(C) NO CONTRIBUTIONS TO RETIREMENT
SYSTEMS OR PLANS.—None of the funds made
available under this title may be used by an em-
ployer to make a contribution on behalf of any
participant to a private retirement system or
plan.
(3) TREATMENT OF ALLOWANCES, EARNINGS,
AND PAYMENTS TO PARTICIPANTS.—
(A) IN
GENERAL.—Notwithstanding any
provision of the Internal Revenue Code of 1986,
for purposes of such Code, including section 32
(relating to earned income credits) and subtitle
C (relating to employment taxes), allowances,
earnings, and payments to individuals partici-
pating in programs carried out under this title
shall be includable in the gross income of indi-
viduals as wages.
(B) TREATMENT FOR MEANS-TESTED PRO-
GRAMS.—Such allowances, earnings, and pay-
ments shall not be considered to be income for
the purposes of determining eligibility for, and
the amount of income transfer and in-kind aid
furnished under, any Federal or federally as-
sisted program based on need.
(4) DENIAL OF DEDUCTIONS AND CREDITS TO
EMPLOYERS.—For purposes of the Internal Revenue
Code of 1986, no deduction or credit under such
Code shall be allowed with respect to trade or busi-
ness expenses paid from or reimbursed by funds pro-
vided under this title.
(b) LABOR STANDARDS.—
(1) DISPLACEMENT.—
(A) PROHIBITION.—A participant in a pro-
gram authorized under this title (referred to in
this subsection as a ‘‘specified activity’’) shall
not displace (including a partial displacement,
such as a reduction in the hours of nonovertime
work, wages, or employment benefits) any em-
ployed employee.
(B) PROHIBITION
ON
IMPAIRMENT
OF
CONTRACTS.—A specified activity shall not im-
pair an existing contract for services or collec-
tive bargaining agreement, and no such activity
that would be inconsistent with the terms of a
collective bargaining agreement shall be under-
taken without the written concurrence of the
labor organization and employer concerned.
(2) OTHER PROHIBITIONS.—
(A) IN GENERAL.—A participant in a spec-
ified activity shall not be employed in a job—
(i) when any other individual is on
layoff from the same or any substantially
equivalent job with the participating em-
ployer;
(ii) when the employer has terminated
the employment of any regular employee or
otherwise reduced the workforce of the em-
ployer with the effect of filling the vacancy
so created with the participant;
(iii) when any other individual is on
leave from, has recall rights pursuant to a
collective bargaining agreement or applica-
ble personnel procedures to, or is subject
to a reduction in force relating to, the
same or any substantially equivalent job,
with the participating employer;
(iv) when any other employee is on
strike or is being locked out with respect
to the same or any substantially equivalent
job with the participating employer;
(v) that is created in a promotional
line that will infringe in any way on the
promotional opportunities of currently em-
ployed individuals (as of the date of the
participation); or
(vi) if the job position is vacant and
was previously held by an employee whose
wages and benefits were not subsidized
under this Act.
(B) CONCURRENCE.—Before an employer
employs a participant described in subpara-
graph (A) in a job that is the same or substan-
tially equivalent to a job held by other employ-
ees of the employer, the employer shall obtain
the written concurrence of the local labor orga-
nization, if any, representing the employees.
(3) HEALTH AND SAFETY.—Health and safety
standards established under Federal and State law,
including the Occupational Safety and Health Act of
1970 (29 U.S.C. 651 et seq.), otherwise applicable
to working conditions of employees shall be equally
applicable to working conditions of participants en-
gaged in specified activities. With respect to any
participant who is engaged in activities that are not
covered by health and safety standards under the
Occupational Safety and Health Act of 1970, the
Secretary shall prescribe, by regulation, such stand-
ards as may be necessary to protect the health and
safety of such participant. To the extent that a
State workers’ compensation law applies, workers’
compensation shall be provided to participants on
the same basis as the compensation is provided to
other individuals in the State in similar employment.
