II

103D CONGRESS

1ST SESSION S. 1058

To amend the Internal Revenue Code of 1986 to create real jobs in America

through investment and savings incentives, to pay for such incentives

by decreasing Federal spending, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 28 (legislative day, APRIL 19), 1993

Mr. ROTH (for himself, Mr. LOTT, Mr. DOLE, Mr. SIMPSON, Mr. COCHRAN,

Mr. NICKLES, Mr. MACK, Mr. CRAIG, Mr. BENNETT, Mr. HATCH, Mr.

WALLOP, Mr. THURMOND, Mr. STEVENS, Mr. HELMS, Mr. MURKOWSKI,

Mr. BURNS, Mr. COATS, Mr. SMITH, Mr. FAIRCLOTH, and Mr. GREGG)

introduced the following bill; which was read twice and referred to the

Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to create

real jobs in America through investment and savings

incentives, to pay for such incentives by decreasing Federal spending, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Real Jobs for America

5 Act of 1993’’.
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1 TITLE I—INVESTMENT AND

2 SAVINGS INCENTIVES

3 SEC. 100. AMENDMENT OF 1986 CODE.

4 Except as otherwise expressly provided, whenever in

5 this Act an amendment or repeal is expressed in terms

6 of an amendment to, or repeal of, a section or other provi7 sion, the reference shall be considered to be made to a

8 section or other provision of the Internal Revenue Code

9 of 1986.

10 Subtitle A—Reductions in Cost of

11 Capital and Tax Penalties on In12 vestment

13 SEC. 101. INDEXING OF CERTAIN ASSETS FOR PURPOSES

14 OF DETERMINING GAIN OR LOSS.

15 (a) IN GENERAL.—Part II of subchapter O of chap16 ter 1 (relating to basis rules of general application) is

17 amended by inserting after section 1021 the following new

18 section:

19 ‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES

20 OF DETERMINING GAIN OR LOSS.

21 ‘‘(a) GENERAL RULE.—

22 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD23 JUSTED BASIS.—Except as provided in paragraph

24 (2), if an indexed asset which has been held for

25 more than 3 years is sold or otherwise disposed of,
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1 for purposes of this title the indexed basis of the

2 asset shall be substituted for its adjusted basis.

3 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.—

4 The deduction for depreciation, depletion, and amor5 tization shall be determined without regard to the

6 application of paragraph (1) to the taxpayer or any

7 other person.

8 ‘‘(b) INDEXED ASSET.—

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the term ‘indexed asset’ means—

11 ‘‘(A) stock in a corporation,

12 ‘‘(B) tangible property (or any interest

13 therein) which is a capital asset or property

14 used in the trade or business (as defined in sec15 tion 1231(b)), and

16 ‘‘(C) the principal residence of the tax17 payer (within the meaning of section 1034).

18 ‘‘(2) CERTAIN PROPERTY EXCLUDED.—For

19 purposes of this section, the term ‘indexed asset’

20 does not include—

21 ‘‘(A) CREDITOR’S INTEREST.—Any interest

22 in property which is in the nature of a credi23 tor’s interest.

24 ‘‘(B) OPTIONS.—Any option or other right

25 to acquire an interest in property.
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1 ‘‘(C) NET LEASE PROPERTY.—In the case

2 of a lessor, net lease property (within the mean3 ing of subsection (h)(1)).

4 ‘‘(D) CERTAIN PREFERRED STOCK.—Stock

5 which is fixed and preferred as to dividends and

6 does not participate in corporate growth to any

7 significant extent.

8 ‘‘(E) STOCK IN CERTAIN CORPORATIONS.—

9 Stock in—

10 ‘‘(i) an S corporation (within the

11 meaning of section 1361),

12 ‘‘(ii) a personal holding company (as

13 defined in section 542), and

14 ‘‘(iii) a foreign corporation.

15 ‘‘(F) COLLECTIBLES.—Any collectible (as

16 defined in section 408(m)(2)).

17 ‘‘(3) EXCEPTION FOR STOCK IN FOREIGN COR18 PORATION WHICH IS REGULARLY TRADED ON NA19 TIONAL OR REGIONAL EXCHANGE.—Clause (iii) of

20 paragraph (2)(E) shall not apply to stock in a for21 eign corporation the stock of which is listed on the

22 New York Stock Exchange, the American Stock Ex23 change, or any domestic regional exchange for which

24 quotations are published on a regular basis other

25 than—
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1 ‘‘(A) stock of a foreign investment com2 pany (within the meaning of section 1246(b)),

3 and

4 ‘‘(B) stock in a foreign corporation held by

5 a United States person who meets the require6 ments of section 1248 (a)(2).

7 ‘‘(c) INDEXED BASIS.—For purposes of this sec8 tion—

9 ‘‘(1) INDEXED BASIS.—The indexed basis for

10 any asset is—

11 ‘‘(A) the adjusted basis of the asset, multi12 plied by

13 ‘‘(B) the applicable inflation ratio.

14 ‘‘(2) APPLICABLE INFLATION RATIO.—The ap15 plicable inflation ratio for any asset is the percent16 age arrived at by dividing—

17 ‘‘(A) the CPI for the calendar year preced18 ing the calendar year in which the disposition

19 takes place, by

20 ‘‘(B) the CPI for the calendar year 1992

21 (or, if later, the calendar year preceding the cal22 endar year in which the asset was acquired by

23 the taxpayer).

24 The applicable inflation ratio shall not be taken into

25 account unless it is greater than 1. The applicable
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1 inflation ratio for any asset shall be rounded to the

2 nearest one-tenth of 1 percent.

3 ‘‘(3) CPI.—The CPI for any calendar year shall

4 be determined under section 1(f)(4).

5 ‘‘(d) SPECIAL RULES.—For purposes of this sec6 tion—

7 ‘‘(1) TREATMENT AS SEPARATE ASSET.—In the

8 case of any asset, the following shall be treated as

9 a separate asset:

10 ‘‘(A) a substantial improvement to prop11 erty,

12 ‘‘(B) in the case of stock of a corporation,

13 a substantial contribution to capital, and

14 ‘‘(C) any other portion of an asset to the

15 extent that separate treatment of such portion

16 is appropriate to carry out the purposes of this

17 section.

18 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

19 THROUGHOUT HOLDING PERIOD.—

20 ‘‘(A) IN GENERAL.—The applicable infla21 tion ratio shall be appropriately reduced for cal22 endar months at any time during which the

23 asset was not an indexed asset.

24 ‘‘(B) CERTAIN SHORT SALES.—For pur25 poses of applying subparagraph (A), an asset
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1 shall be treated as not an indexed asset for any

2 short sale period during which the taxpayer or

3 the taxpayer’s spouse sells short property sub4 stantially identical to the asset. For purposes of

5 the preceding sentence, the short sale period be6 gins on the day after the substantially identical

7 property is sold and ends on the closing date

8 for the sale.

9 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU10 TIONS.—A distribution with respect to stock in a

11 corporation which is not a dividend shall be treated

12 as a disposition.

13 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

14 LOSS.—To the extent that (but for this paragraph)

15 this section would create or increase a net ordinary

16 loss to which section 1231(a)(2) applies or an ordi17 nary loss to which any other provision of this title

18 applies, such provision shall not apply. The taxpayer

19 shall be treated as having a long-term capital loss in

20 an amount equal to the amount of the ordinary loss

21 to which the preceding sentence applies.

22 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

23 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1)

24 WITH RESPECT TO THE TAXPAYER.—If there has

25 been a prior application of subsection (a)(1) to an
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1 asset while such asset was held by the taxpayer, the

2 date of acquisition of such asset by the taxpayer

3 shall be treated as not earlier than the date of the

4 most recent such prior application.

5 ‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli6 cation of section 341(a) (relating to collapsible cor7 porations) shall be determined without regard to this

8 section.

