774
(5) Paragraph (2) of section 7213(a) is amend-
ed by striking ‘‘or (12)’’ and inserting ‘‘(12), or
(15)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 13363. DISCLOSURE OF RETURNS AND RETURN INFOR-
MATION TO DESIGNEE OF TAXPAYER.
Subsection (c) of section 6103 (relating to disclosure
of returns and return information to designee of taxpayer)
is amended by striking ‘‘written request for or consent to
such disclosure’’ and inserting ‘‘request for or consent to
such disclosure’’.
SEC. 13364. STUDY OF NETTING OF INTEREST ON OVERPAY-
MENTS AND LIABILITIES.
(a) IN GENERAL.—The Secretary of the Treasury or
his delegate shall—
(1) conduct a study of the manner in which the
Internal Revenue Service has implemented the net-
ting of interest on overpayments and underpayments
and of the policy and administrative implications of
global netting, and
(2) before submitting the report of such study,
hold a public hearing to receive comments on the
matters included in such study.
775
(b) REPORT.—The report of such study shall be sub-
mitted not later than 6 months after the date of the enact-
ment of this Act to the Committee on Ways and Means
of the House of Representatives and the Committee on
Finance of the Senate.
SEC. 13365. CREDIT FOR EXPENSES OF CERTAIN TCMP AU-
DITS.
(a) IN GENERAL.—Subchapter B of chapter 65 is
amended by adding at the end the following new section:
‘‘SEC. 6428. CREDIT FOR EXPENSES OF 1994 TCMP AUDITS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by subtitle A an amount equal to the qualified
TCMP expenses paid or incurred by the taxpayer during
the taxable year.
‘‘(b) LIMITATION.—The amount of the credit allowed
by subsection (a) shall not exceed $3,000 with respect to
an audit.
‘‘(c) QUALIFIED TCMP EXPENSES.—For purposes
of this section, the term ‘qualified TCMP expenses’ means
amounts which would (but for subsection (d)) be allowed
as a deduction under section 162 or 212(3) in connection
with an audit under the Taxpayer Compliance Measure-
ment Program of the taxpayer’s return of tax imposed by
chapter 1 for any taxable year beginning during 1994.
776
Such term shall not include any expense in connection
with an audit of an estate, trust, partnership, or S cor-
poration.
‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction
shall be allowed under chapter 1 for any amount for which
a credit is allowed under this section.
‘‘(e) CREDIT TREATED AS SUBPART C CREDIT.—For
purposes of this title, the credit allowed under subsection
(a) shall be treated as a credit allowed under subpart C
of part IV of subchapter A of chapter 1.’’
(b) TECHNICAL AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 6428 of such
Code’’.
(2) The table of sections for such subchapter B
is amended by adding at the end the following new
item:
‘‘Sec. 6428. Credit for expenses of 1994 TCMP audits.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
December 31, 1994, in taxable years ending after such
date.
777
SEC. 13366. EXPENSES OF DETECTION OF UNDERPAYMENTS
AND FRAUD, ETC.
(a) IN GENERAL.—Section 7623 (relating to ex-
penses of deduction and punishment of frauds) is amended
to read as follows:
‘‘SEC. 7623. EXPENSES OF DETECTION OF UNDERPAYMENTS
AND FRAUD, ETC.
‘‘The Secretary, under regulations prescribed by the
Secretary, is authorized to pay such sums as he deem nec-
essary for—
‘‘(1) detecting underpayments of tax, and
‘‘(2) detecting and bringing to trial and punish-
ment persons guilty of violating the internal revenue
laws or conniving at the same,
in cases where such expenses are not otherwise provided
for by law. Any amount payable under the preceding sen-
tence shall be paid from the proceeds of amounts (other
than interest) collected by reason of the information pro-
vided, and any amount so collected shall be available for
such payments.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 78 is amended by striking
the item relating to section 7623 and inserting the follow-
ing new item:
‘‘Sec. 7623. Expenses of detection of underpayments and fraud,
etc.’’.
778
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date which is 6 months
after the enactment of this Act.
(d) REPORT.—The Secretary of the Treasury or his
delegate shall submit an annual report to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate on the payments
under section 7623 of the Internal Revenue Code of 1986
during the year and on the amounts collected for which
such payments were made.
Subtitle D—Additional Technical
Corrections
SEC. 13401. REPORTING OF REAL ESTATE TRANSACTIONS.
(a) IN GENERAL.—Paragraph (3) of section 6045(e)
(relating to prohibition of separate charge for filing re-
turn) is amended by adding at the end the following new
sentence: ‘‘Nothing in this paragraph shall be construed
to prohibit the real estate reporting person from taking
into account its cost of complying with such requirement
in establishing its charge (other than a separate charge
for complying with such requirement) to any customer for
performing services in the case of a real estate trans-
action.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in section
779
1015(e)(2)(A) of the Technical and Miscellaneous Reve-
nue Act of 1988.
SEC. 13402. CLARIFICATION OF DENIAL OF DEDUCTION
FOR STOCK REDEMPTION EXPENSES.
(a) IN GENERAL.—Paragraph (1) of section 162(k)
is amended by striking ‘‘the redemption of its stock’’ and
inserting ‘‘the reacquisition of its stock or of the stock
of 
any 
related 
person 
(as 
defined 
in 
section
465(b)(3)(C))’’.
(b) CERTAIN DEDUCTIONS PERMITTED.—Subpara-
graph (A) of section 162(k)(2) is amended by striking
‘‘or’’ at the end of clause (i), by redesignating clause (ii)
as clause (iii), and by inserting after clause (i) the follow-
ing new clause:
‘‘(ii) deduction for amounts which are
properly allocable to indebtedness and am-
ortized over the term of such indebtedness,
or’’.
(c) CLERICAL AMENDMENT.—The subsection head-
ing for subsection (k) of section 162 is amended by strik-
ing ‘‘REDEMPTION’’ and inserting ‘‘REACQUISITION’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to amounts paid or incurred after Sep-
781
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the
amendments made by section 713(d)(4)(A) of the Deficit
Reduction Act of 1984.
SEC. 13405. TREATMENT OF CERTAIN VETERANS’ REEM-
PLOYMENT RIGHTS.
(a) IN GENERAL.—Section 414 is amended by adding
at the end the following new subsection:
‘‘(u) SPECIAL RULES RELATING TO VETERANS’ RE-
EMPLOYMENT RIGHTS.—
‘‘(1) TREATMENT OF CERTAIN CONTRIBUTIONS
MADE
PURSUANT
TO
VETERANS’ REEMPLOYMENT
RIGHTS.—If any contribution is made by an em-
ployer or an employee under an individual account
plan with respect to an employee, or by an employee
to a defined benefit pension plan that provides for
employee contributions, and such contribution is re-
quired by reason of such employee’s rights under
chapter 43 of title 38, United States Code, resulting
from qualified military service, then—
‘‘(A) such contribution shall not be subject
to any otherwise applicable limitation contained
in section 402(g), 402(h), 403(b), 404(a),
404(h), 408, 415, or 457, and shall not be
taken into account in applying such limitations
782
to other contributions or benefits under such
plan or any other plan, with respect to the year
in which the contribution is made,
‘‘(B) such contribution shall be subject to
the limitations referred to in subparagraph (A)
with respect to the year to which the contribu-
tion relates (in accordance with rules prescribed
by the Secretary), and
‘‘(C) such plan shall not be treated as fail-
ing to meet the requirements of section
401(a)(4), 
401(a)(26), 
401(k)(3), 
401(m),
403(b)(12), 408(k)(3), 408(k)(6), 410(b), or
416 by reason of the making of such contribu-
tion.
For purposes of the preceding sentence, any elective
deferral or employee contribution made under para-
graph (2) shall be treated as required by reason of
the employee’s rights under such chapter.
‘‘(2) REEMPLOYMENT RIGHTS WITH RESPECT
TO ELECTIVE DEFERRALS.—
‘‘(A) IN GENERAL.—For purposes of this
subchapter and subchapter E, if an employee is
entitled to the benefits of chapter 43 of title 38,
United States Code, with respect to any plan
which provides for elective deferrals, the em-
783
ployer sponsoring the plan shall be treated as
meeting the requirements of such chapter 43
with respect to such elective deferrals only if
such employer—
‘‘(i) permits such employee to make
additional elective deferrals under such
plan (in the amount determined under sub-
paragraph (B) or such lesser amount as is
elected by the employee) during the period
which begins on the date of the reemploy-
ment of such employee with such employer
and has the same length as the lesser of—
‘‘(I) the product of 3 and the pe-
riod of qualified military service which
resulted in such rights, and
‘‘(II) 5 years, and
‘‘(ii) makes a matching contribution
with respect to any additional elective de-
ferral made pursuant to clause (i) which
would have been required had such defer-
ral actually been made during the period of
such qualified military service.
‘‘(B) AMOUNT OF MAKEUP REQUIRED.—
The amount determined under this subpara-
graph with respect to any plan is the maximum
784
amount of the elective deferrals that the indi-
vidual would have been permitted to make
under the plan in accordance with the limita-
tions referred to in paragraph (1)(A) during his
period of qualified military service if he had
continued to be employed by the employer dur-
ing such period and received compensation as
determined under paragraph (7). Proper adjust-
ment shall be made to the amount determined
under the preceding sentence for any elective
deferrals actually made during the period of
such qualified military service.
‘‘(C) ELECTIVE DEFERRAL.—For purposes
of this paragraph, the term ‘elective deferral’
has the meaning given such term by section
402(g)(3); except that such term shall include
any deferral of compensation under an eligible
deferred compensation plan (as defined in sec-
tion 457(b)).
‘‘(D) AFTER-TAX
EMPLOYEE
CONTRIBU-
TIONS.—References in subparagraphs (A) and
(B) to elective deferrals shall be treated as in-
cluding references to other employee contribu-
tions.
785
‘‘(3) CERTAIN
RETROACTIVE
ADJUSTMENTS
NOT REQUIRED.—For purposes of this subchapter
and subchapter E, no provision of chapter 43 of title
38, United States Code, shall be construed as re-
quiring—
‘‘(A) any crediting of earnings to an em-
ployee with respect to any contribution before
such contribution is actually made, or
‘‘(B) any allocation of any forfeiture with
respect to the period of qualified military serv-
ice.
‘‘(4) LOAN
REPAYMENT
SUSPENSIONS
PER-
MITTED.—If any plan suspends the obligation to
repay any loan made to an employee from such plan
for any part of any period during which such em-
ployee is performing qualified military service, such
suspension shall not be taken into account for pur-
poses of section 72(p), 401(a), or 4975(d)(1).
