I
106TH CONGRESS
2D SESSION
H. R. 3832
To amend the Internal Revenue Code of 1986 to provide tax benefits for
small businesses, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 6, 2000
Mr. ARCHER introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
tax benefits for small businesses, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Business Tax Fairness Act of 2000’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act 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.—
Sec. 1. Short title; references; table of contents.
TITLE I—SMALL BUSINESS PROVISIONS
Sec. 101. Deduction for 100 percent of health insurance costs of self-employed
individuals.
Sec. 102. Increase in expense treatment for small businesses.
Sec. 103. Increased deduction for meal expenses.
Sec. 104. Increased deductibility of business meal expenses for individuals sub-
ject to Federal limitations on hours of service.
Sec. 105. Income averaging for farmers and fishermen not to increase alter-
native minimum tax liability.
Sec. 106. Repeal of occupational taxes relating to distilled spirits, wine, and
beer.
Sec. 107. Repeal of modification of installment method.
TITLE II—PENSION PROVISIONS
Subtitle A—Expanding Coverage
Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of deduction
limits.
Sec. 205. Repeal of coordination requirements for deferred compensation plans
of State and local governments and tax-exempt organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax contributions.
Subtitle B—Enhancing Fairness for Women
Sec. 221. Catchup contributions for individuals age 50 or over.
Sec. 222. Equitable treatment for contributions of employees to defined con-
tribution plans.
Sec. 223. Faster vesting of certain employer matching contributions.
Sec. 224. Simplify and update the minimum distribution rules.
Sec. 225. Clarification of tax treatment of division of section 457 plan benefits
upon divorce.
Sec. 226. Modification of safe harbor relief for hardship withdrawals from cash
or deferred arrangements.
Subtitle C—Increasing Portability for Participants
Sec. 231. Rollovers allowed among various types of plans.
Sec. 232. Rollovers of IRAs into workplace retirement plans.
Sec. 233. Rollovers of after-tax contributions.
Sec. 234. Hardship exception to 60-day rule.
Sec. 235. Treatment of forms of distribution.
Sec. 236. Rationalization of restrictions on distributions.
Sec. 237. Purchase of service credit in governmental defined benefit plans.
Sec. 238. Employers may disregard rollovers for purposes of cash-out amounts.
Sec. 239. Minimum distribution and inclusion requirements for section 457
plans.
Subtitle D—Strengthening Pension Security and Enforcement
Sec. 241. Repeal of 150 percent of current liability funding limit.
Sec. 242. Maximum contribution deduction rules modified and applied to all de-
fined benefit plans.
Sec. 243. Excise tax relief for sound pension funding.
Sec. 244. Excise tax on failure to provide notice by defined benefit plans sig-
nificantly reducing future benefit accruals.
Sec. 245. Treatment of multiemployer plans under section 415.
Subtitle E—Reducing Regulatory Burdens
Sec. 261. Modification of timing of plan valuations.
Sec. 262. ESOP dividends may be reinvested without loss of dividend deduc-
tion.
Sec. 263. Repeal of transition rule relating to certain highly compensated em-
ployees.
Sec. 264. Employees of tax-exempt entities.
Sec. 265. Clarification of treatment of employer-provided retirement advice.
Sec. 266. Reporting simplification.
Sec. 267. Improvement of employee plans compliance resolution system.
Sec. 268. Modification of exclusion for employer provided transit passes.
Sec. 269. Repeal of the multiple use test.
Sec. 270. Flexibility in nondiscrimination, coverage, and line of business rules.
Sec. 271. Extension to international organizations of moratorium on application
of certain nondiscrimination rules applicable to State and local
plans.
Sec. 272. Notice and consent period regarding distributions.
Subtitle F—Plan Amendments
Sec. 281. Provisions relating to plan amendments.
TITLE III—ESTATE TAX RELIEF
Subtitle A—Reductions of Estate and Gift Tax Rates
Sec. 301. Reductions of estate and gift tax rates.
Sec. 302. Sense of the Congress concerning repeal of the death tax.
Subtitle B—Unified Credit Replaced With Unified Exemption Amount
Sec. 311. Unified credit against estate and gift taxes replaced with unified ex-
emption amount.
Subtitle C—Modifications of Generation-Skipping Transfer Tax
Sec. 321. Deemed allocation of GST exemption to lifetime transfers to trusts;
retroactive allocations.
Sec. 322. Severing of trusts.
Sec. 323. Modification of certain valuation rules.
Sec. 324. Relief provisions.
Subtitle D—Conservation Easements
Sec. 331. Expansion of estate tax rule for conservation easements.
TITLE IV—TAX RELIEF FOR DISTRESSED COMMUNITIES AND
INDUSTRIES
Subtitle A—American Community Renewal Act of 2000
Sec. 401. Short title.
Sec. 402. Designation of and tax incentives for renewal communities.
Sec. 403. Extension of expensing of environmental remediation costs to renewal
communities.
Sec. 404. Extension of work opportunity tax credit for renewal communities.
Sec. 405. Conforming and clerical amendments.
Subtitle B—Timber Incentives
Sec. 411. Temporary suspension of maximum amount of amortizable reforest-
ation expenditures.
TITLE V—REAL ESTATE PROVISIONS
Subtitle A—Improvements in Low-Income Housing Credit
Sec. 501. Modification of State ceiling on low-income housing credit.
Sec. 502. Modification of criteria for allocating housing credits among projects.
Sec. 503. Additional responsibilities of housing credit agencies.
Sec. 504. Modifications to rules relating to basis of building which is eligible
for credit.
Sec. 505. Other modifications.
Sec. 506. Carryforward rules.
Sec. 507. Effective date.
Subtitle B—Private Activity Bond Volume Cap
Sec. 511. Acceleration of phase-in of increase in volume cap on private activity
bonds.
Subtitle C—Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations
Sec. 512. Exclusion from gross income for certain forgiven mortgage obliga-
tions.
TITLE I—SMALL BUSINESS
PROVISIONS
SEC. 101. DEDUCTION FOR 100 PERCENT OF HEALTH IN-
SURANCE COSTS OF SELF-EMPLOYED INDI-
VIDUALS.
(a) IN GENERAL.—Paragraph (1) of section 162(l)
is amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case
of an individual who is an employee within the
meaning of section 401(c)(1), there shall be allowed
as a deduction under this section an amount equal
to 100 percent of the amount paid during the tax-
able year for insurance which constitutes medical
care for the taxpayer and the taxpayer’s spouse and
dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) is
amended to read as follows: ‘‘Paragraph (1) shall not
apply to any taxpayer for any calendar month for which
the taxpayer participates in any subsidized health plan
maintained by any employer (other than an employer de-
scribed in section 401(c)(4)) of the taxpayer or the spouse
of the taxpayer.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 102. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) IN GENERAL.—Paragraph (1) of section 179(b)
(relating to dollar limitation) is amended to read as fol-
lows:
‘‘(1) DOLLAR LIMITATION.—The aggregate cost
which may be taken into account under subsection
(a) for any taxable year shall not exceed $30,000.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 103. INCREASED DEDUCTION FOR MEAL EXPENSES.
(a) IN GENERAL.—Paragraph (1) of section 274(n)
(relating to only 50 percent of meal and entertainment
expenses allowed as deduction) is amended by striking ‘‘50
percent’’ in the text and inserting ‘‘the allowable percent-
age’’.
(b) ALLOWABLE PERCENTAGES.—Subsection (n) of
section 274 is amended by redesignating paragraphs (2)
and (3) as paragraphs (3) and (4), respectively, and by
inserting after paragraph (1) the following new paragraph:
‘‘(2) ALLOWABLE PERCENTAGE.—For purposes
of paragraph (1), the allowable percentage is—
‘‘(A) in the case of amounts for items de-
scribed in paragraph (1)(B), 50 percent, and
‘‘(B) in the case of expenses for food or
beverages, 60 percent (55 percent for taxable
years beginning during 2001).’’
(c) CONFORMING AMENDMENT.—The heading for
subsection (n) of section 274 is amended by striking ‘‘50
PERCENT’’ and inserting ‘‘LIMITED PERCENTAGES’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 104. INCREASED DEDUCTIBILITY OF BUSINESS MEAL
EXPENSES FOR INDIVIDUALS SUBJECT TO
FEDERAL LIMITATIONS ON HOURS OF SERV-
ICE.
(a) IN GENERAL.—Paragraph (4) of section 274(n)
(relating to limited percentages of meal and entertainment
expenses allowed as deduction), as redesignated by section
103, is amended to read as follows:
‘‘(4) SPECIAL RULE FOR INDIVIDUALS SUBJECT
TO FEDERAL HOURS OF SERVICE.—In the case of
any expenses for food or beverages consumed while
away from home (within the meaning of section
162(a)(2)) by an individual during, or incident to,
the period of duty subject to the hours of service
limitations of the Department of Transportation,
paragraph (2)(B) shall be applied by substituting
‘80 percent’ for the percentage otherwise applicable
under paragraph (2)(B).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 2000.
SEC. 105. INCOME AVERAGING FOR FARMERS AND FISHER-
MEN NOT TO INCREASE ALTERNATIVE MIN-
IMUM TAX LIABILITY.
(a) IN GENERAL.—Section 55(c) (defining regular
tax) is amended by redesignating paragraph (2) as para-
graph (3) and by inserting after paragraph (1) the fol-
lowing:
‘‘(2) COORDINATION WITH INCOME AVERAGING
FOR
FARMERS
AND
FISHERMEN.—Solely for pur-
poses of this section, section 1301 (relating to aver-
aging of farm and fishing income) shall not apply in
computing the regular tax.’’.
(b) ALLOWING INCOME AVERAGING
FOR FISHER-
MEN.—
(1) IN GENERAL.—Section 1301(a) is amended
by striking ‘‘farming business’’ and inserting ‘‘farm-
ing business or fishing business,’’.
(2) DEFINITION OF ELECTED FARM INCOME.—
(A) IN
GENERAL.—Clause (i) of section
1301(b)(1)(A) is amended by inserting ‘‘or fish-
ing business’’ before the semicolon.
(B) CONFORMING AMENDMENT.—Subpara-
graph (B) of section 1301(b)(1) is amended by
inserting ‘‘or fishing business’’ after ‘‘farming
business’’ both places it occurs.
(3) DEFINITION OF FISHING BUSINESS.—Sec-
tion 1301(b) is amended by adding at the end the
following new paragraph:
‘‘(4) FISHING
BUSINESS.—The term ‘fishing
business’ means the conduct of commercial fishing
as defined in section 3 of the Magnuson-Stevens
Fishery Conservation and Management Act (16
U.S.C. 1802).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 106. REPEAL OF OCCUPATIONAL TAXES RELATING TO
DISTILLED SPIRITS, WINE, AND BEER.
(a) REPEAL OF OCCUPATIONAL TAXES.—
(1) IN GENERAL.—The following provisions of
part II of subchapter A of chapter 51 of the Internal
Revenue Code of 1986 (relating to occupational
taxes) are hereby repealed:
(A) Subpart A (relating to proprietors of
distilled spirits plants, bonded wine cellars,
etc.).
(B) Subpart B (relating to brewer).
(C) Subpart D (relating to wholesale deal-
ers) (other than sections 5114 and 5116).
(D) Subpart E (relating to retail dealers)
(other than section 5124).
(E) Subpart G (relating to general provi-
sions) (other than sections 5142, 5143, 5145,
and 5146).
(2) NONBEVERAGE
DOMESTIC
DRAWBACK.—
Section 5131 is amended by striking ‘‘, on payment
of a special tax per annum,’’.
(3) INDUSTRIAL USE OF DISTILLED SPIRITS.—
Section 5276 is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1)(A) The heading for part II of subchapter A
of chapter 51 and the table of subparts for such
part are amended to read as follows:
‘‘PART II—MISCELLANEOUS PROVISIONS
‘‘Subpart A. Manufacturers of stills.
‘‘Subpart B. Nonbeverage domestic drawback claimants.
‘‘Subpart C. Recordkeeping by dealers.
‘‘Subpart D. Other provisions.’’
(B) The table of parts for such subchapter A
is amended by striking the item relating to part II
and inserting the following new item:
‘‘Part II. Miscellaneous provisions.’’
(2) Subpart C of part II of such subchapter
(relating to manufacturers of stills) is redesignated
as subpart A.
(3)(A) Subpart F of such part II (relating to
nonbeverage domestic drawback claimants) is redes-
ignated as subpart B and sections 5131 through
5134 are redesignated as sections 5111 through
5114, respectively.
(B) The table of sections for such subpart B,
as so redesignated, is amended—
(i) by redesignating the items relating to
sections 5131 through 5134 as relating to sec-
tions 5111 through 5114, respectively, and
(ii) by striking ‘‘and rate of tax’’ in the
item relating to section 5111, as so redesig-
nated.
(C) Section 5111, as redesignated by subpara-
graph (A), is amended—
(i) by striking ‘‘AND RATE OF TAX’’ in
the section heading,
(ii) by striking ‘‘(a) ELIGIBILITY
FOR
DRAWBACK.—’’, and
(iii) by striking subsection (b).
(4) Part II of subchapter A of chapter 51 is
amended by adding after subpart B, as redesignated
by paragraph (3), the following new subpart:
‘‘Subpart C—Recordkeeping by Dealers
‘‘Sec. 5121. Recordkeeping by wholesale dealers.
‘‘Sec. 5122. Recordkeeping by retail dealers.
‘‘Sec. 5123. Preservation and inspection of records, and entry of
premises for inspection.’’
(5)(A) Section 5114 (relating to records) is
moved to subpart C of such part II and inserted
after the table of sections for such subpart.
(B) Section 5114 is amended—
(i) by striking the section heading and in-
serting the following new heading:
‘‘SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.’’,
and
(ii) by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b)
the following new subsection:
‘‘(c) WHOLESALE DEALERS.—For purposes of this
part—
‘‘(1) WHOLESALE DEALER IN LIQUORS.—The
term ‘wholesale dealer in liquors’ means any dealer
(other than a wholesale dealer in beer) who sells, or
offers for sale, distilled spirits, wines, or beer, to an-
other dealer.
‘‘(2) WHOLESALE DEALER IN BEER.—The term
‘wholesale dealer in beer’ means any dealer who
sells, or offers for sale, beer, but not distilled spirits
or wines, to another dealer.
‘‘(3) DEALER.—The term ‘dealer’ means any
person who sells, or offers for sale, any distilled spir-
its, wines, or beer.
‘‘(4) PRESUMPTION IN CASE OF SALE OF 20
WINE GALLONS OR MORE.—The sale, or offer for
sale, of distilled spirits, wines, or beer, in quantities
of 20 wine gallons or more to the same person at
the same time, shall be presumptive evidence that
the person making such sale, or offer for sale, is en-
gaged in or carrying on the business of a wholesale
dealer in liquors or a wholesale dealer in beer, as the
case may be. Such presumption may be overcome by
evidence satisfactorily showing that such sale, or
offer for sale, was made to a person other than a
dealer.’’
(C) Paragraph (3) of section 5121(d), as so re-
designated, is amended by striking ‘‘section 5146’’
and inserting ‘‘section 5123’’.
(6)(A) Section 5124 (relating to records) is
moved to subpart C of part II of subchapter A of
chapter 51 and inserted after section 5121.
(B) Section 5124 is amended—
(i) by striking the section heading and in-
serting the following new heading:
‘‘SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.’’,
(ii) by striking ‘‘section 5146’’ in sub-
section (c) and inserting ‘‘section 5123’’, and
(iii) by redesignating subsection (c) as sub-
section (d) and inserting after subsection (b)
the following new subsection:
‘‘(c) RETAIL
DEALERS.—For purposes of this
section—
‘‘(1) RETAIL DEALER IN LIQUORS.—The term
‘retail dealer in liquors’ means any dealer (other
than a retail dealer in beer) who sells, or offers for
sale, distilled spirits, wines, or beer, to any person
other than a dealer.
‘‘(2) RETAIL DEALER IN BEER.—The term ‘re-
tail dealer in beer’ means any dealer who sells, or of-
fers for sale, beer, but not distilled spirits or wines,
to any person other than a dealer.
‘‘(3) DEALER.—The term ‘dealer’ has the
meaning given such term by section 5121(c)(3).’’
(7) Section 5146 is moved to subpart C of part
II of subchapter A of chapter 51, inserted after sec-
tion 5122, and redesignated as section 5123.
(8) Part II of subchapter A of chapter 51 is
amended by inserting after subpart C the following
new subpart:
‘‘Subpart D. Other Provisions
‘‘Sec. 5131. Packaging distilled spirits for industrial uses.
‘‘Sec. 5132. Prohibited purchases by dealers.’’
(9) Section 5116 is moved to subpart D of part
II of subchapter A of chapter 51, inserted after the
table of sections, redesignated as section 5131, and
amended by inserting ‘‘(as defined in section
5121(c))’’ after ‘‘dealer’’ in subsection (a).
(10) Subpart D of part II of subchapter A of
chapter 51 is amended by adding at the end thereof
the following new section:
‘‘SEC. 5132. PROHIBITED PURCHASES BY DEALERS.
‘‘(a) IN GENERAL.—Except as provided in regula-
tions prescribed by the Secretary, it shall be unlawful for
a dealer to purchase distilled spirits from any person other
than a wholesale dealer in liquors who is required to keep
the records prescribed by section 5121.
‘‘(b) PENALTY AND FORFEITURE.—
‘‘For penalty and forfeiture provisions applicable
to violations of subsection (a), see sections 5687 and
7302.’’
(11) Subsection (b) of section 5002 is
amended—
(A) by striking ‘‘section 5112(a)’’ and in-
serting ‘‘section 5121(c)(3)’’,
(B) by striking ‘‘section 5112’’ and insert-
ing ‘‘section 5121(c)’’,
(C) by striking ‘‘section 5122’’ and insert-
ing ‘‘section 5122(c)’’.
(12) Subparagraph (A) of section 5010(c)(2) is
amended by striking ‘‘section 5134’’ and inserting
‘‘section 5114’’.
(13) Subsection (d) of section 5052 is amended
to read as follows:
‘‘(d) BREWER.—For purposes of this chapter, the
term ‘brewer’ means any person who brews beer or pro-
duces beer for sale. Such term shall not include any person
who produces only beer exempt from tax under section
5053(e).’’
(14) The text of section 5182 is amended to
read as follows:
‘‘For 
provisions 
requiring 
recordkeeping 
by
wholesale liquor dealers, see section 5112, and by
retail liquor dealers, see section 5122.’’
(15) Subsection (b) of section 5402 is amended
by striking ‘‘section 5092’’ and inserting ‘‘section
5052(d)’’.
(16) Section 5671 is amended by striking ‘‘or
5091’’.
(17)(A) Part V of subchapter J of chapter 51
is hereby repealed.
(B) The table of parts for such subchapter J is
amended by striking the item relating to part V.
(18)(A) Sections 5142, 5143, and 5145 are
moved to subchapter D of chapter 52, inserted after
section 5731, redesignated as sections 5732, 5733,
and 5734, respectively, and amended—
(i) by striking ‘‘this part’’ each place it ap-
pears and inserting ‘‘this subchapter’’, and
(ii) by striking ‘‘this subpart’’ in section
5732(c)(2) (as so redesignated) and inserting
‘‘this subchapter’’.
(B) Section 5732, as redesignated by subpara-
graph (A), is amended by striking ‘‘(except the tax
imposed by section 5131)’’ each place it appears.
(C) Subsection (c) of section 5733, as redesig-
nated by subparagraph (A), is amended by striking
paragraph (2) and by redesignating paragraph (3)
as paragraph (2).
(D) The table of sections for subchapter D of
chapter 52 is amended by adding at the end thereof
the following:
‘‘Sec. 5732. Payment of tax.
‘‘Sec. 5733. Provisions relating to liability for occupational taxes.
‘‘Sec. 5734. Application of State laws.’’
(E) Section 5731 is amended by striking sub-
section (c) and by redesignating subsection (d) as
subsection (c).
(19) Subsection (c) of section 6071 is amended
by striking ‘‘section 5142’’ and inserting ‘‘section
5732’’.
(20) Paragraph (1) of section 7652(g) is
amended—
(A) by striking ‘‘subpart F’’ and inserting
‘‘subpart B’’, and
(B) by striking ‘‘section 5131(a)’’ and in-
serting ‘‘section 5111(a)’’.
(21) The table of sections for subchapter D of
chapter 51 is amended by striking the item relating
to section 5276.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on July 1, 2001, but shall
not apply to taxes imposed for periods before such date.
SEC. 107. REPEAL OF MODIFICATION OF INSTALLMENT
METHOD.
(a) IN GENERAL.—Subsection (a) of section 536 of
the Ticket to Work and Work Incentives Improvement Act
of 1999 (relating to modification of installment method
and repeal of installment method for accrual method tax-
payers) is repealed effective with respect to sales and other
dispositions occurring on or after the date of the enact-
ment of such Act.
