000. These persons also are ineligible to claimunemployment benefits with respect to such wages.  The provision was effective with respect toservice performed after August 5, 1997.

**2.  Treatment of certain services performed by inmates**

	The BBA exempted wages paid to persons committed to penal institutions from thedefinition of wages for FUTA tax purposes. These persons are also ineligible to claimunemployment benefits with respect to such wages.  The provision was effective with respect toservice performed after January 1, 1994.

**3.  Exemption of service performed for an elementary or secondary school operatedprimarily for religious purposes from the Federal unemployment tax**

	The BBA exempted service, which is performed in an elementary or secondary schoolthat is operated primarily for religious purposes, from FUTA requirements of coverage underState unemployment compensation laws. This exemption is available to such schools eventhough they are not operated, supervised, controlled, or principally supported by a church orconvention or association of churches. Persons performing such service also are ineligible toclaim unemployment benefits with respect to such wages.  The provision was effective withrespect to service performed after August 5, 1997.

**F.  Authorization of Appropriations for Enforcement Initiatives Related to the Earned Income Credit**

	The BBA authorized to be appropriated to the Secretary of the Treasury for improvedapplication of the earned income credit, the following amounts: $138 million in FY 1998, $143million in FY 1999, $144 million in FY 2000, $145 million in FY 2001, and $146 million in FY2002.  The provision was effective on August 5, 1997.

**G.  Increase in Excise Tax on Tobacco Products**

	The BBA increased the excise tax rates on all tobacco products, including cigarettes,cigars, chewing tobacco, snuff, and pipe tobacco, effective in two stages: an increase of 10 centsper pack of cigarettes on January 1, 2000, and a further increase of 5 cents per pack of cigaretteson January 1, 2002.  Proportionate increases apply to other tobacco products.  The excise tax alsois imposed on "roll-your-own" tobacco, beginning in 2000.  Floor stocks taxes are imposed ontobacco products at the time of the rate increases (including tobacco products in foreign tradezones). The BBA also included expanded compliance measures designed to prevent diversion ofnon-tax-paid tobacco products nominally destined for export to use within the United States. The provision generally is effective on January 1, 2000.

**PART FOUR: TAXPAYER BROWSING PROTECTION ACT (H.R. 1226)(9)**

	The Taxpayer Browsing Protection Act created a new criminal penalty in the InternalRevenue Code. The penalty is imposed for willful inspection (except as authorized by the Code)of any tax return or return information by any Federal employee or IRS contractor. The penaltyalso applies to willful inspection (except as authorized) by any State employee or other personwho acquired the tax return or return information under specific provisions of section 6103.Upon conviction, the penalty is a fine in any amount not exceeding $1,000,(10) or imprisonment ofnot more than one year, or both, together with the costs of prosecution. In addition, uponconviction, an officer or employee of the United States would be dismissed from office ordischarged from employment.

	The Taxpayer Browsing Protection Act amended the provision providing for civildamages for unauthorized disclosure by also providing for civil damages for unauthorizedinspection. Damages are available for unauthorized inspection that occurs either knowingly or byreason of negligence. Accidental or inadvertent inspection that may occur (such as, for example,by making an error in typing in a TIN) would not be subject to damages because it would notmeet this standard. The Act also provides that no damages are available to a taxpayer if thattaxpayer requested the inspection or disclosure.

	The Taxpayer Browsing Protection Act also required that, if any person is criminallycharged by indictment or information with inspection or disclosure of a taxpayer's return orreturn information in violation of section 7213 (a) or (b), new section 7213A (as added by theAct), or 18 USC section 1030(a)(2)(B), the Treasury Secretary must notify that taxpayer as soonas practicable of the inspection or disclosure.

	The provisions of the Taxpayer Browsing Protection Act were effective for violationsoccurring on or after August 5, 1997.

**PART FIVE: EXTENSION OF HIGHWAY TRUST FUND (S. 1519)(11)**

	S. 1519 extended the authority to make expenditures (subject to appropriations) from theHighway Trust Fund through September 30, 1998.  S. 1519 also updated the Highway TrustFund cross reference to authorizing legislation to include expenditure purposes in the Act as ineffect on December 1, 1997.

	In addition, S. 1519 extended the deadline for the transfer from the Highway Trust Fundto other Trust funds of revenues from the tax on gasoline and special motor fuels used inmotorboats, gasoline used in small engines, and motor fuels used in off-highway recreationalvehicles through September 30, 1998. Further, S. 1519 extended the expenditure authority fromthe Boat Safety Account of the Aquatic Resources Trust Fund for six months, through September30, 1998, and extended the expenditure authority from the National Recreational Trails TrustFund through September 30, 1998.

	See, also, the provisions in Part Six, below, describing the revenue provisions of theTransportation Equity Act for the 21st Century (H.R. 2400).

**PART SIX: REVENUE PROVISIONS OF THE TRANSPORTATION EQUITY ACT FOR THE 21ST CENTURY (TITLE IX OF H.R. 2400)(12)**

**I.  HIGHWAY-RELATED TAXES AND TRUST FUND**

**A.  Extension and Modification of Highway-Related Taxes**

**1.  Highway-related taxes and exemptions**

	The Transportation Equity Act for the 21st Century ("TEA 21") extended all of the prior-law Highway Trust Fund excise taxes through September 30, 2005.  The ethanol and renewable-source methanol excise and income tax incentives were extended through September 30, 2007(excise tax reduced rate), and December 31, 2007 (income tax credit), respectively.  Theseincentives will be reduced from 54 cents per gallon to 51 cents per gallon over a 5-year periodbeginning on January 1, 2001.

**2.  Motor fuels tax refund procedure**

	TEA 21 combined refund procedures for all taxable motor fuels, allowing aggregation ofquarterly amounts for all taxable fuels and filing of refund claims once a single $750 minimumamount is reached (determined on a year-to-date basis rather than an individual quarter basis). This provision was effective for claims filed after September 30, 1998.

**3.  Requirement that motor fuels terminals offer dyed fuel**

	TEA 21 delayed the effective date of a requirement, enacted in the Taxpayer Relief Act of1997, that registered motor fuels terminals offer dyed fuel for two years, to July 1, 2000.  See,also, the description of the dyeing requirement contained in Part Two, above.

**B.  Highway Trust Fund Provisions**

	TEA 21 transferred the gross receipts from current highway excise taxes to the HighwayTrust Fund through September 30, 2005.  TEA 21 further provided that the Highway Trust Fundwould earn no further interest on its cash balances after September 30, 1998.  TEA 21 extendedthe Highway Trust Fund expenditure authority through September 30, 2003, and updated theexpenditure purposes to be consistent with the provisions of the Act.  TEA 21 conformed theone-year anti-deficit rule in the Mass Transit Account to the two-year rule in the HighwayAccount.  The Act made two technical corrections to the 1997 Act relating to the Highway TrustFund excise tax revenues and deleted a deadwood provision.

**II.  OTHER TRUST FUND PROVISIONS**

**A.  Aquatic Resources Trust Fund**

	TEA 21 extended the transfer of 11.5 cents per gallon of motorboat fuels tax revenues tothe Boat Safety Account and Wetlands Sub-Account of the Aquatic Resources Trust Fundthrough September 30, 2003.  In addition, TEA 21 transferred an additional 1.5 cents per gallonof motorboat fuels tax and small-engine gasoline revenues to the Aquatic Resources Trust Fundduring fiscal years 2002 and 2003 and 2 cents per gallon of such revenues for 2004 andthereafter.  The provisions were effective on October 1, 1998.  TEA 21 also extended theexpenditure authority for the Boat Safety Account through September 30, 2003.

**B.  National Recreational Trails Trust Fund**

	TEA 21 repealed the National Recreational Trails Trust Fund ("Trails Fund") and thetransfer of nonhighway recreational fuels taxes to the Trails Fund, effective on October 1, 1998. Under authorizing provisions of the TEA 21, Highway Trust Fund expenditures were authorizedfor similar purposes to those of the Trails Fund.

**III.  ADDITIONAL REVENUE PROVISIONS**

**A.  Rail Fuels Excise Tax**

	TEA 21 repealed the additional 1.25 cents per gallon tax rate on fuel used in trains thatwas scheduled to expire after September 30, 1999.  The repeal was effective November 1, 1998.

**B.  Income Tax Provisions**

**1. Tax treatment of parking and transit benefits**

	TEA 21 increased the exclusion for employer-provided transit passes and vanpooling to$100 per month, effective for taxable years beginning after December 31, 2001.  In addition, TEA 21 provided that no amount is includible in gross income or wages of an employee merelybecause the employee is offered the choice of cash in lieu of one or more qualified transportationbenefits, or a combination of such benefits.  In addition, no amount is includible in income orwages merely because the employee is offered a choice among qualified transportation benefits. This provision was effective for taxable years beginning after December 31, 1997.  TEA 21 alsoprovided that there is no indexing of the dollar limit on any qualified transportation benefit in1999.

**2.  Purposes for which Amtrak NOL monies may be used in non-Amtrak States**

	TEA 21 expanded the list of qualified expenses for which Amtrak NOL monies may beused in non-Amtrak States, effective as if included in the Taxpayer Relief Act of 1997.  See,also, Part Two relating to the elective carryback of existing net operating losses of Amtrak.****

**PART SEVEN: INTERNAL REVENUE SERVICE RESTRUCTURING AND REFORM ACT OF 1998 (H.R. 2676)(13)**

**TITLE I.--REORGANIZATION OF STRUCTURE AND MANAGEMENT OF THE IRS**

**A.  IRS Restructuring and Creation of IRS Oversight Board**

**1.  IRS mission and restructuring**

	The Internal Revenue Service Restructuring and Reform Act of 1998 ("IRS Reform Act")directed the Internal Revenue Service ("IRS") to revise its mission statement to provide greateremphasis on serving the public and meeting the needs of taxpayers.  The IRS Reform Actdirected the Commissioner of Internal Revenue ("Commissioner") to restructure the IRS byeliminating or substantially modifying the  three-tier geographic structure and replacing it withan organizational structure that features operating units serving particular groups of taxpayerswith similar needs.

