579
‘‘(3) the Claims Court.
‘‘(b) PERIOD FOR FILING PETITION.—A petition may
be filed under subsection (a) with respect to partnership
items for a partnership taxable year only—
‘‘(1) after the expiration of 6 months from the
date of filing of the request under section 6251, and
‘‘(2) before the date which is 2 years after the
date of such request.
The 2-year period set forth in paragraph (2) shall be ex-
tended for such period as may be agreed upon in writing
by the partnership and the Secretary.
‘‘(c) COORDINATION WITH SUBPART A.—
‘‘(1) NOTICE
OF
PARTNERSHIP
ADJUSTMENT
BEFORE FILING OF PETITION.—No petition may be
filed under this section after the Secretary mails to
the partnership a notice of a partnership adjustment
for the partnership taxable year to which the request
under section 6251 relates.
‘‘(2) NOTICE
OF
PARTNERSHIP
ADJUSTMENT
AFTER
FILING
BUT
BEFORE
HEARING
OF
PETI-
TION.—If the Secretary mails to the partnership a
notice of a partnership adjustment for the partner-
ship taxable year to which the request under section
6251 relates after the filing of a petition under this
subsection but before the hearing of such petition,
580
such petition shall be treated as an action brought
under section 6247 with respect to such notice, ex-
cept that subsection (b) of section 6247 shall not
apply.
‘‘(3) NOTICE MUST BE BEFORE EXPIRATION OF
STATUTE OF LIMITATIONS.—A notice of a partner-
ship adjustment for the partnership taxable year
shall be taken into account under paragraphs (1)
and (2) only if such notice is mailed before the expi-
ration of the period prescribed by section 6248 for
making adjustments to partnership items for such
taxable year.
‘‘(d) SCOPE OF JUDICIAL REVIEW.—Except in the
case described in paragraph (2) of subsection (c), a court
with which a petition is filed in accordance with this sec-
tion shall have jurisdiction to determine only those part-
nership items to which the part of the request under sec-
tion 6251 not allowed by the Secretary relates and those
items with respect to which the Secretary asserts adjust-
ments as offsets to the adjustments requested by the part-
nership.
‘‘(e) DETERMINATION
OF COURT REVIEWABLE.—
Any determination by a court under this subsection shall
have the force and effect of a decision of the Tax Court
or a final judgment or decree of the district court or the
581
Claims Court, as the case may be, and shall be reviewable
as such. The date of any such determination shall be
treated as being the date of the court’s order entering the
decision.
‘‘PART III—DEFINITIONS AND SPECIAL RULES
‘‘Sec. 6255. Definitions and special rules.
‘‘SEC. 6255. DEFINITIONS AND SPECIAL RULES.
‘‘(a) DEFINITIONS.—For purposes of this sub-
chapter—
‘‘(1) ELECTING
LARGE
PARTNERSHIP.—The
term ‘electing large partnership’ has the meaning
given to such term by section 775.
‘‘(2) PARTNERSHIP ITEM.—The term ‘partner-
ship item’ has the meaning given to such term by
section 6231(a)(3).
‘‘(b) PARTNERS BOUND BY ACTIONS OF PARTNER-
SHIP, ETC.—
‘‘(1) DESIGNATION OF PARTNER.—Each elect-
ing large partnership shall designate (in the manner
prescribed by the Secretary) a partner (or other per-
son) who shall have the sole authority to act on be-
half of such partnership under this subchapter. In
any case in which such a designation is not in effect,
the Secretary may select any partner as the partner
with such authority.
582
‘‘(2) BINDING EFFECT.—An electing large part-
nership and all partners of such partnership shall be
bound—
‘‘(A) by actions taken under this sub-
chapter by the partnership, and
‘‘(B) by any decision in a proceeding
brought under this subchapter.
‘‘(c) PARTNERSHIPS HAVING PRINCIPAL PLACE OF
BUSINESS OUTSIDE THE UNITED STATES.—For purposes
of sections 6247 and 6252, a principal place of business
located outside the United States shall be treated as lo-
cated in the District of Columbia.
‘‘(d) TREATMENT WHERE PARTNERSHIP CEASES TO
EXIST.—If a partnership ceases to exist before a partner-
ship adjustment under this subchapter takes effect, such
adjustment shall be taken into account by the former part-
ners of such partnership under regulations prescribed by
the Secretary.
‘‘(e) DATE DECISION BECOMES FINAL.—For pur-
poses of this subchapter, the principles of section 7481(a)
shall be applied in determining the date on which a deci-
sion of a district court or the Claims Court becomes final.
‘‘(f) PARTNERSHIPS IN CASES UNDER TITLE 11 OF
THE UNITED STATES CODE.—The running of any period
of limitations provided in this subchapter on making a
583
partnership adjustment (or provided by section 6501 or
6502 on the assessment or collection of any amount re-
quired to be paid under section 6242) shall, in a case
under title 11 of the United States Code, be suspended
during the period during which the Secretary is prohibited
by reason of such case from making the adjustment (or
assessment or collection) and—
‘‘(1) for adjustment or assessment, 60 days
thereafter, and
‘‘(2) for collection, 6 months thereafter.
‘‘(g) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pro-
visions of this subchapter, including regulations—
‘‘(1) to prevent abuse through manipulation of
the provisions of this subchapter, and
‘‘(2) providing that this subchapter shall not
apply to any case described in section 6231(c)(1) (or
the regulations prescribed thereunder) where the ap-
plication of this subchapter to such a case would
interfere with the effective and efficient enforcement
of this title.
In any case to which this subchapter does not apply by
reason of paragraph (2), rules similar to the rules of sec-
tions 6229(f) and 6255(f) shall apply.’’
584
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 63 is amended by adding at the end
thereof the following new item:
‘‘SUBCHAPTER D. Treatment of electing large partnerships.’’
SEC. 1223. DUE DATE FOR FURNISHING INFORMATION TO
PARTNERS OF ELECTING LARGE PARTNER-
SHIPS.
(a) GENERAL RULE.—Subsection (b) of section 6031
(relating to copies to partners) is amended by adding at
the end the following new sentence: ‘‘In the case of an
electing large partnership (as defined in section 775), such
information shall be furnished on or before the first March
15 following the close of such taxable year.’’
(b) TREATMENT AS INFORMATION RETURN.—Sec-
tion 6724 is amended by adding at the end the following
new subsection:
‘‘(e) SPECIAL RULE FOR CERTAIN PARTNERSHIP RE-
TURNS.—If any partnership return under section 6031(a)
is required under section 6011(e) to be filed on magnetic
media or in other machine-readable form, for purposes of
this part, each schedule required to be included with such
return with respect to each partner shall be treated as a
separate information return.’’
585
SEC. 1224. RETURNS MAY BE REQUIRED ON MAGNETIC
MEDIA.
Paragraph (2) of section 6011(e) (relating to returns
on magnetic media) is amended by adding at the end
thereof the following new sentence:
‘‘Notwithstanding the preceding sentence, the Sec-
retary shall require partnerships having more than
100 partners to file returns on magnetic media.’’
SEC. 1225. TREATMENT OF PARTNERSHIP ITEMS OF INDI-
VIDUAL RETIREMENT ACCOUNTS.
Subsection (b) of section 6012 is amended by adding
at the end thereof the following new paragraph:
‘‘(6) IRA SHARE OF PARTNERSHIP INCOME.—
In the case of a trust which is exempt from taxation
under section 408(e), for purposes of this section,
the trust’s distributive share of items of gross in-
come and gain of any partnership to which sub-
chapter C or D of chapter 63 applies shall be treat-
ed as equal to the trust’s distributive share of the
taxable income of such partnership.’’
SEC. 1226. EFFECTIVE DATE.
The amendments made by this part shall apply to
partnership taxable years ending on or after December 31,
1997.
586
PART II—PROVISIONS RELATED TO TEFRA
PARTNERSHIP PROCEEDINGS
SEC. 1231. TREATMENT OF PARTNERSHIP ITEMS IN DEFI-
CIENCY PROCEEDINGS.
(a) IN GENERAL.—Subchapter C of chapter 63 is
amended by adding at the end the following new section:
‘‘SEC. 
6234. 
DECLARATORY 
JUDGMENT 
RELATING 
TO
TREATMENT OF ITEMS OTHER THAN PART-
NERSHIP ITEMS WITH RESPECT TO AN OVER-
SHELTERED RETURN.
‘‘(a) GENERAL RULE.—If—
‘‘(1) a taxpayer files an oversheltered return for
a taxable year,
‘‘(2) the Secretary makes a determination with
respect to the treatment of items (other than part-
nership items) of such taxpayer for such taxable
year, and
‘‘(3) the adjustments resulting from such deter-
mination do not give rise to a deficiency (as defined
in section 6211) but would give rise to a deficiency
if there were no net loss from partnership items,
the Secretary is authorized to send a notice of adjustment
reflecting such determination to the taxpayer by certified
or registered mail.
587
‘‘(b) OVERSHELTERED RETURN.—For purposes of
this section, the term ‘oversheltered return’ means an in-
come tax return which—
‘‘(1) shows no taxable income for the taxable
year, and
‘‘(2) shows a net loss from partnership items.
‘‘(c) JUDICIAL REVIEW IN THE TAX COURT.—Within
90 days, or 150 days if the notice is addressed to a person
outside the United States, after the day on which the no-
tice of adjustment authorized in subsection (a) is mailed
to the taxpayer, the taxpayer may file a petition with the
Tax Court for redetermination of the adjustments. Upon
the filing of such a petition, the Tax Court shall have ju-
risdiction to make a declaration with respect to all items
(other than partnership items and affected items which
require partner level determinations as described in sec-
tion 6230(a)(2)(A)(i)) for the taxable year to which the
notice of adjustment relates, in accordance with the prin-
ciples of section 6214(a). Any such declaration shall have
the force and effect of a decision of the Tax Court and
shall be reviewable as such.
‘‘(d) FAILURE TO FILE PETITION.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), if the taxpayer does not file a petition
with the Tax Court within the time prescribed in
588
subsection (c), the determination of the Secretary
set forth in the notice of adjustment that was mailed
to the taxpayer shall be deemed to be correct.
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply after the date that the taxpayer—
‘‘(A) files a petition with the Tax Court
within the time prescribed in subsection (c)
with respect to a subsequent notice of adjust-
ment relating to the same taxable year, or
‘‘(B) files a claim for refund of an overpay-
ment of tax under section 6511 for the taxable
year involved.
If a claim for refund is filed by the taxpayer, then
solely for purposes of determining (for the taxable
year involved) the amount of any computational ad-
justment in connection with a partnership proceed-
ing under this subchapter (other than under this
section) or the amount of any deficiency attributable
to affected items in a proceeding under section
6230(a)(2), the items that are the subject of the no-
tice of adjustment shall be presumed to have been
correctly reported on the taxpayer’s return during
the pendency of the refund claim (and, if within the
time prescribed by section 6532 the taxpayer com-
mences a civil action for refund under section 7422,
589
until the decision in the refund action becomes
final).
‘‘(e) LIMITATIONS PERIOD.—
‘‘(1) IN GENERAL.—Any notice to a taxpayer
under subsection (a) shall be mailed before the expi-
ration of the period prescribed by section 6501 (re-
lating to the period of limitations on assessment).
‘‘(2) SUSPENSION WHEN SECRETARY MAILS NO-
TICE OF ADJUSTMENT.—If the Secretary mails a no-
tice of adjustment to the taxpayer for a taxable year,
the period of limitations on the making of assess-
ments shall be suspended for the period during
which the Secretary is prohibited from making the
assessment (and, in any event, if a proceeding in re-
spect of the notice of adjustment is placed on the
docket of the Tax Court, until the decision of the
Tax Court becomes final), and for 60 days there-
after.
‘‘(3) RESTRICTIONS ON ASSESSMENT.—Except
as otherwise provided in section 6851, 6852, or
6861, no assessment of a deficiency with respect to
any tax imposed by subtitle A attributable to any
item (other than a partnership item or any item af-
fected by a partnership item) shall be made—
590
‘‘(A) until the expiration of the applicable
90-day or 150-day period set forth in sub-
section (c) for filing a petition with the Tax
Court, or
‘‘(B) if a petition has been filed with the
Tax Court, until the decision of the Tax Court
has become final.
‘‘(f) FURTHER
NOTICES
OF
ADJUSTMENT
RE-
STRICTED.—If the Secretary mails a notice of adjustment
to the taxpayer for a taxable year and the taxpayer files
a petition with the Tax Court within the time prescribed
in subsection (c), the Secretary may not mail another such
notice to the taxpayer with respect to the same taxable
year in the absence of a showing of fraud, malfeasance,
or misrepresentation of a material fact.
‘‘(g) COORDINATION WITH OTHER PROCEEDINGS
UNDER THIS SUBCHAPTER.—
‘‘(1) IN GENERAL.—The treatment of any item
that has been determined pursuant to subsection (c)
or (d) shall be taken into account in determining the
amount of any computational adjustment that is
made in connection with a partnership proceeding
under this subchapter (other than under this sec-
tion), or the amount of any deficiency attributable to
affected items in a proceeding under section
591
6230(a)(2), for the taxable year involved. Notwith-
standing any other law or rule of law pertaining to
the period of limitations on the making of assess-
ments, for purposes of the preceding sentence, any
adjustment made in accordance with this section
shall be taken into account regardless of whether
any assessment has been made with respect to such
adjustment.
‘‘(2) SPECIAL
RULE
IN
CASE
OF
COMPUTA-
TIONAL ADJUSTMENT.—In the case of a computa-
tional adjustment that is made in connection with a
partnership proceeding under this subchapter (other
than under this section), the provisions of paragraph
(1) shall apply only if the computational adjustment
is made within the period prescribed by section 6229
for assessing any tax under subtitle A which is at-
tributable to any partnership item or affected item
for the taxable year involved.
‘‘(3) CONVERSION
TO
DEFICIENCY
PROCEED-
ING.—If—
‘‘(A) after the notice referred to in sub-
section (a) is mailed to a taxpayer for a taxable
year but before the expiration of the period for
filing a petition with the Tax Court under sub-
section (c) (or, if a petition is filed with the Tax
592
Court, before the Tax Court makes a declara-
tion for that taxable year), the treatment of any
partnership item for the taxable year is finally
determined, or any such item ceases to be a
partnership item pursuant to section 6231(b),
and
‘‘(B) as a result of that final determination
or cessation, a deficiency can be determined
with respect to the items that are the subject
of the notice of adjustment,
the notice of adjustment shall be treated as a notice
of deficiency under section 6212 and any petition
filed in respect of the notice shall be treated as an
action brought under section 6213.
‘‘(4) FINALLY DETERMINED.—For purposes of
this subsection, the treatment of partnership items
shall be treated as finally determined if—
‘‘(A) the Secretary enters into a settlement
agreement (within the meaning of section 6224)
with the taxpayer regarding such items,
‘‘(B) a notice of final partnership adminis-
trative adjustment has been issued and—
‘‘(i) no petition has been filed under
section 6226 and the time for doing so has
expired, or
593
‘‘(ii) a petition has been filed under
section 6226 and the decision of the court
has become final, or
‘‘(C) the period within which any tax at-
tributable to such items may be assessed
against the taxpayer has expired.
‘‘(h) SPECIAL RULES IF SECRETARY INCORRECTLY
DETERMINES APPLICABLE PROCEDURE.—
‘‘(1) SPECIAL
RULE
IF
SECRETARY
ERRO-
NEOUSLY MAILS NOTICE OF ADJUSTMENT.—If the
Secretary erroneously determines that subchapter B
does not apply to a taxable year of a taxpayer and
consistent with that determination timely mails a no-
tice of adjustment to the taxpayer pursuant to sub-
section (a) of this section, the notice of adjustment
shall be treated as a notice of deficiency under sec-
tion 6212 and any petition that is filed in respect of
the notice shall be treated as an action brought
under section 6213.
‘‘(2) SPECIAL
RULE
IF
SECRETARY
ERRO-
NEOUSLY
MAILS
NOTICE
OF
DEFICIENCY.—If the
Secretary erroneously determines that subchapter B
applies to a taxable year of a taxpayer and consist-
ent with that determination timely mails a notice of
deficiency to the taxpayer pursuant to section 6212,
594
the notice of deficiency shall be treated as a notice
of adjustment under subsection (a) and any petition
that is filed in respect of the notice shall be treated
as an action brought under subsection (c).’’
(b) TREATMENT OF PARTNERSHIP ITEMS IN DEFI-
CIENCY
PROCEEDINGS.—Section 6211 (defining defi-
ciency) is amended by adding at the end the following new
subsection:
‘‘(c) COORDINATION WITH SUBCHAPTER C.—In de-
termining the amount of any deficiency for purposes of
this subchapter, adjustments to partnership items shall be
made only as provided in subchapter C.’’
(c) CLERICAL AMENDMENT.—The table of sections
for subchapter C of chapter 63 is amended by adding at
the end the following new item:
‘‘Sec. 6234. Declaratory judgment relating to treatment of items
other than partnership items with respect to an
oversheltered return.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
SEC. 1232. PARTNERSHIP RETURN TO BE DETERMINATIVE
OF AUDIT PROCEDURES TO BE FOLLOWED.
(a) IN GENERAL.—Section 6231 (relating to defini-
tions and special rules) is amended by adding at the end
the following new subsection:
595
‘‘(g) PARTNERSHIP RETURN TO BE DETERMINATIVE
OF WHETHER SUBCHAPTER APPLIES.—
‘‘(1) DETERMINATION THAT SUBCHAPTER AP-
PLIES.—If, on the basis of a partnership return for
a taxable year, the Secretary reasonably determines
that this subchapter applies to such partnership for
such year but such determination is erroneous, then
the provisions of this subchapter are hereby ex-
tended to such partnership (and its items) for such
taxable year and to partners of such partnership.
‘‘(2) DETERMINATION THAT SUBCHAPTER DOES
NOT APPLY.—If, on the basis of a partnership re-
turn for a taxable year, the Secretary reasonably de-
termines that this subchapter does not apply to such
partnership for such year but such determination is
erroneous, then the provisions of this subchapter
shall not apply to such partnership (and its items)
for such taxable year or to partners of such partner-
ship.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
596
SEC. 1233. PROVISIONS RELATING TO STATUTE OF LIMITA-
TIONS.