‘‘(5) QUALIFIED MILITARY SERVICE.—For pur-
poses of this subsection, the term ‘qualified military
service’ means any service in the uniformed services
(as defined in chapter 43 of title 38, United States
Code) by any individual if such individual is entitled
to reemployment rights under such chapter with re-
spect to such service.
786
‘‘(6) INDIVIDUAL
ACCOUNT
PLAN.—For pur-
poses of this subsection, the term ‘individual account
plan’ means any defined contribution plan, any tax-
sheltered annuity plan under section 403(b), and
any eligible deferred compensation plan (as defined
in section 457(b)).
‘‘(7) COMPENSATION.—For purposes of section
415(c)(3), an employee who is in qualified military
service shall be treated as receiving compensation
from the employer during such period of qualified
military service equal to—
‘‘(A) the compensation the employee would
have received during such period if the em-
ployee were not in qualified military service, de-
termined based on the rate of pay the employee
would have received from the employer but for
absence during the period of qualified military
service, or
‘‘(B) if the compensation of the employee
was not based on a fixed rate, the employee’s
average compensation from the employer during
the 12-month period immediately preceding the
qualified military service (or, if shorter, the pe-
riod of employment immediately preceding the
qualified military service).
787
‘‘(8) REQUIREMENTS FOR QUALIFIED RETIRE-
MENT PLAN.—For purposes of this subchapter and
subchapter E, an employer sponsoring a plan shall
be treated as meeting the requirements of chapter
43 of title 38, United States Code, only if each of
the following requirements is met:
‘‘(A) An individual reemployed under such
chapter is treated with respect to such plan as
not having incurred a break in service with the
employer maintaining the plan by reason of
such individual’s period of qualified military
service.
‘‘(B) Each period of qualified military
service served by an individual is, upon reem-
ployment under such chapter, deemed with re-
spect to such plan to constitute service with the
employer maintaining the plan for the purpose
of determining the nonforfeitability of the indi-
vidual’s accrued benefits under such plan and
for the purpose of determining the accrual of
benefits under such plan.
‘‘(C) An individual reemployed under such
chapter is entitled to accrued benefits that are
contingent on the making of, or derived from,
employee contributions or elective deferrals only
788
to the extent the individual makes payment to
the plan with respect to such contributions or
deferrals. No such payment may exceed the
amount the individual would have been per-
mitted or required to contribute had the indi-
vidual remained continuously employed by the
employer throughout the period of qualified
military service. Any payment to such plan shall
be made during the period beginning with the
date of reemployment and whose duration is 3
times the period of the qualified military service
(but not greater than 5 years).
‘‘(9) REFERENCES.—For purposes of this sec-
tion, any reference to chapter 43 of title 38, United
States Code, shall be treated as a reference to such
chapter as in effect on December 12, 1994 (without
regard to any subsequent amendment).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall be effective as of December 12, 1994.
789
Subtitle E—Tax Information
Sharing
SEC. 13501. DISCLOSURE OF RETURN INFORMATION FOR
ADMINISTRATION OF CERTAIN VETERANS
PROGRAMS.
(a) GENERAL RULE.—Subparagraph (D) of section
6103(l)(7) (relating to disclosure of return information to
Federal, State, and local agencies administering certain
programs) is amended by striking ‘‘Clause (viii) shall not
apply after September 30, 1998.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
Subtitle F—Revenue Increases
PART I—PROVISIONS RELATING TO BUSINESSES
SEC. 13601. TAX TREATMENT OF CERTAIN EXTRAORDINARY
DIVIDENDS.
(a) TREATMENT OF EXTRAORDINARY DIVIDENDS IN
EXCESS OF BASIS.—Paragraph (2) of section 1059(a) (re-
lating to corporate shareholder’s basis in stock reduced by
nontaxed portion of extraordinary dividends) is amended
to read as follows:
‘‘(2) AMOUNTS IN EXCESS OF BASIS.—If the
nontaxed portion of such dividends exceeds such
basis, such excess shall be treated as gain from the
790
sale or exchange of such stock for the taxable year
in which the extraordinary dividend is received.’’
(b) TREATMENT OF REDEMPTIONS WHERE OPTIONS
INVOLVED.—Paragraph (1) of section 1059(e) (relating to
treatment of partial liquidations and non-pro rata redemp-
tions) is amended to read as follows:
‘‘(1) TREATMENT
OF
PARTIAL
LIQUIDATIONS
AND CERTAIN REDEMPTIONS.—Except as otherwise
provided in regulations—
‘‘(A) REDEMPTIONS.—In the case of any
redemption of stock—
‘‘(i) which is part of a partial liquida-
tion (within the meaning of section 302(e))
of the redeeming corporation,
‘‘(ii) which is not pro rata as to all
shareholders, or
‘‘(iii) which would not have been
treated (in whole or in part) as a dividend
if any options had not been taken into ac-
count under section 318(a)(4),
any amount treated as a dividend with respect
to such redemption shall be treated as an ex-
traordinary dividend to which paragraphs (1)
and (2) of subsection (a) apply without regard
to the period the taxpayer held such stock. In
791
the case of a redemption described in clause
(iii), only the basis in the stock redeemed shall
be taken into account under subsection (a).
‘‘(B) REORGANIZATIONS, 
ETC.—An ex-
change described in section 356(a)(1) which is
treated as a dividend under section 356(a)(2)
shall be treated as a redemption of stock for
purposes of applying subparagraph (A).’’
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to distributions after May 3,
1995.
(2) 
TRANSITION
RULE.—The 
amendments
made by this section shall not apply to any distribu-
tion made pursuant to the terms of—
(A) a written binding contract in effect on
May 3, 1995, and at all times thereafter before
such distribution, or
(B) a tender offer outstanding on May 3,
1995.
(3) CERTAIN
DIVIDENDS
NOT
PURSUANT
TO
CERTAIN
REDEMPTIONS.—In determining whether
the amendment made by subsection (a) applies to
any extraordinary dividend other than a dividend
treated as an extraordinary dividend under section
792
1059(e)(1) of the Internal Revenue Code of 1986
(as amended by this Act), paragraphs (1) and (2)
shall be applied by substituting ‘‘September 13,
1995’’ for ‘‘May 3, 1995’’.
SEC. 13602. REGISTRATION OF CONFIDENTIAL CORPORATE
TAX SHELTERS.
(a) IN GENERAL.—Section 6111 (relating to registra-
tion of tax shelters) is amended by redesignating sub-
sections (d) and (e) as subsections (e) and (f), respectively,
and by inserting after subsection (c) the following new
subsection:
‘‘(d) 
CERTAIN
CONFIDENTIAL
ARRANGEMENTS
TREATED AS TAX SHELTERS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘tax shelter’ includes any entity, plan,
arrangement, or transaction—
‘‘(A) a significant purpose of which is the
avoidance or evasion of Federal income tax for
a participant which is a corporation,
‘‘(B) which is offered to any potential par-
ticipant under conditions of confidentiality, and
‘‘(C) for which the tax shelter organizers
may receive fees in excess of $100,000 in the
aggregate.
793
‘‘(2) CONDITIONS OF CONFIDENTIALITY.—For
purposes of paragraph (1)(C), an offer is under con-
ditions of confidentiality if—
‘‘(A) the potential participant to whom the
offer is made (or any other person acting on be-
half of such participant) has an understanding
or agreement with or for the benefit of any pro-
moter of the tax shelter that such participant
(or other person) will limit disclosure of the tax
shelter or any significant tax features of the tax
shelter, or
‘‘(B) any promoter of the tax shelter—
‘‘(i) claims, knows, or has reason to
know,
‘‘(ii) knows or has reason to know
that any other person (other than the po-
tential participant) claims, or
‘‘(iii) causes another person to claim,
that the tax shelter (or any aspect thereof) is
proprietary to any person other than the poten-
tial participant or is otherwise protected from
disclosure to or use by others.
For purposes of this subsection, the term ‘promoter’
means any person who participates in the organiza-
tion, management, or sale of the tax shelter.
794
‘‘(3) PERSONS
OTHER
THAN
ORGANIZER
RE-
QUIRED TO REGISTER IN CERTAIN CASES.—
‘‘(A) IN GENERAL.—If—
‘‘(i) the requirements of subsection (a)
are not met with respect to any tax shelter
(as defined in paragraph (1)) by any tax
shelter organizer, and
‘‘(ii) no tax shelter organizer is a
United States person,
then each United States person who discussed
participation in such shelter shall register such
shelter under subsection (a).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a United States person who
discussed participation in a tax shelter if—
‘‘(i) such person notified the promoter
in writing (not later than the close of the
day on which such discussions began) that
such person would not participate in such
shelter, and
‘‘(ii) such person does not participate
in such shelter.
‘‘(4) OFFER
TO
PARTICIPATE
TREATED
AS
OFFER FOR SALE.—For purposes of subsections (a)
and (b), an offer to participate in a tax shelter (as
795
defined in paragraph (1)) shall be treated as an
offer for sale.’’
(b) PENALTY.—Subsection (a) of section 6707 (relat-
ing to failure to furnish information regarding tax shel-
ters) is amended by adding at the end the following new
paragraph:
‘‘(3) CONFIDENTIAL ARRANGEMENTS.—
‘‘(A) IN GENERAL.—In the case of a tax
shelter (as defined in section 6111(d)), the pen-
alty imposed under paragraph (1) shall be an
amount equal to the greater of—
‘‘(i) 50 percent of the fees paid to any
promoter of the tax shelter with respect to
offerings made before the date such shelter
is registered under section 6111, or
‘‘(ii) $10,000.
Clause (i) shall be applied by substituting ‘75
percent’ for ‘50 percent’ in the case of an inten-
tional failure or act described in paragraph (1).
‘‘(B) SPECIAL
RULE
FOR
PARTICIPANTS
REQUIRED
TO
REGISTER
SHELTER.—In the
case of a person required to register such a tax
shelter by reason of section 6111(d)(3)—
‘‘(i) such person shall be required to
pay the penalty under paragraph (1) only
796
if such person actually participated in such
shelter,
‘‘(ii) the amount of such penalty shall
be determined by taking into account
under subparagraph (A)(i) only the fees
paid by such person, and
‘‘(iii) such penalty shall be in addition
to the penalty imposed on any other person
for failing to register such shelter.’’