(b) APPLICABILITY.—The Internal Revenue Code of
1986 shall be applied and administered as if that sub-
section (and the amendments made by that subsection)
had not been enacted.
TITLE II—PENSION PROVISIONS
Subtitle A—Expanding Coverage
SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIM-
ITS.
(a) DEFINED BENEFIT PLANS.—
(1) DOLLAR LIMIT.—
(A) Subparagraph (A) of section 415(b)(1)
(relating to limitation for defined benefit plans)
is amended by striking ‘‘$90,000’’ and inserting
‘‘$160,000’’.
(B) Subparagraphs (C) and (D) of section
415(b)(2) are each amended by striking
‘‘$90,000’’ each place it appears in the head-
ings and the text and inserting ‘‘$160,000’’.
(C) Paragraph (7) of section 415(b) (relat-
ing to benefits under certain collectively bar-
gained plans) is amended by striking ‘‘the
greater of $68,212 or one-half the amount oth-
erwise applicable for such year under paragraph
(1)(A) for ‘$90,000’ ’’ and inserting ‘‘one-half
the amount otherwise applicable for such year
under paragraph (1)(A) for ‘$160,000’ ’’.
(2) LIMIT
REDUCED
WHEN
BENEFIT
BEGINS
BEFORE
AGE
62.—Subparagraph (C) of section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 62’’.
(3) LIMIT INCREASED WHEN BENEFIT BEGINS
AFTER
AGE
65.—Subparagraph (D) of section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 65’’.
(4) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) by striking ‘‘$90,000’’ in paragraph
(1)(A) and inserting ‘‘$160,000’’, and
(B) in paragraph (3)(A)—
(i) by striking ‘‘$90,000’’ in the head-
ing and inserting ‘‘$160,000’’, and
(ii) by striking ‘‘October 1, 1986’’ and
inserting ‘‘July 1, 2000’’.
(5) 
CONFORMING
AMENDMENT.—Section
415(b)(2) is amended by striking subparagraph (F).
(b) DEFINED CONTRIBUTION PLANS.—
(1) DOLLAR LIMIT.—Subparagraph (A) of sec-
tion 415(c)(1) (relating to limitation for defined con-
tribution plans) is amended by striking ‘‘$30,000’’
and inserting ‘‘$40,000’’.
(2) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) by striking ‘‘$30,000’’ in paragraph
(1)(C) and inserting ‘‘$40,000’’, and
(B) in paragraph (3)(D)—
(i) by striking ‘‘$30,000’’ in the head-
ing and inserting ‘‘$40,000’’, and
(ii) by striking ‘‘October 1, 1993’’ and
inserting ‘‘July 1, 2000’’.
(c) QUALIFIED TRUSTS.—
(1) 
COMPENSATION
LIMIT.—Sections
401(a)(17), 404(l), 408(k), and 505(b)(7) are each
amended by striking ‘‘$150,000’’ each place it ap-
pears and inserting ‘‘$200,000’’.
(2) BASE PERIOD AND ROUNDING OF COST-OF-
LIVING ADJUSTMENT.—Subparagraph (B) of section
401(a)(17) is amended—
(A) by striking ‘‘October 1, 1993’’ and in-
serting ‘‘July 1, 2000’’, and
(B) by striking ‘‘$10,000’’ both places it
appears and inserting ‘‘$5,000’’.
(d) ELECTIVE DEFERRALS.—
(1) IN
GENERAL.—Paragraph (1) of section
402(g) (relating to limitation on exclusion for elec-
tive deferrals) is amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) LIMITATION.—Notwithstanding sub-
sections (e)(3) and (h)(1)(B), the elective defer-
rals of any individual for any taxable year shall
be included in such individual’s gross income to
the extent the amount of such deferrals for the
by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as para-
graphs (4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ‘‘402(g)(8)(A)(iii)’’ and in-
serting ‘‘402(g)(7)(A)(iii)’’.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph
(4) thereof)’’.
(e) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—
(1) IN GENERAL.—Section 457 (relating to de-
ferred compensation plans of State and local govern-
ments and tax-exempt organizations) is amended—
(A) in subsections (b)(2)(A) and (c)(1) by
striking ‘‘$7,500’’ each place it appears and in-
serting ‘‘the applicable dollar amount’’, and
(B) in subsection (b)(3)(A) by striking
‘‘$15,000’’ and inserting ‘‘twice the dollar
amount in effect under subsection (b)(2)(A)’’.
(2) APPLICABLE
DOLLAR
AMOUNT; COST-OF-
LIVING
ADJUSTMENT.—Paragraph (15) of section
457(e) is amended to read as follows:
‘‘(15) APPLICABLE DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—The applicable dollar
amount shall be the amount determined in ac-
cordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 .............................................................................
$11,000
2002 .............................................................................
$12,000
2003 .............................................................................
$13,000
2004 or thereafter ........................................................
$14,000.
‘‘(B) COST-OF-LIVING ADJUSTMENTS.—In
the case of taxable years beginning after De-
cember 31, 2004, the Secretary shall adjust the
$14,000 amount specified in the table in sub-
paragraph (A) at the same time and in the
same manner as under section 415(d), except
that the base period shall be the calendar quar-
ter beginning July 1, 2003, and any increase
under this paragraph which is not a multiple of
$500 shall be rounded to the next lowest mul-
tiple of $500.’’.
(f ) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Clause 
(ii) 
of 
section
408(p)(2)(A) (relating to general rule for qualified
salary reduction arrangement) is amended by strik-
ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(2) APPLICABLE DOLLAR AMOUNT.—Subpara-
graph (E) of 408(p)(2) is amended to read as fol-
lows:
‘‘(E) APPLICABLE DOLLAR AMOUNT; COST-
OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 ..................................................................
$7,000
2002 ..................................................................
$8,000
2003 ..................................................................
$9,000
2004 or thereafter ............................................
$10,000.
‘‘(ii) COST-OF-LIVING ADJUSTMENT.—
In the case of a year beginning after De-
cember 31, 2004, the Secretary shall ad-
just the $10,000 amount under clause (i)
at the same time and in the same manner
as under section 415(d), except that the
base period taken into account shall be the
calendar quarter beginning July 1, 2003,
and any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Clause (I) of section 401(k)(11)(B)(i)
is amended by striking ‘‘$6,000’’ and inserting
‘‘the 
amount 
in 
effect 
under 
section
408(p)(2)(A)(ii)’’.
(B) Section 401(k)(11) is amended by
striking subparagraph (E).
(g) ROUNDING RULE RELATING TO DEFINED BEN-
EFIT PLANS
AND DEFINED CONTRIBUTION PLANS.—
Paragraph (4) of section 415(d) is amended to read as
follows:
‘‘(4) ROUNDING.—
‘‘(A) $160,000 AMOUNT.—Any increase
under subparagraph (A) of paragraph (1) which
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) $40,000 
AMOUNT.—Any increase
under subparagraph (C) of paragraph (1) which
is not a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART-
NERS, AND SOLE PROPRIETORS.
(a) AMENDMENT
TO 1986 CODE.—Subparagraph
(B) of section 4975(f )(6) (relating to exemptions not to
apply to certain transactions) is amended by adding at the
end the following new clause:
‘‘(iii) LOAN
EXCEPTION.—For pur-
poses of subparagraph (A)(i), the term
‘owner-employee’ shall only include a per-
son described in subclause (II) or (III) of
clause (i).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to loans made after December 31,
2000.
SEC. 203. MODIFICATION OF TOP-HEAVY RULES.
(a) SIMPLIFICATION OF DEFINITION OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defin-
ing key employee) is amended—
(A) by striking ‘‘or any of the 4 preceding
plan years’’ in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
‘‘(i) an officer of the employer having
an annual compensation greater than
$150,000,’’,
(C) by striking clause (ii) and redesig-
nating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively, and
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C).
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(b) MATCHING CONTRIBUTIONS TAKEN INTO AC-
COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—
Section 416(c)(2)(A) (relating to defined contribution
plans) is amended by adding at the end the following:
‘‘Employer matching contributions (as defined in section
401(m)(4)(A)) shall be taken into account for purposes
of this subparagraph.’’.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—
(1) IN
GENERAL.—Paragraph (3) of section
416(g) is amended to read as follows:
‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE-
FORE
DETERMINATION
DATE
TAKEN
INTO
AC-
COUNT.—
‘‘(A) IN
GENERAL.—For purposes of
determining—
‘‘(i) the present value of the cumu-
lative accrued benefit for any employee, or
‘‘(ii) the amount of the account of any
employee,
such present value or amount shall be increased
by the aggregate distributions made with re-
spect to such employee under the plan during
the 1-year period ending on the determination
date. The preceding sentence shall also apply to
distributions under a terminated plan which if
it had not been terminated would have been re-
quired to be included in an aggregation group.
‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV-
ICE
DISTRIBUTION.—In the case of any dis-
tribution made for a reason other than separa-
tion from service, death, or disability, subpara-
graph (A) shall be applied by substituting ‘5-
year period’ for ‘1-year period’.’’.
(2) BENEFITS NOT TAKEN INTO ACCOUNT.—
Subparagraph 
(E) 
of 
section 
416(g)(4) 
is
amended—
(A) by striking ‘‘LAST 5 YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’, and
(B) by striking ‘‘5-year period’’ and insert-
ing ‘‘1-year period’’.
(d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph
(4) of section 416(g) (relating to other special rules for
top-heavy plans) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING
ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION
REQUIREMENTS.—The
term ‘top-heavy plan’ shall not include a plan
which consists solely of—
‘‘(i) a cash or deferred arrangement
which meets the requirements of section
401(k)(12), and
‘‘(ii) matching contributions with re-
spect to which the requirements of section
401(m)(11) are met.
If, but for this subparagraph, a plan would be
treated as a top-heavy plan because it is a
member of an aggregation group which is a top-
heavy group, contributions under the plan may
be taken into account in determining whether
any other plan in the group meets the require-
ments of subsection (c)(2).’’.
(e) FROZEN PLAN EXEMPT FROM MINIMUM BEN-
EFIT
REQUIREMENT.—Subparagraph (C) of section
416(c)(1) (relating to defined benefit plans) is amended—
(A) by striking ‘‘clause (ii)’’ in clause (i)
and inserting ‘‘clause (ii) or (iii)’’, and
(B) by adding at the end the following:
‘‘(iii) 
EXCEPTION
FOR
FROZEN
PLAN.—For purposes of determining an
employee’s years of service with the em-
ployer, any service with the employer shall
be disregarded to the extent that such
service occurs during a plan year when the
plan benefits (within the meaning of sec-
tion 410(b)) no employee or former em-
ployee.’’.
(f ) ELIMINATION OF FAMILY ATTRIBUTION.—Sec-
tion 416(i)(1)(B) (defining 5-percent owner) is amended
by adding at the end the following new clause:
‘‘(iv) 
FAMILY
ATTRIBUTION
DIS-
REGARDED.—Solely for purposes of apply-
ing this paragraph (and not for purposes
of any provision of this title which incor-
porates by reference the definition of a key
employee or 5-percent owner under this
paragraph), section 318 shall be applied
without regard to subsection (a)(1) thereof
in determining whether any person is a 5-
percent owner.’’.
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIM-
ITS.
(a) IN GENERAL.—Section 404 (relating to deduction
for contributions of an employer to an employees’ trust
or annuity plan and compensation under a deferred pay-
ment plan) is amended by adding at the end the following
new subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective
deferrals (as defined in section 402(g)(3)) shall not be
subject to any limitation contained in paragraph (3), (7),
or (9) of subsection (a), and such elective deferrals shall
not be taken into account in applying any such limitation
to any other contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (re-
lating to deferred compensation plans of State and local
governments and tax-exempt organizations), as amended
by section 211, is amended to read as follows:
‘‘(c) LIMITATION.—The maximum amount of the
compensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed the amount in effect under subsection (b)(2)(A) (as
modified by any adjustment provided under subsection
(b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 2000.
SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The
Secretary of the Treasury or the Secretary’s delegate shall
not require payment of user fees under the program estab-
lished under section 7527 of the Internal Revenue Code
of 1986 for requests to the Internal Revenue Service for
determination letters with respect to the qualified status
of a pension benefit plan maintained solely by one or more
eligible employers or any trust which is part of the plan.
The preceding sentence shall not apply to any request—
(1) made after the 5th plan year the pension
benefit plan is in existence, or
(2) made by the sponsor of any prototype or
similar plan which the sponsor intends to market to
participating employers.
(b) PENSION BENEFIT PLAN.—For purposes of this
section, the term ‘‘pension benefit plan’’ means a pension,
profit-sharing, stock bonus, annuity, or employee stock
ownership plan.
(c) ELIGIBLE EMPLOYER.—For purposes of this sec-
tion, the term ‘‘eligible employer’’ has the same meaning
given such term in section 408(p)(2)(C)(i)(I) of the Inter-
nal Revenue Code of 1986. The determination of whether
an employer is an eligible employer under this section shall
be made as of the date of the request described in sub-
section (a).
(d) EFFECTIVE DATE.—The provisions of this sec-
tion shall apply with respect to requests made after De-
cember 31, 2000.
SEC. 207. DEDUCTION LIMITS.
(a) IN GENERAL.—Section 404(a) (relating to gen-
eral rule) is amended by adding at the end the following:
‘‘(12) DEFINITION
OF
COMPENSATION.—For
purposes of paragraphs (3), (7), (8), and (9), the
term ‘compensation’ shall include amounts treated
as participant’s compensation under subparagraph
(C) or (D) of section 415(c)(3).’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B)
of section 404(a)(3) is amended by striking the last sen-
tence thereof.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.)
is amended by inserting after section 402 the following
new section:
‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS PLUS CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified plus contribution program—
‘‘(1) any designated plus contribution made by
an employee pursuant to the program shall be treat-
ed as an elective deferral for purposes of this chap-
ter, except that such contribution shall not be ex-
cludable from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by rea-
son of including such program.
‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified plus
contribution program’ means a program under which
an employee may elect to make designated plus con-
tributions in lieu of all or a portion of elective defer-
rals the employee is otherwise eligible to make under
the applicable retirement plan.
‘‘(2) SEPARATE
ACCOUNTING
REQUIRED.—A
program shall not be treated as a qualified plus con-
tribution program unless the applicable retirement
plan—
‘‘(A) establishes separate accounts (‘des-
ignated plus accounts’) for the designated plus
contributions of each employee and any earn-
ings properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping
with respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED PLUS CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) DESIGNATED PLUS CONTRIBUTION.—The
term ‘designated plus contribution’ means any elec-
tive deferral which—
‘‘(A) is excludable from gross income of an
employee without regard to this section, and
‘‘(B) the employee designates (at such time
and in such manner as the Secretary may pre-
scribe) as not being so excludable.
‘‘(2) DESIGNATION
LIMITS.—The amount of
elective deferrals which an employee may designate
under paragraph (1) shall not exceed the excess (if
any) of—
‘‘(A) the maximum amount of elective de-
ferrals excludable from gross income of the em-
ployee for the taxable year (without regard to
this section), over
‘‘(B) the aggregate amount of elective de-
ferrals of the employee for the taxable year
which the employee does not designate under
paragraph (1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN
GENERAL.—A rollover contribu-
tion of any payment or distribution from a des-
ignated plus account which is otherwise allow-
able under this chapter may be made only if the
contribution is to—
‘‘(i) another designated plus account
of the individual from whose account the
payment or distribution was made, or
‘‘(ii) a Roth IRA of such individual.
‘‘(B) COORDINATION
WITH
LIMIT.—Any
rollover contribution to a designated plus ac-
count under subparagraph (A) shall not be
taken into account for purposes of paragraph
(1).
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) EXCLUSION.—Any qualified distribution
from a designated plus account shall not be includ-
ible in gross income.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ has the meaning given such term
by section 408A(d)(2)(A) (without regard to
clause (iv) thereof).
‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU-
SION PERIOD.—A payment or distribution from
a designated plus account shall not be treated
as a qualified distribution if such payment or
distribution is made within the 5-taxable-year
period beginning with the earlier of—
‘‘(i) the first taxable year for which
the individual made a designated plus con-
tribution to any designated plus account
established for such individual under the
same applicable retirement plan, or
‘‘(ii) if a rollover contribution was
made to such designated plus account from
a designated plus account previously estab-
lished for such individual under another
applicable retirement plan, the first taxable
year for which the individual made a des-
ignated plus contribution to such pre-
viously established account.
‘‘(C) DISTRIBUTIONS OF EXCESS DEFER-
RALS AND EARNINGS.—The term ‘qualified dis-
tribution’ shall not include any distribution of
any excess deferral under section 402(g)(2) and
any income on the excess deferral.
‘‘(3) AGGREGATION RULES.—Section 72 shall
be applied separately with respect to distributions
and payments from a designated plus account and
other distributions and payments from the plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) APPLICABLE
RETIREMENT
PLAN.—The
term ‘applicable retirement plan’ means—
‘‘(A) an employees’ trust described in sec-
tion 401(a) which is exempt from tax under
section 501(a), and
‘‘(B) a plan under which amounts are con-
tributed by an individual’s employer for an an-
nuity contract described in section 403(b).
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means any elective deferral described in
subparagraph (A) or (C) of section 402(g)(3).’’.
(b) EXCESS DEFERRALS.—Section 402(g) (relating
to limitation on exclusion for elective deferrals) is
amended—
(1) by adding at the end of paragraph (1) the
following new sentence: ‘‘The preceding sentence
shall not apply to so much of such excess as does
not exceed the designated plus contributions of the
individual for the taxable year.’’, and
(2) by inserting ‘‘(or would be included but for
the last sentence thereof)’’ after ‘‘paragraph (1)’’ in
paragraph (2)(A).
(c) ROLLOVERS.—Subparagraph (B) of section
402(c)(8) is amended by adding at the end the following:
‘‘If any portion of an eligible rollover distribu-
tion is attributable to payments or distributions
from a designated plus account (as defined in
section 402A), an eligible retirement plan with
respect to such portion shall include only an-
other designated plus account and a Roth
IRA.’’.
(d) REPORTING REQUIREMENTS.—
(1) W–2 INFORMATION.—Section 6051(a)(8) is
amended by inserting ‘‘, including the amount of
designated plus contributions (as defined in section
402A)’’ before the comma at the end.
(2) INFORMATION.—Section 6047 is amended
by redesignating subsection (f ) as subsection (g)
and by inserting after subsection (e) the following
new subsection:
‘‘(f ) DESIGNATED PLUS CONTRIBUTIONS.—The Sec-
retary shall require the plan administrator of each applica-
ble retirement plan (as defined in section 402A) to make
such returns and reports regarding designated plus con-
tributions (as so defined) to the Secretary, participants
and beneficiaries of the plan, and such other persons as
the Secretary may prescribe.’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 408A(e) is amended by adding after
the first sentence the following new sentence: ‘‘Such
term includes a rollover contribution described in
section 402A(c)(3)(A).’’.
(2) The table of sections for subpart A of part
I of subchapter D of chapter 1 is amended by insert-
ing after the item relating to section 402 the fol-
lowing new item:
‘‘Sec. 402A. Optional treatment of elective deferrals as plus con-
tributions.’’.
(f ) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
Subtitle B—Enhancing Fairness for
Women
SEC. 221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS
AGE 50 OR OVER.
(a) IN GENERAL.—Section 414 (relating to defini-
tions and special rules) is amended by adding at the end
the following new subsection:
‘‘(v) CATCHUP CONTRIBUTIONS
FOR INDIVIDUALS
AGE 50 OR OVER.—
‘‘(1) IN
GENERAL.—An applicable employer
plan shall not be treated as failing to meet any re-
quirement of this title solely because the plan per-
mits an eligible participant to make additional elec-
tive deferrals in any plan year.
‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL
DEFERRALS.—
‘‘(A) IN GENERAL.—A plan shall not per-
mit additional elective deferrals under para-
graph (1) for any year in an amount greater
than the lesser of—
‘‘(i) the applicable percentage of the
applicable dollar amount for such elective
deferrals for such year, or
‘‘(ii) the excess (if any) of—
‘‘(I) the participant’s compensa-
tion for the year, over
‘‘(II) any other elective deferrals
of the participant for such year which
are made without regard to this sub-
section.
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of this paragraph, the applicable per-
centage shall be determined in accordance with
the following table:
‘‘For taxable years
The applicable
beginning in:
percentage is:
2001 .........................................................................................
10 percent
2002 .........................................................................................
20 percent
2003 .........................................................................................
30 percent
2004 and thereafter .................................................................
40 percent.
‘‘(3) TREATMENT OF CONTRIBUTIONS.—In the
case of any contribution to a plan under paragraph
(1)—
‘‘(A) such contribution shall not, with re-
spect to the year in which the contribution is
made—
‘‘(i) be subject to any otherwise appli-
cable 
limitation 
contained 
in 
section
402(g), 402(h), 403(b), 404(a), 404(h),
408, 415, or 457, or
‘‘(ii) be taken into account in applying
such limitations to other contributions or
benefits under such plan or any other such
plan, and
‘‘(B) such plan shall not be treated as fail-
ing to meet the requirements of section
401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11),
401(k)(12), 
401(m), 
403(b)(12), 
408(k),
408(p), 408B, 410(b), or 416 by reason of the
making of (or the right to make) such contribu-
tion.
