120
church plan (within the meaning of section 414(e))
with respect to which the election provided by sec-
tion 410(d) has not been made.’’.
(b) AMENDMENT TO ERISA.—Section 204(h) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(h)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3)(A) A plan to which paragraph (1) applies shall
not be treated as meeting the requirements of such para-
graph unless, in addition to any notice required to be pro-
vided to an individual or organization under such para-
graph, the plan administrator provides the notice de-
scribed in subparagraph (B).
‘‘(B) The notice required by subparagraph (A) shall
be written in a manner calculated to be understood by the
average plan participant and shall provide sufficient infor-
mation (as determined in accordance with regulations pre-
scribed by the Secretary of the Treasury) to allow individ-
uals to understand the effect of the plan amendment.
‘‘(C) Except as provided in regulations prescribed by
the Secretary of the Treasury, the notice required by sub-
paragraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
‘‘(D) A plan shall not be treated as failing to meet
the requirements of subparagraph (A) merely because no-
121
tice is provided before the adoption of the plan amendment
if no material modification of the amendment occurs be-
fore the amendment is adopted.’’.
(c) CLERICAL AMENDMENT.—The table of sections
for chapter 43 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this
Act.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986 and section 204(h)(3) of the Employee
Retirement Income Security Act of 1974 (as added
by the amendments made by this section), a plan
shall be treated as meeting the requirements of such
sections if it makes a good faith effort to comply
with such requirements.
(3) SPECIAL RULE.—The period for providing
any notice required by the amendments made by this
section shall not end before the date which is 3
months after the date of the enactment of this Act.
122
SEC. 348. PROTECTION OF INVESTMENT OF EMPLOYEE
CONTRIBUTIONS TO 401(K) PLANS.
(a) IN GENERAL.—Section 1524(b) of the Taxpayer
Relief Act of 1997 is amended to read as follows:
‘‘(b) EFFECTIVE DATE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to elective deferrals for plan years begin-
ning after December 31, 1998.
‘‘(2)
NONAPPLICATION
TO
PREVIOUSLY
AC-
QUIRED PROPERTY.—The amendments made by this
section shall not apply to any elective deferral which
is invested in assets consisting of qualifying em-
ployer securities, qualifying employer real property,
or both, if such assets were acquired before January
1, 1999.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply as if included in the provision of
the Taxpayer Relief Act of 1997 to which it relates.
SEC. 349. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of sec-
tion 415(b) (relating to limitation for defined benefit
plans) is amended to read as follows:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case
123
of
a
governmental
plan
(as
defined
in
section
414(d)) or a multiemployer plan (as defined in sec-
tion 414(f )), subparagraph (B) of paragraph (1)
shall not apply.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
SEC. 350. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1147) is amended—
(1) in subsection (a), by striking ‘‘2001 and
2005 on or after September 1 of each year involved’’
and inserting ‘‘2001, 2005, and 2009 in the month
of September of each year involved’’;
(2) in subsection (b), by adding at the end the
following new sentence: ‘‘To effectuate the purposes
of this paragraph, the Secretary may enter into a co-
operative agreement, pursuant to the Federal Grant
and Cooperative Agreement Act of 1977 (31 U.S.C.
6301 et seq.), with the American Savings Education
Council.’’;
(3) in subsection (e)(2)—
(A) by striking subparagraph (D) and in-
serting the following:
124
‘‘(D) the Chairman and Ranking Member
of the Subcommittee on Labor, Health and
Human Services, and Education of the Com-
mittee on Appropriations of the House of Rep-
resentatives and the Chairman and Ranking
Member of the Subcommittee on Labor, Health
and Human Services, and Education of the
Committee on Appropriations of the Senate;’’;
(B) by redesignating subparagraph (G) as
subparagraph (J); and
(C) by inserting after subparagraph (F)
the following new subparagraphs:
‘‘(G) the Chairman and Ranking Member
of the Committee on Finance of the Senate;
‘‘(H) the Chairman and Ranking Member
of the Committee on Ways and Means of the
House of Representatives;
‘‘(I) the Chairman and Ranking Member
of the Subcommittee on Employer-Employee
Relations of the Committee on Education and
the Workforce of the House of Representatives;
and’’;
(4) in subsection (e)(3)(A)—
(A) by striking ‘‘There shall be no more
than 200 additional participants.’’ and inserting
125
‘‘The participants in the National Summit shall
also include additional participants appointed
under this subparagraph.’’;
(B) by striking ‘‘one-half shall be ap-
pointed by the President,’’ in clause (i) and in-
serting ‘‘not more than 100 participants shall
be appointed under this clause by the Presi-
dent,’’, and by striking ‘‘and’’ at the end of
clause (i);
(C) by striking ‘‘one-half shall be ap-
pointed by the elected leaders of Congress’’ in
clause (ii) and inserting ‘‘not more than 100
participants
shall
be
appointed
under
this
clause by the elected leaders of Congress’’, and
by striking the period at the end of clause (ii)
and inserting ‘‘; and’’; and
(D) by adding at the end the following new
clause:
‘‘(iii) The President, in consultation
with the elected leaders of Congress re-
ferred to in subsection (a), may appoint
under this clause additional participants to
the National Summit. The number of such
additional
participants
appointed
under
this clause may not exceed the lesser of 3
126
percent of the total number of all addi-
tional participants appointed under this
paragraph, or 10. Such additional partici-
pants shall be appointed from persons
nominated by the organization referred to
in subsection (b)(2) which is made up of
private sector businesses and associations
partnered with Government entities to pro-
mote long term financial security in retire-
ment through savings and with which the
Secretary is required thereunder to consult
and cooperate and shall not be Federal,
State, or local government employees.’’;
(5) in subsection (e)(3)(B), by striking ‘‘Janu-
ary 31, 1998’’ in subparagraph (B) and inserting
‘‘May 1, 2001, May 1, 2005, and May 1, 2009, for
each of the subsequent summits, respectively’’;
(6) in subsection (f)(1)(C), by inserting ‘‘, no
later than 90 days prior to the date of the com-
mencement of the National Summit,’’ after ‘‘com-
ment’’ in paragraph (1)(C);
(7) in subsection (g), by inserting ‘‘, in con-
sultation with the congressional leaders specified in
subsection (e)(2),’’ after ‘‘report’’;
(8) in subsection (i)—
127
(A) by striking ‘‘beginning on or after Oc-
tober 1, 1997’’ in paragraph (1) and inserting
‘‘2001, 2005, and 2009’’; and
(B) by adding at the end the following new
paragraph:
‘‘(3) RECEPTION
AND
REPRESENTATION
AU-
THORITY.—The Secretary is hereby granted recep-
tion and representation authority limited specifically
to the events at the National Summit. The Secretary
shall use any private contributions received in con-
nection with the National Summit prior to using
funds appropriated for purposes of the National
Summit pursuant to this paragraph.’’; and
(9) in subsection (k)—
(A) by striking ‘‘shall enter into a contract
on a sole-source basis’’ and inserting ‘‘may
enter into a contract on a sole-source basis’’;
and
(B) by striking ‘‘fiscal year 1998’’ and in-
serting ‘‘fiscal years 2001, 2005, and 2009’’.
SEC.
351.
MODEL
SPOUSAL
CONSENT
LANGUAGE
AND
QUALIFIED DOMESTIC RELATIONS ORDER.
(a) MODEL SPOUSAL CONSENT LANGUAGE.—Section
205(c) of the Employee Retirement Income Security Act
128
of 1974 (29 U.S.C. 1055(c)) is amended by adding at the
end the following new paragraph:
‘‘(9) Not later than January 1, 2001, the Secretary
of Labor shall develop model language for the spousal con-
sent required under paragraph (2) which—
‘‘(A) is written in a manner calculated to be un-
derstood by the average person, and
‘‘(B) discloses in plain terms whether—
‘‘(i) the waiver is irrevocable, and
‘‘(ii) the waiver may be revoked by a quali-
fied domestic relations order.’’.
(b)
MODEL
QUALIFIED
DOMESTIC
RELATIONS
ORDER.—Section 206(d)(3) of such Act (29 U.S.C.
1056(d)(3)) is amended by adding at the end the following
new subparagraph:
‘‘(O) Not later than January 1, 2001, the Secretary
shall develop language for a qualified domestic relations
order which meets—
‘‘(i) the requirements of subparagraph (B)(i),
and
‘‘(ii) the requirements of this Act related to the
need to consider the treatment of any lump sum
payment, qualified joint and survivor annuity, or
qualified preretirement survivor annuity.’’.
129
(c) PUBLICITY.—The Secretary of Labor shall in-
clude publicity for the model language required by the
amendments made by this section in the pension outreach
efforts undertaken by each Secretary.
SEC. 352. ELIMINATION OF ERISA DOUBLE JEOPARDY.
(a) ELIMINATION OF SECOND LAWSUITS BY THE
SECRETARY.—Section 502(h) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(h)) is
amended—
(1) by inserting ‘‘(1)’’ after ‘‘(h)’’, and
(2) by adding at the end the following:
‘‘(2) In any case in which—
‘‘(A) a complaint in an action brought against
a person under subsection (a)(2) is served in accord-
ance with paragraph (1), and
‘‘(B) the action is maintained as a class action
or derivative action under the Federal Rules of Civil
Procedure,
‘‘(C) the action is resolved by a court-approved
settlement agreement,
‘‘(D) the complaint is served upon the Secretary
at least 90 days prior to final court approval of the
settlement agreement, and
‘‘(E) the Secretary receives a fully executed
copy of the settlement agreement within the time es-
130
tablished by the court for notifying the plan’s par-
ticipants of the proposed compromise pursuant to
Rule 23 or 23.1 of the Federal Rules of Civil Proce-
dure,
the Secretary shall be barred from litigating any claim
against such person under subsection (a)(2) that was, or
could have been, brought in that action with respect to
the same plan. Notwithstanding this paragraph, the Sec-
retary shall not be barred from litigating any claim
against such person under subsection (a)(2) if the Sec-
retary filed a complaint under subsection (a)(2) prior to
the final court approval of the settlement agreement.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section are effective with respect to all actions or
claims commenced by the Secretary that are pending on
or after the date of the enactment of this Act.
Subtitle E—Reducing Regulatory
Burdens
SEC. 361. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) IN GENERAL.—Section 412(c)(9) (relating to an-
nual valuation) is amended—
(1) by striking ‘‘For purposes’’ and inserting
the following:
‘‘(A) IN GENERAL.—For purposes’’, and
(2) by adding at the end the following:
131
‘‘(B)
ELECTION
TO
USE
PRIOR
YEAR
VALUATION.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), if, for any plan year—
‘‘(I) an election is in effect under
this subparagraph with respect to a
plan, and
‘‘(II) the assets of the plan are
not less than 125 percent of the
plan’s current liability (as defined in
paragraph (7)(B)), determined as of
the valuation date for the preceding
plan year,
then this section shall be applied using the
information available as of such valuation
date.
‘‘(ii) EXCEPTIONS.—
‘‘(I) ACTUAL VALUATION EVERY
3 YEARS.—Clause (i) shall not apply
for
more
than
consecutive
plan
years and valuation shall be under
subparagraph (A) with respect to any
plan year to which clause (i) does not
apply by reason of this subclause.
132
‘‘(II) REGULATIONS.—Clause (i)
shall not apply to the extent that
more frequent valuations are required
under the regulations under subpara-
graph (A).
‘‘(iii)
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iv) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’.
(b) AMENDMENTS
TO ERISA.—Paragraph (9) of
section 302(c) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1053(c)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and
(2) by adding at the end the following:
‘‘(B)(i) Except as provided in clause (ii), if, for any
plan year—
‘‘(I) an election is in effect under this subpara-
graph with respect to a plan, and
‘‘(II) the assets of the plan are not less than
125 percent of the plan’s current liability (as defined
133
in paragraph (7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
‘‘(ii)(I) Clause (i) shall not apply for more than 2
consecutive plan years and valuation shall be under sub-
paragraph (A) with respect to any plan year to which
clause (i) does not apply by reason of this subclause.
‘‘(II) Clause (i) shall not apply to the extent that
more frequent valuations are required under the regula-
tions under subparagraph (A).
‘‘(iii) Information under clause (i) shall, in accord-
ance with regulations, be actuarially adjusted to reflect
significant differences in participants.
‘‘(iv) An election under this subparagraph, once
made, shall be irrevocable without the consent of the Sec-
retary of the Treasury.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 362. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining
applicable dividends) is amended by striking ‘‘or’’ at the
end of clause (ii), by redesignating clause (iii) as clause
134
(iv), and by inserting after clause (ii) the following new
clause:
‘‘(iii) is, at the election of such par-
ticipants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 363. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) IN GENERAL.—Paragraph (4) of section 1114(c)
of the Tax Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to plan years beginning after De-
cember 31, 1999.
SEC. 364. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury
shall modify Treasury Regulations section 1.410(b)–6(g)
to provide that employees of an organization described in
section 403(b)(1)(A)(i) of the Internal Revenue Code of
1986 who are eligible to make contributions under section
135
403(b) of such Code pursuant to a salary reduction agree-
ment may be treated as excludable with respect to a plan
under section 401 (k) or (m) of such Code that is provided
under the same general arrangement as a plan under such
section 401(k), if—
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to
participate in such section 401(k) plan or section
401(m) plan, and
(2) 95 percent of the employees who are not
employees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such plan under such section 401 (k) or (m).
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth
in section 1426(b) of the Small Business Job Protection
Act of 1996.
SEC. 365. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (re-
lating to exclusion from gross income) is amended by
striking ‘‘or’’ at the end of paragraph (5), by striking the
period at the end of paragraph (6) and inserting ‘‘, or’’,
and by adding at the end the following new paragraph:
‘‘(7) qualified retirement planning services.’’.
136
(b) QUALIFIED RETIREMENT PLANNING SERVICES
DEFINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
‘‘(m) QUALIFIED RETIREMENT PLANNING SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified retirement planning serv-
ices’ means any retirement planning service provided
to an employee and his spouse by an employer main-
taining a qualified employer plan.
‘‘(2)
NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
employees only if such services are available on sub-
stantially the same terms to each member of the
group of employees normally provided education and
information regarding the employer’s qualified em-
ployer plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur-
poses of this subsection, the term ‘qualified employer
plan’ means a plan, contract, pension, or account de-
scribed in section 219(g)(5).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
137
SEC. 366. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual
returns with respect to one-participant retirement
plans to ensure that such plans with assets of
$250,000 or less as of the close of the plan year
need not file a return for that year.
(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan that—
(A) on the first day of the plan year—
(i) covered only the employer (and the
employer’s
spouse)
and
the
employer
owned the entire business (whether or not
incorporated), or
(ii) covered only one or more partners
(and their spouses) in a business partner-
ship (including partners in an S or C cor-
poration),
(B) meets the minimum coverage require-
ments of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any
138
other plan of the business that covers the em-
ployees of the business,
(C) does not provide benefits to anyone ex-
cept the employer (and the employer’s spouse)
or the partners (and their spouses),
(D) does not cover a business that is a
member of an affiliated service group, a con-
trolled group of corporations, or a group of
businesses under common control, and
(E) does not cover a business that leases
employees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of a retirement plan which covers less than 25 employees
on the first day of the plan year and meets the require-
ments described in subparagraphs (B), (D), and (E) of
subsection (a)(2), the Secretary of the Treasury shall pro-
vide for the filing of a simplified annual return that is
substantially similar to the annual return required to be
filed by a one-participant retirement plan.
139
(c) EFFECTIVE DATE.—The provisions of this section
shall take effect on January 1, 2001.
SEC. 367. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to up-
date and improve the Employee Plans Compliance Resolu-
tion System (or any successor program) giving special at-
tention to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program,
(2) taking into account special concerns and
circumstances that small employers face with respect
to compliance and correction of compliance failures,
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures,
(4) expanding the availability to correct insig-
nificant compliance failures under the Administra-
tive Policy Regarding Self-Correction during audit,
and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
140
SEC. 368. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended
to read as follows:
‘‘(5)(A) For purposes of this paragraph, the term
‘majority owner’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest
in such partnership, or
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
141
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B)
by
redesignating
paragraphs
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following:
142
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
be allocated to benefits described in subparagraph
(B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination
date) of their respective benefits described in that
subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as
defined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
143
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’.
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices
of intent to terminate are provided under sec-
144
tion
4041(a)(2)
of
such
Act
(29
U.S.C.
1341(a)(2)) after December 31, 2000, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such
date.
(2) CONFORMING AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on
the date of the enactment of this Act.
SEC. 369. MODIFICATION OF EXCLUSION FOR EMPLOYER
PROVIDED TRANSIT PASSES.
(a) IN GENERAL.—Section 132(f )(3) (relating to
cash reimbursements) is amended by striking the last sen-
tence.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 370. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m)
is amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection
(k), including regulations permitting appropriate ag-
gregation of plans and contributions.’’.
145
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
SEC.
371.
FLEXIBILITY
IN
NONDISCRIMINATION,
COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall, by regulation, provide that a plan shall be
deemed
to
satisfy
the
requirements
of
section
401(a)(4) of the Internal Revenue Code of 1986 if
such plan satisfies the facts and circumstances test
under section 401(a)(4) of such Code, as in effect
before January 1, 1994, but only if—
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test, and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies such
test.
Subparagraph (B) shall only apply to the extent pro-
vided by the Secretary.
(2) EFFECTIVE DATES.—
(A)
REGULATIONS.—The
regulation
re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2000.
146
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under paragraph (1)(A) shall not apply
before the first year beginning not less than
120 days after the date on which such condition
is prescribed.
(b) COVERAGE TEST.—
(1) IN GENERAL.—Section 410(b)(1) (relating
to minimum coverage requirements) is amended by
adding at the end the following:
‘‘(D) In the case that the plan fails to
meet the requirements of subparagraphs (A),
(B) and (C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’.
147
(2) EFFECTIVE DATES.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2000.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under regulations prescribed by the Sec-
retary under section 410(b)(1)(D) of the Inter-
nal Revenue Code of 1986 shall not apply be-
fore the first year beginning not less than 120
days after the date on which such condition is
prescribed.
(c) LINE OF BUSINESS RULES.—The Secretary of
the Treasury shall, on or before December 31, 2000, mod-
ify the existing regulations issued under section 414(r) of
the Internal Revenue Code of 1986 in order to expand
(to the extent that the Secretary determines appropriate)
the ability of a pension plan to demonstrate compliance
with the line of business requirements based upon the
facts and circumstances surrounding the design and oper-
ation of the plan, even though the plan is unable to satisfy
the mechanical tests currently used to determine compli-
ance.
148
SEC. 372. EXTENSION TO INTERNATIONAL ORGANIZATIONS
OF MORATORIUM ON APPLICATION OF CER-
TAIN NONDISCRIMINATION RULES APPLICA-
BLE TO STATE AND LOCAL PLANS.
(a) IN GENERAL.—Subparagraph (G) of section
401(a)(5), subparagraph (H) of section 401(a)(26), sub-
paragraph (G) of section 401(k)(3), and paragraph (2) of
section 1505(d) of the Taxpayer Relief Act of 1997 are
each amended by inserting ‘‘or by an international organi-
zation which is described in section 414(d)’’ after ‘‘or in-
strumentality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The headings for subparagraph (G) of sec-
tion 401(a)(5) and subparagraph (H) of section
401(a)(26) are each amended by inserting ‘‘AND
INTERNATIONAL
ORGANIZATION’’
after
‘‘GOVERN-
MENTAL’’.
(2) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘STATE AND LOCAL GOVERN-
MENTAL
AND
INTERNATIONAL
ORGANIZATION
PLANS.—’’ after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
149
SEC. 373. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) IN GENERAL.—Subparagraph (A) of section
205(c)(7) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1055) is amended by
striking ‘‘90-day’’ and inserting ‘‘180-day’’.
(2)
MODIFICATION
OF
REGULATIONS.—The
Secretary of the Treasury shall modify the regula-
tions of such Secretary under part 2 of subtitle B
of title I of the Employee Retirement Income Secu-
rity Act of 1974 to the extent that they relate to
sections 203(e) and 205 of such Act to substitute
‘‘180 days’’ for ‘‘90 days’’ each place it appears.
(3) EFFECTIVE DATE.—The amendments made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 2000.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section 205
of the Employee Retirement Income Security Act of
1974 to provide that the description of a partici-
pant’s right, if any, to defer receipt of a distribution
150
shall also describe the consequences of failing to
defer such receipt.
(2) EFFECTIVE DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 2000.
SEC. 374. ANNUAL REPORT DISSEMINATION.
(a) IN GENERAL.—Section 104(b)(3) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1024(b)(3)) is amended by striking ‘‘shall furnish’’
and inserting ‘‘shall make available for examination (and,
upon request, shall furnish)’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to reports for years beginning after
December 31, 1998.
SEC. 375. EXCESS BENEFIT PLANS.
(a) IN GENERAL.—Section 3(36) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1002(36)) is amended to read as follows:
‘‘(36) The term ‘excess benefit plan’ means a plan,
without regard to whether such plan is funded, maintained
by an employer solely for the purpose of providing benefits
to employees in excess of any limitation imposed by section
401(a)(17) or 415 of the Internal Revenue Code of 1986
or any other limitation on contributions or benefits in such
Code on plans to which any of such sections apply. To
151
the extent that a separable part of a plan (as determined
by the Secretary of Labor) maintained by an employer is
maintained for such purpose, that part shall be treated
as a separate plan which is an excess benefit plan.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1999.
SEC. 376. BENEFIT SUSPENSION NOTICE.
