[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3448 Engrossed in House (EH)]
2d Session
H. R. 3448
_______________________________________________________________________
AN ACT
To provide tax relief for small businesses, to protect jobs, to create
opportunities, to increase the take home pay of workers, to amend the
Portal-to-Portal Act of 1947 relating to the payment of wages to
employees who use employer owned vehicles, and to amend the Fair Labor
Standards Act of 1938 to increase the minimum wage rate and to prevent
job loss by providing flexibility to employers in complying with
minimum wage and overtime requirements under that Act.
104th CONGRESS
2d Session
H. R. 3448
_______________________________________________________________________
AN ACT
To provide tax relief for small businesses, to protect jobs, to create
opportunities, to increase the take home pay of workers, to amend the
Portal-to-Portal Act of 1947 relating to the payment of wages to
employees who use employer owned vehicles, and to amend the Fair Labor
Standards Act of 1938 to increase the minimum wage rate and to prevent
job loss by providing flexibility to employers in complying with
minimum wage and overtime requirements under that Act.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Business Job
Protection Act of 1996''.
(b) Table of Contents.--
TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS
Sec. 1101. Amendment of 1986 Code.
Sec. 1102. Underpayments of estimated tax.
Subtitle A--Expensing; Etc.
Sec. 1111. Increase in expense treatment for small businesses.
Sec. 1112. Treatment of employee tips.
Sec. 1113. Treatment of storage of product samples.
Sec. 1114. Treatment of certain charitable risk pools.
Sec. 1115. Treatment of dues paid to agricultural or horticultural
organizations.
Sec. 1116. Clarification of employment tax status of certain fishermen;
information reporting.
Subtitle B--Extension of Certain Expiring Provisions
Sec. 1201. Work opportunity tax credit.
Sec. 1202. Employer-provided educational assistance programs.
Sec. 1203. FUTA exemption for alien agricultural workers.
Subtitle C--Provisions Relating to S Corporations
Sec. 1301. S corporations permitted to have 75 shareholders.
Sec. 1302. Electing small business trusts.
Sec. 1303. Expansion of post-death qualification for certain trusts.
Sec. 1304. Financial institutions permitted to hold safe harbor debt.
Sec. 1305. Rules relating to inadvertent terminations and invalid
elections.
Sec. 1306. Agreement to terminate year.
Sec. 1307. Expansion of post-termination transition period.
Sec. 1308. S corporations permitted to hold subsidiaries.
Sec. 1309. Treatment of distributions during loss years.
Sec. 1310. Treatment of S corporations under subchapter C.
Sec. 1311. Elimination of certain earnings and profits.
Sec. 1312. Carryover of disallowed losses and deductions under at-risk
rules allowed.
Sec. 1313. Adjustments to basis of inherited S stock to reflect certain
items of income.
Sec. 1314. S corporations eligible for rules applicable to real
property subdivided for sale by
noncorporate taxpayers.
Sec. 1315. Effective date.
Subtitle D--Pension Simplification
Chapter 1--Simplified Distribution Rules
Sec. 1401. Repeal of 5-year income averaging for lump-sum
distributions.
Sec. 1402. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 1403. Simplified method for taxing annuity distributions under
certain employer plans.
Sec. 1404. Required distributions.
Chaptsubchapter a--simple savings plansPlans
Sec. 1421. Establishment of savings incentive match plans for employees
of small employers.
Sec. 1422. Extension subchapter b--other provisionsgements.
Sec. 1426. Tax-exempt organizations eligible under section 401(k).
Chapter 3--Nondiscrimination Provisions
Sec. 1431. Definition of highly compensated employees; repeal of family
aggregation.
Sec. 1432. Modification of additional participation requirements.
Sec. 1433. Nondiscrimination rules for qualified cash or deferred
arrangements and matching contributions.
Sec. 1434. Definition of compensation for section 415 purposes.
Chapter 4--Miscellaneous Provisions
Sec. 1441. Plans covering self-employed individuals.
Sec. 1442. Elimination of special vesting rule for multiemployer plans.
Sec. 1443. Distributions under rural cooperative plans.
Sec. 1444. Treatment of governmental plans under section 415.
Sec. 1445. Uniform retirement age.
Sec. 1446. Contributions on behalf of disabled employees.
Sec. 1447. Treatment of deferred compensation plans of State and local
governments and tax-exempt organizations.
Sec. 1448. Trust requirement for deferred compensation plans of State
and local governments.
Sec. 1449. Transition rule for computing maximum benefits under section
415 limitations.
Sec. 1450. Modifications of section 403(b).
Sec. 1451. Waiver of minimum period for joint and survivor annuity
explanation before annuity starting date.
Sec. 1452. Repeal of limitation in case of defined benefit plan and
defined contribution plan for same
employee; excess distributions.
Sec. 1453. Tax on prohibited transactions.
Sec. 1454. Treatment of leased employees.
Sec. 1455. Uniform penalty provisions to apply to certain pension
reporting requirements.
Sec. 1456. Retirement benefits of ministers not subject to tax on net
earnings from self-employment.
Sec. 1457. Date for adoption of plan amendments.
Subtitle E--Foreign Simplification
Sec. 1501. Repeal of inclusion of certain earnings invested in excess
passive assets.
Subtitle F--Revenue Offsets
Sec. 1601. Termination of Puerto Rico and possession tax credit.
Sec. 1602. Repeal of exclusion for interest on loans used to acquire
employer securities.
Sec. 1603. Certain amounts derived from foreign corporations treated as
unrelated business taxable income.
Sec. 1604. Depreciation under income forecast method.
Sec. 1605. Repeal of exclusion for punitive damages and for damages not
attributable to physical injuries or
sickness.
Sec. 1606. Repeal of diesel fuel tax rebate to purchasers of diesel-
powered automobiles and light trucks.
Subtitle G--Technical Corrections
Sec. 1701. Coordination with other subtitles.
Sec. 1702. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 1703. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 1704. Miscellaneous provisions.
TITLE II--PAYMENT OF WAGES
Section 1. Short title.
Sec. 2. Proper compensation for use of employer vehicles.
Sec. 3. Effective date.
Sec. 4. Minimum wage increase.
Sec. 5. Fair Labor Standards Act Amendments.
TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS
SEC. 1101. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this title an
amendment 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 provision of the Internal Revenue Code of
1986.
