H. R. 1180—52
SEC. 405. AUTHORIZATION FOR STATE TO PERMIT ANNUAL WAGE
REPORTS.
(a) IN GENERAL.—Section 1137(a)(3) of the Social Security Act
(42 U.S.C. 1320b–7(a)(3)) is amended by inserting before the semi-
colon the following: ‘‘, and except that in the case of wage reports
with respect to domestic service employment, a State may permit
employers (as so defined) that make returns with respect to such
employment on a calendar year basis pursuant to section 3510
of the Internal Revenue Code of 1986 to make such reports on
an annual basis’’.
(b) TECHNICAL AMENDMENTS.—Section 1137(a)(3) of the Social
Security Act (42 U.S.C. 1320b–7(a)(3)) is amended—
(1) by striking ‘‘(as defined in section 453A(a)(2)(B)(iii))’’;
and
(2) by inserting ‘‘(as defined in section 453A(a)(2)(B))’’ after
‘‘employers’’ .
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to wage reports required to be submitted on and after
the date of the enactment of this Act.
SEC. 406. ASSESSMENT ON ATTORNEYS WHO RECEIVE THEIR FEES
VIA THE SOCIAL SECURITY ADMINISTRATION.
(a) ASSESSMENT ON ATTORNEYS.—
(1) IN GENERAL.—Section 206 of the Social Security Act
(42 U.S.C. 406) is amended by adding at the end the following
new subsection:
‘‘(d) ASSESSMENT ON ATTORNEYS.—
‘‘(1) IN GENERAL.—Whenever a fee for services is required
to be certified for payment to an attorney from a claimant’s
past-due benefits pursuant to subsection (a)(4) or (b)(1), the
Commissioner shall impose on the attorney an assessment cal-
culated in accordance with paragraph (2).
‘‘(2) AMOUNT.—
‘‘(A) The amount of an assessment under paragraph
(1) shall be equal to the product obtained by multiplying
the amount of the representative’s fee that would be
required to be so certified by subsection (a)(4) or (b)(1)
before the application of this subsection, by the percentage
specified in subparagraph (B).
‘‘(B) The percentage specified in this subparagraph is—
‘‘(i) for calendar years before 2001, 6.3 percent,
and
‘‘(ii) for calendar years after 2000, such percentage
rate as the Commissioner determines is necessary in
order to achieve full recovery of the costs of deter-
mining and certifying fees to attorneys from the past-
due benefits of claimants, but not in excess of 6.3
percent.
‘‘(3) COLLECTION.—The Commissioner may collect the
assessment imposed on an attorney under paragraph (1) by
offset from the amount of the fee otherwise required by sub-
section (a)(4) or (b)(1) to be certified for payment to the attorney
from a claimant’s past-due benefits.
‘‘(4) PROHIBITION
ON
CLAIMANT
REIMBURSEMENT.—An
attorney subject to an assessment under paragraph (1) may
not, directly or indirectly, request or otherwise obtain
H. R. 1180—53
reimbursement for such assessment from the claimant whose
claim gave rise to the assessment.
‘‘(5) DISPOSITION OF ASSESSMENTS.—Assessments on attor-
neys collected under this subsection shall be credited to the
Federal Old-Age and Survivors Insurance Trust Fund and the
Federal Disability Insurance Trust Fund, as appropriate.
‘‘(6) AUTHORIZATION OF APPROPRIATIONS.—The assessments
authorized under this section shall be collected and available
for obligation only to the extent and in the amount provided
in advance in appropriations Acts. Amounts so appropriated
are authorized to remain available until expended, for adminis-
trative expenses in carrying out this title and related laws.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 206(a)(4)(A) of such Act (42 U.S.C.
406(a)(4)(A)) is amended by inserting ‘‘and subsection (d)’’
after ‘‘subparagraph (B)’’.
(B) Section 206(b)(1)(A) of such Act (42 U.S.C.
406(b)(1)(A)) is amended by inserting ‘‘, but subject to sub-
section (d) of this section’’ after ‘‘section 205(i)’’.
(b) ELIMINATION
OF 15-DAY WAITING PERIOD
FOR PAYMENT
OF FEES.—Section 206(a)(4) of such Act (42 U.S.C. 406(a)(4)), as
amended by subsection (a)(2)(A) of this section, is amended—
(1) by striking ‘‘(4)(A)’’ and inserting ‘‘(4)’’;
(2) by striking ‘‘subparagraph (B) and’’; and
(3) by striking subparagraph (B).
(c) GAO STUDY AND REPORT.—
(1) STUDY.—The Comptroller General of the United States
shall conduct a study that—
(A) examines the costs incurred by the Social Security
Administration in administering the provisions of sub-
section (a)(4) and (b)(1) of section 206 of the Social Security
Act (42 U.S.C. 406) and itemizes the components of such
costs, including the costs of determining fees to attorneys
from the past-due benefits of claimants before the Commis-
sioner of Social Security and of certifying such fees;
(B) identifies efficiencies that the Social Security
Administration could implement to reduce such costs;
(C) examines the feasibility and advisability of linking
the payment of, or the amount of, the assessment under
section 206(d) of the Social Security Act (42 U.S.C. 406(d))
to the timeliness of the payment of the fee to the attorney
as certified by the Commissioner of Social Security pursu-
ant to subsection (a)(4) or (b)(1) of section 206 of such
Act (42 U.S.C. 406);
(D) determines whether the provisions of subsection
(a)(4) and (b)(1) of section 206 of such Act (42 U.S.C.
406) should be applied to claimants under title XVI of
such Act (42 U.S.C 1381 et seq.);
(E) determines the feasibility and advisability of
stating fees under section 206(d) of such Act (42 U.S.C.
406(d)) in terms of a fixed dollar amount as opposed to
a percentage;
(F) determines whether the dollar limit specified in
section 
206(a)(2)(A)(ii)(II) 
of 
such 
Act 
(42 
U.S.C.
406(a)(2)(A)(ii)(II)) should be raised; and
(G) determines whether the assessment on attorneys
required under section 206(d) of such Act (42 U.S.C. 406(d))
H. R. 1180—54
(as added by subsection (a)(1) of this section) impairs access
to legal representation for claimants.
(2) REPORT.—Not later than 1 year after the date of the
enactment of this Act, the Comptroller General of the United
States shall submit a report to the Committee on Ways and
Means of the House of Representatives and the Committee
on Finance of the Senate on the study conducted under para-
graph (1), together with any recommendations for legislation
that the Comptroller General determines to be appropriate
as a result of such study.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply in the case of any attorney with respect to whom
a fee for services is required to be certified for payment from
a claimant’s past-due benefits pursuant to subsection (a)(4) or (b)(1)
of section 206 of the Social Security Act after the later of—
(1) December 31, 1999, or
(2) the last day of the first month beginning after the
month in which this Act is enacted.
SEC. 407. EXTENSION OF AUTHORITY OF STATE MEDICAID FRAUD CON-
TROL UNITS.
(a) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE
FRAUD
IN OTHER FEDERAL HEALTH CARE PROGRAMS.—Section
1903(q)(3) of the Social Security Act (42 U.S.C. 1396b(q)(3)) is
amended—
(1) by inserting ‘‘(A)’’ after ‘‘in connection with’’; and
(2) by striking ‘‘title.’’ and inserting ‘‘title; and (B) upon
the approval of the Inspector General of the relevant Federal
agency, any aspect of the provision of health care services
and activities of providers of such services under any Federal
health care program (as defined in section 1128B(f )(1)), if the
suspected fraud or violation of law in such case or investigation
is primarily related to the State plan under this title.’’.
(b) RECOUPMENT OF FUNDS.—Section 1903(q)(5) of such Act
(42 U.S.C. 1396b(q)(5)) is amended—
(1) by inserting ‘‘or under any Federal health care program
(as so defined)’’ after ‘‘plan’’; and
(2) by adding at the end the following: ‘‘All funds collected
in accordance with this paragraph shall be credited exclusively
to, and available for expenditure under, the Federal health
care program (including the State plan under this title) that
was subject to the activity that was the basis for the collection.’’.
(c) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE
RESIDENT ABUSE IN NON-MEDICAID BOARD AND CARE FACILITIES.—
Section 1903(q)(4) of such Act (42 U.S.C. 1396b(q)(4)) is amended
to read as follows:
‘‘(4)(A) The entity has—
‘‘(i) procedures for reviewing complaints of abuse or
neglect of patients in health care facilities which receive
payments under the State plan under this title;
‘‘(ii) at the option of the entity, procedures for reviewing
complaints of abuse or neglect of patients residing in board
and care facilities; and
‘‘(iii) procedures for acting upon such complaints under
the criminal laws of the State or for referring such com-
plaints to other State agencies for action.
H. R. 1180—55
‘‘(B) For purposes of this paragraph, the term ‘board and
care facility’ means a residential setting which receives pay-
ment (regardless of whether such payment is made under the
State plan under this title) from or on behalf of two or more
unrelated adults who reside in such facility, and for whom
one or both of the following is provided:
‘‘(i) Nursing care services provided by, or under the
supervision of, a registered nurse, licensed practical nurse,
or licensed nursing assistant.
‘‘(ii) A substantial amount of personal care services
that assist residents with the activities of daily living,
including personal hygiene, dressing, bathing, eating,
toileting, ambulation, transfer, positioning, self-medication,
body care, travel to medical services, essential shopping,
meal preparation, laundry, and housework.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
take effect on the date of the enactment of this Act.
SEC. 408. CLIMATE DATABASE MODERNIZATION.
Notwithstanding any other provision of law, the National Oce-
anic and Atmospheric Administration shall initiate a new competi-
tive contract procurement for its multi-year program for key entry
of valuable climate records, archive services, and database develop-
ment in accordance with existing Federal procurement laws and
regulations.
SEC. 409. SPECIAL ALLOWANCE ADJUSTMENT FOR STUDENT LOANS.
(a) AMENDMENT.—Section 438(b)(2) of the Higher Education
Act of 1965 (20 U.S.C. 1087–1(b)(2)) is amended—
(1) in subparagraph (A), by striking ‘‘(G), and (H)’’ and
inserting ‘‘(G), (H), and (I)’’;
(2) in subparagraph (B)(iv), by striking ‘‘(G), or (H)’’ and
inserting ‘‘(G), (H), or (I)’’;
(3) in subparagraph (C)(ii), by striking ‘‘(G) and (H)’’ and
inserting ‘‘(G), (H), and (I)’’;
(4) in the heading of subparagraph (H), by striking ‘‘JULY
1, 2003’’ and inserting ‘‘JANUARY 1, 2000’’;
(5) in subparagraph (H), by striking ‘‘July 1, 2003,’’ each
place it appears and inserting ‘‘January 1, 2000,’’; and
(6) by inserting after subparagraph (H) the following new
subparagraph:
‘‘(I) LOANS DISBURSED ON OR AFTER JANUARY 1, 2000,
AND BEFORE JULY 1, 2003.—
‘‘(i) IN GENERAL.—Notwithstanding subparagraphs
(G) and (H), but subject to paragraph (4) and clauses
(ii), (iii), and (iv) of this subparagraph, and except
as provided in subparagraph (B), the special allowance
paid pursuant to this subsection on loans for which
the first disbursement is made on or after January
1, 2000, and before July 1, 2003, shall be computed—
‘‘(I) by determining the average of the bond
equivalent rates of the quotes of the 3-month
commercial paper (financial) rates in effect for each
of the days in such quarter as reported by the
Federal Reserve in Publication H–15 (or its suc-
cessor) for such 3-month period;
H. R. 1180—56
‘‘(II) by subtracting the applicable interest
rates on such loans from such average bond equiva-
lent rate;
‘‘(III) by adding 2.34 percent to the resultant
percent; and
‘‘(IV) by dividing the resultant percent by 4.
‘‘(ii) IN SCHOOL AND GRACE PERIOD.—In the case
of any loan for which the first disbursement is made
on or after January 1, 2000, and before July 1, 2003,
and for which the applicable rate of interest is
described in section 427A(k)(2), clause (i)(III) of this
subparagraph shall be applied by substituting ‘1.74
percent’ for ‘2.34 percent’.