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 6707(a) is amend-
ed by striking ‘‘The penalty’’ and inserting ‘‘Except
as provided in paragraph (3), the penalty’’.
(2) Subparagraph (A) of section 6707(a)(1) is
amended by striking ‘‘paragraph (2)’’ and inserting
‘‘paragraph (2) or (3), as the case may be’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to any tax shelter (as defined
in section 6111(d) of the Internal Revenue Code of
1986, as amended by this section) interests in which
are offered to potential participants after the date of
the enactment of this Act.
(2) DUE DATE FOR REGISTRATION.—The due
date for registering any tax shelter required to be
797
registered by reason of the amendments made by
this section shall be not earlier than the close of a
reasonable period after the Secretary of the Treas-
ury prescribes guidance with respect to meeting such
requirements.
SEC. 13603. DENIAL OF DEDUCTION FOR INTEREST ON
LOANS WITH RESPECT TO COMPANY-OWNED
INSURANCE.
(a) IN GENERAL.—Paragraph (4) of section 264(a)
is amended—
(1) by inserting ‘‘or endowment or annuity con-
tract’’ after ‘‘life insurance policies’’, and
(2) by striking all that follows ‘‘carried on by
the taxpayer’’ and inserting a period.
(b) PHASEIN OF DISALLOWANCE.—Section 264 is
amended by adding at the end the following new sub-
section:
‘‘(d) PHASEIN
OF DISALLOWANCE UNDER SUB-
SECTION (a)(4).—In the case of calendar years after 1995
and before 2000—
‘‘(1) IN
GENERAL.—The amount of interest
paid or accrued during any period in any such cal-
endar year with respect to qualified indebtedness
which is disallowed by reason of the amendment
made by section 13603(a) of the Revenue Reconcili-
798
ation Act of 1995 (determined without regard to this
subsection) shall not exceed the applicable percent-
age of such interest which is so disallowed.
‘‘(2) QUALIFIED
INDEBTEDNESS.—For pur-
poses of paragraph (1), the term ‘qualified indebted-
ness’ means indebtedness incurred before September
18, 1995, with respect to a life insurance policy cov-
ering only the life of the individual who was insured
under such policy on such date. Any increase on or
after such date in the amount of such indebtedness
shall be treated as indebtedness incurred after such
date.
‘‘(3) APPLICABLE PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage shall be
determined in accordance with the following table:
‘‘In the case of periods
The applicable
in calendar year:
percentage is:
1996 .......................................................................... 20 percent
1997 .......................................................................... 40 percent
1998 .......................................................................... 60 percent
1999 .......................................................................... 80 percent.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to interest paid or accrued
after December 31, 1995.
(2) EXCEPTION.—The amendments made by
this section shall not apply to contracts purchased
on or before June 20, 1986.
799
(d) 4-YEAR SPREAD OF INCOME INCLUSION ON SUR-
RENDER, ETC. OF CONTRACTS.—
(1) IN GENERAL.—In the case of indebtedness
with respect to any life insurance policy described in
paragraph (4) of section 264(a) of the Internal Rev-
enue Code of 1986, if—
(A) the interest paid or accrued after De-
cember 31, 1995, on such indebtedness is not
allowed as a deduction under chapter 1 of such
Code by reason of such paragraph (4) (as
amended by this section), and
(B) the entire amount of interest paid or
accrued on or before such date on such indebt-
edness was allowed as a deduction under such
chapter 1,
then (in lieu of any other inclusion in gross income)
the qualified amount with respect to such policy
shall be includible in gross income ratably over the
4 taxable years beginning with the taxable year such
amount would (but for this paragraph) be includible.
(2) QUALIFIED
AMOUNT.—For purposes of
paragraph (1), the term ‘‘qualified amount’’ means,
with respect to any policy, the amount received
under such policy—
800
(A) on the complete surrender, redemption,
or maturity of such policy during 1996, or
(B) in full discharge during 1996 of the
obligation under the policy which is in the na-
ture of a refund of the consideration paid for
the policy,
but only to the extent such amount is includible in
gross income for the taxable year in which the event
described in subparagraph (A) or (B) occurs.
(3) SPECIAL RULE.—A contract shall not be
treated as failing to meet the requirement of section
264(c)(1) of the Internal Revenue Code of 1986
solely by reason of an occurrence described in sub-
paragraph (A) or (B) of paragraph (2) of this sub-
section.
SEC. 13604. TERMINATION OF SUSPENSE ACCOUNTS FOR
FAMILY CORPORATIONS REQUIRED TO USE
ACCRUAL METHOD OF ACCOUNTING.
(a) IN GENERAL.—Subsection (i) of section 447 (re-
lating to method of accounting for corporations engaged
in farming) is amended by adding at the end the following
new paragraph:
‘‘(7) TERMINATION.—
‘‘(A) IN GENERAL.—No suspense account
may be established under this subsection by any
801
corporation required by this section to change
its method of accounting for any taxable year
ending after September 13, 1995.
‘‘(B) 20-YEAR
PHASEOUT
OF
EXISTING
SUSPENSE ACCOUNTS.—Each suspense account
under this subsection shall be reduced (but not
below zero) for each of the first 20 taxable
years beginning after September 13, 1995, by
an amount equal to the applicable portion of
such account. Any reduction in a suspense ac-
count under this paragraph shall be included in
gross income for the taxable year of the reduc-
tion. The amount of the reduction required
under this paragraph for any taxable year shall
be reduced (but not below zero) by the amount
of any reduction required for such taxable year
under any other provision of this subsection.
‘‘(C) APPLICABLE
PORTION.—For pur-
poses of subparagraph (B), the term ‘applicable
portion’ means, for any taxable year, the
amount which would ratably reduce the amount
in the account (after taking into account prior
reductions) to zero over the period consisting of
such taxable year and the remaining taxable
years in such first 20 taxable years.’’
802
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years ending after Sep-
tember 13, 1995.
SEC. 13605. TERMINATION OF PUERTO RICO AND POSSES-
SION TAX CREDIT.
(a) IN GENERAL.—Section 936 is amended by adding
at the end the following new subsection:
‘‘(j) TERMINATION.—
‘‘(1) IN GENERAL.—This section shall not apply
to any taxable year beginning after December 31,
1995.
‘‘(2) EXCEPTION FOR EXISTING CLAIMANTS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
be applied by substituting ‘2005’ for ‘1995’ in
the case of an existing credit claimant.
‘‘(B) EXCEPTION
TERMINATES
IF
NEW
LINE OF BUSINESS ADDED.—If, after Septem-
ber 13, 1995, a corporation which would (but
for this subparagraph) be an existing credit
claimant adds a substantial new line of busi-
ness, such corporation shall cease to be treated
as an existing credit claimant as of the close of
the taxable year ending before the date of such
addition.
803
‘‘(C) EXISTING
CREDIT
CLAIMANT.—For
purposes of this subsection, the term ‘existing
credit claimant’ means any corporation which
satisfied the conditions of both subparagraph
(A) and subparagraph (B) of subsection (a)(2)
for at least 1 base period year for which such
corporation elected the application of this sec-
tion.
‘‘(3) LIMIT
ON
CREDIT
OF
EXISTING
CLAIM-
ANTS.—
‘‘(A) IN GENERAL.—In the case of an ex-
isting credit claimant, the aggregate amount of
income taken into account under subsection
(a)(1) for any taxable year beginning after De-
cember 31, 1995 (hereinafter in this subsection
referred to as the ‘current year’), shall not ex-
ceed the adjusted base period income of such
claimant.
‘‘(B) COORDINATION
WITH
SUBSECTION
(a)(4).—The amount of income described in
subsection (a)(1)(A) which is taken into ac-
count in applying subsection (a)(4) shall be
such income as reduced under this paragraph.
In determining such reduction, any reduction
under subparagraph (A) in the amount which
804
would otherwise be taken into account under
subsection (a)(1) shall be allocated between the
income described in subparagraph (A) thereof
and the income described in subparagraph (B)
thereof in proportion to the respective amounts
of such incomes.
‘‘(4) ADJUSTED
BASE
PERIOD
INCOME.—For
purposes of paragraph (3)—
‘‘(A) IN
GENERAL.—The term ‘adjusted
base period income’ means the average of the
inflation-adjusted possession incomes of the cor-
poration for each base period year.
‘‘(B) INFLATION-ADJUSTED
POSSESSION
INCOME.—For purposes of subparagraph (A),
the inflation-adjusted possession income of any
corporation for any base period year shall be an
amount equal to the possession income of such
corporation for such base period year multiplied
by the inflation adjustment percentage for such
base period year.
‘‘(C) INFLATION
ADJUSTMENT
PERCENT-
AGE.—For purposes of subparagraph (B), the
inflation adjustment percentage for any base
period year means, with respect to the current
year, the percentage (if any) by which—
805
‘‘(i) the CPI for last calendar year
ending before the beginning of the current
year, exceeds
‘‘(ii) the CPI for last calendar year
ending before the beginning of the base pe-
riod year.
For purposes of the preceding sentence, the
CPI for any calendar year is the CPI (as de-
fined in section 1(f)(5)) for such year under
section 1(f)(4).
‘‘(D) INCREASE
IN
INFLATION
ADJUST-
MENT PERCENTAGE FOR GROWTH DURING BASE
YEARS.—The inflation adjustment percentage
(determined under subparagraph (C) without
regard to this subparagraph) for each of the 5
taxable years referred to in paragraph (5)(A)
shall be increased by—
‘‘(i) 5 percentage points in the case of
a taxable year ending during the 1-year pe-
riod ending on September 12, 1995;
‘‘(ii) 10.25 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1994;
806
‘‘(iii) 15.76 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1993;
‘‘(iv) 21.55 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1992;
and
‘‘(v) 27.63 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1991.
‘‘(5) BASE PERIOD YEAR.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The term ‘base period
year’ means each of 3 taxable years which are
among the 5 most recent taxable years of the
corporation ending before September 13, 1995,
determined by disregarding—
‘‘(i) one taxable year for which the
corporation had the largest inflation-ad-
justed possession income, and
‘‘(ii) one taxable year for which the
corporation had the smallest inflation-ad-
justed possession income.
807
‘‘(B) CORPORATIONS NOT HAVING SIGNIFI-
CANT
POSSESSION
INCOME
THROUGHOUT
5-
YEAR PERIOD.—
‘‘(i) IN
GENERAL.—If a corporation
does not have significant possession income
for each of the most recent 5 taxable years
ending before September 13, 1995, then,
in lieu of applying subparagraph (A), the
term ‘base period year’ means only those
taxable years (of such 5 taxable years) for
which the corporation has significant pos-
session income; except that, if such cor-
poration has significant possession income
for 4 of such 5 taxable years, the rule of
subparagraph (A)(ii) shall apply.