(a) SUSPENSION OF STATUTE WHERE UNTIMELY
PETITION FILED.—Paragraph (1) of section 6229(d) (re-
lating to suspension where Secretary makes administrative
adjustment) is amended by striking all that follows ‘‘sec-
tion 6226’’ and inserting the following: ‘‘(and, if a petition
is filed under section 6226 with respect to such adminis-
trative adjustment, until the decision of the court becomes
final), and’’.
(b) SUSPENSION OF STATUTE DURING BANKRUPTCY
PROCEEDING.—Section 6229 is amended by adding at the
end the following new subsection:
‘‘(h) SUSPENSION DURING PENDENCY
OF BANK-
RUPTCY PROCEEDING.—If a petition is filed naming a
partner as a debtor in a bankruptcy proceeding under title
11 of the United States Code, the running of the period
of limitations provided in this section with respect to such
partner shall be suspended—
‘‘(1) for the period during which the Secretary
is prohibited by reason of such bankruptcy proceed-
ing from making an assessment, and
‘‘(2) for 60 days thereafter.’’
(c) TAX MATTERS PARTNER IN BANKRUPTCY.—Sec-
tion 6229(b) is amended by redesignating paragraph (2)
597
as paragraph (3) and by inserting after paragraph (1) the
following new paragraph:
‘‘(2) SPECIAL RULE WITH RESPECT TO DEBT-
ORS IN TITLE 11 CASES.—Notwithstanding any other
law or rule of law, if an agreement is entered into
under paragraph (1)(B) and the agreement is signed
by a person who would be the tax matters partner
but for the fact that, at the time that the agreement
is executed, the person is a debtor in a bankruptcy
proceeding under title 11 of the United States Code,
such agreement shall be binding on all partners in
the partnership unless the Secretary has been noti-
fied of the bankruptcy proceeding in accordance with
regulations prescribed by the Secretary.’’
(d) EFFECTIVE DATES.—
(1) SUBSECTIONS (a) AND (b).—The amend-
ments made by subsections (a) and (b) shall apply
to partnership taxable years with respect to which
the period under section 6229 of the Internal Reve-
nue Code of 1986 for assessing tax has not expired
on or before the date of the enactment of this Act.
(2) SUBSECTION (c).—The amendment made
by subsection (c) shall apply to agreements entered
into after the date of the enactment of this Act.
598
SEC. 1234. EXPANSION OF SMALL PARTNERSHIP EXCEP-
TION.
(a) 
IN
GENERAL.—Clause 
(i) 
of 
section
6231(a)(1)(B) (relating to exception for small partner-
ships) is amended to read as follows:
‘‘(i) IN
GENERAL.—The term ‘part-
nership’ shall not include any partnership
having 10 or fewer partners each of whom
is an individual (other than a nonresident
alien), a C corporation, or an estate of a
deceased partner. For purposes of the pre-
ceding sentence, a husband and wife (and
their estates) shall be treated as 1 part-
ner.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
SEC. 1235. EXCLUSION OF PARTIAL SETTLEMENTS FROM 1-
YEAR LIMITATION ON ASSESSMENT.
(a) IN GENERAL.—Subsection (f) of section 6229 (re-
lating to items becoming nonpartnership items) is amend-
ed—
(1) by striking ‘‘(f) ITEMS BECOMING NON-
PARTNERSHIP ITEMS.—If’’ and inserting the follow-
ing:
‘‘(f) SPECIAL RULES.—
599
‘‘(1) 
ITEMS
BECOMING
NONPARTNERSHIP
ITEMS.—If’’,
(2) by moving the text of such subsection 2 ems
to the right, and
(3) by adding at the end the following new
paragraph:
‘‘(2) SPECIAL RULE FOR PARTIAL SETTLEMENT
AGREEMENTS.—If a partner enters into a settlement
agreement with the Secretary with respect to the
treatment of some of the partnership items in dis-
pute for a partnership taxable year but other part-
nership items for such year remain in dispute, the
period of limitations for assessing any tax attrib-
utable to the settled items shall be determined as if
such agreement had not been entered into.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to settlements entered into after
the date of the enactment of this Act.
SEC. 1236. EXTENSION OF TIME FOR FILING A REQUEST
FOR ADMINISTRATIVE ADJUSTMENT.
(a) IN GENERAL.—Section 6227 (relating to admin-
istrative adjustment requests) is amended by redesignat-
ing subsections (b) and (c) as subsections (c) and (d), re-
spectively, and by inserting after subsection (a) the follow-
ing new subsection:
600
‘‘(b) SPECIAL RULE IN CASE OF EXTENSION OF PE-
RIOD OF LIMITATIONS UNDER SECTION 6229.—The pe-
riod prescribed by subsection (a)(1) for filing of a request
for an administrative adjustment shall be extended—
‘‘(1) for the period within which an assessment
may be made pursuant to an agreement (or any ex-
tension thereof) under section 6229(b), and
‘‘(2) for 6 months thereafter.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect as if included in the amend-
ments made by section 402 of the Tax Equity and Fiscal
Responsibility Act of 1982.
SEC. 1237. AVAILABILITY OF INNOCENT SPOUSE RELIEF IN
CONTEXT OF PARTNERSHIP PROCEEDINGS.
(a) IN GENERAL.—Subsection (a) of section 6230 is
amended by adding at the end the following new para-
graph:
‘‘(3) SPECIAL RULE IN CASE OF ASSERTION BY
PARTNER’S
SPOUSE
OF
INNOCENT
SPOUSE
RE-
LIEF.—
‘‘(A) Notwithstanding section 6404(b), if
the spouse of a partner asserts that section
6013(e) applies with respect to a liability that
is attributable to any adjustment to a partner-
ship item, then such spouse may file with the
601
Secretary within 60 days after the notice of
computational adjustment is mailed to the
spouse a request for abatement of the assess-
ment specified in such notice. Upon receipt of
such request, the Secretary shall abate the as-
sessment. Any reassessment of the tax with re-
spect to which an abatement is made under this
subparagraph shall be subject to the deficiency
procedures prescribed by subchapter B. The pe-
riod for making any such reassessment shall
not expire before the expiration of 60 days after
the date of such abatement.
‘‘(B) If the spouse files a petition with the
Tax Court pursuant to section 6213 with re-
spect to the request for abatement described in
subparagraph (A), the Tax Court shall only
have jurisdiction pursuant to this section to de-
termine whether the requirements of section
6013(e) have been satisfied. For purposes of
such determination, the treatment of partner-
ship items under the settlement, the final part-
nership administrative adjustment, or the deci-
sion of the court (whichever is appropriate) that
gave rise to the liability in question shall be
conclusive.
604
of any penalty, addition to tax, or additional amount which
relates to an adjustment to a partnership item)’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (f) of section 6226 is amended—
(A) by striking ‘‘relates and’’ and inserting
‘‘relates,’’, and
(B) by inserting before the period ‘‘, and
the applicability of any penalty, addition to tax,
or additional amount which relates to an ad-
justment to a partnership item’’.
(2) Clause (i) of section 6230(a)(2)(A) is
amended to read as follows:
‘‘(i) affected items which require part-
ner level determinations (other than pen-
alties, additions to tax, and additional
amounts that relate to adjustments to
partnership items), or’’.
(3)(A) Subparagraph (A) of section 6230(a)(3),
as added by section 14317, is amended by inserting
‘‘(including any liability for any penalty, addition to
tax, or additional amount relating to such adjust-
ment)’’ after ‘‘partnership item’’.
(B) Subparagraph (B) of such section is
amended by inserting ‘‘(and the applicability of any
605
penalties, additions to tax, or additional amounts)’’
after ‘‘partnership items’’.
(C) Subparagraph (A) of section 6230(c)(5), as
added by section 14317, is amended by inserting be-
fore the period ‘‘(including any liability for any pen-
alties, additions to tax, or additional amounts relat-
ing to such adjustment)’’.
(D) Subparagraph (D) of section 6230(c)(5), as
added by section 14317, is amended by inserting
‘‘(and the applicability of any penalties, additions to
tax, or additional amounts)’’ after ‘‘partnership
items’’.
(4) Paragraph (1) of section 6230(c) is amend-
ed by striking ‘‘or’’ at the end of subparagraph (A),
by striking the period at the end of subparagraph
(B) and inserting ‘‘, or’’, and by adding at the end
the following new subparagraph:
‘‘(C) the Secretary erroneously imposed
any penalty, addition to tax, or additional
amount which relates to an adjustment to a
partnership item.’’
(5) So much of subparagraph (A) of section
6230(c)(2) as precedes ‘‘shall be filed’’ is amended
to read as follows:
606
‘‘(A) UNDER PARAGRAPH (1) (A) OR (C).—
Any claim under subparagraph (A) or (C) of
paragraph (1)’’.
(6) Paragraph (4) of section 6230(c) is amend-
ed by adding at the end the following: ‘‘In addition,
the determination under the final partnership ad-
ministrative adjustment or under the decision of the
court (whichever is appropriate) concerning the ap-
plicability of any penalty, addition to tax, or addi-
tional amount which relates to an adjustment to a
partnership item shall also be conclusive. Notwith-
standing the preceding sentence, the partner shall be
allowed to assert any partner level defenses that may
apply or to challenge the amount of the computa-
tional adjustment.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
SEC. 1239. PROVISIONS RELATING TO COURT JURISDIC-
TION, ETC.
(a) TAX COURT JURISDICTION TO ENJOIN PRE-
MATURE ASSESSMENTS OF DEFICIENCIES ATTRIBUTABLE
TO PARTNERSHIP ITEMS.—Subsection (b) of section 6225
is amended by striking ‘‘the proper court.’’ and inserting
‘‘the proper court, including the Tax Court. The Tax
607
Court shall have no jurisdiction to enjoin any action or
proceeding under this subsection unless a timely petition
for a readjustment of the partnership items for the taxable
year has been filed and then only in respect of the adjust-
ments that are the subject of such petition.’’
(b) JURISDICTION TO CONSIDER STATUTE OF LIMI-
TATIONS WITH RESPECT TO PARTNERS.—Paragraph (1)
of section 6226(d) is amended by adding at the end the
following new sentence:
‘‘Notwithstanding subparagraph (B), any person
treated under subsection (c) as a party to an action
shall be permitted to participate in such action (or
file a readjustment petition under subsection (b) or
paragraph (2) of this subsection) solely for the pur-
pose of asserting that the period of limitations for
assessing any tax attributable to partnership items
has expired with respect to such person, and the
court having jurisdiction of such action shall have
jurisdiction to consider such assertion.’’
(c) TAX
COURT
JURISDICTION
TO
DETERMINE
OVERPAYMENTS ATTRIBUTABLE TO AFFECTED ITEMS.—
(1) Paragraph (6) of section 6230(d) is amend-
ed by striking ‘‘(or an affected item)’’.
(2) Paragraph (3) of section 6512(b) is amend-
ed by adding at the end the following new sentence:
608
‘‘In the case of a credit or refund relating to an af-
fected 
item 
(within 
the 
meaning 
of 
section
6231(a)(5)), the preceding sentence shall be applied
by substituting the periods under sections 6229 and
6230(d) for the periods under section 6511(b)(2),
(c), and (d).’’
(d) VENUE ON APPEAL.—
(1) Paragraph (1) of section 7482(b) is amend-
ed by striking ‘‘or’’ at the end of subparagraph (D),
by striking the period at the end of subparagraph
(E) and inserting ‘‘, or’’, and by inserting after sub-
paragraph (E) the following new subparagraph:
‘‘(F) in the case of a petition under section
6234(c)—
‘‘(i) the legal residence of the peti-
tioner if the petitioner is not a corporation,
and
‘‘(ii) the place or office applicable
under subparagraph (B) if the petitioner is
a corporation.’’
(2) The last sentence of section 7482(b)(1) is
amended by striking ‘‘or 6228(a)’’ and inserting ‘‘,
6228(a), or 6234(c)’’.
(e) OTHER PROVISIONS.—
609
(1) Subsection (c) of section 7459 is amended
by striking ‘‘or section 6228(a)’’ and inserting ‘‘,
6228(a), or 6234(c)’’.
(2) Subsection (o) of section 6501 is amended
by adding at the end the following new paragraph:
‘‘(3) For declaratory judgment relating to treat-
ment of items other than partnership items with re-
spect to an oversheltered return, see section 6234.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to partnership taxable years ending
after the date of the enactment of this Act.
SEC. 1240. TREATMENT OF PREMATURE PETITIONS FILED
BY 
NOTICE 
PARTNERS 
OR 
5-PERCENT
GROUPS.
(a) IN GENERAL.—Subsection (b) of section 6226
(relating to judicial review of final partnership administra-
tive adjustments) is amended by redesignating paragraph
(5) as paragraph (6) and by inserting after paragraph (4)
the following new paragraph:
‘‘(5) 
TREATMENT
OF
PREMATURE
PETI-
TIONS.—If—
‘‘(A) a petition for a readjustment of part-
nership items for the taxable year involved is
filed by a notice partner (or a 5-percent group)
610
during the 90-day period described in sub-
section (a), and
‘‘(B) no action is brought under paragraph
(1) during the 60-day period described therein
with respect to such taxable year which is not
dismissed,
such petition shall be treated for purposes of para-
graph (1) as filed on the last day of such 60-day
period.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to petitions filed after the date of
the enactment of this Act.
SEC. 1241. BONDS IN CASE OF APPEALS FROM CERTAIN
PROCEEDING.
(a) IN GENERAL.—Subsection (b) of section 7485
(relating to bonds to stay assessment of collection) is
amended—
(1) by inserting ‘‘penalties,’’ after ‘‘any inter-
est,’’, and
(2) by striking ‘‘aggregate of such deficiencies’’
and inserting ‘‘aggregate liability of the parties to
the action’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect as if included in the amend-
611
ments made by section 402 of the Tax Equity and Fiscal
Responsibility Act of 1982.
SEC. 1242. SUSPENSION OF INTEREST WHERE DELAY IN
COMPUTATIONAL ADJUSTMENT RESULTING
FROM CERTAIN SETTLEMENTS.
(a) IN GENERAL.—Subsection (c) of section 6601
(relating to interest on underpayment, nonpayment, or ex-
tension of time for payment, of tax) is amended by adding
at the end the following new sentence: ‘‘In the case of a
settlement under section 6224(c) which results in the con-
version of partnership items to nonpartnership items pur-
suant to section 6231(b)(1)(C), the preceding sentence
shall apply to a computational adjustment resulting from
such settlement in the same manner as if such adjustment
were a deficiency and such settlement were a waiver re-
ferred to in the preceding sentence.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to adjustments with respect to
partnership taxable years beginning after the date of the
enactment of this Act.
612
SEC. 1243. SPECIAL RULES FOR ADMINISTRATIVE ADJUST-
MENT REQUESTS WITH RESPECT TO BAD
DEBTS OR WORTHLESS SECURITIES.
(a) GENERAL RULE.—Section 6227 (relating to ad-
ministrative adjustment requests) is amended by adding
at the end the following new subsection:
‘‘(e) REQUESTS WITH RESPECT TO BAD DEBTS OR
WORTHLESS SECURITIES.—In the case of that portion of
any request for an administrative adjustment which re-
lates to the deductibility by the partnership under section
166 of a debt as a debt which became worthless, or under
section 165(g) of a loss from worthlessness of a security,
the period prescribed in subsection (a)(1) shall be 7 years
from the last day for filing the partnership return for the
year with respect to which such request is made (deter-
mined without regard to extensions).’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall take effect as if included in the
amendments made by section 402 of the Tax Equity
and Fiscal Responsibility Act of 1982.
(2) TREATMENT OF REQUESTS FILED BEFORE
DATE OF ENACTMENT.—In the case of that portion
of any request (filed before the date of the enact-
ment of this Act) for an administrative adjustment
which relates to the deductibility of a debt as a debt
613
which became worthless or the deductibility of a loss
from the worthlessness of a security—
(A) paragraph (2) of section 6227(a) of
the Internal Revenue Code of 1986 shall not
apply,
(B) the period for filing a petition under
section 6228 of the Internal Revenue Code of
1986 with respect to such request shall not ex-
pire before the date 6 months after the date of
the enactment of this Act, and
(C) such a petition may be filed without
regard to whether there was a notice of the be-
ginning of an administrative proceeding or a
final partnership administrative adjustment.
PART III—PROVISION RELATING TO CLOSING OF
PARTNERSHIP TAXABLE YEAR WITH RE-
SPECT TO DECEASED PARTNER, ETC.
SEC. 1246. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH
RESPECT TO DECEASED PARTNER, ETC.
(a) GENERAL RULE.—Subparagraph (A) of section
706(c)(2) (relating to disposition of entire interest) is
amended to read as follows:
‘‘(A) DISPOSITION
OF
ENTIRE
INTER-
EST.—The taxable year of a partnership shall
close with respect to a partner whose entire in-
614
terest in the partnership terminates (whether
by reason of death, liquidation, or otherwise).’’
(b) CLERICAL AMENDMENT.—The paragraph head-
ing for paragraph (2) of section 706(c) is amended to read
as follows:
‘‘(2) TREATMENT OF DISPOSITIONS.—’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to partnership taxable years begin-
ning after December 31, 1997.
Subtitle D—Provisions Relating to
Real Estate Investment Trusts
SEC. 1251. CLARIFICATION OF LIMITATION ON MAXIMUM
NUMBER OF SHAREHOLDERS.
(a) RULES RELATING TO DETERMINATION OF OWN-
ERSHIP.—
(1) FAILURE TO ISSUE SHAREHOLDER DEMAND
LETTER NOT TO DISQUALIFY REIT.—Section 857(a)
(relating to requirements applicable to real estate in-
vestment trusts) is amended by striking paragraph
(2) and by redesignating paragraph (3) as para-
graph (2).
