365
ployee stock ownership plan as defined in section
4975(e)(7)).’’.
(C) Section 401(k)(10) is amended—
(i) in subparagraph (B)—
(I) by striking ‘‘An event’’ in
clause (i) and inserting ‘‘A termi-
nation’’, and
(II) by striking ‘‘the event’’ in
clause (i) and inserting ‘‘the termi-
nation’’,
(ii) by striking subparagraph (C), and
(iii) by striking ‘‘OR DISPOSITION OF
ASSETS OR SUBSIDIARY’’ in the heading.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of sec-
tion 403(b) is amended by striking ‘‘SEPARATION
FROM
SERVICE’’ and inserting ‘‘SEVERANCE
FROM EMPLOYMENT’’.
(3) 
SECTION
457.—Clause 
(ii) 
of 
section
457(d)(1)(A) is amended by striking ‘‘is separated
366
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 337. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 is
amended by adding at the end the following new paragraph:
‘‘(13) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A)) under
such plan, or
‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(b) 457 PLANS.—
(1) Subsection (e) of section 457 is amended by
adding after paragraph (16) the following new para-
graph:
367
‘‘(17) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A)) under
such plan, or
‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(2) Section 457(b)(2) is amended by striking
‘‘(other than rollover amounts)’’ and inserting ‘‘(other
than rollover amounts and amounts received in a
transfer referred to in subsection (e)(17))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to trustee-to-trustee transfers after De-
cember 31, 2000.
SEC. 338. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) QUALIFIED PLANS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—Section 411(a)(11) (relating to restrictions
368
on certain mandatory distributions) is amended by
adding at the end the following:
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined without
regard to that portion of such benefit which is
attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this sub-
paragraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),
and 457(e)(16).’’.
(2) AMENDMENT TO ERISA.—Section 203(e) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1053(c)) is amended by adding at
the end the following:
‘‘(4) A plan shall not fail to meet the requirements of
this subsection if, under the terms of the plan, the present
value of the nonforfeitable accrued benefit is determined
without regard to that portion of such benefit which is at-
tributable to rollover contributions (and earnings allocable
thereto). For purposes of this subparagraph, the term ‘roll-
over contributions’ means any rollover contribution under
369
sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16) of the Internal Revenue Code of 1986.’’.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS.—
Clause (i) of section 457(e)(9)(A) is amended by striking
‘‘such amount’’ and inserting ‘‘the portion of such amount
which is not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 339. MINIMUM DISTRIBUTION AND INCLUSION RE-
QUIREMENTS FOR SECTION 457 PLANS.
(a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para-
graph (2) of section 457(d) (relating to distribution require-
ments) is amended to read as follows:
‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—
A plan meets the minimum distribution requirements
of this paragraph if such plan meets the requirements
of section 401(a)(9).’’.
(b) INCLUSION IN GROSS INCOME.—
(1) YEAR OF INCLUSION.—Subsection (a) of sec-
tion 457 (relating to year of inclusion in gross in-
come) is amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensation
370
plan, and any income attributable to the amounts so
deferred, shall be includible in gross income only for
the taxable year in which such compensation or other
income—
‘‘(A) is paid to the participant or other ben-
eficiary, in the case of a plan of an eligible em-
ployer described in subsection (e)(1)(A), and
‘‘(B) is paid or otherwise made available to
the participant or other beneficiary, in the case
of a plan of an eligible employer described in
subsection (e)(1)(B).
‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—
To the extent provided in section 72(t)(9), section
72(t) shall apply to any amount includible in gross
income under this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amended
to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REASON
OF CERTAIN ELECTIONS, ETC.—In the case of an eligi-
ble deferred compensation plan of an employer de-
scribed in subsection (e)(1)(B)—’’.
371
(B) Section 457(d) is amended by adding at
the end the following new paragraph:
‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—
An eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(A) shall not be
treated as failing to meet the requirements of this sub-
section solely by reason of making a distribution de-
scribed in subsection (e)(9)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
Subtitle D—Strengthening Pension
Security and Enforcement
SEC. 341. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) AMENDMENT TO INTERNAL REVENUE CODE OF
1986.—Section 412(c)(7) (relating to full-funding limita-
tion) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the ap-
plicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
372
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 ....................................................................................
160
2002 ....................................................................................
165
2003 ....................................................................................
170.’’.
(b) AMENDMENT TO ERISA.—Section 302(c)(7) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082(c)(7)) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the ap-
plicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 ....................................................................................
160
2002 ....................................................................................
165
2003 ....................................................................................
170.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
373
SEC. 342. MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED AND APPLIED TO ALL DEFINED
BENEFIT PLANS.
(a) IN
GENERAL.—Subparagraph (D) of section
404(a)(1) (relating to special rule in case of certain plans)
is amended to read as follows:
‘‘(D) SPECIAL RULE IN CASE OF CERTAIN
PLANS.—
‘‘(i) IN GENERAL.—In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deduct-
ible under the limitations of this paragraph
shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retire-
ment Income Security Act of 1974 were the
last day of the plan year).
‘‘(ii) PLANS WITH LESS THAN 100 PAR-
TICIPANTS.—For purposes of this subpara-
graph, in the case of a plan which has less
than 100 participants for the plan year,
termination liability shall not include the
liability attributable to benefit increases for
highly compensated employees (as defined
in section 414(q)) resulting from a plan
374
amendment which is made or becomes effec-
tive, whichever is later, within the last 2
years before the termination date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of de-
termining whether a plan has more than
100 participants, all defined benefit plans
maintained by the same employer (or any
member of such employer’s controlled group
(within 
the 
meaning 
of 
section
412(l)(8)(C))) shall be treated as one plan,
but only employees of such member or em-
ployer shall be taken into account.
‘‘(iv) PLANS ESTABLISHED AND MAIN-
TAIN BY PROFESSIONAL SERVICE EMPLOY-
ERS.—Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Em-
ployee Retirement Income Security Act of
1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of sec-
tion 4972(c) is amended to read as follows:
‘‘(6) EXCEPTIONS.—In determining the amount
of nondeductible contributions for any taxable year,
there shall not be taken into account so much of the
contributions to one or more defined contribution
375
plans which are not deductible when contributed sole-
ly because of section 404(a)(7) as does not exceed the
greater of—
‘‘(A) the amount of contributions not in ex-
cess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued (dur-
ing the taxable year for which the contributions
were made) to beneficiaries under the plans, or
‘‘(B) the sum of—
‘‘(i) the amount of contributions de-
scribed in section 401(m)(4)(A), plus
‘‘(ii) the amount of contributions de-
scribed in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits
under section 404(a)(7) shall first be applied to
amounts contributed to a defined benefit plan and
then to amounts described in subparagraph (B).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 343. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350) is
amended by redesignating subsection (c) as subsection (e)
and by inserting after subsection (b) the following:
376
‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall
prescribe rules similar to the rules in subsection (a) for mul-
tiemployer plans covered by this title that terminate under
section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan ad-
ministrator of a plan described in paragraph (4) may
elect to transfer a missing participant’s benefits to the
corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corporation
information with respect to benefits of a missing par-
ticipant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corporation
or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If bene-
fits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit)
either—
377
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described in
this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this sec-
tion do not apply (without regard to this
subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be distrib-
uted upon termination, the plan—
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Sub-
sections (a)(1) and (a)(3) shall not apply to a plan
described in paragraph (4).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions made after final regula-
378
tions implementing subsections (c) and (d) of section 4050
of the Employee Retirement Income Security Act of 1974
(as added by subsection (a)), respectively, are prescribed.
SEC. 344. PERIODIC PENSION BENEFITS STATEMENTS.
(a) IN GENERAL.—Section 105(a) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1025 (a))
is amended to read as follows:
‘‘(a)(1) Except as provided in paragraph (2)—
‘‘(A) The administrator of an individual account
plan shall furnish a pension benefit statement—
‘‘(i) to a plan participant at least once an-
nually, and
‘‘(ii) to a plan beneficiary upon written re-
quest.
‘‘(B) The administrator of a defined benefit plan
shall furnish a pension benefit statement—
‘‘(i) at least once every 3 years to each par-
ticipant with a nonforfeitable accrued benefit
who is employed by the employer maintaining
the plan at the time the statement is furnished
to participants, and
‘‘(ii) to a participant or beneficiary of the
plan upon written request.
‘‘(2) Notwithstanding paragraph (1), the adminis-
trator of a plan to which more than 1 unaffiliated employer
379
is required to contribute shall only be required to furnish
a pension benefit statement under paragraph (1) upon the
written request of a participant or beneficiary of the plan.
‘‘(3) A pension benefit statement under paragraph
(1)—
‘‘(A) shall indicate, on the basis of the latest
available information—
‘‘(i) the total benefits accrued, and
‘‘(ii) the nonforfeitable pension benefits, if
any, which have accrued, or the earliest date on
which benefits will become nonforfeitable,
‘‘(B) shall be communicated in a manner cal-
culated to be understood by the average plan partici-
pant, and
‘‘(C) may be provided in written, electronic, tele-
phonic, or other appropriate form.
‘‘(4) In the case of a defined benefit plan, the require-
ments of paragraph (1)(B)(i) shall be treated as met with
respect to a participant if the administrator provides the
participant at least once each year with notice of the avail-
ability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such no-
tice shall be provided in written, electronic, telephonic, or
other appropriate form, and may be included with other
communications to the participant if done in a manner
380
reasonably designed to attract the attention of the partici-
pant.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 105 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1025) is
amended by striking subsection (d).
(2) Section 105(b) of such Act (29 U.S.C.
1025(b)) is amended to read as follows:
‘‘(b) In no case shall a participant or beneficiary of
a plan be entitled to more than one statement described in
subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is applica-
ble, in any 12-month period.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 345. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RE-
SPONSIBILITY.
