890
then each United States person who discussed
participation in such shelter shall register such
shelter under subsection (a).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a United States person who
discussed participation in a tax shelter if—
‘‘(i) such person notified the promoter
in writing (not later than the close of the
day on which such discussions began) that
such person would not participate in such
shelter, and
‘‘(ii) such person does not participate
in such shelter.
‘‘(4) OFFER
TO
PARTICIPATE
TREATED
AS
OFFER FOR SALE.—For purposes of subsections (a)
and (b), an offer to participate in a tax shelter (as
defined in paragraph (1)) shall be treated as an
offer for sale.’’
(b) PENALTY.—Subsection (a) of section 6707 (relat-
ing to failure to furnish information regarding tax shel-
ters) is amended by adding at the end the following new
paragraph:
‘‘(3) CONFIDENTIAL ARRANGEMENTS.—
‘‘(A) IN GENERAL.—In the case of a tax
shelter (as defined in section 6111(d)), the pen-
891
alty imposed under paragraph (1) shall be an
amount equal to the greater of—
‘‘(i) 50 percent of the fees paid to any
promoter of the tax shelter with respect to
offerings made before the date such shelter
is registered under section 6111, or
‘‘(ii) $10,000.
Clause (i) shall be applied by substituting ‘75
percent’ for ‘50 percent’ in the case of an inten-
tional failure or act described in paragraph (1).
‘‘(B) SPECIAL
RULE
FOR
PARTICIPANTS
REQUIRED
TO
REGISTER
SHELTER.—In the
case of a person required to register such a tax
shelter by reason of section 6111(d)(3)—
‘‘(i) such person shall be required to
pay the penalty under paragraph (1) only
if such person actually participated in such
shelter,
‘‘(ii) the amount of such penalty shall
be determined by taking into account
under subparagraph (A)(i) only the fees
paid by such person, and
‘‘(iii) such penalty shall be in addition
to the penalty imposed on any other person
for failing to register such shelter.’’
892
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 6707(a) is amend-
ed by striking ‘‘The penalty’’ and inserting ‘‘Except
as provided in paragraph (3), the penalty’’.
(2) Subparagraph (A) of section 6707(a)(1) is
amended by striking ‘‘paragraph (2)’’ and inserting
‘‘paragraph (2) or (3), as the case may be’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to any tax shelter (as defined
in section 6111(d) of the Internal Revenue Code of
1986, as amended by this section) interests in which
are offered to potential participants after the date of
the enactment of this Act.
(2) DUE DATE FOR REGISTRATION.—The due
date for registering any tax shelter required to be
registered by reason of the amendments made by
this section shall be not earlier than the close of a
reasonable period after the Secretary of the Treas-
ury prescribes guidance with respect to meeting such
requirements.
893
SEC. 13603. DENIAL OF DEDUCTION FOR INTEREST ON
LOANS WITH RESPECT TO COMPANY-OWNED
INSURANCE.
(a) IN GENERAL.—Paragraph (4) of section 264(a)
is amended—
(1) by inserting ‘‘or endowment or annuity con-
tract’’ after ‘‘life insurance policies’’, and
(2) by striking all that follows ‘‘carried on by
the taxpayer’’ and inserting a period.
(b) PHASE-IN OF DISALLOWANCE.—Section 264 is
amended by adding at the end the following new sub-
section:
‘‘(d) PHASE-IN
OF DISALLOWANCE UNDER SUB-
SECTION (a)(4).—In the case of calendar years after 1995
and before 2000—
‘‘(1) IN
GENERAL.—The amount of interest
paid or accrued during any period in any such cal-
endar year with respect to qualified indebtedness
which is disallowed by reason of the amendment
made by section 13603(a) of the Revenue Reconcili-
ation Act of 1995 (determined without regard to this
subsection) shall not exceed the applicable percent-
age of such interest which is so disallowed.
‘‘(2) QUALIFIED
INDEBTEDNESS.—For pur-
poses of paragraph (1), the term ‘qualified indebted-
ness’ means indebtedness incurred before September
894
18, 1995, with respect to a life insurance policy cov-
ering only the life of the individual who was insured
under such policy on such date. Any increase on or
after such date in the amount of such indebtedness
shall be treated as indebtedness incurred after such
date.
‘‘(3) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage shall be
determined in accordance with the following table:
‘‘In the case of periods
The applicable
in calendar year:
percentage is:
1996 .......................................................................... 20 percent
1997 .......................................................................... 40 percent
1998 .......................................................................... 60 percent
1999 .......................................................................... 80 percent.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to interest paid or accrued
after December 31, 1995.
(2) EXCEPTION.—The amendments made by
this section shall not apply to contracts purchased
on or before June 20, 1986.
(d) 4-YEAR SPREAD OF INCOME INCLUSION ON SUR-
RENDER, ETC. OF CONTRACTS.—
(1) IN GENERAL.—In the case of indebtedness
with respect to any life insurance policy described in
paragraph (4) of section 264(a) of the Internal Rev-
enue Code of 1986, if—
895
(A) the interest paid or accrued after De-
cember 31, 1995, on such indebtedness is not
allowed as a deduction under chapter 1 of such
Code by reason of such paragraph (4) (as
amended by this section), and
(B) the entire amount of interest paid or
accrued on or before such date on such indebt-
edness was allowed as a deduction under such
chapter 1,
then (in lieu of any other inclusion in gross income)
the qualified amount with respect to such policy
shall be includible in gross income ratably over the
4 taxable years beginning with the taxable year such
amount would (but for this paragraph) be includible.
(2) QUALIFIED
AMOUNT.—For purposes of
paragraph (1), the term ‘‘qualified amount’’ means,
with respect to any policy, the amount received
under such policy—
(A) on the complete surrender, redemption,
or maturity of such policy during 1996, or
(B) in full discharge during 1996 of the
obligation under the policy which is in the na-
ture of a refund of the consideration paid for
the policy,
896
but only to the extent such amount is includible in
gross income for the taxable year in which the event
described in subparagraph (A) or (B) occurs.
(3) SPECIAL RULE.—A contract shall not be
treated as failing to meet the requirement of section
264(c)(1) of the Internal Revenue Code of 1986
solely by reason of an occurrence described in sub-
paragraph (A) or (B) of paragraph (2) of this sub-
section.
SEC. 13604. TERMINATION OF SUSPENSE ACCOUNTS FOR
FAMILY CORPORATIONS REQUIRED TO USE
ACCRUAL METHOD OF ACCOUNTING.
(a) IN GENERAL.—Subsection (i) of section 447 (re-
lating to method of accounting for corporations engaged
in farming) is amended by adding at the end the following
new paragraph:
‘‘(7) TERMINATION.—
‘‘(A) IN GENERAL.—No suspense account
may be established under this subsection by any
corporation required by this section to change
its method of accounting for any taxable year
ending after September 13, 1995.
‘‘(B) 20-YEAR
PHASEOUT
OF
EXISTING
SUSPENSE ACCOUNTS.—Each suspense account
under this subsection shall be reduced (but not
897
below zero) for each of the first 20 taxable
years beginning after September 13, 1995, by
an amount equal to the applicable portion of
such account. Any reduction in a suspense ac-
count under this paragraph shall be included in
gross income for the taxable year of the reduc-
tion. The amount of the reduction required
under this paragraph for any taxable year shall
be reduced (but not below zero) by the amount
of any reduction required for such taxable year
under any other provision of this subsection.
‘‘(C) APPLICABLE
PORTION.—For pur-
poses of subparagraph (B), the term ‘applicable
portion’ means, for any taxable year, the
amount which would ratably reduce the amount
in the account (after taking into account prior
reductions) to zero over the period consisting of
such taxable year and the remaining taxable
years in such first 20 taxable years.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years ending after Sep-
tember 13, 1995.
898
SEC. 13605. TERMINATION OF PUERTO RICO AND POSSES-
SION TAX CREDIT.
(a) IN GENERAL.—Section 936 is amended by adding
at the end the following new subsection:
‘‘(j) TERMINATION.—
‘‘(1) IN GENERAL.—This section shall not apply
to any taxable year beginning after December 31,
1995.
‘‘(2) EXCEPTION FOR EXISTING CLAIMANTS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
be applied by substituting ‘2005’ for ‘1995’ in
the case of an existing credit claimant.
‘‘(B) EXCEPTION
TERMINATES
IF
NEW
LINE OF BUSINESS ADDED.—If, after Septem-
ber 13, 1995, a corporation which would (but
for this subparagraph) be an existing credit
claimant adds a substantial new line of busi-
ness, such corporation shall cease to be treated
as an existing credit claimant as of the close of
the taxable year ending before the date of such
addition.
‘‘(C) EXISTING
CREDIT
CLAIMANT.—For
purposes of this subsection, the term ‘existing
credit claimant’ means any corporation which
satisfied the conditions of both subparagraph
(A) and subparagraph (B) of subsection (a)(2)
899
for at least 1 base period year for which such
corporation elected the application of this sec-
tion.
‘‘(3) LIMIT
ON
CREDIT
OF
EXISTING
CLAIM-
ANTS.—
‘‘(A) IN GENERAL.—In the case of an ex-
isting credit claimant, the aggregate amount of
income taken into account under subsection
(a)(1) for any taxable year beginning after De-
cember 31, 1995 (hereinafter in this subsection
referred to as the ‘current year’), shall not ex-
ceed the adjusted base period income of such
claimant.
‘‘(B) COORDINATION
WITH
SUBSECTION
(a)(4).—The amount of income described in sub-
section (a)(1)(A) which is taken into account in
applying subsection (a)(4) shall be such income
as reduced under this paragraph. In determin-
ing such reduction, any reduction under sub-
paragraph (A) in the amount which would oth-
erwise be taken into account under subsection
(a)(1) shall be allocated between the income de-
scribed in subparagraph (A) thereof and the in-
come described in subparagraph (B) thereof in
900
proportion to the respective amounts of such in-
comes.
‘‘(4) ADJUSTED
BASE
PERIOD
INCOME.—For
purposes of paragraph (3)—
‘‘(A) IN
GENERAL.—The term ‘adjusted
base period income’ means the average of the
inflation-adjusted possession incomes of the cor-
poration for each base period year.
‘‘(B) INFLATION-ADJUSTED
POSSESSION
INCOME.—For purposes of subparagraph (A),
the inflation-adjusted possession income of any
corporation for any base period year shall be an
amount equal to the possession income of such
corporation for such base period year multiplied
by the inflation adjustment percentage for such
base period year.
‘‘(C) INFLATION
ADJUSTMENT
PERCENT-
AGE.—For purposes of subparagraph (B), the
inflation adjustment percentage for any base
period year means, with respect to the current
year, the percentage (if any) by which—
‘‘(i) the CPI for last calendar year
ending before the beginning of the current
year, exceeds
901
‘‘(ii) the CPI for last calendar year
ending before the beginning of the base pe-
riod year.
For purposes of the preceding sentence, the
CPI for any calendar year is the CPI (as de-
fined in section 1(f)(5)) for such year under
section 1(f)(4).
‘‘(D) INCREASE
IN
INFLATION
ADJUST-
MENT PERCENTAGE FOR GROWTH DURING BASE
YEARS.—The inflation adjustment percentage
(determined under subparagraph (C) without
regard to this subparagraph) for each of the 5
taxable years referred to in paragraph (5)(A)
shall be increased by—
‘‘(i) 5 percentage points in the case of
a taxable year ending during the 1-year pe-
riod ending on September 12, 1995;
‘‘(ii) 10.25 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1994;
‘‘(iii) 15.76 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1993;
‘‘(iv) 21.55 percentage points in the
case of a taxable year ending during the 1-
902
year period ending on September 12, 1992;
and
‘‘(v) 27.63 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1991.
‘‘(5) BASE PERIOD YEAR.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The term ‘base period
year’ means each of 3 taxable years which are
among the 5 most recent taxable years of the
corporation ending before September 13, 1995,
determined by disregarding—
‘‘(i) one taxable year for which the
corporation had the largest inflation-ad-
justed possession income, and
‘‘(ii) one taxable year for which the
corporation had the smallest inflation-ad-
justed possession income.
‘‘(B) CORPORATIONS NOT HAVING SIGNIFI-
CANT
POSSESSION
INCOME
THROUGHOUT
5-
YEAR PERIOD.—
‘‘(i) IN
GENERAL.—If a corporation
does not have significant possession income
for each of the most recent 5 taxable years
ending before September 13, 1995, then,
903
in lieu of applying subparagraph (A), the
term ‘base period year’ means only those
taxable years (of such 5 taxable years) for
which the corporation has significant pos-
session income; except that, if such cor-
poration has significant possession income
for 4 of such 5 taxable years, the rule of
subparagraph (A)(ii) shall apply.
‘‘(ii) SPECIAL RULE.—If there is no
year (of such 5 taxable years) for which a
corporation has significant possession in-
come—
‘‘(I) the term ‘base period year’
means the first taxable year ending on
or after September 13, 1995, but
‘‘(II) the amount of possession
income for such year which is taken
into account under paragraph (4)
shall be the amount which would be
determined if such year were a short
taxable year ending on August 31,
1995.
‘‘(iii) SIGNIFICANT
POSSESSION
IN-
COME.—For purposes of this subpara-
graph, the term ‘significant possession in-
904
come’ means possession income which ex-
ceeds 2 percent of the possession income of
the taxpayer for the taxable year (of the
period of 6 taxable years ending with the
first taxable year ending on or after Sep-
tember 13, 1995) having the greatest pos-
session income.
‘‘(C) ELECTION TO USE ONE BASE PERIOD
YEAR.—
‘‘(i) IN GENERAL.—At the election of
the taxpayer, the term ‘base period year’
means only the last taxable year of the cor-
poration ending in calendar year 1992.
‘‘(ii) ELECTION.—An election under
this subparagraph by any possession cor-
poration may be made only for the cor-
poration’s first taxable year beginning
after December 31, 1995, for which it is a
possession 
corporation. 
The 
rules 
of
subclauses (II) and (III) of subsection
(a)(4)(B)(iii) shall apply to the election
under this subparagraph.
‘‘(D) ACQUISITIONS AND DISPOSITIONS.—
Rules similar to the rules of subparagraphs (A)
905
and (B) of section 41(f)(3) shall apply for pur-
poses of this subsection.
‘‘(6) POSSESSION
INCOME.—For purposes of
this subsection, the term ‘possession income’ means
the sum of the income referred to in subsection
(a)(1)(A) and the income referred to in subsection
(a)(1)(B). In no event shall possession income be
treated as being less than zero.
‘‘(7) SHORT YEARS.—If the current year or a
base period year is a short taxable year, the applica-
tion of this subsection shall be made with such
annualizations as the Secretary shall prescribe.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 13606. DEPRECIATION UNDER INCOME FORECAST
METHOD.
(a) GENERAL RULE.—Section 167 (relating to depre-
ciation) is amended by redesignating subsection (g) as
subsection (h) and by inserting after subsection (f) the
following new subsection:
‘‘(g) DEPRECIATION
UNDER
INCOME
FORECAST
METHOD.—
‘‘(1) IN GENERAL.—If the depreciation deduc-
tion allowable under this section to any taxpayer
906
with respect to any property is determined under the
income forecast method or any similar method—
‘‘(A) in determining the amount of the de-
preciation deduction under such method, the es-
timated income from the property shall include
all estimated income from use of the property,
‘‘(B) the adjusted basis of the property
shall only include amounts with respect to
which the requirements of section 461(h) are
satisfied,
‘‘(C) the depreciation deduction under such
method for the 10th taxable year beginning
after the taxable year in which the property was
placed in service shall be equal to the adjusted
basis of such property as of the beginning of
such 10th taxable year, and
‘‘(D) such taxpayer shall pay (or be enti-
tled to receive) interest computed under the
look-back method of paragraph (2) for any re-
computation year.
‘‘(2) LOOK-BACK METHOD.—The interest com-
puted under the look-back method of this paragraph
for any recomputation year shall be determined by—
‘‘(A) first determining the depreciation de-
ductions under this section with respect to such
907
property which would have been allowable for
prior taxable years if the determination of the
amounts so allowable had been made on the
basis of the sum of the following (instead of the
estimated income with respect to such prop-
erty)—
‘‘(i) the actual income from such
property for periods before the close of the
recomputation year, and
‘‘(ii) an estimate of the future income
with respect to such property for periods
after the recomputation year,
‘‘(B) second, determining (solely for pur-
poses of computing such interest) the overpay-
ment or underpayment of tax for each such
prior taxable year which would result solely
from the application of subparagraph (A), and
‘‘(C) then using the adjusted overpayment
rate 
(as 
defined 
in 
section 
460(b)(7)),
compounded daily, on the overpayment or
underpayment determined under subparagraph
(B).
For purposes of the preceding sentence, any cost in-
curred after the property is placed in service (which
is not treated as a separate property under para-
908
graph (5)) shall be taken into account by discount-
ing (using the Federal mid-term rate determined
under section 1274(d) as of the time such cost is in-
curred) such cost to its value as of the date the
property is placed in service. The taxpayer may elect
with respect to any property to have the preceding
sentence not apply to such property.
‘‘(3) EXCEPTION FROM LOOK-BACK METHOD.—
Paragraph (1)(D) shall not apply with respect to
any property which, when placed in service by the
taxpayer, had a basis of $100,000 or less.
‘‘(4) RECOMPUTATION YEAR.—For purposes of
this subsection, except as provided in regulations,
the term ‘recomputation year’ means, with respect to
any property, the third and the 10th taxable years
beginning after the taxable year in which the prop-
erty was placed in service, unless the actual income
from the property for such third or 10th taxable
year (as the case may be) and each prior taxable
year is within 10 percent of the estimated income
from the property for each such year which was
taken into account under paragraph (1)(A).
‘‘(5) SPECIAL RULES.—
‘‘(A) CERTAIN COSTS TREATED AS SEPA-
RATE PROPERTY.—For purposes of this section,
909
the following costs shall be treated as separate
properties:
‘‘(i) Any costs incurred with respect
to any property after the 10th taxable year
beginning after the taxable year in which
the property was placed in service.
‘‘(ii) Any costs incurred after the
property is placed in service and before the
close of such 10th taxable year if such
costs are significant and give rise to a sig-
nificant increase in the income from the
property which was not included in the es-
timated income from the property.
‘‘(B) SYNDICATION INCOME FROM TELE-
VISION SERIES.—In the case of property which
is an episode in a television series, estimated in-
come from syndicating such series shall not be
required to be taken into account under this
subsection before the earlier of—
‘‘(i) the 4th taxable year beginning
after the date the first episode in such se-
ries is placed in service, or
‘‘(ii) the earliest taxable year in which
the taxpayer had a reasonable expectation
910
that there would be a future syndication of
such series.
‘‘(C) COLLECTION
OF
INTEREST.—For
purposes of subtitle F (other than sections
6654 and 6655), any interest required to be
paid by the taxpayer under paragraph (1) for
any recomputation year shall be treated as an
increase in the tax imposed by this chapter for
such year.
‘‘(D) DETERMINATIONS.—For purposes of
this subsection, determinations of the amount
of income from any property shall be deter-
mined in the same manner as for purposes of
applying the income forecast method; except
that any income from the disposition of such
property shall be taken into account.
‘‘(E) TREATMENT
OF
PASS-THRU
ENTI-
TIES.—Rules similar to the rules of section
460(b)(4) shall apply for purposes of this sub-
section.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to property placed in serv-
ice after September 13, 1995.
911
(2) BINDING
CONTRACTS.—The amendment
made by subsection (a) shall not apply to any prop-
erty produced or acquired by the taxpayer pursuant
to a written contract which was binding on Septem-
ber 13, 1995, and at all times thereafter before such
production or acquisition.
SEC. 13607. TRANSFERS OF EXCESS PENSION ASSETS.
(a) IN GENERAL.—Section 420 (relating to transfers
of excess pension assets to retiree health accounts) is
amended by adding at the end the following new sub-
section:
‘‘(f) SIMILAR RULES TO APPLY TO OTHER TRANS-
FERS OF EXCESS PLAN ASSETS.—
‘‘(1) IN GENERAL.—If there is a qualified unre-
stricted transfer of any excess pension assets of a
defined benefit plan (other than a multiemployer
plan) to an employer—
‘‘(A) a trust which is part of such plan
shall not be treated as failing to meet the re-
quirements of section 401(a) solely by reason of
such transfer (or any other action authorized
under this section), and
‘‘(B) such transfer shall not be treated as
a prohibited transaction for purposes of section
4975.
912
The gross income of the employer shall include the
amount of any qualified transfer made during the
taxable year.
‘‘(2) QUALIFIED UNRESTRICTED TRANSFER.—
For purposes of this section—
‘‘(A) IN
GENERAL.—The term ‘qualified
unrestricted transfer’ means a transfer—
‘‘(i) of excess pension assets of a de-
fined benefit plan to the employer, and
‘‘(ii) with respect to which the re-
quirements of subsection (c)(2)(A) are met
(determined by treating such transfer as a
qualified transfer).
‘‘(B) COORDINATION WITH TRANSFERS TO
RETIREE HEALTH ACCOUNTS.—Such term shall
not include any qualified transfer (as defined in
subsection (b)).
‘‘(C) EXPIRATION.—No transfer in any
taxable year beginning after December 31,
2000, shall be treated as a qualified unre-
stricted transfer.
‘‘(3) DEFINITION
AND
SPECIAL
RULE.—For
purposes of this subsection—
‘‘(A) EXCESS PENSION ASSETS.—The term
‘excess pension assets’ has the meaning given
913
such term by subsection (e)(2); except that the
amount thereof shall be the lesser of—
‘‘(i) the amount determined as of the
most recent valuation date of the plan pre-
ceding the transfer, or
‘‘(ii) the amount determined as of
January 1, 1995 (or, if January 1, 1995,
is not a valuation date, the most recent
prior valuation date).
‘‘(B) COORDINATION WITH SECTION 412.—
In the case of a qualified unrestricted trans-
fer—
‘‘(i) any assets transferred in a plan
year on or before the valuation date for
such year (and any income allocable there-
to) shall, for purposes of section 412, be
treated as assets in the plan as of the valu-
ation date for such year, and
‘‘(ii) the plan shall be treated as hav-
ing a net experience loss under section
412(b)(2)(B)(iv) in an amount equal to the
amount of such transfer and for which am-
ortization charges begin for the first plan
year after the plan year in which such
transfer occurs, except that such section
914
shall be applied to such amount by sub-
stituting ‘10 plan years’ for ‘5 plan years’.
‘‘(C) TREATMENT
OF
TRANSFERS.—Ex-
cept for purposes of this section, a qualified un-
restricted transfer shall be treated as a quali-
fied transfer to a health benefits account.’’
(b) REVERSION TAX.—Section 4980 (relating to tax
on reversion of qualified plan assets to employers) is
amended by adding at the end the following new sub-
section:
‘‘(e) SPECIAL
RULES
FOR
QUALIFIED
UNRE-
STRICTED TRANSFERS UNDER SECTION 420.—In the
case of a qualified unrestricted transfer to which section
420(f) applies—
‘‘(1) no tax shall be imposed by subsection (a)
if such transfer occurs before July 1, 1996,
‘‘(2) subsection (a) shall be applied by sub-
stituting ‘6.5 percent’ for ‘20 percent’ if such trans-
fer occurs after June 30, 1996, and
‘‘(3) subsection (d) shall not apply.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1995.
