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Subtitle E—Entrepreneurial Equity
Capital Formation
PART I—TAX-FREE CONVERSIONS OF SPECIAL-
IZED SMALL BUSINESS INVESTMENT COMPA-
NIES INTO PASS-THRU ENTITIES
SEC. 1341. MODIFICATIONS TO PROVISIONS RELATING TO
REGULATED INVESTMENT COMPANIES.
(a) IN GENERAL.—Section 851 (relating to definition
of regulated investment company) is amended by adding
at the end the following new subsection:
‘‘(i) SPECIAL RULES FOR SPECIALIZED SMALL BUSI-
NESS INVESTMENT COMPANIES.—
‘‘(1) IN
GENERAL.—For purposes of deter-
mining whether a specialized small business invest-
ment company is a regulated investment company
for purposes of this subchapter—
‘‘(A) income derived from an investment as
a limited partner in a partnership shall be
treated as qualifying income under subsection
(b)(2) if—
‘‘(i) the company does not participate
in the active management of the normal
business operations of the partnership, and
‘‘(ii) the company’s investment in
such partnership is an investment per-
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mitted for specialized small business in-
vestment companies under the Small Busi-
ness Investment Act of 1958, and
‘‘(B) the requirements of subsection (b)(3)
shall be treated as met if, at the close of each
quarter of the taxable year, at least 50 percent
of the value of its total assets is represented
by—
‘‘(i) assets described in subsection
(b)(3)(A)(i), and
‘‘(ii) other investments permitted to
be made by a specialized small business in-
vestment company under the Small Busi-
ness Investment Act of 1958.
‘‘(2) COORDINATION
OF
DISTRIBUTION
RE-
QUIREMENTS
WITH
SBIC
REQUIREMENTS.—A spe-
cialized small business investment company shall be
treated as meeting the requirements of section
852(a)(1) if the deduction for dividends paid during
the taxable year (as defined in section 561, but with-
out regard to capital gain dividends) equals or ex-
ceeds the lesser of the amount required under sec-
tion 852(a)(1) or 100 percent of the maximum
amount that the company would be permitted to dis-
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tribute during such year under the Small Business
Investment Act of 1958.
‘‘(3) SPECIALIZED
SMALL
BUSINESS
INVEST-
MENT COMPANY.—For purposes of this subsection,
the term ‘specialized small business investment com-
pany’ has the meaning given to such term by section
1044(c)(3).
‘‘(4) REFERENCES TO 1958 ACT.—For purposes
of this subsection, references to the Small Business
Investment Act of 1958 shall be treated as ref-
erences to such Act as in effect on May 13, 1993.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 1342. TAX-FREE REORGANIZATION OF SPECIALIZED
SMALL BUSINESS INVESTMENT COMPANY AS
A PARTNERSHIP.
(a) IN GENERAL.—If, within 180 days after the date
of the enactment of this Act, a corporation which is a spe-
cialized small business investment company transfers sub-
stantially all of its assets to a partnership (including its
license to operate as a specialized small business invest-
ment company) solely in exchange for partnership inter-
ests in such partnership, no gain or loss shall be recog-
nized to the corporation on such a transfer if—
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(1) immediately after such exchange, such cor-
poration holds partnership interests in such partner-
ship having a value equal to at least 80 percent of
the total value of all partnership interests in such
partnership, and
(2) before the 90th day after such exchange,
such corporation transfers all partnership interests
held by the corporation in such partnership, and all
remaining assets of the corporation, to its share-
holders in the complete liquidation of such corpora-
tion.
(b) NONRECOGNITION OF GAIN OR LOSS TO COR-
PORATION ON DISTRIBUTION OF PARTNERSHIP INTER-
ESTS.—In the case of any distribution of a partnership
interest acquired by the liquidating corporation in an ex-
change to which subsection (a) applies—
(1) no gain or loss shall be recognized to the
liquidating corporation by reason of such distribu-
tion, and
(2) such distribution shall not be treated as a
sale 
or 
exchange 
for 
purposes 
of 
section
708(b)(1)(B) of the Internal Revenue Code of 1986.
(c) GAIN RECOGNIZED BY SHAREHOLDERS ON RE-
CEIPT OF PROPERTY OTHER THAN PARTNERSHIP INTER-
ESTS.—
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(1) IN GENERAL.—No gain or loss shall be rec-
ognized to a shareholder of a corporation on the
transfer of such shareholder’s stock in such corpora-
tion to such corporation solely in exchange for a
partnership interest in the partnership referred to in
subsection (a)(1).