**2.  Establishment and duties of IRS Oversight Board**

	The IRS Reform Act provided for the establishment within the Treasury Department ofthe Internal Revenue Service Oversight Board (the "Board").  The general responsibilities of theBoard are to oversee the IRS in its administration, management, conduct, direction, andsupervision of the execution and application of the internal revenue laws.  The Board also has theauthority to recommend candidates for Commissioner to the President, and to recommendremoval of the Commissioner.   The Board has no authority to intervene in (1) specific taxpayercases, including compliance activities involving specific taxpayers such as criminalinvestigations, examinations, and collection activities, (2) specific individual personnel matters,or (3) specific procurement matters.  The Board has authority to oversee general law enforcementmatters, and it has the responsibility to ensure that the organization and operation of the IRSallows the IRS to carry out its mission.

	The Oversight Board is composed of nine members.  Six of the members are so-called"private-life" members who are not otherwise Federal officers or employees.  The other membersare: (1) the Secretary of the Treasury (or, if the Secretary so designates, the Deputy Secretary);(2) the Commissioner; and (3) an individual who is a full-time Federal employee or arepresentative of employees ("employee representative").  The private-life members of the Boardand the Federal employee or employee representative are appointed by the President, with theadvice and consent of the Senate.  Under the IRS Reform Act, the private-life members of theBoard are appointed without regard to political affiliation, based solely on their expertise in thefollowing areas:  management of large service organizations; customer service; the Federal taxlaws, including tax administration and compliance; information technology; organizationdevelopment; the needs and concerns of taxpayers; and the needs and concerns of small business.

	Under the IRS Reform Act, Board members have limited access to confidential tax returnand return information under section 6103.  This limited access permits the Board to receivesection 6103 information from the newly established Treasury Inspector General for TaxAdministration or the Commissioner in connection with reports to the Board.  This access tosection 6103 information does not include the taxpayer's name, address, or taxpayer or employeridentification number.

	The provisions relating to the Board were effective on July 22, 1998.  The President wasdirected to submit nominations for Board members to the Senate by December 22, 1998.  TheIRS Reform Act provided that the provisions relating to the Board are not to be construed toinvalidate the actions and authority of the IRS prior to the appointment of members of the Board.

**B.  Appointment and Duties of IRS Commissioner and Chief Counsel and Other Personnel**
**1.  IRS Commissioner and other personnel**

	As under prior law, the IRS Reform Act provided that the Commissioner is appointed bythe President, with the advice and consent of the Senate, and may be removed at will by thePresident.  Under the IRS Reform Act, one of the qualifications of the Commissioner isdemonstrated ability in management.  The Commissioner is appointed to a five-year term,beginning with the date of appointment.  The Commissioner may be reappointed for more thanone five-year term.  The Board recommends candidates to the President for the position ofCommissioner; however, the President is not  required to nominate for Commissioner acandidate recommended by the Board.  The Board has the authority to recommend the removalof the Commissioner.

**2.  IRS Chief Counsel**

	Under the IRS Reform Act, the IRS Chief Counsel is longer be an Assistant GeneralCounsel of the Treasury and generally reports to the IRS Commissioner, with two exceptions. First, the Chief Counsel reports to both the Commissioner and the Treasury General Counselwith respect to (1) legal advice or interpretation of the tax law not relating solely to tax policyand (2) tax litigation.  Second, the Chief Counsel reports only to the Treasury General Counselwith respect to legal advice or interpretation of the tax law relating solely to tax policy.

**C.  Structure and Funding of the Employee Plans and Exempt Organizations Division ("EP/EO")**

	To facilitate the reorganization of the IRS into operational units, the IRS Reform Acteliminated the statutory requirement that there be an "Office of Employee Plans and ExemptOrganizations" under the supervision and direction of an Assistant Commissioner.  In addition,the IRS Reform Act repealed the special statutory funding mechanism for EP/EO.  Theseprovisions were effective on July 22, 1998.

**D.  Taxpayer Advocate and Taxpayer Assistance Orders**

	The IRS Reform Act renamed the IRS Taxpayer Advocate as the "National TaxpayerAdvocate."  The National Taxpayer Advocate is appointed by the Secretary of the Treasury afterconsultation with the Commissioner and the IRS Oversight Board.  The individual appointed tobe the National Taxpayer Advocate cannot have been an officer or employee of the IRS (otherthan in the Office of the Taxpayer Advocate) during the two-year period ending with suchindividual's appointment, and must agree not to accept employment with the IRS (other than inthe Office of the Taxpayer Advocate) for at least five years after ceasing to be the NationalTaxpayer Advocate.

	The  problem resolution system is replaced with a system of local Taxpayer Advocateswho report directly to the National Taxpayer Advocate and who are independent from the IRSexamination, collection, and appeals functions.

	The IRS Reform Act expanded the circumstances under which a Taxpayer AssistanceOrder may be issued if a taxpayer is suffering from or about to suffer from a significant hardship.

	These provisions generally were effective on July 22, 1998.

**E.  Treasury Office of Inspector General; IRS Office of the Chief Inspector**

	Under the IRS Reform Act, a new, independent Treasury Inspector General for TaxAdministration ("Treasury IG for Tax Administration") is established within the Department ofTreasury.  The IRS Office of the Chief Inspector is eliminated, and all of its powers andresponsibilities are transferred to the Treasury IG for Tax Administration, except for employeebackground checks and protection of employees against physical threats.  The Treasury IG forTax Administration has the powers and responsibilities generally granted to Inspectors Generalunder the IG Act of 1978, without the limitations that currently apply to the Treasury IG undersection D of that Act.  The role of the existing Treasury IG is redefined to exclude responsibilityfor the IRS.  The Treasury IG for Tax Administration is under the supervision of the Secretary ofTreasury, with certain additional reporting to the IRS Oversight Board and the Congress.

	The provision is effective on December 19, 1998.

**F.  Prohibition on Executive Branch Influence Over Taxpayer Audits**

	Subject to certain exceptions, the IRS Reform Act made it unlawful for the President, theVice President, employees of the executive offices of the President or Vice President, as well asany individual (other than the Attorney General) serving in a Cabinet-level position to requestthat any officer or employee of the IRS conduct or terminate an audit or otherwise investigate orterminate the investigation of any particular taxpayer with respect to the tax liability of thattaxpayer.  This prohibition applies to both direct and indirect requests.  Anyone convicted ofviolating this provision can be punished by imprisonment of not more than five years or a finenot exceeding $5,000 (or both).  This provision was effective for violations after July 22, 1998.

**G.  IRS Personnel Flexibilities**

	The IRS Reform Act modified the employee personnel rules applicable to the IRS byproviding certain personnel flexibility to facilitate the efforts of the IRS to better manage itsworkforce.

	The IRS Reform Act addressed issues relating to senior management and technicalpositions, the establishment of a performance management system, the granting of awards to IRSemployees, staffing flexibilities, employee training, and mandatory terminations of employeesfor certain proven actions.

**TITLE II.--ELECTRONIC FILING**

**A.  Electronic Filing of Tax and Information Returns**

	Under the IRS Reform Act, the policy of the Congress is to promote paperless filing, witha long-range goal of providing for the filing of at least 80 percent of all tax returns in electronicform by the year 2007.

**B.  Due Date for Certain Information Returns**

	The IRS Reform Act provided an incentive to filers of information returns to useelectronic filing by extending the due date for filing such returns with the IRS from February 28(under prior law) to March 31 of the year following the calendar year to which the return relates. The IRS Reform Act also required the Treasury to issue a study evaluating the merits anddisadvantages, if any, of extending the deadline for providing taxpayers with copies ofinformation returns (other than Forms W-2) from January 31 to February 15.  This study is dueby June 30, 1999.

**C.  Paperless Electronic Filing**

	To facilitate the filing of electronic returns, the Treasury Secretary is required to developprocedures that would eliminate the need to file a paper form relating to signature information. In addition, the Secretary is to establish procedures, to the extent practicable, to receive all formselectronically for taxable periods beginning after December 31, 1999.  The IRS Reform Act alsoprovided rules for determining when electronic returns are deemed filed and for authorization forreturn preparers to communicate with the IRS on matters included on electronically filed returns.

**D.  Return-Free Tax System**

	The IRS Reform Act required the Treasury Secretary to study the feasibility of, anddevelop procedures for, the implementation of a return-free tax system for appropriateindividuals for taxable years beginning after 2007.

**E.  Access to Account Information**

	Under the IRS Reform Act, the Treasury Secretary is required to develop procedures notlater than December 31, 2006, under which a taxpayer filing returns electronically could reviewthe taxpayer's own account electronically, but only if all necessary privacy safeguards are inplace by that date.

**TITLE III.--TAXPAYER PROTECTION AND RIGHTS**

**A.  Burden of Proof**

	The IRS Reform Act provided that 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 the factual issue relevant to ascertaining the taxpayer's tax liability.  Four conditionsapply.  First, the taxpayer must comply with the requirements of the Internal Revenue Code andthe regulations issued thereunder to substantiate any item.  Second, the taxpayer must maintainrecords required by the Code and regulations.  Third, the taxpayer must cooperate withreasonable requests by the Treasury Secretary for meetings, interviews, witnesses, information,and documents.  Fourth, taxpayers other than individuals must meet the net worth limitations thatapply for awarding attorney's fees.  The provision applies to income, estate, gift, and generation-skipping transfer taxes.