‘‘(4) ELIGIBLE PARTICIPANT.—For purposes of
this subsection, the term ‘eligible participant’ means,
with respect to any plan year, a participant in a
plan—
‘‘(A) who has attained the age of 50 before
the close of the plan year, and
‘‘(B) with respect to whom no other elec-
tive deferrals may (without regard to this sub-
section) be made to the plan for the plan year
by reason of the application of any limitation or
other restriction described in paragraph (3) or
contained in the terms of the plan.
‘‘(5) OTHER
DEFINITIONS
AND
RULES.—For
purposes of this subsection—
‘‘(A) APPLICABLE DOLLAR AMOUNT.—The
term ‘applicable dollar amount’ means, with re-
spect to any year, the amount in effect under
section 
402(g)(1)(B), 
408(p)(2)(E)(i), 
or
457(e)(15)(A), whichever is applicable to an ap-
plicable employer plan, for such year.
‘‘(B) APPLICABLE EMPLOYER PLAN.—The
term ‘applicable employer plan’ means—
‘‘(i) an employees’ trust described in
section 401(a) which is exempt from tax
under section 501(a),
‘‘(ii) a plan under which amounts are
contributed by an individual’s employer for
an annuity contract described in section
403(b),
‘‘(iii) an eligible deferred compensa-
tion plan under section 457 of an eligible
employer 
as 
defined 
in 
section
457(e)(1)(A), and
‘‘(iv) an arrangement meeting the re-
quirements of section 408 (k) or (p).
‘‘(C) ELECTIVE
DEFERRAL.—The term
‘elective deferral’ has the meaning given such
term by subsection (u)(2)(C).
‘‘(D) 
EXCEPTION
FOR
SECTION
457
PLANS.—This subsection shall not apply to an
applicable employer plan described in subpara-
graph (B)(iii) for any year to which section
457(b)(3) applies.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to contributions in taxable years
beginning after December 31, 2000.
SEC. 222. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) EQUITABLE TREATMENT.—
(1) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined con-
tribution plans) is amended by striking ‘‘25 percent’’
and inserting ‘‘100 percent’’.
(2) APPLICATION TO SECTION 403(b).—Section
403(b) is amended—
(A) by striking ‘‘the exclusion allowance
for such taxable year’’ in paragraph (1) and in-
serting ‘‘the applicable limit under section
415’’,
(B) by striking paragraph (2), and
(C) by inserting ‘‘or any amount received
by a former employee after the 5th taxable year
following the taxable year in which such em-
ployee was terminated’’ before the period at the
end of the second sentence of paragraph (3).
(3) CONFORMING AMENDMENTS.—
(A) Subsection (f ) of section 72 is amend-
ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and
inserting ‘‘section 403(b)(2)(D)(iii), as in effect
before the enactment of the Small Business Tax
Fairness Act of 2000)’’.
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under sec-
tion 403(b)(2),’’.
(C) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allow-
ance as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by add-
ing at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case
of an annuity contract described in section
403(b), the term ‘participant’s compensation’
means the participant’s includible compensation
determined under section 403(b)(3).’’.
(E) Section 415(c) is amended by striking
paragraph (4).
(F) Section 415(c)(7) is amended to read
as follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of this subsection, at the elec-
tion of a participant who is an employee of a
church or a convention or association of church-
es, including an organization described in sec-
tion 414(e)(3)(B)(ii), contributions and other
additions for an annuity contract or retirement
income account described in section 403(b) with
respect to such participant, when expressed as
an annual addition to such participant’s ac-
count, shall be treated as not exceeding the lim-
itation of paragraph (1) if such annual addition
is not in excess of $10,000.
‘‘(B) $40,000 AGGREGATE LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
count for purposes of this subparagraph for all
years may not exceed $40,000.
‘‘(C) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph
(2).’’.
(G) Subparagraph (B) of section 402(g)(7)
(as redesignated by section 211) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect before the enactment of
the Small Business Tax Fairness Act of
2000)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
(b) SPECIAL RULES
FOR SECTIONS 403(b) AND
408.—
(1) IN
GENERAL.—Subsection (k) of section
415 is amended by adding at the end the following
new paragraph:
‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND
408.—For purposes of this section, any annuity con-
tract described in section 403(b) for the benefit of
a participant shall be treated as a defined contribu-
tion plan maintained by each employer with respect
to which the participant has the control required
under subsection (b) or (c) of section 414 (as modi-
fied by subsection (h)). For purposes of this section,
any contribution by an employer to a simplified em-
ployee pension plan for an individual for a taxable
year shall be treated as an employer contribution to
a defined contribution plan for such individual for
such year.’’.
(2) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to limitation years
beginning after December 31, 1999.
(B) EXCLUSION
ALLOWANCE.—Effective
for limitation years beginning in 2000, in the
case of any annuity contract described in sec-
tion 403(b) of the Internal Revenue Code of
1986, the amount of the contribution disquali-
fied by reason of section 415(g) of such Code
shall reduce the exclusion allowance as provided
in section 403(b)(2) of such Code.
(3) MODIFICATION OF 403(b) EXCLUSION AL-
LOWANCE TO CONFORM TO 415 MODIFICATION.—The
Secretary of the Treasury shall modify the regula-
tions regarding the exclusion allowance under section
403(b)(2) of the Internal Revenue Code of 1986 to
render void the requirement that contributions to a
defined benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion al-
lowance. For taxable years beginning after Decem-
ber 31, 1999, such regulations shall be applied as if
such requirement were void.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible
deferred compensation plans) is amended by striking
‘‘331⁄3 percent’’ and inserting ‘‘100 percent’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to years beginning
after December 31, 2000.
SEC. 
223. 
FASTER 
VESTING 
OF 
CERTAIN 
EMPLOYER
MATCHING CONTRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Section 411(a)
(relating to minimum vesting standards) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’, and
(2) by adding at the end the following:
‘‘(12) FASTER VESTING FOR MATCHING CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
6 ...............................................................................................
100.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to contributions for plan years beginning
after December 31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to one or
more collective bargaining agreements between em-
ployee representatives and one or more employers
ratified by the date of the enactment of this Act, the
amendments made by this section shall not apply to
contributions on behalf of employees covered by any
such agreement for plan years beginning before the
earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements termi-
nates (determined without regard to any
extension thereof on or after such date of
the enactment), or
(ii) January 1, 2001, or
(B) January 1, 2005.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this
section apply.
SEC. 224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU-
TION RULES.
(a) SIMPLIFICATION
AND FINALIZATION
OF MIN-
IMUM DISTRIBUTION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall—
(A) simplify and finalize the regulations re-
lating to minimum distribution requirements
under sections 401(a)(9), 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2) of the Internal Rev-
enue Code of 1986, and
(B) modify such regulations to—
(i) reflect current life expectancy, and
(ii) revise the required distribution
methods so that, under reasonable assump-
tions, the amount of the required minimum
distribution does not decrease over a par-
ticipant’s life expectancy.
(2) FRESH START.—Notwithstanding subpara-
graph (D) of section 401(a)(9) of such Code, during
the first year that regulations are in effect under
this subsection, required distributions for future
years may be redetermined to reflect changes under
such regulations. Such redetermination shall include
the opportunity to choose a new designated bene-
ficiary and to elect a new method of calculating life
expectancy.
(3) EFFECTIVE
DATE
FOR
REGULATIONS.—
Regulations referred to in paragraph (1) shall be ef-
fective for years beginning after December 31, 2000,
and shall apply in such years without regard to
whether an individual had previously begun receiving
minimum distributions.
(b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD
BEGUN BEFORE DEATH OCCURS.—
(1) IN GENERAL.—Subparagraph (B) of section
401(a)(9) is amended by striking clause (i) and re-
designating clauses (ii), (iii), and (iv) as clauses (i),
(ii), and (iii), respectively.
(2) CONFORMING CHANGES.—
(A) Clause (i) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘FOR OTHER CASES’’ in
the heading, and
(ii) by striking ‘‘the distribution of the
employee’s interest has begun in accord-
ance with subparagraph (A)(ii)’’ and in-
serting ‘‘his entire interest has been dis-
tributed to him,’’.
(B) Clause (ii) of section 401(a)(9)(B) (as
so redesignated) is amended by striking ‘‘clause
(ii)’’ and inserting ‘‘clause (i)’’.
(C) Clause (iii) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’,
(ii) by striking ‘‘clause (iii)(III)’’ in
subclause 
(I) 
and 
inserting 
‘‘clause
(ii)(III)’’,
(iii) by striking ‘‘the date on which
the employee would have attained the age
701⁄2,’’ in subclause (I) and inserting
‘‘April 1 of the calendar year following the
calendar year in which the spouse attains
701⁄2,’’, and
(iv) by striking ‘‘the distributions to
such spouse begin,’’ in subclause (II) and
inserting ‘‘his entire interest has been dis-
tributed to him,’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
(c) REDUCTION IN EXCISE TAX.—
(1) IN
GENERAL.—Subsection (a) of section
4974 is amended by striking ‘‘50 percent’’ and in-
serting ‘‘10 percent’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to years beginning
after December 31, 2000.
SEC. 225. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended—
(1) by inserting ‘‘or an eligible deferred com-
pensation plan (within the meaning of section
457(b))’’ after ‘‘subsection (e))’’, and
(2) in the heading, by striking ‘‘GOVERN-
MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER-
TAIN OTHER PLANS’’.
(b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE-
MENTS.—Paragraph (10) of section 414(p) is amended by
striking ‘‘and section 409(d)’’ and inserting ‘‘section
409(d), and section 457(d)’’.
(c) TAX TREATMENT OF PAYMENTS FROM A SEC-
TION 457 PLAN.—Subsection (p) of section 414 is amend-
ed by redesignating paragraph (12) as paragraph (13) and
inserting after paragraph (11) the following new para-
graph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION 457 PLAN.—If a distribution or payment
from an eligible deferred compensation plan de-
scribed in section 457(b) is made pursuant to a
qualified domestic relations order, rules similar to
the rules of section 402(e)(1)(A) shall apply to such
distribution or payment.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers, distributions, and
payments made after December 31, 2000.
SEC. 226. MODIFICATION OF SAFE HARBOR RELIEF FOR
HARDSHIP WITHDRAWALS FROM CASH OR
DEFERRED ARRANGEMENTS.
(a) IN GENERAL.—The Secretary of the Treasury
shall revise the regulations relating to hardship distribu-
tions under section 401(k)(2)(B)(i)(IV) of the Internal
Revenue Code of 1986 to provide that the period an em-
ployee is prohibited from making elective and employee
contributions in order for a distribution to be deemed nec-
essary to satisfy financial need shall be equal to 6 months.
(b) EFFECTIVE
DATE.—The revised regulations
under subsection (a) shall apply to years beginning after
December 31, 2000.
Subtitle C—Increasing Portability
for Participants
SEC. 231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES
OF PLANS.
(a) ROLLOVERS
FROM
AND
TO
SECTION
457
PLANS.—
(1) ROLLOVERS FROM SECTION 457 PLANS.—
(A) IN GENERAL.—Section 457(e) (relat-
ing to other definitions and special rules) is
amended by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an
eligible deferred compensation plan established
and maintained by an employer described in
subsection (e)(1)(A), if—
‘‘(i) any portion of the balance to the
credit of an employee in such plan is paid
to such employee in an eligible rollover dis-
tribution (within the meaning of section
402(c)(4) without regard to subparagraph
(C) thereof),
‘‘(ii) the employee transfers any por-
tion of the property such employee receives
in such distribution to an eligible retire-
ment 
plan 
described 
in 
section
402(c)(8)(B), and
‘‘(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property distrib-
uted,
then such distribution (to the extent so trans-
ferred) shall not be includible in gross income
for the taxable year in which paid.
‘‘(B) CERTAIN
RULES
MADE
APPLICA-
BLE.—The rules of paragraphs (2) through (7)
(other than paragraph (4)(C)) and (9) of sec-
tion 402(c) and section 402(f ) shall apply for
purposes of subparagraph (A).
‘‘(C) REPORTING.—Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified re-
tirement 
plans 
(as 
defined 
in 
section
4974(c)).’’.
(B) DEFERRAL LIMIT DETERMINED WITH-
OUT REGARD TO ROLLOVER AMOUNTS.—Section
457(b)(2) (defining eligible deferred compensa-
tion plan) is amended by inserting ‘‘(other than
rollover amounts)’’ after ‘‘taxable year’’.
(C) DIRECT ROLLOVER.—Paragraph (1) of
section 457(d) is amended by striking ‘‘and’’ at
the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and in-
serting ‘‘, and’’, and by inserting after subpara-
graph (B) the following:
‘‘(C) in the case of a plan maintained by
an employer described in subsection (e)(1)(A),
the plan meets requirements similar to the re-
quirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trust-
ee transfer in accordance with section 401(a)(31)
shall not be includible in gross income for the tax-
able year of transfer.’’.
(D) WITHHOLDING.—
(i) Paragraph (12) of section 3401(a)
is amended by adding at the end the fol-
lowing:
‘‘(E) under or to an eligible deferred com-
pensation plan which, at the time of such pay-
ment, is a plan described in section 457(b)
maintained by an employer described in section
457(e)(1)(A); or’’.
(ii) Paragraph (3) of section 3405(c)
is amended to read as follows:
‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For
purposes of this subsection, the term ‘eligible roll-
over distribution’ has the meaning given such term
by section 402(f )(2)(A).’’.
(iii) LIABILITY FOR WITHHOLDING.—
Subparagraph (B) of section 3405(d)(2) is
amended by striking ‘‘or’’ at the end of
clause (ii), by striking the period at the
end of clause (iii) and inserting ‘‘, or’’, and
by adding at the end the following:
‘‘(iv) section 457(b).’’.
(2) ROLLOVERS TO SECTION 457 PLANS.—
(A) IN
GENERAL.—Section 402(c)(8)(B)
(defining eligible retirement plan) is amended
by striking ‘‘and’’ at the end of clause (iii), by
striking the period at the end of clause (iv) and
inserting ‘‘, and’’, and by inserting after clause
(iv) the following new clause:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) of an em-
ployer described in section 457(e)(1)(A).’’.
(B) 
SEPARATE
ACCOUNTING.—Section
402(c) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(11) SEPARATE ACCOUNTING.—Unless a plan
described in clause (v) of paragraph (8)(B) agrees to
separately account for amounts rolled into such plan
from eligible retirement plans not described in such
clause, the plan described in such clause may not ac-
cept transfers or rollovers from such retirement
plans.’’.
(C) 10 PERCENT ADDITIONAL TAX.—Sub-
section (t) of section 72 (relating to 10-percent
additional tax on early distributions from quali-
fied retirement plans) is amended by adding at
the end the following new paragraph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC-
TION 457 PLANS.—For purposes of this subsection,
a distribution from an eligible deferred compensation
plan (as defined in section 457(b)) of an employer
described in section 457(e)(1)(A) shall be treated as
a distribution from a qualified retirement plan de-
scribed in 4974(c)(1) to the extent that such dis-
tribution is attributable to an amount transferred to
an eligible deferred compensation plan from a quali-
fied 
retirement 
plan 
(as 
defined 
in 
section
4974(c)).’’.
(b) ALLOWANCE OF ROLLOVERS FROM AND TO 403
(b) PLANS.—
(1) 
ROLLOVERS
FROM
SECTION
403
(b)
PLANS.—Section 403(b)(8)(A)(ii) (relating to roll-
over amounts) is amended by striking ‘‘such dis-
tribution’’ and all that follows and inserting ‘‘such
distribution to an eligible retirement plan described
in section 402(c)(8)(B), and’’.
(2) ROLLOVERS TO SECTION 403 (b) PLANS.—
Section 402(c)(8)(B) (defining eligible retirement
plan), as amended by subsection (a), is amended by
striking ‘‘and’’ at the end of clause (iv), by striking
the period at the end of clause (v) and inserting ‘‘,
and’’, and by inserting after clause (v) the following
new clause:
‘‘(vi) an annuity contract described in
section 403(b).’’.
(c) EXPANDED EXPLANATION TO RECIPIENTS OF
ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section
402(f ) (relating to written explanation to recipients of dis-
tributions eligible for rollover treatment) 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 adding at the end the following new sub-
paragraph:
‘‘(E) of the provisions under which dis-
tributions from the eligible retirement plan re-
ceiving the distribution may be subject to re-
strictions and tax consequences which are dif-
ferent from those applicable to distributions
from the plan making such distribution.’’.
(d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat-
ing to rollover where spouse receives distribution after
death of employee) is amended by striking ‘‘; except that’’
and all that follows up to the end period.
(e) CONFORMING AMENDMENTS.—
(1) Section 72(o)(4) is amended by striking
‘‘and 
408(d)(3)’’ 
and 
inserting 
‘‘403(b)(8),
408(d)(3), and 457(e)(16)’’.
(2) Section 219(d)(2) is amended by striking
‘‘or 
408(d)(3)’’ 
and 
inserting 
‘‘408(d)(3), 
or
457(e)(16)’’.
(3) Section 401(a)(31)(B) is amended by strik-
ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),
403(b)(8), and 457(e)(16)’’.
(4) Subparagraph (A) of section 402(f )(2) is
amended by striking ‘‘or paragraph (4) of section
403(a)’’ and inserting ‘‘, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or
subparagraph (A) of section 457(e)(16)’’.
(5) Paragraph (1) of section 402(f ) is amended
by striking ‘‘from an eligible retirement plan’’.
(6) Subparagraphs (A) and (B) of section
402(f )(1) are amended by striking ‘‘another eligible
retirement plan’’ and inserting ‘‘an eligible retire-
ment plan’’.
(7) Subparagraph (B) of section 403(b)(8) is
amended to read as follows:
‘‘(B) CERTAIN
RULES
MADE
APPLICA-
BLE.—The rules of paragraphs (2) through (7)
and (9) of section 402(c) and section 402(f )
shall apply for purposes of subparagraph (A),
except that section 402(f ) shall be applied to
the payor in lieu of the plan administrator.’’.
(8) Section 408(a)(1) is amended by striking
‘‘or 403(b)(8)’’ and inserting ‘‘, 403(b)(8), or
457(e)(16)’’.
(9) Subparagraphs (A) and (B) of section
415(b)(2) are each amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(10) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(11) Section 4973(b)(1)(A) is amended by
striking ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(f ) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of any amendment made by
this section.
SEC. 232. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE-
MENT PLANS.
(a) IN GENERAL.—Subparagraph (A) of section
408(d)(3) (relating to rollover amounts) is amended by
adding ‘‘or’’ at the end of clause (i), by striking clauses
(ii) and (iii), and by adding at the end the following:
‘‘(ii) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for
the benefit of such individual not later
than the 60th day after the date on which
the payment or distribution is received, ex-
cept that the maximum amount which may
be paid into such plan may not exceed the
portion of the amount received which is in-
cludible in gross income (determined with-
out regard to this paragraph).
For purposes of clause (ii), the term ‘eligible re-
tirement plan’ means an eligible retirement plan
described in clause (iii), (iv), (v), or (vi) of sec-
tion 402(c)(8)(B).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘section 408(d)(3)(A)(ii)’’.
(2) Clause (i) of section 408(d)(3)(D) is amend-
ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)
or (ii)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of the amendments made by
this section.
SEC. 233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS.—Para-
graph (2) of section 402(c) (relating to maximum amount
which may be rolled over) is amended by adding at the
end the following: ‘‘The preceding sentence shall not apply
to such distribution to the extent—
‘‘(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust
which is part of a plan which is a defined con-
tribution plan and which agrees to separately
account for amounts so transferred, including
separately accounting for the portion of such
distribution which is includible in gross income
and the portion of such distribution which is
not so includible, or
‘‘(B) such portion is transferred to an eli-
gible retirement plan described in clause (i) or
(ii) of paragraph (8)(B).’’.
(b) OPTIONAL DIRECT TRANSFER
OF ELIGIBLE
ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec-
tion 401(a)(31) (relating to limitation) is amended by add-
ing at the end the following: ‘‘The preceding sentence shall
not apply to such distribution if the plan to which such
distribution is transferred—
‘‘(i) agrees to separately account for
amounts so transferred, including sepa-
rately accounting for the portion of such
distribution which is includible in gross in-
come and the portion of such distribution
which is not so includible, or
‘‘(ii) is an eligible retirement plan de-
scribed in clause (i) or (ii) of section
402(c)(8)(B).’’.
(c) RULES FOR APPLYING SECTION 72 TO IRAS.—
Paragraph (3) of section 408(d) (relating to special rules
for applying section 72) is amended by inserting at the
end the following:
‘‘(H) APPLICATION OF SECTION 72.—
‘‘(i) IN GENERAL.—If—
‘‘(I) a distribution is made from
an individual retirement plan, and
‘‘(II) a rollover contribution is
made to an eligible retirement plan
described in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all or
part of such distribution,
then, notwithstanding paragraph (2), the
rules of clause (ii) shall apply for purposes
of applying section 72.
