H. R. 3448
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To provide tax relief for small businesses, to protect jobs, to create opportunities,
to increase the take home pay of workers, to amend the Portal-to-Portal Act
of 1947 relating to the payment of wages to employees who use employer owned
vehicles, and to amend the Fair Labor Standards Act of 1938 to increase the
minimum wage rate and to prevent job loss by providing flexibility to employers
in complying with minimum wage and overtime requirements under that Act.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Small Business
Job Protection Act of 1996’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
TITLE I—SMALL BUSINESS AND OTHER TAX PROVISIONS
Sec. 1101. Amendment of 1986 Code.
Sec. 1102. Underpayments of estimated tax.
Subtitle A—Expensing; Etc.
Sec. 1111. Increase in expense treatment for small businesses.
Sec. 1112. Treatment of employee tips.
Sec. 1113. Treatment of storage of product samples.
Sec. 1114. Treatment of certain charitable risk pools.
Sec. 1115. Treatment of dues paid to agricultural or horticultural organizations.
Sec. 1116. Clarification of employment tax status of certain fishermen.
Sec. 1117. Modifications of tax-exempt bond rules for first-time farmers.
Sec. 1118. Newspaper distributors treated as direct sellers.
Sec. 1119. Application of involuntary conversion rules to presidentially declared
disasters.
Sec. 1120. Class life for gas station convenience stores and similar structures.
Sec. 1121. Treatment of abandonment of lessor improvements at termination of
lease.
Sec. 1122. Special rules relating to determination whether individuals are employ-
ees for purposes of employment taxes.
Sec. 1123. Treatment of housing provided to employees by academic health centers.
Subtitle B—Extension of Certain Expiring Provisions
Sec. 1201. Work opportunity tax credit.
Sec. 1202. Employer-provided educational assistance programs.
Sec. 1203. FUTA exemption for alien agricultural workers.
Sec. 1204. Research credit.
Sec. 1205. Orphan drug tax credit.
Sec. 1206. Contributions of stock to private foundations.
Sec. 1207. Extension of binding contract date for biomass and coal facilities.
Sec. 1208. Moratorium for excise tax on diesel fuel sold for use or used in diesel-
powered motorboats.
Subtitle C—Provisions Relating to S Corporations
Sec. 1301. S corporations permitted to have 75 shareholders.
Sec. 1302. Electing small business trusts.
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Sec. 1303. Expansion of post-death qualification for certain trusts.
Sec. 1304. Financial institutions permitted to hold safe harbor debt.
Sec. 1305. Rules relating to inadvertent terminations and invalid elections.
Sec. 1306. Agreement to terminate year.
Sec. 1307. Expansion of post-termination transition period.
Sec. 1308. S corporations permitted to hold subsidiaries.
Sec. 1309. Treatment of distributions during loss years.
Sec. 1310. Treatment of S corporations under subchapter C.
Sec. 1311. Elimination of certain earnings and profits.
Sec. 1312. Carryover of disallowed losses and deductions under at-risk rules al-
lowed.
Sec. 1313. Adjustments to basis of inherited S stock to reflect certain items of in-
come.
Sec. 1314. S corporations eligible for rules applicable to real property subdivided
for sale by noncorporate taxpayers.
Sec. 1315. Financial institutions.
Sec. 1316. Certain exempt organizations allowed to be shareholders.
Sec. 1317. Effective date.
Subtitle D—Pension Simplification
CHAPTER 1—SIMPLIFIED DISTRIBUTION RULES
Sec. 1401. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 1402. Repeal of $5,000 exclusion of employees’ death benefits.
Sec. 1403. Simplified method for taxing annuity distributions under certain em-
ployer plans.
Sec. 1404. Required distributions.
CHAPTER 2—INCREASED ACCESS TO RETIREMENT PLANS
SUBCHAPTER A—SIMPLE SAVINGS PLANS
Sec. 1421. Establishment of savings incentive match plans for employees of small
employers.
Sec. 1422. Extension of simple plan to 401(k) arrangements.
SUBCHAPTER B—OTHER PROVISIONS
Sec. 1426. Tax-exempt organizations eligible under section 401(k).
Sec. 1427. Homemakers eligible for full IRA deduction.
CHAPTER 3—NONDISCRIMINATION PROVISIONS
Sec. 1431. Definition of highly compensated employees; repeal of family aggrega-
tion.
Sec. 1432. Modification of additional participation requirements.
Sec. 1433. Nondiscrimination rules for qualified cash or deferred arrangements and
matching contributions.
Sec. 1434. Definition of compensation for section 415 purposes.
CHAPTER 4—MISCELLANEOUS PROVISIONS
Sec. 1441. Plans covering self-employed individuals.
