I
103D CONGRESS
1ST SESSION
H. R. 1885
To amend the Internal Revenue Code of 1986 to provide tax incentives
for job creation and economic growth, to expand Individual Retirement
Accounts to encourage savings and investment, to restrain Federal spend-
ing, to require a cost analysis of new regulations, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 28, 1993
Mr. DREIER (for himself and Mr. KING) introduced the following bill; which
was referred jointly to the Committees on Ways and Means, the Budget,
the Judiciary, and Government Operations
A BILL
To amend the Internal Revenue Code of 1986 to provide
tax incentives for job creation and economic growth, to
expand Individual Retirement Accounts to encourage sav-
ings and investment, to restrain Federal spending, to
require a cost analysis of new regulations, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Private Sector Job
Creation and Economic Growth Act’’.
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SEC. 2. TABLE OF CONTENTS.
TITLE I—REDUCING THE COST OF CAPITAL BY REDUCING CAP-
ITAL GAINS TAX RATES AND INDEXING THE BASIS OF CER-
TAIN ASSETS
Sec. 101. Reduction in individual capital gains rate.
Sec. 102. Reduction in corporate capital gains rate.
Sec. 103. Reduction of minimum tax rate on capital gains.
Sec. 104. Indexing of certain assets for purposes of determining gain or loss.
Sec. 105. Indexing of limitation on capital losses of individuals.
Sec. 106. Effective dates.
TITLE II—ADJUSTING DEPRECIATION RATES TO REFLECT
INFLATION
Sec. 201. Depreciation adjustment for certain property placed in service in tax-
able years beginning after December 31, 1993.
Sec. 202. Phase-in of expensing for property placed in service in taxable years
beginning after December 31, 1998.
TITLE III—EXPANSION OF INDIVIDUAL RETIREMENT ACCOUNTS
Sec. 301. Restoration of IRA deduction.
Sec. 302. Increase in maximum IRA deduction; inflation adjustment of maxi-
mum IRA deduction.
Sec. 303. Human capital investment accounts.
TITLE IV—TWO PERCENT CAP ON INCREASES IN ALL FEDERAL
SPENDING THROUGH 1998
Sec. 401. Concurrent resolution on the budget for fiscal year 1994.
Sec. 402. Recommended levels and amounts.
TITIE V—REDUCTION IN UNNECESSARY AND BURDENSOME
REGULATIONS
Sec. 501. Findings.
Sec. 502. Concurrent resolution of the House.
Sec. 503. Legislative and regulatory analysis.
SEC. 3. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
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TITLE I—REDUCING THE COST
OF CAPITAL BY REDUCING
CAPITAL GAINS TAX RATES
AND INDEXING THE BASIS OF
CERTAIN ASSETS
SEC. 101. REDUCTION IN INDIVIDUAL CAPITAL GAINS
RATE.
(a) GENERAL RULE.—Subsection (h) of section 1 (re-
lating to maximum capital gains rate) is amended to read
as follows:
‘‘(h) MAXIMUM CAPITAL GAINS RATE.—If a taxpayer
has a net capital gain for any taxable year, then the tax
imposed by this section shall not exceed the sum of—
‘‘(1) a tax computed at the rates and in the
same manner as if this subsection had not been en-
acted on the taxable income reduced by the net cap-
ital gain, plus
‘‘(2) a tax equal to the sum of—
‘‘(A) 7.5 percent of so much of the net
capital gain as does not exceed—
‘‘(i) the maximum amount of taxable
income to which the 15-percent rate ap-
plies under the table applicable to the tax-
payer, reduced by
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‘‘(ii) the taxable income to which
paragraph (1) applies, plus
‘‘(iii) 15 percent of the net capital
gain in excess of the net capital gain to
which clause (i) applies.’’.
(b) PHASEOUT OF PERSONAL EXEMPTIONS AND LIM-
ITATION ON DEDUCTION OF ITEMIZED DEDUCTIONS NOT
TO RESULT FROM NET CAPITAL GAIN.—
(1)(A) Subparagraph (A) and (B) of section
151(d)(3) (relating to phaseout of exemption
amount) are each amended by inserting ‘‘modified’’
before ‘‘adjusted gross income’’.
(B) Paragraph (3) of section 151(d) of such
Code is amended by redesignating subparagraphs
(D) and (E) as subparagraphs (E) and (F), respec-
tively, and by inserting after subparagraph (C) the
following new subparagraph:
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of this paragraph, the
term ‘modified adjusted gross income’ means
adjusted gross income reduced by net capital
gain.’’.
(2) Subsection (a) of section 68 (relating to
overall limitation on itemized deductions) is amend-
ed by inserting ‘‘(reduced by net capital gain (deter-
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mined in accordance with section 151(d)(3)(D)))’’
after ‘‘adjusted gross income’’.