‘‘(ii) APPLICABLE
RULES.—In the
case of a distribution described in clause
(i)—
‘‘(I) section 72 shall be applied
separately to such distribution,
‘‘(II) notwithstanding the pro
rata allocation of income on, and in-
vestment in, the contract to distribu-
tions under section 72, the portion of
such distribution rolled over to an eli-
gible retirement plan described in
clause (i) shall be treated as from in-
come on the contract (to the extent of
the aggregate income on the contract
from all individual retirement plans of
the distributee), and
‘‘(III) appropriate adjustments
shall be made in applying section 72
to other distributions in such taxable
year and subsequent taxable years.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after Decem-
ber 31, 2000.
SEC. 234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) EXEMPT TRUSTS.—Paragraph (3) of section
402(c) (relating to transfer must be made within 60 days
of receipt) is amended to read as follows:
‘‘(3) TRANSFER
MUST
BE
MADE
WITHIN
DAYS OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
after the 60th day following the day on which
the distributee received the property distrib-
uted.
‘‘(B) HARDSHIP
EXCEPTION.—The Sec-
retary may waive the 60-day requirement under
subparagraph (A) where the failure to waive
such requirement would be against equity or
good conscience, including casualty, disaster, or
other events beyond the reasonable control of
the individual subject to such requirement.’’.
(b) IRAS.—Paragraph (3) of section 408(d) (relating
to rollover contributions), as amended by section 233, is
amended by adding after subparagraph (H) the following
new subparagraph:
‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—
The Secretary may waive the 60-day require-
ment under subparagraphs (A) and (D) where
the failure to waive such requirement would be
against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to
such requirement.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
SEC. 235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—Paragraph (6) of section 411(d) (relating
to accrued benefit not to be decreased by amend-
ment) is amended by adding at the end the fol-
lowing:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) A defined contribution plan (in
this subparagraph referred to as the
‘transferee plan’) shall not be treated as
failing to meet the requirements of this
subsection merely because the transferee
plan does not provide some or all of the
forms of distribution previously available
under another defined contribution plan
(in this subparagraph referred to as the
‘transferor plan’) to the extent that—
‘‘(I) the forms of distribution
previously available under the trans-
feror plan applied to the account of a
participant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct trans-
fer rather than pursuant to a distribu-
tion from the transferor plan,
‘‘(II) the terms of both the trans-
feror plan and the transferee plan au-
thorize the transfer described in sub-
clause (I),
‘‘(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan,
‘‘(IV) the election described in
subclause (III) was made after the
participant or beneficiary received a
notice describing the consequences of
making the election,
‘‘(V) if the transferor plan pro-
vides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the
transfer is made with the consent of
the participant’s spouse (if any), and
such consent meets requirements simi-
lar to the requirements imposed by
section 417(a)(2), and
‘‘(VI) the transferee plan allows
the participant or beneficiary de-
scribed in clause (iii) to receive any
distribution to which the participant
or beneficiary is entitled under the
transferee plan in the form of a single
sum distribution.
‘‘(ii) Clause (i) shall apply to plan
mergers and other transactions having the
effect of a direct transfer, including con-
solidations of benefits attributable to dif-
ferent employers within a multiple em-
ployer plan.
‘‘(E) ELIMINATION OF FORM OF DISTRIBU-
TION.—Except to the extent provided in regula-
tions, a defined contribution plan shall not be
treated as failing to meet the requirements of
this section merely because of the elimination of
a form of distribution previously available there-
under. This subparagraph shall not apply to the
elimination of a form of distribution with re-
spect to any participant unless—
‘‘(i) a single sum payment is available
to such participant at the same time or
times as the form of distribution being
eliminated, and
‘‘(ii) such single sum payment is
based on the same or greater portion of
the participant’s account as the form of
distribution being eliminated.’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to years beginning
after December 31, 2000.
(b) REGULATIONS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—The last sentence of paragraph (6)(B) of
section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended to read as fol-
lows: ‘‘The Secretary shall by regulations provide
that this subparagraph shall not apply to any plan
amendment that does not adversely affect the rights
of participants in a material manner.’’.
(2) SECRETARY
DIRECTED.—Not later than
December 31, 2001, the Secretary of the Treasury
is directed to issue final regulations under section
411(d)(6) of the Internal Revenue Code of 1986, in-
cluding the regulations required by the amendments
made by this subsection. Such regulations shall
apply to plan years beginning after December 31,
2001, or such earlier date as is specified by the Sec-
retary of the Treasury.
SEC. 236. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) SECTION 401(k).—
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is
amended by striking ‘‘separation from service’’
and inserting ‘‘severance from employment’’.
(B) 
Subparagraph 
(A) 
of 
section
401(k)(10) (relating to distributions upon ter-
mination of plan or disposition of assets or sub-
sidiary) is amended to read as follows:
‘‘(A) IN GENERAL.—An event described in
this subparagraph is the termination of the
plan without establishment or maintenance of
another defined contribution plan (other than
an employee stock ownership plan as defined in
section 4975(e)(7)).’’.
(C) Section 401(k)(10) is amended—
(i) in subparagraph (B)—
(I) by striking ‘‘An event’’ in
clause (i) and inserting ‘‘A termi-
nation’’, and
(II) by striking ‘‘the event’’ in
clause (i) and inserting ‘‘the termi-
nation’’,
(ii) by striking subparagraph (C), and
(iii) by striking ‘‘OR DISPOSITION OF
ASSETS OR SUBSIDIARY’’ in the heading.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of
section 403(b) is amended by striking ‘‘SEPARA-
TION
FROM
SERVICE’’ and inserting ‘‘SEVER-
ANCE FROM EMPLOYMENT’’.
(3) SECTION
457.—Clause (ii) of section
457(d)(1)(A) is amended by striking ‘‘is separated
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
SEC. 237. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 is
amended by adding at the end the following new para-
graph:
‘‘(13) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’.
(b) 457 PLANS.—
(1) Subsection (e) of section 457 is amended by
adding after paragraph (16) the following new para-
graph:
‘‘(17) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’.
(2) Section 457(b)(2) is amended by striking
‘‘(other than rollover amounts)’’ and inserting
‘‘(other than rollover amounts and amounts received
in a transfer referred to in subsection (e)(17))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to trustee-to-trustee transfers after
December 31, 2000.
SEC. 238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) QUALIFIED PLANS.—Section 411(a)(11) (relating
to restrictions on certain mandatory distributions) is
amended by adding at the end the following:
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined with-
out regard to that portion of such benefit which
is attributable to rollover contributions (and
earnings allocable thereto). For purposes of this
subparagraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),
and 457(e)(16).’’.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS.—
Clause (i) of section 457(e)(9)(A) is amended by striking
‘‘such amount’’ and inserting ‘‘the portion of such amount
which is not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
SEC. 239. MINIMUM DISTRIBUTION AND INCLUSION RE-
QUIREMENTS FOR SECTION 457 PLANS.
(a) MINIMUM
DISTRIBUTION
REQUIREMENTS.—
Paragraph (2) of section 457(d) (relating to distribution
requirements) is amended to read as follows:
‘‘(2) 
MINIMUM
DISTRIBUTION
REQUIRE-
MENTS.—A plan meets the minimum distribution re-
quirements of this paragraph if such plan meets the
requirements of section 401(a)(9).’’.
(b) INCLUSION IN GROSS INCOME.—
(1) YEAR
OF
INCLUSION.—Subsection (a) of
section 457 (relating to year of inclusion in gross in-
come) is amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensa-
tion plan, and any income attributable to the
amounts so deferred, shall be includible in gross in-
come only for the taxable year in which such com-
pensation or other income—
‘‘(A) is paid to the participant or other
beneficiary, in the case of a plan of an eligible
employer described in subsection (e)(1)(A), and
‘‘(B) is paid or otherwise made available to
the participant or other beneficiary, in the case
of a plan of an eligible employer described in
subsection (e)(1)(B).
‘‘(2) 
SPECIAL
RULE
FOR
ROLLOVER
AMOUNTS.—To the extent provided in section
72(t)(9), section 72(t) shall apply to any amount in-
cludible in gross income under this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amend-
ed to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REA-
SON OF CERTAIN ELECTIONS, ETC.—In the case of
an eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(B)—’’.
(B) Section 457(d) is amended by adding
at the end the following new paragraph:
‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—
An eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(A) shall not be
treated as failing to meet the requirements of this
subsection solely by reason of making a distribution
described in subsection (e)(9)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
Subtitle D—Strengthening Pension
Security and Enforcement
SEC. 241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) AMENDMENT TO INTERNAL REVENUE CODE OF
1986.—Section 412(c)(7) (relating to full-funding limita-
tion) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the
applicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A)(i)(I), the applica-
ble percentage shall be determined in accord-
ance with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 .............................................................................
160
2002 .............................................................................
165
2003 .............................................................................
170.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 242. MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED AND APPLIED TO ALL DEFINED
BENEFIT PLANS.
(a) IN GENERAL.—Subparagraph (D) of section
404(a)(1) (relating to special rule in case of certain plans)
is amended to read as follows:
‘‘(D) SPECIAL RULE IN CASE OF CERTAIN
PLANS.—
‘‘(i) IN GENERAL.—In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deduct-
ible under the limitations of this paragraph
shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in sec-
tion 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974
were the last day of the plan year).
‘‘(ii) PLANS
WITH
LESS
THAN
100
PARTICIPANTS.—For purposes of this sub-
paragraph, in the case of a plan which has
less than 100 participants for the plan
year, termination liability shall not include
the liability attributable to benefit in-
creases for highly compensated employees
(as defined in section 414(q)) resulting
from a plan amendment which is made or
becomes effective, whichever is later, within
the last 2 years before the termination
date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of
determining whether a plan has more than
100 participants, all defined benefit plans
maintained by the same employer (or any
member of such employer’s controlled
group (within the meaning of section
412(l)(8)(C))) shall be treated as one plan,
but only employees of such member or em-
ployer shall be taken into account.
‘‘(iv) PLANS ESTABLISHED AND MAIN-
TAIN BY PROFESSIONAL SERVICE EMPLOY-
ERS.—Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the
Employee Retirement Income Security Act
of 1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of
section 4972(c) is amended to read as follows:
‘‘(6) EXCEPTIONS.—In determining the amount
of nondeductible contributions for any taxable year,
there shall not be taken into account so much of the
contributions to one or more defined contribution
plans which are not deductible when contributed
solely because of section 404(a)(7) as does not ex-
ceed the greater of—
‘‘(A) the amount of contributions not in
excess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued
(during the taxable year for which the contribu-
tions were made) to beneficiaries under the
plans, or
‘‘(B) the sum of—
‘‘(i) the amount of contributions de-
scribed in section 401(m)(4)(A), plus
‘‘(ii) the amount of contributions de-
scribed in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits
under section 404(a)(7) shall first be applied to
amounts contributed to a defined benefit plan and
then to amounts described in subparagraph (B).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 243. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(a) IN GENERAL.—Subsection (c) of section 4972
(relating to nondeductible contributions) is amended by
adding at the end the following new paragraph:
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
such year not to take into account any contributions
to a defined benefit plan except to the extent that
such contributions exceed the full-funding limitation
(as defined in section 412(c)(7), determined without
regard to subparagraph (A)(i)(I) thereof). For pur-
poses of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then
to amounts described in this paragraph. If an em-
ployer makes an election under this paragraph for a
taxable year, paragraph (6) shall not apply to such
employer for such taxable year.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 244. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY
REDUCING FUTURE BENEFIT ACCRUALS.
(a) AMENDMENT TO 1986 CODE.—Chapter 43 (relat-
ing to qualified pension, etc., plans) is amended by adding
at the end the following new section:
‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING
BENEFIT ACCRUALS TO SATISFY NOTICE RE-
QUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of any applicable pension plan to meet
the requirements of subsection (e) with respect to any ap-
plicable individual.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect
to any applicable individual shall be $100 for each
day in the noncompliance period with respect to such
failure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes
of this section, the term ‘noncompliance period’
means, with respect to any failure, the period begin-
ning on the date the failure first occurs and ending
on the date the failure is corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—In the case of failures that are
due to reasonable cause and not to willful neglect,
the tax imposed by subsection (a) for failures during
the taxable year of the employer (or, in the case of
a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000.
For purposes of the preceding sentence, all multiem-
ployer plans of which the same trust forms a part
shall be treated as one plan. For purposes of this
paragraph, if not all persons who are treated as a
single employer for purposes of this section have the
same taxable year, the taxable years taken into ac-
count shall be determined under principles similar to
the principles of section 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive rel-
ative to the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI-
CANTLY REDUCING BENEFIT ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended to provide for a significant reduc-
tion in the rate of future benefit accrual, the plan
administrator shall provide written notice to each
applicable individual (and to each employee organi-
zation representing applicable individuals).
‘‘(2) NOTICE.—The notice required by para-
graph (1) shall be written in a manner calculated to
be understood by the average plan participant and
shall provide sufficient information (as determined
in accordance with regulations prescribed by the
Secretary) to allow applicable individuals to under-
stand the effect of the plan amendment.
‘‘(3) TIMING OF NOTICE.—Except as provided
in regulations, the notice required by paragraph (1)
shall be provided within a reasonable time before the
effective date of the plan amendment.
‘‘(4) DESIGNEES.—Any notice under paragraph
(1) may be provided to a person designated, in writ-
ing, by the person to which it would otherwise be
provided.
‘‘(5) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to
meet the requirements of paragraph (1) merely be-
cause notice is provided before the adoption of the
plan amendment if no material modification of the
amendment occurs before the amendment is adopt-
ed.
‘‘(f ) APPLICABLE INDIVIDUAL; APPLICABLE PEN-
SION PLAN.—For purposes of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap-
plicable individual’ means, with respect to any plan
amendment—
‘‘(A) any participant in the plan, and
‘‘(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic relations
order 
(within 
the 
meaning 
of 
section
414(p)(1)(A)),
who may reasonably be expected to be affected by
such plan amendment.
‘‘(2) APPLICABLE
PENSION
PLAN.—The term
‘applicable pension plan’ means—
‘‘(A) any defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412,
which had 100 or more participants who had ac-
crued a benefit, or with respect to whom contribu-
tions were made, under the plan (whether or not
vested) as of the last day of the plan year preceding
the plan year in which the plan amendment becomes
effective. Such term shall not include a governmental
plan (within the meaning of section 414(d)) or a
church plan (within the meaning of section 414(e))
with respect to which the election provided by sec-
tion 410(d) has not been made.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 43 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this
Act.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986 (as added by the amendments made
by this section), a plan shall be treated as meeting
the requirements of such sections if it makes a good
faith effort to comply with such requirements.
(3) SPECIAL RULE.—The period for providing
any notice required by the amendments made by this
section shall not end before the date which is 3
months after the date of the enactment of this Act.
SEC. 245. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of sec-
tion 415(b) (relating to limitation for defined benefit
plans) is amended to read as follows:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case
of a governmental plan (as defined in section
414(d)) or a multiemployer plan (as defined in sec-
tion 414(f )), subparagraph (B) of paragraph (1)
shall not apply.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
Subtitle E—Reducing Regulatory
Burdens
SEC. 261. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) 
AMENDMENTS
TO
1986 
CODE.—Section
412(c)(9) (relating to annual valuation) is amended—
(1) by striking ‘‘For purposes’’ and inserting
the following:
‘‘(A) IN GENERAL.—For purposes’’, and
(2) by adding at the end the following:
‘‘(B) ELECTION
TO
USE
PRIOR
YEAR
VALUATION.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), if, for any plan year—
‘‘(I) an election is in effect under
this subparagraph with respect to a
plan, and
‘‘(II) the assets of the plan are
not less than 125 percent of the
plan’s current liability (as defined in
paragraph (7)(B)), determined as of
the valuation date for the preceding
plan year,
then this section shall be applied using the
information available as of such valuation
date.
‘‘(ii) EXCEPTIONS.—
‘‘(I) ACTUAL VALUATION EVERY
3 YEARS.—Clause (i) shall not apply
for more than 2 consecutive plan
years and valuation shall be under
subparagraph (A) with respect to any
plan year to which clause (i) does not
apply by reason of this subclause.
‘‘(II) REGULATIONS.—Clause (i)
shall not apply to the extent that
more frequent valuations are required
under the regulations under subpara-
graph (A).
‘‘(iii) 
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iv) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 262. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining
applicable dividends) is amended by striking ‘‘or’’ at the
end of clause (ii), by redesignating clause (iii) as clause
(iv), and by inserting after clause (ii) the following new
clause:
‘‘(iii) is, at the election of such par-
ticipants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 263. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) IN GENERAL.—Paragraph (4) of section 1114(c)
of the Tax Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 264. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury
shall modify Treasury Regulations section 1.410(b)–6(g)
to provide that employees of an organization described in
section 403(b)(1)(A)(i) of the Internal Revenue Code of
1986 who are eligible to make contributions under section
403(b) of such Code pursuant to a salary reduction agree-
ment may be treated as excludable with respect to a plan
under section 401 (k) or (m) of such Code that is provided
under the same general arrangement as a plan under such
section 401(k), if—
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to
participate in such section 401(k) plan or section
401(m) plan, and
(2) 95 percent of the employees who are not
employees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such plan under such section 401 (k) or (m).
100
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth
in section 1426(b) of the Small Business Job Protection
Act of 1996.
SEC. 265. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (re-
lating to exclusion from gross income) is amended by
striking ‘‘or’’ at the end of paragraph (5), by striking the
period at the end of paragraph (6) and inserting ‘‘, or’’,
and by adding at the end the following new paragraph:
‘‘(7) qualified retirement planning services.’’.
(b) QUALIFIED RETIREMENT PLANNING SERVICES
DEFINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
‘‘(m) QUALIFIED RETIREMENT PLANNING SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified retirement planning serv-
ices’ means any retirement planning service provided
to an employee and his spouse by an employer main-
taining a qualified employer plan.
‘‘(2) NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
101
employees only if such services are available on sub-
stantially the same terms to each member of the
group of employees normally provided education and
information regarding the employer’s qualified em-
ployer plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur-
poses of this subsection, the term ‘qualified employer
plan’ means a plan, contract, pension, or account de-
scribed in section 219(g)(5).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 266. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual
returns with respect to one-participant retirement
plans to ensure that such plans with assets of
$250,000 or less as of the close of the plan year
need not file a return for that year.
(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan that—
102
(A) on the first day of the plan year—
(i) covered only the employer (and the
employer’s spouse) and the employer
owned the entire business (whether or not
incorporated), or
(ii) covered only one or more partners
(and their spouses) in a business partner-
ship (including partners in an S or C cor-
poration),
(B) meets the minimum coverage require-
ments of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any
other plan of the business that covers the em-
ployees of the business,
(C) does not provide benefits to anyone ex-
cept the employer (and the employer’s spouse)
or the partners (and their spouses),
(D) does not cover a business that is a
member of an affiliated service group, a con-
trolled group of corporations, or a group of
businesses under common control, and
(E) does not cover a business that leases
employees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
103
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of a retirement plan which covers less than 25 employees
on the first day of the plan year and meets the require-
ments described in subparagraphs (B), (D), and (E) of
subsection (a)(2), the Secretary of the Treasury shall pro-
vide for the filing of a simplified annual return that is
substantially similar to the annual return required to be
filed by a one-participant retirement plan.
(c) EFFECTIVE DATE.—The provisions of this section
shall take effect on January 1, 2001.
SEC. 267. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to up-
date and improve the Employee Plans Compliance Resolu-
tion System (or any successor program) giving special at-
tention to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program,
(2) taking into account special concerns and
circumstances that small employers face with respect
to compliance and correction of compliance failures,
104
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures,
(4) expanding the availability to correct insig-
nificant compliance failures under the Administra-
tive Policy Regarding Self-Correction during audit,
and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
SEC. 268. MODIFICATION OF EXCLUSION FOR EMPLOYER
PROVIDED TRANSIT PASSES.
(a) IN GENERAL.—Section 132(f )(3) (relating to
cash reimbursements) is amended by striking the last sen-
tence.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 269. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m)
is amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection
105
(k), including regulations permitting appropriate ag-
gregation of plans and contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
SEC. 270. FLEXIBILITY IN NONDISCRIMINATION, COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall, by regulation, provide that a plan shall be
deemed to satisfy the requirements of section
401(a)(4) of the Internal Revenue Code of 1986 if
such plan satisfies the facts and circumstances test
under section 401(a)(4) of such Code, as in effect
before January 1, 1994, but only if—
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test, and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies such
test.
Subparagraph (B) shall only apply to the extent pro-
vided by the Secretary.
(2) EFFECTIVE DATES.—
106
(A) REGULATIONS.—The regulation re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2000.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under paragraph (1)(A) shall not apply
before the first year beginning not less than
120 days after the date on which such condition
is prescribed.
