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(2) ABUSIVE
TRANSACTIONS.—The amendment
made by subsection (b) shall take effect on the date of
the enactment of this Act.
(3) LOANS
FROM
TRUSTS.—The amendment
made by subsection (c) shall apply to loans of cash
or marketable securities after September 19, 1995.
SEC. 606. RESIDENCE OF ESTATES AND TRUSTS, ETC.
(a) TREATMENT AS UNITED STATES PERSON.—
(1) IN
GENERAL.—Paragraph (30) of section
7701(a) is amended by striking subparagraph (D)
and by inserting after subparagraph (C) the follow-
ing:
‘‘(D) any estate or trust if—
‘‘(i) a court within the United States
is able to exercise primary supervision over
the administration of the estate or trust,
and
‘‘(ii) in the case of a trust, one or more
United States fiduciaries have the authority
to control all substantial decisions of the
trust.’’.
(2) CONFORMING AMENDMENT.—Paragraph (31)
of section 7701(a) is amended to read as follows:
‘‘(31) FOREIGN ESTATE OR TRUST.—The term
‘foreign estate’ or ‘foreign trust’ means any estate or
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trust other than an estate or trust described in section
7701(a)(30)(D).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply—
(A) to taxable years beginning after Decem-
ber 31, 1996, or
(B) at the election of the trustee of a trust,
to taxable years ending after the date of the en-
actment of this Act.
Such an election, once made, shall be irrevocable.
(b) DOMESTIC TRUSTS WHICH BECOME FOREIGN
TRUSTS.—
(1) IN GENERAL.—Section 1491 (relating to im-
position of tax on transfers to avoid income tax) is
amended by adding at the end the following new flush
sentence:
‘‘If a trust which is not a foreign trust becomes a foreign
trust, such trust shall be treated for purposes of this section
as having transferred, immediately before becoming a for-
eign trust, all of its assets to a foreign trust.’’.
(2) PENALTY.—Section 1494 is amended by add-
ing at the end the following new subsection:
‘‘(c) PENALTY.—In the case of any failure to file a re-
turn required by the Secretary with respect to any transfer
described in section 1491 with respect to a trust, the person
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required to file such return shall be liable for the penalties
provided in section 6677 in the same manner as if such
failure were a failure to file a return under section
6048(a).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the date of the
enactment of this Act.
Subtitle B—Repeal of Bad Debt Re-
serve Method for Thrift Savings
Associations
SEC. 611. REPEAL OF BAD DEBT RESERVE METHOD FOR
THRIFT SAVINGS ASSOCIATIONS.
(a) IN GENERAL.—Section 593 (relating to reserves for
losses on loans) is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (d) of section 50 is amended by
adding at the end the following new sentence:
‘‘Paragraphs (1)(A), (2)(A), and (4) of section 46(e) re-
ferred to in paragraph (1) of this subsection shall not apply
to any taxable year beginning after December 31, 1995.’’.
(2) Subsection (e) of section 52 is amended by
striking paragraph (1) and by redesignating para-
graphs (2) and (3) as paragraphs (1) and (2), respec-
tively.
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(3) Subsection (a) of section 57 is amended by
striking paragraph (4).
(4) Section 246 is amended by striking sub-
section (f).
(5) Clause (i) of section 291(e)(1)(B) is amended
by striking ‘‘or to which section 593 applies’’.
(6) Subparagraph (A) of section 585(a)(2) is
amended by striking ‘‘other than an organization to
which section 593 applies’’.
(7) Sections 595 and 596 are hereby repealed.
(8) Subsection (a) of section 860E is amended—
(A) by striking ‘‘Except as provided in
paragraph (2), the’’ in paragraph (1) and in-
serting ‘‘The’’,
(B) by striking paragraphs (2) and (4) and
redesignating paragraphs (3) and (5) as para-
graphs (2) and (3), respectively, and
(C) by striking in paragraph (2) (as so re-
designated) all that follows ‘‘subsection’’ and in-
serting a period.
(9) Paragraph (3) of section 992(d) is amended
by striking ‘‘or 593’’.
