II

106TH CONGRESS

1ST SESSION S. 1867

To amend the Internal Revenue Code of 1986 to provide a tax reduction

for small businesses, and for other purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 5, 1999

Mr. ROBB (for himself and Mr. BAUCUS) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

a tax reduction for small businesses, 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; ETC.

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

5 ‘‘Small Business Tax Reduction Act of 1999’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 (c) TABLE OF CONTENTS.—The table of contents for

4 this Act is as follows:

Sec. 1. Short title; etc.

TITLE I—ENABLING SMALL BUSINESS TO PROVIDE CHILD CARE,

HEALTH, AND RETIREMENT BENEFITS

Sec. 101. Full deduction of health insurance costs for self-employed individuals.

Sec. 102. Allowance of credit for employer expenses for child care assistance.

Sec. 103. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 104. Contributions to IRAs through payroll deductions.

Sec. 105. Modification of top-heavy rules.

Sec. 106. Credit for small employer pension plan contributions and start-up

costs.

Sec. 107. Elective deferrals not taken into account for purposes of deduction

limits.

Sec. 108. Faster vesting of certain employer matching contributions.

Sec. 109. Reduced PBGC premium for new plans of small employers.

Sec. 110. Phase-in of additional PBGC premium for new plans.

Sec. 111. Elimination of user fee for requests to IRS regarding new pension

plans.

Sec. 112. Deduction limits.

Sec. 113. Treatment of multiemployer plans under section 415.

Sec. 114. Pension reduction disclosure.

Sec. 115. Prevention of wearing away of employee’s accrued benefit.

TITLE II—PROMOTING TECHNOLOGICAL AND ECONOMIC

DEVELOPMENT

Sec. 201. Increase in expensing limitation to $25,000.

Sec. 202. New markets tax credit.

Sec. 203. Wage credits for round 2 empowerment zones.

Sec. 204. Credit for information technology training program expenses.

Sec. 205. Restoration of standards for determining whether technical workers

are not employees.

Sec. 206. Certain post-secondary educational benefits provided by an employer

to children of employees excludable from gross income as a

scholarship.

Sec. 207. Increase in State ceiling on low-income housing credit.

TITLE III—EXPANDING ECONOMIC OPPORTUNITIES

Sec. 301. Work opportunity credit and welfare-to-work credit.

Sec. 302. Extension of credit for holders of qualified zone academy bonds.

TITLE IV—PROMOTING FAMILY-OWNED FARMS AND BUSINESSES

Sec. 401. Increase in estate tax deduction for family-owned business interest.

Sec. 402. Income averaging for farmers not to increase alternative minimum

tax liability.
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Sec. 403. Net operating loss of farmers.

Sec. 404. Small businesses allowed increased deduction for meal expenses.

Sec. 405. Tax exclusion for cost-sharing payments under Partners for Wildlife

Program.

TITLE V—PROVIDING ADMINISTRATIVE RELIEF

Sec. 501. Disclosure of tax information to facilitate combined employment tax

reporting.

Sec. 502. Enrolled agents.

1 TITLE I—ENABLING SMALL BUSI2 NESS TO PROVIDE CHILD

3 CARE, HEALTH, AND RETIRE4 MENT BENEFITS

5 SEC. 101. FULL DEDUCTION OF HEALTH INSURANCE COSTS

6 FOR SELF-EMPLOYED INDIVIDUALS.

7 (a) IN GENERAL.—Section 162(l)(1) (relating to al8 lowance of deductions) is amended to read as follows:

9 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

10 of an individual who is an employee within the

11 meaning of section 401(c)(1), there shall be allowed

12 as a deduction under this section an amount equal

13 to the amount paid during the taxable year for in14 surance which constitutes medical care for the tax15 payer and the taxpayer’s spouse and dependents.’’

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

17 this section shall apply to taxable years beginning after

18 December 31, 1999.
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1 SEC. 102. ALLOWANCE OF CREDIT FOR EMPLOYER EX2 PENSES FOR CHILD CARE ASSISTANCE.

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 (relating to business related cred5 its) is amended by adding at the end the following:

6 ‘‘SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.

7 ‘‘(a) IN GENERAL.—For purposes of section 38, the

8 employer-provided child care credit determined under this

9 section for the taxable year is an amount equal to 25 per10 cent of the qualified child care expenditures of the tax11 payer for such taxable year.

12 ‘‘(b) DOLLAR LIMITATION.—The credit allowable

13 under subsection (a) for any taxable year shall not exceed

14 $90,000.

15 ‘‘(c) DEFINITIONS.—For purposes of this section—

16 ‘‘(1) QUALIFIED CHILD CARE EXPENDITURE.—

17 The term ‘qualified child care expenditure’ means

18 any amount paid or incurred—

19 ‘‘(A) to acquire, construct, rehabilitate, or

20 expand property—

21 ‘‘(i) which is to be used as part of a

22 qualified child care facility of the taxpayer,

23 ‘‘(ii) with respect to which a deduction

24 for depreciation (or amortization in lieu of

25 depreciation) is allowable, and
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1 ‘‘(iii) which does not constitute part of

2 the principal residence (within the meaning

3 of section 121) of the taxpayer or any em4 ployee of the taxpayer,

5 ‘‘(B) for the operating costs of a qualified

6 child care facility of the taxpayer, including

7 costs related to the training of employees, to

8 scholarship programs, and to the providing of

9 increased compensation to employees with high10 er levels of child care training, or

11 ‘‘(C) under a contract with a qualified

12 child care facility to provide child care services

13 to employees of the taxpayer.

14 ‘‘(2) QUALIFIED CHILD CARE FACILITY.—

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

16 child care facility’ means a facility—

17 ‘‘(i) the principal use of which is to

18 provide child care assistance, and

19 ‘‘(ii) which meets the requirements of

20 all applicable laws and regulations of the

21 State or local government in which it is lo22 cated, including, but not limited to, the li23 censing of the facility as a child care facil24 ity.
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1 Clause (i) shall not apply to a facility which is

2 the principal residence (within the meaning of

3 section 121) of the operator of the facility.

4 ‘‘(B) SPECIAL RULES WITH RESPECT TO A

5 TAXPAYER.—A facility shall not be treated as a

6 qualified child care facility with respect to a

7 taxpayer unless—

8 ‘‘(i) enrollment in the facility is open

9 to employees of the taxpayer during the

10 taxable year,

11 ‘‘(ii) the facility is not the principal

12 trade or business of the taxpayer unless at

13 least 30 percent of the enrollees of such fa14 cility are dependents of employees of the

15 taxpayer, and

16 ‘‘(iii) the use of such facility (or the

17 eligibility to use such facility) does not dis18 criminate in favor of employees of the tax19 payer who are highly compensated employ20 ees (within the meaning of section 414(q)).

21 ‘‘(d) RECAPTURE OF ACQUISITION AND CONSTRUC22 TION CREDIT.—

23 ‘‘(1) IN GENERAL.—If, as of the close of any

24 taxable year, there is a recapture event with respect

25 to any qualified child care facility of the taxpayer,
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1 then the tax of the taxpayer under this chapter for

2 such taxable year shall be increased by an amount

3 equal to the product of—

4 ‘‘(A) the applicable recapture percentage,

5 and

6 ‘‘(B) the aggregate decrease in the credits

7 allowed under section 38 for all prior taxable

8 years which would have resulted if the qualified

9 child care expenditures of the taxpayer de10 scribed in subsection (c)(1)(A) with respect to

11 such facility had been zero.

12 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

13 ‘‘(A) IN GENERAL.—For purposes of this

14 subsection, the applicable recapture percentage

15 shall be determined from the following table:

The applicable

recapture

‘‘If the recapture event occurs in: percentage is:

Years 1–3 .................................................................. 100

Year 4 ........................................................................ 85

Year 5 ........................................................................ 70

Year 6 ........................................................................ 55

Year 7 ........................................................................ 40

Year 8 ........................................................................ 25

Years 9 and 10 .......................................................... 10

Years 11 and thereafter ............................................ 0.

16 ‘‘(B) YEARS.—For purposes of subpara17 graph (A), year 1 shall begin on the first day

18 of the taxable year in which the qualified child

19 care facility is placed in service by the taxpayer.
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1 ‘‘(3) RECAPTURE EVENT DEFINED.—For pur2 poses of this subsection, the term ‘recapture event’

3 means—

4 ‘‘(A) CESSATION OF OPERATION.—The

5 cessation of the operation of the facility as a

6 qualified child care facility.

7 ‘‘(B) CHANGE IN OWNERSHIP.—

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clause (ii), the disposition of a

10 taxpayer’s interest in a qualified child care

11 facility with respect to which the credit de12 scribed in subsection (a) was allowable.

13 ‘‘(ii) AGREEMENT TO ASSUME RECAP14 TURE LIABILITY.—Clause (i) shall not

15 apply if the person acquiring such interest

16 in the facility agrees in writing to assume

17 the recapture liability of the person dis18 posing of such interest in effect imme19 diately before such disposition. In the

20 event of such an assumption, the person

21 acquiring the interest in the facility shall

22 be treated as the taxpayer for purposes of

23 assessing any recapture liability (computed

24 as if there had been no change in owner25 ship).
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1 ‘‘(4) SPECIAL RULES.—

2 ‘‘(A) TAX BENEFIT RULE.—The tax for

3 the taxable year shall be increased under para4 graph (1) only with respect to credits allowed

5 by reason of this section which were used to re6 duce tax liability. In the case of credits not so

7 used to reduce tax liability, the carryforwards

8 and carrybacks under section 39 shall be appro9 priately adjusted.

10 ‘‘(B) NO CREDITS AGAINST TAX.—Any in11 crease in tax under this subsection shall not be

12 treated as a tax imposed by this chapter for

13 purposes of determining the amount of any

14 credit under subpart A, B, or D of this part.

15 ‘‘(C) NO RECAPTURE BY REASON OF CAS16 UALTY LOSS.—The increase in tax under this

17 subsection shall not apply to a cessation of op18 eration of the facility as a qualified child care

19 facility by reason of a casualty loss to the ex20 tent such loss is restored by reconstruction or

21 replacement within a reasonable period estab22 lished by the Secretary.

23 ‘‘(e) SPECIAL RULES.—For purposes of this

24 section—
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1 ‘‘(1) AGGREGATION RULES.—All persons which

2 are treated as a single employer under subsections

3 (a) and (b) of section 52 shall be treated as a single

4 taxpayer.

5 ‘‘(2) PASS-THRU IN THE CASE OF ESTATES AND

6 TRUSTS.—Under regulations prescribed by the Sec7 retary, rules similar to the rules of subsection (d) of

8 section 52 shall apply.

9 ‘‘(3) ALLOCATION IN THE CASE OF PARTNER10 SHIPS.—In the case of partnerships, the credit shall

11 be allocated among partners under regulations pre12 scribed by the Secretary.

13 ‘‘(f) NO DOUBLE BENEFIT.—

14 ‘‘(1) REDUCTION IN BASIS.—For purposes of

15 this subtitle—

16 ‘‘(A) IN GENERAL.—If a credit is deter17 mined under this section with respect to any

18 property by reason of expenditures described in

19 subsection (c)(1)(A), the basis of such property

20 shall be reduced by the amount of the credit so

21 determined.

22 ‘‘(B) CERTAIN DISPOSITIONS.—If during

23 any taxable year there is a recapture amount

24 determined with respect to any property the

25 basis of which was reduced under subparagraph
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1 (A), the basis of such property (immediately be2 fore the event resulting in such recapture) shall

3 be increased by an amount equal to such recap4 ture amount. For purposes of the preceding

5 sentence, the term ‘recapture amount’ means

6 any increase in tax (or adjustment in

7 carrybacks or carryovers) determined under

8 subsection (d).

9 ‘‘(2) OTHER DEDUCTIONS AND CREDITS.—No

10 deduction or credit shall be allowed under any other

11 provision of this chapter with respect to the amount

12 of the credit determined under this section.’’

13 (b) CONFORMING AMENDMENTS.—

14 (1) Section 38(b) is amended—

15 (A) by striking ‘‘plus’’ at the end of para16 graph (11),

17 (B) by striking the period at the end of

18 paragraph (12), and inserting a comma and

19 ‘‘plus’’, and

20 (C) by adding at the end the following:

21 ‘‘(13) the employer-provided child care credit

22 determined under section 45D.’’

23 (2) The table of sections for subpart D of part

24 IV of subchapter A of chapter 1 is amended by add25 ing at the end the following:

‘‘Sec. 45D. Employer-provided child care credit.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 103. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART5 NERS, AND SOLE PROPRIETORS.

6 (a) AMENDMENT TO 1986 CODE.—Subparagraph

7 (B) of section 4975(f )(6) (relating to exemptions not to

8 apply to certain transactions) is amended by adding at the

9 end the following new clause:

10 ‘‘(iii) LOAN EXCEPTION.—Solely for

11 purposes of subparagraph (A)(i), in deter12 mining whether an individual is—

13 ‘‘(I) an owner-employee under

14 section 401(c)(3), subparagraph (B)

15 thereof shall be applied by sub16 stituting ‘25 percent’ for ‘10 percent’,

17 and

18 ‘‘(II) a shareholder-employee

19 under subparagraph (C), such sub20 paragraph shall be applied by sub21 stituting ‘25 percent’ for ‘5 percent’.’’

22 (b) AMENDMENT TO ERISA.—Section 408(d)(2) of

23 the Employee Retirement Income Security Act of 1974

24 (29 U.S.C. 1108(d)(2)) is amended by adding at the end

25 the following new subparagraph:
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1 ‘‘(C) Solely for purposes of paragraph (1)(A), in de2 termining whether an individual is—

3 ‘‘(i) an owner-employee under section 401(c)(3)

4 of the Internal Revenue Code of 1986, subparagraph

5 (B) thereof shall be applied by substituting ‘25 per6 cent’ for ‘10 percent’, and

7 ‘‘(ii) a shareholder-employee under paragraph

8 (3), such paragraph shall be applied by substituting

9 ‘25 percent’ for ‘5 percent’.’’

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

11 this section shall apply to loans made after December 31,

12 2000.

13 SEC. 104. CONTRIBUTIONS TO IRAS THROUGH PAYROLL DE14 DUCTIONS.

15 (a) DEFINITIONS.—For purposes of this section—

16 (1) CONTRIBUTION CERTIFICATE.—The term

17 ‘‘contribution certificate’’ means a certificate sub18 mitted by an employee to the employee’s employer

19 which—

20 (A) identifies the employee by name, ad21 dress, and social security number,

22 (B) identifies the individual retirement

23 plan to which the employee wishes to make con24 tributions through payroll deductions, and
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1 (C) identifies the amount of such contribu2 tions, not to exceed the amount allowed under

3 section 408 of the Internal Revenue Code of

4 1986 to an individual retirement plan for such

5 year.

6 (2) EMPLOYEE.—The term ‘‘employee’’ does

7 not include an employee as defined in section

8 401(c)(1) of such Code.

9 (3) INDIVIDUAL RETIREMENT PLANS.—The

10 term ‘‘individual retirement plan’’ has the meaning

11 given the term by section 7701(a)(37) of the Inter12 nal Revenue Code of 1986.

13 (4) SECRETARY.—The term ‘‘Secretary’’ means

14 the Secretary of the Treasury.

15 (b) ESTABLISHMENT OF PAYROLL DEDUCTION SYS16 TEM.—An employer may establish a system under which

17 employees, through employer payroll deductions, may

18 make contributions to individual retirement plans. An em19 ployer shall not incur any liability under title I of the Em20 ployee Retirement Income Security Act of 1974 in pro21 viding for such a system.

22 (c) CONTRIBUTIONS TO INDIVIDUAL RETIREMENT

23 PLANS.—

24 (1) IN GENERAL.—The system established

25 under subsection (b) shall provide that contributions
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1 made to an individual retirement plan for any tax2 able year are—

3 (A) contributions through employer payroll

4 deductions, and

5 (B) if the employer so elects, additional

6 contributions by the employee which, when

7 added to contributions under subparagraph (A),

8 do not exceed the amount allowed under section

9 408 of the Internal Revenue Code of 1986 for

10 the taxable year.

11 (2) EMPLOYER PAYROLL DEDUCTIONS.—

12 (A) IN GENERAL.—The system established

13 under subsection (b) shall provide that an em14 ployee may establish and maintain an individual

15 retirement plan simply by—

16 (i) completing a contribution certifi17 cate, and

18 (ii) submitting such certificate to the

19 employee’s employer in the manner pro20 vided under subparagraph (D).

21 (B) CHANGE OF AMOUNTS.—An employee

22 establishing and maintaining an individual re23 tirement plan under subparagraph (A) may

24 change the amount of an employer payroll de-
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1 duction in the same manner as under subpara2 graph (A).

3 (C) SIMPLIFIED FORMS.—

4 (i) CONTRIBUTION CERTIFICATE.—

5 The Secretary shall develop a model con6 tribution certificate for purposes of this

7 paragraph—

8 (I) which is written in a clear

9 and easily understandable manner,

10 and

11 (II) the completion of which by

12 an employee will constitute the estab13 lishment of an individual retirement

14 plan and the request for employer

15 payroll deductions or changes in such

16 deductions.

17 (ii) AVAILABILITY.—The Secretary

18 shall make available to all employees and

19 employers the forms developed under this

20 subparagraph, and shall include with such

21 forms easy to understand explanatory ma22 terials.

23 (D) USE OF CERTIFICATE.—Each em24 ployer electing to adopt a system under sub25 section (b) shall, upon receipt of a contribution
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1 certificate from an employee, deduct the appro2 priate contribution as determined by such cer3 tificate from the employee’s wages in equal

4 amounts during the remaining payroll periods

5 for the taxable year and shall remit such

6 amounts for investment in the employee’s indi7 vidual retirement plan not later than the close

8 of the 30-day period following the last day of

9 the month in which such payroll period occurs.

10 (E) FAILURE TO REMIT PAYROLL DEDUC11 TIONS.—For purposes of the Internal Revenue

12 Code of 1986, any amount which an employer

13 fails to remit on behalf of an employee pursuant

14 to a contribution certificate of such employee

15 shall not be allowed as a deduction to the em16 ployer under such Code.

17 (d) ADDITIONAL INFORMATION.—

18 (1) IN GENERAL.—The system established

19 under subsection (b) shall provide for the furnishing

20 of information to employees of the opportunity of es21 tablishing individual retirement plans and of trans22 ferring amounts to such plans.

23 (2) INVESTMENT INFORMATION.—The employer

24 shall also make available to employees information
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1 on how to make informed investment decisions and

2 how to achieve retirement objectives.

3 (3) INFORMATION NOT INVESTMENT ADVICE.—

4 Information provided under this subsection shall not

5 be treated as investment advice for purposes of any

6 Federal or State law.

7 SEC. 105. MODIFICATION OF TOP-HEAVY RULES.

8 (a) SIMPLIFICATION OF DEFINITION OF KEY EM9 PLOYEE.—

10 (1) IN GENERAL.—Section 416(i)(1)(A) (defin11 ing key employee) is amended—

12 (A) by striking ‘‘or any of the 4 preceding

13 plan years’’ in the matter preceding clause (i),

14 (B) by striking clause (i) and inserting the

15 following:

16 ‘‘(i) an officer of the employer having

17 an annual compensation greater than

18 $80,000,’’,

19 (C) by striking clause (ii) and redesig20 nating clauses (iii) and (iv) as clauses (ii) and

21 (iii), respectively, and

22 (D) by striking the second sentence in the

23 matter following clause (iii), as redesignated by

24 subparagraph (C).
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1 (2) CONFORMING AMENDMENT.—Section

2 416(i)(1)(B)(iii) is amended by striking ‘‘and sub3 paragraph (A)(ii)’’.

4 (b) DISTRIBUTIONS DURING LAST YEAR BEFORE

5 DETERMINATION DATE TAKEN INTO ACCOUNT.—Section

6 416(g) is amended—

7 (1) in paragraph (3)—

8 (A) by striking ‘‘LAST 5 YEARS’’ in the

9 heading and inserting ‘‘LAST YEAR BEFORE DE10 TERMINATION DATE’’, and

11 (B) in the matter following subparagraph

12 (B), by striking ‘‘5-year period’’ and inserting

13 ‘‘1-year period’’, and

14 (2) in paragraph (4)(E)—

15 (A) by striking ‘‘LAST 5 YEARS’’ in the

16 heading and inserting ‘‘LAST YEAR BEFORE DE17 TERMINATION DATE’’, and

18 (B) by striking ‘‘5-year period’’ and insert19 ing ‘‘1-year period’’.

20 (c) REQUIREMENTS FOR QUALIFICATIONS.—Clause

21 (ii) of section 401(a)(10)(B) (relating to requirements for

22 qualifications for top-heavy plans) is amended by adding

23 at the end the following new flush sentence:

24 ‘‘The preceding sentence shall not apply to

25 a plan if the plan is not top-heavy and if
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1 it is not reasonable to expect that the plan

2 will become a top-heavy plan.’’.

3 (d) FROZEN PLAN EXEMPT FROM MINIMUM BEN4 EFIT REQUIREMENT.—

5 (1) IN GENERAL.—Subparagraph (C) of section

6 416(c)(1) (relating to defined benefit plans) is

7 amended—

8 (A) in clause (i), by striking ‘‘clause (ii)’’

9 and inserting ‘‘clause (ii) or (iii)’’, and

10 (B) by adding at the end the following:

11 ‘‘(iii) EXCEPTION FOR FROZEN

12 PLAN.—For purposes of determining an

13 employee’s years of service with the em14 ployer, any service with the employer shall

15 be disregarded to the extent that such

16 service occurs during a plan year when the

17 plan benefits (within the meaning of sec18 tion 410(b)) no employee or former em19 ployee.’’.

20 (2) CONFORMING AMENDMENT.—Subparagraph

21 (A) of section 415(b)(5) is amended by adding at

22 the end the following: ‘‘An employee shall not be

23 credited with a year of participation in a defined

24 benefit plan for any year in which the plan does not
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1 benefit (within the meaning of section 410(b)) such

2 employee.’’.

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

4 this section shall apply to plan years beginning after De5 cember 31, 1999.

6 SEC. 106. CREDIT FOR SMALL EMPLOYER PENSION PLAN

7 CONTRIBUTIONS AND START-UP COSTS.

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 (relating to business related cred10 its), as amended by section 102, is amended by adding

11 at the end the following new section:

12 ‘‘SEC. 45E. SMALL EMPLOYER PENSION PLAN CREDIT.

13 ‘‘(a) GENERAL RULE.—For purposes of section 38,

14 in the case of an eligible employer, the small employer pen15 sion plan credit determined under this section for any tax16 able year is an amount equal to the sum of—

17 ‘‘(1) 50 percent of the qualified employer con18 tributions of the taxpayer for the taxable year, and

19 ‘‘(2) 50 percent of the qualified start-up costs

20 paid or incurred by the taxpayer during the taxable

21 year.

22 ‘‘(b) LIMITATIONS.—

23 ‘‘(1) LIMITS ON CONTRIBUTIONS.—For pur24 poses of subsection (a)(1)—
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1 ‘‘(A) qualified employer contributions may

2 only be taken into account for each of the first

3 5 taxable years ending after the date the em4 ployer establishes the qualified employer plan to

5 which the contribution is made, and

6 ‘‘(B) the amount of the qualified employer

7 contributions taken into account with respect to

8 any qualified employee for any such taxable

9 year shall not exceed 3 percent of the com10 pensation (as defined in section 414(s)) of the

11 qualified employee for such taxable year.

12 ‘‘(2) LIMITS ON START-UP COSTS.—The amount

13 of the credit determined under subsection (a)(2) for

14 any taxable year shall not exceed—

15 ‘‘(A) $2,000 for the first taxable year end16 ing after the date the employer established the

17 qualified employer plan to which such costs re18 late,

19 ‘‘(B) $1,000 for each of the second and

20 third such taxable years, and

21 ‘‘(C) zero for each taxable year thereafter.

22 ‘‘(c) DEFINITIONS.—For purposes of this section—

23 ‘‘(1) ELIGIBLE EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—The term ‘eligible em2 ployer’ means, with respect to any year, an em3 ployer which has no more than—

4 ‘‘(i) for purposes of subsection (a)(1),

5 25 employees, and

6 ‘‘(ii) for purposes of subsection (a)(2),

7 100 employees,

8 who received at least $5,000 of compensation

9 from the employer for the preceding year.

10 ‘‘(B) 2-YEAR GRACE PERIOD.—An eligible

11 employer who establishes and maintains a quali12 fied employer plan for 1 or more years and who

13 fails to be an eligible employer for any subse14 quent year shall be treated as an eligible em15 ployer for the 2 years following the last year

16 the employer was an eligible employer.

17 ‘‘(C) REQUIREMENT FOR NEW QUALIFIED

18 EMPLOYER PLANS.—Such term shall not in19 clude an employer if, during the 3-taxable year

20 period immediately preceding the 1st taxable

21 year for which the credit under this section is

22 otherwise allowable for a qualified employer

23 plan of the employer, the employer and each

24 member of any controlled group including the

25 employer (or any predecessor of either) estab-
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1 lished or maintained a qualified employer plan

2 with respect to which contributions were made,

3 or benefits were accrued, for substantially the

4 same employees as are in the qualified employer

5 plan.

6 ‘‘(2) QUALIFIED EMPLOYER CONTRIBUTIONS.—

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

8 employer contributions’ means, with respect to

9 any taxable year, any employer contributions

10 made on behalf of a qualified employee to a

11 qualified employer plan for a plan year ending

12 with or within the taxable year.

13 ‘‘(B) EMPLOYER CONTRIBUTIONS.—The

14 term ‘employer contributions’ shall not include

15 any elective deferral (within the meaning of sec16 tion 402(g)(3)).

17 ‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali18 fied employee’ means an individual who—

19 ‘‘(A) is eligible to participate in the quali20 fied employer plan to which the employer con21 tributions are made, and

22 ‘‘(B) is not a highly compensated employee

23 (within the meaning of section 414(q)) for the

24 year for which the contribution is made.
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1 ‘‘(4) QUALIFIED START-UP COSTS.—The term

2 ‘qualified start-up costs’ means any ordinary and

3 necessary expenses of an eligible employer which are

4 paid or incurred in connection with—

5 ‘‘(A) the establishment or maintenance of

6 a qualified employer plan in which qualified em7 ployees are eligible to participate, and

8 ‘‘(B) providing educational information to

9 employees regarding participation in such plan

10 and the benefits of establishing an investment

11 plan.

12 ‘‘(5) QUALIFIED EMPLOYER PLAN.—The term

13 ‘qualified employer plan’ has the meaning given such

14 term in section 4972(d).

15 ‘‘(d) SPECIAL RULES.—

16 ‘‘(1) AGGREGATION RULES.—All persons treat17 ed as a single employer under subsection (a) or (b)

18 of section 52, or subsection (n) or (o) of section 414,

19 shall be treated as one person. All qualified employer

20 plans of an employer shall be treated as a single

21 qualified employer plan.

22 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de23 duction shall be allowable under this chapter for any

24 qualified start-up costs or qualified contributions for

25 which a credit is determined under subsection (a).
26

•S 1867 IS

1 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

2 section shall not apply to a taxpayer for any taxable

3 year if such taxpayer elects to have this section not

4 apply for such taxable year.’’.

5 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI6 NESS CREDIT.—Section 38(b) (defining current year busi7 ness credit), as amended by section 102, is amended by

8 striking ‘‘plus’’ at the end of paragraph (12), by striking

9 the period at the end of paragraph (13) and inserting ‘‘,

10 plus’’, and by adding at the end the following new para11 graph:

12 ‘‘(14) in the case of an eligible employer (as de13 fined in section 45E(c)), the small employer pension

14 plan credit determined under section 45E(a).’’.

15 (c) PORTION OF CREDIT REFUNDABLE.—Section

16 38(c) (relating to limitation based on amount of tax) is

17 amended by adding at the end the following new para18 graph:

19 ‘‘(4) PORTION OF SMALL EMPLOYER PENSION

20 PLAN CREDIT REFUNDABLE.—

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

22 small employer pension plan credit under sub23 section (b)(14), the aggregate credits allowed

24 under subpart C shall be increased by the lesser

25 of—
27

•S 1867 IS

1 ‘‘(i) the credit which would be allowed

2 without regard to this paragraph and the

3 limitation under paragraph (1), or

4 ‘‘(ii) the amount by which the aggre5 gate amount of credits allowed by this sec6 tion (without regard to this paragraph)

7 would increase if the limitation under

8 paragraph (1) were increased by the tax9 payer’s applicable payroll taxes for the tax10 able year.

11 ‘‘(B) TREATMENT OF CREDIT.—The

12 amount of the credit allowed under this para13 graph shall not be treated as a credit allowed

14 under this subpart and shall reduce the amount

15 of the credit allowed under this section for the

16 taxable year.

17 ‘‘(C) APPLICABLE PAYROLL TAXES.—For

18 purposes of this paragraph—

19 ‘‘(i) IN GENERAL.—The term ‘applica20 ble payroll taxes’ means, with respect to

21 any taxpayer for any taxable year—

22 ‘‘(I) the amount of the taxes im23 posed by sections 3111 and 3221(a)

24 on compensation paid by the taxpayer

25 during the taxable year,
28

•S 1867 IS

1 ‘‘(II) 50 percent of the taxes im2 posed by section 1401 on the self-em3 ployment income of the taxpayer dur4 ing the taxable year, and

5 ‘‘(III) 50 percent of the taxes im6 posed by section 3211(a)(1) on

7 amounts received by the taxpayer dur8 ing the calendar year in which the

9 taxable year begins.

10 ‘‘(ii) AGREEMENTS REGARDING FOR11 EIGN AFFILIATES.—Section 24(d)(5)(C)

12 shall apply for purposes of clause (i).’’.

13 (d) CONFORMING AMENDMENT.—The table of sec14 tions for subpart D of part IV of subchapter A of chapter

15 1, as amended by section 102, is amended by adding at

16 the end the following new item:

‘‘Sec. 45E. Small employer pension plan credit.’’.

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

18 this section shall apply to costs paid or incurred or con19 tributions made in connection with qualified employer

20 plans established after December 31, 2000.

21 SEC. 107. ELECTIVE DEFERRALS NOT TAKEN INTO AC22 COUNT FOR PURPOSES OF DEDUCTION LIM23 ITS.

24 (a) IN GENERAL.—Section 404 (relating to deduction

25 for contributions of an employer to an employees’ trust
29

•S 1867 IS

1 or annuity plan and compensation under a deferred pay2 ment plan) is amended by adding at the end the following

3 new subsection:

4 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC5 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

6 deferrals (as defined in section 402(g)(3)) shall not be

7 subject to any limitation contained in paragraph (3), (7),

8 or (9) of subsection (a), and such elective deferrals shall

9 not be taken into account in applying any such limitation

10 to any other contributions.’’.

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

12 this section shall apply to years beginning after December

13 31, 2000.

14 SEC. 108. FASTER VESTING OF CERTAIN EMPLOYER

15 MATCHING CONTRIBUTIONS.

16 (a) AMENDMENTS TO 1986 CODE.—Section 411(a)

17 (relating to minimum vesting standards) is amended—

18 (1) in paragraph (2), by striking ‘‘A plan’’ and

19 inserting ‘‘Except as provided in paragraph (12), a

20 plan’’, and

21 (2) by adding at the end the following:

22 ‘‘(12) FASTER VESTING FOR MATCHING CON23 TRIBUTIONS.—In the case of matching contributions

24 (as defined in section 401(m)(4)(A)), paragraph (2)

25 shall be applied—
30

•S 1867 IS

1 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

2 in subparagraph (A), and

3 ‘‘(B) by substituting the following table for

4 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 ............................................................................................... 20

3 ............................................................................................... 40

4 ............................................................................................... 60

5 ............................................................................................... 80

6 ............................................................................................... 100.’’.

5 (b) AMENDMENTS TO ERISA.—Section 203(a) of the

6 Employee Retirement Income Security Act of 1974 (29

7 U.S.C. 1053(a)) is amended—

8 (1) in paragraph (2), by striking ‘‘A plan’’ and

9 inserting ‘‘Except as provided in paragraph (4), a

10 plan’’, and

11 (2) by adding at the end the following:

12 ‘‘(4) FASTER VESTING FOR MATCHING CON13 TRIBUTIONS.—In the case of matching contributions

14 (as defined in section 401(m)(4)(A) of the Internal

15 Revenue Code of 1986), paragraph (2) shall be

16 applied—

17 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

18 in subparagraph (A), and

19 ‘‘(B) by substituting the following table for

20 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 ............................................................................................... 20

3 ............................................................................................... 40
31

•S 1867 IS

The nonforfeitable

‘‘Years of service: percentage is:

4 ............................................................................................... 60

5 ............................................................................................... 80

6 ............................................................................................... 100.’’.

1 (c) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to contributions for plan years beginning

5 after December 31, 1999.

6 (2) COLLECTIVE BARGAINING AGREEMENTS.—

7 In the case of a plan maintained pursuant to 1 or

8 more collective bargaining agreements between em9 ployee representatives and 1 or more employers rati10 fied by the date of enactment of this Act, the

11 amendments made by this section shall not apply to

12 contributions on behalf of employees covered by any

13 such agreement for plan years beginning before the

14 earlier of—

15 (A) the later of—

16 (i) the date on which the last of such

17 collective bargaining agreements termi18 nates (determined without regard to any

19 extension thereof on or after such date of

20 enactment), or

21 (ii) January 1, 2000, or

22 (B) January 1, 2004.
32

•S 1867 IS

1 (3) SERVICE REQUIRED.—With respect to any

2 plan, the amendments made by this section shall not

3 apply to any employee before the date that such em4 ployee has 1 hour of service under such plan in any

5 plan year to which the amendments made by this

6 section apply.

7 SEC. 109. REDUCED PBGC PREMIUM FOR NEW PLANS OF

8 SMALL EMPLOYERS.

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

10 4006(a)(3) of the Employee Retirement Income Security

11 Act of 1974 (29 U.S.C. 1306(a)(3)) is amended—

12 (1) in clause (i), by inserting ‘‘other than a new

13 single-employer plan (as defined in subparagraph

14 (F)),’’ after ‘‘single-employer plan,’’,

15 (2) in clause (iii), by striking the period at the

16 end and inserting ‘‘, and’’, and

17 (3) by adding at the end the following new

18 clause:

19 ‘‘(iv) in the case of a new single-employer plan

20 (as defined in subparagraph (F)) maintained by a

21 small employer (as so defined) for the plan year, $5

22 for each individual who is a participant in such plan

23 during the plan year.’’.

24 (b) DEFINITION OF NEW SINGLE-EMPLOYER

25 PLAN.—Section 4006(a)(3) of the Employee Retirement
33

•S 1867 IS

1 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is

2 amended by adding at the end the following new subpara3 graph:

4 ‘‘(F)(i) For purposes of this paragraph, a

5 single-employer plan maintained by an employer

6 shall be treated as a new single-employer plan

7 for each of its first 5 plan years if, during the

8 36-month period ending on the date of the

9 adoption of such plan, the employer or any

10 member of such employer’s controlled group (or

11 any predecessor of either) had not established

12 or maintained a plan to which this title applies

13 with respect to which contributions were made,

14 or benefits were accrued, for substantially the

15 same employees as are in the new single-em16 ployer plan.

17 ‘‘(ii)(I) For purposes of this paragraph,

18 the term ‘small employer’ means an employer

19 which on the first day of any plan year has, in

20 aggregation with all members of the controlled

21 group of such employer, 100 or fewer employ22 ees.

23 ‘‘(II) In the case of a plan maintained by

24 2 or more contributing sponsors that are not

25 part of the same controlled group, the employ-
34

•S 1867 IS

1 ees of all contributing sponsors and controlled

2 groups of such sponsor shall be aggregated for

3 purposes of determining whether the sponsor is

4 a small employer.’’.

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

6 this section shall apply to plan years beginning after De7 cember 31, 1999.

8 SEC. 110. PHASE-IN OF ADDITIONAL PBGC PREMIUM FOR

9 NEW PLANS.

10 (a) AMENDMENTS TO ERISA.—Subparagraph (E) of

11 section 4006(a)(3) of the Employee Retirement Income

12 Security Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amend13 ed by adding at the end the following new clause:

14 ‘‘(v) In the case of a new defined benefit plan, the

15 amount determined under clause (ii) for any plan year

16 shall be an amount equal to the product derived by multi17 plying the amount determined under clause (ii) by the ap18 plicable percentage. For purposes of this clause, the term

19 ‘applicable percentage’ means—

20 ‘‘(I) 0 percent, for the first plan year.

21 ‘‘(II) 20 percent, for the second plan year.

22 ‘‘(III) 40 percent, for the third plan year.

23 ‘‘(IV) 60 percent, for the fourth plan year.

24 ‘‘(V) 80 percent, for the fifth plan year.
35

•S 1867 IS

1 ‘‘(VI) 100 percent, for the sixth plan year, and

2 for each succeeding plan year.

3 For purposes of this clause, a defined benefit plan (as de4 fined in section 3(35)) maintained by an employer shall

5 be treated as a new defined benefit plan if, during the

6 36-month period ending on the date of the adoption of

7 the plan, the employer and each member of any controlled

8 group including the employer (or any predecessor of ei9 ther) did not establish or maintain a plan to which this

10 title applies with respect to which contributions were

11 made, or benefits were accrued, for substantially the same

12 employees as are in the new plan.’’.

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

14 this section shall apply to plan years beginning after De15 cember 31, 1999.

16 SEC. 111. ELIMINATION OF USER FEE FOR REQUESTS TO

17 IRS REGARDING NEW PENSION PLANS.

18 (a) ELIMINATION OF CERTAIN USER FEES.—The

19 Secretary of the Treasury or the Secretary’s delegate shall

20 not require payment of user fees under the program estab21 lished under section 10511 of the Revenue Act of 1987

22 for requests to the Internal Revenue Service for ruling let23 ters, opinion letters, and determination letters or similar

24 requests with respect to the qualified status of a new pen25 sion benefit plan or any trust which is part of the plan.
36

•S 1867 IS

1 (b) NEW PENSION BENEFIT PLAN.—For purposes of

2 this section—

3 (1) IN GENERAL.—The term ‘‘new pension ben4 efit plan’’ means a pension, profit-sharing, stock

5 bonus, annuity, or employee stock ownership plan

6 which is maintained by one or more eligible employ7 ers if such employer (or any predecessor employer)

8 has not made a prior request described in subsection

9 (a) for such plan (or any predecessor plan).

10 (2) ELIGIBLE EMPLOYER.—The term ‘‘eligible

11 employer’’ means an employer (or any predecessor

12 employer) which has not established or maintained a

13 qualified employer plan with respect to which con14 tributions were made, or benefits were accrued for

15 service, in the 3 most recent taxable years ending

16 prior to the first taxable year in which the request

17 is made.

18 (c) EFFECTIVE DATE.—The provisions of this section

19 shall apply with respect to requests made after December

20 31, 1999.

21 SEC. 112. DEDUCTION LIMITS.

22 (a) IN GENERAL.—Section 404(a) (relating to gen23 eral rule) is amended by adding at the end the following:

24 ‘‘(12) DEFINITION OF COMPENSATION.—For

25 purposes of paragraphs (3), (7), (8), and (9), the
37

•S 1867 IS

1 term ‘compensation’ shall include amounts treated

2 as participant’s compensation under subparagraph

3 (C) or (D) of section 415(c)(3).’’.

4 (b) CONFORMING AMENDMENT.—Subparagraph (B)

5 of section 404(a)(3) is amended by striking the last sen6 tence thereof.

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

8 this section shall apply to years beginning after December

9 31, 2000.

10 SEC. 113. TREATMENT OF MULTIEMPLOYER PLANS UNDER

11 SECTION 415.

12 (a) COMPENSATION LIMIT.—Paragraph (11) of sec13 tion 415(b) (relating to limitation for defined benefit

14 plans) is amended to read as follows:

15 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN16 MENTAL AND MULTIEMPLOYER PLANS.—In the case

17 of a governmental plan (as defined in section

18 414(d)) or a multiemployer plan (as defined in sec19 tion 414(f)), subparagraph (B) of paragraph (1)

20 shall not apply.’’.

21 (b) COMBINING AND AGGREGATION OF PLANS.—

22 (1) COMBINING OF PLANS.—Subsection (f) of

23 section 415 (relating to combining of plans) is

24 amended by adding at the end the following:
38

•S 1867 IS

1 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

2 PLANS.—Notwithstanding paragraph (1) and sub3 section (g), a multiemployer plan (as defined in sec4 tion 414(f)) shall not be combined or aggregated

5 with any other plan maintained by an employer for

6 purposes of applying the limitations established in

7 this section, except that such plan shall be combined

8 or aggregated with another plan solely for purposes

9 of determining whether such other plan meets the

10 requirements of subsection (b)(1)(A).’’.

11 (2) CONFORMING AMENDMENT FOR AGGREGA12 TION OF PLANS.—Subsection (g) of section 415 (re13 lating to aggregation of plans) is amended by strik14 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro15 vided in subsection (f)(3), the Secretary’’.

16 (c) EARLY RETIREMENT LIMITS FOR CERTAIN

17 PLANS.—Section 415(b)(2)(F) is amended to read as fol18 lows:

19 ‘‘(F) MULTIEMPLOYER PLANS AND PLANS

20 MAINTAINED BY GOVERNMENTS AND TAX EX21 EMPT ORGANIZATIONS.—In the case of a gov22 ernmental plan (within the meaning of section

23 414(d)), a plan maintained by an organization

24 (other than a governmental unit) exempt from

25 tax under this subtitle, a multiemployer plan
39

•S 1867 IS

1 (as defined in section 414(f)), or a qualified

2 merchant marine plan—

3 ‘‘(i) subparagraph (C) shall be

4 applied—

5 ‘‘(I) by substituting ‘age 62’ for

6 ‘social security retirement age’ each

7 place it appears, and

8 ‘‘(II) as if the last sentence

9 thereof read as follows: ‘The reduction

10 under this subparagraph shall not re11 duce the limitation of paragraph

12 (1)(A) below (i) 80 percent of such

13 limitation as in effect for the year, or

14 (ii) if the benefit begins before age 55,

15 the equivalent for such 80 percent

16 amount for age 55.’’, and

17 ‘‘(ii) subparagraph (D) shall be ap18 plied by substituting ‘age 65’ for ‘social se19 curity retirement age’ each place it ap20 pears.

21 For purposes of this subparagraph, the term

22 ‘qualified merchant marine plan’ means a plan

23 in existence on January 1, 1986, the partici24 pants in which are merchant marine officers

25 holding licenses issued by the Secretary of
40

•S 1867 IS

1 Transportation under title 46, United States

2 Code.’’.

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

4 this section shall apply to years beginning after December

5 31, 1999.

6 SEC. 114. PENSION REDUCTION DISCLOSURE.

7 (a) NOTICE REQUIRED FOR CERTAIN PLAN AMEND8 MENTS REDUCING FUTURE BENEFIT ACCRUALS.—

9 (1) GENERAL NOTICE REQUIREMENTS.—Sec10 tion 204(h) of the Employee Retirement Income Se11 curity Act of 1974 (29 U.S.C. 1054(h)) is amended

12 to read as follows:

13 ‘‘(h) NOTICE REQUIREMENTS FOR PENSION PLAN

14 AMENDMENTS REDUCING ACCRUALS.—

15 ‘‘(1) IN GENERAL.—If an applicable pension

16 plan is amended so as to provide for a significant re17 duction in the rate of future benefit accrual of 1 or

18 more applicable individuals, the plan administrator

19 shall—

20 ‘‘(A) not later than the 45th day before

21 the effective date of the amendment, provide

22 the written notice described in paragraph (2) to

23 each applicable individual (and to each em24 ployee organization representing applicable indi25 viduals), and
41

•S 1867 IS

1 ‘‘(B) in the case of a large applicable pen2 sion plan—

3 ‘‘(i) include in the notice under para4 graph (2) the additional information de5 scribed in paragraph (3),

6 ‘‘(ii) make available the information

7 described in paragraph (4) in accordance

8 with such paragraph, and

9 ‘‘(iii) provide individual benefit state10 ments in accordance with section 105(e).

11 ‘‘(2) BASIC WRITTEN NOTICE.—The notice

12 under paragraph (1) shall include a summary of the

13 important terms of the amendment, including—

14 ‘‘(A) the effective date of the amendment,

15 ‘‘(B) a statement that the amendment is

16 expected to significantly reduce the rate of fu17 ture benefit accrual,

18 ‘‘(C) a description of the classes of applica19 ble individuals to whom the amendment applies,

20 and

21 ‘‘(D) a description of how the amendment

22 significantly reduces the rate of future benefit

23 accrual.

24 ‘‘(3) ADDITIONAL INFORMATION TO BE PRO25 VIDED BY LARGE APPLICABLE PENSION PLANS.—
42

•S 1867 IS

1 ‘‘(A) IN GENERAL.—The information de2 scribed in this paragraph is—

3 ‘‘(i) a description of the plan’s benefit

4 formulas (including formulas for deter5 mining early retirement benefits) both be6 fore and after the amendment and an ex7 planation of the effect of the different for8 mulas on applicable individuals,

9 ‘‘(ii) an explanation of the cir10 cumstances (if any) under which (for ap11 propriate categories of applicable individ12 uals) the amendment is reasonably ex13 pected to result in a temporary period

14 after the effective date of the amendment

15 during which there are no or minimal ac16 cruals,

17 ‘‘(iii) illustrative examples of normal

18 or early retirement benefits meeting the re19 quirements of subparagraph (B), and

20 ‘‘(iv) notice of each applicable individ21 ual’s right to request, and of the proce22 dures for requesting, the information re23 quired to be provided under paragraph (4)

24 and under section 105(e).
43

•S 1867 IS

1 ‘‘(B) ILLUSTRATIVE EXAMPLES.—Illus2 trative examples meet the requirements of this

3 subparagraph if such examples illustrate the

4 adverse effects of the plan amendment. Such

5 examples shall be prepared by the plan adminis6 trator in accordance with regulations prescribed

7 by the Secretary of the Treasury, and such reg8 ulations shall require that the examples—

9 ‘‘(i) reflect fairly the different cat10 egories of applicable individuals who are

11 similarly affected by the plan amendment

12 after consideration of all relevant factors,

13 ‘‘(ii) show a comparison of benefits

14 for each such category of applicable indi15 viduals under the plan (as in effect before

16 and after the effective date) at appropriate

17 future dates, and

18 ‘‘(iii) illustrate any temporary period

19 described in subparagraph (A)(ii).

20 Such comparison shall be based on benefits in

21 the form of a life annuity and on actuarial as22 sumptions each of which is reasonable (and is

23 so certified by an enrolled actuary) when ap24 plied to all participants in the plan.
44

•S 1867 IS

1 ‘‘(4) SUPPORTING INFORMATION RELATING TO

2 CALCULATION OF BENEFITS.—

3 ‘‘(A) IN GENERAL.—Each individual who

4 receives or who is entitled to receive the infor5 mation described in paragraph (3) may (after

6 so receiving or becoming so entitled) request

7 the plan administrator to provide the informa8 tion described in subparagraph (B).

9 ‘‘(B) INFORMATION.—The plan adminis10 trator shall, within 15 days after the date on

11 which a request under subparagraph (A) is

12 made, provide to the individual information (in13 cluding benefit formulas and actuarial factors)

14 which is sufficient—

15 ‘‘(i) to confirm the benefit compari16 sons in the illustrative examples described

17 in paragraph (3)(B), and

18 ‘‘(ii) to enable the individual to use

19 the individual’s own personal information

20 to make calculations of the individual’s

21 own benefits which are similar to the cal22 culations made in such examples.

23 Nothing in this subsection shall be construed to

24 require the plan administrator to provide to an
45

•S 1867 IS

1 individual such individual’s personal informa2 tion for purposes of clause (ii).

3 ‘‘(C) TIME LIMITATION ON REQUESTS.—

4 This paragraph shall apply only to requests

5 made during the 12-month period that begins

6 on the later of the effective date of the amend7 ment to which it relates or the date the notice

8 described in paragraph (2) is provided.

9 ‘‘(5) SANCTIONS.—

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

11 egregious failure to meet any requirement of

12 this subsection with respect to any plan amend13 ment, the provisions of the applicable pension

14 plan shall be applied as if such plan amendment

15 entitled all applicable individuals to the greater

16 of—

17 ‘‘(i) the benefits to which they would

18 have been entitled without regard to such

19 amendment, or

20 ‘‘(ii) the benefits under the plan with

21 regard to such amendment.

22 ‘‘(B) EGREGIOUS FAILURE.—For purposes

23 of subparagraph (A), there is an egregious fail24 ure to meet the requirements of this subsection

25 if such failure is—
46

•S 1867 IS

1 ‘‘(i) an intentional failure (including

2 any failure to promptly provide the re3 quired notice or information after the plan

4 administrator discovers an unintentional

5 failure to meet the requirements of this

6 subsection),

7 ‘‘(ii) a failure to provide most of the

8 individuals with most of the information

9 they are entitled to receive under this sub10 section, or

11 ‘‘(iii) a failure which is determined to

12 be egregious under regulations prescribed

13 by the Secretary of the Treasury.

14 ‘‘(C) EXCISE TAX.—For excise tax on fail15 ure to meet requirements, see section 4980F of

16 the Internal Revenue Code of 1986.

17 ‘‘(6) SPECIAL RULES.—

18 ‘‘(A) PLAIN LANGUAGE.—The notice re19 quired under paragraph (1) shall be written in

20 a manner calculated to be understood by the av21 erage plan participant who is an applicable indi22 vidual.

23 ‘‘(B) NOTICE TO DESIGNEES.—The notice

24 and information required to be provided under

25 this subsection may be provided to a person
47

•S 1867 IS

1 designated, in writing, by the person to which

2 it would otherwise be provided.

3 ‘‘(7) ALTERNATIVE METHODS OF COMPLIANCE

4 WITH ENHANCED DISCLOSURE REQUIREMENTS IN

5 CERTAIN CASES.—The Secretary of the Treasury

6 shall prescribe such regulations as may be necessary

7 to carry out this subsection. The Secretary of the

8 Treasury may—

9 ‘‘(A) prescribe alternative or simplified

10 methods of complying with paragraphs (3) and

11 (4) in situations where—

12 ‘‘(i) there is no fundamental change in

13 the manner in which the accrued benefit of

14 an applicable individual is determined

15 under the plan, and

16 ‘‘(ii) such other methods are adequate

17 to reasonably inform plan participants who

18 are applicable individuals of the impact of

19 the reductions,

20 ‘‘(B) reduce the advance notice period in

21 paragraph (1)(A) from 45 days to 15 days be22 fore the effective date of the amendment for

23 cases in which compliance with the 45-day ad24 vance notice requirement would be unduly bur25 densome because the amendment is contingent
48

•S 1867 IS

1 on a merger, acquisition, disposition, or other

2 similar transaction involving plan participants

3 who are applicable individuals or because 45

4 days advance notice is otherwise impracticable,

5 ‘‘(C) permit the comparison of benefits

6 under paragraph (3)(B)(i) to be based on a

7 form of payment other than a life annuity, or

8 ‘‘(D) specify actuarial assumptions that

9 are deemed to be reasonable for purposes of the

10 benefit comparisons under paragraph (3)(B)(i).

11 ‘‘(8) APPLICABLE INDIVIDUAL.—For purposes

12 of this subsection, the term ‘applicable individual’

13 means, with respect to any plan amendment—

14 ‘‘(A) each participant in the plan, and

15 ‘‘(B) each beneficiary who is an alternate

16 payee (within the meaning of section

17 206(d)(3)(K)) under a qualified domestic rela18 tions order (within the meaning of section

19 206(d)(3)(B)(i)),

20 whose future benefit accruals under the plan may

21 reasonably be expected to be reduced by such plan

22 amendment.

23 ‘‘(9) TERMS RELATING TO PLANS.—For pur24 poses of this subsection—
49

•S 1867 IS

1 ‘‘(A) APPLICABLE PENSION PLAN.—The

2 term ‘applicable pension plan’ means—

3 ‘‘(i) a defined benefit plan, or

4 ‘‘(ii) an individual account plan which

5 is subject to the funding standards of sec6 tion 302.

7 ‘‘(B) LARGE APPLICABLE PENSION

8 PLAN.—The term ‘large applicable pension

9 plan’ means an applicable pension plan which

10 had 100 or more active participants as of the

11 last day of the plan year preceding the plan

12 year in which the plan amendment becomes ef13 fective.’’

14 (2) INDIVIDUAL STATEMENTS.—Section 105 of

15 the Employee Retirement Income Security Act of

16 1974 (29 U.S.C. 1025) is amended by adding at the

17 end the following new subsection:

18 ‘‘(e)(1) The plan administrator of a large applicable

19 pension plan shall furnish an individual statement de20 scribed in paragraph (2) to each individual—

21 ‘‘(A) who receives, or is entitled to receive,

22 under section 204(h) the information described in

23 paragraph (3) thereof from such administrator, and

24 ‘‘(B) who requests in writing such a statement

25 from such administrator.
50

•S 1867 IS

1 ‘‘(2) The statement described in this paragraph is a

2 statement which provides information which is substan3 tially the same as the information in the illustrative exam4 ples described in section 204(h)(3)(B) but which is based

5 on data specific to the requesting individual and, if the

6 individual so requests, information as of 1 other future

7 date not included in such examples.

8 ‘‘(3) Paragraph (1) shall apply only to requests made

9 during the 12-month period that begins on the later of

10 the effective date of the amendment to which it relates

11 or the date the notice described in section 204(h)(2) is

12 provided. In no case shall an individual be entitled under

13 this subsection to receive more than one such statement

14 with respect to an amendment.

15 ‘‘(4) Notwithstanding section 502(c)(1), the state16 ment required by paragraph (1) shall be treated as timely

17 furnished if furnished on or before—

18 ‘‘(A) the date which is 90 days after the effec19 tive date of the plan amendment to which it relates,

20 or

21 ‘‘(B) such later date as may be permitted by

22 the Secretary of Labor.

23 ‘‘(5) Any term used in this subsection which is used

24 in section 204(h) shall have the meaning given such term

25 by such section.
51

•S 1867 IS

1 ‘‘(6) A statement under this subsection shall not be

2 taken into account for purposes of subsection (b).’’

3 (b) EXCISE TAX ON FAILURE TO PROVIDE NOTICE

4 BY DEFINED BENEFIT PLANS SIGNIFICANTLY REDUCING

5 FUTURE BENEFIT ACCRUALS.—

6 (1) IN GENERAL.—Chapter 43 (relating to

7 qualified pension, etc., plans) is amended by adding

8 at the end the following new section:

9 ‘‘SEC. 4980F. FAILURE OF DEFINED BENEFIT PLANS REDUC10 ING BENEFIT ACCRUALS TO SATISFY NOTICE

11 REQUIREMENTS.

12 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

13 a tax on the failure of a plan administrator of an applica14 ble pension plan to meet the requirements of subsection

15 (e) with respect to any applicable individual.

16 ‘‘(b) AMOUNT OF TAX.—

17 ‘‘(1) IN GENERAL.—The amount of the tax im18 posed by subsection (a) on any failure with respect

19 to any applicable individual shall be $100 for each

20 day in the noncompliance period with respect to such

21 failure.

22 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

23 of this section, the term ‘noncompliance period’

24 means, with respect to any failure, the period begin-
52

•S 1867 IS

1 ning on the date the failure first occurs and ending

2 on the date the failure is corrected.

3 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

4 ‘‘(1) OVERALL LIMITATION FOR UNINTEN5 TIONAL FAILURES.—

6 ‘‘(A) IN GENERAL.—In the case of failures

7 that are due to reasonable cause and not to

8 willful neglect, the tax imposed by subsection

9 (a) for failures during the taxable year of the

10 employer (or, in the case of a multiemployer

11 plan, the taxable year of the trust forming part

12 of the plan) shall not exceed $500,000

13 ($1,000,000 in the case of a large applicable

14 pension plan).

15 ‘‘(B) TAXABLE YEARS IN THE CASE OF

16 CERTAIN CONTROLLED GROUPS.—For purposes

17 of this paragraph, if all persons who are treated

18 as a single employer for purposes of this section

19 do not have the same taxable year, the taxable

20 years taken into account shall be determined

21 under principles similar to the principles of sec22 tion 1561.

23 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

24 failure which is due to reasonable cause and not to

25 willful neglect, the Secretary may waive part or all
53

•S 1867 IS

1 of the tax imposed by subsection (a) to the extent

2 that the payment of such tax would be excessive rel3 ative to the failure involved.

4 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia5 ble for the tax imposed by subsection (a):

6 ‘‘(1) In the case of a plan other than a multi7 employer plan, the employer.

8 ‘‘(2) In the case of a multiemployer plan, the

9 plan.

10 ‘‘(e) NOTICE REQUIREMENTS FOR PENSION PLAN

11 AMENDMENTS REDUCING ACCRUALS.—

12 ‘‘(1) IN GENERAL.—If an applicable pension

13 plan is amended so as to provide for a significant re14 duction in the rate of future benefit accrual of 1 or

15 more applicable individuals, the plan administrator

16 shall—

17 ‘‘(A) not later than the 45th day before

18 the effective date of the amendment, provide

19 the written notice described in paragraph (2) to

20 each applicable individual (and to each em21 ployee organization (as defined in section 3(4)

22 of the Employee Retirement Income Security

23 Act of 1974) representing applicable individ24 uals), and
54

•S 1867 IS

1 ‘‘(B) in the case of a large applicable pen2 sion plan—

3 ‘‘(i) include in the notice under para4 graph (2) the additional information de5 scribed in paragraph (3), and

6 ‘‘(ii) make available the information

7 described in paragraph (4) in accordance

8 with such paragraph.

9 ‘‘(2) BASIC WRITTEN NOTICE.—The notice

10 under paragraph (1) shall include a summary of the

11 important terms of the amendment, including—

12 ‘‘(A) the effective date of the amendment,

13 ‘‘(B) a statement that the amendment is

14 expected to significantly reduce the rate of fu15 ture benefit accrual,

16 ‘‘(C) a description of the classes of applica17 ble individuals to whom the amendment applies,

18 and

19 ‘‘(D) a description of how the amendment

20 significantly reduces the rate of future benefit

21 accrual.

22 ‘‘(3) ADDITIONAL INFORMATION TO BE PRO23 VIDED BY LARGE APPLICABLE PENSION PLANS.—

24 ‘‘(A) IN GENERAL.—The information de25 scribed in this paragraph is—
55

•S 1867 IS

1 ‘‘(i) a description of the plan’s benefit

2 formulas (including formulas for deter3 mining early retirement benefits) both be4 fore and after the amendment and an ex5 planation of the effect of the different for6 mulas on applicable individuals,

7 ‘‘(ii) an explanation of the cir8 cumstances (if any) under which (for ap9 propriate categories of applicable individ10 uals) the amendment is reasonably ex11 pected to result in a temporary period

12 after the effective date of the amendment

13 during which there are no or minimal ac14 cruals,

15 ‘‘(iii) illustrative examples of normal

16 or early retirement benefits meeting the re17 quirements of subparagraph (B), and

18 ‘‘(iv) notice of each applicable individ19 ual’s right to request, and of the proce20 dures for requesting, the information re21 quired to be provided under paragraph (4)

22 and under section 105(e) of Employee Re23 tirement Income Security Act of 1974.

24 ‘‘(B) ILLUSTRATIVE EXAMPLES.—Illus25 trative examples meet the requirements of this
56

•S 1867 IS

1 subparagraph if such examples illustrate the

2 adverse effects of the plan amendment. Such

3 examples shall be prepared by the plan adminis4 trator in accordance with regulations prescribed

5 by the Secretary, and such regulations shall re6 quire that the examples—

7 ‘‘(i) reflect fairly the different cat8 egories of applicable individuals who are

9 similarly affected by the plan amendment

10 after consideration of all relevant factors,

11 ‘‘(ii) show a comparison of benefits

12 for each such category of applicable indi13 viduals under the plan (as in effect before

14 and after the effective date) at appropriate

15 future dates, and

16 ‘‘(iii) illustrate any temporary period

17 described in subparagraph (A)(ii).

18 Such comparison shall be based on benefits in

19 the form of a life annuity and on actuarial as20 sumptions each of which is reasonable (and is

21 so certified by an enrolled actuary) when ap22 plied to all participants in the plan.

23 ‘‘(4) SUPPORTING INFORMATION RELATING TO

24 CALCULATION OF BENEFITS.—
57

•S 1867 IS

1 ‘‘(A) IN GENERAL.—Each individual who

2 receives or who is entitled to receive the infor3 mation described in paragraph (3) may (after

4 so receiving or becoming so entitled) request

5 the plan administrator to provide the informa6 tion described in subparagraph (B).

7 ‘‘(B) INFORMATION.—The plan adminis8 trator shall, within 15 days after the date on

9 which a request under subparagraph (A) is

10 made, provide to the individual information (in11 cluding benefit formulas and actuarial factors)

12 which is sufficient—

13 ‘‘(i) to confirm the benefit compari14 sons in the illustrative examples described

15 in paragraph (3)(B), and

16 ‘‘(ii) to enable the individual to use

17 the individual’s own personal information

18 to make calculations of the individual’s

19 own benefits which are similar to the cal20 culations made in such examples.

21 Nothing in this subsection shall be construed to

22 require the plan administrator to provide to an

23 individual such individual’s personal informa24 tion for purposes of clause (ii).
58

•S 1867 IS

1 ‘‘(C) TIME LIMITATION ON REQUESTS.—

2 This paragraph shall apply only to requests

3 made during the 12-month period that begins

4 on the later of the effective date of the amend5 ment to which it relates or the date the notice

6 described in paragraph (2) is provided.

7 ‘‘(5) SPECIAL RULES.—

8 ‘‘(A) PLAIN LANGUAGE.—The notice re9 quired under paragraph (1) shall be written in

10 a manner calculated to be understood by the av11 erage plan participant who is an applicable indi12 vidual.

13 ‘‘(B) NOTICE TO DESIGNEES.—The notice

14 or information required to be provided under

15 this subsection may be provided to a person

16 designated, in writing, by the person to which

17 it would otherwise be provided.

18 ‘‘(6) ALTERNATIVE METHODS OF COMPLIANCE

19 WITH ENHANCED DISCLOSURE REQUIREMENTS IN

20 CERTAIN CASES.—The Secretary shall prescribe such

21 regulations as may be necessary to carry out this

22 subsection. The Secretary may—

23 ‘‘(A) prescribe alternative or simplified

24 methods of complying with paragraphs (3) and

25 (4) in situations where—
59

•S 1867 IS

1 ‘‘(i) there is no fundamental change in

2 the manner in which the accrued benefit of

3 an applicable individual is determined

4 under the plan, and

5 ‘‘(ii) such other methods are adequate

6 to reasonably inform plan participants who

7 are applicable individuals of the impact of

8 the reductions,

9 ‘‘(B) reduce the advance notice period in

10 paragraph (1)(A) from 45 days to 15 days be11 fore the effective date of the amendment for

12 cases in which compliance with the 45-day ad13 vance notice requirement would be unduly bur14 densome because the amendment is contingent

15 on a merger, acquisition, disposition, or other

16 similar transaction involving plan participants

17 who are applicable individuals or because 45

18 days advance notice is otherwise impracticable,

19 ‘‘(C) permit the comparison of benefits

20 under paragraph (3)(B)(i) to be based on a

21 form of payment other than a life annuity, or

22 ‘‘(D) specify actuarial assumptions that

23 are deemed to be reasonable for purposes of the

24 benefit comparisons under paragraph (3)(B)(i).
60

•S 1867 IS

1 ‘‘(7) APPLICABLE INDIVIDUAL.—For purposes

2 of this subsection, the term ‘applicable individual’

3 means, with respect to any plan amendment—

4 ‘‘(A) each participant in the plan, and

5 ‘‘(B) each beneficiary who is an alternate

6 payee (within the meaning of section 414(p)(8))

7 under a qualified domestic relations order

8 (within the meaning of section 414(p)(1)),

9 whose future benefit accruals under the plan may

10 reasonably be expected to be reduced by such plan

11 amendment.

12 ‘‘(8) TERMS RELATING TO PLANS.—For pur13 poses of this subsection—

14 ‘‘(A) APPLICABLE PENSION PLAN.—The

15 term ‘applicable pension plan’ means—

16 ‘‘(i) a defined benefit plan, or

17 ‘‘(ii) an individual account plan which

18 is subject to the funding standards of sec19 tion 412.

20 Such term shall not include any governmental

21 plan (within the meaning of section 414(d)) or

22 any church plan (within the meaning of section

23 414(e)) with respect to which the election pro24 vided by section 410(d) has not been made.
61

•S 1867 IS

1 ‘‘(B) LARGE APPLICABLE PENSION

2 PLAN.—The term ‘large applicable pension

3 plan’ means an applicable pension plan which

4 had 100 or more active participants as of the

5 last day of the plan year preceding the plan

6 year in which the plan amendment becomes ef7 fective.’’

8 (2) CONFORMING AMENDMENT.—The table of

9 sections for chapter 43 is amended by adding at the

10 end the following new item:

‘‘Sec. 4980F. Failure of defined benefit plans reducing benefit accruals to satisfy notice requirements.’’

11 (c) EFFECTIVE DATES.—

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

13 this section shall apply to plan amendments taking

14 effect after the date of the enactment of this Act.

15 (2) SPECIAL RULES.—

16 (A) IN GENERAL.—The amendments made

17 by this section shall not apply to any plan

18 amendment for which there was written notice

19 before July 12, 1999, which was reasonably ex20 pected to notify substantially all of the plan

21 participants or their representatives.

22 (B) TRANSITION.—Until such time as the

23 Secretary of the Treasury issues regulations

24 under section 4980F(e) (3) and (4) of the In-
62

•S 1867 IS

1 ternal Revenue Code of 1986 and section

2 204(h) (3) and (4) of the Employee Retirement

3 Income Security Act of 1974 (as added by the

4 amendments made by this section), a plan shall

5 be treated as meeting the requirements of such

6 sections if it makes a good faith effort to com7 ply with such requirements.

8 (C) NOTICE AND INFORMATION NOT RE9 QUIRED TO BE FURNISHED BEFORE 120TH DAY

10 AFTER ENACTMENT.—The period for providing

11 any notice or information required by the

12 amendments made by this section shall not end

13 before the date which is 120 days after the date

14 of the enactment of this Act.

15 SEC. 115. PREVENTION OF WEARING AWAY OF EMPLOYEE’S

16 ACCRUED BENEFIT.

17 (a) AMENDMENT TO INTERNAL REVENUE CODE.—

18 Section 411(d)(6) (relating to accrued benefit may not be

19 decreased by amendment) is amended by adding at the

20 end the following new subparagraph:

21 ‘‘(D) TREATMENT OF PLAN AMENDMENTS

22 WEARING AWAY ACCRUED BENEFIT.—

23 ‘‘(i) IN GENERAL.—For purposes of

24 subparagraph (A), a plan amendment

25 adopted by a large defined benefit plan
63

•S 1867 IS

1 shall be treated as reducing accrued bene2 fits of a participant if, under the terms of

3 the plan after the adoption of the amend4 ment, the accrued benefit of the partici5 pant may at any time be less than the sum

6 of—

7 ‘‘(I) the participant’s accrued

8 benefit for years of service before the

9 effective date of the amendment, de10 termined under the terms of the plan

11 as in effect immediately before the ef12 fective date, plus

13 ‘‘(II) the participant’s accrued

14 benefit determined under the formula

15 applicable to benefit accruals under

16 the current plan as applied to years of

17 service after such effective date.

18 ‘‘(ii) LARGE DEFINED BENEFIT

19 PLAN.—For purposes of this subpara20 graph, the term ‘large defined benefit plan’

21 means any defined benefit plan which had

22 100 or more participants who had accrued

23 a benefit under the plan (whether or not

24 vested) as of the last day of the plan year
64

•S 1867 IS

1 preceding the plan year in which the plan

2 amendment becomes effective.

3 ‘‘(iii) PROTECTED ACCRUED BEN4 EFIT.—For purposes of this subparagraph,

5 an accrued benefit shall include any early

6 retirement benefit or retirement-type sub7 sidy (within the meaning of subparagraph

8 (B)(i)), but only with respect to a partici9 pant who satisfies (either before or after

10 the effective date of the amendment) the

11 conditions for the benefit or subsidy under

12 the terms of the plan as in effect imme13 diately before such date.’’

14 (b) AMENDMENT OF ERISA.—Section 204(g) of the

15 Employee Retirement Income Security Act of 1974 is

16 amended by adding at the end the following new para17 graph:

18 ‘‘(4)(A) For purposes of paragraph (1), a plan

19 amendment adopted by a large defined benefit plan shall

20 be treated as reducing accrued benefits of a participant

21 if, under the terms of the plan after the adoption of the

22 amendment, the accrued benefit of the participant may at

23 any time be less than the sum of—

24 ‘‘(i) the participant’s accrued benefit for years

25 of service before the effective date of the amend-
65

•S 1867 IS

1 ment, determined under the terms of the plan as in

2 effect immediately before the effective date, plus

3 ‘‘(ii) the participant’s accrued benefit deter4 mined under the formula applicable to benefit accru5 als under the current plan as applied to years of

6 service after such effective date.

7 ‘‘(B) For purposes of this paragraph, the term ‘large

8 defined benefit plan’ means any defined benefit plan which

9 had 100 or more participants who had accrued a benefit

10 under the plan (whether or not vested) as of the last day

11 of the plan year preceding the plan year in which the plan

12 amendment becomes effective.

13 ‘‘(C) For purposes of this paragraph, an accrued ben14 efit shall include any early retirement benefit or retire15 ment-type subsidy (within the meaning of paragraph

16 (2)(A)), but only with respect to a participant who satis17 fies (either before or after the effective date of the amend18 ment) the conditions for the benefit or subsidy under the

19 terms of the plan as in effect immediately before such

20 date.’’

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

22 this section shall apply to plan amendments adopted after

23 June 29, 1999.
66

•S 1867 IS

1 TITLE II—PROMOTING TECHNO2 LOGICAL AND ECONOMIC DE3 VELOPMENT

4 SEC. 201. INCREASE IN EXPENSING LIMITATION TO $25,000.

5 (a) IN GENERAL.—Paragraph (1) of section 179(b)

6 of the Internal Revenue Code of 1986 (relating to limita7 tions) is amended to read as follows:

8 ‘‘(1) DOLLAR LIMITATION.—The aggregate cost

9 which may be taken into account under subsection

10 (a) for any taxable year shall not exceed $25,000.’’

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

12 this section shall apply to taxable years beginning after

13 December 31, 1999.

14 SEC. 202. NEW MARKETS TAX CREDIT.

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 (relating to business-related cred17 its), as amended by section 106, is amended by adding

18 at the end the following new section:

19 ‘‘SEC. 45F. NEW MARKETS TAX CREDIT.

20 ‘‘(a) ALLOWANCE OF CREDIT.—

21 ‘‘(1) IN GENERAL.—For purposes of section 38,

22 in the case of a taxpayer who holds a qualified eq23 uity investment on a credit allowance date of such

24 investment which occurs during the taxable year, the

25 new markets tax credit determined under this sec-
67

•S 1867 IS

1 tion for such taxable year is an amount equal to 6

2 percent of the amount paid to the qualified commu3 nity development entity for such investment at its

4 original issue.

5 ‘‘(2) CREDIT ALLOWANCE DATE.—The term

6 ‘credit allowance date’ means, with respect to any

7 qualified equity investment—

8 ‘‘(A) the date on which such investment is

9 initially made, and

10 ‘‘(B) each of the 4 anniversary dates of

11 such date thereafter.

12 ‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur13 poses of this section—

14 ‘‘(1) IN GENERAL.—The term ‘qualified equity

15 investment’ means any equity investment in a quali16 fied community development entity if—

17 ‘‘(A) such investment is acquired by the

18 taxpayer at its original issue (directly or

19 through an underwriter) solely in exchange for

20 cash,

21 ‘‘(B) substantially all of such cash is used

22 by the qualified community development entity

23 to make qualified low-income community invest24 ments, and
68

•S 1867 IS

1 ‘‘(C) such investment is designated for

2 purposes of this section by the qualified com3 munity development entity.

4 Such term shall not include any equity investment

5 issued by a qualified community development entity

6 more than 5 years after the date that such entity re7 ceives an allocation under subsection (f). Any alloca8 tion not used within such 5-year period may be re9 allocated by the Secretary under subsection (f).

10 ‘‘(2) LIMITATION.—The maximum amount of

11 equity investments issued by a qualified community

12 development entity which may be designated under

13 paragraph (1)(C) by such entity shall not exceed the

14 portion of the limitation amount allocated under

15 subsection (f) to such entity.

16 ‘‘(3) SAFE HARBOR FOR DETERMINING USE OF

17 CASH.—The requirement of paragraph (1)(B) shall

18 be treated as met if at least 85 percent of the aggre19 gate gross assets of the qualified community devel20 opment entity are invested in qualified low-income

21 community investments.

22 ‘‘(4) TREATMENT OF SUBSEQUENT PUR23 CHASERS.—The term ‘qualified equity investment’

24 includes any equity investment which would (but for

25 paragraph (1)(A)) be a qualified equity investment
69

•S 1867 IS

1 in the hands of the taxpayer if such investment was

2 a qualified equity investment in the hands of a prior

3 holder.

4 ‘‘(5) REDEMPTIONS.—A rule similar to the rule

5 of section 1202(c)(3) shall apply for purposes of this

6 subsection.

7 ‘‘(6) EQUITY INVESTMENT.—The term ‘equity

8 investment’ means—

9 ‘‘(A) any stock in a qualified community

10 development entity which is a corporation, and

11 ‘‘(B) any capital interest in a qualified

12 community development entity which is a part13 nership.

14 ‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT ENTI15 TY.—For purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘qualified com17 munity development entity’ means any domestic cor18 poration or partnership if—

19 ‘‘(A) the primary mission of the entity is

20 serving, or providing investment capital for,

21 low-income communities or low-income persons,

22 ‘‘(B) the entity maintains accountability to

23 residents of low-income communities through

24 representation on governing or advisory boards

25 or otherwise, and
70

•S 1867 IS

1 ‘‘(C) the entity is certified by the Secretary

2 for purposes of this section as being a qualified

3 community development entity.

4 ‘‘(2) SPECIAL RULES FOR CERTAIN ORGANIZA5 TIONS.—The requirements of paragraph (1) shall be

6 treated as met by—

7 ‘‘(A) any specialized small business invest8 ment company (as defined in section

9 1044(c)(3)), and

10 ‘‘(B) any community development financial

11 institution (as defined in section 103 of the

12 Community Development Banking and Finan13 cial Institutions Act of 1994 (12 U.S.C. 4702)).

14 ‘‘(d) QUALIFIED LOW-INCOME COMMUNITY INVEST15 MENTS.—For purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘qualified low-in17 come community investment’ means—

18 ‘‘(A) any equity investment in, or loan to,

19 any qualified active low-income community busi20 ness,

21 ‘‘(B) the purchase from another commu22 nity development entity of any loan made by

23 such entity which is a qualified low-income com24 munity investment if the amount received by

25 such other entity from such purchase is used by
71

•S 1867 IS

1 such other entity to make qualified low-income

2 community investments,

3 ‘‘(C) financial counseling and other serv4 ices specified in regulations prescribed by the

5 Secretary to businesses located in, and resi6 dents of, low-income communities, and

7 ‘‘(D) any equity investment in, or loan to,

8 any qualified community development entity if

9 substantially all of the investment or loan is

10 used by such entity to make qualified low-in11 come community investments described in sub12 paragraphs (A), (B), and (C).

13 ‘‘(2) QUALIFIED ACTIVE LOW-INCOME COMMU14 NITY BUSINESS.—

15 ‘‘(A) IN GENERAL.—For purposes of para16 graph (1), the term ‘qualified active low-income

17 community business’ means, with respect to any

18 taxable year, any corporation or partnership if

19 for such year—

20 ‘‘(i) at least 50 percent of the total

21 gross income of such entity is derived from

22 the active conduct of a qualified business

23 within any low-income community,

24 ‘‘(ii) a substantial portion of the use

25 of the tangible property of such entity
72

•S 1867 IS

1 (whether owned or leased) is within any

2 low-income community,

3 ‘‘(iii) a substantial portion of the serv4 ices performed for such entity by its em5 ployees are performed in any low-income

6 community,

7 ‘‘(iv) less than 5 percent of the aver8 age of the aggregate unadjusted bases of

9 the property of such entity is attributable

10 to collectibles (as defined in section

11 408(m)(2)) other than collectibles that are

12 held primarily for sale to customers in the

13 ordinary course of such business, and

14 ‘‘(v) less than 5 percent of the aver15 age of the aggregate unadjusted bases of

16 the property of such entity is attributable

17 to nonqualified financial property (as de18 fined in section 1397B(e)).

19 ‘‘(B) PROPRIETORSHIP.—Such term shall

20 include any business carried on by an individual

21 as a proprietor if such business would meet the

22 requirements of subparagraph (A) were it incor23 porated.

24 ‘‘(C) PORTIONS OF BUSINESS MAY BE

25 QUALIFIED ACTIVE LOW-INCOME COMMUNITY
73

•S 1867 IS

1 BUSINESS.—The term ‘qualified active low-in2 come community business’ includes any trades

3 or businesses which would qualify as a qualified

4 active low-income community business if such

5 trades or businesses were separately incor6 porated.

7 ‘‘(3) QUALIFIED BUSINESS.—For purposes of

8 this subsection, the term ‘qualified business’ has the

9 meaning given to such term by section 1397B(d);

10 except that—

11 ‘‘(A) in lieu of applying paragraph (2)(B)

12 thereof, the rental to others of real property lo13 cated in any low-income community shall be

14 treated as a qualified business if there are sub15 stantial improvements located on such property,

16 ‘‘(B) paragraph (3) thereof shall not apply,

17 and

18 ‘‘(C) such term shall not include any busi19 ness if a significant portion of the equity inter20 ests in such business are held by any person

21 who holds a significant portion of the equity in22 vestments in the community development entity.

23 ‘‘(e) LOW-INCOME COMMUNITY.—For purposes of

24 this section—
74

•S 1867 IS

1 ‘‘(1) IN GENERAL.—The term ‘low-income com2 munity’ means any population census tract if—

3 ‘‘(A) the poverty rate for such tract is at

4 least 20 percent, or

5 ‘‘(B)(i) in the case of a tract not located

6 within a metropolitan area, the median family

7 income for such tract does not exceed 80 per8 cent of statewide median family income, or

9 ‘‘(ii) in the case of a tract located within

10 a metropolitan area, the median family income

11 for such tract does not exceed 80 percent of the

12 greater of statewide median family income or

13 the metropolitan area median family income.

14 ‘‘(2) AREAS NOT WITHIN CENSUS TRACTS.—In

15 the case of an area which is not tracted for popu16 lation census tracts, the equivalent county divisions

17 (as defined by the Bureau of the Census for pur18 poses of defining poverty areas) shall be used for

19 purposes of determining poverty rates and median

20 family income.

21 ‘‘(3) TARGETED POPULATION.—The Secretary

22 may prescribe regulations under which 1 or more

23 targeted populations (within the meaning of section

24 3(20) of the Riegle Community Development and

25 Regulatory Improvement Act of 1974 (12 U.S.C.
75

•S 1867 IS

1 4702(20))) may be treated as low-income commu2 nities. Such regulations shall include procedures for

3 identifying the area covered by any such community

4 for purposes of determining entities which are quali5 fied active low-income community businesses with re6 spect to such community.

7 ‘‘(f) NATIONAL LIMITATION ON AMOUNT OF INVEST8 MENTS DESIGNATED.—

9 ‘‘(1) IN GENERAL.—There is a new markets tax

10 credit limitation of $750,000,000 for each of cal11 endar years 2001 through 2005 and zero for any

12 succeeding calendar year.

13 ‘‘(2) ALLOCATION OF LIMITATION.—The limita14 tion under paragraph (1) shall be allocated by the

15 Secretary among qualified community development

16 entities selected by the Secretary. In making alloca17 tions under the preceding sentence, the Secretary

18 shall give priority to entities with records of having

19 successfully provided capital or technical assistance

20 to disadvantaged businesses or communities.

21 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If

22 the new markets tax credit limitation for any cal23 endar year exceeds the aggregate amount allocated

24 under paragraph (2) for such year, such limitation
76

•S 1867 IS

1 for the succeeding calendar year shall be increased

2 by the amount of such excess.

3 ‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—

4 ‘‘(1) IN GENERAL.—If, at any time during the

5 5-year period beginning on the date of the original

6 issue of a qualified equity investment in a qualified

7 community development entity, there is a recapture

8 event with respect to such investment, then the tax

9 imposed by this chapter for the taxable year in

10 which such event occurs shall be increased by the

11 credit recapture amount.

12 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur13 poses of paragraph (1), the credit recapture amount

14 is an amount equal to the sum of—

15 ‘‘(A) the aggregate decrease in the credits

16 allowed to the taxpayer under section 38 for all

17 prior taxable years which would have resulted if

18 no credit had been determined under this sec19 tion with respect to such investment, plus

20 ‘‘(B) interest at the overpayment rate es21 tablished under section 6621 on the amount de22 termined under subparagraph (A) for each

23 prior taxable year for the period beginning on

24 the due date for filing the return for the prior

25 taxable year involved.
77

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1 No deduction shall be allowed under this chapter for

2 interest described in subparagraph (B).

3 ‘‘(3) RECAPTURE EVENT.—For purposes of

4 paragraph (1), there is a recapture event with re5 spect to an equity investment in a qualified commu6 nity development entity if—

7 ‘‘(A) such entity ceases to be a qualified

8 community development entity,

9 ‘‘(B) the proceeds of the investment cease

10 to be used as required of subsection (b)(1)(B),

11 or

12 ‘‘(C) such investment is redeemed by such

13 entity.

14 ‘‘(4) SPECIAL RULES.—

15 ‘‘(A) TAX BENEFIT RULE.—The tax for

16 the taxable year shall be increased under para17 graph (1) only with respect to credits allowed

18 by reason of this section which were used to re19 duce tax liability. In the case of credits not so

20 used to reduce tax liability, the carryforwards

21 and carrybacks under section 39 shall be appro22 priately adjusted.

23 ‘‘(B) NO CREDITS AGAINST TAX.—Any in24 crease in tax under this subsection shall not be

25 treated as a tax imposed by this chapter for
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1 purposes of determining the amount of any

2 credit under this chapter or for purposes of sec3 tion 55.

4 ‘‘(h) BASIS REDUCTION.—The basis of any qualified

5 equity investment shall be reduced by the amount of any

6 credit determined under this section with respect to such

7 investment.

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

9 such regulations as may be appropriate to carry out this

10 section, including regulations—

11 ‘‘(1) which limit the credit for investments

12 which are directly or indirectly subsidized by other

13 Federal benefits (including the credit under section

14 42 and the exclusion from gross income under sec15 tion 103),

16 ‘‘(2) which prevent the abuse of the provisions

17 of this section through the use of related parties,

18 ‘‘(3) which impose appropriate reporting re19 quirements,

20 ‘‘(4) which apply the provisions of this section

21 to newly formed entities.’’

22 (b) CREDIT MADE PART OF GENERAL BUSINESS

23 CREDIT.—

24 (1) IN GENERAL.—Subsection (b) of section 38,

25 as amended by section 106, is amended by striking
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1 ‘‘plus’’ at the end of paragraph (13), by striking the

2 period at the end of paragraph (14) and inserting

3 ‘‘, plus’’, and by adding at the end the following new

4 paragraph:

5 ‘‘(15) the new markets tax credit determined

6 under section 45F(a).’’

7 (2) LIMITATION ON CARRYBACK.—Subsection

8 (d) of section 39 is amended by adding at the end

9 the following new paragraph:

10 ‘‘(11) NO CARRYBACK OF NEW MARKETS TAX

11 CREDIT BEFORE JANUARY 1, 2000.—No portion of

12 the unused business credit for any taxable year

13 which is attributable to the credit under section 45E

14 may be carried back to a taxable year ending before

15 January 1, 2000.’’

16 (c) DEDUCTION FOR UNUSED CREDIT.—Subsection

17 (c) of section 196 is amended by striking ‘‘and’’ at the

18 end of paragraph (7), by striking the period at the end

19 of paragraph (8) and inserting ‘‘, and’’, and by adding

20 at the end the following new paragraph:

21 ‘‘(9) the new markets tax credit determined

22 under section 45F(a).’’

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

24 for subpart D of part IV of subchapter A of chapter 1,
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1 as amended by section 106, is amended by adding at the

2 end the following new item:

‘‘Sec. 45F. New markets tax credit.’’

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

4 this section shall apply to investments made after Decem5 ber 31, 2000.

6 SEC. 203. WAGE CREDITS FOR ROUND 2 EMPOWERMENT

7 ZONES.

8 (a) IN GENERAL.—Section 1396(b)(2) (relating to

9 special rule) is amended by inserting ‘‘or pursuant to sec10 tion 1391(g)’’ after ‘‘section 1391(b)(2)’’.

11 (b) CONFORMING AMENDMENT.—Section 1396 is

12 amended by striking subsection (e).

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

14 this section shall take effect of the date of the enactment

15 of this Act.

16 SEC. 204. CREDIT FOR INFORMATION TECHNOLOGY TRAIN17 ING PROGRAM EXPENSES.

18 (a) IN GENERAL.—Subpart D of part IV of sub19 chapter A of chapter 1 (relating to business-related cred20 its), as amended by section 202, is amended by adding

21 at the end the following:

22 ‘‘SEC. 45G. INFORMATION TECHNOLOGY TRAINING PRO23 GRAM EXPENSES.

24 ‘‘(a) GENERAL RULE.—For purposes of section 38,

25 in the case of an employer, the information technology
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1 training program credit determined under this section is

2 an amount equal to 20 percent of information technology

3 training program expenses paid or incurred by the tax4 payer during the taxable year.

5 ‘‘(b) ADDITIONAL CREDIT PERCENTAGE FOR CER6 TAIN PROGRAMS.—The percentage under subsection (a)

7 shall be increased by 5 percentage points for information

8 technology training program expenses paid or incurred—

9 ‘‘(1) by the taxpayer with respect to a program

10 operated in—

11 ‘‘(A) an empowerment zone or enterprise

12 community designated under part I of sub13 chapter U,

14 ‘‘(B) a school district in which at least 50

15 percent of the students attending schools in

16 such district are eligible for free or reduced-cost

17 lunches under the school lunch program estab18 lished under the National School Lunch Act,

19 ‘‘(C) an area designated as a disaster area

20 by the Secretary of Agriculture or by the Presi21 dent under the Disaster Relief and Emergency

22 Assistance Act in the taxable year or the 4 pre23 ceding taxable years,

24 ‘‘(D) a rural enterprise community des25 ignated under section 766 of the Agriculture,
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1 Rural Development, Food and Drug Adminis2 tration, and Related Agencies Appropriations

3 Act, 1999,

4 ‘‘(E) an area designated by the Secretary

5 of Agriculture as a Rural Economic Area Part6 nership Zone, or

7 ‘‘(F) an area designated by the Secretary

8 of Agriculture as a Champion Community, or

9 ‘‘(2) by a small employer.

10 ‘‘(c) LIMITATION.—The amount of information tech11 nology training program expenses with respect to an indi12 vidual which may be taken into account under subsection

13 (a) for the taxable year shall not exceed $6,000.

14 ‘‘(d) INFORMATION TECHNOLOGY TRAINING PRO15 GRAM EXPENSES.—For purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘information

17 technology training program expenses’ means ex18 penses paid or incurred by reason of the participa19 tion of the employer in any information technology

20 training program.

21 ‘‘(2) INFORMATION TECHNOLOGY TRAINING

22 PROGRAM.—The term ‘information technology train23 ing program’ means a program—

24 ‘‘(A) for the training of—
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1 ‘‘(i) computer programmers, systems

2 analysts, and computer scientists or engi3 neers (as such occupations are defined by

4 the Bureau of Labor Statistics), and

5 ‘‘(ii) such other occupations as deter6 mined by the Secretary, after consultation

7 with a working group broadly solicited by

8 the Secretary and open to all interested in9 formation technology entities and trade

10 and professional associations,

11 ‘‘(B) involving a partnership of—

12 ‘‘(i) employers, and

13 ‘‘(ii) State training programs, school

14 districts, university systems, tribal colleges,

15 or certified commercial information tech16 nology training providers, and

17 ‘‘(C) at least 50 percent of the costs of

18 which is paid or incurred by the employers.

19 ‘‘(3) CERTIFIED COMMERCIAL INFORMATION

20 TECHNOLOGY TRAINING PROVIDER.—The term ‘cer21 tified commercial information technology training

22 providers’ means a private sector provider of edu23 cational products and services utilized for training in

24 information technology which is certified with re25 spect to—
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1 ‘‘(A) the curriculum that is used for the

2 training, or

3 ‘‘(B) the technical knowledge of the in4 structors of such provider,

5 by 1 or more software publishers or hardware manu6 facturers the products of which are a subject of the

7 training.

8 ‘‘(e) SMALL EMPLOYER.—For purposes of this sec9 tion, the term ‘small employer’ means, with respect to any

10 calendar year, any employer if such employer employed

11 200 or fewer employees on each business day in each of

12 20 or more calendar weeks in such year or the preceding

13 calendar year.

14 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—No deduction

15 or credit under any other provision of this chapter shall

16 be allowed with respect to information technology training

17 program expenses (determined without regard to the limi18 tation under subsection (c)).

19 ‘‘(g) CERTAIN RULES MADE APPLICABLE.—For pur20 poses of this section, rules similar to the rules of section

21 45A(e)(2) and subsections (c), (d), and (e) of section 52

22 shall apply.’’

23 (b) CREDIT TO BE PART OF GENERAL BUSINESS

24 CREDIT.—Section 38(b) (relating to current year business

25 credit), as amended by section 202, is amended by striking
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1 ‘‘plus’’ at the end of paragraph (14), by striking the period

2 at the end of paragraph (15) and inserting ‘‘, plus’’, and

3 by adding at the end the following:

4 ‘‘(16) the information technology training pro5 gram credit determined under section 45G.’’

6 (c) NO CARRYBACKS.—Subsection (d) of section 39

7 (relating to carryback and carryforward of unused cred8 its), as amended by section 202, is amended by adding

9 at the end the following:

10 ‘‘(12) NO CARRYBACK OF SECTION 45G CREDIT

11 BEFORE EFFECTIVE DATE.—No portion of the un12 used business credit for any taxable year which is

13 attributable to the information technology training

14 program credit determined under section 45G may

15 be carried back to a taxable year ending before the

16 date of the enactment of section 45G.’’

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

18 for subpart D of part IV of subchapter A of chapter 1,

19 as amended by section 202, is amended by adding at the

20 end the following:

‘‘Sec. 45G. Information technology training program expenses.’’

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

22 this section shall apply to taxable years beginning after

23 December 31, 2000.
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1 SEC. 205. RESTORATION OF STANDARDS FOR DETER2 MINING WHETHER TECHNICAL WORKERS

3 ARE NOT EMPLOYEES.

4 (a) REPEAL OF SECTION 530(d) OF THE REVENUE

5 ACT OF 1978.—Section 530(d) of the Revenue Act of

6 1978 (as added by section 1706 of the Tax Reform Act

7 of 1986) is repealed.

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

9 subsection (c) shall apply to periods ending after the date

10 of enactment of this Act.

11 SEC. 206. CERTAIN POST-SECONDARY EDUCATIONAL BENE12 FITS PROVIDED BY AN EMPLOYER TO CHIL13 DREN OF EMPLOYEES EXCLUDABLE FROM

14 GROSS INCOME AS A SCHOLARSHIP.

15 (a) IN GENERAL.—Section 117 (relating to qualified

16 scholarships) is amended by adding at the end the fol17 lowing:

18 ‘‘(e) EMPLOYER-PROVIDED POST-SECONDARY EDU19 CATIONAL BENEFITS PROVIDED TO CHILDREN OF EM20 PLOYEES.—

21 ‘‘(1) IN GENERAL.—In determining whether

22 any amount is a qualified scholarship for purposes

23 of subsection (a), the fact that such amount is pro24 vided in connection with an employment relationship

25 shall be disregarded if—
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1 ‘‘(A) such amount is provided by the em2 ployer to a child (as defined in section

3 161(c)(3)) of an employee of such employer,

4 ‘‘(B) such amount is provided pursuant to

5 a plan which meets the nondiscrimination re6 quirements of subsection (d)(3), and

7 ‘‘(C) amounts provided under such plan

8 are in addition to any other compensation pay9 able to employees and such plan does not pro10 vide employees with a choice between such

11 amounts and any other benefit.

12 For purposes of subparagraph (C), the business

13 practices of the employer (as well as such plan) shall

14 be taken into account.

15 ‘‘(2) DOLLAR LIMITATIONS.—

16 ‘‘(A) PER CHILD.—The amount excluded

17 from the gross income of the employee by rea18 son of paragraph (1) for a taxable year with re19 spect to amounts provided to each child of such

20 employee shall not exceed $2,000.

21 ‘‘(B) AGGREGATE LIMIT.—The amount ex22 cluded from the gross income of the employee

23 by reason of paragraph (1) for a taxable year

24 (after the application of subparagraph (A))

25 shall not exceed the excess of the dollar amount
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1 contained in section 127(a)(2) over the amount

2 excluded from the employee’s gross income

3 under section 127 for such year.

4 ‘‘(3) PRINCIPAL SHAREHOLDERS AND OWN5 ERS.—Paragraph (1) shall not apply to any amount

6 provided to any child of any individual if such indi7 vidual (or such individual’s spouse) owns (on any

8 day of the year) more than 5 percent of the stock

9 or of the capital or profits interest in the employer.