(b) COVERAGE TEST.—
(1) IN GENERAL.—Section 410(b)(1) (relating
to minimum coverage requirements) is amended by
adding at the end the following:
‘‘(D) In the case that the plan fails to
meet the requirements of subparagraphs (A),
(B) and (C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
107
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’.
(2) EFFECTIVE DATES.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2000.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under regulations prescribed by the Sec-
retary under section 410(b)(1)(D) of the Inter-
nal Revenue Code of 1986 shall not apply be-
fore the first year beginning not less than 120
days after the date on which such condition is
prescribed.
(c) LINE OF BUSINESS RULES.—The Secretary of
the Treasury shall, on or before December 31, 2000, mod-
ify the existing regulations issued under section 414(r) of
the Internal Revenue Code of 1986 in order to expand
(to the extent that the Secretary determines appropriate)
the ability of a pension plan to demonstrate compliance
with the line of business requirements based upon the
facts and circumstances surrounding the design and oper-
ation of the plan, even though the plan is unable to satisfy
108
the mechanical tests currently used to determine compli-
ance.
SEC. 271. EXTENSION TO INTERNATIONAL ORGANIZATIONS
OF MORATORIUM ON APPLICATION OF CER-
TAIN NONDISCRIMINATION RULES APPLICA-
BLE TO STATE AND LOCAL PLANS.
(a) IN GENERAL.—Subparagraph (G) of section
401(a)(5), subparagraph (H) of section 401(a)(26), sub-
paragraph (G) of section 401(k)(3), and paragraph (2) of
section 1505(d) of the Taxpayer Relief Act of 1997 are
each amended by inserting ‘‘or by an international organi-
zation which is described in section 414(d)’’ after ‘‘or in-
strumentality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The headings for subparagraph (G) of sec-
tion 401(a)(5) and subparagraph (H) of section
401(a)(26) are each amended by inserting ‘‘AND
INTERNATIONAL
ORGANIZATION’’ after ‘‘GOVERN-
MENTAL’’.
(2) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘STATE AND LOCAL GOVERN-
MENTAL
AND
INTERNATIONAL
ORGANIZATION
PLANS.—’’ after ‘‘(G)’’.
109
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 272. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) AMENDMENT
TO
1986
CODE.—Subpara-
graph (A) of section 417(a)(6) is amended by strik-
ing ‘‘90-day’’ and inserting ‘‘180-day’’.
(2) MODIFICATION
OF
REGULATIONS.—The
Secretary of the Treasury shall modify the regula-
tions under sections 402(f), 411(a)(11), and 417 of
the Internal Revenue Code of 1986 to substitute
‘‘180 days’’ for ‘‘90 days’’ each place it appears in
Treasury Regulations sections 1.402(f)–1, 1.411(a)–
11(c), and 1.417(e)–1(b).
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 2000.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section
411(a)(11) of the Internal Revenue Code of 1986 to
110
provide that the description of a participant’s right,
if any, to defer receipt of a distribution shall also de-
scribe the consequences of failing to defer such re-
ceipt.
(2) EFFECTIVE DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 2000.
Subtitle F—Plan Amendments
SEC. 281. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan during the period described in subsection
(b)(2)(A), and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this title, or pursuant to any regulation issued
under this title, and
111
(B) on or before the last day of the first
plan year beginning on or after January 1,
2003.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986), this paragraph shall be applied by sub-
stituting ‘‘2005’’ for ‘‘2003’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(A) during the period—
(i) beginning on the date the legisla-
tive or regulatory amendment described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative or regulatory
amendment, the effective date specified by
the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date
the plan or contract amendment is adopt-
ed),
the plan or contract is operated as if such plan
or contract amendment were in effect, and
(B) such plan or contract amendment ap-
plies retroactively for such period.
112
TITLE III—ESTATE TAX RELIEF
Subtitle A—Reductions of Estate
and Gift Tax Rates
SEC. 301. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) MAXIMUM RATE OF TAX REDUCED TO 50 PER-
CENT.—
(1) IN GENERAL.—The table contained in sec-
tion 2001(c)(1) is amended by striking the two high-
est brackets and inserting the following:
‘‘Over $2,500,000 ..........................
$1,025,800, plus 50% of the excess
over $2,500,000.’’.
(2) PHASE-IN OF REDUCED RATE.—Subsection
(c) of section 2001 is amended by adding at the end
the following new paragraph:
‘‘(3) PHASE-IN
OF
REDUCED
RATE.—In the
case of decedents dying, and gifts made, during
2001, the last item in the table contained in para-
graph (1) shall be applied by substituting ‘53%’ for
‘50%’.’’.
(b) 
REPEAL
OF
PHASEOUT
OF
GRADUATED
RATES.—Subsection (c) of section 2001 is amended by
striking paragraph (2) and redesignating paragraph (3),
as added by subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS OF RATES OF TAX.—
Subsection (c) of section 2001, as so amended, is amended
by adding at the end the following new paragraph:
113
‘‘(3) PHASEDOWN OF TAX.—In the case of es-
tates of decedents dying, and gifts made, during any
calendar year after 2002—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (C), the tentative tax under this
subsection shall be determined by using a table
prescribed by the Secretary (in lieu of using the
table contained in paragraph (1)) which is the
same as such table; except that—
‘‘(i) each of the rates of tax shall be
reduced by the number of percentage
points determined under subparagraph
(B), and
‘‘(ii) the amounts setting forth the tax
shall be adjusted to the extent necessary to
reflect the adjustments under clause (i).
‘‘(B) PERCENTAGE
POINTS
OF
REDUC-
TION.—
The number of
‘‘For calendar year:
percentage points is:
2003 .............................................................................
1.0
2004 .............................................................................
2.0.
‘‘(C) TABLE FOR YEARS AFTER 2004.—The
table applicable under this subsection to estates
of decedents dying, and gifts made, during cal-
endar year 2004 shall apply to estates of dece-
114
dents dying, and gifts made, after calendar year
2004.
‘‘(D) COORDINATION
WITH
CREDIT
FOR
STATE
DEATH
TAXES.—Rules similar to the
rules of subparagraph (A) shall apply to the
table contained in section 2011(b) except that
the Secretary shall prescribe percentage point
reductions which maintain the proportionate re-
lationship (as in effect before any reduction
under this paragraph) between the credit under
section 2011 and the tax rates under subsection
(c).’’.
(d) EFFECTIVE DATES.—
(1) SUBSECTIONS
(a)
AND
(b).—The amend-
ments made by subsections (a) and (b) shall apply
to estates of decedents dying, and gifts made, after
December 31, 2000.
(2) SUBSECTION (c).—The amendment made by
subsection (c) shall apply to estates of decedents
dying, and gifts made, after December 31, 2002.
SEC. 302. SENSE OF THE CONGRESS CONCERNING REPEAL
OF THE DEATH TAX.
(a) FINDINGS.—Congress finds the following:
(1) The death tax stifles economic growth by
taking productive resources out of the private sector,
115
thereby causing unemployment and inhibiting job
creation.
(2) The death tax penalizes hard work and en-
trepreneurial activity by causing the demise of small,
family-owned businesses when an owner dies.
(3) The death tax rates in the United States
are the second highest among all industrialized na-
tions.
(4) The death tax prevents minorities from
gaining an economic foothold in the economy since
it limits the inter-generational transfer of wealth,
which is critical to establishing a legacy and power
base for minorities in our society.
(5) The death tax presents serious challenges
for farmers whose value is in their land, not liquid
assets, and who must sell land to pay the tax, there-
by jeopardizing the future existence of the already-
struggling family farm.
(6) The death tax contributes to the develop-
ment of rural areas by causing farms and ranches
to be sold and subdivided.
(7) Previous attempts by Congress to create
death tax exemptions have been ineffective due to an
inability to legislatively duplicate the complex family
relationships that exist in our society.
116
(8) Increasing entrepreneurship and investment
in retirement will bring a whole new class of people
under the death tax.
(b) SENSE OF CONGRESS.—It is the sense of Con-
gress that the death tax relief in this Act is considered
a first step in our effort to ultimately repeal this onerous
tax.
Subtitle 
B—Unified 
Credit 
Re-
placed With Unified Exemption
Amount
SEC. 311. UNIFIED CREDIT AGAINST ESTATE AND GIFT
TAXES REPLACED WITH UNIFIED EXEMPTION
AMOUNT.
(a) IN GENERAL.—
(1) ESTATE
TAX.—Subsection (b) of section
2001 (relating to computation of tax) is amended to
read as follows:
‘‘(b) COMPUTATION OF TAX.—
‘‘(1) IN GENERAL.—The tax imposed by this
section shall be the amount equal to the excess (if
any) of—
‘‘(A) the tentative tax determined under
paragraph (2), over
‘‘(B) the aggregate amount of tax which
would have been payable under chapter 12 with
117
respect to gifts made by the decedent after De-
cember 31, 1976, if the provisions of subsection
(c) (as in effect at the decedent’s death) had
been applicable at the time of such gifts.
‘‘(2) TENTATIVE TAX.—For purposes of para-
graph (1), the tentative tax determined under this
paragraph is a tax computed under subsection (c) on
the excess of—
‘‘(A) the sum of—
‘‘(i) the amount of the taxable estate,
and
‘‘(ii) the amount of the adjusted tax-
able gifts, over
‘‘(B) the exemption amount for the cal-
endar year in which the decedent died.
‘‘(3) EXEMPTION
AMOUNT.—For purposes of
paragraph (2), the term ‘exemption amount’ means
the amount determined in accordance with the fol-
lowing table:
‘‘In the case of
The exemption
calendar year:
amount is:
2001 ..................................................................................
$675,000
2002 and 2003 ..................................................................
$700,000
2004 ..................................................................................
$850,000
2005 ..................................................................................
$950,000
2006 or thereafter .............................................................
$1,000,000.
‘‘(4) ADJUSTED
TAXABLE
GIFTS.—For pur-
poses of paragraph (2), the term ‘adjusted taxable
gifts’ means the total amount of the taxable gifts
118
(within the meaning of section 2503) made by the
decedent after December 31, 1976, other than gifts
which are includible in the gross estate of the dece-
dent.’’
(2) GIFT TAX.—Subsection (a) of section 2502
(relating to computation of tax) is amended to read
as follows:
‘‘(a) COMPUTATION OF TAX.—
‘‘(1) IN GENERAL.—The tax imposed by section
2501 for each calendar year shall be the amount
equal to the excess (if any) of—
‘‘(A) the tentative tax determined under
paragraph (2), over
‘‘(B) the tax paid under this section for all
prior calendar periods.
‘‘(2) TENTATIVE TAX.—For purposes of para-
graph (1), the tentative tax determined under this
paragraph for a calendar year is a tax computed
under section 2001(c) on the excess of—
‘‘(A) the aggregate sum of the taxable gifts
for such calendar year and for each of the pre-
ceding calendar periods, over
‘‘(B) the exemption amount under section
2001(b)(3) for such calendar year.’’
(b) REPEAL OF UNIFIED CREDITS.—
119
(1) Section 2010 (relating to unified credit
against estate tax) is hereby repealed.
(2) Section 2505 (relating to unified credit
against gift tax) is hereby repealed.
(c) CONFORMING AMENDMENTS.—
(1)(A) Subsection (b) of section 2011 is
amended—
(i) by striking ‘‘adjusted’’ in the table, and
(ii) by striking the last sentence.
(B) Subsection (f ) of section 2011 is amended
by striking ‘‘, reduced by the amount of the unified
credit provided by section 2010’’.
(2) Subsection (a) of section 2012 is amended
by striking ‘‘and the unified credit provided by sec-
tion 2010’’.
(3) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2010,’’.
(4) Paragraph (2) of section 2014(b) is amend-
ed by striking ‘‘2010,’’.
(5) Clause (ii) of section 2056A(b)(12)(C) is
amended to read as follows:
‘‘(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of
the credit allowable under section 2010 (as
in effect on the day before the date of the
120
enactment of the Small Business Tax Fair-
ness Act of 2000) or the exemption
amount allowable under section 2001(b)
with respect to the decedent as a credit
under section 2505 (as so in effect) or ex-
emption under section 2521 (as the case
may be) allowable to such surviving spouse
for purposes of determining the amount of
the exemption allowable under section
2521 with respect to taxable gifts made by
the surviving spouse during the year in
which the spouse becomes a citizen or any
subsequent year,’’.
(6) Subsection (a) of section 2057 is amended
by striking paragraphs (2) and (3) and inserting the
following new paragraph:
‘‘(2) MAXIMUM DEDUCTION.—The deduction al-
lowed by this section shall not exceed the excess of
$1,300,000 over the exemption amount (as defined
in section 2001(b)(3)).’’
(7)(A) Subsection (b) of section 2101 is amend-
ed amended to read as follows:
‘‘(b) COMPUTATION OF TAX.—
121
‘‘(1) IN GENERAL.—The tax imposed by this
section shall be the amount equal to the excess (if
any) of—
‘‘(A) the tentative tax determined under
paragraph (2), over
‘‘(B) a tentative tax computed under sec-
tion 2001(c) on the amount of the adjusted tax-
able gifts.
‘‘(2) TENTATIVE TAX.—For purposes of para-
graph (1), the tentative tax determined under this
paragraph is a tax computed under section 2001(c)
on the excess of—
‘‘(A) the sum of—
‘‘(i) the amount of the taxable estate,
and
‘‘(ii) the amount of the adjusted tax-
able gifts, over
‘‘(B) the exemption amount for the cal-
endar year in which the decedent died.
‘‘(3) EXEMPTION AMOUNT.—
‘‘(A) IN GENERAL.—The term ‘exemption
amount’ means $60,000.
‘‘(B) RESIDENTS OF POSSESSIONS OF THE
UNITED
STATES.—In the case of a decedent
who is considered to be a nonresident not a cit-
122
izen of the United States under section 2209,
the exemption amount under this paragraph
shall be the greater of—
‘‘(i) $60,000, or
‘‘(ii) that proportion of $175,000
which the value of that part of the dece-
dent’s gross estate which at the time of his
death is situated in the United States
bears to the value of his entire gross estate
wherever situated.
‘‘(C) SPECIAL RULES.—
‘‘(i) 
COORDINATION
WITH
TREA-
TIES.—To the extent required under any
treaty obligation of the United States, the
exemption amount allowed under this para-
graph shall be equal to the amount which
bears the same ratio to the exemption
amount under section 2001(b)(3) (for the
calendar year in which the decedent died)
as the value of the part of the decedent’s
gross estate which at the time of his death
is situated in the United States bears to
the value of his entire gross estate wher-
ever situated. For purposes of the pre-
ceding sentence, property shall not be
123
treated as situated in the United States if
such property is exempt from the tax im-
posed by this subchapter under any treaty
obligation of the United States.
‘‘(ii) COORDINATION WITH GIFT TAX
EXEMPTION AND UNIFIED CREDIT.—If an
exemption has been allowed under section
2521 (or a credit has been allowed under
section 2505 as in effect on the day before
the date of the enactment of the Small
Business Tax Fairness Act of 2000) with
respect to any gift made by the decedent,
each dollar amount contained in subpara-
graph (A) or (B) or the exemption amount
applicable under clause (i) of this subpara-
graph (whichever applies) shall be reduced
by the exemption so allowed under 2521
(or, in the case of such a credit, by the
amount of the gift for which the credit was
so allowed).’’.
(8) Section 2102 is amended by striking sub-
section (c).
(9)(A) Subsection (a) of section 2107 is amend-
ed by adding at the end the following new para-
graph:
124
‘‘(3) LIMITATION
ON
EXEMPTION
AMOUNT.—
Subparagraphs (B) and (C) of section 2101(b)(3)
shall not apply in applying section 2101 for purposes
of this section.’’.
(B) 
Subsection 
(c) 
of 
section 
2107 
is
amended—
(i) by striking paragraph (1) and by
redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively, and
(ii) by striking the second sentence of
paragraph (2) (as so redesignated).
(10) Paragraph (1) of section 6018(a) is
amended by striking ‘‘the applicable exclusion
amount in effect under section 2010(c)’’ and insert-
ing 
‘‘the 
exemption 
amount 
under 
section
2001(b)(3)’’.
(11) Subparagraph (A) of section 6601( j)(2) is
amended to read as follows:
‘‘(A) the amount of the tentative tax which
would be determined under the rate schedule
set forth in section 2001(c) if the amount with
respect to which such tentative tax is to be
computed were $1,000,000, or’’.
125
(12) The table of sections for part II of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2010.
(20) The table of sections for subchapter A of
chapter 12 is amended by striking the item relating
to section 2505.
(13) The table of sections for subchapter C of
chapter 12 is amended by inserting before the item
relating to section 2522 the following new item:
‘‘Sec. 2521. Exemption.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section—
(1) insofar as they relate to the tax imposed by
chapter 11 of the Internal Revenue Code of 1986,
shall apply to estates of decedents dying after De-
cember 31, 2000, and
(2) insofar as they relate to the tax imposed by
chapter 12 of such Code, shall apply to gifts made
after December 31, 2000.
Subtitle C—Modifications of
Generation-skipping Transfer Tax
SEC. 321. DEEMED ALLOCATION OF GST EXEMPTION TO
LIFETIME TRANSFERS TO TRUSTS; RETRO-
ACTIVE ALLOCATIONS.
(a) IN GENERAL.—Section 2632 (relating to special
rules for allocation of GST exemption) is amended by re-
126
designating subsection (c) as subsection (e) and by insert-
ing after subsection (b) the following new subsections:
‘‘(c) DEEMED ALLOCATION TO CERTAIN LIFETIME
TRANSFERS TO GST TRUSTS.—
‘‘(1) IN GENERAL.—If any individual makes an
indirect skip during such individual’s lifetime, any
unused portion of such individual’s GST exemption
shall be allocated to the property transferred to the
extent necessary to make the inclusion ratio for such
property zero. If the amount of the indirect skip ex-
ceeds such unused portion, the entire unused portion
shall be allocated to the property transferred.
‘‘(2) UNUSED PORTION.—For purposes of para-
graph (1), the unused portion of an individual’s
GST exemption is that portion of such exemption
which has not previously been—
‘‘(A) allocated by such individual,
‘‘(B) treated as allocated under subsection
(b) with respect to a direct skip occurring dur-
ing or before the calendar year in which the in-
direct skip is made, or
‘‘(C) treated as allocated under paragraph
(1) with respect to a prior indirect skip.
‘‘(3) DEFINITIONS.—
127
‘‘(A) INDIRECT
SKIP.—For purposes of
this subsection, the term ‘indirect skip’ means
any transfer of property (other than a direct
skip) subject to the tax imposed by chapter 12
made to a GST trust.
‘‘(B) GST TRUST.—The term ‘GST trust’
means a trust that could have a generation-
skipping transfer with respect to the transferor
unless—
‘‘(i) the trust instrument provides that
more than 25 percent of the trust corpus
must be distributed to or may be with-
drawn by 1 or more individuals who are
non-skip persons—
‘‘(I) before the date that the indi-
vidual attains age 46,
‘‘(II) on or before one or more
dates specified in the trust instrument
that will occur before the date that
such individual attains age 46, or
‘‘(III) upon the occurrence of an
event that, in accordance with regula-
tions prescribed by the Secretary, may
reasonably be expected to occur before
128
the date that such individual attains
age 46;
‘‘(ii) the trust instrument provides
that more than 25 percent of the trust cor-
pus must be distributed to or may be with-
drawn by one or more individuals who are
non-skip persons and who are living on the
date of death of another person identified
in the instrument (by name or by class)
who is more than 10 years older than such
individuals;
‘‘(iii) the trust instrument provides
that, if one or more individuals who are
non-skip persons die on or before a date or
event described in clause (i) or (ii), more
than 25 percent of the trust corpus either
must be distributed to the estate or estates
of one or more of such individuals or is
subject to a general power of appointment
exercisable by one or more of such individ-
uals;
‘‘(iv) the trust is a trust any portion
of which would be included in the gross es-
tate of a non-skip person (other than the
129
transferor) if such person died immediately
after the transfer;
‘‘(v) the trust is a charitable lead an-
nuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
‘‘(vi) the trust is a trust with respect
to which a deduction was allowed under
section 2522 for the amount of an interest
in the form of the right to receive annual
payments of a fixed percentage of the net
fair market value of the trust property (de-
termined yearly) and which is required to
pay principal to a non-skip person if such
person is alive when the yearly payments
for which the deduction was allowed termi-
nate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to
be includible in the gross estate of a non-skip
person or subject to a right of withdrawal by
reason of such person holding a right to with-
draw so much of such property as does not ex-
130
ceed the amount referred to in section 2503(b)
with respect to any transferor, and it shall be
assumed that powers of appointment held by
non-skip persons will not be exercised.
‘‘(4) AUTOMATIC
ALLOCATIONS
TO
CERTAIN
GST TRUSTS.—For purposes of this subsection, an
indirect skip to which section 2642(f ) applies shall
be deemed to have been made only at the close of
the estate tax inclusion period. The fair market
value of such transfer shall be the fair market value
of the trust property at the close of the estate tax
inclusion period.
