under section 1201(a) bears to the alternative
rate of tax under section 1201(a).’’
(12) Subsection (d) of section 1044 is amended
by striking the last sentence.
(13)(A) Paragraph (2) of section 1211(b) is
amended to read as follows:
‘‘(2) the sum of—
‘‘(A) the excess of the net short-term cap-
ital loss over the net long-term capital gain, and
‘‘(B) one-half of the excess of the net long-
term capital loss over the net short-term capital
gain.’’
(B) So much of paragraph (2) of section
1212(b) as precedes subparagraph (B) thereof is
amended to read as follows:
‘‘(2) SPECIAL RULES.—
‘‘(A) ADJUSTMENTS.—
‘‘(i) For purposes of determining the
excess referred to in paragraph (1)(A),
there shall be treated as short-term capital
gain in the taxable year an amount equal
to the lesser of—
‘‘(I) the amount allowed for the
taxable year under paragraph (1) or
(2) of section 1211(b), or
‘‘(II) the adjusted taxable income
for such taxable year.
‘‘(ii) For purposes of determining the
excess referred to in paragraph (1)(B),
there shall be treated as short-term capital
gain in the taxable year an amount equal
to the sum of—
‘‘(I) the amount allowed for the
taxable year under paragraph (1) or
(2) of section 1211(b) or the adjusted
taxable income for such taxable year,
whichever is the least, plus
‘‘(II) the excess of the amount
described in subclause (I) over the net
short-term capital loss (determined
without regard to this subsection) for
such year.’’
(C) Subsection (b) of section 1212 is
amended by adding at the end the following
new paragraph:
‘‘(3) TRANSITIONAL RULE.—In the case of any
amount which, under paragraph (1) and section
1211(b) (as in effect for taxable years beginning be-
fore January 1, 1996), is treated as a capital loss
in the first taxable year beginning after December
31, 1995, paragraph (1) and section 1211(b) (as so
in effect) shall apply (and paragraph (1) and section
1211(b) as in effect for taxable years beginning
after December 31, 1995, shall not apply) to the ex-
tent such amount exceeds the total of any net cap-
ital gains (determined without regard to this sub-
section) of taxable years beginning after December
31, 1995.’’
(14) Paragraph (1) of section 1402(i) is amend-
ed by inserting ‘‘, and the deduction provided by sec-
tion 1202 shall not apply’’ before the period at the
end thereof.
(15) Subsection (e) of section 1445 is amend-
ed—
(A) in paragraph (1) by striking ‘‘35 per-
cent (or, to the extent provided in regulations,
28 percent)’’ and inserting ‘‘25 percent (or, to
the extent provided in regulations, 19.8 per-
cent)’’, and
(B) in paragraph (2) by striking ‘‘35 per-
cent’’ and inserting ‘‘25 percent’’.
(16)(A) 
The 
second 
sentence 
of 
section
7518(g)(6)(A) is amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) applies’’, and
(ii) by striking ‘‘28 percent (34 percent’’
and inserting ‘‘19.8 percent (25 percent’’.
(B) 
The 
second 
sentence 
of 
section
607(h)(6)(A) of the Merchant Marine Act, 1936 is
amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) of such Code ap-
plies’’, and
(ii) by striking ‘‘28 percent (34 percent’’
and inserting ‘‘19.8 percent (25 percent’’.
(e) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter P of chapter 1 is amended by
inserting after the item relating to section 1201 the follow-
ing new item:
‘‘Sec. 1202. Capital gains deduction.’’
(f) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to taxable years ending after
December 31, 1994.
(2) CONTRIBUTIONS.—The amendment made
by subsection (d)(3) shall apply to contributions on
or after January 1, 1995.
(3) USE OF LONG-TERM LOSSES.—The amend-
ments made by subsection (d)(13) shall apply to tax-
able years beginning after December 31, 1995.
(4) WITHHOLDING.—The amendment made by
subsection (d)(15) shall apply only to amounts paid
after the date of the enactment of this Act.
SEC. 302. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER
DECEMBER 31, 1994, FOR PURPOSES OF DE-
TERMINING GAIN.
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is
amended by inserting after section 1021 the following new
section:
‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED
AFTER DECEMBER 31, 1994, FOR PURPOSES
OF DETERMINING GAIN.
‘‘(a) GENERAL RULE.—
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Solely for purposes of determining
gain on the sale or other disposition by a taxpayer
(other than a corporation) of an indexed asset which
has been held for more than 3 years, the indexed
basis of the asset shall be substituted for its ad-
justed basis.
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.—
The deductions for depreciation, depletion, and am-
ortization shall be determined without regard to the
‘‘(i) 
the 
gross 
domestic 
product
deflator for the last calendar quarter end-
ing before the asset is disposed of, exceeds
‘‘(ii) the gross domestic product
deflator for the last calendar quarter end-
ing before the asset was acquired by the
taxpayer.
The percentage under subparagraph (B) shall be
rounded to the nearest 1⁄10 of 1 percentage point.
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—
The gross domestic product deflator for any cal-
endar quarter is the implicit price deflator for the
gross domestic product for such quarter (as shown
in the last revision thereof released by the Secretary
of Commerce before the close of the following cal-
endar quarter).
‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI-
MINISHED
RISK
OF
LOSS; TREATMENT
OF
SHORT
SALES.—
‘‘(1) IN GENERAL.—If the taxpayer (or a relat-
ed person) enters into any transaction which sub-
stantially reduces the risk of loss from holding any
asset, such asset shall not be treated as an indexed
asset for the period of such reduced risk.
‘‘(2) SHORT SALES.—
‘‘(A) IN GENERAL.—In the case of a short
sale of an indexed asset with a short sale period
in excess of 3 years, for purposes of this title,
the amount realized shall be an amount equal
to the amount realized (determined without re-
gard to this paragraph) increased by the appli-
cable inflation adjustment. In applying sub-
section (c)(2) for purposes of the preceding sen-
tence, the date on which the property is sold
short shall be treated as the date of acquisition
and the closing date for the sale shall be treat-
ed as the date of disposition.
‘‘(B) SHORT SALE PERIOD.—For purposes
of subparagraph (A), the short sale period be-
gins on the day that the property is sold and
ends on the closing date for the sale.
‘‘(e) TREATMENT
OF
REGULATED
INVESTMENT
COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.—
‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.—
‘‘(A) IN GENERAL.—Except as otherwise
provided in this paragraph, the adjustment
under subsection (a) shall be allowed to any
qualified investment entity (including for pur-
poses of determining the earnings and profits of
such entity).
