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(b) REPEAL OF TEMPORARY INCREASE.—Effective on
and after the date of the enactment of this Act, section 1
of Public Law 103–12 is hereby repealed.
TITLE 
VIII—FINANCE 
COMMIT-
TEE REVENUE PROVISIONS
SEC. 8000. SHORT TITLE; ETC.
(a) SHORT TITLE.—This title may be cited as the
‘‘Revenue Reconciliation Act of 1993’’.
(b) AMENDMENT TO 1986 CODE.—Except as otherwise
expressly provided, whenever in this title an amendment
or repeal is expressed in terms of an amendment to, or re-
peal of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
(c) SECTION 15 NOT TO APPLY.—Except in the case
of the amendments made by section 8221 (relating to cor-
porate rate increase), no amendment made by this title
shall be treated as a change in a rate of tax for purposes
of section 15 of the Internal Revenue Code of 1986.
(d) WAIVER OF ESTIMATED TAX PENALTIES.—No ad-
dition to tax shall be made under section 6654 or 6655 of
the Internal Revenue Code of 1986 for any period before
April 16, 1994 (March 16, 1994, in the case of a corpora-
tion), with respect to any underpayment to the extent such
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underpayment was created or increased by any provision
of this title.
(e) TABLE OF CONTENTS.—
Sec. 8000. Short title; etc.
Subtitle A—Training and Investment Incentives
PART I—PROVISIONS RELATING TO EDUCATION AND TRAINING
Sec. 8101. Employer-provided educational assistance.
Sec. 8102. Targeted jobs credit.
PART II—INVESTMENT INCENTIVES
SUBPART A—RESEARCH CREDIT
Sec. 8111. Extension of research credit.
Sec. 8112. Modification of fixed base percentage for startup companies.
Sec. 8113. Sense of Senate regarding permanent extension of research credit.
SUBPART B—MODIFICATION TO MINIMUM TAX DEPRECIATION RULES
Sec. 8115. Modification to minimum tax depreciation rules.
SUBPART C—INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES
Sec. 8119. Increase in expense treatment for small businesses.
SUBPART D—TAX EXEMPT BONDS
Sec. 8121. Extension of qualified small issue bonds.
PART III—EXPANSION AND SIMPLIFICATION OF EARNED INCOME TAX CREDIT
Sec. 8131. Expansion and simplification of earned income tax credit.
PART IV—INCENTIVES FOR INVESTMENT IN REAL ESTATE
SUBPART A—EXTENSION OF QUALIFIED MORTGAGE BONDS AND LOW-INCOME
HOUSING CREDIT
Sec. 8141. Extension of qualified mortgage bonds.
Sec. 8141A. Sense of the Senate regarding permanent extension of qualified mort-
gage bonds.
Sec. 8142. Low-income housing credit.
SUBPART B—PASSIVE LOSS RULES
Sec. 8143. Modification of passive loss rules.
SUBPART C—PROVISIONS RELATING TO REAL ESTATE INVESTMENTS BY PENSION
FUNDS
Sec. 8144. Real estate property acquired by a qualified organization.
Sec. 8145. Repeal of special treatment of publicly treated partnerships.
Sec. 8146. Title-holding companies permitted to receive small amounts of unre-
lated business taxable income.
Sec. 8147. Exclusion from unrelated business tax of gains from certain property.
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Sec. 8148. Exclusion from unrelated business tax of certain fees and option pre-
miums.
Sec. 8149. Treatment of pension fund investments in real estate investment trusts.
SUBPART D—INCREASE IN RECOVERY PERIOD FOR NONRESIDENTIAL REAL
PROPERTY
Sec. 8151. Increase in recovery period for nonresidential real property.
PART V—LUXURY TAX
Sec. 8161. Repeal of luxury excise taxes other than on passenger vehicles.
Sec. 8162. Exemption from luxury excise tax for certain equipment installed on
passenger vehicles for use by disabled individuals.
Sec. 8163. Tax on diesel fuel used in noncommercial boats.
PART VI—OTHER CHANGES
Sec. 8171. Alternative minimum tax treatment of contributions of appreciated
property.
Sec. 8172. Substantiation requirement for deduction of certain charitable con-
tributions.
Sec. 8173. Disclosure related to quid pro quo contributions.
Sec. 8174. Certain transfers to railroad retirement account made permanent.
Sec. 8175. Temporary extension of deduction for health insurance costs of self-em-
ployed individuals.
PART VII—INVESTMENT IN INDIAN RESERVATIONS
Sec. 8181. Investment tax credit for property on Indian Reservations.
Sec. 8182. Indian employment credit.
Subtitle B—Revenue Increases
PART I—PROVISIONS AFFECTING INDIVIDUALS
SUBPART A—RATE INCREASES
Sec. 8201. Increase in top marginal rate under section 1.
Sec. 8202. Surtax on high-income taxpayers.
Sec. 8203. Modifications to alternative minimum tax rates and exemption
amounts.
Sec. 8203A. Rate increases not to take effect until July 1, 1993.
Sec. 8204. Overall limitation on itemized deductions for high-income taxpayers
made permanent.
Sec. 8205. Phaseout of personal exemption of high-income taxpayers made perma-
nent.
Sec. 8206. Provisions to prevent conversion of ordinary income to capital gain.
SUBPART B—OTHER PROVISIONS
Sec. 8207. Repeal of limitation on amount of wages subject to health insurance
employment tax.
Sec. 8208. Top estate and gift tax rates made permanent.
Sec. 8209. Reduction in deductible portion of business meals and entertainment.
Sec. 8209A. Sense of the Senate relating to the deductibility of business meals and
entertainment expenses.
Sec. 8210. Elimination of deduction for club membership fees.
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Sec. 8211. Disallowance of deduction for certain employee remuneration in excess
of $1,000,000.
Sec. 8212. Reduction in compensation taken into account in determining con-
tributions and benefits under qualified retirement plans.
Sec. 8213. Modification to deduction for certain moving expenses.
