IB
Union Calendar No. 40
104TH CONGRESS
1ST SESSION
H. R. 1215
[Report No. 104–84]
To amend the Internal Revenue Code of 1986 to strengthen the American
family and create jobs.
IN THE HOUSE OF REPRESENTATIVES
MARCH 13, 1995
Mr. ARCHER introduced the following bill; which was referred to the
Committee on Ways and Means
MARCH 21, 1995
Committed to the Committee of the Whole House on the State of the Union
and ordered to be printed
A BILL
To amend the Internal Revenue Code of 1986 to strengthen
the American family and create jobs.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Contract With America Tax Relief Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; amendment of 1986 Code.
TITLE I—AMERICAN DREAM RESTORATION
Sec. 101. Family tax credit.
Sec. 102. Credit to reduce marriage penalty.
Sec. 103. Establishment of American dream savings accounts.
Sec. 104. Spousal IRA computed on basis of compensation of both spouses.
TITLE II—SENIOR CITIZENS’ EQUITY
Subtitle A—Repeal of Increase in Tax on Social Security Benefits
Sec. 201. Repeal of increase in tax on Social Security benefits.
Subtitle B—Treatment of Long-term Care Insurance and Services
Sec. 211. Treatment of long-term care insurance.
Sec. 212. Qualified long-term care services treated as medical care.
Sec. 213. Certain exchanges of life insurance contracts for long-term care in-
surance contracts not taxable.
Sec. 214. Exclusion from gross income for amounts withdrawn from certain re-
tirement plans for long-term care insurance.
Subtitle C—Treatment of Accelerated Death Benefits
Sec. 221. Treatment of accelerated death benefits by recipient.
Sec. 222. Tax treatment of companies issuing qualified accelerated death bene-
fit riders.
Subtitle D—Inclusion in Gross Income of Excess Long-term Care Benefits
Sec. 231. Inclusion in income of excess long-term care benefits.
Sec. 232. Reporting requirements.
TITLE III—JOB CREATION AND WAGE ENHANCEMENT
Subtitle A—Capital Gains Reform
PART I—CAPITAL GAINS REDUCTION FOR TAXPAYERS OTHER THAN
CORPORATIONS
Sec. 301. Capital gains deduction.
Sec. 302. Indexing of certain assets acquired after December 31, 1994, for pur-
poses of determining gain.
PART II—CAPITAL GAINS REDUCTION FOR CORPORATIONS
Sec. 311. Reduction of alternative capital gain tax for corporations.
PART III—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE
OR EXCHANGE OF PRINCIPAL RESIDENCE
Sec. 316. Capital loss deduction allowed with respect to sale or exchange of
principal residence.
Subtitle B—Cost Recovery Provisions
Sec. 321. Depreciation adjustment for certain property placed in service after
December 31, 1994.
Sec. 322. Treatment of abandonment of lessor improvements at termination of
lease.
Subtitle C—Alternative Minimum Tax Relief
Sec. 331. Phaseout of application of alternative minimum tax to corporations.
Subtitle D—Public Debt Reduction Checkoff and Trust Fund
Sec. 341. Designation of amounts for reduction of public debt.
Sec. 342. Public Debt Reduction Trust Fund.
Subtitle E—Small Business Incentives
Sec. 351. Cost-of-living adjustments relating to estate and gift tax provisions.
Sec. 352. Increase in expense treatment for small businesses.
Sec. 353. Clarification of treatment of home office use for administrative and
management activities.
Sec. 354. Treatment of storage of product samples.
TITLE IV—FAMILY REINFORCEMENT
Sec. 401. Credit for adoption expenses.
Sec. 402. Credit for taxpayers with certain persons requiring custodial care in
their households.
TITLE V—SOCIAL SECURITY EARNINGS TEST
Sec. 501. Adjustments in monthly exempt amount for purposes of the Social
Security earnings test.
TITLE VI—TECHNICAL CORRECTIONS
Sec. 601. Coordination with other titles.
Sec. 602. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 603. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 604. Miscellaneous provisions.
TITLE I—AMERICAN DREAM
RESTORATION
SEC. 101. FAMILY TAX CREDIT.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 22 the following new section:
‘‘SEC. 23. FAMILY TAX CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $500 multiplied
by the number of qualifying children of the taxpayer.
‘‘(b) LIMITATION.—The amount of credit which
would (but for this subsection) be allowed by subsection
(a) shall be reduced (but not below zero) by an amount
which bears the same ratio to such amount of credit as—
‘‘(1) the excess (if any) of the taxpayer’s ad-
justed gross income (determined without regard to
sections 911, 931, and 933) over $200,000, bears to
‘‘(2) an amount equal to 100 times the dollar
amount in effect under subsection (a) for the taxable
year.
‘‘(c) QUALIFYING CHILD.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The term ‘qualifying child’
means any individual if—
‘‘(A) the taxpayer is allowed a deduction
under section 151 with respect to such individ-
ual for such taxable year,
‘‘(B) such individual has not attained the
age of 18 as of the close of the calendar year
in which the taxable year of the taxpayer be-
gins, and
‘‘(C) such individual bears a relationship to
the taxpayer described in section 32(c)(3)(B)
(determined without regard to clause (ii) there-
of).
‘‘(2) EXCEPTION FOR CERTAIN NONCITIZENS.—
The term ‘qualifying child’ shall not include any in-
dividual who would not be a dependent if the first
sentence of section 152(b)(3) were applied without
regard to all that follows ‘resident of the United
States’.
‘‘(d) INFLATION ADJUSTMENTS.—
‘‘(1) IN GENERAL.—In the case of a taxable
year beginning in a calendar year after 1996, the
$500 and $200,000 amounts contained in sub-
sections (a) and (b) shall each be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) ROUNDING.—If any amount as adjusted
under paragraph (1) is not a multiple of $50, such
amount shall be rounded to the nearest multiple of
$50.
‘‘(e) CERTAIN OTHER RULES APPLY.—Rules similar
to the rules of subsections (d) and (e) of section 32 shall
apply for purposes of this section.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of chapter
1 is amended by inserting after the item relating to section
22 the following new item:
‘‘Sec. 23. Family tax credit.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 102. CREDIT TO REDUCE MARRIAGE PENALTY.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 23 the following new section:
‘‘SEC. 24. CREDIT TO REDUCE MARRIAGE PENALTY.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a joint
return for the taxable year, there shall be allowed as a
credit against the tax imposed by this chapter for such
taxable year an amount equal to the marriage penalty re-
duction credit.
‘‘(b) LIMITATIONS.—
‘‘(1) DOLLAR
LIMITATION.—The amount of
credit allowed by subsection (a) for the taxable year
shall not exceed $145.
‘‘(2) CREDIT
DISALLOWED
FOR
INDIVIDUALS
CLAIMING SECTION 911, ETC.—No credit shall be al-
lowed under this section for any taxable year if ei-
ther spouse claims the benefits of section 911, 931,
or 933 for such taxable year.
‘‘(c) MARRIAGE PENALTY REDUCTION CREDIT.—For
purposes of this section—
‘‘(1) IN GENERAL.—The marriage penalty re-
duction credit is an amount equal to the excess (if
any) of—
‘‘(A) the joint tax amount of the taxpayer,
over
‘‘(B) the sum of the unmarried tax
amounts for each spouse.
‘‘(2) UNMARRIED TAX AMOUNT.—For purposes
of paragraph (1), the unmarried tax amount, with
respect to an individual, is the amount of tax which
would be imposed by section 1(c) if such individual’s
taxable income were equal to the excess (if any) of—
‘‘(A) such individual’s qualified earned in-
come for the taxable year, over
‘‘(B) the sum of—
‘‘(i) an amount equal to the basic
standard 
deduction 
under 
section
63(c)(2)(C) for the taxable year, plus
‘‘(ii) the exemption amount (as de-
fined in section 151(d)) for such taxable
year.
‘‘(3) JOINT
TAX
AMOUNT.—For purposes of
paragraph (1), the joint tax amount is the amount
of tax which would be imposed by section 1(a) if the
taxpayer’s taxable income were equal to the excess
(if any) of—
‘‘(A) the taxpayer’s qualified earned in-
come for the taxable year, over
‘‘(B) the sum of—
‘‘(i) an amount equal to the basic
standard 
deduction 
under 
section
63(c)(2)(A) for the taxable year, plus
‘‘(ii) an amount equal to twice the ex-
emption amount (as so defined) for such
taxable year.
‘‘(d) QUALIFIED EARNED INCOME.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified earned
income’ means an amount equal to the excess (if
any) of—
‘‘(A) the earned income for the taxable
year, over
‘‘(B) an amount equal to the sum of the
deductions described in paragraphs (1), (2),
(6), (7), and (12) of section 62(a) to the extent
that such deductions are properly allocable to
or chargeable against earned income for such
taxable year.
The amount of qualified earned income shall be de-
termined without regard to any community property
laws.
‘‘(2) EARNED INCOME.—For purposes of para-
graph (1)—
‘‘(A) IN GENERAL.—The term ‘earned in-
come’ means income which is earned income
within the meaning of section 401(c)(2)(C) or
911(d)(2) (determined without regard to the
phrase ‘not in excess of 30 percent of his share
of the net profits of such trade or business’ in
subparagraph (B) thereof).
‘‘(B) EXCEPTION.—Such term shall not in-
clude any amount—
‘‘(i) not includible in gross income,
‘‘(ii) received as a pension or annuity,
‘‘(iii) paid or distributed out of an in-
dividual retirement plan (within the mean-
ing of section 7701(a)(37)),
‘‘(iv) received as deferred compensa-
tion, or
‘‘(v) received for services performed
by an individual in the employ of the
spouse (within the meaning of section
3121(b)(3)(A)).
‘‘(e) AMOUNT
OF CREDIT TO BE DETERMINED
UNDER TABLES.—
‘‘(1) IN GENERAL.—The amount of the credit
allowed by this section shall be determined under ta-
bles prescribed by the Secretary.
‘‘(2) REQUIREMENTS FOR TABLES.—The tables
prescribed under paragraph (1) shall reflect the pro-
visions of subsection (c) and shall round to the near-
est $25 any amount of credit which is less than the
maximum credit under subsection (b)(1).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
23 the following new item:
‘‘Sec. 24. Credit to reduce marriage penalty.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 103. ESTABLISHMENT OF AMERICAN DREAM SAVINGS
ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an American Dream Savings Account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) AMERICAN DREAM SAVINGS ACCOUNT.—For
purposes of this title, the term ‘American Dream Savings
Account’ or ‘ADS account’ means an individual retirement
plan which is designated at the time of the establishment
of the plan as an American Dream Savings Account. Such
designation shall be made in such manner as the Secretary
may prescribe.
‘‘(c) CONTRIBUTION RULES.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an ADS account.
‘‘(2) CONTRIBUTION LIMIT.—
‘‘(A) 
IN
GENERAL.—The 
aggregate
amount of contributions (other than rollover
contributions) for any taxable year to all ADS
accounts maintained for the benefit of an indi-
vidual shall not exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
‘‘(B) $4,000 LIMITATION FOR CERTAIN AD-
DITIONAL MARRIED INDIVIDUALS.—
‘‘(i) IN GENERAL.—In the case of an
individual to whom this subparagraph ap-
plies for the taxable year, the limitation of
subparagraph (A)(ii) shall be equal to the
sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount of the limitation
under subparagraph (A) applicable to
such spouse for such taxable year.
‘‘(ii) INDIVIDUALS TO WHOM CLAUSE
(i) APPLIES.—Clause (i) shall apply to any
individual if—
‘‘(I) such individual files a joint
return for the taxable year, and
‘‘(II) the amount of compensa-
tion (if any) includible in such individ-
ual’s gross income for the taxable year
is less than the compensation includ-
ible in the gross income of such indi-
vidual’s spouse for the taxable year.
‘‘(C) ADJUSTMENT FOR INFLATION.—
‘‘(i) IN GENERAL.—In the case of a
taxable year beginning in a calendar year
after 1996, the $2,000 amount contained
in subparagraph (A) shall be increased by
an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment under section 1(f)(3) for the cal-
endar year in which the taxable year
begins, determined by substituting
‘calendar year 1995’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
of $50, such amount shall be rounded to
the nearest multiple of $50.
‘‘(D) TAX ON EXCESS CONTRIBUTIONS.—
Section 4973 shall be applied separately with
respect to individual retirement plans which are
ADS accounts and individual retirement plans
which are not ADS accounts; except that, for
purposes of applying such section with respect
to individual retirement plans which are ADS
accounts, excess contributions shall be consid-
ered to be any amounts in excess of the limita-
tion under subsection (c)(2)(A).
‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE
701⁄2.—Contributions to an ADS account may be
made even after the individual for whom the account
is maintained has attained age 701⁄2.
‘‘(4) MANDATORY
DISTRIBUTION
RULES
NOT
TO APPLY, ETC.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), subsections (a)(6) and (b)(3)
of section 408 (relating to required distribu-
tions) and section 4974 (relating to excise tax
on certain accumulations in qualified retirement
plans) shall not apply to any ADS account.
‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules
similar to the rules of section 401(a)(9) (other
than subparagraph (A) thereof) shall apply for
purposes of this section.
‘‘(5) LIMITATIONS
ON
ROLLOVER
CONTRIBU-
TIONS.—No rollover contribution may be made to an
ADS account unless—
‘‘(A) such contribution is from another
ADS account, or
‘‘(B) such contribution is from an individ-
ual retirement plan (other than an ADS ac-
count) and is made before January 1, 1998.
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) GENERAL RULES.—
‘‘(A) EXCLUSION FROM GROSS INCOME.—
No portion of a qualified distribution from an
ADS account shall be includible in gross in-
come.
‘‘(B) EXCEPTION FROM PENALTY TAX.—
Section 72(t) shall not apply to—
‘‘(i) any qualified distribution from an
ADS account, and
‘‘(ii) any qualified special purpose dis-
tribution (whether or not a qualified dis-
tribution) from an ADS account.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ means any payment or distribu-
tion—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of the individual) on or after the
death of the individual,
‘‘(iii) attributable to the individual’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified special pur-
pose distribution.
‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—
No payment or distribution shall be treated as
a qualified distribution if—
‘‘(i) it is made within the 5-taxable
year period beginning with the 1st taxable
year for which the individual made a con-
tribution to an ADS account (or such indi-
vidual’s spouse made a contribution to an
ADS account) established for such individ-
ual, or
‘‘(ii) in the case of a payment or dis-
tribution properly allocable to a rollover
contribution (or income allocable thereto),
it is made within 5 years after the date on
which such rollover contribution was made,
as determined under regulations prescribed
by the Secretary.
Clause (ii) shall not apply to a rollover con-
tribution from an ADS account.
‘‘(3) INCOME INCLUSION FOR ROLLOVERS FROM
NON-ADS ACCOUNTS.—In the case of any amount
paid or distributed out of an individual retirement
plan (other than an ADS account) which is paid into
an ADS account (established for the benefit of the
payee or distributee, as the case may be) before the
close of the 60th day after the day on which the
payment or distribution is received—
‘‘(A) sections 72(t) and 408(d)(3) shall not
apply, and
‘‘(B) any amount required to be included
in gross income by reason of this paragraph
shall be so included ratably over the 4-taxable
year period beginning with the taxable year in
which the payment or distribution is made.
‘‘(e) QUALIFIED
SPECIAL
PURPOSE
DISTRIBU-
TION.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified special purpose distribution’
means any payments or distributions from an ADS
account to the individual for whose benefit such ac-
count is established—
‘‘(A) if such payments or distributions are
qualified first-time homebuyer distributions, or
‘‘(B) to the extent such payments or dis-
tributions do not exceed—
‘‘(i) the qualified higher education ex-
penses of the taxpayer for the taxable year
in which received, and
‘‘(ii) the qualified medical expenses of
the taxpayer for the taxable year in which
received.
‘‘(2) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified first-time home-
buyer distribution’ means any payment or dis-
tribution received by an individual to the extent
such payment or distribution is used by the in-
dividual before the close of the 60th day after
the day on which such payment or distribution
is received to pay qualified acquisition costs
with respect to a principal residence for such
individual as a first-time homebuyer.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if such individual (and, if married,
such individual’s spouse) had no present
ownership interest in a principal residence
during the 3-year period ending on the
date of acquisition of the principal resi-
dence to which this paragraph applies.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which a binding contract
to construct or reconstruct such a
principal residence is entered into.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If any payment or distribution out
of an ADS account fails to meet the require-
ments of subparagraph (A) solely by reason of
a delay or cancellation of the purchase, con-
struction, or reconstruction of the residence, the
amount of the payment or distribution may be
contributed to an ADS account as provided in
subsection (d)(3)(A)(i) of section 408 (deter-
mined by substituting ‘120th day’ for ‘60th
day’ in such subsection), except that—
‘‘(i) subsection (d)(3)(B) of such sec-
tion shall not be applied to such contribu-
tion, and
‘‘(ii) such amount shall not be taken
into account in determining whether sub-
section (d)(3)(A)(i) of such section applies
to any other amount.
‘‘(3) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(4) QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified medical ex-
penses’ means any amounts paid during the
taxable year, not compensated for by insurance
or otherwise, for medical care (as defined in
section 213(d)) of the taxpayer, his spouse, or
a dependent (as defined in section 152).
‘‘(B) LONG-TERM CARE INSURANCE PRE-
MIUMS TREATED AS MEDICAL EXPENSES.—For
purposes 
of 
subparagraph 
(A), 
section
213(d)(1)(C) shall not apply but the term
‘qualified medical expenses’ shall include pre-
miums for long-term care insurance (as defined
in section 7702B(b)) for coverage of the tax-
payer or his spouse.
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) ROLLOVER
CONTRIBUTIONS.—The term
‘rollover contributions’ means contributions de-
scribed in sections 402(c), 403(a)(4), 403(b)(8), or
408(d)(3).
‘‘(2) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section
219(f).’’
(b) TERMINATION OF NONDEDUCTIBLE IRA CON-
TRIBUTIONS.—
(1) Section 408(o) is amended by adding at the
end the following new paragraph:
‘‘(5) TERMINATION.—This subsection shall not
apply to any designated nondeductible contribution
for any taxable year beginning after December 31,
1995.’’
(2) Section 219(f) of is amended by striking
paragraph (7).
(c) EXCESS DISTRIBUTIONS TAX NOT TO APPLY.—
Subparagraph (B) of section 4980A(e)(1) is amended by
inserting ‘‘other than an ADS account (as defined in sec-
tion 408A(b))’’ after ‘‘retirement plan’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart A of part I of subchapter D of chapter 1 is
amended by inserting after the item relating to section
408 the following new item:
‘‘Sec. 408A. American Dream Savings Accounts.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 104. SPOUSAL IRA COMPUTED ON BASIS OF COM-
PENSATION OF BOTH SPOUSES.
(a) IN GENERAL.—Subsection (c) of section 219 (re-
lating to special rules for certain married individuals) is
amended to read as follows:
‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI-
VIDUALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this paragraph applies for the taxable year,
the limitation of subsection (b)(1) shall be equal to
the lesser of—
‘‘(A) $2,000, or
‘‘(B) the sum of—
‘‘(i) the compensation includible in
such individual’s gross income for the tax-
able year, plus
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by the
amount allowable as a deduction under
subsection (a) to such spouse for such tax-
able year.
‘‘(2) INDIVIDUALS
TO
WHOM
PARAGRAPH
(1)
APPLIES.—Paragraph (1) shall apply to any individ-
ual if—
‘‘(A) such individual files a joint return for
the taxable year, and
‘‘(B) the amount of compensation (if any)
includible in such individual’s gross income for
the taxable year is less than the compensation
includible in the gross income of such individ-
ual’s spouse for the taxable year.’’
(b) TECHNICAL AMENDMENT.—Paragraph (2) of
section 219(f) (relating to other definitions and special
rules) is amended by striking ‘‘subsections (b) and (c)’’
and inserting ‘‘subsection (b)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
TITLE II—SENIOR CITIZENS’
EQUITY
Subtitle A—Repeal of Increase in
Tax on Social Security Benefits
SEC. 201. REPEAL OF INCREASE IN TAX ON SOCIAL SECU-
RITY BENEFITS.
(a) IN GENERAL.—Subsection (a) of section 86 (re-
lating to social security and tier 1 railroad retirement ben-
efits) is amended by adding at the end the following new
paragraph:
‘‘(3) PHASEOUT OF ADDITIONAL AMOUNT.—In
the case of any taxable year beginning in a calendar
year after 1995 and before 2000, paragraph (2)
shall be applied by substituting the percentage deter-
mined under the following table for ‘85 percent’ each
place it appears:
‘‘In the case of a taxable year
beginning in calendar year:
The percentage is:
1996 ..........................................................................
75 percent
1997 ..........................................................................
65 percent
1998 ..........................................................................
60 percent
1999 ..........................................................................