To the extent that such law is not applicable, each
employer receiving funds under this title shall secure
insurance coverage for injuries suffered by such par-
ticipants as a result of the participation, in accord-
ance with regulations prescribed by the Secretary.
(4) EMPLOYMENT
CONDITIONS.—Individuals
participating in programs carried out under this
title, shall be provided equipment, supplies, family
and medical leave, work space, and other working
conditions at the same level and to the same extent
as other trainees or employees working a similar
length of time and doing the same type of work.
(5) OTHER
LABOR
PROTECTIONS.—Standards
established under the Fair Labor Standards Act of
1938 (29 U.S.C. 201 et seq.), the National Labor
Relations Act (29 U.S.C. 151 et seq.), the Act of
March 3, 1931 (commonly known as the ‘‘Davis-
Bacon Act’’) (46 Stat. 1494; chap. 411; 40 U.S.C.
276a et seq.), the Service Contract Act of 1965 (41
U.S.C. 351 et seq.), and State labor and employ-
ment laws (as defined by the appropriate State
agency), otherwise applicable to working conditions
of employees shall be equally applicable to working
conditions of participants engaged in specified activi-
ties. Participants in employment programs carried
out under this title shall be considered to be employ-
ees, and the employers of the participant shall be
considered to be employers, for purposes of the Fair
Labor Standards Act of 1938 (29 U.S.C. 201 et
seq.).
(6) HEARINGS AND OPPORTUNITY TO SUBMIT
COMMENTS.—Interested members of the public shall
be provided an opportunity for a public hearing on
a State plan submitted under section 202, and an
opportunity to submit comments to the State with
respect to programs described in the State plan and
proposed to be funded under this title. The opportu-
nities for a public hearing and for the submission of
comments shall be provided in accordance with such
procedures as the Secretary shall specify.
(c) GRIEVANCE PROCEDURE.—
(1) IN GENERAL.—An employer receiving as-
sistance under this title shall establish and maintain
a procedure for the filing and adjudication of griev-
ances or complaints alleging violations of the re-
quirements of this title (except as otherwise provided
in section 215) from participants, labor organiza-
tions, and other interested parties. The procedures
shall provide that a hearing on such a grievance or
complaint shall be conducted not later than 30 days
after the date of the filing of the grievance or com-
plaint and that a decision shall be made concerning
the grievance or complaint not later 60 days after
the date of filing. Except for complaints alleging
fraud or criminal activity, no grievance or complaint
may be filed under this paragraph later than 1 year
after the date of the alleged violation.
(2) INVESTIGATION.—
(A) IN GENERAL.—The Secretary shall in-
vestigate an allegation of a violation described
in paragraph (1) if—
(i) a decision relating to such violation
has not been reached within 60 days after
the date of the filing of the grievance or
complaint and either party appeals the de-
cision to the Secretary; or
(ii) a decision relating to such viola-
tion has been reached within 60 days after
the date of the filing and the party to
which such decision is adverse appeals the
decision to the Secretary.
(B) 
ADDITIONAL
REQUIREMENT.—The
Secretary shall make a final determination re-
lating to an appeal made under subparagraph
(A) no later than 120 days after the date of
such appeal.
(C) SECRETARIAL AUTHORITY.—The Sec-
retary may also investigate a violation described
in paragraph (1) in accordance with section
231.
(3) REMEDIES.—Remedies that may be im-
posed under this subsection for a violation of any re-
quirement of this title (except as otherwise provided
in section 215) shall be limited—
(A) to suspension or termination of pay-
ments under this title to a person that has vio-
lated any such requirement of this title;
(B) to prohibition of placement of a partic-
ipant with an employer that has violated any
such requirement of this title;
(C) where applicable, to reinstatement of
an employee, payment of lost wages and bene-
fits, and reestablishment of other relevant
terms, conditions, and privileges of employment;
and
(D) where appropriate, to other equitable
relief.