‘‘(B) EXCEPTION FOR CORPORATE SHARE-
HOLDERS.—Under regulations—
‘‘(i) in the case of a distribution by a
qualified investment entity (directly or in-
directly) to a corporation—
‘‘(I) the determination of whether
such distribution is a dividend shall be
made without regard to this section,
and
‘‘(II) the amount treated as gain
by reason of the receipt of any capital
gain dividend shall be increased by the
percentage by which the entity’s net
capital gain for the taxable year (de-
termined without regard to this sec-
tion) exceeds the entity’s net capital
gain for such year determined with re-
gard to this section, and
‘‘(ii) there shall be other appropriate
adjustments (including deemed distribu-
tions) so as to ensure that the benefits of
this section are not allowed (directly or in-
directly) to corporate shareholders of quali-
fied investment entities.
For purposes of the preceding sentence, any
amount includible in gross income under section
852(b)(3)(D) shall be treated as a capital gain
dividend and an S corporation shall not be
treated as a corporation.
‘‘(C) 
EXCEPTION
FOR
QUALIFICATION
PURPOSES.—This section shall not apply for
purposes of sections 851(b) and 856(c).
‘‘(D) EXCEPTION FOR CERTAIN TAXES IM-
POSED AT ENTITY LEVEL.—
‘‘(i) TAX ON FAILURE TO DISTRIBUTE
ENTIRE GAIN.—If any amount is subject to
tax under section 852(b)(3)(A) for any
taxable year, the amount on which tax is
imposed under such section shall be in-
creased by the percentage determined
under subparagraph (B)(i)(II). A similar
rule shall apply in the case of any amount
subject to tax under paragraph (2) or (3)
of section 857(b) to the extent attributable
to the excess of the net capital gain over
the deduction for dividends paid deter-
mined with reference to capital gain divi-
dends only. The first sentence of this
clause shall not apply to so much of the
amount subject to tax under section
852(b)(3)(A) as is designated by the com-
pany under section 852(b)(3)(D).
‘‘(ii) OTHER
TAXES.—This section
shall not apply for purposes of determining
the amount of any tax imposed by para-
graph (4), (5), or (6) of section 857(b).
‘‘(2) ADJUSTMENTS
TO
INTERESTS
HELD
IN
ENTITY.—
‘‘(A) REGULATED
INVESTMENT
COMPA-
NIES.—Stock in a regulated investment com-
pany (within the meaning of section 851) shall
be an indexed asset for any calendar quarter in
the same ratio as—
‘‘(i) the average of the fair market
values of the indexed assets held by such
company at the close of each month during
such quarter, bears to
‘‘(ii) the average of the fair market
values of all assets held by such company
at the close of each such month.
‘‘(B) 
REAL
ESTATE
INVESTMENT
TRUSTS.—Stock in a real estate investment
trust (within the meaning of section 856) shall
be an indexed asset for any calendar quarter in
the same ratio as—
‘‘(i) the fair market value of the in-
dexed assets held by such trust at the close
of such quarter, bears to
‘‘(ii) the fair market value of all as-
sets held by such trust at the close of such
quarter.
‘‘(C) RATIO OF 80 PERCENT OR MORE.—If
the ratio for any calendar quarter determined
under subparagraph (A) or (B) would (but for
this subparagraph) be 80 percent or more, such
ratio for such quarter shall be 100 percent.
‘‘(D) RATIO OF 20 PERCENT OR LESS.—If
the ratio for any calendar quarter determined
under subparagraph (A) or (B) would (but for
this subparagraph) be 20 percent or less, such
ratio for such quarter shall be zero.
‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For
purposes of this paragraph, a qualified invest-
ment entity which holds a partnership interest
shall be treated (in lieu of holding a partnership
interest) as holding its proportionate share of
the assets held by the partnership.
‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS-
TRIBUTIONS.—Except as otherwise provided by the
Secretary, a distribution with respect to stock in a
qualified investment entity which is not a dividend
and which results in a reduction in the adjusted
basis of such stock shall be treated as allocable to
stock acquired by the taxpayer in the order in which
such stock was acquired.
‘‘(4) QUALIFIED
INVESTMENT
ENTITY.—For
purposes of this subsection, the term ‘qualified in-
vestment entity’ means—
‘‘(A) a regulated investment company
(within the meaning of section 851), and
‘‘(B) a real estate investment trust (within
the meaning of section 856).
‘‘(f) OTHER PASS-THRU ENTITIES.—
‘‘(1) PARTNERSHIPS.—
‘‘(A) IN GENERAL.—In the case of a part-
nership, the adjustment made under subsection
(a) at the partnership level shall be passed
through to the partners.
‘‘(B) SPECIAL RULE IN THE CASE OF SEC-
TION 754 ELECTIONS.—In the case of a transfer
of an interest in a partnership with respect to
which the election provided in section 754 is in
effect—
‘‘(i) the adjustment under section
743(b)(1) shall, with respect to the trans-
feror partner, be treated as a sale of the
partnership assets for purposes of applying
this section, and
‘‘(ii) with respect to the transferee
partner, the partnership’s holding period
for purposes of this section in such assets
shall be treated as beginning on the date
of such adjustment.
‘‘(2) S CORPORATIONS.—In the case of an S
corporation, the adjustment made under subsection
(a) at the corporate level shall be passed through to
the shareholders. This section shall not apply for
purposes of determining the amount of any tax im-
posed by section 1374 or 1375.
‘‘(3) COMMON TRUST FUNDS.—In the case of a
common trust fund, the adjustment made under sub-
section (a) at the trust level shall be passed through
to the participants.
‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN
DETERMINING LOSS ON SALE OF INTEREST IN EN-
TITY.—Notwithstanding the preceding provisions of
this subsection, for purposes of determining the
amount of any loss on a sale or exchange of an in-
terest in a partnership, S corporation, or common
trust fund, the adjustment made under subsection
(a) shall not be taken into account in determining
the adjusted basis of such interest.
‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.—
‘‘(1) IN GENERAL.—This section shall not apply
to any sale or other disposition of property between
related persons except to the extent that the basis
of such property in the hands of the transferee is a
substituted basis.
‘‘(2) RELATED PERSONS DEFINED.—For pur-
poses of this section, the term ‘related persons’
means—
‘‘(A) persons bearing a relationship set
forth in section 267(b), and
‘‘(B) persons treated as single employer
under subsection (b) or (c) of section 414.
‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST-
MENT.—If any person transfers cash, debt, or any other
property to another person and the principal purpose of
such transfer is to secure or increase an adjustment under
subsection (a), the Secretary may disallow part or all of
such adjustment or increase.
‘‘(i) SPECIAL RULES.—For purposes of this section—
‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If
there is an addition to the adjusted basis of any tan-
gible property or of any stock in a corporation dur-
ing the taxable year by reason of an improvement to
such property or a contribution to capital of such
corporation—
‘‘(A) such addition shall never be taken
into account under subsection (c)(1)(A) if the
aggregate amount thereof during the taxable
year with respect to such property or stock is
less than $1,000, and
‘‘(B) such addition shall be treated as a
separate asset acquired at the close of such tax-
able year if the aggregate amount thereof dur-
ing the taxable year with respect to such prop-
erty or stock is $1,000 or more.
A rule similar to the rule of the preceding sentence
shall apply to any other portion of an asset to the
extent that separate treatment of such portion is ap-
propriate to carry out the purposes of this section.
‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS
THROUGHOUT HOLDING PERIOD.—The applicable in-
flation ratio shall be appropriately reduced for peri-
ods during which the asset was not an indexed asset.
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a
corporation which is not a dividend shall be treated
as a disposition.
‘‘(4) ACQUISITION
DATE
WHERE
THERE
HAS
BEEN
PRIOR
APPLICATION
OF
SUBSECTION
(a)(1)
WITH RESPECT TO THE TAXPAYER.—If there has
been a prior application of subsection (a)(1) to an
asset while such asset was held by the taxpayer, the
date of acquisition of such asset by the taxpayer
shall be treated as not earlier than the date of the
most recent such prior application.
‘‘(5) COLLAPSIBLE CORPORATIONS.—The appli-
cation of section 341(a) (relating to collapsible cor-
porations) shall be determined without regard to this
section.
‘‘(j) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for part II of subchapter O of chapter 1 is amended by
inserting after the item relating to section 1021 the follow-
ing new item:
‘‘Sec. 1022. Indexing of certain assets acquired after December
31, 1994, for purposes of determining gain.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to the disposition of any
property the holding period of which begins after
December 31, 1994.
(2) CERTAIN TRANSACTIONS BETWEEN RELAT-
ED PERSONS.—The amendments made by this sec-
tion shall not apply to the disposition of any prop-
erty acquired after December 31, 1994, from a re-
lated person (as defined in section 1022(g)(2) of the
Internal Revenue Code of 1986, as added by this
section) if—
(A) such property was so acquired for a
price less than the property’s fair market value,
and
(B) the amendments made by this section
did not apply to such property in the hands of
such related person.
(d) ELECTION TO RECOGNIZE GAIN
ON ASSETS
HELD ON JANUARY 1, 1995.—For purposes of the Inter-
nal Revenue Code of 1986—
(1) IN GENERAL.—A taxpayer other than a cor-
poration may elect to treat—
(A) any readily tradable stock (which is an
indexed asset) held by such taxpayer on Janu-
ary 1, 1995, and not sold before the next busi-
ness day after such date, as having been sold
on such next business day for an amount equal
to its closing market price on such next busi-
ness day (and as having been reacquired on
such next business day for an amount equal to
such closing market price), and
(B) any other indexed asset held by the
taxpayer on January 1, 1995, as having been
sold on such date for an amount equal to its
fair market value on such date (and as having
been reacquired on such date for an amount
equal to such fair market value).
(2) TREATMENT OF GAIN OR LOSS.—
(A) Any gain resulting from an election
under paragraph (1) shall be treated as received
or accrued on the date the asset is treated as
sold under paragraph (1) and shall be recog-
nized notwithstanding any provision of the In-
ternal Revenue Code of 1986.
(B) Any loss resulting from an election
under paragraph (1) shall not be allowed for
any taxable year.
(3) ELECTION.—An election under paragraph
(1) shall be made in such manner as the Secretary
may prescribe and shall specify the assets for which
such election is made. Such an election, once made
with respect to any asset, shall be irrevocable.
(4) READILY TRADABLE STOCK.—For purposes
of this subsection, the term ‘‘readily tradable stock’’
means any stock which, as of January 1, 1995, is
readily tradable on an established securities market
or otherwise.
(e) TREATMENT OF PRINCIPAL RESIDENCES.—Prop-
erty held and used by the taxpayer on January 1, 1995,
as his principal residence (within the meaning of section
1034 of the Internal Revenue Code of 1986) shall be treat-
ed—
(1) for purposes of subsection (c)(1) of this sec-
tion, as having a holding period which begins after
December 31, 1994, and
(2) for purposes of section 1022(c)(2)(B)(ii) of
such Code, as having been acquired on January 1,
1995.
Subsection (d) shall not apply to property to which this
subsection applies.
PART II—CAPITAL GAINS REDUCTION FOR
CORPORATIONS
SEC. 311. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX
FOR CORPORATIONS.
(a) IN GENERAL.—Section 1201 is amended to read
as follows:
‘‘SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.
‘‘(a) GENERAL RULE.—If for any taxable year a cor-
poration has a net capital gain, then, in lieu of the tax
imposed by sections 11, 511, and 831 (a) and (b) (which-
ever is applicable), there is hereby imposed a tax (if such
tax is less than the tax imposed by such sections) which
shall consist of the sum of—
‘‘(1) a tax computed on the taxable income re-
duced by the amount of the net capital gain, at the
rates and in the manner as if this subsection had
not been enacted, plus
‘‘(2) a tax of 25 percent of the net capital gain.
‘‘(b) TRANSITIONAL RULE.—
‘‘(1) IN GENERAL.—In the case of any taxable
year ending after December 31, 1994, and beginning
before January 1, 1996, subsection (a)(2) shall be
applied as if it read as follows:
‘‘ ‘(2)(A) a tax of 25 percent of the lesser of—
‘‘ ‘(i) the net capital gain for the taxable
year, or
PART III—CAPITAL LOSS DEDUCTION ALLOWED
WITH RESPECT TO SALE OR EXCHANGE OF
PRINCIPAL RESIDENCE
SEC. 316. CAPITAL LOSS DEDUCTION ALLOWED WITH RE-
SPECT TO SALE OR EXCHANGE OF PRINCIPAL
RESIDENCE.