55 percent.’’
(b) TERMINATION OF ADDITIONAL AMOUNT.—Para-
graph (2) of section 86(a) is amended by adding at the
end the following new flush sentence:
‘‘This paragraph shall not apply to any taxable year
beginning after December 31, 1999.’’
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 871(a)(3) is
amended—
(A) by striking ‘‘85 percent’’ and inserting
‘‘50 percent’’, and
(B) by inserting before the last sentence
the following new flush sentence:
‘‘In the case of any taxable year beginning in a cal-
endar year after 1995 and before 2000, subpara-
graph (A) shall be applied by substituting the per-
centage determined for such calendar year under
section 86(a)(3) for ‘50 percent’.’’
(2)(A) Subparagraph (A) of section 121(e)(1)
of the Social Security Amendments of 1983 (Public
Law 98–21) is amended—
(i) by striking ‘‘(A) There’’ and inserting
‘‘There’’;
(ii) by striking ‘‘(i)’’ immediately following
‘‘amounts equivalent to’’; and
(iii) by striking ‘‘, less (ii)’’ and all that
follows and inserting a period.
(B) Paragraph (1) of section 121(e) of such Act
is amended by striking subparagraph (B).
(C) Paragraph (3) of section 121(e) of such Act
is amended by striking subparagraph (B) and by re-
designating subparagraph (C) as subparagraph (B).
(D) Paragraph (2) of section 121(e) of such
Act is amended in the first sentence by striking
‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph (1)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1995.
(2) 
SUBSECTION
(c)(2).—The 
amendments
made by subsection (c)(2) shall apply to tax liabil-
ities for taxable years beginning after December 31,
1995.
Subtitle B—Treatment of Long-
term Care Insurance and Services
SEC. 211. TREATMENT OF LONG-TERM CARE INSURANCE.
(a) GENERAL RULE.—Chapter 79 (relating to defini-
tions) is amended by inserting after section 7702A the fol-
lowing new section:
‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR-
ANCE.
‘‘(a) IN GENERAL.—For purposes of this title—
‘‘(1) a long-term care insurance contract shall
be treated as an accident and health insurance con-
tract,
‘‘(2) amounts (other than policyholder divi-
dends, as defined in section 808, or premium re-
funds) received under a long-term care insurance
contract shall be treated as amounts received for
personal injuries and sickness and shall be treated
as reimbursement for expenses actually incurred for
medical care (as defined in section 213(d)),
‘‘(3) any plan of an employer providing cov-
erage under a long-term care insurance contract
shall be treated as an accident and health plan with
respect to such coverage,
‘‘(4) except as provided in subsection (d)(3),
amounts paid for a long-term care insurance con-
tract providing the benefits described in subsection
(b)(2)(A) shall be treated as payments made for in-
surance for purposes of section 213(d)(1)(D), and
‘‘(5) a long-term care insurance contract shall
be treated as a guaranteed renewable contract sub-
ject to the rules of section 816(e).
‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—
For purposes of this title—
‘‘(1) IN GENERAL.—The term ‘long-term care
insurance contract’ means any insurance contract
if—
‘‘(A) the only insurance protection pro-
vided under such contract is coverage of quali-
fied long-term care services,
‘‘(B) such contract does not pay or reim-
burse expenses incurred for services or items to
the extent that such expenses are reimbursable
under title XVIII of the Social Security Act or
would be so reimbursable but for the applica-
tion of a deductible or coinsurance amount,
‘‘(C) such contract is guaranteed renew-
able,
‘‘(D) such contract does not provide for a
cash surrender value or other money that can
be—
‘‘(i) paid, assigned, or pledged as col-
lateral for a loan, or
‘‘(ii) borrowed,
other than as provided in subparagraph (E) or
paragraph (2)(C), and
‘‘(E) all refunds of premiums, and all pol-
icyholder dividends or similar amounts, under
such contract are to be applied as a reduction
in future premiums or to increase future bene-
fits.
‘‘(2) SPECIAL RULES.—
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be de-
scribed in subparagraph (A) or (B) of para-
graph (1) by reason of payments being made on
a per diem or other periodic basis without re-
gard to the expenses incurred during the period
to which the payments relate.
‘‘(B) SPECIAL RULES RELATING TO MEDI-
CARE.—
‘‘(i) Paragraph (1)(B) shall not apply
to expenses which are reimbursable under
title XVIII of the Social Security Act only
as a secondary payor.
‘‘(ii) No provision of law shall be con-
strued or applied so as to prohibit the of-
fering of a long-term care insurance con-
tract on the basis that the contract coordi-
nates its benefits with those provided
under such title.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(E) shall not apply to any refund on the
death of the insured, or on a complete surren-
der or cancellation of the contract, which can-
not exceed the aggregate premiums paid under
the contract. Any refund on a complete surren-
der or cancellation of the contract shall be in-
cludible in gross income to the extent that any
deduction or exclusion was allowable with re-
spect to the premiums.
‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, pre-
ventive, therapeutic, curing, treating, mitigating, and
rehabilitative services, and maintenance or personal
care services, which—
‘‘(A) are required by a chronically ill indi-
vidual, and
‘‘(B) are provided pursuant to a plan of
care prescribed by a licensed health care practi-
tioner.
‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘chronically
ill individual’ means any individual who has
been certified by a licensed health care practi-
tioner as—
‘‘(i) being unable to perform (without
substantial assistance from another indi-
vidual) at least 2 activities of daily living
for a period of at least 90 days due to a
‘‘(3) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is the provision of needed assistance with any of the
disabilities as a result of which the individual is a
chronically ill individual (including the protection
from threats to health and safety due to severe cog-
nitive impairment).
‘‘(4) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r)(1) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART
OF A LIFE INSURANCE CONTRACT.—Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether
or not qualified) provided by a rider on a life insurance
contract—
‘‘(1) IN GENERAL.—This section shall apply as
if the portion of the contract providing such cov-
erage is a separate contract.
‘‘(2) 
APPLICATION
OF
7702.—Section
7702(c)(2) (relating to the guideline premium limi-
tation) shall be applied by increasing the guideline
premium limitation with respect to a life insurance
contract, as of any date—
‘‘(A) by the sum of any charges (but not
premium payments) against the life insurance
contract’s cash surrender value (within the
meaning of section 7702(f)(2)(A)) for such cov-
erage made to that date under the contract, less
‘‘(B) any such charges the imposition of
which reduces the premiums paid for the con-
tract 
(within 
the 
meaning 
of 
section
7702(f)(1)).
‘‘(3) APPLICATION OF SECTION 213.—No deduc-
tion shall be allowed under section 213(a) for
charges against the life insurance contract’s cash
surrender value described in paragraph (2), unless
such charges are includible in income as a result of
the application of section 72(e)(10) and the rider is
a long-term care insurance contract under sub-
section (b).
‘‘(4) PORTION DEFINED.—For purposes of this
subsection, the term ‘portion’ means only the terms
and benefits under a life insurance contract that are
in addition to the terms and benefits under the con-
tract without regard to the coverage under a long-
term care insurance contract.’’
(b) RESERVE
METHOD.—Clause (iii) of section
807(d)(3)(A) is amended by inserting ‘‘(other than a long-
term care insurance contract, as defined in section
7702B(b))’’ after ‘‘insurance contract’’.
(c) LONG-TERM CARE INSURANCE NOT PERMITTED
UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR-
RANGEMENTS.—
(1) CAFETERIA
PLANS.—Section 125(f) is
amended by adding at the end the following new
sentence: ‘‘Such term shall not include any long-
term care insurance contract (as defined in section
7702B(b)).’’
(2) FLEXIBLE
SPENDING
ARRANGEMENTS.—
The text of section 106 (relating to contributions by
employer to accident and health plans) is amended
to read as follows:
‘‘(a) GENERAL RULE.—Except as provided in sub-
section (b), gross income of an employee does not include
employer-provided coverage under an accident or health
plan.
‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS
PROVIDED THROUGH FLEXIBLE SPENDING ARRANGE-
MENTS.—
‘‘(1) IN GENERAL.—Effective on and after Jan-
uary 1, 1996, gross income of an employee shall in-
clude employer-provided coverage for qualified long-
term care services (as defined in section 7702B(c))
to the extent that such coverage is provided through
a flexible spending or similar arrangement.
‘‘(2) FLEXIBLE
SPENDING
ARRANGEMENT.—
For purposes of this subsection, a flexible spending
arrangement is a benefit program which provides
employees with coverage under which—
‘‘(A) specified incurred expenses may be
reimbursed (subject to reimbursement maxi-
mums and other reasonable conditions), and
‘‘(B) the maximum amount of reimburse-
ment which is reasonably available to a partici-
pant for such coverage is less than 500 percent
of the value of such coverage.
In the case of an insured plan, the maximum
amount reasonably available shall be determined on
the basis of the underlying coverage.’’
(d) CONTINUATION COVERAGE EXCISE TAX NOT TO
APPLY.—Subsection (f) of section 4980B is amended by
adding at the end the following new paragraph:
‘‘(9) CONTINUATION OF LONG-TERM CARE COV-
ERAGE NOT REQUIRED.—A group health plan shall
not be treated as failing to meet the requirements of
this subsection solely by reason of failing to provide
coverage under any long-term care insurance con-
tract (as defined in section 7702B(b)).’’
(e) AMOUNTS PAID TO RELATIVES TREATED AS NOT
PAID FOR MEDICAL CARE.—Section 213(d) is amended
by adding at the end the following new paragraph:
‘‘(10) CERTAIN
PAYMENTS
TO
RELATIVES
TREATED AS NOT PAID FOR MEDICAL CARE.—An
amount paid for a qualified long-term care service
(as defined in section 7702B(c)) provided to an indi-
vidual shall be treated as not paid for medical care
if such service is provided—
‘‘(A) by a relative (directly or through a
partnership, corporation, or other entity) unless
the relative is a licensed professional with re-
spect to such services, or
‘‘(B) by a corporation or partnership which
is related (within the meaning of section 267(b)
or 707(b)) to the individual.
For purposes of this paragraph, the term ‘relative’
means an individual bearing a relationship to the in-
dividual which is described in any of paragraphs (1)
through (8) of section 152(a). This paragraph shall
not apply for purposes of section 105(b) with respect
to reimbursements through insurance.’’
(f) CLERICAL AMENDMENT.—The table of sections
for chapter 79 is amended by inserting after the item re-
lating to section 7702A the following new item:
‘‘Sec. 7702B. Treatment of long-term care insurance.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contracts issued after De-
cember 31, 1995.
(2) CONTINUATION OF EXISTING POLICIES.—In
the case of any contract issued before January 1,
1996, which met the long-term care insurance re-
quirements of the State in which the contract was
sitused at the time the contract was issued—
(A) such contract shall be treated for pur-
poses of the Internal Revenue Code of 1986 as
a long-term care insurance contract (as defined
in section 7702B(b) of such Code), and
(B) services provided under, or reimbursed
by, such contract shall be treated for such pur-
poses as qualified long-term care services (as
defined in section 7702B(c) of such Code).
(3) EXCHANGES
OF
EXISTING
POLICIES.—If,
after the date of enactment of this Act and before
January 1, 1996, a contract providing for long-term
care insurance coverage is exchanged solely for a
long-term care insurance contract (as defined in sec-
tion 7702B(b) of such Code), no gain or loss shall
be recognized on the exchange. If, in addition to a
long-term care insurance contract, money or other
property is received in the exchange, then any gain
shall be recognized to the extent of the sum of the
money and the fair market value of the other prop-
erty received. For purposes of this paragraph, the
cancellation of a contract providing for long-term
care insurance coverage and reinvestment of the can-
cellation proceeds in a long-term care insurance con-
tract within 60 days thereafter shall be treated as
an exchange.
(4) ISSUANCE
OF
CERTAIN
RIDERS
PER-
MITTED.—For purposes of applying sections 101(f),
7702, and 7702A of the Internal Revenue Code of
1986 to any contract—
(A) the issuance of a rider which is treated
as a long-term care insurance contract under
section 7702B, and
(B) the addition of any provision required
to conform any other long-term care rider to be
so treated,
shall not be treated as a modification or material
change of such contract.
SEC. 212. QUALIFIED LONG-TERM CARE SERVICES TREAT-
ED AS MEDICAL CARE.
(a) GENERAL RULE.—Paragraph (1) of section
213(d) (defining medical care) is amended by striking
‘‘or’’ at the end of subparagraph (B), by redesignating
subparagraph (C) as subparagraph (D), and by inserting
after subparagraph (B) the following new subparagraph:
‘‘(C) for qualified long-term care services
(as defined in section 7702B(c)), or’’.
(b) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) (as
redesignated by subsection (a)) is amended by strik-
ing ‘‘subparagraphs (A) and (B)’’ and inserting
‘‘subparagraphs (A), (B), and (C)’’.
(2)(A) Paragraph (1) of section 213(d) is
amended by adding at the end the following new
flush sentence:
‘‘In the case of a long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-
term care premiums (as defined in paragraph (11))
shall be taken into account under subparagraph
(D).’’
(B) Subsection (d) of section 213 is amended
by adding at the end the following new paragraph:
‘‘(11) 
ELIGIBLE
LONG-TERM
CARE
PRE-
MIUMS.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any long-term care insurance con-
tract (as defined in section 7702B(b)) covering
an individual, to the extent such amount does
not exceed the limitation determined under the
following table:
‘‘In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less ...................................................
$200
More than 40 but not more than 50 .........
375
More than 50 but not more than 60 .........
750
More than 60 but not more than 70 .........
2,000
More than 70 .............................................
2,500.
‘‘(B) INDEXING.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1996, each dollar amount contained
in subparagraph (A) shall be increased by
the medical care cost adjustment of such
amount for such calendar year. If any in-
crease determined under the preceding sen-
tence is not a multiple of $10, such in-
crease shall be rounded to the nearest mul-
tiple of $10.
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the
medical care cost adjustment for any cal-
endar year is the percentage (if any) by
which—
‘‘(I) the medical care component
of the Consumer Price Index (as de-
fined in section 1(f)(5)) for August of
the preceding calendar year, exceeds
‘‘(II) such component for August
of 1995.
The Secretary shall, in consultation with
the Secretary of Health and Human Serv-
ices, prescribe an adjustment which the
Secretary determines is more appropriate
for purposes of this paragraph than the
adjustment described in the preceding sen-
tence, and the adjustment so prescribed
shall apply in lieu of the adjustment de-
scribed in the preceding sentence.’’
(3) Paragraph (6) of section 213(d) is amend-
ed—
(A) by striking ‘‘subparagraphs (A) and
(B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’, and
(B) by striking ‘‘paragraph (1)(C)’’ in sub-
paragraph 
(A) 
and 
inserting 
‘‘paragraph
(1)(D)’’.
(4) Paragraph (7) of section 213(d) is amended
by striking ‘‘subparagraphs (A) and (B)’’ and insert-
ing ‘‘subparagraphs (A), (B), and (C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 213. CERTAIN EXCHANGES OF LIFE INSURANCE CON-
TRACTS FOR LONG-TERM CARE INSURANCE
CONTRACTS NOT TAXABLE.
(a) IN GENERAL.—Subsection (a) of section 1035
(relating to certain exchanges of insurance contracts) is
amended by striking the period at the end of paragraph
(3) and inserting ‘‘; or’’, and by adding at the end the
following new paragraph:
‘‘(4) a contract of life insurance or an endow-
ment or annuity contract for a long-term care insur-
ance contract (as defined in section 7702B(b)).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 214. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
WITHDRAWN FROM CERTAIN RETIREMENT
PLANS FOR LONG-TERM CARE INSURANCE.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 (relating to items specifically excluded from gross
income) is amended by redesignating section 137 as sec-
tion 138 and by inserting after section 136 the following
new section:
‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT
PLANS FOR LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount which would
(but for this section) be includible in the gross income of
an individual for the taxable year by reason of eligible dis-
tributions during the taxable year shall be reduced (but
not below zero) by the aggregate premiums paid by such
individual during such taxable year for any long-term care
insurance contract (as defined in section 7702B(b)) for
coverage of such individual or the spouse of such
individual.
‘‘, or’’, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) for the payment of premiums for a
long-term care insurance contract (as defined in
section 7702B(b)) for coverage of the employee
or the spouse of the employee.’’
(3) Subparagraph (A) of section 457(d)(1) is
amended by striking ‘‘or’’ at the end of clause (ii),
by striking ‘‘and’’ at the end of clause (iii) and in-
serting ‘‘or’’, and by inserting after clause (iii) the
following new clause:
‘‘(iv) the date distributions for pre-
miums for a long-term care insurance con-
tract (as defined in section 7702B(b)) for
coverage of such individual or the spouse
of such individual are made, and’’.
(4) The table of sections for part III of sub-
chapter B of chapter 1 is amended by striking the
last item and inserting the following new items:
‘‘Sec. 137. Distributions from certain retirement plans for long-
term care insurance.
‘‘Sec. 138. Cross references to other Acts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
December 31, 1995.
Subtitle C—Treatment of
Accelerated Death Benefits
SEC. 221. TREATMENT OF ACCELERATED DEATH BENEFITS
BY RECIPIENT.
(a) IN GENERAL.—Section 101 (relating to certain
death benefits) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) TREATMENT
OF
CERTAIN
ACCELERATED
DEATH BENEFITS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the following amounts shall be treated as an
amount paid by reason of the death of an insured:
‘‘(A) Any amount received under a life in-
surance contract on the life of an insured who
is a terminally ill individual.
‘‘(B) Any amount received under a life in-
surance contract on the life of an insured who
is a chronically ill individual (as defined in sec-
tion 7702B(c)(2)) but only if such amount is
received under a rider or other provision of
such contract which is treated as a long-term
care insurance contract under section 7702B.
‘‘(2) 
TREATMENT
OF
VIATICAL
SETTLE-
MENTS.—
‘‘(A) IN GENERAL.—In the case of a life
insurance contract on the life of an insured de-
scribed in paragraph (1), if—
‘‘(i) any portion of such contract is
sold to any viatical settlement provider, or
‘‘(ii) any portion of the death benefit
is assigned to such a provider,
the amount paid for such sale or assignment
shall be treated as an amount paid under the
life insurance contract by reason of the death of
such insured.
‘‘(B) VIATICAL SETTLEMENT PROVIDER.—
The term ‘viatical settlement provider’ means
any person regularly engaged in the trade or
business of purchasing, or taking assignments
of, life insurance contracts on the lives of
insureds described in paragraph (1) if—
‘‘(i) such person is licensed for such
purposes in the State in which the insured
resides, or
‘‘(ii) in the case of an insured who re-
sides in a State not requiring the licensing
of such persons for such purposes, such
person meets the requirements of sections
8 and 9 of the Viatical Settlements Model
Act of the National Association of Insur-
ance Commissioners.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) TERMINALLY ILL INDIVIDUAL.—The
term ‘terminally ill individual’ means an indi-
vidual who has been certified by a physician as
having an illness or physical condition which
can reasonably be expected to result in death in
24 months or less after the date of the certifi-
cation.
‘‘(B) PHYSICIAN.—The term ‘physician’
has the meaning given to such term by section
1861(r)(1) of the Social Security Act (42
U.S.C. 1395x(r)(1)).
‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI-
CIES.—This subsection shall not apply in the case of
any amount paid to any taxpayer other than the in-
sured if such taxpayer has an insurable interest with
respect to the life of the insured by reason of the in-
sured being a director, officer, or employee of the
taxpayer or by reason of the insured being finan-
cially interested in any trade or business carried on
by the taxpayer.
‘‘(5) CROSS REFERENCE.—
‘‘For inclusion in gross income of excess benefits,
see section 91.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to amounts received after De-
cember 31, 1995.
SEC. 222. TAX TREATMENT OF COMPANIES ISSUING QUALI-
FIED ACCELERATED DEATH BENEFIT RID-
ERS.
(a) QUALIFIED ACCELERATED DEATH BENEFIT RID-
ERS TREATED AS LIFE INSURANCE.—Section 818 (relat-
ing to other definitions and special rules) is amended by
adding at the end the following new subsection:
‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS TREATED AS LIFE INSURANCE.—For purposes of
this part—
‘‘(1) IN GENERAL.—Any reference to a life in-
surance contract shall be treated as including a ref-
erence to a qualified accelerated death benefit rider
on such contract.
‘‘(2) QUALIFIED ACCELERATED DEATH BENE-
FIT RIDERS.—For purposes of this subsection, the
term ‘qualified accelerated death benefit rider’
means any rider on a life insurance contract if the
only payments under the rider are payments meeting
the requirements of section 101(g).
‘‘(3) EXCEPTION FOR LONG-TERM CARE RID-
ERS.—Paragraph (1) shall not apply to any rider
which is treated as a long-term care insurance con-
tract under section 7702B.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
this section shall take effect on January 1, 1996.
