I
103D CONGRESS
1ST SESSION
H. R. 3645
To provide a tax credit for families, to provide certain tax incentives to
encourage investment and increase savings, and to place limitations on
the growth of spending.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 22, 1993
Mr. GRAMS (for himself, Mr. HUTCHINSON, Mr. HASTERT, Mr. GINGRICH,
Mr. ARMEY, Mr. MCCOLLUM, Mr. DELAY, Mr. HYDE, Mr. HUNTER, Mr.
PAXON, Mr. SOLOMON, Mr. KASICH, Mr. ISTOOK, Mr. KNOLLENBERG,
Mr. TALENT, Mr. CRAPO, Mr. MANZULLO, Ms. DUNN, Mr. BACHUS of
Alabama, Mr. BARTLETT of Maryland, Mr. DICKEY, Mr. KINGSTON, Mr.
KIM, Ms. PRYCE of Ohio, Mr. HOEKSTRA, Mr. LEVY, Mr. POMBO, Mr.
MCKEON, Mr. BAKER of California, Mr. COLLINS of Georgia, Mr. INGLIS
of South Carolina, Mr. QUINN, Mr. CANADY, Mr. HOKE, Mr.
TORKILDSEN, Mr. LINDER, Mr. BLUTE, Mr. MCINNIS, Mr. KING, Mr.
SMITH of Michigan, Mrs. FOWLER, Mr. MCHUGH, Mr. ROYCE, Mr. DOO-
LITTLE, Mr. BARTON of Texas, Mr. BURTON of Indiana, Mr. RAMSTAD,
Mr. COX, Mr. SMITH of Oregon, Mr. DORNAN, Mr. HERGER, Mr.
HEFLEY, Mr. GOSS, Mr. KYL, Mr. ZIMMER, Mr. STEARNS, Mr.
ROHRABACHER, Mr. BAKER of Louisiana, Mr. INHOFE, Mrs. VUCANO-
VICH, Mr. BOEHNER, Mr. EWING, Mr. STUMP, Mr. SAM JOHNSON of
Texas, Mr. MOORHEAD, Ms. MOLINARI, Mr. SANTORUM, Mr. PACKARD,
Mr. SHAYS, Mr. SPENCE, Mr. HANCOCK, Mr. EMERSON, Mr. SMITH of
Texas, Mr. SAXTON, Mr. RAVENEL, Mr. HOBSON, and Mr. GALLEGLY)
introduced the following bill; which was referred jointly to the Committees
on Ways and Means, Government Operations, and Rules
A BILL
To provide a tax credit for families, to provide certain tax
incentives to encourage investment and increase savings,
and to place limitations on the growth of spending.
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Family, Investment, Retirement, Savings, and Tax Fair-
ness Act of 1993’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—FAMILY TAX CREDIT
Sec. 101. Family tax credit.
TITLE II—REDUCING THE COST OF CAPITAL BY REDUCING CAP-
ITAL GAINS TAX RATES AND INDEXING THE BASIS OF CER-
TAIN ASSETS
Sec. 201. Reduction in individual capital gains rate.
Sec. 202. Reduction in corporate capital gains rate.
Sec. 203. Reduction of minimum tax rate on capital gains.
Sec. 204. Indexing of certain assets for purposes of determining gain or loss.
Sec. 205. Indexing of limitation on capital losses of individuals.
Sec. 206. Effective dates.
TITLE III—NEUTRAL COST RECOVERY
Sec. 301. Depreciation adjustment for certain property placed in service in tax-
able years beginning after December 31, 1993.
Sec. 302. Special depreciation rules applicable under the adjusted current earn-
ings provisions of the minimum tax.
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TITLE IV—INCREASING NATIONAL SAVINGS THROUGH INDIVID-
UAL RETIREMENT PLUS ACCOUNTS, INDEXING FOR INFLATION
THE INCOME THRESHOLDS FOR TAXING SOCIAL SECURITY
BENEFITS, ETC.
Sec. 401. Establishment of individual retirement plus accounts.
Sec. 402. Inflation adjustment of income thresholds for taxation of social secu-
rity benefits; income from individual retirement plans excluded.
