1041
HR 2491 RDS
graph are met by an issuer if, within a reason-
able period after the transfer referred to in sub-
paragraph (B)—
‘‘(i) the issuer is described in section
501(c)(3) and exempt from tax under sec-
tion 501(a);
‘‘(ii) the issuer no longer is described
in subparagraphs (A) and (B) of para-
graph (2); and
‘‘(iii) at least 80 percent of the mem-
bers of the board of directors of the issuer
are independent members.
‘‘(D) SENIOR
STOCK.—For purposes of
this paragraph, the term ‘senior stock’ means
stock—
‘‘(i) which participates pro rata and
fully in the equity value of the corporation
with all other common stock of the cor-
poration but which has the right to pay-
ment of liquidation proceeds prior to pay-
ment of liquidation proceeds in respect of
other common stock of the corporation;
‘‘(ii) which has a fixed right upon liq-
uidation and upon redemption to an
amount equal to the greater of—
1042
HR 2491 RDS
‘‘(I) the fair market value of such
stock on the date of liquidation or re-
demption (whichever is applicable); or
‘‘(II) the fair market value of all
assets transferred in exchange for
such stock and reduced by the amount
of all liabilities of the corporation
which has made an election under this
paragraph assumed by the transferee
corporation in such transfer;
‘‘(iii) the holder of which has the right
to require the transferee corporation to re-
deem on a date that is not later than 10
years after the date on which an election
under this paragraph was made and pursu-
ant to such election such stock was issued;
and
‘‘(iv) in respect of which, during the
time such stock is outstanding, there is not
outstanding any equity interest in the cor-
poration having any liquidation, redemp-
tion or dividend rights in the corporation
which are superior to those of such stock.
‘‘(E) INDEPENDENT MEMBER.—The term
‘independent member’ means a member of the
1043
HR 2491 RDS
board of directors of the issuer who (except for
services as a member of such board) receives no
compensation directly or indirectly—
‘‘(i) for services performed in connec-
tion with such transferee corporation, or
‘‘(ii) for services as a member of the
board of directors or as an officer of such
transferee corporation.
For purposes of clause (ii), the term ‘officer’ in-
cludes any individual having powers or respon-
sibilities similar to those of officers.
‘‘(F) COORDINATION WITH CERTAIN PRI-
VATE
FOUNDATION
TAXES.—For purposes of
sections 4942 (relating to the excise tax on a
failure to distribute income) and 4943 (relating
to the excise tax on excess business holdings),
the transferee corporation referred to in sub-
paragraph (B) shall be treated as a functionally
related business (within the meaning of section
4942(j)(4)) with respect to the issuer during
the period commencing with the date on which
an election is made under this paragraph and
ending on the date that is the earlier of—
‘‘(i) the last day of the last taxable
year for which more than 50 percent of the
1044
HR 2491 RDS
gross income of such transferee corpora-
tion is derived from, or more than 50 per-
cent of the assets (by value) of such trans-
feree corporation consists of, student loan
notes incurred under the Higher Education
Act of 1965; or
‘‘(ii) the last day of the taxable year
of the issuer during which occurs the date
which is 10 years after the date on which
the election under this paragraph is made.
‘‘(G) ELECTION.—An election under this
paragraph may be revoked only with the con-
sent of the Secretary.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 13642. CERTAIN AMOUNTS DERIVED FROM FOREIGN
CORPORATIONS TREATED AS UNRELATED
BUSINESS TAXABLE INCOME.
(a) GENERAL RULE.—Subsection (b) of section 512
(relating to modifications) is amended by adding at the
end thereof the following new paragraph:
‘‘(18) TREATMENT OF CERTAIN AMOUNTS DE-
RIVED FROM FOREIGN CORPORATIONS.—
1045
HR 2491 RDS
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), any amount included in gross income
under section 951(a)(1)(A) shall be included as
an item of gross income derived from an unre-
lated trade or business to the extent the
amount so included is attributable to insurance
income (as defined in section 953) which, if de-
rived directly by the organization, would be
treated as gross income from an unrelated
trade or business. There shall be allowed all de-
ductions directly connected with amounts in-
cluded in gross income under the preceding sen-
tence.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to income attributable to a pol-
icy of insurance or reinsurance with respect to
which the person (directly or indirectly) insured
is—
‘‘(i) such organization,
‘‘(ii) an affiliate of such organization
which is exempt from tax under section
501(a), or
‘‘(iii) a director, officer, or employee
of such organization or affiliate but only if
the insurance covers solely risks associated
1046
HR 2491 RDS
with the performance of services for the
benefit of such organization or affiliate.
‘‘(C) REGULATIONS.—The Secretary shall
prescribe such regulations as may be necessary
or appropriate to carry out the purposes of this
paragraph, including regulations for the appli-
cation of this paragraph in the case of income
paid through 1 or more entities or between 2 or
more chains of entities.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to amounts included in gross in-
come in any taxable year beginning after December 31,
1995.
PART VIII—EXCISE TAX ON AMOUNTS OF
PRIVATE EXCESS BENEFITS
SEC. 13646. EXCISE TAXES FOR FAILURE BY CERTAIN
CHARITABLE ORGANIZATIONS TO MEET CER-
TAIN QUALIFICATION REQUIREMENTS.
(a) IN GENERAL.—Chapter 42 (relating to private
foundations and certain other tax-exempt organizations)
is amended by redesignating subchapter D as subchapter
E and by inserting after subchapter C the following new
subchapter:
1047
HR 2491 RDS
‘‘Subchapter D—Failure By Certain
Charitable 
Organizations 
To
Meet Certain Qualification Re-
quirements
‘‘Sec. 4958. Taxes on excess benefit transactions.
‘‘SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.
‘‘(a) INITIAL TAXES.—
‘‘(1) ON THE DISQUALIFIED PERSON.—There is
hereby imposed on each excess benefit transaction a
tax equal to 25 percent of the excess benefit. The
tax imposed by this paragraph shall be paid by any
disqualified person referred to in subsection (f)(1)
with respect to such transaction.
‘‘(2) ON THE MANAGEMENT.—In any case in
which a tax is imposed by paragraph (1), there is
hereby imposed on the participation of any organiza-
tion manager in the excess benefit transaction,
knowing that it is such a transaction, a tax equal to
10 percent of the excess benefit, unless such partici-
pation is not willful and is due to reasonable cause.
The tax imposed by this paragraph shall be paid by
any organization manager who participated in the
excess benefit transaction.
‘‘(b) ADDITIONAL TAX ON THE DISQUALIFIED PER-
SON.—In any case in which an initial tax is imposed by
1048
HR 2491 RDS
subsection (a)(1) on an excess benefit transaction and the
excess benefit involved in such transaction is not corrected
within the taxable period, there is hereby imposed a tax
equal to 200 percent of the excess benefit involved. The
tax imposed by this subsection shall be paid by any dis-
qualified person referred to in subsection (f)(1) with re-
spect to such transaction.
‘‘(c) EXCESS BENEFIT TRANSACTION; EXCESS BEN-
EFIT.—For purposes of this section—
‘‘(1) EXCESS BENEFIT TRANSACTION.—
‘‘(A) IN GENERAL.—The term ‘excess ben-
efit transaction’ means any transaction in
which an economic benefit is provided by an ap-
plicable tax-exempt organization directly or in-
directly to or for the use of any disqualified
person if the value of the economic benefit pro-
vided exceeds the value of the consideration (in-
cluding the performance of services) received
for providing such benefit. For purposes of the
preceding sentence, an economic benefit shall
not be treated as consideration for the perform-
ance of services unless such organization clearly
indicated its intent to so treat such benefit.
1049
HR 2491 RDS
‘‘(B) EXCESS BENEFIT.—The term ‘excess
benefit’ means the excess referred to in sub-
paragraph (A).
‘‘(2) AUTHORITY TO INCLUDE CERTAIN OTHER
PRIVATE
INUREMENT.—To the extent provided in
regulations prescribed by the Secretary, the term
‘excess benefit transaction’ includes any transaction
in which the amount of any economic benefit pro-
vided to or for the use of a disqualified person is de-
termined in whole or in part by the revenues of 1
or more activities of the organization but only if
such transaction results in inurement not permitted
under paragraph (3) or (4) of section 501(c), as the
case may be. In the case of any such transaction,
the excess benefit shall be the amount of the
inurement not so permitted.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) JOINT AND SEVERAL LIABILITY.—If more
than 1 person is liable for any tax imposed by sub-
section (a) or subsection (b), all such persons shall
be jointly and severally liable for such tax.
‘‘(2) LIMIT FOR MANAGEMENT.—With respect
to any 1 excess benefit transaction, the maximum
1050
HR 2491 RDS
amount of the tax imposed by subsection (a)(2) shall
not exceed $10,000.
‘‘(e) APPLICABLE TAX-EXEMPT ORGANIZATION.—
For purposes of this subchapter, the term ‘applicable tax-
exempt organization’ means any organization which (with-
out regard to any excess benefit) would be described in
paragraph (3) or (4) of section 501(c) and exempt from
tax under section 501(a). Such term shall not include a
private foundation (as defined in section 509(a)).
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) DISQUALIFIED PERSON.—The term ‘dis-
qualified person’ means, with respect to any trans-
action—
‘‘(A) any person who was, at any time dur-
ing the 5-year period ending on the date of
such transaction—
‘‘(i) an organization manager, or
‘‘(ii) an individual (other than an or-
ganization manager) in a position to exer-
cise substantial influence over the affairs
of the organization,
‘‘(B) a member of the family of an individ-
ual described in subparagraph (A), and
‘‘(C) a 35-percent controlled entity.
1051
HR 2491 RDS
‘‘(2) ORGANIZATION MANAGER.—The term ‘or-
ganization manager’ means, with respect to any ap-
plicable tax-exempt organization, any officer, direc-
tor, or trustee of such organization (or any individ-
ual having powers or responsibilities similar to those
of officers, directors, or trustees of the organiza-
tion).
‘‘(3) 35-PERCENT CONTROLLED ENTITY.—
‘‘(A) IN GENERAL.—The term ‘35-percent
controlled entity’ means—
‘‘(i) a corporation in which persons
described in subparagraph (A) or (B) of
paragraph (1) own more than 35 percent
of the total combined voting power,
‘‘(ii) a partnership in which such per-
sons own more than 35 percent of the
profits interest, and
‘‘(iii) a trust or estate in which such
persons own more than 35 percent of the
beneficial interest.
‘‘(B) 
CONSTRUCTIVE
OWNERSHIP
RULES.—Rules similar to the rules of para-
graphs (3) and (4) of section 4946(a) shall
apply for purposes of this paragraph.
1052
HR 2491 RDS
‘‘(4) FAMILY MEMBERS.—The members of an
individual’s family shall be determined under section
4946(d); except that such members also shall in-
clude the brothers and sisters (whether by the whole
or half blood) of the individual and their spouses.
‘‘(5) TAXABLE PERIOD.—The term ‘taxable pe-
riod’ means, with respect to any excess benefit
transaction, the period beginning with the date on
which the transaction occurs and ending on the ear-
liest of—
‘‘(A) the date of mailing a notice of defi-
ciency under section 6212 with respect to the
tax imposed by subsection (a)(1), or
‘‘(B) the date on which the tax imposed by
subsection (a)(1) is assessed.
