I

103D CONGRESS

1ST SESSION H. R. 1950

To provide assistance to families, enhance economic growth and opportunity,

and advance education reform.

IN THE HOUSE OF REPRESENTATIVES

APRIL 29, 1993

Mr. WOLF (for himself, Mr. ALLARD, Mr. ARMEY, Mr. KINGSTON, and Mr.

LEVY) introduced the following bill; which was referred jointly to the

Committees on Ways and Means, Education and Labor, and the Judiciary

AUGUST 2, 1993

Additional sponsors: Mr. HUTCHINSON, Mr. BARTLETT of Maryland, Mr.

HYDE, Mr. KING, Mr. PAXON, Mr. TAYLOR of North Carolina, Mr. DORNAN, Mr. LIGHTFOOT, Mr. CRAPO, Mr. GALLEGLY, Mr. DUNCAN, Mr.

GINGRICH, Mr. PACKARD, Mr. LIPINSKI, Mr. GREENWOOD, Mr. HUNTER,

Mr. BAKER of California, Mr. BURTON of Indiana, Mr. POMBO, Mr. DOOLITTLE, Mr. SENSENBRENNER, Mr. ISTOOK, and Mr. INHOFE

A BILL

To provide assistance to families, enhance economic growth

and opportunity, and advance education reform.

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

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

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

5 Family and Economic Recovery Act’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

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

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

7 TITLE I—TAX RELIEF FOR

8 FAMILIES

9 SEC. 101. TAX CREDIT FOR CHILDREN.

10 (a) IN GENERAL.—Subpart B of part IV of sub11 chapter A of chapter 1 (relating to foreign tax credit, etc.)

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

13 section:

14 ‘‘SEC. 30A. CREDIT FOR CHILDREN.

15 ‘‘(a) GENERAL RULE.—In the case of an eligible indi16 vidual, there shall be allowed as a credit against the tax

17 imposed by this chapter and chapter 21 for the taxable

18 year an amount equal to $600 multiplied by the number

19 of qualifying children of the taxpayer who have not at20 tained the age of 19 as of the close of the calendar year

21 in which the taxable year of the taxpayer begins.

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

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

24 not exceed the excess (if any) of—
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1 ‘‘(1) the sum of the regular tax (reduced by the

2 sum of the credits allowable under subpart A and

3 section 32) and the tax imposed by chapter 21, over

4 ‘‘(2) the tentative minimum tax,

5 for the taxable year.

6 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur7 poses of this section—

8 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible

9 individual’ has the meaning given to such term by

10 section 32(c)(1) (determined without regard to sub11 paragraph (B) thereof).

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

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

14 32(c)(3) (determined without regard to subpara15 graphs (C) and (E) thereof).

16 ‘‘(3) CERTAIN OTHER RULES APPLY.—Sub17 sections (d) and (e) of section 32 shall apply.’’

18 (b) DENIAL OF DOUBLE BENEFIT.—Subparagraph

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

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

21 in section 30A(a))’’ after ‘‘taxpayer’’.
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1 (c) CONFORMING AMENDMENT.—The table of sec2 tions for such subpart B is amended by adding at the end

3 thereof the following new item:

‘‘Sec. 30A. Credit for children.’’

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

5 this section shall apply to taxable years beginning after

6 December 31, 1993.

7 SEC. 102. REFUNDABLE CREDIT FOR ADOPTION EXPENSES.

8 (a) CREDIT FOR ADOPTION EXPENSES.—

9 (1) IN GENERAL.—Subpart C of part IV of sub10 chapter A of chapter 1 (relating to refundable cred11 its) is amended by redesignating section 35 as sec12 tion 36 and by inserting after section 34 the follow13 ing new section:

14 ‘‘SEC. 35. ADOPTION EXPENSES.

15 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in16 dividual, there shall be allowed as a credit against the tax

17 imposed by this subtitle for the taxable year the amount

18 of the qualified adoption expenses paid or incurred by the

19 taxpayer during such taxable year.

20 ‘‘(b) LIMITATIONS.—

21 ‘‘(1) DOLLAR LIMITATION.—The aggregate

22 amount of qualified adoption expenses which may be

23 taken into account under subsection (a) with respect

24 to the adoption of a child shall not exceed $5,000.
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1 ‘‘(2) INCOME LIMITATION.—The amount allow2 able as a credit under subsection (a) for any taxable

3 year shall be reduced (but not below zero) by an

4 amount which bears the same ratio to the amount

5 so allowable (determined without regard to this

6 paragraph but with regard to paragraph (1)) as—

7 ‘‘(A) the amount (if any) by which the tax8 payer’s adjusted gross income exceeds $60,000,

9 bears to

10 ‘‘(B) $40,000.

11 For purposes of this paragraph, adjusted gross in12 come shall be determined without regard to section

13 136.

14 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—

15 ‘‘(A) IN GENERAL.—No credit shall be al16 lowed under subsection (a) for any expense for

17 which a deduction or credit is allowable under

18 any other provision of this chapter.

19 ‘‘(B) GRANTS.—No credit shall be allowed

20 under subsection (a) for any expenses paid from

21 any funds received under any Federal, State, or

22 local program.

23 ‘‘(c) QUALIFIED ADOPTION EXPENSES.—For pur24 poses of this section, the term ‘qualified adoption ex25 penses’ means reasonable and necessary adoption fees,
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1 court costs, attorney fees, and other expenses which are

2 directly related to the legal adoption of a child by the tax3 payer and which are not incurred in violation of State or

4 Federal law or in carrying out any surrogate parenting

5 arrangement. The term ‘qualified adoption expenses’ shall

6 not include any expenses in connection with the adoption

7 by an individual of a child who is the child of such individ8 ual’s spouse.’’.

9 (2) CLERICAL AMENDMENT.—The table of sec10 tions for such subpart C is amended by striking the

11 last item and inserting the following:

‘‘Sec. 35. Adoption expenses.

‘‘Sec. 36. Overpayments of tax.’’

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

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

14 December 31, 1993.
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1 TITLE II—FAMILY SAVINGS

2 INCENTIVES

3 Subtitle A—Increase in Income

4 Limitations for Deductible IRA

5 Contributions; Increase in IRA

6 Contribution Limits; Penalty7 Free Withdrawals for Home

8 Ownership, Education, and

9 Medical Expenses

10 SEC. 201. INCREASE IN INCOME LIMITATIONS.

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

12 219(g)(3) is amended—

13 (1) by striking ‘‘$40,000’’ in clause (i) and in14 serting ‘‘$100,000’’, and

15 (2) by striking ‘‘$25,000’’ in clause (ii) and in16 serting ‘‘$75,000’’.

17 (b) COST-OF-LIVING ADJUSTMENT.—Section

18 219(g)(3) is amended by adding at the end the following

19 new subparagraph:

20 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—In

21 the case of taxable years beginning after 1994,

22 the applicable dollar amounts under subpara23 graph (B) shall be adjusted in the same manner

24 as under subsection (h), except that such sub25 section shall be applied—
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1 ‘‘(i) by substituting ‘$20,000’ for

2 ‘$500’ each place it appears in paragraph

3 (1), and

4 ‘‘(ii) by substituting the appropriate

5 dollar amounts for the amounts contained

6 in paragraph (2).’’

7 (c) IRA ALLOWED FOR SPOUSES WHO ARE NOT AC8 TIVE PLAN PARTICIPANTS.—Section 219(g)(1) is amend9 ed by striking ‘‘or the individual’s spouse’’.

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

11 this section shall apply to taxable years beginning after

12 December 31, 1994.

13 SEC. 202. INFLATION ADJUSTMENT FOR DEDUCTIBLE

14 AMOUNT.

15 (a) IN GENERAL.—Section 219 is amended by redes16 ignating subsection (h) as subsection (i) and by inserting

17 after subsection (g) the following new subsection:

18 ‘‘(h) COST-OF-LIVING ADJUSTMENTS.—

19 ‘‘(1) IN GENERAL.—If the cost-of-living amount

20 for any calendar year is equal to or greater than

21 $500, then each applicable dollar amount (as pre22 viously adjusted under this subsection) for any tax23 able year beginning in any subsequent calendar year

24 shall be increased by $500.
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1 ‘‘(2) COST-OF-LIVING AMOUNT.—The cost-of2 living amount for any calendar year is the excess (if

3 any) of—

4 ‘‘(A) $2,000, increased by the cost-of-living

5 adjustment for such calendar year, over

6 ‘‘(B) the applicable dollar amount in effect

7 under subsection (b)(1)(A) for taxable years be8 ginning in such calendar year.

9 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur10 poses of this subsection—

11 ‘‘(A) IN GENERAL.—The cost-of-living ad12 justment for any calendar year is the percent13 age (if any) by which—

14 ‘‘(i) the CPI for such calendar year,

15 exceeds

16 ‘‘(ii) the CPI for 1992.

17 ‘‘(B) CPI FOR ANY CALENDAR YEAR.—The

18 CPI for any calendar year shall be determined

19 in the same manner as under section 1(f)(4).

20 ‘‘(4) APPLICABLE DOLLAR AMOUNT.—For pur21 poses of this subsection, the term ‘applicable dollar

22 amount’ means the dollar amount in effect under

23 any of the following provisions:

24 ‘‘(A) Subsection (b)(1)(A).

25 ‘‘(B) Subsection (c)(2)(A)(i).
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1 ‘‘(C) The last sentence of subsection

2 (c)(2).’’

3 (b) CONFORMING AMENDMENTS.—

4 (1) Section 408(a)(1) is amended by striking

5 ‘‘in excess of $2,000 on behalf of any individual’’

6 and inserting ‘‘on behalf of any individual in excess

7 of the amount in effect for such taxable year under

8 section 219(b)(1)(A)’’.

9 (2) Section 408(b)(2)(B) is amended by strik10 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

11 effect under section 219(b)(1)(A)’’.

12 (3) Section 408(j) is amended by striking

13 ‘‘$2,000’’.

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

15 this section shall apply to taxable years beginning after

16 December 31, 1993.

17 SEC. 203. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

18 USED WITHOUT PENALTY TO PURCHASE

19 FIRST HOMES, TO PAY HIGHER EDUCATION,

20 OR FINANCIALLY DEVASTATING MEDICAL EX21 PENSES, OR BY THE LONG-TERM UNEM22 PLOYED.

23 (a) IN GENERAL.—Paragraph (2) of section 72(t)

24 (relating to exceptions to 10-percent additional tax on

25 early distributions from qualified retirement plans) is
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1 amended by adding at the end thereof the following new

2 subparagraph:

3 ‘‘(D) DISTRIBUTIONS FROM CERTAIN

4 PLANS FOR FIRST HOME PURCHASES OR EDU5 CATIONAL EXPENSES.—Distributions to an in6 dividual from an individual retirement plan, or

7 from amounts attributable to employer con8 tributions made pursuant to elective deferrals

9 described in subparagraph (A) or (C) of section

10 402(g)(3) or section 501(c)(18)(D)(iii)—

11 ‘‘(i) which are qualified first-time

12 homebuyer distributions (as defined in

13 paragraph (6)); or

14 ‘‘(ii) to the extent such distributions

15 do not exceed the qualified higher edu16 cation expenses (as defined in paragraph

17 (7)) of the taxpayer for the taxable year.’’

18 (b) FINANCIALLY DEVASTATING MEDICAL EX19 PENSES.—

20 (1) IN GENERAL.—Section 72(t)(3)(A) is

21 amended by striking ‘‘(B),’’.

22 (2) CERTAIN LINEAL DESCENDANTS AND AN23 CESTORS TREATED AS DEPENDENTS.—Subpara24 graph (B) of section 72(t)(2) is amended by striking
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1 ‘‘medical care’’ and all that follows and inserting

2 ‘‘medical care determined—

3 ‘‘(i) without regard to whether the

4 employee itemizes deductions for such tax5 able year, and

6 ‘‘(ii) by treating such employee’s de7 pendents as including—

8 ‘‘(I) all children and grand9 children of the employee or such em10 ployee’s spouse, and

11 ‘‘(II) all ancestors of the em12 ployee or such employee’s spouse.’’

13 (3) CONFORMING AMENDMENT.—Subparagraph

14 (B) of section 72(t)(2) is amended by striking ‘‘or

15 (C)’’ and inserting ‘‘, (C) or (D)’’.

16 (c) DEFINITIONS.—Section 72(t) is amended by add17 ing at the end thereof the following new paragraphs:

18 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS19 TRIBUTIONS.—For purposes of paragraph

20 (2)(D)(i)—

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

22 first-time homebuyer distribution’ means any

23 payment or distribution received by an individ24 ual to the extent such payment or distribution

25 is used by the individual before the close of the
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1 60th day after the day on which such payment

2 or distribution is received to pay qualified ac3 quisition costs with respect to a principal resi4 dence of a first-time homebuyer who is such in5 dividual or the spouse, child, or grandchild of

6 such individual.

7 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

8 For purposes of this paragraph, the term

9 ‘qualified acquisition costs’ means the costs of

10 acquiring, constructing, or reconstructing a res11 idence. Such term includes any usual or reason12 able settlement, financing, or other closing

13 costs.

14 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

15 DEFINITIONS.—For purposes of this para16 graph—

17 ‘‘(i) FIRST-TIME HOMEBUYER.—The

18 term ‘first-time homebuyer’ means any in19 dividual if—

20 ‘‘(I) such individual (and if mar21 ried, such individual’s spouse) had no

22 present ownership interest in a prin23 cipal residence during the 3-year pe24 riod ending on the date of acquisition
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1 of the principal residence to which

2 this paragraph applies, and

3 ‘‘(II) subsection (a)(6), (h), or

4 (k) of section 1034 did not suspend

5 the running of any period of time

6 specified in section 1034 with respect

7 to such individual on the day before

8 the date the distribution is applied

9 pursuant to subparagraph (A)(ii).

10 In the case of an individual described in

11 section 143(i)(1)(C) for any year, an own12 ership interest shall not include any inter13 est under a contract of deed described in

14 such section.

15 ‘‘(ii) PRINCIPAL RESIDENCE.—The

16 term ‘principal residence’ has the same

17 meaning as when used in section 1034.

18 ‘‘(iii) DATE OF ACQUISITION.—The

19 term ‘date of acquisition’ means the date—

20 ‘‘(I) on which a binding contract

21 to acquire the principal residence to

22 which subparagraph (A) applies is en23 tered into, or
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1 ‘‘(II) on which construction or re2 construction of such a principal resi3 dence is commenced.

4 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC5 QUISITION.—If any distribution from any indi6 vidual retirement plan fails to meet the require7 ments of subparagraph (A) solely by reason of

8 a delay or cancellation of the purchase or con9 struction of the residence, the amount of the

10 distribution may be contributed to an individual

11 retirement plan as provided in section

12 408(d)(3)(A)(i) (determined by substituting

13 ‘120 days’ for ‘60 days’ in such section), except

14 that—

15 ‘‘(i) section 408(d)(3)(B) shall not be

16 applied to such contribution, and

17 ‘‘(ii) such amount shall not be taken

18 into account in determining whether sec19 tion 408(d)(3)(A)(i) applies to any other

20 amount.

