159
‘‘(c) LIMITATION.—The credit allowable under sub-
section (a) for any taxable year shall not exceed the lesser
of—
‘‘(1) the excess (if any) of—
‘‘(A) the regular tax liability of the tax-
payer for such taxable year reduced by the sum
of the credits allowable under subparts A, B, D,
E, and F of this part, over
‘‘(B) the tentative minimum tax for the
taxable year, or
‘‘(2) 90 percent of the amount determined
under paragraph (1)(A).’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1995.
PART IV—TAXPAYER DEBT BUY-DOWN
SEC. 6341. DESIGNATION OF AMOUNTS FOR REDUCTION OF
PUBLIC DEBT.
(a) IN GENERAL.—Subchapter A of chapter 61 of the
Internal Revenue Code of 1986 (relating to returns and
records) is amended by adding at the end the following
new part:
‘‘PART IX—DESIGNATION FOR REDUCTION OF
PUBLIC DEBT
‘‘Sec. 6097. Designation.
160
‘‘SEC. 6097. DESIGNATION.
‘‘(a) IN GENERAL.—Every individual with adjusted
income tax liability for any taxable year may designate
that a portion of such liability (not to exceed 10 percent
thereof) shall be used to reduce the public debt.
‘‘(b) MANNER AND TIME OF DESIGNATION.—A des-
ignation under subsection (a) may be made with respect
to any taxable year only at the time of filing the return
of tax imposed by chapter 1 for the taxable year. The des-
ignation shall be made on the first page of the return or
on the page bearing the taxpayer’s signature.
‘‘(c) ADJUSTED INCOME TAX LIABILITY.—For pur-
poses of this section, the term ‘adjusted income tax liabil-
ity’ means income tax liability (as defined in section
6096(b)) reduced by any amount designated under section
6096 (relating to designation of income tax payments to
Presidential Election Campaign Fund).’’
(b) CLERICAL AMENDMENT.—The table of parts for
such subchapter A is amended by adding at the end the
following new item:
‘‘Part IX. Designation for reduction of public debt.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
161
SEC. 6342. PUBLIC DEBT REDUCTION TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 of the
Internal Revenue Code of 1986 (relating to trust fund
code) is amended by adding at the end the following new
section:
‘‘SEC. 9512. PUBLIC DEBT REDUCTION TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘Public Debt Reduction Trust Fund’,
consisting of any amount appropriated or credited to the
Trust Fund as provided in this section or section 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—There are here-
by appropriated to the Public Debt Reduction Trust Fund
amounts equivalent to the amounts designated under sec-
tion 6097 (relating to designation for public debt reduc-
tion).
‘‘(c) EXPENDITURES.—Amounts in the Public Debt
Reduction Trust Fund shall be used by the Secretary of
the Treasury for purposes of paying at maturity, or to
redeem or buy before maturity, any obligation of the Fed-
eral Government included in the public debt (other than
an obligation held by the Federal Old-Age and Survivors
Insurance Trust Fund, the Civil Service Retirement and
Disability Fund, or the Department of Defense Military
Retirement Fund). Any obligation which is paid, re-
deemed, or bought with amounts from the Public Debt Re-
162
duction Trust Fund shall be canceled and retired and may
not be reissued.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter is amended by adding at the end the
following new item:
‘‘Sec. 9512. Public Debt Reduction Trust Fund.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after the date
of the enactment of this Act.
SEC. 6343. TAXPAYER-GENERATED SEQUESTRATION OF
FEDERAL SPENDING TO REDUCE THE PUBLIC
DEBT.
(a) SEQUESTRATION
TO
REDUCE
THE
PUBLIC
DEBT.—Part C of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended by adding after
section 253 the following new section:
‘‘SEC. 253A. SEQUESTRATION TO REDUCE THE PUBLIC
DEBT.
