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‘‘(i) with respect to which the preced-
ing taxable year was not an applicable elec-
tion year, or
‘‘(ii) which covers a different period
than the preceding taxable year by reason
of 
a 
change 
described 
in 
section
444(d)(2)(B).
If any year described in the preceding sentence
is a short taxable year which does not include
the last day of the required taxable year, the
new applicable election year shall be the taxable
year following the short taxable year.
‘‘(C) ADDITIONAL AMOUNT.—For purposes
of subparagraph (A), the amount determined
under this subparagraph shall be—
‘‘(i) in the case of a year described in
subparagraph (B)(i), 75 percent of the re-
quired payment for the year, and
‘‘(ii) in the case of a year described in
subparagraph (B)(ii), 75 percent of the ex-
cess (if any) of—
‘‘(I) the required payment for the
year, over
‘‘(II) the required payment for
the year which would have been com-
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puted if the change described in sub-
paragraph (B)(ii) had not occurred.
‘‘(D) REQUIRED PAYMENT.—For purposes
of this paragraph, the term ‘required payment’
means the payment required by this section (de-
termined without regard to this paragraph).’’
(2) DUE
DATE.—Paragraph (2) of section
7519(f) (defining due date) is amended to read as
follows:
‘‘(2) DUE DATE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the amount of any required
payment for any applicable election year shall
be paid on or before May 15 of the calendar
year following the calendar year in which the
applicable election year begins.
‘‘(B) SPECIAL RULE WHERE NEW APPLICA-
BLE ELECTION YEAR ADOPTED.—In the case of
a new applicable election year, the portion of
any required payment determined under sub-
section (b)(2) shall be paid on or before Sep-
tember 15 of the calendar year in which the
applicable election year begins.’’
(3) PENALTIES.—
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(A) IN GENERAL.—Section 7519(f)(4) (re-
lating to penalties) is amended by adding at the
end thereof the following new subparagraph:
‘‘(D) 
FAILURE
TO
PAY
ADDITIONAL
AMOUNT.—In the case of any failure by any en-
tity to pay on the date prescribed therefore the
portion of any required payment described in
subsection (b)(2) for any applicable election
year—
‘‘(i) subparagraph (A) shall not apply,
but
‘‘(ii) the entity shall, for purposes of
this title, be treated as having terminated
the election under section 444 for such
year and changed to the required taxable
year.’’
(B) CONFORMING
AMENDMENT.—Section
7519(f)(4)(A) is amended by striking ‘‘In’’ and
inserting ‘‘Except as provided in subparagraph
(D), in’’.
(4) REFUNDS.—Section 7519(c)(2)(A) (relating
to refund of payments) is amended to read as
follows:
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‘‘(A) an election under section 444 is not
in effect for any year but was in effect for the
preceding year, or’’.
(5) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 7519(c) is
amended—
(i) by striking ‘‘subsection (b)(2)’’ and
inserting ‘‘subsection (b)(1)(B)’’, and
(ii) by striking ‘‘subsection (b)(1)’’
and inserting ‘‘subsection (b)(1)(A)’’.
(B) Subsection (d) of section 7519 is
amended by striking paragraph (4) and redesig-
nating paragraph (5) as paragraph (4).
(b) OTHER DEFINITIONS AND SPECIAL RULES.—
(1) 
REFUND.—Paragraph 
(3) 
of 
section
7519(c) (relating to date on which refund is pay-
able) is amended in the matter preceding subpara-
graph (A) by striking ‘‘on the later of’’ and inserting
‘‘by the later of’’.
(2) DEFERRAL
RATIO.—The last sentence of
paragraph (1) of section 7519(d) is amended to read
as follows: ‘‘Except as provided in regulations, the
term ‘deferral ratio’ means the ratio which the num-
ber of months in the deferral period of the applicable
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election year bears to the number of months in the
applicable election year.’’
(3) NET
INCOME.—Paragraph (2) of section
7519(d) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(D) EXCESS APPLICABLE PAYMENTS FOR
BASE YEAR.—In the case of any new applicable
election year, the net income for the base year
shall be increased by the excess (if any) of—
‘‘(i) the applicable payments taken
into account in determining net income for
the base year, over
‘‘(ii) 120 percent of the average
amount of applicable payments made dur-
ing the first 3 taxable years preceding the
base year.’’
(4) DEFERRAL PERIOD.—Paragraph (1) of sec-
tion 7519(e) (defining deferral period) is amended to
read as follows:
‘‘(1) DEFERRAL PERIOD.—Except as provided
in regulations, the term ‘deferral period’ means, with
respect to any taxable year of the entity, the months
between—
‘‘(A) the beginning of such year, and
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‘‘(B) the close of the first required taxable
year (as defined in section 444(e)) ending with-
in such year.’’
(5) BASE YEAR.—
(A) IN
GENERAL.—Paragraph (2)(A) of
section 7519(e) (defining base year) is amended
to read as follows:
‘‘(A) BASE YEAR.—The term ‘base year’
means, with respect to any applicable election
year, the first taxable year of 12 months (or
52–53 weeks) of the partnership or S corpora-
tion preceding such applicable election year.’’
(B) 
CONFORMING
AMENDMENT.—Para-
graph (2) of subsection (g) of section 7519 is
amended to read as follows:
‘‘(2) there is no base year described in sub-
section (e)(2)(A) or no preceding taxable year de-
scribed in section 280H(c)(1)(A)(i).’’
(c) INTEREST.—Section 7519(f)(3) (relating to in-
terest) is amended to read as follows:
‘‘(3) INTEREST.—For purposes of determining
interest, any payment required by this section shall
be treated as a tax, except that interest shall be al-
lowed with respect to any refund of a payment under
this section only for the period from the latest date
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specified in subsection (c)(3) for such refund to the
actual date of payment of such refund.’’
Subtitle H—Deduction for Chari-
table Contribution of Appre-
ciated Property Limited To Ad-
justed Basis
SEC. 871. DEDUCTION FOR CHARITABLE CONTRIBUTION OF
APPRECIATED PROPERTY LIMITED TO AD-
JUSTED BASIS.
(a) IN GENERAL.—The first sentence of section
170(e) (relating to contributions of ordinary income and
capital gain property) is amended to read as follows: ‘‘The
amount of any charitable contribution of property other-
wise taken into account under this section shall be reduced
by the amount which would have been gain had the prop-
erty been sold by the taxpayer at its fair market value
(determined at the time of such contribution).’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (e) of section 170 is amended by
striking paragraphs (3), (4), and (5).
(2) Subsection (a) of section 57 is amended by
striking paragraph (7).
(3) Subsection (c) of section 642 is amended by
adding at the end thereof the following new para-
graph:
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‘‘(7) LIMITATION
ON
DEDUCTION
FOR
CON-
TRIBUTION OF APPRECIATED PROPERTY.—
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions and gifts made
after December 31, 1994.
Subtitle 
I—Minimum 
Percent
Rate of Tax on Interest Paid To
Foreign Persons
SEC. 881. MINIMUM 5 PERCENT RATE OF TAX ON INTEREST
PAID TO FOREIGN PERSONS.
(a) INDIVIDUALS.—
(1) Paragraph (1) of section 871(a) is amended
by adding at the end thereof the following new sen-
tence: ‘‘Notwithstanding any treaty obligation of the
United States, the rate of tax imposed under para-
graph (1)(A) or (1)(C) shall not be less than 5
percent.’’
(2)(A) Paragraph (1) of section 871(h) (relat-
ing to repeal of tax on interest of nonresident alien
individuals received from certain portfolio debt in-
vestments) is amended by striking ‘‘no tax shall be
imposed under paragraph (1)(A) or (1)(C) of sub-
section (a).’’ and inserting ‘‘the rate of tax imposed
under paragraph (1)(A) or (1)(C) of subsection (a)
shall be 5 percent. The preceding sentence shall
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apply notwithstanding any treaty obligation of the
United States.’’
(B) Paragraph (2) of section 861(h) is amend-
ed by striking ‘‘which would be subject to tax under
subsection (a) but for this subsection and’’ and in-
serting ‘‘subject to tax under subsection (a)’’.
(C) The heading of section 871(h) is amended
by striking ‘‘REPEAL
OF TAX’’ and inserting ‘‘5
PERCENT RATE OF TAX’’.
(b) CORPORATIONS.—
(1) Subsection (a) of section 881 is amended by
adding at the end thereof the following new sen-
tence: ‘‘Notwithstanding any treaty obligation of the
United States, the rate of tax imposed under para-
graph (1) or (2) shall not be less than 5 percent.’’
(2)(A) Paragraph (1) of section 881(c) (relating
to repeal of tax on interest of foreign corporations
received from certain portfolio debt investments) is
amended by striking ‘‘no tax shall be imposed under
paragraph (1) or (3) of subsection (a).’’ and insert-
ing ‘‘the rate of tax imposed under paragraph (1) or
(3) of subsection (a) shall be 5 percent. The preced-
ing sentence shall apply notwithstanding any treaty
obligation of the United States.’’
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(B) Paragraph (2) of section 881(c) is amended
by striking ‘‘which would be subject to tax under
subsection (a) but for this subsection and’’ and in-
serting ‘‘subject to tax under subsection (a)’’.
(C) The heading of section 881(c) is amended
by striking ‘‘REPEAL
OF TAX’’ and inserting ‘‘5
PERCENT RATE OF TAX’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to interest received after Decem-
ber 31, 1994, in taxable years ending after such date.
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