9 ‘‘(e) CERTAIN CONDUIT ENTITIES.—

10 ‘‘(1) REGULATED INVESTMENT COMPANIES;

11 REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST

12 FUNDS.—

13 ‘‘(A) IN GENERAL.—Stock in a qualified

14 investment entity shall be an indexed asset for

15 any calendar month in the same ratio as the

16 fair market value of the assets held by such en17 tity at the close of such month which are in18 dexed assets bears to the fair market value of

19 all assets of such entity at the close of such

20 month.

21 ‘‘(B) RATIO OF 90 PERCENT OR MORE.—If

22 the ratio for any calendar month determined

23 under subparagraph (A) would (but for this

24 subparagraph) be 90 percent or more, such

25 ratio for such month shall be 100 percent.
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1 ‘‘(C) RATIO OF 10 PERCENT OR LESS.—If

2 the ratio for any calendar month determined

3 under subparagraph (A) would (but for this

4 subparagraph) be 10 percent or less, such ratio

5 for such month shall be zero.

6 ‘‘(D) VALUATION OF ASSETS IN CASE OF

7 REAL ESTATE INVESTMENT TRUSTS.—Nothing

8 in this paragraph shall require a real estate in9 vestment trust to value its assets more fre10 quently than once each 36 months (except

11 where such trust ceases to exist). The ratio

12 under subparagraph (A) for any calendar

13 month for which there is no valuation shall be

14 the trustee’s good faith judgment as to such

15 valuation.

16 ‘‘(E) QUALIFIED INVESTMENT ENTITY.—

17 For purposes of this paragraph, the term

18 ‘qualified investment entity’ means—

19 ‘‘(i) a regulated investment company

20 (within the meaning of section 851),

21 ‘‘(ii) a real estate investment trust

22 (within the meaning of section 856), and

23 ‘‘(iii) a common trust fund (within the

24 meaning of section 584).
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1 ‘‘(2) PARTNERSHIPS.—In the case of a partner2 ship, the adjustment made under subsection (a) at

3 the partnership level shall be passed through to the

4 partners.

5 ‘‘(3) SUBCHAPTER S CORPORATIONS.—In the

6 case of an electing small business corporation, the

7 adjustment under subsection (a) at the corporate

8 level shall be passed through to the shareholders.

9 ‘‘(f) DISPOSITIONS BETWEEN RELATED PERSONS.—

10 ‘‘(1) IN GENERAL.—This section shall not apply

11 to any sale or other disposition of property between

12 related persons except to the extent that the basis

13 of such property in the hands of the transferee is a

14 substituted basis.

15 ‘‘(2) RELATED PERSONS DEFINED.—For pur16 poses of this section, the term ‘related persons’

17 means—

18 ‘‘(A) persons bearing a relationship set

19 forth in section 267(b), and

20 ‘‘(B) persons treated as single employer

21 under subsection (b) or (c) of section 414.

22 ‘‘(g) TRANSFERS TO INCREASE INDEXING ADJUST23 MENT OR DEPRECIATION ALLOWANCE.—If any person

24 transfers cash, debt, or any other property to another per25 son and the principal purpose of such transfer is—
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1 ‘‘(1) to secure or increase an adjustment under

2 subsection (a), or

3 ‘‘(2) to increase (by reason of an adjustment

4 under subsection (a)) a deduction for depreciation,

5 depletion, or amortization,

6 the Secretary may disallow part or all of such adjustment

7 or increase.

8 ‘‘(h) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) NET LEASE PROPERTY DEFINED.—The

10 term ‘net lease property’ means leased real property

11 where—

12 ‘‘(A) the term of the lease (taking into ac13 count options to renew) was 50 percent or more

14 of the useful life of the property, and

15 ‘‘(B) for the period of the lease, the sum

16 of the deductions with respect to such property

17 which are allowable to the lessor solely by rea18 son of section 162 (other than rents and reim19 bursed amounts with respect to such property)

20 is 15 percent or less of the rental income pro21 duced by such property.

22 ‘‘(2) STOCK INCLUDES INTEREST IN COMMON

23 TRUST FUND.—The term ‘stock in a corporation’ in24 cludes any interest in a common trust fund (as de25 fined in section 584(a)).
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1 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be necessary or appropriate to

3 carry out the purposes of this section.’’

4 (b) ADJUSTMENT TO APPLY FOR PURPOSES OF DE5 TERMINING EARNINGS AND PROFITS.—Subsection (f) of

6 section 312 of such Code (relating to effect on earnings

7 and profits of gain or loss and of receipt of tax-free dis8 tributions) is amended by adding at the end thereof the

9 following new paragraph:

10 ‘‘(3) EFFECT ON EARNINGS AND PROFITS OF

11 INDEXED BASIS.—For substitution of indexed basis

12 for adjusted basis in the case of the disposition of

13 certain assets on or after January 1, 1999, see sec14 tion 1022(a)(1).’’

15 (c) CLERICAL AMENDMENT.—The table of sections

16 for part II of subchapter O of such chapter 1 is amended

17 by inserting after the item relating to section 1021 the

18 following new item:

‘‘Sec. 1022. Indexing of certain assets for purposes of determining

gain or loss.’’

19 (d) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to dispositions on or after January

21 1, 1993, in taxable years ending after such date.
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1 SEC. 102. MODIFICATION TO MINIMUM TAX DEPRECIATION

2 RULES.

3 (a) GENERAL RULE.—Paragraph (1) of section 56(a)

4 (relating to depreciation) is amended by redesignating

5 subparagraphs (B), (C), and (D) as subparagraphs (C),

6 (D), and (E), respectively, and by inserting after subpara7 graph (A) the following new subparagraph:

8 ‘‘(B) TREATMENT OF CERTAIN PERSONAL

9 PROPERTY PLACED IN SERVICE AFTER JUNE 30,

10 1993.—

11 ‘‘(i) IN GENERAL.—In the case of any

12 property to which this subparagraph ap13 plies, the depreciation deduction allowable

14 under section 167 shall be determined

15 under the alternative system under section

16 168(g), except that the method of depre17 ciation used shall be the method used for

18 purposes of section 168.

19 ‘‘(ii) PROPERTY TO WHICH SUBPARA20 GRAPH APPLIES.—This subparagraph shall

21 apply to any tangible property placed in

22 service after June 30, 1993, except that

23 this subparagraph shall not apply to any

24 residential rental property or

25 nonresidential real property (within the

26 meaning of section 168(e)).
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1 ‘‘(iii) COORDINATION WITH SUBPARA2 GRAPH (A).—Subparagraph (A) shall not

3 apply to any property to which this sub4 paragraph applies.’’

5 (b) ELIMINATION OF ACE DEPRECIATION ADJUST6 MENT.—Clause (i) of section 56(g)(4)(A) (relating to de7 preciation adjustments for computing adjusted current

8 earnings) is amended by adding at the end thereof the

9 following new sentence: ‘‘The preceding sentence shall not

10 apply to any property to which subsection (a)(1)(B) ap11 plies, and the depreciation deduction with respect to such

12 property shall be determined under the rules of subsection

13 (a)(1)(B).’’

14 (c) CONFORMING AMENDMENTS.—Section 56(g)(4)

15 is amended by striking subparagraphs (E), (F), and (G)

16 and by redesignating subparagraph (I) as subparagraph

17 (E).

18 (d) EFFECTIVE DATES.—

19 (1) IN GENERAL.—Except as provided in this

20 subsection, the amendments made by this section

21 shall apply to property placed in service after June

22 30, 1993.

23 (2) CONFORMING CHANGES.—The amendments

24 made by subsection (c) shall apply to exchanges, ac-
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1 quisitions, and ownership changes after the date of

2 the enactment of this Act.

