ployer stating that the requirements
of this paragraph have been met.
‘‘(iii) 
REVENUE
OFFSET
PROCE-
DURES.—The Secretary shall, by January
1, 1995, notify defined benefit plans that
have not made an election under this para-
graph for the transition period described in
clause (ii) of the adjustment required by
subparagraph (H). The revenue offset for
the transition period shall apply to plan
years beginning on or after July 1, 1994,
and before January 1, 1995.
‘‘(iv) EXCESS CONTRIBUTIONS MADE
BY NON-ELECTING PLANS.—To the extent
a defined benefit plan sponsor makes a
contribution to a defined benefit plan with
respect to the transition period described
in clause (ii) which exceeds the limitation
of paragraph (7), as adjusted by the Sec-
retary for the transition period, the spon-
sor shall offset the excess contribution
against allowable contributions to the plan
in subsequent quarters in the taxable year
of the sponsor. If no subsequent contribu-
tions may be made for the taxable year,
the trustee of the defined benefit plan shall
return the excess contribution to the spon-
sor in that taxable year or the following
taxable year. Notwithstanding any other
provision of this title, no deduction shall be
allowed for any contribution made in ex-
cess of the limitation of paragraph (7), as
adjusted by the Secretary for the transi-
tion period, and no penalty shall apply
with respect to contributions made in ex-
cess of such limitation to the extent such
excess contributions are either used to off-
set subsequent contributions, or returned
to the plan sponsor, as provided in this
clause.
‘‘(E) TERM OF ELECTION.—Any election
made under this paragraph shall apply for the
election period.
‘‘(F) OTHER
CONSEQUENCES
OF
ELEC-
TION.—
‘‘(i) NO FUNDING WAIVERS.—In the
case of a plan with respect to which an
election is made under this paragraph, no
waiver may be granted under subsection
(d) for any plan year beginning after the
date the election was made and ending at
the close of the election period with respect
thereto.
‘‘(ii) FAILURE TO MAKE SUCCESSIVE
ELECTIONS.—If an election is made under
this paragraph with respect to any plan
and such an election does not apply for
each successive plan year of such plan,
such plan shall be treated as not meeting
the requirements of subparagraph (C) for
the period of 10 plan years beginning after
the close of the last election period for
such plan.
‘‘(G) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) ELECTION
PERIOD.—The term
‘election period’ means the period of 5 con-
secutive plan years beginning with the 1st
plan year for which the election is made.
‘‘(ii) CONTROLLED GROUP.—The term
‘controlled group’ means all persons who
are treated as a single employer under sub-
section (b), (c), (m), or (o) of section 414.
‘‘(H) 
PROCEDURES
IF
ALTERNATIVE
FUNDING LIMITATION REDUCES NET FEDERAL
REVENUES.—
‘‘(i) IN GENERAL.—At least once with
respect to each fiscal year, the Secretary
shall estimate whether the application of
this paragraph will result in a net reduc-
tion in Federal revenues for such fiscal
year.
‘‘(ii) ADJUSTMENT OF FULL-FUNDING
LIMITATION IF REVENUE SHORTFALL.—If
the Secretary estimates that the applica-
tion of this paragraph will result in a more
than insubstantial net reduction in Federal
revenues for any fiscal year, the Sec-
retary—
‘‘(I) shall make the adjustment
described in clause (iii), and
‘‘(II) to the extent such adjust-
ment is not sufficient to reduce such
reduction to an insubstantial amount,
shall make the adjustment described
in clause (iv).
Such adjustments shall apply only to de-
fined benefit plans with respect to which
an election under this paragraph is not in
effect.
‘‘(iii) 
REDUCTION
IN
LIMITATION
BASED ON 150 PERCENT OF CURRENT LI-
ABILITY.—The adjustment described in
this clause is an adjustment which sub-
stitutes a percentage (not lower than 140
percent) for the percentage described in
paragraph (7)(A)(i)(I) determined by re-
ducing the percentage of current liability
taken into account with respect to partici-
pants who are not accruing benefits under
the plan.
‘‘(iv) 
REDUCTION
IN
LIMITATION
BASED ON ACCRUED LIABILITY.—The ad-
justment described in this clause is an ad-
justment which reduces the percentage of
accrued liability taken into account under
paragraph (7)(A)(i)(II). In no event may
the amount of accrued liability taken into
account under such paragraph after the
adjustment be less than 140 percent of
current liability.’’
(b) ALTERATION OF DISCRETIONARY REGULATORY
AUTHORITY.—Subparagraph (D) of section 412(c)(7) is
amended by striking ‘‘provide—’’ and all that follows
through ‘‘(iii) for’’ and inserting ‘‘provide for’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1995, except
that, in the case of an election under subparagraph (D)(ii)
of paragraph (8) of section 412(c) of the Internal Revenue
Code of 1986, as added by this section, such amendments
shall take effect on July 1, 1994.
SEC. 237. DISTRIBUTIONS UNDER RURAL COOPERATIVE
PLANS.
(a) DISTRIBUTIONS AFTER CERTAIN AGE.—Section
401(k)(7) is amended by adding at the end thereof the
following new subparagraph:
‘‘(C) SPECIAL RULE FOR CERTAIN DISTRIBU-
TIONS.—A rural cooperative plan which includes a
qualified cash or deferred arrangement shall not be
treated as violating the requirements of section
401(a) merely by reason of a distribution to a par-
ticipant after attainment of age 591⁄2.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after the date of
the enactment of this Act.
SEC. 238. TREATMENT OF GOVERNMENTAL PLANS UNDER
SECTION 415.
(a) DEFINITION OF COMPENSATION.—Subsection (k)
of section 415 (regarding limitations on benefits and con-
tributions under qualified plans) is amended by adding im-
mediately after paragraph (2) thereof the following new
paragraph:
‘‘(3) DEFINITION OF COMPENSATION FOR GOV-
ERNMENTAL PLANS.—For purposes of this section,
in the case of a governmental plan (as defined in
section 414(d)), the term ‘compensation’ includes, in
addition to the amounts described in subsection
(c)(3)—
‘‘(A) any elective deferral (as defined in
section 402(g)(3)), and
‘‘(B) any amount which is contributed by
the employer at the election of the employee
and which is not includible in the gross income
of an employee under section 125 or 457.’’
(b) COMPENSATION LIMIT.—Subsection (b) of sec-
tion 415 is amended by adding immediately after para-
graph (10) the following new paragraph:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL
PLANS.—In the case of a governmental
plan (as defined in section 414(d)), subparagraph
(B) of paragraph (1) shall not apply.’’
