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person who would be the tax matters partner but for
the fact that, at the time that the agreement is exe-
cuted, the person is a debtor in a bankruptcy proceed-
ing under title 11 of the United States Code, such
agreement shall be binding on all partners in the
partnership unless the Secretary has been notified of
the bankruptcy proceeding in accordance with regula-
tions prescribed by the Secretary.’’.
(d) EFFECTIVE DATES.—
(1) SUBSECTIONS (a) AND (b).—The amend-
ments made by subsections (a) and (b) shall apply to
partnership taxable years with respect to which the
period under section 6229 of the Internal Revenue
Code of 1986 for assessing tax has not expired on or
before the date of the enactment of this Act.
(2) SUBSECTION (c).—The amendment made by
subsection (c) shall apply to agreements entered into
after the date of the enactment of this Act.
SEC. 1034. EXPANSION OF SMALL PARTNERSHIP EXCEP-
TION.
(a) IN GENERAL.—Clause (i) of section 6231(a)(1)(B)
(relating to exception for small partnerships) is amended
to read as follows:
‘‘(i) IN GENERAL.—The term ‘partner-
ship’ shall not include any partnership hav-
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ing 10 or fewer partners each of whom is an
individual (other than a nonresident alien),
a C corporation, or an estate of a deceased
partner. For purposes of the preceding sen-
tence, a husband and wife (and their es-
tates) shall be treated as 1 partner.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
SEC. 1035. EXCLUSION OF PARTIAL SETTLEMENTS FROM 1-
YEAR LIMITATION ON ASSESSMENT.
(a) IN GENERAL.—Subsection (f) of section 6229 (re-
lating to items becoming nonpartnership items) is amend-
ed—
(1) by striking ‘‘(f) ITEMS BECOMING NONPART-
NERSHIP ITEMS.—If’’ and inserting the following:
‘‘(f) SPECIAL RULES.—
‘‘(1) 
ITEMS
BECOMING
NONPARTNERSHIP
ITEMS.—If’’,
(2) by moving the text of such subsection 2 ems
to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) SPECIAL RULE FOR PARTIAL SETTLEMENT
AGREEMENTS.—If a partner enters into a settlement
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agreement with the Secretary with respect to the
treatment of some of the partnership items in dispute
for a partnership taxable year but other partnership
items for such year remain in dispute, the period of
limitations for assessing any tax attributable to the
settled items shall be determined as if such agreement
had not been entered into.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to settlements entered into after the date
of the enactment of this Act.
SEC. 1036. EXTENSION OF TIME FOR FILING A REQUEST
FOR ADMINISTRATIVE ADJUSTMENT.
(a) IN GENERAL.—Section 6227 (relating to adminis-
trative adjustment requests) is amended by redesignating
subsections (b) and (c) as subsections (c) and (d), respec-
tively, and by inserting after subsection (a) the following
new subsection:
‘‘(b) SPECIAL RULE IN CASE OF EXTENSION OF PE-
RIOD OF LIMITATIONS UNDER SECTION 6229.—The period
prescribed by subsection (a)(1) for filing of a request for
an administrative adjustment shall be extended—
‘‘(1) for the period within which an assessment
may be made pursuant to an agreement (or any ex-
tension thereof) under section 6229(b), and
‘‘(2) for 6 months thereafter.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in the amendments
made by section 402 of the Tax Equity and Fiscal Respon-
sibility Act of 1982.
SEC. 1037. AVAILABILITY OF INNOCENT SPOUSE RELIEF IN
CONTEXT OF PARTNERSHIP PROCEEDINGS.
(a) IN GENERAL.—Subsection (a) of section 6230 is
amended by adding at the end the following new paragraph:
‘‘(3) SPECIAL RULE IN CASE OF ASSERTION BY
PARTNER’S SPOUSE OF INNOCENT SPOUSE RELIEF.—
‘‘(A) Notwithstanding section 6404(b), if the
spouse of a partner asserts that section 6013(e)
applies with respect to a liability that is attrib-
utable to any adjustment to a partnership item,
then such spouse may file with the Secretary
within 60 days after the notice of computational
adjustment is mailed to the spouse a request for
abatement of the assessment specified in such no-
tice. Upon receipt of such request, the Secretary
shall abate the assessment. Any reassessment of
the tax with respect to which an abatement is
made under this subparagraph shall be subject to
the deficiency procedures prescribed by sub-
chapter B. The period for making any such reas-
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sessment shall not expire before the expiration of
60 days after the date of such abatement.
‘‘(B) If the spouse files a petition with the
Tax Court pursuant to section 6213 with respect
to the request for abatement described in sub-
paragraph (A), the Tax Court shall only have ju-
risdiction pursuant to this section to determine
whether the requirements of section 6013(e) have
been satisfied. For purposes of such determina-
tion, the treatment of partnership items under
the settlement, the final partnership administra-
tive adjustment, or the decision of the court
(whichever is appropriate) that gave rise to the
liability in question shall be conclusive.
‘‘(C) Rules similar to the rules contained in
subparagraphs (B) and (C) of paragraph (2)
shall apply for purposes of this paragraph.’’.
(b) CLAIMS FOR REFUND.—Subsection (c) of section
6230 is amended by adding at the end the following new
paragraph:
‘‘(5) RULES FOR SEEKING INNOCENT SPOUSE RE-
LIEF.—
‘‘(A) IN GENERAL.—The spouse of a partner
may file a claim for refund on the ground that
the Secretary failed to relieve the spouse under
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section 6013(e) from a liability that is attrib-
utable to an adjustment to a partnership item.
‘‘(B) TIME FOR FILING CLAIM.—Any claim
under subparagraph (A) shall be filed within 6
months after the day on which the Secretary
mails to the spouse the notice of computational
adjustment referred to in subsection (a)(3)(A).
‘‘(C) SUIT IF CLAIM NOT ALLOWED.—If the
claim under subparagraph (B) is not allowed,
the spouse may bring suit with respect to the
claim within the period specified in paragraph
(3).
‘‘(D) PRIOR
DETERMINATIONS
ARE
BIND-
ING.—For purposes of any claim or suit under
this paragraph, the treatment of partnership
items under the settlement, the final partnership
administrative adjustment, or the decision of the
court (whichever is appropriate) that gave rise to
the liability in question shall be conclusive.’’.
(c) TECHNICAL AMENDMENTS.—
(1) Paragraph (1) of section 6230(a) is amended
by striking ‘‘paragraph (2)’’ and inserting ‘‘para-
graph (2) or (3)’’.
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(2) Subsection (a) of section 6503 is amended by
striking ‘‘section 6230(a)(2)(A)’’ and inserting ‘‘para-
graph (2)(A) or (3) of section 6230(a)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the amendments
made by section 402 of the Tax Equity and Fiscal Respon-
sibility Act of 1982.
SEC. 1038. DETERMINATION OF PENALTIES AT PARTNER-
SHIP LEVEL.
(a) IN GENERAL.—Section 6221 (relating to tax treat-
ment determined at partnership level) is amended by strik-
ing ‘‘item’’ and inserting ‘‘item (and the applicability of
any penalty, addition to tax, or additional amount which
relates to an adjustment to a partnership item)’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (f) of section 6226 is amended—
(A) by striking ‘‘relates and’’ and inserting
‘‘relates,’’, and
(B) by inserting before the period ‘‘, and the
applicability of any penalty, addition to tax, or
additional amount which relates to an adjust-
ment to a partnership item’’.
(2) Clause (i) of section 6230(a)(2)(A) is amend-
ed to read as follows:
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‘‘(i) affected items which require part-
ner level determinations (other than pen-
alties, additions to tax, and additional
amounts that relate to adjustments to part-
nership items), or’’.
(3)(A) Subparagraph (A) of section 6230(a)(3),
as added by section 14317, is amended by inserting
‘‘(including any liability for any penalty, addition to
tax, or additional amount relating to such adjust-
ment)’’ after ‘‘partnership item’’.
(B) Subparagraph (B) of such section is amend-
ed by inserting ‘‘(and the applicability of any pen-
alties, additions to tax, or additional amounts)’’ after
‘‘partnership items’’.
(C) Subparagraph (A) of section 6230(c)(5), as
added by section 14317, is amended by inserting be-
fore the period ‘‘(including any liability for any pen-
alties, additions to tax, or additional amounts relat-
ing to such adjustment)’’.
(D) Subparagraph (D) of section 6230(c)(5), as
added by section 14317, is amended by inserting
‘‘(and the applicability of any penalties, additions to
tax, or additional amounts)’’ after ‘‘partnership
items’’.
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(4) Paragraph (1) of section 6230(c) is amended
by striking ‘‘or’’ at the end of subparagraph (A), by
striking the period at the end of subparagraph (B)
and inserting ‘‘, or’’, and by adding at the end the
following new subparagraph:
‘‘(C) the Secretary erroneously imposed any
penalty, addition to tax, or additional amount
which relates to an adjustment to a partnership
item.’’.
(5) So much of subparagraph (A) of section
6230(c)(2) as precedes ‘‘shall be filed’’ is amended to
read as follows:
‘‘(A) UNDER PARAGRAPH (1) (A) OR (C).—
Any claim under subparagraph (A) or (C) of
paragraph (1)’’.
(6) Paragraph (4) of section 6230(c) is amended
by adding at the end the following: ‘‘In addition, the
determination under the final partnership adminis-
trative adjustment or under the decision of the court
(whichever is appropriate) concerning the applicabil-
ity of any penalty, addition to tax, or additional
amount which relates to an adjustment to a partner-
ship item shall also be conclusive. Notwithstanding
the preceding sentence, the partner shall be allowed to
assert any partner level defenses that may apply or
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to challenge the amount of the computational adjust-
ment.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
SEC. 1039. PROVISIONS RELATING TO COURT JURISDIC-
TION, ETC.
(a) TAX COURT JURISDICTION TO ENJOIN PRE-
MATURE ASSESSMENTS OF DEFICIENCIES ATTRIBUTABLE
TO PARTNERSHIP ITEMS.—Subsection (b) of section 6225
is amended by striking ‘‘the proper court.’’ and inserting
‘‘the proper court, including the Tax Court. The Tax Court
shall have no jurisdiction to enjoin any action or proceed-
ing under this subsection unless a timely petition for a re-
adjustment of the partnership items for the taxable year has
been filed and then only in respect of the adjustments that
are the subject of such petition.’’.
(b) JURISDICTION TO CONSIDER STATUTE OF LIMITA-
TIONS WITH RESPECT TO PARTNERS.—Paragraph (1) of
section 6226(d) is amended by adding at the end the follow-
ing new sentence:
‘‘Notwithstanding subparagraph (B), any person
treated under subsection (c) as a party to an action
shall be permitted to participate in such action (or
file a readjustment petition under subsection (b) or
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paragraph (2) of this subsection) solely for the pur-
pose of asserting that the period of limitations for as-
sessing any tax attributable to partnership items has
expired with respect to such person, and the court
having jurisdiction of such action shall have jurisdic-
tion to consider such assertion.’’.
(c) TAX COURT JURISDICTION TO DETERMINE OVER-
PAYMENTS ATTRIBUTABLE TO AFFECTED ITEMS.—
(1) Paragraph (6) of section 6230(d) is amended
by striking ‘‘(or an affected item)’’.
(2) Paragraph (3) of section 6512(b) is amended
by adding at the end the following new sentence:
‘‘In the case of a credit or refund relating to an af-
fected 
item 
(within 
the 
meaning 
of 
section
6231(a)(5)), the preceding sentence shall be applied
by substituting the periods under sections 6229 and
6230(d) for the periods under section 6511(b)(2), (c),
and (d).’’.
(d) VENUE ON APPEAL.—
(1) Paragraph (1) of section 7482(b) is amended
by striking ‘‘or’’ at the end of subparagraph (D), by
striking the period at the end of subparagraph (E)
and inserting ‘‘, or’’, and by inserting after subpara-
graph (E) the following new subparagraph:
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‘‘(F) in the case of a petition under section
6234(c)—
‘‘(i) the legal residence of the petitioner
if the petitioner is not a corporation, and
‘‘(ii) the place or office applicable
under subparagraph (B) if the petitioner is
a corporation.’’.
(2) The last sentence of section 7482(b)(1) is
amended by striking ‘‘or 6228(a)’’ and inserting ‘‘,
6228(a), or 6234(c)’’.
(e) OTHER PROVISIONS.—
(1) Subsection (c) of section 7459 is amended by
striking ‘‘or section 6228(a)’’ and inserting ‘‘,
6228(a), or 6234(c)’’.
(2) Subsection (o) of section 6501 is amended by
adding at the end the following new paragraph:
‘‘(3) For declaratory judgment relating to treat-
ment of items other than partnership items with re-
spect to an oversheltered return, see section 6234.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
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SEC. 1040. TREATMENT OF PREMATURE PETITIONS FILED
BY 
NOTICE 
PARTNERS 
OR 
5-PERCENT
GROUPS.
(a) IN GENERAL.—Subsection (b) of section 6226 (re-
lating to judicial review of final partnership administrative
adjustments) is amended by redesignating paragraph (5)
as paragraph (6) and by inserting after paragraph (4) the
following new paragraph:
‘‘(5) TREATMENT OF PREMATURE PETITIONS.—
If—
‘‘(A) a petition for a readjustment of part-
nership items for the taxable year involved is
filed by a notice partner (or a 5-percent group)
during the 90-day period described in subsection
(a), and
‘‘(B) no action is brought under paragraph
(1) during the 60-day period described therein
with respect to such taxable year which is not
dismissed,
such petition shall be treated for purposes of para-
graph (1) as filed on the last day of such 60-day
period.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to petitions filed after the date of the
enactment of this Act.
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SEC. 1041. BONDS IN CASE OF APPEALS FROM CERTAIN
PROCEEDING.
(a) IN GENERAL.—Subsection (b) of section 7485 (re-
lating to bonds to stay assessment of collection) is amend-
ed—
(1) by inserting ‘‘penalties,’’ after ‘‘any inter-
est,’’, and
(2) by striking ‘‘aggregate of such deficiencies’’
and inserting ‘‘aggregate liability of the parties to the
action’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in the amendments
made by section 402 of the Tax Equity and Fiscal Respon-
sibility Act of 1982.
SEC. 1042. SUSPENSION OF INTEREST WHERE DELAY IN
COMPUTATIONAL ADJUSTMENT RESULTING
FROM CERTAIN SETTLEMENTS.
(a) IN GENERAL.—Subsection (c) of section 6601 (re-
lating to interest on underpayment, nonpayment, or exten-
sion of time for payment, of tax) is amended by adding
at the end the following new sentence: ‘‘In the case of a
settlement under section 6224(c) which results in the con-
version of partnership items to nonpartnership items pur-
suant to section 6231(b)(1)(C), the preceding sentence shall
apply to a computational adjustment resulting from such
settlement in the same manner as if such adjustment were
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a deficiency and such settlement were a waiver referred to
in the preceding sentence.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to adjustments with respect to partner-
ship taxable years beginning after the date of the enactment
of this Act.
SEC. 1043. SPECIAL RULES FOR ADMINISTRATIVE ADJUST-
MENT REQUESTS WITH RESPECT TO BAD
DEBTS OR WORTHLESS SECURITIES.
(a) GENERAL RULE.—Section 6227 (relating to ad-
ministrative adjustment requests) is amended by adding at
the end the following new subsection:
‘‘(e) REQUESTS WITH RESPECT TO BAD DEBTS OR
WORTHLESS SECURITIES.—In the case of that portion of
any request for an administrative adjustment which relates
to the deductibility by the partnership under section 166
of a debt as a debt which became worthless, or under section
165(g) of a loss from worthlessness of a security, the period
prescribed in subsection (a)(1) shall be 7 years from the
last day for filing the partnership return for the year with
respect to which such request is made (determined without
regard to extensions).’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by sub-
section (a) shall take effect as if included in the
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amendments made by section 402 of the Tax Equity
and Fiscal Responsibility Act of 1982.
(2) TREATMENT OF REQUESTS FILED BEFORE
DATE OF ENACTMENT.—In the case of that portion of
any request (filed before the date of the enactment of
this Act) for an administrative adjustment which re-
lates to the deductibility of a debt as a debt which be-
came worthless or the deductibility of a loss from the
worthlessness of a security—
(A) paragraph (2) of section 6227(a) of the
Internal Revenue Code of 1986 shall not apply,
(B) the period for filing a petition under
section 6228 of the Internal Revenue Code of
1986 with respect to such request shall not expire
before the date 6 months after the date of the en-
actment of this Act, and
(C) such a petition may be filed without re-
gard to whether there was a notice of the begin-
ning of an administrative proceeding or a final
partnership administrative adjustment.
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PART III—PROVISION RELATING TO CLOSING OF
PARTNERSHIP 
TAXABLE 
YEAR 
WITH 
RE-
SPECT TO DECEASED PARTNER, ETC.
SEC. 1046. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH
RESPECT TO DECEASED PARTNER, ETC.
(a) GENERAL RULE.—Subparagraph (A) of section
706(c)(2) (relating to disposition of entire interest) is
amended to read as follows:
‘‘(A) DISPOSITION OF ENTIRE INTEREST.—
The taxable year of a partnership shall close
with respect to a partner whose entire interest in
the partnership terminates (whether by reason of
death, liquidation, or otherwise).’’.
(b) CLERICAL AMENDMENT.—The paragraph heading
for paragraph (2) of section 706(c) is amended to read as
follows:
‘‘(2) TREATMENT OF DISPOSITIONS.—’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to partnership taxable years beginning
after December 31, 1997.
Subtitle D—Provisions Relating to
Real Estate Investment Trusts
SEC. 1051. CLARIFICATION OF LIMITATION ON MAXIMUM
NUMBER OF SHAREHOLDERS.
(a) RULES RELATING TO DETERMINATION OF OWNER-
SHIP.—
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(1) FAILURE TO ISSUE SHAREHOLDER DEMAND
LETTER NOT TO DISQUALIFY REIT.—Section 857(a)
(relating to requirements applicable to real estate in-
vestment trusts) is amended by striking paragraph
(2) and by redesignating paragraph (3) as paragraph
(2).
(2) SHAREHOLDER DEMAND LETTER REQUIRE-
MENT; PENALTY.—Section 857 (relating to taxation of
real estate investment trusts and their beneficiaries)
is amended by redesignating subsection (f) as sub-
section (g) and by inserting after subsection (e) the
following new subsection:
‘‘(f) REAL ESTATE INVESTMENT TRUSTS TO ASCER-
TAIN OWNERSHIP.—
‘‘(1) IN GENERAL.—Each real estate investment
trust shall each taxable year comply with regulations
prescribed by the Secretary for the purposes of
ascertaining the actual ownership of the outstanding
shares, or certificates of beneficial interest, of such
trust.
‘‘(2) FAILURE TO COMPLY.—
‘‘(A) IN GENERAL.—If a real estate invest-
ment trust fails to comply with the requirements
of paragraph (1) for a taxable year, such trust
shall pay (on notice and demand by the Sec-
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retary and in the same manner as tax) a pen-
alty of $25,000.
‘‘(B) INTENTIONAL
DISREGARD.—If any
failure under paragraph (1) is due to intentional
disregard of the requirement under paragraph
(1), the penalty under subparagraph (A) shall be
$50,000.
‘‘(C) FAILURE TO COMPLY AFTER NOTICE.—
The Secretary may require a real estate invest-
ment trust to take such actions as the Secretary
determines appropriate to ascertain actual own-
ership if the trust fails to meet the requirements
of paragraph (1). If the trust fails to take such
actions, the trust shall pay (on notice and de-
mand by the Secretary and in the same manner
as tax) an additional penalty equal to the pen-
alty determined under subparagraph (A) or (B),
whichever is applicable.
‘‘(D) REASONABLE
CAUSE.—No penalty
shall be imposed under this paragraph with re-
spect to any failure if it is shown that such fail-
ure is due to reasonable cause and not to willful
neglect.’’.
(b) COMPLIANCE WITH CLOSELY HELD PROHIBI-
TION.—
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(1) IN GENERAL.—Section 856 (defining real es-
tate investment trust) is amended by adding at the
end the following new subsection:
‘‘(k) REQUIREMENT THAT ENTITY NOT BE CLOSELY
HELD TREATED AS MET IN CERTAIN CASES.—A corpora-
tion, trust, or association—
‘‘(1) which for a taxable year meets the require-
ments of section 857(f)(1), and
‘‘(2) which does not know, or exercising reason-
able diligence would not have known, whether the en-
tity failed to meet the requirement of subsection
(a)(6),
shall be treated as having met the requirement of subsection
(a)(6) for the taxable year.’’.
(2) CONFORMING AMENDMENT.—Paragraph (6)
of section 856(a) is amended by inserting ‘‘subject to
the provisions of subsection (k),’’ before ‘‘which is
not’’.
SEC. 1052. DE MINIMIS RULE FOR TENANT SERVICES IN-
COME.
(a) IN GENERAL.—Paragraph (2) of section 856(d)
(defining rents from real property) is amended by striking
subparagraph (C) and the last sentence and inserting:
‘‘(C) any impermissible tenant service in-
come (as defined in paragraph (7)).’’.
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(b) IMPERMISSIBLE TENANT SERVICE INCOME.—Sec-
tion 856(d) is amended by adding at the end the following
new paragraph:
‘‘(7) 
IMPERMISSIBLE
TENANT
SERVICE
IN-
COME.—For purposes of paragraph (2)(C)—
‘‘(A) IN
GENERAL.—The term ‘impermis-
sible tenant service income’ means, with respect
to any real or personal property, any amount
received or accrued directly or indirectly by the
real estate investment trust for—
‘‘(i) services furnished or rendered by
the trust to the tenants of such property, or
‘‘(ii) managing or operating such
property.
‘‘(B) DISQUALIFICATION OF ALL AMOUNTS
WHERE MORE THAN DE MINIMIS AMOUNT.—If
the amount described in subparagraph (A) with
respect to a property for any taxable year ex-
ceeds 1 percent of all amounts received or ac-
crued during such taxable year directly or indi-
rectly by the real estate investment trust with re-
spect to such property, the impermissible tenant
service income of the trust with respect to the
property shall include all such amounts.
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‘‘(C) EXCEPTIONS.—For purposes of sub-
paragraph (A)—
‘‘(i) services furnished or rendered, or
management or operation provided, through
an independent contractor from whom the
trust itself does not derive or receive any in-
come shall not be treated as furnished, ren-
dered, or provided by the trust, and
‘‘(ii) there shall not be taken into ac-
count any amount which would be excluded
from unrelated business taxable income
under section 512(b)(3) if received by an or-
ganization described in section 511(a)(2).
‘‘(D) AMOUNT ATTRIBUTABLE TO IMPERMIS-
SIBLE SERVICES.—For purposes of subparagraph
(A), the amount treated as received for any serv-
ice (or management or operation) shall not be
less than 150 percent of the direct cost of the
trust in furnishing or rendering the service (or
providing the management or operation).
‘‘(E) COORDINATION WITH LIMITATIONS.—
For purposes of paragraphs (2) and (3) of sub-
section (c), amounts described in subparagraph
(A) shall be included in the gross income of the
corporation, trust, or association.’’.
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SEC. 1053. ATTRIBUTION RULES APPLICABLE TO TENANT
OWNERSHIP.
Section 856(d)(5) (relating to constructive ownership
of stock) is amended by adding at the end the following:
‘‘For purposes of paragraph (2)(B), section 318(a)(3)(A)
shall be applied under the preceding sentence in the case
of a partnership by taking into account only partners who
own (directly or indirectly) 25 percent or more of the cap-
ital interest, or the profits interest, in the partnership.’’.
SEC. 1054. CREDIT FOR TAX PAID BY REIT ON RETAINED
CAPITAL GAINS.
(a) GENERAL RULE.—Paragraph (3) of section 857(b)
(relating to capital gains) is amended by redesignating sub-
paragraph (D) as subparagraph (E) and by inserting after
subparagraph (C) the following new subparagraph:
‘‘(D) TREATMENT
BY
SHAREHOLDERS
OF
UNDISTRIBUTED CAPITAL GAINS.—
‘‘(i) Every shareholder of a real estate
investment trust at the close of the trust’s
taxable year shall include, in computing his
long-term capital gains in his return for his
taxable year in which the last day of the
trust’s taxable year falls, such amount as
the trust shall designate in respect of such
shares in a written notice mailed to its
shareholders at any time prior to the expi-
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ration of 60 days after the close of its tax-
able year (or mailed to its shareholders or
holders of beneficial interests with its an-
nual report for the taxable year), but the
amount so includible by any shareholder
shall not exceed that part of the amount
subjected to tax in subparagraph (A)(ii)
which he would have received if all of such
amount had been distributed as capital
gain dividends by the trust to the holders of
such shares at the close of its taxable year.