‘‘(iii) PLUS LOANS.—In the case of any loan for
which the first disbursement is made on or after
January 1, 2000, and before July 1, 2003, and for
which the applicable rate of interest is described in
section 427A(k)(3), clause (i)(III) of this subparagraph
shall be applied by substituting ‘2.64 percent’ for ‘2.34
percent’, subject to clause (v) of this subparagraph.
‘‘(iv) CONSOLIDATION LOANS.—In the case of any
consolidation loan for which the application is received
by an eligible lender on or after January 1, 2000,
and before July 1, 2003, and for which the applicable
interest rate is determined under section 427A(k)(4),
clause (i)(III) of this subparagraph shall be applied
by substituting ‘2.64 percent’ for ‘2.34 percent’, subject
to clause (vi) of this subparagraph.
‘‘(v) LIMITATION ON SPECIAL ALLOWANCES FOR PLUS
LOANS.—In the case of PLUS loans made under section
428B and first disbursed on or after January 1, 2000,
and before July 1, 2003, for which the interest rate
is determined under section 427A(k)(3), a special allow-
ance shall not be paid for such loan during any 12-
month period beginning on July 1 and ending on June
30 unless, on the June 1 preceding such July 1—
‘‘(I) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction held
prior to such June 1 (as determined by the Sec-
retary for purposes of such section); plus
‘‘(II) 3.1 percent,
exceeds 9.0 percent.
‘‘(vi) LIMITATION
ON
SPECIAL
ALLOWANCES
FOR
CONSOLIDATION LOANS.—In the case of consolidation
loans made under section 428C and for which the
application is received on or after January 1, 2000,
and before July 1, 2003, for which the interest rate
is determined under section 427A(k)(4), a special allow-
ance shall not be paid for such loan during any 3-
month period ending March 31, June 30, September
30, or December 31 unless—
‘‘(I) the average of the bond equivalent rates
of the quotes of the 3-month commercial paper
(financial) rates in effect for each of the days in
such quarter as reported by the Federal Reserve
in Publication H–15 (or its successor) for such
3-month period; plus
H. R. 1180—57
‘‘(II) 2.64 percent,
exceeds the rate determined under section 427A(k)(4).’’.
(b) EFFECTIVE DATE.—Subparagraph (I) of section 438(b)(2) of
the Higher Education Act of 1965 (20 U.S.C. 1087–1(b)(2)) as added
by subsection (a) of this section shall apply with respect to any
payment pursuant to such section with respect to any 3-month
period beginning on or after January 1, 2000, for loans for which
the first disbursement is made after such date.
SEC. 410. SCHEDULE FOR PAYMENTS UNDER SSI STATE SUPPLEMEN-
TATION AGREEMENTS.
(a) SCHEDULE FOR SSI SUPPLEMENTATION PAYMENTS.—
(1) IN GENERAL.—Section 1616(d) of the Social Security
Act (42 U.S.C. 1382e(d)) is amended—
(A) in paragraph (1), by striking ‘‘at such times and
in such installments as may be agreed upon between the
Commissioner of Social Security and such State’’ and
inserting ‘‘in accordance with paragraph (5)’’; and
(B) by adding at the end the following new paragraph:
‘‘(5)(A)(i) Any State which has entered into an agreement with
the Commissioner of Social Security under this section shall remit
the payments and fees required under this subsection with respect
to monthly benefits paid to individuals under this title no later
than—
‘‘(I) the business day preceding the date that the Commis-
sioner pays such monthly benefits; or
‘‘(II) with respect to such monthly benefits paid for the
month that is the last month of the State’s fiscal year, the
fifth business day following such date.
‘‘(ii) The Commissioner may charge States a penalty in an
amount equal to 5 percent of the payment and the fees due if
the remittance is received after the date required by clause (i).
‘‘(B) The Cash Management Improvement Act of 1990 shall
not apply to any payments or fees required under this subsection
that are paid by a State before the date required by subparagraph
(A)(i).
‘‘(C) Notwithstanding subparagraph (A)(i), the Commissioner
may make supplementary payments on behalf of a State with
funds appropriated for payment of benefits under this title, and
subsequently to be reimbursed for such payments by the State
at such times as the Commissioner and State may agree. Such
authority may be exercised only if extraordinary circumstances
affecting a State’s ability to make payment when required by
subparagraph (A)(i) are determined by the Commissioner to exist.’’.
(2) AMENDMENT TO SECTION 212.—Section 212 of Public
Law 93–66 (42 U.S.C. 1382 note) is amended—
(A) in subsection (b)(3)(A), by striking ‘‘at such times
and in such installments as may be agreed upon between
the Secretary and the State’’ and inserting ‘‘in accordance
with subparagraph (E)’’;
(B) by adding at the end of subsection (b)(3) the fol-
lowing new subparagraph:
‘‘(E)(i) Any State which has entered into an agreement with
the Commissioner of Social Security under this section shall remit
the payments and fees required under this paragraph with respect
to monthly benefits paid to individuals under title XVI of the
Social Security Act no later than—
H. R. 1180—58
‘‘(I) the business day preceding the date that the Commis-
sioner pays such monthly benefits; or
‘‘(II) with respect to such monthly benefits paid for the
month that is the last month of the State’s fiscal year, the
fifth business day following such date.
‘‘(ii) The Cash Management Improvement Act of 1990 shall
not apply to any payments or fees required under this paragraph
that are paid by a State before the date required by clause (i).
‘‘(iii) Notwithstanding clause (i), the Commissioner may make
supplementary payments on behalf of a State with funds appro-
priated for payment of supplemental security income benefits under
title XVI of the Social Security Act, and subsequently to be
reimbursed for such payments by the State at such times as the
Commissioner and State may agree. Such authority may be exer-
cised only if extraordinary circumstances affecting a State’s ability
to make payment when required by clause (i) are determined by
the Commissioner to exist.’’; and
(C) by striking ‘‘Secretary of Health, Education, and
Welfare’’ and ‘‘Secretary’’ each place such term appear and
inserting ‘‘Commissioner of Social Security’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to payments and fees arising under an agreement
between a State and the Commissioner of Social Security under
section 1616 of the Social Security Act (42 U.S.C. 1382e) or under
section 212 of Public Law 93-66 (42 U.S.C. 1382 note) with respect
to monthly benefits paid to individuals under title XVI of the
Social Security Act for months after September 2009 (October 2009
in the case of a State with a fiscal year that coincides with the
Federal fiscal year), without regard to whether the agreement has
been modified to reflect such amendments or the Commissioner
has promulgated regulations implementing such amendments.
SEC. 411. BONUS COMMODITIES.
Section 6(e)(1) of the Richard B. Russell National School Lunch
Act (42 U.S.C. 1755(e)(1)) is amended—
(1) by striking ‘‘in the form of commodity assistance’’ and
inserting ‘‘in the form of—
‘‘(A) commodity assistance’’;
(2) by striking the period at the end and inserting ‘‘; or’’;
and
(3) by adding at the end the following:
‘‘(B) during the period beginning October 1, 2000, and
ending September 30, 2009, commodities provided by the Sec-
retary under any provision of law.’’.
SEC. 412. SIMPLIFICATION OF DEFINITION OF FOSTER CHILD UNDER
EIC.
(a) IN GENERAL.—Section 32(c)(3)(B)(iii) of the Internal Revenue
Code of 1986 (defining eligible foster child) is amended by redesig-
nating subclauses (I) and (II) as subclauses (II) and (III), respec-
tively, and by inserting before subclause (II), as so redesignated,
the following:
‘‘(I) is a brother, sister, stepbrother, or step-
sister of the taxpayer (or a descendant of any
such relative) or is placed with the taxpayer by
an authorized placement agency,’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1999.
H. R. 1180—59
SEC. 413. DELAY OF EFFECTIVE DATE OF ORGAN PROCUREMENT AND
TRANSPLANTATION NETWORK FINAL RULE.
(a) IN GENERAL.—The final rule entitled ‘‘Organ Procurement
and Transplantation Network’’, promulgated by the Secretary of
Health and Human Services on April 2, 1998 (63 Fed. Reg. 16295
et seq.) (relating to part 121 of title 42, Code of Federal Regulations),
together with the amendments to such rules promulgated on
October 20, 1999 (64 Fed. Reg. 56649 et seq.) shall not become
effective before the expiration of the 90-day period beginning on
the date of the enactment of this Act.
(b) NOTICE AND REVIEW.—For purposes of subsection (a):
(1) Not later than 3 days after the date of the enactment
of this Act, the Secretary of Health and Human Services
(referred to in this subsection as the ‘‘Secretary’’) shall publish
in the Federal Register a notice providing that the period
within which comments on the final rule may be submitted
to the Secretary is 60 days after the date of such publication
of the notice.
(2) Not later than 21 days after the expiration of such
60-day period, the Secretary shall complete the review of the
comments submitted pursuant to paragraph (1) and shall
amend the final rule with any revisions appropriate according
to the review by the Secretary of such comments. The final
rule may be in the form of amendments to the rule referred
to in subsection (a) that was promulgated on April 2, 1998,
and in the form of amendments to the rule referred to in
such subsection that was promulgated on October 20, 1999.
TITLE V—TAX RELIEF EXTENSION ACT
OF 1999
SEC. 500. SHORT TITLE OF TITLE.
This title may be cited as the ‘‘Tax Relief Extension Act of
1999’’.
Subtitle A—Extensions
SEC. 501. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS
AGAINST REGULAR AND MINIMUM TAX LIABILITY.
(a) IN GENERAL.—Subsection (a) of section 26 of the Internal
Revenue Code of 1986 (relating to limitation based on amount
of tax) is amended to read as follows:
‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The aggregate amount of credits allowed
by this subpart for the taxable year shall not exceed the excess
(if any) of—
‘‘(A) the taxpayer’s regular tax liability for the taxable
year, over
‘‘(B) the tentative minimum tax for the taxable year
(determined without regard to the alternative minimum
tax foreign tax credit).
For purposes of subparagraph (B), the taxpayer’s tentative min-
imum tax for any taxable year beginning during 1999 shall
be treated as being zero.’’.
H. R. 1180—60
‘‘(2) SPECIAL
RULE
FOR
2000
AND
2001.—For purposes of
any taxable year beginning during 2000 or 2001, the aggregate
amount of credits allowed by this subpart for the taxable year
shall not exceed the sum of—
‘‘(A) the taxpayer’s regular tax liability for the taxable
year reduced by the foreign tax credit allowable under
section 27(a), and
‘‘(B) the tax imposed by section 55(a) for the taxable
year.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 24(d)(2) of such Code is amended by striking
‘‘1998’’ and inserting ‘‘2001’’.
(2) Section 904(h) of such Code is amended by adding
at the end the following: ‘‘This subsection shall not apply to
taxable years beginning during 2000 or 2001.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1998.
SEC. 502. RESEARCH CREDIT.
(a) EXTENSION.—
(1) IN
GENERAL.—Paragraph (1) of section 41(h) of the
Internal Revenue Code of 1986 (relating to termination) is
amended—
(A) by striking ‘‘June 30, 1999’’ and inserting ‘‘June
30, 2004’’; and
(B) by striking the material following subparagraph
(B).
(2) TECHNICAL AMENDMENT.—Subparagraph (D) of section
45C(b)(1) of such Code is amended by striking ‘‘June 30, 1999’’
and inserting ‘‘June 30, 2004’’.
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to amounts paid or incurred after June
30, 1999.
(b) INCREASE
IN PERCENTAGES UNDER ALTERNATIVE INCRE-
MENTAL CREDIT.—
(1) IN GENERAL.—Subparagraph (A) of section 41(c)(4) of
such Code is amended—
(A) by striking ‘‘1.65 percent’’ and inserting ‘‘2.65 per-
cent’’;
(B) by striking ‘‘2.2 percent’’ and inserting ‘‘3.2 per-
cent’’; and
(C) by striking ‘‘2.75 percent’’ and inserting ‘‘3.75 per-
cent’’.