	The provision applies to court proceedings arising in connection with examinationscommencing (or taxable periods or events beginning or occurring) after July 22, 1998.

**B.  Proceedings by Taxpayers**

**1.  Expansion of authority to award costs and certain fees**

	The IRS Reform Act increased the hourly fee cap on attorneys fees and expanded thecircumstances under which attorneys fees and administrative costs may be awarded to taxpayers,effective for costs incurred and services performed after December 19, 1998.

**2.  Civil damages for collection actions**

	The IRS Reform Act permitted up to $100,000 in civil damages caused by an officer oremployee of the IRS who negligently disregards provisions of the Code or Treasury regulationsin connection with the collection of Federal tax with respect to the taxpayer.  The IRS ReformAct also permitted up to $1 million in civil damages caused by an officer or employee of the IRSwho willfully violates provisions of the Bankruptcy Code relating to automatic stays ordischarges.  These provisions are effective for actions of officers or employees of the IRSoccurring after July 22, 1998.

**3.  Increase in size of cases permitted on small case calendar**

	The IRS Reform Act increased the cap for small case treatment in the Tax Court from$10,000 to $50,000, effective for proceedings commenced after July 22, 1998.

**4.  Actions for refund with respect to certain estates which have elected the installmentmethod of payment**

	The IRS Reform Act granted the U.S. Court of Federal Claims and the U.S. district courtsjurisdiction to determine the correct amount of estate tax liability (or refund) in actions broughtby taxpayers deferring estate tax payments under section 6166, as long as  certain conditions aremet.  The IRS Reform Act further provided that once a final judgment has been entered by adistrict court or the U.S. Court of Federal Claims, the IRS is not permitted to collect any amountdisallowed by the court, and any amounts paid by the taxpayer in excess of the amount the courtfinds to be currently due and payable are refunded to the taxpayer, with interest.  The provision iseffective for claims for refunds filed after July 22, 1998.

**5.  Review of an adverse IRS determination of a bond issue's tax-exempt status**

	The IRS Reform Act directed the Internal Revenue Service to modify its administrativeprocedures to allow tax-exempt bond issuers examined by the IRS to appeal adverse examinationdeterminations to the Appeals Division of the IRS as a matter of right.  Such an appeal is to beconsidered by senior personnel with experience in tax-exempt bonds issues.  The direction to theIRS is effective on July 22, 1998.

**6.  Civil action for release of erroneous lien**

	The IRS Reform Act established an administrative procedure permitting a record ownerof property against which a Federal tax lien has been filed to obtain a certificate of discharge ofproperty from the lien as a matter of right if such record owner is not the person whoseunsatisfied liability gave rise to the lien. The record owner is required to apply to the Secretary ofthe Treasury for such a certificate and either to deposit cash or to furnish a bond sufficient toprotect the lien interest of the United States.  The provision is effective on July 22, 1998.

**C.  Relief for Innocent Spouses and for Taxpayers Unable to Manage Their Financial Affairs Due to Disabilities**

**1.  Relief for innocent spouses**

	The IRS Reform Act generally made innocent spouse relief easier to obtain.  The IRSReform Act eliminated all of the understatement thresholds and required only that theunderstatement of tax be attributable to an erroneous (and not just a grossly erroneous) item ofthe other spouse.

	The IRS Reform Act also provided a separate liability election for a taxpayer who, at thetime of the election, is no longer married to, is legally separated from, or has been living apart forat least 12 months from the person with whom the taxpayer originally filed a joint return.  Suchtaxpayers may elect to have the liability for any deficiency limited to the portion of thedeficiency that is attributable to items allocable to the taxpayer.  The election is not available ifthe Treasury Secretary demonstrates that assets were transferred between individuals filing ajoint return as part of a fraudulent scheme of the individuals or if both individuals had actualknowledge of the understatement of tax.

	Expanded innocent spouse relief and the separate liability election must be elected nolater than two years after the date on which the Secretary has begun collection activities withrespect to the individual seeking the relief.  The IRS Reform Act provided that the Tax Court hasjurisdiction with respect to disputes about innocent spouse relief.

	The IRS Reform Act further authorized the Treasury Secretary to relieve an individual ofliability if relief is not available under the expanded innocent spouse rule or the separate liabilityelection, but it would be inequitable to hold the individual liable for any unpaid tax or anydeficiency.

	The expanded innocent spouse relief, separate liability election, and authority to provideequitable relief apply to liabilities for tax arising after July 22, 1998, as well as any liability fortax arising on or before July 22, 1998, that remains unpaid on July 22, 1998.

**2.  Suspension of statute of limitations on filing refund claims during periods of disability**

	The IRS Reform Act permitted equitable tolling of the statute of limitations for refundclaims of an individual taxpayer during any period of the individual's life in which he or she isunable to manage his or her financial affairs by reason of a medically determinable physical ormental impairment that can be expected to result in death or to last for a continuous period of notless than 12 months.  Tolling does not apply during periods in which the taxpayer's spouse oranother person is authorized to act on the taxpayer's behalf in financial matters.  The provisionapplies to periods of disability before, on, or after July 22, 1998, but does not apply to any claimfor refund or credit which (without regard to the provision) is barred by the statute of limitationsas of July 22, 1998.

**D.  Provisions Relating to Interest and Penalties**

**1.  Elimination of interest differential on overlapping periods of interest on income tax overpayments and underpayments**

	The IRS Reform Act established a net interest rate of zero when interest is payable andallowable on equivalent amounts of overpayment and underpayment of any taxes imposed byTitle 26 (the Internal Revenue Code) that exist for any period.  Each overpayment andunderpayment is considered only once in determining whether equivalent amounts ofoverpayment and underpayment exist. The special rules that increase the interest rate paid onlarge corporate underpayments and decrease the interest rate received on corporateunderpayments in excess of $10,000 do not prevent the application of the net zero rate.  Theprovision applies to interest for periods beginning after July 22, 1998.  The provision applies tointerest for periods beginning before July 22, 1998, if:  (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 for which the zero rate applies; and (3) on or beforeDecember 31, 1999, the taxpayer asks the Treasury Secretary to apply the zero rate.

**2.  Increase in overpayment rate payable to taxpayers other than corporations**

	The IRS Reform Act provided that the overpayment interest rate will be AFR plus threepercentage points, except that for corporations, the rate remains at AFR plus two percentagepoints.  The provision is effective for interest for the second and succeeding calendar quartersbeginning after July 22, 1998.

**3.  Mitigation of penalty for individual's failure to pay during period of installment agreement**

	The IRS Reform Act provided that the penalty for failure to pay taxes is one half of theusual rate (0.25 percent instead of 0.50 percent) imposed with respect to the tax liability of anindividual for any month in which an installment payment agreement with the IRS is in effect,provided that the individual filed the tax return in a timely manner (including extensions).  Theprovision is effective for installment agreement payments made after December 31, 1999.

**4.  Mitigation of failure to deposit penalty for payroll taxes**

	The IRS Reform Act allowed a taxpayer to designate the period to which each deposit isapplied. The designation must be made no later than 90 days of the related IRS penalty notice. The provision extends the authorization to waive the failure to deposit penalty to the first deposita taxpayer is required to make after the taxpayer is required to change the frequency of thetaxpayer's deposits.  The provision is effective for deposits required to be made after December19, 1998.  The IRS Reform Act also provided that, for deposits required to be made afterDecember 31, 2001, any deposit is to be applied to the most recent period to which the depositrelates, unless the taxpayer explicitly designates otherwise.

**5.  Suspension of  interest and certain penalties if Secretary fails to contact individual taxpayer**

	The IRS Reform Act suspended the accrual of certain penalties and interest after one yearif the IRS has not sent the taxpayer a notice specifically stating the taxpayer's liability foradditional taxes (and the basis for the liability) within one year following the date which is thelater of (1) the original due date of the return or (2) the date on which the individual taxpayertimely filed the return.  The suspension only applies to individuals who file a timely tax returnand does not apply to the failure to pay penalty, in the case of fraud, or with respect to criminalpenalties.  The provision is effective for taxable years ending after July 22, 1998.  With respect totaxable years beginning before January 1, 2004, the one-year period is increased to 18 months. Interest and penalties resume 21 days after the IRS sends a notice to the taxpayer specificallystating the taxpayer's liability and the basis for the liability.  The provision is applied separatelywith respect to each item or adjustment.

**6.  Procedural requirements for imposition of penalties and additions to tax**

	The IRS Reform Act required that each notice imposing a penalty include the name of thepenalty, the Code section imposing the penalty, and a computation of the penalty.  The Act alsorequires the specific approval of IRS management to assess all non-computer generated penaltiesunless excepted.  This provision does not apply to failure to file penalties, failure to paypenalties, or to penalties for failure to pay estimated tax.  The provision is effective with respectto notices issued, and penalties assessed, after December 31, 2000.

**7.  Personal delivery of notice of penalty under section 6672**

	The IRS Reform Act permitted in-person delivery, as an alternative to delivery by mail,of a preliminary notice that the IRS intends to assess a 100-percent penalty, effective on July 22,1998.

**8.  Notice of interest charges**

	The IRS Reform Act required every IRS notice that includes an amount of interestrequired to be paid by the taxpayer that is sent to an individual taxpayer to include a detailedcomputation of the interest charged and a citation to the Code section under which such interestis imposed, effective for notices issued after December 31, 2000.