3 (3) COORDINATION WITH TRANSITIONAL

4 RULES.—The amendments made by this section

5 shall not apply to any property to which paragraph

6 (1) of section 56(a) of the Internal Revenue Code of

7 1986 does not apply by reason of subparagraph

8 (D)(i) thereof (as redesignated by subsection (a) of

9 this section).

10 Subtitle B—Investment in Small

11 Business

12 SEC. 111. INCREASE IN EXPENSE TREATMENT FOR SMALL

13 BUSINESS.

14 (a) GENERAL RULE.—Paragraph (1) of section

15 179(b) (relating to dollar limitation) is amended by strik16 ing ‘‘$10,000’’ and inserting ‘‘$25,000’’.

17 (b) INDEXATION.—Section 179(b) is amended by

18 adding at the end the following new paragraph:

19 ‘‘(5) INDEXATION.—In the case of any taxable

20 year beginning after 1994, the $25,000 amount

21 under paragraph (1) shall be increased by an

22 amount equal to such dollar amount multiplied by

23 the cost-of-living adjustment determined under sec24 tion 1(f)(3) for the calendar year in which the tax25 able year begins, except that section 1(f)(3)(B) shall
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1 be applied by substituting ‘1993’ for ‘1989’. The

2 amount determined under the preceding sentence

3 shall be rounded to the nearest multiple of $100.’’

4 (c) EFFECTIVE DATE.—The amendment made by

5 subsection (a) shall apply to taxable years beginning after

6 June 30, 1992.

7 Subtitle C—Increased Savings

8 Through Individual Retirement

9 Accounts

10 PART I—IRA DEDUCTION

11 SEC. 121. RESTORATION OF IRA DEDUCTION.

12 (a) IN GENERAL.—Section 219 (relating to deduction

13 for retirement savings) is amended by striking subsection

14 (g) and by redesignating subsection (h) as subsection (g).

15 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

16 (1) Subsection (f) of section 219 is amended by

17 striking paragraph (7).

18 (2) Paragraph (5) of section 408(d) is amended

19 by striking the last sentence.

20 (3) Section 408(o) is amended by adding at the

21 end thereof the following new paragraph:

22 ‘‘(5) TERMINATION.—This subsection shall not

23 apply to any designated nondeductible contribution

24 for any taxable year beginning after December 31,

25 1995.’’
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1 (4) Subsection (b) of section 4973 is amended

2 by striking the last sentence.

3 (c) EFFECTIVE DATES.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply to taxable years beginning

6 after December 31, 1995.

7 (2) SPECIAL ACCOUNTS.—For purposes of ap8 plying section 408A of the Internal Revenue Code of

9 1986 (as added by section 131), the amendments

10 made by this section shall apply to taxable years be11 ginning after December 31, 1993 (and to qualified

12 transfers after the date of the enactment of this

13 Act).

14 SEC. 122. INFLATION ADJUSTMENT FOR DEDUCTIBLE

15 AMOUNT.

16 (a) IN GENERAL.—Section 219, as amended by sec17 tion 121, is amended by redesignating subsection (g) as

18 subsection (h) and by inserting after subsection (f) the

19 following new subsection:

20 ‘‘(g) COST-OF-LIVING ADJUSTMENTS.—

21 ‘‘(1) IN GENERAL.—If the cost-of-living amount

22 for any calendar year is equal to or greater than

23 $500, then each applicable dollar amount (as pre24 viously adjusted under this subsection) for any tax-
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1 able year beginning in any subsequent calendar year

2 shall be increased by $500.

3 ‘‘(2) COST-OF-LIVING AMOUNT.—The cost-of4 living amount for any calendar year is the excess (if

5 any) of—

6 ‘‘(A) $2,000, increased by the cost-of-living

7 adjustment for such calendar year, over

8 ‘‘(B) the applicable dollar amount in effect

9 under subsection (b)(1)(A) for taxable years be10 ginning in such calendar year.

11 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur12 poses of this subsection—

13 ‘‘(A) IN GENERAL.—The cost-of-living ad14 justment for any calendar year is the percent15 age (if any) by which—

16 ‘‘(i) the CPI for such calendar year,

17 exceeds

18 ‘‘(ii) the CPI for 1994.

19 ‘‘(B) CPI FOR ANY CALENDAR YEAR.—The

20 CPI for any calendar year shall be determined

21 in the same manner as under section 1(f)(4).

22 ‘‘(4) APPLICABLE DOLLAR AMOUNT.—For pur23 poses of this subsection, the term ‘applicable dollar

24 amount’ means the dollar amount in effect under

25 any of the following provisions:
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1 ‘‘(A) Subsection (b)(1)(A).

2 ‘‘(B) Subsection (c)(2)(A)(i).

3 ‘‘(C) The last sentence of subsection

4 (c)(2).’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Section 408(a)(1) is amended by striking

7 ‘‘in excess of $2,000 on behalf of any individual’’

8 and inserting ‘‘on behalf of any individual in excess

9 of the amount in effect for such taxable year under

10 section 219(b)(1)(A)’’.

11 (2) Section 408(b)(2)(B) is amended by strik12 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

13 effect under section 219(b)(1)(A)’’.

14 (3) Section 408(d)(5) is amended by striking

15 ‘‘$2,250’’ and inserting ‘‘the dollar amount in effect

16 for such taxable year under section 219(c)(2)(A)(i)’’.

17 (4) Section 408(j) is amended by striking

18 ‘‘$2,000’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 1995.
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1 SEC. 123. COORDINATION OF IRA DEDUCTION LIMIT WITH

2 ELECTIVE DEFERRAL LIMIT.

3 (a) IN GENERAL.—Section 219(b) (relating to maxi4 mum amount of deduction) is amended by adding at the

5 end thereof the following new paragraph:

6 ‘‘(4) COORDINATION WITH ELECTIVE DEFER7 RAL LIMIT.—The amount determined under para8 graph (1) or subsection (c)(2) with respect to any

9 individual for any taxable year shall not exceed the

10 excess (if any) of—

11 ‘‘(A) the maximum amount of elective de12 ferrals of the individual which are excludable

13 from gross income for the taxable year under

14 section 402(g)(1), over

15 ‘‘(B) the amount so excluded.’’

16 (b) CONFORMING AMENDMENT.—Section 219(c) is

17 amended by adding at the end thereof the following new

18 paragraph:

19 ‘‘(3) CROSS REFERENCE.—

‘‘For reduction in paragraph (2) amount, see subsection (b)(4).’’

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 December 31, 1995.
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1 PART II—NONDEDUCTIBLE TAX-FREE IRAs

2 SEC. 131. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE

3 INDIVIDUAL RETIREMENT ACCOUNTS.

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

5 D of chapter 1 (relating to pension, profit-sharing, stock

6 bonus plans, etc.) is amended by inserting after section

7 408 the following new section:

8 ‘‘SEC. 408A. INDIVIDUAL RETIREMENT PLUS ACCOUNTS.

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

10 section, an individual retirement plus account shall be

11 treated for purposes of this title in the same manner as

12 an individual retirement plan.

13 ‘‘(b) INDIVIDUAL RETIREMENT PLUS ACCOUNT.—

14 For purposes of this title, the term ‘individual retirement

15 plus account’ means an individual retirement plan which

16 is designated at the time of establishment of the plan as

17 an individual retirement plus account.

18 ‘‘(c) TREATMENT OF CONTRIBUTIONS.—

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

20 shall be allowed under section 219 for a contribution

21 to an individual retirement plus account.

22 ‘‘(2) CONTRIBUTION LIMIT.—The aggregate

23 amount of contributions for any taxable year to all

24 individual retirement plus accounts maintained for

25 the benefit of an individual shall not exceed the ex26 cess (if any) of—
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1 ‘‘(A) the maximum amount allowable as a

2 deduction under section 219 with respect to

3 such individual for such taxable year, over

4 ‘‘(B) the amount so allowed.

