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‘‘(A) the value of such property for purposes
of subsection (a) shall be its value as finally de-
termined for purposes of chapter 12 (within the
meaning of section 2001(f)(2)), or, in the case of
an allocation deemed to have been made at the
close of an estate tax inclusion period, its value
at the time of the close of the estate tax inclusion
period, and
‘‘(B) such allocation shall be effective on
and after the date of such transfer, or, in the
case of an allocation deemed to have been made
at the close of an estate tax inclusion period, on
and after the close of such estate tax inclusion
period.’’.
(b) TRANSFERS AT DEATH.—Subparagraph (A) of sec-
tion 2642(b)(2) is amended to read as follows:
‘‘(A) TRANSFERS AT DEATH.—If property is
transferred as a result of the death of the trans-
feror, the value of such property for purposes of
subsection (a) shall be its value as finally deter-
mined for purposes of chapter 11; except that, if
the requirements prescribed by the Secretary re-
specting allocation of post-death changes in value
are not met, the value of such property shall be
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determined as of the time of the distribution con-
cerned.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect as if included in the amendments
made by section 1431 of the Tax Reform Act of 1986.
SEC. 734. RELIEF PROVISIONS.
(a) IN GENERAL.—Section 2642 is amended by adding
at the end the following new subsection:
‘‘(g) RELIEF PROVISIONS.—
‘‘(1) RELIEF FOR LATE ELECTIONS.—
‘‘(A) IN GENERAL.—The Secretary shall by
regulation prescribe such circumstances and pro-
cedures under which extensions of time will be
granted to make—
‘‘(i) an allocation of GST exemption
described in paragraph (1) or (2) of sub-
section (b), and
‘‘(ii) 
an 
election 
under 
section
2632(b)(3).
Such regulations shall include procedures for re-
questing comparable relief with respect to trans-
fers made before the date of enactment of this
paragraph.
‘‘(B) BASIS FOR DETERMINATIONS.—In de-
termining whether to grant relief under this
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paragraph, the Secretary shall take into account
all relevant circumstances, including evidence of
intent contained in the trust instrument or in-
strument of transfer and such other factors as the
Secretary deems relevant. For purposes of deter-
mining whether to grant relief under this para-
graph, the time for making the allocation (or
election) shall be treated as if not expressly pre-
scribed by statute.
‘‘(2) SUBSTANTIAL COMPLIANCE.—An allocation
of GST exemption under section 2632 that dem-
onstrates an intent to have the lowest possible inclu-
sion ratio with respect to a transfer or a trust shall
be deemed to be an allocation of so much of the trans-
feror’s unused GST exemption as produces the lowest
possible inclusion ratio. In determining whether there
has been substantial compliance, all relevant cir-
cumstances shall be taken into account, including evi-
dence of intent contained in the trust instrument or
instrument of transfer and such other factors as the
Secretary deems relevant.’’.
(b) EFFECTIVE DATES.—
(1) RELIEF
FOR
LATE
ELECTIONS.—Section
2642(g)(1) (as added by subsection (a)) shall apply to
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requests pending on, or filed after, the date of the en-
actment of this Act.
(2) 
SUBSTANTIAL
COMPLIANCE.—Section
2642(g)(2) (as so added) shall take effect on the date
of the enactment of this Act and shall apply to alloca-
tions made prior to such date for purposes of deter-
mining the tax consequences of generation-skipping
transfers with respect to which the period of time for
filing claims for refund has not expired. No implica-
tion is intended with respect to the availability of re-
lief for late elections or the application of a rule of
substantial compliance before the enactment of this
amendment.
TITLE VIII—TAX EXEMPT
ORGANIZATIONS PROVISIONS
SEC. 801. EXEMPTION FROM INCOME TAX FOR STATE-CRE-
ATED 
ORGANIZATIONS 
PROVIDING 
PROP-
ERTY AND CASUALTY INSURANCE FOR PROP-
ERTY FOR WHICH SUCH COVERAGE IS OTHER-
WISE UNAVAILABLE.
(a) IN GENERAL.—Subsection (c) of section 501 (relat-
ing to exemption from tax on corporations, certain trusts,
etc.) is amended by adding at the end the following new
paragraph:
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‘‘(28)(A) Any association created before January
1, 1999, by State law and organized and operated ex-
clusively to provide property and casualty insurance
coverage for property located within the State for
which the State has determined that coverage in the
authorized insurance market is limited or unavailable
at reasonable rates, if—
‘‘(i) no part of the net earnings of which in-
ures to the benefit of any private shareholder or
individual,
‘‘(ii) except as provided in clause (v), no
part of the assets of which may be used for, or
diverted to, any purpose other than—
‘‘(I) to satisfy, in whole or in part, the
liability of the association for, or with re-
spect to, claims made on policies written by
the association,
‘‘(II) to invest in investments author-
ized by applicable law,
‘‘(III) to pay reasonable and necessary
administration expenses in connection with
the establishment and operation of the asso-
ciation and the processing of claims against
the association, or
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‘‘(IV) to make remittances pursuant to
State law to be used by the State to provide
for the payment of claims on policies writ-
ten by the association, purchase reinsurance
covering losses under such policies, or to
support governmental programs to prepare
for or mitigate the effects of natural cata-
strophic events,
‘‘(iii) the State law governing the associa-
tion permits the association to levy assessments
on insurance companies authorized to sell prop-
erty and casualty insurance in the State, or on
property and casualty insurance policyholders
with insurable interests in property located in
the State to fund deficits of the association, in-
cluding the creation of reserves,
‘‘(iv) the plan of operation of the associa-
tion is subject to approval by the chief executive
officer or other executive branch official of the
State, by the State legislature, or both, and
‘‘(v) the assets of the association revert upon
dissolution to the State, the State’s designee, or
an entity designated by the State law governing
the association, or State law does not permit the
dissolution of the association.
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fied payment received by the controlling or-
ganization which exceeds the amount which
would have been paid if such payment met
the requirements prescribed under section
482.
‘‘(ii) ADDITION TO TAX FOR VALUATION
MISSTATEMENTS.—The tax imposed by this
chapter on the controlling organization
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 accrued
after December 31, 1999.
(2) PAYMENTS SUBJECT TO BINDING CONTRACT
TRANSITION RULE.—If the amendments made by sec-
tion 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 contract
described in subsection (b)(2) of such section, such
amendments also shall not apply to amounts received
or accrued under such contract before January 1,
2000.
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SEC. 803. SIMPLIFICATION OF LOBBYING EXPENDITURE
LIMITATION.
(a) REPEAL OF GRASSROOTS EXPENDITURE LIMIT.—
Paragraph (1) of section 501(h) (relating to expenditures
by public charities to influence legislation) is amended to
read as follows:
‘‘(1) GENERAL RULE.—In the case of an organi-
zation to which this subsection applies, exemption
from taxation under subsection (a) shall be denied be-
cause a substantial part of the activities of such orga-
nization consists of carrying on propaganda, or oth-
erwise attempting, to influence legislation, but only if
such organization normally makes lobbying expendi-
tures in excess of the lobbying ceiling amount for such
organization for each taxable year.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 501(h)(2) is amended by striking
subparagraphs (C) and (D).
(2) Section 4911(b) is amended to read as fol-
lows:
‘‘(b) EXCESS LOBBYING EXPENDITURES.—For pur-
poses of this section, the term ‘excess lobbying expenditures’
means, for a taxable year, the amount by which the lobbying
expenditures made by the organization during the taxable
year exceed the lobbying nontaxable amount for such orga-
nization for such taxable year.’’.
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(3) Section 4911(c) is amended by striking para-
graphs (3) and (4).
(4) Paragraph (1)(A) of section 4911(f) is
amended by striking ‘‘limits of section 501(h)(1)
have’’ and inserting ‘‘limit of section 501(h)(1) has’’.
(5) Paragraph (1)(C) of section 4911(f) is
amended by striking ‘‘limits of section 501(h)(1) are’’
and inserting ‘‘limit of section 501(h)(1) is’’.
(6) Paragraphs (4)(A) and (4)(B) of section
4911(f) are each amended by striking ‘‘limits of sec-
tion 501(h)(1)’’ and inserting ‘‘limit of section
501(h)(1)’’.
(7) Paragraph (8) of section 6033(b) (relating to
certain organizations described in section 501(c)(3))
is amended by inserting ‘‘and’’ at the end of subpara-
graph (A) and by striking subparagraphs (C) and
(D).
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
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SEC. 804. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE-
TIREMENT ACCOUNTS FOR CHARITABLE PUR-
POSES.
(a) IN GENERAL.—Subsection (d) of section 408 (relat-
ing to individual retirement accounts) is amended by add-
ing at the end the following new paragraph:
‘‘(8) DISTRIBUTIONS
FOR
CHARITABLE
PUR-
POSES.—
‘‘(A) IN GENERAL.—In the case of a quali-
fied charitable distribution from an individual
retirement account to an organization described
in section 170(c), no amount shall be includible
in the gross income of the distributee.
‘‘(B) SPECIAL RULES RELATING TO CHARI-
TABLE
REMAINDER
TRUSTS, POOLED
INCOME
FUNDS, AND CHARITABLE GIFT ANNUITIES.—
‘‘(i) IN GENERAL.—In the case of a
qualified charitable distribution from an in-
dividual retirement account—
‘‘(I) to a charitable remainder an-
nuity trust or a charitable remainder
unitrust (as such terms are defined in
section 664(d)),
‘‘(II) to a pooled income fund (as
defined in section 642(c)(5)), or
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‘‘(III) for the issuance of a chari-
table gift annuity (as defined in sec-
tion 501(m)(5)),
no amount shall be includible in gross in-
come of the distributee. The preceding sen-
tence shall apply only if no person holds
any interest in the amounts in the trust,
fund, or annuity attributable to such dis-
tribution other than one or more of the fol-
lowing: the individual for whose benefit
such account is maintained, the spouse of
such individual, or any organization de-
scribed in section 170(c).
‘‘(ii) DETERMINATION
OF
INCLUSION
OF
AMOUNTS
DISTRIBUTED.—In 
deter-
mining the amount includible in the gross
income of the distributee of a distribution
from a trust described in clause (i)(I) or an
annuity (as described in clause (i)(III)), the
portion of any qualified charitable distribu-
tion to such trust or for such annuity which
would (but for this subparagraph) have been
includible in gross income—
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‘‘(I) in the case of any such trust,
shall be treated as income described in
section 664(b)(1), or
‘‘(II) in the case of any such an-
nuity, shall not be treated as an invest-
ment in the contract.
‘‘(iii) NO
INCLUSION
FOR
DISTRIBU-
TION
TO
POOLED
INCOME
FUND.—No
amount shall be includible in the gross in-
come of a pooled income fund (as so de-
fined) by reason of a qualified charitable
distribution to such fund.
‘‘(C) QUALIFIED
CHARITABLE
DISTRIBU-
TION.—For purposes of this paragraph, the term
‘qualified charitable distribution’ means any dis-
tribution 
from 
an 
individual 
retirement
account—
‘‘(i) which is made on or after the date
that the individual for whose benefit the ac-
count is maintained has attained age 701⁄2,
and
‘‘(ii) which is a charitable contribution
(as defined in section 170(c)) made directly
from the account to—
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‘‘(I) an organization described in
section 170(c), or
‘‘(II) a trust, fund, or annuity de-
scribed in subparagraph (B).
‘‘(D) DENIAL OF DEDUCTION.—The amount
allowable as a deduction to the taxpayer for the
taxable year under section 170 for qualified
charitable distributions shall be reduced (but not
below zero) by the sum of the amounts of the
qualified charitable distributions during such
year which (but for this paragraph) would have
been includible in the gross income of the tax-
payer for such year.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2000.
SEC. 805. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS EXCLUDED FROM GROSS IN-
COME.
(a) IN GENERAL.—Part III of subchapter B of chapter
1 is amended by inserting after section 138 the following
new section:
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‘‘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 for which a deduction would
otherwise be allowable under section 170. The preceding sen-
tence shall apply only to the extent that such reimbursement
would be deductible under section 274(d) (determined by
applying the standard business mileage rate established
pursuant to section 274(d)) if the organization were not so
described and such individual were an employee of such or-
ganization.
‘‘(b) NO DOUBLE BENEFIT.—Subsection (a) shall not
apply with respect to any expenses if the individual claims
a deduction or credit for such expenses under any other pro-
vision of this title.
‘‘(c) 
EXEMPTION
FROM
REPORTING
REQUIRE-
MENTS.—Section 6041 shall not apply with respect to reim-
bursements 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 insert-
ing after the item relating to section 138 the following new
items:
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‘‘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 Decem-
ber 31, 1999.
SEC. 806. CHARITABLE CONTRIBUTION DEDUCTION FOR
CERTAIN EXPENSES INCURRED IN SUPPORT
OF NATIVE ALASKAN SUBSISTENCE WHALING.
(a) IN GENERAL.—Section 170 (relating to charitable,
etc., contributions and gifts) is amended by redesignating
subsection (m) as subsection (n) and by inserting after sub-
section (l) the following new subsection:
‘‘(m) EXPENSES PAID BY CERTAIN WHALING CAP-
TAINS
IN SUPPORT
OF NATIVE ALASKAN SUBSISTENCE
WHALING.—
‘‘(1) IN GENERAL.—In the case of an individual
who is recognized by the Alaska Eskimo Whaling
Commission as a whaling captain charged with the
responsibility of maintaining and carrying out sanc-
tioned whaling activities and who engages in such ac-
tivities during the taxable year, the amount described
in paragraph (2) (to the extent such amount does not
exceed $7,500 for the taxable year) shall be treated for
purposes of this section as a charitable contribution.
‘‘(2) AMOUNT DESCRIBED.—
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‘‘(A) IN GENERAL.—The amount described
in this paragraph is the aggregate of the reason-
able and necessary whaling expenses paid by the
taxpayer during the taxable year in carrying out
sanctioned whaling activities.
‘‘(B) WHALING EXPENSES.—For purposes of
subparagraph (A), the term ‘whaling expenses’
includes expenses for—
‘‘(i) the acquisition and maintenance
of whaling boats, weapons, and gear used in
sanctioned whaling activities,
‘‘(ii) the supplying of food for the crew
and other provisions for carrying out such
activities, and
‘‘(iii) storage and distribution of the
catch from such activities.
‘‘(3) SANCTIONED
WHALING
ACTIVITIES.—For
purposes of this subsection, the term ‘sanctioned whal-
ing activities’ means subsistence bowhead whale hunt-
ing activities conducted pursuant to the management
plan of the Alaska Eskimo Whaling Commission.’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 1999.
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SEC. 807. CHARITABLE CONTRIBUTIONS TO CERTAIN LOW
INCOME SCHOOLS MAY BE MADE IN NEXT
TAXABLE YEAR.
(a) IN GENERAL.—Section 170(f) (relating to dis-
allowance of deduction in certain cases and special rules)
is amended by adding at the end the following new para-
graph:
‘‘(10) TIME
WHEN
CERTAIN
CONTRIBUTIONS
DEEMED MADE.—
‘‘(A) IN GENERAL.—At the election of the
taxpayer, a qualified low-income school contribu-
tion shall be deemed to be made on the last day
of the preceding taxable year if the contribution
is made on account of such taxable year and is
made not later than the time prescribed by law
for filing the return for such taxable year (not
including extensions thereof). The election may
be made at the time of the filing of the return
for such table year, and shall be made and sub-
stantiated in such manner as the Secretary shall
by regulations prescribe.
‘‘(B) QUALIFIED LOW-INCOME SCHOOL CON-
TRIBUTION.—For purposes of subparagraph (A),
the term ‘qualified low-income school contribu-
tion’ means a charitable contribution to an edu-
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cational organization described in subsection
(b)(1)(A)(ii)—
‘‘(i) which is a public, private, or sec-
tarian school which provides elementary or
secondary education (through grade 12), as
determined under State law, and
‘‘(ii) with respect to which at least 50
percent of the students attending such school
are eligible for free or reduced-cost lunches
under the school lunch program established
under the National School Lunch Act.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 808. DEDUCTION FOR PORTION OF CHARITABLE CON-
TRIBUTIONS TO BE ALLOWED TO INDIVID-
UALS WHO DO NOT ITEMIZE DEDUCTIONS.
(a) IN GENERAL.—Section 170 (relating to charitable,
etc., contributions and gifts), as amended by section 806,
is amended by redesignating subsection (n) as subsection
(o) and by inserting after subsection (m) the following new
subsection:
‘‘(n) DEDUCTION FOR INDIVIDUALS NOT ITEMIZING
DEDUCTIONS.—In the case of an individual who does not
itemize his deductions for the taxable year, there shall be
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taken into account as a direct charitable deduction under
section 63 an amount equal to the lesser of—
‘‘(1) the amount allowable as a deduction under
subsection (a) for the taxable year, or
‘‘(2) $50 ($100 in the case of a joint return).’’.
(b) DIRECT CHARITABLE DEDUCTION.—
(1) IN GENERAL.—Subsection (b) of section 63 is
amended by striking ‘‘and’’ at the end of paragraph
(1), by striking the period at the end of paragraph (2)
and inserting ‘‘, and’’, and by adding at the end
thereof the following new paragraph:
‘‘(3) the direct charitable deduction.’’.
(2) DEFINITION.—Section 63 is amended by re-
designating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new sub-
section:
‘‘(g) DIRECT CHARITABLE DEDUCTION.—For purposes
of this section, the term ‘direct charitable deduction’ means
that portion of the amount allowable under section 170(a)
which is taken as a direct charitable deduction for the tax-
able year under section 170(n).’’.
(3) CONFORMING AMENDMENT.—Subsection (d)
of section 63 is amended by striking ‘‘and’’ at the end
of paragraph (1), by striking the period at the end of
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paragraph (2) and inserting ‘‘, and’’, and by adding
at the end thereof the following new paragraph:
‘‘(3) the direct charitable deduction.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004, and before January 1, 2007.
SEC. 809. INCREASE IN LIMIT ON CHARITABLE CONTRIBU-
TIONS AS PERCENTAGE OF AGI.
(a) IN GENERAL.—
(1) INDIVIDUAL LIMIT.—Section 170(b)(1) (relat-
ing to percentage limitations) is amended—
(A) by striking ‘‘50 percent’’ in subpara-
graph (A) and inserting ‘‘the applicable percent-
age’’, and
(B) by striking ‘‘30 percent’’ each place it
appears in subparagraph (C) and inserting ‘‘the
applicable percentage’’.
(2) CORPORATE
LIMIT.—Section 170(b)(2) is
amended by striking ‘‘10 percent’’ and inserting ‘‘the
applicable percentage’’.
(b) APPLICABLE PERCENTAGE.—Section 170(b) is
amended by adding at the end the following new paragraph:
‘‘(3) APPLICABLE
PERCENTAGE.—For purposes
of this subsection, the applicable percentage shall be
determined under the following tables:
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‘‘(A) In the case of paragraph (1)(A):
‘‘For taxable year—
The applicable percentage is—
2002 ....................................................................................
2003 ....................................................................................
2004 ....................................................................................
2005 ....................................................................................
2006 ....................................................................................
2007 and thereafter ...........................................................
70.
‘‘(B) In the case of paragraph (1)(C):
‘‘For taxable year—
The applicable percentage is—
2002 ....................................................................................
2003 ....................................................................................
2004 ....................................................................................
2005 ....................................................................................
2006 ....................................................................................
2007 and thereafter ...........................................................
50.
‘‘(C) In the case of paragraph (2):
‘‘For taxable year—
The applicable percentage is—
2002 ....................................................................................
2003 ....................................................................................
2004 ....................................................................................
2005 ....................................................................................
2006 and thereafter ...........................................................
20.’’.
(c) CONFORMING AMENDMENT.—Section 170(d)(1)(A)
is amended by striking ‘‘50 percent’’ each place it appears
and inserting ‘‘the applicable percentage in effect under
subsection (b)(1)(A)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 810. LIMITED EXCEPTION TO EXCESS BUSINESS HOLD-
INGS RULE.
