II

104TH CONGRESS

1ST SESSION S. 568

To provide a tax credit for families, to provide certain tax incentives to

encourage investment and increase savings, and to place limitations on

the growth of spending.

IN THE SENATE OF THE UNITED STATES

MARCH 16, 1995

Mr. COATS (for himself, Mr. GRAMS, Mr. CRAIG, Mr. LOTT, Mr. BROWN, Mr.

MCCAIN, Mr. KYL, Mr. INHOFE, Mrs. HUTCHISON, and Mr. GRAMM) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide a tax credit for families, to provide certain tax

incentives to encourage investment and increase savings,

and to place limitations on the growth of spending.

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; AMENDMENT OF 1986 CODE;

4 TABLE OF CONTENTS.

5 (a) SHORT TITLE.—This Act may be cited as the

6 ‘‘Family, Investment, Retirement, Savings, and Tax Fair7 ness Act of 1995’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

4 to, or repeal of, a section or other provision, the reference

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.

7 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I—FAMILY TAX CREDIT

Sec. 101. Family tax credit.

TITLE II—REDUCING THE COST OF CAPITAL BY REDUCING CAPITAL GAINS TAX RATES AND INDEXING THE BASIS OF CERTAIN ASSETS

Sec. 201. Reduction in individual capital gains rate.

Sec. 202. Reduction in corporate capital gains rate.

Sec. 203. Reduction of minimum tax rate on capital gains.

Sec. 204. Indexing of certain assets for purposes of determining gain or loss.

Sec. 205. Indexing of limitation on capital losses of individuals.

Sec. 206. Effective dates.

TITLE III—NEUTRAL COST RECOVERY

Sec. 301. Depreciation adjustment for certain property placed in service in taxable years beginning after December 31, 1994.

Sec. 302. Special depreciation rules applicable under the adjusted current earnings provisions of the minimum tax.

TITLE IV—INCREASING NATIONAL SAVINGS THROUGH INDIVIDUAL RETIREMENT PLUS ACCOUNTS, INDEXING FOR INFLATION

THE INCOME THRESHOLDS FOR TAXING SOCIAL SECURITY

BENEFITS, ETC.

Sec. 401. Establishment of individual retirement plus accounts.

Sec. 402. Inflation adjustment of income thresholds for taxation of social security benefits; income from individual retirement plans excluded.

Sec. 403. Inflation adjustment of maximum amount of IRA deduction.

TITLE V—CAP ON FEDERAL SPENDING AND ESTABLISHMENT OF

COMMISSION TO REDUCE FEDERAL SPENDING

Sec. 501. Establishment.

Sec. 502. Duties of Commission.

Sec. 503. Membership and operation of Commission.

Sec. 504. Procedure for making recommendation for proposed cuts.

Sec. 505. Budget outlay reductions.
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Sec. 506. Budget outlay reductions permanent.

Sec. 507. Additional enforcement provisions.

Sec. 508. Compliance report by Comptroller General.

Sec. 509. Amendments to the Balanced Budget and Emergency Deficit Control

Act of 1985 to limit Federal spending.

Sec. 510. Definitions.

TITLE VI—ELIMINATION OF SOCIAL SECURITY EARNINGS TEST

Sec. 601. Elimination of social security earnings test.

1 TITLE I—FAMILY TAX CREDIT

2 SEC. 101. FAMILY TAX CREDIT.

3 (a) IN GENERAL.—Subpart C of part IV of sub4 chapter A of chapter 1 is amended by redesignating sec5 tion 35 as section 36 and by inserting after section 34

6 the following new section:

7 ‘‘SEC. 35. FAMILY TAX CREDIT.

8 ‘‘(a) GENERAL RULE.—In the case of an eligible indi9 vidual, there shall be allowed as a credit against the tax

10 imposed by this subtitle for the taxable year an amount

11 equal to $500 multiplied by the number of qualifying chil12 dren of the taxpayer who have not attained the age of 18

13 as of the close of the calendar year in which the taxable

14 year of the taxpayer begins.

15 ‘‘(b) LIMITATION BASED ON AMOUNT OF TAX.—The

16 credit allowed by subsection (a) for a taxable year shall

17 not exceed the excess (if any) of—

18 ‘‘(1) the sum of—

19 ‘‘(A) the tax imposed by this subtitle for

20 the taxable year (reduced by the credits allow-
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1 able against such tax other than the credits al2 lowable under this subpart), and

3 ‘‘(B) the taxes imposed by sections 3101

4 and 3111 on wages received by the taxpayer

5 during such taxable year, over

6 ‘‘(2) the credit allowable for the taxable year

7 under section 32.

8 ‘‘(c) INFLATION ADJUSTMENTS.—

9 ‘‘(1) IN GENERAL.—In the case of a taxable

10 year beginning in a calendar year after 1995, the

11 $500 amount contained in subsection (a) shall be in12 creased by an amount equal to—

13 ‘‘(A) $500, multiplied by

14 ‘‘(B) the cost-of-living adjustment deter15 mined under section 1(f)(3) for the calendar

16 year in which the taxable year begins, deter17 mined by substituting ‘1994’ for ‘1992’ in sub18 paragraph (B) thereof.

19 ‘‘(2) ROUNDING.—If any increase determined

20 under paragraph (1) is not a multiple of $5, such

21 increase shall be rounded to the next higher multiple

22 of $5.

23 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur24 poses of this section—
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1 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible

2 individual’ has the meaning given to such term by

3 section 32(c)(1) (determined without regard to sub4 paragraph (B) thereof).

5 ‘‘(2) QUALIFYING CHILD.—The term ‘qualifying

6 child’ has the meaning given to such term by section

7 32(c)(3) (determined without regard to subpara8 graphs (C) and (E) thereof).

9 ‘‘(3) CERTAIN OTHER RULES APPLY.—Sub10 sections (d) and (e) of section 32 shall apply.’’

11 (b) DENIAL OF DOUBLE BENEFIT.—Subparagraph

12 (A) of section 21(b)(1) (defining qualifying individual) is

13 amended by inserting ‘‘(other than an individual described

14 in section 35(a))’’ after ‘‘taxpayer’’.

15 (c) CONFORMING AMENDMENT.—The table of sec16 tions for such subpart C is amended by striking the item

17 relating to section 35 and inserting the following new

18 items:

‘‘Sec. 35. Family tax credit.

‘‘Sec. 36. Overpayments of tax.’’

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

20 this section shall apply to taxable years beginning after

21 December 31, 1994.
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1 TITLE II—REDUCING THE COST

2 OF CAPITAL BY REDUCING

3 CAPITAL GAINS TAX RATES

4 AND INDEXING THE BASIS OF

5 CERTAIN ASSETS

6 SEC. 201. REDUCTION IN INDIVIDUAL CAPITAL GAINS

7 RATE.

8 (a) GENERAL RULE.—Subsection (h) of section 1 (re9 lating to maximum capital gains rate) is amended to read

10 as follows:

11 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—

12 ‘‘(1) IN GENERAL.—If a taxpayer has a net

13 capital gain for any taxable year, then the tax im14 posed by this section shall not exceed the sum of—

15 ‘‘(A) a tax computed at the rates and in

16 the same manner as if this subsection had not

17 been enacted on the taxable income reduced by

18 the net capital gain, plus

19 ‘‘(B) a tax equal to the sum of—

20 ‘‘(i) 7.5 percent of so much of the net

21 capital gain as does not exceed—

22 ‘‘(I) the maximum amount of

23 taxable income to which the 15-per24 cent rate applies under the table ap25 plicable to the taxpayer, reduced by
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1 ‘‘(II) the taxable income to which

2 subparagraph (A) applies, plus

3 ‘‘(ii) 15 percent of the net capital gain

4 in excess of the net capital gain to which

5 clause (i) applies.

6 For purposes of the preceding sentence, the net cap7 ital gain for any taxable year shall be reduced (but

8 not below zero) by the amount which the taxpayer

9 elects to take into account as investment income for

10 the taxable year under section 163(d)(4)(B)(iii).

11 ‘‘(2) TRANSITIONAL RULE.—In the case of a

12 taxable year which includes January 1, 1995, the

13 amount of the net capital gain for purposes of para14 graph (1) shall not exceed the net capital gain deter15 mined by only taking into account gains and losses

16 properly taken into account for the portion of the

17 taxable year on or after such date.’’

18 (b) PHASE-OUT OF PERSONAL EXEMPTIONS AND

19 LIMITATION ON DEDUCTION OF ITEMIZED DEDUCTIONS

20 NOT TO RESULT FROM NET CAPITAL GAIN.—

21 (1)(A) Subparagraphs (A) and (B) of section

22 151(d)(3) (relating to phaseout of exemption

23 amount) are each amended by inserting ‘‘modified’’

24 before ‘‘adjusted gross income’’.
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1 (B) Paragraph (3) of section 151(d) is amend2 ed by redesignating subparagraph (D) as subpara3 graph (E) and by inserting after subparagraph (C)

4 the following new subparagraph:

5 ‘‘(D) MODIFIED ADJUSTED GROSS IN6 COME.—For purposes of this paragraph—

7 ‘‘(i) IN GENERAL.—The term ‘modi8 fied adjusted gross income’ means adjusted

9 gross income reduced by net capital gain.

10 ‘‘(ii) TRANSITIONAL RULE.—In the

11 case of a taxable year which includes

12 January 1, 1995, the amount of the net

13 capital gain for purposes of clause (i) shall

14 not exceed the net capital gain determined

15 by only taking into account gains and

16 losses properly taken into account for the

17 portion of the taxable year on or after such

18 date.’’

