II

104TH CONGRESS

2D SESSION S. 1568

To amend the Internal Revenue Code of 1986 to provide for the extension

of certain expiring provisions.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 9 (legislative day, FEBRUARY 7), 1996

Mr. HATCH (for himself, Mr. BAUCUS, Mr. SIMPSON, and Mr. D’AMATO) 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 provide

for the extension of certain expiring provisions.

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

3 SECTION 1. WORK OPPORTUNITY TAX CREDIT.

4 (a) AMOUNT OF CREDIT.—Subsection (a) of section

5 51 of the Internal Revenue Code of 1986 (relating to

6 amount of credit) is amended by striking ‘‘40 percent’’

7 and inserting ‘‘35 percent’’.

8 (b) MEMBERS OF TARGETED GROUPS.—Subsection

9 (d) of section 51 of the Internal Revenue Code of 1986

10 is amended to read as follows:
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1 ‘‘(d) MEMBERS OF TARGETED GROUPS.—For pur2 poses of this subpart—

3 ‘‘(1) IN GENERAL.—An individual is a member

4 of a targeted group if such individual is—

5 ‘‘(A) a qualified IV–A recipient,

6 ‘‘(B) a qualified veteran,

7 ‘‘(C) a qualified ex-felon,

8 ‘‘(D) a high-risk youth,

9 ‘‘(E) a vocational rehabilitation referral,

10 ‘‘(F) a qualified summer youth employee,

11 or

12 ‘‘(G) a qualified food stamp recipient.

13 ‘‘(2) QUALIFIED IV–A RECIPIENT.—

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

15 IV–A recipient’ means any individual who is

16 certified by the designated local agency as being

17 a member of a family receiving assistance under

18 a IV–A program for at least a 9-month period

19 ending during the 9-month period ending on the

20 hiring date.

21 ‘‘(B) IV–A PROGRAM.—For purposes of

22 this paragraph, the term ‘IV–A program’ means

23 any program providing assistance under a State

24 plan approved under part A of title IV of the

25 Social Security Act (relating to assistance for
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1 needy families with minor children) and any

2 successor of such program.

3 ‘‘(3) QUALIFIED VETERAN.—

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

5 veteran’ means any veteran who is certified by

6 the designated local agency as being—

7 ‘‘(i) a member of a family receiving

8 assistance under a IV–A program (as de9 fined in paragraph (2)(B)) for at least a 9-

10 month period ending during the 12-month

11 period ending on the hiring date, or

12 ‘‘(ii) a member of a family receiving

13 assistance under a food stamp program

14 under the Food Stamp Act of 1977 for at

15 least a 3-month period ending during the

16 12-month period ending on the hiring date.

17 ‘‘(B) VETERAN.—For purposes of subpara18 graph (A), the term ‘veteran’ means any indi19 vidual who is certified by the designated local

20 agency as—

21 ‘‘(i)(I) having served on active duty

22 (other than active duty for training) in the

23 Armed Forces of the United States for a

24 period of more than 180 days, or
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1 ‘‘(II) having been discharged or re2 leased from active duty in the Armed

3 Forces of the United States for a service4 connected disability, and

5 ‘‘(ii) not having any day during the

6 60-day period ending on the hiring date

7 which was a day of extended active duty in

8 the Armed Forces of the United States.

9 For purposes of clause (ii), the term ‘extended

10 active duty’ means a period of more than 90

11 days during which the individual was on active

12 duty (other than active duty for training).

13 ‘‘(4) QUALIFIED EX-FELON.—The term ‘quali14 fied ex-felon’ means any individual who is certified

15 by the designated local agency—

16 ‘‘(A) as having been convicted of a felony

17 under any statute of the United States or any

18 State,

19 ‘‘(B) as having a hiring date which is not

20 more than 1 year after the last date on which

21 such individual was so convicted or was released

22 from prison, and

23 ‘‘(C) as being a member of a family which

24 had an income during the 6 months imme25 diately preceding the earlier of the month in
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1 which such income determination occurs or the

2 month in which the hiring date occurs, which,

3 on an annual basis, would be 70 percent or less

4 of the Bureau of Labor Statistics lower living

5 standard.

