I
105TH CONGRESS
2D SESSION
H. R. 4542
To amend the Internal Revenue Code of 1986 to reduce the marriage penalty,
to encourage health coverage, to allow the nonrefundable personal credits
against the alternative minimum tax, and to extend permanently certain
expiring provisions, and to amend the Social Security Act to increase
the earnings limitation.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 10, 1998
Mrs. JOHNSON of Connecticut (for herself, Mr. SAM JOHNSON of Texas, Mrs.
CHENOWETH, Ms. GRANGER, Mr. HOSTETTLER, Mr. LEWIS of Kentucky,
Mr. GIBBONS, Mr. HALL of Texas, Mrs. KELLY, Mr. UPTON, Mr.
POMBO, Mr. KNOLLENBERG, Mr. COBLE, Mr. RIGGS, Mr. ENGLISH of
Pennsylvania, Mr. KINGSTON, Mr. SHAW, Mr. BASS, Mr. PETERSON of
Pennsylvania, Mr. PITTS, Mr. SKEEN, Mr. LEWIS of California, Mr.
MCKEON, Mr. SESSIONS, Mr. ROHRABACHER, Mr. PACKARD, Mrs. WIL-
SON, Mr. MANZULLO, Mr. REDMOND, Mr. STERNS, Mr. QUINN, Mr. GIL-
MAN, Mr. HORN, Mr. CASTLE, Mr. LEACH, Mr. CAMP, Mr. BOEHLERT,
Mr. LOBIONDO, Mr. SHAYS, Mr. KOLBE, Mr. FOSSELLA, and Mr.
FOLEY) introduced the following bill; which was referred to the Commit-
tee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to reduce
the marriage penalty, to encourage health coverage, to
allow the nonrefundable personal credits against the al-
ternative minimum tax, and to extend permanently cer-
tain expiring provisions, and to amend the Social Secu-
rity Act to increase the earnings limitation.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tax Relief for Working Americans Act of 1998’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title.
TITLE I—PROVISIONS PRIMARILY AFFECTING INDIVIDUALS
Sec. 101. Basic standard deduction for married individuals to be twice the de-
duction for unmarried individuals.
Sec. 102. Full deduction for health insurance costs of individuals not eligible
to participate in employer-subsidized health plans.
Sec. 103. Nonrefundable personal credits allowed against alternative minimum
tax.
Sec. 104. Adjustment in monthly exempt amount for purposes of the social se-
curity earnings test.
TITLE II—PROVISIONS PRIMARILY AFFECTING BUSINESSES
Subtitle A—Certain Expiring Provisions Modified and Made Permanent
Sec. 201. Research credit.
Sec. 202. Work opportunity credit.
Sec. 203. Contributions of stock to private foundations.
Sec. 204. Exemption for active financing income.
Subtitle B—Credit for Clinical Testing Research Expenses Attributable to
Certain Qualified Academic Institutions Including Teaching Hospitals
Sec. 211. Credit for clinical testing research expenses attributable to certain
qualified academic institutions including teaching hospitals.
TITLE 
I—PROVISIONS 
PRI-
MARILY AFFECTING INDIVID-
UALS
SEC. 101. BASIC STANDARD DEDUCTION FOR MARRIED IN-
DIVIDUALS TO BE TWICE THE DEDUCTION
FOR UNMARRIED INDIVIDUALS.
(a) IN GENERAL.—Paragraph (2) of section 63(c) of
the Internal Revenue Code of 1986 (relating to standard
deduction) is amended—
(1) by striking ‘‘$5,000’’ in subparagraph (A)
and inserting ‘‘twice the dollar amount in effect
under subparagraph (C) for the taxable year’’,
(2) by adding ‘‘or’’ at the end of subparagraph
(B),
(3) by striking ‘‘in the case of’’ and all that fol-
lows in subparagraph (C) and inserting ‘‘in any
other case.’’, and
(4) by striking subparagraph (D).
(b) TECHNICAL AMENDMENT.—Subparagraph (B) of
section 1(f)(6) of such Code is amended by striking
‘‘(other than with’’ and all that follows through ‘‘shall be
applied’’ and inserting ‘‘(other than sections 63(c)(4) and
151(d)(4)(A)) shall be applied’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 102. FULL DEDUCTION FOR HEALTH INSURANCE
COSTS OF INDIVIDUALS NOT ELIGIBLE TO
PARTICIPATE 
IN 
EMPLOYER-SUBSIDIZED
HEALTH PLANS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions) is amended by redesignat-
ing section 222 as section 223 and by inserting after sec-
tion 221 the following new section:
‘‘SEC. 222. HEALTH INSURANCE COSTS.
‘‘(a) IN GENERAL.—In the case of an individual,
there shall be allowed as a deduction an amount equal to
the amount paid during the taxable year for insurance
which constitutes medical care for the taxpayer, his
spouse, and dependents.
‘‘(b) LIMITATIONS.—
‘‘(1) OTHER COVERAGE.—Subsection (a) shall
not apply to any taxpayer for any calendar month
for which the taxpayer is eligible to participate in
any subsidized health plan maintained by any em-
ployer of the taxpayer or of the spouse of the tax-
payer. The preceding sentence shall be applied sepa-
rately with respect to—
‘‘(A) plans which include primarily cov-
erage for qualified long-term care services (as
defined in section 7702B(c)) or are qualified
long-term care insurance contracts (as defined
in section 7702B(b)), and
‘‘(B) plans which do not include such cov-
erage and are not such contracts.
‘‘(2) LONG-TERM
CARE
PREMIUMS.—In the
case of a qualified long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-
term 
care 
premiums 
(as 
defined 
in 
section
213(d)(10)) shall be taken into account under sub-
section (a).
‘‘(3) MEDICARE
PREMIUMS.—Subsection (a)
shall not apply to amounts paid as premiums under
part B of title XVIII of the Social Security Act.
‘‘(c) SPECIAL RULES.—
‘‘(1) COORDINATION
WITH
MEDICAL
DEDUC-
TION, ETC.—Any amount paid by a taxpayer for in-
surance to which subsection (a) applies shall not be
taken into account in computing the amount allow-
able to the taxpayer as a deduction under section
213(a).
‘‘(2) DEDUCTION NOT ALLOWED FOR SELF-EM-
PLOYMENT
TAX
PURPOSES.—The deduction allow-
able by reason of this section shall not be taken into
account in determining an individual’s net earnings
from self-employment (within the meaning of section
1402(a)) for purposes of chapter 2.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (l) of section 162 of such Code
is hereby repealed.
(2) Subsection (a) of section 62 of such Code
is amended by inserting after paragraph (17) the
following new paragraph:
‘‘(18) HEALTH INSURANCE COSTS OF CERTAIN
INDIVIDUALS.—The deduction allowed by section
222.’’
(3) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by
striking the last item and inserting the following
new items:
‘‘Sec. 222. Health insurance costs.
‘‘Sec. 223. Cross reference.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 103. NONREFUNDABLE PERSONAL CREDITS ALLOWED
AGAINST ALTERNATIVE MINIMUM TAX.
(a) IN GENERAL.—Subsection (a) of section 26 of the
Internal Revenue Code of 1986 is amended to read as fol-
lows:
‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The
aggregate amount of credits allowed by this subpart for
the taxable year shall not exceed the sum of—
‘‘(1) the taxpayer’s regular tax liability for the
taxable year, and
‘‘(2) the tax imposed for the taxable year by
section 55(a).’’.
(b) CONFORMING AMENDMENT.—Subsection (d) of
section 24 of such Code is amended by striking paragraph
(2) and by redesignating paragraph (3) as paragraph (2).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 104. ADJUSTMENT IN MONTHLY EXEMPT AMOUNT FOR
PURPOSES OF THE SOCIAL SECURITY EARN-
INGS TEST.
(a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR
INDIVIDUALS
WHO
HAVE
ATTAINED
RETIREMENT
AGE.—Section 203(f)(8)(D) of the Social Security Act (42
U.S.C. 403(f)(8)(D)) is amended—
(1) in clause (iii), by inserting ‘‘and’’ at the
end; and
(2) by striking clauses (iv) through (vii) and in-
serting the following new clause:
‘‘(iv) for each month of any taxable
year ending after 1998 and before 2000,
$2,500.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 203(f)(8)(B)(ii) of such Act (42
U.S.C. 403(f)(8)(B)(ii)) is amended—
(A) by striking ‘‘after 2001 and before
2003’’ and inserting ‘‘after 1998 and before
2000’’; and
(B) in subclause (II), by striking ‘‘2000’’
and inserting ‘‘1997’’.
(2) The second sentence of section 223(d)(4)(A)
of such Act (42 U.S.C. 423(d)(4)(A)) is amended by
inserting ‘‘and section 104 of the Tax Relief for
Working Americans Act of 1998’’ after ‘‘1996’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to taxable years begin-
ning after 1998.
TITLE 
II—PROVISIONS 
PRI-
MARILY 
AFFECTING 
BUSI-
NESSES
Subtitle A—Certain Expiring Provi-
sions Modified and Made Per-
manent
SEC. 201. RESEARCH CREDIT.
(a) CREDIT MADE PERMANENT.—
(1) IN GENERAL.—Section 41 of the Internal
Revenue Code of 1986 (relating to credit for increas-
ing research activities) is amended by striking sub-
section (h).
(2) CONFORMING AMENDMENT.—Paragraph (1)
section 45C(b) of such Code is amended by striking
subparagraph (D).
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid or in-
curred after June 30, 1998.
(b) INCREASE
IN PERCENTAGES UNDER ALTER-
NATIVE INCREMENTAL CREDIT.—
(1) IN GENERAL.—Subparagraph (A) of section
41(c)(4) of such Code is amended—
(A) by striking ‘‘1.65 percent’’ and insert-
ing ‘‘2.65 percent’’,
(B) by striking ‘‘2.2 percent’’ and inserting
‘‘3.2 percent’’, and
(C) by striking ‘‘2.75 percent’’ and insert-
ing ‘‘3.75 percent’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after June 30, 1998.
SEC. 202. WORK OPPORTUNITY CREDIT.
(a) CREDIT MADE PERMANENT.—
(1) IN GENERAL.—Subsection (c) of section 51
of the Internal Revenue Code of 1986 is amended by
striking paragraph (4).
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to individuals who
begin work for the employer after June 30, 1998.
(b) CREDIT ALLOWED TO TAX-EXEMPT ORGANIZA-
TIONS.—
(1) IN GENERAL.—Chapter 25 of such Code
(relating to general provisions relating to employ-
ment taxes) is amended by inserting after section
3510 the following new section:
‘‘SEC. 3511. TREATMENT OF WORK OPPORTUNITY WAGES
AS PAYMENT OF EMPLOYMENT TAX LIABIL-
ITY.
‘‘(a) GENERAL RULE.—For purposes of this title, the
amount equal to the work opportunity credit amount with
respect to any wages paid for any calendar quarter by an
eligible tax-exempt employer shall be treated as a payment
by such employer of such employer’s employment tax li-
ability for such calendar quarter.
‘‘(b) WORK OPPORTUNITY CREDIT AMOUNT.—For
purposes of this section, the work opportunity credit
amount for any calendar quarter is the amount of the
credit determined under section 51 (relating to work op-
portunity credit) in accordance with the following:
‘‘(1) APPLICABLE PERCENTAGES.—
‘‘(A) INDIVIDUALS PERFORMING AT LEAST
400 HOURS OF SERVICES.—In the case of an in-
dividual who has completed at least 400 hours
of services performed for the eligible tax-exempt
employer, subsection (a) of section 51 shall be
applied by substituting ‘30 percent’ for ‘40 per-
cent’.
‘‘(B) QUARTERLY ESTIMATE OF ANNUAL
HOURS OF SERVICES TO BE PERFORMED.—For
purposes of subparagraph (A) and section
51(i)(3), in lieu of the hours of services actually