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to taxable years beginning after June 30,
1999.
(c) EXTENSION OF RESEARCH CREDIT TO RESEARCH IN PUERTO
RICO AND THE POSSESSIONS OF THE UNITED STATES.—
(1) IN GENERAL.—Subsections (c)(6) and (d)(4)(F) of section
41 of such Code (relating to foreign research) are each amended
by inserting ‘‘, the Commonwealth of Puerto Rico, or any posses-
sion of the United States’’ after ‘‘United States’’.
(2) DENIAL OF DOUBLE BENEFIT.—Section 280C(c)(1) of such
Code is amended by inserting ‘‘or credit’’ after ‘‘deduction’’
each place it appears.
H. R. 1180—61
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to amounts paid or incurred after June
30, 1999.
(d) SPECIAL RULE.—
(1) IN GENERAL.—For purposes of the Internal Revenue
Code of 1986, the credit determined under section 41 of such
Code which is otherwise allowable under such Code—
(A) shall not be taken into account prior to October
1, 2000, to the extent such credit is attributable to the
first suspension period; and
(B) shall not be taken into account prior to October
1, 2001, to the extent such credit is attributable to the
second suspension period.
On or after the earliest date that an amount of credit may
be taken into account, such amount may be taken into account
through the filing of an amended return, an application for
expedited refund, an adjustment of estimated taxes, or other
means allowed by such Code.
(2) SUSPENSION PERIODS.—For purposes of this subsection—
(A) the first suspension period is the period beginning
on July 1, 1999, and ending on September 30, 2000; and
(B) the second suspension period is the period begin-
ning on October 1, 2000, and ending on September 30,
2001.
(3) EXPEDITED REFUNDS.—
(A) IN GENERAL.—If there is an overpayment of tax
with respect to a taxable year by reason of paragraph
(1), the taxpayer may file an application for a tentative
refund of such overpayment. Such application shall be in
such manner and form, and contain such information, as
the Secretary may prescribe.
(B) DEADLINE FOR APPLICATIONS.—Subparagraph (A)
shall apply only to an application filed before the date
which is 1 year after the close of the suspension period
to which the application relates.
(C) ALLOWANCE OF ADJUSTMENTS.—Not later than 90
days after the date on which an application is filed under
this paragraph, the Secretary shall—
(i) review the application;
(ii) determine the amount of the overpayment; and
(iii) apply, credit, or refund such overpayment,
in a manner similar to the manner provided in section
6411(b) of such Code.
(D) CONSOLIDATED RETURNS.—The provisions of section
6411(c) of such Code shall apply to an adjustment under
this paragraph in such manner as the Secretary may pro-
vide.
(4) CREDIT ATTRIBUTABLE TO SUSPENSION PERIOD.—
(A) IN GENERAL.—For purposes of this subsection, in
the case of a taxable year which includes a portion of
the suspension period, the amount of credit determined
under section 41 of such Code for such taxable year which
is attributable to such period is the amount which bears
the same ratio to the amount of credit determined under
such section 41 for such taxable year as the number of
months in the suspension period which are during such
H. R. 1180—62
taxable year bears to the number of months in such taxable
year.
(B) WAIVER OF ESTIMATED TAX PENALTIES.—No addition
to tax shall be made under section 6654 or 6655 of such
Code for any period before July 1, 1999, with respect to
any underpayment of tax imposed by such Code to the
extent such underpayment was created or increased by
reason of subparagraph (A).
(5) SECRETARY.—For purposes of this subsection, the term
‘‘Secretary’’ means the Secretary of the Treasury (or such Sec-
retary’s delegate).
SEC. 503. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.
(a) IN GENERAL.—Sections 953(e)(10) and 954(h)(9) of the
Internal Revenue Code of 1986 (relating to application) are each
amended—
(1) by striking ‘‘the first taxable year’’ and inserting ‘‘tax-
able years’’;
(2) by striking ‘‘January 1, 2000’’ and inserting ‘‘January
1, 2002’’; and
(3) by striking ‘‘within which such’’ and inserting ‘‘within
which any such’’.
(b) TECHNICAL AMENDMENT.—Paragraph (10) of section 953(e)
of such Code is amended by adding at the end the following new
sentence: ‘‘If this subsection does not apply to a taxable year of
a foreign corporation beginning after December 31, 2001 (and tax-
able years of United States shareholders ending with or within
such taxable year), then, notwithstanding the preceding sentence,
subsection (a) shall be applied to such taxable years in the same
manner as it would if the taxable year of the foreign corporation
began in 1998.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1999.
SEC. 504. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR
MARGINAL PRODUCTION.
(a) IN GENERAL.—Subparagraph (H) of section 613A(c)(6) of
the Internal Revenue Code of 1986 (relating to temporary suspen-
sion of taxable limit with respect to marginal production) is
amended by striking ‘‘January 1, 2000’’ and inserting ‘‘January
1, 2002’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1999.
SEC. 505. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK
CREDIT.
(a) TEMPORARY EXTENSION.—Sections 51(c)(4)(B) and 51A(f )
of the Internal Revenue Code of 1986 (relating to termination)
are each amended by striking ‘‘June 30, 1999’’ and inserting
‘‘December 31, 2001’’.
(b) CLARIFICATION OF FIRST YEAR OF EMPLOYMENT.—Paragraph
(2) of section 51(i) of such Code is amended by striking ‘‘during
which he was not a member of a targeted group’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to individuals who begin work for the employer after
June 30, 1999.
H. R. 1180—63
SEC. 506. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.
(a) IN GENERAL.—Subsection (d) of section 127 of the Internal
Revenue Code of 1986 (relating to termination) is amended by
striking ‘‘May 31, 2000’’ and inserting ‘‘December 31, 2001’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to courses beginning after May 31, 2000.
SEC. 507. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING
ELECTRICITY FROM CERTAIN RENEWABLE RESOURCES.
(a) EXTENSION
AND
MODIFICATION
OF
PLACED-IN-SERVICE
RULES.—Paragraph (3) of section 45(c) of the Internal Revenue
Code of 1986 is amended to read as follows:
‘‘(3) QUALIFIED FACILITY.—
‘‘(A) WIND FACILITY.—In the case of a facility using
wind to produce electricity, the term ‘qualified facility’
means any facility owned by the taxpayer which is origi-
nally placed in service after December 31, 1993, and before
January 1, 2002.
‘‘(B) CLOSED-LOOP BIOMASS FACILITY.—In the case of
a facility using closed-loop biomass to produce electricity,
the term ‘qualified facility’ means any facility owned by
the taxpayer which is originally placed in service after
December 31, 1992, and before January 1, 2002.
‘‘(C) POULTRY WASTE FACILITY.—In the case of a facility
using poultry waste to produce electricity, the term ‘quali-
fied facility’ means any facility of the taxpayer which is
originally placed in service after December 31, 1999, and
before January 1, 2002.’’.
(b) EXPANSION OF QUALIFIED ENERGY RESOURCES.—
(1) IN GENERAL.—Section 45(c)(1) of such Code (defining
qualified energy resources) is amended by striking ‘‘and’’ at
the end of subparagraph (A), by striking the period at the
end of subparagraph (B) and inserting ‘‘, and’’, and by adding
at the end the following new subparagraph:
‘‘(C) poultry waste.’’.
(2) DEFINITION.—Section 45(c) of such Code is amended
by adding at the end the following new paragraph:
‘‘(4) POULTRY
WASTE.—The term ‘poultry waste’ means
poultry manure and litter, including wood shavings, straw,
rice hulls, and other bedding material for the disposition of
manure.’’.
(c) SPECIAL RULES.—Section 45(d) of such Code (relating to
definitions and special rules) is amended by adding at the end
the following new paragraphs:
‘‘(6) CREDIT
ELIGIBILITY
IN
THE
CASE
OF
GOVERNMENT-
OWNED FACILITIES USING POULTRY WASTE.—In the case of a
facility using poultry waste to produce electricity and owned
by a governmental unit, the person eligible for the credit under
subsection (a) is the lessee or the operator of such facility.
‘‘(7) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES
UNDER CERTAIN CONTRACTS.—
‘‘(A) IN GENERAL.—The credit determined under sub-
section (a) shall not apply to electricity—
‘‘(i) produced at a qualified facility described in
paragraph (3)(A) which is placed in service by the
taxpayer after June 30, 1999, and
H. R. 1180—64
‘‘(ii) sold to a utility pursuant to a contract origi-
nally entered into before January 1, 1987 (whether
or not amended or restated after that date).
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply
if—
‘‘(i) the prices for energy and capacity from such
facility are established pursuant to an amendment to
the contract referred to in subparagraph (A)(ii),
‘‘(ii) such amendment provides that the prices set
forth in the contract which exceed avoided cost prices
determined at the time of delivery shall apply only
to annual quantities of electricity (prorated for partial
years) which do not exceed the greater of—
‘‘(I) the average annual quantity of electricity
sold to the utility under the contract during cal-
endar years 1994, 1995, 1996, 1997, and 1998,
or
‘‘(II) the estimate of the annual electricity
production set forth in the contract, or, if there
is no such estimate, the greatest annual quantity
of electricity sold to the utility under the contract
in any of the calendar years 1996, 1997, or 1998,
and
‘‘(iii) such amendment provides that energy and
capacity in excess of the limitation in clause (ii) may
be—
‘‘(I) sold to the utility only at prices that do
not exceed avoided cost prices determined at the
time of delivery, or
‘‘(II) sold to a third party subject to a mutually
agreed upon advance notice to the utility.
For purposes of this subparagraph, avoided cost prices
shall be determined as provided for in 18 CFR 292.304(d)(1)
or any successor regulation.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 508. EXTENSION OF DUTY-FREE TREATMENT UNDER GENERAL-
IZED SYSTEM OF PREFERENCES.
(a) IN GENERAL.—Section 505 of the Trade Act of 1974 (19
U.S.C. 2465) is amended by striking ‘‘June 30, 1999’’ and inserting
‘‘September 30, 2001’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this section
applies to articles entered on or after the date of the enactment
of this Act.
(2) RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS
AND RELIQUIDATIONS.—
(A) GENERAL RULE.—Notwithstanding section 514 of
the Tariff Act of 1930 or any other provision of law, and
subject to paragraph (3), any entry—
(i) of an article to which duty-free treatment under
title V of the Trade Act of 1974 would have applied
if such entry had been made on July 1, 1999, and
such title had been in effect on July 1, 1999; and
(ii) that was made—
(I) after June 30, 1999; and
H. R. 1180—65
(II) before the date of the enactment of this
Act,
shall be liquidated or reliquidated as free of duty, and
the Secretary of the Treasury shall refund any duty paid
with respect to such entry.
(B) ENTRY.—As used in this paragraph, the term
‘‘entry’’ includes a withdrawal from warehouse for consump-
tion.
(3) REQUESTS.—Liquidation or reliquidation may be made
under paragraph (2) with respect to an entry only if a request
therefore is filed with the Customs Service, within 180 days
after the date of the enactment of this Act, that contains
sufficient information to enable the Customs Service—
(A) to locate the entry; or
(B) to reconstruct the entry if it cannot be located.
SEC. 509. EXTENSION OF CREDIT FOR HOLDERS OF QUALIFIED ZONE
ACADEMY BONDS.
(a) IN GENERAL.—Section 1397E(e)(1) of the Internal Revenue
Code of 1986 (relating to national limitation) is amended by striking
‘‘and 1999’’ and inserting ‘‘, 1999, 2000, and 2001’’.
(b) LIMITATION ON CARRYOVER PERIODS.—Paragraph (4) of sec-
tion 1397E(e) of such Code is amended by adding at the end
the following flush sentences:
‘‘Any carryforward of a limitation amount may be carried only
to the first 2 years (3 years for carryforwards from 1998 or
1999) following the unused limitation year. For purposes of
the preceding sentence, a limitation amount shall be treated
as used on a first-in first-out basis.’’.