(2) ISSUANCE OF RIDER NOT TREATED AS MA-
TERIAL CHANGE.—For purposes of applying sections
101(f), 7702, and 7702A of the Internal Revenue
Code of 1986 to any contract—
(A) the issuance of a qualified accelerated
death benefit rider (as defined in section 818(g)
of such Code (as added by this Act)), and
(B) the addition of any provision required
to conform an accelerated death benefit rider to
the requirements of such section 818(g),
shall not be treated as a modification or material
change of such contract.
Subtitle D—Inclusion in Gross In-
come of Excess Long-term Care
Benefits
SEC. 231. INCLUSION IN INCOME OF EXCESS LONG-TERM
CARE BENEFITS.
(a) IN GENERAL.—Part II of subchapter B of chap-
ter 1 (relating to items specifically included in gross in-
come) is amended by adding at the end the following new
section:
‘‘SEC. 91. EXCESS LONG-TERM CARE BENEFITS.
‘‘(a) GENERAL RULE.—Notwithstanding any other
provision of this title, gross income shall include the
amount of excess long-term care benefits received by the
taxpayer during the taxable year.
‘‘(b) EXCEPTION
FOR TERMINALLY ILL INDIVID-
UALS.—Subsection (a) shall not apply to any long-term
care benefit paid by reason of an insured who is a termi-
nally ill individual (as defined in section 101(g)) as of the
date the benefit is received.
‘‘(c) EXCESS LONG-TERM CARE BENEFITS.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘excess long-term
care benefits’ means the excess (if any) of—
‘‘(A) the value of the long-term care bene-
fits received by the taxpayer during the taxable
year, over
‘‘(B) the exclusion amount applicable to
such benefits.
‘‘(2) LONG-TERM CARE BENEFITS.—The term
‘long-term care benefits’ means—
‘‘(A) payments and other benefits under
long-term care insurance contracts (as defined
in section 7702B(b)) to the extent excludable
from gross income by reason of section
7702B(a)(2), and
‘‘(B) payments which are excludable from
gross income by reason of section 101(g).
‘‘(3) EXCLUSION AMOUNT.—
‘‘(A) IN GENERAL.—In the case of long-
term care benefits received by the taxpayer dur-
ing the taxable year by reason of the taxpayer
being a chronically ill individual, the term ‘ex-
clusion amount’ means the aggregate of $200
for each day during such year on which the in-
dividual is a chronically ill individual. In the
case of individuals who are married to each
other and who are both chronically ill individ-
uals, the preceding sentence shall be applied
separately with respect to each spouse.
‘‘(B) OTHER TAXPAYERS.—In the case of
long-term care benefits received during the tax-
able year by a taxpayer by reason of another in-
dividual being a chronically ill individual, the
term ‘exclusion amount’ means so much of such
other individual’s exclusion amount (for such
other individual’s taxable year which begins in
the calendar year in which the taxpayer’s tax-
able year begins) as is allocated by such other
individual to the taxpayer. Such an allocation
shall be made at the time and in the manner
prescribed by the Secretary; and once made,
shall be irrevocable.
‘‘(d) CHRONICALLY ILL INDIVIDUAL.—For purposes
of this section, the term ‘chronically ill individual’ has the
meaning given to such term by section 7702B(c)(2).
‘‘(e) INFLATION ADJUSTMENT
OF $200 BENEFIT
LIMIT.—In the case of a calendar year after 1996, the
$200 amount contained in subsection (c)(3)(A) shall be
increased at the same time and in the same manner as
amounts are increased pursuant to section 213(d)(11).’’
(b) CLERICAL AMENDMENT.—The table of sections
for such part II is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 91. Excess long-term care benefits.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 232. REPORTING REQUIREMENTS.
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by adding at the end
the following new section:
‘‘SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.
‘‘(a) REQUIREMENT
OF REPORTING.—Any person
who pays long-term care benefits shall make a return, ac-
cording to the forms or regulations prescribed by the Sec-
retary, setting forth—
‘‘(1) the aggregate amount of such benefits
paid by such person to any individual during any
calendar year, and
‘‘(2) the name, address, and TIN of such indi-
vidual.
‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—
Every person required to make a return under subsection
(a) shall furnish to each individual whose name is required
by inserting after subparagraph (P) the following
new subparagraph:
‘‘(Q) section 6050Q(b) (relating to certain
long-term care benefits),’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart B of part III of subchapter A of chapter 61
is amended by adding at the end the following new item:
‘‘Sec. 6050Q. Certain long-term care benefits.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to benefits paid after December
31, 1995.
TITLE III—JOB CREATION AND
WAGE ENHANCEMENT
Subtitle A—Capital Gains Reform
PART I—CAPITAL GAINS REDUCTION FOR
TAXPAYERS OTHER THAN CORPORATIONS
SEC. 301. CAPITAL GAINS DEDUCTION.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 (relating to treatment of capital gains), as amended by
subsection (d)(1), is amended by inserting after section
1201 the following new section:
‘‘SEC. 1202. CAPITAL GAINS DEDUCTION.
‘‘(a) GENERAL RULE.—If for any taxable year a tax-
payer other than a corporation has a net capital gain, 50
percent of such gain shall be a deduction from gross in-
come.
‘‘(b) ESTATES AND TRUSTS.—In the case of an es-
tate or trust, the deduction shall be computed by excluding
the portion (if any) of the gains for the taxable year from
sales or exchanges of capital assets which, under sections
652 and 662 (relating to inclusions of amounts in gross
income of beneficiaries of trusts), is includible by the in-
come beneficiaries as gain derived from the sale or ex-
change of capital assets.
‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL
GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—
For purposes of this section, the net capital gain for any
taxable year shall be reduced (but not below zero) by the
amount which the taxpayer takes into account as invest-
ment income under section 163(d)(4)(B)(iii).
‘‘(d) SPECIAL RULE FOR COLLECTIBLES.—
‘‘(1) IN GENERAL.—At the election of the tax-
payer, the rate of tax imposed by section 1 shall not
exceed 28 percent on the excess of—
‘‘(A) the amount which would be the net
capital gain for the taxable year without regard
to the application of section 1222(12) to collect-
ibles specified in such election, over
‘‘(B) the net capital gain for such year.
‘‘(2) ELECTION.—Any election under this sub-
section, and any specification therein, once made,
shall be irrevocable.
‘‘(3) COORDINATION WITH INDEXING.—Any col-
lectible specified in such an election shall be treated
as not being an indexed asset for purposes of section
1022.
‘‘(e) TRANSITIONAL RULE.—
‘‘(1) IN GENERAL.—In the case of a taxable
year which includes January 1, 1995—
‘‘(A) the amount taken into account as the
net capital gain under subsection (a) shall not
exceed the net capital gain determined by only
taking into account gains and losses properly
taken into account for the portion of the tax-
able year on or after January 1, 1995, and
‘‘(B) if the net capital gain for such year
exceeds the amount taken into account under
subsection (a), the rate of tax imposed by sec-
tion 1 on such excess shall not exceed 28 per-
cent.
‘‘(2) SPECIAL
RULES
FOR
PASS-THRU
ENTI-
TIES.—
‘‘(A) IN GENERAL.—In applying paragraph
(1) with respect to any pass-thru entity, the de-
termination of when gains and losses are prop-
erly taken into account shall be made at the en-
tity level.
‘‘(B) PASS-THRU ENTITY DEFINED.—For
purposes of subparagraph (A), the term ‘pass-
thru entity’ means—
‘‘(i) a regulated investment company,
‘‘(ii) a real estate investment trust,
‘‘(iii) an S corporation,
‘‘(iv) a partnership,
‘‘(v) an estate or trust, and
‘‘(vi) a common trust fund.’’
(b) DEDUCTION ALLOWABLE
IN COMPUTING AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 is
amended by inserting after paragraph (15) the following
new paragraph:
‘‘(16) LONG-TERM
CAPITAL
GAINS.—The de-
duction allowed by section 1202.’’
(c) TREATMENT OF COLLECTIBLES.—
(1) IN GENERAL.—Section 1222 is amended by
inserting after paragraph (11) the following new
paragraph:
‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—
‘‘(A) IN GENERAL.—Any gain or loss from
the sale or exchange of a collectible shall be
treated as a short-term capital gain or loss (as
the case may be), without regard to the period
such asset was held. The preceding sentence
shall apply only to the extent the gain or loss
is taken into account in computing taxable in-
come.
‘‘(B) TREATMENT OF CERTAIN SALES OF
INTEREST
IN
PARTNERSHIP, ETC.—For pur-
poses of subparagraph (A), any gain from the
sale or exchange of an interest in a partnership,
S corporation, or trust which is attributable to
unrealized appreciation in the value of collect-
ibles held by such entity shall be treated as gain
from the sale or exchange of a collectible. Rules
similar to the rules of section 751(f) shall apply
for purposes of the preceding sentence.
‘‘(C) COLLECTIBLE.—For purposes of this
paragraph, the term ‘collectible’ means any cap-
ital asset which is a collectible (as defined in
section 408(m) without regard to paragraph (3)
thereof).’’
(2) 
CHARITABLE
DEDUCTION
NOT
AF-
FECTED.—
(A) Paragraph (1) of section 170(e) is
amended by adding at the end the following
new sentence: ‘‘For purposes of this paragraph,
section 1222 shall be applied without regard to
paragraph (12) thereof (relating to special rule
for collectibles).’’
(B) Clause (iv) of section 170(b)(1)(C) is
amended by inserting before the period at the
end the following: ‘‘and section 1222 shall be
applied without regard to paragraph (12) there-
of (relating to special rule for collectibles)’’.
(d) TECHNICAL AND CONFORMING CHANGES.—
(1)(A) Section 13113 of the Revenue Reconcili-
ation Act of 1993 (relating to 50-percent exclusion
for gain from certain small business stock), and the
amendments made by such section, are hereby re-
pealed; and the Internal Revenue Code of 1986 shall
be applied as if such section (and amendments) had
never been enacted.
(B) At the election of a taxpayer who holds
qualified small business stock (as defined in section
1202 of such Code, as in effect on the day before
the date of the enactment of this Act) as of such
date of enactment—
(i) the provisions repealed by subparagraph
(A) shall continue to apply to any disposition by
such taxpayer of such stock held on such date,
and
(ii) the amendments made by this section
and section 1002 shall not apply to such stock;
except that losses from the sale or exchange of
such stock shall be taken into account as pro-
vided in the amendments made by paragraph
(13) of this subsection.
Such an election may be made only during the 1-
year period beginning on the date of the enactment
of this Act and, once made, shall be irrevocable.
(2) Section 1 is amended by striking subsection
(h).
(3) Paragraph (1) of section 170(e) is amended
by striking ‘‘the amount of gain’’ in the material fol-
lowing subparagraph (B)(ii) and inserting ‘‘50 per-
cent (25⁄35 in the case of a corporation) of the
amount of gain’’.
(4)(A) Paragraph (2) of section 172(d) is
amended to read as follows:
‘‘(2) CAPITAL GAINS AND LOSSES.—
‘‘(A) LOSSES OF TAXPAYERS OTHER THAN
CORPORATIONS.—In the case of a taxpayer
other than a corporation, the amount deductible
on account of losses from sales or exchanges of
capital assets shall not exceed the amount in-
cludible on account of gains from sales or ex-
changes of capital assets.
‘‘(B) DEDUCTION UNDER SECTION 1202.—
The deduction under section 1202 shall not be
allowed.’’
(B) Subparagraph (B) of section 172(d)(4) is
amended by striking ‘‘paragraphs (1) and (3)’’ and
inserting ‘‘paragraphs (1), (2)(B), and (3)’’.
(5) The last sentence of section 453A(c)(3) is
amended by striking all that follows ‘‘long-term cap-
ital gain,’’ and inserting ‘‘the maximum rate on net
capital gain under section 1201 or the deduction
under section 1202 (whichever is appropriate) shall
be taken into account.’’
(6) Paragraph (4) of section 642(c) is amended
to read as follows:
‘‘(4) ADJUSTMENTS.—To the extent that the
amount otherwise allowable as a deduction under
this subsection consists of gain from the sale or ex-
change of capital assets held for more than 1 year,
proper adjustment shall be made for any deduction
allowable to the estate or trust under section 1202
(relating to deduction for excess of capital gains over
capital losses). In the case of a trust, the deduction
allowed by this subsection shall be subject to section
681 (relating to unrelated business income).’’
(7) Paragraph (3) of section 643(a) is amended
by adding at the end thereof the following new sen-
tence: ‘‘The deduction under section 1202 (relating
to deduction of excess of capital gains over capital
losses) shall not be taken into account.’’
(8) Subparagraph (C) of section 643(a)(6) is
amended by inserting ‘‘(i)’’ before ‘‘there shall’’ and
by inserting before the period ‘‘, and (ii) the deduc-
tion under section 1202 (relating to capital gains de-
duction) shall not be taken into account’’.
(9) Paragraph (4) of section 691(c) is amended
by striking ‘‘sections 1(h), 1201, and 1211’’ and in-
serting ‘‘sections 1201, 1202, and 1211’’.
(10) The second sentence of section 871(a)(2)
is amended by inserting ‘‘such gains and losses shall
be determined without regard to section 1202 (relat-
ing to deduction for capital gains) and’’ after ‘‘ex-
cept that’’.
(11)(A) Paragraph (2) of section 904(b) is
amended by striking subparagraph (A), by redesig-
nating subparagraph (B) as subparagraph (A), and
by inserting after subparagraph (A) (as so redesig-
nated) the following new subparagraph:
‘‘(B) OTHER TAXPAYERS.—In the case of
a taxpayer other than a corporation, taxable in-
come from sources outside the United States
shall include gain from the sale or exchange of
capital assets only to the extent of foreign
source capital gain net income.’’
(B) Subparagraph (A) of section 904(b)(2), as
so redesignated, is amended—
(i) by striking all that precedes clause (i)
and inserting the following:
‘‘(A) CORPORATIONS.—In the case of a
corporation—’’, and
(ii) by striking in clause (i) ‘‘in lieu of ap-
plying subparagraph (A),’’.
(C) Paragraph (3) of section 904(b) is amended
by striking subparagraphs (D) and (E) and inserting
the following new subparagraph:
‘‘(D) RATE DIFFERENTIAL PORTION.—The
rate differential portion of foreign source net
capital gain, net capital gain, or the excess of
net capital gain from sources within the United
States over net capital gain, as the case may
be, is the same proportion of such amount as
the excess of the highest rate of tax specified in
section 11(b) over the alternative rate of tax
under section 1201(a) bears to the alternative
rate of tax under section 1201(a).’’
(12) Subsection (d) of section 1044 is amended
by striking the last sentence.
(13)(A) Paragraph (2) of section 1211(b) is
amended to read as follows:
‘‘(2) the sum of—
‘‘(A) the excess of the net short-term cap-
ital loss over the net long-term capital gain, and
‘‘(B) one-half of the excess of the net long-
term capital loss over the net short-term capital
gain.’’
(B) So much of paragraph (2) of section
1212(b) as precedes subparagraph (B) thereof is
amended to read as follows:
‘‘(2) SPECIAL RULES.—
‘‘(A) ADJUSTMENTS.—
‘‘(i) For purposes of determining the
excess referred to in paragraph (1)(A),
there shall be treated as short-term capital
gain in the taxable year an amount equal
to the lesser of—
‘‘(I) the amount allowed for the
taxable year under paragraph (1) or
(2) of section 1211(b), or
‘‘(II) the adjusted taxable income
for such taxable year.
‘‘(ii) For purposes of determining the
excess referred to in paragraph (1)(B),
there shall be treated as short-term capital
gain in the taxable year an amount equal
to the sum of—
‘‘(I) the amount allowed for the
taxable year under paragraph (1) or
(2) of section 1211(b) or the adjusted
taxable income for such taxable year,
whichever is the least, plus
‘‘(II) the excess of the amount
described in subclause (I) over the net
short-term capital loss (determined
without regard to this subsection) for
such year.’’
(C) Subsection (b) of section 1212 is
amended by adding at the end the following
new paragraph:
‘‘(3) TRANSITIONAL RULE.—In the case of any
amount which, under paragraph (1) and section
1211(b) (as in effect for taxable years beginning be-
fore January 1, 1996), is treated as a capital loss
in the first taxable year beginning after December
31, 1995, paragraph (1) and section 1211(b) (as so
in effect) shall apply (and paragraph (1) and section
1211(b) as in effect for taxable years beginning
after December 31, 1995, shall not apply) to the ex-
tent such amount exceeds the total of any net cap-
ital gains (determined without regard to this sub-
section) of taxable years beginning after December
31, 1995.’’
(14) Paragraph (1) of section 1402(i) is amend-
ed by inserting ‘‘, and the deduction provided by sec-
tion 1202 shall not apply’’ before the period at the
end thereof.
(15) Subsection (e) of section 1445 is amend-
ed—
(A) in paragraph (1) by striking ‘‘35 per-
cent (or, to the extent provided in regulations,
28 percent)’’ and inserting ‘‘25 percent (or, to
the extent provided in regulations, 19.8 per-
cent)’’, and
(B) in paragraph (2) by striking ‘‘35 per-
cent’’ and inserting ‘‘25 percent’’.
(16)(A) 
The 
second 
sentence 
of 
section
7518(g)(6)(A) is amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) applies’’, and
(ii) by striking ‘‘28 percent (34 percent’’
and inserting ‘‘19.8 percent (25 percent’’.
(B) 
The 
second 
sentence 
of 
section
607(h)(6)(A) of the Merchant Marine Act, 1936 is
amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) of such Code ap-
plies’’, and
(ii) by striking ‘‘28 percent (34 percent’’
and inserting ‘‘19.8 percent (25 percent’’.
(e) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter P of chapter 1 is amended by
inserting after the item relating to section 1201 the follow-
ing new item:
‘‘Sec. 1202. Capital gains deduction.’’
(f) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to taxable years ending after
December 31, 1994.
(2) CONTRIBUTIONS.—The amendment made
by subsection (d)(3) shall apply to contributions on
or after January 1, 1995.
(3) USE OF LONG-TERM LOSSES.—The amend-
ments made by subsection (d)(13) shall apply to tax-
able years beginning after December 31, 1995.
(4) WITHHOLDING.—The amendment made by
subsection (d)(15) shall apply only to amounts paid
after the date of the enactment of this Act.
SEC. 302. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER
DECEMBER 31, 1994, FOR PURPOSES OF DE-
TERMINING GAIN.
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is
amended by inserting after section 1021 the following new
section:
‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED
AFTER DECEMBER 31, 1994, FOR PURPOSES
OF DETERMINING GAIN.
‘‘(a) GENERAL RULE.—
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Solely for purposes of determining
gain on the sale or other disposition by a taxpayer
(other than a corporation) of an indexed asset which
has been held for more than 3 years, the indexed
basis of the asset shall be substituted for its ad-
justed basis.
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.—
The deductions for depreciation, depletion, and am-
ortization shall be determined without regard to the
application of paragraph (1) to the taxpayer or any
other person.
‘‘(b) INDEXED ASSET.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means—
‘‘(A) common stock in a C corporation
(other than a foreign corporation), and
‘‘(B) tangible property,
which is a capital asset or property used in the trade
or business (as defined in section 1231(b)).
‘‘(2) STOCK
IN
CERTAIN
FOREIGN
CORPORA-
TIONS INCLUDED.—For purposes of this section—
‘‘(A) IN
GENERAL.—The term ‘indexed
asset’ includes common stock in a foreign cor-
poration which is regularly traded on an estab-
lished securities market.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to—
‘‘(i) stock of a foreign investment
company (within the meaning of section
1246(b)),
‘‘(ii) stock in a passive foreign invest-
ment company (as defined in section
1296),
‘‘(iii) stock in a foreign corporation
held by a United States person who meets
the requirements of section 1248(a)(2),
and
‘‘(iv) stock in a foreign personal hold-
ing company (as defined in section 552).
‘‘(C) TREATMENT OF AMERICAN DEPOSI-
TORY RECEIPTS.—An American depository re-
ceipt for common stock in a foreign corporation
shall be treated as common stock in such cor-
poration.
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion—
‘‘(1) GENERAL RULE.—The indexed basis for
any asset is—
‘‘(A) the adjusted basis of the asset, in-
creased by
‘‘(B) the applicable inflation adjustment.
‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—
The applicable inflation adjustment for any asset is
an amount equal to—
‘‘(A) the adjusted basis of the asset, multi-
plied by
‘‘(B) the percentage (if any) by which—
‘‘(i) 
the 
gross 
domestic 
product
deflator for the last calendar quarter end-
ing before the asset is disposed of, exceeds
‘‘(ii) the gross domestic product
deflator for the last calendar quarter end-
ing before the asset was acquired by the
taxpayer.
The percentage under subparagraph (B) shall be
rounded to the nearest 1⁄10 of 1 percentage point.