(a) IN GENERAL.—Subsection (c) of section 165 (re-
lating to limitation on losses of individuals) is amended
by striking ‘‘and’’ at the end of paragraph (2), by striking
the period at the end of paragraph (3) and inserting ‘‘;
and’’, and by adding at the end the following new para-
graph:
‘‘(4) losses arising from the sale or exchange of
the principal residence (within the meaning of sec-
tion 1034) of the taxpayer.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to sales and exchanges after De-
cember 31, 1994, in taxable years ending after such date.
Subtitle B—Cost Recovery
Provisions
SEC. 321. DEPRECIATION ADJUSTMENT FOR CERTAIN
PROPERTY PLACED IN SERVICE AFTER DE-
CEMBER 31, 1994.
(a) IN GENERAL.—Section 168 (relating to acceler-
ated cost recovery system) is amended by adding at the
end thereof the following new subsection:
‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA-
LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED
IN SERVICE AFTER DECEMBER 31, 1994.—
‘‘(1) IN
GENERAL.—In the case of tangible
property placed in service after December 31, 1994,
the deduction under this section with respect to such
property—
‘‘(A) shall be determined by substituting
‘150 percent’ for ‘200 percent’ in subsection
(b)(1) in the case of property to which the 200
percent declining balance method would other-
wise apply, and
‘‘(B) for any taxable year after the taxable
year during which the property is placed in
service shall be—
‘‘(i) the amount determined under this
section for such taxable year without re-
gard to this subparagraph, multiplied by
‘‘(ii) the applicable neutral cost recov-
ery ratio for such taxable year.
‘‘(2) APPLICABLE
NEUTRAL
COST
RECOVERY
RATIO.—For purposes of paragraph (1)—
‘‘(A) IN GENERAL.—The applicable neutral
cost recovery ratio for the property for any tax-
able year is the number determined by—
‘‘(i) dividing—
‘‘(I) the gross domestic product
deflator for the calendar quarter
which includes the mid-point of the
taxable year, by
‘‘(II) the gross domestic product
deflator for the calendar quarter
which includes the mid-point of the
taxable year in which the property
was placed in service by the taxpayer,
and
‘‘(ii) then multiplying the number de-
termined under clause (i) by the number
equal to 1.035 to the nth power where ‘n’
is the number of full years (as of the close
of the taxable year referred to in clause
(i)(I)) after the date such property was
placed in service.
The applicable neutral cost recovery ratio shall
never be less than 1. The applicable neutral
cost recovery ratio shall be rounded to the near-
est 1⁄1000.
‘‘(B) SPECIAL RULE FOR CERTAIN PROP-
ERTY.—In the case of property described in
paragraph (2) or (3) of subsection (b) or in
subsection (g), the applicable neutral cost recov-
ery ratio shall be determined without regard to
subparagraph (A)(ii).
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—
For purposes of paragraph (2), the gross domestic
product deflator for any calendar quarter is the im-
plicit price deflator for the gross domestic product
for such quarter (as shown in the last revision there-
of released by the Secretary of Commerce before the
close of the following calendar quarter).
‘‘(4) COORDINATION WITH INDEXING OF BASIS
FOR
PURPOSES
OF
DETERMINING
GAIN.—Section
1022 shall not apply to any property to which this
subsection applies.
‘‘(5) ELECTION
NOT
TO
HAVE
SUBSECTION
APPLY.—This subsection shall not apply to any
property if the taxpayer elects not to have this sub-
section apply to such property. Such an election,
once made, shall be irrevocable.
‘‘(6) CHURNING
TRANSACTIONS.—This sub-
section shall not apply to any property if this section
would not apply to such property were—
‘‘(A) subsection (f)(5)(A)(ii) applied by
substituting ‘1995’ for ‘1987’ and ‘1994’ for
‘1986’, and
‘‘(B) subsection (f)(5)(B) not applied.
‘‘(7) ADDITIONAL DEDUCTION NOT TO AFFECT
BASIS OR RECAPTURE.—The additional amount de-
termined under this section by reason of this sub-
section shall not be taken into account in determin-
ing the adjusted basis of any property or of any in-
terest in a pass-thru entity (as defined in section
1202(e)(2)) which holds such property and shall not
be treated as a deduction for depreciation for pur-
poses of sections 1245 and 1250.’’
(b) MINIMUM TAX TREATMENT.—
(1) Paragraph (1) of section 56(a) is amended
by adding at the end thereof the following new sub-
paragraph:
‘‘(E) USE OF NEUTRAL COST RECOVERY
RATIO.—This paragraph shall not apply to
property to which section 168(k) applies.’’
(2) Clause (i) of section 56(g)(4)(A) is amended
by striking ‘‘(a)(1)(A)’’ and inserting ‘‘(a)(1)’’.
(3) Subparagraph (C) of section 56(g)(4) is
amended by adding at the end the following new
clause:
‘‘(v) NEUTRAL COST RECOVERY DE-
DUCTION.—Clause (i) shall not apply to
the additional deduction allowable by rea-
son of section 168(k).’’
(c) TECHNICAL AMENDMENTS.—
(1) Clause (i) of section 280F(a)(1)(B) is
amended by adding at the end the following new
sentence: ‘‘For purposes of this clause, the unre-
covered basis of any passenger automobile shall be
treated as including the additional amount deter-
mined under section 168 by reason of subsection (k)
thereof to the extent not allowed as a deduction by
reason of this paragraph for any taxable year in the
recovery period.’’
(2) Subparagraph (B) of section 382(h)(2) is
amended by adding at the end the following new
sentence: ‘‘The amount of the net unrealized built-
in loss shall be increased by the amount of the addi-
tional deduction allowable by reason of section
168(k) which is treated under the preceding sen-
tence as a recognized built-in loss.’’
(3) Subsection (a) of section 465 is amended by
adding at the end the following new paragraph:
‘‘(4) TREATMENT OF NEUTRAL COST RECOVERY
DEDUCTION.—
‘‘(A) IN GENERAL.—None of the additional
deduction allowable by reason of section 168(k)
for the taxable year shall be disallowed under
paragraph (1) unless there is a disallowed non-
NCR loss for such year.
‘‘(B) PROPORTIONATE DISALLOWANCE.—
‘‘(i) IN GENERAL.—If there is a dis-
allowed non-NCR loss for the taxable year,
only the disallowed portion of the addi-
tional deduction allowable by reason of sec-
tion 168(k) shall be not allowed under
paragraph (1).