Sec. 403. Inflation adjustment of maximum amount of IRA deduction.
TITLE V—CAP ON FEDERAL SPENDING AND ESTABLISHMENT OF
COMMISSION TO REDUCE FEDERAL SPENDING
Sec. 501. Establishment.
Sec. 502. Duties of Commission.
Sec. 503. Membership.
Sec. 504. Director and staff of Commission.
Sec. 505. Powers of Commission.
Sec. 506. Termination.
Sec. 507. Payment of expenses.
Sec. 508. Consideration of Commission’s proposal.
Sec. 509. Advisory council.
Sec. 510. Amendments to the Balanced Budget and Emergency Deficit Control
Act of 1985 to limit Federal spending.
TITLE VI—ELIMINATION OF SOCIAL SECURITY EARNINGS TEST
Sec. 601. Elimination of social security earnings test.
TITLE I—FAMILY TAX CREDIT
SEC. 101. FAMILY TAX CREDIT.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 is amended by redesignating sec-
tion 35 as section 36 and by inserting after section 34
the following new section:
‘‘SEC. 35. FAMILY TAX CREDIT.
‘‘(a) GENERAL RULE.—In the case of an eligible indi-
vidual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount
equal to $500 multiplied by the number of qualifying chil-
dren of the taxpayer who have not attained the age of 18
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as of the close of the calendar year in which the taxable
year of the taxpayer begins.
‘‘(b) LIMITATION BASED ON AMOUNT OF TAX.—The
credit allowed by subsection (a) for a taxable year shall
not exceed the excess (if any) of—
‘‘(1) the sum of—
‘‘(A) the tax imposed by this subtitle for
the taxable year (reduced by the credits allow-
able against such tax other than the credits al-
lowable under this subpart), and
‘‘(B) the taxes imposed by sections 3101
and 3111 on wages received by the taxpayer
during such taxable year, over
‘‘(2) the credit allowable for the taxable year
under section 32.
‘‘(c) INFLATION ADJUSTMENTS.—
‘‘(1) IN GENERAL.—In the case of a taxable
year beginning in a calendar year after 1993, the
$500 amount contained in subsection (a) shall be in-
creased by an amount equal to—
‘‘(A) $500, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins.
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‘‘(2) ROUNDING.—If any increase determined
under paragraph (1) is not a multiple of $5, such
increase shall be rounded to the next higher multiple
of $5.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ has the meaning given to such term by
section 32(c)(1) (determined without regard to sub-
paragraph (B) thereof).
‘‘(2) QUALIFYING CHILD.—The term ‘qualifying
child’ has the meaning given to such term by section
32(c)(3) (determined without regard to subpara-
graphs (C) and (E) thereof).
‘‘(3) CERTAIN
OTHER
RULES
APPLY.—Sub-
sections (d) and (e) of section 32 shall apply.’’
(b) DENIAL OF DOUBLE BENEFIT.—Subparagraph
(A) of section 21(b)(1) (defining qualifying individual) is
amended by inserting ‘‘(other than an individual described
in section 35(a))’’ after ‘‘taxpayer’’.
(c) CONFORMING AMENDMENT.—The table of sec-
tions for such subpart C is amended by striking the item
relating to section 35 and inserting the following new
items:
‘‘Sec. 35. Family tax credit.
‘‘Sec. 36. Overpayments of tax.’’
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(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
TITLE II—REDUCING THE COST
OF CAPITAL BY REDUCING
CAPITAL GAINS TAX RATES
AND INDEXING THE BASIS OF
CERTAIN ASSETS
SEC. 201. 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.—
‘‘(1) IN GENERAL.—If a taxpayer has a net
capital gain for any taxable year, then the tax im-
posed by this section shall not exceed the sum of—
‘‘(A) a tax computed at the rates and in
the same manner as if this subsection had not
been enacted on the taxable income reduced by
the net capital gain, plus
‘‘(B) a tax equal to the sum of—
‘‘(i) 7.5 percent of so much of the net
capital gain as does not exceed—
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‘‘(I) the maximum amount of
taxable income to which the 15-per-
cent rate applies under the table ap-
plicable to the taxpayer, reduced by
‘‘(II) the taxable income to which
subparagraph (A) applies, plus
‘‘(ii) 15 percent of the net capital gain
in excess of the net capital gain to which
clause (i) applies.