915
PART II—LEGAL REFORMS
SEC. 13611. REPEAL OF EXCLUSION FOR PUNITIVE DAM-
AGES 
AND 
FOR 
DAMAGES 
NOT 
ATTRIB-
UTABLE TO PHYSICAL INJURIES OR SICK-
NESS.
(a) IN GENERAL.—Paragraph (2) of section 104(a)
(relating to compensation for injuries or sickness) is
amended to read as follows:
‘‘(2) the amount of any damages (other than
punitive damages) received (whether by suit or
agreement and whether as lump sums or as periodic
payments) on account of personal physical injuries
or physical sickness;’’.
(b) EMOTIONAL DISTRESS AS SUCH TREATED AS
NOT PHYSICAL INJURY OR PHYSICAL SICKNESS.—Sec-
tion 104(a) is amended by striking the last sentence and
inserting the following new sentence: ‘‘For purposes of
paragraph (2), emotional distress shall not be treated as
a physical injury or physical sickness. The preceding sen-
tence shall not apply to an amount of damages not in ex-
cess of the amount paid for medical care (described in sub-
paragraph (A) or (B) of section 213(d)(1)) attributable
to emotional distress.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
916
shall apply to amounts received after December 31,
1995, in taxable years ending after such date.
(2) EXCEPTION.—The amendments made by
this section shall not apply to any amount received
under a written binding agreement, court decree, or
mediation award in effect on (or issued on or before)
September 13, 1995.
SEC. 13612. REPORTING OF CERTAIN PAYMENTS MADE TO
ATTORNEYS.
(a) IN GENERAL.—Section 6045 (relating to returns
of brokers) is amended by adding at the end the following
new subsection:
‘‘(f) RETURN REQUIRED IN THE CASE
OF PAY-
MENTS TO ATTORNEYS.—
‘‘(1) IN GENERAL.—Any person engaged in a
trade or business and making a payment (in the
course of such trade or business) to which this sub-
section applies shall file a return under subsection
(a) and a statement under subsection (b) with re-
spect to such payment.
‘‘(2) APPLICATION OF SUBSECTION.—
‘‘(A) IN GENERAL.—This subsection shall
apply to any payment to an attorney in connec-
tion with legal services (whether or not such
services are performed for the payor).
917
‘‘(B) EXCEPTION.—This subsection shall
not apply to the portion of any payment which
is required to be reported under section 6041(a)
(or would be so required but for the dollar limi-
tation contained therein) or section 6051.’’
(b) REPORTING OF ATTORNEYS FEES PAYABLE TO
CORPORATIONS.—The regulations providing an exception
under section 6041 of the Internal Revenue Code of 1986
for payments made to corporations shall not apply to pay-
ments of attorneys fees.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a), and subsection (b), shall apply to payments
made after December 31, 1995.
PART III—TREATMENT OF INDIVIDUALS WHO
LOSE UNITED STATES CITIZENSHIP
SEC. 13616. REVISION OF INCOME, ESTATE, AND GIFT
TAXES ON INDIVIDUALS WHO LOSE UNITED
STATES CITIZENSHIP.
(a) IN GENERAL.—Subsection (a) of section 877 is
amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) IN GENERAL.—Every nonresident alien in-
dividual who, within the 10-year period immediately
preceding the close of the taxable year, lost United
States citizenship, unless such loss did not have for
918
1 of its principal purposes the avoidance of taxes
under this subtitle or subtitle B, shall be taxable for
such taxable year in the manner provided in sub-
section (b) if the tax imposed pursuant to such sub-
section exceeds the tax which, without regard to this
section, is imposed pursuant to section 871.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING
TAX
AVOIDANCE
PURPOSE.—For purposes of
paragraph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if—
‘‘(A) the average annual net income tax
(as defined in section 38(c)(1)) of such individ-
ual for the period of 5 taxable years ending be-
fore the date of the loss of United States citi-
zenship is greater than $100,000, or
‘‘(B) the net worth of the individual as of
such date is $500,000 or more.
In the case of the loss of United States citizenship
in any calendar year after 1996, such $100,000 and
$500,000 amounts shall be increased by an amount
equal to such dollar amount multiplied by the cost-
of-living 
adjustment 
determined 
under 
section
1(f)(3) for such calendar year by substituting ‘1994’
for ‘1992’ in subparagraph (B) thereof. Any in-
919
crease under the preceding sentence shall be round-
ed to the nearest multiple of $1,000.’’
(b) EXCEPTIONS.—
(1) IN GENERAL.—Section 877 is amended by
striking subsection (d), by redesignating subsection
(c) as subsection (d), and by inserting after sub-
section (b) the following new subsection:
‘‘(c) TAX AVOIDANCE NOT PRESUMED IN CERTAIN
CASES.—
‘‘(1) IN GENERAL.—Subsection (a)(2) shall not
apply to an individual if—
‘‘(A) such individual is described in a sub-
paragraph of paragraph (2) of this subsection,
and
‘‘(B) within the 1-year period beginning on
the date of the loss of United States citizenship,
such individual submits a ruling request for the
Secretary’s determination as to whether such
loss has for 1 of its principal purposes the
avoidance of taxes under this subtitle or subtitle
B.
‘‘(2) INDIVIDUALS DESCRIBED.—
‘‘(A) DUAL CITIZENSHIP, ETC.—An indi-
vidual is described in this subparagraph if—
920
‘‘(i) the individual became at birth a
citizen of the United States and a citizen
of another country and continues to be a
citizen of such other country, or
‘‘(ii) the individual becomes (not later
than the close of a reasonable period after
loss of United States citizenship) a citizen
of the country in which—
‘‘(I) such individual was born,
‘‘(II) if such individual is mar-
ried, such individual’s spouse was
born, or
‘‘(III) either of such individual’s
parents were born.
‘‘(B) LONG-TERM FOREIGN RESIDENTS.—
An individual is described in this subparagraph
if, for each year in the 10-year period ending on
the date of loss of United States citizenship, the
individual was present in the United States for
days 
or 
less. 
The 
rule 
of 
section
7701(b)(3)(D)(ii) shall apply for purposes of
this subparagraph.
‘‘(C) RENUNCIATION UPON REACHING AGE
OF
MAJORITY.—An individual is described in
this subparagraph if the individual’s loss of
921
United States citizenship occurs before such in-
dividual attains age 181⁄2.
‘‘(D) INDIVIDUALS SPECIFIED IN REGULA-
TIONS.—An individual is described in this sub-
paragraph if the individual is described in a
category of individuals prescribed by regulation
by the Secretary.’’
(2) TECHNICAL AMENDMENT.—Paragraph (1)
of section 877(b) of such Code is amended by strik-
ing ‘‘subsection (c)’’ and inserting ‘‘subsection (d)’’.
(c) TREATMENT
OF PROPERTY DISPOSED
OF
IN
NONRECOGNITION TRANSACTIONS; TREATMENT OF DIS-
TRIBUTIONS
FROM
CERTAIN
CONTROLLED
FOREIGN
CORPORATIONS.—Subsection (d) of section 877, as redes-
ignated by subsection (b), is amended to read as follows:
‘‘(d) SPECIAL RULES FOR SOURCE, ETC.—For pur-
poses of subsection (b)—
‘‘(1) SOURCE RULES.—The following items of
gross income shall be treated as income from sources
within the United States:
‘‘(A) SALE OF PROPERTY.—Gains on the
sale or exchange of property (other than stock
or debt obligations) located in the United
States.
922
‘‘(B) STOCK
OR
DEBT
OBLIGATIONS.—
Gains on the sale or exchange of stock issued
by a domestic corporation or debt obligations of
United States persons or of the United States,
a State or political subdivision thereof, or the
District of Columbia.
‘‘(C) INCOME
OR
GAIN
DERIVED
FROM
CONTROLLED FOREIGN CORPORATION.—Any in-
come or gain derived from stock in a foreign
corporation but only—
‘‘(i) if the individual losing United
States citizenship owned (within the mean-
ing of section 958(a)), or is considered as
owning (by applying the ownership rules of
section 958(b)), at any time during the 2-
year period ending on the date of the loss
of United States citizenship, more than 50
percent of—
‘‘(I) the total combined voting
power of all classes of stock entitled
to vote of such corporation, or
‘‘(II) the total value of the stock
of such corporation, and
‘‘(ii) to the extent such income or gain
does not exceed the earnings and profits
923
attributable to such stock which were
earned or accumulated before the loss of
citizenship and during periods that the
ownership requirements of clause (i) are
met.
‘‘(2) GAIN
RECOGNITION
ON
CERTAIN
EX-
CHANGES.—
‘‘(A) IN GENERAL.—In the case of any ex-
change of property to which this paragraph ap-
plies, notwithstanding any other provision of
this title, such property shall be treated as sold
for its fair market value on the date of such ex-
change, and any gain shall be recognized for
the taxable year which includes such date.
‘‘(B) EXCHANGES TO WHICH PARAGRAPH
APPLIES.—This paragraph shall apply to any
exchange during the 10-year period described in
subsection (a) if—
‘‘(i) gain would not (but for this para-
graph) be recognized on such exchange in
whole or in part for purposes of this sub-
title,
‘‘(ii) income derived from such prop-
erty was from sources within the United
924
States (or, if no income was so derived,
would have been from such sources), and
‘‘(iii) income derived from the prop-
erty acquired in the exchange would be
from sources outside the United States.
‘‘(C) 
EXCEPTION.—Subparagraph 
(A)
shall not apply if the individual enters into an
agreement with the Secretary which specifies
that any income or gain derived from the prop-
erty acquired in the exchange (or any other
property which has a basis determined in whole
or part by reference to such property) during
such 10-year period shall be treated as from
sources within the United States. If the prop-
erty transferred in the exchange is disposed of
by the person acquiring such property, such
agreement shall terminate and any gain which
was not recognized by reason of such agreement
shall be recognized as of the date of such dis-
position.
‘‘(D) SECRETARY MAY EXTEND PERIOD.—
To the extent provided in regulations prescribed
by the Secretary, subparagraph (B) shall be ap-
plied by substituting the 15-year period begin-
ning 5 years before the loss of United States
925
citizenship for the 10-year period referred to
therein.
‘‘(E) SECRETARY MAY REQUIRE RECOGNI-
TION OF GAIN IN CERTAIN CASES.—To the ex-
tent provided in regulations prescribed by the
Secretary—
‘‘(i) the removal of appreciated tan-
gible personal property from the United
States, and
‘‘(ii) any other occurrence which
(without recognition of gain) results in a
change in the source of the income or gain
from property from sources within the
United States to sources outside the Unit-
ed States,
shall be treated as an exchange to which this
paragraph applies.
‘‘(3) SUBSTANTIAL DIMINISHING OF RISKS OF
OWNERSHIP.—For purposes of determining whether
this section applies to any gain on the sale or ex-
change of any property, the running of the 10-year
period described in subsection (a) shall be suspended
for any period during which the individual’s risk of
loss with respect to the property is substantially di-
minished by—
926
‘‘(A) the holding of a put with respect to
such property (or similar property),
‘‘(B) the holding by another person of a
right to acquire the property, or
‘‘(C) a short sale or any other trans-
action.’’
(d) CREDIT
FOR FOREIGN TAXES IMPOSED
ON
UNITED STATES SOURCE INCOME.—
(1) Subsection (b) of section 877 is amended by
adding at the end the following new sentence: ‘‘The
tax imposed solely by reason of this section shall be
reduced (but not below zero) by the amount of any
income, war profits, and excess profits taxes (within
the meaning of section 903) paid to any foreign
country or possession of the United States on any
income of the taxpayer on which tax is imposed sole-
ly by reason of this section.’’
(2) Subsection (a) of section 877, as amended
by subsection (a), is amended by inserting ‘‘(after
any reduction in such tax under the last sentence of
such subsection)’’ after ‘‘such subsection’’.
(e) COMPARABLE ESTATE AND GIFT TAX TREAT-
MENT.—
(1) ESTATE TAX.—
927
(A) IN GENERAL.—Subsection (a) of sec-
tion 2107 is amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) RATE OF TAX.—A tax computed in accord-
ance with the table contained in section 2001 is
hereby imposed on the transfer of the taxable estate,
determined as provided in section 2106, of every de-
cedent nonresident not a citizen of the United States
if, within the 10-year period ending with the date of
death, such decedent lost United States citizenship,
unless such loss did not have for 1 of its principal
purposes the avoidance of taxes under this subtitle
or subtitle A.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING TAX AVOIDANCE PURPOSE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if
such individual is so treated under section
877(a)(2).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a decedent meeting the re-
quirements of section 877(c)(1).’’
(B) 
CREDIT
FOR
FOREIGN
DEATH
TAXES.—Subsection (c) of section 2107 is
928
amended by redesignating paragraph (2) as
paragraph (3) and by inserting after paragraph
(1) the following new paragraph:
‘‘(2) CREDIT FOR FOREIGN DEATH TAXES.—
‘‘(A) IN GENERAL.—The tax imposed by
subsection (a) shall be credited with the amount
of any estate, inheritance, legacy, or succession
taxes actually paid to any foreign country in re-
spect of any property which is included in the
gross estate solely by reason of subsection (b).
‘‘(B) LIMITATION ON CREDIT.—The credit
allowed by subparagraph (A) for such taxes
paid to a foreign country shall not exceed the
lesser of—
‘‘(i) the amount which bears the same
ratio to the amount of such taxes actually
paid to such foreign country in respect of
property included in the gross estate as the
value of the property included in the gross
estate solely by reason of subsection (b)
bears to the value of all property subjected
to such taxes by such foreign country, or
‘‘(ii) such property’s proportionate
share of the excess of—
929
‘‘(I) the tax imposed by sub-
section (a), over
‘‘(II) the tax which would be im-
posed by section 2101 but for this
section.
‘‘(C) PROPORTIONATE
SHARE.—For pur-
poses of subparagraph (B), a property’s propor-
tionate share is the percentage which the value
of the property which is included in the gross
estate solely by reason of subsection (b) bears
to the total value of the gross estate.’’
(C) EXPANSION OF INCLUSION IN GROSS
ESTATE
OF
STOCK
OF
FOREIGN
CORPORA-
TIONS.—Paragraph (2) of section 2107(b) is
amended by striking ‘‘more than 50 percent of’’
and all that follows and inserting ‘‘more than
50 percent of—
‘‘(A) the total combined voting power of all
classes of stock entitled to vote of such corpora-
tion, or
‘‘(B) the total value of the stock of such
corporation,’’.
(2) GIFT TAX.—
(A) IN GENERAL.—Paragraph (3) of sec-
tion 2501(a) is amended to read as follows:
930
‘‘(3) EXCEPTION.—
‘‘(A) CERTAIN
INDIVIDUALS.—Paragraph
(2) shall not apply in the case of a donor who,
within the 10-year period ending with the date
of transfer, lost United States citizenship, un-
less such loss did not have for 1 of its principal
purposes the avoidance of taxes under this sub-
title or subtitle A.
‘‘(B) CERTAIN INDIVIDUALS TREATED AS
HAVING TAX AVOIDANCE PURPOSE.—For pur-
poses of subparagraph (A), an individual shall
be treated as having a principal purpose to
avoid such taxes if such individual is so treated
under section 877(a)(2).
‘‘(C) EXCEPTION
FOR
CERTAIN
INDIVID-
UALS.—Subparagraph (B) shall not apply to a
decedent meeting the requirements of section
877(c)(1).
‘‘(D) CREDIT FOR FOREIGN GIFT TAXES.—
The tax imposed by this section solely by reason
of this paragraph shall be credited with the
amount of any gift tax actually paid to any for-
eign country in respect of any gift which is tax-
able under this section solely by reason of this
paragraph.’’
931
(f) COMPARABLE TREATMENT OF LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—
(1) IN GENERAL.—Section 877 is amended by
redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new sub-
section:
‘‘(e) COMPARABLE TREATMENT OF LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—
‘‘(1) IN GENERAL.—Any long-term resident of
the United States who—
‘‘(A) ceases to be a lawful permanent resi-
dent of the United States (within the meaning
of section 7701(b)(6)), or
‘‘(B) commences to be treated as a resi-
dent of a foreign country under the provisions
of a tax treaty between the United States and
the foreign country and who does not waive the
benefits of such treaty applicable to residents of
the foreign country,
shall be treated for purposes of this section and sec-
tions 2107, 2501, and 6039F in the same manner
as if such resident were a citizen of the United
932
States who lost United States citizenship on the date
of such cessation or commencement.
‘‘(2) LONG-TERM RESIDENT.—For purposes of
this subsection, the term ‘long-term resident’ means
any individual (other than a citizen of the United
States) who is a lawful permanent resident of the
United States in at least 8 taxable years during the
period of 15 taxable years ending with the taxable
year during which the event described in subpara-
graph (A) or (B) of paragraph (1) occurs. For pur-
poses of the preceding sentence, an individual shall
not be treated as a lawful permanent resident for
any taxable year if such individual is treated as a
resident of a foreign country for the taxable year
under the provisions of a tax treaty between the
United States and the foreign country and does not
waive the benefits of such treaty applicable to resi-
dents of the foreign country.
‘‘(3) SPECIAL RULES.—
‘‘(A) EXCEPTIONS NOT TO APPLY.—Sub-
section (c) shall not apply to an individual who
is treated as provided in paragraph (1).
‘‘(B) STEP-UP IN BASIS.—Solely for pur-
poses of determining any tax imposed by reason
of this subsection, property which was held by
933
the long-term resident on the date the individ-
ual first became a resident of the United States
shall be treated as having a basis on such date
of not less than the fair market value of such
property on such date. The preceding sentence
shall not apply if the individual elects not to
have such sentence apply. Such an election,
once made, shall be irrevocable.
‘‘(4) AUTHORITY TO EXEMPT INDIVIDUALS.—
This subsection shall not apply to an individual who
is described in a category of individuals prescribed
by regulation by the Secretary.
‘‘(5) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be appropriate to
carry out this subsection, including regulations pro-
viding for the application of this subsection in cases
where an alien individual becomes a resident of the
United States during the 10-year period after being
treated as provided in paragraph (1).’’
(2) CONFORMING AMENDMENTS.—
(A) Section 2107 is amended by striking
subsection (d), by redesignating subsection (e)
as subsection (d), and by inserting after sub-
section (d) (as so redesignated) the following
new subsection:
934
‘‘(e) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful
permanent residents who ceased to be taxed as resi-
dents, see section 877(e).’’
(B) Paragraph (3) of section 2501(a) (as
amended by subsection (e)) is amended by add-
ing at the end the following new subparagraph:
‘‘(E) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful
permanent residents who ceased to be taxed as resi-
dents, see section 877(e).’’
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to—
(A) individuals losing United States citi-
zenship (within the meaning of section 877 of
the Internal Revenue Code of 1986) on or after
February 6, 1995, and
(B) long-term residents of the United
States with respect to whom an event described
in subparagraph (A) or (B) of section 877(e)(1)
of such Code occurs on or after June 13, 1995.
(2) SPECIAL RULE.—
(A) IN GENERAL.—In the case of an indi-
vidual who performed an act of expatriation
specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nation-
ality Act (8 U.S.C. 1481(a)(1)–(4)) before Feb-
935
ruary 6, 1995, but who did not, on or before
such date, furnish to the United States Depart-
ment of State a signed statement of voluntary
relinquishment of United States nationality con-
firming the performance of such act, the
amendments made by this section shall apply to
such individual except that—
(i) the 10-year period described in
section 877(a) of such Code shall not ex-
pire before the end of the 10-year period
beginning on the date such statement is so
furnished, and
(ii) the 1-year period referred to in
section 877(c) of such Code, as amended
by this section, shall not expire before the
date which is 1 year after the date of the
enactment of this Act.
(B) EXCEPTION.—Subparagraph (A) shall
not apply if the individual establishes to the
satisfaction of the Secretary of the Treasury
that such loss of United States citizenship oc-
curred before February 6, 1994.
936
SEC. 13617. INFORMATION ON INDIVIDUALS LOSING UNIT-
ED STATES CITIZENSHIP.
(a) IN GENERAL.—Subpart A of part III of sub-
chapter A of chapter 61 is amended by inserting after sec-
tion 6039E the following new section:
‘‘SEC. 
6039F. 
INFORMATION 
ON 
INDIVIDUALS 
LOSING
UNITED STATES CITIZENSHIP.
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of law, any individual who loses United States citi-
zenship (within the meaning of section 877(a)) shall pro-
vide a statement which includes the information described
in subsection (b). Such statement shall be—
‘‘(1) provided not later than the earliest date of
any act referred to in subsection (c), and
‘‘(2) provided to the person or court referred to
in subsection (c) with respect to such act.
‘‘(b) INFORMATION TO BE PROVIDED.—Information
required under subsection (a) shall include—
‘‘(1) the taxpayer’s TIN,
‘‘(2) the mailing address of such individual’s
principal foreign residence,
‘‘(3) the foreign country in which such individ-
ual is residing,
‘‘(4) the foreign country of which such individ-
ual is a citizen,
937
‘‘(5) in the case of an individual having a net
worth of at least the dollar amount applicable under
section 877(a)(2)(B), information detailing the as-
sets and liabilities of such individual, and
‘‘(6) such other information as the Secretary
may prescribe.
‘‘(c) ACTS DESCRIBED.—For purposes of this sec-
tion, the acts referred to in this subsection are—
‘‘(1) the individual’s renunciation of his United
States nationality before a diplomatic or consular of-
ficer of the United States pursuant to paragraph (5)
of section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(5)),
‘‘(2) the individual’s furnishing to the United
States Department of State a signed statement of
voluntary relinquishment of United States national-
ity confirming the performance of an act of expatria-
tion specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(1)–(4)),
‘‘(3) the issuance by the United States Depart-
ment of State of a certificate of loss of nationality
to the individual, or
938
‘‘(4) the cancellation by a court of the United
States of a naturalized citizen’s certificate of natu-
ralization.
‘‘(d) PENALTY.—Any individual failing to provide a
statement required under subsection (a) shall be subject
to a penalty for each year (of the 10-year period beginning
on the date of loss of United States citizenship) during
any portion of which such failure continues in an amount
equal to the greater of—
‘‘(1) 5 percent of the tax required to be paid
under section 877 for the taxable year ending during
such year, or
‘‘(2) $1,000,
unless it is shown that such failure is due to reasonable
cause and not to willful neglect.
‘‘(e) INFORMATION TO BE PROVIDED TO SEC-
RETARY.—Notwithstanding any other provision of law—
‘‘(1) any Federal agency or court which collects
(or is required to collect) the statement under sub-
section (a) shall provide to the Secretary—
‘‘(A) a copy of any such statement, and
‘‘(B) the name (and any other identifying
information) of any individual refusing to com-
ply with the provisions of subsection (a),
939
‘‘(2) the Secretary of State shall provide to the
Secretary a copy of each certificate as to the loss of
American nationality under section 358 of the Immi-
gration and Nationality Act which is approved by
the Secretary of State, and
‘‘(3) the Federal agency primarily responsible
for administering the immigration laws shall provide
to the Secretary the name of each lawful permanent
resident of the United States (within the meaning of
section 7701(b)(6)) whose status as such has been
revoked or has been administratively or judicially de-
termined to have been abandoned.
