II

104TH CONGRESS

1ST SESSION S. 453

To amend the Internal Revenue Code of 1986 to modify the eligibility criteria

for the earned income tax credit, to improve tax compliance by United

States persons establishing or benefiting from foreign trusts, and for

other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 16 (legislative day, JANUARY 30), 1995

Mr. MOYNIHAN (for himself and Mr. DASCHLE) (by request) 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 modify

the eligibility criteria for the earned income tax credit,

to improve tax compliance by United States persons establishing or benefiting from foreign trusts, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

5 ‘‘Tax Compliance Act of 1995’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend-
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1 ment or repeal is expressed in terms of an amendment

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 (c) TABLE OF CONTENTS.—

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

TITLE I—PROVISIONS RELATING TO THE EARNED INCOME

CREDIT

Sec. 101. Earned income tax credit denied to individuals not authorized to be

employed in the United States.

Sec. 102. Earned income tax credit denied to individuals with substantial unearned income.

TITLE II—PROVISIONS RELATING TO INTERNATIONAL TAXATION

Sec. 201. Revision of tax rules on expatriation.

Sec. 202. Improved information reporting on foreign trusts.

Sec. 203. Modification of rules relating to foreign trusts having one or more

United States beneficiaries.

Sec. 204. Foreign persons not to be treated as owners under grantor trust

rules.

Sec. 205. Gratuitous transfers by partnerships and foreign corporations.

Sec. 206. Information reporting regarding large foreign gifts.

Sec. 207. Modification of rules relating to foreign trusts which are not grantor

trusts.

Sec. 208. Residence of estates and trusts.

TITLE III—ADDITIONAL EMPOWERMENT ZONES

Sec. 301. Additional empowerment zones.

6 TITLE I—PROVISIONS RELATING

7 TO THE EARNED INCOME

8 CREDIT

9 SEC. 101. EARNED INCOME TAX CREDIT DENIED TO INDI10 VIDUALS NOT AUTHORIZED TO BE EM11 PLOYED IN THE UNITED STATES.

12 (a) IN GENERAL.—Section 32(c)(1) (relating to indi13 viduals eligible to claim the earned income tax credit) is
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1 amended by adding at the end the following new subpara2 graph:

3 ‘‘(F) IDENTIFICATION NUMBER REQUIRE4 MENT.—The term ‘eligible individual’ does not

5 include any individual who does not include on

6 the return of tax for the taxable year—

7 ‘‘(i) such individual’s taxpayer identi8 fication number, and

9 ‘‘(ii) if the individual is married (with10 in the meaning of section 7703), the tax11 payer identification number of such indi12 vidual’s spouse.’’

13 (b) SPECIAL IDENTIFICATION NUMBER.—Section 32

14 is amended by adding at the end the following new sub15 section:

16 ‘‘(k) IDENTIFICATION NUMBERS.—Solely for pur17 poses of subsections (c)(1)(F) and (c)(3)(D), a taxpayer

18 identification number means a social security number is19 sued to an individual by the Social Security Administra20 tion (other than a social security number issued pursuant

21 to clause (II) (or that portion of clause (III) that relates

22 to clause (II)) of section 205(c)(2)(B)(i) of the Social Se23 curity Act).’’

24 (c) EXTENSION OF PROCEDURES APPLICABLE TO

25 MATHEMATICAL OR CLERICAL ERRORS.—Section
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1 6213(g)(2) (relating to the definition of mathematical or

2 clerical errors) is amended by striking ‘‘and’ at the end

3 of subparagraph (D), by striking the period at the end

4 of subparagraph (E) and inserting ‘‘, and’’, and by insert5 ing after subparagraph (E) the following new subpara6 graph:

7 ‘‘(F) an omission of a correct taxpayer

8 identification number required under section 23

9 (relating to credit for families with younger

10 children) or section 32 (relating to the earned

11 income tax credit) to be included on a return.’’

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

13 this section shall apply to taxable years beginning after

14 December 31, 1995.

15 SEC. 102. EARNED INCOME TAX CREDIT DENIED TO INDI16 VIDUALS WITH SUBSTANTIAL UNEARNED IN17 COME.

18 (a) IN GENERAL.—Paragraph (1) of section 32(c)

19 (relating to individuals eligible to claim the earned income

20 tax credit) is amended by adding at the end the following

21 new subparagraph:

22 ‘‘(G) EXCEPTION FOR INDIVIDUAL WITH

23 SUBSTANTIAL INTEREST AND DIVIDEND IN24 COME.—The term ‘eligible individual’ shall not

25 include any individual if the aggregate amount
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1 of interest and dividends includible in the gross

2 income of the taxpayer for the taxable year ex3 ceeds $2,500.’’

4 (b) CONFORMING AMENDMENT.—

5 (1) Paragraph (2) of section 32(i) (relating to

6 inflation adjustments) is amended to read as follows:

7 ‘‘(2) UNEARNED INCOME LIMITATION.—In the

8 case of a taxable year beginning in a calendar year

9 after 1996, the dollar amount contained in sub10 section (c)(1)(G) shall be increased by an amount

11 equal to—

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

13 ‘‘(B) the cost-of-living adjustment deter14 mined under section 1(f)(3) for the calendar

15 year in which the taxable year begins, deter16 mined by substituting ‘calendar year 1995’ for

17 ‘calendar year 1992’ in subparagraph (B)

18 thereof.

19 If any amount as adjusted under the preceding sen20 tence is not a multiple of $50, such dollar amount

21 shall be rounded to the nearest multiple of $50.’’

22 (2) Paragraph (1) of section 32(i) is amended

23 by adding at the end the following new flush sen24 tence:
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1 ‘‘If any amount as adjusted under the preceding

2 sentence is not a multiple of $10, such dollar

3 amount shall be rounded to the nearest multiple of

4 $10.’’

