I
105TH CONGRESS
2D SESSION
H. R. 3178
To amend the Internal Revenue Code of 1986 to encourage the use of
public transportation systems by allowing individuals a credit against
income tax for expenses paid to commute to and from work or school
using public transportation, and to reduce corporate welfare.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 11, 1998
Mr. GUTIERREZ introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Na-
tional Security, for a period to be subsequently determined by the Speak-
er, in each case for consideration of such provisions as fall within the ju-
risdiction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to encourage
the use of public transportation systems by allowing indi-
viduals a credit against income tax for expenses paid
to commute to and from work or school using public
transportation, and to reduce corporate welfare.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Transit Commuter
Credit Act of 1998’’.
tation system (including by bus, train, or boat) available
for use by the general public as passengers.
‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction
shall be allowed under any provision of this chapter for
any payment for which a credit is allowed under this sec-
tion.
‘‘(e) VERIFICATION OF EXPENSES.—Credit shall be
allowed under this section for any expense only if—
‘‘(1) such expense is for a monthly or annual
public transit pass, and
‘‘(2) the receipt for such expense is included
with the return of tax imposed by this chapter for
the taxable year during which such expense is paid.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 25A the following new item:
‘‘Sec. 25B. Commuting expenses on public transportation.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid after the date of
the enactment of this Act in taxable years ending after
such date.
TITLE 
II—MODIFICATIONS 
TO
TREATMENT OF FOREIGN OIL
AND GAS INCOME
SEC. 201. MODIFICATIONS TO TREATMENT OF FOREIGN OIL
AND GAS INCOME.
(a) SPECIAL RULES
FOR FOREIGN TAX CREDIT
WITH RESPECT TO FOREIGN OIL AND GAS INCOME.—
(1) CERTAIN TAXES NOT CREDITABLE.—
(A) IN GENERAL.—Subsection (a) of sec-
tion 907 of the Internal Revenue Code of 1986
(relating to reduction in amount allowed as for-
eign tax under section 901) is amended to read
as follows:
‘‘(a) CERTAIN TAXES NOT CREDITABLE.—
‘‘(1) IN GENERAL.—For purposes of this sub-
title, the term ‘income, war profits, and excess prof-
its taxes’ shall not include—
‘‘(A) any taxes which are paid or accrued
to any foreign country with respect to foreign
oil and gas income and which are not imposed
under a generally applicable income tax law of
such country, and
‘‘(B) any taxes (not described in subpara-
graph (A)) which are paid or accrued to any
foreign country with respect to foreign oil and
gas income to the extent that the foreign law
imposing such amount of tax is structured, or
in fact operates, so that the amount of tax im-
posed with respect to foreign oil and gas income
will generally be materially greater, over a rea-
sonable period of time, than the amount gen-
erally imposed on income that is not foreign oil
and gas income.
In computing the amount not treated as tax under
subparagraph (B), such amount shall be treated as
a deduction under the foreign law.
‘‘(2) FOREIGN OIL AND GAS INCOME.—For pur-
poses of this subsection, the term ‘foreign oil and
gas income’ means the amount of foreign oil and gas
extraction income and foreign oil related income.
‘‘(3) GENERALLY
APPLICABLE
INCOME
TAX
LAW.—For purposes of this subsection, the term
‘generally applicable income tax law’ means any law
of a foreign country imposing an income tax if such
tax generally applies to all income from sources
within such foreign country—
‘‘(A) without regard to the residence or na-
tionality of the person earning such income,
and
‘‘(B) in the case of any income earned by
a corporation, partnership, or other entity,
without regard to—
‘‘(i) where such corporation, partner-
ship, or other entity is organized, and
‘‘(ii) the residence or nationality of
the persons owning interests in such cor-
poration, partnership, or entity.’’
(B) CONFORMING
AMENDMENT.—Section
907 of such Code is amended by striking sub-
sections (b), (c)(3), (c)(4), (c)(5), and (f).
(2) SEPARATE BASKETS FOR FOREIGN OIL AND
GAS EXTRACTION INCOME AND FOREIGN OIL RELAT-
ED INCOME.—
(A) IN GENERAL.—Paragraph (1) of sec-
tion 904(d) of such Code (relating to separate
application of section with respect to certain
categories of income) is amended by striking
‘‘and’’ at the end of subparagraph (H), by re-
designating subparagraph (I) as subparagraph
(K) and by inserting after subparagraph (H)
the following new subparagraphs:
‘‘(I) foreign oil and gas extraction income,
‘‘(J) foreign oil related income, and’’.
