PUBLIC LAW 104–7—APR. 11, 1995 109 STAT. 93

Public Law 104–7

104th Congress

An Act

To amend the Internal Revenue Code of 1986 to permanently extend the deduction

for the health insurance costs of self-employed individuals, to repeal the provision

permitting nonrecognition of gain on sales and exchanges effectuating policies

of the Federal Communications Commission, and for other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. PERMANENT EXTENSION AND INCREASE OF DEDUCTION

FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED

INDIVIDUALS.

(a) PERMANENT EXTENSION.—Subsection (l) of section 162 of

the Internal Revenue Code of 1986 (relating to special rules for

health insurance costs of self-employed individuals) is amended

by striking paragraph (6).

(b) INCREASE IN DEDUCTION.—Paragraph (1) of section 162(l)

of the Internal Revenue Code of 1986 is amended by striking

‘‘25 percent’’ and inserting ‘‘30 percent’’.

(c) EFFECTIVE DATES.—

(1) EXTENSION.—The amendment made by subsection (a)

shall apply to taxable years beginning after December 31, 1993.

(2) INCREASE.—The amendment made by subsection (b)

shall apply to taxable years beginning after December 31, 1994.

SEC. 2. REPEAL OF NONRECOGNITION ON FCC CERTIFIED SALES AND

EXCHANGES.

(a) IN GENERAL.—Subchapter O of chapter 1 of the Internal

Revenue Code of 1986 is amended by striking part V (relating

to changes to effectuate FCC policy).

(b) CONFORMING AMENDMENTS.—Sections 1245(b)(5) and

1250(d)(5) of the Internal Revenue Code of 1986 are each amended—

(1) by striking ‘‘section 1071 (relating to gain from sale

or exchange to effectuate polices of FCC) or’’, and

(2) by striking ‘‘1071 AND’’ in the heading thereof.

(c) CLERICAL AMENDMENT.—The table of parts for such subchapter O is amended by striking the item relating to part V.

(d) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to—

(A) sales and exchanges on or after January 17, 1995,

and

(B) sales and exchanges before such date if the FCC

tax certificate with respect to such sale or exchange is

issued on or after such date.

(2) BINDING CONTRACTS.—

26 USC 1071

note.

26 USC prec.

1001.

26 USC 1071.

26 USC 162 note.

Apr. 11, 1995

[H.R. 831]
109 STAT. 94 PUBLIC LAW 104–7—APR. 11, 1995

(A) IN GENERAL.—The amendments made by this section shall not apply to any sale or exchange pursuant

to a written contract which was binding on January 16,

1995, and at all times thereafter before the sale or

exchange, if the FCC tax certificate with respect to such

sale or exchange was applied for, or issued, on or before

such date.

(B) SALES CONTINGENT ON ISSUANCE OF CERTIFICATE.—

(i) IN GENERAL.—A contract shall be treated as

not binding for purposes of subparagraph (A) if the

sale or exchange pursuant to such contract, or the

material terms of such contract, were contingent, at

any time on January 16, 1995, on the issuance of

an FCC tax certificate. The preceding sentence shall

not apply if the FCC tax certificate for such sale or

exchange is issued on or before January 16, 1995.

(ii) MATERIAL TERMS.—For purposes of clause (i),

the material terms of a contract shall not be treated

as contingent on the issuance of an FCC tax certificate

solely because such terms provide that the sales price

would, if such certificate were not issued, be increased

by an amount not greater than 10 percent of the sales

price otherwise provided in the contract.

(3) FCC TAX CERTIFICATE.—For purposes of this subsection,

the term ‘‘FCC tax certificate’’ means any certificate of the

Federal Communications Commission for the effectuation of

section 1071 of the Internal Revenue Code of 1986 (as in

effect on the day before the date of the enactment of this

Act).

SEC. 3. SPECIAL RULES RELATING TO INVOLUNTARY CONVERSIONS.

(a) REPLACEMENT PROPERTY ACQUIRED BY CORPORATIONS FROM

RELATED PERSONS.—

(1) IN GENERAL.—Section 1033 of the Internal Revenue

Code of 1986 (relating to involuntary conversions) is amended

by redesignating subsection (i) as subsection (j) and by inserting

after subsection (h) the following new subsection:

‘‘(i) NONRECOGNITION NOT TO APPLY IF CORPORATION ACQUIRES

REPLACEMENT PROPERTY FROM RELATED PERSON.—

‘‘(1) IN GENERAL.—In the case of—

‘‘(A) a C corporation, or

‘‘(B) a partnership in which 1 or more C corporations

own, directly or indirectly (determined in accordance with

section 707(b)(3)), more than 50 percent of the capital

interest, or profits interest, in such partnership at the

time of the involuntary conversion,

subsection (a) shall not apply if the replacement property or

stock is acquired from a related person. The preceding sentence

shall not apply to the extent that the related person acquired

the replacement property or stock from an unrelated person

during the period described in subsection (a)(2)(B).

‘‘(2) RELATED PERSON.—For purposes of this subsection,

a person is related to another person if the person bears a

relationship to the other person described in section 267(b)

or 707(b)(1).’’
PUBLIC LAW 104–7—APR. 11, 1995 109 STAT. 95

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to involuntary conversions occurring on or after

February 6, 1995.

