‘‘(b) PERFORMANCE OF SERVICE.—For purposes of
this chapter—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, a service shall be treated as
occurring where it is performed.
‘‘(2) SERVICES PERFORMED INSIDE AND OUT-
SIDE
THE
UNITED
STATES.—If a service is per-
formed both inside and outside the United States,
such service shall be treated as performed—
‘‘(A) inside the United States, if 50 per-
cent or more of such service is performed inside
the United States, and
‘‘(B) outside the United States, if less than
50 percent of such service is performed inside
the United States.
‘‘SEC. 3907. RULES RELATING TO OTHER TERMS USED IN
SECTION 3903.
‘‘(a) EXCHANGES TREATED AS SALES.—For pur-
poses of this chapter—
‘‘(1) an exchange of property for property or
services shall be treated as a sale of property, and
‘‘(2) an exchange of services for property or
services shall be treated as the performance of serv-
ices.
‘‘(b) CERTAIN TRANSFERS TO EMPLOYEES TREATED
AS SALES.—For purposes of this chapter, the transfer of
property to an employee as compensation (other than a
transfer of a type for which no amount is includible in
the gross income of employees for purposes of chapter 1)
shall be treated as the sale of property.
‘‘(c) PERFORMANCE OF SERVICES.—For purposes of
this chapter—
‘‘(1) CERTAIN
ACTIVITIES
TREATED
AS
PER-
FORMANCE OF SERVICES.—Activities treated as in-
cluded in the performance of services shall include
(but shall not be limited to)—
‘‘(A) permitting the use of property,
‘‘(B) the granting of a right to the per-
formance of services or to reimbursement (in-
cluding the granting of warranties, insurance,
and similar items), and
‘‘(C) the making of a covenant not to com-
pete (or similar agreement to refrain from
doing something).
‘‘(2) EMPLOYERS AND EMPLOYEES.—
‘‘(A) SERVICES FOR EMPLOYER.—An em-
ployee’s services for his employer shall not be
treated as the performance of services.
‘‘(B) SERVICES FOR EMPLOYEE.—An em-
ployer’s services for his employee shall not be
treated as the performance of services unless
such services are of a type which constitute
gross income to the employee for purposes of
chapter 1.
‘‘(3) PERFORMANCE OF SERVICES TREATED AS
SALE OF SERVICES.—The performance of services
shall be treated as the sale of services.
‘‘Subchapter C—Taxable Amount; Rate of Tax
for Certain Transactions; Credit Against Tax
‘‘Sec. 3911. Taxable amount.
‘‘Sec. 3912. Zero rating for food, housing, and medical care.
‘‘Sec. 3913. Zero rating for exports and interest.
‘‘Sec. 3914. Governmental entities.
‘‘Sec. 3915. Exempt organizations.
‘‘Sec. 3916. Credit against tax.
‘‘SEC. 3911. TAXABLE AMOUNT.
‘‘(a) AMOUNT CHARGED CUSTOMER.—For purposes
of this chapter, the taxable amount for any transaction
for which money is the only consideration shall be the
price charged the purchaser of the property or services by
the seller thereof—
‘‘(1) including all invoiced charges for transpor-
tation, and other items payable to the seller with re-
spect to this transaction, but
‘‘(2) excluding the tax imposed by section 3901
with respect to this transaction and excluding any
State and local sales and use taxes with respect to
this transaction.
‘‘(b) EXCHANGES.—For purposes of this chapter, the
taxable amount in any exchange of property or services
shall be the fair market value of the property or services
transferred by the person liable for the tax (determined
as if such person had sold the property or services to the
other party to the exchange).
‘‘(c) IMPORTS.—For purposes of this chapter, the
taxable amount in the case of any import shall be—
‘‘(1) the customs value plus customs duties and
any other duties which may be imposed, or
‘‘(2) if there is no such customs value, the fair
market value (determined as if the importer had sold
the property).
