248
(4) and by inserting after paragraph (1) the following new
paragraph:
‘‘(2) TRADE
OR
BUSINESS
AND
INVESTMENT
PROPERTY.—If a taxpayer’s property held for produc-
tive use in a trade or business or for investment is
compulsorily or involuntarily converted as a result of
a Presidentially declared disaster, tangible property
of a type held for productive use in a trade or busi-
ness shall be treated for purposes of subsection (a) as
property similar or related in service or use to the
property so converted.’’.
(b) CONFORMING AMENDMENTS.—Section 1033(h) is
amended—
(1) by striking ‘‘residence’’ in paragraph (3) (as
redesignated by subsection (a)) and inserting ‘‘prop-
erty’’,
(2) by striking ‘‘PRINCIPAL RESIDENCES’’ in the
heading and inserting ‘‘PROPERTY’’, and
(3) by striking ‘‘(1) IN GENERAL.—’’ and insert-
ing ‘‘(1) PRINCIPAL RESIDENCES.—’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to disasters declared after December 31,
1994, in taxable years ending after such date.
249
SEC. 1118. CLASS LIFE FOR GAS STATION CONVENIENCE
STORES AND SIMILAR STRUCTURES.
(a) IN GENERAL.—Section 168(e)(3)(E) (classifying
certain property as 15-year property) is amended by strik-
ing ‘‘and’’ at the end of clause (i), by striking the period
at the end of clause (ii) and inserting ‘‘, and’’, and by add-
ing at the end the following new clause:
‘‘(iii) any section 1250 property which
is a retail motor fuels outlet (whether or not
food or other convenience items are sold at
the outlet).’’
(b) CONFORMING AMENDMENT.—Subparagraph (B) of
section 168(g)(3) is amended by inserting after the item re-
lating to subparagraph (E)(ii) in the table contained there-
in the following new item:
‘‘(E)(iii) . . . . . . . . . . . . . . . . . 20’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to property which is placed in service
on or after the date of the enactment of this Act and to
which section 168 of the Internal Revenue Code of 1986 ap-
plies after the amendment made by section 201 of the Tax
Reform Act of 1986. A taxpayer may elect (in such form
and manner as the Secretary of the Treasury may pre-
scribe) to have such amendments apply with respect to any
250
property placed in service before such date and to which
such section so applies.
SEC. 1119. TREATMENT OF ABANDONMENT OF LESSOR IM-
PROVEMENTS AT TERMINATION OF LEASE.
(a) IN GENERAL.—Paragraph (8) of section 168(i) is
amended to read as follows:
‘‘(8) TREATMENT
OF
LEASEHOLD
IMPROVE-
MENTS.—
‘‘(A) IN
GENERAL.—In the case of any
building erected (or improvements made) on
leased property, if such building or improvement
is property to which this section applies, the de-
preciation deduction shall be determined under
the provisions of this section.
‘‘(B) TREATMENT
OF
LESSOR
IMPROVE-
MENTS WHICH ARE ABANDONED AT TERMINATION
OF LEASE.—An improvement—
‘‘(i) which is made by the lessor of
leased property for the lessee of such prop-
erty, and
‘‘(ii) which is irrevocably disposed of
or abandoned by the lessor at the termi-
nation of the lease by such lessee,
251
shall be treated for purposes of determining gain
or loss under this title as disposed of by the les-
sor when so disposed of or abandoned.’’
(b) EFFECTIVE DATE.—Subparagraph (B) of section
168(i)(8) of the Internal Revenue Code of 1986, as added
by the amendment made by subsection (a), shall apply to
improvements disposed of or abandoned after June 12,
1996.
SEC. 1120. DEDUCTIBILITY OF BUSINESS MEAL EXPENSES
FOR CERTAIN SEAFOOD PROCESSING FACILI-
TIES.