Sec. 8214. Simplification of individual estimated tax safe harbor based on last
year’s tax.
Sec. 8215. Social security and tier 1 railroad retirement benefits.
PART II—PROVISIONS AFFECTING BUSINESSES
Sec. 8221. Increase in top marginal rate under section 11.
Sec. 8222. Disallowance of deduction for lobbying expenditures.
Sec. 8223. Mark to market accounting method for securities dealers.
Sec. 8224. Clarification of treatment of certain FSLIC financial assistance.
Sec. 8225. Modification of corporate estimated tax rules.
Sec. 8226. Modifications of discharge of indebtedness provisions.
Sec. 8227. Limitation on section 936 credit.
Sec. 8228. Modification to limitation on deduction for certain interest.
PART III—FOREIGN TAX PROVISIONS
SUBPART A—CURRENT TAXATION OF CERTAIN EARNINGS OF CONTROLLED
FOREIGN CORPORATIONS
Sec. 8231. Earnings invested in excess passive assets.
Sec. 8232. Modification to taxation of investment in United States property.
Sec. 8233. Other modifications to Subpart F.
SUBPART B—ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES
Sec. 8234. Allocation of research and experimental expenditures.
SUBPART C—OTHER PROVISIONS
Sec. 8235. Repeal of certain exceptions for working capital.
Sec. 8236. Modifications of accuracy-related penalty.
Sec. 8237. Denial of portfolio interest exemption for contingent interest.
Sec. 8238. Regulations dealing with conduit arrangements.
Sec. 8239. Treatment of export of certain softwood logs.
PART IV—TRANSPORTATION FUELS PROVISIONS
SUBPART A—TRANSPORTATION FUELS TAX
Sec. 8241. Transportation fuels tax.
SUBPART B—MODIFICATIONS TO TAX ON DIESEL FUEL
Sec. 8242. Modifications to tax on diesel fuel.
Sec. 8243. Floor stocks tax.
SUBPART C—EXTENSION OF MOTOR FUEL TAX RATES; INCREASED DEPOSITS
INTO HIGHWAY TRUST FUND
Sec. 8244. Extension of motor fuel tax rates; increased deposits into Highway
Trust Fund.
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PART V—COMPLIANCE PROVISIONS
Sec. 8251. Modifications to substantial understatement and return-preparer pen-
alties.
Sec. 8252. Returns relating to the cancellation of indebtedness by certain finan-
cial entities.
PART VI—TREATMENT OF INTANGIBLES
Sec. 8261. Amortization of goodwill and certain other intangibles.
Sec. 8262. Treatment of certain payments to retired or deceased partner.
PART VII—MISCELLANEOUS PROVISIONS
Sec. 8271. Denial of deduction relating to travel expenses.
Sec. 8272. Increase in withholding from supplemental wage payments.
Sec. 8273. Excise tax on certain vaccines made permanent.
Subtitle A—Training and
Investment Incentives
PART I—PROVISIONS RELATING TO EDUCATION
AND TRAINING
SEC. 8101. EMPLOYER-PROVIDED EDUCATIONAL ASSIST-
ANCE.
(a) EXTENSION OF EXCLUSION.—
(1) IN GENERAL.—Subsection (d) of section 127
(relating to educational assistance programs) is
amended to read as follows:
‘‘(d) TERMINATION.—
‘‘(1) IN GENERAL.—This section shall not apply
to taxable years beginning after June 30, 1994.
‘‘(2) SPECIAL RULE.—In the case of any taxable
year beginning in 1994, only amounts paid before
July 1, 1994, by the employer for educational assist-
ance for any employee shall be taken into account for
purposes of this section.’’
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(2) CONFORMING AMENDMENT.—Paragraph (2)
of section 103(a) of the Tax Extension Act of 1991 is
hereby repealed.
(b) COORDINATION WITH SECTION 132.—Paragraph
(8) of section 132(i) is amended to read as follows:
‘‘(8) APPLICATION OF SECTION TO OTHERWISE
TAXABLE
EDUCATIONAL
OR
TRAINING
BENEFITS.—
Amounts paid or expenses incurred by the employer
for education or training provided to the employee
which are not excludable from gross income under sec-
tion 127 shall be excluded from gross income under
this section if (and only if) such amounts or expenses
are a working condition fringe.’’
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made by
subsection (a) shall apply to taxable years ending
after June 30, 1992.
(2) SUBSECTION (b).—The amendment made by
subsection (b) shall apply to taxable years beginning
after December 31, 1988.
SEC. 8102. TARGETED JOBS CREDIT.
(a) EXTENSION OF CREDIT.—Paragraph (4) of section
51(c) (relating to amount of targeted jobs credit) is amend-
ed by striking ‘‘1992’’ and inserting ‘‘1994’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to individuals who begin work for
the employer after June 30, 1992.
PART II—INVESTMENT INCENTIVES
Subpart A—Research Credit
SEC. 8111. EXTENSION OF RESEARCH CREDIT.
(a) IN GENERAL.—Subsection (h) of section 41 (relat-
ing to credit for research activities) is amended to read as
follows:
‘‘(h) NONAPPLICABILITY.—
‘‘(1) IN GENERAL.—This section shall not apply
to amounts paid or incurred during any suspension
period.
‘‘(2) BASE AMOUNT.—In the case of any taxable
year which includes a portion of any suspension pe-
riod, the base amount with respect to such taxable
year shall be the amount which bears the same ratio
to the base amount for such year (determined without
regard to this paragraph) as the number of days in
such taxable year which are not in any suspension
period bears to the total number of days in such tax-
able year.
‘‘(3) FIXED-BASE PERCENTAGE.—The fixed-base
percentage under subsection (c)(3)(B)(ii) shall be
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computed as if this section were in effect during any
suspension period.
‘‘(4) SUSPENSION PERIOD.—For purposes of this
subsection, the term ‘suspension period’ includes—
‘‘(A) the period beginning July 1, 1992, and
ending June 30, 1993, and
‘‘(B) any period after June 30, 1994.’’