6 Any determination under subparagraph (C) shall be

7 valid for the 45-day period beginning on the date

8 such determination is made.

9 ‘‘(5) HIGH-RISK YOUTH.—

10 ‘‘(A) IN GENERAL.—The term ‘high-risk

11 youth’ means any individual who is certified by

12 the designated local agency—

13 ‘‘(i) as having attained age 18 but not

14 age 25 on the hiring date, and

15 ‘‘(ii) as having his principal place of

16 abode within an empowerment zone or en17 terprise community.

18 ‘‘(B) YOUTH MUST CONTINUE TO RESIDE

19 IN ZONE.—In the case of a high-risk youth, the

20 term ‘qualified wages’ shall not include wages

21 paid or incurred for services performed while

22 such youth’s principal place of abode is outside

23 an empowerment zone or enterprise community.

24 ‘‘(6) VOCATIONAL REHABILITATION REFER25 RAL.—The term ‘vocational rehabilitation referral’
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1 means any individual who is certified by the des2 ignated local agency as—

3 ‘‘(A) having a physical or mental disability

4 which, for such individual, constitutes or results

5 in a substantial handicap to employment, and

6 ‘‘(B) having been referred to the employer

7 upon completion of (or while receiving) rehabili8 tative services pursuant to—

9 ‘‘(i) an individualized written rehabili10 tation plan under a State plan for voca11 tional rehabilitation services approved

12 under the Rehabilitation Act of 1973, or

13 ‘‘(ii) a program of vocational rehabili14 tation carried out under chapter 31 of title

15 38, United States Code.

16 ‘‘(7) QUALIFIED SUMMER YOUTH EMPLOYEE.—

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

18 summer youth employee’ means any individ19 ual—

20 ‘‘(i) who performs services for the em21 ployer between May 1 and September 15,

22 ‘‘(ii) who is certified by the designated

23 local agency as having attained age 16 but

24 not 18 on the hiring date (or if later, on

25 May 1 of the calendar year involved),
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1 ‘‘(iii) who has not been an employee

2 of the employer during any period prior to

3 the 90-day period described in subpara4 graph (B)(i), and

5 ‘‘(iv) who is certified by the des6 ignated local agency as—

7 ‘‘(I) having his principal place of

8 abode within an empowerment zone or

9 enterprise community, or

10 ‘‘(II) being a member of a family

11 receiving assistance under a food

12 stamp program under the Food

13 Stamp Act of 1977 for at least a 3-

14 month period ending during the 12-

15 month period ending on the hiring

16 date.

17 ‘‘(B) SPECIAL RULES FOR DETERMINING

18 AMOUNT OF CREDIT.—For purposes of applying

19 this subpart to wages paid or incurred to any

20 qualified summer youth employee—

21 ‘‘(i) subsection (b)(2) shall be applied

22 by substituting ‘any 90-day period between

23 May 1 and September 15’ for ‘the 1-year

24 period beginning with the day the individ25 ual begins work for the employer’, and
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1 ‘‘(ii) subsection (b)(3) shall be applied

2 by substituting ‘$3,000’ for ‘$6,000’.

3 The preceding sentence shall not apply to an in4 dividual who, with respect to the same em5 ployer, is certified as a member of another tar6 geted group after such individual has been a

7 qualified summer youth employee.

8 ‘‘(C) YOUTH MUST CONTINUE TO RESIDE

9 IN ZONE.—Paragraph (5)(B) shall apply for

10 purposes of subparagraph (A)(iv)(I).

11 ‘‘(8) QUALIFIED FOOD STAMP RECIPIENT.—

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

13 food stamp recipient’ means any individual who

14 is certified by the designated local agency—

15 ‘‘(i) as having attained age 18 but not

16 age 25 on the hiring date, and

17 ‘‘(ii) as being a member of a family

18 receiving assistance under a food stamp

19 program under the Food Stamp Act of

20 1977 for at least a 3-month period ending

21 during the 12-month period ending on the

22 hiring date.