21 ‘‘(7) QUALIFIED HIGHER EDUCATION EX22 PENSES.—For purposes of paragraph (2)(D)(ii)—

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

24 higher education expenses’ means tuition, fees,
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1 books, supplies, and equipment required for the

2 enrollment or attendance of—

3 ‘‘(i) the taxpayer,

4 ‘‘(ii) the taxpayer’s spouse, or

5 ‘‘(iii) the taxpayer’s child (as defined

6 in section 151(c)(3)) or grandchild,

7 at an eligible educational institution (as defined

8 in section 135(c)(3)).

9 ‘‘(B) COORDINATION WITH SAVINGS BOND

10 PROVISIONS.—The amount of qualified higher

11 education expenses for any taxable year shall be

12 reduced by any amount excludable from gross

13 income under section 135.’’.

14 (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN

15 UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section

16 72(t) is amended by adding at the end thereof the follow17 ing new subparagraph:

18 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED INDI19 VIDUALS.—A distribution from an individual retire20 ment plan (other than a plan referred to in

21 subclause (I) or (II) of paragraph (6)(A)(iii)) to an

22 individual after separation from employment, if—

23 ‘‘(i) such individual has received unemploy24 ment compensation for 12 consecutive weeks
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1 under any Federal or State unemployment com2 pensation law by reason of such separation, and

3 ‘‘(ii) such distributions are made during

4 any taxable year during which such unemploy5 ment compensation is paid or the succeeding

6 taxable year.’’.

7 (e) SPECIAL RULE FOR CERTAIN DISASTER VIC8 TIMS.—For purposes of section 72(t)(6) of the Internal

9 Revenue Code of 1986, an individual whose principal resi10 dence was destroyed or substantially damaged by Hurri11 cane Andrew, Hurricane Iniki, or Typhoon Omar shall be

12 treated as a first-time homebuyer with respect to such res13 idence if the individual rebuilds it or with respect to any

14 other principal residence acquired to replace such resi15 dence.

16 (f) CONFORMING AMENDMENTS.—

17 (1) Section 401(k)(2)(B)(i) is amended by

18 striking ‘‘or’’ at the end of subclause (III), by strik19 ing ‘‘and’’ at the end of subclause (IV) and inserting

20 ‘‘or’’, and by inserting after subclause (IV) the fol21 lowing new subclause:

22 ‘‘(V) the date on which qualified

23 first-time homebuyer distributions (as

24 defined in section 72(t)(6)) or dis25 tributions for qualified higher edu-
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1 cation expenses (as defined in section

2 72(t)(7)) are made, and’’.

3 (2) Section 403(b)(11) is amended by striking

4 ‘‘or’’ at the end of subparagraph (A), by striking the

5 period at the end of subparagraph (B) and inserting

6 ‘‘, or’’, and by inserting after subparagraph (B) the

7 following new subparagraph:

8 ‘‘(C) for qualified first-time homebuyer dis9 tributions (as defined in section 72(t)(6)) or for

10 the payment of qualified higher education ex11 penses (as defined in section 72(t)(7)).’’.

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

13 this section shall apply to payments and distributions after

14 December 31, 1993.

15 Subtitle B—Exclusion for Em16 ployer-Provided Educational As17 sistance To Include Educational

18 Assistance for Spouse and De19 pendents of Employee

20 SEC. 211. EXPANSION OF EXCLUSION FOR EMPLOYER-PRO21 VIDED EDUCATIONAL ASSISTANCE.

22 (a) IN GENERAL.—Paragraph (1) of section 127(b)

23 (relating to educational assistance program) is amended

24 by inserting ‘‘or their spouses and dependents (as defined
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1 in section 152)’’ after ‘‘employees’’ the second place it ap2 pears.

3 (b) EXCLUSION MADE PERMANENT.—

4 (1) Section 127 is amended by striking sub5 section (d) and by redesignating subsection (e) as

6 subsection (d).

7 (2) Subsection (a) of section 103 of the Tax

8 Extension Act of 1991 is amended by striking para9 graph (2).

10 (c) CONFORMING AMENDMENT.—Paragraph (1) of

11 section 127(c) is amended—

12 (1) by striking ‘‘education of the employee’’ in

13 subparagraph (A) and inserting ‘‘education of a

14 qualified individual’’,

15 (2) by striking ‘‘retained by the employee’’ and

16 inserting ‘‘retained by the qualified individual’’, and

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

18 new sentence: ‘‘For purposes of this paragraph, the

19 term ‘qualified individual’ means the employee and

20 the spouse and any dependent (as defined in section

21 152) of the employee.’’

22 (d) EFFECTIVE DATES.—

23 (1) IN GENERAL.—Except as provided in para24 graph (2), the amendments made by this section
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1 shall apply to taxable years beginning after Decem2 ber 31, 1993.

3 (2) EXCLUSION MADE PERMANENT.—The

4 amendments made by subsection (b) shall apply to

5 taxable years beginning after December 31, 1991.

6 TITLE III—MEDICAL CARE SAV7 INGS ACCOUNTS; HEALTH

8 CARE COST CONTROLS; DE9 DUCTION FOR HEALTH IN10 SURANCE COSTS OF SELF-EM11 PLOYED INDIVIDUALS

12 SEC. 301. MEDICAL CARE SAVINGS BENEFITS.

13 (a) IN GENERAL.—Part III of subchapter B of chap14 ter 1 is amended by inserting after section 125 the follow15 ing new section:

16 ‘‘SEC. 125A. MEDICAL CARE SAVINGS BENEFITS.

17 ‘‘(a) IN GENERAL.—A medical care savings benefit

18 is a qualified benefit which consists of a Health Plan meet19 ing the requirements of this section that includes, as part

20 thereof, a Medical Care Savings Account, as set forth in

21 section 408A.

22 ‘‘(b) ESTABLISHMENT OF MEDICAL CARE SAVINGS

23 BENEFIT.—A medical care savings benefit shall be estab24 lished as a Health Plan which provides that all or part

25 of the premium differential realized by instituting a Quali-
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1 fied Higher Deductible Health Plan is credited to a par2 ticipating employee during a plan year to pay for medical

3 care described in section 213(d) and, to the extent that

4 any amount remains credited to that participant at the

5 end of each plan year, such amount is deposited to a sec6 tion 408(A) medical care savings account for that partici7 pant.

8 ‘‘(c) PAYMENTS FROM ACCOUNT BALANCE.—If the

9 plan provides for level installment payments, the plan may

10 also provide that the maximum amount of reimbursement

11 at a particular time during the period of coverage may

12 be limited to the amount of actual contributions to the

13 arrangement. A participant may be advanced, interest

14 free, such amounts necessary to cover incurred medical ex15 penses which exceed the amount then credited to the par16 ticipant’s account, upon the participant’s agreement to

17 repay such advancement from future installments or upon

18 ceasing to be a participant.

19 ‘‘(d) REPORTING.—Employers shall cause to be is20 sued to participating employees, not less frequently than

21 quarterly, a statement setting forth amounts remaining in

22 their accounts.

23 ‘‘(e) LIMITS ON AMOUNTS CONTRIBUTED TO MEDI24 CAL CARE SAVINGS ACCOUNT.—The maximum amount

25 that may be contributed annually to a Medical Care Sav-
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1 ings Account shall not exceed the premium differential set

2 forth in subsection (b). For purposes of determining the

3 maximum premium differential in those years when only

4 the Qualified Higher Deductible Plan is offered, the dif5 ferential shall be the difference between the premiums for

6 the Qualified Higher Deductible Plan and the plan pre7 viously offered, based on bona fide quotes for a Health

8 Plan offering similar benefits for similar employees in the

9 same geographic area. Additionally, this method for cal10 culating said premium differential shall also be used by

11 an employer that has not previously sponsored a Health

12 Plan but desires to institute a medical care savings bene13 fit.

14 ‘‘(f) HEALTH PLAN.—The term ‘Health Plan’ means

15 an employee welfare benefit plan providing medical care

16 (as defined in section 213(d) of the Internal Revenue Code

17 of 1954) to participants or beneficiaries directly or

18 through insurance, reimbursement, or otherwise.

19 ‘‘(g) QUALIFIED HIGHER DEDUCTIBLE PLAN.—The

20 term ‘Qualified Higher Deductible Plan’ is a Health Plan

21 which provides for payment of covered benefits in excess

22 of the higher deductible, which higher deductible shall not

23 exceed $3,000 in 1992 and, adjusted annually thereafter

24 for increases in the cost of living in accordance with regu25 lations prescribed by the Secretary.
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1 ‘‘(h) PREVENTATIVE HEALTH CARE.—By allowing

2 medical expenses payable from a medical care savings ben3 efit to be those permitted under section 213(d) of the In4 ternal Revenue Code, participating employees are encour5 aged to use this benefit to promote good health, to use

6 preventative medical and health procedures, and to seek

7 appropriate consultive and second opinions.

8 ‘‘(i) PREEMPTION.—Insurance policies issued as a

9 part of a medical care savings benefit shall not be required

10 to duplicate expenses that may be proper expenses covered

11 by the medical care savings benefit. Additionally, the high12 er deductible insurance plan may provide that the deduct13 ible specified in the policy may be increased by the amount

14 of any benefits payable by any other health benefits pro15 gram or plan.’’.

16 (b) MEDICAL CARE SAVINGS ACCOUNTS.—Subpart A

17 of part I of subchapter D of chapter 1 is amended by in18 serting after section 408 the following new section:

19 ‘‘SEC. 408A. MEDICAL CARE SAVINGS ACCOUNTS.

20 ‘‘(a) MEDICAL CARE SAVINGS ACCOUNTS.—For pur21 poses of this section, the term ‘medical care savings ac22 count’ means a trust created or organized in the United

23 States for the exclusive benefit of an individual, his de24 pendents (as defined in section 152) or beneficiaries, but
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1 only if the written instrument creating the trust meets the

2 following requirements:

3 ‘‘(1) No contributions will be accepted unless it

4 is in cash.

5 ‘‘(2) The trustee is a bank (as defined in sub6 section (d)), insurance company (as defined in sec7 tion 816), or such other person who demonstrates to

8 the satisfaction of the Secretary that the manner in

9 which such other person will administer the trust

10 will be consistent with the requirements of this sec11 tion.

12 ‘‘(3) No part of the trust funds will be invested

13 in life insurance contracts.

14 ‘‘(4) The interest of an individual in the bal15 ance of the account is nonforfeitable.

16 ‘‘(5) The assets of the trust will not be commin17 gled with other property except in a common trust

18 fund or common investment fund.

19 ‘‘(b) TAX TREATMENT OF ACCOUNTS.—

20 ‘‘(1) EXEMPTION FROM TAX.—Any medical

21 care savings account is exempt from taxation under

22 this subtitle unless such account has ceased to be a

23 medical care savings account by reason of paragraph

24 (2) or (3). Notwithstanding the preceding sentence,

25 any such account is subject to the taxes imposed by
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1 section 511 (relating to imposition of tax on unre2 lated business income of charitable, etc. organiza3 tions).

4 ‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE

5 EMPLOYEE ENGAGES IN PROHIBITED TRANS6 ACTION.—

7 ‘‘(A) IN GENERAL.—If, during any taxable

8 year of the individual for whose benefit any

9 medical care savings account is established,

10 that individual, dependent, or his beneficiary

11 engages in any transaction prohibited by section

12 4975 with respect to such account, such ac13 count ceases to be a medical care savings ac14 count as of the first day of such taxable year.

15 For purposes of this paragraph the individual

16 for whose benefit any account was established is

17 treated as the creator of such account.

18 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

19 ALL ITS ASSETS.—In any case in which any ac20 count ceases to be a medical savings account by

21 reason of subparagraph (A) as of the first day

22 of any taxable year, section 511 shall apply as

23 if there were a distribution on such first day in

24 an amount equal to the fair market value (on
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1 such first day) of all assets in the account (on

2 such first day).

3 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU4 RITY.—If, during any taxable year of the individual

5 for whose benefit a medical care savings account is

6 established, that individual uses the account or any

7 portion thereof as security for a loan, the portion so

8 used is treated as distributed to that individual.

9 ‘‘(4) COMMINGLING MEDICAL CARE SAVINGS AC10 COUNT AMOUNTS IN CERTAIN COMMON TRUST

11 FUNDS AND COMMON INVESTMENT FUNDS.—Any

12 common trust fund or common investment fund of

13 individual medical care savings account assets which

14 is exempt from taxation under this subtitle does not

15 cease to be exempt on account of the participation

16 or inclusion of assets of a trust exempt from tax17 ation under section 501(a) which is described in sec18 tion 401(a).

19 ‘‘(c) TREATMENT OF DISTRIBUTIONS.—

20 ‘‘(1) IN GENERAL.—Except as otherwise pro21 vided in this subsection, any amount paid or distrib22 uted out of a medical savings account shall be in23 cluded in gross income by the distributee.

24 ‘‘(2) DISTRIBUTIONS FOR MEDICAL EX25 PENSES.—Distributions from a medical care savings
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1 account shall not be taxable to the distributee, for

2 amounts paid directly or indirectly for medical ex3 penses as defined in section 213(d).

4 ‘‘(3) 10 PERCENT ADDITIONAL TAX FOR EARLY

5 WITHDRAWALS.—Distributions described in para6 graph 1 and not described in paragraph 2 shall be

7 subject to an additional 10 percent tax for distributions made prior to age 591 8 ⁄2 of the distributee.

9 ‘‘(4) ROLLOVER CONTRIBUTION.—An amount is

10 described in this paragraph as a rollover contribu11 tion which shall not be included in the gross income

12 of the distributee if it meets the requirements of

13 subparagraphs (A) and (B).

14 ‘‘(A) IN GENERAL.—Paragraph (1) does

15 not apply to any amount paid or distributed out

16 of a medical care savings account to the individ17 ual for whose benefit the account is maintained

18 if the entire amount received is paid into a

19 medical care savings account for the benefit of

20 such individual not later than the sixtieth day

21 after the day on which he receives the payment

22 or distribution.

23 ‘‘(B) LIMITATION.—This paragraph does

24 not apply to any amount described in para25 graph (A) received by an individual from a
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1 medical savings account if at any time during

2 the one-year period ending on the day of such

3 receipt such individual received any other

4 amount described in that subparagraph from a

5 medical care savings account which was not in6 cludible in his gross income because of the ap7 plication of this paragraph.

8 ‘‘(C) DENIAL OF ROLLOVER TREATMENT

9 FOR INHERITED ACCOUNTS, ETC.—

10 ‘‘(i) IN GENERAL.—In the case of an

11 inherited medical savings account—

12 ‘‘(I) this paragraph shall not

13 apply to any amount received by an

14 individual from such an account (and

15 no amount transferred from such ac16 count to another medical care savings

17 account shall be excluded from gross

18 income by reason of such transfer),

19 and

20 ‘‘(II) such inherited account shall

21 not be treated as a medical care sav22 ings account for purposes of determin23 ing whether any other amount is a

24 rollover contribution.
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1 ‘‘(ii) INHERITED MEDICAL CARE SAV2 INGS ACCOUNT.—

3 ‘‘(I) the individual for whose ben4 efit the account is maintained ac5 quired such account by reason of the

6 death of another individual, and

7 ‘‘(II) such individual was not the

8 surviving spouse of such other individ9 ual.

10 ‘‘(d) BANK.—For purposes of subsection (a)(2), the

11 term ‘bank’ means—

12 ‘‘(1) a bank (as defined in section 581),

13 ‘‘(2) an insured credit union (within the mean14 ing of section 101(6) of the Federal Credit Union

15 Act), and

16 ‘‘(3) a corporation which, under the laws of the

17 State of its incorporation, is subject to supervision

18 and examination by the Commissioner of Banking or

19 other officer of such State in charge of the adminis20 tration of the banking laws of such state.’’.

21 (c) CLERICAL AMENDMENTS.—

22 (1) The table of sections for part III of sub23 chapter B of chapter 1 is amended by inserting after

24 the item relating to section 125 the following new

25 item:

‘‘Sec. 125A. Medical care savings benefits.’’
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1 (2) The table of sections for subpart A of part

2 I of subchapter D of chapter 1 is amended by insert3 ing after the item relating to section 408 the follow4 ing new item:

‘‘Sec. 408A. Medical care savings accounts.’’

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

6 this section shall apply to taxable years beginning after

7 December 31, 1993.

8 SEC. 302. DEDUCTION FOR HEALTH INSURANCE COSTS OF

9 SELF-EMPLOYED INCREASED AND MADE PER10 MANENT.

11 (a) PERMANENT EXTENSION OF DEDUCTION.—

12 (1) IN GENERAL.—Subsection (l) of section 162

13 (relating to special rules for health insurance costs

14 of self-employed individuals) is amended by striking

15 paragraph (6).

16 (2) CONFORMING AMENDMENT.—Paragraph (2)

17 of section 110(a) of the Tax Extension Act of 1991

18 is hereby repealed.

19 (3) EFFECTIVE DATE.—The amendments made

20 by this subsection shall apply to taxable years begin21 ning after December 31, 1991.

22 (b) INCREASE IN AMOUNT OF DEDUCTION.—

23 (1) IN GENERAL.—Paragraph (1) of section

24 162(l) is amended by striking ‘‘25 percent of’’ and
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1 inserting ‘‘100 percent (50 percent in the case of

2 taxable years beginning in 1995 or 1996) of’’.

3 (2) EFFECTIVE DATE.—The amendment made

4 by paragraph (1) shall apply to taxable years begin5 ning after December 31, 1994.

6 SEC. 303. PREEMPTION FROM INSURANCE MANDATES FOR

7 QUALIFIED SMALL EMPLOYER PURCHASING

8 GROUPS.

9 (a) QUALIFIED SMALL EMPLOYER PURCHASING

10 GROUP DEFINED.—For purposes of this section, an asso11 ciation is a qualified small employer purchasing group if—

12 (1) the association submits an application to

13 the Secretary of Health and Human Services at such

14 time and in such form as the Secretary may require;

15 and

16 (2) on the basis of information contained in the

17 application and any other information the Secretary

18 may require, the Secretary determines that—

19 (A) the association is administered solely

20 under the authority and control of its member

21 employers,

22 (B) the association’s membership consists

23 solely of employers with not more than 100 em24 ployees (except that an employer member of the

25 group may retain its membership in the group
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1 if, after the Secretary determines that the asso2 ciation meets the requirements of this para3 graph, the number of employees of the employer

4 member increases to more than 100),

5 (C) with respect to each State in which its

6 members are located, the association consists of

7 not fewer than 100 employers, and

8 (D) at the time the association submits its

9 application, the health benefit plans with re10 spect to the employer members of the associa11 tion are in compliance with applicable State

12 laws relating to health benefit plans.

13 (b) PREEMPTION FROM INSURANCE MANDATES.—

14 (1) FINDING.—Congress finds that employer

15 purchasing groups organized for the purpose of ob16 taining health insurance for employer members af17 fect interstate commerce.

18 (2) PREEMPTION OF STATE MANDATES.—In the

19 case of a qualified small employer purchasing group

20 described in subsection (a), no provision of State law

21 shall apply that requires the offering, as part of the

22 health benefit plan with respect to an employer

23 member of such a group, of any services, category

24 of care, or services of any class or type of provider.
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1 (3) PREEMPTION OF PROVISIONS PROHIBITING

2 EMPLOYER GROUPS FROM PURCHASING HEALTH IN3 SURANCE.—In the case of a qualified small employer

4 purchasing group described in subsection (a), no

5 provision of State or local law shall apply that pro6 hibits a group of employers from purchasing health

7 insurance with respect to member employers of the

8 group or their employees.

9 (c) EFFECTIVE DATE.—This section shall take effect

10 60 days after the date of the enactment of this Act.

11 TITLE IV—EDUCATIONAL

12 CHOICE PROGRAMS

13 SECTION 401. SHORT TITLE.

14 This title may be cited as the ‘‘Educational Choice

15 Programs Act’’.

16 SEC. 402. PURPOSES.

17 The purposes of this title are—

18 (1) to assist and encourage States and localities

19 to—

20 (A) give children from middle- and low-in21 come families more of the same choices of all el22 ementary and secondary schools and other aca23 demic programs that children from wealthier

24 families already have;
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1 (B) improve schools and other academic

2 programs by giving middle- and low-income par3 ents increased consumer power to choose the

4 schools and programs that they determine best

5 fit the needs of their children;

6 (C) more fully engage middle- and low-in7 come parents in their children’s schooling; and

8 (D) through families, provide new funds at

9 the school site that teachers and principals can

10 use to help all children achieve the high edu11 cational standards called for by the National

12 Education Goals;

13 (2) to encourage the creation and use of supple14 mentary academic programs during and after regu15 lar school hours, on weekends, and during school va16 cation periods for children of middle- and low-in17 come families; and

18 (3) to demonstrate, through a competitive dis19 cretionary grant program, the effects of State and

20 local programs that give middle- and low-income

21 families more of the same choices of all schools, pub22 lic, private or religious, that wealthier families have.

23 SEC. 403. AUTHORIZATION OF APPROPRIATIONS.

24 (a) AUTHORIZATION.—For the purpose of carrying

25 out this title, there are authorized to be appropriated
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1 $1,000,000,000 for fiscal year 1993 and such sums as

2 may be necessary for each of the fiscal years 1994 through

3 2000.

4 (b) NATIONAL EVALUATION.—From the sums appro5 priated for any fiscal year for carrying out this title, the

6 Secretary may reserve up to $2,000,000 to carry out the

7 national evaluation described in section 412.

8 (c) REMAINDER OF FUNDS.—The Secretary shall use

9 any funds remaining after such reservation to make com10 petitive grants to States and to localities to carry out eligi11 ble programs under this title.

12 SEC. 404. ELIGIBILITY.

13 A State or locality is eligible for a grant under this

14 title if—

15 (1) it has taken significant steps to provide a

16 choice of schools to families with school children re17 siding in the program area described in the applica18 tion submitted under section 407, including families

19 who are not eligible for scholarships under this title;

20 (2) during the year for which assistance is

21 sought, assurances are made that if awarded a grant

22 under this title, such State or locality will provide

23 scholarships to parents of eligible children that may

24 be redeemed for elementary or secondary education

25 for their children at a broad variety of public and
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1 private elementary and secondary schools, including

2 religious schools, if any, serving the area; and

3 (3) it allows lawfully operating public and pri4 vate elementary and secondary schools, including re5 ligious schools, if any, serving the area to participate

6 in its program.

7 SEC. 405. SCHOLARSHIPS.

8 (a) SCHOLARSHIP AWARDS.—With funds awarded

9 under this title, each grantee under this title shall provide

10 scholarships to the parents of eligible children, in accord11 ance with section 406.

12 (b) SCHOLARSHIP VALUE.—The value of each schol13 arship shall be the sum of—

14 (1) $2,000 from funds provided under this title;

15 and

16 (2) an additional amount, if any, of State, local,

17 and nongovernmental funds.

18 (c) TAX EXEMPTION.—Scholarships shall not be

19 deemed income of the parents for Federal income tax pur20 poses or for determining eligibility for any other Federal

21 program.

22 SEC. 406. ELIGIBLE CHILDREN.

23 (a) ELIGIBILITY.—With funds awarded under this

24 title, each grantee shall provide a scholarship—

25 (1) to the parents of children who—
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1 (A) reside in the program area described in

2 the application submitted under section 407;

3 (B) will attend a public or private elemen4 tary or secondary school that is participating in

5 the program; and

6 (C) are from a middle- or low-income fam7 ily, as determined by the grantee in accordance

8 with regulations of the Secretary, except that

9 the maximum family income for eligibility may

10 not exceed the State or national median family

11 income (adjusted for family size), whichever is

12 higher, as determined by the Secretary, in con13 sultation with the Bureau of the Census, on the

14 basis of the most recent satisfactory data avail15 able; and

16 (2) in each year of its program to each child

17 who received a scholarship during the previous year

18 of the program, unless—

19 (A) the child no longer resides in the pro20 gram area;

21 (B) the child no longer attends school; or

22 (C) the child’s family income exceeds, by

23 20 percent or more, the maximum family in24 come of families who received scholarship in the

25 preceding year.
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1 (b) PRIORITY.—If the amount of the grant under this

2 title is not sufficient to provide a scholarship to each child

3 up to the income level for which the grantee applied as

4 described in subsection (a)(1)(C), the grantee shall pro5 vide scholarships to the lowest income families.

6 SEC. 407. APPLICATIONS.

7 (a) APPLICATION.—Each State or locality that wishes

8 to receive a grant under this title shall submit an applica9 tion to the Secretary at such time and in such manner

10 as the Secretary may reasonably require.

11 (b) CONTENTS.—Each such application shall con12 tain—

13 (1) a description of the program area;

14 (2) an economic profile of children residing in

15 the program area, in terms of family income and

16 poverty status;

17 (3) the family income range of children who will

18 be eligible to participate in the proposed program,

19 consistent with section 406(a)(1)(C), and a descrip20 tion of the applicant’s method for identifying chil21 dren who fall within that range;

22 (4) an estimate of the number of children, with23 in the income range specified in paragraph (3), who

24 would be eligible to receive scholarships under the

25 program;
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1 (5) information demonstrating that the appli2 cant’s proposed program complies with the eligibility

3 requirements of section 404 and with the other re4 quirements of this title;

5 (6) a description of the procedures the appli6 cant has used, including timely and meaningful con7 sultation with private school officials, to encourage

8 public and private elementary and secondary schools

9 to participate in the programs and to ensure maxi10 mum educational choices for the parents of eligible

11 children and for other children residing in the pro12 gram area;

13 (7) an identification of the public, private, and

14 religious elementary and secondary schools that are

15 eligible and have chosen to participate in the pro16 gram;

17 (8) a description of how the applicant will in18 form children and their parents of the program and

19 of the choices available to them under the program,

20 including the availability of supplementary academic

21 services under section 410(2);

22 (9) a description of the procedures to be used

23 to provide scholarships to parents and to enable par24 ents to use such scholarships, such as the issuance

25 of checks payable to both parents and schools;
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1 (10) a description of—

2 (A) the procedures by which a school will

3 make a pro rata refund to the grantee of a

4 scholarship for any participating child who, be5 fore completing 50 percent of the school attend6 ance period for which the scholarship was is7 sued—

8 (i) is released or expelled from the

9 school; or

10 (ii) withdraws for any reason; or

11 (B) another refund policy that addresses

12 special circumstances an applicant can reason13 ably anticipate and that the applicant dem14 onstrates, to the Secretary’s satisfaction, ade15 quate protection of participating children, in

16 light of the purposes of this title;

17 (11) a description of procedures the applicant

18 will use to—

19 (A) determine a child’s continuing eligi20 bility to participate in the program; and

21 (B) bring new children into the program;

22 (12) an assurance that the applicant will co23 operate in carrying out the national evaluation de24 scribed in section 412;
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1 (13) an assurance that the applicant will main2 tain such records relating to the program as the

3 Secretary may require and will comply with the Sec4 retary’s reasonable requests for information about

5 the program;

6 (14) a description of State and local funds (in7 cluding tax benefits) and nongovernmental funds, if

8 any, that will be available under section 405(b)(2) to

9 supplement scholarship funds provided under this

10 title; and

11 (15) such other assurance and information as

12 the Secretary may require.

13 (c) REVISIONS.—Each such application shall be up14 dated annually as may be needed to reflect revised condi15 tions.

16 SEC. 408. APPROVAL OF PROJECTS.

17 (a) SELECTION.—From applications received each

18 year, the Secretary shall select programs on the basis of—

19 (1) the number and variety of educational

20 choices that are available under the program to fam21 ilies of eligible children;

22 (2) the extent to which educational choices

23 among public, private, and religious schools are

24 available to all families in the program area, includ-
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1 ing families that are not eligible for scholarships

2 under this title;

3 (3) the proportion of children who will partici4 pate in the program who are from low-income fami5 lies;

6 (4) the applicant’s financial support of the pro7 gram, including the amount of State, local, and non8 governmental funds that will be provided to supple9 ment Federal funds, including not only direct ex10 penditures for scholarships, but also other economic

11 incentives provided to families participating in the

12 program, such as a tax relief program. In consider13 ing this factor, the Secretary may take differences in

14 local conditions into account; and

15 (5) other criteria established by the Secretary.

16 (b) GEOGRAPHIC DISTRIBUTION.—The Secretary

17 shall ensure that, to the extent feasible, grants are award18 ed for programs in urban and rural areas and in a variety

19 of geographic areas throughout the Nation.

20 SEC. 409. AMOUNTS AND LENGTH OF GRANTS.

21 (a) AWARDS.—The Secretary shall award annual

22 grants taking into account the availability of appropria23 tions, the number and quality of applications, and other

24 factors related to the purposes of this title that the Sec25 retary determines are appropriate.
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1 (b) RENEWAL.—Each grant under this title may be

2 for a period of up to 4 years, and may be renewed for

3 an additional 4-year period.

4 SEC. 410. USES OF FUNDS.

5 The Federal portion of any scholarship awarded

6 under this title shall be used for the following purposes:

7 (1) first, for—

8 (A) the payment of tuition and fees at the

9 school selected by the parents of the child for

10 whom the scholarship was provided; and

11 (B) the reasonable costs of the child’s

12 transportation to the school, if—

13 (i) the school is not the school to

14 which the child would be assigned in the

15 absence of a program under this title; and

16 (ii) the parents of an eligible child

17 choose to use scholarship funds for that

18 purpose;

19 (2) second, if the parents so choose, to obtain

20 supplementary academic services for the child, at a

21 cost of not more than $500, from any provider cho22 sen by the parents that the grantee, in accordance

23 with regulations of the Secretary, determines is ca24 pable of providing such services and has an appro25 priate refund policy; and
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1 (3) finally, any remaining funds shall be used—

2 (A) for educational programs that help

3 students achieve high levels of academic excel4 lence in the school attended by the child for

5 whom a scholarship was issued, if the child at6 tends a public school; or

7 (B) by the grantee for additional scholar8 ships in the year or the succeeding year of its

9 program, in accordance with this title, if the

10 child attends a private school.

11 SEC. 411. EFFECT OF PROGRAMS.

12 (a) CHAPTER 1.—Notwithstanding any other provi13 sion of law, a local educational agency that, in the absence

14 of an educational choice program that is funded under this

15 title, would provide services to a participating child under

16 part A of chapter 1 of title I of the Elementary and Sec17 ondary Education Act of 1965, shall provide such services

18 to such child.

19 (b) INDIVIDUALS WITH DISABILITIES.—Nothing in

20 this title shall be read to affect the applicability or require21 ments of part B of the Individuals With Disabilities Edu22 cation Act.

23 (c) AID.—(1) Scholarships under this title are to aid

24 families, not institutions. A parent’s expenditure of schol25 arship funds at a school or for supplementary academic
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1 services shall not constitute Federal financial aid or assist2 ance to that school or to the provider of supplementary

3 academic services.

4 (2) Notwithstanding paragraph (1), a school or pro5 vider of supplementary academic services that receives

6 scholarship funds under this title shall, as a condition of

7 participation under this title, comply with the anti dis8 crimination provisions of section 601 of title VI of the

9 Civil Rights Act of 1964 (42 U.S.C. 1681) and section

10 504 of the Rehabilitation Act of 1973 (27 U.S.C. 794).

11 (3) The Secretary shall promulgate new regulations

12 to implement the provisions of paragraph (2), taking into

13 account the purposes of this title and the nature, variety,

14 and missions of schools and providers that may participate

15 in providing services to children under this title.

16 (d) OTHER FEDERAL FUNDS.—No Federal, State, or

17 local agency may, in any year, take into account Federal

18 funds provided to a grantee or to the parents of any child

19 under this title in determining whether to provide any

20 other funds from Federal, State, or local resources, or in

21 determining the amount of such assistance, to such grant22 ee or to a school attended by such child.

23 (e) EXISTING PROVISIONS OF LAW.—Nothing in this

24 title shall be construed to supersede or modify any provi25 sion of a State constitution or State law that prohibits
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1 the expenditure of public funds in or by religious or other

2 private institutions, except that no provision of a State

3 constitution or State law shall be construed or applied to

4 prohibit any grantee from paying the administrative costs

5 of a program under this title or providing any Federal

6 funds received under this title to parents for use at reli7 gious or other private institutions.

8 (f) NO DISCRETION.—Nothing in this title shall be

9 construed to authorize the Secretary to exercise any direc10 tion, supervision, or control over the curriculum, program

11 of instruction, administration, or personnel of any edu12 cational institution or school participating in a program

13 under this title.

14 (g) DISCRIMINATION.—No person shall, on the

15 ground of race, color, or national origin, be excluded from

16 participation in, be denied the benefits of, or be subjected

17 to discrimination under any program or activity under this

18 title.

19 SEC. 412. NATIONAL EVALUATION.

20 With funds reserved under section 403(b), the Sec21 retary shall conduct a national evaluation of the program

22 authorized by this title. Such evaluation shall, at a mini23 mum—

24 (1) assess the implementation of assisted pro25 grams and their effect on participants, schools, and
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1 communities in the program area, including parental

2 involvement in, and satisfaction with, the program

3 and their children’s education;

4 (2) compare educational achievement of partici5 pating children with the achievement of similar non6 participating children before, during, and after the

7 program; and

8 (3) compare—

9 (A) educational achievement of children

10 who use scholarships to attend schools other

11 than the ones they would attend in the absence

12 of the program; with

13 (B) educational achievement of children

14 who attend the schools they would attend in the

15 absence of the program.

16 SEC. 413. ENFORCEMENT.

17 (a) REGULATIONS.—The Secretary shall promulgate

18 regulations to enforce the provisions of this title.

19 (b) PRIVATE CAUSE.—No provision or requirement

20 of this title shall be enforced through a private cause of

21 action.

22 SEC. 414. DEFINITIONS.

23 For the purpose of this title—

24 (1) the terms ‘‘elementary school’’, ‘‘local edu25 cational agency’’, ‘‘parent’’, ‘‘secondary school’’, and
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1 ‘‘State educational agency’’ have the same meanings

2 given such terms in section 1471 of the Elementary

3 and Secondary Education Act of 1965;

4 (2) the term ‘‘locality’’ means—

5 (A) a unit of general purpose local govern6 ment, such as a city, township, or village; or

7 (B) a local educational agency;

8 (3) the term ‘‘Secretary’’ means the Secretary

9 of Education; and

10 (4) the term ‘‘State’’ means each of the 50

11 States, the District of Columbia, and the Common12 wealth of Puerto Rico.

13 TITLE V—GRANTS TO ENCOUR14 AGE EMPLOYERS TO ADOPT

15 FLEXIBLE WORK AND FAMILY

16 POLICIES

17 SEC. 501. PURPOSES.

18 The purpose of this title is to provide grants as start

19 up funds for employers to—

20 (1) explore, initiate, or expand flexible work

21 policies (including for example, flexitime, part-time

22 work, job sharing, telecommuting, flexiplace, or com23 pressed work weeks) in an effort to ease the work

24 and family demands on employees;
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1 (2) efficiently adapt to the Family and Medical

2 Leave Act of 1993 in a comprehensive manner while

3 strategically planning for changes in work force de4 mographics;

5 (3) assess the needs of employees and deter6 mine various work and family policies and human

7 resource policies that best fit with a particular work

8 force or workplace;

9 (4) design work and family programs in such a

10 way that improves recruitment, retention and pro11 ductivity in the context of a changing work force;

12 and

13 (5) share and communicate successful work and

14 family policies with the outside business community.

15 SEC. 502. APPLICATIONS.

16 (a) IN GENERAL.—To receive a grant under this title,

17 an employer must submit an application to the Secretary

18 of Labor at such time and in such manner as such Sec19 retary may prescribe.

20 (b) CONTENTS OF APPLICATION.—Each application

21 shall contain—

22 (1) a description of the employer’s business, in23 cluding the number of employees and their demo24 graphic makeup;
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1 (2) an economic and work profile of the families

2 of employees of such employer, including the work

3 and family situations of the employees who would

4 benefit from a program and their family income

5 range;

6 (3) a description of the work and family pro7 gram the employer plans to implement, including a

8 description of—

9 (A) the methods to be used to assess the

10 needs of employees,

11 (B) the methods to be used to determine

12 which work and family policies best fit the

13 needs of both the employer and the employees,

14 (C) how the new policies will be piloted or

15 implemented, and

16 (D) which work policies will be focused

17 upon, and how support for such policies will be

18 developed and integrated into the management

19 structure;

20 (4) a profile of surrounding businesses that

21 might benefit from the type of program proposed

22 and how information on that program will be shared

23 with those businesses; and
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1 (5) how, and the extent to which, the efforts of

2 the applicant will be communicated back to the De3 partment of Labor.

4 SEC. 503. APPROVAL OF APPLICATIONS.

5 (a) IN GENERAL.—The Secretary of Labor shall ap6 prove applications on the basis of—

7 (1) the comprehensiveness of the approach of

8 the applicant’s work and family programs, the ef9 forts made to survey and assess the work and family

10 needs of employees, and the number of families im11 pacted and the economic demands on the families af12 fected;

13 (2) the applicant’s ability and commitment to

14 developing an ongoing and comprehensive approach

15 to flexible work and family policies; and

16 (3) the efforts by the applicant to share infor17 mation of its work and family policies with the sur18 rounding business community as well as their ability

19 to provide information to the Department of Labor

20 on the development and implementation of their poli21 cies.

22 (b) DIVERSITY OF APPROVED APPLICATIONS.—The

23 Secretary of Labor shall ensure that, to the extent fea24 sible, grants are awarded to a variety of businesses with

25 varying work populations and economic means as well as
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1 variety in both urban and rural areas and in different geo2 graphic areas throughout the Nation.

3 SEC. 504. LIMIT ON AMOUNT OF GRANTS; AUTHORIZATION

4 OF APPROPRIATIONS.

5 (a) LIMIT ON AMOUNT OF GRANTS.—The maximum

6 grant that may be awarded under this title to a business

7 for any year shall not exceed $50,000.

8 (b) AUTHORIZATION.—There are authorized to be ap9 propriated to carry out this title $10,000,000 for fiscal

10 year 1993, to remain available until expended or the close

11 of fiscal year 1994.

12 (c) FUNDS NOT USED FOR GRANTS.—If funds ap13 propriated pursuant to subsection (b) remain available as

14 of the close of fiscal year 1994, the Secretary of Labor

15 shall conduct a national evaluation of the various pro16 grams funded by grants under this title. Notwithstanding

17 subsection (b), such funds may be used during fiscal year

18 1995 for such purpose.
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1 TITLE VI—REDUCING THE COST

2 OF CAPITAL BY REDUCING

3 CAPITAL GAINS TAX RATES,

4 INDEXING THE BASIS OF CER5 TAIN ASSETS, AND EXCLUD6 ING GAIN FROM SALES OF

7 PRINCIPAL RESIDENCES

8 SEC. 601. REDUCTION IN INDIVIDUAL CAPITAL GAINS

9 RATE.

10 (a) GENERAL RULE.—Subsection (h) of section 1 (re11 lating to maximum capital gains rate) is amended to read

12 as follows:

13 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—If a taxpayer

14 has a net capital gain for any taxable year, then the tax

15 imposed by this section shall not exceed the sum of—

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

17 the same manner as if this subsection had not

18 been enacted on the taxable income reduced by

19 the net capital gain, plus

20 ‘‘(B) a tax equal to 15 percent of the net

21 capital gain in excess of—

22 ‘‘(i) the maximum amount of taxable

23 income to which the 15-percent rate ap24 plies under the table applicable to the tax25 payer, reduced by
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1 ‘‘(ii) the taxable income to which sub2 paragraph (A) applies.

3 (b) PHASEOUT OF PERSONAL EXEMPTIONS AND LIM4 ITATION ON DEDUCTION OF ITEMIZED DEDUCTIONS NOT

5 TO RESULT FROM NET CAPITAL GAIN.—

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

7 151(d)(3) (relating to phaseout of exemption

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

9 before ‘‘adjusted gross income’’.

10 (B) Paragraph (3) of section 151(d) of such

11 Code is amended by redesignating subparagraphs

12 (D) and (E) as subparagraphs (E) and (F), respec13 tively, and by inserting after subparagraph (C) the

14 following new subparagraph:

15 ‘‘(D) MODIFIED ADJUSTED GROSS IN16 COME.—For purposes of this paragraph, the

17 term ‘modified adjusted gross income’ means

18 adjusted gross income reduced by net capital

19 gain.’’

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

21 overall limitation on itemized deductions) is amend22 ed by inserting ‘‘(reduced by net capital gain (deter23 mined in accordance with the last sentence of section

24 151(d)(3)(D)))’’ after ‘‘adjusted gross income’’.

25 (c) TECHNICAL AMENDMENTS.—
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•HR 1950 SC

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

2 by striking ‘‘the amount of gain’’ in the material fol3 lowing subparagraph (B)(ii) and inserting ‘‘13/28

4 (19/34 in the case of a corporation) of the amount

5 of gain’’.

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

7 7518(g)(6)(A) is amended by striking ‘‘28 percent

8 (34 percent in the case of a corporation)’’ and in9 serting ‘‘15 percent’’.

10 (B) The second sentence of section

11 607(h)(6)(A) of the Merchant Marine Act, 1936, is

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

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

14 SEC. 602. REDUCTION IN CORPORATE CAPITAL GAINS

15 RATE.

16 (a) GENERAL RULE.—Section 1201 (relating to al17 ternative tax for corporations) is amended by redesignat18 ing subsection (b) as subsection (c), and by striking sub19 section (a) and inserting the following:

20 ‘‘(a) GENERAL RULE.—If for any taxable year a cor21 poration has a net capital gain, then, in lieu of the tax

22 imposed by sections 11, 511, or 831(a) (whichever ap23 plies), there is hereby imposed a tax (if such tax is less

24 than the tax imposed by such section) which shall consist

25 of the sum of—
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•HR 1950 SC

1 ‘‘(1) a tax computed on the taxable income re2 duced by the net capital gain, at the same rates and

3 in the same manner as if this subsection had not

4 been enacted, plus

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

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

7 year which includes December 31, 1992, the amount of

8 the net capital gain for purposes of subsection (a) shall

9 not exceed the net capital gain determined by only taking

10 into account gains and losses properly taken into account

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

12 (b) TECHNICAL AMENDMENTS.—

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

14 amended by striking ‘‘66 percent’’ and inserting ‘‘85

15 percent’’.

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

17 are each amended by striking ‘‘34 percent’’ and in18 serting ‘‘15 percent’’.

19 SEC. 603. REDUCTION OF MINIMUM TAX RATE ON CAPITAL

20 GAINS.

21 Subparagraph (A) of section 55(b)(1) (relating to

22 tentative minimum tax) is amended to read as follows:

23 ‘‘(A) the sum of—

24 ‘‘(i) 15 percent of the lesser of—
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1 ‘‘(I) the net capital gain (deter2 mined with the adjustments provided

3 in this part and (to the extent appli4 cable) the limitations of sections

5 1(h)(2) and 1201(b)), or

6 ‘‘(II) so much of the alternative

7 minimum taxable income for the tax8 able year as exceeds the exemption

9 amount, plus

10 ‘‘(ii) 20 percent (24 percent in the

11 case of a taxpayer other than a corpora12 tion) of the amount (if any) by which the

13 excess referred to in clause (i)(II) exceeds

14 the net capital gain (as so determined), re15 duced by’’.

16 SEC. 604. INDEXING OF CERTAIN ASSETS FOR PURPOSES

17 OF DETERMINING GAIN OR LOSS.

18 (a) IN GENERAL.—Part II of subchapter O of chap19 ter 1 (relating to basis rules of general application) is

20 amended by inserting after section 1021 the following new

21 section:

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

23 OF DETERMINING GAIN OR LOSS.

24 ‘‘(a) GENERAL RULE.—
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1 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD2 JUSTED BASIS.—Except as provided in paragraph

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

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

5 for purposes of this title the indexed basis of the

6 asset shall be substituted for its adjusted basis.

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

8 The deduction for depreciation, depletion, and amor9 tization shall be determined without regard to the

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

11 other person.

12 ‘‘(b) INDEXED ASSET.—

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, the term ‘indexed asset’ means—

15 ‘‘(A) stock in a corporation, and

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

17 therein), which is a capital asset of property

18 used in the trade or business (as defined in sec19 tion 1231(b)).

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

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

22 does not include—

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

24 in property which is in the nature of a credi25 tor’s interest.
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1 ‘‘(B) OPTIONS.—Any option or other right

2 to acquire an interest in property.

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

4 of a lessor, net lease property (within the mean5 ing of subsection (h)(1)).

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

7 which is fixed and preferred as to dividends and

8 does not participate in corporate growth to any

9 significant extent.

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

11 Stock in—

12 ‘‘(i) an S corporation (within the

13 meaning of section 1361),

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

15 defined in section 542), and

16 ‘‘(iii) a foreign corporation.

17 ‘‘(3) EXCEPTION FOR STOCK IN FOREIGN COR18 PORATION WHICH IS REGULARLY TRADED ON NA19 TIONAL OR REGIONAL EXCHANGE.—Clause (iii) of

20 paragraph (2)(E) shall not apply to stock in a for21 eign corporation the stock of which is listed on the

22 New York Stock Exchange, the American Stock Ex23 change, or any domestic regional exchange for which

24 quotations are published on a regular basis other

25 than—
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1 ‘‘(A) stock of a foreign investment com2 pany (within the meaning of section 1246(b)),

3 and

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

5 a United States person who meets the require6 ments of section 1248(a)(2).

7 ‘‘(c) INDEXED BASIS.—For purposes of this sec8 tion—

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

10 any asset is—

11 ‘‘(A) the adjusted basis of the asset, multi12 plied by

13 ‘‘(B) the applicable inflation ratio.

14 ‘‘(2) APPLICABLE INFLATION RATIO.—The ap15 plicable inflation ratio for any asset is the percent16 age arrived at by dividing—

17 ‘‘(A) the gross national product deflator

18 for the calendar quarter in which the disposi19 tion takes place, by

20 ‘‘(B) the gross national product deflator

21 for the calendar quarter in which the asset was

22 acquired by the taxpayer (or, if later, the cal23 endar quarter ending December 31, 1992).

24 The applicable inflation ratio shall not be taken into

25 account unless it is greater than 1. The applicable
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1 inflation ratio for any asset shall be rounded to the

2 nearest one-tenth of 1 percent.

3 ‘‘(3) GROSS NATIONAL PRODUCT

4 DEFLATOR.—The gross national product

5 deflator for any calendar quarter is the implicit

6 price deflator for the gross national product for

7 such quarter (as shown in the first revision

8 thereof).

9 ‘‘(4) SECRETARY TO PUBLISH TABLES.—

10 The Secretary shall publish tables specifying

11 the applicable inflation ratios for each calendar

12 quarter.

13 ‘‘(d) SPECIAL RULES.—For purposes of this sec14 tion—

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

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

17 a separate asset:

18 ‘‘(A) a substantial improvement to prop19 erty,

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

21 a substantial contribution to capital, and

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

23 extent that separate treatment of such portion

24 is appropriate to carry out the purposes of this

25 section.
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1 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

2 THROUGHOUT HOLDING PERIOD.—

3 ‘‘(A) IN GENERAL.—The applicable infla4 tion ratio shall be appropriately reduced for cal5 endar months at any time during which the

6 asset was not an indexed asset.

7 ‘‘(B) CERTAIN SHORT SALES.—For pur8 poses of applying subparagraph (A), an asset

9 shall be treated as not an indexed asset for any

10 short sale period during which the taxpayer or

11 the taxpayer’s spouse sells short property sub12 stantially identical to the asset. For purposes of

13 the preceding sentence, the short sale period be14 gins on the day after the substantially identical

15 property is sold and ends on the closing date

16 for the sale.

17 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU18 TIONS.—A distribution with respect to stock in a

19 corporation which is not a dividend shall be treated

20 as a disposition.

21 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

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

23 this section would create or increase a net ordinary

24 loss to which section 1231(a)(2) applies or an ordi25 nary loss to which any other provision of this title
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1 applies, such provision shall not apply. The taxpayer

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

3 an amount equal to the amount of the ordinary loss

4 to which the preceding sentence applies.

5 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

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

7 WITH RESPECT TO THE TAXPAYER.—If there has

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

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

10 date of acquisition of such asset by the taxpayer

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

12 most recent such prior application.

13 ‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli14 cation of section 341(a) (relating to collapsible cor15 porations) shall be determined without regard to this

16 section.

17 ‘‘(e) CERTAIN CONDUIT ENTITIES.—

18 ‘‘(1) REGULATED INVESTMENT COMPANIES;

19 REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST

20 FUNDS.—

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

22 investment entity shall be an indexed asset for

23 any calendar month in the same ratio as the

24 fair market value of the assets held by such en25 tity at the close of such month which are in-
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1 dexed assets bears to the fair market value of

2 all assets of such entity at the close of such

3 month.

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

5 the ratio for any calendar month determined

6 under subparagraph (A) would (but for the sub7 paragraph) be 90 percent or more, such ratio

8 for such month shall be 100 percent.

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

10 the ratio for any calendar month determined

11 under subparagraph (A) would (but for this

12 subparagraph) be 10 percent or less, such ratio

13 for such month shall be zero.

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

15 REAL ESTATE INVESTMENT TRUSTS.—Nothing

16 in this paragraph shall require a real estate in17 vestment trust to value its assets more fre18 quently than once each 36 months (except

19 where such trust ceases to exist). The ratio

20 under subparagraph (A) for any calendar

21 month for which there is no valuation shall be

22 the trustee’s good faith judgment as to such

23 valuation.
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1 ‘‘(E) QUALIFIED INVESTMENT ENTITY.—

2 For purposes of this paragraph, the term

3 ‘qualified investment entity’ means—

4 ‘‘(i) a regulated investment company

5 (within the meaning of section 851),

6 ‘‘(ii) a real estate investment trust

7 (within the meaning of section 856), and

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

9 meaning of section 584).

10 ‘‘(2) PARTNERSHIPS.—In the case of a partner11 ship, the adjustment made under subsection (a) at

12 the partnership level shall be passed through to the

13 partners.

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

15 case of an electing small business corporation, the

16 adjustment under subsection (a) at the corporate

17 level shall be passed through to the shareholders.

18 ‘‘(f) DISPOSITIONS BETWEEN RELATED PERSONS.—

19 ‘‘(1) IN GENERAL.—This section shall not apply

20 to any sale or other disposition of property between

21 related persons except to the extent that the basis

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

23 substituted basis.
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1 ‘‘(2) RELATED PERSONS DEFINED.—For pur2 poses of this section, the term ‘related persons’

3 means—

4 ‘‘(A) persons bearing a relationship set

5 forth in section 267(b), and

6 ‘‘(B) persons treated as single employer

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

8 ‘‘(g) TRANSFERS TO INCREASE INDEXING ADJUST9 MENT OR DEPRECIATION ALLOWANCE.—If any person

10 transfers cash, debt, or any other property to another per11 son and the principal purpose of such transfer is—

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

13 subsection (a), or

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

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

16 depletion, or amortization,

17 the Secretary may disallow part or all of such adjustment

18 or increase.

19 ‘‘(h) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) NET LEASE PROPERTY DEFINED.—The

21 term ‘net lease property’ means leased real property

22 where—

23 ‘‘(A) the term of the lease (taking into ac24 count options to renew) was 50 percent or more

25 of the useful life of the property, and
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1 ‘‘(B) for the period of the lease, the sum

2 of the deductions with respect to such property

3 which are allowable to the lessor solely by rea4 son of section 162 (other than rents and reim5 bursed amounts with respect to such property)

6 is 15 percent or less of the rental income pro7 duced by such property.

8 ‘‘(2) STOCK INCLUDES INTEREST IN COMMON

9 TRUST FUND.—The term ‘stock in a corporation’ in10 cludes any interest in a common fund (as defined in

11 section 584(a)).

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

13 such regulations as may be necessary or appropriate to

14 carry out the purposes of this section.’’

15 (b) CLERICAL AMENDMENT.—This table of sections

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

17 by inserting after the item relating to section 1021 the

18 following new item:

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

gain or loss.’’

19 (c) ADJUSTMENT TO APPLY FOR PURPOSES OF DE20 TERMINING EARNINGS AND PROFITS.—Subsection (f) of

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

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

23 amended by adding at the end thereof the following new

24 paragraph:
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1 ‘‘(3) EFFECT ON EARNINGS AND PROFITS OF

2 INDEXED BASIS.—For substitution of indexed basis

3 for adjusted basis in the case of the disposition of

4 certain assets after December 31, 1992, see section

5 1022(a)(1).’’

6 SEC. 605. INDEXING OF LIMITATION ON CAPITAL LOSSES

7 OF INDIVIDUALS.

8 Section 1211 (relating to limitation on capital losses)

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

10 subsection:

11 ‘‘(c) INDEXATION OF LIMITATION ON

12 NONCORPORATE TAXPAYERS.—

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

14 year beginning in a calendar year after 1993, the

15 $3,000 and $1,500 amounts under subsection (b)(1)

16 shall be increased by an amount equal to—

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

18 ‘‘(B) the applicable inflation adjustment

19 for the calendar year in which the taxable year

20 begins.

21 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—

22 For purposes of paragraph (1), the applicable infla23 tion adjustment for any calendar year is the percent24 age (if any) by which—
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1 ‘‘(A) the gross national product deflator

2 for the last calendar quarter of the preceding

3 calendar year, exceeds

4 ‘‘(B) the gross national product deflator

5 for the last calendar quarter of 1990.

6 For purposes of this paragraph, the term ‘gross na7 tional product deflator’ has the meaning given such

8 term by section 1022(c)(3).’’

9 SEC. 606. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL

10 RESIDENCE.

11 (a) IN GENERAL.—Section 121 (relating to one-time

12 exclusion of gain from sale of principal residence by indi13 vidual who has attained age 55) is amended to read as

14 follows:

15 ‘‘SEC. 121. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL

16 RESIDENCE.

17 ‘‘(a) GENERAL RULE.—Gross income does not in18 clude gain from the sale or exchange of property if such

19 property has been owned and used by the taxpayer as the

20 taxpayer’s principal residence.

21 ‘‘(b) SPECIAL RULES.—

22 ‘‘(1) TENANT-STOCKHOLDER IN COOPERATIVE

23 HOUSING CORPORATION.—For purposes of this sec24 tion, if the taxpayer holds stock as a tenant-stock25 holder (as defined in section 216) in a cooperative
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1 housing corporation (as defined in such section),

2 then the use requirements of subsection (a) shall be

3 applied to the house or apartment which the tax4 payer was entitled to occupy as such stockholder.

5 ‘‘(2) INVOLUNTARY CONVERSIONS.—For pur6 poses of this section, the destruction, theft, seizure,

7 requisition, or condemnation of property shall be

8 treated as the sale of such property.

9 ‘‘(3) PROPERTY USED IN PART AS PRINCIPAL

10 RESIDENCE.—In the case of property only a portion

11 of which has been owned and used by the taxpayer

12 as the taxpayer’s principal residence, this section

13 shall apply with respect to so much of the gain from

14 sale or exchange of such property as is determined,

15 under regulations prescribed by the Secretary, to be

16 attributable to the portion of the property so owned

17 and used by the taxpayer.’’

18 (b) CONFORMING AMENDMENTS.—

19 (1) Paragraph (3) of section 1033(h) is amend20 ed to read as follows:

21 ‘‘(3) For exclusion from gross income of gain

22 from involuntary conversion of principal residence,

23 see section 121.’’

24 (2) Subsection (l) of section 1034 is amended

25 to read as follows:
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1 ‘‘(l) TERMINATION.—This section shall not apply to

2 any sale or exchange occurring after December 31, 1992,

3 in taxable years ending after such date.’’

4 (3) Section 1038 is amended by striking sub5 section (e) and redesignating subsections (f) and (g)

6 as subsections (e) and (f), respectively.

7 (4) Paragraph (7) of section 1250(d) is amend8 ed to read as follows:

9 ‘‘(7) DISPOSITION OF PRINCIPAL RESIDENCE.—

10 Subsection (a) shall not apply to a disposition of

11 property to the extent used by the taxpayer as the

12 taxpayer’s principal residence (within the meaning of

13 section 121).’’

14 (5) Subsection (c) of section 6012 is amended

15 by striking ‘‘one-time exclusion of gain from sale of

16 principal residence by individual who has attained

17 age 55’’ and inserting ‘‘exclusion of gain from sale

18 of principal residence’’.

19 (c) CLERICAL AMENDMENT.—The table of sections

20 for part III of subchapter B of chapter 1 is amended by

21 striking the item relating to section 121 and inserting the

22 following new item:

‘‘Sec. 121. Exclusion of gain from sale of principal residence.’’

23 SEC. 607. EFFECTIVE DATES.

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

25 (b), the amendments made by this subtitle shall apply to
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1 sales or exchanges occurring after December 31, 1992, in

2 taxable years ending after such date.

3 (b) INDEXING OF LOSS LIMITATION.—The amend4 ments made by section 605 shall apply to taxable years

5 beginning after December 31, 1992.

6 TITLE VII—ENTERPRISE ZONES

7 SEC. 700. PURPOSE.

8 It is the purpose of this title to provide for the estab9 lishment of enterprise zones in order to stimulate entre10 preneurship, particularly by zone residents, the creation

11 of new jobs, particularly for disadvantaged workers and

12 long-term unemployed individuals, and to promote revital13 ization of economically distressed areas primarily by pro14 viding or encouraging—

15 (1) tax relief at the Federal, State, and local

16 levels;

17 (2) regulatory relief at the Federal, State, and

18 local levels; and

19 (3) improved local services and an increase in

20 the economic stake of enterprise zone residents in

21 their own community and its development, particu22 larly through the increased involvement of private,

23 local, and neighborhood organizations.
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1 Subtitle A—Designation of

2 Enterprise Zones

3 SEC. 701. DESIGNATION OF ZONES.

4 (a) GENERAL RULE.—Chapter 80 (relating to gen5 eral rules) is amended by adding at the end thereof the

6 following new subchapter:

7 ‘‘Subchapter D—Designation of Enterprise

8 Zones

‘‘Sec. 7880. Designation.

9 ‘‘SEC. 7880. DESIGNATION.

10 ‘‘(a) DESIGNATION OF ZONES.—

11 ‘‘(1) DEFINITION.—For purposes of this title,

12 the term ‘enterprise zone’ means any area—

13 ‘‘(A) which is nominated by one or more

14 local governments and the State or States in

15 which it is located for designation as an enter16 prise zone (hereinafter in this section referred

17 to as a ‘nominated area’), and

18 ‘‘(B) which the Secretary of Housing and

19 Urban Development, after consultation with—

20 ‘‘(i) the Secretaries of Agriculture,

21 Commerce, Labor, and the Treasury; the

22 Director of the Office of Management and

23 Budget; and the Administrator of the

24 Small Business Administration, and
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1 ‘‘(ii) in the case of an area on an In2 dian reservation, the Secretary of the Inte3 rior,

4 designates as an enterprise zone.

5 ‘‘(2) AUTHORITY TO DESIGNATE.—The Sec6 retary of Housing and Urban Development is au7 thorized to designate enterprise zones in accordance

8 with the provisions of this section.

9 ‘‘(3) LIMITATIONS ON DESIGNATIONS.—

10 ‘‘(A) PUBLICATION OF REGULATIONS.—

11 Before designating any area as an enterprise

12 zone and not later than 4 months following the

13 date of the enactment of this section, the Sec14 retary of Housing and Urban Development

15 shall prescribe by regulation, after consultation

16 with the officials described in paragraph

17 (1)(B)—

18 ‘‘(i) the procedures for nominating an

19 area, and

20 ‘‘(ii) the procedures for designation as

21 an enterprise zone, including a method for

22 comparing courses of action under sub23 section (d) proposed for nominated areas,

24 and the other factors specified in sub25 section (e).
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1 ‘‘(B) TIME LIMITATIONS.—The Secretary

2 of Housing and Urban Development shall des3 ignate nominated areas as enterprise zones only

4 during the 48-month period beginning on the

5 later of—

6 ‘‘(i) the first day of the first month

7 following the month in which the effective

8 date of the regulations described in sub9 paragraph (A) occurs, or

10 ‘‘(ii) June 30, 1992.

11 ‘‘(C) NUMBER OF DESIGNATIONS.—

12 ‘‘(i) IN GENERAL.—The Secretary of

13 Housing and Urban Development may des14 ignate—

15 ‘‘(I) not more than 50 nominated

16 areas as enterprise zones under this

17 section, and

18 ‘‘(II) not more than 15 nomi19 nated areas as enterprise zones during

20 the first 12-month period beginning

21 on the date determined under sub22 paragraph (B), not more than 30 by

23 the end of the second 12-month pe24 riod, not more than 45 by the end of

25 the third 12-month period, and not
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1 more than 50 by the end of the fourth

2 12-month period.

3 ‘‘(ii) MINIMUM DESIGNATION IN

4 RURAL AREAS.—Of the areas designated as

5 enterprise zones, at least one-third must be

6 areas that are—

7 ‘‘(I) within a local government

8 jurisdiction or jurisdictions with a

9 population of less than 50,000 (as de10 termined using the most recent census

11 data available);

12 ‘‘(II) outside of a metropolitan

13 statistical area (within the meaning of

14 section 143(k)(2)(B)); or

15 ‘‘(III) determined by the Sec16 retary of Housing and Urban Devel17 opment, after consultation with the

18 Secretary of Commerce, to be rural

19 areas.

20 ‘‘(D) PROCEDURAL RULES.—The Sec21 retary of Housing and Urban Development

22 shall not make any designations under this sec23 tion unless—
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1 ‘‘(i) the local government and the

2 State in which the nominated area is lo3 cated have the authority to—

4 ‘‘(I) nominate such area for des5 ignation as an enterprise zone,

6 ‘‘(II) make the State and local

7 commitments under subsection (d),

8 and

9 ‘‘(III) provide assurances satis10 factory to the Secretary of Housing

11 and Urban Development that such

12 commitments will be fulfilled, and

13 ‘‘(ii) a nomination therefor is submit14 ted by such State and local governments in

15 such a manner and in such form, and con16 tains such information, as the Secretary of

17 Housing and Urban Development shall

18 prescribe by regulation.

19 ‘‘(4) NOMINATION PROCESS FOR INDIAN RES20 ERVATIONS.—In the case of a nominated area on an

21 Indian reservation, the reservation governing body

22 (as determined by the Secretary of the Interior)

23 shall be deemed to be both the State and local gov24 ernments with respect to such area.
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1 ‘‘(b) TIME PERIOD FOR WHICH DESIGNATION IS IN

2 EFFECT.—

3 ‘‘(1) IN GENERAL.—Any designation of an area

4 as an enterprise zone shall remain in effect during

5 the period beginning on the date of the designation

6 and ending on the earliest of—

7 ‘‘(A) December 31 of the 24th calendar

8 year following the calendar year in which such

9 date occurs,

10 ‘‘(B) the termination date specified by the

11 State and local governments as provided in the

12 nomination submitted in accordance with sub13 section (a)(3)(D)(ii),

14 ‘‘(C) such other date as the Secretary of

15 Housing and Urban Development shall specify

16 as a condition of designation, or

17 ‘‘(D) the date upon which the Secretary of

18 Housing and Urban Development revokes such

19 designation.

20 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec21 retary of Housing and Urban Development, after

22 consultation with the officials described in subsection

23 (a)(1)(B), may revoke the designation of an area if

24 the Secretary of Housing and Urban Development

25 determines that the State or a local government in
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1 which the area is located is not complying substan2 tially with the agreed course of action for the area.

3 ‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS.—

4 ‘‘(1) IN GENERAL.—The Secretary of Housing

5 and Urban Development may designate a nominated

6 area as an enterprise zone only if it meets the re7 quirements of paragraphs (2) and (3).

8 ‘‘(2) AREA REQUIREMENTS.—A nominated area

9 meets the requirements of this paragraph if—

10 ‘‘(A) the area is within the jurisdiction of

11 the local government;

12 ‘‘(B) the boundary of the area is continu13 ous; and

14 ‘‘(C) the area—

15 ‘‘(i) has a population, as determined

16 by the most recent census data available,

17 of not less than—

18 ‘‘(I) 4,000 if any portion of such

19 area (other than a rural area de20 scribed in subsection (a)(3)(C)(ii)) is

21 located within a metropolitan statis22 tical area (as designated by the Direc23 tor of the Office of Management and

24 Budget) with a population of 50,000

25 or more; or
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1 ‘‘(II) 1,000 in any other case; or

2 ‘‘(ii) is entirely within an Indian res3 ervation (as determined by the Secretary of

4 the Interior).

5 ‘‘(3) ELIGIBILITY REQUIREMENTS.—For pur6 poses of paragraph (1), a nominated area meets the

7 requirements of this paragraph if the State or local

8 governments in which the nominated area is located

9 certifies, and the Secretary of Housing and Urban

10 Development accepts such certification, that—

11 ‘‘(A) the area is one of pervasive poverty,

12 unemployment and general distress;

13 ‘‘(B) the unemployment rate for the area,

14 as determined by the appropriate available

15 data, was not less than 1.5 times the national

16 unemployment rate for the period;

17 ‘‘(C) the poverty rate (as determined by

18 the most recent census data available) for each

19 populous census tract (or where not tracted, the

20 equivalent county division as defined by the Bu21 reau of the Census for the purpose of defining

22 poverty areas) within the area was not less than

23 1.5 times the national poverty rate for the pe24 riod to which such data relate; and
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1 ‘‘(D) the area meets at least one of the fol2 lowing criteria:

3 ‘‘(i) Not less than 70 percent of the

4 households living in the area have incomes

5 below 80 percent of the median income of

6 households of the local government (deter7 mined in the same manner as under sec8 tion 119(b)(2) of the Housing and Com9 munity Development Act of 1974).

10 ‘‘(ii) The population of the area de11 creased by 20 percent or more between

12 1970 and 1980 (as determined from the

13 most recent census available).

14 ‘‘(4) ELIGIBILITY REQUIREMENTS FOR RURAL

15 AREAS.—For purposes of paragraph (1), a nomi16 nated area that is a rural area described in sub17 section (a)(3)(C)(ii) meets the requirements of para18 graph (3) if the State and local governments in

19 which it is located certify and the Secretary, after

20 such review of supporting data as he deems appro21 priate, accepts such certification, that the area

22 meets—

23 ‘‘(A) the criteria set forth in subpara24 graphs (A) and (B) of paragraph (3); and
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1 ‘‘(B) not less than one of the criteria set

2 forth in the other subparagraphs of paragraph

3 (3).

4 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT5 MENTS.—

6 ‘‘(1) IN GENERAL.—No nominated area shall be

7 designated as an enterprise zone unless the State

8 and the local government or governments of the ju9 risdictions in which the nominated area is located

10 agree in writing that, during any period during

11 which the nominated area is an enterprise zone, such

12 governments will follow a specified course of action

13 designed to reduce the various burdens borne by em14 ployers or employees in such area.

15 ‘‘(2) COURSE OF ACTION.—The course of action

16 under paragraph (1) may include, but is not limited

17 to—

18 ‘‘(A) the reduction or elimination of tax

19 rates or fees applying within the enterprise

20 zone,

21 ‘‘(B) actions to reduce, remove, simplify,

22 or streamline governmental requirements apply23 ing within the enterprise zone,

24 ‘‘(C) an increase in the level or efficiency

25 of local services within the enterprise zone, for
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1 example, crime prevention, and drug enforce2 ment prevention and treatment,

3 ‘‘(D) involvement in the program by pri4 vate entities, organizations, neighborhood asso5 ciations, and community groups, particularly

6 those within the nominated area, including a

7 commitment from such private entities to pro8 vide jobs and job training for, and technical, fi9 nancial or other assistance to, employers, em10 ployees, and residents of the nominated area,

11 ‘‘(E) mechanisms to increase equity owner12 ship by residents and employees within the en13 terprise zone,

14 ‘‘(F) donation (or sale below market value)

15 of land and buildings to benefit low and mod16 erate income people,

17 ‘‘(G) linkages to—

18 ‘‘(i) job training,

19 ‘‘(ii) transportation,

20 ‘‘(iii) education,

21 ‘‘(iv) day care,

22 ‘‘(v) health care, and

23 ‘‘(vi) other social service support,

24 ‘‘(H) provision of supporting public facili25 ties, and infrastructure improvements,
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1 ‘‘(I) encouragement of local entrepreneur2 ship; and

3 ‘‘(J) other factors determined essential to

4 support enterprise zone activities and encourage

5 livability or quality of life.

6 ‘‘(3) LATER MODIFICATION OF A COURSE OF

7 ACTION.—The Secretary of Housing and Urban De8 velopment may by regulation prescribe procedures to

9 permit or require a course of action to be updated

10 or modified during the time that a designation is in

11 effect.

12 ‘‘(e) PRIORITY OF DESIGNATION.—In choosing nomi13 nated areas for designation, the Secretary of Housing and

14 Urban Development shall give preference to the nominated

15 areas—

16 ‘‘(1) with respect to which the strongest and

17 highest quality contributions have been promised as

18 part of the course of action, taking into consider19 ation the fiscal ability of the nominating State and

20 local governments to provide tax relief,

21 ‘‘(2) with respect to which the nominating State

22 and local governments have provided the most effec23 tive and enforceable guarantees that the proposed

24 course of action will actually be carried out during

25 the period of the enterprise zone designation,
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1 ‘‘(3) with respect to which private entities have

2 made the most substantial commitments in addi3 tional resources and contributions, including the cre4 ation of new or expanded business activities, and

5 ‘‘(4) which best exhibit such other factors deter6 mined by the Secretary of Housing and Urban De7 velopment, including relative distress, as are consist8 ent with the intent of the enterprise zone program

9 and have the greatest likelihood of success.

10 ‘‘(f) GEOGRAPHIC DISTRIBUTION.—In making des11 ignations, the Secretary of Housing and Urban Develop12 ment will take into consideration a reasonable geographic

13 distribution of enterprise zones.

14 ‘‘(g) DEFINITIONS.—For the purposes of this title—

15 ‘‘(1) GOVERNMENTS.—If more than one govern16 ment seeks to nominate an area as an enterprise

17 zone, any reference to, or requirement of, this sec18 tion shall apply to all such governments.

19 ‘‘(2) STATE.—The term ‘State’ shall also in20 clude the Commonwealth of Puerto Rico, the Virgin

21 Islands, Guam, American Samoa, the Common22 wealth of the Northern Mariana Islands, and any

23 other possession of the United States.

24 ‘‘(3) LOCAL GOVERNMENT.—The term ‘local

25 government’ means—
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1 ‘‘(A) any county, city, town, township, par2 ish, village, or other general purpose political

3 subdivision of a State,

4 ‘‘(B) any combination of political subdivi5 sions described in subparagraph (A) recognized

6 by the Secretary of Housing and Urban Devel7 opment, and

8 ‘‘(C) the District of Columbia.

9 ‘‘(h) CROSS REFERENCES FOR—

‘‘(1) definitions, see section 1391,

‘‘(2) treatment of employees in enterprise zones,

see section 1392, and

‘‘(3) treatment of investments in enterprise zones,

see sections 1393 and 1394.’’.

10 (b) CLERICAL AMENDMENT.—The table of sub11 chapters for chapter 80 is amended by adding at the end

12 thereof the following new item:

‘‘SUBCHAPTER D. Designation of enterprise zones.’’.

13 SEC. 702. REPORTING REQUIREMENTS.

14 Not later than the close of the second calendar year

15 after the calendar year in which the Secretary of Housing

16 and Urban Development first designates areas as enter17 prise zones, and at the close of each second calendar year

18 thereafter, the Secretary of Housing and Urban Develop19 ment shall submit to the Congress a report on the effects

20 of such designation in accomplishing the purposes of this

21 title.
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1 SEC. 703. INTERACTION WITH OTHER FEDERAL PROGRAMS.

2 (a) COORDINATION WITH RELOCATION ASSIST3 ANCE.—The designation of an enterprise zone under sec4 tion 7880 of the Internal Revenue Code of 1986 (as added

5 by this title) shall not—

6 (1) constitute approval of a Federal or federally

7 assisted program or project (within the meaning of

8 the Uniform Relocation Assistance and Real Prop9 erty Acquisition Policies Act of 1970 (42 U.S.C.

10 4601)); or

11 (2) entitle any person displaced from real prop12 erty located in such zone to any rights or any bene13 fits under such title.

14 (b) COORDINATION WITH ENVIRONMENTAL POL15 ICY.—Designation of an enterprise zone under section

16 7880 of the Internal Revenue Code of 1986 shall not con17 stitute a Federal action for purposes of applying the pro18 cedural requirements of the National Environmental Pol19 icy Act of 1969 (42 U.S.C. 4341) or other provisions of

20 Federal law relating to the protection of the environment.
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1 Subtitle B—Federal Income Tax

2 Incentives

3 SEC. 711. DEFINITIONS AND REGULATIONS; EMPLOYEE

4 CREDIT; CAPITAL GAIN EXCLUSION; STOCK

5 EXPENSING.

6 (a) GENERAL RULE.—Chapter 1 (relating to normal

7 tax and surtax rules) is amended by inserting after sub8 chapter T the following new subchapter:

9 ‘‘Subchapter U—Enterprise Zones

‘‘Sec. 1391. Definitions and regulatory authority.

‘‘Sec. 1392. Credit for enterprise zone employees.

‘‘Sec. 1393. Enterprise zone capital gain.

‘‘Sec. 1394. Enterprise zone stock.

10 ‘‘SEC. 1391. DEFINITIONS AND REGULATORY AUTHORITY.

11 ‘‘(a) ENTERPRISE ZONE.—

12 ‘‘(1) IN GENERAL.—For purposes of this sub13 chapter, the term ‘enterprise zone’ means any area

14 which the Secretary of Housing and Urban Develop15 ment designates pursuant to section 7880(a) as a

16 Federal enterprise zone for purposes of this title.

17 ‘‘(2) TERMINATION OF ENTERPRISE ZONE.—An

18 area will cease to constitute an enterprise zone once

19 its designation as such terminates or is revoked

20 under section 7880(b).

21 ‘‘(b) ENTERPRISE ZONE BUSINESS.—

22 ‘‘(1) IN GENERAL.—For purposes of this sub23 chapter, the term ‘enterprise zone business’ means
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1 an activity constituting the active conduct of a trade

2 or business within an enterprise zone, and with re3 spect to which—

4 ‘‘(A) at least 80 percent of the gross in5 come in each calendar year is attributable to

6 the active conduct of a trade or business within

7 an enterprise zone,

8 ‘‘(B) less than 10 percent of the property

9 (as measured by unadjusted basis) constitutes

10 stocks, securities, or property held for use by

11 customers,

12 ‘‘(C) less than 10 percent of the property

13 constitutes collectibles (as defined in section

14 408(m)(2)), unless such collectibles constitute

15 property held primarily for sale to customers in

16 the ordinary course of the active trade or

17 business,

18 ‘‘(D) substantially all of the property

19 (whether owned or leased) is located within an

20 enterprise zone, and

21 ‘‘(E) substantially all of the employees

22 work within an enterprise zone.

23 ‘‘(2) RELATED ACTIVITIES TAKEN INTO AC24 COUNT.—Except as otherwise provided in regula25 tions, all activities conducted by a taxpayer and per-
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1 sons related to the taxpayer shall be treated as one

2 activity for purposes of paragraph (1).

3 ‘‘(3) SPECIAL RULES.—

4 ‘‘(A) RENTAL REAL PROPERTY.—For pur5 poses of paragraph (1), real property located

6 within an enterprise zone and held for use by

7 customers other than related persons shall be

8 treated as the active conduct of a trade or busi9 ness for purposes of paragraph (1)(A) and as

10 not subject to paragraph (1)(B).

11 ‘‘(B) TERMINATION OF ENTERPRISE ZONE

12 BUSINESS.—An activity shall cease to be an en13 terprise zone business if—

14 ‘‘(i) the designation of the enterprise

15 zone in which the activity is conducted ter16 minates or is revoked pursuant to section

17 7880(b);

18 ‘‘(ii) more than 50 percent (by value)

19 of the activity’s property or services are

20 obtained from related persons other than

21 enterprise zone businesses; or

22 ‘‘(iii) more than 50 percent of the ac23 tivity’s gross income is attributable to

24 property or services provided to related
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1 persons other than enterprise zone busi2 nesses.

3 ‘‘(c) ENTERPRISE ZONE PROPERTY.—

4 ‘‘(1) IN GENERAL.—For purposes of this sub5 chapter, the term ‘enterprise zone property’ means

6 any property used in the active conduct of an enter7 prise zone business.

8 ‘‘(2) TERMINATION OF ENTERPRISE ZONE.—

9 The treatment of property as enterprise zone prop10 erty under subparagraph (A) shall not terminate

11 upon the termination or revocation of the designa12 tion of the enterprise zone in which the property is

13 located, but instead shall terminate immediately

14 after the first sale or exchange of such property oc15 curring after the expiration or revocation.

16 ‘‘(d) RELATED PERSONS.—For purposes of this sub17 chapter, a person shall be treated as related to another

18 person if—

19 ‘‘(1) the relationship of such persons is de20 scribed in section 267(b) or 707(b)(1), or

21 ‘‘(2) such persons are engaged in trades or

22 businesses under common control (within the mean23 ing of subsections (a) and (b) of section 52).
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1 For purposes of paragraph (1), in applying section 267(b)

2 or 707(b)(1), ‘33 percent’ shall be substituted for ‘50 per3 cent’.

4 ‘‘(e) REGULATORY AUTHORITY.—The Secretary shall

5 prescribe such regulations as may be necessary or appro6 priate to carry out the purposes of title VI of the Family

7 and Economic Recovery Act, including—

8 ‘‘(1) providing that Federal tax relief is un9 available to an activity that does not stimulate em10 ployment in, or revitalization of, enterprise zones,

11 ‘‘(2) providing for appropriate coordination with

12 other Federal programs that, in combination, might

13 enable activity within enterprise zones to be more

14 than 100 percent subsidized by the Federal govern15 ment, and

16 ‘‘(3) preventing the avoidance of the rules in

17 this subchapter.

18 ‘‘SEC. 1392. CREDIT FOR ENTERPRISE ZONE EMPLOYEES.

19 ‘‘(a) GENERAL RULE.—In the case of a taxpayer who

20 is an enterprise zone employee, there shall be allowed as

21 a credit against the tax imposed by this subtitle for the

22 taxable year an amount equal to 5 percent of so much

23 of the qualified wages of the taxpayer for the taxable year

24 as does not exceed $10,500.

25 ‘‘(b) DEFINITIONS.—For purposes of this section—
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1 ‘‘(1) ENTERPRISE ZONE EMPLOYEE.—The term

2 ‘enterprise zone employee’ means an individual—

3 ‘‘(A) performing services during the tax4 able year that are directly related to the con5 duct of an enterprise zone business,

6 ‘‘(B) substantially all of the services de7 scribed in paragraph (1)(A) are performed

8 within an enterprise zone, and

9 ‘‘(C) the employer for whom the services

10 described in paragraph (1)(A) are performed is

11 not the Federal government, any State govern12 ment or subdivision thereof, or any local gov13 ernment.

14 ‘‘(2) WAGES.—The term ‘wages’ has the mean15 ing given to such term by subsection (b) of section

16 3306 (determined without regard to any dollar limi17 tation contained in such subsection).

18 ‘‘(3) QUALIFIED WAGES.—The term ‘qualified

19 wages’ means all wages of the taxpayer, to the ex20 tent attributable to services described in paragraph

21 (1).

22 ‘‘(c) LIMITATIONS.—

23 ‘‘(1) PHASE-OUT OF CREDIT.—The amount of

24 the credit allowable to a taxpayer under subsection
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1 (a) for any taxable year shall not exceed the excess

2 (if any) of—

3 ‘‘(A) $525, over

4 ‘‘(B) 10.5 percent of so much of the tax5 payer’s total wages (whether or not constituting

6 qualified wages) as exceeds $20,000.

7 ‘‘(2) PARTIAL TAXABLE YEAR.—If designation

8 of an area as an enterprise zone occurs, expires, or

9 is revoked pursuant to section 7880 on a date other

10 than the first or last day of the taxable year of the

11 taxpayer, or in the case of a short taxable year, the

12 limitations specified in subsection (c)(1) shall be ad13 justed on a pro rata basis (based upon the number

14 of days).

15 ‘‘(d) REDUCTION OF CREDIT TO TAXPAYERS SUB16 JECT TO ALTERNATIVE MINIMUM TAX.—The credit al17 lowed under this section for the taxable year shall be re18 duced by the amount (if any) of tax imposed by section

19 55 (relating to the alternative minimum tax) with respect

20 to such taxpayer for such year.

21 ‘‘(e) CREDIT TREATED AS SUBPART C CREDIT.—For

22 purposes of this title, the credit allowed under subsection

23 (a) shall be treated as a credit allowed under subpart C

24 of part IV of subchapter A of this chapter.
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1 ‘‘SEC. 1393. ENTERPRISE ZONE CAPITAL GAIN.

2 ‘‘(a) GENERAL RULE.—Gross income does not in3 clude the amount of any gain constituting enterprise zone

4 capital gain.

5 ‘‘(b) DEFINITION.—For purposes of this section—

6 ‘‘(1) IN GENERAL.—The term ‘enterprise zone

7 capital gain’ means gain—

8 ‘‘(A) treated as long-term capital gain,

9 ‘‘(B) allocable in accordance with the rules

10 under subsection (b)(5) of section 338 to the

11 sale or exchange of enterprise zone property,

12 and

13 ‘‘(C) properly attributable to periods of use

14 in an enterprise zone business.

15 ‘‘(2) LIMITATIONS.—Enterprise zone capital

16 gain does not include any gain attributable to—

17 ‘‘(A) the sale or exchange of property not

18 constituting enterprise zone property with re19 spect to the taxpayer throughout the period of

20 twenty-four full calendar months immediately

21 preceding the sale or exchange,

22 ‘‘(B) any collectibles (as defined in section

23 408(m)), or

24 ‘‘(C) sales or exchanges to persons con25 trolled by the same interests.
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1 ‘‘(c) BASIS.—Amounts excluded from gross income

2 pursuant to subsection (a) shall not be applied in reduc3 tion to the basis of any property held by the taxpayer.

4 ‘‘SEC. 1394. ENTERPRISE ZONE STOCK.

5 ‘‘(a) GENERAL RULE.—At the election of any individ6 ual, the aggregate amount paid by such taxpayer during

7 the taxable year for the purchase of enterprise zone stock

8 on the original issue of such stock by a qualified issuer

9 shall be allowed as a deduction.

10 ‘‘(b) LIMITATIONS.—

11 ‘‘(1) CEILING.—The maximum amount allowed

12 as a deduction under subsection (a) to a taxpayer

13 shall not exceed $100,000 for any taxable year, nor

14 $500,000 during the taxpayer’s lifetime.

15 ‘‘(A) EXCESS AMOUNTS.—If the amount

16 otherwise deductible by any person under sub17 section (a) exceeds the limitation under this

18 paragraph (1)—

19 ‘‘(i) the amount of such excess shall

20 be treated as an amount paid in the next

21 taxable year, and

22 ‘‘(ii) the deduction allowed for any

23 taxable year shall be allocated among the

24 enterprise zone stock purchased by such
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1 person in accordance with the purchase

2 price per share.

3 ‘‘(2) RELATED PERSON.—

4 ‘‘(A) IN GENERAL.—The taxpayer and all

5 individuals related to the taxpayer shall be

6 treated as one person for purposes of the limi7 tations described in subsection (b)(1).

8 ‘‘(B) EXCESS AMOUNTS.—The limitations

9 described in subsection (b)(1) shall be allocated

10 among the taxpayer and related persons in ac11 cordance with their respective purchases of en12 terprise zone stock.

13 ‘‘(3) PARTIAL TAXABLE YEAR.—If designation

14 of an area as an enterprise zone occurs, expires, or

15 is revoked pursuant to section 7880 on a date other

16 than the first or last day of the taxable year of the

17 taxpayer, or in the case of a short taxable year, the

18 limitations specified in subsection (b)(1) shall be ad19 justed on a pro rata basis (based upon the number

20 of days).

21 ‘‘(c) DISPOSITIONS OF STOCK.—

22 ‘‘(1) GAIN TREATED AS ORDINARY INCOME.—

23 Except as otherwise provided in regulations, if a tax24 payer disposes of any enterprise zone stock with re25 spect to which a deduction was allowed under sub-
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1 section (a), the amount realized upon such disposi2 tion shall be treated as ordinary income and recog3 nized notwithstanding any other provision of this

4 subtitle.

5 ‘‘(2) INTEREST CHARGED IF DISPOSITION

6 WITHIN 5 YEARS OF PURCHASE.—

7 ‘‘(A) IN GENERAL.—If a taxpayer disposes

8 of any enterprise zone stock before the end of

9 the 5-year period beginning on the date such

10 stock was purchased by the taxpayer, the tax

11 imposed by this chapter for the taxable year in

12 which such disposition occurs shall be increased

13 by the amount determined under subparagraph

14 (B).

15 ‘‘(B) ADDITIONAL AMOUNT.—For purposes

16 of subparagraph (A), the additional amount

17 shall be equal to the amount of interest (deter18 mined at the rate applicable under section

19 6621(a)(2)) that would accrue—

20 ‘‘(i) during the period beginning on

21 the date the stock was purchased by the

22 taxpayer and ending on the date such

23 stock was disposed of by the taxpayer,

24 ‘‘(ii) on an amount equal to the aggre25 gate decrease in tax of the taxpayer result-
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1 ing from the deduction allowed under this

2 subsection (a) with respect to the stock so

3 disposed of.

4 ‘‘(d) DISQUALIFICATION.—

5 ‘‘(1) ISSUER OR STOCK CEASES TO QUALIFY.—

6 If a taxpayer elects the deduction under subsection

7 (a) with respect to enterprise zone stock, and ei8 ther—

9 ‘‘(A) the issuer with respect to which the

10 election was made ceases to be a qualified is11 suer, or

12 ‘‘(B) the proceeds from the issuance of the

13 taxpayer’s enterprise zone stock fail or other14 wise cease to be invested by the issuer in enter15 prise zone property, then, notwithstanding any

16 provision of this subtitle other than paragraph

17 (2) to the contrary, the taxpayer shall recognize

18 as ordinary income the amount of the deduction

19 allowed under subsection (a) with respect to the

20 issuer’s enterprise zone stock.

21 ‘‘(2) SPECIAL RULES.—

22 ‘‘(A) LIQUIDATION.—Where enterprise

23 zone property acquired with proceeds from the

24 issuance of enterprise zone stock is sold or ex25 changed pursuant to a plan of complete liquida-
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1 tion, the treatment described in paragraph (1)

2 shall be inapplicable.

3 ‘‘(B) TERMINATION OF ENTERPRISE

4 ZONE.—The treatment of an activity as an en5 terprise zone business shall not cease for pur6 poses of paragraph (1) solely by reason of the

7 termination or revocation of the designation of

8 the enterprise zone with respect to the activity.

9 ‘‘(C) PARTIAL DISQUALIFICATION.—Where

10 some, but not all, of the property acquired by

11 the issuer with the proceeds of enterprise zone

12 stock ceases to constitute enterprise zone prop13 erty, the treatment described in paragraph (1)

14 shall be modified as follows—

15 ‘‘(i) the total amount recognized as

16 ordinary income by all shareholders of the

17 issuer shall be limited to an amount of de18 duction allowed up to the unadjusted basis

19 of property ceasing to constitute enterprise

20 zone property,

21 ‘‘(ii) the amount recognized shall be

22 allocated among enterprise zone stock with

23 respect to which the election in subsection

24 (a) was made in the reverse order in which

25 such stock was issued, and
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1 ‘‘(iii) the amount recognized shall be

2 apportioned among taxpayers having made

3 the election in subsection (a) in the ratios

4 in which the stock described in paragraph

5 (2)(C)(ii) was purchased.

6 ‘‘(3) ADDITIONAL AMOUNT.—If income is rec7 ognized pursuant to paragraph (1) at any time be8 fore the close of the 5th calendar year ending after

9 the date the enterprise zone stock was purchased,

10 the tax imposed by this chapter with respect to such

11 income shall be increased by an amount equal to the

12 amount of interest (determined at the rate applica13 ble under section 6621(a)(2)) that would accrue—

14 ‘‘(A) during the period beginning on the

15 date the stock was purchased by the taxpayer

16 and ending on the date of the disqualification

17 event described in paragraph (1),

18 ‘‘(B) on an amount equal to the aggregate

19 decrease in tax of the taxpayer resulting from

20 the deduction allowed under this subsection (a)

21 with respect to the stock so disqualified.

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

23 ‘‘(1) ENTERPRISE ZONE STOCK.—The term ‘en24 terprise zone stock’ means common stock issued by

25 a qualified issuer, but only to the extent that the
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1 amount of proceeds of such issuance are used by

2 such issuer no later than twelve months followed is3 suance to acquire and maintain an equal amount of

4 newly acquired enterprise zone property.

5 ‘‘(2) QUALIFIED ISSUER.—

6 ‘‘(A) IN GENERAL.—The term ‘qualified is7 suer’ means any subchapter C corporation

8 which—

9 ‘‘(i) does not have more than one

10 class of stock,

11 ‘‘(ii) is engaged solely in the conduct

12 of one or more enterprise zone businesses,

13 ‘‘(iii) does not own or lease more than

14 $50,000,000 of total property (including

15 money), as measured by the unadjusted

16 basis of the property, and

17 ‘‘(iv) more than 20 percent of the

18 total voting power and 20 percent of the

19 total value of the stock of such corporation

20 is owned by individuals, partnerships, es21 tates or trusts.

22 ‘‘(B) LIMITATION ON TOTAL ISSUANCES.—

23 A qualified issuer may issue no more than an

24 aggregate of $50,000,000 of enterprise zone

25 stock.
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1 ‘‘(C) AGGREGATION.—For purposes of ap2 plying the limitations under paragraph (2), the

3 issuer and all related persons shall be treated

4 as one person.

5 ‘‘(3) AMOUNT PAID.—For purposes of sub6 section (a), the amount ‘paid’ by a taxpayer for any

7 taxable year shall not include the issuance of evi8 dences of indebtedness of the taxpayer (whether or

9 not such indebtedness is guaranteed by another per10 son), nor amounts paid by the taxpayer after the

11 close of the taxable year.

12 ‘‘(f) ISSUANCES IN EXCHANGE FOR PROPERTY.—If

13 enterprise zone stock is issued in exchange for property,

14 then notwithstanding any provision of subchapter C of this

15 chapter to the contrary—

16 ‘‘(1) the issuance shall be treated for purposes

17 of this subtitle as the sale of the property at its then

18 fair market value to the corporation, and a contribu19 tion to the corporation of the proceeds immediately

20 thereafter in exchange for the enterprise zone stock,

21 and

22 ‘‘(2) the issuer’s basis for the property shall be

23 equal to the fair market value of such property at

24 the time of issuance.
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1 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub2 title, if a taxpayer elects the deduction under subsection

3 (a), the taxpayer’s basis (without regard to this sub4 section) for the enterprise zone stock with respect to such

5 election shall be reduced by the deduction allowed or allow6 able.

7 ‘‘(h) LIMITATIONS ON ASSESSMENT AND COLLEC8 TION.—If a taxpayer elects the deduction under subsection

9 (a) for any taxable year, then—

10 ‘‘(1) the period for assessment and collection of

11 any deficiency attributable to any part of the deduc12 tion shall not expire before one year following expi13 ration of such period of the qualified issuer that in14 cludes the circumstances giving rise to the defi15 ciency, and

16 ‘‘(2) such deficiency may be assessed before ex17 piration of the period described in paragraph (1)

18 notwithstanding any provisions of this subtitle to the

19 contrary.

20 ‘‘(i) CROSS REFERENCE.—

‘‘For treatment of the deduction under subsection

(a) for purposes of the alternative minimum tax, see

section 56.’’.

21 (b) TECHNICAL AMENDMENT.—Subsection (a) of

22 section 1016 (relating to adjustments to basis) is amended

23 by striking out ‘‘and’’ at the end of paragraph (23); by

24 striking out the period at the end of paragraph (24) and
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1 inserting in lieu thereof ‘‘; and’’; and by adding at the

2 end thereof the following new paragraph:

3 ‘‘(25) to the extent provided in section 1394(g),

4 in the case of stock with respect to which a deduc5 tion was allowed or allowable under section

6 1394(a).’’.

7 (c) CLERICAL AMENDMENT.—The table of sub8 chapters for chapter 1 is amended by inserting after the

9 item relating to subchapter T the following new item:

‘‘SUBCHAPTER U. Enterprise zones.’’.

10 SEC. 712. CORPORATE ALTERNATIVE MINIMUM TAX.

11 Section 56(g)(4)(B) (relating to adjustments based

12 on adjusted current earnings of corporations) is amended

13 by adding the following new clause at the end thereof:

14 ‘‘(iii) EXCLUSION OF ENTERPRISE

15 ZONE CAPITAL GAIN.—Clause (i) shall not

16 apply in the case of any enterprise zone

17 capital gain (as defined in section

18 1393(b)), and such gain shall not be in19 cluded in income for purposes of comput20 ing alternative minimum taxable income.’’

21 SEC. 713. ADJUSTED GROSS INCOME DEFINED.

22 Section 62(a) (relating to the definition of adjusted

23 gross income) is amended by inserting after paragraph

24 (13) the following new paragraph:
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1 ‘‘(14) ENTERPRISE ZONE STOCK.—The deduc2 tion allowed by section 1394.’’.

3 SEC. 714. EFFECTIVE DATE.

4 The amendments made by this subtitle shall apply to

5 taxable years ending after December 31, 1993.

6 Subtitle C—Regulatory Flexibility

7 SEC. 721. DEFINITION OF SMALL ENTITIES IN ENTERPRISE

8 ZONE FOR PURPOSES OF ANALYSIS OF REGU9 LATORY FUNCTIONS.

10 Section 601 of title 5, United States Code, is amend11 ed by—

12 (1) striking out ‘‘and’’ at the end of paragraph

13 (5); and

14 (2) striking out paragraph (6) and inserting in

15 lieu thereof the following:

16 ‘‘(6) the term ‘small entity’ means—

17 ‘‘(A) a small business, small organization,

18 or small governmental jurisdiction defined in

19 paragraphs (3), (4), and (5) of this section, re20 spectively; and

21 ‘‘(B) any qualified enterprise zone busi22 ness; any unit of government that nominated an

23 area which the Secretary of Housing and Urban

24 Development designates as an enterprise zone

25 (within the meaning of section 7880 of the In-
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1 ternal Revenue Code of 1986) that has a rule

2 pertaining to the carrying out of any project,

3 activity, or undertaking within such zone; and

4 any not-for-profit enterprise carrying out a sig5 nificant portion of its activities within such a

6 zone; and

7 ‘‘(7) the term ‘qualified enterprise zone busi8 ness’ means any person, corporation, or other en9 tity—

10 ‘‘(A) which is engaged in the active con11 duct of a trade or business within an enterprise

12 zone (within the meaning of section 7880 of the

13 Internal Revenue Code of 1986); and

14 ‘‘(B) for whom at least 50 percent of its

15 employees are qualified employees (within the

16 meaning of section 1392(b)(1) of such Code).’’

17 SEC. 722. WAIVER OR MODIFICATION OF AGENCY RULES IN

18 ENTERPRISE ZONES.

19 (a) Chapter 6 of title 5, United States Code, is

20 amended by redesignating sections 611 and 612 as sec21 tions 612 and 613, respectively, and inserting the follow22 ing new section immediately after section 610:
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1 ‘‘§ 611. Waiver or modification of agency rules in en2 terprise zones

3 ‘‘(a) Upon the written request of any government

4 which nominated an area that the Secretary of Housing

5 and Urban Development has designated as an enterprise

6 zone under section 7880 of the Internal Revenue Code of

7 1986, an agency is authorized, in order to further the job

8 creation, community development, or economic revitaliza9 tion objectives with respect to such zone, to waive or mod10 ify all or part of any rule which it has authority to promul11 gate, as such rule pertains to the carrying out of projects,

12 activities, or undertakings within such zone.

13 ‘‘(b) Nothing in this section shall authorize an agency

14 to waive or modify any rule adopted to carry out a statute

15 or Executive order which prohibits, or the purpose of

16 which is to protect persons against, discrimination on the

17 basis of race, color, religion, sex, familial status, national

18 origin, age, or handicap.

19 ‘‘(c) A request under subsection (a) shall specify the

20 rule or rules to be waived or modified and the change pro21 posed, and shall briefly describe why the change would

22 promote the achievement of the job creation, community

23 development, or economic revitalization objectives of the

24 enterprise zone. If such a request is made to any agency

25 other than the Department of Housing and Urban Devel26 opment, the requesting government shall send a copy of
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1 the request to the Secretary of Housing and Urban Devel2 opment at the time the request is made.

3 ‘‘(d) In considering a request, the agency shall weigh

4 the extent to which the proposed change is likely to further

5 job creation, community development, or economic revital6 ization within the enterprise zone against the effect the

7 change is likely to have on the underlying purposes of ap8 plicable statutes in the geographic area which would be

9 affected by the change. The agency shall approve the re10 quest whenever it finds, in its discretion, that the public

11 interest which the proposed change would serve in further12 ing such job creation, community development, or eco13 nomic revitalization outweighs the public interest which

14 continuation of the rule unchanged would serve. The agen15 cy shall not approve any request to waive or modify a rule

16 if that waiver or modification would—

17 ‘‘(1) violate a statutory requirement (including

18 any requirements of the Fair Labor Standards Act

19 of 1938 (52 Stat. 1060; 29 U.S.C. 201 et seq.)); or

20 ‘‘(2) be likely to present a significant risk to the

21 public health, including environmental or occupa22 tional health or safety, or of environmental pollution.

23 ‘‘(e) If a request is disapproved, the agency shall in24 form all the requesting governments, and the Department

25 of Housing and Urban Development, in writing of the rea-
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1 sons therefor and shall, to the maximum extent possible,

2 work with such governments to develop an alternative,

3 consistent with the standards contained in subsection (d).

4 ‘‘(f) Agencies shall discharge their responsibilities

5 under this section in an expeditious manner, and shall

6 make a determination on requests not later than 90 days

7 after their receipt.

8 ‘‘(g) A waiver or modification of a rule under sub9 section (a) shall not be considered to be a rule, rule10 making, or regulation under chapter 5 of this title. To fa11 cilitate reaching its decision on any requested waiver or

12 modification, the agency may seek the views of interested

13 parties and, if the views are to be sought, determine how

14 they should be obtained and to what extent, if any, they

15 should be taken into account in considering the request.

16 The agency shall publish a notice in the Federal Register

17 stating any waiver or modification of a rule under this

18 section, the time such waiver or modification takes effect

19 and its duration, and the scope of applicability of such

20 waiver or modification.

21 ‘‘(h) In the event that an agency proposes to amend

22 a rule for which a waiver or modification under this sec23 tion is in effect, the agency shall not change the waiver

24 or modification to impose additional requirements unless

25 it determines, consistent with standards contained in sub-
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1 section (d), that such action is necessary. Such determina2 tions shall be published with the proposal to amend such

3 rule.

4 ‘‘(i) No waiver or modification of a rule under this

5 section shall remain in effect with respect to an enterprise

6 zone after the enterprise zone designation has expired or

7 has been revoked.

8 ‘‘(j) For purposes of this section, the term ‘rule’

9 means (1) any rule as defined in section 551(4) of this

10 title or (2) any rulemaking conducted on the record after

11 opportunity for an agency hearing pursuant to sections

12 556 and 557 of this title.’’.

13 (b) The analysis for chapter 6 of title 5, United

14 States Code, is amended by redesignating the items relat15 ing to sections 611 and 612 as items relating to sections

16 612 and 613, respectively, and by inserting after the item

17 relating to section 610 the following new item:

‘‘611. Waiver or modification of agency rules in enterprise

zones.’’.

18 (c) Section 601(2) of such title 5 is amended by in19 serting ‘‘(except for purposes of section 611’’ immediately

20 before ‘‘means’’.

21 (d) Section 613 of such title 5, as redesignated by

22 subsection (a), is amended—

23 (1) in subsection (a) by inserting ‘‘(except sec24 tion 611)’’ immediately after ‘‘chapter’’; and
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1 (2) in subsection (b) by inserting ‘‘as defined in

2 section 601(2)’’ immediately before the period at the

3 end of the first sentence.

4 SEC. 723. FEDERAL AGENCY SUPPORT OF ENTERPRISE

5 ZONES.

6 In order to maximize all agencies’ support of enter7 prise zones, the Secretary of Housing and Urban Develop8 ment is authorized to convene regional and local coordinat9 ing councils of any appropriate agencies to assist State

10 and local governments to achieve the objectives agreed to

11 in the course of action under section 7880 of the Internal

12 Revenue Code of 1986.

13 Subtitle D—Establishment of For14 eign-Trade Zones in Enterprise

15 Zones

16 SEC. 731. FOREIGN-TRADE ZONE PREFERENCES.

17 (a) PREFERENCE IN ESTABLISHMENT OF FOREIGN18 TRADE ZONES IN REVITALIZATION AREAS.—In process19 ing applications for the establishment of foreign-trade

20 zones pursuant to an Act ‘‘To provide for the establish21 ment, operation, and maintenance of foreign-trade zones

22 in ports of entry of the United States, to expedite and

23 encourage foreign commerce, and for other purposes’’, ap24 proved June 18, 1934 (48 Stat. 998), the Foreign-Trade

25 Zone Board shall consider on a priority basis and expedite,
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1 to the maximum extent possible, the processing of any ap2 plication involving the establishment of a foreign-trade

3 zone within an enterprise zone designated pursuant to sec4 tion 7880 of the Internal Revenue Code of 1986.

5 (b) APPLICATION PROCEDURE.—In processing appli6 cations for the establishment of ports of entry pursuant

7 to ‘‘An Act making appropriations for sundry civil ex8 penses of the Government for the fiscal year ending June

9 thirtieth, nineteen hundred and fifteen, and for other pur10 poses’’, approved August 1, 1914 (38 Stat. 609), the Sec11 retary of the Treasury shall consider on a priority basis

12 and expedite, to the maximum extent possible, the process13 ing of any application involving the establishment of a port

14 of entry which is necessary to permit the establishment

15 of a foreign-trade zone within an enterprise zone so des16 ignated.

17 (c) APPLICATION EVALUATION.—In evaluating appli18 cations for the establishment of foreign-trade zones and

19 ports of entry in connection with enterprise zones so des20 ignated, the Foreign-Trade Zone Board and the Secretary

21 of the Treasury shall approve the applications, to the max22 imum extent practicable, consistent with their respective

23 statutory responsibilities.

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