(b) CONFORMING AMENDMENT.—Subparagraph (D) of
section 28(b)(1) is amended by striking ‘‘for periods after
June 30, 1992’’ and inserting ‘‘during any suspension pe-
riod (as defined in section 41(h)(4))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years ending after June 30,
1992.
SEC. 8112. MODIFICATION OF FIXED BASE PERCENTAGE
FOR STARTUP COMPANIES.
(a) 
GENERAL
RULE.—Clause 
(ii) 
of 
section
41(c)(3)(B) is amended to read as follows:
‘‘(ii) FIXED-BASE PERCENTAGE.—In a
case to which this subparagraph applies, the
fixed-base percentage is—
‘‘(I) 3 percent for each of the tax-
payer’s 1st 5 taxable years beginning
after December 31, 1993, for which the
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taxpayer has qualified research ex-
penses,
‘‘(II) in the case of the taxpayer’s
6th such taxable year, 1⁄6 of the per-
centage which the aggregate qualified
research expenses of the taxpayer for
the 4th and 5th such taxable years is
of the aggregate gross receipts of the
taxpayer for such years,
‘‘(III) in the case of the taxpayer’s
7th such taxable year, 1⁄3 of the per-
centage which the aggregate qualified
research expenses of the taxpayer for
the 5th and 6th such taxable years is
of the aggregate gross receipts of the
taxpayer for such years,
‘‘(IV) in the case of the taxpayer’s
8th such taxable year, 1⁄2 of the per-
centage which the aggregate qualified
research expenses of the taxpayer for
the 5th, 6th, and 7th such taxable
years is of the aggregate gross receipts
of the taxpayer for such years,
‘‘(V) in the case of the taxpayer’s
9th such taxable year, 2⁄3 of the per-
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centage which the aggregate qualified
research expenses of the taxpayer for
the 5th, 6th, 7th, and 8th such taxable
years is of the aggregate gross receipts
of the taxpayer for such years,
‘‘(VI) in the case of the taxpayer’s
10th such taxable year, 5⁄6 of the per-
centage which the aggregate qualified
research expenses of the taxpayer for
the 5th, 6th, 7th, 8th, and 9th such
taxable years is of the aggregate gross
receipts of the taxpayer for such years,
and
‘‘(VII) for taxable years thereafter,
the percentage which the aggregate
qualified research expenses for any 5
taxable years selected by the taxpayer
from among the 5th through the 10th
such taxable years is of the aggregate
gross receipts of the taxpayer for such
selected years.’’.
(b) CONFORMING AMENDMENTS.—
(1) Clause (iii) of section 41(c)(3)(B) is amended
by striking ‘‘clause (i)’’ and inserting ‘‘clauses (i) and
(ii)’’.
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(2) Subparagraph (D) of section 41(c)(3) is
amended by striking ‘‘subparagraph (A)’’ and insert-
ing ‘‘subparagraphs (A) and (B)(ii)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993.
SEC. 8113. SENSE OF SENATE REGARDING PERMANENT EX-
TENSION OF RESEARCH CREDIT.
It is the sense of the Senate that the research credit
under section 41 of the Internal Revenue Code of 1986 be
extended permanently.
Subpart B—Modification To Minimum Tax
Depreciation Rules
SEC. 8115. MODIFICATION TO MINIMUM TAX DEPRECIATION
RULES.
(a) ELIMINATION OF ACE DEPRECIATION ADJUST-
MENT.—Clause (i) of section 56(g)(4)(A) (relating to depre-
ciation adjustments for computing adjusted current earn-
ings) is amended by adding at the end thereof the following
new sentence: ‘‘The preceding sentence shall not apply to
any property placed in service after December 31, 1993,
and the depreciation deduction with respect to such prop-
erty shall be determined under the rules of subsection
(a)(1)(A).’’.
(b) EFFECTIVE DATES.—
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(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to property placed in service after December
31, 1993.
(2) 
COORDINATION
WITH
TRANSITIONAL
RULES.—The amendments made by this section shall
not apply to any property to which paragraph (1) of
section 56(a) of the Internal Revenue Code of 1986
does not apply by reason of subparagraph (C)(i)
thereof.
Subpart C—Increase in Expense Treatment for Small
Businesses
SEC. 8119. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) GENERAL RULE.—Paragraph (1) of section 179(b)
(relating to dollar limitation) is amended by striking
‘‘$10,000’’ and inserting ‘‘$20,500’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 1992.
Subpart D—Tax Exempt Bonds
SEC. 8121. EXTENSION OF QUALIFIED SMALL ISSUE BONDS.
(a) IN
GENERAL.—Subparagraph (B) of section
144(a)(12) is amended by striking ‘‘1992’’ and inserting
‘‘1994’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to bonds issued after June 30, 1992.
PART III—EXPANSION AND SIMPLIFICATION OF
EARNED INCOME TAX CREDIT
SEC. 8131. EXPANSION AND SIMPLIFICATION OF EARNED
INCOME TAX CREDIT.
(a) GENERAL RULE.—Section 32 (relating to earned
income credit) is amended by striking subsections (a) and
(b) and inserting the following:
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an eligible in-
dividual, there shall be allowed as a credit against the
tax imposed by this subtitle for the taxable year an
amount equal to the credit percentage of so much of
the taxpayer’s earned income for the taxable year as
does not exceed the earned income amount.
‘‘(2) LIMITATION.—The amount of the credit al-
lowable to a taxpayer under paragraph (1) for any
taxable year shall not exceed the excess (if any) of—
‘‘(A) the credit percentage of the earned in-
come amount, over
‘‘(B) the phaseout percentage of so much of
the adjusted gross income (or, if greater, the
earned income) of the taxpayer for the taxable
year as exceeds the phaseout amount.