(a) IN GENERAL.—Section 4943(c)(2) (relating to per-
mitted holdings in a corporation) is amended by adding
at the end the following new subparagraphs:
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‘‘(D) RULE WHERE VOTING STOCK IS PUB-
LICLY TRADED.—
‘‘(i) IN GENERAL.—If—
‘‘(I) the private foundation and
all disqualified persons together do not
own more than the applicable percent-
age of the voting stock and not more
than the applicable percentage in value
of all outstanding shares of all classes
of stock of an incorporated business en-
terprise,
‘‘(II) the voting stock owned by
the private foundation and all dis-
qualified persons together is stock for
which market quotations are readily
available on an established securities
market, and
‘‘(III) the requirements of clause
(ii) are met,
then subparagraph (A) shall be applied by
substituting ‘the applicable percentage’ for
‘20 percent’.
‘‘(ii) REQUIREMENTS
TO
BE
MET.—
The requirements of this clause are met dur-
ing any taxable year—
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‘‘(I) in which disqualified persons
with respect to the private foundation
do not receive compensation (as an em-
ployee or otherwise) from the corpora-
tion or engage in any act with such
corporation which would constitute
self-dealing within the meaning of sec-
tion 4941(d) if such corporation were a
private foundation and if each such
disqualified person were a disqualified
person with respect to such corpora-
tion,
‘‘(II) in which disqualified per-
sons with respect to such private foun-
dation do not own in the aggregate
more than 2 percent of the voting stock
and not more than 2 percent in value
of all outstanding shares of all classes
of stock in such corporation, and
‘‘(III) for which there is submitted
with the annual return of the private
foundation for such year (filed within
the time prescribed by law, including
extensions, for filing such return) a
certification which is signed by all the
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members of an audit committee of the
Board of Directors of such corporation
consisting of a majority of persons who
are not disqualified persons with re-
spect to such private foundation and
which certifies that such members, after
due inquiry, are not aware that any
disqualified person has received com-
pensation from such corporation or has
engaged in any act with such corpora-
tion that would constitute self-dealing
within the meaning of section 4941(d)
if such corporation were a private
foundation and if each such disquali-
fied person were a disqualified person
with respect to such corporation.
For purposes of this clause, the fact that a
disqualified person has received compensa-
tion from such corporation or has engaged
in any act with such corporation which
would constitute self-dealing within the
meaning of section 4941(d) shall be dis-
regarded if such receipt or act is corrected
not later than the due date (not including
extensions thereof) for the filing of the pri-
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vate foundation’s annual return for the year
in which the receipt or act occurs and on
the terms that would be necessary to correct
such receipt or act and thereby avoid impo-
sition of tax under section 4941(b).
‘‘(E) APPLICABLE PERCENTAGE.—For pur-
poses of this paragraph, the applicable percent-
age shall be determined under the following table:
‘‘For taxable year—
The applicable percentage is—
2007 ....................................................................................
2008 and thereafter ...........................................................
49.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to foundations established by bequest of
decedents dying after December 31, 2006.
SEC. 811. CERTAIN COSTS OF PRIVATE FOUNDATION IN RE-
MOVING HAZARDOUS SUBSTANCES TREATED
AS QUALIFYING DISTRIBUTION.
(a) IN GENERAL.—In the case of any taxable year be-
ginning after December 31, 1999, the distributable amount
of a private foundation for such taxable year for purposes
of section 4942 of the Internal Revenue Code of 1986 shall
be reduced (but not below zero) by any amount paid or in-
curred (or set aside) by such private foundation for the in-
vestigatory costs and direct costs of removal or taking reme-
dial action with respect to a hazardous substance released
at a facility which was owned or operated by such private
foundation.
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(b) LIMITATIONS.—Subsection (a) shall only apply to
costs—
(1) incurred with respect to hazardous substances
disposed of at a facility owned or operated by the pri-
vate foundation but only if—
(A) such facility was transferred to such
foundation by bequest before December 11, 1980,
and
(B) the active operation of such facility by
such foundation was terminated before December
12, 1980, and
(2) which were not incurred pursuant to a pend-
ing order issued to the private foundation unilater-
ally by the President or the President’s assignee under
section 106 of the Comprehensive Environmental Re-
sponse, Compensation, and Liability Act of 1980 (42
U.S.C. 9606), or pursuant to a nonconsensual judg-
ment against the private foundation issued in a gov-
ernmental cost recovery action under section 107 of
such Act (42 U.S.C. 9607).
(c) HAZARDOUS SUBSTANCE.—For purposes of this
section, the term ‘‘hazardous substance’’ has the meaning
given such term by section 101(14) of the Comprehensive
Environmental Response, Compensation, and Liability Act
of 1980 (42 U.S.C. 9601(14)).
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SEC. 812. HOLDING PERIOD REDUCED TO 12 MONTHS FOR
PURPOSES 
OF 
DETERMINING 
WHETHER
HORSES ARE SECTION 1231 ASSETS.
(a) IN
GENERAL.—Subparagraph (A) of section
1231(b)(3) (relating to definition of property used in the
trade or business) is amended by striking ‘‘and horses’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
TITLE IX—INTERNATIONAL TAX
RELIEF
SEC. 901. INTEREST ALLOCATION RULES.
(a) ELECTION TO ALLOCATE INTEREST ON A WORLD-
WIDE BASIS.—Subsection (e) of section 864 (relating to
rules for allocating interest, etc.) is amended by redesig-
nating paragraphs (6) and (7) as paragraphs (7) and (8),
respectively, and by inserting after paragraph (5) the fol-
lowing new paragraph:
‘‘(6) ELECTION TO ALLOCATE INTEREST ON A
WORLDWIDE BASIS.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, this subsection shall be applied
by treating a worldwide affiliated group for
which an election is in effect under this para-
graph as an affiliated group solely for purposes
of allocating and apportioning interest expense
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of each domestic corporation which is a member
of such group.
‘‘(B) WORLDWIDE
AFFILIATED
GROUP.—
For purposes of this paragraph, the term ‘world-
wide affiliated group’ means the group of cor-
porations which consists of—
‘‘(i) all corporations in an affiliated
group (as defined in paragraph (5)(A), ex-
cept that section 1504 shall also be applied
without regard to subsection (b)(2) thereof),
and
‘‘(ii) all foreign corporations (other
than a FSC, as defined in section 922(a))
which would be a member of such affiliated
group if paragraph (3) of section 1504 (b)
did not apply.
‘‘(C) TREATMENT OF WORLDWIDE AFFILI-
ATED GROUP.—For purposes of applying para-
graph (1), the taxable income of the domestic
members of a worldwide affiliated group from
sources outside the United States shall be deter-
mined by allocating and apportioning the inter-
est expense of such domestic members to such in-
come in an amount equal to the excess (if any)
of—
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‘‘(i) the total interest expense of the
worldwide affiliated group multiplied by
the ratio which the foreign assets of the
worldwide affiliated group bears to all the
assets of the worldwide affiliated group,
over
‘‘(ii) the interest expense of all foreign
corporations which are members of the
worldwide affiliated group to the extent
such interest expense of such foreign cor-
porations would have been allocated and
apportioned to foreign source income if this
subsection were applied to a group con-
sisting of all the foreign corporations in
such worldwide affiliated group.
‘‘(D) ELECTION.—An election under this
paragraph with respect to any worldwide affili-
ated group may be made only by the common
parent of the affiliated group referred to in sub-
paragraph (B)(i) and may be made only for the
first taxable year beginning after December 31,
2004, in which a worldwide affiliated group ex-
ists which includes such affiliated group and at
least 1 corporation described in subparagraph
(B)(ii). Such an election, once made, shall apply
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to such common parent and all other corpora-
tions which are members of such worldwide af-
filiated group for such taxable year and all sub-
sequent years unless revoked with the consent of
the Secretary.’’.
(b) ELECTION TO EXPAND FINANCIAL INSTITUTION
GROUP OF WORLDWIDE GROUP.—Section 864 is amended
by redesignating subsection (f) as subsection (g) and by in-
serting after subsection (e) the following new subsection:
‘‘(f) ELECTION TO EXPAND FINANCIAL INSTITUTION
GROUP OF WORLDWIDE GROUP.—
‘‘(1) IN
GENERAL.—If a worldwide affiliated
group for which an election under subsection (e)(6) is
in effect elects the application of this subsection, all
financial corporations which—
‘‘(A) are members of such worldwide affili-
ated group, but
‘‘(B) are not corporations described in sub-
section (e)(5)(C),
shall be treated as described in subsection (e)(5)(C)
for purposes of applying subsection (e)(5)(B). Sub-
section (e) shall apply to any such group in the same
manner as subsection (e) applies to the pre-election
worldwide affiliated group of which such group is a
part.
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‘‘(2) FINANCIAL CORPORATION.—For purposes of
this subsection, the term ‘financial corporation’
means any corporation if at least 80 percent of its
gross 
income 
is 
income 
described 
in 
section
904(d)(2)(C)(ii) and the regulations thereunder which
is derived from transactions with persons not bearing
a relationship described in section 267(b) or 707(b)(1)
to the corporation.
‘‘(3) ANTIABUSE RULES.—In the case of a cor-
poration which is a member of an electing financial
institution 
group, 
to 
the 
extent 
that 
such
corporation—
‘‘(A) distributes dividends or makes other
distributions with respect to its stock after the
date of the enactment of this paragraph to any
member of the pre-election worldwide affiliated
group (other than to a member of the electing fi-
nancial institution group) in excess of the great-
er of—
‘‘(i) its average annual dividend (ex-
pressed as a percentage of current earnings
and profits) during the 5-taxable-year pe-
riod ending with the taxable year preceding
the taxable year, or
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‘‘(ii) 25 percent of its average annual
earnings and profits for such 5 taxable year
period, or
‘‘(B) deals with any person in any manner
not clearly reflecting the income of the corpora-
tion (as determined under principles similar to
the principles of section 482),
an amount of indebtedness of the electing financial
institution group equal to the excess distribution or
the understatement or overstatement of income, as the
case may be, shall be recharacterized (for the taxable
year and subsequent taxable years) for purposes of
this subsection as indebtedness of the worldwide affili-
ated group (excluding the electing financial institu-
tion group). If a corporation has not been in existence
for 5 taxable years, this subparagraph shall be ap-
plied with respect to the period it was in existence.
‘‘(4) ELECTION.—An election under this sub-
section with respect to any financial institution
group may be made only by the common parent of the
pre-election worldwide affiliated group and may be
made only for the first taxable year beginning after
December 31, 2004, in which such affiliated group in-
cludes 1 or more financial corporations described in
paragraph (1)(B). Such an election, once made, shall
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apply to all financial corporations which are mem-
bers of the electing financial institution group for
such taxable year and all subsequent years unless re-
voked with the consent of the Secretary.
‘‘(5) DEFINITIONS RELATING TO GROUPS.—For
purposes of this subsection—
‘‘(A) PRE-ELECTION
WORLDWIDE
AFFILI-
ATED GROUP.—The term ‘pre-election worldwide
affiliated group’ means, with respect to a cor-
poration, the worldwide affiliated group of which
such corporation would (but for an election
under this subsection) be a member for purposes
of applying subsection (e).
‘‘(B) ELECTING
FINANCIAL
INSTITUTION
GROUP.—The term ‘electing financial institution
group’ means the group of corporations to which
subsection (e) applies separately by reason of the
application of subsection (e)(5)(B) and which in-
cludes financial corporations by reason of an
election under paragraph (1).
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be appropriate to
carry out this subsection and subsection (e), including
regulations—
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‘‘(A) providing for the direct allocation of
interest expense in other circumstances where
such allocation would be appropriate to carry
out the purposes of this subsection,
‘‘(B) preventing assets or interest expense
from being taken into account more than once,
and
‘‘(C) dealing with changes in members of
any group (through acquisitions or otherwise)
treated under this subsection as an affiliated
group for purposes of subsection (e).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 902. LOOK-THRU RULES TO APPLY TO DIVIDENDS
FROM NONCONTROLLED SECTION 902 COR-
PORATIONS.
(a) IN GENERAL.—Section 904(d)(4) (relating to ap-
plication of look-thru rules to dividends from noncontrolled
section 902 corporations) is amended to read as follows:
‘‘(4) LOOK-THRU APPLIES TO DIVIDENDS FROM
NONCONTROLLED SECTION 902 CORPORATIONS.—
‘‘(A) IN
GENERAL.—For purposes of this
subsection, any dividend from a noncontrolled
section 902 corporation with respect to the tax-
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payer shall be treated as income in a separate
category in proportion to the ratio of—
‘‘(i) the portion of earnings and profits
attributable to income in such category, to
‘‘(ii) the total amount of earnings and
profits.
‘‘(B) SPECIAL RULES.—For purposes of this
paragraph—
‘‘(i) IN
GENERAL.—Rules similar to
the rules of paragraph (3)(F) shall apply,
except that the term ‘separate category’
shall include the category of income de-
scribed in paragraph (1)(I).
‘‘(ii) EARNINGS AND PROFITS.—
‘‘(I) IN GENERAL.—The rules of
section 316 shall apply.
‘‘(II) REGULATIONS.—The Sec-
retary may prescribe regulations re-
garding the treatment of distributions
out of earnings and profits for periods
before the taxpayer’s acquisition of the
stock to which the distributions relate.
‘‘(iii) DIVIDENDS NOT ALLOCABLE TO
SEPARATE CATEGORY.—The portion of any
dividend from a noncontrolled section 902
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corporation which is not treated as income
in a separate category under subparagraph
(A) shall be treated as a dividend to which
subparagraph (A) does not apply.
‘‘(iv) LOOK-THRU
WITH
RESPECT
TO
CARRYFORWARDS OF CREDIT.—Rules simi-
lar to subparagraph (A) also shall apply to
any carryforward under subsection (c) from
a taxable year beginning before January 1,
2005, of tax allocable to a dividend from a
noncontrolled section 902 corporation with
respect to the taxpayer.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (E) of section 904(d)(1), as in
effect both before and after the amendments made by
section 1105 of the Taxpayer Relief Act of 1997, is
hereby repealed.
(2) Section 904(d)(2)(C)(iii), as so in effect, is
amended by striking subclause (II) and by redesig-
nating subclause (III) as subclause (II).
(3) The last sentence of section 904(d)(2)(D), as
so in effect, is amended to read as follows: ‘‘Such term
does not include any financial services income.’’.
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(4) Section 904(d)(2)(E) is amended by striking
clauses (ii) and (iv) and by redesignating clause (iii)
as clause (ii).
(5) Section 904(d)(3)(F) is amended by striking
‘‘(D), or (E)’’ and inserting ‘‘or (D)’’.
(6) Section 864(d)(5)(A)(i) is amended by strik-
ing ‘‘(C)(iii)(III)’’ and inserting ‘‘(C)(iii)(II)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE
TRANSPORTATION INCOME.
(a) IN GENERAL.—Section 954(g)(1) (defining foreign
base company oil related income) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ‘‘, or’’, and
by inserting after subparagraph (B) the following new sub-
paragraph:
‘‘(C) the pipeline transportation of oil or
gas within such foreign country.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years of controlled foreign cor-
porations beginning after December 31, 2002, and taxable
years of United States shareholders with or within which
such taxable years of controlled foreign corporations end.
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SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANS-
MISSION OF HIGH VOLTAGE ELECTRICITY.
(a) IN GENERAL.—Paragraph (2) of section 954(e) (re-
lating to foreign base company services income) is amended
by striking ‘‘or’’ at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) the transmission of high voltage elec-
tricity.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years of controlled foreign cor-
porations beginning after December 31, 2002, and taxable
years of United States shareholders with or within which
such taxable years of controlled foreign corporations end.
SEC. 905. ADVANCE PRICING AGREEMENTS TREATED AS
CONFIDENTIAL TAXPAYER INFORMATION.
(a) IN GENERAL.—
(1) TREATMENT
AS
RETURN
INFORMATION.—
Paragraph (2) of section 6103(b) (defining return in-
formation) is amended by striking ‘‘and’’ at the end
of subparagraph (A), by inserting ‘‘and’’ at the end
of subparagraph (B), and by inserting after subpara-
graph (B) the following new subparagraph:
‘‘(C) any advance pricing agreement en-
tered into by a taxpayer and the Secretary and
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any background information related to such
agreement or any application for an advance
pricing agreement,’’.
(2) EXCEPTION
FROM
PUBLIC
INSPECTION
AS
WRITTEN DETERMINATION.—Paragraph (1) of section
6110(b) (defining written determination) is amended
by adding at the end the following new sentence:
‘‘Such term shall not include any advance pricing
agreement entered into by a taxpayer and the Sec-
retary and any background information related to
such agreement or any application for an advance
pricing agreement.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the date of the
enactment of this Act.
(b) ANNUAL REPORT REGARDING ADVANCE PRICING
AGREEMENTS.—
(1) IN GENERAL.—Not later than 90 days after
the end of each calendar year, the Secretary of the
Treasury shall prepare and publish a report regard-
ing advance pricing agreements.
(2) CONTENTS OF REPORT.—The report shall in-
clude the following for the calendar year to which
such report relates:
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(A) Information about the structure, com-
position, and operation of the advance pricing
agreement program office.
(B) A copy of each model advance pricing
agreement.
(C) The number of—
(i) applications filed during such cal-
endar year for advanced pricing agree-
ments;
(ii) advance pricing agreements exe-
cuted cumulatively to date and during such
calendar year;
(iii) renewals of advanced pricing
agreements issued;
(iv) pending requests for advance pric-
ing agreements;
(v) pending renewals of advance pric-
ing agreements;
(vi) for each of the items in clauses (ii)
through (v), the number that are unilateral,
bilateral, and multilateral, respectively;
(vii) advance pricing agreements re-
voked or canceled, and the number of with-
drawals from the advance pricing agree-
ment program; and
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(viii) advanced pricing agreements fi-
nalized or renewed by industry.
(D) General descriptions of—
(i) the nature of the relationships be-
tween the related organizations, trades, or
businesses covered by advance pricing agree-
ments;
(ii) the covered transactions and the
business functions performed and risks as-
sumed by such organizations, trades, or
businesses;
(iii) the related organizations, trades,
or businesses whose prices or results are
tested to determine compliance with transfer
pricing methodologies prescribed in ad-
vanced pricing agreements;
(iv) methodologies used to evaluate test-
ed parties and transactions and the cir-
cumstances leading to the use of those meth-
odologies;
(v) critical assumptions made and
sources of comparables used;
(vi) comparable selection criteria and
the rationale used in determining such cri-
teria;
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(vii) the nature of adjustments to
comparables or tested parties;
(viii) the nature of any ranges agreed
to, including information regarding when
no range was used and why, when inter-
quartile ranges were used, and when there
was 
a 
statistical 
narrowing 
of 
the
comparables;
(ix) adjustment mechanisms provided
to rectify results that fall outside of the
agreed upon advance pricing agreement
range;
(x) the various term lengths for ad-
vance pricing agreements, including roll-
back years, and the number of advance
pricing agreements with each such term
length;
(xi) the nature of documentation re-
quired; and
(xii) approaches for sharing of cur-
rency or other risks.
(E) Statistics regarding the amount of time
taken to complete new and renewal advance pric-
ing agreements.
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(3) CONFIDENTIALITY.—The reports required by
this subsection shall be treated as authorized by the
Internal Revenue Code of 1986 for purposes of section
6103 of such Code, but the reports shall not include
information—
(A) which would not be permitted to be dis-
closed under section 6110(c) of such Code if such
report were a written determination as defined
in section 6110 of such Code, or
(B) which can be associated with, or other-
wise identify, directly or indirectly, a particular
taxpayer.
(4) FIRST
REPORT.—The report for calendar
year 1999 shall include prior calendar years after
1990.
(c) USER FEE.—Section 7527, as added by this Act,
is amended by redesignating subsection (c) as subsection (d)
and by inserting after subsection (b) the following new sub-
section:
‘‘(c) ADVANCE PRICING AGREEMENTS.—
‘‘(1) IN GENERAL.—In addition to any fee other-
wise imposed under this section, the fee imposed for
requests for advance pricing agreements shall be in-
creased by $500.