(B) DEFINITIONS.—Paragraph (2) of sec-
tion 904(d) of such Code is amended by redes-
ignating subparagraphs (H) and (I) as subpara-
graphs (J) and (K), respectively, and by insert-
ing after subparagraph (G) the following new
subparagraphs:
‘‘(H) FOREIGN OIL AND GAS EXTRACTION
INCOME.—The term ‘foreign oil and gas extrac-
tion income’ has the meaning given such term
by section 907(c)(1). Such term shall not in-
clude any dividend from a noncontrolled section
902 corporation.
‘‘(I) FOREIGN
OIL
RELATED
INCOME.—
The term ‘foreign oil related income’ has the
meaning given such term by section 907(c)(2).
Such term shall not include any dividend from
a noncontrolled section 902 corporation and any
shipping income.’’
(C) CONFORMING
AMENDMENT.—Clause
(i) of section 904(d)(3)(F) of such Code is
amended by striking ‘‘or (E)’’ and inserting
‘‘(E), (I), or (J)’’.
(3) EFFECTIVE DATE.—
(A) IN
GENERAL.—Except as otherwise
provided in this paragraph, the amendments
made by this subsection shall apply to taxable
years beginning after December 31, 1997.
(B) DISALLOWANCE RULE.—
(i) Section 907(a) of such Code (as
amended by paragraph (1)) shall apply to
taxes paid or accrued after December 31,
1997, in taxable years ending after such
date.
(ii) In determining the amount of
taxes deemed to be paid in a taxable year
beginning after December 31, 1997, under
section 902 or 960 of such Code, section
907(a) of such Code (as amended by para-
graph (1)) shall apply to all taxes whether
paid or accrued before, on, or after Decem-
ber 31, 1997.
(C) LOSS
RULE.—Notwithstanding the
amendments made by paragraph (1)(B), section
907(c)(4) of such Code shall continue to apply
with respect to foreign oil and gas extraction
losses for taxable years beginning before Janu-
ary 1, 1998.
(D) TRANSITIONAL RULES.—
(i) Any taxes paid or accrued in a tax-
able year beginning before January 1,
1998, with respect to income which was
described in subparagraph (I) of section
904(d)(1) of such Code (as in effect on the
day before the date of the enactment of
this Act) shall be treated as taxes paid or
accrued with respect to foreign oil and gas
extraction income or foreign oil related in-
come (as the case may be) to the extent
such taxes were paid or accrued with re-
spect to such type of income.
(ii) Any unused oil and gas extraction
taxes which under section 907(f) of such
Code (as so in effect) would have been al-
lowed as a carryover to the taxpayer’s first
taxable year beginning after December 31,
1997 (determined without regard to the
limitation of paragraph (2) of such section
907(f) for such first taxable year), shall be
allowed as carryovers under section 904(c)
of such Code in the same manner as if
they were unused taxes under section
904(c) with respect to foreign oil and gas
extraction income.
(b) ELIMINATION OF DEFERRAL FOR FOREIGN OIL
AND GAS EXTRACTION INCOME.—
(1) GENERAL RULE.—Paragraph (1) of section
954(g) of the Internal Revenue Code of 1986 (defin-
ing foreign base company oil related income) is
amended to read as follows:
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘foreign oil and
gas income’ means any income of a kind which
would be taken into account in determining the
amount of—
‘‘(A) foreign oil and gas extraction income
(as defined in section 907(c)(1)), or
‘‘(B) foreign oil related income (as defined
in section 907(c)(2)).’’
(2) CONFORMING AMENDMENTS.—
(A)(i) Subsections (a)(5), (b)(5), and
(b)(8) of section 954 of such Code are each
amended by striking ‘‘base company oil related
income’’ each place it appears (including in the
heading of subsection (b)(8)) and inserting ‘‘oil
and gas income’’.
(ii) Subsection (b)(4) of section 954 of
such Code is amended by striking ‘‘base com-
pany oil-related income’’ and inserting ‘‘oil and
gas income’’.
(B) The subsection heading for subsection
(g) of section 954 of such Code is amended by
striking ‘‘FOREIGN BASE COMPANY OIL RE-
LATED INCOME’’ and inserting ‘‘FOREIGN OIL
AND GAS INCOME’’.
(C) Subparagraph (A) of section 954(g)(2)
of such Code is amended by striking ‘‘foreign
base company oil related income’’ and inserting
‘‘foreign oil and gas income’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years of for-
eign corporations beginning after December 31,
1997, and to taxable years of United States share-
holders in which or with which such taxable years of
foreign corporations end.
TITLE III—LIMITATIONS ON PAY-
MENTS 
UNDER 
DEFENSE
CONTRACTS
SEC. 301. PROHIBITION ON PAYMENTS UNDER DEFENSE
CONTRACTS FOR RESTRUCTURING COSTS OF
A DEFENSE CONTRACTOR MERGER OR AC-
QUISITION.