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‘‘(b) PERCENTAGES AND AMOUNTS.—For purposes of
subsection (a)—
‘‘(1) PERCENTAGES.—The credit percentage and
the phaseout percentage shall be determined as fol-
lows:
‘‘(A) IN GENERAL.—In the case of taxable
years beginning after 1995:
In the case of an eli-
gible individual with:
The credit percentage
is:
The phaseout percent-
age is:
1 qualifying child ......
34 ..................................
16.16
2 or more qualifying
children ..................
39 ..................................
20.72
‘‘(B) TRANSITIONAL
PERCENTAGES
FOR
1995.—In the case of a taxable year beginning in
1995:
In the case of an eli-
gible individual with:
The credit percentage
is:
The phaseout percent-
age is:
1 qualifying child ......
34 ..................................
16.16
2 or more qualifying
children ..................
34 ..................................
15.94
‘‘(C) TRANSITIONAL
PERCENTAGES
FOR
1994.—In the case of a taxable year beginning in
1994:
In the case of an eli-
gible individual with:
The credit percentage
is:
The phaseout percent-
age is:
1 qualifying child ......
26 ..................................
16.16
2 or more qualifying
children ..................
30 ..................................
15.94
‘‘(2) AMOUNTS.—The earned income amount and
the phaseout amount shall be determined as follows:
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‘‘(A) IN GENERAL.—In the case of taxable
years beginning after 1994:
In the case of an eli-
gible individual with:
The earned income
amount is:
The phaseout amount
is:
1 qualifying child ......
$6,000 ...........................
$11,000
2 or more qualifying
children ..................
$8,500 ...........................
$11,000
‘‘(B) TRANSITIONAL AMOUNTS.—In the case
of a taxable year beginning in 1994:
In the case of an eli-
gible individual with:
The earned income
amount is:
The phaseout amount
is:
1 qualifying child ......
$7,750 ...........................
$11,000
2 or more qualifying
children ..................
$8,500 ...........................
$11,000.’’
(b) INFLATION ADJUSTMENTS.—Section 32(i) (relat-
ing to inflation adjustments) is amended—
(1) by striking paragraphs (1) and (2) and in-
serting the following new paragraph:
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning after 1994, each dollar amount con-
tained in subsection (b)(2)(A) shall be increased by
an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3), for the calendar
year in which the taxable year begins, by sub-
stituting ‘calendar year 1993’ for ‘calendar year
1992’.’’, and
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(2) by redesignating paragraph (3) as para-
graph (2).
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (D) of section 32(c)(3) is
amended—
(A) by striking ‘‘clause (i) or (ii)’’ in clause
(iii) and inserting ‘‘clause (i)’’,
(B) by striking clause (ii), and
(C) by redesignating clause (iii) as clause
(ii).
(2) Paragraph (3) of section 162(l) is amended
to read as follows:
‘‘(3) COORDINATION
WITH
MEDICAL
DEDUC-
TION.—Any amount paid by a taxpayer for insurance
to which paragraph (1) applies shall not be taken
into account in computing the amount allowable to
the taxpayer as a deduction under section 213(a).’’
(3) Section 213 is amended by striking sub-
section (f).
(4) Subsection (b) of section 3507 is amended by
redesignating paragraphs (2) and (3) as paragraphs
(3) and (4), respectively, and by inserting after para-
graph (1) the following new paragraph:
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‘‘(2) certifies that the employee has 1 or more
qualifying children (within the meaning of section
32(c)(3)) for such taxable year,’’.
(5) Subparagraph (B) of section 3507(c)(2) is
amended by striking clauses (i) and (ii) and inserting
the following:
‘‘(i) of not more than the credit per-
centage in effect under section 32(b)(1) for
an eligible individual with 1 qualifying
child and with earned income not in excess
of the earned income amount in effect under
section 32(b)(2) for such an eligible individ-
ual, which
‘‘(ii) phases out at the phaseout per-
centage in effect under section 32(b)(1) for
such an eligible individual between the
phaseout amount in effect under section
32(b)(2) for such an eligible individual and
the amount of earned income at which the
credit under section 32(a) phases out for
such an eligible individual, or’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993.
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PART IV—INCENTIVES FOR INVESTMENT IN REAL
ESTATE
Subpart A—Extension of Qualified Mortgage Bonds
and Low-Income Housing Credit
SEC. 8141. EXTENSION OF QUALIFIED MORTGAGE BONDS.
(a) IN
GENERAL.—Subparagraph (B) of section
143(a)(1) (defining qualified mortgage bond) is amended
by striking ‘‘1992’’ each place it appears and inserting
‘‘1994’’.
(b) MORTGAGE CREDIT CERTIFICATES.—Subsection
(h) of section 25 is amended by striking ‘‘1992’’ and insert-
ing ‘‘1994’’.
(c) EFFECTIVE DATES.—
(1) BONDS.—The amendment made by sub-
section (a) shall apply to bonds issued after June 30,
1992.
(2) CERTIFICATES.—The amendment made by
subsection (b) shall apply to elections for periods after
June 30, 1992.
SEC. 8141A. SENSE OF THE SENATE REGARDING PERMA-
NENT EXTENSION OF QUALIFIED MORTGAGE
BONDS.
(a) FINDINGS.—The Senate finds that:
(1) Low and moderate income families often
have difficulty in obtaining affordable mortgage fi-
nancing.
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(2) The mortgage revenue bond provisions of the
Internal Revenue Code are an important tool in pro-
viding affordable financing for first-time home buy-
ers.
(3) The tax-exempt status of mortgage revenue
bonds have enabled State and local housing agencies
to finance home mortgages for first-time buyers at
rates below conventional market rates. This cost dif-
ferential enables buyers, who otherwise might not be
able to get mortgage financing, to obtain a loan at an
affordable rate.
(4) Mortgage revenue bonds are targeted to fami-
lies with the greatest need. In 1992, the average in-
come of a mortgage revenue bond borrower was 74
percent of median income. Mortgage revenue bonds
are only available to buyers who have not owned a
home within the past 3 years, earn 115 percent or less
of the applicable median income, and buy a principal
residence that does not exceed 90 percent of the aver-
age home purchase price.
