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‘‘(1) TAXPAYERS MAKING PRIOR FRAUDULENT
OR RECKLESS CLAIMS.—
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under this section for any taxable year in
the disallowance period.
‘‘(B) DISALLOWANCE
PERIOD.—For pur-
poses of paragraph (1), the disallowance period
is—
‘‘(i) the period of 10 taxable years
after the most recent taxable year for
which there was a final determination that
the taxpayer’s claim of credit under this
section was due to fraud, and
‘‘(ii) the period of 2 taxable years
after the most recent taxable year for
which there was a final determination that
the taxpayer’s claim of credit under this
section was due to reckless or intentional
disregard of rules and regulations (but not
due to fraud).
‘‘(2) TAXPAYERS
MAKING
IMPROPER
PRIOR
CLAIMS.—In the case of a taxpayer who is denied
credit under this section for any taxable year as a
result of the deficiency procedures under subchapter
B of chapter 63, no credit shall be allowed under
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this section for any subsequent taxable year unless
the taxpayer provides such information as the Sec-
retary may require to demonstrate eligibility for
such credit.’’.
(b) DUE DILIGENCE REQUIREMENT ON INCOME TAX
RETURN PREPARERS.—Section 6695 is amended by add-
ing at the end the following new subsection:
‘‘(g) FAILURE TO BE DILIGENT IN DETERMINING
ELIGIBILITY FOR EARNED INCOME CREDIT.—Any person
who is an income tax preparer with respect to any return
or claim for refund who fails to comply with due diligence
requirements imposed by the Secretary by regulations with
respect to determining eligibility for, or the amount of,
the credit allowable by section 32 shall pay a penalty of
$100 for each such failure.’’.
(c) EXTENSION
PROCEDURES
APPLICABLE
TO
MATHEMATICAL OR CLERICAL ERRORS.—Paragraph (2)
of section 6213(g) (relating to the definition of mathe-
matical or clerical errors) is amended by striking ‘‘and’’
at the end of subparagraph (H), by striking the period
at the end of subparagraph (I) and inserting ‘‘, and’’, and
by inserting after subparagraph (I) the following new sub-
paragraph:
‘‘(J) an omission of information required
by section 32(k)(2) (relating to taxpayers mak-
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ing improper prior claims of earned income
credit).’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 1068. LIMITATION ON PROPERTY FOR WHICH INCOME
FORECAST METHOD MAY BE USED.
(a) LIMITATION.—Subsection (g) of section 167 is
amended by adding at the end the following new para-
graph:
‘‘(6) LIMITATION ON PROPERTY FOR WHICH IN-
COME FORECAST METHOD MAY BE USED.—The de-
preciation deduction allowable under this section
may be determined under the income forecast meth-
od or any similar method only with respect to—
‘‘(A) property described in paragraph (3)
or (4) of section 168(f),
‘‘(B) copyrights,
‘‘(C) books,
‘‘(D) patents, and
‘‘(E) other property specified in regula-
tions.
Such methods may not be used with respect to any
amortizable section 197 intangible (as defined in
section 197(c)).’’.
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(b) DEPRECIATION
PERIOD
FOR
RENT-TO-OWN
PROPERTY.—
(1) IN GENERAL.—Subparagraph (A) of section
168(e)(3) (relating to 3-year property) is amended
by striking ‘‘and’’ at the end of clause (i), by strik-
ing the period at the end of clause (ii) and inserting
‘‘, and’’, and by adding at the end the following new
clause:
‘‘(iii) any qualified rent-to-own prop-
erty.’’.
(2) 4-YEAR CLASS LIFE.—The table contained
in section 168(g)(3)(B) is amended by inserting be-
fore the first item the following new item:
‘‘(A)(iii) .................................................................................
4 ’’.
(3) DEFINITION OF QUALIFIED RENT-TO-OWN
PROPERTY.—Subsection (i) of section 168 is amend-
ed by adding at the end the following new para-
graph:
‘‘(14) QUALIFIED RENT-TO-OWN PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
rent-to-own property’ means property held by a
rent-to-own dealer for purposes of being subject
to a rent-to-own contract.
‘‘(B) RENT-TO-OWN
DEALER.—The term
‘rent-to-own dealer’ means a person that, in the
ordinary course of business, regularly enters
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into rent-to-own contracts with customers for
the use of consumer property, if a substantial
portion of those contracts terminate and the
property is returned to such person before the
receipt of all payments required to transfer
ownership of the property from such person to
the customer.
‘‘(C) CONSUMER
PROPERTY.—The term
‘consumer property’ means tangible personal
property of a type generally used within the
home. Such term shall not include cellular tele-
phones and any computer or peripheral equip-
ment (as defined in section 168(i)).
‘‘(D) 
RENT-TO-OWN
CONTRACT.—The
term ‘rent-to-own contract’ means any lease for
the use of consumer property between a rent-to-
own dealer and a customer who is an individual
which—
‘‘(i) is titled ‘Rent-to-Own Agreement’
or ‘Lease Agreement with Ownership Op-
tion,’ or uses other similar language,
‘‘(ii) provides for level, regular peri-
odic payments (for a payment period which
is a week or month),
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‘‘SEC. 684. RECOGNITION OF GAIN ON CERTAIN TRANSFERS
TO CERTAIN FOREIGN TRUSTS AND ESTATES.
‘‘(a) IN GENERAL.—In the case of any transfer of
property by a United States person to a foreign estate or
trust, for purposes of this subtitle, such transfer shall be
treated as a sale or exchange for an amount equal to the
fair market value of the property transferred, and the
transferor shall recognize as gain the excess of—
‘‘(1) the fair market value of the property so
transferred, over
‘‘(2) the adjusted basis (for purposes of deter-
mining gain) of such property in the hands of the
transferor.
‘‘(b) EXCEPTION.—Subsection (a) shall not apply to
a transfer to a trust by a United States person if such
person is treated as the owner of such trust under section
671.’’.
(b) OTHER ANTI-AVOIDANCE PROVISIONS REPLAC-
ING REPEALED EXCISE TAX.—
(1) GAIN
RECOGNITION
ON
EXCHANGES
IN-
VOLVING
FOREIGN
PERSONS.—Section 1035 is
amended by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b) the
following new subsection:
‘‘(c) EXCHANGES INVOLVING FOREIGN PERSONS.—
To the extent provided in regulations, subsection (a) shall