(4) CONSTRUCTION.—Nothing in paragraph (3)
shall be construed to prohibit a grievant or com-
plainant from pursuing a remedy authorized under
another Federal, State, or local law for a violation
of this title.
(d) RELOCATION.—
(1) PROHIBITION ON USE OF FUNDS TO EN-
COURAGE OR INDUCE RELOCATION.—No funds pro-
vided under this title shall be used, or proposed for
use, to encourage or induce the relocation of a busi-
ness or part of a business if such relocation would
result in a loss of employment for any employee of
such business at the original location and such origi-
nal location is within the United States.
(2) PROHIBITION ON USE OF FUNDS FOR CUS-
TOMIZED OR SKILL TRAINING AND RELATED ACTIVI-
TIES
AFTER
RELOCATION.—No funds provided
under this title shall be used for customized or skill
training, on-the-job training, or company-specific as-
sessments of job applicants or employees for any
business or part of a business that has relocated,
until the date that is 120 days after the date on
which such business commences operations at the
new location, if the relocation of such business or
part of a business results in a loss of employment
for any employee of such business at the original lo-
cation and such original location is within the
United States.
(3) REPAYMENT.—If the Secretary determines
that a violation of paragraph (1) or (2) has oc-
curred, the Secretary shall require the State that
has violated such paragraph to repay to the United
States an amount equal to the amount expended in
violation of such paragraph.
(e) LIMITATION ON USE OF FUNDS.—No funds pro-
vided under this title shall be used for activities for—
(1) the capitalization of businesses (except as
provided in section 501) investment in contract bid-
ding resource centers, or similar activities;
(2) any partisan political activities associated
with a political party or association, or the campaign
of any candidate for public or party office;
(3) foreign travel; or
(4) the promotion or deterrence of union orga-
nizing.
(f) TREATMENT OF PARTICIPATION.—Notwithstand-
ing any other provision of law, no individual may be re-
quired to participate in an employment program carried
out under this title as a condition of receiving any benefit
under any Federal or State law.
(g) NOTIFICATION AND PROVISION OF INFORMATION
ON WORKER RIGHTS.—Each employer carrying out an
employment project under this title shall provide to par-
ticipants in the project notification regarding, and infor-
mation on, worker rights, including rights under this sec-
tion and section 215, and any eligibility for earned income
tax credits under the Internal Revenue Code of 1986 or
applicable State law.
SEC. 215. NONDISCRIMINATION.
(a) PROHIBITED DISCRIMINATION.—
(1) PROHIBITION ON DISCRIMINATION IN FED-
ERAL PROGRAMS AND ACTIVITIES.—For the purpose
of applying the prohibitions against discrimination
on the basis of age under the Age Discrimination
Act of 1975 (42 U.S.C. 6101 et seq.), on the basis
of disability under section 504 of the Rehabilitation
Act of 1973 (29 U.S.C. 794), on the basis of sex
under title IX of the Education Amendments of
1972 (20 U.S.C. 1681 et seq.), or on the basis of
race, color, or national origin under title VI of the
Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.),
programs funded in whole or in part under this title
shall be considered to be programs and activities re-
ceiving Federal financial assistance, and education
programs and activities receiving Federal financial
assistance. For the purpose of applying the provi-
sions of title II of the Americans with Disabilities
Act of 1990 (42 U.S.C. 12131 et seq.) programs
funded, in whole or in part, under this title shall be
considered to be the services, programs, or activities
of a public entity, and each recipient or provider of
Federal financial assistance involved in the programs
shall be considered to be a public entity.
(2) PROHIBITION OF DISCRIMINATION REGARD-
ING
PARTICIPATION, 
BENEFITS, 
AND
EMPLOY-
MENT.—No individual shall be excluded from par-
ticipation in, denied the benefits of, subjected to dis-
crimination under, or denied employment in the ad-
ministration of or in connection with, any program
funded in whole or in part under this title because
of race, color, religion, sex, national origin, age, dis-
ability, or political affiliation or belief.