(a) MODIFICATION OF REGULATION.—The Secretary
of Labor shall modify the regulation under section
203(a)(3)(B) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide
that, except in the case of employment, subsequent to the
commencement of payment of benefits, with a former em-
ployer, the notification required by such regulation—
(1) may be included in the summary plan de-
scription for the plan furnished in accordance with
section 104(b) of such Act (29 U.S.C. 1024(b)),
rather than in a separate notice, and
(2) need not include a copy of the relevant plan
provisions.
(c)
EFFECTIVE
DATE.—The
modification
made
under this section shall apply to plan years beginning after
December 31, 1999.
152
SEC. 377. CLARIFICATION OF CHURCH WELFARE PLAN STA-
TUS UNDER STATE INSURANCE LAW.
For purposes of determining the status under State
insurance law of a church plan (as defined in section
414(e) of the Internal Revenue Code and section 3(33)
of the Employee Retirement Income Security Act that is
a welfare plan (as defined in section 3(1)), such church
plan (and any trust under such plan) shall be deemed a
single-employer plan that—
(1) reimburses costs from general church as-
sets;
(2) purchases insurance coverage with general
church assets; or
(3) both.
For purposes of this paragraph, the term ‘‘reimbursing
costs from general church assets’’ means engaging in a
practice that does not have the effect of transferring or
spreading risk. The scope of this paragraph is limited to
determining the status of a church welfare plan under
State insurance law, and does not otherwise recharacter-
ized the status, or modify or affect the rights, of any plan
participant, including those who make plan contributions.
Subtitle F—Plan Amendments
SEC. 381. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
153
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan
during
the
period
described
in
subsection
(b)(2)(A), and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this title, or pursuant to any regulation issued
under this title, and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2003.
In the case of a government plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986),
this paragraph shall be applied by substituting
‘‘2005’’ for ‘‘2003’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(A) during the period—
154
(i) beginning on the date the legisla-
tive or regulatory amendment described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative or regulatory
amendment, the effective date specified by
the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date
the plan or contract amendment is adopt-
ed),
the plan or contract is operated as if such plan
or contract amendment were in effect, and
(B) such plan or contract amendment ap-
plies retroactively for such period.
TITLE IV—EXTENSION OF WORK
OPPORTUNITY
CREDIT
AND
WELFARE-TO-WORK CREDIT
SEC. 401. WORK OPPORTUNITY CREDIT AND WELFARE-TO-
WORK CREDIT.
(a) TEMPORARY EXTENSION.—Sections 51(c)(4)(B)
and 51A(f ) (relating to termination) are each amended
by striking ‘‘June 30, 1999’’ and inserting ‘‘December 31,
2001’’.
155
(b) CLARIFICATION OF FIRST YEAR OF EMPLOY-
MENT.—Paragraph (2) of section 51(i) is amended by
striking ‘‘during which he was not a member of a targeted
group’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to individuals who begin work for
the employer after June 30, 1999.
TITLE V—ESTATE TAX RELIEF
Subtitle A—Reductions of Estate
and Gift Tax Rates
SEC. 501. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) MAXIMUM RATE OF TAX REDUCED TO 50 PER-
CENT.—
(1) IN GENERAL.—The table contained in sec-
tion 2001(c)(1) is amended by striking the two high-
est brackets and inserting the following:
‘‘Over $2,500,000 ..........................
$1,025,800, plus 50% of the excess
over $2,500,000.’’.
(2) PHASE-IN OF REDUCED RATE.—Subsection
(c) of section 2001 is amended by adding at the end
the following new paragraph:
‘‘(3) PHASE-IN
OF
REDUCED
RATE.—In the
case of decedents dying, and gifts made, during
2001, the last item in the table contained in para-
graph (1) shall be applied by substituting ‘53%’ for
‘50%’.’’.
156
(b)
REPEAL
OF
PHASEOUT
OF
GRADUATED
RATES.—Subsection (c) of section 2001 is amended by
striking paragraph (2) and redesignating paragraph (3),
as added by subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS OF RATES OF TAX.—
Subsection (c) of section 2001, as so amended, is amended
by adding at the end the following new paragraph:
‘‘(3) PHASEDOWN OF TAX.—In the case of es-
tates of decedents dying, and gifts made, during any
calendar year after 2002—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (C), the tentative tax under this
subsection shall be determined by using a table
prescribed by the Secretary (in lieu of using the
table contained in paragraph (1)) which is the
same as such table; except that—
‘‘(i) each of the rates of tax shall be
reduced
by
the
number
of
percentage
points
determined
under
subparagraph
(B), and
‘‘(ii) the amounts setting forth the tax
shall be adjusted to the extent necessary to
reflect the adjustments under clause (i).
‘‘(B)
PERCENTAGE
POINTS
OF
REDUC-
TION.—
157
The number of
‘‘For calendar year:
percentage points is:
2003 .............................................................................
1.0
2004 and thereafter .....................................................
2.0.
‘‘(C) COORDINATION
WITH
CREDIT
FOR
STATE
DEATH
TAXES.—Rules similar to the
rules of subparagraph (A) shall apply to the
table contained in section 2011(b) except that
the Secretary shall prescribe percentage point
reductions which maintain the proportionate re-
lationship (as in effect before any reduction
under this paragraph) between the credit under
section 2011 and the tax rates under subsection
(c).’’.
(d) EFFECTIVE DATES.—
(1) SUBSECTIONS
(a)
AND
(b).—The amend-
ments made by subsections (a) and (b) shall apply
to estates of decedents dying, and gifts made, after
December 31, 2000.
(2) SUBSECTION (c).—The amendment made by
subsection (c) shall apply to estates of decedents
dying, and gifts made, after December 31, 2002.
158
Subtitle
B—Unified
Credit
Re-
placed With Unified Exemption
Amount
SEC. 511. UNIFIED CREDIT AGAINST ESTATE AND GIFT
TAXES REPLACED WITH UNIFIED EXEMPTION
AMOUNT.
(a) IN GENERAL.—
(1) ESTATE TAX.—Part IV of subchapter A of
chapter 11 is amended by inserting after section
2051 the following new section:
‘‘SEC. 2052. EXEMPTION.
‘‘(a) IN GENERAL.—For purposes of the tax imposed
by section 2001, the value of the taxable estate shall be
determined by deducting from the value of the gross estate
an amount equal to the excess (if any) of—
‘‘(1) the exemption amount for the calendar
year in which the decedent died, over
‘‘(2) the sum of—
‘‘(A) the aggregate amount allowed as an
exemption under section 2521 with respect to
gifts made by the decedent after December 31,
2000, and
‘‘(B) the aggregate amount of gifts made
by the decedent for which credit was allowed by
section 2505 (as in effect on the day before the
159
date of the enactment of the Wage and Employ-
ment Growth Act of 1999).
Gifts which are includible in the gross estate of the dece-
dent shall not be taken into account in determining the
amounts under paragraph (2).
‘‘(b) EXEMPTION AMOUNT.—For purposes of sub-
section (a), the term ‘exemption amount’ means the
amount determined in accordance with the following table:
‘‘In the case of
The exemption
calendar year:
amount is:
2001 ..................................................................................
$675,000
2002 and 2003 ..................................................................
$700,000
2004 ..................................................................................
$850,000
2005 ..................................................................................
$950,000
2006 or thereafter .............................................................
$1,000,000.’’.
(2) GIFT TAX.—Subchapter C of chapter 12
(relating to deductions) is amended by inserting be-
fore section 2522 the following new section:
‘‘SEC. 2521. EXEMPTION.
‘‘In computing taxable gifts for any calendar year,
there shall be allowed as a deduction in the case of a cit-
izen or resident of the United States an amount equal to
the excess of—
‘‘(1) the exemption amount determined under
section 2052 for such calendar year, over
‘‘(2) the sum of—
‘‘(A) the aggregate amount allowed as an
exemption under this section for all preceding
calendar years after 2000, and
160
‘‘(B) the aggregate amount of gifts for
which credit was allowed by section 2505 (as in
effect on the day before the date of the enact-
ment of the Wage and Employment Growth Act
of 1999).’’.
(b) REPEAL OF UNIFIED CREDITS.—
(1) Section 2010 (relating to unified credit
against estate tax) is hereby repealed.
(2) Section 2505 (relating to unified credit
against gift tax) is hereby repealed.
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 2001(b)(1) is
amended by inserting before the comma ‘‘reduced by
the amount described in section 2052(a)(2)(B)’’.
(2)(A)
Subsection
(b)
of
section
2011
is
amended—
(i) by striking ‘‘adjusted’’ in the table, and
(ii) by striking the last sentence.
(B) Subsection (f ) of section 2011 is amended
by striking ‘‘, reduced by the amount of the unified
credit provided by section 2010’’.
(3) Subsection (a) of section 2012 is amended
by striking ‘‘and the unified credit provided by sec-
tion 2010’’.
161
(4)(A) Subsection (b) of section 2013 is amend-
ed by inserting before the period at the end of the
first sentence ‘‘and increased by the exemption al-
lowed under section 2052 or 2106(a)(4) (or the cor-
responding provisions of prior law) in determining
the taxable estate of the transferor for purposes of
the estate tax’’.
(B) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2010,’’.
(5) Paragraph (2) of section 2014(b) is amend-
ed by striking ‘‘2010,’’.
(6) Clause (ii) of section 2056A(b)(12)(C) is
amended to read as follows:
‘‘(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of
the credit allowable under section 2010 (as
in effect on the day before the date of the
enactment of the Wage and Employment
Growth Act of 1999) or the exemption al-
lowable under section 2052 with respect to
the decedent as a credit under section
2505 (as so in effect) or exemption under
section 2521 (as the case may be) allow-
able to such surviving spouse for purposes
of determining the amount of the exemp-
162
tion allowable under section 2521 with re-
spect to taxable gifts made by the sur-
viving spouse during the year in which the
spouse becomes a citizen or any subse-
quent year,’’.
(7) Paragraph (3) of section 2057(a) is amend-
ed to read as follows:
‘‘(3)
COORDINATION
WITH
EXEMPTION
AMOUNT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), if this section applies to an
estate, the exemption amount under section
2052 shall be $625,000.
‘‘(B) INCREASE IN EXEMPTION AMOUNT IF
DEDUCTION IS LESS THAN $675,000.—If the de-
duction allowed by this section is less than
$675,000, the amount of the exemption amount
under section 2052 shall be increased (but not
above the amount which would apply to the es-
tate without regard to this section) by the ex-
cess of $675,000 over the amount of the deduc-
tion allowed.’’.
(8)(A) Subparagraph (B) of section 2101(b)(1)
is amended by inserting before the comma ‘‘reduced
by the aggregate amount of gifts for which credit
163
was allowed by section 2505 (as in effect on the day
before the date of the enactment of the Wage and
Employment Growth Act of 1999)’’
(B) Subsection (b) of section 2101 is amended
by striking the last sentence.
(9) Section 2102 is amended by striking sub-
section (c).
(10) Subsection (a) of section 2106 is amended
by adding at the end the following new paragraph:
‘‘(4) EXEMPTION.—
‘‘(A)
IN
GENERAL.—An
exemption
of
$60,000.
‘‘(B) RESIDENTS OF POSSESSIONS OF THE
UNITED
STATES.—In the case of a decedent
who is considered to be a nonresident not a cit-
izen of the United States under section 2209,
the exemption under this paragraph shall be the
greater of—
‘‘(i) $60,000, or
‘‘(ii)
that
proportion
of
$175,000
which the value of that part of the dece-
dent’s gross estate which at the time of his
death is situated in the United States
bears to the value of his entire gross estate
wherever situated.
164
‘‘(C) SPECIAL RULES.—
‘‘(i)
COORDINATION
WITH
TREA-
TIES.—To the extent required under any
treaty obligation of the United States, the
exemption allowed under this paragraph
shall be equal to the amount which bears
the same ratio to the exemption amount
under section 2052 (for the calendar year
in which the decedent died) as the value of
the part of the decedent’s gross estate
which at the time of his death is situated
in the United States bears to the value of
his entire gross estate wherever situated.
For purposes of the preceding sentence,
property shall not be treated as situated in
the United States if such property is ex-
empt from the tax imposed by this sub-
chapter under any treaty obligation of the
United States.
‘‘(ii) COORDINATION WITH GIFT TAX
EXEMPTION AND UNIFIED CREDIT.—If an
exemption has been allowed under section
2521 (or a credit has been allowed under
section 2505 as in effect on the day before
the date of the enactment of the Wage and
165
Employment Growth Act of 1999) with re-
spect to any gift made by the decedent,
each dollar amount contained in subpara-
graph (A) or (B) or the exemption amount
applicable under clause (i) of this subpara-
graph (whichever applies) shall be reduced
by the exemption so allowed under 2521
(or, in the case of such a credit, by the
amount of the gift for which the credit was
so allowed).’’.
(11)(A)
Subsection
(a)
of
section
2107
is
amended by adding at the end the following new
paragraph:
‘‘(3) LIMITATION
ON
EXEMPTION
AMOUNT.—
Subparagraphs (B) and (C) of section 2106(a)(4)
shall not apply in applying section 2106 for purposes
of this section.’’.
(B)
Subsection
(c)
of
section
2107
is
amended—
(i) by striking paragraph (1) and by
redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively, and
(ii) by striking the second sentence of
paragraph (2) (as so redesignated).
166
(12) Section 2206 is amended by striking ‘‘the
taxable estate’’ in the first sentence and inserting
‘‘the sum of the taxable estate and the amount of
the
exemption
allowed
under
section
2052
or
2106(a)(4) in computing the taxable estate’’.
(13) Section 2207 is amended by striking ‘‘the
taxable estate’’ in the first sentence and inserting
‘‘the sum of the taxable estate and the amount of
the
exemption
allowed
under
section
2052
or
2106(a)(4) in computing the taxable estate’’.
(14) Subparagraph (B) of section 2207B(a)(1)
is amended to read as follows:
‘‘(B) the sum of the taxable estate and the
amount of the exemption allowed under section
2052 or 2106(a)(4) in computing the taxable
estate.’’.
(15) Subsection (a) of section 2503 is amended
by striking ‘‘section 2522’’ and inserting ‘‘section
2521’’.
(16)
Paragraph
(1)
of
section
6018(a)
is
amended
by
striking
‘‘the
applicable
exclusion
amount in effect under section 2010(c)’’ and insert-
ing ‘‘the exemption amount under section 2052’’.
(17) Subparagraph (A) of section 6601( j)(2) is
amended to read as follows:
167
‘‘(A) the amount of the tax which would be
imposed by chapter 11 on an amount of taxable
estate equal to $1,000,000, or’’.
(18) The table of sections for part II of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2010.
(19) The table of sections for part IV of sub-
chapter A of chapter 11 is amended by inserting
after the item relating to section 2051 the following
new item:
‘‘Sec. 2052. Exemption.’’.
(20) The table of sections for subchapter A of
chapter 12 is amended by striking the item relating
to section 2505.
(21) The table of sections for subchapter C of
chapter 12 is amended by inserting before the item
relating to section 2522 the following new item:
‘‘Sec. 2521. Exemption.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section—
(1) insofar as they relate to the tax imposed by
chapter 11 of the Internal Revenue Code of 1986,
shall apply to estates of decedents dying after De-
cember 31, 2000, and
168
(2) insofar as they relate to the tax imposed by
chapter 12 of such Code, shall apply to gifts made
after December 31, 2000.
Subtitle C—Modifications of
Generation-skipping Transfer Tax
SEC. 521. DEEMED ALLOCATION OF GST EXEMPTION TO
LIFETIME TRANSFERS TO TRUSTS; RETRO-
ACTIVE ALLOCATIONS.
(a) IN GENERAL.—Section 2632 (relating to special
rules for allocation of GST exemption) is amended by re-
designating subsection (c) as subsection (e) and by insert-
ing after subsection (b) the following new subsections:
‘‘(c) DEEMED ALLOCATION TO CERTAIN LIFETIME
TRANSFERS TO GST TRUSTS.—
‘‘(1) IN GENERAL.—If any individual makes an
indirect skip during such individual’s lifetime, any
unused portion of such individual’s GST exemption
shall be allocated to the property transferred to the
extent necessary to make the inclusion ratio for such
property zero. If the amount of the indirect skip ex-
ceeds such unused portion, the entire unused portion
shall be allocated to the property transferred.
‘‘(2) UNUSED PORTION.—For purposes of para-
graph (1), the unused portion of an individual’s
169
GST exemption is that portion of such exemption
which has not previously been—
‘‘(A) allocated by such individual,
‘‘(B) treated as allocated under subsection
(b) with respect to a direct skip occurring dur-
ing or before the calendar year in which the in-
direct skip is made, or
‘‘(C) treated as allocated under paragraph
(1) with respect to a prior indirect skip.
‘‘(3) DEFINITIONS.—
‘‘(A) INDIRECT
SKIP.—For purposes of
this subsection, the term ‘indirect skip’ means
any transfer of property (other than a direct
skip) subject to the tax imposed by chapter 12
made to a GST trust.
‘‘(B) GST TRUST.—The term ‘GST trust’
means a trust that could have a generation-
skipping transfer with respect to the transferor
unless—
‘‘(i) the trust instrument provides that
more than 25 percent of the trust corpus
must be distributed to or may be with-
drawn by 1 or more individuals who are
non-skip persons—
170
‘‘(I) before the date that the indi-
vidual attains age 46,
‘‘(II) on or before one or more
dates specified in the trust instrument
that will occur before the date that
such individual attains age 46, or
‘‘(III) upon the occurrence of an
event that, in accordance with regula-
tions prescribed by the Secretary, may
reasonably be expected to occur before
the date that such individual attains
age 46;
‘‘(ii) the trust instrument provides
that more than 25 percent of the trust cor-
pus must be distributed to or may be with-
drawn by one or more individuals who are
non-skip persons and who are living on the
date of death of another person identified
in the instrument (by name or by class)
who is more than 10 years older than such
individuals;
‘‘(iii) the trust instrument provides
that, if one or more individuals who are
non-skip persons die on or before a date or
event described in clause (i) or (ii), more
171
than 25 percent of the trust corpus either
must be distributed to the estate or estates
of one or more of such individuals or is
subject to a general power of appointment
exercisable by one or more of such individ-
uals;
‘‘(iv) the trust is a trust any portion
of which would be included in the gross es-
tate of a non-skip person (other than the
transferor) if such person died immediately
after the transfer;
‘‘(v) the trust is a charitable lead an-
nuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
‘‘(vi) the trust is a trust with respect
to which a deduction was allowed under
section 2522 for the amount of an interest
in the form of the right to receive annual
payments of a fixed percentage of the net
fair market value of the trust property (de-
termined yearly) and which is required to
pay principal to a non-skip person if such
172
person is alive when the yearly payments
for which the deduction was allowed termi-
nate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to
be includible in the gross estate of a non-skip
person or subject to a right of withdrawal by
reason of such person holding a right to with-
draw so much of such property as does not ex-
ceed the amount referred to in section 2503(b)
with respect to any transferor, and it shall be
assumed that powers of appointment held by
non-skip persons will not be exercised.
‘‘(4) AUTOMATIC
ALLOCATIONS
TO
CERTAIN
GST TRUSTS.—For purposes of this subsection, an
indirect skip to which section 2642(f ) applies shall
be deemed to have been made only at the close of
the estate tax inclusion period. The fair market
value of such transfer shall be the fair market value
of the trust property at the close of the estate tax
inclusion period.
‘‘(5) APPLICABILITY AND EFFECT.—
‘‘(A) IN GENERAL.—An individual—
‘‘(i) may elect to have this subsection
not apply to—
173
‘‘(I) an indirect skip, or
‘‘(II) any or all transfers made
by such individual to a particular
trust, and
‘‘(ii) may elect to treat any trust as a
GST trust for purposes of this subsection
with respect to any or all transfers made
by such individual to such trust.
‘‘(B) ELECTIONS.—
‘‘(i) ELECTIONS
WITH
RESPECT
TO
INDIRECT SKIPS.—An election under sub-
paragraph (A)(i)(I) shall be deemed to be
timely if filed on a timely filed gift tax re-
turn for the calendar year in which the
transfer was made or deemed to have been
made pursuant to paragraph (4) or on
such later date or dates as may be pre-
scribed by the Secretary.
‘‘(ii) OTHER ELECTIONS.—An election
under clause (i)(II) or (ii) of subparagraph
(A) may be made on a timely filed gift tax
return for the calendar year for which the
election is to become effective.
‘‘(d) RETROACTIVE ALLOCATIONS.—
‘‘(1) IN GENERAL.—If—
174
‘‘(A) a non-skip person has an interest or
a future interest in a trust to which any trans-
fer has been made,
‘‘(B) such person—
‘‘(i) is a lineal descendant of a grand-
parent of the transferor or of a grand-
parent of the transferor’s spouse or former
spouse, and
‘‘(ii) is assigned to a generation below
the generation assignment of the trans-
feror, and
‘‘(C) such person predeceases the trans-
feror,
then the transferor may make an allocation of any
of such transferor’s unused GST exemption to any
previous transfer or transfers to the trust on a
chronological basis.
‘‘(2) SPECIAL RULES.—If the allocation under
paragraph (1) by the transferor is made on a gift
tax return filed on or before the date prescribed by
section 6075(b) for gifts made within the calendar
year
within
which
the
non-skip
person’s
death
occurred—
‘‘(A) the value of such transfer or trans-
fers for purposes of section 2642(a) shall be de-
175
termined as if such allocation had been made
on a timely filed gift tax return for each cal-
endar year within which each transfer was
made,
‘‘(B) such allocation shall be effective im-
mediately before such death, and
‘‘(C) the amount of the transferor’s un-
used GST exemption available to be allocated
shall be determined immediately before such
death.