23 ‘‘(9) HIRING DATE.—The term ‘hiring date’

24 means the day the individual is hired by the em25 ployer.
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1 ‘‘(10) DESIGNATED LOCAL AGENCY.—The term

2 ‘designated local agency’ means a State employment

3 security agency established in accordance with the

4 Act of June 6, 1933, as amended (29 U.S.C. 49–

5 49n).

6 ‘‘(11) SPECIAL RULES FOR CERTIFICATIONS.—

7 ‘‘(A) IN GENERAL.—An individual shall

8 not be treated as a member of a targeted group

9 unless—

10 ‘‘(i) on or before the day on which

11 such individual begins work for the em12 ployer, the employer has received a certifi13 cation from a designated local agency that

14 such individual is a member of a targeted

15 group, or

16 ‘‘(ii)(I) on or before the day the indi17 vidual is offered employment with the em18 ployer, a pre-screening notice is completed

19 by the employer with respect to such indi20 vidual, and

21 ‘‘(II) not later than the 14th day after

22 the individual begins work for the em23 ployer, the employer submits such notice,

24 signed by the employer and the individual

25 under penalties of perjury, to the des-
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1 ignated local agency as part of a written

2 request for such a certification from such

3 agency.

4 For purposes of this paragraph, the term ‘pre5 screening notice’ means a document (in such

6 form as the Secretary shall prescribe) which

7 contains information provided by the individual

8 on the basis of which the employer believes that

9 the individual is a member of a targeted group.

10 ‘‘(B) INCORRECT CERTIFICATIONS.—If—

11 ‘‘(i) an individual has been certified

12 by a designated local agency as a member

13 of a targeted group, and

14 ‘‘(ii) such certification is incorrect be15 cause it was based on false information

16 provided by such individual,

17 the certification shall be revoked and wages

18 paid by the employer after the date on which

19 notice of revocation is received by the employer

20 shall not be treated as qualified wages.

21 ‘‘(C) EXPLANATION OF DENIAL OF RE22 QUEST.—If a designated local agency denies a

23 request for certification of membership in a tar24 geted group, such agency shall provide to the
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1 person making such request a written expla2 nation of the reasons for such denial.’’.

3 (c) MINIMUM EMPLOYMENT PERIOD.—Paragraph

4 (3) of section 51(i) of the Internal Revenue Code of 1986

5 (relating to certain individuals ineligible) is amended to

6 read as follows:

7 ‘‘(3) INDIVIDUALS NOT MEETING MINIMUM EM8 PLOYMENT PERIOD.—No wages shall be taken into

9 account under subsection (a) with respect to any in10 dividual unless such individual either—

11 ‘‘(A) is employed by the employer at least

12 180 days (20 days in the case of a qualified

13 summer youth employee), or

14 ‘‘(B) has completed at least 250 hours

15 (120 hours in the case of a qualified summer

16 youth employee) of services performed for the

17 employer.’’.

18 (d) TERMINATION.—Paragraph (4) of section 51(c)

19 of the Internal Revenue Code of 1986 (relating to wages

20 defined) is amended to read as follows:

21 ‘‘(4) TERMINATION.—The term ‘wages’ shall

22 not include any amount paid or incurred to an indi23 vidual who begins work for the employer—

24 ‘‘(A) after December 31, 1994, and before

25 January 1, 1996, or
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1 ‘‘(B) after December 31, 1997.’’.

2 (e) REDESIGNATION OF CREDIT.—

3 (1) Sections 38(b)(2) and 51(a) of the Internal

4 Revenue Code of 1986 are each amended by striking

5 ‘‘targeted jobs credit’’ and inserting ‘‘work oppor6 tunity credit’’.

7 (2) The subpart heading for subpart F of part

8 IV of subchapter A of chapter 1 of such Code is

9 amended by striking ‘‘Targeted Jobs Credit’’

10 and inserting ‘‘Work Opportunity Credit’’.

11 (3) The table of subparts for such part IV is

12 amended by striking ‘‘targeted jobs credit’’ and in13 serting ‘‘work opportunity credit’’.