SEC. 510. EXTENSION OF FIRST-TIME HOMEBUYER CREDIT FOR DIS-
TRICT OF COLUMBIA.
Section 1400C(i) of the Internal Revenue Code of 1986 is
amended by striking ‘‘2001’’ and inserting ‘‘2002’’.
SEC. 511. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDI-
ATION COSTS.
Section 198(h) of the Internal Revenue Code of 1986 is amended
by striking ‘‘2000’’ and inserting ‘‘2001’’.
SEC. 512. TEMPORARY INCREASE IN AMOUNT OF RUM EXCISE TAX
COVERED OVER TO PUERTO RICO AND VIRGIN ISLANDS.
(a) IN GENERAL.—Section 7652(f )(1) of the Internal Revenue
Code of 1986 (relating to limitation on cover over of tax on distilled
spirits) is amended to read as follows:
‘‘(1) $10.50 ($13.25 in the case of distilled spirits brought
into the United States after June 30, 1999, and before January
1, 2002), or’’.
(b) SPECIAL COVER OVER TRANSFER RULES.—Notwithstanding
section 7652 of the Internal Revenue Code of 1986, the following
rules shall apply with respect to any transfer before October 1,
2000, of amounts relating to the increase in the cover over of
taxes by reason of the amendment made by subsection (a):
(1) INITIAL TRANSFER OF INCREMENTAL INCREASE IN COVER
OVER.—The Secretary of the Treasury shall, within 15 days
after the date of the enactment of this Act, transfer an amount
equal to the lesser of—
H. R. 1180—66
(A) the amount of such increase otherwise required
to be covered over after June 30, 1999, and before the
date of the enactment of this Act; or
(B) $20,000,000.
(2) TRANSFER OF INCREMENTAL INCREASE FOR FISCAL YEAR
2001.—The Secretary of the Treasury shall on October 1, 2000,
transfer an amount equal to the excess of—
(A) the amount of such increase otherwise required
to be covered over after June 30, 1999, and before October
1, 2000, over
(B) the amount of the transfer described in paragraph
(1).
(c) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on July 1, 1999.
Subtitle B—Other Time-Sensitive
Provisions
SEC. 521. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDEN-
TIAL TAXPAYER INFORMATION.
(a) IN GENERAL.—
(1) TREATMENT AS RETURN INFORMATION.—Paragraph (2)
of section 6103(b) of the Internal Revenue Code of 1986
(defining return information) is amended by striking ‘‘and’’
at the end of subparagraph (A), by inserting ‘‘and’’ at the
end of subparagraph (B), and by inserting after subparagraph
(B) the following new subparagraph:
‘‘(C) any advance pricing agreement entered into by
a taxpayer and the Secretary and any background informa-
tion related to such agreement or any application for an
advance pricing agreement,’’.
(2) EXCEPTION FROM PUBLIC INSPECTION AS WRITTEN DETER-
MINATION.—Paragraph (1) of section 6110(b) of such Code
(defining written determination) is amended by adding at the
end the following new sentence: ‘‘Such term shall not include
any advance pricing agreement entered into by a taxpayer
and the Secretary and any background information related
to such agreement or any application for an advance pricing
agreement.’’.
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall take effect on the date of the enactment of this
Act.
(b) ANNUAL REPORT REGARDING ADVANCE PRICING AGREE-
MENTS.—
(1) IN GENERAL.—Not later than 90 days after the end
of each calendar year, the Secretary of the Treasury shall
prepare and publish a report regarding advance pricing agree-
ments.
(2) CONTENTS OF REPORT.—The report shall include the
following for the calendar year to which such report relates:
(A) Information about the structure, composition, and
operation of the advance pricing agreement program office.
(B) A copy of each model advance pricing agreement.
(C) The number of—
(i) applications filed during such calendar year
for advance pricing agreements;
H. R. 1180—68
Code of 1986 for purposes of section 6103 of such Code, but
the reports shall not include information—
(A) which would not be permitted to be disclosed under
section 6110(c) of such Code if such report were a written
determination as defined in section 6110 of such Code;
or
(B) which can be associated with, or otherwise identify,
directly or indirectly, a particular taxpayer.
(4) FIRST REPORT.—The report for calendar year 1999 shall
include prior calendar years after 1990.
(c) REGULATIONS.—The Secretary of the Treasury or the Sec-
retary’s delegate shall prescribe such regulations as may be nec-
essary or appropriate to carry out the purposes of section
6103(b)(2)(C), and the last sentence of section 6110(b)(1), of the
Internal Revenue Code of 1986, as added by this section.
SEC. 522. AUTHORITY TO POSTPONE CERTAIN TAX-RELATED DEAD-
LINES BY REASON OF Y2K FAILURES.
(a) IN GENERAL.—In the case of a taxpayer determined by
the Secretary of the Treasury (or the Secretary’s delegate) to be
affected by a Y2K failure, the Secretary may disregard a period
of up to 90 days in determining, under the internal revenue laws,
in respect of any tax liability (including any interest, penalty,
additional amount, or addition to the tax) of such taxpayer—
(1) whether any of the acts described in paragraph (1)
of section 7508(a) of the Internal Revenue Code of 1986 (without
regard to the exceptions in parentheses in subparagraphs (A)
and (B)) were performed within the time prescribed therefor;
and
(2) the amount of any credit or refund.
(b) APPLICABILITY OF CERTAIN RULES.—For purposes of this
section, rules similar to the rules of subsections (b) and (e) of
section 7508 of the Internal Revenue Code of 1986 shall apply.
SEC. 523. INCLUSION OF CERTAIN VACCINES AGAINST STREPTO-
COCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES.
(a) INCLUSION OF VACCINES.—
(1) IN GENERAL.—Section 4132(a)(1) of the Internal Revenue
Code of 1986 (defining taxable vaccine) is amended by adding
at the end the following new subparagraph:
‘‘(L) Any conjugate vaccine against streptococcus
pneumoniae.’’.
(2) EFFECTIVE DATE.—
(A) SALES.—The amendment made by this subsection
shall apply to vaccine sales after the date of the enactment
of this Act, but shall not take effect if subsection (b) does
not take effect.
(B) DELIVERIES.—For purposes of subparagraph (A),
in the case of sales on or before the date described in
such subparagraph for which delivery is made after such
date, the delivery date shall be considered the sale date.
(b) VACCINE TAX AND TRUST FUND AMENDMENTS.—
(1) Sections 1503 and 1504 of the Vaccine Injury Compensa-
tion Program Modification Act (and the amendments made
by such sections) are hereby repealed.
(2) Subparagraph (A) of section 9510(c)(1) of such Code
is amended by striking ‘‘August 5, 1997’’ and inserting
‘‘December 31, 1999’’.
H. R. 1180—69
(3) The amendments made by this subsection shall take
effect as if included in the provisions of the Omnibus Consoli-
dated and Emergency Supplemental Appropriations Act, 1999
to which they relate.
(c) REPORT.—Not later than January 31, 2000, the Comptroller
General of the United States shall prepare and submit a report
to the Committee on Ways and Means of the House of Representa-
tives and the Committee on Finance of the Senate on the operation
of the Vaccine Injury Compensation Trust Fund and on the ade-
quacy of such Fund to meet future claims made under the Vaccine
Injury Compensation Program.
SEC. 524. DELAY IN EFFECTIVE DATE OF REQUIREMENT FOR
APPROVED DIESEL OR KEROSENE TERMINALS.
Paragraph (2) of section 1032(f ) of the Taxpayer Relief Act
of 1997 is amended by striking ‘‘July 1, 2000’’ and inserting
‘‘January 1, 2002’’.
SEC. 525. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.
Any option to accelerate the receipt of any payment under
a production flexibility contract which is payable under the Federal
Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7200
et seq.), as in effect on the date of the enactment of this Act,
shall be disregarded in determining the taxable year for which
such payment is properly includible in gross income for purposes
of the Internal Revenue Code of 1986.
Subtitle C—Revenue Offsets
PART I—GENERAL PROVISIONS
SEC. 531. MODIFICATION OF ESTIMATED TAX SAFE HARBOR.
(a) IN GENERAL.—The table contained in clause (i) of section
6654(d)(1)(C) of the Internal Revenue Code of 1986 (relating to
limitation on use of preceding year’s tax) is amended by striking
the items relating to 1999 and 2000 and inserting the following
new items:
‘‘1999 ..................................................................................................
108.6
2000 .................................................................................................
110’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply with respect to any installment payment for taxable
years beginning after December 31, 1999.
SEC. 532. CLARIFICATION OF TAX TREATMENT OF INCOME AND LOSS
ON DERIVATIVES.
(a) IN GENERAL.—Section 1221 of the Internal Revenue Code
of 1986 (defining capital assets) is amended—
(1) by striking ‘‘For purposes’’ and inserting the following:
‘‘(a) IN GENERAL.—For purposes’’;
(2) by striking the period at the end of paragraph (5)
and inserting a semicolon; and
(3) by adding at the end the following:
‘‘(6) any commodities derivative financial instrument held
by a commodities derivatives dealer, unless—
‘‘(A) it is established to the satisfaction of the Secretary
that such instrument has no connection to the activities
of such dealer as a dealer, and
H. R. 1180—70
‘‘(B) such instrument is clearly identified in such
dealer’s records as being described in subparagraph (A)
before the close of the day on which it was acquired, origi-
nated, or entered into (or such other time as the Secretary
may by regulations prescribe);
‘‘(7) any hedging transaction which is clearly identified
as such before the close of the day on which it was acquired,
originated, or entered into (or such other time as the Secretary
may by regulations prescribe); or
‘‘(8) supplies of a type regularly used or consumed by
the taxpayer in the ordinary course of a trade or business
of the taxpayer.
‘‘(b) DEFINITIONS AND SPECIAL RULES.—
‘‘(1) COMMODITIES DERIVATIVE FINANCIAL INSTRUMENTS.—
For purposes of subsection (a)(6)—
‘‘(A) COMMODITIES
DERIVATIVES
DEALER.—The term
‘commodities derivatives dealer’ means a person which
regularly offers to enter into, assume, offset, assign, or
terminate positions in commodities derivative financial
instruments with customers in the ordinary course of a
trade or business.
‘‘(B) 
COMMODITIES
DERIVATIVE
FINANCIAL
INSTRUMENT.—
‘‘(i) IN GENERAL.—The term ‘commodities deriva-
tive financial instrument’ means any contract or finan-
cial instrument with respect to commodities (other than
a share of stock in a corporation, a beneficial interest
in a partnership or trust, a note, bond, debenture,
or other evidence of indebtedness, or a section 1256
contract (as defined in section 1256(b)), the value or
settlement price of which is calculated by or deter-
mined by reference to a specified index.
‘‘(ii) SPECIFIED INDEX.—The term ‘specified index’
means any one or more or any combination of—
‘‘(I) a fixed rate, price, or amount, or
‘‘(II) a variable rate, price, or amount,
which is based on any current, objectively determinable
financial or economic information with respect to
commodities which is not within the control of any
of the parties to the contract or instrument and is
not unique to any of the parties’ circumstances.
‘‘(2) HEDGING TRANSACTION.—
‘‘(A) IN GENERAL.—For purposes of this section, the
term ‘hedging transaction’ means any transaction entered
into by the taxpayer in the normal course of the taxpayer’s
trade or business primarily—
‘‘(i) to manage risk of price changes or currency
fluctuations with respect to ordinary property which
is held or to be held by the taxpayer,
‘‘(ii) to manage risk of interest rate or price changes
or currency fluctuations with respect to borrowings
made or to be made, or ordinary obligations incurred
or to be incurred, by the taxpayer, or
‘‘(iii) to manage such other risks as the Secretary
may prescribe in regulations.
H. R. 1180—71
‘‘(B) TREATMENT OF NONIDENTIFICATION OR IMPROPER
IDENTIFICATION
OF
HEDGING
TRANSACTIONS.—Notwith-
standing subsection (a)(7), the Secretary shall prescribe
regulations to properly characterize any income, gain,
expense, or loss arising from a transaction—
‘‘(i) which is a hedging transaction but which was
not identified as such in accordance with subsection
(a)(7), or
‘‘(ii) which was so identified but is not a hedging
transaction.