(a) IMPOSITION AND AMOUNT OF PENALTY MADE DIS-
CRETIONARY.—Section 502(l)(1) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1132(l)(1))
is amended—
(1) by striking ‘‘shall’’ and inserting ‘‘may’’,
and
(2) by striking ‘‘equal to’’ and inserting ‘‘not
greater than’’.
381
(b) 
APPLICABLE
RECOVERY
AMOUNT.—Section
502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended to
read as follows:
‘‘(2) For purposes of paragraph (1), the term ‘applica-
ble recovery amount’ means any amount which is recovered
from any fiduciary or other person (or from any other per-
son on behalf of any such fiduciary or other person) with
respect to a breach or violation described in paragraph (1)
on or after the 30th day following receipt by such fiduciary
or other person of written notice from the Secretary of the
violation, whether paid voluntarily or by order of a court
in a judicial proceeding instituted by the Secretary under
subsection (a)(2) or (a)(5). The Secretary may, in the Sec-
retary’s sole discretion, extend the 30-day period described
in the preceding sentence.’’.
(c) OTHER RULES.—Section 502(l) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1132(l)) is amended by adding at the end the following:
‘‘(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is jointly and severally liable for the appli-
cable recovery amount on which the penalty is based.
‘‘(6) No penalty shall be assessed under this subsection
unless the person against whom the penalty is assessed is
382
given notice and opportunity for a hearing with respect to
the violation and applicable recovery amount.’’.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to any breach of fiduciary re-
sponsibility or other violation of part 4 of subtitle B
of title I of the Employee Retirement Income Security
Act of 1974 occurring on or after the date of enact-
ment of this Act.
(2) TRANSITION RULE.—In applying the amend-
ment made by subsection (b) (relating to applicable
recovery amount), a breach or other violation occur-
ring before the date of enactment of this Act which
continues after the 180th day after such date (and
which may have been discontinued at any time dur-
ing its existence) shall be treated as having occurred
after such date of enactment.
SEC. 346. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(a) IN GENERAL.—Subsection (c) of section 4972 (re-
lating to nondeductible contributions) is amended by add-
ing at the end the following new paragraph:
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
383
such year not to take into account any contributions
to a defined benefit plan except to the extent that such
contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without re-
gard to subparagraph (A)(i)(I) thereof). For purposes
of this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contrib-
uted to defined contribution plans and then to
amounts described in this paragraph. If an employer
makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer
for such taxable year.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 347. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY RE-
DUCING FUTURE BENEFIT ACCRUALS.
(a) AMENDMENT TO 1986 CODE.—Chapter 43 (relat-
ing to qualified pension, etc., plans) is amended by adding
at the end the following new section:
384
‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING
BENEFIT ACCRUALS TO SATISFY NOTICE RE-
QUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a
tax on the failure of any applicable pension plan to meet
the requirements of subsection (e) with respect to any appli-
cable individual.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect to
any applicable individual shall be $100 for each day
in the noncompliance period with respect to such fail-
ure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of
this section, the term ‘noncompliance period’ means,
with respect to any failure, the period beginning on
the date the failure first occurs and ending on the
date the failure is corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) OVERALL LIMITATION FOR UNINTENTIONAL
FAILURES.—In the case of failures that are due to
reasonable cause and not to willful neglect, the tax
imposed by subsection (a) for failures during the tax-
able year of the employer (or, in the case of a multi-
employer plan, the taxable year of the trust forming
part of the plan) shall not exceed $500,000. For pur-
385
poses of the preceding sentence, all multiemployer
plans of which the same trust forms a part shall be
treated as one plan. For purposes of this paragraph,
if not all persons who are treated as a single em-
ployer for purposes of this section have the same tax-
able year, the taxable years taken into account shall
be determined under principles similar to the prin-
ciples of section 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent that
the payment of such tax would be excessive relative to
the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multiem-
ployer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS
FOR PLANS SIGNIFI-
CANTLY REDUCING BENEFIT ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended to provide for a significant reduc-
tion in the rate of future benefit accrual, the plan ad-
386
ministrator shall provide written notice to each ap-
plicable individual (and to each employee organiza-
tion representing applicable individuals).
‘‘(2) NOTICE.—The notice required by paragraph
(1) shall be written in a manner calculated to be un-
derstood by the average plan participant and shall
provide sufficient information (as determined in ac-
cordance with regulations prescribed by the Sec-
retary) to allow applicable individuals to understand
the effect of the plan amendment.
‘‘(3) TIMING OF NOTICE.—Except as provided in
regulations, the notice required by paragraph (1)
shall be provided within a reasonable time before the
effective date of the plan amendment.
‘‘(4) DESIGNEES.—Any notice under paragraph
(1) may be provided to a person designated, in writ-
ing, by the person to which it would otherwise be pro-
vided.
‘‘(5) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to meet
the requirements of paragraph (1) merely because no-
tice is provided before the adoption of the plan
amendment if no material modification of the amend-
ment occurs before the amendment is adopted.
387
‘‘(f ) APPLICABLE INDIVIDUAL; APPLICABLE PENSION
PLAN.—For purposes of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘appli-
cable individual’ means, with respect to any plan
amendment—
‘‘(A) any participant in the plan, and
‘‘(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic relations
order 
(within 
the 
meaning 
of 
section
414(p)(1)(A)),
who may reasonably be expected to be affected by such
plan amendment.
‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap-
plicable pension plan’ means—
‘‘(A) any defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412,
which had 100 or more participants who had accrued
a benefit, or with respect to whom contributions were
made, under the plan (whether or not vested) as of the
last day of the plan year preceding the plan year in
which the plan amendment becomes effective. Such
term shall not include a governmental plan (within
the meaning of section 414(d)) or a church plan
388
(within the meaning of section 414(e)) with respect to
which the election provided by section 410(d) has not
been made.’’.
(b) AMENDMENT TO ERISA.—Section 204(h) of the
Employee Retirement Income Security Act or 1974 (29
U.S.C. 1054(h)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3)(A) A plan to which paragraph (1) applies shall
not be treated as meeting the requirements of such para-
graph unless, in addition to any notice required to be pro-
vided to an individual or organization under such para-
graph, the plan administrator provides the notice described
in subparagraph (B).
‘‘(B) The notice required by subparagraph (A) shall
be written in a manner calculated to be understood by the
average plan participant and shall provide sufficient infor-
mation (as determined in accordance with regulations pre-
scribed by the Secretary of the Treasury) to allow individ-
uals to understand the effect of the plan amendment.
‘‘(C) Except as provided in regulations prescribed by
the Secretary of the Treasury, the notice required by sub-
paragraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
‘‘(D) A plan shall not be treated as failing to meet
the requirements of subparagraph (A) merely because notice
389
is provided before the adoption of the plan amendment if
no material modification of the amendment occurs before
the amendment is adopted.’’.
(c) CLERICAL AMENDMENT.—The table of sections for
chapter 43 is amended by adding at the end the following
new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.’’.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this Act.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986 and section 204(h)(3) of the Employee
Retirement Income Security Act of 1974 (as added by
the amendments made by this section), a plan shall
be treated as meeting the requirements of such sections
if it makes a good faith effort to comply with such re-
quirements.
(3) SPECIAL RULE.—The period for providing
any notice required by the amendments made by this
section shall not end before the date which is 3
months after the date of the enactment of this Act.
390
SEC. 348. PROTECTION OF INVESTMENT OF EMPLOYEE
CONTRIBUTIONS TO 401(K) PLANS.
(a) IN GENERAL.—Section 1524(b) of the Taxpayer
Relief Act of 1997 is amended to read as follows:
‘‘(b) EFFECTIVE DATE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to elective deferrals for plan years beginning
after December 31, 1998.
‘‘(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED
PROPERTY.—The amendments made by this section
shall not apply to any elective deferral which is in-
vested in assets consisting of qualifying employer se-
curities, qualifying employer real property, or both, if
such assets were acquired before January 1, 1999.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply as if included in the provision of the
Taxpayer Relief Act of 1997 to which it relates.