(b) APPLICATION OF SECTION 1033 TO CERTAIN SALES REQUIRED

FOR MICROWAVE RELOCATION.— (1) IN GENERAL.—Section 1033 of the Internal Revenue

Code of 1986 (relating to involuntary conversions), as amended

by subsection (a), is amended by redesignating subsection (j)

as subsection (k) and by inserting after subsection (i) the following new subsection:

‘‘(j) SALES OR EXCHANGES TO IMPLEMENT MICROWAVE RELOCA- TION POLICY.—

‘‘(1) IN GENERAL.—For purposes of this subtitle, if a taxpayer elects the application of this subsection to a qualified

sale or exchange, such sale or exchange shall be treated as

an involuntary conversion to which this section applies.

‘‘(2) QUALIFIED SALE OR EXCHANGE.—For purposes of paragraph (1), the term ‘qualified sale or exchange’ means a sale

or exchange before January 1, 2000, which is certified by the

Federal Communications Commission as having been made

by a taxpayer in connection with the relocation of the taxpayer

from the 1850–1990MHz spectrum by reason of the Federal

Communications Commission’s reallocation of that spectrum

for use for personal communications services. The Commission

shall transmit copies of certifications under this paragraph

to the Secretary.’’

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall apply to sales or exchanges after March 14, 1995.

SEC. 4. DENIAL OF EARNED INCOME CREDIT FOR INDIVIDUALS HAVING EXCESSIVE INVESTMENT INCOME.

(a) IN GENERAL.—Section 32 of the Internal Revenue Code

of 1986 is amended by redesignating subsections (i) and (j) as

subsections (j) and (k), respectively, and by inserting after subsection (h) the following new subsection:

‘‘(i) DENIAL OF CREDIT FOR INDIVIDUALS HAVING EXCESSIVE

INVESTMENT INCOME.—

‘‘(1) IN GENERAL.—No credit shall be allowed under subsection (a) for the taxable year if the aggregate amount of

disqualified income of the taxpayer for the taxable year exceeds

$2,350.

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

the term ‘disqualified income’ means—

‘‘(A) interest or dividends to the extent includible in

gross income for the taxable year,

‘‘(B) interest received or accrued during the taxable

year which is exempt from tax imposed by this chapter,

and

‘‘(C) the excess (if any) of—

‘‘(i) gross income from rents or royalties not derived

in the ordinary course of a trade or business, over

‘‘(ii) the sum of—

‘‘(I) the deductions (other than interest) which

are clearly and directly allocable to such gross

income, plus

‘‘(II) interest deductions properly allocable to

such gross income.’’

26 USC 1033

note.

26 USC 1033

note.
109 STAT. 96 PUBLIC LAW 104–7—APR. 11, 1995

LEGISLATIVE HISTORY—H.R. 831:

HOUSE REPORTS: Nos. 104–32 (Comm. on Ways and Means) and 104–92 (Comm.

of Conference).

SENATE REPORTS: No. 104–16 (Comm. on Finance).

CONGRESSIONAL RECORD, Vol. 141 (1995):

Feb. 21, considered and passed House.

Mar. 24, considered and passed Senate, amended.

Mar. 30, House agreed to conference report.

Mar. 31, Apr. 3, Senate considered and agreed to conference report.

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 31 (1995):

Apr. 6, Presidential statement.

Æ

(b) EFFECTIVE DATE.—The amendments made by this section

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

SEC. 5. EXTENSION OF SPECIAL RULE FOR CERTAIN GROUP HEALTH

PLANS.

Section 13442(b) of the Omnibus Budget Reconciliation Act

of 1993 (Public Law 103–66) is amended by striking ‘‘May 12,

1995’’ and inserting ‘‘December 31, 1995’’.

SEC. 6. STUDY OF EXPATRIATION TAX.

(a) IN GENERAL.—The staff of the Joint Committee on Taxation

shall conduct a study of the issues presented by any proposals

to affect the taxation of expatriation, including an evaluation of— (1) the effectiveness and enforceability of current law with

respect to the tax treatment of expatriation,

(2) the current level of expatriation for tax avoidance purposes,

(3) any restrictions imposed by any constitutional requirement that the Federal income tax apply only to realized gains, (4) the application of international human rights principles

to taxation of expatriation,

(5) the possible effects of any such proposals on the free

flow of capital into the United States,

(6) the impact of any such proposals on existing tax treaties

and future treaty negotiations, (7) the operation of any such proposals in the case of

interests in trusts,

(8) the problems of potential double taxation in any such

proposals,

(9) the impact of any such proposals on the trade policy

objectives of the United States, (10) the administrability of such proposals, and

(11) possible problems associated with existing law, including estate and gift tax provisions.

(b) REPORT.—The Chief of Staff of the Joint Committee on

Taxation shall, not later than June 1, 1995, report the results

of the study conducted under subsection (a) to the Chairmen of

the Committee on Ways and Means of the House of Representatives

and the Committee on Finance of the Senate.

Approved April 11, 1995.

26 USC 162 note.

26 USC 32 note.