639 
‘‘(3) PORTION DEFINED.—For purposes of this 
subsection, the term ‘portion’ means only the terms 
and benefits under a life insurance contract or annu-
ity contract that are in addition to the terms and 
benefits under the contract without regard to long- 
term care insurance coverage. 
‘‘(4) ANNUITY
CONTRACTS
TO
WHICH
PARA-
GRAPH (1) DOES NOT APPLY.—For purposes of this 
subsection, none of the following shall be treated as 
an annuity contract: 
‘‘(A) A trust described in section 401(a) 
which is exempt from tax under section 501(a). 
‘‘(B) A contract— 
‘‘(i) purchased by a trust described in 
subparagraph (A), 
‘‘(ii) purchased as part of a plan de-
scribed in section 403(a), 
‘‘(iii) described in section 403(b), 
‘‘(iv) provided for employees of a life 
insurance company under a plan described 
in section 818(a)(3), or 
‘‘(v) from an individual retirement ac-
count or an individual retirement annuity. 
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‘‘(C) A contract purchased by an employer 
for the benefit of the employee (or the employ-
ee’s spouse). 
Any dividend described in section 404(k) which is 
received by a participant or beneficiary shall, for 
purposes of this paragraph, be treated as paid under 
a separate contract to which subparagraph (B)(i) 
applies.’’. 
(d) INFORMATION REPORTING.— 
(1) Subpart B of part III of subchapter A of 
chapter 61 of such Code (relating to information 
concerning transactions with other persons) is 
amended by adding at the end the following new sec-
tion: 
‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED 
LONG-TERM CARE INSURANCE CONTRACTS 
UNDER COMBINED ARRANGEMENTS. 
‘‘(a) REQUIREMENT
OF REPORTING.—Any person 
who makes a charge against the cash value of an annuity 
contract, or the cash surrender value of a life insurance 
contract, which is excludible from gross income under sec-
tion 72(e)(11) shall make a return, according to the forms 
or regulations prescribed by the Secretary, setting forth— 
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‘‘(1) the amount of the aggregate of such 
charges against each such contract for the calendar 
year, 
‘‘(2) the amount of the reduction in the invest-
ment in each such contract by reason of such 
charges, and 
‘‘(3) the name, address, and TIN of the indi-
vidual who is the holder of each such contract. 
‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS 
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 
Every person required to make a return under subsection 
(a) shall furnish to each individual whose name is required 
to be set forth in such return a written statement show-
ing— 
‘‘(1) the name, address, and phone number of 
the information contact of the person making the 
payments, and 
‘‘(2) the information required to be shown on 
the return with respect to such individual. 
The written statement required under the preceding sen-
tence shall be furnished to the individual on or before Jan-
uary 31 of the year following the calendar year for which 
the return under subsection (a) was required to be made.’’. 
(2) PENALTY FOR FAILURE TO FILE.— 
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(A) RETURN.—Subparagraph (B) of sec-
tion 6724(d)(1) of such Code is amended by 
striking ‘‘or’’ at the end of clause (xvii), by 
striking ‘‘and’’ at the end of clause (xviii) and 
inserting ‘‘or’’, and by adding at the end the 
following new clause: 
‘‘(xix) section 6050U (relating to 
charges or payments for qualified long- 
term care insurance contracts under com-
bined arrangements), and’’. 
(B) STATEMENT.—Paragraph (2) of sec-
tion 6724(d) of such Code is amended by strik-
ing ‘‘or’’ at the end of subparagraph (AA), by 
striking the period at the end of subparagraph 
(BB), and by inserting after subparagraph 
(BB) the following new subparagraph: 
‘‘(CC) section 6050U (relating to charges 
or payments for qualified long-term care insur-
ance 
contracts 
under 
combined 
arrange-
ments).’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of 
such chapter 61 of such Code is amended by adding 
at the end the following new item: 
‘‘Sec. 6050U. Charges or payments for qualified long-term care insurance con-
tracts under combined arrangements.’’. 
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(e) TREATMENT
OF
POLICY
ACQUISITION
EX-
PENSES.—Subsection (e) of section 848 of such Code (re-
lating to classification of contracts) is amended by adding 
at the end the following new paragraph: 
‘‘(6) TREATMENT
OF
CERTAIN
QUALIFIED 
LONG-TERM CARE INSURANCE CONTRACT ARRANGE-
MENTS.—An annuity or life insurance contract 
which includes a qualified long-term care insurance 
contract as a part of or a rider on such annuity or 
life insurance contract shall be treated as a specified 
insurance contract not described in subparagraph 
(A) or (B) of subsection (c)(1).’’. 
(f) TECHNICAL AMENDMENT.—Paragraph (1) of sec-
tion 7702B(e) of such Code (as in effect before amend-
ment by subsection (c)) is amended by striking ‘‘section’’ 
and inserting ‘‘title’’. 
(g) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to contracts issued after De-
cember 31, 1996, but only with respect to taxable 
years beginning after December 31, 2009. 
(2) TAX-FREE EXCHANGES.—The amendments 
made by subsection (b) shall apply with respect to 
exchanges occurring after December 31, 2009. 
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(3) INFORMATION
REPORTING.—The amend-
ments made by subsection (d) shall apply to charges 
made after December 31, 2009. 
(4) 
POLICY
ACQUISITION
EXPENSES.—The 
amendment made by subsection (e) shall apply to 
specified policy acquisition expenses determined for 
taxable years beginning after December 31, 2009. 
(5) TECHNICAL AMENDMENT.—The amendment 
made by subsection (f) shall take effect as if in-
cluded in section 321(a) of the Health Insurance 
Portability and Accountability Act of 1996. 
SEC. 845. DISTRIBUTIONS FROM GOVERNMENTAL RETIRE-
MENT PLANS FOR HEALTH AND LONG-TERM 
CARE INSURANCE FOR PUBLIC SAFETY OFFI-
CERS. 