SEC. 349. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of section
415(b) (relating to limitation for defined benefit plans) is
amended to read as follows:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case of
a governmental plan (as defined in section 414(d)) or
391
a multiemployer plan (as defined in section 414(f )),
subparagraph (B) of paragraph (1) shall not apply.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
SEC. 350. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1147) is amended—
(1) in subsection (a), by striking ‘‘2001 and
2005 on or after September 1 of each year involved’’
and inserting ‘‘2001, 2005, and 2009 in the month of
September of each year involved’’;
(2) in subsection (b), by adding at the end the
following new sentence: ‘‘To effectuate the purposes of
this paragraph, the Secretary may enter into a coop-
erative agreement, pursuant to the Federal Grant and
Cooperative Agreement Act of 1977 (31 U.S.C. 6301
et seq.), with the American Savings Education Coun-
cil.’’;
(3) in subsection (e)(2)—
(A) by striking subparagraph (D) and in-
serting the following:
‘‘(D) the Chairman and Ranking Member of
the Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
392
Appropriations of the House of Representatives
and the Chairman and Ranking Member of the
Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
Appropriations of the Senate;’’;
(B) by redesignating subparagraph (G) as
subparagraph (J); and
(C) by inserting after subparagraph (F) the
following new subparagraphs:
‘‘(G) the Chairman and Ranking Member of
the Committee on Finance of the Senate;
‘‘(H) the Chairman and Ranking Member
of the Committee on Ways and Means of the
House of Representatives;
‘‘(I) the Chairman and Ranking Member of
the Subcommittee on Employer-Employee Rela-
tions of the Committee on Education and the
Workforce of the House of Representatives; and’’;
(4) in subsection (e)(3)(A)—
(A) by striking ‘‘There shall be no more
than 200 additional participants.’’ and inserting
‘‘The participants in the National Summit shall
also include additional participants appointed
under this subparagraph.’’;
393
(B) by striking ‘‘one-half shall be appointed
by the President,’’ in clause (i) and inserting
‘‘not more than 100 participants shall be ap-
pointed under this clause by the President,’’, and
by striking ‘‘and’’ at the end of clause (i);
(C) by striking ‘‘one-half shall be appointed
by the elected leaders of Congress’’ in clause (ii)
and inserting ‘‘not more than 100 participants
shall be appointed under this clause by the elect-
ed leaders of Congress’’, and by striking the pe-
riod at the end of clause (ii) and inserting
‘‘; and’’; and
(D) by adding at the end the following new
clause:
‘‘(iii) The President, in consultation
with the elected leaders of Congress referred
to in subsection (a), may appoint under
this clause additional participants to the
National Summit. The number of such ad-
ditional participants appointed under this
clause may not exceed the lesser of 3 percent
of the total number of all additional par-
ticipants appointed under this paragraph,
or 10. Such additional participants shall be
appointed from persons nominated by the
394
organization referred to in subsection (b)(2)
which is made up of private sector busi-
nesses and associations partnered with Gov-
ernment entities to promote long term fi-
nancial security in retirement through sav-
ings and with which the Secretary is re-
quired thereunder to consult and cooperate
and shall not be Federal, State, or local gov-
ernment employees.’’;
(5) in subsection (e)(3)(B), by striking ‘‘January
31, 1998’’ in subparagraph (B) and inserting ‘‘May
1, 2001, May 1, 2005, and May 1, 2009, for each of
the subsequent summits, respectively’’;
(6) in subsection (f)(1)(C), by inserting ‘‘, no
later than 90 days prior to the date of the commence-
ment of the National Summit,’’ after ‘‘comment’’ in
paragraph (1)(C);
(7) in subsection (g), by inserting ‘‘, in consulta-
tion with the congressional leaders specified in sub-
section (e)(2),’’ after ‘‘report’’;
(8) in subsection (i)—
(A) by striking ‘‘beginning on or after Octo-
ber 1, 1997’’ in paragraph (1) and inserting
‘‘2001, 2005, and 2009’’; and
395
(B) by adding at the end the following new
paragraph:
‘‘(3) RECEPTION AND REPRESENTATION AUTHOR-
ITY.—The Secretary is hereby granted reception and
representation authority limited specifically to the
events at the National Summit. The Secretary shall
use any private contributions received in connection
with the National Summit prior to using funds ap-
propriated for purposes of the National Summit pur-
suant to this paragraph.’’; and
(9) in subsection (k)—
(A) by striking ‘‘shall enter into a contract
on a sole-source basis’’ and inserting ‘‘may enter
into a contract on a sole-source basis’’; and
(B) by striking ‘‘fiscal year 1998’’ and in-
serting ‘‘fiscal years 2001, 2005, and 2009’’.
SEC. 351. MODEL SPOUSAL CONSENT LANGUAGE AND
QUALIFIED DOMESTIC RELATIONS ORDER.
(a) MODEL SPOUSAL CONSENT LANGUAGE.—Section
205(c) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1055(c)) is amended by adding at the end
the following new paragraph:
‘‘(9) Not later than January 1, 2001, the Secretary
of Labor shall develop model language for the spousal con-
sent required under paragraph (2) which—
396
‘‘(A) is written in a manner calculated to be un-
derstood by the average person, and
‘‘(B) discloses in plain terms whether—
‘‘(i) the waiver is irrevocable, and
‘‘(ii) the waiver may be revoked by a quali-
fied domestic relations order.’’.
(b) 
MODEL
QUALIFIED
DOMESTIC
RELATIONS
ORDER.—Section 206(d)(3) of such Act (29 U.S.C.
1056(d)(3)) is amended by adding at the end the following
new subparagraph:
‘‘(O) Not later than January 1, 2001, the Secretary
shall develop language for a qualified domestic relations
order which meets—
‘‘(i) the requirements of subparagraph (B)(i),
and
‘‘(ii) the requirements of this Act related to the
need to consider the treatment of any lump sum pay-
ment, qualified joint and survivor annuity, or quali-
fied preretirement survivor annuity.’’.
(c) PUBLICITY.—The Secretary of Labor shall include
publicity for the model language required by the amend-
ments made by this section in the pension outreach efforts
undertaken by each Secretary.
397
SEC. 352. ELIMINATION OF ERISA DOUBLE JEOPARDY.
(a) ELIMINATION OF SECOND LAWSUITS BY THE SEC-
RETARY.—Section 502(h) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1132(h)) is
amended—
(1) by inserting ‘‘(1)’’ after ‘‘(h)’’, and
(2) by adding at the end the following:
‘‘(2) In any case in which—
‘‘(A) a complaint in an action brought against
a person under subsection (a)(2) is served in accord-
ance with paragraph (1), and
‘‘(B) the action is maintained as a class action
or derivative action under the Federal Rules of Civil
Procedure,
‘‘(C) the action is resolved by a court-approved
settlement agreement,
‘‘(D) the complaint is served upon the Secretary
at least 90 days prior to final court approval of the
settlement agreement, and
‘‘(E) the Secretary receives a fully executed copy
of the settlement agreement within the time estab-
lished by the court for notifying the plan’s partici-
pants of the proposed compromise pursuant to Rule
23 or 23.1 of the Federal Rules of Civil Procedure,
the Secretary shall be barred from litigating any claim
against such person under subsection (a)(2) that was, or
398
could have been, brought in that action with respect to the
same plan. Notwithstanding this paragraph, the Secretary
shall not be barred from litigating any claim against such
person under subsection (a)(2) if the Secretary filed a com-
plaint under subsection (a)(2) prior to the final court ap-
proval of the settlement agreement.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section are effective with respect to all actions or claims
commenced by the Secretary that are pending on or after
the date of the enactment of this Act.
Subtitle E—Reducing Regulatory
Burdens
SEC. 361. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) AMENDMENTS TO 1986 CODE.—Section 412(c)(9)
(relating to annual valuation) is amended—
(1) by striking ‘‘For purposes’’ and inserting the
following:
‘‘(A) IN GENERAL.—For purposes’’, and
(2) by adding at the end the following:
‘‘(B) ELECTION TO USE PRIOR YEAR VALU-
ATION.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), if, for any plan year—
399
‘‘(I) an election is in effect under
this subparagraph with respect to a
plan, and
‘‘(II) the assets of the plan are not
less than 125 percent of the plan’s cur-
rent liability (as defined in paragraph
(7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the
information available as of such valuation
date.
‘‘(ii) EXCEPTIONS.—
‘‘(I) ACTUAL VALUATION EVERY 3
YEARS.—Clause (i) shall not apply for
more than 2 consecutive plan years
and valuation shall be under subpara-
graph (A) with respect to any plan
year to which clause (i) does not apply
by reason of this subclause.
‘‘(II) REGULATIONS.—Clause (i)
shall not apply to the extent that more
frequent valuations are required under
the regulations under subparagraph
(A).
400
‘‘(iii) 
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iv) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’.
(b) AMENDMENTS TO ERISA.—Paragraph (9) of sec-
tion 302(c) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1053(c)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and
(2) by adding at the end the following:
‘‘(B)(i) Except as provided in clause (ii), if, for any
plan year—
‘‘(I) an election is in effect under this subpara-
graph with respect to a plan, and
‘‘(II) the assets of the plan are not less than 125
percent of the plan’s current liability (as defined in
paragraph (7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
‘‘(ii)(I) Clause (i) shall not apply for more than 2 con-
secutive plan years and valuation shall be under subpara-
401
graph (A) with respect to any plan year to which clause
(i) does not apply by reason of this subclause.
‘‘(II) Clause (i) shall not apply to the extent that more
frequent valuations are required under the regulations
under subparagraph (A).
‘‘(iii) Information under clause (i) shall, in accord-
ance with regulations, be actuarially adjusted to reflect sig-
nificant differences in participants.
‘‘(iv) An election under this subparagraph, once made,
shall be irrevocable without the consent of the Secretary of
the Treasury.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 362. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining ap-
plicable dividends) is amended by striking ‘‘or’’ at the end
of clause (ii), by redesignating clause (iii) as clause (iv),
and by inserting after clause (ii) the following new clause:
‘‘(iii) is, at the election of such partici-
pants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
402
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 363. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) IN GENERAL.—Paragraph (4) of section 1114(c)
of the Tax Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—The repeal made by subsection
(a) shall apply to plan years beginning after December 31,
2000.
SEC. 364. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury shall
modify Treasury Regulations section 1.410(b)–6(g) to pro-
vide that employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who
are eligible to make contributions under section 403(b) of
such Code pursuant to a salary reduction agreement may
be treated as excludable with respect to a plan under section
401 (k) or (m) of such Code that is provided under the same
general arrangement as a plan under such section 401(k),
if—
403
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to par-
ticipate in such section 401(k) plan or section 401(m)
plan, and
(2) 95 percent of the employees who are not em-
ployees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such plan under such section 401 (k) or (m).
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth in
section 1426(b) of the Small Business Job Protection Act
of 1996.
SEC. 365. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (relat-
ing to exclusion from gross income) is amended by striking
‘‘or’’ at the end of paragraph (5), by striking the period
at the end of paragraph (6) and inserting ‘‘, or’’, and by
adding at the end the following new paragraph:
‘‘(7) qualified retirement planning services.’’.
(b) QUALIFIED RETIREMENT PLANNING SERVICES DE-
FINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
404
‘‘(m) QUALIFIED
RETIREMENT
PLANNING
SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this section,
the term ‘qualified retirement planning services’
means any retirement planning service provided to
an employee and his spouse by an employer main-
taining a qualified employer plan.
‘‘(2) 
NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
employees only if such services are available on sub-
stantially the same terms to each member of the group
of employees normally provided education and infor-
mation regarding the employer’s qualified employer
plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For purposes
of this subsection, the term ‘qualified employer plan’
means a plan, contract, pension, or account described
in section 219(g)(5).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 366. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
405
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the requirements for filing annual re-
turns with respect to one-participant retirement plans
to ensure that such plans with assets of $250,000 or
less as of the close of the plan year need not file a
return for that year.
(2) ONE-PARTICIPANT
RETIREMENT
PLAN
DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan that—
(A) on the first day of the plan year—
(i) covered only the employer (and the
employer’s spouse) and the employer owned
the entire business (whether or not incor-
porated), or
(ii) covered only one or more partners
(and their spouses) in a business partner-
ship (including partners in an S or C cor-
poration),
(B) meets the minimum coverage require-
ments of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any
other plan of the business that covers the employ-
ees of the business,
406
(C) does not provide benefits to anyone ex-
cept the employer (and the employer’s spouse) or
the partners (and their spouses),
(D) does not cover a business that is a
member of an affiliated service group, a con-
trolled group of corporations, or a group of busi-
nesses under common control, and
(E) does not cover a business that leases em-
ployees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the respec-
tive meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of a retirement plan which covers less than 25 employees
on the first day of the plan year and meets the requirements
described in subparagraphs (B), (D), and (E) of subsection
(a)(2), the Secretary of the Treasury shall provide for the
filing of a simplified annual return that is substantially
similar to the annual return required to be filed by a one-
participant retirement plan.
(c) EFFECTIVE DATE.—The provisions of this section
shall take effect on January 1, 2001.
407
SEC. 367. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to update
and improve the Employee Plans Compliance Resolution
System (or any successor program) giving special attention
to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program,
(2) taking into account special concerns and cir-
cumstances that small employers face with respect to
compliance and correction of compliance failures,
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures,
(4) expanding the availability to correct insig-
nificant compliance failures under the Administrative
Policy Regarding Self-Correction during audit, and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
SEC. 368. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income Se-
408
curity Act of 1974 (29 U.S.C. 1322(b)(5)) is amended to
read as follows:
‘‘(5)(A) For purposes of this paragraph, the term ‘ma-
jority owner’ means an individual who, at any time during
the 60-month period ending on the date the determination
is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest in
such partnership, or
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either the
voting stock of that corporation or all the stock of that
corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this section
shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
409
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to sat-
isfy in full the benefits of all individuals who are de-
scribed in that paragraph, the assets shall be allocated
first to benefits described in subparagraph (A) of that
paragraph. Any remaining assets shall then be allo-
410
cated to benefits described in subparagraph (B) of
that paragraph. If assets allocated to such subpara-
graph (B) are insufficient to satisfy in full the bene-
fits described in that subparagraph, the assets shall be
allocated pro rata among individuals on the basis of
the present value (as of the termination date) of their
respective benefits described in that subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as de-
fined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
411
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock of
that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’.
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices of
intent to terminate are provided under section
4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))
after December 31, 2000, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such date.
412
(2) CONFORMING
AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on the
date of the enactment of this Act.
SEC. 369. MODIFICATION OF EXCLUSION FOR EMPLOYER
PROVIDED TRANSIT PASSES.
(a) IN GENERAL.—Section 132(f )(3) (relating to cash
reimbursements) is amended by striking the last sentence.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 370. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m) is
amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection (k),
including regulations permitting appropriate aggre-
gation of plans and contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
SEC. 
371. 
FLEXIBILITY 
IN 
NONDISCRIMINATION, 
COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
413
(1) IN GENERAL.—The Secretary of the Treasury
shall, by regulation, provide that a plan shall be
deemed to satisfy the requirements of section
401(a)(4) of the Internal Revenue Code of 1986 if
such plan satisfies the facts and circumstances test
under section 401(a)(4) of such Code, as in effect be-
fore January 1, 1994, but only if—
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test, and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies such
test.
Subparagraph (B) shall only apply to the extent pro-
vided by the Secretary.
(2) EFFECTIVE DATES.—
(A) REGULATIONS.—The regulation re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2000.
(B) CONDITIONS
OF
AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under paragraph (1)(A) shall not apply
before the first year beginning not less than 120
days after the date on which such condition is
prescribed.
414
(b) COVERAGE TEST.—
(1) IN GENERAL.—Section 410(b)(1) (relating to
minimum coverage requirements) is amended by add-
ing at the end the following:
‘‘(D) In the case that the plan fails to meet
the requirements of subparagraphs (A), (B) and
(C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’.
(2) EFFECTIVE DATES.—
(A) IN
GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2000.
(B) CONDITIONS
OF
AVAILABILITY.—Any
condition of availability prescribed by the Sec-
415
retary under regulations prescribed by the Sec-
retary under section 410(b)(1)(D) of the Internal
Revenue Code of 1986 shall not apply before the
first year beginning not less than 120 days after
the date on which such condition is prescribed.
(c) LINE OF BUSINESS RULES.—The Secretary of the
Treasury shall, on or before December 31, 2000, modify the
existing regulations issued under section 414(r) of the Inter-
nal Revenue Code of 1986 in order to expand (to the extent
that the Secretary determines appropriate) the ability of
a pension plan to demonstrate compliance with the line of
business requirements based upon the facts and cir-
cumstances surrounding the design and operation of the
plan, even though the plan is unable to satisfy the mechan-
ical tests currently used to determine compliance.
SEC. 372. EXTENSION TO INTERNATIONAL ORGANIZATIONS
OF MORATORIUM ON APPLICATION OF CER-
TAIN NONDISCRIMINATION RULES APPLICA-
BLE TO STATE AND LOCAL PLANS.
(a) IN
GENERAL.—Subparagraph (G) of section
401(a)(5), subparagraph (H) of section 401(a)(26), sub-
paragraph (G) of section 401(k)(3), and paragraph (2) of
section 1505(d) of the Taxpayer Relief Act of 1997 are each
amended by inserting ‘‘or by an international organization
416
which is described in section 414(d)’’ after ‘‘or instrumen-
tality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The headings for subparagraph (G) of section
401(a)(5) 
and 
subparagraph 
(H) 
of 
section
401(a)(26) are each amended by inserting ‘‘AND
INTERNATIONAL
ORGANIZATION’’ 
after 
‘‘GOVERN-
MENTAL’’.
(2) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘STATE AND LOCAL GOVERN-
MENTAL
AND
INTERNATIONAL
ORGANIZATION
PLANS.—’’ after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 373. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) AMENDMENT TO 1986 CODE.—Subparagraph
(A) of section 417(a)(6) is amended by striking ‘‘90-
day’’ and inserting ‘‘180-day’’.
(2) AMENDMENT OF ERISA.—Subparagraph (A)
of section 205(c)(7) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1055) is
417
amended by striking ‘‘90-day’’ and inserting ‘‘180-
day’’.
(3) MODIFICATION OF REGULATIONS.—The Sec-
retary of the Treasury shall modify the regulations
under sections 402(f), 411(a)(11), and 417 of the In-
ternal Revenue Code of 1986, and the regulations of
such Secretary under part 2 of subtitle B of title I
of the Employee Retirement Income Security Act of
1974 to the extent that they relate to sections 203(e)
and 205 of such Act, to substitute ‘‘180 days’’ for ‘‘90
days’’ each place it appears—
(A) 
in 
Treasury 
Regulations 
sections
1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–1(b),
and
(B) in the regulations of such Secretary
under such part 2.
(4) EFFECTIVE DATE.—The amendments made
by paragraphs (1) and (2) and the modifications re-
quired by paragraph (3) shall apply to years begin-
ning after December 31, 2000.
(b) CONSENT REGULATION INAPPLICABLE TO CERTAIN
DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the regulations under section 411(a)(11)
of the Internal Revenue Code of 1986, and the regula-
418
tions under section 205 of the Employee Retirement
Income Security Act of 1974, to provide that the de-
scription of a participant’s right, if any, to defer re-
ceipt of a distribution shall also describe the con-
sequences of failing to defer such receipt.
(2) EFFECTIVE
DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 2000.
SEC. 374. ANNUAL REPORT DISSEMINATION.
(a) IN GENERAL.—Section 104(b)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1024(b)(3)) is amended by striking ‘‘shall furnish’’ and in-
serting ‘‘shall make available for examination (and, upon
request, shall furnish)’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to reports for years beginning after De-
cember 31, 1998.
SEC. 375. EXCESS BENEFIT PLANS.
(a) IN GENERAL.—Section 3(36) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1002(36))
is amended to read as follows:
‘‘(36) The term ‘excess benefit plan’ means a plan,
without regard to whether such plan is funded, maintained
by an employer solely for the purpose of providing benefits
to employees in excess of any limitation imposed by section
419
401(a)(17) or 415 of the Internal Revenue Code of 1986 or
any other limitation on contributions or benefits in such
Code on plans to which any of such sections apply. To the
extent that a separable part of a plan (as determined by
the Secretary of Labor) maintained by an employer is
maintained for such purpose, that part shall be treated as
a separate plan which is an excess benefit plan.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
1999.
SEC. 376. BENEFIT SUSPENSION NOTICE.
(a) MODIFICATION OF REGULATION.—The Secretary of
Labor 
shall 
modify 
the 
regulation 
under 
section
203(a)(3)(B) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide that, ex-
cept in the case of employment, subsequent to the commence-
ment of payment of benefits, with a former employer, the
notification required by such regulation—
(1) may be included in the summary plan de-
scription for the plan furnished in accordance with
section 104(b) of such Act (29 U.S.C. 1024(b)), rather
than in a separate notice, and
(2) need not include a copy of the relevant plan
provisions.
420
(c) EFFECTIVE DATE.—The modification made under
this section shall apply to plan years beginning after De-
cember 31, 1999.
SEC. 377. CLARIFICATION OF CHURCH WELFARE PLAN STA-
TUS UNDER STATE INSURANCE LAW.
For purposes of determining the status under State in-
surance law of a church plan (as defined in section 414(e)
of the Internal Revenue Code and section 3(33) of the Em-
ployee Retirement Income Security Act that is a welfare
plan (as defined in section 3(1)), such church plan (and
any trust under such plan) shall be deemed a single-em-
ployer plan that—
(1) reimburses costs from general church assets;
(2) purchases insurance coverage with general
church assets; or
(3) both.
For purposes of this paragraph, the term ‘‘reimbursing costs
from general church assets’’ means engaging in a practice
that does not have the effect of transferring or spreading
risk. The scope of this paragraph is limited to determining
the status of a church welfare plan under State insurance
law, and does not otherwise recharacterized the status, or
modify or affect the rights, of any plan participant, includ-
ing those who make plan contributions.
421
Subtitle F—Plan Amendments
SEC. 381. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan during the period described in subsection
(b)(2)(A), and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this title, or pursuant to any regulation issued
under this title, and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2003.
In the case of a governmental plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986),
this paragraph shall be applied by substituting
‘‘2005’’ for ‘‘2003’’.
422
(2) CONDITIONS.—This section shall not apply to
any amendment unless—
(A) during the period—
(i) beginning on the date the legislative
or regulatory amendment described in para-
graph (1)(A) takes effect (or in the case of
a plan or contract amendment not required
by such legislative or regulatory amend-
ment, the effective date specified by the
plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan
or contract amendment were in effect, and
(B) such plan or contract amendment ap-
plies retroactively for such period.
TITLE IV—EXTENSION OF WORK
OPPORTUNITY CREDIT AND
WELFARE-TO-WORK CREDIT
SEC. 401. WORK OPPORTUNITY CREDIT AND WELFARE-TO-
WORK CREDIT.
(a) TEMPORARY EXTENSION.—Sections 51(c)(4)(B)
and 51A(f ) (relating to termination) are each amended by
423
striking ‘‘June 30, 1999’’ and inserting ‘‘December 31,
2001’’.
(b) CLARIFICATION
OF FIRST YEAR
OF EMPLOY-
MENT.—Paragraph (2) of section 51(i) is amended by strik-
ing ‘‘during which he was not a member of a targeted
group’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to individuals who begin work for the
employer after June 30, 1999.
(d) SPECIAL RULE.—
(1) IN GENERAL.—For purposes of the Internal
Revenue Code of 1986, the credit determined under
sections 51 and 51A of such Code which is otherwise
allowable under such Code and which is attributable
to the suspension period shall not be taken into ac-
count prior to October 1, 2000. On or after such date,
such credit may be taken into account through the fil-
ing of an amended return, an application for expe-
dited refund, an adjustment of estimated taxes, or
other means allowed by such Code.
(2) SUSPENSION PERIOD.—For purposes of this
subsection, the suspension period is the period begin-
ning on July 1, 1999, and ending on September 30,
2000.
(3) EXPEDITED REFUNDS.—
424
(A) IN GENERAL.—If there is an overpay-
ment of tax with respect to a taxable year by
reason of paragraph (1), the taxpayer may file
an application for a tentative refund of such
overpayment. Such application shall be in such
manner and form, and contain such informa-
tion, as the Secretary may prescribe.
(B) DEADLINE
FOR
APPLICATIONS.—Sub-
paragraph (A) shall apply only to applications
filed before October 1, 2001.
(C) ALLOWANCE
OF
ADJUSTMENTS.—Not
later than 90 days after the date on which an
application is filed under this paragraph, the
Secretary shall—
(i) review the application,
(ii) determine the amount of the over-
payment, and
(iii) apply, credit, or refund such over-
payment,
in a manner similar to the manner provided in
section 6411(b) of such Code.
(D) CONSOLIDATED RETURNS.—The provi-
sions of section 6411(c) of such Code shall apply
to an adjustment under this paragraph in such
manner as the Secretary may provide.
425
(4) CREDIT ATTRIBUTABLE TO SUSPENSION PE-
RIOD.—
(A) IN GENERAL.—For purposes of this sub-
section, in the case of a taxable year which in-
cludes a portion of the suspension period, the
amount of credit determined under sections 51
and 51A of such Code for such taxable year
which is attributable to such period is the
amount which bears the same ratio to the
amount of credit determined under such sections
for such taxable year as the number of months
in the suspension period which are during such
taxable year bears to the number of months in
such taxable year.
(B) WAIVER
OF
ESTIMATED
TAX
PEN-
ALTIES.—No addition to tax shall be made
under section 6654 or 6655 of such Code for any
period before July 1, 1999, with respect to any
underpayment of tax imposed by such Code to
the extent such underpayment was created or in-
creased by reason of subparagraph (A).
(5) SECRETARY.—For purposes of this sub-
section, the term ‘‘Secretary’’ means the Secretary of
the Treasury (or such Secretary’s delegate).
426
TITLE V—ESTATE TAX RELIEF
Subtitle A—Reductions of Estate
and Gift Tax Rates
SEC. 501. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) MAXIMUM RATE OF TAX REDUCED TO 50 PER-
CENT.—
(1) IN GENERAL.—The table contained in section
2001(c)(1) is amended by striking the two highest
brackets and inserting the following:
‘‘Over $2,500,000 ..............................
$1,025,800, plus 50% of the excess over
$2,500,000.’’.
(2) PHASE-IN OF REDUCED RATE.—Subsection
(c) of section 2001 is amended by adding at the end
the following new paragraph:
‘‘(3) PHASE-IN OF REDUCED RATE.—In the case
of decedents dying, and gifts made, during 2001, the
last item in the table contained in paragraph (1)
shall be applied by substituting ‘53%’ for ‘50%’.’’.
(b) REPEAL OF PHASEOUT OF GRADUATED RATES.—
Subsection (c) of section 2001 is amended by striking para-
graph (2) and redesignating paragraph (3), as added by
subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS OF RATES OF TAX.—
Subsection (c) of section 2001, as so amended, is amended
by adding at the end the following new paragraph:
427
‘‘(3) PHASEDOWN OF TAX.—In the case of estates
of decedents dying, and gifts made, during any cal-
endar year after 2002—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (C), 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 re-
duced by the number 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:
2003 ....................................................................................
1.0
2004 ....................................................................................
2.0.
‘‘(C) TABLE FOR YEARS AFTER 2004.—The
table applicable under this subsection to estates
of decedents dying, and gifts made, during cal-
endar year 2004 shall apply to estates of dece-
dents dying, and gifts made, after calendar year
2004.
428
‘‘(D) COORDINATION
WITH
CREDIT
FOR
STATE DEATH TAXES.—Rules similar to the rules
of subparagraph (A) shall apply the table con-
tained in section 2011(b) except that the Sec-
retary shall prescribe percentage point reductions
which maintain the proportionate relationship
(as in effect before any reduction under this
paragraph) between the credit under section
2011 and the tax rates under subsection (c).’’.
(d) EFFECTIVE DATES.—
(1) SUBSECTIONS (a) AND (b).—The amendments
made by subsections (a) and (b) shall apply to estates
of decedents dying, and gifts made, after December
31, 2000.
(2) SUBSECTION (c).—The amendment made by
subsection (c) shall apply to estates of decedents
dying, and gifts made, after December 31, 2002.
SEC. 502. SENSE OF THE CONGRESS CONCERNING REPEAL
OF THE DEATH TAX.
(a) FINDINGS.—Congress finds the following:
(1) The death tax stifles economic growth by tak-
ing productive resources out of the private sector,
thereby causing unemployment and inhibiting job cre-
ation.
429
(2) The death tax penalizes hard work and entre-
preneurial activity by causing the demise of small,
family-owned businesses when an owner dies.
(3) The death tax rates in the United States are
the second highest among all industrialized nations.
(4) The death tax prevents minorities from gain-
ing an economic foothold in the economy since it lim-
its the inter-generational transfer of wealth, which is
critical to establishing a legacy and power base for
minorities in our society.
(5) The death tax presents serious challenges for
farmers whose value is in their land, not liquid as-
sets, and who must sell land to pay the tax, thereby
jeopardizing the future existence of the already-strug-
gling family farm.
(6) The death tax contributes to the development
of rural areas by causing farms and ranches to be
sold and subdivided.
(7) Previous attempts by Congress to create
death tax exemptions have been ineffective due to an
inability to legislatively duplicate the complex family
relationships that exist in our society.
(8) Increasing entrepreneurship and investment
in retirement will bring a whole new class of people
under the death tax.
430
(b) SENSE OF CONGRESS.—It is the sense of Congress
that the death tax relief in this Act is considered a first
step in our effort to ultimately repeal this onerous tax.
Subtitle 
B—Unified 
Credit 
Re-
placed With Unified Exemption
Amount
SEC. 511. UNIFIED CREDIT AGAINST ESTATE AND GIFT
TAXES REPLACED WITH UNIFIED EXEMPTION
AMOUNT.
(a) IN GENERAL.—
(1) ESTATE TAX.—Part IV of subchapter A of
chapter 11 is amended by inserting after section 2051
the following new section:
‘‘SEC. 2052. EXEMPTION.