(a) IN
GENERAL.—Subparagraph (E) of section
274(n)(2) is amended by striking ‘‘or’’ at the end of clause
(iii), by striking the period at the end of clause (iv) and
inserting ‘‘, or’’, and by inserting after clause (iv) the fol-
lowing new clause:
‘‘(v) provided at a remote seafood proc-
essing facility located in the United States
north of 53 degrees north latitude.’’
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1996.
252
SEC. 1121. CLARIFICATION OF TAX TREATMENT OF HARD
CIDER.
(a) HARD CIDER CONTAINING NOT MORE THAN 7
PERCENT ALCOHOL TAXED AS WINE.—Subsection (b) of
section 5041 (relating to imposition and rate of tax) is
amended by striking ‘‘and’’ at the end of paragraph (4),
by striking the period at the end of paragraph (5) and in-
serting ‘‘; and’’, and by adding at the end the following
new paragraph:
‘‘(6) On hard cider derived primarily from ap-
ples or apple concentrate and water, containing no
other fruit product, and containing at least one-half
of 1 percent and not more than 7 percent of alcohol
by volume, 22.6 cents per wine gallon.’’
(b) EXCLUSION FROM SMALL PRODUCER CREDIT.—
Paragraph (1) of section 5041(c) (relating to credit for
small domestic producers) is amended by striking ‘‘sub-
section (b)(4)’’ and inserting ‘‘paragraphs (4) and (6) of
subsection (b)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on January 1, 1997.
253
SEC. 1122. SPECIAL RULES RELATING TO DETERMINATION
WHETHER 
INDIVIDUALS 
ARE 
EMPLOYEES
FOR PURPOSES OF EMPLOYMENT TAXES.
(a) IN GENERAL.—Section 530 of the Revenue Act of
1978 is amended by adding at the end the following new
subsection:
‘‘(e) SPECIAL RULES
FOR APPLICATION
OF SEC-
TION.—
‘‘(1) NOTICE REQUIREMENTS.—
‘‘(A) WRITTEN AGREEMENT REQUIRED BE-
TWEEN TAXPAYER AND INDIVIDUAL.—The provi-
sions of subsection (a)(1) shall not apply with
respect to a taxpayer and any individual unless
such taxpayer and individual sign a statement
(at such time and in such form as the Secretary
may prescribe) which provides that such individ-
ual will not be treated as an employee of the tax-
payer for purposes of employment taxes.
‘‘(B) NOTICE
OF
AVAILABILITY
OF
SEC-
TION.—An officer or employee of the Internal
Revenue Service shall, before or at the commence-
ment of any audit relating to the employment
status of one or more individuals who perform
services for the taxpayer, provide the taxpayer
with a written notice of the provisions of this
section.
254
‘‘(2) RULES RELATING TO STATUTORY STAND-
ARDS.—For purposes of subsection (a)(2)—
‘‘(A) a taxpayer may not rely on an audit
commenced after December 31, 1996, for pur-
poses of subparagraph (B) thereof unless such
audit included an examination for employment
tax purposes of whether the individual involved
(or any individual holding a position substan-
tially similar to the position held by the individ-
ual involved) should be treated as an employee of
the taxpayer,
‘‘(B) in no event shall the significant seg-
ment requirement of subparagraph (C) thereof be
construed to require a reasonable showing of the
practice of more than 25 percent of the industry
(determined by not taking into account the tax-
payer), and
‘‘(C) in applying the long-standing recog-
nized practice requirement of subparagraph (C)
thereof—
‘‘(i) such requirement shall not be con-
strued as requiring the practice to have con-
tinued for more than 10 years, and
255
‘‘(ii) a practice shall not fail to be
treated as long-standing merely because
such practice began after 1978.
‘‘(3) AVAILABILITY OF SAFE HARBORS.—Nothing
in this section shall be construed to provide that sub-
section (a) only applies where the individual involved
is otherwise an employee of the taxpayer.
‘‘(4) BURDEN OF PROOF.—
‘‘(A) IN GENERAL.—If—
‘‘(i) a taxpayer establishes a prima
facie case that it was reasonable not to treat
an individual as an employee for purposes
of this section, and
‘‘(ii) the taxpayer has fully cooperated
with reasonable requests from the Secretary
of the Treasury or his delegate,
then the burden of proof with respect to such
treatment shall be on the Secretary.