‘‘(3) FUTURE INTEREST.—For purposes of this
subsection, a person has a future interest in a trust
if the trust may permit income or corpus to be paid
to such person on a date or dates in the future.’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 2632(b) is amended by striking ‘‘with respect to
a direct skip’’ and inserting ‘‘or subsection (c)(1)’’.
(c) EFFECTIVE DATES.—
(1) DEEMED ALLOCATION.—Section 2632(c) of
the Internal Revenue Code of 1986 (as added by
subsection (a)), and the amendment made by sub-
section (b), shall apply to transfers subject to chap-
ter 11 or 12 made after December 31, 1999, and to
estate tax inclusion periods ending after December
31, 1999.
176
(2)
RETROACTIVE
ALLOCATIONS.—Section
2632(d) of the Internal Revenue Code of 1986 (as
added by subsection (a)) shall apply to deaths of
non-skip persons occurring after the date of the en-
actment of this Act.
SEC. 522. SEVERING OF TRUSTS.
(a) IN GENERAL.—Subsection (a) of section 2642
(relating to inclusion ratio) is amended by adding at the
end the following new paragraph:
‘‘(3) SEVERING OF TRUSTS.—
‘‘(A) IN GENERAL.—If a trust is severed in
a qualified severance, the trusts resulting from
such severance shall be treated as separate
trusts thereafter for purposes of this chapter.
‘‘(B) QUALIFIED
SEVERANCE.—For pur-
poses of subparagraph (A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied severance’ means the division of a sin-
gle trust and the creation (by any means
available under the governing instrument
or under local law) of two or more trusts
if—
‘‘(I) the single trust was divided
on a fractional basis, and
177
‘‘(II) the terms of the new trusts,
in the aggregate, provide for the same
succession of interests of beneficiaries
as are provided in the original trust.
‘‘(ii) TRUSTS WITH INCLUSION RATIO
GREATER THAN ZERO.—If a trust has an
inclusion ratio of greater than zero and
less than 1, a severance is a qualified sev-
erance only if the single trust is divided
into two trusts, one of which receives a
fractional share of the total value of all
trust assets equal to the applicable fraction
of the single trust immediately before the
severance. In such case, the trust receiving
such fractional share shall have an inclu-
sion ratio of zero and the other trust shall
have an inclusion ratio of 1.
‘‘(iii)
REGULATIONS.—The
term
‘qualified severance’ includes any other
severance permitted under regulations pre-
scribed by the Secretary.
‘‘(C)
TIMING
AND
MANNER
OF
SEVERANCES.—A severance pursuant to this
paragraph may be made at any time. The Sec-
retary shall prescribe by forms or regulations
178
the manner in which the qualified severance
shall be reported to the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to severances after the date of the
enactment of this Act.
SEC. 523. MODIFICATION OF CERTAIN VALUATION RULES.
(a) GIFTS FOR WHICH GIFT TAX RETURN FILED OR
DEEMED ALLOCATION MADE.—Paragraph (1) of section
2642(b) (relating to valuation rules, etc.) is amended to
read as follows:
‘‘(1) GIFTS
FOR
WHICH
GIFT
TAX
RETURN
FILED OR DEEMED ALLOCATION MADE.—If the allo-
cation of the GST exemption to any transfers of
property is made on a gift tax return filed on or be-
fore the date prescribed by section 6075(b) for such
transfer or is deemed to be made under section 2632
(b)(1) or (c)(1)—
‘‘(A) the value of such property for pur-
poses of subsection (a) shall be its value as fi-
nally determined 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 pe-
riod, its value at the time of the close of the es-
tate tax inclusion period, and
179
‘‘(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
section 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
transferor, the value of such property for pur-
poses of subsection (a) shall be its value as fi-
nally determined for purposes of chapter 11; ex-
cept that, if the requirements prescribed by the
Secretary respecting allocation of post-death
changes in value are not met, the value of such
property shall be determined as of the time of
the distribution concerned.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the amend-
ments made by section 1431 of the Tax Reform Act of
1986.
SEC. 524. RELIEF PROVISIONS.
(a) IN GENERAL.—Section 2642 is amended by add-
ing at the end the following new subsection:
180
‘‘(g) RELIEF PROVISIONS.—
‘‘(1) RELIEF FOR LATE ELECTIONS.—
‘‘(A) IN GENERAL.—The Secretary shall by
regulation prescribe such circumstances and
procedures 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
subsection
(b)(3) or (c)(5) of section 2632.
Such regulations shall include procedures for
requesting comparable relief with respect to
transfers made before the date of the enactment
of this paragraph.
‘‘(B)
BASIS
FOR
DETERMINATIONS.—In
determining whether to grant relief under this
paragraph, the Secretary shall take into ac-
count all relevant circumstances, including evi-
dence of intent contained in the trust instru-
ment or instrument of transfer and such other
factors as the Secretary deems relevant. For
purposes of determining whether to grant relief
under this paragraph, the time for making the
181
allocation (or election) shall be treated as if not
expressly prescribed by statute.
‘‘(2) SUBSTANTIAL
COMPLIANCE.—An alloca-
tion of GST exemption under section 2632 that
demonstrates an intent to have the lowest possible
inclusion ratio with respect to a transfer or a trust
shall be deemed to be an allocation of so much of
the transferor’s unused GST exemption as produces
the lowest possible inclusion ratio. In determining
whether there has been substantial compliance, all
relevant circumstances shall be taken into account,
including evidence 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) of the Internal Revenue Code of 1986
(as added by subsection (a)) shall apply to requests
pending on, or filed after, the date of the enactment
of this Act.
(2)
SUBSTANTIAL
COMPLIANCE.—Section
2642(g)(2) of such Code (as so added) shall take ef-
fect on the date of the enactment of this Act and
shall apply to allocations made prior to such date for
purposes of determining the tax consequences of
182
generation-skipping transfers with respect to which
the period of time for filing claims for refund has
not expired. No implication is intended with respect
to the availability of relief for late elections or the
application of a rule of substantial compliance prior
to the enactment of this amendment.
Subtitle D—Conservation
Easements
SEC. 531. EXPANSION OF ESTATE TAX RULE FOR CON-
SERVATION EASEMENTS.
(a) WHERE LAND IS LOCATED.—
(1)
IN
GENERAL.—Clause
(i)
of
section
2031(c)(8)(A) (defining land subject to a conserva-
tion easement) is amended—
(A) by striking ‘‘25 miles’’ both places it
appears and inserting ‘‘50 miles’’, and
(B) striking ‘‘10 miles’’ and inserting ‘‘25
miles’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to estates of decedents
dying after December 31, 1999.
(b) CLARIFICATION
OF DATE
FOR DETERMINING
VALUE OF LAND AND EASEMENT.—
(1) IN GENERAL.—Section 2031(c)(2) (defining
applicable percentage) is amended by adding at the
183
end the following new sentence: ‘‘The values taken
into account under the preceding sentence shall be
such values as of the date of the contribution re-
ferred to in paragraph (8)(B).’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to estates of decedents
dying after December 31, 1997.
TITLE VI—TAX RELIEF FOR DIS-
TRESSED COMMUNITIES AND
INDUSTRIES
Subtitle A—American Community
Renewal Act of 1999
SEC. 601. SHORT TITLE.
This subtitle may be cited as the ‘‘American Commu-
nity Renewal Act of 1999’’.
SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RE-
NEWAL COMMUNITIES.
(a) IN GENERAL.—Chapter 1 is amended by adding
at the end the following new subchapter:
‘‘Subchapter X—Renewal Communities
‘‘Part
I. Designation.
‘‘Part
II. Renewal community capital gain; renewal community
business.
‘‘Part
III. Family development accounts.
‘‘Part
IV. Additional incentives.
‘‘PART I—DESIGNATION
‘‘Sec. 1400E. Designation of renewal communities.
184
‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
‘‘(a) DESIGNATION.—
‘‘(1) DEFINITIONS.—For purposes of this title,
the term ‘renewal community’ means any area—
‘‘(A) which is nominated by one or more
local governments and the State or States in
which it is located for designation as a renewal
community (hereinafter in this section referred
to as a ‘nominated area’); and
‘‘(B) which the Secretary of Housing and
Urban Development designates as a renewal
community, after consultation with—
‘‘(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury; the
Director of the Office of Management and
Budget;
and
the
Administrator
of
the
Small Business Administration; and
‘‘(ii) in the case of an area on an In-
dian reservation, the Secretary of the Inte-
rior.
‘‘(2) NUMBER OF DESIGNATIONS.—
‘‘(A)
IN
GENERAL.—The
Secretary
of
Housing and Urban Development may des-
ignate not more than 15 nominated areas as re-
newal communities of which—
185
‘‘(i) only 5 may be designated during
the first 12 months of the period referred
to in paragraph (4)(B),
‘‘(ii) an additional 5 may be des-
ignated during the second 12 months of
such period, and
‘‘(iii) the remaining 5 may be des-
ignated during the last 12 months of such
period.
‘‘(B) MINIMUM
DESIGNATION
IN
RURAL
AREAS.—Of the areas designated under para-
graph (1), at least 3 must be areas—
‘‘(i) which are within a local govern-
ment jurisdiction or jurisdictions with a
population of less than 50,000,
‘‘(ii) which are outside of a metropoli-
tan statistical area (within the meaning of
section 143(k)(2)(B)), or
‘‘(iii) which are determined by the
Secretary of Housing and Urban Develop-
ment, after consultation with the Secretary
of Commerce, to be rural areas.
‘‘(3) AREAS DESIGNATED BASED ON DEGREE
OF POVERTY, ETC.—
186
‘‘(A) IN GENERAL.—Except as otherwise
provided in this section, the nominated areas
designated as renewal communities under this
subsection shall be those nominated areas with
the highest average ranking with respect to the
criteria described in subparagraphs (B), (C),
and (D) of subsection (c)(3). For purposes of
the preceding sentence, an area shall be ranked
within each such criterion on the basis of the
amount by which the area exceeds such cri-
terion, with the area which exceeds such cri-
terion by the greatest amount given the highest
ranking.
‘‘(B)
EXCEPTION
WHERE
INADEQUATE
COURSE OF ACTION, ETC.—An area shall not be
designated under subparagraph (A) if the Sec-
retary of Housing and Urban Development de-
termines that the course of action described in
subsection (d)(2) with respect to such area is
inadequate.
‘‘(C) PRIORITY FOR EMPOWERMENT ZONES
AND ENTERPRISE COMMUNITIES WITH RESPECT
TO FIRST HALF OF DESIGNATIONS.—With re-
spect to the first 10 designations made under
this section—
187
‘‘(i) all shall be chosen from nomi-
nated areas which are empowerment zones
or enterprise communities (and are other-
wise eligible for designation under this sec-
tion); and
‘‘(ii) two shall be areas described in
paragraph (2)(B).
‘‘(4) LIMITATION ON DESIGNATIONS.—
‘‘(A) PUBLICATION
OF
REGULATIONS.—
The Secretary of Housing and Urban Develop-
ment shall prescribe by regulation no later than
4 months after the date of the enactment of
this section, after consultation with the officials
described in paragraph (1)(B)—
‘‘(i) the procedures for nominating an
area under paragraph (1)(A);
‘‘(ii) the parameters relating to the
size and population characteristics of a re-
newal community; and
‘‘(iii) the manner in which nominated
areas will be evaluated based on the cri-
teria specified in subsection (d).
‘‘(B) TIME LIMITATIONS.—The Secretary
of Housing and Urban Development may des-
ignate nominated areas as renewal communities
188
only during the 36-month period beginning on
the first day of the first month following the
month in which the regulations described in
subparagraph (A) are prescribed.
‘‘(C) PROCEDURAL RULES.—The Secretary
of Housing and Urban Development shall not
make any designation of a nominated area as a
renewal
community
under
paragraph
(2)
unless—
‘‘(i) the local governments and the
States in which the nominated area is lo-
cated have the authority—
‘‘(I) to nominate such area for
designation as a renewal community;
‘‘(II) to make the State and local
commitments described in subsection
(d); and
‘‘(III) to provide assurances sat-
isfactory to the Secretary of Housing
and Urban Development that such
commitments will be fulfilled,
‘‘(ii)
a
nomination
regarding
such
area is submitted in such a manner and in
such form, and contains such information,
as the Secretary of Housing and Urban
189
Development shall by regulation prescribe;
and
‘‘(iii) the Secretary of Housing and
Urban Development determines that any
information furnished is reasonably accu-
rate.
‘‘(5) NOMINATION PROCESS FOR INDIAN RES-
ERVATIONS.—For purposes of this subchapter, in
the case of a nominated area on an Indian reserva-
tion, the reservation governing body (as determined
by the Secretary of the Interior) shall be treated as
being both the State and local governments with re-
spect to such area.
‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—
‘‘(1) IN GENERAL.—Any designation of an area
as a renewal community shall remain in effect dur-
ing the period beginning on the date of the designa-
tion and ending on the earliest of—
‘‘(A) December 31, 2007,
‘‘(B) the termination date designated by
the State and local governments in their nomi-
nation, or
190
‘‘(C) the date the Secretary of Housing
and Urban Development revokes such designa-
tion.
‘‘(2) REVOCATION OF DESIGNATION.—The Sec-
retary of Housing and Urban Development may re-
voke the designation under this section of an area if
such Secretary determines that the local government
or the State in which the area is located—
‘‘(A) has modified the boundaries of the
area, or
‘‘(B) is not complying substantially with,
or fails to make progress in achieving, the State
or local commitments, respectively, described in
subsection (d).
‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS.—
‘‘(1) IN GENERAL.—The Secretary of Housing
and Urban Development may designate a nominated
area as a renewal community under subsection (a)
only if the area meets the requirements of para-
graphs (2) and (3) of this subsection.
‘‘(2) AREA REQUIREMENTS.—A nominated area
meets the requirements of this paragraph if—
‘‘(A) the area is within the jurisdiction of
one or more local governments;
191
‘‘(B) the boundary of the area is contin-
uous; and
‘‘(C) the area—
‘‘(i) has a population, of at least—
‘‘(I) 4,000 if any portion of such
area (other than a rural area de-
scribed in subsection (a)(2)(B)(i)) is
located within a metropolitan statis-
tical area (within the meaning of sec-
tion 143(k)(2)(B)) which has a popu-
lation of 50,000 or greater; or
‘‘(II) 1,000 in any other case; or
‘‘(ii) is entirely within an Indian res-
ervation (as determined by the Secretary of
the Interior).
‘‘(3) ELIGIBILITY
REQUIREMENTS.—A nomi-
nated area meets the requirements of this paragraph
if the State and the local governments in which it
is located certify (and the Secretary of Housing and
Urban Development, after such review of supporting
data as he deems appropriate, accepts such certifi-
cation) that—
‘‘(A) the area is one of pervasive poverty,
unemployment, and general distress;
192
‘‘(B) the unemployment rate in the area,
as determined by the most recent available
data, was at least 11⁄2 times the national unem-
ployment rate for the period to which such data
relate;
‘‘(C) the poverty rate for each population
census tract within the nominated area is at
least 20 percent; and
‘‘(D) in the case of an urban area, at least
70 percent of the households living in the area
have incomes below 80 percent of the median
income of households within the jurisdiction of
the local government (determined in the same
manner as under section 119(b)(2) of the
Housing and Community Development Act of
1974).
‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF
CRIME.—The Secretary of Housing and Urban De-
velopment shall take into account, in selecting nomi-
nated areas for designation as renewal communities
under this section, the extent to which such areas
have a high incidence of crime.
‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI-
FIED
IN
GAO
STUDY.—The Secretary of Housing
and Urban Development shall take into account, in
193
selecting nominated areas for designation as renewal
communities under this section, if the area has cen-
sus tracts identified in the May 12, 1998, report of
the Government Accounting Office regarding the
identification of economically distressed areas.
‘‘(d)
REQUIRED
STATE
AND
LOCAL
COMMIT-
MENTS.—
‘‘(1) IN GENERAL.—The Secretary of Housing
and Urban Development may designate any nomi-
nated area as a renewal community under subsection
(a) only if—
‘‘(A) the local government and the State in
which the area is located agree in writing that,
during any period during which the area is a
renewal community, such governments will fol-
low a specified course of action which meets the
requirements of paragraph (2) and is designed
to reduce the various burdens borne by employ-
ers or employees in such area; and
‘‘(B) the economic growth promotion re-
quirements of paragraph (3) are met.
‘‘(2) COURSE OF ACTION.—
‘‘(A) IN
GENERAL.—A course of action
meets the requirements of this paragraph if
such course of action is a written document,
194
signed by a State (or local government) and
neighborhood organizations, which evidences a
partnership between such State or government
and community-based organizations and which
commits each signatory to specific and measur-
able goals, actions, and timetables. Such course
of action shall include at least five of the fol-
lowing:
‘‘(i) A reduction of tax rates or fees
applying within the renewal community.
‘‘(ii) An increase in the level of effi-
ciency of local services within the renewal
community.
‘‘(iii) Crime reduction strategies, such
as crime prevention (including the provi-
sion of such services by nongovernmental
entities).
‘‘(iv) Actions to reduce, remove, sim-
plify, or streamline governmental require-
ments applying within the renewal commu-
nity.
‘‘(v) Involvement in the program by
private entities, organizations, neighbor-
hood
organizations,
and
community
groups, particularly those in the renewal
195
community, including a commitment from
such private entities to provide jobs and
job training for, and technical, financial, or
other assistance to, employers, employees,
and residents from the renewal community.
‘‘(vi) State or local income tax bene-
fits for fees paid for services performed by
a nongovernmental entity which were for-
merly performed by a governmental entity.
‘‘(vii) The gift (or sale at below fair
market value) of surplus real property
(such as land, homes, and commercial or
industrial structures) in the renewal com-
munity
to
neighborhood
organizations,
community development corporations, or
private companies.
‘‘(B) RECOGNITION OF PAST EFFORTS.—
For purposes of this section, in evaluating the
course of action agreed to by any State or local
government,
the
Secretary
of
Housing
and
Urban Development shall take into account the
past efforts of such State or local government
in reducing the various burdens borne by em-
ployers and employees in the area involved.
196
‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE-
MENTS.—The economic growth promotion require-
ments of this paragraph are met with respect to a
nominated area if the local government and the
State in which such area is located certify in writing
that such government and State, respectively, have
repealed or otherwise will not enforce within the
area, if such area is designated as a renewal
community—
‘‘(A) licensing requirements for occupa-
tions that do not ordinarily require a profes-
sional degree;
‘‘(B) zoning restrictions on home-based
businesses which do not create a public nui-
sance;
‘‘(C) permit requirements for street ven-
dors who do not create a public nuisance;
‘‘(D) zoning or other restrictions that im-
pede the formation of schools or child care cen-
ters; and
‘‘(E) franchises or other restrictions on
competition
for
businesses
providing
public
services, including but not limited to taxicabs,
jitneys, cable television, or trash hauling,
197
except to the extent that such regulation of busi-
nesses and occupations is necessary for and well-tai-
lored to the protection of health and safety.
‘‘(e) COORDINATION WITH TREATMENT
OF EM-
POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—
For purposes of this title, if there are in effect with respect
to the same area both—
‘‘(1) a designation as a renewal community; and
‘‘(2) a designation as an empowerment zone or
enterprise community,
both of such designations shall be given full effect with
respect to such area.
‘‘(f ) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this subchapter—
‘‘(1) GOVERNMENTS.—If more than one govern-
ment seeks to nominate an area as a renewal com-
munity, any reference to, or requirement of, this sec-
tion shall apply to all such governments.
‘‘(2) STATE.—The term ‘State’ includes Puerto
Rico, the Virgin Islands of the United States, Guam,
American Samoa, the Northern Mariana Islands,
and any other possession of the United States.
‘‘(3) LOCAL
GOVERNMENT.—The term ‘local
government’ means—
198
‘‘(A) any county, city, town, township, par-
ish, village, or other general purpose political
subdivision of a State;
‘‘(B) any combination of political subdivi-
sions described in subparagraph (A) recognized
by the Secretary of Housing and Urban Devel-
opment; and
‘‘(C) the District of Columbia.
‘‘(4) APPLICATION
OF
RULES
RELATING
TO
CENSUS TRACTS AND CENSUS DATA.—The rules of
sections 1392(b)(4) and 1393(a)(9) shall apply.
‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;
RENEWAL COMMUNITY BUSINESS
‘‘Sec. 1400F. Renewal community capital gain.
‘‘Sec. 1400G. Renewal community business defined.
‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
‘‘(a) GENERAL RULE.—Gross income does not in-
clude any qualified capital gain recognized on the sale or
exchange of a qualified community asset held for more
than 5 years.
‘‘(b) QUALIFIED COMMUNITY ASSET.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘qualified com-
munity asset’ means—
‘‘(A) any qualified community stock;
199
‘‘(B) any qualified community partnership
interest; and
‘‘(C)
any
qualified
community
business
property.
‘‘(2) QUALIFIED COMMUNITY STOCK.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified commu-
nity stock’ means any stock in a domestic cor-
poration if—
‘‘(i) such stock is acquired by the tax-
payer after December 31, 2000, and before
January 1, 2008, at its original issue (di-
rectly or through an underwriter) from the
corporation solely in exchange for cash;
‘‘(ii) as of the time such stock was
issued, such corporation was a renewal
community business (or, in the case of a
new
corporation,
such
corporation
was
being organized for purposes of being a re-
newal community business); and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such stock,
such corporation qualified as a renewal
community business.
200
‘‘(B) REDEMPTIONS.—A rule similar to
the rule of section 1202(c)(3) shall apply for
purposes of this paragraph.
‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN-
TEREST.—The term ‘qualified community partner-
ship interest’ means any capital or profits interest in
a domestic partnership if—
‘‘(A) such interest is acquired by the tax-
payer after December 31, 2000, and before
January 1, 2008;
‘‘(B) as of the time such interest was ac-
quired, such partnership was a renewal commu-
nity business (or, in the case of a new partner-
ship, such partnership was being organized for
purposes of being a renewal community busi-
ness); and
‘‘(C)
during
substantially
all
of
the
taxpayer’s holding period for such interest,
such partnership qualified as a renewal commu-
nity business.
A rule similar to the rule of paragraph (2)(B) shall
apply for purposes of this paragraph.
‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP-
ERTY.—
201
‘‘(A) IN
GENERAL.—The term ‘qualified
community business property’ means tangible
property if—
‘‘(i) such property was acquired by
the taxpayer by purchase (as defined in
section
179(d)(2))
after
December
31,
2000, and before January 1, 2008;
‘‘(ii) the original use of such property
in the renewal community commences with
the taxpayer; and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such prop-
erty, substantially all of the use of such
property was in a renewal community busi-
ness of the taxpayer.
‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM-
PROVEMENTS.—The requirements of clauses (i)
and (ii) of subparagraph (A) shall be treated as
satisfied with respect to—
‘‘(i) property which is substantially
improved (within the meaning of section
1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2008; and
‘‘(ii) any land on which such property
is located.
202
‘‘(c) CERTAIN RULES TO APPLY.—Rules similar to
the rules of paragraphs (5), (6), and (7) of subsection (b),
and subsections (e), (f ), and (g), of section 1400B shall
apply for purposes of this section.
‘‘SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
‘‘For purposes of this part, the term ‘renewal commu-
nity business’ means any entity or proprietorship which
would be a qualified business entity or qualified propri-
etorship under section 1397B if—
‘‘(1) references to renewal communities were
substituted for references to empowerment zones in
such section; and
‘‘(2) ‘80 percent’ were substituted for ‘50 per-
cent’ in subsections (b)(2) and (c)(1) of such sec-
tion.
‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS
‘‘Sec. 1400H. Family development accounts for renewal commu-
nity EITC recipients.
‘‘Sec. 1400I. Designation of earned income tax credit payments
for deposit to family development account.
‘‘SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RE-
NEWAL COMMUNITY EITC RECIPIENTS.
‘‘(a) ALLOWANCE OF DEDUCTION.—
‘‘(1) IN GENERAL.—There shall be allowed as a
deduction—
‘‘(A) in the case of a qualified individual,
the amount paid in cash for the taxable year by
203
such individual to any family development ac-
count for such individual’s benefit; and
‘‘(B) in the case of any person other than
a qualified individual, the amount paid in cash
for the taxable year by such person to any fam-
ily development account for the benefit of a
qualified individual but only if the amount so
paid is designated for purposes of this section
by such individual.
‘‘(2) LIMITATION.—
‘‘(A) IN GENERAL.—The amount allowable
as a deduction to any individual for any taxable
year by reason of paragraph (1)(A) shall not
exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation
includible
in
the
individual’s
gross income for such taxable year.
‘‘(B) PERSONS DONATING TO FAMILY DE-
VELOPMENT
ACCOUNTS
OF
OTHERS.—The
amount which may be designated under para-
graph (1)(B) by any qualified individual for any
taxable year of such individual shall not exceed
$1,000.
204
‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED
INDIVIDUALS.—Rules similar to rules of section
219(c) shall apply to the limitation in paragraph
(2)(A).
‘‘(4) COORDINATION WITH IRAS.—No deduction
shall be allowed under this section for any taxable
year to any person by reason of a payment to an ac-
count for the benefit of a qualified individual if any
amount is paid for such taxable year into an indi-
vidual retirement account (including a Roth IRA)
for the benefit of such individual.
‘‘(5) ROLLOVERS.—No deduction shall be al-
lowed under this section with respect to any rollover
contribution.
‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION
OF
AMOUNTS
IN
GROSS
IN-
COME.—Except as otherwise provided in this sub-
section, any amount paid or distributed out of a
family development account shall be included in
gross income by the payee or distributee, as the case
may be.
‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL-
OPMENT DISTRIBUTIONS.—Paragraph (1) shall not
apply to any qualified family development distribu-
tion.
205
‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU-
TION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified family
development distribution’ means any amount paid or
distributed out of a family development account
which would otherwise be includible in gross income,
to the extent that such payment or distribution is
used exclusively to pay qualified family development
expenses for the holder of the account or the spouse
or dependent (as defined in section 152) of such
holder.
‘‘(2) QUALIFIED
FAMILY
DEVELOPMENT
EX-
PENSES.—The term ‘qualified family development
expenses’ means any of the following:
‘‘(A) Qualified higher education expenses.
‘‘(B) Qualified first-time homebuyer costs.
‘‘(C)
Qualified
business
capitalization
costs.
‘‘(D) Qualified medical expenses.
‘‘(E) Qualified rollovers.
‘‘(3)
QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ has the meaning
given such term by section 72(t)(7), determined
206
by
treating
postsecondary
vocational
edu-
cational schools as eligible educational institu-
tions.
‘‘(B) POSTSECONDARY VOCATIONAL EDU-
CATION SCHOOL.—The term ‘postsecondary vo-
cational educational school’ means an area vo-
cational education school (as defined in sub-
paragraph (C) or (D) of section 521(4) of the
Carl D. Perkins Vocational and Applied Tech-
nology Education Act (20 U.S.C. 2471(4)))
which is in any State (as defined in section
521(33) of such Act), as such sections are in
effect on the date of the enactment of this sec-
tion.
‘‘(C) COORDINATION WITH OTHER BENE-
FITS.—The amount of qualified higher edu-
cation expenses for any taxable year shall be re-
duced as provided in section 25A(g)(2).
‘‘(4)
QUALIFIED
FIRST-TIME
HOMEBUYER
COSTS.—The term ‘qualified first-time homebuyer
costs’ means qualified acquisition costs (as defined
in section 72(t)(8) without regard to subparagraph
(B) thereof) with respect to a principal residence
(within the meaning of section 121) for a qualified
207
first-time
homebuyer
(as
defined
in
section
72(t)(8)).
‘‘(5)
QUALIFIED
BUSINESS
CAPITALIZATION
COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
business capitalization costs’ means qualified
expenditures for the capitalization of a qualified
business pursuant to a qualified plan.
‘‘(B)
QUALIFIED
EXPENDITURES.—The
term ‘qualified expenditures’ means expendi-
tures included in a qualified plan, including
capital, plant, equipment, working capital, and
inventory expenses.
‘‘(C)
QUALIFIED
BUSINESS.—The
term
‘qualified business’ means any trade or business
other than any trade or business—
‘‘(i) which consists of the operation of
any
facility
described
in
section
144(c)(6)(B), or
‘‘(ii) which contravenes any law.
‘‘(D) QUALIFIED PLAN.—The term ‘quali-
fied plan’ means a business plan which meets
such requirements as the Secretary may specify.
‘‘(6)
QUALIFIED
MEDICAL
EXPENSES.—The
term ‘qualified medical expenses’ means any amount
208
paid during the taxable year, not compensated for by
insurance or otherwise, for medical care (as defined
in section 213(d)) of the taxpayer, his spouse, or his
dependent (as defined in section 152).
‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali-
fied rollover’ means any amount paid from a family
development account of a taxpayer into another such
account established for the benefit of—
‘‘(A) such taxpayer, or
‘‘(B) any qualified individual who is—
‘‘(i) the spouse of such taxpayer, or
‘‘(ii) any dependent (as defined in sec-
tion 152) of the taxpayer.
Rules similar to the rules of section 408(d)(3) shall
apply for purposes of this paragraph.
‘‘(d) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—Any family development ac-
count is exempt from taxation under this subtitle
unless such account has ceased to be a family devel-
opment account by reason of paragraph (2). Not-
withstanding the preceding sentence, any such ac-
count is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business
income of charitable, etc., organizations). Notwith-
standing any other provision of this title (including
209
chapters 11 and 12), the basis of any person in such
an account is zero.
‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB-
ITED TRANSACTIONS.—For purposes of this section,
rules similar to the rules of section 408(e) shall
apply.
‘‘(3) OTHER RULES TO APPLY.—Rules similar
to the rules of paragraphs (4), (5), and (6) of sec-
tion 408(d) shall apply for purposes of this section.
‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur-
poses of this title, the term ‘family development account’
means a trust created or organized in the United States
for the exclusive benefit of a qualified individual or his
beneficiaries, but only if the written governing instrument
creating the trust meets the following requirements:
‘‘(1) Except in the case of a qualified rollover
(as defined in subsection (c)(7))—
‘‘(A) no contribution will be accepted un-
less it is in cash; and
‘‘(B) contributions will not be accepted for
the taxable year in excess of $3,000.
‘‘(2)
The
requirements
of
paragraphs
(2)
through (6) of section 408(a) are met.
210
‘‘(f ) QUALIFIED INDIVIDUAL.—For purposes of this
section, the term ‘qualified individual’ means, for any tax-
able year, an individual—
‘‘(1) who is a bona fide resident of a renewal
community throughout the taxable year; and
‘‘(2) to whom a credit was allowed under sec-
tion 32 for the preceding taxable year.
‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.—
‘‘(1)
COMPENSATION.—The
term
‘compensa-
tion’ has the meaning given such term by section
219(f )(1).
‘‘(2) MARRIED
INDIVIDUALS.—The maximum
deduction under subsection (a) shall be computed
separately for each individual, and this section shall
be applied without regard to any community prop-
erty laws.
‘‘(3)
TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
family development account 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).
211
‘‘(4) EMPLOYER
PAYMENTS;
CUSTODIAL
AC-
COUNTS.—Rules similar to the rules of sections
219(f )(5) and 408(h) shall apply for purposes of
this section.
‘‘(5) REPORTS.—The trustee of a family devel-
opment account shall make such reports regarding
such account to the Secretary and to the individual
for whom the account is maintained with respect to
contributions (and the years to which they relate),
distributions, and such other matters as the Sec-
retary may require under regulations. The reports
required by this paragraph—
‘‘(A) shall be filed at such time and in
such manner as the Secretary prescribes in
such regulations; and
‘‘(B) shall be furnished to individuals—
‘‘(i) not later than January 31 of the
calendar year following the calendar year
to which such reports relate; and
‘‘(ii) in such manner as the Secretary
prescribes in such regulations.
‘‘(6) INVESTMENT IN COLLECTIBLES TREATED
AS DISTRIBUTIONS.—Rules similar to the rules of
section 408(m) shall apply for purposes of this sec-
tion.
212
‘‘(h) PENALTY FOR DISTRIBUTIONS NOT USED FOR
QUALIFIED FAMILY DEVELOPMENT EXPENSES.—
‘‘(1) IN GENERAL.—If any amount is distrib-
uted from a family development account and is not
used exclusively to pay qualified family development
expenses for the holder of the account or the spouse
or dependent (as defined in section 152) of such
holder, the tax imposed by this chapter for the tax-
able year of such distribution shall be increased by
10 percent of the portion of such amount which is
includible in gross income.
‘‘(2)
EXCEPTION
FOR
CERTAIN
DISTRIBU-
TIONS.—Paragraph (1) shall not apply to distribu-
tions which are—
‘‘(A) made on or after the date on which
the account holder attains age 591⁄2,
‘‘(B) made to a beneficiary (or the estate
of the account holder) on or after the death of
the account holder, or
‘‘(C) attributable to the account holder’s
being disabled within the meaning of section
72(m)(7).
‘‘(i) APPLICATION OF SECTION.—This section shall
apply to amounts paid to a family development account
213
for any taxable year beginning after December 31, 2000,
and before January 1, 2008.
‘‘SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CRED-
IT PAYMENTS FOR DEPOSIT TO FAMILY DE-
VELOPMENT ACCOUNT.
‘‘(a) IN GENERAL.—With respect to the return of any
qualified individual (as defined in section 1400H(f )) for
the taxable year of the tax imposed by this chapter, such
individual may designate that a specified portion (not less
than $1) of any overpayment of tax for such taxable year
which is attributable to the earned income tax credit shall
be deposited by the Secretary into a family development
account of such individual. The Secretary shall so deposit
such portion designated under this subsection.
‘‘(b) MANNER AND TIME OF DESIGNATION.—A des-
ignation under subsection (a) may be made with respect
to any taxable year—
‘‘(1) at the time of filing the return of the tax
imposed by this chapter for such taxable year, or
‘‘(2) at any other time (after the time of filing
the return of the tax imposed by this chapter for
such taxable year) specified in regulations prescribed
by the Secretary.
Such designation shall be made in such manner as the
Secretary prescribes by regulations.
214
‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME
TAX CREDIT.—For purposes of subsection (a), an over-
payment for any taxable year shall be treated as attrib-
utable to the earned income tax credit to the extent that
such overpayment does not exceed the credit allowed to
the taxpayer under section 32 for such taxable year.
‘‘(d) OVERPAYMENTS TREATED
AS REFUNDED.—
For purposes of this title, any portion of an overpayment
of tax designated under subsection (a) shall be treated as
being refunded to the taxpayer as of the last date pre-
scribed for filing the return of tax imposed by this chapter
(determined without regard to extensions) or, if later, the
date the return is filed.
‘‘(e) TERMINATION.—This section shall not apply to
any taxable year beginning after December 31, 2007.
‘‘PART IV—ADDITIONAL INCENTIVES
‘‘Sec. 1400K. Commercial revitalization deduction.
‘‘Sec. 1400L. Increase in expensing under section 179.
‘‘SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.
‘‘(a) GENERAL RULE.—At the election of the tax-
payer, either—
‘‘(1) one-half of any qualified revitalization ex-
penditures chargeable to capital account with respect
to any qualified revitalization building shall be allow-
able as a deduction for the taxable year in which the
building is placed in service, or
215
‘‘(2) a deduction for all such expenditures shall
be allowable ratably over the 120-month period be-
ginning with the month in which the building is
placed in service.
The deduction provided by this section with respect to
such expenditure shall be in lieu of any depreciation de-
duction otherwise allowable on account of such expendi-
ture.
‘‘(b) QUALIFIED REVITALIZATION BUILDINGS AND
EXPENDITURES.—For purposes of this section—
‘‘(1) QUALIFIED REVITALIZATION BUILDING.—
The term ‘qualified revitalization building’ means
any building (and its structural components) if—
‘‘(A) such building is located in a renewal
community and is placed in service after De-
cember 31, 2000;
‘‘(B) a commercial revitalization deduction
amount is allocated to the building under sub-
section (d); and
‘‘(C) depreciation (or amortization in lieu
of depreciation) is allowable with respect to the
building (without regard to this section).
‘‘(2)
QUALIFIED
REVITALIZATION
EXPENDI-
TURE.—
216
‘‘(A) IN
GENERAL.—The term ‘qualified
revitalization expenditure’ means any amount
properly chargeable to capital account—
‘‘(i) for property for which deprecia-
tion is allowable under section 168 (with-
out regard to this section) and which is—
‘‘(I) nonresidential real property;
or
‘‘(II) an addition or improvement
to property described in subclause (I);
‘‘(ii) in connection with the construc-
tion of any qualified revitalization building
which was not previously placed in service
or in connection with the substantial reha-
bilitation (within the meaning of section
47(c)(1)(C))
of
a
building
which
was
placed in service before the beginning of
such rehabilitation; and
‘‘(iii) for land (including land which is
functionally related to such property and
subordinate thereto).
‘‘(B) DOLLAR
LIMITATION.—The aggre-
gate amount which may be treated as qualified
revitalization expenditures with respect to any
217
qualified revitalization building for any taxable
year shall not exceed the excess of—
‘‘(i) $10,000,000, reduced by
‘‘(ii) any such expenditures with re-
spect to the building taken into account by
the taxpayer or any predecessor in deter-
mining the amount of the deduction under
this section for all preceding taxable years.
‘‘(C) CERTAIN
EXPENDITURES
NOT
IN-
CLUDED.—The term ‘qualified revitalization ex-
penditure’ does not include—
‘‘(i) ACQUISITION COSTS.—The costs
of acquiring any building or interest there-
in and any land in connection with such
building to the extent that such costs ex-
ceed 30 percent of the qualified revitaliza-
tion expenditures determined without re-
gard to this clause.
‘‘(ii)
CREDITS.—Any
expenditure
which the taxpayer may take into account
in computing any credit allowable under
this title unless the taxpayer elects to take
the expenditure into account only for pur-
poses of this section.
218
‘‘(c)
WHEN
EXPENDITURES
TAKEN
INTO
AC-
COUNT.—Qualified revitalization expenditures with re-
spect to any qualified revitalization building shall be taken
into account for the taxable year in which the qualified
revitalization building is placed in service. For purposes
of the preceding sentence, a substantial rehabilitation of
a building shall be treated as a separate building.
‘‘(d) LIMITATION ON AGGREGATE DEDUCTIONS AL-
LOWABLE WITH RESPECT TO BUILDINGS LOCATED IN A
STATE.—
‘‘(1) IN GENERAL.—The amount of the deduc-
tion determined under this section for any taxable
year with respect to any building shall not exceed
the commercial revitalization deduction amount (in
the case of an amount determined under subsection
(a)(2), the present value of such amount as deter-
mined under the rules of section 42(b)(2)(C) by sub-
stituting ‘100 percent’ for ‘72 percent’ in clause (ii)
thereof) allocated to such building under this sub-
section by the commercial revitalization agency.
Such allocation shall be made at the same time and
in the same manner as under paragraphs (1) and
(7) of section 42(h).
‘‘(2) COMMERCIAL REVITALIZATION DEDUCTION
AMOUNT FOR AGENCIES.—
219
‘‘(A) IN GENERAL.—The aggregate com-
mercial revitalization deduction amount which a
commercial revitalization agency may allocate
for any calendar year is the amount of the
State commercial revitalization deduction ceil-
ing determined under this paragraph for such
calendar year for such agency.
‘‘(B) STATE COMMERCIAL REVITALIZATION
DEDUCTION
CEILING.—The State commercial
revitalization deduction ceiling applicable to any
State—
‘‘(i) for each calendar year after 2000
and before 2008 is $6,000,000 for each re-
newal community in the State; and
‘‘(ii)
zero
for
each
calendar
year
thereafter.
‘‘(C) COMMERCIAL REVITALIZATION AGEN-
CY.—For purposes of this section, the term
‘commercial revitalization agency’ means any
agency authorized by a State to carry out this
section.
‘‘(e) RESPONSIBILITIES OF COMMERCIAL REVITAL-
IZATION AGENCIES.—
‘‘(1)
PLANS
FOR
ALLOCATION.—Notwith-
standing any other provision of this section, the
220
commercial revitalization deduction amount with re-
spect to any building shall be zero unless—
‘‘(A) such amount was allocated pursuant
to a qualified allocation plan of the commercial
revitalization agency which is approved (in ac-
cordance with rules similar to the rules of sec-
tion 147(f )(2) (other than subparagraph (B)(ii)
thereof)) by the governmental unit of which
such agency is a part; and
‘‘(B) such agency notifies the chief execu-
tive officer (or its equivalent) of the local juris-
diction within which the building is located of
such allocation and provides such individual a
reasonable opportunity to comment on the allo-
cation.
‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur-
poses of this subsection, the term ‘qualified alloca-
tion plan’ means any plan—
‘‘(A) which sets forth selection criteria to
be used to determine priorities of the commer-
cial revitalization agency which are appropriate
to local conditions;
‘‘(B) which considers—
‘‘(i) the degree to which a project con-
tributes to the implementation of a stra-
221
tegic plan that is devised for a renewal
community through a citizen participation
process;
‘‘(ii) the amount of any increase in
permanent, full-time employment by reason
of any project; and
‘‘(iii) the active involvement of resi-
dents and nonprofit groups within the re-
newal community; and
‘‘(C) which provides a procedure that the
agency (or its agent) will follow in monitoring
compliance with this section.
‘‘(f ) REGULATIONS.—For purposes of this section,
the Secretary shall, by regulations, provide for the applica-
tion of rules similar to the rules of section 49 and sub-
sections (a) and (b) of section 50.
‘‘(g) TERMINATION.—This section shall not apply to
any building placed in service after December 31, 2007.
‘‘SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
‘‘(a) GENERAL RULE.—In the case of a renewal com-
munity business (as defined in section 1400G), for pur-
poses of section 179—
‘‘(1) the limitation under section 179(b)(1)
shall be increased by the lesser of—
‘‘(A) $35,000; or
223
‘‘(2) CERTAIN RULES TO APPLY.—The rules of
subsections (a)(2) and (b) of section 1397C shall
apply for purposes of this section.’’.
SEC. 603. EXTENSION OF EXPENSING OF ENVIRONMENTAL
REMEDIATION COSTS TO RENEWAL COMMU-
NITIES.
(a) EXTENSION.—Paragraph (2) of section 198(c)
(defining targeted area) is amended by redesignating sub-
paragraph (C) as subparagraph (D) and by inserting after
subparagraph (B) the following new subparagraph:
‘‘(C)
RENEWAL
COMMUNITIES
IN-
CLUDED.—Except as provided in subparagraph
(B), such term shall include a renewal commu-
nity (as defined in section 1400E) with respect
to expenditures paid or incurred after Decem-
ber 31, 2000.’’.
(b) EXTENSION OF TERMINATION DATE FOR RE-
NEWAL COMMUNITIES.—Subsection (h) of section 198 is
amended by inserting before the period ‘‘(December 31,
2007, in the case of a renewal community, as defined in
section 1400E).’’.
