II 

Calendar No. 74 

113TH CONGRESS 

1ST SESSION S. 953 

To amend the Higher Education Act of 1965 to extend the reduced interest 

rate for undergraduate Federal Direct Stafford Loans, to modify required 

distribution rules for pension plans, to limit earnings stripping by expatriated entities, to provide for modifications related to the Oil Spill Liability 

Trust Fund, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 14, 2013 

Mr. REED (for himself, Mr. HARKIN, Mr. REID, Mrs. MURRAY, Mr. ROCKEFELLER, Ms. BALDWIN, Mr. SCHUMER, Mr. FRANKEN, Mr. BROWN, Mr. 

MURPHY, Mr. DURBIN, Mrs. GILLIBRAND, Ms. STABENOW, Mr. LAUTENBERG, Mr. WHITEHOUSE, Mr. KAINE, Ms. WARREN, and Mr. JOHNSON

of South Dakota) introduced the following bill; which was read the first 

time 

MAY 15, 2013 

Read the second time and placed on the calendar 

A BILL 

To amend the Higher Education Act of 1965 to extend 

the reduced interest rate for undergraduate Federal Direct Stafford Loans, to modify required distribution rules 

for pension plans, to limit earnings stripping by expatriated entities, to provide for modifications related to the 

Oil Spill Liability Trust Fund, and for other purposes. 


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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 ‘‘Student Loan Afford5 ability Act’’. 

6 SEC. 2. INTEREST RATE EXTENSION. 

7 Section 455(b)(7)(D) of the Higher Education Act of 

8 1965 (20 U.S.C. 1087e(b)(7)(D)) is amended— 

9 (1) in the matter preceding clause (i), by strik10 ing ‘‘and before July 1, 2013,’’ and inserting ‘‘and 

11 before July 1, 2015,’’; and 

12 (2) in clause (v), by striking ‘‘and before July 

13 1, 2013,’’ and inserting ‘‘and before July 1, 2015,’’. 

14 SEC. 3. MODIFICATIONS OF REQUIRED DISTRIBUTION 

15 RULES FOR PENSION PLANS. 

16 (a) IN GENERAL.—Section 401(a)(9)(B) of the Inter17 nal Revenue Code of 1986 is amended to read as follows: 

18 ‘‘(B) REQUIRED DISTRIBUTIONS WHERE

19 EMPLOYEE DIES BEFORE ENTIRE INTEREST IS

20 DISTRIBUTED.— 

21 ‘‘(i) 5-YEAR GENERAL RULE.—A trust 

22 shall not constitute a qualified trust under 

23 this section unless the plan provides that, 

24 if an employee dies before the distribution 

25 of the employee’s interest (whether or not 


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1 such distribution has begun in accordance 

2 with subparagraph (A)), the entire interest 

3 of the employee will be distributed within 

4 5 years after the death of such employee. 

5 ‘‘(ii) EXCEPTION FOR ELIGIBLE DES6 IGNATED BENEFICIARIES.—If— 

7 ‘‘(I) any portion of the employ8 ee’s interest is payable to (or for the 

9 benefit of) an eligible designated bene10 ficiary, 

11 ‘‘(II) such portion will be distrib12 uted (in accordance with regulations) 

13 over the life of such eligible des14 ignated beneficiary (or over a period 

15 not extending beyond the life expect16 ancy of such beneficiary), and 

17 ‘‘(III) such distributions begin 

18 not later than 1 year after the date of 

19 the employee’s death or such later 

20 date as the Secretary may by regula21 tions prescribe, 

22 then, for purposes of clause (i) and except 

23 as provided in clause (iv) or subparagraph 

24 (E)(iii), the portion referred to in subVerDate Mar 15 2010 00:41 May 16, 2013 Jkt 029200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S953.PCS S953

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1 clause (I) shall be treated as distributed on 

2 the date on which such distributions begin. 