(a) IN GENERAL.—Section 402 of the Internal Rev-
enue Code of 1986 (relating to taxability of beneficiary 
of employees’ trust) is amended by adding at the end the 
following new subsection: 
‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL PLANS 
FOR HEALTH AND LONG-TERM CARE INSURANCE.— 
‘‘(1) IN GENERAL.—In the case of an employee 
who is an eligible retired public safety officer who 
makes the election described in paragraph (6) with 
respect to any taxable year of such employee, gross 
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income of such employee for such taxable year does 
not include any distribution from an eligible retire-
ment plan to the extent that the aggregate amount 
of such distributions does not exceed the amount 
paid by such employee for qualified health insurance 
premiums of the employee, his spouse, or dependents 
(as defined in section 152) for such taxable year. 
‘‘(2) LIMITATION.—The amount which may be 
excluded from gross income for the taxable year by 
reason of paragraph (1) shall not exceed $3,000. 
‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE IN-
CLUDIBLE.— 
‘‘(A) IN GENERAL.—An amount shall be 
treated as a distribution for purposes of para-
graph (1) only to the extent that such amount 
would be includible in gross income without re-
gard to paragraph (1). 
‘‘(B) APPLICATION OF SECTION 72.—Not-
withstanding section 72, in determining the ex-
tent to which an amount is treated as a dis-
tribution for purposes of subparagraph (A), the 
aggregate amounts distributed from an eligible 
retirement plan in a taxable year (up to the 
amount excluded under paragraph (1)) shall be 
treated as includible in gross income (without 
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646 
regard to subparagraph (A)) to the extent that 
such amount does not exceed the aggregate 
amount which would have been so includible if 
all amounts distributed from all eligible retire-
ment plans were treated as 1 contract for pur-
poses of determining the inclusion of such dis-
tribution under section 72. Proper adjustments 
shall be made in applying section 72 to other 
distributions in such taxable year and subse-
quent taxable years. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) ELIGIBLE RETIREMENT PLAN.—For 
purposes of paragraph (1), the term ‘eligible re-
tirement plan’ means a governmental plan 
(within the meaning of section 414(d)) which is 
described in clause (iii), (iv), (v), or (vi) of sub-
section (c)(8)(B). 
‘‘(B) ELIGIBLE RETIRED PUBLIC SAFETY 
OFFICER.—The term ‘eligible retired public 
safety officer’ means an individual who, by rea-
son of disability or attainment of normal retire-
ment age, is separated from service as a public 
safety officer with the employer who maintains 
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the eligible retirement plan from which distribu-
tions subject to paragraph (1) are made. 
‘‘(C) PUBLIC SAFETY OFFICER.—The term 
‘public safety officer’ shall have the same mean-
ing given such term by section 1204(9)(A) of 
the Omnibus Crime Control and Safe Streets 
Act of 1968 (42 U.S.C. 3796b(9)(A)). 
‘‘(D) 
QUALIFIED
HEALTH
INSURANCE 
PREMIUMS.—The term ‘qualified health insur-
ance premiums’ means premiums for coverage 
for the eligible retired public safety officer, his 
spouse, and dependents, by an accident or 
health insurance plan or qualified long-term 
care insurance contract (as defined in section 
7702B(b)). 
‘‘(5) SPECIAL
RULES.—For purposes of this 
subsection— 
‘‘(A) DIRECT PAYMENT TO INSURER RE-
QUIRED.—Paragraph (1) shall only apply to a 
distribution if payment of the premiums is 
made directly to the provider of the accident or 
health insurance plan or qualified long-term 
care insurance contract by deduction from a 
distribution from the eligible retirement plan. 
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‘‘(B) RELATED PLANS TREATED AS 1.—All 
eligible retirement plans of an employer shall be 
treated as a single plan. 
‘‘(6) ELECTION DESCRIBED.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an election is described in this para-
graph if the election is made by an employee 
after separation from service with respect to 
amounts not distributed from an eligible retire-
ment plan to have amounts from such plan dis-
tributed in order to pay for qualified health in-
surance premiums. 
‘‘(B) SPECIAL RULE.—A plan shall not be 
treated as violating the requirements of section 
401, or as engaging in a prohibited transaction 
for purposes of section 503(b), merely because 
it provides for an election with respect to 
amounts that are otherwise distributable under 
the plan or merely because of a distribution 
made pursuant to an election described in sub-
paragraph (A). 
‘‘(7) COORDINATION WITH MEDICAL EXPENSE 
DEDUCTION.—The amounts excluded from gross in-
come under paragraph (1) shall not be taken into 
account under section 213. 
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‘‘(8) COORDINATION
WITH
DEDUCTION
FOR 
HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-
DIVIDUALS.—The amounts excluded from gross in-
come under paragraph (1) shall not be taken into 
account under section 162(l).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 403(a) of such Code (relating to 
taxability of beneficiary under a qualified annuity 
plan) is amended by inserting after paragraph (1) 
the following new paragraph: 
‘‘(2) SPECIAL RULE FOR HEALTH AND LONG- 
TERM CARE INSURANCE.—To the extent provided in 
section 402(l), paragraph (1) shall not apply to the 
amount distributed under the contract which is oth-
erwise includible in gross income under this sub-
section.’’. 
(2) Section 403(b) of such Code (relating to 
taxability of beneficiary under annuity purchased by 
section 501(c)(3) organization or public school) is 
amended by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) SPECIAL RULE FOR HEALTH AND LONG- 
TERM CARE INSURANCE.—To the extent provided in 
section 402(l), paragraph (1) shall not apply to the 
amount distributed under the contract which is oth-
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650 
erwise includible in gross income under this sub-
section.’’. 
(3) Section 457(a) of such Code (relating to 
year of inclusion in gross income) is amended by 
adding at the end the following new paragraph: 
‘‘(3) SPECIAL RULE FOR HEALTH AND LONG- 
TERM CARE INSURANCE.—In the case of a plan of 
an 
eligible 
employer 
described 
in 
subsection 
(e)(1)(A), to the extent provided in section 402(l), 
paragraph (1) shall not apply to amounts otherwise 
includible in gross income under this subsection.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions in taxable years 
beginning after December 31, 2006. 
Subtitle E—United States Tax 
Court Modernization 
SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT 
JUDICIAL SURVIVOR ANNUITIES. 