Notwithstanding any other provision of law, not later than
30 days after the close of each calendar quarter, the Sec-
retary shall publish in the Federal Register the name of
each individual losing United States citizenship (within
the meaning of section 877(a)) with respect to whom the
Secretary receives information under the preceding sen-
tence during such quarter.
‘‘(f) REPORTING BY LONG-TERM LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—In lieu of applying the last sentence of sub-
section (a), any individual who is required to provide a
statement under this section by reason of section
877(e)(1) shall provide such statement with the return of
940
tax imposed by chapter 1 for the taxable year during
which the event described in such section occurs.
‘‘(g) EXEMPTION.—The Secretary may by regula-
tions exempt any class of individuals from the require-
ments of this section if he determines that applying this
section to such individuals is not necessary to carry out
the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 6039E the following new item:
‘‘Sec. 6039F. Information on individuals losing United States citi-
zenship.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to—
(1) individuals losing United States citizenship
(within the meaning of section 877 of the Internal
Revenue Code of 1986) after the date of the enact-
ment of this Act, and
(2) long-term residents of the United States
with respect to whom an event described in subpara-
graph (A) or (B) of section 877(e)(1) of such Code
occurs after such date.
941
SEC. 13618. REPORT ON TAX COMPLIANCE BY UNITED
STATES CITIZENS AND RESIDENTS LIVING
ABROAD.
Not later than 90 days after the date of the enact-
ment of this Act, the Secretary of the Treasury shall pre-
pare and submit to the Committee on Ways and Means
of the House of Representatives and the Committee on
Finance of the Senate a report—
(1) describing the compliance with subtitle A of
the Internal Revenue Code of 1986 by citizens and
lawful permanent residents of the United States
(within the meaning of section 7701(b)(6) of such
Code) residing outside the United States, and
(2) recommending measures to improve such
compliance (including improved coordination be-
tween executive branch agencies).
PART IV—REFORMS RELATING TO ENERGY
PROVISIONS
SEC. 13621. TERMINATION OF CREDIT FOR ELECTRICITY
PRODUCED FROM CERTAIN RENEWABLE RE-
SOURCES.
(a) FACILITIES MUST BE PLACED IN SERVICE BE-
FORE SEPTEMBER 14, 1995.—Paragraph (3) of section
45(c) (defining qualified facility) is amended by striking
‘‘July 1, 1999’’ and inserting ‘‘September 14, 1995’’.
(b) EFFECTIVE DATE.—
942
(1) IN
GENERAL.—The amendment made by
this section shall apply to taxable years ending after
September 13, 1995.
(2) BINDING
CONTRACTS.—The amendment
made by this section shall not apply to any facility—
(A) which is constructed or acquired by the
taxpayer pursuant to a written contract which
was binding on September 13, 1995, and at all
times thereafter before such construction or ac-
quisition, and
(B) which is placed in service before Sep-
tember 14, 1996.
SEC. 13622. EXCLUSION FOR ENERGY CONSERVATION SUB-
SIDIES LIMITED TO SUBSIDIES WITH RE-
SPECT TO DWELLING UNITS.
(a) IN GENERAL.—Paragraph (1) of section 136(c)
(defining energy conservation measure) is amended by
striking ‘‘energy demand—’’ and all that follows and in-
serting ‘‘energy demand with respect to a dwelling unit.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 136 is amended to
read as follows:
‘‘(a) EXCLUSION.—Gross income shall not include
the value of any subsidy provided (directly or indirectly)
943
by a public utility to a customer for the purchase or instal-
lation of any energy conservation measure.’’
(2) Paragraph (2) of section 136(c) is amend-
ed—
(A) by striking subparagraph (A) and by
redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively, and
(B) by striking ‘‘AND SPECIAL RULES’’ in
the paragraph heading.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after Septem-
ber 13, 1995, unless received pursuant to a written bind-
ing contract in effect on September 13, 1995, and at all
times thereafter.
PART V—REFORMS RELATING TO
NONRECOGNITION PROVISIONS
SEC. 13626. BASIS ADJUSTMENT TO PROPERTY HELD BY
CORPORATION WHERE STOCK IN CORPORA-
TION IS REPLACEMENT PROPERTY UNDER
INVOLUNTARY CONVERSION RULES.
(a) IN GENERAL.—Subsection (b) of section 1033 is
amended to read as follows:
‘‘(b) BASIS OF PROPERTY ACQUIRED THROUGH IN-
VOLUNTARY CONVERSION.—
944
‘‘(1) CONVERSIONS DESCRIBED IN SUBSECTION
(a)(1).—If the property was acquired as the result
of a compulsory or involuntary conversion described
in subsection (a)(1), the basis shall be the same as
in the case of the property so converted—
‘‘(A) decreased in the amount of any
money received by the taxpayer which was not
expended in accordance with the provisions of
law (applicable to the year in which such con-
version was made) determining the taxable sta-
tus of the gain or loss upon such conversion,
and
‘‘(B) increased in the amount of gain or
decreased in the amount of loss to the taxpayer
recognized upon such conversion under the law
applicable to the year in which such conversion
was made.
‘‘(2) CONVERSIONS DESCRIBED IN SUBSECTION
(a)(2).—In the case of property purchased by the
taxpayer in a transaction described in subsection
(a)(2) which resulted in the nonrecognition of any
part of the gain realized as the result of a compul-
sory or involuntary conversion, the basis shall be the
cost of such property decreased in the amount of the
gain not so recognized; and if the property pur-
945
chased consists of more than 1 piece of property, the
basis determined under this sentence shall be allo-
cated to the purchased properties in proportion to
their respective costs.
‘‘(3) PROPERTY HELD BY CORPORATION THE
STOCK OF WHICH IS REPLACEMENT PROPERTY.—
‘‘(A) IN GENERAL.—If the basis of stock
in a corporation is decreased under paragraph
(2), an amount equal to such decrease shall also
be applied to reduce the basis of property held
by the corporation at the time the taxpayer ac-
quired 
control 
(as 
defined 
in 
subsection
(a)(2)(E)) of such corporation.
‘‘(B) 
LIMITATION.—Subparagraph 
(A)
shall not apply to the extent that it would (but
for this subparagraph) require a reduction in
the aggregate adjusted bases of the property of
the corporation below the taxpayer’s adjusted
basis of the stock in the corporation (deter-
mined immediately after such basis is decreased
under paragraph (2)).
‘‘(C) ALLOCATION OF BASIS REDUCTION.—
The decrease required under subparagraph (A)
shall be allocated—
946
‘‘(i) first to property which is similar
or related in service or use to the converted
property,
‘‘(ii) second to depreciable property
(as defined in section 1017(b)(3)(B)) not
described in clause (i), and
‘‘(iii) then to other property.
‘‘(D) SPECIAL RULES.—
‘‘(i) REDUCTION NOT TO EXCEED AD-
JUSTED BASIS OF PROPERTY.—No reduc-
tion in the basis of any property under this
paragraph shall exceed the adjusted basis
of such property (determined without re-
gard to such reduction).
‘‘(ii) ALLOCATION
OF
REDUCTION
AMONG
PROPERTIES.—If more than 1
property is described in a clause of sub-
paragraph (C), the reduction under this
paragraph shall be allocated among such
property in proportion to the adjusted
bases of such property (determined without
regard to such reduction).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to involuntary conversions occur-
ring after September 13, 1995.
947
SEC. 13627. EXPANSION OF REQUIREMENT THAT INVOLUN-
TARILY 
CONVERTED 
PROPERTY 
BE 
RE-
PLACED WITH PROPERTY ACQUIRED FROM
AN UNRELATED PERSON.
(a) IN GENERAL.—Subsection (i) of section 1033 is
amended to read as follows:
‘‘(i) REPLACEMENT PROPERTY MUST BE ACQUIRED
FROM UNRELATED PERSON IN CERTAIN CASES.—
‘‘(1) IN GENERAL.—If the property which is in-
voluntarily converted is held by a taxpayer to which
this subsection applies, subsection (a) shall not apply
if the replacement property or stock is acquired from
a related person. The preceding sentence shall not
apply to the extent that the related person acquired
the replacement property or stock from an unrelated
person during the period applicable under subsection
(a)(2)(B).
‘‘(2) TAXPAYERS TO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to—
‘‘(A) a C corporation,
‘‘(B) a partnership in which 1 or more C
corporations own, directly or indirectly (deter-
mined in accordance with section 707(b)(3)),
more than 50 percent of the capital interest, or
profits interest, in such partnership at the time
of the involuntary conversion, and
948
‘‘(C) any other taxpayer if, with respect to
property which is involuntarily converted during
the taxable year, the aggregate of the amount
of realized gain on such property on which
there is realized gain exceeds $100,000.
In the case of a partnership, subparagraph (C) shall
apply with respect to the partnership and with re-
spect to each partner. A similar rule shall apply in
the case of an S corporation and its shareholders.
‘‘(3) RELATED PERSON.—For purposes of this
subsection, a person is related to another person if
the person bears a relationship to the other person
described in section 267(b) or 707(b)(1).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to involuntary conversions occur-
ring after September 13, 1995.
SEC. 13628. NO ROLLOVER OR EXCLUSION OF GAIN ON
SALE OF PRINCIPAL RESIDENCE WHICH IS
ATTRIBUTABLE TO DEPRECIATION DEDUC-
TIONS.
(a) IN GENERAL.—Subsection (d) of section 1034
(relating to limitations) is amended by adding at the end
the following new paragraph:
‘‘(3) RECOGNITION OF GAIN ATTRIBUTABLE TO
DEPRECIATION.—Subsection (a) shall not apply to
949
so much of the gain from the sale of any residence
as does not exceed the portion of the depreciation
adjustments (as defined in section 1250(b)(3)) at-
tributable to periods after December 31, 1995, in re-
spect of such residence.’’
(b) COMPARABLE TREATMENT UNDER 1-TIME EX-
CLUSION OF GAIN ON SALE OF PRINCIPAL RESIDENCE.—
Subsection (d) of section 121 is amended by adding at
the end the following new paragraph:
‘‘(10) RECOGNITION
OF
GAIN
ATTRIBUTABLE
TO DEPRECIATION.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to so much of the gain from the sale
of any property as does not exceed the portion
of the depreciation adjustments (as defined in
section 1250(b)(3)) attributable to periods after
December 31, 1995, in respect of such prop-
erty.
‘‘(B) COORDINATION
WITH
PARAGRAPH
(5).—If this section does not apply to gain at-
tributable to a portion of a residence by reason
of paragraph (5), subparagraph (A) shall not
apply to depreciation adjustments attributable
to such portion.’’
950
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1995.
SEC. 13629. NONRECOGNITION OF GAIN ON SALE OF PRIN-
CIPAL RESIDENCE BY NONCITIZENS LIMITED
TO NEW RESIDENCES LOCATED IN THE UNIT-
ED STATES.
(a) IN GENERAL.—Subsection (d) of section 1034
(relating to limitations) (as amended by section 13628)
is amended by adding at the end the following new para-
graph:
‘‘(4) NEW RESIDENCE MUST BE LOCATED IN
UNITED STATES IN CERTAIN CASES.—
‘‘(A) IN GENERAL.—In the case of a sale
of an old residence by a taxpayer—
‘‘(i) who is not a citizen of the United
States at the time of sale, and
‘‘(ii) who is not a citizen or resident
of the United States on the date which is
2 years after the date of the sale of such
old residence,
subsection (a) shall apply only if the new resi-
dence is located in the United States or a pos-
session of the United States.
951
‘‘(B) PROPERTY HELD JOINTLY BY HUS-
BAND AND WIFE.—Subparagraph (A) shall not
apply if—
‘‘(i) the old residence is held by a hus-
band and wife as joint tenants, tenants by
the entirety, or community property,
‘‘(ii) such husband and wife make a
joint return for the taxable year of the sale
or exchange, and
‘‘(iii) one spouse is a citizen of the
United States at the time of sale.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
this section shall apply to sales of old residences
after December 31, 1995.
(2) TREATMENT OF PURCHASES OF NEW RESI-
DENCES.—The amendment made by this section
shall not apply to new residences—
(A) purchased before September 13, 1995,
or
(B) purchased on or after such date pursu-
ant to a binding contract in effect on such date
and at all times thereafter before such pur-
chase.
952
(3) CERTAIN RULES TO APPLY.—For purposes
of this subsection, the rules of paragraphs (1), (2),
and (3) of section 1034(c) of the Internal Revenue
Code of 1986 shall apply.
PART VI—REFORMS RELATING TO GAMING
ACTIVITIES
SEC. 13631. TREATMENT OF INDIAN GAMING ACTIVITIES
UNDER UNRELATED BUSINESS INCOME TAX.
(a) IN GENERAL.—Paragraph (2) of section 511(a)
(relating to imposition of tax on unrelated business income
of charitable, etc., organizations) is amended by adding
at the end the following new subparagraph:
‘‘(C) GAMING
ACTIVITIES
OF
INDIAN
TRIBES.—
‘‘(i) IN GENERAL.—The tax imposed
by paragraph (1) shall apply to any Indian
tribal organization; except that, notwith-
standing any other provision of this part,
in the case of such an organization, the
term ‘unrelated trade or business’ means
only a trade or business of conducting any
class II or class III gaming activity (as de-
fined in section 4 of the Indian Gaming
Regulatory Act (25 U.S.C. 2701 et seq.),
as in effect on the date of the enactment
953
of this subparagraph), including a gaming
activity described in section 513(a)(1).
‘‘(ii) 
INDIAN
TRIBAL
ORGANIZA-
TION.—For purposes of clause (i), the
term ‘Indian tribal organization’ means
any Indian tribe and any organization
which is immune or exempt from tax under
this subtitle solely by reason of being
owned or controlled by an Indian tribe.’’
(b) TREATMENT
OF AMOUNTS PAID
FOR CHARI-
TABLE PURPOSES, ETC., BY REASON OF STATE OR FED-
ERAL LAW.—Subsection (b) of section 512 is amended by
adding at the end the following new paragraph:
‘‘(17) In the case of an Indian tribal organiza-
tion (as defined in section 511(a)(3)), if, by reason
of State or Federal law or of a contract with the
United States or with any State or political subdivi-
sion thereof, such organization is required to use
any portion of the net proceeds of any gaming activ-
ity for specified purposes, the deduction for so using
such proceeds shall be treated as allowed under sec-
tion 170 for purposes of applying paragraph (10).
The preceding sentence shall not apply to such pro-
ceeds which are paid as general revenues to the
954
United States or to any State or political subdivision
thereof.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996.
(d) STUDY OF GAMBLING CONDUCTED BY TAX-EX-
EMPT ORGANIZATIONS.—The Secretary of the Treasury or
his delegate shall conduct a study on the nature and ex-
tent of gaming activities conducted by organizations ex-
empt from tax under section 501(a) of the Internal Reve-
nue Code of 1986, including an examination of—
(1) the types of gaming activities (including
bingo, pull tabs, and casino nights) engaged in by
charities and other nonprofit organizations and the
frequency of such activities;
(2) the dollar volume of such gaming activities;
(3) the nature and extent of the involvement of
for-profit entities and private parties in the manage-
ment or operation of gaming activities of such orga-
nizations;
(4) competition between taxable gaming activi-
ties and gaming activities that are exempt from Fed-
eral income tax; and
(5) an analysis of the present law tax treatment
of gaming activities of tax-exempt organizations.
955
The study may include any recommendations for change,
including examination of the South End decision and the
special exception for bingo games. The Secretary shall
submit the results of the study to the Committee on Ways
and Means of the House of Representatives and the Com-
mittee on Finance of the Senate not later than July 1,
1996.
SEC. 13632. REPEAL OF TARGETED EXEMPTION FROM TAX
ON UNRELATED TRADE OR BUSINESS IN-
COME FROM GAMBLING IN CERTAIN STATES.
(a) IN GENERAL.—Section 311 of the Tax Reform
Act of 1984 is hereby repealed.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to games of chance conducted
after December 31, 1995, in taxable years ending after
such date.
SEC. 13633. EXTENSION OF WITHHOLDING TO CERTAIN
GAMBLING WINNINGS.
(a) REPEAL
OF
EXEMPTION
FOR
BINGO
AND
KENO.—Paragraph (5) of section 3402(q) is amended to
read as follows:
‘‘(5) EXEMPTION FOR SLOT MACHINES.—The
tax imposed under paragraph (1) shall not apply to
winnings from a slot machine.’’
956
(b) THRESHOLD AMOUNT.—Paragraph (3) of section
3402(q) is amended—
(1) by striking ‘‘(B) and (C)’’ in subparagraph
(A) and inserting ‘‘(B), (C), and (D)’’, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(D) BINGO
AND
KENO.—Proceeds of
more than $5,000 from a wager placed in a
bingo or keno game.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996.
PART VII—OTHER REFORMS
SEC. 13636. SUNSET OF LOW-INCOME HOUSING CREDIT.
(a) REPEAL OF REALLOCATION OF UNUSED CRED-
ITS
AMONG
STATES.—Subparagraph (D) of section
42(h)(3) is amended by adding at the end the following
new clause:
‘‘(v) TERMINATION.—No amount may
be allocated under this paragraph for any
calendar year after 1995.’’
(b) TERMINATION.—Section 42 is amended by add-
ing at the end the following new subsection:
‘‘(o) TERMINATION.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2)—
957
‘‘(A) clause (i) of subsection (h)(3)(C)
shall not apply to any amount allocated after
December 31, 1997, and
‘‘(B) subsection (h)(4) shall not apply to
any building placed in service after such date.
‘‘(2) EXCEPTION FOR BOND-FINANCED BUILD-
INGS
IN
PROGRESS.—For purposes of paragraph
(1)(B), a building shall be treated as placed in serv-
ice before January 1, 1998, if—
‘‘(A) the bonds with respect to such build-
ing are issued before such date,
‘‘(B) the taxpayer’s basis in the project (of
which the building is a part) as of December
31, 1997, is more than 10 percent of the tax-
payer’s reasonably expected basis in such
project as of December 31, 1999, and
‘‘(C) such building is placed in service be-
fore January 1, 2000.’’
SEC. 13637. REPEAL OF CREDIT FOR CONTRIBUTIONS TO
COMMUNITY DEVELOPMENT CORPORATIONS.
(a) IN GENERAL.—Section 13311 of the Revenue
Reconciliation Act of 1993 (relating to credit for contribu-
tions to certain community development corporations) is
hereby repealed.
958
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to contributions made after the
date of the enactment of this Act (other than contributions
made pursuant to a legally enforceable agreement which
is effect on the date of the enactment of this Act).
SEC. 13638. REPEAL OF DIESEL FUEL TAX REBATE TO PUR-
CHASERS 
OF 
DIESEL-POWERED 
AUTO-
MOBILES AND LIGHT TRUCKS.
(a) IN GENERAL.—Section 6427 is amended by strik-
ing subsection (g).
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 34(a) is amended
to read as follows:
‘‘(3) under section 6427 with respect to fuels
used for nontaxable purposes or resold during the
taxable year (determined without regard to section
6427(k)).’’
(2) Paragraphs (1) and (2)(A) of section
6427(i) are each amended—
(A) by striking ‘‘(g),’’, and
(B) by striking ‘‘(or a qualified diesel pow-
ered highway vehicle purchased)’’ each place it
appears.
959
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to vehicles purchased after Decem-
ber 31, 1995.
SEC. 13639. APPLICATION OF FAILURE-TO-PAY PENALTY TO
SUBSTITUTE RETURNS.
(a) GENERAL RULE.—Section 6651 (relating to fail-
ure to file tax return or to pay tax) is amended by adding
at the end the following new subsection:
‘‘(g) TREATMENT OF RETURNS PREPARED BY SEC-
RETARY UNDER SECTION 6020(b).—In the case of any
return made by the Secretary under section 6020(b)—
‘‘(1) such return shall be disregarded for pur-
poses of determining the amount of the addition
under paragraph (1) of subsection (a), but
‘‘(2) such return shall be treated as the return
filed by the taxpayer for purposes of determining the
amount of the addition under paragraphs (2) and
(3) of subsection (a).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply in the case of any return the
due date for which (determined without regard to exten-
sions) is after the date of the enactment of this Act.
960
SEC. 13640. REPEAL OF SPECIAL RULE FOR RENTAL USE OF
VACATION HOMES, ETC., FOR LESS THAN 15
DAYS.
(a) IN GENERAL.—Section 280A (relating to dis-
allowance of certain expenses in connection with business
use of home, rental of vacation homes, etc.) is amended
by striking subsection (g).
(b) NO BASIS REDUCTION UNLESS DEPRECIATION
CLAIMED.—Section 1016 is amended by redesignating
subsection (e) as subsection (f) and by inserting after sub-
section (d) the following new subsection:
‘‘(e) SPECIAL RULE WHERE RENTAL USE OF VACA-
TION HOME, ETC., FOR LESS THAN 15 DAYS.—If a dwell-
ing unit is used during the taxable year by the taxpayer
as a residence and such dwelling unit is actually rented
for less than 15 days during the taxable year, the reduc-
tion under subsection (a)(2) by reason of such rental use
in any taxable year beginning after December 31, 1995,
shall not exceed the depreciation deduction allowed for
such rental use.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
961
SEC. 13641. ELECTION TO CEASE STATUS AS QUALIFIED
SCHOLARSHIP FUNDING CORPORATION.
(a) IN GENERAL.—Subsection (d) of section 150 (re-
lating to definitions and special rules) is amended by add-
ing at the end thereof the following new paragraph:
‘‘(3) ELECTION TO CEASE STATUS AS QUALI-
FIED SCHOLARSHIP FUNDING CORPORATION.—
‘‘(A) IN GENERAL.—Any qualified scholar-
ship funding bond, and qualified student loan
bond, outstanding on the date of the issuer’s
election under this paragraph (and any bond
(or series of bonds) issued to refund such a
bond) shall not fail to be a tax-exempt bond
solely because the issuer ceases to be described
in subparagraphs (A) and (B) of paragraph (2)
if the issuer meets the requirements of subpara-
graphs (B) and (C) of this paragraph.
‘‘(B) ASSETS AND LIABILITIES OF ISSUER
TRANSFERRED TO TAXABLE SUBSIDIARY.—The
requirements of this subparagraph are met by
an issuer if—
‘‘(i) all of the student loan notes of
the issuer and other assets pledged to se-
cure the repayment of qualified scholarship
funding bond indebtedness of the issuer
are transferred to another corporation
962
within a reasonable period after the elec-
tion is made under this paragraph;
‘‘(ii) such transferee corporation as-
sumes or otherwise provides for the pay-
ment of all of the qualified scholarship
funding bond indebtedness of the issuer
within a reasonable period after the elec-
tion is made under this paragraph;
‘‘(iii) to the extent permitted by law,
such transferee corporation assumes all of
the responsibilities, and succeeds to all of
the rights, of the issuer under the issuer’s
agreements with the Secretary of Edu-
cation in respect of student loans;
‘‘(iv) immediately after such transfer,
the issuer, together with any other issuer
which has made an election under this
paragraph in respect of such transferee,
hold all of the senior stock in such trans-
feree corporation; and
‘‘(v) such transferee corporation is not
exempt from tax under this chapter.
