222
‘‘(A) administratively feasible,
‘‘(B) in the interests of the private founda-
tion, and
‘‘(C) protective of the rights of the private
foundation.
Before granting an exemption under this paragraph,
the Secretary shall require adequate notice to be
given to interested persons and shall publish notice
in the Federal Register of the pendency of such ex-
emption and shall afford interested persons an op-
portunity to present views.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to transactions occurring after the
date of the enactment of this Act.
SEC. 1005. EXPANSION OF DECLARATORY JUDGMENT REM-
EDY TO TAX-EXEMPT ORGANIZATIONS.
(a) IN GENERAL.—Subsection (a) of section 7428
(relating to creation of remedy) is amended—
(1) in subparagraph (B) by inserting after
‘‘509(a))’’ the following: ‘‘or as a private operating
foundation (as defined in section 4942(j)(3))’’, and
(2) by amending subparagraph (C) to read as
follows:
‘‘(C) with respect to the initial qualifica-
tion or continuing qualification of an organiza-
223
tion as an organization described in section
501(c) (other than paragraph (3)) which is ex-
empt from tax under section 501(a), or’’.
(b) COURT JURISDICTION.—Subsection (a) of section
7428 is amended in the material following paragraph (2)
by striking ‘‘United States Tax Court, the United States
Claims Court, or the district court of the United States
for the District of Columbia’’ and inserting the following:
‘‘United States Tax Court (in the case of any such deter-
mination or failure) or the United States Claims Court
or the district court of the United States for the District
of Columbia (in the case of a determination or failure with
respect to an issue referred to in subparagraph (A) or (B)
of paragraph (1)),’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to pleadings filed with respect to
determinations (or requests for determinations) made
after the date of the enactment of this Act.
SEC. 1006. MODIFICATIONS TO SECTION 512(b)(13).
(a) IN GENERAL.—Paragraph (13) of section 512(b)
is amended by redesignating subparagraph (E) as sub-
paragraph (F) and by inserting after subparagraph (D)
the following new paragraph:
‘‘(E) PARAGRAPH TO APPLY ONLY TO EX-
CESS PAYMENTS.—
224
‘‘(i) IN GENERAL.—Subparagraph (A)
shall apply only to the portion of a speci-
fied payment received by the controlling
organization that exceeds the amount
which would have been paid if such pay-
ment met the requirements prescribed
under section 482.
‘‘(ii) ADDITION
TO
TAX
FOR
VALU-
ATION MISSTATEMENTS.—The tax imposed
by this chapter on the controlling organiza-
tion shall be increased by an amount equal
to 20 percent of such excess.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
this section shall apply to payments received or ac-
crued after December 31, 1999.
(2) PAYMENTS SUBJECT TO BINDING CONTRACT
TRANSITION
RULE.—If the amendments made by
section 1041 of the Taxpayer Relief Act of 1997 do
not apply to any amount received or accrued after
the date of the enactment of this Act under any con-
tract described in subsection (b)(2) of such section,
such amendments also shall not apply to amounts
received or accrued under such contract before Jan-
uary 1, 2000.
225
TITLE XI—REAL ESTATE
PROVISIONS
Subtitle A—Provisions Relating to
Real Estate Investment Trusts
PART I—TREATMENT OF INCOME AND SERVICES
PROVIDED BY TAXABLE REIT SUBSIDIARIES
SEC. 1101. MODIFICATIONS TO ASSET DIVERSIFICATION
TEST.
(a) IN GENERAL.—Subparagraph (B) of section
856(c)(4) is amended to read as follows:
‘‘(B)(i) not more than 25 percent of the
value of its total assets is represented by securi-
ties (other than those includible under subpara-
graph (A)), and
‘‘(ii) except with respect to a taxable REIT
subsidiary and securities includible under sub-
paragraph (A)—
‘‘(I) not more than 5 percent of the
value of its total assets is represented by
securities of any 1 issuer,
‘‘(II) the trust does not hold securities
possessing more than 10 percent of the
total voting power of the outstanding secu-
rities of any 1 issuer, and
226
‘‘(III) the trust does not hold securi-
ties having a value of more than 10 per-
cent of the total value of the outstanding
securities of any 1 issuer.’’
(b) EXCEPTION FOR STRAIGHT DEBT SECURITIES.—
Subsection (c) of section 856 is amended by adding at the
end the following new paragraph:
‘‘(7) STRAIGHT DEBT SAFE HARBOR IN APPLY-
ING PARAGRAPH (4).—Securities of an issuer which
are straight debt (as defined in section 1361(c)(5)
without regard to subparagraph (B)(iii) thereof)
shall not be taken into account in applying para-
graph (4)(B)(ii)(III) if—
‘‘(A) the only securities of such issuer
which are held by the trust or a taxable REIT
subsidiary of the trust are straight debt (as so
defined), or
‘‘(B) the issuer is a partnership and the
trust holds at least a 20 percent profits interest
in the partnership.’’
SEC. 1102. TREATMENT OF INCOME AND SERVICES PRO-
VIDED BY TAXABLE REIT SUBSIDIARIES.
(a) INCOME FROM TAXABLE REIT SUBSIDIARIES
NOT TREATED AS IMPERMISSIBLE TENANT SERVICE IN-
COME.—Clause (i) of section 856(d)(7)(C) (relating to ex-
227
ceptions to impermissible tenant service income) is amend-
ed by inserting ‘‘or through a taxable REIT subsidiary
of such trust’’ after ‘‘income’’.
(b) CERTAIN INCOME FROM TAXABLE REIT SUB-
SIDIARIES NOT EXCLUDED FROM RENTS FROM REAL
PROPERTY.—
(1) IN
GENERAL.—Subsection (d) of section
856 (relating to rents from real property defined) is
amended by adding at the end the following new
paragraphs:
‘‘(8) SPECIAL RULE FOR TAXABLE REIT SUB-
SIDIARIES.—For 
purposes 
of 
this 
subsection,
amounts paid to a real estate investment trust by a
taxable REIT subsidiary of such trust shall not be
excluded from rents from real property by reason of
paragraph (2)(B) if the requirements of subpara-
graph (A) or (B) are met.
‘‘(A) LIMITED RENTAL EXCEPTION.—The
requirements of this subparagraph are met with
respect to any property if at least 90 percent of
the leased space of the property is rented to
persons other than taxable REIT subsidiaries of
such trust and other than persons described in
section 856(d)(2)(B). The preceding sentence
shall apply only to the extent that the amounts
228
paid to the trust as rents from real property (as
defined in paragraph (1) without regard to
paragraph (2)(B)) from such property are sub-
stantially comparable to such rents made by the
other tenants of the trust’s property for com-
parable space.
‘‘(B) EXCEPTION FOR CERTAIN LODGING
FACILITIES.—The requirements of this subpara-
graph are met with respect to an interest in
real property which is a qualified lodging facil-
ity leased by the trust to a taxable REIT sub-
sidiary of the trust if the property is operated
on behalf of such subsidiary by a person who is
an eligible independent contractor.
‘‘(9) ELIGIBLE INDEPENDENT CONTRACTOR.—
For purposes of paragraph (8)(B)—
‘‘(A) IN
GENERAL.—The term ‘eligible
independent contractor’ means, with respect to
any qualified lodging facility, any independent
contractor if, at the time such contractor enters
into a management agreement or other similar
service contract with the taxable REIT sub-
sidiary to operate the facility, such contractor
(or any related person) is actively engaged in
the trade or business of operating qualified
229
lodging facilities for any person who is not a re-
lated person with respect to the real estate in-
vestment trust or the taxable REIT subsidiary.
‘‘(B) SPECIAL RULES.—Solely for purposes
of this paragraph and paragraph (8)(B), a per-
son shall not fail to be treated as an inde-
pendent contractor with respect to any qualified
lodging facility by reason of any of the fol-
lowing:
‘‘(i) The taxable REIT subsidiary
bears the expenses for the operation of the
facility pursuant to the management agree-
ment or other similar service contract.
‘‘(ii) The taxable REIT subsidiary re-
ceives the revenues from the operation of
such facility, net of expenses for such oper-
ation and fees payable to the operator pur-
suant to such agreement or contract.
‘‘(iii) The real estate investment trust
receives income from such person with re-
spect to another property that is attrib-
utable to a lease of such other property to
such person that was in effect as on the
later of—
‘‘(I) January 1, 1999, or
230
‘‘(II) the earliest date that any
taxable REIT subsidiary of such trust
entered into a management agreement
or other similar service contract with
such person with respect to such
qualified lodging facility.
‘‘(C) RENEWALS, 
ETC., 
OF
EXISTING
LEASES.—For 
purposes 
of 
subparagraph
(B)(iii)—
‘‘(i) a lease shall be treated as in ef-
fect on January 1, 1999, without regard to
its renewal after such date, so long as such
renewal is pursuant to the terms of such
lease as in effect on whichever of the dates
under subparagraph (B)(iii) is the latest,
and
‘‘(ii) a lease of a property entered into
after whichever of the dates under sub-
paragraph (B)(iii) is the latest shall be
treated as in effect on such date if—
‘‘(I) on such date, a lease of such
property from the trust was in effect,
and
‘‘(II) under the terms of the new
lease, such trust receives a substan-
231
tially similar or lesser benefit in com-
parison to the lease referred to in sub-
clause (I).
‘‘(D) QUALIFIED LODGING FACILITY.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied lodging facility’ means any lodging fa-
cility unless wagering activities are con-
ducted at or in connection with such facil-
ity by any person who is engaged in the
business of accepting wagers and who is le-
gally authorized to engage in such business
at or in connection with such facility.
‘‘(ii) LODGING
FACILITY.—The term
‘lodging facility’ means a hotel, motel, or
other establishment more than one-half of
the dwelling units in which are used on a
transient basis.
‘‘(iii) CUSTOMARY AMENITIES AND FA-
CILITIES.—The term ‘lodging facility’ in-
cludes customary amenities and facilities
operated as part of, or associated with, the
lodging facility so long as such amenities
and facilities are customary for other prop-
erties of a comparable size and class owned
232
by other owners unrelated to such real es-
tate investment trust.
‘‘(E) OPERATE INCLUDES MANAGE.—Ref-
erences in this paragraph to operating a prop-
erty shall be treated as including a reference to
managing the property.
‘‘(F) RELATED PERSON.—Persons shall be
treated as related to each other if such persons
are treated as a single employer under sub-
section (a) or (b) of section 52.’’.
(2) CONFORMING AMENDMENT.—Subparagraph
(B) of section 856(d)(2) is amended by inserting
‘‘except as provided in paragraph (8),’’ after ‘‘(B)’’.
SEC. 1103. TAXABLE REIT SUBSIDIARY.
(a) IN GENERAL.—Section 856 is amended by adding
at the end the following new subsection:
‘‘(l) TAXABLE REIT SUBSIDIARY.—For purposes of
this part—
‘‘(1) IN GENERAL.—The term ‘taxable REIT
subsidiary’ means, with respect to a real estate in-
vestment trust, a corporation (other than a real es-
tate investment trust) if—
‘‘(A) such trust directly or indirectly owns
stock in such corporation, and
233
‘‘(B) such trust and such corporation joint-
ly elect that such corporation shall be treated as
a taxable REIT subsidiary of such trust for
purposes of this part.
Such an election, once made, shall be irrevocable un-
less both such trust and corporation consent to its
revocation. Such election, and any revocation there-
of, may be made without the consent of the Sec-
retary.
‘‘(2) 35
PERCENT
OWNERSHIP
IN
ANOTHER
TAXABLE
REIT
SUBSIDIARY.—The term ‘taxable
REIT subsidiary’ includes, with respect to any real
estate investment trust, any corporation (other than
a real estate investment trust) with respect to which
a taxable REIT subsidiary of such trust owns di-
rectly or indirectly—
‘‘(A) securities possessing more than 35
percent of the total voting power of the out-
standing securities of such corporation, or
‘‘(B) securities having a value of more
than 35 percent of the total value of the out-
standing securities of such corporation.
The preceding sentence shall not apply to a qualified
REIT subsidiary (as defined in subsection (i)(2)).
234
The rule of section 856(c)(7) shall apply for pur-
poses of subparagraph (B).
‘‘(3) EXCEPTIONS.—The term ‘taxable REIT
subsidiary’ shall not include—
‘‘(A) any corporation which directly or in-
directly operates or manages a lodging facility
or a health care facility, and
‘‘(B) any corporation which directly or in-
directly provides to any other person (under a
franchise, license, or otherwise) rights to any
brand name under which any lodging facility or
health care facility is operated.
Subparagraph (B) shall not apply to rights provided
to an eligible independent contractor to operate or
manage a lodging facility if such rights are held by
such corporation as a franchisee, licensee, or in a
similar capacity and such lodging facility is either
owned by such corporation or is leased to such cor-
poration from the real estate investment trust.
‘‘(4) DEFINITIONS.—For purposes of paragraph
(3)—
‘‘(A) LODGING FACILITY.—The term ‘lodg-
ing facility’ has the meaning given to such term
by paragraph (9)(D)(ii).
235
‘‘(B) HEALTH CARE FACILITY.—The term
‘health care facility’ has the meaning given to
such term by subsection (e)(6)(D)(ii).’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 856(i) is amended by adding at the end the fol-
lowing new sentence: ‘‘Such term shall not include a tax-
able REIT subsidiary.’’
SEC. 1104. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163(j) (relating to limitation
on deduction for interest on certain indebtedness) is
amended by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subparagraph
(B) and inserting ‘‘, and’’, and by adding at the end the
following new subparagraph:
‘‘(C) any interest paid or accrued (directly
or indirectly) by a taxable REIT subsidiary (as
defined in section 856(l)) of a real estate invest-
ment trust to such trust.’’.
SEC. 1105. 100 PERCENT TAX ON IMPROPERLY ALLOCATED
AMOUNTS.
(a) IN GENERAL.—Subsection (b) of section 857 (re-
lating to method of taxation of real estate investment
trusts and holders of shares or certificates of beneficial
interest) is amended by redesignating paragraphs (7) and
236
(8) as paragraphs (8) and (9), respectively, and by insert-
ing after paragraph (6) the following new paragraph:
‘‘(7) INCOME FROM REDETERMINED RENTS, RE-
DETERMINED
DEDUCTIONS, AND
EXCESS
INTER-
EST.—
‘‘(A) IMPOSITION OF TAX.—There is here-
by imposed for each taxable year of the real es-
tate investment trust a tax equal to 100 percent
of redetermined rents, redetermined deductions,
and excess interest.
‘‘(B) REDETERMINED RENTS.—
‘‘(i) IN GENERAL.—The term ‘redeter-
mined rents’ means rents from real prop-
erty (as defined in subsection 856(d)) the
amount of which would (but for subpara-
graph (E)) be reduced on distribution, ap-
portionment, or allocation under section
482 to clearly reflect income as a result of
services furnished or rendered by a taxable
REIT subsidiary of the real estate invest-
ment trust to a tenant of such trust.
‘‘(ii) EXCEPTION FOR CERTAIN SERV-
ICES.—Clause (i) shall not apply to
amounts received directly or indirectly by a
real estate investment trust for services de-
237
scribed in paragraph (1)(B) or (7)(C)(i) of
section 856(d).
‘‘(iii) EXCEPTION
FOR
DE
MINIMIS
AMOUNTS.—Clause (i) shall not apply to
amounts described in section 856(d)(7)(A)
with respect to a property to the extent
such amounts do not exceed the one per-
cent 
threshold 
described 
in 
section
856(d)(7)(B) with respect to such prop-
erty.
‘‘(iv) EXCEPTION
FOR
COMPARABLY
PRICED
SERVICES.—Clause (i) shall not
apply to any service rendered by a taxable
REIT subsidiary of a real estate invest-
ment trust to a tenant of such trust if—
‘‘(I) such subsidiary renders a
significant amount of similar services
to persons other than such trust and
tenants of such trust who are unre-
lated (within the meaning of section
856(d)(8)(F)) to such subsidiary,
trust, and tenants, but
‘‘(II) only to the extent the
charge for such service so rendered is
substantially comparable to the charge
238
for the similar services rendered to
persons referred to in subclause (I).
‘‘(v) EXCEPTION FOR CERTAIN SEPA-
RATELY
CHARGED
SERVICES.—Clause (i)
shall not apply to any service rendered by
a taxable REIT subsidiary of a real estate
investment trust to a tenant of such trust
if—
‘‘(I) the rents paid to the trust
by tenants (leasing at least 25 percent
of the net leasable space in the trust’s
property) who are not receiving such
service from such subsidiary are sub-
stantially comparable to the rents
paid by tenants leasing comparable
space who are receiving such service
from such subsidiary, and
‘‘(II) the charge for such service
from such subsidiary is separately
stated.
‘‘(vi) EXCEPTION FOR CERTAIN SERV-
ICES
BASED
ON
SUBSIDIARY’S
INCOME
FROM THE SERVICES.—Clause (i) shall not
apply to any service rendered by a taxable
REIT subsidiary of a real estate invest-
239
ment trust to a tenant of such trust if the
gross income of such subsidiary from such
service is not less than 150 percent of such
subsidiary’s direct cost in furnishing or
rendering the service.
‘‘(vii) EXCEPTIONS GRANTED BY SEC-
RETARY.—The Secretary may waive the
tax otherwise imposed by subparagraph
(A) if the trust establishes to the satisfac-
tion of the Secretary that rents charged to
tenants were established on an arms’
length basis even though a taxable REIT
subsidiary of the trust provided services to
such tenants.
‘‘(C) REDETERMINED DEDUCTIONS.—The
term ‘redetermined deductions’ means deduc-
tions (other than redetermined rents) of a tax-
able REIT subsidiary of a real estate invest-
ment trust if the amount of such deductions
would (but for subparagraph (E)) be increased
on distribution, apportionment, or allocation
under section 482 to clearly reflect income as
between such subsidiary and such trust.
‘‘(D) EXCESS INTEREST.—The term ‘ex-
cess interest’ means any deductions for interest
240
payments by a taxable REIT subsidiary of a
real estate investment trust to such trust to the
extent that the interest payments are in excess
of a rate that is commercially reasonable.
‘‘(E) COORDINATION WITH SECTION 482.—
The imposition of tax under subparagraph (A)
shall be in lieu of any distribution, apportion-
ment, or allocation under section 482.
‘‘(F) REGULATORY AUTHORITY.—The Sec-
retary shall prescribe such regulations as may
be necessary or appropriate to carry out the
purposes of this paragraph. Until the Secretary
prescribes such regulations, real estate invest-
ment trusts and their taxable REIT subsidi-
aries may base their allocations on any reason-
able method.’’.
(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO
BE
DISTRIBUTED.—Subparagraph 
(E) 
of 
section
857(b)(2) (relating to real estate investment trust taxable
income) is amended by striking ‘‘paragraph (5)’’ and in-
serting ‘‘paragraphs (5) and (7)’’.
SEC. 1106. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
part shall apply to taxable years beginning after December
31, 2000.
241
(b) TRANSITIONAL RULES RELATED
TO SECTION
1101.—
(1) EXISTING ARRANGEMENTS.—
(A) IN
GENERAL.—Except as otherwise
provided in this paragraph, the amendment
made by section 1101 shall not apply to a real
estate investment trust with respect to—
(i) securities of a corporation held di-
rectly or indirectly by such trust on July
12, 1999,
(ii) securities of a corporation held by
an entity on July 12, 1999, if such trust
acquires control of such entity pursuant to
a written binding contract in effect on such
date and at all times thereafter before such
acquisition,
(iii) securities received by such trust
(or a successor) in exchange for, or with
respect to, securities described in clause (i)
or (ii) in a transaction in which gain or
loss is not recognized, and
(iv) securities acquired directly or in-
directly by such trust as part of a reorga-
nization (as defined in section 368(a)(1) of
the Internal Revenue Code of 1986) with
242
respect to such trust if such securities are
described in clause (i), (ii), or (iii) with re-
spect to any other real estate investment
trust.
(B) NEW TRADE OR BUSINESS OR SUB-
STANTIAL
NEW
ASSETS.—Subparagraph (A)
shall cease to apply to securities of a corpora-
tion as of the first day after July 12, 1999, on
which such corporation engages in a substantial
new line of business, or acquires any substantial
asset, other than—
(i) pursuant to a binding contract in
effect on such date and at all times there-
after before the acquisition of such asset,
(ii) in a transaction in which gain or
loss is not recognized by reason of section
1031 or 1033 of the Internal Revenue
Code of 1986, or
(iii) in a reorganization (as so de-
fined) with another corporation the securi-
ties of which are described in paragraph
(1)(A) of this subsection.
(2) TAX-FREE CONVERSION.—If—
(A) at the time of an election for a cor-
poration to become a taxable REIT subsidiary,
243
the amendment made by section 1101 does not
apply to such corporation by reason of para-
graph (1), and
(B) such election first takes effect before
January 1, 2004,
such election shall be treated as a reorganization
qualifying under section 368(a)(1)(A) of such Code.
PART II—HEALTH CARE REITS
SEC. 1111. HEALTH CARE REITS.
(a) SPECIAL FORECLOSURE RULE
FOR HEALTH
CARE PROPERTIES.—Subsection (e) of section 856 (relat-
ing to special rules for foreclosure property) is amended
by adding at the end the following new paragraph:
‘‘(6) SPECIAL RULE FOR QUALIFIED HEALTH
CARE
PROPERTIES.—For 
purposes 
of 
this
subsection—
‘‘(A) ACQUISITION
AT
EXPIRATION
OF
LEASE.—The term ‘foreclosure property’ shall
include any qualified health care property ac-
quired by a real estate investment trust as the
result of the termination of a lease of such
property (other than a termination by reason of
a default, or the imminence of a default, on the
lease).
244
‘‘(B) GRACE
PERIOD.—In the case of a
qualified health care property which is fore-
closure property solely by reason of subpara-
graph (A), in lieu of applying paragraphs (2)
and (3)—
‘‘(i) the qualified health care property
shall cease to be foreclosure property as of
the close of the second taxable year after
the taxable year in which such trust ac-
quired such property, and
‘‘(ii) if the real estate investment
trust establishes to the satisfaction of the
Secretary that an extension of the grace
period in clause (i) is necessary to the or-
derly leasing or liquidation of the trust’s
interest in such qualified health care prop-
erty, the Secretary may grant 1 or more
extensions of the grace period for such
qualified health care property.
Any such extension shall not extend the grace
period beyond the close of the 6th year after
the taxable year in which such trust acquired
such qualified health care property.
‘‘(C) INCOME
FROM
INDEPENDENT
CON-
TRACTORS.—For purposes of applying para-
245
graph (4)(C) with respect to qualified health
care property which is foreclosure property by
reason of subparagraph (A) or paragraph (1),
income derived or received by the trust from an
independent contractor shall be disregarded to
the extent such income is attributable to—
‘‘(i) any lease of property in effect on
the date the real estate investment trust
acquired the qualified health care property
(without regard to its renewal after such
date so long as such renewal is pursuant to
the terms of such lease as in effect on such
date), or
‘‘(ii) any lease of property entered
into after such date if—
‘‘(I) on such date, a lease of such
property from the trust was in effect,
and
‘‘(II) under the terms of the new
lease, such trust receives a substan-
tially similar or lesser benefit in com-
parison to the lease referred to in sub-
clause (I).
‘‘(D) QUALIFIED
HEALTH
CARE
PROP-
ERTY.—
246
‘‘(i) IN GENERAL.—The term ‘quali-
fied health care property’ means any real
property (including interests therein), and
any personal property incident to such real
property, which—
‘‘(I) is a health care facility, or
‘‘(II) is necessary or incidental to
the use of a health care facility.
‘‘(ii) HEALTH
CARE
FACILITY.—For
purposes of clause (i), the term ‘health
care facility’ means a hospital, nursing fa-
cility, assisted living facility, congregate
care facility, qualified continuing care facil-
ity (as defined in section 7872(g)(4)), or
other licensed facility which extends med-
ical or nursing or ancillary services to pa-
tients and which, immediately before the
termination, expiration, default, or breach
of the lease of or mortgage secured by
such facility, was operated by a provider of
such services which was eligible for partici-
pation in the medicare program under title
XVIII of the Social Security Act with re-
spect to such facility.’’
247
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
PART III—CONFORMITY WITH REGULATED
INVESTMENT COMPANY RULES
SEC. 1121. CONFORMITY WITH REGULATED INVESTMENT
COMPANY RULES.
(a) DISTRIBUTION REQUIREMENT.—Clauses (i) and
(ii) of section 857(a)(1)(A) (relating to requirements ap-
plicable to real estate investment trusts) are each amended
by striking ‘‘95 percent (90 percent for taxable years be-
ginning before January 1, 1980)’’ and inserting ‘‘90 per-
cent’’.
(b) IMPOSITION
OF TAX.—Clause (i) of section
857(b)(5)(A) (relating to imposition of tax in case of fail-
ure to meet certain requirements) is amended by striking
‘‘95 percent (90 percent in the case of taxable years begin-
ning before January 1, 1980)’’ and inserting ‘‘90 per-
cent’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
248
PART IV—CLARIFICATION OF EXCEPTION FROM
IMPERMISSIBLE TENANT SERVICE INCOME
SEC. 1131. CLARIFICATION OF EXCEPTION FOR INDE-
PENDENT OPERATORS.
(a) IN GENERAL.—Paragraph (3) of section 856(d)
(relating to independent contractor defined) is amended
by adding at the end the following flush sentence:
‘‘In the event that any class of stock of either the
real estate investment trust or such person is regu-
larly traded on an established securities market, only
persons who own, directly or indirectly, more than 5
percent of such class of stock shall be taken into ac-
count as owning any of the stock of such class for
purposes of applying the 35 percent limitation set
forth in subparagraph (B) (but all of the out-
standing stock of such class shall be considered out-
standing in order to compute the denominator for
purpose of determining the applicable percentage of
ownership).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
249
PART V—MODIFICATION OF EARNINGS AND
PROFITS RULES
SEC. 1141. MODIFICATION OF EARNINGS AND PROFITS
RULES.
(a) RULES
FOR DETERMINING WHETHER REGU-
LATED
INVESTMENT
COMPANY
HAS
EARNINGS
AND
PROFITS FROM NON-RIC YEAR.—Subsection (c) of sec-
tion 852 is amended by adding at the end the following
new paragraph:
‘‘(3) DISTRIBUTIONS TO MEET REQUIREMENTS
OF SUBSECTION (a)(2)(B).—Any distribution which
is made in order to comply with the requirements of
subsection (a)(2)(B)—
‘‘(A) shall be treated for purposes of this
subsection and subsection (a)(2)(B) as made
from the earliest earnings and profits accumu-
lated in any taxable year to which the provi-
sions of this part did not apply rather than the
most recently accumulated earnings and profits,
and
‘‘(B) to the extent treated under subpara-
graph (A) as made from accumulated earnings
and profits, shall not be treated as a distribu-
tion for purposes of subsection (b)(2)(D) and
section 855.’’.
250
(b) CLARIFICATION
OF
APPLICATION
OF
REIT
SPILLOVER DIVIDEND RULES
TO DISTRIBUTIONS TO
MEET
QUALIFICATION
REQUIREMENT.—Subparagraph
(B) of section 857(d)(3) is amended by inserting before
the period ‘‘and section 858’’.
(c) APPLICATION OF DEFICIENCY DIVIDEND PROCE-
DURES.—Paragraph (1) of section 852(e) is amended by
adding at the end the following new sentence: ‘‘If the de-
termination under subparagraph (A) is solely as a result
of the failure to meet the requirements of subsection
(a)(2), the preceding sentence shall also apply for pur-
poses of applying subsection (a)(2) to the non-RIC year.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
PART VI—STUDY RELATING TO TAXABLE REIT
SUBSIDIARIES
SEC. 1151. STUDY RELATING TO TAXABLE REIT SUBSIDI-
ARIES.
The Commissioner of the Internal Revenue shall con-
duct a study to determine how many taxable REIT sub-
sidiaries are in existence and the aggregate amount of
taxes paid by such subsidiaries. The Secretary shall sub-
mit a report to the Congress describing the results of such
study.