**9.  Abatement of interest on underpayments by taxpayers in Presidentially declared disaster areas**

	The IRS Reform Act provided that taxpayers located in a Presidentially declared disasterarea do not have to pay interest on taxes due for the length of any extension for filing their taxreturns granted by the Secretary of the Treasury, effective for disasters declared afterDecember 31, 1997, with respect to taxable years beginning after December 31, 1997.  Theprovision is designated as emergency legislation under section 252(e) of the Balanced Budgetand Emergency Deficit Control Act.  See, also, the provisions in Part Two relating to disasterrelief provisions contained in the Taxpayer Relief Act of 1997.

**E.  Protections for Taxpayers Subject to Audit or Collection Activities**

**1.  Due process in IRS collection actions**

	The IRS Reform Act established formal procedures designed to insure due process wherethe IRS seeks to collect taxes by levy (including by seizure).  The due process procedures alsoapply after notice of a Federal tax lien has been filed.

	The IRS would be required to notify the taxpayer that a Notice of Lien had been filed. During the 30-day period beginning with the mailing or delivery of such notification, thetaxpayer may demand a hearing before an appeals officer who has had no prior involvement withthe taxpayer's case.

	Before the IRS can levy against a taxpayer's property, it would be required to provide thetaxpayer with a "Notice of Intent to Levy," similar to that currently required under section6331(d).  The notice would not be required to itemize the property the Secretary seeks to levy on. Service by registered or certified  mail, return receipt requested, would be required.

	Subject to the exceptions noted below, no levy could occur within the 30-day periodbeginning with the mailing of the "Notice of Intent to Levy."  During that 30-day period, thetaxpayer may demand a pre-levy hearing before an appeals officer who generally has had noprior involvement with the taxpayer's case.

	If a return receipt is not returned, the Treasury Secretary may proceed to levy against thetaxpayer 30 days after the Notice of Intent to Levy was mailed. The Treasury Secretary mustprovide a hearing equivalent to the pre-levy hearing if later requested by the taxpayer.  However,the Treasury Secretary is not required to suspend the levy process pending the completion of ahearing that is not requested within 30 days of the mailing of the Notice.

	An exception to the general rule prohibiting levies during the 30-day period would applyin the case of State tax offset procedures, and in the case of jeopardy or termination assessments.

	No seizure of a dwelling that is the principal residence of the taxpayer or the taxpayer'sspouse, former spouse, or minor child would be allowed without prior judicial approval. Noticeof the judicial hearing must be provided to the taxpayer and  relevant family member.  At thejudicial  hearing, the Secretary would be required to demonstrate (1) that the requirements of anyapplicable law or administrative procedure relevant to the levy have been met, (2) that theliability is owed, and (3) that no reasonable alternative for the collection of the taxpayer's debtexists.

	The provision is effective for collection actions initiated after December 19, 1998.

**2.  Examination activities**

**a.  Uniform application of confidentiality privilege to taxpayer communications with federally authorized practitioners**

	In noncriminal proceedings, the IRS Reform Act extended the attorney-client privilege ofconfidentiality to communications between taxpayers and individuals who are authorized underFederal law to practice before the IRS.  The privilege of confidentiality created by this provisiondoes not apply to a written communication between federally authorized tax practitioner and anydirector, shareholder, officer, employee, agent, or representative of a corporation in connectionwith the promotion of any tax shelter (as defined in section 6662(d)(2)(C)(iii)) with respect towhich such corporation is a direct or indirect participant.

	The provision is effective with regard to communications made on or after July 22, 1998.

**b.  Limitation on financial status audit techniques**

	The IRS Reform Act prohibited the IRS from using financial status or economic realityexamination techniques to determine the existence of unreported income of any taxpayer unlessthe IRS has a reasonable indication that there is a likelihood of unreported income, effective onJuly 22, 1998.

**c.  Software trade secrets protection**

	The IRS Reform Act prohibited the Treasury Secretary from issuing (or beginning anaction to enforce) a summons in a civil action for any portion of any third-party tax-relatedcomputer source code unless certain requirements are satisfied.  The IRS Reform Act alsoestablished a number of protections against the disclosure and improper use of software andsource code obtained by the IRS in the course of an examination.  The IRS Reform Actspecifically provided that computer software or source code that is obtained by the IRS in thecourse of the examination of a taxpayer's return is included in the definition of returninformation under section 6103.

	The provision does not change or eliminate any other requirement of the Code.   Asummons for third-party tax-related computer source code that meets the standards establishedby the provision will not be enforced if it would not be enforced under prior law.

	The provision is effective with respect to summons issued and software acquired afterJuly 22, 1998.  In addition, on October 20, 1998, the protections against the disclosure andimproper use of trade secrets and confidential information added by the provision (except for therequirement that the Secretary provide a written agreement from non-U.S. government officersand employees) apply to software and source code acquired on or before July 22, 1998.

**d.  Threat of audit prohibited to coerce tip reporting alternative commitment agreements**

	The IRS Reform Act required the IRS to instruct its employees that they may not threatento audit any taxpayer in an attempt to coerce the taxpayer to enter into a tip reporting alternativecommitment ("TRAC") agreement, effective on July 22, 1998.

**e.  Taxpayers allowed motion to quash all third-party summonses**

	The IRS Reform Act generally expanded the current "third-party recordkeeper"procedures to apply to summonses issued to persons other than the taxpayer. Thus, the taxpayerwhose liability is being investigated receives notice of the summons and is entitled to bring anaction in the appropriate U.S. District Court to quash the summons.  The provision is effectivefor summonses served after July 22, 1998.

**f.  Service of summonses to third-party recordkeepers permitted by mail**

	The IRS Reform Act allowed the IRS the option of serving any summons either in personor by certified or registered mail, effective for summonses served after July 22, 1998.

**g.  Notice of IRS contact of third parties**

	The IRS Reform Act provided that the IRS may not contact any person other than thetaxpayer with respect to the determination or collection of the tax liability of the taxpayerwithout providing reasonable notice to the taxpayer that contacts with persons other than thetaxpayer may be made.  The provision is effective with respect to contacts made after December19, 1998.

**3.  Collection activities**

**a.  Approval process for liens, levies, and seizures**

	The IRS Reform Act required the IRS to implement an approval process under which anylien, levy or seizure would, when appropriate, be approved by a supervisor, who would reviewthe taxpayer's information, verify that a balance is due, and affirm that a lien, levy or seizure isappropriate under the circumstances.  Circumstances to be considered include the amount dueand the value of the asset.  The provision is effective for collection actions commenced after July22, 1998, except in the case of any action under the automated collection system, the provisionapplies to actions initiated after December 31, 2000.

**b.  Modifications to certain levy exemption amounts**

	The IRS Reform Act increased the value of personal effects exempt from levy to $6,250and the value of books and tools exempt from levy to $3,125.  These amounts are indexed forinflation.  The provision is effective for levies issued after July 22, 1998.

**c.  Release of levy upon agreement that amount is uncollectible**

	The IRS Reform Act required the IRS to release immediately a wage levy uponagreement with the taxpayer that the tax is not collectible, effective for levies imposed afterDecember 31, 1999.

**d.  Levy prohibited during pendency of refund proceedings**

	The IRS Reform Act required the IRS to withhold collection by levy of liabilities that arethe subject of a refund suit during the pendency of the litigation, effective for refund suitsbrought with respect to tax years beginning after December 31, 1998.  Proceedings related to aproceeding under this provision include, but are not limited to, civil actions or third-partycomplaints initiated by the United States or another person with respect to the same kinds of tax(or related taxes or penalties) for the same (or overlapping) tax periods.

**e.  Approval required for jeopardy and termination assessments and jeopardy levies**

	The IRS Reform Act required IRS Chief Counsel review and approval before the IRS canmake a jeopardy assessment, a termination assessment, or a jeopardy levy.  If the Chief Counsel'sapproval is not obtained, the taxpayer is entitled to obtain abatement of the assessment or releaseof the levy, and, if the IRS fails to offer such relief, to appeal first to IRS Appeals under the newdue process procedure for IRS collections and then to court.  The provision is effective for taxesassessed and levies made after July 22, 1998.

**f.  Increase in amount of certain property on which lien not valid**

	The IRS Reform Act increased the dollar limit for purchasers at a casual sale from $250to $1,000, and further increased the dollar limit from $1,000 to $5,000 for mechanics lienorsproviding home improvement work for owner-occupied personal residences and indexed thesedollar amounts for inflation.  The provision is effective on July 22, 1998.

**g.  Waiver of early withdrawal tax for IRS levies on employer-sponsored retirement plans or IRAs**

	The IRS Reform Act provided an exception from the 10-percent early withdrawal tax foramounts withdrawn from an employer-sponsored retirement plan or an IRA that are subject to alevy by the IRS.  The exception applies only if the plan or IRA is levied; it does not apply, forexample, if the taxpayer withdraws funds to pay taxes in the absence of a levy, in order to releasea levy on other interests.  The provision is effective for withdrawals after July 22, 1998.

**h.  Prohibition of sales of seized property at less than minimum bid**

	The IRS Reform Act prohibited the IRS from selling seized property for less than theminimum bid price, effective for sales occurring after July 22, 1998.

**i.  Accounting of sales of seized property**

	The IRS Reform Act required the IRS to provide a written accounting of all sales ofseized property, whether real or personal, to the taxpayer.  The accounting must include a receiptfor the amount credited to the taxpayer's account.  The provision is effective for seizuresoccurring after July 22, 1998.