(2) SHAREHOLDER DEMAND LETTER REQUIRE-
MENT; PENALTY.—Section 857 (relating to taxation
of real estate investment trusts and their bene-
ficiaries) is amended by redesignating subsection (f)
615
as subsection (g) and by inserting after subsection
(e) the following new subsection:
‘‘(f) REAL ESTATE INVESTMENT TRUSTS TO ASCER-
TAIN OWNERSHIP.—
‘‘(1) IN
GENERAL.—Each real estate invest-
ment trust shall each taxable year comply with regu-
lations prescribed by the Secretary for the purposes
of ascertaining the actual ownership of the outstand-
ing shares, or certificates of beneficial interest, of
such trust.
‘‘(2) FAILURE TO COMPLY.—
‘‘(A) IN GENERAL.—If a real estate invest-
ment trust fails to comply with the require-
ments of paragraph (1) for a taxable year, such
trust shall pay (on notice and demand by the
Secretary and in the same manner as tax) a
penalty of $25,000.
‘‘(B) INTENTIONAL
DISREGARD.—If any
failure under paragraph (1) is due to inten-
tional disregard of the requirement under para-
graph (1), the penalty under subparagraph (A)
shall be $50,000.
‘‘(C) FAILURE
TO
COMPLY
AFTER
NO-
TICE.—The Secretary may require a real estate
investment trust to take such actions as the
616
Secretary determines appropriate to ascertain
actual ownership if the trust fails to meet the
requirements of paragraph (1). If the trust fails
to take such actions, the trust shall pay (on no-
tice and demand by the Secretary and in the
same manner as tax) an additional penalty
equal to the penalty determined under subpara-
graph (A) or (B), whichever is applicable.
‘‘(D) REASONABLE
CAUSE.—No penalty
shall be imposed under this paragraph with re-
spect to any failure if it is shown that such fail-
ure is due to reasonable cause and not to willful
neglect.’’
(b) COMPLIANCE WITH CLOSELY HELD PROHIBI-
TION.—
(1) IN GENERAL.—Section 856 (defining real
estate investment trust) is amended by adding at the
end the following new subsection:
‘‘(k) REQUIREMENT THAT ENTITY NOT BE CLOSELY
HELD TREATED AS MET IN CERTAIN CASES.—A corpora-
tion, trust, or association—
‘‘(1) which for a taxable year meets the require-
ments of section 857(f)(1), and
‘‘(2) which does not know, or exercising reason-
able diligence would not have known, whether the
617
entity failed to meet the requirement of subsection
(a)(6),
shall be treated as having met the requirement of sub-
section (a)(6) for the taxable year.’’
(2) CONFORMING AMENDMENT.—Paragraph (6)
of section 856(a) is amended by inserting ‘‘subject
to the provisions of subsection (k),’’ before ‘‘which
is not’’.
SEC. 1252. DE MINIMIS RULE FOR TENANT SERVICES IN-
COME.
(a) IN GENERAL.—Paragraph (2) of section 856(d)
(defining rents from real property) is amended by striking
subparagraph (C) and the last sentence and inserting:
‘‘(C) any impermissible tenant service in-
come (as defined in paragraph (7)).’’
(b) IMPERMISSIBLE TENANT SERVICE INCOME.—
Section 856(d) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(7) IMPERMISSIBLE
TENANT
SERVICE
IN-
COME.—For purposes of paragraph (2)(C)—
‘‘(A) IN GENERAL.—The term ‘impermis-
sible tenant service income’ means, with respect
to any real or personal property, any amount
received or accrued directly or indirectly by the
real estate investment trust for—
618
‘‘(i) services furnished or rendered by
the trust to the tenants of such property,
or
‘‘(ii) managing or operating such
property.
‘‘(B) DISQUALIFICATION OF ALL AMOUNTS
WHERE MORE THAN DE MINIMIS AMOUNT.—If
the amount described in subparagraph (A) with
respect to a property for any taxable year ex-
ceeds 1 percent of all amounts received or ac-
crued during such taxable year directly or indi-
rectly by the real estate investment trust with
respect to such property, the impermissible ten-
ant service income of the trust with respect to
the property shall include all such amounts.
‘‘(C) EXCEPTIONS.—For purposes of sub-
paragraph (A)—
‘‘(i) services furnished or rendered, or
management 
or 
operation 
provided,
through an independent contractor from
whom the trust itself does not derive or re-
ceive any income shall not be treated as
furnished, rendered, or provided by the
trust, and
619
‘‘(ii) there shall not be taken into ac-
count any amount which would be excluded
from unrelated business taxable income
under section 512(b)(3) if received by an
organization 
described 
in 
section
511(a)(2).
‘‘(D) AMOUNT ATTRIBUTABLE TO IMPER-
MISSIBLE SERVICES.—For purposes of subpara-
graph (A), the amount treated as received for
any service (or management or operation) shall
not be less than 150 percent of the direct cost
of the trust in furnishing or rendering the serv-
ice (or providing the management or operation).
‘‘(E) 
COORDINATION
WITH
LIMITA-
TIONS.—For purposes of paragraphs (2) and
(3) of subsection (c), amounts described in sub-
paragraph (A) shall be included in the gross in-
come of the corporation, trust, or association.’’
SEC. 1253. ATTRIBUTION RULES APPLICABLE TO TENANT
OWNERSHIP.
Section 856(d)(5) (relating to constructive ownership
of stock) is amended by adding at the end the following:
‘‘For purposes of paragraph (2)(B), section 318(a)(3)(A)
shall be applied under the preceding sentence in the case
of a partnership by taking into account only partners who
620
own (directly or indirectly) 25 percent or more of the cap-
ital interest, or the profits interest, in the partnership.’’
SEC. 1254. CREDIT FOR TAX PAID BY REIT ON RETAINED
CAPITAL GAINS.
(a) GENERAL RULE.—Paragraph (3) of section
857(b) (relating to capital gains) is amended by redesig-
nating subparagraph (D) as subparagraph (E) and by in-
serting after subparagraph (C) the following new subpara-
graph:
‘‘(D) TREATMENT BY SHAREHOLDERS OF
UNDISTRIBUTED CAPITAL GAINS.—
‘‘(i) Every shareholder of a real estate
investment trust at the close of the trust’s
taxable year shall include, in computing his
long-term capital gains in his return for
his taxable year in which the last day of
the trust’s taxable year falls, such amount
as the trust shall designate in respect of
such shares in a written notice mailed to
its shareholders at any time prior to the
expiration of 60 days after the close of its
taxable year (or mailed to its shareholders
or holders of beneficial interests with its
annual report for the taxable year), but the
amount so includible by any shareholder
621
shall not exceed that part of the amount
subjected to tax in subparagraph (A)(ii)
which he would have received if all of such
amount had been distributed as capital
gain dividends by the trust to the holders
of such shares at the close of its taxable
year.
‘‘(ii) For purposes of this title, every
such shareholder shall be deemed to have
paid, for his taxable year under clause (i),
the tax imposed by subparagraph (A)(ii)
on the amounts required by this subpara-
graph to be included in respect of such
shares in computing his long-term capital
gains for that year; and such shareholders
shall be allowed credit or refund as the
case may be, for the tax so deemed to have
been paid by him.
‘‘(iii) The adjusted basis of such
shares in the hands of the holder shall be
increased with respect to the amounts re-
quired by this subparagraph to be included
in computing his long-term capital gains,
by the difference between the amount of
such includible gains and the tax deemed
622
paid by such shareholder in respect of such
shares under clause (ii).
‘‘(iv) In the event of such designation,
the tax imposed by subparagraph (A)(ii)
shall be paid by the real estate investment
trust within 30 days after the close of its
taxable year.
‘‘(v) The earnings and profits of such
real estate investment trust, and the earn-
ings and profits of any such shareholder
which is a corporation, shall be appro-
priately adjusted in accordance with regu-
lations prescribed by the Secretary.
‘‘(vi) As used in this subparagraph,
the terms ‘shares’ and ‘shareholders’ shall
include beneficial interests and holders of
beneficial interests, respectively.’’
(b) CONFORMING AMENDMENTS.—
(1) Clause (i) of section 857(b)(7)(A) is amend-
ed by striking ‘‘subparagraph (B)’’ and inserting
‘‘subparagraph (B) or (D)’’.
(2) Clause (iii) of section 852(b)(3)(D) is
amended by striking ‘‘by 65 percent’’ and all that
follows and inserting ‘‘by the difference between the
amount of such includible gains and the tax deemed
623
paid by such shareholder in respect of such shares
under clause (ii).’’
SEC. 1255. REPEAL OF 30-PERCENT GROSS INCOME RE-
QUIREMENT.
(a) GENERAL RULE.—Subsection (c) of section 856
(relating to limitations) is amended—
(1) by adding ‘‘and’’ at the end of paragraph
(3),
(2) by striking paragraphs (4) and (8), and
(3) by redesignating paragraphs (5), (6), and
(7) as paragraphs (4), (5), and (6), respectively.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (G) of section 856(c)(5), as
redesignated by subsection (a), is amended by strik-
ing ‘‘and such agreement shall be treated as a secu-
rity for purposes of paragraph (4)(A)’’.
(2) Paragraph (5) of section 857(b) is amended
by striking ‘‘section 856(c)(7)’’ and inserting ‘‘sec-
tion 856(c)(6)’’.
(3) Subparagraph (C) of section 857(b)(6) is
amended by striking ‘‘section 856(c)(6)(B)’’ and in-
serting ‘‘section 856(c)(5)(B)’’.
624
SEC. 1256. MODIFICATION OF EARNINGS AND PROFITS
RULES FOR DETERMINING WHETHER REIT
HAS EARNINGS AND PROFITS FROM NON-
REIT YEAR.
Subsection (d) of section 857 is amended by adding
at the end the following new paragraph:
‘‘(3) DISTRIBUTIONS TO MEET REQUIREMENTS
OF SUBSECTION (a)(2)(B).—Any distribution which
is made in order to comply with the requirements of
subsection (a)(2)(B)—
‘‘(A) shall be treated for purposes of this
subsection and subsection (a)(2)(B) as made
from the earliest accumulated earnings and
profits (other than earnings and profits to
which subsection (a)(2)(A) applies) rather than
the most recently accumulated earnings and
profits, and
‘‘(B) to the extent treated under subpara-
graph (A) as made from accumulated earnings
and profits, shall not be treated as a distribu-
tion for purposes of subsection (b)(2)(B).’’
SEC. 1257. TREATMENT OF FORECLOSURE PROPERTY.
(a) GRACE PERIODS.—
(1) INITIAL PERIOD.—Paragraph (2) of section
856(e) (relating to special rules for foreclosure prop-
erty) is amended by striking ‘‘on the date which is
625
2 years after the date the trust acquired such prop-
erty’’ and inserting ‘‘as of the close of the 3d taxable
year following the taxable year in which the trust ac-
quired such property’’.
(2) EXTENSION.—Paragraph (3) of section
856(e) is amended—
(A) by striking ‘‘or more extensions’’ and
inserting ‘‘extension’’, and
(B) by striking the last sentence and in-
serting: ‘‘Any such extension shall not extend
the grace period beyond the close of the 3d tax-
able year following the last taxable year in the
period under paragraph (2).’’
(b) REVOCATION OF ELECTION.—Paragraph (5) of
section 856(e) is amended by striking the last sentence
and inserting: ‘‘A real estate investment trust may revoke
any such election for a taxable year by filing the revocation
(in the manner provided by the Secretary) on or before
the due date (including any extension of time) for filing
its return of tax under this chapter for the taxable year.
If a trust revokes an election for any property, no election
may be made by the trust under this paragraph with re-
spect to the property for any subsequent taxable year.’’
626
(c) CERTAIN ACTIVITIES NOT TO DISQUALIFY PROP-
ERTY.—Paragraph (4) of section 856(e) is amended by
adding at the end the following new flush sentence:
‘‘For purposes of subparagraph (C), property shall
not be treated as used in a trade or business by rea-
son of any activities of the real estate investment
trust with respect to such property to the extent
that such activities would not result in amounts re-
ceived or accrued, directly or indirectly, with respect
to such property being treated as other than rents
from real property.’’
SEC. 1258. PAYMENTS UNDER HEDGING INSTRUMENTS.
Section 856(c)(5)(G) (relating to treatment of certain
interest rate agreements), as redesignated by section
1255, is amended to read as follows:
‘‘(G) TREATMENT OF CERTAIN HEDGING
INSTRUMENTS.—Except to the extent provided
by regulations, any—
‘‘(i) payment to a real estate invest-
ment trust under an interest rate swap or
cap agreement, option, futures contract,
forward rate agreement, or any similar fi-
nancial instrument, entered into by the
trust in a transaction to reduce the inter-
est rate risks with respect to any indebted-
627
ness incurred or to be incurred by the
trust to acquire or carry real estate assets,
and
‘‘(ii) gain from the sale or other dis-
position of any such investment,
shall be treated as income qualifying under
paragraph (2).’’
SEC. 1259. EXCESS NONCASH INCOME.
Section 857(e)(2) (relating to determination of
amount of excess noncash income) is amended—
(1) by striking subparagraph (B),
(2) by striking the period at the end of sub-
paragraph (C) and inserting a comma,
(3) by redesignating subparagraph (C) (as
amended by paragraph (2)) as subparagraph (B),
and
(4) by adding at the end the following new sub-
paragraphs:
‘‘(C) the amount (if any) by which—
‘‘(i) the amounts includible in gross
income with respect to instruments to
which section 860E(a) or 1272 applies, ex-
ceed
‘‘(ii) the amount of money and the
fair market value of other property re-
628
ceived during the taxable year under such
instruments, and
‘‘(D) amounts includible in income by rea-
son of cancellation of indebtedness.’’
SEC. 1260. PROHIBITED TRANSACTION SAFE HARBOR.
Clause (iii) of section 857(b)(6)(C) (relating to cer-
tain sales not to constitute prohibited transactions) is
amended by striking ‘‘(other than foreclosure property)’’
in subclauses (I) and (II) and inserting ‘‘(other than sales
of foreclosure property or sales to which section 1033 ap-
plies)’’.
SEC. 1261. SHARED APPRECIATION MORTGAGES.
(a) BANKRUPTCY SAFE HARBOR.—Section 856(j)
(relating to treatment of shared appreciation mortgages)
is amended by redesignating paragraph (4) as paragraph
(5) and by inserting after paragraph (3) the following new
paragraph:
‘‘(4) COORDINATION WITH 4-YEAR HOLDING PE-
RIOD.—
‘‘(A) IN GENERAL.—For purposes of sec-
tion 857(b)(6)(C), if a real estate investment
trust is treated as having sold secured property
under paragraph (3)(A), the trust shall be
treated as having held such property for at
least 4 years if—
629
‘‘(i) the secured property is sold or
otherwise disposed of pursuant to a case
under title 11 of the United States Code,
‘‘(ii) the seller is under the jurisdic-
tion of the court in such case, and
‘‘(iii) the disposition is required by the
court or is pursuant to a plan approved by
the court.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply if—
‘‘(i) the secured property was acquired
by the trust with the intent to evict or
foreclose, or
‘‘(ii) the trust knew or had reason to
know that default on the obligation de-
scribed in paragraph (5)(A) would occur.’’
(b) CLARIFICATION OF DEFINITION OF SHARED AP-
PRECIATION
PROVISION.—Clause 
(ii) 
of 
section
856(j)(5)(A) is amended by inserting before the period ‘‘or
appreciation in value as of any specified date’’.
SEC. 1262. WHOLLY OWNED SUBSIDIARIES.
Section 856(i)(2) (defining qualified REIT subsidi-
ary) is amended by striking ‘‘at all times during the period
such corporation was in existence’’.
630
SEC. 1263. EFFECTIVE DATE.
The amendments made by this part shall apply to
taxable years beginning after the date of the enactment
of this Act.
Subtitle E—Provisions Relating to
Regulated Investment Companies
SEC. 1271. REPEAL OF 30-PERCENT GROSS INCOME LIMITA-
TION.
(a) GENERAL RULE.—Subsection (b) of section 851
(relating to limitations) is amended by striking paragraph
(3), by adding ‘‘and’’ at the end of paragraph (2), and
by redesignating paragraph (4) as paragraph (3).
(b) TECHNICAL AMENDMENTS.—
(1) The material following paragraph (3) of sec-
tion 851(b) (as redesignated by subsection (a)) is
amended—
(A) by striking out ‘‘paragraphs (2) and
(3)’’ and inserting ‘‘paragraph (2)’’, and
(B) by striking out the last sentence there-
of.
(2) Subsection (c) of section 851 is amended by
striking ‘‘subsection (b)(4)’’ each place it appears
(including the heading) and inserting ‘‘subsection
(b)(3)’’.
631
(3) Subsection (d) of section 851 is amended by
striking ‘‘subsections (b)(4)’’ and inserting ‘‘sub-
sections (b)(3)’’.
(4) Paragraph (1) of section 851(e) is amended
by striking ‘‘subsection (b)(4)’’ and inserting ‘‘sub-
section (b)(3)’’.
(5) Paragraph (4) of section 851(e) is amended
by striking ‘‘subsections (b)(4)’’ and inserting ‘‘sub-
sections (b)(3)’’.
(6) Section 851 is amended by striking sub-
section (g) and redesignating subsection (h) as sub-
section (g).
(7) Subsection (g) of section 851 (as redesig-
nated by paragraph (6)) is amended by striking
paragraph (3).
(8) Section 817(h)(2) is amended—
(A) by striking ‘‘851(b)(4)’’ in subpara-
graph (A) and inserting ‘‘851(b)(3)’’, and
(B) by striking ‘‘851(b)(4)(A)(i)’’ in sub-
paragraph (B) and inserting ‘‘851(b)(3)(A)(i)’’.
(9) Section 1092(f)(2) is amended by striking
‘‘Except for purposes of section 851(b)(3), the’’ and
inserting ‘‘The’’.
632
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
Subtitle F—Taxpayer Protections
SEC. 1281. REASONABLE CAUSE EXCEPTION FOR CERTAIN
PENALTIES.