‘‘(B) EXCEPTION FOR OTHER REASONABLE
BASIS.—In the case of any issue involving
whether the taxpayer had a reasonable basis not
to treat an individual as an employee for pur-
poses of this section, subparagraph (A) shall only
apply for purposes of determining whether the
256
taxpayer meets the requirements of subparagraph
(A), (B), or (C) of subsection (a)(2).’’
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendment made by this
section shall apply to periods after December 31,
1996.
(2) NOTICE REQUIREMENTS.—
(A) WRITTEN AGREEMENT.—In the case of
individuals who first perform services for a tax-
payer before January 1, 1997, the requirements
of section 530(e)(1)(A) of the Revenue Act of
1978 (as added by subsection (a)) shall not
apply before January 1, 1998, unless the tax-
payer elects to apply such requirements before
such date.
(B) NOTICE BY INTERNAL REVENUE SERV-
ICE.—Section 530(e)(1)(B) of the Revenue Act of
1978 (as added by subsection (a)) shall apply to
audits which commence after December 31, 1996.
(3) BURDEN OF PROOF.—
(A) IN GENERAL.—Section 530(e)(4) of the
Revenue Act of 1978 (as added by subsection (a))
shall apply to disputes involving periods after
December 31, 1996.
257
(B) 
NO
INFERENCE.—Nothing 
in 
the
amendments made by this section shall be con-
strued to infer the proper treatment of the bur-
den of proof with respect to disputes involving
periods before January 1, 1997.
Subtitle B—Extension of Certain
Expiring Provisions
SEC. 1201. WORK OPPORTUNITY TAX CREDIT.
(a) AMOUNT OF CREDIT.—Subsection (a) of section 51
(relating to amount of credit) is amended by striking ‘‘40
percent’’ and inserting ‘‘35 percent’’.
(b) MEMBERS OF TARGETED GROUPS.—Subsection (d)
of section 51 is amended to read as follows:
‘‘(d) MEMBERS OF TARGETED GROUPS.—For purposes
of this subpart—
‘‘(1) IN GENERAL.—An individual is a member
of a targeted group if such individual is—
‘‘(A) a qualified IV–A recipient,
‘‘(B) a qualified veteran,
‘‘(C) a qualified ex-felon,
‘‘(D) a high-risk youth,
‘‘(E) a vocational rehabilitation referral,
‘‘(F) a qualified summer youth employee, or
‘‘(G) a qualified food stamp recipient.
‘‘(2) QUALIFIED IV–A RECIPIENT.—
258
‘‘(A) IN GENERAL.—The term ‘qualified IV–
A recipient’ means any individual who is cer-
tified by the designated local agency as being a
member of a family receiving assistance under a
IV–A program for at least a 9-month period end-
ing during the 9-month period ending on the
hiring date.
‘‘(B) IV–A PROGRAM.—For purposes of this
paragraph, the term ‘IV–A program’ means any
program providing assistance under a State
plan approved under part A of title IV of the So-
cial Security Act (relating to assistance for
needy families with minor children) and any
successor of such program.
‘‘(3) QUALIFIED VETERAN.—
‘‘(A) IN GENERAL.—The term ‘qualified vet-
eran’ means any veteran who is certified by the
designated local agency as being—
‘‘(i) a member of a family receiving as-
sistance under a IV–A program (as defined
in paragraph (2)(B)) for at least a 9-month
period ending during the 12-month period
ending on the hiring date, or
‘‘(ii) a member of a family receiving
assistance under a food stamp program
259
under the Food Stamp Act of 1977 for at
least a 3-month period ending during the
12-month period ending on the hiring date.