**j.  Uniform asset disposal mechanism**

	The IRS Reform Act required the IRS to implement a uniform asset disposal mechanismfor sales of seized property within two years after July 22, 1998.

**k.  Codification of IRS administrative procedures for seizure of taxpayer's property**

	The IRS Reform Act codified the IRS administrative procedures which require the IRS toinvestigate the status of certain property prior to levy, effective on July 22, 1998.

**l.  Procedures for seizure of residences and businesses**

	The IRS Reform Act prohibited the IRS from seizing any real property used as aresidence by the taxpayer or any nonrental real property of the taxpayer used by any otherindividual as a residence to satisfy an unpaid liability of $5,000 or less, including penalties andinterest.  The IRS Reform Act required the IRS to exhaust all other payment options beforeseizing the taxpayer's  business assets or principal residence.  For this purpose, future incomethat may be derived by a taxpayer from the commercial sale of fish or wildlife under a specifiedState permit must be considered in evaluating other payment options before seizing thetaxpayer's business assets.  A levy is permitted on a principal residence only if a judge ormagistrate of a United States district court approves (in writing) of the levy.  The provision iseffective on July 22, 1998.

**4.  Provisions relating to examination and collection activities**

**a.  Procedures relating to extensions of statute of limitations by agreement**

	The IRS Reform Act eliminated the provision of prior law that allowed the statute oflimitations on collections to be extended by agreement between the taxpayer and the IRS. Extensions of the statute of limitations on collection may be made as part of an installmentagreement; the extension is only for the period for which the installment agreement by its termsextends beyond the end of the otherwise applicable 10-year period, plus 90 days.

	The IRS Reform Act also required that, on each occasion on which the taxpayer isrequested by the IRS to extend the statute of limitations on assessment, the IRS must notify thetaxpayer of the taxpayer's right to refuse to extend the statute of limitations or to limit theextension to particular issues.

	The provision is effective for requests to extend the statute of limitations made afterDecember 31, 1999.  If, in any request to extend the period of limitations made on or beforeDecember 31, 1999, a taxpayer agreed to extend that period beyond the 10-year statute oflimitations on collection, that extension shall expire on the latest of: the last day of such 10-yearperiod, December 31, 2002, or the 90th day after the end of the term of the installment agreementrelated to such request.

**b.  Offers-in-compromise**

	The IRS Reform Act expanded the authority for the IRS to accept offers-in-compromise.

	The IRS Reform Act required the IRS to develop and publish schedules of national andlocal allowances that will provide taxpayers entering into an offer-in-compromise with adequatemeans to provide for basic living expenses.  The IRS is required to consider the facts andcircumstances of a particular taxpayer's case in determining whether the national and localschedules are adequate for that particular taxpayer.  The IRS Reform Act prohibited the IRS fromrejecting an offer-in-compromise from a low-income taxpayer solely on the basis of the amountof the offer.

	The IRS Reform Act prohibited the IRS from collecting a tax liability by levy (1) duringany period that a taxpayer's offer-in-compromise for that liability is being processed, (2) duringthe 30 days following rejection of an offer, (3) during any period in which an appeal of therejection of an offer is being considered, and (4) while an installment agreement is pending.

	The IRS Reform Act required that the IRS implement procedures to review all proposedIRS rejections of taxpayer offers-in-compromise and requests for installment agreements prior tothe rejection being communicated to the taxpayer.

	The IRS Reform Act provided that the IRS will adopt a liberal acceptance policy foroffers-in-compromise to provide an incentive for taxpayers to continue to file tax returns andcontinue to pay their taxes.

	The provisions are generally effective for offers-in-compromise submitted after July 22,1998.  The provision suspending levy is effective with respect to offers-in-compromise pendingon or made after December 31, 1999.

**c.  Notice of deficiency to specify deadlines for filing Tax Court petition**

	The IRS Reform Act required the IRS to include on each deficiency notice the datedetermined by the IRS as the last day on which the taxpayer may file a petition with the TaxCourt.  The provision provides that a petition filed with the Tax Court by this date is  treated astimely filed.  The provision is effective for notices mailed after December 31, 1998.

**d.  Refund or credit of overpayments before final determination**

	The IRS Reform Act provided that a proper court (including the Tax Court) may order arefund of any amount that was collected within the period during which the Secretary isprohibited from collecting the deficiency by levy or other proceeding.  The provision allows therefund of any overpayment determined by the Tax Court to the extent the overpayment is notcontested on appeal.  The provision is effective on July 22, 1998.

**e.  IRS procedures relating to appeal of examinations and collections**

	The IRS Reform Act codified existing IRS procedures with respect to early referrals toAppeals and the Collections Appeals Process.  The IRS Reform Act also codified the existingAlternative Dispute Resolution ("ADR") procedures, as modified by eliminating the dollarthreshold.  The provision is effective on July 22, 1998.

**f.  Application of certain fair debt collection practices**

	The IRS Reform Act applied to the IRS certain restrictions relating to communicationwith taxpayer/debtors and the prohibitions on harassing or abusing a debtor.  The provision iseffective on July 22, 1998.

**g.  Guaranteed availability of installment agreements**

	The IRS Reform Act required the Treasury Secretary to enter an installment agreement, atthe taxpayer's option, if: (1) the liability is $10,000, or less (excluding penalties and interest); (2)within the previous five years, the taxpayer has not failed to file or to pay, nor entered aninstallment agreement under this provision; (3) if requested by the Secretary, the taxpayersubmits financial statements, and the Secretary determines that the taxpayer is unable to pay thetax due in full; (4) the installment agreement provides for full payment of the liability withinthree years; and (5) the taxpayer agrees to continue to comply with the tax laws and the terms ofthe agreement for the period (up to three years) that the agreement is in place.  The provision iseffective on July 22, 1998.

**h.  Prohibition on requests to taxpayers to waive rights to bring actions**

	The IRS Reform Act provided that the U.S. Government may not request a taxpayer towaive the taxpayer's right to sue the United States or one of its employees for any action taken inconnection with the tax laws, unless (1) the taxpayer knowingly and voluntarily waives thatright, or (2) the request is made to the taxpayer's attorney or other representative, effective onJuly 22, 1998.

**F.  Disclosures to Taxpayers**

**1.  Explanation of joint and several liability**

	The IRS Reform Act required that the IRS establish procedures to clearly alert marriedtaxpayers of their joint and several liability, the availability of electing separate liability, and anindividual's right to expanded innocent spouse relief on all appropriate tax publications andinstructions.  The IRS Reform Act required that the procedures be established as soon aspracticable, but no later than December 19, 1998.

**2.  Explanation of taxpayers' rights in interviews with the IRS**

	The IRS Reform Act required that the IRS rewrite Publication 1 ("Your Rights as aTaxpayer") to inform taxpayers more clearly of their rights (1) to be represented by arepresentative and (2) if the taxpayer is so represented, that interviews with the IRS may notproceed without the presence of the representative unless the taxpayer consents.  The revisionsare required no later than December 19, 1998.

**3.  Disclosure of criteria for examination selection**

	The IRS Reform Act required that IRS add to Publication 1 ("Your Rights as aTaxpayer") a statement which sets forth in simple and nontechnical terms the criteria andprocedures for selecting taxpayers for examination. The statement is required to be included notlater than December 19, 1998.

**4.  Explanation of the appeals and collection process**

	The IRS Reform Act required that, no later than December 19, 1998, a description of theentire process from examination through collections, including the assistance available totaxpayers from the Taxpayer Advocate at various points in the process, be provided with the firstletter of proposed deficiency that allows the taxpayer an opportunity for administrative review inthe IRS Office of Appeals.

**5.  Explanation of reason for refund disallowance**

	The IRS Reform Act required the IRS to notify the taxpayer of the specific reasons forthe disallowance (or partial disallowance) of a refund claim, effective on December 19, 1998.

**6.  Statements to taxpayers with installment agreements**

	The IRS Reform Act required the IRS to send every taxpayer in an installment agreementan annual statement of the initial balance owed, the payments made during the year, and theremaining balance, effective July 1, 2000.

**7.  Notification of change in tax matters partner**

	The IRS Reform Act required the IRS to notify all partners of any resignation of the taxmatters partner that is required by the IRS, and to notify the partners of any successor tax matterspartner, effective for selections of tax matters partners made by the Treasury Secretary after July22, 1998.

**8.  Conditions under which taxpayers' returns may be disclosed**

	The IRS Reform Act required that general tax forms instruction booklets include adescription of conditions under which tax return information may be disclosed outside the IRS(including to States), effective on July 22, 1998.

**9.  Disclosure of Chief Counsel advice**

	The IRS Reform Act amended established a structured process by which the IRS willmake certain work products, designated as "Chief Counsel Advice," open to public inspection onan ongoing basis.  It is designed to protect taxpayer privacy while allowing the public inspectionof these documents in a manner generally consistent with the mechanism for the publicinspection of written determinations.  In general, the provision operates by establishing thatChief Counsel Advice are written determinations subject to the public inspection provisions ofsection 6110.   The provision applies to Chief Counsel Advice issued after October 20, 1998.

**G.  Low-Income Taxpayer Clinics**

	The IRS Reform Act provided that the Treasury Secretary is authorized to provide up to$6 million per year in matching grants to certain low-income taxpayer clinics. No clinic couldreceive more than $100,000 per year.  Eligible clinics would be those that charge no more than anominal fee to either represent low-income taxpayers in controversies with the IRS or providetax information to individuals for whom English is a second language.  The provision is effectiveon July 22, 1998.