(c) TECHNICAL AMENDMENTS.—
(1) Paragraph (1) of section 170(e) is amended
by inserting after ‘‘such contribution)’’ in the last
sentence of subparagraph (B) the words ‘‘, minus
the product of such gain multiplied by the ratio of
15 percent over the highest rate of taxation that the
taxpayer is subject to without such contribution
(with a minimum taxation rate for this calculation
of 15 percent).’’
(2)(A) 
The 
second 
sentence 
of 
section
7518(g)(6)(A) is amended by striking ‘‘28 percent
(34 percent in the case of a corporation)’’ and in-
serting ‘‘15 percent’’.
(B) 
The 
second 
sentence 
of 
section
607(h)(6)(A) of the Merchant Marine Act, 1936, is
amended by striking ‘‘28 percent (34 percent in the
case of a corporation)’’ and inserting ‘‘15 percent’’.
SEC. 102. REDUCTION IN CORPORATE CAPITAL GAINS
RATE.
(a) GENERAL RULE.—Section 1201 (relating to al-
ternative tax for corporations) is amended by redesignat-
ing subsection (b) as subsection (c), and by striking sub-
section (a) and inserting the following:
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‘‘(a) GENERAL RULE.—If for any taxable year a cor-
poration has a net capital gain, then, in lieu of the tax
imposed by sections 11, 511, or 831(a) (whichever ap-
plies), there is hereby imposed a tax (if such tax is less
than the tax imposed by such section) which shall consist
of the sum of—
‘‘(1) a tax computed on the taxable income re-
duced by the net capital gain, at the same rates and
in the same manner as if this subsection had not
been enacted, plus
‘‘(2) a tax of 15 percent of the net capital gain.
‘‘(b) TRANSITIONAL RULE.—In the case of a taxable
year which includes December 31, 1993, the amount of
the net capital gain for purposes of subsection (a) shall
not exceed the net capital gain determined by only taking
into account gains and losses properly taken into account
for the portion of the taxable year on or after such date.’’.
(b) TECHNICAL AMENDMENTS.—
(1) Clause (iii) of section 852(b)(3)(D) is
amended by striking ‘‘66 percent’’ and inserting ‘‘85
percent’’.
(2) Paragraphs (1) and (2) of section 1445(e)
are each amended by striking ‘‘34 percent’’ and in-
serting ‘‘15 percent’’.
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SEC. 103. REDUCTION OF MINIMUM TAX RATE ON CAPITAL
GAINS.
Subparagraph (A) of section 55(b)(1) (relating to
tentative minimum tax) is amended to read as follows:
‘‘(A) the sum of—
‘‘(i) 15 percent of the lesser of—
‘‘(I) the net capital gain (determined
with the adjustments provided in this part
and (to the extent applicable) the limita-
tions of sections 1(h)(2) and 1201(b)), or
‘‘(II) so much of the alternative mini-
mum taxable income for the taxable year
as exceeds the exemption amount, plus
‘‘(ii) 20 percent (24 percent in the case of
a taxpayer other than a corporation) of the
amount (if any) by which the excess referred to
in clause (i)(II) exceeds the net capital gain (as
so determined), reduced by’’.
SEC. 104. INDEXING OF CERTAIN ASSETS FOR PURPOSES
OF DETERMINING GAIN OR LOSS.
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is
amended by inserting after section 1021 the following new
section:
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‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES
OF DETERMINING GAIN OR LOSS.
‘‘(a) GENERAL RULE.—
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Except as provided in paragraph
(2), if an indexed asset which has been held for
more than 1 year is sold or otherwise disposed of,
for purposes of this title the indexed basis of the
asset shall be substituted for its adjusted basis.
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.—
The deduction for depreciation, depletion, and amor-
tization shall be determined without regard to the
application of paragraph (1) to the taxpayer or any
other person.
‘‘(b) INDEXED ASSET.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means—
‘‘(A) stock in a corporation, and
‘‘(B) tangible property (or any interest
therein), which is a capital asset of property
used in the trade or business (as defined in sec-
tion 1231(b)).
‘‘(2) CERTAIN
PROPERTY
EXCLUDED.—For
purposes of this section, the term ‘indexed asset’
does not include—
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‘‘(A) CREDITOR’S INTEREST.—Any interest
in property which is in the nature of a credi-
tor’s interest.
‘‘(B) OPTIONS.—Any option or other right
to acquire an interest in property.
‘‘(C) NET LEASE PROPERTY.—In the case
of a lessor, net lease property (within the mean-
ing of subsection (h)(1)).
‘‘(D) CERTAIN PREFERRED STOCK.—Stock
which is fixed and preferred as to dividends and
does not participate in corporate growth to any
significant extent.