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‘‘(2) REDUCED FEE FOR SMALL BUSINESSES.—
The Secretary shall provide an appropriate reduction
in the amount imposed by reason of paragraph (1)
for requests for advance pricing agreements for small
businesses.’’.
(d) REGULATIONS.—The Secretary of the Treasury or
the Secretary’s delegate shall prescribe such regulations as
may be necessary or appropriate to carry out the purposes
of section 6103(b)(2)(C), and the last sentence of section
6110(b)(1), of the Internal Revenue Code of 1986, as added
by this section.
SEC. 906. AIRLINE MILEAGE AWARDS TO CERTAIN FOREIGN
PERSONS.
(a) IN
GENERAL.—The last sentence of section
4261(e)(3)(C) (relating to regulations) is amended by in-
serting ‘‘and mileage awards which are issued to individ-
uals whose mailing addresses on record with the person pro-
viding the right to air transportation are outside the United
States’’ before the period at the end thereof.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to amounts paid after December 31,
2004.
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SEC. 907. REPEAL OF FOREIGN TAX CREDIT LIMITATION
UNDER ALTERNATIVE MINIMUM TAX.
(a) IN GENERAL.—Section 59(a) (relating to alter-
native minimum tax foreign tax credit) is amended by
striking paragraph (2) and by redesignating paragraphs
(3) and (4) as paragraphs (2) and (3), respectively.
(b) 
CONFORMING
AMENDMENT.—Section
53(d)(1)(B)(i)(II) is amended by striking ‘‘and if section
59(a)(2) did not apply’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 908. TREATMENT OF MILITARY PROPERTY OF FOREIGN
SALES CORPORATIONS.
(a) IN GENERAL.—Section 923(a) (defining exempt
foreign trade income) is amended by striking paragraph (5)
and by redesignating paragraph (6) as paragraph (5).
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
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TITLE X—HOUSING AND REAL
ESTATE TAX RELIEF PROVI-
SIONS
Subtitle A—Low-Income Housing
Credit
SEC. 1001. MODIFICATION OF STATE CEILING ON LOW-IN-
COME HOUSING CREDIT.
(a) IN GENERAL.—Clauses (i) and (ii) of section
42(h)(3)(C) (relating to State housing credit ceiling) are
amended to read as follows:
‘‘(i) the unused State housing credit
ceiling (if any) of such State for the pre-
ceding calendar year,
‘‘(ii) the greater of—
‘‘(I) the applicable amount under
subparagraph (H) multiplied by the
State population, or
‘‘(II) $2,000,000,’’.
(b) APPLICABLE AMOUNT.—Paragraph (3) of section
42(h) (relating to housing credit dollar amount for agen-
cies) is amended by adding at the end the following new
subparagraph:
‘‘(H) APPLICABLE AMOUNT OF STATE CEIL-
ING.—For purposes of subparagraph (C)(ii), the
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applicable amount shall be determined under the
following table:
‘‘For calendar year—
The applicable amount is—
2001 ....................................................................................
$1.35
2002 ....................................................................................
1.45
2003 ....................................................................................
1.55
2004 ....................................................................................
1.65
2005 and thereafter ...........................................................
1.75.’’.
(c) ADJUSTMENT OF STATE CEILING FOR INCREASES
IN COST-OF-LIVING.—Paragraph (3) of section 42(h) (relat-
ing to housing credit dollar amount for agencies), as
amended by subsection (b), is amended by adding at the
end the following new subparagraph:
‘‘(I) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of a
calendar year after 2005, the $1.75 amount
in subparagraph (H) shall be increased by
an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjustment
determined under section 1(f)(3) for
such calendar year by substituting ‘cal-
endar year 2004’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(ii) ROUNDING.—Any increase under
clause (i) which is not a multiple of 5 cents
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shall be rounded to the next lowest multiple
of 5 cents.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 42(h)(3)(C), as amended by sub-
section (a), is amended—
(A) by striking ‘‘clause (ii)’’ in the matter
following clause (iv) and inserting ‘‘clause (i)’’,
and
(B) by striking ‘‘clauses (i)’’ in the matter
following clause (iv) and inserting ‘‘clauses (ii)’’.
(2) Section 42(h)(3)(D)(ii) is amended—
(A) by striking ‘‘subparagraph (C)(ii)’’ and
inserting ‘‘subparagraph (C)(i)’’, and
(B) by striking ‘‘clauses (i)’’ in subclause
(II) and inserting ‘‘clauses (ii)’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years after 2000.
Subtitle B—Historic Homes
SEC. 
1011. 
TAX 
CREDIT 
FOR 
RENOVATING 
HISTORIC
HOMES.
(a) IN GENERAL.—Subpart A of part IV of subchapter
A of chapter 1 (relating to nonrefundable personal credits)
is amended by inserting after section 25A the following new
section:
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‘‘SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION
CREDIT.
‘‘(a) GENERAL RULE.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to
20 percent of the qualified rehabilitation expenditures made
by the taxpayer with respect to a qualified historic home.
‘‘(b) DOLLAR LIMITATION.—The credit allowed by sub-
section (a) with respect to any residence of a taxpayer shall
not exceed $20,000 ($10,000 in the case of a married indi-
vidual filing a separate return).
‘‘(c) QUALIFIED REHABILITATION EXPENDITURE.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified rehabili-
tation expenditure’ means any amount properly
chargeable to capital account—
‘‘(A) in connection with the certified reha-
bilitation of a qualified historic home, and
‘‘(B) for property for which depreciation
would be allowable under section 168 if the
qualified historic home were used in a trade or
business.
‘‘(2) CERTAIN EXPENDITURES NOT INCLUDED.—
‘‘(A) EXTERIOR.—Such term shall not in-
clude any expenditure in connection with the re-
habilitation of a building unless at least 5 per-
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cent of the total expenditures made in the reha-
bilitation process are allocable to the rehabilita-
tion of the exterior of such building.
‘‘(B) OTHER
RULES
TO
APPLY.—Rules
similar to the rules of clauses (ii) and (iii) of
section 47(c)(2)(B) shall apply.
‘‘(3) MIXED USE OR MULTIFAMILY BUILDING.—
If only a portion of a building is used as the prin-
cipal residence of the taxpayer, only qualified reha-
bilitation expenditures which are properly allocable to
such portion shall be taken into account under this
section.
‘‘(d) CERTIFIED REHABILITATION.—For purposes of
this section:
‘‘(1) IN GENERAL.—Except as otherwise provided
in this subsection, the term ‘certified rehabilitation’
has the meaning given such term by section
47(c)(2)(C).
‘‘(2) FACTORS TO BE CONSIDERED IN THE CASE
OF TARGETED AREA RESIDENCES, ETC.—
‘‘(A) IN GENERAL.—For purposes of apply-
ing section 47(c)(2)(C) under this section with
respect to the rehabilitation of a building to
which this paragraph applies, consideration
shall be given to—
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‘‘(i) the feasibility of preserving exist-
ing architectural and design elements of the
interior of such building,
‘‘(ii) the risk of further deterioration or
demolition of such building in the event
that certification is denied because of the
failure to preserve such interior elements,
and
‘‘(iii) the effects of such deterioration
or demolition on neighboring historic prop-
erties.
‘‘(B) BUILDINGS
TO
WHICH
THIS
PARA-
GRAPH
APPLIES.—This paragraph shall apply
with respect to any building—
‘‘(i) any part of which is a targeted
area residence within the meaning of sec-
tion 143(j)(1), or
‘‘(ii) which is located within an enter-
prise community or empowerment zone as
designated under section 1391,
but shall not apply with respect to any building
which is listed in the National Register.
‘‘(3) APPROVED
STATE
PROGRAM.—The term
‘certified rehabilitation’ includes a certification made
by—
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‘‘(A) a State Historic Preservation Officer
who administers a State Historic Preservation
Program approved by the Secretary of the Inte-
rior pursuant to section 101(b)(1) of the Na-
tional Historic Preservation Act, as in effect on
July 21, 1999, or
‘‘(B) a local government, certified pursuant
to section 101(c)(1) of the National Historic
Preservation Act, as in effect on July 21, 1999,
and authorized by a State Historic Preservation
Officer, or the Secretary of the Interior where
there is no approved State program),
subject to such terms and conditions as may be speci-
fied by the Secretary of the Interior for the rehabilita-
tion of buildings within the jurisdiction of such offi-
cer (or local government) for purposes of this section.
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) QUALIFIED
HISTORIC
HOME.—The term
‘qualified historic home’ means a certified historic
structure—
‘‘(A) which has been substantially rehabili-
tated, and
‘‘(B) which (or any portion of which)—
‘‘(i) is owned by the taxpayer, and
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‘‘(ii) is used (or will, within a reason-
able period, be used) by such taxpayer as
his principal residence.
‘‘(2) 
SUBSTANTIALLY
REHABILITATED.—The
term ‘substantially rehabilitated’ has the meaning
given such term by section 47(c)(1)(C); except that, in
the case of any building described in subsection
(d)(2), clause (i)(I) thereof shall not apply.
‘‘(3) PRINCIPAL
RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used
in section 121.
‘‘(4) CERTIFIED HISTORIC STRUCTURE.—
‘‘(A) IN GENERAL.—The term ‘certified his-
toric structure’ means any building (and its
structural components) which—
‘‘(i) is listed in the National Register,
or
‘‘(ii) is located in a registered historic
district (as defined in section 47(c)(3)(B))
within which only qualified census tracts
(or portions thereof) are located, and is cer-
tified by the Secretary of the Interior to the
Secretary as being of historic significance to
the district.
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‘‘(B) CERTAIN
STRUCTURES
INCLUDED.—
Such term includes any building (and its struc-
tural components) which is designated as being
of historic significance under a statute of a State
or local government, if such statute is certified
by the Secretary of the Interior to the Secretary
as containing criteria which will substantially
achieve the purpose of preserving and rehabili-
tating buildings of historic significance.
‘‘(C) QUALIFIED
CENSUS
TRACTS.—For
purposes of subparagraph (A)(ii)—
‘‘(i) IN GENERAL.—The term ‘qualified
census tract’ means a census tract in which
the median family income is less than twice
the statewide median family income.
‘‘(ii) DATA USED.—The determination
under clause (i) shall be made on the basis
of the most recent decennial census for
which data are available.
‘‘(5) REHABILITATION NOT COMPLETE BEFORE
CERTIFICATION.—A rehabilitation shall not be treated
as complete before the date of the certification referred
to in subsection (d).
‘‘(6) LESSEES.—A taxpayer who leases his prin-
cipal residence shall, for purposes of this section, be
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treated as the owner thereof if the remaining term of
the lease (as of the date determined under regulations
prescribed by the Secretary) is not less than such
minimum period as the regulations require.
‘‘(7) TENANT-STOCKHOLDER
IN
COOPERATIVE
HOUSING CORPORATION.—If the taxpayer holds stock
as a tenant-stockholder (as defined in section 216) in
a cooperative housing corporation (as defined in such
section), such stockholder shall be treated as owning
the house or apartment which the taxpayer is entitled
to occupy as such stockholder.
‘‘(8) ALLOCATION OF EXPENDITURES RELATING
TO EXTERIOR OF BUILDING CONTAINING COOPERATIVE
OR CONDOMINIUM UNITS.—The percentage of the total
expenditures made in the rehabilitation of a building
containing cooperative or condominium residential
units allocated to the rehabilitation of the exterior of
the building shall be attributed proportionately to
each cooperative or condominium residential unit in
such building for which a credit under this section is
claimed.
‘‘(f) WHEN EXPENDITURES TAKEN INTO ACCOUNT.—
In the case of a building other than a building to which
subsection (g) applies, qualified rehabilitation expenditures
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shall be treated for purposes of this section as made on the
date the rehabilitation is completed.
‘‘(g) ALLOWANCE OF CREDIT FOR PURCHASE OF RE-
HABILITATED HISTORIC HOME.—
‘‘(1) IN GENERAL.—In the case of a qualified
purchased historic home, the taxpayer shall be treated
as having made (on the date of purchase) the quali-
fied rehabilitation expenditures made by the seller of
such home. For purposes of the preceding sentence, ex-
penditures made by the seller shall be deemed to be
qualified rehabilitation expenditures if such expendi-
tures, if made by the purchaser, would be qualified re-
habilitation expenditures.
‘‘(2) QUALIFIED PURCHASED HISTORIC HOME.—
For purposes of this subsection, the term ‘qualified
purchased historic home’ means any substantially re-
habilitated certified historic structure purchased by
the taxpayer if—
‘‘(A) the taxpayer is the first purchaser of
such structure after the date rehabilitation is
completed, and the purchase occurs within 5
years after such date,
‘‘(B) the structure (or a portion thereof)
will, within a reasonable period, be the principal
residence of the taxpayer,
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‘‘(C) no credit was allowed to the seller
under this section or section 47 with respect to
such rehabilitation, and
‘‘(D) the taxpayer is furnished with such
information as the Secretary determines is nec-
essary to determine the credit under this sub-
section.
‘‘(h) HISTORIC REHABILITATION MORTGAGE CREDIT
CERTIFICATE.—
‘‘(1) IN GENERAL.—The taxpayer may elect, in
lieu of the credit otherwise allowable under this sec-
tion, to receive a historic rehabilitation mortgage
credit certificate. An election under this paragraph
shall be made—
‘‘(A) in the case of a building to which sub-
section (g) applies, at the time of purchase, or
‘‘(B) in any other case, at the time rehabili-
tation is completed.
‘‘(2) 
HISTORIC
REHABILITATION
MORTGAGE
CREDIT
CERTIFICATE.—For purposes of this sub-
section, the term ‘historic rehabilitation mortgage
credit certificate’ means a certificate—
‘‘(A) issued to the taxpayer, in accordance
with procedures prescribed by the Secretary, with
respect to a certified rehabilitation,
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‘‘(B) the face amount of which shall be
equal to the credit which would (but for this sub-
section) be allowable under subsection (a) to the
taxpayer with respect to such rehabilitation,
‘‘(C) which may only be transferred by the
taxpayer to a lending institution (including a
non-depository institution) in connection with a
loan—
‘‘(i) that is secured by the building
with respect to which the credit relates, and
‘‘(ii) the proceeds of which may not be
used for any purpose other than the acquisi-
tion or rehabilitation of such building, and
‘‘(D) in exchange for which such lending in-
stitution provides the taxpayer—
‘‘(i) a reduction in the rate of interest
on the loan which results in interest pay-
ment reductions which are substantially
equivalent on a present value basis to the
face amount of such certificate, or
‘‘(ii) if the taxpayer so elects with re-
spect to a specified amount of the face
amount of such a certificate relating to a
building—
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‘‘(I) which is a targeted area resi-
dence within the meaning of section
143(j)(1), or
‘‘(II) which is located in an enter-
prise community or empowerment zone
as designated under section 1391,
a payment which is substantially equivalent
to such specified amount to be used to re-
duce the taxpayer’s cost of purchasing the
building (and only the remainder of such
face amount shall be taken into account
under clause (i)).
‘‘(3) METHOD
OF
DISCOUNTING.—The present
value 
under 
paragraph 
(2)(D)(i) 
shall 
be
determined—
‘‘(A) for a period equal to the term of the
loan referred to in subparagraph (D)(i),
‘‘(B) by using the convention that any pay-
ment on such loan in any taxable year within
such period is deemed to have been made on the
last day of such taxable year,
‘‘(C) by using a discount rate equal to 65
percent of the average of the annual Federal
mid-term rate and the annual Federal long-term
rate applicable under section 1274(d)(1) to the
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month in which the taxpayer makes an election
under paragraph (1) and compounded annually,
and
‘‘(D) by assuming that the credit allowable
under this section for any year is received on the
last day of such year.
‘‘(4) USE
OF
CERTIFICATE
BY
LENDER.—The
amount of the credit specified in the certificate shall
be allowed to the lender only to offset the regular tax
(as defined in section 55(c)) of such lender. The lender
may carry forward all unused amounts under this
subsection until exhausted.
‘‘(5) 
HISTORIC
REHABILITATION
MORTGAGE
CREDIT CERTIFICATE NOT TREATED AS TAXABLE IN-
COME.—Notwithstanding any other provision of law,
no benefit accruing to the taxpayer through the use of
an historic rehabilitation mortgage credit certificate
shall be treated as taxable income for purposes of this
title.
‘‘(i) RECAPTURE.—
‘‘(1) IN GENERAL.—If, before the end of the 5-
year period beginning on the date on which the reha-
bilitation of the building is completed (or, if sub-
section (g) applies, the date of purchase of such build-
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ing by the taxpayer, or, if subsection (h) applies, the
date of the loan)—
‘‘(A) the taxpayer disposes of such tax-
payer’s interest in such building, or
‘‘(B) such building ceases to be used as the
principal residence of the taxpayer,
the taxpayer’s tax imposed by this chapter for the
taxable year in which such disposition or cessation
occurs shall be increased by the recapture percentage
of the credit allowed under this section for all prior
taxable years with respect to such rehabilitation.
‘‘(2) RECAPTURE PERCENTAGE.—For purposes of
paragraph (1), the recapture percentage shall be de-
termined in accordance with the following table:
‘‘If the disposition or ces-
sation occurs within—
The recapture percentage is—
(i) One full year after the taxpayer becomes entitled to the
credit.
100
(ii) One full year after the close of the period described in
clause (i).
(iii) One full year after the close of the period described in
clause (ii).
(iv) One full year after the close of the period described in
clause (iii).
(v) One full year after the close of the period described in
clause (iv).
20.’’.
‘‘(j) BASIS ADJUSTMENTS.—For purposes of this sub-
title, if a credit is allowed under this section for any ex-
penditure with respect to any property (including any pur-
chase under subsection (g) and any transfer under sub-
section (h)), the increase in the basis of such property which
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would (but for this subsection) result from such expenditure
shall be reduced by the amount of the credit so allowed.
‘‘(k) DENIAL OF DOUBLE BENEFIT.—No credit shall
be allowed under this section for any amount for which
credit is allowed under section 47.
‘‘(l) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out the
purposes of this section, including regulations where less
than all of a building is used as a principal residence and
where more than 1 taxpayer use the same dwelling unit
as their principal residence.’’.
(b) CONFORMING AMENDMENT.—Subsection (a) of sec-
tion 1016 is amended by striking ‘‘and’’ at the end of para-
graph (26), by striking the period at the end of paragraph
(27) and inserting ‘‘, and’’, and by adding at the end the
following new item:
‘‘(28) to the extent provided in section 25B(j).’’.
(c) CLERICAL AMENDMENT.—The table of sections for
subpart A of part IV of subchapter A of chapter 1 is amend-
ed by inserting after the item relating to section 25A the
following new item:
‘‘Sec. 25B. Historic homeownership rehabilitation credit.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to expenses paid or incurred in taxable
years beginning after December 31, 1999.
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Subtitle C—Provisions Relating to
Real Estate Investment Trusts
PART I—TREATMENT OF INCOME AND SERVICES
PROVIDED BY TAXABLE REIT SUBSIDIARIES
SEC. 1021. 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 se-
curities of any 1 issuer,
‘‘(II) the trust does not hold securities
possessing more than 10 percent of the total
voting power of the outstanding securities of
any 1 issuer, and
‘‘(III) the trust does not hold securities
having a value of more than 10 percent of
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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 APPLYING
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 
paragraph
(4)(B)(ii)(III) if—
‘‘(A) the issuer is an individual, or
‘‘(B) the only securities of such issuer which
are held by the trust or a taxable REIT sub-
sidiary of the trust are straight debt (as so de-
fined), or
‘‘(C) the issuer is a partnership and the
trust holds at least a 20 percent profits interest
in the partnership.’’.
SEC. 1022. TREATMENT OF INCOME AND SERVICES PRO-
VIDED BY TAXABLE REIT SUBSIDIARIES.