224
SEC. 604. EXTENSION OF WORK OPPORTUNITY TAX CREDIT
FOR RENEWAL COMMUNITIES.
(a) EXTENSION.—Subsection (c) of section 51 (relat-
ing to termination) is amended by adding at the end the
following new paragraph:
‘‘(5) EXTENSION
OF
CREDIT
FOR
RENEWAL
COMMUNITIES.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who begins work for the employer after
the date contained in paragraph (4)(B), for
purposes of section 38—
‘‘(i) in lieu of applying subsection (a),
the amount of the work opportunity credit
determined under this section for the tax-
able year shall be equal to—
‘‘(I) 15 percent of the qualified
first-year wages for such year; and
‘‘(II) 30 percent of the qualified
second-year wages for such year;
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$10,000’ for ‘$6,000’;
‘‘(iii) paragraph (4)(B) shall be ap-
plied by substituting for the date contained
therein the last day for which the designa-
tion under section 1400E of the renewal
225
community referred to in subparagraph
(B)(i) is in effect; and
‘‘(iv) rules similar to the rules of sec-
tion 51A(b)(5)(C) shall apply.
‘‘(B)
QUALIFIED
FIRST-
AND
SECOND-
YEAR WAGES.—For purposes of subparagraph
(A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied wages’ means, with respect to each 1-
year period referred to in clause (ii) or
(iii), as the case may be, the wages paid or
incurred by the employer during the tax-
able year to any individual but only if—
‘‘(I) the employer is engaged in a
trade or business in a renewal com-
munity throughout such 1-year period;
‘‘(II) the principal place of abode
of such individual is in such renewal
community
throughout
such
1-year
period; and
‘‘(III)
substantially
all
of
the
services which such individual per-
forms for the employer during such 1-
year period are performed in such re-
newal community.
226
‘‘(ii)
QUALIFIED
FIRST-YEAR
WAGES.—The
term
‘qualified
first-year
wages’ means, with respect to any indi-
vidual, qualified wages attributable to serv-
ice rendered during the 1-year period be-
ginning with the day the individual begins
work for the employer.
‘‘(iii)
QUALIFIED
SECOND-YEAR
WAGES.—The term ‘qualified second-year
wages’ means, with respect to any indi-
vidual, qualified wages attributable to serv-
ice rendered during the 1-year period be-
ginning on the day after the last day of the
1-year period with respect to such indi-
vidual determined under clause (ii).’’.
(b) CONGRUENT TREATMENT OF RENEWAL COMMU-
NITIES
AND ENTERPRISE ZONES
FOR PURPOSES
OF
YOUTH RESIDENCE REQUIREMENTS.—
(1) HIGH-RISK YOUTH.—Subparagraphs (A)(ii)
and (B) of section 51(d)(5) are each amended by
striking ‘‘empowerment zone or enterprise commu-
nity’’ and inserting ‘‘empowerment zone, enterprise
community, or renewal community’’.
(2) QUALIFIED SUMMER YOUTH EMPLOYEE.—
Clause (iv) of section 51(d)(7)(A) is amended by
227
striking ‘‘empowerment zone or enterprise commu-
nity’’ and inserting ‘‘empowerment zone, enterprise
community, or renewal community’’.
(3) HEADINGS.—Paragraphs (5)(B) and (7)(C)
of section 51(d) are each amended by inserting ‘‘OR
COMMUNITY’’ in the heading after ‘‘ZONE’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to individuals who
begin work for the employer after December 31,
2000.
SEC. 605. CONFORMING AND CLERICAL AMENDMENTS.
(a) DEDUCTION FOR CONTRIBUTIONS TO FAMILY
DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER
OR
NOT TAXPAYER ITEMIZES.—Subsection (a) of section 62
(relating to adjusted gross income defined) is amended by
inserting after paragraph (19) the following new para-
graph:
‘‘(20) FAMILY DEVELOPMENT ACCOUNTS.—The
deduction allowed by section 1400H(a)(1).’’.
(b) TAX ON EXCESS CONTRIBUTIONS.—
(1) TAX IMPOSED.—Subsection (a) of section
4973 is amended by striking ‘‘or’’ at the end of
paragraph (3), adding ‘‘or’’ at the end of paragraph
(4), and inserting after paragraph (4) the following
new paragraph:
228
‘‘(5) a family development account (within the
meaning of section 1400H(e)),’’.
(2) EXCESS CONTRIBUTIONS.—Section 4973 is
amended by adding at the end the following new
subsection:
‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur-
poses of this section, in the case of family development
accounts, the term ‘excess contributions’ means the sum
of—
‘‘(1) the excess (if any) of—
‘‘(A) the amount contributed for the tax-
able year to the accounts (other than a quali-
fied
rollover,
as
defined
in
section
1400H(c)(7)), over
‘‘(B) the amount allowable as a deduction
under section 1400H for such contributions;
and
‘‘(2) the amount determined under this sub-
section for the preceding taxable year reduced by the
sum of—
‘‘(A) the distributions out of the accounts
for the taxable year which were included in the
gross
income
of
the
payee
under
section
1400H(b)(1);
229
‘‘(B) the distributions out of the accounts
for the taxable year to which rules similar to
the rules of section 408(d)(5) apply by reason
of section 1400H(d)(3); and
‘‘(C) the excess (if any) of the maximum
amount allowable as a deduction under section
1400H for the taxable year over the amount
contributed to the account for the taxable year.
For purposes of this subsection, any contribution which
is distributed from the family development account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 1400H(d)(3) shall
be treated as an amount not contributed.’’.
(c) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(6) SPECIAL
RULE
FOR
FAMILY
DEVELOP-
MENT ACCOUNTS.—An individual for whose benefit a
family development account is established and any
contributor to such account shall be exempt from the
tax imposed by this section with respect to any
transaction concerning such account (which would
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
230
a family development account by reason of the appli-
cation of section 1400H(d)(2) to such account.’’;
and
(2) in subsection (e)(1), by striking ‘‘or’’ at the
end of subparagraph (E), by redesignating subpara-
graph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following new subpara-
graph:
‘‘(F) a family development account de-
scribed in section 1400H(e), or’’.
(d) INFORMATION RELATING TO CERTAIN TRUSTS
AND ANNUITY PLANS.—Subsection (c) of section 6047 is
amended—
(1) by inserting ‘‘or section 1400H’’ after ‘‘sec-
tion 219’’; and
(2) by inserting ‘‘, of any family development
account described in section 1400H(e),’’, after ‘‘sec-
tion 408(a)’’.
(e) INSPECTION OF APPLICATIONS FOR TAX EXEMP-
TION.—Clause (i) of section 6104(a)(1)(B) is amended by
inserting ‘‘a family development account described in sec-
tion 1400H(e),’’ after ‘‘section 408(a),’’.
(f ) FAILURE TO PROVIDE REPORTS ON FAMILY DE-
VELOPMENT
ACCOUNTS.—Paragraph
(2)
of
section
6693(a) is amended by striking ‘‘and’’ at the end of sub-
231
paragraph (C), by striking the period and inserting
‘‘, and’’ at the end of subparagraph (D), and by adding
at the end the following new subparagraph:
‘‘(E) section 1400H(g)(6) (relating to fam-
ily development accounts).’’.
(g) CONFORMING AMENDMENTS REGARDING COM-
MERCIAL REVITALIZATION DEDUCTION.—
(1) Section 172 is amended by redesignating
subsection ( j) as subsection (k) and by inserting
after subsection (i) the following new subsection:
‘‘( j) NO CARRYBACK OF SECTION 1400K DEDUC-
TION BEFORE DATE OF THE ENACTMENT.—No portion
of the net operating loss for any taxable year which is at-
tributable to any commercial revitalization deduction de-
termined under section 1400K may be carried back to a
taxable year ending before the date of the enactment of
section 1400K.’’.
(2) Subparagraph (B) of section 48(a)(2) is
amended by inserting ‘‘or commercial revitalization’’
after ‘‘rehabilitation’’ each place it appears in the
text and heading.
(3) Subparagraph (C) of section 469(i)(3) is
amended—
(A) by inserting ‘‘or section 1400K’’ after
‘‘section 42’’; and
232
(B) by inserting ‘‘AND COMMERCIAL REVI-
TALIZATION
DEDUCTION’’ after ‘‘CREDIT’’ in
the heading.
(h) CLERICAL AMENDMENTS.—The table of sub-
chapters for chapter 1 is amended by adding at the end
the following new item:
‘‘Subchapter X. Renewal Communities.’’.
Subtitle B—Timber Incentives
SEC. 611. 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 DOL-
LAR LIMITATION.—Subsection (b) of section 194(b) (re-
lating to amortization of reforestation expenditures) is
amended by adding at the end the following new para-
graph:
‘‘(5) SUSPENSION
OF
DOLLAR
LIMITATION.—
Paragraph (1) shall not apply to taxable years be-
ginning after December 31, 1999, and before Janu-
ary 1, 2004.
(c) CONFORMING AMENDMENT.—Paragraph (1) of
section 48(b) is amended by striking ‘‘section 194(b)(1)’’
233
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
December 31, 2000.
TITLE VII—REAL ESTATE
PROVISIONS
Subtitle A—Improvements in Low-
Income Housing Credit
SEC. 701. 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-
234
cies) is amended by adding at the end the following new
subparagraph:
‘‘(H)
APPLICABLE
AMOUNT
OF
STATE
CEILING.—For
purposes
of
subparagraph
(C)(ii), the applicable amount shall be deter-
mined under the following table:
‘‘For calendar year:
The applicable amount is:
2000 ............................................................................. $1.35
2001 .............................................................................
1.45
2002 .............................................................................
1.55
2003 .............................................................................
1.65
2004 and thereafter ..................................................... 1.75.’’.
(c) ADJUSTMENT OF STATE CEILING FOR INCREASES
IN COST-OF-LIVING.—Paragraph (3) of section 42(h) (re-
lating to housing credit dollar amount for agencies), as
amended by subsection (c), 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 2004, the $2,000,000
in subparagraph (C) and the $1.75 amount
in subparagraph (H) shall each be in-
creased by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II)
the
cost-of-living
adjust-
ment
determined
under
section
1(f )(3) for such calendar year by sub-
235
stituting ‘calendar year 2003’ for ‘cal-
endar year 1992’ in subparagraph (B)
thereof.
‘‘(ii) ROUNDING.—
‘‘(I) In the case of the amount in
subparagraph (C), any increase under
clause (i) which is not a multiple of
$5,000 shall be rounded to the next
lowest multiple of $5,000.
‘‘(II) In the case of the amount
in subparagraph (H), any increase
under clause (i) which is not a mul-
tiple of 5 cents 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—
236
(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.
SEC. 702. MODIFICATION OF CRITERIA FOR ALLOCATING
HOUSING CREDITS AMONG PROJECTS.
(a) SELECTION CRITERIA.—Subparagraph (C) of
section 42(m)(1) (relating to certain selection criteria
must be used) is amended—
(1) by inserting ‘‘, including whether the project
includes the use of existing housing as part of a
community revitalization plan’’ before the comma at
the end of clause (iii), and
(2) by striking clauses (v), (vi), and (vii) and
inserting the following new clauses:
‘‘(v) tenant populations with special
housing needs,
‘‘(vi) public housing waiting lists,
‘‘(vii) tenant populations of individ-
uals with children, and
‘‘(viii) projects intended for eventual
tenant ownership.’’.
237
(b) PREFERENCE FOR COMMUNITY REVITALIZATION
PROJECTS LOCATED IN QUALIFIED CENSUS TRACTS.—
Clause (ii) of section 42(m)(1)(B) is amended by striking
‘‘and’’ at the end of subclause (I), by adding ‘‘and’’ at
the end of subclause (II), and by inserting after subclause
(II) the following new subclause:
‘‘(III) projects which are located
in qualified census tracts (as defined
in subsection (d)(5)(C)) and the devel-
opment of which contributes to a con-
certed
community
revitalization
plan,’’.
SEC.
703.
ADDITIONAL
RESPONSIBILITIES
OF
HOUSING
CREDIT AGENCIES.
(a) MARKET STUDY; PUBLIC DISCLOSURE OF RA-
TIONALE
FOR NOT FOLLOWING CREDIT ALLOCATION
PRIORITIES.—Subparagraph (A) of section 42(m)(1) (re-
lating to responsibilities of housing credit agencies) is
amended by striking ‘‘and’’ at the end of clause (i), by
striking the period at the end of clause (ii) and inserting
a comma, and by adding at the end the following new
clauses:
‘‘(iii) a comprehensive market study
of the housing needs of low-income individ-
uals in the area to be served by the project
238
is conducted before the credit allocation is
made and at the developer’s expense by a
disinterested party who is approved by
such agency, and
‘‘(iv) a written explanation is available
to the general public for any allocation of
a housing credit dollar amount which is
not made in accordance with established
priorities and selection criteria of the hous-
ing credit agency.’’.
(b) SITE VISITS.—Clause (iii) of section 42(m)(1)(B)
(relating to qualified allocation plan) is amended by insert-
ing before the period ‘‘and in monitoring for noncompli-
ance with habitability standards through regular site vis-
its’’.
SEC. 704. MODIFICATIONS TO RULES RELATING TO BASIS
OF BUILDING WHICH IS ELIGIBLE FOR CRED-
IT.
(a) ADJUSTED BASIS TO INCLUDE PORTION OF CER-
TAIN BUILDINGS USED BY LOW-INCOME INDIVIDUALS
WHO ARE NOT TENANTS AND BY PROJECT EMPLOY-
EES.—Paragraph (4) of section 42(d) (relating to special
rules relating to determination of adjusted basis) is
amended—
239
(1) by striking ‘‘subparagraph (B)’’ in subpara-
graph (A) and inserting ‘‘subparagraphs (B) and
(C)’’,
(2) by redesignating subparagraph (C) as sub-
paragraph (D), and
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) INCLUSION OF BASIS OF PROPERTY
USED
TO
PROVIDE
SERVICES
FOR
CERTAIN
NONTENANTS.—
‘‘(i)
IN
GENERAL.—The
adjusted
basis of any building located in a qualified
census
tract
(as
defined
in
paragraph
(5)(C)) shall be determined by taking into
account the adjusted basis of property (of
a character subject to the allowance for de-
preciation and not otherwise taken into ac-
count) used throughout the taxable year in
providing any community service facility.
‘‘(ii) LIMITATION.—The increase in
the adjusted basis of any building which is
taken into account by reason of clause (i)
shall not exceed 10 percent of the eligible
basis of the qualified low-income housing
project of which it is a part. For purposes
240
of the preceding sentence, all community
service facilities which are part of the same
qualified low-income housing project shall
be treated as one facility.
‘‘(iii)
COMMUNITY
SERVICE
FACIL-
ITY.—For purposes of this subparagraph,
the
term
‘community
service
facility’
means any facility designed to serve pri-
marily individuals whose income is 60 per-
cent or less of area median income (within
the meaning of subsection (g)(1)(B)).’’.
(b) CERTAIN NATIVE AMERICAN HOUSING ASSIST-
ANCE DISREGARDED IN DETERMINING WHETHER BUILD-
ING IS FEDERALLY SUBSIDIZED FOR PURPOSES OF THE
LOW-INCOME HOUSING CREDIT.—Subparagraph (E) of
section 42(i)(2) (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-Determina-
tion Act of 1996 (25 U.S.C. 4101 et seq.) (as in ef-
fect on October 1, 1997)’’ after ‘‘this subpara-
graph)’’, and
(2) in the subparagraph heading, by inserting
‘‘OR NATIVE AMERICAN HOUSING ASSISTANCE’’ after
‘‘HOME ASSISTANCE’’.
241
SEC. 705. OTHER MODIFICATIONS.
(a) ALLOCATION
OF CREDIT LIMIT
TO CERTAIN
BUILDINGS.—
(1) The first sentence of section 42(h)(1)(E)(ii)
is amended by striking ‘‘(as of’’ the first place it ap-
pears and inserting ‘‘(as of the later of the date
which is 6 months after the date that the allocation
was made or’’.
(2) The last sentence of section 42(h)(3)(C) is
amended by striking ‘‘project which’’ and inserting
‘‘project which fails to meet the 10 percent test
under paragraph (1)(E)(ii) on a date after the close
of the calendar year in which the allocation was
made or which’’.
(b) DETERMINATION OF WHETHER BUILDINGS ARE
LOCATED IN HIGH COST AREAS.—The first sentence of
section 42(d)(5)(C)(ii)(I) is amended—
(1) by inserting ‘‘either’’ before ‘‘in which 50
percent’’, and
(2) by inserting before the period ‘‘or which has
a poverty rate of at least 25 percent’’.
SEC. 706. CARRYFORWARD RULES.
(a) IN GENERAL.—Clause (ii) of section 42(h)(3)(D)
(relating to unused housing credit carryovers allocated
among certain States) is amended by striking ‘‘the excess’’
and all that follows and inserting ‘‘the excess (if any) of—
242
‘‘(I) the unused State housing
credit ceiling for the year preceding
such year, over
‘‘(II) the aggregate housing cred-
it dollar amount allocated for such
year.’’.
(b) CONFORMING AMENDMENT.—The second sen-
tence of section 42(h)(3)(C) (relating to State housing
credit ceiling) is amended by striking ‘‘clauses (i) and
(iii)’’ and inserting ‘‘clauses (i) through (iv)’’.
SEC. 707. EFFECTIVE DATE.
Except as otherwise provided in this subtitle, the
amendments made by this subtitle shall apply to—
(1) housing credit dollar amounts allocated
after December 31, 1999, and
(2) buildings placed in service after such date
to the extent paragraph (1) of section 42(h) of the
Internal Revenue Code of 1986 does not apply to
any building by reason of paragraph (4) thereof, but
only with respect to bonds issued after such date.
243
Subtitle B—Provisions Relating to
Real Estate Investment Trusts
PART I—TREATMENT OF INCOME AND SERVICES
PROVIDED BY TAXABLE REIT SUBSIDIARIES
SEC.
711.
MODIFICATIONS
TO
ASSET
DIVERSIFICATION
TEST.
(a) IN GENERAL.—Subparagraph (B) of section
856(c)(4) is amended to read as follows:
‘‘(B)(i) not more than 25 percent of the
value of its total assets is represented by securi-
ties (other than those includible under subpara-
graph (A)), and
‘‘(ii) except with respect to a taxable REIT
subsidiary and securities includible under sub-
paragraph (A)—
‘‘(I) not more than 5 percent of the
value of its total assets is represented by
securities of any one issuer,
‘‘(II) the trust does not hold securities
possessing more than 10 percent of the
total voting power of the outstanding secu-
rities of any one issuer, and
‘‘(III) the trust does not hold securi-
ties having a value of more than 10 per-
244
cent of the total value of the outstanding
securities of any one issuer.’’.
(b) EXCEPTION FOR STRAIGHT DEBT SECURITIES.—
Subsection (c) of section 856 is amended by adding at the
end the following new paragraph:
‘‘(7) STRAIGHT DEBT SAFE HARBOR IN APPLY-
ING PARAGRAPH (4).—Securities of an issuer which
are straight debt (as defined in section 1361(c)(5)
without regard to subparagraph (B)(iii) thereof)
shall not be taken into account in applying para-
graph (4)(B)(ii)(III) if—
‘‘(A) the issuer is an individual, or
‘‘(B) the only securities of such issuer
which are held by the trust or a taxable REIT
subsidiary of the trust are straight debt (as so
defined), or
‘‘(C) the issuer is a partnership and the
trust holds at least a 20 percent profits interest
in the partnership.’’.
SEC. 712. TREATMENT OF INCOME AND SERVICES PRO-
VIDED BY TAXABLE REIT SUBSIDIARIES.
(a) INCOME FROM TAXABLE REIT SUBSIDIARIES
NOT TREATED AS IMPERMISSIBLE TENANT SERVICE IN-
COME.—Clause (i) of section 856(d)(7)(C) (relating to ex-
ceptions to impermissible tenant service income) is amend-
245
ed by inserting ‘‘or through a taxable REIT subsidiary
of such trust’’ after ‘‘income’’.
(b) CERTAIN INCOME FROM TAXABLE REIT SUB-
SIDIARIES NOT EXCLUDED FROM RENTS FROM REAL
PROPERTY.—
(1) IN
GENERAL.—Subsection (d) of section
856 (relating to rents from real property defined) is
amended by adding at the end the following new
paragraphs:
‘‘(8) SPECIAL RULE FOR TAXABLE REIT SUB-
SIDIARIES.—For
purposes
of
this
subsection,
amounts paid to a real estate investment trust by a
taxable REIT subsidiary of such trust shall not be
excluded from rents from real property by reason of
paragraph (2)(B) if the requirements of either of the
following subparagraphs are met:
‘‘(A) LIMITED RENTAL EXCEPTION.—The
requirements of this subparagraph are met with
respect to any property if at least 90 percent of
the leased space of the property is rented to
persons other than taxable REIT subsidiaries of
such trust and other than persons described in
section 856(d)(2)(B). The preceding sentence
shall apply only to the extent that the amounts
paid to the trust as rents from real property (as
246
defined in paragraph (1) without regard to
paragraph (2)(B)) from such property are sub-
stantially comparable to such rents made by the
other tenants of the trust’s property for com-
parable space.
‘‘(B) EXCEPTION FOR CERTAIN LODGING
FACILITIES.—The requirements of this subpara-
graph are met with respect to an interest in
real property which is a qualified lodging facil-
ity leased by the trust to a taxable REIT sub-
sidiary of the trust if the property is operated
on behalf of such subsidiary by a person who is
an eligible independent contractor.