‘‘(6) CORRECTION.—The terms ‘correction’ and
‘correct’ mean, with respect to any excess benefit
transaction, undoing the excess benefit to the extent
possible, and where fully undoing the excess benefit
is not possible, such additional corrective action as
is prescribed by the Secretary by regulations.
‘‘(g) TREATMENT OF PREVIOUSLY EXEMPT ORGANI-
ZATIONS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the status of any organization as an applicable
1053
HR 2491 RDS
tax-exempt organization shall be terminated only
if—
‘‘(A)(i) such organization notifies the Sec-
retary (at such time and in such manner as the
Secretary may by regulations prescribe) of its
intent to accomplish such termination, or
‘‘(ii) there is a final determination by the
Secretary that such status has terminated, and
‘‘(B)(i) such organization pays the tax im-
posed by paragraph (2) (or any portion not
abated pursuant to paragraph (3)), or
‘‘(ii) the entire amount of such tax is
abated pursuant to paragraph (3).
‘‘(2) IMPOSITION OF TAX.—There is hereby im-
posed on each organization referred to in paragraph
(1) a tax equal to the lesser of—
‘‘(A) the amount which the organization
substantiates by adequate records or other cor-
roborating evidence as the aggregate tax benefit
resulting from its exemption from tax under
section 501(a), or
‘‘(B) the value of the net assets of such or-
ganization.
‘‘(3) ABATEMENT OF TAX.—The Secretary may
abate the unpaid portion of the assessment of any
1054
HR 2491 RDS
tax imposed by paragraph (2), or any liability in re-
spect thereof, if the applicable tax-exempt organiza-
tion distributes all of its net assets to 1 or more or-
ganizations each of which has been in existence, and
described in section 501(c)(3), for a continuous pe-
riod of at least 60 calendar months. If the distribut-
ing organization is described in section 501(c)(4),
the preceding sentence shall be applied by treating
the reference to section 501(c)(3) as including a ref-
erence to section 501(c)(4).
‘‘(4) CERTAIN
RULES
MADE
APPLICABLE.—
Rules similar to the rules of subsections (d), (e), and
(f) of section 507 shall apply for purposes of this
subsection.’’
(b) APPLICATION OF PRIVATE INUREMENT RULE TO
TAX-EXEMPT ORGANIZATIONS DESCRIBED IN SECTION
501(c)(4).—Paragraph (4) of section 501(c) is amended
by inserting ‘‘(A)’’ after ‘‘(4)’’ and by adding at the end
the following:
‘‘(B) Subparagraph (A) shall not apply to an
entity unless no part of the net earnings of such en-
tity inures to the benefit of any private shareholder
or individual.’’
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
1055
HR 2491 RDS
(1) Subsection (e) of section 4955 is amend-
ed—
(A) by striking ‘‘SECTION 4945’’ in the
heading and inserting ‘‘SECTIONS 4945 and
4958’’, and
(B) by inserting before the period ‘‘or an
excess benefit for purposes of section 4958’’.
(2) Subsections (a), (b), and (c) of section 4963
are each amended by inserting ‘‘4958,’’ after
‘‘4955,’’.
(3) Subsection (e) of section 6213 is amended
by inserting ‘‘4958 (relating to private excess bene-
fit),’’ before ‘‘4971’’.
(4) Paragraphs (2) and (3) of section 7422(g)
are each amended by inserting ‘‘4958,’’ after
‘‘4955,’’.
(5) Subsection (b) of section 7454 is amended
by inserting ‘‘or whether an organization manager
(as defined in section 4958(f)(2)) has ‘knowingly’
participated in an excess benefit transaction (as de-
fined in section 4958(c)),’’ after ‘‘section 4912(b),’’.
(6) The table of subchapters for chapter 42 is
amended by striking the last item and inserting the
following:
1056
HR 2491 RDS
‘‘Subchapter D. Failure by certain charitable organizations to
meet certain qualification requirements.
‘‘Subchapter E. Abatement of first and second tier taxes in cer-
tain cases.’’
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than subsection (b)) shall apply
to excess benefit transactions occurring on or after
September 14, 1995.
(2) BINDING CONTRACTS FOR PERSONAL SERV-
ICES.—The amendments referred to in paragraph
(1) shall not apply to any transaction pursuant to
any written contract for the performance of personal
services which was binding on September 13, 1995,
and at all times thereafter before such transaction
occurred.
(3) APPLICATION
OF
PRIVATE
INUREMENT
RULE TO TAX-EXEMPT ORGANIZATIONS DESCRIBED
IN SECTION 501(C)(4).—
(A) IN GENERAL.—The amendment made
by subsection (b) shall apply to inurement oc-
curring on or after September 14, 1995.
(B) BINDING
CONTRACTS.—The amend-
ment made by subsection (b) shall not apply to
any inurement occurring before January 1,
1997, pursuant to a written contract which was
binding on September 13, 1995, and at all
1057
HR 2491 RDS
times thereafter before such inurement oc-
curred.
SEC. 13647. REPORTING OF CERTAIN EXCISE TAXES AND
OTHER INFORMATION.
(a) REPORTING BY ORGANIZATIONS DESCRIBED IN
SECTION 501(c)(3).—Subsection (b) of section 6033 (re-
lating to certain organizations described in section
501(c)(3)) is amended by striking ‘‘and’’ at the end of
paragraph (9), by redesignating paragraph (10) as para-
graph (14), and by inserting after paragraph (9) the fol-
lowing new paragraphs:
‘‘(10) the respective amounts (if any) of the
taxes paid by the organization during the taxable
year under the following provisions:
‘‘(A) section 4911 (relating to tax on ex-
cess expenditures to influence legislation),
‘‘(B) section 4912 (relating to tax on dis-
qualifying lobbying expenditures of certain or-
ganizations), and
‘‘(C) section 4955 (relating to taxes on po-
litical expenditures of section 501(c)(3) organi-
zations),
‘‘(11) the respective amounts (if any) of the
taxes paid by the organization or any disqualified
person during the taxable year under section 4958
1058
HR 2491 RDS
(relating to taxes on private excess benefit from cer-
tain charitable organizations),
‘‘(12) such information as the Secretary may
require with respect to any excess benefit trans-
action (as defined in section 4958),
‘‘(13) the name of each disqualified person who
receives an economic benefit from an applicable tax-
exempt organization (as defined in section 4958(e))
and such other information as the Secretary may
prescribe with respect to such benefit, and’’.
(b) 
ORGANIZATIONS
DESCRIBED
IN
SECTION
501(c)(4).—Section 6033 is amended by redesignating
subsection (f) as subsection (g) and by inserting after sub-
section (e) the following new subsection:
‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SEC-
TION 501(c)(4).—Every organization described in section
501(c)(4) which is subject to the requirements of sub-
section (a) shall include on the return required under sub-
section (a) the information referred to in paragraphs (10),
(11), (12) and (13) of subsection (b) with respect to such
organization.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years begin-
ning after the date of the enactment of this Act.
1059
HR 2491 RDS
SEC. 13648. EXEMPT ORGANIZATIONS REQUIRED TO PRO-
VIDE COPY OF RETURN.
(a) GENERAL RULE.—
(1) Subparagraph (A) of section 6104(e)(1) (re-
lating to public inspection of annual returns) is
amended to read as follows:
‘‘(A) IN GENERAL.—During the 3-year pe-
riod beginning on the filing date—
‘‘(i) a copy of the annual return filed
under section 6033 (relating to returns by
exempt organizations) by any organization
to which this paragraph applies shall be
made available by such organization for in-
spection during regular business hours by
any individual at the principal office of
such organization and, if such organization
regularly maintains 1 or more regional or
district offices having 3 or more employees,
at each such regional or district office, and
‘‘(ii) upon request of an individual
made at such principal office or such a re-
gional or district office, a copy of such an-
nual return shall be provided to such indi-
vidual without charge other than a reason-
able fee for any reproduction and mailing
costs.
1060
HR 2491 RDS
If the request under clause (ii) is made in per-
son, such copy shall be provided immediately
and, if made other than in person, shall be pro-
vided within 30 days.’’
(2) Clause (ii) of section 6104(e)(2)(A) is
amended by inserting before the period at the end
thereof the following: ‘‘(and, upon request of an in-
dividual made at such principal office or such a re-
gional or district office, a copy of the material re-
quired to be available for inspection under this sub-
paragraph shall be provided (in accordance with the
last sentence of paragraph (1)(A)) to such individual
without charge other than a reasonable fee for any
reproduction and mailing costs)’’.
(3) Subsection (e) of section 6104 is amended
by adding at the end the following new paragraph:
‘‘(3) LIMITATION.—Paragraph (1)(A)(ii) (and
the corresponding provision of paragraph (2)) shall
not apply to any request if the Secretary determines,
upon application by an organization, that such re-
quest is part of a harassment campaign and that
compliance with such request is not in the public in-
terest.’’
(b) ADVERTISEMENTS ETC., REQUIRED TO DIS-
CLOSE AVAILABILITY OF ANNUAL RETURN.—
1061
HR 2491 RDS
(1) Paragraph (1) of section 6104(e) is amend-
ed by adding at the end thereof the following new
subparagraph:
‘‘(E) ADVERTISEMENTS
ETC., REQUIRED
TO
DISCLOSE
AVAILABILITY
OF
ANNUAL
RE-
TURN.—In the case of an organization required
by subparagraph (A) to provide a copy of its
annual return under section 6033 upon request
to individuals, each written advertisement or so-
licitation by (or on behalf of) such organization
shall contain an express statement (in a con-
spicuous and easily recognizable format) that
such return shall be provided to individuals
upon request.’’
(2) Section 6716, as added by section 13649 of
this title, is amended—
(A) by striking ‘‘section 6116’’ each place
it appears and inserting ‘‘section 6116 or sec-
tion 6104(e)(1)(E)’’,
(B) by striking ‘‘$1,000’’ in subsection (a)
and inserting ‘‘$1,000 ($100 in the case of a
failure 
to 
meet 
the 
requirements 
of
6104(e)(1)(E))’’, and
(C) by inserting before the period at the
end of the section heading ‘‘; FAILURE OF
1062
HR 2491 RDS
CERTAIN EXEMPT ORGANIZATIONS TO DIS-
CLOSE
AVAILABILITY
OF
ANNUAL
RE-
TURN’’.
(3) Subparagraph (C) of section 6652(c)(1) is
amended by striking ‘‘(e)(1)’’ and inserting ‘‘(e)(1)
(other than subparagraph (E))’’, by striking ‘‘$10’’
and inserting ‘‘$20’’, and by striking ‘‘$5,000’’ and
inserting ‘‘$10,000’’.
(4) Subparagraph (D) of section 6652(c)(1) is
amended by striking ‘‘$10’’ and inserting ‘‘$20’’.
(5) The item relating to section 6716 in the
table of sections for part I of subchapter B of chap-
ter 68 is amended by inserting before the period ‘‘;
failure of certain exempt organizations to disclose
availability of annual return’’.
(c) INCREASE IN PENALTY FOR WILLFUL FAILURE
TO ALLOW PUBLIC INSPECTION OF CERTAIN RETURNS,
ETC.—Section 6685 is amended by striking ‘‘$1,000’’ and
inserting ‘‘$5,000’’.