(a) INCOME FROM TAXABLE REIT SUBSIDIARIES NOT
TREATED AS IMPERMISSIBLE TENANT SERVICE INCOME.—
Clause (i) of section 856(d)(7)(C) (relating to exceptions to
impermissible tenant service income) is amended by insert-
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ing ‘‘or through a taxable REIT subsidiary of such trust’’
after ‘‘income’’.
(b) CERTAIN INCOME FROM TAXABLE REIT SUBSIDI-
ARIES NOT EXCLUDED FROM RENTS FROM REAL PROP-
ERTY.—
(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 SUBSIDI-
ARIES.—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 subparagraph (A) or (B)
are met.
‘‘(A) LIMITED RENTAL EXCEPTION.—The re-
quirements 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 per-
sons 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
paid to the trust as rents from real property (as
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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 FA-
CILITIES.—The requirements of this subpara-
graph are met with respect to an interest in real
property which is a qualified lodging facility
leased by the trust to a taxable REIT subsidiary
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 inde-
pendent contractor’ means, with respect to any
qualified lodging facility, any independent con-
tractor if, at the time such contractor enters into
a management agreement or other similar serv-
ice contract with the taxable REIT subsidiary to
operate the facility, such contractor (or any re-
lated person) is actively engaged in the trade or
business of operating qualified lodging facilities
for any person who is not a related person with
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respect to the real estate investment 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 independent
contractor with respect to any qualified lodging
facility by reason of any of the following:
‘‘(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
‘‘(II) the earliest date that any
taxable REIT subsidiary of such trust
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entered into a management agreement
or other similar service contract with
such person with respect to such quali-
fied lodging facility.
‘‘(C) 
RENEWALS, 
ETC., 
OF
EXISTING
LEASES.—For 
purposes 
of 
subparagraph
(B)(iii)—
‘‘(i) a lease shall be treated as in effect
on January 1, 1999, without regard to its
renewal after such date, so long as such re-
newal 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 subpara-
graph (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-
tially similar or lesser benefit in com-
parison to the lease referred to in sub-
clause (I).
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‘‘(D) QUALIFIED LODGING FACILITY.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘qualified
lodging facility’ means any lodging facility
unless wagering activities are conducted at
or in connection with such facility by any
person who is engaged in the business of ac-
cepting wagers and who is legally author-
ized to engage in such business at or in con-
nection 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
by other owners unrelated to such real estate
investment trust.
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‘‘(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 subsection
(a) or (b) of section 52.’’.
(2) CONFORMING
AMENDMENT.—Subparagraph
(B) of section 856(d)(2) is amended by inserting ‘‘ex-
cept as provided in paragraph (8),’’ after ‘‘(B)’’.
(3) DETERMINING
RENTS
FROM
REAL
PROP-
ERTY.—
(A)(i) Paragraph (1) of section 856(d) is
amended by striking ‘‘adjusted bases’’ in each
place that it occurs and inserting ‘‘fair market
values’’ in each such place.
(ii) The amendment made by this para-
graph shall apply to taxable years beginning
after December 31, 1999.
(B)(i) Clause (i) of section 856(d)(2)(B) is
amended by striking ‘‘number’’ and inserting
‘‘value’’.
(ii) The amendment made by this para-
graph shall apply to amounts received or accrued
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in taxable years beginning after December 31,
1999, except for amounts paid pursuant to leases
in effect on July 12, 1999 or pursuant to a bind-
ing contract in effect on such date and at all
times thereafter.
SEC. 1023. 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 sub-
sidiary’ means, with respect to a real estate invest-
ment trust, a corporation (other than a real estate in-
vestment trust) if—
‘‘(A) such trust directly or indirectly owns
stock in such corporation, and
‘‘(B) such trust and such corporation joint-
ly elect that such corporation shall be treated as
a taxable REIT subsidiary of such trust for pur-
poses of this part.
Such an election, once made, shall be irrevocable un-
less both such trust and corporation consent to its rev-
ocation. Such election, and any revocation thereof,
may be made without the consent of the Secretary.
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‘‘(2) 35 PERCENT OWNERSHIP IN ANOTHER TAX-
ABLE
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 tax-
able REIT subsidiary of such trust owns directly or
indirectly—
‘‘(A) securities possessing more than 35 per-
cent of the total voting power of the outstanding
securities of such corporation, or
‘‘(B) securities having a value of more than
35 percent of the total value of the outstanding
securities of such corporation.
The preceding sentence shall not apply to a qualified
REIT subsidiary (as defined in subsection (i)(2)).
The rule of section 856(c)(7) shall apply for purposes
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
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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).
‘‘(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 sec-
tion 856(i) is amended by adding at the end the following
new sentence: ‘‘Such term shall not include a taxable REIT
subsidiary.’’.
SEC. 1024. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163(j) (relating to limitation
on deduction for interest on certain indebtedness) is amend-
ed by striking ‘‘and’’ at the end of subparagraph (A), by
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striking the period at the end of subparagraph (B) and in-
serting ‘‘, 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. 1025. 100 PERCENT TAX ON IMPROPERLY ALLOCATED
AMOUNTS.
(a) IN GENERAL.—Subsection (b) of section 857 (relat-
ing 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 (8) as
paragraphs (8) and (9), respectively, and by inserting after
paragraph (6) the following new paragraph:
‘‘(7) INCOME FROM REDETERMINED RENTS, RE-
DETERMINED DEDUCTIONS, AND EXCESS INTEREST.—
‘‘(A) IMPOSITION OF TAX.—There is hereby
imposed for each taxable year of the real estate
investment trust a tax equal to 100 percent of re-
determined rents, redetermined deductions, and
excess interest.
‘‘(B) REDETERMINED RENTS.—
‘‘(i) IN GENERAL.—The term ‘redeter-
mined rents’ means rents from real prop-
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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-
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 percent
threshold described in section 856(d)(7)(B)
with respect to such property.
‘‘(iv) EXCEPTION
FOR
COMPARABLY
PRICED
SERVICES.—Clause (i) shall not
apply to any service rendered by a taxable
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REIT subsidiary of a real estate investment
trust to a tenant of such trust if—
‘‘(I) such subsidiary renders a sig-
nificant amount of similar services to
persons other than such trust and ten-
ants of such trust who are unrelated
(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 substan-
tially comparable to the charge for the
similar services rendered to persons re-
ferred 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-
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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 investment 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 satisfaction 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.
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‘‘(C) REDETERMINED
DEDUCTIONS.—The
term ‘redetermined deductions’ means deductions
(other than redetermined rents) of a taxable
REIT subsidiary of a real estate investment
trust if the amount of such deductions would
(but for subparagraph (E)) be decreased on dis-
tribution, apportionment, or allocation under
section 482 to clearly reflect income as between
such subsidiary and such trust.
‘‘(D) EXCESS INTEREST.—The term ‘excess
interest’ means any deductions for interest pay-
ments by a taxable REIT subsidiary of a real es-
tate 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 pur-
poses of this paragraph. Until the Secretary pre-
scribes such regulations, real estate investment
trusts and their taxable REIT subsidiaries may
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base their allocations on any reasonable meth-
od.’’.
(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE
DISTRIBUTED.—Subparagraph (E) of section 857(b)(2) (re-
lating to real estate investment trust taxable income) is
amended by striking ‘‘paragraph (5)’’ and inserting ‘‘para-
graphs (5) and (7)’’.
SEC. 1026. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this part
shall apply to taxable years beginning after December 31,
2000.
(b) TRANSITIONAL RULES RELATED
TO SECTION
1021.—
(1) EXISTING ARRANGEMENTS.—
(A) IN GENERAL.—Except as otherwise pro-
vided in this paragraph, the amendment made
by section 1021 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 ac-
quires control of such entity pursuant to a
written binding contract in effect on such
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date and at all times thereafter before such
acquisition,
(iii) securities received by such trust
(or a successor) in exchange for, or with re-
spect 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 re-
spect to such trust if such securities are de-
scribed in clause (i), (ii), or (iii) with re-
spect to any other real estate investment
trust.
Notwithstanding the preceding sentence, such se-
curities shall be taken into account in deter-
mining whether such trust fails to meet the re-
quirements of section 856(c)(4)(B) of such Code
(as amended by such amendments) if such trust
acquires or receives securities to which the pre-
ceding sentence does not apply.
(B) NEW TRADE OR BUSINESS OR SUBSTAN-
TIAL
NEW
ASSETS.—Subparagraph (A) shall
cease to apply to securities of a corporation as
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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.
(C) LIMITATION ON TRANSITION RULES.—
Subparagraph (A) shall cease to apply to securi-
ties of a corporation held, acquired, or received,
directly or indirectly, by a real estate investment
trust as of the first day after July 12, 1999, on
which such trust acquires any additional securi-
ties of such corporation other than—
(i) pursuant to a binding contract in
effect on such date and at all times there-
after, or
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(ii) in a reorganization (as so defined)
with another corporation the securities 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 corpora-
tion to become a taxable REIT subsidiary, the
amendment made by section 1021 does not apply
to such corporation by reason of paragraph (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. 1031. HEALTH CARE REITS.
(a) SPECIAL FORECLOSURE RULE FOR HEALTH CARE
PROPERTIES.—Subsection (e) of section 856 (relating 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 in-
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clude any qualified health care property ac-
quired by a real estate investment trust as the
result of the termination of a lease of such prop-
erty (other than a termination by reason of a de-
fault, or the imminence of a default, on the
lease).
‘‘(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 acquired
such property, and
‘‘(ii) if the real estate investment trust
establishes to the satisfaction of the Sec-
retary that an extension of the grace period
in clause (i) is necessary to the orderly leas-
ing or liquidation of the trust’s interest in
such qualified health care property, the Sec-
retary may grant 1 or more extensions of
the grace period for such qualified health
care property.
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Any such extension shall not extend the grace pe-
riod 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-
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 inde-
pendent contractor shall be disregarded to the ex-
tent such income is attributable to—
‘‘(i) any lease of property in effect on
the date the real estate investment trust ac-
quired 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
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‘‘(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.—
‘‘(i) IN GENERAL.—The term ‘qualified
health care property’ means any real prop-
erty (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 facility,
assisted living facility, congregate care fa-
cility, qualified continuing care facility (as
defined in section 7872(g)(4)), or other li-
censed facility which extends medical or
nursing or ancillary services to patients
and which, immediately before the termi-
nation, expiration, default, or breach of the
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lease of or mortgage secured by such facil-
ity, was operated by a provider of such
services which was eligible for participation
in the medicare program under title XVIII
of the Social Security Act with respect to
such facility.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
PART III—CONFORMITY WITH REGULATED
INVESTMENT COMPANY RULES
SEC. 1041. CONFORMITY WITH REGULATED INVESTMENT
COMPANY RULES.
(a) DISTRIBUTION REQUIREMENT.—Clauses (i) and
(ii) of section 857(a)(1)(A) (relating to requirements appli-
cable to real estate investment trusts) are each amended by
striking ‘‘95 percent (90 percent for taxable years beginning
before January 1, 1980)’’ and inserting ‘‘90 percent’’.
(b) IMPOSITION
OF
TAX.—Clause (i) of section
857(b)(5)(A) (relating to imposition of tax in case of failure
to meet certain requirements) is amended by striking ‘‘95
percent (90 percent in the case of taxable years beginning
before January 1, 1980)’’ and inserting ‘‘90 percent’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
PART IV—CLARIFICATION OF EXCEPTION FROM
IMPERMISSIBLE TENANT SERVICE INCOME
SEC. 1051. 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 regularly
traded on an established securities market, only per-
sons who own, directly or indirectly, more than 5 per-
cent of such class of stock shall be taken into account
as owning any of the stock of such class for purposes
of applying the 35 percent limitation set forth in sub-
paragraph (B) (but all of the outstanding stock of
such class shall be considered outstanding 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 Decem-
ber 31, 2000.
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PART V—MODIFICATION OF EARNINGS AND
PROFITS RULES
SEC. 1061. MODIFICATION OF EARNINGS AND PROFITS
RULES.
(a) RULES FOR DETERMINING WHETHER REGULATED
INVESTMENT COMPANY HAS EARNINGS AND PROFITS FROM
NON-RIC YEAR.—Subsection (c) of section 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 provisions
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 distribution
for purposes of subsection (b)(2)(D) and section
855.’’.
(b) CLARIFICATION OF APPLICATION OF REIT SPILL-
OVER DIVIDEND RULES
TO DISTRIBUTIONS TO MEET
QUALIFICATION REQUIREMENT.—Subparagraph (B) of sec-
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tion 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 deter-
mination 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 purposes 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. 1071. STUDY RELATING TO TAXABLE REIT SUBSIDI-
ARIES.
The Commissioner of the Internal Revenue shall con-
duct a study to determine how many taxable REIT subsidi-
aries are in existence and the aggregate amount of taxes
paid by such subsidiaries. The Secretary shall submit a re-
port to the Congress describing the results of such study.
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Subtitle D—Private Activity Bond
Volume Cap
SEC. 1081. INCREASE IN VOLUME CAP ON PRIVATE ACTIV-
ITY BONDS.
(a) IN GENERAL.—The table contained in section
146(d)(2) (relating to per capita limit; aggregate limit) is
amended by striking ‘‘2002’’, ‘‘2003’’, ‘‘2004’’, ‘‘2005’’,
‘‘2006’’, and ‘‘2007’’ and inserting ‘‘2000’’, ‘‘2001’’, ‘‘2002’’,
‘‘2003’’, ‘‘2004’’, and ‘‘2005’’, respectively.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years after 2000.
Subtitle E—Leasehold
Improvements Depreciation
SEC. 1091. RECOVERY PERIOD FOR DEPRECIATION OF CER-
TAIN LEASEHOLD IMPROVEMENTS.
(a) 15-YEAR RECOVERY PERIOD.—Subparagraph (E)
of section 168(e)(3) (relating to 15-year property) is amend-
ed by striking ‘‘and’’ at the end of clause (ii), by striking
the period at the end of clause (iii) and inserting ‘‘, and’’,
and by adding at the end the following new clause:
‘‘(iv) any qualified leasehold improve-
ment property.’’.
(b) QUALIFIED LEASEHOLD IMPROVEMENT PROP-
ERTY.—Subsection (e) of section 168 is amended by adding
at the end the following new paragraph:
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‘‘(6) 
QUALIFIED
LEASEHOLD
IMPROVEMENT
PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
leasehold improvement property’ means any im-
provement to an interior portion of a building
which is nonresidential real property if—
‘‘(i) such improvement is made under
or pursuant to a lease (as defined in sub-
section (h)(7))—
‘‘(I) by the lessee (or any subles-
see) of such portion, or
‘‘(II) by the lessor of such portion,
‘‘(ii) the original use of such improve-
ment begins with the lessee and after De-
cember 31, 2002,
‘‘(iii) such portion is to be occupied ex-
clusively by the lessee (or any sublessee) of
such portion, and
‘‘(iv) such improvement is placed in
service more than 3 years after the date the
building was first placed in service.
‘‘(B) CERTAIN
IMPROVEMENTS
NOT
IN-
CLUDED.—Such term shall not include any im-
provement for which the expenditure is attrib-
utable to—
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‘‘(i) the enlargement of the building,
‘‘(ii) any elevator or escalator,
‘‘(iii) any structural component bene-
fiting a common area, and
‘‘(iv) the internal structural framework
of the building.
‘‘(C) DEFINITIONS AND SPECIAL RULES.—
For purposes of this paragraph—
‘‘(i) COMMITMENT TO LEASE TREATED
AS LEASE.—A commitment to enter into a
lease shall be treated as a lease, and the
parties to such commitment shall be treated
as lessor and lessee, respectively, if the lease
is in effect at the time the property is
placed in service.
‘‘(ii) RELATED PERSONS.—A lease be-
tween related persons shall not be considered
a lease. For purposes of the preceding sen-
tence, the term ‘related persons’ means—
‘‘(I) members of an affiliated
group (as defined in section 1504), and
‘‘(II) persons having a relation-
ship described in subsection (b) of sec-
tion 267(b) or 707(b)(1); except that,
for purposes of this clause, the phrase
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‘80 percent or more’ shall be sub-
stituted for the phrase ‘more than 50
percent’ each place it appears in such
subsections.’’.
(c) REQUIREMENT TO USE STRAIGHT LINE METH-
OD.—Paragraph (3) of section 168(b) is amended by adding
at the end the following new subparagraph:
‘‘(G) Qualified leasehold improvement prop-
erty described in subsection (e)(6).’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to qualified leasehold improvement
property placed in service after December 31, 2002.
TITLE XI—MISCELLANEOUS
PROVISIONS
SEC. 1101. REPEAL OF CERTAIN MOTOR FUEL EXCISE TAXES
ON FUEL USED BY RAILROADS AND ON IN-
LAND WATERWAY TRANSPORTATION.
(a) REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES
ON RAILROADS AND INLAND WATERWAY TRANSPORTATION
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’’.
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(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-powered
train’’.
(iv) Section 6427(l) is amended by
striking paragraph (3) and by redesig-
nating paragraphs (4) and (5) as para-
graphs (3) and (4), respectively.
(2) FUEL USED ON INLAND WATERWAYS.—
(A) IN GENERAL.—Paragraph (1) of section
4042(b) is amended by adding ‘‘and’’ at the end
of subparagraph (A), by striking ‘‘, and’’ at the
end of subparagraph (B) and inserting a period,
and by striking subparagraph (C).
(B) CONFORMING AMENDMENT.—Paragraph
(2) of section 4042(b) is amended by striking
subparagraph (C).
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(b) EFFECTIVE DATE.—The amendments made by this
subsection shall take effect on October 1, 2000.
SEC. 1102. TAX TREATMENT OF ALASKA NATIVE SETTLE-
MENT TRUSTS.
(a) TAX EXEMPTION.—Section 501(c), as amended by
section 801(a), is amended by adding at the end the fol-
lowing new paragraph:
‘‘(29) A trust which—
‘‘(A) constitutes a Settlement Trust under
section 39 of the Alaska Native Claims Settle-
ment Act (43 U.S.C. 1629e), and
‘‘(B) with respect to which an election
under subsection (p)(2) is in effect.’’.
(b) SPECIAL RULES RELATING TO TAXATION OF ALAS-
KA NATIVE SETTLEMENT TRUSTS.—Section 501 is amend-
ed by redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
‘‘(p) SPECIAL RULES FOR TAXATION OF ALASKA NA-
TIVE SETTLEMENT TRUSTS.—
‘‘(1) IN GENERAL.—For purposes of this title, the
following rules shall apply in the case of a Settlement
Trust:
‘‘(A) ELECTING
TRUST.—If an election
under paragraph (2) is in effect for any taxable
year—
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‘‘(i) no amount shall be includible in
the gross income of a beneficiary of the Set-
tlement Trust by reason of a contribution to
the Settlement Trust made during such tax-
able year, and
‘‘(ii) except as provided in this sub-
section, the provisions of subchapter J and
section 1(e) shall not apply to the Settle-
ment Trust and its beneficiaries for such
taxable year.
‘‘(B) NONELECTING TRUST.—If an election
is not in effect under paragraph (2) for any tax-
able year, the provisions of subchapter J and sec-
tion 1(e) shall apply to the Settlement Trust and
its beneficiaries for such taxable year.
‘‘(2) ONE-TIME ELECTION.—
‘‘(A) IN
GENERAL.—A Settlement Trust
may elect to have the provisions of this sub-
section and subsection (c)(29) apply to the trust
and its beneficiaries.
‘‘(B) TIME AND METHOD OF ELECTION.—
An election under subparagraph (A) shall be
made—
‘‘(i) on or before the due date (includ-
ing extensions) for filing the Settlement
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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.