‘‘(E) STOCK IN CERTAIN CORPORATIONS.—
Stock in—
‘‘(i) an S corporation (within the
meaning of section 1361),
‘‘(ii) a personal holding company (as
defined in section 542), and
‘‘(iii) a foreign corporation.
‘‘(3) EXCEPTION FOR STOCK IN FOREIGN COR-
PORATION WHICH IS REGULARLY TRADED ON NA-
TIONAL OR REGIONAL EXCHANGE.—Clause (iii) of
paragraph (2)(E) shall not apply to stock in a for-
eign corporation the stock of which is listed on the
New York Stock Exchange, the American Stock Ex-
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change, or any domestic regional exchange for which
quotations are published on a regular basis other
than—
‘‘(A) stock of a foreign investment com-
pany (within the meaning of section 1246(b)),
and
‘‘(B) stock in a foreign corporation held by
a United States person who meets the require-
ments of section 1248(a)(2).
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion—
‘‘(1) INDEXED BASIS.—The indexed basis for
any asset is—
‘‘(A) the adjusted basis of the asset, multi-
plied by
‘‘(B) the applicable inflation ratio.
‘‘(2) APPLICATION INFLATION RATIO.—The ap-
plicable inflation ratio for any asset is the percent-
age arrived at by dividing—
‘‘(A) the gross national product deflator
for the calendar quarter in which the disposi-
tion takes place, by
‘‘(B) the gross national product deflator
for the calendar quarter in which the asset was
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acquired by the taxpayer (or, if later, the cal-
endar quarter ending December 31, 1993).
The applicable inflation ratio shall not be taken into
account unless it is greater than 1. The applicable
inflation ratio for any asset shall be rounded to the
nearest one-tenth of 1 percent.
‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—
The gross national product deflator for any calendar
quarter is the implicit price deflator for the gross
national product for such quarter (as shown in the
first revision thereof).
‘‘(4) SECRETARY
TO
PUBLISH
TABLES.—The
Secretary shall publish tables specifying the applica-
ble inflation ratios for each calendar quarter.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) TREATMENT AS SEPARATE ASSET.—In the
case of any asset, the following shall be treated as
a separate asset:
‘‘(A) 
a 
substantial 
improvement 
to
property,
‘‘(B) in the case of stock of a corporation,
a substantial contribution to capital, and
‘‘(C) any other portion of an asset to the
extent that separate treatment of such portion
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is appropriate to carry out the purposes of this
section.
‘‘(2) Assets which are not indexed assets
throughout holding period.—
‘‘(A) IN GENERAL.—The applicable infla-
tion ratio shall be appropriately reduced for cal-
endar months at any time during which the
asset was not an indexed asset.
‘‘(B) CERTAIN
SHORT
SALES.—For pur-
poses of applying subparagraph (A), an asset
shall be treated as not an indexed asset for any
short sale period during which the taxpayer or
the taxpayer’s spouse sells short property sub-
stantially identical to the asset. For purposes of
the preceding sentence, the short sale period be-
gins on the day after the substantially identical
property is sold and ends on the closing date
for the sale.
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a
corporation which is not a dividend shall be treated
as a disposition.
‘‘(4) SECTION
CANNOT
INCREASE
ORDINARY
LOSS.—To the extent that (but for this paragraph)
this section would create or increase a net ordinary
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loss to which section 1231(a)(2) applies or an ordi-
nary loss to which any other provision of this title
applies, such provision shall not apply. The taxpayer
shall be treated as having a long-term capital loss in
an amount equal to the amount of the ordinary loss
to which the preceding sentence applies.
‘‘(5) ACQUISITION
DATE
WHERE
THERE
HAS
BEEN
PRIOR
APPLICATION
OF
SUBSECTION
(A)(1)
WITH RESPECT TO THE TAXPAYER.—If there has
been a prior application of subsection (a)(1) to an
asset while such asset was held by the taxpayer, the
date of acquisition of such asset by the taxpayer
shall be treated as not earlier than the date of the
most recent such prior application.
‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli-
cation of section 341(a) (relating to collapsible cor-
porations) shall be determined without regard to this
section.
‘‘(e) CERTAIN CONDUIT ENTITIES.—
‘‘(1) REGULATED
INVESTMENT
COMPANIES;
REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST
FUNDS.—
‘‘(A) IN GENERAL.—Stock in a qualified
investment entity shall be an indexed asset for
any calendar month in the same ratio as the
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fair market value of the assets held by such en-
tity at the close of such month which are in-
dexed assets bears to the fair market value of
all assets of such entity at the close of such
month.