(a) IN GENERAL.—Subsection (s) of section 7448 of 
the Internal Revenue Code of 1986 (relating to annuities 
to surviving spouses and dependent children of judges) is 
amended to read as follows: 
‘‘(s) INCREASES
IN SURVIVOR ANNUITIES.—Each 
time that an increase is made under section 8340(b) of 
title 5, United States Code, in annuities payable under 
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subchapter III of chapter 83 of that title, each annuity 
payable from the survivors annuity fund under this section 
shall be increased at the same time by the same percent-
age by which annuities are increased under such section 
8340(b).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to increases made 
under section 8340(b) of title 5, United States Code, in 
annuities payable under subchapter III of chapter 83 of 
that title, taking effect after the date of the enactment 
of this Act. 
SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX 
COURT JUDGES AGE 65 OR OVER. 
Section 7472 of the Internal Revenue Code of 1986 
(relating to expenditures) is amended by inserting after 
the first sentence the following new sentence: ‘‘Notwith-
standing any other provision of law, the Tax Court is au-
thorized to pay on behalf of its judges, age 65 or over, 
any increase in the cost of Federal Employees’ Group Life 
Insurance imposed after the date of the enactment of the 
Pension Protection Act of 2006, including any expenses 
generated by such payments, as authorized by the chief 
judge in a manner consistent with such payments author-
ized by the Judicial Conference of the United States pur-
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suant to section 604(a)(5) of title 28, United States 
Code.’’ 
SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE 
THRIFT SAVINGS PLAN. 
(a) IN GENERAL.—Section 7447 of the Internal Rev-
enue Code of 1986 (relating to retirement of judges) is 
amended by adding at the end the following new sub-
section: 
‘‘(j) THRIFT SAVINGS PLAN.— 
‘‘(1) ELECTION TO CONTRIBUTE.— 
‘‘(A) IN GENERAL.—A judge of the Tax 
Court may elect to contribute to the Thrift Sav-
ings Fund established by section 8437 of title 
5, United States Code. 
‘‘(B) PERIOD OF ELECTION.—An election 
may be made under this paragraph only during 
a period provided under section 8432(b) of title 
5, United States Code, for individuals subject to 
chapter 84 of such title. 
‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.— 
Except as otherwise provided in this subsection, the 
provisions of subchapters III and VII of chapter 84 
of title 5, United States Code, shall apply with re-
spect to a judge who makes an election under para-
graph (1). 
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‘‘(3) SPECIAL RULES.— 
‘‘(A) 
AMOUNT
CONTRIBUTED.—The 
amount contributed by a judge to the Thrift 
Savings Fund in any pay period shall not ex-
ceed the maximum percentage of such judge’s 
basic pay for such period as allowable under 
section 8440f of title 5, United States Code. 
Basic pay does not include any retired pay paid 
pursuant to this section. 
‘‘(B) CONTRIBUTIONS
FOR
BENEFIT
OF 
JUDGE.—No contributions may be made for the 
benefit of a judge under section 8432(c) of title 
5, United States Code. 
‘‘(C) APPLICABILITY OF SECTION 8433(b) 
OF
TITLE 5 WHETHER
OR
NOT
JUDGE
RE-
TIRES.—Section 8433(b) of title 5, United 
States Code, applies with respect to a judge 
who makes an election under paragraph (1) and 
who either— 
‘‘(i) retires under subsection (b), or 
‘‘(ii) ceases to serve as a judge of the 
Tax Court but does not retire under sub-
section (b). 
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Retirement under subsection (b) is a separation 
from service for purposes of subchapters III 
and VII of chapter 84 of that title. 
‘‘(D) 
APPLICABILITY
OF
SECTION 
8351(b)(5) OF TITLE 5.—The provisions of sec-
tion 8351(b)(5) of title 5, United States Code, 
shall apply with respect to a judge who makes 
an election under paragraph (1). 
‘‘(E) EXCEPTION.—Notwithstanding sub-
paragraph (C), if any judge retires under this 
section, or resigns without having met the age 
and service requirements set forth under sub-
section (b)(2), and such judge’s nonforfeitable 
account balance is less than an amount that the 
Executive Director of the Federal Retirement 
Thrift Investment Board prescribes by regula-
tion, the Executive Director shall pay the non-
forfeitable account balance to the participant in 
a single payment.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act, except that United States Tax Court judges 
may only begin to participate in the Thrift Savings Plan 
at the next open season beginning after such date. 
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SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DE-
PENDENT 
CHILDREN 
OF 
SPECIAL 
TRIAL 
JUDGES OF THE TAX COURT. 
(a) DEFINITIONS.—Section 7448(a) of the Internal 
Revenue Code of 1986 (relating to definitions), as amend-
ed by this Act, is amended by redesignating paragraphs 
(5), (6), (7), and (8) as paragraphs (7), (8), (9), and (10), 
respectively, and by inserting after paragraph (4) the fol-
lowing new paragraphs: 
‘‘(5) The term ‘special trial judge’ means a ju-
dicial officer appointed pursuant to section 7443A, 
including any individual receiving an annuity under 
chapters 83 or 84 of title 5, United States Code, 
whether or not performing judicial duties under sec-
tion 7443B. 
‘‘(6) The term ‘special trial judge’s salary’ 
means the salary of a special trial judge received 
under section 7443A(d), any amount received as an 
annuity under chapters 83 or 84 of title 5, United 
States Code, and compensation received under sec-
tion 7443B.’’. 
(b) ELECTION.—Subsection (b) of section 7448 of 
such Code (relating to annuities to surviving spouses and 
dependent children of judges) is amended— 
(1) by striking the subsection heading and in-
serting the following: 
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‘‘(b) ELECTION.— 
‘‘(1) JUDGES.—’’, 
(2) by moving the text 2 ems to the right, and 
(3) by adding at the end the following new 
paragraph: 
‘‘(2) SPECIAL TRIAL JUDGES.—Any special trial 
judge may by written election filed with the chief 
judge bring himself or herself within the purview of 
this section. Such election shall be filed not later 
than the later of 6 months after— 
‘‘(A) 6 months after the date of the enact-
ment of this paragraph, 
‘‘(B) the date the judge takes office, or 
‘‘(C) the date the judge marries.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) The heading of section 7448 of such Code 
is amended by inserting ‘‘AND
SPECIAL
TRIAL 
JUDGES’’ after ‘‘JUDGES’’. 