‘‘(ii) For purposes of this title, every
such shareholder shall be deemed to have
paid, for his taxable year under clause (i),
the tax imposed by subparagraph (A)(ii) on
the amounts required by this subparagraph
to be included in respect of such shares in
computing his long-term capital gains for
that year; and such shareholders shall be al-
lowed credit or refund as the case may be,
for the tax so deemed to have been paid by
him.
‘‘(iii) The adjusted basis of such shares
in the hands of the holder shall be increased
with respect to the amounts required by this
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subparagraph to be included in computing
his long-term capital gains, by the dif-
ference between the amount of such includ-
ible gains and the tax deemed paid by such
shareholder in respect of such shares under
clause (ii).
‘‘(iv) In the event of such designation,
the tax imposed by subparagraph (A)(ii)
shall be paid by the real estate investment
trust within 30 days after the close of its
taxable year.
‘‘(v) The earnings and profits of such
real estate investment trust, and the earn-
ings and profits of any such shareholder
which is a corporation, shall be appro-
priately adjusted in accordance with regula-
tions prescribed by the Secretary.
‘‘(vi) As used in this subparagraph, the
terms ‘shares’ and ‘shareholders’ shall in-
clude beneficial interests and holders of ben-
eficial interests, respectively.’’.
(b) CONFORMING AMENDMENTS.—
(1) Clause (i) of section 857(b)(7)(A) is amended
by striking ‘‘subparagraph (B)’’ and inserting ‘‘sub-
paragraph (B) or (D)’’.
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(2) Clause (iii) of section 852(b)(3)(D) is amend-
ed by striking ‘‘by 65 percent’’ and all that follows
and inserting ‘‘by the difference between the amount
of such includible gains and the tax deemed paid by
such shareholder in respect of such shares under
clause (ii).’’.
SEC. 1055. REPEAL OF 30-PERCENT GROSS INCOME RE-
QUIREMENT.
(a) GENERAL RULE.—Subsection (c) of section 856
(relating to limitations) is amended—
(1) by adding ‘‘and’’ at the end of paragraph
(3),
(2) by striking paragraphs (4) and (8), and
(3) by redesignating paragraphs (5), (6), and (7)
as paragraphs (4), (5), and (6), respectively.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (G) of section 856(c)(5), as re-
designated by subsection (a), is amended by striking
‘‘and such agreement shall be treated as a security for
purposes of paragraph (4)(A)’’.
(2) Paragraph (5) of section 857(b) is amended
by striking ‘‘section 856(c)(7)’’ and inserting ‘‘section
856(c)(6)’’.
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(3) Subparagraph (C) of section 857(b)(6) is
amended by striking ‘‘section 856(c)(6)(B)’’ and in-
serting ‘‘section 856(c)(5)(B)’’.
SEC. 1056. MODIFICATION OF EARNINGS AND PROFITS
RULES FOR DETERMINING WHETHER REIT
HAS EARNINGS AND PROFITS FROM NON-
REIT YEAR.
Subsection (d) of section 857 is amended by adding
at the end the following new paragraph:
‘‘(3) DISTRIBUTIONS TO MEET REQUIREMENTS
OF SUBSECTION (a)(2)(B).—Any distribution which
is made in order to comply with the requirements of
subsection (a)(2)(B)—
‘‘(A) shall be treated for purposes of this
subsection and subsection (a)(2)(B) as made
from the earliest accumulated earnings and prof-
its (other than earnings and profits to which
subsection (a)(2)(A) applies) rather than the
most recently accumulated earnings and profits,
and
‘‘(B) to the extent treated under subpara-
graph (A) as made from accumulated earnings
and profits, shall not be treated as a distribution
for purposes of subsection (b)(2)(B).’’.
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SEC. 1057. TREATMENT OF FORECLOSURE PROPERTY.
(a) GRACE PERIODS.—
(1) INITIAL PERIOD.—Paragraph (2) of section
856(e) (relating to special rules for foreclosure prop-
erty) is amended by striking ‘‘on the date which is 2
years after the date the trust acquired such property’’
and inserting ‘‘as of the close of the 3d taxable year
following the taxable year in which the trust acquired
such property’’.
(2) EXTENSION.—Paragraph (3) of section
856(e) is amended—
(A) by striking ‘‘or more extensions’’ and
inserting ‘‘extension’’, and
(B) by striking the last sentence and insert-
ing: ‘‘Any such extension shall not extend the
grace period beyond the close of the 3d taxable
year following the last taxable year in the period
under paragraph (2).’’.
(b) REVOCATION OF ELECTION.—Paragraph (5) of sec-
tion 856(e) is amended by striking the last sentence and
inserting: ‘‘A real estate investment trust may revoke any
such election for a taxable year by filing the revocation (in
the manner provided by the Secretary) on or before the due
date (including any extension of time) for filing its return
of tax under this chapter for the taxable year. If a trust
revokes an election for any property, no election may be
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made by the trust under this paragraph with respect to the
property for any subsequent taxable year.’’.
(c) CERTAIN ACTIVITIES NOT TO DISQUALIFY PROP-
ERTY.—Paragraph (4) of section 856(e) is amended by add-
ing at the end the following new flush sentence:
‘‘For purposes of subparagraph (C), property shall
not be treated as used in a trade or business by rea-
son of any activities of the real estate investment
trust with respect to such property to the extent that
such activities would not result in amounts received
or accrued, directly or indirectly, with respect to such
property being treated as other than rents from real
property.’’.
SEC. 1058. PAYMENTS UNDER HEDGING INSTRUMENTS.
Section 856(c)(5)(G) (relating to treatment of certain
interest rate agreements), as redesignated by section 1255,
is amended to read as follows:
‘‘(G) TREATMENT OF CERTAIN HEDGING IN-
STRUMENTS.—Except to the extent provided by
regulations, any—
‘‘(i) payment to a real estate invest-
ment trust under an interest rate swap or
cap agreement, option, futures contract, for-
ward rate agreement, or any similar finan-
cial instrument, entered into by the trust in
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a transaction to reduce the interest rate
risks with respect to any indebtedness in-
curred or to be incurred by the trust to ac-
quire or carry real estate assets, and
‘‘(ii) gain from the sale or other dis-
position of any such investment,
shall be treated as income qualifying under
paragraph (2).’’.
SEC. 1059. EXCESS NONCASH INCOME.
Section 857(e)(2) (relating to determination of amount
of excess noncash income) is amended—
(1) by striking subparagraph (B),
(2) by striking the period at the end of subpara-
graph (C) and inserting a comma,
(3) by redesignating subparagraph (C) (as
amended by paragraph (2)) as subparagraph (B),
and
(4) by adding at the end the following new sub-
paragraphs:
‘‘(C) the amount (if any) by which—
‘‘(i) the amounts includible in gross in-
come with respect to instruments to which
section 860E(a) or 1272 applies, exceed
‘‘(ii) the amount of money and the fair
market value of other property received dur-
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ing the taxable year under such instru-
ments, and
‘‘(D) amounts includible in income by rea-
son of cancellation of indebtedness.’’.
SEC. 1060. PROHIBITED TRANSACTION SAFE HARBOR.
Clause (iii) of section 857(b)(6)(C) (relating to certain
sales not to constitute prohibited transactions) is amended
by striking ‘‘(other than foreclosure property)’’ in sub-
clauses (I) and (II) and inserting ‘‘(other than sales of fore-
closure property or sales to which section 1033 applies)’’.
SEC. 1061. SHARED APPRECIATION MORTGAGES.
(a) BANKRUPTCY SAFE HARBOR.—Section 856(j) (re-
lating to treatment of shared appreciation mortgages) is
amended by redesignating paragraph (4) as paragraph (5)
and by inserting after paragraph (3) the following new
paragraph:
‘‘(4) COORDINATION WITH 4-YEAR HOLDING PE-
RIOD.—
‘‘(A) IN GENERAL.—For purposes of section
857(b)(6)(C), if a real estate investment trust is
treated as having sold secured property under
paragraph (3)(A), the trust shall be treated as
having held such property for at least 4 years
if—
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‘‘(i) the secured property is sold or oth-
erwise disposed of pursuant to a case under
title 11 of the United States Code,
‘‘(ii) the seller is under the jurisdiction
of the court in such case, and
‘‘(iii) the disposition is required by the
court or is pursuant to a plan approved by
the court.
‘‘(B) EXCEPTION.—Subparagraph (A) shall
not apply if—
‘‘(i) the secured property was acquired
by the trust with the intent to evict or fore-
close, or
‘‘(ii) the trust knew or had reason to
know that default on the obligation de-
scribed in paragraph (5)(A) would occur.’’.
(b) CLARIFICATION OF DEFINITION OF SHARED AP-
PRECIATION PROVISION.—Clause (ii) of section 856(j)(5)(A)
is amended by inserting before the period ‘‘or appreciation
in value as of any specified date’’.
SEC. 1062. WHOLLY OWNED SUBSIDIARIES.
Section 856(i)(2) (defining qualified REIT subsidi-
ary) is amended by striking ‘‘at all times during the period
such corporation was in existence’’.
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SEC. 1063. EFFECTIVE DATE.
The amendments made by this part shall apply to tax-
able years beginning after the date of the enactment of this
Act.
Subtitle E—Provisions Relating to
Regulated Investment Companies
SEC. 1071. REPEAL OF 30-PERCENT GROSS INCOME LIMITA-
TION.
(a) GENERAL RULE.—Subsection (b) of section 851
(relating to limitations) is amended by striking paragraph
(3), by adding ‘‘and’’ at the end of paragraph (2), and by
redesignating paragraph (4) as paragraph (3).
(b) TECHNICAL AMENDMENTS.—
(1) The material following paragraph (3) of sec-
tion 851(b) (as redesignated by subsection (a)) is
amended—
(A) by striking out ‘‘paragraphs (2) and
(3)’’ and inserting ‘‘paragraph (2)’’, and
(B) by striking out the last sentence thereof.
(2) Subsection (c) of section 851 is amended by
striking ‘‘subsection (b)(4)’’ each place it appears (in-
cluding the heading) and inserting ‘‘subsection
(b)(3)’’.
(3) Subsection (d) of section 851 is amended by
striking ‘‘subsections (b)(4)’’ and inserting ‘‘sub-
sections (b)(3)’’.
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(4) Paragraph (1) of section 851(e) is amended
by striking ‘‘subsection (b)(4)’’ and inserting ‘‘sub-
section (b)(3)’’.
(5) Paragraph (4) of section 851(e) is amended
by striking ‘‘subsections (b)(4)’’ and inserting ‘‘sub-
sections (b)(3)’’.
(6) Section 851 is amended by striking sub-
section (g) and redesignating subsection (h) as sub-
section (g).
(7) Subsection (g) of section 851 (as redesignated
by paragraph (6)) is amended by striking paragraph
(3).
(8) Section 817(h)(2) is amended—
(A) by striking ‘‘851(b)(4)’’ in subpara-
graph (A) and inserting ‘‘851(b)(3)’’, and
(B) by striking ‘‘851(b)(4)(A)(i)’’ in sub-
paragraph (B) and inserting ‘‘851(b)(3)(A)(i)’’.
(9) Section 1092(f)(2) is amended by striking
‘‘Except for purposes of section 851(b)(3), the’’ and
inserting ‘‘The’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1997.
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Subtitle F—Taxpayer Protections
SEC. 1081. REASONABLE CAUSE EXCEPTION FOR CERTAIN
PENALTIES.
(a) INFORMATION ON DEDUCTIBLE EMPLOYEE CON-
TRIBUTIONS.—Subsection (g) of section 6652 (relating to
information required in connection with deductible em-
ployee contributions) is amended by adding at the end the
following new sentence: ‘‘No penalty shall be imposed under
this subsection on any failure which is shown to be due to
reasonable cause and not willful neglect.’’.
(b) REPORTS ON STATUS AS QUALIFIED SMALL BUSI-
NESS.—Subsection (k) of section 6652 (relating to failure
to make reports required under section 1202) is amended
by adding at the end the following new sentence: ‘‘No pen-
alty shall be imposed under this subsection on any failure
which is shown to be due to reasonable cause and not willful
neglect.’’.
(c) RETURNS OF PERSONAL HOLDING COMPANY TAX
BY FOREIGN CORPORATIONS.—Section 6683 (relating to
failure of foreign corporation to file return of personal hold-
ing company tax) is amended by adding at the end the fol-
lowing new sentence: ‘‘No penalty shall be imposed under
this section on any failure which is shown to be due to rea-
sonable cause and not willful neglect.’’.
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(d) FAILURE TO MAKE REQUIRED PAYMENTS.—Sub-
paragraph (A) of section 7519(f)(4) is amended by adding
at the end the following new sentence: ‘‘No penalty shall
be imposed under this subparagraph on any failure which
is shown to be due to reasonable cause and not willful ne-
glect.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
SEC. 1082. CLARIFICATION OF PERIOD FOR FILING CLAIMS
FOR REFUNDS.
(a) IN GENERAL.—Paragraph (3) of section 6512(b)
(relating to overpayment determined by Tax Court) is
amended by adding at the end the following flush sentence:
‘‘In a case described in subparagraph (B) where the
date of the mailing of the notice of deficiency is dur-
ing the third year after the due date (with extensions)
for filing the return of tax and no return was filed
before such date, the applicable period under sub-
sections (a) and (b)(2) of section 6511 shall be 3
years.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to claims for credit or refund for
taxable years ending after the date of the enactment of this
Act.
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SEC. 1083. REPEAL OF AUTHORITY TO DISCLOSE WHETHER
PROSPECTIVE JUROR HAS BEEN AUDITED.
(a) IN GENERAL.—Subsection (h) of section 6103 (re-
lating to disclosure to certain Federal officers and employ-
ees for purposes of tax administration, etc.) is amended by
striking paragraph (5) and by redesignating paragraph (6)
as paragraph (5).
(b) CONFORMING AMENDMENT.—Paragraph (4) of sec-
tion 6103(p) is amended by striking ‘‘(h)(6)’’ each place
it appears and inserting ‘‘(h)(5)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to judicial proceedings commenced after
the date of the enactment of this Act.
SEC. 1084. CLARIFICATION OF STATUTE OF LIMITATIONS.
(a) IN GENERAL.—Subsection (a) of section 6501 (re-
lating to limitations on assessment and collection) is
amended by adding at the end thereof the following new
sentence: ‘‘For purposes of this chapter, the term ‘return’
means the return required to be filed by the taxpayer (and
does not include a return of any person from whom the tax-
payer has received an item of income, gain, loss, deduction,
or credit).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
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SEC. 1085. PENALTY FOR UNAUTHORIZED INSPECTION OF
TAX RETURNS OR TAX RETURN INFORMA-
TION.
(a) IN GENERAL.—Part I of subchapter A of chapter
75 (relating to crimes, other offenses, and forfeitures) is
amended by adding after section 7213 the following new
section:
‘‘SEC. 7213A. UNAUTHORIZED INSPECTION OF RETURNS OR
RETURN INFORMATION.
‘‘(a) PROHIBITIONS.—
‘‘(1) FEDERAL
EMPLOYEES
AND
OTHER
PER-
SONS.—It shall be unlawful for—
‘‘(A) any officer or employee of the United
States, or
‘‘(B) any person described in section
6103(n) or an officer or employee of any such
person,
willfully to inspect, except as authorized in this title,
any return or return information.
‘‘(2) STATE AND OTHER EMPLOYEES.—It shall be
unlawful for any person (not described in paragraph
(1)) willfully to inspect, except as authorized in this
title, any return or return information acquired by
such person or another person under a provision of
section 6103 referred to in section 7213(a)(2).
‘‘(b) PENALTY.—
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‘‘(1) IN GENERAL.—Any violation of subsection
(a) shall be punishable upon conviction by a fine in
any amount not exceeding $1,000, or imprisonment of
not more than 1 year, or both, together with the costs
of prosecution.
‘‘(2) FEDERAL OFFICERS OR EMPLOYEES.—An
officer or employee of the United States who is con-
victed of any violation of subsection (a) shall, in ad-
dition to any other punishment, be dismissed from of-
fice or discharged from employment.
‘‘(c) DEFINITIONS.—For purposes of this section, the
terms ‘inspect’, ‘return’, and ‘return information’ have the
respective meanings given such terms by section 6103(b).’’.
(b) TECHNICAL AMENDMENTS.—
(1) Paragraph (2) of section 7213(a) is amended
by inserting ‘‘(5),’’ after ‘‘(m)(2), (4),’’.
(2) The table of sections for part I of subchapter
A of chapter 75 is amended by inserting after the
item relating to section 7213 the following new item:
‘‘Sec. 7213A. Unauthorized inspection of returns or return informa-
tion.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to violations occurring on and after the
date of the enactment of this Act.
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SEC. 1086. CIVIL DAMAGES FOR UNAUTHORIZED INSPEC-
TION OF RETURNS AND RETURN INFORMA-
TION; NOTIFICATION OF UNLAWFUL INSPEC-
TION OR DISCLOSURE.
(a) CIVIL DAMAGES
FOR UNAUTHORIZED INSPEC-
TION.—Subsection (a) of section 7431 is amended—
(1) by striking ‘‘DISCLOSURE’’ in the headings
for paragraphs (1) and (2) and inserting ‘‘INSPEC-
TION OR DISCLOSURE’’, and
(2) by striking ‘‘discloses’’ in paragraphs (1) and
(2) and inserting ‘‘inspects or discloses’’.
(b) NOTIFICATION OF UNLAWFUL INSPECTION OR DIS-
CLOSURE.—Section 7431 is amended by redesignating sub-
sections (e) and (f) as subsections (f) and (g), respectively,
and by inserting after subsection (d) the following new sub-
section:
‘‘(e) NOTIFICATION OF UNLAWFUL INSPECTION AND
DISCLOSURE.—If any person is criminally charged by in-
dictment or information with inspection or disclosure of a
taxpayer’s return or return information in violation of—
‘‘(1) paragraph (1) or (2) of section 7213(a),
‘‘(2) section 7213A(a), or
‘‘(3) subparagraph (B) of section 1030(a)(2) of
title 18, United States Code,
the Secretary shall notify such taxpayer as soon as prac-
ticable of such inspection or disclosure.’’.
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(c) NO DAMAGES FOR INSPECTION REQUESTED BY
TAXPAYER.—Subsection (b) of section 7431 is amended to
read as follows:
‘‘(b) EXCEPTIONS.—No liability shall arise under this
section with respect to any inspection or disclosure—
‘‘(1) which results from a good faith, but erro-
neous, interpretation of section 6103, or
‘‘(2) which is requested by the taxpayer.’’.
(d) CONFORMING AMENDMENTS.—
(1) Subsections (c)(1)(A), (c)(1)(B)(i), and (d) of
section 7431 are each amended by inserting ‘‘inspec-
tion or’’ before ‘‘disclosure’’.
(2) Clause (ii) of section 7431(c)(1)(B) is
amended by striking ‘‘willful disclosure or a disclo-
sure’’ and inserting ‘‘willful inspection or disclosure
or an inspection or disclosure’’.
(3) Subsection (f) of section 7431, as redesig-
nated by subsection (b), is amended to read as follows:
‘‘(f) DEFINITIONS.—For purposes of this section, the
terms ‘inspect’, ‘inspection’, ‘return’, and ‘return informa-
tion’ have the respective meanings given such terms by sec-
tion 6103(b).’’.
(4) The section heading for section 7431 is
amended by inserting ‘‘INSPECTION
OR’’ before
‘‘DISCLOSURE’’.
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(5) The table of sections for subchapter B of
chapter 76 is amended by inserting ‘‘inspection or’’
before ‘‘disclosure’’ in the item relating to section
7431.
(6) Paragraph (2) of section 7431(g), as redesig-
nated by subsection (b), is amended by striking ‘‘any
use’’ and inserting ‘‘any inspection or use’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to inspections and disclosures occurring
on and after the date of the enactment of this Act.
TITLE XI—SIMPLIFICATION PRO-
VISIONS 
RELATING 
TO 
ES-
TATE AND GIFT TAXES
SEC. 1101. GIFTS TO CHARITIES EXEMPT FROM GIFT TAX
FILING REQUIREMENTS.
(a) IN GENERAL.—Section 6019 is amended by strik-
ing ‘‘or’’ at the end of paragraph (1), by adding ‘‘or’’ at
the end of paragraph (2), and by inserting after paragraph
(2) the following new paragraph:
‘‘(3) a transfer with respect to which a deduction
is allowed under section 2522, except that this para-
graph shall apply with respect to a transfer of prop-
erty (other than a transfer described in section
2522(d)) only if the entire value of such property is
allowed as a deduction under section 2522,’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to gifts made after the date of the enact-
ment of this Act.
SEC. 1102. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS
OF RECOVERY.
(a) AMENDMENT TO SECTION 2207A.—Paragraph (2)
of section 2207A(a) (relating to right of recovery in the case
of certain marital deduction property) is amended to read
as follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will (or
a revocable trust) specifically indicates an intent to
waive any right of recovery under this subchapter
with respect to such property.’’.
(b) AMENDMENT TO SECTION 2207B.—Paragraph (2)
of section 2207B(a) (relating to right of recovery where de-
cedent retained interest) is amended to read as follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will (or
a revocable trust) specifically indicates an intent to
waive any right of recovery under this subchapter
with respect to such property.’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to the estates of decedents
dying after the date of the enactment of this Act.
SEC. 1103. TRANSITIONAL RULE UNDER SECTION 2056A.
(a) GENERAL RULE.—In the case of any trust created
under an instrument executed before the date of the enact-
ment of the Revenue Reconciliation Act of 1990, such trust
shall be treated as meeting the requirements of paragraph
(1) of section 2056A(a) of the Internal Revenue Code of
1986 if the trust instrument requires that all trustees of
the trust be individual citizens of the United States or do-
mestic corporations.
(b) EFFECTIVE DATE.—The provisions of subsection
(a) shall take effect as if included in the provisions of sec-
tion 11702(g) of the Revenue Reconciliation Act of 1990.
SEC. 1104. TREATMENT FOR ESTATE TAX PURPOSES OF
SHORT-TERM OBLIGATIONS HELD BY NON-
RESIDENT ALIENS.
(a) IN GENERAL.—Subsection (b) of section 2105 is
amended by striking ‘‘and’’ at the end of paragraph (2),
by striking the period at the end of paragraph (3) and in-
serting ‘‘, and’’, and by inserting after paragraph (3) the
following new paragraph:
‘‘(4) obligations which would be original issue
discount obligations as defined in section 871(g)(1)
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but for subparagraph (B)(i) thereof, if any interest
thereon (were such interest received by the decedent at
the time of his death) would not be effectively con-
nected with the conduct of a trade or business within
the United States.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
SEC. 1105. DISTRIBUTIONS DURING FIRST 65 DAYS OF TAX-
ABLE YEAR OF ESTATE.
(a) IN GENERAL.—Subsection (b) of section 663 (relat-
ing to distributions in first 65 days of taxable year) is
amended by inserting ‘‘an estate or’’ before ‘‘a trust’’ each
place it appears.
(b) CONFORMING AMENDMENT.—Paragraph (2) of sec-
tion 663(b) is amended by striking ‘‘the fiduciary of such
trust’’ and inserting ‘‘the executor of such estate or the fidu-
ciary of such trust (as the case may be)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
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SEC. 1106. SEPARATE SHARE RULES AVAILABLE TO ES-
TATES.
(a) IN GENERAL.—Subsection (c) of section 663 (relat-
ing to separate shares treated as separate trusts) is amend-
ed—
(1) by inserting before the last sentence the fol-
lowing new sentence: ‘‘Rules similar to the rules of the
preceding provisions of this subsection shall apply to
treat substantially separate and independent shares of
different beneficiaries in an estate having more than
1 beneficiary as separate estates.’’, and
(2) by inserting ‘‘or estates’’ after ‘‘trusts’’ in the
last sentence.