‘‘(B) RATIO OF 90 PERCENT OR MORE.—If
the ratio for any calendar month determined
under subparagraph (A) would (but for the sub-
paragraph) be 90 percent or more, such ratio
for such month shall be 100 percent.
‘‘(C) RATIO OF 10 PERCENT OR LESS.—If
the ratio for any calendar month determined
under subparagraph (A) would (but for this
subparagraph) be 10 percent or less, such ratio
for such month shall be zero.
‘‘(D) VALUATION OF ASSETS IN CASE OF
REAL ESTATE INVESTMENT TRUSTS.—Nothing
in this paragraph shall require a real estate in-
vestment trust to value its assets more fre-
quently than once each 36 months (except
where such trust ceases to exist). The ratio
under subparagraph (A) for any calendar
month for which there is no valuation shall be
the trustee’s good faith judgment as to such
valuation.
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‘‘(E) QUALIFIED INVESTMENT ENTITY.—
For purposes of this paragraph, the term
‘qualified investment entity’ means—
‘‘(i) a regulated investment company
(within the meaning of section 851),
‘‘(ii) a real estate investment trust
(within the meaning of section 856), and
‘‘(iii) a common trust fund (within the
meaning of section 584).
‘‘(2) PARTNERSHIPS.—In the case of a partner-
ship, the adjustment made under subsection (a) at
the partnership level shall be passed through to the
partners.
‘‘(3) SUBCHAPTER
S
CORPORATIONS.—In the
case of an electing small business corporation, the
adjustment under subsection (a) at the corporate
level shall be passed through to the shareholders.
‘‘(f) DISPOSITIONS BETWEEN RELATED PERSONS.—
‘‘(1) IN GENERAL.—This section shall not apply
to any sale or other disposition of property between
related persons except to the extent that the basis
of such property in the hands of the transferee is a
substituted basis.
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‘‘(2) RELATED PERSONS DEFINED.—For pur-
poses of this section, the term ‘related persons’
means—
‘‘(A) persons bearing a relationship set
forth in section 267(b), and
‘‘(B) persons treated as single employer
under subsection (b) or (c) of section 414.
‘‘(g) TRANSFERS TO INCREASE INDEXING ADJUST-
MENT OR DEPRECIATION ALLOWANCE.—If any person
transfers cash, debt, or any other property to another per-
son and the principal purpose of such transfer is—
‘‘(1) to secure or increase an adjustment under
subsection (a), or
‘‘(2) to increase (by reason of an adjustment
under subsection (a)) a deduction for depreciation,
depletion, or amortization, the Secretary may dis-
allow part or all of such adjustment or increase.
‘‘(h) DEFINITIONS.—For purposes of this section—
‘‘(1) NET
LEASE
PROPERTY
DEFINED.—The
term ‘net lease property’ means leased real property
where—
‘‘(A) the term of the lease (taking into ac-
count options to renew) was 50 percent or more
of the useful life of the property, and
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‘‘(B) for the period of the lease, the sum
of the deductions with respect to such property
which are allowable to the lessor solely by rea-
son of section 162 (other than rents and reim-
bursed amounts with respect to such property)
is 15 percent or less of the rental income pro-
duced by such property.
‘‘(2) STOCK INCLUDES INTEREST IN COMMON
TRUST FUND.—The term ‘stock in a corporation’ in-
cludes any interest in a common fund (as defined in
section 584(a)).
‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’.
‘‘(b) CLERICAL AMENDMENT.—This table of sections
for part II of subchapter O of such chapter 1 is amended
by inserting after the item relating to section 1021 the
following new item:
‘‘Sec. 1022. Indexing of certain assets for purposes of determining
gain or loss.’’.
‘‘(c) ADJUSTMENT TO APPLY FOR PURPOSES OF DE-
TERMINING EARNINGS AND PROFITS.—Subsection (f) of
section 312 (relating to effect on earnings and profits of
gain or loss and of receipt of tax-free distributions) is
amended by adding at the end thereof the following new
paragraph:
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‘‘(3) EFFECT ON EARNINGS AND PROFITS OF
INDEXED BASIS.—For substitution of indexed basis
for adjusted basis in the case of the disposition of
certain assets after December 31, 1993, see section
1022(a)(1).’’.
SEC. 105. INDEXING OF LIMITATION ON CAPITAL LOSSES
OF INDIVIDUALS.
Section 1211 (relating to limitation on capital losses)
is amended by adding at the end thereof the following new
subsection:
‘‘(c) 
INDEXATION
OF
LIMITATION
ON
NONCORPORATE TAXPAYERS.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 1993, the
$3,000 and $1,500 amounts under subsection (b)(1)
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the applicable inflation adjustment
for the calendar year in which the taxable year
begins.
‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—
For purposes of paragraph (1), the applicable infla-
tion adjustment for any calendar year is the percent-
age (if any) by which—
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‘‘(A) the gross national product deflator
for the last calendar quarter of the preceding
calendar year, exceeds
‘‘(B) the gross national product deflator for the
last calendar quarter of 1992. For purposes of this
paragraph, the term ‘gross national product deflator’
has the meaning given such term by section
1022(c)(3).’’.
SEC. 106. EFFECTIVE DATES.
(a) IN GENERAL.—Except as provided in subsection
(b), the amendments made by this title shall apply to sales
or exchanges occurring after December 31, 1993, in tax-
able years ending after such date.
(b) INDEXING OF LOSS LIMITATION.—The amend-
ments made by section 205 shall apply to taxable years
beginning after December 31, 1993.
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TITLE 
II—ADJUSTING 
DEPRE-
CIATION RATES TO REFLECT
INFLATION
SEC. 201. DEPRECIATION ADJUSTMENT FOR CERTAIN
PROPERTY PLACED IN SERVICE IN TAXABLE
YEARS BEGINNING AFTER DECEMBER 31,
1993.
(a) IN GENERAL.—Section 168 (relating to acceler-
ated cost recovery system) is amended by adding at the
end thereof the following new subsection:
‘‘(j) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA-
LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED
IN SERVICE IN TAXABLE YEARS BEGINNING AFTER DE-
CEMBER 31, 1993.—
‘‘(1) IN
GENERAL.—In the case of tangible
property (other than residential rental property and
nonresidential real property) placed in service in a
taxable year beginning after December 31, 1993, the
deduction allowable under this section with respect
to such property for any taxable year (after the tax-
able year during which the property is placed in
service) shall be—
‘‘(A) the amount so allowable for such tax-
able year without regard to this subsection,
multiplied by
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‘‘(B) the applicable neutral cost recovery
adjustment.
‘‘(2) APPLICABLE
NEUTRAL
COST
RECOVERY
ADJUSTMENT.—For purposes of paragraph (1), the
applicable neutral cost recovery adjustment for any
calendar year is the number determined by—
‘‘(A) dividing—‘(i) the gross national prod-
uct deflator for the calendar quarter of the pre-
ceding calendar year which corresponds to the
calendar quarter during which the property was
placed in service by the taxpayer’, by ‘(ii) the
gross national product deflator for the calendar
quarter during which the property was placed
in service by the taxpayer’, and
‘‘(B) then multiplying the number deter-
mined under subparagraph (A) by the number
equal to 1.035 to the nth power where ‘n’ is the
number of calendar years after the calendar
year in which the property was placed in service
by the taxpayer and before the 1st calendar
year beginning with or within the taxable year
for which the deduction under this subsection is
being determined.
‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—
For purposes of paragraph (2), the term ‘gross na-
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tional product deflator’ has the meaning given such
term by section 1022(c)(3).’’.
(b) CORRESPONDING MODIFICATION TO DEPRECIA-
TION SCHEDULES.—Paragraphs (1)(A) and (2) of section
168(b) (relating to applicable depreciation method) are
each amended by striking ‘‘200 percent’’ and inserting
‘‘125 percent’’.
(c) AMENDMENTS TO ALTERNATIVE MINIMUM TAX-
ABLE INCOME.—
(1) NO
INCREASE
DUE
TO
INDEXING.—Sub-
sections (a)(1)(A)(i) and (g)(4)(A) of section 56 (re-
lating to adjustments in computing alternative mini-
mum taxable income) are each amended by inserting
‘‘(as adjusted by section 168(j))’’ after ‘‘section
168(g)’’ each place it appears.
(2) PHASE-OUT OF ALTERNATIVE MINIMUM TAX
DEPRECIATION DEDUCTION.—Section 56 is amended
by adding at the end thereof the following new sub-
section:
‘‘(i) PHASE-IN
OF FULL DEPRECIATION DEDUC-
TION.—
‘‘(1) IN GENERAL.—The depreciation deduction
with respect to any property determined under sub-
sections (a)(1) and (g)(4) for each taxable year shall
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be increased by the applicable percentage of the de-
preciation differential for such taxable year.
‘‘(2) APPLICABLE PERCENTAGE.—The applica-
ble percentage for any taxable year shall be deter-
mined in accordance with the following table:
‘‘In the case of a taxable
The applicable
year which begins:
percentage is:
After January 1 of
And on or before
January 1 of
1994
1995
1995
1996
1996
1997
1997
1998
1998
1999
1999
2000
2000
2001
2001
2002
2002
100.
‘‘(3) DEPRECIATION
DEDUCTION
DIFFEREN-
TIAL.—With respect to any property, the deprecia-
tion deduction differential for any taxable year is
equal to the excess of—
‘‘(A) the depreciation deduction applicable
for purposes of computing the regular tax for
such taxable year, over
‘‘(B) the depreciation deduction deter-
mined under subsections (a)(1) and (g)(4) for
such taxable year.’’.
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(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 202. PHASE-IN OF EXPENSING FOR PROPERTY PLACED
IN SERVICE IN TAXABLE YEARS BEGINNING
AFTER DECEMBER 31, 1999.
(a) IN GENERAL.—Section 168 (relating to acceler-
ated cost recovery system) is amended by adding at the
end thereof the following new subsection:
‘‘(k) PHASE-IN OF EXPENSING.—
‘‘(1) IN
GENERAL.—In the case of tangible
property placed in service in a taxable year begin-
ning after December 31, 1999—
‘‘(A) the phase-in deductions with respect
to such property shall be allowable under this
section for the taxable year in which such prop-
erty is placed in service, and
‘‘(B) the applicable recovery period with
respect to such property shall be reduced by the
phase-in number of years.
‘‘(2) PHASE-IN DEDUCTIONS AND YEARS.—For
purposes of this subsection—
‘‘(A) IN GENERAL.—The phase-in deduc-
tions with respect to any property are the ag-
gregate deductions allowable under this section
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(determined without regard to this subsection
and subsection (j)) for the first phase-in num-
ber of years in the applicable recovery period.
‘‘(B) PHASE-IN NUMBER OF YEARS.—The
phase-in number of years with respect to any
property is the number of calendar years after
1999 and before the calendar year in which the
property is placed in service.
‘‘(3) ELECTION.—This subsection shall not
apply to any property if the taxpayer elects not to
apply this subsection to such property. Such an elec-
tion, once made, shall be irrevocable.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
TITLE III—EXPANSION OF INDI-
VIDUAL 
RETIREMENT 
AC-
COUNTS
SEC. 301. RESTORATION OF IRA DEDUCTION.
(a) IN GENERAL.—Section 219 (relating to deduction
for retirement savings) is amended by striking subsection
(g).
(b) RESTORATION OF DEDUCTION FOR QUALIFIED
VOLUNTARY
EMPLOYEE
CONTRIBUTIONS.—Subsection
(e) of section 219 is amended to read as follows:
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‘‘(e) 
QUALIFIED
RETIREMENT
CONTRIBUTION;
QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTION.—
For purposes of this section:
‘‘(1) 
QUALIFIED
RETIREMENT
CONTRIBU-
TION.—The term ‘qualified retirement contribution’
means—
‘‘(A) any qualified voluntary employee con-
tribution paid in cash by the individual for the
taxable year,
‘‘(B) any amount paid in cash for the tax-
able year by or on behalf of such individual to
an individual retirement plan for such individ-
ual’s benefit, and
‘‘(C) any amount contributed on behalf of
any individual to a plan described in section
501(c)(18).
‘‘(2) QUALIFIED VOLUNTARY EMPLOYEE CON-
TRIBUTION.—
‘‘(A) IN
GENERAL.—The term ‘qualified
voluntary employee contribution’ means any vol-
untary contribution—
‘‘(i) which is made by an individual as
an employee under a qualified employer
plan or government plan, which plan allows
an employee to make contributions which
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may be treated as qualified voluntary em-
ployee contributions under this section,
and
‘‘(ii) with respect to which the individ-
ual has not designated such contribution
as a contribution which should not be
taken into account under this section.
‘‘(B) VOLUNTARY
CONTRIBUTION.—For
purposes of subparagraph (A), the term ‘vol-
untary contribution’ means any contribution
which is not a mandatory contribution (within
the meaning of section 411(c)(2)(C)).
‘‘(C) DESIGNATION.—For purposes of de-
termining whether or not an individual has
made a designation described in subparagraph
(A)(ii) with respect to any contribution during
any calendar year under a qualified employer
plan or government plan, such individual shall
be treated as having made such designation if
he notifies the plan administrator of such plan,
not later than the earlier of—
‘‘(i) April 15 of the succeeding cal-
endar year, or
‘‘(ii) the time prescribed by the plan
administrator, that the individual does not
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want such contribution taken into account
under this section. Any designation or noti-
fication referred to in the preceding sen-
tence shall be made in such manner as the
Secretary shall be regulations prescribe
and, after the last date on which such des-
ignation or notification may be made, shall
be irrevocable for such taxable year.
‘‘(D) QUALIFIED
EMPLOYER
PLAN.—The
term ‘qualified employer plan’ has the meaning
given such term by section 72(p)(3)(A)(i).
‘‘(E) GOVERNMENT PLAN.—The term ‘gov-
ernment plan’ has the meaning given such term
by section 72(p)(3)(B).