‘‘(5) APPLICABILITY AND EFFECT.—
‘‘(A) IN GENERAL.—An individual—
‘‘(i) may elect to have this subsection
not apply to—
‘‘(I) an indirect skip, or
‘‘(II) any or all transfers made
by such individual to a particular
trust, and
‘‘(ii) may elect to treat any trust as a
GST trust for purposes of this subsection
with respect to any or all transfers made
by such individual to such trust.
‘‘(B) ELECTIONS.—
131
‘‘(i) ELECTIONS
WITH
RESPECT
TO
INDIRECT SKIPS.—An election under sub-
paragraph (A)(i)(I) shall be deemed to be
timely if filed on a timely filed gift tax re-
turn for the calendar year in which the
transfer was made or deemed to have been
made pursuant to paragraph (4) or on
such later date or dates as may be pre-
scribed by the Secretary.
‘‘(ii) OTHER ELECTIONS.—An election
under clause (i)(II) or (ii) of subparagraph
(A) may be made on a timely filed gift tax
return for the calendar year for which the
election is to become effective.
‘‘(d) RETROACTIVE ALLOCATIONS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a non-skip person has an interest or
a future interest in a trust to which any trans-
fer has been made,
‘‘(B) such person—
‘‘(i) is a lineal descendant of a grand-
parent of the transferor or of a grand-
parent of the transferor’s spouse or former
spouse, and
132
‘‘(ii) is assigned to a generation below
the generation assignment of the trans-
feror, and
‘‘(C) such person predeceases the trans-
feror,
then the transferor may make an allocation of any
of such transferor’s unused GST exemption to any
previous transfer or transfers to the trust on a
chronological basis.
‘‘(2) SPECIAL RULES.—If the allocation under
paragraph (1) by the transferor is made on a gift
tax return filed on or before the date prescribed by
section 6075(b) for gifts made within the calendar
year within which the non-skip person’s death
occurred—
‘‘(A) the value of such transfer or trans-
fers for purposes of section 2642(a) shall be de-
termined as if such allocation had been made
on a timely filed gift tax return for each cal-
endar year within which each transfer was
made,
‘‘(B) such allocation shall be effective im-
mediately before such death, and
‘‘(C) the amount of the transferor’s un-
used GST exemption available to be allocated
133
shall be determined immediately before such
death.
‘‘(3) FUTURE INTEREST.—For purposes of this
subsection, a person has a future interest in a trust
if the trust may permit income or corpus to be paid
to such person on a date or dates in the future.’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 2632(b) is amended by striking ‘‘with respect to
a direct skip’’ and inserting ‘‘or subsection (c)(1)’’.
(c) EFFECTIVE DATES.—
(1) DEEMED ALLOCATION.—Section 2632(c) of
the Internal Revenue Code of 1986 (as added by
subsection (a)), and the amendment made by sub-
section (b), shall apply to transfers subject to chap-
ter 11 or 12 made after December 31, 1999, and to
estate tax inclusion periods ending after December
31, 1999.
(2) 
RETROACTIVE
ALLOCATIONS.—Section
2632(d) of the Internal Revenue Code of 1986 (as
added by subsection (a)) shall apply to deaths of
non-skip persons occurring after December 31,
1999.
134
SEC. 322. SEVERING OF TRUSTS.
(a) IN GENERAL.—Subsection (a) of section 2642
(relating to inclusion ratio) is amended by adding at the
end the following new paragraph:
‘‘(3) SEVERING OF TRUSTS.—
‘‘(A) IN GENERAL.—If a trust is severed in
a qualified severance, the trusts resulting from
such severance shall be treated as separate
trusts thereafter for purposes of this chapter.
‘‘(B) QUALIFIED
SEVERANCE.—For pur-
poses of subparagraph (A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied severance’ means the division of a sin-
gle trust and the creation (by any means
available under the governing instrument
or under local law) of two or more trusts
if—
‘‘(I) the single trust was divided
on a fractional basis, and
‘‘(II) the terms of the new trusts,
in the aggregate, provide for the same
succession of interests of beneficiaries
as are provided in the original trust.
‘‘(ii) TRUSTS WITH INCLUSION RATIO
GREATER THAN ZERO.—If a trust has an
inclusion ratio of greater than zero and
135
less than 1, a severance is a qualified sev-
erance only if the single trust is divided
into two trusts, one of which receives a
fractional share of the total value of all
trust assets equal to the applicable fraction
of the single trust immediately before the
severance. In such case, the trust receiving
such fractional share shall have an inclu-
sion ratio of zero and the other trust shall
have an inclusion ratio of 1.
‘‘(iii) 
REGULATIONS.—The 
term
‘qualified severance’ includes any other
severance permitted under regulations pre-
scribed by the Secretary.
‘‘(C) 
TIMING
AND
MANNER
OF
SEVERANCES.—A severance pursuant to this
paragraph may be made at any time. The Sec-
retary shall prescribe by forms or regulations
the manner in which the qualified severance
shall be reported to the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to severances after December 31,
1999.
136
SEC. 323. MODIFICATION OF CERTAIN VALUATION RULES.
(a) GIFTS FOR WHICH GIFT TAX RETURN FILED OR
DEEMED ALLOCATION MADE.—Paragraph (1) of section
2642(b) (relating to valuation rules, etc.) is amended to
read as follows:
‘‘(1) GIFTS
FOR
WHICH
GIFT
TAX
RETURN
FILED OR DEEMED ALLOCATION MADE.—If the allo-
cation of the GST exemption to any transfers of
property is made on a gift tax return filed on or be-
fore the date prescribed by section 6075(b) for such
transfer or is deemed to be made under section 2632
(b)(1) or (c)(1)—
‘‘(A) the value of such property for pur-
poses of subsection (a) shall be its value as fi-
nally determined for purposes of chapter 12
(within the meaning of section 2001(f )(2)), or,
in the case of an allocation deemed to have been
made at the close of an estate tax inclusion pe-
riod, its value at the time of the close of the es-
tate tax inclusion period, and
‘‘(B) such allocation shall be effective on
and after the date of such transfer, or, in the
case of an allocation deemed to have been made
at the close of an estate tax inclusion period, on
and after the close of such estate tax inclusion
period.’’.
137
(b) TRANSFERS AT DEATH.—Subparagraph (A) of
section 2642(b)(2) is amended to read as follows:
‘‘(A) TRANSFERS AT DEATH.—If property
is transferred as a result of the death of the
transferor, the value of such property for pur-
poses of subsection (a) shall be its value as fi-
nally determined for purposes of chapter 11; ex-
cept that, if the requirements prescribed by the
Secretary respecting allocation of post-death
changes in value are not met, the value of such
property shall be determined as of the time of
the distribution concerned.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers subject to chapter 11
or 12 of the Internal Revenue Code of 1986 made after
December 31, 1999.
SEC. 324. RELIEF PROVISIONS.
(a) IN GENERAL.—Section 2642 is amended by add-
ing at the end the following new subsection:
‘‘(g) RELIEF PROVISIONS.—
‘‘(1) RELIEF FOR LATE ELECTIONS.—
‘‘(A) IN GENERAL.—The Secretary shall by
regulation prescribe such circumstances and
procedures under which extensions of time will
be granted to make—
138
‘‘(i) an allocation of GST exemption
described in paragraph (1) or (2) of sub-
section (b), and
‘‘(ii) an election under subsection
(b)(3) or (c)(5) of section 2632.
Such regulations shall include procedures for
requesting comparable relief with respect to
transfers made before the date of the enactment
of this paragraph.
‘‘(B) BASIS
FOR
DETERMINATIONS.—In
determining whether to grant relief under this
paragraph, the Secretary shall take into ac-
count all relevant circumstances, including evi-
dence of intent contained in the trust instru-
ment or instrument of transfer and such other
factors as the Secretary deems relevant. For
purposes of determining whether to grant relief
under this paragraph, the time for making the
allocation (or election) shall be treated as if not
expressly prescribed by statute.
‘‘(2) SUBSTANTIAL
COMPLIANCE.—An alloca-
tion of GST exemption under section 2632 that
demonstrates an intent to have the lowest possible
inclusion ratio with respect to a transfer or a trust
shall be deemed to be an allocation of so much of
139
the transferor’s unused GST exemption as produces
the lowest possible inclusion ratio. In determining
whether there has been substantial compliance, all
relevant circumstances shall be taken into account,
including evidence of intent contained in the trust
instrument or instrument of transfer and such other
factors as the Secretary deems relevant.’’.
(b) EFFECTIVE DATES.—
(1) RELIEF
FOR
LATE
ELECTIONS.—Section
2642(g)(1) of the Internal Revenue Code of 1986
(as added by subsection (a)) shall apply to requests
pending on, or filed after, December 31, 1999.
(2) 
SUBSTANTIAL
COMPLIANCE.—Section
2642(g)(2) of such Code (as so added) shall take ef-
fect on the date of the enactment of this Act and
shall apply to transfers subject to chapter 11 or 12
of the Internal Revenue Code of 1986 made after
December 31, 1999.
Subtitle D—Conservation
Easements
SEC. 331. EXPANSION OF ESTATE TAX RULE FOR CON-
SERVATION EASEMENTS.
(a) WHERE LAND IS LOCATED.—
140
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
2031(c)(8)(A) (defining land subject to a conserva-
tion easement) is amended—
(A) by striking ‘‘25 miles’’ both places it
appears and inserting ‘‘50 miles’’, and
(B) striking ‘‘10 miles’’ and inserting ‘‘25
miles’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to estates of decedents
dying after December 31, 1999.
(b) CLARIFICATION
OF DATE
FOR DETERMINING
VALUE OF LAND AND EASEMENT.—
(1) IN GENERAL.—Section 2031(c)(2) (defining
applicable percentage) is amended by adding at the
end the following new sentence: ‘‘The values taken
into account under the preceding sentence shall be
such values as of the date of the contribution re-
ferred to in paragraph (8)(B).’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to estates of decedents
dying after December 31, 1997.
141
TITLE IV—TAX RELIEF FOR DIS-
TRESSED COMMUNITIES AND
INDUSTRIES
Subtitle A—American Community
Renewal Act of 2000
SEC. 401. SHORT TITLE.
This subtitle may be cited as the ‘‘American Commu-
nity Renewal Act of 2000’’.
SEC. 402. DESIGNATION OF AND TAX INCENTIVES FOR RE-
NEWAL COMMUNITIES.
(a) IN GENERAL.—Chapter 1 is amended by adding
at the end the following new subchapter:
‘‘Subchapter X—Renewal Communities
‘‘Part 
I. Designation.
‘‘Part II. Renewal community capital gain; renewal community
business.
‘‘Part III. Family development accounts.
‘‘Part
IV. Additional incentives.
‘‘PART I—DESIGNATION
‘‘Sec. 1400E. Designation of renewal communities.
‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
‘‘(a) DESIGNATION.—
‘‘(1) DEFINITIONS.—For purposes of this title,
the term ‘renewal community’ means any area—
‘‘(A) which is nominated by one or more
local governments and the State or States in
which it is located for designation as a renewal
142
community (hereinafter in this section referred
to as a ‘nominated area’); and
‘‘(B) which the Secretary of Housing and
Urban Development designates as a renewal
community, after consultation with—
‘‘(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury; the
Director of the Office of Management and
Budget; and the Administrator of the
Small Business Administration; and
‘‘(ii) in the case of an area on an In-
dian reservation, the Secretary of the Inte-
rior.
‘‘(2) NUMBER OF DESIGNATIONS.—
‘‘(A) IN
GENERAL.—The Secretary of
Housing and Urban Development may des-
ignate not more than 15 nominated areas as re-
newal communities.
‘‘(B) MINIMUM
DESIGNATION
IN
RURAL
AREAS.—Of the areas designated under para-
graph (1), at least 3 must be areas—
‘‘(i) which are within a local govern-
ment jurisdiction or jurisdictions with a
population of less than 50,000,
143
‘‘(ii) which are outside of a metropoli-
tan statistical area (within the meaning of
section 143(k)(2)(B)), or
‘‘(iii) which are determined by the
Secretary of Housing and Urban Develop-
ment, after consultation with the Secretary
of Commerce, to be rural areas.
‘‘(3) AREAS DESIGNATED BASED ON DEGREE
OF POVERTY, ETC.—
‘‘(A) IN GENERAL.—Except as otherwise
provided in this section, the nominated areas
designated as renewal communities under this
subsection shall be those nominated areas with
the highest average ranking with respect to the
criteria described in subparagraphs (B), (C),
and (D) of subsection (c)(3). For purposes of
the preceding sentence, an area shall be ranked
within each such criterion on the basis of the
amount by which the area exceeds such cri-
terion, with the area which exceeds such cri-
terion by the greatest amount given the highest
ranking.
‘‘(B) EXCEPTION
WHERE
INADEQUATE
COURSE OF ACTION, ETC.—An area shall not be
designated under subparagraph (A) if the Sec-
144
retary of Housing and Urban Development de-
termines that the course of action described in
subsection (d)(2) with respect to such area is
inadequate.
‘‘(C) PRIORITY FOR EMPOWERMENT ZONES
AND ENTERPRISE COMMUNITIES WITH RESPECT
TO FIRST 10 DESIGNATIONS.—With respect to
the first 10 designations made under this
section—
‘‘(i) all shall be chosen from nomi-
nated areas which are empowerment zones
or enterprise communities (and are other-
wise eligible for designation under this sec-
tion); and
‘‘(ii) two shall be areas described in
paragraph (2)(B).
‘‘(4) LIMITATION ON DESIGNATIONS.—
‘‘(A) PUBLICATION
OF
REGULATIONS.—
The Secretary of Housing and Urban Develop-
ment shall prescribe by regulation no later than
4 months after the date of the enactment of
this section, after consultation with the officials
described in paragraph (1)(B)—
‘‘(i) the procedures for nominating an
area under paragraph (1)(A);
145
‘‘(ii) the parameters relating to the
size and population characteristics of a re-
newal community; and
‘‘(iii) the manner in which nominated
areas will be evaluated based on the cri-
teria specified in subsection (d).
‘‘(B) TIME LIMITATIONS.—The Secretary
of Housing and Urban Development may des-
ignate nominated areas as renewal communities
only during the 36-month period beginning on
the first day of the first month following the
month in which the regulations described in
subparagraph (A) are prescribed.
‘‘(C) PROCEDURAL RULES.—The Secretary
of Housing and Urban Development shall not
make any designation of a nominated area as a
renewal 
community 
under 
paragraph 
(2)
unless—
‘‘(i) the local governments and the
States in which the nominated area is lo-
cated have the authority—
‘‘(I) to nominate such area for
designation as a renewal community;
146
‘‘(II) to make the State and local
commitments described in subsection
(d); and
‘‘(III) to provide assurances sat-
isfactory to the Secretary of Housing
and Urban Development that such
commitments will be fulfilled,
‘‘(ii) a nomination regarding such
area is submitted in such a manner and in
such form, and contains such information,
as the Secretary of Housing and Urban
Development shall by regulation prescribe;
and
‘‘(iii) the Secretary of Housing and
Urban Development determines that any
information furnished is reasonably accu-
rate.
‘‘(5) NOMINATION PROCESS FOR INDIAN RES-
ERVATIONS.—For purposes of this subchapter, in
the case of a nominated area on an Indian reserva-
tion, the reservation governing body (as determined
by the Secretary of the Interior) shall be treated as
being both the State and local governments with re-
spect to such area.
147
‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—
‘‘(1) IN GENERAL.—Any designation of an area
as a renewal community shall remain in effect dur-
ing the period beginning on the date of the designa-
tion and ending on the earliest of—
‘‘(A) December 31, 2007,
‘‘(B) the termination date designated by
the State and local governments in their nomi-
nation, or
‘‘(C) the date the Secretary of Housing
and Urban Development revokes such designa-
tion.
‘‘(2) REVOCATION OF DESIGNATION.—The Sec-
retary of Housing and Urban Development may re-
voke the designation under this section of an area if
such Secretary determines that the local government
or the State in which the area is located—
‘‘(A) has modified the boundaries of the
area, or
‘‘(B) is not complying substantially with,
or fails to make progress in achieving, the State
or local commitments, respectively, described in
subsection (d).
‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS.—
148
‘‘(1) IN GENERAL.—The Secretary of Housing
and Urban Development may designate a nominated
area as a renewal community under subsection (a)
only if the area meets the requirements of para-
graphs (2) and (3) of this subsection.
‘‘(2) AREA REQUIREMENTS.—A nominated area
meets the requirements of this paragraph if—
‘‘(A) the area is within the jurisdiction of
one or more local governments;
‘‘(B) the boundary of the area is contin-
uous; and
‘‘(C) the area—
‘‘(i) has a population, of at least—
‘‘(I) 4,000 if any portion of such
area (other than a rural area de-
scribed in subsection (a)(2)(B)(i)) is
located within a metropolitan statis-
tical area (within the meaning of sec-
tion 143(k)(2)(B)) which has a popu-
lation of 50,000 or greater; or
‘‘(II) 1,000 in any other case; or
‘‘(ii) is entirely within an Indian res-
ervation (as determined by the Secretary of
the Interior).
149
‘‘(3) ELIGIBILITY
REQUIREMENTS.—A nomi-
nated area meets the requirements of this paragraph
if the State and the local governments in which it
is located certify (and the Secretary of Housing and
Urban Development, after such review of supporting
data as he deems appropriate, accepts such certifi-
cation) that—
‘‘(A) the area is one of pervasive poverty,
unemployment, and general distress;
‘‘(B) the unemployment rate in the area,
as determined by the most recent available
data, was at least 11⁄2 times the national unem-
ployment rate for the period to which such data
relate;
‘‘(C) the poverty rate for each population
census tract within the nominated area is at
least 20 percent; and
‘‘(D) in the case of an urban area, at least
70 percent of the households living in the area
have incomes below 80 percent of the median
income of households within the jurisdiction of
the local government (determined in the same
manner as under section 119(b)(2) of the
Housing and Community Development Act of
1974).
150
‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF
CRIME.—The Secretary of Housing and Urban De-
velopment shall take into account, in selecting nomi-
nated areas for designation as renewal communities
under this section, the extent to which such areas
have a high incidence of crime.
‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI-
FIED
IN
GAO
STUDY.—The Secretary of Housing
and Urban Development shall take into account, in
selecting nominated areas for designation as renewal
communities under this section, if the area has cen-
sus tracts identified in the May 12, 1998, report of
the Government Accounting Office regarding the
identification of economically distressed areas.
‘‘(d) REQUIRED
STATE
AND
LOCAL
COMMIT-
MENTS.—
‘‘(1) IN GENERAL.—The Secretary of Housing
and Urban Development may designate any nomi-
nated area as a renewal community under subsection
(a) only if—
‘‘(A) the local government and the State in
which the area is located agree in writing that,
during any period during which the area is a
renewal community, such governments will fol-
low a specified course of action which meets the
151
requirements of paragraph (2) and is designed
to reduce the various burdens borne by employ-
ers or employees in such area; and
‘‘(B) the economic growth promotion re-
quirements of paragraph (3) are met.
‘‘(2) COURSE OF ACTION.—
‘‘(A) IN
GENERAL.—A course of action
meets the requirements of this paragraph if
such course of action is a written document,
signed by a State (or local government) and
neighborhood organizations, which evidences a
partnership between such State or government
and community-based organizations and which
commits each signatory to specific and measur-
able goals, actions, and timetables. Such course
of action shall include at least five of the fol-
lowing:
‘‘(i) A reduction of tax rates or fees
applying within the renewal community.
‘‘(ii) An increase in the level of effi-
ciency of local services within the renewal
community.
‘‘(iii) Crime reduction strategies, such
as crime prevention (including the provi-
152
sion of such services by nongovernmental
entities).
‘‘(iv) Actions to reduce, remove, sim-
plify, or streamline governmental require-
ments applying within the renewal commu-
nity.
‘‘(v) Involvement in the program by
private entities, organizations, neighbor-
hood 
organizations, 
and 
community
groups, particularly those in the renewal
community, including a commitment from
such private entities to provide jobs and
job training for, and technical, financial, or
other assistance to, employers, employees,
and residents from the renewal community.
‘‘(vi) State or local income tax bene-
fits for fees paid for services performed by
a nongovernmental entity which were for-
merly performed by a governmental entity.
‘‘(vii) The gift (or sale at below fair
market value) of surplus real property
(such as land, homes, and commercial or
industrial structures) in the renewal com-
munity to neighborhood organizations,
153
community development corporations, or
private companies.
‘‘(B) RECOGNITION OF PAST EFFORTS.—
For purposes of this section, in evaluating the
course of action agreed to by any State or local
government, the Secretary of Housing and
Urban Development shall take into account the
past efforts of such State or local government
in reducing the various burdens borne by em-
ployers and employees in the area involved.
‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE-
MENTS.—The economic growth promotion require-
ments of this paragraph are met with respect to a
nominated area if the local government and the
State in which such area is located certify in writing
that such government and State, respectively, have
repealed or otherwise will not enforce within the
area, if such area is designated as a renewal
community—
‘‘(A) licensing requirements for occupa-
tions that do not ordinarily require a profes-
sional degree;
‘‘(B) zoning restrictions on home-based
businesses which do not create a public nui-
sance;
154
‘‘(C) permit requirements for street ven-
dors who do not create a public nuisance;
‘‘(D) zoning or other restrictions that im-
pede the formation of schools or child care cen-
ters; and
‘‘(E) franchises or other restrictions on
competition for businesses providing public
services, including but not limited to taxicabs,
jitneys, cable television, or trash hauling,
except to the extent that such regulation of busi-
nesses and occupations is necessary for and well-tai-
lored to the protection of health and safety.
‘‘(e) COORDINATION WITH TREATMENT
OF EM-
POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—
For purposes of this title, if there are in effect with respect
to the same area both—
‘‘(1) a designation as a renewal community; and
‘‘(2) a designation as an empowerment zone or
enterprise community,
both of such designations shall be given full effect with
respect to such area.
‘‘(f ) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this subchapter—
‘‘(1) GOVERNMENTS.—If more than one govern-
ment seeks to nominate an area as a renewal com-
155
munity, any reference to, or requirement of, this sec-
tion shall apply to all such governments.
‘‘(2) STATE.—The term ‘State’ includes Puerto
Rico, the Virgin Islands of the United States, Guam,
American Samoa, the Northern Mariana Islands,
and any other possession of the United States.
‘‘(3) LOCAL
GOVERNMENT.—The term ‘local
government’ means—
‘‘(A) any county, city, town, township, par-
ish, village, or other general purpose political
subdivision of a State;
‘‘(B) any combination of political subdivi-
sions described in subparagraph (A) recognized
by the Secretary of Housing and Urban Devel-
opment; and
‘‘(C) the District of Columbia.
‘‘(4) APPLICATION
OF
RULES
RELATING
TO
CENSUS TRACTS AND CENSUS DATA.—The rules of
sections 1392(b)(4) and 1393(a)(9) shall apply.
‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;
RENEWAL COMMUNITY BUSINESS
‘‘Sec. 1400F. Renewal community capital gain.
‘‘Sec. 1400G. Renewal community business defined.
‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
‘‘(a) GENERAL RULE.—Gross income does not in-
clude any qualified capital gain recognized on the sale or
156
exchange of a qualified community asset held for more
than 5 years.
‘‘(b) QUALIFIED COMMUNITY ASSET.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘qualified com-
munity asset’ means—
‘‘(A) any qualified community stock;
‘‘(B) any qualified community partnership
interest; and
‘‘(C) any qualified community business
property.
‘‘(2) QUALIFIED COMMUNITY STOCK.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified commu-
nity stock’ means any stock in a domestic cor-
poration if—
‘‘(i) such stock is acquired by the tax-
payer after December 31, 2000, and before
January 1, 2008, at its original issue (di-
rectly or through an underwriter) from the
corporation solely in exchange for cash;
‘‘(ii) as of the time such stock was
issued, such corporation was a renewal
community business (or, in the case of a
new corporation, such corporation was
157
being organized for purposes of being a re-
newal community business); and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such stock,
such corporation qualified as a renewal
community business.
‘‘(B) REDEMPTIONS.—A rule similar to
the rule of section 1202(c)(3) shall apply for
purposes of this paragraph.
‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN-
TEREST.—The term ‘qualified community partner-
ship interest’ means any capital or profits interest in
a domestic partnership if—
‘‘(A) such interest is acquired by the tax-
payer after December 31, 2000, and before
January 1, 2008;
‘‘(B) as of the time such interest was ac-
quired, such partnership was a renewal commu-
nity business (or, in the case of a new partner-
ship, such partnership was being organized for
purposes of being a renewal community busi-
ness); and
‘‘(C) during substantially all of the
taxpayer’s holding period for such interest,
158
such partnership qualified as a renewal commu-
nity business.
A rule similar to the rule of paragraph (2)(B) shall
apply for purposes of this paragraph.
‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP-
ERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
community business property’ means tangible
property if—
‘‘(i) such property was acquired by
the taxpayer by purchase (as defined in
section 179(d)(2)) after December 31,
2000, and before January 1, 2008;
‘‘(ii) the original use of such property
in the renewal community commences with
the taxpayer; and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such prop-
erty, substantially all of the use of such
property was in a renewal community busi-
ness of the taxpayer.
‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM-
PROVEMENTS.—The requirements of clauses (i)
and (ii) of subparagraph (A) shall be treated as
satisfied with respect to—
159
‘‘(i) property which is substantially
improved (within the meaning of section
1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2008; and
‘‘(ii) any land on which such property
is located.
‘‘(c) CERTAIN RULES TO APPLY.—Rules similar to
the rules of paragraphs (5), (6), and (7) of subsection (b),
and subsections (e), (f ), and (g), of section 1400B shall
apply for purposes of this section.
‘‘SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
‘‘For purposes of this part, the term ‘renewal commu-
nity business’ means any entity or proprietorship which
would be a qualified business entity or qualified propri-
etorship under section 1397B if—
‘‘(1) references to renewal communities were
substituted for references to empowerment zones in
such section; and
‘‘(2) ‘80 percent’ were substituted for ‘50 per-
cent’ in subsections (b)(2) and (c)(1) of such sec-
tion.
‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS
‘‘Sec. 1400H. Family development accounts for renewal commu-
nity EITC recipients.
‘‘Sec. 1400I. Designation of earned income tax credit payments
for deposit to family development account.
160
‘‘SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RE-
NEWAL COMMUNITY EITC RECIPIENTS.
‘‘(a) ALLOWANCE OF DEDUCTION.—
‘‘(1) IN GENERAL.—There shall be allowed as a
deduction—
‘‘(A) in the case of a qualified individual,
the amount paid in cash for the taxable year by
such individual to any family development ac-
count for such individual’s benefit; and
‘‘(B) in the case of any person other than
a qualified individual, the amount paid in cash
for the taxable year by such person to any fam-
ily development account for the benefit of a
qualified individual but only if the amount so
paid is designated for purposes of this section
by such individual.
‘‘(2) LIMITATION.—
‘‘(A) IN GENERAL.—The amount allowable
as a deduction to any individual for any taxable
year by reason of paragraph (1)(A) shall not
exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
161
‘‘(B) PERSONS DONATING TO FAMILY DE-
VELOPMENT
ACCOUNTS
OF
OTHERS.—The
amount which may be designated under para-
graph (1)(B) by any qualified individual for any
taxable year of such individual shall not exceed
$1,000.
‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED
INDIVIDUALS.—Rules similar to rules of section
219(c) shall apply to the limitation in paragraph
(2)(A).
‘‘(4) COORDINATION WITH IRAS.—No deduction
shall be allowed under this section for any taxable
year to any person by reason of a payment to an ac-
count for the benefit of a qualified individual if any
amount is paid for such taxable year into an indi-
vidual retirement account (including a Roth IRA)
for the benefit of such individual.
‘‘(5) ROLLOVERS.—No deduction shall be al-
lowed under this section with respect to any rollover
contribution.
‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION
OF
AMOUNTS
IN
GROSS
IN-
COME.—Except as otherwise provided in this sub-
section, any amount paid or distributed out of a
family development account shall be included in
162
gross income by the payee or distributee, as the case
may be.
‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL-
OPMENT DISTRIBUTIONS.—Paragraph (1) shall not
apply to any qualified family development distribu-
tion.
‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU-
TION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified family
development distribution’ means any amount paid or
distributed out of a family development account
which would otherwise be includible in gross income,
to the extent that such payment or distribution is
used exclusively to pay qualified family development
expenses for the holder of the account or the spouse
or dependent (as defined in section 152) of such
holder.
‘‘(2) QUALIFIED
FAMILY
DEVELOPMENT
EX-
PENSES.—The term ‘qualified family development
expenses’ means any of the following:
‘‘(A) Qualified higher education expenses.
‘‘(B) Qualified first-time homebuyer costs.
‘‘(C) 
Qualified 
business 
capitalization
costs.
‘‘(D) Qualified medical expenses.
163
‘‘(E) Qualified rollovers.
‘‘(3) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ has the meaning
given such term by section 72(t)(7), determined
by treating postsecondary vocational edu-
cational schools as eligible educational institu-
tions.
‘‘(B) POSTSECONDARY VOCATIONAL EDU-
CATION SCHOOL.—The term ‘postsecondary vo-
cational educational school’ means an area vo-
cational education school (as defined in sub-
paragraph (C) or (D) of section 521(4) of the
Carl D. Perkins Vocational and Applied Tech-
nology Education Act (20 U.S.C. 2471(4)))
which is in any State (as defined in section
521(33) of such Act), as such sections are in
effect on the date of the enactment of this sec-
tion.
‘‘(C) COORDINATION WITH OTHER BENE-
FITS.—The amount of qualified higher edu-
cation expenses for any taxable year shall be re-
duced as provided in section 25A(g)(2).
164
‘‘(4) 
QUALIFIED
FIRST-TIME
HOMEBUYER
COSTS.—The term ‘qualified first-time homebuyer
costs’ means qualified acquisition costs (as defined
in section 72(t)(8) without regard to subparagraph
(B) thereof) with respect to a principal residence
(within the meaning of section 121) for a qualified
first-time 
homebuyer 
(as 
defined 
in 
section
72(t)(8)).
‘‘(5) QUALIFIED
BUSINESS
CAPITALIZATION
COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
business capitalization costs’ means qualified
expenditures for the capitalization of a qualified
business pursuant to a qualified plan.
‘‘(B) 
QUALIFIED
EXPENDITURES.—The
term ‘qualified expenditures’ means expendi-
tures included in a qualified plan, including
capital, plant, equipment, working capital, and
inventory expenses.
‘‘(C) QUALIFIED
BUSINESS.—The term
‘qualified business’ means any trade or business
other than any trade or business—
‘‘(i) which consists of the operation of
any 
facility 
described 
in 
section
144(c)(6)(B), or
165
‘‘(ii) which contravenes any law.
‘‘(D) QUALIFIED PLAN.—The term ‘quali-
fied plan’ means a business plan which meets
such requirements as the Secretary may specify.
‘‘(6) QUALIFIED
MEDICAL
EXPENSES.—The
term ‘qualified medical expenses’ means any amount
paid during the taxable year, not compensated for by
insurance or otherwise, for medical care (as defined
in section 213(d)) of the taxpayer, his spouse, or his
dependent (as defined in section 152).
‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali-
fied rollover’ means any amount paid from a family
development account of a taxpayer into another such
account established for the benefit of—
‘‘(A) such taxpayer, or
‘‘(B) any qualified individual who is—
‘‘(i) the spouse of such taxpayer, or
‘‘(ii) any dependent (as defined in sec-
tion 152) of the taxpayer.
Rules similar to the rules of section 408(d)(3) shall
apply for purposes of this paragraph.
‘‘(d) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—Any family development ac-
count is exempt from taxation under this subtitle
unless such account has ceased to be a family devel-
166
opment account by reason of paragraph (2). Not-
withstanding the preceding sentence, any such ac-
count is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business
income of charitable, etc., organizations). Notwith-
standing any other provision of this title (including
chapters 11 and 12), the basis of any person in such
an account is zero.
‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB-
ITED TRANSACTIONS.—For purposes of this section,
rules similar to the rules of section 408(e) shall
apply.
‘‘(3) OTHER RULES TO APPLY.—Rules similar
to the rules of paragraphs (4), (5), and (6) of sec-
tion 408(d) shall apply for purposes of this section.
‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur-
poses of this title, the term ‘family development account’
means a trust created or organized in the United States
for the exclusive benefit of a qualified individual or his
beneficiaries, but only if the written governing instrument
creating the trust meets the following requirements:
‘‘(1) Except in the case of a qualified rollover
(as defined in subsection (c)(7))—
‘‘(A) no contribution will be accepted un-
less it is in cash; and
167
‘‘(B) contributions will not be accepted for
the taxable year in excess of $3,000.
‘‘(2) The requirements of paragraphs (2)
through (6) of section 408(a) are met.
‘‘(f ) QUALIFIED INDIVIDUAL.—For purposes of this
section, the term ‘qualified individual’ means, for any tax-
able year, an individual—
‘‘(1) who is a bona fide resident of a renewal
community throughout the taxable year; and
‘‘(2) to whom a credit was allowed under sec-
tion 32 for the preceding taxable year.
‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.—
‘‘(1) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section
219(f )(1).
‘‘(2) MARRIED
INDIVIDUALS.—The maximum
deduction under subsection (a) shall be computed
separately for each individual, and this section shall
be applied without regard to any community prop-
erty laws.
‘‘(3) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
family development account on the last day of the
preceding taxable year if the contribution is made on
168
account of such taxable year and is made not later
than the time prescribed by law for filing the return
for such taxable year (not including extensions
thereof).
‘‘(4) EMPLOYER
PAYMENTS; CUSTODIAL
AC-
COUNTS.—Rules similar to the rules of sections
219(f )(5) and 408(h) shall apply for purposes of
this section.
‘‘(5) REPORTS.—The trustee of a family devel-
opment account shall make such reports regarding
such account to the Secretary and to the individual
for whom the account is maintained with respect to
contributions (and the years to which they relate),
distributions, and such other matters as the Sec-
retary may require under regulations. The reports
required by this paragraph—
‘‘(A) shall be filed at such time and in
such manner as the Secretary prescribes in
such regulations; and
‘‘(B) shall be furnished to individuals—
‘‘(i) not later than January 31 of the
calendar year following the calendar year
to which such reports relate; and
‘‘(ii) in such manner as the Secretary
prescribes in such regulations.
169
‘‘(6) INVESTMENT IN COLLECTIBLES TREATED
AS DISTRIBUTIONS.—Rules similar to the rules of
section 408(m) shall apply for purposes of this sec-
tion.
‘‘(h) PENALTY FOR DISTRIBUTIONS NOT USED FOR
QUALIFIED FAMILY DEVELOPMENT EXPENSES.—
‘‘(1) IN GENERAL.—If any amount is distrib-
uted from a family development account and is not
used exclusively to pay qualified family development
expenses for the holder of the account or the spouse
or dependent (as defined in section 152) of such
holder, the tax imposed by this chapter for the tax-
able year of such distribution shall be increased by
10 percent of the portion of such amount which is
includible in gross income.
‘‘(2) EXCEPTION
FOR
CERTAIN
DISTRIBU-
TIONS.—Paragraph (1) shall not apply to distribu-
tions which are—
‘‘(A) made on or after the date on which
the account holder attains age 591⁄2,
‘‘(B) made to a beneficiary (or the estate
of the account holder) on or after the death of
the account holder, or
170
‘‘(C) attributable to the account holder’s
being disabled within the meaning of section
72(m)(7).
‘‘(i) APPLICATION OF SECTION.—This section shall
apply to amounts paid to a family development account
for any taxable year beginning after December 31, 2000,
and before January 1, 2008.
‘‘SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CRED-
IT PAYMENTS FOR DEPOSIT TO FAMILY DE-
VELOPMENT ACCOUNT.
‘‘(a) IN GENERAL.—With respect to the return of any
qualified individual (as defined in section 1400H(f )) for
the taxable year of the tax imposed by this chapter, such
individual may designate that a specified portion (not less
than $1) of any overpayment of tax for such taxable year
which is attributable to the earned income tax credit shall
be deposited by the Secretary into a family development
account of such individual. The Secretary shall so deposit
such portion designated under this subsection.
‘‘(b) MANNER AND TIME OF DESIGNATION.—A des-
ignation under subsection (a) may be made with respect
to any taxable year—
‘‘(1) at the time of filing the return of the tax
imposed by this chapter for such taxable year, or
171
‘‘(2) at any other time (after the time of filing
the return of the tax imposed by this chapter for
such taxable year) specified in regulations prescribed
by the Secretary.
Such designation shall be made in such manner as the
Secretary prescribes by regulations.
‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME
TAX CREDIT.—For purposes of subsection (a), an over-
payment for any taxable year shall be treated as attrib-
utable to the earned income tax credit to the extent that
such overpayment does not exceed the credit allowed to
the taxpayer under section 32 for such taxable year.
‘‘(d) OVERPAYMENTS TREATED
AS REFUNDED.—
For purposes of this title, any portion of an overpayment
of tax designated under subsection (a) shall be treated as
being refunded to the taxpayer as of the last date pre-
scribed for filing the return of tax imposed by this chapter
(determined without regard to extensions) or, if later, the
date the return is filed.
‘‘(e) TERMINATION.—This section shall not apply to
any taxable year beginning after December 31, 2007.
‘‘PART IV—ADDITIONAL INCENTIVES
‘‘Sec. 1400K. Commercial revitalization deduction.
‘‘Sec. 1400L. Increase in expensing under section 179.
172
‘‘SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.
‘‘(a) GENERAL RULE.—At the election of the tax-
payer, either—
‘‘(1) one-half of any qualified revitalization ex-
penditures chargeable to capital account with respect
to any qualified revitalization building shall be allow-
able as a deduction for the taxable year in which the
building is placed in service, or
‘‘(2) a deduction for all such expenditures shall
be allowable ratably over the 120-month period be-
ginning with the month in which the building is
placed in service.
The deduction provided by this section with respect to
such expenditure shall be in lieu of any depreciation de-
duction otherwise allowable on account of such expendi-
ture.
‘‘(b) QUALIFIED REVITALIZATION BUILDINGS AND
EXPENDITURES.—For purposes of this section—
‘‘(1) QUALIFIED REVITALIZATION BUILDING.—
The term ‘qualified revitalization building’ means
any building (and its structural components) if—
‘‘(A) such building is located in a renewal
community and is placed in service after De-
cember 31, 2000;
173
‘‘(B) a commercial revitalization deduction
amount is allocated to the building under sub-
section (d); and
‘‘(C) depreciation (or amortization in lieu
of depreciation) is allowable with respect to the
building (without regard to this section).
‘‘(2) QUALIFIED
REVITALIZATION
EXPENDI-
TURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
revitalization expenditure’ means any amount
properly chargeable to capital account—
‘‘(i) for property for which deprecia-
tion is allowable under section 168 (with-
out regard to this section) and which is—
‘‘(I) nonresidential real property;
or
‘‘(II) an addition or improvement
to property described in subclause (I);
‘‘(ii) in connection with the construc-
tion of any qualified revitalization building
which was not previously placed in service
or in connection with the substantial reha-
bilitation (within the meaning of section
47(c)(1)(C)) of a building which was
174
placed in service before the beginning of
such rehabilitation; and
‘‘(iii) for land (including land which is
functionally related to such property and
subordinate thereto).
‘‘(B) DOLLAR
LIMITATION.—The aggre-
gate amount which may be treated as qualified
revitalization expenditures with respect to any
qualified revitalization building for any taxable
year shall not exceed the excess of—
‘‘(i) $10,000,000, reduced by
‘‘(ii) any such expenditures with re-
spect to the building taken into account by
the taxpayer or any predecessor in deter-
mining the amount of the deduction under
this section for all preceding taxable years.
‘‘(C) CERTAIN
EXPENDITURES
NOT
IN-
CLUDED.—The term ‘qualified revitalization ex-
penditure’ does not include—
‘‘(i) ACQUISITION COSTS.—The costs
of acquiring any building or interest there-
in and any land in connection with such
building to the extent that such costs ex-
ceed 30 percent of the qualified revitaliza-
175
tion expenditures determined without re-
gard to this clause.
‘‘(ii) 
CREDITS.—Any 
expenditure
which the taxpayer may take into account
in computing any credit allowable under
this title unless the taxpayer elects to take
the expenditure into account only for pur-
poses of this section.
‘‘(c) WHEN
EXPENDITURES
TAKEN
INTO
AC-
COUNT.—Qualified revitalization expenditures with re-
spect to any qualified revitalization building shall be taken
into account for the taxable year in which the qualified
revitalization building is placed in service. For purposes
of the preceding sentence, a substantial rehabilitation of
a building shall be treated as a separate building.
‘‘(d) LIMITATION ON AGGREGATE DEDUCTIONS AL-
LOWABLE WITH RESPECT TO BUILDINGS LOCATED IN A
STATE.—
‘‘(1) IN GENERAL.—The amount of the deduc-
tion determined under this section for any taxable
year with respect to any building shall not exceed
the commercial revitalization deduction amount (in
the case of an amount determined under subsection
(a)(2), the present value of such amount as deter-
mined under the rules of section 42(b)(2)(C) by sub-
176
stituting ‘100 percent’ for ‘72 percent’ in clause (ii)
thereof) allocated to such building under this sub-
section by the commercial revitalization agency.
Such allocation shall be made at the same time and
in the same manner as under paragraphs (1) and
(7) of section 42(h).