‘‘(3) SPECIAL
RULES
WHERE
TRANSFER
RE-
STRICTIONS MODIFIED.—
‘‘(A) TRANSFER
OF
BENEFICIAL
INTER-
ESTS.—If, at any time, a beneficial interest in
a Settlement Trust may be disposed of in a man-
ner 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—
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‘‘(i) no election may be made under
paragraph (2)(A) with respect to such trust,
and
‘‘(ii) if an election under paragraph
(2)(A) is in effect as of such time—
‘‘(I) such election is revoked as of
the 1st day of the taxable year fol-
lowing the taxable year in which such
disposition is first permitted, and
‘‘(II) there is hereby imposed on
such trust a tax equal to the product of
the fair market value of the assets held
by the trust as of the close of the tax-
able year in which such disposition is
first permitted and the highest rate of
tax under section 1(e) for such taxable
year.
The tax imposed by clause (ii)(II) shall be in
lieu of any other tax imposed by this chapter for
the taxable year.
‘‘(B) STOCK IN CORPORATION.—If—
‘‘(i) the Settlement Common Stock in
any Native Corporation which transferred
assets to a Settlement Trust making an elec-
tion under paragraph (2)(A) may be dis-
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posed of in a manner not permitted by sec-
tion 7(h) of the Alaska Native Claims Set-
tlement Act (43 U.S.C. 1606(h)), and
‘‘(ii) at any time after such disposition
of stock is first permitted, such corporation
transfers assets to such trust,
clause (ii) of subparagraph (A) 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) ADMINISTRATIVE
PROVISIONS.—For
purposes of subtitle F, any tax imposed by sub-
paragraph (A)(ii)(II) shall be treated as an ex-
cise tax with respect to which the deficiency pro-
cedures of such subtitle apply.
‘‘(4) DISTRIBUTION REQUIREMENT ON ELECTING
SETTLEMENT TRUST.—
‘‘(A) IN GENERAL.—If an election is in ef-
fect under paragraph (2) for any taxable year,
a Settlement Trust shall distribute at least 55
percent of its adjusted taxable income for such
taxable year.
‘‘(B) TAX IMPOSED IF INSUFFICIENT DIS-
TRIBUTION.—If a Settlement Trust fails to meet
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the distribution requirement of subparagraph (A)
for any taxable year, then, notwithstanding sub-
section (c)(29), a tax shall be imposed on the
trust under section 1(e) on an amount of taxable
income equal to the amount of such failure.
‘‘(C) DESIGNATION
OF
DISTRIBUTION.—
Solely for purposes of meeting the requirements
of this paragraph, a Settlement Trust may elect
to treat any distribution (or portion) during the
65-day period following the close of any taxable
year as made on the last day of such taxable
year. Any such distribution (or portion) may not
be taken into account under this paragraph for
any other taxable year.
‘‘(D) ADJUSTED
TAXABLE
INCOME.—For
purposes of this paragraph, the term ‘adjusted
taxable income’ means taxable income deter-
mined under section 641(b) without regard to
any deduction under section 651 or 661.
‘‘(5) TAX
TREATMENT
OF
DISTRIBUTIONS
TO
BENEFICIARIES.—
‘‘(A) ELECTING TRUST.—If an election is in
effect under paragraph (2) for any taxable year,
any distribution to a beneficiary shall be in-
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cluded in gross income of the beneficiary as ordi-
nary income.
‘‘(B) NONELECTING TRUSTS.—Any distribu-
tion to a beneficiary from a Settlement Trust not
described in subparagraph (A) shall be includible
in income as provided under subchapter J.
‘‘(C) EARNINGS AND PROFITS.—The earn-
ings and profits of any Native Corporation mak-
ing a contribution 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 con-
tribution) as distributions are thereafter made
by the Settlement Trust which exceed the sum
of—
‘‘(i) such Trust’s total undistributed
net income for all prior years during which
an election under paragraph (2) is in effect,
and
‘‘(ii) such Trust’s distributable net in-
come.
‘‘(6) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
‘‘(A) NATIVE CORPORATION.—The term ‘Na-
tive Corporation’ has the meaning given such
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term by section 3(m) of the Alaska Native
Claims Settlement Act (43 U.S.C. 1602(m)).
‘‘(B) SETTLEMENT TRUST.—The term ‘Set-
tlement Trust’ means a trust which constitutes a
Settlement Trust under section 39 of the Alaska
Native Claims Settlement Act (43 U.S.C.
1629e).’’.
(c) WITHHOLDING ON DISTRIBUTIONS BY ELECTING
ANCSA SETTLEMENT TRUSTS.—Section 3402 is amended
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 de-
fined in section 501(p)(6)(B)) which is exempt from
income tax under section 501(c)(29) (in this sub-
section referred to as an ‘electing trust’) and which
makes a payment to any beneficiary shall deduct 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
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section 6012(a)(1)(A)(i) for taxable years beginning
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 without re-
gard to any rate of tax in excess of 31 percent) 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 sub-
section, amounts shall be annualized in the manner
prescribed by the Secretary.
‘‘(5) ALTERNATE WITHHOLDING PROCEDURES.—
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 ta-
bles 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 sub-
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ject to withholding under this subsection shall be
treated as if they were wages paid by an employer to
an employee.’’.
(d) 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 Settlement
Trust (as defined in section 501(p)(6)(B)) to a beneficiary,
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 informa-
tion as to the character of such distribution (if appli-
cable) and the amount of tax imposed by chapter 1
which has been deducted and withheld from such dis-
tribution, 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 (including
any form or schedule to be included with the trust’s
tax return).’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years of Settlement Trusts
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ending after December 31, 1999, and to contributions to
such trusts after such date.
SEC. 
1103. 
LONG-TERM 
UNUSED 
CREDITS 
ALLOWED
AGAINST MINIMUM TAX.
(a) IN GENERAL.—Subsection (c) of section 53 (relat-
ing to limitation) is amended by adding at the end the fol-
lowing:
‘‘(2) SPECIAL RULE FOR CORPORATIONS WITH
LONG-TERM UNUSED CREDITS.—
‘‘(A) IN GENERAL.—If—
‘‘(i) a corporation to which section
56(g) applies has a long-term unused min-
imum tax credit for a taxable year, and
‘‘(ii) no credit would be allowable
under this section for the taxable year by
reason of paragraph (1),
then there shall be allowed a credit under sub-
section (a) for the taxable year in the amount de-
termined under subparagraph (B).
‘‘(B) AMOUNT OF CREDIT.—For purposes of
subparagraph (A), the amount of the credit shall
be equal to the least of the following for the tax-
able year:
‘‘(i) The long-term unused minimum
tax credit.
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‘‘(ii) 50 percent of the taxpayer’s ten-
tative minimum tax.
‘‘(iii) The excess (if any) of the amount
under paragraph (1)(B) over the amount
under paragraph (1)(A).
‘‘(C) LONG-TERM
UNUSED
MINIMUM
TAX
CREDIT.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The long-term un-
used minimum tax credit for any taxable
year is the portion of the minimum tax
credit determined under subsection (b) at-
tributable to the adjusted net minimum tax
for taxable years beginning after 1986 and
ending before the 5th taxable year imme-
diately preceding the taxable year for which
the determination is being made.
‘‘(ii) FIRST-IN, FIRST-OUT
ORDERING
RULE.—For purposes of clause (i), credits
shall be treated as allowed under subsection
(a) on a first-in, first-out basis.’’.
(b) CONFORMING AMENDMENTS.—Section 53(c) (as in
effect before the amendment made by subsection (a)) is
amended—
(1) by striking ‘‘The’’ and inserting the fol-
lowing:
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‘‘(1) IN GENERAL.—The’’; and
(2) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003.
SEC. 1104. 5-YEAR NET OPERATING LOSS CARRYBACK FOR
LOSSES ATTRIBUTABLE TO OPERATING MIN-
ERAL INTERESTS OF INDEPENDENT OIL AND
GAS PRODUCERS.
(a) IN GENERAL.—Paragraph (1) of section 172(b)
(relating to years to which loss may be carried) is amended
by adding at the end the following new subparagraph:
‘‘(H) LOSSES ON OPERATING MINERAL IN-
TERESTS OF INDEPENDENT OIL AND GAS PRO-
DUCERS.—In the case of a taxpayer—
‘‘(i) which has an eligible oil and gas
loss (as defined in subsection (j)) for a tax-
able year, and
‘‘(ii) which is not an integrated oil
company (as defined in section 291(b)(4)),
such eligible oil and gas loss shall be a net oper-
ating loss carryback to each of the 5 taxable
years preceding the taxable year of such loss.’’.
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(b) ELIGIBLE OIL AND GAS LOSS.—Section 172 is
amended by redesignating subsection (j) as subsection (k)
and by inserting after subsection (i) the following new sub-
section:
‘‘(j) ELIGIBLE OIL AND GAS LOSS.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘eligible oil and
gas loss’ means the lesser of—
‘‘(A) the amount which would be the net op-
erating loss for the taxable year if only income
and deductions attributable to operating mineral
interests (as defined in section 614(d)) in oil and
gas wells are taken into account, or
‘‘(B) the amount of the net operating loss
for such taxable year.
‘‘(2) COORDINATION WITH SUBSECTION (b)(2).—
For purposes of applying subsection (b)(2), an eligible
oil and gas loss for any taxable year shall be treated
in a manner similar to the manner in which a speci-
fied liability loss is treated.
‘‘(3) ELECTION.—Any taxpayer entitled to a 5-
year carryback under subsection (b)(1)(H) from any
loss year may elect to have the carryback period with
respect to such loss year determined without regard to
subsection (b)(1)(H).’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to net operating losses for taxable years
beginning after December 31, 1998.
SEC. 1105. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES.
(a) IN GENERAL.—Section 263 (relating to capital ex-
penditures) is amended by adding at the end the following:
‘‘(j) GEOLOGICAL AND GEOPHYSICAL EXPENDITURES
FOR DOMESTIC OIL AND GAS WELLS.—Notwithstanding
subsection (a), a taxpayer may elect to treat geological and
geophysical expenses incurred in connection with the explo-
ration for, or development of, oil or gas within the United
States (as defined in section 638) as expenses which are
not chargeable to capital account. Any expenses so treated
shall be allowed as a deduction in the taxable year in which
paid or incurred.’’.
(b) CONFORMING AMENDMENT.—Section 263A(c)(3) is
amended by inserting ‘‘263(j),’’ after ‘‘263(i),’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to expenses paid or incurred in taxable
years beginning after December 31, 1999.
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SEC. 1106. ELECTION TO EXPENSE DELAY RENTAL PAY-
MENTS
(a) IN GENERAL.—Section 263 (relating to capital ex-
penditures), as amended by section 1105(a), is amended by
adding at the end the following:
‘‘(k) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL
AND GAS WELLS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a), a taxpayer may elect to treat delay rental pay-
ments incurred in connection with the development of
oil or gas within the United States (as defined in sec-
tion 638) as payments which are not chargeable to
capital account. Any payments so treated shall be al-
lowed as a deduction in the taxable year in which
paid or incurred.
‘‘(2) DELAY RENTAL PAYMENTS.—For purposes
of paragraph (1), the term ‘delay rental payment’
means an amount paid for the privilege of deferring
development of an oil or gas well.’’.
(b) CONFORMING AMENDMENT.—Section 263A(c)(3),
as amended by section 1105(b), is amended by inserting
‘‘263(k),’’ after ‘‘263(j),’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to payments made or incurred in tax-
able years beginning after December 31, 1999.
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SEC. 1107. MODIFICATION OF ACTIVE BUSINESS DEFINI-
TION UNDER SECTION 355.
(a) IN GENERAL.—Section 355(b) (defining active con-
duct of a trade or business) is amended by adding at the
end the following new paragraph:
‘‘(3) SPECIAL RULES RELATING TO ACTIVE BUSI-
NESS REQUIREMENT.—
‘‘(A) IN GENERAL.—For purposes of deter-
mining whether a corporation meets the require-
ment of paragraph (2)(A), all members of such
corporation’s separate affiliated group shall be
treated as 1 corporation. For purposes of the pre-
ceding sentence, a corporation’s separate affili-
ated group is the affiliated group which would be
determined under section 1504(a) if such cor-
poration were the common parent and section
1504(b) did not apply.
‘‘(B) CONTROL.—For purposes of para-
graph (2)(D), all distributee corporations which
are members of the same affiliated group (as de-
fined in section 1504(a) without regard to sec-
tion 1504(b)) shall be treated as 1 distributee
corporation.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 355(b)(2) is
amended to read as follows:
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‘‘(A) it is engaged in the active conduct of
a trade or business,’’.
(2) Section 355(b)(2) is amended by striking the
last sentence.
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to distributions after the date
of the enactment of this Act.
(2) TRANSITION RULE.—The amendments made
by this section shall not apply to any distribution
pursuant to a transaction which is—
(A) made pursuant to an agreement which
was binding on such date and at all times there-
after,
(B) described in a ruling request submitted
to the Internal Revenue Service on or before such
date, or
(C) described on or before such date in a
public announcement or in a filing with the Se-
curities and Exchange Commission.
(3) ELECTION TO HAVE AMENDMENTS APPLY.—
Paragraph (2) shall not apply if the distributing cor-
poration elects not to have such paragraph apply to
distributions of such corporation. Any such election,
once made, shall be irrevocable.
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SEC. 1108. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT
OF AMORTIZABLE REFORESTATION EXPENDI-
TURES.
(a) INCREASE IN DOLLAR LIMITATION.—Paragraph
(1) of section 194(b) (relating to amortization of reforest-
ation expenditures) is amended by striking ‘‘$10,000
($5,000’’ and inserting ‘‘$25,000 ($12,500’’.
(b) TEMPORARY SUSPENSION OF INCREASED DOLLAR
LIMITATION.—Subsection (b) of section 194(b) (relating to
amortization of reforestation expenditures) is amended by
adding at the end the following new paragraph:
‘‘(5) SUSPENSION
OF
DOLLAR
LIMITATION.—
Paragraph (1) shall not apply to taxable years begin-
ning after December 31, 1999, and before January 1,
2004.
(c) CONFORMING AMENDMENT.—Paragraph (1) of sec-
tion 48(b) is amended by striking ‘‘section 194(b)(1)’’ and
inserting ‘‘section 194(b)(1) and without regard to section
194(b)(5)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
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SEC. 1109. MODIFICATION OF EXCISE TAX IMPOSED ON
ARROW COMPONENTS.
(a) IN GENERAL.—Paragraph (2) of section 4161(b)
(relating to bows and arrows, etc.) is amended to read as
follows:
‘‘(2) ARROWS.—
‘‘(A) IN
GENERAL.—There is hereby im-
posed on the sale by the manufacturer, producer,
or importer of any shaft, point, article used to
attach a point to a shaft, nock, or vane of a type
used in the manufacture of any arrow which
after its assembly—
‘‘(i) measures 18 inches overall or more
in length, or
‘‘(ii) measures less than 18 inches over-
all in length but is suitable for use with a
bow described in paragraph (1)(A),
a tax equal to 12.4 percent of the price for which
so sold.
‘‘(B) REDUCED RATE ON CERTAIN HUNTING
POINTS.—Subparagraph (A) shall be applied by
substituting ‘11 percent’ for ‘12.4 percent’ in the
case of a point which is designed primarily for
use in hunting fish or large animals.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to articles sold by the manufacturer,
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producer, or importer after the close of the first calendar
month ending more than 30 days after the date of the enact-
ment of this Act.
SEC. 1110. 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 sub-
section (a) shall take effect on the date of the enactment
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 enactment under
section 6405 of the Internal Revenue Code of 1986.
SEC. 1111. MODIFICATION OF RURAL AIRPORT DEFINITION.
(a) IN GENERAL.—Clause (ii) of section 4261(e)(1)(B)
(defining rural airport) is amended by striking the period
at the end of subclause (II) and inserting ‘‘, or’’, and by
adding at the end the following new subclause:
‘‘(III) is not connected by paved
roads to another airport.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after 1999.
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SEC. 1112. PAYMENT OF DIVIDENDS ON STOCK OF CO-
OPERATIVES WITHOUT REDUCING PATRON-
AGE DIVIDENDS.
(a) IN GENERAL.—Subsection (a) of section 1388 (re-
lating to patronage dividend defined) is amended by adding
at the end the following: ‘‘For purposes of paragraph (3),
net earnings shall not be reduced by amounts paid during
the year as dividends on capital stock or other proprietary
capital interests of the organization to the extent that the
articles of incorporation or bylaws of such organization or
other contract with patrons provide that such dividends are
in addition to amounts otherwise payable to patrons which
are derived from business done with or for patrons during
the taxable year.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions in taxable years begin-
ning after the date of the enactment of this Act.
SEC. 1113. 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) Section 1504 is amended by striking sub-
section (c) and by redesignating subsections (d), (e),
and (f) as subsections (c), (d), and (e), respectively.
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(2) 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 Decem-
ber 31, 2000.
(d) NO CARRYBACK BEFORE JANUARY 1, 2001.—To
the extent that a consolidated net operating loss is allowed
or increased by reason of the amendments made by this sec-
tion, such loss may not be carried back to a taxable year
beginning before January 1, 2001.
(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 reg-
ulations prescribed by the Secretary of the Treasury or his
delegate, an automatic waiver from the 5-year waiting pe-
riod for reconsolidation provided in section 1504(a)(3) of
the Internal Revenue Code of 1986 shall be granted to any
corporation 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 sec-
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tion 1504(c)(2) of such Code (as in effect on the day before
the date of the enactment of this Act).
SEC. 1114. EXPANSION OF EXEMPTION FROM PERSONAL
HOLDING COMPANY TAX FOR LENDING OR FI-
NANCE COMPANIES.
(a) IN GENERAL.—Paragraph (6) of section 542(c)
(defining personal holding company) is amended—
(1) by striking ‘‘rents,’’ in subparagraph (B),
and
(2) by adding ‘‘and’’ at the end of subparagraph
(B),
(3) by striking subparagraph (C), and
(4) by redesignating subparagraph (D) as sub-
paragraph (C).
(b) EXCEPTION FOR LENDING OR FINANCE COMPANIES
DETERMINED ON AFFILIATED GROUP BASIS.—Subsection
(d) of section 542 is amended by striking paragraphs (1)
and (2) and inserting the following new paragraphs:
‘‘(1) LENDING
OR
FINANCE
BUSINESS
DE-
FINED.— For purposes of subsection (c)(6), the term
‘lending or finance business’ means a business of—
‘‘(A) making loans,
‘‘(B) purchasing or discounting accounts re-
ceivable, notes, or installment obligations,
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‘‘(C) engaging in leasing (including enter-
ing into leases and purchasing, servicing, and
disposing of leases and leased assets),
‘‘(D) rendering services or making facilities
available in the ordinary course of a lending or
finance business.
‘‘(E) rendering services or making facilities
available in connection with activities described
in subparagraphs (A), (B), and (C) carried on
by the corporation rendering services or making
facilities available, or
‘‘(F) rendering services or making facilities
available to another corporation which is en-
gaged in the lending or finance business (within
the meaning of this paragraph), if such services
or facilities are related to the lending or finance
business (within such meaning) of such other
corporation and such other corporation and the
corporation rendering services or making facili-
ties available are members of the same affiliated
group (as defined in section 1504).
‘‘(2) EXCEPTION
DETERMINED
ON
AN
AFFILI-
ATED GROUP BASIS.—In the case of a lending or fi-
nance company which is a member of an affiliated
group (as defined in section 1504), such company
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shall be treated as meeting the requirements of sub-
section (c)(6) if such group (determined by taking
into account only members of such group which are
engaged in a lending or finance business) meets such
requirements.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years ending after December
31, 1999.
SEC. 1115. CREDIT FOR MODIFICATIONS TO INTER-CITY
BUSES REQUIRED UNDER THE AMERICANS
WITH DISABILITIES ACT OF 1990.
(a) IN GENERAL.—Subsection (a) of section 44 (relat-
ing to expenditures to provide access to disabled individ-
uals) is amended to read as follows:
‘‘(a) GENERAL RULE.—For purposes of section 38, the
amount of the disabled access credit determined under this
section for any taxable year shall be an amount equal to
the sum of—
‘‘(1) in the case of an eligible small business, 50
percent of so much of the eligible access expenditures
for the taxable year as exceed $250 but do not exceed
$10,250, and
‘‘(2) 50 percent of so much of the eligible bus ac-
cess expenditures for the taxable year with respect to
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each eligible bus as exceed $250 but do not exceed
$30,250.’’.
(b) ELIGIBLE BUS ACCESS EXPENDITURES.—Section
44 is amended by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively, and by inserting after
subsection (c) the following new subsection:
‘‘(d) ELIGIBLE BUS ACCESS EXPENDITURES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘eligible bus access
expenditures’ means amounts paid or incurred by the
taxpayer for the purpose of enabling the taxpayer’s el-
igible bus to comply with applicable requirements
under the Americans With Disabilities Act of 1990
(as in effect on the date of the enactment of this sub-
section).
‘‘(2) CERTAIN EXPENDITURES NOT INCLUDED.—
The amount of eligible bus access expenditures other-
wise taken into account under subsection (a)(2) shall
be reduced to the extent that funds for such expendi-
tures are received under any Federal, State, or local
program.
‘‘(3) ELIGIBLE
BUS.—The term ‘eligible bus’
means any automobile bus eligible for a refund under
section 6427(b) by reason of transportation described
in section 6427(b)(1)(A).’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999, and before January 1, 2012.
SEC. 1116. INCREASED DEDUCTIBILITY OF BUSINESS MEAL
EXPENSES FOR INDIVIDUALS SUBJECT TO
FEDERAL LIMITATIONS ON HOURS OF SERV-
ICE.
The table in section 274(n)(3)(B) (relating to special
rule for individuals subject to Federal hours of service) is
amended—
(1) by striking ‘‘or 2007’’, and
(2) by striking ‘‘2008’’ and inserting ‘‘2007’’.
SEC. 1117. TAX-EXEMPT FINANCING OF QUALIFIED HIGH-
WAY INFRASTRUCTURE CONSTRUCTION.
(a) TREATMENT AS EXEMPT FACILITY BOND.—A bond
described in subsection (b) shall be treated as described in
section 141(e)(1)(A) of the Internal Revenue Code of 1986,
except that—
(1) section 146 of such Code shall not apply to
such bond, and
(2) section 147(c)(1) of such Code shall be ap-
plied by substituting ‘‘any portion of’’ for ‘‘25 percent
or more’’.
(b) BOND DESCRIBED.—
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(1) IN GENERAL.—A bond is described in this
subsection if such bond is issued after December 31,
1999, as part of an issue—
(A) 95 percent or more of the net proceeds
of which are to be used to provide a qualified
highway infrastructure project, and
(B) to which there has been allocated a por-
tion of the allocation to the project under para-
graph (2)(C)(ii) which is equal to the aggregate
face amount of bonds to be issued as part of such
issue.
(2) 
QUALIFIED
HIGHWAY
INFRASTRUCTURE
PROJECTS.—
(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘‘qualified highway infra-
structure project’’ means a project—
(i) for the construction or reconstruc-
tion of a highway, and
(ii) designated under subparagraph
(B) as an eligible pilot project.
(B) ELIGIBLE PILOT PROJECT.—
(i) IN
GENERAL.—The Secretary of
Transportation, in consultation with the
Secretary of the Treasury, shall select not
more 
than 
highway 
infrastructure
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projects to be pilot projects eligible for tax-
exempt financing.
(ii) ELIGIBILITY CRITERIA.—In deter-
mining the criteria necessary for the eligi-
bility of pilot projects, the Secretary of
Transportation shall include the following:
(I) The project must serve the gen-
eral public.
(II) The project is necessary to
evaluate the potential of the private
sector’s participation in the provision
of the highway infrastructure of the
United States.
(III) The project must be located
on publicly-owned rights-of-way.
(IV) The project must be publicly
owned or the ownership of the highway
constructed or reconstructed under the
project must revert to the public.
(V) The project must be consistent
with a transportation plan developed
pursuant to section 134(g) or 135(e) of
title 23, United States Code.
(C) AGGREGATE FACE AMOUNT OF TAX-EX-
EMPT FINANCING.—
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(i) IN GENERAL.—The aggregate face
amount of bonds issued pursuant to this
section shall not exceed $15,000,000,000, de-
termined without regard to any bond the
proceeds of which are used exclusively to re-
fund (other than to advance refund) a bond
issued pursuant to this section (or a bond
which is a part of a series of refundings of
a bond so issued) if the amount of the re-
funding bond does not exceed the out-
standing amount of the refunded bond.
(ii) ALLOCATION.—The Secretary of
Transportation, in consultation with the
Secretary of the Treasury, shall allocate the
amount described in clause (i) among the
eligible pilot projects designated under sub-
paragraph (B).
(iii) REALLOCATION.—If any portion
of an allocation under clause (ii) is unused
on the date which is 3 years after such allo-
cation, the Secretary of Transportation, in
consultation with the Secretary of the
Treasury, may reallocate such portion
among the remaining eligible pilot projects.
(c) REPORT.—
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(1) IN GENERAL.—Not later than the earlier of—
(A) 1 year after either 1⁄2 of the projects au-
thorized under this section have been identified
or 1⁄2 of the total bonds allowable for the projects
under this section have been issued, or
(B) 7 years after the date of the enactment
of this Act,
the Secretary of Transportation, in consultation with
the Secretary of the Treasury, shall submit the report
described in paragraph (2) to the Committees on Fi-
nance and on Environment and Public Works of the
Senate and the Committees on Ways and Means and
on Transportation and Infrastructure of the House of
Representatives.
(2) CONTENTS.—The report under paragraph (1)
shall evaluate the overall success of the program con-
ducted pursuant to this section, including—
(A) a description of each project under the
program,
(B) the extent to which the projects used
new technologies, construction techniques, or in-
novative cost controls that resulted in savings in
building the project, and
(C) the use and efficiency of the Federal tax
subsidy provided by the bond financing.
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SEC. 1118. EXPANSION OF DC HOMEBUYER TAX CREDIT.
(a) EXTENSION.—Section 1400C(i) (relating to appli-
cation of section) is amended by striking ‘‘2001’’ and insert-
ing ‘‘2002’’.
(b) EXPANSION
OF INCOME LIMITATION.—Section
1400C(b)(1) (relating to limitation based on modified ad-
justed gross income) is amended—
(1) by striking ‘‘$110,000’’ in subparagraph
(A)(i) and inserting ‘‘$140,000’’, and
(2) by inserting ‘‘($40,000 in the case of a joint
return)’’ after ‘‘$20,000’’ in subparagraph (B).
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 1119. EXTENSION OF DC ZERO PERCENT CAPITAL
GAINS RATE.
(a) IN GENERAL.—Section 1400B (relating to zero
percent capital gains rate) is amended by adding at the
end the following new subsection:
‘‘(h) EXTENSION TO ENTIRE DISTRICT OF COLUM-
BIA.—In determining whether any stock or partnership in-
terest which is originally issued after December 31, 1999,
or any tangible property acquired by the taxpayer by pur-
chase after December 31, 1999, is a DC Zone asset, sub-
section (d) shall be applied without regard to paragraph
(2) thereof.’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on January 1, 2000.
SEC. 1120. NATURAL GAS GATHERING LINES TREATED AS 7-
YEAR PROPERTY.
(a) IN
GENERAL.—Subparagraph (C) of section
168(e)(3) (relating to classification of certain property) is
amended by redesignating clause (ii) as clause (iii) and by
inserting after clause (i) the following new clause:
‘‘(ii) any natural gas gathering line,
and’’.
(b) NATURAL GAS GATHERING LINE.—Subsection (i)
of section 168 is amended by adding at the end the following
new paragraph:
‘‘(15) NATURAL
GAS
GATHERING
LINE.—The
term ‘natural gas gathering line’ means—
‘‘(A) the pipe, equipment, and appur-
tenances determined to be a gathering line by the
Federal Energy Regulatory Commission, or
‘‘(B) the pipe, equipment, and appur-
tenances used to deliver natural gas from the
wellhead or a common point to the point at
which such gas first reaches—
‘‘(i) a gas processing plant,
‘‘(ii) an interconnection with a trans-
mission pipeline certificated by the Federal
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Energy Regulatory Commission as an
interstate transmission pipeline,
‘‘(iii) an interconnection with an
intrastate transmission pipeline, or
‘‘(iv) a direct interconnection with a
local distribution company, a gas storage
facility, or an industrial consumer.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to property placed in service on or after
the date of the enactment of this Act.
SEC. 1121. EXEMPTION FROM TICKET TAXES FOR CERTAIN
TRANSPORTATION PROVIDED BY SMALL SEA-
PLANES.
(a) IN GENERAL.—Section 4281 (relating to small air-
craft on nonestablished lines) is amended to read as follows:
‘‘SEC. 4281. SMALL AIRCRAFT.
‘‘The taxes imposed by sections 4261 and 4271 shall
not apply to—
‘‘(1) transportation by an aircraft having a
maximum certificated takeoff weight of 6,000 pounds
or less, except when such aircraft is operated on an
established line, and
‘‘(2) transportation by a seaplane having a max-
imum certificated takeoff weight of 6,000 pounds or
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less with respect to any segment consisting of a take-
off from, and a landing on, water.
For purposes of the preceding sentence, the term ‘maximum
certificated takeoff weight’ means the maximum such weight
contained in the type certificate or airworthiness certifi-
cate.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter C of chapter 33 is amended by strik-
ing ‘‘on nonestablished lines’’ in the item relating to section
4281.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act but shall not apply to any amount paid on or before
such date with respect to taxes imposed by sections 4261
and 4271 of the Internal Revenue Code of 1986.
SEC. 1122. NO FEDERAL INCOME TAX ON AMOUNTS AND
LANDS RECEIVED BY HOLOCAUST VICTIMS
OR THEIR HEIRS.
(a) IN GENERAL.—For purposes of the Internal Rev-
enue Code of 1986, gross income shall not include—
(1) any amount received by an individual (or
any heir of the individual)—
(A) from the Swiss Humanitarian Fund es-
tablished by the Government of Switzerland or
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from any similar fund established by any foreign
country, or
(B) as a result of the settlement of the ac-
tion entitled ‘‘In re Holocaust Victims’ Asset
Litigation’’, (E.D. NY), C.A. No. 96–4849, or as
a result of any similar action; and
(2) the value of any land (including structures
thereon) recovered by an individual (or any heir of
the individual) from a government of a foreign coun-
try as a result of a settlement of a claim arising out
of the confiscation of such land in connection with the
Holocaust.
(b) EFFECTIVE DATE.—This section shall apply to
any amount received before, on, or after the date of the en-
actment of this Act.
SEC. 
1123. 
2-PERCENT 
FLOOR 
ON 
MISCELLANEOUS
ITEMIZED DEDUCTIONS NOT TO APPLY TO
QUALIFIED 
PROFESSIONAL 
DEVELOPMENT
EXPENSES AND QUALIFIED INCIDENTAL EX-
PENSES OF ELEMENTARY AND SECONDARY
SCHOOL TEACHERS.
(a) QUALIFIED PROFESSIONAL DEVELOPMENT EX-
PENSES DEDUCTION.—
(1) IN GENERAL.—Section 67(b) (defining mis-
cellaneous itemized deductions) is amended by strik-
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ing ‘‘and’’ at the end of paragraph (11), by striking
the period at the end of paragraph (12) and inserting
‘‘, and’’, and by adding at the end the following new
paragraph:
‘‘(13) any deduction allowable for the qualified
professional development expenses of an eligible teach-
er.’’.
(2) DEFINITIONS.—Section 67 (relating to 2-per-
cent floor on miscellaneous itemized deductions) is
amended by adding at the end the following new sub-
section:
‘‘(g) QUALIFIED PROFESSIONAL DEVELOPMENT EX-
PENSES OF ELIGIBLE TEACHERS.—For purposes of sub-
section (b)(13)—
‘‘(1) QUALIFIED
PROFESSIONAL
DEVELOPMENT
EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
professional 
development 
expenses’ 
means
expenses—
‘‘(i) for tuition, fees, books, supplies,
equipment, and transportation required for
the enrollment or attendance of an indi-
vidual in a qualified course of instruction,
and
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‘‘(ii) with respect to which a deduction
is allowable under section 162 (determined
without regard to this section).
‘‘(B) QUALIFIED
COURSE
OF
INSTRUC-
TION.—The term ‘qualified course of instruction’
means a course of instruction which—
‘‘(i) is—
‘‘(I) at an institution of higher
education (as defined in section 481 of
the Higher Education Act of 1965 (20
U.S.C. 1088), as in effect on the date
of the enactment of this subsection), or
‘‘(II) a professional conference,
and
‘‘(ii) is part of a program of profes-
sional development which is approved and
certified by the appropriate local edu-
cational agency as furthering the individ-
ual’s teaching skills.
‘‘(C) LOCAL EDUCATIONAL AGENCY.—The term
‘local educational agency’ has the meaning given such
term by section 14101 of the Elementary and Sec-
ondary Education Act of 1965, as so in effect.
‘‘(2) ELIGIBLE TEACHER.—
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‘‘(A) IN
GENERAL.—The term ‘eligible
teacher’ means an individual who is a kinder-
garten through grade 12 classroom teacher, in-
structor, counselor, aide, or principal in an ele-
mentary or secondary school.
‘‘(B) 
ELEMENTARY
OR
SECONDARY
SCHOOL.—The terms ‘elementary school’ and
‘secondary school’ have the meanings given such
terms by section 14101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C.
8801), as so in effect.’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to taxable years beginning
after December 31, 2000, and ending before December
31, 2004.
(b) QUALIFIED INCIDENTAL EXPENSES.—
(1) IN GENERAL.—Section 67(g)(1)(A), as added
by subsection (a)(2), is amended by striking ‘‘and’’ at
the end of clause (i), by redesignating clause (ii) as
clause (iii), and by inserting after clause (i) the fol-
lowing new clause:
‘‘(ii) for qualified incidental expenses,
and’’.
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(2) DEFINITION.—Section 67(g), as added by
subsection (a)(2), is amended by adding at the end
the following new paragraph:
‘‘(3) QUALIFIED INCIDENTAL EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘qualified in-
cidental expenses’ means expenses paid or in-
curred by an eligible teacher in an amount not
to exceed $125 for any taxable year for books,
supplies, and equipment related to instruction,
teaching, or other educational job-related activi-
ties of such eligible teacher.
‘‘(B) 
SPECIAL
RULE
FOR
HOMESCHOOLING.—Such term shall include ex-
penses described in subparagraph (A) in connec-
tion with education provided by homeschooling if
the requirements of any applicable State or local
law are met with respect to such education.’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to taxable years beginning
after December 31, 2000, and ending before December
31, 2004.
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SEC. 1124. EXPANSION OF DEDUCTION FOR COMPUTER DO-
NATIONS TO SCHOOLS.
(a) EXTENSION OF AGE OF ELIGIBLE COMPUTERS.—
Section 170(e)(6)(B)(ii) (defining qualified elementary or
secondary educational contribution) is amended—
(1) by striking ‘‘2 years’’ and inserting ‘‘3
years’’, and
(2) by inserting ‘‘for the taxpayer’s own use’’
after ‘‘constructed by the taxpayer’’.
(b) REACQUIRED COMPUTERS ELIGIBLE FOR DONA-
TION.—
(1) IN GENERAL.—Section 170(e)(6)(B)(iii) (de-
fining qualified elementary or secondary educational
contribution) is amended by inserting ‘‘, the person
from whom the donor reacquires the property,’’ after
‘‘the donor’’.
(2) 
CONFORMING
AMENDMENT.—Section
170(e)(6)(B)(ii) is amended by inserting ‘‘or reac-
quired’’ after ‘‘acquired’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to contributions made in taxable years
ending after the date of the enactment of this Act.
SEC. 
1125. 
CREDIT 
FOR 
COMPUTER 
DONATIONS 
TO
SCHOOLS AND SENIOR CENTERS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits), as
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amended by this Act, is amended by adding at the end the
following:
‘‘SEC. 
45E. 
CREDIT 
FOR 
COMPUTER 
DONATIONS 
TO
SCHOOLS AND SENIOR CENTERS.
‘‘(a) GENERAL RULE.—For purposes of section 38, the
computer donation credit determined under this section is
an amount equal to 30 percent of the qualified computer
contributions made by the taxpayer during the taxable
year.
‘‘(b) QUALIFIED
COMPUTER
CONTRIBUTION.—For
purposes of this section, the term ‘qualified computer con-
tribution’ has the meaning given the term ‘qualified elemen-
tary or secondary educational contribution’ by section
170(e)(6)(B), except that—
‘‘(1) such term shall include the contribution of
a computer (as defined in section 168(i)(2)(B)(ii))
only if computer software (as defined in section
197(e)(3)(B)) that serves as a computer operating sys-
tem has been lawfully installed in such computer, and
‘‘(2) for purposes of clauses (i) and (iv) of sec-
tion 170(e)(6)(B), such term shall include the con-
tribution of computer technology or equipment to
multipurpose senior centers (as defined in section
102(35) of the Older Americans Act of 1965 (42
U.S.C. 3002(35)) to be used by individuals who have
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attained 60 years of age to improve job skills in com-
puters.
‘‘(c) INCREASED PERCENTAGE FOR CONTRIBUTIONS TO
ENTITIES IN EMPOWERMENT ZONES, ENTERPRISE COMMU-
NITIES, AND INDIAN RESERVATIONS.—In the case of a
qualified computer contribution to an entity located in an
empowerment zone or enterprise community designated
under section 1391 or an Indian reservation (as defined
in section 168(j)(6)), subsection (a) shall be applied by sub-
stituting ‘50 percent’ for ‘30 percent’.
‘‘(d) CERTAIN RULES MADE APPLICABLE.—For pur-
poses of this section, rules similar to the rules of paragraphs
(1) and (2) of section 41(f) and of section 170(e)(6)(A) shall
apply.
‘‘(e) TERMINATION.—This section shall not apply to
taxable years beginning on or after the date which is 3 years
after the date of the enactment of the Taxpayer Refund Act
of 1999.’’.
(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) (relating to current year business
credit), as amended by this Act, is amended by striking
‘‘plus’’ at the end of paragraph (12), by striking the period
at the end of paragraph (13) and inserting ‘‘, plus’’, and
by adding at the end the following:
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‘‘(14) the computer donation credit determined
under section 45E(a).’’.
(c) DISALLOWANCE OF DEDUCTION BY AMOUNT OF
CREDIT.—Section 280C (relating to certain expenses for
which credits are allowable) is amended by adding at the
end the following:
‘‘(d) CREDIT FOR COMPUTER DONATIONS.—No deduc-
tion shall be allowed for that portion of the qualified com-
puter contributions (as defined in section 45E(b)) made
during the taxable year that is equal to the amount of credit
determined for the taxable year under section 45E(a). In
the case of a corporation which is a member of a controlled
group of corporations (within the meaning of section 52(a))
or a trade or business which is treated as being under com-
mon control with other trades or businesses (within the
meaning of section 52(b)), this subsection shall be applied
under rules prescribed by the Secretary similar to the rules
applicable under subsections (a) and (b) of section 52.’’.
(d) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39 (relating to carryback and carryforward of un-
used credits) is amended by adding at the end the following:
‘‘(9) NO CARRYBACK OF COMPUTER DONATION
CREDIT
BEFORE
EFFECTIVE
DATE.—No amount of
unused business credit available under section 45E
may be carried back to a taxable year beginning on
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or before the date of the enactment of this para-
graph.’’.
(e) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by inserting after the item
relating to section 45D the following:
‘‘Sec. 45E. Credit for computer donations to schools and senior cen-
ters.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to contributions made in taxable years begin-
ning after the date of the enactment of this Act.
(2) CERTAIN CONTRIBUTIONS.—The amendments
made by this section shall apply to contributions
made to an organization or entity not described in
section 45E(c) of the Internal Revenue Code of 1986,
as added by subsection (a), in taxable years beginning
after the date that is one year after the date of the
enactment of this Act.
SEC. 1126. INCREASE IN MANDATORY SPENDING FOR CHILD
CARE AND DEVELOPMENT BLOCK GRANT.
