H. R. 2488—198 
‘‘(2) to exclude certain forward contracts which do not 
convey substantially all of the economic return with respect 
to a financial asset.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for part IV 
of subchapter P of chapter 1 is amended by adding at the end 
the following new item: 
‘‘Sec. 1260. Gains from constructive ownership transactions.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to transactions entered into after July 11, 1999. 
SEC. 1507. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS 
FOR RETIREE HEALTH BENEFITS. 
(a) EXTENSION.— 
(1) IN GENERAL.—Paragraph (5) of section 420(b) (relating 
to expiration) is amended by striking ‘‘in any taxable year 
beginning after December 31, 2000’’ and inserting ‘‘made after 
September 30, 2009’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 101(e)(3) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1021(e)(3)) is 
amended by striking ‘‘1995’’ and inserting ‘‘2001’’. 
(B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) 
is amended by striking ‘‘1995’’ and inserting ‘‘2001’’. 
(C) Paragraph (13) of section 408(b) of such Act (29 
U.S.C. 1108(b)(13)) is amended— 
(i) by striking ‘‘in a taxable year beginning before 
January 1, 2001’’ and inserting ‘‘made before October 
1, 2009’’, and 
(ii) by striking ‘‘1995’’ and inserting ‘‘2001’’. 
(b) APPLICATION OF MINIMUM COST REQUIREMENTS.— 
(1) IN
GENERAL.—Paragraph (3) of section 420(c) is 
amended to read as follows: 
‘‘(3) MINIMUM COST REQUIREMENTS.— 
‘‘(A) IN GENERAL.—The requirements of this paragraph 
are met if each group health plan or arrangement under 
which applicable health benefits are provided provides that 
the applicable employer cost for each taxable year during 
the cost maintenance period shall not be less than the 
higher of the applicable employer costs for each of the 
2 taxable years immediately preceding the taxable year 
of the qualified transfer. 
‘‘(B) APPLICABLE EMPLOYER COST.—For purposes of this 
paragraph, the term ‘applicable employer cost’ means, with 
respect to any taxable year, the amount determined by 
dividing— 
‘‘(i) the qualified current retiree health liabilities 
of the employer for such taxable year determined— 
‘‘(I) without regard to any reduction under 
subsection (e)(1)(B), and 
‘‘(II) in the case of a taxable year in which 
there was no qualified transfer, in the same 
manner as if there had been such a transfer at 
the end of the taxable year, by 
‘‘(ii) the number of individuals to whom coverage 
for applicable health benefits was provided during such 
taxable year. 
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H. R. 2488—199 
‘‘(C) ELECTION
TO
COMPUTE
COST
SEPARATELY.—An 
employer may elect to have this paragraph applied sepa-
rately with respect to individuals eligible for benefits under 
title XVIII of the Social Security Act at any time during 
the taxable year and with respect to individuals not so 
eligible. 
‘‘(D) COST MAINTENANCE PERIOD.—For purposes of this 
paragraph, the term ‘cost maintenance period’ means the 
period of 5 taxable years beginning with the taxable year 
in which the qualified transfer occurs. If a taxable year 
is in two or more overlapping cost maintenance periods, 
this paragraph shall be applied by taking into account 
the highest applicable employer cost required to be provided 
under subparagraph (A) for such taxable year.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Clause (iii) of section 420(b)(1)(C) is amended by 
striking ‘‘benefits’’ and inserting ‘‘cost’’. 
(B) Subparagraph (D) of section 420(e)(1) is amended 
by striking ‘‘and shall not be subject to the minimum 
benefit requirements of subsection (c)(3)’’ and inserting ‘‘or 
in calculating applicable employer cost under subsection 
(c)(3)(B)’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to qualified transfers occurring after the date of 
the enactment of this Act. 
(2) TRANSITION RULE.—If the cost maintenance period for 
any qualified transfer after the date of the enactment of this 
Act includes any portion of a benefit maintenance period for 
any qualified transfer on or before such date, the amendments 
made by subsection (b) shall not apply to such portion of the 
cost maintenance period (and such portion shall be treated 
as a benefit maintenance period). 
SEC. 1508. MODIFICATION OF INSTALLMENT METHOD AND REPEAL 
OF INSTALLMENT METHOD FOR ACCRUAL METHOD TAX-
PAYERS. 
(a) REPEAL OF INSTALLMENT METHOD FOR ACCRUAL BASIS TAX-
PAYERS.— 
(1) IN GENERAL.—Subsection (a) of section 453 (relating 
to installment method) is amended to read as follows: 
‘‘(a) USE OF INSTALLMENT METHOD.— 
‘‘(1) IN GENERAL.—Except as otherwise provided in this 
section, income from an installment sale shall be taken into 
account for purposes of this title under the installment method. 
‘‘(2) ACCRUAL METHOD TAXPAYER.—The installment method 
shall not apply to income from an installment sale if such 
income would be reported under an accrual method of 
accounting without regard to this section. The preceding sen-
tence shall not apply to a disposition described in subparagraph 
(A) or (B) of subsection (l)(2).’’. 
(2) 
CONFORMING
AMENDMENTS.—Sections 
453(d)(1), 
453(i)(1), and 453(k) are each amended by striking ‘‘(a)’’ each 
place it appears and inserting ‘‘(a)(1)’’. 