(d) COPIES OF RETURNS OF EXEMPT ORGANIZA-
TIONS
AVAILABLE
FROM
SECRETARY
IN
CERTAIN
CASES.—Subsection (b) of section 6104 is amended to
read as follows:
‘‘(b) INSPECTION
OF ANNUAL INFORMATION RE-
TURNS.—
1063
HR 2491 RDS
‘‘(1) IN GENERAL.—The information required
to be furnished by sections 6033, 6034, and 6058,
together with the names and addresses of such orga-
nizations and trusts, shall be made available to the
public at such times and in such places as the Sec-
retary may prescribe. Nothing in this subsection
shall authorize the Secretary to disclose the name or
address of any contributor to any organization or
trust (other than a private foundation, as defined in
section 509(a)) which is required to furnish such in-
formation.
‘‘(2) COPIES
PROVIDED
OF
RETURNS
FILED
UNDER
SECTION
6033
AND
APPLICATIONS
FILED
UNDER SECTION 508 IN CERTAIN CASES.—The Sec-
retary shall provide copies of returns filed under sec-
tion 6033 and applications for exemption filed under
section 508 by any organization to which subsection
(d) or (e)(1) applies to any person who agrees (sub-
ject to such conditions as the Secretary shall pre-
scribe)—
‘‘(A) to accept broad categories of such re-
turns and applications, and
‘‘(B) to provide electronic access to the
provided returns and applications on an elec-
tronic network available to the general public.
1064
HR 2491 RDS
Such copies shall be provided without charge if such
person agrees to provide such access without charge.
Otherwise, the Secretary may impose a reasonable
fee for any reproduction and mailing costs.
‘‘(3) RETURNS AND APPLICATIONS FILED BE-
FORE 1996.—Paragraph (2) shall apply to returns
and applications filed before January 1, 1996, only
to the extent provided by the Secretary.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996 (or, if
later, the 90th day after the date of the enactment of this
Act).
SEC. 13649. CERTAIN ORGANIZATIONS REQUIRED TO DIS-
CLOSE NONEXEMPT STATUS.
(a) GENERAL RULE.—Subchapter B of chapter 61
(relating to miscellaneous provisions) is amended by redes-
ignating section 6116 as section 6117 and by inserting
after section 6115 the following new section:
‘‘SEC. 6116. CERTAIN ORGANIZATIONS REQUIRED TO DIS-
CLOSE NONEXEMPT STATUS.
‘‘(a) IN GENERAL.—If—
‘‘(1) in an advertisement or solicitation by (or
on behalf of) an organization, such organization is
referred to as being nonprofit, and
1065
HR 2491 RDS
‘‘(2) such organization is not exempt from tax
under subtitle A,
such advertisement or solicitation shall contain an express
statement (in a conspicuous and easily recognizable for-
mat) that such organization is not exempt from Federal
income taxes.
‘‘(b) CROSS REFERENCE.—
‘‘For penalties for violation of subsection (a), see
section 6716.’’
(b) PENALTY.—Part I of subchapter B of chapter 68
is amended by adding at the end thereof the following new
section:
‘‘SEC. 6716. FAILURE TO DISCLOSE NONEXEMPT STATUS.
‘‘(a) IMPOSITION OF PENALTY.—If there is a failure
to meet the requirements of section 6116 with respect to
any advertisement or solicitation by (or on behalf of) an
organization, such organization shall pay a penalty of
$1,000 for each day on which such a failure occurred. The
maximum penalty imposed under this subsection on fail-
ures by any organization during any calendar year shall
not exceed $10,000.
‘‘(b) REASONABLE CAUSE EXEMPTION.—No penalty
shall be imposed under this section with respect to any
failure if it is shown that such failure is due to reasonable
cause.
1066
HR 2491 RDS
‘‘(c) $10,000 LIMITATION NOT TO APPLY WHERE
INTENTIONAL DISREGARD.—If any failure to which sub-
section (a) applies is due to intentional disregard of the
requirements of section 6116—
‘‘(1) the penalty under subsection (a) for the
day on which failure occurred shall be the greater
of—
‘‘(A) $1,000, or
‘‘(B) 50 percent of the aggregate cost of
the advertisements and solicitations which oc-
curred on such day and with respect to which
there was such failure,
‘‘(2) the $10,000 limitation of subsection (a)
shall not apply to any penalty under subsection (a)
for the day on which such failure occurred, and
‘‘(3) such penalty shall not be taken into ac-
count in applying such limitation to other penalties
under subsection (a).
‘‘(d) DAY ON WHICH FAILURE OCCURS.—For pur-
poses of this section, rules similar to the rules of section
6710(d) shall apply in determining the day on which any
failure occurs.’’
(c) CLERICAL AMENDMENTS.—
1067
HR 2491 RDS
(1) The table of sections for subchapter B of
chapter 61 is amended by striking the item relating
to section 6116 and inserting the following:
‘‘Sec. 6116. Certain organizations required to disclose
nonexempt status.
‘‘Sec. 6117. Cross reference.’’
(2) The table of sections of part I of subchapter
B of chapter 68 is amended by adding at the end
thereof the following new item:
‘‘Sec. 6716. Failure to disclose nonexempt status.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996 (or, if
later, the 90th day after the date of the enactment of this
Act).
SEC. 13650. INCREASE IN PENALTIES ON EXEMPT ORGANI-
ZATIONS FOR FAILURE TO FILE COMPLETE
AND TIMELY ANNUAL RETURNS.
(a) IN GENERAL.—Subparagraph (A) of section
6652(c)(1) (relating to annual returns under section
6033) is amended by striking ‘‘$10’’ and inserting ‘‘$20’’
and by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’.
(b) LARGER PENALTY ON ORGANIZATIONS HAVING
GROSS RECEIPTS IN EXCESS OF $1,000,000.—Subpara-
graph (A) of section 6652(c)(1) is amended by adding at
the end the following new sentence: ‘‘In the case of an
organization having gross receipts exceeding $1,000,000
for any year, with respect to the return required under
1068
HR 2491 RDS
section 6033 for such year, the first sentence of this sub-
paragraph shall be applied by substituting ‘$100’ for ‘$20’
and, in lieu of applying the second sentence of this sub-
paragraph, the maximum penalty under this subparagraph
shall not exceed $50,000.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns for taxable years ending
on or after December 31, 1995.
SEC. 13651. STUDIES.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall conduct a study of—
(1) whether the statutory prohibition on private
inurement, and the provisions of section 4958 of the
Internal Revenue Code of 1986 (as added by this
part), should apply to other tax-exempt organiza-
tions,
(2) whether State officials responsible for
overseeing charitable organizations should be pro-
vided with Federal tax information in addition to the
information available under section 6103 of such
Code for purposes of such oversight, and
(3) whether the return required to be filed by
section 6033 of such Code should be modified to as-
sure the return’s utility to such Secretary and to the
1069
HR 2491 RDS
public and to reduce any unnecessary reporting bur-
dens.
(b) REPORT.—Not later than January 1, 1997, the
report of such study shall be submitted to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate.
Subtitle G—Reform of the Earned
Income Tax Credit
SEC. 13701. REPEAL OF EARNED INCOME CREDIT FOR INDI-
VIDUALS WITHOUT QUALIFYING CHILDREN;
MODIFICATIONS TO CREDIT PHASEOUT.
(a) REPEAL OF CREDIT FOR INDIVIDUALS WITHOUT
CHILDREN.—Subparagraph (A) of section 32(c)(1) (defin-
ing eligible individual) is amended to read as follows:
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means any individual who has a quali-
fying child for the taxable year.’’
(b) MODIFICATIONS TO PHASEOUT.—
(1) Subsection (b) of section 32 is amended to
read as follows:
‘‘(b) PERCENTAGES.—
‘‘(1) IN GENERAL.—The credit percentage and
the phaseout percentage shall be determined as
follows:
1070
HR 2491 RDS
‘‘In the case of an eligible individ-
ual with:
The credit percentage
is:
The phaseout percentage
is:
1 qualifying child .....................
34 .............................
2 or more qualifying children ..
40 .............................
‘‘(2) AMOUNTS.—The earned income amount
and the phaseout amount shall be determined as
follows:
‘‘In the case of an eligible individ-
ual with:
The earned income
amount is:
The phaseout amount is:
1 qualifying child .....................
$6,340 ......................
$11,630
2 or more qualifying children ..
$8,910 ......................
$11,630.’’
(2) Subsection (j) of section 32 is amended—
(A) by striking ‘‘subsection (b)(2)(A)’’ and
inserting ‘‘subsection (b)(2)’’,
(B) by striking ‘‘1994’’ and inserting
‘‘1996’’, and
(C) by striking ‘‘1993’’ and inserting
‘‘1995’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 13702. MODIFICATION OF ADJUSTED GROSS INCOME
USED FOR PHASEOUT.
(a) IN GENERAL.—Subsections (a)(2)(B), (c)(1)(C),
and (f)(2)(B) of section 32 are each amended by striking
‘‘adjusted gross income’’ each place it appears and insert-
ing ‘‘modified adjusted gross income’’.
1071
HR 2491 RDS
(b) MODIFIED ADJUSTED GROSS INCOME.—Sub-
section (c) of section 32 is amended by adding at the end
the following new paragraph:
‘‘(5) MODIFIED
ADJUSTED
GROSS
INCOME.—
For purposes of this section, the term ‘modified ad-
justed gross income’ means adjusted gross income
increased by—
‘‘(A) any amount received as a pension or
annuity, and any distribution or payment re-
ceived from an individual retirement plan, by
the taxpayer during the taxable year to the ex-
tent not otherwise included in gross income,
and
‘‘(B) the social security benefits (as de-
fined in section 86(d)) received by the taxpayer
during the taxable year to the extent not in-
cluded in gross income.
Any amount which is not includible in gross income
by reason of paragraph (3), (4), or (5) of section
408(d) or section 402(c), 403(a)(4), 403(b)(8), or
457(e)(10) shall be treated as not described in sub-
paragraph (A).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
1072
HR 2491 RDS
SEC. 13703. EARNED INCOME TAX CREDIT DENIED TO INDI-
VIDUALS 
NOT 
AUTHORIZED 
TO 
BE 
EM-
PLOYED IN THE UNITED STATES.
(a) IN GENERAL.—Section 32(c)(1) (relating to indi-
viduals eligible to claim the earned income tax credit) is
amended by adding at the end the following new subpara-
graph:
‘‘(F) IDENTIFICATION NUMBER REQUIRE-
MENT.—The term ‘eligible individual’ does not
include any individual who does not include on
the return of tax for the taxable year—
‘‘(i) such individual’s taxpayer identi-
fication number, and
‘‘(ii) if the individual is married (with-
in the meaning of section 7703), the tax-
payer identification number of such indi-
vidual’s spouse.’’
(b) SPECIAL IDENTIFICATION NUMBER.—Section 32
is amended by adding at the end the following new sub-
section:
‘‘(l) IDENTIFICATION NUMBERS.—Solely for pur-
poses of subsections (c)(1)(F) and (c)(3)(D), a taxpayer
identification number means a social security number is-
sued to an individual by the Social Security Administra-
tion (other than a social security number issued pursuant
to clause (II) (or that portion of clause (III) that relates
1073
HR 2491 RDS
to clause (II)) of section 205(c)(2)(B)(i) of the Social Se-
curity Act).’’
(c) EXTENSION OF PROCEDURES APPLICABLE TO
MATHEMATICAL
OR
CLERICAL
ERRORS.—Section
6213(g)(2) (relating to the definition of mathematical or
clerical errors) is amended by striking ‘‘and’ at the end
of subparagraph (D), by striking the period at the end
of subparagraph (E) and inserting a comma, and by in-
serting after subparagraph (E) the following new subpara-
graphs:
‘‘(F) an omission of a correct taxpayer
identification number required under section 32
(relating to the earned income tax credit) to be
included on a return, and
‘‘(G) an entry on a return claiming the
credit under section 32 with respect to net
earnings from self-employment described in sec-
tion 32(c)(2)(A) to the extent the tax imposed
by section 1401 (relating to self-employment
tax) on such net earnings has not been paid.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
1074
HR 2491 RDS
Subtitle H—Increase in Public
Debt Limit
SEC. 13801. INCREASE IN PUBLIC DEBT LIMIT.
Subsection (b) of section 3101 of title 31, United
States Code, is amended by striking the dollar amount
contained therein and inserting ‘‘$5,500,000,000,000’’.
Subtitle I—Coal Industry Retiree
Health Equity
SEC. 13901. REPEAL OF REACHBACK PROVISIONS OF COAL
INDUSTRY HEALTH BENEFIT SYSTEM.
(a) AMENDMENTS RELATED TO DEFINITIONS.—
(1) AGREEMENTS.—
(A) IN GENERAL.—Paragraph (1) of sec-
tion 9701(b) (relating to agreements) is amend-
ed to read as follows:
‘‘(1) COAL WAGE AGREEMENTS.—
‘‘(A) 1988 AGREEMENT.—The term ‘1988
agreement’ means the collective bargaining
agreement between the settlors which became
effective on February 1, 1988.
‘‘(B) COAL WAGE AGREEMENT.—The term
‘coal wage agreement’ means any predecessor to
the 1988 agreement.’’
(B) CONFORMING
AMENDMENT.—Section
9701(b) is amended by striking paragraph (3).
1075
HR 2491 RDS
(2) OPERATORS.—
(A) SIGNATORY
OPERATOR.—Paragraph
(1) of section 9701(c) (relating to operators) is
amended to read as follows:
‘‘(1) SIGNATORY OPERATOR.—The term ‘signa-
tory operator’ means a 1988 agreement operator.’’
(B) 1988 AGREEMENT OPERATOR.—Para-
graph (3) of section 9701(c) is amended to read
as follows:
‘‘(3) 1988 AGREEMENT OPERATOR.—The term
‘1988 agreement operator’ means—
‘‘(A) an operator which was a signatory to
the 1988 agreement, or
‘‘(B) a person in business which, during
the term of the 1988 agreement, was a signa-
tory to an agreement (other than the National
Coal Mine Construction Agreement and the
Coal Haulers’ Agreement) containing pension
and health care contribution and benefit provi-
sions which are the same as those contained in
the 1988 agreement.
Such term shall not include any operator who was
assessed, and did pay the full amount of, contractual
withdrawal liability to the 1950 UMWA Benefit
1076
HR 2491 RDS
Plan, the 1974 UMWA Benefit Plan, or the Com-
bined Fund.’’
(C) LAST SIGNATORY OPERATOR.—Section
9701(c)(4) is amended by inserting ‘‘bitu-
minous’’ before ‘‘coal’’ each place it appears.
(b) COMBINED BENEFIT FUND.—Section 9702(b)(1)
is amended to read as follows:
‘‘(b) BOARD OF TRUSTEES.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the board of trustees for the Combined Fund
shall be appointed as follows:
‘‘(A) two individuals who represent employ-
ers in the coal mining industry shall be des-
ignated by the BCOA;
‘‘(B) two individuals designated by the
United Mine Workers of America; and
‘‘(C) three persons selected by the persons
appointed under subparagraphs (A) and (B).’’
(c) ASSIGNMENT
OF ELIGIBLE BENEFICIARIES.—
Subsection (a) of section 9706 is amended by adding at
the end the following new flush sentence:
‘‘For purposes of assessing premiums on or after October
1, 1995, under this chapter, the Commissioner of Social
Security shall, effective October 1, 1995, revoke all assign-
ments previously made (and shall make no further assign-
1077
HR 2491 RDS
ments and shall terminate all unpaid liabilities for any
pending assignments) to all persons other than signatory
operators and shall deem each affected coal industry re-
tiree who is an eligible beneficiary to be an unassigned
beneficiary under section 9706. The preceding sentence
shall not be construed to prevent any transfer, or any
treatment of a successor as an assigned operator, under
subsection (b)(2).’’
(d) 1992 UMWA BENEFIT PLAN.—Section 9712(d)
is amended—
(1) by striking paragraph (3) and by redesig-
nating paragraphs (4), (5), and (6) as paragraphs
(3), (4), and (5), respectively, and
(2) by striking ‘‘or last signatory operator de-
scribed in paragraph (3),’’ in paragraph (3) (as re-
designated under paragraph (1)).
(e) INFORMATION REQUIREMENTS.—
(1) IN
GENERAL.—Subsection (h) of section
9704 is amended by adding at the end the following
new paragraph:
‘‘(2) INFORMATION TO CONTRIBUTORS.—
‘‘(A) IN
GENERAL.—The trustees of the
Combined Fund shall, within 30 days of a writ-
ten request, make available to any person re-
1078
HR 2491 RDS
quired to make contributions to the Combined
Fund, or their agent—
‘‘(i) all documents which reflect its fi-
nancial and operational status, including
documents under which it is operated, and
‘‘(ii) all documents prepared at the re-
quest of the trustees or staff of the Com-
bined Fund which form the basis for any
of its actions or reports, including the eli-
gibility of participants in predecessor
plans.
‘‘(B) FEES.—The trustees may charge rea-
sonable fees (not in excess of actual expenses)
for providing documents under this paragraph.’’
(2) CONFORMING AMENDMENT.—Subsection (h)
of section 9704 is amended by striking ‘‘(h) INFOR-
MATION.—The’’ and inserting the following:
‘‘(h) INFORMATION.—
‘‘(1) INFORMATION TO SECRETARY.—The’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after Sep-
tember 30, 1995.
1079
HR 2491 RDS
TITLE 
XIV—COMMITTEE 
ON
WAYS AND MEANS—TAX SIM-
PLIFICATION
SEC. 14001. SHORT TITLE; AMENDMENT TO 1986 CODE.
(a) SHORT TITLE.—This title may be cited as the
‘‘Tax Simplification Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this title an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this title is as follows:
TITLE XIV—COMMITTEE ON WAYS AND MEANS—TAX
SIMPLIFICATION
Sec. 14001. Short title; amendment to 1986 Code.
Subtitle A—Provisions Relating to Individuals
PART I—PROVISIONS RELATING TO ROLLOVER OF GAIN ON SALE OF
PRINCIPAL RESIDENCE
Sec. 14101. Multiple sales within rollover period.
Sec. 14102. Special rules in case of divorce.
Sec. 14103. One-time exclusion of gain from sale of principal residence for cer-
tain spouses.
PART II—OTHER PROVISIONS
Sec. 14111. Payment of tax by commercially acceptable means.
Sec. 14112. Simplified foreign tax credit limitation for individuals.
Sec. 14113. Treatment of personal transactions by individuals under foreign
currency rules.
Sec. 14114. Treatment of certain reimbursed expenses of rural mail carriers.
Sec. 14115. Exclusion of combat pay from withholding limited to amount ex-
cludable from gross income.
1080
HR 2491 RDS
Sec. 14116. Treatment of traveling expenses of certain Federal employees en-
gaged in criminal investigations.
Subtitle B—Pension Simplification
PART I—SIMPLIFIED DISTRIBUTION RULES
Sec. 14201. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 14202. Repeal of $5,000 exclusion of employees’ death benefits.
Sec. 14203. Simplified method for taxing annuity distributions under certain
employer plans.
Sec. 14204. Required distributions.
PART II—INCREASED ACCESS TO PENSION PLANS
Sec. 14211. Modifications of simplified employee pensions.
Sec. 14212. State and local governments and tax-exempt organizations eligible
under section 401(k).
PART III—NONDISCRIMINATION PROVISIONS
Sec. 14221. Definition of highly compensated employees.
Sec. 14222. Repeal of family aggregation rules.
Sec. 14223. Modification of additional participation requirements.
Sec. 14224. Nondiscrimination rules for qualified cash or deferred arrange-
ments and matching contributions.
PART IV—MISCELLANEOUS SIMPLIFICATION
Sec. 14231. Treatment of leased employees.
Sec. 14232. Plans covering self-employed individuals.
Sec. 14233. Elimination of special vesting rule for multiemployer plans.
Sec. 14234. Distributions under rural cooperative plans.
Sec. 14235. Treatment of governmental plans under section 415.
Sec. 14236. Uniform retirement age.
Sec. 14237. Uniform penalty provisions to apply to certain pension reporting
requirements.
Sec. 14238. Contributions on behalf of disabled employees.
Sec. 14239. Treatment of deferred compensation plans of State and local gov-
ernments and tax-exempt organizations.
Sec. 14240. Trust requirement for deferred compensation plans of State and
local governments.
Sec. 14241. Transition rule for computing maximum benefits under section 415
limitations.
Sec. 14242. Multiple salary reduction agreements permitted under section
403(b).
Sec. 14243. Waiver of minimum period for joint and survivor annuity expla-
nation before annuity starting date.
Sec. 14244. Repeal of limitation in case of defined benefit plan and defined
contribution plan for same employee.
Sec. 14245. Date for adoption of plan amendments.
Subtitle C—Treatment of Large Partnerships
PART I—GENERAL PROVISIONS
Sec. 14301. Simplified flow-through for large partnerships.
Sec. 14302. Simplified audit procedures for large partnerships.
1081
HR 2491 RDS
Sec. 14303. Due date for furnishing information to partners of large partner-
ships.
Sec. 14304. Returns may be required on magnetic media.
Sec. 14305. Treatment of partnership items of individual retirement accounts.
Sec. 14306. Effective date.
PART II—PROVISIONS RELATED TO CERTAIN PARTNERSHIP PROCEEDINGS
Sec. 14311. Treatment of partnership items in deficiency proceedings.
Sec. 14312. Partnership return to be determinative of audit procedures to be
followed.
Sec. 14313. Provisions relating to statute of limitations.
Sec. 14314. Expansion of small partnership exception.
Sec. 14315. Exclusion of partial settlements from 1-year limitation on assess-
ment.
Sec. 14316. Extension of time for filing a request for administrative adjust-
ment.
Sec. 14317. Availability of innocent spouse relief in context of partnership pro-
ceedings.
Sec. 14318. Determination of penalties at partnership level.
Sec. 14319. Provisions relating to court jurisdiction, etc.
Sec. 14320. Treatment of premature petitions filed by notice partners or 5-per-
cent groups.
Sec. 14321. Bonds in case of appeals from certain proceeding.
Sec. 14322. Suspension of interest where delay in computational adjustment re-
sulting from certain settlements.
Sec. 14323. Special rules for administrative adjustment requests with respect
to bad debts or worthless securities.
Subtitle D—Foreign Provisions
PART I—MODIFICATIONS TO TREATMENT OF PASSIVE FOREIGN INVESTMENT
COMPANIES
Sec. 14401. United States shareholders of controlled foreign corporations not
subject to PFIC inclusion.