**H.  Other Provisions**

**1.  Cataloging complaints**

	The IRS Reform Act required that, in collecting data for the annual report to the Congresson allegations of IRS employee misconduct, records of taxpayer complaints of misconduct byIRS employees must be maintained on an individual employee basis, effective January 1, 2000.

**2.  Archive of records of Internal Revenue Service**

	The IRS Reform Act provided an exception to the disclosure rules to require IRS todisclose IRS records to officers or employees of National Archives and Records Administration("NARA"), upon written request from the U.S. Archivist, for purposes of the appraisal of suchrecords for destruction or retention.  The prohibitions on and penalties for disclosure of taxinformation generally apply to NARA.  The provision is effective for requests made by theArchivist after July 22, 1998.

**3.  Payment of taxes**

	The IRS Reform Act required the Treasury Secretary or his delegate to establish suchrules, regulations, and procedures as are necessary to allow payment of taxes by check or moneyorder to be made payable to the United States Treasury, rather than to the IRS, effective on July22, 1998.

**4.  Clarification of authority of Secretary relating to the making of elections**

	The IRS Reform Act clarified that, except as otherwise provided, the Treasury Secretarymay prescribe the manner of making any election under the Code by any reasonable means,effective on July 22, 1998.

**5.  IRS employee contacts**

	The IRS Reform Act required any manually generated correspondence received by ataxpayer from the IRS to include in a prominent manner the name, telephone number, and uniqueidentifying number of an IRS employee the taxpayer may contact with respect to thecorrespondence.  Any other correspondence or notice received by a taxpayer from the IRS mustinclude in a prominent manner a telephone number that the taxpayer may contact.  An IRSemployee must give a taxpayer during a telephone or personal contact the employee's telephonenumber and unique identifying number.  The requirements for a unique identifying number areeffective on December 22, 1998.

**6.  Use of pseudonyms by IRS employees**

	The IRS Reform Act provided that an IRS employee may use a pseudonym only if (1)adequate justification, such as protecting personal safety, for using the pseudonym was providedby the employee as part of the employee's request to use a pseudonym, and (2) IRS managementhas approved the request to use the pseudonym prior to its use.  This provision is effective forrequests made after July 22, 1998.

**7.  Illegal tax protester designations**

	The IRS Reform Act prohibited the use by the IRS of the "illegal tax protester"designation. Any extant designation in the individual master file (the main individual income taxcomputer file) must be removed and any other extant designation (such as on paper records thathave been archived) must be disregarded.  The IRS is, however, permitted to designateappropriate taxpayers as nonfilers.  The IRS must remove the nonfiler designation once thetaxpayer has filed valid tax returns for two consecutive years and paid all taxes shown on thosereturns.  The provision is effective on July 22, 1998, except that the removal of any designationfrom the master file, is not required to begin before January 1, 1999. 

**8.  Provision of confidential information to Congress by whistleblowers**

	The IRS Reform Act provided that any person (i.e., a whistleblower) who otherwise hasor had access to any return or return information under section 6103 may disclose such return orreturn information to the House Ways and Means Committee, the Senate Finance Committee, orthe Joint Committee on Taxation or to any individual authorized by one of those committees toreceive or inspect any return or return information if such person (the whistleblower) believessuch return or return information relates to evidence of possible misconduct, maladministration,or taxpayer abuse.  The provision is effective on July 22, 1998.

**9.  Listing of local IRS telephone numbers and addresses**

	The IRS Reform Act required the IRS, as soon as is practicable, to publish addresses andlocal telephone numbers of local IRS offices in appropriate local telephone directories.

**10.  Identification of return preparers**

	The IRS Reform Act authorized the IRS to approve alternatives to Social Securitynumbers to identify tax return preparers, effective on July 22, 1998.

**11.  Offset of past-due, legally enforceable State income tax obligations againstoverpayments**

	The IRS Reform Act permitted States to participate in the IRS refund offset program forspecified past-due, legally enforceable State income tax debts,  providing the person making theFederal tax overpayment has shown on the Federal return for the taxable year of the overpaymentan address that is within the State seeking the tax offset.  The provision is effective for Federalincome tax refunds payable after December 31, 1999.

**12.  Reporting requirements in connection with education tax credits**

	The IRS Reform Act modified the information reporting requirements applicable tocertain educational institutions in connection with the HOPE Scholarship and Lifetime Learningcredits.  In addition to reporting the aggregate amount of payments for qualified tuition andrelated expenses received by the educational institution with respect to a student, the institutionmust report any grant amount received by the student and processed through the institutionduring the applicable calendar year.  An educational institution also must report only theaggregate amount of reimbursements or refunds paid to a student by the institution (and not byany other party).  The Act further clarifies that the definition of  term "qualified tuition andrelated expenses" shall be as set forth in section 25A, determined without regard to section25A(g)(2) (which requires adjustments for certain scholarships).  The provision applies to returnsrequired to be filed with respect to taxable years beginning after December 31, 1998.  See, also,the provisions relating to the HOPE scholarship and Lifetime Learning tax credits in Part Two.

**I.  Studies**

**1.  Administration of penalties and interest**

	The IRS Reform Act required the Joint Committee on Taxation and the Treasury to eachconduct a separate study reviewing the interest and penalty provisions of the Code, and make anylegislative and administrative recommendations deemed appropriate to simplify penaltyadministration and reduce taxpayer burden.  The reports must be provided not later than July 22,1999.

**2.  Confidentiality of tax return information**

	The IRS Reform Act required the Joint Committee on Taxation and Treasury to eachconduct a separate study on provisions regarding taxpayer confidentiality.  The studies are toexamine:  (1)  present-law protections of taxpayer privacy; (2) the need, if any, for third parties touse tax return information; (3) whether greater levels of voluntary compliance can be achievedby allowing the public to know who is legally required to file tax returns but does not do so; (4)the interrelationship of the taxpayer confidentiality provisions in the Internal Revenue Code withthose elsewhere in the United States Code (such as the Freedom of Information Act); (5) theimpact on taxpayer privacy of sharing tax information for the purposes of enforcing State andlocal tax laws (other than income tax laws) and (6) an examination of whether the public interestwould be served by greater disclosure of information relating to tax-exempt organizations.  Thefindings of the studies, along with any recommendations, are required to be reported to theCongress no later than January 22, 2000.

**3.  Noncompliance with internal revenue laws by taxpayers**

	The IRS Reform Act provided that the Secretary of the Treasury and the Commissioner,in consultation with the Joint Committee on Taxation, must conduct a study of noncompliancewith the tax law, including tax law complexity and willful noncompliance or other factors.  Thestudy must be reported to the Congress before July 22, 1999.

**4.  Payments for informants**

	The IRS Reform Act required a study and report by the Secretary of the Treasury to theCongress of the present-law informant reward program (including results) and any legislative oradministrative recommendations regarding the program and its application.  The study must bereported to the Congress before July 22, 1999.

**TITLE IV.--CONGRESSIONAL ACCOUNTABILITY FOR THE IRS
**A.  Review of Requests for GAO Investigations of the IRS**

	Under the IRS Reform Act, the Joint Committee on Taxation is to review all requests(other than requests by the chair or ranking member of a Committee or Subcommittee of theCongress) for investigations of the IRS by the General Accounting Office ("GAO") and approvesuch requests when appropriate.  In reviewing such requests, the Joint Committee on Taxation isto eliminate overlapping investigations, ensure that the GAO has the capacity to handle theinvestigation, and ensure that investigations focus on areas of primary importance to taxadministration.  The provision is effective with respect to requests for GAO investigations madeafter July 22, 1998.

**B.  Joint Congressional Review and Coordinated Oversight Reports**

	Under the IRS Reform Act, there will be one annual joint review which shall include twomajority and one minority members of each of the Senate Committees on Finance,Appropriations, and Government Affairs and the House Committees on Ways and Means,Appropriations, and Government Reform and Oversight.  The review is to be held before June 1on the progress of the IRS in meeting its objectives under the strategic and business plans, theprogress of the IRS in improving taxpayer service and compliance, the progress of the IRS ontechnology modernization, and the annual filing season.  The annual review will be called by theChairman of the Joint Committee on Taxation and will take place in each of calendar years 1999-2003.

	The IRS Reform Act provided that the Joint Committee on Taxation is to make a reportonce during each Congress to the Senate Committee on Finance and the House Committee onWays and Means on the overall state of the Federal tax system, together with recommendationswith respect to possible simplification proposals and other matters relating to the administrationof the Federal tax system as it may deem advisable.  This report will be required only if amountsnecessary to carry out this requirement are specifically appropriated to the Joint Committee onTaxation.  The Joint Committee on Taxation also is to report annually to the Senate Committeeson Finance, Appropriations, and Government Affairs and the House Committees on Ways andMeans, Appropriations, and Government Reform and Oversight with respect to the matters thatare the subject of the annual joint hearings of members of such Committees.  This reportingrequirement will apply only for calendar years 1999-2003.

**C.  Funding for Century Date Changes**

	The IRS Reform Act provided that it is the sense of the Congress that the IRS efforts toresolve the century date change computing problems should be fully funded to provide forcertain resolution of such problems, and it is the sense of the Congress that the IRS should placeresolving the century date change computing problems as a high priority.

**D.  Tax Law Complexity Analysis**

	The IRS Reform Act provided that it is the sense of the Congress that the IRS shouldprovide the Congress with an independent view of tax administration and that the tax-writingcommittees should hear from front-line technical experts at the IRS during the legislative processwith respect to the administrability of pending amendments to the Internal Revenue Code.  Inaddition, the IRS is required to report by March 1 of each year to the House Committee on Waysand Means and the Senate Committee on Finance regarding sources of complexity in theadministration of the Federal tax laws.