For purposes of the preceding sentence, the net cap-
ital gain for any taxable year shall be reduced (but
not below zero) by the amount which the taxpayer
elects to take into account as investment income for
the taxable year under section 163(d)(4)(B)(iii).
‘‘(2) TRANSITIONAL RULE.—In the case of a
taxable year which includes January 1, 1994, the
amount of the net capital gain for purposes of para-
graph (1) shall not exceed the net capital gain deter-
mined 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) PHASE-OUT
OF PERSONAL EXEMPTIONS
AND
LIMITATION ON DEDUCTION OF ITEMIZED DEDUCTIONS
NOT TO RESULT FROM NET CAPITAL GAIN.—
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(1)(A) Subparagraphs (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) is amend-
ed by redesignating subparagraph (D) as subpara-
graph (E) and by inserting after subparagraph (C)
the following new subparagraph:
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘modi-
fied adjusted gross income’ means adjusted
gross income reduced by net capital gain.
‘‘(ii) TRANSITIONAL
RULE.—In the
case of a taxable year which includes
January 1, 1994, the amount of the net
capital gain for purposes of clause (i) 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.’’
(2) Subsection (a) of section 68 (relating to
overall limitation on itemized deductions) is amend-
ed by adding at the end the following new sentence:
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‘‘(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 or 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—
‘‘(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 preferred as to dividends and does not
participate in corporate growth to any signifi-
cant extent.
‘‘(E) STOCK IN CERTAIN CORPORATIONS.—
Stock in—
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‘‘(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-
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—
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‘‘(A) the adjusted basis of the asset, multi-
plied by
‘‘(B) the applicable inflation ratio.
‘‘(2) APPLICABLE 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
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.
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‘‘(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 prop-
erty,
‘‘(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
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
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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
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.
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‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli-
cation of section 341(a) (relating to collapsible
corporations) 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
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 this
subparagraph) 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
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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.
‘‘(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.
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‘‘(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.
‘‘(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
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‘‘(2) to increase (by reason of an adjustment
under subsection (a)) a deduction for depreciation,
depletion, or amortization,
the Secretary may disallow 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
‘‘(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 trust fund (as de-
fined in section 584(a)).
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‘‘(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.—The 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 determin-
ing 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:
‘‘(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. 205. 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.—
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‘‘(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—
‘‘(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 na-
tional product deflator’ has the meaning given such
term by section 1022(c)(3).’’
SEC. 206. 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.
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(b) INDEXING OF LOSS LIMITATION.—The amend-
ments made by section 205 shall apply to taxable years
beginning after December 31, 1993.
TITLE III—NEUTRAL COST
RECOVERY
SEC. 301. 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 the following new subsection:
‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA-
LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED
IN SERVICE
IN TAXABLE YEARS BEGINNING AFTER
DECEMBER 31, 1993.—
‘‘(1) IN
GENERAL.—In the case of tangible
property placed in service in a taxable year begin-
ning after December 31, 1993, the deduction allow-
able under this section with respect to such property
for any taxable year (after the taxable 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
ratio for such taxable year.
For purposes of subparagraph (A), paragraphs (1)
and (2) of subsection (b) shall be applied by sub-
stituting ‘150 percent’ for ‘200 percent’.
‘‘(2) APPLICABLE
NEUTRAL
COST
RECOVERY
RATIO.—For purposes of paragraph (1), the applica-
ble neutral cost recovery ratio for any taxable year
is the number determined by—
‘‘(A) dividing—
‘‘(i) 
the 
gross 
national 
product
deflator for the calendar quarter ending in
such taxable 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 full years in the period beginning on
the 1st day of the calendar quarter during
which the property was placed in service by the
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taxpayer and ending on the day before the be-
ginning of the corresponding calendar quarter
ending during such taxable year.
The applicable neutral cost recovery ratio shall not
be taken into account unless it is greater than 1.