‘‘(a) SEQUESTRATION.—Notwithstanding sections
255 and 256, within 15 days after Congress adjourns to
end a session, and on the same day as a sequestration
(if any) under sections 251, 252, and 253, but after any
sequestration of budget-year budgetary resources required
by those sections, there shall be a sequestration equivalent
to the estimated aggregate amount designated under sec-
tion 6097 of the Internal Revenue Code of 1986 for the
163
calendar year two years before the year in which that ses-
sion of Congress started, as estimated by the Department
of the Treasury on October 1 in the year after the applica-
ble tax year and as modified by the total of (1) any
amounts by which net discretionary spending is reduced
by legislation below the discretionary spending limits en-
acted after the enactment of this section related to the
fiscal year subject to the sequestration or, in the absence
of such limits, any net reduction below discretionary out-
lays for fiscal year 1995 and (2) the net deficit change
that has resulted from all direct spending legislation en-
acted after the enactment of this section related to the
fiscal year subject to the sequestration, as estimated by
OMB. Within 5 days after the enactment of any such di-
rect spending legislation, OMB shall estimate the change
in spending resulting from that legislation for the 5-fiscal-
year period beginning with the first fiscal year for which
that legislation becomes effective and transmit a report
to the House of Representatives and the Senate containing
that estimate. Only the estimated deficit reduction in-
cluded in the 5-year estimate made at the time the legisla-
tion is enacted shall be used for purposes of determining
whether there shall be a sequestration under this sub-
section. Notwithstanding the preceding two sentences, any
estimates of direct spending made by OMB under this
164
subsection for any legislation that first takes effect in fis-
cal year 1995, 1996, or 1997 shall include estimates of
the direct spending effects through fiscal year 2002 and
those estimates shall be used for purposes of determining
whether there shall be a sequestration under this sub-
section. If the reduction in spending under paragraphs (1)
and (2) for a fiscal year is greater than the estimated ag-
gregate amount designated under section 6097 of the In-
ternal Revenue Code of 1986 respecting that fiscal year,
then there shall be no sequestration under this section.
‘‘(b) APPLICABILITY.—
‘‘(1) IN
GENERAL.—Except as provided by
paragraph (2), each account of the United States
shall be reduced by a dollar amount calculated by
multiplying the level of budgetary resources in that
account at that time by the uniform percentage nec-
essary to carry out subsection (a). All obligational
authority reduced under this section shall be done in
a manner that makes such reductions permanent.
‘‘(2) EXEMPT ACCOUNTS.—(A) No order issued
under this part may—
‘‘(i) reduce benefits payable to the old-age
and survivors insurance program established
under title II of the Social Security Act;
165
‘‘(ii) reduce payments for net interest (all
of major functional category 900); or
‘‘(iii) make any reduction in the following
accounts:
‘‘Federal Deposit Insurance Corpora-
tion, Bank Insurance Fund;
‘‘Federal Deposit Insurance Corpora-
tion, FSLIC Resolution Fund;
‘‘Federal Deposit Insurance Corpora-
tion, Savings Association Insurance Fund;
‘‘National Credit Union Administra-
tion, credit union share insurance fund; or
‘‘Resolution Trust Corporation.
‘‘(B) The following budget accounts, activities
within accounts, or income shall be exempt from se-
questration—
‘‘(i) all payments to trust funds from ex-
cise taxes or other receipts or collections prop-
erly creditable to those trust funds;
‘‘(ii) offsetting receipts and collections;
‘‘(iii) all payments from one Federal direct
spending budget account to another Federal
budget account; all intragovernmental funds in-
cluding those from which funding is derived pri-
marily from other Government accounts, except
166
to the extent that such funds are augmented
by direct appropriations for the fiscal year for
which the order is in effect; and those obliga-
tions of discretionary accounts or activities that
are financed by intragovernmental payments
from another discretionary account or activity;
‘‘(iv) expenses to the extent they result
from private donations, bequests, or voluntary
contributions to the Government;
‘‘(v) nonbudgetary activities, including but
not limited to—
‘‘(I) credit liquidating and financing
accounts;
‘‘(II) the Pension Benefit Guarantee
Corporation Trust Funds;
‘‘(III) the Thrift Savings Fund;
‘‘(IV) the Federal Reserve System;
and
‘‘(V) appropriations for the District of
Columbia to the extent they are appropria-
tions of locally raised funds;
‘‘(vi) payments resulting from Government
insurance, Government guarantees, or any other
form of contingent liability, to the extent those
payments result from contractual or other le-
167
gally binding commitments of the Government
at the time of any sequestration;
‘‘(vii) the following accounts, which largely
fulfill requirements of the Constitution or other-
wise make payments to which the Government
is committed—
‘‘Administration of Territories, North-
ern Mariana Islands Covenant grants (14–
0412–0–1–806);
‘‘Bureau of Indian Affairs, miscellane-
ous payments to Indians (14–2303–0–1–
452);
‘‘Bureau of Indian Affairs, miscellane-
ous trust funds, tribal trust funds (14–
9973–0–7–999);
‘‘Claims, defense;
‘‘Claims, judgments, and relief act
(20–1895–0–1–806);
‘‘Compact of Free Association, eco-
nomic assistance pursuant to Public Law
99–658 (14–0415–0–1–806);
‘‘Compensation of the President (11–
0001–0–1–802);
168
‘‘Customs Service, miscellaneous per-
manent 
appropriations 
(20–9992–0–2–
852);
‘‘Eastern Indian land claims settle-
ment fund (14–2202–0–1–806);
‘‘Farm Credit System Financial As-
sistance Corporation, interest payments
(20–1850–0–1–351);
‘‘Internal Revenue collections of Puer-
to Rico (20–5737–0–2–852);
‘‘Panama Canal Commission, operat-
ing expenses and capital outlay (95–5190–
0–2–403);
‘‘Payments of Vietnam and USS
Pueblo prisoner-of-war claims (15–0104–
0–1–153);
‘‘Payments to copyright owners (03–
5175–0–2–376);
‘‘Payments to the United States terri-
tories, fiscal assistance (14–0418–0–1–
801);
‘‘Salaries of Article III judges;
‘‘Soldier’s and Airmen’s Home, pay-
ment of claims (84–8930–0–7–705);
169
‘‘Washington Metropolitan Area Tran-
sit Authority, interest payments (46–
0300–0–1–401).
‘‘(viii) the following noncredit special, re-
volving, or trust-revolving funds—
‘‘Coinage profit fund (20–5811–0–2–
803);
‘‘Exchange Stabilization Fund (20–
4444–0–3–155);
‘‘Foreign Military Sales trust fund
(11–82232–0–7–155); and
‘‘(ix)(I) any amount paid as regular
unemployment compensation by a State
from its account in the Unemployment
Trust Fund (established by section 904(a)
of the Social Security Act);
‘‘(II) any advance made to a State
from the Federal unemployment account
(established by section 904(g) of such Act)
under title XII of such Act and any ad-
vance appropriated to the Federal unem-
ployment account pursuant to section 1203
of such Act; and
‘‘(III) any payment made from the
Federal Employees Compensation Account
170
(as established under section 909 of such
Act) for the purpose of carrying out chap-
ter 85 of title 5, United States Code, and
funds appropriated or transferred to or
otherwise deposited in such Account.
‘‘(3) FEDERAL ADMINISTRATIVE EXPENSES.—
‘‘(A) Administrative expenses incurred by
the departments and agencies, including inde-
pendent agencies, of the Federal Government in
connection with any program, project, activity,
or account shall be subject to reduction pursu-
ant to any sequestration order, without regard
to the exemptions under paragraph (2) and re-
gardless of whether the program, project, activ-
ity, or account is self-supporting and does not
receive appropriations.
‘‘(B) Payments made by the Federal Gov-
ernment to reimburse or match administrative
costs incurred by a State or political subdivision
under or in connection with any program,
project, activity, or account shall not be consid-
ered administrative expenses of the Federal
Government for purposes of this section, and
shall be subject to sequestration to the extent
(and only to the extent) that other payments
171
made by the Federal Government under or in
connection with that program, project, activity,
or account are subject to that reduction or se-
questration; except that Federal payments
made to a State as reimbursement of adminis-
trative costs incurred by that State under or in
connection with the unemployment compensa-
tion programs specified in paragraph (2)(ix)
shall be subject to reduction or sequestration
under this part notwithstanding the exemption
otherwise granted to such programs under that
paragraph.’’.
(b) REPORTS.—Section 254 of the Balanced Budget
and Emergency Deficit Control Act of 1985 is amended—
(1) in subsection (a), by inserting after the item
relating to the GAO compliance report the following:
‘‘October 1 . . . Department of Treasury report to
Congress estimating amount of income tax designated
pursuant to section 6097 of the Internal Revenue Code
of 1986.’’;
(2) in subsection (d)(1), by inserting ‘‘, and se-
questration to reduce the public debt,’’;
(3) in subsection (d), by redesignating para-
graph (5) as paragraph (6) and by inserting after
paragraph (4) the following new paragraph:
172
‘‘(5) SEQUESTRATION TO REDUCE THE PUBLIC
DEBT REPORTS.—The preview reports shall set forth
for the budget year estimates for each of the follow-
ing:
‘‘(A) The aggregate amount designated
under section 6097 of the Internal Revenue
Code of 1986 for the calendar year two years
before the year in which the budget year begins.
‘‘(B) The amount of reductions required
under section 253A and the deficit remaining
after those reductions have been made.
‘‘(C) The sequestration percentage nec-
essary to achieve the required reduction in ac-
counts under section 253A(b).’’; and
(4) in subsection (g), by redesignating para-
graphs (4) and (5) as paragraphs (5) and (6), re-
spectively, and by inserting after paragraph (3) the
following new paragraph:
‘‘(4) SEQUESTRATION TO REDUCE THE PUBLIC
DEBT REPORTS.—The final reports shall contain all
of the information contained in the public debt tax-
ation designation report required on October 1.’’.
(c) EFFECTIVE
DATE.—Notwithstanding section
275(b) of the Balanced Budget and Emergency Deficit
Control Act of 1985, the expiration date set forth in that
173
section shall not apply to the amendments made by this
section. The amendments made by this section shall cease
to have any effect after the first fiscal year during which
there is no public debt.
PART V—SMALL BUSINESS INCENTIVES
SEC. 6351. COST-OF-LIVING ADJUSTMENTS RELATING TO
ESTATE AND GIFT TAX PROVISIONS.
(a) INCREASE IN UNIFIED ESTATE AND GIFT TAX
CREDIT.—
(1) ESTATE TAX CREDIT.—
(A) Subsection (a) of section 2010 (relat-
ing to unified credit against estate tax) is
amended by striking ‘‘$192,800’’ and inserting
‘‘the applicable credit amount’’.
(B) Section 2010 is amended by redesig-
nating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new
subsection:
‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes
of this section—
‘‘(1) IN
GENERAL.—The applicable credit
amount is the amount of the tentative tax which
would be determined under the rate schedule set
forth in section 2001(c) if the amount with respect
to which such tentative tax is to be computed were
174
the applicable exclusion amount determined in ac-
cordance with the following table:
‘‘In the case of estates of decedents
The applicable
dying, and gifts made, during:
exclusion amount is:
1996 .......................................................................
$700,000
1997 .......................................................................
$725,000
1998 or thereafter .................................................
$750,000.
‘‘(2) COST-OF-LIVING
ADJUSTMENTS.—In the
case of any decedent dying, and gift made, in a cal-
endar year after 1998, the $750,000 amount set
forth in paragraph (1) shall be increased by an
amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(C) Paragraph (1) of section 6018(a) is
amended by striking ‘‘$600,000’’ and inserting
‘‘the applicable exclusion amount in effect
under section 2010(c) (as adjusted under para-
graph (2) thereof) for the calendar year which
includes the date of death’’.
175
(D) Paragraph (2) of section 2001(c) is
amended by striking ‘‘$21,040,000’’ and insert-
ing ‘‘the amount at which the average tax rate
under this section is 55 percent’’.
(E) 
Subparagraph 
(A) 
of 
section
2102(c)(3) is amended by striking ‘‘$192,800’’
and inserting ‘‘the applicable credit amount in
effect under section 2010(c) for the calendar
year which includes the date of death’’.
(2) UNIFIED
GIFT
TAX
CREDIT.—Paragraph
(1) of section 2505(a) is amended by striking
‘‘$192,800’’ and inserting ‘‘the applicable credit
amount in effect under section 2010(c) for such cal-
endar year’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to the estates of dece-
dents dying, and gifts made, after December 31,
1995.
(b) ALTERNATE VALUATION
OF CERTAIN FARM,
ETC., REAL PROPERTY.—Subsection (a) of section 2032A
is amended by adding at the end the following new para-
graph:
‘‘(3) INFLATION ADJUSTMENT.—In the case of
estates of decedents dying in a calendar year after
176
1998, the $750,000 amount contained in paragraph
(2) shall be increased by an amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b)
of section 2503 is amended—
(1) by striking the subsection heading and in-
serting the following:
‘‘(b) EXCLUSIONS FROM GIFTS.—
‘‘(1) IN GENERAL.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new
paragraph:
‘‘(2) INFLATION ADJUSTMENT.—In the case of
gifts made in a calendar year after 1998, the
$10,000 amount contained in paragraph (1) shall be
increased by an amount equal to—
177
‘‘(A) $10,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $1,000, such amount shall
be rounded to the nearest multiple of $1,000.’’
(d) 
EXEMPTION
FROM
GENERATION-SKIPPING
TAX.—Section 2631 (relating to GST exemption) is
amended by adding at the end the following new sub-
section:
‘‘(c) INFLATION ADJUSTMENT.—In the case of an in-
dividual who dies in any calendar year after 1998, the
$1,000,000 amount contained in subsection (a) shall be
increased by an amount equal to—
‘‘(1) $1,000,000, multiplied by
‘‘(2) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year
1992’ in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence
is not a multiple of $10,000, such amount shall be round-
ed to the nearest multiple of $10,000.’’