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—
The gross domestic product deflator for any cal-
endar quarter is the implicit price deflator for the
gross domestic product for such quarter (as shown
in the last revision thereof released by the Secretary
of Commerce before the close of the following cal-
endar quarter).
‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI-
MINISHED
RISK
OF
LOSS; TREATMENT
OF
SHORT
SALES.—
‘‘(1) IN GENERAL.—If the taxpayer (or a relat-
ed person) enters into any transaction which sub-
stantially reduces the risk of loss from holding any
asset, such asset shall not be treated as an indexed
asset for the period of such reduced risk.
‘‘(2) SHORT SALES.—
‘‘(A) IN GENERAL.—In the case of a short
sale of an indexed asset with a short sale period
in excess of 3 years, for purposes of this title,
the amount realized shall be an amount equal
to the amount realized (determined without re-
gard to this paragraph) increased by the appli-
cable inflation adjustment. In applying sub-
section (c)(2) for purposes of the preceding sen-
tence, the date on which the property is sold
short shall be treated as the date of acquisition
and the closing date for the sale shall be treat-
ed as the date of disposition.
‘‘(B) SHORT SALE PERIOD.—For purposes
of subparagraph (A), the short sale period be-
gins on the day that the property is sold and
ends on the closing date for the sale.
‘‘(e) TREATMENT
OF
REGULATED
INVESTMENT
COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.—
‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.—
‘‘(A) IN GENERAL.—Except as otherwise
provided in this paragraph, the adjustment
under subsection (a) shall be allowed to any
qualified investment entity (including for pur-
poses of determining the earnings and profits of
such entity).
‘‘(B) EXCEPTION FOR CORPORATE SHARE-
HOLDERS.—Under regulations—
‘‘(i) in the case of a distribution by a
qualified investment entity (directly or in-
directly) to a corporation—
‘‘(I) the determination of whether
such distribution is a dividend shall be
made without regard to this section,
and
‘‘(II) the amount treated as gain
by reason of the receipt of any capital
gain dividend shall be increased by the
percentage by which the entity’s net
capital gain for the taxable year (de-
termined without regard to this sec-
tion) exceeds the entity’s net capital
gain for such year determined with re-
gard to this section, and
‘‘(ii) there shall be other appropriate
adjustments (including deemed distribu-
tions) so as to ensure that the benefits of
this section are not allowed (directly or in-
directly) to corporate shareholders of quali-
fied investment entities.
For purposes of the preceding sentence, any
amount includible in gross income under section
852(b)(3)(D) shall be treated as a capital gain
dividend and an S corporation shall not be
treated as a corporation.
‘‘(C) 
EXCEPTION
FOR
QUALIFICATION
PURPOSES.—This section shall not apply for
purposes of sections 851(b) and 856(c).
‘‘(D) EXCEPTION FOR CERTAIN TAXES IM-
POSED AT ENTITY LEVEL.—
‘‘(i) TAX ON FAILURE TO DISTRIBUTE
ENTIRE GAIN.—If any amount is subject to
tax under section 852(b)(3)(A) for any
taxable year, the amount on which tax is
imposed under such section shall be in-
creased by the percentage determined
under subparagraph (B)(i)(II). A similar
rule shall apply in the case of any amount
subject to tax under paragraph (2) or (3)
of section 857(b) to the extent attributable
to the excess of the net capital gain over
the deduction for dividends paid deter-
mined with reference to capital gain divi-
dends only. The first sentence of this
clause shall not apply to so much of the
amount subject to tax under section
852(b)(3)(A) as is designated by the com-
pany under section 852(b)(3)(D).
‘‘(ii) OTHER
TAXES.—This section
shall not apply for purposes of determining
the amount of any tax imposed by para-
graph (4), (5), or (6) of section 857(b).
‘‘(2) ADJUSTMENTS
TO
INTERESTS
HELD
IN
ENTITY.—
‘‘(A) REGULATED
INVESTMENT
COMPA-
NIES.—Stock in a regulated investment com-
pany (within the meaning of section 851) shall
be an indexed asset for any calendar quarter in
the same ratio as—
‘‘(i) the average of the fair market
values of the indexed assets held by such
company at the close of each month during
such quarter, bears to
‘‘(ii) the average of the fair market
values of all assets held by such company
at the close of each such month.
‘‘(B) 
REAL
ESTATE
INVESTMENT
TRUSTS.—Stock in a real estate investment
trust (within the meaning of section 856) shall
be an indexed asset for any calendar quarter in
the same ratio as—
‘‘(i) the fair market value of the in-
dexed assets held by such trust at the close
of such quarter, bears to
‘‘(ii) the fair market value of all as-
sets held by such trust at the close of such
quarter.
‘‘(C) RATIO OF 80 PERCENT OR MORE.—If
the ratio for any calendar quarter determined
under subparagraph (A) or (B) would (but for
this subparagraph) be 80 percent or more, such
ratio for such quarter shall be 100 percent.
‘‘(D) RATIO OF 20 PERCENT OR LESS.—If
the ratio for any calendar quarter determined
under subparagraph (A) or (B) would (but for
this subparagraph) be 20 percent or less, such
ratio for such quarter shall be zero.
‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For
purposes of this paragraph, a qualified invest-
ment entity which holds a partnership interest
shall be treated (in lieu of holding a partnership
interest) as holding its proportionate share of
the assets held by the partnership.
‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS-
TRIBUTIONS.—Except as otherwise provided by the
Secretary, a distribution with respect to stock in a
qualified investment entity which is not a dividend
and which results in a reduction in the adjusted
basis of such stock shall be treated as allocable to
stock acquired by the taxpayer in the order in which
such stock was acquired.
‘‘(4) QUALIFIED
INVESTMENT
ENTITY.—For
purposes of this subsection, the term ‘qualified in-
vestment entity’ means—
‘‘(A) a regulated investment company
(within the meaning of section 851), and
‘‘(B) a real estate investment trust (within
the meaning of section 856).
‘‘(f) OTHER PASS-THRU ENTITIES.—
‘‘(1) PARTNERSHIPS.—
‘‘(A) IN GENERAL.—In the case of a part-
nership, the adjustment made under subsection
(a) at the partnership level shall be passed
through to the partners.
‘‘(B) SPECIAL RULE IN THE CASE OF SEC-
TION 754 ELECTIONS.—In the case of a transfer
of an interest in a partnership with respect to
which the election provided in section 754 is in
effect—
‘‘(i) the adjustment under section
743(b)(1) shall, with respect to the trans-
feror partner, be treated as a sale of the
partnership assets for purposes of applying
this section, and
‘‘(ii) with respect to the transferee
partner, the partnership’s holding period
for purposes of this section in such assets
shall be treated as beginning on the date
of such adjustment.
‘‘(2) S CORPORATIONS.—In the case of an S
corporation, the adjustment made under subsection
(a) at the corporate level shall be passed through to
the shareholders. This section shall not apply for
purposes of determining the amount of any tax im-
posed by section 1374 or 1375.
‘‘(3) COMMON TRUST FUNDS.—In the case of a
common trust fund, the adjustment made under sub-
section (a) at the trust level shall be passed through
to the participants.
‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN
DETERMINING LOSS ON SALE OF INTEREST IN EN-
TITY.—Notwithstanding the preceding provisions of
this subsection, for purposes of determining the
amount of any loss on a sale or exchange of an in-
terest in a partnership, S corporation, or common
trust fund, the adjustment made under subsection
(a) shall not be taken into account in determining
the adjusted basis of such interest.
‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.—
‘‘(1) IN GENERAL.—This section shall not apply
to any sale or other disposition of property between
related persons except to the extent that the basis
of such property in the hands of the transferee is a
substituted basis.
‘‘(2) RELATED PERSONS DEFINED.—For pur-
poses of this section, the term ‘related persons’
means—
‘‘(A) persons bearing a relationship set
forth in section 267(b), and
‘‘(B) persons treated as single employer
under subsection (b) or (c) of section 414.
‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST-
MENT.—If any person transfers cash, debt, or any other
property to another person and the principal purpose of
such transfer is to secure or increase an adjustment under
subsection (a), the Secretary may disallow part or all of
such adjustment or increase.
‘‘(i) SPECIAL RULES.—For purposes of this section—
‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If
there is an addition to the adjusted basis of any tan-
gible property or of any stock in a corporation dur-
ing the taxable year by reason of an improvement to
such property or a contribution to capital of such
corporation—
‘‘(A) such addition shall never be taken
into account under subsection (c)(1)(A) if the
aggregate amount thereof during the taxable
year with respect to such property or stock is
less than $1,000, and
‘‘(B) such addition shall be treated as a
separate asset acquired at the close of such tax-
able year if the aggregate amount thereof dur-
ing the taxable year with respect to such prop-
erty or stock is $1,000 or more.
A rule similar to the rule of the preceding sentence
shall apply to any other portion of an asset to the
extent that separate treatment of such portion is ap-
propriate to carry out the purposes of this section.
‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS
THROUGHOUT HOLDING PERIOD.—The applicable in-
flation ratio shall be appropriately reduced for peri-
ods during which the asset was not an indexed asset.
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a
corporation which is not a dividend shall be treated
as a disposition.
‘‘(4) ACQUISITION
DATE
WHERE
THERE
HAS
BEEN
PRIOR
APPLICATION
OF
SUBSECTION
(a)(1)
WITH RESPECT TO THE TAXPAYER.—If there has
been a prior application of subsection (a)(1) to an
asset while such asset was held by the taxpayer, the
date of acquisition of such asset by the taxpayer
shall be treated as not earlier than the date of the
most recent such prior application.
‘‘(5) COLLAPSIBLE CORPORATIONS.—The appli-
cation of section 341(a) (relating to collapsible cor-
porations) shall be determined without regard to this
section.
‘‘(j) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’
(b) CLERICAL AMENDMENT.—The table of sections
for part II of subchapter O of chapter 1 is amended by
inserting after the item relating to section 1021 the follow-
ing new item:
‘‘Sec. 1022. Indexing of certain assets acquired after December
31, 1994, for purposes of determining gain.’’
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to the disposition of any
property the holding period of which begins after
December 31, 1994.
(2) CERTAIN TRANSACTIONS BETWEEN RELAT-
ED PERSONS.—The amendments made by this sec-
tion shall not apply to the disposition of any prop-
erty acquired after December 31, 1994, from a re-
lated person (as defined in section 1022(g)(2) of the
Internal Revenue Code of 1986, as added by this
section) if—
(A) such property was so acquired for a
price less than the property’s fair market value,
and
(B) the amendments made by this section
did not apply to such property in the hands of
such related person.
(d) ELECTION TO RECOGNIZE GAIN
ON ASSETS
HELD ON JANUARY 1, 1995.—For purposes of the Inter-
nal Revenue Code of 1986—
(1) IN GENERAL.—A taxpayer other than a cor-
poration may elect to treat—
(A) any readily tradable stock (which is an
indexed asset) held by such taxpayer on Janu-
ary 1, 1995, and not sold before the next busi-
ness day after such date, as having been sold
on such next business day for an amount equal
to its closing market price on such next busi-
ness day (and as having been reacquired on
such next business day for an amount equal to
such closing market price), and
(B) any other indexed asset held by the
taxpayer on January 1, 1995, as having been
sold on such date for an amount equal to its
fair market value on such date (and as having
been reacquired on such date for an amount
equal to such fair market value).
(2) TREATMENT OF GAIN OR LOSS.—
(A) Any gain resulting from an election
under paragraph (1) shall be treated as received
or accrued on the date the asset is treated as
sold under paragraph (1) and shall be recog-
nized notwithstanding any provision of the In-
ternal Revenue Code of 1986.
(B) Any loss resulting from an election
under paragraph (1) shall not be allowed for
any taxable year.
(3) ELECTION.—An election under paragraph
(1) shall be made in such manner as the Secretary
may prescribe and shall specify the assets for which
such election is made. Such an election, once made
with respect to any asset, shall be irrevocable.
(4) READILY TRADABLE STOCK.—For purposes
of this subsection, the term ‘‘readily tradable stock’’
means any stock which, as of January 1, 1995, is
readily tradable on an established securities market
or otherwise.
(e) TREATMENT OF PRINCIPAL RESIDENCES.—Prop-
erty held and used by the taxpayer on January 1, 1995,
as his principal residence (within the meaning of section
1034 of the Internal Revenue Code of 1986) shall be treat-
ed—
(1) for purposes of subsection (c)(1) of this sec-
tion, as having a holding period which begins after
December 31, 1994, and
(2) for purposes of section 1022(c)(2)(B)(ii) of
such Code, as having been acquired on January 1,
1995.
Subsection (d) shall not apply to property to which this
subsection applies.
PART II—CAPITAL GAINS REDUCTION FOR
CORPORATIONS
SEC. 311. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX
FOR CORPORATIONS.
(a) IN GENERAL.—Section 1201 is amended to read
as follows:
‘‘SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.
‘‘(a) GENERAL RULE.—If for any taxable year a cor-
poration has a net capital gain, then, in lieu of the tax
imposed by sections 11, 511, and 831 (a) and (b) (which-
ever is applicable), there is hereby imposed a tax (if such
tax is less than the tax imposed by such sections) which
shall consist of the sum of—
‘‘(1) a tax computed on the taxable income re-
duced by the amount of the net capital gain, at the
rates and in the manner as if this subsection had
not been enacted, plus
‘‘(2) a tax of 25 percent of the net capital gain.
‘‘(b) TRANSITIONAL RULE.—
‘‘(1) IN GENERAL.—In the case of any taxable
year ending after December 31, 1994, and beginning
before January 1, 1996, subsection (a)(2) shall be
applied as if it read as follows:
‘‘ ‘(2)(A) a tax of 25 percent of the lesser of—
‘‘ ‘(i) the net capital gain for the taxable
year, or
‘‘ ‘(ii) the net capital gain taking into ac-
count only gain or loss properly taken into ac-
count for the portion of the taxable year after
December 31, 1994, plus
‘‘ ‘(B) a tax of 35 percent of the excess (if any)
of—
‘‘ ‘(i) the net capital gain for the taxable
year, over
‘‘ ‘(ii) the amount of net capital gain taken
into account under subparagraph (A).’
‘‘(2) SPECIAL
RULE
FOR
PASS-THRU
ENTI-
TIES.—Section 1202(e)(2) shall apply for purposes
of paragraph (1).
‘‘(c) CROSS REFERENCES.—
‘‘For computation of the alternative tax—
‘‘(1) in the case of life insurance companies, see
section 801(a)(2),
‘‘(2) in the case of regulated investment compa-
nies and their shareholders, see section 852(b)(3)(A)
and (D), and
‘‘(3) in the case of real estate investment trusts,
see section 857(b)(3)(A).’’
(b) TECHNICAL AMENDMENT.—Clause (iii) of section
852(b)(3)(D) is amended by striking ‘‘65 percent’’ and in-
serting ‘‘75 percent’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1994.
PART III—CAPITAL LOSS DEDUCTION ALLOWED
WITH RESPECT TO SALE OR EXCHANGE OF
PRINCIPAL RESIDENCE
SEC. 316. CAPITAL LOSS DEDUCTION ALLOWED WITH RE-
SPECT TO SALE OR EXCHANGE OF PRINCIPAL
RESIDENCE.
(a) IN GENERAL.—Subsection (c) of section 165 (re-
lating to limitation on losses of individuals) is amended
by striking ‘‘and’’ at the end of paragraph (2), by striking
the period at the end of paragraph (3) and inserting ‘‘;
and’’, and by adding at the end the following new para-
graph:
‘‘(4) losses arising from the sale or exchange of
the principal residence (within the meaning of sec-
tion 1034) of the taxpayer.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to sales and exchanges after De-
cember 31, 1994, in taxable years ending after such date.
Subtitle B—Cost Recovery
Provisions
SEC. 321. DEPRECIATION ADJUSTMENT FOR CERTAIN
PROPERTY PLACED IN SERVICE AFTER DE-
CEMBER 31, 1994.
(a) IN GENERAL.—Section 168 (relating to acceler-
ated cost recovery system) is amended by adding at the
end thereof the following new subsection:
‘‘(k) DEDUCTION ADJUSTMENT TO ALLOW EQUIVA-
LENT OF EXPENSING FOR CERTAIN PROPERTY PLACED
IN SERVICE AFTER DECEMBER 31, 1994.—
‘‘(1) IN
GENERAL.—In the case of tangible
property placed in service after December 31, 1994,
the deduction under this section with respect to such
property—
‘‘(A) shall be determined by substituting
‘150 percent’ for ‘200 percent’ in subsection
(b)(1) in the case of property to which the 200
percent declining balance method would other-
wise apply, and
‘‘(B) for any taxable year after the taxable
year during which the property is placed in
service shall be—
‘‘(i) the amount determined under this
section for such taxable year without re-
gard to this subparagraph, multiplied by
‘‘(ii) the applicable neutral cost recov-
ery ratio for such taxable year.
‘‘(2) APPLICABLE
NEUTRAL
COST
RECOVERY
RATIO.—For purposes of paragraph (1)—
‘‘(A) IN GENERAL.—The applicable neutral
cost recovery ratio for the property for any tax-
able year is the number determined by—
‘‘(i) dividing—
‘‘(I) the gross domestic product
deflator for the calendar quarter
which includes the mid-point of the
taxable year, by
‘‘(II) the gross domestic product
deflator for the calendar quarter
which includes the mid-point of the
taxable year in which the property
was placed in service by the taxpayer,
and
‘‘(ii) then multiplying the number de-
termined under clause (i) by the number
equal to 1.035 to the nth power where ‘n’
is the number of full years (as of the close
of the taxable year referred to in clause
(i)(I)) after the date such property was
placed in service.
The applicable neutral cost recovery ratio shall
never be less than 1. The applicable neutral
cost recovery ratio shall be rounded to the near-
est 1⁄1000.
‘‘(B) SPECIAL RULE FOR CERTAIN PROP-
ERTY.—In the case of property described in
paragraph (2) or (3) of subsection (b) or in
subsection (g), the applicable neutral cost recov-
ery ratio shall be determined without regard to
subparagraph (A)(ii).
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—
For purposes of paragraph (2), the gross domestic
product deflator for any calendar quarter is the im-
plicit price deflator for the gross domestic product
for such quarter (as shown in the last revision there-
of released by the Secretary of Commerce before the
close of the following calendar quarter).
‘‘(4) COORDINATION WITH INDEXING OF BASIS
FOR
PURPOSES
OF
DETERMINING
GAIN.—Section
1022 shall not apply to any property to which this
subsection applies.
‘‘(5) ELECTION
NOT
TO
HAVE
SUBSECTION
APPLY.—This subsection shall not apply to any
property if the taxpayer elects not to have this sub-
section apply to such property. Such an election,
once made, shall be irrevocable.
‘‘(6) CHURNING
TRANSACTIONS.—This sub-
section shall not apply to any property if this section
would not apply to such property were—
‘‘(A) subsection (f)(5)(A)(ii) applied by
substituting ‘1995’ for ‘1987’ and ‘1994’ for
‘1986’, and
‘‘(B) subsection (f)(5)(B) not applied.
‘‘(7) ADDITIONAL DEDUCTION NOT TO AFFECT
BASIS OR RECAPTURE.—The additional amount de-
termined under this section by reason of this sub-
section shall not be taken into account in determin-
ing the adjusted basis of any property or of any in-
terest in a pass-thru entity (as defined in section
1202(e)(2)) which holds such property and shall not
be treated as a deduction for depreciation for pur-
poses of sections 1245 and 1250.’’
(b) MINIMUM TAX TREATMENT.—
(1) Paragraph (1) of section 56(a) is amended
by adding at the end thereof the following new sub-
paragraph:
‘‘(E) USE OF NEUTRAL COST RECOVERY
RATIO.—This paragraph shall not apply to
property to which section 168(k) applies.’’
(2) Clause (i) of section 56(g)(4)(A) is amended
by striking ‘‘(a)(1)(A)’’ and inserting ‘‘(a)(1)’’.
(3) Subparagraph (C) of section 56(g)(4) is
amended by adding at the end the following new
clause:
‘‘(v) NEUTRAL COST RECOVERY DE-
DUCTION.—Clause (i) shall not apply to
the additional deduction allowable by rea-
son of section 168(k).’’
(c) TECHNICAL AMENDMENTS.—
(1) Clause (i) of section 280F(a)(1)(B) is
amended by adding at the end the following new
sentence: ‘‘For purposes of this clause, the unre-
covered basis of any passenger automobile shall be
treated as including the additional amount deter-
mined under section 168 by reason of subsection (k)
thereof to the extent not allowed as a deduction by
reason of this paragraph for any taxable year in the
recovery period.’’
(2) Subparagraph (B) of section 382(h)(2) is
amended by adding at the end the following new
sentence: ‘‘The amount of the net unrealized built-
in loss shall be increased by the amount of the addi-
tional deduction allowable by reason of section
168(k) which is treated under the preceding sen-
tence as a recognized built-in loss.’’