5 ‘‘(3) SPECIAL RULES FOR QUALIFIED TRANS6 FERS.—

7 ‘‘(A) IN GENERAL.—No rollover contribu8 tion may be made to an individual retirement

9 plus account unless it is a qualified transfer.

10 ‘‘(B) LIMIT NOT TO APPLY.—The limita11 tion under paragraph (2) shall not apply to a

12 qualified transfer to an individual retirement

13 plus account.

14 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

15 ‘‘(1) IN GENERAL.—Except as provided in this

16 subsection, any amount paid or distributed out of an

17 individual retirement plus account shall not be in18 cluded in the gross income of the distributee.

19 ‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU20 TIONS HELD LESS THAN 5 YEARS.—

21 ‘‘(A) IN GENERAL.—Any amount distrib22 uted out of an individual retirement plus ac23 count which consists of earnings allocable to

24 contributions made to the account during the 5-

25 year period ending on the day before such dis-
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1 tribution shall be included in the gross income

2 of the distributee for the taxable year in which

3 the distribution occurs.

4 ‘‘(B) ORDERING RULE.—

5 ‘‘(i) FIRST-IN, FIRST-OUT RULE.—

6 Distributions from an individual retirement

7 plus account shall be treated as having

8 been made—

9 ‘‘(I) first from the earliest con10 tribution (and earnings allocable

11 thereto) remaining in the account at

12 the time of the distribution, and

13 ‘‘(II) then from other contribu14 tions (and earnings allocable thereto)

15 in the order in which made.

16 ‘‘(ii) ALLOCATIONS BETWEEN CON17 TRIBUTIONS AND EARNINGS.—Any portion

18 of a distribution allocated to a contribution

19 (and earnings allocable thereto) shall be

20 treated as allocated first to the earnings

21 and then to the contribution.

22 ‘‘(iii) ALLOCATION OF EARNINGS.—

23 Earnings shall be allocated to a contribu24 tion in such manner as the Secretary may

25 by regulations prescribe.
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1 ‘‘(iv) CONTRIBUTIONS IN SAME

2 YEAR.—Except as provided in regulations,

3 all contributions made during the same

4 taxable year may be treated as 1 contribu5 tion for purposes of this subparagraph.

6 ‘‘(C) CROSS REFERENCE.—

‘‘For additional tax for early withdrawal, see section 72(t).

7 ‘‘(3) QUALIFIED TRANSFER.—

8 ‘‘(A) IN GENERAL.—Paragraph (2) shall

9 not apply to any distribution which is trans10 ferred in a qualified transfer to another individ11 ual retirement plus account.

12 ‘‘(B) CONTRIBUTION PERIOD.—For pur13 poses of paragraph (2), the individual retire14 ment plus account to which any contributions

15 are transferred shall be treated as having held

16 such contributions during any period such con17 tributions were held (or are treated as held

18 under this subparagraph) by the individual re19 tirement plus account from which transferred.

20 ‘‘(4) SPECIAL RULES RELATING TO CERTAIN

21 TRANSFERS.—

22 ‘‘(A) IN GENERAL.—Notwithstanding any

23 other provision of law, in the case of a qualified

24 transfer to an individual retirement plus ac-
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1 count from an individual retirement plan or

2 qualified plan which is not an individual retire3 ment plus account—

4 ‘‘(i) there shall be included in gross

5 income any amount which, but for the

6 qualified transfer, would be includible in

7 gross income, but

8 ‘‘(ii) section 72(t) shall not apply to

9 such amount.

10 ‘‘(B) 4-YEAR RATABLE INCLUSION.—In the

11 case of any qualified transfer described in sub12 paragraph (A) which is made during the phase13 in period, any amount includible in gross in14 come under subparagraph (A) with respect to

15 such contribution shall be includible ratably

16 over the 4-taxable year period beginning in the

17 taxable year in which the amount was paid or

18 distributed out of the individual retirement

19 plan.

20 ‘‘(C) PHASE-IN PERIOD.—For purposes of

21 subparagraph (B), the term ‘phase-in period’

22 means the period beginning on the date of the

23 enactment of this section and ending on the last

24 day of the 2d calendar year following the cal-
26

•S 1058 IS

1 endar year in which such date of enactment oc2 curs.’’

3 ‘‘(e) QUALIFIED TRANSFER.—For purposes of this

4 section—

5 ‘‘(1) IN GENERAL.—The term ‘qualified trans6 fer’ means a transfer to an individual retirement

7 plus account—

8 ‘‘(A) from another such account; or

9 ‘‘(B) from an individual retirement plan or

10 qualified plan, but only if such transfer meets

11 the requirements of section 408(d)(3).

12 ‘‘(2) QUALIFIED PLAN.—The term ‘qualified

13 plan’ means any trust or contract described in sec14 tion 72(e)(5)(D) (i) or (ii).

15 (b) EARLY WITHDRAWAL PENALTY.—Section 72(t),

16 as amended by section 141(c), is amended by adding at

17 the end thereof the following new paragraph:

18 ‘‘(8) RULES RELATING TO SPECIAL INDIVIDUAL

19 RETIREMENT ACCOUNTS.—In the case of an individ20 ual retirement plus account under section 408A—

21 ‘‘(A) this subsection shall only apply to

22 distributions out of such account which consist

23 of earnings allocable to contributions made to

24 the account during the 5-year period ending on

25 the day before such distribution, and
27

•S 1058 IS

1 ‘‘(B) paragraph (2)(A)(i) shall not apply to

2 any distribution described in subparagraph

3 (A).’’

4 (c) EXCESS CONTRIBUTIONS.—Section 4973(b) is

5 amended by adding at the end thereof the following new

6 sentence: ‘‘For purposes of paragraphs (1)(B) and (2)(C),

7 the amount allowable as a deduction under section 219

8 shall be computed without regard to section 408A.’’

9 (d) CONFORMING AMENDMENT.—The table of sec10 tions for subpart A of part I of subchapter D of chapter

11 1 is amended by inserting after the item relating to section

12 408 the following new item:

‘‘Sec. 408A. Individual retirement plus accounts.’’

13 (e) EFFECTIVE DATES.—

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section

16 shall apply to taxable years beginning after Decem17 ber 31, 1993.

18 (2) QUALIFIED TRANSFERS IN 1993.—The

19 amendments made by this section shall apply to any

20 qualified transfer after the date of the enactment of

21 this Act.
28

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1 PART III—PENALTY-FREE DISTRIBUTIONS

2 SEC. 141. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

3 USED WITHOUT PENALTY TO PURCHASE

4 FIRST HOMES, TO PAY HIGHER EDUCATION

5 OR FINANCIALLY DEVASTATING MEDICAL EX6 PENSES, OR BY THE LONG-TERM UNEM7 PLOYED.

8 (a) IN GENERAL.—Paragraph (2) of section 72(t)

9 (relating to exceptions to 10-percent additional tax on

10 early distributions from qualified retirement plans) is

11 amended by adding at the end thereof the following new

12 subparagraph:

13 ‘‘(D) DISTRIBUTIONS FROM CERTAIN

14 PLANS FOR FIRST HOME PURCHASES OR EDU15 CATIONAL EXPENSES.—Distributions to an in16 dividual from an individual retirement plan, or

17 from amounts attributable to employer con18 tributions made pursuant to elective deferrals

19 described in subparagraph (A) or (C) of section

20 402(g)(3) or section 501(c)(18)(D)(iii)—

21 ‘‘(i) which are qualified first-time

22 homebuyer distributions (as defined in

23 paragraph (6)); or

24 ‘‘(ii) to the extent such distributions

25 do not exceed the qualified higher edu-
29

•S 1058 IS

1 cation expenses (as defined in paragraph

2 (7)) of the taxpayer for the taxable year.’’