(3) PROHIBITION ON ASSISTANCE FOR FACILI-
TIES FOR SECTARIAN INSTRUCTION OR RELIGIOUS
WORSHIP.—Participants shall not be employed under
this title to carry out the construction, operation, or
maintenance of any part of any facility that is used
or to be used for sectarian instruction or as a place
for religious worship.
(4) PROHIBITION ON DISCRIMINATION ON BASIS
OF PARTICIPANT STATUS.—No person may discrimi-
nate against an individual who is a participant in a
program or activity that receives funds under this
title, with respect to the terms and conditions affect-
ing, or rights provided to, the individual, solely be-
cause of the status of the individual as a participant,
in carrying out any endeavor that involves—
(A) participants in programs that receive
funding under this title; and
(B) persons who receive no assistance
under this title.
(5) PROHIBITION ON DISCRIMINATION AGAINST
CERTAIN NONCITIZENS.—Participation in programs
receiving funds under this title shall be available to
citizens and nationals of the United States, lawfully
admitted 
permanent 
resident 
aliens, 
refugees,
asylees, and parolees, other aliens lawfully present in
the United States, and other individuals authorized
by the Attorney General to work in the United
States.
(b) ACTION
OF SECRETARY.—Whenever the Sec-
retary finds (in response to a complaint filed with the Sec-
retary by a participant or on the initiative of the Sec-
retary) that a State or other recipient of funds under this
title has failed to comply with a provision of law referred
to in subsection (a)(1), or with paragraph (2), (3), (4),
or (5) of subsection (a), including an applicable regulation
prescribed to carry out such provision or paragraph, the
Secretary shall notify such State or recipient and shall re-
quest that the State or recipient comply. If within a rea-
sonable period of time, not to exceed 60 days, the State
or recipient fails or refuses to comply, the Secretary
may—
(1) refer the matter to the Attorney General
with a recommendation that an appropriate civil ac-
tion be instituted;
(2) exercise the powers and functions provided
to the head of a Federal department or agency
under the Age Discrimination Act of 1975, title V
of the Rehabilitation Act of 1973 (29 U.S.C. 791 et
seq.), title IX of the Education Amendments of
1972, or title VI of the Civil Rights Act of 1964, as
may be applicable; or
(3) take such other action as may be provided
by law.
(c) ACTION OF ATTORNEY GENERAL.—When a mat-
ter is referred to the Attorney General pursuant to sub-
section (b)(1), or whenever the Attorney General has rea-
son to believe that a State or other recipient of funds
under this title is engaged in a pattern or practice of dis-
crimination in violation of a provision of law referred to
in subsection (a)(1) or in violation of paragraph (2), (3),
(4), or (5) of subsection (a), the Attorney General may
bring a civil action in any appropriate district court of the
United States for such relief as may be appropriate, in-
cluding injunctive relief.
(d) PARTICIPANTS.—For purposes of this section,
participants in employment programs shall be considered
as the ultimate beneficiaries of an education program or
activity receiving Federal financial assistance.
SEC. 216. LOCAL ADMINISTRATION.
(a) IN GENERAL.—Except as provided in subsection
(b), the chief elected official shall carry out the adminis-
tration of the local plan.
(b) ORGANIZATIONS AND PARTNERSHIPS.—In carry-
ing out the administration of the local plan, the official
shall, at a minimum, solicit the opinions of organizations
and partnerships described in section 202(d). To the ex-
tent possible, the official shall arrange for the organiza-
tions and partnerships to carry out the administration of
the local plan. The official shall ensure the coordination
of activities to be carried out under the plan with the em-
ployment and training programs carried out by the organi-
zations and partnerships and with other social service pro-
grams.
(c) FISCAL AGENT.—The chief elected official shall
serve as the fiscal agent for the funds made available to
the local area under this title.