(3) Subsection (a) of section 465 is amended by
adding at the end the following new paragraph:
‘‘(4) TREATMENT OF NEUTRAL COST RECOVERY
DEDUCTION.—
‘‘(A) IN GENERAL.—None of the additional
deduction allowable by reason of section 168(k)
for the taxable year shall be disallowed under
paragraph (1) unless there is a disallowed non-
NCR loss for such year.
‘‘(B) PROPORTIONATE DISALLOWANCE.—
‘‘(i) IN GENERAL.—If there is a dis-
allowed non-NCR loss for the taxable year,
only the disallowed portion of the addi-
tional deduction allowable by reason of sec-
tion 168(k) shall be not allowed under
paragraph (1).
‘‘(ii) 
DISALLOWED
PORTION.—For
purposes of clause (i), the disallowed por-
tion is the percentage which the disallowed
non-NCR loss’s allocable share of non-
NCR depreciation is of total non-NCR de-
preciation.
‘‘(iii) ALLOCABLE SHARE.—For pur-
poses of clause (ii), a disallowed non-NCR
loss’s allocable share of non-NCR deprecia-
tion is the amount which bears the same
ratio to the amount of the loss as the
amount of non-NCR depreciation for the
taxable year bears to the total amount of
deductions for such taxable year.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) DISALLOWED
NON-NCR
LOSS.—
The 
term 
‘disallowed 
non-NCR 
loss’
means, for any taxable year, the amount of
the loss from the activity which would be
disallowed under paragraph (1) if such loss
were determined without regard to the ad-
ditional deduction allowable by reason of
section 168(k).
‘‘(ii) NON-NCR
DEPRECIATION.—The
term ‘non-NCR depreciation’ means the
amount allowable as a deduction under
section 168 without regard to subsection
(k) thereof.’’
(4) Subparagraph (A) of section 1503(e)(1) is
amended by inserting before the comma ‘‘and shall
be determined without regard to section 168(k)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1994.
SEC. 322. 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 improve-
ment is property to which this section applies,
the depreciation deduction shall be determined
under the provisions of this section.
‘‘(B) TREATMENT
OF
LESSOR
IMPROVE-
MENTS
WHICH
ARE
ABANDONED
AT
TERMI-
NATION 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,
shall be treated for purposes of determining
gain or loss under this title as disposed of by
the lessor 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 March 13,
1995.
100
Subtitle C—Alternative Minimum
Tax Relief
SEC. 331. PHASEOUT OF APPLICATION OF ALTERNATIVE
MINIMUM TAX TO CORPORATIONS.
(a) TERMINATION.—Subsection (a) of section 55 is
amended by adding at the end the following new flush sen-
tence:
‘‘In the case of a corporation, the tentative minimum tax
for any taxable year beginning after December 31, 2000,
shall be zero.’’
(b) EARLIER TERMINATION OF CERTAIN ADJUST-
MENTS FOR ALL TAXPAYERS.—
(1) DEPRECIATION.—Paragraph (1) of section
56(a) is amended by inserting ‘‘and before March
14, 1995,’’ after ‘‘December 31, 1986,’’.
(2) MINING EXPLORATION AND DEVELOPMENT
COSTS.—Paragraph (2) of section 56(a) is amended
by inserting ‘‘and before January 1, 1996,’’ after
‘‘December 31, 1986,’’.
(3) LONG-TERM CONTRACTS.—Paragraph (3) of
section 56(a) is amended by inserting ‘‘and before
January 1, 1996,’’ after ‘‘March 1, 1986,’’.
(4) POLLUTION
CONTROL
FACILITIES.—Para-
graph (5) of section 56(a) is amended by inserting
101
‘‘and before January 1, 1996,’’ after ‘‘December 31,
1986,’’.
(5) INSTALLMENT
SALES.—Paragraph (6) of
section 56(a) is amended by inserting ‘‘and before
January 1, 1996,’’ after ‘‘March 1, 1986,’’.
(c) EARLIER TERMINATION OF CIRCULATION AND
RESEARCH AND EXPERIMENTAL EXPENDITURE ADJUST-
MENT FOR INDIVIDUALS.—Subparagraph (A) of section
56(b)(2) is amended by inserting ‘‘and before January 1,
1996,’’ after ‘‘December 31, 1986,’’.
(d) EARLIER TERMINATION OF CERTAIN ADJUST-
MENTS FOR CORPORATIONS.—
(1) MERCHANT
MARINE
CAPITAL
CONSTRUC-
TION
FUNDS.—Paragraph (2) of section 56(c) is
amended—
(A) by inserting ‘‘and before January 1,
1996,’’ after ‘‘December 31, 1986,’’ each place
it appears, and
(B) by striking the last sentence and in-
serting the following new flush sentence:
‘‘For purposes of this paragraph, any withdrawal of
deposit or earnings from the fund shall be treated as
allocable to deposits made, and earnings received or
accrued, in the order in which made, received, or ac-
crued.’’
102
(2) SECTION
833(b)
DEDUCTION.—Paragraph
(3) of section 56(c) is amended by adding at the end
the following new sentence: ‘‘This paragraph shall
not apply to any taxable year beginning after De-
cember 31, 1995.’’
(3) CERTAIN EARNINGS AND PROFITS ITEMS.—
(A) Subparagraph (B) of section 56(g)(4)
is amended by adding at the end the following
new clause:
‘‘(iii) TERMINATION.—This subpara-
graph shall not apply to any taxable year
beginning after December 31, 1995.’’
(B) Subparagraph (C) of section 56(g)(4)
is amended by adding at the end the following
new clause:
‘‘(v) TERMINATION.—This subpara-
graph shall not apply to any taxable year
beginning after December 31, 1995.’’
(4) INTANGIBLE DRILLING COSTS.—Clause (i)
of section 56(g)(4)(D) is amended by adding at the
end the following new sentence: ‘‘This clause shall
not apply to any taxable year beginning after De-
cember 31, 1995.’’
(5) CERTAIN
AMORTIZATION
PROVISIONS.—
Clause (ii) of section 56(g)(4)(D) is amended by
103
adding at the end the following new sentence: ‘‘This
clause shall not apply to any expenditure paid or in-
curred after December 31, 1995.’’
(6) LIFO INVENTORY ADJUSTMENTS.—Clause
(iii) of section 56(g)(4)(D) is amended by adding at
the end the following new sentence: ‘‘This clause
shall not apply to any adjustment arising in a tax-
able year beginning after December 31, 1995.’’
(7) INSTALLMENT SALES.—Clause (iv) of sec-
tion 56(g)(4)(D) is amended by adding at the end
the following new sentence: ‘‘This clause shall not
apply to any disposition after December 31, 1995.’’
(8) DEBT POOLS.—Subparagraph (E) of section
56(g)(4) is amended by adding at the end the follow-
ing new sentence: ‘‘This subparagraph shall not
apply to any exchange after December 31, 1995.’’
(9) DEPLETION.—Subparagraph (F) of section
56(g)(4) is amended by adding at the end the follow-
ing new clause:
‘‘(iii) TERMINATION.—This subpara-
graph shall not apply to any deduction for
depletion for any taxable year beginning
after December 31, 1995.’’
(10) 
OWNERSHIP
CHANGES.—Subparagraph
(G) of section 56(g)(4) is amended by adding at the
104
end the following new sentence: ‘‘This subparagraph
shall not apply to any ownership change after De-
cember 31, 1995.’’
(e) EARLIER TERMINATION OF ITEMS OF TAX PREF-
ERENCE.—
(1) DEPLETION.—Paragraph (1) of section
57(a) is amended by adding at the end the following
new sentence: ‘‘This paragraph shall not apply to
any taxable year beginning after December 31,
1995.’’
(2) INTANGIBLE DRILLING COSTS.—Paragraph
(2) of section 57(a) is amended by adding at the end
the following new subparagraph:
‘‘(F) TERMINATION.—This paragraph shall
not apply to any taxable year beginning after
December 31, 1995.’’
(3) RESERVES FOR LOSSES ON BAD DEBTS.—
Paragraph (4) of section 57(a) is amended by add-
ing at the end the following new sentence: ‘‘This
paragraph shall not apply to any taxable year begin-
ning after December 31, 1995.’’
(4) TAX-EXEMPT INTEREST.—Paragraph (5) of
section 57(a) is amended by adding at the end the
following new subparagraph:
105
‘‘(D) TERMINATION FOR CORPORATIONS.—
In the case of a corporation (other than a cor-
poration referred to in section 56(g)(6)), this
paragraph shall not apply to interest accruing
for periods after December 31, 1995.’’
(f) NET OPERATING LOSS DEDUCTION.—Paragraph
(1) of section 56(d) is amended by inserting ‘‘(100 percent
in the case of taxable years beginning after December 31,
1995)’’ after ‘‘90 percent’’ each place it appears.
(g) LOSSES.—
(1) Section 58 is amended by adding at the end
the following new subsection:
‘‘(d) TERMINATION.—This section shall not apply to
any loss incurred for any taxable year beginning after De-
cember 31, 1995.’’
(2) Subsection (h) of section 59 is amended by
inserting ‘‘469,’’ after ‘‘465,’’.
(h) FOREIGN TAX CREDIT.—Paragraph (2) of section
59(a) is amended by adding at the end the following new
subparagraph:
‘‘(D) 
TERMINATION.—This 
paragraph
shall not apply to any taxable year beginning
after December 31, 1995.’’
(i) LIMITATION ON USE OF CREDIT FOR PRIOR YEAR
MINIMUM TAX LIABILITY.—
106
(1) IN GENERAL.—Subsection (c) of section 53
is amended to read as follows:
‘‘(c) LIMITATION.—The credit allowable under sub-
section (a) for any taxable year shall not exceed the lesser
of—
‘‘(1) the excess (if any) of—
‘‘(A) the regular tax liability of the tax-
payer for such taxable year reduced by the sum
of the credits allowable under subparts A, B, D,
E, and F of this part, over
‘‘(B) the tentative minimum tax for the
taxable year, or
‘‘(2) 90 percent of the amount determined
under paragraph (1)(A).’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1995.
Subtitle D—Public Debt Reduction
Checkoff and Trust Fund
SEC. 341. DESIGNATION OF AMOUNTS FOR REDUCTION OF
PUBLIC DEBT.
(a) IN GENERAL.—Subchapter A of chapter 61 of the
Internal Revenue Code of 1986 (relating to returns and
records) is amended by adding at the end the following
new part:
107
‘‘PART IX—DESIGNATION FOR REDUCTION OF
PUBLIC DEBT
‘‘Sec. 6097. Designation.
‘‘SEC. 6097. DESIGNATION.
‘‘(a) IN GENERAL.—Every individual with adjusted
income tax liability for any taxable year may designate
that a portion of such liability (not to exceed 10 percent
thereof) shall be used to reduce the public debt.
‘‘(b) MANNER AND TIME OF DESIGNATION.—A des-
ignation under subsection (a) may be made with respect
to any taxable year only at the time of filing the return
of tax imposed by chapter 1 for the taxable year. The des-
ignation shall be made on the first page of the return or
on the page bearing the taxpayer’s signature.
‘‘(c) ADJUSTED INCOME TAX LIABILITY.—For pur-
poses of this section, the term ‘adjusted income tax liabil-
ity’ means income tax liability (as defined in section
6096(b)) reduced by any amount designated under section
6096 (relating to designation of income tax payments to
Presidential Election Campaign Fund).’’
(b) CLERICAL AMENDMENT.—The table of parts for
such subchapter A is amended by adding at the end the
following new item:
‘‘Part IX. Designation for reduction of public debt.’’
108
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
SEC. 342. PUBLIC DEBT REDUCTION TRUST FUND.
(a) IN GENERAL.—Subchapter A of chapter 98 of the
Internal Revenue Code of 1986 (relating to trust fund
code) is amended by adding at the end the following new
section:
‘‘SEC. 9512. PUBLIC DEBT REDUCTION TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘Public Debt Reduction Trust Fund’,
consisting of any amount appropriated or credited to the
Trust Fund as provided in this section or section 9602(b).
‘‘(b) TRANSFERS TO TRUST FUND.—There are here-
by appropriated to the Public Debt Reduction Trust Fund
amounts equivalent to the amounts designated under sec-
tion 6097 (relating to designation for public debt reduc-
tion).
‘‘(c) EXPENDITURES.—Amounts in the Public Debt
Reduction Trust Fund shall be used by the Secretary of
the Treasury for purposes of paying at maturity, or to
redeem or buy before maturity, any obligation of the Fed-
eral Government included in the public debt (other than
an obligation held by the Federal Old-Age and Survivors
109
Insurance Trust Fund, the Civil Service Retirement and
Disability Fund, or the Department of Defense Military
Retirement Fund). Any obligation which is paid, re-
deemed, or bought with amounts from the Public Debt Re-
duction Trust Fund shall be canceled and retired and may
not be reissued.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subchapter is amended by adding at the end the
following new item:
‘‘Sec. 9512. Public Debt Reduction Trust Fund.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received after the date
of the enactment of this Act.
Subtitle E—Small Business
Incentives
SEC. 351. COST-OF-LIVING ADJUSTMENTS RELATING TO ES-
TATE AND GIFT TAX PROVISIONS.
(a) INCREASE IN UNIFIED ESTATE AND GIFT TAX
CREDIT.—
(1) ESTATE TAX CREDIT.—
(A) Subsection (a) of section 2010 (relat-
ing to unified credit against estate tax) is
amended by striking ‘‘$192,800’’ and inserting
‘‘the applicable credit amount’’.
(B) Section 2010 is amended by redesig-
nating subsection (c) as subsection (d) and by
110
inserting after subsection (b) the following new
subsection:
‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes
of this section—
‘‘(1) IN
GENERAL.—The applicable credit
amount is the amount of the tentative tax which
would be determined under the rate schedule set
forth in section 2001(c) if the amount with respect
to which such tentative tax is to be computed were
the applicable exclusion amount determined in ac-
cordance with the following table:
‘‘In the case of estates of decedents
The applicable
dying, and gifts made, during:
exclusion amount is:
1996 .......................................................................
$700,000
1997 .......................................................................
$725,000
1998 or thereafter .................................................
$750,000.
‘‘(2) COST-OF-LIVING
ADJUSTMENTS.—In the
case of any decedent dying, and gift made, in a cal-
endar year after 1998, the $750,000 amount set
forth in paragraph (1) shall be increased by an
amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
111
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(C) Paragraph (1) of section 6018(a) is
amended by striking ‘‘$600,000’’ and inserting
‘‘the applicable exclusion amount in effect
under section 2010(c) (as adjusted under para-
graph (2) thereof) for the calendar year which
includes the date of death’’.
(D) Paragraph (2) of section 2001(c) is
amended by striking ‘‘$21,040,000’’ and insert-
ing ‘‘the amount at which the average tax rate
under this section is 55 percent’’.
(E) 
Subparagraph 
(A) 
of 
section
2102(c)(3) is amended by striking ‘‘$192,800’’
and inserting ‘‘the applicable credit amount in
effect under section 2010(c) for the calendar
year which includes the date of death’’.
(2) UNIFIED
GIFT
TAX
CREDIT.—Paragraph
(1) of section 2505(a) is amended by striking
‘‘$192,800’’ and inserting ‘‘the applicable credit
amount in effect under section 2010(c) for such cal-
endar year’’.
112
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to the estates of dece-
dents dying, and gifts made, after December 31,
1995.
(b) ALTERNATE VALUATION
OF CERTAIN FARM,
ETC., REAL PROPERTY.—Subsection (a) of section 2032A
is amended by adding at the end the following new para-
graph:
‘‘(3) INFLATION ADJUSTMENT.—In the case of
estates of decedents dying in a calendar year after
1998, the $750,000 amount contained in paragraph
(2) shall be increased by an amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b)
of section 2503 is amended—
113
(1) by striking the subsection heading and in-
serting the following:
‘‘(b) EXCLUSIONS FROM GIFTS.—
‘‘(1) IN GENERAL.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new
paragraph:
‘‘(2) INFLATION ADJUSTMENT.—In the case of
gifts made in a calendar year after 1998, the
$10,000 amount contained in paragraph (1) shall be
increased by an amount equal to—
‘‘(A) $10,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $1,000, such amount shall
be rounded to the nearest multiple of $1,000.’’
(d) 
EXEMPTION
FROM
GENERATION-SKIPPING
TAX.—Section 2631 (relating to GST exemption) is
amended by adding at the end the following new sub-
section:
114
‘‘(c) INFLATION ADJUSTMENT.—In the case of an in-
dividual who dies in any calendar year after 1998, the
$1,000,000 amount contained in subsection (a) shall be
increased by an amount equal to—
‘‘(1) $1,000,000, multiplied by
‘‘(2) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year
1992’ in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence
is not a multiple of $10,000, such amount shall be round-
ed to the nearest multiple of $10,000.’’
(e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT IN-
TEREST RATE ON EXTENSION OF TIME FOR PAYMENT OF
ESTATE TAX ON CLOSELY HELD BUSINESS.—
(1) Subparagraph (A) of section 6601(j)(2) is
amended by striking ‘‘$345,800’’ and inserting ‘‘the
applicable limitation amount’’.
(2) Subsection (j) of section 6601 is amended
by redesignating paragraph (3) as paragraph (4)
and by inserting after paragraph (2) the following
new paragraph:
‘‘(3) APPLICABLE LIMITATION AMOUNT.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), the applicable limitation amount is
115
the amount of the tentative tax which would be
determined under the rate schedule set forth in
section 2001(c) if the amount with respect to
which such tentative tax is to be computed were
$1,000,000.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of estates of decedents dying in a calendar
year after 1998, the $1,000,000 amount con-
tained in subparagraph (A) shall be increased
by an amount equal to—
‘‘(i) $1,000,000, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year by substituting ‘calendar
year 1997’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
If any amount as adjusted under the preceding
sentence is not a multiple of $10,000, such
amount shall be rounded to the nearest multiple
of $10,000.’’
SEC. 352. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) GENERAL RULE.—Paragraph (1) of section
179(b) (relating to dollar limitation) is amended to read
as follows:
116
‘‘(1) DOLLAR LIMITATION.—The aggregate cost
which may be taken into account under subsection
(a) for any taxable year shall not exceed the follow-
ing applicable amount:
‘‘If the taxable year
The applicable
begins in:
amount is:
1996 .......................................................................
$22,500
1997 .......................................................................
27,500
1998 .......................................................................
32,500
1999 or thereafter .................................................
35,000.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 353. CLARIFICATION OF TREATMENT OF HOME OF-
FICE USE FOR ADMINISTRATIVE AND MAN-
AGEMENT ACTIVITIES.
(a) IN GENERAL.—Paragraph (1) of section 280A(c)
is amended by adding at the end the following new sen-
tence:
‘‘For purposes of subparagraph (A), the term ‘prin-
cipal place of business’ includes a place of business
which is used by the taxpayer for the administrative
or management activities of any trade or business of
the taxpayer if there is no other fixed location of
such trade or business where the taxpayer conducts
substantial administrative or management activities
of such trade or business.’’
117
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 354. TREATMENT OF STORAGE OF PRODUCT SAMPLES.
(a) IN GENERAL.—Paragraph (2) of section 280A(c)
is amended by striking ‘‘inventory’’ and inserting ‘‘inven-
tory or product samples’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
TITLE IV—FAMILY
REINFORCEMENT
SEC. 401. CREDIT FOR ADOPTION EXPENSES.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 25 the following new section:
‘‘SEC. 25A. ADOPTION EXPENSES.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year the amount
of the qualified adoption expenses paid or incurred by the
taxpayer during such taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) DOLLAR
LIMITATION.—The aggregate
amount of qualified adoption expenses which may be
118
taken into account under subsection (a) with respect
to the adoption of a child shall not exceed $5,000.
‘‘(2) INCOME LIMITATION.—The amount allow-
able as a credit under subsection (a) for any taxable
year shall be reduced (but not below zero) by an
amount which bears the same ratio to the amount
so allowable (determined without regard to this
paragraph but with regard to paragraph (1)) as—
‘‘(A) the amount (if any) by which the tax-
payer’s adjusted gross income (determined
without regard to sections 911, 931, and 933)
exceeds $60,000, bears to
‘‘(B) $40,000.
‘‘(3) DENIAL OF DOUBLE BENEFIT.—
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under subsection (a) for any expense for
which a deduction or credit is allowable under
any other provision of this chapter.
‘‘(B) GRANTS.—No credit shall be allowed
under subsection (a) for any expense to the ex-
tent that funds for such expense are received
under any Federal, State, or local program.
The preceding sentence shall not apply to ex-
penses for the adoption of a child with special
needs.