‘‘(9) ELIGIBLE INDEPENDENT CONTRACTOR.—
For purposes of paragraph (8)(B)—
‘‘(A)
IN
GENERAL.—The
term
‘eligible
independent contractor’ means, with respect to
any qualified lodging facility, any independent
contractor if, at the time such contractor enters
into a management agreement or other similar
service contract with the taxable REIT sub-
sidiary to operate the facility, such contractor
(or any related person) is actively engaged in
the trade or business of operating qualified
lodging facilities for any person who is not a re-
247
lated person with respect to the real estate in-
vestment trust or the taxable REIT subsidiary.
‘‘(B) SPECIAL RULES.—Solely for purposes
of this paragraph and paragraph (8)(B), a per-
son shall not fail to be treated as an inde-
pendent contractor with respect to any qualified
lodging facility by reason of any of the fol-
lowing:
‘‘(i)
The
taxable
REIT
subsidiary
bears the expenses for the operation of the
facility pursuant to the management agree-
ment or other similar service contract.
‘‘(ii) The taxable REIT subsidiary re-
ceives the revenues from the operation of
such facility, net of expenses for such oper-
ation and fees payable to the operator pur-
suant to such agreement or contract.
‘‘(iii) The real estate investment trust
receives income from such person with re-
spect to another property that is attrib-
utable to a lease of such other property to
such person that was in effect as of the
later of—
‘‘(I) January 1, 1999, or
248
‘‘(II) the earliest date that any
taxable REIT subsidiary of such trust
entered into a management agreement
or other similar service contract with
such
person
with
respect
to
such
qualified lodging facility.
‘‘(C)
RENEWALS,
ETC.,
OF
EXISTING
LEASES.—For
purposes
of
subparagraph
(B)(iii)—
‘‘(i) a lease shall be treated as in ef-
fect on January 1, 1999, without regard to
its renewal after such date, so long as such
renewal is pursuant to the terms of such
lease as in effect on whichever of the dates
under subparagraph (B)(iii) is the latest,
and
‘‘(ii) a lease of a property entered into
after whichever of the dates under sub-
paragraph (B)(iii) is the latest shall be
treated as in effect on such date if—
‘‘(I) on such date, a lease of such
property from the trust was in effect,
and
‘‘(II) under the terms of the new
lease, such trust receives a substan-
249
tially similar or lesser benefit in com-
parison to the lease referred to in sub-
clause (I).
‘‘(D) QUALIFIED LODGING FACILITY.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied lodging facility’ means any lodging fa-
cility unless wagering activities are con-
ducted at or in connection with such facil-
ity by any person who is engaged in the
business of accepting wagers and who is le-
gally authorized to engage in such business
at or in connection with such facility.
‘‘(ii) LODGING FACILITY.—The term
‘lodging facility’ means a hotel, motel, or
other establishment more than one-half of
the dwelling units in which are used on a
transient basis.
‘‘(iii) CUSTOMARY AMENITIES AND FA-
CILITIES.—The term ‘lodging facility’ in-
cludes customary amenities and facilities
operated as part of, or associated with, the
lodging facility so long as such amenities
and facilities are customary for other prop-
erties of a comparable size and class owned
250
by other owners unrelated to such real es-
tate investment trust.
‘‘(E) OPERATE INCLUDES MANAGE.—Ref-
erences in this paragraph to operating a prop-
erty shall be treated as including a reference to
managing the property.
‘‘(F) RELATED PERSON.—Persons shall be
treated as related to each other if such persons
are treated as a single employer under sub-
section (a) or (b) of section 52.’’.
(2) CONFORMING AMENDMENT.—Subparagraph
(B) of section 856(d)(2) is amended by inserting
‘‘except as provided in paragraph (8),’’ after ‘‘(B)’’.
(3) DETERMINING
RENTS
FROM
REAL
PROP-
ERTY.—
(A)(i) Paragraph (1) of section 856(d) is
amended by striking ‘‘adjusted bases’’ each
place it occurs and inserting ‘‘fair market val-
ues’’.
(ii) The amendment made by this subpara-
graph shall apply to taxable years beginning
after December 31, 2000.
(B)(i) Clause (i) of section 856(d)(2)(B) is
amended by striking ‘‘number’’ and inserting
‘‘value’’.
251
(ii) The amendment made by this subpara-
graph shall apply to amounts received or ac-
crued in taxable years beginning after Decem-
ber 31, 2000, except for amounts paid pursuant
to leases in effect on July 12, 1999, or pursu-
ant to a binding contract in effect on such date
and at all times thereafter.
SEC. 713. TAXABLE REIT SUBSIDIARY.
(a) IN GENERAL.—Section 856 is amended by adding
at the end the following new subsection:
‘‘(l) TAXABLE REIT SUBSIDIARY.—For purposes of
this part—
‘‘(1) IN GENERAL.—The term ‘taxable REIT
subsidiary’ means, with respect to a real estate in-
vestment trust, a corporation (other than a real es-
tate investment trust) if—
‘‘(A) such trust directly or indirectly owns
stock in such corporation, and
‘‘(B) such trust and such corporation joint-
ly elect that such corporation shall be treated as
a taxable REIT subsidiary of such trust for
purposes of this part.
Such an election, once made, shall be irrevocable un-
less both such trust and corporation consent to its
revocation. Such election, and any revocation there-
252
of, may be made without the consent of the Sec-
retary.
‘‘(2)
PERCENT
OWNERSHIP
IN
ANOTHER
TAXABLE
REIT
SUBSIDIARY.—The
term
‘taxable
REIT subsidiary’ includes, with respect to any real
estate investment trust, any corporation (other than
a real estate investment trust) with respect to which
a taxable REIT subsidiary of such trust owns di-
rectly or indirectly—
‘‘(A) securities possessing more than 35
percent of the total voting power of the out-
standing securities of such corporation, or
‘‘(B) securities having a value of more
than 35 percent of the total value of the out-
standing securities of such corporation.
The preceding sentence shall not apply to a qualified
REIT subsidiary (as defined in subsection (i)(2)).
The rule of section 856(c)(7) shall apply for pur-
poses of subparagraph (B).
‘‘(3) EXCEPTIONS.—The term ‘taxable REIT
subsidiary’ shall not include—
‘‘(A) any corporation which directly or in-
directly operates or manages a lodging facility
or a health care facility, and
253
‘‘(B) any corporation which directly or in-
directly provides to any other person (under a
franchise, license, or otherwise) rights to any
brand name under which any lodging facility or
health care facility is operated.
Subparagraph (B) shall not apply to rights provided
to an eligible independent contractor to operate or
manage a lodging facility if such rights are held by
such corporation as a franchisee, licensee, or in a
similar capacity and such lodging facility is either
owned by such corporation or is leased to such cor-
poration from the real estate investment trust.
‘‘(4) DEFINITIONS.—For purposes of paragraph
(3)—
‘‘(A) LODGING FACILITY.—The term ‘lodg-
ing facility’ has the meaning given to such term
by paragraph (9)(D)(ii).
‘‘(B) HEALTH CARE FACILITY.—The term
‘health care facility’ has the meaning given to
such term by subsection (e)(6)(D)(ii).’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 856(i) is amended by adding at the end the fol-
lowing new sentence: ‘‘Such term shall not include a tax-
able REIT subsidiary.’’.
254
SEC. 714. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163( j) (relating to limita-
tion on deduction for interest on certain indebtedness) is
amended by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subparagraph
(B) and inserting ‘‘, and’’, and by adding at the end the
following new subparagraph:
‘‘(C) any interest paid or accrued (directly
or indirectly) by a taxable REIT subsidiary (as
defined in section 856(l)) of a real estate invest-
ment trust to such trust.’’.
SEC. 715. 100 PERCENT TAX ON IMPROPERLY ALLOCATED
AMOUNTS.
(a) IN GENERAL.—Subsection (b) of section 857 (re-
lating to method of taxation of real estate investment
trusts and holders of shares or certificates of beneficial
interest) is amended by redesignating paragraphs (7) and
(8) as paragraphs (8) and (9), respectively, and by insert-
ing after paragraph (6) the following new paragraph:
‘‘(7) INCOME FROM REDETERMINED RENTS, RE-
DETERMINED
DEDUCTIONS,
AND
EXCESS
INTER-
EST.—
‘‘(A) IMPOSITION OF TAX.—There is here-
by imposed for each taxable year of the real es-
tate investment trust a tax equal to 100 percent
255
of redetermined rents, redetermined deductions,
and excess interest.
‘‘(B) REDETERMINED RENTS.—
‘‘(i) IN GENERAL.—The term ‘redeter-
mined rents’ means rents from real prop-
erty (as defined in subsection 856(d)) the
amount of which would (but for subpara-
graph (E)) be reduced on distribution, ap-
portionment, or allocation under section
482 to clearly reflect income as a result of
services furnished or rendered by a taxable
REIT subsidiary of the real estate invest-
ment trust to a tenant of such trust.
‘‘(ii) EXCEPTION FOR CERTAIN SERV-
ICES.—Clause
(i)
shall
not
apply
to
amounts received directly or indirectly by a
real estate investment trust for services de-
scribed in paragraph (1)(B) or (7)(C)(i) of
section 856(d).
‘‘(iii) EXCEPTION
FOR
DE
MINIMIS
AMOUNTS.—Clause (i) shall not apply to
amounts described in section 856(d)(7)(A)
with respect to a property to the extent
such amounts do not exceed the one per-
cent
threshold
described
in
section
256
856(d)(7)(B) with respect to such prop-
erty.
‘‘(iv) EXCEPTION
FOR
COMPARABLY
PRICED
SERVICES.—Clause (i) shall not
apply to any service rendered by a taxable
REIT subsidiary of a real estate invest-
ment trust to a tenant of such trust if—
‘‘(I) such subsidiary renders a
significant amount of similar services
to persons other than such trust and
tenants of such trust who are unre-
lated (within the meaning of section
856(d)(8)(F))
to
such
subsidiary,
trust, and tenants, but
‘‘(II)
only
to
the
extent
the
charge for such service so rendered is
substantially comparable to the charge
for the similar services rendered to
persons referred to in subclause (I).
‘‘(v) EXCEPTION FOR CERTAIN SEPA-
RATELY
CHARGED
SERVICES.—Clause (i)
shall not apply to any service rendered by
a taxable REIT subsidiary of a real estate
investment trust to a tenant of such trust
if—
257
‘‘(I) the rents paid to the trust
by tenants (leasing at least 25 percent
of the net leasable space in the trust’s
property) who are not receiving such
service from such subsidiary are sub-
stantially
comparable
to
the
rents
paid by tenants leasing comparable
space who are receiving such service
from such subsidiary, and
‘‘(II) the charge for such service
from
such
subsidiary
is
separately
stated.
‘‘(vi) EXCEPTION FOR CERTAIN SERV-
ICES
BASED
ON
SUBSIDIARY’S
INCOME
FROM THE SERVICES.—Clause (i) shall not
apply to any service rendered by a taxable
REIT subsidiary of a real estate invest-
ment trust to a tenant of such trust if the
gross income of such subsidiary from such
service is not less than 150 percent of such
subsidiary’s direct cost in furnishing or
rendering the service.
‘‘(vii) EXCEPTIONS GRANTED BY SEC-
RETARY.—The Secretary may waive the
tax otherwise imposed by subparagraph
258
(A) if the trust establishes to the satisfac-
tion of the Secretary that rents charged to
tenants
were
established
on
an
arms’
length basis even though a taxable REIT
subsidiary of the trust provided services to
such tenants.
‘‘(C) REDETERMINED DEDUCTIONS.—The
term ‘redetermined deductions’ means deduc-
tions (other than redetermined rents) of a tax-
able REIT subsidiary of a real estate invest-
ment trust if the amount of such deductions
would (but for subparagraph (E)) be decreased
on distribution, apportionment, or allocation
under section 482 to clearly reflect income as
between such subsidiary and such trust.
‘‘(D) EXCESS INTEREST.—The term ‘ex-
cess interest’ means any deductions for interest
payments by a taxable REIT subsidiary of a
real estate investment trust to such trust to the
extent that the interest payments are in excess
of a rate that is commercially reasonable.
‘‘(E) COORDINATION WITH SECTION 482.—
The imposition of tax under subparagraph (A)
shall be in lieu of any distribution, apportion-
ment, or allocation under section 482.
259
‘‘(F) REGULATORY AUTHORITY.—The Sec-
retary shall prescribe such regulations as may
be necessary or appropriate to carry out the
purposes of this paragraph. Until the Secretary
prescribes such regulations, real estate invest-
ment trusts and their taxable REIT subsidi-
aries may base their allocations on any reason-
able method.’’.
(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO
BE
DISTRIBUTED.—Subparagraph
(E)
of
section
857(b)(2) (relating to real estate investment trust taxable
income) is amended by striking ‘‘paragraph (5)’’ and in-
serting ‘‘paragraphs (5) and (7)’’.
SEC. 716. 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
711.—
(1) EXISTING ARRANGEMENTS.—
(A) IN
GENERAL.—Except as otherwise
provided in this paragraph, the amendment
made by section 711 shall not apply to a real
estate investment trust with respect to—
260
(i) securities of a corporation held di-
rectly or indirectly by such trust on July
12, 1999,
(ii) securities of a corporation held by
an entity on July 12, 1999, if such trust
acquires control of such entity pursuant to
a written binding contract in effect on such
date and at all times thereafter before such
acquisition,
(iii) securities received by such trust
(or a successor) in exchange for, or with
respect to, securities described in clause (i)
or (ii) in a transaction in which gain or
loss is not recognized, and
(iv) securities acquired directly or in-
directly by such trust as part of a reorga-
nization (as defined in section 368(a)(1) of
the Internal Revenue Code of 1986) with
respect to such trust if such securities are
described in clause (i), (ii), or (iii) with re-
spect to any other real estate investment
trust.
(B) NEW TRADE OR BUSINESS OR SUB-
STANTIAL
NEW
ASSETS.—Subparagraph
(A)
shall cease to apply to securities of a corpora-
261
tion as of the first day after July 12, 1999,
on which such corporation engages in a sub-
stantial 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 secu-
rities of a corporation held, acquired, or re-
ceived, directly or indirectly, by a real estate in-
vestment trust as of the first day after July 12,
1999, on which such trust acquires any addi-
tional
securities
of
such
corporation
other
than—
262
(i) pursuant to a binding contract in
effect on July 12, 1999, and at all times
thereafter, or
(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 cor-
poration to become a taxable REIT subsidiary,
the amendment made by section 1021 does not
apply to such corporation by reason of para-
graph (1), and
(B) such election first takes effect before
January 1, 2004,
such election shall be treated as a reorganization
qualifying under section 368(a)(1)(A) of such Code.
PART II—HEALTH CARE REITS
SEC. 721. HEALTH CARE REITS.
(a) SPECIAL FORECLOSURE RULE
FOR HEALTH
CARE PROPERTIES.—Subsection (e) of section 856 (relat-
ing to special rules for foreclosure property) is amended
by adding at the end the following new paragraph:
263
‘‘(6) SPECIAL RULE FOR QUALIFIED HEALTH
CARE
PROPERTIES.—For
purposes
of
this
subsection—
‘‘(A)
ACQUISITION
AT
EXPIRATION
OF
LEASE.—The term ‘foreclosure property’ shall
include any qualified health care property ac-
quired by a real estate investment trust as the
result of the termination of a lease of such
property (other than a termination by reason of
a default, or the imminence of a default, on the
lease).
‘‘(B) GRACE PERIOD.—In the case of a
qualified health care property which is fore-
closure property solely by reason of subpara-
graph (A), in lieu of applying paragraphs (2)
and (3)—
‘‘(i) the qualified health care property
shall cease to be foreclosure property as of
the close of the second taxable year after
the taxable year in which such trust ac-
quired such property, and
‘‘(ii) if the real estate investment
trust establishes to the satisfaction of the
Secretary that an extension of the grace
period in clause (i) is necessary to the or-
264
derly leasing or liquidation of the trust’s
interest in such qualified health care prop-
erty, the Secretary may grant one or more
extensions of the grace period for such
qualified health care property.
Any such extension shall not extend the grace
period beyond the close of the 6th year after
the taxable year in which such trust acquired
such qualified health care property.
‘‘(C) INCOME
FROM
INDEPENDENT
CON-
TRACTORS.—For purposes of applying para-
graph (4)(C) with respect to qualified health
care property which is foreclosure property by
reason of subparagraph (A) or paragraph (1),
income derived or received by the trust from an
independent contractor shall be disregarded to
the extent such income is attributable to—
‘‘(i) any lease of property in effect on
the date the real estate investment trust
acquired the qualified health care property
(without regard to its renewal after such
date so long as such renewal is pursuant to
the terms of such lease as in effect on such
date), or
265
‘‘(ii) any lease of property entered
into after such date if—
‘‘(I) on such date, a lease of such
property from the trust was in effect,
and
‘‘(II) under the terms of the new
lease, such trust receives a substan-
tially similar or lesser benefit in com-
parison to the lease referred to in sub-
clause (I).
‘‘(D)
QUALIFIED
HEALTH
CARE
PROP-
ERTY.—
‘‘(i) IN GENERAL.—The term ‘quali-
fied health care property’ means any real
property (including interests therein), and
any personal property incident to such real
property, which—
‘‘(I) is a health care facility, or
‘‘(II) is necessary or incidental to
the use of a health care facility.
‘‘(ii) HEALTH
CARE
FACILITY.—For
purposes of clause (i), the term ‘health
care facility’ means a hospital, nursing fa-
cility, assisted living facility, congregate
care facility, qualified continuing care facil-
266
ity (as defined in section 7872(g)(4)), or
other licensed facility which extends med-
ical or nursing or ancillary services to pa-
tients and which, immediately before the
termination, expiration, default, or breach
of the lease of or mortgage secured by
such facility, was operated by a provider of
such services which was eligible for partici-
pation in the medicare program under title
XVIII of the Social Security Act with re-
spect to such facility.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
PART III—CONFORMITY WITH REGULATED
INVESTMENT COMPANY RULES
SEC. 731. CONFORMITY WITH REGULATED INVESTMENT
COMPANY RULES.
(a) DISTRIBUTION REQUIREMENT.—Clauses (i) and
(ii) of section 857(a)(1)(A) (relating to requirements ap-
plicable to real estate investment trusts) are each amended
by striking ‘‘95 percent (90 percent for taxable years be-
ginning before January 1, 1980)’’ and inserting ‘‘90 per-
cent’’.
267
(b) IMPOSITION
OF TAX.—Clause (i) of section
857(b)(5)(A) (relating to imposition of tax in case of fail-
ure to meet certain requirements) is amended by striking
‘‘95 percent (90 percent in the case of taxable years begin-
ning before January 1, 1980)’’ and inserting ‘‘90 per-
cent’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
PART IV—CLARIFICATION OF EXCEPTION FROM
IMPERMISSIBLE TENANT SERVICE INCOME
SEC.
741.
CLARIFICATION
OF
EXCEPTION
FOR
INDE-
PENDENT OPERATORS.
(a) IN GENERAL.—Paragraph (3) of section 856(d)
(relating to independent contractor defined) is amended
by adding at the end the following flush sentence:
‘‘In the event that any class of stock of either the
real estate investment trust or such person is regu-
larly traded on an established securities market, only
persons who own, directly or indirectly, more than 5
percent of such class of stock shall be taken into ac-
count as owning any of the stock of such class for
purposes of applying the 35 percent limitation set
forth in subparagraph (B) (but all of the out-
standing stock of such class shall be considered out-
268
standing in order to compute the denominator for
purpose of determining the applicable percentage of
ownership).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
PART V—MODIFICATION OF EARNINGS AND
PROFITS RULES
SEC.
751.
MODIFICATION
OF
EARNINGS
AND
PROFITS
RULES.
(a) RULES
FOR DETERMINING WHETHER REGU-
LATED
INVESTMENT
COMPANY
HAS
EARNINGS
AND
PROFITS FROM NON-RIC YEAR.—
(1) IN
GENERAL.—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 earnings and profits which, but for the
distribution, would result in a failure to meet
269
such requirements (and allocated to such earn-
ings on a first-in, first-out basis), and
‘‘(B) to the extent treated under subpara-
graph (A) as made from accumulated earnings
and profits, shall not be treated as a distribu-
tion for purposes of subsection (b)(2)(D) and
section 855.’’.
(2) CONFORMING AMENDMENT.—Subparagraph
(A) of section 857(d)(3) is amended to read as fol-
lows:
‘‘(A) shall be treated for purposes of this
subsection and subsection (a)(2)(B) as made
from earnings and profits which, but for the
distribution, would result in a failure to meet
such requirements (and allocated to such earn-
ings on a first-in, first-out basis), and’’.
(b)
CLARIFICATION
OF
APPLICATION
OF
REIT
SPILLOVER DIVIDEND RULES
TO DISTRIBUTIONS TO
MEET
QUALIFICATION
REQUIREMENT.—Subparagraph
(B) of section 857(d)(3) is amended by inserting before
the period ‘‘and section 858’’.
(c) APPLICATION OF DEFICIENCY DIVIDEND PROCE-
DURES.—Paragraph (1) of section 852(e) is amended by
adding at the end the following new sentence: ‘‘If the de-
termination under subparagraph (A) is solely as a result
270
of the failure to meet the requirements of subsection
(a)(2), the preceding sentence shall also apply for pur-
poses of applying subsection (a)(2) to the non-RIC year
and the amount referred to in paragraph (2)(A)(i) shall
be the portion of the accumulated earnings and profits
which resulted in such failure.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
Subtitle C—Private Activity Bond
Volume Cap
SEC. 761. ACCELERATION OF PHASE-IN OF INCREASE IN
VOLUME CAP ON PRIVATE ACTIVITY BONDS.