(a) INFORMATION ON DEDUCTIBLE EMPLOYEE CON-
TRIBUTIONS.—Subsection (g) of section 6652 (relating to
information required in connection with deductible em-
ployee contributions) is amended by adding at the end the
following new sentence: ‘‘No penalty shall be imposed
under this subsection on any failure which is shown to be
due to reasonable cause and not willful neglect.’’
(b) REPORTS
ON STATUS
AS QUALIFIED SMALL
BUSINESS.—Subsection (k) of section 6652 (relating to
failure to make reports required under section 1202) is
amended by adding at the end the following new sentence:
‘‘No penalty shall be imposed under this subsection on any
failure which is shown to be due to reasonable cause and
not willful neglect.’’
(c) RETURNS OF PERSONAL HOLDING COMPANY TAX
BY FOREIGN CORPORATIONS.—Section 6683 (relating to
failure of foreign corporation to file return of personal
holding company tax) is amended by adding at the end
the following new sentence: ‘‘No penalty shall be imposed
633
under this section on any failure which is shown to be due
to reasonable cause and not willful neglect.’’
(d) FAILURE TO MAKE REQUIRED PAYMENTS.—
Subparagraph (A) of section 7519(f)(4) is amended by
adding at the end the following new sentence: ‘‘No penalty
shall be imposed under this subparagraph on any failure
which is shown to be due to reasonable cause and not will-
ful neglect.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 1282. CLARIFICATION OF PERIOD FOR FILING CLAIMS
FOR REFUNDS.
(a) IN GENERAL.—Paragraph (3) of section 6512(b)
(relating to overpayment determined by Tax Court) is
amended by adding at the end the following flush sen-
tence:
‘‘In a case described in subparagraph (B) where the
date of the mailing of the notice of deficiency is dur-
ing the third year after the due date (with exten-
sions) for filing the return of tax and no return was
filed before such date, the applicable period under
subsections (a) and (b)(2) of section 6511 shall be
3 years.’’
634
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to claims for credit or refund
for taxable years ending after the date of the enactment
of this Act.
SEC. 1283. REPEAL OF AUTHORITY TO DISCLOSE WHETHER
PROSPECTIVE JUROR HAS BEEN AUDITED.
(a) IN GENERAL.—Subsection (h) of section 6103
(relating to disclosure to certain Federal officers and em-
ployees for purposes of tax administration, etc.) is amend-
ed by striking paragraph (5) and by redesignating para-
graph (6) as paragraph (5).
(b) CONFORMING AMENDMENT.—Paragraph (4) of
section 6103(p) is amended by striking ‘‘(h)(6)’’ each
place it appears and inserting ‘‘(h)(5)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to judicial proceedings commenced
after the date of the enactment of this Act.
SEC. 1284. CLARIFICATION OF STATUTE OF LIMITATIONS.
(a) IN GENERAL.—Subsection (a) of section 6501
(relating to limitations on assessment and collection) is
amended by adding at the end thereof the following new
sentence: ‘‘For purposes of this chapter, the term ‘return’
means the return required to be filed by the taxpayer (and
does not include a return of any person from whom the
635
taxpayer has received an item of income, gain, loss, deduc-
tion, or credit).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 1285. AWARDING OF ADMINISTRATIVE COSTS.
(a) RIGHT TO APPEAL TAX COURT DECISION.—Sub-
section (f) of section 7430 (relating to right of appeal)
is amended by adding at the end the following new para-
graph:
‘‘(3) APPEAL
OF
TAX
COURT
DECISION.—An
order of the Tax Court disposing of a petition under
paragraph (2) shall be reviewable in the same man-
ner as a decision of the Tax Court, but only with re-
spect to the matters determined in such order.’’
(b) PERIOD FOR APPLYING TO IRS FOR COSTS.—
Subsection (b) of section 7430 (relating to limitations) is
amended by adding at the end the following new para-
graph:
‘‘(5) PERIOD FOR APPLYING TO IRS FOR AD-
MINISTRATIVE
COSTS.—An award may be made
under subsection (a) by the Internal Revenue Serv-
ice for reasonable administrative costs only if the
prevailing party files an application with the Inter-
nal Revenue Service for such costs before the 91st
636
day after the date on which the final decision of the
Internal Revenue Service as to the determination of
the tax, interest, or penalty is mailed to such party.’’
(c) PERIOD FOR PETITIONING OF TAX COURT FOR
REVIEW OF DENIAL OF COSTS.—Paragraph (2) of section
7430(f) (relating to right of appeal) is amended—
(1) by striking ‘‘appeal to’’ and inserting ‘‘the
filing of a petition for review with’’, and
(2) by adding at the end the following new sen-
tence: ‘‘If the Secretary sends by certified or reg-
istered mail a notice of such decision to the peti-
tioner, no proceeding in the Tax Court may be initi-
ated under this paragraph unless such petition is
filed before the 91st day after the date of such mail-
ing.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to civil actions or proceedings com-
menced after the date of the enactment of this Act.
SEC. 1286. PENALTY FOR UNAUTHORIZED INSPECTION OF
TAX RETURNS OR TAX RETURN INFORMA-
TION.
(a) IN GENERAL.—Part I of subchapter A of chapter
75 (relating to crimes, other offenses, and forfeitures) is
amended by adding after section 7213 the following new
section:
637
‘‘SEC. 7213A. UNAUTHORIZED INSPECTION OF RETURNS OR
RETURN INFORMATION.
‘‘(a) PROHIBITIONS.—
‘‘(1) FEDERAL EMPLOYEES AND OTHER PER-
SONS.—It shall be unlawful for—
‘‘(A) any officer or employee of the United
States, or
‘‘(B) any person described in section
6103(n) or an officer or employee of any such
person,
willfully to inspect, except as authorized in this title,
any return or return information.
‘‘(2) STATE AND OTHER EMPLOYEES.—It shall
be unlawful for any person (not described in para-
graph (1)) willfully to inspect, except as authorized
in this title, any return or return information ac-
quired by such person or another person under a
provision of section 6103 referred to in section
7213(a)(2).
‘‘(b) PENALTY.—
‘‘(1) IN GENERAL.—Any violation of subsection
(a) shall be punishable upon conviction by a fine in
any amount not exceeding $1,000, or imprisonment
of not more than 1 year, or both, together with the
costs of prosecution.
638
‘‘(2) FEDERAL OFFICERS OR EMPLOYEES.—An
officer or employee of the United States who is con-
victed of any violation of subsection (a) shall, in ad-
dition to any other punishment, be dismissed from
office or discharged from employment.
‘‘(c) DEFINITIONS.—For purposes of this section, the
terms ‘inspect’, ‘return’, and ‘return information’ have the
respective meanings given such terms by section 6103(b).’’
(b) TECHNICAL AMENDMENTS.—
(1) Paragraph (2) of section 7213(a) is amend-
ed by inserting ‘‘(5),’’ after ‘‘(m)(2), (4),’’.
(2) The table of sections for part I of sub-
chapter A of chapter 75 is amended by inserting
after the item relating to section 7213 the following
new item:
‘‘Sec. 7213A. Unauthorized inspection of returns or return infor-
mation.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to violations occurring on and after
the date of the enactment of this Act.
SEC. 1287. CIVIL DAMAGES FOR UNAUTHORIZED INSPEC-
TION OF RETURNS AND RETURN INFORMA-
TION; NOTIFICATION OF UNLAWFUL INSPEC-
TION OR DISCLOSURE.
(a) CIVIL DAMAGES FOR UNAUTHORIZED INSPEC-
TION.—Subsection (a) of section 7431 is amended—
639
(1) by striking ‘‘DISCLOSURE’’ in the headings
for paragraphs (1) and (2) and inserting ‘‘INSPEC-
TION OR DISCLOSURE’’, and
(2) by striking ‘‘discloses’’ in paragraphs (1)
and (2) and inserting ‘‘inspects or discloses’’.
(b) NOTIFICATION OF UNLAWFUL INSPECTION OR
DISCLOSURE.—Section 7431 is amended by redesignating
subsections (e) and (f) as subsections (f) and (g), respec-
tively, and by inserting after subsection (d) the following
new subsection:
‘‘(e) NOTIFICATION OF UNLAWFUL INSPECTION AND
DISCLOSURE.—If any person is criminally charged by in-
dictment or information with inspection or disclosure of
a taxpayer’s return or return information in violation of—
‘‘(1) paragraph (1) or (2) of section 7213(a),
‘‘(2) section 7213A(a), or
‘‘(3) subparagraph (B) of section 1030(a)(2) of
title 18, United States Code,
the Secretary shall notify such taxpayer as soon as prac-
ticable of such inspection or disclosure.’’
(c) NO DAMAGES FOR INSPECTION REQUESTED BY
TAXPAYER.—Subsection (b) of section 7431 is amended
to read as follows:
‘‘(b) EXCEPTIONS.—No liability shall arise under this
section with respect to any inspection or disclosure—
640
‘‘(1) which results from a good faith, but erro-
neous, interpretation of section 6103, or
‘‘(2) which is requested by the taxpayer.’’
(d) CONFORMING AMENDMENTS.—
(1) Subsections (c)(1)(A), (c)(1)(B)(i), and (d)
of section 7431 are each amended by inserting ‘‘in-
spection or’’ before ‘‘disclosure’’.
(2) Clause (ii) of section 7431(c)(1)(B) is
amended by striking ‘‘willful disclosure or a disclo-
sure’’ and inserting ‘‘willful inspection or disclosure
or an inspection or disclosure’’.
(3) Subsection (f) of section 7431, as redesig-
nated by subsection (b), is amended to read as fol-
lows:
‘‘(f) DEFINITIONS.—For purposes of this section, the
terms ‘inspect’, ‘inspection’, ‘return’, and ‘return informa-
tion’ have the respective meanings given such terms by
section 6103(b).’’
(4) The section heading for section 7431 is
amended by inserting ‘‘INSPECTION
OR’’ before
‘‘DISCLOSURE’’.
(5) The table of sections for subchapter B of
chapter 76 is amended by inserting ‘‘inspection or’’
before ‘‘disclosure’’ in the item relating to section
7431.
641
(6) Paragraph (2) of section 7431(g), as redes-
ignated by subsection (b), is amended by striking
‘‘any use’’ and inserting ‘‘any inspection or use’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to inspections and disclosures oc-
curring on and after the date of the enactment of this
Act.
TITLE 
XIII—SIMPLIFICATION
PROVISIONS 
RELATING 
TO
ESTATE AND GIFT TAXES
SEC. 1301. GIFTS TO CHARITIES EXEMPT FROM GIFT TAX
FILING REQUIREMENTS.
(a) IN GENERAL.—Section 6019 is amended by strik-
ing ‘‘or’’ at the end of paragraph (1), by adding ‘‘or’’ at
the end of paragraph (2), and by inserting after paragraph
(2) the following new paragraph:
‘‘(3) a transfer with respect to which a deduc-
tion is allowed under section 2522, except that this
paragraph shall apply with respect to a transfer of
property (other than a transfer described in section
2522(d)) only if the entire value of such property is
allowed as a deduction under section 2522,’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to gifts made after the date of the
enactment of this Act.
642
SEC. 1302. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS
OF RECOVERY.
(a) AMENDMENT TO SECTION 2207A.—Paragraph
(2) of section 2207A(a) (relating to right of recovery in
the case of certain marital deduction property) is amended
to read as follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will
(or a revocable trust) specifically indicates an intent
to waive any right of recovery under this subchapter
with respect to such property.’’
(b) AMENDMENT TO SECTION 2207B.—Paragraph
(2) of section 2207B(a) (relating to right of recovery
where decedent retained interest) is amended to read as
follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will
(or a revocable trust) specifically indicates an intent
to waive any right of recovery under this subchapter
with respect to such property.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to the estates of dece-
dents dying after the date of the enactment of this Act.
643
SEC. 1303. TRANSITIONAL RULE UNDER SECTION 2056A.
(a) GENERAL RULE.—In the case of any trust cre-
ated under an instrument executed before the date of the
enactment of the Revenue Reconciliation Act of 1990,
such trust shall be treated as meeting the requirements
of paragraph (1) of section 2056A(a) of the Internal Reve-
nue Code of 1986 if the trust instrument requires that
all trustees of the trust be individual citizens of the United
States or domestic corporations.
(b) EFFECTIVE DATE.—The provisions of subsection
(a) shall take effect as if included in the provisions of sec-
tion 11702(g) of the Revenue Reconciliation Act of 1990.
SEC. 1304. CLARIFICATIONS RELATING TO DISCLAIMERS.
(a) PARTIAL TRANSFER-TYPE DISCLAIMERS PER-
MITTED.—Paragraph (3) of section 2518(c) (relating to
certain transfers treated as disclaimers) is amended by in-
serting ‘‘(or an undivided portion of such interest)’’ after
‘‘entire interest in the property’’.
(b) RETENTION
OF
INTEREST
BY
DECEDENT’S
SPOUSE
PERMITTED
IN
TRANSFER-TYPE
DISCLAIM-
ERS.—Paragraph (3) of section 2518(c) is amended by
adding at the end the following new flush sentence:
‘‘For purposes of the preceding sentence, a written
transfer by the spouse of the decedent of property
to a trust shall not fail to be treated as a transfer
644
of such spouse’s interest in such property by reason
of such spouse having an interest in such trust.’’
(c) DISCLAIMERS ARE EFFECTIVE FOR INCOME TAX
PURPOSES.—Subsection (a) of section 2518 is amended
by inserting ‘‘and subtitle A’’ after ‘‘this subtitle’’ each
place it appears.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers creating an interest
in the person disclaiming, and disclaimers, made after the
date of the enactment of this Act.
SEC. 1305. INCREASE OF AMOUNT OF LAPSE OF GENERAL
POWER OF APPOINTMENT NOT TREATED AS
RELEASE FOR PURPOSES OF ESTATE AND
GIFT TAX (5 OR 5 POWER).
(a) ESTATE TAX.—Subparagraph (A) of section
2041(b)(2) (relating to lapse of power) is amended by
striking ‘‘$5,000’’ and inserting ‘‘$10,000’’.
(b) GIFT TAX.—Paragraph (1) of section 2514(e)
(relating to lapse of power) is amended by striking
‘‘$5,000’’ and inserting ‘‘$10,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
645
SEC. 1306. TREATMENT FOR ESTATE TAX PURPOSES OF
SHORT-TERM OBLIGATIONS HELD BY NON-
RESIDENT ALIENS.
(a) IN GENERAL.—Subsection (b) of section 2105 is
amended by striking ‘‘and’’ at the end of paragraph (2),
by striking the period at the end of paragraph (3) and
inserting ‘‘, and’’, and by inserting after paragraph (3)
the following new paragraph:
‘‘(4) obligations which would be original issue
discount obligations as defined in section 871(g)(1)
but for subparagraph (B)(i) thereof, if any interest
thereon (were such interest received by the decedent
at the time of his death) would not be effectively
connected with the conduct of a trade or business
within the United States.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to estates of decedents dying after
the date of the enactment of this Act.
SEC. 1307. CERTAIN REVOCABLE TRUSTS TREATED AS
PART OF ESTATE.
(a) IN GENERAL.—Subpart A of part I of subchapter
J (relating to estates, trusts, beneficiaries, and decedents)
is amended by adding at the end the following new section:
646
‘‘SEC. 646. CERTAIN REVOCABLE TRUSTS TREATED AS
PART OF ESTATE.
‘‘(a) GENERAL RULE.—For purposes of this subtitle,
if both the executor (if any) of an estate and the trustee
of a qualified revocable trust elect the treatment provided
in this section, such trust shall be treated and taxed as
part of such estate (and not as a separate trust) for all
taxable years of the estate ending after the date of the
decedent’s death and before the applicable date.
‘‘(b) DEFINITIONS.—For purposes of subsection
(a)—
‘‘(1) 
QUALIFIED
REVOCABLE
TRUST.—The
term ‘qualified revocable trust’ means any trust (or
portion thereof) which was treated under section 676
as owned by the decedent of the estate referred to
in subsection (a) by reason of a power in the grantor
(determined without regard to section 672(e)).
‘‘(2) APPLICABLE DATE.—The term ‘applicable
date’ means—
‘‘(A) if no return of tax imposed by chap-
ter 11 is required to be filed, the date which is
2 years after the date of the decedent’s death,
and
‘‘(B) if such a return is required to be
filed, the date which is 6 months after the date
647
of the final determination of the liability for tax
imposed by chapter 11.
‘‘(c) ELECTION.—The election under subsection (a)
shall be made not later than the time prescribed for filing
the return of tax imposed by this chapter for the first tax-
able year of the estate (determined with regard to exten-
sions) and, once made, shall be irrevocable.’’
(b) COMPARABLE TREATMENT UNDER GENERATION-
SKIPPING TAX.—Paragraph (1) of section 2652(b) is
amended by adding at the end the following new sentence:
‘‘Such term shall not include any trust during any period
the trust is treated as part of an estate under section
646.’’
(c) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by adding at the end the
following new item:
‘‘Sec. 646. Certain revocable trusts treated as part of estate.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to estates of decedents
dying after the date of the enactment of this Act.
SEC. 1308. DISTRIBUTIONS DURING FIRST 65 DAYS OF TAX-
ABLE YEAR OF ESTATE.
(a) IN GENERAL.—Subsection (b) of section 663 (re-
lating to distributions in first 65 days of taxable year) is
648
amended by inserting ‘‘an estate or’’ before ‘‘a trust’’ each
place it appears.
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 663(b) is amended by striking ‘‘the fiduciary of
such trust’’ and inserting ‘‘the executor of such estate or
the fiduciary of such trust (as the case may be)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 1309. SEPARATE SHARE RULES AVAILABLE TO ES-
TATES.
(a) IN GENERAL.—Subsection (c) of section 663 (re-
lating to separate shares treated as separate trusts) is
amended—
(1) by inserting before the last sentence the fol-
lowing new sentence: ‘‘Rules similar to the rules of
the preceding provisions of this subsection shall
apply to treat substantially separate and independ-
ent shares of different beneficiaries in an estate hav-
ing more than 1 beneficiary as separate estates.’’,
and
(2) by inserting ‘‘or estates’’ after ‘‘trusts’’ in
the last sentence.