(a) PROHIBITION.—No funds appropriated or other-
wise made available to the Department of Defense may
be obligated or expended under section 2324 of title 10,
(1) in the matter preceding paragraph (1), by
striking out ‘‘and 1997’’ and inserting in lieu there-
of ‘‘1997, 1998, 1999, and 2000’’; and
(2) by adding at the end of paragraph (3) the
following:
‘‘(F) An analysis of the dollar amount of
any windfalls achieved by the combining defense
contractors which results from the reduction of
overhead on fixed-price type contracts from the
Department of Defense that existed before the
business combination.
‘‘(G) A list of each major weapons system
purchased by the Department of Defense since
July 21, 1993, for which actual prices have ac-
tually been reduced that are attributable to the
contractors’ restructuring efforts.
‘‘(H) The total number of pending restruc-
turing proposals submitted to the Department
of Defense as of the date of the report and the
total dollar amount of the requests for restruc-
turing costs contained in those proposals.’’.
(e) COMPTROLLER GENERAL REPORT.—Subsection
(g)(3) of such section is amended by adding at the end
the following: ‘‘The report shall include an estimate and
detailed description of the net effect on the Federal budget
of reimbursing defense contractors for their merger-relat-
ed restructuring costs, including the following:
‘‘(A) The payment by the Department of De-
fense of restructuring costs resulting from business
combinations of defense contractors.
‘‘(B) The reduction of Federal tax revenues
from unemployment resulting from business com-
binations of defense contractors who have been reim-
bursed for their merger-related restructuring costs.
‘‘(C) The increase in Federal expenditures in
other Federal adjustment programs from unemploy-
ment resulting from business combinations of de-
fense contractors who have been reimbursed for
their merger-related restructuring costs, including
food stamps, housing and energy assistance, and any
other programs the Comptroller General determines
that unemployed persons are likely to use at a rate
higher than employed persons.
‘‘(D) The increase in Federal grants of cash
and in-kind assistance to States and local commu-
nities that have experienced significant layoffs or fa-
cility relocation (or both) resulting from the business
combination, that are attributable to losses in the
State and local tax base and increased the use of
State and local government services similar to those
described in subparagraph (C).
‘‘(E) The effect of reduced competition result-
ing from business combinations on the prices the
Department of Defense pays for military equipment
and services.’’.
(f) DEFINITIONS.—Such section is further amended
by adding at the end the following new subsection:
‘‘(h) DEFINITIONS.—For purposes of this section:
‘‘(1) The term ‘windfall’ means the savings, ei-
ther actually realized or anticipated, by the combin-
ing defense contractors as a result of reducing over-
head through merger-related restructuring which are
foregone by the Government because certain defense
contracts are fixed-price type contracts that existed
before the business combination and cannot be ad-
justed to reflect the contractor’s reduced overhead.
‘‘(2) The term ‘significant layoffs’ means a situ-
ation in which the number of layoffs exceed 500 full-
time equivalent employees or in which one of the
combining defense contractors previously represented
the fifth largest employer or greater in the relevant
State or local community.’’.
SEC. 302. LIMITATION ON COMPENSATION PAID UNDER DE-
FENSE CONTRACTS.
(a) LIMITATION.—Section 2324 of title 10, United
States Code, is amended—
(1) by redesignating subsection (l) as subsection
(m); and
(2) by inserting after subsection (k) the follow-
ing new subsection (l):
‘‘(l) LIMITATION ON COMPENSATION.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
the head of an agency may not obligate funds to pay
a contractor under a contract with the agency for
the costs of compensation with respect to the serv-
ices of any one individual to the extent that the total
amount of the compensation paid in a fiscal year to
that individual exceeds $250,000.
‘‘(2) AGGREGATION RULE.—For purposes of de-
termining the limitation on payment to a contractor
under paragraph (1), all contracts entered into by
the contractor with the agencies covered by this
chapter and with all executive agencies (if any) shall
be treated as one contract, and the $250,000 limita-
tion with respect to the services of an individual in
a fiscal year shall be allocated among the contracts
in the manner prescribed in regulation by the Ad-
ministrator for Federal Procurement Policy.
‘‘(3) DEFINITIONS.—In this subsection:
‘‘(A) The term ‘compensation’ includes sal-
aries, bonuses, deferred compensation, stock op-
tions and payouts, certified indirect costs, re-
structuring costs, and performance-based pay-
ments.
‘‘(B) The term ‘executive agency’ has the
meaning provided by section 3 of the Federal
Property and Administrative Services Act of
1949 (41 U.S.C. 472).’’.
(b) APPLICABILITY.—Subsection (l) of section 2324
of title 10, United States Code, as added by subsection
(a), applies to contracts entered into after the date of the
enactment of this Act.
TITLE IV—REPEAL OF CERTAIN
INCENTIVES 
FOR 
OIL 
AND
GAS EXPLORATION AND DE-
VELOPMENT AND FOR MIN-
ING
SEC. 401. REPEAL OF EXPENSING OF INTANGIBLE DRILL-
ING AND DEVELOPMENT COSTS AND OF MIN-
ING 
EXPLORATION 
AND 
DEVELOPMENT
COSTS.
(a) INTANGIBLE
DRILLING
AND
DEVELOPMENT
COSTS.—Section 263(c) of the Internal Revenue Code of
1986 is hereby repealed.
(b) DEVELOPMENT EXPENDITURES.—Section 616 of
such Code (relating to development expenditures) is here-
by repealed.
(c) EXPLORATION EXPENDITURES.—Subsection (i)
of section 617 of such Code is amended to read as follows:
‘‘(i) TERMINATION.—No deduction shall be allowed
under this section for any expenditure paid or incurred
in a taxable year beginning after the date of the enactment
of this subsection.’’
(d) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 56(a) of such Code
is hereby repealed.
(2) Subsection (a) of section 57 of such Code
is amended by striking paragraph (2).
(3) Paragraph (2) of section 59(e) of such Code
is amended by adding ‘‘and’’ at the end of subpara-
graph (A), by striking the comma at the end of sub-
paragraph (B) and inserting a period, and by strik-
ing subparagraphs (C), (D), and (E).
(4) Subparagraph (A) of section 59(e)(5) of
such Code is amended by inserting before the period
‘‘, as in effect before the Transit Commuter Credit
Act of 1998’’.
(5) Subsection (c) of section 193 of such Code
is amended to read as follows:
‘‘(c) APPLICATION WITH OTHER DEDUCTIONS.—No
deduction shall be allowed under subsection (a) with re-
spect to any expenditure with respect to which a deduction
is allowed or allowable to the taxpayer under any other
provision of this chapter.’’
(6) Paragraph (1) of section 263(a) of such
Code is amended by striking subparagraph (A) and
by redesignating the succeeding subparagraphs ac-
cordingly.
(7) Section 263 of such Code is amended by
striking subsection (i).
(8) Subsection (c) of section 263A of such Code
is amended by striking paragraph (3) and by redes-
ignating the succeeding paragraphs accordingly.
(9) Paragraph (5) of section 263A(c) of such
Code, as redesignated by paragraph (8), is amended
by striking ‘‘subparagraphs (B), (C), (D), and (E)’’
and inserting ‘‘subparagraph (B)’’.
(10) Section 291 of such Code is amended by
striking subsection (b).
(11) Subsection (n) of section 312 of such Code
is amended by striking paragraph (2).
(12) Paragraph (1) of section 1254(a) of such
Code is amended—
(A) by inserting ‘‘(as in effect before the
Transit Commuter Credit Act of 1998)’’ after
‘‘617’’ in subparagraph (A)(i), and
(B) by adding at the end the following:
‘‘For purposes of clause (i), any deduction
under section 291(b)(2) (as in effect before the
Transit Commuter Credit Act of 1998) shall be
treated as a deduction allowable under section
263, 616, or 617 (whichever is appropriate).’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred in tax-
able years beginning after the date of the enactment of
this Act.
SEC. 402. REPEAL OF PERCENTAGE DEPLETION.
(a) IN GENERAL.—Section 613 of the Internal Reve-
nue Code of 1986 (relating to limitations on percentage
depletion in case of oil and gas wells) is amended by add-
ing at the end the following new subsection:
‘‘(f) TERMINATION.—The allowance under section
611 shall be determined without regard to this section for
taxable years beginning after the date of the enactment
of this subsection.’’
(b) TERMINATION OF SECTION 613A.—Section 613A
of such Code is amended by adding at the end the follow-
ing new subsection:
‘‘(f) TERMINATION.—The allowance under section
611 shall be determined without regard to this section for
taxable years beginning after the date of the enactment
of this subsection.’’
SEC. 403. REPEAL OF ENHANCED OIL RECOVERY CREDIT.
(a) IN GENERAL.—Section 43 of the Internal Reve-
nue Code of 1986 is hereby repealed.
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of chapter
1 is amended by striking the item relating to section 43.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
TITLE 
V—REPEAL 
OF 
EXCLU-
SION FOR CITIZENS OR RESI-
DENTS OF UNITED STATES
LIVING ABROAD
SEC. 501. REPEAL OF EXCLUSION FOR CITIZENS OR RESI-
DENTS OF UNITED STATES LIVING ABROAD.
Section 911 of the Internal Revenue Code of 1986
(relating to citizens or residents of the United States living
abroad) is amended by redesignating subsection (f) as sub-
section (g) and by inserting after subsection (e) the follow-
ing new subsection:
‘‘(f) TERMINATION.—This section shall not apply to
any taxable year beginning after the date of the enactment
of this Act.’’
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