3 ‘‘(iii) SPECIAL RULE FOR SURVIVING

4 SPOUSE OF EMPLOYEE.—If the eligible 

5 designated beneficiary referred to in clause 

6 (ii)(I) is the surviving spouse of the em7 ployee— 

8 ‘‘(I) the date on which the dis9 tributions are required to begin under 

10 clause (ii)(III) shall not be earlier 

11 than the date on which the employee 

would have attained age 701 12 ⁄2, and 

13 ‘‘(II) if the surviving spouse dies 

14 before the distributions to such spouse 

15 begin, this subparagraph shall be ap16 plied as if the surviving spouse were 

17 the employee. 

18 ‘‘(iv) RULES UPON DEATH OF ELIGI19 BLE DESIGNATED BENEFICIARY.—If an el20 igible designated beneficiary dies before the 

21 portion of an employee’s interest described 

22 in clause (ii) is entirely distributed, clause 

23 (ii) shall not apply to any beneficiary of 

24 such eligible designated beneficiary and the 

25 remainder of such portion shall be distribVerDate Mar 15 2010 00:41 May 16, 2013 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S953.PCS S953

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1 uted within 5 years after the death of such 

2 beneficiary.’’. 

3 (b) DEFINITION OF ELIGIBLE DESIGNATED BENE4 FICIARY.—Section 401(a)(9)(E) of the Internal Revenue 

5 Code of 1986 is amended to read as follows: 

6 ‘‘(E) DEFINITIONS AND RULES RELATING

7 TO DESIGNATED BENEFICIARY.—For purposes 

8 of this paragraph— 

9 ‘‘(i) DESIGNATED BENEFICIARY.—The 

10 term ‘designated beneficiary’ means any 

11 individual designated as a beneficiary by 

12 the employee. 

13 ‘‘(ii) ELIGIBLE DESIGNATED BENE14 FICIARY.—The term ‘eligible designated 

15 beneficiary’ means, with respect to any em16 ployee, any designated beneficiary who, as 

17 of the date of death of the employee, is— 

18 ‘‘(I) the surviving spouse of the 

19 employee, 

20 ‘‘(II) subject to clause (iii), a 

21 child of the employee who has not 

22 reached majority (within the meaning 

23 of subparagraph (F)), 

24 ‘‘(III) disabled (within the mean25 ing of section 72(m)(7)), 


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1 ‘‘(IV) a chronically ill individual 

2 (within the meaning of section 

3 7702B(c)(2), except that the require4 ments of subparagraph (A)(i) thereof 

5 shall only be treated as met if there is 

6 a certification that, as of such date, 

7 the period of inability described in 

8 such subparagraph with respect to the 

9 individual is an indefinite one that is 

10 reasonably expected to be lengthy in 

11 nature), or 

12 ‘‘(V) an individual not described 

13 in any of the preceding subparagraphs 

14 who is not more than 10 years young15 er than the employee. 

16 ‘‘(iii) SPECIAL RULE FOR CHIL17 DREN.—Subject to subparagraph (F), an 

18 individual described in clause (ii)(II) shall 

19 cease to be an eligible designated bene20 ficiary as of the date the individual reaches 

21 majority and the requirement of subpara22 graph (B)(i) shall not be treated as met 

23 with respect to any remaining portion of 

24 an employee’s interest payable to the indiVerDate Mar 15 2010 00:41 May 16, 2013 Jkt 029200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S953.PCS S953

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1 vidual unless such portion is distributed 

2 within 5 years after such date.’’. 

3 (c) REQUIRED BEGINNING DATE.—Section 

4 401(a)(9)(C) of the Internal Revenue Code of 1986 is 

5 amended by adding at the end the following new clause: 

6 ‘‘(v) EMPLOYEES BECOMING 5-PERCENT OWNERS AFTER AGE 701 7 ⁄2.—If an 

8 employee becomes a 5-percent owner (as 

9 defined in section 416) with respect to a 

10 plan year ending in a calendar year after 

11 the calendar year in which the employee 

attains age 701 12 ⁄2, then clause (i)(II) shall 

13 be applied by substituting the calendar 

14 year in which the employee became such 

15 an owner for the calendar year in which 

16 the employee retires.’’. 

17 (d) EFFECTIVE DATES.— 

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

19 subsection, the amendments made by this section 

20 shall apply to distributions with respect to employees 

21 who die after December 31, 2013. 