‘‘(ii) 
DISALLOWED
PORTION.—For
purposes of clause (i), the disallowed por-
tion is the percentage which the disallowed
non-NCR loss’s allocable share of non-
NCR depreciation is of total non-NCR de-
preciation.
‘‘(iii) ALLOCABLE SHARE.—For pur-
poses of clause (ii), a disallowed non-NCR
loss’s allocable share of non-NCR deprecia-
tion is the amount which bears the same
ratio to the amount of the loss as the
amount of non-NCR depreciation for the
taxable year bears to the total amount of
deductions for such taxable year.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) DISALLOWED
NON-NCR
LOSS.—
The 
term 
‘disallowed 
non-NCR 
loss’
means, for any taxable year, the amount of
the loss from the activity which would be
disallowed under paragraph (1) if such loss
were determined without regard to the ad-
ditional deduction allowable by reason of
section 168(k).
‘‘(ii) NON-NCR
DEPRECIATION.—The
term ‘non-NCR depreciation’ means the
amount allowable as a deduction under
section 168 without regard to subsection
(k) thereof.’’
(4) Subparagraph (A) of section 1503(e)(1) is
amended by inserting before the comma ‘‘and shall
be determined without regard to section 168(k)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1994.
SEC. 322. TREATMENT OF ABANDONMENT OF LESSOR IM-
PROVEMENTS AT TERMINATION OF LEASE.
(a) IN GENERAL.—Paragraph (8) of section 168(i)
is amended to read as follows:
‘‘(8) TREATMENT
OF
LEASEHOLD
IMPROVE-
MENTS.—
‘‘(A) IN
GENERAL.—In the case of any
building erected (or improvements made) on
leased property, if such building or improve-
ment is property to which this section applies,
the depreciation deduction shall be determined
under the provisions of this section.
‘‘(B) TREATMENT
OF
LESSOR
IMPROVE-
MENTS
WHICH
ARE
ABANDONED
AT
TERMI-
NATION OF LEASE.—An improvement—
‘‘(i) which is made by the lessor of
leased property for the lessee of such prop-
erty, and
‘‘(ii) which is irrevocably disposed of
or abandoned by the lessor at the termi-
nation of the lease by such lessee,
shall be treated for purposes of determining
gain or loss under this title as disposed of by
the lessor when so disposed of or abandoned.’’
(b) EFFECTIVE DATE.—Subparagraph (B) of section
168(i)(8) of the Internal Revenue Code of 1986, as added
by the amendment made by subsection (a), shall apply to
improvements disposed of or abandoned after March 13,
1995.
Subtitle C—Alternative Minimum
Tax Relief
SEC. 331. PHASEOUT OF APPLICATION OF ALTERNATIVE
MINIMUM TAX TO CORPORATIONS.
(a) TERMINATION.—Subsection (a) of section 55 is
amended by adding at the end the following new flush sen-
tence:
‘‘In the case of a corporation, the tentative minimum tax
for any taxable year beginning after December 31, 2000,
shall be zero.’’
(b) EARLIER TERMINATION OF CERTAIN ADJUST-
MENTS FOR ALL TAXPAYERS.—
(1) DEPRECIATION.—Paragraph (1) of section
56(a) is amended by inserting ‘‘and before March
14, 1995,’’ after ‘‘December 31, 1986,’’.
(2) MINING EXPLORATION AND DEVELOPMENT
COSTS.—Paragraph (2) of section 56(a) is amended
by inserting ‘‘and before January 1, 1996,’’ after
‘‘December 31, 1986,’’.
(3) LONG-TERM CONTRACTS.—Paragraph (3) of
section 56(a) is amended by inserting ‘‘and before
January 1, 1996,’’ after ‘‘March 1, 1986,’’.
(4) POLLUTION
CONTROL
FACILITIES.—Para-
graph (5) of section 56(a) is amended by inserting
100
‘‘and before January 1, 1996,’’ after ‘‘December 31,
1986,’’.
(5) INSTALLMENT
SALES.—Paragraph (6) of
section 56(a) is amended by inserting ‘‘and before
January 1, 1996,’’ after ‘‘March 1, 1986,’’.
(c) EARLIER TERMINATION OF CIRCULATION AND
RESEARCH AND EXPERIMENTAL EXPENDITURE ADJUST-
MENT FOR INDIVIDUALS.—Subparagraph (A) of section
56(b)(2) is amended by inserting ‘‘and before January 1,
1996,’’ after ‘‘December 31, 1986,’’.
(d) EARLIER TERMINATION OF CERTAIN ADJUST-
MENTS FOR CORPORATIONS.—
(1) MERCHANT
MARINE
CAPITAL
CONSTRUC-
TION
FUNDS.—Paragraph (2) of section 56(c) is
amended—
(A) by inserting ‘‘and before January 1,
1996,’’ after ‘‘December 31, 1986,’’ each place
it appears, and
(B) by striking the last sentence and in-
serting the following new flush sentence:
‘‘For purposes of this paragraph, any withdrawal of
deposit or earnings from the fund shall be treated as
allocable to deposits made, and earnings received or
accrued, in the order in which made, received, or ac-
crued.’’
101
(2) SECTION
833(b)
DEDUCTION.—Paragraph
(3) of section 56(c) is amended by adding at the end
the following new sentence: ‘‘This paragraph shall
not apply to any taxable year beginning after De-
cember 31, 1995.’’
(3) CERTAIN EARNINGS AND PROFITS ITEMS.—
(A) Subparagraph (B) of section 56(g)(4)
is amended by adding at the end the following
new clause:
‘‘(iii) TERMINATION.—This subpara-
graph shall not apply to any taxable year
beginning after December 31, 1995.’’
(B) Subparagraph (C) of section 56(g)(4)
is amended by adding at the end the following
new clause:
‘‘(v) TERMINATION.—This subpara-
graph shall not apply to any taxable year
beginning after December 31, 1995.’’
(4) INTANGIBLE DRILLING COSTS.—Clause (i)
of section 56(g)(4)(D) is amended by adding at the
end the following new sentence: ‘‘This clause shall
not apply to any taxable year beginning after De-
cember 31, 1995.’’
(5) CERTAIN
AMORTIZATION
PROVISIONS.—
Clause (ii) of section 56(g)(4)(D) is amended by
102
adding at the end the following new sentence: ‘‘This
clause shall not apply to any expenditure paid or in-
curred after December 31, 1995.’’
(6) LIFO INVENTORY ADJUSTMENTS.—Clause
(iii) of section 56(g)(4)(D) is amended by adding at
the end the following new sentence: ‘‘This clause
shall not apply to any adjustment arising in a tax-
able year beginning after December 31, 1995.’’
(7) INSTALLMENT SALES.—Clause (iv) of sec-
tion 56(g)(4)(D) is amended by adding at the end
the following new sentence: ‘‘This clause shall not
apply to any disposition after December 31, 1995.’’
(8) DEBT POOLS.—Subparagraph (E) of section
56(g)(4) is amended by adding at the end the follow-
ing new sentence: ‘‘This subparagraph shall not
apply to any exchange after December 31, 1995.’’
(9) DEPLETION.—Subparagraph (F) of section
56(g)(4) is amended by adding at the end the follow-
ing new clause:
‘‘(iii) TERMINATION.—This subpara-
graph shall not apply to any deduction for
depletion for any taxable year beginning
after December 31, 1995.’’
(10) 
OWNERSHIP
CHANGES.—Subparagraph
(G) of section 56(g)(4) is amended by adding at the
103
end the following new sentence: ‘‘This subparagraph
shall not apply to any ownership change after De-
cember 31, 1995.’’
(e) EARLIER TERMINATION OF ITEMS OF TAX PREF-
ERENCE.—
(1) DEPLETION.—Paragraph (1) of section
57(a) is amended by adding at the end the following
new sentence: ‘‘This paragraph shall not apply to
any taxable year beginning after December 31,
1995.’’
(2) INTANGIBLE DRILLING COSTS.—Paragraph
(2) of section 57(a) is amended by adding at the end
the following new subparagraph:
‘‘(F) TERMINATION.—This paragraph shall
not apply to any taxable year beginning after
December 31, 1995.’’
(3) RESERVES FOR LOSSES ON BAD DEBTS.—
Paragraph (4) of section 57(a) is amended by add-
ing at the end the following new sentence: ‘‘This
paragraph shall not apply to any taxable year begin-
ning after December 31, 1995.’’
(4) TAX-EXEMPT INTEREST.—Paragraph (5) of
section 57(a) is amended by adding at the end the
following new subparagraph:
104
‘‘(D) TERMINATION FOR CORPORATIONS.—
In the case of a corporation (other than a cor-
poration referred to in section 56(g)(6)), this
paragraph shall not apply to interest accruing
for periods after December 31, 1995.’’
(f) NET OPERATING LOSS DEDUCTION.—Paragraph
(1) of section 56(d) is amended by inserting ‘‘(100 percent
in the case of taxable years beginning after December 31,
1995)’’ after ‘‘90 percent’’ each place it appears.
(g) LOSSES.—
(1) Section 58 is amended by adding at the end
the following new subsection:
‘‘(d) TERMINATION.—This section shall not apply to
any loss incurred for any taxable year beginning after De-
cember 31, 1995.’’
(2) Subsection (h) of section 59 is amended by
inserting ‘‘469,’’ after ‘‘465,’’.
(h) FOREIGN TAX CREDIT.—Paragraph (2) of section
59(a) is amended by adding at the end the following new
subparagraph:
‘‘(D) 
TERMINATION.—This 
paragraph
shall not apply to any taxable year beginning
after December 31, 1995.’’
(i) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR
MINIMUM TAX LIABILITY.—
105
(1) IN GENERAL.—Subsection (c) of section 53
is amended to read as follows:
‘‘(c) LIMITATION.—The credit allowable under sub-
section (a) for any taxable year shall not exceed the lesser
of—
‘‘(1) the excess (if any) of—
‘‘(A) the regular tax liability of the tax-
payer for such taxable year reduced by the sum
of the credits allowable under subparts A, B, D,
E, and F of this part, over
‘‘(B) the tentative minimum tax for the
taxable year, or
‘‘(2) 90 percent of the amount determined
under paragraph (1)(A).’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1995.
Subtitle D—Public Debt Reduction
Checkoff and Trust Fund
SEC. 341. DESIGNATION OF AMOUNTS FOR REDUCTION OF
PUBLIC DEBT.
(a) IN GENERAL.—Subchapter A of chapter 61 of the
Internal Revenue Code of 1986 (relating to returns and
records) is amended by adding at the end the following
new part:
106
‘‘PART IX—DESIGNATION FOR REDUCTION OF
PUBLIC DEBT
‘‘Sec. 6097. Designation.
‘‘SEC. 6097. DESIGNATION.
‘‘(a) IN GENERAL.—Every individual with adjusted
income tax liability for any taxable year may designate
that a portion of such liability (not to exceed 10 percent
thereof) shall be used to reduce the public debt.
‘‘(b) MANNER AND TIME OF DESIGNATION.—A des-
ignation under subsection (a) may be made with respect
to any taxable year only at the time of filing the return
of tax imposed by chapter 1 for the taxable year. The des-
ignation shall be made on the first page of the return or
on the page bearing the taxpayer’s signature.
‘‘(c) ADJUSTED INCOME TAX LIABILITY.—For pur-
poses of this section, the term ‘adjusted income tax liabil-
ity’ means income tax liability (as defined in section
6096(b)) reduced by any amount designated under section
6096 (relating to designation of income tax payments to
Presidential Election Campaign Fund).’’
(b) CLERICAL AMENDMENT.—The table of parts for
such subchapter A is amended by adding at the end the
following new item:
‘‘Part IX. Designation for reduction of public debt.’’
108
Insurance Trust Fund, the Civil Service Retirement and
Disability Fund, or the Department of Defense Military
Retirement Fund). Any obligation which is paid, re-
deemed, or bought with amounts from the Public Debt Re-
duction Trust Fund shall be canceled and retired and may
not be reissued.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter is amended by adding at the end the
following new item:
‘‘Sec. 9512. Public Debt Reduction Trust Fund.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after the date
of the enactment of this Act.
Subtitle E—Small Business
Incentives
SEC. 351. COST-OF-LIVING ADJUSTMENTS RELATING TO ES-
TATE AND GIFT TAX PROVISIONS.
(a) INCREASE IN UNIFIED ESTATE AND GIFT TAX
CREDIT.—
(1) ESTATE TAX CREDIT.—
(A) Subsection (a) of section 2010 (relat-
ing to unified credit against estate tax) is
amended by striking ‘‘$192,800’’ and inserting
‘‘the applicable credit amount’’.