(b) MODIFICATION OF PLEDGE RULES.—Paragraph (4) of section 
453A(d) (relating to pledges, etc., of installment obligations) is 
amended by adding at the end the following: ‘‘A payment shall 
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H. R. 2488—200 
be treated as directly secured by an interest in an installment 
obligation to the extent an arrangement allows the taxpayer to 
satisfy all or a portion of the indebtedness with the installment 
obligation.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to sales or other dispositions occurring on or after 
the date of the enactment of this Act. 
SEC. 1509. LIMITATION ON USE OF NONACCRUAL EXPERIENCE 
METHOD OF ACCOUNTING. 
(a) IN GENERAL.—Section 448(d)(5) (relating to special rule 
for services) is amended— 
(1) by inserting ‘‘in fields described in paragraph (2)(A)’’ 
after ‘‘services by such person’’, and 
(2) by inserting ‘‘CERTAIN PERSONAL’’ before ‘‘SERVICES’’ in 
the heading. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to taxable years ending after the date of the enact-
ment of this Act. 
(2) CHANGE IN METHOD OF ACCOUNTING.—In the case of 
any taxpayer required by the amendments made by this section 
to change its method of accounting for its first taxable year 
ending after the date of the enactment of this Act— 
(A) such change shall be treated as initiated by the 
taxpayer, 
(B) such change shall be treated as made with the 
consent of the Secretary of the Treasury, and 
(C) the net amount of the adjustments required to 
be taken into account by the taxpayer under section 481 
of the Internal Revenue Code of 1986 shall be taken into 
account over a period (not greater than 4 taxable years) 
beginning with such first taxable year. 
SEC. 1510. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, 
AND ENDOWMENT CONTRACTS. 
(a) IN GENERAL.—Subsection (f ) of section 170 (relating to 
disallowance of deduction in certain cases and special rules) is 
amended by adding at the end the following new paragraph: 
‘‘(10) SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOW-
MENT CONTRACTS.— 
‘‘(A) IN GENERAL.—Nothing in this section or in section 
545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall 
be construed to allow a deduction, and no deduction shall 
be allowed, for any transfer to or for the use of an organiza-
tion described in subsection (c) if in connection with such 
transfer— 
‘‘(i) the organization directly or indirectly pays, 
or has previously paid, any premium on any personal 
benefit contract with respect to the transferor, or 
‘‘(ii) there is an understanding or expectation that 
any person will directly or indirectly pay any premium 
on any personal benefit contract with respect to the 
transferor. 
‘‘(B) PERSONAL BENEFIT CONTRACT.—For purposes of 
subparagraph (A), the term ‘personal benefit contract’ 
means, with respect to the transferor, any life insurance, 
annuity, or endowment contract if any direct or indirect 
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H. R. 2488—201 
beneficiary under such contract is the transferor, any 
member of the transferor’s family, or any other person 
(other than an organization described in subsection (c)) 
designated by the transferor. 
‘‘(C) APPLICATION TO CHARITABLE REMAINDER TRUSTS.— 
In the case of a transfer to a trust referred to in subpara-
graph (E), references in subparagraphs (A) and (F) to an 
organization described in subsection (c) shall be treated 
as a reference to such trust. 
‘‘(D) EXCEPTION FOR CERTAIN ANNUITY CONTRACTS.— 
If, in connection with a transfer to or for the use of an 
organization described in subsection (c), such organization 
incurs an obligation to pay a charitable gift annuity (as 
defined in section 501(m)) and such organization purchases 
any annuity contract to fund such obligation, persons 
receiving payments under the charitable gift annuity shall 
not be treated for purposes of subparagraph (B) as indirect 
beneficiaries under such contract if— 
‘‘(i) such organization possesses all of the incidents 
of ownership under such contract, 
‘‘(ii) such organization is entitled to all the pay-
ments under such contract, and 
‘‘(iii) the timing and amount of payments under 
such contract are substantially the same as the timing 
and amount of payments to each such person under 
such obligation (as such obligation is in effect at the 
time of such transfer). 
‘‘(E) EXCEPTION
FOR
CERTAIN
CONTRACTS
HELD
BY 
CHARITABLE
REMAINDER
TRUSTS.—A person shall not be 
treated for purposes of subparagraph (B) as an indirect 
beneficiary under any life insurance, annuity, or endow-
ment contract held by a charitable remainder annuity trust 
or a charitable remainder unitrust (as defined in section 
664(d)) solely by reason of being entitled to any payment 
referred to in paragraph (1)(A) or (2)(A) of section 664(d) 
if— 
‘‘(i) such trust possesses all of the incidents of 
ownership under such contract, and 
‘‘(ii) such trust is entitled to all the payments 
under such contract. 
‘‘(F) EXCISE TAX ON PREMIUMS PAID.— 
‘‘(i) IN GENERAL.—There is hereby imposed on any 
organization described in subsection (c) an excise tax 
equal to the premiums paid by such organization on 
any life insurance, annuity, or endowment contract 
if the payment of premiums on such contract is in 
connection with a transfer for which a deduction is 
not allowable under subparagraph (A), determined 
without regard to when such transfer is made. 
‘‘(ii) PAYMENTS BY OTHER PERSONS.—For purposes 
of clause (i), payments made by any other person 
pursuant to an understanding or expectation referred 
to in subparagraph (A) shall be treated as made by 
the organization. 
‘‘(iii) REPORTING.—Any organization on which tax 
is imposed by clause (i) with respect to any premium 
shall file an annual return which includes— 
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