(2) The item relating to section 7448 in the 
table of sections for part I of subchapter C of chap-
ter 76 of such Code is amended by inserting ‘‘and 
special trial judges’’ after ‘‘judges’’. 
(3) Subsections (c)(1), (d), (f), (g), (h), (j), 
(m), (n), and (u) of section 7448 of such Code, as 
amended by this Act, are each amended— 
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(A) by inserting ‘‘or special trial judge’’ 
after ‘‘judge’’ each place it appears other than 
in the phrase ‘‘chief judge’’, and 
(B) by inserting ‘‘or special trial judge’s’’ 
after ‘‘judge’s’’ each place it appears. 
(4) Section 7448(c) of such Code is amended— 
(A) in paragraph (1), by striking ‘‘Tax 
Court judges’’ and inserting ‘‘Tax Court judi-
cial officers’’, 
(B) in paragraph (2)— 
(i) in subparagraph (A), by inserting 
‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, 
and 
(ii) in subparagraph (B), by striking 
‘‘subsection (a)(4)’’ and inserting ‘‘sub-
sections (a)(4) and (a)(6)’’. 
(5) Section 7448(j)(1) of such Code is amend-
ed— 
(A) in subparagraph (A), by striking 
‘‘service or retired’’ and inserting ‘‘service, re-
tired’’, and by inserting ‘‘, or receiving any an-
nuity under chapters 83 or 84 of title 5, United 
States Code,’’ after ‘‘section 7447’’, and 
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(B) in the last sentence, by striking ‘‘sub-
sections (a) (6) and (7)’’ and inserting ‘‘para-
graphs (8) and (9) of subsection (a)’’. 
(6) Section 7448(m)(1) of such Code, as 
amended by this Act, is amended by inserting ‘‘or 
any annuity under chapters 83 or 84 of title 5, 
United States Code’’ after ‘‘7447(d)’’. 
(7) Section 7448(n) of such Code is amended 
by inserting ‘‘his years of service pursuant to any 
appointment under section 7443A,’’ after ‘‘of the 
Tax Court,’’. 
(8) Section 3121(b)(5)(E) of such Code is 
amended by inserting ‘‘or special trial judge’’ before 
‘‘of the United States Tax Court’’. 
(9) Section 210(a)(5)(E) of the Social Security 
Act is amended by inserting ‘‘or special trial judge’’ 
before ‘‘of the United States Tax Court’’. 
SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION 
DUE PROCESS CASES. 
(a) IN GENERAL.—Paragraph (1) of section 6330(d) 
of the Internal Revenue Code of 1986 (relating to pro-
ceeding after hearing) is amended to read as follows: 
‘‘(1) JUDICIAL REVIEW OF DETERMINATION.— 
The person may, within 30 days of a determination 
under this section, appeal such determination to the 
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659 
Tax Court (and the Tax Court shall have jurisdic-
tion with respect to such matter).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to determinations made after the 
date which is 60 days after the date of the enactment of 
this Act. 
SEC. 856. PROVISIONS FOR RECALL. 
(a) IN GENERAL.—Part I of subchapter C of chapter 
76 of the Internal Revenue Code of 1986 is amended by 
inserting after section 7443A the following new section: 
‘‘SEC. 7443B. RECALL OF SPECIAL TRIAL JUDGES OF THE 
TAX COURT. 
‘‘(a) RECALLING
OF
RETIRED
SPECIAL
TRIAL 
JUDGES.—Any individual who has retired pursuant to the 
applicable provisions of title 5, United States Code, upon 
reaching the age and service requirements established 
therein, may at or after retirement be called upon by the 
chief judge of the Tax Court to perform such judicial du-
ties with the Tax Court as may be requested of such indi-
vidual for any period or periods specified by the chief 
judge; except that in the case of any such individual— 
‘‘(1) the aggregate of such periods in any 1 cal-
endar year shall not (without such individual’s con-
sent) exceed 90 calendar days, and 
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‘‘(2) such individual shall be relieved of per-
forming such duties during any period in which ill-
ness or disability precludes the performance of such 
duties. 
Any act, or failure to act, by an individual performing ju-
dicial duties pursuant to this subsection shall have the 
same force and effect as if it were the act (or failure to 
act) of a special trial judge of the Tax Court. 
‘‘(b) COMPENSATION.—For the year in which a pe-
riod of recall occurs, the special trial judge shall receive, 
in addition to the annuity provided under the applicable 
provisions of title 5, United States Code, an amount equal 
to the difference between that annuity and the current sal-
ary of the office to which the special trial judge is recalled. 
‘‘(c) RULEMAKING AUTHORITY.—The provisions of 
this section may be implemented under such rules as may 
be promulgated by the Tax Court.’’ 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part I of subchapter C of chapter 76 of such 
Code is amended by inserting after the item relating to 
section 7443A the following new item: 
‘‘Sec. 7443B. Recall of special trial judges of the Tax Court.’’. 
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SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO 
HEAR AND DECIDE CERTAIN EMPLOYMENT 
STATUS CASES. 
(a) IN GENERAL.—Section 7443A(b) of the Internal 
Revenue Code of 1986 (relating to proceedings which may 
be assigned to special trial judges) is amended by striking 
‘‘and’’ at the end of paragraph (4), by redesignating para-
graph (5) as paragraph (6), and by inserting after para-
graph (4) the following new paragraph: 
‘‘(5) any proceeding under section 7436(c), 
and’’. 
(b) CONFORMING AMENDMENT.—Section 7443A(c) 
of such Code is amended by striking ‘‘or (4)’’ and insert-
ing ‘‘(4), or (5)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any proceeding under section 
7436(c) of the Internal Revenue Code of 1986 with re-
spect to which a decision has not become final (as deter-
mined under section 7481 of such Code) before the date 
of the enactment of this Act. 
SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT 
TO 
APPLY 
DOCTRINE 
OF 
EQUITABLE 
RECOUPMENT. 