119
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED ADOPTION EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
adoption expenses’ means reasonable and nec-
essary adoption fees, court costs, attorney fees,
and other expenses—
‘‘(i) which are directly related to, and
the principal purpose of which is for, the
legal adoption of an eligible child by the
taxpayer, and
‘‘(ii) which are not incurred in viola-
tion of State or Federal law or in carrying
out any surrogate parenting arrangement.
‘‘(B) 
EXPENSES
FOR
ADOPTION
OF
SPOUSE’S
CHILD
NOT
ELIGIBLE.—The term
‘qualified adoption expenses’ shall not include
any expenses in connection with the adoption by
an individual of a child who is the child of such
individual’s spouse.
‘‘(2) ELIGIBLE
CHILD.—The term ‘eligible
child’ means any individual—
‘‘(A) who has not attained age 18 as of the
time of the adoption, or
‘‘(B) who is physically or mentally incapa-
ble of caring for himself.
120
‘‘(3) CHILD WITH SPECIAL NEEDS.—The term
‘child with special needs’ means any child if—
‘‘(A) a State has determined that the child
cannot or should not be returned to the home
of his parents, and
‘‘(B) such State has determined that there
exists with respect to the child a specific factor
or condition (such as his ethnic background,
age, or membership in a minority or sibling
group, or the presence of factors such as medi-
cal conditions or physical, mental, or emotional
handicaps) because of which it is reasonable to
conclude that such child cannot be placed with
adoptive parents without providing adoption as-
sistance.
‘‘(d) MARRIED COUPLES MUST FILE JOINT RE-
TURNS, ETC.—Rules similar to the rules of paragraphs
(2), (3), and (4) of section 21(e) shall apply for purposes
of this section.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of chapter
1 is amended by inserting after the item relating to section
25 the following new item:
‘‘Sec. 25A. Adoption expenses.’’.
121
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 402. CREDIT FOR TAXPAYERS WITH CERTAIN PER-
SONS REQUIRING CUSTODIAL CARE IN THEIR
HOUSEHOLDS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 25A the following new section:
‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PER-
SONS REQUIRING CUSTODIAL CARE IN THEIR
HOUSEHOLDS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual who maintains a household which includes as a
member one or more qualified persons, there shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $500 for each
such person.
‘‘(b) QUALIFIED PERSON.—For purposes of this sec-
tion, the term ‘qualified person’ means any individual—
‘‘(1) who is a father or mother of the taxpayer,
his spouse, or his former spouse or who is an ances-
tor of such a father or mother,
‘‘(2) who is physically or mentally incapable of
caring for himself,
122
‘‘(3) who has as his principal place of abode for
more than half of the taxable year the home of the
taxpayer, and
‘‘(4) whose name and TIN are included on the
taxpayer’s return for the taxable year.
For purposes of paragraph (1), a stepfather or stepmother
shall be treated as a father or mother.
‘‘(c) SPECIAL RULES.—For purposes of this section,
rules similar to the rules of paragraphs (1), (2), (3), and
(4) of section 21(e) shall apply.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
25A the following new item:
‘‘Sec. 25B. Credit for taxpayers with certain persons requiring
custodial care in their households.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
TITLE V—SOCIAL SECURITY
EARNINGS TEST
SEC. 501. ADJUSTMENTS IN MONTHLY EXEMPT AMOUNT
FOR PURPOSES OF THE SOCIAL SECURITY
EARNINGS TEST.
(a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR
INDIVIDUALS
WHO
HAVE
ATTAINED
RETIREMENT
123
AGE.—Section 203(f)(8)(D) of the Social Security Act (42
U.S.C. 403(f)(8)(D)) is amended to read as follows:
‘‘(D)(i) Notwithstanding any other provision of
this subsection, the exempt amount which is applica-
ble to an individual who has attained retirement age
(as defined in section 216(1)) before the close of the
taxable year involved shall be—
‘‘(I) for the taxable year beginning after
1995 and before 1997, $1,250.00,
‘‘(II) for the taxable year beginning after
1996 and before 1998, $1,583.331⁄3,
‘‘(III) for the taxable year beginning after
1997 and before 1999, $1,916.662⁄3,
‘‘(IV) for the taxable year beginning after
1998 and before 2000, $2,250.00, and
‘‘(V) for the taxable year beginning after
1999 and before 2001, $2,500.00.
‘‘(ii) For purposes of subparagraph (B)(ii)(II),
the increase in the exempt amount provided under
clause (i)(V) shall be deemed to have resulted from
a determination which shall be deemed to have been
made under subparagraph (A) in 1999.’’.
(b) CONFORMING AMENDMENT.—The second sen-
tence of section 223(d)(4) of such Act (42 U.S.C.
423(d)(4)) is amended by striking ‘‘the exempt amount
124
under section 203(f)(8) which is applicable to individuals
described in subparagraph (D) thereof’’ and inserting the
following: ‘‘an amount equal to the exempt amount which
would have been applicable under section 203(f)(8), to in-
dividuals described in subparagraph (D) thereof, if section
501 of the Contract With America Tax Relief Act of 1995
had not been enacted’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to taxable years begin-
ning after 1995.
TITLE VI—TECHNICAL
CORRECTIONS
SEC. 601. COORDINATION WITH OTHER TITLES.
For purposes of applying the amendments made by
any title of this Act other than this title, the provisions
of this title shall be treated as having been enacted imme-
diately before the provisions of such other titles.
SEC. 602. AMENDMENTS 
RELATED 
TO 
REVENUE 
REC-
ONCILIATION ACT OF 1990.
(a) AMENDMENTS RELATED TO SUBTITLE A.—
(1) Subparagraph (B) of section 59(j)(3) is
amended by striking ‘‘section 1(i)(3)(B)’’ and insert-
ing ‘‘section 1(g)(3)(B)’’.
125
(2) Clause (i) of section 151(d)(3)(C) is amend-
ed by striking ‘‘joint of a return’’ and inserting
‘‘joint return’’.
(b) AMENDMENTS RELATED TO SUBTITLE B.—
(1) Paragraph (1) of section 11212(e) of the
Revenue Reconciliation Act of 1990 is amended by
striking ‘‘Paragraph (1) of section 6724(d)’’ and in-
serting ‘‘Subparagraph (B) of section 6724(d)(1)’’.
(2)(A) Subparagraph (B) of section 4093(c)(2),
as in effect before the amendments made by the
Revenue Reconciliation Act of 1993, is amended by
inserting before the period ‘‘unless such fuel is sold
for exclusive use by a State or any political subdivi-
sion thereof’’.
(B) Paragraph (4) of section 6427(l), as in ef-
fect before the amendments made by the Revenue
Reconciliation Act of 1993, is amended by inserting
before the period ‘‘unless such fuel was used by a
State or any political subdivision thereof’’.
(3) Paragraph (1) of section 6416(b) is amend-
ed by striking ‘‘chapter 32 or by section 4051’’ and
inserting ‘‘chapter 31 or 32’’.
(4) Section 7012 is amended—
126
(A) by striking ‘‘production or importation
of gasoline’’ in paragraph (3) and inserting
‘‘taxes on gasoline and diesel fuel’’, and
(B) by striking paragraph (4) and redesig-
nating paragraphs (5) and (6) as paragraphs
(4) and (5), respectively.
(5) Subsection (c) of section 5041 is amended
by striking paragraph (6) and by inserting the fol-
lowing new paragraphs:
‘‘(6) CREDIT FOR TRANSFEREE IN BOND.—If—
‘‘(A) wine produced by any person would
be eligible for any credit under paragraph (1)
if removed by such person during the calendar
year,
‘‘(B) wine produced by such person is re-
moved during such calendar year by any other
person (hereafter in this paragraph referred to
as the ‘transferee’) to whom such wine was
transferred in bond and who is liable for the tax
imposed by this section with respect to such
wine, and
‘‘(C) such producer holds title to such wine
at the time of its removal and provides to the
transferee such information as is necessary to
127
properly determine the transferee’s credit under
this paragraph,
then, the transferee (and not the producer) shall be
allowed the credit under paragraph (1) which would
be allowed to the producer if the wine removed by
the transferee had been removed by the producer on
that date.
‘‘(7) REGULATIONS.—The Secretary may pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection, including regula-
tions—
‘‘(A) to prevent the credit provided in this
subsection from benefiting any person who pro-
duces more than 250,000 wine gallons during a
calendar year, and
‘‘(B) to assure proper reduction of such
credit for persons producing more than 150,000
wine gallons of wine during a calendar year.’’.
(6) Paragraph (3) of section 5061(b) is amend-
ed to read as follows:
‘‘(3) section 5041(f),’’.
(7) Section 5354 is amended by inserting ‘‘(tak-
ing into account the appropriate amount of credit
with respect to such wine under section 5041(c))’’
after ‘‘any one time’’.
128
(c) AMENDMENTS RELATED TO SUBTITLE C.—
(1) Paragraph (4) of section 56(g) is amended
by redesignating subparagraphs (I) and (J) as sub-
paragraphs (H) and (I), respectively.
(2) Subparagraph (B) of section 6724(d)(1) is
amended—
(A) by striking ‘‘or’’ at the end of clause
(xii), and
(B) by striking the period at the end of
clause (xiii) and inserting ‘‘, or’’.
(3) Subsection (g) of section 6302 is amended
by inserting ‘‘, 22,’’ after ‘‘chapters 21’’.
(4) The earnings and profits of any insurance
company to which section 11305(c)(3) of the Reve-
nue Reconciliation Act of 1990 applies shall be de-
termined without regard to any deduction allowed
under such section; except that, for purposes of ap-
plying sections 56 and 902, and subpart F of part
III of subchapter N of chapter 1 of the Internal
Revenue Code of 1986, such deduction shall be
taken into account.
(5) Subparagraph (D) of section 6038A(e)(4) is
amended—
129
(A) by striking ‘‘any transaction to which
the summons relates’’ and inserting ‘‘any af-
fected taxable year’’, and
(B) by adding at the end thereof the fol-
lowing new sentence: ‘‘For purposes of this sub-
paragraph, the term ‘affected taxable year’
means any taxable year if the determination of
the amount of tax imposed for such taxable
year is affected by the treatment of the trans-
action to which the summons relates.’’.
(6) Subparagraph (A) of section 6621(c)(2) is
amended by adding at the end thereof the following
new flush sentence:
‘‘The preceding sentence shall be applied with-
out regard to any such letter or notice which is
withdrawn by the Secretary.’’.
(7) Clause (i) of section 6621(c)(2)(B) is
amended by striking ‘‘this subtitle’’ and inserting
‘‘this title’’.
(d) AMENDMENTS RELATED TO SUBTITLE D.—
(1) Notwithstanding section 11402(c) of the
Revenue Reconciliation Act of 1990, the amendment
made by section 11402(b)(1) of such Act shall apply
to taxable years ending after December 31, 1989.
130
(2) Clause (ii) of section 143(m)(4)(C) is
amended—
(A) by striking ‘‘any month of the 10-year
period’’ and inserting ‘‘any year of the 4-year
period’’,
(B) by striking ‘‘succeeding months’’ and
inserting ‘‘succeeding years’’, and
(C) by striking ‘‘over the remainder of
such period (or, if lesser, 5 years)’’ and insert-
ing ‘‘to zero over the succeeding 5 years’’.
(e) AMENDMENTS RELATED TO SUBTITLE E.—
(1)(A) Clause (ii) of section 56(d)(1)(B) is
amended to read as follows:
‘‘(ii) appropriate adjustments in the
application of section 172(b)(2) shall be
made to take into account the limitation of
subparagraph (A).’’
(B) For purposes of applying sections 56(g)(1)
and 56(g)(3) of the Internal Revenue Code of 1986
with respect to taxable years beginning in 1991 and
1992, the reference in such sections to the alter-
native tax net operating loss deduction shall be
treated as including a reference to the deduction
under section 56(h) of such Code as in effect before
133
family member’ includes any lineal descendant
of any parent of the transferor or the transfer-
or’s spouse.’’
(B) Section 2701(e)(3) is amended—
(i) by striking subparagraph (B), and
(ii) by striking so much of paragraph (3)
as precedes ‘‘shall be treated as holding’’ and
inserting:
‘‘(3) ATTRIBUTION
OF
INDIRECT
HOLDINGS
AND TRANSFERS.—An individual’’.
(C) Section 2704(c)(3) is amended by striking
‘‘section 2701(e)(3)(A)’’ and inserting ‘‘section
2701(e)(3)’’.
(4) Clause (i) of section 2701(c)(1)(B) is
amended to read as follows:
‘‘(i) a right to distributions with re-
spect to any interest which is junior to the
rights of the transferred interest,’’.
(5)(A) Clause (i) of section 2701(c)(3)(C) is
amended to read as follows:
‘‘(i) IN
GENERAL.—Payments under
any interest held by a transferor which
(without regard to this subparagraph) are
qualified payments shall be treated as
qualified payments unless the transferor
134
elects not to treat such payments as quali-
fied payments. Payments described in the
preceding sentence which are held by an
applicable family member shall be treated
as qualified payments only if such member
elects to treat such payments as qualified
payments.’’
(B) 
The 
first 
sentence 
of 
section
2701(c)(3)(C)(ii) is amended to read as follows: ‘‘A
transferor or applicable family member holding any
distribution right which (without regard to this sub-
paragraph) is not a qualified payment may elect to
treat such right as a qualified payment, to be paid
in the amounts and at the times specified in such
election.’’.
(C) The time for making an election under the
second sentence of section 2701(c)(3)(C)(i) of the
Internal Revenue Code of 1986 (as amended by sub-
paragraph (A)) shall not expire before the due date
(including extensions) for filing the transferor’s re-
turn of the tax imposed by section 2501 of such
Code for the first calendar year ending after the
date of enactment.
(6) Section 2701(d)(3)(A)(iii) is amended by
striking ‘‘the period ending on the date of’’.
135
(7) Subclause (I) of section 2701(d)(3)(B)(ii) is
amended by inserting ‘‘or the exclusion under sec-
tion 2503(b),’’ after ‘‘section 2523,’’.
(8) Section 2701(e)(5) is amended—
(A) by striking ‘‘such contribution to cap-
ital or such redemption, recapitalization, or
other change’’ in subparagraph (A) and insert-
ing ‘‘such transaction’’, and
(B) by striking ‘‘the transfer’’ in subpara-
graph (B) and inserting ‘‘such transaction’’.
(9) Section 2701(d)(4) is amended by adding at
the end thereof the following new subparagraph:
‘‘(C) TRANSFER
TO
TRANSFERORS.—In
the case of a taxable event described in para-
graph (3)(A)(ii) involving a transfer of an ap-
plicable retained interest from an applicable
family member to a transferor, this subsection
shall continue to apply to the transferor during
any period the transferor holds such interest.’’
(10) Section 2701(e)(6) is amended by insert-
ing ‘‘or to reflect the application of subsection (d)’’
before the period at the end thereof.
(11)(A) Section 2702(a)(3)(A) is amended—
(i) by striking ‘‘to the extent’’ and insert-
ing ‘‘if’’ in clause (i),
136
(ii) by striking ‘‘or’’ at the end of clause
(i),
(iii) by striking the period at the end of
clause (ii) and inserting ‘‘, or’’, and
(iv) by adding at the end thereof the fol-
lowing new clause:
‘‘(iii) to the extent that regulations
provide that such transfer is not inconsist-
ent with the purposes of this section.’’
(B)(i) Section 2702(a)(3) is amended by strik-
ing ‘‘incomplete transfer’’ each place it appears and
inserting ‘‘incomplete gift’’.
(ii) The heading for section 2702(a)(3)(B) is
amended by striking ‘‘INCOMPLETE TRANSFER’’ and
inserting ‘‘INCOMPLETE GIFT’’.
(g) AMENDMENTS RELATED TO SUBTITLE G.—
(1)(A) Subsection (a) of section 1248 is
amended—
(i) by striking ‘‘, or if a United States per-
son receives a distribution from a foreign cor-
poration which, under section 302 or 331, is
treated as an exchange of stock’’ in paragraph
(1), and
(ii) by adding at the end thereof the follow-
ing new sentence: ‘‘For purposes of this section,
137
a United States person shall be treated as hav-
ing sold or exchanged any stock if, under any
provision of this subtitle, such person is treated
as realizing gain from the sale or exchange of
such stock.’’.
(B) Paragraph (1) of section 1248(e) is amend-
ed by striking ‘‘, or receives a distribution from a
domestic corporation which, under section 302 or
331, is treated as an exchange of stock’’.
(C) Subparagraph (B) of section 1248(f)(1) is
amended by striking ‘‘or 361(c)(1)’’ and inserting
‘‘355(c)(1), or 361(c)(1)’’.
(D) Paragraph (1) of section 1248(i) is amend-
ed to read as follows:
‘‘(1) IN GENERAL.—If any shareholder of a 10-
percent corporate shareholder of a foreign corpora-
tion exchanges stock of the 10-percent corporate
shareholder for stock of the foreign corporation,
such 10-percent corporate shareholder shall recog-
nize gain in the same manner as if the stock of the
foreign corporation received in such exchange had
been—
‘‘(A) issued to the 10-percent corporate
shareholder, and
138
‘‘(B) then distributed by the 10-percent
corporate shareholder to such shareholder in re-
demption or liquidation (whichever is appro-
priate).
The amount of gain recognized by such 10-percent
corporate shareholder under the preceding sentence
shall not exceed the amount treated as a dividend
under this section.’’
(2) Section 897 is amended by striking sub-
section (f).
(3) Paragraph (13) of section 4975(d) is
amended by striking ‘‘section 408(b)’’ and inserting
‘‘section 408(b)(12)’’.
(4) Clause (iii) of section 56(g)(4)(D) is amend-
ed by inserting ‘‘, but only with respect to taxable
years beginning after December 31, 1989’’ before
the period at the end thereof.
(5)(A) Paragraph (11) of section 11701(a) of
the Revenue Reconciliation Act of 1990 (and the
amendment made by such paragraph) are hereby re-
pealed, and section 7108(r)(2) of the Revenue Rec-
onciliation Act of 1989 shall be applied as if such
paragraph (and amendment) had never been en-
acted.
139
(B) Subparagraph (A) shall not apply to any
building if the owner of such building establishes to
the satisfaction of the Secretary of the Treasury or
his delegate that such owner reasonably relied on the
amendment made by such paragraph (11).
(h) AMENDMENTS RELATED TO SUBTITLE H.—
(1)(A) Clause (vi) of section 168(e)(3)(B) is
amended by striking ‘‘or’’ at the end of subclause
(I), by striking the period at the end of subclause
(II) and inserting ‘‘, or’’, and by adding at the end
thereof the following new subclause:
‘‘(III) is described in section
48(l)(3)(A)(ix) (as in effect on the
day before the date of the enactment
of the Revenue Reconciliation Act of
1990).’’
(B) Subparagraph (K) of section 168(g)(4) is
amended by striking ‘‘section 48(a)(3)(A)(iii)’’ and
inserting ‘‘section 48(l)(3)(A)(ix) (as in effect on the
day before the date of the enactment of the Revenue
Reconciliation Act of 1990)’’.
(2) Clause (ii) of section 172(b)(1)(E) is
amended by striking ‘‘subsection (m)’’ and inserting
‘‘subsection (h)’’.
140
(3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II),
and 832(b)(5)(D)(ii)(II) are each amended by strik-
ing ‘‘243(b)(5)’’ and inserting ‘‘243(b)(2)’’.
(4) Subparagraph (A) of section 243(b)(3) is
amended by inserting ‘‘of’’ after ‘‘In the case’’.
(5) The subsection heading for subsection (a) of
section 280F is amended by striking ‘‘INVESTMENT
TAX CREDIT AND’’.
(6) Clause (i) of section 1504(c)(2)(B) is
amended by inserting ‘‘section’’ before ‘‘243(b)(2)’’.
(7) Paragraph (3) of section 341(f) is amended
by striking ‘‘351, 361, 371(a), or 374(a)’’ and in-
serting ‘‘351, or 361’’.
(8) Paragraph (2) of section 243(b) is amended
to read as follows:
‘‘(2) AFFILIATED GROUP.—For purposes of this
subsection:
‘‘(A) IN
GENERAL.—The term ‘affiliated
group’ has the meaning given such term by sec-
tion 1504(b), except that for such purposes sec-
tions 1504(b)(2), 1504(b)(4), and 1504(c) shall
not apply.
‘‘(B) GROUP
MUST
BE
CONSISTENT
IN
FOREIGN TAX TREATMENT.—The requirements
of paragraph (1)(A) shall not be treated as
141
being met with respect to any dividend received
by a corporation if, for any taxable year which
includes the day on which such dividend is re-
ceived—
‘‘(i) 1 or more members of the affili-
ated group referred to in paragraph (1)(A)
choose to any extent to take the benefits of
section 901, and
‘‘(ii) 1 or more other members of such
group claim to any extent a deduction for
taxes otherwise creditable under section
901.’’