3 (b) FINANCIALLY DEVASTATING MEDICAL EX4 PENSES.—

5 (1) IN GENERAL.—Section 72(t)(3)(A) is

6 amended by striking ‘‘(B),’’.

7 (2) CERTAIN LINEAL DESCENDANTS AND AN8 CESTORS TREATED AS DEPENDENTS.—Subpara9 graph (B) of section 72(t)(2) is amended by striking

10 ‘‘medical care’’ and all that follows and inserting

11 ‘‘medical care determined—

12 ‘‘(i) without regard to whether the

13 employee itemizes deductions for such tax14 able year, and

15 ‘‘(ii) by treating such employee’s de16 pendents as including—

17 ‘‘(I) all children and grand18 children of the employee or such em19 ployee’s spouse, and

20 ‘‘(II) all ancestors of the em21 ployee or such employee’s spouse.’’

22 (3) CONFORMING AMENDMENT.—Subparagraph

23 (B) of section 72(t)(2) is amended by striking ‘‘or

24 (C)’’ and inserting ‘‘, (C) or (D)’’.
30

•S 1058 IS

1 (c) DEFINITIONS.—Section 72(t) is amended by add2 ing at the end thereof the following new paragraphs:

3 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS4 TRIBUTIONS.—For purposes of paragraph

5 (2)(D)(i)—

6 ‘‘(A) IN GENERAL.—The term ‘qualified

7 first-time homebuyer distribution’ means any

8 payment or distribution received by an individ9 ual to the extent such payment or distribution

10 is used by the individual before the close of the

11 60th day after the day on which such payment

12 or distribution is received to pay qualified ac13 quisition costs with respect to a principal resi14 dence of a first-time homebuyer who is such in15 dividual or the spouse, child, or grandchild of

16 such individual.

17 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

18 For purposes of this paragraph, the term

19 ‘qualified acquisition costs’ means the costs of

20 acquiring, constructing, or reconstructing a res21 idence. Such term includes any usual or reason22 able settlement, financing, or other closing

23 costs.
31

•S 1058 IS

1 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

2 DEFINITIONS.—For purposes of this para3 graph—

4 ‘‘(i) FIRST-TIME HOMEBUYER.—The

5 term ‘first-time homebuyer’ means any in6 dividual if—

7 ‘‘(I) such individual (and if mar8 ried, such individual’s spouse) had no

9 present ownership interest in a prin10 cipal residence during the 3-year pe11 riod ending on the date of acquisition

12 of the principal residence to which

13 this paragraph applies, and

14 ‘‘(II) subsection (a)(6), (h), or

15 (k) of section 1034 did not suspend

16 the running of any period of time

17 specified in section 1034 with respect

18 to such individual on the day before

19 the date the distribution is applied

20 pursuant to subparagraph (A).

21 ‘‘(ii) PRINCIPAL RESIDENCE.—The

22 term ‘principal residence’ has the same

23 meaning as when used in section 1034.

24 ‘‘(iii) DATE OF ACQUISITION.—The

25 term ‘date of acquisition’ means the date—
32

•S 1058 IS

1 ‘‘(I) on which a binding contract

2 to acquire the principal residence to

3 which subparagraph (A) applies is en4 tered into, or

5 ‘‘(II) on which construction or re6 construction of such a principal resi7 dence is commenced.

8 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC9 QUISITION.—If any distribution from any indi10 vidual retirement plan fails to meet the require11 ments of subparagraph (A) solely by reason of

12 a delay or cancellation of the purchase or con13 struction of the residence, the amount of the

14 distribution may be contributed to an individual

15 retirement plan as provided in section

16 408(d)(3)(A)(i) (determined by substituting

17 ‘120 days’ for ‘60 days’ in such section), except

18 that—

19 ‘‘(i) section 408(d)(3)(B) shall not be

20 applied to such contribution, and

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

22 into account in determining whether sec23 tion 408(d)(3)(A)(i) applies to any other

24 amount.
33

•S 1058 IS

1 ‘‘(7) QUALIFIED HIGHER EDUCATION EX2 PENSES.—For purposes of paragraph (2)(D)(ii)—

3 ‘‘(A) IN GENERAL.—The term ‘qualified

4 higher education expenses’ means tuition, fees,

5 books, supplies, and equipment required for the

6 enrollment or attendance of—

7 ‘‘(i) the taxpayer,

8 ‘‘(ii) the taxpayer’s spouse, or

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

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

11 at an eligible educational institution (as defined

12 in section 135(c)(3)).

13 ‘‘(B) COORDINATION WITH SAVINGS BOND

14 PROVISIONS.—The amount of qualified higher

15 education expenses for any taxable year shall be

16 reduced by any amount excludable from gross

17 income under section 135.’’

18 (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN

19 UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section

20 72(t) is amended by adding at the end thereof the follow21 ing new subparagraph:

22 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED INDI23 VIDUALS.—A distribution from an individual retire24 ment plan (other than a plan referred to in
34

•S 1058 IS

1 subclause (I) or (II) of paragraph (6)(A)(iii)) to an

2 individual after separation from employment, if—

3 ‘‘(i) such individual has received unemploy4 ment compensation for 12 consecutive weeks

5 under any Federal or State unemployment com6 pensation law by reason of such separation, and

7 ‘‘(ii) such distributions are made during

8 any taxable year during which such unemploy9 ment compensation is paid or the succeeding

10 taxable year.

11 To the extent provided in regulations, a self-em12 ployed individual shall be treated as meeting the re13 quirements of clause (i) if, under Federal or State

14 unemployment compensation, the individual would

15 have received unemployment compensation for 12

16 consecutive weeks but for the fact the individual was

17 self-employed.’’

18 (e) SPECIAL RULE FOR CERTAIN DISASTER VIC19 TIMS.—For purposes of section 72(t)(6) of the Internal

20 Revenue Code of 1986, an individual whose principal resi21 dence was destroyed or substantially damaged by Hurri22 cane Andrew, Hurricane Iniki, or Typhoon Omar shall be

23 treated as a first-time homebuyer with respect to such res24 idence if the individual rebuilds it or with respect to any
35

•S 1058 IS

1 other principal residence acquired to replace such resi2 dence.

3 (f) CONFORMING AMENDMENTS.—

4 (1) Section 401(k)(2)(B)(i) is amended by

5 striking ‘‘or’’ at the end of subclause (III), by strik6 ing ‘‘and’’ at the end of subclause (IV) and inserting

7 ‘‘or’’, and by inserting after subclause (IV) the fol8 lowing new subclause:

9 ‘‘(V) the date on which qualified

10 first-time homebuyer distributions (as

11 defined in section 72(t)(6)) or dis12 tributions for qualified higher edu13 cation expenses (as defined in section

14 72(t)(7)) are made, and’’.

15 (2) Section 403(b)(11) is amended by striking

16 ‘‘or’’ at the end of subparagraph (A), by striking the

17 period at the end of subparagraph (B) and inserting

18 ‘‘, or’’, and by inserting after subparagraph (B) the

19 following new subparagraph:

20 ‘‘(C) for qualified first-time homebuyer dis21 tributions (as defined in section 72(t)(6)) or for

22 the payment of qualified higher education ex23 penses (as defined in section 72(t)(7)).’’
36

•S 1058 IS

1 (g) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to payments and distributions after

3 December 31, 1993.

4 SEC. 142. CONTRIBUTIONS MUST BE HELD AT LEAST 5

5 YEARS IN CERTAIN CASES.

6 (a) IN GENERAL.—Section 72(t), as amended by sec7 tion 131(b), is amended by adding at the end thereof the

8 following new paragraph:

9 ‘‘(9) CERTAIN CONTRIBUTIONS MUST BE HELD

10 5 YEARS.—

11 ‘‘(A) IN GENERAL.—Paragraph (2)(A)(i)

12 shall not apply to any amount distributed out

13 of an individual retirement plan (other than an

14 individual retirement plus account) which is al15 locable to contributions made to the plan during

16 the 5-year period ending on the date of such

17 distribution (and earnings on such contribu18 tions).