(a) CONFIRMATION OF AUTHORITY OF TAX COURT 
TO APPLY DOCTRINE OF EQUITABLE RECOUPMENT.— 
Section 6214(b) of the Internal Revenue Code of 1986 (re-
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662 
lating to jurisdiction over other years and quarters) is 
amended by adding at the end the following new sentence: 
‘‘Notwithstanding the preceding sentence, the Tax Court 
may apply the doctrine of equitable recoupment to the 
same extent that it is available in civil tax cases before 
the district courts of the United States and the United 
States Court of Federal Claims.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to any action or proceeding in the 
United States Tax Court with respect to which a decision 
has not become final (as determined under section 7481 
of the Internal Revenue Code of 1986) as of the date of 
the enactment of this Act. 
SEC. 859. TAX COURT FILING FEE IN ALL CASES COM-
MENCED BY FILING PETITION. 
(a) IN GENERAL.—Section 7451 of the Internal Rev-
enue Code of 1986 (relating to fee for filing a Tax Court 
petition) is amended by striking all that follows ‘‘petition’’ 
and inserting a period. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
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SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE 
FOR PRO SE TAXPAYERS. 
(a) IN GENERAL.—Section 7475(b) of the Internal 
Revenue Code of 1986 (relating to use of fees) is amended 
by inserting before the period at the end ‘‘and to provide 
services to pro se taxpayers’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
Subtitle F—Other Provisions 
SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF 
CURRENT MORATORIUM ON APPLICATION OF 
CERTAIN NONDISCRIMINATION RULES APPLI-
CABLE TO STATE AND LOCAL PLANS. 
(a) IN GENERAL.— 
(1) Subparagraph (G) of section 401(a)(5) and 
subparagraph (G) of section 401(a)(26) of the Inter-
nal Revenue Code of 1986 are each amended by 
striking ‘‘section 414(d))’’ and all that follows and 
inserting ‘‘section 414(d)).’’. 
(2) Subparagraph (G) of section 401(k)(3) of 
such Code and paragraph (2) of section 1505(d) of 
the Taxpayer Relief Act of 1997 (Public Law 105– 
34; 111 Stat. 1063) are each amended by striking 
‘‘maintained by a State or local government or polit-
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ical subdivision thereof (or agency or instrumentality 
thereof)’’. 
(b) CONFORMING AMENDMENTS.— 
(1) The heading of subparagraph (G) of section 
401(a)(5) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘STATE AND LOCAL GOVERN-
MENTAL’’ and inserting ‘‘GOVERNMENTAL’’. 
(2) The heading of subparagraph (G) of section 
401(a)(26) of such Code is amended by striking 
‘‘EXCEPTION FOR STATE AND LOCAL’’ and inserting 
‘‘EXCEPTION FOR’’. 
(3) Section 401(k)(3)(G) of such Code is 
amended by inserting ‘‘GOVERNMENTAL PLAN.—’’ 
after ‘‘(G)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any year beginning after the 
date of the enactment of this Act. 
SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE 
OF EXCESS FUNDS FROM BLACK LUNG DIS-
ABILITY TRUSTS. 
(a) IN GENERAL.—So much of section 501(c)(21)(C) 
of the Internal Revenue Code of 1986 (relating to black 
lung disability trusts) as precedes the last sentence is 
amended to read as follows: 
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‘‘(C) Payments described in subparagraph 
(A)(i)(IV) may be made from such trust during 
a taxable year only to the extent that the aggre-
gate amount of such payments during such tax-
able year does not exceed the excess (if any), as 
of the close of the preceding taxable year, of— 
‘‘(i) the fair market value of the as-
sets of the trust, over 
‘‘(ii) 110 percent of the present value 
of the liability described in subparagraph 
(A)(i)(I) of such person.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 863. TREATMENT OF DEATH BENEFITS FROM COR-
PORATE-OWNED LIFE INSURANCE. 
(a) IN GENERAL.—Section 101 of the Internal Rev-
enue Code of 1986 (relating to certain death benefits) is 
amended by adding at the end the following new sub-
section: 
‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED 
LIFE INSURANCE CONTRACTS.— 
‘‘(1) GENERAL RULE.—In the case of an em-
ployer-owned life insurance contract, the amount ex-
cluded from gross income of an applicable policy-
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holder by reason of paragraph (1) of subsection (a) 
shall not exceed an amount equal to the sum of the 
premiums and other amounts paid by the policy-
holder for the contract. 
‘‘(2) EXCEPTIONS.—In the case of an employer- 
owned life insurance contract with respect to which 
the notice and consent requirements of paragraph 
(4) are met, paragraph (1) shall not apply to any of 
the following: 
‘‘(A) EXCEPTIONS
BASED
ON
INSURED’S 
STATUS.—Any amount received by reason of 
the death of an insured who, with respect to an 
applicable policyholder— 
‘‘(i) was an employee at any time dur-
ing the 12-month period before the in-
sured’s death, or 
‘‘(ii) is, at the time the contract is 
issued— 
‘‘(I) a director, 
‘‘(II) a highly compensated em-
ployee within the meaning of section 
414(q) (without regard to paragraph 
(1)(B)(ii) thereof), or 
‘‘(III) a highly compensated indi-
vidual within the meaning of section 
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105(h)(5), except that ‘35 percent’ 
shall be substituted for ‘25 percent’ in 
subparagraph (C) thereof. 
‘‘(B) EXCEPTION FOR AMOUNTS PAID TO 
INSURED’S
HEIRS.—Any amount received by 
reason of the death of an insured to the ex-
tent— 
‘‘(i) the amount is paid to a member 
of the family (within the meaning of sec-
tion 267(c)(4)) of the insured, any indi-
vidual who is the designated beneficiary of 
the insured under the contract (other than 
the applicable policyholder), a trust estab-
lished for the benefit of any such member 
of the family or designated beneficiary, or 
the estate of the insured, or 
‘‘(ii) the amount is used to purchase 
an equity (or capital or profits) interest in 
the applicable policyholder from any person 
described in clause (i). 
‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CON-
TRACT.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘employer-owned life insur-
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ance contract’ means a life insurance contract 
which— 
‘‘(i) is owned by a person engaged in 
a trade or business and under which such 
person (or a related person described in 
subparagraph (B)(ii)) is directly or indi-
rectly a beneficiary under the contract, and 
‘‘(ii) covers the life of an insured who 
is an employee with respect to the trade or 
business of the applicable policyholder on 
the date the contract is issued. 