(B) Section 2010 is amended by redesig-
nating subsection (c) as subsection (d) and by
110
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(C) Paragraph (1) of section 6018(a) is
amended by striking ‘‘$600,000’’ and inserting
‘‘the applicable exclusion amount in effect
under section 2010(c) (as adjusted under para-
graph (2) thereof) for the calendar year which
includes the date of death’’.
(D) Paragraph (2) of section 2001(c) is
amended by striking ‘‘$21,040,000’’ and insert-
ing ‘‘the amount at which the average tax rate
under this section is 55 percent’’.
(E) 
Subparagraph 
(A) 
of 
section
2102(c)(3) is amended by striking ‘‘$192,800’’
and inserting ‘‘the applicable credit amount in
effect under section 2010(c) for the calendar
year which includes the date of death’’.
(2) UNIFIED
GIFT
TAX
CREDIT.—Paragraph
(1) of section 2505(a) is amended by striking
‘‘$192,800’’ and inserting ‘‘the applicable credit
amount in effect under section 2010(c) for such cal-
endar year’’.
111
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to the estates of dece-
dents dying, and gifts made, after December 31,
1995.
(b) ALTERNATE VALUATION
OF CERTAIN FARM,
ETC., REAL PROPERTY.—Subsection (a) of section 2032A
is amended by adding at the end the following new para-
graph:
‘‘(3) INFLATION ADJUSTMENT.—In the case of
estates of decedents dying in a calendar year after
1998, the $750,000 amount contained in paragraph
(2) shall be increased by an amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b)
of section 2503 is amended—
112
(1) by striking the subsection heading and in-
serting the following:
‘‘(b) EXCLUSIONS FROM GIFTS.—
‘‘(1) IN GENERAL.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new
paragraph:
‘‘(2) INFLATION ADJUSTMENT.—In the case of
gifts made in a calendar year after 1998, the
$10,000 amount contained in paragraph (1) shall be
increased by an amount equal to—
‘‘(A) $10,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $1,000, such amount shall
be rounded to the nearest multiple of $1,000.’’
(d) 
EXEMPTION
FROM
GENERATION-SKIPPING
TAX.—Section 2631 (relating to GST exemption) is
amended by adding at the end the following new sub-
section:
113
‘‘(c) INFLATION ADJUSTMENT.—In the case of an in-
dividual who dies in any calendar year after 1998, the
$1,000,000 amount contained in subsection (a) shall be
increased by an amount equal to—
‘‘(1) $1,000,000, multiplied by
‘‘(2) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year
1992’ in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence
is not a multiple of $10,000, such amount shall be round-
ed to the nearest multiple of $10,000.’’
(e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT IN-
TEREST RATE ON EXTENSION OF TIME FOR PAYMENT OF
ESTATE TAX ON CLOSELY HELD BUSINESS.—
(1) Subparagraph (A) of section 6601(j)(2) is
amended by striking ‘‘$345,800’’ and inserting ‘‘the
applicable limitation amount’’.
(2) Subsection (j) of section 6601 is amended
by redesignating paragraph (3) as paragraph (4)
and by inserting after paragraph (2) the following
new paragraph:
‘‘(3) APPLICABLE LIMITATION AMOUNT.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), the applicable limitation amount is
114
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.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of estates of decedents dying in a calendar
year after 1998, the $1,000,000 amount con-
tained in subparagraph (A) shall be increased
by an amount equal to—
‘‘(i) $1,000,000, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year by substituting ‘calendar
year 1997’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
If any amount as adjusted under the preceding
sentence is not a multiple of $10,000, such
amount shall be rounded to the nearest multiple
of $10,000.’’
SEC. 352. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) GENERAL RULE.—Paragraph (1) of section
179(b) (relating to dollar limitation) is amended to read
as follows:
115
‘‘(1) DOLLAR LIMITATION.—The aggregate cost
which may be taken into account under subsection
(a) for any taxable year shall not exceed the follow-
ing applicable amount:
‘‘If the taxable year
The applicable
begins in:
amount is:
1996 .......................................................................
$22,500
1997 .......................................................................
27,500
1998 .......................................................................
32,500
1999 or thereafter .................................................
35,000.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 353. CLARIFICATION OF TREATMENT OF HOME OF-
FICE USE FOR ADMINISTRATIVE AND MAN-
AGEMENT ACTIVITIES.
(a) IN GENERAL.—Paragraph (1) of section 280A(c)
is amended by adding at the end the following new sen-
tence:
‘‘For purposes of subparagraph (A), the term ‘prin-
cipal place of business’ includes a place of business
which is used by the taxpayer for the administrative
or management activities of any trade or business of
the taxpayer if there is no other fixed location of
such trade or business where the taxpayer conducts
substantial administrative or management activities
of such trade or business.’’
118
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED ADOPTION EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
adoption expenses’ means reasonable and nec-
essary adoption fees, court costs, attorney fees,
and other expenses—
‘‘(i) which are directly related to, and
the principal purpose of which is for, the
legal adoption of an eligible child by the
taxpayer, and
‘‘(ii) which are not incurred in viola-
tion of State or Federal law or in carrying
out any surrogate parenting arrangement.
‘‘(B) 
EXPENSES
FOR
ADOPTION
OF
SPOUSE’S
CHILD
NOT
ELIGIBLE.—The term
‘qualified adoption expenses’ shall not include
any expenses in connection with the adoption by
an individual of a child who is the child of such
individual’s spouse.
‘‘(2) ELIGIBLE
CHILD.—The term ‘eligible
child’ means any individual—
‘‘(A) who has not attained age 18 as of the
time of the adoption, or
‘‘(B) who is physically or mentally incapa-
ble of caring for himself.
119
‘‘(3) CHILD WITH SPECIAL NEEDS.—The term
‘child with special needs’ means any child if—
‘‘(A) a State has determined that the child
cannot or should not be returned to the home
of his parents, and
‘‘(B) such State has determined that there
exists with respect to the child a specific factor
or condition (such as his ethnic background,
age, or membership in a minority or sibling
group, or the presence of factors such as medi-
cal conditions or physical, mental, or emotional
handicaps) because of which it is reasonable to
conclude that such child cannot be placed with
adoptive parents without providing adoption as-
sistance.
‘‘(d) MARRIED COUPLES MUST FILE JOINT RE-
TURNS, ETC.—Rules similar to the rules of paragraphs
(2), (3), and (4) of section 21(e) shall apply for purposes
of this section.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of chapter
1 is amended by inserting after the item relating to section
25 the following new item:
‘‘Sec. 25A. Adoption expenses.’’.