(c) TREATMENT
OF CERTAIN EXCESS BENEFIT
PLANS.—
(1) IN GENERAL.—Section 415 is amended by
adding at the end thereof the following new sub-
section:
‘‘(m) TREATMENT OF QUALIFIED GOVERNMENTAL
EXCESS BENEFIT ARRANGEMENTS.—
‘‘(1) GOVERNMENTAL PLAN NOT AFFECTED.—
In determining whether a governmental plan (as de-
fined in section 414(d)) meets the requirements of
this section, benefits provided under a qualified gov-
ernmental excess benefit arrangement shall not be
taken into account. Income accruing to a govern-
mental plan (or to a trust that is maintained solely
for the purpose of providing benefits under a quali-
fied governmental excess benefit arrangement) in re-
spect of a qualified governmental excess benefit ar-
rangement shall constitute income derived from the
exercise of an essential governmental function upon
which such governmental plan (or trust) shall be ex-
empt from tax under section 115.
‘‘(2) TAXATION
OF
PARTICIPANT.—For pur-
poses of this chapter—
‘‘(A) the taxable year or years for which
amounts in respect of a qualified governmental
excess benefit arrangement are includible in
gross income by a participant, and
‘‘(B) the treatment of such amounts when
so includible by the participant,
shall be determined as if such qualified govern-
mental excess benefit arrangement were treated as a
plan for the deferral of compensation which is main-
tained by a corporation not exempt from tax under
this chapter and which does not meet the require-
ments for qualification under section 401.
‘‘(3) QUALIFIED GOVERNMENTAL EXCESS BEN-
EFIT
ARRANGEMENT.—For purposes of this sub-
section, the term ‘qualified governmental excess ben-
efit arrangement’ means a portion of a governmental
plan if—
‘‘(A) such portion is maintained solely for
the purpose of providing to participants in the
plan that part of the participant’s annual bene-
fit otherwise payable under the terms of the
plan that exceeds the limitations on benefits im-
posed by this section,
‘‘(B) under such portion no election is pro-
vided at any time to the participant (directly or
indirectly) to defer compensation, and
‘‘(C) benefits described in subparagraph
(A) are not paid from a trust forming a part
of such governmental plan unless such trust is
maintained solely for the purpose of providing
such benefits.’’
(2) COORDINATION WITH SECTION 457.—Sub-
section (e) of section 457 is amended by adding at
the end thereof the following new paragraph:
‘‘(15) TREATMENT
OF
QUALIFIED
GOVERN-
MENTAL
EXCESS
BENEFIT
ARRANGEMENTS.—Sub-
sections (b)(2) and (c)(1) shall not apply to any
qualified governmental excess benefit arrangement
(as defined in section 415(m)(3)), and benefits pro-
vided under such an arrangement shall not be taken
into account in determining whether any other plan
is an eligible deferred compensation plan.’’
(3) CONFORMING AMENDMENT.—Paragraph (2)
of section 457(f) is amended by striking the word
‘‘and’’ at the end of subparagraph (C), by striking
the period after subparagraph (D) and inserting the
words ‘‘, and’’, and by inserting immediately there-
after the following new subparagraph:
‘‘(E) a qualified governmental excess bene-
fit arrangement described in section 415(m).’’
(d) EXEMPTION
FOR SURVIVOR
AND DISABILITY
BENEFITS.—Paragraph (2) of section 415(b) is amended
by adding at the end thereof the following new subpara-
graph:
‘‘(I) EXEMPTION FOR SURVIVOR AND DIS-
ABILITY BENEFITS PROVIDED UNDER GOVERN-
MENTAL
PLANS.—Subparagraph (B) of para-
graph (1), subparagraph (C) of this paragraph,
and paragraph (5) shall not apply to—
‘‘(i) income received from a govern-
mental plan (as defined in section 414(d))
as a pension, annuity, or similar allowance
as the result of the recipient becoming dis-
abled by reason of personal injuries or
sickness, or
‘‘(ii) amounts received from a govern-
mental plan by the beneficiaries, survivors,
or the estate of an employee as the result
of the death of the employee.’’
(e) REVOCATION
OF GRANDFATHER ELECTION.—
Subparagraph (C) of section 415(b)(10) is amended by
adding at the end thereof the following new sentence: ‘‘An
election made pursuant to the preceding sentence to have
the provisions of this paragraph applied to the plan may
be revoked not later than the last day of the 3rd plan year
beginning after the date of enactment with respect to all
plan years as to which such election has been applicable
and all subsequent plan years; provided that any amount
paid by the plan in a taxable year ending after revocation
of such election in respect of benefits attributable to a tax-
able year during which such election was in effect shall
be includible in income by the recipient in accordance with
the rules of this chapter in the taxable year in which such
amount is received (except that such amount shall be
treated as received for purposes of the limitations imposed
by this section in the earlier taxable year or years to which
such amount is attributable).’’
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsections (a), (b), (c), and (d) shall apply to tax-
able years beginning on or after the date of the en-
actment of this Act. The amendments made by sub-
section (e) shall apply with respect to election rev-
ocations adopted after the date of the enactment of
this Act.
(2) TREATMENT
FOR
YEARS
BEGINNING
BE-
FORE DATE OF ENACTMENT.—In the case of a gov-
ernmental plan (as defined in section 414(d) of the
Internal Revenue Code of 1986), such plan shall be
treated as satisfying the requirements of section 415
of such Code for all taxable years beginning before
the date of the enactment of this Act.
SEC. 239. UNIFORM RETIREMENT AGE.
(a) DISCRIMINATION TESTING.—Paragraph (5) of
section 401(a) (relating to special rules relating to non-
discrimination requirements) is amended by adding at the
end thereof the following new subparagraph:
‘‘(F) 
SOCIAL
SECURITY
RETIREMENT
AGE.—For purposes of testing for discrimina-
tion under paragraph (4)—
‘‘(i) the social security retirement age
(as defined in section 415(b)(8)) shall be
treated as a uniform retirement age, and
‘‘(ii) subsidized early retirement bene-
fits and joint and survivor annuities shall
not be treated as being unavailable to em-
ployees on the same terms merely because
such benefits or annuities are based in
whole or in part on an employee’s social
security retirement age (as so defined).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1993.
SEC. 240. UNIFORM PENALTY PROVISIONS TO APPLY TO
CERTAIN 
PENSION 
REPORTING 
REQUIRE-
MENTS.