(a) IN GENERAL.—The table contained in section
146(d)(2) (relating to per capita limit; aggregate limit) is
amended to read as follows:
‘‘Calendar Year
Per Capita
Limit
Aggregate
Limit
2000 ....................................................................................
$55.00
165,000,000
2001 ....................................................................................
60.00
180,000,000
2002 ....................................................................................
65.00
195,000,000
2003 ....................................................................................
70.00
210,000,000
2004 and thereafter ............................................................
75.00
225,000,000.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to calendar years beginning after
1999.
271
Subtitle D—Exclusion from gross
income
for
certain
forgiven
mortgage obligations
SEC. 771. EXCLUSION FROM GROSS INCOME FOR CERTAIN
FORGIVEN MORTGAGE OBLIGATIONS.
(a) IN GENERAL.—Paragraph (1) of section 108(a)
of the Internal Revenue Code of 1986 (relating to exclu-
sion from gross income) is amended by striking ‘‘or’’ at
the end of both subparagraphs (A) and (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, or’’, and by inserting after subparagraph (D) the fol-
lowing new subparagraph:
‘‘(E) in the case of an individual, the in-
debtedness discharged is qualified residential in-
debtedness.’’.
(b)
QUALIFIED
RESIDENTIAL
INDEBTEDNESS
SHORTFALL.—Section 108 of such Code (relating to dis-
charge of indebtedness) is amended by adding at the end
the following new subsection:
‘‘(h) QUALIFIED RESIDENTIAL INDEBTEDNESS.—
‘‘(1)
LIMITATIONS.—The
amount
excluded
under subparagraph (E) of subsection (a)(1) with
respect to any qualified residential indebtedness
shall not exceed the excess (if any) of—
272
‘‘(A) the outstanding principal amount of
such indebtedness (immediately before the dis-
charge), over
‘‘(B) the sum of—
‘‘(i) the amount realized from the sale
of the real property securing such indebt-
edness reduced by the cost of such sale,
and
‘‘(ii) the outstanding principal amount
of any other indebtedness secured by such
property.
‘‘(2)
QUALIFIED
RESIDENTIAL
INDEBTED-
NESS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
residential
indebtedness’
means
indebtedness
which—
‘‘(i) was incurred or assumed by the
taxpayer in connection with real property
used as a residence and is secured by such
real property,
‘‘(ii) is incurred or assumed to ac-
quire, construct, reconstruct, or substan-
tially improve such real property, and
273
‘‘(iii) with respect to which such tax-
payer makes an election to have this para-
graph apply.
‘‘(B) REFINANCED INDEBTEDNESS.—Such
term shall include indebtedness resulting from
the refinancing of indebtedness under subpara-
graph (A)(ii), but only to the extent the refi-
nanced
indebtedness
does
not
exceed
the
amount of the indebtedness being refinanced.
‘‘(C) EXCEPTIONS.—Such term shall not
include qualified farm indebtedness or qualified
real property business indebtedness.’’.
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 108(a) of such
Code is amended—
(A) in subparagraph (A) by striking ‘‘and
(D)’’ and inserting ‘‘(D), and (E)’’, and
(B) by amending subparagraph (B) to read
as follows:
‘‘(B)
INSOLVENCY
EXCLUSION
TAKES
PRECEDENCE OVER QUALIFIED FARM EXCLU-
SION;
QUALIFIED
REAL
PROPERTY
BUSINESS
EXCLUSION;
AND
QUALIFIED
RESIDENTIAL
SHORTFALL
EXCLUSION.—Subparagraphs (C),
(D), and (E) of paragraph (1) shall not apply
274
to a discharge to the extent the taxpayer is in-
solvent.’’.
(2) Paragraph (1) of section 108(b) of such
Code is amended by striking ‘‘or (C)’’ and inserting
‘‘(C), or (E)’’.
(3) Subsection (c) of section 121 of such Code
is amended by adding at the end the following new
paragraph:
‘‘(4) SPECIAL RULE RELATING TO DISCHARGE
OF
INDEBTEDNESS.—The amount of gain which
(but for this paragraph) would be excluded from
gross income under subsection (a) with respect to a
principal residence shall be reduced by the amount
excluded
from
gross
income
under
section
108(a)(1)(E) with respect to such residence.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to discharges after the date of the
enactment of this Act.
275
TITLE VIII—MISCELLANEOUS
PROVISIONS
SEC.
801.
CREDIT
FOR
MODIFICATIONS
TO
INTER-CITY
BUSES REQUIRED UNDER THE AMERICANS
WITH DISABILITIES ACT OF 1990.
(a) IN GENERAL.—Subsection (a) of section 44 (re-
lating 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 expendi-
tures for the taxable year as exceed $250 but do not
exceed $10,250, and
‘‘(2) 50 percent of so much of the eligible bus
access expenditures for the taxable year with respect
to each eligible bus as exceed $250 but do not ex-
ceed $30,250.’’.
(b) ELIGIBLE BUS ACCESS EXPENDITURES.—Sec-
tion 44 is amended by redesignating subsections (d) and
(e) as subsections (e) and (f), respectively, and by insert-
ing after subsection (c) the following new subsection:
276
‘‘(d) ELIGIBLE BUS ACCESS EXPENDITURES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘eligible bus ac-
cess expenditures’ means amounts paid or incurred
by the taxpayer for the purpose of enabling the tax-
payer’s eligible bus to comply with applicable re-
quirements under the Americans With Disabilities
Act of 1990 (as in effect on the date of the enact-
ment of this subsection).
‘‘(2)
CERTAIN
EXPENDITURES
NOT
IN-
CLUDED.—The amount of eligible bus access ex-
penditures otherwise taken into account under sub-
section (a)(2) shall be reduced to the extent that
funds for such expenditures 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).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999, and before January 1, 2012.
277
SEC. 802. CERTAIN EDUCATIONAL BENEFITS PROVIDED BY
AN EMPLOYER TO CHILDREN OF EMPLOYEES
EXCLUDABLE
FROM
GROSS
INCOME
AS
A
SCHOLARSHIP.
(a) IN GENERAL.—Section 117 (relating to qualified
scholarships) is amended by adding at the end the fol-
lowing new subsection:
‘‘(e) EMPLOYER-PROVIDED EDUCATIONAL BENEFITS
PROVIDED TO CHILDREN OF EMPLOYEES.—
‘‘(1) IN
GENERAL.—In determining whether
any amount is a qualified scholarship for purposes
of subsection (a), the fact that such amount is pro-
vided in connection with an employment relationship
shall be disregarded if—
‘‘(A) such amount is provided by the em-
ployer
to
a
child
(as
defined
in
section
151(c)(3)) of an employee of such employer,
‘‘(B) such amount is provided pursuant to
a plan which meets the nondiscrimination re-
quirements of subsection (d)(3), and
‘‘(C) amounts provided under such plan
are in addition to any other compensation pay-
able to employees and such plan does not pro-
vide employees with a choice between such
amounts and any other benefit.
278
For purposes of subparagraph (C), the business
practices of the employer (as well as such plan) shall
be taken into account.
‘‘(2) DOLLAR LIMITATIONS.—
‘‘(A) PER CHILD.—The amount excluded
from the gross income of the employee by rea-
son of paragraph (1) for a taxable year with re-
spect to amounts provided to each child of such
employee shall not exceed $2,000.
‘‘(B) AGGREGATE LIMIT.—The amount ex-
cluded from the gross income of the employee
by reason of paragraph (1) for a taxable year
(after the application of subparagraph (A))
shall not exceed the excess of the dollar amount
contained in section 127(a)(2) over the amount
excluded from the employee’s gross income
under section 127 for such year.
‘‘(3)
PRINCIPAL
SHAREHOLDERS
AND
OWN-
ERS.—Paragraph (1) shall not apply to any amount
provided to any child of any individual if such indi-
vidual (or such individual’s spouse) owns (on any
day of the year) more than 5 percent of the stock
or of the capital or profits interest in the employer.
‘‘(4) DEGREE REQUIREMENT NOT TO APPLY.—
In the case of an amount which is treated as a quali-
279
fied scholarship by reason of this subsection, sub-
section (a) shall be applied without regard to the re-
quirement that the recipient be a candidate for a de-
gree.
‘‘(5) CERTAIN OTHER RULES TO APPLY.—Rules
similar to the rules of paragraphs (4), (5), and (7)
of section 127(c) shall apply for purposes of this
subsection.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 803. TAX INCENTIVES FOR QUALIFIED UNITED STATES
INDEPENDENT FILM AND TELEVISION PRO-
DUCTION.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 (relating to refundable credits) is
amended by redesignating section 35 as section 36 and
by inserting after section 34 the following new section:
‘‘SEC. 35. UNITED STATES INDEPENDENT FILM AND TELE-
VISION PRODUCTION WAGE CREDIT.
‘‘(a) AMOUNT OF CREDIT.—There shall be allowed
as a credit against the tax imposed by this subtitle for
the taxable year an amount equal to 20 percent of the
qualified wages paid or incurred during the calendar year
which ends with or within the taxable year.
280
‘‘(b) ONLY FIRST $20,000 OF WAGES PER YEAR
TAKEN INTO ACCOUNT.—With respect to each qualified
United States independent film and television production,
the amount of qualified wages paid or incurred to each
qualified United States independent film and television
production employee which may be taken into account for
a calendar year shall not exceed $20,000.
‘‘(c)
QUALIFIED
WAGES.—For
purposes
of
this
section—
‘‘(1) IN GENERAL.—The term ‘qualified wages’
means any wages paid or incurred by an employer
for services performed by an employee while such
employee is a qualified United States independent
film and television production employee.
‘‘(2)
QUALIFIED
UNITED
STATES
INDE-
PENDENT FILM AND TELEVISION PRODUCTION EM-
PLOYEE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
United States independent film and television
production employee’ means, with respect to
any period, any employee of an employer if sub-
stantially all of the services performed during
such period by such employee for such employer
are performed in an activity related to any
qualified United States independent film and
281
television production in a trade or business of
the employer.
‘‘(B) CERTAIN
INDIVIDUALS
NOT
ELIGI-
BLE.—Such term shall not include—
‘‘(i) any individual described in sub-
paragraph (A), (B), or (C) of section
51(i)(1), and
‘‘(ii) any 5-percent owner (as defined
in section 416(i)(1)(B).
‘‘(3) COORDINATION WITH OTHER WAGE CRED-
ITS.—No credit shall be allowed under any other
provision of this chapter for wages paid to any em-
ployee during any calendar year if the employer is
allowed a credit under this section for any of such
wages.
‘‘(4) WAGES.—The term ‘wages’ has the same
meaning as when used in section 51.
‘‘(d) QUALIFIED UNITED STATES INDEPENDENT
FILM AND TELEVISION PRODUCTION.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified United
States independent film and television production’
means any production of any motion picture (wheth-
er released theatrically or directly to video cassette
282
or any other format), a mini series, or a pilot pro-
duction for a dramatic series if—
‘‘(A) the production is produced in whole
or in substantial part within the United States
(determined on the basis of proportion of the
qualified United States independent film and
television production employees with respect to
such production to total employee performing
services related to such production),
‘‘(B) the production is created primarily
for use as public entertainment or for edu-
cational purposes, and
‘‘(C) the total production cost of the pro-
duction is less than $10,000,000.
‘‘(2)
PUBLIC
ENTERTAINMENT.—The
term
‘public entertainment’ includes a motion picture
film, video tape, or television program intended for
initial broadcast via the public broadcast spectrum
or delivered via cable distribution, or productions
that are submitted to a national organization that
rates films for violent or adult content. Such term
does not include any film or tape the market for
which is primarily topical, is otherwise essentially
transitory in nature, or is produced for private non-
commercial use.
283
‘‘(3)
TOTAL
PRODUCTION
COST.—The
term
‘total production cost’ includes costs incurred in the
delivery of the final master copy but does not in-
clude development, acquisition, and marketing costs
of the qualified United States independent film and
television production.
‘‘(e) CONTROLLED GROUPS.—For purposes of this
section—
‘‘(1) all employers treated as a single employer
under subsection (a) or (b) of section 52 shall be
treated as a single employer for purposes of this
subpart, and
‘‘(2) the credit (if any) determined under this
section with respect to each such employer shall be
its proportionate share of the wages giving rise to
such credit.
‘‘(f) CERTAIN OTHER RULES MADE APPLICABLE.—
Rules similar to the rules of section 51(k) and subsections
(c) and (d) of section 52 shall apply for purposes of this
section.’’.
(b) DENIAL OF DOUBLE BENEFIT.—Subsection (a)
of section 280C is amended by inserting ‘‘35,’’ before
‘‘45A(a),’’.
(c) CONFORMING AMENDMENTS.—
284
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 35 of such Code’’.
(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 35. United States independent film and television produc-
tion wage credit.
‘‘Sec. 36. Overpayments of tax.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to wages paid or incurred after
the date of the enactment of this Act in taxable years end-
ing after such date.
TITLE II—SMALL BUSINESS
PROVISIONS
SEC. 201. DEDUCTION FOR 100 PERCENT OF HEALTH INSUR-
ANCE COSTS OF SELF-EMPLOYED INDIVID-
UALS.
(a) IN GENERAL.—Paragraph (1) of section 162(l) is
amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case of
an individual who is an employee within the mean-
ing of section 401(c)(1), there shall be allowed as a
deduction under this section an amount equal to 100
percent of the amount paid during the taxable year
285
for insurance which constitutes medical care for the
taxpayer and the taxpayer’s spouse and dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) is
amended to read as follows: ‘‘Paragraph (1) shall not apply
to any taxpayer for any calendar month for which the tax-
payer participates in any subsidized health plan main-
tained by any employer (other than an employer described
in section 401(c)(4)) of the taxpayer or the spouse of the
taxpayer.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 202. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) IN GENERAL.—Paragraph (1) of section 179(b)
(relating to dollar limitation) is amended to read as follows:
‘‘(1) DOLLAR LIMITATION.—The aggregate cost
which may be taken into account under subsection (a)
for any taxable year shall not exceed $30,000.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
286
SEC. 203. INCREASED DEDUCTION FOR MEAL EXPENSES.
(a) IN GENERAL.—Paragraph (1) of section 274(n)
(relating to only 50 percent of meal and entertainment ex-
penses allowed as deduction) is amended by striking ‘‘50
percent’’ in the text and inserting ‘‘the allowable percent-
age’’.
(b) ALLOWABLE PERCENTAGES.—Subsection (n) of
section 274 is amended by redesignating paragraphs (2)
and (3) as paragraphs (3) and (4), respectively, and by
inserting after paragraph (1) the following new paragraph:
‘‘(2) ALLOWABLE PERCENTAGE.—For purposes of
paragraph (1), the allowable percentage is—
‘‘(A) in the case of amounts for items de-
scribed in paragraph (1)(B), 50 percent, and
‘‘(B) in the case of expenses for food or bev-
erages, 60 percent (55 percent for taxable years
beginning during 2001).’’
(c) CONFORMING AMENDMENT.—The heading for sub-
section (n) of section 274 is amended by striking ‘‘50 PER-
CENT’’ and inserting ‘‘LIMITED PERCENTAGES’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
287
SEC. 204. INCREASED DEDUCTIBILITY OF BUSINESS MEAL
EXPENSES FOR INDIVIDUALS SUBJECT TO
FEDERAL LIMITATIONS ON HOURS OF SERV-
ICE.
(a) IN GENERAL.—Paragraph (4) of section 274(n)
(relating to limited percentages of meal and entertainment
expenses allowed as deduction), as redesignated by section
203, is amended to read as follows:
‘‘(4) SPECIAL RULE FOR INDIVIDUALS SUBJECT
TO FEDERAL HOURS OF SERVICE.—In the case of any
expenses for food or beverages consumed while away
from home (within the meaning of section 162(a)(2))
by an individual during, or incident to, the period of
duty subject to the hours of service limitations of the
Department of Transportation, paragraph (2)(B)
shall be applied by substituting ‘80 percent’ for the
percentage otherwise applicable under paragraph
(2)(B).’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2000.
SEC. 205. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.
Any option to accelerate the receipt of any payment
under a production flexibility contract which is payable
under the Federal Agriculture Improvement and Reform
Act of 1996 (7 U.S.C. 7200 et seq.), as in effect on the date
288
of the enactment of this Act, shall be disregarded in deter-
mining the taxable year for which such payment is properly
includible in gross income for purposes of the Internal Rev-
enue Code of 1986.
SEC. 206. INCOME AVERAGING FOR FARMERS AND FISHER-
MEN NOT TO INCREASE ALTERNATIVE MIN-
IMUM TAX LIABILITY.
(a) IN GENERAL.—Section 55(c) (defining regular tax)
is amended by redesignating paragraph (2) as paragraph
(3) and by inserting after paragraph (1) the following:
‘‘(2) COORDINATION
WITH
INCOME
AVERAGING
FOR FARMERS AND FISHERMEN.—Solely for purposes
of this section, section 1301 (relating to averaging of
farm and fishing income) shall not apply in com-
puting the regular tax.’’.
(b) ALLOWING INCOME AVERAGING
FOR FISHER-
MEN.—
(1) IN GENERAL.—Section 1301(a) is amended
by striking ‘‘farming business’’ and inserting ‘‘farm-
ing business or fishing business,’’.
(2) DEFINITION OF ELECTED FARM INCOME.—
(A) IN
GENERAL.—Clause (i) of section
1301(b)(1)(A) is amended by inserting ‘‘or fish-
ing business’’ before the semicolon.
289
(B) CONFORMING
AMENDMENT.—Subpara-
graph (B) of section 1301(b)(1) is amended by
inserting ‘‘or fishing business’’ after ‘‘farming
business’’ both places it occurs.
(3) DEFINITION OF FISHING BUSINESS.—Section
1301(b) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(4) FISHING
BUSINESS.—The term ‘fishing
business’ means the conduct of commercial fishing as
defined in section 3 of the Magnuson-Stevens Fishery
Conservation and Management Act (16 U.S.C.
1802).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 207. REPEAL OF OCCUPATIONAL TAXES RELATING TO
DISTILLED SPIRITS, WINE, AND BEER.
(a) REPEAL OF OCCUPATIONAL TAXES.—
(1) IN GENERAL.—The following provisions of
part II of subchapter A of chapter 51 of the Internal
Revenue Code of 1986 (relating to occupational taxes)
are hereby repealed:
(A) Subpart A (relating to proprietors of
distilled spirits plants, bonded wine cellars, etc.).
(B) Subpart B (relating to brewer).
290
(C) Subpart D (relating to wholesale deal-
ers) (other than sections 5114 and 5116).
(D) Subpart E (relating to retail dealers)
(other than section 5124).
(E) Subpart G (relating to general provi-
sions) (other than sections 5142, 5143, 5145, and
5146).
(2) NONBEVERAGE DOMESTIC DRAWBACK.—Sec-
tion 5131 is amended by striking ‘‘, on payment of
a special tax per annum,’’.
(3) INDUSTRIAL USE OF DISTILLED SPIRITS.—
Section 5276 is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1)(A) The heading for part II of subchapter A
of chapter 51 and the table of subparts for such part
are amended to read as follows:
‘‘PART II—MISCELLANEOUS PROVISIONS
‘‘Subpart A. Manufacturers of stills.
‘‘Subpart B. Nonbeverage domestic drawback claimants.
‘‘Subpart C. Recordkeeping by dealers.
‘‘Subpart D. Other provisions.’’
(B) The table of parts for such subchapter A is
amended by striking the item relating to part II and
inserting the following new item:
‘‘Part II. Miscellaneous provisions.’’
291
(2) Subpart C of part II of such subchapter (re-
lating to manufacturers of stills) is redesignated as
subpart A.
(3)(A) Subpart F of such part II (relating to
nonbeverage domestic drawback claimants) is redesig-
nated as subpart B and sections 5131 through 5134
are redesignated as sections 5111 through 5114, re-
spectively.
(B) The table of sections for such subpart B, as
so redesignated, is amended—
(i) by redesignating the items relating to
sections 5131 through 5134 as relating to sec-
tions 5111 through 5114, respectively, and
(ii) by striking ‘‘and rate of tax’’ in the
item relating to section 5111, as so redesignated.
(C) Section 5111, as redesignated by subpara-
graph (A), is amended—
(i) by striking ‘‘AND RATE OF TAX’’ in
the section heading,
(ii) by striking ‘‘(a) ELIGIBILITY
FOR
DRAWBACK.—’’, and
(iii) by striking subsection (b).
(4) Part II of subchapter A of chapter 51 is
amended by adding after subpart B, as redesignated
by paragraph (3), the following new subpart:
292
‘‘Subpart C—Recordkeeping by Dealers
‘‘Sec. 5121. Recordkeeping by wholesale dealers.
‘‘Sec. 5122. Recordkeeping by retail dealers.
‘‘Sec. 5123. Preservation and inspection of records, and entry of
premises for inspection.’’
(5)(A) Section 5114 (relating to records) is
moved to subpart C of such part II and inserted after
the table of sections for such subpart.
(B) Section 5114 is amended—
(i) by striking the section heading and in-
serting the following new heading:
‘‘SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.’’,
and
(ii) by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b)
the following new subsection:
‘‘(c) WHOLESALE DEALERS.—For purposes of this
part—
‘‘(1) WHOLESALE
DEALER
IN
LIQUORS.—The
term ‘wholesale dealer in liquors’ means any dealer
(other than a wholesale dealer in beer) who sells, or
offers for sale, distilled spirits, wines, or beer, to an-
other dealer.