(2) RECEIPT OF PROPERTY.—If paragraph (1)
would apply to an exchange but for the fact that
there is received, in addition to the partnership in-
terests permitted to be received under paragraph
(1), other property or money, then—
(A) gain (if any) to such recipient shall be
recognized, but not in excess of—
(i) the amount of money received, plus
(ii) the fair market value of such
other property received, and
(B) no loss to such recipient shall be rec-
ognized.
(d) BASIS.—The basis of property received in any ex-
change to which this section applies shall be determined
in accordance with rules similar to the rules of section 358
of the Internal Revenue Code of 1986.
(e) ADDITIONAL REQUIREMENTS.—This section shall
not apply to any specialized small business investment
company unless—
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(1) such company elects to be subject to tax on
its built-in gains computed in a manner similar to
that provided in section 1374 of such Code (without
regard to any recognition period (as defined in sub-
section (d)(7) thereof)), and
(2) such company distributes all of its accumu-
lated earnings and profits (in distributions to which
section 301 of such Code applies) before its liquida-
tion under this section.
If, after making an election under paragraph (1), a com-
pany ceases to be a specialized small business investment
company, such company shall be treated as having dis-
posed of all of its assets for purposes of applying para-
graph (1).
(f) SPECIALIZED SMALL BUSINESS INVESTMENT
COMPANY.—For purposes of this section, the term ‘‘spe-
cialized small business investment company’’ has the
meaning given to such term by section 1044(c)(3) of such
Code.
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PART II—ADDITIONAL INCENTIVES RELATED TO
INVESTING IN SPECIALIZED SMALL BUSI-
NESS INVESTMENT COMPANIES
SEC. 1346. EXPANSION OF NONRECOGNITION TREATMENT
FOR SECURITIES GAIN ROLLED OVER INTO
SPECIALIZED SMALL BUSINESS INVESTMENT
COMPANIES.
(a) EXTENSION OF ROLLOVER PERIOD.—Paragraph
(1) of section 1044(a) (relating to nonrecognition of gain)
is amended by striking ‘‘60-day period’’ and inserting
‘‘180-day period’’.
(b) INCREASE OF MAXIMUM EXCLUSION.—
(1) IN GENERAL.—Paragraphs (1) and (2) of
section 1044(b) (relating to limitations) are amend-
ed to read as follows:
‘‘(1) LIMITATION
ON
INDIVIDUALS.—In the
case of an individual, the amount of gain which may
be excluded under subsection (a) for any taxable
year shall not exceed—
‘‘(A) $750,000, reduced by
‘‘(B) the amount of gain excluded under
subsection (a) for all preceding taxable years.
‘‘(2) LIMITATION ON C CORPORATIONS.—In the
case of a C corporation, the amount of gain which
may be excluded under subsection (a) for any tax-
able year shall not exceed—
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‘‘(A) $2,000,000, reduced by
‘‘(B) the amount of gain excluded under
subsection (a) for all preceding taxable years.’’.
(2) CONFORMING AMENDMENT.—Subparagraph
(A) of section 1044(b)(3) (relating to special rules
for married individuals) is amended to read as fol-
lows:
‘‘(A) SEPARATE RETURNS.—In the case of
a separate return by a married individual, para-
graph (1) shall be applied by substituting
‘$375,000’ for ‘$750,000’.’’.
(c) EXTENSION TO PREFERRED STOCK.—Paragraph
(1) of section 1044(a) is amended by striking ‘‘common’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales occurring after the date
of the enactment of this Act.
SEC. 1347. MODIFICATIONS TO EXCLUSION FOR GAIN FROM
QUALIFIED SMALL BUSINESS STOCK.
(a) IN GENERAL.—Section 1202 (relating to 50-per-
cent exclusion for gain from certain small business stock)
is amended by redesignating subsection (k) as subsection
(l) and by inserting after subsection (j) the following new
subsection:
‘‘(k) SPECIAL RULES
FOR SPECIALIZED SMALL
BUSINESS INVESTMENT COMPANIES.—
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‘‘(1) INCREASE
IN
EXCLUSION.—In the case
of—
‘‘(A) the sale or exchange of stock in a
specialized small business investment company,
and
‘‘(B) any amount treated under subsection
(g) as gain described in subsection (a) by rea-
son of the sale or exchange of stock in a spe-
cialized small business investment company,
subsection (a) shall be applied by substituting ‘60
percent’ for ‘50 percent’.