‘‘(ii) SPECIAL RULE.—If there is no
year (of such 5 taxable years) for which a
corporation has significant possession in-
come—
‘‘(I) the term ‘base period year’
means the first taxable year ending on
or after September 13, 1995, but
‘‘(II) the amount of possession
income for such year which is taken
into account under paragraph (4)
808
shall be the amount which would be
determined if such year were a short
taxable year ending on August 31,
1995.
‘‘(iii) SIGNIFICANT
POSSESSION
IN-
COME.—For purposes of this subpara-
graph, the term ‘significant possession in-
come’ means possession income which ex-
ceeds 2 percent of the possession income of
the taxpayer for the taxable year (of the
period of 6 taxable years ending with the
first taxable year ending on or after Sep-
tember 13, 1995) having the greatest pos-
session income.
‘‘(C) ELECTION TO USE ONE BASE PERIOD
YEAR.—
‘‘(i) IN GENERAL.—At the election of
the taxpayer, the term ‘base period year’
means only the last taxable year of the cor-
poration ending in calendar year 1992.
‘‘(ii) ELECTION.—An election under
this subparagraph by any possession cor-
poration may be made only for the cor-
poration’s first taxable year beginning
after December 31, 1995, for which it is a
809
possession 
corporation. 
The 
rules 
of
subclauses (II) and (III) of subsection
(a)(4)(B)(iii) shall apply to the election
under this subparagraph.
‘‘(D) ACQUISITIONS AND DISPOSITIONS.—
Rules similar to the rules of subparagraphs (A)
and (B) of section 41(f)(3) shall apply for pur-
poses of this subsection.
‘‘(6) POSSESSION
INCOME.—For purposes of
this subsection, the term ‘possession income’ means
the sum of the income referred to in subsection
(a)(1)(A) and the income referred to in subsection
(a)(1)(B). In no event shall possession income be
treated as being less than zero.
‘‘(7) SHORT YEARS.—If the current year or a
base period year is a short taxable year, the applica-
tion of this subsection shall be made with such
annualizations as the Secretary shall prescribe.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 13606. DEPRECIATION UNDER INCOME FORECAST
METHOD.
(a) GENERAL RULE.—Section 167 (relating to depre-
ciation) is amended by redesignating subsection (g) as
810
subsection (h) and by inserting after subsection (f) the
following new subsection:
‘‘(g) DEPRECIATION
UNDER
INCOME
FORECAST
METHOD.—
‘‘(1) IN GENERAL.—If the depreciation deduc-
tion allowable under this section to any taxpayer
with respect to any property is determined under the
income forecast method or any similar method—
‘‘(A) in determining the amount of the de-
preciation deduction under such method, the es-
timated income from the property shall include
all estimated income from use of the property,
‘‘(B) the adjusted basis of the property
shall only include amounts with respect to
which the requirements of section 461(h) are
satisfied,
‘‘(C) the depreciation deduction under such
method for the 10th taxable year beginning
after the taxable year in which the property was
placed in service shall be equal to the adjusted
basis of such property as of the beginning of
such 10th taxable year, and
‘‘(D) such taxpayer shall pay (or be enti-
tled to receive) interest computed under the
811
look-back method of paragraph (2) for any re-
computation year.
‘‘(2) LOOK-BACK METHOD.—The interest com-
puted under the look-back method of this paragraph
for any recomputation year shall be determined by—
‘‘(A) first determining the depreciation de-
ductions under this section with respect to such
property which would have been allowable for
prior taxable years if the determination of the
amounts so allowable had been made on the
basis of the sum of the following (instead of the
estimated income with respect to such prop-
erty)—
‘‘(i) the actual income from such
property for periods before the close of the
recomputation year, and
‘‘(ii) an estimate of the future income
with respect to such property for periods
after the recomputation year,
‘‘(B) second, determining (solely for pur-
poses of computing such interest) the overpay-
ment or underpayment of tax for each such
prior taxable year which would result solely
from the application of subparagraph (A), and
812
‘‘(C) then using the adjusted overpayment
rate 
(as 
defined 
in 
section 
460(b)(7)),
compounded daily, on the overpayment or
underpayment determined under subparagraph
(B).
For purposes of the preceding sentence, any cost in-
curred after the property is placed in service (which
is not treated as a separate property under para-
graph (5)) shall be taken into account by discount-
ing (using the Federal mid-term rate determined
under section 1274(d) as of the time such cost is in-
curred) such cost to its value as of the date the
property is placed in service. The taxpayer may elect
with respect to any property to have the preceding
sentence not apply to such property.
‘‘(3) EXCEPTION FROM LOOK-BACK METHOD.—
Paragraph (1)(D) shall not apply with respect to
any property which, when placed in service by the
taxpayer, had a basis of $100,000 or less.
‘‘(4) RECOMPUTATION YEAR.—For purposes of
this subsection, except as provided in regulations,
the term ‘recomputation year’ means, with respect to
any property, the third and the 10th taxable years
beginning after the taxable year in which the prop-
erty was placed in service, unless the actual income
813
from the property for such third or 10th taxable
year (as the case may be) and each prior taxable
year is within 10 percent of the estimated income
from the property for each such year which was
taken into account under paragraph (1)(A).
‘‘(5) SPECIAL RULES.—
‘‘(A) CERTAIN COSTS TREATED AS SEPA-
RATE PROPERTY.—For purposes of this section,
the following costs shall be treated as separate
properties:
‘‘(i) Any costs incurred with respect
to any property after the 10th taxable year
beginning after the taxable year in which
the property was placed in service.
‘‘(ii) Any costs incurred after the
property is placed in service and before the
close of such 10th taxable year if such
costs are significant and give rise to a sig-
nificant increase in the income from the
property which was not included in the es-
timated income from the property.
‘‘(B) SYNDICATION INCOME FROM TELE-
VISION SERIES.—In the case of property which
is an episode in a television series, estimated in-
come from syndicating such series shall not be
814
required to be taken into account under this
subsection before the earlier of—
‘‘(i) the 4th taxable year beginning
after the date the first episode in such se-
ries is placed in service, or
‘‘(ii) the earliest taxable year in which
the taxpayer had a reasonable expectation
that there would be a future syndication
of such series.
‘‘(C) COLLECTION
OF
INTEREST.—For
purposes of subtitle F (other than sections
6654 and 6655), any interest required to be
paid by the taxpayer under paragraph (1) for
any recomputation year shall be treated as an
increase in the tax imposed by this chapter for
such year.
‘‘(D) DETERMINATIONS.—For purposes of
this subsection, determinations of the amount
of income from any property shall be deter-
mined in the same manner as for purposes of
applying the income forecast method; except
that any income from the disposition of such
property shall be taken into account.
‘‘(E) TREATMENT
OF
PASS-THRU
ENTI-
TIES.—Rules similar to the rules of section
815
460(b)(4) shall apply for purposes of this sub-
section.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to property placed in serv-
ice after September 13, 1995.
(2) BINDING
CONTRACTS.—The amendment
made by subsection (a) shall not apply to any prop-
erty produced or acquired by the taxpayer pursuant
to a written contract which was binding on Septem-
ber 13, 1995, and at all times thereafter before such
production or acquisition.
SEC. 13607. TRANSFERS OF EXCESS PENSION ASSETS.
(a) IN GENERAL.—Section 420 (relating to transfers
of excess pension assets to retiree health accounts) is
amended by adding at the end the following new sub-
section:
‘‘(f) SIMILAR RULES TO APPLY TO OTHER TRANS-
FERS OF EXCESS PLAN ASSETS.—
‘‘(1) IN GENERAL.—If there is a qualified unre-
stricted transfer of any excess pension assets of a
defined benefit plan (other than a multiemployer
plan) to an employer—
‘‘(A) a trust which is part of such plan
shall not be treated as failing to meet the re-
816
quirements of section 401(a) or any other pro-
vision of law solely by reason of such transfer
(or any other action authorized under this sec-
tion), and
‘‘(B) such transfer shall not be treated as
a prohibited transaction for purposes of section
4975.
The gross income of the employer shall include the
amount of any qualified transfer made during the
taxable year.
‘‘(2) QUALIFIED UNRESTRICTED TRANSFER.—
For purposes of this section—
‘‘(A) IN
GENERAL.—The term ‘qualified
unrestricted transfer’ means a transfer—
‘‘(i) of excess pension assets of a de-
fined benefit plan to the employer, and
‘‘(ii) with respect to which the re-
quirements of subsection (c)(2)(A) are met
(determined by treating such transfer as a
qualified transfer).
‘‘(B) COORDINATION WITH TRANSFERS TO
RETIREE HEALTH ACCOUNTS.—Such term shall
not include any qualified transfer (as defined in
subsection (b)).
817
‘‘(C) EXPIRATION.—No transfer in any
taxable year beginning after December 31,
2000, shall be treated as a qualified unre-
stricted transfer.
‘‘(3) DEFINITION
AND
SPECIAL
RULE.—For
purposes of this subsection—
‘‘(A) EXCESS PENSION ASSETS.—The term
‘excess pension assets’ has the meaning given
such term by subsection (e)(2); except that the
amount thereof shall be the lesser of—
‘‘(i) the amount determined as of the
most recent valuation date of the plan pre-
ceding the transfer, or
‘‘(ii) the amount determined as of
January 1, 1995 (or, if January 1, 1995,
is not a valuation date, the most recent
prior valuation date).
‘‘(B) COORDINATION WITH SECTION 412.—
In the case of a qualified unrestricted trans-
fer—
‘‘(i) any assets transferred in a plan
year on or before the valuation date for
such year (and any income allocable there-
to) shall, for purposes of section 412, be
818
treated as assets in the plan as of the valu-
ation date for such year, and
‘‘(ii) the plan shall be treated as hav-
ing a net experience loss under section
412(b)(2)(B)(iv) in an amount equal to the
amount of such transfer and for which am-
ortization charges begin for the first plan
year after the plan year in which such
transfer occurs, except that such section
shall be applied to such amount by sub-
stituting ‘10 plan years’ for ‘5 plan years’.
‘‘(C) TREATMENT
OF
TRANSFERS.—Ex-
cept for purposes of this section, a qualified un-
restricted transfer shall be treated as a quali-
fied transfer to a health benefits account.’’