‘‘(C) ISSUER TO OPERATE AS INDEPEND-
ENT
ORGANIZATION
DESCRIBED
IN
SECTION
501(c)(3).—The requirements of this subpara-
963
graph are met by an issuer if, within a reason-
able period after the transfer referred to in sub-
paragraph (B)—
‘‘(i) the issuer is described in section
501(c)(3) and exempt from tax under sec-
tion 501(a);
‘‘(ii) the issuer no longer is described
in subparagraphs (A) and (B) of para-
graph (2); and
‘‘(iii) at least 80 percent of the mem-
bers of the board of directors of the issuer
are independent members.
‘‘(D) SENIOR
STOCK.—For purposes of
this paragraph, the term ‘senior stock’ means
stock—
‘‘(i) which participates pro rata and
fully in the equity value of the corporation
with all other common stock of the cor-
poration but which has the right to pay-
ment of liquidation proceeds prior to pay-
ment of liquidation proceeds in respect of
other common stock of the corporation;
‘‘(ii) which has a fixed right upon liq-
uidation and upon redemption to an
amount equal to the greater of—
964
‘‘(I) the fair market value of such
stock on the date of liquidation or re-
demption (whichever is applicable); or
‘‘(II) the fair market value of all
assets transferred in exchange for
such stock and reduced by the amount
of all liabilities of the corporation
which has made an election under this
paragraph assumed by the transferee
corporation in such transfer;
‘‘(iii) the holder of which has the right
to require the transferee corporation to re-
deem on a date that is not later than 10
years after the date on which an election
under this paragraph was made and pursu-
ant to such election such stock was issued;
and
‘‘(iv) in respect of which, during the
time such stock is outstanding, there is not
outstanding any equity interest in the cor-
poration having any liquidation, redemp-
tion or dividend rights in the corporation
which are superior to those of such stock.
‘‘(E) INDEPENDENT MEMBER.—The term
‘independent member’ means a member of the
965
board of directors of the issuer who (except for
services as a member of such board) receives no
compensation directly or indirectly—
‘‘(i) for services performed in connec-
tion with such transferee corporation, or
‘‘(ii) for services as a member of the
board of directors or as an officer of such
transferee corporation.
For purposes of clause (ii), the term ‘officer’ in-
cludes any individual having powers or respon-
sibilities similar to those of officers.
‘‘(F) COORDINATION WITH CERTAIN PRI-
VATE
FOUNDATION
TAXES.—For purposes of
sections 4942 (relating to the excise tax on a
failure to distribute income) and 4943 (relating
to the excise tax on excess business holdings),
the transferee corporation referred to in sub-
paragraph (B) shall be treated as a functionally
related business (within the meaning of section
4942(j)(4)) with respect to the issuer during
the period commencing with the date on which
an election is made under this paragraph and
ending on the date that is the earlier of—
‘‘(i) the last day of the last taxable
year for which more than 50 percent of the
966
gross income of such transferee corpora-
tion is derived from, or more than 50 per-
cent of the assets (by value) of such trans-
feree corporation consists of, student loan
notes incurred under the Higher Education
Act of 1965; or
‘‘(ii) the last day of the taxable year
of the issuer during which occurs the date
which is 10 years after the date on which
the election under this paragraph is made.
‘‘(G) ELECTION.—An election under this
paragraph may be revoked only with the con-
sent of the Secretary.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 13642. CERTAIN AMOUNTS DERIVED FROM FOREIGN
CORPORATIONS TREATED AS UNRELATED
BUSINESS TAXABLE INCOME.
(a) GENERAL RULE.—Subsection (b) of section 512
(relating to modifications) is amended by adding at the
end thereof the following new paragraph:
‘‘(18) TREATMENT OF CERTAIN AMOUNTS DE-
RIVED FROM FOREIGN CORPORATIONS.—
968
with the performance of services for the
benefit of such organization or affiliate.
‘‘(C) REGULATIONS.—The Secretary shall
prescribe such regulations as may be necessary
or appropriate to carry out the purposes of this
paragraph, including regulations for the appli-
cation of this paragraph in the case of income
paid through 1 or more entities or between 2 or
more chains of entities.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to amounts included in gross in-
come in any taxable year beginning after December 31,
1995.
PART VIII—EXCISE TAX ON AMOUNTS OF
PRIVATE EXCESS BENEFITS
SEC. 13646. EXCISE TAXES FOR FAILURE BY CERTAIN
CHARITABLE ORGANIZATIONS TO MEET CER-
TAIN QUALIFICATION REQUIREMENTS.
(a) IN GENERAL.—Chapter 42 (relating to private
foundations and certain other tax-exempt organizations)
is amended by redesignating subchapter D as subchapter
E and by inserting after subchapter C the following new
subchapter:
969
‘‘Subchapter D—Failure By Certain
Charitable 
Organizations 
To
Meet Certain Qualification Re-
quirements
‘‘Sec. 4958. Taxes on excess benefit transactions.
‘‘SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.
‘‘(a) INITIAL TAXES.—
‘‘(1) ON THE DISQUALIFIED PERSON.—There is
hereby imposed on each excess benefit transaction a
tax equal to 25 percent of the excess benefit. The
tax imposed by this paragraph shall be paid by any
disqualified person referred to in subsection (f)(1)
with respect to such transaction.
‘‘(2) ON THE MANAGEMENT.—In any case in
which a tax is imposed by paragraph (1), there is
hereby imposed on the participation of any organiza-
tion manager in the excess benefit transaction,
knowing that it is such a transaction, a tax equal to
10 percent of the excess benefit, unless such partici-
pation is not willful and is due to reasonable cause.
The tax imposed by this paragraph shall be paid by
any organization manager who participated in the
excess benefit transaction.
‘‘(b) ADDITIONAL TAX ON THE DISQUALIFIED PER-
SON.—In any case in which an initial tax is imposed by
970
subsection (a)(1) on an excess benefit transaction and the
excess benefit involved in such transaction is not corrected
within the taxable period, there is hereby imposed a tax
equal to 200 percent of the excess benefit involved. The
tax imposed by this subsection shall be paid by any dis-
qualified person referred to in subsection (f)(1) with re-
spect to such transaction.
‘‘(c) EXCESS BENEFIT TRANSACTION; EXCESS BEN-
EFIT.—For purposes of this section—
‘‘(1) EXCESS BENEFIT TRANSACTION.—
‘‘(A) IN GENERAL.—The term ‘excess ben-
efit transaction’ means any transaction in
which an economic benefit is provided by an ap-
plicable tax-exempt organization directly or in-
directly to or for the use of any disqualified
person if the value of the economic benefit pro-
vided exceeds the value of the consideration (in-
cluding the performance of services) received
for providing such benefit. For purposes of the
preceding sentence, an economic benefit shall
not be treated as consideration for the perform-
ance of services unless such organization clearly
indicated its intent to so treat such benefit.
971
‘‘(B) EXCESS BENEFIT.—The term ‘excess
benefit’ means the excess referred to in sub-
paragraph (A).
‘‘(2) AUTHORITY TO INCLUDE CERTAIN OTHER
PRIVATE
INUREMENT.—To the extent provided in
regulations prescribed by the Secretary, the term
‘excess benefit transaction’ includes any transaction
in which the amount of any economic benefit pro-
vided to or for the use of a disqualified person is de-
termined in whole or in part by the revenues of 1
or more activities of the organization but only if
such transaction results in inurement not permitted
under paragraph (3) or (4) of section 501(c), as the
case may be. In the case of any such transaction,
the excess benefit shall be the amount of the
inurement not so permitted.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) JOINT AND SEVERAL LIABILITY.—If more
than 1 person is liable for any tax imposed by sub-
section (a) or subsection (b), all such persons shall
be jointly and severally liable for such tax.
‘‘(2) LIMIT FOR MANAGEMENT.—With respect
to any 1 excess benefit transaction, the maximum
972
amount of the tax imposed by subsection (a)(2) shall
not exceed $10,000.
‘‘(e) APPLICABLE TAX-EXEMPT ORGANIZATION.—
For purposes of this subchapter, the term ‘applicable tax-
exempt organization’ means any organization which (with-
out regard to any excess benefit) would be described in
paragraph (3) or (4) of section 501(c) and exempt from
tax under section 501(a). Such term shall not include a
private foundation (as defined in section 509(a)).
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) DISQUALIFIED PERSON.—The term ‘dis-
qualified person’ means, with respect to any trans-
action—
‘‘(A) any person who was, at any time dur-
ing the 5-year period ending on the date of
such transaction—
‘‘(i) an organization manager, or
‘‘(ii) an individual (other than an or-
ganization manager) in a position to exer-
cise substantial influence over the affairs
of the organization,
‘‘(B) a member of the family of an individ-
ual described in subparagraph (A), and
‘‘(C) a 35-percent controlled entity.
973
‘‘(2) ORGANIZATION MANAGER.—The term ‘or-
ganization manager’ means, with respect to any ap-
plicable tax-exempt organization, any officer, direc-
tor, or trustee of such organization (or any individ-
ual having powers or responsibilities similar to those
of officers, directors, or trustees of the organiza-
tion).
‘‘(3) 35-PERCENT CONTROLLED ENTITY.—
‘‘(A) IN GENERAL.—The term ‘35-percent
controlled entity’ means—
‘‘(i) a corporation in which persons
described in subparagraph (A) or (B) of
paragraph (1) own more than 35 percent
of the total combined voting power,
‘‘(ii) a partnership in which such per-
sons own more than 35 percent of the
profits interest, and
‘‘(iii) a trust or estate in which such
persons own more than 35 percent of the
beneficial interest.
‘‘(B) 
CONSTRUCTIVE
OWNERSHIP
RULES.—Rules similar to the rules of para-
graphs (3) and (4) of section 4946(a) shall
apply for purposes of this paragraph.
974
‘‘(4) FAMILY MEMBERS.—The members of an
individual’s family shall be determined under section
4946(d); except that such members also shall in-
clude the brothers and sisters (whether by the whole
or half blood) of the individual and their spouses.
‘‘(5) TAXABLE PERIOD.—The term ‘taxable pe-
riod’ means, with respect to any excess benefit
transaction, the period beginning with the date on
which the transaction occurs and ending on the ear-
liest of—
‘‘(A) the date of mailing a notice of defi-
ciency under section 6212 with respect to the
tax imposed by subsection (a)(1), or
‘‘(B) the date on which the tax imposed by
subsection (a)(1) is assessed.
‘‘(6) CORRECTION.—The terms ‘correction’ and
‘correct’ mean, with respect to any excess benefit
transaction, undoing the excess benefit to the extent
possible, and where fully undoing the excess benefit
is not possible, such additional corrective action as
is prescribed by the Secretary by regulations.
‘‘(g) TREATMENT OF PREVIOUSLY EXEMPT ORGANI-
ZATIONS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the status of any organization as an applicable
975
tax-exempt organization shall be terminated only
if—
‘‘(A)(i) such organization notifies the Sec-
retary (at such time and in such manner as the
Secretary may by regulations prescribe) of its
intent to accomplish such termination, or
‘‘(ii) there is a final determination by the
Secretary that such status has terminated, and
‘‘(B)(i) such organization pays the tax im-
posed by paragraph (2) (or any portion not
abated pursuant to paragraph (3)), or
‘‘(ii) the entire amount of such tax is
abated pursuant to paragraph (3).
‘‘(2) IMPOSITION OF TAX.—There is hereby im-
posed on each organization referred to in paragraph
(1) a tax equal to the lesser of—
‘‘(A) the amount which the organization
substantiates by adequate records or other cor-
roborating evidence as the aggregate tax benefit
resulting from its exemption from tax under
section 501(a), or
‘‘(B) the value of the net assets of such or-
ganization.
‘‘(3) ABATEMENT OF TAX.—The Secretary may
abate the unpaid portion of the assessment of any
976
tax imposed by paragraph (2), or any liability in re-
spect thereof, if the applicable tax-exempt organiza-
tion distributes all of its net assets to 1 or more or-
ganizations each of which has been in existence, and
described in section 501(c)(3), for a continuous pe-
riod of at least 60 calendar months. If the distribut-
ing organization is described in section 501(c)(4),
the preceding sentence shall be applied by treating
the reference to section 501(c)(3) as including a ref-
erence to section 501(c)(4).
‘‘(4) CERTAIN
RULES
MADE
APPLICABLE.—
Rules similar to the rules of subsections (d), (e), and
(f) of section 507 shall apply for purposes of this
subsection.’’
(b) APPLICATION OF PRIVATE INUREMENT RULE TO
TAX-EXEMPT ORGANIZATIONS DESCRIBED IN SECTION
501(c)(4).—Paragraph (4) of section 501(c) is amended
by inserting ‘‘(A)’’ after ‘‘(4)’’ and by adding at the end
the following:
‘‘(B) Subparagraph (A) shall not apply to an
entity unless no part of the net earnings of such en-
tity inures to the benefit of any private shareholder
or individual.’’
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
977
(1) Subsection (e) of section 4955 is amend-
ed—
(A) by striking ‘‘SECTION 4945’’ in the
heading and inserting ‘‘SECTIONS 4945 and
4958’’, and
(B) by inserting before the period ‘‘or an
excess benefit for purposes of section 4958’’.
(2) Subsections (a), (b), and (c) of section 4963
are each amended by inserting ‘‘4958,’’ after
‘‘4955,’’.
(3) Subsection (e) of section 6213 is amended
by inserting ‘‘4958 (relating to private excess bene-
fit),’’ before ‘‘4971’’.
(4) Paragraphs (2) and (3) of section 7422(g)
are each amended by inserting ‘‘4958,’’ after
‘‘4955,’’.
(5) Subsection (b) of section 7454 is amended
by inserting ‘‘or whether an organization manager
(as defined in section 4958(f)(2)) has ‘knowingly’
participated in an excess benefit transaction (as de-
fined in section 4958(c)),’’ after ‘‘section 4912(b),’’.
(6) The table of subchapters for chapter 42 is
amended by striking the last item and inserting the
following:
978
‘‘Subchapter D. Failure by certain charitable organizations to
meet certain qualification requirements.
‘‘Subchapter E. Abatement of first and second tier taxes in cer-
tain cases.’’
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than subsection (b)) shall apply
to excess benefit transactions occurring on or after
September 14, 1995.
(2) BINDING CONTRACTS FOR PERSONAL SERV-
ICES.—The amendments referred to in paragraph
(1) shall not apply to any transaction pursuant to
any written contract for the performance of personal
services which was binding on September 13, 1995,
and at all times thereafter before such transaction
occurred.
(3) APPLICATION
OF
PRIVATE
INUREMENT
RULE TO TAX-EXEMPT ORGANIZATIONS DESCRIBED
IN SECTION 501(C)(4).—
(A) IN GENERAL.—The amendment made
by subsection (b) shall apply to inurement oc-
curring on or after September 14, 1995.
(B) BINDING
CONTRACTS.—The amend-
ment made by subsection (b) shall not apply to
any inurement occurring before January 1,
1997, pursuant to a written contract which was
binding on September 13, 1995, and at all
979
times thereafter before such inurement oc-
curred.
SEC. 13647. REPORTING OF CERTAIN EXCISE TAXES AND
OTHER INFORMATION.
(a) REPORTING BY ORGANIZATIONS DESCRIBED IN
SECTION 501(c)(3).—Subsection (b) of section 6033 (re-
lating to certain organizations described in section
501(c)(3)) is amended by striking ‘‘and’’ at the end of
paragraph (9), by redesignating paragraph (10) as para-
graph (14), and by inserting after paragraph (9) the fol-
lowing new paragraphs:
‘‘(10) the respective amounts (if any) of the
taxes paid by the organization during the taxable
year under the following provisions:
‘‘(A) section 4911 (relating to tax on ex-
cess expenditures to influence legislation),
‘‘(B) section 4912 (relating to tax on dis-
qualifying lobbying expenditures of certain or-
ganizations), and
‘‘(C) section 4955 (relating to taxes on po-
litical expenditures of section 501(c)(3) organi-
zations),
‘‘(11) the respective amounts (if any) of the
taxes paid by the organization or any disqualified
person during the taxable year under section 4958
980
(relating to taxes on private excess benefit from cer-
tain charitable organizations),
‘‘(12) such information as the Secretary may
require with respect to any excess benefit trans-
action (as defined in section 4958),
‘‘(13) the name of each disqualified person who
receives an economic benefit from an applicable tax-
exempt organization (as defined in section 4958(e))
and such other information as the Secretary may
prescribe with respect to such benefit, and’’.
(b) 
ORGANIZATIONS
DESCRIBED
IN
SECTION
501(c)(4).—Section 6033 is amended by redesignating
subsection (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection:
‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SEC-
TION 501(c)(4).—Every organization described in section
501(c)(4) which is subject to the requirements of sub-
section (a) shall include on the return required under sub-
section (a) the information referred to in paragraphs (10),
(11), (12) and (13) of subsection (b) with respect to such
organization.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years begin-
ning after the date of the enactment of this Act.
981
SEC. 13648. EXEMPT ORGANIZATIONS REQUIRED TO PRO-
VIDE COPY OF RETURN.
(a) GENERAL RULE.—
(1) Subparagraph (A) of section 6104(e)(1) (re-
lating to public inspection of annual returns) is
amended to read as follows:
‘‘(A) IN GENERAL.—During the 3-year pe-
riod beginning on the filing date—
‘‘(i) a copy of the annual return filed
under section 6033 (relating to returns by
exempt organizations) by any organization
to which this paragraph applies shall be
made available by such organization for in-
spection during regular business hours by
any individual at the principal office of
such organization and, if such organization
regularly maintains 1 or more regional or
district offices having 3 or more employees,
at each such regional or district office, and
‘‘(ii) upon request of an individual
made at such principal office or such a re-
gional or district office, a copy of such an-
nual return shall be provided to such indi-
vidual without charge other than a reason-
able fee for any reproduction and mailing
costs.
982
If the request under clause (ii) is made in per-
son, such copy shall be provided immediately
and, if made other than in person, shall be pro-
vided within 30 days.’’
(2) Clause (ii) of section 6104(e)(2)(A) is
amended by inserting before the period at the end
thereof the following: ‘‘(and, upon request of an in-
dividual made at such principal office or such a re-
gional or district office, a copy of the material re-
quired to be available for inspection under this sub-
paragraph shall be provided (in accordance with the
last sentence of paragraph (1)(A)) to such individual
without charge other than a reasonable fee for any
reproduction and mailing costs)’’.
(3) Subsection (e) of section 6104 is amended
by adding at the end the following new paragraph:
‘‘(3) LIMITATION.—Paragraph (1)(A)(ii) (and
the corresponding provision of paragraph (2)) shall
not apply to any request if the Secretary determines,
upon application by an organization, that such re-
quest is part of a harassment campaign and that
compliance with such request is not in the public in-
terest.’’
(b) ADVERTISEMENTS ETC., REQUIRED TO DIS-
CLOSE AVAILABILITY OF ANNUAL RETURN.—
983
(1) Paragraph (1) of section 6104(e) is amend-
ed by adding at the end thereof the following new
subparagraph:
‘‘(E) ADVERTISEMENTS
ETC., REQUIRED
TO
DISCLOSE
AVAILABILITY
OF
ANNUAL
RE-
TURN.—In the case of an organization required
by subparagraph (A) to provide a copy of its
annual return under section 6033 upon request
to individuals, each written advertisement or so-
licitation by (or on behalf of) such organization
shall contain an express statement (in a con-
spicuous and easily recognizable format) that
such return shall be provided to individuals
upon request.’’
(2) Section 6716, as added by section 13649 of
this title, is amended—
(A) by striking ‘‘section 6116’’ each place
it appears and inserting ‘‘section 6116 or sec-
tion 6104(e)(1)(E)’’,
(B) by striking ‘‘$1,000’’ in subsection (a)
and inserting ‘‘$1,000 ($100 in the case of a
failure 
to 
meet 
the 
requirements 
of
6104(e)(1)(E))’’, and
(C) by inserting before the period at the
end of the section heading ‘‘; FAILURE
OF
984
CERTAIN EXEMPT ORGANIZATIONS TO DIS-
CLOSE
AVAILABILITY
OF
ANNUAL
RE-
TURN’’.
(3) Subparagraph (C) of section 6652(c)(1) is
amended by striking ‘‘(e)(1)’’ and inserting ‘‘(e)(1)
(other than subparagraph (E))’’, by striking ‘‘$10’’
and inserting ‘‘$20’’, and by striking ‘‘$5,000’’ and
inserting ‘‘$10,000’’.
(4) Subparagraph (D) of section 6652(c)(1) is
amended by striking ‘‘$10’’ and inserting ‘‘$20’’.
(5) The item relating to section 6716 in the
table of sections for part I of subchapter B of chap-
ter 68 is amended by inserting before the period ‘‘;
failure of certain exempt organizations to disclose
availability of annual return’’.
(c) INCREASE IN PENALTY FOR WILLFUL FAILURE
TO ALLOW PUBLIC INSPECTION OF CERTAIN RETURNS,
ETC.—Section 6685 is amended by striking ‘‘$1,000’’ and
inserting ‘‘$5,000’’.
(d) COPIES OF RETURNS OF EXEMPT ORGANIZA-
TIONS
AVAILABLE
FROM
SECRETARY
IN
CERTAIN
CASES.—Subsection (b) of section 6104 is amended to
read as follows:
‘‘(b) INSPECTION
OF ANNUAL INFORMATION RE-
TURNS.—
985
‘‘(1) IN GENERAL.—The information required
to be furnished by sections 6033, 6034, and 6058,
together with the names and addresses of such orga-
nizations and trusts, shall be made available to the
public at such times and in such places as the Sec-
retary may prescribe. Nothing in this subsection
shall authorize the Secretary to disclose the name or
address of any contributor to any organization or
trust (other than a private foundation, as defined in
section 509(a)) which is required to furnish such in-
formation.
‘‘(2) COPIES
PROVIDED
OF
RETURNS
FILED
UNDER
SECTION
6033
AND
APPLICATIONS
FILED
UNDER SECTION 508 IN CERTAIN CASES.—The Sec-
retary shall provide copies of returns filed under sec-
tion 6033 and applications for exemption filed under
section 508 by any organization to which subsection
(d) or (e)(1) applies to any person who agrees (sub-
ject to such conditions as the Secretary shall pre-
scribe)—
‘‘(A) to accept broad categories of such re-
turns and applications, and
‘‘(B) to provide electronic access to the
provided returns and applications on an elec-
tronic network available to the general public.
986
Such copies shall be provided without charge if such
person agrees to provide such access without charge.
Otherwise, the Secretary may impose a reasonable
fee for any reproduction and mailing costs.
‘‘(3) RETURNS AND APPLICATIONS FILED BE-
FORE 1996.—Paragraph (2) shall apply to returns
and applications filed before January 1, 1996, only
to the extent provided by the Secretary.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996 (or, if
later, the 90th day after the date of the enactment of this
Act).
SEC. 13649. CERTAIN ORGANIZATIONS REQUIRED TO DIS-
CLOSE NONEXEMPT STATUS.
(a) GENERAL RULE.—Subchapter B of chapter 61
(relating to miscellaneous provisions) is amended by redes-
ignating section 6116 as section 6117 and by inserting
after section 6115 the following new section:
‘‘SEC. 6116. CERTAIN ORGANIZATIONS REQUIRED TO DIS-
CLOSE NONEXEMPT STATUS.