‘‘(3) REGULATIONS.—The Secretary shall prescribe such
regulations as are appropriate to carry out the purposes of
paragraph (6) and (7) of subsection (a) in the case of trans-
actions involving related parties.’’.
(b) MANAGEMENT OF RISK.—
(1) Section 475(c)(3) of such Code is amended by striking
‘‘reduces’’ and inserting ‘‘manages’’.
(2) Section 871(h)(4)(C)(iv) of such Code is amended by
striking ‘‘to reduce’’ and inserting ‘‘to manage’’.
(3) Clauses (i) and (ii) of section 988(d)(2)(A) of such Code
are each amended by striking ‘‘to reduce’’ and inserting ‘‘to
manage’’.
(4) Paragraph (2) of section 1256(e) of such Code is
amended to read as follows:
‘‘(2) DEFINITION OF HEDGING TRANSACTION.—For purposes
of this subsection, the term ‘hedging transaction’ means any
hedging transaction (as defined in section 1221(b)(2)(A)) if,
before the close of the day on which such transaction was
entered into (or such earlier time as the Secretary may pre-
scribe by regulations), the taxpayer clearly identifies such trans-
action as being a hedging transaction.’’.
(c) CONFORMING AMENDMENTS.—
(1) Each of the following sections of such Code are amended
by striking ‘‘section 1221’’ and inserting ‘‘section 1221(a)’’:
(A) Section 170(e)(3)(A).
(B) Section 170(e)(4)(B).
(C) Section 367(a)(3)(B)(i).
(D) Section 818(c)(3).
(E) Section 865(i)(1).
(F) Section 1092(a)(3)(B)(ii)(II).
(G) Subparagraphs (C) and (D) of section 1231(b)(1).
(H) Section 1234(a)(3)(A).
(2) Each of the following sections of such Code are amended
by striking ‘‘section 1221(1)’’ and inserting ‘‘section 1221(a)(1)’’:
(A) Section 198(c)(1)(A)(i).
(B) Section 263A(b)(2)(A).
(C) Clauses (i) and (iii) of section 267(f )(3)(B).
(D) Section 341(d)(3).
(E) Section 543(a)(1)(D)(i).
(F) Section 751(d)(1).
(G) Section 775(c).
(H) Section 856(c)(2)(D).
(I) Section 856(c)(3)(C).
(J) Section 856(e)(1).
(K) Section 856( j)(2)(B).
(L) Section 857(b)(4)(B)(i).
(M) Section 857(b)(6)(B)(iii).
H. R. 1180—72
(N) Section 864(c)(4)(B)(iii).
(O) Section 864(d)(3)(A).
(P) Section 864(d)(6)(A).
(Q) Section 954(c)(1)(B)(iii).
(R) Section 995(b)(1)(C).
(S) Section 1017(b)(3)(E)(i).
(T) Section 1362(d)(3)(C)(ii).
(U) Section 4662(c)(2)(C).
(V) Section 7704(c)(3).
(W) Section 7704(d)(1)(D).
(X) Section 7704(d)(1)(G).
(Y) Section 7704(d)(5).
(3) Section 818(b)(2) of such Code is amended by striking
‘‘section 1221(2)’’ and inserting ‘‘section 1221(a)(2)’’.
(4) Section 1397B(e)(2) of such Code is amended by striking
‘‘section 1221(4)’’ and inserting ‘‘section 1221(a)(4)’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to any instrument held, acquired, or entered into, any
transaction entered into, and supplies held or acquired on or after
the date of the enactment of this Act.
SEC. 533. EXPANSION OF REPORTING OF CANCELLATION OF INDEBT-
EDNESS INCOME.
(a) IN GENERAL.—Paragraph (2) of section 6050P(c) of the
Internal Revenue Code of 1986 (relating to definitions and special
rules) is amended by striking ‘‘and’’ at the end of subparagraph
(B), by striking the period at the end of subparagraph (C) and
inserting ‘‘, and’’, and by inserting after subparagraph (C) the
following new subparagraph:
‘‘(D) any organization a significant trade or business
of which is the lending of money.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to discharges of indebtedness after December 31, 1999.
SEC. 534. LIMITATION ON CONVERSION OF CHARACTER OF INCOME
FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.
(a) IN GENERAL.—Part IV of subchapter P of chapter 1 of
the Internal Revenue Code of 1986 (relating to special rules for
determining capital gains and losses) is amended by inserting after
section 1259 the following new section:
‘‘SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.
‘‘(a) IN GENERAL.—If the taxpayer has gain from a constructive
ownership transaction with respect to any financial asset and such
gain would (without regard to this section) be treated as a long-
term capital gain—
‘‘(1) such gain shall be treated as ordinary income to the
extent that such gain exceeds the net underlying long-term
capital gain, and
‘‘(2) to the extent such gain is treated as a long-term
capital gain after the application of paragraph (1), the deter-
mination of the capital gain rate (or rates) applicable to such
gain under section 1(h) shall be determined on the basis of
the respective rate (or rates) that would have been applicable
to the net underlying long-term capital gain.
‘‘(b) INTEREST CHARGE ON DEFERRAL OF GAIN RECOGNITION.—
‘‘(1) IN GENERAL.—If any gain is treated as ordinary income
for any taxable year by reason of subsection (a)(1), the tax
H. R. 1180—73
imposed by this chapter for such taxable year shall be increased
by the amount of interest determined under paragraph (2)
with respect to each prior taxable year during any portion
of which the constructive ownership transaction was open. Any
amount payable under this paragraph shall be taken into
account in computing the amount of any deduction allowable
to the taxpayer for interest paid or accrued during such taxable
year.
‘‘(2) AMOUNT OF INTEREST.—The amount of interest deter-
mined under this paragraph with respect to a prior taxable
year is the amount of interest which would have been imposed
under section 6601 on the underpayment of tax for such year
which would have resulted if the gain (which is treated as
ordinary income by reason of subsection (a)(1)) had been
included in gross income in the taxable years in which it
accrued (determined by treating the income as accruing at
a constant rate equal to the applicable Federal rate as in
effect on the day the transaction closed). The period during
which such interest shall accrue shall end on the due date
(without extensions) for the return of tax imposed by this
chapter for the taxable year in which such transaction closed.
‘‘(3) APPLICABLE FEDERAL RATE.—For purposes of paragraph
(2), the applicable Federal rate is the applicable Federal rate
determined under section 1274(d) (compounded semiannually)
which would apply to a debt instrument with a term equal
to the period the transaction was open.
‘‘(4) NO CREDITS AGAINST INCREASE IN TAX.—Any increase
in tax under paragraph (1) shall not be treated as tax imposed
by this chapter for purposes of determining—
‘‘(A) the amount of any credit allowable under this
chapter, or
‘‘(B) the amount of the tax imposed by section 55.
‘‘(c) FINANCIAL ASSET.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘financial asset’ means—
‘‘(A) any equity interest in any pass-thru entity, and
‘‘(B) to the extent provided in regulations—
‘‘(i) any debt instrument, and
‘‘(ii) any stock in a corporation which is not a
pass-thru entity.
‘‘(2) PASS-THRU
ENTITY.—For purposes of paragraph (1),
the term ‘pass-thru entity’ means—
‘‘(A) a regulated investment company,
‘‘(B) a real estate investment trust,
‘‘(C) an S corporation,
‘‘(D) a partnership,
‘‘(E) a trust,
‘‘(F) a common trust fund,
‘‘(G) a passive foreign investment company (as defined
in section 1297 without regard to subsection (e) thereof ),
‘‘(H) a foreign personal holding company,
‘‘(I) a foreign investment company (as defined in section
1246(b)), and
‘‘(J) a REMIC.
‘‘(d) CONSTRUCTIVE OWNERSHIP TRANSACTION.—For purposes
of this section—
H. R. 1180—74
‘‘(1) IN GENERAL.—The taxpayer shall be treated as having
entered into a constructive ownership transaction with respect
to any financial asset if the taxpayer—
‘‘(A) holds a long position under a notional principal
contract with respect to the financial asset,
‘‘(B) enters into a forward or futures contract to acquire
the financial asset,
‘‘(C) is the holder of a call option, and is the grantor
of a put option, with respect to the financial asset and
such options have substantially equal strike prices and
substantially contemporaneous maturity dates, or
‘‘(D) to the extent provided in regulations prescribed
by the Secretary, enters into one or more other transactions
(or acquires one or more positions) that have substantially
the same effect as a transaction described in any of the
preceding subparagraphs.
‘‘(2) EXCEPTION
FOR
POSITIONS
WHICH
ARE
MARKED
TO
MARKET.—This section shall not apply to any constructive
ownership transaction if all of the positions which are part
of such transaction are marked to market under any provision
of this title or the regulations thereunder.
‘‘(3) LONG
POSITION
UNDER
NOTIONAL
PRINCIPAL
CON-
TRACT.—A person shall be treated as holding a long position
under a notional principal contract with respect to any financial
asset if such person—
‘‘(A) has the right to be paid (or receive credit for)
all or substantially all of the investment yield (including
appreciation) on such financial asset for a specified period,
and
‘‘(B) is obligated to reimburse (or provide credit for)
all or substantially all of any decline in the value of such
financial asset.
‘‘(4) FORWARD
CONTRACT.—The term ‘forward contract’
means any contract to acquire in the future (or provide or
receive credit for the future value of ) any financial asset.
‘‘(e) NET UNDERLYING LONG-TERM CAPITAL GAIN.—For purposes
of this section, in the case of any constructive ownership transaction
with respect to any financial asset, the term ‘net underlying long-
term capital gain’ means the aggregate net capital gain that the
taxpayer would have had if—
‘‘(1) the financial asset had been acquired for fair market
value on the date such transaction was opened and sold for
fair market value on the date such transaction was closed,
and
‘‘(2) only gains and losses that would have resulted from
the deemed ownership under paragraph (1) were taken into
account.
The amount of the net underlying long-term capital gain with
respect to any financial asset shall be treated as zero unless the
amount thereof is established by clear and convincing evidence.
‘‘(f ) SPECIAL RULE WHERE TAXPAYER TAKES DELIVERY.—Except
as provided in regulations prescribed by the Secretary, if a construc-
tive ownership transaction is closed by reason of taking delivery,
this section shall be applied as if the taxpayer had sold all the
contracts, options, or other positions which are part of such trans-
action for fair market value on the closing date. The amount of
gain recognized under the preceding sentence shall not exceed the
H. R. 1180—75
amount of gain treated as ordinary income under subsection (a).
Proper adjustments shall be made in the amount of any gain
or loss subsequently realized for gain recognized and treated as
ordinary income under this subsection.
‘‘(g) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary or appropriate to carry out the purposes
of this section, including regulations—
‘‘(1) to permit taxpayers to mark to market constructive
ownership transactions in lieu of applying this section, and
‘‘(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 of such Code 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. 535. TREATMENT OF EXCESS PENSION ASSETS USED FOR
RETIREE HEALTH BENEFITS.
(a) EXTENSION.—
(1) IN GENERAL.—Paragraph (5) of section 420(b) of the
Internal Revenue Code of 1986 (relating to expiration) is
amended by striking ‘‘in any taxable year beginning after
December 31, 2000’’ and inserting ‘‘made after December 31,
2005’’.
(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 ‘‘January 1, 1995’’ and inserting ‘‘the
date of the enactment of the Tax Relief Extension Act
of 1999’’.
(B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1))
is amended by striking ‘‘January 1, 1995’’ and inserting
‘‘the date of the enactment of the Tax Relief Extension
Act of 1999’’.
(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 January
1, 2006’’; and
(ii) by striking ‘‘January 1, 1995’’ and inserting
‘‘the date of the enactment of the Tax Relief Extension
Act of 1999’’.