For purposes of the preceding sentence, if cov-
erage for each insured under a master contract 
is treated as a separate contract for purposes of 
sections 817(h), 7702, and 7702A, coverage for 
each such insured shall be treated as a separate 
contract. 
‘‘(B) APPLICABLE
POLICYHOLDER.—For 
purposes of this subsection— 
‘‘(i) IN GENERAL.—The term ‘applica-
ble policyholder’ means, with respect to 
any employer-owned life insurance con-
tract, the person described in subpara-
graph (A)(i) which owns the contract. 
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‘‘(ii) RELATED PERSONS.—The term 
‘applicable policyholder’ includes any per-
son which— 
‘‘(I) bears a relationship to the 
person described in clause (i) which is 
specified 
in 
section 
267(b) 
or 
707(b)(1), or 
‘‘(II) is engaged in trades or 
businesses with such person which are 
under common control (within the 
meaning of subsection (a) or (b) of 
section 52). 
‘‘(4) NOTICE AND CONSENT REQUIREMENTS.— 
The notice and consent requirements of this para-
graph are met if, before the issuance of the contract, 
the employee— 
‘‘(A) is notified in writing that the applica-
ble policyholder intends to insure the employee’s 
life and the maximum face amount for which 
the employee could be insured at the time the 
contract was issued, 
‘‘(B) provides written consent to being in-
sured under the contract and that such cov-
erage may continue after the insured terminates 
employment, and 
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‘‘(C) is informed in writing that an appli-
cable policyholder will be a beneficiary of any 
proceeds payable upon the death of the em-
ployee. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) EMPLOYEE.—The term ‘employee’ in-
cludes an officer, director, and highly com-
pensated employee (within the meaning of sec-
tion 414(q)). 
‘‘(B) 
INSURED.—The 
term 
‘insured’ 
means, with respect to an employer-owned life 
insurance contract, an individual covered by the 
contract who is a United States citizen or resi-
dent. In the case of a contract covering the 
joint lives of 2 individuals, references to an in-
sured include both of the individuals.’’. 
(b) REPORTING REQUIREMENTS.—Subpart A of part 
III of subchapter A of chapter 61 of the Internal Revenue 
Code of 1986 (relating to information concerning persons 
subject to special provisions) is amended by inserting after 
section 6039H the following new section: 
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‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO 
EMPLOYER-OWNED LIFE INSURANCE CON-
TRACTS. 
‘‘(a) IN GENERAL.—Every applicable policyholder 
owning 1 or more employer-owned life insurance contracts 
issued after the date of the enactment of this section shall 
file a return (at such time and in such manner as the 
Secretary shall by regulations prescribe) showing for each 
year such contracts are owned— 
‘‘(1) the number of employees of the applicable 
policyholder at the end of the year, 
‘‘(2) the number of such employees insured 
under such contracts at the end of the year, 
‘‘(3) the total amount of insurance in force at 
the end of the year under such contracts, 
‘‘(4) the name, address, and taxpayer identifica-
tion number of the applicable policyholder and the 
type of business in which the policyholder is en-
gaged, and 
‘‘(5) that the applicable policyholder has a valid 
consent for each insured employee (or, if all such 
consents are not obtained, the number of insured 
employees for whom such consent was not obtained). 
‘‘(b) RECORDKEEPING REQUIREMENT.—Each appli-
cable policyholder owning 1 or more employer-owned life 
insurance contracts during any year shall keep such 
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records as may be necessary for purposes of determining 
whether the requirements of this section and section 
101(j) are met. 
‘‘(c) DEFINITIONS.—Any term used in this section 
which is used in section 101(j) shall have the same mean-
ing given such term by section 101(j).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Paragraph (1) of section 101(a) of the In-
ternal Revenue Code of 1986 is amended by striking 
‘‘and subsection (f)’’ and inserting ‘‘subsection (f), 
and subsection (j)’’. 
(2) The table of sections for subpart A of part 
III of subchapter A of chapter 61 of such Code is 
amended by inserting after the item relating to sec-
tion 6039H the following new item: 
‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance 
contracts.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to life insurance contracts issued 
after the date of the enactment of this Act, except for a 
contract issued after such date pursuant to an exchange 
described in section 1035 of the Internal Revenue Code 
of 1986 for a contract issued on or prior to that date. 
For purposes of the preceding sentence, any material in-
crease in the death benefit or other material change shall 
cause the contract to be treated as a new contract except 
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that, in the case of a master contract (within the meaning 
of section 264(f)(4)(E) of such Code), the addition of cov-
ered lives shall be treated as a new contract only with re-
spect to such additional covered lives. 
SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND 
PROCTORS WHO ASSIST IN THE ADMINISTRA-
TION OF COLLEGE ENTRANCE AND PLACE-
MENT EXAMS. 
(a) IN GENERAL.—Section 530 of the Revenue Rec-
onciliation Act of 1978 is amended by adding at the end 
the following new subsection: 
‘‘(f) TREATMENT OF TEST ROOM SUPERVISORS AND 
PROCTORS WHO ASSIST
IN
THE ADMINISTRATION
OF 
COLLEGE ENTRANCE AND PLACEMENT EXAMS.— 
‘‘(1) IN GENERAL.—In the case of an individual 
described in paragraph (2) who is providing services 
as a test proctor or room supervisor by assisting in 
the administration of college entrance or placement 
examinations, this section shall be applied to such 
services performed after December 31, 2006 (and 
remuneration paid for such services) without regard 
to subsection (a)(3) thereof. 
‘‘(2) APPLICABILITY.—An individual is de-
scribed in this paragraph if the individual— 
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‘‘(A) is providing the services described in 
subsection (a) to an organization described in 
section 501(c), and exempt from tax under sec-
tion 501(a), of the Internal Revenue Code of 
1986, and 
‘‘(B) is not otherwise treated as an em-
ployee of such organization for purposes of sub-
title C of such Code (relating to employment 
taxes).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to remuneration for services per-
formed after December 31, 2006. 
SEC. 865. GRANDFATHER RULE FOR CHURCH PLANS 
WHICH SELF-ANNUITIZE. 
