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proportion to the respective amounts of such in-
comes.
‘‘(4) ADJUSTED
BASE
PERIOD
INCOME.—For
purposes of paragraph (3)—
‘‘(A) IN
GENERAL.—The term ‘adjusted
base period income’ means the average of the
inflation-adjusted possession incomes of the cor-
poration for each base period year.
‘‘(B) INFLATION-ADJUSTED
POSSESSION
INCOME.—For purposes of subparagraph (A),
the inflation-adjusted possession income of any
corporation for any base period year shall be an
amount equal to the possession income of such
corporation for such base period year multiplied
by the inflation adjustment percentage for such
base period year.
‘‘(C) INFLATION
ADJUSTMENT
PERCENT-
AGE.—For purposes of subparagraph (B), the
inflation adjustment percentage for any base
period year means, with respect to the current
year, the percentage (if any) by which—
‘‘(i) the CPI for last calendar year
ending before the beginning of the current
year, exceeds
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‘‘(ii) the CPI for last calendar year
ending before the beginning of the base pe-
riod year.
For purposes of the preceding sentence, the
CPI for any calendar year is the CPI (as de-
fined in section 1(f)(5)) for such year under
section 1(f)(4).
‘‘(D) INCREASE
IN
INFLATION
ADJUST-
MENT PERCENTAGE FOR GROWTH DURING BASE
YEARS.—The inflation adjustment percentage
(determined under subparagraph (C) without
regard to this subparagraph) for each of the 5
taxable years referred to in paragraph (5)(A)
shall be increased by—
‘‘(i) 5 percentage points in the case of
a taxable year ending during the 1-year pe-
riod ending on September 12, 1995;
‘‘(ii) 10.25 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1994;
‘‘(iii) 15.76 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1993;
‘‘(iv) 21.55 percentage points in the
case of a taxable year ending during the 1-
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year period ending on September 12, 1992;
and
‘‘(v) 27.63 percentage points in the
case of a taxable year ending during the 1-
year period ending on September 12, 1991.
‘‘(5) BASE PERIOD YEAR.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The term ‘base period
year’ means each of 3 taxable years which are
among the 5 most recent taxable years of the
corporation ending before September 13, 1995,
determined by disregarding—
‘‘(i) one taxable year for which the
corporation had the largest inflation-ad-
justed possession income, and
‘‘(ii) one taxable year for which the
corporation had the smallest inflation-ad-
justed possession income.
‘‘(B) CORPORATIONS NOT HAVING SIGNIFI-
CANT
POSSESSION
INCOME
THROUGHOUT
5-
YEAR PERIOD.—
‘‘(i) IN
GENERAL.—If a corporation
does not have significant possession income
for each of the most recent 5 taxable years
ending before September 13, 1995, then,
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in lieu of applying subparagraph (A), the
term ‘base period year’ means only those
taxable years (of such 5 taxable years) for
which the corporation has significant pos-
session income; except that, if such cor-
poration has significant possession income
for 4 of such 5 taxable years, the rule of
subparagraph (A)(ii) shall apply.
‘‘(ii) SPECIAL RULE.—If there is no
year (of such 5 taxable years) for which a
corporation has significant possession in-
come—
‘‘(I) the term ‘base period year’
means the first taxable year ending on
or after September 13, 1995, but
‘‘(II) the amount of possession
income for such year which is taken
into account under paragraph (4)
shall be the amount which would be
determined if such year were a short
taxable year ending on August 31,
1995.
‘‘(iii) SIGNIFICANT
POSSESSION
IN-
COME.—For purposes of this subpara-
graph, the term ‘significant possession in-
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come’ means possession income which ex-
ceeds 2 percent of the possession income of
the taxpayer for the taxable year (of the
period of 6 taxable years ending with the
first taxable year ending on or after Sep-
tember 13, 1995) having the greatest pos-
session income.
‘‘(C) ELECTION TO USE ONE BASE PERIOD
YEAR.—
‘‘(i) IN GENERAL.—At the election of
the taxpayer, the term ‘base period year’
means only the last taxable year of the cor-
poration ending in calendar year 1992.
‘‘(ii) ELECTION.—An election under
this subparagraph by any possession cor-
poration may be made only for the cor-
poration’s first taxable year beginning
after December 31, 1995, for which it is a
possession 
corporation. 
The 
rules 
of
subclauses (II) and (III) of subsection
(a)(4)(B)(iii) shall apply to the election
under this subparagraph.
‘‘(D) ACQUISITIONS AND DISPOSITIONS.—
Rules similar to the rules of subparagraphs (A)
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and (B) of section 41(f)(3) shall apply for pur-
poses of this subsection.
‘‘(6) POSSESSION
INCOME.—For purposes of
this subsection, the term ‘possession income’ means
the sum of the income referred to in subsection
(a)(1)(A) and the income referred to in subsection
(a)(1)(B). In no event shall possession income be
treated as being less than zero.
‘‘(7) SHORT YEARS.—If the current year or a
base period year is a short taxable year, the applica-
tion of this subsection shall be made with such
annualizations as the Secretary shall prescribe.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 13606. DEPRECIATION UNDER INCOME FORECAST
METHOD.
(a) GENERAL RULE.—Section 167 (relating to depre-
ciation) is amended by redesignating subsection (g) as
subsection (h) and by inserting after subsection (f) the
following new subsection:
‘‘(g) DEPRECIATION
UNDER
INCOME
FORECAST
METHOD.—
‘‘(1) IN GENERAL.—If the depreciation deduc-
tion allowable under this section to any taxpayer
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with respect to any property is determined under the
income forecast method or any similar method—
‘‘(A) in determining the amount of the de-
preciation deduction under such method, the es-
timated income from the property shall include
all estimated income from use of the property,
‘‘(B) the adjusted basis of the property
shall only include amounts with respect to
which the requirements of section 461(h) are
satisfied,
‘‘(C) the depreciation deduction under such
method for the 10th taxable year beginning
after the taxable year in which the property was
placed in service shall be equal to the adjusted
basis of such property as of the beginning of
such 10th taxable year, and
‘‘(D) such taxpayer shall pay (or be enti-
tled to receive) interest computed under the
look-back method of paragraph (2) for any re-
computation year.
‘‘(2) LOOK-BACK METHOD.—The interest com-
puted under the look-back method of this paragraph
for any recomputation year shall be determined by—
‘‘(A) first determining the depreciation de-
ductions under this section with respect to such
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property which would have been allowable for
prior taxable years if the determination of the
amounts so allowable had been made on the
basis of the sum of the following (instead of the
estimated income with respect to such prop-
erty)—
‘‘(i) the actual income from such
property for periods before the close of the
recomputation year, and
‘‘(ii) an estimate of the future income
with respect to such property for periods
after the recomputation year,
‘‘(B) second, determining (solely for pur-
poses of computing such interest) the overpay-
ment or underpayment of tax for each such
prior taxable year which would result solely
from the application of subparagraph (A), and
‘‘(C) then using the adjusted overpayment
rate 
(as 
defined 
in 
section 
460(b)(7)),
compounded daily, on the overpayment or
underpayment determined under subparagraph
(B).
For purposes of the preceding sentence, any cost in-
curred after the property is placed in service (which
is not treated as a separate property under para-
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graph (5)) shall be taken into account by discount-
ing (using the Federal mid-term rate determined
under section 1274(d) as of the time such cost is in-
curred) such cost to its value as of the date the
property is placed in service. The taxpayer may elect
with respect to any property to have the preceding
sentence not apply to such property.
‘‘(3) EXCEPTION FROM LOOK-BACK METHOD.—
Paragraph (1)(D) shall not apply with respect to
any property which, when placed in service by the
taxpayer, had a basis of $100,000 or less.
‘‘(4) RECOMPUTATION YEAR.—For purposes of
this subsection, except as provided in regulations,
the term ‘recomputation year’ means, with respect to
any property, the third and the 10th taxable years
beginning after the taxable year in which the prop-
erty was placed in service, unless the actual income
from the property for such third or 10th taxable
year (as the case may be) and each prior taxable
year is within 10 percent of the estimated income
from the property for each such year which was
taken into account under paragraph (1)(A).
‘‘(5) SPECIAL RULES.—
‘‘(A) CERTAIN COSTS TREATED AS SEPA-
RATE PROPERTY.—For purposes of this section,
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the following costs shall be treated as separate
properties:
‘‘(i) Any costs incurred with respect
to any property after the 10th taxable year
beginning after the taxable year in which
the property was placed in service.
‘‘(ii) Any costs incurred after the
property is placed in service and before the
close of such 10th taxable year if such
costs are significant and give rise to a sig-
nificant increase in the income from the
property which was not included in the es-
timated income from the property.
‘‘(B) SYNDICATION INCOME FROM TELE-
VISION SERIES.—In the case of property which
is an episode in a television series, estimated in-
come from syndicating such series shall not be
required to be taken into account under this
subsection before the earlier of—
‘‘(i) the 4th taxable year beginning
after the date the first episode in such se-
ries is placed in service, or
‘‘(ii) the earliest taxable year in which
the taxpayer had a reasonable expectation
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that there would be a future syndication of
such series.
‘‘(C) COLLECTION
OF
INTEREST.—For
purposes of subtitle F (other than sections
6654 and 6655), any interest required to be
paid by the taxpayer under paragraph (1) for
any recomputation year shall be treated as an
increase in the tax imposed by this chapter for
such year.
‘‘(D) DETERMINATIONS.—For purposes of
this subsection, determinations of the amount
of income from any property shall be deter-
mined in the same manner as for purposes of
applying the income forecast method; except
that any income from the disposition of such
property shall be taken into account.
‘‘(E) TREATMENT
OF
PASS-THRU
ENTI-
TIES.—Rules similar to the rules of section
460(b)(4) shall apply for purposes of this sub-
section.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to property placed in serv-
ice after September 13, 1995.
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(2) BINDING
CONTRACTS.—The amendment
made by subsection (a) shall not apply to any prop-
erty produced or acquired by the taxpayer pursuant
to a written contract which was binding on Septem-
ber 13, 1995, and at all times thereafter before such
production or acquisition.
SEC. 13607. TRANSFERS OF EXCESS PENSION ASSETS.
(a) IN GENERAL.—Section 420 (relating to transfers
of excess pension assets to retiree health accounts) is
amended by adding at the end the following new sub-
section:
‘‘(f) SIMILAR RULES TO APPLY TO OTHER TRANS-
FERS OF EXCESS PLAN ASSETS.—
‘‘(1) IN GENERAL.—If there is a qualified unre-
stricted transfer of any excess pension assets of a
defined benefit plan (other than a multiemployer
plan) to an employer—
‘‘(A) a trust which is part of such plan
shall not be treated as failing to meet the re-
quirements of section 401(a) solely by reason of
such transfer (or any other action authorized
under this section), and
‘‘(B) such transfer shall not be treated as
a prohibited transaction for purposes of section
4975.
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The gross income of the employer shall include the
amount of any qualified transfer made during the
taxable year.
‘‘(2) QUALIFIED UNRESTRICTED TRANSFER.—
For purposes of this section—
‘‘(A) IN
GENERAL.—The term ‘qualified
unrestricted transfer’ means a transfer—
‘‘(i) of excess pension assets of a de-
fined benefit plan to the employer, and
‘‘(ii) with respect to which the re-
quirements of subsection (c)(2)(A) are met
(determined by treating such transfer as a
qualified transfer).
‘‘(B) COORDINATION WITH TRANSFERS TO
RETIREE HEALTH ACCOUNTS.—Such term shall
not include any qualified transfer (as defined in
subsection (b)).
‘‘(C) EXPIRATION.—No transfer in any
taxable year beginning after December 31,
2000, shall be treated as a qualified unre-
stricted transfer.
‘‘(3) DEFINITION
AND
SPECIAL
RULE.—For
purposes of this subsection—
‘‘(A) EXCESS PENSION ASSETS.—The term
‘excess pension assets’ has the meaning given
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such term by subsection (e)(2); except that the
amount thereof shall be the lesser of—
‘‘(i) the amount determined as of the
most recent valuation date of the plan pre-
ceding the transfer, or
‘‘(ii) the amount determined as of
January 1, 1995 (or, if January 1, 1995,
is not a valuation date, the most recent
prior valuation date).
‘‘(B) COORDINATION WITH SECTION 412.—
In the case of a qualified unrestricted trans-
fer—
‘‘(i) any assets transferred in a plan
year on or before the valuation date for
such year (and any income allocable there-
to) shall, for purposes of section 412, be
treated as assets in the plan as of the valu-
ation date for such year, and
‘‘(ii) the plan shall be treated as hav-
ing a net experience loss under section
412(b)(2)(B)(iv) in an amount equal to the
amount of such transfer and for which am-
ortization charges begin for the first plan
year after the plan year in which such
transfer occurs, except that such section
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shall be applied to such amount by sub-
stituting ‘10 plan years’ for ‘5 plan years’.
‘‘(C) TREATMENT
OF
TRANSFERS.—Ex-
cept for purposes of this section, a qualified un-
restricted transfer shall be treated as a quali-
fied transfer to a health benefits account.’’
(b) REVERSION TAX.—Section 4980 (relating to tax
on reversion of qualified plan assets to employers) is
amended by adding at the end the following new sub-
section:
‘‘(e) SPECIAL
RULES
FOR
QUALIFIED
UNRE-
STRICTED TRANSFERS UNDER SECTION 420.—In the
case of a qualified unrestricted transfer to which section
420(f) applies—
‘‘(1) no tax shall be imposed by subsection (a)
if such transfer occurs before July 1, 1996,
‘‘(2) subsection (a) shall be applied by sub-
stituting ‘6.5 percent’ for ‘20 percent’ if such trans-
fer occurs after June 30, 1996, and
‘‘(3) subsection (d) shall not apply.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1995.
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PART II—LEGAL REFORMS
SEC. 13611. REPEAL OF EXCLUSION FOR PUNITIVE DAM-
AGES 
AND 
FOR 
DAMAGES 
NOT 
ATTRIB-
UTABLE TO PHYSICAL INJURIES OR SICK-
NESS.
(a) IN GENERAL.—Paragraph (2) of section 104(a)
(relating to compensation for injuries or sickness) is
amended to read as follows:
‘‘(2) the amount of any damages (other than
punitive damages) received (whether by suit or
agreement and whether as lump sums or as periodic
payments) on account of personal physical injuries
or physical sickness;’’.
(b) EMOTIONAL DISTRESS AS SUCH TREATED AS
NOT PHYSICAL INJURY OR PHYSICAL SICKNESS.—Sec-
tion 104(a) is amended by striking the last sentence and
inserting the following new sentence: ‘‘For purposes of
paragraph (2), emotional distress shall not be treated as
a physical injury or physical sickness. The preceding sen-
tence shall not apply to an amount of damages not in ex-
cess of the amount paid for medical care (described in sub-
paragraph (A) or (B) of section 213(d)(1)) attributable
to emotional distress.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
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shall apply to amounts received after December 31,
1995, in taxable years ending after such date.
(2) EXCEPTION.—The amendments made by
this section shall not apply to any amount received
under a written binding agreement, court decree, or
mediation award in effect on (or issued on or before)
September 13, 1995.
SEC. 13612. REPORTING OF CERTAIN PAYMENTS MADE TO
ATTORNEYS.
(a) IN GENERAL.—Section 6045 (relating to returns
of brokers) is amended by adding at the end the following
new subsection:
‘‘(f) RETURN REQUIRED IN THE CASE
OF PAY-
MENTS TO ATTORNEYS.—
‘‘(1) IN GENERAL.—Any person engaged in a
trade or business and making a payment (in the
course of such trade or business) to which this sub-
section applies shall file a return under subsection
(a) and a statement under subsection (b) with re-
spect to such payment.
‘‘(2) APPLICATION OF SUBSECTION.—
‘‘(A) IN GENERAL.—This subsection shall
apply to any payment to an attorney in connec-
tion with legal services (whether or not such
services are performed for the payor).
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‘‘(B) EXCEPTION.—This subsection shall
not apply to the portion of any payment which
is required to be reported under section 6041(a)
(or would be so required but for the dollar limi-
tation contained therein) or section 6051.’’
(b) REPORTING OF ATTORNEYS FEES PAYABLE TO
CORPORATIONS.—The regulations providing an exception
under section 6041 of the Internal Revenue Code of 1986
for payments made to corporations shall not apply to pay-
ments of attorneys fees.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a), and subsection (b), shall apply to payments
made after December 31, 1995.
PART III—TREATMENT OF INDIVIDUALS WHO
LOSE UNITED STATES CITIZENSHIP
SEC. 13616. REVISION OF INCOME, ESTATE, AND GIFT
TAXES ON INDIVIDUALS WHO LOSE UNITED
STATES CITIZENSHIP.
(a) IN GENERAL.—Subsection (a) of section 877 is
amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) IN GENERAL.—Every nonresident alien in-
dividual who, within the 10-year period immediately
preceding the close of the taxable year, lost United
States citizenship, unless such loss did not have for
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1 of its principal purposes the avoidance of taxes
under this subtitle or subtitle B, shall be taxable for
such taxable year in the manner provided in sub-
section (b) if the tax imposed pursuant to such sub-
section exceeds the tax which, without regard to this
section, is imposed pursuant to section 871.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING
TAX
AVOIDANCE
PURPOSE.—For purposes of
paragraph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if—
‘‘(A) the average annual net income tax
(as defined in section 38(c)(1)) of such individ-
ual for the period of 5 taxable years ending be-
fore the date of the loss of United States citi-
zenship is greater than $100,000, or
‘‘(B) the net worth of the individual as of
such date is $500,000 or more.
In the case of the loss of United States citizenship
in any calendar year after 1996, such $100,000 and
$500,000 amounts shall be increased by an amount
equal to such dollar amount multiplied by the cost-
of-living 
adjustment 
determined 
under 
section
1(f)(3) for such calendar year by substituting ‘1994’
for ‘1992’ in subparagraph (B) thereof. Any in-
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crease under the preceding sentence shall be round-
ed to the nearest multiple of $1,000.’’
(b) EXCEPTIONS.—
(1) IN GENERAL.—Section 877 is amended by
striking subsection (d), by redesignating subsection
(c) as subsection (d), and by inserting after sub-
section (b) the following new subsection:
‘‘(c) TAX AVOIDANCE NOT PRESUMED IN CERTAIN
CASES.—
‘‘(1) IN GENERAL.—Subsection (a)(2) shall not
apply to an individual if—
‘‘(A) such individual is described in a sub-
paragraph of paragraph (2) of this subsection,
and
‘‘(B) within the 1-year period beginning on
the date of the loss of United States citizenship,
such individual submits a ruling request for the
Secretary’s determination as to whether such
loss has for 1 of its principal purposes the
avoidance of taxes under this subtitle or subtitle
B.
‘‘(2) INDIVIDUALS DESCRIBED.—
‘‘(A) DUAL CITIZENSHIP, ETC.—An indi-
vidual is described in this subparagraph if—
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‘‘(i) the individual became at birth a
citizen of the United States and a citizen
of another country and continues to be a
citizen of such other country, or
‘‘(ii) the individual becomes (not later
than the close of a reasonable period after
loss of United States citizenship) a citizen
of the country in which—
‘‘(I) such individual was born,
‘‘(II) if such individual is mar-
ried, such individual’s spouse was
born, or
‘‘(III) either of such individual’s
parents were born.
‘‘(B) LONG-TERM FOREIGN RESIDENTS.—
An individual is described in this subparagraph
if, for each year in the 10-year period ending on
the date of loss of United States citizenship, the
individual was present in the United States for
days 
or 
less. 
The 
rule 
of 
section
7701(b)(3)(D)(ii) shall apply for purposes of
this subparagraph.
‘‘(C) RENUNCIATION UPON REACHING AGE
OF
MAJORITY.—An individual is described in
this subparagraph if the individual’s loss of
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United States citizenship occurs before such in-
dividual attains age 181⁄2.
‘‘(D) INDIVIDUALS SPECIFIED IN REGULA-
TIONS.—An individual is described in this sub-
paragraph if the individual is described in a
category of individuals prescribed by regulation
by the Secretary.’’
(2) TECHNICAL AMENDMENT.—Paragraph (1)
of section 877(b) of such Code is amended by strik-
ing ‘‘subsection (c)’’ and inserting ‘‘subsection (d)’’.
(c) TREATMENT
OF PROPERTY DISPOSED
OF
IN
NONRECOGNITION TRANSACTIONS; TREATMENT OF DIS-
TRIBUTIONS
FROM
CERTAIN
CONTROLLED
FOREIGN
CORPORATIONS.—Subsection (d) of section 877, as redes-
ignated by subsection (b), is amended to read as follows:
‘‘(d) SPECIAL RULES FOR SOURCE, ETC.—For pur-
poses of subsection (b)—
‘‘(1) SOURCE RULES.—The following items of
gross income shall be treated as income from sources
within the United States:
‘‘(A) SALE OF PROPERTY.—Gains on the
sale or exchange of property (other than stock
or debt obligations) located in the United
States.
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‘‘(B) STOCK
OR
DEBT
OBLIGATIONS.—
Gains on the sale or exchange of stock issued
by a domestic corporation or debt obligations of
United States persons or of the United States,
a State or political subdivision thereof, or the
District of Columbia.
‘‘(C) INCOME
OR
GAIN
DERIVED
FROM
CONTROLLED FOREIGN CORPORATION.—Any in-
come or gain derived from stock in a foreign
corporation but only—
‘‘(i) if the individual losing United
States citizenship owned (within the mean-
ing of section 958(a)), or is considered as
owning (by applying the ownership rules of
section 958(b)), at any time during the 2-
year period ending on the date of the loss
of United States citizenship, more than 50
percent of—
‘‘(I) the total combined voting
power of all classes of stock entitled
to vote of such corporation, or
‘‘(II) the total value of the stock
of such corporation, and
‘‘(ii) to the extent such income or gain
does not exceed the earnings and profits
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attributable to such stock which were
earned or accumulated before the loss of
citizenship and during periods that the
ownership requirements of clause (i) are
met.
‘‘(2) GAIN
RECOGNITION
ON
CERTAIN
EX-
CHANGES.—
‘‘(A) IN GENERAL.—In the case of any ex-
change of property to which this paragraph ap-
plies, notwithstanding any other provision of
this title, such property shall be treated as sold
for its fair market value on the date of such ex-
change, and any gain shall be recognized for
the taxable year which includes such date.
‘‘(B) EXCHANGES TO WHICH PARAGRAPH
APPLIES.—This paragraph shall apply to any
exchange during the 10-year period described in
subsection (a) if—
‘‘(i) gain would not (but for this para-
graph) be recognized on such exchange in
whole or in part for purposes of this sub-
title,
‘‘(ii) income derived from such prop-
erty was from sources within the United
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States (or, if no income was so derived,
would have been from such sources), and
‘‘(iii) income derived from the prop-
erty acquired in the exchange would be
from sources outside the United States.
‘‘(C) 
EXCEPTION.—Subparagraph 
(A)
shall not apply if the individual enters into an
agreement with the Secretary which specifies
that any income or gain derived from the prop-
erty acquired in the exchange (or any other
property which has a basis determined in whole
or part by reference to such property) during
such 10-year period shall be treated as from
sources within the United States. If the prop-
erty transferred in the exchange is disposed of
by the person acquiring such property, such
agreement shall terminate and any gain which
was not recognized by reason of such agreement
shall be recognized as of the date of such dis-
position.
‘‘(D) SECRETARY MAY EXTEND PERIOD.—
To the extent provided in regulations prescribed
by the Secretary, subparagraph (B) shall be ap-
plied by substituting the 15-year period begin-
ning 5 years before the loss of United States
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citizenship for the 10-year period referred to
therein.
‘‘(E) SECRETARY MAY REQUIRE RECOGNI-
TION OF GAIN IN CERTAIN CASES.—To the ex-
tent provided in regulations prescribed by the
Secretary—
‘‘(i) the removal of appreciated tan-
gible personal property from the United
States, and
‘‘(ii) any other occurrence which
(without recognition of gain) results in a
change in the source of the income or gain
from property from sources within the
United States to sources outside the Unit-
ed States,
shall be treated as an exchange to which this
paragraph applies.
‘‘(3) SUBSTANTIAL DIMINISHING OF RISKS OF
OWNERSHIP.—For purposes of determining whether
this section applies to any gain on the sale or ex-
change of any property, the running of the 10-year
period described in subsection (a) shall be suspended
for any period during which the individual’s risk of
loss with respect to the property is substantially di-
minished by—
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‘‘(A) the holding of a put with respect to
such property (or similar property),
‘‘(B) the holding by another person of a
right to acquire the property, or
‘‘(C) a short sale or any other trans-
action.’’
(d) CREDIT
FOR FOREIGN TAXES IMPOSED
ON
UNITED STATES SOURCE INCOME.—
(1) Subsection (b) of section 877 is amended by
adding at the end the following new sentence: ‘‘The
tax imposed solely by reason of this section shall be
reduced (but not below zero) by the amount of any
income, war profits, and excess profits taxes (within
the meaning of section 903) paid to any foreign
country or possession of the United States on any
income of the taxpayer on which tax is imposed sole-
ly by reason of this section.’’
(2) Subsection (a) of section 877, as amended
by subsection (a), is amended by inserting ‘‘(after
any reduction in such tax under the last sentence of
such subsection)’’ after ‘‘such subsection’’.
(e) COMPARABLE ESTATE AND GIFT TAX TREAT-
MENT.—
(1) ESTATE TAX.—
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(A) IN GENERAL.—Subsection (a) of sec-
tion 2107 is amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) RATE OF TAX.—A tax computed in accord-
ance with the table contained in section 2001 is
hereby imposed on the transfer of the taxable estate,
determined as provided in section 2106, of every de-
cedent nonresident not a citizen of the United States
if, within the 10-year period ending with the date of
death, such decedent lost United States citizenship,
unless such loss did not have for 1 of its principal
purposes the avoidance of taxes under this subtitle
or subtitle A.
‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAV-
ING TAX AVOIDANCE PURPOSE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), an individual shall be treated as hav-
ing a principal purpose to avoid such taxes if
such individual is so treated under section
877(a)(2).
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a decedent meeting the re-
quirements of section 877(c)(1).’’
(B) 
CREDIT
FOR
FOREIGN
DEATH
TAXES.—Subsection (c) of section 2107 is
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amended by redesignating paragraph (2) as
paragraph (3) and by inserting after paragraph
(1) the following new paragraph:
‘‘(2) CREDIT FOR FOREIGN DEATH TAXES.—
‘‘(A) IN GENERAL.—The tax imposed by
subsection (a) shall be credited with the amount
of any estate, inheritance, legacy, or succession
taxes actually paid to any foreign country in re-
spect of any property which is included in the
gross estate solely by reason of subsection (b).
‘‘(B) LIMITATION ON CREDIT.—The credit
allowed by subparagraph (A) for such taxes
paid to a foreign country shall not exceed the
lesser of—
‘‘(i) the amount which bears the same
ratio to the amount of such taxes actually
paid to such foreign country in respect of
property included in the gross estate as the
value of the property included in the gross
estate solely by reason of subsection (b)
bears to the value of all property subjected
to such taxes by such foreign country, or
‘‘(ii) such property’s proportionate
share of the excess of—
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‘‘(I) the tax imposed by sub-
section (a), over
‘‘(II) the tax which would be im-
posed by section 2101 but for this
section.
‘‘(C) PROPORTIONATE
SHARE.—For pur-
poses of subparagraph (B), a property’s propor-
tionate share is the percentage which the value
of the property which is included in the gross
estate solely by reason of subsection (b) bears
to the total value of the gross estate.’’
(C) EXPANSION OF INCLUSION IN GROSS
ESTATE
OF
STOCK
OF
FOREIGN
CORPORA-
TIONS.—Paragraph (2) of section 2107(b) is
amended by striking ‘‘more than 50 percent of’’
and all that follows and inserting ‘‘more than
50 percent of—
‘‘(A) the total combined voting power of all
classes of stock entitled to vote of such corpora-
tion, or
‘‘(B) the total value of the stock of such
corporation,’’.
(2) GIFT TAX.—
(A) IN GENERAL.—Paragraph (3) of sec-
tion 2501(a) is amended to read as follows:
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‘‘(3) EXCEPTION.—
‘‘(A) CERTAIN
INDIVIDUALS.—Paragraph
(2) shall not apply in the case of a donor who,
within the 10-year period ending with the date
of transfer, lost United States citizenship, un-
less such loss did not have for 1 of its principal
purposes the avoidance of taxes under this sub-
title or subtitle A.
‘‘(B) CERTAIN INDIVIDUALS TREATED AS
HAVING TAX AVOIDANCE PURPOSE.—For pur-
poses of subparagraph (A), an individual shall
be treated as having a principal purpose to
avoid such taxes if such individual is so treated
under section 877(a)(2).
‘‘(C) EXCEPTION
FOR
CERTAIN
INDIVID-
UALS.—Subparagraph (B) shall not apply to a
decedent meeting the requirements of section
877(c)(1).
‘‘(D) CREDIT FOR FOREIGN GIFT TAXES.—
The tax imposed by this section solely by reason
of this paragraph shall be credited with the
amount of any gift tax actually paid to any for-
eign country in respect of any gift which is tax-
able under this section solely by reason of this
paragraph.’’
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(f) COMPARABLE TREATMENT OF LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—
(1) IN GENERAL.—Section 877 is amended by
redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new sub-
section:
‘‘(e) COMPARABLE TREATMENT OF LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—
‘‘(1) IN GENERAL.—Any long-term resident of
the United States who—
‘‘(A) ceases to be a lawful permanent resi-
dent of the United States (within the meaning
of section 7701(b)(6)), or
‘‘(B) commences to be treated as a resi-
dent of a foreign country under the provisions
of a tax treaty between the United States and
the foreign country and who does not waive the
benefits of such treaty applicable to residents of
the foreign country,
shall be treated for purposes of this section and sec-
tions 2107, 2501, and 6039F in the same manner
as if such resident were a citizen of the United
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‘‘(e) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful
permanent residents who ceased to be taxed as resi-
dents, see section 877(e).’’
(B) Paragraph (3) of section 2501(a) (as
amended by subsection (e)) is amended by add-
ing at the end the following new subparagraph:
‘‘(E) CROSS REFERENCE.—
‘‘For comparable treatment of long-term lawful
permanent residents who ceased to be taxed as resi-
dents, see section 877(e).’’
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to—
(A) individuals losing United States citi-
zenship (within the meaning of section 877 of
the Internal Revenue Code of 1986) on or after
February 6, 1995, and
(B) long-term residents of the United
States with respect to whom an event described
in subparagraph (A) or (B) of section 877(e)(1)
of such Code occurs on or after June 13, 1995.
(2) SPECIAL RULE.—
(A) IN GENERAL.—In the case of an indi-
vidual who performed an act of expatriation
specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nation-
ality Act (8 U.S.C. 1481(a)(1)–(4)) before Feb-
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ruary 6, 1995, but who did not, on or before
such date, furnish to the United States Depart-
ment of State a signed statement of voluntary
relinquishment of United States nationality con-
firming the performance of such act, the
amendments made by this section shall apply to
such individual except that—
(i) the 10-year period described in
section 877(a) of such Code shall not ex-
pire before the end of the 10-year period
beginning on the date such statement is so
furnished, and
(ii) the 1-year period referred to in
section 877(c) of such Code, as amended
by this section, shall not expire before the
date which is 1 year after the date of the
enactment of this Act.
(B) EXCEPTION.—Subparagraph (A) shall
not apply if the individual establishes to the
satisfaction of the Secretary of the Treasury
that such loss of United States citizenship oc-
curred before February 6, 1994.
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SEC. 13617. INFORMATION ON INDIVIDUALS LOSING UNIT-
ED STATES CITIZENSHIP.
(a) IN GENERAL.—Subpart A of part III of sub-
chapter A of chapter 61 is amended by inserting after sec-
tion 6039E the following new section:
‘‘SEC. 
6039F. 
INFORMATION 
ON 
INDIVIDUALS 
LOSING
UNITED STATES CITIZENSHIP.
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of law, any individual who loses United States citi-
zenship (within the meaning of section 877(a)) shall pro-
vide a statement which includes the information described
in subsection (b). Such statement shall be—
‘‘(1) provided not later than the earliest date of
any act referred to in subsection (c), and
‘‘(2) provided to the person or court referred to
in subsection (c) with respect to such act.
‘‘(b) INFORMATION TO BE PROVIDED.—Information
required under subsection (a) shall include—
‘‘(1) the taxpayer’s TIN,
‘‘(2) the mailing address of such individual’s
principal foreign residence,
‘‘(3) the foreign country in which such individ-
ual is residing,
‘‘(4) the foreign country of which such individ-
ual is a citizen,
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‘‘(5) in the case of an individual having a net
worth of at least the dollar amount applicable under
section 877(a)(2)(B), information detailing the as-
sets and liabilities of such individual, and
‘‘(6) such other information as the Secretary
may prescribe.
‘‘(c) ACTS DESCRIBED.—For purposes of this sec-
tion, the acts referred to in this subsection are—
‘‘(1) the individual’s renunciation of his United
States nationality before a diplomatic or consular of-
ficer of the United States pursuant to paragraph (5)
of section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(5)),
‘‘(2) the individual’s furnishing to the United
States Department of State a signed statement of
voluntary relinquishment of United States national-
ity confirming the performance of an act of expatria-
tion specified in paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(1)–(4)),
‘‘(3) the issuance by the United States Depart-
ment of State of a certificate of loss of nationality
to the individual, or
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‘‘(4) the cancellation by a court of the United
States of a naturalized citizen’s certificate of natu-
ralization.
‘‘(d) PENALTY.—Any individual failing to provide a
statement required under subsection (a) shall be subject
to a penalty for each year (of the 10-year period beginning
on the date of loss of United States citizenship) during
any portion of which such failure continues in an amount
equal to the greater of—
‘‘(1) 5 percent of the tax required to be paid
under section 877 for the taxable year ending during
such year, or
‘‘(2) $1,000,
unless it is shown that such failure is due to reasonable
cause and not to willful neglect.
‘‘(e) INFORMATION TO BE PROVIDED TO SEC-
RETARY.—Notwithstanding any other provision of law—
‘‘(1) any Federal agency or court which collects
(or is required to collect) the statement under sub-
section (a) shall provide to the Secretary—
‘‘(A) a copy of any such statement, and
‘‘(B) the name (and any other identifying
information) of any individual refusing to com-
ply with the provisions of subsection (a),
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‘‘(2) the Secretary of State shall provide to the
Secretary a copy of each certificate as to the loss of
American nationality under section 358 of the Immi-
gration and Nationality Act which is approved by
the Secretary of State, and
‘‘(3) the Federal agency primarily responsible
for administering the immigration laws shall provide
to the Secretary the name of each lawful permanent
resident of the United States (within the meaning of
section 7701(b)(6)) whose status as such has been
revoked or has been administratively or judicially de-
termined to have been abandoned.
Notwithstanding any other provision of law, not later than
30 days after the close of each calendar quarter, the Sec-
retary shall publish in the Federal Register the name of
each individual losing United States citizenship (within
the meaning of section 877(a)) with respect to whom the
Secretary receives information under the preceding sen-
tence during such quarter.
‘‘(f) REPORTING BY LONG-TERM LAWFUL PERMA-
NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI-
DENTS.—In lieu of applying the last sentence of sub-
section (a), any individual who is required to provide a
statement under this section by reason of section
877(e)(1) shall provide such statement with the return of
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tax imposed by chapter 1 for the taxable year during
which the event described in such section occurs.
‘‘(g) EXEMPTION.—The Secretary may by regula-
tions exempt any class of individuals from the require-
ments of this section if he determines that applying this
section to such individuals is not necessary to carry out
the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 6039E the following new item:
‘‘Sec. 6039F. Information on individuals losing United States citi-
zenship.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to—
(1) individuals losing United States citizenship
(within the meaning of section 877 of the Internal
Revenue Code of 1986) after the date of the enact-
ment of this Act, and
(2) long-term residents of the United States
with respect to whom an event described in subpara-
graph (A) or (B) of section 877(e)(1) of such Code
occurs after such date.
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SEC. 13618. REPORT ON TAX COMPLIANCE BY UNITED
STATES CITIZENS AND RESIDENTS LIVING
ABROAD.
Not later than 90 days after the date of the enact-
ment of this Act, the Secretary of the Treasury shall pre-
pare and submit to the Committee on Ways and Means
of the House of Representatives and the Committee on
Finance of the Senate a report—
(1) describing the compliance with subtitle A of
the Internal Revenue Code of 1986 by citizens and
lawful permanent residents of the United States
(within the meaning of section 7701(b)(6) of such
Code) residing outside the United States, and
(2) recommending measures to improve such
compliance (including improved coordination be-
tween executive branch agencies).
PART IV—REFORMS RELATING TO ENERGY
PROVISIONS
SEC. 13621. TERMINATION OF CREDIT FOR ELECTRICITY
PRODUCED FROM CERTAIN RENEWABLE RE-
SOURCES.
(a) FACILITIES MUST BE PLACED IN SERVICE BE-
FORE SEPTEMBER 14, 1995.—Paragraph (3) of section
45(c) (defining qualified facility) is amended by striking
‘‘July 1, 1999’’ and inserting ‘‘September 14, 1995’’.
(b) EFFECTIVE DATE.—
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(1) IN
GENERAL.—The amendment made by
this section shall apply to taxable years ending after
September 13, 1995.
(2) BINDING
CONTRACTS.—The amendment
made by this section shall not apply to any facility—
(A) which is constructed or acquired by the
taxpayer pursuant to a written contract which
was binding on September 13, 1995, and at all
times thereafter before such construction or ac-
quisition, and
(B) which is placed in service before Sep-
tember 14, 1996.
SEC. 13622. EXCLUSION FOR ENERGY CONSERVATION SUB-
SIDIES LIMITED TO SUBSIDIES WITH RE-
SPECT TO DWELLING UNITS.
(a) IN GENERAL.—Paragraph (1) of section 136(c)
(defining energy conservation measure) is amended by
striking ‘‘energy demand—’’ and all that follows and in-
serting ‘‘energy demand with respect to a dwelling unit.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 136 is amended to
read as follows:
‘‘(a) EXCLUSION.—Gross income shall not include
the value of any subsidy provided (directly or indirectly)
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by a public utility to a customer for the purchase or instal-
lation of any energy conservation measure.’’
(2) Paragraph (2) of section 136(c) is amend-
ed—
(A) by striking subparagraph (A) and by
redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively, and
(B) by striking ‘‘AND SPECIAL RULES’’ in
the paragraph heading.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after Septem-
ber 13, 1995, unless received pursuant to a written bind-
ing contract in effect on September 13, 1995, and at all
times thereafter.
PART V—REFORMS RELATING TO
NONRECOGNITION PROVISIONS
SEC. 13626. BASIS ADJUSTMENT TO PROPERTY HELD BY
CORPORATION WHERE STOCK IN CORPORA-
TION IS REPLACEMENT PROPERTY UNDER
INVOLUNTARY CONVERSION RULES.
(a) IN GENERAL.—Subsection (b) of section 1033 is
amended to read as follows:
‘‘(b) BASIS OF PROPERTY ACQUIRED THROUGH IN-
VOLUNTARY CONVERSION.—
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‘‘(1) CONVERSIONS DESCRIBED IN SUBSECTION
(a)(1).—If the property was acquired as the result
of a compulsory or involuntary conversion described
in subsection (a)(1), the basis shall be the same as
in the case of the property so converted—
‘‘(A) decreased in the amount of any
money received by the taxpayer which was not
expended in accordance with the provisions of
law (applicable to the year in which such con-
version was made) determining the taxable sta-
tus of the gain or loss upon such conversion,
and
‘‘(B) increased in the amount of gain or
decreased in the amount of loss to the taxpayer
recognized upon such conversion under the law
applicable to the year in which such conversion
was made.
‘‘(2) CONVERSIONS DESCRIBED IN SUBSECTION
(a)(2).—In the case of property purchased by the
taxpayer in a transaction described in subsection
(a)(2) which resulted in the nonrecognition of any
part of the gain realized as the result of a compul-
sory or involuntary conversion, the basis shall be the
cost of such property decreased in the amount of the
gain not so recognized; and if the property pur-
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chased consists of more than 1 piece of property, the
basis determined under this sentence shall be allo-
cated to the purchased properties in proportion to
their respective costs.
‘‘(3) PROPERTY HELD BY CORPORATION THE
STOCK OF WHICH IS REPLACEMENT PROPERTY.—
‘‘(A) IN GENERAL.—If the basis of stock
in a corporation is decreased under paragraph
(2), an amount equal to such decrease shall also
be applied to reduce the basis of property held
by the corporation at the time the taxpayer ac-
quired 
control 
(as 
defined 
in 
subsection
(a)(2)(E)) of such corporation.
‘‘(B) 
LIMITATION.—Subparagraph 
(A)
shall not apply to the extent that it would (but
for this subparagraph) require a reduction in
the aggregate adjusted bases of the property of
the corporation below the taxpayer’s adjusted
basis of the stock in the corporation (deter-
mined immediately after such basis is decreased
under paragraph (2)).
‘‘(C) ALLOCATION OF BASIS REDUCTION.—
The decrease required under subparagraph (A)
shall be allocated—
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‘‘(i) first to property which is similar
or related in service or use to the converted
property,
‘‘(ii) second to depreciable property
(as defined in section 1017(b)(3)(B)) not
described in clause (i), and
‘‘(iii) then to other property.
‘‘(D) SPECIAL RULES.—
‘‘(i) REDUCTION NOT TO EXCEED AD-
JUSTED BASIS OF PROPERTY.—No reduc-
tion in the basis of any property under this
paragraph shall exceed the adjusted basis
of such property (determined without re-
gard to such reduction).
‘‘(ii) ALLOCATION
OF
REDUCTION
AMONG
PROPERTIES.—If more than 1
property is described in a clause of sub-
paragraph (C), the reduction under this
paragraph shall be allocated among such
property in proportion to the adjusted
bases of such property (determined without
regard to such reduction).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to involuntary conversions occur-
ring after September 13, 1995.
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SEC. 13627. EXPANSION OF REQUIREMENT THAT INVOLUN-
TARILY 
CONVERTED 
PROPERTY 
BE 
RE-
PLACED WITH PROPERTY ACQUIRED FROM
AN UNRELATED PERSON.
(a) IN GENERAL.—Subsection (i) of section 1033 is
amended to read as follows:
‘‘(i) REPLACEMENT PROPERTY MUST BE ACQUIRED
FROM UNRELATED PERSON IN CERTAIN CASES.—
‘‘(1) IN GENERAL.—If the property which is in-
voluntarily converted is held by a taxpayer to which
this subsection applies, subsection (a) shall not apply
if the replacement property or stock is acquired from
a related person. The preceding sentence shall not
apply to the extent that the related person acquired
the replacement property or stock from an unrelated
person during the period applicable under subsection
(a)(2)(B).
‘‘(2) TAXPAYERS TO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to—
‘‘(A) a C corporation,
‘‘(B) a partnership in which 1 or more C
corporations own, directly or indirectly (deter-
mined in accordance with section 707(b)(3)),
more than 50 percent of the capital interest, or
profits interest, in such partnership at the time
of the involuntary conversion, and
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‘‘(C) any other taxpayer if, with respect to
property which is involuntarily converted during
the taxable year, the aggregate of the amount
of realized gain on such property on which
there is realized gain exceeds $100,000.
In the case of a partnership, subparagraph (C) shall
apply with respect to the partnership and with re-
spect to each partner. A similar rule shall apply in
the case of an S corporation and its shareholders.
‘‘(3) RELATED PERSON.—For purposes of this
subsection, a person is related to another person if
the person bears a relationship to the other person
described in section 267(b) or 707(b)(1).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to involuntary conversions occur-
ring after September 13, 1995.
SEC. 13628. NO ROLLOVER OR EXCLUSION OF GAIN ON
SALE OF PRINCIPAL RESIDENCE WHICH IS
ATTRIBUTABLE TO DEPRECIATION DEDUC-
TIONS.
(a) IN GENERAL.—Subsection (d) of section 1034
(relating to limitations) is amended by adding at the end
the following new paragraph:
‘‘(3) RECOGNITION OF GAIN ATTRIBUTABLE TO
DEPRECIATION.—Subsection (a) shall not apply to
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so much of the gain from the sale of any residence
as does not exceed the portion of the depreciation
adjustments (as defined in section 1250(b)(3)) at-
tributable to periods after December 31, 1995, in re-
spect of such residence.’’
(b) COMPARABLE TREATMENT UNDER 1-TIME EX-
CLUSION OF GAIN ON SALE OF PRINCIPAL RESIDENCE.—
Subsection (d) of section 121 is amended by adding at
the end the following new paragraph:
‘‘(10) RECOGNITION
OF
GAIN
ATTRIBUTABLE
TO DEPRECIATION.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to so much of the gain from the sale
of any property as does not exceed the portion
of the depreciation adjustments (as defined in
section 1250(b)(3)) attributable to periods after
December 31, 1995, in respect of such prop-
erty.
‘‘(B) COORDINATION
WITH
PARAGRAPH
(5).—If this section does not apply to gain at-
tributable to a portion of a residence by reason
of paragraph (5), subparagraph (A) shall not
apply to depreciation adjustments attributable
to such portion.’’
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(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1995.
SEC. 13629. NONRECOGNITION OF GAIN ON SALE OF PRIN-
CIPAL RESIDENCE BY NONCITIZENS LIMITED
TO NEW RESIDENCES LOCATED IN THE UNIT-
ED STATES.
(a) IN GENERAL.—Subsection (d) of section 1034
(relating to limitations) (as amended by section 13628)
is amended by adding at the end the following new para-
graph:
‘‘(4) NEW RESIDENCE MUST BE LOCATED IN
UNITED STATES IN CERTAIN CASES.—
‘‘(A) IN GENERAL.—In the case of a sale
of an old residence by a taxpayer—
‘‘(i) who is not a citizen of the United
States at the time of sale, and
‘‘(ii) who is not a citizen or resident
of the United States on the date which is
2 years after the date of the sale of such
old residence,
subsection (a) shall apply only if the new resi-
dence is located in the United States or a pos-
session of the United States.
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‘‘(B) PROPERTY HELD JOINTLY BY HUS-
BAND AND WIFE.—Subparagraph (A) shall not
apply if—
‘‘(i) the old residence is held by a hus-
band and wife as joint tenants, tenants by
the entirety, or community property,
‘‘(ii) such husband and wife make a
joint return for the taxable year of the sale
or exchange, and
‘‘(iii) one spouse is a citizen of the
United States at the time of sale.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
this section shall apply to sales of old residences
after December 31, 1995.
(2) TREATMENT OF PURCHASES OF NEW RESI-
DENCES.—The amendment made by this section
shall not apply to new residences—
(A) purchased before September 13, 1995,
or
(B) purchased on or after such date pursu-
ant to a binding contract in effect on such date
and at all times thereafter before such pur-
chase.
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(3) CERTAIN RULES TO APPLY.—For purposes
of this subsection, the rules of paragraphs (1), (2),
and (3) of section 1034(c) of the Internal Revenue
Code of 1986 shall apply.
PART VI—REFORMS RELATING TO GAMING
ACTIVITIES
SEC. 13631. TREATMENT OF INDIAN GAMING ACTIVITIES
UNDER UNRELATED BUSINESS INCOME TAX.
(a) IN GENERAL.—Paragraph (2) of section 511(a)
(relating to imposition of tax on unrelated business income
of charitable, etc., organizations) is amended by adding
at the end the following new subparagraph:
‘‘(C) GAMING
ACTIVITIES
OF
INDIAN
TRIBES.—
‘‘(i) IN GENERAL.—The tax imposed
by paragraph (1) shall apply to any Indian
tribal organization; except that, notwith-
standing any other provision of this part,
in the case of such an organization, the
term ‘unrelated trade or business’ means
only a trade or business of conducting any
class II or class III gaming activity (as de-
fined in section 4 of the Indian Gaming
Regulatory Act (25 U.S.C. 2701 et seq.),
as in effect on the date of the enactment
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of this subparagraph), including a gaming
activity described in section 513(a)(1).
‘‘(ii) 
INDIAN
TRIBAL
ORGANIZA-
TION.—For purposes of clause (i), the
term ‘Indian tribal organization’ means
any Indian tribe and any organization
which is immune or exempt from tax under
this subtitle solely by reason of being
owned or controlled by an Indian tribe.’’
(b) TREATMENT
OF AMOUNTS PAID
FOR CHARI-
TABLE PURPOSES, ETC., BY REASON OF STATE OR FED-
ERAL LAW.—Subsection (b) of section 512 is amended by
adding at the end the following new paragraph:
‘‘(17) In the case of an Indian tribal organiza-
tion (as defined in section 511(a)(3)), if, by reason
of State or Federal law or of a contract with the
United States or with any State or political subdivi-
sion thereof, such organization is required to use
any portion of the net proceeds of any gaming activ-
ity for specified purposes, the deduction for so using
such proceeds shall be treated as allowed under sec-
tion 170 for purposes of applying paragraph (10).
The preceding sentence shall not apply to such pro-
ceeds which are paid as general revenues to the
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United States or to any State or political subdivision
thereof.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996.
(d) STUDY OF GAMBLING CONDUCTED BY TAX-EX-
EMPT ORGANIZATIONS.—The Secretary of the Treasury or
his delegate shall conduct a study on the nature and ex-
tent of gaming activities conducted by organizations ex-
empt from tax under section 501(a) of the Internal Reve-
nue Code of 1986, including an examination of—
(1) the types of gaming activities (including
bingo, pull tabs, and casino nights) engaged in by
charities and other nonprofit organizations and the
frequency of such activities;
(2) the dollar volume of such gaming activities;
(3) the nature and extent of the involvement of
for-profit entities and private parties in the manage-
ment or operation of gaming activities of such orga-
nizations;
(4) competition between taxable gaming activi-
ties and gaming activities that are exempt from Fed-
eral income tax; and
(5) an analysis of the present law tax treatment
of gaming activities of tax-exempt organizations.
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The study may include any recommendations for change,
including examination of the South End decision and the
special exception for bingo games. The Secretary shall
submit the results of the study to the Committee on Ways
and Means of the House of Representatives and the Com-
mittee on Finance of the Senate not later than July 1,
1996.
SEC. 13632. REPEAL OF TARGETED EXEMPTION FROM TAX
ON UNRELATED TRADE OR BUSINESS IN-
COME FROM GAMBLING IN CERTAIN STATES.
(a) IN GENERAL.—Section 311 of the Tax Reform
Act of 1984 is hereby repealed.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to games of chance conducted
after December 31, 1995, in taxable years ending after
such date.
SEC. 13633. EXTENSION OF WITHHOLDING TO CERTAIN
GAMBLING WINNINGS.
(a) REPEAL
OF
EXEMPTION
FOR
BINGO
AND
KENO.—Paragraph (5) of section 3402(q) is amended to
read as follows:
‘‘(5) EXEMPTION FOR SLOT MACHINES.—The
tax imposed under paragraph (1) shall not apply to
winnings from a slot machine.’’