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

6 this section shall apply to taxable years beginning after

7 December 31, 1995.

8 TITLE II—PROVISIONS RELAT9 ING TO INTERNATIONAL TAX10 ATION

11 SEC. 201. REVISION OF TAX RULES ON EXPATRIATION.

12 (a) IN GENERAL.—Subpart A of part II of sub13 chapter N of chapter 1 is amended by inserting after sec14 tion 877 the following new section:

15 ‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

16 ‘‘(a) GENERAL RULES.—For purposes of this sub17 title:

18 ‘‘(1) CITIZENS.—If any United States citizen

19 relinquishes his citizenship during a taxable year, all

20 property held by such citizen at the time imme21 diately before such relinquishment shall be treated

22 as sold at such time for its fair market value and

23 any gain or loss shall be taken into account for such

24 taxable year.
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1 ‘‘(2) CERTAIN RESIDENTS.—If any long-term

2 resident of the United States ceases to be subject to

3 tax as a resident of the United States for any por4 tion of any taxable year, all property held by such

5 resident at the time of such cessation shall be treat6 ed as sold at such time for its fair market value and

7 any gain or loss shall be taken into account for the

8 taxable year which includes the date of such ces9 sation.

10 ‘‘(b) EXCLUSION FOR CERTAIN GAIN.—The amount

11 which would (but for this subsection) be includible in the

12 gross income of any taxpayer by reason of subsection (a)

13 shall be reduced (but not below zero) by $600,000.

14 ‘‘(c) PROPERTY TREATED AS HELD.—For purposes

15 of this section, except as otherwise provided by the Sec16 retary, an individual shall be treated as holding—

17 ‘‘(1) all property which would be includible in

18 his gross estate under chapter 11 were such individ19 ual to die at the time the property is treated as sold,

20 ‘‘(2) any other interest in a trust which the in21 dividual is treated as holding under the rules of sec22 tion 679(e) (determined by treating such section as

23 applying to foreign and domestic trusts), and
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1 ‘‘(3) any other interest in property specified by

2 the Secretary as necessary or appropriate to carry

3 out the purposes of this section.

4 ‘‘(d) EXCEPTIONS.—The following property shall not

5 be treated as sold for purposes of this section:

6 ‘‘(1) UNITED STATES REAL PROPERTY INTER7 ESTS.—Any United States real property interest (as

8 defined in section 897(c)(1)), other than stock of a

9 United States real property holding corporation

10 which does not, on the date the individual relin11 quishes his citizenship or ceases to be subject to tax

12 as a resident, meet the requirements of section

13 897(c)(2).

14 ‘‘(2) INTEREST IN CERTAIN RETIREMENT

15 PLANS.—

16 ‘‘(A) IN GENERAL.—Any interest in a

17 qualified retirement plan (as defined in section

18 4974(d)), other than any interest attributable

19 to contributions which are in excess of any limi20 tation or which violate any condition for tax21 favored treatment.

22 ‘‘(B) FOREIGN PENSION PLANS.—

23 ‘‘(i) IN GENERAL.—Under regulations

24 prescribed by the Secretary, interests in
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1 foreign pension plans or similar retirement

2 arrangements or programs.

3 ‘‘(ii) LIMITATION.—The value of prop4 erty which is treated as not sold by reason

5 of this subparagraph shall not exceed

6 $500,000.

7 ‘‘(e) DEFINITIONS.—For purposes of this section—

8 ‘‘(1) RELINQUISHMENT OF CITIZENSHIP.—A

9 citizen shall be treated as relinquishing his United

10 States citizenship on the date the United States De11 partment of State issues to the individual a certifi12 cate of loss of nationality or on the date a court of

13 the United States cancels a naturalized citizen’s cer14 tificate of naturalization.

15 ‘‘(2) LONG-TERM RESIDENT.—

16 ‘‘(A) IN GENERAL.—The term ‘long-term

17 resident’ means any individual (other than a

18 citizen of the United States) who is a lawful

19 permanent resident of the United States and,

20 as a result of such status, has been subject to

21 tax as a resident in at least 10 taxable years

22 during the period of 15 taxable years ending

23 with the taxable year during which the sale

24 under subsection (a) is treated as occurring.
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1 ‘‘(B) SPECIAL RULE.—For purposes of

2 subparagraph (A), there shall not be taken into

3 account—

4 ‘‘(i) any taxable year during which

5 any prior sale is treated under subsection

6 (a) as occurring, or

7 ‘‘(ii) any taxable year prior to the tax8 able year referred to in clause (i).

9 ‘‘(f) TERMINATION OF DEFERRALS, ETC.—On the

10 date any property held by an individual is treated as sold

11 under subsection (a)—

12 ‘‘(1) any period deferring recognition of income

13 or gain shall terminate, and

14 ‘‘(2) any extension of time for payment of tax

15 shall cease to apply and the unpaid portion of such

16 tax shall be due and payable.

17 ‘‘(g) ELECTION BY EXPATRIATING RESIDENTS.—

18 Solely for purposes of determining gain under subsection

19 (a)—

20 ‘‘(1) IN GENERAL.—At the election of a resi21 dent not a citizen of the United States, property—

22 ‘‘(A) which was held by such resident on

23 the date the individual first became a resident

24 of the United States during the period of long-
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1 term residency to which the treatment under

2 subsection (a) relates, and

3 ‘‘(B) which is treated as sold under sub4 section (a),

5 shall be treated as having a basis on such date of

6 not less than the fair market value of such property

7 on such date.

8 ‘‘(2) ELECTION.—Such an election shall apply

9 to all property described in paragraph (1), and, once

10 made, shall be irrevocable.

11 ‘‘(h) DEFERRAL OF TAX ON CLOSELY HELD BUSI12 NESS INTERESTS.—The District Director may enter into

13 an agreement with any individual which permits such indi14 vidual to defer payment for not more than 5 years of any

15 tax imposed by subsection (a) by reason of holding any

16 interest in a closely held business (as defined in section

17 6166(b)) other than a United States real property interest

18 described in subsection (d)(1).

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

20 such regulations as may be necessary or appropriate to

21 carry out the purposes of this section.
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1 ‘‘(j) CROSS REFERENCE.—

‘‘For termination of United States citizenship for

tax purposes, see section 7701(a)(47).’’

2 (b) DEFINITION OF TERMINATION OF UNITED

3 STATES CITIZENSHIP.—Section 7701(a) is amended by

4 adding at the end the following new paragraph:

5 ‘‘(47) TERMINATION OF UNITED STATES CITI6 ZENSHIP.—An individual shall not cease to be treat7 ed as a United States citizen before the date on

8 which the individual’s citizenship is treated as relin9 quished under section 877A(e)(1).’’