19 ‘‘(B) ORDERING RULE.—For purposes of

20 this paragraph, distributions shall be treated as

21 having been made—

22 ‘‘(i) first from the earliest contribu23 tion (and earnings allocable thereto) re24 maining in the account at the time of the

25 distribution, and
37

•S 1058 IS

1 ‘‘(ii) then from other contributions

2 (and earnings allocable thereto) in the

3 order in which made.

4 Earnings shall be allocated to contributions in

5 such manner as the Secretary may prescribe.

6 ‘‘(C) SPECIAL RULE FOR ROLLOVERS.—

7 ‘‘(i) PENSION PLANS.—Subparagraph

8 (A) shall not apply to distributions out of

9 an individual retirement plan which are al10 locable to rollover contributions to which

11 section 402(c), 403(a)(4), or 403(b)(8) ap12 plied.

13 ‘‘(ii) CONTRIBUTION PERIOD.—For

14 purposes of subparagraph (A), amounts

15 shall be treated as having been held by a

16 plan during any period such contributions

17 were held (or are treated as held under

18 this clause) by any individual retirement

19 plan from which transferred.

20 ‘‘(D) PLUS ACCOUNTS.—For rules applica21 ble to individual retirement plus accounts under

22 section 408A, see paragraph (8).’’

23 (b) EFFECTIVE DATE.—The amendment made by

24 this section shall apply to contributions (and earnings allo-
38

•S 1058 IS

1 cable thereto) which are made after the date of the enact2 ment of this Act.

3 Subtitle D—Incentives for Private

4 Businesses To Hire New Employees

5 SEC. 151. REFUNDABLE TAX CREDIT FOR HIRING NEW EM6 PLOYEES.

7 (a) IN GENERAL.—Subpart C of part IV of sub8 chapter A of chapter 1 (relating to refundable credits) is

9 amended by redesignating section 35 as section 36 and

10 by inserting after section 34 the following new section:

11 ‘‘SEC. 35. EMPLOYMENT TAXES ON NEW EMPLOYEES.

12 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al13 lowed as a credit against the tax imposed by this subtitle

14 for the taxable year an amount equal to the employment

15 taxes paid on the qualified wages of eligible new employees

16 of the employer.

17 ‘‘(b) ELIGIBLE NEW EMPLOYEES.—For purposes of

18 this section—

19 ‘‘(1) IN GENERAL.—The term ‘eligible new em20 ployee’ means, with respect to any employer, an em21 ployee who first begins work for the employer during

22 the period beginning July 1, 1993, and ending June

23 30, 1994, and

24 ‘‘(2) REPLACEMENT EMPLOYEES NOT COUNT25 ED.—
39

•S 1058 IS

1 ‘‘(A) IN GENERAL.—The number of em2 ployees treated as eligible new employees for

3 any payroll period shall not exceed the excess

4 (if any) of—

5 ‘‘(i) the number of full-time employees

6 of the employer during the payroll period,

7 over

8 ‘‘(ii) the average number of full-time

9 employees of the employer during the 12-

10 month period ending on June 30, 1993.

11 ‘‘(B) ORDERING RULE.—If subparagraph

12 (A) results in a reduction in the number of em13 ployees who may be treated as eligible new em14 ployees for any payroll period, such reduction

15 shall come from employees with the highest

16 wages for such period.

17 ‘‘(c) EMPLOYMENT TAXES; WAGES.—For purposes

18 of this section—

19 ‘‘(1) EMPLOYMENT TAXES.—The term ‘employ20 ment taxes’ means—

21 ‘‘(A) the amount of the taxes imposed by

22 subsections (a) and (b) of section 3111 (relat23 ing to Social Security taxes),
40

•S 1058 IS

1 ‘‘(B) the amount of the taxes imposed by

2 section 3221 (relating to tier 1 railroad retire3 ment taxes), and

4 ‘‘(C) the tax imposed by section 3301 (re5 lating to unemployment taxes).

6 ‘‘(2) QUALIFIED WAGES.—

7 ‘‘(A) IN GENERAL.—The term ‘qualified

8 wages’ means, with respect to any employee,

9 wages paid or incurred by the employer which

10 are attributable to services rendered by the em11 ployee during the 6-month period beginning

12 with the day the employee begins work for the

13 employer. Such term shall not include wages

14 treated as qualified first-year wages under sec15 tion 51.

16 ‘‘(B) WAGES.—The term ‘wages’ means

17 any wages with respect to which employment

18 taxes are required to be paid.

19 ‘‘(d) SPECIAL RULES.—Rules similar to the rules of

20 subsections (f), (h), (i), and (k) of section 51 and the rules

21 of section 52 shall apply for purposes of this section.’’

22 (b) COORDINATION WITH REFUND PROVISION.—For

23 purposes of section 1324(b)(2) of title 31 of the United

24 States Code, section 35 of the Internal Revenue Code of

25 1986 shall be considered to be a credit provision of the
41

•S 1058 IS

1 Internal Revenue Code of 1954 enacted before January

2 1, 1978.

3 (c) CONFORMING AMENDMENTS.—(1) Subparagraph

4 (A) of section 51(i)(1) is amended by inserting ‘‘, or, if

5 the taxpayer is an entity other than a corporation, to any

6 individual who owns, directly or indirectly, more than 50

7 percent of the capital and profits interests in the entity,’’

8 after ‘‘of the corporation’’.

9 (2) The table of sections for subpart C of part IV

10 of subchapter A of chapter 1 is amended by striking the

11 item relating to section 35 and inserting the following new

12 items:

‘‘Sec. 35. Employment taxes on new employees.

‘‘Sec. 36. Overpayments of tax.’’

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years ending after the

15 date of the enactment of this Act.

16 SEC. 152. REPEAL OF LUXURY EXCISE TAXES.

17 (a) IN GENERAL.—Chapter 31 (relating to retail ex18 cise taxes) is amended by striking subchapter A and by

19 redesignating subchapters B and C as subchapters A and

20 B, respectively.

21 (b) CONFORMING AMENDMENTS.—

22 (1) The material preceding paragraph (1) of

23 section 4221(a) is amended by striking ‘‘subchapter

24 A or C of chapter 31’’ and inserting ‘‘section 4051’’.
42

•S 1058 IS

1 (2) Subsection (a) of section 4221 is amended

2 by striking the last sentence.

3 (3) Subsection (c) of section 4221 is amended

4 by striking ‘‘section 4001(c), 4002(b), 4003(c),

5 4004(a), or 4053(a)(6)’’ and inserting ‘‘section

6 4053(a)(6)’’.

7 (4) Paragraph (1) of section 4221(d) is amend8 ed by striking ‘‘taxes imposed by subchapter A or C

9 of chapter 31’’ and inserting ‘‘the tax imposed by

10 section 4051’’.

11 (5) Subsection (d) of section 4222 is amended

12 by striking ‘‘sections 4001(c), 4002(b), 4003(c),

13 4004(a), 4053(a)(6)’’ and inserting ‘‘sections

14 4053(a)(6)’’.

15 (6) Section 4293 is amended by striking ‘‘sub16 chapter A of chapter 31,’’.

17 (7) The table of subchapters for chapter 31 is

18 amended to read as follows:

‘‘SUBCHAPTER A. Special fuels.

‘‘SUBCHAPTER B. Heavy trucks and trailers.’’