649
(b) CONFORMING
AMENDMENT.—The subsection
heading of section 663(c) is amended by inserting ‘‘ES-
TATES OR’’ before ‘‘TRUSTS’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying after
the date of the enactment of this Act.
SEC. 1310. EXECUTOR OF ESTATE AND BENEFICIARIES
TREATED AS RELATED PERSONS FOR DIS-
ALLOWANCE OF LOSSES, ETC.
(a) DISALLOWANCE OF LOSSES.—Subsection (b) of
section 267 (relating to losses, expenses, and interest with
respect to transactions between related taxpayers) is
amended by striking ‘‘or’’ at the end of paragraph (11),
by striking the period at the end of paragraph (12) and
inserting ‘‘; or’’, and by adding at the end the following
new paragraph:
‘‘(13) Except in the case of a sale or exchange
in satisfaction of a pecuniary bequest, an executor of
an estate and a beneficiary of such estate.’’
(b) ORDINARY INCOME FROM GAIN FROM SALE OF
DEPRECIABLE PROPERTY.—Subsection (b) of section
1239 is amended by striking the period at the end of para-
graph (2) and inserting ‘‘, and’’ and by adding at the end
the following new paragraph:
650
‘‘(3) except in the case of a sale or exchange in
satisfaction of a pecuniary bequest, an executor of
an estate and a beneficiary of such estate.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 1311. LIMITATION ON TAXABLE YEAR OF ESTATES.
(a) IN GENERAL.—Section 645 (relating to taxable
year of trusts) is amended to read as follows:
‘‘SEC. 645. TAXABLE YEAR OF ESTATES AND TRUSTS.
‘‘(a) ESTATES.—For purposes of this subtitle, the
taxable year of an estate shall be a year ending on October
31, November 30, or December 31.
‘‘(b) TRUSTS.—
‘‘(1) IN GENERAL.—For purposes of this sub-
title, the taxable year of any trust shall be the cal-
endar year.
‘‘(2) EXCEPTION FOR TRUSTS EXEMPT FROM
TAX
AND
CHARITABLE
TRUSTS.—Paragraph (1)
shall not apply to a trust exempt from taxation
under section 501(a) or to a trust described in sec-
tion 4947(a)(1).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part I of subchapter J of chapter 1 is
651
amended by striking the item relating to section 645 and
inserting the following new item:
‘‘Sec. 645. Taxable year of estates and trusts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying after
the date of the enactment of this Act.
SEC. 1312. TREATMENT OF FUNERAL TRUSTS.
(a) IN GENERAL.—Subpart F of part I of subchapter
J of chapter 1 is amended by adding at the end the follow-
ing new section:
‘‘SEC. 684. TREATMENT OF FUNERAL TRUSTS.
‘‘(a) IN GENERAL.—In the case of a qualified funeral
trust—
‘‘(1) subparts B, C, D, and E shall not apply,
and
‘‘(2) no deduction shall be allowed by section
642(b).
‘‘(b) QUALIFIED FUNERAL TRUST.—For purposes of
this subsection, the term ‘qualified funeral trust’ means
any trust (other than a foreign trust) if—
‘‘(1) the trust arises as a result of a contract
with a person engaged in the trade or business of
providing funeral or burial services or property nec-
essary to provide such services,
652
‘‘(2) the sole purpose of the trust is to hold, in-
vest, and reinvest funds in the trust and to use such
funds solely to make payments for such services or
property for the benefit of the beneficiaries of the
trust,
‘‘(3) the only beneficiaries of such trust are in-
dividuals who have entered into contracts described
in paragraph (1) to have such services or property
provided at their death,
‘‘(4) the only contributions to the trust are con-
tributions by or for the benefit of such beneficiaries,
‘‘(5) the trustee elects the application of this
subsection, and
‘‘(6) the trust would (but for the election de-
scribed in paragraph (5)) be treated as owned by the
beneficiaries under subpart E.
‘‘(c) DOLLAR LIMITATION ON CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—The term ‘qualified funeral
trust’ shall not include any trust which accepts ag-
gregate contributions by or for the benefit of an in-
dividual in excess of $7,000.
‘‘(2) RELATED TRUSTS.—For purposes of para-
graph (1), all trusts having trustees which are relat-
ed 
persons 
shall 
be
653
treated as 1 trust. For purposes of the preceding
sentence, persons are related if—
‘‘(A) the relationship between such persons
is described in section 267 or 707(b),
‘‘(B) such persons are treated as a single
employer under subsection (a) or (b) of section
52, or
‘‘(C) the Secretary determines that treat-
ing such persons as related is necessary to pre-
vent avoidance of the purposes of this section.
‘‘(3) INFLATION ADJUSTMENT.—In the case of
any contract referred to in subsection (b)(1) which
is entered into during any calendar year after 1998,
the dollar amount referred to paragraph (1) 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 such calendar
year, by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any dollar amount after being increased under the
preceding sentence is not a multiple of $100, such
dollar amount shall be rounded to the nearest mul-
tiple of $100.
654
‘‘(d) APPLICATION
OF RATE SCHEDULE.—Section
1(e) shall be applied to each qualified funeral trust by
treating each beneficiary’s interest in each such trust as
a separate trust.
‘‘(e) TREATMENT OF AMOUNTS REFUNDED TO BEN-
EFICIARY ON CANCELLATION.—No gain or loss shall be
recognized to a beneficiary described in subsection (b)(3)
of any qualified funeral trust by reason of any payment
from such trust to such beneficiary by reason of cancella-
tion of a contract referred to in subsection (b)(1). If any
payment referred to in the preceding sentence consists of
property other than money, the basis of such property in
the hands of such beneficiary shall be the same as the
trust’s basis in such property immediately before the pay-
ment.
‘‘(f) SIMPLIFIED REPORTING.—The Secretary may
prescribe rules for simplified reporting of all trusts having
a single trustee.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart F of part I of subchapter J of chapter 1 is
amended by adding at the end the following new item:
‘‘Sec. 684. Treatment of funeral trusts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
655
SEC. 1313. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF
DECEDENT’S DEATH.
(a) GENERAL RULE.—Section 2035 is amended to
read as follows:
‘‘SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE
WITHIN 3 YEARS OF DECEDENT’S DEATH.
‘‘(a) INCLUSION OF CERTAIN PROPERTY IN GROSS
ESTATE.—If—
‘‘(1) the decedent made a transfer (by trust or
otherwise) of an interest in any property, or relin-
quished a power with respect to any property, during
the 3-year period ending on the date of the dece-
dent’s death, and
‘‘(2) the value of such property (or an interest
therein) would have been included in the decedent’s
gross estate under section 2036, 2037, 2038, or
2042 if such transferred interest or relinquished
power had been retained by the decedent on the date
of his death,
the value of the gross estate shall include the value of any
property (or interest therein) which would have been so
included.
‘‘(b) INCLUSION OF GIFT TAX ON GIFTS MADE DUR-
ING
3 YEARS
BEFORE
DECEDENT’S
DEATH.—The
amount of the gross estate (determined without regard to
this subsection) shall be increased by the amount of any
656
tax paid under chapter 12 by the decedent or his estate
on any gift made by the decedent or his spouse during
the 3-year period ending on the date of the decedent’s
death.
‘‘(c) OTHER
RULES
RELATING
TO
TRANSFERS
WITHIN 3 YEARS OF DEATH.—
‘‘(1) IN GENERAL.—For purposes of—
‘‘(A) section 303(b) (relating to distribu-
tions in redemption of stock to pay death
taxes),
‘‘(B) section 2032A (relating to special
valuation of certain farms, etc., real property),
and
‘‘(C) subchapter C of chapter 64 (relating
to lien for taxes),
the value of the gross estate shall include the value
of all property to the extent of any interest therein
of which the decedent has at any time made a trans-
fer, by trust or otherwise, during the 3-year period
ending on the date of the decedent’s death.
‘‘(2) COORDINATION WITH SECTION 6166.—An
estate shall be treated as meeting the 35 percent of
adjusted 
gross 
estate 
requirement 
of 
section
6166(a)(1) only if the estate meets such requirement
657
both with and without the application of paragraph
(1).
‘‘(3) MARITAL AND SMALL TRANSFERS.—Para-
graph (1) shall not apply to any transfer (other than
a transfer with respect to a life insurance policy)
made during a calendar year to any donee if the de-
cedent was not required by section 6019 (other than
by reason of section 6019(2)) to file any gift tax re-
turn for such year with respect to transfers to such
donee.
‘‘(d) EXCEPTION.—Subsection (a) shall not apply to
any bona fide sale for an adequate and full consideration
in money or money’s worth.
‘‘(e) TREATMENT OF CERTAIN TRANSFERS FROM
REVOCABLE TRUSTS.—For purposes of this section and
section 2038, any transfer from any portion of a trust dur-
ing any period that such portion was treated under section
676 as owned by the decedent by reason of a power in
the grantor (determined without regard to section 672(e))
shall be treated as a transfer made directly by the dece-
dent.’’
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter A of chapter 11 is amended
by striking ‘‘gifts’’ in the item relating to section 2035
and inserting ‘‘certain gifts’’.
658
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to the estates of decedents dying
after the date of the enactment of this Act.
SEC. 1314. CLARIFICATION OF TREATMENT OF SURVIVOR
ANNUITIES UNDER QUALIFIED TERMINABLE
INTEREST RULES.
(a) IN GENERAL.—Subparagraph (C) of section
2056(b)(7) is amended by inserting ‘‘(or, in the case of
an interest in an annuity arising under the community
property laws of a State, included in the gross estate of
the decedent under section 2033)’’ after ‘‘section 2039’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to estates of decedents dying after
the date of the enactment of this Act.
SEC. 1315. TREATMENT UNDER QUALIFIED DOMESTIC
TRUST RULES OF FORMS OF OWNERSHIP
WHICH ARE NOT TRUSTS.
(a) IN GENERAL.—Subsection (c) of section 2056A
(defining qualified domestic trust) is amended by adding
at the end the following new paragraph:
‘‘(3) TRUST.—To the extent provided in regula-
tions prescribed by the Secretary, the term ‘trust’
includes other arrangements which have substan-
tially the same effect as a trust.’’
659
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to estates of decedents dying after
the date of the enactment of this Act.
SEC. 1316. OPPORTUNITY TO CORRECT CERTAIN FAILURES
UNDER SECTION 2032A.
(a) GENERAL RULE.—Paragraph (3) of section
2032A(d) (relating to modification of election and agree-
ment to be permitted) is amended to read as follows:
‘‘(3) MODIFICATION OF ELECTION AND AGREE-
MENT TO BE PERMITTED.—The Secretary shall pre-
scribe procedures which provide that in any case in
which the executor makes an election under para-
graph (1) (and submits the agreement referred to in
paragraph (2)) within the time prescribed therefor,
but—
‘‘(A) the notice of election, as filed, does
not contain all required information, or
‘‘(B) signatures of 1 or more persons re-
quired to enter into the agreement described in
paragraph (2) are not included on the agree-
ment as filed, or the agreement does not con-
tain all required information,
the executor will have a reasonable period of time
(not exceeding 90 days) after notification of such
failures to provide such information or signatures.’’
660
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to the estates of decedents dying
after the date of the enactment of this Act.
SEC. 1317. AUTHORITY TO WAIVE REQUIREMENT OF UNIT-
ED STATES TRUSTEE FOR QUALIFIED DOMES-
TIC TRUSTS.
(a) IN GENERAL.—Subparagraph (A) of section
2056A(a)(1) is amended by inserting ‘‘except as provided
in regulations prescribed by the Secretary,’’ before ‘‘re-
quires’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to estates of decedents dying after
the date of the enactment of this Act.
661
TITLE 
XIV—SIMPLIFICATION
PROVISIONS 
RELATING 
TO
EXCISE TAXES, TAX-EXEMPT
BONDS, AND OTHER MATTERS
Subtitle A—Excise Tax
Simplification
PART I—EXCISE TAXES ON HEAVY TRUCKS AND
LUXURY CARS
SEC. 1401. INCREASE IN DE MINIMIS LIMIT FOR AFTER-
MARKET ALTERATIONS FOR HEAVY TRUCKS
AND LUXURY CARS.
(a) IN
GENERAL.—Sections 4003(a)(3)(C) and
4051(b)(2)(B) (relating to exceptions) are each amended
by striking ‘‘$200’’ and inserting ‘‘$1,000’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to installations on vehicles sold
after the date of the enactment of this Act.
SEC. 1402. CREDIT FOR TIRE TAX IN LIEU OF EXCLUSION
OF VALUE OF TIRES IN COMPUTING PRICE.
(a) IN GENERAL.—Subsection (e) of section 4051 is
amended to read as follows:
‘‘(e) CREDIT AGAINST TAX FOR TIRE TAX.—If—
‘‘(1) tires are sold on or in connection with the
sale of any article, and
662
‘‘(2) tax is imposed by this subchapter on the
sale of such tires,
there shall be allowed as a credit against the tax imposed
by this subchapter an amount equal to the tax (if any)
imposed by section 4071 on such tires.’’
(b) CONFORMING AMENDMENT.—Subparagraph (B)
of section 4052(b)(1) is amended by striking clause (iii),
by adding ‘‘and’’ at the end of clause (ii), and by redesig-
nating clause (iv) as clause (iii).
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1998.
PART II—PROVISIONS RELATED TO DISTILLED
SPIRITS, WINES, AND BEER
SEC. 1411. CREDIT OR REFUND FOR IMPORTED BOTTLED
DISTILLED 
SPIRITS 
RETURNED 
TO 
DIS-
TILLED SPIRITS PLANT.
(a) IN GENERAL.—Section 5008(c)(1) (relating to
distilled spirits returned to bonded premises) is amended
by striking ‘‘withdrawn from bonded premises on payment
or determination of tax’’ and inserting ‘‘on which tax has
been determined or paid’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the 1st day of the 1st
calendar quarter that begins at least 90 days after the
date of the enactment of this Act.
663
SEC. 1412. AUTHORITY TO CANCEL OR CREDIT EXPORT
BONDS WITHOUT SUBMISSION OF RECORDS.
(a) IN GENERAL.—Section 5175(c) (relating to can-
cellation of credit of export bonds) is amended by striking
‘‘on the submission of’’ and all that follows and inserting
‘‘if there is such proof of exportation as the Secretary may
by regulations require.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the 1st day of the 1st
calendar quarter that begins at least 90 days after the
date of the enactment of this Act.
SEC. 1413. REPEAL OF REQUIRED MAINTENANCE OF
RECORDS ON PREMISES OF DISTILLED SPIR-
ITS PLANT.
(a) IN GENERAL.—Section 5207(c) (relating to pres-
ervation and inspection) is amended by striking ‘‘shall be
kept on the premises where the operations covered by the
record are carried on and’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the 1st day of the 1st
calendar quarter that begins at least 90 days after the
date of the enactment of this Act.
664
SEC. 1414. FERMENTED MATERIAL FROM ANY BREWERY
MAY BE RECEIVED AT A DISTILLED SPIRITS
PLANT.
(a) IN GENERAL.—Section 5222(b)(2) (relating to
receipt) is amended to read as follows:
‘‘(2) beer conveyed without payment of tax
from brewery premises, beer which has been lawfully
removed from brewery premises upon determination
of tax, or’’.
(b) CLARIFICATION OF AUTHORITY TO PERMIT RE-
MOVAL OF BEER WITHOUT PAYMENT OF TAX FOR USE
AS DISTILLING MATERIAL.—Section 5053 (relating to ex-
emptions) is amended by redesignating subsection (f) as
subsection (i) and by inserting after subsection (e) the fol-
lowing new subsection:
‘‘(f) REMOVAL
FOR USE
AS DISTILLING MATE-
RIAL.—Subject to such regulations as the Secretary may
prescribe, beer may be removed from a brewery without
payment of tax to any distilled spirits plant for use as
distilling material.’’
(c) CLARIFICATION
OF REFUND
AND CREDIT
OF
TAX.—Section 5056 (relating to refund and credit of tax,
or relief from liability) is amended—
(1) by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b) the
following new subsection:
665
‘‘(c) BEER RECEIVED
AT
A DISTILLED SPIRITS
PLANT.—Any tax paid by any brewer on beer produced
in the United States may be refunded or credited to the
brewer, without interest, or if the tax has not been paid,
the brewer may be relieved of liability therefor, under reg-
ulations as the Secretary may prescribe, if such beer is
received on the bonded premises of a distilled spirits plant
pursuant to the provisions of section 5222(b)(2), for use
in the production of distilled spirits.’’, and
(2) by striking ‘‘or rendering unmerchantable’’
in subsection (d) (as so redesignated) and inserting
‘‘rendering unmerchantable, or receipt on the bond-
ed premises of a distilled spirits plant’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the 1st day of the 1st cal-
endar quarter that begins at least 90 days after the date
of the enactment of this Act.
SEC. 1415. REPEAL OF REQUIREMENT FOR WHOLESALE
DEALERS IN LIQUORS TO POST SIGN.
(a) IN GENERAL.—Section 5115 (relating to sign re-
quired on premises) is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1) Section 5681(a) is amended by striking ‘‘,
and every wholesale dealer in liquors,’’ and by strik-
ing ‘‘section 5115(a) or’’.
666
(2) Section 5681(c) is amended—
(A) by striking ‘‘or wholesale liquor estab-
lishment, on which no sign required by section
5115(a) or’’ and inserting ‘‘on which no sign
required by’’, and
(B) by striking ‘‘or wholesale liquor estab-
lishment, or who’’ and inserting ‘‘or who’’.
(3) The table of sections for subpart D of part
II of subchapter A of chapter 51 is amended by
striking the item relating to section 5115.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 1416. REFUND OF TAX TO WINE RETURNED TO BOND
NOT LIMITED TO UNMERCHANTABLE WINE.
(a) IN GENERAL.—Section 5044(a) (relating to re-
fund of tax on unmerchantable wine) is amended by strik-
ing ‘‘as unmerchantable’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 5361 is amended by striking
‘‘unmerchantable’’.
(2) The section heading for section 5044 is
amended by striking ‘‘UNMERCHANTABLE’’.
