H. R. 2014—74
‘‘(1) IN GENERAL.—For purposes of determining whether
any transfer is a generation-skipping transfer, if—
‘‘(A) an individual is a descendant of a parent of the
transferor (or the transferor’s spouse or former spouse),
and
‘‘(B) such individual’s parent who is a lineal descendant
of the parent of the transferor (or the transferor’s spouse
or former spouse) is dead at the time the transfer (from
which an interest of such individual is established or
derived) is subject to a tax imposed by chapter 11 or
12 upon the transferor (and if there shall be more than
1 such time, then at the earliest such time),
such individual shall be treated as if such individual were
a member of the generation which is 1 generation below the
lower of the transferor’s generation or the generation assign-
ment of the youngest living ancestor of such individual who
is also a descendant of the parent of the transferor (or the
transferor’s spouse or former spouse), and the generation
assignment of any descendant of such individual shall be
adjusted accordingly.
‘‘(2) LIMITED APPLICATION OF SUBSECTION TO COLLATERAL
HEIRS.—This subsection shall not apply with respect to a trans-
fer to any individual who is not a lineal descendant of the
transferor (or the transferor’s spouse or former spouse) if, at
the time of the transfer, such transferor has any living lineal
descendant.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 2612(c) (defining direct skip) is amended by
striking paragraph (2) and by redesignating paragraph (3) as
paragraph (2).
(2) Section 2612(c)(2) (as so redesignated) is amended by
striking ‘‘section 2651(e)(2)’’ and inserting ‘‘section 2651(f)(2)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to terminations, distributions, and transfers occurring
after December 31, 1997.
TITLE VI—EXTENSIONS
SEC. 601. RESEARCH TAX CREDIT.
(a) IN GENERAL.—Paragraph (1) of section 41(h) (relating to
termination) is amended—
(1) by striking ‘‘May 31, 1997’’ and inserting ‘‘June 30,
1998’’, and
(2) by striking in the last sentence ‘‘during the first 11
months of such taxable year.’’ and inserting ‘‘during the 24-
month period beginning with the first month of such year.
The 24 months referred to in the preceding sentence shall
be reduced by the number of full months after June 1996
(and before the first month of such first taxable year) during
which the taxpayer paid or incurred any amount which is
taken into account in determining the credit under this sec-
tion.’’.
(b) TECHNICAL AMENDMENTS.—
(1) Subparagraph (B) of section 41(c)(4) is amended to
read as follows:
H. R. 2014—75
‘‘(B) ELECTION.—An election under this paragraph shall
apply to the taxable year for which made and all succeeding
taxable years unless revoked with the consent of the Sec-
retary.’’.
(2) Paragraph (1) of section 45C(b) is amended by striking
‘‘May 31, 1997’’ and inserting ‘‘June 30, 1998’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to amounts paid or incurred after May 31, 1997.
SEC. 602. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.
(a) IN GENERAL.—Clause (ii) of section 170(e)(5)(D) (relating
to termination) is amended by striking ‘‘May 31, 1997’’ and inserting
‘‘June 30, 1998’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to contributions made after May 31, 1997.
SEC. 603. WORK OPPORTUNITY TAX CREDIT.
(a) EXTENSION.—Subparagraph (B) of section 51(c)(4) (relating
to termination) is amended by striking ‘‘September 30, 1997’’ and
inserting ‘‘June 30, 1998’’.
(b) MODIFICATION
OF ELIGIBILITY REQUIREMENT BASED
ON
PERIOD ON WELFARE.—
(1) IN
GENERAL.—Subparagraph (A) of section 51(d)(2)
(defining qualified IV–A recipient) is amended by striking all
that follows ‘‘a IV–A program’’ and inserting ‘‘for any 9 months
during the 18-month period ending on the hiring date.’’.
(2) CONFORMING AMENDMENT.—Subparagraph (A) of section
51(d)(3) is amended to read as follows:
‘‘(A) IN GENERAL.—The term ‘qualified veteran’ means
any veteran who is certified by the designated local agency
as being a member of a family receiving assistance under
a food stamp program under the Food Stamp Act of 1977
for at least a 3-month period ending during the 12-month
period ending on the hiring date.’’.
(c) QUALIFIED SSI RECIPIENTS TREATED AS MEMBERS OF TAR-
GETED GROUPS.—
(1) IN GENERAL.—Section 51(d)(1) (relating to members of
targeted groups) is amended by striking ‘‘or’’ at the end of
subparagraph (F), by striking the period at the end of subpara-
graph (G) and inserting ‘‘, or’’, and by adding at the end the
following new subparagraph:
‘‘(H) a qualified SSI recipient.’’.
(2) QUALIFIED SSI RECIPIENTS.—Section 51(d) is amended
by redesignating paragraphs (9), (10), and (11) as paragraphs
(10), (11), and (12), respectively, and by inserting after para-
graph (8) the following new paragraph:
‘‘(9) QUALIFIED
SSI
RECIPIENT.—The term ‘qualified SSI
recipient’ means any individual who is certified by the des-
ignated local agency as receiving supplemental security income
benefits under title XVI of the Social Security Act (including
supplemental security income benefits of the type described
in section 1616 of such Act or section 212 of Public Law 93–
66) for any month ending within the 60-day period ending
on the hiring date.’’.
(d) PERCENTAGE OF WAGES ALLOWED AS CREDIT.—
(1) IN GENERAL.—Subsection (a) of section 51 (relating to
determination of amount) is amended by striking ‘‘35 percent’’
and inserting ‘‘40 percent’’.
H. R. 2014—76
(2) APPLICATION OF CREDIT FOR INDIVIDUALS PERFORMING
FEWER THAN 400 HOURS OF SERVICES.—Paragraph (3) of section
51(i) is amended to read as follows:
‘‘(3) INDIVIDUALS NOT MEETING MINIMUM EMPLOYMENT PERI-
ODS.—
‘‘(A) REDUCTION OF CREDIT FOR INDIVIDUALS PERFORM-
ING FEWER THAN 400 HOURS OF SERVICE.—In the case of
an individual who has performed at least 120 hours, but
less than 400 hours, of service for the employer, subsection
(a) shall be applied by substituting ‘25 percent’ for ‘40
percent’.
‘‘(B) DENIAL OF CREDIT FOR INDIVIDUALS PERFORMING
FEWER THAN 120 HOURS OF SERVICE.—No wages shall be
taken into account under subsection (a) with respect to
any individual unless such individual has performed at
least 120 hours of service for the employer.’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to individuals who begin work for the employer after
September 30, 1997.
SEC. 604. ORPHAN DRUG TAX CREDIT.
(a) IN GENERAL.—Section 45C (relating to clinical testing
expenses for certain drugs for rare diseases or conditions) is amend-
ed by striking subsection (e).
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to amounts paid or incurred after May 31, 1997.
TITLE VII—INCENTIVES FOR REVITAL-
IZATION OF THE DISTRICT OF COLUM-
BIA
SEC. 701. TAX INCENTIVES FOR REVITALIZATION OF THE DISTRICT
OF COLUMBIA.
(a) IN GENERAL.—Chapter 1 is amended by adding at the
end the following new subchapter:
‘‘Subchapter W—District of Columbia Enterprise Zone
‘‘Sec. 1400.
Establishment of DC Zone.
‘‘Sec. 1400A. Tax-exempt economic development bonds.
‘‘Sec. 1400B. Zero percent capital gains rate.
‘‘Sec. 1400C. First-time homebuyer credit for District of Columbia.
‘‘SEC. 1400. ESTABLISHMENT OF DC ZONE.
‘‘(a) IN GENERAL.—For purposes of this title—
‘‘(1) the applicable DC area is hereby designated as the
District of Columbia Enterprise Zone, and
‘‘(2) except as otherwise provided in this subchapter, the
District of Columbia Enterprise Zone shall be treated as an
empowerment zone designated under subchapter U.
‘‘(b) APPLICABLE DC AREA.—For purposes of subsection (a),
the term ‘applicable DC area’ means the area consisting of—
‘‘(1) the census tracts located in the District of Columbia
which are part of an enterprise community designated under
subchapter U before the date of the enactment of this sub-
chapter, and
H. R. 2014—77
‘‘(2) all other census tracts—
‘‘(A) which are located in the District of Columbia,
and
‘‘(B) for which the poverty rate is not less than than
20 percent.
‘‘(c) DISTRICT OF COLUMBIA ENTERPRISE ZONE.—For purposes
of this subchapter, the terms ‘District of Columbia Enterprise Zone’
and ‘DC Zone’ mean the District of Columbia Enterprise Zone
designated by subsection (a).
‘‘(d) SPECIAL
RULES
FOR
APPLICATION
OF
EMPLOYMENT
CREDIT.—
‘‘(1) EMPLOYEES WHOSE PRINCIPAL PLACE OF ABODE IS IN
DISTRICT OF COLUMBIA.—With respect to the DC Zone, section
1396(d)(1)(B) (relating to empowerment zone employment
credit) shall be applied by substituting ‘the District of Columbia’
for ‘such empowerment zone’.
‘‘(2) NO DECREASE OF PERCENTAGE IN 2002.—In the case
of the DC Zone, section 1396 (relating to empowerment zone
employment credit) shall be applied by substituting ‘‘20’’ for
‘‘15’’ in the table contained in section 1396(b). The preceding
sentence shall apply only with respect to qualified zone employ-
ees, as defined in section 1396(d), determined by treating no
area other than the DC Zone as an empowerment zone or
enterprise community.
‘‘(e) SPECIAL RULE FOR APPLICATION OF ENTERPRISE ZONE BUSI-
NESS DEFINITION.—For purposes of this subchapter and for purposes
of applying subchapter U with respect to the DC Zone, section
1397B shall be applied without regard to subsections (b)(6) and
(c)(5) thereof.
‘‘(f) TIME FOR WHICH DESIGNATION APPLICABLE.—
‘‘(1) IN GENERAL.—The designation made by subsection (a)
shall apply for the period beginning on January 1, 1998, and
ending on December 31, 2002.
‘‘(2) COORDINATION WITH DC ENTERPRISE COMMUNITY DES-
IGNATED UNDER SUBCHAPTER U.—The designation under sub-
chapter U of the census tracts referred to in subsection (b)(1)
as an enterprise community shall terminate on December 31,
2002.
‘‘SEC. 1400A. TAX-EXEMPT ECONOMIC DEVELOPMENT BONDS.
‘‘(a) IN GENERAL.—In the case of the District of Columbia
Enterprise Zone, subparagraph (A) of section 1394(c)(1) (relating
to limitation on amount of bonds) shall be applied by substituting
‘$15,000,000’ for ‘$3,000,000’.
‘‘(b) PERIOD
OF APPLICABILITY.—This section shall apply to
bonds issued during the period beginning on January 1, 1998,
and ending on December 31, 2002.
‘‘SEC. 1400B. ZERO PERCENT CAPITAL GAINS RATE.
‘‘(a) EXCLUSION.—Gross income shall not include qualified
capital gain from the sale or exchange of any DC Zone asset held
for more than 5 years.
‘‘(b) DC ZONE ASSET.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘DC Zone asset’ means—
‘‘(A) any DC Zone business stock,
‘‘(B) any DC Zone partnership interest, and
‘‘(C) any DC Zone business property.
‘‘(2) DC ZONE BUSINESS STOCK.—
H. R. 2014—78
‘‘(A) IN GENERAL.—The term ‘DC Zone business stock’
means any stock in a domestic corporation which is origi-
nally issued after December 31, 1997, if—
‘‘(i) such stock is acquired by the taxpayer, before
January 1, 2003, at its original issue (directly or
through an underwriter) solely in exchange for cash,
‘‘(ii) as of the time such stock was issued, such
corporation was a DC Zone business (or, in the case
of a new corporation, such corporation was being orga-
nized for purposes of being a DC Zone business), and
‘‘(iii) during substantially all of the taxpayer’s hold-
ing period for such stock, such corporation qualified
as a DC Zone business.
‘‘(B) REDEMPTIONS.—A rule similar to the rule of sec-
tion 1202(c)(3) shall apply for purposes of this paragraph.
‘‘(3) DC ZONE PARTNERSHIP INTEREST.—The term ‘DC Zone
partnership interest’ means any capital or profits interest in
a domestic partnership which is originally issued after Decem-
ber 31, 1997, if—
‘‘(A) such interest is acquired by the taxpayer, before
January 1, 2003, from the partnership solely in exchange
for cash,
‘‘(B) as of the time such interest was acquired, such
partnership was a DC Zone business (or, in the case of
a new partnership, such partnership was being organized
for purposes of being a DC Zone business), and
‘‘(C) during substantially all of the taxpayer’s holding
period for such interest, such partnership qualified as a
DC Zone business.
A rule similar to the rule of paragraph (2)(B) shall apply
for purposes of this paragraph.
‘‘(4) DC ZONE BUSINESS PROPERTY.—
‘‘(A) IN GENERAL.—The term ‘DC Zone business prop-
erty’ means tangible property if—
‘‘(i) such property was acquired by the taxpayer
by purchase (as defined in section 179(d)(2)) after
December 31, 1997, and before January 1, 2003,
‘‘(ii) the original use of such property in the DC
Zone commences with the taxpayer, and
‘‘(iii) during substantially all of the taxpayer’s hold-
ing period for such property, substantially all of the
use of such property was in a DC Zone business of
the taxpayer.
‘‘(B) SPECIAL RULE FOR BUILDINGS WHICH ARE SUBSTAN-
TIALLY IMPROVED.—
‘‘(i) IN GENERAL.—The requirements of clauses (i)
and (ii) of subparagraph (A) shall be treated as met
with respect to—
‘‘(I) property which is substantially improved
by the taxpayer before January 1, 2003, and
‘‘(II) any land on which such property is
located.
‘‘(ii) SUBSTANTIAL IMPROVEMENT.—For purposes of
clause (i), property shall be treated as substantially
improved by the taxpayer only if, during any 24-month
period beginning after December 31, 1997, additions
H. R. 2014—79
to basis with respect to such property in the hands
of the taxpayer exceed the greater of—
‘‘(I) an amount equal to the adjusted basis
of such property at the beginning of such 24-month
period in the hands of the taxpayer, or
‘‘(II) $5,000.
‘‘(6) TREATMENT OF SUBSEQUENT PURCHASERS, ETC.—The
term ‘DC Zone asset’ includes any property which would be
a DC Zone asset but for paragraph (2)(A)(i), (3)(A), or (4)(A)(ii)
in the hands of the taxpayer if such property was a DC Zone
asset in the hands of a prior holder.
‘‘(7) 5-YEAR SAFE HARBOR.—If any property ceases to be
a DC Zone asset by reason of paragraph (2)(A)(iii), (3)(C),
or (4)(A)(iii) after the 5-year period beginning on the date
the taxpayer acquired such property, such property shall con-
tinue to be treated as meeting the requirements of such para-
graph; except that the amount of gain to which subsection
(a) applies on any sale or exchange of such property shall
not exceed the amount which would be qualified capital gain
had such property been sold on the date of such cessation.
‘‘(c) DC ZONE BUSINESS.—For purposes of this section, the
term ‘DC Zone business’ means any entity which is an enterprise
zone business (as defined in section 1397B), determined—
‘‘(1) after the application of section 1400(e),
‘‘(2) by substituting ‘‘80 percent’’ for ‘‘50 percent’’ in sub-
sections (b)(2) and (c)(1) of section 1397B, and
‘‘(3) by treating no area other than the DC Zone as an
empowerment zone or enterprise community.
‘‘(d) TREATMENT OF ZONE AS INCLUDING CENSUS TRACTS WITH
10 PERCENT POVERTY RATE.—For purposes of applying this section
(and for purposes of applying this subchapter and subchapter U
with respect to this section), the DC Zone shall be treated as
including all census tracts—
‘‘(1) which are located in the District of Columbia, and
‘‘(2) for which the poverty rate is not less than 10 percent.
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes
of this section—
‘‘(1) QUALIFIED CAPITAL GAIN.—Except as otherwise pro-
vided in this subsection, the term ‘qualified capital gain’ means
any gain recognized on the sale or exchange of—
‘‘(A) a capital asset, or
‘‘(B) property used in the trade or business (as defined
in section 1231(b)).
‘‘(2) GAIN BEFORE 1998 OR AFTER 2007 NOT QUALIFIED.—
The term ‘qualified capital gain’ shall not include any gain
attributable to periods before January 1, 1998, or after Decem-
ber 31, 2007.
‘‘(3) CERTAIN
GAIN
NOT
QUALIFIED.—The term ‘qualified
capital gain’ shall not include any gain which would be treated
as ordinary income under section 1245 or under section 1250
if section 1250 applied to all depreciation rather than the
additional depreciation.
‘‘(4) INTANGIBLES
AND
LAND
NOT
INTEGRAL
PART
OF
DC
ZONE
BUSINESS.—The term ‘qualified capital gain’ shall not
include any gain which is attributable to real property, or
an intangible asset, which is not an integral part of a DC
Zone business.
H. R. 2014—80
‘‘(5) RELATED PARTY TRANSACTIONS.—The term ‘qualified
capital gain’ shall not include any gain attributable, directly
or indirectly, in whole or in part, to a transaction with a
related person. For purposes of this paragraph, persons are
related to each other if such persons are described in section
267(b) or 707(b)(1).
‘‘(f) CERTAIN OTHER RULES TO APPLY.—Rules similar to the
rules of subsections (g), (h), (i)(2), and (j) of section 1202 shall
apply for purposes of this section.
‘‘(g) SALES AND EXCHANGES OF INTERESTS IN PARTNERSHIPS
AND S CORPORATIONS WHICH ARE DC ZONE BUSINESSES.—In the
case of the sale or exchange of an interest in a partnership, or
of stock in an S corporation, which was a DC Zone business during
substantially all of the period the taxpayer held such interest or
stock, the amount of qualified capital gain shall be determined
without regard to—
‘‘(1) any gain which is attributable to real property, or
an intangible asset, which is not an integral part of a DC
Zone business, and
‘‘(2) any gain attributable to periods before January 1,
1998, or after December 31, 2007.
‘‘SEC. 1400C. FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT OF
COLUMBIA.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an individual who
is a first-time homebuyer of a principal residence in the District
of Columbia during any taxable year, there shall be allowed as
a credit against the tax imposed by this chapter for the taxable
year an amount equal to so much of the purchase price of the
residence as does not exceed $5,000.
‘‘(b) LIMITATION
BASED
ON
MODIFIED
ADJUSTED
GROSS
INCOME.—
‘‘(1) IN GENERAL.—The amount allowable as a credit under
subsection (a) (determined without regard to this subsection)
for the taxable year shall be reduced (but not below zero)
by the amount which bears the same ratio to the credit so
allowable as—
‘‘(A) the excess (if any) of—
‘‘(i) the taxpayer’s modified adjusted gross income
for such taxable year, over
‘‘(ii) $70,000 ($110,000 in the case of a joint return),
bears to
‘‘(B) $20,000.
‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—For purposes of
paragraph (1), the term ‘modified adjusted gross income’ means
the adjusted gross income of the taxpayer for the taxable year
increased by any amount excluded from gross income under
section 911, 931, or 933.
‘‘(c) FIRST-TIME HOMEBUYER.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘first-time homebuyer’ has the
same meaning as when used in section 72(t)(8)(D)(i), except
that ‘principal residence in the District of Columbia during
the 1-year period’ shall be substituted for ‘principal residence
during the 2-year period’ in subclause (I) thereof.
‘‘(2) ONE-TIME ONLY.—If an individual is treated as a first-
time homebuyer with respect to any principal residence, such
H. R. 2014—81
individual may not be treated as a first-time homebuyer with
respect to any other principal residence.
‘‘(3) PRINCIPAL RESIDENCE.—The term ‘principal residence’
has the same meaning as when used in section 121.
‘‘(d) CARRYOVER OF CREDIT.—If the credit allowable under sub-
section (a) exceeds the limitation imposed by section 26(a) for such
taxable year reduced by the sum of the credits allowable under
subpart A of part IV of subchapter A (other than this section),
such excess shall be carried to the succeeding taxable year and
added to the credit allowable under subsection (a) for such taxable
year.
‘‘(e) SPECIAL RULES.—For purposes of this section—
‘‘(1) ALLOCATION OF DOLLAR LIMITATION.—
‘‘(A) MARRIED INDIVIDUALS FILING SEPARATELY.—In the
case of a married individual filing a separate return, sub-
section (a) shall be applied by substituting ‘$2,500’ for
‘$5,000’.
‘‘(B) OTHER TAXPAYERS.—If 2 or more individuals who
are not married purchase a principal residence, the amount
of the credit allowed under subsection (a) shall be allocated
among such individuals in such manner as the Secretary
may prescribe, except that the total amount of the credits
allowed to all such individuals shall not exceed $5,000.
‘‘(2) PURCHASE.—
‘‘(A) IN
GENERAL.—The term ‘purchase’ means any
acquisition, but only if—
‘‘(i) the property is not acquired from a person
whose relationship to the person acquiring it would
result in the disallowance of losses under section 267
or 707(b) (but, in applying section 267 (b) and (c)
for purposes of this section, paragraph (4) of section
267(c) shall be treated as providing that the family
of an individual shall include only his spouse, ances-
tors, and lineal descendants), and
‘‘(ii) the basis of the property in the hands of
the person acquiring it is not determined—
‘‘(I) in whole or in part by reference to the
adjusted basis of such property in the hands of
the person from whom acquired, or
‘‘(II) under section 1014(a) (relating to property
acquired from a decedent).
‘‘(B) CONSTRUCTION.—A residence which is constructed
by the taxpayer shall be treated as purchased by the tax-
payer.
‘‘(3) PURCHASE PRICE.—The term ‘purchase price’ means
the adjusted basis of the principal residence on the date of
acquisition (within the meaning of section 72(t)(8)(D)(iii)).
‘‘(f) REPORTING.—If the Secretary requires information reporting
under section 6045 by a person described in subsection (e)(2) thereof
to verify the eligibility of taxpayers for the credit allowable by
this section, the exception provided by section 6045(e)(5) shall not
apply.
‘‘(g) CREDIT TREATED AS NONREFUNDABLE PERSONAL CREDIT.—
For purposes of this title, the credit allowed by this section shall
be treated as a credit allowable under subpart A of part IV of
subchapter A of this chapter.
H. R. 2014—82
‘‘(h) BASIS ADJUSTMENT.—For purposes of this subtitle, if a
credit is allowed under this section with respect to the purchase
of any residence, the basis of such residence shall be reduced
by the amount of the credit so allowed.
‘‘(i) TERMINATION.—This section shall not apply to any property
purchased after December 31, 2000.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (d) of section 39 is amended by adding
at the end the following new paragraph:
‘‘(8) NO CARRYBACK OF DC ZONE CREDITS BEFORE EFFECTIVE
DATE.—No portion of the unused business credit for any taxable
year which is attributable to the credits allowable under sub-
chapter U by reason of section 1400 may be carried back
to a taxable year ending before the date of the enactment
of section 1400.’’.
(2) Subsection (a) of section 1016 is amended by striking
‘‘and’’ at the end of paragraph (25), by striking the period
at the end of paragraph (26) and inserting ‘‘, and’’, and by
adding at the end thereof the following new paragraph:
‘‘(27) in the case of a residence with respect to which
a credit was allowed under section 1400C, to the extent pro-
vided in section 1400C(h).’’.
(c) CLERICAL AMENDMENT.—The table of subchapters for chap-
ter 1 is amended by adding at the end the following new item:
‘‘Subchapter W. District of Columbia Enterprise Zone.’’.
(d) EFFECTIVE DATE.—Except as provided in subsection (c),
the amendments made by this section shall take effect on the
date of the enactment of this Act.