SEC. 1102. UNDERPAYMENTS OF ESTIMATED TAX.
No addition to the tax shall be made under section 6654 or 6655 of
the Internal Revenue Code of 1986 (relating to failure to pay estimated
tax) with respect to any underpayment of an installment required to be
paid before the date of the enactment of this Act to the extent such
underpayment was created or increased by any provision of this title.
Subtitle A--Expensing; Etc.
SEC. 1111. 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:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed the following applicable amount:
``If the taxable year
The applicable
begins in:
amount is:
1996............................... $18,500
1997............................... 19,000
1998............................... 20,000
1999............................... 21,000
2000............................... 22,000
2001............................... 23,000
2002............................... 23,500
2003 or thereafter................. 25,000.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1995.
SEC. 1112. TREATMENT OF EMPLOYEE TIPS.
(a) Employee Cash Tips.--
(1) Reporting requirement not considered.--Subparagraph (A)
of section 45B(b)(1) (relating to excess employer social
security tax) is amended by inserting ``(without regard to
whether such tips are reported under section 6053)'' after
``section 3121(q)''.
(2) Taxes paid.--Subsection (d) of section 13443 of the
Revenue Reconciliation Act of 1993 is amended by inserting ``,
with respect to services performed before, on, or after such
date'' after ``1993''.
(3) Effective date.--The amendments made by this subsection
shall take effect as if included in the amendments made by, and
the provisions of, section 13443 of the Revenue Reconciliation
Act of 1993.
(b) Tips for Employees Delivering Food or Beverages.--
(1) In general.--Paragraph (2) of section 45B(b) is amended
to read as follows:
``(2) Only tips received for food or beverages taken into
account.--In applying paragraph (1), there shall be taken into
account only tips received from customers in connection with
the delivering or serving of food or beverages for consumption
if the tipping of employees delivering or serving food or
beverages by customers is customary.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to tips received for services performed after
December 31, 1996.
SEC. 1113. TREATMENT OF STORAGE OF PRODUCT SAMPLES.
(a) In General.--Paragraph (2) of section 280A(c) is amended by
striking ``inventory'' and inserting ``inventory or product samples''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1995.
SEC. 1114. TREATMENT OF CERTAIN CHARITABLE RISK POOLS.
(a) General Rule.--Section 501 (relating to exemption from tax on
corporations, certain trusts, etc.) is amended by redesignating
subsection (n) as subsection (o) and by inserting after subsection (m)
the following new subsection:
``(n) Charitable Risk Pools.--
``(1) In general.--For purposes of this title--
``(A) a qualified charitable risk pool shall be
treated as an organization organized and operated
exclusively for charitable purposes, and
``(B) subsection (m) shall not apply to a qualified
charitable risk pool.
``(2) Qualified charitable risk pool.--For purposes of this
subsection, the term `qualified charitable risk pool' means any
organization--
``(A) which is organized and operated solely to
pool insurable risks of its members (other than risks
related to medical malpractice) and to provide
information to its members with respect to loss control
and risk management,
``(B) which is comprised solely of members that are
organizations described in subsection (c)(3) and exempt
from tax under subsection (a), and
``(C) which meets the organizational requirements
of paragraph (3).
``(3) Organizational requirements.--An organization
(hereinafter in this subsection referred to as the `risk pool')
meets the organizational requirements of this paragraph if--
``(A) such risk pool is organized as a nonprofit
organization under State law provisions authorizing
risk pooling arrangements for charitable organizations,
``(B) such risk pool is exempt from any income tax
imposed by the State (or will be so exempt after such
pool qualifies as an organization exempt from tax under
this title),
``(C) such risk pool has obtained at least
$1,000,000 in startup capital from nonmember charitable
organizations,
``(D) such risk pool is controlled by a board of
directors elected by its members, and
``(E) the organizational documents of such risk
pool require that--
``(i) each member of such pool shall at all
times be an organization described in
subsection (c)(3) and exempt from tax under
subsection (a),
``(ii) any member which receives a final
determination that it no longer qualifies as an
organization described in subsection (c)(3)
shall immediately notify the pool of such
determination and the effective date of such
determination, and
``(iii) each policy of insurance issued by
the risk pool shall provide that such policy
will not cover the insured with respect to
events occurring after the date such final
determination was issued to the insured.
An organization shall not cease to qualify as a qualified
charitable risk pool solely by reason of the failure of any of
its members to continue to be an organization described in
subsection (c)(3) if, within a reasonable period of time after
such pool is notified as required under subparagraph (C)(ii),
such pool takes such action as may be reasonably necessary to
remove such member from such pool.
``(4) Other definitions.--For purposes of this subsection--
``(A) Startup capital.--The term `startup capital'
means any capital contributed to, and any program-
related investments (within the meaning of section
4944(c)) made in, the risk pool before such pool
commences operations.
``(B) Nonmember charitable organization.--The term
`nonmember charitable organization' means any
organization which is described in subsection (c)(3)
and exempt from tax under subsection (a) and which is
not a member of the risk pool and does not benefit
(directly or indirectly) from the insurance coverage
provided by the pool to its members.''
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 1115. TREATMENT OF DUES PAID TO AGRICULTURAL OR HORTICULTURAL
ORGANIZATIONS.
(a) General Rule.--Section 512 (defining unrelated business taxable
income) is amended by adding at the end thereof the following new
subsection:
``(d) Treatment of Dues of Agricultural or Horticultural
Organizations.--
``(1) In general.--If--
``(A) an agricultural or horticultural organization
described in section 501(c)(5) requires annual dues to
be paid in order to be a member of such organization,
and
``(B) the amount of such required annual dues does
not exceed $100,
in no event shall any portion of such dues be treated as
derived by such organization from an unrelated trade or
business by reason of any benefits or privileges to which
members of such organization are entitled.
``(2) Indexation of $100 amount.--In the case of any
taxable year beginning in a calendar year after 1995, the $100
amount in paragraph (1) shall be increased by an amount equal
to--
``(A) $100, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, by substituting `calendar year
1994' for `calendar year 1992' in subparagraph (B)
thereof.
``(3) Dues.--For purposes of this subsection, the term
`dues' includes any payment required to be made in order to be
recognized by the organization as a member of the
organization.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1994.
SEC. 1116. CLARIFICATION OF EMPLOYMENT TAX STATUS OF CERTAIN FISHERMEN;
INFORMATION REPORTING.