The applicable neutral cost recovery ratio shall be
rounded to the nearest one-tenth of 1 percent.
‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—
For purposes of paragraph (2), the gross national
product deflator for any calendar quarter is the im-
plicit price deflator for the gross national product
for such quarter (as shown in the first revision
thereof).
‘‘(4) ELECTION
NOT
TO
HAVE
SUBSECTION
APPLY.—This subsection shall not apply to any
property if the taxpayer elects not to have this sub-
section apply to such property. Such an election,
once made, shall be irrevocable.’’
(b) MINIMUM TAX TREATMENT.—Paragraph (1) of
section 56(a) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(E) USE OF NEUTRAL COST RECOVERY
RATIO.—In the case of tangible property placed
in service in a taxable year beginning after De-
cember 31, 1993, the deduction allowable under
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this paragraph with respect to such property
for any taxable year (after the taxable year dur-
ing which the property is placed in service)
shall be—
‘‘(i) the amount so allowable for such
taxable year without regard to this sub-
paragraph, multiplied by
‘‘(ii) the applicable neutral cost recov-
ery ratio for such taxable year (as deter-
mined under section 168(k)).
This subparagraph shall not apply to any prop-
erty with respect to which there is an election
in effect not to have section 168(k) apply.’’
(c) DISALLOWANCE OF INTEREST DEDUCTION TO
ENSURE EQUITY FINANCING RECEIVES SAME TREAT-
MENT AS DEBT FINANCING.—Section 163 (relating to de-
duction for interest) is amended by redesignating sub-
section (k) as subsection (l) and by inserting after sub-
section (j) the following new subsection:
‘‘(k) DISALLOWANCE OF DEDUCTION FOR PROPERTY
SUBJECT TO NEUTRAL COST RECOVERY.—No deduction
shall be allowed for any amount otherwise allowable as a
deduction for interest on indebtedness incurred or contin-
ued to purchase or carry tangible property with respect
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to which an election is made under section 168(k) (relat-
ing to neutral cost recovery).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 302. SPECIAL DEPRECIATION RULES APPLICABLE
UNDER THE ADJUSTED CURRENT EARNINGS
PROVISIONS OF THE MINIMUM TAX.
(a) IN GENERAL.—Subparagraph (A) of section
56(g)(4) (relating to adjustments) is amended by adding
at the end the following new clauses:
‘‘(vi) SPECIAL
BASIS
RULES
FOR
1994.—
‘‘(I) 
IN
GENERAL.—Notwith-
standing clause (i), the adjusted basis
of any depreciable property held by
the taxpayer as of the beginning of
the taxpayer’s first taxable year be-
ginning after December 31, 1993,
shall be determined as if the provi-
sions of the last sentence of clause (i)
had also applied to taxable years be-
ginning in 1990, 1991, 1992, or
1993.
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‘‘(II) LOST
BASIS
RECOVERED
OVER 5 YEARS.—The amount deter-
mined under clause (vii) shall be al-
lowed as a deduction ratably over the
60-month period beginning with the
first month of the taxpayer’s first tax-
able year beginning after December
31, 1993.
‘‘(vii) AMOUNT OF LOST BASIS.—For
purposes of clause (vi)(II), the amount de-
termined under this clause is the excess
of—
‘‘(I) the aggregate adjusted bases
of depreciable property held by the
taxpayer as of the beginning of the
taxpayer’s first taxable year beginning
after December 31, 1993, which
would have been determined (as of
such time) under clause (i) without
regard to clause (vi), over
‘‘(II) 
the 
aggregate 
adjusted
bases of such property (as of such
time) as determined under the rules of
clause (vi).’’
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(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
TITLE 
IV—INCREASING 
NA-
TIONAL SAVINGS THROUGH
INDIVIDUAL 
RETIREMENT
PLUS ACCOUNTS, INDEXING
FOR INFLATION THE INCOME
THRESHOLDS 
FOR 
TAXING
SOCIAL SECURITY BENEFITS,
ETC.