(10) Section 1038 is amended by striking sub-
section (f).
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(11) Clause (ii) of section 1042(c)(4)(B) is
amended by striking ‘‘or 593’’.
(12) Subsection (c) of section 1277 is amended
by striking ‘‘or to which section 593 applies’’.
(13) Subparagraph (B) of section 1361(b)(2) is
amended by striking ‘‘or to which section 593 ap-
plies’’.
(14) The table of sections for part II of sub-
chapter H of chapter 1 is amended by striking the
items relating to sections 593, 595, and 596.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to taxable years beginning after December 31,
1995.
(2) REPEAL OF SECTION 595.—The repeal of sec-
tion 595 under subsection (b)(7) shall apply to prop-
erty acquired in taxable years beginning after Decem-
ber 31, 1995.
(d) 6-YEAR SPREAD OF ADJUSTMENTS.—
(1) IN GENERAL.—In the case of any taxpayer
who is required by reason of the amendments made
by this section to change its method of computing re-
serves for bad debts—
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(A) such change shall be treated as a change
in a method of accounting,
(B) such change shall be treated as initiated
by the taxpayer and as having been made with
the consent of the Secretary, and
(C) the net amount of the adjustments re-
quired to be taken into account by the taxpayer
under section 481(a)—
(i) shall be determined by taking into
account only applicable excess reserves, and
(ii) as so determined, shall be taken
into account ratably over the 6-taxable year
period beginning with the first taxable year
beginning after December 31, 1995.
(2) APPLICABLE EXCESS RESERVES.—
(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘applicable excess reserves’
means the excess (if any) of—
(i) the balance of the reserves described
in section 593(c)(1) of such Code (as in ef-
fect on the day before the date of the enact-
ment of this Act) as of the close of the tax-
payer’s last taxable year beginning before
January 1, 1996, over
(ii) the lesser of—
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(I) the balance of such reserves as
of the close of the taxpayer’s last tax-
able year beginning before January 1,
1988, or
(II) the balance of the reserves de-
scribed in subclause (I), reduce by an
amount determined in the same man-
ner as under section 585(b)(2)(B)(ii)
on the basis of the taxable years de-
scribed in clause (i) and this clause.
(B) SPECIAL
RULE
FOR
THRIFTS
WHICH
BECOME SMALL BANKS.—In the case of a bank
(as defined in section 581 of such Code) which
is not a large bank (as defined in section
585(c)(2) of such Code) for its first taxable year
beginning after December 31, 1995—
(i) the balance taken into account
under subparagraph (A)(ii) shall not be less
than the amount which would be the bal-
ance of such reserve as of the close of its last
taxable year beginning before January 1,
1996, if the additions to such reserve for all
taxable years had been determined under
section 585(b)(2)(A), and
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(ii) the opening balance of the reserve
for bad debts as of the beginning of such
first taxable year shall be the balance taken
into account under subparagraph (A)(ii)
(determined after the application of clause
(i) of this subparagraph).
The preceding sentence shall not apply for pur-
poses of paragraphs (5), (6), and (7).
(3) RECAPTURE OF PRE-1988 RESERVES WHERE
TAXPAYER CEASES TO BE BANK.—If during any tax-
able year beginning after December 31, 1995, a tax-
payer to which paragraph (1) applied is not a bank
(as defined in section 581), paragraph (1) shall apply
to the reserves described in subparagraph (A)(ii) ex-
cept that such reserves shall be taken into account rat-
ably over the 6-taxable year period beginning with
such taxable year.
(4) SUSPENSION OF RECAPTURE IF RESIDENTIAL
LOAN REQUIREMENT MET.—
(A) IN GENERAL.—In the case of a bank
which meets the residential loan requirement of
subparagraph (B) for a taxable year beginning
after December 31, 1995, and before January 1,
1998—
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(i) no adjustment shall be taken into
account under paragraph (1) for such tax-
able year, and
(ii) such taxable year shall be dis-
regarded in determining—
(I) whether any other taxable year
is a taxable year for which an adjust-
ment is required to be taken into ac-
count under paragraph (1), and
(II) the amount of such adjust-
ment.