14 (4) The heading for paragraph (3) of section

15 1396(c) of such Code is amended by striking ‘‘TAR16 GETED JOBS CREDIT’’ and inserting ‘‘WORK OPPOR17 TUNITY CREDIT’’.

18 (f) TECHNICAL AMENDMENTS.—

19 (1) Paragraph (1) of section 51(c) of the Inter20 nal Revenue Code of 1986 is amended by striking

21 ‘‘, subsection (d)(8)(D),’’.

22 (2) Paragraph (3) of section 51(i) of such Code

23 is amended by striking ‘‘(d)(12)’’ each place it ap24 pears and inserting ‘‘(d)(6)’’.
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1 (g) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to individuals who begin work for

3 the employer after December 31, 1995.

4 SEC. 2. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE

5 PROGRAMS.

6 (a) EXTENSION.—Subsection (d) of section 127 of

7 the Internal Revenue Code of 1986 (relating to edu8 cational assistance programs) is amended by striking ‘‘De9 cember 31, 1994’’ and inserting ‘‘December 31, 1997’’.

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

11 this section shall apply to taxable years beginning after

12 December 31, 1994.

13 SEC. 3. RESEARCH CREDIT.

14 (a) IN GENERAL.—Subsection (h) of section 41 of the

15 Internal Revenue Code of 1986 (relating to credit for re16 search activities) is amended—

17 (1) by striking ‘‘June 30, 1995’’ each place it

18 appears and inserting ‘‘December 31, 1997’’, and

19 (2) by striking ‘‘July 1, 1995’’ each place it ap20 pears and inserting ‘‘January 1, 1998’’.

21 (b) BASE AMOUNT FOR START-UP COMPANIES.—

22 Clause (i) of section 41(c)(3)(B) of the Internal Revenue

23 Code of 1986 (relating to start-up companies) is amended

24 to read as follows:
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1 ‘‘(i) TAXPAYERS TO WHICH SUBPARA2 GRAPH APPLIES.—The fixed-base percent3 age shall be determined under this sub4 paragraph if—

5 ‘‘(I) the first taxable year in

6 which a taxpayer had both gross re7 ceipts and qualified research expenses

8 begins after December 31, 1983, or

9 ‘‘(II) there are fewer than 3 tax10 able years beginning after December

11 31, 1983, and before January 1,

12 1989, in which the taxpayer had both

13 gross receipts and qualified research

14 expenses.’’.

15 (c) ELECTION OF ALTERNATIVE INCREMENTAL

16 CREDIT.—Subsection (c) of section 41 of the Internal

17 Revenue Code of 1986 is amended by redesignating para18 graphs (4) and (5) as paragraphs (5) and (6), respectively,

19 and by inserting after paragraph (3) the following new

20 paragraph:

21 ‘‘(4) ELECTION OF ALTERNATIVE INCREMEN22 TAL CREDIT.—

23 ‘‘(A) IN GENERAL.—At the election of the

24 taxpayer, the credit determined under sub25 section (a)(1) shall be equal to the sum of—
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1 ‘‘(i) 1.65 percent of so much of the

2 qualified research expenses for the taxable

3 year as exceeds 1 percent of the average

4 described in subsection (c)(1)(B) but does

5 not exceed 1.5 percent of such average,

6 ‘‘(ii) 2.2 percent of so much of such

7 expenses as exceeds 1.5 percent of such av8 erage but does not exceed 2 percent of

9 such average, and

10 ‘‘(iii) 2.75 percent of so much of such

11 expenses as exceeds 2 percent of such aver12 age.

13 ‘‘(B) ELECTION.—An election under this

14 paragraph may be made only for the first tax15 able year of the taxpayer beginning after June

16 30, 1995. Such an election shall apply to the

17 taxable year for which made and all succeeding

18 taxable years unless revoked with the consent of

19 the Secretary.’’.