‘‘(a) IN GENERAL.—If—
‘‘(1) in an advertisement or solicitation by (or
on behalf of) an organization, such organization is
referred to as being nonprofit, and
987
‘‘(2) such organization is not exempt from tax
under subtitle A,
such advertisement or solicitation shall contain an express
statement (in a conspicuous and easily recognizable for-
mat) that such organization is not exempt from Federal
income taxes.
‘‘(b) CROSS REFERENCE.—
‘‘For penalties for violation of subsection (a), see
section 6716.’’
(b) PENALTY.—Part I of subchapter B of chapter 68
is amended by adding at the end thereof the following new
section:
‘‘SEC. 6716. FAILURE TO DISCLOSE NONEXEMPT STATUS.
‘‘(a) IMPOSITION OF PENALTY.—If there is a failure
to meet the requirements of section 6116 with respect to
any advertisement or solicitation by (or on behalf of) an
organization, such organization shall pay a penalty of
$1,000 for each day on which such a failure occurred. The
maximum penalty imposed under this subsection on fail-
ures by any organization during any calendar year shall
not exceed $10,000.
‘‘(b) REASONABLE CAUSE EXEMPTION.—No penalty
shall be imposed under this section with respect to any
failure if it is shown that such failure is due to reasonable
cause.
988
‘‘(c) $10,000 LIMITATION NOT TO APPLY WHERE
INTENTIONAL DISREGARD.—If any failure to which sub-
section (a) applies is due to intentional disregard of the
requirements of section 6116—
‘‘(1) the penalty under subsection (a) for the
day on which failure occurred shall be the greater
of—
‘‘(A) $1,000, or
‘‘(B) 50 percent of the aggregate cost of
the advertisements and solicitations which oc-
curred on such day and with respect to which
there was such failure,
‘‘(2) the $10,000 limitation of subsection (a)
shall not apply to any penalty under subsection (a)
for the day on which such failure occurred, and
‘‘(3) such penalty shall not be taken into ac-
count in applying such limitation to other penalties
under subsection (a).
‘‘(d) DAY ON WHICH FAILURE OCCURS.—For pur-
poses of this section, rules similar to the rules of section
6710(d) shall apply in determining the day on which any
failure occurs.’’
(c) CLERICAL AMENDMENTS.—
989
(1) The table of sections for subchapter B of
chapter 61 is amended by striking the item relating
to section 6116 and inserting the following:
‘‘Sec. 6116. Certain organizations required to disclose
nonexempt status.
‘‘Sec. 6117. Cross reference.’’
(2) The table of sections of part I of subchapter
B of chapter 68 is amended by adding at the end
thereof the following new item:
‘‘Sec. 6716. Failure to disclose nonexempt status.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996 (or, if
later, the 90th day after the date of the enactment of this
Act).
SEC. 13650. INCREASE IN PENALTIES ON EXEMPT ORGANI-
ZATIONS FOR FAILURE TO FILE COMPLETE
AND TIMELY ANNUAL RETURNS.
(a) IN GENERAL.—Subparagraph (A) of section
6652(c)(1) (relating to annual returns under section
6033) is amended by striking ‘‘$10’’ and inserting ‘‘$20’’
and by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’.
(b) LARGER PENALTY ON ORGANIZATIONS HAVING
GROSS RECEIPTS IN EXCESS OF $1,000,000.—Subpara-
graph (A) of section 6652(c)(1) is amended by adding at
the end the following new sentence: ‘‘In the case of an
organization having gross receipts exceeding $1,000,000
for any year, with respect to the return required under
990
section 6033 for such year, the first sentence of this sub-
paragraph shall be applied by substituting ‘$100’ for ‘$20’
and, in lieu of applying the second sentence of this sub-
paragraph, the maximum penalty under this subparagraph
shall not exceed $50,000.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years ending
on or after December 31, 1995.
SEC. 13651. STUDIES.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall conduct a study of—
(1) whether the statutory prohibition on private
inurement, and the provisions of section 4958 of the
Internal Revenue Code of 1986 (as added by this
part), should apply to other tax-exempt organiza-
tions,
(2) whether State officials responsible for
overseeing charitable organizations should be pro-
vided with Federal tax information in addition to the
information available under section 6103 of such
Code for purposes of such oversight, and
(3) whether the return required to be filed by
section 6033 of such Code should be modified to as-
sure the return’s utility to such Secretary and to the
991
public and to reduce any unnecessary reporting bur-
dens.
(b) REPORT.—Not later than January 1, 1997, the
report of such study shall be submitted to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate.
Subtitle G—Reform of the Earned
Income Tax Credit
SEC. 13701. REPEAL OF EARNED INCOME CREDIT FOR INDI-
VIDUALS WITHOUT QUALIFYING CHILDREN;
MODIFICATIONS TO CREDIT PHASEOUT.
(a) REPEAL OF CREDIT FOR INDIVIDUALS WITHOUT
CHILDREN.—Subparagraph (A) of section 32(c)(1) (defin-
ing eligible individual) is amended to read as follows:
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means any individual who has a quali-
fying child for the taxable year.’’
(b) MODIFICATIONS TO PHASEOUT.—
(1) Subsection (b) of section 32 is amended to
read as follows:
‘‘(b) PERCENTAGES.—
‘‘(1) IN GENERAL.—The credit percentage and
the phaseout percentage shall be determined as
follows:
992
‘‘In the case of an eligible individ-
ual with:
The credit percentage
is:
The phaseout percentage
is:
1 qualifying child .....................
34 .............................
2 or more qualifying children ..
40 .............................
‘‘(2) AMOUNTS.—The earned income amount
and the phaseout amount shall be determined as
follows:
‘‘In the case of an eligible individ-
ual with:
The earned income
amount is:
The phaseout amount is:
1 qualifying child .....................
$6,340 ......................
$11,630
2 or more qualifying children ..
$8,910 ......................
$11,630.’’
(2) Subsection (j) of section 32 is amended—
(A) by striking ‘‘subsection (b)(2)(A)’’ and
inserting ‘‘subsection (b)(2)’’,
(B) by striking ‘‘1994’’ and inserting
‘‘1996’’, and
(C) by striking ‘‘1993’’ and inserting
‘‘1995’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 13702. MODIFICATION OF ADJUSTED GROSS INCOME
USED FOR PHASEOUT.
(a) IN GENERAL.—Subsections (a)(2)(B), (c)(1)(C),
and (f)(2)(B) of section 32 are each amended by striking
‘‘adjusted gross income’’ each place it appears and insert-
ing ‘‘modified adjusted gross income’’.
993
(b) MODIFIED ADJUSTED GROSS INCOME.—Sub-
section (c) of section 32 is amended by adding at the end
the following new paragraph:
‘‘(5) MODIFIED
ADJUSTED
GROSS
INCOME.—
For purposes of this section, the term ‘modified ad-
justed gross income’ means adjusted gross income
increased by—
‘‘(A) any amount received as a pension or
annuity, and any distribution or payment re-
ceived from an individual retirement plan, by
the taxpayer during the taxable year to the ex-
tent not otherwise included in gross income,
and
‘‘(B) the social security benefits (as de-
fined in section 86(d)) received by the taxpayer
during the taxable year to the extent not in-
cluded in gross income.
Any amount which is not includible in gross income
by reason of paragraph (3), (4), or (5) of section
408(d) or section 402(c), 403(a)(4), 403(b)(8), or
457(e)(10) shall be treated as not described in sub-
paragraph (A).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
994
SEC. 13703. EARNED INCOME TAX CREDIT DENIED TO INDI-
VIDUALS 
NOT 
AUTHORIZED 
TO 
BE 
EM-
PLOYED IN THE UNITED STATES.
(a) IN GENERAL.—Section 32(c)(1) (relating to indi-
viduals eligible to claim the earned income tax credit) is
amended by adding at the end the following new subpara-
graph:
‘‘(F) IDENTIFICATION NUMBER REQUIRE-
MENT.—The term ‘eligible individual’ does not
include any individual who does not include on
the return of tax for the taxable year—
‘‘(i) such individual’s taxpayer identi-
fication number, and
‘‘(ii) if the individual is married (with-
in the meaning of section 7703), the tax-
payer identification number of such indi-
vidual’s spouse.’’
(b) SPECIAL IDENTIFICATION NUMBER.—Section 32
is amended by adding at the end the following new sub-
section:
‘‘(l) IDENTIFICATION NUMBERS.—Solely for pur-
poses of subsections (c)(1)(F) and (c)(3)(D), a taxpayer
identification number means a social security number is-
sued to an individual by the Social Security Administra-
tion (other than a social security number issued pursuant
to clause (II) (or that portion of clause (III) that relates
995
to clause (II)) of section 205(c)(2)(B)(i) of the Social Se-
curity Act).’’
(c) EXTENSION OF PROCEDURES APPLICABLE TO
MATHEMATICAL
OR
CLERICAL
ERRORS.—Section
6213(g)(2) (relating to the definition of mathematical or
clerical errors) is amended by striking ‘‘and’ at the end
of subparagraph (D), by striking the period at the end
of subparagraph (E) and inserting a comma, and by in-
serting after subparagraph (E) the following new subpara-
graphs:
‘‘(F) an omission of a correct taxpayer
identification number required under section 32
(relating to the earned income tax credit) to be
included on a return, and
‘‘(G) an entry on a return claiming the
credit under section 32 with respect to net
earnings from self-employment described in sec-
tion 32(c)(2)(A) to the extent the tax imposed
by section 1401 (relating to self-employment
tax) on such net earnings has not been paid.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
996
Subtitle H—Increase in Public
Debt Limit
SEC. 13801. INCREASE IN PUBLIC DEBT LIMIT.
Subsection (b) of section 3101 of title 31, United
States Code, is amended by striking the dollar amount
contained therein and inserting ‘‘$5,500,000,000,000’’.
Subtitle I—Coal Industry Retiree
Health Equity
SEC. 13901. REPEAL OF REACHBACK PROVISIONS OF COAL
INDUSTRY HEALTH BENEFIT SYSTEM.
(a) AMENDMENTS RELATED TO DEFINITIONS.—
(1) AGREEMENTS.—
(A) IN GENERAL.—Paragraph (1) of sec-
tion 9701(b) (relating to agreements) is amend-
ed to read as follows:
‘‘(1) COAL WAGE AGREEMENTS.—
‘‘(A) 1988 AGREEMENT.—The term ‘1988
agreement’ means the collective bargaining
agreement between the settlors which became
effective on February 1, 1988.
‘‘(B) COAL WAGE AGREEMENT.—The term
‘coal wage agreement’ means any predecessor to
the 1988 agreement.’’
(B) CONFORMING
AMENDMENT.—Section
9701(b) is amended by striking paragraph (3).
997
(2) OPERATORS.—
(A) SIGNATORY
OPERATOR.—Paragraph
(1) of section 9701(c) (relating to operators) is
amended to read as follows:
‘‘(1) SIGNATORY OPERATOR.—The term ‘signa-
tory operator’ means a 1988 agreement operator.’’
(B) 1988 AGREEMENT OPERATOR.—Para-
graph (3) of section 9701(c) is amended to read
as follows:
‘‘(3) 1988 AGREEMENT OPERATOR.—The term
‘1988 agreement operator’ means—
‘‘(A) an operator which was a signatory to
the 1988 agreement, or
‘‘(B) a person in business which, during
the term of the 1988 agreement, was a signa-
tory to an agreement (other than the National
Coal Mine Construction Agreement and the
Coal Haulers’ Agreement) containing pension
and health care contribution and benefit provi-
sions which are the same as those contained in
the 1988 agreement.
Such term shall not include any operator who was
assessed, and did pay the full amount of, contractual
withdrawal liability to the 1950 UMWA Benefit
998
Plan, the 1974 UMWA Benefit Plan, or the Com-
bined Fund.’’
(C) LAST SIGNATORY OPERATOR.—Section
9701(c)(4) is amended by inserting ‘‘bitu-
minous’’ before ‘‘coal’’ each place it appears.
(b) COMBINED BENEFIT FUND.—Section 9702(b)(1)
is amended to read as follows:
‘‘(b) BOARD OF TRUSTEES.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the board of trustees for the Combined Fund
shall be appointed as follows:
‘‘(A) two individuals who represent employ-
ers in the coal mining industry shall be des-
ignated by the BCOA;
‘‘(B) two individuals designated by the
United Mine Workers of America; and
‘‘(C) three persons selected by the persons
appointed under subparagraphs (A) and (B).’’
(c) ASSIGNMENT
OF ELIGIBLE BENEFICIARIES.—
Subsection (a) of section 9706 is amended by adding at
the end the following new flush sentence:
‘‘For purposes of assessing premiums on or after October
1, 1995, under this chapter, the Commissioner of Social
Security shall, effective October 1, 1995, revoke all assign-
ments previously made (and shall make no further assign-
999
ments and shall terminate all unpaid liabilities for any
pending assignments) to all persons other than signatory
operators and shall deem each affected coal industry re-
tiree who is an eligible beneficiary to be an unassigned
beneficiary under section 9706. The preceding sentence
shall not be construed to prevent any transfer, or any
treatment of a successor as an assigned operator, under
subsection (b)(2).’’
(d) 1992 UMWA BENEFIT PLAN.—Section 9712(d)
is amended—
(1) by striking paragraph (3) and by redesig-
nating paragraphs (4), (5), and (6) as paragraphs
(3), (4), and (5), respectively, and
(2) by striking ‘‘or last signatory operator de-
scribed in paragraph (3),’’ in paragraph (3) (as re-
designated under paragraph (1)).
(e) INFORMATION REQUIREMENTS.—
(1) IN
GENERAL.—Subsection (h) of section
9704 is amended by adding at the end the following
new paragraph:
‘‘(2) INFORMATION TO CONTRIBUTORS.—
‘‘(A) IN
GENERAL.—The trustees of the
Combined Fund shall, within 30 days of a writ-
ten request, make available to any person re-
1000
quired to make contributions to the Combined
Fund, or their agent—
‘‘(i) all documents which reflect its fi-
nancial and operational status, including
documents under which it is operated, and
‘‘(ii) all documents prepared at the re-
quest of the trustees or staff of the Com-
bined Fund which form the basis for any
of its actions or reports, including the eli-
gibility of participants in predecessor
plans.
‘‘(B) FEES.—The trustees may charge rea-
sonable fees (not in excess of actual expenses)
for providing documents under this paragraph.’’
(2) CONFORMING AMENDMENT.—Subsection (h)
of section 9704 is amended by striking ‘‘(h) INFOR-
MATION.—The’’ and inserting the following:
‘‘(h) INFORMATION.—
‘‘(1) INFORMATION TO SECRETARY.—The’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after Sep-
tember 30, 1995.
1001
TITLE 
XIV—COMMITTEE 
ON
WAYS AND MEANS—TAX SIM-
PLIFICATION
SEC. 14001. SHORT TITLE; AMENDMENT TO 1986 CODE.
(a) SHORT TITLE.—This title may be cited as the
‘‘Tax Simplification Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this title an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this title is as follows:
TITLE XIV—COMMITTEE ON WAYS AND MEANS—TAX
SIMPLIFICATION
Sec. 14001. Short title; amendment to 1986 Code.
Subtitle A—Provisions Relating to Individuals
PART I—PROVISIONS RELATING TO ROLLOVER OF GAIN ON SALE OF
PRINCIPAL RESIDENCE
Sec. 14101. Multiple sales within rollover period.
Sec. 14102. Special rules in case of divorce.
Sec. 14103. One-time exclusion of gain from sale of principal residence for cer-
tain spouses.
PART II—OTHER PROVISIONS
Sec. 14111. Payment of tax by commercially acceptable means.
Sec. 14112. Simplified foreign tax credit limitation for individuals.
Sec. 14113. Treatment of personal transactions by individuals under foreign
currency rules.
Sec. 14114. Treatment of certain reimbursed expenses of rural mail carriers.
Sec. 14115. Exclusion of combat pay from withholding limited to amount ex-
cludable from gross income.
1002
Sec. 14116. Treatment of traveling expenses of certain Federal employees en-
gaged in criminal investigations.
Subtitle B—Pension Simplification
PART I—SIMPLIFIED DISTRIBUTION RULES
Sec. 14201. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 14202. Repeal of $5,000 exclusion of employees’ death benefits.
Sec. 14203. Simplified method for taxing annuity distributions under certain
employer plans.
Sec. 14204. Required distributions.
PART II—INCREASED ACCESS TO PENSION PLANS
Sec. 14211. Modifications of simplified employee pensions.
Sec. 14212. State and local governments and tax-exempt organizations eligible
under section 401(k).
PART III—NONDISCRIMINATION PROVISIONS
Sec. 14221. Definition of highly compensated employees.
Sec. 14222. Repeal of family aggregation rules.
Sec. 14223. Modification of additional participation requirements.
Sec. 14224. Nondiscrimination rules for qualified cash or deferred arrange-
ments and matching contributions.
PART IV—MISCELLANEOUS SIMPLIFICATION
Sec. 14231. Treatment of leased employees.
Sec. 14232. Plans covering self-employed individuals.
Sec. 14233. Elimination of special vesting rule for multiemployer plans.
Sec. 14234. Distributions under rural cooperative plans.
Sec. 14235. Treatment of governmental plans under section 415.
Sec. 14236. Uniform retirement age.
Sec. 14237. Uniform penalty provisions to apply to certain pension reporting
requirements.
Sec. 14238. Contributions on behalf of disabled employees.
Sec. 14239. Treatment of deferred compensation plans of State and local gov-
ernments and tax-exempt organizations.
Sec. 14240. Trust requirement for deferred compensation plans of State and
local governments.
Sec. 14241. Transition rule for computing maximum benefits under section 415
limitations.
Sec. 14242. Multiple salary reduction agreements permitted under section
403(b).
Sec. 14243. Waiver of minimum period for joint and survivor annuity expla-
nation before annuity starting date.
Sec. 14244. Repeal of limitation in case of defined benefit plan and defined
contribution plan for same employee.
Sec. 14245. Date for adoption of plan amendments.
Subtitle C—Treatment of Large Partnerships
PART I—GENERAL PROVISIONS
Sec. 14301. Simplified flow-through for large partnerships.
Sec. 14302. Simplified audit procedures for large partnerships.
1003
Sec. 14303. Due date for furnishing information to partners of large partner-
ships.
Sec. 14304. Returns may be required on magnetic media.
Sec. 14305. Treatment of partnership items of individual retirement accounts.
Sec. 14306. Effective date.
PART II—PROVISIONS RELATED TO CERTAIN PARTNERSHIP PROCEEDINGS
Sec. 14311. Treatment of partnership items in deficiency proceedings.
Sec. 14312. Partnership return to be determinative of audit procedures to be
followed.
Sec. 14313. Provisions relating to statute of limitations.
Sec. 14314. Expansion of small partnership exception.
Sec. 14315. Exclusion of partial settlements from 1-year limitation on assess-
ment.
Sec. 14316. Extension of time for filing a request for administrative adjust-
ment.
Sec. 14317. Availability of innocent spouse relief in context of partnership pro-
ceedings.
Sec. 14318. Determination of penalties at partnership level.
Sec. 14319. Provisions relating to court jurisdiction, etc.
Sec. 14320. Treatment of premature petitions filed by notice partners or 5-per-
cent groups.
Sec. 14321. Bonds in case of appeals from certain proceeding.
Sec. 14322. Suspension of interest where delay in computational adjustment re-
sulting from certain settlements.
Sec. 14323. Special rules for administrative adjustment requests with respect
to bad debts or worthless securities.
Subtitle D—Foreign Provisions
PART I—MODIFICATIONS TO TREATMENT OF PASSIVE FOREIGN INVESTMENT
COMPANIES
Sec. 14401. United States shareholders of controlled foreign corporations not
subject to PFIC inclusion.
Sec. 14402. Election of mark to market for marketable stock in passive foreign
investment company.
Sec. 14403. Modifications to definition of passive income.
Sec. 14404. Effective date.
PART II—TREATMENT OF CONTROLLED FOREIGN CORPORATIONS
Sec. 14411. Gain on certain stock sales by controlled foreign corporations treat-
ed as dividends.
Sec. 14412. Miscellaneous modifications to subpart F.
Sec. 14413. Indirect foreign tax credit allowed for certain lower tier companies.
Sec. 14414. Repeal of inclusion of certain earnings invested in excess passive
assets.
PART III—OTHER PROVISIONS
Sec. 14421. Exchange rate used in translating foreign taxes.
Sec. 14422. Election to use simplified section 904 limitation for alternative
minimum tax.
Sec. 14423. Modification of section 1491.
Sec. 14424. Modification of section 367(b).
1004
Sec. 14425. Increase in filing thresholds for returns as to organization of for-
eign corporations and acquisitions of stock in such corpora-
tions.
Sec. 14426. Application of uniform capitalization rules to foreign persons.
Sec. 14427. Certain prizes and awards.
Sec. 14428. Treatment for estate tax purposes of short-term obligations held by
nonresident aliens.
Subtitle E—Other Income Tax Provisions
PART I—PROVISIONS RELATING TO S CORPORATIONS
Sec. 14501. S corporations permitted to have 75 shareholders.
Sec. 14502. Electing small business trusts.
Sec. 14503. Expansion of post-death qualification for certain trusts.
Sec. 14504. Financial institutions permitted to hold safe harbor debt.
Sec. 14505. Rules relating to inadvertent terminations and invalid elections.
Sec. 14506. Agreement to terminate year.
Sec. 14507. Expansion of post-termination transition period.
Sec. 14508. S corporations permitted to hold subsidiaries.
Sec. 14509. Treatment of distributions during loss years.
Sec. 14510. Treatment of S corporations under subchapter C.
Sec. 14511. Elimination of certain earnings and profits.
Sec. 14512. Carryover of disallowed losses and deductions under at-risk rules
allowed.
Sec. 14513. Adjustments to basis of inherited S stock to reflect certain items
of income.
Sec. 14514. S corporations eligible for rules applicable to real property sub-
divided for sale by noncorporate taxpayers.
Sec. 14515. Effective date.
PART II—PROVISIONS RELATING TO REGULATED INVESTMENT COMPANIES
Sec. 14521. Repeal of 30-percent gross income limitation.
PART III—PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS
Sec. 14531. Clarification of limitation on maximum number of shareholders.
Sec. 14532. De minimis rule for tenant services income.
Sec. 14533. Attribution rules applicable to tenant ownership.
Sec. 14534. Credit for tax paid by REIT on retained capital gains.
Sec. 14535. Repeal of 30-percent gross income requirement.
Sec. 14536. Modification of earnings and profits rules for determining whether
REIT has earnings and profits from non-REIT year.
Sec. 14537. Treatment of foreclosure property.
Sec. 14538. Payments under hedging instruments.
Sec. 14539. Excess noncash income.
Sec. 14540. Prohibited transaction safe harbor.
Sec. 14541. Shared appreciation mortgages.
Sec. 14542. Wholly owned subsidiaries.
Sec. 14543. Effective date.
PART IV—ACCOUNTING PROVISIONS
Sec. 14551. Modifications to look-back method for long-term contracts.
Sec. 14552. Application of mark to market accounting method to traders in se-
curities.
1005
Sec. 14553. Modification of ruling amounts for nuclear decommissioning costs.
Sec. 14554. Election of alternative taxable years by partnerships and S cor-
porations.
Sec. 14555. Special rule for crop insurance proceeds and disaster payments.