‘‘(B) VETERAN.—For purposes of subpara-
graph (A), the term ‘veteran’ means any individ-
ual who is certified by the designated local agen-
cy as—
‘‘(i)(I) having served on active duty
(other than active duty for training) in the
Armed Forces of the United States for a pe-
riod of more than 180 days, or
‘‘(II) having been discharged or re-
leased from active duty in the Armed Forces
of the United States for a service-connected
disability, and
‘‘(ii) not having any day during the
60-day period ending on the hiring date
which was a day of extended active duty in
the Armed Forces of the United States.
For purposes of clause (ii), the term ‘extended
active duty’ means a period of more than 90
days during which the individual was on active
duty (other than active duty for training).
260
‘‘(4) QUALIFIED EX-FELON.—The term ‘qualified
ex-felon’ means any individual who is certified by the
designated local agency—
‘‘(A) as having been convicted of a felony
under any statute of the United States or any
State,
‘‘(B) as having a hiring date which is not
more than 1 year after the last date on which
such individual was so convicted or was released
from prison, and
‘‘(C) as being a member of a family which
had an income during the 6 months immediately
preceding the earlier of the month in which such
income determination occurs or the month in
which the hiring date occurs, which, on an an-
nual basis, would be 70 percent or less of the Bu-
reau of Labor Statistics lower living standard.
Any determination under subparagraph (C) shall be
valid for the 45-day period beginning on the date
such determination is made.
‘‘(5) HIGH-RISK YOUTH.—
‘‘(A) IN
GENERAL.—The term ‘high-risk
youth’ means any individual who is certified by
the designated local agency—
261
‘‘(i) as having attained age 18 but not
age 25 on the hiring date, and
‘‘(ii) as having his principal place of
abode within an empowerment zone or en-
terprise community.
‘‘(B) YOUTH MUST CONTINUE TO RESIDE IN
ZONE.—In the case of a high-risk youth, the term
‘qualified wages’ shall not include wages paid or
incurred for services performed while such
youth’s principal place of abode is outside an
empowerment zone or enterprise community.
‘‘(6) VOCATIONAL REHABILITATION REFERRAL.—
The term ‘vocational rehabilitation referral’ means
any individual who is certified by the designated
local agency as—
‘‘(A) having a physical or mental disability
which, for such individual, constitutes or results
in a substantial handicap to employment, and
‘‘(B) having been referred to the employer
upon completion of (or while receiving) rehabili-
tative services pursuant to—
‘‘(i) an individualized written rehabili-
tation plan under a State plan for voca-
tional 
rehabilitation 
services 
approved
under the Rehabilitation Act of 1973, or
262
‘‘(ii) a program of vocational rehabili-
tation carried out under chapter 31 of title
38, United States Code.
‘‘(7) QUALIFIED SUMMER YOUTH EMPLOYEE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
summer youth employee’ means any individ-
ual—
‘‘(i) who performs services for the em-
ployer between May 1 and September 15,
‘‘(ii) who is certified by the designated
local agency as having attained age 16 but
not 18 on the hiring date (or if later, on
May 1 of the calendar year involved),
‘‘(iii) who has not been an employee of
the employer during any period prior to the
90-day period described in subparagraph
(B)(i), and
‘‘(iv) who is certified by the designated
local agency as having his principal place
of abode within an empowerment zone or
enterprise community.
‘‘(B) SPECIAL
RULES
FOR
DETERMINING
AMOUNT OF CREDIT.—For purposes of applying
this subpart to wages paid or incurred to any
qualified summer youth employee—
263
‘‘(i) subsection (b)(2) shall be applied
by substituting ‘any 90-day period between
May 1 and September 15’ for ‘the 1-year
period beginning with the day the individ-
ual begins work for the employer’, and
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$3,000’ for ‘$6,000’.
The preceding sentence shall not apply to an in-
dividual who, with respect to the same employer,
is certified as a member of another targeted
group after such individual has been a qualified
summer youth employee.
‘‘(C) YOUTH MUST CONTINUE TO RESIDE IN
ZONE.—Paragraph (5)(B) shall apply for pur-
poses of subparagraph (A)(iv).
