494
‘‘(5) 
ANNUALIZATION.—Payments 
shall 
be
placed on an annualized basis under regulations pre-
scribed by the Secretary.
‘‘(6) 
ALTERNATE
WITHHOLDING
PROCE-
DURES.—At the election of an Indian tribe, the tax
imposed by this subsection on any payment made by
such tribe shall be determined in accordance with
such tables or computational procedures as may be
specified in regulations prescribed by the Secretary
(in lieu of in accordance with paragraphs (2) and
(3)).
‘‘(7) COORDINATION WITH OTHER SECTIONS.—
For purposes of this chapter and so much of subtitle
F as relates to this chapter, payments to any person
which are subject to withholding under this sub-
section shall be treated as if they were wages paid
by an employer to an employee.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to payments made after December
31, 1994.
495
SEC. 702. VOLUNTARY WITHHOLDING ON CERTAIN FED-
ERAL PAYMENTS AND ON UNEMPLOYMENT
COMPENSATION.
(a) IN GENERAL.—Subsection (p) of section 3402
(relating to voluntary withholding agreements) is amended
to read as follows:
‘‘(p) VOLUNTARY WITHHOLDING AGREEMENTS.—
‘‘(1) CERTAIN FEDERAL PAYMENTS.—
‘‘(A) IN GENERAL.—If, at the time a speci-
fied Federal payment is made to any person, a
request by such person is in effect that such
payment be subject to withholding under this
chapter, then for purposes of this chapter and
so much of subtitle F as relates to this chapter,
such payment shall be treated as if it were a
payment of wages by an employer to an em-
ployee.
‘‘(B) AMOUNT
WITHHELD.—The amount
to be deducted and withheld under this chapter
from any payment to which any request under
subparagraph (A) applies shall be an amount
equal to the percentage of such payment speci-
fied in such request. Such a request shall apply
to any payment only if the percentage specified
is 7, 15, 28, or 31 percent or such other per-
496
centage as is permitted under regulations pre-
scribed by the Secretary.
‘‘(C) SPECIFIED
FEDERAL
PAYMENTS.—
For purposes of this paragraph, the term ‘spec-
ified Federal payment’ means—
‘‘(i) any payment of a social security
benefit (as defined in section 86(d)),
‘‘(ii) any payment referred to in the
second sentence of section 451(d) which is
treated as insurance proceeds,
‘‘(iii) any amount which is includible
in gross income under section 77(a), and
‘‘(iv) any other payment made pursu-
ant to Federal law which is specified by
the Secretary for purposes of this para-
graph.
‘‘(D) REQUESTS
FOR
WITHHOLDING.—
Rules similar to the rules that apply to annu-
ities under subsection (o)(4) shall apply to re-
quests under this paragraph and paragraph (2).
‘‘(2) VOLUNTARY
WITHHOLDING
ON
UNEM-
PLOYMENT BENEFITS.—If, at the time a payment of
unemployment compensation (as defined in section
85(b)) is made to any person, a request by such per-
son is in effect that such payment be subject to
497
withholding under this chapter, then for purposes of
this chapter and so much of subtitle F as relates to
this chapter, such payment shall be treated as if it
were a payment of wages by an employer to an em-
ployee. The amount to be deducted and withheld
under this chapter from any payment to which any
request under this paragraph applies shall be an
amount equal to 15 percent of such payment.
‘‘(3) AUTHORITY
FOR
OTHER
VOLUNTARY
WITHHOLDING.—The Secretary is authorized by reg-
ulations to provide for withholding—
‘‘(A) from remuneration for services per-
formed by an employee for the employee’s em-
ployer which (without regard to this paragraph)
does not constitute wages, and
‘‘(B) from any other type of payment with
respect to which the Secretary finds that with-
holding would be appropriate under the provi-
sions of this chapter,
if the employer and employee, or the person making
and the person receiving such other type of payment,
agree to such withholding. Such agreement shall be
in such form and manner as the Secretary may by
regulations prescribe. For purposes of this chapter
(and so much of subtitle F as relates to this chap-
498
ter), remuneration or other payments with respect to
which such agreement is made shall be treated as if
they were wages paid by an employer to an employee
to the extent that such remuneration is paid or other
payments are made during the period for which the
agreement is in effect.’’
(b) STATE LAW MUST PERMIT VOLUNTARY WITH-
HOLDING OF FEDERAL INCOME TAX FROM UNEMPLOY-
MENT COMPENSATION.—Section 3304(a) is amended by
striking ‘‘and’’ at the end of paragraph (17), by redesig-
nating paragraph (18) as paragraph (19), and by insert-
ing after paragraph (17) the following new paragraph:
‘‘(18) Federal individual income tax from un-
employment compensation is to be deducted and
withheld if an individual receiving such compensa-
tion voluntarily requests such deduction and with-
holding; and’’.
(c) WITHHOLDING FROM UNEMPLOYMENT COM-
PENSATION OF FEDERAL, STATE, AND LOCAL INCOME
TAXES PERMITTED.—
(1) Subparagraph (C) of section 3304(a)(4) is
amended by inserting after ‘‘health insurance’’ the
following: ‘‘, or the withholding of Federal, State, or
local individual income tax,’’.