22 (2) REQUIRED BEGINNING DATE.— 

23 (A) IN GENERAL.—The amendment made 

24 by subsection (c) shall apply to employees be25 coming a 5-percent owner with respect to plan 


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1 years ending in calendar years beginning before, 

2 on, or after the date of the enactment of this 

3 Act. 

4 (B) SPECIAL RULE.—If— 

5 (i) an employee became a 5-percent 

6 owner with respect to a plan year ending 

7 in a calendar year which began before Jan8 uary 1, 2013, and 

9 (ii) the employee has not retired be10 fore calendar year 2014, 

11 such employee shall be treated as having be12 come a 5-percent owner with respect to a plan 

13 year ending in 2013 for purposes of applying 

14 section 401(a)(9)(C)(v) of the Internal Revenue 

15 Code of 1986 (as added by the amendment 

16 made by subsection (c)). 

17 (3) EXCEPTION FOR CERTAIN BENE18 FICIARIES.—If a designated beneficiary of an em19 ployee who dies before January 1, 2014, dies after 

20 December 31, 2013— 

21 (A) the amendments made by this section 

22 shall apply to any beneficiary of such des23 ignated beneficiary, and 

24 (B) the designated beneficiary shall be 

25 treated as an eligible designated beneficiary for 


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1 purposes of applying section 401(a)(9)(B)(iv) of 

2 such Code (as in effect after the amendments 

3 made by this section). 

4 (4) EXCEPTION FOR CERTAIN EXISTING ANNU5 ITY CONTRACTS.— 

6 (A) IN GENERAL.—The amendments made 

7 by this section shall not apply to a qualified an8 nuity which is a binding annuity contract in ef9 fect on the date of the enactment of this Act 

10 and at all times thereafter. 

11 (B) QUALIFIED ANNUITY CONTRACT.—For 

12 purposes of this paragraph, the term ‘‘qualified 

13 annuity’’ means, with respect to an employee, 

14 an annuity— 

15 (i) which is a commercial annuity (as 

16 defined in section 3405(e)(6) of such 

17 Code) or payable by a defined benefit plan, 

18 (ii) under which the annuity payments 

19 are substantially equal periodic payments 

20 (not less frequently than annually) over the 

21 lives of such employee and a designated 

22 beneficiary (or over a period not extending 

23 beyond the life expectancy of such em24 ployee or the life expectancy of such em25 ployee and a designated beneficiary) in acVerDate Mar 15 2010 00:41 May 16, 2013 Jkt 029200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S953.PCS S953

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1 cordance with the regulations described in 

2 section 401(a)(9)(A)(ii) of such Code (as 

3 in effect before such amendments) and 

4 which meets the other requirements of this 

5 section 401(a)(9) of such Code (as so in 

6 effect) with respect to such payments, and 

7 (iii) with respect to which— 

8 (I) annuity payments to the em9 ployee have begun before January 1, 

10 2014, and the employee has made an 

11 irrevocable election before such date 

12 as to the method and amount of the 

13 annuity payments to the employee or 

14 any designated beneficiaries, or 

15 (II) if subclause (I) does not 

16 apply, the employee has made an ir17 revocable election before the date of 

18 the enactment of this Act as to the 

19 method and amount of the annuity 

20 payments to the employee or any des21 ignated beneficiaries. 

22 SEC. 4. LIMITATION ON EARNINGS STRIPPING BY EXPATRI23 ATED ENTITIES. 

24 (a) IN GENERAL.—Subsection (j) of section 163 of 

25 the Internal Revenue Code of 1986 is amended— 


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1 (1) by redesignating paragraph (9) as para2 graph (10), and 

3 (2) by inserting after paragraph (8) the fol4 lowing new paragraph: 

5 ‘‘(9) SPECIAL RULES FOR EXPATRIATED ENTI6 TIES.— 

7 ‘‘(A) IN GENERAL.—In the case of a cor8 poration to which this subsection applies which 

9 is an expatriated entity, this subsection shall 

10 apply to such corporation with the following 

11 modifications: 

12 ‘‘(i) Paragraph (2)(A) shall be applied 

13 without regard to clause (ii) thereof. 