10 (c) CONFORMING AMENDMENTS.—

11 (1) Section 877 is amended by adding at the

12 end the following new subsection:

13 ‘‘(f) TERMINATION.—This section shall not apply to

14 any individual who is subject to the provisions of section

15 877A.’’

16 (2) Paragraph (10) of section 7701(b) is

17 amended by adding at the end the following new

18 sentence: ‘‘This paragraph shall not apply to any in19 dividual who is subject to the provisions of section

20 877A.’’

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

22 for subpart A of part II of subchapter N of chapter 1

23 is amended by inserting after the item relating to section

24 877 the following new item:
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‘‘Sec. 877A. Tax responsibilities of expatriation.’’

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

2 this section shall apply to—

3 (1) United States citizens who relinquish (with4 in the meaning of section 877A(e)(1) of the Internal

5 Revenue Code of 1986, as added by this section)

6 United States citizenship on or after February 6,

7 1995, and

8 (2) long-term residents (as defined in such sec9 tion) who cease to be subject to tax as residents of

10 the United States on or after such date.

11 SEC. 202. IMPROVED INFORMATION REPORTING ON FOR12 EIGN TRUSTS.

13 (a) IN GENERAL.—Section 6048 (relating to returns

14 as to certain foreign trusts) is amended to read as follows:

15 ‘‘SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN

16 FOREIGN TRUSTS.

17 ‘‘(a) NOTICE OF CERTAIN EVENTS.—

18 ‘‘(1) GENERAL RULE.—On or before the 90th

19 day (or such later day as the Secretary may pre20 scribe) after any reportable event, the responsible

21 party shall—

22 ‘‘(A) notify each trustee of the trust of the

23 requirements of subsection (b), and
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1 ‘‘(B) provide written notice of such event

2 to the Secretary in accordance with paragraph

3 (2).

4 ‘‘(2) CONTENTS OF NOTICE.—The notice re5 quired by paragraph (1)(B) shall contain such infor6 mation as the Secretary may prescribe, including—

7 ‘‘(A) the amount of money or other prop8 erty (if any) transferred to the trust in connec9 tion with the reportable event,

10 ‘‘(B) the identity of the trust and of each

11 trustee and beneficiary (or class of bene12 ficiaries) of the trust, and

13 ‘‘(C) a statement that each trustee of the

14 trust has been informed of the requirements of

15 subsection (b).

16 ‘‘(3) REPORTABLE EVENT.—For purposes of

17 this subsection, the term ‘reportable event’ means—

18 ‘‘(A) the creation of any foreign trust by a

19 United States person,

20 ‘‘(B) the transfer of any money or property

21 to a foreign trust by a United States person, in22 cluding a transfer by reason of death,

23 ‘‘(C) a domestic trust becoming a foreign

24 trust,
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1 ‘‘(D) the death of a citizen or resident of

2 the United States who is a grantor of a foreign

3 trust, and

4 ‘‘(E) the residency starting date (within

5 the meaning of section 7701(b)(2)(A)) of a

6 grantor of a foreign trust subject to tax under

7 section 679(a)(3).

8 Subparagraphs (A) and (B) shall not apply with re9 spect to a trust described in section 404(a)(4) or

10 404A.

11 ‘‘(4) RESPONSIBLE PARTY.—For purposes of

12 this subsection, the term ‘responsible party’

13 means—

14 ‘‘(A) the grantor in the case of a report15 able event described in subparagraph (A) or (E)

16 of paragraph (3),

17 ‘‘(B) the transferor in the case of a report18 able event described in paragraph (3)(B) other

19 than a transfer by reason of death,

20 ‘‘(C) the trustee of the domestic trust in

21 the case of a reportable event described in para22 graph (3)(C), and

23 ‘‘(D) the executor of the decedent’s estate

24 in the case of a transfer by reason of death.
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1 ‘‘(b) TRUST REPORTING REQUIREMENTS.—If a for2 eign trust, at any time during a taxable year of such

3 trust—

4 ‘‘(1) has a grantor who is a United States per5 son and—

6 ‘‘(A) such grantor is treated as the owner

7 of any portion of such trust under the rules of

8 subpart E of part I of subchapter J of chapter

9 1, or

10 ‘‘(B) any portion of such trust would be in11 cluded in the gross estate of such grantor if the

12 grantor were to die at such time, or

13 ‘‘(2) directly or indirectly distributes, credits, or

14 allocates money or property to any United States

15 person (whether or not the trust has a grantor de16 scribed in paragraph (1)),

17 then such trust shall meet the requirements of subsection

18 (c) (relating to trust information and agent) and sub19 section (d) (relating to annual return).

20 ‘‘(c) CONTENTS OF SECTION 6048 STATEMENT.—

21 ‘‘(1) IN GENERAL.—The requirements of this

22 subsection are met if the trust files with the Sec23 retary a statement which contains such information

24 as the Secretary may prescribe and which—
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1 ‘‘(A) identifies a United States person who

2 is the trust’s limited agent to provide the Sec3 retary with such information that reasonably

4 should be available to the trust for purposes of

5 applying sections 7602, 7603, and 7604 with

6 respect to any request by the Secretary to ex7 amine trust records or produce testimony relat8 ed to any transaction by the trust or with re9 spect to any summons by the Secretary for such

10 records or testimony, and

11 ‘‘(B) contains an agreement to comply with

12 the requirements of subsection (d).

13 ‘‘(2) SPECIAL RULE.—A foreign trust which ap14 points an agent described in paragraph (1)(A) shall

15 not be considered to have an office or a permanent

16 establishment in the United States solely because of

17 the activities of such agent pursuant to this section.

18 For purposes of this section, the appearance of per19 sons or production of records by reason of the cre20 ation of the agency shall not subject such persons or

21 records to legal process for any purpose other than

22 determining the correct treatment under this title of

23 the activities and operations of the trust.