	The IRS Reform Act required the Joint Committee on Taxation (in consultation with theIRS and Treasury) to provide an analysis of complexity or administrability concerns raised by taxlegislation provisions of widespread applicability to individuals or small businesses, effectiveafter 1998.  The analysis is to be included in any Committee Report of the House Committee onWays and Means  or Senate Committee on Finance or Conference Report containing taxprovisions, or provided to the Members of the relevant Committee or Committees as soon aspracticable after the report is filed.  A point of order is established with respect to the floorconsideration by the House of Representatives of a Act or conference report that does not containthe required tax complexity analysis.  The point of order may be waived by a majority vote.

**TITLE V.--ADDITIONAL PROVISIONS**

**A.  Elimination of 18-Month Holding Period for Capital Gains**

	The 1997 Act generally reduced the maximum capital gains rate for individuals to 20percent (10 percent for taxpayers in the 15-percent bracket).  The IRS Reform Act provided thatproperty held more than one year (rather than more than 18 months) will be eligible for the lowerrates, effective January 1, 1998.

**B.  Deductibility of Meals Provided for the Convenience of the Employer**

	The IRS Reform Act provided that all meals furnished to employees on the businesspremises of the employer are treated as provided for the convenience of the employer undersection 119 if more than one-half of employees to whom such meals are furnished on thepremises are furnished such meals for the convenience of the employer under section 119.  Ifthese conditions are satisfied, the value of all such meals would be excludable from theemployee's income and fully deductible to the employer.

	The provision is effective for taxable years beginning before, on, or after July 22, 1998.

**TITLE VI.--TAX TECHNICAL CORRECTIONS**

	The IRS Reform Act contained technical, clerical, and conforming amendments to theTaxpayer Relief Act of 1997 and other recently enacted legislation.  The provisions generally areeffective as if enacted in the original legislation to which each provision relates.

**TITLE VII.--REVENUE OFFSETS**

**A.  Employer Deductions for Vacation and Severance Pay**

	The IRS Reform Act provided that, for purposes of determining whether an item ofcompensation is deferred compensation, the compensation is not considered to be paid orreceived until actually received by the employee.  The IRS Reform Act is intended to overrulethe result in *Schmidt Baking*.  The provision is effective for taxable years ending after July 22,1998, with a three-year spread under section 481.

**B.  Freeze Grandfathered Status of Stapled REITs**

	The IRS Reform Act treats activities and gross income of a stapled REIT group withrespect to real property interests acquired after March 26, 1998, by any member of a stapledREIT group as activities and income of the REIT for certain purposes.  There is an exception tothis treatment for certain grandfathered real property interests.  The provision is effective fortaxable years ending after March 26, 1998.

**C.  Make Certain Trade Receivables Ineligible for Mark-to-Market Treatment**

	The IRS Reform Act provided that certain trade receivables are not eligible for mark-to-market treatment under section 475.  The provision generally is effective for taxable years endingafter July 22, 1998, with a four-year spread under section 481.

**D.  Exclusion of Minimum Required Distributions from AGI for Roth IRA Conversions**

	The IRS Reform Act excluded minimum required distributions from IRAs from thedefinition of AGI solely for purposes of determining eligibility to convert from an IRA to a RothIRA.  The provision is effective for taxable years beginning after December 31, 2004.  See, also,the provisions relating to Roth IRAs in Part Two, above.

**TITLE IX.--CORRECTIONS TO THE TRANSPORTATION EQUITY ACT FOR THE 21st CENTURY**

	The IRS Reform Act included corrections to the Transportation Equity Act for the 21stCentury.

**PART EIGHT: TAX AND TRADE RELIEF EXTENSION ACT OF 1998(DIVISION J OF H.R. 4328, THE OMNIBUS CONSOLIDATED AND EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT, 1999)(14)**

**A.  Emergency Tax Relief for Farmers
**1.  Income averaging for farmers**

	The Tax and Trade Relief Extension Act of 1998 ("the Tax Extension Act") permanentlyextended the income averaging provision available to farmers, effective for taxable yearsbeginning after December 31, 2000.  See, also, Part Two, above, which provided incomeaveraging for farmers on a temporary basis.

**2.  Farm production flexibility contract payments**

	The time a production flexibility contract payment under the Federal AgricultureImprovement and Reform Act of 1996 ("FAIR Act") is properly includible in income isdetermined without regard to the options granted by section 112(d)(2) (allowing receipt of one-half of the annual payment on either December 15 or January 15 of the fiscal year) or section112(d)(3) (allowing the acceleration of all payments for fiscal year 1999) of the FAIR Act.  Theprovision is effective for taxable years ending after December 31, 1995.

**3.  Net operating loss carrybacks**

	The Tax Extension Act provided a special five-year carryback period for net operatinglosses attributable to a farming business.  The provision is effective for net operating lossesarising in taxable years beginning after December 31, 1997.

**B.  Extension of Expiring Tax and Trade Provisions**

	The Tax Extension Act extends the following tax and trade provisions, retroactive to theexisting expiration date:

	(1)	Research and experimentation tax credit (through June 30, 1999);

	(2)	Work opportunity tax credit (through June 30, 1999);

	(3)	Welfare-to-work tax credit (through June 30, 1999);

	(4)	Permanent extension of the deduction for contributions of appreciated stock to privatefoundations, along with public inspection of private foundation annual returns;

	(5)	Exceptions under subpart F for certain active financing income, with modifications,applicable only for taxable years beginning in 1999; and

	(6)	Disclosure of return information to the Department of Education for incomecontingent student loans (through September 30, 2003).

See, also, the provisions in Part Two, above, relating to: (1) prior extensions of the research andexperimentation tax credit, the work opportunity tax credit, and the deduction for contributionsof appreciated stock to private foundations; (2) the enactment of the welfare-to-work tax credit,and (3) the enactment of exceptions under subpart F for certain active financing incomeapplicable only for taxable years beginning in 1998.

**C.  Other Revenue Provisions**

**1.  Personal credits fully allowed against regular tax liability during 1998**

	The Tax Extension Act allowed the nonrefundable personal credits to offset the regulartax in full (without regard to the tentative minimum tax) for taxable years beginning during 1998. See, also, the provisions in Part Two, above, relating to the child tax credit, the Hope credit, andthe Lifetime Learning credit.

**2.  Increase deduction for health insurance expenses of self-employed individuals**

	The Tax Extension Act increased the deduction for health insurance of self-employedindividuals to 60 percent for taxable years beginning in 1999 through 2001, to 70 percent fortaxable years beginning in 2002, and to 100 percent for taxable years beginning in 2003 andthereafter.  See, also, the provision increasing the deduction for health insurance of self-employed individuals in Part Two, above.

**3.  Modification of individual estimated tax safe harbors**

	The Tax Extension Act modified the estimated tax safe harbor which is based on ataxpayer's prior year's liability for individual taxpayers with an adjusted gross income of morethan $150,000.  For taxable years beginning in 2000 and 2001, 106 percent of the prior year'sliability must be paid by such taxpayers in order to satisfy the safe harbor.  See, also, theprovision relating to the individual estimated tax safe harbors contained in Part Two, above.

**4.  Volume limits on private activity bonds**

	The Tax Extension Act increased the annual State volume limits that apply to moreprivate activity tax-exempt bonds to $75 per resident of each State or $225 million (if greater)beginning in calendar year 2007.  The increase is phased in, beginning with $55 per capita or$165 million (if greater) in calendar year 2003.

**5.  Treasury study on depreciation**

	The Treasury Department is directed to conduct a comprehensive study of the recoveryperiods and depreciation methods under section 168 of the Internal Revenue Code, and toprovide recommendations for determining such periods and methods in a more rational manner. The results and recommendations of the study are to be submitted to the House Ways and Meansand Senate Finance Committees by March 31, 2000.

**6.  State election to exempt student employees from Social Security**

	The Tax Extension Act allowed a limited window of time (January 1 through March 31,1999) for States to modify existing State agreements to exempt from Social Security coveragestudents (including graduate assistants) who are employed by a public school, university, orcollege in a nonexempted State.  This provision applies to three States that did not previouslyelect to exempt student employees from Social Security coverage.  The provision is effectivewith respect to earnings after June 30, 2000.

**D.  Revenue Offset Provisions**

**1.  Treatment of certain deductible liquidating distributions of regulated investmentcompanies ("RICs") and real estate investment trusts ("REITs")**

	Under the Tax Extension Act, any amount which a liquidating RIC or REIT may take as adeduction for dividends paid with respect to an otherwise tax-free liquidating distribution to an80-percent corporate owner will be includible in the income of the recipient corporation.  Theprovision is effective for distributions on or after May 22, 1998, regardless of when the plan ofliquidation was adopted.

**2.  Vaccine excise tax**

	The Tax Extension Act added any vaccine against rotavirus gastroenteritis to the list oftaxable vaccines.  The net receipts from the tax are deposited in the Vaccine InjuryCompensation Trust Fund.  The provision is effective beginning on October 22, 1998.  See, also,the provision in relating to the vaccine excise tax in Part Two, above.

**3.  Mathematical error procedure**

	The Tax Extension Act clarified and expanded the mathematical and clerical errorprocedures so that a correct taxpayer identification number ("TIN") is a TIN assigned by theSocial Security Administration (or Internal Revenue Service) to the individual identified on thetax return.  The provision is effective for taxable years ending after October 21, 1998.

**4.  Restrict NOL carryback rules for specified liability losses**

	The Tax Extension Act limited the definition of specified liability losses that can becarried back 10 years.  The provision is effective for net operating losses arising in taxable yearsending after October 21, 1998.