SEC. 401. ESTABLISHMENT OF INDIVIDUAL RETIREMENT
PLUS ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. INDIVIDUAL RETIREMENT PLUS ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an individual retirement plus account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) INDIVIDUAL RETIREMENT PLUS ACCOUNT.—
For purposes of this title, the term ‘individual retirement
plus account’ means an individual retirement plan which
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is designated at the time of the establishment of the plan
as an individual retirement plus account. Such designation
shall be made in such manner as the Secretary may pre-
scribe.
‘‘(c) CONTRIBUTION RULES.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an individual retirement plus account.
‘‘(2) CONTRIBUTION LIMIT.—
‘‘(A) IN GENERAL.—Except in the case of
rollover contributions, the aggregate amount
which may be accepted as contributions to an
individual retirement plus account shall not be
greater than the excess (if any) of—
‘‘(i) the nondeductible limit with re-
spect to the individual for the taxable year
under section 408(o) (after application of
subparagraph (B)(ii) thereof), over
‘‘(ii) the designated nondeductible
contributions made by the individual for
such taxable year to 1 or more individual
retirement plans.
‘‘(B) $1,000 INCREASE AFTER 1995.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning after December 31,
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1995, the amount determined under sub-
paragraph (A)(i) (without regard to this
subparagraph) 
shall 
be 
increased 
by
$1,000.
‘‘(ii) ADJUSTMENT FOR INFLATION.—
In the case of any taxable year beginning
in a calendar year after 1997, the $1,000
amount in clause (i) shall be increased by
an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment under section 1(f)(3) for the cal-
endar year in which the taxable year
begins, determined by substituting
‘calendar year 1996’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(iii) ROUNDING.—If any amount as
adjusted under clause (ii) 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, such amount
shall be rounded to the next highest mul-
tiple of $50).
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‘‘(C) SPECIAL RULE FOR MARRIED INDI-
VIDUALS.—The nondeductible limits under sub-
paragraph (A) for an individual or for such in-
dividual’s spouse shall be an amount equal to
the excess (if any) of—
‘‘(i) the amount determined under
subparagraph (A)(i) (after application of
subparagraph (B)), over
‘‘(ii) the sum of the amount allowed
as a deduction under section 219 for con-
tributions on behalf of such individual or
such spouse, plus the amount determined
under subparagraph (A)(ii) with respect to
each.
In no event shall the sum of such limits exceed
an amount equal to the sum of the compensa-
tion includible in the individual’s and spouse’s
gross income for the taxable year, reduced by
the sum of the amounts determined under
clause (ii).
‘‘(3) CONTRIBUTIONS AFTER AGE 701⁄2.—Con-
tributions may be made by an individual to an indi-
vidual retirement plus account after such individual
has attained the age of 701⁄2.
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‘‘(4) LIMITATIONS
ON
ROLLOVER
CONTRIBU-
TIONS.—No rollover contributions may be made to
an individual retirement plus account unless such
rollover contribution is a contribution of a distribu-
tion or payment out of—
‘‘(A) another individual retirement plus ac-
count, or
‘‘(B) an individual retirement plan which is
not allocable to any amount transferred to such
plan which represented any portion of the bal-
ance to the credit of an employee in a qualified
trust (or any income allocable to such portion).
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) IN GENERAL.—Except in the case of a
qualified distribution, the rules of paragraphs (1)
and (2) of section 408(d) shall apply to any distribu-
tion from an individual retirement plus account.
‘‘(2) TREATMENT
OF
QUALIFIED
DISTRIBU-
TION.—In the case of a qualified distribution from
an individual retirement plus account—
‘‘(A) the amount of such distribution shall
not be includible in gross income, and
‘‘(B) section 72(t) shall not apply.
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‘‘(3) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ means any distribution—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of an individual) on or after the
death of the individual,
‘‘(iii) attributable to the employee’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified special pur-
pose distribution (within the meaning of
subsection (e)).
‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—
No distribution shall be treated as a qualified
distribution if—
‘‘(i) it is made within the 5-taxable
year period beginning with the 1st taxable
year in which the individual made a con-
tribution to an individual retirement plus
account, or
‘‘(ii) in the case of a distribution
properly allocable to a rollover contribution
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(or income allocable thereto), it is made
within 5 years of the date on which such
rollover contribution was made.