19 (2) Subsection (a) of section 68 (relating to

20 overall limitation on itemized deductions) is amend21 ed by adding at the end the following new sentence:

22 ‘‘For purposes of paragraph (1), adjusted gross income

23 shall be computed without regard to net capital gain (de24 termined after application of the rule of section

25 151(d)(3)(D)(ii)).’’
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1 (c) TECHNICAL AMENDMENTS.—

2 (1) Paragraph (1) of section 170(e) is amended

3 by striking ‘‘the amount of gain’’ in the material

4 following subparagraph (B)(ii) and inserting

5 ‘‘24.6/39.6 (20/35 in the case of a corporation) of

6 the amount of gain’’.

7 (2)(A) The second sentence of section

8 7518(g)(6)(A) is amended by striking ‘‘28 percent

9 (34 percent in the case of a corporation)’’ and in10 serting ‘‘15 percent’’.

11 (B) The second sentence of section

12 607(h)(6)(A) of the Merchant Marine Act, 1936, is

13 amended by striking ‘‘28 percent (34 percent in the

14 case of a corporation)’’ and inserting ‘‘15 percent’’.

15 SEC. 202. REDUCTION IN CORPORATE CAPITAL GAINS

16 RATE.

17 (a) GENERAL RULE.—Section 1201 (relating to al18 ternative tax for corporations) is amended by redesignat19 ing subsection (b) as subsection (c), and by striking sub20 section (a) and inserting the following:

21 ‘‘(a) GENERAL RULE.—If for any taxable year a cor22 poration has a net capital gain, then, in lieu of the tax

23 imposed by section 11, 511, or 831(a) (whichever applies),

24 there is hereby imposed a tax (if such tax is less than
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1 the tax imposed by such section) which shall consist of

2 the sum of—

3 ‘‘(1) a tax computed on the taxable income re4 duced by the net capital gain, at the same rates and

5 in the same manner as if this subsection had not

6 been enacted, plus

7 ‘‘(2) a tax of 15 percent of the net capital gain.

8 ‘‘(b) TRANSITIONAL RULE.—In the case of a taxable

9 year which includes January 1, 1995, the amount of the

10 net capital gain for purposes of subsection (a) shall not

11 exceed the net capital gain determined by only taking into

12 account gains and losses properly taken into account for

13 the portion of the taxable year on or after such date.’’

14 (b) TECHNICAL AMENDMENTS.—

15 (1) Clause (iii) of section 852(b)(3)(D) is

16 amended by striking ‘‘65 percent’’ and inserting ‘‘85

17 percent’’.

18 (2) Paragraphs (1) and (2) of section 1445(e)

19 are each amended by striking ‘‘35 percent’’ and in20 serting ‘‘15 percent’’.

21 (3) Paragraph (1) of section 1445(e) is amend22 ed by striking ‘‘(or, to the extent provided in regula23 tions, 28 percent)’’.
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1 SEC. 203. REDUCTION OF MINIMUM TAX RATE ON CAPITAL

2 GAINS.

3 Section 55(b)(1) (relating to tentative minimum tax)

4 is amended by adding at the end the following new sub5 paragraph:

6 ‘‘(C) SPECIAL RULE FOR CAPITAL

7 GAINS.—If a taxpayer has a net capital gain for

8 any taxable year, the tentative minimum tax for

9 the taxable year is the sum of—

10 ‘‘(i) 15 percent of the lesser of—

11 ‘‘(I) the net capital gain (deter12 mined with the adjustments provided

13 in this part and (to the extent appli14 cable) the limitations of sections

15 1(h)(2) and 1201(b)), or

16 ‘‘(II) so much of the alternative

17 minimum taxable income for the tax18 able year as exceeds the exemption

19 amount, plus

20 ‘‘(ii) a tax computed on the amount

21 (if any) by which the excess referred to in

22 clause (i)(II) exceeds the net capital gain

23 (as so determined), at the same rates and

24 in the same manner as if this subpara25 graph had not been enacted.’’
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1 SEC. 204. INDEXING OF CERTAIN ASSETS FOR PURPOSES

2 OF DETERMINING GAIN OR LOSS.

3 (a) IN GENERAL.—Part II of subchapter O of chap4 ter 1 (relating to basis rules of general application) is

5 amended by inserting after section 1021 the following new

6 section:

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

8 OF DETERMINING GAIN OR LOSS.

9 ‘‘(a) GENERAL RULE.—

10 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD11 JUSTED BASIS.—Except as provided in paragraph

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

13 more than 1 year is sold or otherwise disposed of,

14 then, for purposes of this title, the indexed basis of

15 the asset shall be substituted for its adjusted basis.

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

17 The deduction for depreciation, depletion, and amor18 tization shall be determined without regard to the

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

20 other person.

21 ‘‘(b) INDEXED ASSET.—

22 ‘‘(1) IN GENERAL.—For purposes of this sec23 tion, the term ‘indexed asset’ means—

24 ‘‘(A) stock in a corporation, and

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

26 therein), which is a capital asset or property
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1 used in the trade or business (as defined in sec2 tion 1231(b)).

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

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

5 does not include—

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

7 in property which is in the nature of a credi8 tor’s interest.

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

10 to acquire an interest in property.

11 ‘‘(C) NET LEASE PROPERTY.—In the case

12 of a lessor, net lease property (within the mean13 ing of subsection (h)(1)).

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

15 which is preferred as to dividends and does not

16 participate in corporate growth to any signifi17 cant extent.

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

19 Stock in—

20 ‘‘(i) an S corporation (within the

21 meaning of section 1361),

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

23 defined in section 542), and

24 ‘‘(iii) a foreign corporation.
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1 ‘‘(3) EXCEPTION FOR STOCK IN FOREIGN COR2 PORATION WHICH IS REGULARLY TRADED ON NA3 TIONAL OR REGIONAL EXCHANGE.—Clause (iii) of

4 paragraph (2)(E) shall not apply to stock in a for5 eign corporation the stock of which is listed on the

6 New York Stock Exchange, the American Stock Ex7 change, or any domestic regional exchange for which

8 quotations are published on a regular basis other

9 than—

10 ‘‘(A) stock of a foreign investment com11 pany (within the meaning of section 1246(b)),

12 and

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

14 a United States person who meets the require15 ments of section 1248(a)(2).

16 ‘‘(c) INDEXED BASIS.—For purposes of this sec17 tion—

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

19 any asset is—

20 ‘‘(A) the adjusted basis of the asset, multi21 plied by

22 ‘‘(B) the applicable inflation ratio.

23 ‘‘(2) APPLICABLE INFLATION RATIO.—The ap24 plicable inflation ratio for any asset is the percent25 age arrived at by dividing—
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1 ‘‘(A) the gross national product deflator

2 for the calendar quarter in which the disposi3 tion takes place, by

4 ‘‘(B) the gross national product deflator

5 for the calendar quarter in which the asset was

6 acquired by the taxpayer (or, if later, the cal7 endar quarter ending December 31, 1994).

8 The applicable inflation ratio shall not be taken into

9 account unless it is greater than 1. The applicable

10 inflation ratio for any asset shall be rounded to the

11 nearest one-tenth of 1 percent.

12 ‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—

13 The gross national product deflator for any calendar

14 quarter is the implicit price deflator for the gross

15 national product for such quarter (as shown in the

16 first revision thereof).

17 ‘‘(4) SECRETARY TO PUBLISH TABLES.—The

18 Secretary shall publish tables specifying the applica19 ble inflation ratios for each calendar quarter.

20 ‘‘(d) SPECIAL RULES.—For purposes of this sec21 tion—

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

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

24 a separate asset:
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1 ‘‘(A) a substantial improvement to prop2 erty,

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

4 a substantial contribution to capital, and

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

6 extent that separate treatment of such portion

7 is appropriate to carry out the purposes of this

8 section.

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

10 THROUGHOUT HOLDING PERIOD.—

11 ‘‘(A) IN GENERAL.—The applicable infla12 tion ratio shall be appropriately reduced for cal13 endar months at any time during which the

14 asset was not an indexed asset.

15 ‘‘(B) CERTAIN SHORT SALES.—For pur16 poses of applying subparagraph (A), an asset

17 shall be treated as not an indexed asset for any

18 short sale period during which the taxpayer or

19 the taxpayer’s spouse sells short property sub20 stantially identical to the asset. For purposes of

21 the preceding sentence, the short sale period be22 gins on the day after the substantially identical

23 property is sold and ends on the closing date

24 for the sale.
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1 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU2 TIONS.—A distribution with respect to stock in a

3 corporation which is not a dividend shall be treated

4 as a disposition.

5 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

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

7 this section would create or increase a net ordinary

8 loss to which section 1231(a)(2) applies or an ordi9 nary loss to which any other provision of this title

10 applies, such provision shall not apply. The taxpayer

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

12 an amount equal to the amount of the ordinary loss

13 to which the preceding sentence applies.

14 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

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

16 WITH RESPECT TO THE TAXPAYER.—If there has

17 been a prior application of subsection (a)(1) to an

18 asset while such asset was held by the taxpayer, the

19 date of acquisition of such asset by the taxpayer

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

21 most recent such prior application.

22 ‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli23 cation of section 341(a) (relating to collapsible

24 corporations) shall be determined without regard to

25 this section.
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1 ‘‘(e) CERTAIN CONDUIT ENTITIES.—

2 ‘‘(1) REGULATED INVESTMENT COMPANIES;

3 REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST

4 FUNDS.—

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

6 investment entity shall be an indexed asset for

7 any calendar month in the same ratio as the

8 fair market value of the assets held by such en9 tity at the close of such month which are in10 dexed assets bears to the fair market value of

11 all assets of such entity at the close of such

12 month.

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

14 the ratio for any calendar month determined

15 under subparagraph (A) would (but for this

16 subparagraph) be 90 percent or more, such

17 ratio for such month shall be 100 percent.

18 ‘‘(C) RATIO OF 10 PERCENT OR LESS.—If

19 the ratio for any calendar month determined

20 under subparagraph (A) would (but for this

21 subparagraph) be 10 percent or less, such ratio

22 for such month shall be zero.

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

24 REAL ESTATE INVESTMENT TRUSTS.—Nothing

25 in this paragraph shall require a real estate in-
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1 vestment trust to value its assets more fre2 quently than once each 36 months (except

3 where such trust ceases to exist). The ratio

4 under subparagraph (A) for any calendar

5 month for which there is no valuation shall be

6 the trustee’s good faith judgment as to such

7 valuation.

8 ‘‘(E) QUALIFIED INVESTMENT ENTITY.—

9 For purposes of this paragraph, the term

10 ‘qualified investment entity’ means—

11 ‘‘(i) a regulated investment company

12 (within the meaning of section 851),

13 ‘‘(ii) a real estate investment trust

14 (within the meaning of section 856), and

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

16 meaning of section 584).

17 ‘‘(2) PARTNERSHIPS.—In the case of a partner18 ship, the adjustment made under subsection (a) at

19 the partnership level shall be passed through to the

20 partners.

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

22 case of an electing small business corporation, the

23 adjustment under subsection (a) at the corporate

24 level shall be passed through to the shareholders.

25 ‘‘(f) DISPOSITIONS BETWEEN RELATED PERSONS.—
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1 ‘‘(1) IN GENERAL.—This section shall not apply

2 to any sale or other disposition of property between

3 related persons except to the extent that the basis

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

5 substituted basis.

6 ‘‘(2) RELATED PERSONS DEFINED.—For pur7 poses of this section, the term ‘related persons’

8 means—

9 ‘‘(A) persons bearing a relationship set

10 forth in section 267(b), and

11 ‘‘(B) persons treated as single employer

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

13 ‘‘(g) TRANSFERS TO INCREASE INDEXING ADJUST14 MENT OR DEPRECIATION ALLOWANCE.—If any person

15 transfers cash, debt, or any other property to another per16 son and the principal purpose of such transfer is—

17 ‘‘(1) to secure or increase an adjustment under

18 subsection (a), or

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

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

21 depletion, or amortization,

22 the Secretary may disallow part or all of such adjustment

23 or increase.

24 ‘‘(h) DEFINITIONS.—For purposes of this section—
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1 ‘‘(1) NET LEASE PROPERTY DEFINED.—The

2 term ‘net lease property’ means leased real property

3 where—

4 ‘‘(A) the term of the lease (taking into ac5 count options to renew) was 50 percent or more

6 of the useful life of the property, and

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

8 of the deductions with respect to such property

9 which are allowable to the lessor solely by rea10 son of section 162 (other than rents and reim11 bursed amounts with respect to such property)

12 is 15 percent or less of the rental income pro13 duced by such property.

14 ‘‘(2) STOCK INCLUDES INTEREST IN COMMON

15 TRUST FUND.—The term ‘stock in a corporation’ in16 cludes any interest in a common trust fund (as de17 fined in section 584(a)).

18 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

19 such regulations as may be necessary or appropriate to

20 carry out the purposes of this section.’’

21 (b) CLERICAL AMENDMENT.—The table of sections

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

23 by inserting after the item relating to section 1021 the

24 following new item:

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

gain or loss.’’
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1 (c) ADJUSTMENT TO APPLY FOR PURPOSES OF DE2 TERMINING EARNINGS AND PROFITS.—Subsection (f) of

3 section 312 (relating to effect on earnings and profits of

4 gain or loss and of receipt of tax-free distributions) is

5 amended by adding at the end thereof the following new

6 paragraph:

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

8 INDEXED BASIS.—

For substitution of indexed basis for adjusted

basis in the case of the disposition of certain assets

after December 31, 1993, see section 1022(a)(1).’’

9 SEC. 205. INDEXING OF LIMITATION ON CAPITAL LOSSES

10 OF INDIVIDUALS.

11 Section 1211 (relating to limitation on capital losses)

12 is amended by adding at the end thereof the following new

13 subsection:

14 ‘‘(c) INDEXATION OF LIMITATION ON

15 NONCORPORATE TAXPAYERS.—

16 ‘‘(1) IN GENERAL.—In the case of any taxable

17 year beginning in a calendar year after 1994, the

18 $3,000 and $1,500 amounts under subsection (b)(1)

19 shall be increased by an amount equal to—

20 ‘‘(A) such dollar amount, multiplied by

21 ‘‘(B) the applicable inflation adjustment

22 for the calendar year in which the taxable year

23 begins.
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1 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—

2 For purposes of paragraph (1), the applicable infla3 tion adjustment for any calendar year is the percent4 age (if any) by which—

5 ‘‘(A) the gross national product deflator

6 for the last calendar quarter of the preceding

7 calendar year, exceeds

8 ‘‘(B) the gross national product deflator

9 for the last calendar quarter of 1993.

10 For purposes of this paragraph, the term ‘gross na11 tional product deflator’ has the meaning given such

12 term by section 1022(c)(3).’’

13 SEC. 206. EFFECTIVE DATES.

14 (a) IN GENERAL.—Except as provided in subsection

15 (b), the amendments made by this title shall apply to sales

16 or exchanges occurring after December 31, 1994, in tax17 able years ending after such date.

18 (b) INDEXING OF LOSS LIMITATION.—The amend19 ments made by section 205 shall apply to taxable years

20 beginning after December 31, 1994.
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1 TITLE III—NEUTRAL COST

2 RECOVERY

3 SEC. 301. DEPRECIATION ADJUSTMENT FOR CERTAIN

4 PROPERTY PLACED IN SERVICE IN TAXABLE

5 YEARS BEGINNING AFTER DECEMBER 31,

6 1994.

7 (a) IN GENERAL.—Section 168 (relating to acceler8 ated cost recovery system) is amended by adding at the

9 end the following new subsection:

10 ‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA11 LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED

12 IN SERVICE IN TAXABLE YEARS BEGINNING AFTER

13 DECEMBER 31, 1994.—

14 ‘‘(1) IN GENERAL.—In the case of tangible

15 property placed in service in a taxable year begin16 ning after December 31, 1994, the deduction allow17 able under this section with respect to such property

18 for any taxable year (after the taxable year during

19 which the property is placed in service) shall be—

20 ‘‘(A) the amount so allowable for such tax21 able year without regard to this subsection,

22 multiplied by

23 ‘‘(B) the applicable neutral cost recovery

24 ratio for such taxable year.
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•S 568 IS

1 For purposes of subparagraph (A), paragraphs (1)

2 and (2) of subsection (b) shall be applied by sub3 stituting ‘150 percent’ for ‘200 percent’.

4 ‘‘(2) APPLICABLE NEUTRAL COST RECOVERY

5 RATIO.—For purposes of paragraph (1), the applica6 ble neutral cost recovery ratio for any taxable year

7 is the number determined by—

8 ‘‘(A) dividing—

9 ‘‘(i) the gross national product

10 deflator for the calendar quarter ending in

11 such taxable year which corresponds to the

12 calendar quarter during which the property

13 was placed in service by the taxpayer, by

14 ‘‘(ii) the gross national product

15 deflator for the calendar quarter during

16 which the property was placed in service by

17 the taxpayer, and

18 ‘‘(B) then multiplying the number deter19 mined under subparagraph (A) by the number

20 equal to 1.035 to the nth power where ‘n’ is the

21 number of full years in the period beginning on

22 the 1st day of the calendar quarter during

23 which the property was placed in service by the

24 taxpayer and ending on the day before the be-
26

•S 568 IS

1 ginning of the corresponding calendar quarter

2 ending during such taxable year.

3 The applicable neutral cost recovery ratio shall not

4 be taken into account unless it is greater than 1.

5 The applicable neutral cost recovery ratio shall be

6 rounded to the nearest one-tenth of 1 percent.

7 ‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—

8 For purposes of paragraph (2), the gross national

9 product deflator for any calendar quarter is the im10 plicit price deflator for the gross national product

11 for such quarter (as shown in the first revision

12 thereof).

13 ‘‘(4) ELECTION NOT TO HAVE SUBSECTION

14 APPLY.—This subsection shall not apply to any

15 property if the taxpayer elects not to have this sub16 section apply to such property. Such an election,

17 once made, shall be irrevocable.’’

18 (b) MINIMUM TAX TREATMENT.—Paragraph (1) of

19 section 56(a) is amended by adding at the end the follow20 ing new subparagraph:

21 ‘‘(E) USE OF NEUTRAL COST RECOVERY

22 RATIO.—In the case of tangible property placed

23 in service in a taxable year beginning after De24 cember 31, 1994, the deduction allowable under

25 this paragraph with respect to such property
27

•S 568 IS

1 for any taxable year (after the taxable year dur2 ing which the property is placed in service)

3 shall be—

4 ‘‘(i) the amount so allowable for such

5 taxable year without regard to this sub6 paragraph, multiplied by

7 ‘‘(ii) the applicable neutral cost recov8 ery ratio for such taxable year (as deter9 mined under section 168(k)).

10 This subparagraph shall not apply to any prop11 erty with respect to which there is an election

12 in effect not to have section 168(k) apply.’’

13 (c) DISALLOWANCE OF INTEREST DEDUCTION TO

14 ENSURE EQUITY FINANCING RECEIVES SAME TREAT15 MENT AS DEBT FINANCING.—Section 163 (relating to de16 duction for interest) is amended by redesignating sub17 section (k) as subsection (l) and by inserting after

18 subsection (j) the following new subsection:

19 ‘‘(k) DISALLOWANCE OF DEDUCTION FOR PROPERTY

20 SUBJECT TO NEUTRAL COST RECOVERY.—No deduction

21 shall be allowed for any amount otherwise allowable as a

22 deduction for interest on indebtedness incurred or contin23 ued to purchase or carry tangible property with respect

24 to which an election is made under section 168(k) (relat25 ing to neutral cost recovery).’’
28

•S 568 IS

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

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 SEC. 302. SPECIAL DEPRECIATION RULES APPLICABLE

5 UNDER THE ADJUSTED CURRENT EARNINGS

6 PROVISIONS OF THE MINIMUM TAX.

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

8 56(g)(4) (relating to adjustments) is amended by adding

9 at the end the following new clauses:

10 ‘‘(vi) SPECIAL BASIS RULES FOR

11 1994.—

12 ‘‘(I) IN GENERAL.—Notwith13 standing clause (i), the adjusted basis

14 of any depreciable property held by

15 the taxpayer as of the beginning of

16 the taxpayer’s first taxable year be17 ginning after December 31, 1994,

18 shall be determined as if the provi19 sions of the last sentence of clause (i)

20 had also applied to taxable years be21 ginning in 1991, 1992, 1993, or

22 1994.

23 ‘‘(II) LOST BASIS RECOVERED

24 OVER 5 YEARS.—The amount deter25 mined under clause (vii) shall be al-
29

•S 568 IS

1 lowed as a deduction ratably over the

2 60-month period beginning with the

3 first month of the taxpayer’s first tax4 able year beginning after December

5 31, 1994.

6 ‘‘(vii) AMOUNT OF LOST BASIS.—For

7 purposes of clause (vi)(II), the amount de8 termined under this clause is the excess

9 of—

10 ‘‘(I) the aggregate adjusted bases

11 of depreciable property held by the

12 taxpayer as of the beginning of the

13 taxpayer’s first taxable year beginning

14 after December 31, 1994, which

15 would have been determined (as of

16 such time) under clause (i) without

17 regard to clause (vi), over

18 ‘‘(II) the aggregate adjusted

19 bases of such property (as of such

20 time) as determined under the rules of

21 clause (vi).’’

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

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

24 December 31, 1994.
30

•S 568 IS

1 TITLE IV—INCREASING NA2 TIONAL SAVINGS THROUGH

3 INDIVIDUAL RETIREMENT

4 PLUS ACCOUNTS, INDEXING

5 FOR INFLATION THE INCOME

6 THRESHOLDS FOR TAXING

7 SOCIAL SECURITY BENEFITS,

8 ETC.

9 SEC. 401. ESTABLISHMENT OF INDIVIDUAL RETIREMENT

10 PLUS ACCOUNTS.

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

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

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

14 408 the following new section:

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

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

17 section, an individual retirement plus account shall be

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

19 an individual retirement plan.

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

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

22 plus account’ means an individual retirement plan which

23 is designated at the time of the establishment of the plan

24 as an individual retirement plus account. Such designation
31

•S 568 IS

1 shall be made in such manner as the Secretary may

2 prescribe.

3 ‘‘(c) CONTRIBUTION RULES.—

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

5 shall be allowed under section 219 for a contribution

6 to an individual retirement plus account.

7 ‘‘(2) CONTRIBUTION LIMIT.—

8 ‘‘(A) IN GENERAL.—Except in the case of

9 rollover contributions, the aggregate amount

10 which may be accepted as contributions to an

11 individual retirement plus account shall not be

12 greater than the excess (if any) of—

13 ‘‘(i) the nondeductible limit with re14 spect to the individual for the taxable year

15 under section 408(o) (after application of

16 subparagraph (B)(ii) thereof), over

17 ‘‘(ii) the designated nondeductible

18 contributions made by the individual for

19 such taxable year to 1 or more individual

20 retirement plans.

21 ‘‘(B) $1,000 INCREASE AFTER 1995.—

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

23 taxable year beginning after December 31,

24 1996, the amount determined under sub25 paragraph (A)(i) (without regard to this
32

•S 568 IS

1 subparagraph) shall be increased by

2 $1,000.

3 ‘‘(ii) ADJUSTMENT FOR INFLATION.—

4 In the case of any taxable year beginning

5 in a calendar year after 1998, the $1,000

6 amount in clause (i) shall be increased by

7 an amount equal to—

8 ‘‘(I) such dollar amount, multi9 plied by

10 ‘‘(II) the cost-of-living adjust11 ment under section 1(f)(3) for the cal12 endar year in which the taxable year

13 begins, determined by substituting

14 ‘calendar year 1997’ for ‘calendar

15 year 1992’ in subparagraph (B) there16 of.

17 ‘‘(iii) ROUNDING.—If any amount as

18 adjusted under clause (ii) is not a multiple

19 of $50, such amount shall be rounded to

20 the nearest multiple of $50 (or, if such

21 amount is a multiple of $25, such amount

22 shall be rounded to the next highest mul23 tiple of $50).

24 ‘‘(C) SPECIAL RULE FOR MARRIED INDI25 VIDUALS.—The nondeductible limits under sub-
33

•S 568 IS

1 paragraph (A) for an individual or for such in2 dividual’s spouse shall be an amount equal to

3 the excess (if any) of—

4 ‘‘(i) the amount determined under

5 subparagraph (A)(i) (after application of

6 subparagraph (B)), over

7 ‘‘(ii) the sum of the amount allowed

8 as a deduction under section 219 for con9 tributions on behalf of such individual or

10 such spouse, plus the amount determined

11 under subparagraph (A)(ii) with respect to

12 each.

13 In no event shall the sum of such limits exceed

14 an amount equal to the sum of the compensa15 tion includible in the individual’s and spouse’s

16 gross income for the taxable year, reduced by

17 the sum of the amounts determined under

18 clause (ii).

‘‘(3) CONTRIBUTIONS AFTER AGE 701 19 ⁄2.—Con20 tributions may be made by an individual to an indi21 vidual retirement plus account after such individual

has attained the age of 701 22 ⁄2.

23 ‘‘(4) LIMITATIONS ON ROLLOVER CONTRIBU24 TIONS.—No rollover contributions may be made to

25 an individual retirement plus account unless such
34

•S 568 IS

1 rollover contribution is a contribution of a distribu2 tion or payment out of—

3 ‘‘(A) another individual retirement plus ac4 count, or

5 ‘‘(B) an individual retirement plan which is

6 not allocable to any amount transferred to such

7 plan which represented any portion of the bal8 ance to the credit of an employee in a qualified

9 trust (or any income allocable to such portion).

10 ‘‘(d) DISTRIBUTION RULES.—For purposes of this

11 title—

12 ‘‘(1) IN GENERAL.—Except in the case of a

13 qualified distribution, the rules of paragraphs (1)

14 and (2) of section 408(d) shall apply to any distribu15 tion from an individual retirement plus account.

16 ‘‘(2) TREATMENT OF QUALIFIED DISTRIBU17 TION.—In the case of a qualified distribution from

18 an individual retirement plus account—

19 ‘‘(A) the amount of such distribution shall

20 not be includible in gross income, and

21 ‘‘(B) section 72(t) shall not apply.

22 ‘‘(3) QUALIFIED DISTRIBUTION.—For purposes

23 of this subsection—

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

25 distribution’ means any distribution—
35

•S 568 IS

1 ‘‘(i) made on or after the date on

which the individual attains age 591 2 ⁄2,

3 ‘‘(ii) made to a beneficiary (or to the

4 estate of an individual) on or after the

5 death of the individual,

6 ‘‘(iii) attributable to the employee’s

7 being disabled (within the meaning of sec8 tion 72(m)(7)), or

9 ‘‘(iv) which is a qualified special pur10 pose distribution (within the meaning of

11 subsection (e)).

12 ‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—

13 No distribution shall be treated as a qualified

14 distribution if—

15 ‘‘(i) it is made within the 5-taxable

16 year period beginning with the 1st taxable

17 year in which the individual made a con18 tribution to an individual retirement plus

19 account, or

20 ‘‘(ii) in the case of a distribution

21 properly allocable to a rollover contribution

22 (or income allocable thereto), it is made

23 within 5 years of the date on which such

24 rollover contribution was made.
36

•S 568 IS

1 ‘‘(4) SPECIAL RULES RELATING TO ROLLOVERS

2 FROM REGULAR INDIVIDUAL RETIREMENT AC3 COUNTS.—

4 ‘‘(A) IN GENERAL.—Except as provided in

5 this paragraph, any amount paid or distributed

6 out of an individual retirement plan on or be7 fore the earlier of—

8 ‘‘(i) the date on which the individual

9 attains age 55, or

10 ‘‘(ii) January 1, 1996,

11 shall not be included in gross income (and sec12 tion 72(t) shall not apply to such amount) if

13 the individual receiving such amount transfers,

14 within 60 days of receipt, the entire amount re15 ceived to an individual retirement plus account.

16 ‘‘(B) TREATMENT OF TAX-FAVORED

17 AMOUNTS.—

18 ‘‘(i) IN GENERAL.—Notwithstanding

19 subparagraph (A), there shall be included

20 in gross income (but section 72(t) shall not

21 apply to) the portion of any amount trans22 ferred which bears the same ratio to such

23 amount as—

24 ‘‘(I) the aggregate amount of

25 contributions to individual retirement
37

•S 568 IS

1 plans with respect to which a deduc2 tion was allowable under section 219,

3 bears to

4 ‘‘(II) the aggregate balance of

5 such plans.

6 ‘‘(ii) TIME FOR INCLUSION.—Any

7 amount described in clause (i) shall be in8 cluded in gross income ratably over the 4-

9 taxable year period beginning with the tax10 able year in which the amount was paid or

11 distributed out of the individual retirement

12 plan.

13 ‘‘(e) QUALIFIED SPECIAL PURPOSE DISTRIBU14 TION.—For purposes of this section—

15 ‘‘(1) IN GENERAL.—The term ‘qualified special

16 purpose distribution’ means—

17 ‘‘(A) a qualified first-time homebuyer dis18 tribution, or

19 ‘‘(B) an applicable medical or educational

20 distribution.

21 ‘‘(2) 25 PERCENT ACCOUNT LIMIT.—A distribu22 tion shall not be treated as a qualified special pur23 pose distribution to the extent it exceeds the amount

24 (if any) by which—

25 ‘‘(A) 25 percent of the sum of—
38

•S 568 IS

1 ‘‘(i) the aggregate balance of individ2 ual retirement plus accounts established on

3 behalf of an individual, plus

4 ‘‘(ii) the aggregate amounts previously

5 treated as qualified special purpose dis6 tributions, exceeds

7 ‘‘(B) the amount determined under sub8 paragraph (A)(ii).

9 ‘‘(3) DISTRIBUTIONS USED TO PURCHASE A

10 HOME BY FIRST-TIME HOMEBUYER.—For purposes

11 of paragraph (1)—

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

13 first-time homebuyer distribution’ means any

14 payment or distribution received by a first-time

15 homebuyer from an individual retirement plan

16 to the extent such payment or distribution is

17 used by the individual before the close of the

18 60th day after the day on which such payment

19 or distribution is received to pay qualified ac20 quisition costs with respect to a principal resi21 dence for such individual.

22 ‘‘(B) BASIS REDUCTION.—The basis of any

23 principal residence described in subparagraph

24 (A) shall be reduced by any amount excluded
39

•S 568 IS

1 from the gross income of such first-time home2 buyer by reason of this section.

3 ‘‘(C) RECOGNITION OF GAIN AS ORDINARY

4 INCOME.—

5 ‘‘(i) IN GENERAL.—Notwithstanding

6 any other provision of this subtitle, except

7 as provided in clause (ii)—

8 ‘‘(I) gain (if any) on the sale or

9 exchange of a principal residence to

10 which subparagraph (A) applies shall,

11 to the extent of the amount excluded

12 from gross income under this section,

13 be treated as ordinary income by such

14 individual, and

15 ‘‘(II) section 72(t) shall apply to

16 such amount.

17 ‘‘(ii) EXCEPTION.—Clause (i) shall

18 not apply to any taxable year to the extent

19 of any amount which, before the due date

20 (without extensions) for filing the return

21 for such year, the taxpayer contributes to

22 an individual retirement plus account.

23 Such amount shall not be taken into ac24 count for purposes of any provision of this

25 title relating to excess contributions.
40

•S 568 IS

1 ‘‘(iii) COORDINATION WITH OTHER

2 PROVISIONS.—In the event all or part of

3 the gain referred to in clause (i) is treated

4 as ordinary income under any other provi5 sion of this subtitle, such provision shall be

6 applied before clause (i).

7 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC8 QUISITION.—If—

9 ‘‘(i) any amount is paid or distributed

10 from an individual retirement plus account

11 to an individual for purposes of being used

12 as provided in subparagraph (A), and

13 ‘‘(ii) by reason of a delay in the acqui14 sition of the residence, such amount cannot

15 be so used,

16 the amount so paid or distributed may be paid

17 into an individual retirement plus account as

18 provided in section 408(d)(3)(A)(i) without re19 gard to section 408(d)(3)(B), and, if so paid

20 into such other plan, such amount shall not be

21 taken into account in determining whether sec22 tion 408(d)(3)(A)(i) applies to any other

23 amount.

24 ‘‘(E) DEFINITIONS.—For purposes of this

25 paragraph—
41

•S 568 IS

1 ‘‘(i) QUALIFIED ACQUISITION

2 COSTS.—The term ‘qualified acquisition

3 costs’ means the costs of acquiring, con4 structing, or reconstructing a residence.

5 Such term includes any usual or reason6 able settlement, financing, or other closing

7 costs.

8 ‘‘(ii) FIRST-TIME HOMEBUYER.—The

9 term ‘first-time homebuyer’ means any in10 dividual if such individual (and if married,

11 such individual’s spouse) had no present

12 ownership interest in a principal residence

13 during the 3-year period ending on the

14 date of acquisition of the principal resi15 dence to which this paragraph applies.

16 ‘‘(iii) PRINCIPAL RESIDENCE.—The

17 term ‘principal residence’ has the same

18 meaning as when used in section 1034.

19 ‘‘(iv) DATE OF ACQUISITION.—The

20 term ‘date of acquisition’ means the date—

21 ‘‘(I) on which a binding contract

22 to acquire the principal residence to

23 which subparagraph (A) applies is en24 tered into, or
42

•S 568 IS

1 ‘‘(II) on which construction or re2 construction of such a principal resi3 dence is commenced.

4 ‘‘(4) APPLICABLE MEDICAL DISTRIBUTIONS.—

5 For purposes of paragraph (1), the term ‘applicable

6 medical distributions’ means any distributions made

7 to an individual (not otherwise taken into account

8 under this subsection) to the extent such distribu9 tions do not exceed the amount allowable as a de10 duction under section 213 for amounts paid during

11 the taxable year for medical care (without regard to

12 whether the individual itemized deductions for the

13 taxable year).

14 ‘‘(5) DISTRIBUTIONS FROM INDIVIDUAL RE15 TIREMENT PLUS ACCOUNTS FOR EDUCATIONAL EX16 PENSES.—

17 ‘‘(A) IN GENERAL.—For purposes of para18 graph (1), the term ‘applicable educational dis19 tributions’ means distributions to an individual

20 to the extent that the amount of such distribu21 tions (not otherwise treated as qualified special

22 purpose distributions, determined after applica23 tion of paragraph (4)) does not exceed the

24 qualified higher education expenses of the indi25 vidual for the taxable year.
43

•S 568 IS

1 ‘‘(B) QUALIFIED HIGHER EDUCATION EX2 PENSES.—For purposes of subparagraph (A)—

3 ‘‘(i) IN GENERAL.—The term ‘quali4 fied higher education expenses’ means tui5 tion, fees, books, supplies, and equipment

6 required for the enrollment or attendance

7 of—

8 ‘‘(I) the taxpayer,

9 ‘‘(II) the taxpayer’s spouse, or

10 ‘‘(III) the taxpayer’s child (as de11 fined in section 151(c)(3)) or grand12 child,

13 at an eligible educational institution (as

14 defined in section 135(c)(3)).

15 ‘‘(ii) COORDINATION WITH SAVINGS

16 BOND PROVISIONS.—The amount of quali17 fied higher education expenses for any tax18 able year shall be reduced by any amount

19 excludable from gross income under section

20 135.

21 ‘‘(f) ROLLOVER CONTRIBUTIONS.—For purposes of

22 this section, the term ‘rollover contributions’ means con23 tributions described in sections 402(a)(5), 402(a)(7),

24 403(a)(4), 403(b)(8), and 408(d)(3).
44

•S 568 IS

1 ‘‘(g) DETERMINATIONS.—For purposes of this sec2 tion, any determinations with respect to aggregate con3 tributions to, or the balance of, individual retirement plus

4 accounts shall be made as of the close of the calendar year

5 preceding the calendar year in which the taxable year

6 begins.’’

7 (b) CONFORMING AMENDMENT.—The table of sec8 tions for subpart A of part I of subchapter D of chapter

9 1 is amended by inserting after the item relating to section

10 408 the following new item:

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

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

12 this section shall apply to taxable years beginning after

13 December 31, 1994.

14 SEC. 402. INFLATION ADJUSTMENT OF INCOME THRESH15 OLDS FOR TAXATION OF SOCIAL SECURITY

16 BENEFITS; INCOME FROM INDIVIDUAL RE17 TIREMENT PLANS EXCLUDED.

18 (a) ADJUSTMENT OF INCOME THRESHOLDS FOR IN19 FLATION.—Subsection (c) of section 86 (relating to social

20 security and tier 1 railroad retirement benefits) is amend21 ed by adding at the end the following new paragraph:

22 ‘‘(3) ADJUSTMENT OF INCOME THRESHOLDS

23 FOR INFLATION.—

24 ‘‘(A) IN GENERAL.—In the case of any

25 taxable year beginning in a calendar year after
45

•S 568 IS

1 1997, each dollar amount contained in para2 graphs (1) and (2) shall be increased by an

3 amount equal to—

4 ‘‘(i) such dollar amount, multiplied by

5 ‘‘(ii) the cost-of-living adjustment

6 under section 1(f)(3) for the calendar year

7 in which the taxable year begins, deter8 mined by substituting ‘calendar year 1996’

9 for ‘calendar year 1992’ in subparagraph

10 (B) thereof.

11 ‘‘(B) ROUNDING.—If any amount as ad12 justed under subparagraph (A) is not a multiple

13 of $50, such amount shall be rounded to the

14 nearest multiple of $50 (or, if such amount is

15 a multiple of $25, such amount shall be round16 ed to the next highest multiple of $50).’’