(3) The item relating to section 5044 in the
table of sections for subpart C of part I of sub-
667
chapter A of chapter 51 is amended by striking
‘‘unmerchantable’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the 1st day of the 1st cal-
endar quarter that begins at least 90 days after the date
of the enactment of this Act.
SEC. 1417. USE OF ADDITIONAL AMELIORATING MATERIAL
IN CERTAIN WINES.
(a) IN GENERAL.—Section 5384(b)(2)(D) (relating
to ameliorated fruit and berry wines) is amended by strik-
ing ‘‘loganberries, currants, or gooseberries,’’ and insert-
ing ‘‘any fruit or berry with a natural fixed acid of 20
parts per thousand or more (before any correction of such
fruit or berry)’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the 1st day of the 1st cal-
endar quarter that begins at least 90 days after the date
of the enactment of this Act.
SEC. 1418. DOMESTICALLY PRODUCED BEER MAY BE WITH-
DRAWN FREE OF TAX FOR USE OF FOREIGN
EMBASSIES, LEGATIONS, ETC.
(a) IN GENERAL.—Section 5053 (relating to exemp-
tions), as amended by section 1414(b), is amended by in-
serting after subsection (f) the following new subsection:
668
‘‘(g) REMOVALS FOR USE OF FOREIGN EMBASSIES,
LEGATIONS, ETC.—
‘‘(1) IN GENERAL.—Subject to such regulations
as the Secretary may prescribe—
‘‘(A) beer may be withdrawn from the
brewery without payment of tax for transfer to
any customs bonded warehouse for entry pend-
ing withdrawal therefrom as provided in sub-
paragraph (B), and
‘‘(B) beer entered into any customs bonded
warehouse under subparagraph (A) may be
withdrawn for consumption in the United
States by, and for the official and family use of,
such foreign governments, organizations, and
individuals as are entitled to withdraw imported
beer from such warehouses free of tax.
Beer transferred to any customs bonded warehouse
under subparagraph (A) shall be entered, stored,
and accounted for in such warehouse under such
regulations and bonds as the Secretary may pre-
scribe, and may be withdrawn therefrom by such
governments, organizations, and individuals free of
tax under the same conditions and procedures as im-
ported beer.
669
‘‘(2) OTHER RULES TO APPLY.—Rules similar
to the rules of paragraphs (2) and (3) of section
5362(e) shall apply for purposes of this subsection.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the 1st day of the 1st
calendar quarter that begins at least 90 days after the
date of the enactment of this Act.
SEC. 1419. BEER MAY BE WITHDRAWN FREE OF TAX FOR
DESTRUCTION.
(a) IN GENERAL.—Section 5053 (relating to exemp-
tions), as amended by section 1418(a), is amended by in-
serting after subsection (g) the following new subsection:
‘‘(h) REMOVALS
FOR DESTRUCTION.—Subject to
such regulations as the Secretary may prescribe, beer may
be removed from the brewery without payment of tax for
destruction.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the 1st day of the 1st
calendar quarter that begins at least 90 days after the
date of the enactment of this Act.
SEC. 1420. AUTHORITY TO ALLOW DRAWBACK ON EX-
PORTED BEER WITHOUT SUBMISSION OF
RECORDS.
(a) IN GENERAL.—The first sentence of section 5055
(relating to drawback of tax on beer) is amended by strik-
670
ing ‘‘found to have been paid’’ and all that follows and
inserting ‘‘paid on such beer if there is such proof of ex-
portation as the Secretary may by regulations require.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the 1st day of the 1st
calendar quarter that begins at least 90 days after the
date of the enactment of this Act.
SEC. 1421. TRANSFER TO BREWERY OF BEER IMPORTED IN
BULK WITHOUT PAYMENT OF TAX.
(a) IN GENERAL.—Part II of subchapter G of chap-
ter 51 is amended by adding at the end the following new
section:
‘‘SEC. 5418. BEER IMPORTED IN BULK.
‘‘Beer imported or brought into the United States in
bulk containers may, under such regulations as the Sec-
retary may prescribe, be withdrawn from customs custody
and transferred in such bulk containers to the premises
of a brewery without payment of the internal revenue tax
imposed on such beer. The proprietor of a brewery to
which such beer is transferred shall become liable for the
tax on the beer withdrawn from customs custody under
this section upon release of the beer from customs custody,
and the importer, or the person bringing such beer into
the United States, shall thereupon be relieved of the liabil-
ity for such tax.’’
671
(b) CLERICAL AMENDMENT.—The table of sections
for such part II is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 5418. Beer imported in bulk.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the 1st day of the 1st cal-
endar quarter that begins at least 90 days after the date
of the enactment of this Act.
SEC. 1422. TRANSFER TO BONDED WINE CELLARS OF WINE
IMPORTED IN BULK WITHOUT PAYMENT OF
TAX.
(a) IN GENERAL.—Part II of subchapter F of chap-
ter 51 is amended by inserting after section 5363 the fol-
lowing new section:
‘‘SEC. 5364. WINE IMPORTED IN BULK.
‘‘Wine imported or brought into the United States
in bulk containers may, under such regulations as the Sec-
retary may prescribe, be withdrawn from customs custody
and transferred in such bulk containers to the premises
of a bonded wine cellar without payment of the internal
revenue tax imposed on such wine. The proprietor of a
bonded wine cellar to which such wine is transferred shall
become liable for the tax on the wine withdrawn from cus-
toms custody under this section upon release of the wine
from customs custody, and the importer, or the person
672
bringing such wine into the United States, shall thereupon
be relieved of the liability for such tax.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such part II is amended by inserting after the item
relating to section 5363 the following new item:
‘‘Sec. 5364. Wine imported in bulk.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the 1st day of the 1st cal-
endar quarter that begins at least 90 days after the date
of the enactment of this Act.
PART III—OTHER EXCISE TAX PROVISIONS
SEC. 1431. AUTHORITY TO GRANT EXEMPTIONS FROM REG-
ISTRATION REQUIREMENTS.
(a) IN GENERAL.—Section 4222(b)(2) (relating to
export) is amended—
(1) by striking ‘‘in the case of any sale or resale
for export,’’, and
(2) by striking ‘‘EXPORT’’ and inserting
‘‘UNDER REGULATIONS’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 1432. REPEAL OF EXPIRED PROVISIONS.
(a) PIGGY-BACK TRAILERS.—Section 4051 (relating
to imposition of tax on heavy trucks and trailers sold at
673
retail) is amended by striking subsection (d) and by redes-
ignating subsection (e) as subsection (d).
(b) DEEP SEABED MINING.—
(1) IN GENERAL.—Subchapter F of chapter 36
(relating to tax on removal of hard mineral re-
sources from deep seabed) is hereby repealed.
(2) CONFORMING AMENDMENT.—The table of
subchapters for chapter 36 is amended by striking
the item relating to subchapter F.
(c) OZONE-DEPLETING CHEMICALS.—
(1) Paragraph (1) of section 4681(b) is amend-
ed by striking subparagraphs (B) and (C) and in-
serting the following new subparagraph:
‘‘(B) BASE TAX AMOUNT.—The base tax
amount for purposes of subparagraph (A) with
respect to any sale or use during any calendar
year after 1995 shall be $5.35 increased by 45
cents for each year after 1995.’’
(2) Subsection (g) of section 4682 is amended
to read as follows:
‘‘(g) CHEMICALS USED AS PROPELLANTS IN ME-
TERED-DOSE INHALERS.—
‘‘(1) EXEMPTION FROM TAX.—
‘‘(A) IN GENERAL.—No tax shall be im-
posed by section 4681 on—
674
‘‘(i) any use of any substance as a
propellant in metered-dose inhalers, or
‘‘(ii) any qualified sale by the manu-
facturer, producer, or importer of any sub-
stance.
‘‘(B) QUALIFIED SALE.—For purposes of
subparagraph (A), the term ‘qualified sale’
means any sale by the manufacturer, producer,
or importer of any substance—
‘‘(i) for use by the purchaser as a pro-
pellant in metered dose inhalers, or
‘‘(ii) for resale by the purchaser to a
2d purchaser for such use by the 2d pur-
chaser.
The preceding sentence shall apply only if the
manufacturer, producer, and importer, and the
1st and 2d purchasers (if any) meet such reg-
istration requirements as may be prescribed by
the Secretary.
‘‘(2) OVERPAYMENTS.—If any substance on
which tax was paid under this subchapter is used by
any person as a propellant in metered-dose inhalers,
credit or refund without interest shall be allowed to
such person in an amount equal to the tax so paid.
Amounts payable under the preceding sentence with
675
respect to uses during the taxable year shall be
treated as described in section 34(a) for such year
unless claim thereof has been timely filed under this
paragraph.’’
Subtitle B—Tax-Exempt Bond
Provisions
SEC. 1441. REPEAL OF $100,000 LIMITATION ON UNSPENT
PROCEEDS UNDER 1-YEAR EXCEPTION FROM
REBATE.
Subclause (I) of section 148(f)(4)(B)(ii) (relating to
additional period for certain bonds) is amended by striking
‘‘the lesser of 5 percent of the proceeds of the issue or
$100,000’’ and inserting ‘‘5 percent of the proceeds of the
issue’’.
SEC. 1442. EXCEPTION FROM REBATE FOR EARNINGS ON
BONA FIDE DEBT SERVICE FUND UNDER
CONSTRUCTION BOND RULES.
Subparagraph (C) of section 148(f)(4) is amended by
adding at the end the following new clause:
‘‘(xvii) TREATMENT
OF
BONA
FIDE
DEBT
SERVICE
FUNDS.—If the spending
requirements of clause (ii) are met with re-
spect to the available construction proceeds
of a construction issue, then paragraph (2)
676
shall not apply to earnings on a bona fide
debt service fund for such issue.’’
SEC. 1443. REPEAL OF DEBT SERVICE-BASED LIMITATION
ON INVESTMENT IN CERTAIN NONPURPOSE
INVESTMENTS.
Subsection (d) of section 148 (relating to special
rules for reasonably required reserve or replacement fund)
is amended by striking paragraph (3).
SEC. 1444. REPEAL OF EXPIRED PROVISIONS.
(a) Paragraph (2) of section 148(c) is amended by
striking subparagraph (B) and by redesignating subpara-
graphs (C), (D), and (E) as subparagraphs (B), (C), and
(D), respectively.
(b) Paragraph (4) of section 148(f) is amended by
striking subparagraph (E).
SEC. 1445. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to
bonds issued after the date of the enactment of this Act.
Subtitle C—Tax Court Procedures
SEC. 
1451. 
OVERPAYMENT 
DETERMINATIONS 
OF 
TAX
COURT.
(a) APPEAL OF ORDER.—Paragraph (2) of section
6512(b) (relating to jurisdiction to enforce) is amended
by adding at the end the following new sentence: ‘‘An
order of the Tax Court disposing of a motion under this
677
paragraph shall be reviewable in the same manner as a
decision of the Tax Court, but only with respect to the
matters determined in such order.’’
(b) DENIAL OF JURISDICTION REGARDING CERTAIN
CREDITS AND REDUCTIONS.—Subsection (b) of section
6512 (relating to overpayment determined by Tax Court)
is amended by adding at the end the following new para-
graph:
‘‘(4) DENIAL
OF
JURISDICTION
REGARDING
CERTAIN
CREDITS
AND
REDUCTIONS.—The Tax
Court shall have no jurisdiction under this sub-
section to restrain or review any credit or reduction
made by the Secretary under section 6402.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 1452. REDETERMINATION OF INTEREST PURSUANT TO
MOTION.
(a) IN GENERAL.—Subsection (c) of section 7481
(relating to jurisdiction over interest determinations) is
amended to read as follows:
‘‘(c) JURISDICTION OVER INTEREST DETERMINA-
TIONS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a), if, within 1 year after the date the decision of
678
the Tax Court becomes final under subsection (a) in
a case to which this subsection applies, the taxpayer
files a motion in the Tax Court for a redetermina-
tion of the amount of interest involved, then the Tax
Court may reopen the case solely to determine
whether the taxpayer has made an overpayment of
such interest or the Secretary has made an under-
payment of such interest and the amount thereof.
‘‘(2) CASES TO WHICH THIS SUBSECTION AP-
PLIES.—This subsection shall apply where—
‘‘(A)(i) an assessment has been made by
the Secretary under section 6215 which in-
cludes interest as imposed by this title, and
‘‘(ii) the taxpayer has paid the entire
amount of the deficiency plus interest claimed
by the Secretary, and
‘‘(B) the Tax Court finds under section
6512(b) that the taxpayer has made an over-
payment.
‘‘(3) SPECIAL RULES.—If the Tax Court deter-
mines under this subsection that the taxpayer has
made an overpayment of interest or that the Sec-
retary has made an underpayment of interest, then
that determination shall be treated under section
6512(b)(1) as a determination of an overpayment of
679
tax. An order of the Tax Court redetermining inter-
est, when entered upon the records of the court,
shall be reviewable in the same manner as a decision
of the Tax Court.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 1453. APPLICATION OF NET WORTH REQUIREMENT
FOR AWARDS OF LITIGATION COSTS.
(a) IN GENERAL.—Paragraph (4) of section 7430(c)
(defining prevailing party) is amended by adding at the
end thereof the following new subparagraph:
‘‘(D) SPECIAL RULES FOR APPLYING NET
WORTH
REQUIREMENT.—In applying the re-
quirements of section 2412(d)(2)(B) of title 28,
United States Code, for purposes of subpara-
graph (A)(iii) of this paragraph—
‘‘(i) the net worth limitation in clause
(i) of such section shall apply to—
‘‘(I) an estate but shall be deter-
mined as of the date of the decedent’s
death, and
‘‘(II) a trust but shall be deter-
mined as of the last day of the taxable
year involved in the proceeding, and
680
‘‘(ii) individuals filing a joint return
shall be treated as 1 individual for pur-
poses of clause (i) of such section, except
in the case of a spouse relieved of liability
under section 6013(e).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to proceedings commenced after
the date of the enactment of this Act.
SEC. 1454. PROCEEDINGS FOR DETERMINATION OF EM-
PLOYMENT STATUS.
(a) IN GENERAL.—Subchapter B of chapter 76 (re-
lating to proceedings by taxpayers and third parties) is
amended by redesignating section 7435 as section 7436
and by inserting after section 7434 the following new sec-
tion:
‘‘SEC. 7435. PROCEEDINGS FOR DETERMINATION OF EM-
PLOYMENT STATUS.
‘‘(a) CREATION OF REMEDY.—If, in connection with
an audit of any person, there is an actual controversy in-
volving a determination by the Secretary as part of an ex-
amination that—
‘‘(1) one or more individuals performing serv-
ices for such person are employees of such person
for purposes of subtitle C, or
681
‘‘(2) such person is not entitled to the treat-
ment under subsection (a) of section 530 of the Rev-
enue Act of 1978 with respect to such an individual,
upon the filing of an appropriate pleading, the Tax Court
may determine whether such a determination by the Sec-
retary is correct. Any such determination by the Tax
Court shall have the force and effect of a decision of the
Tax Court and shall be reviewable as such.
‘‘(b) LIMITATIONS.—
‘‘(1) PETITIONER.—A pleading may be filed
under this section only by the person for whom the
services are performed.
‘‘(2) TIME FOR FILING ACTION.—If the Sec-
retary sends by certified or registered mail notice to
the petitioner of a determination by the Secretary
described in subsection (a), no proceeding may be
initiated under this section with respect to such de-
termination unless the pleading is filed before the
91st day after the date of such mailing.
‘‘(3) NO ADVERSE INFERENCE FROM TREAT-
MENT WHILE ACTION IS PENDING.—If, during the
pendency of any proceeding brought under this sec-
tion, the petitioner changes his treatment for em-
ployment tax purposes of any individual whose em-
ployment status as an employee is involved in such
682
proceeding (or of any individual holding a substan-
tially similar position) to treatment as an employee,
such change shall not be taken into account in the
Tax Court’s determination under this section.
‘‘(c) SMALL CASE PROCEDURES.—
‘‘(1) IN GENERAL.—At the option of the peti-
tioner, concurred in by the Tax Court or a division
thereof before the hearing of the case, proceedings
under this section may (notwithstanding the provi-
sions of section 7453) be conducted subject to the
rules of evidence, practice, and procedure applicable
under section 7463 if the amount of employment
taxes placed in dispute is $10,000 or less for each
calendar quarter involved.
‘‘(2) FINALITY OF DECISIONS.—A decision en-
tered in any proceeding conducted under this sub-
section shall not be reviewed in any other court and
shall not be treated as a precedent for any other
case not involving the same petitioner and the same
determinations.
‘‘(3) CERTAIN RULES TO APPLY.—Rules similar
to the rules of the last sentence of subsection (a),
and subsections (c), (d), and (e), of section 7463
shall apply to proceedings conducted under this sub-
section.
683
‘‘(d) SPECIAL RULES.—
‘‘(1) RESTRICTIONS ON ASSESSMENT AND COL-
LECTION PENDING ACTION, ETC.—The principles of
subsections (a), (b), and (d) of section 6213, section
6214(a), section 6503(a), and section 6512 shall
apply to proceedings brought under this section in
the same manner as if the Secretary’s determination
described in subsection (a) were a notice of defi-
ciency.
‘‘(2) AWARDING
OF
COSTS
AND
CERTAIN
FEES.—Section 7430 shall apply to proceedings
brought under this section.
‘‘(e) EMPLOYMENT TAX.—The term ‘employment
tax’ means any tax imposed by subtitle C.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (d) of section 6511 is amended
by adding at the end the following new paragraph:
‘‘(7) SPECIAL PERIOD OF LIMITATION WITH RE-
SPECT
TO
SELF-EMPLOYMENT
TAX
IN
CERTAIN
CASES.—If—
‘‘(A) the claim for credit or refund relates
to an overpayment of the tax imposed by chap-
ter 2 (relating to the tax on self-employment in-
come) attributable to Tax Court determination
in a proceeding under section 7435, and
684
‘‘(B) the allowance of a credit or refund of
such overpayment is otherwise prevented by the
operation of any law or rule of law other than
section 7122 (relating to compromises),
such credit or refund may be allowed or made if
claim therefor is filed on or before the last day of
the second year after the calendar year in which
such determination becomes final.’’