‘‘(4) SPECIAL RULES RELATING TO ROLLOVERS
FROM
REGULAR
INDIVIDUAL
RETIREMENT
AC-
COUNTS.—
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, any amount paid or distributed
out of an individual retirement plan on or be-
fore the earlier of—
‘‘(i) the date on which the individual
attains age 55, or
‘‘(ii) January 1, 1995,
shall not be included in gross income (and sec-
tion 72(t) shall not apply to such amount) if
the individual receiving such amount transfers,
within 60 days of receipt, the entire amount re-
ceived to an individual retirement plus account.
‘‘(B) 
TREATMENT
OF
TAX-FAVORED
AMOUNTS.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A), there shall be included
in gross income (but section 72(t) shall not
apply to) the portion of any amount trans-
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ferred which bears the same ratio to such
amount as—
‘‘(I) the aggregate amount of
contributions to individual retirement
plans with respect to which a deduc-
tion was allowable under section 219,
bears to
‘‘(II) the aggregate balance of
such plans.
‘‘(ii) TIME
FOR
INCLUSION.—Any
amount described in clause (i) shall be in-
cluded in gross income ratably over the 4-
taxable year period beginning with the tax-
able year in which the amount was paid or
distributed out of the individual retirement
plan.
‘‘(e) QUALIFIED
SPECIAL
PURPOSE
DISTRIBU-
TION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified special
purpose distribution’ means—
‘‘(A) a qualified first-time homebuyer dis-
tribution, or
‘‘(B) an applicable medical or educational
distribution.
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‘‘(2) 25 PERCENT ACCOUNT LIMIT.—A distribu-
tion shall not be treated as a qualified special pur-
pose distribution to the extent it exceeds the amount
(if any) by which—
‘‘(A) 25 percent of the sum of—
‘‘(i) the aggregate balance of individ-
ual retirement plus accounts established on
behalf of an individual, plus
‘‘(ii) the aggregate amounts previously
treated as qualified special purpose dis-
tributions, exceeds
‘‘(B) the amount determined under sub-
paragraph (A)(ii).
‘‘(3) DISTRIBUTIONS
USED
TO
PURCHASE
A
HOME BY FIRST-TIME HOMEBUYER.—For purposes
of paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘qualified
first-time homebuyer distribution’ means any
payment or distribution received by a first-time
homebuyer from an individual retirement plan
to the extent such payment or distribution is
used by the individual before the close of the
60th day after the day on which such payment
or distribution is received to pay qualified ac-
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quisition costs with respect to a principal resi-
dence for such individual.
‘‘(B) BASIS REDUCTION.—The basis of any
principal residence described in subparagraph
(A) shall be reduced by any amount excluded
from the gross income of such first-time home-
buyer by reason of this section.
‘‘(C) RECOGNITION OF GAIN AS ORDINARY
INCOME.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of this subtitle, except
as provided in clause (ii)—
‘‘(I) gain (if any) on the sale or
exchange of a principal residence to
which subparagraph (A) applies shall,
to the extent of the amount excluded
from gross income under this section,
be treated as ordinary income by such
individual, and
‘‘(II) section 72(t) shall apply to
such amount.
‘‘(ii) EXCEPTION.—Clause (i) shall
not apply to any taxable year to the extent
of any amount which, before the due date
(without extensions) for filing the return
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for such year, the taxpayer contributes to
an individual retirement plus account.
Such amount shall not be taken into ac-
count for purposes of any provision of this
title relating to excess contributions.
‘‘(iii) COORDINATION
WITH
OTHER
PROVISIONS.—In the event all or part of
the gain referred to in clause (i) is treated
as ordinary income under any other provi-
sion of this subtitle, such provision shall be
applied before clause (i).
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If—
‘‘(i) any amount is paid or distributed
from an individual retirement plus account
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, such amount cannot
be so used,
the amount so paid or distributed may be paid
into an individual retirement plus account as
provided in section 408(d)(3)(A)(i) without re-
gard to section 408(d)(3)(B), and, if so paid
into such other plan, such amount shall not be
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taken into account in determining whether sec-
tion 408(d)(3)(A)(i) applies to any other
amount.