(B) RESIDENTIAL LOAN REQUIREMENT.—A
taxpayer meets the residential loan requirement
of this subparagraph for any taxable year if the
principal amount of the residential loans made
by the taxpayer during such year is not less than
the base amount for such year.
(C) RESIDENTIAL LOAN.—For purposes of
this paragraph, the term ‘‘residential loan’’
means any loan described in clause (v) of section
7701(a)(19)(C) of such Code but only if such
loan is incurred in acquiring, constructing, or
improving the property described in such clause.
(D) BASE AMOUNT.—For purposes of sub-
paragraph (B), the base amount is the average
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of the principal amounts of the residential loans
made by the taxpayer during the 6 most recent
taxable years beginning before January 1, 1996.
At the election of the taxpayer who made such
loans during each of such 6 taxable years, the
preceding sentence shall be applied without re-
gard to the taxable year in which such principal
amount was the highest and the taxable year in
such principal amount was the lowest. Such an
election may be made only for the first taxable
year beginning after December 31, 1995, and, if
made for such taxable year, shall apply to the
succeeding taxable year unless revoked with the
consent of the Secretary of the Treasury or the
Secretary’s delegate.
(E) CONTROLLED GROUPS.—In the case of
a taxpayer which is a member of any controlled
group of corporations described in section
1563(a)(1) of such Code, subparagraph (B) shall
be applied with respect to such group.
(5) CONTINUED APPLICATION OF FRESH START
UNDER SECTION 585 TRANSITIONAL RULES.—In the
case of a taxpayer to which paragraph (1) applied
and which was not a large bank (as defined in section
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585(c)(2) of such Code) for its first taxable year be-
ginning after December 31, 1995:
(A) IN GENERAL.—For purposes of deter-
mining the net amount of adjustments referred to
in section 585(c)(3)(A)(iii) of such Code, there
shall be taken into account only the excess of the
reserve for bad debts as of the close of the last
taxable year before the disqualification year over
the balance taken into account by such taxpayer
under paragraph (2)(A)(ii) of this subsection.
(B) TREATMENT UNDER ELECTIVE CUT-OFF
METHOD.—For purposes of applying section
585(c)(4) of such Code—
(i) the balance of the reserve taken into
account under subparagraph (B) thereof
shall be reduced by the balance taken into
account by such taxpayer under paragraph
(2)(A)(ii) of this subsection, and
(ii) no amount shall be includible in
gross income by reason of such reduction.
(6) 
CONTINUED
APPLICATION
OF
SECTION
593(e).—Notwithstanding the amendments made by
this section, in the case of a taxpayer to which para-
graph (1) of this subsection applies, section 593(e) of
such Code (as in effect on the day before the date of
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the enactment of this Act) shall continue to apply to
such taxpayer as if such taxpayer were a domestic
building and loan association but the amount of the
reserves taken into account under subparagraphs (B)
and (C) of section 593(e)(1) (as so in effect) shall be
the balance taken into account by such taxpayer
under paragraph (2)(A)(ii) of this subsection.
(7) CERTAIN ITEMS INCLUDED AS SECTION 381(c)
ITEMS.—The balance of the applicable excess reserves,
and the balance taken into account by a taxpayer
under paragraph (2)(A)(ii) of this subsection, shall be
treated as items described in section 381(c) of such
Code.
(8) CONVERSIONS TO CREDIT UNIONS.—In the
case of a taxpayer to which paragraph (1) applied
which becomes a credit union described in section
501(c)(14)(A)—
(A) any amount required to be included in
the gross income of the credit union by reason of
this subsection shall be treated as derived from
an unrelated trade or business (as defined in sec-
tion 513), and
(B) for purposes of paragraph (3), the cred-
it union shall not be treated as if it were a bank.
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(9) REGULATIONS.—The Secretary of the Treas-
ury or the Secretary’s delegate shall prescribe such
regulations as may be necessary to carry out this sub-
section, including regulations providing for the appli-
cation of paragraphs (4) and (6) in the case of acqui-
sitions, mergers, spin-offs, and other reorganizations.