‘‘(d) SPECIAL RULE IN THE CASE OF SALES OF CER-
TAIN USED CONSUMER GOODS.—For purposes of this
chapter, if—
‘‘(1) a taxable person acquires any tangible per-
sonal property in a transaction which was not a tax-
able transaction, and
‘‘(2) such property had been used by an ulti-
mate consumer before such acquisition,
the taxable amount in the case of any sale of such property
by such taxable person (determined without regard to this
subsection) shall be reduced by the amount paid for such
property by such taxable person.
‘‘SEC. 3912. ZERO RATING FOR FOOD, HOUSING, AND MEDI-
CAL CARE.
‘‘(a) ZERO RATING FOR FOOD, HOUSING, AND MEDI-
CAL CARE.—The rate of the tax imposed by section 3901
shall be zero with respect to the following:
‘‘(1) FOOD.—The retail sale of food and non-
alcoholic beverages for human consumption (other
than consumption on the premises).
‘‘(2) HOUSING.—The sale and renting of resi-
dential real property for use by the purchaser or
tenant as a principal residence.
‘‘(3) MEDICAL CARE.—Medical care.
‘‘(b) DEFINITIONS.—For purposes of subsection
(a)—
‘‘(1) NONALCOHOLIC
BEVERAGES.—The term
‘nonalcoholic beverages’ does not include any article
which is taxable under chapter 51.
‘‘(2) MEDICAL CARE.—The term ‘medical care’
means the performance of any service, and the retail
sale of any property, payment for which by the pur-
chaser would constitute medical care within the
meaning of section 213.
‘‘(3) MOBILE HOMES, ETC., TREATED AS REAL
PROPERTY.—A mobile or floating home shall be
treated as real property.
‘‘(c) ADVANCE ZERO RATING.—The Secretary shall
prescribe regulations under which any item which becomes
clearly identifiable as an item to which subsection (a) will
apply when it reaches the retail stage shall be zero rated
for all transactions after it becomes so clearly identifiable.
‘‘SEC. 3913. ZERO RATING FOR EXPORTS AND INTEREST.
‘‘The rate of the tax imposed by section 3901 shall
be zero with respect to the following:
‘‘(1) EXPORTS.—Exports of property.
‘‘(2) INTEREST.—Interest.
‘‘SEC. 3914. GOVERNMENTAL ENTITIES.
‘‘(a) ZERO RATING FOR SALES TO GOVERNMENTAL
ENTITIES AND EDUCATIONAL ACTIVITIES OF GOVERN-
MENTAL ENTITIES.—The rate of the tax imposed by sec-
tion 3901 shall be zero with respect to the following:
‘‘(1) SALES
TO
GOVERNMENTAL
ENTITIES.—
Any sale of property or services to a governmental
entity.
‘‘(2) EDUCATIONAL ACTIVITIES.—The providing
by a governmental entity of property and services in
connection with the education of students.
‘‘(b) SALES, ETC., BY GOVERNMENTAL ENTITIES
TAXABLE ONLY WHERE SEPARATE CHARGE IS MADE.—
For purposes of this chapter, the sale of property and the
performance of services by a governmental entity shall be
a taxable transaction if (and only if) a separate charge
of fee is made therefor.
‘‘(c) GOVERNMENTAL ENTITY DEFINED.—For pur-
poses of this chapter, the term ‘governmental entity’
means the United States, any State or political subdivision
thereof, the District of Columbia, a Commonwealth or pos-
session of the United States, or any agency or instrumen-
tality of any of the foregoing.
‘‘SEC. 3915. EXEMPT ORGANIZATIONS.
‘‘(a) ZERO RATING FOR SECTION 501(c)(3) ORGANI-
ZATIONS; CREDIT ALLOWED FOR ALL PURCHASES.—
‘‘(1) ZERO RATING.—The rate of the tax im-
posed by section 3901 shall be zero with respect to
any taxable transaction engaged in by a section
501(c)(3) organization other than as part of an un-
related business.
‘‘(2) CREDIT ALLOWED FOR ALL PURCHASES.—
For purposes of this chapter, a section 501(c)(3) or-
ganization shall be treated as engaged in a business
with respect to all of its activities.
‘‘(b) TAXABLE TRANSACTIONS IN CASE OF OTHER
EXEMPT ORGANIZATIONS.—For purposes of this chapter,
the sale of property and the performance of services by
any exempt organization other than a section 501(c)(3)
organization shall be a taxable transaction if (and only
if) a charge or fee is made for such services.
‘‘(c) DEFINITIONS.—For purposes of this chapter—
‘‘(1) SECTION
501(c)(3)
ORGANIZATIONS.—The
term ‘section 501(c)(3) organization’ means an orga-
nization described in section 501(c)(3) which is ex-
empt from tax under section 501(a).
‘‘(2) OTHER
EXEMPT
ORGANIZATION.—The
term ‘other exempt organization’ means any organi-
zation (other than a section 501(c)(3) organization)
which is exempt from tax under chapter 1.
‘‘SEC. 3916. CREDIT AGAINST TAX.
‘‘(a) GENERAL RULE.—There shall be allowed as a
credit against the tax imposed by section 3901 the aggre-
gate amount of tax imposed by section 3901 which has
been paid by sellers to the taxpayer of property and serv-
ices which the taxpayer uses in the business to which the
transaction relates.
‘‘(b) EXEMPT TRANSACTIONS, ETC.—If—
‘‘(1) property or services are used partly in the
business and partly for other purposes, or
‘‘(2) property or services are used partly for
taxable transactions and partly for other trans-
actions,
the credit shall be allowable only with respect to the prop-
erty and services used for taxable transactions in the busi-
ness. No credit shall be allowable for any transaction oc-
curring when the taxpayer was a nontaxable person.
‘‘(c) EXCESS CREDIT TREATED AS OVERPAYMENT.—
‘‘(1) IN GENERAL.—If for any taxable period
the aggregate amount of the credits allowable by
subsection (a) exceeds the aggregate amount of the
tax imposed by section 3901 for such period, such
excess shall be treated as an overpayment of the tax
imposed by section 3901.
‘‘(2) TIME WHEN OVERPAYMENT ARISES.—Any
overpayment under paragraph (1) for any taxable
period shall be treated as arising on the later of—
‘‘(A) the due date for the return for such
period, or
‘‘(B) the date on which the return is filed.
‘‘Subchapter D—Administration
‘‘Sec. 3921. Seller liable for tax.
‘‘Sec. 3922. Tax invoices.
‘‘Sec. 3923. De minimis exemption.
‘‘Sec. 3924. Time for filing return and claiming credit; deposits
of tax.
‘‘Sec. 3925. Treatment of related businesses, etc.
‘‘Sec. 3926. Secretary to be notified of certain events.
‘‘Sec. 3927. Regulations.
‘‘SEC. 3921. SELLER LIABLE FOR TAX.
‘‘The person selling the property or services shall be
liable for the tax imposed by section 3901.
‘‘SEC. 3922. TAX INVOICES.
‘‘(a) SELLER MUST GIVE PURCHASER TAX IN-
VOICE.—Any taxable person engaging in a taxable trans-
action shall give the purchaser a tax invoice with respect
to such transaction if the seller has reason to believe that
the purchaser is a taxable person.
‘‘(b) CONTENT OF INVOICE.—The tax invoice re-
quired by subsection (a) with respect to any transaction
shall set forth—
‘‘(1) the name and identification number of the
seller,
‘‘(2) the name of the purchaser,
‘‘(3) the amount of the tax imposed by section
3901, and
‘‘(4) such other information as may be pre-
scribed by regulations.
‘‘(c) NO CREDIT WITHOUT INVOICE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), a purchaser may claim a credit
with respect to a transaction only if the purchaser—
‘‘(A) has received from the seller and has
in his possession a tax invoice which meets the
requirements of subsection (b), and
‘‘(B) is named as the purchaser in such in-
voice.
‘‘(2) EMPLOYEES OR OTHER AGENTS NAMED IN
INVOICES.—To the extent provided in regulations,
the naming of an employee or other agent of the
purchaser shall be treated as the naming of the pur-
chaser.
‘‘(3) WAIVER
OF
INVOICE
REQUIREMENT
IN
CERTAIN CASES.—To the extent provided in regula-
tions, paragraph (1) shall not apply—
‘‘(A) where the purchaser without fault on
his part fails to receive or fails to have in his
possession a tax invoice,
‘‘(B) to a taxable transaction (or category
of transactions) where—
‘‘(i) the amount involved is de
minimis, or
‘‘(ii) the information required by sub-
section (b) can be reliably established by
sampling or by another method and can be
adequately documented.
‘‘(d) TIME FOR FURNISHING INVOICE.—Any invoice
required to be furnished by subsection (a) with respect to
any transaction shall be furnished not later than 15 busi-
ness days after the tax point for such transaction.
‘‘SEC. 3923. DE MINIMIS EXEMPTION.
‘‘(a) IN GENERAL.—Under regulations, a person—
‘‘(1) whose aggregate taxable transactions for
the calendar year do not exceed $20,000, and
‘‘(2) whose aggregate taxable transactions for
the next calendar year can reasonably be expected
not to exceed $20,000,
may elect to be treated as a person who is not a taxable
person for the next calendar year.
‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply—
‘‘(1) to any sale or leasing of real property, and
‘‘(2) to any importing of property.
‘‘(c) TERMINATION
OF ELECTION.—Any election
under subsection (a) for a calendar year shall terminate
if the aggregate taxable transactions—
‘‘(1) for the first calendar quarter in such year
exceed $7,000,
‘‘(2) for the first 2 calendar quarters in such
year exceed $12,000, or
‘‘(3) for the first 3 calendar quarters in such
year exceed $17,000.
Such termination shall take effect on the first day of the
second month following the close of the first period in
which the requirements of paragraph (1), (2), or (3) are
met.
‘‘(d) TAXABLE AMOUNT TREATED
AS ZERO
FOR
ZERO-RATED TRANSACTIONS.—For purposes of this sec-
tion, the taxable amount of any zero-rated transaction
shall be treated as zero.
‘‘(e) CONDITION OF ELECTION.—In the case of a per-
son who is a taxable person for any period, an election
under subsection (a) may be made for succeeding periods
only with the consent of the Secretary. Such consent shall
be conditioned on placing such person, for all succeeding
periods, in the same position with respect to the tax im-
posed by section 3901 (and the credit allowed by section
3916) he would have been in if all property and services
he holds at the time he becomes a nontaxable person had
been acquired as a nontaxable person.
‘‘(f) CASUAL SALES AND LEASES OF REAL PROP-
ERTY EXCLUDED.—For purposes of this section, the term
‘taxable transaction’ does not include a transaction which
is treated as a commercial-type transaction solely by rea-
son of section 3904(b)(1)(A).
‘‘SEC. 3924. TIME FOR FILING RETURN AND CLAIMING
CREDIT; DEPOSITS OF TAX.
‘‘(a) FILING RETURN.—Before the first day of the
second calendar month beginning after the close of each
taxable period, each taxable person shall file a return of
the tax imposed by section 3901 on taxable transactions
having a tax point within such taxable period.
‘‘(b) CREDIT ALLOWED FOR TAXABLE PERIOD IN
WHICH PURCHASER RECEIVES INVOICE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), a credit allowable by section 3916 with
respect to a transaction may be allowed only for the
first taxable period by the close of which the tax-
payer—
‘‘(A) has paid or accrued amounts properly
allocable to the tax imposed by section 3901
with respect to such transaction, and
‘‘(B) has a tax invoice (or equivalent) with
respect to such transaction.
‘‘(2) USE FOR LATER PERIOD.—Under regula-
tions, a credit allowable by section 3916 may be al-
lowed for a period after the period set forth in para-
graph (1).
‘‘(c) TAXABLE PERIOD.—For purposes of this chap-
ter—
‘‘(1) IN GENERAL.—The term ‘taxable period’
means a calendar quarter.
‘‘(2) EXCEPTION.—
‘‘(A) ELECTION OF 1-MONTH PERIOD.—If
the taxpayer so elects, the term ‘taxable period’
means a calendar month.
‘‘(B) OTHER PERIODS.—To the extent pro-
vided in regulations, the term ‘taxable period’
includes a period, other than a calendar quarter
or month, selected by the taxpayer.
‘‘(d) TAX POINT.—For purposes of this chapter—
‘‘(1) CHAPTER
RULES
WITH
RESPECT
TO
SELLER GOVERN.—Except as provided in paragraph
(2), the tax point for any sale of property or services
is the earlier of—
‘‘(A) the time (or times) when any income
from the sale should be treated by the seller as
received or accrued (or any loss should be taken
into account by the seller) for purposes of chap-
ter 1, or
‘‘(B) the time (or times) when the seller
receives payment for the sale.
‘‘(2) IMPORTS.—In the case of the importing of
property, the tax point is when the property is en-
tered, or withdrawn from warehouse, for consump-
tion in the United States.
‘‘(e) MONTHLY DEPOSITS REQUIRED.—To the extent
provided in regulations, monthly deposits may be required
of the estimated liability for any taxable period for the
tax imposed by section 3901.
‘‘SEC. 3925. TREATMENT OF RELATED BUSINESSES, ETC.
‘‘(a) GENERAL RULE.—For purposes of this chapter
(other than section 3923), to the extent provided in regu-
lations, the taxpayer may elect—
‘‘(1) to treat as 1 taxable person 2 or more
businesses which may be treated under section 52(b)
as 1 employer, and
‘‘(2) to treat as separate taxable persons sepa-
rate divisions of the same business.
‘‘(b) DE MINIMUS EXEMPTION.—For purposes of
section 3923, all businesses which are under common con-
trol (within the meaning of section 52(b)) shall be treated
as 1 business.
‘‘SEC. 3926. SECRETARY TO BE NOTIFIED OF CERTAIN
EVENTS.
‘‘To the extent provided in regulations, each person
engaged in a business shall notify the Secretary (at such
time or times as may be prescribed by such regulations)
of any change in the form in which a business is conducted
or any other change which might affect the liability for
the tax imposed by section 3901 or the amount of such
tax or any credit against such tax, or otherwise affect the
administration of such tax in the case of such person.
‘‘SEC. 3927. REGULATIONS.
‘‘The Secretary shall prescribe such regulations as
may be necessary to carry out the purposes of this chap-
ter.
‘‘Subchapter E—Definitions and Special
Rules; Treatment of Certain Transactions
‘‘Sec. 3931. Definitions.
‘‘Sec. 3932. Special rules.
‘‘Sec. 3933. Personal use by owner of business property or serv-
ices.
‘‘Sec. 3934. Gift of business property or services.
‘‘Sec. 3935. Special rules for dispositions of nonbusiness real
property.
‘‘Sec. 3936. Special rule for insurance contracts.
‘‘SEC. 3931. DEFINITIONS.
‘‘(a) PROPERTY.—For purposes of this chapter, the
term ‘property’ means any tangible property.
‘‘(b) BUSINESS.—For purposes of this chapter, the
term ‘business’ includes—
‘‘(1) a trade, and
‘‘(2) an activity regularly carried on for profit.
‘‘(c) EMPLOYEE.—For purposes of this chapter, the
term ‘employee’ has the meaning such term has for pur-
poses of chapter 24 (relating to withholding).
‘‘(d) PERSON.—For purposes of this chapter, the
term ‘person’ includes any governmental entity.
‘‘(e) BUSINESS DAY.—For purposes of this chapter,
the term ‘business day’ means any day other than Satur-
day and Sunday and other than a legal holiday (within
the meaning of section 7503).
‘‘(f) UNITED STATES.—For purposes of this chapter,
the term ‘United States’, when used in a geographical
sense, includes a Commonwealth and any possession of the
United States.
‘‘SEC. 3932. SPECIAL RULES.
‘‘(a) COORDINATION WITH SUBTITLE A.—For pur-
poses of subtitle A—
‘‘(1) TREATMENT OF CREDIT.—Any credit al-
lowable to a taxpayer under section 3916 which is
attributable to any property or services shall be
treated as a reduction in the amount paid or in-
curred by the taxpayer for such property or services.
‘‘(2) AMOUNT OF DEDUCTION FOR TAX.—The
amount allowable as a deduction for the tax imposed
by section 3901 shall be determined without regard
to any credit allowable under section 3916.
‘‘(3) COMPUTATION
OF
PERCENTAGE
DEPLE-
TION.—For purposes of sections 613 and 613A—
‘‘(A) gross income shall be reduced by the
amount of the tax imposed by section 3901,
and
‘‘(B) taxable income shall be determined
without regard to any deduction allowed for
such tax.
‘‘(b) SPECIAL RULE SALE OF PROPERTY INCLUDES INCI-
DENTAL PERFORMANCE OF SERVICES.—For purposes of
this chapter, if in connection with the sale of any property
there is an incidental performance of services, such per-
formance of services shall be treated as part of the sale
of such property.
‘‘(c) SPECIAL RULE WHERE PERFORMANCE
OF
SERVICES INCLUDES INCIDENTAL TRANSFER OF PROP-
ERTY.—For purposes of this chapter, if in connection with
the performance of any services there is an incidental
transfer of property, such transfer shall be treated as part
of the performance of such services.
‘‘(d) AUTHORITY
TO
ZERO
RATE
DE
MINIMIS
TRANSACTIONS, ETC.—The Secretary may prescribe regu-
lations providing that the rate of tax shall be zero for a
taxable transaction (or category of such transactions)
where—
‘‘(1) the amount involved is de minimis, or
‘‘(2) the revenue raised by taxing the trans-
action is not sufficient to justify the administrative
and other costs involved in the payment and collec-
tion of the tax.
‘‘(e) IMPORTING TREATED
AS SALE
AND PUR-
CHASE.—For purposes of this chapter, the importing of
any property into the United States shall be treated as
both a sale and purchase of such property by the person
importing such property.
‘‘(f) SUBCHAPTER S CORPORATION TREATED
AS
NOT A CORPORATION.—For purposes of this chapter, an
S corporation (as defined in section 1361(a)) shall be
treated as a person which is not a corporation.
‘‘(g) USE INCLUDES HELD FOR USE.—For purposes
of this chapter, property and services held for use by any
person shall be treated as used by the person.
‘‘SEC. 3933. PERSONAL USE BY OWNER OF BUSINESS PROP-
ERTY OR SERVICES.
‘‘(a) GENERAL RULE.—If any business property or
services are used by an owner of the taxpayer for personal
purposes, for purposes of this chapter such use shall be
treated as a taxable transaction.
‘‘(b) TAXABLE AMOUNT.—In the case of a use de-
scribed in subsection (a), for purposes of this chapter, the
taxable amount shall be—
‘‘(1) except as provided in paragraph (2), the
fair market value of the property or the services, or
‘‘(2) if such use is only the temporary use of
property, the fair rental value of such use.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) BUSINESS PROPERTY OR SERVICES.—The
term ‘business property or services’ means any prop-
erty or services if a sale of such property, or the per-
formance of such services, by the taxpayer would be
a taxable transaction.
‘‘(2) OWNER.—The term ‘owner’ means—
‘‘(A) in the case of a sole proprietorship,
the proprietor,
‘‘(B) in the case of any other business enter-
prise, any holder of a beneficial interest in the cor-
poration, partnership, or other entity, and
‘‘(C) any member of the family (within the
meaning of section 267(c)(4)) of an individual
described in subparagraph (A) or (B).
‘‘SEC. 3934. GIFT OF BUSINESS PROPERTY OR SERVICES.
‘‘(a) GENERAL RULE.—In the case of any gift of
business property or services, for purposes of this chap-
ter—
‘‘(1) such gift shall be treated as a taxable
transaction, and
‘‘(2) the taxable amount shall be the amount
determined under section 3933(b).
‘‘(b) GIFTS RELATED TO BUSINESS PROMOTION AC-
TIVITIES.—For purposes of subsection (a), the term ‘gift’
includes any gift of property or services transferred in con-
nection with business promotion activities.
‘‘SEC. 
3935. 
SPECIAL 
RULES 
FOR 
DISPOSITIONS 
OF
NONBUSINESS REAL PROPERTY.
‘‘(a) IN GENERAL.—In the case of any sale of real
property which is treated as a commercial-type transaction
solely by reason of section 3904(b)(1)(A), for purposes of
this chapter, the taxable amount shall be the excess (if
any) of—
‘‘(1) the amount realized on such sale, over
‘‘(2) the adjusted cost to the taxpayer of such
real property.
‘‘(b) ADJUSTED COST.—For purposes of subsection
(a)—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the term ‘adjusted cost’ means, with re-
spect to any property, the basis of such property in-
creased by expenditures properly chargeable to cap-
ital account (other than taxes or other carrying
charges described in section 266) for periods during
the holding period for such property.
‘‘(2) TRANSITIONAL RULE.—The adjusted cost
of any property shall include only amounts incurred
during periods after December 31, 1993.
‘‘(c) VALUE ADDED TAX NOT TAKEN INTO AC-
COUNT.—For purposes of this section, the amount realized
on any sale of real property shall not include any amount
attributable to the tax imposed by this chapter.
‘‘SEC. 3936. SPECIAL RULE FOR INSURANCE CONTRACTS.
‘‘In the case of any contract of insurance, for pur-
poses of this chapter, the taxable amount is the excess
of—
‘‘(1) the portion of the premium attributable to
insurance coverage, over
‘‘(2) the actuarial cost to the insurer of provid-
ing such insurance coverage.’’
(b) CLERICAL AMENDMENT.—The table of chapters
for subtitle D of the Internal Revenue Code of 1986 is
amended by inserting before the item relating to chapter
31 the following:
‘‘CHAPTER 30. Value added tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to transactions occurring after
December 31, 1993.
SEC. 1002. REVENUE FROM VALUE ADDED TAX TO FUND
NATIONAL HEALTH CARE TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 of the
Internal Revenue Code of 1986 (relating to trust fund
code) is amended by adding at the end the following new
section:
‘‘SEC. 9511. NATIONAL HEALTH CARE TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘National Health Care Trust Fund’,
consisting of such amounts as may be appropriated or
credited to the Trust Fund as provided in this section or
section 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—There are here-
by appropriated to the National Health Care Trust Fund
amounts equivalent to amounts received in the Treasury
from the tax imposed under section 3901 of the Internal
Revenue Code of 1986 (relating to the value added tax).
‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts
in the National Health Care Trust Fund shall be available
only for purposes of making expenditures to carry out the
program of health benefits under the National Health In-
surance Act.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter A is amended by adding at the end
the following new item:
‘‘Sec. 9511. National Health Care Trust Fund.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1994.
TITLE XI—STUDY AND DEVELOP-
MENT 
OF 
COST 
CONTROL
MECHANISMS
SEC. 1101. DEVELOPMENT OF COST CONTROL MECHA-
NISMS.
(a) STUDY.—The Secretary of Health and Human
Services shall conduct a study analyzing various methods
to control the costs of providing personal health benefits
under this Act, and shall include in such study an analysis
of the effects on such costs of medical malpractice claims
and the purchase of medical malpractice liability insurance
by providers of the benefits.
(b) REPORTS TO CONGRESS.—Not later than Octo-
ber 1, 1995, the Secretary shall submit a report to Con-
gress describing the study conducted under subsection (a),
and shall include in the report recommendations on meth-
ods to control costs under this Act, including recommenda-
tions on the development of a system under which medical
malpractice claims brought against providers of benefits
under this Act may be resolved in an equitable and cost-
effective manner. Not later than April 1, 1996, the Sec-
retary shall promulgate regulations to implement the rec-
ommendations made in the report.
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