(b) CONFORMING AMENDMENT.—The subsection head-
ing of section 663(c) is amended by inserting ‘‘ESTATES
OR’’ before ‘‘TRUSTS’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
SEC. 1107. EXECUTOR OF ESTATE AND BENEFICIARIES
TREATED AS RELATED PERSONS FOR DIS-
ALLOWANCE OF LOSSES, ETC.
(a) DISALLOWANCE OF LOSSES.—Subsection (b) of sec-
tion 267 (relating to losses, expenses, and interest with re-
spect to transactions between related taxpayers) is amended
by striking ‘‘or’’ at the end of paragraph (11), by striking
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the period at the end of paragraph (12) and inserting ‘‘;
or’’, and by adding at the end the following new paragraph:
‘‘(13) Except in the case of a sale or exchange in
satisfaction of a pecuniary bequest, an executor of an
estate and a beneficiary of such estate.’’.
(b) ORDINARY INCOME FROM GAIN FROM SALE OF
DEPRECIABLE PROPERTY.—Subsection (b) of section 1239
is amended by striking the period at the end of paragraph
(2) and inserting ‘‘, and’’ and by adding at the end the
following new paragraph:
‘‘(3) except in the case of a sale or exchange in
satisfaction of a pecuniary bequest, an executor of an
estate and a beneficiary of such estate.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
SEC. 1108. TREATMENT OF FUNERAL TRUSTS.
(a) IN GENERAL.—Subpart F of part I of subchapter
J of chapter 1 is amended by adding at the end the follow-
ing new section:
‘‘SEC. 684. TREATMENT OF FUNERAL TRUSTS.
‘‘(a) IN GENERAL.—In the case of a qualified funeral
trust—
‘‘(1) subparts B, C, D, and E shall not apply,
and
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‘‘(2) no deduction shall be allowed by section
642(b).
‘‘(b) QUALIFIED FUNERAL TRUST.—For purposes of
this subsection, the term ‘qualified funeral trust’ means any
trust (other than a foreign trust) if—
‘‘(1) the trust arises as a result of a contract
with a person engaged in the trade or business of pro-
viding funeral or burial services or property nec-
essary to provide such services,
‘‘(2) the sole purpose of the trust is to hold, in-
vest, and reinvest funds in the trust and to use such
funds solely to make payments for such services or
property for the benefit of the beneficiaries of the
trust,
‘‘(3) the only beneficiaries of such trust are indi-
viduals who have entered into contracts described in
paragraph (1) to have such services or property pro-
vided at their death,
‘‘(4) the only contributions to the trust are con-
tributions by or for the benefit of such beneficiaries,
‘‘(5) the trustee elects the application of this sub-
section, and
‘‘(6) the trust would (but for the election de-
scribed in paragraph (5)) be treated as owned by the
beneficiaries under subpart E.
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‘‘(c) DOLLAR LIMITATION ON CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—The term ‘qualified funeral
trust’ shall not include any trust which accepts aggre-
gate contributions by or for the benefit of an individ-
ual in excess of $7,000.
‘‘(2) RELATED TRUSTS.—For purposes of para-
graph (1), all trusts having trustees which are related
persons shall be treated as 1 trust. For purposes of the
preceding sentence, persons are related if—
‘‘(A) the relationship between such persons
is described in section 267 or 707(b),
‘‘(B) such persons are treated as a single
employer under subsection (a) or (b) of section
52, or
‘‘(C) the Secretary determines that treating
such persons as related is necessary to prevent
avoidance of the purposes of this section.
‘‘(3) INFLATION
ADJUSTMENT.—In the case of
any contract referred to in subsection (b)(1) which is
entered into during any calendar year after 1998, the
dollar amount referred to paragraph (1) shall be in-
creased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
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year, by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B) there-
of.
If any dollar amount after being increased under the
preceding sentence is not a multiple of $100, such dol-
lar amount shall be rounded to the nearest multiple
of $100.
‘‘(d) APPLICATION OF RATE SCHEDULE.—Section 1(e)
shall be applied to each qualified funeral trust by treating
each beneficiary’s interest in each such trust as a separate
trust.
‘‘(e) TREATMENT OF AMOUNTS REFUNDED TO BENE-
FICIARY ON CANCELLATION.—No gain or loss shall be recog-
nized to a beneficiary described in subsection (b)(3) of any
qualified funeral trust by reason of any payment from such
trust to such beneficiary by reason of cancellation of a con-
tract referred to in subsection (b)(1). If any payment re-
ferred to in the preceding sentence consists of property other
than money, the basis of such property in the hands of such
beneficiary shall be the same as the trust’s basis in such
property immediately before the payment.
‘‘(f) SIMPLIFIED REPORTING.—The Secretary may
prescribe rules for simplified reporting of all trusts having
a single trustee.’’.
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(b) CLERICAL AMENDMENT.—The table of sections for
subpart F of part I of subchapter J of chapter 1 is amended
by adding at the end the following new item:
‘‘Sec. 684. Treatment of funeral trusts.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
SEC. 1109. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF
DECEDENT’S DEATH.
(a) GENERAL RULE.—Section 2035 is amended to
read as follows:
‘‘SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE
WITHIN 3 YEARS OF DECEDENT’S DEATH.
‘‘(a) INCLUSION OF CERTAIN PROPERTY IN GROSS ES-
TATE.—If—
‘‘(1) the decedent made a transfer (by trust or
otherwise) of an interest in any property, or relin-
quished a power with respect to any property, during
the 3-year period ending on the date of the decedent’s
death, and
‘‘(2) the value of such property (or an interest
therein) would have been included in the decedent’s
gross estate under section 2036, 2037, 2038, or 2042
if such transferred interest or relinquished power had
been retained by the decedent on the date of his death,
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the value of the gross estate shall include the value of any
property (or interest therein) which would have been so in-
cluded.
‘‘(b) INCLUSION OF GIFT TAX ON GIFTS MADE DURING
3 YEARS BEFORE DECEDENT’S DEATH.—The amount of
the gross estate (determined without regard to this sub-
section) shall be increased by the amount of any tax paid
under chapter 12 by the decedent or his estate on any gift
made by the decedent or his spouse during the 3-year period
ending on the date of the decedent’s death.
‘‘(c) OTHER RULES RELATING TO TRANSFERS WITHIN
3 YEARS OF DEATH.—
‘‘(1) IN GENERAL.—For purposes of—
‘‘(A) section 303(b) (relating to distribu-
tions in redemption of stock to pay death taxes),
‘‘(B) section 2032A (relating to special
valuation of certain farms, etc., real property),
and
‘‘(C) subchapter C of chapter 64 (relating to
lien for taxes),
the value of the gross estate shall include the value of
all property to the extent of any interest therein of
which the decedent has at any time made a transfer,
by trust or otherwise, during the 3-year period ending
on the date of the decedent’s death.
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‘‘(2) COORDINATION WITH SECTION 6166.—An es-
tate shall be treated as meeting the 35 percent of ad-
justed gross estate requirement of section 6166(a)(1)
only if the estate meets such requirement both with
and without the application of paragraph (1).
‘‘(3) MARITAL AND SMALL TRANSFERS.—Para-
graph (1) shall not apply to any transfer (other than
a transfer with respect to a life insurance policy)
made during a calendar year to any donee if the dece-
dent was not required by section 6019 (other than by
reason of section 6019(2)) to file any gift tax return
for such year with respect to transfers to such donee.
‘‘(d) EXCEPTION.—Subsection (a) shall not apply to
any bona fide sale for an adequate and full consideration
in money or money’s worth.
‘‘(e) TREATMENT OF CERTAIN TRANSFERS FROM REV-
OCABLE TRUSTS.—For purposes of this section and section
2038, any transfer from any portion of a trust during any
period that such portion was treated under section 676 as
owned by the decedent by reason of a power in the grantor
(determined without regard to section 672(e)) shall be treat-
ed as a transfer made directly by the decedent.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter A of chapter 11 is amended by strik-
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ing ‘‘gifts’’ in the item relating to section 2035 and insert-
ing ‘‘certain gifts’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to the estates of decedents dying after
the date of the enactment of this Act.
SEC. 1110. CLARIFICATION OF TREATMENT OF SURVIVOR
ANNUITIES UNDER QUALIFIED TERMINABLE
INTEREST RULES.
(a) IN
GENERAL.—Subparagraph (C) of section
2056(b)(7) is amended by inserting ‘‘(or, in the case of an
interest in an annuity arising under the community prop-
erty laws of a State, included in the gross estate of the dece-
dent under section 2033)’’ after ‘‘section 2039’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
SEC. 1111. TREATMENT UNDER QUALIFIED DOMESTIC
TRUST RULES OF FORMS OF OWNERSHIP
WHICH ARE NOT TRUSTS.
(a) IN GENERAL.—Subsection (c) of section 2056A (de-
fining qualified domestic trust) is amended by adding at
the end the following new paragraph:
‘‘(3) TRUST.—To the extent provided in regula-
tions prescribed by the Secretary, the term ‘trust’ in-
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cludes other arrangements which have substantially
the same effect as a trust.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
SEC. 1112. OPPORTUNITY TO CORRECT CERTAIN FAILURES
UNDER SECTION 2032A.
(a) GENERAL
RULE.—Paragraph (3) of section
2032A(d) (relating to modification of election and agree-
ment to be permitted) is amended to read as follows:
‘‘(3) MODIFICATION OF ELECTION AND AGREE-
MENT TO BE PERMITTED.—The Secretary shall pre-
scribe procedures which provide that in any case in
which the executor makes an election under para-
graph (1) (and submits the agreement referred to in
paragraph (2)) within the time prescribed therefor,
but—
‘‘(A) the notice of election, as filed, does not
contain all required information, or
‘‘(B) signatures of 1 or more persons re-
quired to enter into the agreement described in
paragraph (2) are not included on the agreement
as filed, or the agreement does not contain all re-
quired information,
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the executor will have a reasonable period of time (not
exceeding 90 days) after notification of such failures
to provide such information or signatures.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to the estates of decedents dying after
the date of the enactment of this Act.
SEC. 1113. AUTHORITY TO WAIVE REQUIREMENT OF UNITED
STATES TRUSTEE FOR QUALIFIED DOMESTIC
TRUSTS.
(a) IN
GENERAL.—Subparagraph (A) of section
2056A(a)(1) is amended by inserting ‘‘except as provided
in regulations prescribed by the Secretary,’’ before ‘‘re-
quires’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
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TITLE 
XII—SIMPLIFICATION
PROVISIONS 
RELATING 
TO
EXCISE TAXES, TAX-EXEMPT
BONDS, AND OTHER MATTERS
Subtitle A—Excise Tax
Simplification
PART I—EXCISE TAXES ON HEAVY TRUCKS AND
LUXURY CARS
SEC. 1201. INCREASE IN DE MINIMIS LIMIT FOR AFTER-MAR-
KET ALTERATIONS FOR HEAVY TRUCKS AND
LUXURY CARS.
(a) 
IN
GENERAL.—Sections 
4003(a)(3)(C) 
and
4051(b)(2)(B) (relating to exceptions) are each amended by
striking ‘‘$200’’ and inserting ‘‘$1,000’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to installations on vehicles sold after
the date of the enactment of this Act.
PART II—PROVISIONS RELATED TO DISTILLED
SPIRITS, WINES, AND BEER
SEC. 1211. CREDIT OR REFUND FOR IMPORTED BOTTLED
DISTILLED SPIRITS RETURNED TO DISTILLED
SPIRITS PLANT.
(a) IN GENERAL.—Section 5008(c)(1) (relating to dis-
tilled spirits returned to bonded premises) is amended by
striking ‘‘withdrawn from bonded premises on payment or
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determination of tax’’ and inserting ‘‘on which tax has been
determined or paid’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
SEC. 1212. AUTHORITY TO CANCEL OR CREDIT EXPORT
BONDS WITHOUT SUBMISSION OF RECORDS.
(a) IN GENERAL.—Section 5175(c) (relating to can-
cellation of credit of export bonds) is amended by striking
‘‘on the submission of’’ and all that follows and inserting
‘‘if there is such proof of exportation as the Secretary may
by regulations require.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
SEC. 
1213. 
REPEAL 
OF 
REQUIRED 
MAINTENANCE 
OF
RECORDS ON PREMISES OF DISTILLED SPIR-
ITS PLANT.
(a) IN GENERAL.—Section 5207(c) (relating to preser-
vation and inspection) is amended by striking ‘‘shall be
kept on the premises where the operations covered by the
record are carried on and’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
SEC. 1214. FERMENTED MATERIAL FROM ANY BREWERY
MAY BE RECEIVED AT A DISTILLED SPIRITS
PLANT.
(a) IN GENERAL.—Section 5222(b)(2) (relating to re-
ceipt) is amended to read as follows:
‘‘(2) beer conveyed without payment of tax from
brewery premises, beer which has been lawfully re-
moved from brewery premises upon determination of
tax, or’’.
(b) CLARIFICATION OF AUTHORITY TO PERMIT RE-
MOVAL OF BEER WITHOUT PAYMENT OF TAX FOR USE AS
DISTILLING MATERIAL.—Section 5053 (relating to exemp-
tions) is amended by redesignating subsection (f) as sub-
section (i) and by inserting after subsection (e) the following
new subsection:
‘‘(f) REMOVAL FOR USE AS DISTILLING MATERIAL.—
Subject to such regulations as the Secretary may prescribe,
beer may be removed from a brewery without payment of
tax to any distilled spirits plant for use as distilling mate-
rial.’’.
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(c) CLARIFICATION
OF REFUND
AND CREDIT
OF
TAX.—Section 5056 (relating to refund and credit of tax,
or relief from liability) is amended—
(1) by redesignating subsection (c) as subsection
(d) and by inserting after subsection (b) the following
new subsection:
‘‘(c) BEER
RECEIVED
AT
A
DISTILLED
SPIRITS
PLANT.—Any tax paid by any brewer on beer produced in
the United States may be refunded or credited to the brewer,
without interest, or if the tax has not been paid, the brewer
may be relieved of liability therefor, under regulations as
the Secretary may prescribe, if such beer is received on the
bonded premises of a distilled spirits plant pursuant to the
provisions of section 5222(b)(2), for use in the production
of distilled spirits.’’, and
(2) by striking ‘‘or rendering unmerchantable’’
in subsection (d) (as so redesignated) and inserting
‘‘rendering unmerchantable, or receipt on the bonded
premises of a distilled spirits plant’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
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SEC. 1218. DOMESTICALLY PRODUCED BEER MAY BE WITH-
DRAWN FREE OF TAX FOR USE OF FOREIGN
EMBASSIES, LEGATIONS, ETC.
(a) IN GENERAL.—Section 5053 (relating to exemp-
tions), as amended by section 1414(b), is amended by in-
serting after subsection (f) the following new subsection:
‘‘(g) REMOVALS FOR USE OF FOREIGN EMBASSIES,
LEGATIONS, ETC.—
‘‘(1) IN GENERAL.—Subject to such regulations
as the Secretary may prescribe—
‘‘(A) beer may be withdrawn from the brew-
ery without payment of tax for transfer to any
customs bonded warehouse for entry pending
withdrawal therefrom as provided in subpara-
graph (B), and
‘‘(B) beer entered into any customs bonded
warehouse under subparagraph (A) may be with-
drawn for consumption in the United States by,
and for the official and family use of, such for-
eign governments, organizations, and individuals
as are entitled to withdraw imported beer from
such warehouses free of tax.
Beer transferred to any customs bonded warehouse
under subparagraph (A) shall be entered, stored, and
accounted for in such warehouse under such regula-
tions and bonds as the Secretary may prescribe, and
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may be withdrawn therefrom by such governments,
organizations, and individuals free of tax under the
same conditions and procedures as imported beer.
‘‘(2) OTHER RULES TO APPLY.—Rules similar to
the rules of paragraphs (2) and (3) of section 5362(e)
shall apply for purposes of this subsection.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
SEC. 1219. BEER MAY BE WITHDRAWN FREE OF TAX FOR DE-
STRUCTION.
(a) IN GENERAL.—Section 5053 (relating to exemp-
tions), as amended by section 1418(a), is amended by in-
serting after subsection (g) the following new subsection:
‘‘(h) REMOVALS FOR DESTRUCTION.—Subject to such
regulations as the Secretary may prescribe, beer may be re-
moved from the brewery without payment of tax for destruc-
tion.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
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SEC. 1220. AUTHORITY TO ALLOW DRAWBACK ON EX-
PORTED BEER WITHOUT SUBMISSION OF
RECORDS.
(a) IN GENERAL.—The first sentence of section 5055
(relating to drawback of tax on beer) is amended by striking
‘‘found to have been paid’’ and all that follows and insert-
ing ‘‘paid on such beer if there is such proof of exportation
as the Secretary may by regulations require.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
SEC. 1221. TRANSFER TO BREWERY OF BEER IMPORTED IN
BULK WITHOUT PAYMENT OF TAX.
(a) IN GENERAL.—Part II of subchapter G of chapter
51 is amended by adding at the end the following new sec-
tion:
‘‘SEC. 5418. BEER IMPORTED IN BULK.
‘‘Beer imported or brought into the United States in
bulk containers may, under such regulations as the Sec-
retary may prescribe, be withdrawn from customs custody
and transferred in such bulk containers to the premises of
a brewery without payment of the internal revenue tax im-
posed on such beer. The proprietor of a brewery to which
such beer is transferred shall become liable for the tax on
the beer withdrawn from customs custody under this section
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upon release of the beer from customs custody, and the im-
porter, or the person bringing such beer into the United
States, shall thereupon be relieved of the liability for such
tax.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
such part II is amended by adding at the end the following
new item:
‘‘Sec. 5418. Beer imported in bulk.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
SEC. 1222. TRANSFER TO BONDED WINE CELLARS OF WINE
IMPORTED IN BULK WITHOUT PAYMENT OF
TAX.
(a) IN GENERAL.—Part II of subchapter F of chapter
51 is amended by inserting after section 5363 the following
new section:
‘‘SEC. 5364. WINE IMPORTED IN BULK.
‘‘Wine imported or brought into the United States in
bulk containers may, under such regulations as the Sec-
retary may prescribe, be withdrawn from customs custody
and transferred in such bulk containers to the premises of
a bonded wine cellar without payment of the internal reve-
nue tax imposed on such wine. The proprietor of a bonded
wine cellar to which such wine is transferred shall become
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liable for the tax on the wine withdrawn from customs cus-
tody under this section upon release of the wine from cus-
toms custody, and the importer, or the person bringing such
wine into the United States, shall thereupon be relieved of
the liability for such tax.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
such part II is amended by inserting after the item relating
to section 5363 the following new item:
‘‘Sec. 5364. Wine imported in bulk.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the 1st day of the 1st calendar
quarter that begins at least 90 days after the date of the
enactment of this Act.
PART III—OTHER EXCISE TAX PROVISIONS
SEC. 1231. AUTHORITY TO GRANT EXEMPTIONS FROM REG-
ISTRATION REQUIREMENTS.
(a) IN GENERAL.—Section 4222(b)(2) (relating to ex-
port) is amended—
(1) by striking ‘‘in the case of any sale or resale
for export,’’, and
(2) by striking ‘‘EXPORT’’ and inserting ‘‘UNDER
REGULATIONS’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall take effect on the date of the enactment
of this Act.
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SEC. 1232. REPEAL OF EXPIRED PROVISIONS.
(a) PIGGY-BACK TRAILERS.—Section 4051 (relating to
imposition of tax on heavy trucks and trailers sold at re-
tail) is amended by striking subsection (d) and by redesig-
nating subsection (e) as subsection (d).
(b) DEEP SEABED MINING.—
(1) IN GENERAL.—Subchapter F of chapter 36
(relating to tax on removal of hard mineral resources
from deep seabed) is hereby repealed.
(2) CONFORMING
AMENDMENT.—The table of
subchapters for chapter 36 is amended by striking the
item relating to subchapter F.
(c) OZONE-DEPLETING CHEMICALS.—
(1) Paragraph (1) of section 4681(b) is amended
by striking subparagraphs (B) and (C) and inserting
the following new subparagraph:
‘‘(B) BASE
TAX
AMOUNT.—The base tax
amount for purposes of subparagraph (A) with
respect to any sale or use during any calendar
year after 1995 shall be $5.35 increased by 45
cents for each year after 1995.’’.
(2) Subsection (g) of section 4682 is amended to
read as follows:
‘‘(g) CHEMICALS USED
AS PROPELLANTS
IN ME-
TERED-DOSE INHALERS.—
‘‘(1) EXEMPTION FROM TAX.—
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‘‘(A) IN GENERAL.—No tax shall be imposed
by section 4681 on—
‘‘(i) any use of any substance as a pro-
pellant in metered-dose inhalers, or
‘‘(ii) any qualified sale by the manu-
facturer, producer, or importer of any sub-
stance.
‘‘(B) QUALIFIED
SALE.—For purposes of
subparagraph (A), the term ‘qualified sale’
means any sale by the manufacturer, producer,
or importer of any substance—
‘‘(i) for use by the purchaser as a pro-
pellant in metered dose inhalers, or
‘‘(ii) for resale by the purchaser to a
2d purchaser for such use by the 2d pur-
chaser.
The preceding sentence shall apply only if the
manufacturer, producer, and importer, and the
1st and 2d purchasers (if any) meet such reg-
istration requirements as may be prescribed by
the Secretary.
‘‘(2) OVERPAYMENTS.—If any substance on
which tax was paid under this subchapter is used by
any person as a propellant in metered-dose inhalers,
credit or refund without interest shall be allowed to
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such person in an amount equal to the tax so paid.
Amounts payable under the preceding sentence with
respect to uses during the taxable year shall be treated
as described in section 34(a) for such year unless
claim thereof has been timely filed under this para-
graph.’’.
SEC. 1233. SIMPLIFICATION OF IMPOSITION OF EXCISE TAX
ON ARROWS.
(a) IN GENERAL.—Subsection (b) of section 4161 (re-
lating to imposition of tax) is amended to read as follows:
‘‘(b) BOWS AND ARROWS, ETC.—
‘‘(1) BOWS.—
‘‘(A) IN
GENERAL.—There is hereby im-
posed on the sale by the manufacturer, producer,
or importer of any bow which has a draw weight
of 10 pounds or more, a tax equal to 11 percent
of the price for which so sold.
‘‘(B) PARTS AND ACCESSORIES.—There is
hereby imposed upon the sale by the manufac-
turer, producer, or importer—
‘‘(i) of any part of accessory suitable
for inclusion in or attachment to a bow de-
scribed in subparagraph (A), and
‘‘(ii) of any quiver suitable for use
with arrows described in paragraph (2),
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a tax equivalent to 11 percent of the price for
which so sold.
‘‘(2) ARROWS.—There is hereby imposed on the
sale by the manufacturer, producer, or importer of
any shaft, point, nock, or vane of a type used in the
manufacture of any arrow which after its assembly—
‘‘(A) measures 18 inches overall or more in
length, or
‘‘(B) measures less than 18 inches overall in
length but is suitable for use with a bow de-
scribed in paragraph (1)(A),
a tax equal to 12.4 percent of the price for which so
sold.
‘‘(3) COORDINATION WITH SUBSECTION (a).—No
tax shall be imposed under this subsection with re-
spect to any article taxable under subsection (a).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to articles sold by the manufacturer,
producer, or importer after September 30 1997.
SEC. 1234. MODIFICATIONS TO RETAIL TAX ON HEAVY
TRUCKS.
(a) CERTAIN
REPAIRS
AND
MODIFICATIONS
NOT
TREATED AS MANUFACTURE.—Section 4052 is amended by
redesignating the subsection defining a long-term lease as
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subsection (e) and by adding at the end the following new
subsection:
‘‘(f) CERTAIN REPAIRS
AND MODIFICATIONS NOT
TREATED AS MANUFACTURE.—
‘‘(1) IN GENERAL.—An article described in sec-
tion 4051(a)(1) shall not be treated as manufactured
or produced solely by reason of repairs or modifica-
tions to the article (including any modification which
changes the transportation function of the article or
restores a wrecked article to a functional condition)
if the cost of such repairs and modifications does not
exceed 75 percent of the retail price of a comparable
new article.