(d) ADMINISTRATIVE EXPENSES.—Not more than 15
percent of the funds made available to a local area through
a grant made under section 211 may be used for the ad-
ministration of the local plan.
SEC. 217. LOCAL REPORTS.
Each chief elected official in a local area receiving
funds under this title to carry out an employment program
shall annually prepare and submit to the State a report
containing information on—
(1) the number of participants in the program;
(2) the number of positions created for the pro-
gram;
(3) the type of work performed by the partici-
pants;
(4) the number and type of employers carrying
out employment projects through the program;
(5) the wages and benefits provided to the par-
ticipants;
(6) the costs of the program to the local areas;
(7) the employment status (including placement
in public or private employment that is not sub-
sidized with funds made available under this Act)
and wages (during the year for which the report is
prepared) of former participants in the program, for
the 5 years after the participants end their partici-
pation in the program;
(8) the impact of the employment positions in
the employment projects on the identified commu-
nities in the local area; and
(9) the extent to which, and the manner in
which, the official has ensured the coordination de-
scribed in section 216(b).
Subtitle C—Activities in Outlying
Areas
SEC. 221. GRANTS.
From the funds appropriated to carry out this title
for a fiscal year, the Secretary shall reserve not more than
1⁄4 of 1 percent to make grants to eligible outlying areas
in order to implement employment programs in the outly-
ing areas.
SEC. 222. APPLICATION.
To be eligible to receive a grant under section 221,
an outlying area shall submit an application to the Sec-
retary at such time, in such manner, and containing such
information and assurances as the Secretary may require.
SEC. 223. REGULATIONS.
The Secretary shall issue regulations specifying re-
quirements of this title that apply to outlying areas receiv-
ing funds under section 221.
Subtitle D—General Provisions
SEC. 231. MONITORING.
(a) IN GENERAL.—The Secretary is authorized to
monitor all recipients of financial assistance under this
title to determine whether the recipients are complying
with the provisions of this title, including the regulations
issued under this title.
(b) INVESTIGATIONS.—The Secretary may inves-
tigate any matter the Secretary determines to be necessary
to determine the compliance of the recipients with this
title, including the regulations issued under this title. The
investigations authorized by this subsection may include
examining records (including making certified copies of
the records), questioning employees and participants, and
entering any premises or onto any site in which any part
of an employment program of such a recipient is con-
ducted or in which any of the records of the recipient are
kept.
(c) WITNESSES AND PRODUCTION.—For the purpose
of any investigation or hearing conducted under this title
by the Secretary, the provisions of section 9 of the Federal
Trade Commission Act (15 U.S.C. 49) (relating to the at-
tendance of witnesses and the production of documents)
apply to the Secretary, in the same manner and to the
same extent as the provisions apply to the Federal Trade
Commission.
SEC. 232. REPORT TO CONGRESS.
The Secretary shall prepare and submit to Congress
a report containing—
(1) the information received by the Secretary
from State reports submitted under section 204; and
(2) information on the costs of the programs to
the Federal Government and level of funding pro-
vided by the Federal Government for such programs.
SEC. 233. FEDERAL ADMINISTRATION.
From the amounts appropriated under section 234
for a fiscal year, the Secretary may reserve not more than
10 percent for the administration of this title.
SEC. 234. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to carry out
this 
title, 
$2,300,000,000 
for 
fiscal 
year 
2000,
$6,800,000,000 
for 
fiscal 
year 
2001, 
and
$11,300,000,000 for fiscal year 2002.
TITLE III—FEDERAL GRANTS TO
LOCAL AREAS FOR IMPLE-
MENTATION 
OF 
EMPLOY-
MENT PROGRAMS
SEC. 301. GRANTS
(a) FUNDS.—If the funds allotted under section 201
to a State for a fiscal year are not distributed to the State
for such fiscal year, the Secretary—
(1) shall first use the funds for implementation
grants to local areas in the State in accordance with
this title; and
(2) shall reallot any remaining funds to remain-
ing eligible States in accordance with section 201(d).