20 (d) INCREASED CREDIT FOR CONTRACT RESEARCH

21 EXPENSES WITH RESPECT TO CERTAIN RESEARCH CON22 SORTIA.—Paragraph (3) of section 41(b) of the Internal

23 Revenue Code of 1986 is amended by adding at the end

24 the following new subparagraph:
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1 ‘‘(C) AMOUNTS PAID TO CERTAIN RE2 SEARCH CONSORTIA.—

3 ‘‘(i) IN GENERAL.—Subparagraph (A)

4 shall be applied by substituting ‘75 per5 cent’ for ‘65 percent’ with respect to

6 amounts paid or incurred by the taxpayer

7 to a qualified research consortium for

8 qualified research.

9 ‘‘(ii) QUALIFIED RESEARCH CONSOR10 TIUM.—The term ‘qualified research con11 sortium’ means any organization described

12 in subsection (e)(6)(B) if—

13 ‘‘(I) at least 15 unrelated tax14 payers paid (during the calendar year

15 in which the taxable year of the tax16 payer begins) amounts to such organi17 zation for qualified research,

18 ‘‘(II) no 3 persons paid during

19 such calendar year more than 50 per20 cent of the total amounts paid during

21 such calendar year for qualified re22 search, and

23 ‘‘(III) no person contributed

24 more than 20 percent of such total

25 amounts.
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1 For purposes of subclause (I), all persons

2 treated as a single employer under sub3 section (a) or (b) of section 52 shall be

4 treated as related taxpayers.’’.

5 (e) CONFORMING AMENDMENT.—Subparagraph (D)

6 of section 28(b)(1) of the Internal Revenue Code of 1986

7 is amended by striking ‘‘June 30, 1995’’ and inserting

8 ‘‘December 31, 1997’’.

9 (f) EFFECTIVE DATE.—

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section

12 shall apply to taxable years ending after June 30,

13 1995.

14 (2) SUBSECTIONS (c) AND (d).—The amend15 ments made by subsections (c) and (d) shall apply

16 to taxable years beginning after June 30, 1995.

17 SEC. 4. ORPHAN DRUG TAX CREDIT.

18 (a) RECATEGORIZED AS A BUSINESS CREDIT.—

19 (1) IN GENERAL.—Section 28 of the Internal

20 Revenue Code of 1986 (relating to clinical testing

21 expenses for certain drugs for rare diseases or condi22 tions) is transferred to subpart D of part IV of sub23 chapter A of chapter 1 of such Code, inserted after

24 section 45B, and redesignated as section 45C.
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1 (2) CONFORMING AMENDMENT.—Subsection (b)

2 of section 38 of such Code (relating to general busi3 ness credit) is amended by striking ‘‘plus’’ at the

4 end of paragraph (10), by striking the period at the

5 end of paragraph (11) and inserting ‘‘, plus’’, and

6 by adding at the end the following new paragraph:

7 ‘‘(12) the orphan drug credit determined under

8 section 45C(a).’’.

9 (3) CLERICAL AMENDMENTS.—

10 (A) The table of sections for subpart B of

11 such part IV is amended by striking the item

12 relating to section 28.

13 (B) The table of sections for subpart D of

14 such part IV is amended by adding at the end

15 the following new item:

‘‘Sec. 45C. Clinical testing expenses for certain drugs for rare diseases or

conditions.’’.

16 (b) CREDIT TERMINATION.—Subsection (e) of sec17 tion 45C of the Internal Revenue Code of 1986, as redes18 ignated by subsection (a)(1), is amended by striking ‘‘De19 cember 31, 1994’’ and inserting ‘‘December 31, 1997’’.

20 (c) NO PRE-1995 CARRYBACKS.—Subsection (d) of

21 section 39 of the Internal Revenue Code of 1986 (relating

22 to carryback and carryforward of unused credits) is

23 amended by adding at the end the following new para24 graph:
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1 ‘‘(7) NO CARRYBACK OF SECTION 45C CREDIT

2 BEFORE 1995.—No portion of the unused business

3 credit for any taxable year which is attributable to

4 the orphan drug credit determined under section

5 45C may be carried back to a taxable year beginning

6 before January 1, 1995.’’.