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply if the article (as repaired or modified) would,
if new, be taxable under section 4051 and the article
when new was not taxable under this section or the
corresponding provision of prior law.’’.
(b) SIMPLIFICATION OF CERTIFICATION PROCEDURES
WITH RESPECT TO SALES OF TAXABLE ARTICLES.—
(1) REPEAL OF REGISTRATION REQUIREMENT.—
Subsection (d) of section 4052 is amended by striking
‘‘rules of—’’ and all that follows through ‘‘shall
apply’’ and inserting ‘‘rules of subsections (c) and (d)
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of section 4216 (relating to partial payments) shall
apply’’.
(2) REQUIREMENT TO MODIFY REGULATIONS.—
Section 4052 is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) REGULATIONS.—The Secretary shall prescribe
regulations which permit, in lieu of any other certification,
persons who are purchasing articles taxable under this sub-
chapter for resale or leasing in a long-term lease to execute
a statement (made under penalties of perjury) on the sale
invoice that such sale is for resale. The Secretary shall not
impose any registration requirement as a condition of using
such procedure.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on January 1, 1998.
SEC. 1235. SKYDIVING FLIGHTS EXEMPT FROM TAX ON
TRANSPORTATION OF PERSONS BY AIR.
(a) IN GENERAL.—Section 4261 (relating to imposi-
tion of tax on transportation of persons by air) is amended
by redesignating subsection (h) as subsection (i) and by in-
serting after subsection (g) the following new subsection:
‘‘(h) EXEMPTION FOR SKYDIVING USES.—No tax shall
be imposed by this section or section 4271 on any air trans-
portation exclusively for the purpose of skydiving.’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to transportation beginning after
September 30, 1997.
SEC. 1236. ALLOWANCE OR CREDIT OF REFUND FOR TAX-
PAID AVIATION FUEL PURCHASED BY REG-
ISTERED PRODUCER OF AVIATION FUEL.
(a) IN GENERAL.—Subsection (l) of section 6467 (re-
lating to nontaxable uses of diesel fuel and aviation fuel)
is amended by adding at the end the following new para-
graph:
‘‘(6) REFUND OF TAX-PAID AVIATION FUEL TO
REGISTERED PRODUCER OF FUEL.—For purposes of
this subsection, the term ‘nontaxable use’ includes the
taxable sale of aviation fuel by a producer of such fuel
who is registered under section 4101 if a prior tax
imposed by section 4091 was paid (and not credited
or refunded) on such fuel.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to sales by the producer after Sep-
tember 30, 1997.
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Subtitle B—Tax-Exempt Bond
Provisions
SEC. 1241. REPEAL OF $100,000 LIMITATION ON UNSPENT
PROCEEDS UNDER 1-YEAR EXCEPTION FROM
REBATE.
Subclause (I) of section 148(f)(4)(B)(ii) (relating to
additional period for certain bonds) is amended by striking
‘‘the lesser of 5 percent of the proceeds of the issue or
$100,000’’ and inserting ‘‘5 percent of the proceeds of the
issue’’.
SEC. 1242. EXCEPTION FROM REBATE FOR EARNINGS ON
BONA FIDE DEBT SERVICE FUND UNDER CON-
STRUCTION BOND RULES.
Subparagraph (C) of section 148(f)(4) is amended by
adding at the end the following new clause:
‘‘(xvii) TREATMENT
OF
BONA
FIDE
DEBT SERVICE FUNDS.—If the spending re-
quirements of clause (ii) are met with re-
spect to the available construction proceeds
of a construction issue, then paragraph (2)
shall not apply to earnings on a bona fide
debt service fund for such issue.’’.
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SEC. 1243. REPEAL OF DEBT SERVICE-BASED LIMITATION
ON INVESTMENT IN CERTAIN NONPURPOSE
INVESTMENTS.
Subsection (d) of section 148 (relating to special rules
for reasonably required reserve or replacement fund) is
amended by striking paragraph (3).
SEC. 1244. REPEAL OF EXPIRED PROVISIONS.
(a) Paragraph (2) of section 148(c) is amended by
striking subparagraph (B) and by redesignating subpara-
graphs (C), (D), and (E) as subparagraphs (B), (C), and
(D), respectively.
(b) Paragraph (4) of section 148(f) is amended by
striking subparagraph (E).
SEC. 1245. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to
bonds issued after the date of the enactment of this Act.
Subtitle C—Tax Court Procedures
SEC. 
1251. 
OVERPAYMENT 
DETERMINATIONS 
OF 
TAX
COURT.
(a) APPEAL OF ORDER.—Paragraph (2) of section
6512(b) (relating to jurisdiction to enforce) is amended by
adding at the end the following new sentence: ‘‘An order
of the Tax Court disposing of a motion under this para-
graph shall be reviewable in the same manner as a decision
of the Tax Court, but only with respect to the matters deter-
mined in such order.’’.
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(b) DENIAL OF JURISDICTION REGARDING CERTAIN
CREDITS AND REDUCTIONS.—Subsection (b) of section 6512
(relating to overpayment determined by Tax Court) is
amended by adding at the end the following new paragraph:
‘‘(4) DENIAL OF JURISDICTION REGARDING CER-
TAIN
CREDITS
AND
REDUCTIONS.—The Tax Court
shall have no jurisdiction under this subsection to re-
strain or review any credit or reduction made by the
Secretary under section 6402.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 1252. REDETERMINATION OF INTEREST PURSUANT TO
MOTION.
(a) IN GENERAL.—Subsection (c) of section 7481 (re-
lating to jurisdiction over interest determinations) is
amended to read as follows:
‘‘(c) JURISDICTION
OVER
INTEREST
DETERMINA-
TIONS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a), if, within 1 year after the date the decision of the
Tax Court becomes final under subsection (a) in a
case to which this subsection applies, the taxpayer
files a motion in the Tax Court for a redetermination
of the amount of interest involved, then the Tax Court
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may reopen the case solely to determine whether the
taxpayer has made an overpayment of such interest
or the Secretary has made an underpayment of such
interest and the amount thereof.
‘‘(2) CASES
TO
WHICH
THIS
SUBSECTION
AP-
PLIES.—This subsection shall apply where—
‘‘(A)(i) an assessment has been made by the
Secretary under section 6215 which includes in-
terest as imposed by this title, and
‘‘(ii) the taxpayer has paid the entire
amount of the deficiency plus interest claimed by
the Secretary, and
‘‘(B) the Tax Court finds under section
6512(b) that the taxpayer has made an overpay-
ment.
‘‘(3) SPECIAL RULES.—If the Tax Court deter-
mines under this subsection that the taxpayer has
made an overpayment of interest or that the Sec-
retary has made an underpayment of interest, then
that determination shall be treated under section
6512(b)(1) as a determination of an overpayment of
tax. An order of the Tax Court redetermining interest,
when entered upon the records of the court, shall be
reviewable in the same manner as a decision of the
Tax Court.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 1253. APPLICATION OF NET WORTH REQUIREMENT
FOR AWARDS OF LITIGATION COSTS.
(a) IN GENERAL.—Paragraph (4) of section 7430(c)
(defining prevailing party) is amended by adding at the
end thereof the following new subparagraph:
‘‘(D) SPECIAL RULES FOR APPLYING NET
WORTH
REQUIREMENT.—In applying the re-
quirements of section 2412(d)(2)(B) of title 28,
United States Code, for purposes of subpara-
graph (A)(iii) of this paragraph—
‘‘(i) the net worth limitation in clause
(i) of such section shall apply to—
‘‘(I) an estate but shall be deter-
mined as of the date of the decedent’s
death, and
‘‘(II) a trust but shall be deter-
mined as of the last day of the taxable
year involved in the proceeding, and
‘‘(ii) individuals filing a joint return
shall be treated as separate individuals for
purposes of clause (i) of such section.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to proceedings commenced after the date
of the enactment of this Act.
SEC. 1254. PROCEEDINGS FOR DETERMINATION OF EM-
PLOYMENT STATUS.
(a) IN GENERAL.—Subchapter B of chapter 76 (relat-
ing to proceedings by taxpayers and third parties) is
amended by redesignating section 7435 as section 7436 and
by inserting after section 7434 the following new section:
‘‘SEC. 7435. PROCEEDINGS FOR DETERMINATION OF EM-
PLOYMENT STATUS.
‘‘(a) CREATION OF REMEDY.—If, in connection with
an audit of any person, there is an actual controversy in-
volving a determination by the Secretary as part of an ex-
amination that—
‘‘(1) one or more individuals performing services
for such person are employees of such person for pur-
poses of subtitle C, or
‘‘(2) such person is not entitled to the treatment
under subsection (a) of section 530 of the Revenue Act
of 1978 with respect to such an individual,
upon the filing of an appropriate pleading, the Tax Court
may determine whether such a determination by the Sec-
retary is correct. Any such determination by the Tax Court
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shall have the force and effect of a decision of the Tax Court
and shall be reviewable as such.
‘‘(b) LIMITATIONS.—
‘‘(1) PETITIONER.—A pleading may be filed
under this section only by the person for whom the
services are performed.
‘‘(2) TIME FOR FILING ACTION.—If the Secretary
sends by certified or registered mail notice to the peti-
tioner of a determination by the Secretary described
in subsection (a), no proceeding may be initiated
under this section with respect to such determination
unless the pleading is filed before the 91st day after
the date of such mailing.
‘‘(3) NO ADVERSE INFERENCE FROM TREATMENT
WHILE ACTION IS PENDING.—If, during the pendency
of any proceeding brought under this section, the peti-
tioner changes his treatment for employment tax pur-
poses of any individual whose employment status as
an employee is involved in such proceeding (or of any
individual holding a substantially similar position)
to treatment as an employee, such change shall not be
taken into account in the Tax Court’s determination
under this section.
‘‘(c) SMALL CASE PROCEDURES.—
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‘‘(1) IN GENERAL.—At the option of the peti-
tioner, concurred in by the Tax Court or a division
thereof before the hearing of the case, proceedings
under this section may (notwithstanding the provi-
sions of section 7453) be conducted subject to the rules
of evidence, practice, and procedure applicable under
section 7463 if the amount of employment taxes
placed in dispute is $10,000 or less for each calendar
quarter involved.
‘‘(2) FINALITY OF DECISIONS.—A decision en-
tered in any proceeding conducted under this sub-
section shall not be reviewed in any other court and
shall not be treated as a precedent for any other case
not involving the same petitioner and the same deter-
minations.
‘‘(3) CERTAIN RULES TO APPLY.—Rules similar
to the rules of the last sentence of subsection (a), and
subsections (c), (d), and (e), of section 7463 shall
apply to proceedings conducted under this subsection.
‘‘(d) SPECIAL RULES.—
‘‘(1) RESTRICTIONS ON ASSESSMENT AND COL-
LECTION PENDING ACTION, ETC.—The principles of
subsections (a), (b), and (d) of section 6213, section
6214(a), section 6215, section 6503(a), and section
6512 shall apply to proceedings brought under this
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section in the same manner as if the Secretary’s de-
termination described in subsection (a) were a notice
of deficiency.
‘‘(2) AWARDING OF COSTS AND CERTAIN FEES.—
Section 7430 shall apply to proceedings brought
under this section.
‘‘(e) EMPLOYMENT TAX.—The term ‘employment tax’
means any tax imposed by subtitle C.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (d) of section 6511 is amended by
adding at the end the following new paragraph:
‘‘(7) SPECIAL PERIOD OF LIMITATION WITH RE-
SPECT
TO
SELF-EMPLOYMENT
TAX
IN
CERTAIN
CASES.—If—
‘‘(A) the claim for credit or refund relates
to an overpayment of the tax imposed by chapter
2 (relating to the tax on self-employment income)
attributable to Tax Court determination in a
proceeding under section 7435, and
‘‘(B) the allowance of a credit or refund of
such overpayment is otherwise prevented by the
operation of any law or rule of law other than
section 7122 (relating to compromises),
such credit or refund may be allowed or made if
claim therefor is filed on or before the last day of the
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second year after the calendar year in which such de-
termination becomes final.’’.
(2) Sections 7453 and 7481(b) are each amended
by striking ‘‘section 7463’’ and inserting ‘‘section
7435(c) or 7463’’.
(3) The table of sections for subchapter B of
chapter 76 is amended by striking the last item and
inserting the following:
‘‘Sec. 7435. Proceedings for determination of employment status.
‘‘Sec. 7436. Cross references.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
Subtitle D—Other Provisions
SEC. 1261. EXTENSION OF DUE DATE OF FIRST QUARTER
ESTIMATED TAX PAYMENT BY PRIVATE FOUN-
DATIONS.
(a) IN GENERAL.—Paragraph (3) of section 6655(g)
is amended by adding at the end the following new sentence:
‘‘In the case of a private foundation, subsection (c)(2) shall
be applied by substituting ‘May 15’ for ‘April 15’.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply for purposes of determining under-
payments of estimated tax for taxable years beginning after
the date of the enactment of this Act.
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SEC. 1262. CLARIFICATION OF AUTHORITY TO WITHHOLD
PUERTO RICO INCOME TAXES FROM SALA-
RIES OF FEDERAL EMPLOYEES.
(a) IN GENERAL.—Subsection (c) of section 5517 of
title 5, United States Code, is amended by striking ‘‘or ter-
ritory or possession’’ and inserting ‘‘, territory, possession,
or commonwealth’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on January 1, 1998.
SEC. 1263. CERTAIN NOTICES DISREGARDED UNDER PROVI-
SION INCREASING INTEREST RATE ON LARGE
CORPORATE UNDERPAYMENTS.
(a) GENERAL RULE.—Subparagraph (B) of section
6621(c)(2) (defining applicable date) is amended by adding
at the end the following new clause:
‘‘(iii) EXCEPTION
FOR
LETTERS
OR
NOTICES INVOLVING SMALL AMOUNTS.—For
purposes of this paragraph, any letter or
notice shall be disregarded if the amount of
the deficiency or proposed deficiency (or the
assessment or proposed assessment) set forth
in such letter or notice is not greater than
$100,000 (determined by not taking into ac-
count any interest, penalties, or additions
to tax).’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply for purposes of determining interest
for periods after December 31, 1997.
TITLE XIII—PENSION
SIMPLIFICATION
SEC. 1301. MATCHING CONTRIBUTIONS OF SELF-EMPLOYED
INDIVIDUALS NOT TREATED AS ELECTIVE EM-
PLOYER CONTRIBUTIONS.
(a) IN GENERAL.—Section 402(g) (relating to limita-
tion on exclusion for elective deferrals) is amended by add-
ing at the end the following:
‘‘(9) MATCHING CONTRIBUTIONS ON BEHALF OF
SELF-EMPLOYED
INDIVIDUALS
NOT
TREATED
AS
ELECTIVE EMPLOYER CONTRIBUTIONS.—Any match-
ing contribution described in section 401(m)(4)(A))
which is made on behalf of a self-employed individual
(as defined in section 401(c)) shall not be treated as
an elective employer contribution under a qualified
cash or deferred arrangement (as defined in section
401(k)) for purposes of this title.’’.
(b) CONFORMING AMENDMENT FOR SIMPLE RETIRE-
MENT ACCOUNTS.—Section 408(p) (relating to simple re-
tirement accounts) is amended by adding at the end the
following:
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‘‘(8) MATCHING CONTRIBUTIONS ON BEHALF OF
SELF-EMPLOYED
INDIVIDUALS
NOT
TREATED
AS
ELECTIVE EMPLOYER CONTRIBUTIONS.—Any match-
ing contribution described in paragraph (2)(A)(iii)
which is made on behalf of a self-employed individual
(as defined in section 401(c)) shall not be treated as
an elective employer contribution to a simple retire-
ment account for purposes of this title.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
1997.
SEC. 1302. CONTRIBUTIONS TO IRAS THROUGH PAYROLL
DEDUCTIONS.
(a) DEFINITIONS.—For purposes of this section:
(1) CONTRIBUTION
CERTIFICATE.—The term
‘‘contribution certificate’’ means a certificate submit-
ted by an eligible employee to the employee’s employer
which—
(A) identifies the employee by name, ad-
dress, and social security number,
(B) includes a certification by the employee
that the employee is an eligible employee,
(C) identifies the individual retirement
plan to which the employee wishes to make con-
tributions through payroll deductions,
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(D) identifies the amount of such contribu-
tions, not to exceed the amount allowed under
section 408 of the Internal Revenue Code of 1986
to an individual retirement plan for such year.
(2) ELIGIBLE EMPLOYEE.—
(A) IN GENERAL.—The term ‘‘eligible em-
ployee’’ means, with respect to any taxable year,
an employee whose employer does not sponsor a
plan, contract, pension, account, or trust de-
scribed in section 219(g)(5) (A) or (B) of the In-
ternal Revenue Code of 1986.
(B) EMPLOYEE.—The term ‘‘employee’’ does
not include an employee as defined in section
401(c)(1) of such Code.
(3) INDIVIDUAL RETIREMENT PLANS.—The term
‘‘individual retirement plan’’ has the meaning given
the term by section 7701(a)(37) of the Internal Reve-
nue Code of 1986.
(4) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of the Treasury.
(b) ESTABLISHMENT OF PAYROLL DEDUCTION SYS-
TEM.—An employer may establish a system under which
eligible employees, through employer payroll deductions,
may make contributions to individual retirement plans. An
employer shall not incur any liability under title I of the
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Employee Retirement Income Security Act of 1974 in pro-
viding for such a system.
(c) CONTRIBUTIONS
TO
INDIVIDUAL
RETIREMENT
PLANS.—
(1) IN GENERAL.—The system established under
subsection (b) shall provide that contributions made
to an individual retirement plan for any taxable year
are—
(A) contributions through employer payroll
deductions, and
(B) if the employer so elects, additional con-
tributions by the employee which, when added to
contributions under subparagraph (A), do not
exceed the amount allowed under section 408 of
the Internal Revenue Code of 1986 for the tax-
able year.
(2) EMPLOYER PAYROLL DEDUCTIONS.—
(A) IN GENERAL.—The system established
under subsection (b) shall provide that an eligi-
ble employee may establish and maintain an in-
dividual retirement plan simply by—
(i) completing a contribution certifi-
cate, and
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(ii) submitting such certificate to the
eligible employee’s employer in the manner
provided under subparagraph (D).
(B) EASE OF ADMINISTRATION.—An eligible
employee establishing and maintaining an indi-
vidual retirement plan under subparagraph (A)
may change the amount of an employer payroll
deduction in the same manner as under subpara-
graph (A).
(C) SIMPLIFIED
CONTRIBUTION
CERTIFI-
CATE.—The Secretary shall develop a model con-
tribution certificate for purposes of this para-
graph which is written in a clear and easily un-
derstandable manner.
(D) USE OF CERTIFICATE.—Each employer
electing to adopt a system under subsection (b)
shall, upon receipt of a contribution certificate
from an eligible employee, deduct the appro-
priate contribution as determined by such cer-
tificate from the employee’s wages in equal
amounts during the remaining payroll periods
for the taxable year and shall remit such
amounts for investment in the employee’s indi-
vidual retirement plan not later than the close of
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the 30-day period following the last day of the
month in which such payroll period occurs.
(E) FAILURE TO REMIT PAYROLL DEDUC-
TIONS.—For purposes of the Internal Revenue
Code of 1986, any amount which an employer
fails to remit on behalf of an eligible employee
pursuant to a contribution certificate of such
employee shall not be allowed as a deduction to
the employer under such Code.
SEC. 1303. PLANS NOT DISQUALIFIED MERELY BY ACCEPT-
ING ROLLOVER CONTRIBUTIONS.
(a) IN GENERAL.—Section 401(a) (relating to quali-
fied pension, profit-sharing, and stock bonus plans) is
amended by inserting after paragraph (34) the following:
‘‘(35) PLANS NOT DISQUALIFIED MERELY BY AC-
CEPTING ROLLOVER CONTRIBUTIONS.—A trust which
is part of a plan shall not fail to be a qualified trust
under this section solely because the plan accepts a
contribution of an eligible rollover distribution as de-
scribed in section 402(c)(4) from another plan with-
out such a qualified trust if, at the time of the trans-
fer, the trustee of the other plan provided notice of the
other plan’s intention to have such a qualified trust.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to rollover contributions made after De-
cember 31, 1997.
SEC. 1304. MODIFICATION OF PROHIBITION OF ASSIGN-
MENT OR ALIENATION.
(a) AMENDMENT TO ERISA.—Section 206(d) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1056(d)) is amended by adding at the end the follow-
ing:
‘‘(4) Paragraph (1) shall not apply to any offset of
a participant’s accrued benefit in an employee pension ben-
efit plan against an amount that the participant is ordered
or required to pay to the plan if—
‘‘(A) the order or requirement to pay arises—
‘‘(i) under a judgment of conviction for a
crime involving such plan,
‘‘(ii) under a civil judgment (including a
consent order or decree) entered by a court in an
action brought in connection with a violation (or
alleged violation) of part 4 of this subtitle, or
‘‘(iii) pursuant to a settlement agreement
between the Secretary and the participant, or a
settlement agreement between the Pension Benefit
Guaranty Corporation and the participant, in
connection with a violation (or alleged violation)
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of part 4 of this subtitle by a fiduciary or any
other person,
‘‘(B) the judgment, order, decree, or settlement
agreement expressly provides for the offset of all or
part of the amount ordered or required to be paid to
the plan against the participant’s accrued benefit in
the plan, and
‘‘(C) if the participant has a spouse at the time
at which the offset is to be made—
‘‘(i) such spouse has consented in writing to
such offset and such consent is witnessed by a
notary public or representative of the plan,
‘‘(ii) such spouse is ordered or required in
such judgment, order, decree, or settlement to
pay an amount to the plan in connection with
a violation of part 4 of this subtitle, or
‘‘(iii) in such judgment, order, decree, or
settlement, such spouse retains the right to re-
ceive the value of the survivor annuity under a
qualified joint and survivor annuity provided
pursuant to section 205(a)(1) and under a quali-
fied preretirement survivor annuity provided
pursuant to section 205(a)(2), determined in ac-
cordance with paragraph (5).
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A plan shall not be treated as failing to meet the require-
ments of section 205 solely by reason of an offset under this
paragraph.
‘‘(5)(A) The value of the survivor annuity described
in paragraph (4)(C)(iii) shall be determined as if—
‘‘(i) the participant terminated employment on
the date of the offset,
‘‘(ii) there was no offset,
‘‘(iii) the plan permitted retirement only on or
after normal retirement age,
‘‘(iv) the plan provided only the minimum-re-
quired qualified joint and survivor annuity, and
‘‘(v) the amount of the qualified preretirement
survivor annuity under the plan is equal to the
amount of the survivor annuity payable under the
minimum-required qualified joint and survivor annu-
ity.
‘‘(B) For purposes of this paragraph, the term ‘mini-
mum-required qualified joint and survivor annuity’ means
the qualified joint and survivor annuity which is the actu-
arial equivalent of a single annuity for the life of the partic-
ipant and under which the survivor annuity is 50 percent
of the amount of the annuity which is payable during the
joint lives of the participant and the spouse.’’.
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(b) AMENDMENT TO 1986 CODE.—Section 401(a)(13)
(relating to assignment and alienation) is made by adding
at the end the following:
‘‘(C) SPECIAL
RULE
FOR
CERTAIN
JUDG-
MENTS AND SETTLEMENTS.—Subparagraph (A)
shall not apply to any offset of a participant’s
accrued benefit in an employee pension benefit
plan against an amount that the participant is
ordered or required to pay to the plan if—
‘‘(i) the order or requirement to pay
arises—
‘‘(I) under a judgment of convic-
tion for a crime involving such plan,
‘‘(II) under a civil judgment (in-
cluding a consent order or decree) en-
tered by a court in an action brought
in connection with a violation (or al-
leged violation) of part 4 of subtitle B
of title I of the Employee Retirement
Income Security Act of 1974, or
‘‘(III) pursuant to a settlement
agreement between the Secretary and
the participant, or a settlement agree-
ment between the Pension Benefit
Guaranty Corporation and the partici-
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pant, in connection with a violation
(or alleged violation) of part 4 of such
subtitle by a fiduciary or any other
person,
‘‘(ii) the judgment, order, decree, or
settlement agreement expressly provides for
the offset of all or part of the amount or-
dered or required to be paid to the plan
against the participant’s accrued benefit in
the plan, and
‘‘(iii) if the participant has a spouse
at the time at which the offset is to be
made—
‘‘(I) such spouse has consented in
writing to such offset and such consent
is witnessed by a notary public or rep-
resentative of the plan,
‘‘(II) such spouse is ordered or re-
quired in such judgment, order, decree,
or settlement to pay an amount to the
plan in connection with a violation of
part 4 of such subtitle, or
‘‘(III) in such judgment, order,
decree, or settlement, such spouse re-
tains the right to receive the value of
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the survivor annuity under a qualified
joint and survivor annuity provided
pursuant to section 401(a)(11)(A)(i)
and under a qualified preretirement
survivor annuity provided pursuant to
section 401(a)(11)(A)(ii), determined
in accordance with subparagraph (D).