‘‘(3) PAYMENTS
FOR
CERTAIN
PLANS.—The
term ‘amounts paid to an individual retirement plan’
includes amounts paid for an individual retirement
annuity.’’
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Subsection (b) of section 219 is amended by
adding at the end thereof the following new para-
graph:
‘‘(4) SPECIAL RULE FOR INDIVIDUAL RETIRE-
MENT PLANS.—If the individual has paid any quali-
fied voluntary employee contributions for the taxable
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year, the amount of qualified retirement contribu-
tions which are paid for the taxable year to an indi-
vidual retirement plan and which are allowable as a
deduction under subsection (a) for such taxable year
shall not exceed—
‘‘(A) the amount determined under para-
graph (1) for such taxable year, reduced by
‘‘(B) the amount of the qualified voluntary
employee contributions for the taxable year’’
‘‘(2) Paragraph (3) of section 219(f) is amend-
ed to read as follows:
‘‘(3) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section—
‘‘(A) INDIVIDUAL RETIREMENT PLANS.—A
taxpayer shall be deemed to have had a con-
tribution to an individual retirement plan on
the last day of the preceding taxable year if the
contribution is made on account of such taxable
year and is made not later than the time pre-
scribed by law for filing the return for such tax-
able year (not including extensions thereof).
‘‘(B) QUALIFIED EMPLOYER OR GOVERN-
MENT PLANS.—If a qualified employer or gov-
ernment plan elects to have the provisions of
this subparagraph apply, a taxpayer shall be
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deemed to have made a voluntary contribution
to such plan on the last day of the preceding
calendar year (if, without regard to this para-
graph, such contribution may be made on such
date) if the contribution is made on account of
the taxable year which includes such last day
and by April 15 of the calendar year or such
earlier time as is provided by the plan adminis-
trator.’’
(3) Subsection (f) of section 219 is amended by
striking paragraph (7).
(4) Subparagraph (A) of section 72(o)(5) is
amended to read as follows:
‘‘(A) DEDUCTIBLE EMPLOYEE CONTRIBU-
TIONS.—The term ‘deductible employee con-
tributions’ means any qualified voluntary em-
ployee contribution (as defined in section
219(e)(2))—
‘‘(i) which is made—
‘‘(I) after December 31, 1981, in
a taxable year beginning after such
date and for a taxable year beginning
before January 1, 1987, or
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‘‘(II) after December 31, 1993,
in a taxable year beginning after such
date, and
‘‘(ii) which is allowable as a deduction
under section 219(a) for such taxable
year.’’
(5) Section 408 is amended by striking sub-
section (o) and by redesignating subsection (p) as
subsection (o).
(6) Subsection (b) of section 4973 is amended
by striking the last sentence.
(7) Paragraph (5) of section 408(d) is amended
by striking the last sentence.
(8)(A) Section 6693 is amended by striking
subsection (b) and by redesignating subsection (c) as
subsection (b).
(B) The heading of section 6693 is amend-
ed by striking ‘‘; overstatement of designated
nondeductible contributions’’.
(C) The table of sections for part I of sub-
chapter B of chapter 68 is amended by striking
‘‘; overstatement of designated nondeductible
contributions’’ in the item relating to section
6693.
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(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 302. INCREASE IN MAXIMUM IRA DEDUCTION; INFLA-
TION ADJUSTMENT OF MAXIMUM IRA DEDUC-
TION.
(a) INCREASE IN MAXIMUM IRA DEDUCTION.—
(1) IN GENERAL.—The following provisions of
the Internal Revenue Code of 1986 are each amend-
ed by striking ‘‘$2,000’’ and inserting ‘‘$4,000’’:
(A) Subsections (b)(1)(A) and (c)(2) of
section 219.
(B) Subsections (a)(1), (b), and (j) of sec-
tion 408.
(2) 
CONFORMING
AMENDMENT.—Sections
219(c)(2) and 408(d)(5) are each amended by strik-
ing ‘‘$2,250’’ and inserting ‘‘$4,250’’.
(b) INFLATION ADJUSTMENT OF MAXIMUM IRA DE-
DUCTION.—Section 219 of such Code, as amended by sec-
tion 401, is amended by inserting after subsection (f) the
following new subsection:
‘‘(g) INFLATION ADJUSTMENT
OF MAXIMUM IRA
DEDUCTION.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 1994, each
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applicable dollar amount shall be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment under
section 1(f)(3) for the calendar year in which
the taxable year begins, determined by sub-
stituting ‘calendar year 1994’ for ‘calendar year
1989’ in subparagraph (B) thereof.