19 (c) EXEMPTION FROM LUXURY EXCISE TAX FOR

20 CERTAIN EQUIPMENT INSTALLED ON PASSENGER VEHI21 CLES FOR USE BY DISABLED INDIVIDUALS.—

22 (1) IN GENERAL.—Paragraph (3) of section

23 4004(b) (relating to separate purchase of article and

24 parts and accessories therefor), as in effect on the
43

•S 1058 IS

1 day before the date of the enactment of this Act, is

2 amended—

3 (A) by striking ‘‘or’’ at the end of subpara4 graph (A),

5 (B) by redesignating subparagraph (B) as

6 subparagraph (C),

7 (C) by inserting after subparagraph (A)

8 the following new subparagraph:

9 ‘‘(B) the part or accessory is installed on

10 a passenger vehicle to enable or assist an indi11 vidual with a disability to operate the vehicle, or

12 to enter or exit the vehicle, by compensating for

13 the effect of such disability, or’’, and

14 (D) by inserting after subparagraph (C)

15 the following flush sentence:

16 ‘‘The price of any part or accessory (and its installa17 tion) to which paragraph (1) does not apply by rea18 son of this paragraph shall not be taken into ac19 count under paragraph (2)(A).’’

20 (2) EFFECTIVE DATE.—The amendments made

21 by this subsection shall take effect as if included in

22 the amendments made by section 11221(a) of the

23 Omnibus Budget Reconciliation Act of 1990.

24 (3) PERIOD FOR FILING CLAIMS.—If refund or

25 credit of any overpayment of tax resulting from the
44

•S 1058 IS

1 application of the amendments made by this sub2 section is prevented at any time before the close of

3 the 1-year period beginning on the date of the enact4 ment of this Act by the operation of any law or rule

5 of law (including res judicata), refund or credit of

6 such overpayment (to the extent attributable to such

7 amendments) may, nevertheless, be made or allowed

8 if claim therefore is filed before the close of such 1-

9 year period.

10 (d) EFFECTIVE DATE.—Except as provided in sub11 section (c)(2), the amendments made by this section shall

12 take effect on January 1, 1993.

13 SEC. 153. APPLICATION OF PASSIVE LOSS RULES TO RENT14 AL REAL ESTATE ACTIVITIES.

15 (a) RENTAL REAL ESTATE ACTIVITIES OF PERSONS

16 IN REAL PROPERTY BUSINESS NOT AUTOMATICALLY

17 TREATED AS PASSIVE ACTIVITIES.—Subsection (c) of sec18 tion 469 (defining passive activity) is amended by adding

19 at the end thereof the following new paragraph:

20 ‘‘(7) SPECIAL RULES FOR TAXPAYERS IN REAL

21 PROPERTY BUSINESS.—

22 ‘‘(A) IN GENERAL.—If this paragraph ap23 plies to any taxpayer for a taxable year—
45

•S 1058 IS

1 ‘‘(i) paragraph (2) shall not apply to

2 any rental real estate activity of such tax3 payer for such taxable year, and

4 ‘‘(ii) this section shall be applied as if

5 each interest of the taxpayer in rental real

6 estate were a separate activity.

7 Notwithstanding clause (ii), a taxpayer may

8 elect to treat all interests in rental real estate

9 as 1 activity. Nothing in the preceding provi10 sions of this subparagraph shall be construed as

11 affecting the determination of whether the tax12 payer materially participates with respect to

13 any interest in a limited partnership as a lim14 ited partner.

15 ‘‘(B) TAXPAYERS TO WHOM PARAGRAPH

16 APPLIES.—This paragraph shall apply to a tax17 payer for a taxable year if more than one-half

18 of the personal services performed in trades or

19 businesses by the taxpayer during such taxable

20 year are performed in real property trades or

21 businesses in which the taxpayer materially par22 ticipates.

23 ‘‘(C) REAL PROPERTY TRADE OR BUSI24 NESS.—For purposes of this paragraph, the

25 term ‘real property trade or business’ means
46

•S 1058 IS

1 any real property development, redevelopment,

2 construction, reconstruction, acquisition, con3 version, rental, operation, management, leasing,

4 or brokerage trade or business.

5 ‘‘(D) SPECIAL RULES FOR SUBPARAGRAPH

6 (B).—

7 ‘‘(i) CLOSELY HELD C CORPORA8 TIONS.—In the case of a closely held C

9 corporation, the requirements of subpara10 graph (B) shall be treated as met for any

11 taxable year if more than 50 percent of the

12 gross receipts of such corporation for such

13 taxable year are derived from real property

14 trades or businesses in which the corpora15 tion materially participates.

16 ‘‘(ii) PERSONAL SERVICES AS AN EM17 PLOYEE.—For purposes of subparagraph

18 (B), personal services performed as an em19 ployee shall not be treated as performed in

20 real property trades or businesses. The

21 preceding sentence shall not apply if such

22 employee is a 5-percent owner (as defined

23 in section 416(i)(1)(B)) in the employer.’’

24 (b) CONFORMING AMENDMENTS.—
47

•S 1058 IS

1 (1) Paragraph (2) of section 469(c) is amended

2 by striking ‘‘The’’ and inserting ‘‘Except as provided

3 in paragraph (7), the’’.

4 (2) Clause (iv) of section 469(i)(3)(E) is

5 amended by inserting ‘‘or any loss allowable by rea6 son of subsection (c)(7)’’ after ‘‘loss’’.

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to taxable years beginning after

9 December 31, 1992.

10 TITLE II—DEFICIT REDUCTIONS

11 Subtitle A—Extension of the Caps

12 on Discretionary Spending

13 SEC. 201. EXTENSION OF THE CAPS.

14 (a) FISCAL YEAR 1993.—For fiscal year 1993, the

15 discretionary spending limits established in section

16 601(a)(2) of the Congressional Budget Act of 1974 as in

17 effect on the date of enactment of this Act for the three

18 categories for such fiscal year shall be reduced by an ag19 gregate amount of $1,200,000,000, with each individual

20 category being reduced by the amount of savings in such

21 category resulting from the enactment of section 211.

22 (b) FISCAL YEARS 1994 AND 1995.—The overall dis23 cretionary spending limits established in section 601(a)(2)

24 of the Congressional Budget Act of 1974 for fiscal years
48

•S 1058 IS

1 1994 and 1995 as in effect on the date of enactment of

2 this Act are reduced by—

3 (1) $3,991,000,000 in outlays for fiscal year

4 1994; and

5 (2) $7,135,000,000 in outlays for fiscal year

6 1995.

7 (c) FISCAL YEARS 1996, 1997, AND 1998.—

8 (1) IN GENERAL.—For fiscal years 1996, 1997,

9 and 1998, there shall be caps on discretionary

10 spending as provided in section 601(a)(2) of the

11 Congressional Budget Act of 1974 for fiscal years

12 1994 and 1995, subject to the provisions of para13 graphs (2) and (3).

14 (2) LEVEL OF LIMITS.—The discretionary lim15 its on new budget authority and outlays for fiscal

16 years 1996, 1997, and 1998 shall be—

17 (A) the levels assumed in H. Con. Res. 64,

18 agreed to March 31, 1993, for such fiscal years,

19 reduced by

20 (B)(i) $8,001,000,000, in outlays for fiscal

21 year 1996;

22 (ii) $9,022,000,000, in outlays for fiscal

23 year 1997; and

24 (iii) $9,843,000,000, in outlays for fiscal

25 year 1998.
49

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1 (3) EXTENSION OF LAW.—The provisions of the

2 Balanced Budget and Emergency Deficit Control

3 Act of 1985 and the Congressional Budget Act of

4 1974 relating to the enforcement of the discre5 tionary spending limit for fiscal years 1994 and

6 1995 are extended through fiscal year 1998 for the

7 purpose of enforcing the limits set forth in this sub8 section.