(9) 
The 
amendment 
made 
by 
section
11813(b)(17) of the Revenue Reconciliation Act of
1990 shall be applied as if the material stricken by
such amendment included the closing parenthesis
after ‘‘section 48(a)(5)’’.
(10) Paragraph (1) of section 179(d) is amend-
ed—
(A) by striking ‘‘in a trade or business’’
and inserting ‘‘a trade or business’’, and
(B) by adding at the end thereof the fol-
lowing new sentence: ‘‘Such term shall not in-
clude any property described in section 50(b)
142
and shall not include air conditioning or heating
units and horses.’’
(11) Subparagraph (E) of section 50(a)(2) is
amended by striking ‘‘section 48(a)(5)(A)’’ and in-
serting ‘‘section 48(a)(5)’’.
(12) 
The 
amendment 
made 
by 
section
11801(c)(9)(G)(ii) of the Revenue Reconciliation Act
of 1990 shall be applied as if it struck ‘‘Section
422A(c)(2)’’ and inserted ‘‘Section 422(c)(2)’’.
(13) Subparagraph (B) of section 424(c)(3) is
amended by striking ‘‘a qualified stock option, an in-
centive stock option, an option granted under an em-
ployee stock purchase plan, or a restricted stock op-
tion’’ and inserting ‘‘an incentive stock option or an
option granted under an employee stock purchase
plan’’.
(14) Subparagraph (E) of section 1367(a)(2) is
amended by striking ‘‘section 613A(c)(13)(B)’’ and
inserting ‘‘section 613A(c)(11)(B)’’.
(15) Subparagraph (B) of section 460(e)(6) is
amended by striking ‘‘section 167(k)’’ and inserting
‘‘section 168(e)(2)(A)(ii)’’.
(16) Subparagraph (C) of section 172(h)(4) is
amended by striking ‘‘subsection (b)(1)(M)’’ and in-
serting ‘‘subsection (b)(1)(E)’’.
143
(17) Section 6503 is amended—
(A) by redesignating the subsection relat-
ing to extension in case of certain summonses
as subsection (j), and
(B) by redesignating the subsection relat-
ing to cross references as subsection (k).
(18) Paragraph (4) of section 1250(e) is hereby
repealed.
(i) EFFECTIVE DATE.—Except as otherwise expressly
provided—
(1) the amendments made by this section shall
be treated as amendments to the Internal Revenue
Code of 1986 as amended by the Revenue Reconcili-
ation Act of 1993; and
(2) any amendment made by this section shall
apply to periods before the date of the enactment of
this section in the same manner as if it had been in-
cluded in the provision of the Revenue Reconciliation
Act of 1990 to which such amendment relates.
SEC. 603. AMENDMENTS RELATED TO REVENUE REC-
ONCILIATION ACT OF 1993.
(a) AMENDMENT RELATED TO SECTION 13114.—
Paragraph (2) of section 1044(c) is amended to read as
follows:
144
‘‘(2) PURCHASE.—The taxpayer shall be consid-
ered to have purchased any property if, but for sub-
section (d), the unadjusted basis of such property
would be its cost within the meaning of section
1012.’’
(b) AMENDMENTS RELATED TO SECTION 13142.—
(1) Subparagraph (B) of section 13142(b)(6) of
the Revenue Reconciliation Act of 1993 is amended
to read as follows:
‘‘(B) FULL-TIME STUDENTS, WAIVER AU-
THORITY, AND PROHIBITED DISCRIMINATION.—
The amendments made by paragraphs (2), (3),
and (4) shall take effect on the date of the en-
actment of this Act.’’
(2) Subparagraph (C) of section 13142(b)(6) of
such Act is amended by striking ‘‘paragraph (2)’’
and inserting ‘‘paragraph (5)’’.
(c) AMENDMENT RELATED TO SECTION 13161.—
(1) IN
GENERAL.—Subsection (e) of section
4001 (relating to inflation adjustment) is amended
to read as follows:
‘‘(e) INFLATION ADJUSTMENT.—
‘‘(1) IN
GENERAL.—The $30,000 amount in
subsection (a) and section 4003(a) shall be increased
by an amount equal to—
145
‘‘(A) $30,000, multiplied by
‘‘(B) the cost-of-living adjustment under
section 1(f)(3) for the calendar year in which
the vehicle is sold, determined by substituting
‘calendar year 1990’ for ‘calendar year 1992’ in
subparagraph (B) thereof.
‘‘(2) ROUNDING.—If any amount as adjusted
under paragraph (1) is not a multiple of $2,000,
such amount shall be rounded to the next lowest
multiple of $2,000.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act.
(d) AMENDMENT RELATED TO SECTION 13201.—
Clause (ii) of section 135(b)(2)(B) is amended by insert-
ing before the period at the end thereof the following: ‘‘,
determined by substituting ‘calendar year 1989’ for ‘cal-
endar year 1992’ in subparagraph (B) thereof’’.
(e) AMENDMENTS RELATED TO SECTION 13203.—
Subsection (a) of section 59 is amended—
(1) by striking ‘‘the amount determined under
section 55(b)(1)(A)’’ in paragraph (1)(A) and
(2)(A)(i) and inserting ‘‘the pre-credit tentative min-
imum tax’’,
146
(2) 
by 
striking 
‘‘specified 
in 
section
55(b)(1)(A)’’ in paragraph (1)(C) and inserting
‘‘specified in subparagraph (A)(i) or (B)(i) of section
55(b)(1) (whichever applies)’’,
(3) by striking ‘‘which would be determined
under section 55(b)(1)(A)’’ in paragraph (2)(A)(ii)
and inserting ‘‘which would be the pre-credit ten-
tative minimum tax’’, and
(4) by adding at the end thereof the following
new paragraph:
‘‘(3) PRE-CREDIT TENTATIVE MINIMUM TAX.—
For purposes of this subsection, the term ‘pre-credit
tentative minimum tax’ means—
‘‘(A) in the case of a taxpayer other than
a corporation, the amount determined under the
first sentence of section 55(b)(1)(A)(i), or
‘‘(B) in the case of a corporation, the
amount 
determined 
under 
section
55(b)(1)(B)(i).’’
(f) AMENDMENT RELATED TO SECTION 13221.—
Sections 1201(a) and 1561(a) are each amended by strik-
ing ‘‘last sentence’’ each place it appears and inserting
‘‘last 2 sentences’’.
(g) AMENDMENTS RELATED TO SECTION 13222.—
147
(1) Subparagraph (B) of section 6033(e)(1) is
amended by adding at the end thereof the following
new clause:
‘‘(iii) COORDINATION
WITH
SECTION
527(f).—This subsection shall not apply to
any amount on which tax is imposed by
reason of section 527(f).’’.
(2) Clause (i) of section 6033(e)(1)(B) is
amended by striking ‘‘this subtitle’’ and inserting
‘‘section 501’’.
(h) AMENDMENT RELATED TO SECTION 13225.—
Paragraph (3) of section 6655(g) is amended by striking
all that follows ‘‘ ‘3rd month’ ’’ in the sentence following
subparagraph (C) and inserting ‘‘, subsection (e)(2)(A)
shall be applied by substituting ‘2 months’ for ‘3 months’
in clause (i)(I), the election under clause (i) of subsection
(e)(2)(C) may be made separately for each installment,
and clause (ii) of subsection (e)(2)(C) shall not apply.’’.
(i) AMENDMENTS RELATED TO SECTION 13231.—
(1) Subparagraph (G) of section 904(d)(3) is
amended by striking ‘‘section 951(a)(1)(B)’’ and in-
serting ‘‘subparagraph (B) or (C) of section
951(a)(1)’’.
(2) Paragraph (1) of section 956A(b) is amend-
ed to read as follows:
148
‘‘(1) the amount (not including a deficit) re-
ferred to in section 316(a)(1) to the extent such
amount was accumulated in prior taxable years be-
ginning after September 30, 1993, and’’.
(3) Subsection (f) of section 956A is amended
by inserting before the period at the end thereof:
‘‘and regulations coordinating the provisions of sub-
sections (c)(3)(A) and (d)’’.
(4) Subsection (b) of section 958 is amended by
striking ‘‘956(b)(2)’’ each place it appears and in-
serting ‘‘956(c)(2)’’.
(5)(A) Subparagraph (A) of section 1297(d)(2)
is amended by striking ‘‘The adjusted basis of any
asset’’ and inserting ‘‘The amount taken into ac-
count under section 1296(a)(2) with respect to any
asset’’.
(B) The paragraph heading of paragraph (2) of
section 1297(d) is amended to read as follows:
‘‘(2) AMOUNT TAKEN INTO ACCOUNT.—’’.
(6) Subsection (e) of section 1297 is amended
by inserting ‘‘For purposes of this part—’’ after the
subsection heading.
(j) AMENDMENT RELATED TO SECTION 13241.—
Subparagraph (B) of section 40(e)(1) is amended to read
as follows:
149
‘‘(B) for any period before January 1,
2001, during which the rates of tax under sec-
tion 4081(a)(2)(A) are 4.3 cents per gallon.’’
(k) AMENDMENT RELATED TO SECTION 13261.—
Clause (iii) of section 13261(g)(2)(A) of the Revenue Rec-
onciliation Act of 1993 is amended by striking ‘‘by the
taxpayer’’ and inserting ‘‘by the taxpayer or a related per-
son’’.
(l) AMENDMENT RELATED TO SECTION 13301.—
Subparagraph (B) of section 1397B(d)(5) is amended by
striking ‘‘preceding’’.
(m) CLERICAL AMENDMENTS.—
(1) Subsection (d) of section 39 is amended—
(A) by striking ‘‘45’’ in the heading of
paragraph (5) and inserting ‘‘45A’’, and
(B) by striking ‘‘45’’ in the heading of
paragraph (6) and inserting ‘‘45B’’.
(2) Subparagraph (A) of section 108(d)(9) is
amended by striking ‘‘paragraph (3)(B)’’ and insert-
ing ‘‘paragraph (3)(C)’’.
(3) Subparagraph (C) of section 143(d)(2) is
amended by striking the period at the end thereof
and inserting a comma.
(4) Clause (ii) of section 163(j)(6)(E) is amend-
ed by striking ‘‘which is a’’ and inserting ‘‘which is’’.
150
(5) Subparagraph (A) of section 1017(b)(4) is
amended by striking ‘‘subsection (b)(2)(D)’’ and in-
serting ‘‘subsection (b)(2)(E)’’.
(6) So much of section 1245(a)(3) as precedes
subparagraph (A) thereof is amended to read as fol-
lows:
‘‘(3) SECTION 1245 PROPERTY.—For purposes
of this section, the term ‘section 1245 property’
means any property which is or has been property
of a character subject to the allowance for deprecia-
tion provided in section 167 and is either—’’.
(7) Paragraph (2) of section 1394(e) is amend-
ed—
(A) by striking ‘‘(i)’’ and inserting ‘‘(A)’’,
and
(B) by striking ‘‘(ii)’’ and inserting ‘‘(B)’’.
(8) Subsection (m) of section 6501 (as redesig-
nated by section 602) is amended by striking ‘‘or
51(j)’’ and inserting ‘‘45B, or 51(j)’’.
(9)(A) The section 6714 added by section
13242(b)(1) of the Revenue Reconciliation Act of
1993 is hereby redesignated as section 6715.
(B) The table of sections for part I of sub-
chapter B of chapter 68 is amended by striking
151
‘‘6714’’ in the item added by such section
13242(b)(2) of such Act and inserting ‘‘6715’’.
(10) Paragraph (2) of section 9502(b) is
amended by inserting ‘‘and before’’ after ‘‘1982,’’.
(11) Subsection (a)(3) of section 13206 of the
Revenue Reconciliation Act of 1993 are each amend-
ed by striking ‘‘this section’’ and inserting ‘‘this sub-
section’’.
(12) Paragraph (1) of section 13215(c) of the
Revenue Reconciliation Act of 1993 is amended by
striking ‘‘Public Law 92–21’’ and inserting ‘‘Public
Law 98–21’’.
(13) Paragraph (2) of section 13311(e) of the
Revenue Reconciliation Act of 1993 is amended by
striking ‘‘section 1393(a)(3)’’ and inserting ‘‘section
1393(a)(2)’’.
(14) Subparagraph (B) of section 117(d)(2) is
amended by striking ‘‘section 132(f)’’ and inserting
‘‘section 132(h)’’.
(n) EFFECTIVE DATE.—Any amendment made by
this section shall take effect as if included in the provision
of the Revenue Reconciliation Act of 1993 to which such
amendment relates.
152
SEC. 604. MISCELLANEOUS PROVISIONS.
(a) APPLICATION OF AMENDMENTS MADE BY TITLE
XII OF OMNIBUS BUDGET RECONCILIATION ACT
OF
1990.—Except as otherwise expressly provided, whenever
in title XII of the Omnibus Budget Reconciliation Act of
1990 an amendment or repeal is expressed in terms of
an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
(b) TREATMENT
OF CERTAIN AMOUNTS UNDER
HEDGE BOND RULES.—
(1) Clause (iii) of section 149(g)(3)(B) is
amended to read as follows:
‘‘(iii) AMOUNTS HELD PENDING REIN-
VESTMENT
OR
REDEMPTION.—Amounts
held for not more than 30 days pending re-
investment or bond redemption shall be
treated as invested in bonds described in
clause (i).’’
(2) The amendment made by paragraph (1)
shall take effect as if included in the amendments
made by section 7651 of the Omnibus Budget Rec-
onciliation Act of 1989.
(c) 
TREATMENT
OF
CERTAIN
DISTRIBUTIONS
UNDER SECTION 1445.—
153
(1) IN
GENERAL.—Paragraph (3) of section
1445(e) is amended by adding at the end thereof
the following new sentence: ‘‘Rules similar to the
rules of the preceding provisions of this paragraph
shall apply in the case of any distribution to which
section 301 applies and which is not made out of the
earnings and profits of such a domestic corpora-
tion.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to distributions after
the date of the enactment of this Act.
(d) TREATMENT OF CERTAIN CREDITS UNDER SEC-
TION 469.—
(1) IN GENERAL.—Subparagraph (B) of section
469(c)(3) is amended by adding at the end thereof
the following new sentence: ‘‘If the preceding sen-
tence applies to the net income from any property
for any taxable year, any credits allowable under
subpart B (other than section 27(a)) or D of part
IV of subchapter A for such taxable year which are
attributable to such property shall be treated as
credits not from a passive activity to the extent the
amount of such credits does not exceed the regular
tax liability of the taxpayer for the taxable year
which is allocable to such net income.’’
154
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1986.
(e) TREATMENT OF DISPOSITIONS UNDER PASSIVE
LOSS RULES.—
(1) IN GENERAL.—Subparagraph (A) of section
469(g)(1) is amended to read as follows:
‘‘(A) IN GENERAL.—If all gain or loss real-
ized on such disposition is recognized, the ex-
cess of—
‘‘(i) any loss from such activity for
such taxable year (determined after the ap-
plication of subsection (b)), over
‘‘(ii) any net income or gain for such
taxable year from all other passive activi-
ties (determined after the application of
subsection (b)),
shall be treated as a loss which is not from a
passive activity.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after December 31, 1986.
(f) MISCELLANEOUS AMENDMENTS
TO FOREIGN
PROVISIONS.—
155
(1) COORDINATION OF UNIFIED ESTATE TAX
CREDIT WITH TREATIES.—Subparagraph (A) of sec-
tion 2102(c)(3) is amended by adding at the end
thereof the following new sentence: ‘‘For purposes
of the preceding sentence, property shall not be
treated as situated in the United States if such
property is exempt from the tax imposed by this
subchapter under any treaty obligation of the United
States.’’
(2) TREATMENT OF CERTAIN INTEREST PAID
TO RELATED PERSON.—
(A) IN
GENERAL.—Subparagraph (B) of
section 163(j)(1) is amended by inserting before
the period at the end thereof the following:
‘‘(and clause (ii) of paragraph (2)(A) shall not
apply for purposes of applying this subsection
to the amount so treated)’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall apply as if in-
cluded in the amendments made by section
7210(a) of the Revenue Reconciliation Act of
1989.
(3) TREATMENT OF INTEREST ALLOCABLE TO
EFFECTIVELY CONNECTED INCOME.—
(A) IN GENERAL.—
156
(i) Subparagraph (B) of section
884(f)(1) is amended by striking ‘‘to the
extent’’ and all that follows down through
‘‘subparagraph (A)’’ and inserting ‘‘to the
extent that the allocable interest exceeds
the interest described in subparagraph
(A)’’.
(ii) The second sentence of section
884(f)(1) is amended by striking ‘‘reason-
ably expected’’ and all that follows down
through the period at the end thereof and
inserting ‘‘reasonably expected to be alloca-
ble interest.’’
(iii) Paragraph (2) of section 884(f) is
amended to read as follows:
‘‘(2) ALLOCABLE INTEREST.—For purposes of
this subsection, the term ‘allocable interest’ means
any interest which is allocable to income which is ef-
fectively connected (or treated as effectively con-
nected) with the conduct of a trade or business in
the United States.’’
(B) EFFECTIVE DATE.—The amendments
made by subparagraph (A) shall take effect as
if included in the amendments made by section
1241(a) of the Tax Reform Act of 1986.
157
(4) CLARIFICATION OF SOURCE RULE.—
(A) IN GENERAL.—Paragraph (2) of sec-
tion 865(b) is amended by striking ‘‘863(b)’’
and inserting ‘‘863’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall take effect as
if included in the amendments made by section
1211 of the Tax Reform Act of 1986.
(5) REPEAL OF OBSOLETE PROVISIONS.—
(A) Paragraph (1) of section 6038(a) is
amended by striking ‘‘, and’’ at the end of sub-
paragraph (E) and inserting a period, and by
striking subparagraph (F).
(B) Subsection (b) of section 6038A is
amended by adding ‘‘and’’ at the end of para-
graph (2), by striking ‘‘, and’’ at the end of
paragraph (3) and inserting a period, and by
striking paragraph (4).
(g) TREATMENT OF ASSIGNMENT OF INTEREST IN
CERTAIN BOND-FINANCED FACILITIES.—
(1) IN GENERAL.—Subparagraph (A) of section
1317(3) of the Tax Reform Act of 1986 is amended
by adding at the end thereof the following new sen-
tence: ‘‘A facility shall not fail to be treated as de-
scribed in this subparagraph by reason of an assign-
158
ment (or an agreement to an assignment) by the
governmental unit on whose behalf the bonds are is-
sued of any part of its interest in the property fi-
nanced by such bonds to another governmental
unit.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect as if included in
such section 1317 on the date of the enactment of
the Tax Reform Act of 1986.
(h) CLARIFICATION OF TREATMENT OF MEDICARE
ENTITLEMENT UNDER COBRA PROVISIONS.—
(1) IN GENERAL.—
(A) 
Subclause 
(V) 
of 
section
4980B(f)(2)(B)(i) is amended to read as fol-
lows:
‘‘(V) MEDICARE
ENTITLEMENT
FOLLOWED BY QUALIFYING EVENT.—
In the case of a qualifying event de-
scribed in paragraph (3)(B) that oc-
curs less than 18 months after the
date the covered employee became en-
titled to benefits under title XVIII of
the Social Security Act, the period of
coverage for qualified beneficiaries
other than the covered employee shall
159
not terminate under this clause before
the close of the 36-month period be-
ginning on the date the covered em-
ployee became so entitled.’’
(B) Clause (v) of section 602(2)(A) of the
Employee Retirement Income Security Act of
1974 is amended to read as follows:
‘‘(v) MEDICARE
ENTITLEMENT
FOL-
LOWED
BY
QUALIFYING
EVENT.—In the
case of a qualifying event described in sec-
tion 603(2) that occurs less than 18
months after the date the covered em-
ployee became entitled to benefits under
title XVIII of the Social Security Act, the
period of coverage for qualified bene-
ficiaries other than the covered employee
shall not terminate under this subpara-
graph before the close of the 36-month pe-
riod beginning on the date the covered em-
ployee became so entitled.’’
(C) Clause (iv) of section 2202(2)(A) of
the Public Health Service Act is amended to
read as follows:
‘‘(iv) MEDICARE ENTITLEMENT FOL-
LOWED
BY
QUALIFYING
EVENT.—In the
160
case of a qualifying event described in sec-
tion 2203(2) that occurs less than 18
months after the date the covered em-
ployee became entitled to benefits under
title XVIII of the Social Security Act, the
period of coverage for qualified bene-
ficiaries other than the covered employee
shall not terminate under this subpara-
graph before the close of the 36-month pe-
riod beginning on the date the covered em-
ployee became so entitled.’’
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to plan years begin-
ning after December 31, 1989.