‘‘(2) APPLICABLE DOLLAR AMOUNT.—For pur-
poses of paragraph (1), the term ‘applicable dollar
amount’ means—
‘‘(A) the $4,000 amount in subsections
(b)(1)(A) and (c)(2) of this section and in sub-
sections (a)(1), (b), and (j) of section 408, and
‘‘(B) the $4,250 amount in subsection
(c)(2) of this section and in section 408(d)(5).
‘‘(3) ROUNDING.—If any amount as adjusted
under paragraph (1) is not a multiple of $50, such
amount shall be rounded to the nearest multiple of
$50 (or, if such amount is a multiple of $25 and not
of $50, such amount shall be rounded to the next
highest multiple of $50).
‘‘(4) ADJUSTED MAXIMUM IRA DEDUCTION.—
The adjusted maximum IRA deduction for each year
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shall be the applicable dollar amount as increased
and rounded by this subsection.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 303. HUMAN CAPITAL INVESTMENT ACCOUNTS.
(a) DISTRIBUTIONS FROM IRA’S MAY BE USED
WITHOUT PENALTY TO PURCHASE FIRST HOMES OR TO
PAY HIGHER EDUCATION OR FINANCIALLY DEVASTATING
MEDICAL EXPENSES.—Paragraph (2) of section 72(t) (re-
lating to exceptions to 10-percent additional tax on early
distributions from qualified retirement plans) is amended
by adding at the end thereof the following new subpara-
graph:
‘‘(D) Distributions from individual retire-
ment plans for first home purchases or edu-
cational expenses.—
‘‘(i) IN
GENERAL.—Distributions to
an individual from an individual retirement
plan—
‘‘(I) which are qualified first-time
homebuyer distributions (as defined in
paragraph (6)), or
‘‘(II) to the extent such distribu-
tions do not exceed the qualified high-
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er education expenses (as defined in
paragraph (7)) of the taxpayer for the
taxable year.
‘‘(ii) 
LIMITATION.—Notwithstanding
clause (i) and paragraph (3)(A), the tax
imposed by paragraph (1) shall apply to
distributions described in clause (i) or
paragraph (3)(A) from an individual retire-
ment plan to the extent that the aggregate
of such distributions exceed the sum of—
‘‘(I) the aggregate contributions
to such plans for taxable years begin-
ning after December 31, 1993, taking
into account only contributions for a
taxable year to the extent such con-
tributions exceed the adjusted maxi-
mum IRA deduction (as defined by
section 219(g)) for that year, plus
‘‘(II) the earnings on contribu-
tions 
taken 
into 
account 
under
subclause (I).’’.
(b) FINANCIALLY
DEVASTATING
MEDICAL
EX-
PENSES.—Section 72(t)(3)(A) is amended by striking ‘‘,
(B),’’.
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(c) DEFINITIONS.—Section 72(t) is amended by add-
ing at the end thereof the following new paragraphs:
‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—For 
purposes 
of 
paragraph
(2)(D)(i)—
‘‘(A) IN
GENERAL.—The term ‘qualified
first-time homebuyer distribution’ means any
payment or distribution received by an individ-
ual to the extent such payment or distribution
is used by the individual before the close of the
sixtieth day after the day on which such pay-
ment or distribution is received to pay qualified
acquisition costs with respect to a principal res-
idence of a first-time homebuyer who is such in-
dividual or the child or grandchild of such indi-
vidual.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
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‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if such individual (and if married,
such individual’s spouse) had no present
ownership interest in a principal residence
during the 2-year period ending on the
date of acquisition of the principal resi-
dence to which this paragraph applies.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) Date of acquisition.—The term
‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If—
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‘‘(i) any amount is paid or distributed
from an individual retirement plan to an
individual for purposes of being used as
provided in subparagraph (A), and
‘‘(ii) by reason of a delay in the acqui-
sition of the residence, the requirements of
subparagraph (A) cannot be met,
the amount so paid or distributed may be paid
into an individual retirement plan as provided
in section 408(d)(3)(A)(i) without regard to
section 408(d)(3)(B), and, if so paid into such
other plan, such amount shall not be taken into
account 
in 
determining 
whether 
section
408(d)(3)(A)(i) applies to any other amount.
‘‘(7) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of paragraph (2)(D)(i)—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
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at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.’’
(d) CONFORMING AMENDMENTS.—
(1) Section 401(k)(2)(B)(i) is amended by
striking ‘‘or’’ at the end of subclause (III), by strik-
ing ‘‘and’’ at the end of subclause (IV) and inserting
‘‘or’’, and by inserting after subclause (IV) the fol-
lowing new subclause:
‘‘(V) the date on which qualified
first-time homebuyer distributions (as
defined in section 72(t)(6)) or dis-
tributions for qualified higher edu-
cation expenses (as defined in section
72(t)(7)) are made, and’’.
(2) Section 403(b)(11) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the
following new subparagraph: