‘‘If taxable income is:
The tax is:
Not over $27,553 ..........................
15% of taxable income.
Over 
$27,553 
but 
not 
over
$62,450.
$4,132.95, plus 28% of the excess
over $27,553.
Over 
$62,450 
but 
not 
over
$130,250.
$13,904.11, plus 31% of the excess
over $62,450.
Over 
$130,250 
but 
not 
over
$283,150.
$34,922.11, plus 36% of the excess
over $130,250.
Over $283,150 ...............................
$89,966.11, plus 39.6% of the excess
over $283,150.
‘‘(3) FOR TAXABLE YEARS BEGINNING AFTER
2001.—
‘‘If taxable income is:
The tax is:
Not over $28,326 ..........................
15% of taxable income.
Over 
$28,326 
but 
not 
over
$62,450.
$4,248.90, plus 28% of the excess
over $28,326.
Over 
$62,450 
but 
not 
over
$130,250.
$13,803.62, plus 31% of the excess
over $62,450.
Over 
$130,250 
but 
not 
over
$283,150.
$34,821.62, plus 36% of the excess
over $130,250.
Over $283,150 ...............................
$89,865.62, plus 39.6% of the excess
over $283,150.
‘‘(d) ESTATES AND TRUSTS.—There is hereby im-
posed on the taxable income of every estate and every
trust taxable under this subsection a tax determined in
accordance with the following tables:
‘‘(1) FOR
TAXABLE
YEARS
BEGINNING
IN
2000.—
‘‘If taxable income is:
The tax is:
Not over $1,820 ............................
15% of taxable income.
Over $1,820 but not over $4,050 ..
$273, plus 28% of the excess over
$1,820.
Over $4,050 but not over $6,200 ..
$897.40, plus 31% of the excess over
$4,050.
Over $6,200 but not over $8,450 ..
$1,563.90, plus 36% of the excess
over $6,200.
Over $8,450 ...................................
$2,373.90, plus 39.6% of the excess
over $8,450.
‘‘(2) FOR
TAXABLE
YEARS
BEGINNING
IN
2001.—
‘‘If taxable income is:
The tax is:
Not over $1,873 ............................
15% of taxable income.
Over $1,873 but not over $4,050 ..
$280.95, plus 28% of the excess over
$1,873.
Over $4,050 but not over $6,200 ..
$890.51, plus 31% of the excess over
$4,050.
Over $6,200 but not over $8,450 ..
$1,557.01, plus 36% of the excess
over $6,200.
Over $8,450 ...................................
$2,367.01, plus 39.6% of the excess
over $8,450.
‘‘(3) FOR TAXABLE YEARS BEGINNING AFTER
2001.—
‘‘If taxable income is:
The tax is:
Not over $1,926 ............................
15% of taxable income.
Over $1,926 but not over $4,050 ..
$288.90, plus 28% of the excess over
$1,926.
Over $4,050 but not over $6,200 ..
$883.62, plus 31% of the excess over
$4,050.
Over $6,200 but not over $8,450 ..
$1,550.12, plus 36% of the excess
over $6,200.
Over $8,450 ...................................
$2,360.12, plus 39.6% of the excess
over $8,450.’’.
(b) INFLATION ADJUSTMENT TO APPLY IN DETER-
MINING RATES AFTER 1999.—Subsection (f) of section 1
is amended—
(1) by striking ‘‘1993’’ in paragraph (1) and in-
serting ‘‘1999’’,
(2) by striking ‘‘1992’’ in paragraph (3)(B) and
inserting ‘‘1998’’, and
(3) by striking paragraph (7).
(c) CONFORMING AMENDMENTS.—
(1) The following provisions are each amended
by striking ‘‘1992’’ and inserting ‘‘1998’’ each place
it appears:
(A) Section 25A(h).
(B) Section 32(j)(1)(B).
(C) Section 41(e)(5)(C).
(D) Section 59(j)(2)(B).
(E) Section 63(c)(4)(B).
(F) Section 68(b)(2)(B).
(G) Section 135(b)(2)(B)(ii).
(H) Section 151(d)(4).
(I) Section 220(g)(2).
(J) Section 221(g)(1)(B).
(K) Section 512(d)(2)(B).
(L) Section 513(h)(2)(C)(ii).
(M) Section 685(c)(3)(B).
(N) Section 877(a)(2).
(O) Section 911(b)(2)(D)(ii)(II).
(P) Section 2032A(a)(3)(B).
(Q) Section 2503(b)(2)(B).
(R) Section 2631(c)(1)(B).
(S) Section 4001(e)(1)(B).
(T) Section 4261(e)(4)(A)(ii).
(U) Section 6039F(d).
(V) Section 6323(i)(4)(B).
(W) Section 6601(j)(3)(B).
(X) Section 7430(c)(1).
(2) Subclause (II) of section 42(h)(6)(G)(i) is
amended by striking ‘‘1987’’ and inserting ‘‘1998’’.
(3) Subparagraph (B) of section 132(f)(6) is
amended by inserting before the period ‘‘, deter-
mined by substituting ‘calendar year 1992’ for ‘cal-
endar year 1998’ in subparagraph (B) thereof’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 104. NONREFUNDABLE PERSONAL CREDITS FULLY AL-
LOWED AGAINST REGULAR TAX LIABILITY
DURING 1999 AND 2000.
(a) IN GENERAL.—The last sentence of section 26(a)
is by striking ‘‘1998’’ and inserting ‘‘1998, 1999, or
2000’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
Subtitle B—Relief From Social
Security Earning Test
SEC. 111. ELIMINATION OF EARNINGS TEST FOR INDIVID-
UALS WHO HAVE ATTAINED RETIREMENT
AGE.
Section 203 of the Social Security Act (42 U.S.C.
403) is amended—
(1) in subsection (c)(1), by striking ‘‘the age of
seventy’’ and inserting ‘‘retirement age (as defined
in section 216(l))’’;
(2) in paragraphs (1)(A) and (2) of subsection
(d), by striking ‘‘the age of seventy’’ each place it
appears and inserting ‘‘retirement age (as defined in
section 216(l))’’;
(3) in subsection (f)(1)(B), by striking ‘‘was
age seventy or over’’ and inserting ‘‘was at or above
retirement age (as defined in section 216(l))’’;
(4) in subsection (f)(3)—
(A) by striking ‘‘331⁄3 percent’’ and all
that follows through ‘‘any other individual,’’
and inserting ‘‘50 percent of such individual’s
earnings for such year in excess of the product
of the exempt amount as determined under
paragraph (8),’’; and
(B) by striking ‘‘age 70’’ and inserting
‘‘retirement age (as defined in section 216(l))’’;
(5) in subsection (h)(1)(A), by striking ‘‘age
70’’ each place it appears and inserting ‘‘retirement
age (as defined in section 216(l))’’; and
(6) in subsection (j)—
(A) in the heading, by striking ‘‘Age Sev-
enty’’ and inserting ‘‘Retirement Age’’; and
(c) REPEAL OF BASIS FOR COMPUTATION OF SPE-
CIAL EXEMPT AMOUNT.—Section 203(f)(8)(D) of the So-
cial Security Act (42 U.S.C. 403(f)(8)(D)) is repealed.
SEC. 113. ADDITIONAL CONFORMING AMENDMENTS.
(a) ELIMINATION OF REDUNDANT REFERENCES TO
RETIREMENT AGE.—Section 203 of the Social Security
Act (42 U.S.C. 403) is amended—
(1) in subsection (c), in the last sentence, by
striking ‘‘nor shall any deduction’’ and all that fol-
lows and inserting ‘‘nor shall any deduction be made
under this subsection from any widow’s or widower’s
insurance benefit if the widow, surviving divorced
wife, widower, or surviving divorced husband in-
volved became entitled to such benefit prior to at-
taining age 60.’’; and
(2) in subsection (f)(1), by striking clause (D)
and inserting the following: ‘‘(D) for which such in-
dividual is entitled to widow’s or widower’s insurance
benefits if such individual became so entitled prior
to attaining age 60,’’.
(b) CONFORMING AMENDMENT TO PROVISIONS FOR
DETERMINING AMOUNT OF INCREASE ON ACCOUNT OF
DELAYED RETIREMENT.—Section 202(w)(2)(B)(ii) of the
Social Security Act (42 U.S.C. 402(w)(2)(B)(ii)) is
amended—
(1) by striking ‘‘either’’; and
(2) by striking ‘‘or suffered deductions under
section 203(b) or 203(c) in amounts equal to the
amount of such benefit’’.
(c) PROVISIONS RELATING
TO EARNINGS TAKEN
INTO ACCOUNT IN DETERMINING SUBSTANTIAL GAINFUL
ACTIVITY OF BLIND INDIVIDUALS.—The second sentence
of section 223(d)(4) of such Act (42 U.S.C. 423(d)(4))
is amended by striking ‘‘if section 102 of the Senior Citi-
zens’ Right to Work Act of 1996 had not been enacted’’
and inserting the following: ‘‘if the amendments to section
203 made by section 102 of the Senior Citizens’ Right
to Work Act of 1996 and by subtitle B of title I of the
Lifetime Tax Relief Act of 1999 had not been enacted’’.
SEC. 114. EFFECTIVE DATE.
The amendments and repeals made by this subtitle
shall apply with respect to taxable years ending after De-
cember 31, 1999.
TITLE II—BUSINESS RELIEF
SEC. 201. PHASEOUT OF ESTATE AND GIFT TAXES.
(a) REPEAL OF ESTATE AND GIFT TAXES.—Subtitle
B (relating to estate and gift taxes) is repealed effective
with respect to estates of decedents dying, and gifts made,
after December 31, 2009.
(b) PHASEOUT OF TAX.—Subsection (c) of section
2001 (relating to imposition and rate of tax) is amended
by adding at the end the following new paragraph:
‘‘(3) PHASEOUT OF TAX.—In the case of es-
tates of decedents dying, and gifts made, during any
calendar year after 1999 and before 2010—
‘‘(A) IN
GENERAL.—The tentative tax
under this subsection shall be determined by
using a table prescribed by the Secretary (in
lieu of using the table contained in paragraph
(1)) which is the same as such table; except
that—
‘‘(i) each of the rates of tax shall be
reduced (but not below zero) by the num-
ber of percentage points determined under
subparagraph (B), and
‘‘(ii) the amounts setting forth the tax
shall be adjusted to the extent necessary to
reflect the adjustments under clause (i).
‘‘(B) PERCENTAGE
POINTS
OF
REDUC-
TION.—
The number of
‘‘For calendar year:
percentage points is:
2000 .........................................................................................
2001 .........................................................................................
2002 .........................................................................................
2003 .........................................................................................
2004 .........................................................................................
2005 .........................................................................................
2006 .........................................................................................
The number of
‘‘For calendar year:
percentage points is:
2007 .........................................................................................
2008 .........................................................................................
2009 .........................................................................................
50.
‘‘(C) COORDINATION
WITH
PARAGRAPH
(2).—Paragraph (2) shall be applied by reduc-
ing the 55 percent percentage contained therein
by the number of percentage points determined
for such calendar year under subparagraph (B).
‘‘(D) COORDINATION
WITH
CREDIT
FOR
STATE
DEATH
TAXES.—Rules similar to the
rules of subparagraph (A) shall apply to the
table contained in section 2011(b) except that
the number of percentage points referred to in
subparagraph (A)(i) shall be determined under
the following table:
The number of
‘‘For calendar year:
percentage points is:
2000 .........................................................................................
11⁄2
2001 .........................................................................................
2002 .........................................................................................
41⁄2
2003 .........................................................................................
2004 .........................................................................................
71⁄2
2005 .........................................................................................
2006 .........................................................................................
101⁄2
2007 .........................................................................................
2008 .........................................................................................
131⁄2
2009 .........................................................................................
15.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying, and
gifts made, after December 31, 1999.
SEC. 202. MODIFICATION AND PERMANENT EXTENSION OF
RESEARCH CREDIT.
(a) CREDIT MADE PERMANENT.—
(1) IN GENERAL.—Section 41 (relating to cred-
it for increasing research activities) is amended by
striking subsection (h).
(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 45C(b) is amended by striking subpara-
graph (D).
(b) INCREASE
IN
ALTERNATIVE
INCREMENTAL
CREDIT RATES.—Subparagraph (A) of section 41(c)(4) is
amended—
(1) by striking ‘‘1.65 percent’’ in clause (i) and
inserting ‘‘2.65 percent’’,
(2) by striking ‘‘2.2 percent’’ in clause (ii) and
inserting ‘‘3.2 percent’’, and
(3) by striking ‘‘2.75 percent’’ in clause (iii)
and inserting ‘‘3.75 percent’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
June 30, 1999.
SEC. 203. WORK OPPORTUNITY CREDIT MADE PERMANENT.
(a) IN GENERAL.—Subsection (c) of section 51 is
amended by striking paragraph (4).
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to individuals who begin work
for the employer after June 30, 1999.
SEC. 204. PERMANENT SUBPART F EXEMPTION FOR ACTIVE
FINANCING INCOME.
(a) BANKING, FINANCING, 
OR
SIMILAR
BUSI-
NESSES.—Subsection (h) of section 954 (relating to spe-
cial rule for income derived in the active conduct of bank-
ing, financing, or similar businesses) is amended by strik-
ing paragraph (9).
(b) INSURANCE BUSINESSES.—Subsection (a) of sec-
tion 953 (defining insurance income) is amended by strik-
ing paragraph (10) and by redesignating paragraph (11)
as paragraph (10).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years of a foreign cor-
poration beginning after December 31, 1998, and to tax-
able years of United States shareholders with or within
which such taxable years of such foreign corporation end.
SEC. 205. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED 
INDIVIDUALS 
INCREASED
TO 100 PERCENT.
(a) IN GENERAL.—Paragraph (1) of section 162(l)
(relating to special rules for health insurance costs of self-
employed individuals) is amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case
of an individual who is an employee within the
meaning of section 401(c)(1), there shall be allowed
as a deduction under this section an amount equal
to the amount paid during the taxable year for in-
surance which constitutes medical care for the tax-
payer, the taxpayer’s spouse, and dependents.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 206. INCREASED EXCLUSION AND OTHER MODIFICA-
TIONS APPLICABLE TO QUALIFIED SMALL
BUSINESS STOCK.
(a) INCREASED EXCLUSION.—
(1) IN
GENERAL.—Subsection (a) of section
1202 (50-percent exclusion for gain from certain
small business stock) is amended—
(A) by striking ‘‘50 percent’’ and inserting
‘‘100 percent’’, and
(B) by striking ‘‘50-PERCENT’’ in the
heading and inserting ‘‘100-PERCENT’’.
(2) CONFORMING AMENDMENTS.—
(A) Subparagraph (A) of section 1(h)(5) is
amended to read as follows:
‘‘(A) collectibles gain, over’’.
(B) Section 1(h) is amended by striking
paragraph (8).
(C) Paragraph (9) of section 1(h) is
amended by striking ‘‘, gain described in para-
graph (7)(A)(i), and section 1202 gain’’ and in-
serting ‘‘and gain described in paragraph
(7)(A)(i)’’.
(D) The heading for section 1202 is
amended by striking ‘‘50-PERCENT’’ and in-
serting ‘‘100-PERCENT’’.
(E) The table of sections for part I of sub-
chapter P of chapter 1 is amended by striking
‘‘50-percent’’ in the item relating to section
1202 and inserting ‘‘100-percent’’.
(b) REDUCTION IN HOLDING PERIOD.—
(1) IN
GENERAL.—Subsection (a) of section
1202 is amended by striking ‘‘5 years’’ and inserting
‘‘3 years’’.
(2) CONFORMING
AMENDMENT.—Subsections
(g)(2)(A) and (j)(1)(A) of section 1202 are each
amended by striking ‘‘5 years’’ and inserting ‘‘3
years’’.
(c) EXCLUSION AVAILABLE TO CORPORATIONS.—
(1) IN
GENERAL.—Subsection (a) of section
1202 is amended by striking ‘‘other than a corpora-
tion’’.
(2) TECHNICAL AMENDMENT.—Subsection (c)
of section 1202 is amended by adding at the end the
following new paragraph:
‘‘(4) STOCK HELD AMONG MEMBERS OF CON-
TROLLED GROUP NOT ELIGIBLE.—Stock of a mem-
ber of a parent-subsidiary controlled group (as de-
fined in subsection (d)(3)) shall not be treated as
qualified small business stock while held by another
member of such group.’’
(d) REPEAL OF MINIMUM TAX PREFERENCE.—
(1) IN GENERAL.—Subsection (a) of section 57
(relating to items of tax preference) is amended by
striking paragraph (7).
(2) TECHNICAL AMENDMENT.—Subclause (II)
of section 53(d)(1)(B)(ii) is amended by striking ‘‘,
(5), and (7)’’ and inserting ‘‘and (5)’’.
(e) STOCK OF LARGER BUSINESSES ELIGIBLE FOR
EXCLUSION.—
(1) IN
GENERAL.—Paragraph (1) of section
1202(d) (defining qualified small business) is
amended by striking ‘‘$50,000,000’’ each place it
appears and inserting ‘‘$300,000,000’’.
(2) INFLATION ADJUSTMENT.—Section 1202(d)
is amended by adding at the end the following:
‘‘(4) INFLATION ADJUSTMENT OF ASSET LIMI-
TATION.—In the case of stock issued in any calendar
year after 2000, the $300,000,000 amount con-
tained in paragraph (1) shall be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 1999’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(f) REPEAL OF PER-ISSUER LIMITATION.—Section
1202 is amended by striking subsection (b).
(g) OTHER MODIFICATIONS.—
(1) REPEAL
OF
WORKING
CAPITAL
LIMITA-
TION.—Section 1202(e)(6) (relating to working cap-
ital) is amended—
(A) in subparagraph (B), by striking ‘‘2
years’’ and inserting ‘‘5 years’’; and
(B) by striking the last sentence.
(2) EXCEPTION
FROM
REDEMPTION
RULES
WHERE
BUSINESS
PURPOSE.—Section 1202(c)(3)
(relating to certain purchases by corporation of its
own stock) is amended by adding at the end the fol-
lowing:
‘‘(D) WAIVER
WHERE
BUSINESS
PUR-
POSE.—A purchase of stock by the issuing cor-
poration shall be disregarded for purposes of
subparagraph (B) if the issuing corporation es-
tablishes that there was a business purpose for
such purchase and one of the principal purposes
of the purchase was not to avoid the limitations
of this section.’’
(h) QUALIFIED
TRADE
OR
BUSINESS.—Section
1202(e)(3) (defining qualified trade or business) is
amended by inserting ‘‘and’’ at the end of subparagraph
(C), by striking ‘‘, and’’ at the end of subparagraph (D)
and inserting a period, and by striking subparagraph (E).
(i) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
apply to stock issued after the date of enactment of
this Act.
(2) SPECIAL RULE.—The amendments made by
subsections (a), (c), (e), (f), and (g)(1) apply to
stock issued after August 10, 1993.
SEC. 207. INCREASED EXCLUSION FOR INCENTIVE STOCK
OPTIONS; EXCEPTION FROM ALTERNATIVE
MINIMUM TAX.
(a) INCREASED EXCLUSION.—Subsection (d) of sec-
tion 422 (relating to $100,000 per year limitation) is
amended by striking ‘‘$100,000’’ each place it appears
and inserting ‘‘$200,000’’.
(b) EXCEPTION
FROM
ALTERNATIVE
MINIMUM
TAX.—Subsection (b) of section 56 is amended by striking
paragraph (3).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to options exercised in calendar
years beginning after the date of the enactment of this
Act.
TITLE III—SAVINGS AND
INVESTMENT
SEC. 301. EXCLUSION FROM GROSS INCOME OF CERTAIN
AMOUNTS OF THE NET CAPITAL GAIN OF IN-
DIVIDUALS.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 (relating to treatment of capital gains) is amended by
adding at the end the following new section:
‘‘SEC. 1203. EXCLUSION OF CERTAIN AMOUNTS OF NET CAP-
ITAL GAIN OF INDIVIDUALS.
‘‘(a) GENERAL RULE.—In the case of an individual,
gross income shall not include an amount equal to the net
capital gain of the taxpayer for the taxable year.
‘‘(b) LIMITATION.—The amount excluded from gross
income under subsection (a) shall not exceed $1,000
($2,000 in the case of a joint return).’’
(b) CONFORMING AMENDMENTS.—
(1) Section 1222 is amended by adding at the
end the following new sentence:
‘‘Determinations under this section shall be made before
the application of section 1203.’’
(2) The table of sections for part I of sub-
chapter P of chapter 1 is amended by adding at the
end the following new item:
‘‘Sec. 1203. Exclusion of certain amounts of net capital gain of
individuals.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 302. INCREASE IN MAXIMUM AMOUNT OF DEDUCTION
FOR IRAS.
(a) INCREASE IN MAXIMUM AMOUNT OF DEDUC-
TION.—Subparagraph (A) of section 219(b)(1) (relating
to maximum amount of deduction) is amended by striking
‘‘$2,000’’ and inserting ‘‘$3,000’’.
(b) CONFORMING AMENDMENTS.—
(1) Subsections (a)(1) and (b) of section 408
are each amended by striking ‘‘$2,000’’ each place
it appears and inserting ‘‘the dollar limitation in ef-
fect under section 219(b)(1)(A)’’.
(2) Subsection (j) of section 408 is amended by
striking ‘‘the $2,000 amounts contained’’ and insert-
ing ‘‘the dollar limitations referred to’’.
(3) Paragraph (8) of section 408(p) is amended
by striking ‘‘$2,000’’ and inserting ‘‘the dollar limi-
tation in effect under section 219(b)(1)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
SEC. 303. HIGHER ELECTIVE DEFERRAL LIMIT IF EMPLOY-
EE’S SPOUSE IS NOT A PARTICIPANT IN ELEC-
TIVE DEFERRALS PLAN.
(a) IN GENERAL.—Paragraph (1) of section 402(g)
(relating to limitation on elective deferrals) is amended to
read as follows:
‘‘(1) DOLLAR LIMITATION.—
‘‘(A) IN GENERAL.—Notwithstanding sub-
sections (e)(3) and (h)(1)(B), the elective defer-
rals of any individual for any taxable year shall
be included in such individual’s gross income to
the extent the amount of such deferrals for the
taxable year exceeds $7,000.
‘‘(B) HIGHER LIMITATION IF SPOUSE OF
EMPLOYEE NOT ELIGIBLE TO PARTICIPATE IN
ELECTIVE DEFERRAL PLAN.—In the case of a
married individual whose spouse is not eligible
at any time during the taxable year to partici-
pate in any plan or contract which permits elec-
tive deferrals—
‘‘(I) the dollar amount applicable to
such individual under subparagraph (A)
shall be twice the dollar amount which
would otherwise be applicable for the tax-
able year, and
‘‘(II) elective deferrals permitted by
this subparagraph shall not be taken into
account under section 415, 401(a)(4), or
401(k)(4)(A)(ii).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1999.
TITLE IV—EDUCATION
SEC. 401. AMENDMENTS TO ENCOURAGE ADDITIONAL
SCHOOL CONSTRUCTION.
(a) IN GENERAL.—Clause (i) of section 149(d)(3)(A)
is amended—
(1) by striking ‘‘or’’ at the end of subclause (I),
(2) by adding ‘‘or’’ at the end of subclause (II),
and
(3) by inserting after subclause (II) the follow-
ing:
‘‘(III) the 2d advance refunding
of the original bond if the original
bond was issued after 1985 or the 3d
advance refunding of the original
bond if the original bond was issued
before 1986 if, in either case, the
original bond was issued to finance
the construction, reconstruction, or re-
habilitation of public elementary and
secondary schools, provided that the
issuer in good faith estimates the
present value savings, if any, associ-
ated with such advance refunding and
applies those savings to the construc-
tion, reconstruction, or rehabilitation
of public elementary and secondary
schools,’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to refunding obligations issued
after December 31, 1999.
SEC. 402. MODIFICATION OF ARBITRAGE REBATE RULES
APPLICABLE TO PUBLIC SCHOOL CONSTRUC-
TION BONDS.
(a) IN GENERAL.—Subparagraph (C) of section
148(f)(4) is amended by adding at the end the following
new clause:
‘‘(xviii) 4-YEAR
SPENDING
REQUIRE-
MENT FOR PUBLIC SCHOOL CONSTRUCTION
ISSUE.—
‘‘(I) IN GENERAL.—In the case
of a public school construction issue,
the spending requirements of clause
(ii) shall be treated as met if at least
10 percent of the available construc-
tion proceeds of the construction issue
are spent for the governmental pur-
poses of the issue within the 1-year
period beginning on the date the
bonds are issued, 30 percent of such
proceeds are spent for such purposes
within the 2-year period beginning on
such date, 50 percent of such pro-
ceeds are spent for such purposes
within the 3-year period beginning on
such date, and 100 percent of such
proceeds are spent for such purposes
within the 4-year period beginning on
such date.
‘‘(II) 
PUBLIC
SCHOOL
CON-
STRUCTION ISSUE.—For purposes of
this clause, the term ‘public school
construction issue’ means any con-
struction issue if no bond which is
part of such issue is a private activity
bond and all of the available construc-
tion proceeds of such issue are to be
used for the construction (as defined
in clause (iv)) of public school facili-
ties to provide education or training
below the postsecondary level or for
the acquisition of land that is func-
tionally related and subordinate to
such facilities.
‘‘(III) 
OTHER
RULES
TO
APPLY.—Rules similar to the rules of
the preceding provisions of this sub-
paragraph which apply to clause (ii)
also apply to this clause.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to obligations issued after Decem-
ber 31, 1999.
SEC. 403. ADDITIONAL INCREASE IN ARBITRAGE REBATE
EXCEPTION 
FOR 
GOVERNMENTAL 
BONDS
USED TO FINANCE PUBLIC SCHOOL FACILI-
TIES.
(a) IN GENERAL.—Section 148(f)(4)(D)(vii) (relat-
ing to increase in exception for bonds financing public
school capital expenditures) is amended by striking
‘‘$5,000,000’’ the second place it appears and inserting
‘‘$15,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to obligations issued after De-
cember 31, 1999.
SEC. 404. EXCLUSION FROM GROSS INCOME OF EDUCATION
DISTRIBUTIONS FROM QUALIFIED TUITION
PROGRAMS; COVERAGE OF PRIVATE PRO-
GRAMS.