‘‘(E) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) 
QUALIFIED
ACQUISITION
COSTS.—The term ‘qualified acquisition
costs’ means the costs of acquiring, con-
structing, or reconstructing a residence.
Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(ii) 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 3-year period ending on the
date of acquisition of the principal resi-
dence to which this paragraph applies.
‘‘(iii) PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iv) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
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‘‘(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.
‘‘(4) APPLICABLE MEDICAL DISTRIBUTIONS.—
For purposes of paragraph (1), the term ‘applicable
medical distributions’ means any distributions made
to an individual (not otherwise taken into account
under this subsection) to the extent such distribu-
tions do not exceed the amount allowable as a de-
duction under section 213 for amounts paid during
the taxable year for medical care (without regard to
whether the individual itemized deductions for the
taxable year).
‘‘(5) DISTRIBUTIONS
FROM
INDIVIDUAL
RE-
TIREMENT PLUS ACCOUNTS FOR EDUCATIONAL EX-
PENSES.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘applicable educational dis-
tributions’ means distributions to an individual
to the extent that the amount of such distribu-
tions (not otherwise treated as qualified special
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purpose distributions, determined after applica-
tion of paragraph (4)) does not exceed the
qualified higher education expenses of the indi-
vidual for the taxable year.
‘‘(B) QUALIFIED HIGHER EDUCATION EX-
PENSES.—For purposes of subparagraph (A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied higher education expenses’ means tui-
tion, 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 de-
fined in section 151(c)(3)) or grand-
child,
at an eligible educational institution (as
defined in section 135(c)(3)).
‘‘(ii) COORDINATION
WITH
SAVINGS
BOND PROVISIONS.—The amount of quali-
fied higher education expenses for any tax-
able year shall be reduced by any amount
excludable from gross income under section
135.
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‘‘(f) ROLLOVER CONTRIBUTIONS.—For purposes of
this section, the term ‘rollover contributions’ means con-
tributions described in sections 402(a)(5), 402(a)(7),
403(a)(4), 403(b)(8), and 408(d)(3).
‘‘(g) DETERMINATIONS.—For purposes of this sec-
tion, any determinations with respect to aggregate con-
tributions to, or the balance of, individual retirement plus
accounts shall be made as of the close of the calendar year
preceding the calendar year in which the taxable year
begins.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part I of subchapter D of chapter
1 is amended by inserting after the item relating to section
408 the following new item:
‘‘Sec. 408A. Individual retirement plus accounts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 402. INFLATION ADJUSTMENT OF INCOME THRESH-
OLDS FOR TAXATION OF SOCIAL SECURITY
BENEFITS; INCOME FROM INDIVIDUAL RE-
TIREMENT PLANS EXCLUDED.
(a) ADJUSTMENT OF INCOME THRESHOLDS FOR IN-
FLATION.—Subsection (c) of section 86 (relating to social
security and tier 1 railroad retirement benefits) is amend-
ed by adding at the end the following new paragraph:
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the bill to be engrossed, certified, and transmitted to the
other House of Congress within one calendar day after the
bill is agreed to.
(c)(1) A bill transmitted to the House of Representa-
tives or the Senate pursuant to subsection (b) shall be
placed upon the appropriate calendar.
(2) A vote on final passage of a bill transmitted to
that House shall be taken on or before the close of the
7th legislative day in that House after the date on which
the bill is transmitted. If the bill is agreed to in that
House, the Clerk of the House of Representatives (in the
case of a bill agreed to in the House of Representatives)
or the Secretary of the Senate (in the case of a bill agreed
to in the Senate) shall cause the engrossed bill to be re-
turned to the House.
(d)(1) A motion in the House of Representatives to
proceed to the consideration of a bill under this section
shall be highly privileged and not debatable. An amend-
ment to the motion shall not be in order, nor shall it be
in order to move to reconsider the vote by which the mo-
tion is agreed to or disagreed to.
(2) Debate in the House of Representatives on a bill
under this section shall not exceed 4 hours, which shall
be divided equally between those favoring and those oppos-
ing the bill. A motion further to limit debate shall not be