‘‘(2) WAIVER OF ACTIVE BUSINESS REQUIRE-
MENT.—Notwithstanding any provision of subsection
(e), a corporation shall be treated as meeting the ac-
tive business requirements of such subsection for
any period during which such corporation qualifies
as a specialized small business investment company.
‘‘(3) SPECIALIZED
SMALL
BUSINESS
INVEST-
MENT COMPANY.—For purposes of this section, the
term ‘specialized small business investment com-
pany’ means any eligible corporation (as defined in
subsection (e)(4)) which is licensed to operate under
section 301(d) of the Small Business Investment Act
of 1958 (as in effect on May 13, 1993).’’.
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(b) CONFORMING AMENDMENT.—Section 1202(c)(2)
is amended to read as follows:
‘‘(2) ACTIVE BUSINESS REQUIREMENT, ETC.—
Stock in a corporation shall not be treated as quali-
fied small business stock unless, during substantially
all of the taxpayer’s holding period for such stock,
such corporation meets the active business require-
ments of subsection (e) and such corporation is a C
corporation.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales and exchanges occurring
after the date of the enactment of this Act.
Subtitle F—Other Provisions
SEC. 1351. 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
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‘‘(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. 1352. 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
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
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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
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.
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‘‘(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
‘‘(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
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‘‘(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)
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
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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-
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-
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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-
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.
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‘‘(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
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-
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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).’’.
(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. 1353. 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-
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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 the
enactment under section 6405 of the Internal Revenue
Code of 1986.
SEC. 1354. CLARIFICATION OF DEPRECIATION STUDY.
Paragraph (1) of section 2022 of the Tax and Trade
Relief Extension Act of 1998 (Public Law 105–277; 112
Stat. 2681-903) is amended by inserting after ‘‘1986,’’ the
following: ‘‘including such periods and methods applicable
to section 1250 property used in connection with a fran-
chise (within the meaning of section 1253) and owned by
the franchisee,’’.
Subtitle G—Tax Court Provisions
SEC. 1361. 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.
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SEC. 1362. 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. 1363. 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
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.
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Subtitle H—Tax-Free Transfer of
Bottled 
Distilled 
Spirits 
to
Bonded Dealers
SEC. 1371. TAX-FREE TRANSFER OF BOTTLED DISTILLED
SPIRITS FROM DISTILLED SPIRITS PLANT TO
BONDED DEALER.
(a) DOMESTIC BOTTLED DISTILLED SPIRITS.—
(1) IN GENERAL.—The last sentence of section
5212 is amended by inserting before the period ‘‘and
shall not apply to bottled distilled spirits transferred
from a distilled spirits plant (other than a bonded
dealer) to a bonded dealer if the proprietor of such
plant notifies (in such form and manner as the Sec-
retary prescribes by regulations) such bonded dealer
of the amount of tax determined on the distilled
spirits so transferred’’.
(2) TRANSFER OF LIABILITY CONTINGENT ON
FURNISHING
OF
CERTAIN
INFORMATION.—Para-
graph (2) of section 5005(c) is amended by adding
at the end the following new sentence: ‘‘In the case
of a transfer of bottled distilled spirits from a dis-
tilled spirits plant to a bonded dealer, the preceding
provisions of this subsection shall apply only to the
extent of the amount specified by the proprietor of
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such plant in accordance with the last sentence of
section 5212.’’.
(b) COMPARABLE TREATMENT FOR IMPORTED BOT-
TLED DISTILLED SPIRITS.—Subsection (a) of section
5232 is amended to read as follows:
‘‘(a) TRANSFER
TO
DISTILLED
SPIRITS
PLANT
WITHOUT PAYMENT OF TAX.—
‘‘(1) IN GENERAL.—Distilled spirits imported
or brought into the United States in bulk containers
may, under such regulations as the Secretary shall
prescribe, be withdrawn from customs custody and
transferred in such bulk containers or by pipeline to
the bonded premises of a distilled spirits plant with-
out payment of the internal revenue tax imposed on
such distilled spirits by section 5001.
‘‘(2) IMPORTED
BOTTLED
DISTILLED
SPIR-
ITS.—The restriction under paragraph (1) to trans-
fers in bulk or by pipeline shall not apply to bottled
distilled spirits transferred from customs custody to
a bonded dealer if the proprietor of the customs
bonded warehouse notifies (in such form and man-
ner as the Secretary prescribes by regulations) such
bonded dealer of the amount of tax determined on
the distilled spirits so transferred.
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‘‘(3) TRANSFER OF LIABILITY.—The person op-
erating the bonded premises of the distilled spirits
plant to which such spirits are transferred shall be-
come liable for the tax on distilled spirits withdrawn
from customs custody under this section upon re-
lease of the spirits from customs custody, and the
importer, or the person bringing such distilled spirits
into the United States, shall thereupon be relieved of
his liability for such tax. In the case of a transfer
of bottled distilled spirits from a customs bonded
warehouse to a bonded dealer, the preceding sen-
tence shall apply only to the extent of the amount
specified by the proprietor of such warehouse in ac-
cordance with paragraph (2).’’.
(c) PENALTY FOR FALSE OR ERRONEOUS INFORMA-
TION TO BONDED DEALERS.—
(1) IN GENERAL.—Section 5684 is amended by
redesignating subsections (b) and (c) as subsections
(c) and (d), respectively, and inserting after sub-
section (a) the following new subsection:
‘‘(b) FALSE
OR
ERRONEOUS
INFORMATION
TO
BONDED DEALERS.—Any distilled spirits plant or im-
porter which furnishes false or erroneous information to
a bonded dealer relating to the amount of tax determined
on a product, as required under sections 5212 and 5232,
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shall, in addition to any other penalty imposed by this
title, be liable for a penalty equal to the greater of $1,000
or 5 times the amount of additional tax due on the prod-
uct.’’.
(2) CONFORMING AMENDMENT.—Subsection (c)
of section 5684, as redesignated by paragraph (1),
is amended by striking ‘‘subsection (a)’’ and insert-
ing ‘‘subsections (a) and (b)’’.
SEC. 1372. ESTABLISHMENT OF DISTILLED SPIRITS PLANT.
Section 5171 is amended—
(1) by striking from subsection (a) ‘‘or proc-
essor’’ and inserting ‘‘processor, or bonded dealer’’,
and
(2) by striking from subsection (b) ‘‘or both.’’
and inserting ‘‘as a bonded dealer, or as any com-
bination thereof.’’.
SEC. 1373. DISTILLED SPIRITS PLANTS.
Section 5178(a) is amended by adding at the end the
following new paragraph:
‘‘(5) BONDED DEALER OPERATIONS.—Any per-
son establishing a distilled spirits plant to conduct
operations as a bonded dealer may, as described in
the application for registration—
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‘‘(A) store distilled spirits in any approved
container on the bonded premises of such plant,
and
‘‘(B) under such regulations as the Sec-
retary shall prescribe, store taxpaid distilled
spirits, beer and wine and such other beverages
and items (products) not subject to tax or regu-
lation under this title on such bonded prem-
ises.’’.
SEC. 1374. BONDED DEALERS.
(a) IN GENERAL.—Subpart A of part I of subchapter
A of chapter 51 (relating to distilled spirits) is amended
by adding at the end the following new section:
‘‘SEC. 5011. ELECTION TO BE TREATED AS BONDED
DEALER.
‘‘(a) ELECTION.—
‘‘(1) IN GENERAL.—Any wholesale dealer, or
any control State entity, may elect to be treated as
a bonded dealer if such wholesale dealer or entity
sells bottled distilled spirits exclusively to 1 or more
of the following: wholesale dealers in liquor, inde-
pendent retail dealers, or other bonded dealers.
‘‘(2) ELECTION
BY
CERTAIN
ENTITIES
NOT
PERMITTED.—
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‘‘(A) RETAIL
DEALERS.—Except in the
case of a control State entity, the election under
paragraph (1) may not be made by a retail
dealer in liquor.
‘‘(B) 
SMALL
DEALERS.—The 
election
under paragraph (1) may not be made by any
person who is part of a group treated as a sin-
gle taxpayer under section 5061(e)(3) if the
gross receipts of such group from the sale of
distilled spirits during the 12-month period
prior to making such election is less than
$10,000,000.
‘‘(3) CONTROL STATE ENTITIES PERMITTED TO
SELL TO RELATED RETAIL DEALERS.—In the case
of a control State entity, paragraph (1) shall be ap-
plied by substituting ‘retail dealers’ for ‘independent
retail dealers’.
‘‘(b) INDEPENDENT RETAIL DEALER.—For purposes
of subsection (a), the term ‘independent retail dealer’
means, with respect to a bonded dealer, any retail dealer
if—
‘‘(1) the bonded dealer does not have a greater
than 10 percent ownership interest in, or control of,
the retail dealer,
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‘‘(2) the retail dealer does not have a greater
than 10 percent ownership interest in, or control of,
the bonded dealer, and
‘‘(3) no person has a greater than 10 percent
ownership interest in, or control of, both the bonded
and retail dealer.
For purposes of this subsection, rules similar to the rules
of section 318 shall apply.
‘‘(c) INVENTORY OWNED AT TIME OF ELECTION.—
Any bottled distilled spirits in the inventory of any person
electing under this section to be treated as a bonded dealer
shall not be subject to additional Federal excise tax on
such spirits as a result of the election being in effect to
the extent that the bonded dealer establishes that the Fed-
eral excise tax previously has been determined and paid
at the time the election becomes effective.
‘‘(d) REVOCATION OF ELECTION.—The election made
under this section may be revoked by the bonded dealer
at any time, but once revoked shall not be made again
without the consent of the Secretary. When the election
is revoked, the bonded dealer shall immediately withdraw
the distilled spirits on determination of tax in accordance
with a tax payment procedure established by the Sec-
retary.
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‘‘(e) APPROVAL OF APPLICATION.—Any application
under section 5171(c) submitted by a person electing to
be treated as a bonded dealer shall be subject to the same
conditions as an application for a basic permit under sec-
tion 204(a)(2) of title 27 of the United States Code (the
Federal Alcohol Administration Act) and shall be accorded
notice and hearing as described in section 204(b) of such
title 27.
‘‘(f) ADDITIONAL TAX.—
‘‘(1) IN GENERAL.—In addition to any other
tax imposed by this chapter, there is hereby imposed
on each bonded dealer a tax for each semimonthly
period under section 5061(d) for which an election
under this section is in effect for such dealer.
‘‘(2) AMOUNT OF TAX.—The tax imposed by
this subsection for any semimonthly period shall be
equal to 1.5 percent of the liability for tax under
sections 5001 and 7652 of such dealer for such
semimonthly period.
‘‘(3) PAYMENT OF TAX.—The tax imposed by
this subsection shall be paid with the return of tax
for such semimonthly period.
‘‘(4) TAXPAYERS
NOT
PAYING
ON
SEMI-
MONTHLY BASIS.—If the taxes referred to in para-
graph (2) are not paid on the basis of semimonthly
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periods, this subsection shall be applied by sub-
stituting the time such taxes are required to be paid
for such periods.
‘‘(5) TERMINATION.—The tax imposed by this
subsection shall not apply to any semimonthly period
ending after December 31, 2010.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 5002(a) is amended by adding the
end the following new paragraphs:
‘‘(16) BONDED
DEALER.—The term ‘bonded
dealer’ means any person who has elected under sec-
tion 5011 to be treated as a bonded dealer.
‘‘(17) CONTROL
STATE
ENTITY.—The term
‘control State entity’ means a State or a political
subdivision of a State in which only the State or a
political subdivision thereof is allowed under applica-
ble law to perform distilled spirit operations, or any
instrumentality of such a State or political subdivi-
sion.’’.
(2) The table of sections of subpart A of part
I of subchapter A of chapter 51 and the table of
contents of subtitle E are each amended by adding
at the appropriate places:
‘‘Sec. 5011. Election to be treated as bonded dealer.’’.
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SEC. 1375. TIME FOR COLLECTING TAX ON DISTILLED SPIR-
ITS.
(a) IN GENERAL.—Section 5061(d) is amended by
adding at the end the following new paragraph:
‘‘(6) ADVANCED PAYMENT OF DISTILLED SPIR-
ITS
TAX
BY
BONDED
DEALERS.—Notwithstanding
the preceding provisions of this subsection, in the
case of any tax imposed by section 5001, 5011(f), or
7652 with respect to a bonded dealer who has an
election under section 5011 in effect on September
20 of any year, any payment which would, but for
this paragraph, be due in October or November of
that year, shall be made on such September 20. No
penalty or interest shall be imposed for the period
after such September 20 and before the due date for
such payment (determined without regard to this
paragraph) to the extent that the tax due exceeds
the payment which would have been due in such Oc-
tober and November had the election under section
5011 been in effect.’’.
(b) PAYMENT BY ELECTRONIC FUND TRANSFER.—
Section 5061(e)(1) is amended by inserting ‘‘and any
bonded dealer,’’ after ‘‘respectively,’’.
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SEC. 1376. EXEMPTION FROM OCCUPATIONAL TAX NOT AP-
PLICABLE.
Section 5113(a) is amended by adding at the end the
following new sentence: ‘‘The exemption under this sub-
section shall not apply to a proprietor of a distilled spirits
plant whose premises are used for operations of a bonded
dealer.’’.
SEC. 1377. TECHNICAL, CONFORMING, AND CLERICAL
AMENDMENTS.
(a) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Section 5003(3) is amended by striking
‘‘certain’’.
(2) Subsection (a) of section 5214 is amended
by inserting ‘‘(other than a bonded dealer)’’ after
‘‘distilled spirits plant’’.
(3) Section 5362(b)(5) is amended by adding at
the end the following new sentence: ‘‘This term shall
not apply to premises used for operations as a bond-
ed dealer.’’.
(4) Section 5551(a) is amended by inserting
‘‘bonded dealer,’’ after ‘‘processor,’’ each place it ap-
pears.
(5) Section 5601(a) (2), (3), (4), (5), and (b)
are amended by inserting ‘‘, bonded dealer’’ before
‘‘or processor’’ each place it appears.
(6) Section 5602 is amended—
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(A) by inserting ‘‘, warehouseman, proc-
essor, or bonded dealer’’ after ‘‘distiller’’, and
(B) by inserting ‘‘or possessed’’ after ‘‘dis-
tilled’’.
(7) Sections 5180 and 5681 are repealed.
(b) CLERICAL AMENDMENTS.—
(1) The table of sections for subchapter B of
chapter 51 is amended by striking the item relating
to section 5180.
(2) The table of sections for part IV of sub-
chapter J of chapter 51 is amended by striking the
item relating to section 5681.
SEC. 1378. COOPERATIVE AGREEMENTS.
(a) STUDY.—The Secretary of the Treasury shall
study and report to Congress concerning possible adminis-
trative efficiencies which could inure to the benefit of the
Federal Government of cooperative agreements with
States regarding the collection of distilled spirits excise
taxes. Such study shall include, but not be limited to, pos-
sible benefits of the standardization of forms and collec-
tion procedures and shall be submitted 1 year after the
date of the enactment of this Act.
(b) COOPERATIVE AGREEMENT.—The Secretary of
the Treasury is authorized to enter into such cooperative
agreements with States which the Secretary deems will in-
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crease the efficient collection of distilled spirits excise
taxes.
SEC. 1379. EFFECTIVE DATE.
(a) IN GENERAL.—Except as otherwise provided in
this section, the amendments made by this subtitle shall
take effect at the beginning of the first calendar quarter
that begins after one hundred and twenty days following
enactment.
(b) AUTHORITY TO ESTABLISH DISTILLED SPIRITS
PLANT.—
(1) IN GENERAL.—The amendments made by
section 1372 of this Act shall take effect on the date
of the enactment of this Act.
(2) DEEMED
QUALIFICATION
IN
CERTAIN
CASES.—Each wholesale dealer—
(A) who is required to file an application
for registration under section 5171(c) of the In-
ternal Revenue Code of 1986,
(B) whose operations are required to be
covered by a basic permit under the Federal Al-
cohol Administration Act (27 U.S.C. 203 and
204) and who has received such a basic permit
as an importer, wholesaler, or both, and
(C) has obtained a bond required under
this subchapter,
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shall be treated as having such application approved
as of the first day of the first calendar quarter that
begins at least 9 months after the application is filed
until such time as the Secretary or the Secretary’s
delegate takes final action on such application.
(3) CONTROL STATE ENTITIES.—In the case of
a control State entity, paragraph (2) shall be applied
without regard to subparagraph (B) thereof.
(c) EQUITABLE TREATMENT OF BONDED DEALERS
USING LIFO INVENTORY.—The Secretary of the Treas-
ury or the Secretary’s delegate shall provide such rules
as may be necessary to assure that taxpayers using the
last-in first-out method of inventory valuation do not suf-
fer a recapture of their LIFO reserve by reason of making
the election under section 5011 of such Code or by reason
of operating a bonded wine cellar as permitted by section
5351 of such Code.
SEC. 1380. STUDY.
Not later than June 1, 2002, the Secretary of the
Treasury or the Secretary’s delegate shall prepare and
submit to the Congress a report—
(1) on the extent to which (if any) there has
been a decrease in compliance with the provisions of
chapter 51 of the Internal Revenue Code of 1986 by
reason of the amendments made by this subtitle, and
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(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.
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’’.
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(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 ‘‘December 31,
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.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to individuals who begin work for
the employer after June 30, 1999.
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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:
‘‘SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.
‘‘(a) GENERAL RULE.—The Secretary shall establish
a program requiring the payment of user fees for—
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‘‘(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:
‘‘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.
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‘‘(c) TERMINATION.—No fee shall be imposed under
this section with respect to requests made after September
30, 2009.’’.
(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
provided through the fund are 1 or more of the
following:
‘‘(i) Medical benefits.
‘‘(ii) Disability benefits.
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‘‘(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
‘‘(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,
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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),
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’’.
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(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, or
‘‘(B) in the case of a trust, owns beneficial
interests in the trust which would meet the re-
quirements of subparagraph (A) if such inter-
ests were stock.
‘‘(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
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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:
‘‘(i) The corporation elects to be treat-
ed as an incubator REIT.
‘‘(ii) The corporation has only voting
common stock outstanding.
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‘‘(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
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
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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
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
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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
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.
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‘‘(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 paragraph (3) shall apply in deter-
mining the ownership of stock.
‘‘(F) DEFINITIONS.—The term ‘established
securities market’ shall have the meaning set
forth in the regulations under section 897.’’.
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(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, which is a real estate investment
trust for the taxable year which includes such date,
and which has significant business assets or activi-
ties 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:
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‘‘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
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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
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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,
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‘‘(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-
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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
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‘‘(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.
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‘‘(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.’’.
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(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-
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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
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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.
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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-
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ment obligations) is amended by adding at the end the
following: ‘‘A payment shall be treated as directly secured
by an interest in an installment obligation to the extent
an arrangement allows the taxpayer to satisfy all or a por-
tion of the indebtedness with the installment obligation.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales or other dispositions occur-
ring on or after the date of the enactment of this Act.
SEC. 1509. LIMITATION ON USE OF NONACCRUAL EXPERI-
ENCE METHOD OF ACCOUNTING.
(a) IN GENERAL.—Section 448(d)(5) (relating to
special rule for services) is amended—
(1) by inserting ‘‘in fields described in para-
graph (2)(A)’’ after ‘‘services by such person’’, and
(2) by inserting ‘‘CERTAIN PERSONAL’’ before
‘‘SERVICES’’ in the heading.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years ending after
the date of the enactment of this Act.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer required by the amend-
ments made by this section to change its method of
accounting for its first taxable year ending after the
date of the enactment of this Act—
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(A) such change shall be treated as initi-
ated by the taxpayer,
(B) such change shall be treated as made
with the consent of the Secretary of the Treas-
ury, and
(C) the net amount of the adjustments re-
quired to be taken into account by the taxpayer
under section 481 of the Internal Revenue Code
of 1986 shall be taken into account over a pe-
riod (not greater than 4 taxable years) begin-
ning with such first taxable year.
SEC. 1510. EXCLUSION OF LIKE-KIND EXCHANGE PROP-
ERTY FROM NONRECOGNITION TREATMENT
ON THE SALE OF A PRINCIPAL RESIDENCE.
(a) IN GENERAL.—Subsection (d) of section 121 (re-
lating to the exclusion of gain from the sale of a principal
residence) is amended by adding at the end the following
new paragraph:
‘‘(9) LIKE-KIND
EXCHANGES.—Subsection (a)
shall not apply to any sale or exchange of a resi-
dence if such residence was acquired by the taxpayer
during the 5-year period ending on the date of such
sale or exchange in an exchange in which any
amount of gain was not recognized under section
1031.’’.
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(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to any sale or exchange of a
principal residence after the date of the enactment of this
Act.
TITLE XVI—TECHNICAL
CORRECTIONS
SEC. 1601. AMENDMENTS RELATED TO TAX AND TRADE RE-
LIEF EXTENSION ACT OF 1998.
(a) AMENDMENT RELATED TO SECTION 1004(b) OF
THE ACT.—Subsection (d) of section 6104 is amended by
adding at the end the following new paragraph:
‘‘(6) APPLICATION
TO
NONEXEMPT
CHARI-
TABLE TRUSTS AND NONEXEMPT PRIVATE FOUNDA-
TIONS.—The organizations referred to in paragraphs
(1) and (2) of section 6033(d) shall comply with the
requirements of this subsection relating to annual
returns filed under section 6033 in the same manner
as the organizations referred to in paragraph (1).’’.
(b) AMENDMENTS RELATED TO SECTION 4003 OF
THE ACT.—
(1) Subsection (b) of section 4003 of the Tax
and Trade Relief Extension Act of 1998 is amended
by inserting ‘‘(7)(A)(i)(II),’’ after ‘‘(5)(A)(ii)(I),’’.
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(2) Subparagraph (A) of section 9510(c)(1) is
amended by striking ‘‘August 5, 1997’’ and insert-
ing ‘‘October 21, 1998’’.
(c) VACCINE TAX AND TRUST FUND.—Sections 1503
and 1504 of the Vaccine Injury Compensation Program
Modification Act (and the amendments made by such sec-
tions) are hereby repealed.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
of the Tax and Trade Relief Extension Act of 1998 to
which they relate.
SEC. 1602. AMENDMENTS RELATED TO INTERNAL REVENUE
SERVICE RESTRUCTURING AND REFORM ACT
OF 1998.
(a) AMENDMENT RELATED TO 1103 OF THE ACT.—
Paragraph (6) of section 6103(k) is amended—
(1) by inserting ‘‘and an officer or employee of
the Office of Treasury Inspector General for Tax
Administration’’ after ‘‘internal revenue officer or
employee’’, and
(2) by striking ‘‘INTERNAL REVENUE’’ in the
heading and inserting ‘‘CERTAIN’’.
(b) AMENDMENT RELATED TO SECTION 3509 OF
THE ACT.—Subparagraph (A) of section 6110(g)(5) is
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amended by inserting ‘‘, any Chief Counsel advice,’’ after
‘‘technical advice memorandum’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
of the Internal Revenue Service Restructuring and Reform
Act of 1998 to which they relate.
SEC. 1603. AMENDMENTS RELATED TO TAXPAYER RELIEF
ACT OF 1997.
(a) AMENDMENT RELATED TO SECTION 302 OF THE
ACT.—The last sentence of section 3405(e)(1)(B) is
amended by inserting ‘‘(other than a Roth IRA)’’ after
‘‘individual retirement plan’’.
(b) AMENDMENTS RELATED TO SECTION 1072 OF
THE ACT.—
(1) Clause (ii) of section 415(c)(3)(D) and sub-
paragraph (B) of section 403(b)(3) are each amend-
ed by striking ‘‘section 125 or’’ and inserting ‘‘sec-
tion 125, 132(f)(4), or’’.
(2) Paragraph (2) of section 414(s) is amended
by striking ‘‘section 125, 402(e)(3)’’ and inserting
‘‘section 125, 132(f)(4), 402(e)(3)’’.
(c) AMENDMENT RELATED TO SECTION 1454 OF
THE ACT.—Subsection (a) of section 7436 is amended by
inserting before the period at the end of the first sentence
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‘‘and the proper amount of employment tax under such
determination’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
of the Taxpayer Relief of 1997 to which they relate.
SEC. 1604. OTHER TECHNICAL CORRECTIONS.
(a) AFFILIATED CORPORATIONS
IN CONTEXT
OF
WORTHLESS SECURITIES.—
(1) Subparagraph (A) of section 165(g)(3) is
amended to read as follows:
‘‘(A) the taxpayer owns directly stock in
such corporation meeting the requirements of
section 1504(a)(2), and’’.
(2) Paragraph (3) of section 165(g) is amended
by striking the last sentence.
(3) The amendments made by this subsection
shall apply to taxable years beginning after Decem-
ber 31, 1984.
(b) REFERENCE TO CERTAIN STATE PLANS.—
(1) Subparagraph (B) of section 51(d)(2) is
amended—
(A) by striking ‘‘plan approved’’ and in-
serting ‘‘program funded’’, and
(B) by striking ‘‘(relating to assistance for
needy families with minor children)’’.