(b) REVERSION TAX.—Section 4980 (relating to tax
on reversion of qualified plan assets to employers) is
amended by adding at the end the following new sub-
section:
‘‘(e) SPECIAL
RULES
FOR
QUALIFIED
UNRE-
STRICTED TRANSFERS UNDER SECTION 420.—In the
case of a qualified unrestricted transfer to which section
420(f) applies—
‘‘(1) no tax shall be imposed by subsection (a)
if such transfer occurs before July 1, 1996,
819
‘‘(2) subsection (a) shall be applied by sub-
stituting ‘6.5 percent’ for ‘20 percent’ if such trans-
fer occurs after June 30, 1996, and
‘‘(3) subsection (d) shall not apply.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1995.
PART II—LEGAL REFORMS
SEC. 13611. REPEAL OF EXCLUSION FOR PUNITIVE DAM-
AGES 
AND 
FOR 
DAMAGES 
NOT 
ATTRIB-
UTABLE TO PHYSICAL INJURIES OR SICK-
NESS.
(a) IN GENERAL.—Paragraph (2) of section 104(a)
(relating to compensation for injuries or sickness) is
amended to read as follows:
‘‘(2) the amount of any damages (other than
punitive damages) received (whether by suit or
agreement and whether as lump sums or as periodic
payments) on account of personal physical injuries
or physical sickness;’’.
(b) EMOTIONAL DISTRESS AS SUCH TREATED AS
NOT PHYSICAL INJURY OR PHYSICAL SICKNESS.—Sec-
tion 104(a) is amended by striking the last sentence and
inserting the following new sentence: ‘‘For purposes of
paragraph (2), emotional distress shall not be treated as
a physical injury or physical sickness. The preceding sen-
820
tence shall not apply to an amount of damages not in ex-
cess of the amount paid for medical care (described in sub-
paragraph (A) or (B) of section 213(d)(1)) attributable
to emotional distress.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to amounts received after December 31,
1995, in taxable years ending after such date.
(2) EXCEPTION.—The amendments made by
this section shall not apply to any amount received
under a written binding agreement, court decree, or
mediation award in effect on (or issued on or before)
September 13, 1995.
SEC. 13612. REPORTING OF CERTAIN PAYMENTS MADE TO
ATTORNEYS.
(a) IN GENERAL.—Section 6045 (relating to returns
of brokers) is amended by adding at the end the following
new subsection:
‘‘(f) RETURN REQUIRED IN THE CASE
OF PAY-
MENTS TO ATTORNEYS.—
‘‘(1) IN GENERAL.—Any person engaged in a
trade or business and making a payment (in the
course of such trade or business) to which this sub-
section applies shall file a return under subsection
821
(a) and a statement under subsection (b) with re-
spect to such payment.
‘‘(2) APPLICATION OF SUBSECTION.—
‘‘(A) IN GENERAL.—This subsection shall
apply to any payment to an attorney in connec-
tion with legal services (whether or not such
services are performed for the payor).
‘‘(B) EXCEPTION.—This subsection shall
not apply to the portion of any payment which
is required to be reported under section 6041(a)
(or would be so required but for the dollar limi-
tation contained therein) or section 6051.’’
(b) REPORTING OF ATTORNEYS FEES PAYABLE TO
CORPORATIONS.—The regulations providing an exception
under section 6041 of the Internal Revenue Code of 1986
for payments made to corporations shall not apply to pay-
ments of attorneys fees.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a), and subsection (b), shall apply to payments
made after December 31, 1995.
822
PART III—TREATMENT OF INDIVIDUALS WHO
LOSE UNITED STATES CITIZENSHIP
SEC. 13616. REVISION OF INCOME, ESTATE, AND GIFT
TAXES ON INDIVIDUALS WHO LOSE UNITED
STATES CITIZENSHIP.
(a) IN GENERAL.—Subsection (a) of section 877 is
amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) IN GENERAL.—Every nonresident alien in-
dividual who, within the 10-year period immediately
preceding the close of the taxable year, lost United
States citizenship, unless such loss did not have for
1 of its principal purposes the avoidance of taxes
under this subtitle or subtitle B, shall be taxable for
such taxable year in the manner provided in sub-
section (b) if the tax imposed pursuant to such sub-
section exceeds the tax which, without regard to this
section, is imposed pursuant to section 871.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING
TAX
AVOIDANCE
PURPOSE.—For purposes of
paragraph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if—
‘‘(A) the average annual net income tax
(as defined in section 38(c)(1)) of such individ-
ual for the period of 5 taxable years ending be-
823
fore the date of the loss of United States citi-
zenship is greater than $100,000, or
‘‘(B) the net worth of the individual as of
such date is $500,000 or more.
In the case of the loss of United States citizenship
in any calendar year after 1996, such $100,000 and
$500,000 amounts shall be increased by an amount
equal to such dollar amount multiplied by the cost-
of-living 
adjustment 
determined 
under 
section
1(f)(3) for such calendar year by substituting ‘1994’
for ‘1992’ in subparagraph (B) thereof. Any in-
crease under the preceding sentence shall be round-
ed to the nearest multiple of $1,000.’’
(b) EXCEPTIONS.—
(1) IN GENERAL.—Section 877 is amended by
striking subsection (d), by redesignating subsection
(c) as subsection (d), and by inserting after sub-
section (b) the following new subsection:
‘‘(c) TAX AVOIDANCE NOT PRESUMED IN CERTAIN
CASES.—
‘‘(1) IN GENERAL.—Subsection (a)(2) shall not
apply to an individual if—
‘‘(A) such individual is described in a sub-
paragraph of paragraph (2) of this subsection,
and
824
‘‘(B) within the 1-year period beginning on
the date of the loss of United States citizenship,
such individual submits a ruling request for the
Secretary’s determination as to whether such
loss has for 1 of its principal purposes the
avoidance of taxes under this subtitle or subtitle
B.
‘‘(2) INDIVIDUALS DESCRIBED.—
‘‘(A) DUAL CITIZENSHIP, ETC.—An indi-
vidual is described in this subparagraph if—
‘‘(i) the individual became at birth a
citizen of the United States and a citizen
of another country and continues to be a
citizen of such other country, or
‘‘(ii) the individual becomes (not later
than the close of a reasonable period after
loss of United States citizenship) a citizen
of the country in which—
‘‘(I) such individual was born,
‘‘(II) if such individual is mar-
ried, such individual’s spouse was
born, or
‘‘(III) either of such individual’s
parents were born.
825
‘‘(B) LONG-TERM FOREIGN RESIDENTS.—
An individual is described in this subparagraph
if, for each year in the 10-year period ending on
the date of loss of United States citizenship, the
individual was present in the United States for
days 
or 
less. 
The 
rule 
of 
section
7701(b)(3)(D)(ii) shall apply for purposes of
this subparagraph.
‘‘(C) RENUNCIATION UPON REACHING AGE
OF
MAJORITY.—An individual is described in
this subparagraph if the individual’s loss of
United States citizenship occurs before such in-
dividual attains age 181⁄2.
‘‘(D) INDIVIDUALS SPECIFIED IN REGULA-
TIONS.—An individual is described in this sub-
paragraph if the individual is described in a
category of individuals prescribed by regulation
by the Secretary.’’
(2) TECHNICAL AMENDMENT.—Paragraph (1)
of section 877(b) of such Code is amended by strik-
ing ‘‘subsection (c)’’ and inserting ‘‘subsection (d)’’.
(c) TREATMENT
OF PROPERTY DISPOSED
OF
IN
NONRECOGNITION TRANSACTIONS; TREATMENT OF DIS-
TRIBUTIONS
FROM
CERTAIN
CONTROLLED
FOREIGN
826
CORPORATIONS.—Subsection (d) of section 877, as redes-
ignated by subsection (b), is amended to read as follows:
‘‘(d) SPECIAL RULES FOR SOURCE, ETC.—For pur-
poses of subsection (b)—
‘‘(1) SOURCE RULES.—The following items of
gross income shall be treated as income from sources
within the United States:
‘‘(A) SALE OF PROPERTY.—Gains on the
sale or exchange of property (other than stock
or debt obligations) located in the United
States.
‘‘(B) STOCK
OR
DEBT
OBLIGATIONS.—
Gains on the sale or exchange of stock issued
by a domestic corporation or debt obligations of
United States persons or of the United States,
a State or political subdivision thereof, or the
District of Columbia.
‘‘(C) INCOME
OR
GAIN
DERIVED
FROM
CONTROLLED FOREIGN CORPORATION.—Any in-
come or gain derived from stock in a foreign
corporation but only—
‘‘(i) if the individual losing United
States citizenship owned (within the mean-
ing of section 958(a)), or is considered as
owning (by applying the ownership rules of
827
section 958(b)), at any time during the 2-
year period ending on the date of the loss
of United States citizenship, more than 50
percent of—
‘‘(I) the total combined voting
power of all classes of stock entitled
to vote of such corporation, or
‘‘(II) the total value of the stock
of such corporation, and
‘‘(ii) to the extent such income or gain
does not exceed the earnings and profits
attributable to such stock which were
earned or accumulated before the loss of
citizenship and during periods that the
ownership requirements of clause (i) are
met.
‘‘(2) GAIN
RECOGNITION
ON
CERTAIN
EX-
CHANGES.—
‘‘(A) IN GENERAL.—In the case of any ex-
change of property to which this paragraph ap-
plies, notwithstanding any other provision of
this title, such property shall be treated as sold
for its fair market value on the date of such ex-
change, and any gain shall be recognized for
the taxable year which includes such date.
828
‘‘(B) EXCHANGES TO WHICH PARAGRAPH
APPLIES.—This paragraph shall apply to any
exchange during the 10-year period described in
subsection (a) if—
‘‘(i) gain would not (but for this para-
graph) be recognized on such exchange in
whole or in part for purposes of this sub-
title,
‘‘(ii) income derived from such prop-
erty was from sources within the United
States (or, if no income was so derived,
would have been from such sources), and
‘‘(iii) income derived from the prop-
erty acquired in the exchange would be
from sources outside the United States.
‘‘(C) 
EXCEPTION.—Subparagraph 
(A)
shall not apply if the individual enters into an
agreement with the Secretary which specifies
that any income or gain derived from the prop-
erty acquired in the exchange (or any other
property which has a basis determined in whole
or part by reference to such property) during
such 10-year period shall be treated as from
sources within the United States. If the prop-
erty transferred in the exchange is disposed of
830
shall be treated as an exchange to which this
paragraph applies.
‘‘(3) SUBSTANTIAL DIMINISHING OF RISKS OF
OWNERSHIP.—For purposes of determining whether
this section applies to any gain on the sale or ex-
change of any property, the running of the 10-year
period described in subsection (a) shall be suspended
for any period during which the individual’s risk of
loss with respect to the property is substantially di-
minished by—
‘‘(A) the holding of a put with respect to
such property (or similar property),
‘‘(B) the holding by another person of a
right to acquire the property, or
‘‘(C) a short sale or any other trans-
action.’’
(d) CREDIT FOR FOREIGN TAXES IMPOSED ON UNIT-
ED STATES SOURCE INCOME.—
(1) Subsection (b) of section 877 is amended by
adding at the end the following new sentence: ‘‘The
tax imposed solely by reason of this section shall be
reduced (but not below zero) by the amount of any
income, war profits, and excess profits taxes (within
the meaning of section 903) paid to any foreign
country or possession of the United States on any
831
income of the taxpayer on which tax is imposed sole-
ly by reason of this section.’’
(2) Subsection (a) of section 877, as amended
by subsection (a), is amended by inserting ‘‘(after
any reduction in such tax under the last sentence of
such subsection)’’ after ‘‘such subsection’’.
(e) COMPARABLE ESTATE AND GIFT TAX TREAT-
MENT.—
(1) ESTATE TAX.—
(A) IN GENERAL.—Subsection (a) of sec-
tion 2107 is amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) RATE OF TAX.—A tax computed in accord-
ance with the table contained in section 2001 is
hereby imposed on the transfer of the taxable estate,
determined as provided in section 2106, of every de-
cedent nonresident not a citizen of the United States
if, within the 10-year period ending with the date of
death, such decedent lost United States citizenship,
unless such loss did not have for 1 of its principal
purposes the avoidance of taxes under this subtitle
or subtitle A.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING TAX AVOIDANCE PURPOSE.—
832
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if
such individual is so treated under section
877(a)(2).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a decedent meeting the re-
quirements of section 877(c)(1).’’
(B) 
CREDIT
FOR
FOREIGN
DEATH
TAXES.—Subsection (c) of section 2107 is
amended by redesignating paragraph (2) as
paragraph (3) and by inserting after paragraph
(1) the following new paragraph:
‘‘(2) CREDIT FOR FOREIGN DEATH TAXES.—
‘‘(A) IN GENERAL.—The tax imposed by
subsection (a) shall be credited with the amount
of any estate, inheritance, legacy, or succession
taxes actually paid to any foreign country in re-
spect of any property which is included in the
gross estate solely by reason of subsection (b).
‘‘(B) LIMITATION ON CREDIT.—The credit
allowed by subparagraph (A) for such taxes
paid to a foreign country shall not exceed the
lesser of—
833
‘‘(i) the amount which bears the same
ratio to the amount of such taxes actually
paid to such foreign country in respect of
property included in the gross estate as the
value of the property included in the gross
estate solely by reason of subsection (b)
bears to the value of all property subjected
to such taxes by such foreign country, or
‘‘(ii) such property’s proportionate
share of the excess of—
‘‘(I) the tax imposed by sub-
section (a), over
‘‘(II) the tax which would be im-
posed by section 2101 but for this
section.
‘‘(C) PROPORTIONATE
SHARE.—For pur-
poses of subparagraph (B), a property’s propor-
tionate share is the percentage which the value
of the property which is included in the gross
estate solely by reason of subsection (b) bears
to the total value of the gross estate.’’
(C) EXPANSION OF INCLUSION IN GROSS
ESTATE
OF
STOCK
OF
FOREIGN
CORPORA-
TIONS.—Paragraph (2) of section 2107(b) is
amended by striking ‘‘more than 50 percent of’’
834
and all that follows and inserting ‘‘more than
50 percent of—
‘‘(A) the total combined voting power of all
classes of stock entitled to vote of such corpora-
tion, or
‘‘(B) the total value of the stock of such
corporation,’’.
(2) GIFT TAX.—
(A) IN GENERAL.—Paragraph (3) of sec-
tion 2501(a) is amended to read as follows:
‘‘(3) EXCEPTION.—
‘‘(A) CERTAIN
INDIVIDUALS.—Paragraph
(2) shall not apply in the case of a donor who,
within the 10-year period ending with the date
of transfer, lost United States citizenship, un-
less such loss did not have for 1 of its principal
purposes the avoidance of taxes under this sub-
title or subtitle A.
‘‘(B) CERTAIN INDIVIDUALS TREATED AS
HAVING TAX AVOIDANCE PURPOSE.—For pur-
poses of subparagraph (A), an individual shall
be treated as having a principal purpose to
avoid such taxes if such individual is so treated
under section 877(a)(2).
835
‘‘(C) EXCEPTION
FOR
CERTAIN
INDIVID-
UALS.—Subparagraph (B) shall not apply to a
decedent meeting the requirements of section
877(c)(1).
‘‘(D) CREDIT FOR FOREIGN GIFT TAXES.—
The tax imposed by this section solely by reason
of this paragraph shall be credited with the
amount of any gift tax actually paid to any for-
eign country in respect of any gift which is tax-
able under this section solely by reason of this
paragraph.’’
(f) COMPARABLE TREATMENT OF LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—
(1) IN GENERAL.—Section 877 is amended by
redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new sub-
section:
‘‘(e) COMPARABLE TREATMENT OF LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—
‘‘(1) IN GENERAL.—Any long-term resident of
the United States who—
837
resident of a foreign country for the taxable year
under the provisions of a tax treaty between the
United States and the foreign country and does not
waive the benefits of such treaty applicable to resi-
dents of the foreign country.
‘‘(3) SPECIAL RULES.—
‘‘(A) EXCEPTIONS NOT TO APPLY.—Sub-
section (c) shall not apply to an individual who
is treated as provided in paragraph (1).
‘‘(B) STEP-UP IN BASIS.—Solely for pur-
poses of determining any tax imposed by reason
of this subsection, property which was held by
the long-term resident on the date the individ-
ual first became a resident of the United States
shall be treated as having a basis on such date
of not less than the fair market value of such
property on such date. The preceding sentence
shall not apply if the individual elects not to
have such sentence apply. Such an election,
once made, shall be irrevocable.
‘‘(4) AUTHORITY TO EXEMPT INDIVIDUALS.—
This subsection shall not apply to an individual who
is described in a category of individuals prescribed
by regulation by the Secretary.
838
‘‘(5) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be appropriate to
carry out this subsection, including regulations pro-
viding for the application of this subsection in cases
where an alien individual becomes a resident of the
United States during the 10-year period after being
treated as provided in paragraph (1).’’
(2) CONFORMING AMENDMENTS.—
(A) Section 2107 is amended by striking
subsection (d), by redesignating subsection (e)
as subsection (d), and by inserting after sub-
section (d) (as so redesignated) the following
new subsection:
‘‘(e) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful
permanent residents who ceased to be taxed as resi-
dents, see section 877(e).’’
(B) Paragraph (3) of section 2501(a) (as
amended by subsection (e)) is amended by add-
ing at the end the following new subparagraph:
‘‘(E) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful
permanent residents who ceased to be taxed as resi-
dents, see section 877(e).’’
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to—
839
(A) individuals losing United States citi-
zenship (within the meaning of section 877 of
the Internal Revenue Code of 1986) on or after
February 6, 1995, and
(B) long-term residents of the United
States with respect to whom an event described
in subparagraph (A) or (B) of section 877(e)(1)
of such Code occurs on or after June 13, 1995.
(2) SPECIAL RULE.—
(A) IN GENERAL.—In the case of an indi-
vidual who performed an act of expatriation
specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nation-
ality Act (8 U.S.C. 1481(a)(1)–(4)) before Feb-
ruary 6, 1995, but who did not, on or before
such date, furnish to the United States Depart-
ment of State a signed statement of voluntary
relinquishment of United States nationality con-
firming the performance of such act, the
amendments made by this section shall apply to
such individual except that—
(i) the 10-year period described in
section 877(a) of such Code shall not ex-
pire before the end of the 10-year period
840
beginning on the date such statement is so
furnished, and
(ii) the 1-year period referred to in
section 877(c) of such Code, as amended
by this section, shall not expire before the
date which is 1 year after the date of the
enactment of this Act.
(B) EXCEPTION.—Subparagraph (A) shall
not apply if the individual establishes to the
satisfaction of the Secretary of the Treasury
that such loss of United States citizenship oc-
curred before February 6, 1994.
SEC. 13617. INFORMATION ON INDIVIDUALS LOSING UNIT-
ED STATES CITIZENSHIP.
(a) IN GENERAL.—Subpart A of part III of sub-
chapter A of chapter 61 is amended by inserting after sec-
tion 6039E the following new section:
‘‘SEC. 
6039F. 
INFORMATION 
ON 
INDIVIDUALS 
LOSING
UNITED STATES CITIZENSHIP.
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of law, any individual who loses United States citi-
zenship (within the meaning of section 877(a)) shall pro-
vide a statement which includes the information described
in subsection (b). Such statement shall be—
841
‘‘(1) provided not later than the earliest date of
any act referred to in subsection (c), and
‘‘(2) provided to the person or court referred to
in subsection (c) with respect to such act.
‘‘(b) INFORMATION TO BE PROVIDED.—Information
required under subsection (a) shall include—
‘‘(1) the taxpayer’s TIN,
‘‘(2) the mailing address of such individual’s
principal foreign residence,
‘‘(3) the foreign country in which such individ-
ual is residing,
‘‘(4) the foreign country of which such individ-
ual is a citizen,
‘‘(5) in the case of an individual having a net
worth of at least the dollar amount applicable under
section 877(a)(2)(B), information detailing the as-
sets and liabilities of such individual, and
‘‘(6) such other information as the Secretary
may prescribe.
‘‘(c) ACTS DESCRIBED.—For purposes of this sec-
tion, the acts referred to in this subsection are—
‘‘(1) the individual’s renunciation of his United
States nationality before a diplomatic or consular of-
ficer of the United States pursuant to paragraph (5)
842
of section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(5)),
‘‘(2) the individual’s furnishing to the United
States Department of State a signed statement of
voluntary relinquishment of United States national-
ity confirming the performance of an act of expatria-
tion specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(1)–(4)),
‘‘(3) the issuance by the United States Depart-
ment of State of a certificate of loss of nationality
to the individual, or
‘‘(4) the cancellation by a court of the United
States of a naturalized citizen’s certificate of natu-
ralization.
‘‘(d) PENALTY.—Any individual failing to provide a
statement required under subsection (a) shall be subject
to a penalty for each year (of the 10-year period beginning
on the date of loss of United States citizenship) during
any portion of which such failure continues in an amount
equal to the greater of—
‘‘(1) 5 percent of the tax required to be paid
under section 877 for the taxable year ending during
such year, or
‘‘(2) $1,000,
843
unless it is shown that such failure is due to reasonable
cause and not to willful neglect.
‘‘(e) INFORMATION TO BE PROVIDED
TO SEC-
RETARY.—Notwithstanding any other provision of law—
‘‘(1) any Federal agency or court which collects
(or is required to collect) the statement under sub-
section (a) shall provide to the Secretary—
‘‘(A) a copy of any such statement, and
‘‘(B) the name (and any other identifying
information) of any individual refusing to com-
ply with the provisions of subsection (a),
‘‘(2) the Secretary of State shall provide to the
Secretary a copy of each certificate as to the loss of
American nationality under section 358 of the Immi-
gration and Nationality Act which is approved by
the Secretary of State, and
‘‘(3) the Federal agency primarily responsible
for administering the immigration laws shall provide
to the Secretary the name of each lawful permanent
resident of the United States (within the meaning of
section 7701(b)(6)) whose status as such has been
revoked or has been administratively or judicially de-
termined to have been abandoned.
Notwithstanding any other provision of law, not later than
30 days after the close of each calendar quarter, the Sec-
844
retary shall publish in the Federal Register the name of
each individual losing United States citizenship (within
the meaning of section 877(a)) with respect to whom the
Secretary receives information under the preceding sen-
tence during such quarter.
‘‘(f) REPORTING BY LONG-TERM LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—In lieu of applying the last sentence of sub-
section (a), any individual who is required to provide a
statement under this section by reason of section
877(e)(1) shall provide such statement with the return of
tax imposed by chapter 1 for the taxable year during
which the event described in such section occurs.
‘‘(g) EXEMPTION.—The Secretary may by regula-
tions exempt any class of individuals from the require-
ments of this section if he determines that applying this
section to such individuals is not necessary to carry out
the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 6039E the following new item:
‘‘Sec. 6039F. Information on individuals losing United States citi-
zenship.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to—
845
(1) individuals losing United States citizenship
(within the meaning of section 877 of the Internal
Revenue Code of 1986) after the date of the enact-
ment of this Act, and
(2) long-term residents of the United States
with respect to whom an event described in subpara-
graph (A) or (B) of section 877(e)(1) of such Code
occurs after such date.
SEC. 13618. REPORT ON TAX COMPLIANCE BY UNITED
STATES CITIZENS AND RESIDENTS LIVING
ABROAD.
Not later than 90 days after the date of the enact-
ment of this Act, the Secretary of the Treasury shall pre-
pare and submit to the Committee on Ways and Means
of the House of Representatives and the Committee on
Finance of the Senate a report—
(1) describing the compliance with subtitle A of
the Internal Revenue Code of 1986 by citizens and
lawful permanent residents of the United States
(within the meaning of section 7701(b)(6) of such
Code) residing outside the United States, and
(2) recommending measures to improve such
compliance (including improved coordination be-
tween executive branch agencies).
846
PART IV—REFORMS RELATING TO ENERGY
PROVISIONS
SEC. 13621. TERMINATION OF CREDIT FOR ELECTRICITY
PRODUCED FROM CERTAIN RENEWABLE RE-
SOURCES.
(a) FACILITIES MUST BE PLACED IN SERVICE BE-
FORE SEPTEMBER 14, 1995.—Paragraph (3) of section
45(c) (defining qualified facility) is amended by striking
‘‘July 1, 1999’’ and inserting ‘‘September 14, 1995’’.
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
this section shall apply to taxable years ending after
September 13, 1995.
(2) BINDING
CONTRACTS.—The amendment
made by this section shall not apply to any facility—
(A) which is constructed or acquired by the
taxpayer pursuant to a written contract which
was binding on September 13, 1995, and at all
times thereafter before such construction or ac-
quisition, and
(B) which is placed in service before Sep-
tember 14, 1996.
SEC. 13622. REDUCTION OF INCENTIVES FOR ALCOHOL
FUELS.
(a) DENIAL OF CREDIT FOR ALCOHOL USED TO
PRODUCE
ETHER.—Subsection (b) of section 40 is
847
amended by adding at the end the following new para-
graph:
‘‘(6) DENIAL OF CREDIT FOR ALCOHOL USED
TO PRODUCE ETHER.—No credit shall be allowed
under this section for alcohol used to produce any
ether.’’
(b) LIMITATION ON ALCOHOL ELIGIBLE FOR CREDIT
FOR ALCOHOL USED AS FUEL—
(1) IN GENERAL.—Subparagraph (A) of section
40(d)(1) (defining alcohol) is amended by striking
‘‘or’’ at the end of clause (i), by striking the period
at the end of clause (ii) and inserting ‘‘, or’’, and
by adding at the end the following new clause:
‘‘(iii) alcohol produced by a still (or
other distilling apparatus) placed in service
after September 13, 1995.’’
(2) FUTURE CREDIT LIMITED TO AVERAGE HIS-
TORICAL PRODUCTION.—Section 40 is amended by
adding at the end the following new subsection:
‘‘(i) EXPANDED
PRODUCTION
INELIGIBLE
FOR
CREDIT.—
‘‘(1) IN GENERAL.—Subsection (a) shall apply
to alcohol produced after December 31, 1995, only
if the alcohol is designated under this subsection by
a producer who is registered under section 4101.
848
‘‘(2) DESIGNATION BASED ON HISTORICAL PRO-
DUCTION.—The amount of alcohol produced by a
producer during any calendar year which may be
designated under this subsection by any producer
other than an eligible small ethanol producer is the
amount equal to the average annual amount of alco-
hol (as defined in subsection (d)(1)(A) without re-
gard to clause (iii))—
‘‘(A) which was produced by such producer
(other than casual off-farm production) during
the 3-year period ending on August 31, 1995,
and
‘‘(B) which was sold or used by such pro-
ducer for any purpose described in clause (i) of
subsection (b)(4)(B).
For purposes of the preceding sentence, a rule simi-
lar to the rule of subsection (b)(4)(D) shall apply.
‘‘(3) PRODUCTION
FOR
LESS
THAN
ENTIRE
BASE PERIOD.—
‘‘(A) IN GENERAL.—If alcohol is produced
by a producer for less than the entire 3-year pe-
riod referred to in paragraph (2)(A), the aver-
age referred to in paragraph (2) shall be treat-
ed as being equal to 50 percent of the annual
849
productive capacity of such producer as of Sep-
tember 13, 1995.
‘‘(B) PRODUCER MAY ESTABLISH HIGHER
AVERAGE PRODUCTION.—In the case of a pro-
ducer who produced alcohol during at least the
last 3 months of such 3-year period, subpara-
graph (A) shall be applied by substituting for
‘50 percent’ the percentage established by such
producer to the satisfaction of the Secretary as
the percentage which such producer’s normal
alcohol production is of its productive capacity.
‘‘(4) ACQUISITIONS AND DISPOSITIONS.—Rules
similar to the rules of subparagraphs (A) and (B) of
section 41(f)(3) shall apply for purposes of this sub-
section.’’
(3) CONFORMING AMENDMENT.—Paragraph (1)
of section 40(g) is amended by striking ‘‘clauses (i)
and (ii)’’ and inserting ‘‘clauses (i), (ii), and (iii)’’.
(c) REDUCTION OF CREDIT FOR ETHANOL BY REA-
SON OF CARBON DIOXIDE BYPRODUCT BENEFIT.—Sub-
section (h) of section 40 is amended—
(1) by striking ‘‘54 cents’’ each place it appears
and inserting ‘‘51 cents’’, and
(2) by striking ‘‘40 cents’’ each place it appears
and inserting ‘‘38.25 cents’’.
850
(d) CONFORMING REDUCTIONS OF OTHER INCEN-
TIVES FOR ETHANOL FUEL.—
(1) REPEAL OF REDUCED RATE ON ETHANOL
FUEL PRODUCED OTHER THAN FROM PETROLEUM
OR NATURAL GAS.—Subsection (b) of section 4041
is amended to read as follows:
‘‘(b) EXEMPTION
FOR
OFF-HIGHWAY
BUSINESS
USE.—
‘‘(1) IN GENERAL.—No tax shall be imposed by
subsection (a) or (d)(1) on liquids sold for use or
used in an off-highway business use.
‘‘(2) TAX WHERE OTHER USE.—If a liquid on
which no tax was imposed by reason of paragraph
(1) is used otherwise than in an off-highway busi-
ness use, a tax shall be imposed by paragraph
(1)(B), (2)(B), or (3)(A)(ii) of subsection (a)
(whichever is appropriate) and by the corresponding
provision of subsection (d)(1) (if any).
‘‘(3) OFF-HIGHWAY BUSINESS USE DEFINED.—
For purposes of this subsection, the term ‘off-high-
way business use’ has the meaning given to such
term by section 6421(e)(2); except that such term
shall not, for purposes of subsection (a)(1), include
use in a diesel-powered train.’’
851
(2) REPEAL OF REDUCED RATE ON ETHANOL
FUEL PRODUCED FROM NATURAL GAS.—Subsection
(m) of section 4041 is amended—
(A) by striking ‘‘or ethanol’’ each place it
appears (including the heading of paragraph
(2)), and
(B) by striking ‘‘, ethanol, or other alco-
hol’’ in paragraph (2) and inserting ‘‘or other
alcohol (other than ethanol)’’.
(e) CONFORMING AMENDMENTS TO EXCISE TAXES;
FUEL ALCOHOL TAXED IN SAME MANNER AS OTHER
MOTOR FUELS.—
(1) IN
GENERAL.—Paragraph (1) of section
4083(a) (defining taxable fuel) is amended by strik-
ing ‘‘and’’ at the end of subparagraph (A), by strik-
ing the period at the end of subparagraph (B) and
inserting ‘‘, and’’, and by adding at the end the fol-
lowing:
‘‘(C) fuel alcohol.’’
(2) FUEL ALCOHOL.—Subsection (a) of section
4083 is amended by adding at the end the following
new paragraph:
‘‘(4) FUEL ALCOHOL.—The term ‘fuel alcohol’
means any alcohol (including ethanol and meth-
anol)—
852
‘‘(A) which is produced other than from
petroleum, natural gas, or coal (including peat),
and
‘‘(B) which is withdrawn from the distillery
where produced free of tax under chapter 51 by
reason of section 5181 or so much of section
5214(a)(1) as relates to fuel use.
Such term shall not include alcohol designated under
section 40(i).’’
(3) RATE
OF
TAX.—Clause (i) of section
4081(a)(2)(A) is amended by inserting ‘‘or fuel alco-
hol’’ after ‘‘gasoline’’.
(4) SPECIAL RULES FOR IMPOSITION OF TAX.—
(A) Paragraph (1) of section 4081(a) is
amended by adding at the end the following
new subparagraph:
‘‘(C) SPECIAL
RULES
FOR
FUEL
ALCO-
HOL.—In the case of fuel alcohol—
‘‘(i) the distillery where produced shall
be treated as a refinery, and
‘‘(ii) subparagraph (B) shall be ap-
plied by including transfers by truck or rail
in excess of such minimum quantities as
the Secretary shall prescribe.’’
853
(B) Paragraph (1) of section 4081(b) is
amended by inserting ‘‘(other than fuel alcohol
designated under section 40(i))’’ after ‘‘taxable
fuel’’.
(5) REPEAL OF REDUCED RATES ON ALCOHOL
FUELS.—
(A) Section 4041 is amended by striking
subsection (k).
(B) Section 4081 is amended by striking
subsection (c).
(C) Section 4091 is amended by striking
subsection (c).
(6) CONFORMING AMENDMENTS.—
(A) Subsection (c) of section 40 is amend-
ed by striking all that follows ‘‘application of’’
and inserting ‘‘the last sentence of section
4083(a)(4)’’.
(B) Paragraph (4) of section 40(d) is
amended to read as follows:
‘‘(4) VOLUME OF ALCOHOL.—For purposes of
determining under subsection (a) the number of gal-
lons of alcohol with respect to which a credit is al-
lowable under subsection (a), the volume of alcohol
shall include the volume of any denaturant (includ-
ing gasoline) which is added under any formulas ap-
854
proved by the Secretary to the extent that such de-
naturants do not exceed 5 percent of the volume of
such alcohol (including denaturants).’’
(C) Paragraph (2) of section 4041(a) is
amended by adding at the end the following:
‘‘No tax shall be imposed by this paragraph on
the sale or use of any liquid if tax was imposed
on such liquid under section 4081 and the tax
thereon was not credited or refunded.’’
(D) Section 6427 is amended by striking
subsection (f).
(E) Subsection (i) of section 6427 is
amended by striking paragraph (3).
(F) Paragraph (2) of section 6427(k) is
amended by striking ‘‘(3)’’.
(G)(i) Paragraph (1) of section 6427(l) is
amended by striking ‘‘or’’ at the end of sub-
paragraph (A), by redesignating subparagraph
(B) as subparagraph (C), and by inserting after
subparagraph (A) the following new subpara-
graph:
‘‘(B) any fuel alcohol (as defined in section
4083) on which tax has been imposed by sec-
tion 4081, or’’.
855
(ii) Paragraph (2) of section 6427(l) is
amended by striking ‘‘and’’ at the end of sub-
paragraph (A), by redesignating subparagraph
(B) as subparagraph (C), and by inserting after
subparagraph (A) the following new subpara-
graph:
‘‘(B) in the case of fuel alcohol (as so de-
fined), any use which is exempt from the tax
imposed by section 4041(a)(2) other than by
reason of a prior imposition of tax, and’’.
(iii) The heading of subsection (l) of sec-
tion 6427 is amended by inserting ‘‘, FUEL AL-
COHOL,’’ after ‘‘DIESEL FUEL’’.
(H) 
Sections 
9503(b)(1)(E) 
and
9508(b)(2) are each amended by striking ‘‘and
kerosene’’ and inserting ‘‘kerosene, and fuel al-
cohol’’.
(I) Section 9502 is amended by striking
subsection (e) and by redesignating subsection
(f) as subsection (e).
(J) Subsection (e) of section 9502 (as re-
designated by subparagraph (I)) is amended by
striking paragraph (2) and by redesignating
paragraph (3) as paragraph (2).
856
(K) Subsection (b) of section 9503 is
amended by striking paragraph (5).
(L) Paragraph (3) of section 9503(f) is
amended to read as follows:
‘‘(3) PARTIALLY EXEMPT METHANOL OR ETHA-
NOL FUEL.—In the case of a rate of tax determined
under section 4041(m), the Highway Trust Fund fi-
nancing rate is the excess (if any) of the rate so de-
termined over—
‘‘(A) 5.55 cents per gallon after September
30, 1993, and before October 1, 1995, and
‘‘(B) 4.3 cents per gallon after September
30, 1995.’’
(f) INCREASE IN SMALL ETHANOL PRODUCER CRED-
IT.—Subparagraph (A) of section 40(b)(4) is amended by
striking ‘‘10 cents’’ and inserting ‘‘13 cents’’.
(g) EFFECTIVE DATE.—
(1) AMENDMENTS RELATING TO CREDIT.—The
amendments made by subsections (a), (b), (c), and
(f) shall apply to alcohol produced after December
31, 1995, in taxable years ending after such date.
(2) 
AMENDMENTS
RELATING
TO
EXCISE
TAXES.—The amendments made by subsections (d)
and (e) shall take effect on January 1, 1996.
857
(3) STILLS PLACED IN SERVICE PURSUANT TO
BINDING CONTRACTS.—For purposes of subsections
(d)(1)(A)(iii) and (i)(3)(A) of section 40 of the In-
ternal Revenue Code of 1986, as amended by this
section, a still (or other distilling apparatus) shall be
treated as placed in service before September 14,
1995, if such still (or other apparatus)—
(A) is constructed or acquired by the tax-
payer pursuant to a written contract which was
binding on September 13, 1995, and at all
times thereafter before such construction or ac-
quisition, and
(B) is placed in service before September
14, 1996.
(h) FLOOR STOCK TAXES.—
(1) IMPOSITION OF TAX.—In the case of fuel al-
cohol which is held on January 1, 1996, by any per-
son, there is hereby imposed a floor stocks tax of
18.4 cents per gallon.
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY FOR TAX.—A person hold-
ing fuel alcohol on January 1, 1996, to which
the tax imposed by paragraph (1) applies shall
be liable for such tax.
858
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such
manner as the Secretary shall prescribe.
(C) TIME
FOR
PAYMENT.—The tax im-
posed by paragraph (1) shall be paid on or be-
fore June 30, 1996.
(3) DEFINITIONS.—For purposes of this sub-
section—
(A) FUEL ALCOHOL.—The term ‘‘fuel alco-
hol’’ has the meaning given such term by sec-
tion 4083 of the Internal Revenue Code of
1986, as amended by this section.
(B) HELD
BY
A
PERSON.—Fuel alcohol
shall be considered as ‘‘held by a person’’ if
title thereto has passed to such person (whether
or not delivery to the person has been made).
(C) SECRETARY.—The term ‘‘Secretary’’
means the Secretary of the Treasury or his del-
egate.
(4) EXCEPTION FOR EXEMPT USES.—The tax
imposed by paragraph (1) shall not apply to fuel al-
cohol held by any person exclusively for any use to
the extent a credit or refund of the tax imposed by
section 4081 of the Internal Revenue Code of 1986
is allowable for such use.
859
(5) EXCEPTION FOR FUEL HELD IN VEHICLE
TANK.—No tax shall be imposed by paragraph (1)
on fuel alcohol held in the tank of a motor vehicle
or motorboat.
(6) EXCEPTION
FOR
CERTAIN
AMOUNTS
OF
FUEL.—
(A) IN
GENERAL.—No tax shall be im-
posed by paragraph (1) on fuel alcohol held on
January 1, 1996, by any person if the aggre-
gate amount of fuel alcohol held by such person
on such date does not exceed 2,000 gallons.
The preceding sentence shall apply only if such
person submits to the Secretary (at the time
and in the manner required by the Secretary)
such information as the Secretary shall require
for purposes of this paragraph.
(B) EXEMPT FUEL.—For purposes of sub-
paragraph (A), there shall not be taken into ac-
count fuel held by any person which is exempt
from the tax imposed by paragraph (1) by rea-
son of paragraph (4) or (5).
(C) CONTROLLED GROUPS.—For purposes
of this paragraph—
(i) CORPORATIONS.—
860
(I) IN
GENERAL.—All persons
treated as a controlled group shall be
treated as 1 person.
(II) CONTROLLED
GROUP.—The
term ‘‘controlled group’’ has the
meaning given to such term by sub-
section (a) of section 1563 of such
Code; except that for such purposes
the phrase ‘‘more than 50 percent’’
shall be substituted for the phrase ‘‘at
least 80 percent’’ each place it ap-
pears in such subsection.
(ii) 
NONINCORPORATED
PERSONS
UNDER COMMON CONTROL.—Under regula-
tions prescribed by the Secretary, prin-
ciples similar to the principles of clause (i)
shall apply to a group of persons under
common control where 1 or more of such
persons is not a corporation.
(7) OTHER LAWS APPLICABLE.—All provisions
of law, including penalties, applicable with respect to
the taxes imposed by section 4081 of such Code
shall, insofar as applicable and not inconsistent with
the provisions of this subsection, apply with respect
to the floor stock taxes imposed by paragraph (1) to
861
the same extent as if such taxes were imposed by
such section 4081.
SEC. 13623. EXCLUSION FOR ENERGY CONSERVATION SUB-
SIDIES LIMITED TO SUBSIDIES WITH RE-
SPECT TO DWELLING UNITS.
(a) IN GENERAL.—Paragraph (1) of section 136(c)
(defining energy conservation measure) is amended by
striking ‘‘energy demand—’’ and all that follows and in-
serting ‘‘energy demand with respect to a dwelling unit.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 136 is amended to
read as follows:
‘‘(a) EXCLUSION.—Gross income shall not include
the value of any subsidy provided (directly or indirectly)
by a public utility to a customer for the purchase or instal-
lation of any energy conservation measure.’’
(2) Paragraph (2) of section 136(c) is amend-
ed—
(A) by striking subparagraph (A) and by
redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively, and
(B) by striking ‘‘AND SPECIAL RULES’’ in
the paragraph heading.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after Septem-