(b) GRANTS.—Using the funds described in sub-
section (a), the Secretary may provide implementation
grants, on a competitive basis, directly to local areas in
States described in subsection (c), in such amounts as the
Secretary may determine to be necessary, to implement
employment programs in the local areas. The Secretary
shall make the grants to pay for the program share of
the cost of the implementation.
(c) ELIGIBILITY.—To be eligible to receive a grant
under this section for a fiscal year, a local area shall be
located in a State for which the Secretary has not ap-
proved an application under section 202 for the fiscal year.
(d) PROGRAM SHARE.—
(1) IN GENERAL.—The program share of the
cost of implementing an employment program in a
local area is 662⁄3 percent.
(2) NON-PROGRAM SHARE.—The non-program
share of the cost may be provided in cash (including
funds made available from federally funded pro-
grams, other than programs carried out under this
Act, with a non-Federal share requirement, and in-
cluding funds from State, local, and private sources)
or in kind, fairly evaluated, including plant, equip-
ment, or services.
SEC. 302. APPLICATIONS.
(a) IDENTIFICATION
OF
COMMUNITIES
WITHIN
LOCAL AREAS.—To develop the applications under sub-
section (b) and enable the Secretary to make the selection
described in subsection (c), the chief elected officials of
the local areas in a State described in section 301(c) shall
compile and analyze data in accordance with the require-
ments applicable to Governors under section 202(c)(2).
(b) APPLICATION.—For a local area to be eligible to
receive a grant under this section, the chief local official
of the local area shall submit the application described in
section 212.
(c) SELECTION PRIORITY AND CONSIDERATION.—In
selecting local areas to receive grants under this section,
the Secretary shall give priority to local areas described
in section 202(c)(1)(A) and take into consideration the
need of the local areas for the employment to be provided
through the employment programs.
SEC. 303. ADMINISTRATION.
(a) IN GENERAL.—The chief elected officials of the
local areas shall implement the employment programs in
accordance with—
(1) the requirements applicable to local areas
and chief elected officials under subtitle B of title II,
including the requirements of section 216(b); and
(2) the provisions applicable to States and Gov-
ernors under sections 202(c)(2) and 214.
(b) REFERENCES.—For purposes of subsection (a),
references in the requirements described in subsection
(a)(1) (other than the provisions described in subsection
(a)(2)) to a State, Governor, or State entity shall be con-
sidered to be references to the Secretary.
(c) REGULATIONS.—The Secretary shall issue regula-
tions specifying the manner in which the requirements and
provisions described in subsection (a) shall apply to chief
elected officials under this title and the manner in which
the requirements of subtitle D of title II shall apply to
programs carried out under this title.
TITLE IV—GRANTS TO INDIAN
TRIBES AND NATIVE HAWAI-
IAN ORGANIZATIONS FOR EM-
PLOYMENT PROGRAMS
SEC. 401. GRANTS.
From the amounts appropriated under sections 104
and 234 for a fiscal year, the Secretary shall reserve not
more than 3 percent to make grants to Indian tribes and
Native Hawaiian organizations for development and imple-
mentation, respectively, of employment programs.
SEC. 402. PLANS.
To be eligible to receive a grant under section 401,
an Indian tribe or Native Hawaiian organization shall sub-
mit a plan to the Secretary at such time, in such manner,
and containing such information, as the Secretary may re-
quire.
SEC. 403. REGULATIONS.
The Secretary shall issue regulations specifying re-
quirements of title II that apply to Indian tribes and Na-
tive Hawaiian organizations receiving grants under section
401. Such requirements shall not include a non-program
share requirement.