24 ‘‘(d) ANNUAL RETURNS AND STATEMENTS.—The re25 quirements of this subsection are met if—
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1 ‘‘(1) the trust makes a return for the taxable

2 year which sets forth a full and complete accounting

3 of all trust activities and operations for the taxable

4 year, and contains such other information as the

5 Secretary may prescribe; and

6 ‘‘(2) the trust furnishes such information as the

7 Secretary may prescribe to each United States per8 son—

9 ‘‘(A) who is treated as the owner of any

10 portion of such trust under the rules of subpart

11 E of part I of subchapter J of chapter 1,

12 ‘‘(B) to whom any item with respect to the

13 taxable year is credited or allocated, or

14 ‘‘(C) who receives a distribution from such

15 trust with respect to the taxable year.

16 ‘‘(e) TIME AND MANNER OF FILING INFORMA17 TION.—Any notice, statement, or return required under

18 this section shall be made at such time and in such man19 ner as the Secretary shall prescribe.

20 ‘‘(f) MODIFICATION OF RETURN REQUIREMENTS.—

21 The Secretary is authorized to suspend or modify any re22 quirement of this section if the Secretary determines that

23 the United States has no significant tax interest in obtain24 ing the required information.’’
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1 (b) PENALTIES.—Section 6677 (relating to failure to

2 file information returns with respect to certain foreign

3 trusts) is amended to read as follows:

4 ‘‘SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT

5 TO CERTAIN FOREIGN TRUSTS.

6 ‘‘(a) FAILURE TO REPORT CERTAIN EVENTS.—

7 ‘‘(1) IN GENERAL.—In the case of a reportable

8 event described in any subparagraph of section

9 6048(a)(3) for which a responsible party does not

10 file a written notice meeting the requirements of sec11 tion 6048(a)(2) within the time specified in section

12 6048(a)(1), the responsible party shall pay a penalty

13 of $10,000. If any failure described in the preceding

14 sentence continues for more than 90 days after the

15 day on which the Secretary mails notice of such fail16 ure to the responsible party, such party shall pay a

17 penalty (in addition to the $10,000 amount) of

18 $10,000 for each 30-day period (or fraction thereof)

19 during which such failure continues after the expira20 tion of such 90-day period.

21 ‘‘(2) 35-PERCENT PENALTY.—In the case of a

22 reportable event described in subparagraph (A), (B),

23 or (C) of section 6048(a)(3) (other than a transfer

24 by reason of death), the aggregate amount of the

25 penalties under paragraph (1) shall not be less than
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1 an amount equal to 35 percent of the gross value of

2 the property involved in such event (determined as

3 of the date of the event).

4 ‘‘(3) RESPONSIBLE PARTY.—For purposes of

5 this subsection, the term ‘responsible party’ has the

6 meaning given to such term by section 6048(a)(4).

7 ‘‘(b) FAILURE TO MAKE CERTAIN STATEMENTS AND

8 RETURNS.—

9 ‘‘(1) IN GENERAL.—In the case of any failure

10 to meet the requirements of section 6048(b), the ap11 propriate tax treatment of any trust transactions or

12 operations shall be determined by the Secretary in

13 the Secretary’s sole discretion from the Secretary’s

14 own knowledge or from such information as the Sec15 retary may obtain through testimony or otherwise.

16 ‘‘(2) MONETARY PENALTY.—In the case of any

17 failure to meet the requirements of section 6048(b)

18 with respect to a trust described in such section by

19 reason of paragraph (1) thereof, the grantor de20 scribed in such paragraph (1) shall pay a penalty of

21 $10,000 for each taxable year with respect to which

22 the foreign trust fails to meet such requirements. If

23 any failure described in the preceding sentence con24 tinues for more than 90 days after the day on which

25 the Secretary mails notice of such failure to such
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1 grantor, such grantor shall pay a penalty (in addi2 tion to any other penalty) of $10,000 for each 30-

3 day period (or fraction thereof) during which such

4 failure continues after the expiration of such 90-day

5 period.

6 ‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty

7 shall be imposed by this section on any failure which is

8 shown to be due to reasonable cause and not due to willful

9 neglect. The fact that a foreign jurisdiction would impose

10 a civil or criminal penalty on the taxpayer (or any other

11 person) for disclosing the requested documentation is not

12 reasonable cause.

13 ‘‘(d) DEFICIENCY PROCEDURES NOT TO APPLY.—

14 Subchapter B of chapter 63 (relating to deficiency proce15 dures for income, estate, gift, and certain excise taxes)

16 shall not apply in respect of the assessment or collection

17 of any penalty imposed by this section.’’

18 (c) CLERICAL AMENDMENTS.—

19 (1) The table of sections for subpart B of part

20 III of subchapter A of chapter 61 is amended by

21 striking the item relating to section 6048 and insert22 ing the following new item:

‘‘Sec. 6048. Information with respect to certain foreign trusts.’’

23 (2) The table of sections for part I of sub24 chapter B of chapter 68 is amended by striking the
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1 item relating to section 6677 and inserting the fol2 lowing new item:

‘‘Sec. 6677. Failure to file information with respect to certain foreign trusts.’’

3 (d) EFFECTIVE DATES.—

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

5 this section shall apply—

6 (A) to reportable events occurring on or

7 after February 6, 1995, and

8 (B) to the extent such amendments require

9 reporting for any taxable year under section

10 6048(b) of the Internal Revenue Code of 1986

11 (as added by this section), to taxable years be12 ginning after the date of the enactment of this

13 Act.

14 (2) NOTICES.—For purposes of section 6048(a)

15 of such Code, the 90th day referred to therein shall

16 in no event be treated as being earlier than the 90th

17 day after the date of the enactment of this Act.

18 SEC. 203. MODIFICATION OF RULES RELATING TO FOREIGN

19 TRUSTS HAVING ONE OR MORE UNITED

20 STATES BENEFICIARIES.

21 (a) IN GENERAL.—Section 679 (relating to foreign

22 trusts having one or more United States beneficiaries) is

23 amended to read as follows:
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1 ‘‘SEC. 679. FOREIGN TRUSTS HAVING ONE OR MORE

2 UNITED STATES BENEFICIARIES.

3 ‘‘(a) TRANSFEROR TREATED AS OWNER.—

4 ‘‘(1) IN GENERAL.—A United States person

5 who directly or indirectly transfers property to a for6 eign trust (other than a trust described in section

7 404(a)(4) or section 404A) shall be treated as the

8 owner for his taxable year of the portion of such

9 trust attributable to such property if for such year

10 there is a United States beneficiary of such trust.