A plan shall not be treated as failing to meet the
requirements of this subsection, subsection (k),
section 403(b), or section 409(d) solely by reason
of an offset described in this subparagraph.
‘‘(D) VALUATION OF SURVIVOR ANNUITY.—
‘‘(i) IN
GENERAL.—The value of the
survivor annuity described in subparagraph
(C)(iii)(III) shall be determined as if—
‘‘(I) the participant terminated
employment on the date of the offset,
‘‘(II) there was no offset,
‘‘(III) the plan permitted retire-
ment only on or after normal retire-
ment age,
‘‘(IV) the plan provided only the
minimum-required qualified joint and
survivor annuity, and
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‘‘(V) the amount of the qualified
preretirement survivor annuity under
the plan is equal to the amount of the
survivor annuity payable under the
minimum-required qualified joint and
survivor annuity.
‘‘(ii) DEFINITION.—For purposes of
this subparagraph, the term ‘minimum-re-
quired qualified joint and survivor annuity’
means the qualified joint and survivor an-
nuity which is the actuarial equivalent of a
single annuity for the life of the participant
and under which the survivor annuity is 50
percent of the amount of the annuity which
is payable during the joint lives of the par-
ticipant and the spouse.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to judgments, orders, and decrees issued,
and settlement agreements entered into, on or after the date
of the enactment of this Act.
SEC. 1305. ELIMINATION OF PAPERWORK BURDENS ON
PLANS.
(a) ELIMINATION OF UNNECESSARY FILING REQUIRE-
MENTS.—Section 101(b) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1021(b)) is amended
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by striking paragraphs (1), (2), and (3) and by redesignat-
ing paragraphs (4) and (5) as paragraphs (1) and (2), re-
spectively.
(b) ELIMINATION OF PLAN DESCRIPTION.—
(1) IN GENERAL.—Section 102(a) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1022(a)) is amended—
(A) by striking paragraph (2), and
(B) by striking ‘‘(a)(1)’’ and inserting
‘‘(a)’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 102(b) of such Act (29 U.S.C.
1022(b)) is amended by striking ‘‘The plan de-
scription and summary plan description shall
contain’’ and inserting ‘‘The summary plan de-
scription shall contain’’.
(B) The heading for section 102 of such Act
is amended by striking ‘‘PLAN
DESCRIPTION
AND’’.
(c) FURNISHING OF REPORTS.—
(1) IN GENERAL.—Section 104(a)(1) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1024(a)(1)) is amended to read as follows:
‘‘SEC. 104. (a)(1) The administrator of any employee
benefit plan subject to this part shall file with the Secretary
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the annual report for a plan year within 210 days after
the close of such year (or within such time as may be re-
quired by regulations promulgated by the Secretary in
order to reduce duplicative filing). The Secretary shall
make copies of such annual reports available for inspection
in the public document room of the Department of Labor.’’.
(2) SECRETARY MAY REQUEST DOCUMENTS.—
(A) IN GENERAL.—Section 104(a) of such
Act (29 U.S.C. 1024(a)) is amended by adding
at the end the following:
‘‘(6) The administrator of any employee benefit plan
subject to this part shall furnish to the Secretary, upon re-
quest, any documents relating to the employee benefit plan,
including but not limited to, the latest summary plan de-
scription (including any summaries of plan changes not
contained in the summary plan description), and the bar-
gaining agreement, trust agreement, contract, or other in-
strument under which the plan is established or operated.’’.
(B) PENALTY.—Section 502(c) of such Act
(29 U.S.C. 1132(c)) is amended by redesignating
paragraph (6) as paragraph (7) and by insert-
ing after paragraph (5) the following:
‘‘(6) If, within 30 days of a request by the Secretary
to a plan administrator for documents under section
104(a)(6), the plan administrator fails to furnish the mate-
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rial requested to the Secretary, the Secretary may assess
a civil penalty against the plan administrator of up to
$100 a day from the date of such failure (but in no event
in excess of $1,000 per request). No penalty shall be imposed
under this paragraph for any failure resulting from matters
reasonably beyond the control of the plan administrator.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 104(b)(1) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1024(b)(1)) 
is 
amended 
by 
striking 
‘‘section
102(a)(1)’’ each place it appears and inserting ‘‘sec-
tion 102(a)’’.
(2) Section 104(b)(2) of such Act (29 U.S.C.
1024(b)(2)) is amended by striking ‘‘the plan descrip-
tion and’’ and inserting ‘‘the latest updated summary
plan description and’’.
(3) Section 104(b)(4) of such Act (29 U.S.C.
1024(b)(4)) is amended by striking ‘‘plan descrip-
tion’’.
(4) Section 106(a) of such Act (29 U.S.C.
1026(a)) is amended by striking ‘‘descriptions,’’.
(5) Section 107 of such Act (29 U.S.C. 1027) is
amended by striking ‘‘description or’’.
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(6) Paragraph (2)(B) of section 108 of such Act
(29 U.S.C. 1028) is amended to read as follows: ‘‘(B)
after publishing or filing the annual reports,’’.
(7) Section 502(a)(6) of such Act (29 U.S.C.
1132(a)(6)) is amended by striking ‘‘or (5)’’ and in-
serting ‘‘(5), or (6)’’.
(e) TECHNICAL CORRECTION.—Section 1144(c) of the
Social Security Act (42 U.S.C. 1320b–14(c)) is amended
by redesignating paragraph (9) as paragraph (8).
SEC. 1306. MODIFICATION OF 403(b) EXCLUSION ALLOW-
ANCE TO CONFORM TO 415 MODIFICATIONS.
(a) DEFINITION OF COMPENSATION.—
(1) IN
GENERAL.—Section 403(b)(3) (defining
includible compensation) is amended by adding at the
end the following: ‘‘Such term includes—
‘‘(A) any elective deferral (as defined in sec-
tion 402(g)(3)), and
‘‘(B) any amount which is contributed or
deferred by the employer at the election of the
employee and which is not includible in the gross
income of the employee by reason of section 125
or 457.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 1997.
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(b) REPEAL OF RULES IN SECTION 415(e).—The Sec-
retary of the Treasury shall modify the regulations regard-
ing the exclusion allowance under section 403(b)(2) of the
Internal Revenue Code of 1986 to reflect the amendment
made by section 1452(a) of the Small Business Job Protec-
tion Act of 1996. Such modification shall take effect for lim-
itation years beginning after December 31, 1999.
SEC. 1307. NEW TECHNOLOGIES IN RETIREMENT PLANS.
(a) IN GENERAL.—Not later than December 31, 1998,
the Secretary of the Treasury and the Secretary of Labor
shall each issue guidance which is designed to—
(1) interpret the notice, election, consent, disclo-
sure, and time requirements (and related record-
keeping requirements) under the Internal Revenue
Code of 1986 and the Employee Retirement Income
Security Act of 1974 relating to retirement plans as
applied to the use of new technologies by plan spon-
sors and administrators while maintaining the pro-
tection of the rights of participants and beneficiaries,
and
(2) clarify the extent to which writing require-
ments under the Internal Revenue Code of 1986 relat-
ing to retirement plans shall be interpreted to permit
paperless transactions.
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(b) APPLICABILITY OF FINAL REGULATIONS.—Final
regulations applicable to the guidance regarding new tech-
nologies described in subsection (a) shall not be effective
until the first plan year beginning at least 6 months after
the issuance of such final regulations.
SEC. 1308. EXTENSION OF MORATORIUM ON APPLICATION
OF CERTAIN NONDISCRIMINATION RULES TO
STATE AND LOCAL GOVERNMENTS.
(a) GENERAL NONDISCRIMINATION AND PARTICIPA-
TION RULES.—
(1) NONDISCRIMINATION
REQUIREMENTS.—Sec-
tion 401(a)(5) (relating to qualified pension, profit-
sharing, and stock bonus plans) is amended by add-
ing at the end the following:
‘‘(G) GOVERNMENTAL PLANS.—Paragraphs
(3) and (4) shall not apply to a governmental
plan (within the meaning of section 414(d)).’’.
(2) 
ADDITIONAL
PARTICIPATION
REQUIRE-
MENTS.—Section 401(a)(26)(H) (relating to addi-
tional participation requirements) is amended to read
as follows:
‘‘(H) 
EXCEPTION
FOR
GOVERNMENTAL
PLANS.—This paragraph shall not apply to a
governmental plan (within the meaning of sec-
tion 414(d)).’’.
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(3) MINIMUM PARTICIPATION STANDARDS.—Sec-
tion 410(c)(2) (relating to application of participa-
tion standards to certain plans) is amended to read
as follows:
‘‘(2) A plan described in paragraph (1) shall be
treated as meeting the requirements of this section for
purposes of section 401(a), except that in the case of
a plan described in subparagraph (B), (C), or (D) of
paragraph (1), this paragraph shall only apply if
such plan meets the requirements of section 401(a)(3)
(as in effect on September 1, 1974).’’.
(b) PARTICIPATION STANDARDS FOR QUALIFIED CASH
OR DEFERRED ARRANGEMENTS.—
(1) IN GENERAL.—Section 401(k)(3) (relating to
application of participation and discrimination
standards) is amended by adding at the end the fol-
lowing:
‘‘(G) The requirements of subparagraph
(A)(i) and (C) shall not apply to a governmental
plan (within the meaning of section 414(d)).’’.
(2) 
MATCHING
CONTRIBUTIONS.—Section
401(m)(2) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(C) SPECIAL
RULE
FOR
GOVERNMENTAL
PLANS.—A defined contribution plan which is a
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governmental plan (as defined in section 414(d))
shall be treated as meeting the requirements of
this paragraph.’’.
(c) NONDISCRIMINATION RULES FOR SECTION 403(b)
PLANS.—Section 403(b)(12) (relating to nondiscrimination
requirements) is amended by adding at the end the follow-
ing:
‘‘(C) GOVERNMENTAL PLANS.—For purposes
of paragraph (1)(D), the requirements of sub-
paragraph (A)(i) (other than those relating to
section 401(a)(17)) shall not apply to a govern-
mental plan (within the meaning of section
414(d)).’’.
(d) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section apply to taxable years beginning on or
after the date of enactment of this Act.
(2) TREATMENT FOR YEARS BEGINNING BEFORE
DATE OF ENACTMENT.—A governmental plan (within
the meaning of section 414(d) of the Internal Revenue
Code of 1986) shall be treated as satisfying the re-
quirements 
of 
sections 
401(a)(3), 
401(a)(4),
401(a)(26), 401(k), 401(m), 403 (b)(1)(D) and
(b)(12), and 410 of such Code for all taxable years be-
ginning before the date of enactment of this Act.
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SEC. 1309. CLARIFICATION OF CERTAIN RULES RELATING
TO EMPLOYEE STOCK OWNERSHIP PLANS OF
S CORPORATIONS.
(a) CERTAIN CASH DISTRIBUTIONS PERMITTED.—
(1) Paragraph (2) of section 409(h) is amended
by adding at the end the following new subparagraph:
‘‘(B) PLAN
MAINTAINED
BY
S
CORPORA-
TION.—In the case of a plan established and
maintained by an S corporation which otherwise
meets the requirements of this subsection or sec-
tion 4975(e)(7), such plan shall not be treated as
failing to meet the requirements of this sub-
section or section 401(a) merely because it does
not permit a participant to exercise the right de-
scribed in paragraph (1)(A) if such plan pro-
vides that the participant entitled to a distribu-
tion has a right to receive the distribution in
cash.’’.
(2) Paragraph (2) of section 409(h) is amend-
ed—
(A) by striking ‘‘a plan which’’ in the first
sentence and inserting the following:
‘‘(A) IN GENERAL.—A plan which’’, and
(B) by moving the text before subparagraph
(B) 2 ems to the right.
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(b) CERTAIN SHAREHOLDER-EMPLOYEES NOT TREAT-
ED AS OWNER-EMPLOYEES.—
(1) AMENDMENT TO 1986 CODE.—The last sen-
tence of section 4975(d) is amended by inserting ‘‘,
except that this sentence shall not apply for purposes
of any sale of stock by such a shareholder-employee to
an employee stock ownership plan (as defined in sub-
section (e)(7))’’ after ‘‘owner-employee’’.
(2) AMENDMENT TO ERISA.—The last sentence of
section 408(d) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1108(d)) is amended
by inserting ‘‘, except that this sentence shall not
apply for purposes of any sale of stock by such a
shareholder-employee to an employee stock ownership
plan (as defined in section 4975(e)(7) of the Internal
Revenue Code of 1986)’’ after ‘‘owner-employee’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1997.
SEC. 1310. MODIFICATION OF 10 PERCENT TAX FOR NON-
DEDUCTIBLE CONTRIBUTIONS.
(a) IN GENERAL.—Section 4972(c)(6)(B) (relating to
exceptions) is amended to read as follows:
‘‘(B) so much of the contributions to 1 or
more defined contribution plans which are not
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deductible when contributed solely because of sec-
tion 404(a)(7) as does not exceed the greater of—
‘‘(i) the amount of contributions not in
excess of 6 percent of compensation (within
the meaning of section 404(a)) paid or ac-
crued (during the taxable year for which the
contributions were made) to beneficiaries
under the plans, or
‘‘(ii) the sum of—
‘‘(I) the amount of contributions
described in section 401(m)(4)(A), plus
‘‘(II) the amount of contributions
described in section 402(g)(3)(A).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1997.
SEC. 1311. MODIFICATION OF FUNDING REQUIREMENTS
FOR CERTAIN PLANS.
(a) FUNDING RULES FOR CERTAIN PLANS.—Section
769 of the Retirement Protection Act of 1994 is amended
by adding at the end the following new subsection:
‘‘(c) TRANSITION RULES FOR CERTAIN PLANS.—
‘‘(1) IN GENERAL.—In the case of a plan that—
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‘‘(A) was not required to pay a variable
rate premium for the plan year beginning in
1996;
‘‘(B) has not, in any plan year beginning
after 1995 and before 2009, merged with another
plan (other than a plan sponsored by an em-
ployer that was in 1996 within the controlled
group of the plan sponsor); and
‘‘(C) is sponsored by a company that is en-
gaged primarily in the interurban or interstate
passenger bus service,
the transition rules described in paragraph (2) shall
apply for any plan year beginning after 1996 and be-
fore 2010.
‘‘(2) TRANSITION RULES.—The transition rules
described in this paragraph are as follows:
‘‘(A) For purposes of section 412(l)(9)(A) of the
Internal 
Revenue 
Code 
of 
1986 
and 
section
302(d)(9)(A) of the Employee Retirement Income Se-
curity Act of 1974—
‘‘(i) the funded current liability percentage
for any plan year beginning after 1996 and be-
fore 2005 shall be treated as not less than 90 per-
cent if for such plan year the funded current li-
ability percentage is at least 85 percent, and
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‘‘(ii) the funded current liability percentage
for any plan year beginning after 2004 and be-
fore 2010 shall be treated as not less than 90 per-
cent if for such plan year the funded current li-
ability percentage satisfies the minimum per-
centage determined according to the following
table:
‘‘In the case of a plan year beginning in:
The minimum
percentage is:
2005 .......................................................................
86 percent
2006 .......................................................................
87 percent
2007 .......................................................................
88 percent
2008 .......................................................................
89 percent
2009 and thereafter ..............................................
90 percent.
‘‘(B) Sections 412(c)(7)(E)(i)(I) of such Code
and 302(c)(7)(E)(i)(I) of such Act shall be applied—
‘‘(i) by substituting ‘85 percent’ for ‘90 per-
cent’ for plan years beginning after 1996 and be-
fore 2005, and
‘‘(ii) by substituting the minimum percent-
age specified in the table contained in subpara-
graph (A)(ii) for ‘90 percent’ for plan years be-
ginning after 2004 and before 2010.
‘‘(C) In the event the funded current liability
percentage of a plan is less than 85 percent for any
plan year beginning after 1996 and before 2005, the
transition rules under subparagraphs (A) and (B)
shall continue to apply to the plan if contributions
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for such a plan year are made to the plan in an
amount equal to the lesser of—
‘‘(i) the amount necessary to result in a
funded current liability percentage of 85 percent,
or
‘‘(ii) the greater of—
‘‘(I) 2 percent of the plan’s current li-
ability as of the beginning of such plan
year, or
‘‘(II) the amount necessary to result in
a funded current liability percentage of 80
percent as of the end of such plan year.
For the plan year beginning in 2005 and for the 3
succeeding plan years, the transition rules under sub-
paragraphs (A) and (B) shall continue to apply to
the plan for such plan year only if contributions to
the plan equal at least the expected increase in cur-
rent liability due to benefits accruing during such
plan year.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions due after December 31,
1997.
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TITLE XIV—TECHNICAL AMEND-
MENTS RELATED TO SMALL
BUSINESS JOB PROTECTION
ACT OF 1996 AND OTHER LEG-
ISLATION
SEC. 1401. AMENDMENTS RELATED TO SMALL BUSINESS
JOB PROTECTION ACT OF 1996.
(a) AMENDMENTS RELATED TO SUBTITLE A.—
(1) AMENDMENT RELATED TO SECTION 1116.—
Paragraph (1) of section 6050R(c) is amended by
striking ‘‘name and address’’ and inserting ‘‘name,
address, and phone number of the information con-
tact’’.
(2) AMENDMENT TO SECTION 1116.—Paragraphs
(1) and (2)(C) of section 1116(b) of the Small Busi-
ness Job Protection Act of 1996 shall each be applied
as if the reference to chapter 68 were a reference to
chapter 61.
(b) AMENDMENT RELATED TO SUBTITLE B.—Sub-
section (c) of section 52 is amended by striking ‘‘targeted
jobs credit’’ and inserting ‘‘work opportunity credit’’.
(c) AMENDMENTS RELATED TO SUBTITLE C.—
(1) AMENDMENT RELATED TO SECTION 1302.—
Subparagraph (B) of section 1361(e)(1) is amended
by striking ‘‘and’’ at the end of clause (i), striking the
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period at the end of clause (ii) and inserting ‘‘, and’’,
and adding at the end the following new clause:
‘‘(iii) any charitable remainder annu-
ity trust or charitable remainder unitrust
(as defined in section 664(d)).’’.
(2) EFFECTIVE DATE FOR SECTION 1307.—
(A) Notwithstanding section 1317 of the
Small Business Job Protection Act of 1996, the
amendments made by subsections (a) and (b) of
section 1307 of such Act shall apply to deter-
minations made after December 31, 1996.
(B) In no event shall the 120-day period re-
ferred to in section 1377(b)(1)(B) of the Internal
Revenue Code of 1986 (as added by such section
1307) expire before the end of the 120-day period
beginning on the date of the enactment of this
Act.
(3) AMENDMENT RELATED TO SECTION 1308.—
Subparagraph (A) of section 1361(b)(3) is amended
by striking ‘‘For purposes of this title’’ and inserting
‘‘Except as provided in regulations prescribed by the
Secretary, for purposes of this title’’.
(4) AMENDMENTS RELATED TO SECTION 1316.—
(A) Paragraph (2) of section 512(e) is
amended by striking ‘‘within the meaning of sec-
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tion 1012’’ and inserting ‘‘as defined in section
1361(e)(1)(C)’’.
(B) Paragraph (7) of section 1361(c) is re-
designated as paragraph (6).
(C) Subparagraph (B) of section 1361(b)(1)
is amended by striking ‘‘subsection (c)(7)’’ and
inserting ‘‘subsection (c)(6)’’.
(D) Paragraph (1) of section 512(e) is
amended by striking ‘‘section 1361(c)(7)’’ and
inserting ‘‘section 1361(e)(6)’’.
(d) AMENDMENTS RELATED TO SUBTITLE D.—
(1) AMENDMENTS RELATED TO SECTION 1421.—
(A) Subsection (i) of section 408 is amended
in the last sentence by striking ‘‘30 days’’ and
inserting ‘‘31 days’’.
(B) Subparagraph (H) of section 408(k)(6)
is amended by striking ‘‘if the terms of such pen-
sion’’ and inserting ‘‘of an employer if the terms
of simplified employee pensions of such em-
ployer’’.
(C)(i) 
Subparagraph 
(B) 
of 
section
408(l)(2) is amended—
(I) by inserting ‘‘and the issuer of an
annuity established under such an arrange-
ment’’ after ‘‘under subsection (p)’’, and
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(II) in clause (i), by inserting ‘‘or is-
suer’’ after ‘‘trustee’’.
(ii) Paragraph (2) of section 6693(c) is
amended—
(I) by inserting ‘‘or issuer’’ after
‘‘trustee’’, and
(II) in the heading, by inserting ‘‘AND
ISSUER’’ after ‘‘trustee’’.
(D) Subsection (p) of section 408 is amend-
ed by adding at the end the following new para-
graph:
‘‘(8) COORDINATION WITH MAXIMUM LIMITATION
UNDER SUBSECTION (a).—In the case of any simple
retirement account, subsections (a)(1) and (b)(2) shall
be applied by substituting ‘the sum of the dollar
amount in effect under paragraph (2)(A)(ii) of this
subsection and the employer contribution required
under subparagraph (A)(iii) or (B)(i) of paragraph
(2) of this subsection, whichever is applicable’ for
‘$2,000’.’’.
(E) Clause (i) of section 408(p)(2)(D) is
amended by adding at the end the following new
sentence: ‘‘If only individuals other than employ-
ees described in subparagraph (A) or (B) of sec-
tion 410(b)(3) are eligible to participate in such
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arrangement, then the preceding sentence shall be
applied without regard to any qualified plan in
which only employees so described are eligible to
participate.’’.
(F) Subparagraph (D) of section 408(p)(2)
is amended by adding at the end the following
new clause:
‘‘(iii) GRACE PERIOD.—In the case of
an employer who establishes and maintains
a plan under this subsection for 1 or more
years and who fails to meet any require-
ment of this subsection for any subsequent
year due to any acquisition, disposition, or
similar transaction involving another such
employer, rules similar to the rules of sec-
tion 410(b)(6)(C) shall apply for purposes
of this subparagraph.’’.
(G) Paragraph (5) of section 408(p) is
amended in the text preceding subparagraph (A)
by striking ‘‘simplified’’ and inserting ‘‘simple’’.
(2) AMENDMENTS RELATED TO SECTION 1422.—
(A) Clause (ii) of section 401(k)(11)(D) is
amended by striking the period and inserting ‘‘if
such plan allows only contributions required
under this paragraph.’’.
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(B) Paragraph (11) of section 401(k) is
amended by adding at the end the following new
subparagraph:
‘‘(E) COST-OF-LIVING
ADJUSTMENT.—The
Secretary shall adjust the $6,000 amount under
subparagraph (B)(i)(I) at the same time and in
the 
same 
manner 
as 
under 
section
408(p)(2)(E).’’.
(C) Subparagraph (A) of section 404(a)(3)
is amended—
(i) in clause (i), by striking ‘‘not in ex-
cess of’’ and all that follows and inserting
the following: ‘‘not in excess of the greater
of—
‘‘(I) 15 percent of the compensa-
tion otherwise paid or accrued during
the taxable year to the beneficiaries
under the stock bonus or profit-sharing
plan, or
‘‘(II) the amount such employer is
required to contribute to such trust
under section 401(k)(11) for such
year.’’, and
(ii) in clause (ii), by striking ‘‘15 per-
cent’’ and all that follows and inserting the
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following ‘‘the amount described in sub-
clause (I) or (II) of clause (i), whichever is
greater, with respect to such taxable year.’’.