17 (b) INCOME FROM INDIVIDUAL RETIREMENT PLANS

18 EXCLUDED.—Paragraph (2) of section 86(b) is amended

19 by striking ‘‘and’’ at the end of subparagraph (A), by

20 striking the period at the end of subparagraph (B) and

21 inserting ‘‘, and’’, and by adding at the end the following

22 new subparagraph:

23 ‘‘(C) decreased by the portion of such in24 come which is attributable to a distribution or

25 payment from an individual retirement plan.’’
46

•S 568 IS

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

2 this section shall apply to taxable years beginning after

3 December 31, 1997.

4 SEC. 403. INFLATION ADJUSTMENT OF MAXIMUM AMOUNT

5 OF IRA DEDUCTION.

6 (a) IN GENERAL.—Section 219 (relating to retire7 ment savings) is amended by redesignating subsection (h)

8 as subsection (i) and by inserting after subsection (g) the

9 following new subsection:

10 ‘‘(h) ADJUSTMENT OF MAXIMUM DEDUCTION FOR

11 INFLATION.—

12 ‘‘(1) IN GENERAL.—In the case of any taxable

13 year beginning in a calendar year after 1997, each

14 applicable dollar amount shall be increased by an

15 amount equal to—

16 ‘‘(A) such dollar amount, multiplied by

17 ‘‘(B) the cost-of-living adjustment under

18 section 1(f)(3) for the calendar year in which

19 the taxable year begins, determined by sub20 stituting ‘calendar year 1996’ for ‘calendar year

21 1992’ in subparagraph (B) thereof.

22 ‘‘(2) APPLICABLE DOLLAR AMOUNT.—For pur23 poses of paragraph (1), the term ‘applicable dollar

24 amount’ means—
47

•S 568 IS

1 ‘‘(A) the $2,000 amount in subsections

2 (b)(1)(A) and (c)(2) of this section, in sub3 sections (a)(1), (b), and (j) of section 408, and

4 in section 408A(c)(2)(C), and

5 ‘‘(B) the $2,250 amount in subsection

6 (c)(2) of this section and in section 408(d)(5).

7 ‘‘(3) ROUNDING.—If any amount as adjusted

8 under paragraph (1) is not a multiple of $50, such

9 amount shall be rounded to the nearest multiple of

10 $50 (or, if such amount is a multiple of $25, such

11 amount shall be rounded to the next highest multiple

12 of $50).’’

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

14 this section shall apply to taxable years beginning after

15 December 31, 1997.

16 TITLE V—CAP ON FEDERAL

17 SPENDING AND ESTABLISH18 MENT OF COMMISSION TO RE19 DUCE FEDERAL SPENDING

20 SEC. 501. ESTABLISHMENT.

21 There is established an independent commission to be

22 known as the ‘‘Spending Reduction Commission’’ (herein23 after referred to as the ‘‘Commission’’).

24 SEC. 502. DUTIES OF COMMISSION.

25 The Commission is authorized and directed to—
48

•S 568 IS

1 (1) review all Federal spending, including enti2 tlement programs, in order to identify and rec3 ommend specific reductions in any Federal project,

4 program, or activity to assure that aggregate Fed5 eral spending does not grow at a rate in excess of

6 2 percent per annum for any fiscal year beginning

7 after 1995, and

8 (2) take the actions required by this title to

9 achieve the reductions in Federal spending described

10 in paragraph (1).

11 SEC. 503. MEMBERSHIP AND OPERATION OF COMMISSION.

12 (a) APPOINTMENT.—(1)(A) The Commission shall be

13 composed of 7 members appointed by the President, by

14 and with the advice and consent of the Senate.

15 (B) Not later than January 15th of any calendar

16 year, the President shall transmit to the Senate the nomi17 nations for appointment to the Commission for the fiscal

18 year beginning in the calendar year.

19 (2) In selecting individuals for nominations for ap20 pointments to the Commission, the President shall se21 lect—

22 (A) 4 of the members from a list of 10 individ23 uals submitted by the Speaker of the House of Rep24 resentatives and the Majority Leader of the Senate,

25 and
49

•S 568 IS

1 (B) 3 of the members from a list of 10 individ2 uals submitted by the Minority Leader of the House

3 of Representatives and the Minority Leader of the

4 Senate.

5 (3) At the time the President nominates individuals

6 for appointment to the Commission, the President shall

7 designate 1 such individual who shall serve as Chairman

8 and Vice Chairman of the Commission.

9 (4) No current Member of Congress, employee of the

10 executive branch, or current or former registered lobbyist

11 may serve on the Commission.

12 (b) TERMS.—(1) Except as provided in paragraph

13 (2), each member of the Commission shall serve until No14 vember 1st of the calendar year in which the member is

15 appointed.

16 (2) The Chairman of the Commission shall serve until

17 the confirmation of a successor.

18 (c) MEETINGS.—(1) Each meeting of the Commis19 sion, other than meetings in which classified information

20 is to be discussed, shall be open to the public.

21 (2) All the proceedings, information, and delibera22 tions of the Commission shall be open, upon request, to

23 the Chairman and the ranking minority member of the

24 Budget and Appropriations Committees of each House.
50

•S 568 IS

1 (d) VACANCIES.—A vacancy in the Commission shall

2 be filled in the same manner as the original appointment.

3 (e) PAY AND TRAVEL EXPENSES.—(1)(A) Each

4 member, other than the Chairman, shall be paid at a rate

5 not to exceed the daily equivalent of the minimum annual

6 rate of basic pay payable for level IV of the Executive

7 Schedule under section 5315 of title 5, United States

8 Code, for each day (including travel time) during vested

9 in the Commission.

10 (B) The Chairman shall be paid for each day referred

11 to in subparagraph (A) at a rate not to exceed the daily

12 equivalent of the minimum annual rate of basic pay pay13 able for level III of the Executive Schedule under section

14 5314 of title 5, United States Code.

15 (2) Members shall receive travel expenses, including

16 per diem in lieu of subsistence, in accordance with sections

17 5702 and 5703 of title 5, United States Code.

18 (f) DIRECTOR OF STAFF.—(1) The Commission shall,

19 without regard to section 5311(b) of title 5, United States

20 Code, appoint a Director who has not been employed by

21 the Federal Government during the 1-year period preced22 ing the date of such appointment and who is not a former

23 Member of Congress or registered lobbyist.

24 (2) The Director shall be paid at a rate not to exceed

25 the rate of basic pay payable for level IV of the Executive
51

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1 Schedule under section 5315 of title 5, United States

2 Code.

3 (g) STAFF.—(1) Subject to paragraphs (2) and (3),

4 the Director, with the approval of the Commission, may

5 appoint and fix pay of additional personnel.

6 (2) The Director may take such appointments with7 out regard to the provisions of title 5, United States Code,

8 governing appointment in the competitive service, and any

9 personnel so appointed may be paid without regard to the

10 provisions of chapter 51 and subchapter III of chapter 53

11 of that title relating to classification and General Schedule

12 pay rates, except that an individual so appointed may not

13 receive pay in excess of the annual rate of basic pay pay14 able for GS–18 of the General Schedule.

15 (3) Not more than one-third of the personnel em16 ployed by or detailed to the Commission may be on detail

17 from any Government agency.

18 (4) Upon request of the Director, the head of any

19 Federal department or agency may detail any of the per20 sonnel of that department or agency to the Commission

21 to assist the Commission in carrying out its duties under

22 this Act.

23 (5) The Comptroller General of the United States

24 shall provide assistance, including the detailing of employ-
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1 ees, to the Commission in accordance with an agreement

2 entered into with the Commission.

3 (h) OTHER AUTHORITY.—(1) The Commission may

4 procure by contract, to the extent funds are available, the

5 temporary or intermittent services of experts or consult6 ants pursuant to section 3109 of title 5, United States

7 Code.

8 (2) The Commission may lease space and acquire per9 sonal property to the extent funds are available.

10 (i) FUNDING.—Each department and agency shall

11 transfer necessary funding to the Commission on a pro

12 rata basis based on that agency’s or department’s funding

13 percentage of the total Executive budget.

14 (j) TERMINATION.—Each Commission shall termi15 nate on November 1st of the calendar year in which the

16 Commission is appointed.

17 SEC. 504. PROCEDURE FOR MAKING RECOMMENDATION

18 FOR PROPOSED CUTS.

19 (a) SELECTION CRITERIA.—(1) OMB shall, by no

20 later than January 1st of each year, publish in the Federal

21 Register and transmit to the Budget and Appropriations

22 committees of each House the criteria proposed to be used

23 by OMB in making budget outlay reduction recommenda24 tions required by this section. OMB shall provide an op25 portunity for public comment on the proposed criteria for
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1 a period of at least 10 days and shall include notice of

2 that opportunity in the publication required under the pre3 ceding sentence.

4 (2)(A) OMB shall, by no later than January 15th,

5 publish in the Federal Register and transmit to the con6 gressional budget and appropriations committees the final

7 criteria to be used in making recommendations for pro8 gram cuts. Except as provided in subparagraph (B), such

9 criteria shall be the final criteria to be used in making

10 such recommendations unless disapproved by a joint reso11 lution of Congress enacted on or before February 1st.

12 (B) OMB shall amend such criteria, but such amend13 ments may not become effective until they have been pub14 lished in the Federal Register, opened to public comment

15 for at least 10 days, and then transmitted to the Budget

16 and Appropriations committees of each House in final

17 form by no later than February 1st. Such amended cri18 teria shall be the final criteria to be used in making such

19 recommendations unless disapproved by a joint resolution

20 of Congress enacted on or before February 15th.