11 ‘‘(2) EXCEPTION.—

12 ‘‘(A) IN GENERAL.—Paragraph (1) shall

13 not apply to any sale or exchange of property

14 to a trust if—

15 ‘‘(i) the trust pays fair market value

16 for such property, and

17 ‘‘(ii) all of the gain to the transferor

18 is recognized at the time of transfer.

19 ‘‘(B) CERTAIN OBLIGATIONS NOT TAKEN

20 INTO ACCOUNT.—For purposes of subparagraph

21 (A), in determining whether the transferor re22 ceived fair market value, there shall not be

23 taken into account—

24 ‘‘(i) any obligation of—

25 ‘‘(I) the trust,
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1 ‘‘(II) any grantor or beneficiary

2 of the trust, or

3 ‘‘(III) any person who is related

4 (within the meaning of section

5 643(i)(3)) to any grantor or bene6 ficiary of the trust, and

7 ‘‘(ii) except as provided in regulations,

8 any obligation which is guaranteed by a

9 person described in clause (i).

10 ‘‘(C) TREATMENT OF DEEMED SALE ELEC11 TION UNDER SECTION 1057.—For purposes of

12 subparagraph (A), a transfer with respect to

13 which an election under section 1057 is made

14 shall not be treated as a sale or exchange.

15 ‘‘(3) SPECIAL RULES APPLICABLE TO FOREIGN

16 GRANTOR WHO LATER BECOMES A UNITED STATES

17 PERSON.—A nonresident alien individual who be18 comes a United States resident within 5 years after

19 directly or indirectly transferring property to a for20 eign trust shall be treated for purposes of this sec21 tion and section 6048 as having transferred such

22 property, and any undistributed income (including

23 all realized and unrealized gains) attributable there24 to, to the foreign trust immediately after becoming

25 a United States resident. For this purpose, a non-
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1 resident alien shall be treated as becoming a resi2 dent of the United States on the residency starting

3 date (within the meaning of section 7701(b)(2)(A)).

4 ‘‘(b) BENEFICIARIES TREATED AS TRANSFERORS IN

5 CERTAIN CASES.—For purposes of this section and sec6 tion 6048, if—

7 ‘‘(1) a citizen or resident of the United States

8 who is treated as the owner of any portion of a trust

9 under subsection (a) dies,

10 ‘‘(2) property is transferred to a foreign trust

11 by reason of the death of a citizen or resident of the

12 United States, or

13 ‘‘(3) a domestic trust to which any United

14 States person made a transfer becomes a foreign

15 trust,

16 then, except as otherwise provided in regulations, the trust

17 beneficiaries shall be treated as having transferred to such

18 trust (as of the date of the applicable event under para19 graph (1), (2), or (3)) their respective interests (as deter20 mined under subsection (e)) in the property involved.

21 ‘‘(c) TRUSTS ACQUIRING UNITED STATES BENE22 FICIARIES.—If—

23 ‘‘(1) subsection (a) applies to a trust for the

24 transferor’s taxable year, and
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1 ‘‘(2) subsection (a) would have applied to the

2 trust for the transferor’s immediately preceding tax3 able year but for the fact that for such preceding

4 taxable year there was no United States beneficiary

5 for any portion of the trust,

6 then, for purposes of this subtitle, the transferor shall be

7 treated as having received as an accumulation distribution

8 taxable under subpart D an amount equal to the undis9 tributed net income (as determined under section 665(a)

10 as of the close of such immediately preceding taxable year)

11 attributable to the portion of the trust referred to in sub12 section (a).

13 ‘‘(d) TRUSTS TREATED AS HAVING A UNITED

14 STATES BENEFICIARY.—

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion, a trust shall be treated as having a United

17 States beneficiary for the taxable year unless—

18 ‘‘(A) under the terms of the trust, no part

19 of the income or corpus of the trust may be

20 paid or accumulated during the taxable year to

21 or for the benefit of a United States person,

22 and

23 ‘‘(B) if the trust were terminated at any

24 time during the taxable year, no part of the in-
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1 come or corpus of such trust could be paid to

2 or for the benefit of a United States person.

3 To the extent provided by the Secretary, for pur4 poses of this subsection, the term ‘United States

5 person’ includes any person who was a United

6 States person at any time during the existence of

7 the trust.

8 ‘‘(2) ATTRIBUTION OF OWNERSHIP.—For pur9 poses of paragraph (1), an amount shall be treated

10 as paid or accumulated to or for the benefit of a

11 United States person if such amount is paid to or

12 accumulated for a foreign corporation, foreign part13 nership, or foreign trust or estate, and—

14 ‘‘(A) in the case of a foreign corporation,

15 more than 50 percent of the total combined vot16 ing power of all classes of stock of such cor17 poration entitled to vote is owned (within the

18 meaning of section 958(a)) or is considered to

19 be owned (within the meaning of section

20 958(b)) by United States shareholders (as de21 fined in section 951(b)),

22 ‘‘(B) in the case of a foreign partnership,

23 a United States person is a partner of such

24 partnership, or
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1 ‘‘(C) in the case of a foreign trust or es2 tate, such trust or estate has a United States

3 beneficiary (within the meaning of paragraph

4 (1)).

5 ‘‘(e) DETERMINATION OF BENEFICIARIES’ INTER6 ESTS IN TRUST.—

7 ‘‘(1) GENERAL RULE.—For purposes of this

8 section, a beneficiary’s interest in a foreign trust

9 shall be based upon all relevant facts and cir10 cumstances, including the terms of the trust instru11 ment and any letter of wishes or similar document,

12 historical patterns of trust distributions, and the ex13 istence of and functions performed by a trust protec14 tor or any similar advisor.

15 ‘‘(2) SPECIAL RULE.—In the case of bene16 ficiaries whose interests in a trust cannot be deter17 mined under paragraph (1)—

18 ‘‘(A) the beneficiary having the closest de19 gree of kinship to the grantor shall be treated

20 as holding the remaining interests in the trust

21 not determined under paragraph (1) to be held

22 by any other beneficiary, and

23 ‘‘(B) if 2 or more beneficiaries have the

24 same degree of kinship to the grantor, such re-
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1 maining interests shall be treated as held equal2 ly by such beneficiaries.

3 ‘‘(3) CONSTRUCTIVE OWNERSHIP.—If a bene4 ficiary of a foreign trust is a corporation, partner5 ship, trust, or estate, the shareholders, partners, or

6 beneficiaries shall be deemed to be the trust bene7 ficiaries for purposes of this section.

8 ‘‘(4) TAXPAYER RETURN POSITION.—A tax9 payer shall clearly indicate on its income tax re10 turn—

11 ‘‘(A) the methodology used to determine

12 that taxpayer’s trust interest under this section,

13 and

14 ‘‘(B) if the taxpayer knows (or has reason

15 to know) that any other beneficiary of such

16 trust is using a different methodology to deter17 mine such beneficiary’s trust interest under this

18 section.

19 ‘‘(f) REGULATIONS.—The Secretary shall prescribe

20 such regulations as may be necessary or appropriate to

21 carry out the purposes of this section.’’

22 (b) EFFECTIVE DATE.—

23 (1) IN GENERAL.—Except as otherwise pro24 vided in this subsection, the amendments made by
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1 this section shall apply to taxable years ending on or

2 after February 6, 1995.

3 (2) SECTION 679(a).—Paragraphs (2) and (3)

4 of section 679(a) of the Internal Revenue Code of

5 1986 (as added by this section) shall apply to—

6 (A) any trust created on or after February

7 6, 1995, and

8 (B) the portion of any trust created before

9 such date which is attributable to actual trans10 fers of property to the trust on or after such

11 date.

12 (3) SECTION 679(b).—

13 (A) IN GENERAL.—Paragraphs (1) and (2)

14 of section 679(b) of such Code (as so added)

15 shall apply to—

16 (i) any trust created on or after the

17 date of the enactment of this Act, and

18 (ii) the portion of any trust created

19 before such date which is attributable to

20 actual transfers of property to the trust on

21 or after such date.

22 (B) SECTION 679(b)(3).—Section

23 679(b)(3) of such Code (as so added) shall take

24 effect on February 6, 1995, without regard to

25 when the property was transferred to the trust.
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1 SEC. 204. FOREIGN PERSONS NOT TO BE TREATED AS OWN2 ERS UNDER GRANTOR TRUST RULES.

3 (a) IN GENERAL.—So much of section 672(f) (relat4 ing to special rule where grantor is foreign person) as pre5 cedes paragraph (2) is amended to read as follows:

6 ‘‘(f) SUBPART NOT TO RESULT IN FOREIGN OWNER7 SHIP.—

8 ‘‘(1) IN GENERAL.—Notwithstanding any other

9 provision of this subpart, this subpart shall apply

10 only to the extent such application results in an

11 amount being included (directly or through 1 or

12 more entities) in the gross income of a citizen or

13 resident of the United States or a domestic corpora14 tion. The preceding sentence shall not apply to any

15 portion of an investment trust if such trust is treat16 ed as a trust for purposes of this title and the grant17 or of such portion is the sole beneficiary of such por18 tion.’’

19 (b) CREDIT FOR CERTAIN TAXES.—Paragraph (2) of

20 section 665(d) is amended by adding at the end the follow21 ing new sentence: ‘‘Under rules or regulations prescribed

22 by the Secretary, in the case of any foreign trust of which

23 the settlor or another person would be treated as owner

24 of any portion of the trust under subpart E but for section

25 672(f), the term ‘taxes imposed on the trust’ includes the

26 allocable amount of any income, war profits, and excess
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1 profits taxes imposed by any foreign country or possession

2 of the United States on the settlor or such other person

3 in respect of trust income.’’

4 (c) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS

5 THROUGH NOMINEES.—

6 (1) Section 643 is amended by adding at the

7 end the following new subsection:

8 ‘‘(h) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS

9 THROUGH NOMINEES.—For purposes of this part, any

10 amount paid to a United States person which is derived

11 directly or indirectly from a foreign trust of which the

12 payor is not the grantor shall be deemed in the year of

13 payment to have been directly paid by the foreign trust

14 to such United States person.’’

15 (2) Section 665 is amended by striking sub16 section (c).

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

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

19 of this Act.

20 (e) TRANSITIONAL RULE.—If—

21 (1) by reason of the amendments made by this

22 section, any person other than a United States per23 son ceases to be treated as the owner of a portion

24 of a domestic trust, and
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1 (2) before January 1, 1996, such trust becomes

2 a foreign trust, or the assets of such trust are trans3 ferred to a foreign trust,

4 no tax shall be imposed by section 1491 of the Internal

5 Revenue Code of 1986 by reason of such trust becoming

6 a foreign trust or the assets of such trust being trans7 ferred to a foreign trust.

8 SEC. 205. GRATUITOUS TRANSFERS BY PARTNERSHIPS AND

9 FOREIGN CORPORATIONS.

10 (a) IN GENERAL.—Subchapter C of chapter 80 (re11 lating to provisions affecting more than one subtitle) is

12 amended by adding at the end the following new section:

13 ‘‘SEC. 7874. PURPORTED GIFTS BY PARTNERSHIPS AND

14 FOREIGN CORPORATIONS.

15 ‘‘(a) IN GENERAL.—Any property (including money)

16 that is purportedly a direct or indirect gift by a partner17 ship or a foreign corporation to a person who is not a

18 partner of the partnership or a shareholder of the corpora19 tion, respectively, may be recharacterized by the Secretary

20 to prevent the avoidance of tax. The Secretary may not

21 recharacterize gifts made for bona fide business or chari22 table purposes.

23 ‘‘(b) STATEMENTS ON RECIPIENT’S RETURN.—A

24 taxpayer who receives a purported gift subject to sub25 section (a) shall attach a statement to his income tax re-
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1 turn for the year of receipt that identifies the property

2 received and describes fully the circumstances surrounding

3 the purported gift.

4 ‘‘(c) EXEMPTION.—Subsection (a) shall not apply to

5 purported gifts received by any person during any taxable

6 year if the amount thereof is less than $2,500.

7 ‘‘(d) REGULATIONS.—The Secretary may prescribe

8 such rules as may be necessary or appropriate to carry

9 out the purposes of this section.’’