(a) IN GENERAL.—In the case of any plan year end-
ing after the date of the enactment of this Act, annuity 
payments provided with respect to any account maintained 
for a participant or beneficiary under a qualified church 
plan shall not fail to satisfy the requirements of section 
401(a)(9) of the Internal Revenue Code of 1986 merely 
because the payments are not made under an annuity con-
tract purchased from an insurance company if such pay-
ments would not fail such requirements if provided with 
respect to a retirement income account described in sec-
tion 403(b)(9) of such Code. 
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(b) QUALIFIED CHURCH PLAN.—For purposes of 
this section, the term ‘‘qualified church plan’’ means any 
money purchase pension plan described in section 401(a) 
of such Code which— 
(1) is a church plan (as defined in section 
414(e) of such Code) with respect to which the elec-
tion provided by section 410(d) of such Code has not 
been made, and 
(2) was in existence on April 17, 2002. 
SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED 
REAL ESTATE HELD BY CHURCH PLANS. 
(a) IN GENERAL.—Section 514(c)(9)(C) of the Inter-
nal Revenue Code of 1986 is amended by striking ‘‘or’’ 
after clause (ii), by striking the period at the end of clause 
(iii) and inserting ‘‘; or’’, and by inserting after clause (iii) 
the following: 
‘‘(iv) a retirement income account de-
scribed in section 403(b)(9).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning on 
or after the date of enactment of this Act. 
SEC. 867. CHURCH PLAN RULE. 
(a) IN GENERAL.—Paragraph (11) of section 415(b) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following: ‘‘Subparagraph (B) of para-
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graph (1) shall not apply to a plan maintained by an orga-
nization described in section 3121(w)(3)(A) except with 
respect to highly compensated benefits. For purposes of 
this paragraph, the term ‘highly compensated benefits’ 
means any benefits accrued for an employee in any year 
on or after the first year in which such employee is a high-
ly compensated employee (as defined in section 414(q)) 
of the organization described in section 3121(w)(3)(A). 
For purposes of applying paragraph (1)(B) to highly com-
pensated benefits, all benefits of the employee otherwise 
taken into account (without regard to this paragraph) 
shall be taken into account.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to years beginning after December 
31, 2006. 
SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EM-
PLOYEES. 
(a) IN GENERAL.—Subparagraph (E) of section 
664(g)(3) of the Internal Revenue Code of 1986 is amend-
ed by inserting ‘‘(determined on the basis of fair market 
value of securities when allocated to participants)’’ after 
‘‘paragraph (7)’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
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TITLE 
IX—INCREASE 
IN 
PEN-
SION PLAN DIVERSIFICATION 
AND 
PARTICIPATION 
AND 
OTHER PENSION PROVISIONS 
SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO 
PROVIDE EMPLOYEES WITH FREEDOM TO IN-
VEST THEIR PLAN ASSETS. 
(a) AMENDMENTS OF INTERNAL REVENUE CODE.— 
(1) QUALIFICATION
REQUIREMENT.—Section 
401(a) of the Internal Revenue Code of 1986 (relat-
ing to qualified pension, profit-sharing, and stock 
bonus plans) is amended by inserting after para-
graph (34) the following new paragraph: 
‘‘(35) DIVERSIFICATION
REQUIREMENTS
FOR 
CERTAIN DEFINED CONTRIBUTION PLANS.— 
‘‘(A) IN GENERAL.—A trust which is part 
of an applicable defined contribution plan shall 
not be treated as a qualified trust unless the 
plan meets the diversification requirements of 
subparagraphs (B), (C), and (D). 
‘‘(B) EMPLOYEE
CONTRIBUTIONS
AND 
ELECTIVE DEFERRALS INVESTED IN EMPLOYER 
SECURITIES.—In the case of the portion of an 
applicable individual’s account attributable to 
employee contributions and elective deferrals 
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which is invested in employer securities, a plan 
meets the requirements of this subparagraph if 
the applicable individual may elect to direct the 
plan to divest any such securities and to rein-
vest an equivalent amount in other investment 
options meeting the requirements of subpara-
graph (D). 
‘‘(C) 
EMPLOYER
CONTRIBUTIONS
IN-
VESTED
IN
EMPLOYER
SECURITIES.—In the 
case of the portion of the account attributable 
to employer contributions other than elective 
deferrals which is invested in employer securi-
ties, a plan meets the requirements of this sub-
paragraph if each applicable individual who— 
‘‘(i) is a participant who has com-
pleted at least 3 years of service, or 
‘‘(ii) is a beneficiary of a participant 
described in clause (i) or of a deceased 
participant, 
may elect to direct the plan to divest any such 
securities and to reinvest an equivalent amount 
in other investment options meeting the re-
quirements of subparagraph (D). 
‘‘(D) INVESTMENT OPTIONS.— 
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‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if the plan 
offers not less than 3 investment options, 
other than employer securities, to which an 
applicable individual may direct the pro-
ceeds from the divestment of employer se-
curities pursuant to this paragraph, each 
of which is diversified and has materially 
different risk and return characteristics. 
‘‘(ii) TREATMENT
OF
CERTAIN
RE-
STRICTIONS AND CONDITIONS.— 
‘‘(I) TIME FOR MAKING INVEST-
MENT CHOICES.—A plan shall not be 
treated as failing to meet the require-
ments of this subparagraph merely be-
cause the plan limits the time for di-
vestment and reinvestment to peri-
odic, reasonable opportunities occur-
ring no less frequently than quarterly. 
‘‘(II) 
CERTAIN
RESTRICTIONS 
AND
CONDITIONS
NOT
ALLOWED.— 
Except as provided in regulations, a 
plan shall not meet the requirements 
of this subparagraph if the plan im-
poses restrictions or conditions with 
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ccoleman on PROD1PC71 with BILLS
680 
respect to the investment of employer 
securities which are not imposed on 
the investment of other assets of the 
plan. This subclause shall not apply to 
any restrictions or conditions imposed 
by reason of the application of securi-
ties laws. 
‘‘(E) APPLICABLE
DEFINED
CONTRIBU-
TION PLAN.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘applica-
ble defined contribution plan’ means any 
defined contribution plan which holds any 
publicly traded employer securities. 