(a) IN GENERAL.—
(1) Paragraph (1) of section 6724(d) is amend-
ed by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subpara-
graph (B) and inserting ‘‘, and’’, and by inserting
after subparagraph (B) the following new subpara-
graph:
‘‘(C) any statement of the amount of pay-
ments to another person required to be made to
the Secretary under—
‘‘(i) section 408(i) (relating to reports
with respect to individual retirement ac-
counts or annuities), or
‘‘(ii) section 6047(d) (relating to re-
ports by employers, plan administrators,
etc.).’’
(2) Paragraph (2) of section 6724(d) is amend-
ed by striking ‘‘or’’ at the end of subparagraph (S),
by striking the period at the end of subparagraph
(T) and inserting a comma, and by inserting after
subparagraph 
(T) 
the 
following 
new
subparagraphs:
‘‘(U) section 408(i) (relating to reports
with respect to individual retirement plans) to
any person other than the Secretary with re-
spect to the amount of payments made to such
person, or
‘‘(V) section 6047(d) (relating to reports
by plan administrators) to any person other
than the Secretary with respect to the amount
of payments made to such person.’’
(b) MODIFICATION
OF REPORTABLE DESIGNATED
DISTRIBUTIONS.—
(1) SECTION 408.—Subsection (i) of section 408
(relating to individual retirement account reports) is
amended by inserting ‘‘aggregating $10 or more in
any calendar year’’ after ‘‘distributions’’.
(2) SECTION 6047.—Paragraph (1) of section
6047(d) (relating to reports by employers, plan ad-
ministrators, etc.) is amended by adding at the end
thereof the following new sentence: ‘‘No return or
report may be required under the preceding sentence
with respect to distributions to any person during
any year unless such distributions aggregate $10 or
more.’’
(c) QUALIFYING ROLLOVER DISTRIBUTIONS.—Sec-
tion 6652(i) is amended—
(1) by striking ‘‘the $10’’ and inserting
‘‘$100’’, and
(2) 
by 
striking 
‘‘$5,000’’ 
and 
inserting
‘‘$50,000’’.
(d) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 6047(f) is amend-
ed to read as follows:
‘‘(1) For provisions relating to penalties for fail-
ures to file returns and reports required under this
section, see sections 6652(e), 6721, and 6722.’’
(2) Subsection (e) of section 6652 is amended
by adding at the end thereof the following new sen-
tence: ‘‘This subsection shall not apply to any return
or statement which is an information return de-
scribed in section 6724(d)(1)(C)(ii) or a payee state-
ment described in section 6724(d)(2)(U).’’
(3) Subsection (a) of section 6693 is amended
by adding at the end thereof the following new sen-
tence: ‘‘This subsection shall not apply to any report
which is an information return described in section
6724(d)(1)(C)(i) or a payee statement described in
section 6724(d)(2)(T).’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns, reports, and other
statements the due date for which (determined without re-
gard to extensions) is after December 31, 1993.
SEC. 241. CONTRIBUTIONS ON BEHALF OF DISABLED EM-
PLOYEES.
(a) ALL DISABLED PARTICIPANTS RECEIVING CON-
TRIBUTIONS.—Section 415(c)(3)(C) is amended by adding
at the end thereof the following: ‘‘If a defined contribution
plan provides for the continuation of contributions on be-
half of all participants described in clause (i) for a fixed
or determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1993.
SEC. 242. SPECIAL RULES FOR PLANS COVERING PILOTS.
(a) GENERAL RULE.—
(1) Subparagraph (B) of section 410(b)(3) is
amended to read as follows:
‘‘(B) in the case of a plan established or
maintained by one or more employers to provide
contributions or benefits for air pilots employed
by one or more common carriers engaged in
interstate or foreign commerce or air pilots em-
ployed by carriers transporting mail for or
under contract with the United States Govern-
ment, all employees who are not air pilots.’’
(2) Paragraph (3) of section 410(b) is amended
by striking the last sentence and inserting the fol-
lowing new sentence: ‘‘Subparagraph (B) shall not
apply in the case of a plan which provides contribu-
tions or benefits for employees who are not air pilots
or for air pilots whose principal duties are not cus-
tomarily performed aboard aircraft in flight.’’
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1993.
SEC. 243. TREATMENT 
OF 
DEFERRED 
COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS
AND TAX-EXEMPT ORGANIZATIONS.
(a) SPECIAL RULES FOR PLAN DISTRIBUTIONS.—
Paragraph (9) of section 457(e) (relating to other defini-
tions and special rules) is amended to read as follows:
‘‘(9) BENEFITS NOT TREATED AS MADE AVAIL-
ABLE BY REASON OF CERTAIN ELECTIONS, ETC.—
‘‘(A) TOTAL AMOUNT PAYABLE IS $3,500
OR LESS.—The total amount payable to a par-
ticipant under the plan shall not be treated as
made available merely because the participant
may elect to receive such amount (or the plan
may distribute such amount without the partici-
pant’s consent) if—
‘‘(i) such amount does not exceed
$3,500, and
‘‘(ii) such amount may be distributed
only if—
‘‘(I) no amount has been deferred
under the plan with respect to such
participant during the 2-year period
ending on the date of the distribution,
and
‘‘(II) there has been no prior dis-
tribution under the plan to such par-
ticipant to which this subparagraph
applied.
A plan shall not be treated as failing to
meet the distribution requirements of sub-
section (d) by reason of a distribution to which
this subparagraph applies.
‘‘(B) ELECTION
TO
DEFER
COMMENCE-
MENT OF DISTRIBUTIONS.—The total amount
payable to a participant under the plan shall
not be treated as made available merely because
the participant may elect to defer commence-
ment of distributions under the plan if—
‘‘(i) such election is made after
amounts may be available under the plan
in accordance with subsection (d)(1)(A)
and before commencement of such dis-
tributions, and
‘‘(ii) the participant may make only 1
such election.’’
(b) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DE-
FERRAL AMOUNT.—Subsection (e) of section 457 is
amended by adding at the end thereof the following new
paragraph:
‘‘(14) COST-OF-LIVING ADJUSTMENT OF MAXI-
MUM DEFERRAL AMOUNT.—The Secretary shall ad-
just the $7,500 amount specified in subsections
(b)(2) and (c)(1) at the same time and in the same
manner as under section 415(d), except that the
base year in applying such section for purposes of
this paragraph shall be 1993.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 244. TREATMENT OF EMPLOYER REVERSIONS RE-
QUIRED BY CONTRACT TO BE PAID TO THE
UNITED STATES.