‘‘(a) IN GENERAL.—For purposes of the tax imposed
by section 2001, the value of the taxable estate shall be deter-
mined by deducting from the value of the gross estate an
amount equal to the excess (if any) of—
‘‘(1) the exemption amount for the calendar year
in which the decedent died, over
‘‘(2) the sum of—
‘‘(A) the aggregate amount allowed as an
exemption under section 2521 with respect to
gifts made by the decedent after December 31,
2000, and
431
‘‘(B) the aggregate amount of gifts made by
the decedent for which credit was allowed by sec-
tion 2505 (as in effect on the day before the date
of the enactment of the Wage and Employment
Growth Act of 1999).
Gifts which are includible in the gross estate of the decedent
shall not be taken into account in determining the amounts
under paragraph (2).
‘‘(b) EXEMPTION AMOUNT.—For purposes of sub-
section (a), the term ‘exemption amount’ means the amount
determined in accordance with the following table:
‘‘In the case of
The exemption
calendar year:
amount is:
2001 .........................................................................................
$675,000
2002 and 2003 ........................................................................
$700,000
2004 .........................................................................................
$850,000
2005 .........................................................................................
$950,000
2006 or thereafter ...................................................................
$1,000,000.’’.
(2) GIFT TAX.—Subchapter C of chapter 12 (re-
lating to deductions) is amended by inserting before
section 2522 the following new section:
‘‘SEC. 2521. EXEMPTION.
‘‘In computing taxable gifts for any calendar year,
there shall be allowed as a deduction in the case of a citizen
or resident of the United States an amount equal to the
excess of—
‘‘(1) the exemption amount determined under
section 2052 for such calendar year, over
‘‘(2) the sum of—
432
‘‘(A) the aggregate amount allowed as an
exemption under this section for all preceding
calendar years after 2000, and
‘‘(B) the aggregate amount of gifts for which
credit was allowed by section 2505 (as in effect
on the day before the date of the enactment of the
Wage and Employment Growth Act of 1999).’’.
(b) REPEAL OF UNIFIED CREDITS.—
(1) Section 2010 (relating to unified credit
against estate tax) is hereby repealed.
(2) Section 2505 (relating to unified credit
against gift tax) is hereby repealed.
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 2001(b)(1) is
amended by inserting before the comma ‘‘reduced by
the amount described in section 2052(a)(2)(B)’’.
(2)(A) Subsection (b) of section 2011 is
amended—
(i) by striking ‘‘adjusted’’ in the table, and
(ii) by striking the last sentence.
(B) Subsection (f ) of section 2011 is amended by
striking ‘‘, reduced by the amount of the unified cred-
it provided by section 2010’’.
433
(3) Subsection (a) of section 2012 is amended by
striking ‘‘and the unified credit provided by section
2010’’.
(4)(A) Subsection (b) of section 2013 is amended
by inserting before the period at the end of the first
sentence ‘‘and increased by the exemption allowed
under section 2052 or 2106(a)(4) (or the cor-
responding provisions of prior law) in determining
the taxable estate of the transferor for purposes of the
estate tax’’.
(B) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2010,’’.
(5) Paragraph (2) of section 2014(b) is amended
by striking ‘‘2010,’’.
(6) Clause (ii) of section 2056A(b)(12)(C) is
amended to read as follows:
‘‘(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of
the credit allowable under section 2010 (as
in effect on the day before the date of the en-
actment of the Wage and Employment
Growth Act of 1999) or the exemption al-
lowable under section 2052 with respect to
the decedent as a credit under section 2505
(as so in effect) or exemption under section
434
2521 (as the case may be) allowable to such
surviving spouse for purposes of deter-
mining the amount of the exemption allow-
able under section 2521 with respect to tax-
able gifts made by the surviving spouse dur-
ing the year in which the spouse becomes a
citizen or any subsequent year,’’.
(7) Paragraph (3) of section 2057(a) is amended
to read as follows:
‘‘(3) 
COORDINATION
WITH
EXEMPTION
AMOUNT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), if this section applies to an
estate, the exemption amount under section 2052
shall be $625,000.
‘‘(B) INCREASE IN EXEMPTION AMOUNT IF
DEDUCTION IS LESS THAN $675,000.—If the de-
duction allowed by this section is less than
$675,000, the amount of the exemption amount
under section 2052 shall be increased (but not
above the amount which would apply to the es-
tate without regard to this section) by the excess
of $675,000 over the amount of the deduction al-
lowed.’’.
435
(8)(A) Subparagraph (B) of section 2101(b)(1) is
amended by inserting before the comma ‘‘reduced by
the aggregate amount of gifts for which credit was al-
lowed by section 2505 (as in effect on the day before
the date of the enactment of the Wage and Employ-
ment Growth Act of 1999)’’
(B) Subsection (b) of section 2101 is amended by
striking the last sentence.
(9) Section 2102 is amended by striking sub-
section (c).
(10) Subsection (a) of section 2106 is amended
by adding at the end the following new paragraph:
‘‘(4) EXEMPTION.—
‘‘(A) 
IN
GENERAL.—An 
exemption 
of
$60,000.
‘‘(B) RESIDENTS OF POSSESSIONS OF THE
UNITED STATES.—In the case of a decedent who
is considered to be a nonresident not a citizen of
the United States under section 2209, the exemp-
tion under this paragraph shall be the greater
of—
‘‘(i) $60,000, or
‘‘(ii) that proportion of $175,000
which the value of that part of the dece-
dent’s gross estate which at the time of his
436
death is situated in the United States bears
to the value of his entire gross estate wher-
ever situated.
‘‘(C) SPECIAL RULES.—
‘‘(i) COORDINATION WITH TREATIES.—
To the extent required under any treaty ob-
ligation of the United States, the exemption
allowed under this paragraph shall be equal
to the amount which bears the same ratio to
the exemption amount under section 2052
(for the calendar year in which the decedent
died) as the value of the part of the dece-
dent’s gross estate which at the time of his
death is situated in the United States bears
to the value of his entire gross estate wher-
ever situated. For purposes of the preceding
sentence, property shall not be treated as
situated in the United States if such prop-
erty is exempt from the tax imposed by this
subchapter under any treaty obligation of
the United States.
‘‘(ii) COORDINATION
WITH
GIFT
TAX
EXEMPTION
AND
UNIFIED
CREDIT.—If an
exemption has been allowed under section
2521 (or a credit has been allowed under
437
section 2505 as in effect on the day before
the date of the enactment of the Wage and
Employment Growth Act of 1999) with re-
spect to any gift made by the decedent, each
dollar amount contained in subparagraph
(A) or (B) or the exemption amount appli-
cable under clause (i) of this subparagraph
(whichever applies) shall be reduced by the
exemption so allowed under 2521 (or, in the
case of such a credit, by the amount of the
gift for which the credit was so allowed).’’.
(11)(A) Subsection (a) of section 2107 is amend-
ed by adding at the end the following new paragraph:
‘‘(3) LIMITATION ON EXEMPTION AMOUNT.—Sub-
paragraphs (B) and (C) of section 2106(a)(4) shall
not apply in applying section 2106 for purposes of
this section.’’.
(B) Subsection (c) of section 2107 is amended—
(i) by striking paragraph (1) and by
redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively, and
(ii) by striking the second sentence of
paragraph (2) (as so redesignated).
(12) Section 2206 is amended by striking ‘‘the
taxable estate’’ in the first sentence and inserting ‘‘the
438
sum of the taxable estate and the amount of the ex-
emption allowed under section 2052 or 2106(a)(4) in
computing the taxable estate’’.
(13) Section 2207 is amended by striking ‘‘the
taxable estate’’ in the first sentence and inserting ‘‘the
sum of the taxable estate and the amount of the ex-
emption allowed under section 2052 or 2106(a)(4) in
computing the taxable estate’’.
(14) Subparagraph (B) of section 2207B(a)(1) is
amended to read as follows:
‘‘(B) the sum of the taxable estate and the
amount of the exemption allowed under section
2052 or 2106(a)(4) in computing the taxable es-
tate.’’.
(15) Subsection (a) of section 2503 is amended
by striking ‘‘section 2522’’ and inserting ‘‘section
2521’’.
(16) Paragraph (1) of section 6018(a) is amend-
ed by striking ‘‘the applicable exclusion amount in ef-
fect under section 2010(c)’’ and inserting ‘‘the exemp-
tion amount under section 2052’’.
(17) Subparagraph (A) of section 6601( j)(2) is
amended to read as follows:
439
‘‘(A) the amount of the tax which would be
imposed by chapter 11 on an amount of taxable
estate equal to $1,000,000, or’’.
(18) The table of sections for part II of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2010.
(19) The table of sections for part IV of sub-
chapter A of chapter 11 is amended by inserting after
the item relating to section 2051 the following new
item:
‘‘Sec. 2052. Exemption.’’.
(20) The table of sections for subchapter A of
chapter 12 is amended by striking the item relating
to section 2505.
(21) The table of sections for subchapter C of
chapter 12 is amended by inserting before the item re-
lating to section 2522 the following new item:
‘‘Sec. 2521. Exemption.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section—
(1) insofar as they relate to the tax imposed by
chapter 11 of the Internal Revenue Code of 1986, shall
apply to estates of decedents dying after December 31,
2000, and
440
(2) insofar as they relate to the tax imposed by
chapter 12 of such Code, shall apply to gifts made
after December 31, 2000.
Subtitle C—Modifications of
Generation-skipping Transfer Tax
SEC. 521. DEEMED ALLOCATION OF GST EXEMPTION TO
LIFETIME TRANSFERS TO TRUSTS; RETRO-
ACTIVE ALLOCATIONS.
