439
HR 2264 EAS
‘‘(B) CORPORATIONS.—In the case of a cor-
poration, the tentative minimum tax for the tax-
able year is—
‘‘(i) 20 percent of so much of the alter-
native minimum taxable income for the tax-
able year as exceeds the exemption amount,
reduced by
‘‘(ii) the alternative minimum tax for-
eign tax credit for the taxable year.’’
(b) INCREASE IN EXEMPTION AMOUNTS.—Paragraph
(1) of section 55(d) (defining exemption amount) is amend-
ed—
(1) by striking ‘‘$40,000’’ in subparagraph (A)
and inserting ‘‘$45,000’’,
(2) by striking ‘‘$30,000’’ in subparagraph (B)
and inserting ‘‘$33,750’’, and
(3) by striking ‘‘$20,000’’ in subparagraph (C)
and inserting ‘‘$22,500’’.
(c) CONFORMING AMENDMENTS.—
(1) The last sentence of section 55(d)(3) is
amended by striking ‘‘$155,000 or (ii) $20,000’’ and
inserting ‘‘$165,000 or (ii) $22,500’’.
(2)(A) Subparagraph (A) of section 897(a)(2) is
amended by striking ‘‘the amount determined under
section 55(b)(1)(A) shall not be less than 21 percent
440
HR 2264 EAS
of’’ and inserting ‘‘the taxable excess for purposes of
section 55(b)(1)(A) shall not be less than’’.
(B) The heading for paragraph (2) of section
897(a) is amended by striking ‘‘21-PERCENT’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1992.
SEC. 8203A. RATE INCREASES NOT TO TAKE EFFECT UNTIL
JULY 1, 1993.
(a) IN GENERAL.—Section 1 (relating to tax imposed)
is amended by adding at the end the following new sub-
section:
‘‘(i) SPECIAL RULES FOR TAXABLE YEARS BEGINNING
IN 1993.—
‘‘(1) IN GENERAL.—In the case of taxable years
beginning in calendar year 1993, each of the tables
contained in subsections (a), (b), (c), (d), and (e)
shall be applied—
‘‘(A) by substituting ‘33.5 percent’ for ‘36
percent’,
‘‘(B) by substituting ‘35.3 percent’ for ‘39.6
percent’, and
‘‘(C) by substituting for the dollar amount
of tax in the last rate bracket the dollar amount
441
HR 2264 EAS
determined under the table contained in para-
graph (2).
‘‘(2) DOLLAR
AMOUNT
OF
TAX.—The dollar
amount substituted under paragraph (1) shall be de-
termined as follows:
‘‘In the case of:
The dollar amount is:
Subsection (a) ......................
$72,778.50 for $75,528.50.
Subsection (b) .......................
$74,422.50 for $77,485.00.
Subsection (c) .......................
$76,397.00 for $79,772.00.
Subsection (d) ......................
$36,389.25 for $37,764.25.
Subsection (e) .......................
$2,075.00 for $2,125.00.’’
(b) CONFORMING AMENDMENTS.—
(1) Sections 531 and 541 (as amended by section
8202) are each amended by inserting ‘‘(35.3 percent
in the case of taxable years beginning in calendar
year 1993)’’ after ‘‘39.6 percent’’.
(2) Section 1(h)(3), as added by section 8202(b),
is amended by inserting ‘‘(1.4 percent in the case of
taxable years beginning in calendar year 1993)’’ after
‘‘2.8 percent’’.
(3) Paragraph (1) of section 55(b), as amended
by section 8203, is amended by adding at the end the
following new subparagraph:
‘‘(C) SPECIAL RULES FOR 1993.—In the case
of any taxable year beginning in the calendar
year 1993, subparagraph (A)(i) shall be applied
by substituting—
442
HR 2264 EAS
‘‘(i) ‘25 percent’ for ‘26 percent’ in
subclause (I), and
‘‘(ii) ‘26 percent’ for ‘28 percent’ in
subclause (II).’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1992.
SEC. 8204. OVERALL LIMITATION ON ITEMIZED DEDUC-
TIONS FOR HIGH-INCOME TAXPAYERS MADE
PERMANENT.
Subsection (f) of section 68 (relating to overall limita-
tion on itemized deductions) is hereby repealed.
SEC. 8205. PHASEOUT OF PERSONAL EXEMPTION OF HIGH-
INCOME TAXPAYERS MADE PERMANENT.
Section 151(d)(3) (relating to phaseout of personal ex-
emption) is amended by striking subparagraph (E).
SEC. 8206. PROVISIONS TO PREVENT CONVERSION OF OR-
DINARY INCOME TO CAPITAL GAIN.
(a) INTEREST
EMBEDDED
IN
FINANCIAL TRANS-
ACTIONS.—
(1) IN GENERAL.—Part IV of subchapter P of
chapter 1 (relating to special rules for determining
capital gains and losses) is amended by adding at the
end the following new section:
443
HR 2264 EAS
‘‘SEC. 1258. RECHARACTERIZATION OF GAIN FROM CERTAIN
FINANCIAL TRANSACTIONS.
‘‘(a) GENERAL RULE.—In the case of any gain—
‘‘(1) which (but for this section) would be treated
as gain from the sale or exchange of a capital asset,
and
‘‘(2) which is recognized on the disposition or
other termination of any position which was held as
part of a conversion transaction,
such gain (to the extent such gain does not exceed the appli-
cable imputed income amount) shall be treated as ordinary
income.
‘‘(b) APPLICABLE IMPUTED INCOME AMOUNT.—For
purposes of subsection (a), the term ‘applicable imputed in-
come amount’ means, with respect to any disposition or
other termination referred to in subsection (a), an amount
equal to—
‘‘(1) the amount of interest which would have ac-
crued on the taxpayer’s net investment in the conver-
sion transaction for the period ending on the date of
such disposition or other termination (or, if earlier,
the date on which the requirements of subsection (c)
ceased to be satisfied) at a rate equal to 120 percent
of the applicable rate, reduced by
‘‘(2) the amount treated as ordinary income
under subsection (a) with respect to any prior dis-
444
HR 2264 EAS
position or other termination of a position which was
held as a part of such transaction.
The Secretary shall by regulations provide for such reduc-
tions in the applicable imputed income amount as may be
appropriate by reason of amounts capitalized under section
263(g), ordinary income received, or otherwise.
‘‘(c) CONVERSION TRANSACTION.—For purposes of this
section, the term ‘conversion transaction’ means any trans-
action—
‘‘(1) substantially all of the taxpayer’s expected
return from which is attributable to the time value of
the taxpayer’s net investment in such transaction,
and
‘‘(2) which is—
‘‘(A) the holding of any property (whether
or not actively traded), and the entering into a
contract to sell such property (or substantially
identical property) at a price determined in ac-
cordance with such contract, but only if such
property was acquired and such contract was en-
tered into on a substantially contemporaneous
basis,
‘‘(B) an applicable straddle,
445
HR 2264 EAS
‘‘(C) any other transaction which is mar-
keted or sold as producing capital gains and as
a transaction described in paragraph (1), or
‘‘(D) any other transaction specified in reg-
ulations prescribed by the Secretary.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) APPLICABLE STRADDLE.—The term ‘appli-
cable straddle’ means any straddle (within the mean-
ing of section 1092(c)); except that the term ‘personal
property’ shall include stock.
‘‘(2) APPLICABLE RATE.—The term ‘applicable
rate’ means—
‘‘(A) the applicable Federal rate determined
under section 1274(d) (compounded semiannu-
ally) as if the conversion transaction were a debt
instrument, or
‘‘(B) if the term of the conversion trans-
action is indefinite, the Federal short-term rates
in effect under section 6621(b) during the period
of the conversion transaction (compounded
daily).
‘‘(3) TREATMENT OF BUILT-IN LOSSES.—
446
HR 2264 EAS
‘‘(A) IN GENERAL.—If any position with a
built-in loss becomes part of a conversion trans-
action—
‘‘(i) for purposes of applying this sub-
title to such position for periods after such
position becomes part of such transaction,
such position shall be taken into account at
its fair market value as of the time it be-
came part of such transaction, except that
‘‘(ii) upon the disposition or other ter-
mination of such position in a transaction
in which gain or loss is recognized, such
built-in loss shall be recognized and shall
have a character determined without regard
to this section.
‘‘(B) BUILT-IN LOSS.—For purposes of sub-
paragraph (A), the term ‘built-in loss’ means the
loss (if any) which would have been realized if
the position had been disposed of or otherwise
terminated at its fair market value as of the
time such position became part of such trans-
action.
‘‘(4) POSITION TAKEN INTO ACCOUNT AT FAIR
MARKET VALUE.—In determining the taxpayer’s net
investment in any conversion transaction, there shall
447
HR 2264 EAS
be included the fair market value of any position
which becomes part of such transaction (determined
as of the time such position became part of such
transaction).
‘‘(5) SPECIAL RULE FOR OPTIONS DEALERS AND
COMMODITIES TRADERS.—
‘‘(A) IN GENERAL.—Subsection (a) shall not
apply to transactions —
‘‘(i) of an options dealer in the normal
course of the dealer’s trade or business of
dealing with options, or
‘‘(ii) of a commodities trader in the
normal course of the trader’s trade or busi-
ness of trading section 1256 contracts.
‘‘(B) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) OPTIONS DEALER.—The term ‘op-
tions dealer’ has the meaning given such
term by section 1256(g)(8).
‘‘(ii) COMMODITIES
TRADER.— The
term ‘commodities trader’ means any per-
son who is a member (or, to the extent pro-
vided in regulations, is entitled to trade as
a member) of a domestic board of trade
which is designated as a contract market by
448
HR 2264 EAS
the Commodity Futures Trading Commis-
sion.
‘‘(C) LIMITED PARTNERS AND LIMITED EN-
TREPRENEURS.—In the case of any gain from a
transaction recognized by an entity which is al-
locable to a limited partner or limited entre-
preneur 
(within 
the 
meaning 
of 
section
464(e)(2)), subparagraph (A) shall not apply
if—
‘‘(i) substantially all of the limited
partner’s (or limited entrepreneur’s) ex-
pected return from the entity is attributable
to the time value of the partner’s (or entre-
preneur’s) net investment in such entity,
‘‘(ii) the transaction (or the interest in
the entity) was marketed or sold as produc-
ing capital gains treatment and as a trans-
action described in subsection (c)(1), or
‘‘(iii) the transaction (or the interest
in the entity) is a transaction (or interest)
specified in regulations prescribed by the
Secretary.’’
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part IV of subchapter P of chapter 1 is
449
HR 2264 EAS
amended by adding at the end thereof the following
new item:
‘‘Sec. 1258. Recharacterization of gain from certain financial
transactions.’’
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to conversion transactions
entered into after April 30, 1993.
(b) REPEAL OF CERTAIN EXCEPTIONS TO MARKET
DISCOUNT RULES.—
(1) MARKET DISCOUNT BONDS ISSUED ON OR
BEFORE JULY 18, 1984.—The following provisions are
hereby repealed:
(A) Section 1276(e).
(B) Section 1277(d).
(2) TAX-EXEMPT OBLIGATIONS.—
(A) IN GENERAL.—Paragraph (1) of section
1278(a) (defining market discount bond) is
amended—
(i) by striking clause (ii) of subpara-
graph (B) and redesignating subclauses (iii)
and (iv) of such subparagraph as clauses
(ii) and (iii), respectively,
(ii) by redesignating subparagraph (C)
as subparagraph (D), and
(iii) by inserting after subparagraph
(B) the following new subparagraph:
450
HR 2264 EAS
‘‘(C) SECTION
1277
NOT
APPLICABLE
TO
TAX-EXEMPT OBLIGATIONS.—For purposes of sec-
tion 1277, the term ‘market discount bond’ shall
not include any tax-exempt obligation (as de-
fined in section 1275(a)(3)).’’
(B) CONFORMING
AMENDMENT.—Sections
1276(a)(4) and 1278(b)(1) are each amended by
striking ‘‘sections 871(a)’’ and inserting ‘‘sec-
tions 103, 871(a),’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to obligations purchased
(within the meaning of section 1272(d)(1) of the In-
ternal Revenue Code of 1986) after April 30, 1993.
(c) TREATMENT OF STRIPPED PREFERRED STOCK.—
(1) IN GENERAL.—Section 305 is amended by re-
designating subsection (e) as subsection (f) and by in-
serting after subsection (d) the following new sub-
section:
‘‘(e) TREATMENT OF PURCHASER OF STRIPPED PRE-
FERRED STOCK.—
‘‘(1) IN
GENERAL.—If any person purchases
after April 30, 1993, any stripped preferred stock,
then such person, while holding such stock, shall in-
clude in gross income amounts equal to the amounts
which would have been so includible if such stripped
451
HR 2264 EAS
preferred stock were a bond issued on the purchase
date and having original issue discount equal to the
excess, if any, of—
‘‘(A) the redemption price for such stock,
over
‘‘(B) the price at which such person pur-
chased such stock.
The preceding sentence shall also apply in the case of
any person whose basis in such stock is determined by
reference to the basis in the hands of such purchaser.
‘‘(2) BASIS ADJUSTMENTS.—Appropriate adjust-
ments to basis shall be made for amounts includible
in gross income under paragraph (1).
‘‘(3) TAX
TREATMENT
OF
PERSON
STRIPPING
STOCK.—If any person strips the rights to 1 or more
dividends from any stock described in paragraph
(5)(B) and after April 30, 1993, disposes of such divi-
dend rights, for purposes of paragraph (1), such per-
son shall be treated as having purchased the stripped
preferred stock on the date of such disposition for a
purchase price equal to such person’s adjusted basis
in such stripped preferred stock.
‘‘(4) AMOUNTS
TREATED
AS
ORDINARY
IN-
COME.—Any amount included in gross income under
paragraph (1) shall be treated as ordinary income.
452
HR 2264 EAS
‘‘(5) STRIPPED PREFERRED STOCK.—For pur-
poses of this subsection—
‘‘(A) IN GENERAL.—The term ‘stripped pre-
ferred stock’ means any stock described in sub-
paragraph (B) if there has been a separation in
ownership between such stock and any dividend
on such stock which has not become payable.
‘‘(B) DESCRIPTION OF STOCK.—Stock is de-
scribed in this subsection if such stock—
‘‘(i) is limited and preferred as to divi-
dends and does not participate in corporate
growth to any significant extent, and
‘‘(ii) has a fixed redemption price.
‘‘(6) PURCHASE.—For purposes of this sub-
section, the term ‘purchase’ means—
‘‘(A) any acquisition of stock, where
‘‘(B) the basis of such stock is not deter-
mined in whole or in part by the reference to the
adjusted basis of such stock in the hands of the
person from whom acquired.’’
(2) COORDINATION WITH SECTION 167(e).—Para-
graph (2) of section 167(e) is amended to read as fol-
lows:
‘‘(2) COORDINATION WITH OTHER PROVISIONS.—
453
HR 2264 EAS
‘‘(A) SECTION
273.—This subsection shall
not apply to any term interest to which section
273 applies.
‘‘(B) SECTION 305(e).—This subsection shall
not apply to the holder of the dividend rights
which were separated from any stripped pre-
ferred stock to which section 305(e)(1) applies.’’
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall take effect on April 30, 1993.
(d) TREATMENT OF CAPITAL GAIN UNDER LIMITATION
ON INVESTMENT INTEREST.—
(1) IN GENERAL.—Subparagraph (B) of section
163(d)(4) (defining investment income) is amended to
read as follows:
‘‘(B) INVESTMENT INCOME.—The term ‘in-
vestment income’ means the sum of—
‘‘(i) gross income from property held
for investment (other than any gain taken
into account under clause (ii)(I)),
‘‘(ii) the excess (if any) of—
‘‘(I) the net gain attributable to
the disposition of property held for in-
vestment, over
‘‘(II) the net capital gain deter-
mined by only taking into account
454
HR 2264 EAS
gains and losses from dispositions of
property held for investment, plus
‘‘(iii) so much of the net capital gain
referred to in clause (ii)(II) (or, if lesser,
the net gain referred to in clause (ii)(I)) as
the taxpayer elects to take into account
under this clause.’’
(2) COORDINATION WITH SPECIAL CAPITAL GAINS
RATE.—Subsection (h) of section 1, as amended by
section 8202(b), is amended by adding at the end the
following new sentence:
‘‘For purposes of the preceding sentence, the net capital
gain for any taxable year shall be reduced (but not below
zero) by the amount which the taxpayer elects to take into
account as investment income for the taxable year under
section 163(d)(4)(B)(iii).’’
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1992.
(e) TREATMENT OF CERTAIN APPRECIATED INVEN-
TORY.—
(1) IN
GENERAL.—Paragraph (1) of section
751(d) is amended to read as follows:
‘‘(1) SUBSTANTIAL APPRECIATION.—
455
HR 2264 EAS
‘‘(A) IN GENERAL.—Inventory items of the
partnership shall be considered to have appre-
ciated substantially in value if their fair market
value exceeds 120 percent of the adjusted basis to
the partnership of such property.
‘‘(B) CERTAIN PROPERTY EXCLUDED.—For
purposes of subparagraph (A), there shall be ex-
cluded any inventory property if a principal
purpose for acquiring such property was to
avoid the provisions of this section relating to
inventory items.’’
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to sales, exchanges, and
distributions after April 30, 1993.
Subpart B—Other Provisions
SEC. 8207. REPEAL OF LIMITATION ON AMOUNT OF WAGES
SUBJECT TO HEALTH INSURANCE EMPLOY-
MENT TAX.
(a) HOSPITAL INSURANCE TAX.—
(1) Paragraph (1) of section 3121(a) (defining
wages) is amended—
(A) by inserting ‘‘in the case of the taxes
imposed by sections 3101(a) and 3111(a)’’ after
‘‘(1)’’,
456
HR 2264 EAS
(B) by striking ‘‘applicable contribution
base (as determined under subsection (x))’’ each
place it appears and inserting ‘‘contribution and
benefit base (as determined under section 230 of
the Social Security Act)’’, and
(C) by striking ‘‘such applicable contribu-
tion base’’ and inserting ‘‘such contribution and
benefit base’’.
(2) Section 3121 is amended by striking sub-
section (x).
(b) SELF-EMPLOYMENT TAX.—
(1) Subsection (b) of section 1402 is amended—
(A) by striking ‘‘that part of the net’’ in
paragraph (1) and inserting ‘‘in the case of the
tax imposed by section 1401(a), that part of the
net’’,
(B) by striking ‘‘applicable contribution
base (as determined under subsection (k))’’ in
paragraph (1) and inserting ‘‘contribution and
benefit base (as determined under section 230 of
the Social Security Act)’’,
(C) by inserting ‘‘and’’ after ‘‘section
3121(b),’’, and
(D) by striking ‘‘and (C) includes’’ and all
that follows through ‘‘3111(b)’’.
457
HR 2264 EAS
(2) Section 1402 is amended by striking sub-
section (k).
(c) RAILROAD RETIREMENT TAX.—
(1) Subparagraph (A) of section 3231(e)(2) is
amended by adding at the end thereof the following
new clause:
‘‘(iii) HOSPITAL INSURANCE TAXES.—
Clause (i) shall not apply to—
‘‘(I) so much of the rate applica-
ble under section 3201(a) or 3221(a) as
does not exceed the rate of tax in effect
under section 3101(b), and
‘‘(II) so much of the rate applica-
ble under section 3211(a)(1) as does
not exceed the rate of tax in effect
under section 1401(b).’’
(2) Clause (i) of section 3231(e)(2)(B) is amend-
ed to read as follows:
‘‘(i) TIER 1 TAXES.—Except as pro-
vided in clause (ii), the term ‘applicable
base’ means for any calendar year the con-
tribution and benefit base determined under
section 230 of the Social Security Act for
such calendar year.’’
(d) TECHNICAL AMENDMENTS.—
458
HR 2264 EAS
(1) Paragraph (1) of section 6413(c) is amended
by striking ‘‘section 3101 or section 3201’’ and insert-
ing ‘‘section 3101(a) or section 3201(a) (to the extent
of so much of the rate applicable under section
3201(a) as does not exceed the rate of tax in effect
under section 3101(a))’’.
(2) Subparagraphs (B) and (C) of section
6413(c)(2) are each amended by striking ‘‘section
3101’’ each place it appears and inserting ‘‘section
3101(a)’’.
(3) Subsection (c) of section 6413 is amended by
striking paragraph (3).
(4) Sections 3122 and 3125 are each amended by
striking ‘‘applicable contribution base limitation’’
and inserting ‘‘contribution and benefit base limita-
tion’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to 1994 and later calendar years.
SEC. 8208. TOP ESTATE AND GIFT TAX RATES MADE PERMA-
NENT.
(a) GENERAL RULE.—The table contained in para-
graph (1) of section 2001(c) is amended by striking the last
item and inserting the following new items:
‘‘Over $2,500,000 but not over
$3,000,000.
$1,025,800, plus 53% of the excess over
$2,500,000.
Over $3,000,000 ................................
$1,290,800, plus 55% of the excess over
$3,000,000.’’
459
HR 2264 EAS
(b) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 2001 is amended by
striking paragraph (2) and by redesignating para-
graph (3) as paragraph (2).
(2) Paragraph (2) of section 2001(c), as redesig-
nated by paragraph (1), is amended by striking
‘‘($18,340,000 in the case of decedents dying, and
gifts made, after 1992)’’.
(3) The last sentence of section 2101(b) is
amended by striking ‘‘section 2001(c)(3)’’ and insert-
ing ‘‘section 2001(c)(2)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply in the case of decedents dying, and gifts
made, after December 31, 1992.
SEC. 8209. REDUCTION IN DEDUCTIBLE PORTION OF BUSI-
NESS MEALS AND ENTERTAINMENT.
(a) GENERAL RULE.—Paragraph (1) of section 274(n)
(relating to only 80 percent of meal and entertainment ex-
penses allowed as deduction) is amended by striking ‘‘80
percent’’ and inserting ‘‘50 percent’’.
(b) SUBSTANTIATION REQUIREMENT.—In the case of
taxable years beginning after December 31, 1993, Treasury
Regulation § 1.274–5T(c)(2)(iii)(B) shall be applied by sub-
stituting ‘‘$20’’ for ‘‘$25’’.
460
HR 2264 EAS
(c) CONFORMING AMENDMENT.—The subsection head-
ing for section 274(n) is amended by striking ‘‘80’’ and in-
serting ‘‘50’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993.
SEC. 8209A. SENSE OF THE SENATE RELATING TO THE DE-
DUCTIBILITY OF BUSINESS MEALS AND EN-
TERTAINMENT EXPENSES.
(a) FINDINGS.—The Congress finds the following:
(1) That—
(A) travel and tourism is the third largest
retail industry in the United States and ac-
counts for 11 percent of the total value of goods
and services exported by the United States;
(B) in 1992, the tourism industry produced
revenues in the amount of $369,000,000,000
which produced $44,000,000,000 in tax revenues;
and
(C) of such tax revenues, the Federal Gov-
ernment received $24,000,000,000.
(2) The restaurant industry provides thousands
of jobs in the United States.
461
HR 2264 EAS
(3) The American performing arts community
supports, develops, and exports world-class perform-
ing arts.
(4) The reduction in the rate of the tax deduct-
ibility of business meals and entertainment expenses
from 80 percent to 50 percent may have a negative
impact on the United States restaurant, entertain-
ment, and tourism industries.
(5) Any loss of revenues due to the reduction de-
scribed in paragraph (4) may result in the loss of jobs
in the restaurant, entertainment, and tourism indus-
tries, many of which are filled by young individuals
in their first jobs and by members of minority groups.
(6) The unemployment rate among individuals
and members described in paragraph (5) greatly ex-
ceeds the national unemployment rate of 6.9 percent.
(b) SENSE OF THE SENATE.—It is the sense of the Sen-
ate that the conferees with respect to this title will make
every effort to reduce or eliminate the proposed reduction
in the deductibility of business meals and entertainment ex-
penses.
SEC. 8210. ELIMINATION OF DEDUCTION FOR CLUB MEM-
BERSHIP FEES.
(a) IN GENERAL.—Subsection (a) of section 274 (relat-
ing to disallowance of certain entertainment, etc., expenses)
463
HR 2264 EAS
‘‘(1) IN GENERAL.—In the case of any publicly
held corporation, no deduction shall be allowed under
this chapter for applicable employee remuneration
with respect to any covered employee to the extent
that the amount of such remuneration for the taxable
year with respect to such employee exceeds $1,000,000.
‘‘(2) PUBLICLY HELD CORPORATION.—For pur-
poses of this subsection, the term ‘publicly held cor-
poration’ means any corporation issuing any class of
common equity securities required to be registered
under section 12 of the Securities Exchange Act of
1934.
‘‘(3) COVERED EMPLOYEE.—For purposes of this
subsection, the term ‘covered employee’ means any
employee of the taxpayer if—
‘‘(A) as of the close of the taxable year, such
employee is the chief executive officer of the tax-
payer or is an individual acting in such a ca-
pacity, or
‘‘(B) the total compensation for the taxable
year of such employee is required to be reported
to shareholders under the Securities Exchange
Act of 1934 by reason of such employee being
among the 4 highest compensated officers for the
464
HR 2264 EAS
taxable year (other than the chief executive offi-
cer).
‘‘(4) APPLICABLE EMPLOYEE REMUNERATION.—
For purposes of this subsection—
‘‘(A) IN
GENERAL.—Except as otherwise
provided in this paragraph, the term ‘applicable
employee remuneration’ means, with respect to
any covered employee for any taxable year, the
aggregate amount allowable as a deduction
under this chapter for such taxable year (deter-
mined without regard to this subsection) for re-
muneration for services performed by such em-
ployee (whether or not during the taxable year).
‘‘(B) EXCEPTION FOR REMUNERATION PAY-
ABLE ON COMMISSION BASIS.—The term ‘appli-
cable employee remuneration’ shall not include
any remuneration payable on a commission
basis solely on account of income generated di-
rectly by the individual performance of the indi-
vidual to whom such remuneration is payable.
‘‘(C) OTHER
PERFORMANCE-BASED
COM-
PENSATION.—The term ‘applicable employee re-
muneration’ shall not include any remuneration
payable solely on account of the attainment of
one or more performance goals, but only if—
465
HR 2264 EAS
‘‘(i) the performance goals are deter-
mined by a compensation committee of the
board of directors of the taxpayer which is
comprised solely of 2 or more outside direc-
tors,
‘‘(ii) the material terms under which
the remuneration is to be paid, including
the performance goals, are disclosed to
shareholders and approved by a majority of
the vote in a separate shareholder vote be-
fore the payment of such remuneration, and
‘‘(iii) before any payment of such re-
muneration, the compensation committee re-
ferred to in clause (i) certifies that the per-
formance goals and any other material
terms were in fact satisfied.
‘‘(D) EXCEPTION
FOR
EXISTING
BINDING
CONTRACTS.—The term ‘applicable employee re-
muneration’ shall not include any remuneration
payable under a written binding contract which
was in effect on February 17, 1993, and which
was not modified thereafter in any material re-
spect before such remuneration is paid.
‘‘(E) REMUNERATION.—For purposes of this
paragraph, the term ‘remuneration’ includes any
466
HR 2264 EAS
remuneration (including benefits) in any me-
dium other than cash, but shall not include—
‘‘(i) any payment referred to in so
much of section 3121(a)(5) as precedes sub-
paragraph (E) thereof, and
‘‘(ii) any benefit provided to or on be-
half of an employee if at the time such bene-
fit is provided it is reasonable to believe
that the employee will be able to exclude
such benefit from gross income under this
chapter.
For purposes of clause (i), section 3121(a)(5)
shall be applied without regard to section
3121(v)(1).
‘‘(F) COORDINATION
WITH
DISALLOWED
GOLDEN
PARACHUTE
PAYMENTS.—The dollar
limitation contained in paragraph (1) shall be
reduced (but not below zero) by the amount (if
any) which would have been included in the ap-
plicable employee remuneration of the covered
employee for the taxable year but for being dis-
allowed under section 280G.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to amounts which would otherwise
467
HR 2264 EAS
be deductible for taxable years beginning on or after Janu-
ary 1, 1994.
SEC. 8212. REDUCTION IN COMPENSATION TAKEN INTO AC-
COUNT IN DETERMINING CONTRIBUTIONS
AND BENEFITS UNDER QUALIFIED RETIRE-
MENT PLANS.
(a) QUALIFICATION REQUIREMENT.—
(1) IN GENERAL.—Section 401(a)(17) is amend-
ed—
(A) by striking ‘‘$200,000’’ in the first sen-
tence and inserting ‘‘$150,000’’,
(B) by striking the second sentence, and
(C) by adding at the end the following new
subparagraph:
‘‘(B) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—If, for any cal-
endar year after 1994, the excess (if any)
of—
‘‘(I) $150,000, increased by the
cost-of-living adjustment for the cal-
endar year, over
‘‘(II) the dollar amount in effect
under subparagraph (A) for taxable
years beginning in the calendar year,
468
HR 2264 EAS
is equal to or greater than $10,000, then the
$150,000 amount under subparagraph (A)
(as previously adjusted under this subpara-
graph) for any taxable year beginning in
any subsequent calendar year shall be in-
creased by $10,000.
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
The cost-of-living adjustment for any cal-
endar year shall be the adjustment made
under section 415(d) for such calendar year,
except that the base period for purposes of
section 415(d)(1)(A) shall be the calendar
quarter beginning October 1, 1993.’’
(2) 
CONFORMING
AMENDMENT.—Section
401(a)(17) is amended by striking ‘‘(17) A trust’’ and
inserting:
‘‘(17) COMPENSATION LIMIT.—
‘‘(A) IN GENERAL.—A trust’’.
(b) SIMPLIFIED EMPLOYEE PENSIONS.—
(1) 
IN
GENERAL.—Paragraphs 
(3)(C) 
and
(6)(D)(ii) of section 408(k) are each amended by
striking ‘‘$200,000’’ and inserting ‘‘$150,000’’.
(2) COST-OF-LIVING.—Paragraph (8) of section
408(k) is amended to read as follows:
469
HR 2264 EAS
‘‘(8) COST-OF-LIVING
ADJUSTMENT.—The Sec-
retary shall adjust the $300 amount in paragraph
(2)(C) at the same time and in the same manner as
under section 415(d) and shall adjust the $150,000
amount in paragraphs (3)(C) and (6)(D)(ii) at the
same time, and by the same amount, as the adjust-
ment under section 401(a)(17)(B).’’
(c) OTHER RELATED PROVISIONS.—
(1) IN GENERAL.—Sections 404(l) and 505(b)(7)
are each amended—
(A) by striking ‘‘$200,000’’ in the first sen-
tence and inserting ‘‘$150,000’’, and
(B) by striking the second sentence and in-
serting ‘‘The Secretary shall adjust the $150,000
amount at the same time, and by the same
amount, 
as 
the 
adjustment 
under 
section
401(a)(17)(B).’’
(2) CONFORMING AMENDMENT.—The heading for
section 505(b)(7) is amended by striking ‘‘$200,000’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to benefits accruing in plan years beginning
after December 31, 1993.
470
HR 2264 EAS
(2) EXCEPTION FOR COLLECTIVELY BARGAINED
PLANS.—In the case of a plan maintained pursuant
to 1 or more collective bargaining agreements between
employee representatives and 1 or more employers
ratified before the date of the enactment of this Act,
the amendments made by this section shall not apply
to contributions or benefits pursuant to such agree-
ments for plan years beginning before the earlier of—
(A) the latest of—
(i) January 1, 1994,
(ii) the date on which the last of such
collective bargaining agreements terminates
(without regard to any extension, amend-
ment, or modification of such agreements on
or after such date of enactment), or
(iii) in the case of a plan maintained
pursuant to collective bargaining under the
Railway Labor Act, the date of execution of
an extension or replacement of the last of
such collective bargaining agreements in ef-
fect on such date of enactment, or
(B) January 1, 1997.
(3) TRANSITION RULE FOR STATE AND LOCAL
PLANS.—
471
HR 2264 EAS
(A) IN GENERAL.—In the case of an eligible
participant in a governmental plan (within the
meaning of section 414(d) of the Internal Reve-
nue Code of 1986), the dollar limitation under
section 401(a)(17) of such Code shall not apply
to the extent the amount of compensation which
is allowed to be taken into account under the
plan would be reduced below the amount which
was allowed to be taken into account under the
plan as in effect on July 1, 1993.
(B) ELIGIBLE PARTICIPANT.—For purposes
of subparagraph (A), an eligible participant is
an individual who first became a participant in
the plan during a plan year beginning before the
1st plan year beginning after the earlier of—
(i) the plan year in which the plan is
amended to reflect the amendments made by
this section, or
(ii) December 31, 1995.
(C) PLAN MUST BE AMENDED TO INCOR-
PORATE
LIMITS.—This paragraph shall not
apply to any eligible participant of a plan un-
less the plan is amended so that the plan incor-
porates by reference the dollar limitation under
section 401(a)(17) of the Internal Revenue Code
472
HR 2264 EAS
of 1986, effective with respect to noneligible par-
ticipants for plan years beginning after Decem-
ber 31, 1995 (or earlier if the plan amendment
so provides).
SEC. 8213. MODIFICATION TO DEDUCTION FOR CERTAIN
MOVING EXPENSES.
(a) DOLLAR LIMITATION.—
(1) IN
GENERAL.—Paragraph (3) of section
217(b) is amended by striking subparagraphs (A) and
(B) and inserting the following:
‘‘(A) DOLLAR LIMIT.—
‘‘(i) 
IN
GENERAL.—The 
aggregate
amount allowable as a deduction under sub-
section (a) in connection with a commence-
ment of work shall not exceed $10,000, of
which the aggregate amount which is attrib-
utable to expenses described in subpara-
graph (C) or (D) of paragraph (1) shall not
exceed $1,500.
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
In the case of taxable years beginning in
calendar years after 1994, the $10,000
amount under clause (i) shall be increased
by an amount equal to the product of such
dollar amount and the cost-of-living adjust-
473
HR 2264 EAS
ment determined under section 1(f)(3) for
the calendar year in which the taxable year
begins, except that section 1(f)(3)(B) shall
be applied by substituting ‘1993’ for ‘1992’.
Any amount determined under this clause
which is not a multiple of $50 shall be
rounded to the next lowest multiple of $50.
‘‘(B) HUSBAND AND WIFE.—If a husband
and wife both commence work at a new prin-
cipal place of work within the same general loca-
tion, subparagraph (A) shall be applied as if
there was only 1 commencement of work. In the
case of a husband and wife filing separate re-
turns, subparagraph (A) shall be applied by sub-
stituting ‘$5,000’ for ‘$10,000’ and ‘$750’ for
‘$1,500’.’’
(2) FOREIGN MOVES.—Paragraph (1) of section
217(h) is amended by striking subparagraphs (B) and
(C) and inserting:
‘‘(B) subsection (b)(2)(A) shall be applied
by substituting ‘$4,500’ for ‘$1,500’, and
‘‘(C) subsection (b)(2)(B) shall be applied as
if the last sentence of such subsection read as fol-
lows: ‘In the case of a husband and wife filing
separate returns, subparagraph (A) (as modified
474
HR 2264 EAS
by subsection (h)(1)(B)) shall be applied by sub-
stituting ‘‘$2,250’’ for ‘‘$4,500’’.’.’’
(b) REPEAL OF DEDUCTION FOR QUALIFIED RESI-
DENCE SALE, ETC., EXPENSES.—
(1) IN
GENERAL.—Paragraph (1) of section
217(b) (defining moving expenses) is amended by in-
serting ‘‘or’’ at the end of subparagraph (C), by strik-
ing ‘‘, or’’ at the end of subparagraph (D) and in-
serting 
a 
period, 
and 
by 
striking
subparagraph (E).
(2) CONFORMING AMENDMENTS.—
(A) Subsection (b) of section 217, as
amended by subsection (a), is amended by strik-
ing paragraph (2) and redesignating paragraph
(3) as paragraph (2).
(B) Section 217 is amended by striking sub-
section (e).
(c) DEDUCTION DISALLOWED FOR MEAL EXPENSES.—
Paragraph (1) of section 217(b) is amended—
(1) by striking ‘‘meals and lodging’’ in subpara-
graphs (B), (C) and (D) and inserting ‘‘lodging’’, and
(2) by adding at the end thereof the following
new sentence:
‘‘Such term shall not include any expenses for meals.’’
475
HR 2264 EAS
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to expenses incurred after December 31,
1993.
SEC. 8214. SIMPLIFICATION OF INDIVIDUAL ESTIMATED
TAX SAFE HARBOR BASED ON LAST YEAR’S
TAX.
(a) IN GENERAL.—Paragraph (1) of section 6654(d)
(relating to amount of required estimated tax installments)
is amended by striking subparagraphs (C), (D), (E), and
(F) and by inserting the following new subparagraph:
‘‘(C) LIMITATION
ON
USE
OF
PRECEDING
YEAR’S TAX.—
‘‘(i) IN
GENERAL.—If the adjusted
gross income shown on the return of the in-
dividual for the preceding taxable year ex-
ceeds $150,000, clause (ii) of subparagraph
(B) shall be applied by substituting ‘110
percent’ for ‘100 percent’.
‘‘(ii) SEPARATE
RETURNS.—In the
case of a married individual (within the
meaning of section 7703) who files a sepa-
rate return for the taxable year for which
the amount of the installment is being de-
termined, clause (i) shall be applied by sub-
stituting ‘$75,000’ for ‘$150,000’.
476
HR 2264 EAS
‘‘(iii) SPECIAL RULE.—In the case of
an estate or trust, adjusted gross income
shall be determined as provided in section
67(e).’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 6654(j)(3) is
amended by striking ‘‘and subsection (d)(1)(C)(iii)
shall not apply’’.
(2) Paragraph (4) of section 6654(l) is amended
by striking ‘‘paragraphs (1)(C)(iv) and (2)(B)(i) of
subsection 
(d)’’ 
and 
inserting 
‘‘subsection
(d)(2)(B)(i)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993.
SEC. 8215. SOCIAL SECURITY AND TIER 1 RAILROAD RE-
TIREMENT BENEFITS.
(a) ADDITIONAL
INCLUSION
FOR
CERTAIN
TAX-
PAYERS.—
(1) IN GENERAL.—Subsection (a) of section 86
(relating to social security and tier 1 railroad retire-
ment benefits) is amended by adding at the end the
following new paragraph:
‘‘(2) ADDITIONAL AMOUNT.—In the case of a tax-
payer with respect to whom the amount determined
477
HR 2264 EAS
under subsection (b)(1)(A) exceeds the adjusted base
amount, the amount included in gross income under
this section shall be equal to the lesser of—
‘‘(A) the sum of—
‘‘(i) 85 percent of such excess, plus
‘‘(ii) the lesser of the amount deter-
mined under paragraph (1) or an amount
equal to one-half of the difference between
the adjusted base amount and the base
amount of the taxpayer, or
‘‘(B) 85 percent of the social security bene-
fits received during the taxable year.’’
(2) CONFORMING AMENDMENTS.—Subsection (a)
of section 86 is amended—
(A) by striking ‘‘Gross’’ and inserting:
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), gross’’, and
(B) by redesignating paragraphs (1) and
(2) as subparagraphs (A) and (B), respectively.
(b) ADJUSTED BASE AMOUNT.—Section 86(c) (defin-
ing base amount) is amended to read as follows:
‘‘(c) BASE AMOUNT AND ADJUSTED BASE AMOUNT.—
For purposes of this section—
‘‘(1) BASE AMOUNT.—The term ‘base amount’
means—
478
HR 2264 EAS
‘‘(A) except as otherwise provided in this
paragraph, $25,000,
‘‘(B) $32,000 in the case of a joint return,
and
‘‘(C) zero in the case of a taxpayer who—
‘‘(i) is married as of the close of the
taxable year (within the meaning of section
7703) but does not file a joint return for
such year, and
‘‘(ii) does not live apart from his
spouse at all times during the taxable year.
‘‘(2) ADJUSTED BASE AMOUNT.—The term ‘ad-
justed base amount’ means—
‘‘(A) except as otherwise provided in this
paragraph, $32,000,
‘‘(B) $40,000 in the case of a joint return,
and
‘‘(C) zero in the case of a taxpayer described
in paragraph (1)(C).’’
(c) TRANSFERS TO THE HOSPITAL INSURANCE TRUST
FUND.—
(1) IN
GENERAL.—Paragraph (1) of section
121(e) of the Social Security Amendments of 1983
(Public Law 92–21) is amended by—
(A) striking ‘‘There’’ and inserting:
479
HR 2264 EAS
‘‘(A) There’’;
(B) inserting ‘‘(i)’’ immediately following
‘‘amounts equivalent to’’; and
(C) striking the period and inserting the
following: ‘‘, less (ii) the amounts equivalent to
the aggregate increase in tax liabilities under
chapter 1 of the Internal Revenue Code of 1986
which is attributable to the amendments to sec-
tion 86 of such Code made by section 8215 of the
Revenue Reconciliation Act of 1993.
‘‘(B) There are hereby appropriated to the
hospital insurance trust fund amounts equal to
the increase in tax liabilities described in sub-
paragraph (A)(ii). Such appropriated amounts
shall be transferred from the general fund of the
Treasury on the basis of estimates of such tax li-
abilities made by the Secretary of the Treasury.
Transfers shall be made pursuant to a schedule
made by the Secretary of the Treasury that takes
into account estimated timing of collection of
such liabilities.’’
(2) DEFINITION.—Paragraph (3) of section
121(e) of such Act is amended by redesignating sub-
paragraph (B) as subparagraph (C), and by inserting
480
HR 2264 EAS
after subparagraph (A) the following new subpara-
graph:
‘‘(B) HOSPITAL INSURANCE TRUST FUND.—
The term ‘hospital insurance trust fund’ means
the fund established pursuant to section 1817 of
the Social Security Act.’’.
(3) CONFORMING AMENDMENT.—Paragraph (2)
of section 121(e) of such Act is amended in the first
sentence by striking ‘‘paragraph (1)’’ and inserting
‘‘paragraph (1)(A).’’
(4) 
TECHNICAL
AMENDMENTS.—Paragraph
(1)(A) of section 121(e) of such Act, as redesignated
and amended by paragraph (1), is amended by strik-
ing ‘‘1954’’ and inserting ‘‘1986’’.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to taxable years begin-
ning after December 31, 1993.
PART II—PROVISIONS AFFECTING BUSINESSES
SEC. 8221. INCREASE IN TOP MARGINAL RATE UNDER SEC-
TION 11.
(a) GENERAL RULE.—Paragraph (1) of section 11(b)
(relating to amount of tax) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (B),
481
HR 2264 EAS
(2) by striking subparagraph (C) and inserting
the following:
‘‘(C) 34 percent of so much of the taxable
income as exceeds $75,000 but does not exceed
$10,000,000, and
‘‘(D) 35 percent of so much of the taxable
income as exceeds $10,000,000.’’, and
(3) by adding at the end thereof the following
new sentence: ‘‘In the case of a corporation which has
taxable income in excess of $15,000,000, the amount
of the tax determined under the foregoing provisions
of this paragraph shall be increased by an additional
amount equal to the lesser of (i) 3 percent of such ex-
cess, or (ii) $100,000.’’
(b) CERTAIN PERSONAL SERVICE CORPORATIONS.—
Paragraph (2) of section 11(b) is amended by striking ‘‘34
percent’’ and inserting ‘‘35 percent’’.
(c) CONFORMING AMENDMENTS.—
(1) Clause (iii) of section 852(b)(3)(D) is amend-
ed by striking ‘‘66 percent’’ and inserting ‘‘65 per-
cent’’.
(2) Subsection (a) of section 1201 is amended by
striking ‘‘34 percent’’ each place it appears and in-
serting ‘‘35 percent’’.
482
HR 2264 EAS
(3) Paragraphs (1) and (2) of section 1445(e)
are each amended by striking ‘‘34 percent’’ and in-
serting ‘‘35 percent’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning on or after
January 1, 1993; except that the amendment made by sub-
section (c)(3) shall take effect on the date of the enactment
of this Act.
SEC. 8222. DISALLOWANCE OF DEDUCTION FOR LOBBYING
EXPENDITURES.
(a) DISALLOWANCE OF DEDUCTION.—
(1) IN GENERAL.—Part IX of subchapter B of
chapter 1 (relating to items not deductible) is amend-
ed by adding at the end the following new section:
‘‘SEC. 280I. LOBBYING EXPENDITURES.
‘‘(a) DEDUCTION DISALLOWED.—No deduction shall be
allowed under this chapter for any amount paid or in-
curred—
‘‘(1) for lobbying activities, or
‘‘(2) to another person for the conduct of lobby-
ing activities.
‘‘(b) LOBBYING ACTIVITIES.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The term ‘lobbying activity’
means—
483
HR 2264 EAS
‘‘(A) any lobbying contact, or
‘‘(B) any activity in support of a lobbying
contact.
‘‘(2) SUPPORT
ACTIVITIES.—For purposes of
paragraph (1)(B), the following shall be treated as in
support of a lobbying contact:
‘‘(A) Any preparation or planning activity
relating to a lobbying contact (including, in the
case of a lobbyist, the formulation, review, and
management of the lobbying contacts on behalf of
a client).
‘‘(B) Any research or other background
work relating to a lobbying contact.
‘‘(C) Any activity coordinating the lobbying
activity of 2 or more persons.
‘‘(3) MEALS, ENTERTAINMENT, OR
TRAVEL.—
Any amount paid or incurred in connection with the
providing of meals, entertainment, or travel to a cov-
ered legislative or executive branch official (or to an
individual accompanying such official) shall be treat-
ed as paid or incurred for a lobbying activity without
regard to whether it is in support of a lobbying con-
tact.
‘‘(c) LOBBYING CONTACT.—For purposes of this sec-
tion—
484
HR 2264 EAS
‘‘(1) IN GENERAL.—The term ‘lobbying contact’
means—
‘‘(A) in the case of a lobbyist, any oral or
written communication with a covered legislative
or executive branch official, and
‘‘(B) in the case of any other person, any
oral or written communication with a covered
legislative or executive branch official in connec-
tion with an attempt to influence governmental
actions described in paragraph (2).
‘‘(2) GOVERNMENTAL ACTIONS AFFECTED.—The
following governmental actions are described in this
paragraph:
‘‘(A) The formulation, modification, adop-
tion, or repeal of legislation (including legisla-
tive proposals).
‘‘(B) The formulation, modification, adop-
tion, or repeal of a Federal rule, regulation,
Executive order, or any other program, policy,
or position of the United States.
‘‘(C) The administration or execution of a
Federal program or policy (including the nego-
tiation, award, or administration of a Federal
contract, grant, loan, permit, or license).
485
HR 2264 EAS
‘‘(3) EXCEPTIONS.—The term ‘lobbying contact’
shall not include any contact—
‘‘(A) required by subpoena, civil investiga-
tive demand, or otherwise compelled by statute,
regulation, or other action of Congress, a State
or local legislative body, or a Federal agency,
‘‘(B) made in response to a notice in the
Federal Register, Commerce Business Daily, or
other similar publication soliciting communica-
tions from the public and directed to the agency
official specifically designated in the notice to re-
ceive such communications,
‘‘(C) made to Federal agency officials with
regard to judicial proceedings, criminal or civil
law enforcement inquiries, investigations or pro-
ceedings, or filings required by statute or regula-
tion,
‘‘(D) made in compliance with written
agency procedures regarding an adjudication
conducted by the agency under section 554 of
title 5, United States Code, or any substantially
similar provision, or
‘‘(E) made on behalf of an individual with
regard to such individual’s benefits, employment,
other personal matters involving only that indi-
486
HR 2264 EAS
vidual, or disclosures by that individual pursu-
ant to applicable whistleblower statutes,
‘‘(F) in the case of any governmental action
described in paragraph (2) (B) or (C), which
consists of written comments filed in a public
docket or other communications made on the
record in a public proceeding, or
‘‘(G) in the case of any governmental action
described in paragraph (2)(C), which consists of
communications which are made to officials serv-
ing in the agency responsible for taking such ac-
tion who serve in the Senior Executive Service or
who are members of the uniformed services whose
pay grade is lower than 0–9 under section 201
of title 37, United States Code.
‘‘(d) SPECIAL RULE FOR EXEMPT ORGANIZATIONS.—
‘‘(1) TREATMENT OF DUES, ETC.—Subsection (a)
shall apply to dues, assessments, or other similar
amounts paid by any person to an organization ex-
empt from taxation under this chapter (other than an
organization described in section 170(c)) to the extent
such dues, assessments, or amounts are attributable to
amounts paid or incurred by the organization which
are described in subsection (a).
487
HR 2264 EAS
‘‘(2) SPECIAL
RULE
FOR
CHARITIES.—In the
case of an organization described in section 170(c)
(other 
than 
paragraph 
(1) 
thereof 
or 
section
170(b)(1)(A)(i)), subsection (a) shall apply to any
dues, assessments, contributions, or other similar
amounts which are paid to the organization and
which are otherwise deductible under this chapter to
the extent that any such amount—
‘‘(A) is attributable to amounts paid or in-
curred by the organization which are described
in subsection (a),
‘‘(B) is in connection with lobbying activi-
ties of direct financial interest to the payor’s (or
a related person’s) trade or business, and
‘‘(C) when added to all other payments
made by the payor (and any related person) to
the organization during the calendar year in
which the taxable year begins, exceeds $2,000.
‘‘(3) ALLOCATION RULES.—For purposes of this
subsection—
‘‘(A) dues or other similar amounts paid
during any calendar year shall, except as pro-
vided by the Secretary, only be attributable to
amounts not deductible under subsection (a)
488
HR 2264 EAS
which are paid or incurred by the organization
during such calendar year, and
‘‘(B) amounts which are not deductible
under subsection (a) shall be treated as paid first
out of dues or other similar amounts.
‘‘(4) REPORTING REQUIREMENTS.—
‘‘For requirements of organization to notify con-
tributors, see section 6050O.
‘‘(e) OTHER RULES AND DEFINITIONS.—For purposes
of this section—
‘‘(1) SPECIAL RULE FOR CERTAIN TAXPAYERS.—
In the case of—
‘‘(A) any taxpayer engaged in the trade or
business of conducting activities described in
subsection (a), or
‘‘(B) any taxpayer who is an employee who
is reimbursed by his employer for expenses in-
curred in conducting such activities,
subsection (a) shall not apply to expenditures of the
taxpayer in conducting such activities on behalf of
another person or his employer (but shall apply to
payments by such other person or the employer to the
taxpayer for conducting the activities).
‘‘(2) AGENCY.—The term ‘agency’ has the same
meaning given such term by section 551(1) of title 5,
United States Code.
489
HR 2264 EAS
‘‘(3) COVERED EXECUTIVE BRANCH OFFICIAL.—
The term ‘covered executive branch official’ means—
‘‘(A) the President,
‘‘(B) the Vice President,
‘‘(C) any officer or employee of the Execu-
tive Office of the President, other than a clerical
or secretarial employee,
‘‘(D) any officer or employee serving in an
Executive level I, II, III, IV, or V position, as
designated in statute or Executive order,
‘‘(E) any officer or employee serving in a
Senior Executive Service position as defined
under section 3232(a)(2) of title 5, United States
Code,
‘‘(F) any member of the uniformed services
whose pay grade is at or in excess of O–7 under
section 201 of title 37, United States Code, and
‘‘(G) any officer or employee serving in a
position of confidential or policy-determining
character under schedule C of the excepted service
pursuant to section 7511 of title 5, United States
Code.
‘‘(4) COVERED
LEGISLATIVE
BRANCH
OFFI-
CIAL.—The term ‘covered legislative branch official’
means—
490
HR 2264 EAS
‘‘(A) a Member of Congress,
‘‘(B) an elected officer of Congress,
‘‘(C) any employee of a Member of the
House of Representatives, of a committee of the
House of Representatives, or on the leadership
staff of the House of Representatives,
‘‘(D) any employee of a Senator, of a Sen-
ate committee, or on the leadership staff of the
Senate, and
‘‘(E) any employee of a joint committee of
the Congress.
Such term includes any member, officer, or employee
of a State or local legislative body.
‘‘(5) LOBBYIST.—The term ‘lobbyist’ means any
person who is employed or retained by another person
to perform services which include any attempt to in-
fluence a governmental action described in subsection
(c)(2). Such term does not include a person whose lob-
bying activities are only incidental to, and are not a
significant part of, the services the person performs
for such other person. For purposes of the preceding
sentence, lobbying activities shall not include activi-
ties described in subsection (c)(3).
‘‘(6) LEGISLATION.—The term ‘legislation’ has
the meaning given such term by section 4911(e)(2).
491
HR 2264 EAS
‘‘(7) COORDINATION WITH SECTION 4911.—No tax
shall be imposed under section 4911 on any amount
with respect to which a deduction is not allowed by
reason of subsection (d).
‘‘(f) CROSS REFERENCE.—
‘‘For disallowance of deductions for grassroots lob-
bying expenditures, see section 162(e)(2).’’
(2) CONFORMING AMENDMENTS.—
(A) Section 162(e) (relating to appearances,
etc., with respect to legislation) is amended to
read as follows:
‘‘(e) DENIAL OF DEDUCTION FOR CERTAIN POLITICAL
EXPENDITURES.—
‘‘(1) IN
GENERAL.—No deduction shall be al-
lowed under this chapter for any amount paid or in-
curred—
‘‘(A) for participation in, or intervention
in, any political campaign on behalf of (or in
opposition to) any candidate for public office, or
‘‘(B) in connection with any attempt to in-
fluence the general public, or segments thereof,
with respect to legislative matters, elections, or
referendums.
‘‘(2) APPLICATION TO DUES.—
‘‘(A) IN GENERAL.—No deduction shall be
allowed under this chapter for the portion of
492
HR 2264 EAS
dues or other similar amounts paid by the tax-
payer to an organization which is allocable to
the expenditures described in paragraph (1).
‘‘(B) ALLOCATION.—For purposes of sub-
paragraph (A), expenditures described in para-
graph (1) shall be treated as paid first out of
dues or other similar amounts.
‘‘(3) CROSS REFERENCE.—
‘‘For disallowance of deductions for lobbying ex-
penditures, see section 280I.’’
(B) The table of sections for part IX of sub-
chapter B of chapter 1 is amended by adding at
the end the following new item:
‘‘Sec. 280I. Lobbying expenditures.’’
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid or in-
curred after December 31, 1993.
(b) REPORTING REQUIREMENTS RELATING TO LOBBY-
ING EXPENDITURES.—
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 (relating to information con-
cerning transactions with other persons) is amended
by adding at the end the following new section:
493
HR 2264 EAS
‘‘SEC. 6050O. RETURNS RELATING TO LOBBYING EXPENDI-
TURES OF CERTAIN ORGANIZATIONS.
‘‘(a) REQUIREMENT OF REPORTING.—Each organiza-
tion described in section 280I(d) shall make a return, ac-
cording to the forms or regulations prescribed by the Sec-
retary, setting forth the names and addresses of persons
paying dues to the organization, the amount of the dues
paid by such person, and the portion of such dues which
is nondeductible under section 280I.
‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS
WITH RESPECT TO WHOM INFORMATION IS FURNISHED.—
Any organization required to make a return under sub-
section (a) shall furnish to each person whose name is re-
quired to be set forth in such return a written statement
showing—
‘‘(1) the name and address of the organization,
and
‘‘(2) the dues paid by the person during the cal-
endar year and the portion of such dues which is non-
deductible under section 280I.
The written statement required under the preceding sen-
tence shall be furnished (either in person or in a statement
mailing by first-class mail which includes adequate notice
that the statement is enclosed) to the persons on or before
January 31 of the year following the calendar year for
which the return under subsection (a) was made and shall
494
HR 2264 EAS
be in such form as the Secretary may prescribe by regula-
tions.
‘‘(c) DE MINIMUS EXCEPTION.—This section shall not
apply to any organization for any calendar year if the or-
ganization’s lobbying expenditures described in section
280I(a) for such year are less than $2,000. For purposes
of the preceding sentence, overhead costs otherwise allocable
to lobbying activities shall not be taken into account.
‘‘(d) WAIVER.—The Secretary may waive the reporting
requirements of this section with respect to any organiza-
tion or class of organizations if the Secretary determines
that such reporting is not necessary to carry out the pur-
poses of section 280I.
‘‘(e) DUES.—For purposes of this section, the term
‘dues’ includes assessments, contributions, and other similar
amounts.’’
(2) PENALTIES.—
(A) RETURNS.—Subparagraph (B) of sec-
tion 6724(d)(1) (defining information return) is
amended by striking ‘‘or’’ at the end of clause
(xi), by striking the period at the end of the
clause (xii) relating to section 4101(d) and in-
serting a comma, by redesignating the clause
(xii) relating to section 338(h)(10) as clause
(xiii), by striking the period at the end of clause
495
HR 2264 EAS
(xiii) (as so redesignated) and inserting ‘‘, or’’,
and by adding at the end the following new
clause:
‘‘(xiv) section 6050O(a) (relating to in-
formation on nondeductible lobbying ex-
penditures).’’
(B) PAYEE
STATEMENTS.—Paragraph (2)
of section 6724(d) (defining payee statement) is
amended by striking ‘‘or’’ at the end of subpara-
graph (R), by striking the period at the end of
subparagraph (S) and inserting ‘‘, or’’, and by
adding at the end the following new subpara-
graph:
‘‘(T) section 6050O(b) (relating to returns
on nondeductible lobbying expenditures).’’
(3) CONFORMING AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of
chapter 61 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 6050O. Returns relating to lobbying expenditures of certain
organizations.’’
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to calendar years begin-
ning after December 31, 1993.
496
HR 2264 EAS
SEC. 8223. MARK TO MARKET ACCOUNTING METHOD FOR
SECURITIES DEALERS.
(a) GENERAL RULE.—Subpart D of part II of sub-
chapter E of chapter 1 (relating to inventories) is amended
by adding at the end thereof the following new section:
‘‘SEC. 475. MARK TO MARKET ACCOUNTING METHOD FOR
DEALERS IN SECURITIES.
‘‘(a) GENERAL RULE.—Notwithstanding any other
provision of this subpart, the following rules shall apply
to securities held by a dealer in securities:
‘‘(1) Any security which is inventory in the
hands of the dealer shall be included in inventory at
its fair market value.
‘‘(2) In the case of any security which is not in-
ventory in the hands of the dealer and which is held
at the close of any taxable year—
‘‘(A) the dealer shall recognize gain or loss
as if such security were sold for its fair market
value on the last business day of such taxable
year, and
‘‘(B) any gain or loss shall be taken into ac-
count for such taxable year.
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 applica-
497
HR 2264 EAS
tion of this paragraph at times other than the times
provided in this paragraph.
‘‘(b) EXCEPTIONS.—
‘‘(1) IN
GENERAL.—Subsection (a) shall not
apply to—
‘‘(A) any security held for investment, and
‘‘(B) any security which is a hedge with re-
spect to—
‘‘(i) a security to which subsection (a)
does not apply, or
‘‘(ii) a position, right to income, or a
liability which is not a security in the
hands of the taxpayer.
To the extent provided in regulations, subparagraph
(B) shall not apply to any security held by a person
in its capacity as a dealer in securities.
‘‘(2) IDENTIFICATION
REQUIRED.—A security
shall not be treated as described in subparagraph (A)
or (B) of paragraph (1), as the case may be, unless
such security is clearly identified in the dealer’s
records as being described in such subparagraph be-
fore 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).
498
HR 2264 EAS
‘‘(3) 
SECURITIES
SUBSEQUENTLY
NOT
EX-
EMPT.—If a security ceases to be described in para-
graph (1) at any time after it was identified as such
under paragraph (2), subsection (a) shall apply to
any changes in value of the security occurring after
the cessation.
‘‘(4) SPECIAL RULE FOR PROPERTY HELD FOR
INVESTMENT.—To the extent provided in regulations,
subparagraph (A) of paragraph (1) shall not apply to
any security described in subparagraph (D) or (E) of
subsection (c)(2) which is held by a dealer in such se-
curities.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) DEALER
IN
SECURITIES
DEFINED.—The
term ‘dealer in securities’ means a taxpayer who—
‘‘(A) regularly purchases securities from or
sells securities to customers in the ordinary
course of a trade or business; or
‘‘(B) regularly offers to enter into, assume,
offset, assign or otherwise terminate positions in
securities with customers in the ordinary course
of a trade or business.
‘‘(2) SECURITY
DEFINED.—The term ‘security’
means any—
‘‘(A) share of stock in a corporation;
499
HR 2264 EAS
‘‘(B) partnership or beneficial ownership
interest in a widely held or publicly traded part-
nership or trust;
‘‘(C) note, bond, debenture, or other evidence
of indebtedness;
‘‘(D) interest rate, currency, or equity no-
tional principal contract;
‘‘(E) evidence of an interest in, or a deriva-
tive financial instrument in, any security de-
scribed in subparagraph (A), (B), (C), or (D), or
any currency, including any option, forward
contract, short position, and any similar finan-
cial instrument in such a security or currency;
and
‘‘(F) position which—
‘‘(i) is not a security described in sub-
paragraph (A), (B), (C), (D), or (E),
‘‘(ii) is a hedge with respect to such a
security, and
‘‘(iii) is clearly identified in the deal-
er’s records as being described in this sub-
paragraph before the close of the day on
which it was acquired or entered into (or
such other time as the Secretary may by
regulations prescribe).
500
HR 2264 EAS
Subparagraph (E) shall not include any contract to
which section 1256(a) applies.
‘‘(3) HEDGE.—The term ‘hedge’ means any posi-
tion which reduces the dealer’s risk of interest rate or
price changes or currency fluctuations, including any
position which is reasonably expected to become a
hedge within 60 days after the acquisition of the posi-
tion.
‘‘(d) SPECIAL RULES.—For purposes of this section—
‘‘(1) COORDINATION WITH CERTAIN RULES.—The
rules of sections 263(g), 263A, and 1256(a) shall not
apply to securities to which subsection (a) applies,
and section 1091 shall not apply (and section 1092
shall apply) to any loss recognized under subsection
(a).
‘‘(2) IMPROPER
IDENTIFICATION.—If a tax-
payer—
‘‘(A) identifies any security under sub-
section (b)(2) as being described in subsection
(b)(1) and such security is not so described, or
‘‘(B) fails under subsection (c)(2)(F)(iii) to
identify any position which is described in sub-
section (c)(2)(F) (without regard to clause (iii)
thereof) at the time such identification is re-
quired,
501
HR 2264 EAS
the provisions of subsection (a) shall apply to such se-
curity or position, except that any loss under this sec-
tion prior to the disposition of the security or posi-
tion shall be recognized only to the extent of gain pre-
viously recognized under this section (and not pre-
viously taken into account under this paragraph)
with respect to such security or position.
‘‘(3) CHARACTER OF GAIN OR LOSS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B) or section 1236(b)—
‘‘(i) IN GENERAL.—Any gain or loss
with respect to a security under subsection
(a)(2) shall be treated as ordinary income
or loss.
‘‘(ii) SPECIAL
RULE
FOR
DISPOSI-
TIONS.—If—
‘‘(I) gain or loss is recognized
with respect to a security before the
close of the taxable year, and
‘‘(II) subsection (a)(2) would have
applied if the security were held as of
the close of the taxable year,
such gain or loss shall be treated as ordi-
nary income or loss.
502
HR 2264 EAS
‘‘(B) EXCEPTION.—Subparagraph (A) shall
not apply to any gain or loss which is allocable
to a period during which—
‘‘(i) the security is described in sub-
section (b)(1)(B) (without regard to sub-
section (b)(2)),
‘‘(ii) the security is held by a person
other than in connection with its activities
as a dealer in securities, or
‘‘(iii) the security is improperly identi-
fied (within the meaning of subparagraph
(A) or (B) of paragraph (2)).
‘‘(e) REGULATORY AUTHORITY.—The Secretary shall
prescribe such regulations as may be necessary or appro-
priate to carry out the purposes of this section, including
rules—
‘‘(1) to prevent the use of year-end transfers, re-
lated parties, or other arrangements to avoid the pro-
visions of this section, and
‘‘(2) to provide for the application of this section
to any security which is a hedge which cannot be
identified with a specific security, position, right to
income, or liability.’’
(b) CONFORMING AMENDMENTS.—
503
HR 2264 EAS
(1) Paragraph (1) of section 988(d) is amend-
ed—
(A) by striking ‘‘section 1256’’ and insert-
ing ‘‘section 475 or 1256’’, and
(B) by striking ‘‘1092 and 1256’’ and in-
serting ‘‘475, 1092, and 1256’’.
(2) The table of sections for subpart D of part
II of subchapter E of chapter 1 is amended by adding
at the end thereof the following new item:
‘‘Sec. 475. Mark to market accounting method for dealers in securi-
ties.’’
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to all taxable years ending on
or after December 31, 1993.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer required by this section to
change its method of accounting for any taxable
year—
(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, and
(C) except as provided in paragraph (3),
the net amount of the adjustments required to be
taken into account by the taxpayer under section
504
HR 2264 EAS
481 of the Internal Revenue Code of 1986 shall
be taken into account ratably over the 5-taxable
year period beginning with the first taxable year
ending on or after December 31, 1993.
(3) SPECIAL RULE FOR FLOOR SPECIALISTS AND
MARKET MAKERS.—
(A) IN GENERAL.—If—
(i) a taxpayer (or any predecessor)
used the last-in first-out (LIFO) method of
accounting with respect to any qualified se-
curities for the 5-taxable year period ending
with its last taxable year ending before De-
cember 31, 1993, and
(ii) any portion of the net amount de-
scribed in paragraph (2)(C) is attributable
to the use of such method of accounting,
then paragraph (2)(C) shall be applied by taking
such portion into account ratably over the 15-
taxable year period beginning with the first tax-
able year ending on or after December 31, 1993.
(B) QUALIFIED SECURITY.—For purposes of
this paragraph, the term ‘‘qualified security’’
means any security acquired—
(i) by a floor specialist (as defined in
section 1236(d)(2) of the Internal Revenue
505
HR 2264 EAS
Code of 1986) in connection with the spe-
cialist’s duties as a specialist on an ex-
change, but only if the security is one in
which the specialist is registered with the
exchange, or
(ii) by a taxpayer who is a market
maker in connection with the taxpayer’s du-
ties as a market maker, but only if—
(I) the security is included on the
National Association of Security Deal-
ers Automated Quotation System,
(II) the taxpayer is registered as
a market maker in such security with
the National Association of Security
Dealers, and
(III) as of the last day of the tax-
able year preceding the taxpayer’s first
taxable year ending on or after Decem-
ber 31, 1993, the taxpayer (or any
predecessor) has been actively and reg-
ularly engaged as a market maker in
such security for the 2-year period end-
ing on such date (or, if shorter, the pe-
riod beginning 61 days after the secu-
506
HR 2264 EAS
rity was listed in such quotation sys-
tem and ending on such date).
SEC. 8224. CLARIFICATION OF TREATMENT OF CERTAIN
FSLIC FINANCIAL ASSISTANCE.
(a) GENERAL RULE.—For purposes of chapter 1 of the
Internal Revenue Code of 1986—
(1) any FSLIC assistance with respect to any
loss of principal, capital, or similar amount upon the
disposition of any asset shall be taken into account as
compensation for such loss for purposes of section 165
of such Code, and
(2) any FSLIC assistance with respect to any
debt shall be taken into account for purposes of sec-
tion 166, 585, or 593 of such Code in determining
whether such debt is worthless (or the extent to which
such debt is worthless) and in determining the
amount of any addition to a reserve for bad debts
arising from the worthlessness or partial worthlessness
of such debts.
(b) FSLIC ASSISTANCE.—For purposes of this section,
the term ‘‘FSLIC assistance’’ means any assistance (or
right to assistance) with respect to a domestic building and
loan association (as defined in section 7701(a)(19) of such
Code without regard to subparagraph (C) thereof) under
section 406(f) of the National Housing Act or section 21A
507
HR 2264 EAS
of the Federal Home Loan Bank Act (or under any similar
provision of law).
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as otherwise provided
in this subsection—
(A) The provisions of this section shall
apply to taxable years ending on or after March
4, 1991, but only with respect to FSLIC assist-
ance not credited before March 4, 1991.
(B) If any FSLIC assistance not credited
before March 4, 1991, is with respect to a loss
sustained or charge-off in a taxable year ending
before March 4, 1991, for purposes of determin-
ing the amount of any net operating loss carry-
over to a taxable year ending on or after March
4, 1991, the provisions of this section shall apply
to such assistance for purposes of determining
the amount of the net operating loss for the tax-
able year in which such loss was sustained or
debt written off. Except as provided in the pre-
ceding sentence, this section shall not apply to
any FSLIC assistance with respect to a loss
sustained or charge-off in a taxable year ending
before March 4, 1991.
508
HR 2264 EAS
(2) EXCEPTIONS.—The provisions of this section
shall not apply to any assistance to which the amend-
ments made by section 1401(a)(3) of the Financial
Institutions Reform, Recovery, and Enforcement Act
of 1989 apply.
SEC. 8225. MODIFICATION OF CORPORATE ESTIMATED TAX
RULES.
(a) INCREASE IN REQUIRED INSTALLMENT BASED ON
CURRENT YEAR TAX.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
6655(d)(1)(B) (relating to amount of required install-
ment) is amended by striking ‘‘91 percent’’ each place
it appears and inserting ‘‘100 percent’’.
(2) CONFORMING AMENDMENTS.—
(A) Subsection (d) of section 6655 is
amended—
(i) by striking paragraph (3), and
(ii) by striking ‘‘91 PERCENT’’ in the
paragraph heading of paragraph (2) and
inserting ‘‘100 PERCENT’’.
(B) Clause (ii) of section 6655(e)(2)(B) is
amended by striking the table contained therein
and inserting the following:
‘‘In the case of the following re-
The applicable
quired installments:
percentage is:
1st .......................................................................
2nd ......................................................................
509
HR 2264 EAS
3rd ......................................................................
4th .......................................................................
100.’’
(C) Clause (i) of section 6655(e)(3)(A) is
amended by striking ‘‘91 percent’’ and inserting
‘‘100 percent’’.
(b) MODIFICATION
OF
PERIODS
FOR
APPLYING
ANNUALIZATION.—
(1) Clause (i) of section 6655(e)(2)(A) is amend-
ed—
(A) by striking ‘‘or for the first 5 months’’
in subclause (II),
(B) by striking ‘‘or for the first 8 months’’
in subclause (III), and
(C) by striking ‘‘or for the first 11 months’’
in subclause (IV).
(2) Paragraph (2) of section 6655(e) is amended
by adding at the end thereof the following new sub-
paragraph:
‘‘(C) 
ELECTION
FOR
DIFFERENT
ANNUALIZATION PERIODS.—
‘‘(i) If the taxpayer makes an election
under this clause—
‘‘(I) subclause (I) of subparagraph
(A)(i) shall be applied by substituting
‘2 months’ for ‘3 months’,
510
HR 2264 EAS
‘‘(II) subclause (II) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘4 months’ for ‘3 months’,
‘‘(III) subclause (III) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘7 months’ for ‘6 months’, and
‘‘(IV) subclause (IV) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘10 months’ for ‘9 months’.
‘‘(ii) If the taxpayer makes an election
under this clause—
‘‘(I) subclause (II) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘5 months’ for ‘3 months’,
‘‘(II) subclause (III) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘8 months’ for ‘6 months’, and
‘‘(III) subclause (IV) of subpara-
graph (A)(i) shall be applied by sub-
stituting ‘11 months’ for ‘9 months’.
‘‘(iii) An election under clause (i) or
(ii) shall apply to the taxable year for
which made and such an election shall be
effective only if made on or before the date
511
HR 2264 EAS
required for the payment of the first re-
quired installment for such taxable year.’’
(3) The last sentence of section 6655(g)(3) is
amended by striking ‘‘and subsection (e)(2)(A)’’ and
inserting ‘‘and, except in the case of an election under
subsection (e)(2)(C), subsection (e)(2)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993.
SEC. 8226. MODIFICATIONS OF DISCHARGE OF INDEBTED-
NESS PROVISIONS.
(a) REPEAL OF STOCK FOR DEBT EXCEPTION IN DE-
TERMINING INCOME FROM DISCHARGE
OF INDEBTED-
NESS.—
(1) IN GENERAL.—Subsection (e) of section 108
is amended—
(A) by striking paragraph (10) and by re-
designating paragraph (11) as paragraph (10),
and
(B) by amending paragraph (8) to read as
follows:
‘‘(8) INDEBTEDNESS
SATISFIED
BY
CORPORA-
TION’S STOCK.—For purposes of determining income
of a debtor from discharge of indebtedness, if a debtor
corporation transfers stock to a creditor in satisfac-
512
HR 2264 EAS
tion of its indebtedness, such corporation shall be
treated as having satisfied the indebtedness with an
amount of money equal to the fair market value of the
stock.’’
(2) CONFORMING
AMENDMENT.—Subparagraph
(C) of section 382(l)(5) is amended to read as follows:
‘‘(C) COORDINATION WITH SECTION 108.—In
applying section 108(e)(8) to any case to which
subparagraph (A) applies, there shall not be
taken into account any indebtedness for interest
described in subparagraph (B).’’
(3) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as otherwise pro-
vided in this paragraph, the amendments made
by this subsection shall apply to stock transferred
after June 17, 1993, in satisfaction of any in-
debtedness.
(B) EXCEPTION FOR TITLE 11 CASES.—The
amendments made by this subsection shall not
apply to stock transferred in satisfaction of any
indebtedness if such transfer is in a title 11 or
similar case (as defined in section 368(a)(3)(A)
of the Internal Revenue Code of 1986) which was
filed on or before June 17, 1993.
513
HR 2264 EAS
(C) EXCEPTION FOR BINDING CONTRACTS.—
The amendments made by this section shall not
apply to any stock transferred after June 17,
1993, and before January 1, 1994, if such trans-
fer is pursuant to a binding contract in effect on
June 17, 1993, and at all times thereafter before
the transfer.
(D) EXCEPTION
FOR
CERTAIN
FILINGS.—
The amendments made by this section shall not
apply to any stock transferred in satisfaction of
any indebtedness if—
(i) such transfer occurs after June 17,
1993, and before January 1, 1994, and
(ii) the taxpayer had filed with the Se-
curities and Exchange Commission on or
before June 17, 1993, a registration state-
ment which proposed a stock-for-debt ex-
change with respect to such indebtedness,
and which discussed the possible application
of the stock-for-debt exception to such ex-
change.
(b) TAX ATTRIBUTES SUBJECT TO REDUCTION.—
(1) MINIMUM
TAX
CREDIT.—Section 108(b)(2)
(relating to tax attributes affected; order of reduction)
is amended by redesignating subparagraphs (C), (D),
514
HR 2264 EAS
and (E) as subparagraphs (D), (E), and (F) and by
adding after subparagraph (B) the following new sub-
paragraph:
‘‘(C) MINIMUM TAX CREDIT.—The amount
of the minimum tax credit available under sec-
tion 53(b) as of the beginning of the taxable year
immediately following the taxable year of the
discharge.’’
(2) PASSIVE ACTIVITY LOSSES AND CREDITS.—
Section 108(b)(2), as amended by paragraph (1), is
amended by redesignating subparagraph (F) as sub-
paragraph (G) and by adding after subparagraph (E)
the following new subparagraph:
‘‘(F) PASSIVE ACTIVITY LOSS AND CREDIT
CARRYOVERS.—Any passive activity loss or cred-
it carryover of the taxpayer under section 469(b)
from the taxable year of the discharge.’’
(3) CONFORMING AMENDMENTS.—
(A) Subparagraph (B) of section 108(b)(3)
is amended to read as follows:
‘‘(B) CREDIT CARRYOVER REDUCTION.—The
reductions described in subparagraphs (B), (C),
and (G) shall be 331⁄3 cents for each dollar ex-
cluded by subsection (a). The reduction described
in subparagraph (F) in any passive activity
515
HR 2264 EAS
credit carryover shall be 331⁄3 cents for each dol-
lar excluded by subsection (a).’’
(B) Subparagraph (B) of section 108(b)(4)
is amended by striking ‘‘(C)’’ in the text and
heading thereof and inserting ‘‘(D)’’.
(C) Subparagraph (C) of section 108(b)(4)
is amended by striking ‘‘(E)’’ in the text and
heading thereof and inserting ‘‘(G)’’.
(D) Subparagraph (B) of section 108(g)(3)
is amended—
(i) by striking ‘‘subparagraphs (A),
(B), (C), and (E)’’ and inserting ‘‘subpara-
graphs (A), (B), (C), (D), (F), and (G)’’,
(ii) by striking ‘‘subparagraphs (B)
and (E)’’ and inserting ‘‘subparagraphs
(B), (C), and (G)’’, and
(iii) by inserting before the period at
the end the following: ‘‘and the attribute de-
scribed in subparagraph (F) of subsection
(b)(2) to the extent attributable to any pas-
sive activity credit carryover’’.
(4) EFFECTIVE DATE.—The amendments made
by this section shall apply to taxable years beginning
after December 31, 1993.
516
HR 2264 EAS
SEC. 8227. LIMITATION ON SECTION 936 CREDIT.
(a) GENERAL RULE.—Subsection (a) of section 936
(relating to Puerto Rico and possession tax credit) is
amended—
(1) by striking ‘‘as provided in paragraph (3)’’
in paragraph (1) and inserting ‘‘as otherwise pro-
vided in this section’’;
(2) by adding at the end thereof the following
new paragraph:
‘‘(4) LIMITATIONS ON CREDIT FOR ACTIVE BUSI-
NESS INCOME.—
‘‘(A) IN
GENERAL.—The amount of the
credit determined under paragraph (1)(A) for
any taxable year shall not exceed the sum of the
following amounts:
‘‘(i) 95 percent of the sum of—
‘‘(I) the aggregate amount of the
possession corporation’s qualified pos-
session wages for such taxable year,
plus
‘‘(II) the allocable employee fringe
benefit expenses of the possession cor-
poration for the taxable year.
‘‘(ii) The sum of—
‘‘(I) 50 percent of the depreciation
deductions allowable under section 167
517
HR 2264 EAS
to the possession corporation for the
taxable year with respect to short-life
qualified tangible property,
‘‘(II) 75 percent of the deprecia-
tion deductions allowable under section
167 to the possession corporation for
the taxable year with respect to me-
dium-life qualified tangible property,
and
‘‘(III) 100 percent of the deprecia-
tion deductions allowable under section
167 to the possession corporation for
the taxable year with respect to long-
life qualified tangible property.
‘‘(iii) If the possession corporation does
not have an election to use the method de-
scribed in subsection (h)(5)(C)(ii) (relating
to profit split) in effect for the taxable year,
the amount of qualified possession income
taxes for the taxable year allocable to
nonsheltered income.
‘‘(B) ELECTION TO TAKE REDUCED CRED-
IT.—
518
HR 2264 EAS
‘‘(i) IN
GENERAL.—If an election
under this subparagraph applies to a pos-
session corporation for any taxable year—
‘‘(I) subparagraph (A), and the
provisions of subsection (i), shall not
apply to such possession corporation
for such taxable year, and
‘‘(II) the credit determined under
paragraph (1)(A) for such taxable year
shall be the applicable percentage of the
credit which would otherwise have been
determined under such paragraph.
Notwithstanding subclause (I), a possession
corporation to which an election under this
subparagraph applies shall be entitled to the
benefits of subsection (i)(3)(B) for taxes al-
locable (on a pro rata basis) to taxable in-
come the tax on which is not offset by rea-
son of this subparagraph.
‘‘(ii) APPLICABLE PERCENTAGE.—The
term ‘applicable percentage’ means the per-
centage determined in accordance with the
following table:
‘‘In the case of taxable
The percentage is:
year beginning in:
1994 ................................................................................................
1995 ................................................................................................
1996 ................................................................................................
519
HR 2264 EAS
‘‘In the case of taxable
The percentage is:
year beginning in:
1997 ................................................................................................
1998 and thereafter ........................................................................
40.
‘‘(iii) ELECTION.—
‘‘(I) IN
GENERAL.—An election
under this subparagraph by any pos-
session corporation may be made only
for the corporation’s first taxable year
beginning after December 31, 1993, for
which it is a possession corporation.
‘‘(II) PERIOD OF ELECTION.—An
election under this subparagraph shall
apply to the taxable year for which
made and all subsequent taxable years
unless revoked.
‘‘(III) AFFILIATED
GROUPS.—If,
for any taxable year, an election is not
in effect for any possession corporation
which is a member of an affiliated
group, any election under this sub-
paragraph for any other member of
such group is revoked for such taxable
year and all subsequent taxable years.
For purposes of this subclause, mem-
bers of an affiliated group shall be de-
termined without regard to the excep-
520
HR 2264 EAS
tions contained in section 1504(b) and
as if the constructive ownership rules
of section 1563(e) applied for purposes
of section 1504(a). The Secretary may
prescribe regulations to prevent the
avoidance of this subclause through
deconsolidation or otherwise.
‘‘(C) CROSS REFERENCE.—
‘‘For definitions and special rules applicable to
this paragraph, see subsection (i).’’; and
(3) by inserting ‘‘97.5 percent of’’ after ‘‘equal
to’’ in paraagraph (1).
(b) DEFINITIONS AND SPECIAL RULES.—Section 936
is amended by adding at the end thereof the following new
subsection:
‘‘(i) DEFINITIONS AND SPECIAL RULES RELATING TO
LIMITATIONS OF SUBSECTION (a)(4).—
‘‘(1) QUALIFIED POSSESSION WAGES.—For pur-
poses of this section—
‘‘(A) IN
GENERAL.—The term ‘qualified
possession wages’ means wages paid or incurred
by the possession corporation during the taxable
year in connection with the active conduct of a
trade or business within a possession of the
United States to any employee for services per-
formed in such possession, but only if such serv-
521
HR 2264 EAS
ices are performed while the principal place of
employment of such employee is within such pos-
session.
‘‘(B) LIMITATION
ON
AMOUNT
OF
WAGES
TAKEN INTO ACCOUNT.—
‘‘(i) IN
GENERAL.—The amount of
wages which may be taken into account
under subparagraph (A) with respect to any
employee for any taxable year shall not ex-
ceed 85 percent of the contribution and ben-
efit base determined under section 230 of
the Social Security Act for the calendar
year in which such taxable year begins.
‘‘(ii) TREATMENT OF PART-TIME EM-
PLOYEES, ETC.—If—
‘‘(I) any employee is not em-
ployed by the possession corporation on
a substantially full-time basis at all
times during the taxable year, or
‘‘(II) the principal place of em-
ployment of any employee with the
possession corporation is not within a
possession at all times during the tax-
able year,
522
HR 2264 EAS
the limitation applicable under clause (i)
with respect to such employee shall be the
appropriate portion (as determined by the
Secretary) of the limitation which would
otherwise be in effect under clause (i).
‘‘(C) TREATMENT
OF
CERTAIN
EMPLOY-
EES.—The term ‘qualified possession wages’ shall
not include any wages paid to employees who
are assigned by the employer to perform services
for another person, unless the principal trade or
business of the employer is to make employees
available for temporary periods to other persons
in return for compensation. All possession cor-
porations treated as 1 corporation under para-
graph (6) shall be treated as 1 employer for pur-
poses of the preceding sentence.
‘‘(D) WAGES.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), the term ‘wages’ has the
meaning given to such term by subsection
(b) of section 3306 (determined without re-
gard to any dollar limitation contained in
such section). For purposes of the preceding
sentence, such subsection (b) shall be ap-
523
HR 2264 EAS
plied as if the term ‘United States’ included
all possessions of the United States.
‘‘(ii) SPECIAL
RULE
FOR
AGRICUL-
TURAL
LABOR
AND
RAILWAY
LABOR.—In
any case to which subparagraph (A) or (B)
of paragraph (1) of section 51(h) applies,
the term ‘wages’ has the meaning given to
such term by section 51(h)(2).
‘‘(2) ALLOCABLE
EMPLOYEE
FRINGE
BENEFIT
EXPENSES.—
‘‘(A) IN GENERAL.—The allocable employee
fringe benefit expenses of any possession corpora-
tion for any taxable year is an amount which
bears the same ratio to the amount determined
under subparagraph (B) for such taxable year
as—
‘‘(i) the aggregate amount of the pos-
session corporation’s qualified possession
wages for such taxable year, bears to
‘‘(ii) the aggregate amount of the wages
paid or incurred by such possession cor-
poration during such taxable year.
In no event shall the amount determined under
the preceding sentence exceed 15 percent of the
amount referred to in clause (i).
524
HR 2264 EAS
‘‘(B) EXPENSES
TAKEN
INTO
ACCOUNT.—
For purposes of subparagraph (A), the amount
determined under this subparagraph for any tax-
able year is the aggregate amount allowable as
a deduction under this chapter to the possession
corporation for such taxable year (determined
without regard to paragraph (5)) with respect
to—
‘‘(i) employer contributions under a
stock bonus, pension, profit-sharing, or an-
nuity plan,
‘‘(ii) employer-provided coverage under
any accident or health plan for employees,
and
‘‘(iii) the cost of life or disability in-
surance provided to employees.
Any amount treated as wages under paragraph
(1)(D) shall not be taken into account under this
subparagraph.
‘‘(3) TREATMENT OF POSSESSION TAXES.—
‘‘(A) AMOUNT OF CREDIT FOR POSSESSION
CORPORATIONS NOT USING PROFIT SPLIT.—
‘‘(i) IN
GENERAL.—For purposes of
subsection (a)(4)(A)(iii), the amount of the
qualified possession income taxes for any
525
HR 2264 EAS
taxable year allocable to nonsheltered in-
come shall be an amount which bears the
same ratio to the possession income taxes
for such taxable year as—
‘‘(I) the increase in the tax liabil-
ity of the possession corporation under
this chapter by reason of subsection
(a)(4)(A) (without regard to clause
(iii) thereof) and paragraph (5) of this
subsection, bears to
‘‘(II) the tax liability of the pos-
session corporation for the taxable year
determined without regard to the credit
allowable under this section and with-
out regard to paragraph (5) of this
subsection.
‘‘(ii) LIMITATION
ON
AMOUNT
OF
TAXES
TAKEN
INTO
ACCOUNT.—Possession
income taxes shall not be taken into account
under clause (i) for any taxable year to the
extent that the amount of such taxes exceeds
9 percent of the amount of the taxable in-
come for such taxable year.
‘‘(B) DEDUCTION
FOR
POSSESSION
COR-
PORATIONS USING PROFIT SPLIT.—Notwithstand-
526
HR 2264 EAS
ing subsection (c) if a possession corporation is
not described in subsection (a)(4)(A)(iii) for any
taxable year, such possession corporation shall be
allowed a deduction for such taxable year in an
amount which bears the same ratio to the posses-
sion income taxes for such taxable year as—
‘‘(i) the increase in the tax liability of
the possession corporation under this chap-
ter by reason of subsection (a)(4)(A) and
paragraph (5) of this subsection, bears to
‘‘(ii) the tax liability of the possession
corporation for the taxable year determined
without regard to the credit allowable under
this section and without regard to para-
graph (5) of this subsection.
In determining the credit under subsection (a)
and in applying the preceding sentence, taxable
income shall be determined without regard to the
preceding sentence.
‘‘(C) POSSESSION
INCOME
TAXES.—For
purposes of this paragraph, the term ‘possession
income taxes’ means any taxes of a possession of
the United States which are treated as not being
income, war profits, or excess profits taxes paid
527
HR 2264 EAS
or accrued to a possession of the United States
by reason of subsection (c).
‘‘(4) 
CATEGORIES
OF
DEPRECIABLE
PROP-
ERTY.—For purposes of this section—
‘‘(A) QUALIFIED
TANGIBLE
PROPERTY.—
The term ‘qualified tangible property’ means
any tangible property used by the possession cor-
poration in a possession of the United States in
the active conduct of a trade or business within
such possession.
‘‘(B) SHORT-LIFE
QUALIFIED
TANGIBLE
PROPERTY.—The term ‘short-life qualified tan-
gible property’ means any qualified tangible
property to which section 168 applies and which
is 3-year property or 5-year property for pur-
poses of such section.
‘‘(C) MEDIUM-LIFE
QUALIFIED
TANGIBLE
PROPERTY.—The term ‘medium-life qualified
tangible property’ means any qualified tangible
property to which section 168 applies and which
is 7-year property or 10-year property for pur-
poses of such section.
‘‘(D) 
LONG-LIFE
QUALIFIED
TANGIBLE
PROPERTY.—The term ‘long-life qualified tan-
gible property’ means any qualified tangible
528
HR 2264 EAS
property to which section 168 applies and which
is not described in subparagraph (B) or (C).
‘‘(E) TRANSITIONAL RULE.—In the case of
any qualified tangible property to which section
168 (as in effect on the day before the date of the
enactment of the Tax Reform Act of 1986) ap-
plies, any reference in this paragraph to section
168 shall be treated as a reference to such section
as so in effect.
‘‘(5) DENIAL OF DOUBLE BENEFIT.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this chapter, no deduction
shall be allowed to a possession corporation for—
‘‘(i) any qualified possession wages,
‘‘(ii) any allocable employee fringe
benefit expenses, and
‘‘(iii) any depreciation deductions re-
ferred to in subsection (a)(4)(A)(ii).
‘‘(B) COORDINATION
WITH
OTHER
PROVI-
SIONS.—Subparagraph (A) shall not apply for
purposes of—
‘‘(i) determining the amount of the
credit allowable under subsection (a)(1)(A)
or otherwise determining the taxable income
529
HR 2264 EAS
of the possession corporation under any
other provision of this section, and
‘‘(ii) determining adjustments to the
basis of any property on account of depre-
ciation deductions.
‘‘(6) ELECTION TO COMPUTE CREDIT ON CON-
SOLIDATED BASIS.—
‘‘(A) IN
GENERAL.—Any affiliated group
may elect to treat all possession corporations
which would be members of such group but for
section 1504(b) (3) or (4) as 1 corporation for
purposes of this section. The credit determined
under this section with respect to such 1 corpora-
tion shall be allocated among such possession
corporations in such manner as the Secretary
may prescribe.
‘‘(B) ELECTION.—An election under sub-
paragraph (A) shall apply to the taxable year
for which made and all succeeding taxable years
unless revoked with the consent of the Secretary.
‘‘(7) POSSESSION CORPORATION.—The term ‘pos-
session corporation’ means a domestic corporation for
which the election provided in subsection (a) is in ef-
fect.’’
(c) MINIMUM TAX TREATMENT.—
530
HR 2264 EAS
(1) 
IN
GENERAL.—Clause 
(ii) 
of 
section
56(g)(4)(C) (relating to treatment of special rule for
certain dividends) is amended by striking ‘‘sections
936 and 921’’ and inserting ‘‘sections 936 (including
subsections (a)(4) and (i) thereof) and 921’’.
(2) TREATMENT
OF
FOREIGN
TAXES.—Clause
(iii) of section 56(g)(4)(C) is amended by adding at
the end thereof the following subclauses:
‘‘(IV) SEPARATE APPLICATION OF
FOREIGN TAX CREDIT LIMITATIONS.—
In determining the alternative mini-
mum foreign tax credit, section 904(d)
shall be applied as if dividends from a
corporation eligible for the credit pro-
vided by section 936 were a separate
category of income referred to in a sub-
paragraph of section 904(d)(1).
‘‘(V) COORDINATION WITH LIMITA-
TION ON 936 CREDIT.—Any reference in
this clause to a dividend received from
a corporation eligible for the credit
provided by section 936 shall be treated
as a reference to the portion of any
such dividend for which the dividends
received deduction is disallowed under
531
HR 2264 EAS
clause (i) after the application of
clause (ii)(I).’’
(d) CONFORMING AMENDMENT.—Paragraph (4) of sec-
tion 904(b) is amended by inserting before the period at
the end thereof the following: ‘‘(without regard to sub-
sections (a)(4) and (i) thereof)’’.
(e) INCREASE IN LIMITATION ON COVER OVER.—Para-
graph (1) of section 7652(f) is amended to read as follows:
‘‘(1) $10.50 ($11.30 in the case of distilled spir-
its brought into the United States during the 5-year
period beginning on July 1, 1995), or.’’
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1993; except that the amendment made by subsection
(e) shall take effect on October 1, 1993.
SEC. 8228. MODIFICATION TO LIMITATION ON DEDUCTION
FOR CERTAIN INTEREST.
(a) GENERAL RULE.—Paragraph (3) of section 163(j)
(defining disqualified interest) is amended to read as fol-
lows:
‘‘(3) DISQUALIFIED INTEREST.—For purposes of
this subsection, the term ‘disqualified interest’
means—
‘‘(A) any interest paid or accrued by the
taxpayer (directly or indirectly) to a related per-
532
HR 2264 EAS
son if no tax is imposed by this subtitle with re-
spect to such interest, and
‘‘(B) any interest paid or accrued by the
taxpayer with respect to any indebtedness to a
person who is not a related person if—
‘‘(i) there is a disqualified guarantee of
such indebtedness, and
‘‘(ii) no gross basis tax is imposed by
this subtitle with respect to such interest.’’
(b) DEFINITIONS.—Paragraph (6) of section 163(j) is
amended by adding at the end thereof the following new
subparagraphs:
‘‘(D) DISQUALIFIED GUARANTEE.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), the term ‘disqualified guaran-
tee’ means any guarantee by a related per-
son which is—
‘‘(I) an organization exempt from
taxation under this subtitle, or
‘‘(II) a foreign person.
‘‘(ii) EXCEPTIONS.—The term ‘dis-
qualified guarantee’ shall not include a
guarantee—
‘‘(I) in any circumstances identi-
fied by the Secretary by regulation,
533
HR 2264 EAS
where the interest on the indebtedness
would have been subject to a net basis
tax if the interest had been paid to the
guarantor, or
‘‘(II) if the taxpayer owns a con-
trolling interest in the guarantor.
For purposes of subclause (II), except as
provided in regulations, the term ‘a control-
ling interest’ means direct or indirect own-
ership of at least 80 percent of the total vot-
ing power and value of all classes of stock
of a corporation, or 80 percent of the profit
and capital interests in any other entity.
For purposes of the preceding sentence, the
rules of paragraphs (1) and (5) of section
267(c) shall apply; except that such rules
shall also apply to interest in entities other
than corporations.
‘‘(iii) GUARANTEE.—Except as pro-
vided in regulations, the term ‘guarantee’
includes any arrangement under which a
person (directly or indirectly through an
entity or otherwise) assures, on a condi-
tional or unconditional basis, the payment
534
HR 2264 EAS
of another person’s obligation under any in-
debtedness.
‘‘(E) 
GROSS
BASIS
AND
NET
BASIS
TAXATION.—
‘‘(i) GROSS
BASIS
TAX.—The term
‘gross basis tax’ means any tax imposed by
this subtitle which is determined by ref-
erence to the gross amount of any item of
income without any reduction for any de-
duction allowed by this subtitle.
‘‘(ii) NET BASIS TAX.—The term ‘net
basis tax’ means any tax imposed by this
subtitle which is a not a gross basis tax.’’
(c) CONFORMING AMENDMENT.—Subparagraph (B) of
section 163(j)(5) is amended by striking ‘‘to a related per-
son’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to interest paid or accrued in taxable
years beginning after December 31, 1993.
535
HR 2264 EAS
PART III—FOREIGN TAX PROVISIONS
Subpart A—Current Taxation of Certain Earnings of
Controlled Foreign Corporations
SEC. 8231. EARNINGS INVESTED IN EXCESS PASSIVE AS-
SETS.
(a) GENERAL RULE.—Paragraph (1) of section 951(a)
(relating to amounts included in gross income of United
States shareholders) 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 thereof the following new subparagraph:
‘‘(C) the amount determined under section
956A with respect to such shareholder for such
year (but only to the extent not excluded from
gross income under section 959(a)(3)).’’
(b) AMOUNT OF INCLUSION.—Subpart F of part III
of subchapter N of chapter 1 is amended by inserting after
section 956 the following new section:
‘‘SEC. 956A. EARNINGS INVESTED IN EXCESS PASSIVE AS-
SETS.
‘‘(a) GENERAL RULE.—In the case of any controlled
foreign corporation, the amount determined under this sec-
tion with respect to any United States shareholder for any
taxable year is the lesser of—
‘‘(1) the excess (if any) of—
536
HR 2264 EAS
‘‘(A) such shareholder’s pro rata share of the
amount of the controlled foreign corporation’s ex-
cess passive assets for such taxable year, over
‘‘(B) the amount of earnings and profits de-
scribed in section 959(c)(1)(B) with respect to
such shareholder, or
‘‘(2) such shareholder’s pro rata share of the ap-
plicable earnings of such controlled foreign corpora-
tion determined after the application of section
951(a)(1)(B).
‘‘(b) APPLICABLE EARNINGS.—For purposes of this
section, the term ‘applicable earnings’ means, with respect
to any controlled foreign corporation, the sum of—
‘‘(1) the amount referred to in section 316(a)(1)
to the extent such amount was accumulated in taxable
years beginning after September 30, 1993, and
‘‘(2) the amount referred to in section 316(a)(2),
but reduced by distributions made during the taxable year
and reduced by the earnings and profits described in section
959(c)(1) to the extent that the earnings and profits so de-
scribed were accumulated in taxable years beginning after
September 30, 1993.
‘‘(c) EXCESS PASSIVE ASSETS.—For purposes of this
section—
537
HR 2264 EAS
‘‘(1) IN GENERAL.—The excess passive assets of
any controlled foreign corporation for any taxable
year is the excess (if any) of—
‘‘(A) the average of the amounts of passive
assets held by such corporation as of the close of
each quarter of such taxable year, over
‘‘(B) 25 percent of the average of the
amounts of total assets held by such corporation
as of the close of each quarter of such taxable
year.
For purposes of the preceding sentence, the amount
taken into account with respect to any asset shall be
its adjusted basis as determined for purposes of com-
puting earnings and profits.
‘‘(2) PASSIVE ASSET.—
‘‘(A) IN
GENERAL.—Except as otherwise
provided in this section, the term ‘passive asset’
means any asset held by the controlled foreign
corporation which produces passive income (as
defined in section 1296(b)) or is held for the pro-
duction of such income.
‘‘(B) COORDINATION WITH SECTION 956.—
The term ‘passive asset’ shall not include any
United States property (as defined in section
956).
538
HR 2264 EAS
‘‘(3) CERTAIN RULES TO APPLY.—For purposes of
this subsection, the rules of the following provisions
shall apply:
‘‘(A) Section 1296(c) (relating to look-thru
rules).
‘‘(B) Section 1297(d) (relating to leasing
rules).
‘‘(C) Section 1297(e) (relating to intangible
property).
‘‘(d) TREATMENT
OF CERTAIN CHAINS
OF CON-
TROLLED FOREIGN CORPORATION.—
‘‘(1) IN
GENERAL.—For purposes of applying
subsection (c)—
‘‘(A) all controlled foreign corporations
which are members of the same CFC chain shall
be treated as 1 controlled foreign corporation,
and
‘‘(B) the amount of the excess passive assets
determined with respect to such 1 corporation
shall be allocated among the controlled foreign
corporations which are members of such chain in
proportion to their respective amounts of appli-
cable earnings.
‘‘(2) CFC CHAIN.—For purposes of paragraph
(1), the term ‘CFC chain’ means any chain of con-
539
HR 2264 EAS
trolled foreign corporations connected through stock
ownership, but only if more than 50 percent (by vote
or value) of the stock of each member of such chain
(other than the top tier corporation) is owned (di-
rectly or indirectly) by one or more other members of
the chain.
‘‘(e) SPECIAL RULE WHERE CORPORATION CEASES TO
BE CONTROLLED FOREIGN CORPORATION DURING TAX-
ABLE YEAR.—If any foreign corporation ceases to be a con-
trolled foreign corporation during any taxable year—
‘‘(1) the determination of any United States
shareholder’s pro rata share shall be made on the
basis of stock owned (within the meaning of section
958(a)) by such shareholder on the last day during
the taxable year on which the foreign corporation is
a controlled foreign corporation, and
‘‘(2) the amount of such corporation’s excess pas-
sive assets for such taxable year shall be determined
by only taking into account quarters ending on or be-
fore such last day, and
‘‘(3) in determining applicable earnings, the
amount taken into account by reason of being de-
scribed in paragraph (2) of section 316(a) shall be the
portion of the amount so described which is allocable
(on a pro rata basis) to the part of such year during
540
HR 2264 EAS
which the corporation is a controlled foreign corpora-
tion.
‘‘(f) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section, including regulations to prevent the
avoidance of the provisions of this section through reorga-
nizations or otherwise.’’
(c) PREVIOUSLY TAXED INCOME RULES.—
(1) IN GENERAL.—Subsection (a) of section 959
(relating to exclusion from gross income of previously
taxed earnings and profits) is amended by striking
‘‘or’’ at the end of paragraph (1), by adding ‘‘or’’ at
the end of paragraph (2), and by inserting after
paragraph (2) the following new paragraph:
‘‘(3) such amounts would, but for this subsection,
be included under section 951(a)(1)(C) in the gross
income of,’’.
(2) ALLOCATION RULES.—
(A) Subsection (a) of section 959 is amend-
ed by adding at the end thereof the following new
sentence: ‘‘The rules of subsection (c) shall apply
for purposes of paragraph (1) of this subsection
and the rules of subsection (f) shall apply for
purposes of paragraphs (2) and (3) of this sub-
section.’’.
541
HR 2264 EAS
(B) Section 959 is amended by adding at
the end thereof the following new subsection:
‘‘(f) ALLOCATION RULES FOR CERTAIN INCLUSIONS.—
‘‘(1) IN
GENERAL.—For purposes of this sec-
tion—
‘‘(A) amounts that would be included under
subparagraph (B) of section 951(a)(1) (deter-
mined without regard to this section) shall be
treated as attributable first to earnings described
in subsection (c)(2), and then to earnings de-
scribed in subsection (c)(3), and
‘‘(B) amounts that would be included under
subparagraph (C) of section 951(a)(1) (deter-
mined without regard to this section) shall be
treated as attributable first to earnings described
in subsection (c)(2) to the extent the earnings so
described were accumulated in taxable years be-
ginning after September 30, 1993, and then to
earnings described in subsection (c)(3).
‘‘(2) TREATMENT OF DISTRIBUTIONS.—In apply-
ing this section, actual distributions shall be taken
into account before amounts that would be included
under subparagraphs (B) and (C) of section 951(a)(1)
(determined without regard to this section).’’
542
HR 2264 EAS
(C) Paragraph (1) of section 959(c) is
amended to read as follows:
‘‘(1) first to the aggregate of—
‘‘(A) earnings and profits attributable to
amounts included in gross income under section
951(a)(1)(B) (or which would have been included
except for subsection (a)(2) of this section), and
‘‘(B) earnings and profits attributable to
amounts included in gross income under section
951(a)(1)(C) (or which would have been included
except for subsection (a)(3) of this section),
with any distribution being allocated between earn-
ings and profits described in subparagraph (A) and
earnings and profits described in subparagraph (B)
proportionately on the basis of the respective amounts
of such earnings and profits,’’.
(3) CONFORMING AMENDMENTS.—
(A) Subsections (a) and (b) of section 959
are each amended by striking ‘‘earnings and
profits for a taxable year’’ and inserting ‘‘earn-
ings and profits’’.
(B) Paragraph (2) of section 959(c) is
amended to read as follows:
‘‘(2) then to earnings and profits attributable to
amounts included in gross income under section
543
HR 2264 EAS
951(a)(1)(A) (but reduced by amounts not included
under subparagraph (B) or (C) of section 951(a)(1)
because of the exclusions in paragraphs (2) and (3)
of subsection (a) of this section), and’’
(C) Subsection (b) of section 989 is amend-
ed by striking ‘‘section 951(a)(1)(B)’’ and insert-
ing ‘‘subparagraph (B) or (C) of section
951(a)(1)’’.
(d) MODIFICATIONS
TO PASSIVE FOREIGN INVEST-
MENT COMPANY RULES.—
(1) ADJUSTED BASIS USED IN CERTAIN DETER-
MINATIONS.—Subsection (a) of section 1296 is amend-
ed by striking the material following paragraph (2)
and inserting the following:
‘‘In the case of a controlled foreign corporation (or any
other foreign corporation if such corporation so elects), the
determination under paragraph (2) shall be based on the
adjusted bases (as determined for purposes of computing
earnings and profits) of its assets in lieu of their value.
Such an election, once made, may be revoked only with the
consent of the Secretary.’’
(2) TREATMENT OF CERTAIN SUBPART F INCLU-
SIONS.—Subsection (b) of section 1297 is amended by
adding at the end thereof the following new para-
graph:
544
HR 2264 EAS
‘‘(9) TREATMENT OF CERTAIN SUBPART F INCLU-
SIONS.—Any amount included in gross income under
subparagraph (B) or (C) of section 951(a)(1) shall be
treated as a distribution received with respect to the
stock.’’
(3) TREATMENT OF CERTAIN DEALERS IN SECU-
RITIES.—Subsection (b) of section 1296 is amended
by adding at the end thereof the following new para-
graph:
‘‘(3) TREATMENT OF CERTAIN DEALERS IN SECU-
RITIES.—
‘‘(A) IN GENERAL.—In the case of any for-
eign corporation which is a controlled foreign
corporation (as defined in section 957(a)), the
term ‘passive income’ does not include any in-
come derived in the active conduct of a securities
business by such corporation if such corporation
is registered as a securities broker or dealer
under section 15(a) of the Securities Exchange
Act of 1934 or is registered as a Government se-
curities broker or dealer under section 15C(a) of
such Act. To the extent provided in regulations,
such term shall not include any income derived
in the active conduct of a securities business by
545
HR 2264 EAS
a controlled foreign corporation which is not so
registered.
‘‘(B) 
APPLICATION
OF
LOOK-THRU
RULES.—For purposes of paragraph (2)(C),
rules similar to the rules of subparagraph (A) of
this paragraph shall apply in determining
whether any income of a related person (whether
or not a corporation) is passive income.
‘‘(C) LIMITATION.—The preceding provi-
sions of this paragraph shall only apply in the
case of persons who are United States sharehold-
ers (as defined in section 951(b)) in the con-
trolled foreign corporation.’’
(4) LEASING AND INTANGIBLE ASSET RULES.—
Section 1297 is amended by redesignating subsection
(d) as subsection (f) and by inserting after subsection
(c) the following new subsections:
‘‘(d) TREATMENT OF CERTAIN LEASED PROPERTY.—
For purposes of this part:
‘‘(1) IN GENERAL.—Any tangible personal prop-
erty with respect to which a foreign corporation is the
lessee under a lease with a term of at least 12 months
shall be treated as an asset actually held by such cor-
poration.
‘‘(2) DETERMINATION OF ADJUSTED BASIS.—
546
HR 2264 EAS
‘‘(A) IN GENERAL.—The adjusted basis of
any asset to which paragraph (1) applies shall
be the unamortized portion (as determined under
regulations prescribed by the Secretary) of the
present value of the payments under the lease for
the use of such property.
‘‘(B) PRESENT
VALUE.—For purposes of
subparagraph (A), the present value of payments
described in subparagraph (A) shall be deter-
mined in the manner provided in regulations
prescribed by the Secretary—
‘‘(i) as of the beginning of the lease
term, and
‘‘(ii) except as provided in such regula-
tions, by using a discount rate equal to the
applicable Federal rate determined under
section 1274(d)—
‘‘(I) by substituting the lease term
for the term of the debt instrument,
and
‘‘(II) without regard to paragraph
(2) or (3) thereof.
‘‘(3) EXCEPTIONS.—This subsection shall not
apply in any case where—
547
HR 2264 EAS
‘‘(A) the lessor is a related person (as de-
fined in section 954(d)(3)) with respect to the
foreign corporation, or
‘‘(B) a principal purpose of leasing the
property was to avoid the provisions of this
section.
‘‘(e) SPECIAL RULES FOR CERTAIN INTANGIBLES.—
‘‘(1) RESEARCH EXPENDITURES.—The adjusted
basis of the total assets of a controlled foreign cor-
poration shall be increased by the research or experi-
mentation expenditures (within the meaning of sec-
tion 174) paid or incurred by such foreign corpora-
tion during the taxable year and the preceding 2 tax-
able years.
‘‘(2) CERTAIN LICENSED INTANGIBLES.—In the
case of any intangible property (as defined in section
936(h)(3)(B)) with respect to which a controlled for-
eign corporation is a licensee and which is used by
such foreign corporation in the active conduct of a
trade or business, the adjusted basis of the total assets
of such foreign corporation shall be increased by an
amount equal to 300 percent of the payments made
during the taxable year for the use of such intangible
property. For purposes of the preceding sentence, pay-
ments to a foreign person shall not be taken into ac-
548
HR 2264 EAS
count if such foreign person is a related person (as
defined in section 954(d)(3)) with respect to the con-
trolled foreign corporation.
‘‘(3) CONTROLLED FOREIGN CORPORATION.—For
purposes of this subsection, the term ‘controlled for-
eign corporation’ has the meaning given such term by
section 957(a).’’
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years of foreign corporations
beginning after September 30, 1993, and to taxable years
of United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 8232. MODIFICATION TO TAXATION OF INVESTMENT IN
UNITED STATES PROPERTY.
(a) GENERAL RULE.—Section 956 (relating to invest-
ment of earnings in United States property) is amended—
(1) by redesignating subsections (b) and (c) as
subsections (c) and (d), respectively, and
(2) by striking subsection (a) and inserting the
following:
‘‘(a) GENERAL RULE.—In the case of any controlled
foreign corporation, the amount determined under this sec-
tion with respect to any United States shareholder for any
taxable year is the lesser of—
‘‘(1) the excess (if any) of—
549
HR 2264 EAS
‘‘(A) such shareholder’s pro rata share of the
average of the amounts of United States property
held (directly or indirectly) by the controlled for-
eign corporation as of the close of each quarter
of such taxable year, over
‘‘(B) the amount of earnings and profits de-
scribed in section 959(c)(1)(A) with respect to
such shareholder, or
‘‘(2) such shareholder’s pro rata share of the ap-
plicable earnings of such controlled foreign corpora-
tion.
The amount taken into account under paragraph (1) with
respect to any property shall be its adjusted basis as deter-
mined for purposes of computing earnings and profits, re-
duced by any liability to which the property is subject.
‘‘(b) ADJUSTMENTS
FOR CERTAIN DISTRIBUTIONS;
OTHER SPECIAL RULES.—
‘‘(1) APPLICABLE
EARNINGS.—For purposes of
this section, the term ‘applicable earnings’ has the
meaning given to such term by section 956A(b), ex-
cept that the provisions of such section disregarding
earnings and profits accumulated in taxable years be-
ginning before October 1, 1993 shall be disregarded.
‘‘(2) 
SPECIAL
RULE
WHERE
CORPORATION
CEASES
TO
BE
CONTROLLED
FOREIGN
CORPORA-
550
HR 2264 EAS
TION.—Rules similar to the rules of section 956A(e)
shall apply for purposes of this section.’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 951(a)(1) is
amended to read as follows:
‘‘(B) the amount determined under section
956 with respect to such shareholder for such
year (but only to the extent not excluded from
gross income under section 959(a)(2)); and’’
(2) Subsection (a) of section 951 is amended by
striking paragraph (4).
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years of controlled foreign cor-
porations beginning after September 30, 1993, and to tax-
able years of United States shareholders in which or with
which such taxable years of controlled foreign corporations
end.
SEC. 8233. OTHER MODIFICATIONS TO SUBPART F.
(a) SAME COUNTRY EXCEPTION NOT TO APPLY TO
CERTAIN DIVIDENDS.—
(1) IN
GENERAL.—Paragraph (3) of section
954(c) (relating to certain income received from relat-
ed persons) is amended by adding at the end thereof
the following new subparagraph:
551
HR 2264 EAS
‘‘(C) 
EXCEPTION
FOR
CERTAIN
DIVI-
DENDS.—Subparagraph (A)(i) shall not apply to
any dividend with respect to any stock which is
attributable to earnings and profits of the dis-
tributing corporation accumulated during any
period during which the person receiving such
dividend did not hold such stock.’’
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to taxable years of con-
trolled foreign corporations beginning after September
30, 1993, and to taxable years of United States share-
holders in which or with which such taxable years of
controlled foreign corporations end.
(b) SIMPLIFICATION OF SECTION 960(b).—
(1) IN GENERAL.—Subsection (b) of section 960
is amended—
(A) by redesignating paragraphs (3) and
(4) as paragraphs (4) and (5), respectively, and
(B) by striking paragraphs (1) and (2) and
inserting the following new paragraphs:
‘‘(1) INCREASE IN SECTION 904 LIMITATION.—In
the case of any taxpayer who—
‘‘(A) either (i) chose to have the benefits of
subpart A of this part for a taxable year begin-
ning after September 30, 1993, in which he was
552
HR 2264 EAS
required under section 951(a) to include any
amount in his gross income, or (ii) did not pay
or accrue for such taxable year any income, war
profits, or excess profits taxes to any foreign
country or to any possession of the United
States,
‘‘(B) chooses to have the benefits of subpart
A of this part for any taxable year in which he
receives 1 or more distributions or amounts
which are excludable from gross income under
section 959(a) and which are attributable to
amounts included in his gross income for taxable
years referred to in subparagraph (A), and
‘‘(C) for the taxable year in which such dis-
tributions or amounts are received, pays, or is
deemed to have paid, or accrues income, war
profits, or excess profits taxes to a foreign coun-
try or to any possession of the United States
with respect to such distributions or amounts,
the limitation under section 904 for the taxable year
in which such distributions or amounts are received
shall be increased by the lesser of the amount of such
taxes paid, or deemed paid, or accrued with respect
to such distributions or amounts or the amount in the
553
HR 2264 EAS
excess limitation account as of the beginning of such
taxable year.
‘‘(2) EXCESS LIMITATION ACCOUNT.—
‘‘(A) ESTABLISHMENT OF ACCOUNT.—Each
taxpayer meeting the requirements of paragraph
(1)(A) shall establish an excess limitation ac-
count. The opening balance of such account shall
be zero.
‘‘(B) INCREASES
IN
ACCOUNT.—For each
taxable year beginning after September 30, 1993,
the taxpayer shall increase the amount in the ex-
cess limitation account by the excess (if any)
of—
‘‘(i) the amount by which the limita-
tion under section 904(a) for such taxable
year was increased by reason of the total
amount of the inclusions in gross income
under section 951(a) for such taxable year,
over
‘‘(ii) the amount of any income, war
profits, and excess profits taxes paid, or
deemed paid, or accrued to any foreign
country or possession of the United States
which were allowable as a credit under sec-
tion 901 for such taxable year and which
554
HR 2264 EAS
would not have been allowable but for the
inclusions in gross income described in
clause (i).
Proper reductions in the amount added to the
account under the preceding sentence for any
taxable year shall be made for any increase in
the credit allowable under section 901 for such
taxable year by reason of a carryback if such in-
crease would not have been allowable but for the
inclusions in gross income described in clause
(i).
‘‘(C) DECREASES
IN
ACCOUNT.—For each
taxable year beginning after September 30, 1993,
for which the limitation under section 904 was
increased under paragraph (1), the taxpayer
shall reduce the amount in the excess limitation
account by the amount of such increase.
‘‘(3) DISTRIBUTIONS
OF
INCOME
PREVIOUSLY
TAXED
IN
YEARS
BEGINNING
BEFORE
OCTOBER
1,
1993.—If the taxpayer receives a distribution or
amount in a taxable year beginning after September
30, 1993, which is excluded from gross income under
section 959(a) and is attributable to any amount in-
cluded in gross income under section 951(a) for a tax-
able year beginning before October 1, 1993, the limi-
555
HR 2264 EAS
tation under section 904 for the taxable year in which
such amount or distribution is received shall be in-
creased by the amount determined under this sub-
section as in effect on the day before the date of the
enactment of the Revenue Reconcilation Act of 1993.’’
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to taxable years beginning
after September 30, 1993.
Subpart B—Allocation of Research and Experimental
Expenditures
SEC. 8234. ALLOCATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
(a) GENERAL RULE.—Subparagraph (B) of section
864(f)(1) (relating to allocation of research and experi-
mental expenditures) is amended by striking ‘‘64 percent’’
each place it appears and inserting ‘‘50 percent’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsection (f) of section 864 is amended by
striking paragraph (5) and inserting the following
new paragraphs:
‘‘(5) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be appropriate to
carry out the purposes of this subsection, including
regulations relating to the determination of whether
any expenses are attributable to activities conducted
556
HR 2264 EAS
in the United States or outside the United States and
regulations providing such adjustments to the provi-
sions of this subsection as may be appropriate in the
case of cost-sharing arrangements and contract re-
search.
‘‘(6) 
APPLICABILITY.—This 
subsection 
shall
apply to the taxpayer’s first taxable year (beginning
on or before August 1, 1994) following the taxpayer’s
last taxable year to which Revenue Procedure 92–56
applies or would apply if the taxpayer elected the
benefits of such Revenue Procedure.’’
(2) Subparagraph (D) of section 864(f)(4) is
amended by striking ‘‘subparagraph (C)’’ and insert-
ing ‘‘subparagraph (B) or (C)’’.
Subpart C—Other Provisions
SEC. 8235. REPEAL OF CERTAIN EXCEPTIONS FOR WORKING
CAPITAL.
(a) PROVISIONS RELATING
TO OIL
AND GAS IN-
COME.—
(1) AMENDMENTS TO SECTION 907.—
(A) Paragraph (1) of section 907(c) is
amended by adding at the end thereof the follow-
ing new flush sentence:
557
HR 2264 EAS
‘‘Such term does not include any dividend or interest in-
come which is passive income (as defined in section
904(d)(2)(A)).’’.
(B) Paragraph (2) of section 907(c) is
amended by adding at the end thereof the follow-
ing new flush sentence:
‘‘Such term does not include any dividend or interest in-
come which is passive income (as defined in section
904(d)(2)(A)).’’.
(2) SEPARATE
APPLICATION
OF
FOREIGN
TAX
CREDIT.—Clause (iii) of section 904(d)(2)(A) is
amended by inserting ‘‘and’’ at the end of subclause
(II), by striking ‘‘, and’’ at the end of subclause (III)
and inserting a period, and by striking subclause
(IV).
(3) TREATMENT UNDER SUBPART F.—
(A) Paragraph (1) of section 954(g) is
amended by adding at the end thereof the follow-
ing new flush sentence:
Such term shall not include any foreign personal holding
company income (as defined in subsection (c)).’’.
(B) Paragraph (8) of section 954(b) is
amended by striking ‘‘(1),’’.
(b) TREATMENT OF SHIPPING INCOME.—Subsection (f)
of section 954 is amended by adding at the end thereof the
558
HR 2264 EAS
following new sentence: ‘‘Such term shall not include any
dividend or interest income which is foreign personal hold-
ing company income (as defined in subsection (c)).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1992.
SEC. 8236. MODIFICATIONS OF ACCURACY-RELATED PEN-
ALTY.
(a) THRESHOLD REQUIREMENT.—Clause (ii) of sec-
tion 6662(e)(1)(B) (relating to substantial valuation
misstatement under chapter 1) is amended to read as
follows:
‘‘(ii) the net section 482 transfer price
adjustment for the taxable year exceeds the
lesser of $5,000,000 or 10 percent of the tax-
payer’s gross receipts.’’
(b) CERTAIN ADJUSTMENTS EXCLUDED IN DETERMIN-
ING THRESHOLD.—Subparagraph (B) of section 6662(e)(3)
is amended to read as follows:
‘‘(B) CERTAIN ADJUSTMENTS EXCLUDED IN
DETERMINING THRESHOLD.—For purposes of de-
termining whether the threshold requirements of
paragraph (1)(B)(ii) are met, the following shall
be excluded:
559
HR 2264 EAS
‘‘(i) Any portion of the net increase in
taxable income referred to in subparagraph
(A) which is attributable to any redeter-
mination of a price if—
‘‘(I) it is established that the tax-
payer determined such price in accord-
ance with a specific pricing method set
forth in the regulations prescribed
under section 482 and that the tax-
payer’s use of such method was reason-
able,
‘‘(II) the taxpayer has documenta-
tion (which was in existence as of the
time of filing the return) which sets
forth the determination of such price
in accordance with such a method and
which establishes that the use of such
method was reasonable, and
‘‘(III) the taxpayer provides such
documentation to the Secretary within
30 days of a request for such docu-
mentation.
‘‘(ii) Any portion of the net increase in
taxable income referred to in subparagraph
(A) which is attributable to a redetermina-
581
HR 2264 EAS
‘‘(iii) the entry into the United States
of any taxable fuel for consumption, use, or
warehousing, and
‘‘(iv) the sale of a taxable fuel to any
person who is not registered under section
4101 unless there was a prior taxable re-
moval or entry of such fuel under clause (i),
(ii), or (iii).
‘‘(B) EXEMPTION FOR BULK TRANSFERS TO
REGISTERED TERMINALS OR REFINERIES.—The
tax imposed by this paragraph shall not apply
to any removal or entry of a taxable fuel trans-
ferred in bulk to a terminal or refinery if the
person removing or entering the taxable fuel and
the operator of such terminal or refinery are reg-
istered under section 4101.
‘‘(2) RATES OF TAX.—
‘‘(A) IN GENERAL.—The rate of the tax im-
posed by this section is the sum of—
‘‘(i) the Highway Trust Fund financ-
ing rate,
‘‘(ii) the Leaking Underground Storage
Tank Trust Fund financing rate, and
‘‘(iii) the deficit reduction rate.
822
HR 2264 EAS
section (a)(1)(E) shall be considered the date that the indi-
vidual first enters on active duty.’’.
SEC. 13004. PERMANENT EXTENSION OF PROCEDURES AP-
PLICABLE TO LIQUIDATION SALES UPON DE-
FAULT OF HOME LOANS GUARANTEED BY
THE DEPARTMENT OF VETERANS AFFAIRS.
(a) INCLUSION OF RESALE LOSSES IN NET-VALUE
CALCULATION.—Paragraph (1)(C) of section 3732(c) of title
38, United States Code, is amended by inserting ‘‘(includ-
ing losses sustained on the resale of the property)’’ after
‘‘resale’’.
(b) PERMANENT EXTENSION OF AUTHORITY.—Para-
graph (11) of such section is repealed.
SEC. 13005. INCREASE IN CERTAIN LOAN FEES.
(a) FEE INCREASE.—Paragraph (2) of section 3729(a)
of title 38, United States Code, is amended—
(1) in the matter above subparagraph (A), by
striking out ‘‘1.25 percent’’ and inserting in lieu
thereof ‘‘2 percent’’;
(2) in subparagraph (A), by striking out ‘‘one
percent’’ and inserting in lieu thereof ‘‘1 percent’’;
(3) in subparagraph (B), by striking out ‘‘0.75
percent’’ and inserting in lieu thereof ‘‘1.50 percent’’;