TITLE 
V—COMMUNITY 
DEVEL-
OPMENT VENTURE CAPITAL
SEC. 501. COMMUNITY DEVELOPMENT VENTURE CAPITAL
ACTIVITIES
(a) IN GENERAL.—The Administrator is authorized
to make grants to 1 or more intermediary organizations
to develop the capacity of community development venture
capital organizations.
(b) USE OF ASSISTANCE.—An intermediary organiza-
tion that receives a grant under subsection (a) may use
the funds made available through the grant to—
(1) provide training, education, support, peer
exchanges, and advice to enhance the technical and
administrative capacity of community development
venture capital organizations;
(2) provide capacity building grants, operating
support, and capital in the form of investments,
loans, or grants, to enable community development
venture capital organizations to provide financing
to—
(A) private businesses with enterprises
benefiting low-income communities, as defined
by the Administrator; or
(B) entities carrying out community devel-
opment projects benefiting the communities;
(3) invest, in partnership with community de-
velopment venture capital organizations, in such en-
terprises or projects; and
(4) such other activities as may be determined
to be appropriate by the organization in consultation
with the Administrator.
(c) ALLOCATION
OF ASSISTANCE.—The Adminis-
trator shall ensure that not less than 25 percent of the
funds made available under this section are made available
to support activities described in subsection (b)(3).
(d) MATCHING REQUIREMENT.—No intermediary or-
ganization shall receive a grant under this section unless
that organization agrees that, with respect to the costs
to be incurred by the organization in carrying out the ac-
tivities for which the grant was awarded, the organization
will make available (directly or through donations from
public or private entities) non-Federal contributions in an
amount equal to not less than $1 for every $1 of Federal
funds provided under the grant. The non-Federal con-
tributions may be in cash or in kind, fairly evaluated, in-
cluding plant, equipment, or services.
(e) REQUIREMENTS.—The Administrator may issue
such requirements as may be necessary to carry out this
section. The requirements shall take effect on issuance.
nancial assistance to community development ven-
ture capital organizations, including organizations in
the process of establishing community development
venture capital funds.
TITLE VI—REVENUE
PROVISIONS
SEC. 601. DENIAL OF DEDUCTION FOR PAYMENTS OF EX-
CESSIVE COMPENSATION.
(a) IN GENERAL.—Section 162 of the Internal Reve-
nue Code of 1986 (relating to deduction for trade or busi-
ness expenses) is amended by inserting after subsection
(h) the following new subsection:
‘‘(i) EXCESSIVE COMPENSATION.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed under this chapter for any excessive com-
pensation with respect to any full-time employee.
‘‘(2) EXCESSIVE
COMPENSATION.—For pur-
poses of this subsection, the term ‘excessive com-
pensation’ means, with respect to any employee, the
amount by which—
‘‘(A) the compensation for services per-
formed by such employee during the taxable
year, exceeds
‘‘(B) an amount equal to 25 times the low-
est compensation for services performed by any
other full-time employee during such taxable
year.
‘‘(3) DEFINITIONS AND SPECIAL RULES.—For
purposes of this subsection—
‘‘(A) COMPENSATION.—
‘‘(i) IN
GENERAL.—The term ‘com-
pensation’ means salary, wages, and bo-
nuses.
‘‘(ii) PART-YEAR EMPLOYEES.—In the
case of any part-year employee, the com-
pensation of the employee shall be com-
puted on an annualized basis.
‘‘(B) EMPLOYER.—All persons treated as a
single employer under subsection (a) or (b) of
section 52 or subsection (m) or (o) of section
414 shall be treated as 1 employer.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 602. REPEAL OF DEFERRAL FOR INCOME OF CON-
TROLLED FOREIGN CORPORATIONS.
(a) GENERAL RULE.—Section 952 of the Internal
Revenue Code of 1986 is amended to read as follows:
‘‘SEC. 952. SUBPART F INCOME.