(b) APPLICATION OF MINIMUM COST REQUIREMENTS.—
(1) IN GENERAL.—Paragraph (3) of section 420(c) of the
Internal Revenue Code of 1986 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
H. R. 1180—76
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.
‘‘(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.
‘‘(E) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary to prevent an employer
who significantly reduces retiree health coverage during
the cost maintenance period from being treated as satis-
fying the minimum cost requirement of this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) Clause (iii) of section 420(b)(1)(C) of such Code
is amended by striking ‘‘benefits’’ and inserting ‘‘cost’’.
(B) Subparagraph (D) of section 420(e)(1) of such Code
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).
H. R. 1180—77
SEC. 536. 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 of the
Internal Revenue Code of 1986 (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) of such Code 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) of such Code (relating to pledges, etc., of installment obliga-
tions) is amended by adding at the end the following: ‘‘A payment
shall 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. 537. DENIAL OF CHARITABLE CONTRIBUTION DEDUCTION FOR
TRANSFERS ASSOCIATED WITH SPLIT-DOLLAR INSUR-
ANCE ARRANGEMENTS.
(a) IN GENERAL.—Subsection (f ) of section 170 of the Internal
Revenue Code of 1986 (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,
H. R. 1180—79
‘‘(iii) REPORTING.—Any organization on which tax
is imposed by clause (i) with respect to any premium
shall file an annual return which includes—
‘‘(I) the amount of such premiums paid during
the year and the name and TIN of each beneficiary
under the contract to which the premium relates,
and
‘‘(II) such other information as the Secretary
may require.
The penalties applicable to returns required under sec-
tion 6033 shall apply to returns required under this
clause. Returns required under this clause shall be
furnished at such time and in such manner as the
Secretary shall by forms or regulations require.
‘‘(iv) CERTAIN RULES TO APPLY.—The tax imposed
by this subparagraph shall be treated as imposed by
chapter 42 for purposes of this title other than sub-
chapter B of chapter 42.
‘‘(G) SPECIAL RULE WHERE STATE REQUIRES SPECIFICA-
TION
OF
CHARITABLE
GIFT
ANNUITANT
IN
CONTRACT.—In
the case of an obligation to pay a charitable gift annuity
referred to in subparagraph (D) which is entered into under
the laws of a State which requires, in order for the chari-
table gift annuity to be exempt from insurance regulation
by such State, that each beneficiary under the charitable
gift annuity be named as a beneficiary under an annuity
contract issued by an insurance company authorized to
transact business in such State, the requirements of clauses
(i) and (ii) of subparagraph (D) shall be treated as met
if—
‘‘(i) such State law requirement was in effect on
February 8, 1999,
‘‘(ii) each such beneficiary under the charitable
gift annuity is a bona fide resident of such State at
the time the obligation to pay a charitable gift annuity
is entered into, and
‘‘(iii) the only persons entitled to payments under
such contract are persons entitled to payments as bene-
ficiaries under such obligation on the date such obliga-
tion is entered into.
‘‘(H) MEMBER OF FAMILY.—For purposes of this para-
graph, an individual’s family consists of the individual’s
grandparents, the grandparents of such individual’s spouse,
the lineal descendants of such grandparents, and any
spouse of such a lineal descendant.
‘‘(I) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry
out the purposes of this paragraph, including regulations
to prevent the avoidance of such purposes.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as otherwise provided in this sec-
tion, the amendment made by this section shall apply to trans-
fers made after February 8, 1999.
(2) EXCISE TAX.—Except as provided in paragraph (3) of
this subsection, section 170(f )(10)(F) of the Internal Revenue
Code of 1986 (as added by this section) shall apply to premiums
paid after the date of the enactment of this Act.
H. R. 1180—80
(3) REPORTING.—Clause (iii) of such section 170(f )(10)(F)
shall apply to premiums paid after February 8, 1999 (deter-
mined as if the tax imposed by such section applies to premiums
paid after such date).
SEC. 538. DISTRIBUTIONS BY A PARTNERSHIP TO A CORPORATE
PARTNER OF STOCK IN ANOTHER CORPORATION.
(a) IN GENERAL.—Section 732 of the Internal Revenue Code
of 1986 (relating to basis of distributed property other than money)
is amended by adding at the end the following new subsection:
‘‘(f ) CORRESPONDING ADJUSTMENT TO BASIS OF ASSETS OF A
DISTRIBUTED
CORPORATION
CONTROLLED
BY
A
CORPORATE
PARTNER.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a corporation (hereafter in this subsection referred
to as the ‘corporate partner’) receives a distribution from
a partnership of stock in another corporation (hereafter
in this subsection referred to as the ‘distributed corpora-
tion’),
‘‘(B) the corporate partner has control of the distributed
corporation immediately after the distribution or at any
time thereafter, and
‘‘(C) the partnership’s adjusted basis in such stock
immediately before the distribution exceeded the corporate
partner’s adjusted basis in such stock immediately after
the distribution,
then an amount equal to such excess shall be applied to reduce
(in accordance with subsection (c)) the basis of property held
by the distributed corporation at such time (or, if the corporate
partner does not control the distributed corporation at such
time, at the time the corporate partner first has such control).
‘‘(2) EXCEPTION FOR CERTAIN DISTRIBUTIONS BEFORE CON-
TROL ACQUIRED.—Paragraph (1) shall not apply to any distribu-
tion of stock in the distributed corporation if—
‘‘(A) the corporate partner does not have control of
such corporation immediately after such distribution, and
‘‘(B) the corporate partner establishes to the satisfac-
tion of the Secretary that such distribution was not part
of a plan or arrangement to acquire control of the distrib-
uted corporation.
‘‘(3) LIMITATIONS ON BASIS REDUCTION.—
‘‘(A) IN GENERAL.—The amount of the reduction under
paragraph (1) shall not exceed the amount by which the
sum of the aggregate adjusted bases of the property and
the amount of money of the distributed corporation exceeds
the corporate partner’s adjusted basis in the stock of the
distributed corporation.
‘‘(B) REDUCTION NOT TO EXCEED ADJUSTED BASIS OF
PROPERTY.—No reduction under paragraph (1) in the basis
of any property shall exceed the adjusted basis of such
property (determined without regard to such reduction).
‘‘(4) GAIN RECOGNITION WHERE REDUCTION LIMITED.—If the
amount of any reduction under paragraph (1) (determined after
the application of paragraph (3)(A)) exceeds the aggregate
adjusted bases of the property of the distributed corporation—
‘‘(A) such excess shall be recognized by the corporate
partner as long-term capital gain, and
H. R. 1180—81
‘‘(B) the corporate partner’s adjusted basis in the stock
of the distributed corporation shall be increased by such
excess.
‘‘(5) CONTROL.—For purposes of this subsection, the term
‘control’ means ownership of stock meeting the requirements
of section 1504(a)(2).
‘‘(6) INDIRECT DISTRIBUTIONS.—For purposes of paragraph
(1), if a corporation acquires (other than in a distribution from
a partnership) stock the basis of which is determined (by reason
of being distributed from a partnership) in whole or in part
by reference to subsection (a)(2) or (b), the corporation shall
be treated as receiving a distribution of such stock from a
partnership.
‘‘(7) SPECIAL RULE FOR STOCK IN CONTROLLED CORPORA-
TION.—If the property held by a distributed corporation is stock
in a corporation which the distributed corporation controls,
this subsection shall be applied to reduce the basis of the
property of such controlled corporation. This subsection shall
be reapplied to any property of any controlled corporation which
is stock in a corporation which it controls.
‘‘(8) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes
of this subsection, including regulations to avoid double
counting and to prevent the abuse of such purposes.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendment made by this section shall apply to distributions
made after July 14, 1999.
(2) PARTNERSHIPS IN EXISTENCE ON JULY 14, 1999.—In the
case of a corporation which is a partner in a partnership as
of July 14, 1999, the amendment made by this section shall
apply to any distribution made (or treated as made) to such
partner from such partnership after June 30, 2001, except
that this paragraph shall not apply to any distribution after
the date of the enactment of this Act unless the partner makes
an election to have this paragraph apply to such distribution
on the partner’s return of Federal income tax for the taxable
year in which such distribution occurs.
PART II—PROVISIONS RELATING TO REAL
ESTATE INVESTMENT TRUSTS
Subpart A—Treatment of Income and Services
Provided by Taxable REIT Subsidiaries
SEC. 541. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.
(a) IN GENERAL.—Subparagraph (B) of section 856(c)(4) of the
Internal Revenue Code of 1986 is amended to read as follows:
‘‘(B)(i) not more than 25 percent of the value of its
total assets is represented by securities (other than those
includible under subparagraph (A)),
‘‘(ii) not more than 20 percent of the value of its total
assets is represented by securities of one or more taxable
REIT subsidiaries, and
‘‘(iii) except with respect to a taxable REIT subsidiary
and securities includible under subparagraph (A)—
H. R. 1180—82
‘‘(I) not more than 5 percent of the value of its
total assets is represented by securities of any one
issuer,
‘‘(II) the trust does not hold securities possessing
more than 10 percent of the total voting power of
the outstanding securities of any one issuer, and
‘‘(III) the trust does not hold securities having
a value of more than 10 percent of the total value
of the outstanding securities of any one issuer.’’.
(b) EXCEPTION
FOR STRAIGHT DEBT SECURITIES.—Subsection
(c) of section 856 of such Code is amended by adding at the end
the following new paragraph:
‘‘(7) STRAIGHT DEBT SAFE HARBOR IN APPLYING PARAGRAPH
(4).—Securities of an issuer which are straight debt (as defined
in section 1361(c)(5) without regard to subparagraph (B)(iii)
thereof ) shall not be taken into account in applying paragraph
(4)(B)(ii)(III) if—
‘‘(A) the issuer is an individual, or
‘‘(B) the only securities of such issuer which are held
by the trust or a taxable REIT subsidiary of the trust
are straight debt (as so defined), or
‘‘(C) the issuer is a partnership and the trust holds
at least a 20 percent profits interest in the partnership.’’.
SEC. 542. TREATMENT OF INCOME AND SERVICES PROVIDED BY TAX-
ABLE REIT SUBSIDIARIES.
(a) INCOME FROM TAXABLE REIT SUBSIDIARIES NOT TREATED
AS IMPERMISSIBLE TENANT SERVICE INCOME.—Clause (i) of section
856(d)(7)(C) of the Internal Revenue Code of 1986 (relating to
exceptions to impermissible tenant service income) is amended by
inserting ‘‘or through a taxable REIT subsidiary of such trust’’
after ‘‘income’’.
(b) CERTAIN INCOME FROM TAXABLE REIT SUBSIDIARIES NOT
EXCLUDED FROM RENTS FROM REAL PROPERTY.—
(1) IN
GENERAL.—Subsection (d) of section 856 of such
Code (relating to rents from real property defined) is amended
by adding at the end the following new paragraphs:
‘‘(8) SPECIAL RULE FOR TAXABLE REIT SUBSIDIARIES.—For
purposes of this subsection, amounts paid to a real estate
investment trust by a taxable REIT subsidiary of such trust
shall not be excluded from rents from real property by reason
of paragraph (2)(B) if the requirements of either of the following
subparagraphs are met:
‘‘(A) LIMITED RENTAL EXCEPTION.—The requirements
of this subparagraph are met with respect to any property
if at least 90 percent of the leased space of the property
is rented to persons other than taxable REIT subsidiaries
of such trust and other than persons described in section
856(d)(2)(B). The preceding sentence shall apply only to
the extent that the amounts paid to the trust as rents
from real property (as defined in paragraph (1) without
regard to paragraph (2)(B)) from such property are substan-
tially comparable to such rents made by the other tenants
of the trust’s property for comparable space.
‘‘(B) EXCEPTION
FOR
CERTAIN
LODGING
FACILITIES.—
The requirements of this subparagraph are met with
respect to an interest in real property which is a qualified
H. R. 1180—83
lodging facility leased by the trust to a taxable REIT sub-
sidiary of the trust if the property is operated on behalf
of such subsidiary by a person who is an eligible inde-
pendent contractor.