(5) Prior to its expiration in June, mortgage
revenue bonds were the only Federal assistance tar-
geted to first-time home buyers. During the past 15
years, mortgage revenue bonds have financed more
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than 2 million home purchases and accounted for 1
out of every 12 mortgages made to first-time buyers.
(6) In the last decade, mortgage revenue bonds
have been scheduled to sunset 7 times, making admin-
istration and timing of bond issues extremely difficult
and costly. The mortgage revenue bond program
lapsed on June 30, underscoring the need for perma-
nent extension.
(b) SENSE OF THE SENATE.—It is the sense of the Sen-
ate that mortgage revenue bonds are a vital, proven tool
for providing affordable home ownership opportunities for
low- and moderate-income families and that Congress
should adopt a permanent extension of the mortgage reve-
nue bond program as part of the Internal Revenue Code.
SEC. 8142. LOW-INCOME HOUSING CREDIT.
(a) PERMANENT EXTENSION.—
(1) IN GENERAL.—Section 42 (relating to low-
income housing credit) is amended by striking sub-
section (o).
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to periods ending after
June 30, 1992.
(b) MODIFICATIONS.—
(1) HOUSING CREDIT AGENCY DETERMINATION
OF REASONABLENESS OF PROJECT COSTS.—Subpara-
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graph (B) of section 42(m)(2) (relating to credit allo-
cated to building not to exceed amount necessary to
assure project feasibility) is amended—
(A) by striking ‘‘and’’ at the end of clause
(ii),
(B) by striking the period at the end of
clause (iii) and inserting ‘‘, and’’, and
(C) by inserting after clause (iii) the follow-
ing new clause:
‘‘(iv) the reasonableness of the devel-
opmental and operational costs of the
project.’’
(2) UNITS WITH CERTAIN FULL-TIME STUDENTS
NOT
DISQUALIFIED.—Subparagraph (D) of section
42(i)(3) (defining low-income unit) is amended to
read as follows:
‘‘(D) CERTAIN
STUDENTS
NOT
TO
DIS-
QUALIFY UNIT.—A unit shall not fail to be treat-
ed as a low-income unit merely because it is oc-
cupied—
‘‘(i) by an individual who is—
‘‘(I) a student and receiving as-
sistance under title IV of the Social Se-
curity Act, or
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‘‘(II) enrolled in a job training
program receiving assistance under the
Job Training Partnership Act or
under other similar Federal, State, or
local laws, or
‘‘(ii) entirely by full-time students if
such students are—
‘‘(I) single parents and their chil-
dren and such parents and children
are not dependents (as defined in sec-
tion 152) of another individual, or
‘‘(II) married and file a joint re-
turn.’’
(3) TREASURY WAIVERS OF CERTAIN DE MINIMIS
ERRORS AND RECERTIFICATIONS.—Subsection (g) of
section 42 (relating to qualified low-income housing
projects) is amended by adding at the end thereof the
following new paragraph:
‘‘(8) WAIVER OF CERTAIN DE MINIMIS ERRORS
AND RECERTIFICATIONS.—On application by the tax-
payer, the Secretary may waive—
‘‘(A) any recapture under subsection (j) in
the case of any de minimis error in complying
with paragraph (1), or
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‘‘(B) any annual recertification of tenant
income for purposes of this subsection, if the en-
tire building is occupied by low-income tenants.’’
(4) DISCRIMINATION AGAINST TENANTS PROHIB-
ITED.—Section 42(h)(6)(B) (defining extended low-in-
come housing commitment) is amended by redesignat-
ing clauses (iv) and (v) as clauses (v) and (vi) and
by inserting after clause (iii) the following new
clause:
‘‘(iv) which prohibits the refusal to
lease to a holder of a voucher or certificate
of eligibility under section 8 of the United
States Housing Act of 1937 because of the
status of the prospective tenant as such a
holder,’’.
(5) EFFECTIVE DATES.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the amendments made by this
subsection shall apply to—
(i) determinations under section 42 of
the Internal Revenue Code of 1986 with re-
spect to housing credit dollar amounts allo-
cated from State housing credit ceilings
after June 30, 1992, or
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(ii) buildings placed in service after
June 30, 1992, to the extent paragraph (1)
of section 42(h) of such Code does not apply
to any building by reason of paragraph (4)
thereof, but only with respect to bonds is-
sued after such date.
(B) WAIVER AUTHORITY AND PROHIBITED
DISCRIMINATION.—The amendments made by
paragraphs (3) and (4) shall take effect on the
date of the enactment of this Act.
(c) ELECTION TO DETERMINE RENT LIMITATION
BASED ON NUMBER OF BEDROOMS AND DEEP RENT SKEW-
ING.—In the case of a building to which the amendments
made by subsection (e)(1) or (n)(2) of section 7108 of the
Revenue Reconciliation Act of 1989 did not apply, the tax-
payer may elect to have such amendments apply to such
building but only with respect to tenants first occupying
any unit in the building after the date of the election, and
only if the taxpayer has met the requirements of the proce-
dures described in section 42(m)(1)(B)(iii) of the Internal
Revenue Code of 1986. Such an election may be made only
during the 180 day period beginning on the date of the en-
actment of this Act and, once made, shall be irrevocable.
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Subpart B—Passive Loss Rules
SEC. 8143. MODIFICATION OF PASSIVE LOSS RULES.
(a) GENERAL RULE.—Section 469 (relating to passive
activity losses and credits limited) is amended by redesig-
nating subsections (l) and (m) as subsections (m) and (n),
respectively, and by inserting after subsection (k) the follow-
ing new subsection:
‘‘(l) SPECIAL RULES
FOR REAL ESTATE ACTIVI-
TIES.—
‘‘(1) LOSS FROM CERTAIN RENTAL REAL ESTATE
ACTIVITIES TREATED AS NOT PASSIVE.—If the tax-
payer meets the requirements of paragraph (2) for the
taxable year, subsection (a) shall not apply to so
much of the passive activity loss for such taxable year
as does not exceed the least of—
‘‘(A) the lesser of—
‘‘(i) the net loss for such taxable year
from rental real estate activities in which
the taxpayer materially participates, or
‘‘(ii) the net loss for such taxable year
from all rental real estate activities of the
taxpayer,
‘‘(B) the net income of the taxpayer for the
taxable year from real property trade or business
activities which are not passive activities, or
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‘‘(C) the taxable income of the taxpayer for
the taxable year determined without regard to
this subsection.