9 Subtitle B—Spending Cuts

10 SEC. 211. ADMINISTRATIVE EXPENSES.

11 (a) IN GENERAL.—Of the amounts provided in pre12 vious fiscal year 1993 appropriations Acts and available

13 budget authority under previous appropriations Acts, such

14 amounts of budgetary resources are rescinded so as to

15 equal $1,200,000,000 in outlays as provided in sub16 sections (b) and (c).

17 (b) OMB REDUCTIONS.—

18 (1) IN GENERAL.—The Director of the Office of

19 Management and Budget shall make uniform per20 centage reductions in budget authority in Federal

21 agency administrative expenses, except that no re22 duction shall be made in current rates of pay under

23 current law.

24 (2) NO APPROPRIATIONS ACT.—To the extent

25 budgetary resources are not provided in appropria-
50

•S 1058 IS

1 tions Acts, the Director shall make the same uni2 form percentage reduction as required in paragraph

3 (1) in Federal administrative expenses as deter4 mined in section 256(h) of the Balanced Budget and

5 Emergency Deficit Control Act of 1985.

6 (c) DEFINITION.—For the purposes of this section,

7 Federal agency administrative expenses are defined as ob8 ject classes 10 (excluding object classes 12.1, 12.2, and

9 13.0), 20 (excluding object class 23.1), and 30.

10 SEC. 212. PERMANENT ELIMINATION OF THE ALTER11 NATIVE-FORM-OF-ANNUITY OPTION EXCEPT

12 FOR INDIVIDUALS WITH A CRITICAL MEDI13 CAL CONDITION.

14 (a) CIVIL SERVICE RETIREMENT SYSTEM; FEDERAL

15 EMPLOYEES’ RETIREMENT SYSTEM.—Sections 8343a and

16 8420a of title 5, United States Code, are each amended—

17 (1) in subsection (a) by striking ‘‘an employee

18 or Member may,’’ and inserting ‘‘any employee or

19 Member who has a life-threatening affliction or

20 other critical medical condition may,’’; and

21 (2) by striking subsection (f).

22 (b) FOREIGN SERVICE RETIREMENT AND DISABIL23 ITY SYSTEM.—Section 807(e)(1) of the Foreign Service

24 Act of 1980 (22 U.S.C. 4047(e)(1)) is amended by strik25 ing ‘‘a participant may,’’ and inserting ‘‘any participant
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1 who has a life-threatening affliction or other critical medi2 cal condition may,’’.

3 (c) CENTRAL INTELLIGENCE AGENCY RETIREMENT

4 AND DISABILITY SYSTEM.—Section 294(a) of the Central

5 Intelligence Agency Retirement Act (50 U.S.C. 2143(a)),

6 as set forth in section 802 of the CIARDS Technical Cor7 rections Act of 1992 (Public Law 102–496; 106 Stat.

8 3196), is amended by striking ‘‘a participant may,’’ and

9 inserting ‘‘any participant who has a life-threatening af10 fliction or other critical medical condition may,’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall become effective on January 1, 1994,

13 and shall apply with respect to any annuity commencing

14 on or after that date.

15 SEC. 213. GROUP HEALTH PLAN INFORMATION REPORT16 ING.

17 (a) IN GENERAL.—Subsection (a) of section 6051 of

18 the Internal Revenue Code of 1986 (relating to receipts

19 for employees) is amended—

20 (1) by striking ‘‘and’’ at the end of paragraph

21 (8),

22 (2) by striking the period at the end of para23 graph (9) and inserting ‘‘, and’’, and

24 (3) by inserting after paragraph (9) the follow25 ing new paragraph:
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1 ‘‘(10) whether a group health plan (as defined

2 in section 6103(l)(12)(E)(ii) is available to the em3 ployee and the plan coverage (single or family) elect4 ed by such employee (if any).’’.

5 (b) DISCLOSURE OF INFORMATION.—Paragraph (12)

6 of section 6103(l) of the Internal Revenue Code of 1986

7 (relating to disclosure of returns and return information

8 for purposes other than tax administration) is amended—

9 (1) by striking ‘‘the Administrator of the

10 Health Care Financing Administration, disclose to

11 the Administrator’’ in subparagraph (B) and insert12 ing ‘‘the applicable official, disclose to such official’’,

13 (2) by adding at the end of subparagraph (B)

14 the following new clause:

15 ‘‘(iv) With respect to each such medicare

16 beneficiary and spouse (if any), the group

17 health plan information required under section

18 6051(a)(10).’’,

19 (3) by striking the matter preceding clause (i)

20 of subparagraph (C) and inserting the following:

21 ‘‘(C) DISCLOSURE BY OFFICIAL.—With re22 spect to the information disclosed under sub23 paragraph (B), the applicable official may dis24 close—’’,
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1 (4) by striking ‘‘as having received wages from

2 the employer’’ in subparagraph (C)(i),

3 (5) by striking ‘‘such Administrator’’ each place

4 it appears in subparagraph (C)(iii) and inserting

5 ‘‘such official’’,

6 (6) by striking clause (iii) of subparagraph (E),

7 and inserting the following new clause:

8 ‘‘(iii) APPLICABLE OFFICIAL.—The

9 term ‘applicable official’ means—

10 ‘‘(I) the Administrator of the

11 Health Care Financing Administra12 tion,

13 ‘‘(II) the Secretary of Defense,

14 ‘‘(III) the Secretary of Veterans

15 Affairs, and

16 ‘‘(IV) the Director of the Office

17 of Personnel Management.’’,

18 (7) by striking ‘‘qualified employer’’ each place

19 it appears and inserting ‘‘employer’’,

20 (8) by striking subparagraph (F), and

21 (9) by inserting ‘‘AND GROUP HEALTH PLAN’’ in

22 the heading thereof.

23 (c) DATA BANK.—Paragraph (5) of section 1862(b)

24 of the Social Security Act (42 U.S.C. 1395y(b)) is amend-
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1 ed by adding at the end thereof the following new subpara2 graph:

3 ‘‘(F) MEDICARE SECONDARY PAYER DATA

4 BANK.—The Secretary shall collect and store in

5 a data bank established for purposes of this

6 subsection the information provided to the Sec7 retary by entities as described in this paragraph

8 along with such further information on medi9 care secondary payer situations as the Sec10 retary deems appropriate not later than July 1,

11 1994.’’.

12 (d) CONFORMING AMENDMENTS.—Paragraph (5) of

13 section 1862(b) of the Social Security Act (42 U.S.C.

14 1395y(b)) is amended—

15 (1) by striking ‘‘a qualified employer (as de16 fined in section 6103(l)(12)(D)(iii) of such Code)’’

17 in subparagraph (C)(i) and inserting ‘‘an employer’’,

18 and

19 (2) by striking clause (iii) of subparagraph (C).

20 (e) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 December 31, 1992.
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1 SEC. 214. ADDITIONAL SPENDING REDUCTIONS.

2 It is the sense of the Congress that the reductions

3 in discretionary spending as set forth in section 201 of

4 this Act shall be achieved by—

5 (1) reducing Federal aid for mass transit;

6 (2) eliminating highway demonstration pro7 grams;

8 (3) modifying the Service Contact Act by elimi9 nating the successorship provision;

10 (4) reducing Federal employment by 150,000

11 employees;

12 (5) reducing Federal Government administra13 tive expenses;

14 (6) modifying vacation leave for Federal man15 agers;

16 (7) reducing legislative branch administrative

17 expenses;

18 (8) eliminating the Interstate Commerce Com19 mission;

20 (9) closing and privatizing the Federal Helium

21 Reserve;

22 (10) reducing Legal Services funding by 50 per

23 cent;

24 (11) terminating the Copyright Royalty Com25 mission; and
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1 (12) reducing funding for the European Bank

2 for Reconstruction and Development, the Special

3 Defense Acquisition Fund, and freezing funding for

4 International Development Authority.

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