(a) IN GENERAL.—Subparagraph (B) of section
4980(c)(2) (defining employer reversion) is amended by
striking ‘‘or’’ at the end of clause (i), by striking the pe-
riod at the end of clause (ii) and inserting ‘‘, or’’, and
by adding at the end thereof the following new clause:
‘‘(iii) any distribution to the employer
to the extent that the distribution is paid
within a reasonable period to the United
States in satisfaction of a Federal claim
for an equitable share of the plan’s surplus
assets, as determined pursuant to Federal
contracting regulations.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to reversions on or after the date
of the enactment of this Act.
SEC. 245. CONTINUATION HEALTH COVERAGE FOR EM-
PLOYEES OF FAILED FINANCIAL INSTITU-
TIONS.
(a) ENFORCEMENT OF CONTINUATION OF HEALTH
PLAN REQUIREMENTS OF ACQUIRERS OF FAILED DEPOS-
ITORY INSTITUTIONS.—Subsection (f) of section 4980B
(relating to continuation of coverage requirements of
group health plans) is amended by adding at the end
thereof the following new paragraph:
‘‘(9) SPECIAL
RULES
FOR
ACQUIRERS
OF
FAILED DEPOSITORY INSTITUTIONS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), any acquirer of a failed de-
pository institution—
‘‘(i) shall have the same obligation to
provide a group health plan meeting the
requirements of this subsection with re-
spect to qualified individuals of such insti-
tution as the failed depository institution
would have had but for its failure, and
‘‘(ii) shall be treated as the employer
of such qualified individuals for purposes
of this section.
‘‘(B) TAX NOT TO APPLY IF FDIC OR RTC
PROVIDE CONTINUATION COVERAGE.—No per-
son shall be subject to any liability under this
section by reason of being an acquirer of a
failed depository institution if the Federal De-
posit Insurance Corporation or the Resolution
Trust Corporation elects to relieve such
acquirer from its obligations under subpara-
graph (A). In any such case, the requirements
of subparagraph (A) shall apply to the Federal
Deposit Insurance Corporation or the Resolu-
tion Trust Corporation, as the case may be.
‘‘(C) ACQUIRER.—For purposes of this
paragraph, an entity is an acquirer of a failed
depository institution during any period if—
‘‘(i) such entity holds substantially all
of the assets or liabilities of such institu-
tion, and
‘‘(ii)(I) such entity is a bridge bank,
or
‘‘(II) such entity acquired such assets
or liabilities from the Federal Deposit In-
surance Corporation, the Resolution Trust
Corporation, or a bridge bank.
‘‘(D) FAILED DEPOSITORY INSTITUTION.—
For purposes of this section, the term ‘failed
depository institution’ means any depository in-
stitution (as defined in section 3(c) of the Fed-
eral Deposit Insurance Act) for which a receiver
or conservator has been appointed.
‘‘(E) QUALIFIED
INDIVIDUAL.—For pur-
poses of this section, the term ‘qualified individ-
ual’ means—
‘‘(i) any individual who was, on the
day before the date of the appointment of
the receiver or conservator, provided cov-
erage under a group health plan of the
failed depository institution by reason of
the performance of services for such insti-
tution, and
‘‘(ii) any individual who was, on such
day, a beneficiary under such plan as the
spouse or dependent child of the individual
described in clause (i).’’
(b) TREATMENT OF DEPOSITORY INSTITUTION FAIL-
URES AS QUALIFYING EVENTS FOR RETIREES OF SUCH
INSTITUTIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
4980B(f)(3) is amended—
(A) by striking ‘‘The termination’’ and in-
serting ‘‘(i) The termination’’,
(B) by striking the period at the end and
inserting ‘‘, or’’, and
(C) by inserting after clause (i) the follow-
ing new clause:
‘‘(ii) the appointment of a receiver or
conservator for a failed depository institu-
tion from whose employment the covered
employee retired at any time.’’
(2) CONFORMING AMENDMENT.—Subclause (I)
of section 4980B(f)(2)(B)(i) is amended by striking
‘‘AND REDUCED HOURS’’ and inserting ‘‘, REDUCED
HOURS, AND
FAILURES
OF
DEPOSITORY
INSTITU-
TIONS’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply as if included in section 451 of the Fed-
eral Deposit Insurance Corporation Improvement
Act of 1991 as of the date of the enactment of such
Act.
(2) LIABILITY OF FDIC.—In the case of the
Federal Deposit Insurance Corporation or any
acquirer from such Corporation, the amendments
made by this section shall apply only to failed depos-
itory institutions for which the receiver or conserva-
tor is appointed after the date of the enactment of
this Act.
(3) SPECIAL RULE FOR COVERAGE UNDER FDIC
PLAN.—Effective as of the date of the enactment of
the Federal Deposit Insurance Corporation Improve-
ment Act of 1991, coverage under the health care
continuation plan maintained by the Federal Deposit
Insurance Corporation on June 25, 1992, and any
other substantially similar plan maintained by such
Corporation, shall be deemed to satisfy the obliga-
tions of the Federal Deposit Insurance Corporation
(and any acquirer from such Corporation) under sec-
tion 4980B(f) of the Internal Revenue Code of 1986
and section 451 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 with respect
to qualified individuals of failed depository institu-
tions.
SEC. 246. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this title requires an
amendment to any plan, such plan amendment shall not
be required to be made before the first day of the first
plan year beginning on or after January 1, 1995, if—
(1) during the period after such amendment
takes effect and before such first plan year, the plan
is operated in accordance with the requirements of
such amendment, and
(2) such plan amendment applies retroactively
to such period.
TITLE III—TREATMENT OF
LARGE PARTNERSHIPS
Subtitle A—General Provisions
SEC. 301. SIMPLIFIED FLOW-THROUGH FOR LARGE PART-
NERSHIPS.
(a) GENERAL RULE.—Subchapter K (relating to
partners and partnerships) is amended by adding at the
end thereof the following new part:
‘‘PART IV—SPECIAL RULES FOR LARGE
PARTNERSHIPS
‘‘Sec. 771. Application of subchapter to large partnerships.
‘‘Sec. 772. Simplified flow-through.
‘‘Sec. 773. Computations at partnership level.
‘‘Sec. 774. Other modifications.
‘‘Sec. 775. Large partnership defined.
‘‘Sec. 776. Special rules for partnerships holding oil and gas
properties.
‘‘Sec. 777. Regulations.
‘‘SEC. 771. APPLICATION OF SUBCHAPTER TO LARGE PART-
NERSHIPS.
‘‘The preceding provisions of this subchapter to the
extent inconsistent with the provisions of this part shall
not apply to a large partnership and its partners.
‘‘SEC. 772. SIMPLIFIED FLOW-THROUGH.