**E.  Tax Technical Corrections Provisions**

	The Tax Extension Act made necessary technical corrections to recent tax legislation,including the Internal Revenue Service Restructuring and Reform Act of 1998, the TaxpayerRelief Act of 1997, and other tax legislation.

**F.  Revenue Offset for Medicare Home Health Provisions**

**1.  Treatment of certain prizes**

	A prize winner who is provided the option to choose either cash or an annuity within 60days after becoming entitled to the prize is not required to include amounts in gross incomemerely by reason of having the option.  The provision is effective for prizes to which thetaxpayer first becomes entitled after October 21, 1998.  In addition, the provision applies to aprize to which the taxpayer became entitled before the date of enactment, if the taxpayer has theoption to receive a single cash payment during the 18-month period beginning on July 1, 1999.

**PART NINE: RICKY RAY HEMOPHILIA RELIEF FUND ACT OF 1998(Sec. 103(h) of H.R. 1023)(15)**

	The Ricky Ray Hemophilia Relief Fund Act of 1998 provided that payments made underthe Act to certain individuals with blood-clotting disorders who contracted HIV due tocontaminated blood products are treated for purposes of the Internal Revenue Code as damagesreceived on account of personal physical injury or physical sickness described in section104(a)(2).  The provision is effective on November 12, 1998.

**APPENDIX A: TOPICAL INDEX TO REVENUE PROVISIONS ENACTED DURING THE 105TH CONGRESS**

		[NOT INCLUDED IN ON-LINE VERSION]
1.   This document may be cited as follows: Joint Committee on Taxation, *Summary ofRevenue Provisions Contained in Legislation Enacted in the 105th Congress*(JCX-75-98),November 19, 1998.
2.   P.L. 105-2; February 28, 1997.  H.R. 668 was reported by the House Committee onWays and Means on February 13, 1997 (H. Rept. 105-5).  The bill was passed by the House onFebruary 26, 1997, and by the Senate on February 27, 1997.  H.R. 668 was signed by thePresident on February 28, 1997.  See also Part Two for a description of the subsequent 10-yearextension and modification of the Airport Trust Fund excise taxes in the Taxpayer Relief Act of1997 (sec. 1031 of H.R. 2014).
3.   P.L. 105-34; August 5, 1997.  H.R. 2014 was reported by the House Committee on theBudget on June 24, 1997 (H. Rept. 105-148), after the revenue reconciliation provisions wereapproved by the House Committee on Ways and Means on June 13, 1997. The bill, as amended,was passed by the House on June 26, 1997.

	S. 949 was reported by the Senate Committee on Finance on June 20, 1997 (S. Rept. 105-33). The bill was considered by the Senate on June 25-27, 1997, and the provisions of the bill asamended, were incorporated in the Senate-passed version of H.R. 2014 on June 27, 1997. Aconference report on H.R. 2014 was filed in the House on July 30, 1997 (H. Rept. 105-220); theHouse passed the conference report on July 31, 1997; and the Senate also passed the conferencereport on July 31, 1997.  H.R. 2014 was signed by the President on August 5, 1997.

	Two provisions in the conference agreement on H.R. 2014 as passed by the House andthe Senate were canceled by the President under the Line Item Veto Act: (1) temporaryexceptions under subpart F for certain active financing income; and (2) nonrecognition of gain onthe sale of stock in agricultural processors facilities to certain farmer's cooperatives. Modifiedversions of these two canceled provisions were passed by the House in H.R. 2513, as amended,on November 8, 1997. (See report of the Committee on Ways and Means on H.R. 2513; H. Rept.105-318, Part I, October 9, 1997.  H.R. 2513 was referred to the House Committee on theBudget, and the bill was discharged from the Committee on the Budget on October 22, 1997.) The Supreme Court subsequently held the Line Item Veto Act was unconstitutional, therebyreinstating the two canceled provisions.

	Further, section 977 of H.R. 2014 (relating to carryback of existing net operating lossesof the National Railroad Passenger Corporation (Amtrak)) was contingent on the enactment ofAmtrak reform legislation.  S. 738 ("Amtrak Reform and Accountability Act of 1997") wasreported by the Senate Committee on Commerce, Science, and Transportation on May 14, 1997(S. Rept. 105-85), and was passed by the Senate, as amended, on November 7, 1997.  S. 738 waspassed by the House, with amendment, on November 13, 1997, and the Senate agreed to theHouse amendment on November 13, 1997.  S. 738 was signed by the President on December 2,1997 (P.L. 105-134).
4.   For taxable years beginning after 1998, the nonrefundable personal credits may offsetthe entire regular tax.  See the description of this provision in Part Eight, below.
5.   See, also, the provision in Part Eight, below, providing rules for 1998 relating to the useof nonrefundable credits that will affect the amount of the Hope and Lifetime Learning taxcredits for which a taxpayer may be eligible.
6.   P.L. 105-33; August 5, 1997. H.R. 2015 was reported by the House Committee on theBudget on June 24, 1997 (H. Rept. 105-149). The Committee on Ways and Means approved itshealth and human resources reconciliation provisions on June 9 and 10, 1997, respectively,which were incorporated in H.R. 2015 as reported. The bill, as amended, was passed by theHouse on June 25, 1997.

	S. 947 was reported by the Senate Committee on the Budget on June 20, 1997 (no writtenreport). S. 947 included the health and human resources reconciliation provisions as approved bythe Committee on Finance on June 18, 1997. S. 947 was considered by the Senate on June 23 and24, 1997, and was passed, as amended, on June 25, 1997.

	H.R. 2015, as amended by the Senate provisions of S. 947, was passed by the Senate onJune 25, 1997. A conference report was filed in the House on July 30, 1997 (H. Rept. 105-217);the House passed the conference report on July 30, 1997; and the Senate passed the conferencereport on July 31, 1997. H.R. 2015 was signed by the President on August 5, 1997.

	H.R. 2015, as enacted, includes the revenue-related provisions described in this Part.A
7.   As under prior law, individuals who are eligible for Medicare are not eligible for anMSA that is not a Medicare+Choice MSA. 
8.   The qualification of a hospital as a tax-exempt charitable organization under section501(c)(3) is determined as under present law. See Rev. Rul. 69-545, 1969-2 C.B. 117. 
9.   P.L. 105-35; August 5, 1997. H.R. 1226 was reported by the House Committee onWays and Means on April 14, 1997 (H. Rept. 105-51). The bill, as amended, passed the Houseon April 15, 1997, and was passed by the Senate on July 23, 1997. H.R. 1226 was signed by thePresident on August 5, 1997. 
10.   Pursuant to 18 U.S.C. sec. 3571 (added by the Sentencing Reform Act of 1984), theamount of the fine is not more than the greater of the amount specified in this new Code sectionor $100,000.
11.   P.L. 105-130; December 1, 1997 (Section 9 of the Surface Transportation ExtensionAct of 1997).  S. 1519 was passed by the Senate on November 10, 1997, and by the House onNovember 12, 1997.  The Act was signed by the President on December 1, 1997.
12.   Title IX of H.R. 2400 ("Surface Transportation Revenue Act of 1998"); P.L. 105-178. The revenue provisions (Title IX) of H.R. 2400 were reported by the House Committee on Waysand Means on March 27, 1998 (H. Rept. 105-467, Part II).  H.R. 2400 was passed by the Houseon April 1, 1998.

	The Senate passed H.R. 2400, as amended with the provisions of S. 1173, on April 2,1998.  The conference report was filed on the bill on May 22, 1998 (H. Rept. 105-550), and waspassed by the House and the Senate on May 22, 1998.  H.R. 2400 was signed by the President onJune 9, 1998.
13.   P.L. 105-206. H.R. 2676 was reported by the House Committee on Ways and Meanson October 31, 1997 (H. Rept. 105-364, Part I).  The House passed the bill on November 5,1997, and added (as new Title VI) the provisions of H.R. 2645 ("Tax Technical Corrections Actof 1997") as previously reported by the Committee on Ways and Means (H. Rept. 105-356,October 29, 1997).

	H.R. 2676 was reported, as amended, by the Senate Committee on Finance on April 22,1998 (S. Rept. 105-174), and was passed by the Senate, as amended, on May 7, 1998.  Theconference report on H.R. 2676 was filed on June 24, 1998 (H. Rept. 105-599).  The Housepassed the conference report on June 25, 1998, and the Senate passed it on July 9, 1998.

	H.R. 2676 was signed by the President on July 22, 1998.
14.   P.L. 105-277.  The revenue provisions of H.R. 4328 generally originated in H.R. 4738. H.R. 4738 was reported by the Committee on Ways and Means on October 12, 1998 (H. Rept.105-817), and was passed by the House on October 12, 1998.  Some provisions were included inS. 2260, as introduced by Senators Roth and Moynihan.  The conference report on H.R. 4328was filed on October 19, 1998 (H. Rept 105-825).  The House passed the conference report onOctober 20, 1998, and the Senate passed it on October 21, 1998.

	H.R. 4328 was signed by the President on October 21, 1998.
15.   P.L. 105-369.  H.R. 1023 was reported by the House Committee on Judiciary onMarch 25, 1998 (H. Rept. 105-465, Part I).  The bill was reported by the House Committee onWays and Means on May 7, 1998 (H. Rept. 105-465, Part II).  The bill was passed by the Houseon May 19, 1998.  The Senate Committee on Labor and Human Resources reported the bill onOctober 7, 1998.  The Senate passed the bill on October 21, 1998.  H.R. 1023 was signed by thePresident on November 12, 1998.****