251
Subtitle B—Modification of At-Risk
Rules for Publicly Traded Secu-
rities
SEC. 1161. TREATMENT UNDER AT-RISK RULES OF PUB-
LICLY TRADED NONRECOURSE DEBT.
(a) IN GENERAL.—Subparagraph (A) of section
465(b)(6) (relating to qualified nonrecourse financing
treated as amount at risk) is amended by striking ‘‘share
of’’ and all that follows and inserting ‘‘share of—
‘‘(i) any qualified nonrecourse financ-
ing which is secured by real property used
in such activity, and
‘‘(ii) any other financing which—
‘‘(I) would (but for subparagraph
(B)(ii)) be qualified nonrecourse fi-
nancing,
‘‘(II) is qualified publicly traded
debt, and
‘‘(III) is not borrowed by the tax-
payer from a person described in sub-
clause (I), (II), or (III) of section
49(a)(1)(D)(iv).’’
(b) QUALIFIED PUBLICLY TRADED DEBT.—Para-
graph (6) of section 465(b) is amended by adding at the
end the following new subparagraph:
252
‘‘(F) 
QUALIFIED
PUBLICLY
TRADED
DEBT.—For purposes of subparagraph (A), the
term ‘qualified publicly traded debt’ means any
debt instrument which is readily tradable on an
established securities market. Such term shall
not include any debt instrument which has a
yield to maturity which equals or exceeds the
limitation in section 163(i)(1)(B).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to debt instruments issued after
December 31, 1999.
Subtitle C—Treatment of Construc-
tion Allowances and Certain
Contributions To Capital of Re-
tailers
SEC. 1171. EXCLUSION FROM GROSS INCOME OF QUALI-
FIED LESSEE CONSTRUCTION ALLOWANCES
NOT LIMITED FOR CERTAIN RETAILERS TO
SHORT-TERM LEASES.
(a) IN GENERAL.—Subsection (a) section 110 (relat-
ing to qualified lessee construction allowances for short-
term leases) is amended by adding at the end the following
new sentence: ‘‘Paragraph (1) shall not apply if the lessee
is a qualified retail business (as defined by section
118(d)(3)).’’.
253
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to leases entered into after Decem-
ber 31, 1999.
SEC. 1172. EXCLUSION FROM GROSS INCOME FOR CERTAIN
CONTRIBUTIONS TO THE CAPITAL OF CER-
TAIN RETAILERS.
(a) IN GENERAL.—Section 118 (relating to contribu-
tions to the capital of a corporation) is amended by redes-
ignating subsections (d) and (e) as subsections (e) and (f),
respectively, and by inserting after subsection (c) the fol-
lowing new subsection:
‘‘(d) SAFE HARBOR FOR CONTRIBUTIONS TO CER-
TAIN RETAILERS.—
‘‘(1) GENERAL
RULE.—For purposes of this
section, the term ‘contribution to the capital of the
taxpayer’ includes any amount of money or other
property received by the taxpayer if—
‘‘(A) the taxpayer has entered into an
agreement to operate (or cause to be operated)
a qualified retail business at a particular loca-
tion for a period of at least 15 years,
‘‘(B)(i) immediately after the receipt of
such money or other property, the taxpayer
owns the land and the structure to be used by
254
the taxpayer in carrying on a qualified retail
business at such location, or
‘‘(ii) the taxpayer uses such amount to ac-
quire ownership of at least such land and struc-
ture,
‘‘(C) such amount meets the requirements
of the expenditure rule of paragraph (2), and
‘‘(D) the contributor of such amount does
not hold a beneficial interest in any property lo-
cated on the premises of such qualified retail
business other than de minimis amounts of
property associated with the operation of prop-
erty adjacent to such premises.
‘‘(2) EXPENDITURE RULE.—An amount meets
the requirements of this paragraph if—
‘‘(A) an amount equal to such amount is
expended for the acquisition of land or for ac-
quisition or construction of other property de-
scribed in section 1231(b)—
‘‘(i) which was the purpose motivating
the contribution, and
‘‘(ii) which is used predominantly in a
qualified retail business at the location re-
ferred to in paragraph (1)(A),
255
‘‘(B) the expenditure referred to in sub-
paragraph (A) occurs before the end of the sec-
ond taxable year after the year in which such
amount was received, and
‘‘(C) accurate records are kept of the
amounts contributed and expenditures made on
the basis of the project for which the contribu-
tion was made and on the basis of the year of
the contribution expenditure.
‘‘(3) DEFINITION OF QUALIFIED RETAIL BUSI-
NESS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified retail
business’ means a trade or business of selling
tangible personal property to the general public
if the premises on which such trade or business
is conducted is in close proximity to property
that the contributor of the amount referred to
in paragraph (1) is developing or operating for
profit (or, in the case of a contributor which is
a governmental entity, is attempting to revi-
talize).
‘‘(B) SERVICES.—A trade or business shall
not fail to be treated as a qualified retail busi-
ness by reason of sales of services if such sales
256
are incident to the sale of tangible personal
property or if the services are de minimis in
amount.
‘‘(4) SPECIAL RULES.—
‘‘(A) LEASES.—For purposes of paragraph
(1)(B)(i), property shall be treated as owned by
the taxpayer if the taxpayer is the lessee of
such property under a lease having a term of at
least 30 years and on which only nominal rent
is required.
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of this subsection, all persons treated as
a single employer under subsection (a) or (b) of
section 52 shall be treated as 1 person.
‘‘(5) DISALLOWANCE
OF
DEDUCTIONS
AND
CREDITS; ADJUSTED
BASIS.—Notwithstanding any
other provision of this subtitle, no deduction or cred-
it shall be allowed for, or by reason of, any amount
received by the taxpayer which constitutes a con-
tribution to capital to which this subsection applies.
The adjusted basis of any property acquired with the
contributions to which this subsection applies shall
be reduced by the amount of the contributions to
which this subsection applies.
257
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations are appropriate to prevent
the abuse of the purposes of the subsection, includ-
ing regulations which allocate income and deductions
(or adjust the amount excludable under this sub-
section) in cases in which—
‘‘(A) payments in excess of fair market
value are paid to the contributor by the tax-
payer, or
‘‘(B) the contributor and the taxpayer are
related parties.’’
(b) CONFORMING AMENDMENT.—Subsection (e) of
section 118 (as redesignated by subsection (a)) is amended
by adding at the end the following flush sentence:
‘‘Rules similar to the rules of the preceding sentence shall
apply to any amount treated as a contribution to the cap-
ital of the taxpayer under subsection (d).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after Decem-
ber 31, 1999.
258
TITLE XII—PROVISIONS
RELATING TO PENSIONS
Subtitle A—Expanding Coverage
SEC. 1201. 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 headings and the text
and inserting ‘‘$160,000’’.
(C) Paragraph (7) of section 415(b) (relating to
benefits under certain collectively bargained plans) is
amended by striking ‘‘the greater of $68,212 or one-
half the amount otherwise applicable for such year
under paragraph (1)(A) for ‘$90,000’ ’’ and insert-
ing ‘‘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
259
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) in paragraph (1)(A) by striking
‘‘$90,000’’ 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’’.
260
(2) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) in paragraph (1)(C) by striking
‘‘$30,000’’ 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.—
261
(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
taxable year exceeds the applicable dollar
amount.
‘‘(B) APPLICABLE DOLLAR AMOUNT.—For
purposes of subparagraph (A), the applicable
dollar amount shall be the amount determined
in accordance with the following table:
‘‘Taxable year:
Applicable dollar amount:
2001 ............................................................................. $11,000
2002 ............................................................................. $12,000
2003 ............................................................................. $13,000
2004 ............................................................................. $14,000
2005 or thereafter ........................................................ $15,000.’’.
(2) COST-OF-LIVING ADJUSTMENT.—Paragraph
(5) of section 402(g) is amended to read as follows:
‘‘(5) COST-OF-LIVING
ADJUSTMENT.—In the
case of taxable years beginning after December 31,
2005, the Secretary shall adjust the $15,000
amount under paragraph (1)(B) at the same time
and in the same manner as under section 415(d);
262
except that the base period shall be the calendar
quarter beginning July 1, 2004, and any increase
under this paragraph which is not a multiple of
$500 shall be rounded to the next lowest multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraphs (1) and (2), is further amended
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—
263
(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:
‘‘Taxable year:
Applicable dollar amount:
2001 .............................................................................
$11,000
2002 .............................................................................
$12,000
2003 .............................................................................
$13,000
2004 .............................................................................
$14,000
2005 or thereafter ........................................................
$15,000.
‘‘(B) COST-OF-LIVING ADJUSTMENTS.—In
the case of taxable years beginning after De-
cember 31, 2005, the Secretary shall adjust the
$15,000 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, 2004, and any increase
under this paragraph which is not a multiple of
264
$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:
‘‘Year:
Applicable dollar amount:
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
265
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
266
is not a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.’’.
(h) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to years beginning after De-
cember 31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to 1 or
more collective bargaining agreements between em-
ployee representatives and 1 or more employers rati-
fied by the date of enactment of this Act, the
amendments made by this section shall not apply to
contributions or benefits pursuant to any such
agreement for 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
enactment), or
(ii) January 1, 2001, or
(B) January 1, 2005.
267
SEC. 1202. PLAN LOANS FOR SUBCHAPTER S OWNERS,
PARTNERS, AND SOLE PROPRIETORS.
(a) IN GENERAL.—Subparagraph (B) of section
4975(f)(6) (relating to exemptions not to apply to certain
transactions) is amended by adding at the end the fol-
lowing 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. 1203. 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,’’,
268
(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—
269
‘‘(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
270
(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).’’
271
(e) FROZEN PLAN EXEMPT FROM MINIMUM BEN-
EFIT
REQUIREMENT.—Subparagraph (C) of section
416(c)(1) (relating to defined benefit plans) is amended—
(A) in clause (i), by striking ‘‘clause (ii)’’
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) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 1204. 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-
272
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. 1205. REDUCED PBGC PREMIUM FOR NEW PLANS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subparagraph (A) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—
(1) in clause (i), by inserting ‘‘other than a new
single-employer plan (as defined in subparagraph
(F)) maintained by a small employer (as so de-
fined),’’ after ‘‘single-employer plan,’’,
(2) in clause (iii), by striking the period at the
end and inserting ‘‘, and’’, and
(3) by adding at the end the following new
clause:
273
‘‘(iv) in the case of a new single-employer plan
(as defined in subparagraph (F)) maintained by a
small employer (as so defined) for the plan year, $5
for each individual who is a participant in such plan
during the plan year.’’.
(b) 
DEFINITION
OF
NEW
SINGLE-EMPLOYER
PLAN.—Section 4006(a)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is
amended by adding at the end the following new subpara-
graph:
‘‘(F)(i) For purposes of this paragraph, a single-em-
ployer plan maintained by a contributing sponsor shall be
treated as a new single-employer plan for each of its first
5 plan years if, during the 36-month period ending on the
date of the adoption of such plan, the sponsor or any
member of such sponsor’s controlled group (or any prede-
cessor of either) had not established or maintained a plan
to which this title applies with respect to which benefits
were accrued for substantially the same employees as are
in the new single-employer plan.
‘‘(ii)(I) For purposes of this paragraph, the term
‘small employer’ means an employer which on the first day
of any plan year has, in aggregation with all members of
the controlled group of such employer, 100 or fewer em-
ployees.
274
‘‘(II) In the case of a plan maintained by 2 or more
contributing sponsors that are not part of the same con-
trolled group, the employees of all contributing sponsors
and controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing
sponsor is a small employer.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plans established after Decem-
ber 31, 2000.
SEC. 1206. REDUCTION OF ADDITIONAL PBGC PREMIUM
FOR NEW AND SMALL PLANS.
(a) NEW PLANS.—Subparagraph (E) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by
adding at the end the following new clause:
‘‘(v) In the case of a new defined benefit plan, the
amount determined under clause (ii) for any plan year
shall be an amount equal to the product of the amount
determined under clause (ii) and the applicable percent-
age. For purposes of this clause, the term ‘applicable per-
centage’ means—
‘‘(I) 0 percent, for the first plan year.
‘‘(II) 20 percent, for the second plan year.
‘‘(III) 40 percent, for the third plan year.
‘‘(IV) 60 percent, for the fourth plan year.
275
‘‘(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as de-
fined in section 3(35)) maintained by a contributing spon-
sor shall be treated as a new defined benefit plan for its
first 5 plan years if, during the 36-month period ending
on the date of the adoption of the plan, the sponsor and
each member of any controlled group including the spon-
sor (or any predecessor of either) did not establish or
maintain a plan to which this title applies with respect
to which benefits were accrued for substantially the same
employees as are in the new plan.’’.
(b) SMALL
PLANS.—Paragraph (3) of section
4006(a) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1306(a)) is amended—
(1) in subparagraph (E)(i) by striking ‘‘The’’
and inserting ‘‘Except as provided in subparagraph
(G), the’’, and
(2) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) In the case of an employer who has 25 or
fewer employees on the first day of the plan year, the addi-
tional premium determined under subparagraph (E) for
each participant shall not exceed $5 multiplied by the
number of participants in the plan as of the close of the
preceding plan year.
276
‘‘(ii) For purposes of clause (i), whether an employer
has 25 or fewer employees on the first day of the plan
year is determined taking into consideration all of the em-
ployees of all members of the contributing sponsor’s con-
trolled group. In the case of a plan maintained by 2 or
more contributing sponsors, the employees of all contrib-
uting sponsors and their controlled groups shall be aggre-
gated for purposes of determining whether 25-or-fewer-
employees limitation has been satisfied.’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made
by subsection (a) shall apply to plans established
after December 31, 2000.
(2) SUBSECTION (b).—The amendments made
by subsection (b) shall apply to plan years beginning
after December 31, 2000.
SEC. 1207. REPEAL OF COORDINATION REQUIREMENTS
FOR DEFERRED COMPENSATION PLANS OF
STATE AND LOCAL GOVERNMENTS AND TAX-
EXEMPT 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 1201(e), is amended to read as follows:
277
‘‘(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. 1208. 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
made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating em-
ployers.
(b) PENSION BENEFIT PLAN.—For purposes of this
section, the term ‘‘pension benefit plan’’ means a pension,
278
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. 1209. 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.
279
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 1210. 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—
280
‘‘(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
281
‘‘(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.
282
‘‘(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 1st taxable year for which the
individual made a designated plus con-
tribution to any designated plus account
283
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 1st 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—
284
‘‘(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
285
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).’’
286
(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 contributions.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 1211. INCREASE IN MINIMUM DEFINED BENEFIT LIMIT
UNDER SECTION 415.
(a) IN GENERAL.—Paragraph (4) of section 415(b)
(relating to total annual benefits not in excess of $10,000)
is amended to read as follows:
‘‘(4) TOTAL ANNUAL BENEFITS NOT IN EXCESS
OF $40,000.—
‘‘(A) IN
GENERAL.—Notwithstanding the
preceding provisions of this subsection, the ben-
efits payable with respect to a participant under
any defined benefit plan shall be deemed not to
exceed the limitation of this subsection if the
retirement benefits payable with respect to such
participant under such plan and under all other
defined benefit plans of the employer do not ex-
ceed applicable limit which applies to the plan
year, or the applicable limit which applies to
prior plan years.
287
‘‘(B) APPLICABLE LIMIT.—For purposes of
subparagraph (A), the applicable limit is—
‘‘(i) $10,000 for plan years beginning
before 2001,
‘‘(ii) $20,000 for plan years beginning
during 2001,
‘‘(iii) $30,000 for plan years begin-
ning during 2002, and
‘‘(iv) $40,000 for plan years begin-
ning after 2002.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
Subtitle B—Enhancing Fairness for
Women
SEC. 1221. ADDITIONAL SALARY REDUCTION CATCH-UP
CONTRIBUTIONS.
(a) LIMITATION ON EXCLUSION FOR ELECTIVE DE-
FERRALS.—
(1) IN
GENERAL.—Subsection (g) of section
402 (as amended by section 1201(d)) is further
amended by adding at the end the following:
‘‘(9) CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING RETIREMENT.—
288
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is at least age 50 as of the end of
any taxable year, the limitation of paragraph
(1) for such year, after the application of para-
graph (7), shall be increased by the applicable
catch-up amount.
‘‘(B) APPLICABLE
CATCH-UP
AMOUNT.—
For purposes of subparagraph (A), the applica-
ble catch-up amount shall be the amount deter-
mined in accordance with the following table:
‘‘Taxable year:
Applicable catch-up amount:
2001 .............................................................................
$1,000
2002 .............................................................................
$2,000
2003 .............................................................................
$3,000
2004 .............................................................................
$4,000
2005 or thereafter ........................................................
$5,000.’’.
(2) 
COST-OF-LIVING
ADJUSTMENTS.—Para-
graph (4) of section 402(g) (relating to cost-of-living
adjustment), as amended by section 1201(d), is fur-
ther amended by inserting ‘‘and the $5,000 dollar
amount 
in 
paragraph 
(9)’’ 
after 
‘‘paragraph
(1)(B)’’.
(b) SIMPLE RETIREMENT ACCOUNTS.—Paragraph
(2) of section 408(p) (relating to qualified salary reduction
arrangement) is amended by inserting at the end of the
following new subparagraph:
‘‘(F) 
CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING
RETIREMENT.—In the
289
case of an individual who is at least age 50 as
of the end of any taxable year, the limitation of
subparagraph (A)(ii) for such year shall be in-
creased by the applicable catch-up amount. For
purposes of the preceding sentence, the applica-
ble catch-up amount is the amount in effect
under section 402(g)(9) for such taxable year.’’.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—Subsection (e) of section 457 (relating to other
definitions and special rules) is amended by adding after
paragraph (16) the following new paragraph:
‘‘(17) CATCH-UP AMOUNTS.—In the case of an
individual who is at least age 50 as of the end of
any taxable year, the limitation of subsection
(b)(2)(A) for such year shall be increased by the ap-
plicable catch-up amount (as in effect under section
402(g)(9) for such taxable year), except that this
paragraph shall not apply to any taxable year to
which subsection (b)(3) applies.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
290
SEC. 1222. 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
on December 31, 2000)’’.
291
(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-
292
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 amended by section 1201(d)) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect on the date of the enact-
ment of the Financial Freedom Act of 1999)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
293
(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-
294
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.
(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. 1223. FASTER VESTING OF CERTAIN EMPLOYER
MATCHING CONTRIBUTIONS.
(a) IN GENERAL.—Section 411(a) (relating to min-
imum 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
295
(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 or more ......................................................................
100.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan years beginning after December
31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to 1 or
more collective bargaining agreements between em-
ployee representatives and 1 or more employers rati-
fied by the date of the enactment of this Act, the
amendments made by this section shall not apply to
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
296
extension thereof on or after such date of
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. 1224. SIMPLIFY AND UPDATE THE MINIMUM DIS-
TRIBUTION 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-
297
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.—
298
(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) in subclause (I) by striking
‘‘clause (iii)(III)’’ and inserting ‘‘clause
(ii)(III)’’,
(iii) in subclause (I) by striking ‘‘the
date on which the employee would have at-
tained the age 701⁄2,’’ and inserting ‘‘April
1 of the calendar year following the cal-
endar year in which the spouse attains
701⁄2,’’, and
299
(iv) in subclause (II) by striking ‘‘the
distributions to such spouse begin,’’ 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. 1225. CLARIFICATION OF TAX TREATMENT OF DIVI-
SION OF SECTION 457 PLAN BENEFITS UPON
DIVORCE.
(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
300
(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.
301
Subtitle C—Increasing Portability
for Participants
SEC. 1231. 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-
302
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’’.
303
(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:
304
‘‘(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:
305
‘‘(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.—
306
(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 fol-
lowing 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-
307
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’’.
308
(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)’’.
309
(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. 1232. 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
310
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’ has the meaning given such term
by clauses (iii), (iv), (v), and (vi) of section
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-
311
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. 1233. 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-
312
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).’’.
313
(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
314
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. 1234. 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
315
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) is amended by adding after sub-
paragraph (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. 1235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
316
(1) IN
GENERAL.—Paragraph (6) of section
411(d) (relating to accrued benefit not to be de-
creased by amendment) is amended by adding at the
end the following:
‘‘(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;
317
‘‘(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-
318
scribed in subclause (III) to receive
any distribution to which the partici-
pant 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
319
‘‘(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) IN GENERAL.—The last sentence of para-
graph (6)(B) of section 411(d) (relating to accrued
benefit not to be decreased by amendment) is
amended to read as follows: ‘‘The Secretary may by
regulations provide that this subparagraph shall not
apply to any plan amendment that does not ad-
versely 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.
Such regulations shall apply to plan years beginning
after December 31, 2001, or such earlier date as is
specified by the Secretary of the Treasury.
320
SEC. 1236. 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’’,
321
(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. 1237. 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:
322
‘‘(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 (17) the following new para-
graph:
‘‘(18) 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
323
‘‘(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)(16))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to trustee-to-trustee transfers after
December 31, 2000.
SEC. 1238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) IN GENERAL.—Section 411(a)(11) (relating to
restrictions on certain mandatory distributions) is amend-
ed 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
324
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. 1239. 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.—
325
‘‘(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
AMENDMENT.—So much of
paragraph (9) of section 457(e) as precedes subpara-
graph (A) is amended 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)—’’.
327
SEC. 1242. 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
328
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 1 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
329
contributions to 1 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. 1243. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350)
330
is amended by redesignating subsection (c) as subsection
(e) and by inserting after subsection (b) the following:
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation
shall prescribe rules similar to the rules in subsection (a)
for multiemployer plans covered by this title that termi-
nate under section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan
administrator of a plan described in paragraph (4)
may elect to transfer a missing participant’s benefits
to the corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corpora-
tion information with respect to benefits of a miss-
ing participant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
331
transferred (or the appropriate survivor benefit)
either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described
in this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this
section do not apply (without regard to
this subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a
plan described in paragraph (4).’’.
332
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to distributions made after final
regulations implementing subsections (c) and (d) of sec-
tion 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are
prescribed.
SEC. 1244. 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
333
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. 1245. EXCISE TAX ON FAILURE TO PROVIDE NOTICE
BY DEFINED BENEFIT PLANS SIGNIFICANTLY
REDUCING FUTURE BENEFIT ACCRUALS.
(a) IN GENERAL.—Chapter 43 of subtitle D (relating
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.
334
‘‘(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 1 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
335
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)
336
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)),
337
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.’’
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 43 of subtitle D is amended by adding at the
end the following new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals to satisfy no-
tice 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
338
Code of 1986 (as added by the amendment made by
subsection (a)), a plan shall be treated as meeting
the requirements of such section 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.
Subtitle E—Reducing Regulatory
Burdens
SEC. 1251. 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
(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. 1252. MODIFICATION OF TIMING OF PLAN VALU-
ATIONS.
(a) IN GENERAL.—Section 412(c)(9) (relating to an-
nual valuation) is amended—
339
(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
340
subparagraph (A) with respect to any
plan year to which clause (i) does not
apply by reason of this clause.
‘‘(II) REGULATIONS.—Subclause
(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. 1253. FLEXIBILITY AND NONDISCRIMINATION AND
LINE OF BUSINESS RULES.
The Secretary of the Treasury shall, on or before De-
cember 31, 2000, modify the existing regulations issued
under section 401(a)(4) and section 414(r) of the Internal
Revenue Code of 1986 in order to expand (to the extent
341
that the Secretary determines appropriate) the ability of
a pension plan to demonstrate compliance with the non-
discrimination and line of business requirements based
upon the facts and circumstances surrounding the design
and operation of the plan, even though the plan is unable
to satisfy the mechanical tests currently used to determine
compliance.
SEC. 1254. SUBSTANTIAL OWNER BENEFITS IN TERMI-
NATED PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended
to read as follows:
‘‘(5)(A) For purposes of this paragraph, the term
‘majority owner’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest
in such partnership, or
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either
342
the voting stock of that corporation or all the stock
of that corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
343
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
be allocated to benefits described in subparagraph
(B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination
date) of their respective benefits described in that
subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1321) is
amended—
344
(A) in subsection (b)(9), by striking ‘‘as
defined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’.
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
345
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices
of intent to terminate are provided under sec-
tion 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) after December 31, 2000, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such
date.
(2) CONFORMING AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on
the date of enactment of this Act.
SEC. 1255. 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—
346
‘‘(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. 1256. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) IN GENERAL.—Subparagraph (A) of section
417(a)(6) is amended by striking ‘‘90-day’’ and in-
serting ‘‘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 amendments made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 2000.
347
(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
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.
SEC. 1257. REPEAL OF TRANSITION RULE RELATING TO
CERTAIN HIGHLY COMPENSATED EMPLOY-
EES.
(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 on or after
January 1, 2000.
SEC. 1258. 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
348
1986 who are eligible to make contributions under section
403(b) pursuant to a salary reduction agreement may be
treated as excludable with respect to a plan under section
401(k), or section 401(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 section 401(k) plan or section 401(m)
plan.
(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. 1259. 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
349
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 retirement plan.
‘‘(2) NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
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 pension plan.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
350
SEC. 1260. 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 Act, or pursuant to any regulation issued
under this Act, and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2003.
In the case of a government plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986,
this paragraph shall be applied by substituting
‘‘2005’’ for ‘‘2003’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
351
(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.
SEC. 1261. MODEL PLANS FOR SMALL BUSINESSES.
(a) IN GENERAL.—Not later than December 31,
2000, the Secretary of the Treasury is directed to issue
at least one model defined contribution plan and at least
one model defined benefit plan that fit the needs of small
businesses and that shall be treated as meeting the re-
quirements of section 401(a) of the Internal Revenue Code
of 1986 with respect to the form of the plan. To the extent
that the requirements of section 401(a) of such Code are
352
modified after the issuance of such plans, the Secretary
of the Treasury shall, in a timely manner, issue model
amendments that, if adopted in a timely manner by an
employer that has a model plan in effect, shall cause such
model plan to be treated as meeting the requirements of
section 401(a) of such Code, as modified, with respect to
the form of the plan.
(b) PROTOTYPE PLAN ALTERNATIVE.—The Sec-
retary of the Treasury may satisfy the requirements of
subsection (a) through the enhancement and simplification
of the Secretary’s programs for prototype plans in such
a manner as to achieve the purposes of subsection (a).
SEC. 1262. SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.
(a) IN GENERAL.—In the case of a retirement plan
which covers less than 25 employees on the 1st day of
the plan year and meets the requirements described in
subsection (b), the Secretary of the Treasury shall provide
for the filing of a simplified annual return that is substan-
tially similar to the annual return required to be filed by
a one-participant retirement plan.
(b) REQUIREMENTS.—A plan meets the requirements
of this subsection if it—
(1) meets the minimum coverage requirements
of section 410(b) of the Internal Revenue Code of
353
1986 without being combined with any other plan of
the business that covers the employees of the busi-
ness,
(2) does not cover a business that is a member
of an affiliated service group, a controlled group of
corporations, or a group of businesses under com-
mon control, and
(3) does not cover a business that leases em-
ployees.
SEC. 1263. INTERMEDIATE SANCTIONS FOR INADVERTENT
FAILURES.
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,
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures,
354
(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.
TITLE XIII—MISCELLANEOUS
PROVISIONS
Subtitle A—Provisions Primarily
Affecting Individuals
SEC. 1301. EXCLUSION FOR FOSTER CARE PAYMENTS TO
APPLY TO PAYMENTS BY QUALIFIED PLACE-
MENT AGENCIES.
(a) IN GENERAL.—The matter preceding subpara-
graph (B) of section 131(b)(1) (defining qualified foster
care payment) is amended to read as follows:
‘‘(1) IN GENERAL.—The term ‘qualified foster
care payment’ means any payment made pursuant to
a foster care program of a State or political subdivi-
sion thereof—
‘‘(A) which is paid by—
‘‘(i) a State or political subdivision
thereof, or
355
‘‘(ii) a qualified foster care placement
agency, and’’.
(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE
INDIVIDUALS PLACED BY QUALIFIED PLACEMENT AGEN-
CIES.—Subparagraph (B) of section 131(b)(2) (defining
qualified foster individual) is amended to read as follows:
‘‘(B) a qualified foster care placement
agency.’’
(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY
DEFINED.—Subsection (b) of section 131 is amended by
redesignating paragraph (3) as paragraph (4) and by in-
serting after paragraph (2) the following new paragraph:
‘‘(3) QUALIFIED
FOSTER
CARE
PLACEMENT
AGENCY.—The term ‘qualified foster care placement
agency’ means any placement agency which is li-
censed or certified by—
‘‘(A) a State or political subdivision there-
of, or
‘‘(B) an entity designated by a State or
political subdivision thereof,
for the foster care program of such State or political
subdivision to make foster care payments to pro-
viders of foster care.’’
356
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 1302. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS EXCLUDED FROM GROSS IN-
COME.
(A) IN GENERAL.—Part III of subchapter B of chap-
ter 1 is amended by inserting after section 138 the fol-
lowing new section:
‘‘SEC. 138A. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS.
‘‘(a) IN GENERAL.—Gross income of an individual
does not include amounts received, from an organization
described in section 170(c), as reimbursement of operating
expenses with respect to use of a passenger automobile
for the benefit of such organization. The preceding sen-
tence shall apply only to the extent that such reimburse-
ment would be deductible under section 274(d) (deter-
mined by applying the standard business mileage rate es-
tablished pursuant to section 274(d)) if the organization
were not so described and such individual were an em-
ployee of such organization.
‘‘(b) NO DOUBLE BENEFIT.—Subsection (a) shall
not apply with respect to any expenses if the individual
357
claims a deduction or credit for such expenses under any
other provision of this title.
‘‘(c) EXEMPTION
FROM
REPORTING
REQUIRE-
MENTS.—Section 6041 shall not apply with respect to re-
imbursements excluded from income under subsection
(a).’’
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 is amended by
inserting after the item relating to section 138 the fol-
lowing new items:
‘‘Sec. 138A. Reimbursement for use of passenger automobile for
charity.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 1303. W–2 TO INCLUDE EMPLOYER SOCIAL SECURITY
TAXES.
(a) IN GENERAL.—Subsection (a) of section 6051
(relating to receipts for employees) is amended by striking
‘‘and’’ at the end of paragraph (10), by striking the period
at the end of paragraph (11) and inserting a comma, and
by inserting after paragraph (11) the following new para-
graphs:
‘‘(12) the amount of tax imposed by section
3111(a), and
358
‘‘(13) the amount of tax imposed by section
3111(b).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply with respect to remuneration paid
after December 31, 1999.
Subtitle B—Provisions Primarily
Affecting Businesses
SEC. 1311. DISTRIBUTIONS FROM PUBLICLY TRADED PART-
NERSHIPS TREATED AS QUALIFYING INCOME
OF REGULATED INVESTMENT COMPANIES.
(a) IN GENERAL.—Paragraph (2) of section 851(b)
(defining regulated investment company) is amended by
inserting ‘‘income derived from an interest in a publicly
traded partnership (as defined in section 7704(b)),’’ after
‘‘dividends, interest,’’.
(b) SOURCE
FLOW-THROUGH
RULE
NOT
TO
APPLY.—The last sentence of section 851(b) is amended
by inserting ‘‘(other than a publicly traded partnership (as
defined in section 7704(b)))’’ after ‘‘derived from a part-
nership’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
359
SEC. 1312. SPECIAL PASSIVE ACTIVITY RULE FOR PUB-
LICLY TRADED PARTNERSHIPS TO APPLY TO
REGULATED INVESTMENT COMPANIES.
(a) IN GENERAL.—Subsection (k) of section 469 (re-
lating to separate application of section in case of publicly
traded partnerships) is amended by adding at the end the
following new paragraph:
‘‘(4) APPLICATION
TO
REGULATED
INVEST-
MENT COMPANIES.—For purposes of this section, a
regulated investment company (as defined in section
851) holding an interest in a publicly traded part-
nership shall be treated as a taxpayer described in
subsection (a)(2) with respect to items attributable
to such interest.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 1313. LARGE ELECTRIC TRUCKS, VANS, AND BUSES EL-
IGIBLE FOR DEDUCTION FOR CLEAN-FUEL
VEHICLES IN LIEU OF CREDIT.
(a) IN GENERAL.—Paragraph (1) of section 30(c)
(relating to credit for qualified electric vehicles) is amend-
ed by adding at the end the following new flush sentence:
‘‘Such term shall not include any vehicle described
in 
subclause 
(I) 
or 
(II) 
of 
section
179A(b)(1)(A)(iii).’’
360
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service after
December 31, 1999.
SEC. 1314. MODIFICATIONS TO SPECIAL RULES FOR NU-
CLEAR DECOMMISSIONING COSTS.
(a) REPEAL
OF LIMITATION
ON DEPOSITS INTO
FUND BASED ON COST OF SERVICE.—Subsection (b) of
section 468A is amended to read as follows:
‘‘(b) LIMITATION ON AMOUNTS PAID INTO FUND.—
The amount which a taxpayer may pay into the Fund for
any taxable year shall not exceed the ruling amount appli-
cable to such taxable year.’’
(b) CLARIFICATION
OF
TREATMENT
OF
FUND
TRANSFERS.—Subsection (e) of section 468A is amended
by adding at the end the following new paragraph:
‘‘(8) TREATMENT OF FUND TRANSFERS.—If, in
connection with the transfer of the taxpayer’s inter-
est in a nuclear powerplant, the taxpayer transfers
the Fund with respect to such powerplant to the
transferee of such interest and the transferee elects
to continue the application of this section to such
Fund—
‘‘(A) the transfer of such Fund shall not
cause such Fund to be disqualified from the ap-
plication of this section, and
361
‘‘(B) no amount shall be treated as distrib-
uted from such Fund, or be includible in gross
income, by reason of such transfer.’’
(c) TRANSFERS
OF BALANCES
IN NONQUALIFIED
FUNDS.—Section 468A is amended by redesignating sub-
sections (f) and (g) as subsections (g) and (h), respec-
tively, and by inserting after subsection (e) the following
new subsection:
‘‘(f) TRANSFERS OF BALANCES IN NONQUALIFIED
FUNDS INTO QUALIFIED FUNDS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b), any taxpayer maintaining a Fund to which this
section applies with respect to a nuclear powerplant
may transfer into such Fund amounts held in any
nonqualified fund of such taxpayer with respect to
such powerplant.
‘‘(2) MAXIMUM
AMOUNT
PERMITTED
TO
BE
TRANSFERRED.—The amount permitted to be trans-
ferred under paragraph (1) shall not exceed the bal-
ance in the nonqualified fund as of December 31,
1998.
‘‘(3) 
DEDUCTION
FOR
AMOUNTS
TRANS-
FERRED.—
‘‘(A) IN GENERAL.—The deduction allowed
by subsection (a) for any transfer permitted by
362
this subsection shall be allowed ratably over the
remaining estimated useful life (within the
meaning of subsection (d)(2)(A)) of the nuclear
powerplant, beginning with the later of the tax-
able year during which the transfer is made or
the taxpayer’s first taxable year beginning after
December 31, 2001.
‘‘(B) DENIAL
OF
DEDUCTION
FOR
PRE-
VIOUSLY DEDUCTED AMOUNTS.—No deduction
shall be allowed for any transfer under this sub-
section of an amount for which a deduction was
allowed when such amount was paid into the
nonqualified fund. For purposes of the pre-
ceding sentence, a ratable portion of each trans-
fer shall be treated as being from previously de-
ducted amounts to the extent thereof.
‘‘(C) TRANSFERS OF QUALIFIED FUNDS.—
If—
‘‘(i) any transfer permitted by this
subsection is made to any Fund to which
this section applies, and
‘‘(ii) such Fund is transferred there-
after,
any deduction under this subsection for taxable
years ending after the date that such Fund is
363
transferred shall be allowed to the transferee
and not to the transferor. The preceding sen-
tence shall not apply if the transferor is an or-
ganization exempt from tax imposed by this
chapter.
‘‘(4) NEW RULING AMOUNT REQUIRED.—Para-
graph (1) shall not apply to any transfer unless the
taxpayer requests from the Secretary a new schedule
of ruling amounts in connection with such transfer.
‘‘(5) NONQUALIFIED FUND.—For purposes of
this subsection, the term ‘nonqualified fund’ means,
with respect to any nuclear powerplant, any fund in
which amounts are irrevocably set aside pursuant to
the requirements of any State or Federal agency ex-
clusively for the purpose of funding the decommis-
sioning of such powerplant.
‘‘(6) NO
BASIS
IN
QUALIFIED
FUNDS.—Not-
withstanding any other provision of law, the basis of
any Fund to which this section applies shall not be
increased by reason of any transfer permitted by
this subsection.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
364
SEC. 1315. CONSOLIDATION OF LIFE INSURANCE COMPA-
NIES WITH OTHER CORPORATIONS.
(a) IN GENERAL.—Section 1504(b) (defining includ-
ible corporation) is amended by striking paragraph (2).
(b) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 1503 is amended
by striking paragraph (2) (relating to losses of re-
cent nonlife affiliates).
(2) Section 1504 is amended by striking sub-
section (c) and by redesignating subsections (d), (e),
and (f) as subsections (c), (d), and (e), respectively.
(3) Section 1503(c)(1) (relating to special rule
for application of certain losses against income of in-
surance companies taxed under section 801) is
amended by striking ‘‘an election under section
1504(c)(2) is in effect for the taxable year and’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2004.
(d) NO CARRYBACK BEFORE JANUARY 1, 2005.—To
the extent that a consolidated net operating loss is allowed
or increased by reason of the amendments made by this
section, such loss may not be carried back to a taxable
year beginning before January 1, 2005.
365
(e) NONTERMINATION
OF GROUP.—No affiliated
group shall terminate solely as a result of the amendments
made by this section.
(f) WAIVER OF 5-YEAR WAITING PERIOD.—Under
regulations prescribed by the Secretary of the Treasury
or his delegate, an automatic waiver from the 5-year wait-
ing period for reconsolidation provided in section
1504(a)(3) of such Code shall be granted to any corpora-
tion which was previously an includible corporation but
was subsequently deemed a nonincludible corporation as
a result of becoming a subsidiary of a corporation which
was not an includible corporation solely by operation of
section 1504(c)(2) of such Code (as in effect on the day
before the date of enactment of this Act).
Subtitle C—Provisions Relating to
Excise Taxes
SEC. 1321. CONSOLIDATION OF HAZARDOUS SUBSTANCE
SUPERFUND AND LEAKING UNDERGROUND
STORAGE TANK TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 (re-
lating to trust fund code) is amended by striking sections
9507 and 9508 and inserting the following new section:
‘‘SEC. 9507. ENVIRONMENTAL REMEDIATION TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
366
to be known as the ‘Environmental Remediation Trust
Fund’ consisting of such amounts as may be—
‘‘(1) appropriated to the Environmental Reme-
diation Trust Fund as provided in this section,
‘‘(2) appropriated to the Environmental Reme-
diation Trust Fund pursuant to section 517(b) of
the Superfund Revenue Act of 1986, or
‘‘(3) credited to the Environmental Remediation
Trust Fund as provided in section 9602(b).
‘‘(b) TRANSFERS TO ENVIRONMENTAL REMEDIATION
TRUST FUND.—
‘‘(1) IN GENERAL.—There are hereby appro-
priated to the Environmental Remediation Trust
Fund amounts equivalent to—
‘‘(A) the taxes received in the Treasury
under—
‘‘(i) section 59A, 4611, 4661, or 4671
(relating to environmental taxes),
‘‘(ii) section 4041(d) (relating to addi-
tional taxes on motor fuels),
‘‘(iii) section 4081 (relating to tax on
gasoline, diesel fuel, and kerosene) to the
extent attributable to the Environmental
Remediation Trust Fund financing rate
under such section,
367
‘‘(iv) section 4091 (relating to tax on
aviation fuel) to the extent attributable to
the 
Environmental 
Remediation 
Trust
Fund financing rate under such section,
and
‘‘(v) section 4042 (relating to tax on
fuel used in commercial transportation on
inland waterways) to the extent attrib-
utable to the Environmental Remediation
Trust Fund financing rate under such sec-
tion,
‘‘(B) amounts recovered on behalf of the
Environmental Remediation Trust Fund under
the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (here-
inafter 
in 
this 
section 
referred 
to 
as
‘CERCLA’),
‘‘(C) all moneys recovered or collected
under section 311(b)(6)(B) of the Clean Water
Act,
‘‘(D) penalties assessed under title I of
CERCLA,
‘‘(E) punitive damages under section
107(c)(3) of CERCLA, and
368
‘‘(F) amounts received in the Treasury and
collected under section 9003(h)(6) of the Solid
Waste Disposal Act.
‘‘(2) LIMITATION ON TRANSFERS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), no amount may be appro-
priated or credited to the Environmental Reme-
diation Trust Fund on and after the date of
any expenditure from any such Trust Fund
which is not permitted by this section. The de-
termination of whether an expenditure is so
permitted shall be made without regard to—
‘‘(i) any provision of law which is not
contained or referenced in this title or in
a revenue Act, and
‘‘(ii) whether such provision of law is
a subsequently enacted provision or di-
rectly or indirectly seeks to waive the ap-
plication of this paragraph.
‘‘(B) EXCEPTION
FOR
PRIOR
OBLIGA-
TIONS.—Subparagraph (A) shall not apply to
any expenditure to liquidate any contract en-
tered into (or for any amount otherwise obli-
gated) in accordance with the provisions of this
section.’’
369
‘‘(c) EXPENDITURES FROM ENVIRONMENTAL REME-
DIATION TRUST FUND.—
‘‘(1) IN GENERAL.—Amounts in the Environ-
mental Remediation Trust Fund shall be available,
as provided in appropriation Acts, only for purposes
of making expenditures—
‘‘(A) to carry out the purposes of—
‘‘(i) paragraphs (1), (2), (5), and (6)
of section 111(a) of CERCLA as in effect
on July 12, 1999,
‘‘(ii) section 111(c) of CERCLA (as
so in effect), other than paragraphs (1)
and (2) thereof, and
‘‘(iii) section 111(m) of CERCLA (as
so in effect), or
‘‘(B) to carry out section 9003(h) of the
Solid Waste Disposal Act as in effect on July
12, 1999.
‘‘(2) EXCEPTION
FOR
CERTAIN
TRANSFERS,
ETC., OF HAZARDOUS SUBSTANCES.—No amount in
the Environmental Remediation Trust Fund or de-
rived from the Environmental Remediation Trust
Fund shall be available or used for the transfer or
disposal of hazardous waste carried out pursuant to
a cooperative agreement between the Administrator
370
of the Environmental Protection Agency and a State
if the following conditions apply—
‘‘(A) the transfer or disposal, if made on
December 13, 1985, would not comply with a
State or local requirement,
‘‘(B) the transfer is to a facility for which
a final permit under section 3005(a) of the
Solid Waste Disposal Act was issued after Jan-
uary 1, 1983, and before November 1, 1984,
and
‘‘(C) the transfer is from a facility identi-
fied as the McColl Site in Fullerton, California.
‘‘(3) TRANSFERS FROM TRUST FUND FOR CER-
TAIN REPAYMENTS AND CREDITS.—
‘‘(A) IN
GENERAL.—The Secretary shall
pay from time to time from the Environmental
Remediation Trust Fund into the general fund
of the Treasury amounts equivalent to—
‘‘(i) amounts paid under—
‘‘(I) section 6420 (relating to
amounts paid in respect of gasoline
used on farms),
‘‘(II) section 6421 (relating to
amounts paid in respect of gasoline
371
used for certain nonhighway purposes
or by local transit systems), and
‘‘(III) section 6427 (relating to
fuels not used for taxable purposes),
and
‘‘(ii) credits allowed under section 34,
with respect to the taxes imposed by section
4041(d) or by sections 4081 and 4091 (to the
extent attributable to the Leaking Underground
Storage Tank Trust Fund financing rate or the
Environmental Remediation Trust Fund financ-
ing rate under such sections).
‘‘(B) TRANSFERS BASED ON ESTIMATES.—
Transfers under subparagraph (A) shall be
made on the basis of estimates by the Sec-
retary, and proper adjustments shall be made
in amounts subsequently transferred to the ex-
tent prior estimates were in excess of or less
than the amounts required to be transferred.
‘‘(d) LIABILITY OF UNITED STATES LIMITED TO
AMOUNT IN TRUST FUND.—
‘‘(1) GENERAL RULE.—Any claim filed against
the Environmental Remediation Trust Fund may be
paid only out of the Environmental Remediation
Trust Fund.
372
‘‘(2) COORDINATION
WITH
OTHER
PROVI-
SIONS.—Nothing in CERCLA or the Superfund
Amendments and Reauthorization Act of 1986 (or in
any amendment made by either of such Acts) shall
authorize the payment by the United States Govern-
ment of any amount with respect to any such claim
out of any source other than the Environmental Re-
mediation Trust Fund.
‘‘(3) ORDER IN WHICH UNPAID CLAIMS ARE TO
BE PAID.—If at any time the Environmental Reme-
diation Trust Fund has insufficient funds to pay all
of the claims payable out of the Environmental Re-
mediation Trust Fund at such time, such claims
shall, to the extent permitted under paragraph (1),
be paid in full in the order in which they were finally
determined.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsections (c) and (d) of section 4611 are
each amended by striking ‘‘Hazardous Substance
Superfund’’ each place it appears and inserting ‘‘En-
vironmental Remediation Trust Fund’’.
(2) Subsection (c) of section 4661 is amended
by striking ‘‘Hazardous Substance Superfund’’ and
inserting ‘‘Environmental Remediation Trust Fund’’.
373
(3) Sections 4041(d), 4042(b), 4081(a)(2)(B),
4081(d)(3), 4091(b), 4092(b), 6421(f), and 6427(l)
are each amended by striking ‘‘Leaking Under-
ground Storage Tank’’ each place it appears (other
than the headings) and inserting ‘‘Environmental
Remediation’’.
(4) The heading for subsection (d) of section
4041 is amended by striking ‘‘LEAKING UNDER-
GROUND STORAGE TANK’’ and inserting ‘‘ENVIRON-
MENTAL REMEDIATION’’.
(5) The headings for subsections (a)(2)(B) and
(d)(3) of section 4081 and section 4091(b)(2) are
each amended by striking ‘‘LEAKING UNDERGROUND
STORAGE
TANK’’ and inserting ‘‘ENVIRONMENTAL
REMEDIATION’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on October 1, 1999.
(d) ENVIRONMENTAL REMEDIATION TRUST FUND
TREATED AS CONTINUATION OF OLD TRUST FUNDS.—
The Environmental Remediation Trust Fund established
by the amendments made by this section shall be treated
for all purposes of law as a continuation of both the Haz-
ardous Substance Superfund and the Leaking Under-
ground Storage Tank Trust Fund. Any reference in any
law to the Hazardous Substance Superfund or the Leak-
374
ing Underground Storage Tank Trust Fund shall be
deemed to include (wherever appropriate) a reference to
the Environmental Remediation Trust Fund established
by such amendments.
SEC. 1322. REPEAL OF CERTAIN MOTOR FUEL EXCISE
TAXES ON FUEL USED BY RAILROADS AND ON
INLAND WATERWAY TRANSPORTATION.
(a) REPEAL OF LEAKING UNDERGROUND STORAGE
TANK TRUST FUND TAXES ON FUEL USED IN TRAINS.—
(1) IN
GENERAL.—Paragraph (1) of section
4041(d) is amended by adding at the end the fol-
lowing new sentence: ‘‘The preceding sentence shall
not apply to any sale for use, or use, of fuel in a
diesel-powered train.’’
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (3) of section 6421(f) is
amended by striking ‘‘with respect to—’’ and
all that follows through ‘‘so much of’’ and in-
serting ‘‘with respect to so much of’’.
(B) Paragraph (3) of section 6427(l) is
amended by striking ‘‘with respect to—’’ and
all that follows through ‘‘so much of’’ and in-
serting ‘‘with respect to so much of’’.
375
(b) REPEAL
OF 4.3-CENT MOTOR FUEL EXCISE
TAXES ON RAILROADS AND INLAND WATERWAY TRANS-
PORTATION WHICH REMAIN IN GENERAL FUND.—
(1) TAXES ON TRAINS.—
(A) IN
GENERAL.—Subparagraph (A) of
section 4041(a)(1) is amended by striking ‘‘or
a diesel-powered train’’ each place it appears
and by striking ‘‘or train’’.
(B) CONFORMING AMENDMENTS.—
(i) 
Subparagraph 
(C) 
of 
section
4041(a)(1) is amended by striking clause
(ii) and by redesignating clause (iii) as
clause (ii).
(ii) Subparagraph (C) of section
4041(b)(1) is amended by striking all that
follows ‘‘section 6421(e)(2)’’ and inserting
a period.
(iii) Paragraph (3) of section 4083(a)
is amended by striking ‘‘or a diesel-pow-
ered train’’.
(iv) Section 6421(f) is amended by
striking paragraph (3).
(v) Section 6427(l) is amended by
striking paragraph (3).
(2) FUEL USED ON INLAND WATERWAYS.—
377
Subtitle D—Other Provisions
SEC. 1331. INCREASE IN VOLUME CAP ON PRIVATE ACTIV-
ITY BONDS.
(a) IN GENERAL.—Subsection (d) of section 146 (re-
lating to volume cap) is amended by striking paragraph
(2), by redesignating paragraphs (3) and (4) as para-
graphs (2) and (3), respectively, and by striking para-
graph (1) and inserting the following new paragraph:
‘‘(1) IN GENERAL.—The State ceiling applicable
to any State for any calendar year shall be the
greater of—
‘‘(A) an amount equal to $75 multiplied by
the State population, or
‘‘(B) $225,000,000.
Subparagraph (B) shall not apply to any possession
of the United States.’’.
(b) CONFORMING AMENDMENT.—Sections 25(f)(3)
and 42(h)(3)(E)(iii) are each amended by striking ‘‘sec-
tion 146(d)(3)(C)’’ and inserting ‘‘section 146(d)(2)(C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years after 1999.
SEC. 1332. TAX TREATMENT OF ALASKA NATIVE SETTLE-
MENT TRUSTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
J of chapter 1 (relating to general rules for taxation of
378
trusts and estates) is amended by adding at the end the
following new section:
‘‘SEC. 
646. 
ELECTING 
ALASKA 
NATIVE 
SETTLEMENT
TRUSTS.
‘‘(a) IN GENERAL.—Except as otherwise provided in
this section, the provisions of this subchapter and section
1(e) shall apply to all Settlement Trusts.
‘‘(b) BENEFICIARIES
OF ELECTING TRUST NOT
TAXED ON CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—In the case of a Settlement
Trust for which an election under paragraph (2) is
in effect for any taxable year, no amount shall be in-
cludible in the gross income of a beneficiary of the
Settlement Trust by reason of a contribution to the
Settlement Trust made during such taxable year.
‘‘(2) ONE-TIME ELECTION.—
‘‘(A) IN
GENERAL.—A Settlement Trust
may elect to have the provisions of this section
apply to the trust and its beneficiaries.
‘‘(B) TIME AND METHOD OF ELECTION.—
An election under subparagraph (A) shall be
made—
‘‘(i) before the due date (including ex-
tensions) for filing the Settlement Trust’s
return of tax for the 1st taxable year of
379
the Settlement Trust ending after Decem-
ber 31, 1999, and
‘‘(ii) by attaching to such return of
tax a statement specifically providing for
such election.
‘‘(C) PERIOD ELECTION IN EFFECT.—Ex-
cept as provided in paragraph (3), an election
under subparagraph (A)—
‘‘(i) shall apply to the 1st taxable year
described in subparagraph (B)(i) and all
subsequent taxable years, and
‘‘(ii) may not be revoked once it is
made.
‘‘(c) SPECIAL RULES WHERE TRANSFER RESTRIC-
TIONS MODIFIED.—
‘‘(1) TRANSFER OF BENEFICIAL INTERESTS.—
If, at any time, a beneficial interest in a Settlement
Trust may be disposed of to a person in a manner
which would not be permitted by section 7(h) of the
Alaska Native Claims Settlement Act (43 U.S.C.
1606(h)) if the interest were Settlement Common
Stock—
‘‘(A) no election may be made under sub-
section (b)(2) with respect to such trust, and
380
‘‘(B) if such an election is in effect as of
such time, such election shall cease to apply for
purposes of subsection (b)(1) as of the 1st day
of the taxable year following the taxable year in
which such disposition is first permitted.
‘‘(2) STOCK IN CORPORATION.—If—
‘‘(A) the Settlement Common Stock in any
Native Corporation which transferred assets to
a Settlement Trust making an election under
subsection (b)(2) may be disposed of to a per-
son in a manner not permitted by section 7(h)
of the Alaska Native Claims Settlement Act (43
U.S.C. 1606(h)), and
‘‘(B) at any time after such disposition of
stock is first permitted, such corporation trans-
fers assets to such trust,
subparagraph (B) of paragraph (1) shall be applied
to such trust on and after the date of the transfer
in the same manner as if the trust permitted dis-
positions of beneficial interests in the trust in a
manner not permitted by such section 7(h).
‘‘(c) TAX TREATMENT OF DISTRIBUTIONS TO BENE-
FICIARIES.—
‘‘(1) IN GENERAL.—In the case of a Settlement
Trust for which an election under subsection (b)(2)
381
is in effect for any taxable year, any distribution to
a beneficiary shall be included in gross income of the
beneficiary as ordinary income to the extent such
distribution reduces the earnings and profits of any
Native Corporation making a contribution to such
Trust.
‘‘(2) EARNINGS AND PROFITS.—The earnings
and profits of any Native Corporation making a con-
tribution to a Settlement Trust shall not be reduced
on account thereof at the time of such contribution,
but such earnings and profits shall be reduced (up
to the amount of such contribution) as distributions
are thereafter made by the Settlement Trust which
exceed the sum of—
‘‘(A) such Trust’s total undistributed net
income for all prior years during which an elec-
tion under subsection (b)(2) is in effect, and
‘‘(B) such Trust’s distributable net income.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) NATIVE CORPORATION.—The term ‘Native
Corporation’ has the meaning given such term by
section 3(m) of the Alaska Native Claims Settlement
Act (43 U.S.C. 1602(m)).
‘‘(2) SETTLEMENT TRUST.—The term ‘Settle-
ment Trust’ means a trust which constitutes a Set-
382
tlement Trust under section 39 of the Alaska Native
Claims Settlement Act (43 U.S.C. 1629e).’’
(b) WITHHOLDING ON DISTRIBUTIONS BY ELECTING
ANCSA SETTLEMENT TRUSTS.—Section 3402 is amend-
ed by adding at the end the following new subsection:
‘‘(t) TAX WITHHOLDING
ON DISTRIBUTIONS
BY
ELECTING ANCSA SETTLEMENT TRUSTS.—
‘‘(1) IN GENERAL.—Any Settlement Trust (as
defined in section 646(d)) for which an election
under section 646(b)(2) is in effect (in this sub-
section referred to as an ‘electing trust’) and which
makes a payment to any beneficiary which is includ-
able in gross income under section 646(c) shall de-
duct and withhold from such payment a tax in an
amount equal to such payment’s proportionate share
of the annualized tax.
‘‘(2) EXCEPTION.—The tax imposed by para-
graph (1) shall not apply to any payment to the ex-
tent that such payment, when annualized, does not
exceed an amount equal to the amount in effect
under section 6012(a)(1)(A)(i) for taxable years be-
ginning in the calendar year in which the payment
is made.
‘‘(3) ANNUALIZED TAX.—For purposes of para-
graph (1), the term ‘annualized tax’ means, with re-
383
spect to any payment, the amount of tax which
would be imposed by section 1(c) (determined with-
out regard to any rate of tax in excess of 31 per-
cent) on an amount of taxable income equal to the
excess of—
‘‘(A) the annualized amount of such pay-
ment, over
‘‘(B) the amount determined under para-
graph (2).
‘‘(4) ANNUALIZATION.—For purposes of this
subsection, amounts shall be annualized in the man-
ner prescribed by the Secretary.
‘‘(5) 
ALTERNATE
WITHHOLDING
PROCE-
DURES.—At the election of an electing trust, the tax
imposed by this subsection on any payment made by
such trust shall be determined in accordance with
such tables or computational procedures as may be
specified in regulations prescribed by the Secretary
(in lieu of in accordance with paragraphs (2) and
(3)).
‘‘(6) COORDINATION WITH OTHER SECTIONS.—
For purposes of this chapter and so much of subtitle
F as relates to this chapter, payments which are
subject to withholding under this subsection shall be
384
treated as if they were wages paid by an employer
to an employee.’’
(c) REPORTING.—Section 6041 is amended by adding
at the end the following new subsection:
‘‘(f) APPLICATION TO ALASKA NATIVE SETTLEMENT
TRUSTS.—In the case of any distribution from a Settle-
ment Trust (as defined in section 646(d)) to a beneficiary
which is includable in gross income under section 646(c),
this section shall apply, except that—
‘‘(1) this section shall apply to such distribution
without regard to the amount thereof,
‘‘(2) the Settlement Trust shall include on any
return or statement required by this section infor-
mation as to the character of such distribution (if
applicable) and the amount of tax imposed by chap-
ter 1 which has been deducted and withheld from
such distribution, and
‘‘(3) the filing of any return or statement re-
quired by this section shall satisfy any requirement
to file any other form or schedule under this title
with respect to distributive share information (in-
cluding any form or schedule to be included with the
trust’s tax return).’’
385
(d) CLERICAL AMENDMENT.—The table of sections
for subpart A of part I of subchapter J of chapter 1 is
amended by adding at the end the following new item:
‘‘Sec. 646. Electing Alaska Native Settlement Trusts.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years of Settlement
Trusts ending after December 31, 1999, and to contribu-
tions to such trusts after such date.
SEC. 1333. INCREASE IN THRESHOLD FOR JOINT COM-
MITTEE REPORTS ON REFUNDS AND CRED-
ITS.
(a) GENERAL RULE.—Subsections (a) and (b) of sec-
tion 6405 are each amended by striking ‘‘$1,000,000’’ and
inserting ‘‘$2,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act, except that such amendment shall not
apply with respect to any refund or credit with respect
to a report that has been made before such date of enact-
ment under section 6405 of the Internal Revenue Code
of 1986.
386
Subtitle E—Tax Court Provisions
SEC. 1341. TAX COURT FILING FEE IN ALL CASES COM-
MENCED BY FILING PETITION.
(a) IN GENERAL.—Section 7451 (relating to fee for
filing a Tax Court petition) is amended by striking all that
follows ‘‘petition’’ and inserting a period.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 1342. EXPANDED USE OF TAX COURT PRACTICE FEE.
Subsection (b) of section 7475 (relating to use of
fees) is amended by inserting before the period at the end
‘‘and to provide services to pro se taxpayers’’.
SEC. 1343. CONFIRMATION OF AUTHORITY OF TAX COURT
TO 
APPLY 
DOCTRINE 
OF 
EQUITABLE
RECOUPMENT.
(a) CONFIRMATION OF AUTHORITY OF TAX COURT
TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.—
Subsection (b) of section 6214 (relating to jurisdiction
over other years and quarters) is amended by adding at
the end the following new sentence: ‘‘Notwithstanding the
preceding sentence, the Tax Court may apply the doctrine
of equitable recoupment to the same extent that it is avail-
able in civil tax cases before the district courts of the
387
United States and the United States Court of Federal
Claims.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to any action or proceeding in the
Tax Court with respect to which a decision has not become
final (as determined under section 7481 of the Internal
Revenue Code of 1986) as of the date of the enactment
of this Act.
TITLE XIV—EXTENSIONS OF
EXPIRING PROVISIONS
SEC. 1401. RESEARCH CREDIT.
(a) EXTENSION.—
(1) IN
GENERAL.—Paragraph (1) of section
41(h) (relating to termination) is amended—
(A) by striking ‘‘June 30, 1999’’ and in-
serting ‘‘June 30, 2004’’, and
(B) by striking the material following sub-
paragraph (B).
(2) TECHNICAL
AMENDMENT.—Subparagraph
(D) of section 45C(b)(1) is amended by striking
‘‘June 30, 1999’’ and inserting ‘‘June 30, 2004’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid or in-
curred after June 30, 1999.
388
(b) INCREASE
IN PERCENTAGES UNDER ALTER-
NATIVE INCREMENTAL CREDIT.—
(1) IN GENERAL.—Subparagraph (A) of section
41(c)(4) is amended—
(A) by striking ‘‘1.65 percent’’ and insert-
ing ‘‘2.65 percent’’,
(B) by striking ‘‘2.2 percent’’ and inserting
‘‘3.2 percent’’, and
(C) by striking ‘‘2.75 percent’’ and insert-
ing ‘‘3.75 percent’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after June 30, 1999.
SEC. 1402. SUBPART F EXEMPTION FOR ACTIVE FINANCING
INCOME.
(a) 
IN
GENERAL.—Sections 
953(e)(10) 
and
954(h)(9) are each amended—
(1) by striking ‘‘the first taxable year’’ and in-
serting ‘‘taxable years’’, and
(2) by striking ‘‘January 1, 2000’’ and insert-
ing ‘‘January 1, 2005’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
389
SEC. 1403. TAXABLE INCOME LIMIT ON PERCENTAGE DE-
PLETION FOR MARGINAL PRODUCTION.
(a) IN GENERAL.—Subparagraph (H) of section
613A(c)(6) is amended by striking ‘‘January 1, 2000’’ and
inserting ‘‘January 1, 2005’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 1404. WORK OPPORTUNITY CREDIT AND WELFARE-TO-
WORK CREDIT.
(a) TEMPORARY EXTENSION.—Sections 51(c)(4)(B)
and 51A(f) (relating to termination) are each amended by
striking ‘‘June 30, 1999’’ and inserting ‘‘June 30, 2001’’.
(b) CLARIFICATION OF FIRST YEAR OF EMPLOY-
MENT.—Paragraph (2) of section 51(i) is amended by
striking ‘‘during which he was not a member of a targeted
group’’.
(c) ELECTRONIC FILING OF CERTIFICATION.—Not
later than July 1, 2001, the Secretary of the Treasury
or the Secretary’s delegate shall provide an electronic for-
mat by which employers may submit requests to des-
ignated local agencies (as defined in section 51(d)(11) of
the Internal Revenue Code of 1986) for certifications that
individuals are members of targeted groups for purposes
of section 51 of such Code.
390
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to individuals who begin work for
the employer after June 30, 1999.
TITLE XV—REVENUE OFFSETS
SEC. 1501. RETURNS RELATING TO CANCELLATIONS OF IN-
DEBTEDNESS BY ORGANIZATIONS LENDING
MONEY.
(a) 
IN
GENERAL.—Paragraph 
(2) 
of 
section
6050P(c) (relating to definitions and special rules) is
amended by striking ‘‘and’’ at the end of subparagraph
(B), by striking the period at the end of subparagraph
(C) and inserting ‘‘, and’’, and by inserting after subpara-
graph (C) the following new subparagraph:
‘‘(D) any organization a significant trade
or business of which is the lending of money.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to discharges of indebtedness
after December 31, 1999.
SEC. 1502. EXTENSION OF INTERNAL REVENUE SERVICE
USER FEES.
(a) IN GENERAL.—Chapter 77 (relating to miscella-
neous provisions) is amended by adding at the end the
following new section:
391
‘‘SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.
‘‘(a) GENERAL RULE.—The Secretary shall establish
a program requiring the payment of user fees for—
‘‘(1) requests to the Internal Revenue Service
for ruling letters, opinion letters, and determination
letters, and
‘‘(2) other similar requests.
‘‘(b) PROGRAM CRITERIA.—
‘‘(1) IN GENERAL.—The fees charged under the
program required by subsection (a)—
‘‘(A) shall vary according to categories (or
subcategories) established by the Secretary,
‘‘(B) shall be determined after taking into
account the average time for (and difficulty of)
complying with requests in each category (and
subcategory), and
‘‘(C) shall be payable in advance.
‘‘(2) EXEMPTIONS, ETC.—The Secretary shall
provide for such exemptions (and reduced fees)
under such program as the Secretary determines to
be appropriate.
‘‘(3) AVERAGE FEE REQUIREMENT.—The aver-
age fee charged under the program required by sub-
section (a) shall not be less than the amount deter-
mined under the following table:
392
‘‘Category
Average Fee
Employee plan ruling and opinion ...........................................
$250
Exempt organization ruling .....................................................
$350
Employee plan determination ..................................................
$300
Exempt organization determination ........................................
$275
Chief counsel ruling .................................................................
$200.
‘‘(c) TERMINATION.—No fee shall be imposed under
this section with respect to requests made after September
30, 2007.’’
(b) CONFORMING AMENDMENTS.—
(1) The table of sections for chapter 77 is
amended by adding at the end the following new
item:
‘‘Sec. 7527. Internal Revenue Service user fees.’’
(2) Section 10511 of the Revenue Act of 1987
is repealed.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to requests made after the date
of the enactment of this Act.
SEC. 1503. LIMITATIONS ON WELFARE BENEFIT FUNDS OF
10 OR MORE EMPLOYER PLANS.
(a) BENEFITS TO WHICH EXCEPTION APPLIES.—
Section 419A(f)(6)(A) (relating to exception for 10 or
more employer plans) is amended to read as follows:
‘‘(A) IN GENERAL.—This subpart shall not
apply to a welfare benefit fund which is part of
a 10 or more employer plan if the only benefits
393
provided through the fund are 1 or more of the
following:
‘‘(i) Medical benefits.
‘‘(ii) Disability benefits.
‘‘(iii) Group term life insurance bene-
fits which do not provide for any cash sur-
render value or other money that can be
paid, assigned, borrowed, or pledged for
collateral for a loan.
The preceding sentence shall not apply to any
plan which maintains experience-rating arrange-
ments with respect to individual employers.’’
(b) LIMITATION ON USE OF AMOUNTS FOR OTHER
PURPOSES.—Section 4976(b) (defining disqualified ben-
efit) is amended by adding at the end the following new
paragraph:
‘‘(5) SPECIAL
RULE
FOR
OR
MORE
EM-
PLOYER PLANS EXEMPTED FROM PREFUNDING LIM-
ITS.—For purposes of paragraph (1)(C), if—
‘‘(A) subpart D of part I of subchapter D
of chapter 1 does not apply by reason of section
419A(f)(6) to contributions to provide 1 or
more welfare benefits through a welfare benefit
fund under a 10 or more employer plan, and
394
‘‘(B) any portion of the welfare benefit
fund attributable to such contributions is used
for a purpose other than that for which the con-
tributions were made,
then such portion shall be treated as reverting to the
benefit of the employers maintaining the fund.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions paid or accrued
after June 9, 1999, in taxable years ending after such
date.
SEC. 1504. INCREASE IN ELECTIVE WITHHOLDING RATE
FOR NONPERIODIC DISTRIBUTIONS FROM
DEFERRED COMPENSATION PLANS.
(a) IN GENERAL.—Section 3405(b)(1) (relating to
withholding) is amended by striking ‘10 percent’ and in-
serting ‘15 percent’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to distributions after December
31, 1999.
SEC. 1505. CONTROLLED ENTITIES INELIGIBLE FOR REIT
STATUS.
(a) IN GENERAL.—Subsection (a) of section 856 (re-
lating to definition of real estate investment trust) is
amended by striking ‘‘and’’ at the end of paragraph (6),
395
by redesignating paragraph (7) as paragraph (8), and by
inserting after paragraph (6) the following new paragraph:
‘‘(7) which is not a controlled entity (as defined
in subsection (l)); and’’.
(b) CONTROLLED ENTITY.—Section 856 is amended
by adding at the end the following new subsection:
‘‘(l) CONTROLLED ENTITY.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(7), an entity is a controlled entity if, at any time
during the taxable year, one person (other than a
qualified entity)—
‘‘(A) in the case of a corporation, owns
stock—
‘‘(i) possessing at least 50 percent of
the total voting power of the stock of such
corporation, or
‘‘(ii) having a value equal to at least
50 percent of the total value of the stock
of such corporation,
‘‘(B) in the case of a partnership, owns at
least 50 percent of the capital or profits inter-
ests in the partnership, or
‘‘(C) in the case of a trust, owns at least
50 percent of the beneficial interests in the
trust.
396
‘‘(2) QUALIFIED
ENTITY.—For purposes of
paragraph (1), the term ‘qualified entity’ means—
‘‘(A) any real estate investment trust, and
‘‘(B) any partnership in which one real es-
tate investment trust owns at least 50 percent
of the capital and profits interests in the part-
nership.
‘‘(3) ATTRIBUTION
RULES.—For purposes of
this paragraphs (1) and (2)—
‘‘(A) IN GENERAL.—Rules similar to the
rules of subsections (d)(5) and (h)(3) shall
apply.
‘‘(B) STAPLED ENTITIES.—A group of en-
tities which are stapled entities (as defined in
section 269B(c)(2)) shall be treated as 1 per-
son.
‘‘(4) EXCEPTION FOR CERTAIN NEW REITS.—
‘‘(A) IN GENERAL.—The term ‘controlled
entity’ shall not include an incubator REIT.
‘‘(B) INCUBATOR
REIT.—A corporation
shall be treated as an incubator REIT for any
taxable year during the eligibility period if it
meets all the following requirements for such
year:
397
‘‘(i) The corporation elects to be treat-
ed as an incubator REIT.
‘‘(ii) The corporation has only voting
common stock outstanding.
‘‘(iii) Not more than 50 percent of the
corporation’s real estate assets consist of
mortgages.
‘‘(iv) From not later than the begin-
ning of the last half of the second taxable
year, at least 10 percent of the corpora-
tion’s capital is provided by lenders or eq-
uity investors who are unrelated to the cor-
poration’s largest shareholder.
‘‘(v) The directors of the corporation
adopt a resolution setting forth an intent
to engage in a going public transaction.
No election may be made with respect to any
REIT if an election under this subsection was
in effect for any predecessor of such REIT.
‘‘(C) ELIGIBILITY PERIOD.—The eligibility
period (for which an incubator REIT election
can be made) begins with the REIT’s second
taxable year and ends at the close of the
REIT’s third taxable year, but, subject to the
398
following rules, it may be extended for an addi-
tional 2 taxable years if the REIT so elects:
‘‘(i) A REIT cannot elect to extend
the eligibility period unless it agrees that,
if it does not engage in a going public
transaction by the end of the extended eli-
gibility period, it shall pay Federal income
taxes for the 2 years of the extended eligi-
bility period as if it had not made an incu-
bator REIT election and had ceased to
qualify as a REIT for those 2 taxable
years.
‘‘(ii) In the event the corporation
ceases to be treated as a REIT by oper-
ation of clause (i), the corporation shall file
any appropriate amended returns reflecting
the change in status within 3 months of
the close of the extended eligibility period.
Interest would be payable but, unless there
was a finding under subparagraph (D), no
substantial underpayment penalties shall
be imposed. The corporation shall, at the
same time, also notify its shareholders and
any other persons whose tax position is, or
may reasonably be expected to be, affected
399
by the change in status so they also may
file any appropriate amended returns to
conform their tax treatment consistent
with the corporation’s loss of REIT status.
The Secretary shall provide appropriate
regulations setting forth transferee liability
and other provisions to ensure collection of
tax and the proper administration of this
provision.
‘‘(iii) Clause (i) and (ii) shall not
apply if the corporation allows its incu-
bator REIT status to lapse at the end of
the initial 2-year eligibility period without
engaging in a going public transaction,
provided the corporation satisfies the re-
quirements of the closely-held test com-
mencing with its fourth taxable year. In
such a case, the corporation’s directors
may still be liable for the penalties de-
scribed in subparagraph (D) during the eli-
gibility period.
‘‘(D) SPECIAL
PENALTIES.—If the Sec-
retary determines that an incubator REIT elec-
tion was filed for a principal purpose other than
as part of a reasonable plan to undertake a
400
going public transaction, an excise tax of
$20,000 would be imposed on each of the cor-
poration’s directors for each taxable year for
which an election was in effect.
‘‘(E) GOING
PUBLIC
TRANSACTION.—For
purposes of this paragraph, a going public
transaction means—
‘‘(i) a public offering of shares of the
stock of the incubator REIT;
‘‘(ii) a transaction, or series of trans-
actions, that results in the stock of the in-
cubator REIT being regularly traded on an
established securities market and that re-
sults in at least 50 percent of such stock
being held by shareholders who are unre-
lated to persons who held such stock before
it began to be so regularly traded; or
‘‘(iii) any transaction resulting in
ownership of the REIT by 200 or more
persons (excluding the largest single share-
holder) who in the aggregate own at least
50 percent of the stock of the REIT.
For the purposes of this subparagraph, the
rules of section 318 shall apply in determining
the ownership of stock.
401
‘‘(F) DEFINITIONS.—The term ‘‘estab-
lished securities market’’ shall have the mean-
ing set forth in the regulations under section
897.’’
(c) CONFORMING AMENDMENT.—Paragraph (2) of
section 856(h) is amended by striking ‘‘and (6)’’ each
place it appears and inserting ‘‘, (6), and (7)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years ending after
July 12, 1999.
(2) EXCEPTION
FOR
EXISTING
CONTROLLED
ENTITIES.—The amendments made by this section
shall not apply to any entity which is a controlled
entity (as defined in section 856(l) of the Internal
Revenue Code of 1986, as added by this section) as
of July 12, 1999, and which has significant business
assets or activities as of such date.
SEC. 1506. TREATMENT OF GAIN FROM CONSTRUCTIVE
OWNERSHIP TRANSACTIONS.
(a) IN GENERAL.—Part IV of subchapter P of chap-
ter 1 (relating to special rules for determining capital
gains and losses) is amended by inserting after section
1259 the following new section:
402
‘‘SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP
TRANSACTIONS.
‘‘(a) IN GENERAL.—If the taxpayer has gain from
a constructive ownership transaction with respect to any
financial asset and such gain would (without regard to this
section) be treated as a long-term capital gain—
‘‘(1) such gain shall be treated as ordinary in-
come to the extent that such gain exceeds the net
underlying long-term capital gain, and
‘‘(2) to the extent such gain is treated as a
long-term capital gain after the application of para-
graph (1), the determination of the capital gain rate
(or rates) applicable to such gain under section 1(h)
shall be determined on the basis of the respective
rate (or rates) that would have been applicable to
the net underlying long-term capital gain.
‘‘(b) INTEREST CHARGE ON DEFERRAL OF GAIN
RECOGNITION.—
‘‘(1) IN GENERAL.—If any gain is treated as
ordinary income for any taxable year by reason of
subsection (a)(1), the tax imposed by this chapter
for such taxable year shall be increased by the
amount of interest determined under paragraph (2)
with respect to each prior taxable year during any
portion of which the constructive ownership trans-
action was open. Any amount payable under this
403
paragraph shall be taken into account in computing
the amount of any deduction allowable to the tax-
payer for interest paid or accrued during such tax-
able year.
‘‘(2) AMOUNT OF INTEREST.—The amount of
interest determined under this paragraph with re-
spect to a prior taxable year is the amount of inter-
est which would have been imposed under section
6601 on the underpayment of tax for such year
which would have resulted if the gain (which is
treated as ordinary income by reason of subsection
(a)(1)) had been included in gross income in the tax-
able years in which it accrued (determined by treat-
ing the income as accruing at a constant rate equal
to the applicable Federal rate as in effect on the day
the transaction closed). The period during which
such interest shall accrue shall end on the due date
(without extensions) for the return of tax imposed
by this chapter for the taxable year in which such
transaction closed.
‘‘(3) APPLICABLE
FEDERAL
RATE.—For pur-
poses of paragraph (2), the applicable Federal rate
is the applicable Federal rate determined under
1274(d) (compounded semiannually) which would
404
apply to a debt instrument with a term equal to the
period the transaction was open.
‘‘(4) NO CREDITS AGAINST INCREASE IN TAX.—
Any increase in tax under paragraph (1) shall not
be treated as tax imposed by this chapter for pur-
poses of determining—
‘‘(A) the amount of any credit allowable
under this chapter, or
‘‘(B) the amount of the tax imposed by
section 55.
‘‘(c) FINANCIAL
ASSET.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘financial asset’
means—
‘‘(A) any equity interest in any pass-thru
entity, and
‘‘(B) 
to 
the 
extent 
provided 
in
regulations—
‘‘(i) any debt instrument, and
‘‘(ii) any stock in a corporation which
is not a pass-thru entity.
‘‘(2) PASS-THRU
ENTITY.—For purposes of
paragraph (1), the term ‘pass-thru entity’ means—
‘‘(A) a regulated investment company,
‘‘(B) a real estate investment trust,
405
‘‘(C) an S corporation,
‘‘(D) a partnership,
‘‘(E) a trust,
‘‘(F) a common trust fund,
‘‘(G) a passive foreign investment company
(as defined in section 1297),
‘‘(H) a foreign personal holding company,
and
‘‘(I) a foreign investment company (as de-
fined in section 1246(b)).
‘‘(d) CONSTRUCTIVE OWNERSHIP TRANSACTION.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The taxpayer shall be
treated as having entered into a constructive owner-
ship transaction with respect to any financial asset
if the taxpayer—
‘‘(A) holds a long position under a notional
principal contract with respect to the financial
asset,
‘‘(B) enters into a forward or futures con-
tract to acquire the financial asset,
‘‘(C) is the holder of a call option, and is
the grantor of a put option, with respect to the
financial asset and such options have substan-
406
tially equal strike prices and substantially con-
temporaneous maturity dates, or
‘‘(D) to the extent provided in regulations
prescribed by the Secretary, enters into 1 or
more other transactions (or acquires 1 or more
positions) that have substantially the same ef-
fect as a transaction described in any of the
preceding subparagraphs.
‘‘(2) EXCEPTION FOR POSITIONS WHICH ARE
MARKED TO MARKET.—This section shall not apply
to any constructive ownership transaction if all of
the positions which are part of such transaction are
marked to market under any provision of this title
or the regulations thereunder.
‘‘(3) LONG POSITION UNDER NOTIONAL PRIN-
CIPAL
CONTRACT.—A person shall be treated as
holding a long position under a notional principal
contract with respect to any financial asset if such
person—
‘‘(A) has the right to be paid (or receive
credit for) all or substantially all of the invest-
ment yield (including appreciation) on such fi-
nancial asset for a specified period, and
407
‘‘(B) is obligated to reimburse (or provide
credit for) all or substantially all of any decline
in the value of such financial asset.
‘‘(4) FORWARD CONTRACT.—The term ‘forward
contract’ means any contract to acquire in the fu-
ture (or provide or receive credit for the future value
of) any financial asset.
‘‘(e) 
NET
UNDERLYING
LONG-TERM
CAPITAL
GAIN.—For purposes of this section, in the case of any
constructive ownership transaction with respect to any fi-
nancial asset, the term ‘net underlying long-term capital
gain’ means the aggregate net capital gain that the tax-
payer would have had if—
‘‘(1) the financial asset had been acquired for
fair market value on the date such transaction was
opened and sold for fair market value on the date
such transaction was closed, and
‘‘(2) only gains and losses that would have re-
sulted from the deemed ownership under paragraph
(1) were taken into account.
The amount of the net underlying long-term capital gain
with respect to any financial asset shall be treated as zero
unless the amount thereof is established by clear and con-
vincing evidence.
408
‘‘(f) SPECIAL RULE WHERE TAXPAYER TAKES DE-
LIVERY.—Except as provided in regulations prescribed by
the Secretary, if a constructive ownership transaction is
closed by reason of taking delivery, this section shall be
applied as if the taxpayer had sold all the contracts, op-
tions, or other positions which are part of such transaction
for fair market value on the closing date. The amount of
gain recognized under the preceding sentence shall not ex-
ceed the amount of gain treated as ordinary income under
subsection (a). Proper adjustments shall be made in the
amount of any gain or loss subsequently realized for gain
recognized and treated as ordinary income under this sub-
section.
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section, including
regulations—
‘‘(1) to permit taxpayers to mark to market
constructive ownership transactions in lieu of apply-
ing this section, and
‘‘(2) to exclude certain forward contracts which
do not convey substantially all of the economic re-
turn with respect to a financial asset.’’
409
(b) CLERICAL AMENDMENT.—The table of sections
for part IV of subchapter P of chapter 1 is amended by
adding at the end the following new item:
‘‘Sec. 1260. Gains from constructive ownership transactions.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to transactions entered into after
July 11, 1999.
SEC. 1507. TRANSFER OF EXCESS DEFINED BENEFIT PLAN
ASSETS FOR RETIREE HEALTH BENEFITS.
(a) EXTENSION.—Paragraph (5) of section 420(b)
(relating to expiration) is amended by striking ‘‘in any
taxable year beginning after December 31, 2000’’ and in-
serting ‘‘made after September 30, 2009’’.
(b) APPLICATION
OF MINIMUM COST REQUIRE-
MENTS.—
(1) IN
GENERAL.—Paragraph (3) of section
420(c) is amended to read as follows:
‘‘(3) MINIMUM COST REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met if each group health
plan or arrangement under which applicable
health benefits are provided provides that the
applicable employer cost for each taxable year
during the cost maintenance period shall not be
less than the higher of the applicable employer
costs for each of the 2 taxable years imme-
410
diately preceding the taxable year of the quali-
fied transfer.
‘‘(B) APPLICABLE EMPLOYER COST.—For
purposes of this paragraph, the term ‘applicable
employer cost’ means, with respect to any tax-
able year, the amount determined by dividing—
‘‘(i) the qualified current retiree
health liabilities of the employer for such
taxable year determined—
‘‘(I) without regard to any reduc-
tion under subsection (e)(1)(B), and
‘‘(II) in the case of a taxable
year in which there was no qualified
transfer, in the same manner as if
there had been such a transfer at the
end of the taxable year, by
‘‘(ii) the number of individuals to
whom coverage for applicable health bene-
fits was provided during such taxable year.
‘‘(C) ELECTION TO COMPUTE COST SEPA-
RATELY.—An employer may elect to have this
paragraph applied separately with respect to in-
dividuals eligible for benefits under title XVIII
of the Social Security Act at any time during
411
the taxable year and with respect to individuals
not so eligible.
‘‘(D) COST
MAINTENANCE
PERIOD.—For
purposes of this paragraph, the term ‘cost
maintenance period’ means the period of 5 tax-
able years beginning with the taxable year in
which the qualified transfer occurs. If a taxable
year is in 2 or more overlapping cost mainte-
nance periods, this paragraph shall be applied
by taking into account the highest applicable
employer cost required to be provided under
subparagraph (A) for such taxable year.’’
(2) CONFORMING AMENDMENTS.—
(A) Clause (iii) of section 420(b)(1)(C) is
amended by striking ‘‘benefits’’ and inserting
‘‘cost’’.
(B) Subparagraph (D) of section 420(e)(1)
is amended by striking ‘‘and shall not be sub-
ject to the minimum benefit requirements of
subsection (c)(3)’’ and inserting ‘‘or in calcu-
lating applicable employer cost under subsection
(c)(3)(B)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to qualified transfers occurring
after the date of the enactment of this Act.
412
SEC. 1508. MODIFICATION OF INSTALLMENT METHOD AND
REPEAL OF INSTALLMENT METHOD FOR AC-
CRUAL METHOD TAXPAYERS.
(a) REPEAL OF INSTALLMENT METHOD FOR AC-
CRUAL BASIS TAXPAYERS.—
(1) IN
GENERAL.—Subsection (a) of section
453 (relating to installment method) is amended to
read as follows:
‘‘(a) USE OF INSTALLMENT METHOD.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, income from an installment
sale shall be taken into account for purposes of this
title under the installment method.
‘‘(2) ACCRUAL
METHOD
TAXPAYER.—The in-
stallment method shall not apply to income from an
installment sale if such income would be reported
under an accrual method of accounting without re-
gard to this section. The preceding sentence shall
not apply to a disposition described in subparagraph
(A) or (B) of subsection (l)(2).’’
(2) 
CONFORMING
AMENDMENTS.—Sections
453(d)(1), 453(i)(1), and 453(k) are each amended
by striking ‘‘(a)’’ each place it appears and inserting
‘‘(a)(1)’’.
(b) MODIFICATION OF PLEDGE RULES.—Paragraph
(4) of section 453A(d) (relating to pledges, etc., of install-