Sec. 1442. Elimination of special vesting rule for multiemployer plans.
Sec. 1443. Distributions under rural cooperative plans.
Sec. 1444. Treatment of governmental plans under section 415.
Sec. 1445. Uniform retirement age.
Sec. 1446. Contributions on behalf of disabled employees.
Sec. 1447. Treatment of deferred compensation plans of State and local govern-
ments and tax-exempt organizations.
Sec. 1448. Trust requirement for deferred compensation plans of State and local
governments.
Sec. 1449. Transition rule for computing maximum benefits under section 415 limi-
tations.
Sec. 1450. Modifications of section 403(b).
Sec. 1451. Special rules relating to joint and survivor annuity explanations.
Sec. 1452. Repeal of limitation in case of defined benefit plan and defined contribu-
tion plan for same employee; excess distributions.
Sec. 1453. Tax on prohibited transactions.
Sec. 1454. Treatment of leased employees.
Sec. 1455. Uniform penalty provisions to apply to certain pension reporting require-
ments.
Sec. 1456. Retirement benefits of ministers not subject to tax on net earnings from
self-employment.
Sec. 1457. Sample language for spousal consent and qualified domestic relations
forms.
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Sec. 1458. Treatment of length of service awards to volunteers performing fire
fighting or prevention services, emergency medical services, or ambu-
lance services.
Sec. 1459. Alternative nondiscrimination rules for certain plans that provide for
early participation.
Sec. 1460. Clarification of application of ERISA to insurance company general ac-
counts.
Sec. 1461. Special rules for chaplains and self-employed ministers.
Sec. 1462. Definition of highly compensated employee for pre-ERISA rules for
church plans.
Sec. 1463. Rule relating to investment in contract not to apply to foreign mission-
aries.
Sec. 1464. Waiver of excise tax on failure to pay liquidity shortfall.
Sec. 1465. Date for adoption of plan amendments.
Subtitle E—Foreign Simplification
Sec. 1501. Repeal of inclusion of certain earnings invested in excess passive assets.
Subtitle F—Revenue Offsets
PART I—GENERAL PROVISIONS
Sec. 1601. Modifications of Puerto Rico and possession tax credit.
Sec. 1602. Repeal of exclusion for interest on loans used to acquire employer securi-
ties.
Sec. 1603. Certain amounts derived from foreign corporations treated as unrelated
business taxable income.
Sec. 1604. Depreciation under income forecast method.
Sec. 1605. Repeal of exclusion for punitive damages and for damages not attrib-
utable to physical injuries or sickness.
Sec. 1606. Repeal of diesel fuel tax rebate to purchasers of diesel-powered auto-
mobiles and light trucks.
Sec. 1607. Extension and phasedown of luxury passenger automobile tax.
Sec. 1608. Termination of future tax-exempt bond financing for local furnishers of
electricity and gas.
Sec. 1609. Extension of Airport and Airway Trust Fund excise taxes.
Sec. 1610. Basis adjustment to property held by corporation where stock in corpora-
tion is replacement property under involuntary conversion rules.
Sec. 1611. Treatment of certain insurance contracts on retired lives.
Sec. 1612. Treatment of modified guaranteed contracts.
Sec. 1613. Treatment of contributions in aid of construction.
Sec. 1614. Election to cease status as qualified scholarship funding corporation.
Sec. 1615. Certain tax benefits denied to individuals failing to provide taxpayer
identification numbers.
Sec. 1616. Repeal of bad debt reserve method for thrift savings associations.
Sec. 1617. Exclusion for energy conservation subsidies limited to subsidies with re-
spect to dwelling units.
PART II—FINANCIAL ASSET SECURITIZATION INVESTMENTS
Sec. 1621. Financial Asset Securitization Investment Trusts.
Subtitle G—Technical Corrections
Sec. 1701. Coordination with other subtitles.
Sec. 1702. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 1703. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 1704. Miscellaneous provisions.
Subtitle H—Other Provisions
Sec. 1801. Exemption from diesel fuel dyeing requirements with respect to certain
States.
Sec. 1802. Treatment of certain university accounts.
Sec. 1803. Modifications to excise tax on ozone-depleting chemicals.
Sec. 1804. Tax-exempt bonds for sale of Alaska Power Administration facility.
Sec. 1805. Nonrecognition treatment for certain transfers by common trust funds to
regulated investment companies.
Sec. 1806. Qualified State tuition programs.
Sec. 1807. Adoption assistance.
Sec. 1808. Removal of barriers to interethnic adoption.
Sec. 1809. 6-month delay of electronic fund transfer requirement.
Subtitle I—Foreign Trust Tax Compliance
Sec. 1901. Improved information reporting on foreign trusts.