Section 418(a)(3) of the Social Security Act (42 U.S.C.
618(a)(3)) is amended—
(1) in subparagraph (E), by striking ‘‘and’’ at
the end;
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(2) in subparagraph (F), by striking the period
at the end and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(E) $3,918,000,000 for fiscal year 2002;
‘‘(F) $3,979,000,000 for fiscal year 2003;
‘‘(G) $4,010,000,000 for fiscal year 2004;
‘‘(H) $3,860,000,000 for fiscal year 2005;
‘‘(I) $3,954,000,000 for fiscal year 2006;
‘‘(J) $4,004,000,000 for fiscal year 2007;
‘‘(K) $4,073,000,000 for fiscal year 2008;
and
‘‘(L) $4,075,000,000 for fiscal year 2009.’’.
SEC. 1127. SENSE OF THE SENATE REGARDING SAVINGS IN-
CENTIVES.
It is the sense of the Senate that before December 31,
1999, Congress should pass legislation that creates savings
incentives by providing a partial Federal income tax exclu-
sion for income derived from interest and dividends of no
less than $400 for married taxpayers and $200 for single
taxpayers.
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SEC. 1128. SENSE OF CONGRESS REGARDING THE NEED
FOR ADDITIONAL FEDERAL FUNDING AND
TAX INCENTIVES FOR EMPOWERMENT ZONES
AND ENTERPRISE COMMUNITIES AUTHOR-
IZED AND DESIGNATED PURSUANT TO 1997
AND 1998 LAWS.
(a) FINDINGS.—The Senate finds that—
(1) providing Federal tax incentives and other
incentives to distressed communities across the Nation
to help them rebuild and grow was one of the impor-
tant goals of the Taxpayer Relief Act of 1997 and the
Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999;
(2) to help reach that goal, the Taxpayer Relief
Act of 1997 authorized 20 additional empowerment
zones, 15 urban and 5 rural, followed by 20 new
rural enterprise communities authorized in 1998;
(3) the 1997 law authorizing this second round
of empowerment zones (EZs) was also significant and
important because it broadened empowerment zone
eligibility, for the first time, to Indian tribes and
rural regions suffering from massive out-migration;
(4) many of our urban and rural communities
are not sharing in the benefits of the prolonged eco-
nomic expansion now enjoyed by many other parts of
our country;
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(8) a fully funded second round of EZs and ECs
is estimated to create and retain about 90,000 jobs
and stimulate $10,000,000,000 in private and public
investments over the next decade.
(b) SENSE OF CONGRESS.—It is the sense of Congress
that—
(1) if Congress and the President agree to a sub-
stantial tax relief measure, it should ensure that such
measure includes full funding for the second round of
empowerment zones and enterprise communities au-
thorized in 1997 and 1998 as well as those areas cur-
rently designated rural economic area partnerships
(REAPs) by the Department of Agriculture; and
(2) all such designated distressed areas, rural
and urban, should equally share at least the same ag-
gregate level of funding, tax incentives, and other
Federal support that Congress provided to urban and
rural empowerment zones and enterprise communities
authorized by the 1993 omnibus budget reconciliation
bill.
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SEC. 1129. SENSE OF CONGRESS REGARDING THE NEED TO
ENCOURAGE 
IMPROVEMENTS 
IN 
MAIN
STREET BUSINESSES BY EXPANDING EXIST-
ING SMALL BUSINESS TAX EXPENSING RULES
TO INCLUDE INVESTMENTS IN BUILDINGS
AND OTHER DEPRECIABLE REAL PROPERTY.
(a) FINDINGS.—Congress finds that—
(1) under current tax law, small businesses can
immediately deduct, that is, ‘‘expense’’, up to $19,000
in purchases of equipment and similar assets;
(2) there is bipartisan support for increasing the
amount of this expensing provision because it helps
many small businesses make the investments in
equipment and machinery they need by allowing
them to immediately write off the costs of such invest-
ments and bolstering their cash flow;
(3) this expensing provision, however, is not as
helpful as it could be for some small businesses be-
cause it does not cover their investments in improving
the storefront or the buildings in which they conduct
their business;
(4) in many small towns, the local drug store,
shoe store, or grocery store doesn’t have much need for
new equipment, but it does need to improve the store-
front or the interior;
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(5) although such investments are good for Main
Streets across this Nation, our current tax law creates
a disincentive to make them by requiring a small
business owner to depreciate the costs of the building
improvements over 39 years for tax purposes;
(6) legislation to expand the current expensing
provision to cover investments in depreciable real
property was recently introduced in the Senate with
broad bipartisan cosponsorship, including the leaders
of the Republican and Democratic parties;
(7) this proposal is also strongly supported by
small business-oriented trade groups, including the
National Federation of Independent Business, the
Small Business Legislative Council, and the National
Association of Realtors;
(8) the Department of the Treasury is currently
conducting a comprehensive study of all depreciation
provisions in our tax laws; and
(9) Congress should consider expanding the exist-
ing expensing provision to cover investments in store-
front improvements and other depreciable real prop-
erty in any reform legislation that results from this
study or, if possible, in any earlier legislation.
(b) SENSE OF CONGRESS.—It is the sense of Congress
that—
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(1) many small businesses trying to improve
their storefronts on Main Street or investing to up-
grade their property would benefit if Congress ex-
panded the existing expensing provision to cover in-
vestments in depreciable real property; and
(2) Congress should consider including this pro-
posal in any future tax legislation.
SEC. 1130. CERTAIN NATIVE AMERICAN HOUSING ASSIST-
ANCE 
DISREGARDED 
IN 
DETERMINING
WHETHER BUILDING IS FEDERALLY SUB-
SIDIZED FOR PURPOSES OF THE LOW-INCOME
HOUSING CREDIT.
(a) IN
GENERAL.—Subparagraph (E) of section
42(i)(2) of the Internal Revenue Code of 1986 (relating to
determination of whether building is federally subsidized)
is amended—
(1) in clause (i), by inserting ‘‘or the Native
American Housing Assistance and Self-Determination
Act of 1996 (25 U.S.C. 4101 et seq.) (as in effect on
October 1, 1997)’’ after ‘‘this subparagraph)’’, and
(2) in the subparagraph heading, by inserting
‘‘OR NATIVE AMERICAN HOUSING ASSISTANCE’’ after
‘‘HOME ASSISTANCE’’.
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(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to periods after the date of the enact-
ment of this Act.
SEC. 1131. DISCLOSURE OF TAX INFORMATION TO FACILI-
TATE COMBINED EMPLOYMENT TAX REPORT-
ING.
Section 6103(d)(5) of the Internal Revenue Code of
1986 is amended to read as follows:
‘‘(5) DISCLOSURE FOR COMBINED EMPLOYMENT
TAX REPORTING.—The Secretary may disclose tax-
payer identity information and signatures to any
agency, body, or commission of any State for the pur-
pose of carrying out with such agency, body, or com-
mission a combined Federal and State employment
tax reporting program approved by the Secretary.
Subsections (a)(2) and (p)(4) and sections 7213 and
7213A shall not apply with respect to disclosures or
inspections made pursuant to this paragraph.’’.
SEC. 1132. TREATMENT OF MAPLE SYRUP PRODUCTION.
Line 3 of subsection (k) of section 3306 of the Internal
Revenue Code of 1986 is amended by inserting after ‘‘chap-
ter’’ the following: ‘‘agricultural labor includes labor con-
nected to the harvesting or production of maple sap into
maple syrup or sugar, and’’.
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SEC. 1133. TREATMENT OF BONDS ISSUED TO ACQUIRE RE-
NEWABLE RESOURCES ON LAND SUBJECT TO
CONSERVATION EASEMENT.
(a) IN GENERAL.—Section 145 (defining qualified
501(c)(3) bond) is amended by redesignating subsection (e)
as subsection (f) and by inserting after subsection (d) the
following new subsection:
‘‘(e) BONDS ISSUED TO ACQUIRE RENEWABLE RE-
SOURCES
ON LAND SUBJECT
TO CONSERVATION EASE-
MENT.—
‘‘(1) IN GENERAL.—If—
‘‘(A) the proceeds of any bond are used to
acquire land (or a long-term lease thereof) to-
gether with any renewable resource associated
with the land (including standing timber, agri-
cultural crops, or water rights) from an unaffili-
ated person,
‘‘(B) the land is subject to a conservation
restriction—
‘‘(i) which is granted in perpetuity to
an unaffiliated person that is—
‘‘(I) a 501(c)(3) organization, or
‘‘(II) a Federal, State, or local
government conservation organization,
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with the stated charitable purposes of the 501(c)(3)
organization.
‘‘(2) TREATMENT OF TIMBER, ETC.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the cost of any renewable resource ac-
quired with proceeds of any bond described in
paragraph (1) shall be treated as a cost of ac-
quiring the land associated with the renewable
resource and such land shall not be treated as
used for a private business use because of the sale
or leasing of the renewable resource to, or other
use of the renewable resource by, an unaffiliated
person to the extent that such sale, leasing, or
other use does not constitute an unrelated trade
or business, determined by applying section
513(a).
‘‘(B) APPLICATION OF BOND MATURITY LIM-
ITATION.—For purposes of section 147(b), the
cost of any land or renewable resource acquired
with proceeds of any bond described in para-
graph (1) shall have an economic life commensu-
rate with the economic and ecological feasibility
of the financing of such land or renewable re-
source.
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‘‘(C) UNAFFILIATED
PERSON.—For pur-
poses of this subsection, the term ‘unaffiliated
person’ means any person who controls not more
than 20 percent of the governing body of another
person.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to obligations issued after the date
of the enactment of this Act.
SEC. 1134. MODIFICATION OF ALTERNATIVE MINIMUM TAX
FOR INDIVIDUALS.
Section 56(b)(1)(E), as amended by section 206, is
amended by striking ‘‘$250’’ and inserting ‘‘$300’’.
SEC. 1135. EXCLUSION FROM INCOME OF SEVERANCE PAY-
MENT AMOUNTS.
(a) IN GENERAL.—Part III of subchapter B of chapter
1 (relating to items specifically excluded from gross income)
is amended by redesignating section 139 as section 140 and
by inserting after section 138 the following new section:
‘‘SEC. 139. SEVERANCE PAYMENTS.
‘‘(a) IN GENERAL.—In the case of an individual, gross
income shall not include any qualified severance payment.
‘‘(b) LIMITATION.—The amount to which the exclusion
under subsection (a) applies shall not exceed $2,000 with
respect to any separation from employment.
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‘‘(c) QUALIFIED SEVERANCE PAYMENT.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘qualified severance
payment’ means any payment received by an indi-
vidual if—
‘‘(A) such payment was paid by such indi-
vidual’s employer on account of such individ-
ual’s separation from employment,
‘‘(B) such separation was in connection
with a reduction in the work force of the em-
ployer, and
‘‘(C) such individual does not attain em-
ployment within 6 months of the date of such
separation in which the amount of compensation
is equal to or greater than 95 percent of the
amount of compensation for the employment that
is related to such payment.
‘‘(2) LIMITATION.—Such term shall not include
any payment received by an individual if the aggre-
gate payments received with respect to the separation
from employment exceed $75,000.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter B of chapter 1 is amended by striking
the item relating to section 139 and inserting the following
new items:
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‘‘Sec. 139. Severance payments.
‘‘Sec. 140. Cross references to other Acts.’’.
(c) EFFECTIVE DATE.—The amendments made by sub-
sections (a) and (b) shall apply to taxable years beginning
after December 31, 2000, and before January 1, 2002.
SEC. 1136. CAPITAL GAIN TREATMENT UNDER SECTION
631(b) TO APPLY TO OUTRIGHT SALES BY
LAND OWNER.
(a) IN GENERAL.—Subsection (b) of section 631 (relat-
ing to disposal of timber with a retained economic interest)
is amended—
(1) by inserting ‘‘AND OUTRIGHT SALES OF TIM-
BER’’ after ‘‘ECONOMIC INTEREST’’ in the subsection
heading, and
(2) by adding before the last sentence the fol-
lowing new sentence: ‘‘The requirement in the first
sentence of this subsection to retain an economic in-
terest in timber shall not apply to an outright sale of
such timber by the owner thereof if such owner owned
the land (at the time of such sale) from which the
timber is cut.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to sales after the date of the enactment
of this Act.
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SEC. 1137. CREDIT FOR CLINICAL TESTING RESEARCH EX-
PENSES ATTRIBUTABLE TO CERTAIN QUALI-
FIED ACADEMIC INSTITUTIONS INCLUDING
TEACHING HOSPITALS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
amended by inserting after section 41 the following:
‘‘SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.
‘‘(a) GENERAL RULE.—For purposes of section 38, the
medical innovation credit determined under this section for
the taxable year shall be an amount equal to 40 percent
of the excess (if any) of—
‘‘(1) the qualified medical innovation expenses
for the taxable year, over
‘‘(2) the medical innovation base period amount.
‘‘(b) QUALIFIED MEDICAL INNOVATION EXPENSES.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified medical
innovation expenses’ means the amounts which are
paid or incurred by the taxpayer during the taxable
year directly or indirectly to any qualified academic
institution for clinical testing research activities.
‘‘(2) CLINICAL
TESTING
RESEARCH
ACTIVI-
TIES.—
‘‘(A) IN GENERAL.—The term ‘clinical test-
ing research activities’ means human clinical
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testing conducted at any qualified academic in-
stitution in the development of any product,
which occurs before—
‘‘(i) the date on which an application
with respect to such product is approved
under section 505(b), 506, or 507 of the
Federal Food, Drug, and Cosmetic Act (as
in effect on the date of the enactment of this
section),
‘‘(ii) the date on which a license for
such product is issued under section 351 of
the Public Health Service Act (as so in ef-
fect), or
‘‘(iii) the date classification or ap-
proval of such product which is a device in-
tended for human use is given under section
513, 514, or 515 of the Federal Food, Drug,
and Cosmetic Act (as so in effect).
‘‘(B) PRODUCT.—The term ‘product’ means
any drug, biologic, or medical device.
‘‘(3) QUALIFIED
ACADEMIC
INSTITUTION.—The
term ‘qualified academic institution’ means any of
the following institutions:
‘‘(A) EDUCATIONAL INSTITUTION.—A quali-
fied 
organization 
described 
in 
section
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170(b)(1)(A)(iii) which is owned by, or affiliated
with, an institution of higher education (as de-
fined in section 3304(f)).
‘‘(B) TEACHING
HOSPITAL.—A teaching
hospital which—
‘‘(i) is publicly supported or owned by
an 
organization 
described 
in 
section
501(c)(3), and
‘‘(ii) is affiliated with an organization
meeting the requirements of subparagraph
(A).
‘‘(C) FOUNDATION.—A medical research or-
ganization described in section 501(c)(3) (other
than a private foundation) which is affiliated
with, or owned by—
‘‘(i) an organization meeting the re-
quirements of subparagraph (A), or
‘‘(ii) a teaching hospital meeting the
requirements of subparagraph (B).
‘‘(D) CHARITABLE RESEARCH HOSPITAL.—
A hospital that is designated as a cancer center
by the National Cancer Institute.
‘‘(4) EXCLUSION
FOR
AMOUNTS
FUNDED
BY
GRANTS, ETC.—The term ‘qualified medical innova-
tion expenses’ shall not include any amount to the ex-
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tent such amount is funded by any grant, contract,
or otherwise by another person (or any governmental
entity).
‘‘(c) MEDICAL INNOVATION BASE PERIOD AMOUNT.—
For purposes of this section, the term ‘medical innovation
base period amount’ means the average annual qualified
medical innovation expenses paid by the taxpayer during
the 3-taxable year period ending with the taxable year im-
mediately preceding the first taxable year of the taxpayer
beginning after December 31, 1998.
‘‘(d) SPECIAL RULES.—
‘‘(1) LIMITATION
ON
FOREIGN
TESTING.—No
credit shall be allowed under this section with respect
to any clinical testing research activities conducted
outside the United States.
‘‘(2) CERTAIN RULES MADE APPLICABLE.—Rules
similar to the rules of subsections (f) and (g) of sec-
tion 41 shall apply for purposes of this section.
‘‘(3) ELECTION.—This section shall apply to any
taxpayer for any taxable year only if such taxpayer
elects to have this section apply for such taxable year.
‘‘(4) COORDINATION WITH CREDIT FOR INCREAS-
ING
RESEARCH
EXPENDITURES
AND
WITH
CREDIT
FOR
CLINICAL
TESTING
EXPENSES
FOR
CERTAIN
DRUGS FOR RARE DISEASES.—Any qualified medical
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innovation expense for a taxable year to which an
election under this section applies shall not be taken
into account for purposes of determining the credit al-
lowable under section 41 or 45C for such taxable
year.’’.
(b) CREDIT TO BE PART OF GENERAL BUSINESS
CREDIT.—
(1) IN GENERAL.—Section 38(b) (relating to cur-
rent year business credits), as amended by this Act,
is amended by striking ‘‘plus’’ at the end of para-
graph (14), by striking the period at the end of para-
graph (15) and inserting ‘‘, plus’’, and by adding at
the end the following:
‘‘(16) the medical innovation expenses credit de-
termined under section 41A(a).’’.
(2) 
TRANSITION
RULE.—Section 
39(d), 
as
amended by this Act, is amended by adding at the
end the following new paragraph:
‘‘(11) NO CARRYBACK OF SECTION 41A CREDIT
BEFORE ENACTMENT.—No portion of the unused busi-
ness credit for any taxable year which is attributable
to the medical innovation credit determined under
section 41A may be carried back to a taxable year be-
ginning before January 1, 1999.’’.
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(c) DENIAL OF DOUBLE BENEFIT.—Section 280C, as
amended by this Act, is amended by adding at the end the
following new subsection:
‘‘(e) CREDIT FOR INCREASING MEDICAL INNOVATION
EXPENSES.—
‘‘(1) IN
GENERAL.—No deduction shall be al-
lowed for that portion of the qualified medical inno-
vation expenses (as defined in section 41A(b)) other-
wise allowable as a deduction for the taxable year
which is equal to the amount of the credit determined
for such taxable year under section 41A(a).
‘‘(2) CERTAIN RULES TO APPLY.—Rules similar
to the rules of paragraphs (2), (3), and (4) of sub-
section (c) shall apply for purposes of this sub-
section.’’.
(d) DEDUCTION FOR UNUSED PORTION OF CREDIT.—
Section 196(c) (defining qualified business credits) is
amended by redesignating paragraphs (5) through (8) as
paragraphs (6) through (9), respectively, and by inserting
after paragraph (4) the following new paragraph:
‘‘(5) the medical innovation expenses credit de-
termined under section 41A(a) (other than such credit
determined under the rules of section 280C(d)(2)),’’.
(e) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amend-
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ed by adding after the item relating to section 41 the fol-
lowing:
‘‘Sec. 41A. Credit for medical innovation expenses.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1998.
TITLE XII—EXTENSION OF EX-
PIRED AND EXPIRING PROVI-
SIONS
SEC. 1201. PERMANENT EXTENSION AND MODIFICATION OF
RESEARCH CREDIT.
(a) PERMANENT EXTENSION.—
(1) IN GENERAL.—Section 41 (relating to credit
for increasing research activities) is amended by
striking subsection (h).
(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 45C(b) is amended by striking subpara-
graph (D).
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid or in-
curred after June 30, 1999.
(b) INCREASE IN PERCENTAGES UNDER ALTERNATIVE
INCREMENTAL CREDIT.—
(1) IN GENERAL.—Subparagraph (A) of section
41(c)(4) is amended—
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(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. 1202. 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 inserting
‘‘January 1, 2005’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 1203. 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 Decem-
ber 31, 1999.
SEC. 1204. 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, 2004’’.
(b) CLARIFICATION
OF FIRST YEAR
OF EMPLOY-
MENT.—Paragraph (2) of section 51(i) is amended by strik-
ing ‘‘during which he was not a member of a targeted
group’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to individuals who begin work for the
employer after June 30, 1999.