(D) Subparagraph (B) of section 401(k)(11)
is amended by adding at the end the following
new clause:
‘‘(iii) 
ADMINISTRATIVE
REQUIRE-
MENTS.—
‘‘(I) IN GENERAL.—Rules similar
to the rules of subparagraphs (B) and
(C) of section 408(p)(5) shall apply for
purposes of this subparagraph.
‘‘(II) NOTICE
OF
ELECTION
PE-
RIOD.—The requirements of this sub-
paragraph shall not be treated as met
with respect to any year unless the em-
ployer notifies each employee eligible to
participate, within a reasonable period
of time before the 60th day before the
beginning of such year (and, for the
first year the employee is so eligible,
the 60th day before the first day such
employee is so eligible), of the rules
similar 
to 
the 
rules 
of 
section
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408(p)(5)(C) which apply by reason of
subclause (I).’’.
(3) AMENDMENT RELATED TO SECTION 1433.—
The heading of paragraph (11) of section 401(m) is
amended by striking ‘‘ALTERNATIVE’’ and inserting
‘‘ADDITIONAL ALTERNATIVE’’.
(4) AMENDMENTS RELATED TO SECTION 1461.—
(A) Section 415(e)(5)(A) is amended to read
as follows:
‘‘(A) CERTAIN
MINISTERS
MAY
PARTICI-
PATE.—For purposes of this part—
‘‘(i) IN GENERAL.—A duly ordained,
commissioned, or licensed minister of a
church is described in paragraph (3)(B) if,
in connection with the exercise of their min-
istry, the minister—
‘‘(I) is a self-employed individual
(within 
the 
meaning 
of 
section
401(c)(1)(B), or
‘‘(II) is employed by an organiza-
tion other than an organization which
is described in section 501(c)(3) and
with respect to which the minister
shares common religious bonds.
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‘‘(ii) TREATMENT AS EMPLOYER AND
EMPLOYEE.—For 
purposes 
of 
sections
403(b)(1)(A) and 404(a)(10), a minister de-
scribed in clause (i)(I) shall be treated as
employed by the minister’s own employer
which is an organization described in sec-
tion 501(c)(3) and exempt from tax under
section 501(a).’’.
(B) Section 403(b)(1)(A) is amended by
striking ‘‘or’’ at the end of clause (i), by insert-
ing ‘‘or’’ at the end of clause (ii), and by adding
at the end the following new clause:
‘‘(iii) for the minister described in sec-
tion 415(e)(5)(A) by the minister or by an
employer,’’.
(5) AMENDMENT RELATED TO SECTION 1462.—
The paragraph (7) of section 414(q) added by section
1462 of the Small Business Job Protection Act of
1996 is redesignated as paragraph (9).
(6) CLARIFICATION OF SECTION 1450.—
(A) Section 403(b)(11) of the Internal Reve-
nue Code of 1986 shall not apply with respect to
a distribution from a contract described in sec-
tion 1450(b)(1) of such Act to the extent that
such distribution is not includible in income by
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reason of section 403(b)(8) of such Code (deter-
mined after the application of section 1450(b)(2)
of such Act).
(B) This paragraph shall apply as if in-
cluded in section 1450 of the Small Business Job
Protection Act of 1996.
(e) AMENDMENT RELATED TO SUBTITLE E.—Sub-
paragraph (A) of section 956(b)(1) is amended by inserting
‘‘to the extent such amount was accumulated in prior tax-
able years’’ after ‘‘section 316(a)(1)’’.
(f) AMENDMENTS RELATED TO SUBTITLE F.—
(1) AMENDMENTS RELATED TO SECTION 1601.—
(A) The heading of section 30A is amended
to read as follows:
‘‘SEC. 30A. PUERTO RICO ECONOMIC ACTIVITY CREDIT.’’.
(B) The table of sections for subpart B of
part IV of subchapter A of chapter 1 is amended
in the item relating to section 30A by striking
‘‘Puerto Rican’’ and inserting ‘‘Puerto Rico’’.
(C) Paragraph (1) of section 55(c) is
amended by striking ‘‘Puerto Rican’’ and insert-
ing ‘‘Puerto Rico’’.
(2) AMENDMENTS RELATED TO SECTION 1606.—
(A) Clause (ii) of section 9503(c)(2)(A) is
amended by striking ‘‘(or with respect to quali-
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fied diesel-powered highway vehicles purchased
before January 1, 1999)’’.
(B) Subparagraph (A) of section 9503(e)(5)
is amended by striking ‘‘; except that’’ and all
that follows and inserting a period.
(3) AMENDMENTS RELATED TO SECTION 1607.—
(A) Subsection (f) of section 4001 (relating
to phasedown of tax on luxury passenger auto-
mobiles) is amended—
(i) by inserting ‘‘and section 4003(a)’’
after ‘‘subsection (a)’’, and
(ii) by inserting ‘‘, each place it ap-
pears,’’ before ‘‘the percentage’’.
(B) Subsection (g) of section 4001 (relating
to termination) is amended by striking ‘‘tax im-
posed by this section’’ and inserting ‘‘taxes im-
posed by this section and section 4003’’ and by
striking ‘‘or use’’ and inserting ‘‘, use, or instal-
lation’’.
(4) AMENDMENTS RELATED TO SECTION 1609.—
(A) Subsection (l) of section 4041 is amend-
ed—
(i) by inserting ‘‘or a fixed-wing air-
craft’’ after ‘‘helicopter’’, and
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(ii) in the heading, by striking ‘‘HELI-
COPTER’’.
(B) The last sentence of section 4041(a)(2)
is amended by striking ‘‘section 4081(a)(2)(A)’’
and inserting ‘‘section 4081(a)(2)(A)(i)’’.
(C) Subsection (b) of section 4092 is amend-
ed by striking ‘‘section 4041(c)(4)’’ and inserting
‘‘section 4041(c)(2)’’.
(D) Subsection (g) of section 4261 (as redes-
ignated by title X) is amended by inserting ‘‘on
that flight’’ after ‘‘dedicated’’.
(E) Paragraph (1) of section 1609(h) of
such Act is amended by striking ‘‘paragraph
(3)(A)(i)’’ and inserting ‘‘paragraph (3)(A)’’.
(F) Paragraph (4) of section 1609(h) of
such Act is amended by inserting before the pe-
riod ‘‘or exclusively for the use described in sec-
tion 4092(b) of such Code’’.
(5) AMENDMENTS RELATED TO SECTION 1616.—
(A) Subparagraph (A) of section 593(e)(1)
is amended by inserting ‘‘(and, in the case of an
S corporation, the accumulated adjustments ac-
count, as defined in section 1368(e)(1))’’ after
‘‘1951,’’.
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(B) Paragraph (7) of section 1374(d) is
amended by adding at the end the following new
sentence: ‘‘For purposes of applying this section
to any amount includible in income by reason of
section 593(e), the preceding sentence shall be ap-
plied without regard to the phrase ‘10-year’.’’.
(6) AMENDMENTS RELATED TO SECTION 1621.—
(A) Subparagraph (A) of section 860L(b)(1)
is amended in the text preceding clause (i) by
striking ‘‘after the startup date’’ and inserting
‘‘on or after the startup date’’.
(B) Paragraph (2) of section 860L(d) is
amended by striking ‘‘section 860I(c)(2)’’ and
inserting ‘‘section 860I(b)(2)’’.
(C) Subparagraph (B) of section 860L(e)(2)
is amended by inserting ‘‘other than foreclosure
property’’ after ‘‘any permitted asset’’.
(D) Subparagraph (A) of section 860L(e)(3)
is amended by striking ‘‘if the FASIT’’ and all
that follows and inserting the following new flush
text after clause (ii):
‘‘if the FASIT were treated as a REMIC and
permitted assets (other than cash or cash equiva-
lents) were treated as qualified mortgages.’’.
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(E)(i) Paragraph (3) of section 860L(e) is
amended by adding at the end the following new
subparagraph:
‘‘(D) 
INCOME
FROM
DISPOSITIONS
OF
FORMER
HEDGE
ASSETS.—Paragraph (2)(A)
shall not apply to income derived from the dis-
position of—
‘‘(i) an asset which was described in
subsection (c)(1)(D) when first acquired by
the FASIT but on the date of such disposi-
tion was no longer described in subsection
(c)(1)(D)(ii), or
‘‘(ii) a contract right to acquire an
asset described in clause (i).’’.
(ii) Subparagraph (A) of section 860L(e)(2)
is amended by inserting ‘‘except as provided in
paragraph (3),’’ before ‘‘the receipt’’.
(g) AMENDMENTS RELATED TO SUBTITLE G.—
(1) EXTENSION OF PERIOD FOR CLAIMING RE-
FUNDS FOR ALCOHOL FUELS.—Notwithstanding sec-
tion 6427(i)(3)(C) of the Internal Revenue Code of
1986, a claim filed under section 6427(f) of such Code
for any period after September 30, 1995, and before
October 1, 1996, shall be treated as timely filed if
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filed before the 60th day after the date of the enact-
ment of this Act.
(2) AMENDMENTS TO SECTIONS 1703 AND 1704.—
Sections 1703(n)(8) and 1704(j)(4)(B) of the Small
Business Job Protection Act of 1996 shall each be ap-
plied as if such sections referred to section 1702 in-
stead of section 1602.
(h) AMENDMENTS RELATED TO SUBTITLE H.—
(1) AMENDMENTS RELATED TO SECTION 1806.—
(A) Subparagraph (B) of section 529(e)(1)
is amended by striking ‘‘subsection (c)(2)(C)’’
and inserting ‘‘subsection (c)(3)(C)’’.
(B) Subparagraph (C) of section 529(e)(1)
is amended by inserting ‘‘(or agency or instru-
mentality thereof)’’ after ‘‘local government’’.
(C) Paragraph (2) of section 1806(c) of the
Small Business Job Protection Act of 1996 is
amended by striking so much of the first sentence
as follows subparagraph (B)(ii) and inserting
the following:
‘‘then such program (as in effect on August 20, 1996)
shall be treated as a qualified State tuition program
with respect to contributions (and earnings allocable
thereto) pursuant to contracts entered into under such
program before the first date on which such program
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meets such requirements (determined without regard
to this paragraph) and the provisions of such pro-
gram (as so in effect) shall apply in lieu of section
529(b) of the Internal Revenue Code of 1986 with re-
spect to such contributions and earnings.’’.
(2) AMENDMENTS RELATED TO SECTION 1807.—
(A) Paragraph (2) of section 23(a) is
amended to read as follows:
‘‘(2) YEAR CREDIT ALLOWED.—The credit under
paragraph (1) with respect to any expense shall be al-
lowed—
‘‘(A) in the case of any expense paid or in-
curred before the taxable year in which such
adoption becomes final, for the taxable year fol-
lowing the taxable year during which such ex-
pense is paid or incurred, and
‘‘(B) in the case of an expense paid or in-
curred during or after the taxable year in which
such adoption becomes final, for the taxable year
in which such expense is paid or incurred.’’.
(B) Subparagraph (B) of section 23(b)(2) is
amended by striking ‘‘determined—’’ and all
that follows and inserting the following: ‘‘deter-
mined without regard to sections 911, 931, and
933.’’.
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(C) Paragraph (1) of section 137(b) (relat-
ing to adoption assistance programs) is amended
by striking ‘‘amount excludable from gross in-
come’’ and inserting ‘‘of the amounts paid or ex-
penses incurred which may be taken into ac-
count’’.
(D)(i) 
Subparagraph 
(C) 
of 
section
414(n)(3) is amended by inserting ‘‘137,’’ after
‘‘132,’’.
(ii) Paragraph (2) of section 414(t) is
amended by inserting ‘‘137,’’ after ‘‘132,’’.
(iii) Paragraph (1) of section 6039D(d) is
amended by striking ‘‘or 129’’ and inserting
‘‘129, or 137’’.
(i) AMENDMENTS RELATED TO SUBTITLE I.—
(1) AMENDMENT RELATED TO SECTION 1901.—
Subsection (b) of section 6048 is amended in the
heading by striking ‘‘GRANTOR’’ and inserting
‘‘OWNER’’.
(2) AMENDMENTS RELATED TO SECTION 1903.—
Clauses (ii) and (iii) of section 679(a)(3)(C)
are each amended by inserting ‘‘, owner,’’ after
‘‘grantor’’.
(3) AMENDMENTS RELATED TO SECTION 1907.—
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(A) Clause (ii) of section 7701(a)(30)(E) is
amended by striking ‘‘fiduciaries’’ and inserting
‘‘persons’’.
(B) Subsection (b) of section 641 is amend-
ed by adding at the end the following new sen-
tence: ‘‘For purposes of this subsection, a foreign
trust or foreign estate shall be treated as a non-
resident alien individual who is not present in
the United States at any time.’’.
(4) EFFECTIVE DATE RELATED
TO SUBTITLE
I.—The Secretary of the Treasury may by regulations
or other administrative guidance provide that the
amendments made by section 1907(a) of the Small
Business Job Protection Act of 1996 shall not apply
to a trust with respect to a reasonable period begin-
ning on the date of the enactment of such Act, if—
(A) such trust is in existence on August 20,
1996, and is a United States person for purposes
of the Internal Revenue Code of 1986 on such
date (determined without regard to such amend-
ments),
(B) no election is in effect under section
1907(a)(3)(B) of such Act with respect to such
trust,
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(C) before the expiration of such reasonable
period, such trust makes the modifications nec-
essary to be treated as a United States person for
purposes of such Code (determined with regard
to such amendments), and
(D) such trust meets such other conditions
as the Secretary may require.
(j) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
take effect as if included in the provisions of the
Small Business Job Protection Act of 1996 to which
they relate.
(2) CERTAIN
ADMINISTRATIVE
REQUIREMENTS
WITH
RESPECT
TO
CERTAIN
PENSION
PLANS.—The
amendment made by subsection (d)(2)(D) shall apply
to calendar years beginning after the date of the en-
actment of this Act.
SEC. 1402. AMENDMENTS RELATED TO HEALTH INSURANCE
PORTABILITY AND ACCOUNTABILITY ACT OF
1996.
(a) AMENDMENTS RELATED TO SECTION 301.—
(1) Paragraph (2) of section 26(b) is amended by
striking ‘‘and’’ at the end of subparagraph (N), by
striking the period at the end of subparagraph (O)
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and inserting ‘‘, and’’, and by adding at the end the
following new subparagraph:
‘‘(P) section 220(f)(4) (relating to addi-
tional tax on medical savings account distribu-
tions not used for qualified medical expenses).’’.
(2) Paragraph (3) of section 220(c) is amended
by striking subparagraph (A) and redesignating sub-
paragraphs (B) through (D) as subparagraphs (A)
through (C), respectively.
(3) Subparagraph (C) of section 220(d)(2) is
amended by striking ‘‘an eligible individual’’ and in-
serting ‘‘described in clauses (i) and (ii) of subsection
(c)(1)(A)’’.
(4) Subsection (a) of section 6693 is amended by
adding at the end the following new sentence:
‘‘This subsection shall not apply to any report which is an
information return described in section 6724(d)(1)(C)(i) or
a payee statement described in section 6724(d)(2)(X).’’.
(5) Paragraph (4) of section 4975(d) is amended
by striking ‘‘if, with respect to such transaction’’ and
all that follows and inserting the following: ‘‘if section
220(e)(2) applies to such transaction.’’.
(b) AMENDMENT RELATED TO SECTION 321.—Sub-
paragraph (B) of section 7702B(c)(2) is amended in the
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last sentence by inserting ‘‘described in subparagraph
(A)(i)’’ after ‘‘chronically ill individual’’.
(c) AMENDMENT RELATED TO SECTION 322.—Sub-
paragraph (B) of section 162(l)(2) is amended by adding
at the end the following new sentence: ‘‘The preceding sen-
tence shall be applied separately with respect to—
‘‘(i) plans which include coverage for
qualified long-term care services (as defined
in section 7702B(c)) or are qualified long-
term care insurance contracts (as defined in
section 7702B(b)), and
‘‘(ii) plans which do not include such
coverage and are not such contracts.’’.
(d) AMENDMENTS RELATED TO SECTION 323.—
(1) Paragraph (1) of section 6050Q(b) is amend-
ed by inserting ‘‘, address, and phone number of the
information contact’’ after ‘‘name’’.
(2)(A) Paragraph (2) of section 6724(d) is
amended by striking so much as follows subparagraph
(Q) and precedes the last sentence, and inserting the
following new subparagraphs:
‘‘(R) section 6050R(c) (relating to returns
relating to certain purchases of fish),
‘‘(S) section 6051 (relating to receipts for
employees),
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(1) Paragraph (4) of section 264(a) is amended
by striking subparagraph (A) and all that follows
through ‘‘by the taxpayer.’’ and inserting the follow-
ing:
‘‘(A) is or was an officer or employee, or
‘‘(B) is or was financially interested in,
any trade or business carried on (currently or for-
merly) by the taxpayer.’’.
(2) 
The 
last 
sentences 
of 
section
264(d)(2)(B)(ii) are amended to read as follows:
‘‘For purposes of subclause (II), the term
‘applicable period’ means the 12-month pe-
riod beginning on the date the policy is is-
sued (and each successive 12-month period
thereafter) unless the taxpayer elects a num-
ber of months (not greater than 12) other
than such 12-month period to be its appli-
cable period. Such an election shall be made
not later than the 90th day after the date
of the enactment of this sentence and, if
made, shall apply to the taxpayer’s first
taxable year ending on or after October 13,
1995, and all subsequent taxable years un-
less revoked with the consent of the Sec-
retary.’’.
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(3) Subparagraph (B) of section 264(d)(4) is
amended by striking ‘‘the employer’’ and inserting
‘‘the taxpayer’’.
(4) Subsection (c) of section 501 of the Health
Insurance Portability and Accountability Act of 1996
is amended by striking paragraph (3).
(5) Paragraph (2) of section 501(d) of such Act
is amended by striking ‘‘no additional premiums’’
and all that follows and inserting the following: ‘‘a
lapse occurring by reason of no additional premiums
being received under the contract after October 13,
1995.’’.
(g) AMENDMENTS RELATED TO SECTION 511.—
(1) Subparagraph (B) of section 877(d)(2) is
amended by striking ‘‘the 10-year period described in
subsection (a)’’ and inserting ‘‘the 10-year period be-
ginning on the date the individual loses United States
citizenship’’.
(2) Subparagraph (D) of section 877(d)(2) is
amended by adding at the end the following new sen-
tence: ‘‘In the case of any exchange occurring during
such 5 years, any gain recognized under this subpara-
graph shall be recognized immediately after such loss
of citizenship.’’.
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(3) Paragraph (3) of section 877(d) is amended
by inserting ‘‘and the period applicable under para-
graph (2)’’ after ‘‘subsection (a)’’.
(4) Subparagraph (A) of section 877(d)(4) is
amended—
(A) by inserting ‘‘during the 10-year period
beginning on the date the individual loses United
States citizenship’’ after ‘‘contributes property’’
in clause (i),
(B) by inserting ‘‘immediately before such
contribution’’ after ‘‘from such property’’, and
(C) by striking ‘‘during the 10-year period
referred to in subsection (a),’’.
(5) Subparagraph (C) of section 2501(a)(3) is
amended by striking ‘‘decedent’’ and inserting
‘‘donor’’.
(6)(A) Clause (i) of section 2107(c)(2)(A) is
amended by striking ‘‘such foreign country in respect
of property included in the gross estate’’ and inserting
‘‘such foreign country’’.
(B) Subparagraph (C) of section 2107(c)(2) is
amended to read as follows:
‘‘(C) PROPORTIONATE SHARE.—In the case
of property which is included in the gross estate
solely by reason of subsection (b), such property’s
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proportionate share is the percentage which the
value of such property bears to the total value of
all property included in the gross estate solely by
reason of subsection (b).’’.
(h) AMENDMENTS RELATED TO SECTION 512.—
(1) Subpart A of part III of subchapter A of
chapter 61 is amended by redesignating the section
6039F added by section 512 of the Health Insurance
Portability and Accountability Act of 1996 as section
6039G and by moving such section 6039G to imme-
diately after the section 6039F added by section 1905
of the Small Business Job Protection Act of 1996.
(2) The table of sections for subpart A of part III
of subchapter A of chapter 61 is amended by striking
the item relating to the section 6039F related to infor-
mation on individuals losing United States citizen-
ship and inserting after the item relating to the sec-
tion 6039F related to notice of large gifts received
from foreign persons the following new item:
‘‘Sec. 6039G. Information on individuals losing United States citi-
zenship.’’.
(3) Paragraph (1) of section 877(e) is amended
by striking ‘‘6039F’’ and inserting ‘‘6039G’’.
(i) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
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the Health Insurance Portability and Accountability Act
of 1996 to which such amendments relate.
SEC. 1403. AMENDMENTS RELATED TO TAXPAYER BILL OF
RIGHTS 2.
(a) AMENDMENT RELATED TO SECTION 1311.—Sub-
section (b) of section 4962 is amended by striking ‘‘sub-
chapter A or C’’ and inserting ‘‘subchapter A, C, or D’’.
(b) AMENDMENTS RELATED TO SECTION 1312.—
(1)(A) Paragraph (10) of section 6033(b) is
amended by striking all that precedes subparagraph
(A) and inserting the following:
‘‘(10) the respective amounts (if any) of the taxes
imposed on the organization, or any organization
manager of the organization, during the taxable year
under any of the following provisions (and the respec-
tive amounts (if any) of reimbursements paid by the
organization during the taxable year with respect to
taxes imposed on any such organization manager
under any of such provisions):’’.
(B) Subparagraph (C) of section 6033(b)(10) is
amended by adding at the end the following: ‘‘except
to the extent that, by reason of section 4962, the taxes
imposed under such section are not required to be
paid or are credited or refunded,’’.
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(2) Paragraph (11) of section 6033(b) is amend-
ed to read as follows:
‘‘(11) the respective amounts (if any) of—
‘‘(A) the taxes imposed with respect to the
organization on any organization manager, or
any disqualified person, during the taxable year
under section 4958 (relating to taxes on private
excess benefit from certain charitable organiza-
tions), and
‘‘(B) reimbursements paid by the organiza-
tion during the taxable year with respect to taxes
imposed under such section,
except to the extent that, by reason of section 4962,
the taxes imposed under such section are not required
to be paid or are credited or refunded,’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the provisions of
the Taxpayer Bill of Rights 2 to which such amendments
relate.
SEC. 1404. MISCELLANEOUS PROVISIONS.
(a) AMENDMENTS RELATED TO ENERGY POLICY ACT
OF 1992.—
(1) Paragraph (1) of section 263(a) is amended
by striking ‘‘or’’ at the end of subparagraph (F), by
striking the period at the end of subparagraph (G)
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and inserting ‘‘; or’’, and by adding at the end the
following new subparagraph:
‘‘(H) expenditures for which a deduction is
allowed under section 179A.’’.
(2) Subparagraph (B) of section 312(k)(3) is
amended—
(A) by striking ‘‘179’’ in the heading and
the first place it appears in the text and insert-
ing ‘‘179 or 179A’’, and
(B) by striking ‘‘179’’ the last place it ap-
pears and inserting ‘‘179 or 179A, as the case
may be’’.
(3) Paragraphs (2)(C) and (3)(C) of section
1245(a) are each amended by inserting ‘‘179A,’’ after
‘‘179,’’.
(4) The amendments made by this subsection
shall take effect as if included in the amendments
made by section 1913 of the Energy Policy Act of
1992.
(b) AMENDMENTS RELATED
TO URUGUAY ROUND
AGREEMENTS ACT.—
(1) Paragraph (1) of section 6621(a) is amended
in the last sentence by striking ‘‘subsection (c)(3))’’
and inserting ‘‘subsection (c)(3), applied by substitut-
ing ‘overpayment’ for ‘underpayment’)’’.
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(2) Subclause (II) of section 412(m)(5)(E)(ii) is
amended by striking ‘‘clause (i)’’ and inserting ‘‘sub-
clause (I)’’.
(3) Subparagraph (A) of section 767(d)(3) of the
Uruguay Round Agreements Act is amended in the
last sentence by striking ‘‘(except that’’ and all that
follows through ‘‘into account)’’.
(4) The amendments made by this subsection
shall take effect as if included in the sections of the
Uruguay Round Agreements Act to which they relate.
(c) AMENDMENT RELATED TO TAX REFORM ACT OF
1986.—Paragraph (3) of section 1059(d) is amended by
striking ‘‘subsection (a)(2)’’ and inserting ‘‘subsection (a)’’.
(d) AMENDMENT RELATED TO TAX REFORM ACT OF
1984.—
(1) Section 267(f) is amended by adding at the
end the following new paragraph:
‘‘(4) DETERMINATION
OF
RELATIONSHIP
RE-
SULTING IN DISALLOWANCE OF LOSS, FOR PURPOSES
OF OTHER PROVISIONS.—For purposes of any other
section of this title which refers to a relationship
which would result in a disallowance of losses under
this section, deferral under paragraph (2) shall be
treated as disallowance.’’.
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(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect as if included in
section 174(b) of the Tax Reform Act of 1984.
(e) CLERICAL AMENDMENTS.—
(1) Clause (iii) of section 163(j)(2)(B) is amend-
ed by striking ‘‘clause (i)’’ and inserting ‘‘clause
(ii)’’.
(2) Paragraph (1) of section 665(d) is amended
in the last sentence by striking ‘‘or 669(d) and (e)’’.
(3) Subsection (g) of section 1441 (relating to
cross reference) is amended by striking ‘‘one-half’’ and
inserting ‘‘85 percent’’.
(4) Paragraph (1) of section 2523(g) is amended
by striking ‘‘qualified remainder trust’’ and inserting
‘‘qualified charitable remainder trust’’.
(5) Subsection (d) of section 9502 is amended by
redesignating the paragraph added by section 806 of
the Federal Aviation Reauthorization Act of 1996 as
paragraph (6).
TITLE XV—CHILDREN’S HEALTH
INSURANCE INITIATIVES
SEC. 1501. ESTABLISHMENT OF CHILDREN’S HEALTH IN-
SURANCE INITIATIVES.
(a) IN GENERAL.—The Social Security Act is amend-
ed by adding at the end the following:
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‘‘TITLE XXI—CHILD HEALTH INSURANCE
INITIATIVES
‘‘SEC. 2101. PURPOSE.
‘‘The purpose of this title is to provide funds to States
to enable such States to expand the provision of health in-
surance coverage for low-income children. Funds provided
under this title shall be used to achieve this purpose through
outreach activities described in section 2106(a) and, at the
option of the State through—
‘‘(1) a grant program conducted in accordance
with section 2107 and the other requirements of this
title; or
‘‘(2) expansion of coverage of such children
under the State medicaid program who are not re-
quired to be provided medical assistance under section
1902(l) (taking into account the process of individ-
uals aging into eligibility under subsection (l)(1)(D)).
‘‘SEC. 2102. DEFINITIONS.
‘‘In this title:
‘‘(1) BASE-YEAR
COVERED
LOW-INCOME
CHILD
POPULATION.—The term ‘base-year covered low-in-
come child population’ means the total number of
low-income children with respect to whom, as of fiscal
year 1996, an eligible State provides or pays the cost
of health benefits either through a State funded pro-
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gram or through expanded eligibility under the State
plan under title XIX (including under a waiver of
such plan), as determined by the Secretary. Such
term does not include any low-income child described
in paragraph (3)(A) that a State must cover in order
to be considered an eligible State under this title.
‘‘(2) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
‘‘(3) ELIGIBLE STATE.—The term ‘eligible State’
means, with respect to a fiscal year, a State that—
‘‘(A) provides, under section 1902(l)(1)(D)
or under a waiver, for eligibility for medical as-
sistance under a State plan under title XIX of
individuals under 17 years of age in fiscal year
1998, and under 19 years of age in fiscal year
2000, regardless of date of birth;
‘‘(B) has submitted to the Secretary under
section 2104 a program outline that—
‘‘(i) sets forth how the State intends to
use the funds provided under this title to
provide health insurance coverage for low-
income children consistent with the provi-
sions of this title; and
‘‘(ii) is approved under section 2104;
and
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‘‘(iii) otherwise satisfies the require-
ments of this title; and
‘‘(C) satisfies the maintenance of effort re-
quirement described in section 2105(c)(5).
‘‘(4) FEDERAL MEDICAL ASSISTANCE PERCENT-
AGE.—The term ‘Federal medical assistance percent-
age’ means, with respect to a State, the meaning
given that term under section 1905(b). Any cost-shar-
ing imposed under this title may not be included in
determining Federal medical assistance percentage for
reimbursement of expenditures under a State program
funded under this title.
‘‘(5) FEHBP-EQUIVALENT CHILDREN’S HEALTH
INSURANCE
COVERAGE.—The term ‘FEHBP-equiva-
lent children’s health insurance coverage’ means, with
respect to a State, any plan or arrangement that pro-
vides, or pays the cost of, health benefits that the Sec-
retary has certified are equivalent to or better than
the services covered for a child, including hearing and
vision services, under the standard Blue Cross/Blue
Shield preferred provider option service benefit plan
offered under chapter 89 of title 5, United States
Code.
‘‘(6) INDIANS.—The term ‘Indians’ has the
meaning given that term in section 4(c) of the Indian
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Health Care Improvement Act (25 U.S.C. 1601 et
seq.).
‘‘(7) LOW-INCOME CHILD.—The term ‘low-income
child’ means a child in a family whose income is
below 200 percent of the poverty line for a family of
the size involved.
‘‘(8) POVERTY
LINE.—The term ‘poverty line’
has the meaning given that term in section 673(2) of
the Community Services Block Grant Act (42 U.S.C.
9902(2)), including any revision required by such sec-
tion.
‘‘(9) SECRETARY.—The term ‘Secretary’ means
the Secretary of Health and Human Services.
‘‘(10) STATE.—The term ‘State’ means each of
the 50 States, the District of Columbia, Puerto Rico,
Guam, the Virgin Islands, American Samoa, and the
Northern Mariana Islands.
‘‘(11) STATE
CHILDREN’S
HEALTH
EXPENDI-
TURES.—The term ‘State children’s health expendi-
tures’ means the State share of expenditures by the
State for providing children with health care items
and services under—
‘‘(A) the State plan for medical assistance
under title XIX;
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‘‘(B) the maternal and child health services
block grant program under title V;
‘‘(C) the preventive health services block
grant program under part A of title XIX of the
Public Health Services Act (42 U.S.C. 300w et
seq.);
‘‘(D) State-funded programs that are de-
signed to provide health care items and services
to children;
‘‘(E) school-based health services programs;
‘‘(F) State programs that provide uncom-
pensated or indigent health care;
‘‘(G) county-indigent care programs for
which the State requires a matching share by a
county government or for which there are inter-
governmental transfers from a county to State
government; and
‘‘(H) any other program under which the
Secretary determines the State incurs uncompen-
sated expenditures for providing children with
health care items and services.
‘‘(12) STATE
MEDICAID
PROGRAM.—The term
‘State medicaid program’ means the program of med-
ical assistance provided under title XIX.
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‘‘SEC. 2103. APPROPRIATION.
‘‘(a) APPROPRIATION.—
‘‘(1) IN GENERAL.—Subject to subsection (b), out
of any money in the Treasury of the United States
not otherwise appropriated, there is appropriated for
the purpose of carrying out this title—
‘‘(A) for each of fiscal years 1998 and 1999,
$1,000,000,000;
‘‘(B) for each of fiscal years 2000 through
2002, $2,000,000,000; and
‘‘(C) for each of fiscal years 2003 through
2007, $0.
‘‘(2) AVAILABILITY.—Funds appropriated under
this section shall remain available without fiscal year
limitation, as provided under section 2105(b)(4).
‘‘(b) REDUCTION FOR INCREASED MEDICAID EXPENDI-
TURES.—With respect to each of the fiscal years described
in subsection (a)(1), the amount appropriated under sub-
section (a)(1) for each such fiscal year shall be reduced by
an amount equal to the amount of the total Federal outlays
under the medicaid program under title XIX resulting
from—
‘‘(1) the amendment made by section 5732 of the
Balanced Budget Act of 1997 (regarding the State op-
tion to provide 12-month continuous eligibility for
children);
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‘‘(2) increased enrollment under State plans ap-
proved under such program as a result of outreach ac-
tivities under section 2106(a); and
‘‘(3) the requirement under section 2102(3)A) to
provide eligibility for medical assistance under the
State plan under title XIX for all children under 19
years of age who have families with income that is at
or below the poverty line.
‘‘(c) STATE
ENTITLEMENT.—This title constitutes
budget authority in advance of appropriations Acts and
represents the obligation of the Federal Government to pro-
vide for the payment to States of amounts provided in ac-
cordance with the provisions of this title.
‘‘(d) EFFECTIVE DATE.—No State is eligible for pay-
ments under section 2105 for any calendar quarter begin-
ning before October 1, 1997.
‘‘SEC. 2104. PROGRAM OUTLINE.
‘‘(a) GENERAL DESCRIPTION.—A State shall submit to
the Secretary for approval a program outline, consistent
with the requirements of this title, that—
‘‘(1) identifies, on or after the date of enactment
of the Balanced Budget Act of 1997, which of the 2
options described in section 2101 the State intends to
use to provide low-income children in the State with
health insurance coverage;
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‘‘(2) describes the manner in which such coverage
shall be provided; and
‘‘(3) provides such other information as the Sec-
retary may require.
‘‘(b) OTHER REQUIREMENTS.—The program outline
submitted under this section shall include the following:
‘‘(1) ELIGIBILITY STANDARDS AND METHODOLO-
GIES.—A summary of the standards and methodolo-
gies used to determine the eligibility of low-income
children for health insurance coverage under a State
program funded under this title.
‘‘(2) ELIGIBILITY
SCREENING; 
COORDINATION
WITH OTHER HEALTH COVERAGE.—A description of
the procedures to be used to ensure—
‘‘(A) through both intake and followup
screening, that only low-income children are fur-
nished health insurance coverage through funds
provided under this title; and
‘‘(B) that any health insurance coverage
provided for children through funds under this
title does not reduce the number of children who
are provided such coverage through any other
publicly or privately funded health plan.
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‘‘(3) INDIANS.—A description of how the State
will ensure that Indians are served through a State
program funded under this title.
‘‘(c) DEADLINE FOR SUBMISSION.—A State program
outline shall be submitted to the Secretary by not later than
March 31 of any fiscal year (October 1, 1997, in the case
of fiscal year 1998).
‘‘SEC. 2105. DISTRIBUTION OF FUNDS.
‘‘(a) ESTABLISHMENT OF FUNDING POOLS.—
‘‘(1) IN
GENERAL.—From the amount appro-
priated under section 2103(a)(1) for each fiscal year,
determined after the reduction required under section
2103(b), the Secretary shall, for purposes of fiscal
year 1998, reserve 85 percent of such amount for dis-
tribution to eligible States through the basic allotment
pool under subsection (b) and 15 percent of such
amount for distribution through the new coverage in-
centive pool under subsection (c)(2)(B)(ii).
‘‘(2) ANNUAL
ADJUSTMENT
OF
RESERVE
PER-
CENTAGES.—The Secretary shall annually adjust the
amount of the percentages described in paragraph (1)
in order to provide sufficient basic allotments and
sufficient new coverage incentives to achieve the pur-
pose of this title.
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‘‘(b) DISTRIBUTION OF FUNDS UNDER THE BASIC AL-
LOTMENT POOL.—
‘‘(1) STATES.—
‘‘(A) IN GENERAL.—From the total amount
reserved under subsection (a) for a fiscal year for
distribution through the basic allotment pool, the
Secretary shall first set aside 0.25 percent for
distribution under paragraph (2) and shall allot
from the amount remaining to each eligible State
not described in such paragraph the State’s allot-
ment percentage for such fiscal year.
‘‘(B) STATE’S ALLOTMENT PERCENTAGE.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the allotment percentage
for a fiscal year for each State is the per-
centage equal to the ratio of the number of
low-income children in the base period in
the State to the total number of low-income
children in the base period in all States not
described in paragraph (2).
‘‘(ii) NUMBER OF LOW-INCOME CHIL-
DREN IN THE BASE PERIOD.—In clause (i),
the number of low-income children in the
base period for a fiscal year in a State is
equal to the average of the number of low-
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income children in the State for the period
beginning on October 1, 1992, and ending
on September 30, 1995, as reported in the
March 1994, March 1995, and March 1996
supplements to the Current Population Sur-
vey of the Bureau of the Census.
‘‘(2) OTHER STATES.—
‘‘(A) IN GENERAL.—From the amount set
aside under paragraph (1)(A) for each fiscal
year, the Secretary shall make allotments for
such fiscal year in accordance with the percent-
ages specified in subparagraph (B) to Puerto
Rico, Guam, the Virgin Islands, American
Samoa, and the Northern Mariana Islands, if
such States are eligible States for such fiscal
year.
‘‘(B) PERCENTAGES SPECIFIED.—The per-
centages specified in this subparagraph are in
the case of—
‘‘(i) Puerto Rico, 91.6 percent;
‘‘(ii) Guam, 3.5 percent;
‘‘(iii) the Virgin Islands, 2.6 percent;
‘‘(iv) American Samoa, 1.2 percent;
and
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‘‘(v) the Northern Mariana Islands, 1.1
percent.
‘‘(3) THREE-YEAR
AVAILABILITY
OF
AMOUNTS
ALLOTTED.—Amounts allotted to a State pursuant to
this subsection for a fiscal year shall remain available
for expenditure by the State through the end of the
second succeeding fiscal year.
‘‘(4) PROCEDURE FOR DISTRIBUTION OF UNUSED
FUNDS.—The Secretary shall determine an appro-
priate procedure for distribution of funds to eligible
States that remain unused under this subsection after
the expiration of the availability of funds required
under paragraph (3). Such procedure shall be devel-
oped and administered in a manner that is consistent
with the purpose of this title.
‘‘(c) PAYMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall—
‘‘(A) before October 1 of any fiscal year,
pay an eligible State an amount equal to 1 per-
cent of the amount allotted to the State under
subsection (b) for conducting the outreach activi-
ties required under section 2106(a); and
‘‘(B) make quarterly fiscal year payments
to an eligible State from the amount remaining
of such allotment for such fiscal year in an
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amount equal to the Federal medical assistance
percentage for the State (as defined under section
2102(4) and determined without regard to the
amount of Federal funds received by the State
under title XIX before the date of enactment of
this title) of the Federal and State incurred cost
of providing health insurance coverage for a low-
income child in the State plus the applicable
bonus amount.
‘‘(2) APPLICABLE BONUS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the applicable bonus amount is—
‘‘(i) 5 percent of the Federal and State
incurred cost, with respect to a period, of
providing health insurance coverage for
children covered at State option among the
base-year covered low-income child popu-
lation (measured in full year equivalency)
(including such children covered by the
State through expanded eligibility under the
medicaid program under title XIX before
the date of enactment of this title, but ex-
cluding any low-income child described in
section 2102(3)(A) that a State must cover
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in order to be considered an eligible State
under this title); and
‘‘(ii) 10 percent of the Federal and
State incurred cost, with respect to a pe-
riod, of providing health insurance coverage
for children covered at State option among
the number (as so measured) of low-income
children that are in excess of such popu-
lation.
‘‘(B) SOURCE OF BONUSES.—
‘‘(i) BASE-YEAR COVERED LOW-INCOME
CHILD POPULATION.—A bonus described in
subparagraph (A)(i) shall be paid out of an
eligible State’s allotment for a fiscal year.
‘‘(ii) FOR OTHER LOW-INCOME CHILD
POPULATIONS.—A bonus described in sub-
paragraph (A)(ii) shall be paid out of the
new coverage incentive pool reserved under
subsection (a)(1).
‘‘(3) DEFINITION
OF
COST
OF
PROVIDING
HEALTH INSURANCE COVERAGE.—For purposes of this
subsection the cost of providing health insurance cov-
erage for a low-income child in the State means—
‘‘(A) in the case of an eligible State that
opts to use funds provided under this title
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through the medicaid program, the cost of pro-
viding such child with medical assistance under
the State plan under title XIX; and
‘‘(B) in the case of an eligible State that
opts to use funds provided under this title under
section 2107, the cost of providing such child
with health insurance coverage under such sec-
tion.
‘‘(4) LIMITATION
ON
TOTAL
PAYMENTS.—With
respect to a fiscal year, the total amount paid to an
eligible State under this title (including any bonus
payments) shall not exceed 85 percent of the total cost
of a State program conducted under this title for such
fiscal year.
‘‘(5) MAINTENANCE OF EFFORT.—
‘‘(A) DEEMED COMPLIANCE.—A State shall
be deemed to be in compliance with this provi-
sion if—
‘‘(i) it does not adopt income and re-
source standards and methodologies that are
more restrictive than those applied as of
June 1, 1997, for purposes of determining a
child’s eligibility for medical assistance
under the State plan under title XIX; and
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‘‘(ii) in the case of fiscal year 1998
and each fiscal year thereafter, the State
children’s health expenditures defined in
section 2102(11) are not less than the
amount of such expenditures for fiscal year
1996.
‘‘(B) FAILURE
TO
MAINTAIN
MEDICAID
STANDARDS
AND
METHODOLOGIES.—A State
that fails to meet the conditions described in sub-
paragraph (A) shall not receive—
‘‘(i) funds under this title for any child
that would be determined eligible for medi-
cal assistance under the State plan under
title XIX using the income and resource
standards and methodologies applied under
such plan as of June 1, 1997; and
‘‘(ii) any bonus amounts described in
paragraph (2)(A)(ii).
‘‘(C) FAILURE TO MAINTAIN SPENDING ON
CHILD HEALTH PROGRAMS.—A State that fails
to meet the condition described in subparagraph
(A)(ii) shall not receive funding under this title.
‘‘(6) ADVANCE
PAYMENT; RETROSPECTIVE
AD-
JUSTMENT.—The Secretary may make payments
under this subsection for each quarter on the basis of
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advance estimates of expenditures submitted by the
State and such other investigation as the Secretary
may find necessary, and shall reduce or increase the
payments as necessary to adjust for any overpayment
or underpayment for prior quarters.
‘‘SEC. 2106. USE OF FUNDS.
‘‘(a) SET-ASIDE FOR OUTREACH ACTIVITIES.—
‘‘(1) IN GENERAL.—From the amount allotted to
a State under section 2105(b) for a fiscal year, each
State shall conduct outreach activities described in
paragraph (2).
‘‘(2) OUTREACH
ACTIVITIES
DESCRIBED.—The
outreach activities described in this paragraph in-
clude activities to—
‘‘(A) identify and enroll children who are
eligible for medical assistance under the State
plan under title XIX; and
‘‘(B) conduct public awareness campaigns
to encourage employers to provide health insur-
ance coverage for children.
‘‘(b) STATE OPTIONS FOR REMAINDER.—A State may
use the amount remaining of the allotment to a State under
section 2105(b) for a fiscal year, determined after the pay-
ment required under section 2105(c)(1)(A), in accordance
with section 2107 or the State medicaid program (but not
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both). Nothing in the preceding sentence shall be construed
as limiting a State’s eligibility for receiving the 5 percent
bonus described in section 2105(c)(2)(A)(i) for children cov-
ered by the State through expanded eligibility under the
medicaid program under title XIX before the date of enact-
ment of this title.
‘‘(c) PROHIBITION ON USE OF FUNDS.—No funds pro-
vided under this title may be used to provide health insur-
ance coverage for—
‘‘(1) families of State public employees; or
‘‘(2) children who are committed to a penal in-
stitution.
‘‘(d) USE LIMITED TO STATE PROGRAM EXPENDI-
TURES.—Funds provided to an eligible State under this
title shall only be used to carry out the purpose of this title
(as described in section 2101), and any health insurance
coverage provided with such funds may include coverage of
abortion only if necessary to save the life of the mother or
if the pregnancy is the result of an act of rape or incest.
‘‘(e) ADMINISTRATIVE EXPENDITURES.—
‘‘(1) IN GENERAL.—Not more than the applicable
percentage of the amount allotted to a State under
section 2105(b) for a fiscal year, determined after the
payment required under section 2105(c)(1)(A), shall
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be used for administrative expenditures for the pro-
gram funded under this title.
‘‘(2) APPLICABLE
PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage with re-
spect to a fiscal year is—
‘‘(A) for the first 2 years of a State pro-
gram funded under this title, 10 percent;
‘‘(B) for the third year of a State program
funded under this title, 7.5 percent; and
‘‘(C) for the fourth year of a State program
funded under this title and each year thereafter,
5 percent.
‘‘(f) NONAPPLICATION OF FIVE-YEAR LIMITED ELIGI-
BILITY FOR MEANS-TESTED PUBLIC BENEFITS.—The pro-
visions of section 403 of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (8 U.S.C.
1613) shall not apply with respect to a State program fund-
ed under this title.
‘‘(g) AUDITS.—The provisions of section 506(b) shall
apply to funds expended under this title to the same extent
as they apply to title V.
‘‘(h) REQUIREMENT
TO FOLLOW STATE PROGRAM
OUTLINE.—The State shall conduct the program in accord-
ance with the program outline approved by the Secretary
under section 2104.
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‘‘SEC. 2107. STATE OPTION FOR THE PURCHASE OR PROVI-
SION OF CHILDREN’S HEALTH INSURANCE.
‘‘(a) STATE OPTION.—
‘‘(1) IN GENERAL.—An eligible State that opts to
use funds provided under this title under this section
shall use such funds to provide FEHBP-equivalent
children’s health insurance coverage for low-income
children who reside in the State.
‘‘(2) PRIORITY FOR LOW-INCOME CHILDREN.—A
State that uses funds provided under this title under
this section shall not cover low-income children with
higher family income without covering such children
with a lower family income.
‘‘(3) DETERMINATION OF ELIGIBILITY AND FORM
OF ASSISTANCE.—An eligible State may establish any
additional eligibility criteria for the provision of
health insurance coverage for a low-income child
through funds provided under this title, so long as
such criteria and assistance are consistent with the
purpose and provisions of this title.
‘‘(4) AFFORDABILITY.—An eligible State may
impose any family premium obligations or cost-shar-
ing requirements otherwise permitted under this title
on low-income children with family incomes that ex-
ceed 150 percent of the poverty line. In the case of a
low-income child whose family income is at or below
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150 percent of the poverty line, limits on beneficiary
costs generally applicable under title XIX apply to
coverage provided such children under this section.
‘‘(b) NONENTITLEMENT.—Nothing in this section shall
be construed as providing an entitlement for an individual
or person to any health insurance coverage, assistance, or
service provided through a State program funded under this
title. If, with respect to a fiscal year, an eligible State deter-
mines that the funds provided under this title are not suffi-
cient to provide health insurance coverage for all the low-
income children that the State proposes to cover in the State
program outline submitted under section 2104 for such fis-
cal year, the State may adjust the applicable eligibility cri-
teria for such children appropriately or adjust the State
program in another manner specified by the Secretary, so
long as any such adjustments are consistent with the pur-
pose of this title.
‘‘SEC. 2107A. MENTAL HEALTH PARITY.
‘‘(a) PROHIBITION.—In the case of a health plan that
enrolls children through the use of assistance provided
under a grant program conducted under this title, such
plan, if the plan provides both medical and surgical benefits
and mental health benefits, shall not impose treatment limi-
tations or financial requirements on the coverage of mental
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health benefits if similar limitations or requirements are
not imposed on medical and surgical benefits.
‘‘(b) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed—
‘‘(1) as prohibiting a health plan from requiring
preadmission screening prior to the authorization of
services covered under the plan or from applying
other limitations that restrict coverage for mental
health services to those services that are medically
necessary; and
‘‘(2) as requiring a health plan to provide any
mental health benefits.
‘‘(c) SEPARATE APPLICATION TO EACH OPTION OF-
FERED.—In the case of a health plan that offers a child
described in subsection (a) 2 or more benefit package op-
tions under the plan, the requirements of this section shall
be applied separately with respect to each such option.
‘‘(d) DEFINITIONS.—In this section:
‘‘(1) MEDICAL
OR
SURGICAL
BENEFITS.—The
term ‘medical or surgical benefits’ means benefits
with respect to medical or surgical services, as defined
under the terms of the plan, but does not include
mental health benefits.
‘‘(2) MENTAL
HEALTH
BENEFITS.—The term
‘mental health benefits’ means benefits with respect to
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mental health services, as defined under the terms of
the plan, but does not include benefits with respect to
the treatment of substance abuse and chemical de-
pendency.