A similar rule shall apply to any passive activity
credit.
‘‘(2) REQUIREMENTS.—The taxpayer meets the
requirements of this paragraph for any taxable year
if more than one-half of the personal services per-
formed in trades or businesses by the taxpayer during
such taxable year are performed in real property
trades or businesses in which the taxpayer materially
participates.
‘‘(3) REAL PROPERTY TRADE OR BUSINESS.—
For purposes of this paragraph, the term ‘real prop-
erty trade or business’ means any real property devel-
opment, redevelopment, construction, reconstruction,
acquisition, conversion, rental, operation, manage-
ment, leasing, or brokerage trade or business.
‘‘(4) SPECIAL RULES.—
‘‘(A) PERSONAL
SERVICES
AS
AN
EM-
PLOYEE.—For purposes of paragraph (2), per-
sonal services performed as an employee shall
not be treated as performed in real property
trades or businesses. The preceding sentence shall
not apply if such employee is a 5-percent owner
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(as defined in section 416(i)(1)(B)) in the em-
ployer.
‘‘(B) CLOSELY
HELD
C
CORPORATIONS.—
This subsection shall not apply to any interests
held by a closely held C corporation.
‘‘(5) COORDINATION WITH SUBSECTION (i).—
‘‘(A) IN GENERAL.—This subsection shall be
applied after the application of subsection (i).
‘’(B) AMOUNTS
ALLOWED
UNDER
SUB-
SECTION (i).—For purposes of this subsection—
‘‘(i) the passive activity loss and pas-
sive activity credit, and
‘‘(ii) the net loss referred to in para-
graph (1)(A),
shall not include any amount allowed under sub-
section (i).’’
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993.
Subpart C—Provisions Relating to Real Estate
Investments by Pension Funds
SEC. 8144. REAL ESTATE PROPERTY ACQUIRED BY A QUALI-
FIED ORGANIZATION.
(a) MODIFICATIONS OF EXCEPTIONS.—Paragraph (9)
of section 514(c) (relating to real property acquired by a
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qualified organization) is amended by adding at the end
thereof the following new subparagraphs:
‘‘(G) SPECIAL
RULES
FOR
PURPOSES
OF
THE EXCEPTIONS.—Except as otherwise provided
by regulations—
‘‘(i) SMALL LEASES DISREGARDED.—
For purposes of clauses (iii) and (iv) of sub-
paragraph (B), a lease to a person described
in such clause (iii) or (iv) shall be dis-
regarded if no more than 25 percent of the
leasable floor space in a building (or com-
plex of buildings) is covered by the lease
and if the lease is on commercially reason-
able terms.
‘‘(ii) COMMERCIALLY REASONABLE FI-
NANCING.—Clause (v) of subparagraph (B)
shall not apply if the financing is on com-
mercially reasonable terms.
‘‘(H) QUALIFYING SALES BY FINANCIAL IN-
STITUTIONS.—
‘‘(i) IN GENERAL.—In the case of a
qualifying sale by a financial institution,
except as provided in regulations, clauses
(i) and (ii) of subparagraph (B) shall not
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apply with respect to financing provided by
such institution for such sale.
‘‘(ii) QUALIFYING SALE.—For purposes
of this clause, there is a qualifying sale by
a financial institution if—
‘‘(I) a qualified organization ac-
quires property described in clause
(iii) from a financial institution and
any gain recognized by the financial
institution with respect to the property
is ordinary income,
‘‘(II) the stated principal amount
of the financing provided by the finan-
cial institution does not exceed the
amount of the outstanding indebtedness
(including accrued but unpaid inter-
est) of the financial institution with
respect to the property described in
clause (iii) immediately before the ac-
quisition referred to in clause (iii) or
(v), whichever is applicable, and
‘‘(III) the present value (deter-
mined as of the time of the sale and by
using the applicable Federal rate deter-
mined under section 1274(d)) of the
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maximum amount payable pursuant
to the financing that is determined by
reference to the revenue, income, or
profits derived from the property can-
not exceed 30 percent of the total pur-
chase price of the property (including
the contingent payments).
‘‘(iii) PROPERTY TO WHICH SUBPARA-
GRAPH APPLIES.—Property is described in
this clause if such property is foreclosure
property, or is real property which—
‘‘(I) was acquired by the qualified
organization from a financial institu-
tion which is in conservatorship or re-
ceivership, or from the conservator or
receiver of such an institution, and
‘‘(II) was held by the financial in-
stitution at the time it entered into
conservatorship or receivership.
‘‘(iv) FINANCIAL
INSTITUTION.—For
purposes of this subparagraph, the term ‘fi-
nancial institution’ means—
‘‘(I) any financial institution de-
scribed in section 581 or 591(a),
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‘‘(II) any other corporation which
is a direct or indirect subsidiary of an
institution referred to in subclause (I)
but only if, by virtue of being affiliated
with such institution, such other cor-
poration is subject to supervision and
examination by a Federal or State
agency which regulates institutions re-
ferred to in subclause (I), and
‘‘(III) any person acting as a con-
servator or receiver of an entity re-
ferred to in subclause (I) or (II) (or
any government agency or corporation
succeeding to the rights or interest of
such person).
‘‘(v) FORECLOSURE
PROPERTY.—For
purposes of this subparagraph, the term
‘foreclosure property’ means any real prop-
erty acquired by the financial institution as
the result of having bid on such property at
foreclosure, or by operation of an agreement
or process of law, after there was a default
(or a default was imminent) on indebted-
ness which such property secured.’’.
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(b) CONFORMING AMENDMENT.—Paragraph (9) of sec-
tion 514(c) is amended—
(1) by adding the following new sentence at the
end of subparagraph (A): ‘‘For purposes of this para-
graph, an interest in a mortgage shall in no event be
treated as real property.’’, and
(2) by striking the last sentence of subparagraph
(B).
(c) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to acquisitions on or after
January 1, 1994.
(2) SMALL LEASES.—The provisions of section
514(c)(9)(G)(i) of the Internal Revenue Code of 1986
shall, in addition to any leases to which the provi-
sions apply by reason of paragraph (1), apply to
leases entered into on or after January 1, 1994.
SEC. 8145. REPEAL OF SPECIAL TREATMENT OF PUBLICLY
TREATED PARTNERSHIPS.
(a) GENERAL RULE.—Subsection (c) of section 512 is
amended—
(1) by striking paragraph (2),
(2) by redesignating paragraph (3) as para-
graph (2), and
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(3) by striking ‘‘paragraph (1) or (2)’’ in para-
graph (2) (as so redesignated) and inserting ‘‘para-
graph (1)’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to partnership years beginning on
or after January 1, 1994.
SEC. 8146. TITLE-HOLDING COMPANIES PERMITTED TO RE-
CEIVE 
SMALL 
AMOUNTS 
OF 
UNRELATED
BUSINESS TAXABLE INCOME.
(a) GENERAL
RULE.—Paragraph
(25)
of
section
501(c) is amended by adding at the end thereof the follow-
ing new subparagraph:
‘‘(G)(i) An organization shall not be treated
as failing to be described in this paragraph
merely by reason of the receipt of any otherwise
disqualifying income which is incidentally de-
rived from the holding of real property.
‘‘(ii) Clause (i) shall not apply if the
amount of gross income described in such clause
exceeds 10 percent of the organization’s gross in-
come for the taxable year unless the organization
establishes to the satisfaction of the Secretary
that the receipt of gross income described in
clause (i) in excess of such limitation was inad-
vertent and reasonable steps are being taken to
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correct the circumstances giving rise to such in-
come.’’
(b) CONFORMING AMENDMENT.—Paragraph (2) of sec-
tion 501(c) is amended by adding at the end thereof the
following new sentence: ‘‘Rules similar to the rules of sub-
paragraph (G) of paragraph (25) shall apply for purposes
of this paragraph.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning on or after
January 1, 1994.
SEC. 8147. EXCLUSION FROM UNRELATED BUSINESS TAX
OF GAINS FROM CERTAIN PROPERTY.
(a) GENERAL RULE.—Subsection (b) of section 512
(relating to modifications) is amended by adding at the end
thereof the following new paragraph:
‘‘(16)(A) Notwithstanding paragraph (5)(B),
there shall be excluded all gains or losses from the
sale, exchange, or other disposition of any real prop-
erty described in subparagraph (B) if—
‘‘(i) such property was acquired by the or-
ganization from—
‘‘(I) a financial institution described
in section 581 or 591(a) which is in
conservatorship or receivership, or
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‘‘(II) the conservator or receiver of such
an institution (or any government agency
or corporation succeeding to the rights or
interests of the conservator or receiver),
‘‘(ii) such property is designated by the or-
ganization within the 9-month period beginning
on the date of its acquisition as property held for
sale, except that not more than one-half (by
value determined as of such date) of property ac-
quired
in
a
single
transaction
may
be
so
designated,
‘‘(iii) such sale, exchange, or disposition oc-
curs before the later of—
‘‘(I) the date which is 30 months after
the date of the acquisition of such property,
or
‘‘(II) the date specified by the Sec-
retary in order to assure an orderly disposi-
tion of property held by persons described
in subparagraph (A), and
‘‘(iv) while such property was held by the
organization, the aggregate expenditures on im-
provements and development activities included
in the basis of the property are (or were) not in
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excess of 20 percent of the net selling price of
such property.
‘‘(B) Property is described in this subparagraph
if it is real property which—
‘‘(i) was held by the financial institution at
the time it entered into conservatorship or receiv-
ership, or
‘‘(ii) was foreclosure property (as defined in
section 514(c)(9)(H)(v)) which secured indebted-
ness held by the financial institution at such
time.
For purposes of this subparagraph, real property in-
cludes an interest in a mortgage.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to property acquired on or after Jan-
uary 1, 1994.
SEC. 8148. EXCLUSION FROM UNRELATED BUSINESS TAX
OF CERTAIN FEES AND OPTION PREMIUMS.
(a) LOAN COMMITMENT FEES.—Paragraph (1) of sec-
tion 512(b) (relating to modifications) is amended by in-
serting ‘‘amounts received or accrued as consideration for
entering into agreements to make loans,’’ before ‘‘and annu-
ities’’.
(b) OPTION PREMIUMS.—The second sentence of sec-
tion 512(b)(5) is amended—
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(1) by striking ‘‘all gains on’’ and inserting ‘‘all
gains or losses recognized, in connection with the or-
ganization’s investment activities, from’’,
(2) by striking ‘‘, written by the organization in
connection with its investment activities,’’ and
(3) by inserting ‘‘or real property and all gains
or losses from the forfeiture of good-faith deposits
(that are consistent with established business practice)
for the purchase, sale, or lease of real property in con-
nection with the organization’s investment activities’’
before the period.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to amounts received on or after January
1, 1994.
SEC. 8149. TREATMENT OF PENSION FUND INVESTMENTS
IN REAL ESTATE INVESTMENT TRUSTS.
(a) GENERAL RULE.—Subsection (h) of section 856
(relating to closely held determinations) is amended by add-
ing at the end thereof the following new paragraph:
‘‘(3) TREATMENT OF TRUSTS DESCRIBED IN SEC-
TION 401(a).—
‘‘(A) LOOK-THRU TREATMENT.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), in determining whether the
stock ownership requirement of section
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542(a)(2) is met for purposes of paragraph
(1)(A), any stock held by a qualified trust
shall be treated as held directly by its bene-
ficiaries in proportion to their actuarial in-
terests in such trust and shall not be treated
as held by such trust.