PART V—TAX-EXEMPT BOND PROVISIONS
Sec. 14561. Repeal of $100,000 limitation on unspent proceeds under 1-year
exception from rebate.
Sec. 14562. Exception from rebate for earnings on bona fide debt service fund
under construction bond rules.
Sec. 14563. Repeal of debt service-based limitation on investment in certain
nonpurpose investments.
Sec. 14564. Repeal of expired provisions.
Sec. 14565. Effective dates.
PART VI—INSURANCE PROVISIONS
Sec. 14571. Treatment of certain insurance contracts on retired lives.
Sec. 14572. Treatment of modified guaranteed contracts.
Sec. 14573. Minimum tax treatment of certain property and casualty insurance
companies.
PART VII—OTHER PROVISIONS
Sec. 14581. Closing of partnership taxable year with respect to deceased part-
ner, etc.
Sec. 14582. Credit for Social Security taxes paid with respect to employee cash
tips.
Sec. 14583. Due date for first quarter estimated tax payments by private foun-
dations.
Sec. 14584. Treatment of dues paid to agricultural or horticultural organiza-
tions.
Subtitle F—Estates and Trusts
PART I—INCOME TAX PROVISIONS
Sec. 14601. Certain revocable trusts treated as part of estate.
Sec. 14602. Distributions during first 65 days of taxable year of estate.
Sec. 14603. Separate share rules available to estates.
Sec. 14604. Executor of estate and beneficiaries treated as related persons for
disallowance of losses, etc.
Sec. 14605. Limitation on taxable year of estates.
Sec. 14606. Repeal of certain throwback rules applicable to domestic trusts.
Sec. 14607. Treatment of funeral trusts.
PART II—ESTATE AND GIFT TAX PROVISIONS
Sec. 14611. Clarification of waiver of certain rights of recovery.
Sec. 14612. Adjustments for gifts within 3 years of decedent’s death.
Sec. 14613. Clarification of qualified terminable interest rules.
Sec. 14614. Transitional rule under section 2056A.
Sec. 14615. Opportunity to correct certain failures under section 2032A.
Sec. 14616. Unified credit of decedent increased by unified credit of spouse
used on split gift included in decedent’s gross estate.
Sec. 14617. Reformation of defective bequests, etc. to spouse of decedent.
1006
Sec. 14618. Gifts may not be revalued for estate tax purposes after expiration
of statute of limitations.
Sec. 14619. Clarifications relating to disclaimers.
Sec. 14620. Clarification of treatment of survivor annuities under qualified ter-
minable interest rules.
Sec. 14621. Treatment under qualified domestic trust rules of forms of owner-
ship which are not trusts.
Sec. 14622. Authority to waive requirement of United States trustee for quali-
fied domestic trusts.
PART III—GENERATION-SKIPPING TAX PROVISIONS
Sec. 14631. Severing of trusts holding property having an inclusion ratio of
greater than zero.
Sec. 14632. Clarification of who is transferor where subsequent gift by reason
of power of appointment.
Sec. 14633. Taxable termination not to include direct skips.
Sec. 14634. Expansion of exception from generation-skipping transfer tax for
transfers to individuals with deceased parents.
Subtitle G—Excise Tax Simplification
PART I—PROVISIONS RELATED TO DISTILLED SPIRITS, WINES, AND BEER
Sec. 14701. Credit or refund for imported bottled distilled spirits returned to
distilled spirits plant.
Sec. 14702. Authority to cancel or credit export bonds without submission of
records.
Sec. 14703. Repeal of required maintenance of records on premises of distilled
spirits plant.
Sec. 14704. Fermented material from any brewery may be received at a dis-
tilled spirits plant.
Sec. 14705. Repeal of requirement for wholesale dealers in liquors to post sign.
Sec. 14706. Refund of tax on wine returned to bond not limited to
unmerchantable wine.
Sec. 14707. Use of additional ameliorating material in certain wines.
Sec. 14708. Domestically produced beer may be withdrawn free of tax for use
of foreign embassies, legations, etc.
Sec. 14709. Beer may be withdrawn free of tax for destruction.
Sec. 14710. Authority to allow drawback on exported beer without submission
of records.
Sec. 14711. Transfer to brewery of beer imported in bulk without payment of
tax.
PART II—CONSOLIDATION OF TAXES ON AVIATION GASOLINE
Sec. 14721. Consolidation of taxes on aviation gasoline.
PART III—OTHER EXCISE TAX PROVISIONS
Sec. 14731. Authority to grant exemptions from registration requirements.
Sec. 14732. Certain combinations not treated as manufacture under retail sales
tax on heavy trucks.
Sec. 14733. Exemption from diesel fuel dyeing requirements with respect to
certain States.
Sec. 14734. Repeal of expired provisions.
1007
Subtitle H—Administrative Provisions
PART I—GENERAL PROVISIONS
Sec. 14801. Repeal of authority to disclose whether prospective juror has been
audited.
Sec. 14802. Clarification of statute of limitations.
Sec. 14803. Certain notices disregarded under provision increasing interest rate
on large corporate underpayments.
Sec. 14804. Clarification of authority to withhold Puerto Rico income taxes
from salaries of Federal employees.
PART II—TAX COURT PROCEDURES
Sec. 14811. Overpayment determinations of tax court.
Sec. 14812. Awarding of administrative costs.
Sec. 14813. Redetermination of interest pursuant to motion.
Sec. 14814. Application of net worth requirement for awards of litigation costs.
PART III—AUTHORITY FOR CERTAIN COOPERATIVE AGREEMENTS
Sec. 14821. Cooperative agreements with State tax authorities.
Subtitle A—Provisions Relating to
Individuals
PART I—PROVISIONS RELATING TO ROLLOVER
OF GAIN ON SALE OF PRINCIPAL RESIDENCE
SEC. 14101. MULTIPLE SALES WITHIN ROLLOVER PERIOD.
(a) GENERAL RULE.—
(1) Section 1034 (relating to rollover of gain on
sale of principal residence) is amended by striking
subsection (d).
(2) Paragraph (4) of section 1034(c) is amend-
ed to read as follows:
‘‘(4) If the taxpayer, during the period de-
scribed in subsection (a), purchases more than 1 res-
idence which is used by him as his principal resi-
dence at some time within 2 years after the date of
the sale of the old residence, only the first of such
1008
residences so used by him after the date of such sale
shall constitute the new residence.’’
(3) Subsections (h)(1) and (k) of section 1034
are each amended by striking ‘‘(other than the 2
years referred to in subsection (c)(4))’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales of old residences (within
the meaning of section 1034 of the Internal Revenue Code
of 1986) after the date of the enactment of this Act.
SEC. 14102. SPECIAL RULES IN CASE OF DIVORCE.
(a) IN GENERAL.—Subsection (c) of section 1034 is
amended by adding at the end the following new para-
graph:
‘‘(5) If—
‘‘(A) a residence is sold by an individual
pursuant to a divorce or marital separation,
and
‘‘(B) the taxpayer used such residence as
his principal residence at any time during the
2-year period ending on the date of such sale,
for purposes of this section, such residence shall be
treated as the taxpayer’s principal residence at the
time of such sale.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to sales of old residences (within
1009
the meaning of section 1034 of the Internal Revenue Code
of 1986) after the date of the enactment of this Act.
SEC. 14103. ONE-TIME EXCLUSION OF GAIN FROM SALE OF
PRINCIPAL 
RESIDENCE 
FOR 
CERTAIN
SPOUSES.
(a) IN GENERAL.—Paragraph (2) of section 121(b)
(relating to one-time exclusion of gain from sale of prin-
cipal residence by individual who has attained age 55) is
amended by adding at the end the following new sentence:
‘‘For purposes of applying the preceding sentence to indi-
viduals who are married to each other, an election by one
individual with respect to a sale or exchange occurring be-
fore the marriage shall be disregarded for purposes of per-
mitting an election with respect to property owned and
used by the other individual as his principal residence
throughout the 3-year period ending on the date of the
marriage.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply for purposes of determining
whether an election may be made under section 121 of
the Internal Revenue Code of 1986 with respect to a sale
or exchange occurring after September 13, 1995.
1010
PART II—OTHER PROVISIONS
SEC. 14111. PAYMENT OF TAX BY COMMERCIALLY ACCEPT-
ABLE MEANS.
(a) GENERAL RULE.—Section 6311 is amended to
read as follows:
‘‘SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPT-
ABLE MEANS.
‘‘(a) AUTHORITY TO RECEIVE.—It shall be lawful for
the Secretary to receive for internal revenue taxes (or in
payment for internal revenue stamps) any commercially
acceptable means that the Secretary deems appropriate to
the extent and under the conditions provided in regula-
tions prescribed by the Secretary.
‘‘(b) ULTIMATE
LIABILITY.—If a check, money
order, or other method of payment, including payment by
credit card, debit card, or charge card so received is not
duly paid, or is paid and subsequently charged back to
the Secretary, the person by whom such check, or money
order, or other method of payment has been tendered shall
remain liable for the payment of the tax or for the stamps,
and for all legal penalties and additions, to the same ex-
tent as if such check, money order, or other method of
payment had not been tendered.
‘‘(c) LIABILITY OF BANKS AND OTHERS.—If any cer-
tified, treasurer’s, or cashier’s check (or other guaranteed
draft), or any money order, or any other means of pay-
1011
ment that has been guaranteed by a financial institution
(such as a credit card, debit card, or charge card trans-
action which has been guaranteed expressly by a financial
institution) so received is not duly paid, the United States
shall, in addition to its right to exact payment from the
party originally indebted therefor, have a lien for—
‘‘(1) the amount of such check (or draft) upon
all assets of the financial institution on which
drawn,
‘‘(2) the amount of such money order upon all
the assets of the issuer thereof, or
‘‘(3) the guaranteed amount of any other trans-
action upon all the assets of the institution making
such guarantee,
and such amount shall be paid out of such assets in pref-
erence to any other claims whatsoever against such finan-
cial institution, issuer, or guaranteeing institution, except
the necessary costs and expenses of administration and
the reimbursement of the United States for the amount
expended in the redemption of the circulating notes of
such financial institution.
‘‘(d) PAYMENT BY OTHER MEANS.—
‘‘(1) AUTHORITY
TO
PRESCRIBE
REGULA-
TIONS.—The Secretary shall prescribe such regula-
tions as the Secretary deems necessary to receive
1012
payment by commercially acceptable means, includ-
ing regulations that—
‘‘(A) specify which methods of payment by
commercially acceptable means will be accept-
able,
‘‘(B) specify when payment by such means
will be considered received,
‘‘(C) identify types of nontax matters re-
lated to payment by such means that are to be
resolved by persons ultimately liable for pay-
ment and financial intermediaries, without the
involvement of the Secretary, and
‘‘(D) ensure that tax matters will be re-
solved by the Secretary, without the involve-
ment of financial intermediaries.
‘‘(2) 
AUTHORITY
TO
ENTER
INTO
CON-
TRACTS.—Notwithstanding section 3718(f) of title
31, United States Code, the Secretary is authorized
to enter into contracts to obtain services related to
receiving payment by other means where cost bene-
ficial to the Government. The Secretary may not pay
any fee or provide any other consideration under
such contracts.
‘‘(3) SPECIAL PROVISIONS FOR USE OF CREDIT
CARDS.—If use of credit cards is accepted as a
1013
method of payment of taxes pursuant to subsection
(a)—
‘‘(A) a payment of internal revenue taxes
(or a payment for internal revenue stamps) by
a person by use of a credit card shall not be
subject to section 161 of the Truth-in-Lending
Act (15 U.S.C. 1666), or to any similar provi-
sions of State law, if the error alleged by the
person is an error relating to the underlying tax
liability, rather than an error relating to the
credit card account such as a computational
error or numerical transposition in the credit
card transaction or an issue as to whether the
person authorized payment by use of the credit
card,
‘‘(B) a payment of internal revenue taxes
(or a payment for internal revenue stamps)
shall not be subject to section 170 of the Truth-
in-Lending Act (15 U.S.C. 1666i), or to any
similar provisions of State law,
‘‘(C) a payment of internal revenue taxes
(or a payment for internal revenue stamps) by
a person by use of a debit card shall not be
subject to section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), or to any simi-
1014
lar provisions of State law, if the error alleged
by the person is an error relating to the under-
lying tax liability, rather than an error relating
to the debit card account such as a computa-
tional error or numerical transposition in the
debit card transaction or an issue as to whether
the person authorized payment by use of the
debit card,
‘‘(D) the term ‘creditor’ under section
103(f) of the Truth-in-Lending Act (15 U.S.C.
1602(f)) shall not include the Secretary with re-
spect to credit card transactions in payment of
internal revenue taxes (or payment for internal
revenue stamps), and
‘‘(E) notwithstanding any other provision
of law to the contrary, in the case of payment
made by credit card or debit card transaction of
an amount owed to a person as the result of the
correction of an error under section 161 of the
Truth-in-Lending Act (15 U.S.C. 1666) or sec-
tion 908 of the Electronic Fund Transfer Act
(15 U.S.C. 1693f), the Secretary is authorized
to provide such amount to such person as a
credit to that person’s credit card or debit card
1015
account through the applicable credit card or
debit card system.
‘‘(e) CONFIDENTIALITY OF INFORMATION.—
‘‘(1) IN
GENERAL.—Except as otherwise au-
thorized by this subsection, no person may use or
disclose any information relating to credit or debit
card transactions obtained pursuant to section
6103(k)(8) other than for purposes directly related
to the processing of such transactions, or the billing
or collection of amounts charged or debited pursuant
thereto.
‘‘(2) EXCEPTIONS.—
‘‘(A) Debit or credit card issuers or others
acting on behalf of such issuers may also use
and disclose such information for purposes di-
rectly related to servicing an issuer’s accounts.
‘‘(B) Debit or credit card issuers or others
directly involved in the processing of credit or
debit card transactions or the billing or collec-
tion of amounts charged or debited thereto may
also use and disclose such information for pur-
poses directly related to—
‘‘(i) statistical risk and profitability
assessment;
1016
‘‘(ii) 
transferring 
receivables, 
ac-
counts, or interest therein;
‘‘(iii) auditing the account informa-
tion;
‘‘(iv) complying with Federal, State,
or local law; and
‘‘(v) properly authorized civil, crimi-
nal, or regulatory investigation by Federal,
State, or local authorities.
‘‘(3) PROCEDURES.—Use and disclosure of in-
formation under this paragraph shall be made only
to the extent authorized by written procedures pro-
mulgated by the Secretary.
‘‘(4) CROSS REFERENCE.—
‘‘For provision providing for civil damages for vio-
lation of paragraph (1), see section 7431.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 64 is amended by striking
the item relating to section 6311 and inserting the follow-
ing:
‘‘Sec. 6311. Payment of tax by commercially acceptable means.’’
(c) AMENDMENTS
TO SECTIONS 6103 AND 7431
WITH RESPECT TO DISCLOSURE AUTHORIZATION.—
(1) Subsection (k) of section 6103 (relating to
confidentiality and disclosure of returns and return
1017
information) is amended by adding at the end the
following new paragraph:
‘‘(8) DISCLOSURE OF INFORMATION TO ADMIN-
ISTER SECTION 6311.—The Secretary may disclose
returns or return information to financial institu-
tions and others to the extent the Secretary deems
necessary for the administration of section 6311.
Disclosures of information for purposes other than
to accept payments by checks or money orders shall
be made only to the extent authorized by written
procedures promulgated by the Secretary.’’
(2) Section 7431 (relating to civil damages for
unauthorized disclosure of returns and return infor-
mation) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) SPECIAL RULE FOR INFORMATION OBTAINED
UNDER SECTION 6103(k)(8).—For purposes of this sec-
tion, any reference to section 6103 shall be treated as in-
cluding a reference to section 6311(e).’’
(3) Section 6103(p)(3)(A) is amended by strik-
ing ‘‘or (6)’’ and inserting ‘‘(6), or (8)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the day 9 months after
the date of the enactment of this Act.
1018
SEC. 14112. SIMPLIFIED FOREIGN TAX CREDIT LIMITATION
FOR INDIVIDUALS.
(a) GENERAL RULE.—Section 904 (relating to limi-
tations on foreign tax credit) is amended by redesignating
subsection (j) as subsection (k) and by inserting after sub-
section (i) the following new subsection:
‘‘(j) SIMPLIFIED LIMITATION FOR CERTAIN INDIVID-
UALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this subsection applies for any taxable year,
the limitation of subsection (a) shall be the lesser
of—
‘‘(A) 25 percent of such individual’s gross
income for the taxable year from sources with-
out the United States, or
‘‘(B) the amount of the creditable foreign
taxes paid or accrued by the individual during
the taxable year (determined without regard to
subsection (c)).
No taxes paid or accrued by the individual during
such taxable year may be deemed paid or accrued in
any other taxable year under subsection (c).
‘‘(2) INDIVIDUALS TO WHOM SUBSECTION AP-
PLIES.—This subsection shall apply to an individual
for any taxable year if—
1019
‘‘(A) the entire amount of such individual’s
gross income for the taxable year from sources
without the United States consists of qualified
passive income,
‘‘(B) the amount of the creditable foreign
taxes paid or accrued by the individual during
the taxable year does not exceed $200 ($400 in
the case of a joint return), and
‘‘(C) such individual elects to have this
subsection apply for the taxable year.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) QUALIFIED
PASSIVE
INCOME.—The
term ‘qualified passive income’ means any item
of gross income if—
‘‘(i) such item of income is passive in-
come (as defined in subsection (d)(2)(A)
without regard to clause (iii) thereof), and
‘‘(ii) such item of income is shown on
a payee statement furnished to the individ-
ual.
‘‘(B) CREDITABLE FOREIGN TAXES.—The
term ‘creditable foreign taxes’ means any taxes
for which a credit is allowable under section
901; except that such term shall not include
1020
any tax unless such tax is shown on a payee
statement furnished to such individual.
‘‘(C) 
PAYEE
STATEMENT.—The 
term
‘payee statement’ has the meaning given to
such term by section 6724(d)(2).
‘‘(D) ESTATES
AND
TRUSTS
NOT
ELIGI-
BLE.—This subsection shall not apply to any
estate or trust.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 14113. TREATMENT OF PERSONAL TRANSACTIONS BY
INDIVIDUALS UNDER FOREIGN CURRENCY
RULES.
(a) GENERAL RULE.—Subsection (e) of section 988
(relating to application to individuals) is amended to read
as follows:
‘‘(e) APPLICATION TO INDIVIDUALS.—
‘‘(1) IN GENERAL.—The preceding provisions of
this section shall not apply to any section 988 trans-
action entered into by an individual which is a per-
sonal transaction.
‘‘(2) EXCLUSION
FOR
CERTAIN
PERSONAL
TRANSACTIONS.—If—
1021
‘‘(A) nonfunctional currency is disposed of
by an individual in any transaction, and
‘‘(B) such transaction is a personal trans-
action,
no gain shall be recognized for purposes of this sub-
title by reason of changes in exchange rates after
such currency was acquired by such individual and
before such disposition. The preceding sentence shall
not apply if the gain which would otherwise be rec-
ognized exceeds $200.
‘‘(3) PERSONAL TRANSACTIONS.—For purposes
of this subsection, the term ‘personal transaction’
means any transaction entered into by an individual,
except that such term shall not include any trans-
action to the extent that expenses properly allocable
to such transaction meet the requirements of section
162 or 212 (other than that part of section 212
dealing with expenses incurred in connection with
taxes).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
1022
SEC. 14114. TREATMENT OF CERTAIN REIMBURSED EX-
PENSES OF RURAL MAIL CARRIERS.
(a) IN GENERAL.—Section 162 (relating to trade or
business expenses) is amended by redesignating subsection
(o) as subsection (p) and by inserting after subsection (n)
the following new subsection:
‘‘(o) TREATMENT
OF CERTAIN REIMBURSED EX-
PENSES OF RURAL MAIL CARRIERS.—
‘‘(1) GENERAL RULE.—In the case of any em-
ployee of the United States Postal Service who per-
forms services involving the collection and delivery of
mail on a rural route and who receives qualified re-
imbursements for the expenses incurred by such em-
ployee for the use of a vehicle in performing such
services—
‘‘(A) the amount allowable as a deduction
under this chapter for the use of a vehicle in
performing such services shall be equal to the
amount of such qualified reimbursements; and
‘‘(B) such qualified reimbursements shall
be treated as paid under a reimbursement or
other expense allowance arrangement for pur-
poses of section 62(a)(2)(A) (and section 62(c)
shall not apply to such qualified reimburse-
ments).
1023
‘‘(2) DEFINITION OF QUALIFIED REIMBURSE-
MENTS.—For purposes of this subsection, the term
‘qualified reimbursements’ means the amounts paid
by the United States Postal Service to employees as
an equipment maintenance allowance under the
1991 collective bargaining agreement between the
United States Postal Service and the National Rural
Letter Carriers’ Association. Amounts paid as an
equipment maintenance allowance by such Postal
Service under later collective bargaining agreements
that supersede the 1991 agreement shall be consid-
ered qualified reimbursements if such amounts do
not exceed the amounts that would have been paid
under the 1991 agreement, adjusted for changes in
the Consumer Price Index (as defined in section
1(f)(5)) since 1991.’’
(b) TECHNICAL AMENDMENT.—Section 6008 of the
Technical and Miscellaneous Revenue Act of 1988 is here-
by repealed.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
1024
SEC. 14115. EXCLUSION OF COMBAT PAY FROM WITHHOLD-
ING 
LIMITED 
TO 
AMOUNT 
EXCLUDABLE
FROM GROSS INCOME.
(a) IN GENERAL.—Paragraph (1) of section 3401(a)
(defining wages) is amended by inserting before the semi-
colon the following: ‘‘to the extent remuneration for such
service is excludable from gross income under such sec-
tion’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to remuneration paid after De-
cember 31, 1995.
SEC. 14116. TREATMENT OF TRAVELING EXPENSES OF CER-
TAIN FEDERAL EMPLOYEES ENGAGED IN
CRIMINAL INVESTIGATIONS.
(a) IN GENERAL.—Subsection (a) of section 162 is
amended by adding at the end the following new sentence:
‘‘The preceding sentence shall not apply to any Federal
employee during any period for which such employee is
certified by the Attorney General (or the designee thereof)
as traveling on behalf of the United States in temporary
duty status to investigate, or provide support services for
the investigation of, a Federal crime.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years ending after
the date of the enactment of this Act.
1025
Subtitle B—Pension Simplification
PART I—SIMPLIFIED DISTRIBUTION RULES
SEC. 14201. REPEAL OF 5-YEAR INCOME AVERAGING FOR
LUMP-SUM DISTRIBUTIONS.
(a) IN GENERAL.—Subsection (d) of section 402 (re-
lating to taxability of beneficiary of employees’ trust) is
amended by adding at the end the following new para-
graph:
‘‘(8) TERMINATION.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), this subsection shall not
apply to any taxable year beginning after De-
cember 31, 1995.
‘‘(B) RETENTION OF CERTAIN TRANSITION
RULES.—Subparagraph (A) shall not apply to
any distribution for which the taxpayer elects
the benefits of section 1122 (h)(3) or (h)(5) of
the Tax Reform Act of 1986.’’
SEC. 14202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES’
DEATH BENEFITS.
(a) IN GENERAL.—Subsection (b) of section 101 is
hereby repealed.