‘‘SEC. 2108. PROGRAM INTEGRITY.
‘‘The following provisions of the Social Security Act
shall apply to eligible States under this title in the same
manner as such provisions apply to a State under title
XIX:
‘‘(1) Section 1116 (relating to administrative
and judicial review).
‘‘(2) Section 1124 (relating to disclosure of own-
ership and related information).
‘‘(3) Section 1126 (relating to disclosure of infor-
mation about certain convicted individuals).
‘‘(4) Section 1128 (relating to exclusion from in-
dividuals and entities from participation in State
health care plans).
‘‘(5) Section 1128A (relating to civil monetary
penalties).
‘‘(6) Section 1128B (relating to criminal pen-
alties).
‘‘(7) Section 1132 (relating to periods within
which claims must be filed).
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‘‘(8) Section 1902(a)(4)(C) (relating to conflict
of interest standards).
‘‘(9) Section 1903(i) (relating to limitations on
payment).
‘‘(10) Section 1903(m)(5) (as in effect on the day
before the date of enactment of the Balanced Budget
Act of 1997).
‘‘(11) Section 1903(w) (relating to limitations on
provider taxes and donations).
‘‘(12) Section 1905(a)(B) (relating to the exclu-
sion of care or services for any individual who has
not attained 65 years of age and who is a patient in
an institution for mental diseases from the definition
of medical assistance).
‘‘(13) Section 1921 (relating to state licensure
authorities).
‘‘(14) Sections 1902(a)(25), 1912(a)(1)(A), and
1903(o) (insofar as such sections relate to third party
liability).
‘‘(15) Sections 1948 and 1949 (as added by sec-
tion 5701(a)(2) of the Balanced Budget Act of 1997).
‘‘SEC. 2109. ANNUAL REPORTS.
‘‘(a) ANNUAL STATE ASSESSMENT OF PROGRESS.—An
eligible State shall—
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‘‘(1) assess the operation of the State program
funded under this title in each fiscal year, including
the progress made in providing health insurance cov-
erage for low-income children; and
‘‘(2) report to the Secretary, by January 1 fol-
lowing the end of the fiscal year, on the result of the
assessment.
‘‘(b) REPORT
OF
THE SECRETARY.—The Secretary
shall submit to the appropriate committees of Congress an
annual report and evaluation of the State programs funded
under this title based on the State assessments and reports
submitted under subsection (a). Such report shall include
any conclusions and recommendations that the Secretary
considers appropriate.’’.
(b) CONFORMING AMENDMENT.—Section 1128(h) (42
U.S.C. 1320a–7(h)) is amended by—
(1) in paragraph (2), by striking ‘‘or’’ at the
end;
(2) in paragraph (3), by striking the period and
inserting ‘‘, or’’; and
(3) by adding at the end the following:
‘‘(4) a program funded under title XXI.’’.
SEC. 1502. APPLICABILITY.
If, on the date of enactment of this Act, the Social Se-
curity Act contains a title XXI, the amendments made to
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the Social Security Act by this title shall not take effect,
except that amounts appropriated under such title XXI for
a fiscal year shall be increased by the amounts that would
have been appropriated for such fiscal year under section
2103 of the Social Security Act, as added by this title.
TITLE XVI—BUDGET
ENFORCEMENT
Subtitle 
A—Amendments 
to 
the
Congressional Budget and Im-
poundment Control Act of 1974
SEC. 1601. AMENDMENTS TO SECTION 201.
Section 201 of the Congressional Budget Act of 1974
is amended by redesignating subsection (g) (relating to rev-
enue estimates) as subsection (f).
SEC. 1602. AMENDMENTS TO SECTION 202.
(a) ASSISTANCE TO BUDGET COMMITTEES.—The first
sentence of section 202(a) of the Congressional Budget Act
of 1974 is amended by inserting ‘‘primary’’ before ‘‘duty’’.
(b) ELIMINATION OF EXECUTED PROVISION.—Section
202 of the Congressional Budget Act of 1974 is amended
by striking subsection (e) and by redesignating subsections
(f), (g), and (h) as subsections (e), (f), and (g), respectively.
SEC. 1603. AMENDMENT TO SECTION 300.
The item relating to February 25 in the timetable set
forth in section 300 of the Congressional Budget Act of 1974
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is amended by striking ‘‘February 25’’ and inserting ‘‘With-
in 6 weeks after President submits budget’’.
SEC. 1604. AMENDMENTS TO SECTION 301.
(a) TERMS
OF
BUDGET
RESOLUTIONS.—Section
301(a) of the Congressional Budget Act of 1974 is amended
by striking ‘‘, and planning levels for each of the two ensu-
ing fiscal years,’’ and inserting ‘‘and for at least each of
the 4 ensuing fiscal years’’.
(b) CONTENTS
OF BUDGET RESOLUTIONS.—Para-
graphs (1) and (4) of section 301(a) of the Congressional
Budget Act of 1974 are amended by striking ‘‘, budget out-
lays, direct loan obligations, and primary loan guarantee
commitments’’ each place it appears and inserting ‘‘and
budget outlays’’.
(c) ADDITIONAL MATTERS.—Section 301(b) of the
Congressional Budget Act of 1974 is amended by—
(1) amending paragraph (7) to read as follows—
‘‘(7) set forth pay-as-you-go procedures in the
Senate whereby committee allocations, aggregates, and
other levels can be revised for legislation if such legis-
lation would not increase the deficit or would not in-
crease the deficit when taken with other legislation en-
acted after the adoption of the resolution for the first
fiscal year or the total period of fiscal years covered
by the resolution;’’;
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(2) in paragraph 8, striking the period and in-
serting ‘‘; and’’; and
(3) adding the following new paragraph:
‘‘(9) set forth direct loan obligations and pri-
mary loan commitment guarantee levels.’’.
(d) VIEWS AND ESTIMATES.—The first sentence of sec-
tion 301(d) of the Congressional Budget Act of 1974 is
amended by inserting ‘‘or at such time as may be requested
by the Committee on the Budget,’’ after ‘‘Code,’’.
(e) HEARINGS AND REPORT.—Section 301(e) of the
Congressional Budget Act of 1974 is amended—
(1) by striking ‘‘In developing’’ and inserting the
following:
‘‘(1) IN GENERAL.—In developing’’; and
(2) by striking the sentence beginning with ‘‘The
report accompanying ’’ and all that follows through
the end of the subsection and inserting the following:
‘‘(2) REQUIRED CONTENTS OF REPORT.—The re-
port accompanying such concurrent resolution shall
include—
‘‘(A) a comparison of the appropriate levels
of total new budget authority, total budget out-
lays, and total revenues as set forth in such con-
current resolution with those requested in the
budget submitted by the President;
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‘‘(B) with respect to each major functional
category, an estimate of total new budget author-
ity and total outlays with the estimates divided
between permanent authority and funds provided
in appropriations Acts;
‘‘(C) the economic assumptions which un-
derlie each of the matters set forth in such con-
current resolution and any alternative economic
assumptions and objectives that the committee
considered;
‘‘(D) projections for the period of 5 fiscal
years beginning with such fiscal year, of the esti-
mated levels of total new budget authority, total
outlays and total revenues and the surplus or
deficit for each fiscal year;
‘‘(E) information, data, and comparisons
indicating the manner in which, and the basis
on which, the committee determined each of the
matters set forth in the concurrent resolutions;
‘‘(F) the estimated levels of tax expenditures
(the tax expenditures budget) by major items and
functional categories for the President’s budget
and in the concurrent resolution; and
‘‘(G) allocations described in section 302(a).
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‘‘(3) ADDITIONAL CONTENTS OF REPORT.—The
report accompanying such concurrent resolution may
include—
‘‘(A) a statement of any significant changes
in the proposed levels of Federal assistance to
State and local governments;
‘‘(B) an allocation of the level of Federal
revenues recommended in the concurrent resolu-
tion among the major sources of such revenues;
‘‘(C) information, data, and comparisons
on the share of total Federal budget outlays and
of gross domestic product devoted to investment
in the budget submitted by the President and in
the concurrent resolution; and
‘‘(D) other matters, relating to the budget
and fiscal policy, the committee deems appro-
priate.’’.
(f) SOCIAL SECURITY CORRECTIONS.—Section 301(i)
of the Congressional Budget Act of 1974 is amended by—
(1) inserting ‘‘SOCIAL
SECURITY
POINT
OF
ORDER.—’’ after ‘‘(i)’’; and
(2) striking ‘‘as reported to the Senate’’ and in-
serting ‘‘(or amendment, motion, or conference report
on such a resolution)’’.
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(g) REPEAL OF BUDGET RESOLUTION PROVISION.—
Section 22 of House Concurrent Resolution 218 (103d Con-
gress) is repealed.
SEC. 1605. AMENDMENTS TO SECTION 302.
(a) 
ALLOCATIONS
AND
SUBALLOCATIONS.—Sub-
sections (a) and (b) of section 302 of the Congressional
Budget Act of 1974 are amended to read as follows:
‘‘(a) COMMITTEE SPENDING ALLOCATIONS.—
‘‘(1) HOUSE OF REPRESENTATIVES.—
‘‘(A) ALLOCATION
AMONG
COMMITTEES.—
The joint explanatory statement accompanying a
conference report on a budget resolution shall in-
clude allocations, consistent with the resolution
recommended in the conference report, of the ap-
propriate levels (for each fiscal year covered by
that resolution and a total for all such years)
of—
‘‘(i) total new budget authority;
‘‘(ii) total entitlement authority; and
‘‘(iii) total outlays;
among each committee of the House of Represent-
atives that has jurisdiction over legislation pro-
viding or creating such amounts.
‘‘(B) NO DOUBLE COUNTING.—Any item al-
located to one committee of the House of Rep-
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resentatives may not be allocated to another such
committee.
‘‘(C) FURTHER
DIVISION
OF
AMOUNTS.—
The amounts allocated to each committee for
each fiscal year, other than the Committee on
Appropriations, shall be further divided between
amounts provided or required by law on the date
of filing of that conference report and amounts
not so provided or required. The amounts allo-
cated to the Committee on Appropriations for
each fiscal year shall be further divided between
discretionary and mandatory amounts or pro-
grams, as appropriate.
‘‘(2) SENATE
ALLOCATION
AMONG
COMMIT-
TEES.—The joint explanatory statement accompany-
ing a conference report on a budget resolution shall
include an allocation, consistent with the resolution
recommended in the conference report, of the appro-
priate levels of—
‘‘(A) total new budget authority; and
‘‘(B) total outlays;
among each committee of the Senate that has jurisdic-
tion over legislation providing or creating such
amounts.
‘‘(3) AMOUNTS NOT ALLOCATED.—
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‘‘(A) IN THE HOUSE.—In the House of Rep-
resentatives, if a committee receives no allocation
of new budget authority, entitlement authority,
or outlays, that committee shall be deemed to
have received an allocation equal to zero for new
budget authority, entitlement authority, or out-
lays.
‘‘(B) IN THE SENATE.—In the Senate, if a
committee receives no allocation of new budget
authority, outlays, or social security outlays,
that committee shall be deemed to have received
an allocation equal to zero for new budget au-
thority, outlays, or social security outlays.
‘‘(4) SCOPE OF ALLOCATIONS IN THE SENATE.—
In the Senate, the allocations made pursuant to para-
graph (2) shall be made for all committees for the
first fiscal year covered by the resolution and for all
committees other than the Committee on Appropria-
tions for the period of fiscal years covered by such res-
olution.
‘‘(b) SUBALLOCATIONS BY APPROPRIATION COMMIT-
TEES.—As soon as practicable after a concurrent resolution
on the budget is agreed to, the Committee on Appropriations
of each House (after consulting with the Committee on Ap-
propriations of the other House) shall suballocate each
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amount allocated to it for the budget year under subsection
(a)(1)(A) or (a)(2) among its subcommittees. Each Commit-
tee on Appropriations shall promptly report to its House
suballocations made or revised under this paragraph.’’.
(b) POINT OF ORDER.—Section 302(c) of the Congres-
sional Budget Act of 1974 is amended to read as follows:
‘‘(c) POINT OF ORDER.—After the Committee on Ap-
propriations has received an allocation pursuant to sub-
section (a) for a fiscal year, it shall not be in order in the
House of Representatives or the Senate to consider any bill,
joint resolution, amendment, motion, or conference report
providing new budget authority for that fiscal year within
the jurisdiction of that committee, until such committee
makes the suballocations required by subsection (b).’’.
(c) ENFORCEMENT
OF POINT
OF ORDER.—Section
302(f)(2) of the Congressional Budget Act of 1974 is amend-
ed to read as follows:
‘‘(2) ENFORCEMENT
OF
COMMITTEE
ALLOCA-
TIONS AND SUBALLOCATIONS.—After a concurrent res-
olution on the budget is agreed to, it shall not be in
order in the Senate to consider any bill, joint resolu-
tion, amendment, motion, or conference report that
would cause—
‘‘(A) in the case of any committee except the
Committee on Appropriations, the appropriate
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(b) CONFORMING AMENDMENT.—The item relating to
section 303 in the table of contents set forth in section 1(b)
of the Congressional Budget and Impoundment Control Act
of 1974 is amended by striking ‘‘new credit authority,’’.
SEC. 1607. AMENDMENT TO SECTION 305.
Section 305(a)(1) of the Congressional Budget Act of
1974 is amended by inserting ‘‘when the House is not in
session’’ after ‘‘holidays’’ each place it appears.
SEC. 1608. AMENDMENT TO SECTION 308.
(a) ELIMINATION OF REFERENCES TO CREDIT AU-
THORITY.—Section 308 of the Congressional Budget Act of
1974 is amended—
(1) by striking the center heading and inserting
the following:
‘‘REPORTS ON SPENDING AND REVENUE LEGISLATION’’;
(2) in paragraphs (1) and (2) of subsection (a),
by striking ‘‘or new credit authority,’’ each place it
appears and insert ‘‘and’’ before ‘‘new spending’’ each
place it appears;
(3) in subsection (b)(1), by striking ‘‘or new
credit authority,’’ and insert ‘‘and’’ before ‘‘new
spending’’; and
(4) in subsection (c), by inserting ‘‘and’’ after
the semicolon at the end of paragraph (3), strike ‘‘;
and’’ at the end of paragraph (4) and insert a period;
and strike paragraph (5).
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(b) CONFORMING AMENDMENT.—The item relating to
section 308 in the table of contents set forth in section 1(b)
of the Congressional Budget and Impoundment Control Act
of 1974 is amended by striking ‘‘or new credit authority’’
and by inserting ‘‘and’’ after the first comma.
SEC. 1609. AMENDMENTS TO SECTION 311.
Section 311 of the Congressional Budget Act of 1974
is amended to read as follows:
‘‘NEW
BUDGET
AUTHORITY, NEW
SPENDING
AUTHORITY,
AND REVENUE LEGISLATION MUST BE WITHIN APPRO-
PRIATE LEVELS
‘‘SEC. 311. (a) ENFORCEMENT OF BUDGET AGGRE-
GATES.—
‘‘(1) IN THE HOUSE OF REPRESENTATIVES.—Ex-
cept as provided by subsection (c), after the Congress
has completed action on a concurrent resolution on
the budget for a fiscal year, it shall not be in order
in the House of Representatives to consider any bill,
joint resolution, amendment, motion, or conference re-
port providing new budget authority for such fiscal
year, providing new entitlement authority effective
during such fiscal year, or reducing revenues for such
fiscal year, if—
‘‘(A) the enactment of such bill or resolution
as reported;
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‘‘(B) the adoption and enactment of such
amendment; or
‘‘(C) the enactment of such bill or resolution
in the form recommended in such conference re-
port;
would cause the appropriate level of total new budget
authority or total budget outlays set forth in the most
recently agreed to concurrent resolution on the budget
for such fiscal year to be exceeded, or would cause rev-
enues to be less than the appropriate level of total rev-
enues set forth in such concurrent resolution except in
the case that a declaration of war by the Congress is
in effect.
‘‘(2) IN THE SENATE.—After a concurrent resolu-
tion on the budget is agreed to, it shall not be in
order in the Senate to consider any bill, resolution,
amendment, motion, or conference report that—
‘‘(A) would cause the appropriate level of
total new budget authority or total outlays set
forth for the first fiscal year in such resolution
to be exceeded; or
‘‘(B) would cause revenues to be less than
the appropriate level of total revenues set forth
for the first fiscal year covered by such resolution
or for the period including the first fiscal year
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plus the following 4 fiscal years in such resolu-
tion.
‘‘(3) ENFORCEMENT OF SOCIAL SECURITY LEV-
ELS IN THE SENATE.—After a concurrent resolution
on the budget is agreed to, it shall not be in order in
the Senate to consider any bill, resolution, amend-
ment, motion, or conference report that would cause
a decrease in social security surpluses or an increase
in social security deficits derived from the levels of so-
cial security revenues and social security outlays set
forth for the first fiscal year covered by the resolution
and for the period including the first fiscal year plus
the following 4 fiscal years in such resolution.
‘‘(b) SOCIAL SECURITY LEVELS.—
‘‘(1) IN
GENERAL.—For the purposes of sub-
section (a)(3), social security surpluses equal the ex-
cess of social security revenues over social security
outlays in a fiscal year or years with such an excess
and social security deficits equal the excess of social
security outlays over social security revenues in a fis-
cal year or years with such an excess.
‘‘(2) TAX TREATMENT.—For the purposes of this
section, no provision of any legislation involving a
change in chapter 1 of the Internal Revenue Code of
1986 shall be treated as affecting the amount of social
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security revenues or outlays unless such provision
changes the income tax treatment of social security
benefits.
‘‘(c) EXCEPTION IN THE HOUSE OF REPRESENTA-
TIVES.—Subsection (a)(1) shall not apply in the House of
Representatives to any bill, resolution, or amendment which
provides new budget authority or new entitlement authority
effective during such fiscal year, or to any conference report
on any such bill or resolution, if—
‘‘(1) the enactment of such bill or resolution as
reported;
‘‘(2) the adoption and enactment of such amend-
ment; or
‘‘(3) the enactment of such bill or resolution in
the form recommended in such conference report;
would not cause the appropriate allocation of new discre-
tionary budget authority or new entitlement authority
made pursuant to section 302(a) for such fiscal year, for
the committee within whose jurisdiction such bill, resolu-
tion, or amendment falls, to be exceeded.’’.
SEC. 1610. AMENDMENT TO SECTION 312.
(a) IN GENERAL.—Section 312 of the Congressional
Budget Act of 1974 is amended to read as follows:
‘‘POINTS OF ORDER
‘‘SEC. 312. (a) DETERMINATIONS.—For purposes of
this title and title IV, the levels of new budget authority,
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budget outlays, spending authority as described in section
401(c)(2), direct spending, new entitlement authority, and
revenues for a fiscal year shall be determined on the basis
of estimates made by the Committee on the Budget of the
House of Representatives or the Senate, as the case may
be.
‘‘(b) DISCRETIONARY SPENDING POINT OF ORDER IN
THE SENATE.—
‘‘(1) Except as otherwise provided in this sub-
section, it shall not be in order in the Senate to con-
sider any concurrent resolution on the budget (or
amendment, motion, or conference report on such a
resolution) that would exceed any of the discretionary
spending limits in section 251(c) of the Balanced
Budget and Emergency Deficit Control Act of 1985.
‘‘(2) This subsection shall not apply if a declara-
tion of war by the Congress is in effect or if a joint
resolution pursuant to section 258 of the Balanced
Budget and Emergency Deficit Control Act of 1985
has been enacted.
‘‘(c) MAXIMUM DEFICIT AMOUNT POINT OF ORDER IN
THE SENATE.—It shall not be in order in the Senate to
consider any concurrent resolution on the budget for a fiscal
year under section 301, or to consider any amendment to
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that concurrent resolution, or to consider a conference re-
port on that concurrent resolution—
‘‘(1) if the level of total budget outlays for the
first fiscal year that is set forth in that concurrent
resolution or conference report exceeds the rec-
ommended level of Federal revenues set forth for that
year by an amount that is greater than the maximum
deficit amount, if any, specified in the Balanced
Budget and Emergency Deficit Control Act of 1985
for such fiscal year; or
‘‘(2) if the adoption of such amendment would
result in a level of total budget outlays for that fiscal
year which exceeds the recommended level of Federal
revenues for that fiscal year, by an amount that is
greater than the maximum deficit amount, if any,
specified in the Balanced Budget and Emergency Def-
icit Control Act of 1985 for such fiscal year.
‘‘(d) TIMING OF POINTS OF ORDER IN THE SENATE.—
A point of order under this Act may not be raised against
a bill, resolution, amendment, motion, or conference report
while an amendment or motion, the adoption of which
would remedy the violation of this Act, is pending before
the Senate.
‘‘(e) POINTS OF ORDER IN THE SENATE AGAINST
AMENDMENTS BETWEEN THE HOUSES.—Each provision of
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this Act that establishes a point of order against an amend-
ment also establishes a point of order in the Senate against
an amendment between the Houses. If a point of order
under this Act is raised in the Senate against an amend-
ment between the Houses, and the point of order is sus-
tained, the effect shall be the same as if the Senate had dis-
agreed to the amendment.
‘‘(f) EFFECT OF A POINT OF ORDER ON A BILL IN THE
SENATE.—In the Senate, if the Chair sustains a point of
order under this Act against a bill, the Chair shall then
send the bill to the committee of appropriate jurisdiction
for further consideration.’’.
(b) CONFORMING
AMENDMENTS.—Sections 302(g),
311(c), and 313(e) of the Congressional Budget Act of 1974
are repealed.
SEC. 1611. ADJUSTMENTS.
(a) IN GENERAL.—Title III of the Congressional
Budget Act of 1974 is amended by adding at the end the
following new sections:
‘‘ADJUSTMENTS
‘‘SEC. 314. (a) ADJUSTMENTS.—When—
‘‘(1)(A) the Committee on Appropriations re-
ports an appropriation measure for fiscal year 1998,
1999, 2000, 2001, or 2002 that specifies an amount
for emergencies pursuant to section 251(b)(2)(A) of
the Balanced Budget and Emergency Deficit Control
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Act of 1985 or for continuing disability reviews pur-
suant to section 251(b)(2)(C) of that Act;
‘‘(B) any other committee reports emergency leg-
islation described in section 252(e) of that Act;
‘‘(C) the Committee on Appropriations reports
an appropriation measure for fiscal year 1998, 1999,
2000, 2001, or 2002 that includes an appropriation
with respect to clause (i) or (ii), the adjustment shall
be the amount of budget authority in the measure that
is the dollar equivalent, in terms of Special Drawing
Rights, of—
‘‘(i) an increase in the United States quota
as part of the International Monetary Fund
Eleventh General Review of Quotas (United
States Quota); or
‘‘(ii) an increase in the maximum amount
available to the Secretary of the Treasury pursu-
ant to section 17 of the Bretton Woods Agree-
ments Act, as amended from time to time (New
Arrangements to Borrow); or
‘‘(D) the Committee on Appropriations reports
an appropriation measure for fiscal year 1998, 1999,
or 2000 that includes an appropriation for arrearages
for international organizations, international peace-
keeping, and multilateral development banks during
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that fiscal year, and the sum of the appropriations
for the period of fiscal years 1998 through 2000 does
not exceed $1,884,000,000 in budget authority; or
‘‘(2) a conference committee submits a conference
report thereon;
the chairman of the Committee on the Budget of the Senate
or House of Representatives (whichever is appropriate)
shall make the adjustments referred to in subsection (c) to
reflect the additional new budget authority for such matter
provided in that measure or conference report and the addi-
tional outlays flowing from such amounts for such matter.
‘‘(b) APPLICATION
OF ADJUSTMENTS.—The adjust-
ments and revisions to allocations, aggregates, and limits
made by the Chairman of the Committee on the Budget pur-
suant to subsection (a) for legislation shall only apply while
such legislation is under consideration shall only perma-
nently take effect upon the enactment of that legislation.
‘‘(c) CONTENT OF ADJUSTMENTS.—The adjustments
referred to in subsection (a) shall consist of adjustments,
as appropriate, to—
‘‘(1) the discretionary spending limits as set
forth in the most recently adopted concurrent resolu-
tion on the budget;