[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1389 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 1389

 To amend the Internal Revenue Code of 1986 to expand the availability 
      of, and amount of, deductible individual retirement account 
                 contributions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 4, 1995

  Mr. Hinchey (for himself, Mr. Sanders, Mr. Brown of California, Mr. 
  Frost, Mr. Fattah, Mr. Owens, Ms. Velazquez, Mr. Underwood, and Mr. 
  Martinez) introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to expand the availability 
      of, and amount of, deductible individual retirement account 
                 contributions, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Middle Class Flexible Savings Act of 
1995''.

SEC. 2. HIGHER MAXIMUM IRA DEDUCTION AND INCOME PHASEOUT LIMITS; 
              INFLATION ADJUSTMENT OF MAXIMUM IRA DEDUCTION AND 
              PHASEOUT LIMITS.

    (a) Higher Maximum IRA Deduction.--
            (1) In general.--The following provisions of the Internal 
        Revenue Code of 1986 are each amended by striking ``$2,000'' 
        and inserting ``$3,000'':
                    (A) Subsections (b)(1)(A) and (c)(2) of section 
                219.
                    (B) Subsections (a)(1), (b), and (j) of section 
                408.
            (2) Conforming amendment.--Sections 219(c)(2) and 408(d)(5) 
        of such Code are each amended by striking ``$2,250'' and 
        inserting ``$3,500''.
    (b) Higher Income Phaseout Limits.--
            (1) Subparagraph (B) of section 219(g)(3) of such Code is 
        amended--
                    (A) by striking ``$40,000'' and inserting 
                ``$60,000'', and
                    (B) by striking ``$25,000'' and inserting 
                ``$40,000''.
            (2) Clause (ii) of section 219(g)(2)(A) of such Code is 
        amended to read as follows:
                            ``(ii) $15,000.''
    (c) Inflation Adjustment of Maximum IRA Deduction and Income 
Phaseout Limits.--Section 219 of such Code is amended by inserting 
after subsection (f) the following new subsection:
    ``(g) Inflation Adjustment of Maximum Deduction and Income Phaseout 
Limits.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1995, each applicable dollar 
        amount shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment under section 
                1(f)(3) for the calendar year in which the taxable year 
                begins, determined by substituting `calendar year 1994' 
                for `calendar year 1992' in subparagraph (B) thereof.
            ``(2) Applicable dollar amount.--For purposes of paragraph 
        (1), the term `applicable dollar amount' means--
                    ``(A) the $3,000 amount in subsections (b)(1)(A), 
                (c)(2), and (c)(3) of this section and in subsections 
                (a)(1), (b), and (j) of section 408,
                    ``(B) the $3,500 amount in subsection (c)(2) of 
                this section and in section 408(d)(5),
                    ``(C) the $60,000 and $40,000 amounts in subsection 
                (g)(3)(B), and
                    ``(D) the $15,000 amount in subsection 
                (g)(2)(A)(ii).
            ``(3) 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.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 3. IRA FOR NONWORKING SPOUSE WITH YOUNG CHILDREN COMPUTED ON BASIS 
              OF COMPENSATION OF BOTH SPOUSES.

    (a) In General.--Subsection (c) of section 219 of the Internal 
Revenue Code of 1986 (relating to special rules for certain married 
individuals) is amended by adding at the end thereof the following new 
paragraph:
            ``(3) Higher limit for spouse with young children.--
                    ``(A) In general.--In the case of a qualifying 
                spouse, the amount allowable as a deduction under 
                paragraph (1) shall not exceed the lesser of--
                            ``(i) $3,000, or
                            ``(ii) 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 
                                individual's spouse for the taxable 
                                year reduced by the amount allowable as 
                                a deduction under subsection (a) to 
                                such spouse for such taxable year.
                    ``(B) Qualifying spouse.--For purposes of 
                subparagraph (A), the term `qualifying spouse' means 
                any spouse of an individual if--
                            ``(i) such individual and spouse file a 
                        joint return for the taxable year,
                            ``(ii) such spouse has less than $1,000 of 
                        compensation (determined without regard to 
                        section 911) for the taxable year, and
                            ``(iii) such spouse has a child (as defined 
                        in section 151(c)(3)) who has not attained age 
                        6 as of the close of such taxable year and who 
                        is a dependent (as defined in section 152) of 
                        the taxpayer for such year.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.

SEC. 4. PENALTY-FREE WITHDRAWALS FROM CERTAIN PLANS TO PAY EDUCATIONAL 
              EXPENSES, MEDICAL EXPENSES, BUSINESS START-UP EXPENSES, 
              AND FIRST-TIME HOMEBUYER EXPENSES.