21 (b) OMB RECOMMENDATIONS.—(1) OMB may, by

22 no later than April 1st, publish in the Federal Register

23 and transmit to the congressional budget and appropria24 tions committees and to the Commission OMB’s rec-
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1 ommendations for budget outlay reductions which meet

2 the requirements of section 502(1).

3 (2) OMB shall include, with the list of recommenda4 tions published and transmitted pursuant to paragraph

5 (1), a summary of the selection process that resulted in

6 the recommendation.

7 (3) In considering such outlay reductions, OMB shall

8 consider all programs without regard to whether such pro9 grams have previously been considered or proposed for

10 elimination.

11 (4) OMB shall make available to the Commission and

12 the Comptroller General of the United States all informa13 tion used by OMB in making its recommendations.

14 (c) REVIEW AND RECOMMENDATIONS BY THE COM15 MISSION.—(1) After receiving the recommendations from

16 OMB pursuant to subsection (b), the Commission shall

17 conduct public hearings on the recommendations.

18 (2) The Director of the Congressional Budget Office

19 shall notify the Commission on August 1st of any savings

20 that have been enacted into law for the upcoming fiscal

21 year. The target for such fiscal year shall be reduced by

22 the amount of such savings.

23 (3)(A) The Commission shall, by no later than Au24 gust 15th, transmit to the President a report containing
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1 the Commission’s findings and conclusions based on a re2 view and analysis of the recommendations.

3 (B) In making its recommendations, the Commission

4 may make changes in any of the recommendations made

5 by OMB.

6 (4) The Commission shall explain and justify in its

7 report submitted to the President pursuant to paragraph

8 (2) any recommendation made by the Commission that is

9 different from the recommendations made by OMB pursu10 ant to subsection (b). The Commission shall transmit a

11 copy of such report to the Budget and Appropriations

12 committees of each House on the same date on which it

13 transmits its recommendations to the President under

14 paragraph (2).

15 (5) After August 15th, the Commission shall prompt16 ly provide, upon request, to any Member of Congress in17 formation used by the Commission in making its rec18 ommendations.

19 (6) The Congressional Budget Office shall—

20 (A) assist the Commission, to the extent re21 quested, in the Commission’s review and analysis of

22 the recommendations made by OMB pursuant to

23 subsection (b); and

24 (B) by no later than June 1st, transmit to the

25 Congress and to the Commission a report containing
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1 a detailed analysis of OMB’s recommendations and

2 selection process.

3 (d) REVIEW BY THE PRESIDENT.—(1) The President

4 shall, by no later than September 1st, transmit to the

5 Commission and to the Congress, a report containing the

6 President’s approval or disapproval of the Commission’s

7 recommendations.

8 (2) If the President approves all the recommenda9 tions of the Commission, the President shall transmit a

10 copy of such recommendations to the Congress, together

11 with a certification of such approval and legislative lan12 guage implementing such recommendations.

13 (3) If the President disapproves the recommendations

14 of the Commission, in whole or in part, the President shall

15 transmit to the Commission and the Congress the reasons

16 for that disapproval. The Commission shall then transmit

17 to the President, by no later than September 5th, a revised

18 list of recommendations.

19 (4) If the President approves all of the revised rec20 ommendations of the Commission transmitted to the

21 President under paragraph (3), the President shall trans22 mit a copy of such revised recommendation to the Con23 gress, together with a certification of such approval.

24 (5) If the President does not transmit to the Con25 gress an approval and certification described in paragraph
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1 (2) or (4) by September 10th, the process by which budget

2 outlay reductions may occur under this title with respect

3 to that year shall be terminated.

4 SEC. 505. BUDGET OUTLAY REDUCTIONS.

5 (a) IN GENERAL.—The President shall submit rec6 ommendations to Congress together with a joint resolution

7 containing legislative language implementing such rec8 ommendations not later than September 10th, as provided

9 in section 504.

10 (b) CONGRESSIONAL CONSIDERATION OF PRESI11 DENT’S RECOMMENDATIONS.—

12 (1) TERMS OF THE RESOLUTION.—For the pur13 poses of subsection (a), the term ‘‘joint resolution’’

14 means a joint resolution that—

15 (A) is introduced within the 2-day period

16 beginning on the date on which the President

17 transmits a report to the Congress under sec18 tion 3(d);

19 (B) does not have a preamble;

20 (C) states after the resolving clause ‘‘That

21 Congress approves the recommendations of the

22 Spending Reduction Commission submitted by

23 the President on lll’’, the blank space

24 being filled in with the appropriate date and
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1 contains the President’s legislative language de2 scribed in subsection (a); and

3 (D) is entitled a ‘‘Joint resolution approv4 ing the recommendations of the Spending Re5 duction Commission.’’

6 (2) REFERRAL.—(A) A resolution described in

7 paragraph (1) that is introduced in the House of

8 Representatives shall be referred to the Committee

9 on Government Operations of the House of Rep10 resentatives.

11 (B) A resolution described in paragraph (1)

12 that is introduced in the Senate shall be referred to

13 the Committee on Governmental Affairs of the Sen14 ate.

15 (3) DISCHARGE.—If the committee to which a

16 resolution described in paragraph (1) is referred has

17 not reported the resolution (or an identical resolu18 tion) by the end of the 5-day period beginning on

19 the date on which the President transmits the report

20 to the Congress, such committee shall, at the end of

21 that period, be discharged from further consider22 ation of the resolution, and the resolution shall be

23 placed on the appropriate calendar of the House of

24 Representatives or the Senate, as the case may be.
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1 (4) CONSIDERATION.—(A)(i) On or after the

2 first day after the date on which the committee to

3 which a joint resolution described in paragraph (1)

4 is referred has reported, or has been discharged

5 (under paragraph (3)) from further consideration of,

6 such a resolution, it is in order (even though a pre7 vious motion to the same effect has been disagreed

8 to) for any member of the House of Representatives

9 or the Senate, respectively, to move to proceed to the

10 consideration of the resolution (but only on the date

11 after the calendar day on which the member an12 nounces to the House concerned the member’s inten13 tion to do so).

14 (ii) All points of order against a resolution de15 scribed in paragraph (1) (and against consideration

16 of the resolution) are waived.

17 (iii)(I) A motion to proceed to the consideration

18 of a joint resolution described in paragraph (1) is

19 highly privileged in the House of Representatives

20 and is privileged in the Senate and is not debatable.

21 (II) A motion described in subclause (I) is not

22 subject to amendment, to a motion to postpone con23 sideration of the resolution, or to a motion to pro24 ceed to the consideration of other business.
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1 (III) A motion to reconsider the vote by which

2 a motion described in subclause (I) is agreed to or

3 not agreed to shall not be in order.

4 (IV) If a motion described in subclause (I) is

5 agreed to, the House of Representatives or the Sen6 ate, as the case may be, shall immediately proceed

7 to consideration of the joint resolution without inter8 vening motion, order, or other business, and the res9 olution shall remain the unfinished business of the

10 House of Representatives or the Senate, as the case

11 may be, until disposed of.

12 (B)(i) Debate on a joint resolution described in

13 paragraph (1) and on all debatable motions and ap14 peals in connection therewith shall be limited to not

15 more than 5 hours, which shall be divided equally

16 between those favoring and those opposing the reso17 lution.

18 (ii) An amendment to a joint resolution de19 scribed in paragraph (1) is not in order.

20 (iii) A motion further to limit debate on a joint

21 resolution described in paragraph (1) is in order and

22 not debatable.

23 (iv) A motion to postpone consideration of a

24 joint resolution described in paragraph (1), a motion
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1 to proceed to the consideration of other business, or

2 a motion to recommit the resolution is not in order.

3 (v) A motion to reconsider the vote by which a

4 resolution described in paragraph (1) is agreed to or

5 not agreed to is not in order.

6 (C) Immediately following the conclusion of the

7 debate on a joint resolution described in paragraph

8 (1) and a single quorum call at the conclusion of the

9 debate if requested in accordance with the rules of

10 the House of Representatives or the Senate, as the

11 case may be, the vote on final passage of the resolu12 tion shall occur.

13 (D) Appeals from the decisions of the Chair re14 lating to the application of the rules of the House

15 of Representatives or of the Senate, as the case may

16 be, to the procedure relating to a joint resolution de17 scribed in paragraph (1) shall be decided without de18 bate.

19 (5) CONSIDERATION BY OTHER HOUSE.—(A) If,

20 before the passage by one House of a joint resolu21 tion described in paragraph (1) that was introduced

22 in that House, that House receives from the other

23 House a joint resolution described in paragraph

24 (1)—
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1 (i) the resolution of the other House shall

2 not be referred to a committee and may not be

3 considered in the House that receives it other4 wise than on final passage under clause (ii)(II);

5 and

6 (ii)(I) the procedure in the House that re7 ceives such a resolution with respect to such a

8 resolution that was introduced in that House

9 shall be the same as if no resolution had been

10 received from the other House; but

11 (II) the vote on final passage shall be on

12 the resolution of the other House.

13 (B) Upon disposition of a joint resolution de14 scribed in paragraph (1) that is received by one

15 House from the other House, it shall no longer be

16 in order to consider such a resolution that was intro17 duced in the receiving House.

18 (6) DATE CERTAIN.—If the Senate and the

19 House of Representatives have not acted upon the

20 joint resolution by September 30th, then on that day

21 or the next day of session thereafter the joint resolu22 tion shall be called up by the Presiding Officer of

23 each House upon convening and a roll call vote shall

24 be conducted on passage. If the joint resolution
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1 passes one House a vote on final passage shall be

2 immediately conducted in the other House.

3 (7) RULES OF THE SENATE AND HOUSE OF

4 REPRESENTATIVES.—This subsection is enacted by

5 Congress—

6 (A) as an exercise of the rulemaking power

7 of the Senate and House of Representatives, re8 spectively, and is deemed to be part of the rules

9 of each House, respectively, but applicable only

10 with respect to the procedure to be followed in

11 that House in the case of a joint resolution de12 scribed in paragraph (1), and it supersedes

13 other rules only to the extent that it is incon14 sistent with such rules; and

15 (B) with full recognition of the constitu16 tional right of either House to change the rules

17 (so far as they relate to the procedure of that

18 House) at any time, in the same manner, and

19 to the same extent as in the case of any other

20 rule of that House.

21 SEC. 506. BUDGET OUTLAY REDUCTIONS PERMANENT.

22 All obligational authority reduced pursuant to this

23 title shall be done in a manner that shall make such reduc24 tions permanent.
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1 SEC. 507. ADDITIONAL ENFORCEMENT PROVISIONS.

2 (a) PAYGO SCORECARD.—No reductions in direct

3 spending pursuant to this title shall be treated as a net

4 deficit decrease for purposes of section 252 of the Bal5 anced Budget and Emergency Deficit Control Act of 1985.

6 (b) DISCRETIONARY SPENDING LIMITS.—When

7 OMB submits a sequestration report under section 254

8 (g) or (h) of the Balanced Budget and Emergency Deficit

9 Control Act of 1985, OMB shall include downward adjust10 ments to discretionary spending limits (in new budget au11 thority and outlays) for the budget year and each outyear

12 to take full account of all reductions in discretionary

13 spending pursuant to this title for that fiscal year.

14 SEC. 508. COMPLIANCE REPORT BY COMPTROLLER

15 GENERAL.

16 Within 15 days after the end of a session of Congress,

17 the Comptroller General shall submit to the Congress and

18 the President a report stating whether the requirements

19 of this title have been complied with and indicating which

20 requirements (if any) have not been complied with.

21 SEC. 509. AMENDMENTS TO THE BALANCED BUDGET AND

22 EMERGENCY DEFICIT CONTROL ACT OF 1985

23 TO LIMIT FEDERAL SPENDING.

24 The Balanced Budget and Emergency Deficit Control

25 Act of 1985 is amended by adding after section 252 the

26 following new section:
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1 ‘‘SEC. 252A. LIMITATIONS ON DIRECT SPENDING.

2 ‘‘(a) ENFORCEMENT.—The purpose of this section is

3 to assure that any increase in the annual amount of total

4 Federal spending exceeding the amount resulting from an

5 annual rate of inflation of 2 percent will trigger an offset6 ting sequestration.

7 ‘‘(b) SEQUESTRATION.—Within 15 calendar days

8 after Congress adjourns to end a session and on the same

9 day as a sequestration (if any) under sections 251 and

10 252, and prior to any sequestration under section 253,

11 there shall be a sequestration to offset the amount of any

12 excess Federal spending in that fiscal year. The amount

13 of excess Federal spending for a fiscal year shall be the

14 amount by which OMB projects total Federal spending for

15 that year to exceed the direct spending limit for that year

16 set forth in the following table:

Fiscal Year Outlay limits (in billions of

dollars)

1996 ...................................................................... 1578

1997 ...................................................................... 1609

1998 ...................................................................... 1642

1999 ...................................................................... 1675

2000 ...................................................................... 1708

17 ‘‘(c) ELIMINATING EXCESS FEDERAL SPENDING.—

18 The amount required to be sequestered in a fiscal year

19 under subsection (b) shall be obtained from all non-exempt

20 accounts. Each non-exempt account shall be reduced by
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1 the uniform percentage necessary to make the required re2 duction in Federal spending. The uniform reduction re3 quired shall be made without application of the exemp4 tions, limitations, and special rules set forth in sections

5 255 and 256, except for the following: section 255(a) (with

6 respect to social security benefits), 255(c) and prior legal

7 obligations of the Government in sections 255(g)(1) and

8 255(g)(2).

9 ‘‘(d) REPORTS.—The requirements of section 254 for

10 reports and orders that are applicable to section 252 shall

11 also apply to this section except that such reports and or12 ders for this section shall refer to and apply the require13 ments, calculations and sequestrations of this section.

14 ‘‘(e) RECONCILIATION PROCESS TO AVOID SEQUES15 TRATION.—Whenever an update report for this section in16 dicates that a sequester would be necessary to eliminate

17 excess Federal spending, the special reconciliation process

18 set forth in section 258C shall apply for consideration of

19 alternatives to the order envisioned by such report.

20 ‘‘(f) TRIGGER.—This section shall only be effective

21 if the recommendations of the Spending Reduction Com22 mission established under title V of the Family Invest23 ment, Retirement Savings, and Tax Fairness Act of 1995

24 are not enacted into law.’’
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1 SEC. 510. DEFINITIONS.

2 As used in this title—

3 (1) the terms ‘‘budget outlay’’, ‘‘outlay’’, ‘‘new

4 budget authority’’, ‘‘direct spending’’, and ‘‘OMB’’

5 have the meanings given to such terms by section

6 250(c) of the Balanced Budget and Emergency Defi7 cit Control Act of 1985;

8 (2) the term ‘‘aggregate Federal spending’’

9 shall not include Federal deposit insurance outlays

10 and receipts; and

11 (3) the term ‘‘reductions in Federal spending’’

12 shall not include any offsetting reductions and

13 receipts.

14 TITLE VI—ELIMINATION OF SO15 CIAL SECURITY EARNINGS

16 TEST

17 SEC. 601. ELIMINATION OF SOCIAL SECURITY EARNINGS

18 TEST.

19 (a) IN GENERAL.—Section 203 of the Social Security

20 Act is amended—

21 (1) in paragraph (1) of subsection (c) and para22 graphs (1)(A) and (2) of subsection (d), by striking

23 ‘‘the age of seventy’’ and inserting ‘‘retirement age

24 (as defined in section 216(l))’’;
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1 (2) in subsection (f)(1)(B), by striking ‘‘was

2 age seventy or over’’ and inserting ‘‘was at or above

3 retirement age (as defined in section 216(l))’’;

(3) in subsection (f)(3), by striking ‘‘331 4 ⁄3 per5 cent’’ and all that follows through ‘‘any other indi6 vidual,’’ and inserting ‘‘50 percent of such individ7 ual’s earnings for such year in excess of the product

8 of the exempt amount as determined under para9 graph (8),’’ and by striking ‘‘age 70’’ and inserting

10 ‘‘retirement age (as defined in section 216(l))’’;

11 (4) in subsection (h)(1)(A), by striking ‘‘age

12 70’’ each place it appears and inserting ‘‘retirement

13 age (as defined in section 216(l))’’; and

14 (5) in subsection (j), by striking ‘‘Age Seventy’’

15 in the heading and inserting ‘‘Retirement Age’’, and

16 by striking ‘‘seventy years of age’’ and inserting

17 ‘‘having attained retirement age (as defined in sec18 tion 216(l))’’.

19 (b) CONFORMING AMENDMENTS ELIMINATING THE

20 SPECIAL EXEMPT AMOUNT FOR INDIVIDUALS WHO HAVE

21 ATTAINED RETIREMENT AGE.—

22 (1) UNIFORM EXEMPT AMOUNT.—Section

23 203(f)(8)(A) of such Act is amended by striking

24 ‘‘the new exempt amounts (separately stated for in25 dividuals described in subparagraph (D) and for
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1 other individuals) which are to be applicable’’ and

2 inserting ‘‘a new exempt amount which shall be

3 applicable’’.

4 (2) CONFORMING AMENDMENTS.—Section

5 203(f)(8)(B) of such Act is amended—

6 (A) in the matter preceding clause (i), by

7 striking ‘‘Except’’ and all that follows through

8 ‘‘whichever’’ and inserting ‘‘The exempt amount

9 which is applicable for each month of a particu10 lar taxable year shall be whichever’’;

11 (B) in clause (i), by striking ‘‘correspond12 ing’’; and

13 (C) in the last sentence, by striking ‘‘an

14 exempt amount’’ and inserting ‘‘the exempt

15 amount’’.

16 (3) REPEAL OF BASIS FOR COMPUTATION OF

17 SPECIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of

18 such Act is repealed.

19 (c) ELIMINATION OF REDUNDANT REFERENCES TO

20 RETIREMENT AGE.—Section 203 of such Act is amend21 ed—

22 (1) in the last sentence of subsection (c), by

23 striking ‘‘nor shall any deduction’’ and all that fol24 lows and inserting ‘‘nor shall any deduction be made

25 under this subsection from any widow’s or widower’s
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1 insurance benefit if the widow, surviving divorced

2 wife, widower, or surviving divorced husband in3 volved became entitled to such benefit prior to at4 taining age 60.’’; and

5 (2) in subsection (f)(1), by striking clause (D)

6 and inserting the following: ‘‘(D) for which such in7 dividual is entitled to widow’s or widower’s insurance

8 benefits if such individual became so entitled prior

9 to attaining age 60, or’’.

10 (d) CONFORMING AMENDMENT TO PROVISIONS FOR

11 DETERMINING AMOUNT OF INCREASE ON ACCOUNT OF

12 DELAYED RETIREMENT.—Section 202(w)(2)(B)(ii) of

13 such Act is amended—

14 (1) by striking ‘‘either’’; and

15 (2) by striking ‘‘or suffered deductions under

16 section 203(b) or 203(c) in amounts equal to the

17 amount of such benefit’’.

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

19 this section shall apply with respect to taxable years begin20 ning after December 31, 1994.

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