120
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 402. CREDIT FOR TAXPAYERS WITH CERTAIN PER-
SONS REQUIRING CUSTODIAL CARE IN THEIR
HOUSEHOLDS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 25A the following new section:
‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PER-
SONS REQUIRING CUSTODIAL CARE IN THEIR
HOUSEHOLDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual who maintains a household which includes as a
member one or more qualified persons, there shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $500 for each
such person.
‘‘(b) QUALIFIED PERSON.—For purposes of this sec-
tion, the term ‘qualified person’ means any individual—
‘‘(1) who is a father or mother of the taxpayer,
his spouse, or his former spouse or who is an ances-
tor of such a father or mother,
‘‘(2) who is physically or mentally incapable of
caring for himself,
121
‘‘(3) who has as his principal place of abode for
more than half of the taxable year the home of the
taxpayer, and
‘‘(4) whose name and TIN are included on the
taxpayer’s return for the taxable year.
For purposes of paragraph (1), a stepfather or stepmother
shall be treated as a father or mother.
‘‘(c) SPECIAL RULES.—For purposes of this section,
rules similar to the rules of paragraphs (1), (2), (3), and
(4) of section 21(e) shall apply.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
25A the following new item:
‘‘Sec. 25B. Credit for taxpayers with certain persons requiring
custodial care in their households.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
TITLE V—SOCIAL SECURITY
EARNINGS TEST
SEC. 501. ADJUSTMENTS IN MONTHLY EXEMPT AMOUNT
FOR PURPOSES OF THE SOCIAL SECURITY
EARNINGS TEST.
(a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR
INDIVIDUALS
WHO
HAVE
ATTAINED
RETIREMENT
122
AGE.—Section 203(f)(8)(D) of the Social Security Act (42
U.S.C. 403(f)(8)(D)) is amended to read as follows:
‘‘(D)(i) Notwithstanding any other provision of
this subsection, the exempt amount which is applica-
ble to an individual who has attained retirement age
(as defined in section 216(1)) before the close of the
taxable year involved shall be—
‘‘(I) for the taxable year beginning after
1995 and before 1997, $1,250.00,
‘‘(II) for the taxable year beginning after
1996 and before 1998, $1,583.331⁄3,
‘‘(III) for the taxable year beginning after
1997 and before 1999, $1,916.662⁄3,
‘‘(IV) for the taxable year beginning after
1998 and before 2000, $2,250.00, and
‘‘(V) for the taxable year beginning after
1999 and before 2001, $2,500.00.
‘‘(ii) For purposes of subparagraph (B)(ii)(II),
the increase in the exempt amount provided under
clause (i)(V) shall be deemed to have resulted from
a determination which shall be deemed to have been
made under subparagraph (A) in 1999.’’.
(b) CONFORMING AMENDMENT.—The second sen-
tence of section 223(d)(4) of such Act (42 U.S.C.
423(d)(4)) is amended by striking ‘‘the exempt amount
123
under section 203(f)(8) which is applicable to individuals
described in subparagraph (D) thereof’’ and inserting the
following: ‘‘an amount equal to the exempt amount which
would have been applicable under section 203(f)(8), to in-
dividuals described in subparagraph (D) thereof, if section
501 of the Contract With America Tax Relief Act of 1995
had not been enacted’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to taxable years begin-
ning after 1995.
TITLE VI—TECHNICAL
CORRECTIONS
SEC. 601. COORDINATION WITH OTHER TITLES.
For purposes of applying the amendments made by
any title of this Act other than this title, the provisions
of this title shall be treated as having been enacted imme-
diately before the provisions of such other titles.
SEC. 602. AMENDMENTS 
RELATED 
TO 
REVENUE 
REC-
ONCILIATION ACT OF 1990.
(a) AMENDMENTS RELATED TO SUBTITLE A.—
(1) Subparagraph (B) of section 59(j)(3) is
amended by striking ‘‘section 1(i)(3)(B)’’ and insert-
ing ‘‘section 1(g)(3)(B)’’.
130
the amendments made by section 1915 of the En-
ergy Policy Act of 1992.
(2) Clause (i) of section 613A(c)(3)(A) is
amended by striking ‘‘the table contained in’’.
(3) Section 6501 is amended—
(A) by striking subsection (m) (relating to
deficiency attributable to election under section
44B) and by redesignating subsections (n) and
(o) as subsections (m) and (n), respectively, and
(B) by striking ‘‘section 40(f) or 51(j)’’ in
subsection (m) (as redesignated by subpara-
graph (A)) and inserting ‘‘section 40(f), 43, or
51(j)’’.
(4) Subparagraph (C) of section 38(c)(2) (as in
effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1990) is
amended by inserting before the period at the end
of the first sentence the following: ‘‘and without re-
gard to the deduction under section 56(h)’’.
(5) 
The 
amendment 
made 
by 
section
1913(b)(2)(C)(i) of the Energy Policy Act of 1992
shall apply to taxable years beginning after Decem-
ber 31, 1990.
(f) AMENDMENTS RELATED TO SUBTITLE F.—
131
(1)(A) Section 2701(a)(3) is amended by add-
ing at the end thereof the following new subpara-
graph:
‘‘(C) VALUATION OF QUALIFIED PAYMENTS
WHERE NO LIQUIDATION, ETC. RIGHTS.—In the
case of an applicable retained interest which is
described in subparagraph (B)(i) but not sub-
paragraph (B)(ii), the value of the distribution
right shall be determined without regard to this
section.’’
(B) Section 2701(a)(3)(B) is amended by in-
serting ‘‘CERTAIN’’ before ‘‘QUALIFIED’’ in the head-
ing thereof.
(C) Sections 2701 (d)(1) and (d)(4) are each
amended by striking ‘‘subsection (a)(3)(B)’’ and in-
serting ‘‘subsection (a)(3) (B) or (C)’’.
(2) Clause (i) of section 2701(a)(4)(B) is
amended by inserting ‘‘(or, to the extent provided in
regulations, the rights as to either income or cap-
ital)’’ after ‘‘income and capital’’.
(3)(A) Section 2701(b)(2) is amended by add-
ing at the end thereof the following new subpara-
graph:
‘‘(C) APPLICABLE FAMILY MEMBER.—For
purposes of this subsection, the term ‘applicable