(relating to simplified dollar-value LIFO method for cer-
tain small businesses). 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 312(n) is amended by striking 
paragraph (4) and by redesignating paragraphs (5) 
through (8) as paragraphs (4) through (7), respec-
tively. 
(B) Section 312(n)(7), as redesignated by sub-
paragraph (A), is amended— 
(i) by striking ‘‘paragraphs (4) and (6)’’ in 
subparagraph (A) and inserting ‘‘paragraph 
(5)’’, and 
(ii) by striking ‘‘paragraph (5)’’ in sub-
paragraph (B) and inserting ‘‘paragraph (4)’’. 
(C) Section 56(g)(4)(D) is amended by striking 
clause (iii) and by redesignating clause (iv) as clause 
(iii). 
(2) Section 1363 is amended by striking sub-
section (d). 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after the date of the enactment of this Act. 
(2) CHANGE IN METHOD OF ACCOUNTING.—In 
the case of any taxpayer required by the amend-
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ments made by this section to change its method of 
accounting for its first taxable year beginning after 
the date of the enactment of this Act— 
(A) such change shall be treated as initi-
ated by the taxpayer, 
(B) such change shall be treated as made 
with the consent of the Secretary of the Treas-
ury, and 
(C) if the net amount of the adjustments 
required to be taken into account by the tax-
payer under section 481 of the Internal Rev-
enue Code of 1986 is positive, such amount 
shall be taken into account over a period of 8 
years beginning with such first taxable year. 
SEC. 302. REPEAL OF LOWER OF COST OR MARKET METH-
OD OF INVENTORY. 
(a) IN GENERAL.—Section 471 is amended by redes-
ignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection: 
‘‘(c) INVENTORIES
TAKEN
INTO
ACCOUNT
AT 
COST.—A method of determining inventories shall not be 
treated as clearly reflecting income unless such method 
provides that inventories shall be taken into account at 
cost.’’. 
(b) EFFECTIVE DATE.— 
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(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after the date of the enactment of this Act. 
(2) CHANGE IN METHOD OF ACCOUNTING.—In 
the case of any taxpayer required by the amend-
ments made by this section to change its method of 
accounting for its first taxable year beginning after 
the date of the enactment of this Act— 
(A) such change shall be treated as initi-
ated by the taxpayer, 
(B) such change shall be treated as made 
with the consent of the Secretary of the Treas-
ury, and 
(C) if the net amount of the adjustments 
required to be taken into account by the tax-
payer under section 481 of the Internal Rev-
enue Code of 1986 is positive, such amount 
shall be taken into account over a period of 8 
years beginning with such first taxable year. 
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TITLE IV—INDIVIDUAL TAX 
EXPENDITURES 
SEC. 401. LIMITATION ON ITEMIZED DEDUCTIONS TO 28- 
PERCENT RATE BRACKET. 
(a) IN GENERAL.—The Internal Revenue Code of 
1986 is amended by inserting after section 68 the fol-
lowing new section: 
‘‘SEC. 68A. BENEFIT OF ITEMIZED DEDUCTIONS LIMITED 
TO 28-PERCENT RATE BRACKET. 
‘‘(a) IN GENERAL.—In the case of an individual 
whose adjusted gross income exceeds $200,000 ($250,000 
in the case of a joint return), the amount of the itemized 
deductions otherwise allowable for the taxable year shall 
be reduced by an amount necessary to increase the amount 
of regular tax liability of the taxpayer to an amount that 
would be imposed if such deductions reduced the regular 
tax liability by not more than the amount such deductions 
would reduce the tax imposed by section 1 on taxable in-
come within the 28-percent bracket amount. 
‘‘(b) REGULAR TAX LIABILITY.—For purposes of 
this section, the term ‘regular tax liability’ has the mean-
ing given such term by section 26(b). 
‘‘(c) COORDINATION WITH SECTION 68.—This sec-
tion shall apply after the application of section 68.’’. 
(b) ALTERNATIVE MINIMUM TAX.— 
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(1) IN GENERAL.—Subsection (b) of section 55 
is amended by adding at the end the following new 
paragraph: 
‘‘(5) COORDINATION WITH SECTION 68A.—In 
the case of an individual, for purposes of paragraph 
(2), alternative minimum taxable income shall be de-
termined by reducing the amount of any itemized 
deductions otherwise allowed in determining alter-
native minimum taxable income by an amount which 
bears the same ratio to the amount by which the 
itemized deductions of the taxpayer were reduced for 
the taxable year under section 68A as— 
‘‘(A) the amount of itemized deductions 
otherwise allowed in determining the alternative 
minimum taxable income for the taxable year, 
bears to 
‘‘(B) the aggregate amount of itemized de-
ductions of the taxpayer for the taxable year 
(determined without regard to section 68A).’’. 
(2) CONFORMING AMENDMENT.—Paragraph (1) 
of section 56(b) is amended by adding at the end the 
following new subparagraph: 
‘‘(G) SECTION 68A NOT
APPLICABLE.— 
Section 68A shall not apply.’’. 
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(c) CLERICAL AMENDMENT.—The table of sections 
for part I of subchapter B of chapter 1 is amended by 
adding at the end the following new item: 
‘‘Sec. 68A. Benefit of itemized deductions limited to 28-percent rate bracket.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 402. REPEAL OF FOREIGN EARNED INCOME EXCLU-
SION. 
(a) IN GENERAL.—Subsection (a) of section 911 is 
amended by striking ‘‘for any taxable year—’’ and all that 
follows through the end and inserting ‘‘for any taxable 
year the housing cost amount of such individual.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (f) of section 86 is amended by 
inserting ‘‘and’’ at the end of paragraph (2), by 
striking ‘‘, and’’ at the end of paragraph (3) and in-
serting a period, and by striking paragraph (4). 
(2) Section 1401(a) is amended by striking 
paragraph (11). 
(3)(A) Clause (i) of section 1411(a)(1)(B) is 
amended by striking ‘‘modified’’. 
(B) Section 1411 is amended by striking sub-
section (d) and by redesignating subsection (e) as 
subsection (d). 
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(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. 403. PHASE-OUT OF HEALTH SAVINGS ACCOUNTS. 
Section 223 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(i) TERMINATION.— 
‘‘(1) DEDUCTION.—No deduction shall be al-
lowed under subsection (a) with respect to amounts 
paid to health savings accounts after the date of the 
enactment of this subsection. 
‘‘(2) TAX TREATMENT ACCOUNTS.—Subsection 
(e) shall not apply with respect to income derived in 
taxable years beginning more than 2 years after the 
date of the enactment of this subsection.’’. 
SEC. 404. PHASE-OUT OF ARCHER MSAS. 
Section 220 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(i) TERMINATION.— 
‘‘(1) DEDUCTION.—No deduction shall be al-
lowed under subsection (a) with respect to amounts 
paid to an Archer MSA after the date of the enact-
ment of this subsection. 
‘‘(2) TAX
TREATMENT
OF
ACCOUNTS.—Sub-
section (e) shall not apply with respect to income de-
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