‘‘(2) WHOLESALE DEALER IN BEER.—The term
‘wholesale dealer in beer’ means any dealer who sells,
or offers for sale, beer, but not distilled spirits or
wines, to another dealer.
293
‘‘(3) DEALER.—The term ‘dealer’ means any
person who sells, or offers for sale, any distilled spir-
its, wines, or beer.
‘‘(4) PRESUMPTION IN CASE OF SALE OF 20 WINE
GALLONS OR MORE.—The sale, or offer for sale, of dis-
tilled spirits, wines, or beer, in quantities of 20 wine
gallons or more to the same person at the same time,
shall be presumptive evidence that the person making
such sale, or offer for sale, is engaged in or carrying
on the business of a wholesale dealer in liquors or a
wholesale dealer in beer, as the case may be. Such
presumption may be overcome by evidence satisfac-
torily showing that such sale, or offer for sale, was
made to a person other than a dealer.’’
(C) Paragraph (3) of section 5121(d), as so re-
designated, is amended by striking ‘‘section 5146’’
and inserting ‘‘section 5123’’.
(6)(A) Section 5124 (relating to records) is
moved to subpart C of part II of subchapter A of
chapter 51 and inserted after section 5121.
(B) Section 5124 is amended—
(i) by striking the section heading and in-
serting the following new heading:
294
‘‘SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.’’,
(ii) by striking ‘‘section 5146’’ in subsection
(c) and inserting ‘‘section 5123’’, and
(iii) by redesignating subsection (c) as sub-
section (d) and inserting after subsection (b) the
following new subsection:
‘‘(c) 
RETAIL
DEALERS.—For 
purposes 
of 
this
section—
‘‘(1) RETAIL
DEALER
IN
LIQUORS.—The term
‘retail dealer in liquors’ means any dealer (other than
a retail dealer in beer) who sells, or offers for sale,
distilled spirits, wines, or beer, to any person other
than a dealer.
‘‘(2) RETAIL DEALER IN BEER.—The term ‘retail
dealer in beer’ means any dealer who sells, or offers
for sale, beer, but not distilled spirits or wines, to any
person other than a dealer.
‘‘(3) DEALER.—The term ‘dealer’ has the mean-
ing given such term by section 5121(c)(3).’’
(7) Section 5146 is moved to subpart C of part
II of subchapter A of chapter 51, inserted after section
5122, and redesignated as section 5123.
(8) Part II of subchapter A of chapter 51 is
amended by inserting after subpart C the following
new subpart:
295
‘‘Subpart D. Other Provisions
‘‘Sec. 5131. Packaging distilled spirits for industrial uses.
‘‘Sec. 5132. Prohibited purchases by dealers.’’
(9) Section 5116 is moved to subpart D of part
II of subchapter A of chapter 51, inserted after the
table of sections, redesignated as section 5131, and
amended by inserting ‘‘(as defined in section
5121(c))’’ after ‘‘dealer’’ in subsection (a).
(10) Subpart D of part II of subchapter A of
chapter 51 is amended by adding at the end thereof
the following new section:
‘‘SEC. 5132. PROHIBITED PURCHASES BY DEALERS.
‘‘(a) IN GENERAL.—Except as provided in regulations
prescribed by the Secretary, it shall be unlawful for a dealer
to purchase distilled spirits from any person other than a
wholesale dealer in liquors who is required to keep the
records prescribed by section 5121.
‘‘(b) PENALTY AND FORFEITURE.—
‘‘For penalty and forfeiture provisions applicable
to violations of subsection (a), see sections 5687 and
7302.’’
(11) Subsection (b) of section 5002 is amended—
(A) by striking ‘‘section 5112(a)’’ and in-
serting ‘‘section 5121(c)(3)’’,
(B) by striking ‘‘section 5112’’ and insert-
ing ‘‘section 5121(c)’’,
296
(C) by striking ‘‘section 5122’’ and insert-
ing ‘‘section 5122(c)’’.
(12) Subparagraph (A) of section 5010(c)(2) is
amended by striking ‘‘section 5134’’ and inserting
‘‘section 5114’’.
(13) Subsection (d) of section 5052 is amended
to read as follows:
‘‘(d) BREWER.—For purposes of this chapter, the term
‘brewer’ means any person who brews beer or produces beer
for sale. Such term shall not include any person who pro-
duces only beer exempt from tax under section 5053(e).’’
(14) The text of section 5182 is amended to read
as follows:
‘‘For provisions requiring recordkeeping by whole-
sale liquor dealers, see section 5112, and by retail
liquor dealers, see section 5122.’’
(15) Subsection (b) of section 5402 is amended
by striking ‘‘section 5092’’ and inserting ‘‘section
5052(d)’’.
(16) Section 5671 is amended by striking ‘‘or
5091’’.
(17)(A) Part V of subchapter J of chapter 51 is
hereby repealed.
(B) The table of parts for such subchapter J is
amended by striking the item relating to part V.
(18)(A) Sections 5142, 5143, and 5145 are
moved to subchapter D of chapter 52, inserted after
297
section 5731, redesignated as sections 5732, 5733, and
5734, respectively, and amended—
(i) by striking ‘‘this part’’ each place it ap-
pears and inserting ‘‘this subchapter’’, and
(ii) by striking ‘‘this subpart’’ in section
5732(c)(2) (as so redesignated) and inserting
‘‘this subchapter’’.
(B) Section 5732, as redesignated by subpara-
graph (A), is amended by striking ‘‘(except the tax
imposed by section 5131)’’ each place it appears.
(C) Subsection (c) of section 5733, as redesig-
nated by subparagraph (A), is amended by striking
paragraph (2) and by redesignating paragraph (3) as
paragraph (2).
(D) The table of sections for subchapter D of
chapter 52 is amended by adding at the end thereof
the following:
‘‘Sec. 5732. Payment of tax.
‘‘Sec. 5733. Provisions relating to liability for occupational taxes.
‘‘Sec. 5734. Application of State laws.’’
(E) Section 5731 is amended by striking sub-
section (c) and by redesignating subsection (d) as sub-
section (c).
(19) Subsection (c) of section 6071 is amended
by striking ‘‘section 5142’’ and inserting ‘‘section
5732’’.
298
(20) Paragraph (1) of section 7652(g) is
amended—
(A) by striking ‘‘subpart F’’ and inserting
‘‘subpart B’’, and
(B) by striking ‘‘section 5131(a)’’ and in-
serting ‘‘section 5111(a)’’.
(21) The table of sections for subchapter D of
chapter 51 is amended by striking the item relating
to section 5276.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on July 1, 2001, but shall not apply
to taxes imposed for periods before such date.
TITLE III—PENSION PROVISIONS
Subtitle A—Expanding Coverage
SEC. 301. INCREASE IN BENEFIT AND CONTRIBUTION LIM-
ITS.
(a) DEFINED BENEFIT PLANS.—
(1) DOLLAR LIMIT.—
(A) Subparagraph (A) of section 415(b)(1)
(relating to limitation for defined benefit plans)
is amended by striking ‘‘$90,000’’ and inserting
‘‘$160,000’’.
(B) Subparagraphs (C) and (D) of section
415(b)(2) 
are 
each 
amended 
by 
striking
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‘‘$90,000’’ each place it appears in the headings
and the text and inserting ‘‘$160,000’’.
(C) Paragraph (7) of section 415(b) (relat-
ing to benefits under certain collectively bar-
gained plans) is amended by striking ‘‘the great-
er of $68,212 or one-half the amount otherwise
applicable for such year under paragraph (1)(A)
for ‘$90,000’ ’’ and inserting ‘‘one-half the
amount otherwise applicable for such year under
paragraph (1)(A) for ‘$160,000’ ’’.
(2) LIMIT REDUCED WHEN BENEFIT BEGINS BE-
FORE AGE 62.—Subparagraph (C) of section 415(b)(2)
is amended by striking ‘‘the social security retirement
age’’ each place it appears in the heading and text
and inserting ‘‘age 62’’.
(3) LIMIT
INCREASED
WHEN
BENEFIT
BEGINS
AFTER
AGE
65.—Subparagraph 
(D) 
of 
section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 65’’.
(4) COST-OF-LIVING ADJUSTMENTS.—Subsection
(d) of section 415 (related to cost-of-living adjust-
ments) is amended—
(A) by striking ‘‘$90,000’’ in paragraph
(1)(A) and inserting ‘‘$160,000’’, and
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(B) in paragraph (3)(A)—
(i) by striking ‘‘$90,000’’ in the head-
ing and inserting ‘‘$160,000’’, and
(ii) by striking ‘‘October 1, 1986’’ and
inserting ‘‘July 1, 2000’’.
(5) 
CONFORMING
AMENDMENT.—Section
415(b)(2) is amended by striking subparagraph (F).
(b) DEFINED CONTRIBUTION PLANS.—
(1) DOLLAR LIMIT.—Subparagraph (A) of sec-
tion 415(c)(1) (relating to limitation for defined con-
tribution plans) is amended by striking ‘‘$30,000’’
and inserting ‘‘$40,000’’.
(2) COST-OF-LIVING ADJUSTMENTS.—Subsection
(d) of section 415 (related to cost-of-living adjust-
ments) is amended—
(A) by striking ‘‘$30,000’’ in paragraph
(1)(C) and inserting ‘‘$40,000’’, and
(B) in paragraph (3)(D)—
(i) by striking ‘‘$30,000’’ in the head-
ing and inserting ‘‘$40,000’’, and
(ii) by striking ‘‘October 1, 1993’’ and
inserting ‘‘July 1, 2000’’.
(c) QUALIFIED TRUSTS.—
(1) COMPENSATION LIMIT.—Sections 401(a)(17),
404(l), 408(k), and 505(b)(7) are each amended by
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striking ‘‘$150,000’’ each place it appears and insert-
ing ‘‘$200,000’’.
(2) BASE PERIOD AND ROUNDING OF COST-OF-
LIVING ADJUSTMENT.—Subparagraph (B) of section
401(a)(17) is amended—
(A) by striking ‘‘October 1, 1993’’ and in-
serting ‘‘July 1, 2000’’, and
(B) by striking ‘‘$10,000’’ both places it ap-
pears and inserting ‘‘$5,000’’.
(d) ELECTIVE DEFERRALS.—
(1) IN
GENERAL.—Paragraph (1) of section
402(g) (relating to limitation on exclusion for elective
deferrals) is amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) LIMITATION.—Notwithstanding sub-
sections (e)(3) and (h)(1)(B), the elective defer-
rals of any individual for any taxable year shall
be included in such individual’s gross income to
the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar
amount.
‘‘(B) APPLICABLE
DOLLAR
AMOUNT.—For
purposes of subparagraph (A), the applicable
dollar amount shall be the amount determined in
accordance with the following table:
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‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 ....................................................................................
$11,000
2002 ....................................................................................
$12,000
2003 ....................................................................................
$13,000
2004 or thereafter ..............................................................
$14,000.’’.
(2) COST-OF-LIVING
ADJUSTMENT.—Paragraph
(5) of section 402(g) is amended to read as follows:
‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the case
of taxable years beginning after December 31, 2004,
the Secretary shall adjust the $14,000 amount under
paragraph (1)(B) at the same time and in the same
manner as under section 415(d), except that the base
period shall be the calendar quarter beginning July 1,
2003, and any increase under this paragraph which
is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraphs (1) and (2), is further amended
by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as para-
graphs (4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ‘‘402(g)(8)(A)(iii)’’ and in-
serting ‘‘402(g)(7)(A)(iii)’’.
303
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph (4)
thereof)’’.
(e) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Section 457 (relating to de-
ferred compensation plans of State and local govern-
ments and tax-exempt organizations) is amended—
(A) in subsections (b)(2)(A) and (c)(1) by
striking ‘‘$7,500’’ each place it appears and in-
serting ‘‘the applicable dollar amount’’, and
(B) in subsection (b)(3)(A) by striking
‘‘$15,000’’ and inserting ‘‘twice the dollar
amount in effect under subsection (b)(2)(A)’’.
(2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV-
ING ADJUSTMENT.—Paragraph (15) of section 457(e)
is amended to read as follows:
‘‘(15) APPLICABLE DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—The applicable dollar
amount shall be the amount determined in ac-
cordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 ....................................................................................
$11,000
2002 ....................................................................................
$12,000
2003 ....................................................................................
$13,000
2004 or thereafter ..............................................................
$14,000.
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‘‘(B) COST-OF-LIVING
ADJUSTMENTS.—In
the case of taxable years beginning after Decem-
ber 31, 2004, the Secretary shall adjust the
$14,000 amount specified in the table in sub-
paragraph (A) at the same time and in the same
manner as under section 415(d), except that the
base period shall be the calendar quarter begin-
ning July 1, 2003, and any increase under this
paragraph which is not a multiple of $500 shall
be rounded to the next lowest multiple of $500.’’.
(f ) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Clause 
(ii) 
of 
section
408(p)(2)(A) (relating to general rule for qualified
salary reduction arrangement) is amended by striking
‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(2) APPLICABLE
DOLLAR
AMOUNT.—Subpara-
graph (E) of 408(p)(2) is amended to read as follows:
‘‘(E) APPLICABLE DOLLAR AMOUNT; COST-
OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
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‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 .......................................................................
$7,000
2002 .......................................................................
$8,000
2003 .......................................................................
$9,000
2004 or thereafter ..................................................
$10,000.
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
In the case of a year beginning after Decem-
ber 31, 2004, the Secretary shall adjust the
$10,000 amount under clause (i) at the
same time and in the same manner as
under section 415(d), except that the base
period taken into account shall be the cal-
endar quarter beginning July 1, 2003, and
any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Clause (I) of section 401(k)(11)(B)(i) is
amended by striking ‘‘$6,000’’ and inserting ‘‘the
amount in effect under section 408(p)(2)(A)(ii)’’.
(B) Section 401(k)(11) is amended by strik-
ing subparagraph (E).
(g) ROUNDING RULE RELATING TO DEFINED BENEFIT
PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph
(4) of section 415(d) is amended to read as follows:
‘‘(4) ROUNDING.—
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‘‘(A) 
$160,000 
AMOUNT.—Any 
increase
under subparagraph (A) of paragraph (1) which
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) 
$40,000 
AMOUNT.—Any 
increase
under subparagraph (C) of paragraph (1) which
is not a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.’’.
(h) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 302. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART-
NERS, AND SOLE PROPRIETORS.
(a) AMENDMENT TO 1986 CODE.—Subparagraph (B)
of section 4975(f )(6) (relating to exemptions not to apply
to certain transactions) is amended by adding at the end
the following new clause:
‘‘(iii) LOAN EXCEPTION.—For purposes
of subparagraph (A)(i), the term ‘owner-em-
ployee’ shall only include a person described
in subclause (II) or (III) of clause (i).’’.
(b) AMENDMENT TO ERISA.—Section 408(d)(2) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(d)(2)) is amended by adding at the end the
following new subparagraph:
307
‘‘(C) For purposes of paragraph (1)(A), the term
‘owner-employee’ shall only include a person described in
clause (ii) or (iii) of subparagraph (A).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to loans made after December 31, 2000.
SEC. 303. MODIFICATION OF TOP-HEAVY RULES.
(a) SIMPLIFICATION
OF DEFINITION
OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defining
key employee) is amended—
(A) by striking ‘‘or any of the 4 preceding
plan years’’ in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
‘‘(i) an officer of the employer having
an annual compensation greater than
$150,000,’’,
(C) by striking clause (ii) and redesig-
nating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively, and
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C).
308
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT
FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section
416(c)(2)(A) (relating to defined contribution plans) is
amended by adding at the end the following: ‘‘Employer
matching 
contributions 
(as 
defined 
in 
section
401(m)(4)(A)) shall be taken into account for purposes of
this subparagraph.’’.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE-
TERMINATION DATE TAKEN INTO ACCOUNT.—
(1) IN
GENERAL.—Paragraph (3) of section
416(g) is amended to read as follows:
‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—
‘‘(A) 
IN
GENERAL.—For 
purposes 
of
determining—
‘‘(i) the present value of the cumulative
accrued benefit for any employee, or
‘‘(ii) the amount of the account of any
employee,
such present value or amount shall be increased
by the aggregate distributions made with respect
to such employee under the plan during the 1-
309
year period ending on the determination date.
The preceding sentence shall also apply to dis-
tributions under a terminated plan which if it
had not been terminated would have been re-
quired to be included in an aggregation group.
‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV-
ICE DISTRIBUTION.—In the case of any distribu-
tion made for a reason other than separation
from service, death, or disability, subparagraph
(A) shall be applied by substituting ‘5-year pe-
riod’ for ‘1-year period’.’’.
(2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub-
paragraph (E) of section 416(g)(4) is amended—
(A) by striking ‘‘LAST
YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’, and
(B) by striking ‘‘5-year period’’ and insert-
ing ‘‘1-year period’’.
(d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph
(4) of section 416(g) (relating to other special rules for top-
heavy plans) is amended by adding at the end the following
new subparagraph:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING ALTERNATIVE METHODS OF MEETING NON-
DISCRIMINATION
REQUIREMENTS.—The 
term
310
‘top-heavy plan’ shall not include a plan which
consists solely of—
‘‘(i) a cash or deferred arrangement
which meets the requirements of section
401(k)(12), and
‘‘(ii) matching contributions with re-
spect to which the requirements of section
401(m)(11) are met.
If, but for this subparagraph, a plan would be
treated as a top-heavy plan because it is a mem-
ber of an aggregation group which is a top-heavy
group, contributions under the plan may be
taken into account in determining whether any
other plan in the group meets the requirements
of subsection (c)(2).’’.
(e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT
REQUIREMENT.—Subparagraph (C) of section 416(c)(1)
(relating to defined benefit plans) is amended—
(A) by striking ‘‘clause (ii)’’ in clause (i)
and inserting ‘‘clause (ii) or (iii)’’, and
(B) by adding at the end the following:
‘‘(iii) 
EXCEPTION
FOR
FROZEN
PLAN.—For purposes of determining an em-
ployee’s years of service with the employer,
any service with the employer shall be dis-
311
regarded to the extent that such service oc-
curs during a plan year when the plan ben-
efits (within the meaning of section 410(b))
no employee or former employee.’’.
(f ) ELIMINATION OF FAMILY ATTRIBUTION.—Section
416(i)(1)(B) (defining 5-percent owner) is amended by add-
ing at the end the following new clause:
‘‘(iv) 
FAMILY
ATTRIBUTION
DIS-
REGARDED.—Solely for purposes of apply-
ing this paragraph (and not for purposes of
any provision of this title which incor-
porates by reference the definition of a key
employee or 5-percent owner under this
paragraph), section 318 shall be applied
without regard to subsection (a)(1) thereof
in determining whether any person is a 5-
percent owner.’’.
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 304. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIM-
ITS.
(a) IN GENERAL.—Section 404 (relating to deduction
for contributions of an employer to an employees’ trust or
312
annuity plan and compensation under a deferred payment
plan) is amended by adding at the end the following new
subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective
deferrals (as defined in section 402(g)(3)) shall not be sub-
ject to any limitation contained in paragraph (3), (7), or
(9) of subsection (a), and such elective deferrals shall not
be taken into account in applying any such limitation to
any other contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
SEC. 305. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (relat-
ing to deferred compensation plans of State and local gov-
ernments and tax-exempt organizations), as amended by
section 211, is amended to read as follows:
‘‘(c) LIMITATION.—The maximum amount of the com-
pensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed the amount in effect under subsection (b)(2)(A) (as
313
modified by any adjustment provided under subsection
(b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to years beginning after December
31, 2000.
SEC. 306. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The Sec-
retary of the Treasury or the Secretary’s delegate shall not
require payment of user fees under the program established
under section 7527 of the Internal Revenue Code of 1986
for requests to the Internal Revenue Service for determina-
tion letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible em-
ployers or any trust which is part of the plan. The pre-
ceding sentence shall not apply to any request—
(1) made after the 5th plan year the pension
benefit plan is in existence, or
(2) made by the sponsor of any prototype or
similar plan which the sponsor intends to market to
participating employers.
(b) PENSION BENEFIT PLAN.—For purposes of this
section, the term ‘‘pension benefit plan’’ means a pension,
profit-sharing, stock bonus, annuity, or employee stock own-
ership plan.
314
(c) ELIGIBLE EMPLOYER.—For purposes of this sec-
tion, the term ‘‘eligible employer’’ has the same meaning
given such term in section 408(p)(2)(C)(i)(I) of the Internal
Revenue Code of 1986. The determination of whether an em-
ployer is an eligible employer under this section shall be
made as of the date of the request described in subsection
(a).
(d) EFFECTIVE DATE.—The provisions of this section
shall apply with respect to requests made after December
31, 2000.
SEC. 307. DEDUCTION LIMITS.
(a) IN GENERAL.—Section 404(a) (relating to general
rule) is amended by adding at the end the following:
‘‘(12) DEFINITION OF COMPENSATION.—For pur-
poses of paragraphs (3), (7), (8), and (9), the term
‘compensation’ shall include amounts treated as par-
ticipant’s compensation under subparagraph (C) or
(D) of section 415(c)(3).’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B) of
section 404(a)(3) is amended by striking the last sentence
thereof.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
315
SEC. 308. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS PLUS CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified plus contribution program—
‘‘(1) any designated plus contribution made by
an employee pursuant to the program shall be treated
as an elective deferral for purposes of this chapter, ex-
cept that such contribution shall not be excludable
from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by reason
of including such program.
‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified plus con-
tribution program’ means a program under which an
employee may elect to make designated plus contribu-
tions in lieu of all or a portion of elective deferrals