(a) IN GENERAL.—Section 2632 (relating to special
rules for allocation of GST exemption) is amended by redes-
ignating subsection (c) as subsection (e) and by inserting
after subsection (b) the following new subsections:
‘‘(c) DEEMED ALLOCATION
TO CERTAIN LIFETIME
TRANSFERS TO GST TRUSTS.—
‘‘(1) IN GENERAL.—If any individual makes an
indirect skip during such individual’s lifetime, any
unused portion of such individual’s GST exemption
shall be allocated to the property transferred to the ex-
tent necessary to make the inclusion ratio for such
property zero. If the amount of the indirect skip ex-
ceeds such unused portion, the entire unused portion
shall be allocated to the property transferred.
‘‘(2) UNUSED PORTION.—For purposes of para-
graph (1), the unused portion of an individual’s GST
441
exemption is that portion of such exemption which
has not previously been—
‘‘(A) allocated by such individual,
‘‘(B) treated as allocated under subsection
(b) with respect to a direct skip occurring during
or before the calendar year in which the indirect
skip is made, or
‘‘(C) treated as allocated under paragraph
(1) with respect to a prior indirect skip.
‘‘(3) DEFINITIONS.—
‘‘(A) INDIRECT SKIP.—For purposes of this
subsection, the term ‘indirect skip’ means any
transfer of property (other than a direct skip)
subject to the tax imposed by chapter 12 made
to a GST trust.
‘‘(B) GST TRUST.—The term ‘GST trust’
means a trust that could have a generation-skip-
ping transfer with respect to the transferor
unless—
‘‘(i) the trust instrument provides that
more than 25 percent of the trust corpus
must be distributed to or may be withdrawn
by 1 or more individuals who are non-skip
persons—
442
‘‘(I) before the date that the indi-
vidual attains age 46,
‘‘(II) on or before one or more
dates specified in the trust instrument
that will occur before the date that
such individual attains age 46, or
‘‘(III) upon the occurrence of an
event that, in accordance with regula-
tions prescribed by the Secretary, may
reasonably be expected to occur before
the date that such individual attains
age 46;
‘‘(ii) the trust instrument provides that
more than 25 percent of the trust corpus
must be distributed to or may be withdrawn
by one or more individuals who are non-
skip persons and who are living on the date
of death of another person identified in the
instrument (by name or by class) who is
more than 10 years older than such individ-
uals;
‘‘(iii) the trust instrument provides
that, if one or more individuals who are
non-skip persons die on or before a date or
event described in clause (i) or (ii), more
443
than 25 percent of the trust corpus either
must be distributed to the estate or estates
of one or more of such individuals or is sub-
ject to a general power of appointment exer-
cisable by one or more of such individuals;
‘‘(iv) the trust is a trust any portion
of which would be included in the gross es-
tate of a non-skip person (other than the
transferor) if such person died immediately
after the transfer;
‘‘(v) the trust is a charitable lead an-
nuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
‘‘(vi) the trust is a trust with respect
to which a deduction was allowed under sec-
tion 2522 for the amount of an interest in
the form of the right to receive annual pay-
ments of a fixed percentage of the net fair
market value of the trust property (deter-
mined yearly) and which is required to pay
principal to a non-skip person if such per-
444
son is alive when the yearly payments for
which the deduction was allowed terminate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to be
includible in the gross estate of a non-skip per-
son or subject to a right of withdrawal by reason
of such person holding a right to withdraw so
much of such property as does not exceed the
amount referred to in section 2503(b) with re-
spect to any transferor, and it shall be assumed
that powers of appointment held by non-skip
persons will not be exercised.
‘‘(4) AUTOMATIC ALLOCATIONS TO CERTAIN GST
TRUSTS.—For purposes of this subsection, an indirect
skip to which section 2642(f ) applies shall be deemed
to have been made only at the close of the estate tax
inclusion period. The fair market value of such trans-
fer shall be the fair market value of the trust property
at the close of the estate tax inclusion period.
‘‘(5) APPLICABILITY AND EFFECT.—
‘‘(A) IN GENERAL.—An individual—
‘‘(i) may elect to have this subsection
not apply to—
‘‘(I) an indirect skip, or
445
‘‘(II) any or all transfers made by
such individual to a particular trust,
and
‘‘(ii) may elect to treat any trust as a
GST trust for purposes of this subsection
with respect to any or all transfers made by
such individual to such trust.
‘‘(B) ELECTIONS.—
‘‘(i) ELECTIONS WITH RESPECT TO IN-
DIRECT SKIPS.—An election under subpara-
graph (A)(i)(I) shall be deemed to be timely
if filed on a timely filed gift tax return for
the calendar year in which the transfer was
made or deemed to have been made pursu-
ant to paragraph (4) or on such later date
or dates as may be prescribed by the Sec-
retary.
‘‘(ii) OTHER ELECTIONS.—An election
under clause (i)(II) or (ii) of subparagraph
(A) may be made on a timely filed gift tax
return for the calendar year for which the
election is to become effective.
‘‘(d) RETROACTIVE ALLOCATIONS.—
‘‘(1) IN GENERAL.—If—
446
‘‘(A) a non-skip person has an interest or a
future interest in a trust to which any transfer
has been made,
‘‘(B) such person—
‘‘(i) is a lineal descendant of a grand-
parent of the transferor or of a grandparent
of the transferor’s spouse or former spouse,
and
‘‘(ii) is assigned to a generation below
the generation assignment of the transferor,
and
‘‘(C) such person predeceases the transferor,
then the transferor may make an allocation of any of
such transferor’s unused GST exemption to any pre-
vious transfer or transfers to the trust on a chrono-
logical basis.
‘‘(2) SPECIAL RULES.—If the allocation under
paragraph (1) by the transferor is made on a gift tax
return filed on or before the date prescribed by section
6075(b) for gifts made within the calendar year with-
in which the non-skip person’s death occurred—
‘‘(A) the value of such transfer or transfers
for purposes of section 2642(a) shall be deter-
mined as if such allocation had been made on a
447
timely filed gift tax return for each calendar
year within which each transfer was made,
‘‘(B) such allocation shall be effective imme-
diately before such death, and
‘‘(C) the amount of the transferor’s unused
GST exemption available to be allocated shall be
determined immediately before such death.
‘‘(3) FUTURE INTEREST.—For purposes of this
subsection, a person has a future interest in a trust
if the trust may permit income or corpus to be paid
to such person on a date or dates in the future.’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of sec-
tion 2632(b) is amended by striking ‘‘with respect to a di-
rect skip’’ and inserting ‘‘or subsection (c)(1)’’.
(c) EFFECTIVE DATES.—
(1) DEEMED ALLOCATION.—Section 2632(c) of
the Internal Revenue Code of 1986 (as added by sub-
section (a)), and the amendment made by subsection
(b), shall apply to transfers subject to chapter 11 or
12 made after December 31, 1999, and to estate tax
inclusion periods ending after December 31, 1999.
(2) 
RETROACTIVE
ALLOCATIONS.—Section
2632(d) of the Internal Revenue Code of 1986 (as
added by subsection (a)) shall apply to deaths of non-
skip persons occurring after December 31, 1999.
448
SEC. 522. SEVERING OF TRUSTS.
(a) IN GENERAL.—Subsection (a) of section 2642 (re-
lating to inclusion ratio) is amended by adding at the end
the following new paragraph:
‘‘(3) SEVERING OF TRUSTS.—
‘‘(A) IN GENERAL.—If a trust is severed in
a qualified severance, the trusts resulting from
such severance shall be treated as separate trusts
thereafter for purposes of this chapter.
‘‘(B) QUALIFIED
SEVERANCE.—For pur-
poses of subparagraph (A)—
‘‘(i) IN GENERAL.—The term ‘qualified
severance’ means the division of a single
trust and the creation (by any means avail-
able under the governing instrument or
under local law) of two or more trusts if—
‘‘(I) the single trust was divided
on a fractional basis, and
‘‘(II) the terms of the new trusts,
in the aggregate, provide for the same
succession of interests of beneficiaries
as are provided in the original trust.
‘‘(ii) TRUSTS WITH INCLUSION RATIO
GREATER THAN ZERO.—If a trust has an
inclusion ratio of greater than zero and less
than 1, a severance is a qualified severance
449
only if the single trust is divided into two
trusts, one of which receives a fractional
share of the total value of all trust assets
equal to the applicable fraction of the single
trust immediately before the severance. In
such case, the trust receiving such fractional
share shall have an inclusion ratio of zero
and the other trust shall have an inclusion
ratio of 1.
‘‘(iii) 
REGULATIONS.—The 
term
‘qualified severance’ includes any other sev-
erance permitted under regulations pre-
scribed by the Secretary.
‘‘(C) 
TIMING
AND
MANNER
OF
SEVERANCES.—A severance pursuant to this
paragraph may be made at any time. The Sec-
retary shall prescribe by forms or regulations the
manner in which the qualified severance shall be
reported to the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to severances after December 31, 1999.
SEC. 523. MODIFICATION OF CERTAIN VALUATION RULES.
(a) GIFTS FOR WHICH GIFT TAX RETURN FILED OR
DEEMED ALLOCATION MADE.—Paragraph (1) of section
450
2642(b) (relating to valuation rules, etc.) is amended to
read as follows:
‘‘(1) GIFTS FOR WHICH GIFT TAX RETURN FILED
OR DEEMED ALLOCATION MADE.—If the allocation of
the GST exemption to any transfers of property is
made on a gift tax return filed on or before the date
prescribed by section 6075(b) for such transfer or is
deemed to be made under section 2632 (b)(1) or
(c)(1)—
‘‘(A) the value of such property for purposes
of subsection (a) shall be its value as finally de-
termined for purposes of chapter 12 (within the
meaning of section 2001(f )(2)), or, in the case of
an allocation deemed to have been made at the
close of an estate tax inclusion period, its value
at the time of the close of the estate tax inclusion
period, and
‘‘(B) such allocation shall be effective on
and after the date of such transfer, or, in the
case of an allocation deemed to have been made
at the close of an estate tax inclusion period, on
and after the close of such estate tax inclusion
period.’’.