    (a) Educational Expenses and Business Start-up Expenses.--
            (1) In general.--Paragraph (2) of section 72(t) of the 
        Internal Revenue Code of 1986 (relating to exceptions to 10-
        percent additional tax on early distributions from qualified 
        retirement plans) is amended by adding at the end thereof the 
        following new subparagraph:
                    ``(D) Distributions from certain plans for 
                educational expenses and business start-up expenses.--
                            ``(i) In general.--Distributions to an 
                        individual from an individual retirement plan, 
                        or from amounts attributable to employer 
                        contributions made pursuant to elective 
                        deferrals described in subparagraph (A) or (C) 
                        of section 402(g)(3) or section 
                        501(c)(18)(D)(iii) to the extent such 
                        distributions do not exceed the sum of--
                                    ``(I) the qualified higher 
                                education expenses (as defined in 
                                paragraph (6)) of the taxpayer for the 
                                taxable year, and
                                    ``(II) the start-up expenditures 
                                (as defined in section 195(c)) of the 
                                taxpayer for the taxable year.
                            ``(ii) Adjusted gross income limit.--Clause 
                        (i) shall apply to distributions from an 
                        individual retirement plan only if the adjusted 
                        gross income of the distributee for the taxable 
                        year in which the distribution occurs does not 
                        exceed--
                                    ``(I) $60,000 in the case of an 
                                unmarried individual,
                                    ``(II) $80,000 in the case of a 
                                joint return, and
                                    ``(III) $40,000 in the case of a 
                                married individual filing a separate 
                                return.''
            (2) Qualified higher education expenses defined.--Section 
        72(t) of such Code is amended by adding at the end thereof the 
        following new paragraph:
            ``(6) Qualified higher education expenses.--For purposes of 
        paragraph (2)(D)--
                    ``(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) a child (as defined in section 
                        151(c)(3)) of the taxpayer,
                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.''
    (b) Catastrophic Illness Expenses.--Subparagraph (A) of section 
72(t)(3) of such Code is amended to read as follows:
                    ``(A) Certain exceptions not to apply to individual 
                retirement plans.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), subparagraphs (A)(v), (B), and (C) 
                        of paragraph (2) shall not apply to 
                        distributions from an individual retirement 
                        plan.
                            ``(ii) Distributions for medical expenses 
                        from certain individual retirement plans.--
                        Subparagraph (B) of paragraph (2) shall apply 
                        to distributions from an individual retirement 
                        plan if the adjusted gross income of the 
                        distributee for the taxable year in which the 
                        distribution occurs does not exceed the 
                        applicable limitation under paragraph (2)(D).''
    (c) Penalty-Free Distributions for Certain Unemployed 
Individuals.--Paragraph (2) of section 72(t) of such Code (as amended 
by the preceding provisions of this section) is amended further by 
adding at the end the following new subparagraph:
                    ``(E) Distributions to unemployed individuals.--A 
                distribution from an individual retirement plan to an 
                individual after separation from employment, if--
                            ``(i) such individual has received 
                        unemployment compensation for 12 consecutive 
                        weeks under any Federal or State unemployment 
                        compensation law by reason of such separation, 
                        and
                            ``(ii) such distributions are made during 
                        any taxable year during which such unemployment 
                        compensation is paid or the succeeding taxable 
                        year.''
    (d) Expenses for First-Time Homebuyers.--
            (1) In general.--Paragraph (2) of section 72(t) of such 
        Code (as amended by the preceding provisions of this section) 
        is amended further by adding at the end the following new 
        subparagraph:
                    ``(F) Distributions from individual retirement 
                plans for first-time homebuyers.--
                            ``(i) In general.--Distributions to an 
                        individual from an individual retirement plan 
                        which are qualified first-time homebuyer 
                        distributions (as defined in paragraph (7)).
                            ``(ii) Adjusted gross income limit.--Clause 
                        (i) shall apply to distributions from an 
                        individual retirement plan only if the adjusted 
                        gross income of the distributee for the taxable 
                        year in which the distribution occurs does not 
                        exceed--
                                    ``(I) $60,000 in the case of an 
                                unmarried individual,
                                    ``(II) $80,000 in the case of a 
                                joint return, and
                                    ``(III) $40,000 in the case of a 
                                married individual filing a separate 
                                return.''
            (2) Definition.--Section 72(t) of such Code (as amended by 
        the preceding provisions of this section) is amended further by 
        adding at the end the following new paragraph:
            ``(7) Qualified first-time homebuyer distributions.--For 
        purposes of paragraph (2)(F)(i)--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer distribution' means any payment or 
                distribution received by an individual to the extent 
                such payment or distribution is used by the individual 
                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 of a first-time homebuyer who is such 
                individual or such individual's spouse.
                    ``(B) Qualified acquisition costs.--For purposes of 
                this paragraph, the term `qualified acquisition costs' 
                means the costs of acquiring, constructing, or 
                reconstructing a residence. Such term includes any 
                usual or reasonable settlement, financing, or other 
                closing costs.
                    ``(C) First-time homebuyer; other definitions.--For 
                purposes of this paragraph--
                            ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual if 
                        such individual (and if married, such 
                        individual's spouse) had no present ownership 
                        interest in a principal residence during the 
                        10-year period ending on the date of 
                        acquisition of the principal residence 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 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
                    ``(D) Special rule where delay in acquisition.--If 
                any distribution from any individual retirement plan 
                fails to meet the requirements of subparagraph (A) 
                solely by reason of a delay or cancellation of the 
                purchase or construction of the residence, the amount 
                of the distribution may be contributed to an individual 
                retirement plan as provided in section 408(d)(3)(A)(i) 
                (determined by substituting `120 days' for `60 days' in 
                such section), except that--
                            ``(i) section 408(d)(3)(B) shall not be 
                        applied to such contribution, and
                            ``(ii) such amount shall not be taken into 
                        account in determining whether section 
                        408(d)(3)(A)(i) applies to any other amount.''
    (e) Conforming Amendments.--
            (1) Section 401(k)(2)(B)(i) of such Code is amended by 
        striking ``or'' at the end of subclause (III), by striking 
        ``and'' at the end of subclause (IV) and inserting ``or'', and 
        by inserting after subclause (IV) the following new subclause:
                                    ``(V) the date on which 
                                distributions for qualified higher 
                                education expenses (as defined in 
                                section 72(t)(6)) or start-up expenses 
                                (as defined in section 195(c)) or 
                                qualified first-time homebuyer 
                                distributions (as defined in section 
                                72(t)(7)(A)) are made, and''.
            (2) Section 403(b)(11) of such Code is amended by striking 
        ``or'' at the end of subparagraph (A), by striking the period 
        at the end of subparagraph (B) and inserting ``, or'', and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) for the payment of qualified higher education 
                expenses (as defined in section 72(t)(6)), start-up 
                expenses (as defined in section 195(c)), or qualified 
                acquisition costs (as defined in section 72(t)(7)) with 
                respect to a principal residence (as so defined) of a 
                first-time homebuyer (as so defined).''
    (f) Effective Date.--The amendments made by this section shall 
apply to payments and distributions after the date of the enactment of 
this Act.

SEC. 5. MINIMUM TAX ON FOREIGN AND FOREIGN-OWNED CORPORATIONS.

    (a) In General.--Subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 (relating to determination of tax liability) is amended by 
adding at the end thereof the following new part:

     ``PART VIII--MINIMUM TAX ON CERTAIN FOREIGN AND FOREIGN-OWNED 
                              CORPORATIONS

                              ``Sec. 59B. Minimum tax on certain 
                                        foreign and foreign-owned 
                                        corporations.

``SEC. 59B. MINIMUM TAX ON CERTAIN FOREIGN AND FOREIGN-OWNED 
              CORPORATIONS.

    ``(a) Imposition of Tax.--In the case of a corporation to which 
this section applies, there is hereby imposed (in addition to any other 
tax imposed by this subtitle) a tax equal to the excess (if any) of--
            ``(1) 35 percent of the product of--
                    ``(A) 9 percent, and
                    ``(B) an amount equal to 75 percent of the gross 
                receipts of the taxpayer from the sale or leasing of 
                property manufactured by the taxpayer or by any foreign 
                person that is a related party of the taxpayer, over
            ``(2) the aggregate tax imposed under sections 11, 55, and 
        1201 for such year.
    ``(b) Taxpayers to Which Section Applies.--This section shall apply 
to a corporation for the taxable year if--
            ``(1) such corporation is--
                    ``(A) a domestic corporation which is 25-percent 
                foreign-owned, or
                    ``(B) a foreign corporation engaged in a trade or 
                business within the United States, and
            ``(2) the gross receipts from the sale or leasing of 
        property manufactured by such corporation or by any foreign 
        person that is a related party of such corporation are greater 
        than the lesser of--
                    ``(A) $2,000,000, or
                    ``(B) an amount equal to 10 percent of the total 
                gross receipts of such corporation.
    ``(c) Definitions.--For purposes of this section, the term `25-
percent foreign-owned', `foreign person', and `related party' have the 
respective meanings given such terms by section 6038A(c).''
    (b) Clerical Amendment.--The table of parts for such subchapter A 
is amended by adding at the end thereof the following new item:

                              ``Part VIII. Minimum tax on certain 
                                        foreign and foreign-owned 
                                        corporations.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.
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