TITLE VIII—WELFARE-TO-WORK
INCENTIVES
SEC. 801. INCENTIVES FOR EMPLOYING LONG-TERM FAMILY ASSIST-
ANCE RECIPIENTS.
(a) IN GENERAL.—Subpart F of part IV of subchapter A of
chapter 1 is amended by inserting after section 51 the following
new section:
‘‘SEC. 51A. TEMPORARY INCENTIVES FOR EMPLOYING LONG-TERM
FAMILY ASSISTANCE RECIPIENTS.
‘‘(a) DETERMINATION OF AMOUNT.—For purposes of section 38,
the amount of the welfare-to-work credit determined under this
section for the taxable year shall be equal to—
‘‘(1) 35 percent of the qualified first-year wages for such
year, and
‘‘(2) 50 percent of the qualified second-year wages for such
year.
‘‘(b) QUALIFIED WAGES DEFINED.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified wages’ means the
wages paid or incurred by the employer during the taxable
year to individuals who are long-term family assistance recipi-
ents.
‘‘(2) QUALIFIED
FIRST-YEAR
WAGES.—The term ‘qualified
first-year wages’ means, with respect to any individual, quali-
fied wages attributable to service rendered during the 1-year
H. R. 2014—83
period beginning with the day the individual begins work for
the employer.
‘‘(3) QUALIFIED SECOND-YEAR WAGES.—The term ‘qualified
second-year wages’ means, with respect to any individual, quali-
fied wages attributable to service rendered during the 1-year
period beginning on the day after the last day of the 1-year
period with respect to such individual determined under para-
graph (2).
‘‘(4) ONLY FIRST $10,000 OF WAGES PER YEAR TAKEN INTO
ACCOUNT.—The amount of the qualified first-year wages, and
the amount of qualified second-year wages, which may be taken
into account with respect to any individual shall not exceed
$10,000 per year.
‘‘(5) WAGES.—
‘‘(A) IN GENERAL.—The term ‘wages’ has the meaning
given such term by section 51(c), without regard to para-
graph (4) thereof.
‘‘(B) CERTAIN AMOUNTS TREATED AS WAGES.—The term
‘wages’ includes amounts paid or incurred by the employer
which are excludable from such recipient’s gross income
under—
‘‘(i) section 105 (relating to amounts received under
accident and health plans),
‘‘(ii) section 106 (relating to contributions by
employer to accident and health plans),
‘‘(iii) section 127 (relating to educational assistance
programs) or would be so excludable but for section
127(d), but only to the extent paid or incurred to a
person not related to the employer, or
‘‘(iv) section 129 (relating to dependent care assist-
ance programs).
The amount treated as wages by clause (i) or (ii) for any
period shall be based on the reasonable cost of coverage
for the period, but shall not exceed the applicable premium
for the period under section 4980B(f)(4).
‘‘(C) SPECIAL RULES FOR AGRICULTURAL AND RAILWAY
LABOR.—If such recipient is an employee to whom subpara-
graph (A) or (B) of section 51(h)(1) applies, rules similar
to the rules of such subparagraphs shall apply except that—
‘‘(i) such subparagraph (A) shall be applied by
substituting ‘$10,000’ for ‘$6,000’, and
‘‘(ii) such subparagraph (B) shall be applied by
substituting ‘$833.33’ for ‘$500’.
‘‘(c) LONG-TERM FAMILY ASSISTANCE RECIPIENTS.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘long-term family assistance
recipient’ means any individual who is certified by the des-
ignated local agency (as defined in section 51(d)(10))—
‘‘(A) as being a member of a family receiving assistance
under a IV-A program (as defined in section 51(d)(2)(B))
for at least the 18-month period ending on the hiring
date,
‘‘(B)(i) as being a member of a family receiving such
assistance for 18 months beginning after the date of the
enactment of this section, and
H. R. 2014—84
‘‘(ii) as having a hiring date which is not more than
2 years after the end of the earliest such 18-month period,
or
‘‘(C)(i) as being a member of a family which ceased
to be eligible after the date of the enactment of this section
for such assistance by reason of any limitation imposed
by Federal or State law on the maximum period such
assistance is payable to a family, and
‘‘(ii) as having a hiring date which is not more than
2 years after the date of such cessation.
‘‘(2) HIRING DATE.—The term ‘hiring date’ has the meaning
given such term by section 51(d).
‘‘(d) CERTAIN RULES TO APPLY.—
‘‘(1) IN
GENERAL.—Rules similar to the rules of section
52, and subsections (d)(11), (f), (g), (i) (as in effect on the
day before the date of the enactment of the Taxpayer Relief
Act of 1997), (j), and (k) of section 51, shall apply for purposes
of this section.
‘‘(2) CREDIT
TO
BE
PART
OF
GENERAL
BUSINESS
CREDIT,
ETC.—References to section 51 in section 38(b), 280C(a), and
1396(c)(3) shall be treated as including references to this sec-
tion.
‘‘(e) COORDINATION WITH WORK OPPORTUNITY CREDIT.—If a
credit is allowed under this section to an employer with respect
to an individual for any taxable year, then for purposes of applying
section 51 to such employer, such individual shall not be treated
as a member of a targeted group for such taxable year.
‘‘(f) TERMINATION.—This section shall not apply to individuals
who begin work for the employer after April 30, 1999.’’.
(b) CLERICAL AMENDMENT.—The table of sections for subpart
F of part IV of subchapter A of chapter 1 is amended by inserting
after the item relating to section 51 the following new item:
‘‘Sec. 51A. Temporary incentives for employing long-term family assistance
recipients.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to individuals who begin work for the employer after
December 31, 1997.
TITLE IX—MISCELLANEOUS
PROVISIONS
Subtitle A—Provisions Relating to Excise
Taxes
SEC. 901. GENERAL REVENUE PORTION OF HIGHWAY MOTOR FUELS
TAXES DEPOSITED INTO HIGHWAY TRUST FUND.
(a) IN GENERAL.—Paragraph (4) of section 9503(b) (relating
to certain additional taxes not transferred to Highway Trust Fund)
is amended to read as follows:
‘‘(4) CERTAIN TAXES NOT TRANSFERRED TO HIGHWAY TRUST
FUND.—For purposes of paragraphs (1) and (2), there shall
not be taken into account the taxes imposed by—
‘‘(A) section 4041(d),
H. R. 2014—85
‘‘(B) section 4081 to the extent attributable to the
rate specified in section 4081(a)(2)(B),
‘‘(C) section 4041 or 4081 to the extent attributable
to fuel used in a train,
‘‘(D) in the case of fuels used as described in paragraph
(4)(D), (5)(B), or (6)(D) of subsection (c), section 4041 or
4081—
‘‘(i) with respect to so much of the rate of tax
on gasoline or special motor fuels as exceeds 11.5 cents
per gallon, and
‘‘(ii) with respect to so much of the rate of tax
on diesel fuel or kerosene as exceeds 17.5 cents per
gallon,
‘‘(E) in the case of fuels described in section
4041(b)(2)(A), 4041(k), or 4081(c), section 4041 or 4081
before October 1, 1999, with respect to a rate equal to
2.5 cents per gallon, or
‘‘(F) in the case of fuels described in section 4081(c)(2),
such section before October 1, 1999, with respect to a
rate equal to 2.8 cents per gallon.’’.
(b) MASS TRANSIT PORTION.—Section 9503(e)(2) (relating to
transfers to Mass Transit Account) is amended by striking ‘‘2 cents’’
and inserting ‘‘2.85 cents’’.
(c) LIMITATION
ON EXPENDITURES.—Subsection (c) of section
9503 is amended by adding at the end the following new paragraph:
‘‘(7) LIMITATION ON EXPENDITURES.—Notwithstanding any
other provision of law, in calculating amounts under section
157(a) of title 23, United States Code, and sections 1013(c),
1015(a), and 1015(b) of the Intermodal Surface Transportation
Efficiency Act of 1991 (Public Law 102–240; 105 Stat. 1914),
deposits in the Highway Trust Fund resulting from the amend-
ments made by the Taxpayer Relief Act of 1997 shall not
be taken into account.’’.
(d) TECHNICAL AMENDMENTS.—
(1) Section 9503 is amended by striking subsection (f).
(2) The last sentence of subparagraph (A) of section
9503(c)(2) is amended by striking ‘‘by taking into account only
the Highway Trust Fund financing rate applicable to any fuel’’
and inserting ‘‘by taking into account only the portion of the
taxes which are deposited into the Highway Trust Fund’’.
(3) Paragraphs (4)(D), (5)(B), and (6)(D) of section 9503(c)
are each amended by striking ‘‘attributable to the Highway
Trust Fund financing rate’’ and inserting ‘‘deposited into the
Highway Trust Fund’’.
(e) DELAYED DEPOSITS OF HIGHWAY MOTOR FUEL TAX REVE-
NUES.—Notwithstanding section 6302 of the Internal Revenue Code
of 1986, in the case of deposits of taxes imposed by sections 4041
and 4081 (other than subsection (a)(2)(A)(ii)) of the Internal Reve-
nue Code of 1986, the due date for any deposit which would (but
for this subsection) be required to be made after July 31, 1998,
and before October 1, 1998, shall be October 5, 1998.
(f) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxes received in the Treasury after September 30,
1997.
H. R. 2014—86
SEC. 902. REPEAL OF TAX ON DIESEL FUEL USED IN RECREATIONAL
BOATS.
(a) IN GENERAL.—Subparagraph (B) of section 6421(e)(2) (defin-
ing off-highway business use) is amended by striking clauses (iii)
and (iv).
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 4041(a)(1) is amended—
(A) by striking ‘‘, a diesel-powered train, or a diesel-
powered boat’’ each place it appears and inserting ‘‘or a
diesel-powered train’’, and
(B) by striking ‘‘vehicle, train, or boat’’ and inserting
‘‘vehicle or train’’.
(2) Paragraph (1) of section 4041(a) is amended by striking
subparagraph (D).
(3) Paragraph (3) of section 4083(a) is amended by striking
‘‘, a diesel-powered train, or a diesel-powered boat’’ and insert-
ing ‘‘or a diesel-powered train’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on January 1, 1998.
SEC. 903. CONTINUED APPLICATION OF TAX ON IMPORTED RECYCLED
HALON-1211.
(a) IN GENERAL.—Paragraph (1) of section 4682(d) is amended
by striking ‘‘recycled halon’’ and inserting ‘‘recycled Halon-1301
or recycled Halon-2402’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on the date of the enactment of this Act.
SEC. 904. UNIFORM RATE OF TAX ON VACCINES.
(a) IN GENERAL.—Subsection (b) of section 4131 is amended
to read as follows:
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax imposed by sub-
section (a) shall be 75 cents per dose of any taxable vaccine.
‘‘(2) COMBINATIONS OF VACCINES.—If any taxable vaccine
is described in more than 1 subparagraph of section 4132(a)(1),
the amount of the tax imposed by subsection (a) on such vaccine
shall be the sum of the amounts for the vaccines which are
so included.’’.
(b) TAXABLE VACCINES.—Paragraph (1) of section 4132(a) is
amended to read as follows:
‘‘(1) TAXABLE VACCINE.—The term ‘taxable vaccine’ means
any of the following vaccines which are manufactured or pro-
duced in the United States or entered into the United States
for consumption, use, or warehousing:
‘‘(A) Any vaccine containing diphtheria toxoid.
‘‘(B) Any vaccine containing tetanus toxoid.
‘‘(C) 
Any 
vaccine 
containing 
pertussis 
bacteria,
extracted or partial cell bacteria, or specific pertussis anti-
gens.
‘‘(D) Any vaccine against measles.
‘‘(E) Any vaccine against mumps.
‘‘(F) Any vaccine against rubella.
‘‘(G) Any vaccine containing polio virus.
‘‘(H) Any HIB vaccine.
‘‘(I) Any vaccine against hepatitis B.
‘‘(J) Any vaccine against chicken pox.’’.
H. R. 2014—87
(c) CONFORMING AMENDMENT.—Subsection (a) of section 4132
is amended by striking paragraphs (2), (3), (4), and (5) and by
redesignating paragraphs (6) through (8) as paragraphs (2) through
(4), respectively.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the day after the date of the enactment of
this Act.
(e) LIMITATION ON CERTAIN CREDITS OR REFUNDS.—For pur-
poses of applying section 4132(b) of the Internal Revenue Code
of 1986 with respect to any claim for credit or refund filed before
January 1, 1999, the amount of tax taken into account shall not
exceed the tax computed under the rate in effect on the day after
the date of the enactment of this Act.
SEC. 905. OPERATORS OF MULTIPLE GASOLINE RETAIL OUTLETS
TREATED AS WHOLESALE DISTRIBUTOR FOR REFUND
PURPOSES.
(a) IN GENERAL.—Subparagraph (B) of section 6416(a)(4) (defin-
ing wholesale distributor) is amended by adding at the end the
following new sentence: ‘‘Such term includes any person who makes
retail sales of gasoline at 10 or more retail motor fuel outlets.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to sales after the date of the enactment of this Act.
SEC. 906. EXEMPTION OF ELECTRIC AND OTHER CLEAN-FUEL MOTOR
VEHICLES FROM LUXURY AUTOMOBILE CLASSIFICATION.
(a) IN GENERAL.—Subsection (a) of section 4001 (relating to
imposition of tax) is amended to read as follows:
‘‘(a) IMPOSITION OF TAX.—
‘‘(1) IN
GENERAL.—There is hereby imposed on the 1st
retail sale of any passenger vehicle a tax equal to 10 percent
of the price for which so sold to the extent such price exceeds
the applicable amount.
‘‘(2) APPLICABLE AMOUNT.—
‘‘(A) IN
GENERAL.—Except as provided in subpara-
graphs (B) and (C), the applicable amount is $30,000.
‘‘(B) QUALIFIED CLEAN-FUEL VEHICLE PROPERTY.—In the
case of a passenger vehicle which is propelled by a fuel
which is not a clean-burning fuel and to which is installed
qualified clean-fuel vehicle property (as defined in section
179A(c)(1)(A)) for purposes of permitting such vehicle to
be propelled by a clean-burning fuel, the applicable amount
is equal to the sum of—
‘‘(i) the dollar amount in effect under subparagraph
(A), plus
‘‘(ii) the increase in the price for which the pas-
senger vehicle was sold (within the meaning of section
4002) due to the installation of such property.
‘‘(C) PURPOSE BUILT PASSENGER VEHICLE.—
‘‘(i) IN GENERAL.—In the case of a purpose built
passenger vehicle, the applicable amount is equal to
150 percent of the dollar amount in effect under
subparagraph (A).
‘‘(ii) PURPOSE BUILT PASSENGER VEHICLE.—For pur-
poses of clause (i), the term ‘purpose built passenger
vehicle’ means a passenger vehicle produced by an
original equipment manufacturer and designed so that
the vehicle may be propelled primarily by electricity.’’.
H. R. 2014—88
(b) CONFORMING AMENDMENTS.—
(1) Subsection (e) of section 4001 (relating to inflation
adjustment) is amended by striking ‘‘and section 4003(a)’’.
(2) Subsection (f) of section 4001 (relating to phasedown)
is amended by striking ‘‘subsection (a)’’ and inserting ‘‘sub-
section (a)(1)’’.
(3) Subparagraph (A) of section 4003(a)(1) is amended by
inserting 
‘‘(other 
than 
property 
described 
in 
section
4001(a)(2)(B))’’ after ‘‘part or accessory’’.
(4) Subparagraph (B) of section 4003(a)(2) is amended to
read as follows:
‘‘(B) the appropriate applicable amount as determined
under section 4001(a)(2).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to sales and installations occurring after the date of
the enactment of this Act.
SEC. 907. RATE OF TAX ON CERTAIN SPECIAL FUELS DETERMINED
ON BASIS OF BTU EQUIVALENCY WITH GASOLINE.
(a) SPECIAL MOTOR FUELS.—
(1) IN GENERAL.—Paragraph (2) of section 4041(a) (relating
to special motor fuels) is amended to read as follows:
‘‘(2) SPECIAL MOTOR FUELS.—
‘‘(A) IN GENERAL.—There is hereby imposed a tax on
any liquid (other than kerosene, gas oil, fuel oil, or any
product taxable under section 4081)—
‘‘(i) sold by any person to an owner, lessee, or
other operator of a motor vehicle or motorboat for
use as a fuel in such motor vehicle or motorboat, or
‘‘(ii) used by any person as a fuel in a motor
vehicle or motorboat unless there was a taxable sale
of such liquid under clause (i).
‘‘(B) RATE OF TAX.—The rate of the tax imposed by
this paragraph shall be—
‘‘(i) except as otherwise provided in this subpara-
graph, 
the 
rate 
of 
tax 
specified 
in 
section
4081(a)(2)(A)(i) which is in effect at the time of such
sale or use,
‘‘(ii) 13.6 cents per gallon in the case of liquefied
petroleum gas, and
‘‘(iii) 11.9 cents per gallon in the case of liquefied
natural gas.
In the case of any sale or use after September 30, 1999,
clause (ii) shall be applied by substituting ‘3.2 cents’ for
‘13.6 cents’, and clause (iii) shall be applied by substituting
‘2.8 cents’ for ‘11.9 cents’.’’.
(2) CONFORMING
AMENDMENT.—Paragraph (1) of section
4041(d) is amended by inserting ‘‘and other than liquefied natu-
ral gas’’ after ‘‘liquefied petroleum gas’’.
(b) METHANOL FUEL PRODUCED FROM NATURAL GAS.—Subpara-
graph (A) of section 4041(m)(1) is amended to read as follows:
‘‘(A) the rate of the tax imposed by subsection (a)(2)
shall be—
‘‘(i) after September 30, 1997, and before October
1, 1999—
H. R. 2014—89
‘‘(I) in the case of fuel none of the alcohol
in which consists of ethanol, 9.15 cents per gallon,
and
‘‘(II) in any other case, 11.3 cents per gallon,
and
‘‘(ii) after September 30, 1999—
‘‘(I) in the case of fuel none of the alcohol
in which consists of ethanol, 2.15 cents per gallon,
and
‘‘(II) in any other case, 4.3 cents per gallon,
and’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on October 1, 1997.
SEC. 908. MODIFICATION OF TAX TREATMENT OF HARD CIDER.
(a) HARD CIDER CONTAINING LESS THAN 7 PERCENT ALCOHOL
TAXED AS WINE.—Subsection (b) of section 5041 (relating to imposi-
tion and rate of tax) is amended by striking ‘‘and’’ at the end
of paragraph (4), by striking the period at the end of paragraph
(5) and inserting ‘‘; and’’, and by adding at the end the following
new paragraph:
‘‘(6) On hard cider derived primarily from apples or apple
concentrate and water, containing no other fruit product, and
containing at least one-half of 1 percent and less than 7 percent
alcohol by volume, 22.6 cents per wine gallon.’’.
(b) APPLICATION OF SMALL PRODUCER CREDIT.—Paragraph (1)
of section 5041(c) (relating to credit for small domestic producers)
is amended by adding at the end the following new sentence:
‘‘In the case of wine described in subsection (b)(6), the preceding
sentence shall be applied by substituting ‘5.6 cents’ for ‘90 cents’.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on October 1, 1997.
SEC. 909. STUDY OF FEASIBILITY OF MOVING COLLECTION POINT FOR
DISTILLED SPIRITS EXCISE TAX.
(a) IN GENERAL.—The Secretary of the Treasury or his delegate
shall conduct a study of options for changing the event on which
the tax imposed by section 5001 of the Internal Revenue Code
of 1986 is determined. One such option which shall be studied
is determining such tax on removal from registered wholesale ware-
houses. In studying each such option, such Secretary shall focus
on administrative issues including—
(1) tax compliance,
(2) the number of taxpayers required to pay the tax,
(3) the types of financial responsibility requirements that
might be required, and
(4) special requirements regarding segregation of non-tax-
paid distilled spirits from other products.
Such study shall review the effects of each such option on the
Department of the Treasury (including staffing and other demands
on budgetary resources) and the change in the period between
the time such tax is currently paid and the time such tax would
be paid under each such option.
(b) REPORT.—The report of such study shall be submitted to
the Committee on Finance of the Senate and the Committee on
Ways and Means of the House of Representatives not later than
March 31, 1998.
H. R. 2014—90
SEC. 910. CLARIFICATION OF AUTHORITY TO USE SEMI-GENERIC DES-
IGNATIONS ON WINE LABELS.
(a) IN GENERAL.—Section 5388 (relating to designation of wines)
is amended by adding at the end the following new subsection:
‘‘(c) USE OF SEMI-GENERIC DESIGNATIONS.—
‘‘(1) IN GENERAL.—Semi-generic designations may be used
to designate wines of an origin other than that indicated by
such name only if—
‘‘(A) there appears in direct conjunction therewith an
appropriate appellation of origin disclosing the true place
of origin of the wine, and
‘‘(B) the wine so designated conforms to the standard
of identity, if any, for such wine contained in the regula-
tions under this section or, if there is no such standard,
to the trade understanding of such class or type.
‘‘(2) DETERMINATION OF WHETHER NAME IS SEMI-GENERIC.—
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(B), a name of geographic significance, which is also the
designation of a class or type of wine, shall be deemed
to have become semi-generic only if so found by the Sec-
retary.
‘‘(B) CERTAIN NAMES TREATED AS SEMI-GENERIC.—The
following names shall be treated as semi-generic: Angelica,
Burgundy, Claret, Chablis, Champagne, Chianti, Malaga,
Marsala, Madeira, Moselle, Port, Rhine Wine or Hock, Sau-
terne, Haut Sauterne, Sherry, Tokay.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on the date of the enactment of this Act.
Subtitle B—Revisions Relating to Disasters
SEC. 911. AUTHORITY TO POSTPONE CERTAIN TAX-RELATED DEAD-
LINES BY REASON OF PRESIDENTIALLY DECLARED
DISASTER.
(a) IN GENERAL.—Chapter 77 is amended by inserting after
section 7508 the following new section:
‘‘SEC. 7508A. AUTHORITY TO POSTPONE CERTAIN TAX-RELATED DEAD-
LINES BY REASON OF PRESIDENTIALLY DECLARED
DISASTER.
‘‘(a) IN GENERAL.—In the case of a taxpayer determined by
the Secretary to be affected by a Presidentially declared disaster
(as defined by section 1033(h)(3)), the Secretary may prescribe
regulations under which a period of up to 90 days may be dis-
regarded in determining, under the internal revenue laws, in respect
of any tax liability (including any penalty, additional amount, or
addition to the tax) of such taxpayer—
‘‘(1) whether any of the acts described in paragraph (1)
of section 7508(a) were performed within the time prescribed
therefor, and
‘‘(2) the amount of any credit or refund.
‘‘(b) INTEREST ON OVERPAYMENTS AND UNDERPAYMENTS.—Sub-
section (a) shall not apply for the purpose of determining interest
on any overpayment or underpayment.’’.
H. R. 2014—91
(b) CLERICAL AMENDMENT.—The table of sections for chapter
77 is amended by inserting after the item relating to section 7508
the following new item:
‘‘Sec. 7508A. Authority to postpone certain tax-related deadlines by reason
of presidentially declared disaster.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply with respect to any period for performing an act that
has not expired before the date of the enactment of this Act.
SEC. 912. USE OF CERTAIN APPRAISALS TO ESTABLISH AMOUNT OF
DISASTER LOSS.
(a) IN GENERAL.—Subsection (i) of section 165 is amended
by adding at the end the following new paragraph:
‘‘(4) USE
OF
DISASTER
LOAN
APPRAISALS
TO
ESTABLISH
AMOUNT
OF
LOSS.—Nothing in this title shall be construed
to prohibit the Secretary from prescribing regulations or other
guidance under which an appraisal for the purpose of obtaining
a loan of Federal funds or a loan guarantee from the Federal
Government as a result of a Presidentially declared disaster
(as defined by section 1033(h)(3)) may be used to establish
the amount of any loss described in paragraph (1) or (2).’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on the date of the enactment of this Act.
SEC. 913. TREATMENT OF LIVESTOCK SOLD ON ACCOUNT OF
WEATHER-RELATED CONDITIONS.
(a) DEFERRAL OF INCOME INCLUSION.—Subsection (e) of section
451 (relating to special rules for proceeds from livestock sold on
account of drought) is amended—
(1) by striking ‘‘drought conditions, and that these drought
conditions’’ in paragraph (1) and inserting ‘‘drought, flood, or
other weather-related conditions, and that such conditions’’;
and
(2) by inserting ‘‘, FLOOD, OR OTHER WEATHER-RELATED
CONDITIONS’’ after ‘‘DROUGHT’’ in the subsection heading.
(b) INVOLUNTARY CONVERSIONS.—Subsection (e) of section 1033
(relating to livestock sold on account of drought) is amended—
(1) by inserting ‘‘, flood, or other weather-related conditions’’
before the period at the end thereof; and
(2) by inserting ‘‘, FLOOD, OR OTHER WEATHER-RELATED
CONDITIONS’’ after ‘‘DROUGHT’’ in the subsection heading.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to sales and exchanges after December 31, 1996.
SEC. 914. MORTGAGE FINANCING FOR RESIDENCES LOCATED IN
DISASTER AREAS.
Subsection (k) of section 143 (relating to mortgage revenue
bonds; qualified mortgage bond and qualified veteran’s mortgage
bond) is amended by adding at the end the following new paragraph:
‘‘(11) SPECIAL RULES FOR RESIDENCES LOCATED IN DISASTER
AREAS.—In the case of a residence located in an area determined
by the President to warrant assistance from the Federal
Government under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (as in effect on the date of the
enactment of the Taxpayer Relief Act of 1997), this section
shall be applied with the following modifications to financing
provided with respect to such residence within 2 years after
the date of the disaster declaration:
H. R. 2014—92
‘‘(A) Subsection (d) (relating to 3-year requirement)
shall not apply.
‘‘(B) Subsections (e) and (f) (relating to purchase price
requirement and income requirement) shall be applied as
if such residence were a targeted area residence.
The preceding sentence shall apply only with respect to bonds
issued after December 31, 1996, and before January 1, 1999.’’.
SEC. 915. ABATEMENT OF INTEREST ON UNDERPAYMENTS BY TAX-
PAYERS 
IN 
PRESIDENTIALLY 
DECLARED 
DISASTER
AREAS.
(a) IN GENERAL.—If the Secretary of the Treasury extends
for any period the time for filing income tax returns under section
6081 of the Internal Revenue Code of 1986 and the time for paying
income tax with respect to such returns under section 6161 of
such Code (and waives any penalties relating to the failure to
so file or so pay) for any individual located in a Presidentially
declared disaster area, the Secretary shall, notwithstanding section
7508A(b) of such Code, abate for such period the assessment of
any interest prescribed under section 6601 of such Code on such
income tax.
(b) PRESIDENTIALLY DECLARED DISASTER AREA.—For purposes
of subsection (a), the term ‘‘Presidentially declared disaster area’’
means, with respect to any individual, any area which the President
has determined during 1997 warrants assistance by the Federal
Government under the Robert T. Stafford Disaster Relief and Emer-
gency Assistance Act.
(c) INDIVIDUAL.—For purposes of this section, the term ‘‘individ-
ual’’ shall not include any estate or trust.
(d) EFFECTIVE DATE.—This section shall apply to disasters
declared after December 31, 1996.
Subtitle C—Provisions Relating to
Employment Taxes
SEC. 921. CLARIFICATION OF STANDARD TO BE USED IN DETERMINING
EMPLOYMENT TAX STATUS OF SECURITIES BROKERS.
(a) IN GENERAL.—In determining for purposes of the Internal
Revenue Code of 1986 whether a registered representative of a
securities broker-dealer is an employee (as defined in section 3121(d)
of the Internal Revenue Code of 1986), no weight shall be given
to instructions from the service recipient which are imposed only
in compliance with investor protection standards imposed by the
Federal Government, any State government, or a governing body
pursuant to a delegation by a Federal or State agency.
(b) EFFECTIVE DATE.—Subsection (a) shall apply to services
performed after December 31, 1997.
SEC. 922. CLARIFICATION OF EXEMPTION FROM SELF-EMPLOYMENT
TAX FOR CERTAIN TERMINATION PAYMENTS RECEIVED
BY FORMER INSURANCE SALESMEN.
(a) INTERNAL REVENUE CODE.—Section 1402 (relating to defini-
tions) is amended by adding at the end the following new subsection:
‘‘(k) CODIFICATION OF TREATMENT OF CERTAIN TERMINATION
PAYMENTS RECEIVED BY FORMER INSURANCE SALESMEN.—Nothing
in subsection (a) shall be construed as including in the net earnings
H. R. 2014—93
from self-employment of an individual any amount received during
the taxable year from an insurance company on account of services
performed by such individual as an insurance salesman for such
company if—
‘‘(1) such amount is received after termination of such
individual’s agreement to perform such services for such com-
pany,
‘‘(2) such individual performs no services for such company
after such termination and before the close of such taxable
year,
‘‘(3) such individual enters into a covenant not to compete
against such company which applies to at least the 1-year
period beginning on the date of such termination, and
‘‘(4) the amount of such payment—
‘‘(A) depends primarily on policies sold by or credited
to the account of such individual during the last year
of such agreement or the extent to which such policies
remain in force for some period after such termination,
or both, and
‘‘(B) does not depend to any extent on length of service
or overall earnings from services performed for such com-
pany (without regard to whether eligibility for payment
depends on length of service).’’.
(b) SOCIAL SECURITY ACT.—Section 211 of the Social Security
Act is amended by adding at the end the following new subsection:
‘‘Codification of Treatment of Certain Termination Payments
Received by Former Insurance Salesmen
‘‘(j) Nothing in subsection (a) shall be construed as including
in the net earnings from self-employment of an individual any
amount received during the taxable year from an insurance com-
pany on account of services performed by such individual as an
insurance salesman for such company if—
‘‘(1) such amount is received after termination of such
individual’s agreement to perform such services for such com-
pany,
‘‘(2) such individual performs no services for such company
after such termination and before the close of such taxable
year,
‘‘(3) such individual enters into a covenant not to compete
against such company which applies to at least the 1-year
period beginning on the date of such termination, and
‘‘(4) the amount of such payment—
‘‘(A) depends primarily on policies sold by or credited
to the account of such individual during the last year
of such agreement or the extent to which such policies
remain in force for some period after such termination,
or both, and
‘‘(B) does not depend to any extent on length of service
or overall earnings from services performed for such com-
pany (without regard to whether eligibility for payment
depends on length of service).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to payments after December 31, 1997.
H. R. 2014—94
Subtitle D—Provisions Relating to Small
Businesses
SEC. 931. WAIVER OF PENALTY THROUGH JUNE 30, 1998, ON SMALL
BUSINESSES FAILING TO MAKE ELECTRONIC FUND
TRANSFERS OF TAXES.
No penalty shall be imposed under the Internal Revenue Code
of 1986 solely by reason of a failure by a person to use the electronic
fund transfer system established under section 6302(h) of such
Code if—
(1) such person is a member of a class of taxpayers first
required to use such system on or after July 1, 1997, and
(2) such failure occurs before July 1, 1998.
SEC. 932. CLARIFICATION OF TREATMENT OF HOME OFFICE USE FOR
ADMINISTRATIVE AND MANAGEMENT ACTIVITIES.
(a) IN GENERAL.—Paragraph (1) of section 280A(c) is amended
by adding at the end the following new sentence: ‘‘For purposes
of subparagraph (A), the term ‘principal place of business’ includes
a place of business which is used by the taxpayer for the administra-
tive or management activities of any trade or business of the
taxpayer if there is no other fixed location of such trade or business
where the taxpayer conducts substantial administrative or manage-
ment activities of such trade or business.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1998.
SEC. 933. AVERAGING OF FARM INCOME OVER 3 YEARS.
(a) IN GENERAL.—Subchapter Q of chapter 1 (relating to
readjustment of tax between years and special limitations) is
amended by adding the following new part:
‘‘PART I—INCOME AVERAGING
‘‘Sec. 1301. Averaging of farm income.
‘‘SEC. 1301. AVERAGING OF FARM INCOME.
‘‘(a) IN GENERAL.—At the election of an individual engaged
in a farming business, the tax imposed by section 1 for such taxable
year shall be equal to the sum of—
‘‘(1) a tax computed under such section on taxable income
reduced by elected farm income, plus
‘‘(2) the increase in tax imposed by section 1 which would
result if taxable income for each of the 3 prior taxable years
were increased by an amount equal to one-third of the elected
farm income.
Any adjustment under this section for any taxable year shall be
taken into account in applying this section for any subsequent
taxable year.
‘‘(b) DEFINITIONS.—In this section—
‘‘(1) ELECTED FARM INCOME.—
‘‘(A) IN
GENERAL.—The term ‘elected farm income’
means so much of the taxable income for the taxable year—
‘‘(i) which is attributable to any farming business;
and
H. R. 2014—95
‘‘(ii) which is specified in the election under sub-
section (a).
‘‘(B) TREATMENT OF GAINS.—For purposes of subpara-
graph (A), gain from the sale or other disposition of prop-
erty (other than land) regularly used by the taxpayer in
such a farming business for a substantial period shall
be treated as attributable to such a farming business.
‘‘(2) INDIVIDUAL.—The term ‘individual’ shall not include
any estate or trust.
‘‘(3) FARMING BUSINESS.—The term ‘farming business’ has
the meaning given such term by section 263A(e)(4).
‘‘(c) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be appropriate to carry out the purposes of this
section, including regulations regarding—
‘‘(1) the order and manner in which items of income, gain,
deduction, or loss, or limitations on tax, shall be taken into
account in computing the tax imposed by this chapter on the
income of any taxpayer to whom this section applies for any
taxable year, and
‘‘(2) the treatment of any short taxable year.’’.
(b) CLERICAL AMENDMENT.—The table of parts for such sub-
chapter Q is amended by inserting before the item relating to
part II the following new item:
‘‘Part I. Income averaging.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1997,
and before January 1, 2001.
SEC. 934. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS
OF SELF-EMPLOYED INDIVIDUALS.
(a) IN GENERAL.—The table contained in section 162(l)(1)(B)
is amended to read as follows:
‘‘For taxable years beginning in
calendar year—
The applicable percentage is—
1997 ...................................................................................................
1998 and 1999 ..................................................................................
2000 and 2001 ..................................................................................
2002 ...................................................................................................
2003 through 2005 ...........................................................................
2006 ...................................................................................................
2007 and thereafter ..........................................................................
100.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1996.
SEC. 935. MORATORIUM ON CERTAIN REGULATIONS.
No temporary or final regulation with respect to the definition
of a limited partner under section 1402(a)(13) of the Internal Reve-
nue Code of 1986 may be issued or made effective before July
1, 1998.
Subtitle E—Brownfields
SEC. 941. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) IN GENERAL.—Part VI of subchapter B of chapter 1 is
amended by adding at the end the following new section:
H. R. 2014—96
‘‘SEC. 198. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
‘‘(a) IN GENERAL.—A taxpayer may elect to treat any qualified
environmental remediation expenditure which is paid or incurred
by the taxpayer as an expense which is not chargeable to capital
account. Any expenditure which is so treated shall be allowed
as a deduction for the taxable year in which it is paid or incurred.
‘‘(b) QUALIFIED ENVIRONMENTAL REMEDIATION EXPENDITURE.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified environmental
remediation expenditure’ means any expenditure—
‘‘(A) which is otherwise chargeable to capital account,
and
‘‘(B) which is paid or incurred in connection with the
abatement or control of hazardous substances at a qualified
contaminated site.
‘‘(2) SPECIAL
RULE
FOR
EXPENDITURES
FOR
DEPRECIABLE
PROPERTY.—Such term shall not include any expenditure for
the acquisition of property of a character subject to the allow-
ance for depreciation which is used in connection with the
abatement or control of hazardous substances at a qualified
contaminated site; except that the portion of the allowance
under section 167 for such property which is otherwise allocated
to such site shall be treated as a qualified environmental
remediation expenditure.
‘‘(c) QUALIFIED CONTAMINATED SITE.—For purposes of this sec-
tion—
‘‘(1) QUALIFIED CONTAMINATED SITE.—
‘‘(A) IN GENERAL.—The term ‘qualified contaminated
site’ means any area—
‘‘(i) which is held by the taxpayer for use in a
trade or business or for the production of income, or
which is property described in section 1221(1) in the
hands of the taxpayer,
‘‘(ii) which is within a targeted area, and
‘‘(iii) at or on which there has been a release (or
threat of release) or disposal of any hazardous sub-
stance.
‘‘(B) TAXPAYER MUST RECEIVE STATEMENT FROM STATE
ENVIRONMENTAL AGENCY.—An area shall be treated as a
qualified contaminated site with respect to expenditures
paid or incurred during any taxable year only if the tax-
payer receives a statement from the appropriate agency
of the State in which such area is located that such area
meets the requirements of clauses (ii) and (iii) of subpara-
graph (A).
‘‘(C) APPROPRIATE
STATE
AGENCY.—For purposes of
subparagraph (B), the chief executive officer of each State
may, in consultation with the Administrator of the Environ-
mental Protection Agency, designate the appropriate State
environmental agency within 60 days of the date of the
enactment of this section. If the chief executive officer
of a State has not designated an appropriate State environ-
mental agency within such 60-day period, the appropriate
environmental agency for such State shall be designated
by the Administrator of the Environmental Protection
Agency.
‘‘(2) TARGETED AREA.—
H. R. 2014—97
‘‘(A) IN GENERAL.—The term ‘targeted area’ means—
‘‘(i) any population census tract with a poverty
rate of not less than 20 percent,
‘‘(ii) a population census tract with a population
of less than 2,000 if—
‘‘(I) more than 75 percent of such tract is zoned
for commercial or industrial use, and
‘‘(II) such tract is contiguous to 1 or more
other population census tracts which meet the
requirement of clause (i) without regard to this
clause,
‘‘(iii) any empowerment zone or enterprise commu-
nity (and any supplemental zone designated on Decem-
ber 21, 1994), and
‘‘(iv) any site announced before February 1, 1997,
as being included as a brownfields pilot project of the
Environmental Protection Agency.
‘‘(B) 
NATIONAL
PRIORITIES
LISTED
SITES
NOT
INCLUDED.—Such term shall not include any site which
is on, or proposed for, the national priorities list under
section 105(a)(8)(B) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (as
in effect on the date of the enactment of this section).
‘‘(C) CERTAIN RULES TO APPLY.—For purposes of this
paragraph the rules of sections 1392(b)(4) and 1393(a)(9)
shall apply.
‘‘(d) HAZARDOUS SUBSTANCE.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘hazardous substance’ means—
‘‘(A) any substance which is a hazardous substance
as defined in section 101(14) of the Comprehensive Environ-
mental Response, Compensation, and Liability Act of 1980,
and
‘‘(B) any substance which is designated as a hazardous
substance under section 102 of such Act.
‘‘(2) EXCEPTION.—Such term shall not include any sub-
stance with respect to which a removal or remedial action
is not permitted under section 104 of such Act by reason of
subsection (a)(3) thereof.
‘‘(e) DEDUCTION RECAPTURED AS ORDINARY INCOME ON SALE,
ETC.—Solely for purposes of section 1245, in the case of property
to which a qualified environmental remediation expenditure would
have been capitalized but for this section—
‘‘(1) the deduction allowed by this section for such expendi-
ture shall be treated as a deduction for depreciation, and
‘‘(2) such property (if not otherwise section 1245 property)
shall be treated as section 1245 property solely for purposes
of applying section 1245 to such deduction.
‘‘(f) COORDINATION WITH OTHER PROVISIONS.—Sections 280B
and 468 shall not apply to amounts which are treated as expenses
under this section.
‘‘(g) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary or appropriate to carry out the purposes
of this section.
‘‘(h) TERMINATION.—This section shall not apply to expenditures
paid or incurred after December 31, 2000.’’.
H. R. 2014—98
(b) CLERICAL AMENDMENT.—The table of sections for part VI
of subchapter B of chapter 1 is amended by adding at the end
the following new item:
‘‘Sec. 198. Expensing of environmental remediation costs.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to expenditures paid or incurred after the date of the
enactment of this Act, in taxable years ending after such date.
Subtitle F—Empowerment Zones, Enter-
prise 
Communities, 
Brownfields, 
and
Community Development Financial Insti-
tutions
CHAPTER 1—ADDITIONAL EMPOWERMENT ZONES
SEC. 951. ADDITIONAL EMPOWERMENT ZONES.
(a) IN GENERAL.—Paragraph (2) of section 1391(b) (relating
to designations of empowerment zones and enterprise communities)
is amended—
(1) by striking ‘‘9’’ and inserting ‘‘11’’,
(2) by striking ‘‘6’’ and inserting ‘‘8’’, and
(3) by striking ‘‘750,000’’ and inserting ‘‘1,000,000’’.
(b) SPECIAL RULES FOR APPLICATION OF EMPLOYMENT CREDIT.—
Subsection (b) of section 1396 (relating to empowerment zone
employment credit) is amended—
(1) by striking so much of the subsection as precedes the
table and inserting the following:
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this section—
‘‘(1) IN GENERAL.—Except as provided in paragraph (2),
the term ‘applicable percentage’ means the percentage deter-
mined in accordance with the following table:’’, and
(2) by adding at the end the following new paragraph:
‘‘(2) SPECIAL RULE.—With respect to each empowerment
zone designated pursuant to the amendments made by the
Taxpayer Relief Act of 1997 to section 1391(b)(2), the following
table shall apply in lieu of the table in paragraph (1):
‘‘In the case of wages paid or
The
applicable
incurred during calendar year—
percentage
is—
2000 through 2004 ...........................................................................
2005 ...................................................................................................
2006 ...................................................................................................
2007 ...................................................................................................
5.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall take effect on the date of the enactment of this Act, except
that designations of new empowerment zones made pursuant to
such amendments shall be made during the 180-day period begin-
ning on the date of the enactment of this Act. No designation
pursuant to such amendments shall take effect before January
1, 2000.
H. R. 2014—99
CHAPTER 2—NEW EMPOWERMENT ZONES
SEC. 952. DESIGNATION OF NEW EMPOWERMENT ZONES.
(a) IN GENERAL.—Section 1391 (relating to designation proce-
dure for empowerment zones and enterprise communities) is amend-
ed by adding at the end the following new subsection:
‘‘(g) ADDITIONAL DESIGNATIONS PERMITTED.—
‘‘(1) IN GENERAL.—In addition to the areas designated under
subsection (a), the appropriate Secretaries may designate in
the 
aggregate 
an 
additional 
nominated 
areas 
as
empowerment zones under this section, subject to the availabil-
ity of eligible nominated areas. Of that number, not more
than 15 may be designated in urban areas and not more than
5 may be designated in rural areas.
‘‘(2) PERIOD
DESIGNATIONS
MAY
BE
MADE
AND
TAKE
EFFECT.—A designation may be made under this subsection
after the date of the enactment of this subsection and before
January 1, 1999.
‘‘(3) MODIFICATIONS TO ELIGIBILITY CRITERIA, ETC.—
‘‘(A) POVERTY RATE REQUIREMENT.—
‘‘(i) IN
GENERAL.—A nominated area shall be
eligible for designation under this subsection only if
the poverty rate for each population census tract within
the nominated area is not less than 20 percent and
the poverty rate for at least 90 percent of the popu-
lation census tracts within the nominated area is not
less than 25 percent.
‘‘(ii) TREATMENT OF CENSUS TRACTS WITH SMALL
POPULATIONS.—A population census tract with a popu-
lation of less than 2,000 shall be treated as having
a poverty rate of not less than 25 percent if—
‘‘(I) more than 75 percent of such tract is zoned
for commercial or industrial use, and
‘‘(II) such tract is contiguous to 1 or more
other population census tracts which have a pov-
erty rate of not less than 25 percent (determined
without regard to this clause).
‘‘(iii) EXCEPTION FOR DEVELOPABLE SITES.—Clause
(i) shall not apply to up to 3 noncontiguous parcels
in a nominated area which may be developed for
commercial or industrial purposes. The aggregate area
of noncontiguous parcels to which the preceding sen-
tence applies with respect to any nominated area shall
not exceed 2,000 acres.
‘‘(iv) CERTAIN PROVISIONS NOT TO APPLY.—Section
1392(a)(4) (and so much of paragraphs (1) and (2)
of section 1392(b) as relate to section 1392(a)(4)) shall
not apply to an area nominated for designation under
this subsection.
‘‘(v) SPECIAL
RULE
FOR
RURAL
EMPOWERMENT
ZONE.—The Secretary of Agriculture may designate not
more than 1 empowerment zone in a rural area without
regard to clause (i) if such area satisfies emigration
criteria specified by the Secretary of Agriculture.
‘‘(B) SIZE LIMITATION.—
‘‘(i) 
IN
GENERAL.—The 
parcels 
described 
in
subparagraph (A)(iii) shall not be taken into account
H. R. 2014—100
in determining whether the requirement of subpara-
graph (A) or (B) of section 1392(a)(3) is met.
‘‘(ii) SPECIAL RULE FOR RURAL AREAS.—If a popu-
lation census tract (or equivalent division under section
1392(b)(4)) in a rural area exceeds 1,000 square miles
or includes a substantial amount of land owned by
the Federal, State, or local government, the nominated
area may exclude such excess square mileage or
governmentally owned land and the exclusion of that
area will not be treated as violating the continuous
boundary requirement of section 1392(a)(3)(B).
‘‘(C) AGGREGATE POPULATION LIMITATION.—The aggre-
gate population limitation under the last sentence of sub-
section (b)(2) shall not apply to a designation under para-
graph (1)(B).
‘‘(D) PREVIOUSLY
DESIGNATED
ENTERPRISE
COMMU-
NITIES MAY BE INCLUDED.—Subsection (e)(5) shall not apply
to any enterprise community designated under subsection
(a) that is also nominated for designation under this sub-
section.
‘‘(E) INDIAN RESERVATIONS MAY BE NOMINATED.—
‘‘(i) IN
GENERAL.—Section 1393(a)(4) shall not
apply to an area nominated for designation under this
subsection.
‘‘(ii) SPECIAL RULE.—An area in an Indian reserva-
tion shall be treated as nominated by a State and
a local government if it is nominated by the reservation
governing body (as determined by the Secretary of
Interior).’’.
(b) EMPLOYMENT CREDIT NOT TO APPLY TO NEW EMPOWERMENT
ZONES.—Section 1396 (relating to empowerment zone employment
credit) is amended by adding at the end the following new sub-
section:
‘‘(e) CREDIT NOT TO APPLY
TO EMPOWERMENT ZONES DES-
IGNATED UNDER SECTION 1391(g).—This section shall be applied
without regard to any empowerment zone designated under section
1391(g).’’.
(c) INCREASED EXPENSING UNDER SECTION 179 NOT TO APPLY
IN DEVELOPABLE SITES.—Section 1397A (relating to increase in
expensing under section 179) is amended by adding at the end
the following new subsection:
‘‘(c) LIMITATION.—For purposes of this section, qualified zone
property shall not include any property substantially all of the
use of which is in any parcel described in section 1391(g)(3)(A)(iii).’’.
(d) CONFORMING AMENDMENTS.—
(1) Subsections (e) and (f) of section 1391 are each amended
by striking ‘‘subsection (a)’’ and inserting ‘‘this section’’.
(2) Section 1391(c) is amended by striking ‘‘this section’’
and inserting ‘‘subsection (a)’’.
SEC. 953. VOLUME CAP NOT TO APPLY TO ENTERPRISE ZONE FACILITY
BONDS WITH RESPECT TO NEW EMPOWERMENT ZONES.
(a) IN GENERAL.—Section 1394 (relating to tax-exempt enter-
prise zone facility bonds) is amended by adding at the end the
following new subsection:
‘‘(f) BONDS FOR EMPOWERMENT ZONES DESIGNATED UNDER SEC-
TION 1391(g).—
H. R. 2014—101
‘‘(1) IN GENERAL.—In the case of a new empowerment zone
facility bond—
‘‘(A) such bond shall not be treated as a private activity
bond for purposes of section 146, and
‘‘(B) subsection (c) of this section shall not apply.
‘‘(2) LIMITATION ON AMOUNT OF BONDS.—
‘‘(A) IN GENERAL.—Paragraph (1) shall apply to a new
empowerment zone facility bond only if such bond is des-
ignated for purposes of this subsection by the local govern-
ment which nominated the area to which such bond relates.
‘‘(B) LIMITATION ON BONDS DESIGNATED.—The aggre-
gate face amount of bonds which may be designated under
subparagraph (A) with respect to any empowerment zone
shall not exceed—
‘‘(i) $60,000,000 if such zone is in a rural area,
‘‘(ii) $130,000,000 if such zone is in an urban area
and the zone has a population of less than 100,000,
and
‘‘(iii) $230,000,000 if such zone is in an urban
area and the zone has a population of at least 100,000.
‘‘(C) SPECIAL RULES.—
‘‘(i) COORDINATION WITH LIMITATION IN SUBSECTION
(c).—Bonds to which paragraph (1) applies shall not
be taken into account in applying the limitation of
subsection (c) to other bonds.
‘‘(ii) 
CURRENT
REFUNDING
NOT
TAKEN
INTO
ACCOUNT.—In the case of a refunding (or series of
refundings) of a bond designated under this paragraph,
the refunding obligation shall be treated as designated
under this paragraph (and shall not be taken into
account in applying subparagraph (B)) if—
‘‘(I) the amount of the refunding bond does
not exceed the outstanding amount of the refunded
bond, and
‘‘(II) the refunded bond is redeemed not later
than 90 days after the date of issuance of the
refunding bond.
‘‘(3) NEW EMPOWERMENT ZONE FACILITY BOND.—For pur-
poses of this subsection, the term ‘new empowerment zone
facility bond’ means any bond which would be described in
subsection (a) if only empowerment zones designated under
section 1391(g) were taken into account under sections 1397B
and 1397C.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to obligations issued after the date of the enactment
of this Act.
SEC. 954. MODIFICATION TO ELIGIBILITY CRITERIA FOR DESIGNATION
OF FUTURE ENTERPRISE ZONES IN ALASKA OR HAWAII.
Section 1392 (relating to eligibility criteria) is amended by
adding at the end the following new subsection:
‘‘(d) SPECIAL ELIGIBILITY FOR NOMINATED AREAS LOCATED IN
ALASKA OR HAWAII.—A nominated area in Alaska or Hawaii shall
be treated as meeting the requirements of paragraphs (2), (3),
and (4) of subsection (a) if for each census tract or block group
within such area 20 percent or more of the families have income
H. R. 2014—102
which is 50 percent or less of the statewide median family income
(as determined under section 143).’’.
CHAPTER 3—TREATMENT OF EMPOWERMENT ZONES
AND ENTERPRISE COMMUNITIES
SEC. 955. MODIFICATIONS TO ENTERPRISE ZONE FACILITY BOND
RULES FOR ALL EMPOWERMENT ZONES AND ENTER-
PRISE COMMUNITIES.
(a) MODIFICATIONS RELATING TO ENTERPRISE ZONE BUSINESS.—
Paragraph (3) of section 1394(b) (defining enterprise zone business)
is amended to read as follows:
‘‘(3) ENTERPRISE ZONE BUSINESS.—
‘‘(A) IN GENERAL.—Except as modified in this para-
graph, the term ‘enterprise zone business’ has the meaning
given such term by section 1397B.
‘‘(B) MODIFICATIONS.—In applying section 1397B for
purposes of this section—
‘‘(i) BUSINESSES
IN
ENTERPRISE
COMMUNITIES
ELIGIBLE.—References 
in 
section 
1397B 
to
empowerment zones shall be treated as including ref-
erences to enterprise communities.
‘‘(ii) WAIVER OF REQUIREMENTS DURING STARTUP
PERIOD.—A business shall not fail to be treated as
an enterprise zone business during the startup period
if—
‘‘(I) as of the beginning of the startup period,
it is reasonably expected that such business will
be an enterprise zone business (as defined in sec-
tion 1397B as modified by this paragraph) at the
end of such period, and
‘‘(II) such business makes bona fide efforts
to be such a business.
‘‘(iii) REDUCED
REQUIREMENTS
AFTER
TESTING
PERIOD.—A business shall not fail to be treated as
an enterprise zone business for any taxable year begin-
ning after the testing period by reason of failing to
meet any requirement of subsection (b) or (c) of section
1397B if at least 35 percent of the employees of such
business 
for 
such 
year 
are 
residents 
of 
an
empowerment zone or an enterprise community. The
preceding sentence shall not apply to any business
which is not a qualified business by reason of para-
graph (1), (4), or (5) of section 1397B(d).
‘‘(C) DEFINITIONS
RELATING
TO
SUBPARAGRAPH
(B).—
For purposes of subparagraph (B)—
‘‘(i) STARTUP PERIOD.—The term ‘startup period’
means, with respect to any property being provided
for any business, the period before the first taxable
year beginning more than 2 years after the later of—
‘‘(I) the date of issuance of the issue providing
such property, or
‘‘(II) the date such property is first placed
in service after such issuance (or, if earlier, the
date which is 3 years after the date described
in subclause (I)).
H. R. 2014—103
‘‘(ii) TESTING
PERIOD.—The term ‘testing period’
means the first 3 taxable years beginning after the
startup period.
‘‘(D) PORTIONS OF BUSINESS MAY BE ENTERPRISE ZONE
BUSINESS.—The term ‘enterprise zone business’ includes
any trades or businesses which would qualify as an enter-
prise zone business (determined after the modifications
of subparagraph (B)) if such trades or businesses were
separately incorporated.’’.
(b) MODIFICATIONS RELATING TO QUALIFIED ZONE PROPERTY.—
Paragraph (2) of section 1394(b) (defining qualified zone property)
is amended to read as follows:
‘‘(2) QUALIFIED ZONE PROPERTY.—The term ‘qualified zone
property’ has the meaning given such term by section 1397C;
except that—
‘‘(A) the references to empowerment zones shall be
treated as including references to enterprise communities,
and
‘‘(B) section 1397C(a)(2) shall be applied by substituting
‘an amount equal to 15 percent of the adjusted basis’ for
‘an amount equal to the adjusted basis’.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to obligations issued after the date of the enactment
of this Act.
SEC. 956. MODIFICATIONS TO ENTERPRISE ZONE BUSINESS DEFINI-
TION FOR ALL EMPOWERMENT ZONES AND ENTERPRISE
COMMUNITIES.
(a) IN GENERAL.—Section 1397B (defining enterprise zone busi-
ness) is amended—
(1) by striking ‘‘80 percent’’ in subsections (b)(2) and (c)(1)
and inserting ‘‘50 percent’’,
(2) by striking ‘‘substantially all’’ each place it appears
in subsections (b) and (c) and inserting ‘‘a substantial portion’’,
(3) by striking ‘‘, and exclusively related to,’’ in subsections
(b)(4) and (c)(3),
(4) by adding at the end of subsection (d)(2) the following
new flush sentence:
‘‘For purposes of subparagraph (B), the lessor of the property
may rely on a lessee’s certification that such lessee is an enter-
prise zone business.’’,
(5) by striking ‘‘substantially all’’ in subsection (d)(3) and
inserting ‘‘at least 50 percent’’, and
(6) by adding at the end the following new subsection:
‘‘(f) TREATMENT
OF BUSINESSES STRADDLING CENSUS TRACT
LINES.—For purposes of this section, if—
‘‘(1) a business entity or proprietorship uses real property
located within an empowerment zone,
‘‘(2) the business entity or proprietorship also uses real
property located outside the empowerment zone,
‘‘(3) the amount of real property described in paragraph
(1) is substantial compared to the amount of real property
described in paragraph (2), and
‘‘(4) the real property described in paragraph (2) is contig-
uous to part or all of the real property described in paragraph
(1),
H. R. 2014—104
then all the services performed by employees, all business activities,
all tangible property, and all intangible property of the business
entity or proprietorship that occur in or is located on the real
property described in paragraphs (1) and (2) shall be treated as
occurring or situated in an empowerment zone.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by this section
shall apply to taxable years beginning on or after the date
of the enactment of this Act.
(2) SPECIAL RULE FOR ENTERPRISE ZONE FACILITY BONDS.—
For purposes of section 1394(b) of the Internal Revenue Code
of 1986, the amendments made by this section shall apply
to obligations issued after the date of the enactment of this
Act.
Subtitle G—Other Provisions
SEC. 961. USE OF ESTIMATES OF SHRINKAGE FOR INVENTORY
ACCOUNTING.
(a) IN GENERAL.—Section 471 (relating to general rule for inven-
tories) is amended by redesignating subsection (b) as subsection
(c) and by inserting after subsection (a) the following new sub-
section:
‘‘(b) ESTIMATES
OF
INVENTORY
SHRINKAGE
PERMITTED.—A
method of determining inventories shall not be treated as failing
to clearly reflect income solely because it utilizes estimates of inven-
tory shrinkage that are confirmed by a physical count only after
the last day of the taxable year if—
‘‘(1) the taxpayer normally does a physical count of inven-
tories at each location on a regular and consistent basis, and
‘‘(2) the taxpayer makes proper adjustments to such inven-
tories and to its estimating methods to the extent such esti-
mates are greater than or less than the actual shrinkage.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this section
shall apply to taxable years ending after the date of the enact-
ment of this Act.
(2) COORDINATION WITH SECTION 481.—In the case of any
taxpayer permitted by this section to change its method of
accounting to a permissible method for any taxable year—
(A) such changes shall be treated as initiated by the
taxpayer,
(B) such changes shall be treated as made with the
consent of the Secretary of the Treasury, and
(C) the period for taking into account the adjustments
under section 481 by reason of such change shall be 4
years.
SEC. 962. ASSIGNMENT OF WORKMEN’S COMPENSATION LIABILITY
ELIGIBLE FOR EXCLUSION RELATING TO PERSONAL
INJURY LIABILITY ASSIGNMENTS.
(a) IN GENERAL.—Subsection (c) of section 130 (relating to
certain personal injury liability assignments) is amended—
(1) by inserting ‘‘, or as compensation under any workmen’s
compensation act,’’ after ‘‘(whether by suit or agreement)’’ in
the material preceding paragraph (1),
H. R. 2014—105
(2) by inserting ‘‘or the workmen’s compensation claim,’’
after ‘‘agreement,’’ in paragraph (1), and
(3) by striking ‘‘section 104(a)(2)’’ in paragraph (2)(D) and
inserting ‘‘paragraph (1) or (2) of section 104(a)’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to claims under workmen’s compensation acts filed
after the date of the enactment of this Act.
SEC. 963. TAX-EXEMPT STATUS FOR CERTAIN STATE WORKER’S COM-
PENSATION ACT COMPANIES.
(a) IN GENERAL.—Section 501(c)(27) (relating to membership
organizations under workmen’s compensation acts) is amended by
adding at the end the following:
‘‘(B) Any organization (including a mutual insurance com-
pany) if—
‘‘(i) such organization is created by State law and is
organized and operated under State law exclusively to—
‘‘(I) provide workmen’s compensation insurance
which is required by State law or with respect to
which State law provides significant disincentives if
such insurance is not purchased by an employer, and
‘‘(II) provide related coverage which is incidental
to workmen’s compensation insurance,
‘‘(ii) such organization must provide workmen’s com-
pensation insurance to any employer in the State (for
employees in the State or temporarily assigned out-of-
State) which seeks such insurance and meets other reason-
able requirements relating thereto,
‘‘(iii)(I) the State makes a financial commitment with
respect to such organization either by extending the full
faith and credit of the State to the initial debt of such
organization or by providing the initial operating capital
of such organization, and (II) in the case of periods after
the date of enactment of this subparagraph, the assets
of such organization revert to the State upon dissolution
or State law does not permit the dissolution of such
organization, and
‘‘(iv) the majority of the board of directors or oversight
body of such organization are appointed by the chief execu-
tive officer or other executive branch official of the State,
by the State legislature, or by both.’’.
(b) CONFORMING AMENDMENTS.—Section 501(c)(27) is amended
by inserting ‘‘(A)’’ after ‘‘(27)’’, by redesignating subparagraphs (A),
(B), and (C) as clauses (i), (ii), and (iii), respectively, and by
redesignating clauses (i) and (ii) of subparagraphs (B) and (C)
(before redesignation) as subclauses (I) and (II), respectively.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 964. ELECTION FOR 1987 PARTNERSHIPS TO CONTINUE EXCEP-
TION FROM TREATMENT OF PUBLICLY TRADED PART-
NERSHIPS AS CORPORATIONS.
(a) IN GENERAL.—Section 7704 is amended by adding at the
end the following new subsection:
‘‘(g) EXCEPTION FOR ELECTING 1987 PARTNERSHIPS.—
‘‘(1) IN
GENERAL.—Subsection (a) shall not apply to an
electing 1987 partnership.
H. R. 2014—106
‘‘(2) ELECTING 1987 PARTNERSHIP.—For purposes of this sub-
section, the term ‘electing 1987 partnership’ means any publicly
traded partnership if—
‘‘(A) such partnership is an existing partnership (as
defined in section 10211(c)(2) of the Revenue Reconciliation
Act of 1987),
‘‘(B) subsection (a) has not applied (and without regard
to subsection (c)(1) would not have applied) to such partner-
ship for all prior taxable years beginning after December
31, 1987, and before January 1, 1998, and
‘‘(C) such partnership elects the application of this
subsection, and consents to the application of the tax
imposed by paragraph (3), for its first taxable year begin-
ning after December 31, 1997.
A partnership which, but for this sentence, would be treated
as an electing 1987 partnership shall cease to be so treated
(and the election under subparagraph (C) shall cease to be
in effect) as of the 1st day after December 31, 1997, on which
there has been an addition of a substantial new line of business
with respect to such partnership.
‘‘(3) ADDITIONAL TAX ON ELECTING PARTNERSHIPS.—
‘‘(A) IMPOSITION OF TAX.—There is hereby imposed for
each taxable year on the income of each electing 1987
partnership a tax equal to 3.5 percent of such partnership’s
gross income for the taxable year from the active conduct
of trades and businesses by the partnership.
‘‘(B) ADJUSTMENTS IN THE CASE OF TIERED PARTNER-
SHIPS.—For purposes of this paragraph, in the case of a
partnership which is a partner in another partnership,
the gross income referred to in subparagraph (A) shall
include the partnership’s distributive share of the gross
income of such other partnership from the active conduct
of trades and businesses of such other partnership. A simi-
lar rule shall apply in the case of lower-tiered partnerships.
‘‘(C) TREATMENT OF TAX.—For purposes of this title,
the tax imposed by this paragraph shall be treated as
imposed by chapter 1 other than for purposes of determin-
ing the amount of any credit allowable under chapter 1.
‘‘(4) ELECTION.—An election and consent under this sub-
section shall apply to the taxable year for which made and
all subsequent taxable years unless revoked by the partnership.
Such revocation may be made without the consent of the Sec-
retary, but, once so revoked, may not be reinstated.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 965. EXCLUSION FROM UNRELATED BUSINESS TAXABLE INCOME
FOR CERTAIN SPONSORSHIP PAYMENTS.
(a) IN GENERAL.—Section 513 (relating to unrelated trade or
business income) is amended by adding at the end the following
new subsection:
‘‘(i) TREATMENT OF CERTAIN SPONSORSHIP PAYMENTS.—
‘‘(1) IN GENERAL.—The term ‘unrelated trade or business’
does not include the activity of soliciting and receiving qualified
sponsorship payments.
‘‘(2) QUALIFIED SPONSORSHIP PAYMENTS.—For purposes of
this subsection—
H. R. 2014—107
‘‘(A) IN GENERAL.—The term ‘qualified sponsorship pay-
ment’ means any payment made by any person engaged
in a trade or business with respect to which there is no
arrangement or expectation that such person will receive
any substantial return benefit other than the use or
acknowledgement of the name or logo (or product lines)
of such person’s trade or business in connection with the
activities of the organization that receives such payment.
Such a use or acknowledgement does not include advertis-
ing such person’s products or services (including messages
containing qualitative or comparative language, price
information, or other indications of savings or value, an
endorsement, or an inducement to purchase, sell, or use
such products or services).
‘‘(B) LIMITATIONS.—
‘‘(i) CONTINGENT PAYMENTS.—The term ‘qualified
sponsorship payment’ does not include any payment
if the amount of such payment is contingent upon
the level of attendance at one or more events, broadcast
ratings, or other factors indicating the degree of public
exposure to one or more events.
‘‘(ii) SAFE HARBOR DOES NOT APPLY TO PERIODICALS
AND QUALIFIED CONVENTION AND TRADE SHOW ACTIVI-
TIES.—The term ‘qualified sponsorship payment’ does
not include—
‘‘(I) any payment which entitles the payor to
the use or acknowledgement of the name or logo
(or product lines) of the payor’s trade or business
in regularly scheduled and printed material pub-
lished by or on behalf of the payee organization
that is not related to and primarily distributed
in connection with a specific event conducted by
the payee organization, or
‘‘(II) any payment made in connection with
any qualified convention or trade show activity
(as defined in subsection (d)(3)(B)).
‘‘(3) ALLOCATION OF PORTIONS OF SINGLE PAYMENT.—For
purposes of this subsection, to the extent that a portion of
a payment would (if made as a separate payment) be a qualified
sponsorship payment, such portion of such payment and the
other portion of such payment shall be treated as separate
payments.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to payments solicited or received after December 31,
1997.
SEC. 966. ASSOCIATIONS OF HOLDERS OF TIMESHARE INTERESTS TO
BE TAXED LIKE OTHER HOMEOWNERS ASSOCIATIONS.
(a) TIMESHARE
ASSOCIATIONS
INCLUDED
AS
HOMEOWNER
ASSOCIATIONS.—
(1) IN GENERAL.—Paragraph (1) of section 528(c) (defining
homeowners association) is amended—
(A) by striking ‘‘or a residential real estate manage-
ment association’’ and inserting ‘‘, a residential real estate
management association, or a timeshare association’’ in
the material preceding subparagraph (A),
H. R. 2014—108
(B) by striking ‘‘or’’ at the end of clause (i) of subpara-
graph (B), by striking the period at the end of clause
(ii) of subparagraph (B) and inserting ‘‘, or’’, and by adding
at the end of subparagraph (B) the following new clause:
‘‘(iii) owners of timeshare rights to use, or
timeshare ownership interests in, association property
in the case of a timeshare association,’’, and
(C) by inserting ‘‘and, in the case of a timeshare
association, for activities provided to or on behalf of mem-
bers of the association’’ before the comma at the end of
subparagraph (C).
(2) TIMESHARE
ASSOCIATION
DEFINED.—Subsection (c) of
section 528 is amended by redesignating paragraph (4) as para-
graph (5) and by inserting after paragraph (3) the following
new paragraph:
‘‘(4) 
TIMESHARE
ASSOCIATION.—The 
term 
‘timeshare
association’ means any organization (other than a condominium
management association) meeting the requirement of subpara-
graph (A) of paragraph (1) if any member thereof holds a
timeshare right to use, or a timeshare ownership interest in,
real property constituting association property.’’.
(b) EXEMPT FUNCTION INCOME.—Paragraph (3) of section 528(d)
is amended by striking ‘‘or’’ at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and inserting
‘‘, or’’, and by adding at the end the following new subparagraph:
‘‘(C) owners of timeshare rights to use, or timeshare
ownership interests in, real property in the case of a
timeshare association.’’.
(c) ASSOCIATION PROPERTY.—Paragraph (5) of section 528(c),
as redesignated by subsection (a)(2), is amended by adding at the
end the following new flush sentence:
‘‘In the case of a timeshare association, such term includes
property in which the timeshare association, or members of
the association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property
related to the timeshare project.’’.
(d) RATE OF TAX.—Subsection (b) of section 528 (relating to
certain homeowners associations) is amended by inserting before
the period ‘‘(32 percent of such income in the case of a timeshare
association)’’.
(e) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 1996.
SEC. 967. ADDITIONAL ADVANCE REFUNDING OF CERTAIN VIRGIN
ISLAND BONDS.
Subclause (I) of section 149(d)(3)(A)(i) of the Internal Revenue
Code of 1986 shall not apply to the second advance refunding
of any issue of the Virgin Islands which was first advance refunded
before June 9, 1997, if the debt provisions of the refunding bonds
are changed to repeal the priority first lien requirement of the
refunded bonds.
SEC. 968. NONRECOGNITION OF GAIN ON SALE OF STOCK TO CERTAIN
FARMERS’ COOPERATIVES.
(a) IN GENERAL.—Section 1042 (relating to sales of stock to
employee stock ownership plans or certain cooperatives) is amended
by adding at the end the following new subsection:
H. R. 2014—109
‘‘(g) APPLICATION OF SECTION TO SALES OF STOCK IN AGRICUL-
TURAL REFINERS AND PROCESSORS TO ELIGIBLE FARM COOPERA-
TIVES.—
‘‘(1) IN GENERAL.—This section shall apply to the sale of
stock of a qualified refiner or processor to an eligible farmers’
cooperative.
‘‘(2) QUALIFIED REFINER OR PROCESSOR.—For purposes of
this subsection, the term ‘qualified refiner or processor’ means
a domestic corporation—
‘‘(A) substantially all of the activities of which consist
of the active conduct of the trade or business of refining
or processing agricultural or horticultural products, and
‘‘(B) which, during the 1-year period ending on the
date of the sale, purchases more than one-half of such
products to be refined or processed from—
‘‘(i) farmers who make up the eligible farmers’
cooperative which is purchasing stock in the corpora-
tion in a transaction to which this subsection is to
apply, or
‘‘(ii) such cooperative.
‘‘(3) ELIGIBLE FARMERS’ COOPERATIVE.—For purposes of this
section, the term ‘eligible farmers’ cooperative’ means an
organization to which part I of subchapter T applies and which
is engaged in the marketing of agricultural or horticultural
products.
‘‘(4) SPECIAL RULES.—In applying this section to a sale
to which paragraph (1) applies—
‘‘(A) the eligible farmers’ cooperative shall be treated
in the same manner as a cooperative described in sub-
section (b)(1)(B),
‘‘(B) subsection (b)(2) shall be applied by substituting
‘100 percent’ for ‘30 percent’ each place it appears,
‘‘(C) the determination as to whether any stock in
the domestic corporation is a qualified security shall be
made without regard to whether the stock is an employer
security or to subsection (c)(1)(A), and
‘‘(D) paragraphs (2)(D) and (7) of subsection (c) shall
not apply.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to sales after December 31, 1997.
SEC. 969. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES
FOR INDIVIDUALS SUBJECT TO FEDERAL HOURS OF
SERVICE.
(a) IN GENERAL.—Section 274(n) (relating to only 50 percent
of meal and entertainment expenses allowed as deduction) is amend-
ed by adding at the end the following new paragraph:
‘‘(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT TO FEDERAL
HOURS OF SERVICE.—
‘‘(A) IN
GENERAL.—In the case of any expenses for
food or beverages consumed while away from home (within
the meaning of section 162(a)(2)) by an individual during,
or incident to, the period of duty subject to the hours
of service limitations of the Department of Transportation,
paragraph (1) shall be applied by substituting ‘the
applicable percentage’ for ‘50 percent’.
H. R. 2014—110
‘‘(B) APPLICABLE PERCENTAGE.—For purposes of this
paragraph, the term ‘applicable percentage’ means the
percentage determined under the following table:
‘‘For taxable years beginning
The
applicable
in calendar year—
percentage
is—
1998 or 1999 .....................................................................................
2000 or 2001 .....................................................................................
2002 or 2003 .....................................................................................
2004 or 2005 .....................................................................................
2006 or 2007 .....................................................................................
2008 or thereafter .............................................................................
80.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1997.
SEC. 970. CLARIFICATION OF DE MINIMIS FRINGE BENEFIT RULES
TO NO-CHARGE EMPLOYEE MEALS.
(a) IN GENERAL.—Paragraph (2) of section 132(e) (defining de
minimis fringe) is amended by adding at the end the following
new sentence: ‘‘For purposes of subparagraph (B), an employee
entitled under section 119 to exclude the value of a meal provided
at such facility shall be treated as having paid an amount for
such meal equal to the direct operating costs of the facility attrib-
utable to such meal.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1997.
SEC. 971. EXEMPTION OF THE INCREMENTAL COST OF A CLEAN FUEL
VEHICLE FROM THE LIMITS ON DEPRECIATION FOR
VEHICLES.
(a) IN GENERAL.—Section 280F(a)(1) (relating to limiting depre-
ciation on luxury automobiles) is amended by adding at the end
the following new subparagraph:
‘‘(C) SPECIAL RULE FOR CERTAIN CLEAN-FUEL PASSENGER
AUTOMOBILES.—
‘‘(i) MODIFIED AUTOMOBILES.—In the case of a pas-
senger automobile which is propelled by a fuel which
is not a clean-burning fuel and to which is installed
qualified clean-fuel vehicle property (as defined in sec-
tion 179A(c)(1)(A)) for purposes of permitting such
vehicle to be propelled by a clean burning fuel (as
defined in section 179A(e)(1)), subparagraph (A) shall
not apply to the cost of the installed qualified clean
burning vehicle property.
‘‘(ii) PURPOSE BUILT PASSENGER VEHICLES.—In the
case of a purpose built passenger vehicle (as defined
in section 4001(a)(2)(C)(ii)), each of the annual limita-
tions specified in subparagraph (A) shall be tripled.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to property placed in service after the date of enactment
of this Act and before January 1, 2005.
SEC. 972. TEMPORARY SUSPENSION OF TAXABLE INCOME LIMIT ON
PERCENTAGE DEPLETION FOR MARGINAL PRODUCTION.
(a) IN GENERAL.—Paragraph (6) of section 613A(c) is amended
by adding at the end the following new subparagraph:
H. R. 2014—111
‘‘(H) TEMPORARY SUSPENSION OF TAXABLE INCOME LIMIT
WITH RESPECT TO MARGINAL PRODUCTION.—The second sen-
tence of subsection (a) of section 613 shall not apply to
so much of the allowance for depletion as is determined
under subparagraph (A) for any taxable year beginning
after December 31, 1997, and before January 1, 2000.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1997.
SEC. 973. INCREASE IN STANDARD MILEAGE RATE EXPENSE DEDUC-
TION FOR CHARITABLE USE OF PASSENGER AUTO-
MOBILE.
(a) IN GENERAL.—Section 170(i) (relating to standard mileage
rate for use of passenger automobile) is amended to read as follows:
‘‘(i) STANDARD MILEAGE RATE FOR USE OF PASSENGER AUTO-
MOBILE.—For purposes of computing the deduction under this sec-
tion for use of a passenger automobile, the standard mileage rate
shall be 14 cents per mile.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1997.
SEC. 974. CLARIFICATION OF TREATMENT OF CERTAIN RECEIVABLES
PURCHASED 
BY 
COOPERATIVE 
HOSPITAL 
SERVICE
ORGANIZATIONS.
(a) IN GENERAL.—Subparagraph (A) of section 501(e)(1) is
amended by inserting ‘‘(including the purchase of patron accounts
receivable on a recourse basis)’’ after ‘‘billing and collection’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to taxable years beginning after December 31, 1996.
SEC. 975. DEDUCTION IN COMPUTING ADJUSTED GROSS INCOME FOR
EXPENSES IN CONNECTION WITH SERVICE PERFORMED
BY CERTAIN OFFICIALS.
(a) IN GENERAL.—Paragraph (2) of section 62(a) (defining
adjusted gross income) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(C) CERTAIN EXPENSES OF OFFICIALS.—The deductions
allowed by section 162 which consist of expenses paid or
incurred with respect to services performed by an official
as an employee of a State or a political subdivision thereof
in a position compensated in whole or in part on a fee
basis.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to expenses paid or incurred in taxable years beginning
after December 31, 1986.
SEC. 976. COMBINED EMPLOYMENT TAX REPORTING DEMONSTRATION
PROJECT.
(a) IN GENERAL.—The Secretary of the Treasury shall provide
for a demonstration project to assess the feasibility and desirability
of expanding combined Federal and State tax reporting.
(b) DESCRIPTION OF DEMONSTRATION PROJECT.—The demonstra-
tion project under subsection (a) shall be—
(1) carried out between the Internal Revenue Service and
the State of Montana for a period ending with the date which
is 5 years after the date of the enactment of this Act,
(2) limited to the reporting of employment taxes, and
H. R. 2014—112
(3) limited to the disclosure of the taxpayer identity (as
defined in section 6103(b)(6) of such Code) and the signature
of the taxpayer.
(c) CONFORMING AMENDMENT.—Section 6103(d) is amended by
adding at the end the following new paragraph:
‘‘(5) DISCLOSURE
FOR
CERTAIN
COMBINED
REPORTING
PROJECT.—The Secretary shall disclose taxpayer identities and
signatures for purposes of the demonstration project described
in section 967 of the Taxpayer Relief Act of 1997.’’.
SEC. 977. ELECTIVE CARRYBACK OF EXISTING CARRYOVERS OF
NATIONAL RAILROAD PASSENGER CORPORATION.
(a) ELECTIVE CARRYBACK.—
(1) IN GENERAL.—If the National Railroad Passenger Cor-
poration (in this section referred to as the ‘‘Corporation’’)—
(A) makes an election under this section for its first
taxable year ending after September 30, 1997, and
(B) agrees to the conditions specified in paragraph
(2),
then the Corporation shall be treated as having made a pay-
ment of the tax imposed by chapter 1 of the Internal Revenue
Code of 1986 for such first taxable year and the succeeding
taxable year in an amount (for each such taxable year) equal
to 50 percent of the amount determined under paragraph (3).
Each such payment shall be treated as having been made
by the Corporation on the last day prescribed by law (without
regard to extensions) for filing its return of tax under chapter
1 of such Code for the taxable year to which such payment
relates.
(2) CONDITIONS.—
(A) IN GENERAL.—This section shall only apply to the
Corporation if it agrees (in such manner as the Secretary
of the Treasury or his delegate may prescribe) to—
(i) except as provided in clause (ii), use any refund
of the payment described in paragraph (1) (and any
interest thereon) solely to finance qualified expenses
of the Corporation, and
(ii) make the payments to non-Amtrak States as
described in subsection (c).
(B) REPAYMENT.—
(i) IN GENERAL.—The Corporation shall repay to
the United States any amount not used in accordance
with this paragraph and any amount remaining unused
as of January 1, 2010.
(ii) SPECIAL RULES.—For purposes of clause (i)—
(I) no amount shall be treated as remaining
unused as of January 1, 2010, if it is obligated
as of such date for a qualified expense, and
(II) the Corporation shall not be treated as
failing to meet the requirements of clause (i) by
reason of investing any amount for a temporary
period.
(3) AMOUNT.—For purposes of paragraph (1)—
(A) IN GENERAL.—The amount determined under this
paragraph shall be the lesser of—
(i) 35 percent of the Corporation’s existing qualified
carryovers, or
H. R. 2014—113
(ii) the Corporation’s net tax liability for the
carryback period.
(B) DOLLAR
LIMIT.—Such amount shall not exceed
$2,323,000,000.
(b) EXISTING QUALIFIED CARRYOVERS; NET TAX LIABILITY.—
For purposes of this section—
(1) EXISTING QUALIFIED CARRYOVERS.—The term ‘‘existing
qualified carryovers’’ means the aggregate of the amounts which
are net operating loss carryovers under section 172(b) of the
Internal Revenue Code of 1986 to the Corporation’s first taxable
year ending after September 30, 1997.
(2) NET TAX LIABILITY FOR CARRYBACK PERIOD.—
(A) IN GENERAL.—The Corporation’s net tax liability
for the carryback period is the aggregate of the net tax
liability of the Corporation’s railroad predecessors for tax-
able years in the carryback period.
(B) NET TAX LIABILITY.—The term ‘‘net tax liability’’
means, with respect to any taxable year, the amount of
the tax imposed by chapter 1 of the Internal Revenue
Code of 1986 (or any corresponding provision of prior law)
for such taxable year, reduced by the sum of the credits
allowable against such tax under such Code (or any cor-
responding provision of prior law).
(C) CARRYBACK PERIOD.—The term ‘‘carryback period’’
means the period—
(i) which begins with the first taxable year of
any railroad predecessor beginning before January 1,
1971, for which there is a net tax liability, and
(ii) which ends with the last taxable year of any
railroad predecessor beginning before January 1, 1971.
(3) RAILROAD PREDECESSOR.—
(A) IN
GENERAL.—The term ‘‘railroad predecessor’’
means—
(i) any railroad which entered into a contract under
section 401 or 404(a) of the Rail Passenger Service
Act of 1970 relieving the railroad of its entire respon-
sibility for the provision of intercity rail passenger
service, and
(ii) any predecessor thereof.
(B) CONSOLIDATED RETURNS.—If any railroad described
in subparagraph (A) was a member of an affiliated group
which filed a consolidated return for any taxable year in
the carryback period, each member of such group shall
be treated as a railroad predecessor for such year.
(c) PAYMENTS TO NON-AMTRAK STATES.—
(1) IN GENERAL.—Within 30 days after receipt of any refund
of any payment described in subsection (a)(1), the Corporation
shall pay to each non-Amtrak State an amount equal to 1
percent of the amount of such refund.
(2) USE OF PAYMENT.—Each non-Amtrak State shall use
the payment described in paragraph (1) (and any interest
thereon) solely to finance qualified expenses of the State.
(3) REPAYMENT.—A non-Amtrak State shall pay to the
United States—
(A) any portion of the payment received by the State
under paragraph (1) (and any interest thereon) which is
used for a purpose other than to finance qualified expenses
H. R. 2014—114
of the State or which remains unused as of January 1,
2010, or
(B) if such State ceases to be a non-Amtrak State,
the portion of such payment (and any interest thereon)
remaining as of the date of the cessation.
Rules similar to the rules of subsection (a)(2)(B) shall apply
for purposes of this paragraph.
(d) TAX CONSEQUENCES.—
(1) REDUCTION IN CARRYOVERS.—If the Corporation elects
the application of this section, the Corporation’s existing quali-
fied carryovers shall be reduced by an amount equal to the
amount determined under subsection (a)(3) divided by 0.35.
(2) REDUCTION IN TAX PAID BY RAILROAD PREDECESSORS.—
(A) IN GENERAL.—The Secretary of the Treasury or
his delegate shall appropriately adjust the tax account
of each railroad predecessor to reduce the net tax liability
of such predecessor for taxable years beginning in the
carryback period which is offset by reason of the application
of this section.
(B) FIFO ORDERING RULE.—The Secretary shall make
the adjustments under subparagraph (A) first for the earli-
est year in the carryback period and then for each subse-
quent year in such period.
(C) NO
EFFECT
ON
OTHER
TAXPAYERS.—In no event
shall any taxpayer other than the Corporation be allowed
a refund or credit by reason of this section.
(D) WAIVER OF LIMITATIONS.—If the adjustment under
subparagraph (A) is barred by the operation of any law
or rule of law, such law or rule of law shall be waived
solely for purposes of making such adjustment.
(3) TAX
TREATMENT
OF
EXPENDITURES.—With respect to
any payment by the Corporation of qualified expenses described
in subsection (e)(1)(A) during any taxable year from the amount
of any refund of the payment described in subsection (a)(1)—
(A) no deduction shall be allowed to the Corporation
with respect to any amount paid or incurred which is
attributable to such amount, and
(B) the basis of any property shall be reduced by the
portion of the cost of such property which is attributable
to such amount.
(4) PAYMENTS TO A NON-AMTRAK STATE.—No deduction shall
be allowed to the Corporation under chapter 1 of the Internal
Revenue Code of 1986 for any payment to a non-Amtrak State
required under subsection (a)(2)(A)(ii).
(e) DEFINITIONS.—For purposes of this section—
(1) QUALIFIED EXPENSES.—The term ‘‘qualified expenses’’
means expenses incurred for—
(A) in the case of the Corporation—
(i) the acquisition of equipment, rolling stock, and
other capital improvements, the upgrading of mainte-
nance facilities, and the maintenance of existing equip-
ment, in intercity passenger rail service, and
(ii) the payment of interest and principal on obliga-
tions incurred for such acquisition, upgrading, and
maintenance, and
(B) in the case of a non-Amtrak State—
H. R. 2014—115
(i) the acquisition of equipment, rolling stock, and
other capital improvements, the upgrading of mainte-
nance facilities, and the maintenance of existing equip-
ment, in intercity passenger rail service,
(ii) the acquisition of equipment, rolling stock, and
other capital improvements, the upgrading of mainte-
nance facilities, and the maintenance of existing equip-
ment, in intercity bus service,
(iii) the purchase of intercity passenger rail serv-
ices from the Corporation, and
(iv) the payment of interest and principal on
obligations incurred for such acquisition, upgrading,
maintenance, and purchase.
In the case of a non-Amtrak State which provides its own
intercity passenger rail service on the date of the enactment
of this paragraph, subparagraph (B) shall be applied by only
taking into account clauses (i) and (iv).
(2) NON-AMTRAK
STATE.—The term ‘‘non-Amtrak State’’
means, with respect to any payment, any State which does
not receive intercity passenger rail service from the Corporation
at any time during the period beginning on the date of the
enactment of this Act and ending on the date of the payment.
(f) AUTHORIZING REFORM REQUIRED.—
(1) IN GENERAL.—The Secretary of the Treasury shall not
make payment of any refund of any payment described in
subsection (a)(1) earlier than the date of the enactment of
Federal legislation, other than legislation included in this sec-
tion, which is enacted after July 29, 1997, and which authorizes
reforms of the National Railroad Passenger Corporation.
(2) NO INTEREST.—Notwithstanding any other provision of
law, if the payment of any refund is delayed by reason of
paragraph (1), no interest shall accrue with respect to such
payment prior to the 45th day following the date of the enact-
ment of Federal legislation described in paragraph (1).
(3) ESTIMATE
OF
REVENUE.—For purposes of estimating
revenues under budget reconciliation, the impact of this section
on Federal revenues shall be determined without regard to
this subsection.
Subtitle H—Extension of Duty-Free Treat-
ment Under Generalized System of Pref-
erences
SEC. 981. GENERALIZED SYSTEM OF PREFERENCES.
(a) EXTENSION OF DUTY-FREE TREATMENT UNDER SYSTEM.—
Section 505 of the Trade Act of 1974 (19 U.S.C. 2465) is amended
by striking ‘‘May 31, 1997’’ and inserting ‘‘June 30, 1998’’.
(b) RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS AND
RELIQUIDATIONS.—
(1) IN GENERAL.—Notwithstanding section 514 of the Tariff
Act of 1930 or any other provision of law and subject to para-
graph (2), the entry—
(A) of any article to which duty-free treatment under
title V of the Trade Act of 1974 would have applied if
the entry had been made on May 31, 1997, and
H. R. 2014—116
(B) that was made after May 31, 1997, and before
the date of the enactment of this Act,
shall be liquidated or reliquidated as free of duty, and the
Secretary of the Treasury shall refund any duty paid with
respect to such entry. As used in this subsection, the term
‘‘entry’’ includes a withdrawal from warehouse for consumption.
(2) REQUESTS.—Liquidation or reliquidation may be made
under paragraph (1) with respect to an entry only if a request
therefor is filed with the Customs Service, within 180 days
after the date of the enactment of this Act, that contains
sufficient information to enable the Customs Service—
(A) to locate the entry; or
(B) to reconstruct the entry if it cannot be located.
TITLE X—REVENUES
Subtitle A—Financial Products
SEC. 1001. CONSTRUCTIVE SALES TREATMENT FOR APPRECIATED
FINANCIAL POSITIONS.
(a) IN GENERAL.—Part IV of subchapter P of chapter 1 is
amended by adding at the end the following new section:
‘‘SEC. 1259. CONSTRUCTIVE SALES TREATMENT FOR APPRECIATED
FINANCIAL POSITIONS.
‘‘(a) IN GENERAL.—If there is a constructive sale of an appre-
ciated financial position—
‘‘(1) the taxpayer shall recognize gain as if such position
were sold, assigned, or otherwise terminated at its fair market
value on the date of such constructive sale (and any gain
shall be taken into account for the taxable year which includes
such date), and
‘‘(2) for purposes of applying this title for periods after
the constructive sale—
‘‘(A) proper adjustment shall be made in the amount
of any gain or loss subsequently realized with respect to
such position for any gain taken into account by reason
of paragraph (1), and
‘‘(B) the holding period of such position shall be deter-
mined as if such position were originally acquired on the
date of such constructive sale.
‘‘(b) APPRECIATED FINANCIAL POSITION.—For purposes of this
section—
‘‘(1) IN GENERAL.—Except as provided in paragraph (2),
the term ‘appreciated financial position’ means any position
with respect to any stock, debt instrument, or partnership
interest if there would be gain were such position sold, assigned,
or otherwise terminated at its fair market value.
‘‘(2) EXCEPTIONS.—The term ‘appreciated financial position’
shall not include—
‘‘(A) any position with respect to debt if—
‘‘(i) the debt unconditionally entitles the holder
to receive a specified principal amount,
‘‘(ii) the interest payments (or other similar
amounts) with respect to such debt meet the require-
ments of clause (i) of section 860G(a)(1)(B), and
H. R. 2014—117
‘‘(iii) such debt is not convertible (directly or
indirectly) into stock of the issuer or any related per-
son, and
‘‘(B) any position which is marked to market under
any provision of this title or the regulations thereunder.
‘‘(3) POSITION.—The term ‘position’ means an interest,
including a futures or forward contract, short sale, or option.
‘‘(c) CONSTRUCTIVE SALE.—For purposes of this section—
‘‘(1) IN GENERAL.—A taxpayer shall be treated as having
made a constructive sale of an appreciated financial position
if the taxpayer (or a related person)—
‘‘(A) enters into a short sale of the same or substan-
tially identical property,
‘‘(B) enters into an offsetting notional principal contract
with respect to the same or substantially identical property,
‘‘(C) enters into a futures or forward contract to deliver
the same or substantially identical property,
‘‘(D) in the case of an appreciated financial position
that is a short sale or a contract described in subparagraph
(B) or (C) with respect to any property, acquires the same
or substantially identical property, or
‘‘(E) to the extent prescribed by the Secretary in regula-
tions, enters into 1 or more other transactions (or acquires
1 or more positions) that have substantially the same effect
as a transaction described in any of the preceding subpara-
graphs.
‘‘(2) EXCEPTION FOR SALES OF NONPUBLICLY TRADED PROP-
ERTY.—The term ‘constructive sale’ shall not include any con-
tract for sale of any stock, debt instrument, or partnership
interest which is not a marketable security (as defined in
section 453(f)) if the contract settles within 1 year after the
date such contract is entered into.
‘‘(3) EXCEPTION FOR CERTAIN CLOSED TRANSACTIONS.—
‘‘(A) IN GENERAL.—In applying this section, there shall
be disregarded any transaction (which would otherwise
be treated as a constructive sale) during the taxable year
if—
‘‘(i) such transaction is closed before the end of
the 30th day after the close of such taxable year,
‘‘(ii) the taxpayer holds the appreciated financial
position throughout the 60-day period beginning on
the date such transaction is closed, and
‘‘(iii) at no time during such 60-day period is the
taxpayer’s risk of loss with respect to such position
reduced by reason of a circumstance which would be
described in section 246(c)(4) if references to stock
included references to such position.
‘‘(B) TREATMENT
OF
POSITIONS
WHICH
ARE
REESTAB-
LISHED.—If—
‘‘(i) a transaction, which would otherwise be treat-
ed as a constructive sale of an appreciated financial
position, is closed during the taxable year or during
the 30 days thereafter, and
‘‘(ii) another substantially similar transaction is
entered into during the 60-day period beginning on
the date the transaction referred to in clause (i) is
closed—
H. R. 2014—118
‘‘(I) which also would otherwise be treated as
a constructive sale of such position,
‘‘(II) which is closed before the 30th day after
the close of the taxable year in which the trans-
action referred to in clause (i) occurs, and
‘‘(III) which meets the requirements of clauses
(ii) and (iii) of subparagraph (A),
the transaction referred to in clause (ii) shall be disregarded
for purposes of determining whether the requirements of
subparagraph (A)(iii) are met with respect to the trans-
action described in clause (i).
‘‘(4) RELATED PERSON.—A person is related to another per-
son with respect to a transaction if—
‘‘(A) the relationship is described in section 267(b) or
707(b), and
‘‘(B) such transaction is entered into with a view toward
avoiding the purposes of this section.
‘‘(d) OTHER DEFINITIONS.—For purposes of this section—
‘‘(1) FORWARD
CONTRACT.—The term ‘forward contract’
means a contract to deliver a substantially fixed amount of
property for a substantially fixed price.
‘‘(2) OFFSETTING NOTIONAL PRINCIPAL CONTRACT.—The term
‘offsetting notional principal contract’ means, with respect to
any property, an agreement which includes—
‘‘(A) a requirement to pay (or provide credit for) all
or substantially all of the investment yield (including
appreciation) on such property for a specified period, and
‘‘(B) a right to be reimbursed for (or receive credit
for) all or substantially all of any decline in the value
of such property.
‘‘(e) SPECIAL RULES.—
‘‘(1) TREATMENT OF SUBSEQUENT SALE OF POSITION WHICH
WAS DEEMED SOLD.—If—
‘‘(A) there is a constructive sale of any appreciated
financial position,
‘‘(B) such position is subsequently disposed of, and
‘‘(C) at the time of such disposition, the transaction
resulting in the constructive sale of such position is open
with respect to the taxpayer or any related person,
solely for purposes of determining whether the taxpayer has
entered into a constructive sale of any other appreciated finan-
cial position held by the taxpayer, the taxpayer shall be treated
as entering into such transaction immediately after such dis-
position. For purposes of the preceding sentence, an assignment
or other termination shall be treated as a disposition.
‘‘(2) CERTAIN
TRUST
INSTRUMENTS
TREATED
AS
STOCK.—
For purposes of this section, an interest in a trust which is
actively traded (within the meaning of section 1092(d)(1)) shall
be treated as stock unless substantially all (by value) of the
property held by the trust is debt described in subsection
(b)(2)(A).
‘‘(3) MULTIPLE POSITIONS IN PROPERTY.—If a taxpayer holds
multiple positions in property, the determination of whether
a specific transaction is a constructive sale and, if so, which
appreciated financial position is deemed sold shall be made
in the same manner as actual sales.
H. R. 2014—119
‘‘(f) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary or appropriate to carry out the purposes
of this section.’’.
(b) ELECTION OF MARK TO MARKET FOR DEALERS IN COMMOD-
ITIES AND FOR TRADERS IN SECURITIES OR COMMODITIES.—Section
475 (relating to mark to market accounting method for dealers
in securities) is amended by redesignating subsection (e) as sub-
section (g) and by inserting after subsection (d) the following new
subsections:
‘‘(e) ELECTION OF MARK TO MARKET FOR DEALERS IN COMMOD-
ITIES.—
‘‘(1) IN GENERAL.—In the case of a dealer in commodities
who elects the application of this subsection, this section shall
apply to commodities held by such dealer in the same manner
as this section applies to securities held by a dealer in securi-
ties.
‘‘(2) COMMODITY.—For purposes of this subsection and sub-
section (f), the term ‘commodity’ means—
‘‘(A) any commodity which is actively traded (within
the meaning of section 1092(d)(1));
‘‘(B) any notional principal contract with respect to
any commodity described in subparagraph (A);
‘‘(C) any evidence of an interest in, or a derivative
instrument in, any commodity described in subparagraph
(A) or (B), including any option, forward contract, futures
contract, short position, and any similar instrument in
such a commodity; and
‘‘(D) any position which—
‘‘(i) is not a commodity described in subparagraph
(A), (B), or (C),
‘‘(ii) is a hedge with respect to such a commodity,
and
‘‘(iii) is clearly identified in the taxpayer’s records
as being described in this subparagraph before the
close of the day on which it was acquired or entered
into (or such other time as the Secretary may by regu-
lations prescribe).
‘‘(3) ELECTION.—An election under this subsection may be
made without the consent of the Secretary. Such an election,
once made, shall apply to the taxable year for which made
and all subsequent taxable years unless revoked with the con-
sent of the Secretary.
‘‘(f) ELECTION OF MARK TO MARKET FOR TRADERS IN SECURITIES
OR COMMODITIES.—
‘‘(1) TRADERS IN SECURITIES.—
‘‘(A) IN
GENERAL.—In the case of a person who is
engaged in a trade or business as a trader in securities
and who elects to have this paragraph apply to such trade
or business—
‘‘(i) such person shall recognize gain or loss on
any security held in connection with such trade or
business at the close of any taxable year as if such
security were sold for its fair market value on the
last business day of such taxable year, and
‘‘(ii) any gain or loss shall be taken into account
for such taxable year.
H. R. 2014—120
Proper adjustment shall be made in the amount of any
gain or loss subsequently realized for gain or loss taken
into account under the preceding sentence. The Secretary
may provide by regulations for the application of this
subparagraph at times other than the times provided in
this subparagraph.
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply
to any security—
‘‘(i) which is established to the satisfaction of the
Secretary as having no connection to the activities
of such person as a trader, and
‘‘(ii) which is clearly identified in such person’s
records as being described in clause (i) before the close
of the day on which it was acquired, originated, or
entered into (or such other time as the Secretary may
by regulations prescribe).
If a security ceases to be described in clause (i) at any
time after it was identified as such under clause (ii),
subparagraph (A) shall apply to any changes in value of
the security occurring after the cessation.
‘‘(C) COORDINATION WITH SECTION 1259.—Any security
to which subparagraph (A) applies and which was acquired
in the normal course of the taxpayer’s activities as a trader
in securities shall not be taken into account in applying
section 1259 to any position to which subparagraph (A)
does not apply.
‘‘(D) OTHER
RULES
TO
APPLY.—Rules similar to the
rules of subsections (b)(4) and (d) shall apply to securities
held by a person in any trade or business with respect
to which an election under this paragraph is in effect.
‘‘(2) TRADERS IN COMMODITIES.—In the case of a person
who is engaged in a trade or business as a trader in commod-
ities and who elects to have this paragraph apply to such
trade or business, paragraph (1) shall apply to commodities
held by such trader in connection with such trade or business
in the same manner as paragraph (1) applies to securities
held by a trader in securities.
‘‘(3) ELECTION.—The elections under paragraphs (1) and
(2) may be made separately for each trade or business and
without the consent of the Secretary. Such an election, once
made, shall apply to the taxable year for which made and
all subsequent taxable years unless revoked with the consent
of the Secretary.’’.
(c) CLERICAL AMENDMENT.—The table of sections for part IV
of subchapter P of chapter 1 is amended by adding at the end
the following new item:
‘‘Sec. 1259. Constructive sales treatment for appreciated financial posi-
tions.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to
any constructive sale after June 8, 1997.
(2) EXCEPTION FOR SALES OF POSITIONS, ETC. HELD BEFORE
JUNE 9, 1997.—If—
(A) before June 9, 1997, the taxpayer entered into
any transaction which is a constructive sale of any appre-
ciated financial position, and
H. R. 2014—121
(B) before the close of the 30-day period beginning
on the date of the enactment of this Act or before such
later date as may be specified by the Secretary of the
Treasury, such transaction and position are clearly identi-
fied in the taxpayer’s records as offsetting,
such transaction and position shall not be taken into account
in determining whether any other constructive sale after June
8, 1997, has occurred. The preceding sentence shall cease to
apply as of the date such transaction is closed or the taxpayer
ceases to hold such position.
(3) SPECIAL RULE.—In the case of a decedent dying after
June 8, 1997, if—
(A) there was a constructive sale on or before such
date of any appreciated financial position,
(B) the transaction resulting in such constructive sale
of such position remains open (with respect to the decedent
or any related person)—
(i) for not less than 2 years after the date of
such transaction (whether such period is before or after
June 8, 1997), and
(ii) at any time during the 3-year period ending
on the date of the decedent’s death, and
(C) such transaction is not closed within the 30-day
period beginning on the date of the enactment of this
Act,
then, for purposes of such Code, such position (and the trans-
action resulting in such constructive sale) shall be treated
as property constituting rights to receive an item of income
in respect of a decedent under section 691 of such Code. Section
1014(c) of such Code shall not apply to so much of such posi-
tion’s or property’s value (as included in the decedent’s estate
for purposes of chapter 11 of such Code) as exceeds its fair
market value as of the date such transaction is closed.
(4) ELECTION OF MARK TO MARKET BY SECURITIES TRADERS
AND TRADERS AND DEALERS IN COMMODITIES.—
(A) IN GENERAL.—The amendments made by subsection
(b) shall apply to taxable years ending after the date of
the enactment of this Act.
(B) 4-YEAR SPREAD OF ADJUSTMENTS.—In the case of
a taxpayer who elects under subsection (e) or (f) of section
475 of the Internal Revenue Code of 1986 (as added by
this section) to change its method of accounting for the
taxable year which includes the date of the enactment
of this Act—
(i) any identification required under such sub-
section with respect to securities and commodities held
on the date of the enactment of this Act shall be
treated as timely made if made on or before the 30th
day after such date of enactment, and
(ii) the net amount of the adjustments required
to be taken into account by the taxpayer under section
481 of such Code shall be taken into account ratably
over the 4-taxable year period beginning with such
first taxable year.
H. R. 2014—122
SEC. 1002. LIMITATION ON EXCEPTION FOR INVESTMENT COMPANIES
UNDER SECTION 351.
(a) IN GENERAL.—Paragraph (1) of section 351(e) (relating to
exceptions) is amended by adding at the end the following: ‘‘For
purposes of the preceding sentence, the determination of whether
a company is an investment company shall be made—
‘‘(A) by taking into account all stock and securities
held by the company, and
‘‘(B) by treating as stock and securities—
‘‘(i) money,
‘‘(ii) stocks and other equity interests in a corpora-
tion, evidences of indebtedness, options, forward or
futures contracts, notional principal contracts and
derivatives,
‘‘(iii) any foreign currency,
‘‘(iv) any interest in a real estate investment trust,
a common trust fund, a regulated investment company,
a publicly-traded partnership (as defined in section
7704(b)) or any other equity interest (other than in
a corporation) which pursuant to its terms or any
other arrangement is readily convertible into, or
exchangeable for, any asset described in any preceding
clause, this clause or clause (v) or (viii),
‘‘(v) except to the extent provided in regulations
prescribed by the Secretary, any interest in a precious
metal, unless such metal is used or held in the active
conduct of a trade or business after the contribution,
‘‘(vi) except as otherwise provided in regulations
prescribed by the Secretary, interests in any entity
if substantially all of the assets of such entity consist
(directly or indirectly) of any assets described in any
preceding clause or clause (viii),
‘‘(vii) to the extent provided in regulations pre-
scribed by the Secretary, any interest in any entity
not described in clause (vi), but only to the extent
of the value of such interest that is attributable to
assets listed in clauses (i) through (v) or clause (viii),
or
‘‘(viii) any other asset specified in regulations pre-
scribed by the Secretary.
The Secretary may prescribe regulations that, under appro-
priate circumstances, treat any asset described in clauses (i)
through (v) as not so listed.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by subsection (a)
shall apply to transfers after June 8, 1997, in taxable years
ending after such date.
(2) BINDING CONTRACTS.—The amendment made by sub-
section (a) shall not apply to any transfer pursuant to a written
binding contract in effect on June 8, 1997, and at all times
thereafter before such transfer if such contract provides for
the transfer of a fixed amount of property.
SEC. 1003. GAINS AND LOSSES FROM CERTAIN TERMINATIONS WITH
RESPECT TO PROPERTY.
(a) APPLICATION OF CAPITAL TREATMENT TO PROPERTY OTHER
THAN PERSONAL PROPERTY.—
H. R. 2014—123
(1) IN GENERAL.—Paragraph (1) of section 1234A (relating
to gains and losses from certain terminations) is amended
by striking ‘‘personal property (as defined in section 1092(d)(1))’’
and inserting ‘‘property’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to terminations more than 30 days after the
date of the enactment of this Act.
(b) TREATMENT OF SHORT SALES OF PROPERTY WHICH BECOMES
SUBSTANTIALLY WORTHLESS.—
(1) IN GENERAL.—Section 1233 is amended by adding at
the end the following new subsection:
‘‘(h) SHORT SALES
OF PROPERTY WHICH BECOMES SUBSTAN-
TIALLY WORTHLESS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) the taxpayer enters into a short sale of property,
and
‘‘(B) such property becomes substantially worthless,
the taxpayer shall recognize gain in the same manner as if
the short sale were closed when the property becomes substan-
tially worthless. To the extent provided in regulations pre-
scribed by the Secretary, the preceding sentence also shall
apply with respect to any option with respect to property,
any offsetting notional principal contract with respect to prop-
erty, any futures or forward contract to deliver any property,
and any other similar transaction.
‘‘(2) 
STATUTE
OF
LIMITATIONS.—If 
property 
becomes
substantially worthless during a taxable year and any short
sale of such property remains open at the time such property
becomes substantially worthless, then—
‘‘(A) the statutory period for the assessment of any
deficiency attributable to any part of the gain on such
transaction shall not expire before the earlier of—
‘‘(i) the date which is 3 years after the date the
Secretary is notified by the taxpayer (in such manner
as the Secretary may by regulations prescribe) of the
substantial worthlessness of such property, or
‘‘(ii) the date which is 6 years after the date the
return for such taxable year is filed, and
‘‘(B) such deficiency may be assessed before the date
applicable under subparagraph (A) notwithstanding the
provisions of any other law or rule of law which would
otherwise prevent such assessment.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to property which becomes substantially worth-
less after the date of the enactment of this Act.
(c) APPLICATION OF CAPITAL TREATMENT, ETC. TO OBLIGATIONS
ISSUED BY NATURAL PERSONS.—
(1) IN GENERAL.—Section 1271(b) is amended to read as
follows:
‘‘(b) EXCEPTION FOR CERTAIN OBLIGATIONS.—
‘‘(1) IN GENERAL.—This section shall not apply to—
‘‘(A) any obligation issued by a natural person before
June 9, 1997, and
‘‘(B) any obligation issued before July 2, 1982, by an
issuer which is not a corporation and is not a government
or political subdivision thereof.
H. R. 2014—124
‘‘(2) TERMINATION.—Paragraph (1) shall not apply to any
obligation purchased (within the meaning of section 1272(d)(1))
after June 8, 1997.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to sales, exchanges, and retirements after the
date of enactment of this Act.
SEC. 1004. DETERMINATION OF ORIGINAL ISSUE DISCOUNT WHERE
POOLED DEBT OBLIGATIONS SUBJECT TO ACCELERA-
TION.
(a) IN GENERAL.—Subparagraph (C) of section 1272(a)(6) (relat-
ing to debt instruments to which the paragraph applies) 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 inserting
after clause (ii) the following:
‘‘(iii) any pool of debt instruments the yield on
which may be affected by reason of prepayments (or
to the extent provided in regulations, by reason of
other events).
To the extent provided in regulations prescribed by the
Secretary, in the case of a small business engaged in the
trade or business of selling tangible personal property at
retail, clause (iii) shall not apply to debt instruments
incurred in the ordinary course of such trade or business
while held by such business.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendment made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
(2) CHANGE IN METHOD OF ACCOUNTING.—In the case of
any taxpayer required by this section to change its method
of accounting for its first taxable year beginning after the
date of the enactment of this Act—
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury, and
(C) the net amount of the adjustments required to
be taken into account by the taxpayer under section 481
of the Internal Revenue Code of 1986 shall be taken into
account ratably over the 4-taxable year period beginning
with such first taxable year.
SEC. 1005. DENIAL OF INTEREST DEDUCTIONS ON CERTAIN DEBT
INSTRUMENTS.
(a) IN
GENERAL.—Section 163 (relating to deduction for
interest), as amended by title V, is amended by redesignating
subsection (l) as subsection (m) and by inserting after subsection
(k) the following new subsection:
‘‘(l) 
DISALLOWANCE
OF
DEDUCTION
ON
CERTAIN
DEBT
INSTRUMENTS OF CORPORATIONS.—
‘‘(1) IN GENERAL.—No deduction shall be allowed under
this chapter for any interest paid or accrued on a disqualified
debt instrument.
‘‘(2) DISQUALIFIED DEBT INSTRUMENT.—For purposes of this
subsection, the term ‘disqualified debt instrument’ means any
indebtedness of a corporation which is payable in equity of
the issuer or a related party.
H. R. 2014—125
‘‘(3) SPECIAL RULES FOR AMOUNTS PAYABLE IN EQUITY.—
For purposes of paragraph (2), indebtedness shall be treated
as payable in equity of the issuer or a related party only
if—
‘‘(A) a substantial amount of the principal or interest
is required to be paid or converted, or at the option of
the issuer or a related party is payable in, or convertible
into, such equity,
‘‘(B) a substantial amount of the principal or interest
is required to be determined, or at the option of the issuer
or a related party is determined, by reference to the value
of such equity, or
‘‘(C) the indebtedness is part of an arrangement which
is reasonably expected to result in a transaction described
in subparagraph (A) or (B).
For purposes of this paragraph, principal or interest shall be
treated as required to be so paid, converted, or determined
if it may be required at the option of the holder or a related
party and there is a substantial certainty the option will be
exercised.
‘‘(4) RELATED PARTY.—For purposes of this subsection, a
person is a related party with respect to another person if
such person bears a relationship to such other person described
in section 267(b) or 707(b).
‘‘(5) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection, including regulations prevent-
ing avoidance of this subsection through the use of an issuer
other than a corporation.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by this section
shall apply to disqualified debt instruments issued after June
8, 1997.
(2) TRANSITION RULE.—The amendment made by this sec-
tion shall not apply to any instrument issued after June 8,
1997, if such instrument is—
(A) issued pursuant to a written agreement which was
binding on such date and at all times thereafter,
(B) described in a ruling request submitted to the
Internal Revenue Service on or before such date, or
(C) described on or before such date in a public
announcement or in a filing with the Securities and
Exchange Commission required solely by reason of the
issuance.
Subtitle B—Corporate Organizations and
Reorganizations
SEC. 1011. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.
(a) TREATMENT OF EXTRAORDINARY DIVIDENDS IN EXCESS OF
BASIS.—Paragraph (2) of section 1059(a) (relating to corporate
shareholder’s recognition of gain attributable to 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 sale or exchange of such stock for
H. R. 2014—126
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 redemptions) 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 liquidation (within
the meaning of section 302(e)) of the redeeming cor-
poration,
‘‘(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 account under section 318(a)(4),
any amount treated as a dividend with respect to such
redemption shall be treated as an extraordinary dividend
to which paragraphs (1) and (2) of subsection (a) apply
without regard to the period the taxpayer held such stock.
In 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 exchange described
in section 356 which is treated as a dividend shall be
treated as a redemption of stock for purposes of applying
subparagraph (A).’’.
(c) TIME
FOR REDUCTION.—Paragraph (1) of section 1059(d)
is amended to read as follows:
‘‘(1) TIME FOR REDUCTION.—Any reduction in basis under
subsection (a)(1) shall be treated as occurring at the beginning
of the ex-dividend date of the extraordinary dividend to which
the reduction relates.’’.
(d) 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 sec-
tion shall not apply to any distribution 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 REDEMP-
TIONS.—In determining whether the amendment made by sub-
section (a) applies to any extraordinary dividend other than
a dividend treated as an extraordinary dividend under section
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’’.
H. R. 2014—127
SEC. 1012. APPLICATION OF SECTION 355 TO DISTRIBUTIONS IN
CONNECTION WITH ACQUISITIONS AND TO INTRAGROUP
TRANSACTIONS.
(a) DISTRIBUTIONS IN CONNECTION WITH ACQUISITIONS.—Sec-
tion 355 (relating to distributions of stock and securities of a con-
trolled corporation) is amended by adding at the end the following
new subsection:
‘‘(e) RECOGNITION OF GAIN ON CERTAIN DISTRIBUTIONS OF STOCK
OR SECURITIES IN CONNECTION WITH ACQUISITIONS.—
‘‘(1) GENERAL RULE.—If there is a distribution to which
this subsection applies, any stock or securities in the controlled
corporation shall not be treated as qualified property for pur-
poses of subsection (c)(2) of this section or section 361(c)(2).
‘‘(2) DISTRIBUTIONS TO WHICH SUBSECTION APPLIES.—
‘‘(A) IN GENERAL.—This subsection shall apply to any
distribution—
‘‘(i) to which this section (or so much of section
356 as relates to this section) applies, and
‘‘(ii) which is part of a plan (or series of related
transactions) pursuant to which 1 or more persons
acquire directly or indirectly stock representing a 50-
percent or greater interest in the distributing corpora-
tion or any controlled corporation.
‘‘(B) PLAN PRESUMED TO EXIST IN CERTAIN CASES.—
If 1 or more persons acquire directly or indirectly stock
representing a 50-percent or greater interest in the distrib-
uting corporation or any controlled corporation during the
4-year period beginning on the date which is 2 years before
the date of the distribution, such acquisition shall be treat-
ed as pursuant to a plan described in subparagraph (A)(ii)
unless it is established that the distribution and the
acquisition are not pursuant to a plan or series of related
transactions.
‘‘(C) CERTAIN PLANS DISREGARDED.—A plan (or series
of related transactions) shall not be treated as described
in subparagraph (A)(ii) if, immediately after the completion
of such plan or transactions, the distributing corporation
and all controlled corporations are members of a single
affiliated group (as defined in section 1504 without regard
to subsection (b) thereof).
‘‘(D) COORDINATION WITH SUBSECTION (d).—This sub-
section shall not apply to any distribution to which sub-
section (d) applies.
‘‘(3) SPECIAL RULES RELATING TO ACQUISITIONS.—
‘‘(A) 
CERTAIN
ACQUISITIONS
NOT
TAKEN
INTO
ACCOUNT.—Except as provided in regulations, the following
acquisitions shall not be treated as described in paragraph
(2)(A)(ii):
‘‘(i) The acquisition of stock in any controlled cor-
poration by the distributing corporation.
‘‘(ii) The acquisition by a person of stock in any
controlled corporation by reason of holding stock or
securities in the distributing corporation.
‘‘(iii) The acquisition by a person of stock in any
successor corporation of the distributing corporation
or any controlled corporation by reason of holding stock
H. R. 2014—128
or securities in such distributing or controlled corpora-
tion.
‘‘(iv) The acquisition of stock in a corporation if
shareholders owning directly or indirectly stock
possessing—
‘‘(I) more than 50 percent of the total combined
voting power of all classes of stock entitled to
vote, and
‘‘(II) more than 50 percent of the total value
of shares of all classes of stock,
in the distributing corporation or any controlled cor-
poration before such acquisition own directly or
indirectly stock possessing such vote and value in such
distributing or controlled corporation after such
acquisition.
This subparagraph shall not apply to any acquisition if
the stock held before the acquisition was acquired pursuant
to a plan (or series of related transactions) described in
paragraph (2)(A)(ii).
‘‘(B) ASSET ACQUISITIONS.—Except as provided in regu-
lations, for purposes of this subsection, if the assets of
the distributing corporation or any controlled corporation
are acquired by a successor corporation in a transaction
described in subparagraph (A), (C), or (D) of section
368(a)(1) or any other transaction specified in regulations
by the Secretary, the shareholders (immediately before the
acquisition) of the corporation acquiring such assets shall
be treated as acquiring stock in the corporation from which
the assets were acquired.
‘‘(4) DEFINITION AND SPECIAL RULES.—For purposes of this
subsection—
‘‘(A) 50-PERCENT OR GREATER INTEREST.—The term ‘50-
percent or greater interest’ has the meaning given such
term by subsection (d)(4).
‘‘(B) DISTRIBUTIONS
IN
TITLE
OR
SIMILAR
CASE.—
Paragraph (1) shall not apply to any distribution made
in a title 11 or similar case (as defined in section 368(a)(3)).
‘‘(C) AGGREGATION AND ATTRIBUTION RULES.—
‘‘(i) AGGREGATION.—The rules of paragraph (7)(A)
of subsection (d) shall apply.
‘‘(ii) ATTRIBUTION.—Section 318(a)(2) shall apply
in determining whether a person holds stock or securi-
ties in any corporation. Except as provided in regula-
tions, section 318(a)(2)(C) shall be applied without
regard to the phrase ‘50 percent or more in value’
for purposes of the preceding sentence.
‘‘(D) SUCCESSORS
AND
PREDECESSORS.—For purposes
of this subsection, any reference to a controlled corporation
or a distributing corporation shall include a reference to
any predecessor or successor of such corporation.
‘‘(E) STATUTE OF LIMITATIONS.—If there is a distribu-
tion to which paragraph (1) applies—
‘‘(i) the statutory period for the assessment of any
deficiency attributable to any part of the gain recog-
nized under this subsection by reason of such distribu-
tion shall not expire before the expiration of 3 years
from the date the Secretary is notified by the taxpayer
H. R. 2014—129
(in such manner as the Secretary may by regulations
prescribe) that such distribution occurred, and
‘‘(ii) such deficiency may be assessed before the
expiration of such 3-year period notwithstanding the
provisions of any other law or rule of law which would
otherwise prevent such assessment.
‘‘(5) REGULATIONS.—The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes
of this subsection, including regulations—
‘‘(A) providing for the application of this subsection
where there is more than 1 controlled corporation,
‘‘(B) treating 2 or more distributions as 1 distribution
where necessary to prevent the avoidance of such purposes,
and
‘‘(C) providing for the application of rules similar to
the rules of subsection (d)(6) where appropriate for pur-
poses of paragraph (2)(B).’’.
(b) SPECIAL RULES FOR CERTAIN INTRAGROUP TRANSACTIONS.—
(1) SECTION 355 NOT TO APPLY.—Section 355, as amended
by subsection (a), is amended by adding at the end the following
new subsection:
‘‘(f) SECTION NOT TO APPLY TO CERTAIN INTRAGROUP DISTRIBU-
TIONS.—Except as provided in regulations, this section (or so much
of section 356 as relates to this section) shall not apply to the
distribution of stock from 1 member of an affiliated group (as
defined in section 1504(a)) to another member of such group if
such distribution is part of a plan (or series of related transactions)
described in subsection (e)(2)(A)(ii) (determined after the application
of subsection (e)).’’.
(2) ADJUSTMENTS TO BASIS.—Section 358 (relating to basis
to distributees) is amended by adding at the end the following
new subsection:
‘‘(g) ADJUSTMENTS
IN INTRAGROUP TRANSACTIONS INVOLVING
SECTION 355.—In the case of a distribution to which section 355
(or so much of section 356 as relates to section 355) applies and
which involves the distribution of stock from 1 member of an
affiliated group (as defined in section 1504(a) without regard to
subsection (b) thereof) to another member of such group, the Sec-
retary may, notwithstanding any other provision of this section,
provide adjustments to the adjusted basis of any stock which—
‘‘(1) is in a corporation which is a member of such group,
and
‘‘(2) is held by another member of such group,
to appropriately reflect the proper treatment of such distribution.’’.
(c) DETERMINATION OF CONTROL IN CERTAIN DIVISIVE TRANS-
ACTIONS.—
(1) SECTION
351
TRANSACTIONS.—Section 351(c) (relating
to special rule) is amended to read as follows:
‘‘(c) SPECIAL RULES WHERE DISTRIBUTION TO SHAREHOLDERS.—
In determining control for purposes of this section—
‘‘(1) the fact that any corporate transferor distributes part
or all of the stock in the corporation which it receives in
the exchange to its shareholders shall not be taken into account,
and
‘‘(2) if the requirements of section 355 are met with respect
to such distribution, the shareholders shall be treated as in
control of such corporation immediately after the exchange
H. R. 2014—130
if the shareholders own (immediately after the distribution)
stock possessing—
‘‘(A) more than 50 percent of the total combined voting
power of all classes of stock of such corporation entitled
to vote, and
‘‘(B) more than 50 percent of the total value of shares
of all classes of stock of such corporation.’’.
(2) D REORGANIZATIONS.—Section 368(a)(2)(H) (relating to
special rule for determining whether certain transactions are
qualified under paragraph (1)(D)) is amended to read as follows:
‘‘(H) SPECIAL RULES FOR DETERMINING WHETHER CER-
TAIN
TRANSACTIONS
ARE
QUALIFIED
UNDER
PARAGRAPH
(1)(D).—For purposes of determining whether a transaction
qualifies under paragraph (1)(D)—
‘‘(i) in the case of a transaction with respect to
which the requirements of subparagraphs (A) and (B)
of section 354(b)(1) are met, the term ‘control’ has
the meaning given such term by section 304(c), and
‘‘(ii) in the case of a transaction with respect to
which the requirements of section 355 are met, the
shareholders described in paragraph (1)(D) shall be
treated as having control of the corporation to which
the assets are transferred if such shareholders own
(immediately after the distribution) stock possessing—
‘‘(I) more than 50 percent of the total combined
voting power of all classes of stock of such corpora-
tion entitled to vote, and
‘‘(II) more than 50 percent of the total value
of shares of all classes of stock of such corpora-
tion.’’.
(d) EFFECTIVE DATES.—
(1) SECTION 355 RULES.—The amendments made by sub-
sections (a) and (b) shall apply to distributions after April
16, 1997, pursuant to a plan (or series of related transactions)
which 
involves 
an 
acquisition 
described 
in 
section
355(e)(2)(A)(ii) of the Internal Revenue Code of 1986 occurring
after such date.
(2) DIVISIVE
TRANSACTIONS.—The amendments made by
subsection (c) shall apply to transfers after the date of the
enactment of this Act.
(3) TRANSITION RULE.—The amendments made by this sec-
tion shall not apply to any distribution pursuant to a plan
(or series of related transactions) which involves an acquisition
described in section 355(e)(2)(A)(ii) of the Internal Revenue
Code of 1986 (or, in the case of the amendments made by
subsection (c), any transfer) occurring after April 16, 1997,
if such acquisition or transfer is—
(A) made pursuant to an agreement which was binding
on such date and at all times thereafter,
(B) described in a ruling request submitted to the
Internal Revenue Service on or before such date, or
(C) described on or before such date in a public
announcement or in a filing with the Securities and
Exchange Commission required solely by reason of the
acquisition or transfer.
This paragraph shall not apply to any agreement, ruling
request, or public announcement or filing unless it identifies
H. R. 2014—131
the acquirer of the distributing corporation or any controlled
corporation, or the transferee, whichever is applicable.
SEC. 1013. TAX TREATMENT OF REDEMPTIONS INVOLVING RELATED
CORPORATIONS.
(a) STOCK PURCHASES BY RELATED CORPORATIONS.—The last
sentence of section 304(a)(1) (relating to acquisition by related cor-
poration other than subsidiary) is amended to read as follows:
‘‘To the extent that such distribution is treated as a distribution
to which section 301 applies, the transferor and the acquiring
corporation shall be treated in the same manner as if the transferor
had transferred the stock so acquired to the acquiring corporation
in exchange for stock of the acquiring corporation in a transaction
to which section 351(a) applies, and then the acquiring corporation
had redeemed the stock it was treated as issuing in such trans-
action.’’.
(b) COORDINATION WITH SECTION 1059.—Clause (iii) of section
1059(e)(1)(A), as amended by this title, is amended to read as
follows:
‘‘(iii) which would not have been treated (in whole
or in part) as a dividend if—
‘‘(I) any options had not been taken into
account under section 318(a)(4), or
‘‘(II) section 304(a) had not applied,’’.
(c) SPECIAL RULE
FOR ACQUISITIONS
BY FOREIGN CORPORA-
TIONS.—Section 304(b) (relating to special rules for application of
subsection (a)) is amended by adding at the end the following
new paragraph:
‘‘(5) ACQUISITIONS BY FOREIGN CORPORATIONS.—
‘‘(A) IN GENERAL.—In the case of any acquisition to
which subsection (a) applies in which the acquiring corpora-
tion is a foreign corporation, the only earnings and profits
taken into account under paragraph (2)(A) shall be those
earnings and profits—
‘‘(i) which are attributable (under regulations pre-
scribed by the Secretary) to stock of the acquiring
corporation owned (within the meaning of section
958(a)) by a corporation or individual which is—
‘‘(I) a United States shareholder (within the
meaning of section 951(b)) of the acquiring corpora-
tion, and
‘‘(II) the transferor or a person who bears a
relationship to the transferor described in section
267(b) or 707(b), and
‘‘(ii) which were accumulated during the period
or periods such stock was owned by such person while
the acquiring corporation was a controlled foreign cor-
poration.
‘‘(B) APPLICATION OF SECTION 1248.—For purposes of
subparagraph (A), the rules of section 1248(d) shall apply
except to the extent otherwise provided by the Secretary.
‘‘(C) REGULATIONS.—The Secretary shall prescribe such
regulations as are appropriate to carry out the purposes
of this paragraph.’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to distributions and acquisitions after June 8, 1997.
H. R. 2014—132
(2) TRANSITION RULE.—The amendments made by this sec-
tion shall not apply to any distribution or acquisition after
June 8, 1997, if such distribution or acquisition is—
(A) made pursuant to a written agreement which was
binding on such date and at all times thereafter,
(B) described in a ruling request submitted to the
Internal Revenue Service on or before such date, or
(C) described in a public announcement or filing with
the Securities and Exchange Commission on or before such
date.
SEC. 1014. CERTAIN PREFERRED STOCK TREATED AS BOOT.
(a) SECTION 351.—Section 351 (relating to transfer to corpora-
tion controlled by transferor) is amended by redesignating sub-
section (g) as subsection (h) and by inserting after subsection (f)
the following new subsection:
‘‘(g) NONQUALIFIED
PREFERRED
STOCK
NOT
TREATED
AS
STOCK.—
‘‘(1) IN GENERAL.—In the case of a person who transfers
property to a corporation and receives nonqualified preferred
stock—
‘‘(A) subsection (a) shall not apply to such transferor,
‘‘(B) subsection (b) shall apply to such transferor, and
‘‘(C) such nonqualified preferred stock shall be treated
as other property for purposes of applying subsection (b).
‘‘(2) NONQUALIFIED
PREFERRED
STOCK.—For purposes of
paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘nonqualified preferred
stock’ means preferred stock if—
‘‘(i) the holder of such stock has the right to require
the issuer or a related person to redeem or purchase
the stock,
‘‘(ii) the issuer or a related person is required
to redeem or purchase such stock,
‘‘(iii) the issuer or a related person has the right
to redeem or purchase the stock and, as of the issue
date, it is more likely than not that such right will
be exercised, or
‘‘(iv) the dividend rate on such stock varies in
whole or in part (directly or indirectly) with reference
to interest rates, commodity prices, or other similar
indices.
‘‘(B) LIMITATIONS.—Clauses (i), (ii), and (iii) of subpara-
graph (A) shall apply only if the right or obligation referred
to therein may be exercised within the 20-year period begin-
ning on the issue date of such stock and such right or
obligation is not subject to a contingency which, as of
the issue date, makes remote the likelihood of the redemp-
tion or purchase.
‘‘(C) EXCEPTIONS
FOR
CERTAIN
RIGHTS
OR
OBLIGA-
TIONS.—
‘‘(i) IN GENERAL.—A right or obligation shall not
be treated as described in clause (i), (ii), or (iii) of
subparagraph (A) if—
‘‘(I) it may be exercised only upon the death,
disability, or mental incompetency of the holder,
or
H. R. 2014—133
‘‘(II) in the case of a right or obligation to
redeem or purchase stock transferred in connection
with the performance of services for the issuer
or a related person (and which represents reason-
able compensation), it may be exercised only upon
the holder’s separation from service from the issuer
or a related person.
‘‘(ii) EXCEPTION.—Clause (i)(I) shall not apply if
the stock relinquished in the exchange, or the stock
acquired in the exchange is in—
‘‘(I) a corporation if any class of stock in such
corporation or a related party is readily tradable
on an established securities market or otherwise,
or
‘‘(II) any other corporation if such exchange
is part of a transaction or series of transactions
in which such corporation is to become a corpora-
tion described in subclause (I).
‘‘(3) DEFINITIONS.—For purposes of this subsection—
‘‘(A) PREFERRED
STOCK.—The term ‘preferred stock’
means stock which is limited and preferred as to dividends
and does not participate in corporate growth to any signifi-
cant extent.
‘‘(B) RELATED PERSON.—A person shall be treated as
related to another person if they bear a relationship to
such other person described in section 267(b) or 707(b).
‘‘(4) REGULATIONS.—The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection and sections 354(a)(2)(C),
355(a)(3)(D), and 356(e). The Secretary may also prescribe regu-
lations, consistent with the treatment under this subsection
and such sections, for the treatment of nonqualified preferred
stock under other provisions of this title.’’.
(b) SECTION 354.—Paragraph (2) of section 354(a) (relating
to exchanges of stock and securities in certain reorganizations)
is amended by adding at the end the following new subparagraph:
‘‘(C) NONQUALIFIED PREFERRED STOCK.—
‘‘(i) IN GENERAL.—Nonqualified preferred stock (as
defined in section 351(g)(2)) received in exchange for
stock other than nonqualified preferred stock (as so
defined) shall not be treated as stock or securities.
‘‘(ii) RECAPITALIZATIONS
OF
FAMILY-OWNED
COR-
PORATIONS.—
‘‘(I) IN GENERAL.—Clause (i) shall not apply
in the case of a recapitalization under section
368(a)(1)(E) of a family-owned corporation.
‘‘(II) FAMILY-OWNED CORPORATION.—For pur-
poses of this clause, except as provided in regula-
tions, the term ‘family-owned corporation’ means
any corporation which is described in clause (i)
of section 447(d)(2)(C) throughout the 8-year period
beginning on the date which is 5 years before
the date of the recapitalization. For purposes of
the preceding sentence, stock shall not be treated
as owned by a family member during any period
described in section 355(d)(6)(B).’’.
H. R. 2014—134
(c) SECTION 355.—Paragraph (3) of section 355(a) is amended
by adding at the end the following new subparagraph:
‘‘(D) NONQUALIFIED PREFERRED STOCK.—Nonqualified
preferred stock (as defined in section 351(g)(2)) received
in a distribution with respect to stock other than non-
qualified preferred stock (as so defined) shall not be treated
as stock or securities.’’.
(d) SECTION 356.—Section 356 is amended by redesignating
subsections (e) and (f) as subsections (f) and (g), respectively, and
by inserting after subsection (d) the following new subsection:
‘‘(e) NONQUALIFIED PREFERRED STOCK TREATED AS OTHER PROP-
ERTY.—For purposes of this section—
‘‘(1) IN GENERAL.—Except as provided in paragraph (2),
the term ‘other property’ includes nonqualified preferred stock
(as defined in section 351(g)(2)).
‘‘(2) EXCEPTION.—The term ‘other property’ does not include
nonqualified preferred stock (as so defined) to the extent that,
under section 354 or 355, such preferred stock would be per-
mitted to be received without the recognition of gain.’’.
(e) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 354(a)(2) and subparagraph
(C) of section 355(a)(3)(C) are each amended by inserting
‘‘(including nonqualified preferred stock, as defined in section
351(g)(2))’’ after ‘‘stock’’.
(2) Subparagraph (A) of section 354(a)(3) and subparagraph
(A) of section 355(a)(4) are each amended by inserting ‘‘non-
qualified preferred stock and’’ after ‘‘including’’.
(3) Section 1036 is amended by redesignating subsection
(b) as subsection (c) and by inserting after subsection (a) the
following new subsection:
‘‘(b) NONQUALIFIED
PREFERRED
STOCK
NOT
TREATED
AS
STOCK.—For purposes of this section, nonqualified preferred stock
(as defined in section 351(g)(2)) shall be treated as property other
than stock.’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to transactions after June 8, 1997.
(2) TRANSITION RULE.—The amendments made by this sec-
tion shall not apply to any transaction after June 8, 1997,
if such transaction is—
(A) made pursuant to a written agreement which was
binding on such date and at all times thereafter,
(B) described in a ruling request submitted to the
Internal Revenue Service on or before such date, or
(C) described on or before such date in a public
announcement or in a filing with the Securities and
Exchange Commission required solely by reason of the
transaction.
SEC. 1015. MODIFICATION OF HOLDING PERIOD APPLICABLE TO DIVI-
DENDS RECEIVED DEDUCTION.
(a) IN GENERAL.—Subparagraph (A) of section 246(c)(1) is
amended to read as follows:
‘‘(A) which is held by the taxpayer for 45 days or
less during the 90-day period beginning on the date which
is 45 days before the date on which such share becomes
ex-dividend with respect to such dividend, or’’.
H. R. 2014—135
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 246(c) is amended to read
as follows:
‘‘(2) 90-DAY RULE IN THE CASE OF CERTAIN PREFERENCE
DIVIDENDS.—In the case of stock having preference in dividends,
if the taxpayer receives dividends with respect to such stock
which are attributable to a period or periods aggregating in
excess of 366 days, paragraph (1)(A) shall be applied—
‘‘(A) by substituting ‘90 days’ for ‘45 days’ each place
it appears, and
‘‘(B) by substituting ‘180-day period’ for ‘90-day
period’.’’.
(2) Paragraph (3) of section 246(c) is amended by adding
‘‘and’’ at the end of subparagraph (A), by striking subparagraph
(B), and by redesignating subparagraph (C) as subparagraph
(B).
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to dividends received or accrued after the 30th
day after the date of the enactment of this Act.
(2) TRANSITIONAL RULE.—The amendments made by this
section shall not apply to dividends received or accrued during
the 2-year period beginning on the date of the enactment of
this Act if—
(A) the dividend is paid with respect to stock held
by the taxpayer on June 8, 1997, and all times thereafter
until the dividend is received,
(B) such stock is continuously subject to a position
described in section 246(c)(4) of the Internal Revenue Code
of 1986 on June 8, 1997, and all times thereafter until
the dividend is received, and
(C) such stock and position are clearly identified in
the taxpayer’s records within 30 days after the date of
the enactment of this Act.
Stock shall not be treated as meeting the requirement of
subparagraph (B) if the position is sold, closed, or otherwise
terminated and reestablished.
Subtitle C—Administrative Provisions
SEC. 1021. 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 PAYMENTS TO ATTOR-
NEYS.—
‘‘(1) IN GENERAL.—Any person engaged in a trade or busi-
ness and making a payment (in the course of such trade or
business) to which this subsection applies shall file a return
under subsection (a) and a statement under subsection (b)
with respect to such payment.
‘‘(2) APPLICATION OF SUBSECTION.—
‘‘(A) IN GENERAL.—This subsection shall apply to any
payment to an attorney in connection 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
H. R. 2014—136
under section 6041(a) (or would be so required but for
the dollar limitation contained therein) or section 6051.’’.
(b) REPORTING
OF ATTORNEYS’ FEES PAYABLE
TO CORPORA-
TIONS.—The regulations providing an exception under section 6041
of the Internal Revenue Code of 1986 for payments made to corpora-
tions shall not apply to payments of attorneys’ fees.
(c) EFFECTIVE DATE.—The amendment made by this section
shall apply to payments made after December 31, 1997.
SEC. 1022. DECREASE OF THRESHOLD FOR REPORTING PAYMENTS
TO CORPORATIONS PERFORMING SERVICES FOR FED-
ERAL AGENCIES.
(a) IN GENERAL.—Subsection (d) of section 6041A (relating to
returns regarding payments of remuneration for services and direct
sales) is amended by adding at the end the following new paragraph:
‘‘(3) PAYMENTS TO CORPORATIONS BY FEDERAL EXECUTIVE
AGENCIES.—
‘‘(A) IN
GENERAL.—Notwithstanding any regulation
prescribed by the Secretary before the date of the enact-
ment of this paragraph, subsection (a) shall apply to remu-
neration paid to a corporation by any Federal executive
agency (as defined in section 6050M(b)).
‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply
to—
‘‘(i) services under contracts described in section
6050M(e)(3) with respect to which the requirements
of section 6050M(e)(2) are met, and
‘‘(ii) such other services as the Secretary may
specify in regulations prescribed after the date of the
enactment of this paragraph.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to returns the due date for which (determined without
regard to any extension) is more than 90 days after the date
of the enactment of this Act.
SEC. 1023. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRA-
TION OF CERTAIN VETERANS PROGRAMS.
(a) GENERAL RULE.—Clause (viii) of section 6103(l)(7)(D) (relat-
ing to disclosure of return information to Federal, State, and local
agencies administering certain programs) is amended by striking
‘‘1998’’ and inserting ‘‘2003’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on the date of the enactment of this Act.
SEC. 1024. CONTINUOUS LEVY ON CERTAIN PAYMENTS.
(a) IN GENERAL.—Section 6331 (relating to levy and distraint)
is amended—
(1) by redesignating subsection (h) as subsection (i), and
(2) by inserting after subsection (g) the following new sub-
section:
‘‘(h) CONTINUING LEVY ON CERTAIN PAYMENTS.—
‘‘(1) IN GENERAL.—The effect of a levy on specified payments
to or received by a taxpayer shall be continuous from the
date such levy is first made until such levy is released. Notwith-
standing section 6334, such continuous levy shall attach to
up to 15 percent of any specified payment due to the taxpayer.
‘‘(2) SPECIFIED PAYMENT.—For the purposes of paragraph
(1), the term ‘specified payment’ means—
H. R. 2014—137
‘‘(A) any Federal payment other than a payment for
which eligibility is based on the income or assets (or both)
of a payee,
‘‘(B) any payment described in paragraph (4), (7), (9),
or (11) of section 6334(a), and
‘‘(C) any annuity or pension payment under the Rail-
road Retirement Act or benefit under the Railroad
Unemployment Insurance Act.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to levies issued after the date of the enactment of
this Act.
SEC. 1025. MODIFICATION OF LEVY EXEMPTION.
(a) IN GENERAL.—Section 6334 (relating to property exempt
from levy) is amended by redesignating subsection (f) as subsection
(g) and by inserting after subsection (e) the following new sub-
section:
‘‘(f) LEVY ALLOWED ON CERTAIN SPECIFIED PAYMENTS.—Any
payment described in subparagraph (B) or (C) of section 6331(h)(2)
shall not be exempt from levy if the Secretary approves the levy
thereon under section 6331(h).’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to levies issued after the date of the enactment of
this Act.
SEC. 1026. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND
RETURN INFORMATION.
(a) IN GENERAL.—Subsection (k) of section 6103 is amended
by adding at the end the following new paragraph:
‘‘(8) LEVIES ON CERTAIN GOVERNMENT PAYMENTS.—
‘‘(A) DISCLOSURE OF RETURN INFORMATION IN LEVIES
ON FINANCIAL MANAGEMENT SERVICE.—In serving a notice
of levy, or release of such levy, with respect to any
applicable government payment, the Secretary may disclose
to officers and employees of the Financial Management
Service—
‘‘(i) return information, including taxpayer identity
information,
‘‘(ii) the amount of any unpaid liability under this
title (including penalties and interest), and
‘‘(iii) the type of tax and tax period to which such
unpaid liability relates.
‘‘(B) RESTRICTION
ON
USE
OF
DISCLOSED
INFORMA-
TION.—Return information disclosed under subparagraph
(A) may be used by officers and employees of the Financial
Management Service only for the purpose of, and to the
extent necessary in, transferring levied funds in satisfac-
tion of the levy, maintaining appropriate agency records
in regard to such levy or the release thereof, notifying
the taxpayer and the agency certifying such payment that
the levy has been honored, or in the defense of any litiga-
tion ensuing from the honor of such levy.
‘‘(C) APPLICABLE GOVERNMENT PAYMENT.—For purposes
of this paragraph, the term ‘applicable government pay-
ment’ means—
‘‘(i) any Federal payment (other than a payment
for which eligibility is based on the income or assets
H. R. 2014—138
(or both) of a payee) certified to the Financial Manage-
ment Service for disbursement, and
‘‘(ii) any other payment which is certified to the
Financial Management Service for disbursement and
which the Secretary designates by published notice.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 6103(p) is amended—
(A) in paragraph (3)(A), by striking ‘‘(2), or (6)’’ and
inserting ‘‘(2), (6), or (8)’’, and
(B) in paragraph (4), by inserting ‘‘(k)(8),’’ after ‘‘(j)
(1) or (2),’’ each place it appears.
(2) Section 552a(a)(8)(B) of title 5, United States Code,
is amended by striking ‘‘or’’ at the end of clause (v), by adding
‘‘or’’ at the end of clause (vi), and by adding at the end the
following new clause:
‘‘(vii) matches performed incident to a levy
described in section 6103(k)(8) of the Internal Revenue
Code of 1986;’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to levies issued after the date of the enactment of
this Act.
SEC. 1027. RETURNS OF BENEFICIARIES OF ESTATES AND TRUSTS
REQUIRED TO FILE RETURNS CONSISTENT WITH ESTATE
OR TRUST RETURN OR TO NOTIFY SECRETARY OF
INCONSISTENCY.
(a) DOMESTIC ESTATES AND TRUSTS.—Section 6034A (relating
to information to beneficiaries of estates and trusts) is amended
by adding at the end the following new subsection:
‘‘(c) BENEFICIARY’S RETURN MUST BE CONSISTENT WITH ESTATE
OR TRUST RETURN OR SECRETARY NOTIFIED OF INCONSISTENCY.—
‘‘(1) IN GENERAL.—A beneficiary of any estate or trust to
which subsection (a) applies shall, on such beneficiary’s return,
treat any reported item in a manner which is consistent with
the treatment of such item on the applicable entity’s return.
‘‘(2) NOTIFICATION OF INCONSISTENT TREATMENT.—
‘‘(A) IN GENERAL.—In the case of any reported item,
if—
‘‘(i)(I) the applicable entity has filed a return but
the beneficiary’s treatment on such beneficiary’s return
is (or may be) inconsistent with the treatment of the
item on the applicable entity’s return, or
‘‘(II) the applicable entity has not filed a return,
and
‘‘(ii) the beneficiary files with the Secretary a state-
ment identifying the inconsistency,
paragraph (1) shall not apply to such item.
‘‘(B) BENEFICIARY
RECEIVING
INCORRECT
INFORMA-
TION.—A beneficiary shall be treated as having complied
with clause (ii) of subparagraph (A) with respect to a
reported item if the beneficiary—
‘‘(i) demonstrates to the satisfaction of the Sec-
retary that the treatment of the reported item on the
beneficiary’s return is consistent with the treatment
of the item on the statement furnished under sub-
section (a) to the beneficiary by the applicable entity,
and
H. R. 2014—139
‘‘(ii) elects to have this paragraph apply with
respect to that item.
‘‘(3) EFFECT OF FAILURE TO NOTIFY.—In any case—
‘‘(A) described in subparagraph (A)(i)(I) of paragraph
(2), and
‘‘(B) in which the beneficiary does not comply with
subparagraph (A)(ii) of paragraph (2),
any adjustment required to make the treatment of the items
by such beneficiary consistent with the treatment of the items
on the applicable entity’s return shall be treated as arising
out of mathematical or clerical errors and assessed according
to section 6213(b)(1). Paragraph (2) of section 6213(b) shall
not apply to any assessment referred to in the preceding sen-
tence.
‘‘(4) DEFINITIONS.—For purposes of this subsection—
‘‘(A) REPORTED ITEM.—The term ‘reported item’ means
any item for which information is required to be furnished
under subsection (a).
‘‘(B) APPLICABLE ENTITY.—The term ‘applicable entity’
means the estate or trust of which the taxpayer is the
beneficiary.
‘‘(5) ADDITION TO TAX FOR FAILURE TO COMPLY WITH SEC-
TION.—For addition to tax in the case of a beneficiary’s neg-
ligence in connection with, or disregard of, the requirements
of this section, see part II of subchapter A of chapter 68.’’.
(b) FOREIGN TRUSTS.—Subsection (d) of section 6048 (relating
to information with respect to certain foreign trusts) is amended
by adding at the end the following new paragraph:
‘‘(5) UNITED STATES PERSON’S RETURN MUST BE CONSISTENT
WITH
TRUST
RETURN
OR
SECRETARY
NOTIFIED
OF
INCONSIST-
ENCY.—Rules similar to the rules of section 6034A(c) shall
apply to items reported by a trust under subsection (b)(1)(B)
and to United States persons referred to in such subsection.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to returns of beneficiaries and owners filed after the
date of the enactment of this Act.
SEC. 1028. REGISTRATION AND OTHER PROVISIONS RELATING TO CON-
FIDENTIAL CORPORATE TAX SHELTERS.
(a) IN GENERAL.—Section 6111 (relating to registration of tax
shelters) is amended by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively, and by inserting after sub-
section (c) the following new subsection:
‘‘(d) CERTAIN CONFIDENTIAL ARRANGEMENTS TREATED AS TAX
SHELTERS.—
‘‘(1) IN GENERAL.—For purposes of this section, the term
‘tax shelter’ includes any entity, plan, arrangement, or trans-
action—
‘‘(A) a significant purpose of the structure of which
is the avoidance or evasion of Federal income tax for a
direct or indirect participant which is a corporation,
‘‘(B) which is offered to any potential participant under
conditions of confidentiality, and
‘‘(C) for which the tax shelter promoters may receive
fees in excess of $100,000 in the aggregate.
H. R. 2014—140
‘‘(2) CONDITIONS
OF
CONFIDENTIALITY.—For purposes of
paragraph (1)(B), an offer is under conditions of confidentiality
if—
‘‘(A) the potential participant to whom the offer is
made (or any other person acting on behalf of such partici-
pant) has an understanding or agreement with or for the
benefit of any promoter of the tax shelter that such partici-
pant (or such 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 potential 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 potential participant or is
otherwise protected from disclosure to or use by others.
For purposes of this subsection, the term ‘promoter’ means
any person or any related person (within the meaning of section
267 or 707) who participates in the organization, management,
or sale of the tax shelter.
‘‘(3) PERSONS OTHER THAN PROMOTER REQUIRED TO REG-
ISTER 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 promoter, and
‘‘(ii) no tax shelter promoter 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 90th day after 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 shel-
ter.
‘‘(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 defined in paragraph (1)) shall be treated
as an offer for sale.’’.
(b) PENALTY.—Subsection (a) of section 6707 (relating to failure
to furnish information regarding tax shelters) 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 penalty imposed under
paragraph (1) shall be an amount equal to the greater
of—
‘‘(i) 50 percent of the fees paid to all promoters
of the tax shelter with respect to offerings made before
H. R. 2014—141
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 intentional failure or
act described in paragraph (1).
‘‘(B) SPECIAL RULE FOR PARTICIPANTS REQUIRED TO REG-
ISTER 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 pen-
alty under paragraph (1) only if such person actually
participated in such shelter,
‘‘(ii) the amount of such penalty shall be deter-
mined 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 pen-
alty imposed on any other person for failing to register
such shelter.’’.
(c) MODIFICATIONS
TO SUBSTANTIAL UNDERSTATEMENT PEN-
ALTY.—
(1) RESTRICTION
ON
REASONABLE
BASIS
FOR
CORPORATE
UNDERSTATEMENT OF INCOME TAX.—Subparagraph (B) of section
6662(d)(2) is amended by adding at the end the following new
flush sentence:
‘‘For purposes of clause (ii)(II), in no event shall a corpora-
tion be treated as having a reasonable basis for its tax
treatment of an item attributable to a multiple-party
financing transaction if such treatment does not clearly
reflect the income of the corporation.’’.
(2) MODIFICATION TO DEFINITION OF TAX SHELTER.—Clause
(iii) of section 6662(d)(2)(C) is amended by striking ‘‘the prin-
cipal purpose’’ and inserting ‘‘a significant purpose’’.
(d) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 6707(a) is amended 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’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), 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 Secretary of the Treas-
ury prescribes guidance with respect to meeting requirements
added by such amendments.
(2) MODIFICATIONS TO SUBSTANTIAL UNDERSTATEMENT PEN-
ALTY.—The amendments made by subsection (c) shall apply
to items with respect to transactions entered into after the
date of the enactment of this Act.
H. R. 2014—142
Subtitle D—Excise and Employment Tax
Provisions
SEC. 1031. EXTENSION AND MODIFICATION OF TAXES FUNDING AIR-
PORT AND AIRWAY TRUST FUND; INCREASED DEPOSITS
INTO SUCH FUND.
(a) FUEL TAXES.—
(1) AVIATION FUEL.—Clause (ii) of section 4091(b)(3)(A) is
amended by striking ‘‘September 30, 1997’’ and inserting
‘‘September 30, 2007’’.
(2) AVIATION
GASOLINE.—Subparagraph (B) of section
4081(d)(2) is amended by striking ‘‘September 30, 1997’’ and
inserting ‘‘September 30, 2007’’.
(3) NONCOMMERCIAL AVIATION.—Subparagraph (B) of sec-
tion 4041(c)(3) is amended by striking ‘‘September 30, 1997’’
and inserting ‘‘September 30, 2007’’.
(b) TICKET TAXES.—
(1) PERSONS.—Clause (ii) of section 4261(g)(1)(A) is amend-
ed by striking ‘‘September 30, 1997’’ and inserting ‘‘September
30, 2007’’.
(2) PROPERTY.—Clause (ii) of section 4271(d)(1)(A) is
amended by striking ‘‘September 30, 1997’’ and inserting
‘‘September 30, 2007’’.
(c) MODIFICATIONS TO TAX ON TRANSPORTATION OF PERSONS
BY AIR.—
(1) IN GENERAL.—Section 4261 (relating to imposition of
tax) is amended by striking subsections (a), (b), and (c) and
inserting the following new subsections:
‘‘(a) IN GENERAL.—There is hereby imposed on the amount
paid for taxable transportation of any person a tax equal to 7.5
percent of the amount so paid.
‘‘(b) DOMESTIC SEGMENTS OF TAXABLE TRANSPORTATION.—
‘‘(1) IN GENERAL.—There is hereby imposed on the amount
paid for each domestic segment of taxable transportation by
air a tax in the amount determined in accordance with the
following table for the period in which the segment begins:
In the case of segments
beginning:
The tax is:
After September 30, 1997, and before October 1, 1998 .................
$1.00
After September 30, 1998, and before October 1, 1999 .................
$2.00
After September 30, 1999, and before January 1, 2000 ................
$2.25
During 2000 ......................................................................................
$2.50
During 2001 ......................................................................................
$2.75
During 2002 or thereafter ................................................................
$3.00.
‘‘(2) DOMESTIC SEGMENT.—For purposes of this section, the
term ‘domestic segment’ means any segment consisting of 1
takeoff and 1 landing and which is taxable transportation
described in section 4262(a)(1).
‘‘(3) CHANGES IN SEGMENTS BY REASON OF REROUTING.—
If—
‘‘(A) transportation is purchased between 2 locations
on specified flights, and
‘‘(B) there is a change in the route taken between
such 2 locations which changes the number of domestic
segments, but there is no change in the amount charged
for such transportation,
H. R. 2014—143
the tax imposed by paragraph (1) shall be determined without
regard to such change in route.
‘‘(c) USE OF INTERNATIONAL TRAVEL FACILITIES.—
‘‘(1) IN GENERAL.—There is hereby imposed a tax of $12.00
on any amount paid (whether within or without the United
States) for any transportation of any person by air, if such
transportation begins or ends in the United States.
‘‘(2) EXCEPTION
FOR
TRANSPORTATION
ENTIRELY
TAXABLE
UNDER SUBSECTION (a).—This subsection shall not apply to any
transportation all of which is taxable under subsection (a)
(determined without regard to sections 4281 and 4282).
‘‘(3) SPECIAL RULE FOR ALASKA AND HAWAII.—In any case
in which the tax imposed by paragraph (1) applies to a domestic
segment beginning or ending in Alaska or Hawaii, such tax
shall apply only to departures and shall be at the rate of
$6.’’.
(2) 
SPECIAL
RULES.—Section 
4261 
is 
amended 
by
redesignating subsections (e), (f), and (g) as subsections (f),
(g), and (h), respectively, and by inserting after subsection
(d) the following new subsection:
‘‘(e) SPECIAL RULES.—
‘‘(1) SEGMENTS TO AND FROM RURAL AIRPORTS.—
‘‘(A) EXCEPTION FROM SEGMENT TAX.—The tax imposed
by subsection (b)(1) shall not apply to any domestic segment
beginning or ending at an airport which is a rural airport
for the calendar year in which such segment begins or
ends (as the case may be).
‘‘(B) RURAL AIRPORT.—For purposes of this paragraph,
the term ‘rural airport’ means, with respect to any calendar
year, any airport if—
‘‘(i) there were fewer than 100,000 commercial pas-
sengers departing by air during the second preceding
calendar year from such airport, and
‘‘(ii) such airport—
‘‘(I) is not located within 75 miles of another
airport which is not described in clause (i), or
‘‘(II) is receiving essential air service subsidies
as of the date of the enactment of this paragraph.
‘‘(C) NO PHASEIN OF REDUCED TICKET TAX.—In the case
of transportation beginning before October 1, 1999—
‘‘(i) IN GENERAL.—Paragraph (5) shall not apply
to any domestic segment beginning or ending at an
airport which is a rural airport for the calendar year
in which such segment begins or ends (as the case
may be).
‘‘(ii) TRANSPORTATION
INVOLVING
MULTIPLE
SEG-
MENTS.—In the case of transportation involving more
than 1 domestic segment at least 1 of which does
not begin or end at a rural airport, the 7.5 percent
rate applicable by reason of clause (i) shall be applied
by taking into account only an amount which bears
the same ratio to the amount paid for such transpor-
tation as the number of specified miles in domestic
segments which begin or end at a rural airport bears
to the total number of specified miles in such transpor-
tation.
H. R. 2014—144
‘‘(2) AMOUNTS PAID OUTSIDE THE UNITED STATES.—In the
case of amounts paid outside the United States for taxable
transportation, the taxes imposed by subsections (a) and (b)
shall apply only if such transportation begins and ends in
the United States.
‘‘(3) AMOUNTS PAID FOR RIGHT TO AWARD FREE OR REDUCED
RATE AIR TRANSPORTATION.—
‘‘(A) IN GENERAL.—Any amount paid (and the value
of any other benefit provided) to an air carrier (or any
related person) for the right to provide mileage awards
for (or other reductions in the cost of) any transportation
of persons by air shall be treated for purposes of subsection
(a) as an amount paid for taxable transportation, and such
amount shall be taxable under subsection (a) without
regard to any other provision of this subchapter.
‘‘(B) CONTROLLED GROUP.—For purposes of subpara-
graph (A), a corporation and all wholly owned subsidiaries
of such corporation shall be treated as 1 corporation.
‘‘(C) REGULATIONS.—The Secretary shall prescribe
rules which reallocate items of income, deduction, credit,
exclusion, or other allowance to the extent necessary to
prevent the avoidance of tax imposed by reason of this
paragraph. The Secretary may prescribe rules which
exclude from the tax imposed by subsection (a) amounts
attributable to mileage awards which are used other than
for transportation of persons by air.
‘‘(4) INFLATION ADJUSTMENT OF DOLLAR RATES OF TAX.—
‘‘(A) IN GENERAL.—In the case of taxable events in
a calendar year after the last nonindexed year, the $3.00
amount contained in subsection (b) and each dollar amount
contained in subsection (c) shall be increased by an amount
equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by
substituting the year before the last nonindexed year
for ‘calendar year 1992’ in subparagraph (B) thereof.
If any increase determined under the preceding sentence
is not a multiple of 10 cents, such increase shall be rounded
to the nearest multiple of 10 cents.
‘‘(B) 
LAST
NONINDEXED
YEAR.—For 
purposes 
of
subparagraph (A), the last nonindexed year is—
‘‘(i) 2002 in the case of the $3.00 amount contained
in subsection (b), and
‘‘(ii) 1998 in the case of the dollar amounts con-
tained in subsection (c).
‘‘(C) TAXABLE EVENT.—For purposes of subparagraph
(A), in the case of the tax imposed subsection (b), the
beginning of the domestic segment shall be treated as
the taxable event.
‘‘(5) RATES OF TICKET TAX FOR TRANSPORTATION BEGINNING
BEFORE OCTOBER 1, 1999.—Subsection (a) shall be applied by
substituting for ‘7.5 percent’—
‘‘(A) ‘9 percent’ in the case of transportation beginning
after September 30, 1997, and before October 1, 1998,
and
H. R. 2014—145
‘‘(B) ‘8 percent’ in the case of transportation beginning
after September 30, 1998, and before October 1, 1999.’’.
(3) SECONDARY LIABILITY OF CARRIER FOR UNPAID TAX.—
Subsection (c) of section 4263 is amended by striking ‘‘sub-
chapter—’’ and all that follows and inserting ‘‘subchapter, such
tax shall be paid by the carrier providing the initial segment
of such transportation which begins or ends in the United
States.’’.
(d) INCREASED AIRPORT AND AIRWAY TRUST FUND DEPOSITS.—
(1) Paragraph (1) of section 9502(b) is amended—
(A) by striking ‘‘(to the extent that the rate of the
tax on such gasoline exceeds 4.3 cents per gallon)’’ in
subparagraph (C),
(B) by striking ‘‘to the extent attributable to the Airport
and Airway Trust Fund financing rate’’ in subparagraph
(D), and
(C) by adding at the end the following flush sentence:
‘‘There shall not be taken into account under paragraph (1) so
much of the taxes imposed by sections 4081 and 4091 as are
determined at the rates specified in section 4081(a)(2)(B) or
4091(b)(2).’’.
(2) Section 9502 is amended by striking subsection (f).
(e) EFFECTIVE DATES.—
(1) FUEL
TAXES.—The amendments made by subsection
(a) shall apply take effect on October 1, 1997.
(2) TICKET TAXES.—
(A) IN GENERAL.—Except as otherwise provided in this
paragraph, the amendments made by subsections (b) and
(c) shall apply to transportation beginning on or after Octo-
ber 1, 1997.
(B) TREATMENT OF AMOUNTS PAID FOR TICKETS PUR-
CHASED BEFORE OCTOBER 1, 1997.—The amendments made
by subsection (c) shall not apply to amounts paid before
October 1, 1997; except that—
(i) the amendment made to section 4261(c) of the
Internal Revenue Code of 1986 shall apply to amounts
paid more than 7 days after the date of the enactment
of this Act for transportation beginning on or after
October 1, 1997, and
(ii) the amendment made to section 4263(c) of such
Code shall apply to the extent related to taxes imposed
under the amendment made to such section 4261(c)
on the amounts described in clause (i).
(C) AMOUNTS
PAID
FOR
RIGHT
TO
AWARD
MILEAGE
AWARDS.—
(i) IN GENERAL.—Paragraph (3) of section 4261(e)
of the Internal Revenue Code of 1986 (as added by
the amendment made by subsection (c)) shall apply
to amounts paid (and other benefits provided) after
September 30, 1997.
(ii) PAYMENTS
WITHIN
CONTROLLED
GROUP.—For
purposes of clause (i), any amount paid after June
11, 1997, and before October 1, 1997, by 1 member
of a controlled group for a right which is described
in such section 4261(e)(3) and is furnished by another
member of such group after September 30, 1997, shall
H. R. 2014—146
be treated as paid after September 30, 1997. For pur-
poses of the preceding sentence, all persons treated
as a single employer under subsection (a) or (b) of
section 52 of such Code shall be treated as members
of a controlled group.
(3) INCREASED DEPOSITS INTO AIRPORT AND AIRWAY TRUST
FUND.—The amendments made by subsection (d) shall apply
with respect to taxes received in the Treasury on and after
October 1, 1997.
(g) DELAYED DEPOSITS OF AIRPORT TRUST FUND TAX REVE-
NUES.—Notwithstanding section 6302 of the Internal Revenue Code
of 1986—
(1) in the case of deposits of taxes imposed by section
4261 of such Code, the due date for any such deposit which
would (but for this subsection) be required to be made after
August 14, 1997, and before October 1, 1997, shall be October
10, 1997,
(2) in the case of deposits of taxes imposed by section
4261 of such Code, the due date for any such deposit which
would (but for this subsection) be required to be made after
August 14, 1998, and before October 1, 1998, shall be October
5, 1998, and
(3) in the case of deposits of taxes imposed by sections
4081(a)(2)(A)(ii), 4091, and 4271 of such Code, the due date
for any such deposit which would (but for this subsection)
be required to be made after July 31, 1998, and before October
1, 1998, shall be October 5, 1998.
SEC. 1032. KEROSENE TAXED AS DIESEL FUEL.
(a) IN GENERAL.—Subsection (a) of section 4083 (defining tax-
able fuel) is amended by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subparagraph (B) and
inserting ‘‘, and’’, and by adding at the end the following new
subparagraph:
‘‘(C) kerosene.’’.
(b) RATE OF TAX.—Clause (iii) of section 4081(a)(2)(A) is amend-
ed by inserting ‘‘or kerosene’’ after ‘‘diesel fuel’’.
(c) EXEMPTIONS FROM TAX; REFUNDS TO VENDORS.—
(1) IN GENERAL.—Section 4082 (relating to exemptions for
diesel fuel) is amended by striking ‘‘diesel fuel’’ each place
it appears in subsections (a), (c), and (d) and inserting ‘‘diesel
fuel and kerosene’’.
(2) CERTAIN
KEROSENE
EXEMPT
FROM
DYEING
REQUIRE-
MENT.—Section 4082 is amended by redesignating subsections
(d) and (e) as subsections (e) and (f), respectively, and by
inserting after subsection (c) the following new subsection:
‘‘(d) ADDITIONAL EXCEPTIONS TO DYEING REQUIREMENTS FOR
KEROSENE.—
‘‘(1) AVIATION-GRADE
KEROSENE.—Subsection (a)(2) shall
not apply to a removal, entry, or sale of aviation-grade kerosene
(as determined under regulations prescribed by the Secretary)
if the person receiving the kerosene is registered under section
4101 with respect to the tax imposed by section 4091.
‘‘(2) USE FOR NON-FUEL FEEDSTOCK PURPOSES.—Subsection
(a)(2) shall not apply to kerosene—
‘‘(A) received by pipeline or vessel for use by the person
receiving the kerosene in the manufacture or production
H. R. 2014—147
of any substance (other than gasoline, diesel fuel, or special
fuels referred to in section 4041), or
‘‘(B) to the extent provided in regulations, removed
or entered—
‘‘(i) for such a use by the person removing or
entering the kerosene, or
‘‘(ii) for resale by such person for such a use by
the purchaser,
but only if the person receiving, removing, or entering the
kerosene and such purchaser (if any) are registered under
section 4101 with respect to the tax imposed by section 4081.
‘‘(3) WHOLESALE DISTRIBUTORS.—To the extent provided in
regulations, subsection (a)(2) shall not apply to a removal,
entry, or sale of kerosene to a wholesale distributor of kerosene
if such distributor—
‘‘(A) is registered under section 4101 with respect to
the tax imposed by section 4081 on kerosene, and
‘‘(B) sells kerosene exclusively to ultimate vendors
described in section 6427(l)(5)(B) with respect to kerosene.’’.
(3) REFUNDS.—
(A) Subsection (l) of section 6427 is amended by insert-
ing ‘‘or kerosene’’ after ‘‘diesel fuel’’ each place it appears
in paragraphs (1), (2), and (5) (including the heading for
paragraph (5)).
(B) Paragraph (5) of section 6427(l) is amended by
redesignating subparagraph (B) as subparagraph (C) and
by inserting after subparagraph (A) the following new
subparagraph:
‘‘(B) SALES
OF
KEROSENE
NOT
FOR
USE
IN
MOTOR
FUEL.—Paragraph (1)(A) shall not apply to kerosene sold
by a vendor—
‘‘(i) for any use if such sale is from a pump which
(as determined under regulations prescribed by the
Secretary) is not suitable for use in fueling any diesel-
powered highway vehicle or train, or
‘‘(ii) to the extent provided by the Secretary, for
blending with heating oil to be used during periods
of extreme or unseasonable cold.’’.
(C) Subparagraph (C) of section 6427(l)(5), as redesig-
nated by subparagraph (B) of this paragraph, is amended
by striking ‘‘subparagraph (A)’’ and inserting ‘‘subpara-
graph (A) or (B)’’.
(D) The heading for subsection (l) of section 6427 is
amended by inserting ‘‘, KEROSENE,’’ after ‘‘DIESEL FUEL’’.
(E) Clause (i) of section 6427(i)(5)(A) is amended by
inserting ‘‘($100 or more in the case of kerosene)’’ after
‘‘$200 or more’’.
(d) CERTAIN APPROVED TERMINALS
OF REGISTERED PERSONS
REQUIRED TO OFFER DYED DIESEL FUEL AND KEROSENE FOR NON-
TAXABLE PURPOSES.—Section 4101 is amended by adding at the
end the following new subsection:
‘‘(e) CERTAIN APPROVED TERMINALS OF REGISTERED PERSONS
REQUIRED TO OFFER DYED DIESEL FUEL AND KEROSENE FOR NON-
TAXABLE PURPOSES.—
‘‘(1) IN GENERAL.—A terminal for kerosene or diesel fuel
may not be an approved facility for storage of non-tax-paid
diesel fuel or kerosene under this section unless the operator