Subtitle C—Other Provisions
SEC. 621. EXTENSION OF MEDICARE SECONDARY PAYOR
PROVISIONS.
Section 1862(b) of the Social Security Act (42 U.S.C.
1395y(b)) is amended—
(1) in paragraph (1)—
(A) in subparagraph (B), by striking clause
(iii) and redesignating clause (iv) as clause (iii);
and
(B) in the matter following clause (ii) of
subparagraph (C), by striking ‘‘, and before Oc-
tober 1, 1998’’; and
(2) in paragraph (5)(C), by striking clause (iii).
SEC. 622. ANNUAL ADJUSTMENT FACTORS FOR OPERATING
COSTS 
ONLY; 
RESTRAINT 
ON 
RENT 
IN-
CREASES.
(a) ANNUAL ADJUSTMENT FACTORS FOR OPERATING
COSTS ONLY.—Section 8(c)(2)(A) of the United States
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Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amend-
ed—
(1) 
by 
striking 
‘‘(2)(A)’’ 
and 
inserting
‘‘(2)(A)(i)’’;
(2) by striking the second sentence and all that
follows through the end of the subparagraph; and
(3) by adding at the end the following new
clause:
‘‘(ii) Each assistance contract under this section shall
provide that—
‘‘(I) if the maximum monthly rent for a unit in
a new construction or substantial rehabilitation
project to be adjusted using an annual adjustment
factor exceeds 100 percent of the fair market rent for
an existing dwelling unit in the market area, the Sec-
retary shall adjust the rent using an operating costs
factor that increases the rent to reflect increases in
operating costs in the market area; and
‘‘(II) if the owner of a unit in a project described
in subclause (I) demonstrates that the adjusted rent
determined under subclause (I) would not exceed the
rent for an unassisted unit of similar quality, type,
and age in the same market area, as determined by
the Secretary, the Secretary shall use the otherwise
applicable annual adjustment factor.’’.
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(b) RESTRAINT ON SECTION 8 RENT INCREASES.—
Section 8(c)(2)(A) of the United States Housing Act of 1937
(42 U.S.C. 1437f(c)(2)(A)), as amended by subsection (a)
of this section, is amended by adding at the end the follow-
ing new clause:
‘‘(iii)(I) Subject to subclause (II), with respect to any
unit assisted under this section that is occupied by the same
family at the time of the most recent annual rental adjust-
ment, if the assistance contract provides for the adjustment
of the maximum monthly rent by applying an annual ad-
justment factor, and if the rent for the unit is otherwise
eligible for an adjustment based on the full amount of the
annual adjustment factor, 0.01 shall be subtracted from the
amount of the annual adjustment factor, except that the an-
nual adjustment factor shall not be reduced to less than 1.0.
‘‘(II) With respect to any unit described in subclause
(I) that is assisted under the certificate program, the ad-
justed rent shall not exceed the rent for a comparable unas-
sisted unit of similar quality, type, and age in the market
area in which the unit is located.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall be construed to have become effective on Octo-
ber 1, 1995.
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SEC. 623. FORECLOSURE AVOIDANCE AND BORROWER AS-
SISTANCE.
(a) EFFECTIVENESS
AND
APPLICABILITY.—Section
407 of The Balanced Budget Downpayment Act, I (Public
Law 104–99) is amended—
(1) in subsection (c)—
(A) by striking ‘‘Except as provided in sub-
section (e), the’’ and inserting ‘‘The’’; and
(B) by striking ‘‘only with respect to mort-
gages insured under the National Housing Act
that are originated before October 1, 1995’’ and
inserting ‘‘to all mortgages insured under the
National Housing Act’’; and
(2) by striking subsection (e).
(b) TECHNICAL AMENDMENT.—Section 230(d) of the
National Housing Act (12 U.S.C. 1715u(d)) is amended by
striking ‘‘the Departments’’ and all that follows through
‘‘1996’’ and inserting ‘‘The Balanced Budget Downpayment
Act, I’’.
Attest:
Secretary.
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