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

11 for such subchapter C is amended by adding at the end

12 the following new item:

‘‘Sec. 7874. Purported gifts by partnerships and foreign corporations.’’

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

14 this section shall apply to amounts received after the date

15 of the enactment of this Act.

16 SEC. 206. INFORMATION REPORTING REGARDING LARGE

17 FOREIGN GIFTS.

18 (a) IN GENERAL.—Subpart A of part III of sub19 chapter A of chapter 61 is amended by inserting after sec20 tion 6039E the following new section:

21 ‘‘SEC. 6039F. NOTICE OF LARGE GIFTS RECEIVED FROM

22 FOREIGN PERSONS.

23 ‘‘(a) IN GENERAL.—If the value of the aggregate for24 eign gifts received by a United States person (other than
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1 an organization described in section 501(c) and exempt

2 from tax under section 501(a)) during any taxable year

3 exceeds $100,000, such United States person shall furnish

4 (at such time and in such manner as the Secretary shall

5 prescribe) such information as the Secretary may pre6 scribe regarding each foreign gift received during such

7 year.

8 ‘‘(b) FOREIGN GIFT.—For purposes of this section,

9 the term ‘foreign gift’ means any amount received from

10 a person other than a United States person which the re11 cipient treats as a gift or bequest. Such term shall not

12 include any qualified transfer (within the meaning of sec13 tion 2503(e)(2)).

14 ‘‘(c) PENALTY FOR FAILURE TO FILE INFORMA15 TION.—

16 ‘‘(1) IN GENERAL.—If a United States person

17 fails to furnish the information required by sub18 section (a) with respect to any foreign gift within

19 the time prescribed therefor (including extensions)—

20 ‘‘(A) the tax consequences of the receipt of

21 such gift shall be determined by the Secretary

22 in the Secretary’s sole discretion from the Sec23 retary’s own knowledge or from such informa24 tion as the Secretary may obtain through testi25 mony or otherwise, and
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1 ‘‘(B) such United States person shall pay

2 (upon notice and demand by the Secretary and

3 in the same manner as tax) an amount equal to

4 5 percent of the amount of such foreign gift for

5 each month for which the failure continues (not

6 to exceed 25 percent of such amount in the ag7 gregate).

8 ‘‘(2) REASONABLE CAUSE EXCEPTION.— Para9 graph (1) shall not apply to any failure to report a

10 foreign gift if the United States person shows that

11 the failure is due to reasonable cause and not due

12 to willful neglect.

13 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

14 such regulations as may be necessary to carry out the pur15 poses of this section.’’

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

17 for such subpart is amended by inserting after the item

18 relating to section 6039E the following new item:

‘‘Sec. 6039F. Notice of large gifts received from foreign persons.’’

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

20 this section shall apply to amounts received after the date

21 of the enactment of this Act in taxable years ending after

22 such date.
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1 SEC. 207. MODIFICATION OF RULES RELATING TO FOREIGN

2 TRUSTS WHICH ARE NOT GRANTOR TRUSTS.

3 (a) MODIFICATION OF INTEREST CHARGE ON ACCU4 MULATION DISTRIBUTIONS.—Subsection (a) of section

5 668 (relating to interest charge on accumulation distribu6 tions from foreign trusts) is amended to read as follows:

7 ‘‘(a) GENERAL RULE.—For purposes of the tax de8 termined under section 667(a)—

9 ‘‘(1) SUM OF INTEREST CHARGES FOR EACH

10 THROWBACK YEAR.—The interest charge (deter11 mined under paragraph (2)) with respect to any dis12 tribution is the sum of the interest charges for each

13 of the throwback years to which such distribution is

14 allocated under section 666(a).

15 ‘‘(2) INTEREST CHARGE FOR YEAR.—Except as

16 provided in paragraph (6), the interest charge for

17 any throwback year on such year’s allocable share of

18 the partial tax computed under section 667(b) with

19 respect to any distribution shall be determined for

20 the period—

21 ‘‘(A) beginning on the due date for the

22 throwback year, and

23 ‘‘(B) ending on the due date for the tax24 able year of the distribution,

25 by using the rates and method applicable under sec26 tion 6621 for underpayments of tax for such period.
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1 For purposes of the preceding sentence, the term

2 ‘due date’ means the date prescribed by law (deter3 mined without regard to extensions) for filing the re4 turn of the tax imposed by this chapter for the tax5 able year.

6 ‘‘(3) ALLOCABLE PARTIAL TAX.—For purposes

7 of paragraph (2), a throwback year’s allocable share

8 of the partial tax is an amount equal to such partial

9 tax multiplied by the fraction—

10 ‘‘(A) the numerator of which is the amount

11 deemed by section 666(a) to be distributed on

12 the last day of such throwback year, and

13 ‘‘(B) the denominator of which is the accu14 mulation distribution taken into account under

15 section 666(a).

16 ‘‘(4) THROWBACK YEAR.—For purposes of this

17 subsection, the term ‘throwback year’ means any

18 taxable year to which a distribution is allocated

19 under section 666(a).

20 ‘‘(5) PERIODS OF NONRESIDENCE.—The period

21 under paragraph (2) shall not include any portion

22 thereof during which the beneficiary was not a citi23 zen or resident of the United States.

24 ‘‘(6) THROWBACK YEARS BEFORE 1996.—In the

25 case of any throwback year beginning before 1996—
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1 ‘‘(A) interest for the portion of the period

2 described in paragraph (2) which occurs before

3 the first taxable year beginning after 1995 shall

4 be determined by using an interest rate of 6

5 percent and no compounding, and

6 ‘‘(B) interest for the remaining portion of

7 such period shall be determined as if the partial

8 tax computed under section 667(b) for the

9 throwback year were increased (as of the begin10 ning of such first taxable year) by the amount

11 of the interest determined under subparagraph

12 (A).’’

13 (b) RULE WHEN INFORMATION NOT AVAILABLE.—

14 Subsection (d) of section 666 is amended by adding at

15 the end the following: ‘‘In the case of a distribution from

16 a foreign trust to which section 6048(b) applies, adequate

17 records shall not be considered to be available for purposes

18 of the preceding sentence unless such trust meets the re19 quirements referred to in such section. If a taxpayer is

20 not able to demonstrate when a trust was created, the Sec21 retary may use any reasonable approximation based on

22 available evidence.’’