10 ‘‘(4) SPECIAL RULES OF APPLICATION.—In the

11 case of an amount which is treated as a qualified

12 scholarship by reason of this subsection—

13 ‘‘(A) subsection (a) shall be applied with14 out regard to the requirement that the recipient

15 be a candidate for a degree, and

16 ‘‘(B) subsection (b)(2)(A) shall be applied

17 by substituting ‘section 529(e)(5)’ for ‘section

18 170(b)(1)(A)(ii)’.

19 ‘‘(5) CERTAIN OTHER RULES TO APPLY.—Rules

20 similar to the rules of paragraphs (4), (5), and (7)

21 of section 127(c) shall apply for purposes of this

22 subsection.’’

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

24 this section shall apply to taxable years beginning after

25 the date of enactment of this Act.
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1 SEC. 207. INCREASE IN STATE CEILING ON LOW-INCOME

2 HOUSING CREDIT.

3 (a) IN GENERAL.—Clause (i) of section 42(h)(3)(C)

4 (relating to State housing credit ceiling) is amended to

5 read as follows:

6 ‘‘(i) the applicable amount under sub7 paragraph (H) multiplied by the State

8 population,’’.

9 (b) APPLICABLE AMOUNT.—Paragraph (3) of section

10 42(h) (relating to housing credit dollar amount for agen11 cies) is amended by adding at the end the following new

12 subparagraph:

13 ‘‘(H) APPLICABLE AMOUNT OF STATE

14 CEILING.—For purposes of subparagraph

15 (C)(i), the applicable amount shall be deter16 mined under the following table:

‘‘For calendar year— The applicable amount is—

2000 ............................................................................. $1.30

2001 ............................................................................. 1.35

2002 ............................................................................. 1.40

2003 ............................................................................. 1.45

2004 ............................................................................. 1.50

2005 ............................................................................. 1.55

2006 ............................................................................. 1.60

2007 ............................................................................. 1.65

2008 ............................................................................. 1.70

2009 and thereafter ..................................................... 1.75.’’

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

18 this section shall apply to calendar years after 1999.
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1 TITLE III—EXPANDING

2 ECONOMIC OPPORTUNITIES

3 SEC. 301. WORK OPPORTUNITY CREDIT AND WELFARE-TO4 WORK CREDIT.

5 (a) TEMPORARY EXTENSION.—Sections 51(c)(4)(B)

6 and 51A(f ) (relating to termination) are each amended

7 by striking ‘‘December 31, 2000’’ and inserting ‘‘Decem8 ber 31, 2004’’.

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

10 this section shall apply to individuals who begin work for

11 the employer after December 31, 2000.

12 SEC. 302. EXTENSION OF CREDIT FOR HOLDERS OF QUALI13 FIED ZONE ACADEMY BONDS.

14 Section 1397E(e)(1) (relating to national limitation)

15 is amended by striking ‘‘and 1999’’ and inserting ‘‘, 1999,

16 and 2000’’.

17 TITLE IV—PROMOTING FAMILY18 OWNED FARMS AND BUSI19 NESSES

20 SEC. 401. INCREASE IN ESTATE TAX DEDUCTION FOR FAM21 ILY-OWNED BUSINESS INTEREST.

22 (a) IN GENERAL.—Section 2057(a)(2) (relating to

23 maximum deduction) is amended by striking ‘‘$675,000’’

24 and inserting ‘‘$1,125,000’’.
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1 (b) CONFORMING AMENDMENTS.—Section

2 2057(a)(3)(B) (relating to coordination with unified cred3 it) is amended by striking ‘‘$675,000’’ each place it ap4 pears in the text and heading and inserting ‘‘$1,125,000’’.

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

6 this section shall apply to estates of decedents dying after

7 December 31, 2002.

8 SEC. 402. INCOME AVERAGING FOR FARMERS NOT TO IN9 CREASE ALTERNATIVE MINIMUM TAX LIABIL10 ITY.

11 (a) IN GENERAL.—Section 55(c) (defining regular

12 tax) is amended by redesignating paragraph (2) as para13 graph (3) and by inserting after paragraph (1) the fol14 lowing:

15 ‘‘(2) COORDINATION WITH INCOME AVERAGING

16 FOR FARMERS.—Solely for purposes of this section,

17 section 1301 (relating to averaging of farm income)

18 shall not apply in computing the regular tax.’’

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

20 this section shall apply to taxable years beginning after

21 December 31, 2000.

22 SEC. 403. NET OPERATING LOSS OF FARMERS.

23 (a) INCREASE IN CARRYBACK YEARS.—Paragraph

24 (1) of section 172(b) (relating to net operating loss
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1 carrybacks and carryforwards) is amended by adding at

2 the end the following new subparagraph:

3 ‘‘(G) FARMING LOSSES.—Subparagraph

4 (A) shall be applied—

5 ‘‘(i) in the matter preceding clause (i),

6 by substituting ‘any taxable year beginning

7 with the 3rd taxable year after the taxable

8 year of such loss’ for ‘any taxable year’,

9 and

10 ‘‘(ii) in clause (i), by substituting ‘10

11 years’ for ‘2 years’,

12 with respect to the portion of the net operating

13 loss of an eligible taxpayer (as defined in sub14 section (i)) for any taxable year beginning after

15 December 31, 2000, and ending before January

16 1, 2003, which is a farming loss (as so defined)

17 with respect to the taxpayer.’’

18 (b) DEFINITIONS AND RULES RELATING TO FARM19 ING LOSSES.—Section 172 is amended by redesignating

20 subsection (i) as subsection (j) and inserting after sub21 section (h) the following new subsection:

22 ‘‘(i) DEFINITIONS AND RULES RELATING TO FARM23 ING LOSSES.—For purposes of this section—

24 ‘‘(1) FARMING LOSS.—
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1 ‘‘(A) IN GENERAL.—The term ‘farming

2 loss’ means the lesser of—

3 ‘‘(i) the net operating loss of the tax4 payer for the taxable year, or

5 ‘‘(ii) the net operating loss of the tax6 payer for the taxable year determined by

7 only taking into account items of income

8 and deduction attributable to 1 or more

9 qualified farming business of the taxpayer.

10 ‘‘(B) DOLLAR LIMITATION.—

11 ‘‘(i) IN GENERAL.—The farming loss

12 of taxpayer for any taxable year shall not

13 exceed $200,000.

14 ‘‘(ii) AGGREGATION RULES.—

15 ‘‘(I) IN GENERAL.—All persons

16 treated as 1 employer under sub17 sections (a) or (b) of section 52 shall

18 be treated as 1 person.

19 ‘‘(II) PASS-THRU ENTITY.—In

20 the case of a partnership, trust, or

21 other pass-thru entity, the limitation

22 shall be applied at both the entity and

23 the owner level.

24 ‘‘(III) OWNER.—The limitation

25 shall be reduced by the amount of
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1 farming loss determined for a cor2 poration for which the taxpayer is a

3 50 percent owner in the taxable year

4 of the corporation ending in the tax5 able year of the taxpayer owner.

6 ‘‘(2) ELIGIBLE TAXPAYER.—

7 ‘‘(A) IN GENERAL.—The term ‘eligible tax8 payer’ means a taxpayer which derives more

9 than 50 percent of its gross income for the 3-

10 year period beginning 2 years prior to the cur11 rent taxable year from qualified farming busi12 nesses.

13 ‘‘(B) QUALIFIED FARMING BUSINESS.—

14 The term ‘qualified farming business’ means a

15 trade or business of farming (within the mean16 ing of section 2032A)—

17 ‘‘(i) with respect to which—

18 ‘‘(I) the taxpayer or a member of

19 the family of the taxpayer materially

20 participates (within the meaning of

21 section 2032A(e)(6)), or

22 ‘‘(II) in the case of a taxpayer

23 other than an individual, a 20 percent

24 owner of the taxpayer or a member of
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1 the owner’s family materially partici2 pates (as so defined), and

3 ‘‘(ii) which does not receive in excess

4 of $7,000,000 for sales in a taxable year.

5 For purposes of clause (i)(II), owners which are

6 members of a single family shall be treated as

7 a single owner.

8 ‘‘(3) OWNER.—

9 ‘‘(A) 20 PERCENT OWNER.—The term ‘20

10 percent owner’ means any person who would be

11 described in section 416(i)(1)(B)(i) if ‘20 per12 cent’ were substituted for ‘5 percent’ each place

13 it appears in such section.

14 ‘‘(B) 50 PERCENT OWNER.—The term ‘50

15 percent owner’ means any person who would be

16 described in section 416(i)(1)(B)(i) if ‘50 per17 cent’ were substituted for ‘5 percent’ each place

18 it appears in such section.

19 ‘‘(4) COORDINATION WITH SUBSECTION

20 (b)(2).—For purposes of applying subsection (b)(2),

21 a farming loss for any taxable year shall be treated

22 as a separate net operating loss for such taxable

23 year to be taken into account for the remaining por24 tion of the net operating loss for such taxable year.
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1 ‘‘(5) ELECTION.—Any taxpayer entitled to a

2 10-year carryback under subsection (b)(1)(G) from

3 any loss year may elect to have the carryback period

4 with respect to such loss year, and any portion of

5 the farming loss for such year, determined without

6 regard to subsection (b)(1)(G). Such election shall

7 be made in such manner as may be prescribed by

8 the Secretary and shall be made by the due date (in9 cluding extensions of time) for filing the taxpayer’s

10 return for the taxable year of the net operating loss.

11 Such election, once made for any taxable year, shall

12 be irrevocable for the taxable year.’’

13 SEC. 404. SMALL BUSINESSES ALLOWED INCREASED DE14 DUCTION FOR MEAL EXPENSES.

15 (a) IN GENERAL.—Subsection (n) of section 274 (re16 lating to only 50 percent of meal and entertainment ex17 penses allowed as deduction) is amended by adding at the

18 end the following new paragraph:

19 ‘‘(4) SPECIAL RULE FOR SMALL BUSINESSES.—

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

21 taxpayer which is a small business, paragraph

22 (1) shall be applied by substituting for ‘50 per23 cent’ with respect to expenses for food or

24 beverages—
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1 ‘‘(i) ‘55 percent’ in the case of taxable

2 years beginning in 2001, and

3 ‘‘(ii) ‘60 percent’ in the case of tax4 able years beginning after 2001.

5 ‘‘(B) SMALL BUSINESS.—For purposes of

6 this paragraph, the term ‘small business’

7 means, with respect to expenses paid or in8 curred during any taxable year—

9 ‘‘(i) any C corporation which meets

10 the requirements of section 55(e)(1) for

11 such year, and

12 ‘‘(ii) any S corporation, partnership,

13 or sole proprietorship which would meet

14 such requirements if it were a C corpora15 tion.’’

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

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

18 December 31, 2000.

19 SEC. 405. TAX EXCLUSION FOR COST-SHARING PAYMENTS

20 UNDER PARTNERS FOR WILDLIFE PROGRAM.

21 (a) IN GENERAL.—Section 126(a) (relating to cer22 tain cost-sharing payments) is amended by redesignating

23 paragraph (10) as paragraph (11) and by inserting after

24 paragraph (9) the following:
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1 ‘‘(10) The Partners for Wildlife Program au2 thorized by the Fish and Wildlife Act of 1956 (16

3 U.S.C. 742a et seq.).’’.

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

5 this section shall apply to taxable years beginning after

6 December 31, 2000.

7 TITLE V—PROVIDING

8 ADMINISTRATIVE RELIEF

9 SEC. 501. DISCLOSURE OF TAX INFORMATION TO FACILI10 TATE COMBINED EMPLOYMENT TAX REPORT11 ING.

12 Section 6103(d)(5) is amended to read as follows:

13 ‘‘(5) DISCLOSURE FOR COMBINED EMPLOY14 MENT TAX REPORTING.—The Secretary may disclose

15 taxpayer identity information and signatures to any

16 agency, body, or commission of any State for the

17 purpose of carrying out with such agency, body, or

18 commission a combined Federal and State employ19 ment tax reporting program approved by the Sec20 retary. Subsections (a)(2) and (p)(4) and sections

21 7213 and 7213A shall not apply with respect to dis22 closures or inspections made pursuant to this para23 graph.’’
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1 SEC. 502. ENROLLED AGENTS.

2 (a) IN GENERAL.—Chapter 77 (relating to miscella3 neous provisions) is amended by adding at the end the

4 following new section:

5 ‘‘SEC. 7527. ENROLLED AGENTS.

6 ‘‘(a) IN GENERAL.—The Secretary may prescribe

7 such regulations as may be necessary to regulate the con8 duct of enrolled agents in regards to their practice before

9 the Internal Revenue Service.

10 ‘‘(b) USE OF CREDENTIALS.—

11 ‘‘(1) IN GENERAL.—Any enrolled agent prop12 erly licensed to practice before the Internal Revenue

13 Service under subsection (a) shall be allowed to use

14 the credentials ‘Enrolled Agent’, ‘EA’, or ‘E.A.’.

15 ‘‘(2) PROHIBITION ON INTERFERENCE.—No

16 state, municipality or locality, or agency thereof,

17 shall interfere with the right of enrolled agents to

18 use such credentials as described in paragraph

19 (b)(1).’’

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

21 for chapter 77 is amended by adding at the end the fol22 lowing new item:

‘‘Sec. 7527. Enrolled agents.’’

23 (c) PRIOR REGULATIONS.—Nothing in the amend24 ments made by this section shall be construed to have any

25 effect on part 10 of title 31, Code of Federal Regulations,
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1 or any other Federal rule or regulation issued before the

2 date of the enactment of this Act.

Æ