‘‘(a) GENERAL RULE.—In determining the income
tax of a partner of a large partnership, such partner shall
take into account separately such partner’s distributive
share of the partnership’s—
‘‘(1) taxable income or loss from passive loss
limitation activities,
‘‘(2) taxable income or loss from other activi-
ties,
‘‘(3) net capital gain (or net capital loss)—
‘‘(A) to the extent allocable to passive loss
limitation activities, and
‘‘(B) to the extent allocable to other activi-
ties,
‘‘(4) tax-exempt interest,
‘‘(5) applicable net AMT adjustment separately
computed for—
‘‘(A) passive loss limitation activities, and
‘‘(B) other activities,
‘‘(6) general credits,
‘‘(7) low-income housing credit determined
under section 42,
‘‘(8) rehabilitation credit determined under sec-
tion 47,
‘‘(9) foreign income taxes,
‘‘(10) the credit allowable under section 29, and
‘‘(11) other items to the extent that the Sec-
retary determines that the separate treatment of
such items is appropriate.
‘‘(b) SEPARATE COMPUTATIONS.—In determining
the amounts required under subsection (a) to be sepa-
rately taken into account by any partner, this section and
section 773 shall be applied separately with respect to
such partner by taking into account such partner’s dis-
tributive share of the items of income, gain, loss, deduc-
tion, or credit of the partnership.
‘‘(c) TREATMENT AT PARTNER LEVEL.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, rules similar to the rules of section
702(b) shall apply to any partner’s distributive share
of the amounts referred to in subsection (a).
‘‘(2) INCOME OR LOSS FROM PASSIVE LOSS LIM-
ITATION ACTIVITIES.—For purposes of this chapter,
any partner’s distributive share of any income or
loss described in subsection (a)(1) shall be treated as
an item of income or loss (as the case may be) from
the conduct of a trade or business which is a single
passive activity (as defined in section 469). A similar
rule shall apply to a partner’s distributive share of
amounts referred to in paragraphs (3)(A) and
(5)(A) of subsection (a).
‘‘(3) INCOME OR LOSS FROM OTHER ACTIVI-
TIES.—
‘‘(A) IN GENERAL.—For purposes of this
chapter, any partner’s distributive share of any
income or loss described in subsection (a)(2)
shall be treated as an item of income or expense
(as the case may be) with respect to property
held for investment.
‘‘(B) DEDUCTIONS
FOR
LOSS
NOT
SUB-
JECT
TO
SECTION
67.—The deduction under
section 212 for any loss described in subpara-
graph (A) shall not be treated as a miscellane-
ous itemized deduction for purposes of section
67.
‘‘(4) TREATMENT
OF
NET
CAPITAL
GAIN
OR
LOSS.—For purposes of this chapter, any partner’s
distributive share of any gain or loss described in
subsection (a)(3) shall be treated as a long-term
capital gain or loss, as the case may be.
‘‘(5) MINIMUM TAX TREATMENT.—In determin-
ing the alternative minimum taxable income of any
partner, such partner’s distributive share of any ap-
plicable net AMT adjustment shall be taken into ac-
count in lieu of making the separate adjustments
provided in sections 56, 57, and 58 with respect to
the items of the partnership. Except as provided in
regulations, the applicable net AMT adjustment
shall be treated, for purposes of section 53, as an
adjustment or item of tax preference not specified in
section 53(d)(1)(B)(ii).
‘‘(6) GENERAL CREDITS.—A partner’s distribu-
tive share of the amount referred to in paragraph
(6) of subsection (a) shall be taken into account as
a current year business credit.
‘‘(d) OPERATING RULES.—For purposes of this sec-
tion—
‘‘(1) PASSIVE
LOSS
LIMITATION
ACTIVITY.—
The term ‘passive loss limitation activity’ means—
‘‘(A) any activity which involves the con-
duct of a trade or business, and
‘‘(B) any rental activity.
For purposes of the preceding sentence, the term
‘trade or business’ includes any activity treated as a
trade or business under paragraph (5) or (6) of sec-
tion 469(c).
‘‘(2) TAX-EXEMPT INTEREST.—The term ‘tax-
exempt interest’ means interest excludable from
gross income under section 103.
‘‘(3) APPLICABLE NET AMT ADJUSTMENT.—
‘‘(A) IN
GENERAL.—The applicable net
AMT adjustment is—
‘‘(i) with respect to taxpayers other
than corporations, the net adjustment de-
termined by using the adjustments applica-
ble to individuals, and
‘‘(ii) with respect to corporations, the
net adjustment determined by using the
adjustments applicable to corporations.
‘‘(B) NET ADJUSTMENT.—The term ‘net
adjustment’ means the net adjustment in the
items attributable to passive loss activities or
other activities (as the case may be) which
would result if such items were determined with
the adjustments of sections 56, 57, and 58.
‘‘(4) TREATMENT
OF
CERTAIN
SEPARATELY
STATED ITEMS.—
‘‘(A) EXCLUSION
FOR
CERTAIN
PUR-
POSES.—In determining the amounts referred
to in paragraphs (1) and (2) of subsection (a),
any net capital gain or net capital loss (as the
case may be), and any item referred to in sub-
section (a)(11), shall be excluded.
‘‘(B) ALLOCATION RULES.—The net cap-
ital gain shall be treated—
‘‘(i) as allocable to passive loss limita-
tion activities to the extent the net capital
gain does not exceed the net capital gain
determined by only taking into account
gains and losses from sales and exchanges
of property used in connection with such
activities, and
‘‘(ii) as allocable to other activities to
the extent such gain exceeds the amount
allocated under clause (i).
A similar rule shall apply for purposes of allo-
cating any net capital loss.
‘‘(C) NET CAPITAL LOSS.—The term ‘net
capital loss’ means the excess of the losses from
sales or exchanges of capital assets over the
gains from sales or exchange of capital assets.
‘‘(5) GENERAL
CREDITS.—The term ‘general
credits’ means any credit other than the low-income
housing credit, the rehabilitation credit, the foreign
tax credit, and the credit allowable under section 29.
‘‘(6) FOREIGN INCOME TAXES.—The term ‘for-
eign income taxes’ means taxes described in section
901 which are paid or accrued to foreign countries
and to possessions of the United States.
‘‘(e) SPECIAL RULE
FOR UNRELATED BUSINESS
TAX.—In the case of a partner which is an organization
subject to tax under section 511, such partner’s distribu-
tive share of any items shall be taken into account sepa-
rately to the extent necessary to comply with the provi-
sions of section 512(c)(1).