‘‘(ii) CERTAIN RELATED TRUSTS NOT
ELIGIBLE.—Clause (i) shall not apply to
any qualified trust if one or more disquali-
fied 
persons 
(as 
defined 
in 
section
4975(e)(2), without regard to subpara-
graphs (B) and (I) thereof) with respect to
such qualified trust hold in the aggregate 5
percent or more in value of the interests in
the real estate investment trust and such
real estate investment trust has accumulated
earnings and profits attributable to any pe-
riod for which it did not qualify as a real
estate investment trust.
‘‘(B) COORDINATION WITH PERSONAL HOLD-
ING COMPANY RULES.—If any entity qualifies as
a real estate investment trust for any taxable
year by reason of subparagraph (A), such entity
shall not be treated as a personal holding com-
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pany for such taxable year for purposes of part
II of subchapter G of this chapter.
‘‘(C) TREATMENT FOR PURPOSES OF UNRE-
LATED BUSINESS TAX.—If any qualified trust
holds more than 10 percent (by value) of the in-
terests in any pension-held REIT at any time
during a taxable year, the trust shall be treated
as having for such taxable year gross income
from an unrelated trade or business in an
amount which bears the same ratio to the aggre-
gate dividends paid (or treated as paid) by the
REIT to the trust for the taxable year of the
REIT with or within which the taxable year of
the trust ends (the ‘REIT year’) as—
‘‘(i) the gross income (less direct ex-
penses related thereto) of the REIT for the
REIT year from unrelated trades or busi-
nesses (determined as if the REIT were a
qualified trust), bears to
‘‘(ii) the gross income (less direct ex-
penses related thereto) of the REIT for the
REIT year.
This subparagraph shall apply only if the ratio
determined under the preceding sentence is at
least 5 percent.
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‘‘(D) PENSION-HELD
REIT.—The purposes
of subparagraph (C)—
‘‘(i) IN GENERAL.—A real estate in-
vestment trust is a pension-held REIT if
such trust would not have qualified as a
real estate investment trust but for the pro-
visions of this paragraph and if such trust
is predominantly held by qualified trusts.
‘‘(ii) 
PREDOMINANTLY
HELD.—For
purposes of clause (i), a real estate invest-
ment trust is predominantly held by quali-
fied trusts if—
‘‘(I) at least 1 qualified trust
holds more than 25 percent (by value)
of the interests in such real estate in-
vestment trust, or
‘‘(II) 1 or more qualified trusts
(each of whom own more than 10 per-
cent by value of the interests in such
real estate investment trust) hold in
the aggregate more than 50 percent (by
value) of the interests in such real es-
tate investment trust.
‘‘(E) QUALIFIED TRUST.—For purposes of
this paragraph, the term ‘qualified trust’ means
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cated within an Indian reservation shall be treated as
the active conduct of a trade or business in an Indian
reservation.
‘‘(4) INDIAN RESERVATION DEFINED.—For pur-
poses of this subpart, the term ‘Indian reservation’
means a reservation, as defined in—
‘‘(A) section 3(d) of the Indian Financing
Act of 1974 (25 U.S.C. 1452(d)), or
‘‘(B) section 4(10) of the Indian Child Wel-
fare Act of 1978 (25 U.S.C. 1903(10)).
‘‘(5) LIMITATION BASED ON UNEMPLOYMENT.—
‘‘(A) GENERAL RULE.—The Indian reserva-
tion credit allowed under section 46 for any tax-
able year shall equal—
‘‘(i) if the Indian unemployment rate
on the applicable Indian reservation for
which the credit is sought exceeds 300 per-
cent of the national average unemployment
rate at any time during the calendar year
in which the property is placed in service or
during the immediately preceding 2 cal-
endar years, 100 percent of such credit,
‘‘(ii) if such Indian unemployment
rate exceeds 150 percent but not 300 per-
cent, 50 percent of such credit, and
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‘‘If taxable income is:
The tax is:
Not over $36,900 ..............................
15% of taxable income.
Over $36,900 but not over $89,150
$5,535, plus 28% of the excess over
$36,900.
Over $89,150 but not over $140,000
$20,165, plus 31% of the excess over
$89,150.
Over $140,000 ...................................
$35,928.50, plus 36% of the excess over
$140,000.
‘‘(b) HEADS OF HOUSEHOLDS.—There is hereby im-
posed on the taxable income of every head of a household
(as defined in section 2(b)) a tax determined in accordance
with the following table:
‘‘If taxable income is:
The tax is:
Not over $29,600 ..............................
15% of taxable income.
Over $29,600 but not over $76,400
$4,440, plus 28% of the excess over
$29,600.
Over $76,400 but not over $127,500
$17,544, plus 31% of the excess over
$76,400.
Over $127,500 ...................................
$33,385, plus 36% of the excess over
$127,500.
‘‘(c) UNMARRIED INDIVIDUALS (OTHER THAN SURVIV-
ING SPOUSES AND HEADS OF HOUSEHOLDS).—There is
hereby imposed on the taxable income of every individual
(other than a surviving spouse as defined in section 2(a)
or the head of a household as defined in section 2(b)) who
is not a married individual (as defined in section 7703)
a tax determined in accordance with the following table:
‘‘If taxable income is:
The tax is:
Not over $22,100 ..............................
15% of taxable income.
Over $22,100 but not over $53,500
$3,315, plus 28% of the excess over
$22,100.
Over $53,500 but not over $115,000
$12,107, plus 31% of the excess over
$53,500.
Over $115,000 ...................................
$31,172, plus 36% of the excess over
$115,000.
‘‘(d) MARRIED INDIVIDUALS FILING SEPARATE RE-
TURNS.—There is hereby imposed on the taxable income of