23 (c) ABUSIVE TRANSACTIONS.—Section 643(a) is

24 amended by inserting after paragraph (6) the following

25 new paragraph:
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1 ‘‘(7) ABUSIVE TRANSACTIONS.—The Secretary

2 shall prescribe such regulations as may be necessary

3 or appropriate to carry out the purposes of this part,

4 including regulations to prevent avoidance of such

5 purposes.’’

6 (d) TREATMENT OF USE OF TRUST PROPERTY.—

7 Section 643 (relating to definitions applicable to subparts

8 A, B, C, and D) is amended by adding at the end the

9 following new subsection:

10 ‘‘(i) USE OF FOREIGN TRUST PROPERTY.—

11 ‘‘(1) GENERAL RULE.—For purposes of sub12 parts B, C, and D, if, during a taxable year of a for13 eign trust a trust participant of such trust directly

14 or indirectly uses any of the trust’s property, the use

15 value for such taxable year shall be treated as an

16 amount paid to such participant (other than from

17 income for the taxable year) within the meaning of

18 sections 661(a)(2) and section 662(a)(2).

19 ‘‘(2) EXEMPTION.—Paragraph (1) shall not

20 apply to any trust participant as to whom the aggre21 gate use value during the taxable year does not ex22 ceed $2,500.

23 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For

24 purposes of this subsection—
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1 ‘‘(A) USE VALUE.—Except as provided in

2 subparagraph (B), the term ‘use value’ means

3 the fair market value of the use of property re4 duced by any amount paid for such use by the

5 trust participant or by any person who is relat6 ed to such participant.

7 ‘‘(B) SPECIAL RULE FOR CASH AND CASH

8 EQUIVALENT.—A direct or indirect loan of

9 cash, or cash equivalent, by a foreign trust shall

10 be treated as a use of trust property by the bor11 rower and the full amount of the loan principal

12 shall be the use value.

13 ‘‘(C) USE BY RELATED PARTY.—

14 ‘‘(i) Use by a person who is related to

15 a trust participant shall be treated as use

16 by the participant.

17 ‘‘(ii) If property is used by any person

18 who is a related person with respect to

19 more than one trust participant, then the

20 property shall be treated as used by the

21 trust participant most closely related, by

22 blood or otherwise, to such person.

23 ‘‘(D) PROPERTY INCLUDES CASH AND

24 CASH EQUIVALENTS.—The term ‘property’ in25 cludes cash and cash equivalents.
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1 ‘‘(E) TRUST PARTICIPANT.—The term

2 ‘trust participant’ means each grantor and ben3 eficiary of the trust.

4 ‘‘(F) RELATED PERSON.—A person is re5 lated to a trust participant if the relationship

6 between such persons would result in a dis7 allowance of losses under section 267(b) or

8 707(b). In applying section 267 for purposes of

9 the preceding sentence—

10 ‘‘(i) section 267(e) shall be applied as

11 if such person or the trust participant were

12 a pass-thru entity,

13 ‘‘(ii) section 267(b) shall be applied

14 by substituting ‘at least 10 percent’ for

15 ‘more than 50 percent’ each place it ap16 pears, and

17 ‘‘(iii) in determining the family of an

18 individual under section 267(c)(4), such

19 section shall be treated as including the

20 spouse (and former spouse) of such indi21 vidual and of each other person who is

22 treated under such section as being a

23 member of the family of such individual or

24 spouse.
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1 ‘‘(G) SUBSEQUENT TRANSACTIONS RE2 GARDING LOAN PRINCIPAL.—If any loan de3 scribed in subparagraph (B) is taken into ac4 count under paragraph (1), any subsequent

5 transaction between the trust and the original

6 borrower regarding the principal of the loan (by

7 way of complete or partial repayment, satisfac8 tion, cancellation, discharge, or otherwise) shall

9 be disregarded for purposes of this title.’’

10 (e) EFFECTIVE DATES.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section

13 shall apply to taxable years beginning after the date

14 of the enactment of this Act.

15 (2) INTEREST CHARGE.—The amendment made

16 by subsection (a) shall apply to interest for throw17 back years beginning before, on, or after the date of

18 the enactment of this Act.

19 SEC. 208. RESIDENCE OF ESTATES AND TRUSTS.

20 (a) TREATMENT AS UNITED STATES PERSON.—

21 Paragraph (30) of section 7701(a) is amended by striking

22 subparagraph (D) and by inserting after subparagraph

23 (C) the following:

24 ‘‘(D) any estate or trust if—
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1 ‘‘(i) a court within the United States

2 is able to exercise primary supervision over

3 the administration of the estate or trust,

4 and

5 ‘‘(ii) in the case of a trust, one or

6 more United States fiduciaries have the

7 authority to control all substantial deci8 sions of the trust.’’

9 (b) CONFORMING AMENDMENT.—Paragraph (31) of

10 section 7701(a) is amended to read as follows:

11 ‘‘(31) FOREIGN ESTATE OR TRUST.—The term

12 ‘foreign estate’ or ‘foreign trust’ means any estate or

13 trust other than an estate or trust described in sec14 tion 7701(a)(30)(D).’’

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

16 this section shall apply—

17 (1) to taxable years beginning after December

18 31, 1996, and

19 (2) at the election of the trustee of a trust, to

20 taxable years beginning after the date of the enact21 ment of this Act and on or before December 31,

22 1996.

23 Such an election, once made, shall be irrevocable.
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1 TITLE III—ADDITIONAL

2 EMPOWERMENT ZONES

3 SEC. 301. ADDITIONAL EMPOWERMENT ZONES.

4 (a) IN GENERAL.—Paragraph (2) of section 1391(b)

5 (relating to designations of empowerment zones and enter6 prise communities) is amended—

7 (1) by striking ‘‘9’’ and inserting ‘‘11’’,

8 (2) by striking ‘‘6’’ and inserting ‘‘8’’, and

9 (3) by striking ‘‘750,000’’ and inserting

10 ‘‘1,000,000’’.

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

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

13 of this Act.

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