(b) CONFORMING AMENDMENTS.—
1026
(1) Subsection (c) of section 101 is amended by
striking ‘‘subsection (a) or (b)’’ and inserting ‘‘sub-
section (a)’’.
(2) Sections 406(e) and 407(e) are each amend-
ed by striking paragraph (2) and by redesignating
paragraph (3) as paragraph (2).
(3) Section 7701(a)(20) is amended by striking
‘‘, for the purposes of applying the provisions of sec-
tion 101(b) with respect to employees’ death bene-
fits’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 14203. SIMPLIFIED METHOD FOR TAXING ANNUITY
DISTRIBUTIONS UNDER CERTAIN EMPLOYER
PLANS.
(a) GENERAL RULE.—Subsection (d) of section 72
(relating to annuities; certain proceeds of endowment and
life insurance contracts) is amended to read as follows:
‘‘(d) SPECIAL RULES FOR QUALIFIED EMPLOYER
RETIREMENT PLANS.—
‘‘(1) SIMPLIFIED METHOD OF TAXING ANNUITY
PAYMENTS.—
1027
‘‘(A) IN
GENERAL.—In the case of any
amount received as an annuity under a quali-
fied employer retirement plan—
‘‘(i) subsection (b) shall not apply,
and
‘‘(ii) the investment in the contract
shall be recovered as provided in this para-
graph.
‘‘(B) METHOD
OF
RECOVERING
INVEST-
MENT IN CONTRACT.—
‘‘(i) 
IN
GENERAL.—Gross 
income
shall not include so much of any monthly
annuity payment under a qualified em-
ployer retirement plan as does not exceed
the amount obtained by dividing—
‘‘(I) the investment in the con-
tract (as of the annuity starting date),
by
‘‘(II) the number of anticipated
payments determined under the table
contained in clause (iii) (or, in the
case of a contract to which subsection
(c)(3)(B) applies, the number of
monthly annuity payments under such
contract).
1028
‘‘(ii) CERTAIN RULES MADE APPLICA-
BLE.—Rules similar to the rules of para-
graphs (2) and (3) of subsection (b) shall
apply for purposes of this paragraph.
‘‘(iii) NUMBER OF ANTICIPATED PAY-
MENTS.—
‘‘If the age of the
primary annuitant on
The number
the annuity starting
of anticipated
date is:
payments is:
Not more than 55 ..................................
300
More than 55 but not more than 60 .....
260
More than 60 but not more than 65 .....
240
More than 65 but not more than 70 .....
170
More than 70 .........................................
120
‘‘(C) ADJUSTMENT FOR REFUND FEATURE
NOT APPLICABLE.—For purposes of this para-
graph, investment in the contract shall be de-
termined under subsection (c)(1) without re-
gard to subsection (c)(2).
‘‘(D) SPECIAL
RULE
WHERE
LUMP
SUM
PAID
IN
CONNECTION
WITH
COMMENCEMENT
OF ANNUITY PAYMENTS.—If, in connection with
the commencement of annuity payments under
any qualified employer retirement plan, the tax-
payer receives a lump sum payment—
‘‘(i) such payment shall be taxable
under subsection (e) as if received before
the annuity starting date, and
1029
‘‘(ii) the investment in the contract
for purposes of this paragraph shall be de-
termined as if such payment had been so
received.
‘‘(E) EXCEPTION.—This paragraph shall
not apply in any case where the primary annu-
itant has attained age 75 on the annuity start-
ing date unless there are fewer than 5 years of
guaranteed payments under the annuity.
‘‘(F) ADJUSTMENT WHERE ANNUITY PAY-
MENTS NOT ON MONTHLY BASIS.—In any case
where the annuity payments are not made on a
monthly basis, appropriate adjustments in the
application of this paragraph shall be made to
take into account the period on the basis of
which such payments are made.
‘‘(G) QUALIFIED EMPLOYER RETIREMENT
PLAN.—For purposes of this paragraph, the
term ‘qualified employer retirement plan’ means
any plan or contract described in paragraph
(1), (2), or (3) of section 4974(c).
‘‘(2) TREATMENT
OF
EMPLOYEE
CONTRIBU-
TIONS
UNDER
DEFINED
CONTRIBUTION
PLANS.—
For purposes of this section, employee contributions
(and any income allocable thereto) under a defined
1030
contribution plan may be treated as a separate con-
tract.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply in cases where the annuity start-
ing date is after December 31, 1995.
SEC. 14204. REQUIRED DISTRIBUTIONS.
(a) IN GENERAL.—Section 401(a)(9)(C) (defining re-
quired beginning date) is amended to read as follows:
‘‘(C) REQUIRED
BEGINNING
DATE.—For
purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘re-
quired beginning date’ means April 1 of
the calendar year following the later of—
‘‘(I) the calendar year in which
the employee attains age 701⁄2, or
‘‘(II) the calendar year in which
the employee retires.
‘‘(ii) EXCEPTION.—Subclause (II) of
clause (i) shall not apply—
‘‘(I) except as provided in section
409(d), in the case of an employee
who is a 5-percent owner (as defined
in section 416) with respect to the
plan year ending in the calendar year
1031
in which the employee attains age
701⁄2, or
‘‘(II) for purposes of section 408
(a)(6) or (b)(3).
‘‘(iii) ACTUARIAL
ADJUSTMENT.—In
the case of an employee to whom clause
(i)(II) applies who retires in a calendar
year after the calendar year in which the
employee attains age 701⁄2, the employee’s
accrued benefit shall be actuarially in-
creased to take into account the period
after age 701⁄2 in which the employee was
not receiving any benefits under the plan.
‘‘(iv) 
EXCEPTION
FOR
GOVERN-
MENTAL
AND
CHURCH
PLANS.—Clauses
(ii) and (iii) shall not apply in the case of
a governmental plan or church plan. For
purposes of this clause, the term ‘church
plan’ means a plan maintained by a church
for church employees, and the term
‘church’ means any church (as defined in
section 3121(w)(3)(A)) or qualified church-
controlled organization (as defined in sec-
tion 3121(w)(3)(B)).’’
1032
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995.
PART II—INCREASED ACCESS TO PENSION
PLANS
SEC. 14211. MODIFICATIONS OF SIMPLIFIED EMPLOYEE
PENSIONS.
(a) INCREASE IN NUMBER OF ALLOWABLE PARTICI-
PANTS FOR SALARY REDUCTION ARRANGEMENTS.—Sec-
tion 408(k)(6)(B) is amended by striking ‘‘25’’ each place
it appears in the text and heading thereof and inserting
‘‘100’’.
(b) REPEAL OF PARTICIPATION REQUIREMENT.—
(1) IN
GENERAL.—Section 408(k)(6)(A) is
amended by striking clause (ii) and by redesignating
clauses (iii) and (iv) as clauses (ii) and (iii), respec-
tively.
(2) CONFORMING AMENDMENTS.—Clause (ii) of
section 408(k)(6)(C) and clause (ii) of section
408(k)(6)(F) are each amended by striking ‘‘sub-
paragraph (A)(iii)’’ and inserting ‘‘subparagraph
(A)(ii)’’.
(c) ALTERNATIVE TEST.—Clause (ii) of section
408(k)(6)(A), as redesignated by subsection (b)(1), is
1033
amended by adding at the end the following new flush sen-
tence:
‘‘The requirements of the preceding sen-
tence are met if the employer makes con-
tributions to the simplified employee pen-
sion meeting the requirements of sections
401(k)(11) (B) or (C), 401(k)(11)(D), and
401(m)(10)(B).’’
(d) YEAR
FOR
COMPUTING
NONHIGHLY
COM-
PENSATED EMPLOYEE PERCENTAGE.—Clause (ii) of sec-
tion 408(k)(6)(A), as redesignated by subsection (b)(1),
is amended—
(1) by striking ‘‘such year’’ in subclause (I) and
inserting ‘‘the preceding year’’, and
(2) by adding at the end the following new
flush sentence:
‘‘In the case of the first plan year for
which an employer makes contributions to
a simplified employee pension, rules similar
to the rules of section 401(k)(3)(E) shall
apply.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
1034
SEC. 14212. STATE AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT 
ORGANIZATIONS 
ELIGIBLE 
UNDER
SECTION 401(k).
(a) IN GENERAL.—Subparagraph (B) of section
401(k)(4) is amended to read as follows:
‘‘(B) ELIGIBILITY OF STATE AND LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—Any—
‘‘(i) State or local government or po-
litical subdivision thereof, or any agency or
instrumentality thereof, and
‘‘(ii) any organization exempt from
tax under this subtitle,
may include a qualified cash or deferred ar-
rangement as part of a plan maintained by it
unless the entity maintains an eligible deferred
compensation plan (as defined in section
457(b)). This subparagraph shall not apply to
a rural cooperative plan.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to plan years beginning after De-
cember 31, 1996, but shall not apply to any cash or de-
ferred arrangement to which clause (i) or (ii) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
1035
PART III—NONDISCRIMINATION PROVISIONS
SEC. 14221. DEFINITION OF HIGHLY COMPENSATED EM-
PLOYEES.
(a) IN GENERAL.—Paragraph (1) of section 414(q)
(defining highly compensated employee) is amended to
read as follows:
‘‘(1) IN
GENERAL.—The term ‘highly com-
pensated employee’ means any employee who—
‘‘(A) was a 5-percent owner at any time
during the year or the preceding year, or
‘‘(B) had compensation for the preceding
year from the employer in excess of $80,000.
The Secretary shall adjust the $80,000 amount
under subparagraph (B) at the same time and in the
same manner as under section 415(d), except that
the base period in applying such section for purposes
of this paragraph shall be the calendar quarter end-
ing September 30, 1995.’’
(b) CONFORMING AMENDMENTS.—
(1)(A) Subsection (q) of section 414 is amended
by striking paragraphs (2), (4), (5), (8), and (12)
and by redesignating paragraphs (3), (6), (7), (9),
(10), and (11) as paragraphs (2) through (7), re-
spectively.
(B) Section 129(d)(8)(B), 401(a)(5)(D)(ii),
408(k)(2)(C), and 416(i)(1)(D) are each amended
1036
by striking ‘‘section 414(q)(7)’’ and inserting ‘‘sec-
tion 414(q)(4)’’.
(C) Sections 401(a)(17) and 404(l) are each
amended by striking ‘‘section 414(q)(6)’’ and insert-
ing ‘‘section 414(q)(3)’’.
(D) Section 416(i)(1)(A) is amended by strik-
ing ‘‘section 414(q)(8)’’ and inserting ‘‘section
414(r)(9)’’.
(2)(A) Section 414(r) is amended by adding at
the end the following new paragraph:
‘‘(9) EXCLUDED EMPLOYEES.—For purposes of
paragraph (2)(A), the following employees shall be
excluded:
‘‘(A) Employees who have not completed 6
months of service.
‘‘(B) Employees who normally work less
than 171⁄2 hours per week.
‘‘(C) Employees who normally work not
more than 6 months during any year.
‘‘(D) Employees who have not attained the
age of 21.
‘‘(E) Except to the extent provided in reg-
ulations, employees who are included in a unit
of employees covered by an agreement which
the Secretary of Labor finds to be a collective
1037
bargaining agreement between employee rep-
resentatives and the employer.
Except as provided by the Secretary, the employer
may elect to apply subparagraph (A), (B), (C), or
(D) by substituting a shorter period of service,
smaller number of hours or months, or lower age for
the period of service, number of hours or months, or
age (as the case may be) specified in such subpara-
graph.’’
(B) Subparagraph (A) of section 414(r)(2) is
amended by striking ‘‘subsection (q)(8)’’ and insert-
ing ‘‘paragraph (9)’’.
(3) Section 1114(c)(4) of the Tax Reform Act
of 1986 is amended by adding at the end the follow-
ing new sentence: ‘‘Any reference in this paragraph
to section 414(q) shall be treated as a reference to
such section as in effect before the Tax Simplifica-
tion Act of 1995’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14222. REPEAL OF FAMILY AGGREGATION RULES.
(a) IN GENERAL.—Paragraph (6) of section 414(q)
is hereby repealed.
1038
(b) COMPENSATION LIMIT.—Subparagraph (A) of
section 401(a)(17) is amended by striking the last sen-
tence.
(c) DEDUCTION.—Subsection (l) of section 404 is
amended by striking the last sentence.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14223. MODIFICATION OF ADDITIONAL PARTICIPA-
TION REQUIREMENTS.
(a) GENERAL RULE.—Section 401(a)(26)(A) (relat-
ing to additional participation requirements) is amended
to read as follows:
‘‘(A) IN GENERAL.—In the case of a trust
which is a part of a defined benefit plan, such
trust shall not constitute a qualified trust under
this subsection unless on each day of the plan
year such trust benefits at least the lesser of—
‘‘(i) 50 employees of the employer, or
‘‘(ii) the greater of—
‘‘(I) 40 percent of all employees
of the employer, or
‘‘(II) 2 employees (or if there is
only 1 employee, such employee).’’
1039
(b) SEPARATE LINE OF BUSINESS TEST.—Section
401(a)(26)(G) (relating to separate line of business) is
amended by striking ‘‘paragraph (7)’’ and inserting ‘‘para-
graph (2)(A) or (7)’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14224. NONDISCRIMINATION RULES FOR QUALIFIED
CASH OR DEFERRED ARRANGEMENTS AND
MATCHING CONTRIBUTIONS.
(a) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(k) 
NONDISCRIMINATION
TESTS.—Section
401(k) (relating to cash or deferred arrangements) is
amended by adding at the end the following new para-
graph:
‘‘(11) ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—A cash or deferred ar-
rangement shall be treated as meeting the re-
quirements of paragraph (3)(A)(ii) if such ar-
rangement—
‘‘(i) meets the contribution require-
ments of subparagraph (B) or (C), and
‘‘(ii) meets the notice requirements of
subparagraph (D).
1040
‘‘(B) MATCHING CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met if, under the
arrangement, the employer makes match-
ing contributions on behalf of each em-
ployee who is not a highly compensated
employee in an amount equal to—
‘‘(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee’s
compensation, and
‘‘(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee’s compensa-
tion.
‘‘(ii) 
RATE
FOR
HIGHLY
COM-
PENSATED
EMPLOYEES.—The 
require-
ments of this subparagraph are not met if,
under the arrangement, the matching con-
tribution with respect to any elective con-
tribution of a highly compensated employee
at any level of compensation is greater
1041
than that with respect to an employee who
is not a highly compensated employee.
‘‘(iii) ALTERNATIVE PLAN DESIGNS.—
If the matching contribution with respect
to any elective contribution at any specific
level of compensation is not equal to the
percentage required under clause (i), an
arrangement shall not be treated as failing
to meet the requirements of clause (i) if—
‘‘(I) the level of an employer’s
matching contribution does not in-
crease as an employee’s elective con-
tributions increase, and
‘‘(II) the aggregate amount of
matching contributions with respect to
elective contributions not in excess of
such level of compensation is at least
equal to the amount of matching con-
tributions which would be made if
matching contributions were made on
the basis of the percentages described
in clause (i).
‘‘(C) 
NONELECTIVE
CONTRIBUTIONS.—
The requirements of this subparagraph are met
if, under the arrangement, the employer is re-
1042
quired, without regard to whether the employee
makes an elective contribution or employee con-
tribution, to make a contribution to a defined
contribution plan on behalf of each employee
who is not a highly compensated employee and
who is eligible to participate in the arrangement
in an amount equal to at least 3 percent of the
employee’s compensation.
‘‘(D) NOTICE
REQUIREMENT.—An ar-
rangement meets the requirements of this para-
graph if, under the arrangement, each employee
eligible to participate is, within a reasonable pe-
riod before any year, given written notice of the
employee’s rights and obligations under the ar-
rangement which—
‘‘(i) is sufficiently accurate and com-
prehensive to apprise the employee of such
rights and obligations, and
‘‘(ii) is written in a manner calculated
to be understood by the average employee
eligible to participate.
‘‘(E) OTHER REQUIREMENTS.—
‘‘(i) WITHDRAWAL AND VESTING RE-
STRICTIONS.—An arrangement shall not be
treated as meeting the requirements of
1043
subparagraph (B) or (C) unless the re-
quirements of subparagraphs (B) and (C)
of paragraph (2) are met with respect to
all 
employer 
contributions 
(including
matching contributions).
‘‘(ii) SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS
NOT
TAKEN
INTO
AC-
COUNT.—An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) unless such re-
quirements are met without regard to sub-
section (l), and, for purposes of subsection
(l), employer contributions under subpara-
graph (B) or (C) shall not be taken into
account.
‘‘(F) OTHER
PLANS.—An arrangement
shall be treated as meeting the requirements
under subparagraph (A)(i) if any other plan
maintained by the employer meets such require-
ments with respect to employees eligible under
the arrangement.’’
(b) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(m) 
NONDISCRIMINATION
TESTS.—Section
401(m) (relating to nondiscrimination test for matching
contributions and employee contributions) is amended by
1044
redesignating paragraph (10) as paragraph (11) and by
adding after paragraph (9) the following new paragraph:
‘‘(10) ALTERNATIVE METHOD OF SATISFYING
TESTS.—
‘‘(A) IN GENERAL.—A defined contribution
plan shall be treated as meeting the require-
ments of paragraph (2) with respect to match-
ing contributions if the plan—
‘‘(i) meets the contribution require-
ments of subparagraph (B) or (C) of sub-
section (k)(11),
‘‘(ii) meets the notice requirements of
subsection (k)(11)(D), and
‘‘(iii) meets the requirements of sub-
paragraph (B).
‘‘(B) LIMITATION
ON
MATCHING
CON-
TRIBUTIONS.—The requirements of this sub-
paragraph are met if—
‘‘(i) matching contributions on behalf
of any employee may not be made with re-
spect to an employee’s contributions or
elective deferrals in excess of 6 percent of
the employee’s compensation,
‘‘(ii) the level of an employer’s match-
ing contribution does not increase as an
1045
employee’s contributions or elective defer-
rals increase, and
‘‘(iii) the matching contribution with
respect to any highly compensated em-
ployee at a specific level of compensation is
not greater than that with respect to an
employee who is not a highly compensated
employee.’’
(c) YEAR
FOR
COMPUTING
NONHIGHLY
COM-
PENSATED EMPLOYEE PERCENTAGE.—
(1) CASH
OR
DEFERRED
ARRANGEMENTS.—
Clause (ii) of section 401(k)(3)(A) is amended—
(A) by striking ‘‘such year’’ and inserting
‘‘the plan year’’, and
(B) by striking ‘‘for such plan year’’ and
inserting ‘‘the preceding plan year’’.
(2) MATCHING
AND
EMPLOYEE
CONTRIBU-
TIONS.—Section 401(m)(2)(A) is amended—
(A) by inserting ‘‘for such plan year’’ after
‘‘highly compensated employees’’, and
(B) by inserting ‘‘for the preceding plan
year’’ after ‘‘eligible employees’’ each place it
appears in clause (i) and clause (ii).
(d) SPECIAL RULE FOR DETERMINING AVERAGE DE-
FERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC.—
1046
(1) Paragraph (3) of section 401(k) is amended
by adding at the end the following new subpara-
graph:
‘‘(E) For purposes of this paragraph, in
the case of the first plan year of any plan, the
amount taken into account as the actual defer-
ral percentage of nonhighly compensated em-
ployees for the preceding plan year shall be—
‘‘(i) 3 percent, or
‘‘(ii) if the employer makes an election
under this subclause, the actual deferral
percentage of nonhighly compensated em-
ployees determined for such first plan
year.’’
(2) Paragraph (3) of section 401(m) is amend-
ed by adding at the end the following: ‘‘Rules similar
to the rules of subsection (k)(3)(E) shall apply for
purposes of this subsection.’’
(e) DISTRIBUTION OF EXCESS CONTRIBUTIONS.—
(1) Subparagraph (C) of section 401(k)(8) (re-
lating to arrangement not disqualified if excess con-
tributions distributed) is amended by striking ‘‘on
the basis of the respective portions of the excess con-
tributions attributable to each of such employees’’
and inserting ‘‘on the basis of the amount of con-
1047
tributions by, or on behalf of, each of such employ-
ees’’.
(2) Subparagraph (C) of section 401(m)(6) (re-
lating to method of distributing excess aggregate
contributions) is amended by striking ‘‘on the basis
of the respective portions of such amounts attrib-
utable to each of such employees’’ and inserting ‘‘on
the basis of the amount of contributions on behalf
of, or by, each such employee’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
PART IV—MISCELLANEOUS SIMPLIFICATION
SEC. 14231. TREATMENT OF LEASED EMPLOYEES.
(a) GENERAL RULE.—Subparagraph (C) of section
414(n)(2) (defining leased employee) is amended to read
as follows:
‘‘(C) such services are performed under
significant direction or control by the recipi-
ent.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995, but shall not apply to any relationship deter-
mined under an Internal Revenue Service ruling issued be-
fore the date of the enactment of this Act pursuant to
1048
section 414(n)(2)(C) of the Internal Revenue Code of
1986 (as in effect on the day before such date) not to
involve a leased employee.
SEC. 14232. PLANS COVERING SELF-EMPLOYED INDIVID-
UALS.
(a) AGGREGATION RULES.—Section 401(d) (relating
to additional requirements for qualification of trusts and
plans benefiting owner-employees) is amended to read as
follows:
‘‘(d) CONTRIBUTION LIMIT
ON OWNER-EMPLOY-
EES.—A trust forming part of a pension or profit-sharing
plan which provides contributions or benefits for employ-
ees some or all of whom are owner-employees shall con-
stitute a qualified trust under this section only if, in addi-
tion to meeting the requirements of subsection (a), the
plan provides that contributions on behalf of any owner-
employee may be made only with respect to the earned
income of such owner-employee which is derived from the
trade or business with respect to which such plan is
established.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
1049
SEC. 14233. ELIMINATION OF SPECIAL VESTING RULE FOR
MULTIEMPLOYER PLANS.
(a) IN GENERAL.—Paragraph (2) of section 411(a)
(relating to minimum vesting standards) is amended—
(1) by striking ‘‘subparagraph (A), (B), or (C)’’
and inserting ‘‘subparagraph (A) or (B)’’; and
(2) by striking subparagraph (C).
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the earlier of—
(1) the later of—
(A) January 1, 1996, or
(B) the date on which the last of the col-
lective bargaining agreements pursuant to
which the plan is maintained terminates (deter-
mined without regard to any extension thereof
after the date of the enactment of this Act), or
(2) January 1, 1998.
Such amendments shall not apply to any individual who
does not have more than 1 hour of service under the plan
on or after the 1st day of the 1st plan year to which such
amendments apply.
1050
SEC. 14234. DISTRIBUTIONS UNDER RURAL COOPERATIVE
PLANS.
(a) DISTRIBUTIONS AFTER CERTAIN AGE.—Section
401(k)(7) is amended by adding at the end the following
new subparagraph:
‘‘(C) SPECIAL
RULE
FOR
CERTAIN
DIS-
TRIBUTIONS.—A rural cooperative plan which
includes a qualified cash or deferred arrange-
ment shall not be treated as violating the re-
quirements of section 401(a) merely by reason
of a distribution to a participant after attain-
ment of age 591⁄2.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to distributions after December 31,
1995.
SEC. 
14235. 
TREATMENT 
OF 
GOVERNMENTAL 
PLANS
UNDER SECTION 415.