(b) TRANSFERS AT DEATH.—Subparagraph (A) of sec-
tion 2642(b)(2) is amended to read as follows:
451
‘‘(A) TRANSFERS AT DEATH.—If property is
transferred as a result of the death of the trans-
feror, the value of such property for purposes of
subsection (a) shall be its value as finally deter-
mined for purposes of chapter 11; except that, if
the requirements prescribed by the Secretary re-
specting allocation of post-death changes in value
are not met, the value of such property shall be
determined as of the time of the distribution con-
cerned.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to transfers subject to chapter 11 or 12
of the Internal Revenue Code of 1986 made after December
31, 1999.
SEC. 524. RELIEF PROVISIONS.
(a) IN GENERAL.—Section 2642 is amended by adding
at the end the following new subsection:
‘‘(g) RELIEF PROVISIONS.—
‘‘(1) RELIEF FOR LATE ELECTIONS.—
‘‘(A) IN GENERAL.—The Secretary shall by
regulation prescribe such circumstances and pro-
cedures under which extensions of time will be
granted to make—
452
‘‘(i) an allocation of GST exemption
described in paragraph (1) or (2) of sub-
section (b), and
‘‘(ii) an election under subsection
(b)(3) or (c)(5) of section 2632.
Such regulations shall include procedures for re-
questing comparable relief with respect to trans-
fers made before the date of the enactment of this
paragraph.
‘‘(B) BASIS FOR DETERMINATIONS.—In de-
termining whether to grant relief under this
paragraph, the Secretary shall take into account
all relevant circumstances, including evidence of
intent contained in the trust instrument or in-
strument of transfer and such other factors as the
Secretary deems relevant. For purposes of deter-
mining whether to grant relief under this para-
graph, the time for making the allocation (or
election) shall be treated as if not expressly pre-
scribed by statute.
‘‘(2) SUBSTANTIAL COMPLIANCE.—An allocation
of GST exemption under section 2632 that dem-
onstrates an intent to have the lowest possible inclu-
sion ratio with respect to a transfer or a trust shall
be deemed to be an allocation of so much of the
453
transferor’s unused GST exemption as produces the
lowest possible inclusion ratio. In determining wheth-
er there has been substantial compliance, all relevant
circumstances shall be taken into account, including
evidence of intent contained in the trust instrument
or instrument of transfer and such other factors as the
Secretary deems relevant.’’.
(b) EFFECTIVE DATES.—
(1) RELIEF
FOR
LATE
ELECTIONS.—Section
2642(g)(1) of the Internal Revenue Code of 1986 (as
added by subsection (a)) shall apply to requests pend-
ing on, or filed after, December 31, 1999.
(2) 
SUBSTANTIAL
COMPLIANCE.—Section
2642(g)(2) of such Code (as so added) shall take effect
on the date of the enactment of this Act and shall
apply to transfers subject to chapter 11 or 12 of the
Internal Revenue Code of 1986 made after December
31, 1999.
Subtitle D—Conservation
Easements
SEC. 531. EXPANSION OF ESTATE TAX RULE FOR CON-
SERVATION EASEMENTS.
(a) WHERE LAND IS LOCATED.—
454
(1) 
IN
GENERAL.—Clause 
(i) 
of 
section
2031(c)(8)(A) (defining land subject to a conservation
easement) is amended—
(A) by striking ‘‘25 miles’’ both places it
appears and inserting ‘‘50 miles’’, and
(B) striking ‘‘10 miles’’ and inserting ‘‘25
miles’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to estates of decedents
dying after December 31, 1999.
(b) CLARIFICATION
OF
DATE
FOR
DETERMINING
VALUE OF LAND AND EASEMENT.—
(1) IN GENERAL.—Section 2031(c)(2) (defining
applicable percentage) is amended by adding at the
end the following new sentence: ‘‘The values taken
into account under the preceding sentence shall be
such values as of the date of the contribution referred
to in paragraph (8)(B).’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to estates of decedents
dying after December 31, 1997.
455
TITLE VI—TAX RELIEF FOR DIS-
TRESSED COMMUNITIES AND
INDUSTRIES
Subtitle A—American Community
Renewal Act of 1999
SEC. 601. SHORT TITLE.
This subtitle may be cited as the ‘‘American Commu-
nity Renewal Act of 1999’’.
SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RE-
NEWAL COMMUNITIES.
(a) IN GENERAL.—Chapter 1 is amended by adding
at the end the following new subchapter:
‘‘Subchapter X—Renewal Communities
‘‘Part 
I. Designation.
‘‘Part II. Renewal community capital gain; renewal community
business.
‘‘Part III. Family development accounts.
‘‘Part
IV. Additional incentives.
‘‘PART I—DESIGNATION
‘‘Sec. 1400E. Designation of renewal communities.
‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
‘‘(a) DESIGNATION.—
‘‘(1) DEFINITIONS.—For purposes of this title,
the term ‘renewal community’ means any area—
‘‘(A) which is nominated by one or more
local governments and the State or States in
which it is located for designation as a renewal
456
community (hereinafter in this section referred
to as a ‘nominated area’); and
‘‘(B) which the Secretary of Housing and
Urban Development designates as a renewal
community, after consultation with—
‘‘(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury; the
Director of the Office of Management and
Budget; and the Administrator of the Small
Business Administration; and
‘‘(ii) in the case of an area on an In-
dian reservation, the Secretary of the Inte-
rior.
‘‘(2) NUMBER OF DESIGNATIONS.—
‘‘(A) IN GENERAL.—The Secretary of Hous-
ing and Urban Development may designate not
more than 15 nominated areas as renewal com-
munities.
‘‘(B) MINIMUM
DESIGNATION
IN
RURAL
AREAS.—Of the areas designated under para-
graph (1), at least 3 must be areas—
‘‘(i) which are within a local govern-
ment jurisdiction or jurisdictions with a
population of less than 50,000,
457
‘‘(ii) which are outside of a metropoli-
tan statistical area (within the meaning of
section 143(k)(2)(B)), or
‘‘(iii) which are determined by the Sec-
retary of Housing and Urban Development,
after consultation with the Secretary of
Commerce, to be rural areas.
‘‘(3) AREAS DESIGNATED BASED ON DEGREE OF
POVERTY, ETC.—
‘‘(A) IN
GENERAL.—Except as otherwise
provided in this section, the nominated areas
designated as renewal communities under this
subsection shall be those nominated areas with
the highest average ranking with respect to the
criteria described in subparagraphs (B), (C),
and (D) of subsection (c)(3). For purposes of the
preceding sentence, an area shall be ranked with-
in each such criterion on the basis of the amount
by which the area exceeds such criterion, with
the area which exceeds such criterion by the
greatest amount given the highest ranking.
‘‘(B) 
EXCEPTION
WHERE
INADEQUATE
COURSE OF ACTION, ETC.—An area shall not be
designated under subparagraph (A) if the Sec-
retary of Housing and Urban Development de-
458
termines that the course of action described in
subsection (d)(2) with respect to such area is in-
adequate.
‘‘(C) PRIORITY FOR EMPOWERMENT ZONES
AND ENTERPRISE COMMUNITIES WITH RESPECT
TO FIRST 10 DESIGNATIONS.—With respect to the
first 10 designations made under this section—
‘‘(i) all shall be chosen from nominated
areas which are empowerment zones or en-
terprise communities (and are otherwise eli-
gible for designation under this section);
and
‘‘(ii) two shall be areas described in
paragraph (2)(B).
‘‘(4) LIMITATION ON DESIGNATIONS.—
‘‘(A) PUBLICATION OF REGULATIONS.—The
Secretary of Housing and Urban Development
shall prescribe by regulation no later than 4
months after the date of the enactment of this
section, after consultation with the officials de-
scribed in paragraph (1)(B)—
‘‘(i) the procedures for nominating an
area under paragraph (1)(A);
459
‘‘(ii) the parameters relating to the size
and population characteristics of a renewal
community; and
‘‘(iii) the manner in which nominated
areas will be evaluated based on the criteria
specified in subsection (d).
‘‘(B) TIME LIMITATIONS.—The Secretary of
Housing and Urban Development may designate
nominated areas as renewal communities only
during the 36-month period beginning on the
first day of the first month following the month
in which the regulations described in subpara-
graph (A) are prescribed.
‘‘(C) PROCEDURAL RULES.—The Secretary
of Housing and Urban Development shall not
make any designation of a nominated area as a
renewal 
community 
under 
paragraph 
(2)
unless—
‘‘(i) the local governments and the
States in which the nominated area is lo-
cated have the authority—
‘‘(I) to nominate such area for
designation as a renewal community;
477
tional educational school’ means an area voca-
tional education school (as defined in subpara-
graph (C) or (D) of section 521(4) of the Carl D.
Perkins Vocational and Applied Technology
Education Act (20 U.S.C. 2471(4))) which is in
any State (as defined in section 521(33) of such
Act), as such sections are in effect on the date of
the enactment of this section.
‘‘(C) COORDINATION
WITH
OTHER
BENE-
FITS.—The amount of qualified higher education
expenses for any taxable year shall be reduced as
provided in section 25A(g)(2).
‘‘(4) 
QUALIFIED
FIRST-TIME
HOMEBUYER
COSTS.—The term ‘qualified first-time homebuyer
costs’ means qualified acquisition costs (as defined in
section 72(t)(8) without regard to subparagraph (B)
thereof) with respect to a principal residence (within
the meaning of section 121) for a qualified first-time
homebuyer (as defined in section 72(t)(8)).
‘‘(5) 
QUALIFIED
BUSINESS
CAPITALIZATION
COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
business capitalization costs’ means qualified ex-
penditures for the capitalization of a qualified
business pursuant to a qualified plan.