‘‘(a) GENERAL RULE.—For purposes of this subpart,
the term ‘subpart F income’ means the earnings and prof-
its of the controlled foreign corporation for the taxable
year computed with the following adjustments:
‘‘(1) There shall be excluded the amount of the
earnings and profits which are attributable to in-
come from sources within the United States which
is effectively connected with the conduct by the con-
trolled foreign corporation of a trade or business
within the United States, except to the extent such
income is exempt from taxation (or subject to a re-
duced rate of tax) pursuant to a treaty obligation of
the United States. For purposes of the preceding
sentence, income described in paragraph (2) or (3)
of section 921(d) shall be treated as derived from
sources within the United States.
‘‘(2) In determining earnings and profits (or
the deficit in earnings and profits), the amount of
any illegal bribe, kickback, or other payment (within
the meaning of section 162(c)) shall not be taken
into account to decrease such earnings and profits or
to increase such deficit. The payments referred to in
the preceding sentence are payments which would be
unlawful under the Foreign Corrupt Practices Act of
1977 if the payor were a United States person.
‘‘(3) Under regulations prescribed by the Sec-
retary, there shall be excluded the part of any earn-
ings and profits if it is established to the satisfaction
of the Secretary that such part could not have been
distributed by the controlled foreign corporation to
United States shareholders who own (within the
meaning of section 958(a)) stock of such controlled
foreign corporation because of currency or other re-
strictions or limitations imposed under the laws of
any foreign country.
‘‘(4) Earnings and profits shall be determined
without regard to paragraphs (4), (5), and (6) of
section 312(n). Under regulations, the preceding
sentence shall not apply to the extent it would in-
crease earnings and profits by an amount which was
previously distributed by the controlled foreign cor-
poration.
Except as provided in this subsection and section
312(k)(4), the earnings and profits of any foreign corpora-
tion, and any deficit in earnings and profits of any foreign
corporation, for any taxable year shall be determined ac-
cording to rules similar to those applicable to domestic
corporations, under regulations prescribed by the Sec-
retary.
‘‘(b) CERTAIN DEFICITS MAY BE TAKEN INTO AC-
COUNT.—
‘‘(1) TREATMENT
OF
CERTAIN
PRIOR
YEAR
DEFICITS.—
‘‘(A) IN GENERAL.—The amount included
in the gross income of any United States share-
holder under section 951(a)(1)(A)(i) for any
taxable year with respect to any controlled for-
eign corporation shall be reduced by the amount
of such shareholder’s pro rata share of any
qualified deficit of such controlled foreign cor-
poration.
‘‘(B) QUALIFIED DEFICIT.—For purposes
of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied deficit’ means any deficit in the earn-
ings and profits of the controlled foreign
corporation for any prior taxable year
which began after December 31, 1998, and
for which such corporation was a con-
trolled foreign corporation, but only to the
extent such deficit has not previously been
taken into account under this paragraph.
‘‘(ii) SPECIAL
RULE
FOR
DEFICITS
BEFORE 1999.—The term ‘qualified deficit’
includes any deficit in earnings and profits
for any taxable year beginning before Jan-
uary 1, 1999, to the extent that such defi-
cit qualified as a qualified deficit under
subsection (c)(1)(B) of this section (as in
effect on the day before the date of the en-
actment of the Strategic Transitional Em-
ployment Act); except that any such deficit
may be taken into account under this para-
graph only to offset amounts attributable
to the same activity as the activity giving
rise to such deficit.
‘‘(C) PRO RATA SHARE.—For purposes of
this paragraph, the shareholder’s pro rata share
of any deficit shall be determined under rules
similar to the rules of section 951(a)(2) for
whichever of the following yields the smallest
share:
‘‘(i) the close of the taxable year, or
‘‘(ii) the close of the taxable year in
which the deficit arose.
‘‘(2) CERTAIN DEFICITS OF MEMBER OF THE
SAME
CHAIN
OF
CORPORATIONS
MAY
BE
TAKEN
INTO ACCOUNT.—