‘‘(9) ELIGIBLE INDEPENDENT CONTRACTOR.—For purposes of
paragraph (8)(B)—
‘‘(A) IN GENERAL.—The term ‘eligible independent con-
tractor’ means, with respect to any qualified lodging facility,
any independent contractor if, at the time such contractor
enters into a management agreement or other similar
service contract with the taxable REIT subsidiary to
operate the facility, such contractor (or any related person)
is actively engaged in the trade or business of operating
qualified lodging facilities for any person who is not a
related person with respect to the real estate investment
trust or the taxable REIT subsidiary.
‘‘(B) SPECIAL RULES.—Solely for purposes of this para-
graph and paragraph (8)(B), a person shall not fail to
be treated as an independent contractor with respect to
any qualified lodging facility by reason of any of the fol-
lowing:
‘‘(i) The taxable REIT subsidiary bears the
expenses for the operation of the facility pursuant to
the management agreement or other similar service
contract.
‘‘(ii) The taxable REIT subsidiary receives the reve-
nues from the operation of such facility, net of expenses
for such operation and fees payable to the operator
pursuant to such agreement or contract.
‘‘(iii) The real estate investment trust receives
income from such person with respect to another prop-
erty that is attributable to a lease of such other prop-
erty to such person that was in effect as of the later
of—
‘‘(I) January 1, 1999, or
‘‘(II) the earliest date that any taxable REIT
subsidiary of such trust entered into a manage-
ment agreement or other similar service contract
with such person with respect to such qualified
lodging facility.
‘‘(C) RENEWALS, ETC., OF EXISTING LEASES.—For pur-
poses of subparagraph (B)(iii)—
‘‘(i) a lease shall be treated as in effect on January
1, 1999, without regard to its renewal after such date,
so long as such renewal is pursuant to the terms
of such lease as in effect on whichever of the dates
under subparagraph (B)(iii) is the latest, and
‘‘(ii) a lease of a property entered into after which-
ever of the dates under subparagraph (B)(iii) is the
latest shall be treated as in effect on such date if—
‘‘(I) on such date, a lease of such property
from the trust was in effect, and
‘‘(II) under the terms of the new lease, such
trust receives a substantially similar or lesser ben-
efit in comparison to the lease referred to in sub-
clause (I).
H. R. 1180—84
‘‘(D) QUALIFIED
LODGING
FACILITY.—For purposes of
this paragraph—
‘‘(i) IN
GENERAL.—The term ‘qualified lodging
facility’ means any lodging facility unless wagering
activities are conducted at or in connection with such
facility by any person who is engaged in the business
of accepting wagers and who is legally authorized to
engage in such business at or in connection with such
facility.
‘‘(ii) LODGING FACILITY.—The term ‘lodging facility’
means a hotel, motel, or other establishment more
than one-half of the dwelling units in which are used
on a transient basis.
‘‘(iii) CUSTOMARY AMENITIES AND FACILITIES.—The
term ‘lodging facility’ includes customary amenities
and facilities operated as part of, or associated with,
the lodging facility so long as such amenities and facili-
ties are customary for other properties of a comparable
size and class owned by other owners unrelated to
such real estate investment trust.
‘‘(E) OPERATE INCLUDES MANAGE.—References in this
paragraph to operating a property shall be treated as
including a reference to managing the property.
‘‘(F) RELATED
PERSON.—Persons shall be treated as
related to each other if such persons are treated as a
single employer under subsection (a) or (b) of section 52.’’.
(2) CONFORMING AMENDMENT.—Subparagraph (B) of section
856(d)(2) of such Code is amended by inserting ‘‘except as
provided in paragraph (8),’’ after ‘‘(B)’’.
(3) DETERMINING RENTS FROM REAL PROPERTY.—
(A)(i) Paragraph (1) of section 856(d) of such Code
is amended by striking ‘‘adjusted bases’’ each place it occurs
and inserting ‘‘fair market values’’.
(ii) The amendment made by this subparagraph shall
apply to taxable years beginning after December 31, 2000.
(B)(i) Clause (i) of section 856(d)(2)(B) of such Code
is amended by striking ‘‘number’’ and inserting ‘‘value’’.
(ii) The amendment made by this subparagraph shall
apply to amounts received or accrued in taxable years
beginning after December 31, 2000, except for amounts
paid pursuant to leases in effect on July 12, 1999, or
pursuant to a binding contract in effect on such date and
at all times thereafter.
SEC. 543. TAXABLE REIT SUBSIDIARY.
(a) IN GENERAL.—Section 856 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new sub-
section:
‘‘(l) TAXABLE REIT SUBSIDIARY.—For purposes of this part—
‘‘(1) IN
GENERAL.—The term ‘taxable REIT subsidiary’
means, with respect to a real estate investment trust, a corpora-
tion (other than a real estate investment trust) if—
‘‘(A) such trust directly or indirectly owns stock in
such corporation, and
‘‘(B) such trust and such corporation jointly elect that
such corporation shall be treated as a taxable REIT sub-
sidiary of such trust for purposes of this part.
H. R. 1180—85
Such an election, once made, shall be irrevocable unless both
such trust and corporation consent to its revocation. Such elec-
tion, and any revocation thereof, may be made without the
consent of the Secretary.
‘‘(2) THIRTY-FIVE PERCENT OWNERSHIP IN ANOTHER TAXABLE
REIT SUBSIDIARY.—The term ‘taxable REIT subsidiary’ includes,
with respect to any real estate investment trust, any corpora-
tion (other than a real estate investment trust) with respect
to which a taxable REIT subsidiary of such trust owns directly
or indirectly—
‘‘(A) securities possessing more than 35 percent of the
total voting power of the outstanding securities of such
corporation, or
‘‘(B) securities having a value of more than 35 percent
of the total value of the outstanding securities of such
corporation.
The preceding sentence shall not apply to a qualified REIT
subsidiary (as defined in subsection (i)(2)). The rule of section
856(c)(7) shall apply for purposes of subparagraph (B).
‘‘(3) EXCEPTIONS.—The term ‘taxable REIT subsidiary’ shall
not include—
‘‘(A) any corporation which directly or indirectly oper-
ates or manages a lodging facility or a health care facility,
and
‘‘(B) any corporation which directly or indirectly pro-
vides to any other person (under a franchise, license, or
otherwise) rights to any brand name under which any
lodging facility or health care facility is operated.
Subparagraph (B) shall not apply to rights provided to an
eligible independent contractor to operate or manage a lodging
facility if such rights are held by such corporation as a
franchisee, licensee, or in a similar capacity and such lodging
facility is either owned by such corporation or is leased to
such corporation from the real estate investment trust.
‘‘(4) DEFINITIONS.—For purposes of paragraph (3)—
‘‘(A) LODGING FACILITY.—The term ‘lodging facility’ has
the meaning given to such term by paragraph (9)(D)(ii).
‘‘(B) HEALTH CARE FACILITY.—The term ‘health care
facility’ has the meaning given to such term by subsection
(e)(6)(D)(ii).’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of section 856(i)
of such Code is amended by adding at the end the following new
sentence: ‘‘Such term shall not include a taxable REIT subsidiary.’’.
SEC. 544. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163( j) of the Internal Revenue Code
of 1986 (relating to limitation on deduction for interest on certain
indebtedness) is amended by striking ‘‘and’’ at the end of subpara-
graph (A), by striking the period at the end of subparagraph (B)
and inserting ‘‘, and’’, and by adding at the end the following
new subparagraph:
‘‘(C) any interest paid or accrued (directly or indirectly)
by a taxable REIT subsidiary (as defined in section 856(l))
of a real estate investment trust to such trust.’’.
SEC. 545. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.
(a) IN GENERAL.—Subsection (b) of section 857 of the Internal
Revenue Code of 1986 (relating to method of taxation of real estate
H. R. 1180—86
investment trusts and holders of shares or certificates of beneficial
interest) is amended by redesignating paragraphs (7) and (8) as
paragraphs (8) and (9), respectively, and by inserting after para-
graph (6) the following new paragraph:
‘‘(7) INCOME FROM REDETERMINED RENTS, REDETERMINED
DEDUCTIONS, AND EXCESS INTEREST.—
‘‘(A) IMPOSITION OF TAX.—There is hereby imposed for
each taxable year of the real estate investment trust a
tax equal to 100 percent of redetermined rents, redeter-
mined deductions, and excess interest.
‘‘(B) REDETERMINED RENTS.—
‘‘(i) IN GENERAL.—The term ‘redetermined rents’
means rents from real property (as defined in sub-
section 856(d)) the amount of which would (but for
subparagraph (E)) be reduced on distribution, appor-
tionment, or allocation under section 482 to clearly
reflect income as a result of services furnished or ren-
dered by a taxable REIT subsidiary of the real estate
investment trust to a tenant of such trust.
‘‘(ii) EXCEPTION FOR CERTAIN SERVICES.—Clause (i)
shall not apply to amounts received directly or
indirectly by a real estate investment trust for services
described in paragraph (1)(B) or (7)(C)(i) of section
856(d).
‘‘(iii) EXCEPTION
FOR
DE
MINIMIS
AMOUNTS.—
Clause (i) shall not apply to amounts described in
section 856(d)(7)(A) with respect to a property to the
extent such amounts do not exceed the one percent
threshold described in section 856(d)(7)(B) with respect
to such property.
‘‘(iv) EXCEPTION
FOR
COMPARABLY
PRICED
SERV-
ICES.—Clause (i) shall not apply to any service ren-
dered by a taxable REIT subsidiary of a real estate
investment trust to a tenant of such trust if—
‘‘(I) such subsidiary renders a significant
amount of similar services to persons other than
such trust and tenants of such trust who are unre-
lated (within the meaning of section 856(d)(8)(F))
to such subsidiary, trust, and tenants, but
‘‘(II) only to the extent the charge for such
service so rendered is substantially comparable to
the charge for the similar services rendered to
persons referred to in subclause (I).
‘‘(v) EXCEPTION FOR CERTAIN SEPARATELY CHARGED
SERVICES.—Clause (i) shall not apply to any service
rendered by a taxable REIT subsidiary of a real estate
investment trust to a tenant of such trust if—
‘‘(I) the rents paid to the trust by tenants
(leasing at least 25 percent of the net leasable
space in the trust’s property) who are not receiving
such service from such subsidiary are substantially
comparable to the rents paid by tenants leasing
comparable space who are receiving such service
from such subsidiary, and
‘‘(II) the charge for such service from such
subsidiary is separately stated.
H. R. 1180—87
‘‘(vi) EXCEPTION FOR CERTAIN SERVICES BASED ON
SUBSIDIARY’S INCOME FROM THE SERVICES.—Clause (i)
shall not apply to any service rendered by a taxable
REIT subsidiary of a real estate investment trust to
a tenant of such trust if the gross income of such
subsidiary from such service is not less than 150 per-
cent of such subsidiary’s direct cost in furnishing or
rendering the service.
‘‘(vii) EXCEPTIONS
GRANTED
BY
SECRETARY.—The
Secretary may waive the tax otherwise imposed by
subparagraph (A) if the trust establishes to the satis-
faction of the Secretary that rents charged to tenants
were established on an arms’ length basis even though
a taxable REIT subsidiary of the trust provided serv-
ices to such tenants.
‘‘(C) REDETERMINED DEDUCTIONS.—The term ‘redeter-
mined deductions’ means deductions (other than redeter-
mined rents) of a taxable REIT subsidiary of a real estate
investment trust if the amount of such deductions would
(but for subparagraph (E)) be decreased on distribution,
apportionment, or allocation under section 482 to clearly
reflect income as between such subsidiary and such trust.
‘‘(D) EXCESS
INTEREST.—The term ‘excess interest’
means any deductions for interest payments by a taxable
REIT subsidiary of a real estate investment trust to such
trust to the extent that the interest payments are in excess
of a rate that is commercially reasonable.
‘‘(E) COORDINATION WITH SECTION 482.—The imposition
of tax under subparagraph (A) shall be in lieu of any
distribution, apportionment, or allocation under section
482.