(a) EXCLUSION.—
(1) IN GENERAL.—Subparagraph (B) of section
529(c)(3) (relating to distributions) is amended to
read as follows:
‘‘(B) 
DISTRIBUTIONS
FOR
QUALIFIED
HIGHER EDUCATION EXPENSES.—If a distribu-
tee elects the application of this subparagraph
for any taxable year—
‘‘(i) no amount shall be includible in
gross income by reason of a distribution
which consists of providing a benefit to the
distributee which, if paid for by the dis-
tributee, would constitute payment of a
qualified higher education expense, and
‘‘(ii) the amount which (but for the
election) would be includible in gross in-
come by reason of any other distribution
shall not be so includible in an amount
which bears the same ratio to the amount
which would be so includible as the amount
of the qualified higher education expenses
of the distributee bears to the amount of
the distribution.’’
(2) ADDITIONAL TAX ON AMOUNTS NOT USED
FOR HIGHER EDUCATION EXPENSES.—Section 529
is amended by adding at the end the following new
subsection:
‘‘(f) ADDITIONAL TAX
FOR DISTRIBUTIONS NOT
USED FOR EDUCATIONAL EXPENSES.—
‘‘(1) IN GENERAL.—The tax imposed by section
530(d)(4) shall apply to payments and distributions
from qualified tuition programs in the same manner
as such tax applies to education individual retire-
ment accounts.
‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (1) shall
not apply to the distribution to a contributor of any
contribution paid during a taxable year to a quali-
fied tuition program to the extent that such con-
tribution exceeds the limitation in section 4973(e) if
such distribution (and the net income with respect
to such excess contribution) meets requirements
comparable to the requirements of clauses (i) and
(ii) of section 530(d)(4)(C).’’
(3) COORDINATION
WITH
EDUCATION
CRED-
ITS.—Section 25A(e)(2) is amended by inserting
‘‘529(c)(3)(B) or’’ before ‘‘530(d)(2)’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to distributions after
December 31, 1999, for education furnished in aca-
demic periods beginning after such date.
(b) ELIGIBLE EDUCATIONAL INSTITUTIONS PER-
MITTED TO MAINTAIN QUALIFIED TUITION PROGRAMS.—
(1) IN
GENERAL.—Paragraph (1) of section
529(b) (defining qualified State tuition program) is
amended by inserting ‘‘or by one or more eligible
educational institutions’’ after ‘‘maintained by a
State or agency or instrumentality thereof’’.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (2) of section 26(b) is
amended by redesignating subparagraphs (E)
through (Q) as subparagraphs (F) through (R),
respectively, and by inserting after subpara-
graph (D) the following new subparagraph:
‘‘(E) section 529(f) (relating to additional
tax on certain distributions from qualified tui-
tion programs),’’.
(B) The text and headings of sections 529
and 530 are amended by striking ‘‘qualified
State tuition program’’ each place it appears
and inserting ‘‘qualified tuition program’’.
(C)(i) The section heading of section 529
is amended to read as follows:
‘‘SEC. 529. QUALIFIED TUITION PROGRAMS.’’
(ii) The item relating to section 529 in the
table of sections for part VIII of subchapter F
of chapter 1 is amended by striking ‘‘State’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1999.
(c) CHANGE OF QUALIFIED TUITION PROGRAM OR
OF DESIGNATED BENEFICIARY.—
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
529(c)(3)(C) is amended by inserting ‘‘to another
qualified tuition program for the benefit of the des-
ignated beneficiary or’’ after ‘‘transferred’’.
(2) INCLUSION OF SIBLINGS AS MEMBER OF
FAMILY.—Paragraph (2) of section 529(e) is amend-
ed by striking ‘‘subparagraph (B).’’ and inserting
‘‘subparagraph (B),
except that such term shall include any sibling
(whether by the whole or half blood) of the des-
ignated beneficiary.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1999.
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