‘‘(8) QUALIFIED FOOD STAMP RECIPIENT.—
‘‘(A) IN
GENERAL.—The term ‘qualified
food stamp recipient’ means any individual who
is certified by the designated local agency—
‘‘(i) as having attained age 18 but not
age 25 on the hiring date, and
‘‘(ii) as being a member of a family re-
ceiving assistance under a food stamp pro-
gram under the Food Stamp Act of 1977 for
264
the 3-month period ending on the hiring
date.
‘‘(B) PARTICIPATION
INFORMATION.—Not-
withstanding any other provision of law, the
Secretary of the Treasury and the Secretary of
Agriculture shall enter into an agreement to pro-
vide information to designated local agencies
with respect to participation in the food stamp
program.
‘‘(9) HIRING
DATE.—The term ‘hiring date’
means the day the individual is hired by the em-
ployer.
‘‘(10) DESIGNATED LOCAL AGENCY.—The term
‘designated local agency’ means a State employment
security agency established in accordance with the Act
of June 6, 1933, as amended (29 U.S.C. 49–49n).
‘‘(11) SPECIAL RULES FOR CERTIFICATIONS.—
‘‘(A) IN GENERAL.—An individual shall not
be treated as a member of a targeted group un-
less—
‘‘(i) on or before the day on which such
individual begins work for the employer, the
employer has received a certification from a
designated local agency that such individual
is a member of a targeted group, or
266
the certification shall be revoked and wages paid
by the employer after the date on which notice
of revocation is received by the employer shall
not be treated as qualified wages.
‘‘(C) EXPLANATION
OF
DENIAL
OF
RE-
QUEST.—If a designated local agency denies a
request for certification of membership in a tar-
geted group, such agency shall provide to the per-
son making such request a written explanation
of the reasons for such denial.’’
(c) MINIMUM EMPLOYMENT PERIOD.—Paragraph (3)
of section 51(i) (relating to certain individuals ineligible)
is amended to read as follows:
‘‘(3) INDIVIDUALS NOT MEETING MINIMUM EM-
PLOYMENT PERIOD.—No wages shall be taken into ac-
count under subsection (a) with respect to any indi-
vidual unless such individual either—
‘‘(A) is employed by the employer at least
180 days (20 days in the case of a qualified
summer youth employee), or
‘‘(B) has completed at least 375 hours (120
hours in the case of a qualified summer youth
employee) of services performed for the em-
ployer.’’
267
(d) TERMINATION.—Paragraph (4) of section 51(c)
(relating to wages defined) is amended to read as follows:
‘‘(4) TERMINATION.—The term ‘wages’ shall not
include any amount paid or incurred to an individ-
ual who begins work for the employer—
‘‘(A) after December 31, 1994, and before
October 1, 1996, or
‘‘(B) after September 30, 1997.’’
(e) REDESIGNATION OF CREDIT.—
(1) Sections 38(b)(2) and 51(a) are each amend-
ed by striking ‘‘targeted jobs credit’’ and inserting
‘‘work opportunity credit’’.
(2) The subpart heading for subpart F of part IV
of subchapter A of chapter 1 is amended by striking
‘‘Targeted Jobs Credit’’ and inserting ‘‘Work
Opportunity Credit’’.
(3) The table of subparts for such part IV is
amended by striking ‘‘targeted jobs credit’’ and insert-
ing ‘‘work opportunity credit’’.
(4) The heading for paragraph (3) of section
1396(c) is amended by striking ‘‘TARGETED
JOBS
CREDIT’’ and inserting ‘‘WORK OPPORTUNITY CRED-
IT’’.
(f) TECHNICAL AMENDMENT.—Paragraph (1) of sec-
tion 51(c) is amended by striking ‘‘, subsection (d)(8)(D),’’.
268
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to individuals who begin work for the
employer after September 30, 1996.
SEC. 1202. EMPLOYER-PROVIDED EDUCATIONAL ASSIST-
ANCE PROGRAMS.
(a) EXTENSION.—Subsection (d) of section 127 (relat-
ing to educational assistance programs) is amended by
striking ‘‘December 31, 1994’’ and inserting ‘‘December 31,
1996’’.
(b) EFFECTIVE DATES.—
(1) EXTENSION.—The amendment made by sub-
section (a) shall apply to taxable years beginning
after December 31, 1994.
(2) EXPEDITED PROCEDURES.—The Secretary of
the Treasury shall establish expedited procedures for
the refund of any overpayment of taxes imposed by
the Internal Revenue Code of 1986 which is attrib-
utable to amounts excluded from gross income during
1995 or 1996 under section 127 of such Code, includ-
ing procedures waiving the requirement that an em-
ployer obtain an employee’s signature where the em-
ployer demonstrates to the satisfaction of the Sec-
retary that any refund collected by the employer on
behalf of the employee will be paid to the employee.
269
SEC. 1203. RESEARCH CREDIT.
(a) IN GENERAL.—Subsection (h) of section 41 (relat-
ing to credit for research activities) is amended to read as
follows:
‘‘(h) TERMINATION.—
‘‘(1) IN GENERAL.—This section shall not apply
to any amount paid or incurred—
‘‘(A) after June 30, 1995, and before July
1, 1996, or
‘‘(B) after June 30, 1997.’’
‘‘(2) COMPUTATION OF BASE AMOUNT.—In the
case of any taxable year with respect to which this
section applies to a number of days which is less than
the total number of days in such taxable year, the
base amount with respect to such taxable year shall
be the amount which bears the same ratio to the base
amount for such year (determined without regard to
this paragraph) as the number of days in such tax-
able year to which this section applies bears to the
total number of days in such taxable year.’’
(b) BASE AMOUNT
FOR START-UP COMPANIES.—
Clause (i) of section 41(c)(3)(B) (relating to start-up com-
panies) is amended to read as follows:
‘‘(i) TAXPAYERS TO WHICH SUBPARA-
GRAPH APPLIES.—The fixed-base percentage
270
shall be determined under this subpara-
graph if—
‘‘(I) the first taxable year in
which a taxpayer had both gross re-
ceipts and qualified research expenses
begins after December 31, 1983, or
‘‘(II) there are fewer than 3 tax-
able years beginning after December
31, 1983, and before January 1, 1989,
in which the taxpayer had both gross
receipts and qualified research ex-
penses.’’
(c) ELECTION OF ALTERNATIVE INCREMENTAL CRED-
IT.—Subsection (c) of section 41 is amended by redesignat-
ing paragraphs (4) and (5) as paragraphs (5) and (6), re-
spectively, and by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) ELECTION OF ALTERNATIVE INCREMENTAL
CREDIT.—
‘‘(A) IN GENERAL.—At the election of the
taxpayer, the credit determined under subsection
(a)(1) shall be equal to the sum of—
‘‘(i) 1.65 percent of so much of the
qualified research expenses for the taxable
year as exceeds 1 percent of the average de-
271
scribed in subsection (c)(1)(B) but does not
exceed 1.5 percent of such average,
‘‘(ii) 2.2 percent of so much of such ex-
penses as exceeds 1.5 percent of such average
but does not exceed 2 percent of such aver-
age, and
‘‘(iii) 2.75 percent of so much of such
expenses as exceeds 2 percent of such aver-
age.
‘‘(B) ELECTION.—An election under this
paragraph may be made only for the first tax-
able year of the taxpayer beginning after June
30, 1996. Such an election shall apply to the
taxable year for which made and all succeeding
taxable years unless revoked with the consent of
the Secretary.’’
(d) INCREASED CREDIT FOR CONTRACT RESEARCH
EXPENSES WITH RESPECT TO CERTAIN RESEARCH CON-
SORTIA.—Paragraph (3) of section 41(b) is amended by
adding at the end the following new subparagraph:
‘‘(C) AMOUNTS PAID TO CERTAIN RESEARCH
CONSORTIA.—
‘‘(i) IN GENERAL.—Subparagraph (A)
shall be applied by substituting ‘75 percent’
for ‘65 percent’ with respect to amounts