(i) TREATMENT OF CERTAIN REMIC INCLUSIONS.—
(1) IN
GENERAL.—Subsection (a) of section
860E is amended by adding at the end thereof the
following new paragraph:
‘‘(6) COORDINATION WITH MINIMUM TAX.—For
purposes of part VI of subchapter A of this chap-
ter—
‘‘(A) the reference in section 55(b)(2) to
taxable income shall be treated as a reference
to taxable income determined without regard to
this subsection,
161
‘‘(B) the alternative minimum taxable in-
come of any holder of a residual interest in a
REMIC for any taxable year shall in no event
be less than the excess inclusion for such tax-
able year, and
‘‘(C) any excess inclusion shall be dis-
regarded for purposes of computing the alter-
native tax net operating loss deduction.
The preceding sentence shall not apply to any orga-
nization to which section 593 applies, except to the
extent provided in regulations prescribed by the Sec-
retary under paragraph (2).’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect as if included in
the amendments made by section 671 of the Tax Re-
form Act of 1986 unless the taxpayer elects to apply
such amendment only to taxable years beginning
after the date of the enactment of this Act.
(j) EXEMPTION FROM HARBOR MAINTENANCE TAX
FOR CERTAIN PASSENGERS.—
(1) IN GENERAL.—Subparagraph (D) of section
4462(b)(1) (relating to special rule for Alaska, Ha-
waii, and possessions) is amended by inserting be-
fore the period the following: ‘‘, or passengers trans-
ported on United States flag vessels operating solely
162
within the State waters of Alaska or Hawaii and ad-
jacent international waters’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect as if included in
the amendments made by section 1402(a) of the
Harbor Maintenance Revenue Act of 1986.
(k) AMENDMENTS RELATED TO REVENUE PROVI-
SIONS OF ENERGY POLICY ACT OF 1992.—
(1) Effective with respect to taxable years be-
ginning after December 31, 1990, subclause (II) of
section 53(d)(1)(B)(iv) is amended to read as fol-
lows:
‘‘(II) the adjusted net minimum
tax for any taxable year is the amount
of the net minimum tax for such year
increased in the manner provided in
clause (iii).’’
(2) Subsection (g) of section 179A is redesig-
nated as subsection (f).
(3) Subparagraph (E) of section 6724(d)(3) is
amended by striking ‘‘section 6109(f)’’ and inserting
‘‘section 6109(h)’’.
(4)(A) Subsection (d) of section 30 is amend-
ed—
163
(i) by inserting ‘‘(determined without re-
gard to subsection (b)(3))’’ before the period at
the end of paragraph (1) thereof, and
(ii) by adding at the end thereof the follow-
ing new paragraph:
‘‘(4) ELECTION
TO
NOT
TAKE
CREDIT.—No
credit shall be allowed under subsection (a) for any
vehicle if the taxpayer elects to not have this section
apply to such vehicle.’’
(B) Subsection (m) of section 6501 (as redesig-
nated by section 101) is amended by striking ‘‘sec-
tion 40(f)’’ and inserting ‘‘section 30(d)(4), 40(f)’’.
(5) Subclause (III) of section 501(c)(21)(D)(ii)
is amended by striking ‘‘section 101(6)’’ and insert-
ing ‘‘section 101(7)’’ and by striking ‘‘1752(6)’’ and
inserting ‘‘1752(7)’’.
(6) Paragraph (1) of section 1917(b) of the En-
ergy Policy Act of 1992 shall be applied as if ‘‘at a
rate’’ appeared instead of ‘‘at the rate’’ in the mate-
rial proposed to be stricken.
(7) Paragraph (2) of section 1921(b) of the En-
ergy Policy Act of 1992 shall be applied as if a
comma appeared after ‘‘(2)’’ in the material pro-
posed to be stricken.
164
(8) Subsection (a) of section 1937 of the En-
ergy Policy Act of 1992 shall be applied as if ‘‘Sub-
part B’’ appeared instead of ‘‘Subpart C’’.
(l) TREATMENT OF QUALIFIED FOOTBALL COACHES
PLAN.—
(1) IN GENERAL.—Section 1022 of title II of
the Employee Retirement Income Security Act of
1974 is amended by adding at the end thereof the
following new subsection:
‘‘(l) QUALIFIED FOOTBALL COACHES PLAN.—For
purposes of determining the qualified plan status of a
qualified football coaches plan, section 3(37)(F) shall be
treated as part of this title and a qualified football coaches
plan shall be treated as a multiemployer collectively bar-
gained plan for purposes of the Internal Revenue Code
of 1986.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to years beginning
after the date of the enactment of Public Law 100–
202.
(m) DETERMINATION
OF UNRECOVERED INVEST-
MENT IN ANNUITY CONTRACT.—
(1) IN GENERAL.—Subparagraph (A) of section
72(b)(4) is amended by inserting ‘‘(determined with-
out regard to subsection (c)(2))’’ after ‘‘contract’’.
165
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect as if included in
the amendments made by section 1122(c) of the Tax
Reform Act of 1986.
(n) MODIFICATIONS
TO ELECTION TO INCLUDE
CHILD’S INCOME ON PARENT’S RETURN.—
(1) ELIGIBILITY FOR ELECTION.—Clause (ii) of
section 1(g)(7)(A) (relating to election to include
certain unearned income of child on parent’s return)
is amended to read as follows:
‘‘(ii) such gross income is more than
the 
amount 
described 
in 
paragraph
(4)(A)(ii)(I) and less than 10 times the
amount so described,’’.
(2) COMPUTATION OF TAX.—Subparagraph (B)
of section 1(g)(7) (relating to income included on
parent’s return) is amended—
(A) by striking ‘‘$1,000’’ in clause (i) and
inserting ‘‘twice the amount described in para-
graph (4)(A)(ii)(I)’’, and
(B) by amending subclause (II) of clause
(ii) to read as follows:
‘‘(II) for each such child, 15 per-
cent of the lesser of the amount de-
scribed in paragraph (4)(A)(ii)(I) or
166
the excess of the gross income of such
child over the amount so described,
and’’.
(3) MINIMUM TAX.—Subparagraph (B) of sec-
tion 59(j)(1) is amended by striking ‘‘$1,000’’ and
inserting ‘‘twice the amount in effect for the taxable
year under section 63(c)(5)(A)’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1994.
(o) MISCELLANEOUS CLERICAL AMENDMENTS.—
(1) Subclause (II) of section 56(g)(4)(C)(ii) is
amended by striking ‘‘of the subclause’’ and insert-
ing ‘‘of subclause’’.
(2) Paragraph (2) of section 72(m) is amended
by inserting ‘‘and’’ at the end of subparagraph (A),
by striking subparagraph (B), and by redesignating
subparagraph (C) as subparagraph (B).
(3) Paragraph (2) of section 86(b) is amended
by striking ‘‘adusted’’ and inserting ‘‘adjusted’’.
(4)(A) The heading for section 112 is amended
by striking ‘‘COMBAT PAY’’ and inserting ‘‘COM-
BAT ZONE COMPENSATION’’.
(B) The item relating to section 112 in the
table of sections for part III of subchapter B of
167
chapter 1 is amended by striking ‘‘combat pay’’ and
inserting ‘‘combat zone compensation’’.
(C) Paragraph (1) of section 3401(a) is amend-
ed by striking ‘‘combat pay’’ and inserting ‘‘combat
zone compensation’’.
(5) Clause (i) of section 172(h)(3)(B) is amend-
ed by striking the comma at the end thereof and in-
serting a period.
(6) Clause (ii) of section 543(a)(2)(B) is
amended by striking ‘‘section 563(c)’’ and inserting
‘‘section 563(d)’’.
(7) Paragraph (1) of section 958(a) is amended
by 
striking 
‘‘sections 
955(b)(1)(A) 
and 
(B),
955(c)(2)(A)(ii), and 960(a)(1)’’ and inserting ‘‘sec-
tion 960(a)(1)’’.
(8) Subsection (g) of section 642 is amended by
striking ‘‘under 2621(a)(2)’’ and inserting ‘‘under
section 2621(a)(2)’’.
(9) Section 1463 is amended by striking ‘‘this
subsection’’ and inserting ‘‘this section’’.
(10) Subsection (k) of section 3306 is amended
by inserting a period at the end thereof.
(11) The item relating to section 4472 in the
table of sections for subchapter B of chapter 36 is
amended by striking ‘‘and special rules’’.
168
(12) Paragraph (2) of section 4978(b) is
amended by striking the period at the end of sub-
paragraph (A) and inserting a comma, and by strik-
ing the period and quotation marks at the end of
subparagraph (B) and inserting a comma.
(13) Paragraph (3) of section 5134(c) is
amended by striking ‘‘section 6662(a)’’ and inserting
‘‘section 6665(a)’’.
(14) Paragraph (2) of section 5206(f) is
amended by striking ‘‘section 5(e)’’ and inserting
‘‘section 105(e)’’.
(15) Paragraph (1) of section 6050B(c) is
amended by striking ‘‘section 85(c)’’ and inserting
‘‘section 85(b)’’.
(16) Subsection (k) of section 6166 is amended
by striking paragraph (6).
(17) Subsection (e) of section 6214 is amended
to read as follows:
‘‘(e) CROSS REFERENCE.—
‘‘For provision giving Tax Court jurisdiction to
order a refund of an overpayment and to award
sanctions, see section 6512(b)(2).’’
(18) The section heading for section 6043 is
amended by striking the semicolon and inserting a
comma.
(19) The item relating to section 6043 in the
table of sections for subpart B of part III of sub-
169
chapter A of chapter 61 is amended by striking the
semicolon and inserting a comma.
(20) The table of sections for part I of sub-
chapter A of chapter 68 is amended by striking the
item relating to section 6662.
(21)(A) Section 7232 is amended—
(i) by striking ‘‘LUBRICATING OIL,’’ in
the heading, and
(ii) by striking ‘‘lubricating oil,’’ in the
text.
(B) The table of sections for part II of sub-
chapter A of chapter 75 is amended by striking ‘‘lu-
bricating oil,’’ in the item relating to section 7232.
(22) Paragraph (1) of section 6701(a) of the
Omnibus Budget Reconciliation Act of 1989 is
amended by striking ‘‘subclause (IV)’’ and inserting
‘‘subclause (V)’’.
(23) Clause (ii) of section 7304(a)(2)(D) of
such Act is amended by striking ‘‘subsection (c)(2)’’
and inserting ‘‘subsection (c)’’.
(24) Paragraph (1) of section 7646(b) of such
Act is amended by striking ‘‘section 6050H(b)(1)’’
and inserting ‘‘section 6050H(b)(2)’’.
(25) Paragraph (10) of section 7721(c) of
such 
Act 
is 
amended 
by 
striking 
‘‘section
170
6662(b)(2)(C)(ii)’’ 
and 
inserting 
‘‘section
6661(b)(2)(C)(ii)’’.
(26) Subparagraph (A) of section 7811(i)(3) of
such Act is amended by inserting ‘‘the first place it
appears’’ before ‘‘in clause (i)’’.
(27) Paragraph (10) of section 7841(d) of
such Act is amended by striking ‘‘section 381(a)’’
and inserting ‘‘section 381(c)’’.
(28) Paragraph (2) of section 7861(c) of such
Act is amended by inserting ‘‘the second place it ap-
pears’’ before ‘‘and inserting’’.
(29) Paragraph (1) of section 460(b) is amend-
ed by striking ‘‘the look-back method of paragraph
(3)’’ and inserting ‘‘the look-back method of para-
graph (2)’’.
(30) Subparagraph (C) of section 50(a)(2) is
amended by striking ‘‘subsection (c)(4)’’ and insert-
ing ‘‘subsection (d)(5)’’.
(31) Subparagraph (B) of section 172(h)(4) is
amended by striking the material following the head-
ing and preceding clause (i) and inserting ‘‘For pur-
poses of subsection (b)(2)—’’.
(32) Subparagraph (A) of section 355(d)(7) is
amended by inserting ‘‘section’’ before ‘‘267(b)’’.
171
(33) Subparagraph (C) of section 420(e)(1) is
amended by striking ‘‘mean’’ and inserting ‘‘means’’.
(34) Paragraph (4) of section 537(b) is amend-
ed by striking ‘‘section 172(i)’’ and inserting ‘‘sec-
tion 172(f)’’.
(35) Subparagraph (B) of section 613(e)(1) is
amended by striking the comma at the end thereof
and inserting a period.
(36) Paragraph (4) of section 856(a) is amend-
ed by striking ‘‘section 582(c)(5)’’ and inserting
‘‘section 582(c)(2)’’.
(37) 
Sections 
904(f)(2)(B)(i) 
and
907(c)(4)(B)(iii) are each amended by inserting ‘‘(as
in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1990)’’ after
‘‘section 172(h)’’.
(38) Subsection (b) of section 936 is amended
by striking ‘‘subparagraphs (D)(ii)(I)’’ and inserting
‘‘subparagraphs (D)(ii)’’.
(39) Subsection (c) of section 2104 is amended
by striking ‘‘subparagraph (A), (C), or (D) of sec-
tion 
861(a)(1)’’ 
and 
inserting 
‘‘section
861(a)(1)(A)’’.
(40) Subparagraph (A) of section 280A(c)(1) is
amended to read as follows:
172
‘‘(A) as the principal place of business for
any trade or business of the taxpayer,’’.
(41) Section 6038 is amended by redesignating
the subsection relating to cross references as sub-
section (f).
(42) Clause (iv) of section 6103(e)(1)(A) is
amended by striking all that follows ‘‘provisions of’’
and inserting ‘‘section 1(g) or 59(j);’’.
(43) The subsection (f) of section 6109 of the
Internal Revenue Code of 1986 which was added by
section 2201(d) of Public Law 101–624 is redesig-
nated as subsection (g).
(44) Subsection (b) of section 7454 is amended
by striking ‘‘section 4955(e)(2)’’ and inserting ‘‘sec-
tion 4955(f)(2)’’.
(45) Subsection (d) of section 11231 of the
Revenue Reconciliation Act of 1990 shall be applied
as if ‘‘comma’’ appeared instead of ‘‘period’’ and as
if the paragraph (9) proposed to be added ended
with a comma.
(46) Paragraph (1) of section 11303(b) of the
Revenue Reconciliation Act of 1990 shall be applied
as if ‘‘paragraph’’ appeared instead of ‘‘subpara-
graph’’ in the material proposed to be stricken.
173
(47) Subsection (f) of section 11701 of the Rev-
enue Reconciliation Act of 1990 is amended by in-
serting ‘‘(relating to definitions)’’ after ‘‘section
6038(e)’’.
(48) Subsection (i) of section 11701 of the Rev-
enue Reconciliation Act of 1990 shall be applied as
if ‘‘subsection’’ appeared instead of ‘‘section’’ in the
material proposed to be stricken.
(49) Subparagraph (B) of section 11801(c)(2)
of the Revenue Reconciliation Act of 1990 shall be
applied as if ‘‘section 56(g)’’ appeared instead of
‘‘section 59(g)’’.
(50) Subparagraph (C) of section 11801(c)(8)
of the Revenue Reconciliation Act of 1990 shall be
applied as if ‘‘reorganizations’’ appeared instead of
‘‘reorganization’’ in the material proposed to be
stricken.
(51) Subparagraph (H) of section 11801(c)(9)
of the Revenue Reconciliation Act of 1990 shall be
applied as if ‘‘section 1042(c)(1)(B)’’ appeared in-
stead of ‘‘section 1042(c)(2)(B)’’.
(52) Subparagraph (F) of section 11801(c)(12)
of the Revenue Reconciliation Act of 1990 shall be
applied as if ‘‘and (3)’’ appeared instead of ‘‘and
(E)’’.
174
(53) Subparagraph (A) of section 11801(c)(22)
of the Revenue Reconciliation Act of 1990 shall be
applied as if ‘‘chapters 21’’ appeared instead of
‘‘chapter 21’’ in the material proposed to be strick-
en.
(54) Paragraph (3) of section 11812(b) of the
Revenue Reconciliation Act of 1990 shall be applied
by not executing the amendment therein to the
heading of section 42(d)(5)(B).
(55) Clause (i) of section 11813(b)(9)(A) of the
Revenue Reconciliation Act of 1990 shall be applied
as if a comma appeared after ‘‘(3)(A)(ix)’’ in the
material proposed to be stricken.
(56) Subparagraph (F) of section 11813(b)(13)
of the Revenue Reconciliation Act of 1990 shall be
applied as if ‘‘tax’’ appeared after ‘‘investment’’ in
the material proposed to be stricken.
(57) Paragraph (19) of section 11813(b) of the
Revenue Reconciliation Act of 1990 shall be applied
as if ‘‘Paragraph (20) of section 1016(a), as redesig-
nated by section 11801,’’ appeared instead of ‘‘Para-
graph (21) of section 1016(a)’’.
(58) Paragraph (5) section 8002(a) of the Sur-
face Transportation Revenue Act of 1991 shall be
175
applied as if ‘‘4481(e)’’ appeared instead of
‘‘4481(c)’’.
(59) Section 7872 is amended—
(A) by striking ‘‘foregone’’ each place it
appears in subsections (a) and (e)(2) and in-
serting ‘‘forgone’’, and
(B) by striking ‘‘FOREGONE’’ in the head-
ing for subsection (e) and the heading for para-
graph (2) of subsection (e) and inserting ‘‘FOR-
GONE’’.
(60) Paragraph (7) of section 7611(h) is
amended by striking ‘‘approporiate’’ and inserting
‘‘appropriate’’.
(61) The heading of paragraph (3) of section
419A(c) is amended by striking ‘‘SEVERENCE’’ and
inserting ‘‘SEVERANCE’’.
(62) Clause (ii) of section 807(d)(3)(B) is
amended by striking ‘‘Commissoners’ ’’ and insert-
ing ‘‘Commissioners’ ’’.
(63) Subparagraph (B) of section 1274A(c)(1)
is amended by striking ‘‘instument’’ and inserting
‘‘instrument’’.
(64) Subparagraph (B) of section 724(d)(3) by
striking ‘‘Subparagaph’’ and inserting ‘‘Subpara-
graph’’.
176
(65) The last sentence of paragraph (2) of sec-
tion 42(c) is amended by striking ‘‘of 1988’’.
(66) Paragraph (1) of section 9707(d) is
amended by striking ‘‘diligence,’’ and inserting ‘‘dili-
gence’’.
(67) Subsection (c) of section 4977 is amended
by striking ‘‘section 132(i)(2)’’ and inserting ‘‘sec-
tion 132(h)’’.
(68) The last sentence of section 401(a)(20) is
amended by striking ‘‘section 211’’ and inserting
‘‘section 521’’.
(69) Subparagraph (A) of section 402(g)(3) is
amended by striking ‘‘subsection (a)(8)’’ and insert-
ing ‘‘subsection (e)(3)’’.
(70) The last sentence of section 403(b)(10) is
amended by striking ‘‘an direct’’ and inserting ‘‘a di-
rect’’.
(71) Subparagraph (A) of section 4973(b)(1) is
amended by striking ‘‘sections 402(c)’’ and inserting
‘‘section 402(c)’’.
(72) Paragraph (12) of section 3405(e) is
amended 
by 
striking 
‘‘(b)(3)’’ 
and 
inserting
‘‘(b)(2)’’.
(73) Paragraph (41) of section 521(b) of the
Unemployment Compensation Amendments of 1992
177
shall be applied as if ‘‘section’’ appeared instead of
‘‘sections’’ in the material proposed to be stricken.
(74) Paragraph (27) of section 521(b) of the
Unemployment Compensation Amendments of 1992
shall be applied as if ‘‘Section 691(c)(5)’’ appeared
instead of ‘‘Section 691(c)’’.
(75) Paragraph (5) of section 860F(a) is
amended by striking ‘‘paragraph (1)’’ and inserting
‘‘paragraph (2)’’.
(76) Paragraph (1) of section 415(k) is amend-
ed by adding ‘‘or’’ at the end of subparagraph (C),
by striking subparagraphs (D) and (E), and by re-
designating subparagraph (F) as subparagraph (D).
(77) Paragraph (2) of section 404(a) is amend-
ed by striking ‘‘(18),’’.
(78) Clause (ii) of section 72(p)(4)(A) is
amended to read as follows:
‘‘(ii) 
SPECIAL
RULE.—The 
term
‘qualified employer plan’ shall not include
any plan which was (or was determined to
be) a qualified employer plan or a govern-
ment plan.’’
(79) 
Sections 
461(i)(3)(C) 
and
1274(b)(3)(B)(i) are each amended by striking ‘‘sec-
178
tion 
6662(d)(2)(C)(ii)’’ 
and 
inserting 
‘‘section
6662(d)(2)(C)(iii)’’.
(80) Subsection (a) of section 164 is amended
by striking the paragraphs relating to the genera-
tion-skipping tax and the environmental tax imposed
by section 59A and by inserting after paragraph (3)
the following new paragraphs:
‘‘(4) The GST tax imposed on income distribu-
tions.
‘‘(5) The environmental tax imposed by section
59A.’’