499
(2) Subsection (f) of section 3306 is amended
by redesignating paragraphs (3) and (4) as para-
graphs (4) and (5), respectively, and by inserting
after paragraph (2) the following new paragraph:
‘‘(3) nothing in this subsection shall be con-
strued to prohibit deducting any amount from unem-
ployment compensation otherwise payable to an indi-
vidual and using the amount so deducted to pay for
health insurance, or the withholding of Federal,
State, or local individual income tax, if the individ-
ual elected to have such deduction made and such
deduction was made under a program approved by
the Secretary of Labor;’’.
(3) Paragraph (5) of section 303(a) of the So-
cial Security Act is amended by inserting after
‘‘health insurance’’ the following: ‘‘, or the withhold-
ing of Federal, State, or local individual income
tax,’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments made after December
31, 1996.
500
Subtitle B—Provisions Relating to
Estimated Taxes and Payments
and Deposits of Taxes
SEC. 711. TREATMENT OF SUBPART F AND SECTION 936 IN-
COME OF TAXPAYERS USING ANNUALIZED
METHOD FOR ESTIMATED TAX.
(a) CORPORATIONS.—Section 6655(e) (relating to
lower required installment where annualized income in-
stallment is less) is amended by adding at the end the
following new paragraph:
‘‘(4) TREATMENT OF SUBPART F AND SECTION
936 INCOME.—
‘‘(A) IN GENERAL.—Any amounts required
to be included in gross income under section
936(h) or 951(a) (and credits properly allocable
thereto) shall be taken into account in comput-
ing any annualized income installment under
paragraph (2) in a manner similar to the man-
ner under which partnership income inclusions
(and credits properly allocable thereto) are
taken into account.
‘‘(B) PRIOR YEAR SAFE HARBOR.—
‘‘(i) IN
GENERAL.—If a taxpayer
elects to have this subparagraph apply for
any taxable year—
501
‘‘(I) subparagraph (A) shall not
apply, and
‘‘(II) for purposes of computing
any annualized income installment for
such taxable year, the taxpayer shall
be treated as having received ratably
during such taxable year items of in-
come and credit described in subpara-
graph (A) in an amount equal to 115
percent of the amount of such items
shown on the return of the taxpayer
for the preceding taxable year (the
second preceding taxable year in the
case of the first and second required
installments for such taxable year).
‘‘(ii) 
SPECIAL
RULE
FOR
NONCONTROLLING SHAREHOLDER.—
‘‘(I) IN GENERAL.—If a taxpayer
making the election under clause (i) is
a noncontrolling shareholder of a cor-
poration, clause (i)(II) shall be ap-
plied with respect to items of such
corporation by substituting ‘100 per-
cent’ for ‘115 percent’.
502
‘‘(II) NONCONTROLLING SHARE-
HOLDER.—For purposes of subclause
(I), the term ‘noncontrolling share-
holder’ means, with respect to any
corporation, a shareholder which (as
of the beginning of the taxable year
for which the installment is being
made) does not own (within the mean-
ing of section 958(a)), and is not
treated as owning (within the meaning
of section 958(b)), more than 50 per-
cent (by vote or value) of the stock in
the corporation.’’
(b) INDIVIDUALS.—Section 6654(d)(2) (relating to
lower required installment where annualized income in-
stallment is less) is amended by adding at the end the
following new subparagraph:
‘‘(D) TREATMENT
OF
SUBPART
F
AND
SECTION 936 INCOME.—
‘‘(i) IN GENERAL.—Any amounts re-
quired to be included in gross income
under section 936(h) or 951(a) (and cred-
its properly allocable thereto) shall be
taken into account in computing any
annualized income installment under sub-
503
paragraph (B) in a manner similar to the
manner under which partnership income
inclusions (and credits properly allocable
thereto) are taken into account.
‘‘(ii) PRIOR YEAR SAFE HARBOR.—If
a taxpayer elects to have this clause apply
to any taxable year—
‘‘(I) clause (i) shall not apply,
and
‘‘(II) for purposes of computing
any annualized income installment for
such taxable year, the taxpayer shall
be treated as having received ratably
during such taxable year items of in-
come and credit described in clause (i)
in an amount equal to the amount of
such items shown on the return of the
taxpayer for the preceding taxable
year (the second preceding taxable
year in the case of the first and sec-
ond required installments for such
taxable year).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply for purposes of determining under-
519
‘‘(B) in the case of a participant who sepa-
rated from service, the amount taken into ac-
count under subsection (b)(1)(B), and
‘‘(C) the $30,000 amount in subsection
(c)(1)(A),
for increases in the cost-of-living in accordance with
regulations prescribed by the Secretary.
‘‘(2) METHOD.—The regulations prescribed
under paragraph (1) shall provide for—
‘‘(A) an adjustment with respect to any
calendar year based on the increase in the ap-
plicable index for the calendar quarter ending
September 30 of the preceding calendar year
over such index for the base period, and
‘‘(B) adjustment procedures which are
similar to the procedures used to adjust benefit
amounts under section 215(i)(2)(A) of the So-
cial Security Act.
‘‘(3) BASE
PERIOD.—For purposes of para-
graph (2)—
‘‘(A) $90,000 AMOUNT.—The base period
taken into account for purposes of paragraph
(1)(A) is the calendar quarter beginning Octo-
ber 1, 1986.