by an organization described in paragraph (2)(D)) if
the discharge is on account of services performed for
either such organization.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to discharges of indebtedness after
the date of the enactment of this Act.
SEC. 105. EMPLOYER-PROVIDED EDUCATIONAL ASSIST-
ANCE PROGRAMS.
(a) EXTENSION.—Subsection (d) of section 127 (re-
lating to exclusion for educational assistance programs)
is amended to read as follows:
‘‘(d) TERMINATION.—This section shall not apply to
taxable years beginning after December 31, 2000.’’
(b) REPEAL OF LIMITATION ON GRADUATE EDU-
CATION.—The last sentence of section 127(c)(1) is amend-
ed by striking ‘‘, and such term also does not include any
payment for, or the provision of any benefits with respect
to, any graduate level course of a kind normally taken by
an individual pursuing a program leading to a law, busi-
ness, medical, or other advanced academic or professional
degree’’.
(c) EFFECTIVE DATES.—
(1) EXTENSION.—The amendments made by
subsection (a) shall apply to taxable years beginning
after December 31, 1996.
(2) GRADUATE EDUCATION.—The amendment
made by subsection (b) shall apply with respect to
expenses relating to courses beginning after June
30, 1996.
(3) EXPEDITED PROCEDURES.—The Secretary
of the Treasury shall establish expedited procedures
for the refund of any overpayment of taxes imposed
by the Internal Revenue Code of 1986 which is at-
tributable to amounts excluded from gross income
during 1996 or 1997 under section 127 of such
Code, including procedures waiving the requirement
that an employer obtain an employee’s signature
where the employer demonstrates to the satisfaction
of the Secretary that any refund collected by the em-
ployer on behalf of the employee will be paid to the
employee.
SEC. 106. SMALL BUSINESS EDUCATIONAL ASSISTANCE
CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by adding at the end the following new
section:
‘‘SEC. 45D. SMALL BUSINESS EDUCATIONAL ASSISTANCE
CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the small business educational assistance credit for any
taxable year is an amount equal to 10 percent of the quali-
fied educational assistance expenses of the taxpayer for
the taxable year.
‘‘(b) QUALIFIED EDUCATIONAL ASSISTANCE EX-
PENSES.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified edu-
cational assistance expenses’ means any amount
paid or incurred by an eligible small employer for
educational assistance furnished to an employee of
the employer by a person other than such employer
(or an employee of such employer) under an edu-
cational assistance program described in section
127(b).
‘‘(2) EDUCATIONAL
ASSISTANCE.—The term
‘educational assistance’ has the meaning given such
term by section 127(c)(1) (determined without re-
gard to subparagraph (B) thereof).
‘‘(3) LIMITATIONS.—
‘‘(A) 
DOLLAR
LIMITATION
PER
EM-
PLOYEE.—The aggregate amount which may be
taken into account under paragraph (1) with
respect to any employee for any taxable year
shall not exceed $5,250.
‘‘(B) PAYMENTS TO RELATED PERSONS.—
‘‘(i) IN GENERAL.—No amount shall
be taken into account under paragraph (1)
if such amount is to be paid to a related
person with respect to the employer.
‘‘(ii) RELATED
PERSON.—For pur-
poses of this subparagraph, a person shall
be related to the employer if—
‘‘(I) such person is a 5-percent
owner (within the meaning of section
416(i)(1)(B)(i)) of the employer, or
‘‘(II) such person bears a rela-
tionship to the employer or such a 5-
percent owner which is described in
section 267(b) or 707(b)(1).
‘‘(C) TRADE
OR
BUSINESS.—No amount
shall be taken into account under paragraph (1)
unless it is incurred in the active conduct of a
trade or business by the taxpayer.
‘‘(c) ELIGIBLE SMALL EMPLOYER.—For purposes of
this section—
‘‘(1) IN GENERAL.—A taxpayer shall be treated
as an eligible small employer for any taxable year if
the average annual gross receipts of the taxpayer for
the 3-taxable year period ending with the preceding
taxable year are $10,000,000 or less.
‘‘(2) SPECIAL RULES.—Section 448(c)(3) shall
apply for purposes of this subsection.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) DEFINITIONS.—The terms ‘employee’ and
‘employer’ have the meanings given such terms by
paragraphs (2) and (3) of section 127(c), respec-
tively.
‘‘(2) AGGREGATION.—
‘‘(A) IN GENERAL.—All persons treated as
a single employer under subsection (a) or (b) of
section 52 or subsection (m) or (o) of section
414 shall be treated as a single employer.
‘‘(B) ALLOCATION OF CREDIT.—The credit
(if any) determined under this section with re-
spect to each person described in subparagraph
(A) shall be its proportionate share of the quali-
fied educational assistance expenses giving rise
to such credit.
‘‘(3) SHORT TAXABLE YEARS.—For any taxable
year having less than 12 months, the credit deter-
mined under this section shall be multiplied by a
fraction, the numerator of which is the number of
days in the taxable year and the denominator of
which is 365.
‘‘(4) DISALLOWANCE OF DEDUCTION.—
‘‘For disallowance of deduction for expenses for
which credit allowable, see section 280C(d).
‘‘(e) TERMINATION.—This section shall not apply to
qualified educational assistance expenses incurred in tax-
able years beginning after December 31, 2000.’’
(b) DISALLOWANCE OF DEDUCTIONS.—Section 280C
(relating to certain expenses for which credits are allow-
able) is amended by adding at the end the following new
subsection:
‘‘(d) CREDIT FOR SMALL BUSINESS EDUCATIONAL
ASSISTANCE EXPENSES.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the qualified educational
assistance expenses (as defined in section 45D(b))
otherwise allowable as a deduction for the taxable
year which is equal to the amount of the credit de-
termined for such taxable year under section 45D.
‘‘(2) ELECTION OF REDUCED CREDIT.—
‘‘(A) IN
GENERAL.—In the case of any
taxable year for which an election is made
under this paragraph—