‘‘(ii) 
EXCEPTION
FOR
CERTAIN 
ESOPS.—Such term does not include an 
employee stock ownership plan if— 
‘‘(I) there are no contributions to 
such plan (or earnings thereunder) 
which are held within such plan and 
are subject to subsection (k) or (m), 
and 
‘‘(II) such plan is a separate plan 
for purposes of section 414(l) with re-
spect to any other defined benefit plan 
or defined contribution plan main-
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ccoleman on PROD1PC71 with BILLS
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tained by the same employer or em-
ployers. 
‘‘(iii) EXCEPTION FOR ONE PARTICI-
PANT PLANS.—Such term does not include 
a one-participant retirement plan. 
‘‘(iv) ONE-PARTICIPANT RETIREMENT 
PLAN.—For purposes of clause (iii), the 
term 
‘one-participant 
retirement 
plan’ 
means a retirement plan that— 
‘‘(I) on the first day of the plan 
year covered only one individual (or 
the individual and the individual’s 
spouse) and the individual owned 100 
percent of the plan sponsor (whether 
or not incorporated), or covered only 
one or more partners (or partners and 
their spouses) in the plan sponsor, 
‘‘(II) meets the minimum cov-
erage requirements of section 410(b) 
without being combined with any 
other plan of the business that covers 
the employees of the business, 
‘‘(III) does not provide benefits 
to anyone except the individual (and 
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682 
the individual’s spouse) or the part-
ners (and their spouses), 
‘‘(IV) does not cover a business 
that is a member of an affiliated serv-
ice group, a controlled group of cor-
porations, or a group of businesses 
under common control, and 
‘‘(V) does not cover a business 
that uses the services of leased em-
ployees (within the meaning of section 
414(n)). 
For purposes of this clause, the term ‘part-
ner’ includes a 2-percent shareholder (as 
defined in section 1372(b)) of an S cor-
poration. 
‘‘(F) CERTAIN PLANS TREATED AS HOLD-
ING
PUBLICLY
TRADED
EMPLOYER
SECURI-
TIES.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in regulations or in clause (ii), a plan 
holding employer securities which are not 
publicly traded employer securities shall be 
treated as holding publicly traded employer 
securities if any employer corporation, or 
any member of a controlled group of cor-
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ccoleman on PROD1PC71 with BILLS
683 
porations which includes such employer 
corporation, has issued a class of stock 
which is a publicly traded employer secu-
rity. 
‘‘(ii) EXCEPTION FOR CERTAIN CON-
TROLLED GROUPS WITH PUBLICLY TRAD-
ED
SECURITIES.—Clause (i) shall not 
apply to a plan if— 
‘‘(I) no employer corporation, or 
parent corporation of an employer 
corporation, has issued any publicly 
traded employer security, and 
‘‘(II) no employer corporation, or 
parent corporation of an employer 
corporation, has issued any special 
class of stock which grants particular 
rights to, or bears particular risks for, 
the holder or issuer with respect to 
any corporation described in clause (i) 
which has issued any publicly traded 
employer security. 
‘‘(iii) DEFINITIONS.—For purposes of 
this subparagraph, the term— 
‘‘(I) ‘controlled group of corpora-
tions’ has the meaning given such 
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ccoleman on PROD1PC71 with BILLS
684 
term by section 1563(a), except that 
‘50 percent’ shall be substituted for 
‘80 percent’ each place it appears, 
‘‘(II) 
‘employer 
corporation’ 
means a corporation which is an em-
ployer maintaining the plan, and 
‘‘(III) ‘parent corporation’ has 
the meaning given such term by sec-
tion 424(e). 
‘‘(G) OTHER DEFINITIONS.—For purposes 
of this paragraph— 
‘‘(i) APPLICABLE
INDIVIDUAL.—The 
term ‘applicable individual’ means— 
‘‘(I) any participant in the plan, 
and 
‘‘(II) any beneficiary who has an 
account under the plan with respect to 
which the beneficiary is entitled to ex-
ercise the rights of a participant. 
‘‘(ii) 
ELECTIVE
DEFERRAL.—The 
term ‘elective deferral’ means an employer 
contribution 
described 
in 
section 
402(g)(3)(A). 
‘‘(iii) 
EMPLOYER
SECURITY.—The 
term ‘employer security’ has the meaning 
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ccoleman on PROD1PC71 with BILLS
685 
given such term by section 407(d)(1) of 
the Employee Retirement Income Security 
Act of 1974. 
‘‘(iv) EMPLOYEE
STOCK
OWNERSHIP 
PLAN.—The term ‘employee stock owner-
ship plan’ has the meaning given such 
term by section 4975(e)(7). 
‘‘(v) PUBLICLY
TRADED
EMPLOYER 
SECURITIES.—The term ‘publicly traded 
employer securities’ means employer secu-
rities which are readily tradable on an es-
tablished securities market. 
‘‘(vi) YEAR OF SERVICE.—The term 
‘year of service’ has the meaning given 
such term by section 411(a)(5). 
‘‘(H) TRANSITION RULE FOR SECURITIES 
ATTRIBUTABLE
TO
EMPLOYER
CONTRIBU-
TIONS.— 
‘‘(i) RULES
PHASED
IN
OVER
YEARS.— 
‘‘(I) IN GENERAL.—In the case 
of the portion of an account to which 
subparagraph (C) applies and which 
consists of employer securities ac-
quired in a plan year beginning before 
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ccoleman on PROD1PC71 with BILLS
686 
January 1, 2007, subparagraph (C) 
shall only apply to the applicable per-
centage of such securities. This sub-
paragraph shall be applied separately 
with respect to each class of securi-
ties. 
‘‘(II) EXCEPTION
FOR
CERTAIN 
PARTICIPANTS
AGED
OR
OVER.— 
Subclause (I) shall not apply to an 
applicable individual who is a partici-
pant who has attained age 55 and 
completed at least 3 years of service 
before the first plan year beginning 
after December 31, 2005. 
‘‘(ii) APPLICABLE PERCENTAGE.—For 
purposes of clause (i), the applicable per-
centage shall be determined as follows: 
‘‘Plan year to which 
The applicable 
subparagraph (C) applies: 
percentage is: 
1st ......................................................................................................
2d .......................................................................................................
3d and following .................................................................................
100.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 401(a)(28)(B) of such Code 
(relating to additional requirements relating to 
employee stock ownership plans) is amended by 
adding at the end the following new clause: 
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