(a) DEFINITION OF COMPENSATION.—Subsection (k)
of section 415 (regarding limitations on benefits and con-
tributions under qualified plans) is amended by adding im-
mediately after paragraph (2) the following new para-
graph:
‘‘(3) DEFINITION OF COMPENSATION FOR GOV-
ERNMENTAL PLANS.—For purposes of this section,
in the case of a governmental plan (as defined in
section 414(d)), the term ‘compensation’ includes, in
1051
addition to the amounts described in subsection
(c)(3)—
‘‘(A) any elective deferral (as defined in
section 402(g)(3)), and
‘‘(B) any amount which is contributed by
the employer at the election of the employee
and which is not includible in the gross income
of an employee under section 125 or 457.’’
(b) COMPENSATION LIMIT.—Subsection (b) of sec-
tion 415 is amended by adding immediately after para-
graph (10) the following new paragraph:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL
PLANS.—In the case of a governmental
plan (as defined in section 414(d)), subparagraph
(B) of paragraph (1) shall not apply.’’
(c) TREATMENT
OF CERTAIN EXCESS BENEFIT
PLANS.—
(1) IN GENERAL.—Section 415 is amended by
adding at the end the following new subsection:
‘‘(m) TREATMENT OF QUALIFIED GOVERNMENTAL
EXCESS BENEFIT ARRANGEMENTS.—
‘‘(1) GOVERNMENTAL PLAN NOT AFFECTED.—
In determining whether a governmental plan (as de-
fined in section 414(d)) meets the requirements of
this section, benefits provided under a qualified gov-
1052
ernmental excess benefit arrangement shall not be
taken into account. Income accruing to a govern-
mental plan (or to a trust that is maintained solely
for the purpose of providing benefits under a quali-
fied governmental excess benefit arrangement) in re-
spect of a qualified governmental excess benefit ar-
rangement shall constitute income derived from the
exercise of an essential governmental function upon
which such governmental plan (or trust) shall be ex-
empt from tax under section 115.
‘‘(2) TAXATION
OF
PARTICIPANT.—For pur-
poses of this chapter—
‘‘(A) the taxable year or years for which
amounts in respect of a qualified governmental
excess benefit arrangement are includible in
gross income by a participant, and
‘‘(B) the treatment of such amounts when
so includible by the participant,
shall be determined as if such qualified govern-
mental excess benefit arrangement were treated as a
plan for the deferral of compensation which is main-
tained by a corporation not exempt from tax under
this chapter and which does not meet the require-
ments for qualification under section 401.
1053
‘‘(3) QUALIFIED GOVERNMENTAL EXCESS BEN-
EFIT
ARRANGEMENT.—For purposes of this sub-
section, the term ‘qualified governmental excess ben-
efit arrangement’ means a portion of a governmental
plan if—
‘‘(A) such portion is maintained solely for
the purpose of providing to participants in the
plan that part of the participant’s annual bene-
fit otherwise payable under the terms of the
plan that exceeds the limitations on benefits im-
posed by this section,
‘‘(B) under such portion no election is pro-
vided at any time to the participant (directly or
indirectly) to defer compensation, and
‘‘(C) benefits described in subparagraph
(A) are not paid from a trust forming a part
of such governmental plan unless such trust is
maintained solely for the purpose of providing
such benefits.’’
(2) COORDINATION WITH SECTION 457.—Sub-
section (e) of section 457 is amended by adding at
the end the following new paragraph:
‘‘(15) TREATMENT
OF
QUALIFIED
GOVERN-
MENTAL
EXCESS
BENEFIT
ARRANGEMENTS.—Sub-
sections (b)(2) and (c)(1) shall not apply to any
1054
qualified governmental excess benefit arrangement
(as defined in section 415(m)(3)), and benefits pro-
vided under such an arrangement shall not be taken
into account in determining whether any other plan
is an eligible deferred compensation plan.’’
(3) CONFORMING AMENDMENT.—Paragraph (2)
of section 457(f) is amended by striking ‘‘and’’ at
the end of subparagraph (C), by striking the period
at the end of subparagraph (D) and inserting ‘‘,
and’’, and by inserting immediately thereafter the
following new subparagraph:
‘‘(E) a qualified governmental excess bene-
fit arrangement described in section 415(m).’’
(d) EXEMPTION
FOR SURVIVOR
AND DISABILITY
BENEFITS.—Paragraph (2) of section 415(b) is amended
by adding at the end the following new subparagraph:
‘‘(I) EXEMPTION FOR SURVIVOR AND DIS-
ABILITY BENEFITS PROVIDED UNDER GOVERN-
MENTAL
PLANS.—Subparagraph (B) of para-
graph (1), subparagraph (C) of this paragraph,
and paragraph (5) shall not apply to—
‘‘(i) income received from a govern-
mental plan (as defined in section 414(d))
as a pension, annuity, or similar allowance
as the result of the recipient becoming dis-
1055
abled by reason of personal injuries or
sickness, or
‘‘(ii) amounts received from a govern-
mental plan by the beneficiaries, survivors,
or the estate of an employee as the result
of the death of the employee.’’
(e) REVOCATION OF GRANDFATHER ELECTION.—
(1) IN GENERAL.—Subparagraph (C) of section
415(b)(10) is amended by adding at the end the fol-
lowing new clause:
‘‘(ii) REVOCATION OF ELECTION.—An
election under clause (i) may be revoked
not later than the last day of the third
plan year beginning after the date of the
enactment of this clause. The revocation
shall apply to all plan years to which the
election applied and to all subsequent plan
years. Any amount paid by a plan in a tax-
able year ending after the revocation shall
be includible in income in such taxable
year under the rules of this chapter in ef-
fect for such taxable year, except that, for
purposes of applying the limitations im-
posed by this section, any portion of such
amount which is attributable to any tax-
1056
able year during which the election was in
effect shall be treated as received in such
taxable year.’’
(2) CONFORMING AMENDMENT.—Subparagraph
(C) of section 415(b)(10) is amended by striking
‘‘This’’ and inserting:
‘‘(i) IN GENERAL.—This’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsections (a), (b), (c), and (d) shall apply to tax-
able years beginning on or after the date of the en-
actment of this Act. The amendment made by sub-
section (e) shall apply with respect to election rev-
ocations adopted after the date of the enactment of
this Act.
(2) TREATMENT
FOR
YEARS
BEGINNING
BE-
FORE DATE OF ENACTMENT.—In the case of a gov-
ernmental plan (as defined in section 414(d) of the
Internal Revenue Code of 1986), such plan shall be
treated as satisfying the requirements of section 415
of such Code for all taxable years beginning before
the date of the enactment of this Act.
SEC. 14236. UNIFORM RETIREMENT AGE.
(a) DISCRIMINATION TESTING.—Paragraph (5) of
section 401(a) (relating to special rules relating to non-
1057
discrimination requirements) is amended by adding at the
end the following new subparagraph:
‘‘(F) 
SOCIAL
SECURITY
RETIREMENT
AGE.—For purposes of testing for discrimina-
tion under paragraph (4)—
‘‘(i) the social security retirement age
(as defined in section 415(b)(8)) shall be
treated as a uniform retirement age, and
‘‘(ii) subsidized early retirement bene-
fits and joint and survivor annuities shall
not be treated as being unavailable to em-
ployees on the same terms merely because
such benefits or annuities are based in
whole or in part on an employee’s social
security retirement age (as so defined).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14237. UNIFORM PENALTY PROVISIONS TO APPLY TO
CERTAIN 
PENSION 
REPORTING 
REQUIRE-
MENTS.
(a) PENALTIES.—
(1) STATEMENTS.—Paragraph (1) of section
6724(d) is amended by striking ‘‘and’’ at the end of
subparagraph (A), by striking the period at the end
1058
of subparagraph (B) and inserting ‘‘, and’’, and by
inserting after subparagraph (B) the following new
subparagraph:
‘‘(C) any statement of the amount of pay-
ments to another person required to be made to
the Secretary under—
‘‘(i) section 408(i) (relating to reports
with respect to individual retirement ac-
counts or annuities), or
‘‘(ii) section 6047(d) (relating to re-
ports by employers, plan administrators,
etc.).’’
(2) 
REPORTS.—Paragraph 
(2) 
of 
section
6724(d) is amended by striking ‘‘or’’ at the end of
subparagraph (S), by striking the period at the end
of subparagraph (T) and inserting a comma, and by
inserting after subparagraph (T) the following new
subparagraphs:
‘‘(U) section 408(i) (relating to reports
with respect to individual retirement plans) to
any person other than the Secretary with re-
spect to the amount of payments made to such
person, or
‘‘(V) section 6047(d) (relating to reports
by plan administrators) to any person other
1059
than the Secretary with respect to the amount
of payments made to such person.’’
(b) MODIFICATION
OF REPORTABLE DESIGNATED
DISTRIBUTIONS.—
(1) SECTION 408.—Subsection (i) of section 408
(relating to individual retirement account reports) is
amended by inserting ‘‘aggregating $10 or more in
any calendar year’’ after ‘‘distributions’’.
(2) SECTION 6047.—Paragraph (1) of section
6047(d) (relating to reports by employers, plan ad-
ministrators, etc.) is amended by adding at the end
the following new sentence: ‘‘No return or report
may be required under the preceding sentence with
respect to distributions to any person during any
year unless such distributions aggregate $10 or
more.’’
(c) QUALIFYING ROLLOVER DISTRIBUTIONS.—Sec-
tion 6652(i) is amended—
(1) by striking ‘‘the $10’’ and inserting
‘‘$100’’, and
(2) 
by 
striking 
‘‘$5,000’’ 
and 
inserting
‘‘$50,000’’.
(d) CONFORMING AMENDMENTS.—
1060
(1) Paragraph (1) of section 6047(f) is amend-
ed to read as follows:
‘‘(1) For provisions relating to penalties for fail-
ures to file returns and reports required under this
section, see sections 6652(e), 6721, and 6722.’’
(2) Subsection (e) of section 6652 is amended
by adding at the end the following new sentence:
‘‘This subsection shall not apply to any return or
statement which is an information return described
in section 6724(d)(1)(C)(ii) or a payee statement de-
scribed in section 6724(d)(2)(U).’’
(3) 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)(T).’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns, reports, and other
statements the due date for which (determined without re-
gard to extensions) is after December 31, 1995.
SEC. 14238. CONTRIBUTIONS ON BEHALF OF DISABLED EM-
PLOYEES.
(a) ALL DISABLED PARTICIPANTS RECEIVING CON-
TRIBUTIONS.—Section 415(c)(3)(C) is amended by adding
at the end the following: ‘‘If a defined contribution plan
provides for the continuation of contributions on behalf
1061
of all participants described in clause (i) for a fixed or
determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14239. TREATMENT OF DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS
AND TAX-EXEMPT ORGANIZATIONS.
(a) SPECIAL RULES FOR PLAN DISTRIBUTIONS.—
Paragraph (9) of section 457(e) (relating to other defini-
tions and special rules) is amended to read as follows:
‘‘(9) BENEFITS NOT TREATED AS MADE AVAIL-
ABLE BY REASON OF CERTAIN ELECTIONS, ETC.—
‘‘(A) TOTAL AMOUNT PAYABLE IS $3,500
OR LESS.—The total amount payable to a par-
ticipant under the plan shall not be treated as
made available merely because the participant
may elect to receive such amount (or the plan
may distribute such amount without the partici-
pant’s consent) if—
‘‘(i) such amount does not exceed
$3,500, and
‘‘(ii) such amount may be distributed
only if—
1062
‘‘(I) no amount has been deferred
under the plan with respect to such
participant during the 2-year period
ending on the date of the distribution,
and
‘‘(II) there has been no prior dis-
tribution under the plan to such par-
ticipant to which this subparagraph
applied.
A plan shall not be treated as failing to meet
the distribution requirements of subsection (d)
by reason of a distribution to which this sub-
paragraph applies.
‘‘(B) ELECTION
TO
DEFER
COMMENCE-
MENT OF DISTRIBUTIONS.—The total amount
payable to a participant under the plan shall
not be treated as made available merely because
the participant may elect to defer commence-
ment of distributions under the plan if—
‘‘(i) such election is made after
amounts may be available under the plan
in accordance with subsection (d)(1)(A)
and before commencement of such dis-
tributions, and
1063
‘‘(ii) the participant may make only 1
such election.’’
(b) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DE-
FERRAL AMOUNT.—Subsection (e) of section 457 is
amended by adding at the end the following new para-
graph:
‘‘(14) COST-OF-LIVING ADJUSTMENT OF MAXI-
MUM DEFERRAL AMOUNT.—The Secretary shall ad-
just the $7,500 amount specified in subsections
(b)(2) and (c)(1) at the same time and in the same
manner as under section 415(d) (determined without
regard to paragraph (4)), except that the base pe-
riod in applying such section for purposes of this
paragraph shall be the calendar quarter ending Sep-
tember 30, 1994.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 14240. TRUST REQUIREMENT FOR DEFERRED COM-
PENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS.
(a) IN GENERAL.—Section 457 is amended by adding
at the end the following new subsection:
‘‘(g) GOVERNMENTAL PLANS MUST MAINTAIN SET
ASIDES FOR EXCLUSIVE BENEFIT OF PARTICIPANTS.—
1064
‘‘(1) IN GENERAL.—A plan maintained by an
eligible employer described in subsection (e)(1)(A)
shall not be treated as an eligible deferred com-
pensation plan unless all assets and income of the
plan described in subsection (b)(6) are held in trust
for the exclusive benefit of participants and their
beneficiaries.
‘‘(2) TAXABILITY
OF
TRUSTS
AND
PARTICI-
PANTS.—For purposes of this title—
‘‘(A) a trust described in paragraph (1)
shall be treated as an organization exempt from
taxation under section 501(a), and
‘‘(B) notwithstanding any other provision
of this title, amounts in the trust shall be in-
cludible in the gross income of participants and
beneficiaries only to the extent, and at the time,
provided in this section.
‘‘(3) CUSTODIAL ACCOUNTS AND CONTRACTS.—
For purposes of this subsection, custodial accounts
and contracts described in section 401(f) shall be
treated as trusts under rules similar to the rules
under section 401(f).’’
(b) CONFORMING AMENDMENT.—Paragraph (6) of
section 457(b) is amended by inserting ‘‘except as pro-
vided in subsection (g),’’ before ‘‘which provides that’’.
1065
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to assets and income described in section
457(b)(6) of the Internal Revenue Code of 1986
held by a plan on and after the date of the enact-
ment of this Act.
(2) TRANSITION RULE.—In the case of assets
and income described in paragraph (1) held by a
plan before the 90th day after the date of the enact-
ment of this Act, a trust need not be established by
reason of the amendments made by this section be-
fore such 90th day.
SEC. 14241. TRANSITION RULE FOR COMPUTING MAXIMUM
BENEFITS UNDER SECTION 415 LIMITATIONS.
(a) IN GENERAL.—Subparagraph (A) of section
767(d)(3) of the Uruguay Round Agreements Act is
amended to read as follows:
‘‘(A) EXCEPTION.—A plan that was adopt-
ed and in effect before December 8, 1994, shall
not be required to apply the amendments made
by subsection (b) with respect to benefits ac-
crued before the earlier of—
1066
‘‘(i) the later of the date a plan
amendment applying such amendment is
adopted or made effective, or
‘‘(ii) the first day of the first limita-
tion year beginning after December 31,
1999.
Determinations under section 415(b)(2)(E) of
the Internal Revenue Code of 1986 shall be
made with respect to such benefits on the basis
of such section as in effect on December 7,
1994, and the provisions of the plan as in effect
on December 7, 1994, but only if such provi-
sions of the plan meet the requirements of such
section (as so in effect).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect as if included in the provisions
of section 767 of the Uruguay Round Agreements Act.
(c) TRANSITIONAL RULE.—In the case of a plan that
was adopted and in effect before December 8, 1994, if—
(1) a plan amendment was adopted or made ef-
fective on or before the date of the enactment of this
Act applying the amendments made by section
767(b) of the Uruguay Round Agreements Act, and
(2) within 1 year after the date of the enact-
ment of this Act, a plan amendment is adopted
1067
which repeals the amendment referred to in para-
graph (1),
the amendment referred to in paragraph (1) shall not be
taken into account in applying section 767(d)(3)(A) of the
Uruguay Round Agreements Act, as amended by sub-
section (a).
SEC. 14242. MULTIPLE SALARY REDUCTION AGREEMENTS
PERMITTED UNDER SECTION 403(b).
(a) GENERAL RULE.—For purposes of section 403(b)
of the Internal Revenue Code of 1986, the frequency that
an employee is permitted to enter into a salary reduction
agreement, the salary to which such an agreement may
apply, and the ability to revoke such an agreement shall
be determined under the rules applicable to cash or de-
ferred elections under section 401(k) of such Code.
(b) EFFECTIVE DATE.—Subsection (a) shall apply to
taxable years beginning after December 31, 1995.
SEC. 14243. WAIVER OF MINIMUM PERIOD FOR JOINT AND
SURVIVOR ANNUITY EXPLANATION BEFORE
ANNUITY STARTING DATE.
(a) GENERAL
RULE.—For purposes of section
417(a)(3)(A) of the Internal Revenue Code of 1986 (relat-
ing to plan to provide written explanations), the minimum
period prescribed by the Secretary of the Treasury be-
tween the date that the explanation referred to in such
1068
section is provided and the annuity starting date shall not
apply if waived by the participant and, if applicable, the
participant’s spouse.
(b) EFFECTIVE DATE.—Subsection (a) shall apply to
plan years beginning after December 31, 1995.
SEC. 14244. REPEAL OF LIMITATION IN CASE OF DEFINED
BENEFIT PLAN AND DEFINED CONTRIBUTION
PLAN FOR SAME EMPLOYEE.
(a) IN GENERAL.—Section 415(e) is repealed.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 415(b)(5) is
amended by striking ‘‘and subsection (e)’’.
(2) Paragraph (1) of section 415(f) is amended
by striking ‘‘subsections (b), (c), and (e)’’ and in-
serting ‘‘subsections (b) and (c)’’.
(3) Subsection (g) of section 415 is amended by
striking ‘‘subsections (e) and (f)’’ in the last sen-
tence and inserting ‘‘subsection (f)’’.
(4) Clause (i) of section 415(k)(2)(A) is amend-
ed to read as follows:
‘‘(i) any contribution made directly by
an employee under such an arrangement
shall not be treated as an annual addition
for purposes of subsection (c), and’’.
1069
(5) Clause (ii) of section 415(k)(2)(A) is
amended by striking ‘‘subsections (c) and (e)’’ and
inserting ‘‘subsection (c)’’.
(6) Section 416 is amended by striking sub-
section (h).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to limitation years beginning after
December 31, 1996.
SEC. 14245. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this title requires an
amendment to any plan, such plan amendment shall not
be required to be made before the first day of the first
plan year beginning on or after January 1, 1997, if—
(1) during the period after such amendment
takes effect and before such first plan year, the plan
is operated in accordance with the requirements of
such amendment, and
(2) such plan amendment applies retroactively
to such period.
1070
Subtitle C—Treatment of Large
Partnerships
PART I—GENERAL PROVISIONS
SEC. 14301. SIMPLIFIED FLOW-THROUGH FOR LARGE PART-
NERSHIPS.
(a) GENERAL RULE.—Subchapter K (relating to
partners and partnerships) is amended by adding at the
end the following new part:
‘‘PART IV—SPECIAL RULES FOR LARGE
PARTNERSHIPS
‘‘Sec. 771. Application of subchapter to large partnerships.
‘‘Sec. 772. Simplified flow-through.
‘‘Sec. 773. Computations at partnership level.
‘‘Sec. 774. Other modifications.
‘‘Sec. 775. Large partnership defined.
‘‘Sec. 776. Special rules for partnerships holding oil and gas prop-
erties.
‘‘Sec. 777. Regulations.
‘‘SEC. 771. APPLICATION OF SUBCHAPTER TO LARGE PART-
NERSHIPS.
‘‘The preceding provisions of this subchapter to the
extent inconsistent with the provisions of this part shall
not apply to a large partnership and its partners.
‘‘SEC. 772. SIMPLIFIED FLOW-THROUGH.
‘‘(a) GENERAL RULE.—In determining the income
tax of a partner of a large partnership, such partner shall
take into account separately such partner’s distributive
share of the partnership’s—
1071
‘‘(1) taxable income or loss from passive loss
limitation activities,
‘‘(2) taxable income or loss from other activi-
ties,
‘‘(3) net capital gain (or net capital loss)—
‘‘(A) to the extent allocable to passive loss
limitation activities, and
‘‘(B) to the extent allocable to other activi-
ties,
‘‘(4) tax-exempt interest,
‘‘(5) applicable net AMT adjustment separately
computed for—
‘‘(A) passive loss limitation activities, and
‘‘(B) other activities,
‘‘(6) general credits,
‘‘(7) low-income housing credit determined
under section 42,
‘‘(8) rehabilitation credit determined under sec-
tion 47,
‘‘(9) foreign income taxes,
‘‘(10) the credit allowable under section 29, and
‘‘(11) other items to the extent that the Sec-
retary determines that the separate treatment of
such items is appropriate.
1072
‘‘(b) SEPARATE COMPUTATIONS.—In determining
the amounts required under subsection (a) to be sepa-
rately taken into account by any partner, this section and
section 773 shall be applied separately with respect to
such partner by taking into account such partner’s dis-
tributive share of the items of income, gain, loss, deduc-
tion, or credit of the partnership.
‘‘(c) TREATMENT AT PARTNER LEVEL.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, rules similar to the rules of section
702(b) shall apply to any partner’s distributive share
of the amounts referred to in subsection (a).
‘‘(2) INCOME OR LOSS FROM PASSIVE LOSS LIM-
ITATION ACTIVITIES.—For purposes of this chapter,
any partner’s distributive share of any income or
loss described in subsection (a)(1) shall be treated as
an item of income or loss (as the case may be) from
the conduct of a trade or business which is a single
passive activity (as defined in section 469). A similar
rule shall apply to a partner’s distributive share of
amounts referred to in paragraphs (3)(A) and
(5)(A) of subsection (a).
‘‘(3) INCOME OR LOSS FROM OTHER ACTIVI-
TIES.—
1073
‘‘(A) IN GENERAL.—For purposes of this
chapter, any partner’s distributive share of any
income or loss described in subsection (a)(2)
shall be treated as an item of income or expense
(as the case may be) with respect to property
held for investment.
‘‘(B) DEDUCTIONS
FOR
LOSS
NOT
SUB-
JECT
TO
SECTION
67.—The deduction under
section 212 for any loss described in subpara-
graph (A) shall not be treated as a miscellane-
ous itemized deduction for purposes of section
67.
‘‘(4) TREATMENT
OF
NET
CAPITAL
GAIN
OR
LOSS.—For purposes of this chapter, any partner’s
distributive share of any gain or loss described in
subsection (a)(3) shall be treated as a long-term
capital gain or loss, as the case may be.
‘‘(5) MINIMUM TAX TREATMENT.—In determin-
ing the alternative minimum taxable income of any
partner, such partner’s distributive share of any ap-
plicable net AMT adjustment shall be taken into ac-
count in lieu of making the separate adjustments
provided in sections 56, 57, and 58 with respect to
the items of the partnership. Except as provided in
regulations, the applicable net AMT adjustment