7 (d) ADDITIONAL CONFORMING AMENDMENTS.—

8 (1) Section 45C(a) of the Internal Revenue

9 Code of 1986, as redesignated by subsection (a)(1),

10 is amended by striking ‘‘There shall be allowed as a

11 credit against the tax imposed by this chapter for

12 the taxable year’’ and inserting ‘‘For purposes of

13 section 38, the credit determined under this section

14 for the taxable year is’’.

15 (2) Section 45C(d) of such Code, as so redesig16 nated, is amended by striking paragraph (2) and by

17 redesignating paragraphs (3), (4), and (5) as para18 graphs (2), (3), and (4).

19 (3) Section 29(b)(6)(A) of such Code is amend20 ed by striking ‘‘sections 27 and 28’’ and inserting

21 ‘‘section 27’’.

22 (4) Section 30(b)(3)(A) of such Code is amend23 ed by striking ‘‘sections 27, 28, and 29’’ and insert24 ing ‘‘sections 27 and 29’’.
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1 (5) Section 53(d)(1)(B) of such Code is amend2 ed—

3 (A) by striking ‘‘or not allowed under sec4 tion 28 solely by reason of the application of

5 section 28(d)(2)(B),’’ in clause (iii), and

6 (B) by striking ‘‘or not allowed under sec7 tion 28 solely by reason of the application of

8 section 28(d)(2)(B)’’ in clause (iv)(II).

9 (6) Section 55(c)(2) of such Code is amended

10 by striking ‘‘28(d)(2),’’.

11 (7) Section 280C(b) of such Code is amended—

12 (A) by striking ‘‘section 28(b)’’ in para13 graph (1) and inserting ‘‘section 45C(b)’’,

14 (B) by striking ‘‘section 28’’ in paragraphs

15 (1) and (2)(A) and inserting ‘‘section 45C(b)’’,

16 and

17 (C) by striking ‘‘subsection (d)(2) thereof’’

18 in paragraphs (1) and (2)(A) and inserting

19 ‘‘section 38(c)’’.

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

21 this section shall apply to taxable years ending after De22 cember 31, 1994.
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1 SEC. 5. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDA2 TIONS.

3 (a) IN GENERAL.—Subparagraph (D) of section

4 170(e)(5) of the Internal Revenue Code of 1986 (relating

5 to special rule for contributions of stock for which market

6 quotations are readily available) is amended by striking

7 ‘‘December 31, 1994’’ and inserting ‘‘December 31,

8 1997’’.

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

10 this section shall apply to contributions made after De11 cember 31, 1994.

12 SEC. 6. EXTENSION OF BINDING CONTRACT DATE FOR BIO13 MASS AND COAL FACILITIES.

14 (a) IN GENERAL.—Subparagraph (A) of section

15 29(g)(1) of the Internal Revenue Code of 1986 (relating

16 to extension of certain facilities) is amended by striking

17 ‘‘January 1, 1997’’ and inserting ‘‘January 1, 1999’’ and

18 by striking ‘‘January 1, 1996’’ and inserting ‘‘July 1,

19 1997’’.

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

21 this section shall take effect on the date of the enactment

22 of this Act.

23 SEC. 7. EXTENSION OF TRANSITION RULE FOR CERTAIN

24 PUBLICLY TRADED PARTNERSHIPS.

25 (a) IN GENERAL.—Subparagraph (B) of section

26 10211(c)(1) of the Revenue Act of 1987 (Public Law 100–
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1 203) is amended by striking ‘‘December 31, 1997’’ and

2 inserting ‘‘December 31, 1999’’.

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

4 this section shall take effect as if included in the provisions

5 of section 10211 of the Revenue Act of 1987.

6 SEC. 8. EXTENSION OF GROUP LEGAL SERVICES.

7 (a) EXTENSION.—Subsection (e) of section 120 of

8 the Internal Revenue Code of 1986 (relating to amounts

9 received under qualified group legal services plans) is

10 amended by striking ‘‘June 30, 1992’’ and inserting ‘‘De11 cember 31, 1997’’.

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

13 this section shall apply to taxable years beginning after

14 June 30, 1992.

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