(2) Sections 7453 and 7481(b) are each amend-
ed by striking ‘‘section 7463’’ and inserting ‘‘section
7435(c) or 7463’’.
(3) The table of sections for subchapter B of
chapter 76 is amended by striking the last item and
inserting the following:
‘‘Sec. 7435. Proceedings for determination of employment status.
‘‘Sec. 7436. Cross references.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
Subtitle D—Other Provisions
SEC. 1461. EXTENSION OF DUE DATE OF FIRST QUARTER
ESTIMATED 
TAX 
PAYMENT 
BY 
PRIVATE
FOUNDATIONS.
(a) IN GENERAL.—Paragraph (3) of section 6655(g)
is amended by adding at the end the following new sen-
tence: ‘‘In the case of a private foundation, subsection
685
(c)(2) shall be applied by substituting ‘May 15’ for ‘April
15’.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply for purposes of determining un-
derpayments of estimated tax for taxable years beginning
after the date of the enactment of this Act.
SEC. 1462. CLARIFICATION OF AUTHORITY TO WITHHOLD
PUERTO RICO INCOME TAXES FROM SALA-
RIES OF FEDERAL EMPLOYEES.
(a) IN GENERAL.—Subsection (c) of section 5517 of
title 5, United States Code, is amended by striking ‘‘or
territory or possession’’ and inserting ‘‘, territory, posses-
sion, or commonwealth’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on January 1, 1998.
SEC. 1463. CERTAIN NOTICES DISREGARDED UNDER PROVI-
SION INCREASING INTEREST RATE ON LARGE
CORPORATE UNDERPAYMENTS.
(a) GENERAL RULE.—Subparagraph (B) of section
6621(c)(2) (defining applicable date) is amended by add-
ing at the end the following new clause:
‘‘(iii) EXCEPTION
FOR
LETTERS
OR
NOTICES
INVOLVING
SMALL
AMOUNTS.—
For purposes of this paragraph, any letter
or notice shall be disregarded if the
686
amount of the deficiency or proposed defi-
ciency (or the assessment or proposed as-
sessment) set forth in such letter or notice
is not greater than $100,000 (determined
by not taking into account any interest,
penalties, or additions to tax).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply for purposes of determining in-
terest for periods after December 31, 1997.
TITLE XV—TECHNICAL AMEND-
MENTS RELATED TO SMALL
BUSINESS JOB PROTECTION
ACT OF 1996 AND OTHER LEG-
ISLATION
SEC. 1501. AMENDMENTS RELATED TO SMALL BUSINESS
JOB PROTECTION ACT OF 1996.
(a) AMENDMENTS RELATED TO SUBTITLE A.—
(1) AMENDMENT RELATED TO SECTION 1116.—
Paragraph (1) of section 6050R(c) is amended by
striking ‘‘name and address’’ and inserting ‘‘name,
address, and phone number of the information con-
tact’’.
(2) AMENDMENT
TO
SECTION
1116.—Para-
graphs (1) and (2)(C) of section 1116(b) of the
Small Business Job Protection Act of 1996 shall
687
each be applied as if the reference to chapter 68
were a reference to chapter 61.
(b) AMENDMENT RELATED TO SUBTITLE B.—Sub-
section (c) of section 52 is amended by striking ‘‘targeted
jobs credit’’ and inserting ‘‘work opportunity credit’’.
(c) AMENDMENTS RELATED TO SUBTITLE C.—
(1) AMENDMENT RELATED TO SECTION 1302.—
Subparagraph (B) of section 1361(e)(1) is amended
by striking ‘‘and’’ at the end of clause (i), striking
the period at the end of clause (ii) and inserting ‘‘,
and’’, and adding at the end the following new
clause:
‘‘(iii) any charitable remainder annu-
ity trust or charitable remainder unitrust
(as defined in section 664(d)).’’
(2) EFFECTIVE DATE FOR SECTION 1307.—
(A) Notwithstanding section 1317 of the
Small Business Job Protection Act of 1996, the
amendments made by subsections (a) and (b) of
section 1307 of such Act shall apply to deter-
minations made after December 31, 1996.
(B) In no event shall the 120-day period
referred to in section 1377(b)(1)(B) of the In-
ternal Revenue Code of 1986 (as added by such
section 1307) expire before the end of the 120-
688
day period beginning on the date of the enact-
ment of this Act.
(3) AMENDMENT RELATED TO SECTION 1308.—
Subparagraph (A) of section 1361(b)(3) is amended
by striking ‘‘For purposes of this title’’ and inserting
‘‘Except as provided in regulations prescribed by the
Secretary, for purposes of this title’’.
(4) 
AMENDMENTS
RELATED
TO
SECTION
1316.—
(A) Paragraph (2) of section 512(e) is
amended by striking ‘‘within the meaning of
section 1012’’ and inserting ‘‘as defined in sec-
tion 1361(e)(1)(C)’’.
(B) Paragraph (7) of section 1361(c) is re-
designated as paragraph (6).
(C) 
Subparagraph 
(B) 
of 
section
1361(b)(1) is amended by striking ‘‘subsection
(c)(7)’’ and inserting ‘‘subsection (c)(6)’’.
(D) Paragraph (1) of section 512(e) is
amended by striking ‘‘section 1361(c)(7)’’ and
inserting ‘‘section 1361(e)(6)’’.
(d) AMENDMENTS RELATED TO SUBTITLE D.—
(1) 
AMENDMENTS
RELATED
TO
SECTION
1421.—
689
(A) Subsection (i) of section 408 is amend-
ed in the last sentence by striking ‘‘30 days’’
and inserting ‘‘31 days’’.
(B) 
Subparagraph 
(H) 
of 
section
408(k)(6) is amended by striking ‘‘if the terms
of such pension’’ and inserting ‘‘of an employer
if the terms of simplified employee pensions of
such employer’’.
(C)(i) 
Subparagraph 
(B) 
of 
section
408(l)(2) is amended—
(I) by inserting ‘‘and the issuer of an
annuity established under such an arrange-
ment’’ after ‘‘under subsection (p)’’, and
(II) in clause (i), by inserting ‘‘or is-
suer’’ after ‘‘trustee’’.
(ii) Paragraph (2) of section 6693(c) is
amended—
(I) by inserting ‘‘or issuer’’ after
‘‘trustee’’, and
(II) in the heading, by inserting ‘‘AND
ISSUER’’ after ‘‘trustee’’.
(D) Subsection (p) of section 408 is
amended by adding at the end the following
new paragraph:
690
‘‘(8) COORDINATION
WITH
MAXIMUM
LIMITA-
TION UNDER SUBSECTION (a).—In the case of any
simple retirement account, subsections (a)(1) and
(b)(2) shall be applied by substituting ‘the sum of
the dollar amount in effect under paragraph
(2)(A)(ii) of this subsection and the employer con-
tribution required under subparagraph (A)(iii) or
(B)(i) of paragraph (2) of this subsection, whichever
is applicable’ for ‘$2,000’.’’
(E) Clause (i) of section 408(p)(2)(D) is
amended by adding at the end the following
new sentence: ‘‘If only individuals other than
employees described in subparagraph (A) or (B)
of section 410(b)(3) are eligible to participate
in such arrangement, then the preceding sen-
tence shall be applied without regard to any
qualified plan in which only employees so de-
scribed are eligible to participate.’’
(F) Subparagraph (D) of section 408(p)(2)
is amended by adding at the end the following
new clause:
‘‘(iii) GRACE PERIOD.—In the case of
an employer who establishes and maintains
a plan under this subsection for 1 or more
years and who fails to meet the require-
691
ments of this subparagraph for any subse-
quent year due to any acquisition, disposi-
tion, or similar transaction involving an-
other such employer, rules similar to the
rules of section 410(b)(6)(C) shall apply
for purposes of this subparagraph.’’
(G) Paragraph (5) of section 408(p) is
amended in the text preceding subparagraph
(A) by striking ‘‘simplified’’ and inserting ‘‘sim-
ple’’.
(2) 
AMENDMENTS
RELATED
TO
SECTION
1422.—
(A) Clause (ii) of section 401(k)(11)(D) is
amended by striking the period and inserting
‘‘if such plan allows only contributions required
under this paragraph.’’
(B) Paragraph (11) of section 401(k) is
amended by adding at the end the following
new subparagraph:
‘‘(E) COST-OF-LIVING ADJUSTMENT.—The
Secretary shall adjust the $6,000 amount under
subparagraph (B)(i)(I) at the same time and in
the 
same 
manner 
as 
under 
section
408(p)(2)(E).’’
692
(C) Subparagraph (A) of section 404(a)(3)
is amended—
(i) in clause (i), by striking ‘‘not in
excess of’’ and all that follows and insert-
ing the following: ‘‘not in excess of the
greater of—
‘‘(I) 15 percent of the compensa-
tion otherwise paid or accrued during
the taxable year to the beneficiaries
under the stock bonus or profit-shar-
ing plan, or
‘‘(II) the amount such employer
is required to contribute to such trust
under section 401(k)(11) for such
year.’’, and
(ii) in clause (ii), by striking ‘‘15 per-
cent’’ and all that follows and inserting the
following ‘‘the amount described in sub-
clause (I) or (II) of clause (i), whichever is
greater, with respect to such taxable year.’’
(D) 
Subparagraph 
(B) 
of 
section
401(k)(11) is amended by adding at the end
the following new clause:
‘‘(iii) 
ADMINISTRATIVE
REQUIRE-
MENTS.—
693
‘‘(I) IN GENERAL.—Rules similar
to the rules of subparagraphs (B) and
(C) of section 408(p)(5) shall apply
for purposes of this subparagraph.
‘‘(II) NOTICE OF ELECTION PE-
RIOD.—The requirements of this sub-
paragraph shall not be treated as met
with respect to any year unless the
employer notifies each employee eligi-
ble to participate, within a reasonable
period of time before the 60th day be-
fore the beginning of such year (and,
for the first year the employee is so
eligible, the 60th day before the first
day such employee is so eligible), of
the rules similar to the rules of sec-
tion 408(p)(5)(C) which apply by rea-
son of subclause (I).’’
(3) AMENDMENT RELATED TO SECTION 1433.—
The heading of paragraph (11) of section 401(m) is
amended by striking ‘‘ALTERNATIVE’’ and inserting
‘‘ADDITIONAL ALTERNATIVE’’.
(4) AMENDMENT RELATED TO SECTION 1462.—
The paragraph (7) of section 414(q) added by sec-
694
tion 1462 of the Small Business Job Protection Act
of 1996 is redesignated as paragraph (9).
(5) CLARIFICATION OF SECTION 1450.—
(A) Section 403(b)(11) of the Internal
Revenue Code of 1986 shall not apply with re-
spect to a distribution from a contract de-
scribed in section 1450(b)(1) of such Act to the
extent that such distribution is not includible in
income by reason of section 403(b)(8) of such
Code (determined after the application of sec-
tion 1450(b)(2) of such Act).
(B) This paragraph shall apply as if in-
cluded in section 1450 of the Small Business
Job Protection Act of 1996.
(e) AMENDMENT RELATED TO SUBTITLE E.—Sub-
paragraph (A) of section 956(b)(1) is amended by insert-
ing ‘‘to the extent such amount was accumulated in prior
taxable years’’ after ‘‘section 316(a)(1)’’.
(f) AMENDMENTS RELATED TO SUBTITLE F.—
(1) 
AMENDMENTS
RELATED
TO
SECTION
1601.—
(A) The heading of section 30A is amend-
ed to read as follows:
695
‘‘SEC. 30A. PUERTO RICO ECONOMIC ACTIVITY CREDIT.’’
(B) The table of sections for subpart B of
part IV of subchapter A of chapter 1 is amend-
ed in the item relating to section 30A by strik-
ing ‘‘Puerto Rican’’ and inserting ‘‘Puerto
Rico’’.
(C) Paragraph (1) of section 55(c) is
amended by striking ‘‘Puerto Rican’’ and in-
serting ‘‘Puerto Rico’’.
(2) 
AMENDMENTS
RELATED
TO
SECTION
1606.—
(A) Clause (ii) of section 9503(c)(2)(A) is
amended by striking ‘‘(or with respect to quali-
fied diesel-powered highway vehicles purchased
before January 1, 1999)’’.
(B) 
Subparagraph 
(A) 
of 
section
9503(e)(5) is amended by striking ‘‘; except
that’’ and all that follows and inserting a pe-
riod.
(3) 
AMENDMENTS
RELATED
TO
SECTION
1607.—
(A) Subsection (f) of section 4001 (relat-
ing to phasedown of tax on luxury passenger
automobiles) is amended—
(i) by inserting ‘‘and section 4003(a)’’
after ‘‘subsection (a)’’, and
696
(ii) by inserting ‘‘, each place it ap-
pears,’’ before ‘‘the percentage’’.
(B) Subsection (g) of section 4001 (relat-
ing to termination) is amended by striking ‘‘tax
imposed by this section’’ and inserting ‘‘taxes
imposed by this section and section 4003’’ and
by striking ‘‘or use’’ and inserting ‘‘, use, or in-
stallation’’.
(4) 
AMENDMENTS
RELATED
TO
SECTION
1609.—
(A) Subsection (l) of section 4041 is
amended—
(i) by inserting ‘‘or a fixed-wing air-
craft’’ after ‘‘helicopter’’, and
(ii) in the heading, by striking ‘‘HELI-
COPTER’’.
(B) 
The 
last 
sentence 
of 
section
4041(a)(2) is amended by striking ‘‘section
4081(a)(2)(A)’’ 
and 
inserting 
‘‘section
4081(a)(2)(A)(i)’’.
(C) Subsection (b) of section 4092 is
amended by striking ‘‘section 4041(c)(4)’’ and
inserting ‘‘section 4041(c)(2)’’.
697
(D) Subsection (g) of section 4261 (as re-
designated by title X) is amended by inserting
‘‘on that flight’’ after ‘‘dedicated’’.
(E) Paragraph (1) of section 1609(h) of
such Act is amended by striking ‘‘paragraph
(3)(A)(i)’’ and inserting ‘‘paragraph (3)(A)’’.
(F) Paragraph (4) of section 1609(h) of
such Act is amended by inserting before the pe-
riod ‘‘or exclusively for the use described in sec-
tion 4092(b) of such Code’’.
(5) 
AMENDMENTS
RELATED
TO
SECTION
1616.—
(A) Subparagraph (A) of section 593(e)(1)
is amended by inserting ‘‘(and, in the case of
an S corporation, the accumulated adjustments
account, as defined in section 1368(e)(1))’’
after ‘‘1951,’’.
(B) Paragraph (7) of section 1374(d) is
amended by adding at the end the following
new sentence: ‘‘For purposes of applying this
section to any amount includible in income by
reason of section 593(e), the preceding sentence
shall be applied without regard to the phrase
‘10-year’.’’
698
(6) 
AMENDMENTS
RELATED
TO
SECTION
1621.—
(A) 
Subparagraph 
(A) 
of 
section
860L(b)(1) is amended in the text preceding
clause (i) by striking ‘‘after the startup date’’
and inserting ‘‘on or after the startup date’’.
(B) Paragraph (2) of section 860L(d) is
amended by striking ‘‘section 860I(c)(2)’’ and
inserting ‘‘section 860I(b)(2)’’.
(C) 
Subparagraph 
(B) 
of 
section
860L(e)(2) is amended by inserting ‘‘other than
foreclosure property’’ after ‘‘any permitted
asset’’.
(D) 
Subparagraph 
(A) 
of 
section
860L(e)(3) is amended by striking ‘‘if the
FASIT’’ and all that follows and inserting the
following new flush text after clause (ii):
‘‘if the FASIT were treated as a REMIC and
permitted assets (other than cash or cash
equivalents) were treated as qualified mort-
gages.’’
(E)(i) Paragraph (3) of section 860L(e) is
amended by adding at the end the following
new subparagraph:
699
‘‘(D) INCOME
FROM
DISPOSITIONS
OF
FORMER
HEDGE
ASSETS.—Paragraph (2)(A)
shall not apply to income derived from the dis-
position of—
‘‘(i) an asset which was described in
subsection (c)(1)(D) when first acquired by
the FASIT but on the date of such disposi-
tion was no longer described in subsection
(c)(1)(D)(ii), or
‘‘(ii) a contract right to acquire an
asset described in clause (i).’’
(ii) 
Subparagraph 
(A) 
of 
section
860L(e)(2) is amended by inserting ‘‘except as
provided in paragraph (3),’’ before ‘‘the re-
ceipt’’.
(g) AMENDMENTS RELATED TO SUBTITLE G.—
(1) EXTENSION OF PERIOD FOR CLAIMING RE-
FUNDS FOR ALCOHOL FUELS.—Notwithstanding sec-
tion 6427(i)(3)(C) of the Internal Revenue Code of
1986, a claim filed under section 6427(f) of such
Code for any period after September 30, 1995, and
before October 1, 1996, shall be treated as timely
filed if filed before the 60th day after the date of the
enactment of this Act.
700
(2) AMENDMENTS
TO
SECTIONS
1703
AND
1704.—Sections 1703(n)(8) and 1704(j)(4)(B) of the
Small Business Job Protection Act of 1996 shall
each be applied as if such sections referred to sec-
tion 1702 instead of section 1602.
(h) AMENDMENTS RELATED TO SUBTITLE H.—
(1) 
AMENDMENTS
RELATED
TO
SECTION
1806.—
(A) Subparagraph (B) of section 529(e)(1)
is amended by striking ‘‘subsection (c)(2)(C)’’
and inserting ‘‘subsection (c)(3)(C)’’.
(B) Subparagraph (C) of section 529(e)(1)
is amended by inserting ‘‘(or agency or instru-
mentality thereof)’’ after ‘‘local government’’.