‘‘(F) REGULATORY AUTHORITY.—The Secretary shall pre-
scribe such regulations as may be necessary or appropriate
to carry out the purposes of this paragraph. Until the
Secretary prescribes such regulations, real estate invest-
ment trusts and their taxable REIT subsidiaries may base
their allocations on any reasonable method.’’.
(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE DISTRIB-
UTED.—Subparagraph (E) of section 857(b)(2) of such Code (relating
to real estate investment trust taxable income) is amended by
striking ‘‘paragraph (5)’’ and inserting ‘‘paragraphs (5) and (7)’’.
SEC. 546. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this subpart shall
apply to taxable years beginning after December 31, 2000.
(b) TRANSITIONAL RULES RELATED TO SECTION 541.—
(1) EXISTING ARRANGEMENTS.—
(A) IN GENERAL.—Except as otherwise provided in this
paragraph, the amendment made by section 541 shall not
apply to a real estate investment trust with respect to—
(i) securities of a corporation held directly or
indirectly by such trust on July 12, 1999;
(ii) securities of a corporation held by an entity
on July 12, 1999, if such trust acquires control of
such entity pursuant to a written binding contract
in effect on such date and at all times thereafter before
such acquisition;
H. R. 1180—88
(iii) securities received by such trust (or a suc-
cessor) in exchange for, or with respect to, securities
described in clause (i) or (ii) in a transaction in which
gain or loss is not recognized; and
(iv) securities acquired directly or indirectly by
such trust as part of a reorganization (as defined in
section 368(a)(1) of the Internal Revenue Code of 1986)
with respect to such trust if such securities are
described in clause (i), (ii), or (iii) with respect to
any other real estate investment trust.
(B) NEW
TRADE
OR
BUSINESS
OR
SUBSTANTIAL
NEW
ASSETS.—Subparagraph (A) shall cease to apply to securi-
ties of a corporation as of the first day after July 12,
1999, on which such corporation engages in a substantial
new line of business, or acquires any substantial asset,
other than—
(i) pursuant to a binding contract in effect on such
date and at all times thereafter before the acquisition
of such asset;
(ii) in a transaction in which gain or loss is not
recognized by reason of section 1031 or 1033 of the
Internal Revenue Code of 1986; or
(iii) in a reorganization (as so defined) with another
corporation the securities of which are described in
paragraph (1)(A) of this subsection.
(C) LIMITATION ON TRANSITION RULES.—Subparagraph
(A) shall cease to apply to securities of a corporation held,
acquired, or received, directly or indirectly, by a real estate
investment trust as of the first day after July 12, 1999,
on which such trust acquires any additional securities of
such corporation other than—
(i) pursuant to a binding contract in effect on July
12, 1999, and at all times thereafter; or
(ii) in a reorganization (as so defined) with another
corporation the securities of which are described in
paragraph (1)(A) of this subsection.
(2) TAX-FREE CONVERSION.—If—
(A) at the time of an election for a corporation to
become a taxable REIT subsidiary, the amendment made
by section 541 does not apply to such corporation by reason
of paragraph (1); and
(B) such election first takes effect before January 1,
2004,
such election shall be treated as a reorganization qualifying
under section 368(a)(1)(A) of such Code.
SEC. 547. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.
The Secretary of the Treasury shall conduct a study to deter-
mine how many taxable REIT subsidiaries are in existence and
the aggregate amount of taxes paid by such subsidiaries. The Sec-
retary shall submit a report to the Congress describing the results
of such study.
H. R. 1180—89
Subpart B—Health Care REITs
SEC. 551. HEALTH CARE REITS.
(a) SPECIAL FORECLOSURE RULE
FOR HEALTH CARE PROP-
ERTIES.—Subsection (e) of section 856 of the Internal Revenue Code
of 1986 (relating to special rules for foreclosure property) is amended
by adding at the end the following new paragraph:
‘‘(6) SPECIAL
RULE
FOR
QUALIFIED
HEALTH
CARE
PROP-
ERTIES.—For purposes of this subsection—
‘‘(A) ACQUISITION AT EXPIRATION OF LEASE.—The term
‘foreclosure property’ shall include any qualified health care
property acquired by a real estate investment trust as
the result of the termination of a lease of such property
(other than a termination by reason of a default, or the
imminence of a default, on the lease).
‘‘(B) GRACE PERIOD.—In the case of a qualified health
care property which is foreclosure property solely by reason
of subparagraph (A), in lieu of applying paragraphs (2)
and (3)—
‘‘(i) the qualified health care property shall cease
to be foreclosure property as of the close of the second
taxable year after the taxable year in which such trust
acquired such property, and
‘‘(ii) if the real estate investment trust establishes
to the satisfaction of the Secretary that an extension
of the grace period in clause (i) is necessary to the
orderly leasing or liquidation of the trust’s interest
in such qualified health care property, the Secretary
may grant one or more extensions of the grace period
for such qualified health care property.
Any such extension shall not extend the grace period
beyond the close of the 6th year after the taxable year
in which such trust acquired such qualified health care
property.
‘‘(C) INCOME FROM INDEPENDENT CONTRACTORS.—For
purposes of applying paragraph (4)(C) with respect to quali-
fied health care property which is foreclosure property by
reason of subparagraph (A) or paragraph (1), income
derived or received by the trust from an independent con-
tractor shall be disregarded to the extent such income
is attributable to—
‘‘(i) any lease of property in effect on the date
the real estate investment trust acquired the qualified
health care property (without regard to its renewal
after such date so long as such renewal is pursuant
to the terms of such lease as in effect on such date),
or
‘‘(ii) any lease of property entered into after such
date if—
‘‘(I) on such date, a lease of such property
from the trust was in effect, and
‘‘(II) under the terms of the new lease, such
trust receives a substantially similar or lesser ben-
efit in comparison to the lease referred to in sub-
clause (I).
‘‘(D) QUALIFIED HEALTH CARE PROPERTY.—
H. R. 1180—90
‘‘(i) IN GENERAL.—The term ‘qualified health care
property’ means any real property (including interests
therein), and any personal property incident to such
real property, which—
‘‘(I) is a health care facility, or
‘‘(II) is necessary or incidental to the use of
a health care facility.
‘‘(ii) HEALTH
CARE
FACILITY.—For purposes of
clause (i), the term ‘health care facility’ means a hos-
pital, nursing facility, assisted living facility, con-
gregate care facility, qualified continuing care facility
(as defined in section 7872(g)(4)), or other licensed
facility which extends medical or nursing or ancillary
services to patients and which, immediately before the
termination, expiration, default, or breach of the lease
of or mortgage secured by such facility, was operated
by a provider of such services which was eligible for
participation in the medicare program under title XVIII
of the Social Security Act with respect to such facility.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2000.
Subpart C—Conformity With Regulated
Investment Company Rules
SEC. 556. CONFORMITY WITH REGULATED INVESTMENT COMPANY
RULES.
(a) DISTRIBUTION REQUIREMENT.—Clauses (i) and (ii) of section
857(a)(1)(A) of the Internal Revenue Code of 1986 (relating to
requirements applicable to real estate investment trusts) are each
amended by striking ‘‘95 percent (90 percent for taxable years
beginning before January 1, 1980)’’ and inserting ‘‘90 percent’’.
(b) IMPOSITION OF TAX.—Clause (i) of section 857(b)(5)(A) of
such Code (relating to imposition of tax in case of failure to meet
certain requirements) is amended by striking ‘‘95 percent (90 per-
cent in the case of taxable years beginning before January 1,
1980)’’ and inserting ‘‘90 percent’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2000.
Subpart D—Clarification of Exception From
Impermissible Tenant Service Income
SEC. 561. CLARIFICATION OF EXCEPTION FOR INDEPENDENT OPERA-
TORS.
(a) IN GENERAL.—Paragraph (3) of section 856(d) of the Internal
Revenue Code of 1986 (relating to independent contractor defined)
is amended by adding at the end the following flush sentence:
‘‘In the event that any class of stock of either the real estate
investment trust or such person is regularly traded on an
established securities market, only persons who own, directly
or indirectly, more than 5 percent of such class of stock shall
be taken into account as owning any of the stock of such
class for purposes of applying the 35 percent limitation set
forth in subparagraph (B) (but all of the outstanding stock
H. R. 1180—91
of such class shall be considered outstanding in order to com-
pute the denominator for purpose of determining the applicable
percentage of ownership).’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 2000.
Subpart E—Modification of Earnings and Profits
Rules
SEC. 566. MODIFICATION OF EARNINGS AND PROFITS RULES.
(a) RULES FOR DETERMINING WHETHER REGULATED INVESTMENT
COMPANY HAS EARNINGS
AND PROFITS FROM NON-RIC YEAR.—
(1) IN
GENERAL.—Subsection (c) of section 852 of the
Internal Revenue Code of 1986 is amended by adding at the
end the following new paragraph:
‘‘(3) DISTRIBUTIONS TO MEET REQUIREMENTS OF SUBSECTION
(a)(2)(B).—Any distribution which is made in order to comply
with the requirements of subsection (a)(2)(B)—
‘‘(A) shall be treated for purposes of this subsection
and subsection (a)(2)(B) as made from earnings and profits
which, but for the distribution, would result in a failure
to meet such requirements (and allocated to such earnings
on a first-in, first-out basis), and
‘‘(B) to the extent treated under subparagraph (A) as
made from accumulated earnings and profits, shall not
be treated as a distribution for purposes of subsection
(b)(2)(D) and section 855.’’.
(2) CONFORMING AMENDMENT.—Subparagraph (A) of section
857(d)(3) of such Code is amended to read as follows:
‘‘(A) shall be treated for purposes of this subsection
and subsection (a)(2)(B) as made from earnings and profits
which, but for the distribution, would result in a failure
to meet such requirements (and allocated to such earnings
on a first-in, first-out basis), and’’.
(b) CLARIFICATION OF APPLICATION OF REIT SPILLOVER DIVI-
DEND RULES TO DISTRIBUTIONS TO MEET QUALIFICATION REQUIRE-
MENT.—Subparagraph (B) of section 857(d)(3) of such Code is
amended by inserting before the period ‘‘and section 858’’.
(c) APPLICATION OF DEFICIENCY DIVIDEND PROCEDURES.—Para-
graph (1) of section 852(e) of such Code is amended by adding
at the end the following new sentence: ‘‘If the determination under
subparagraph (A) is solely as a result of the failure to meet the
requirements of subsection (a)(2), the preceding sentence shall also
apply for purposes of applying subsection (a)(2) to the non-RIC
year and the amount referred to in paragraph (2)(A)(i) shall be
the portion of the accumulated earnings and profits which resulted
in such failure.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to distributions after December 31, 2000.
Subpart F—Modification of Estimated Tax Rules
SEC. 571. MODIFICATION OF ESTIMATED TAX RULES FOR CLOSELY
HELD REAL ESTATE INVESTMENT TRUSTS.
(a) IN GENERAL.—Subsection (e) of section 6655 of the Internal
Revenue Code of 1986 (relating to estimated tax by corporations)
is amended by adding at the end the following new paragraph:
H. R. 1180—92
‘‘(5) TREATMENT OF CERTAIN REIT DIVIDENDS.—
‘‘(A) IN GENERAL.—Any dividend received from a closely
held real estate investment trust by any person which
owns (after application of subsections (d)(5) and (l)(3)(B)
of section 856) 10 percent or more (by vote or value) of
the stock or beneficial interests in the trust shall be taken
into account in computing annualized income installments
under paragraph (2) in a manner similar to the manner
under which partnership income inclusions are taken into
account.
‘‘(B) CLOSELY HELD REIT.—For purposes of subpara-
graph (A), the term ‘closely held real estate investment
trust’ means a real estate investment trust with respect
to which 5 or fewer persons own (after application of sub-
sections (d)(5) and (l)(3)(B) of section 856) 50 percent or
more (by vote or value) of the stock or beneficial interests
in the trust.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to estimated tax payments due on or after December
15, 1999.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.