14 ‘‘(ii) Paragraph (1)(B) shall be ap15 plied— 

16 ‘‘(I) without regard to the par17 enthetical, and 

18 ‘‘(II) by substituting ‘in the 1st 

19 succeeding taxable year and in the 

20 2nd through 10th succeeding taxable 

21 years to the extent not previously 

22 taken into account under this sub23 paragraph’ for ‘in the succeeding tax24 able year’. 


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1 ‘‘(iii) Paragraph (2)(B) shall be ap2 plied— 

3 ‘‘(I) without regard to clauses (ii) 

4 and (iii), and 

5 ‘‘(II) by substituting ‘25 percent 

6 of the adjusted taxable income of the 

7 corporation for such taxable year’ for 

8 the matter of clause (i)(II) thereof. 

9 ‘‘(B) EXPATRIATED ENTITY.—For pur10 poses of this paragraph— 

11 ‘‘(i) IN GENERAL.—With respect to a 

12 corporation and a taxable year, the term 

13 ‘expatriated entity’ has the meaning given 

14 such term by section 7874(a)(2), deter15 mined as if such section and the regula16 tions under such section as in effect on the 

17 first day of such taxable year applied to all 

18 taxable years of the corporation beginning 

19 after July 10, 1989. 

20 ‘‘(ii) EXCEPTION FOR SURROGATES

21 TREATED AS A DOMESTIC CORPORATION.— 

22 The term ‘expatriated entity’ does not in23 clude a surrogate foreign corporation 

24 which is treated as a domestic corporation 

25 by reason of section 7874(b).’’. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 5. MODIFICATIONS RELATED TO THE OIL SPILL LI5 ABILITY TRUST FUND. 

6 (a) DEFINITION OF CRUDE OIL.—Paragraph (1) of 

7 section 4612(a) of the Internal Revenue Code of 1986 is 

8 amended to read as follows: 

9 ‘‘(1) CRUDE OIL.—The term ‘crude oil’ includes 

10 crude oil condensates, natural gasoline, any bitumen 

11 or bituminous mixture, and any oil derived from a 

12 bitumen or bituminous mixture.’’. 

13 (b) REMOVING RESTRICTIONS RELATING TO OIL

14 WELLS AND EXTRACTION METHODS.—Paragraph (2) of 

15 section 4612(a) of the Internal Revenue Code of 1986 is 

16 amended by striking ‘‘from a well located’’. 

17 (c) PERMANENT EXTENSION OF OIL SPILL LIABIL18 ITY TRUST FUND FINANCING RATE.—Section 4611(f) is 

19 amended by striking subsection (f). 

20 (d) CLERICAL AMENDMENT.—Subclause (I) of sec21 tion 4612(e)(2)(B)(ii) of the Internal Revenue Code of 

22 1986 is amended by striking ‘‘tranferred’’ and inserting 

23 ‘‘transferred’’. 

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

25 subsections (a) and (b) shall apply to crude oil and petroVerDate Mar 15 2010 00:41 May 16, 2013 Jkt 029200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S953.PCS S953

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1 leum products received or entered during calendar quar2 ters beginning more than 60 days after the date of the 

3 enactment of this Act. 

4 SEC. 6. RESERVING RESULTING SURPLUSES FOR DEFICIT 

5 REDUCTION. 

6 (a) PAYGO SCORECARD.—The budgetary effects of 

7 this Act shall not be entered on either PAYGO scorecard 

8 maintained pursuant to section 4(d) of the Statutory Pay9 As-You-Go Act of 2010 (2 U.S.C. 933(d)). 

10 (b) SENATE PAYGO SCORECARD.—The budgetary ef11 fects of this Act shall not be entered on any PAYGO score12 card maintained for purposes of section 201 of S. Con. 

13 Res. 21 (110th Congress). 


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Calendar No. 74 

113TH CONGRESS 

1ST SESSION S. 953 

A BILL 

To amend the Higher Education Act of 1965 to exposes. Spill Liability Trust Fund, and for other pur- to provide for modifications related to the Oil limit earnings stripping by expatriated entities, quired distribution rules for pension plans, to Federal Direct Stafford Loans, to modify re- tend the reduced interest rate for undergraduate 

MAY 15, 2013 

Read the second time and placed on the calendar 


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