(C) Paragraph (2) of section 1806(c) of
the Small Business Job Protection Act of 1996
is amended by striking so much of the first sen-
tence as follows subparagraph (B)(ii) and in-
serting the following:
‘‘then such program (as in effect on August 20,
1996) shall be treated as a qualified State tuition
program with respect to contributions (and earnings
allocable thereto) pursuant to contracts entered into
under such program before the first date on which
such program meets such requirements (determined
701
without regard to this paragraph) and the provisions
of such program (as so in effect) shall apply in lieu
of section 529(b) of the Internal Revenue Code of
1986 with respect to such contributions and earn-
ings.’’
(2) 
AMENDMENTS
RELATED
TO
SECTION
1807.—
(A) Paragraph (2) of section 23(a) is
amended to read as follows:
‘‘(2) YEAR
CREDIT
ALLOWED.—The credit
under paragraph (1) with respect to any expense
shall be allowed—
‘‘(A) in the case of any expense paid or in-
curred before the taxable year in which such
adoption becomes final, for the taxable year fol-
lowing the taxable year during which such ex-
pense is paid or incurred, and
‘‘(B) in the case of an expense paid or in-
curred during or after the taxable year in which
such adoption becomes final, for the taxable
year in which such expense is paid or incurred.’’
(B) Subparagraph (B) of section 23(b)(2)
is amended by striking ‘‘determined—’’ and all
that follows and inserting the following: ‘‘deter-
702
mined without regard to sections 911, 931, and
933.’’
(C) Paragraph (1) of section 137(b) (relat-
ing to adoption assistance programs) is amend-
ed by striking ‘‘amount excludable from gross
income’’ and inserting ‘‘of the amounts paid or
expenses incurred which may be taken into ac-
count’’.
(D)(i) 
Subparagraph 
(C) 
of 
section
414(n)(3) is amended by inserting ‘‘137,’’ after
‘‘132,’’.
(ii) Paragraph (2) of section 414(t) is
amended by inserting ‘‘137,’’ after ‘‘132,’’.
(iii) Paragraph (1) of section 6039D(d) is
amended by striking ‘‘or 129’’ and inserting
‘‘129, or 137’’.
(i) AMENDMENTS RELATED TO SUBTITLE I.—
(1) AMENDMENT RELATED TO SECTION 1901.—
Subsection (b) of section 6048 is amended in the
heading by striking ‘‘GRANTOR’’ and inserting
‘‘OWNER’’.
(2) 
AMENDMENTS
RELATED
TO
SECTION
1903.—
703
Clauses 
(ii) 
and 
(iii) 
of 
section
679(a)(3)(C) are each amended by inserting ‘‘,
owner,’’ after ‘‘grantor’’.
(3) 
AMENDMENTS
RELATED
TO
SECTION
1907.—
(A) Clause (ii) of section 7701(a)(30)(E)
is amended by striking ‘‘fiduciaries’’ and insert-
ing ‘‘persons’’.
(B) Subsection (b) of section 641 is
amended by adding at the end the following
new sentence: ‘‘For purposes of this subsection,
a foreign trust or foreign estate shall be treated
as a nonresident alien individual who is not
present in the United States at any time.’’
(4) EFFECTIVE DATE RELATED TO SUBTITLE
I.—The Secretary of the Treasury may by regula-
tions or other administrative guidance provide that
the amendments made by section 1907(a) of the
Small Business Job Protection Act of 1996 shall not
apply to a trust with respect to a reasonable period
beginning on the date of the enactment of such Act,
if—
(A) such trust is in existence on August
20, 1996, and is a United States person for
purposes of the Internal Revenue Code of 1986
704
on such date (determined without regard to
such amendments),
(B) no election is in effect under section
1907(a)(3)(B) of such Act with respect to such
trust,
(C) before the expiration of such reason-
able period, such trust makes the modifications
necessary to be treated as a United States per-
son for purposes of such Code (determined with
regard to such amendments), and
(D) such trust meets such other conditions
as the Secretary may require.
(j) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall take effect as if included in the provisions of
the Small Business Job Protection Act of 1996 to
which they relate.
(2) CERTAIN ADMINISTRATIVE REQUIREMENTS
WITH RESPECT TO CERTAIN PENSION PLANS.—The
amendment made by subsection (d)(2)(D) shall
apply to calendar years beginning after the date of
the enactment of this Act.
705
SEC. 1502. AMENDMENTS RELATED TO HEALTH INSURANCE
PORTABILITY AND ACCOUNTABILITY ACT OF
1996.
(a) AMENDMENTS RELATED TO SECTION 301.—
(1) Paragraph (2) of section 26(b) is amended
by striking ‘‘and’’ at the end of subparagraph (N),
by striking the period at the end of subparagraph
(O) and inserting ‘‘, and’’, and by adding at the end
the following new subparagraph:
‘‘(P) section 220(f)(4) (relating to addi-
tional tax on medical savings account distribu-
tions not used for qualified medical expenses).’’
(2) Paragraph (3) of section 220(c) is amended
by striking subparagraph (A) and redesignating sub-
paragraphs (B) through (D) as subparagraphs (A)
through (C), respectively.
(3) Subparagraph (C) of section 220(d)(2) is
amended by striking ‘‘an eligible individual’’ and in-
serting ‘‘described in clauses (i) and (ii) of sub-
section (c)(1)(A)’’.
(4) Subsection (a) of section 6693 is amended
by adding at the end the following new sentence:
‘‘This subsection shall not apply to any report which is
an 
information 
return 
described 
in 
section
6724(d)(1)(C)(i) or a payee statement described in section
6724(d)(2)(X).’’
706
(5) Paragraph (4) of section 4975(d) is amend-
ed by striking ‘‘if, with respect to such transaction’’
and all that follows and inserting the following: ‘‘if
section 220(e)(2) applies to such transaction.’’
(b) AMENDMENT RELATED TO SECTION 321.—Sub-
paragraph (B) of section 7702B(c)(2) is amended in the
last sentence by inserting ‘‘described in subparagraph
(A)(i)’’ after ‘‘chronically ill individual’’.
(c) AMENDMENT RELATED TO SECTION 322.—Sub-
paragraph (B) of section 162(l)(2) is amended by adding
at the end the following new sentence: ‘‘The preceding sen-
tence shall be applied separately with respect to—
‘‘(i) plans which include coverage for
qualified long-term care services (as de-
fined in section 7702B(c)) or are qualified
long-term care insurance contracts (as de-
fined in section 7702B(b)), and
‘‘(ii) plans which do not include such
coverage and are not such contracts.’’
(d) AMENDMENTS RELATED TO SECTION 323.—
(1) Paragraph (1) of section 6050Q(b) is
amended by inserting ‘‘, address, and phone number
of the information contact’’ after ‘‘name’’.
(2)(A) Paragraph (2) of section 6724(d) is
amended by striking so much as follows subpara-
707
graph (Q) and precedes the last sentence, and in-
serting the following new subparagraphs:–––
‘‘(R) section 6050R(c) (relating to returns
relating to certain purchases of fish),–––
‘‘(S) section 6051 (relating to receipts for
employees),–––
‘‘(T) section 6052(b) (relating to returns
regarding payment of wages in the form of
group-term life insurance),–––
‘‘(U) section 6053(b) or (c) (relating to re-
ports of tips), –––
‘‘(V) section 6048(b)(1)(B) (relating to
foreign trust reporting requirements),–––
‘‘(W) section 4093(c)(4)(B) (relating to
certain purchasers of diesel and aviation
fuels),–––
‘‘(X) section 408(i) (relating to reports
with respect to individual retirement plans) to
any person other than the Secretary with re-
spect to the amount of payments made to such
person, or –––
‘‘(Y) section 6047(d) (relating to reports
by plan administrators) to any person other
than the Secretary with respect to the amount
of payments made to such person.’’
708
(B) Subsection (e) of section 6652 is amended
in 
the 
last 
sentence 
by 
striking 
‘‘section
6724(d)(2)(X)’’ 
and 
inserting 
‘‘section
6724(d)(2)(Y)’’.
(e) AMENDMENT
RELATED
TO
SECTION
325.—
Clauses (ii) and (iii) of section 7702B(g)(4)(B) are each
amended by striking ‘‘Secretary’’ and inserting ‘‘appro-
priate State regulatory agency’’.
(f) AMENDMENTS RELATED TO SECTION 501.—
(1) Paragraph (4) of section 264(a) is amended
by striking subparagraph (A) and all that follows
through ‘‘by the taxpayer.’’ and inserting the follow-
ing:
‘‘(A) is or was an officer or employee, or
‘‘(B) is or was financially interested in,
any trade or business carried on (currently or for-
merly) by the taxpayer.’’
(2) 
The 
last 
sentences 
of 
section
264(d)(2)(B)(ii) are amended to read as follows:
‘‘For purposes of subclause (II), the term
‘applicable period’ means the 12-month pe-
riod beginning on the date the policy is is-
sued (and each successive 12-month period
thereafter) unless the taxpayer elects a
number of months (not greater than 12)
710
beginning on the date the individual loses United
States citizenship’’.
(2) Subparagraph (D) of section 877(d)(2) is
amended by adding at the end the following new
sentence: ‘‘In the case of any exchange occurring
during such 5 years, any gain recognized under this
subparagraph shall be recognized immediately after
such loss of citizenship.’’
(3) Paragraph (3) of section 877(d) is amended
by inserting ‘‘and the period applicable under para-
graph (2)’’ after ‘‘subsection (a)’’.
(4) Subparagraph (A) of section 877(d)(4) is
amended—
(A) by inserting ‘‘during the 10-year pe-
riod beginning on the date the individual loses
United States citizenship’’ after ‘‘contributes
property’’ in clause (i),
(B) by inserting ‘‘immediately before such
contribution’’ after ‘‘from such property’’, and
(C) by striking ‘‘during the 10-year period
referred to in subsection (a),’’.
(5) Subparagraph (C) of section 2501(a)(3) is
amended by striking ‘‘decedent’’ and inserting
‘‘donor’’.
711
(6)(A) Clause (i) of section 2107(c)(2)(A) is
amended by striking ‘‘such foreign country in re-
spect of property included in the gross estate’’ and
inserting ‘‘such foreign country’’.
(B) Subparagraph (C) of section 2107(c)(2) is
amended to read as follows:
‘‘(C) PROPORTIONATE
SHARE.—In the
case of property which is included in the gross
estate solely by reason of subsection (b), such
property’s proportionate share is the percentage
which the value of such property bears to the
total value of all property included in the gross
estate solely by reason of subsection (b).’’.
(h) AMENDMENTS RELATED TO SECTION 512.—
(1) Subpart A of part III of subchapter A of
chapter 61 is amended by redesignating the section
6039F added by section 512 of the Health Insur-
ance Portability and Accountability Act of 1996 as
section 6039G and by moving such section 6039G to
immediately after the section 6039F added by sec-
tion 1905 of the Small Business Job Protection Act
of 1996.
(2) The table of sections for subpart A of part
III of subchapter A of chapter 61 is amended by
striking the item relating to the section 6039F relat-
712
ed to information on individuals losing United States
citizenship and inserting after the item relating to
the section 6039F related to notice of large gifts re-
ceived from foreign persons the following new item:
‘‘Sec. 6039G. Information on individuals losing United States citi-
zenship.’’
(3) Paragraph (1) of section 877(e) is amended
by striking ‘‘6039F’’ and inserting ‘‘6039G’’.
(i) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
of the Health Insurance Portability and Accountability
Act of 1996 to which such amendments relate.
SEC. 1503. AMENDMENTS RELATED TO TAXPAYER BILL OF
RIGHTS 2.
(a) AMENDMENT RELATED TO SECTION 1311.—Sub-
section (b) of section 4962 is amended by striking ‘‘sub-
chapter A or C’’ and inserting ‘‘subchapter A, C, or D’’.
(b) AMENDMENTS RELATED TO SECTION 1312.—
(1)(A) Paragraph (10) of section 6033(b) is
amended by striking all that precedes subparagraph
(A) and inserting the following:
‘‘(10) the respective amounts (if any) of the
taxes imposed on the organization, or any organiza-
tion manager of the organization, during the taxable
year under any of the following provisions (and the
respective amounts (if any) of reimbursements paid
713
by the organization during the taxable year with re-
spect to taxes imposed on any such organization
manager under any of such provisions):’’.
(B) Subparagraph (C) of section 6033(b)(10) is
amended by adding at the end the following: ‘‘except
to the extent that, by reason of section 4962, the
taxes imposed under such section are not required to
be paid or are credited or refunded,’’.
(2) Paragraph (11) of section 6033(b) is
amended to read as follows:
‘‘(11) the respective amounts (if any) of—
‘‘(A) the taxes imposed with respect to the
organization on any organization manager, or
any disqualified person, during the taxable year
under section 4958 (relating to taxes on private
excess benefit from certain charitable organiza-
tions), and
‘‘(B) reimbursements paid by the organiza-
tion during the taxable year with respect to
taxes imposed under such section,
except to the extent that, by reason of section 4962,
the taxes imposed under such section are not re-
quired to be paid or are credited or refunded,’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the provisions
714
of the Taxpayer Bill of Rights 2 to which such amend-
ments relate.
SEC. 1504. MISCELLANEOUS PROVISIONS.
(a) AMENDMENTS RELATED
TO ENERGY POLICY
ACT OF 1992.—
(1) Paragraph (1) of section 263(a) is amended
by striking ‘‘or’’ at the end of subparagraph (F), by
striking the period at the end of subparagraph (G)
and inserting ‘‘; or’’, and by adding at the end the
following new subparagraph:
‘‘(H) expenditures for which a deduction is
allowed under section 179A.’’
(2) Subparagraph (B) of section 312(k)(3) is
amended—
(A) by striking ‘‘179’’ in the heading and
the first place it appears in the text and insert-
ing ‘‘179 or 179A’’, and
(B) by striking ‘‘179’’ the last place it ap-
pears and inserting ‘‘179 or 179A, as the case
may be’’.
(3) Paragraphs (2)(C) and (3)(C) of section
1245(a) are each amended by inserting ‘‘179A,’’
after ‘‘179,’’.
(4) The amendments made by this subsection
shall take effect as if included in the amendments
715
made by section 1913 of the Energy Policy Act of
1992.
(b) AMENDMENTS RELATED TO URUGUAY ROUND
AGREEMENTS ACT.—
(1) Paragraph (1) of section 6621(a) is amend-
ed in the last sentence by striking ‘‘subsection
(c)(3))’’ and inserting ‘‘subsection (c)(3), applied by
substituting ‘overpayment’ for ‘underpayment’)’’.
(2) Subclause (II) of section 412(m)(5)(E)(ii) is
amended by striking ‘‘clause (i)’’ and inserting ‘‘sub-
clause (I)’’.
(3) Subparagraph (A) of section 767(d)(3) of
the Uruguay Round Agreements Act is amended in
the last sentence by striking ‘‘(except that’’ and all
that follows through ‘‘into account)’’.
(4) The amendments made by this subsection
shall take effect as if included in the sections of the
Uruguay Round Agreements Act to which they re-
late.
(c) AMENDMENT RELATED TO OMNIBUS BUDGET
RECONCILIATION ACT OF 1993.—
(1) Paragraph (6) of section 168(j) (defining
Indian reservation) is amended by adding at the end
the following new flush sentence:
716
‘‘For purposes of the preceding sentence, such sec-
tion 3(d) shall be applied by treating the term
‘former Indian reservations in Oklahoma’ as includ-
ing only lands which are within the jurisdictional
area of an Oklahoma Indian tribe (as determined by
the Secretary of the Interior) and are recognized by
such Secretary as eligible for trust land status under
25 CFR Part 151 (as in effect on the date of the
enactment of this sentence).’’
(2) The amendment made by paragraph (1)
shall apply as if included in the amendments made
by section 13321 of the Omnibus Budget Reconcili-
ation Act of 1993, except that such amendment shall
not apply—
(A) with respect to property (with an ap-
plicable recovery period under section 168(j) of
the Internal Revenue Code of 1986 of 6 years
or less) held by the taxpayer if the taxpayer
claimed the benefits of section 168(j) of such
Code with respect to such property on a return
filed before March 18, 1997, but only if such
return is the first return of tax filed for the
taxable year in which such property was placed
in service, or
717
(B) with respect to wages for which the
taxpayer claimed the benefits of section 45A of
such Code for a taxable year on a return filed
before March 18, 1997, but only if such return
was the first return of tax filed for such taxable
year.
(d) AMENDMENT RELATED TO TAX REFORM ACT OF
1986.—Paragraph (3) of section 1059(d) is amended by
striking ‘‘subsection (a)(2)’’ and inserting ‘‘subsection
(a)’’.
(e) AMENDMENT RELATED TO TAX REFORM ACT OF
1984.—
(1) Section 267(f) is amended by adding at the
end the following new paragraph:
‘‘(4) DETERMINATION
OF
RELATIONSHIP
RE-
SULTING
IN
DISALLOWANCE
OF
LOSS, FOR
PUR-
POSES OF OTHER PROVISIONS.—For purposes of any
other section of this title which refers to a relation-
ship which would result in a disallowance of losses
under this section, deferral under paragraph (2)
shall be treated as disallowance.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect as if included in
section 174(b) of the Tax Reform Act of 1984.
(f) CLERICAL AMENDMENTS.—
718
(1) Clause (iii) of section 163(j)(2)(B) is
amended by striking ‘‘clause (i)’’ and inserting
‘‘clause (ii)’’.
(2) Paragraph (1) of section 665(d) is amended
in the last sentence by striking ‘‘or 669(d) and (e)’’.
(3) Subsection (g) of section 1441 (relating to
cross reference) is amended by striking ‘‘one-half’’
and inserting ‘‘85 percent’’.
(4) Paragraph (1) of section 2523(g) is amend-
ed by striking ‘‘qualified remainder trust’’ and in-
serting ‘‘qualified charitable remainder trust’’.
(5) Subsection (d) of section 9502 is amended
by redesignating the paragraph added by section
806 of the Federal Aviation Reauthorization Act of
1996 as paragraph (6).
Union Calendar No. 88
105TH CONGRESS
1ST SESSION
H. R. 2014
[Report No. 105–148]
A BILL
To provide for reconciliation pursuant to sub-
sections (b)(2) and (d) of section 105 of the con-
current resolution on the budget for fiscal year
1998.
JUNE 24, 1997
Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed