186
‘‘(A) IN
GENERAL.—For purposes of this
subsection, any dividend from a noncontrolled
section 902 corporation with respect to the tax-
payer shall be treated as income in a separate
category in proportion to the ratio of—
‘‘(i) the portion of earnings and profits
attributable to income in such category, to
‘‘(ii) the total amount of earnings and
profits.
‘‘(B) SPECIAL RULES.—For purposes of this
paragraph—
‘‘(i) IN
GENERAL.—Rules similar to
the rules of paragraph (3)(F) shall apply;
except that the term ‘separate category’
shall include the category of income de-
scribed in paragraph (1)(I).
‘‘(ii) EARNINGS AND PROFITS.—
‘‘(I) IN GENERAL.—The rules of
section 316 shall apply.
‘‘(II) REGULATIONS.—The Sec-
retary may prescribe regulations re-
garding the treatment of distributions
out of earnings and profits for periods
before the taxpayer’s acquisition of the
stock to which the distributions relate.
187
‘‘(iii) DIVIDENDS NOT ALLOCABLE TO
SEPARATE CATEGORY.—The portion of any
dividend from a noncontrolled section 902
corporation which is not treated as income
in a separate category under subparagraph
(A) shall be treated as a dividend to which
subparagraph (A) does not apply.
‘‘(iv) LOOK-THRU
WITH
RESPECT
TO
CARRYFORWARDS OF CREDIT.—Rules simi-
lar to subparagraph (A) also shall apply to
any carryforward under subsection (c) from
a taxable year beginning before January 1,
2002, of tax allocable to a dividend from a
noncontrolled section 902 corporation with
respect to the taxpayer.’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (E) of section 904(d)(1), as in
effect both before and after the amendments made by
section 1105 of the Taxpayer Relief Act of 1997, is
hereby repealed.
(2) Section 904(d)(2)(C)(iii), as so in effect, is
amended by striking subclause (II) and by redesig-
nating subclause (III) as subclause (II).
188
(3) The last sentence of section 904(d)(2)(D), as
so in effect, is amended to read as follows: ‘‘Such term
does not include any financial services income.’’
(4) Section 904(d)(2)(E) is amended by striking
clauses (ii) and (iv) and by redesignating clause (iii)
as clause (ii).
(5) Section 904(d)(3)(F) is amended by striking
‘‘(D), or (E)’’ and inserting ‘‘or (D)’’.
(6) Section 864(d)(5)(A)(i) is amended by strik-
ing ‘‘(C)(iii)(III)’’ and inserting ‘‘(C)(iii)(II)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE
TRANSPORTATION INCOME.
(a) IN GENERAL.—Section 954(g)(1) (defining foreign
base company oil related income) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ‘‘, or’’, and
by inserting after subparagraph (B) the following new sub-
paragraph:
‘‘(C) the pipeline transportation of oil or
gas within such foreign country.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years of controlled foreign cor-
189
porations beginning after December 31, 2001, and taxable
years of United States shareholders with or within which
such taxable years of controlled foreign corporations end.
SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANS-
MISSION OF HIGH VOLTAGE ELECTRICITY.
(a) IN GENERAL.—Paragraph (2) of section 954(e) (re-
lating to foreign base company services income) is amended
by striking ‘‘or’’ at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) the transmission of high voltage elec-
tricity.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years of controlled foreign cor-
porations beginning after December 31, 2001, and taxable
years of United States shareholders with or within which
such taxable years of controlled foreign corporations end.
SEC. 905. RECHARACTERIZATION OF OVERALL DOMESTIC
LOSS.
(a) GENERAL RULE.—Section 904 is amended by re-
designating subsections (g), (h), (i), (j), and (k) as sub-
sections (h), (i), (j), (k), and (l), respectively, and by insert-
ing after subsection (f) the following new subsection:
190
‘‘(g) RECHARACTERIZATION OF OVERALL DOMESTIC
LOSS.—
‘‘(1) GENERAL RULE.—For purposes of this sub-
part and section 936, in the case of any taxpayer who
sustains an overall domestic loss for any taxable year
beginning after December 31, 2004, that portion of
the taxpayer’s taxable income from sources within the
United States for each succeeding taxable year which
is equal to the lesser of—
‘‘(A) the amount of such loss (to the extent
not used under this paragraph in prior taxable
years), or
‘‘(B) 50 percent of the taxpayer’s taxable
income from sources within the United States for
such succeeding taxable year,
shall be treated as income from sources without the
United States (and not as income from sources within
the United States).
‘‘(2) OVERALL DOMESTIC LOSS DEFINED.—For
purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘overall do-
mestic loss’ means any domestic loss to the extent
such loss offsets taxable income from sources
without the United States for the taxable year or
for any preceding taxable year by reason of a
191
carryback. For purposes of the preceding sen-
tence, the term ‘domestic loss’ means the amount
by which the gross income for the taxable year
from sources within the United States is exceeded
by the sum of the deductions properly appor-
tioned or allocated thereto (determined without
regard to any carryback from a subsequent tax-
able year).
‘‘(B) TAXPAYER MUST HAVE ELECTED FOR-
EIGN TAX CREDIT FOR YEAR OF LOSS.—The term
‘overall domestic loss’ shall not include any loss
for any taxable year unless the taxpayer chose
the benefits of this subpart for such taxable year.
‘‘(3) CHARACTERIZATION
OF
SUBSEQUENT
IN-
COME.—
‘‘(A) IN
GENERAL.—Any income from
sources within the United States that is treated
as income from sources without the United
States under paragraph (1) shall be allocated
among and increase the income categories in
proportion to the loss from sources within the
United States previously allocated to those in-
come categories.
‘‘(B) INCOME CATEGORY.—For purposes of
this paragraph, the term ‘income category’ has
192
the meaning given such term by subsection
(f)(5)(E)(i).
‘‘(4) COORDINATION WITH SUBSECTION (f).—The
Secretary shall prescribe such regulations as may be
necessary to coordinate the provisions of this sub-
section with the provisions of subsection (f).’’
(b) CONFORMING AMENDMENTS.—
(1) Section 535(d)(2) is amended by striking
‘‘section 904(g)(6)’’ and inserting ‘‘section 904(h)(6)’’.
(2) Subparagraph (A) of section 936(a)(2) is
amended by striking ‘‘section 904(f)’’ and inserting
‘‘subsections (f) and (g) of section 904’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to losses for taxable years beginning
after December 31, 2004.
SEC. 906. TREATMENT OF MILITARY PROPERTY OF FOREIGN
SALES CORPORATIONS.
(a) IN GENERAL.—Section 923(a) (defining exempt
foreign trade income) is amended by striking paragraph (5)
and by redesignating paragraph (6) as paragraph (5).
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
193
SEC. 907. TREATMENT OF CERTAIN DIVIDENDS OF REGU-
LATED INVESTMENT COMPANIES.
(a) TREATMENT OF CERTAIN DIVIDENDS.—
(1) NONRESIDENT ALIEN INDIVIDUALS.—Section
871 (relating to tax on nonresident alien individuals)
is amended by redesignating subsection (k) as sub-
section (l) and by inserting after subsection (j) the fol-
lowing new subsection:
‘‘(k) EXEMPTION FOR CERTAIN DIVIDENDS OF REGU-
LATED INVESTMENT COMPANIES.—
‘‘(1) INTEREST-RELATED DIVIDENDS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), no tax shall be imposed under
paragraph (1)(A) of subsection (a) on any inter-
est-related dividend received from a regulated in-
vestment company.
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply—
‘‘(i) to any interest-related dividend re-
ceived from a regulated investment com-
pany by a person to the extent such divi-
dend is attributable to interest (other than
interest described in clause (i), (iii), or the
last sentence of subparagraph (E)) received
by such company on indebtedness issued by
such person or by any corporation or part-
194
nership with respect to which such person is
a 10-percent shareholder,
‘‘(ii) to any interest-related dividend
with respect to stock of a regulated invest-
ment company unless the person who would
otherwise be required to deduct and with-
hold tax from such dividend under chapter
3 receives a statement (which meets require-
ments similar to the requirements of sub-
section (h)(5)) that the beneficial owner of
such stock is not a United States person,
and
‘‘(iii) to any interest-related dividend
paid to any person within a foreign coun-
try (or any interest-related dividend pay-
ment addressed to, or for the account of,
persons within such foreign country) during
any period described in subsection (h)(6)
with respect to such country.
Clause (iii) shall not apply to any dividend with
respect to any stock the holding period of which
begins on or before the date of the publication of
the Secretary’s determination under subsection
(h)(6).
195
‘‘(C) INTEREST-RELATED
DIVIDEND.—For
purposes of this paragraph, an interest-related
dividend is any dividend (or part thereof) which
is designated by the regulated investment com-
pany as an interest-related dividend in a writ-
ten notice mailed to its shareholders not later
than 60 days after the close of its taxable year.
If the aggregate amount so designated with re-
spect to a taxable year of the company (includ-
ing amounts so designated with respect to divi-
dends paid after the close of the taxable year de-
scribed in section 855) is greater than the quali-
fied net interest income of the company for such
taxable year, the portion of each distribution
which shall be an interest-related dividend shall
be only that portion of the amounts so designated
which such qualified net interest income bears to
the aggregate amount so designated.
‘‘(D) QUALIFIED NET INTEREST INCOME.—
For purposes of subparagraph (C), the term
‘qualified net interest income’ means the quali-
fied interest income of the regulated investment
company reduced by the deductions properly al-
locable to such income.
196
‘‘(E) QUALIFIED
INTEREST
INCOME.—For
purposes of subparagraph (D), the term ‘quali-
fied interest income’ means the sum of the fol-
lowing amounts derived by the regulated invest-
ment company from sources within the United
States:
‘‘(i) Any amount includible in gross
income as original issue discount (within
the meaning of section 1273) on an obliga-
tion payable 183 days or less from the date
of original issue (without regard to the pe-
riod held by the company).
‘‘(ii) Any interest includible in gross
income (including amounts recognized as
ordinary income in respect of original issue
discount or market discount or acquisition
discount under part V of subchapter P and
such other amounts as regulations may pro-
vide) on an obligation which is in registered
form; except that this clause shall not apply
to—
‘‘(I) any interest on an obligation
issued by a corporation or partnership
if the regulated investment company is
197
a 10-percent shareholder in such cor-
poration or partnership, and
‘‘(II) any interest which is treated
as not being portfolio interest under
the rules of subsection (h)(4).
‘‘(iii) Any interest referred to in sub-
section (i)(2)(A) (without regard to the
trade or business of the regulated investment
company).
‘‘(iv) Any interest-related dividend in-
cludable in gross income with respect to
stock of another regulated investment com-
pany.
Such term includes any interest derived by the
regulated investment company from sources out-
side the United States other than interest that is
subject to a tax imposed by a foreign jurisdiction
if the amount of such tax is reduced (or elimi-
nated) by a treaty with the United States.
‘‘(F) 
10-PERCENT
SHAREHOLDER.—For
purposes of this paragraph, the term ‘10-percent
shareholder’ has the meaning given such term by
subsection (h)(3)(B).
‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.—
198
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), no tax shall be imposed under
paragraph (1)(A) of subsection (a) on any short-
term capital gain dividend received from a regu-
lated investment company.
‘‘(B) EXCEPTION
FOR
ALIENS
TAXABLE
UNDER
SUBSECTION
(a)(2).—Subparagraph (A)
shall not apply in the case of any nonresident
alien individual subject to tax under subsection
(a)(2).
‘‘(C) SHORT-TERM
CAPITAL
GAIN
DIVI-
DEND.—For purposes of this paragraph, a short-
term capital gain dividend is any dividend (or
part thereof) which is designated by the regu-
lated investment company as a short-term cap-
ital gain dividend in a written notice mailed to
its shareholders not later than 60 days after the
close of its taxable year. If the aggregate amount
so designated with respect to a taxable year of
the company (including amounts so designated
with respect to dividends paid after the close of
the taxable year described in section 855) is
greater than the qualified short-term gain of the
company for such taxable year, the portion of
each distribution which shall be a short-term
199
capital gain dividend shall be only that portion
of the amounts so designated which such quali-
fied short-term gain bears to the aggregate
amount so designated.
‘‘(D) QUALIFIED SHORT-TERM GAIN.—For
purposes of subparagraph (C), the term ‘quali-
fied short-term gain’ means the excess of the net
short-term capital gain of the regulated invest-
ment company for the taxable year over the net
long-term capital loss (if any) of such company
for such taxable year. For purposes of this
subparagraph—
‘‘(i) the net short-term capital gain of
the regulated investment company shall be
computed by treating any short-term cap-
ital gain dividend includible in gross in-
come with respect to stock of another regu-
lated investment company as a short-term
capital gain, and
‘‘(ii) the excess of the net short-term
capital gain for a taxable year over the net
long-term capital loss for a taxable year (to
which an election under section 4982(e)(4)
does not apply) shall be determined without
regard to any net capital loss or net short-
200
term capital loss attributable to trans-
actions after October 31 of such year, and
any such net capital loss or net short-term
capital loss shall be treated as arising on
the 1st day of the next taxable year.
To the extent provided in regulations, clause (ii)
shall apply also for purposes of computing the
taxable income of the regulated investment com-
pany.’’
(2) FOREIGN CORPORATIONS.—Section 881 (re-
lating to tax on income of foreign corporations not
connected with United States business) is amended by
redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new sub-
section:
‘‘(e) TAX NOT TO APPLY TO CERTAIN DIVIDENDS OF
REGULATED INVESTMENT COMPANIES.—
‘‘(1) INTEREST-RELATED DIVIDENDS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), no tax shall be imposed under
paragraph (1) of subsection (a) on any interest-
related dividend (as defined in section 871(k)(1))
received from a regulated investment company.
‘‘(B) EXCEPTION.—Subparagraph (A) shall
not apply—
201
‘‘(i) to any dividend referred to in sec-
tion 871(k)(1)(B), and
‘‘(ii) to any interest-related dividend
received by a controlled foreign corporation
(within the meaning of section 957(a)) to
the extent such dividend is attributable to
interest received by the regulated investment
company from a person who is a related
person (within the meaning of section
864(d)(4)) with respect to such controlled
foreign corporation.
‘‘(C) TREATMENT OF DIVIDENDS RECEIVED
BY CONTROLLED FOREIGN CORPORATIONS.—The
rules of subsection (c)(5)(A) shall apply to any
interest-related dividend received by a controlled
foreign corporation (within the meaning of sec-
tion 957(a)) to the extent such dividend is attrib-
utable to interest received by the regulated in-
vestment company which is described in clause
(ii) of section 871(k)(1)(E) (and not described in
clause (i), (iii), or the last sentence of such sec-
tion).
‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.—
No tax shall be imposed under paragraph (1) of sub-
section (a) on any short-term capital gain dividend
202
(as defined in section 871(k)(2)) received from a regu-
lated investment company.’’
(3) WITHHOLDING TAXES.—
(A) Section 1441(c) (relating to exceptions)
is amended by adding at the end the following
new paragraph:
‘‘(12) CERTAIN DIVIDENDS RECEIVED FROM REG-
ULATED INVESTMENT COMPANIES.—
‘‘(A) IN
GENERAL.—No tax shall be re-
quired to be deducted and withheld under sub-
section (a) from any amount exempt from the
tax imposed by section 871(a)(1)(A) by reason of
section 871(k).
‘‘(B) SPECIAL RULE.—For purposes of sub-
paragraph (A), clause (i) of section 871(k)(1)(B)
shall not apply to any dividend unless the regu-
lated investment company knows that such divi-
dend is a dividend referred to in such clause. A
similar rule shall apply with respect to the ex-
ception contained in section 871(k)(2)(B).’’
(B) Section 1442(a) (relating to with-
holding of tax on foreign corporations) is
amended—
203
(i) by striking ‘‘and the reference in
section 1441(c)(10)’’ and inserting ‘‘the ref-
erence in section 1441(c)(10)’’, and
(ii) by inserting before the period at
the end the following: ‘‘, and the references
in section 1441(c)(12) to sections 871(a)
and 871(k) shall be treated as referring to
sections 881(a) and 881(e) (except that for
purposes of applying subparagraph (A) of
section 1441(c)(12), as so modified, clause
(ii) of section 881(e)(1)(B) shall not apply
to any dividend unless the regulated invest-
ment company knows that such dividend is
a dividend referred to in such clause)’’.
(b) ESTATE TAX TREATMENT OF INTEREST IN CER-
TAIN REGULATED INVESTMENT COMPANIES.—Section 2105
(relating to property without the United States for estate
tax purposes) is amended by adding at the end the following
new subsection:
‘‘(d) STOCK IN A RIC.—
‘‘(1) IN
GENERAL.—For purposes of this sub-
chapter, stock in a regulated investment company (as
defined in section 851) owned by a nonresident not
a citizen of the United States shall not be deemed
property within the United States in the proportion
204
that, at the end of the quarter of such investment
company’s taxable year immediately preceding a de-
cedent’s date of death (or at such other time as the
Secretary may designate in regulations), the assets of
the investment company that were qualifying assets
with respect to the decedent bore to the total assets of
the investment company.
‘‘(2) QUALIFYING ASSETS.—For purposes of this
subsection, qualifying assets with respect to a dece-
dent are assets that, if owned directly by the decedent,
would have been—
‘‘(A) amounts, deposits, or debt obligations
described in subsection (b) of this section,
‘‘(B) debt obligations described in the last
sentence of section 2104(c), or
‘‘(C) other property not within the United
States.’’
(c) TREATMENT OF REGULATED INVESTMENT COMPA-
NIES UNDER SECTION 897.—
(1) Paragraph (1) of section 897(h) is amended
by striking ‘‘REIT’’ each place it appears and insert-
ing ‘‘qualified investment entity’’.
(2) Paragraphs (2) and (3) of section 897(h) are
amended to read as follows:
205
‘‘(2) SALE
OF
STOCK
IN
DOMESTICALLY
CON-
TROLLED
ENTITY
NOT
TAXED.—The term ‘United
States real property interest’ does not include any in-
terest in a domestically controlled qualified invest-
ment entity.
‘‘(3) DISTRIBUTIONS
BY
DOMESTICALLY
CON-
TROLLED QUALIFIED INVESTMENT ENTITIES.—In the
case of a domestically controlled qualified investment
entity, rules similar to the rules of subsection (d)
shall apply to the foreign ownership percentage of any
gain.’’
(3) Subparagraphs (A) and (B) of section
897(h)(4) are amended to read as follows:
‘‘(A) QUALIFIED INVESTMENT ENTITY.—The
term ‘qualified investment entity’ means any
real estate investment trust and any regulated
investment company.
‘‘(B) DOMESTICALLY
CONTROLLED.—The
term ‘domestically controlled qualified invest-
ment entity’ means any qualified investment en-
tity in which at all times during the testing pe-
riod less than 50 percent in value of the stock
was held directly or indirectly by foreign per-
sons.’’
206
(4) Subparagraphs (C) and (D) of section
897(h)(4) are each amended by striking ‘‘REIT’’ and
inserting ‘‘qualified investment entity’’.
(5) The subsection heading for subsection (h) of
section 897 is amended by striking ‘‘REITS’’ and in-
serting ‘‘CERTAIN INVESTMENT ENTITIES’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided
in this subsection, the amendments made by this sec-
tion shall apply to dividends with respect to taxable
years of regulated investment companies beginning
after December 31, 2004.
(2) ESTATE TAX TREATMENT.—The amendment
made by subsection (b) shall apply to estates of dece-
dents dying after December 31, 2004.
(3) CERTAIN OTHER PROVISIONS.—The amend-
ments made by subsection (c) (other than paragraph
(1) thereof) shall take effect on January 1, 2005.
SEC. 908. REPEAL OF SPECIAL RULES FOR APPLYING FOR-
EIGN TAX CREDIT IN CASE OF FOREIGN OIL
AND GAS INCOME.
(a) IN GENERAL.—Section 907 (relating to special
rules in case of foreign oil and gas income) is repealed.
(b) CONFORMING AMENDMENTS.—
207
(1) Each of the following provisions are amended
by striking ‘‘907,’’:
(A) Section 245(a)(10).
(B) Section 865(h)(1)(B).
(C) Section 904(d)(1).
(D) Section 904(g)(10)(A).
(2) Section 904(f)(5)(E)(iii) is amended by in-
serting ‘‘, as in effect before its repeal by the Finan-
cial 
Freedom 
Act 
of 
1999’’ 
after 
‘‘section
907(c)(4)(B)’’.
(3) Section 954(g)(1) is amended by inserting ‘‘,
as in effect before its repeal by the Financial Freedom
Act of 1999’’ after ‘‘907(c)’’.
(4) Section 6501(i) is amended—
(A) by striking ‘‘, or under section 907(f)
(relating to carryback and carryover of dis-
allowed oil and gas extraction taxes)’’, and
(B) by striking ‘‘or 907(f)’’.
(5) The table of sections for subpart A of part III
of subchapter N of chapter 1 is amended by striking
the item relating to section 907.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
208
SEC. 909. STUDY OF PROPER TREATMENT OF EUROPEAN
UNION UNDER SAME COUNTRY EXCEPTIONS.
(a) STUDY.—The Secretary of the Treasury or the Sec-
retary’s delegate shall conduct a study on the feasibility of
treating all countries included in the European Union as
1 country for purposes of applying the same country excep-
tions under subpart F of part III of subchapter N of chapter
1 of the Internal Revenue Code of 1986.
(b) REPORT.—Not later than 6 months after the date
of the enactment of this Act, the Secretary of the Treasury
shall report to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate the results of the study conducted under sub-
section (a), including recommendations (if any) for legisla-
tion.
SEC. 910. APPLICATION OF DENIAL OF FOREIGN TAX CRED-
IT WITH RESPECT TO CERTAIN FOREIGN
COUNTRIES.
(a) IN GENERAL.—Clause (ii) of section 901(j)(2)(B)
(relating to denial of foreign tax credit, etc., with respect
to certain foreign countries) is amended by inserting before
the period ‘‘or, if earlier, ending on the date that the Presi-
dent determines that the application of this subsection to
such foreign country is no longer in the national interests
of the United States’’.
209
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 911. ADVANCE PRICING AGREEMENTS TREATED AS
CONFIDENTIAL TAXPAYER INFORMATION.
(a) IN GENERAL.—
(1) TREATMENT
AS
RETURN
INFORMATION.—
Paragraph (2) of section 6103(b) (defining return in-
formation) is amended by striking ‘‘and’’ at the end
of subparagraph (A), by inserting ‘‘and’’ at the end
of subparagraph (B), and by inserting after subpara-
graph (B) the following new subparagraph:
‘‘(C) any advance pricing agreement en-
tered into by a taxpayer and the Secretary and
any background information related to such
agreement or any application for an advance
pricing agreement,’’.
(2) EXCEPTION
FROM
PUBLIC
INSPECTION
AS
WRITTEN DETERMINATION.—Paragraph (1) of section
6110(b) (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 Sec-
retary and any background information related to
210
such agreement or any application for an advance
pricing agreement.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on the date of the
enactment of this Act.
(b) ANNUAL REPORT REGARDING ADVANCE PRICING
AGREEMENTS.—
(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 regard-
ing advance pricing agreements.
(2) CONTENTS OF REPORT.—The report shall in-
clude the following for the calendar year to which
such report relates:
(A) Information about the structure, com-
position, 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 cal-
endar year for advanced pricing agree-
ments;
211
(ii) advance pricing agreements exe-
cuted cumulatively to date and during such
calendar year;
(iii) renewals of advanced pricing
agreements issued;
(iv) pending requests for advance pric-
ing agreements;
(v) pending renewals of advance pric-
ing agreements;
(vi) for each of the items in clauses (ii)
through (v), the number that are unilateral,
bilateral, and multilateral, respectively;
(vii) advance pricing agreements re-
voked or canceled, and the number of with-
drawals from the advance pricing agree-
ment program; and
(viii) advanced pricing agreements fi-
nalized or renewed by industry.
(D) General descriptions of—
(i) the nature of the relationships be-
tween the related organizations, trades, or
businesses covered by advance pricing agree-
ments;
(ii) the covered transactions and the
business functions performed and risks as-
212
sumed by such organizations, trades, or
businesses;
(iii) the related organizations, trades,
or businesses whose prices or results are
tested to determine compliance with transfer
pricing methodologies prescribed in ad-
vanced pricing agreements;
(iv) methodologies used to evaluate test-
ed parties and transactions and the cir-
cumstances leading to the use of those meth-
odologies;
(v) critical assumptions made and
sources of comparables used;
(vi) comparable selection criteria and
the rationale used in determining such cri-
teria;
(vii) the nature of adjustments to
comparables or tested parties;
(viii) the nature of any ranges agreed
to, including information regarding when
no range was used and why, when inter-
quartile ranges were used, and when there
was 
a 
statistical 
narrowing 
of 
the
comparables;
213
(ix) adjustment mechanisms provided
to rectify results that fall outside of the
agreed upon advance pricing agreement
range;
(x) the various term lengths for ad-
vance pricing agreements, including roll-
back years, and the number of advance
pricing agreements with each such term
length;
(xi) the nature of documentation re-
quired; and
(xii) approaches for sharing of cur-
rency or other risks.
(E) Statistics regarding the amount of time
taken to complete new and renewal advance pric-
ing agreements.
(3) CONFIDENTIALITY.—The reports required by
this subsection shall be treated as authorized by the
Internal Revenue 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 dis-
closed under section 6110(c) of such Code if such
report were a written determination as defined
in section 6110 of such Code, or
214
(B) which can be associated with, or other-
wise identify, directly or indirectly, a particular
taxpayer.
(4) FIRST
REPORT.—The report for calendar
year 1999 shall include prior calendar years after
1990.
(c) USER FEE.—Section 7527, as added by title XV
of this Act, is amended by redesignating subsection (c) as
subsection (d) and by inserting after subsection (b) the fol-
lowing new subsection:
‘‘(c) ADVANCE PRICING AGREEMENTS.—
‘‘(1) IN GENERAL.—In addition to any fee other-
wise imposed under this section, the fee imposed for
requests for advance pricing agreements shall be in-
creased by $500.
‘‘(2) REDUCED FEE FOR SMALL BUSINESSES.—
The Secretary shall provide an appropriate reduction
in the amount imposed by reason of paragraph (1)
for requests for advance pricing agreements for small
businesses.’’
(d) REGULATIONS.—The Secretary of the Treasury or
the Secretary’s delegate shall prescribe such regulations as
may be necessary or appropriate to carry out the purposes
of section 6103(b)(2)(C), and the last sentence of section
215
6110(b)(1), of the Internal Revenue Code of 1986, as added
by this section.
SEC. 912. INCREASE IN DOLLAR LIMITATION ON SECTION
911 EXCLUSION.
(a) GENERAL RULE.—The table contained in clause
(i) of section 911(b)(2)(D) is amended to read as follows:
‘‘For calendar year—
The exclusion amount is—
2000 ................................................................................................
$76,000
2001 ................................................................................................
78,000
2002 ................................................................................................
80,000
2003 ................................................................................................
83,000
2004 ................................................................................................
86,000
2005 ................................................................................................
89,000
2006 ................................................................................................
92,000
2007 and thereafter ........................................................................
95,000.’’
(b) CONFORMING AMENDMENT.—Clause (ii) of section
911(b)(2)(D) is amended by striking ‘‘$80,000’’ and insert-
ing ‘‘$95,000’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
216
TITLE X—PROVISIONS RELATING
TO TAX-EXEMPT ORGANIZA-
TIONS
SEC. 1001. EXEMPTION FROM INCOME TAX FOR STATE-CRE-
ATED 
ORGANIZATIONS 
PROVIDING 
PROP-
ERTY AND CASUALTY INSURANCE FOR PROP-
ERTY FOR WHICH SUCH COVERAGE IS OTHER-
WISE UNAVAILABLE.
(a) IN GENERAL.—Subsection (c) of section 501 (relat-
ing to exemption from tax on corporations, certain trusts,
etc.) is amended by adding at the end the following new
paragraph:
‘‘(28)(A) Any association created before January
1, 1999, by State law and organized and operated ex-
clusively to provide property and casualty insurance
coverage for property located within the State for
which the State has determined that coverage in the
authorized insurance market is limited or unavailable
at reasonable rates, if—
‘‘(i) no part of the net earnings of which in-
ures to the benefit of any private shareholder or
individual,
‘‘(ii) except as provided in clause (v), no
part of the assets of which may be used for, or
diverted to, any purpose other than—
217
‘‘(I) to satisfy, in whole or in part, the
liability of the association for, or with re-
spect to, claims made on policies written by
the association,
‘‘(II) to invest in investments author-
ized by applicable law,
‘‘(III) to pay reasonable and necessary
administration expenses in connection with
the establishment and operation of the asso-
ciation and the processing of claims against
the association, or
‘‘(IV) to make remittances pursuant to
State law to be used by the State to provide
for the payment of claims on policies writ-
ten by the association, purchase reinsurance
covering losses under such policies, or to
support governmental programs to prepare
for or mitigate the effects of natural cata-
strophic events,
‘‘(iii) the State law governing the associa-
tion permits the association to levy assessments
on insurance companies authorized to sell prop-
erty and casualty insurance in the State, or on
property and casualty insurance policyholders
with insurable interests in property located in
218
the State to fund deficits of the association, in-
cluding the creation of reserves,
‘‘(iv) the plan of operation of the associa-
tion is subject to approval by the chief executive
officer or other official of the State, by the State
legislature, or both, and
‘‘(v) the assets of the association revert upon
dissolution to the State, the State’s designee, or
an entity designated by the State law governing
the association, or State law does not permit the
dissolution of the association.
‘‘(B)(i) An entity described in clause (ii) shall be
disregarded as a separate entity and treated as part
of the association described in subparagraph (A) from
which it receives remittances described in clause (ii)
if an election is made within 30 days after the date
that such association is determined to be exempt from
tax.
‘‘(ii) An entity is described in this clause if it
is an entity or fund created before January 1, 1999,
pursuant to State law and organized and operated
exclusively to receive, hold, and invest remittances
from an association described in subparagraph (A)
and exempt from tax under subsection (a), to make
disbursements to pay claims on insurance contracts
219
issued by such association, and to make disbursements
to support governmental programs to prepare for or
mitigate the effects of natural catastrophic events.’’
(b) UNRELATED BUSINESS TAXABLE INCOME.—Sub-
section (a) of section 512 (relating to unrelated business
taxable income) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(6) SPECIAL RULE APPLICABLE TO ORGANIZA-
TIONS DESCRIBED IN SECTION 501(C)(28).—In the case
of an organization described in section 501(c)(28), the
term ‘unrelated business taxable income’ means tax-
able income for a taxable year computed without the
application of section 501(c)(28) if at the end of the
immediately preceding taxable year the organization’s
net equity exceeded 15 percent of the total coverage in
force under insurance contracts issued by the organi-
zation and outstanding at the end of such preceding
year.’’
(c) TRANSITIONAL RULE.—No income or gain shall be
recognized by an association as a result of a change in sta-
tus to that of an association described by section 501(c)(28)
of the Internal Revenue Code of 1986, as amended by sub-
section (a).
220
(d) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 1999.
SEC. 1002. MODIFICATION OF SPECIAL ARBITRAGE RULE
FOR CERTAIN FUNDS.
(a) IN GENERAL.—Paragraph (1) of section 648 of the
Tax Reform Act of 1984 is amended to read as follows:
‘‘(1) such securities or obligations are held in a
fund—
‘‘(A) which, except to the extent of the in-
vestment earnings on such securities or obliga-
tions, cannot be used, under State constitutional
or statutory restrictions continuously in effect
since October 9, 1969, through the date of issue
of the bond issue, to pay debt service on the bond
issue or to finance the facilities that are to be fi-
nanced with the proceeds of the bonds, or
‘‘(B) the annual distributions from which
cannot exceed 7 percent of the average fair mar-
ket value of the assets held in such fund except
to the extent distributions are necessary to pay
debt service on the bond issue,’’.
(b) CONFORMING AMENDMENT.—Paragraph (3) of
such section is amended by striking ‘‘the investment earn-
ings of’’ and inserting ‘‘distributions from’’.
221
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on January 1, 2000.
SEC. 1003. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE,
ANNUITY, AND ENDOWMENT CONTRACTS.
(a) IN GENERAL.—Subsection (f) of section 170 (relat-
ing to disallowance of deduction in certain cases and spe-
cial rules) is amended by adding at the end the following
new paragraph:
‘‘(10) SPLIT-DOLLAR LIFE INSURANCE, ANNUITY,
AND ENDOWMENT 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 indi-
rectly pays, or has previously paid, any
premium on any personal benefit contract
with respect to the transferor, or
‘‘(ii) there is an understanding or ex-
pectation that any person will directly or
indirectly pay any premium on any per-
222
sonal benefit contract with respect to the
transferor.
‘‘(B) PERSONAL BENEFIT CONTRACT.—For
purposes of subparagraph (A), the term ‘personal
benefit contract’ means, with respect to the
transferor, any life insurance, annuity, or en-
dowment contract if any direct or indirect bene-
ficiary under such contract is the transferor, any
member of the transferor’s family, or any other
person (other than an organization described in
subsection (c)) designated by the transferor.
‘‘(C) APPLICATION TO CHARITABLE REMAIN-
DER TRUSTS.—In the case of a transfer to a
trust referred to in subparagraph (E), references
in subparagraphs (A) and (F) to an organiza-
tion described in subsection (c) shall be treated
as a reference to such trust.
‘‘(D) EXCEPTION
FOR
CERTAIN
ANNUITY
CONTRACTS.—If, in connection with a transfer to
or for the use of an organization described in
subsection (c), such organization incurs an obli-
gation to pay a charitable gift annuity (as de-
fined in section 501(m)) and such organization
purchases any annuity contract to fund such ob-
ligation, persons receiving payments under the
223
charitable gift annuity shall not be treated for
purposes of subparagraph (B) as indirect bene-
ficiaries under such contract if—
‘‘(i) such organization possesses all of
the incidents of ownership under such con-
tract,
‘‘(ii) such organization is entitled to
all the payments under such contract, and
‘‘(iii) the timing and amount of pay-
ments under such contract are substantially
the same as the timing and amount of pay-
ments to each such person under such obli-
gation (as such obligation is in effect at the
time of such transfer).
‘‘(E) EXCEPTION FOR CERTAIN CONTRACTS
HELD BY CHARITABLE REMAINDER TRUSTS.—A
person shall not be treated for purposes of sub-
paragraph (B) as an indirect beneficiary under
any life insurance, annuity, or endowment con-
tract held by a charitable remainder annuity
trust or a charitable remainder unitrust (as de-
fined in section 664(d)) solely by reason of being
entitled to any payment referred to in para-
graph (1)(A) or (2)(A) of section 664(d) if—
224
‘‘(i) such trust possesses all of the inci-
dents of ownership under such contract, and
‘‘(ii) such trust is entitled to all the
payments under such contract.
‘‘(F) EXCISE TAX ON PREMIUMS PAID.—
‘‘(i) IN GENERAL.—There is hereby im-
posed on any organization described in sub-
section (c) an excise tax equal to the pre-
miums paid by such organization on any
life insurance, annuity, or endowment con-
tract if the payment of premiums on such
contract is in connection with a transfer for
which a deduction is not allowable under
subparagraph (A), determined without re-
gard to when such transfer is made.
‘‘(ii) 
PAYMENTS
BY
OTHER
PER-
SONS.—For purposes of clause (i), pay-
ments made by any other person pursuant
to an understanding or expectation referred
to in subparagraph (A) shall be treated as
made by the organization.
‘‘(iii) REPORTING.—Any organization
on which tax is imposed by clause (i) with
respect to any premium shall file an annual
return which includes—
225
‘‘(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 section 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 pur-
poses of this title other than subchapter B
of chapter 42.
‘‘(G) SPECIAL
RULE
WHERE
STATE
RE-
QUIRES SPECIFICATION OF CHARITABLE GIFT AN-
NUITANT IN CONTRACT.—In the case of an obli-
gation 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 charitable gift annuity to be exempt
227
‘‘(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 DATE.—
(1) IN GENERAL.—Except as otherwise provided
in this section, the amendment made by this section
shall apply to transfers made after February 8, 1999.
(2) EXCISE TAX.—Except as provided in para-
graph (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.
(3) REPORTING.—Clause (iii) of such section
170(f)(10)(F) shall apply to premiums paid after
February 8, 1999 (determined as if the tax imposed
by such section applies to premiums paid after such
date).
SEC. 1004. EXEMPTION PROCEDURE FROM TAXES ON SELF-
DEALING.
(a) IN GENERAL.—Subsection (d) of section 4941 (re-
lating to taxes on self-dealing) is amended by adding at
the end the following new paragraph:
228
‘‘(3) SPECIAL EXEMPTION.—The Secretary shall
establish an exemption procedure for purposes of this
subsection. Pursuant to such procedure, the Secretary
may grant a conditional or unconditional exemption
of any disqualified person or transaction or class of
disqualified persons or transactions, from all or part
of the restrictions imposed by paragraph (1). The Sec-
retary may not grant an exemption under this para-
graph unless he finds that such exemption is—
‘‘(A) administratively feasible,
‘‘(B) in the interests of the private founda-
tion, and
‘‘(C) protective of the rights of the private
foundation.
Before granting an exemption under this paragraph,
the Secretary shall require adequate notice to be given
to interested persons and shall publish notice in the
Federal Register of the pendency of such exemption
and shall afford interested persons an opportunity to
present views.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to transactions occurring after the date
of the enactment of this Act.
229
SEC. 1005. EXPANSION OF DECLARATORY JUDGMENT REM-
EDY TO TAX-EXEMPT ORGANIZATIONS.
(a) IN GENERAL.—Subsection (a) of section 7428 (re-
lating to creation of remedy) is amended—
(1) in subparagraph (B) by inserting after
‘‘509(a))’’ the following: ‘‘or as a private operating
foundation (as defined in section 4942(j)(3))’’, and
(2) by amending subparagraph (C) to read as
follows:
‘‘(C) with respect to the initial qualification
or continuing qualification of an organization as
an organization described in section 501(c)
(other than paragraph (3)) which is exempt from
tax under section 501(a), or’’.
(b) COURT JURISDICTION.—Subsection (a) of section
7428 is amended in the material following paragraph (2)
by striking ‘‘United States Tax Court, the United States
Claims Court, or the district court of the United States for
the District of Columbia’’ and inserting the following:
‘‘United States Tax Court (in the case of any such deter-
mination or failure) or the United States Claims Court or
the district court of the United States for the District of
Columbia (in the case of a determination or failure with
respect to an issue referred to in subparagraph (A) or (B)
of paragraph (1)),’’.
230
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to pleadings filed with respect to deter-
minations (or requests for determinations) made after the
date of the enactment of this Act.
SEC. 1006. MODIFICATIONS TO SECTION 512(b)(13).
(a) IN GENERAL.—Paragraph (13) of section 512(b)
is amended by redesignating subparagraph (E) as subpara-
graph (F) and by inserting after subparagraph (D) the fol-
lowing new paragraph:
‘‘(E) PARAGRAPH TO APPLY ONLY TO EX-
CESS PAYMENTS.—
‘‘(i) IN GENERAL.—Subparagraph (A)
shall apply only to the portion of a speci-
fied payment received by the controlling or-
ganization that exceeds the amount which
would have been paid if such payment met
the requirements prescribed under section
482.
‘‘(ii) ADDITION TO TAX FOR VALUATION
MISSTATEMENTS.—The tax imposed by this
chapter on the controlling organization
shall be increased by an amount equal to 20
percent of such excess.’’
(b) EFFECTIVE DATE.—
231
(1) IN GENERAL.—The amendment made by this
section shall apply to payments received or accrued
after December 31, 1999.
(2) PAYMENTS SUBJECT TO BINDING CONTRACT
TRANSITION RULE.—If the amendments made by sec-
tion 1041 of the Taxpayer Relief Act of 1997 do not
apply to any amount received or accrued after the
date of the enactment of this Act under any contract
described in subsection (b)(2) of such section, such
amendments also shall not apply to amounts received
or accrued under such contract before January 1,
2000.
TITLE XI—REAL ESTATE
PROVISIONS
Subtitle A—Provisions Relating to
Real Estate Investment Trusts
PART I—TREATMENT OF INCOME AND SERVICES
PROVIDED BY TAXABLE REIT SUBSIDIARIES
SEC. 1101. MODIFICATIONS TO ASSET DIVERSIFICATION
TEST.
(a) IN
GENERAL.—Subparagraph (B) of section
856(c)(4) is amended to read as follows:
‘‘(B)(i) not more than 25 percent of the
value of its total assets is represented by securi-
232
ties (other than those includible under subpara-
graph (A)), and
‘‘(ii) except with respect to a taxable REIT
subsidiary and securities includible under sub-
paragraph (A)—
‘‘(I) not more than 5 percent of the
value of its total assets is represented by se-
curities of any 1 issuer,
‘‘(II) the trust does not hold securities
possessing more than 10 percent of the total
voting power of the outstanding securities of
any 1 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 1 issuer.’’
(b) EXCEPTION FOR STRAIGHT DEBT SECURITIES.—
Subsection (c) of section 856 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—
233
‘‘(A) the only securities of such issuer which
are held by the trust or a taxable REIT sub-
sidiary of the trust are straight debt (as so de-
fined), or
‘‘(B) the issuer is a partnership and the
trust holds at least a 20 percent profits interest
in the partnership.’’
SEC. 1102. TREATMENT OF INCOME AND SERVICES PRO-
VIDED BY TAXABLE REIT SUBSIDIARIES.
(a) INCOME FROM TAXABLE REIT SUBSIDIARIES NOT
TREATED AS IMPERMISSIBLE TENANT SERVICE INCOME.—
Clause (i) of section 856(d)(7)(C) (relating to exceptions to
impermissible tenant service income) is amended by insert-
ing ‘‘or through a taxable REIT subsidiary of such trust’’
after ‘‘income’’.
(b) CERTAIN INCOME FROM TAXABLE REIT SUBSIDI-
ARIES NOT EXCLUDED FROM RENTS FROM REAL PROP-
ERTY.—
(1) IN GENERAL.—Subsection (d) of section 856
(relating to rents from real property defined) is
amended by adding at the end the following new
paragraphs:
‘‘(8) SPECIAL RULE FOR TAXABLE REIT SUBSIDI-
ARIES.—For purposes of this subsection, amounts
paid to a real estate investment trust by a taxable
234
REIT subsidiary of such trust shall not be excluded
from rents from real property by reason of paragraph
(2)(B) if the requirements of subparagraph (A) or (B)
are met.
‘‘(A) LIMITED RENTAL EXCEPTION.—The re-
quirements 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 per-
sons 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 sub-
stantially comparable to such rents made by the
other tenants of the trust’s property for com-
parable space.
‘‘(B) EXCEPTION FOR CERTAIN LODGING FA-
CILITIES.—The requirements of this subpara-
graph are met with respect to an interest in real
property which is a qualified lodging facility
leased by the trust to a taxable REIT subsidiary
of the trust if the property is operated on behalf
235
of such subsidiary by a person who is an eligible
independent contractor.
‘‘(9) ELIGIBLE
INDEPENDENT
CONTRACTOR.—
For purposes of paragraph (8)(B)—
‘‘(A) IN GENERAL.—The term ‘eligible inde-
pendent contractor’ means, with respect to any
qualified lodging facility, any independent con-
tractor if, at the time such contractor enters into
a management agreement or other similar serv-
ice contract with the taxable REIT subsidiary to
operate the facility, such contractor (or any re-
lated 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 paragraph and paragraph (8)(B), a per-
son shall not fail to be treated as an independent
contractor with respect to any qualified lodging
facility by reason of any of the following:
‘‘(i) The taxable REIT subsidiary
bears the expenses for the operation of the
facility pursuant to the management agree-
ment or other similar service contract.
236
‘‘(ii) The taxable REIT subsidiary re-
ceives the revenues from the operation of
such facility, net of expenses for such oper-
ation and fees payable to the operator pur-
suant to such agreement or contract.
‘‘(iii) The real estate investment trust
receives income from such person with re-
spect to another property that is attrib-
utable to a lease of such other property to
such person that was in effect as on the
later of—
‘‘(I) January 1, 1999, or
‘‘(II) the earliest date that any
taxable REIT subsidiary of such trust
entered into a management agreement
or other similar service contract with
such person with respect to such quali-
fied lodging facility.
‘‘(C) 
RENEWALS, 
ETC., 
OF
EXISTING
LEASES.—For 
purposes 
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 re-
newal is pursuant to the terms of such lease
237
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 whichever of the dates under subpara-
graph (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 substan-
tially similar or lesser benefit in com-
parison to the lease referred to in sub-
clause (I).
‘‘(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 ac-
cepting wagers and who is legally author-
ized to engage in such business at or in con-
nection with such facility.
238
‘‘(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 FA-
CILITIES.—The term ‘lodging facility’ in-
cludes customary amenities and facilities
operated as part of, or associated with, the
lodging facility so long as such amenities
and facilities are customary for other prop-
erties of a comparable size and class owned
by other owners unrelated to such real estate
investment trust.
‘‘(E) OPERATE
INCLUDES
MANAGE.—Ref-
erences in this paragraph to operating a prop-
erty 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) is amended by inserting ‘‘ex-
cept as provided in paragraph (8),’’ after ‘‘(B)’’.
241
owned by such corporation or is leased to such cor-
poration from the real estate investment trust.
‘‘(4) DEFINITIONS.—For purposes of paragraph
(3)—
‘‘(A) LODGING FACILITY.—The term ‘lodg-
ing 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 sec-
tion 856(i) is amended by adding at the end the following
new sentence: ‘‘Such term shall not include a taxable REIT
subsidiary.’’
SEC. 1104. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163(j) (relating to limitation
on deduction for interest on certain indebtedness) is amend-
ed by striking ‘‘and’’ at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and in-
serting ‘‘, 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 invest-
ment trust to such trust.’’.
242
SEC. 1105. 100 PERCENT TAX ON IMPROPERLY ALLOCATED
AMOUNTS.
(a) IN GENERAL.—Subsection (b) of section 857 (relat-
ing to method of taxation of real estate 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
paragraph (6) the following new paragraph:
‘‘(7) INCOME FROM REDETERMINED RENTS, RE-
DETERMINED 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 re-
determined rents, redetermined deductions, and
excess interest.
‘‘(B) REDETERMINED RENTS.—
‘‘(i) IN GENERAL.—The term ‘redeter-
mined rents’ means rents from real prop-
erty (as defined in subsection 856(d)) the
amount of which would (but for subpara-
graph (E)) be reduced on distribution, ap-
portionment, or allocation under section
482 to clearly reflect income as a result of
services furnished or rendered by a taxable
REIT subsidiary of the real estate invest-
ment trust to a tenant of such trust.
243
‘‘(ii) EXCEPTION FOR CERTAIN SERV-
ICES.—Clause (i) shall not apply to
amounts received directly or indirectly by a
real estate investment trust for services de-
scribed 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
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) such subsidiary renders a sig-
nificant amount of similar services to
persons other than such trust and ten-
ants of such trust who are unrelated
(within 
the 
meaning 
of 
section
856(d)(8)(F)) to such subsidiary, trust,
and tenants, but
244
‘‘(II) only to the extent the charge
for such service so rendered is substan-
tially comparable to the charge for the
similar services rendered to persons re-
ferred to in subclause (I).
‘‘(v) EXCEPTION FOR CERTAIN SEPA-
RATELY
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 sub-
stantially 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.
‘‘(vi) EXCEPTION FOR CERTAIN SERV-
ICES BASED ON SUBSIDIARY’S INCOME FROM
245
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 percent of such subsidiary’s
direct cost in furnishing or rendering the
service.
‘‘(vii) EXCEPTIONS GRANTED BY SEC-
RETARY.—The Secretary may waive the tax
otherwise imposed by subparagraph (A) if
the trust establishes to the satisfaction 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 services to such tenants.
‘‘(C) REDETERMINED
DEDUCTIONS.—The
term ‘redetermined deductions’ means deductions
(other than redetermined rents) of a taxable
REIT subsidiary of a real estate investment
trust if the amount of such deductions would
(but for subparagraph (E)) be increased on dis-
tribution, apportionment, or allocation under
section 482 to clearly reflect income as between
such subsidiary and such trust.
246
‘‘(D) EXCESS INTEREST.—The term ‘excess
interest’ means any deductions for interest pay-
ments by a taxable REIT subsidiary of a real es-
tate 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, apportion-
ment, or allocation under section 482.
‘‘(F) REGULATORY
AUTHORITY.—The Sec-
retary shall prescribe such regulations as may be
necessary or appropriate to carry out the pur-
poses of this paragraph. Until the Secretary pre-
scribes such regulations, real estate investment
trusts and their taxable REIT subsidiaries may
base their allocations on any reasonable meth-
od.’’.
(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE
DISTRIBUTED.—Subparagraph (E) of section 857(b)(2) (re-
lating to real estate investment trust taxable income) is
amended by striking ‘‘paragraph (5)’’ and inserting ‘‘para-
graphs (5) and (7)’’.
247
SEC. 1106. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this part
shall apply to taxable years beginning after December 31,
2000.
(b) TRANSITIONAL RULES RELATED
TO SECTION
1101.—
(1) EXISTING ARRANGEMENTS.—
(A) IN GENERAL.—Except as otherwise pro-
vided in this paragraph, the amendment made
by section 1101 shall not apply to a real estate
investment trust with respect to—
(i) securities of a corporation held di-
rectly 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 ac-
quires control of such entity pursuant to a
written binding contract in effect on such
date and at all times thereafter before such
acquisition,
(iii) securities received by such trust
(or a successor) in exchange for, or with re-
spect to, securities described in clause (i) or
(ii) in a transaction in which gain or loss
is not recognized, and
248
(iv) securities acquired directly or in-
directly by such trust as part of a reorga-
nization (as defined in section 368(a)(1) of
the Internal Revenue Code of 1986) with re-
spect to such trust if such securities are de-
scribed in clause (i), (ii), or (iii) with re-
spect to any other real estate investment
trust.
(B) NEW TRADE OR BUSINESS OR SUBSTAN-
TIAL
NEW
ASSETS.—Subparagraph (A) shall
cease to apply to securities 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 there-
after 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 de-
fined) with another corporation the securi-
249
ties 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 corpora-
tion to become a taxable REIT subsidiary, the
amendment made by section 1101 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.
PART II—HEALTH CARE REITS
SEC. 1111. HEALTH CARE REITS.
(a) SPECIAL FORECLOSURE RULE FOR HEALTH CARE
PROPERTIES.—Subsection (e) of section 856 (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
PROPERTIES.—For 
purposes 
of 
this
subsection—
‘‘(A) ACQUISITION
AT
EXPIRATION
OF
LEASE.—The term ‘foreclosure property’ shall in-
clude any qualified health care property ac-
quired by a real estate investment trust as the
250
result of the termination of a lease of such prop-
erty (other than a termination by reason of a de-
fault, or the imminence of a default, on the
lease).
‘‘(B) GRACE
PERIOD.—In the case of a
qualified health care property which is fore-
closure property solely by reason of subpara-
graph (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 Sec-
retary that an extension of the grace period
in clause (i) is necessary to the orderly leas-
ing or liquidation of the trust’s interest in
such qualified health care property, the Sec-
retary may grant 1 or more extensions of
the grace period for such qualified health
care property.
Any such extension shall not extend the grace pe-
riod beyond the close of the 6th year after the
251
taxable year in which such trust acquired such
qualified health care property.
‘‘(C) INCOME
FROM
INDEPENDENT
CON-
TRACTORS.—For purposes of applying para-
graph (4)(C) with respect to qualified health care
property which is foreclosure property by reason
of subparagraph (A) or paragraph (1), income
derived or received by the trust from an inde-
pendent contractor shall be disregarded to the ex-
tent such income is attributable to—
‘‘(i) any lease of property in effect on
the date the real estate investment trust ac-
quired 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 substan-
tially similar or lesser benefit in com-
252
parison to the lease referred to in sub-
clause (I).
‘‘(D) QUALIFIED
HEALTH
CARE
PROP-
ERTY.—
‘‘(i) IN GENERAL.—The term ‘qualified
health care property’ means any real prop-
erty (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 hospital, nursing facility,
assisted living facility, congregate care fa-
cility, qualified continuing care facility (as
defined in section 7872(g)(4)), or other li-
censed facility which extends medical or
nursing or ancillary services to patients
and which, immediately before the termi-
nation, expiration, default, or breach of the
lease of or mortgage secured by such facil-
ity, was operated by a provider of such
services which was eligible for participation
253
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 Decem-
ber 31, 2000.
PART III—CONFORMITY WITH REGULATED
INVESTMENT COMPANY RULES
SEC. 1121. CONFORMITY WITH REGULATED INVESTMENT
COMPANY RULES.
(a) DISTRIBUTION REQUIREMENT.—Clauses (i) and
(ii) of section 857(a)(1)(A) (relating to requirements appli-
cable 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) (relating to imposition of tax in case of failure
to meet certain requirements) is amended by striking ‘‘95
percent (90 percent 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 Decem-
ber 31, 2000.
254
PART IV—CLARIFICATION OF EXCEPTION FROM
IMPERMISSIBLE TENANT SERVICE INCOME
SEC. 1131. CLARIFICATION OF EXCEPTION FOR INDE-
PENDENT OPERATORS.
(a) IN GENERAL.—Paragraph (3) of section 856(d)
(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 per-
sons who own, directly or indirectly, more than 5 per-
cent 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 sub-
paragraph (B) (but all of the outstanding stock of
such class shall be considered outstanding in order to
compute 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 Decem-
ber 31, 2000.
255
PART V—MODIFICATION OF EARNINGS AND
PROFITS RULES
SEC. 1141. MODIFICATION OF EARNINGS AND PROFITS
RULES.
(a) RULES FOR DETERMINING WHETHER REGULATED
INVESTMENT COMPANY HAS EARNINGS AND PROFITS FROM
NON-RIC YEAR.—Subsection (c) of section 852 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 the earliest earnings and profits accumu-
lated in any taxable year to which the provisions
of this part did not apply rather than the most
recently accumulated earnings and profits, and
‘‘(B) to the extent treated under subpara-
graph (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.’’.
(b) CLARIFICATION OF APPLICATION OF REIT SPILL-
OVER DIVIDEND RULES
TO DISTRIBUTIONS TO MEET
QUALIFICATION REQUIREMENT.—Subparagraph (B) of sec-
256
tion 857(d)(3) is amended by inserting before the period
‘‘and section 858’’.
(c) APPLICATION OF DEFICIENCY DIVIDEND PROCE-
DURES.—Paragraph (1) of section 852(e) is amended by
adding at the end the following new sentence: ‘‘If the deter-
mination 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.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
PART VI—STUDY RELATING TO TAXABLE REIT
SUBSIDIARIES
SEC. 1151. STUDY RELATING TO TAXABLE REIT SUBSIDI-
ARIES.
The Commissioner of the Internal Revenue shall con-
duct a study to determine how many taxable REIT subsidi-
aries are in existence and the aggregate amount of taxes
paid by such subsidiaries. The Secretary shall submit a re-
port to the Congress describing the results of such study.
257
Subtitle B—Modification of At-Risk
Rules for Publicly Traded Non-
recourse Debt
SEC. 1161. TREATMENT UNDER AT-RISK RULES OF PUB-
LICLY TRADED NONRECOURSE DEBT.
(a) IN
GENERAL.—Subparagraph (A) of section
465(b)(6) (relating to qualified nonrecourse financing treat-
ed as amount at risk) is amended by striking ‘‘share of’’
and all that follows and inserting ‘‘share of—
‘‘(i) any qualified nonrecourse financ-
ing which is secured by real property used
in such activity, and
‘‘(ii) any other financing which—
‘‘(I) would (but for subparagraph
(B)(ii)) be qualified nonrecourse fi-
nancing,
‘‘(II) is qualified publicly traded
debt, and
‘‘(III) is not borrowed by the tax-
payer from a person described in sub-
clause (I), (II), or (III) of section
49(a)(1)(D)(iv).’’
(b) QUALIFIED PUBLICLY TRADED DEBT.—Paragraph
(6) of section 465(b) is amended by adding at the end the
following new subparagraph:
258
‘‘(F) 
QUALIFIED
PUBLICLY
TRADED
DEBT.—For purposes of subparagraph (A), the
term ‘qualified publicly traded debt’ means any
debt instrument which is readily tradable on an
established securities market. Such term shall not
include any debt instrument which has a yield
to maturity which equals or exceeds the limita-
tion in section 163(i)(1)(B).’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to debt instruments issued after Decem-
ber 31, 1999.
Subtitle C—Treatment of Construc-
tion 
Allowances 
and 
Certain
Contributions to Capital of Re-
tailers
SEC. 1171. EXCLUSION FROM GROSS INCOME OF QUALIFIED
LESSEE CONSTRUCTION ALLOWANCES NOT
LIMITED 
FOR 
CERTAIN 
RETAILERS 
TO
SHORT-TERM LEASES.
(a) IN GENERAL.—Subsection (a) section 110 (relating
to qualified lessee construction allowances for short-term
leases) is amended by adding at the end the following new
sentence: ‘‘Paragraph (1) shall not apply if the lessee is a
qualified retail business (as defined by section 118(d)(3)
259
without regard to the proximity requirement in subpara-
graph (A) thereof).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to leases entered into after December 31,
1999.
SEC. 1172. EXCLUSION FROM GROSS INCOME FOR CERTAIN
CONTRIBUTIONS TO THE CAPITAL OF CER-
TAIN RETAILERS.
(a) IN GENERAL.—Section 118 (relating to contribu-
tions to the capital of a corporation) is amended by redesig-
nating subsections (d) and (e) as subsections (e) and (f),
respectively, and by inserting after subsection (c) the fol-
lowing new subsection:
‘‘(d) SAFE HARBOR FOR CONTRIBUTIONS TO CERTAIN
RETAILERS.—
‘‘(1) GENERAL RULE.—For purposes of this sec-
tion, the term ‘contribution to the capital of the tax-
payer’ includes any amount of money or other prop-
erty received by the taxpayer if—
‘‘(A) the taxpayer has entered into an
agreement to operate (or cause to be operated) a
qualified retail business at a particular location
for a period of at least 15 years,
‘‘(B)(i) immediately after the receipt of such
money or other property, the taxpayer owns the
260
land and the structure to be used by the taxpayer
in carrying on a qualified retail business at such
location, or
‘‘(ii) the taxpayer uses such amount to ac-
quire ownership of at least such land and struc-
ture,
‘‘(C) such amount meets the requirements of
the expenditure rule of paragraph (2), and
‘‘(D) the contributor of such amount does
not hold a beneficial interest in any property lo-
cated on the premises of such qualified retail
business other than de minimis amounts of prop-
erty associated with the operation of property
adjacent to such premises.
‘‘(2) EXPENDITURE
RULE.—An amount meets
the requirements of this paragraph if—
‘‘(A) an amount equal to such amount is
expended for the acquisition of land or for acqui-
sition or construction of other property described
in section 1231(b)—
‘‘(i) which was the purpose motivating
the contribution, and
‘‘(ii) which is used predominantly in a
qualified retail business at the location re-
ferred to in paragraph (1)(A),
261
‘‘(B) the expenditure referred to in subpara-
graph (A) occurs before the end of the second tax-
able year after the year in which such amount
was received, and
‘‘(C) accurate records are kept of the
amounts contributed and expenditures made on
the basis of the project for which the contribution
was made and on the basis of the year of the
contribution expenditure.
‘‘(3) DEFINITION OF QUALIFIED RETAIL BUSI-
NESS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified retail
business’ means a trade or business of selling
tangible personal property to the general public
if the premises on which such trade or business
is conducted is in close proximity to property
that the contributor of the amount referred to in
paragraph (1) is developing or operating for
profit (or, in the case of a contributor which is
a governmental entity, is attempting to revi-
talize).
‘‘(B) SERVICES.—A trade or business shall
not fail to be treated as a qualified retail busi-
ness by reason of sales of services if such sales
262
are incident to the sale of tangible personal
property or if the services are de minimis in
amount.
‘‘(4) SPECIAL RULES.—
‘‘(A) LEASES.—For purposes of paragraph
(1)(B)(i), property shall be treated as owned by
the taxpayer if the taxpayer is the lessee of such
property under a lease having a term of at least
30 years and on which only nominal rent is re-
quired.
‘‘(B) CONTROLLED GROUPS.—For purposes
of this subsection, all persons treated as a single
employer under subsection (a) or (b) of section
52 shall be treated as 1 person.
‘‘(5) DISALLOWANCE OF DEDUCTIONS AND CRED-
ITS; ADJUSTED
BASIS.—Notwithstanding any other
provision of this subtitle, no deduction or credit shall
be allowed for, or by reason of, any amount received
by the taxpayer which constitutes a contribution to
capital to which this subsection applies. The adjusted
basis of any property acquired with the contributions
to which this subsection applies shall be reduced by
the amount of the contributions to which this sub-
section applies.
263
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations are appropriate to prevent the
abuse of the purposes of the subsection, including reg-
ulations which allocate income and deductions (or ad-
just the amount excludable under this subsection) in
cases in which—
‘‘(A) payments in excess of fair market
value are paid to the contributor by the tax-
payer, or
‘‘(B) the contributor and the taxpayer are
related parties.’’
(b) CONFORMING AMENDMENT.—Subsection (e) of sec-
tion 118 (as redesignated by subsection (a)) is amended by
adding at the end the following flush sentence:
‘‘Rules similar to the rules of the preceding sentence shall
apply to any amount treated as a contribution to the cap-
ital of the taxpayer under subsection (d).’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to amounts received after December 31,
1999.
264
TITLE XII—PROVISIONS
RELATING TO PENSIONS
Subtitle A—Expanding Coverage
SEC. 1201. INCREASE IN BENEFIT AND CONTRIBUTION LIM-
ITS.
(a) DEFINED BENEFIT PLANS.—
(1) DOLLAR LIMIT.—
(A) Subparagraph (A) of section 415(b)(1)
(relating to limitation for defined benefit plans)
is amended by striking ‘‘$90,000’’ and inserting
‘‘$160,000’’.
(B) Subparagraphs (C) and (D) of section
415(b)(2) are each amended by striking ‘‘$90,000’’
each place it appears in the headings and the text
and inserting ‘‘$160,000’’.
(C) Paragraph (7) of section 415(b) (relating to
benefits under certain collectively bargained plans) is
amended by striking ‘‘the greater of $68,212 or one-
half the amount otherwise applicable for such year
under paragraph (1)(A) for ‘$90,000’ ’’ and inserting
‘‘one-half the amount otherwise applicable for such
year under paragraph (1)(A) for ‘$160,000’ ’’.
(2) LIMIT REDUCED WHEN BENEFIT BEGINS BE-
FORE AGE 62.—Subparagraph (C) of section 415(b)(2)
is amended by striking ‘‘the social security retirement
265
age’’ each place it appears in the heading and text
and inserting ‘‘age 62’’.
(3) LIMIT
INCREASED
WHEN
BENEFIT
BEGINS
AFTER
AGE
65.—Subparagraph 
(D) 
of 
section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 65’’.
(4) COST-OF-LIVING ADJUSTMENTS.—Subsection
(d) of section 415 (related to cost-of-living adjust-
ments) is amended—
(A) in paragraph (1)(A) by striking
‘‘$90,000’’ and inserting ‘‘$160,000’’, and
(B) in paragraph (3)(A)—
(i) by striking ‘‘$90,000’’ in the head-
ing and inserting ‘‘$160,000’’, and
(ii) by striking ‘‘October 1, 1986’’ and
inserting ‘‘July 1, 2000’’.
(5) 
CONFORMING
AMENDMENT.—Section
415(b)(2) is amended by striking subparagraph (F).
(b) DEFINED CONTRIBUTION PLANS.—
(1) DOLLAR LIMIT.—Subparagraph (A) of sec-
tion 415(c)(1) (relating to limitation for defined con-
tribution plans) is amended by striking ‘‘$30,000’’
and inserting ‘‘$40,000’’.
266
(2) COST-OF-LIVING ADJUSTMENTS.—Subsection
(d) of section 415 (related to cost-of-living adjust-
ments) is amended—
(A) in paragraph (1)(C) by striking
‘‘$30,000’’ and inserting ‘‘$40,000’’, and
(B) in paragraph (3)(D)—
(i) by striking ‘‘$30,000’’ in the head-
ing and inserting ‘‘$40,000’’, and
(ii) by striking ‘‘October 1, 1993’’ and
inserting ‘‘July 1, 2000’’.
(c) QUALIFIED TRUSTS.—
(1) COMPENSATION LIMIT.—Sections 401(a)(17),
404(l), 408(k), and 505(b)(7) are each amended by
striking ‘‘$150,000’’ each place it appears and insert-
ing ‘‘$200,000’’.
(2) BASE PERIOD AND ROUNDING OF COST-OF-
LIVING ADJUSTMENT.—Subparagraph (B) of section
401(a)(17) is amended—
(A) by striking ‘‘October 1, 1993’’ and in-
serting ‘‘July 1, 2000’’, and
(B) by striking ‘‘$10,000’’ both places it ap-
pears and inserting ‘‘$5,000’’.
(d) ELECTIVE DEFERRALS.—
267
(1) IN
GENERAL.—Paragraph (1) of section
402(g) (relating to limitation on exclusion for elective
deferrals) is amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) LIMITATION.—Notwithstanding sub-
sections (e)(3) and (h)(1)(B), the elective defer-
rals of any individual for any taxable year shall
be included in such individual’s gross income to
the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar
amount.
‘‘(B) APPLICABLE
DOLLAR
AMOUNT.—For
purposes of subparagraph (A), the applicable
dollar amount shall be the amount determined in
accordance with the following table:
‘‘Taxable year:
Applicable dollar amount:
2001 ....................................................................................
$11,000
2002 ....................................................................................
$12,000
2003 ....................................................................................
$13,000
2004 ....................................................................................
$14,000
2005 or thereafter ..............................................................
$15,000.’’.
(2) COST-OF-LIVING
ADJUSTMENT.—Paragraph
(5) of section 402(g) is amended to read as follows:
‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the case
of taxable years beginning after December 31, 2005,
the Secretary shall adjust the $15,000 amount under
paragraph (1)(B) at the same time and in the same
manner as under section 415(d); except that the base
268
period shall be the calendar quarter beginning July 1,
2004, and any increase under this paragraph which
is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraphs (1) and (2), is further amended
by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as para-
graphs (4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ‘‘402(g)(8)(A)(iii)’’ and in-
serting ‘‘402(g)(7)(A)(iii)’’.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph (4)
thereof)’’.
(e) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Section 457 (relating to de-
ferred compensation plans of State and local govern-
ments and tax-exempt organizations) is amended—
269
(A) in subsections (b)(2)(A) and (c)(1) by
striking ‘‘$7,500’’ each place it appears and in-
serting ‘‘the applicable dollar amount’’, and
(B) in subsection (b)(3)(A) by striking
‘‘$15,000’’ and inserting ‘‘twice the dollar
amount in effect under subsection (b)(2)(A)’’.
(2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV-
ING ADJUSTMENT.—Paragraph (15) of section 457(e)
is amended to read as follows:
‘‘(15) APPLICABLE DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—The applicable dollar
amount shall be the amount determined in ac-
cordance with the following table:
‘‘Taxable year:
Applicable dollar amount:
2001 ....................................................................................
$11,000
2002 ....................................................................................
$12,000
2003 ....................................................................................
$13,000
2004 ....................................................................................
$14,000
2005 or thereafter ..............................................................
$15,000.
‘‘(B) COST-OF-LIVING
ADJUSTMENTS.—In
the case of taxable years beginning after Decem-
ber 31, 2005, the Secretary shall adjust the
$15,000 amount specified in the table in sub-
paragraph (A) at the same time and in the same
manner as under section 415(d), except that the
base period shall be the calendar quarter begin-
ning July 1, 2004, and any increase under this
270
paragraph which is not a multiple of $500 shall
be rounded to the next lowest multiple of $500.’’.
(f) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Clause 
(ii) 
of 
section
408(p)(2)(A) (relating to general rule for qualified
salary reduction arrangement) is amended by striking
‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(2) APPLICABLE
DOLLAR
AMOUNT.—Subpara-
graph (E) of 408(p)(2) is amended to read as follows:
‘‘(E) APPLICABLE DOLLAR AMOUNT; COST-
OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
‘‘Year:
Applicable dollar amount:
2001 .......................................................................
$7,000
2002 .......................................................................
$8,000
2003 .......................................................................
$9,000
2004 or thereafter ..................................................
$10,000.
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
In the case of a year beginning after Decem-
ber 31, 2004, the Secretary shall adjust the
$10,000 amount under clause (i) at the
same time and in the same manner as
under section 415(d), except that the base
period taken into account shall be the cal-
271
endar quarter beginning July 1, 2003, and
any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Clause (I) of section 401(k)(11)(B)(i) is
amended by striking ‘‘$6,000’’ and inserting ‘‘the
amount in effect under section 408(p)(2)(A)(ii)’’.
(B) Section 401(k)(11) is amended by strik-
ing subparagraph (E).
(g) ROUNDING RULE RELATING TO DEFINED BENEFIT
PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph
(4) of section 415(d) is amended to read as follows:
‘‘(4) ROUNDING.—
‘‘(A) 
$160,000 
AMOUNT.—Any 
increase
under subparagraph (A) of paragraph (1) which
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) 
$40,000 
AMOUNT.—Any 
increase
under subparagraph (C) of paragraph (1) which
is not a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.’’.
(h) EFFECTIVE DATE.—
272
(1) IN
GENERAL.—The amendments made by
this section shall apply to years beginning after De-
cember 31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—In
the case of a plan maintained pursuant to 1 or more
collective bargaining agreements between employee
representatives and 1 or more employers ratified by
the date of enactment of this Act, the amendments
made by this section shall not apply to contributions
or benefits pursuant to any such agreement for years
beginning before the earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any exten-
sion thereof on or after such date of enact-
ment), or
(ii) January 1, 2001, or
(B) January 1, 2005.
SEC. 1202. PLAN LOANS FOR SUBCHAPTER S OWNERS,
PARTNERS, AND SOLE PROPRIETORS.
(a) IN
GENERAL.—Subparagraph (B) of section
4975(f)(6) (relating to exemptions not to apply to certain
transactions) is amended by adding at the end the following
new clause:
273
‘‘(iii) LOAN EXCEPTION.—For purposes
of subparagraph (A)(i), the term ‘owner-em-
ployee’ shall only include a person described
in subclause (II) or (III) of clause (i).’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to loans made after December 31, 2000.
SEC. 1203. MODIFICATION OF TOP-HEAVY RULES.
(a) SIMPLIFICATION
OF DEFINITION
OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defining
key employee) is amended—
(A) by striking ‘‘or any of the 4 preceding
plan years’’ in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
‘‘(i) an officer of the employer having
an annual compensation greater than
$150,000,’’,
(C) by striking clause (ii) and redesig-
nating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively, and
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C).
274
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT
FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section
416(c)(2)(A) (relating to defined contribution plans) is
amended by adding at the end the following: ‘‘Employer
matching 
contributions 
(as 
defined 
in 
section
401(m)(4)(A)) shall be taken into account for purposes of
this subparagraph.’’.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE-
TERMINATION DATE TAKEN INTO ACCOUNT.—
(1) IN
GENERAL.—Paragraph (3) of section
416(g) is amended to read as follows:
‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—
‘‘(A) 
IN
GENERAL.—For 
purposes 
of
determining—
‘‘(i) the present value of the cumulative
accrued benefit for any employee, or
‘‘(ii) the amount of the account of any
employee,
such present value or amount shall be increased
by the aggregate distributions made with respect
to such employee under the plan during the 1-
275
year period ending on the determination date.
The preceding sentence shall also apply to dis-
tributions under a terminated plan which if it
had not been terminated would have been re-
quired to be included in an aggregation group.
‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV-
ICE DISTRIBUTION.—In the case of any distribu-
tion made for a reason other than separation
from service, death, or disability, subparagraph
(A) shall be applied by substituting ‘5-year pe-
riod’ for ‘1-year period’.’’.
(2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub-
paragraph (E) of section 416(g)(4) is amended—
(A) by striking ‘‘LAST
YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’, and
(B) by striking ‘‘5-year period’’ and insert-
ing ‘‘1-year period’’.
(d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph
(4) of section 416(g) (relating to other special rules for top-
heavy plans) is amended by adding at the end the following
new subparagraph:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING ALTERNATIVE METHODS OF MEETING NON-
DISCRIMINATION
REQUIREMENTS.—The 
term
276
‘top-heavy plan’ shall not include a plan which
consists solely of—
‘‘(i) a cash or deferred arrangement
which meets the requirements of section
401(k)(12), and
‘‘(ii) matching contributions with re-
spect to which the requirements of section
401(m)(11) are met.
If, but for this subparagraph, a plan would be
treated as a top-heavy plan because it is a mem-
ber of an aggregation group which is a top-heavy
group, contributions under the plan may be
taken into account in determining whether any
other plan in the group meets the requirements
of subsection (c)(2).’’
(e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT
REQUIREMENT.—Subparagraph (C) of section 416(c)(1)
(relating to defined benefit plans) is amended—
(A) in clause (i), by striking ‘‘clause (ii)’’
and inserting ‘‘clause (ii) or (iii)’’, and
(B) by adding at the end the following:
‘‘(iii) 
EXCEPTION
FOR
FROZEN
PLAN.—For purposes of determining an em-
ployee’s years of service with the employer,
any service with the employer shall be dis-
277
regarded to the extent that such service oc-
curs during a plan year when the plan ben-
efits (within the meaning of section 410(b))
no employee or former employee.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 1204. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIM-
ITS.
(a) IN GENERAL.—Section 404 (relating to deduction
for contributions of an employer to an employees’ trust or
annuity plan and compensation under a deferred payment
plan) is amended by adding at the end the following new
subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective
deferrals (as defined in section 402(g)(3)) shall not be sub-
ject to any limitation contained in paragraph (3), (7), or
(9) of subsection (a), and such elective deferrals shall not
be taken into account in applying any such limitation to
any other contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
278
SEC. 1205. REDUCED PBGC PREMIUM FOR NEW PLANS OF
SMALL EMPLOYERS.
(a) IN
GENERAL.—Subparagraph (A) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—
(1) in clause (i), by inserting ‘‘other than a new
single-employer plan (as defined in subparagraph
(F)) maintained by a small employer (as so de-
fined),’’ after ‘‘single-employer plan,’’,
(2) in clause (iii), by striking the period at the
end and inserting ‘‘, and’’, and
(3) by adding at the end the following new
clause:
‘‘(iv) in the case of a new single-employer plan
(as defined in subparagraph (F)) maintained by a
small employer (as so defined) for the plan year, $5
for each individual who is a participant in such plan
during the plan year.’’.
(b) DEFINITION OF NEW SINGLE-EMPLOYER PLAN.—
Section 4006(a)(3) of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1306(a)(3)) is amended by
adding at the end the following new subparagraph:
‘‘(F)(i) For purposes of this paragraph, a single-em-
ployer plan maintained by a contributing sponsor shall be
treated as a new single-employer plan for each of its first
5 plan years if, during the 36-month period ending on the
279
date of the adoption of such plan, the sponsor or any mem-
ber of such sponsor’s controlled group (or any predecessor
of either) had not established or maintained a plan to which
this title applies with respect to which benefits were accrued
for substantially the same employees as are in the new sin-
gle-employer plan.
‘‘(ii)(I) For purposes of this paragraph, the term
‘small employer’ means an employer which on the first day
of any plan year has, in aggregation with all members of
the controlled group of such employer, 100 or fewer employ-
ees.
‘‘(II) In the case of a plan maintained by 2 or more
contributing sponsors that are not part of the same con-
trolled group, the employees of all contributing sponsors and
controlled groups of such sponsors shall be aggregated for
purposes of determining whether any contributing sponsor
is a small employer.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plans established after December 31,
2000.
SEC. 1206. REDUCTION OF ADDITIONAL PBGC PREMIUM
FOR NEW AND SMALL PLANS.
(a) NEW
PLANS.—Subparagraph (E) of section
4006(a)(3) of the Employee Retirement Income Security
280
Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by add-
ing at the end the following new clause:
‘‘(v) In the case of a new defined benefit plan, the
amount determined under clause (ii) for any plan year
shall be an amount equal to the product of the amount de-
termined under clause (ii) and the applicable percentage.
For purposes of this clause, the term ‘applicable percentage’
means—
‘‘(I) 0 percent, for the first plan year.
‘‘(II) 20 percent, for the second plan year.
‘‘(III) 40 percent, for the third plan year.
‘‘(IV) 60 percent, for the fourth plan year.
‘‘(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as de-
fined in section 3(35)) maintained by a contributing spon-
sor shall be treated as a new defined benefit plan for its
first 5 plan years if, during the 36-month period ending
on the date of the adoption of the plan, the sponsor and
each member of any controlled group including the sponsor
(or any predecessor of either) did not establish or maintain
a plan to which this title applies with respect to which bene-
fits were accrued for substantially the same employees as
are in the new plan.’’.
281
(b) SMALL PLANS.—Paragraph (3) of section 4006(a)
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1306(a)) is amended—
(1) in subparagraph (E)(i) by striking ‘‘The’’
and inserting ‘‘Except as provided in subparagraph
(G), the’’, and
(2) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) In the case of an employer who has 25 or fewer
employees on the first day of the plan year, the additional
premium determined under subparagraph (E) for each par-
ticipant shall not exceed $5 multiplied by the number of
participants in the plan as of the close of the preceding plan
year.
‘‘(ii) For purposes of clause (i), whether an employer
has 25 or fewer employees on the first day of the plan year
is determined taking into consideration all of the employees
of all members of the contributing sponsor’s controlled
group. In the case of a plan maintained by 2 or more con-
tributing sponsors, the employees of all contributing spon-
sors and their controlled groups shall be aggregated for pur-
poses of determining whether 25-or-fewer-employees limita-
tion has been satisfied.’’.
(c) EFFECTIVE DATES.—
282
(1) SUBSECTION (a).—The amendments made by
subsection (a) shall apply to plans established after
December 31, 2000.
(2) SUBSECTION (b).—The amendments made by
subsection (b) shall apply to plan years beginning
after December 31, 2000.
SEC. 1207. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (relat-
ing to deferred compensation plans of State and local gov-
ernments and tax-exempt organizations), as amended by
section 1201(e), is amended to read as follows:
‘‘(c) LIMITATION.—The maximum amount of the com-
pensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed the amount in effect under subsection (b)(2)(A) (as
modified by any adjustment provided under subsection
(b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to years beginning after December
31, 2000.
283
SEC. 1208. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The Sec-
retary of the Treasury or the Secretary’s delegate shall not
require payment of user fees under the program established
under section 7527 of the Internal Revenue Code of 1986
for requests to the Internal Revenue Service for determina-
tion letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible em-
ployers or any trust which is part of the plan. The pre-
ceding sentence shall not apply to any request made by the
sponsor of any prototype or similar plan which the sponsor
intends to market to participating employers.
(b) PENSION BENEFIT PLAN.—For purposes of this
section, the term ‘‘pension benefit plan’’ means a pension,
profit-sharing, stock bonus, annuity, or employee stock own-
ership plan.
(c) ELIGIBLE EMPLOYER.—For purposes of this sec-
tion, the term ‘‘eligible employer’’ has the same meaning
given such term in section 408(p)(2)(C)(i)(I) of the Internal
Revenue Code of 1986. The determination of whether an em-
ployer is an eligible employer under this section shall be
made as of the date of the request described in subsection
(a).
284
(d) EFFECTIVE DATE.—The provisions of this section
shall apply with respect to requests made after December
31, 2000.
SEC. 1209. DEDUCTION LIMITS.
(a) IN GENERAL.—Section 404(a) (relating to general
rule) is amended by adding at the end the following:
‘‘(12) DEFINITION OF COMPENSATION.—For pur-
poses of paragraphs (3), (7), (8), and (9), the term
‘compensation’ shall include amounts treated as par-
ticipant’s compensation under subparagraph (C) or
(D) of section 415(c)(3).’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B) of
section 404(a)(3) is amended by striking the last sentence
thereof.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 1210. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
285
‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS PLUS CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified plus contribution program—
‘‘(1) any designated plus contribution made by
an employee pursuant to the program shall be treated
as an elective deferral for purposes of this chapter, ex-
cept that such contribution shall not be excludable
from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by reason
of including such program.
‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified plus con-
tribution program’ means a program under which an
employee may elect to make designated plus contribu-
tions in lieu of all or a portion of elective deferrals
the employee is otherwise eligible to make under the
applicable retirement plan.
‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro-
gram shall not be treated as a qualified plus contribu-
tion program unless the applicable retirement plan—
‘‘(A) establishes separate accounts (‘des-
ignated plus accounts’) for the designated plus
286
contributions of each employee and any earnings
properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping with
respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED PLUS CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) DESIGNATED
PLUS
CONTRIBUTION.—The
term ‘designated plus contribution’ means any elec-
tive deferral which—
‘‘(A) is excludable from gross income of an
employee without regard to this section, and
‘‘(B) the employee designates (at such time
and in such manner as the Secretary may pre-
scribe) as not being so excludable.
‘‘(2) DESIGNATION LIMITS.—The amount of elec-
tive deferrals which an employee may designate under
paragraph (1) shall not exceed the excess (if any) of—
‘‘(A) the maximum amount of elective defer-
rals excludable from gross income of the employee
for the taxable year (without regard to this sec-
tion), over
‘‘(B) the aggregate amount of elective defer-
rals of the employee for the taxable year which
287
the employee does not designate under paragraph
(1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—A rollover contribution
of any payment or distribution from a des-
ignated plus account which is otherwise allow-
able under this chapter may be made only if the
contribution is to—
‘‘(i) another designated plus account of
the individual from whose account the pay-
ment or distribution was made, or
‘‘(ii) a Roth IRA of such individual.
‘‘(B) COORDINATION
WITH
LIMIT.—Any
rollover contribution to a designated plus ac-
count under subparagraph (A) shall not be taken
into account for purposes of paragraph (1).
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) EXCLUSION.—Any qualified distribution
from a designated plus account shall not be includible
in gross income.
‘‘(2) QUALIFIED
DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified dis-
tribution’ has the meaning given such term by
288
section 408A(d)(2)(A) (without regard to clause
(iv) thereof).
‘‘(B) DISTRIBUTIONS
WITHIN
NONEXCLU-
SION PERIOD.—A payment or distribution from
a designated plus account shall not be treated as
a qualified distribution if such payment or dis-
tribution is made within the 5-taxable-year pe-
riod beginning with the earlier of—
‘‘(i) the 1st taxable year for which the
individual made a designated plus con-
tribution to any designated plus account es-
tablished for such individual under the
same applicable retirement plan, or
‘‘(ii) if a rollover contribution was
made to such designated plus account from
a designated plus account previously estab-
lished for such individual under another
applicable retirement plan, the 1st taxable
year for which the individual made a des-
ignated plus contribution to such previously
established account.
‘‘(C) DISTRIBUTIONS
OF
EXCESS
DEFER-
RALS AND EARNINGS.—The term ‘qualified dis-
tribution’ shall not include any distribution of
289
any excess deferral under section 402(g)(2) and
any income on the excess deferral.
‘‘(3) AGGREGATION RULES.—Section 72 shall be
applied separately with respect to distributions and
payments from a designated plus account and other
distributions and payments from the plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) APPLICABLE RETIREMENT PLAN.—The term
‘applicable retirement plan’ means—
‘‘(A) an employees’ trust described in sec-
tion 401(a) which is exempt from tax under sec-
tion 501(a), and
‘‘(B) a plan under which amounts are con-
tributed by an individual’s employer for an an-
nuity contract described in section 403(b).
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means any elective deferral described in sub-
paragraph (A) or (C) of section 402(g)(3).’’
(b) EXCESS DEFERRALS.—Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended—
(1) by adding at the end of paragraph (1) the
following new sentence: ‘‘The preceding sentence shall
not apply to so much of such excess as does not exceed
290
the designated plus contributions of the individual for
the taxable year.’’, and
(2) by inserting ‘‘(or would be included but for
the last sentence thereof)’’ after ‘‘paragraph (1)’’ in
paragraph (2)(A).
(c) 
ROLLOVERS.—Subparagraph 
(B) 
of 
section
402(c)(8) is amended by adding at the end the following:
‘‘If any portion of an eligible rollover distribu-
tion is attributable to payments or distributions
from a designated plus account (as defined in
section 402A), an eligible retirement plan with
respect to such portion shall include only another
designated plus account and a Roth IRA.’’
(d) REPORTING REQUIREMENTS.—
(1) W–2 INFORMATION.—Section 6051(a)(8) is
amended by inserting ‘‘, including the amount of des-
ignated plus contributions (as defined in section
402A)’’ before the comma at the end.
(2) INFORMATION.—Section 6047 is amended by
redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new sub-
section:
‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec-
retary shall require the plan administrator of each applica-
ble retirement plan (as defined in section 402A) to make
291
such returns and reports regarding designated plus con-
tributions (as so defined) to the Secretary, participants and
beneficiaries of the plan, and such other persons as the Sec-
retary may prescribe.’’
(e) CONFORMING AMENDMENTS.—
(1) Section 408A(e) is amended by adding after
the first sentence the following new sentence: ‘‘Such
term includes a rollover contribution described in sec-
tion 402A(c)(3)(A).’’
(2) The table of sections for subpart A of part I
of subchapter D of chapter 1 is amended by inserting
after the item relating to section 402 the following
new item:
‘‘Sec. 402A. Optional treatment of elective deferrals as plus contributions.’’
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 1211. INCREASE IN MINIMUM DEFINED BENEFIT LIMIT
UNDER SECTION 415.
(a) IN GENERAL.—Paragraph (4) of section 415(b)
(relating to total annual benefits not in excess of $10,000)
is amended to read as follows:
‘‘(4) TOTAL ANNUAL BENEFITS NOT IN EXCESS
OF $40,000.—Notwithstanding the preceding provisions
of this subsection, the benefits payable with respect to
a participant under any defined benefit plan shall be
292
deemed not to exceed the limitation of this subsection
if the retirement benefits payable with respect to such
participant under such plan and under all other de-
fined benefit plans of the employer do not exceed
$40,000 for the plan year or any prior plan year. The
preceding sentence shall be applied by substituting for
‘$40,000’—
‘‘(A) $20,000 if the plan year begins during
2001, and
‘‘(B) $30,000 if the plan year begins during
2002.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
Subtitle B—Enhancing Fairness for
Women
SEC. 1221. ADDITIONAL SALARY REDUCTION CATCH-UP
CONTRIBUTIONS.
(a) LIMITATION ON EXCLUSION FOR ELECTIVE DE-
FERRALS.—
(1) IN GENERAL.—Subsection (g) of section 402
(as amended by section 1201(d)) is further amended
by adding at the end the following:
‘‘(9) CATCH-UP CONTRIBUTIONS FOR THOSE AP-
PROACHING RETIREMENT.—
293
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is at least age 50 as of the end of any
taxable year, the limitation of paragraph (1) for
such year, after the application of paragraph
(7), shall be increased by the applicable catch-up
amount.
‘‘(B) APPLICABLE CATCH-UP AMOUNT.—For
purposes of subparagraph (A), the applicable
catch-up amount shall be the amount determined
in accordance with the following table:
‘‘Taxable year:
Applicable catch-up amount:
2001 ....................................................................................
$1,000
2002 ....................................................................................
$2,000
2003 ....................................................................................
$3,000
2004 ....................................................................................
$4,000
2005 or thereafter ..............................................................
$5,000.’’.
(2) COST-OF-LIVING ADJUSTMENTS.—Paragraph
(4) of section 402(g) (relating to cost-of-living adjust-
ment), as amended by section 1201(d), is further
amended by inserting ‘‘and the $5,000 dollar amount
in paragraph (9)’’ after ‘‘paragraph (1)(B)’’.
(b) SIMPLE RETIREMENT ACCOUNTS.—Paragraph (2)
of section 408(p) (relating to qualified salary reduction ar-
rangement) is amended by inserting at the end of the fol-
lowing new subparagraph:
‘‘(F) CATCH-UP CONTRIBUTIONS FOR THOSE
APPROACHING RETIREMENT.—In the case of an
individual who is at least age 50 as of the end
294
of any taxable year, the limitation of subpara-
graph (A)(ii) for such year shall be increased by
the applicable catch-up amount. For purposes of
the preceding sentence, the applicable catch-up
amount is the amount in effect under section
402(g)(9) for such taxable year.’’.
(c) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—Subsection (e) of section 457 (relating to other defi-
nitions and special rules) is amended by adding after para-
graph (16) the following new paragraph:
‘‘(17) CATCH-UP AMOUNTS.—In the case of an
individual who is at least age 50 as of the end of any
taxable year, the limitation of subsection (b)(2)(A) for
such year shall be increased by the applicable catch-
up amount (as in effect under section 402(g)(9) for
such taxable year), except that this paragraph shall
not apply to any taxable year to which subsection
(b)(3) applies.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
295
SEC. 1222. EQUITABLE TREATMENT FOR CONTRIBUTIONS
OF EMPLOYEES TO DEFINED CONTRIBUTION
PLANS.
(a) EQUITABLE TREATMENT.—
(1) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined contribu-
tion plans) is amended by striking ‘‘25 percent’’ and
inserting ‘‘100 percent’’.
(2) APPLICATION
TO
SECTION
403(b).—Section
403(b) is amended—
(A) by striking ‘‘the exclusion allowance for
such taxable year’’ in paragraph (1) and insert-
ing ‘‘the applicable limit under section 415’’,
(B) by striking paragraph (2), and
(C) by inserting ‘‘or any amount received
by a former employee after the 5th taxable year
following the taxable year in which such em-
ployee was terminated’’ before the period at the
end of the second sentence of paragraph (3).
(3) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amended
by striking ‘‘section 403(b)(2)(D)(iii))’’ and in-
serting ‘‘section 403(b)(2)(D)(iii), as in effect on
December 31, 2000)’’.
296
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under section
403(b)(2),’’.
(C) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allowance
as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by adding
at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case of
an annuity contract described in section 403(b),
the term ‘participant’s compensation’ means the
participant’s 
includible 
compensation 
deter-
mined under section 403(b)(3).’’.
(E) Section 415(c) is amended by striking
paragraph (4).
(F) Section 415(c)(7) is amended to read as
follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this subsection, at the election
of a participant who is an employee of a church
or a convention or association of churches, in-
cluding an organization described in section
297
414(e)(3)(B)(ii), contributions and other addi-
tions for an annuity contract or retirement in-
come account described in section 403(b) with re-
spect to such participant, when expressed as an
annual addition to such participant’s account,
shall be treated as not exceeding the limitation
of paragraph (1) if such annual addition is not
in excess of $10,000.
‘‘(B) $40,000 AGGREGATE
LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
count for purposes of this subparagraph for all
years may not exceed $40,000.
‘‘(C) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph (2).’’.
(G) Subparagraph (B) of section 402(g)(7)
(as amended by section 1201(d)) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect on the date of the enact-
ment of the Financial Freedom Act of 1999)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2000.
(b) SPECIAL RULES FOR SECTIONS 403(b) AND 408.—
298
(1) IN GENERAL.—Subsection (k) of section 415
is amended by adding at the end the following new
paragraph:
‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND
408.—For purposes of this section, any annuity con-
tract described in section 403(b) for the benefit of a
participant shall be treated as a defined contribution
plan maintained by each employer with respect to
which the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)). For purposes of this section, any con-
tribution by an employer to a simplified employee
pension plan for an individual for a taxable year
shall be treated as an employer contribution to a de-
fined contribution plan for such individual for such
year.’’.
(2) EFFECTIVE DATE.—
(A) IN
GENERAL.—The amendment made
by paragraph (1) shall apply to limitation years
beginning after December 31, 1999.
(B) EXCLUSION ALLOWANCE.—Effective for
limitation years beginning in 2000, in the case
of any annuity contract described in section
403(b) of the Internal Revenue Code of 1986, the
amount of the contribution disqualified by rea-
299
son of section 415(g) of such Code shall reduce
the exclusion allowance as provided in section
403(b)(2) of such Code.
(c) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible de-
ferred compensation plans) is amended by striking
‘‘331⁄3 percent’’ and inserting ‘‘100 percent’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
SEC. 1223. FASTER VESTING OF CERTAIN EMPLOYER
MATCHING CONTRIBUTIONS.
(a) IN GENERAL.—Section 411(a) (relating to min-
imum vesting standards) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’, and
(2) by adding at the end the following:
‘‘(12) FASTER
VESTING
FOR
MATCHING
CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
300
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ..........................................................................................
3 ..........................................................................................
4 ..........................................................................................
5 ..........................................................................................
6 or more ............................................................................
100.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to plan years beginning after December 31,
2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—In
the case of a plan maintained pursuant to 1 or more
collective bargaining agreements between employee
representatives and 1 or more employers ratified by
the date of the enactment of this Act, the amendments
made by this section shall not apply to plan years be-
ginning before the earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any exten-
sion thereof on or after such date of enact-
ment), or
301
(ii) January 1, 2001, or
(B) January 1, 2005.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this sec-
tion apply.
SEC. 1224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU-
TION RULES.
(a) SIMPLIFICATION AND FINALIZATION OF MINIMUM
DISTRIBUTION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treasury
shall—
(A) simplify and finalize the regulations re-
lating to minimum distribution requirements
under sections 401(a)(9), 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2) of the Internal Rev-
enue Code of 1986, and
(B) modify such regulations to—
(i) reflect current life expectancy, and
(ii) revise the required distribution
methods so that, under reasonable assump-
tions, the amount of the required minimum
302
distribution does not decrease over a par-
ticipant’s life expectancy.
(2) FRESH
START.—Notwithstanding subpara-
graph (D) of section 401(a)(9) of such Code, during
the first year that regulations are in effect under this
subsection, required distributions for future years
may be redetermined to reflect changes under such
regulations. Such redetermination shall include the
opportunity to choose a new designated beneficiary
and to elect a new method of calculating life expect-
ancy.
(3) EFFECTIVE DATE FOR REGULATIONS.—Regu-
lations referred to in paragraph (1) shall be effective
for years beginning after December 31, 2000, and
shall apply in such years without regard to whether
an individual had previously begun receiving min-
imum distributions.
(b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD
BEGUN BEFORE DEATH OCCURS.—
(1) IN GENERAL.—Subparagraph (B) of section
401(a)(9) is amended by striking clause (i) and redes-
ignating clauses (ii), (iii), and (iv) as clauses (i),
(ii), and (iii), respectively.
(2) CONFORMING CHANGES.—
303
(A) Clause (i) of section 401(a)(9)(B) (as so
redesignated) is amended—
(i) by striking ‘‘FOR OTHER CASES’’ in
the heading, and
(ii) by striking ‘‘the distribution of the
employee’s interest has begun in accordance
with subparagraph (A)(ii)’’ and inserting
‘‘his entire interest has been distributed to
him,’’.
(B) Clause (ii) of section 401(a)(9)(B) (as
so redesignated) is amended by striking ‘‘clause
(ii)’’ and inserting ‘‘clause (i)’’.
(C) Clause (iii) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’,
(ii) in subclause (I) by striking ‘‘clause
(iii)(III)’’ and inserting ‘‘clause (ii)(III)’’,
(iii) in subclause (I) by striking ‘‘the
date on which the employee would have at-
tained the age 701⁄2,’’ and inserting ‘‘April
1 of the calendar year following the cal-
endar year in which the spouse attains
701⁄2,’’, and
304
(iv) in subclause (II) by striking ‘‘the
distributions to such spouse begin,’’ and in-
serting ‘‘his entire interest has been distrib-
uted to him,’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2000.
(c) REDUCTION IN EXCISE TAX.—
(1) IN GENERAL.—Subsection (a) of section 4974
is amended by striking ‘‘50 percent’’ and inserting
‘‘10 percent’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
SEC. 1225. CLARIFICATION OF TAX TREATMENT OF DIVI-
SION OF SECTION 457 PLAN BENEFITS UPON
DIVORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to ap-
plication of rules to governmental and church plans) is
amended—
(1) by inserting ‘‘or an eligible deferred com-
pensation plan (within the meaning of section
457(b))’’ after ‘‘subsection (e))’’, and
305
(2) in the heading, by striking ‘‘GOVERNMENTAL
AND CHURCH PLANS’’ and inserting ‘‘CERTAIN OTHER
PLANS’’.
(b) WAIVER
OF CERTAIN DISTRIBUTION REQUIRE-
MENTS.—Paragraph (10) of section 414(p) is amended by
striking ‘‘and section 409(d)’’ and inserting ‘‘section
409(d), and section 457(d)’’.
(c) TAX TREATMENT OF PAYMENTS FROM A SECTION
457 PLAN.—Subsection (p) of section 414 is amended by
redesignating paragraph (12) as paragraph (13) and in-
serting after paragraph (11) the following new paragraph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION
457
PLAN.—If a distribution or payment
from an eligible deferred compensation plan described
in section 457(b) is made pursuant to a qualified do-
mestic relations order, rules similar to the rules of
section 402(e)(1)(A) shall apply to such distribution
or payment.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to transfers, distributions, and pay-
ments made after December 31, 2000.
306
Subtitle C—Increasing Portability
for Participants
SEC. 1231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES
OF PLANS.
(a) ROLLOVERS FROM AND TO SECTION 457 PLANS.—
(1) ROLLOVERS FROM SECTION 457 PLANS.—
(A) IN GENERAL.—Section 457(e) (relating
to other definitions and special rules) is amend-
ed by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an el-
igible deferred compensation plan established
and maintained by an employer described in
subsection (e)(1)(A), if—
‘‘(i) any portion of the balance to the
credit of an employee in such plan is paid
to such employee in an eligible rollover dis-
tribution (within the meaning of section
402(c)(4) without regard to subparagraph
(C) thereof),
‘‘(ii) the employee transfers any por-
tion of the property such employee receives
in such distribution to an eligible retire-
ment plan described in section 402(c)(8)(B),
and
307
‘‘(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property distrib-
uted,
then such distribution (to the extent so trans-
ferred) shall not be includible in gross income for
the taxable year in which paid.
‘‘(B) CERTAIN RULES MADE APPLICABLE.—
The rules of paragraphs (2) through (7) (other
than paragraph (4)(C)) and (9) of section 402(c)
and section 402(f) shall apply for purposes of
subparagraph (A).
‘‘(C) REPORTING.—Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified re-
tirement plans (as defined in section 4974(c)).’’.
(B) DEFERRAL LIMIT DETERMINED WITH-
OUT REGARD TO ROLLOVER AMOUNTS.—Section
457(b)(2) (defining eligible deferred compensa-
tion plan) is amended by inserting ‘‘(other than
rollover amounts)’’ after ‘‘taxable year’’.
(C) DIRECT ROLLOVER.—Paragraph (1) of
section 457(d) is amended by striking ‘‘and’’ at
the end of subparagraph (A), by striking the pe-
riod at the end of subparagraph (B) and insert-
308
ing ‘‘, and’’, and by inserting after subpara-
graph (B) the following:
‘‘(C) in the case of a plan maintained by
an employer described in subsection (e)(1)(A),
the plan meets requirements similar to the re-
quirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall
not be includible in gross income for the taxable year
of transfer.’’.
(D) WITHHOLDING.—
(i) Paragraph (12) of section 3401(a)
is amended by adding at the end the fol-
lowing:
‘‘(E) under or to an eligible deferred com-
pensation plan which, at the time of such pay-
ment, is a plan described in section 457(b)
maintained by an employer described in section
457(e)(1)(A); or’’.
(ii) Paragraph (3) of section 3405(c) is
amended to read as follows:
‘‘(3) ELIGIBLE
ROLLOVER
DISTRIBUTION.—For
purposes of this subsection, the term ‘eligible rollover
distribution’ has the meaning given such term by sec-
tion 402(f)(2)(A).’’.
309
(iii) LIABILITY FOR WITHHOLDING.—
Subparagraph (B) of section 3405(d)(2) is
amended by striking ‘‘or’’ at the end of
clause (ii), by striking the period at the end
of clause (iii) and inserting ‘‘, or’’, and by
adding at the end the following:
‘‘(iv) section 457(b).’’.
(2) ROLLOVERS TO SECTION 457 PLANS.—
(A) IN
GENERAL.—Section 402(c)(8)(B)
(defining eligible retirement plan) is amended by
striking ‘‘and’’ at the end of clause (iii), by
striking the period at the end of clause (iv) and
inserting ‘‘, and’’, and by inserting after clause
(iv) the following new clause:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) of an em-
ployer described in section 457(e)(1)(A).’’.
(B) 
SEPARATE
ACCOUNTING.—Section
402(c) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(11) SEPARATE ACCOUNTING.—Unless a plan
described in clause (v) of paragraph (8)(B) agrees to
separately account for amounts rolled into such plan
from eligible retirement plans not described in such
clause, the plan described in such clause may not ac-
310
cept transfers or rollovers from such retirement
plans.’’.
(C) 10 PERCENT
ADDITIONAL
TAX.—Sub-
section (t) of section 72 (relating to 10-percent
additional tax on early distributions from quali-
fied retirement plans) is amended by adding at
the end the following new paragraph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SECTION
457 PLANS.—For purposes of this subsection, a dis-
tribution from an eligible deferred compensation plan
(as defined in section 457(b)) of an employer de-
scribed in section 457(e)(1)(A) shall be treated as a
distribution from a qualified retirement plan de-
scribed in 4974(c)(1) to the extent that such distribu-
tion is attributable to an amount transferred to an el-
igible deferred compensation plan from a qualified re-
tirement plan (as defined in section 4974(c)).’’.
(b) ALLOWANCE OF ROLLOVERS FROM AND TO 403(b)
PLANS.—
(1) ROLLOVERS FROM SECTION 403(b) PLANS.—
Section 
403(b)(8)(A)(ii) 
(relating 
to 
rollover
amounts) is amended by striking ‘‘such distribution’’
and all that follows and inserting ‘‘such distribution
to an eligible retirement plan described in section
402(c)(8)(B), and’’.
311
(2) ROLLOVERS TO SECTION 403(b) PLANS.—Sec-
tion 402(c)(8)(B) (defining eligible retirement plan),
as amended by subsection (a), is amended by striking
‘‘and’’ at the end of clause (iv), by striking the period
at 
the 
end 
of 
clause 
(v) 
and 
inserting
‘‘, and’’, and by inserting after clause (v) the fol-
lowing new clause:
‘‘(vi) an annuity contract described in
section 403(b).’’
(c) EXPANDED EXPLANATION
TO RECIPIENTS
OF
ROLLOVER
DISTRIBUTIONS.—Paragraph (1) of section
402(f) (relating to written explanation to recipients of dis-
tributions eligible for rollover treatment) is amended by
striking ‘‘and’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, and’’, and by adding at the end the following new sub-
paragraph:
‘‘(E) of the provisions under which distribu-
tions from the eligible retirement plan receiving
the distribution may be subject to restrictions
and tax consequences which are different from
those applicable to distributions from the plan
making such distribution.’’.
(d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat-
ing to rollover where spouse receives distribution after death
312
of employee) is amended by striking ‘‘; except that’’ and
all that follows up to the end period.
(e) CONFORMING AMENDMENTS.—
(1) Section 72(o)(4) is amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(2) Section 219(d)(2) is amended by striking ‘‘or
408(d)(3)’’ and inserting ‘‘408(d)(3), or 457(e)(16)’’.
(3) Section 401(a)(31)(B) is amended by strik-
ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),
403(b)(8), and 457(e)(16)’’.
(4) Subparagraph (A) of section 402(f)(2) is
amended by striking ‘‘or paragraph (4) of section
403(a)’’ and inserting ‘‘, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or sub-
paragraph (A) of section 457(e)(16)’’.
(5) Paragraph (1) of section 402(f) is amended
by striking ‘‘from an eligible retirement plan’’.
(6) Subparagraphs (A) and (B) of section
402(f)(1) are amended by striking ‘‘another eligible
retirement plan’’ and inserting ‘‘an eligible retire-
ment plan’’.
(7) Subparagraph (B) of section 403(b)(8) is
amended to read as follows:
313
‘‘(B) CERTAIN RULES MADE APPLICABLE.—
The rules of paragraphs (2) through (7) and (9)
of section 402(c) and section 402(f) shall apply
for purposes of subparagraph (A), except that
section 402(f) shall be applied to the payor in
lieu of the plan administrator.’’.
(8) Section 408(a)(1) is amended by striking ‘‘or
403(b)(8)’’ and inserting ‘‘, 403(b)(8), or 457(e)(16)’’.
(9) Subparagraphs (A) and (B) of section
415(b)(2) are each amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(10) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(11) Section 4973(b)(1)(A) is amended by strik-
ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(f) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of sec-
tion 1122 of the Tax Reform Act of 1986 shall not
314
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of any amendment made by this sec-
tion.
SEC. 1232. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE-
MENT PLANS.
(a) IN
GENERAL.—Subparagraph (A) of section
408(d)(3) (relating to rollover amounts) is amended by add-
ing ‘‘or’’ at the end of clause (i), by striking clauses (ii)
and (iii), and by adding at the end the following:
‘‘(ii) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for the
benefit of such individual not later than the
60th day after the date on which the pay-
ment or distribution is received, except that
the maximum amount which may be paid
into such plan may not exceed the portion
of the amount received which is includible
in gross income (determined without regard
to this paragraph).
315
For purposes of clause (ii), the term ‘eligible re-
tirement plan’ has the meaning given such term
by clauses (iii), (iv), (v), and (vi) of section
402(c)(8)(B).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘section 408(d)(3)(A)(ii)’’.
(2) Clause (i) of section 408(d)(3)(D) is amended
by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i) or
(ii)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
316
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of the amendments made by this sec-
tion.
SEC. 1233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph
(2) of section 402(c) (relating to maximum amount which
may be rolled over) is amended by adding at the end the
following: ‘‘The preceding sentence shall not apply to such
distribution to the extent—
‘‘(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust
which is part of a plan which is a defined con-
tribution plan and which agrees to separately
account for amounts so transferred, including
separately accounting for the portion of such dis-
tribution which is includible in gross income
and the portion of such distribution which is not
so includible, or
317
‘‘(B) such portion is transferred to an eligi-
ble retirement plan described in clause (i) or (ii)
of paragraph (8)(B).’’.
(b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL-
OVER
DISTRIBUTIONS.—Subparagraph (B) of section
401(a)(31) (relating to limitation) is amended by adding
at the end the following: ‘‘The preceding sentence shall not
apply to such distribution if the plan to which such dis-
tribution is transferred—
‘‘(i) agrees to separately account for
amounts so transferred, including sepa-
rately accounting for the portion of such
distribution which is includible in gross in-
come and the portion of such distribution
which is not so includible, or
‘‘(ii) is an eligible retirement plan de-
scribed in clause (i) or (ii) of section
402(c)(8)(B).’’.
(c) RULES FOR APPLYING SECTION 72 TO IRAS.—
Paragraph (3) of section 408(d) (relating to special rules
for applying section 72) is amended by inserting at the end
the following:
‘‘(H) APPLICATION OF SECTION 72.—
‘‘(i) IN GENERAL.—If—
318
‘‘(I) a distribution is made from
an individual retirement plan, and
‘‘(II) a rollover contribution is
made to an eligible retirement plan de-
scribed in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all or
part of such distribution,
then, notwithstanding paragraph (2), the
rules of clause (ii) shall apply for purposes
of applying section 72.
‘‘(ii) APPLICABLE RULES.—In the case
of a distribution described in clause (i)—
‘‘(I) section 72 shall be applied
separately to such distribution,
‘‘(II) notwithstanding the pro
rata allocation of income on, and in-
vestment in the contract, to distribu-
tions under section 72, the portion of
such distribution rolled over to an eli-
gible retirement plan described in
clause (i) shall be treated as from in-
come on the contract (to the extent of
the aggregate income on the contract
from all individual retirement plans of
the distributee), and
319
‘‘(III) appropriate adjustments
shall be made in applying section 72 to
other distributions in such taxable year
and subsequent taxable years.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions made after December 31,
2000.
SEC. 1234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) EXEMPT
TRUSTS.—Paragraph (3) of section
402(c) (relating to transfer must be made within 60 days
of receipt) is amended to read as follows:
‘‘(3) TRANSFER MUST BE MADE WITHIN 60 DAYS
OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
after the 60th day following the day on which the
distributee received the property distributed.
‘‘(B) HARDSHIP
EXCEPTION.—The Sec-
retary may waive the 60-day requirement under
subparagraph (A) where the failure to waive
such requirement would be against equity or
good conscience, including casualty, disaster, or
other events beyond the reasonable control of the
individual subject to such requirement.’’.
320
(b) IRAS.—Paragraph (3) of section 408(d) (relating
to rollover contributions) is amended by adding after sub-
paragraph (H) the following new subparagraph:
‘‘(I) WAIVER
OF
60-DAY
REQUIREMENT.—
The Secretary may waive the 60-day require-
ment under subparagraphs (A) and (D) where
the failure to waive such requirement would be
against equity or good conscience, including cas-
ualty, disaster, or other events beyond the rea-
sonable control of the individual subject to such
requirement.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 1235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
(1) IN
GENERAL.—Paragraph (6) of section
411(d) (relating to accrued benefit not to be decreased
by amendment) is amended by adding at the end the
following:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) A defined contribution plan (in
this subparagraph referred to as the ‘trans-
feree plan’) shall not be treated as failing to
meet the requirements of this subsection
merely because the transferee plan does not
321
provide some or all of the forms of distribu-
tion previously available under another de-
fined contribution plan (in this subpara-
graph referred to as the ‘transferor plan’) to
the extent that—
‘‘(I) the forms of distribution pre-
viously available under the transferor
plan applied to the account of a par-
ticipant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct transfer
rather than pursuant to a distribution
from the transferor plan;
‘‘(II) the terms of both the trans-
feror plan and the transferee plan au-
thorize the transfer described in sub-
clause (I);
‘‘(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan;
‘‘(IV) the election described in
subclause (III) was made after the par-
322
ticipant or beneficiary received a no-
tice describing the consequences of
making the election;
‘‘(V) if the transferor plan pro-
vides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the trans-
fer is made with the consent of the par-
ticipant’s spouse (if any), and such
consent meets requirements similar to
the requirements imposed by section
417(a)(2); and
‘‘(VI) the transferee plan allows
the participant or beneficiary described
in subclause (III) to receive any dis-
tribution to which the participant or
beneficiary is entitled under the trans-
feree plan in the form of a single sum
distribution.
‘‘(ii) Clause (i) shall apply to plan
mergers and other transactions having the
effect of a direct transfer, including consoli-
dations of benefits attributable to different
employers within a multiple employer plan.
323
‘‘(E) ELIMINATION OF FORM OF DISTRIBU-
TION.—Except to the extent provided in regula-
tions, a defined contribution plan shall not be
treated as failing to meet the requirements of this
section merely because of the elimination of a
form of distribution previously available there-
under. This subparagraph shall not apply to the
elimination of a form of distribution with re-
spect to any participant unless—
‘‘(i) a single sum payment is available
to such participant at the same time or
times as the form of distribution being
eliminated; and
‘‘(ii) such single sum payment is based
on the same or greater portion of the par-
ticipant’s account as the form of distribu-
tion being eliminated.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
(b) REGULATIONS.—
(1) IN
GENERAL.—The last sentence of para-
graph (6)(B) of section 411(d) (relating to accrued
benefit not to be decreased by amendment) is amended
to read as follows: ‘‘The Secretary may by regulations
324
provide that this subparagraph shall not apply to
any plan amendment that does not adversely affect
the rights of participants in a material manner.’’.
(2) SECRETARY DIRECTED.—Not later than De-
cember 31, 2001, the Secretary of the Treasury is di-
rected to issue final regulations under section
411(d)(6) of the Internal Revenue Code of 1986. Such
regulations shall apply to plan years beginning after
December 31, 2001, or such earlier date as is specified
by the Secretary of the Treasury.
SEC. 1236. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) SECTION 401(k).—
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is
amended by striking ‘‘separation from service’’
and inserting ‘‘severance from employment’’.
(B) Subparagraph (A) of section 401(k)(10)
(relating to distributions upon termination of
plan or disposition of assets or subsidiary) is
amended to read as follows:
‘‘(A) IN GENERAL.—An event described in
this subparagraph is the termination of the plan
without establishment or maintenance of another
325
defined contribution plan (other than an em-
ployee stock ownership plan as defined in section
4975(e)(7)).’’.
(C) Section 401(k)(10) is amended—
(i) in subparagraph (B)—
(I) by striking ‘‘An event’’ in
clause (i) and inserting ‘‘A termi-
nation’’, and
(II) by striking ‘‘the event’’ in
clause (i) and inserting ‘‘the termi-
nation’’,
(ii) by striking subparagraph (C), and
(iii) by striking ‘‘OR DISPOSITION OF
ASSETS OR SUBSIDIARY’’ in the heading.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of sec-
tion 403(b) is amended by striking ‘‘SEPARATION
FROM
SERVICE’’ and inserting ‘‘SEVERANCE
FROM EMPLOYMENT’’.
(3) 
SECTION
457.—Clause 
(ii) 
of 
section
457(d)(1)(A) is amended by striking ‘‘is separated
326
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 1237. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 is
amended by adding at the end the following new paragraph:
‘‘(13) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A)) under
such plan, or
‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(b) 457 PLANS.—
(1) Subsection (e) of section 457 is amended by
adding after paragraph (17) the following new para-
graph:
327
‘‘(18) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A)) under
such plan, or
‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(2) Section 457(b)(2) is amended by striking
‘‘(other than rollover amounts)’’ and inserting ‘‘(other
than rollover amounts and amounts received in a
transfer referred to in subsection (e)(16))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to trustee-to-trustee transfers after De-
cember 31, 2000.
SEC. 1238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) IN GENERAL.—Section 411(a)(11) (relating to re-
strictions on certain mandatory distributions) is amended
by adding at the end the following:
328
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined without
regard to that portion of such benefit which is
attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this sub-
paragraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),
and 457(e)(16).’’.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS.—
Clause (i) of section 457(e)(9)(A) is amended by striking
‘‘such amount’’ and inserting ‘‘the portion of such amount
which is not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 1239. MINIMUM DISTRIBUTION AND INCLUSION RE-
QUIREMENTS FOR SECTION 457 PLANS.
(a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para-
graph (2) of section 457(d) (relating to distribution require-
ments) is amended to read as follows:
329
‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—
A plan meets the minimum distribution requirements
of this paragraph if such plan meets the requirements
of section 401(a)(9).’’
(b) INCLUSION IN GROSS INCOME.—
(1) YEAR OF INCLUSION.—Subsection (a) of sec-
tion 457 (relating to year of inclusion in gross in-
come) is amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensation
plan, and any income attributable to the amounts so
deferred, shall be includible in gross income only for
the taxable year in which such compensation or other
income—
‘‘(A) is paid to the participant or other ben-
eficiary, in the case of a plan of an eligible em-
ployer described in subsection (e)(1)(A), and
‘‘(B) is paid or otherwise made available to
the participant or other beneficiary, in the case
of a plan of an eligible employer described in
subsection (e)(1)(B).
‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—
To the extent provided in section 72(t)(9), section
330
72(t) shall apply to any amount includible in gross
income under this subsection.’’.
(2) CONFORMING
AMENDMENT.—So much of
paragraph (9) of section 457(e) as precedes subpara-
graph (A) is amended to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REASON
OF CERTAIN ELECTIONS, ETC.—In the case of an eligi-
ble deferred compensation plan of an employer de-
scribed in subsection (e)(1)(B)—’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
Subtitle D—Strengthening Pension
Security and Enforcement
SEC. 1241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) IN GENERAL.—Section 412(c)(7) (relating to full-
funding limitation) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the ap-
plicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
331
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 ....................................................................................
160
2002 ....................................................................................
165
2003 ....................................................................................
170.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 1242. MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED AND APPLIED TO ALL DEFINED
BENEFIT PLANS.
(a) IN
GENERAL.—Subparagraph (D) of section
404(a)(1) (relating to special rule in case of certain plans)
is amended to read as follows:
‘‘(D) SPECIAL RULE IN CASE OF CERTAIN
PLANS.—
‘‘(i) IN GENERAL.—In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deduct-
ible under the limitations of this paragraph
shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retire-
332
ment Income Security Act of 1974 were the
last day of the plan year).
‘‘(ii) PLANS WITH LESS THAN 100 PAR-
TICIPANTS.—For purposes of this subpara-
graph, in the case of a plan which has less
than 100 participants for the plan year,
termination liability shall not include the
liability attributable to benefit increases for
highly compensated employees (as defined
in section 414(q)) resulting from a plan
amendment which is made or becomes effec-
tive, whichever is later, within the last 2
years before the termination date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of de-
termining whether a plan has more than
100 participants, all defined benefit plans
maintained by the same employer (or any
member of such employer’s controlled group
(within 
the 
meaning 
of 
section
412(l)(8)(C))) shall be treated as 1 plan, but
only employees of such member or employer
shall be taken into account.
‘‘(iv) PLANS ESTABLISHED AND MAIN-
TAIN BY PROFESSIONAL SERVICE EMPLOY-
333
ERS.—Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Em-
ployee Retirement Income Security Act of
1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of sec-
tion 4972(c) is amended to read as follows:
‘‘(6) EXCEPTIONS.—In determining the amount
of nondeductible contributions for any taxable year,
there shall not be taken into account so much of the
contributions to 1 or more defined contribution plans
which are not deductible when contributed solely be-
cause of section 404(a)(7) as does not exceed the great-
er of—
‘‘(A) the amount of contributions not in ex-
cess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued (dur-
ing the taxable year for which the contributions
were made) to beneficiaries under the plans, or
‘‘(B) the sum of—
‘‘(i) the amount of contributions de-
scribed in section 401(m)(4)(A), plus
‘‘(ii) the amount of contributions de-
scribed in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits
under section 404(a)(7) shall first be applied to
334
amounts contributed to a defined benefit plan and
then to amounts described in subparagraph (B).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 1243. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350) is
amended by redesignating subsection (c) as subsection (e)
and by inserting after subsection (b) the following:
‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall
prescribe rules similar to the rules in subsection (a) for mul-
tiemployer plans covered by this title that terminate under
section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan ad-
ministrator of a plan described in paragraph (4) may
elect to transfer a missing participant’s benefits to the
corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corporation
information with respect to benefits of a missing par-
ticipant if the plan transfers such benefits—
335
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corporation
or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If bene-
fits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit)
either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described in
this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this sec-
tion do not apply (without regard to this
subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be distrib-
uted upon termination, the plan—
336
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Sub-
sections (a)(1) and (a)(3) shall not apply to a plan
described in paragraph (4).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions made after final regula-
tions implementing subsections (c) and (d) of section 4050
of the Employee Retirement Income Security Act of 1974
(as added by subsection (a)), respectively, are prescribed.
SEC. 1244. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(a) IN GENERAL.—Subsection (c) of section 4972 (re-
lating to nondeductible contributions) is amended by add-
ing at the end the following new paragraph:
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
such year not to take into account any contributions
to a defined benefit plan except to the extent that such
contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without re-
337
gard to subparagraph (A)(i)(I) thereof). For purposes
of this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contrib-
uted to defined contribution plans and then to
amounts described in this paragraph. If an employer
makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer
for such taxable year.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 1245. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY RE-
DUCING FUTURE BENEFIT ACCRUALS.
(a) IN GENERAL.—Chapter 43 of subtitle D (relating
to qualified pension, etc., plans) is amended by adding at
the end the following new section:
‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING
BENEFIT ACCRUALS TO SATISFY NOTICE RE-
QUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a
tax on the failure of any applicable pension plan to meet
the requirements of subsection (e) with respect to any appli-
cable individual.
‘‘(b) AMOUNT OF TAX.—
338
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect to
any applicable individual shall be $100 for each day
in the noncompliance period with respect to such fail-
ure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of
this section, the term ‘noncompliance period’ means,
with respect to any failure, the period beginning on
the date the failure first occurs and ending on the
date the failure is corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) OVERALL LIMITATION FOR UNINTENTIONAL
FAILURES.—In the case of failures that are due to
reasonable cause and not to willful neglect, the tax
imposed by subsection (a) for failures during the tax-
able year of the employer (or, in the case of a multi-
employer plan, the taxable year of the trust forming
part of the plan) shall not exceed $500,000. For pur-
poses of the preceding sentence, all multiemployer
plans of which the same trust forms a part shall be
treated as 1 plan. For purposes of this paragraph, if
not all persons who are treated as a single employer
for purposes of this section have the same taxable
year, the taxable years taken into account shall be de-
339
termined under principles similar to the principles of
section 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent that
the payment of such tax would be excessive relative to
the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multiem-
ployer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS
FOR PLANS SIGNIFI-
CANTLY REDUCING BENEFIT ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended to provide for a significant reduc-
tion in the rate of future benefit accrual, the plan ad-
ministrator shall provide written notice to each ap-
plicable individual (and to each employee organiza-
tion representing applicable individuals).
‘‘(2) NOTICE.—The notice required by paragraph
(1) shall be written in a manner calculated to be un-
derstood by the average plan participant and shall
340
provide sufficient information (as determined in ac-
cordance with regulations prescribed by the Sec-
retary) to allow applicable individuals to understand
the effect of the plan amendment.
‘‘(3) TIMING OF NOTICE.—Except as provided in
regulations, the notice required by paragraph (1)
shall be provided within a reasonable time before the
effective date of the plan amendment.
‘‘(4) DESIGNEES.—Any notice under paragraph
(1) may be provided to a person designated, in writ-
ing, by the person to which it would otherwise be pro-
vided.
‘‘(5) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to meet
the requirements of paragraph (1) merely because no-
tice is provided before the adoption of the plan
amendment if no material modification of the amend-
ment occurs before the amendment is adopted.
‘‘(f) APPLICABLE INDIVIDUAL; APPLICABLE PENSION
PLAN.—For purposes of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘appli-
cable individual’ means, with respect to any plan
amendment—
‘‘(A) any participant in the plan, and
341
‘‘(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic relations
order 
(within 
the 
meaning 
of 
section
414(p)(1)(A)),
who may reasonably be expected to be affected by such
plan amendment.
‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap-
plicable pension plan’ means—
‘‘(A) any defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412,
which had 100 or more participants who had accrued
a benefit, or with respect to whom contributions were
made, under the plan (whether or not vested) as of the
last day of the plan year preceding the plan year in
which the plan amendment becomes effective.’’
(b) CLERICAL AMENDMENT.—The table of sections for
chapter 43 of subtitle D is amended by adding at the end
the following new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals to satisfy notice
requirements.’’
(c) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this Act.
342
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986 (as added by the amendment made by
subsection (a)), a plan shall be treated as meeting the
requirements of such section if it makes a good faith
effort to comply with such requirements.
(3) SPECIAL RULE.—The period for providing
any notice required by the amendments made by this
section shall not end before the date which is 3
months after the date of the enactment of this Act.
Subtitle E—Reducing Regulatory
Burdens
SEC. 1251. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m) is
amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection (k),
including regulations permitting appropriate aggre-
gation of plans and contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
343
SEC. 1252. MODIFICATION OF TIMING OF PLAN VALU-
ATIONS.
(a) IN GENERAL.—Section 412(c)(9) (relating to an-
nual valuation) is amended—
(1) by striking ‘‘For purposes’’ and inserting the
following:
‘‘(A) IN GENERAL.—For purposes’’, and
(2) by adding at the end the following:
‘‘(B) ELECTION TO USE PRIOR YEAR VALU-
ATION.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), if, for any plan year—
‘‘(I) an election is in effect under
this subparagraph with respect to a
plan, and
‘‘(II) the assets of the plan are not
less than 125 percent of the plan’s cur-
rent liability (as defined in paragraph
(7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the
information available as of such valuation
date.
‘‘(ii) EXCEPTIONS.—
‘‘(I) ACTUAL VALUATION EVERY 3
YEARS.—Clause (i) shall not apply for
344
more than 2 consecutive plan years
and valuation shall be under subpara-
graph (A) with respect to any plan
year to which clause (i) does not apply
by reason of this clause.
‘‘(II) 
REGULATIONS.—Subclause
(I) shall not apply to the extent that
more frequent valuations are required
under the regulations under subpara-
graph (A).
‘‘(iii) 
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iv) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 1253. FLEXIBILITY AND NONDISCRIMINATION AND
LINE OF BUSINESS RULES.
The Secretary of the Treasury shall, on or before De-
cember 31, 2000, modify the existing regulations issued
345
under section 401(a)(4) and section 414(r) of the Internal
Revenue Code of 1986 in order to expand (to the extent that
the Secretary determines appropriate) the ability of a pen-
sion plan to demonstrate compliance with the non-
discrimination and line of business requirements based
upon the facts and circumstances surrounding the design
and operation of the plan, even though the plan is unable
to satisfy the mechanical tests currently used to determine
compliance.
SEC. 1254. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1322(b)(5)) is amended to
read as follows:
‘‘(5)(A) For purposes of this paragraph, the term ‘ma-
jority owner’ means an individual who, at any time during
the 60-month period ending on the date the determination
is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest in
such partnership, or
346
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either the
voting stock of that corporation or all the stock of that
corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this section
shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
347
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to sat-
isfy in full the benefits of all individuals who are de-
scribed in that paragraph, the assets shall be allocated
first to benefits described in subparagraph (A) of that
paragraph. Any remaining assets shall then be allo-
cated to benefits described in subparagraph (B) of
that paragraph. If assets allocated to such subpara-
graph (B) are insufficient to satisfy in full the bene-
fits described in that subparagraph, the assets shall be
allocated pro rata among individuals on the basis of
the present value (as of the termination date) of their
respective benefits described in that subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1321) is
amended—
348
(A) in subsection (b)(9), by striking ‘‘as de-
fined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock of
that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’.
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
349
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices of
intent to terminate are provided under section
4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))
after December 31, 2000, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such date.
(2) CONFORMING
AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on the
date of enactment of this Act.
SEC. 1255. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining ap-
plicable dividends) is amended by striking ‘‘or’’ at the end
of clause (ii), by redesignating clause (iii) as clause (iv),
and by inserting after clause (ii) the following new clause:
‘‘(iii) is, at the election of such partici-
pants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
350
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 1256. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) IN GENERAL.—Subparagraph (A) of section
417(a)(6) is amended by striking ‘‘90-day’’ and in-
serting ‘‘180-day’’.
(2) MODIFICATION OF REGULATIONS.—The Sec-
retary of the Treasury shall modify the regulations
under sections 402(f), 411(a)(11), and 417 of the In-
ternal Revenue Code of 1986 to substitute ‘‘180 days’’
for ‘‘90 days’’ each place it appears in Treasury Reg-
ulations sections 1.402(f)–1, 1.411(a)–11(c), and
1.417(e)–1(b).
(3) EFFECTIVE DATE.—The amendments made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 2000.
(b) CONSENT REGULATION INAPPLICABLE TO CERTAIN
DISTRIBUTIONS.—
351
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the regulations under section 411(a)(11)
of the Internal Revenue Code of 1986 to provide that
the description of a participant’s right, if any, to
defer receipt of a distribution shall also describe the
consequences of failing to defer such receipt.
(2) EFFECTIVE
DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 2000.
SEC. 1257. REPEAL OF TRANSITION RULE RELATING TO
CERTAIN HIGHLY COMPENSATED EMPLOY-
EES.
(a) IN GENERAL.—Paragraph (4) of section 1114(c)
of the Tax Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—The repeal made by subsection
(a) shall apply to plan years beginning after December 31,
2000.
SEC. 1258. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury shall
modify Treasury Regulations section 1.410(b)–6(g) to pro-
vide that employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who
are eligible to make contributions under section 403(b) pur-
suant to a salary reduction agreement may be treated as
excludable with respect to a plan under section 401(k), or
352
section 401(m) of such Code that is provided under the same
general arrangement as a plan under such section 401(k),
if—
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to par-
ticipate in such section 401(k) plan or section 401(m)
plan, and
(2) 95 percent of the employees who are not em-
ployees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such section 401(k) plan or section 401(m)
plan.
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth in
section 1426(b) of the Small Business Job Protection Act
of 1996.
SEC. 1259. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (relat-
ing to exclusion from gross income) is amended by striking
‘‘or’’ at the end of paragraph (5), by striking the period
at the end of paragraph (6) and inserting ‘‘, or’’, and by
adding at the end the following new paragraph:
‘‘(7) qualified retirement planning services.’’.
353
(b) QUALIFIED RETIREMENT PLANNING SERVICES DE-
FINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
‘‘(m) QUALIFIED
RETIREMENT
PLANNING
SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this section,
the term ‘qualified retirement planning services’
means any retirement planning service provided to
an employee and his spouse by an employer main-
taining a retirement plan.
‘‘(2) 
NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
employees only if such services are available on sub-
stantially the same terms to each member of the group
of employees normally provided education and infor-
mation regarding the employer’s pension plan.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 1260. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
354
plan during the period described in subsection
(b)(2)(A), and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this title, or pursuant to any regulation issued
under this title, and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2003.
In the case of a government plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986, this
paragraph shall be applied by substituting ‘‘2005’’ for
‘‘2003’’.
(2) CONDITIONS.—This section shall not apply to
any amendment unless—
(A) during the period—
(i) beginning on the date the legislative
or regulatory amendment described in para-
graph (1)(A) takes effect (or in the case of
355
a plan or contract amendment not required
by such legislative or regulatory amend-
ment, the effective date specified by the
plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan
or contract amendment were in effect, and
(B) such plan or contract amendment ap-
plies retroactively for such period.
SEC. 1261. MODEL PLANS FOR SMALL BUSINESSES.
(a) IN GENERAL.—Not later than December 31, 2000,
the Secretary of the Treasury is directed to issue at least
one model defined contribution plan and at least one model
defined benefit plan that fit the needs of small businesses
and that shall be treated as meeting the requirements of
section 401(a) of the Internal Revenue Code of 1986 with
respect to the form of the plan. To the extent that the re-
quirements of section 401(a) of such Code are modified after
the issuance of such plans, the Secretary of the Treasury
shall, in a timely manner, issue model amendments that,
if adopted in a timely manner by an employer that has
a model plan in effect, shall cause such model plan to be
356
treated as meeting the requirements of section 401(a) of
such Code, as modified, with respect to the form of the plan.
(b) PROTOTYPE PLAN ALTERNATIVE.—The Secretary
of the Treasury may satisfy the requirements of subsection
(a) through the enhancement and simplification of the Sec-
retary’s programs for prototype plans in such a manner
as to achieve the purposes of subsection (a).
SEC. 1262. SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.
(a) IN GENERAL.—In the case of a retirement plan
which covers less than 25 employees on the 1st day of the
plan year and meets the requirements described in sub-
section (b), the Secretary of the Treasury shall provide for
the filing of a simplified annual return that is substantially
similar to the annual return required to be filed by a one-
participant retirement plan.
(b) REQUIREMENTS.—A plan meets the requirements
of this subsection if it—
(1) meets the minimum coverage requirements of
section 410(b) of the Internal Revenue Code of 1986
without being combined with any other plan of the
business that covers the employees of the business,
(2) does not cover a business that is a member
of an affiliated service group, a controlled group of
357
corporations, or a group of businesses under common
control, and
(3) does not cover a business that leases employ-
ees.
SEC. 1263. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to update
and improve the Employee Plans Compliance Resolution
System (or any successor program) giving special attention
to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program,
(2) taking into account special concerns and cir-
cumstances that small employers face with respect to
compliance and correction of compliance failures,
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures,
(4) expanding the availability to correct insig-
nificant compliance failures under the Administrative
Policy Regarding Self-Correction during audit, and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
358
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
TITLE XIII—MISCELLANEOUS
PROVISIONS
Subtitle A—Provisions Primarily
Affecting Individuals
SEC. 1301. EXCLUSION FOR FOSTER CARE PAYMENTS TO
APPLY TO PAYMENTS BY QUALIFIED PLACE-
MENT AGENCIES.
(a) IN GENERAL.—The matter preceding subpara-
graph (B) of section 131(b)(1) (defining qualified foster care
payment) is amended to read as follows:
‘‘(1) IN
GENERAL.—The term ‘qualified foster
care payment’ means any payment made pursuant to
a foster care program of a State or political subdivi-
sion thereof—
‘‘(A) which is paid by—
‘‘(i) a State or political subdivision
thereof, or
‘‘(ii) a qualified foster care placement
agency, and’’.
(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE IN-
DIVIDUALS PLACED
BY QUALIFIED PLACEMENT AGEN-
CIES.—Subparagraph (B) of section 131(b)(2) (defining
qualified foster individual) is amended to read as follows:
359
‘‘(B) a qualified foster care placement agen-
cy.’’
(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY
DEFINED.—Subsection (b) of section 131 is amended by re-
designating paragraph (3) as paragraph (4) and by insert-
ing after paragraph (2) the following new paragraph:
‘‘(3) QUALIFIED
FOSTER
CARE
PLACEMENT
AGENCY.—The term ‘qualified foster care placement
agency’ means any placement agency which is li-
censed or certified by—
‘‘(A) a State or political subdivision thereof,
or
‘‘(B) an entity designated by a State or po-
litical subdivision thereof,
for the foster care program of such State or political
subdivision to make foster care payments to providers
of foster care.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
360
SEC. 1302. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS EXCLUDED FROM GROSS IN-
COME.
(A) IN GENERAL.—Part III of subchapter B of chapter
1 is amended by inserting after section 138 the following
new section:
‘‘SEC. 138A. MILEAGE REIMBURSEMENTS TO CHARITABLE
VOLUNTEERS.
‘‘(a) IN GENERAL.—Gross income of an individual
does not include amounts received, from an organization
described in section 170(c), as reimbursement of operating
expenses with respect to use of a passenger automobile for
the benefit of such organization. The preceding sentence
shall apply only to the extent that such reimbursement
would be deductible under section 274(d) (determined by
applying the standard business mileage rate established
pursuant to section 274(d)) if the organization were not so
described and such individual were an employee of such or-
ganization.
‘‘(b) NO DOUBLE BENEFIT.—Subsection (a) shall not
apply with respect to any expenses if the individual claims
a deduction or credit for such expenses under any other pro-
vision of this title.
‘‘(c) 
EXEMPTION
FROM
REPORTING
REQUIRE-
MENTS.—Section 6041 shall not apply with respect to reim-
bursements excluded from income under subsection (a).’’
361
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter B of chapter 1 is amended by insert-
ing after the item relating to section 138 the following new
items:
‘‘Sec. 138A. Reimbursement for use of passenger automobile for
charity.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 1303. W–2 TO INCLUDE EMPLOYER SOCIAL SECURITY
TAXES.
(a) IN GENERAL.—Subsection (a) of section 6051 (re-
lating to receipts for employees) is amended by striking
‘‘and’’ at the end of paragraph (10), by striking the period
at the end of paragraph (11) and inserting a comma, and
by inserting after paragraph (11) the following new para-
graphs:
‘‘(12) the amount of tax imposed by section
3111(a), and
‘‘(13) the amount of tax imposed by section
3111(b).’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply with respect to remuneration paid after
December 31, 1999.
362
SEC. 1304. CONSISTENT TREATMENT OF SURVIVOR BENE-
FITS FOR PUBLIC SAFETY OFFICERS KILLED
IN THE LINE OF DUTY.
Subsection (b) of section 1528 of the Taxpayer Relief
Act of 1997 (Public Law 105–34) is amended by striking
the period and inserting ‘, and to amounts received in tax-
able years beginning after December 31, 1999, with respect
to individuals dying on or before December 31, 1996.’’
Subtitle B—Provisions Primarily
Affecting Businesses
SEC. 1311. DISTRIBUTIONS FROM PUBLICLY TRADED PART-
NERSHIPS TREATED AS QUALIFYING INCOME
OF REGULATED INVESTMENT COMPANIES.
(a) IN GENERAL.—Paragraph (2) of section 851(b)
(defining regulated investment company) is amended by in-
serting ‘‘income derived from an interest in a publicly trad-
ed partnership (as defined in section 7704(b)),’’ after ‘‘divi-
dends, interest,’’.
(b) SOURCE FLOW-THROUGH RULE NOT TO APPLY.—
The last sentence of section 851(b) is amended by inserting
‘‘(other than a publicly traded partnership (as defined in
section 7704(b)))’’ after ‘‘derived from a partnership’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
363
SEC. 1312. SPECIAL PASSIVE ACTIVITY RULE FOR PUBLICLY
TRADED PARTNERSHIPS TO APPLY TO REGU-
LATED INVESTMENT COMPANIES.
(a) IN GENERAL.—Subsection (k) of section 469 (relat-
ing to separate application of section in case of publicly
traded partnerships) is amended by adding at the end the
following new paragraph:
‘‘(4) APPLICATION TO REGULATED INVESTMENT
COMPANIES.—For purposes of this section, a regulated
investment company (as defined in section 851) hold-
ing an interest in a publicly traded partnership shall
be treated as a taxpayer described in subsection (a)(2)
with respect to items attributable to such interest.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 1313. LARGE ELECTRIC TRUCKS, VANS, AND BUSES EL-
IGIBLE FOR DEDUCTION FOR CLEAN-FUEL VE-
HICLES IN LIEU OF CREDIT.
(a) IN GENERAL.—Paragraph (1) of section 30(c) (re-
lating to credit for qualified electric vehicles) is amended
by adding at the end the following new flush sentence:
‘‘Such term shall not include any vehicle described in
subclause (I) or (II) of section 179A(b)(1)(A)(iii).’’
364
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to property placed in service after De-
cember 31, 1999.
SEC. 1314. MODIFICATIONS TO SPECIAL RULES FOR NU-
CLEAR DECOMMISSIONING COSTS.
(a) REPEAL OF LIMITATION ON DEPOSITS INTO FUND
BASED ON COST OF SERVICE.—Subsection (b) of section
468A is amended to read as follows:
‘‘(b) LIMITATION ON AMOUNTS PAID INTO FUND.—The
amount which a taxpayer may pay into the Fund for any
taxable year shall not exceed the ruling amount applicable
to such taxable year.’’
(b) CLARIFICATION OF TREATMENT OF FUND TRANS-
FERS.—Subsection (e) of section 468A is amended by add-
ing at the end the following new paragraph:
‘‘(8) TREATMENT OF FUND TRANSFERS.—If, in
connection with the transfer of the taxpayer’s interest
in a nuclear powerplant, the taxpayer transfers the
Fund with respect to such powerplant to the trans-
feree of such interest and the transferee elects to con-
tinue the application of this section to such Fund—
‘‘(A) the transfer of such Fund shall not
cause such Fund to be disqualified from the ap-
plication of this section, and
365
‘‘(B) no amount shall be treated as distrib-
uted from such Fund, or be includible in gross
income, by reason of such transfer.’’
(c) TRANSFERS
OF
BALANCES
IN
NONQUALIFIED
FUNDS.—Section 468A is amended by redesignating sub-
sections (f) and (g) as subsections (g) and (h), respectively,
and by inserting after subsection (e) the following new sub-
section:
‘‘(f) TRANSFERS
OF BALANCES
IN NONQUALIFIED
FUNDS INTO QUALIFIED FUNDS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b), any taxpayer maintaining a Fund to which this
section applies with respect to a nuclear powerplant
may transfer into such Fund amounts held in any
nonqualified fund of such taxpayer with respect to
such powerplant.
‘‘(2) MAXIMUM
AMOUNT
PERMITTED
TO
BE
TRANSFERRED.—The amount permitted to be trans-
ferred under paragraph (1) shall not exceed the bal-
ance in the nonqualified fund as of December 31,
1998.
‘‘(3) 
DEDUCTION
FOR
AMOUNTS
TRANS-
FERRED.—
‘‘(A) IN GENERAL.—The deduction allowed
by subsection (a) for any transfer permitted by
366
this subsection shall be allowed ratably over the
remaining estimated useful life (within the
meaning of subsection (d)(2)(A)) of the nuclear
powerplant, beginning with the later of the tax-
able year during which the transfer is made or
the taxpayer’s first taxable year beginning after
December 31, 2001.
‘‘(B) DENIAL
OF
DEDUCTION
FOR
PRE-
VIOUSLY
DEDUCTED
AMOUNTS.—No deduction
shall be allowed for any transfer under this sub-
section of an amount for which a deduction was
allowed when such amount was paid into the
nonqualified fund. For purposes of the preceding
sentence, a ratable portion of each transfer shall
be treated as being from previously deducted
amounts to the extent thereof.
‘‘(C) TRANSFERS OF QUALIFIED FUNDS.—
If—
‘‘(i) any transfer permitted by this
subsection is made to any Fund to which
this section applies, and
‘‘(ii) such Fund is transferred there-
after,
any deduction under this subsection for taxable
years ending after the date that such Fund is
367
transferred shall be allowed to the transferee and
not to the transferor. The preceding sentence
shall not apply if the transferor is an organiza-
tion exempt from tax imposed by this chapter.
‘‘(4) NEW RULING AMOUNT REQUIRED.—Para-
graph (1) shall not apply to any transfer unless the
taxpayer requests from the Secretary a new schedule
of ruling amounts in connection with such transfer.
‘‘(5) NONQUALIFIED FUND.—For purposes of this
subsection, the term ‘nonqualified fund’ means, with
respect to any nuclear powerplant, any fund in which
amounts are irrevocably set aside pursuant to the re-
quirements of any State or Federal agency exclusively
for the purpose of funding the decommissioning of
such powerplant.
‘‘(6) NO BASIS IN QUALIFIED FUNDS.—Notwith-
standing any other provision of law, the basis of any
Fund to which this section applies shall not be in-
creased by reason of any transfer permitted by this
subsection.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
368
SEC. 1315. CONSOLIDATION OF LIFE INSURANCE COMPA-
NIES WITH OTHER CORPORATIONS.
(a) IN GENERAL.—Section 1504(b) (defining includ-
ible corporation) is amended by striking paragraph (2).
(b) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 1503 is amended by
striking paragraph (2) (relating to losses of recent
nonlife affiliates).
(2) Section 1504 is amended by striking sub-
section (c) and by redesignating subsections (d), (e),
and (f) as subsections (c), (d), and (e), respectively.
(3) Section 1503(c)(1) (relating to special rule
for application of certain losses against income of in-
surance companies taxed under section 801) is
amended by striking ‘‘an election under section
1504(c)(2) is in effect for the taxable year and’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
(d) NO CARRYBACK BEFORE JANUARY 1, 2005.—To
the extent that a consolidated net operating loss is allowed
or increased by reason of the amendments made by this sec-
tion, such loss may not be carried back to a taxable year
beginning before January 1, 2005.
369
(e) NONTERMINATION OF GROUP.—No affiliated group
shall terminate solely as a result of the amendments made
by this section.
(f) WAIVER OF 5-YEAR WAITING PERIOD.—Under reg-
ulations prescribed by the Secretary of the Treasury or his
delegate, an automatic waiver from the 5-year waiting pe-
riod for reconsolidation provided in section 1504(a)(3) of
such Code shall be granted to any corporation which was
previously an includible corporation but was subsequently
deemed a nonincludible corporation as a result of becoming
a subsidiary of a corporation which was not an includible
corporation solely by operation of section 1504(c)(2) of such
Code (as in effect on the day before the date of enactment
of this Act).
Subtitle C—Provisions Relating to
Excise Taxes
SEC. 1321. CONSOLIDATION OF HAZARDOUS SUBSTANCE
SUPERFUND AND LEAKING UNDERGROUND
STORAGE TANK TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 (relat-
ing to trust fund code) is amended by striking sections 9507
and 9508 and inserting the following new section:
‘‘SEC. 9507. ENVIRONMENTAL REMEDIATION TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is established
in the Treasury of the United States a trust fund to be
370
known as the ‘Environmental Remediation Trust Fund’
consisting of such amounts as may be—
‘‘(1) appropriated to the Environmental Remedi-
ation Trust Fund as provided in this section,
‘‘(2) appropriated to the Environmental Remedi-
ation Trust Fund pursuant to section 517(b) of the
Superfund Revenue Act of 1986, or
‘‘(3) credited to the Environmental Remediation
Trust Fund as provided in section 9602(b).
‘‘(b) TRANSFERS TO ENVIRONMENTAL REMEDIATION
TRUST FUND.—
‘‘(1) IN
GENERAL.—There are hereby appro-
priated to the Environmental Remediation Trust
Fund amounts equivalent to—
‘‘(A) the taxes received in the Treasury
under—
‘‘(i) section 59A, 4611, 4661, or 4671
(relating to environmental taxes),
‘‘(ii) section 4041(d) (relating to addi-
tional taxes on motor fuels),
‘‘(iii) section 4081 (relating to tax on
gasoline, diesel fuel, and kerosene) to the ex-
tent attributable to the Environmental Re-
mediation Trust Fund financing rate under
such section,
371
‘‘(iv) section 4091 (relating to tax on
aviation fuel) to the extent attributable to
the 
Environmental 
Remediation 
Trust
Fund financing rate under such section,
and
‘‘(v) section 4042 (relating to tax on
fuel used in commercial transportation on
inland waterways) to the extent attributable
to the Environmental Remediation Trust
Fund financing rate under such section,
‘‘(B) amounts recovered on behalf of the En-
vironmental Remediation Trust Fund under the
Comprehensive Environmental Response, Com-
pensation, and Liability Act of 1980 (hereinafter
in this section referred to as ‘CERCLA’),
‘‘(C) all moneys recovered or collected under
section 311(b)(6)(B) of the Clean Water Act,
‘‘(D) penalties assessed under title I of
CERCLA,
‘‘(E) 
punitive 
damages 
under 
section
107(c)(3) of CERCLA, and
‘‘(F) amounts received in the Treasury and
collected under section 9003(h)(6) of the Solid
Waste Disposal Act.
‘‘(2) LIMITATION ON TRANSFERS.—
372
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), no amount may be appro-
priated or credited to the Environmental Reme-
diation Trust Fund on and after the date of any
expenditure from any such Trust Fund which is
not permitted by this section. The determination
of whether an expenditure is so permitted shall
be made without regard to—
‘‘(i) any provision of law which is not
contained or referenced in this title or in a
revenue Act, and
‘‘(ii) whether such provision of law is
a subsequently enacted provision or directly
or indirectly seeks to waive the application
of this paragraph.
‘‘(B) 
EXCEPTION
FOR
PRIOR
OBLIGA-
TIONS.—Subparagraph (A) shall not apply to
any expenditure to liquidate any contract en-
tered into (or for any amount otherwise obli-
gated) in accordance with the provisions of this
section.’’
‘‘(c) EXPENDITURES FROM ENVIRONMENTAL REMEDI-
ATION TRUST FUND.—
‘‘(1) IN
GENERAL.—Amounts in the Environ-
mental Remediation Trust Fund shall be available, as
373
provided in appropriation Acts, only for purposes of
making expenditures—
‘‘(A) to carry out the purposes of—
‘‘(i) paragraphs (1), (2), (5), and (6)
of section 111(a) of CERCLA as in effect on
July 12, 1999,
‘‘(ii) section 111(c) of CERCLA (as so
in effect), other than paragraphs (1) and
(2) thereof, and
‘‘(iii) section 111(m) of CERCLA (as
so in effect), or
‘‘(B) to carry out section 9003(h) of the
Solid Waste Disposal Act as in effect on July 12,
1999.
‘‘(2) EXCEPTION FOR CERTAIN TRANSFERS, ETC.,
OF HAZARDOUS SUBSTANCES.—No amount in the En-
vironmental Remediation Trust Fund or derived from
the Environmental Remediation Trust Fund shall be
available or used for the transfer or disposal of haz-
ardous waste carried out pursuant to a cooperative
agreement between the Administrator of the Environ-
mental Protection Agency and a State if the following
conditions apply—
374
‘‘(A) the transfer or disposal, if made on
December 13, 1985, would not comply with a
State or local requirement,
‘‘(B) the transfer is to a facility for which
a final permit under section 3005(a) of the Solid
Waste Disposal Act was issued after January 1,
1983, and before November 1, 1984, and
‘‘(C) the transfer is from a facility identi-
fied as the McColl Site in Fullerton, California.
‘‘(3) TRANSFERS FROM TRUST FUND FOR CER-
TAIN REPAYMENTS AND CREDITS.—
‘‘(A) IN GENERAL.—The Secretary shall pay
from time to time from the Environmental Re-
mediation Trust Fund into the general fund of
the Treasury amounts equivalent to—
‘‘(i) amounts paid under—
‘‘(I) section 6420 (relating to
amounts paid in respect of gasoline
used on farms),
‘‘(II) section 6421 (relating to
amounts paid in respect of gasoline
used for certain nonhighway purposes
or by local transit systems), and
375
‘‘(III) section 6427 (relating to
fuels not used for taxable purposes),
and
‘‘(ii) credits allowed under section 34,
with respect to the taxes imposed by section
4041(d) or by sections 4081 and 4091 (to the ex-
tent attributable to the Leaking Underground
Storage Tank Trust Fund financing rate or the
Environmental Remediation Trust Fund financ-
ing rate under such sections).
‘‘(B) TRANSFERS BASED ON ESTIMATES.—
Transfers under subparagraph (A) shall be made
on the basis of estimates by the Secretary, and
proper adjustments shall be made in amounts
subsequently transferred to the extent prior esti-
mates were in excess of or less than the amounts
required to be transferred.
‘‘(d) LIABILITY
OF UNITED STATES LIMITED
TO
AMOUNT IN TRUST FUND.—
‘‘(1) GENERAL RULE.—Any claim filed against
the Environmental Remediation Trust Fund may be
paid only out of the Environmental Remediation
Trust Fund.
‘‘(2) COORDINATION WITH OTHER PROVISIONS.—
Nothing in CERCLA or the Superfund Amendments
376
and Reauthorization Act of 1986 (or in any amend-
ment made by either of such Acts) shall authorize the
payment by the United States Government of any
amount with respect to any such claim out of any
source other than the Environmental Remediation
Trust Fund.
‘‘(3) ORDER IN WHICH UNPAID CLAIMS ARE TO
BE PAID.—If at any time the Environmental Remedi-
ation Trust Fund has insufficient funds to pay all of
the claims payable out of the Environmental Remedi-
ation Trust Fund at such time, such claims shall, to
the extent permitted under paragraph (1), be paid in
full in the order in which they were finally deter-
mined.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsections (c) and (d) of section 4611 are
each amended by striking ‘‘Hazardous Substance
Superfund’’ each place it appears and inserting ‘‘En-
vironmental Remediation Trust Fund’’.
(2) Subsection (c) of section 4661 is amended by
striking ‘‘Hazardous Substance Superfund’’ and in-
serting ‘‘Environmental Remediation Trust Fund’’.
(3) Sections 4041(d), 4042(b), 4081(a)(2)(B),
4081(d)(3), 4091(b), 4092(b), 6421(f), and 6427(l) are
each amended by striking ‘‘Leaking Underground
377
Storage Tank’’ each place it appears (other than the
headings) and inserting ‘‘Environmental Remedi-
ation’’.
(4) The heading for subsection (d) of section
4041 is amended by striking ‘‘LEAKING UNDER-
GROUND STORAGE TANK’’ and inserting ‘‘ENVIRON-
MENTAL REMEDIATION’’.
(5) The headings for subsections (a)(2)(B) and
(d)(3) of section 4081 and section 4091(b)(2) are each
amended by striking ‘‘LEAKING UNDERGROUND STOR-
AGE TANK’’ and inserting ‘‘ENVIRONMENTAL REMEDI-
ATION’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on October 1, 1999.
(d) ENVIRONMENTAL
REMEDIATION
TRUST
FUND
TREATED AS CONTINUATION OF OLD TRUST FUNDS.—The
Environmental Remediation Trust Fund established by the
amendments made by this section shall be treated for all
purposes of law as a continuation of both the Hazardous
Substance Superfund and the Leaking Underground Stor-
age Tank Trust Fund. Any reference in any law to the Haz-
ardous Substance Superfund or the Leaking Underground
Storage Tank Trust Fund shall be deemed to include (wher-
ever appropriate) a reference to the Environmental Remedi-
ation Trust Fund established by such amendments.
378
SEC. 1322. REPEAL OF CERTAIN MOTOR FUEL EXCISE TAXES
ON FUEL USED BY RAILROADS AND ON IN-
LAND WATERWAY TRANSPORTATION.
(a) REPEAL OF LEAKING UNDERGROUND STORAGE
TANK TRUST FUND TAXES ON FUEL USED IN TRAINS.—
(1) IN
GENERAL.—Paragraph (1) of section
4041(d) is amended by adding at the end the fol-
lowing new sentence: ‘‘The preceding sentence shall
not apply to any sale for use, or use, of fuel in a die-
sel-powered train.’’
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (3) of section 6421(f) is
amended by striking ‘‘with respect to—’’ and all
that follows through ‘‘so much of’’ and inserting
‘‘with respect to so much of’’.
(B) Paragraph (3) of section 6427(l) is
amended by striking ‘‘with respect to—’’ and all
that follows through ‘‘so much of’’ and inserting
‘‘with respect to so much of’’.
(b) REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES
ON RAILROADS AND INLAND WATERWAY TRANSPORTATION
WHICH REMAIN IN GENERAL FUND.—
(1) TAXES ON TRAINS.—
(A) IN
GENERAL.—Subparagraph (A) of
section 4041(a)(1) is amended by striking ‘‘or a
379
diesel-powered train’’ each place it appears and
by striking ‘‘or train’’.
(B) CONFORMING AMENDMENTS.—
(i) 
Subparagraph 
(C) 
of 
section
4041(a)(1) is amended by striking clause
(ii) and by redesignating clause (iii) as
clause (ii).
(ii) Subparagraph (C) of section
4041(b)(1) is amended by striking all that
follows ‘‘section 6421(e)(2)’’ and inserting a
period.
(iii) Paragraph (3) of section 4083(a)
is amended by striking ‘‘or a diesel-powered
train’’.
(iv) Section 6421(f) is amended by
striking paragraph (3).
(v) Section 6427(l) is amended by
striking paragraph (3).
(2) FUEL USED ON INLAND WATERWAYS.—
(A) IN GENERAL.—Paragraph (1) of section
4042(b) is amended by adding ‘‘and’’ at the end
of subparagraph (A), by striking ‘‘, and’’ at the
end of subparagraph (B) and inserting a period,
and by striking subparagraph (C).