SEC. 1205. EXTENSION AND MODIFICATION OF CREDIT FOR
PRODUCING ELECTRICITY FROM CERTAIN RE-
NEWABLE RESOURCES.
(a) EXTENSION AND MODIFICATION OF PLACED-IN-
SERVICE
RULES.—Paragraph (3) of section 45(c) is
amended to read as follows:
‘‘(3) QUALIFIED FACILITY.—
‘‘(A) WIND FACILITY.—In the case of a fa-
cility using wind to produce electricity, the term
‘qualified facility’ means any facility owned by
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the taxpayer which is originally placed in serv-
ice after December 31, 1993, and before July 1,
2004.
‘‘(B) CLOSED-LOOP BIOMASS FACILITY.—In
the case of a facility using closed-loop biomass to
produce electricity, the term ‘qualified facility’
means any facility owned by the taxpayer which
is originally placed in service after December 31,
1992, and before July 1, 2004.
‘‘(C) BIOMASS FACILITY.—In the case of a
facility using biomass (other than closed-loop
biomass) to produce electricity, the term ‘quali-
fied facility’ means any facility owned by the
taxpayer which is originally placed in service be-
fore January 1, 2003.
‘‘(D) LANDFILL
GAS
OR
POULTRY
WASTE
FACILITY.—
‘‘(i) IN GENERAL.—In the case of a fa-
cility using landfill gas or poultry waste to
produce electricity, the term ‘qualified facil-
ity’ means any facility of the taxpayer
which is originally placed in service after
December 31, 1999, and before July 1, 2004.
‘‘(ii) LANDFILL GAS.—In the case of a
facility using landfill gas, such term shall
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include equipment and housing (not includ-
ing wells and related systems required to
collect and transmit gas to the production
facility) required to generate electricity
which are owned by the taxpayer and so
placed in service.
‘‘(E) SPECIAL
RULE.—In the case of a
qualified facility described in subparagraph (C),
the 10-year period referred to in subsection (a)
shall be treated as beginning no earlier than
January 1, 2000.’’.
(b) 
EXPANSION
OF
QUALIFIED
ENERGY
RE-
SOURCES.—
(1) IN
GENERAL.—Section 45(c)(1) (defining
qualified energy resources) is amended by striking
‘‘and’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting
a comma, and by adding at the end the following new
subparagraphs:
‘‘(C) biomass (other than closed-loop bio-
mass),
‘‘(B) landfill gas, and
‘‘(C) poultry waste.’’.
(2) DEFINITIONS.—Section 45(c) is amended by
redesignating paragraph (3) as paragraph (6) and
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inserting after paragraph (2) the following new para-
graphs:
‘‘(3) BIOMASS.—The term ‘biomass’ means any
solid, nonhazardous, cellulosic waste material which
is segregated from other waste materials and which is
derived from—
‘‘(A) any of the following forest-related re-
sources: mill residues, precommercial thinnings,
slash, and brush, but not including old-growth
timber,
‘‘(B) urban sources, including waste pallets,
crates, and dunnage, manufacturing and con-
struction wood wastes, and landscape or right-of-
way tree trimmings, but not including unsegre-
gated municipal solid waste (garbage) or paper
that is commonly recycled, or
‘‘(C) agriculture sources, including orchard
tree crops, vineyard, grain, legumes, sugar, and
other crop by-products or residues.
‘‘(4) LANDFILL
GAS.—The term ‘landfill gas’
means gas from the decomposition of any household
solid waste, commercial solid waste, and industrial
solid waste disposed of in a municipal solid waste
landfill unit (as such terms are defined in regulations
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promulgated under subtitle D of the Solid Waste Dis-
posal Act (42 U.S.C. 6941 et seq.)).
‘‘(5) POULTRY WASTE.—The term ‘poultry waste’
means poultry manure and litter, including wood
shavings, straw, rice hulls, and other bedding mate-
rial for the disposition of manure.’’.
(c) SPECIAL RULES.—Section 45(d) (relating to defi-
nitions and special rules) is amended by adding at the end
the following new paragraphs:
‘‘(6) CREDIT ELIGIBILITY IN THE CASE OF GOV-
ERNMENT-OWNED
FACILITIES
USING
POULTRY
WASTE.—In the case of a facility using poultry waste
to produce electricity and owned by a governmental
unit, the person eligible for the credit under sub-
section (a) is the lessor or the operator of such facil-
ity.
‘‘(7) PROPORTIONAL
CREDIT
FOR
FACILITY
USING COAL TO CO-FIRE WITH CERTAIN BIOMASS.—In
the case of a qualified facility as defined in subsection
(c)(3)(C) using coal to co-fire with biomass (other
than closed-loop biomass), the amount of the credit
determined under subsection (a) for the taxable year
shall be reduced by the percentage coal comprises (on
a Btu basis) of the average fuel input of the facility
for the taxable year.’’.
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‘‘(A) which is held by the taxpayer for use
in a trade or business or for the production of
income, or which is property described in section
1221(1) in the hands of the taxpayer, and
‘‘(B) at or on which there has been a release
(or threat of release) or disposal of any haz-
ardous substance.
‘‘(2) NATIONAL PRIORITIES LISTED SITES NOT
INCLUDED.—Such term shall not include any site
which is on, or proposed for, the national priorities
list under section 105(a)(8)(B) of the Comprehensive
Environmental Response, Compensation, and Liabil-
ity Act of 1980 (as in effect on the date of the enact-
ment of this section).
‘‘(3) TAXPAYER
MUST
RECEIVE
STATEMENT
FROM
STATE
ENVIRONMENTAL
AGENCY.—An area
shall be treated as a qualified contaminated site with
respect to expenditures paid or incurred during any
taxable year only if the taxpayer receives a statement
from the appropriate agency of the State in which
such area is located that such area meets the require-
ment of paragraph (1)(B).
‘‘(4) APPROPRIATE
STATE
AGENCY.—For pur-
poses of paragraph (2), the chief executive officer of
each State may, in consultation with the Adminis-
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trator of the Environmental Protection Agency, des-
ignate the appropriate State environmental agency
within 60 days of the date of the enactment of this
section. If the chief executive officer of a State has not
designated an appropriate State environmental agen-
cy within such 60-day period, the appropriate envi-
ronmental agency for such State shall be designated
by the Administrator of the Environmental Protection
Agency.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to expenditures paid or incurred after
December 31, 1999.
TITLE XIII—REVENUE OFFSETS
Subtitle A—General Provisions
SEC. 
1301. 
MODIFICATION 
TO 
FOREIGN 
TAX 
CREDIT
CARRYBACK AND CARRYOVER PERIODS.
(a) IN GENERAL.—Section 904(c) (relating to limita-
tion on credit) is amended—
(1) by striking ‘‘in the second preceding taxable
year,’’, and
(2) by striking ‘‘or fifth’’ and inserting ‘‘fifth,
sixth, or seventh’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to credits arising in taxable years
beginning after December 31, 1999.
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SEC. 1302. 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 subparagraph (C) the fol-
lowing new subparagraph:
‘‘(D) any organization a significant trade
or business of which is the lending of money.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to discharges of indebtedness after
December 31, 1999.
SEC. 1303. 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 sub-
section (a) shall apply to distributions after December 31,
2000.
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SEC. 1304. 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 fol-
lowing 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—
‘‘(1) requests to the Internal Revenue Service for
ruling letters, opinion letters, and determination let-
ters, 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 ap-
propriate.
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‘‘(3) AVERAGE FEE REQUIREMENT.—The average
fee charged under the program required by subsection
(a) shall not be less than the amount determined
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.
‘‘(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 amend-
ed 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. 1305. TRANSFER OF EXCESS DEFINED BENEFIT PLAN
ASSETS FOR RETIREE HEALTH BENEFITS.
(a) EXTENSION.—
(1) IN GENERAL.—Paragraph (5) of section
420(b) (relating to expiration) is amended by striking
‘‘in any taxable year beginning after December 31,
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2000’’ and inserting ‘‘made after September 30,
2009’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 101(e)(3) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1021(e)(3)) is amended by striking ‘‘1995’’ and
inserting ‘‘2001’’.
(B) Section 403(c)(1) of such Act (29
U.S.C. 1103(c)(1)) is amended by striking
‘‘1995’’ and inserting ‘‘2001’’.
(C) Paragraph (13) of section 408(b) of
such Act (29 U.S.C. 1108(b)(13)) is amended—
(i) by striking ‘‘in a taxable year be-
ginning before January 1, 2001’’ and in-
serting ‘‘made before October 1, 2009’’, and
(ii) by striking ‘‘1995’’ and inserting
‘‘2001’’.
(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
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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 immediately pre-
ceding the taxable year of the qualified 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 trans-
fer, 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 benefits
was provided during such taxable year.
‘‘(C) ELECTION TO COMPUTE COST SEPA-
RATELY.—An employer may elect to have this
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paragraph applied separately with respect to in-
dividuals eligible for benefits under title XVIII of
the Social Security Act at any time during the
taxable year and with respect to individuals not
so eligible.
‘‘(D) COST
MAINTENANCE
PERIOD.—For
purposes of this paragraph, the term ‘cost main-
tenance period’ means the period of 5 taxable
years beginning with the taxable year in which
the qualified transfer occurs. If a taxable year is
in 2 or more overlapping cost maintenance peri-
ods, 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 subject
to the minimum benefit requirements of sub-
section (c)(3)’’ and inserting ‘‘or in calculating
applicable 
employer 
cost 
under 
subsection
(c)(3)(B)’’.
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(c) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to qualified transfers occur-
ring after the date of the enactment of this Act.
(2) TRANSITION RULE.—If the cost maintenance
period for any qualified transfer after the date of the
enactment of this Act includes any portion of a ben-
efit maintenance period for any qualified transfer on
or before such date, the amendments made by sub-
section (b) shall not apply to such portion of the cost
maintenance period (and such portion shall be treated
as a benefit maintenance period).
SEC. 1306. TAX TREATMENT OF INCOME AND LOSS ON DE-
RIVATIVES.
(a) IN GENERAL.—Section 1221 (defining capital as-
sets) is amended—
(1) by striking ‘‘For purposes’’ and inserting the
following:
‘‘(a) IN GENERAL.—For purposes’’,
(2) by striking the period at the end of para-
graph (5) and inserting a semicolon, and
(3) by adding at the end the following:
‘‘(6) any commodities derivative financial in-
strument held by a commodities derivatives dealer,
unless—
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‘‘(A) it is established to the satisfaction of
the Secretary that such instrument has no con-
nection to the activities of such dealer as a deal-
er, and
‘‘(B) such instrument is clearly identified
in such dealer’s records as being described in
subparagraph (A) before the close of the day on
which it was acquired, originated, or entered
into (or such other time as the Secretary may by
regulations prescribe);
‘‘(7) any hedging transaction which is clearly
identified as such before the close of the day on which
it was acquired, originated, or entered into (or such
other time as the Secretary may by regulations pre-
scribe); or
‘‘(8) supplies of a type regularly used or con-
sumed by the taxpayer in the ordinary course of a
trade or business of the taxpayer.
‘‘(b) DEFINITIONS AND SPECIAL RULES.—
‘‘(1) COMMODITIES
DERIVATIVE
FINANCIAL
IN-
STRUMENTS.—For purposes of subsection (a)(6)—
‘‘(A) COMMODITIES
DERIVATIVES
DEAL-
ER.—The term ‘commodities derivatives dealer’
means a person which regularly offers to enter
into, assume, offset, assign, or terminate posi-
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tions in commodities derivative financial instru-
ments with customers in the ordinary course of
a trade or business.
‘‘(B) COMMODITIES DERIVATIVE FINANCIAL
INSTRUMENT.—
‘‘(i) IN GENERAL.—The term ‘commod-
ities derivative financial instrument’ means
any contract or financial instrument with
respect to commodities (other than a share
of stock in a corporation, a beneficial inter-
est in a partnership or trust, a note, bond,
debenture, or other evidence of indebtedness,
or a section 1256 contract (as defined in
section 1256(b)), the value or settlement
price of which is calculated by or deter-
mined by reference to a specified index.
‘‘(ii) SPECIFIED
INDEX.—The term
‘specified index’ means any one or more or
any combination of—
‘‘(I) a fixed rate, price, or
amount, or
‘‘(II) a variable rate, price, or
amount,
which is based on any current, objectively
determinable financial or economic infor-
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fined in section 1221(b)(2)(A)) if, before the close of
the day on which such transaction was entered into
(or such earlier time as the Secretary may prescribe
by regulations), the taxpayer clearly identifies such
transaction as being a hedging transaction.’’.
(c) CONFORMING AMENDMENTS.—
(1) Each of the following sections are amended
by striking ‘‘section 1221’’ and inserting ‘‘section
1221(a)’’:
(A) Section 170(e)(3)(A).
(B) Section 170(e)(4)(B).
(C) Section 367(a)(3)(B)(i).
(D) Section 818(c)(3).
(E) Section 865(i)(1).
(F) Section 1092(a)(3)(B)(ii)(II).
(G) Subparagraphs (C) and (D) of section
1231(b)(1).
(H) Section 1234(a)(3)(A).
(2) Each of the following sections are amended
by striking ‘‘section 1221(1)’’ and inserting ‘‘section
1221(a)(1)’’:
(A) Section 198(c)(1)(A)(i).
(B) Section 263A(b)(2)(A).
(C) Clauses (i) and (iii) of section
267(f)(3)(B).
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(D) Section 341(d)(3).
(E) Section 543(a)(1)(D)(i).
(F) Section 751(d)(1).
(G) Section 775(c).
(H) Section 856(c)(2)(D).
(I) Section 856(c)(3)(C).
(J) Section 856(e)(1).
(K) Section 856(j)(2)(B).
(L) Section 857(b)(4)(B)(i).
(M) Section 857(b)(6)(B)(iii).
(N) Section 864(c)(4)(B)(iii).
(O) Section 864(d)(3)(A).
(P) Section 864(d)(6)(A).
(Q) Section 954(c)(1)(B)(iii).
(R) Section 995(b)(1)(C).
(S) Section 1017(b)(3)(E)(i).
(T) Section 1362(d)(3)(C)(ii).
(U) Section 4662(c)(2)(C).
(V) Section 7704(c)(3).
(W) Section 7704(d)(1)(D).
(X) Section 7704(d)(1)(G).
(Y) Section 7704(d)(5).
(3) Section 818(b)(2) is amended by striking
‘‘section 1221(2)’’ and inserting ‘‘section 1221(a)(2)’’.
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(4) Section 1397B(e)(2) is amended by striking
‘‘section 1221(4)’’ and inserting ‘‘section 1221(a)(4)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to any instrument held, acquired, or en-
tered into, any transaction entered into, and supplies held
or acquired on or after the date of enactment of this Act.
Subtitle B—Loophole Closers
SEC. 1311. LIMITATION ON USE OF NON-ACCRUAL EXPERI-
ENCE METHOD OF ACCOUNTING.
(a) IN GENERAL.—Section 448(d)(5) (relating to spe-
cial 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 amendments
made by this section to change its method of account-
ing 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 initiated
by the taxpayer,
(B) such change shall be treated as made
with the consent of the Secretary of the Treasury,
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 period
(not greater than 4 taxable years) beginning
with such first taxable year.
SEC. 1312. LIMITATIONS ON WELFARE BENEFIT FUNDS OF
10 OR MORE EMPLOYER PLANS.
(a) BENEFITS TO WHICH EXCEPTION APPLIES.—Sec-
tion 419A(f)(6)(A) (relating to exception for 10 or more em-
ployer 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.
‘‘(iii) Group term life insurance bene-
fits which do not provide directly or indi-
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rectly for any cash surrender 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 benefit)
is amended by adding at the end the following new para-
graph:
‘‘(5) SPECIAL RULE FOR 10 OR MORE EMPLOYER
PLANS EXEMPTED FROM PREFUNDING LIMITS.—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 contribu-
tions were made,
then such portion shall be treated as reverting to the
benefit of the employers maintaining the fund.’’.
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(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. 1313. MODIFICATION OF INSTALLMENT METHOD AND
REPEAL OF INSTALLMENT METHOD FOR AC-
CRUAL METHOD TAXPAYERS.
(a) REPEAL OF INSTALLMENT METHOD FOR ACCRUAL
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 provided
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 install-
ment method shall not apply to income from an in-
stallment sale if such income would be reported under
an accrual method of accounting without regard 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
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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-
ment obligations) is amended by adding at the end the fol-
lowing: ‘‘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 portion
of the indebtedness with the installment obligation.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to sales or other dispositions occurring
on or after the date of the enactment of this Act.
SEC. 1314. TREATMENT OF GAIN FROM CONSTRUCTIVE
OWNERSHIP TRANSACTIONS.
(a) IN GENERAL.—Part IV of subchapter P of chapter
1 (relating to special rules for determining capital gains
and losses) is amended by inserting after section 1259 the
following new section:
‘‘SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP
TRANSACTIONS.
‘‘(a) IN GENERAL.—If the taxpayer has gain from a
constructive ownership transaction with respect to any fi-
nancial asset and such gain would (without regard to this
section) be treated as a long-term capital gain—
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‘‘(1) such gain shall be treated as ordinary in-
come to the extent that such gain exceeds the net un-
derlying long-term capital gain, and
‘‘(2) to the extent such gain is treated as a long-
term capital gain after the application of paragraph
(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 un-
derlying long-term capital gain.
‘‘(b) INTEREST CHARGE ON DEFERRAL OF GAIN REC-
OGNITION.—
‘‘(1) IN GENERAL.—If any gain is treated as or-
dinary income for any taxable year by reason of sub-
section (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 transaction was
open. Any amount payable under this paragraph
shall be taken into account in computing the amount
of any deduction allowable to the taxpayer for interest
paid or accrued during such taxable year.
‘‘(2) AMOUNT OF INTEREST.—The amount of in-
terest determined under this paragraph with respect
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to a prior taxable year is the amount of interest
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 taxable years in
which it accrued (determined by treating 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 purposes
of paragraph (2), the applicable Federal rate is the
applicable Federal rate determined under 1274(d)
(compounded semiannually) which would 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 purposes
of determining—
‘‘(A) the amount of any credit allowable
under this chapter, or
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‘‘(B) the amount of the tax imposed by sec-
tion 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 para-
graph (1), the term ‘pass-thru entity’ means—
‘‘(A) a regulated investment company,
‘‘(B) a real estate investment trust,
‘‘(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 without regard to
subsection (e) thereof),
‘‘(H) a foreign personal holding company,
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‘‘(I) a foreign investment company (as de-
fined in section 1246(b)), and
‘‘(J) a REMIC.
‘‘(d) CONSTRUCTIVE OWNERSHIP TRANSACTION.—For
purposes of this section—
‘‘(1) IN GENERAL.—The taxpayer shall be treated
as having entered into a constructive ownership
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-
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 effect
as a transaction described in any of the pre-
ceding subparagraphs.
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‘‘(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 hold-
ing a long position under a notional principal con-
tract 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
‘‘(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 future
(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 financial asset,
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the term ‘net underlying long-term capital gain’ means the
aggregate net capital gain that the taxpayer 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.
‘‘(f) SPECIAL RULE WHERE TAXPAYER TAKES DELIV-
ERY.—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, options, or
other positions which are part of such transaction for fair
market value on the closing date. The amount of gain recog-
nized under the preceding sentence shall not exceed the
amount of gain treated as ordinary income under sub-
section (a). Proper adjustments shall be made in the
amount of any gain or loss subsequently realized for gain
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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 con-
structive ownership transactions in lieu of applying
this section, and
‘‘(2) to exclude certain forward contracts which
do not convey substantially all of the economic return
with respect to a financial asset.’’.
(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. 1315. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE,
ANNUITY, AND ENDOWMENT CONTRACTS.
(a) IN GENERAL.—Subsection (f) of section 170 (relat-
ing to disallowance of deduction in certain cases and spe-
cial rules), as amended by section 807, is amended by add-
ing at the end the following new paragraph: