I
104TH CONGRESS
2D SESSION
H. R. 2994
To amend the Internal Revenue Code of 1986 to provide for the extension
of certain expiring provisions.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 29, 1996
Mrs. JOHNSON of Connecticut (for herself and Mr. MATSUI) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
for the extension of certain expiring provisions.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. WORK OPPORTUNITY TAX CREDIT.
(a) AMOUNT OF CREDIT.—Subsection (a) of section
51 of the Internal Revenue Code of 1986 (relating to
amount of credit) is amended by striking ‘‘40 percent’’
and inserting ‘‘35 percent’’.
(b) MEMBERS OF TARGETED GROUPS.—Subsection
(d) of section 51 of the Internal Revenue Code of 1986
is amended to read as follows:
‘‘(d) MEMBERS OF TARGETED GROUPS.—For pur-
poses of this subpart—
‘‘(1) IN GENERAL.—An individual is a member
of a targeted group if such individual is—
‘‘(A) a qualified IV–A recipient,
‘‘(B) a qualified veteran,
‘‘(C) a qualified ex-felon,
‘‘(D) a high-risk youth,
‘‘(E) a vocational rehabilitation referral,
‘‘(F) a qualified summer youth employee,
or
‘‘(G) a qualified food stamp recipient.
‘‘(2) QUALIFIED IV–A RECIPIENT.—
‘‘(A) IN
GENERAL.—The term ‘qualified
IV–A recipient’ means any individual who is
certified by the designated local agency as being
a member of a family receiving assistance under
a IV–A program for at least a 9-month period
ending during the 9-month period ending on the
hiring date.
‘‘(B) IV–A PROGRAM.—For purposes of
this paragraph, the term ‘IV–A program’ means
any program providing assistance under a State
plan approved under part A of title IV of the
Social Security Act (relating to assistance for
needy families with minor children) and any
successor of such program.
‘‘(3) QUALIFIED VETERAN.—
‘‘(A) IN
GENERAL.—The term ‘qualified
veteran’ means any veteran who is certified by
the designated local agency as being—
‘‘(i) a member of a family receiving
assistance under a IV–A program (as de-
fined in paragraph (2)(B)) for at least a 9-
month period ending during the 12-month
period ending on the hiring date, or
‘‘(ii) a member of a family receiving
assistance under a food stamp program
under the Food Stamp Act of 1977 for at
least a 3-month period ending during the
12-month period ending on the hiring date.
‘‘(B) VETERAN.—For purposes of subpara-
graph (A), the term ‘veteran’ means any indi-
vidual who is certified by the designated local
agency as—
‘‘(i)(I) having served on active duty
(other than active duty for training) in the
Armed Forces of the United States for a
period of more than 180 days, or
‘‘(II) having been discharged or re-
leased from active duty in the Armed
Forces of the United States for a service-
connected disability, and
‘‘(ii) not having any day during the
60-day period ending on the hiring date
which was a day of extended active duty in
the Armed Forces of the United States.
For purposes of clause (ii), the term ‘extended
active duty’ means a period of more than 90
days during which the individual was on active
duty (other than active duty for training).
‘‘(4) QUALIFIED EX-FELON.—The term ‘quali-
fied ex-felon’ means any individual who is certified
by the designated local agency—
‘‘(A) as having been convicted of a felony
under any statute of the United States or any
State,
‘‘(B) as having a hiring date which is not
more than 1 year after the last date on which
such individual was so convicted or was released
from prison, and
‘‘(C) as being a member of a family which
had an income during the 6 months imme-
diately preceding the earlier of the month in
which such income determination occurs or the
month in which the hiring date occurs, which,
on an annual basis, would be 70 percent or less
of the Bureau of Labor Statistics lower living
standard.
Any determination under subparagraph (C) shall be
valid for the 45-day period beginning on the date
such determination is made.
‘‘(5) HIGH-RISK YOUTH.—
‘‘(A) IN
GENERAL.—The term ‘high-risk
youth’ means any individual who is certified by
the designated local agency—
‘‘(i) as having attained age 18 but not
age 25 on the hiring date, and
‘‘(ii) as having his principal place of
abode within an empowerment zone or en-
terprise community.
‘‘(B) YOUTH MUST CONTINUE TO RESIDE
IN ZONE.—In the case of a high-risk youth, the
term ‘qualified wages’ shall not include wages
paid or incurred for services performed while
such youth’s principal place of abode is outside
an empowerment zone or enterprise community.
‘‘(6) VOCATIONAL
REHABILITATION
REFER-
RAL.—The term ‘vocational rehabilitation referral’
means any individual who is certified by the des-
ignated local agency as—
‘‘(A) having a physical or mental disability
which, for such individual, constitutes or results
in a substantial handicap to employment, and
‘‘(B) having been referred to the employer
upon completion of (or while receiving) rehabili-
tative services pursuant to—
‘‘(i) an individualized written rehabili-
tation plan under a State plan for voca-
tional 
rehabilitation 
services 
approved
under the Rehabilitation Act of 1973, or
‘‘(ii) a program of vocational rehabili-
tation carried out under chapter 31 of title
38, United States Code.
‘‘(7) QUALIFIED SUMMER YOUTH EMPLOYEE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
summer youth employee’ means any individ-
ual—
‘‘(i) who performs services for the em-
ployer between May 1 and September 15,
‘‘(ii) who is certified by the designated
local agency as having attained age 16 but
not 18 on the hiring date (or if later, on
May 1 of the calendar year involved),
‘‘(iii) who has not been an employee
of the employer during any period prior to
the 90-day period described in subpara-
graph (B)(i), and
‘‘(iv) who is certified by the des-
ignated local agency as—
‘‘(I) having his principal place of
abode within an empowerment zone or
enterprise community, or
‘‘(II) being a member of a family
receiving assistance under a food
stamp 
program 
under 
the 
Food
Stamp Act of 1977 for at least a 3-
month period ending during the 12-
month period ending on the hiring
date.
‘‘(B) SPECIAL RULES FOR DETERMINING
AMOUNT OF CREDIT.—For purposes of applying
this subpart to wages paid or incurred to any
qualified summer youth employee—
‘‘(i) subsection (b)(2) shall be applied
by substituting ‘any 90-day period between
May 1 and September 15’ for ‘the 1-year
period beginning with the day the individ-
ual begins work for the employer’, and
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$3,000’ for ‘$6,000’.
The preceding sentence shall not apply to an in-
dividual who, with respect to the same em-
ployer, is certified as a member of another tar-
geted group after such individual has been a
qualified summer youth employee.
‘‘(C) YOUTH MUST CONTINUE TO RESIDE
IN
ZONE.—Paragraph (5)(B) shall apply for
purposes of subparagraph (A)(iv)(I).
‘‘(8) QUALIFIED FOOD STAMP RECIPIENT.—
‘‘(A) IN
GENERAL.—The term ‘qualified
food stamp recipient’ means any individual who
is certified by the designated local agency—
‘‘(i) as having attained age 18 but not
age 25 on the hiring date, and
‘‘(ii) as being a member of a family
receiving assistance under a food stamp
program under the Food Stamp Act of
1977 for at least a 3-month period ending
during the 12-month period ending on the
hiring date.
‘‘(9) HIRING
DATE.—The term ‘hiring date’
means the day the individual is hired by the em-
ployer.
‘‘(10) DESIGNATED LOCAL AGENCY.—The term
‘designated local agency’ means a State employment
security agency established in accordance with the
Act of June 6, 1933, as amended (29 U.S.C. 49–
49n).
‘‘(11) SPECIAL RULES FOR CERTIFICATIONS.—
‘‘(A) IN
GENERAL.—An individual shall
not be treated as a member of a targeted group
unless—
‘‘(i) on or before the day on which
such individual begins work for the em-
ployer, the employer has received a certifi-
cation from a designated local agency that
such individual is a member of a targeted
group, or
‘‘(ii)(I) on or before the day the indi-
vidual is offered employment with the em-
ployer, a pre-screening notice is completed
by the employer with respect to such indi-
vidual, and
‘‘(II) not later than the 30th day after
the individual begins work for the em-
ployer, the employer submits such notice,
signed by the employer under penalties of
perjury, to the designated local agency as
part of a written request for such a certifi-
cation from such agency.
For purposes of this paragraph, the term ‘pre-
screening notice’ means a document (in such
form as the Secretary shall prescribe) which
contains information provided by the individual
on the basis of which the employer believes that
the individual is a member of a targeted group.
‘‘(B) INCORRECT CERTIFICATIONS.—If—
‘‘(i) an individual has been certified
by a designated local agency as a member
of a targeted group, and
‘‘(ii) such certification is incorrect be-
cause it was based on false information
provided by such individual,
the certification shall be revoked and wages
paid by the employer after the date on which
notice of revocation is received by the employer
shall not be treated as qualified wages.
‘‘(C) EXPLANATION
OF
DENIAL
OF
RE-
QUEST.—If a designated local agency denies a
request for certification of membership in a tar-
geted group, such agency shall provide to the
person making such request a written expla-
nation of the reasons for such denial.’’.
(e) REDESIGNATION OF CREDIT.—
(1) Sections 38(b)(2) and 51(a) of the Internal
Revenue Code of 1986 are each amended by striking
‘‘targeted jobs credit’’ and inserting ‘‘work oppor-
tunity credit’’.
(2) The subpart heading for subpart F of part
IV of subchapter A of chapter 1 of such Code is
amended by striking ‘‘Targeted Jobs Credit’’
and inserting ‘‘Work Opportunity Credit’’.
(3) The table of subparts for such part IV is
amended by striking ‘‘targeted jobs credit’’ and in-
serting ‘‘work opportunity credit’’.
(4) The heading for paragraph (3) of section
1396(c) of such Code is amended by striking ‘‘TAR-
GETED JOBS CREDIT’’ and inserting ‘‘WORK OPPOR-
TUNITY CREDIT’’.
(f) TECHNICAL AMENDMENTS.—
(1) Paragraph (1) of section 51(c) of the Inter-
nal Revenue Code of 1986 is amended by striking
‘‘, subsection (d)(8)(D),’’.
(2) Paragraph (3) of section 51(i) of such Code
is amended by striking ‘‘(d)(12)’’ each place it ap-
pears and inserting ‘‘(d)(6)’’.
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to individuals who begin work for
the employer on or after the 60th day after the date of
the enactment of this Act.
SEC. 2. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE
PROGRAMS.
(a) EXTENSION.—Subsection (d) of section 127 of
the Internal Revenue Code of 1986 (relating to edu-
cational assistance programs) is amended by striking ‘‘De-
cember 31, 1994’’ and inserting ‘‘December 31, 1997’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 3. RESEARCH CREDIT.
(a) IN GENERAL.—Subsection (h) of section 41 of the
Internal Revenue Code of 1986 (relating to credit for re-
search activities) is amended—
(1) by striking ‘‘June 30, 1995’’ each place it
appears and inserting ‘‘December 31, 1997’’, and
(2) by striking ‘‘July 1, 1995’’ each place it ap-
pears and inserting ‘‘January 1, 1998’’.
(b) BASE AMOUNT FOR START-UP COMPANIES.—
Clause (i) of section 41(c)(3)(B) of the Internal Revenue
Code of 1986 (relating to start-up companies) is amended
to read as follows:
‘‘(i) TAXPAYERS TO WHICH SUBPARA-
GRAPH APPLIES.—The fixed-base percent-
age shall be determined under this sub-
paragraph if—
‘‘(I) the first taxable year in
which a taxpayer had both gross re-
ceipts and qualified research expenses
begins after December 31, 1983, or
‘‘(II) there are fewer than 3 tax-
able years beginning after December
31, 1983, and before January 1,
1989, in which the taxpayer had both
gross receipts and qualified research
expenses.’’.
(c) ELECTION
OF
ALTERNATIVE
INCREMENTAL
CREDIT.—Subsection (c) of section 41 of the Internal
Revenue Code of 1986 is amended by redesignating para-
graphs (4) and (5) as paragraphs (5) and (6), respectively,
and by inserting after paragraph (3) the following new
paragraph:
‘‘(4) ELECTION
OF
ALTERNATIVE
INCREMEN-
TAL CREDIT.—
‘‘(A) IN GENERAL.—At the election of the
taxpayer, the credit determined under sub-
section (a)(1) shall be equal to the sum of—
‘‘(i) 1.65 percent of so much of the
qualified research expenses for the taxable
year as exceeds 1 percent of the average
described in subsection (c)(1)(B) but does
not exceed 1.5 percent of such average,
‘‘(ii) 2.2 percent of so much of such
expenses as exceeds 1.5 percent of such av-
erage but does not exceed 2 percent of
such average, and
‘‘(iii) 2.75 percent of so much of such
expenses as exceeds 2 percent of such aver-
age.
‘‘(B) ELECTION.—An election under this
paragraph may be made only for the first tax-
able year of the taxpayer beginning after June
30, 1995. Such an election shall apply to the
taxable year for which made and all succeeding
taxable years unless revoked with the consent
of the Secretary.’’.
(d) INCREASED CREDIT FOR CONTRACT RESEARCH
EXPENSES WITH RESPECT TO CERTAIN RESEARCH CON-
SORTIA.—Paragraph (3) of section 41(b) of the Internal
Revenue Code of 1986 is amended by adding at the end
the following new subparagraph:
‘‘(C) AMOUNTS
PAID
TO
CERTAIN
RE-
SEARCH CONSORTIA.—
‘‘(i) IN GENERAL.—Subparagraph (A)
shall be applied by substituting ‘75 per-
cent’ for ‘65 percent’ with respect to
amounts paid or incurred by the taxpayer
to a qualified research consortium for
qualified research.
‘‘(ii) QUALIFIED RESEARCH CONSOR-
TIUM.—The term ‘qualified research con-
sortium’ means any organization described
in subsection (e)(6)(B) if—
‘‘(I) at least 15 unrelated tax-
payers paid (during the calendar year
in which the taxable year of the tax-
payer begins) amounts to such organi-
zation for qualified research,
‘‘(II) no 3 persons paid during
such calendar year more than 50 per-
cent of the total amounts paid during
such calendar year for qualified re-
search, and
‘‘(III) 
no 
person 
contributed
more than 20 percent of such total
amounts.
For purposes of subclause (I), all persons
treated as a single employer under sub-
section (a) or (b) of section 52 shall be
treated as related taxpayers.’’.
(e) CONFORMING AMENDMENT.—Subparagraph (D)
of section 28(b)(1) of the Internal Revenue Code of 1986
is amended by striking ‘‘June 30, 1995’’ and inserting
‘‘December 31, 1997’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years ending after June 30,
1995.
(2) SUBSECTIONS (c) AND (d).—The amend-
ments made by subsections (c) and (d) shall apply
to taxable years beginning after June 30, 1995.
SEC. 4. ORPHAN DRUG TAX CREDIT.
(a) RECATEGORIZED AS A BUSINESS CREDIT.—
(1) IN GENERAL.—Section 28 of the Internal
Revenue Code of 1986 (relating to clinical testing
expenses for certain drugs for rare diseases or condi-
tions) is transferred to subpart D of part IV of sub-
chapter A of chapter 1 of such Code, inserted after
section 45B, and redesignated as section 45C.
(2) CONFORMING AMENDMENT.—Subsection (b)
of section 38 of such Code (relating to general busi-
ness credit) is amended by striking ‘‘plus’’ at the
end of paragraph (10), by striking the period at the
end of paragraph (11) and inserting ‘‘, plus’’, and
by adding at the end the following new paragraph:
‘‘(12) the orphan drug credit determined under
section 45C(a).’’.
(3) CLERICAL AMENDMENTS.—
(A) The table of sections for subpart B of
such part IV is amended by striking the item
relating to section 28.
(B) The table of sections for subpart D of
such part IV is amended by adding at the end
the following new item:
‘‘Sec. 45C. Clinical testing expenses for certain drugs for rare diseases or
conditions.’’.
(b) CREDIT TERMINATION.—Subsection (e) of sec-
tion 45C of the Internal Revenue Code of 1986, as redes-
ignated by subsection (a)(1), is amended by striking ‘‘De-
cember 31, 1994’’ and inserting ‘‘December 31, 1997’’.
(c) NO PRE-1995 CARRYBACKS.—Subsection (d) of
section 39 of the Internal Revenue Code of 1986 (relating
to carryback and carryforward of unused credits) is
amended by adding at the end the following new para-
graph:
‘‘(7) NO CARRYBACK OF SECTION 45C CREDIT
BEFORE 1995.—No portion of the unused business
credit for any taxable year which is attributable to
the orphan drug credit determined under section
45C may be carried back to a taxable year beginning
before January 1, 1995.’’.
(d) ADDITIONAL CONFORMING AMENDMENTS.—
(1) Section 45C(a) of the Internal Revenue
Code of 1986, as redesignated by subsection (a)(1),
is amended by striking ‘‘There shall be allowed as a
credit against the tax imposed by this chapter for
the taxable year’’ and inserting ‘‘For purposes of
section 38, the credit determined under this section
for the taxable year is’’.
(2) Section 45C(d) of such Code, as so redesig-
nated, is amended by striking paragraph (2) and by
redesignating paragraphs (3), (4), and (5) as para-
graphs (2), (3), and (4).
(3) Section 29(b)(6)(A) of such Code is amend-
ed by striking ‘‘sections 27 and 28’’ and inserting
‘‘section 27’’.
(4) Section 30(b)(3)(A) of such Code is amend-
ed by striking ‘‘sections 27, 28, and 29’’ and insert-
ing ‘‘sections 27 and 29’’.
(5) Section 53(d)(1)(B) of such Code is amend-
ed—
(A) by striking ‘‘or not allowed under sec-
tion 28 solely by reason of the application of
section 28(d)(2)(B),’’ in clause (iii), and
(B) by striking ‘‘or not allowed under sec-
tion 28 solely by reason of the application of
section 28(d)(2)(B)’’ in clause (iv)(II).
(6) Section 55(c)(2) of such Code is amended
by striking ‘‘28(d)(2),’’.
(7) Section 280C(b) of such Code is amended—
(A) by striking ‘‘section 28(b)’’ in para-
graph (1) and inserting ‘‘section 45C(b)’’,
(B) by striking ‘‘section 28’’ in paragraphs
(1) and (2)(A) and inserting ‘‘section 45C(b)’’,
and
(C) by striking ‘‘subsection (d)(2) thereof’’
in paragraphs (1) and (2)(A) and inserting
‘‘section 38(c)’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1994.
SEC. 5. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDA-
TIONS.
(a) IN GENERAL.—Subparagraph (D) of section
170(e)(5) of the Internal Revenue Code of 1986 (relating
to special rule for contributions of stock for which market
quotations are readily available) is amended by striking
‘‘December 31, 1994’’ and inserting ‘‘December 31,
1997’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to contributions made after De-
cember 31, 1994.
SEC. 6. EXTENSION OF BINDING CONTRACT DATE FOR BIO-
MASS AND COAL FACILITIES.
(a) IN GENERAL.—Subparagraph (A) of section
29(g)(1) of the Internal Revenue Code of 1986 (relating
to extension of certain facilities) is amended by striking
‘‘January 1, 1997’’ and inserting ‘‘January 1, 1999’’ and
by striking ‘‘January 1, 1996’’ and inserting ‘‘July 1,
1997’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 7. EXTENSION OF GROUP LEGAL SERVICES.
(a) EXTENSION.—Subsection (e) of section 120 of
the Internal Revenue Code of 1986 (relating to amounts
received under qualified group legal services plans) is
amended by striking ‘‘June 30, 1992’’ and inserting ‘‘De-
cember 31, 1997’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
June 30, 1992.
SEC. 8. FUTA EXEMPTION FOR ALIEN AGRICULTURAL
WORKERS.
(a) IN GENERAL.—Subparagraph (B) of section
3306(c)(1) (defining employment) is amended by striking
‘‘before January 1, 1995,’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to services performed after De-
cember 31, 1994.
Æ
HR 2994 IH——2