‘‘(2) COMMERCIAL REVITALIZATION DEDUCTION
AMOUNT FOR AGENCIES.—
‘‘(A) IN GENERAL.—The aggregate com-
mercial revitalization deduction amount which a
commercial revitalization agency may allocate
for any calendar year is the amount of the
State commercial revitalization deduction ceil-
ing determined under this paragraph for such
calendar year for such agency.
‘‘(B) STATE COMMERCIAL REVITALIZATION
DEDUCTION
CEILING.—The State commercial
revitalization deduction ceiling applicable to any
State—
‘‘(i) for each calendar year after 2000
and before 2008 is $6,000,000 for each re-
newal community in the State; and
‘‘(ii) zero for each calendar year
thereafter.
177
‘‘(C) COMMERCIAL REVITALIZATION AGEN-
CY.—For purposes of this section, the term
‘commercial revitalization agency’ means any
agency authorized by a State to carry out this
section.
‘‘(e) RESPONSIBILITIES OF COMMERCIAL REVITAL-
IZATION AGENCIES.—
‘‘(1) 
PLANS
FOR
ALLOCATION.—Notwith-
standing any other provision of this section, the
commercial revitalization deduction amount with re-
spect to any building shall be zero unless—
‘‘(A) such amount was allocated pursuant
to a qualified allocation plan of the commercial
revitalization agency which is approved (in ac-
cordance with rules similar to the rules of sec-
tion 147(f )(2) (other than subparagraph (B)(ii)
thereof)) by the governmental unit of which
such agency is a part; and
‘‘(B) such agency notifies the chief execu-
tive officer (or its equivalent) of the local juris-
diction within which the building is located of
such allocation and provides such individual a
reasonable opportunity to comment on the allo-
cation.
178
‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur-
poses of this subsection, the term ‘qualified alloca-
tion plan’ means any plan—
‘‘(A) which sets forth selection criteria to
be used to determine priorities of the commer-
cial revitalization agency which are appropriate
to local conditions;
‘‘(B) which considers—
‘‘(i) the degree to which a project con-
tributes to the implementation of a stra-
tegic plan that is devised for a renewal
community through a citizen participation
process;
‘‘(ii) the amount of any increase in
permanent, full-time employment by reason
of any project; and
‘‘(iii) the active involvement of resi-
dents and nonprofit groups within the re-
newal community; and
‘‘(C) which provides a procedure that the
agency (or its agent) will follow in monitoring
compliance with this section.
‘‘(f ) REGULATIONS.—For purposes of this section,
the Secretary shall, by regulations, provide for the applica-
179
tion of rules similar to the rules of section 49 and sub-
sections (a) and (b) of section 50.
‘‘(g) TERMINATION.—This section shall not apply to
any building placed in service after December 31, 2007.
‘‘SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
‘‘(a) GENERAL RULE.—In the case of a renewal com-
munity business (as defined in section 1400G), for pur-
poses of section 179—
‘‘(1) the limitation under section 179(b)(1)
shall be increased by the lesser of—
‘‘(A) $35,000; or
‘‘(B) the cost of section 179 property
which is qualified renewal property placed in
service during the taxable year; and
‘‘(2) the amount taken into account under sec-
tion 179(b)(2) with respect to any section 179 prop-
erty which is qualified renewal property shall be 50
percent of the cost thereof.
‘‘(b) RECAPTURE.—Rules similar to the rules under
section 179(d)(10) shall apply with respect to any quali-
fied renewal property which ceases to be used in a renewal
community by a renewal community business.
‘‘(c) QUALIFIED RENEWAL PROPERTY.—For pur-
poses of this section—
180
‘‘(1) IN GENERAL.—The term ‘qualified renewal
property’ means any property to which section 168
applies (or would apply but for section 179) if—
‘‘(A) such property was acquired by the
taxpayer by purchase (as defined in section
179(d)(2)) after December 31, 2000, and be-
fore January 1, 2008; and
‘‘(B) such property would be qualified zone
property (as defined in section 1397C) if ref-
erences to renewal communities were sub-
stituted for references to empowerment zones in
section 1397C.
‘‘(2) CERTAIN RULES TO APPLY.—The rules of
subsections (a)(2) and (b) of section 1397C shall
apply for purposes of this section.’’.
SEC. 403. EXTENSION OF EXPENSING OF ENVIRONMENTAL
REMEDIATION COSTS TO RENEWAL COMMU-
NITIES.
(a) EXTENSION.—Paragraph (2) of section 198(c)
(defining targeted area) is amended by redesignating sub-
paragraph (C) as subparagraph (D) and by inserting after
subparagraph (B) the following new subparagraph:
‘‘(C) 
RENEWAL
COMMUNITIES
IN-
CLUDED.—Except as provided in subparagraph
(B), such term shall include a renewal commu-
181
nity (as defined in section 1400E) with respect
to expenditures paid or incurred after Decem-
ber 31, 2000.’’.
(b) EXTENSION OF TERMINATION DATE FOR RE-
NEWAL COMMUNITIES.—Subsection (h) of section 198 is
amended by inserting before the period ‘‘(December 31,
2007, in the case of a renewal community, as defined in
section 1400E).’’.
SEC. 404. EXTENSION OF WORK OPPORTUNITY TAX CREDIT
FOR RENEWAL COMMUNITIES.
(a) EXTENSION.—Subsection (c) of section 51 (relat-
ing to termination) is amended by adding at the end the
following new paragraph:
‘‘(5) EXTENSION
OF
CREDIT
FOR
RENEWAL
COMMUNITIES.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who begins work for the employer after
the date contained in paragraph (4)(B), for
purposes of section 38—
‘‘(i) in lieu of applying subsection (a),
the amount of the work opportunity credit
determined under this section for the tax-
able year shall be equal to—
‘‘(I) 15 percent of the qualified
first-year wages for such year; and
182
‘‘(II) 30 percent of the qualified
second-year wages for such year;
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$10,000’ for ‘$6,000’;
‘‘(iii) paragraph (4)(B) shall be ap-
plied by substituting for the date contained
therein the last day for which the designa-
tion under section 1400E of the renewal
community referred to in subparagraph
(B)(i) is in effect; and
‘‘(iv) rules similar to the rules of sec-
tion 51A(b)(5)(C) shall apply.
‘‘(B) QUALIFIED
FIRST- AND
SECOND-
YEAR WAGES.—For purposes of subparagraph
(A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied wages’ means, with respect to each 1-
year period referred to in clause (ii) or
(iii), as the case may be, the wages paid or
incurred by the employer during the tax-
able year to any individual but only if—
‘‘(I) the employer is engaged in a
trade or business in a renewal com-
munity throughout such 1-year period;
183
‘‘(II) the principal place of abode
of such individual is in such renewal
community throughout such 1-year
period; and
‘‘(III) substantially all of the
services which such individual per-
forms for the employer during such 1-
year period are performed in such re-
newal community.
‘‘(ii) 
QUALIFIED
FIRST-YEAR
WAGES.—The term ‘qualified first-year
wages’ means, with respect to any indi-
vidual, qualified wages attributable to serv-
ice rendered during the 1-year period be-
ginning with the day the individual begins
work for the employer.
‘‘(iii) 
QUALIFIED
SECOND-YEAR
WAGES.—The term ‘qualified second-year
wages’ means, with respect to any indi-
vidual, qualified wages attributable to serv-
ice rendered during the 1-year period be-
ginning on the day after the last day of the
1-year period with respect to such indi-
vidual determined under clause (ii).’’.
184
(b) CONGRUENT TREATMENT OF RENEWAL COMMU-
NITIES
AND ENTERPRISE ZONES
FOR PURPOSES
OF
YOUTH RESIDENCE REQUIREMENTS.—
(1) HIGH-RISK YOUTH.—Subparagraphs (A)(ii)
and (B) of section 51(d)(5) are each amended by
striking ‘‘empowerment zone or enterprise commu-
nity’’ and inserting ‘‘empowerment zone, enterprise
community, or renewal community’’.
(2) QUALIFIED SUMMER YOUTH EMPLOYEE.—
Clause (iv) of section 51(d)(7)(A) is amended by
striking ‘‘empowerment zone or enterprise commu-
nity’’ and inserting ‘‘empowerment zone, enterprise
community, or renewal community’’.
(3) HEADINGS.—Paragraphs (5)(B) and (7)(C)
of section 51(d) are each amended by inserting ‘‘OR
COMMUNITY’’ in the heading after ‘‘ZONE’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to individuals who
begin work for the employer after December 31,
2000.
SEC. 405. CONFORMING AND CLERICAL AMENDMENTS.
(a) DEDUCTION FOR CONTRIBUTIONS TO FAMILY
DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER
OR
NOT TAXPAYER ITEMIZES.—Subsection (a) of section 62
(relating to adjusted gross income defined) is amended by
185
inserting after paragraph (19) the following new para-
graph:
‘‘(20) FAMILY DEVELOPMENT ACCOUNTS.—The
deduction allowed by section 1400H(a)(1).’’.
(b) TAX ON EXCESS CONTRIBUTIONS.—
(1) TAX IMPOSED.—Subsection (a) of section
4973 is amended by striking ‘‘or’’ at the end of
paragraph (3), adding ‘‘or’’ at the end of paragraph
(4), and inserting after paragraph (4) the following
new paragraph:
‘‘(5) a family development account (within the
meaning of section 1400H(e)),’’.
(2) EXCESS CONTRIBUTIONS.—Section 4973 is
amended by adding at the end the following new
subsection:
‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur-
poses of this section, in the case of family development
accounts, the term ‘excess contributions’ means the sum
of—
‘‘(1) the excess (if any) of—
‘‘(A) the amount contributed for the tax-
able year to the accounts (other than a quali-
fied 
rollover, 
as 
defined 
in 
section
1400H(c)(7)), over
186
‘‘(B) the amount allowable as a deduction
under section 1400H for such contributions;
and
‘‘(2) the amount determined under this sub-
section for the preceding taxable year reduced by the
sum of—
‘‘(A) the distributions out of the accounts
for the taxable year which were included in the
gross income of the payee under section
1400H(b)(1);
‘‘(B) the distributions out of the accounts
for the taxable year to which rules similar to
the rules of section 408(d)(5) apply by reason
of section 1400H(d)(3); and
‘‘(C) the excess (if any) of the maximum
amount allowable as a deduction under section
1400H for the taxable year over the amount
contributed to the account for the taxable year.
For purposes of this subsection, any contribution which
is distributed from the family development account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 1400H(d)(3) shall
be treated as an amount not contributed.’’.
(c) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 is amended—
187
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(6) SPECIAL
RULE
FOR
FAMILY
DEVELOP-
MENT ACCOUNTS.—An individual for whose benefit a
family development account is established and any
contributor to such account shall be exempt from the
tax imposed by this section with respect to any
transaction concerning such account (which would
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
a family development account by reason of the appli-
cation of section 1400H(d)(2) to such account.’’;
and
(2) in subsection (e)(1), by striking ‘‘or’’ at the
end of subparagraph (E), by redesignating subpara-
graph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following new subpara-
graph:
‘‘(F) a family development account de-
scribed in section 1400H(e), or’’.
(d) INFORMATION RELATING TO CERTAIN TRUSTS
AND ANNUITY PLANS.—Subsection (c) of section 6047 is
amended—
(1) by inserting ‘‘or section 1400H’’ after ‘‘sec-
tion 219’’; and
188
(2) by inserting ‘‘, of any family development
account described in section 1400H(e),’’, after ‘‘sec-
tion 408(a)’’.
(e) INSPECTION OF APPLICATIONS FOR TAX EXEMP-
TION.—Clause (i) of section 6104(a)(1)(B) is amended by
inserting ‘‘a family development account described in sec-
tion 1400H(e),’’ after ‘‘section 408(a),’’.
(f ) FAILURE TO PROVIDE REPORTS ON FAMILY DE-
VELOPMENT
ACCOUNTS.—Paragraph (2) of section
6693(a) is amended by striking ‘‘and’’ at the end of sub-
paragraph (C), by striking the period and inserting ‘‘,
and’’ at the end of subparagraph (D), and by adding at
the end the following new subparagraph:
‘‘(E) section 1400H(g)(6) (relating to fam-
ily development accounts).’’.
(g) CONFORMING AMENDMENTS REGARDING COM-
MERCIAL REVITALIZATION DEDUCTION.—
(1) Section 172 is amended by redesignating
subsection ( j) as subsection (k) and by inserting
after subsection (i) the following new subsection:
‘‘( j) NO CARRYBACK OF SECTION 1400K DEDUCTION
BEFORE DATE OF THE ENACTMENT.—No portion of the
net operating loss for any taxable year which is attrib-
utable to any commercial revitalization deduction deter-
mined under section 1400K may be carried back to a tax-
189
able year ending before the date of the enactment of sec-
tion 1400K.’’.
(2) Subparagraph (B) of section 48(a)(2) is
amended by inserting ‘‘or commercial revitalization’’
after ‘‘rehabilitation’’ each place it appears in the
text and heading.
(3) Subparagraph (C) of section 469(i)(3) is
amended—
(A) by inserting ‘‘or section 1400K’’ after
‘‘section 42’’; and
(B) by inserting ‘‘AND COMMERCIAL REVI-
TALIZATION
DEDUCTION’’ after ‘‘CREDIT’’ in
the heading.
(h) CLERICAL AMENDMENTS.—The table of sub-
chapters for chapter 1 is amended by adding at the end
the following new item:
‘‘Subchapter X. Renewal Communities.’’.
Subtitle B—Timber Incentives
SEC. 411. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT
OF AMORTIZABLE REFORESTATION EXPENDI-
TURES.
(a) INCREASE IN DOLLAR LIMITATION.—Paragraph
(1) of section 194(b) (relating to amortization of reforest-
ation expenditures) is amended by striking ‘‘$10,000
($5,000’’ and inserting ‘‘$25,000 ($12,500’’.
190
(b) TEMPORARY SUSPENSION OF INCREASED DOL-
LAR LIMITATION.—Subsection (b) of section 194(b) (re-
lating to amortization of reforestation expenditures) is
amended by adding at the end the following new para-
graph:
‘‘(5) SUSPENSION
OF
DOLLAR
LIMITATION.—
Paragraph (1) shall not apply to taxable years be-
ginning after December 31, 2000, and before Janu-
ary 1, 2004.
(c) CONFORMING AMENDMENT.—Paragraph (1) of
section 48(b) is amended by striking ‘‘section 194(b)(1)’’
and inserting ‘‘section 194(b)(1) and without regard to
section 194(b)(5)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
TITLE V—REAL ESTATE
PROVISIONS
Subtitle A—Improvements in Low-
Income Housing Credit
SEC. 501. MODIFICATION OF STATE CEILING ON LOW-IN-
COME HOUSING CREDIT.
(a) IN GENERAL.—Clauses (i) and (ii) of section
42(h)(3)(C) (relating to State housing credit ceiling) are
amended to read as follows:
191
‘‘(i) the unused State housing credit
ceiling (if any) of such State for the pre-
ceding calendar year,
‘‘(ii) the greater of—
‘‘(I) the applicable amount under
subparagraph (H) multiplied by the
State population, or
‘‘(II) $2,000,000,’’.
(b) APPLICABLE AMOUNT.—Paragraph (3) of section
42(h) (relating to housing credit dollar amount for agen-
cies) is amended by adding at the end the following new
subparagraph:
‘‘(H) APPLICABLE
AMOUNT
OF
STATE
CEILING.—For 
purposes 
of 
subparagraph
(C)(ii), the applicable amount shall be deter-
mined under the following table:
‘‘For calendar year:
The applicable amount is:
2001 ............................................................................. $1.35
2002 .............................................................................
1.45
2003 .............................................................................
1.55
2004 and thereafter .....................................................
1.65.’’.
(c) ADJUSTMENT OF STATE CEILING FOR INCREASES
IN COST-OF-LIVING.—Paragraph (3) of section 42(h) (re-
lating to housing credit dollar amount for agencies), as
amended by subsection (c), is amended by adding at the
end the following new subparagraph:
‘‘(I) COST-OF-LIVING ADJUSTMENT.—
192
‘‘(i) IN GENERAL.—In the case of a
calendar year after 2004, the $2,000,000
in subparagraph (C) and the $1.65 amount
in subparagraph (H) shall each be in-
creased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment 
determined 
under 
section
1(f )(3) for such calendar year by sub-
stituting ‘calendar year 2003’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof.
‘‘(ii) ROUNDING.—
‘‘(I) In the case of the amount in
subparagraph (C), any increase under
clause (i) which is not a multiple of
$5,000 shall be rounded to the next
lowest multiple of $5,000.
‘‘(II) In the case of the amount
in subparagraph (H), any increase
under clause (i) which is not a mul-
tiple of 5 cents shall be rounded to
the next lowest multiple of 5 cents.’’.
(d) CONFORMING AMENDMENTS.—
193
(1) Section 42(h)(3)(C), as amended by sub-
section (a), is amended—
(A) by striking ‘‘clause (ii)’’ in the matter
following clause (iv) and inserting ‘‘clause (i)’’,
and
(B) by striking ‘‘clauses (i)’’ in the matter
following clause (iv) and inserting ‘‘clauses
(ii)’’.
(2) Section 42(h)(3)(D)(ii) is amended—
(A) by striking ‘‘subparagraph (C)(ii)’’ and
inserting ‘‘subparagraph (C)(i)’’, and
(B) by striking ‘‘clauses (i)’’ in subclause
(II) and inserting ‘‘clauses (ii)’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years after 2000.
SEC. 502. MODIFICATION OF CRITERIA FOR ALLOCATING
HOUSING CREDITS AMONG PROJECTS.
(a) SELECTION CRITERIA.—Subparagraph (C) of
section 42(m)(1) (relating to certain selection criteria
must be used) is amended—
(1) by inserting ‘‘, including whether the project
includes the use of existing housing as part of a
community revitalization plan’’ before the comma at
the end of clause (iii), and
194
(2) by striking clauses (v), (vi), and (vii) and
inserting the following new clauses:
‘‘(v) tenant populations with special
housing needs,
‘‘(vi) public housing waiting lists,
‘‘(vii) tenant populations of individ-
uals with children, and
‘‘(viii) projects intended for eventual
tenant ownership.’’.
(b) PREFERENCE FOR COMMUNITY REVITALIZATION
PROJECTS LOCATED IN QUALIFIED CENSUS TRACTS.—
Clause (ii) of section 42(m)(1)(B) is amended by striking
‘‘and’’ at the end of subclause (I), by adding ‘‘and’’ at
the end of subclause (II), and by inserting after subclause
(II) the following new subclause:
‘‘(III) projects which are located
in qualified census tracts (as defined
in subsection (d)(5)(C)) and the devel-
opment of which contributes to a con-
certed 
community 
revitalization
plan,’’.
SEC. 503. ADDITIONAL RESPONSIBILITIES OF HOUSING
CREDIT AGENCIES.
(a) MARKET STUDY; PUBLIC DISCLOSURE OF RA-
TIONALE
FOR NOT FOLLOWING CREDIT ALLOCATION
195
PRIORITIES.—Subparagraph (A) of section 42(m)(1) (re-
lating to responsibilities of housing credit agencies) is
amended by striking ‘‘and’’ at the end of clause (i), by
striking the period at the end of clause (ii) and inserting
a comma, and by adding at the end the following new
clauses:
‘‘(iii) a comprehensive market study
of the housing needs of low-income individ-
uals in the area to be served by the project
is conducted before the credit allocation is
made and at the developer’s expense by a
disinterested party who is approved by
such agency, and
‘‘(iv) a written explanation is available
to the general public for any allocation of
a housing credit dollar amount which is
not made in accordance with established
priorities and selection criteria of the hous-
ing credit agency.’’.
(b) SITE VISITS.—Clause (iii) of section 42(m)(1)(B)
(relating to qualified allocation plan) is amended by insert-
ing before the period ‘‘and in monitoring for noncompli-
ance with habitability standards through regular site vis-
its’’.
196
SEC. 504. MODIFICATIONS TO RULES RELATING TO BASIS
OF BUILDING WHICH IS ELIGIBLE FOR CRED-
IT.
(a) ADJUSTED BASIS TO INCLUDE PORTION OF CER-
TAIN BUILDINGS USED BY LOW-INCOME INDIVIDUALS
WHO ARE NOT TENANTS AND BY PROJECT EMPLOY-
EES.—Paragraph (4) of section 42(d) (relating to special
rules relating to determination of adjusted basis) is
amended—
(1) by striking ‘‘subparagraph (B)’’ in subpara-
graph (A) and inserting ‘‘subparagraphs (B) and
(C)’’,
(2) by redesignating subparagraph (C) as sub-
paragraph (D), and
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) INCLUSION OF BASIS OF PROPERTY
USED
TO
PROVIDE
SERVICES
FOR
CERTAIN
NONTENANTS.—
‘‘(i) 
IN
GENERAL.—The 
adjusted
basis of any building located in a qualified
census tract (as defined in paragraph
(5)(C)) shall be determined by taking into
account the adjusted basis of property (of
a character subject to the allowance for de-
preciation and not otherwise taken into ac-