‘‘(f) SPECIAL RULES FOR APPLYING PASSIVE LOSS
LIMITATIONS.—If any person holds an interest in a large
partnership other than as a limited partner—
‘‘(1) paragraph (2) of subsection (c) shall not
apply to such partner, and
‘‘(2) such partner’s distributive share of the
partnership items allocable to passive loss limitation
activities shall be taken into account separately to
the extent necessary to comply with the provisions of
section 469.
The preceding sentence shall not apply to any items alloca-
ble to an interest held as a limited partner.
‘‘SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.
‘‘(a) GENERAL RULE.—
‘‘(1) TAXABLE INCOME.—The taxable income of
a large partnership shall be computed in the same
manner as in the case of an individual except that—
‘‘(A) the items described in section 772(a)
shall be separately stated, and
‘‘(B) the modifications of subsection (b)
shall apply.
‘‘(2) ELECTIONS.—All elections affecting the
computation of the taxable income of a large part-
nership or the computation of any credit of a large
partnership shall be made by the partnership; except
that the election under section 901, and any election
under section 108, shall be made by each partner
separately.
‘‘(3) LIMITATIONS, ETC.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), all limitations and other pro-
visions affecting the computation of the taxable
income of a large partnership or the computa-
tion of any credit of a large partnership shall
be applied at the partnership level (and not at
the partner level).
‘‘(B) CERTAIN LIMITATIONS APPLIED AT
PARTNER
LEVEL.—The following provisions
shall be applied at the partner level (and not at
the partnership level):
‘‘(i) Section 68 (relating to overall
limitation on itemized deductions).
‘‘(ii) Sections 49 and 465 (relating to
at risk limitations).
‘‘(iii) Section 469 (relating to limita-
tion on passive activity losses and credits).
‘‘(iv) Any other provision specified in
regulations.
‘‘(4) COORDINATION
WITH
OTHER
PROVI-
SIONS.—Paragraphs (2) and (3) shall apply notwith-
standing any other provision of this chapter other
than this part.
‘‘(b) MODIFICATIONS TO DETERMINATION OF TAX-
ABLE INCOME.—In determining the taxable income of a
large partnership—
‘‘(1) CERTAIN DEDUCTIONS NOT ALLOWED.—
The following deductions shall not be allowed:
100
‘‘(A) The deduction for personal exemp-
tions provided in section 151.
‘‘(B) The net operating loss deduction pro-
vided in section 172.
‘‘(C) The additional itemized deductions
for individuals provided in part VII of sub-
chapter B (other than section 212 thereof).
‘‘(2) CHARITABLE DEDUCTIONS.—In determin-
ing the amount allowable under section 170, the lim-
itation of section 170(b)(2) shall apply.
‘‘(3) COORDINATION WITH SECTION 67.—In lieu
of applying section 67, 70 percent of the amount of
the miscellaneous itemized deductions shall be dis-
allowed.
‘‘(c) SPECIAL RULES FOR INCOME FROM DISCHARGE
OF INDEBTEDNESS.—If a large partnership has income
from the discharge of any indebtedness—
‘‘(1) such income shall be excluded in determin-
ing the amounts referred to in section 772(a), and
‘‘(2) in determining the income tax of any part-
ner of such partnership—
‘‘(A) such income shall be treated as an
item required to be separately taken into ac-
count under section 772(a), and
101
‘‘(B) the provisions of section 108 shall be
applied without regard to this part.
‘‘SEC. 774. OTHER MODIFICATIONS.
‘‘(a) TREATMENT OF CERTAIN OPTIONAL ADJUST-
MENTS, ETC.—In the case of a large partnership—
‘‘(1) computations under section 773 shall be
made without regard to any adjustment under sec-
tion 743(b) or 108(b), but
‘‘(2) a partner’s distributive share of any
amount referred to in section 772(a) shall be appro-
priately adjusted to take into account any adjust-
ment under section 743(b) or 108(b) with respect to
such partner.
‘‘(b) CREDIT RECAPTURE DETERMINED AT PART-
NERSHIP LEVEL.—
‘‘(1) IN GENERAL.—In the case of a large part-
nership—
‘‘(A) any credit recapture shall be taken
into account by the partnership, and
‘‘(B) the amount of such recapture shall be
determined as if the credit with respect to
which the recapture is made had been fully uti-
lized to reduce tax.
‘‘(2) METHOD OF TAKING RECAPTURE INTO AC-
COUNT.—A large partnership shall take into account
102
a credit recapture by reducing the amount of the ap-
propriate current year credit to the extent thereof,
and if such recapture exceeds the amount of such
current year credit, the partnership shall be liable to
pay such excess.
‘‘(3) DISPOSITIONS NOT TO TRIGGER RECAP-
TURE.—No credit recapture shall be required by rea-
son of any transfer of an interest in a large partner-
ship.
‘‘(4) CREDIT
RECAPTURE.—For purposes of
this subsection, the term ‘credit recapture’ means
any increase in tax under section 42(j) or 50(a).
‘‘(c) PARTNERSHIP NOT TERMINATED BY REASON
OF CHANGE IN OWNERSHIP.—Subparagraph (B) of sec-
tion 708(b)(1) shall not apply to a large partnership.
‘‘(d) PARTNERSHIP ENTITLED TO CERTAIN CRED-
ITS.—The following shall be allowed to a large partnership
and shall not be taken into account by the partners of
such partnership:
‘‘(1) The credit provided by section 34.
‘‘(2) Any credit or refund under section
852(b)(3)(D).
‘‘(e) TREATMENT OF REMIC RESIDUALS.—For pur-
poses of applying section 860E(e)(6) to any large partner-
ship—
103
‘‘(1) all interests in such partnership shall be
treated as held by disqualified organizations,
‘‘(2) in lieu of applying subparagraph (C) of
section 860E(e)(6), the amount subject to tax under
section 860E(e)(6) shall be excluded from the gross
income of such partnership, and
‘‘(3) subparagraph (D) of section 860E(e)(6)
shall not apply.
‘‘(f) SPECIAL RULES FOR APPLYING CERTAIN IN-
STALLMENT SALE RULES.—In the case of a large partner-
ship—
‘‘(1) the provisions of sections 453(l)(3) and
453A shall be applied at the partnership level, and
‘‘(2) in determining the amount of interest pay-
able under such sections, such partnership shall be
treated as subject to tax under this chapter at the
highest rate of tax in effect under section 1 or 11.
‘‘SEC. 775. LARGE PARTNERSHIP.
‘‘(a) GENERAL RULE.—For purposes of this part—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section or section 776, the term ‘large
partnership’ means, with respect to any partnership
taxable year, any partnership if the number of per-
sons who were partners in such partnership in such
taxable year or any preceding partnership taxable
104
year ending on or after December 31, 1994, equaled
or exceeded 250. To the extent provided in regula-
tions, a partnership shall cease to be treated as a
large partnership for any partnership taxable year if
in such taxable year fewer than 100 persons were
partners in such partnership.
‘‘(2) ELECTION FOR PARTNERSHIPS WITH AT
LEAST 100 PARTNERS.—If a partnership makes an
election under this paragraph, paragraph (1) shall
be applied by substituting ‘100’ for ‘250’. Such an
election shall apply to the taxable year for which
made and all subsequent taxable years unless re-
voked with the consent of the Secretary.
‘‘(b) SPECIAL RULES FOR CERTAIN SERVICE PART-
NERSHIPS.—
‘‘(1) CERTAIN PARTNERS NOT COUNTED.—For
purposes of this section, the term ‘partner’ does not
include any individual performing substantial serv-
ices in connection with the activities of the partner-
ship and holding an interest in such partnership, or
an individual who formerly performed substantial
services in connection with such activities and who
held an interest in such partnership at the time the
individual performed such services.
105
‘‘(2) EXCLUSION.—For purposes of this part,
the term ‘large partnership’ does not include any
partnership if substantially all the partners of such
partnership—
‘‘(A) are individuals performing substantial
services in connection with the activities of such
partnership or are personal service corporations
(as defined in section 269A(b)) the owner-em-
ployees (as defined in section 269A(b)) of which
perform such substantial services,
‘‘(B) are retired partners who had per-
formed such substantial services, or
‘‘(C) are spouses of partners who are per-
forming (or had previously performed) such
substantial services.
‘‘(3) SPECIAL RULE FOR LOWER TIER PART-
NERSHIPS.—For purposes of this subsection, the ac-
tivities of a partnership shall include the activities of
any other partnership in which the partnership owns
directly an interest in the capital and profits of at
least 80 percent.
‘‘(c) EXCLUSION OF COMMODITY POOLS.—For pur-
poses of this part, the term ‘large partnership’ does not
include any partnership the principal activity of which is
the buying and selling of commodities (not described in
106
section 1221(1)), or options, futures, or forwards with re-
spect to such commodities.
‘‘(d) SECRETARY MAY RELY ON TREATMENT ON RE-
TURN.—If, on the partnership return of any partnership,
such partnership is treated as a large partnership, such
treatment shall be binding on such partnership and all
partners of such partnership but not on the Secretary.
‘‘SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING
OIL AND GAS PROPERTIES.
‘‘(a) EXCEPTION FOR PARTNERSHIPS HOLDING SIG-
NIFICANT OIL AND GAS PROPERTIES.—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘large partnership’ shall not include any
partnership if the average percentage of assets (by
value) held by such partnership during the taxable
year which are oil or gas properties is at least 25
percent. For purposes of the preceding sentence, any
interest held by a partnership in another partnership
shall be disregarded, except that the partnership
shall be treated as holding its proportionate share of
the assets of such other partnership.
‘‘(2) ELECTION
TO
WAIVE
EXCEPTION.—Any
partnership may elect to have paragraph (1) not
apply. Such an election shall apply to the partner-
ship taxable year for which made and all subsequent
107
partnership taxable years unless revoked with the
consent of the Secretary.
‘‘(b) SPECIAL RULES WHERE PART APPLIES.—
‘‘(1) COMPUTATION
OF
PERCENTAGE
DEPLE-
TION.—In the case of a large partnership, except as
provided in paragraph (2)—
‘‘(A) the allowance for depletion under sec-
tion 611 with respect to any partnership oil or
gas property shall be computed at the partner-
ship level without regard to any provision of
section 613A requiring such allowance to be
computed separately by each partner,
‘‘(B) such allowance shall be determined
without regard to the provisions of section
613A(c) limiting the amount of production for
which percentage depletion is allowable and
without regard to paragraph (1) of section
613A(d), and
‘‘(C) paragraph (3) of section 705(a) shall
not apply.
‘‘(2) TREATMENT OF CERTAIN PARTNERS.—
‘‘(A) IN GENERAL.—In the case of a dis-
qualified person, the treatment under this chap-
ter of such person’s distributive share of any
item of income, gain, loss, deduction, or credit
108
attributable to any partnership oil or gas prop-
erty shall be determined without regard to this
part. Such person’s distributive share of any
such items shall be excluded for purposes of
making determinations under sections 772 and
773.
‘‘(B) DISQUALIFIED
PERSON.—For pur-
poses of subparagraph (A), the term ‘disquali-
fied person’ means, with respect to any partner-
ship taxable year—
‘‘(i) any person referred to in para-
graph (2) or (4) of section 613A(d) for
such person’s taxable year in which such
partnership taxable year ends, and
‘‘(ii) any other person if such person’s
average daily production of domestic crude
oil and natural gas for such person’s tax-
able year in which such partnership tax-
able year ends exceeds 500 barrels.
‘‘(C) AVERAGE DAILY PRODUCTION.—For
purposes of subparagraph (B), a person’s aver-
age daily production of domestic crude oil and
natural gas for any taxable year shall be com-
puted as provided in section 613A(c)(2)—
109
‘‘(i) by taking into account all produc-
tion of domestic crude oil and natural gas
(including such person’s proportionate
share of any production of a partnership),
‘‘(ii) by treating 6,000 cubic feet of
natural gas as a barrel of crude oil, and
‘‘(iii) by treating as 1 person all per-
sons treated as 1 taxpayer under section
613A(c)(8) or among whom allocations are
required under such section.
‘‘SEC. 777. REGULATIONS.
‘‘The Secretary shall prescribe such regulations as
may be appropriate to carry out the purposes of this
part.’’
(b) CLERICAL AMENDMENT.—The table of parts for
subchapter K of chapter 1 is amended by adding at the
end thereof the following new item:
‘‘Part IV. Special rules for large partnerships.’’
SEC. 302. SIMPLIFIED AUDIT PROCEDURES FOR LARGE
PARTNERSHIPS.
(a) GENERAL RULE.—Chapter 63 is amended by
adding at the end thereof the following new subchapter:
‘‘SUBCHAPTER D—TREATMENT OF LARGE
PARTNERSHIPS
‘‘Part I. Treatment of partnership items and adjustments.
‘‘Part II. Partnership level adjustments.
‘‘Part III. Definitions and special rules.
110
‘‘PART I—TREATMENT OF PARTNERSHIP ITEMS
AND ADJUSTMENTS
‘‘Sec. 6240. Application of subchapter.
‘‘Sec. 6241. Partner’s return must be consistent with partnership
return.
‘‘Sec. 6242. Procedures for taking partnership adjustments into
account.
‘‘SEC. 6240. APPLICATION OF SUBCHAPTER.
‘‘(a) GENERAL RULE.—This subchapter shall only
apply to large partnerships and partners in such partner-
ships.
‘‘(b) COORDINATION WITH OTHER PARTNERSHIP
AUDIT PROCEDURES.—
‘‘(1) IN GENERAL.—Subchapter C of this chap-
ter shall not apply to any large partnership other
than in its capacity as a partner in another partner-
ship which is not a large partnership.
‘‘(2) TREATMENT WHERE PARTNER IN OTHER
PARTNERSHIP.—If a large partnership is a partner
in another partnership which is not a large partner-
ship—
‘‘(A) subchapter C of this chapter shall
apply to items of such large partnership which
are partnership items with respect to such other
partnership, but
‘‘(B) any adjustment under such sub-
chapter C shall be taken into account in the
manner provided by section 6242.
111
‘‘SEC. 6241. PARTNER’S RETURN MUST BE CONSISTENT
WITH PARTNERSHIP RETURN.
‘‘(a) GENERAL RULE.—A partner of any large part-
nership shall, on the partner’s return, treat each partner-
ship item attributable to such partnership in a manner
which is consistent with the treatment of such partnership
item on the partnership return.
‘‘(b) UNDERPAYMENT
DUE
TO
INCONSISTENT
TREATMENT
ASSESSED
AS
MATH
ERROR.—Any
underpayment of tax by a partner by reason of failing to
comply with the requirements of subsection (a) shall be
assessed and collected in the same manner as if such
underpayment were on account of a mathematical or cleri-
cal error appearing on the partner’s return. Paragraph (2)
of section 6213(b) shall not apply to any assessment of
an underpayment referred to in the preceding sentence.
‘‘(c) ADJUSTMENTS NOT TO AFFECT PRIOR YEAR
OF PARTNERS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), subsections (a) and (b) shall apply with-
out regard to any adjustment to the partnership
item under part II.
‘‘(2) CERTAIN
CHANGES
IN
DISTRIBUTIVE
SHARE TAKEN INTO ACCOUNT BY PARTNER.—
‘‘(A) IN
GENERAL.—To the extent that
any adjustment under part II involves a change
112
under section 704 in a partner’s distributive
share of the amount of any partnership item
shown on the partnership return, such adjust-
ment shall be taken into account in applying
this title to such partner for the partner’s tax-
able year for which such item was required to
be taken into account.
‘‘(B) COORDINATION
WITH
DEFICIENCY
PROCEDURES.—
‘‘(i) IN
GENERAL.—Subchapter B
shall not apply to the assessment or collec-
tion of any underpayment of tax attrib-
utable to an adjustment referred to in sub-
paragraph (A).
‘‘(ii) 
ADJUSTMENT
NOT
PRE-
CLUDED.—Notwithstanding any other law
or rule of law, nothing in subchapter B (or
in any proceeding under subchapter B)
shall preclude the assessment or collection
of any underpayment of tax (or the allow-
ance of any credit or refund of any over-
payment of tax) attributable to an adjust-
ment referred to in subparagraph (A) and
such assessment or collection or allowance
(or any notice thereof) shall not preclude
113
any notice, proceeding, or determination
under subchapter B.
‘‘(C) PERIOD OF LIMITATIONS.—The pe-
riod for—
‘‘(i) assessing any underpayment of
tax, or
‘‘(ii) filing a claim for credit or refund
of any overpayment of tax,
attributable to an adjustment referred to in
subparagraph (A) shall not expire before the
close of the period prescribed by section 6248
for making adjustments with respect to the
partnership taxable year involved.
‘‘(D) TIERED STRUCTURES.—If the part-
ner referred to in subparagraph (A) is another
partnership or an S corporation, the rules of
this paragraph shall also apply to persons hold-
ing interests in such partnership or S corpora-
tion (as the case may be); except that, if such
partner is a large partnership, the adjustment
referred to in subparagraph (A) shall be taken
into account in the manner provided by section
6242.
114
‘‘(d) ADDITION TO TAX FOR FAILURE TO COMPLY
WITH SECTION.—
‘‘For addition to tax in case of partner’s disregard
of requirements of this section, see part II of sub-
chapter A of chapter 68.
‘‘SEC. 6242. PROCEDURES FOR TAKING PARTNERSHIP AD-
JUSTMENTS INTO ACCOUNT.
‘‘(a) ADJUSTMENTS FLOW THROUGH TO PARTNERS
FOR YEAR IN WHICH ADJUSTMENT TAKES EFFECT.—
‘‘(1) IN GENERAL.—If any partnership adjust-
ment with respect to any partnership item takes ef-
fect (within the meaning of subsection (d)(2)) during
any partnership taxable year and if an election
under paragraph (2) does not apply to such adjust-
ment, such adjustment shall be taken into account
in determining the amount of such item for the part-
nership taxable year in which such adjustment takes
effect. In applying this title to any person who is
(directly or indirectly) a partner in such partnership
during such partnership taxable year, such adjust-
ment shall be treated as an item actually arising
during such taxable year.
‘‘(2) 
PARTNERSHIP
LIABLE
IN
CERTAIN
CASES.—If—
‘‘(A) a partnership elects under this para-
graph to not take an adjustment into account
under paragraph (1),
126
the United States or the Claims Court only if the
partnership filing the petition deposits with the Sec-
retary, on or before the date the petition is filed, the
amount for which the partnership would be liable
under section 6242(b) (as of the date of the filing
of the petition) if the partnership items were ad-
justed as provided by the notice of partnership ad-
justment. The court may by order provide that the
jurisdictional requirements of this paragraph are
satisfied where there has been a good faith attempt
to satisfy such requirement and any shortfall of the
amount required to be deposited is timely corrected.
‘‘(2) INTEREST PAYABLE.—Any amount depos-
ited under paragraph (1), while deposited, shall not
be treated as a payment of tax for purposes of this
title (other than chapter 67).
‘‘(c) SCOPE OF JUDICIAL REVIEW.—A court with
which a petition is filed in accordance with this section
shall have jurisdiction to determine all partnership items
of the partnership for the partnership taxable year to
which the notice of partnership adjustment relates and the
proper allocation of such items among the partners (and
the applicability of any penalty, addition to tax, or addi-
tional amount for which the partnership may be liable
under section 6242(b)).