Sec. 14402. Election of mark to market for marketable stock in passive foreign
investment company.
Sec. 14403. Modifications to definition of passive income.
Sec. 14404. Effective date.
PART II—TREATMENT OF CONTROLLED FOREIGN CORPORATIONS
Sec. 14411. Gain on certain stock sales by controlled foreign corporations treat-
ed as dividends.
Sec. 14412. Miscellaneous modifications to subpart F.
Sec. 14413. Indirect foreign tax credit allowed for certain lower tier companies.
Sec. 14414. Repeal of inclusion of certain earnings invested in excess passive
assets.
PART III—OTHER PROVISIONS
Sec. 14421. Exchange rate used in translating foreign taxes.
Sec. 14422. Election to use simplified section 904 limitation for alternative
minimum tax.
Sec. 14423. Modification of section 1491.
Sec. 14424. Modification of section 367(b).
1082
HR 2491 RDS
Sec. 14425. Increase in filing thresholds for returns as to organization of for-
eign corporations and acquisitions of stock in such corpora-
tions.
Sec. 14426. Application of uniform capitalization rules to foreign persons.
Sec. 14427. Certain prizes and awards.
Sec. 14428. Treatment for estate tax purposes of short-term obligations held by
nonresident aliens.
Subtitle E—Other Income Tax Provisions
PART I—PROVISIONS RELATING TO S CORPORATIONS
Sec. 14501. S corporations permitted to have 75 shareholders.
Sec. 14502. Electing small business trusts.
Sec. 14503. Expansion of post-death qualification for certain trusts.
Sec. 14504. Financial institutions permitted to hold safe harbor debt.
Sec. 14505. Rules relating to inadvertent terminations and invalid elections.
Sec. 14506. Agreement to terminate year.
Sec. 14507. Expansion of post-termination transition period.
Sec. 14508. S corporations permitted to hold subsidiaries.
Sec. 14509. Treatment of distributions during loss years.
Sec. 14510. Treatment of S corporations under subchapter C.
Sec. 14511. Elimination of certain earnings and profits.
Sec. 14512. Carryover of disallowed losses and deductions under at-risk rules
allowed.
Sec. 14513. Adjustments to basis of inherited S stock to reflect certain items
of income.
Sec. 14514. S corporations eligible for rules applicable to real property sub-
divided for sale by noncorporate taxpayers.
Sec. 14515. Effective date.
PART II—PROVISIONS RELATING TO REGULATED INVESTMENT COMPANIES
Sec. 14521. Repeal of 30-percent gross income limitation.
PART III—PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS
Sec. 14531. Clarification of limitation on maximum number of shareholders.
Sec. 14532. De minimis rule for tenant services income.
Sec. 14533. Attribution rules applicable to tenant ownership.
Sec. 14534. Credit for tax paid by REIT on retained capital gains.
Sec. 14535. Repeal of 30-percent gross income requirement.
Sec. 14536. Modification of earnings and profits rules for determining whether
REIT has earnings and profits from non-REIT year.
Sec. 14537. Treatment of foreclosure property.
Sec. 14538. Payments under hedging instruments.
Sec. 14539. Excess noncash income.
Sec. 14540. Prohibited transaction safe harbor.
Sec. 14541. Shared appreciation mortgages.
Sec. 14542. Wholly owned subsidiaries.
Sec. 14543. Effective date.
PART IV—ACCOUNTING PROVISIONS
Sec. 14551. Modifications to look-back method for long-term contracts.
Sec. 14552. Application of mark to market accounting method to traders in se-
curities.
1083
HR 2491 RDS
Sec. 14553. Modification of ruling amounts for nuclear decommissioning costs.
Sec. 14554. Election of alternative taxable years by partnerships and S cor-
porations.
Sec. 14555. Special rule for crop insurance proceeds and disaster payments.
PART V—TAX-EXEMPT BOND PROVISIONS
Sec. 14561. Repeal of $100,000 limitation on unspent proceeds under 1-year
exception from rebate.
Sec. 14562. Exception from rebate for earnings on bona fide debt service fund
under construction bond rules.
Sec. 14563. Repeal of debt service-based limitation on investment in certain
nonpurpose investments.
Sec. 14564. Repeal of expired provisions.
Sec. 14565. Effective dates.
PART VI—INSURANCE PROVISIONS
Sec. 14571. Treatment of certain insurance contracts on retired lives.
Sec. 14572. Treatment of modified guaranteed contracts.
Sec. 14573. Minimum tax treatment of certain property and casualty insurance
companies.
PART VII—OTHER PROVISIONS
Sec. 14581. Closing of partnership taxable year with respect to deceased part-
ner, etc.
Sec. 14582. Credit for Social Security taxes paid with respect to employee cash
tips.
Sec. 14583. Due date for first quarter estimated tax payments by private foun-
dations.
Sec. 14584. Treatment of dues paid to agricultural or horticultural organiza-
tions.
Subtitle F—Estates and Trusts
PART I—INCOME TAX PROVISIONS
Sec. 14601. Certain revocable trusts treated as part of estate.
Sec. 14602. Distributions during first 65 days of taxable year of estate.
Sec. 14603. Separate share rules available to estates.
Sec. 14604. Executor of estate and beneficiaries treated as related persons for
disallowance of losses, etc.
Sec. 14605. Limitation on taxable year of estates.
Sec. 14606. Repeal of certain throwback rules applicable to domestic trusts.
Sec. 14607. Treatment of funeral trusts.
PART II—ESTATE AND GIFT TAX PROVISIONS
Sec. 14611. Clarification of waiver of certain rights of recovery.
Sec. 14612. Adjustments for gifts within 3 years of decedent’s death.
Sec. 14613. Clarification of qualified terminable interest rules.
Sec. 14614. Transitional rule under section 2056A.
Sec. 14615. Opportunity to correct certain failures under section 2032A.
Sec. 14616. Unified credit of decedent increased by unified credit of spouse
used on split gift included in decedent’s gross estate.
Sec. 14617. Reformation of defective bequests, etc. to spouse of decedent.
1084
HR 2491 RDS
Sec. 14618. Gifts may not be revalued for estate tax purposes after expiration
of statute of limitations.
Sec. 14619. Clarifications relating to disclaimers.
Sec. 14620. Clarification of treatment of survivor annuities under qualified ter-
minable interest rules.
Sec. 14621. Treatment under qualified domestic trust rules of forms of owner-
ship which are not trusts.
Sec. 14622. Authority to waive requirement of United States trustee for quali-
fied domestic trusts.
PART III—GENERATION-SKIPPING TAX PROVISIONS
Sec. 14631. Severing of trusts holding property having an inclusion ratio of
greater than zero.
Sec. 14632. Clarification of who is transferor where subsequent gift by reason
of power of appointment.
Sec. 14633. Taxable termination not to include direct skips.
Sec. 14634. Expansion of exception from generation-skipping transfer tax for
transfers to individuals with deceased parents.
Subtitle G—Excise Tax Simplification
PART I—PROVISIONS RELATED TO DISTILLED SPIRITS, WINES, AND BEER
Sec. 14701. Credit or refund for imported bottled distilled spirits returned to
distilled spirits plant.
Sec. 14702. Authority to cancel or credit export bonds without submission of
records.
Sec. 14703. Repeal of required maintenance of records on premises of distilled
spirits plant.
Sec. 14704. Fermented material from any brewery may be received at a dis-
tilled spirits plant.
Sec. 14705. Repeal of requirement for wholesale dealers in liquors to post sign.
Sec. 14706. Refund of tax on wine returned to bond not limited to
unmerchantable wine.
Sec. 14707. Use of additional ameliorating material in certain wines.
Sec. 14708. Domestically produced beer may be withdrawn free of tax for use
of foreign embassies, legations, etc.
Sec. 14709. Beer may be withdrawn free of tax for destruction.
Sec. 14710. Authority to allow drawback on exported beer without submission
of records.
Sec. 14711. Transfer to brewery of beer imported in bulk without payment of
tax.
PART II—CONSOLIDATION OF TAXES ON AVIATION GASOLINE
Sec. 14721. Consolidation of taxes on aviation gasoline.
PART III—OTHER EXCISE TAX PROVISIONS
Sec. 14731. Authority to grant exemptions from registration requirements.
Sec. 14732. Certain combinations not treated as manufacture under retail sales
tax on heavy trucks.
Sec. 14733. Exemption from diesel fuel dyeing requirements with respect to
certain States.
Sec. 14734. Repeal of expired provisions.
1085
HR 2491 RDS
Subtitle H—Administrative Provisions
PART I—GENERAL PROVISIONS
Sec. 14801. Repeal of authority to disclose whether prospective juror has been
audited.
Sec. 14802. Clarification of statute of limitations.
Sec. 14803. Certain notices disregarded under provision increasing interest rate
on large corporate underpayments.
Sec. 14804. Clarification of authority to withhold Puerto Rico income taxes
from salaries of Federal employees.
PART II—TAX COURT PROCEDURES
Sec. 14811. Overpayment determinations of tax court.
Sec. 14812. Awarding of administrative costs.
Sec. 14813. Redetermination of interest pursuant to motion.
Sec. 14814. Application of net worth requirement for awards of litigation costs.
PART III—AUTHORITY FOR CERTAIN COOPERATIVE AGREEMENTS
Sec. 14821. Cooperative agreements with State tax authorities.
Subtitle A—Provisions Relating to
Individuals
PART I—PROVISIONS RELATING TO ROLLOVER
OF GAIN ON SALE OF PRINCIPAL RESIDENCE
SEC. 14101. MULTIPLE SALES WITHIN ROLLOVER PERIOD.
(a) GENERAL RULE.—
(1) Section 1034 (relating to rollover of gain on
sale of principal residence) is amended by striking
subsection (d).
(2) Paragraph (4) of section 1034(c) is amend-
ed to read as follows:
‘‘(4) If the taxpayer, during the period de-
scribed in subsection (a), purchases more than 1 res-
idence which is used by him as his principal resi-
dence at some time within 2 years after the date of
the sale of the old residence, only the first of such
1086
HR 2491 RDS
residences so used by him after the date of such sale
shall constitute the new residence.’’
(3) Subsections (h)(1) and (k) of section 1034
are each amended by striking ‘‘(other than the 2
years referred to in subsection (c)(4))’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales of old residences (within
the meaning of section 1034 of the Internal Revenue Code
of 1986) after the date of the enactment of this Act.
SEC. 14102. SPECIAL RULES IN CASE OF DIVORCE.
(a) IN GENERAL.—Subsection (c) of section 1034 is
amended by adding at the end the following new para-
graph:
‘‘(5) If—
‘‘(A) a residence is sold by an individual
pursuant to a divorce or marital separation,
and
‘‘(B) the taxpayer used such residence as
his principal residence at any time during the
2-year period ending on the date of such sale,
for purposes of this section, such residence shall be
treated as the taxpayer’s principal residence at the
time of such sale.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to sales of old residences (within
1087
HR 2491 RDS
the meaning of section 1034 of the Internal Revenue Code
of 1986) after the date of the enactment of this Act.
SEC. 14103. ONE-TIME EXCLUSION OF GAIN FROM SALE OF
PRINCIPAL 
RESIDENCE 
FOR 
CERTAIN
SPOUSES.
(a) IN GENERAL.—Paragraph (2) of section 121(b)
(relating to one-time exclusion of gain from sale of prin-
cipal residence by individual who has attained age 55) is
amended by adding at the end the following new sentence:
‘‘For purposes of applying the preceding sentence to indi-
viduals who are married to each other, an election by one
individual with respect to a sale or exchange occurring be-
fore the marriage shall be disregarded for purposes of per-
mitting an election with respect to property owned and
used by the other individual as his principal residence
throughout the 3-year period ending on the date of the
marriage.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply for purposes of determining
whether an election may be made under section 121 of
the Internal Revenue Code of 1986 with respect to a sale
or exchange occurring after September 13, 1995.
1088
HR 2491 RDS
PART II—OTHER PROVISIONS
SEC. 14111. PAYMENT OF TAX BY COMMERCIALLY ACCEPT-
ABLE MEANS.
(a) GENERAL RULE.—Section 6311 is amended to
read as follows:
‘‘SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPT-
ABLE MEANS.
‘‘(a) AUTHORITY TO RECEIVE.—It shall be lawful for
the Secretary to receive for internal revenue taxes (or in
payment for internal revenue stamps) any commercially
acceptable means that the Secretary deems appropriate to
the extent and under the conditions provided in regula-
tions prescribed by the Secretary.
‘‘(b) ULTIMATE
LIABILITY.—If a check, money
order, or other method of payment, including payment by
credit card, debit card, or charge card so received is not
duly paid, or is paid and subsequently charged back to
the Secretary, the person by whom such check, or money
order, or other method of payment has been tendered shall
remain liable for the payment of the tax or for the stamps,
and for all legal penalties and additions, to the same ex-
tent as if such check, money order, or other method of
payment had not been tendered.
‘‘(c) LIABILITY OF BANKS AND OTHERS.—If any cer-
tified, treasurer’s, or cashier’s check (or other guaranteed
draft), or any money order, or any other means of pay-
1089
HR 2491 RDS
ment that has been guaranteed by a financial institution
(such as a credit card, debit card, or charge card trans-
action which has been guaranteed expressly by a financial
institution) so received is not duly paid, the United States
shall, in addition to its right to exact payment from the
party originally indebted therefor, have a lien for—
‘‘(1) the amount of such check (or draft) upon
all assets of the financial institution on which
drawn,
‘‘(2) the amount of such money order upon all
the assets of the issuer thereof, or
‘‘(3) the guaranteed amount of any other trans-
action upon all the assets of the institution making
such guarantee,
and such amount shall be paid out of such assets in pref-
erence to any other claims whatsoever against such finan-
cial institution, issuer, or guaranteeing institution, except
the necessary costs and expenses of administration and
the reimbursement of the United States for the amount
expended in the redemption of the circulating notes of
such financial institution.
‘‘(d) PAYMENT BY OTHER MEANS.—
‘‘(1) AUTHORITY
TO
PRESCRIBE
REGULA-
TIONS.—The Secretary shall prescribe such regula-
tions as the Secretary deems necessary to receive
1090
HR 2491 RDS
payment by commercially acceptable means, includ-
ing regulations that—
‘‘(A) specify which methods of payment by
commercially acceptable means will be accept-
able,
‘‘(B) specify when payment by such means
will be considered received,
‘‘(C) identify types of nontax matters re-
lated to payment by such means that are to be
resolved by persons ultimately liable for pay-
ment and financial intermediaries, without the
involvement of the Secretary, and
‘‘(D) ensure that tax matters will be re-
solved by the Secretary, without the involve-
ment of financial intermediaries.
‘‘(2) 
AUTHORITY
TO
ENTER
INTO
CON-
TRACTS.—Notwithstanding section 3718(f) of title
31, United States Code, the Secretary is authorized
to enter into contracts to obtain services related to
receiving payment by other means where cost bene-
ficial to the Government. The Secretary may not pay
any fee or provide any other consideration under
such contracts.
‘‘(3) SPECIAL PROVISIONS FOR USE OF CREDIT
CARDS.—If use of credit cards is accepted as a
1091
HR 2491 RDS
method of payment of taxes pursuant to subsection
(a)—
‘‘(A) a payment of internal revenue taxes
(or a payment for internal revenue stamps) by
a person by use of a credit card shall not be
subject to section 161 of the Truth-in-Lending
Act (15 U.S.C. 1666), or to any similar provi-
sions of State law, if the error alleged by the
person is an error relating to the underlying tax
liability, rather than an error relating to the
credit card account such as a computational
error or numerical transposition in the credit
card transaction or an issue as to whether the
person authorized payment by use of the credit
card,
‘‘(B) a payment of internal revenue taxes
(or a payment for internal revenue stamps)
shall not be subject to section 170 of the Truth-
in-Lending Act (15 U.S.C. 1666i), or to any
similar provisions of State law,
‘‘(C) a payment of internal revenue taxes
(or a payment for internal revenue stamps) by
a person by use of a debit card shall not be
subject to section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), or to any simi-
1092
HR 2491 RDS
lar provisions of State law, if the error alleged
by the person is an error relating to the under-
lying tax liability, rather than an error relating
to the debit card account such as a computa-
tional error or numerical transposition in the
debit card transaction or an issue as to whether
the person authorized payment by use of the
debit card,
‘‘(D) the term ‘creditor’ under section
103(f) of the Truth-in-Lending Act (15 U.S.C.
1602(f)) shall not include the Secretary with re-
spect to credit card transactions in payment of
internal revenue taxes (or payment for internal
revenue stamps), and
‘‘(E) notwithstanding any other provision
of law to the contrary, in the case of payment
made by credit card or debit card transaction of
an amount owed to a person as the result of the
correction of an error under section 161 of the
Truth-in-Lending Act (15 U.S.C. 1666) or sec-
tion 908 of the Electronic Fund Transfer Act
(15 U.S.C. 1693f), the Secretary is authorized
to provide such amount to such person as a
credit to that person’s credit card or debit card
1093
HR 2491 RDS
account through the applicable credit card or
debit card system.
‘‘(e) CONFIDENTIALITY OF INFORMATION.—
‘‘(1) IN
GENERAL.—Except as otherwise au-
thorized by this subsection, no person may use or
disclose any information relating to credit or debit
card transactions obtained pursuant to section
6103(k)(8) other than for purposes directly related
to the processing of such transactions, or the billing
or collection of amounts charged or debited pursuant
thereto.
‘‘(2) EXCEPTIONS.—
‘‘(A) Debit or credit card issuers or others
acting on behalf of such issuers may also use
and disclose such information for purposes di-
rectly related to servicing an issuer’s accounts.
‘‘(B) Debit or credit card issuers or others
directly involved in the processing of credit or
debit card transactions or the billing or collec-
tion of amounts charged or debited thereto may
also use and disclose such information for pur-
poses directly related to—
‘‘(i) statistical risk and profitability
assessment;
1094
HR 2491 RDS
‘‘(ii) 
transferring 
receivables, 
ac-
counts, or interest therein;
‘‘(iii) auditing the account informa-
tion;
‘‘(iv) complying with Federal, State,
or local law; and
‘‘(v) properly authorized civil, crimi-
nal, or regulatory investigation by Federal,
State, or local authorities.
‘‘(3) PROCEDURES.—Use and disclosure of in-
formation under this paragraph shall be made only
to the extent authorized by written procedures pro-
mulgated by the Secretary.
‘‘(4) CROSS REFERENCE.—
‘‘For provision providing for civil damages for vio-
lation of paragraph (1), see section 7431.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 64 is amended by striking
the item relating to section 6311 and inserting the follow-
ing:
‘‘Sec. 6311. Payment of tax by commercially acceptable means.’’
(c) AMENDMENTS
TO SECTIONS 6103 AND 7431
WITH RESPECT TO DISCLOSURE AUTHORIZATION.—
(1) Subsection (k) of section 6103 (relating to
confidentiality and disclosure of returns and return
1095
HR 2491 RDS
information) is amended by adding at the end the
following new paragraph:
‘‘(8) DISCLOSURE OF INFORMATION TO ADMIN-
ISTER SECTION 6311.—The Secretary may disclose
returns or return information to financial institu-
tions and others to the extent the Secretary deems
necessary for the administration of section 6311.
Disclosures of information for purposes other than
to accept payments by checks or money orders shall
be made only to the extent authorized by written
procedures promulgated by the Secretary.’’
(2) Section 7431 (relating to civil damages for
unauthorized disclosure of returns and return infor-
mation) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) SPECIAL RULE FOR INFORMATION OBTAINED
UNDER SECTION 6103(k)(8).—For purposes of this sec-
tion, any reference to section 6103 shall be treated as in-
cluding a reference to section 6311(e).’’
(3) Section 6103(p)(3)(A) is amended by strik-
ing ‘‘or (6)’’ and inserting ‘‘(6), or (8)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the day 9 months after
the date of the enactment of this Act.
1096
HR 2491 RDS
SEC. 14112. SIMPLIFIED FOREIGN TAX CREDIT LIMITATION
FOR INDIVIDUALS.
(a) GENERAL RULE.—Section 904 (relating to limi-
tations on foreign tax credit) is amended by redesignating
subsection (j) as subsection (k) and by inserting after sub-
section (i) the following new subsection:
‘‘(j) SIMPLIFIED LIMITATION FOR CERTAIN INDIVID-
UALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this subsection applies for any taxable year,
the limitation of subsection (a) shall be the lesser
of—
‘‘(A) 25 percent of such individual’s gross
income for the taxable year from sources with-
out the United States, or
‘‘(B) the amount of the creditable foreign
taxes paid or accrued by the individual during
the taxable year (determined without regard to
subsection (c)).
No taxes paid or accrued by the individual during
such taxable year may be deemed paid or accrued in
any other taxable year under subsection (c).
‘‘(2) INDIVIDUALS TO WHOM SUBSECTION AP-
PLIES.—This subsection shall apply to an individual
for any taxable year if—
1097
HR 2491 RDS
‘‘(A) the entire amount of such individual’s
gross income for the taxable year from sources
without the United States consists of qualified
passive income,
‘‘(B) the amount of the creditable foreign
taxes paid or accrued by the individual during
the taxable year does not exceed $200 ($400 in
the case of a joint return), and
‘‘(C) such individual elects to have this
subsection apply for the taxable year.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) QUALIFIED
PASSIVE
INCOME.—The
term ‘qualified passive income’ means any item
of gross income if—
‘‘(i) such item of income is passive in-
come (as defined in subsection (d)(2)(A)
without regard to clause (iii) thereof), and
‘‘(ii) such item of income is shown on
a payee statement furnished to the individ-
ual.
‘‘(B) CREDITABLE FOREIGN TAXES.—The
term ‘creditable foreign taxes’ means any taxes
for which a credit is allowable under section
901; except that such term shall not include
1098
HR 2491 RDS
any tax unless such tax is shown on a payee
statement furnished to such individual.
‘‘(C) 
PAYEE
STATEMENT.—The 
term
‘payee statement’ has the meaning given to
such term by section 6724(d)(2).
‘‘(D) ESTATES
AND
TRUSTS
NOT
ELIGI-
BLE.—This subsection shall not apply to any
estate or trust.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 14113. TREATMENT OF PERSONAL TRANSACTIONS BY
INDIVIDUALS UNDER FOREIGN CURRENCY
RULES.
(a) GENERAL RULE.—Subsection (e) of section 988
(relating to application to individuals) is amended to read
as follows:
‘‘(e) APPLICATION TO INDIVIDUALS.—
‘‘(1) IN GENERAL.—The preceding provisions of
this section shall not apply to any section 988 trans-
action entered into by an individual which is a per-
sonal transaction.
‘‘(2) EXCLUSION
FOR
CERTAIN
PERSONAL
TRANSACTIONS.—If—
1099
HR 2491 RDS
‘‘(A) nonfunctional currency is disposed of
by an individual in any transaction, and
‘‘(B) such transaction is a personal trans-
action,
no gain shall be recognized for purposes of this sub-
title by reason of changes in exchange rates after
such currency was acquired by such individual and
before such disposition. The preceding sentence shall
not apply if the gain which would otherwise be rec-
ognized exceeds $200.
‘‘(3) PERSONAL TRANSACTIONS.—For purposes
of this subsection, the term ‘personal transaction’
means any transaction entered into by an individual,
except that such term shall not include any trans-
action to the extent that expenses properly allocable
to such transaction meet the requirements of section
162 or 212 (other than that part of section 212
dealing with expenses incurred in connection with
taxes).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
1100
HR 2491 RDS
SEC. 14114. TREATMENT OF CERTAIN REIMBURSED EX-
PENSES OF RURAL MAIL CARRIERS.
(a) IN GENERAL.—Section 162 (relating to trade or
business expenses) is amended by redesignating subsection
(o) as subsection (p) and by inserting after subsection (n)
the following new subsection:
‘‘(o) TREATMENT
OF CERTAIN REIMBURSED EX-
PENSES OF RURAL MAIL CARRIERS.—
‘‘(1) GENERAL RULE.—In the case of any em-
ployee of the United States Postal Service who per-
forms services involving the collection and delivery of
mail on a rural route and who receives qualified re-
imbursements for the expenses incurred by such em-
ployee for the use of a vehicle in performing such
services—
‘‘(A) the amount allowable as a deduction
under this chapter for the use of a vehicle in
performing such services shall be equal to the
amount of such qualified reimbursements; and
‘‘(B) such qualified reimbursements shall
be treated as paid under a reimbursement or
other expense allowance arrangement for pur-
poses of section 62(a)(2)(A) (and section 62(c)
shall not apply to such qualified reimburse-
ments).
1101
HR 2491 RDS
‘‘(2) DEFINITION OF QUALIFIED REIMBURSE-
MENTS.—For purposes of this subsection, the term
‘qualified reimbursements’ means the amounts paid
by the United States Postal Service to employees as
an equipment maintenance allowance under the
1991 collective bargaining agreement between the
United States Postal Service and the National Rural
Letter Carriers’ Association. Amounts paid as an
equipment maintenance allowance by such Postal
Service under later collective bargaining agreements
that supersede the 1991 agreement shall be consid-
ered qualified reimbursements if such amounts do
not exceed the amounts that would have been paid
under the 1991 agreement, adjusted for changes in
the Consumer Price Index (as defined in section
1(f)(5)) since 1991.’’
(b) TECHNICAL AMENDMENT.—Section 6008 of the
Technical and Miscellaneous Revenue Act of 1988 is here-
by repealed.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
1102
HR 2491 RDS
SEC. 14115. EXCLUSION OF COMBAT PAY FROM WITHHOLD-
ING 
LIMITED 
TO 
AMOUNT 
EXCLUDABLE
FROM GROSS INCOME.
(a) IN GENERAL.—Paragraph (1) of section 3401(a)
(defining wages) is amended by inserting before the semi-
colon the following: ‘‘to the extent remuneration for such
service is excludable from gross income under such sec-
tion’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to remuneration paid after De-
cember 31, 1995.
SEC. 14116. TREATMENT OF TRAVELING EXPENSES OF CER-
TAIN FEDERAL EMPLOYEES ENGAGED IN
CRIMINAL INVESTIGATIONS.
(a) IN GENERAL.—Subsection (a) of section 162 is
amended by adding at the end the following new sentence:
‘‘The preceding sentence shall not apply to any Federal
employee during any period for which such employee is
certified by the Attorney General (or the designee thereof)
as traveling on behalf of the United States in temporary
duty status to investigate, or provide support services for
the investigation of, a Federal crime.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years ending after
the date of the enactment of this Act.
1103
HR 2491 RDS
Subtitle B—Pension Simplification
PART I—SIMPLIFIED DISTRIBUTION RULES
SEC. 14201. REPEAL OF 5-YEAR INCOME AVERAGING FOR
LUMP-SUM DISTRIBUTIONS.
(a) IN GENERAL.—Subsection (d) of section 402 (re-
lating to taxability of beneficiary of employees’ trust) is
amended by adding at the end the following new para-
graph:
‘‘(8) TERMINATION.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), this subsection shall not
apply to any taxable year beginning after De-
cember 31, 1995.
‘‘(B) RETENTION OF CERTAIN TRANSITION
RULES.—Subparagraph (A) shall not apply to
any distribution for which the taxpayer elects
the benefits of section 1122 (h)(3) or (h)(5) of
the Tax Reform Act of 1986.’’
SEC. 14202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES’
DEATH BENEFITS.
(a) IN GENERAL.—Subsection (b) of section 101 is
hereby repealed.
(b) CONFORMING AMENDMENTS.—
1104
HR 2491 RDS
(1) Subsection (c) of section 101 is amended by
striking ‘‘subsection (a) or (b)’’ and inserting ‘‘sub-
section (a)’’.
(2) Sections 406(e) and 407(e) are each amend-
ed by striking paragraph (2) and by redesignating
paragraph (3) as paragraph (2).
(3) Section 7701(a)(20) is amended by striking
‘‘, for the purposes of applying the provisions of sec-
tion 101(b) with respect to employees’ death bene-
fits’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 14203. SIMPLIFIED METHOD FOR TAXING ANNUITY
DISTRIBUTIONS UNDER CERTAIN EMPLOYER
PLANS.
(a) GENERAL RULE.—Subsection (d) of section 72
(relating to annuities; certain proceeds of endowment and
life insurance contracts) is amended to read as follows:
‘‘(d) SPECIAL RULES FOR QUALIFIED EMPLOYER
RETIREMENT PLANS.—
‘‘(1) SIMPLIFIED METHOD OF TAXING ANNUITY
PAYMENTS.—
1105
HR 2491 RDS
‘‘(A) IN
GENERAL.—In the case of any
amount received as an annuity under a quali-
fied employer retirement plan—
‘‘(i) subsection (b) shall not apply,
and
‘‘(ii) the investment in the contract
shall be recovered as provided in this para-
graph.
‘‘(B) METHOD
OF
RECOVERING
INVEST-
MENT IN CONTRACT.—
‘‘(i) 
IN
GENERAL.—Gross 
income
shall not include so much of any monthly
annuity payment under a qualified em-
ployer retirement plan as does not exceed
the amount obtained by dividing—
‘‘(I) the investment in the con-
tract (as of the annuity starting date),
by
‘‘(II) the number of anticipated
payments determined under the table
contained in clause (iii) (or, in the
case of a contract to which subsection
(c)(3)(B) applies, the number of
monthly annuity payments under such
contract).
1106
HR 2491 RDS
‘‘(ii) CERTAIN RULES MADE APPLICA-
BLE.—Rules similar to the rules of para-
graphs (2) and (3) of subsection (b) shall
apply for purposes of this paragraph.
‘‘(iii) NUMBER OF ANTICIPATED PAY-
MENTS.—
‘‘If the age of the
primary annuitant on
The number
the annuity starting
of anticipated
date is:
payments is:
Not more than 55 ..................................
300
More than 55 but not more than 60 .....
260
More than 60 but not more than 65 .....
240
More than 65 but not more than 70 .....
170
More than 70 .........................................
120
‘‘(C) ADJUSTMENT FOR REFUND FEATURE
NOT APPLICABLE.—For purposes of this para-
graph, investment in the contract shall be de-
termined under subsection (c)(1) without re-
gard to subsection (c)(2).
‘‘(D) SPECIAL
RULE
WHERE
LUMP
SUM
PAID
IN
CONNECTION
WITH
COMMENCEMENT
OF ANNUITY PAYMENTS.—If, in connection with
the commencement of annuity payments under
any qualified employer retirement plan, the tax-
payer receives a lump sum payment—
‘‘(i) such payment shall be taxable
under subsection (e) as if received before
the annuity starting date, and
1107
HR 2491 RDS
‘‘(ii) the investment in the contract
for purposes of this paragraph shall be de-
termined as if such payment had been so
received.
‘‘(E) EXCEPTION.—This paragraph shall
not apply in any case where the primary annu-
itant has attained age 75 on the annuity start-
ing date unless there are fewer than 5 years of
guaranteed payments under the annuity.
‘‘(F) ADJUSTMENT WHERE ANNUITY PAY-
MENTS NOT ON MONTHLY BASIS.—In any case
where the annuity payments are not made on a
monthly basis, appropriate adjustments in the
application of this paragraph shall be made to
take into account the period on the basis of
which such payments are made.
‘‘(G) QUALIFIED EMPLOYER RETIREMENT
PLAN.—For purposes of this paragraph, the
term ‘qualified employer retirement plan’ means
any plan or contract described in paragraph
(1), (2), or (3) of section 4974(c).
‘‘(2) TREATMENT
OF
EMPLOYEE
CONTRIBU-
TIONS
UNDER
DEFINED
CONTRIBUTION
PLANS.—
For purposes of this section, employee contributions
(and any income allocable thereto) under a defined
1108
HR 2491 RDS
contribution plan may be treated as a separate con-
tract.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply in cases where the annuity start-
ing date is after December 31, 1995.
SEC. 14204. REQUIRED DISTRIBUTIONS.
(a) IN GENERAL.—Section 401(a)(9)(C) (defining re-
quired beginning date) is amended to read as follows:
‘‘(C) REQUIRED
BEGINNING
DATE.—For
purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘re-
quired beginning date’ means April 1 of
the calendar year following the later of—
‘‘(I) the calendar year in which
the employee attains age 701⁄2, or
‘‘(II) the calendar year in which
the employee retires.
‘‘(ii) EXCEPTION.—Subclause (II) of
clause (i) shall not apply—
‘‘(I) except as provided in section
409(d), in the case of an employee
who is a 5-percent owner (as defined
in section 416) with respect to the
plan year ending in the calendar year
1109
HR 2491 RDS
in which the employee attains age
701⁄2, or
‘‘(II) for purposes of section 408
(a)(6) or (b)(3).
‘‘(iii) ACTUARIAL
ADJUSTMENT.—In
the case of an employee to whom clause
(i)(II) applies who retires in a calendar
year after the calendar year in which the
employee attains age 701⁄2, the employee’s
accrued benefit shall be actuarially in-
creased to take into account the period
after age 701⁄2 in which the employee was
not receiving any benefits under the plan.
‘‘(iv) 
EXCEPTION
FOR
GOVERN-
MENTAL
AND
CHURCH
PLANS.—Clauses
(ii) and (iii) shall not apply in the case of
a governmental plan or church plan. For
purposes of this clause, the term ‘church
plan’ means a plan maintained by a church
for church employees, and the term
‘church’ means any church (as defined in
section 3121(w)(3)(A)) or qualified church-
controlled organization (as defined in sec-
tion 3121(w)(3)(B)).’’
1110
HR 2491 RDS
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995.
PART II—INCREASED ACCESS TO PENSION
PLANS
SEC. 14211. MODIFICATIONS OF SIMPLIFIED EMPLOYEE
PENSIONS.
(a) INCREASE IN NUMBER OF ALLOWABLE PARTICI-
PANTS FOR SALARY REDUCTION ARRANGEMENTS.—Sec-
tion 408(k)(6)(B) is amended by striking ‘‘25’’ each place
it appears in the text and heading thereof and inserting
‘‘100’’.
(b) REPEAL OF PARTICIPATION REQUIREMENT.—
(1) IN
GENERAL.—Section 408(k)(6)(A) is
amended by striking clause (ii) and by redesignating
clauses (iii) and (iv) as clauses (ii) and (iii), respec-
tively.
(2) CONFORMING AMENDMENTS.—Clause (ii) of
section 408(k)(6)(C) and clause (ii) of section
408(k)(6)(F) are each amended by striking ‘‘sub-
paragraph (A)(iii)’’ and inserting ‘‘subparagraph
(A)(ii)’’.
(c) ALTERNATIVE TEST.—Clause (ii) of section
408(k)(6)(A), as redesignated by subsection (b)(1), is
1111
HR 2491 RDS
amended by adding at the end the following new flush sen-
tence:
‘‘The requirements of the preceding sen-
tence are met if the employer makes con-
tributions to the simplified employee pen-
sion meeting the requirements of sections
401(k)(11) (B) or (C), 401(k)(11)(D), and
401(m)(10)(B).’’
(d) YEAR
FOR
COMPUTING
NONHIGHLY
COM-
PENSATED EMPLOYEE PERCENTAGE.—Clause (ii) of sec-
tion 408(k)(6)(A), as redesignated by subsection (b)(1),
is amended—
(1) by striking ‘‘such year’’ in subclause (I) and
inserting ‘‘the preceding year’’, and
(2) by adding at the end the following new
flush sentence:
‘‘In the case of the first plan year for
which an employer makes contributions to
a simplified employee pension, rules similar
to the rules of section 401(k)(3)(E) shall
apply.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
1112
HR 2491 RDS
SEC. 14212. STATE AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT 
ORGANIZATIONS 
ELIGIBLE 
UNDER
SECTION 401(k).
(a) IN GENERAL.—Subparagraph (B) of section
401(k)(4) is amended to read as follows:
‘‘(B) ELIGIBILITY OF STATE AND LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—Any—
‘‘(i) State or local government or po-
litical subdivision thereof, or any agency or
instrumentality thereof, and
‘‘(ii) any organization exempt from
tax under this subtitle,
may include a qualified cash or deferred ar-
rangement as part of a plan maintained by it
unless the entity maintains an eligible deferred
compensation plan (as defined in section
457(b)). This subparagraph shall not apply to
a rural cooperative plan.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to plan years beginning after De-
cember 31, 1996, but shall not apply to any cash or de-
ferred arrangement to which clause (i) or (ii) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
1113
HR 2491 RDS
PART III—NONDISCRIMINATION PROVISIONS
SEC. 14221. DEFINITION OF HIGHLY COMPENSATED EM-
PLOYEES.
(a) IN GENERAL.—Paragraph (1) of section 414(q)
(defining highly compensated employee) is amended to
read as follows:
‘‘(1) IN
GENERAL.—The term ‘highly com-
pensated employee’ means any employee who—
‘‘(A) was a 5-percent owner at any time
during the year or the preceding year, or
‘‘(B) had compensation for the preceding
year from the employer in excess of $80,000.
The Secretary shall adjust the $80,000 amount
under subparagraph (B) at the same time and in the
same manner as under section 415(d), except that
the base period in applying such section for purposes
of this paragraph shall be the calendar quarter end-
ing September 30, 1995.’’
(b) CONFORMING AMENDMENTS.—
(1)(A) Subsection (q) of section 414 is amended
by striking paragraphs (2), (4), (5), (8), and (12)
and by redesignating paragraphs (3), (6), (7), (9),
(10), and (11) as paragraphs (2) through (7), re-
spectively.
(B) Section 129(d)(8)(B), 401(a)(5)(D)(ii),
408(k)(2)(C), and 416(i)(1)(D) are each amended
1114
HR 2491 RDS
by striking ‘‘section 414(q)(7)’’ and inserting ‘‘sec-
tion 414(q)(4)’’.
(C) Sections 401(a)(17) and 404(l) are each
amended by striking ‘‘section 414(q)(6)’’ and insert-
ing ‘‘section 414(q)(3)’’.
(D) Section 416(i)(1)(A) is amended by strik-
ing ‘‘section 414(q)(8)’’ and inserting ‘‘section
414(r)(9)’’.
(2)(A) Section 414(r) is amended by adding at
the end the following new paragraph:
‘‘(9) EXCLUDED EMPLOYEES.—For purposes of
paragraph (2)(A), the following employees shall be
excluded:
‘‘(A) Employees who have not completed 6
months of service.
‘‘(B) Employees who normally work less
than 171⁄2 hours per week.
‘‘(C) Employees who normally work not
more than 6 months during any year.
‘‘(D) Employees who have not attained the
age of 21.
‘‘(E) Except to the extent provided in reg-
ulations, employees who are included in a unit
of employees covered by an agreement which
the Secretary of Labor finds to be a collective
1115
HR 2491 RDS
bargaining agreement between employee rep-
resentatives and the employer.
Except as provided by the Secretary, the employer
may elect to apply subparagraph (A), (B), (C), or
(D) by substituting a shorter period of service,
smaller number of hours or months, or lower age for
the period of service, number of hours or months, or
age (as the case may be) specified in such subpara-
graph.’’
(B) Subparagraph (A) of section 414(r)(2) is
amended by striking ‘‘subsection (q)(8)’’ and insert-
ing ‘‘paragraph (9)’’.
(3) Section 1114(c)(4) of the Tax Reform Act
of 1986 is amended by adding at the end the follow-
ing new sentence: ‘‘Any reference in this paragraph
to section 414(q) shall be treated as a reference to
such section as in effect before the Tax Simplifica-
tion Act of 1995’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14222. REPEAL OF FAMILY AGGREGATION RULES.
(a) IN GENERAL.—Paragraph (6) of section 414(q)
is hereby repealed.
1116
HR 2491 RDS
(b) COMPENSATION LIMIT.—Subparagraph (A) of
section 401(a)(17) is amended by striking the last sen-
tence.
(c) DEDUCTION.—Subsection (l) of section 404 is
amended by striking the last sentence.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14223. MODIFICATION OF ADDITIONAL PARTICIPA-
TION REQUIREMENTS.
(a) GENERAL RULE.—Section 401(a)(26)(A) (relat-
ing to additional participation requirements) is amended
to read as follows:
‘‘(A) IN GENERAL.—In the case of a trust
which is a part of a defined benefit plan, such
trust shall not constitute a qualified trust under
this subsection unless on each day of the plan
year such trust benefits at least the lesser of—
‘‘(i) 50 employees of the employer, or
‘‘(ii) the greater of—
‘‘(I) 40 percent of all employees
of the employer, or
‘‘(II) 2 employees (or if there is
only 1 employee, such employee).’’
1117
HR 2491 RDS
(b) SEPARATE LINE OF BUSINESS TEST.—Section
401(a)(26)(G) (relating to separate line of business) is
amended by striking ‘‘paragraph (7)’’ and inserting ‘‘para-
graph (2)(A) or (7)’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14224. NONDISCRIMINATION RULES FOR QUALIFIED
CASH OR DEFERRED ARRANGEMENTS AND
MATCHING CONTRIBUTIONS.
(a) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(k) 
NONDISCRIMINATION
TESTS.—Section
401(k) (relating to cash or deferred arrangements) is
amended by adding at the end the following new para-
graph:
‘‘(11) ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—A cash or deferred ar-
rangement shall be treated as meeting the re-
quirements of paragraph (3)(A)(ii) if such ar-
rangement—
‘‘(i) meets the contribution require-
ments of subparagraph (B) or (C), and
‘‘(ii) meets the notice requirements of
subparagraph (D).
1118
HR 2491 RDS
‘‘(B) MATCHING CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met if, under the
arrangement, the employer makes match-
ing contributions on behalf of each em-
ployee who is not a highly compensated
employee in an amount equal to—
‘‘(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee’s
compensation, and
‘‘(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee’s compensa-
tion.
‘‘(ii) 
RATE
FOR
HIGHLY
COM-
PENSATED
EMPLOYEES.—The 
require-
ments of this subparagraph are not met if,
under the arrangement, the matching con-
tribution with respect to any elective con-
tribution of a highly compensated employee
at any level of compensation is greater
1119
HR 2491 RDS
than that with respect to an employee who
is not a highly compensated employee.
‘‘(iii) ALTERNATIVE PLAN DESIGNS.—
If the matching contribution with respect
to any elective contribution at any specific
level of compensation is not equal to the
percentage required under clause (i), an
arrangement shall not be treated as failing
to meet the requirements of clause (i) if—
‘‘(I) the level of an employer’s
matching contribution does not in-
crease as an employee’s elective con-
tributions increase, and
‘‘(II) the aggregate amount of
matching contributions with respect to
elective contributions not in excess of
such level of compensation is at least
equal to the amount of matching con-
tributions which would be made if
matching contributions were made on
the basis of the percentages described
in clause (i).
‘‘(C) 
NONELECTIVE
CONTRIBUTIONS.—
The requirements of this subparagraph are met
if, under the arrangement, the employer is re-
1120
HR 2491 RDS
quired, without regard to whether the employee
makes an elective contribution or employee con-
tribution, to make a contribution to a defined
contribution plan on behalf of each employee
who is not a highly compensated employee and
who is eligible to participate in the arrangement
in an amount equal to at least 3 percent of the
employee’s compensation.
‘‘(D) NOTICE
REQUIREMENT.—An ar-
rangement meets the requirements of this para-
graph if, under the arrangement, each employee
eligible to participate is, within a reasonable pe-
riod before any year, given written notice of the
employee’s rights and obligations under the ar-
rangement which—
‘‘(i) is sufficiently accurate and com-
prehensive to apprise the employee of such
rights and obligations, and
‘‘(ii) is written in a manner calculated
to be understood by the average employee
eligible to participate.
‘‘(E) OTHER REQUIREMENTS.—
‘‘(i) WITHDRAWAL AND VESTING RE-
STRICTIONS.—An arrangement shall not be
treated as meeting the requirements of
1121
HR 2491 RDS
subparagraph (B) or (C) unless the re-
quirements of subparagraphs (B) and (C)
of paragraph (2) are met with respect to
all 
employer 
contributions 
(including
matching contributions).
‘‘(ii) SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS
NOT
TAKEN
INTO
AC-
COUNT.—An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) unless such re-
quirements are met without regard to sub-
section (l), and, for purposes of subsection
(l), employer contributions under subpara-
graph (B) or (C) shall not be taken into
account.
‘‘(F) OTHER
PLANS.—An arrangement
shall be treated as meeting the requirements
under subparagraph (A)(i) if any other plan
maintained by the employer meets such require-
ments with respect to employees eligible under
the arrangement.’’
(b) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(m) 
NONDISCRIMINATION
TESTS.—Section
401(m) (relating to nondiscrimination test for matching
contributions and employee contributions) is amended by