(a) Clarification of Employment Tax Status.--
(1) Amendments of internal revenue code of 1986.--
(A) Determination of size of crew.--Subsection (b)
of section 3121 (defining employment) is amended by
adding at the end thereof the following new sentence:
``For purposes of paragraph (20), the operating crew of a boat shall be
treated as normally made up of fewer than 10 individuals if the average
size of the operating crew on trips made during the preceding 4
calendar quarters consisted of fewer than 10 individuals.''.
(B) Certain cash remuneration permitted.--
Subparagraph (A) of section 3121(b)(20) is amended to
read as follows:
``(A) such individual does not receive any cash
remuneration other than as provided in subparagraph (B)
and other than cash remuneration--
``(i) which does not exceed $100 per trip;
``(ii) which is contingent on a minimum
catch; and
``(iii) which is paid solely for additional
duties (such as mate, engineer, or cook) for
which additional cash remuneration is
traditional in the industry,''.
(C) Conforming amendment.--Section 6050A(a) is
amended by striking ``and'' at the end of paragraph
(3), by striking the period at the end of paragraph (4)
and inserting ``; and'', and by adding at the end
thereof the following new paragraph:
``(5) any cash remuneration described in section
3121(b)(20)(A).''.
(2) Amendment of social security act.--
(A) Determination of size of crew.--Subsection (a)
of section 210 of the Social Security Act is amended by
adding at the end thereof the following new sentence:
``For purposes of paragraph (20), the operating crew of a boat shall be
treated as normally made up of fewer than 10 individuals if the average
size of the operating crew on trips made during the preceding 4
calendar quarters consisted of fewer than 10 individuals.''.
(B) Certain cash remuneration permitted.--
Subparagraph (A) of section 210(a)(20) of such Act is
amended to read as follows:
``(A) such individual does not receive any
additional compensation other than as provided in
subparagraph (B) and other than cash remuneration--
``(i) which does not exceed $100 per trip;
``(ii) which is contingent on a minimum
catch; and
``(iii) which is paid solely for additional
duties (such as mate, engineer, or cook) for
which additional cash remuneration is
traditional in the industry,''.
(3) Effective date.--
(A) In general.--The amendments made by this
subsection shall apply to remuneration paid after
December 31, 1996.
(B) Special rule.--The amendments made by this
subsection (other than paragraph (1)(C)) shall also
apply to remuneration paid after December 31, 1984, and
before January 1, 1997, unless the payor treated such
remuneration (when paid) as being subject to tax under
chapter 21 of the Internal Revenue Code of 1986.
(b) Information Reporting.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 68 (relating to information concerning transactions
with other persons) is amended by adding at the end the
following new section:
``SEC. 6050Q. RETURNS RELATING TO CERTAIN PURCHASES OF FISH.
``(a) Requirement of Reporting.--Every person--
``(1) who is engaged in the trade or business of purchasing
fish for resale from any person engaged in the trade or
business of catching fish; and
``(2) who makes payments in cash in the course of such
trade or business to such a person of $600 or more during any
calendar year for the purchase of fish,
shall make a return (at such times as the Secretary may prescribe)
described in subsection (b) with respect to each person to whom such a
payment was made during such calendar year.
``(b) Return.--A return is described in this subsection if such
return--
``(1) is in such form as the Secretary may prescribe, and
``(2) contains--
``(A) the name, address, and TIN of each person to
whom a payment described in subsection (a)(2) was made
during the calendar year;
``(B) the aggregate amount of such payments made to
such person during such calendar year and the date and
amount of each such payment, and
``(C) such other information as the Secretary may
require.
``(c) Statement To Be Furnished With Respect to Whom Information is
Required.--Every person required to make a return under subsection (a)
shall furnish to each person whose name is required to be set forth in
such return a written statement showing--
``(1) the name and address of the person required to make
such a return, and
``(2) the aggregate amount of payments to the person
required to be shown on the return.
The written statement required under the preceding sentence shall be
furnished to the person on or before January 31 of the year following
the calendar year for which the return under subsection (a) is required
to be made.
``(d) Definitions.--For purposes of this section:
``(1) Cash.--The term `cash' has the meaning given such
term by section 6050I(d).
``(2) Fish.--The term `fish' includes other forms of
aquatic life.''.
(2) Technical amendments.--
(A) Subparagraph (A) of section 6724(d)(1) is
amended by striking ``or'' at the end of clause (vi),
by striking ``and'' at the end of clause (vii) and
inserting ``or'', and by adding at the end the
following new clause:
``(viii) section 6050Q (relating to returns
relating to certain purchases of fish), and''.
(B) Paragraph (2) of section 6724(d) is amended by
redesignating subparagraphs (Q) through (T) as
subparagraphs (R) through (U), respectively, and by
inserting after subparagraph (P) the following new
subparagraph:
``(Q) section 6050Q(c) (relating to returns
relating to certain purchases of fish),''.
(C) The table of sections for subpart B of part III
of subchapter A of chapter 68 is amended by adding at
the end the following new item:
``Sec. 6050Q. Returns relating to certain purchases of fish.''.
(3) Effective date.--The amendments made by this subsection
shall apply to payments made after December 31, 1996.
Subtitle B--Extension of Certain Expiring Provisions
SEC. 1201. WORK OPPORTUNITY TAX CREDIT.
(a) Amount of Credit.--Subsection (a) of section 51 (relating to
amount of credit) is amended by striking ``40 percent'' and inserting
``35 percent''.
(b) Members of Targeted Groups.--Subsection (d) of section 51 is
amended to read as follows:
``(d) Members of Targeted Groups.--For purposes of this subpart--
``(1) In general.--An individual is a member of a targeted
group if such individual is--
``(A) a qualified IV-A recipient,
``(B) a qualified veteran,
``(C) a qualified ex-felon,
``(D) a high-risk youth,
``(E) a vocational rehabilitation referral, or
``(F) a qualified summer youth employee.
``(2) Qualified iv-a recipient.--
``(A) In general.--The term `qualified IV-A
recipient' means any individual who is certified by the
designated local agency as being a member of a family
receiving assistance under a IV-A program for at least
a 9-month period ending during the 9-month period
ending on the hiring date.
``(B) IV-A program.--For purposes of this
paragraph, the term `IV-A program' means any program
providing assistance under a State plan approved under
part A of title IV of the Social Security Act (relating
to assistance for needy families with minor children)
and any successor of such program.
``(3) Qualified veteran.--
``(A) In general.--The term `qualified veteran'
means any veteran who is certified by the designated
local agency as being--
``(i) a member of a family receiving
assistance under a IV-A program (as defined in
paragraph (2)(B)) for at least a 9-month period
ending during the 12-month period ending on the
hiring date, or
``(ii) a member of a family receiving
assistance under a food stamp program under the
Food Stamp Act of 1977 for at least a 3-month
period ending during the 12-month period ending
on the hiring date.
``(B) Veteran.--For purposes of subparagraph (A),
the term `veteran' means any individual who is
certified by the designated local agency as--
``(i)(I) having served on active duty
(other than active duty for training) in the
Armed Forces of the United States for a period
of more than 180 days, or
``(II) having been discharged or released
from active duty in the Armed Forces of the
United States for a service-connected
disability, and
``(ii) not having any day during the 60-day
period ending on the hiring date which was a
day of extended active duty in the Armed Forces
of the United States.
For purposes of clause (ii), the term `extended active
duty' means a period of more than 90 days during which
the individual was on active duty (other than active
duty for training).
``(4) Qualified ex-felon.--The term `qualified ex-felon'
means any individual who is certified by the designated local
agency--
``(A) as having been convicted of a felony under
any statute of the United States or any State,
``(B) as having a hiring date which is not more
than 1 year after the last date on which such
individual was so convicted or was released from
prison, and
``(C) as being a member of a family which had an
income during the 6 months immediately preceding the
earlier of the month in which such income determination
occurs or the month in which the hiring date occurs,
which, on an annual basis, would be 70 percent or less
of the Bureau of Labor Statistics lower living
standard.
Any determination under subparagraph (C) shall be valid for the
45-day period beginning on the date such determination is made.
``(5) High-risk youth.--
``(A) In general.--The term `high-risk youth' means
any individual who is certified by the designated local
agency--
``(i) as having attained age 18 but not age
25 on the hiring date, and
``(ii) as having his principal place of
abode within an empowerment zone or enterprise
community.
``(B) Youth must continue to reside in zone.--In
the case of a high-risk youth, the term `qualified
wages' shall not include wages paid or incurred for
services performed while such youth's principal place
of abode is outside an empowerment zone or enterprise
community.
``(6) Vocational rehabilitation referral.--The term
`vocational rehabilitation referral' means any individual who
is certified by the designated local agency as--
``(A) having a physical or mental disability which,
for such individual, constitutes or results in a
substantial handicap to employment, and
``(B) having been referred to the employer upon
completion of (or while receiving) rehabilitative
services pursuant to--
``(i) an individualized written
rehabilitation plan under a State plan for
vocational rehabilitation services approved
under the Rehabilitation Act of 1973, or
``(ii) a program of vocational
rehabilitation carried out under chapter 31 of
title 38, United States Code.
``(7) Qualified summer youth employee.--
``(A) In general.--The term `qualified summer youth
employee' means any individual--
``(i) who performs services for the
employer between May 1 and September 15,
``(ii) who is certified by the designated
local agency as having attained age 16 but not
18 on the hiring date (or if later, on May 1 of
the calendar year involved),
``(iii) who has not been an employee of the
employer during any period prior to the 90-day
period described in subparagraph (B)(i), and
``(iv) who is certified by the designated
local agency as having his principal place of
abode within an empowerment zone or enterprise
community.
``(B) Special rules for determining amount of
credit.--For purposes of applying this subpart to wages
paid or incurred to any qualified summer youth
employee--
``(i) subsection (b)(2) shall be applied by
substituting `any 90-day period between May 1
and September 15' for `the 1-year period
beginning with the day the individual begins
work for the employer', and
``(ii) subsection (b)(3) shall be applied
by substituting `$3,000' for `$6,000'.
The preceding sentence shall not apply to an individual
who, with respect to the same employer, is certified as
a member of another targeted group after such
individual has been a qualified summer youth employee.
``(C) Youth must continue to reside in zone.--
Paragraph (5)(B) shall apply for purposes of this
paragraph.
``(8) Hiring date.--The term `hiring date' means the day
the individual is hired by the employer.
``(9) Designated local agency.--The term `designated local
agency' means a State employment security agency established in
accordance with the Act of June 6, 1933, as amended (29 U.S.C.
49-49n).
``(10) Special rules for certifications.--
``(A) In general.--An individual shall not be
treated as a member of a targeted group unless--
``(i) on or before the day on which such
individual begins work for the employer, the
employer has received a certification from a
designated local agency that such individual is
a member of a targeted group, or
``(ii)(I) on or before the day the
individual is offered employment with the
employer, a pre-screening notice is completed
by the employer with respect to such
individual, and
``(II) not later than the 14th day after
the individual begins work for the employer,
the employer submits such notice, signed by the
employer and the individual under penalties of
perjury, to the designated local agency as part
of a written request for such a certification
from such agency.
For purposes of this paragraph, the term `pre-screening
notice' means a document (in such form as the Secretary
shall prescribe) which contains information provided by
the individual on the basis of which the employer
believes that the individual is a member of a targeted
group.
``(B) Incorrect certifications.--If--
``(i) an individual has been certified by a
designated local agency as a member of a
targeted group, and
``(ii) such certification is incorrect
because it was based on false information
provided by such individual,
the certification shall be revoked and wages paid by
the employer after the date on which notice of
revocation is received by the employer shall not be
treated as qualified wages.
``(C) Explanation of denial of request.--If a
designated local agency denies a request for
certification of membership in a targeted group, such
agency shall provide to the person making such request
a written explanation of the reasons for such
denial.''.
(c) Minimum Employment Period.--Paragraph (3) of section 51(i)
(relating to certain individuals ineligible) is amended to read as
follows:
``(3) Individuals not meeting minimum employment period.--
No wages shall be taken into account under subsection (a) with
respect to any individual unless such individual either--
``(A) is employed by the employer at least 180 days
(20 days in the case of a qualified summer youth
employee), or
``(B) has completed at least 500 hours (120 hours
in the case of a qualified summer youth employee) of
services performed for the employer.''.
(d) Termination.--Paragraph (4) of section 51(c) (relating to wages
defined) is amended to read as follows:
``(4) Termination.--The term `wages' shall not include any
amount paid or incurred to an individual who begins work for
the employer--
``(A) after December 31, 1994, and before July 1,
1996, or
``(B) after June 30, 1997.''.
(e) Redesignation of Credit.--
(1) Sections 38(b)(2) and 51(a) are each amended by
striking ``targeted jobs credit'' and inserting ``work
opportunity credit''.
(2) The subpart heading for subpart F of part IV of
subchapter A of chapter 1 is amended by striking ``Targeted
Jobs Credit'' and inserting ``Work Opportunity Credit''.
(3) The table of subparts for such part IV is amended by
striking ``targeted jobs credit'' and inserting ``work
opportunity credit''.
(4) The heading for paragraph (3) of section 1396(c) is
amended by striking ``targeted jobs credit'' and inserting
``work opportunity credit''.
(f) Technical Amendment.--Paragraph (1) of section 51(c) is amended
by striking ``, subsection (d)(8)(D),''.
(g) Effective Date.--The amendments made by this section shall
apply to individuals who begin work for the employer after June 30,
1996.
SEC. 1202. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE PROGRAMS.
(a) Extension.--Subsection (d) of section 127 (relating to
educational assistance programs) is amended by striking ``December 31,
1994'' and inserting ``December 31, 1996''.
(b) Limitation to Education Below Graduate Level.--The last
sentence of section 127(c)(1) is amended by inserting before the period
``or at the graduate level''.
(c) Effective Dates.--
(1) Extension.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1994.
(2) Limitation.--The amendment made by subsection (b) shall
apply to taxable years beginning after December 31, 1995.
(3) Expedited procedures.--The Secretary of the Treasury
shall establish expedited procedures for the refund of any
overpayment of taxes imposed by chapter 24 of the Internal
Revenue Code of 1986 which is attributable to amounts excluded
from gross income during 1995 or 1996 under section 127 of such
Code, including procedures waiving the requirement that an
employer obtain an employee's signature where the employer
demonstrates to the satisfaction of the Secretary that any
refund collected by the employer on behalf of the employee will
be paid to the employee.
SEC. 1203. FUTA EXEMPTION FOR ALIEN AGRICULTURAL WORKERS.
(a) In General.--Subparagraph (B) of section 3306(c)(1) (defining
employment) is amended by striking ``before January 1, 1995,''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to services performed after December 31, 1994.
Subtitle C--Provisions Relating to S Corporations
SEC. 1301. S CORPORATIONS PERMITTED TO HAVE 75 SHAREHOLDERS.
Subparagraph (A) of section 1361(b)(1) (defining small business
corporation) is amended by striking ``35 shareholders'' and inserting
``75 shareholders''.
SEC. 1302. ELECTING SMALL BUSINESS TRUSTS.
(a) General Rule.--Subparagraph (A) of section 1361(c)(2) (relating
to certain trusts permitted as shareholders) is amended by inserting
after clause (iv) the following new clause:
``(v) An electing small business trust.''.
(b) Current Beneficiaries Treated as Shareholders.--Subparagraph
(B) of section 1361(c)(2) is amended by adding at the end the following
new clause:
``(v) In the case of a trust described in
clause (v) of subparagraph (A), each potential
current beneficiary of such trust shall be
treated as a shareholder; except that, if for
any period there is no potential current
beneficiary of such trust, such trust shall be
treated as the shareholder during such
period.''.
(c) Electing Small Business Trust Defined.--Section 1361 (defining
S corporation) is amended by adding at the end the following new
subsection:
``(e) Electing Small Business Trust Defined.--
``(1) Electing small business trust.--For purposes of this
section--
``(A) In general.--Except as provided in
subparagraph (B), the term `electing small business
trust' means any trust if--
``(i) such trust does not have as a
beneficiary any person other than (I) an
individual, (II) an estate, or (III) an
organization described in paragraph (2), (3),
(4), or (5) of section 170(c) which holds a
contingent interest and is not a potential
current beneficiary,
``(ii) no interest in such trust was
acquired by purchase, and
``(iii) an election under this subsection
applies to such trust.
``(B) Certain trusts not eligible.--The term
`electing small business trust' shall not include--
``(i) any qualified subchapter S trust (as
defined in subsection (d)(3)) if an election
under subsection (d)(2) applies to any
corporation the stock of which is held by such
trust, and
``(ii) any trust exempt from tax under this
subtitle.
``(C) Purchase.--For purposes of subparagraph (A),
the term `purchase' means any acquisition if the basis
of the property acquired is determined under section
1012.
``(2) Potential current beneficiary.--For purposes of this
section, the term `potential current beneficiary' means, with
respect to any period, any person who at any time during such
period is entitled to, or at the discretion of any person may
receive, a distribution from the principal or income of the
trust. If a trust disposes of all of the stock which it holds
in an S corporation, then, with respect to such corporation,
the term `potential current beneficiary' does not include any
person who first met the requirements of the preceding sentence
during the 60-day period ending on the date of such
disposition.
``(3) Election.--An election under this subsection shall be
made by the trustee. Any such election shall apply to the
taxable year of the trust for which made and all subsequent
taxable years of such trust unless revoked with the consent of
the Secretary.
``(4) Cross reference.--
``For special treatment of electing
small business trusts, see section 641(d).''.
(d) Taxation of Electing Small Business Trusts.--Section 641
(relating to imposition of tax on trusts) is amended by adding at the
end the following new subsection:
``(d) Special Rules for Taxation of Electing Small Business
Trusts.--
``(1) In general.--For purposes of this chapter--
``(A) the portion of any electing small business
trust which consists of stock in 1 or more S
corporations shall be treated as a separate trust, and
``(B) the amount of the tax imposed by this chapter
on such separate trust shall be determined with the
modifications of paragraph (2).
``(2) Modifications.--For purposes of paragraph (1), the
modifications of this paragraph are the following:
``(A) Except as provided in section 1(h), the
amount of the tax imposed by section 1(e) shall be
determined by using the highest rate of tax set forth
in section 1(e).
``(B) The exemption amount under section 55(d)
shall be zero.
``(C) The only items of income, loss, deduction, or
credit to be taken into account are the following:
``(i) The items required to be taken into
account under section 1366.
``(ii) Any gain or loss from the
disposition of stock in an S corporation.
``(iii) To the extent provided in
regulations, State or local income taxes or
administrative expenses to the extent allocable
to items described in clauses (i) and (ii).
No deduction or credit shall be allowed for any amount
not described in this paragraph, and no item described
in this paragraph shall be apportioned to any
beneficiary.
``(D) No amount shall be allowed under paragraph
(1) or (2) of section 1211(b).
``(3) Treatment of remainder of trust and distributions.--
For purposes of determining--
``(A) the amount of the tax imposed by this chapter
on the portion of any electing small business trust not
treated as a separate trust under paragraph (1), and
``(B) the distributable net income of the entire
trust,
the items referred to in paragraph (2)(C) shall be excluded.
Except as provided in the preceding sentence, this subsection
shall not affect the taxation of any distribution from the
trust.
``(4) Treatment of unused deductions where termination of
separate trust.--If a portion of an electing small business
trust ceases to be treated as a separate trust under paragraph
(1), any carryover or excess deduction of the separate trust
which is referred to in section 642(h) shall be taken into
account by the entire trust.
``(5) Electing small business trust.--For purposes of this
subsection, the term `electing small business trust' has the
meaning given such term by section 1361(e)(1).''.
(e) Technical Amendment.--Paragraph (1) of section 1366(a) is
amended by inserting ``, or of a trust or estate which terminates,''
after ``who dies''.
SEC. 1303. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN TRUSTS.
Subparagraph (A) of section 1361(c)(2) (relating to certain trusts
permitted as shareholders) is amended--
(1) by striking ``60-day period'' each place it appears in
clauses (ii) and (iii) and inserting ``2-year period'', and
(2) by striking the last sentence in clause (ii).
SEC. 1304. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE HARBOR DEBT.
Clause (iii) of section 1361(c)(5)(B) (defining straight debt) is
amended by striking ``or a trust described in paragraph (2)'' and
inserting ``a trust described in paragraph (2), or a person which is
actively and regularly engaged in the business of lending money''.
SEC. 1305. RULES RELATING TO INADVERTENT TERMINATIONS AND INVALID
ELECTIONS.
(a) General Rule.--Subsection (f) of section 1362 (relating to
inadvertent terminations) is amended to read as follows:
``(f) Inadvertent Invalid Elections or Terminations.--If--
``(1) an election under subsection (a) by any corporation--
``(A) was not effective for the taxable year for
which made (determined without regard to subsection
(b)(2)) by reason of a failure to meet the requirements
of section 1361(b) or to obtain shareholder consents,
or
``(B) was terminated under paragraph (2) or (3) of
subsection (d),
``(2) the Secretary determines that the circumstances
resulting in such ineffectiveness or termination were
inadvertent,
``(3) no later than a reasonable period of time after
discovery of the circumstances resulting in such
ineffectiveness or termination, steps were taken--
``(A) so that the corporation is a small business
corporation, or
``(B) to acquire the required shareholder consents,
and
``(4) the corporation, and each person who was a
shareholder in the corporation at any time during the period
specified pursuant to this subsection, agrees to make such
adjustments (consistent with the treatment of the corporation
as an S corporation) as may be required by the Secretary with
respect to such period,
then, notwithstanding the circumstances resulting in such
ineffectiveness or termination, such corporation shall be treated as an
S corporation during the period specified by the Secretary.''.
(b) Late Elections, Etc.--Subsection (b) of section 1362 is amended
by adding at the end the following new paragraph:
``(5) Authority to treat late elections, etc., as timely.--
If--
``(A) an election under subsection (a) is made for
any taxable year (determined without regard to
paragraph (3)) after the date prescribed by this
subsection for making such election for such taxable
year or no such election is made for any taxable year,
and
``(B) the Secretary determines that there was
reasonable cause for the failure to timely make such
election,
the Secretary may treat such an election as timely made for
such taxable year (and paragraph (3) shall not apply).''.
(c) Effective Date.--The amendments made by subsection (a) and (b)
shall apply with respect to elections for taxable years beginning after
December 31, 1982.
SEC. 1306. AGREEMENT TO TERMINATE YEAR.
Paragraph (2) of section 1377(a) (relating to pro rata share) is
amended to read as follows:
``(2) Election to terminate year.--
``(A) In general.--Under regulations prescribed by
the Secretary, if any shareholder terminates the
shareholder's interest in the corporation during the
taxable year and all affected shareholders and the
corporation agree to the application of this paragraph,
paragraph (1) shall be applied to the affected
shareholders as if the taxable year consisted of 2
taxable years the first of which ends on the date of
the termination.
``(B) Affected shareholders.--For purposes of
subparagraph (A), the term `affected shareholders'
means the shareholder whose interest is terminated and
all shareholders to whom such shareholder has
transferred shares during the taxable year. If such
shareholder has transferred shares to the corporation,
the term `affected shareholders' shall include all
persons who are shareholders during the taxable
year.''.
SEC. 1307. EXPANSION OF POST-TERMINATION TRANSITION PERIOD.
(a) In General.--Paragraph (1) of section 1377(b) (relating to
post-termination transition period) is amended by striking ``and'' at
the end of subparagraph (A), by redesignating subparagraph (B) as
subparagraph (C), and by inserting after subparagraph (A) the following
new subparagraph:
``(B) the 120-day period beginning on the date of
any determination pursuant to an audit of the taxpayer
which follows the termination of the corporation's
election and which adjusts a subchapter S item of
income, loss, or deduction of the corporation arising
during the S period (as defined in section 1368(e)(2)),
and''.
(b) Determination Defined.--Paragraph (2) of section 1377(b) is
amended by striking subparagraphs (A) and (B), by redesignating
subparagraph (C) as subparagraph (B), and by inserting before
subparagraph (B) (as so redesignated) the following new subparagraph:
``(A) a determination as defined in section
1313(a), or''.
(c) Repeal of Special Audit Provisions for Subchapter S Items.--
(1) General rule.--Subchapter D of chapter 63 (relating to
tax treatment of subchapter S items) is hereby repealed.
(2) Consistent treatment required.--Section 6037 (relating
to return of S corporation) is amended by adding at the end the
following new subsection:
``(c) Shareholder's Return Must Be Consistent With Corporate Return
or Secretary Notified of Inconsistency.--
``(1) In general.--A shareholder of an S corporation shall,
on such shareholder's return, treat a subchapter S item in a
manner which is consistent with the treatment of such item on
the corporate return.
``(2) Notification of inconsistent treatment.--
``(A) In general.--In the case of any subchapter S
item, if--
``(i)(I) the corporation has filed a return
but the shareholder's treatment on his return
is (or may be) inconsistent with the treatment
of the item on the corporate return, or
``(II) the corporation has not filed a
return, and
``(ii) the shareholder files with the
Secretary a statement identifying the
inconsistency,
paragraph (1) shall not apply to such item.
``(B) Shareholder receiving incorrect
information.--A shareholder shall be treated as having
complied with clause (ii) of subparagraph (A) with
respect to a subchapter S item if the shareholder--
``(i) demonstrates to the satisfaction of
the Secretary that the treatment of the
subchapter S item on the shareholder's return
is consistent with the treatment of the item on
the schedule furnished to the shareholder by
the corporation, and
``(ii) elects to have this paragraph apply
with respect to that item.
``(3) Effect of failure to notify.--In any case--
``(A) described in subparagraph (A)(i)(I) of
paragraph (2), and
``(B) in which the shareholder does not comply with
subparagraph (A)(ii) of paragraph (2),
any adjustment required to make the treatment of the items by
such shareholder consistent with the treatment of the items on
the corporate return shall be treated as arising out of
mathematical or clerical errors and assessed according to
section 6213(b)(1). Paragraph (2) of section 6213(b) shall not
apply to any assessment referred to in the preceding sentence.
``(4) Subchapter s item.--For purposes of this subsection,
the term `subchapter S item' means any item of an S corporation
to the extent that regulations prescribed by the Secretary
provide that, for purposes of this subtitle, such item is more
appropriately determined at the corporation level than at the
shareholder level.
``(5) Addition to tax for failure to comply with section.--
``For addition to tax in the case of a
shareholder's negligence in connection with, or disregard of, the
requirements of this section, see part II of subchapter A of chapter
68.''.
(3) Conforming amendments.--
(A) Section 1366 is amended by striking subsection
(g).
(B) Subsection (b) of section 6233 is amended to
read as follows:
``(b) Similar Rules in Certain Cases.--If a partnership return is
filed for any taxable year but it is determined that there is no entity
for such taxable year, to the extent provided in regulations, rules
similar to the rules of subsection (a) shall apply.''.
(C) The table of subchapters for chapter 63 is
amended by striking the item relating to subchapter D.
SEC. 1308. S CORPORATIONS PERMITTED TO HOLD SUBSIDIARIES.
(a) In General.--Paragraph (2) of section 1361(b) (defining
ineligible corporation) is amended by striking subparagraph (A) and by
redesignating subparagraphs (B), (C), (D), and (E) as subparagraphs
(A), (B), (C), and (D), respectively.
(b) Treatment of Certain Wholly Owned S Corporation Subsidiaries.--
Section 1361(b) (defining small business corporation) is amended by
adding at the end the following new paragraph:
``(3) Treatment of certain wholly owned subsidiaries.--
``(A) In general.--For purposes of this title--
``(i) a corporation which is a qualified
subchapter S subsidiary shall not be treated as
a separate corporation, and
``(ii) all assets, liabilities, and items
of income, deduction, and credit of a qualified
subchapter S subsidiary shall be treated as
assets, liabilities, and such items (as the
case may be) of the S corporation.
``(B) Qualified subchapter s subsidiary.--For
purposes of this paragraph, the term `qualified
subchapter S subsidiary' means any domestic corporation
which is not an ineligible corporation (as defined in
paragraph (2)), if--
``(i) 100 percent of the stock of such
corporation is held by the S corporation, and
``(ii) the S corporation elects to treat
such corporation as a qualified subchapter S
subsidiary.
``(C) Treatment of terminations of qualified
subchapter s subsidiary status.--For purposes of this
title, if any corporation which was a qualified
subchapter S subsidiary ceases to meet the requirements
of subparagraph (B), such corporation shall be treated
as a new corporation acquiring all of its assets (and
assuming all of its liabilities) immediately before
such cessation from the S corporation in exchange for
its stock.''.
(c) Certain Dividends Not Treated as Passive Investment Income.--
Paragraph (3) of section 1362(d) is amended by adding at the end the
following new subparagraph:
``(F) Treatment of certain dividends.--If an S
corporation holds stock in a C corporation meeting the
requirements of section 1504(a)(2), the term `passive
investment income' shall not include dividends from
such C corporation to the extent such dividends are
attributable to the earnings and profits of such C
corporation derived from the active conduct of a trade
or business.''.
(d) Conforming Amendments.--
(1) Subsection (c) of section 1361 is amended by striking
paragraph (6).
(2) Subsection (b) of section 1504 (defining includible
corporation) is amended by adding at the end the following new
paragraph:
``(8) An S corporation.''.
SEC. 1309. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.
(a) Adjustments for Distributions Taken Into Account Before
Losses.--
(1) Subparagraph (A) of section 1366(d)(1) (relating to
losses and deductions cannot exceed shareholder's basis in
stock and debt) is amended by striking ``paragraph (1)'' and
inserting ``paragraphs (1) and (2)(A)''.
(2) Subsection (d) of section 1368 (relating to certain
adjustments taken into account) is amended by adding at the end
the following new sentence:
``In the case of any distribution made during any taxable year, the
adjusted basis of the stock shall be determined with regard to the
adjustments provided in paragraph (1) of section 1367(a) for the
taxable year.''.
(b) Accumulated Adjustments Account.--Paragraph (1) of section
1368(e) (relating to accumulated adjustments account) is amended by
adding at the end the following new subparagraph:
``(C) Net loss for year disregarded.--
``(i) In general.--In applying this section to
distributions made during any taxable year, the amount
in the accumulated adjustments account as of the close
of such taxable year shall be determined without regard
to any net negative adjustment for such taxable year.
``(ii) Net negative adjustment.--For purposes of
clause (i), the term `net negative adjustment' means,
with respect to any taxable year, the excess (if any)
of--
``(I) the reductions in the account for the
taxable year (other than for distributions),
over
``(II) the increases in such account for
such taxable year.''.
(c) Conforming Amendments.--Subparagraph (A) of section 1368(e)(1)
is amended--
(1) by striking ``as provided in subparagraph (B)'' and
inserting ``as otherwise provided in this paragraph'', and
(2) by striking ``section 1367(b)(2)(A)'' and inserting
``section 1367(a)(2)''.
SEC. 1310. TREATMENT OF S CORPORATIONS UNDER SUBCHAPTER C.
Subsection (a) of section 1371 (relating to application of
subchapter C rules) is amended to read as follows:
``(a) Application of Subchapter C Rules.--Except as otherwise
provided in this title, and except to the extent inconsistent with this
subchapter, subchapter C shall apply to an S corporation and its
shareholders.''.
SEC. 1311. ELIMINATION OF CERTAIN EARNINGS AND PROFITS.
(a) In General.--If--
(1) a corporation was an electing small business
corporation under subchapter S of chapter 1 of the Internal
Revenue Code of 1986 for any taxable year beginning before
January 1, 1983, and
(2) such corporation is an S corporation under subchapter S
of chapter 1 of such Code for its first taxable year beginning
after December 31, 1996,
the amount of such corporation's accumulated earnings and profits (as
of the beginning of such first taxable year) shall be reduced by an
amount equal to the portion (if any) of such accumulated earnings and
profits which were accumulated in any taxable year beginning before
January 1, 1983, for which such corporation was an electing small
business corporation under such subchapter S.
(b) Conforming Amendments.--
(1) Paragraph (3) of section 1362(d), as amended by section
1308, is amended--
(A) by striking ``subchapter c'' in the paragraph
heading and inserting ``accumulated'',
(B) by striking ``subchapter C'' in subparagraph
(A)(i)(I) and inserting ``accumulated'', and
(C) by striking subparagraph (B) and redesignating
the following subparagraphs accordingly.
(2)(A) Subsection (a) of section 1375 is amended by
striking ``subchapter C'' in paragraph (1) and inserting
``accumulated''.
(B) Paragraph (3) of section 1375(b) is amended to read as
follows:
``(3) Passive investment income, etc.--The terms `passive
investment income' and `gross receipts' have the same
respective meanings as when used in paragraph (3) of section
1362(d).''.
(C) The section heading for section 1375 is amended by
striking ``subchapter c'' and inserting ``accumulated''.
(D) The table of sections for part III of subchapter S of
chapter 1 is amended by striking ``subchapter C'' in the item
relating to section 1375 and inserting ``accumulated''.
(3) Clause (i) of section 1042(c)(4)(A) is amended by
striking ``section 1362(d)(3)(D)'' and inserting ``section
1362(d)(3)(C)''.
SEC. 1312. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS UNDER AT-RISK
RULES ALLOWED.
Paragraph (3) of section 1366(d) (relating to carryover of
disallowed losses and deductions to post-termination transition period)
is amended by adding at the end the following new subparagraph:
``(D) At-risk limitations.--To the extent that any
increase in adjusted basis described in subparagraph
(B) would have increased the shareholder's amount at
risk under section 465 if such increase had occurred on
the day preceding the commencement of the post-
termination transition period, rules similar to the
rules described in subparagraphs (A) through (C) shall
apply to any losses disallowed by reason of section
465(a).''.
SEC. 1313. ADJUSTMENTS TO BASIS OF INHERITED S STOCK TO REFLECT CERTAIN
ITEMS OF INCOME.
(a) In General.--Subsection (b) of section 1367 (relating to
adjustments to basis of stock of shareholders, etc.) is amended by
adding at the end the following new paragraph:
``(4) Adjustments in case of inherited stock.--
``(A) In general.--If any person acquires stock in
an S corporation by reason of the death of a decedent
or by bequest, devise, or inheritance, section 691
shall be applied with respect to any item of income of
the S corporation in the same manner as if the decedent
had held directly his pro rata share of such item.
``(B) Adjustments to basis.--The basis determined
under section 1014 of any stock in an S corporation
shall be reduced by the portion of the value of the
stock which is attributable to items constituting
income in respect of the decedent.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply in the case of decedents dying after the date of the enactment of
this Act.
SEC. 1314. S CORPORATIONS ELIGIBLE FOR RULES APPLICABLE TO REAL
PROPERTY SUBDIVIDED FOR SALE BY NONCORPORATE TAXPAYERS.
(a) In General.--Subsection (a) of section 1237 (relating to real
property subdivided for sale) is amended by striking ``other than a
corporation'' in the material preceding paragraph (1) and inserting
``other than a C corporation''.
(b) Conforming Amendment.--Subparagraph (A) of section 1237(a)(2)
is amended by inserting ``an S corporation which included the taxpayer
as a shareholder,'' after ``controlled by the taxpayer,''.
SEC. 1315. EFFECTIVE DATE.
(a) In General.--Except as otherwise provided in this subtitle, the
amendments made by this subtitle shall apply to taxable years beginning
after December 31, 1996.
(b) Treatment of Certain Elections Under Prior Law.--For purposes
of section 1362(g) of the Internal Revenue Code of 1986 (relating to
election after termination), any termination under section 1362(d) of
such Code in a taxable year beginning before January 1, 1997, shall not
be taken into account.
Subtitle D--Pension Simplification
CHAPTER 1--SIMPLIFIED DISTRIBUTION RULES
SEC. 1401. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM
DISTRIBUTIONS.
(a) In General.--Subsection (d) of section 402 (relating to
taxability of beneficiary of employees' trust) is amended to read as
follows:
``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension,
or profit-sharing trust which would qualify for exemption from tax
under section 501(a) except for the fact that it is a trust created or
organized outside the United States shall be treated as if it were a
trust exempt from tax under section 501(a).''.
(b) Conforming Amendments.--
(1) Subparagraph (D) of section 402(e)(4) (relating to
other rules applicable to exempt trusts) is amended to read as
follows:
``(D) Lump-sum distribution.--For purposes of this
paragraph--
``(i) In general.--The term `lump sum
distribution' means the distribution or payment
within one taxable year of the recipient of the
balance to the credit of an employee which
becomes payable to the recipient--
``(I) on account of the employee's
death,
``(II) after the employee attains
age 59\1/2\,
``(III) on account of the
employee's separation from service, or
``(IV) after the employee has
become disabled (within the meaning of
section 72(m)(7)),
from a trust which forms a part of a plan
described in section 401(a) and which is exempt
from tax under section 501 or from a plan
described in section 403(a). Subclause (III) of
this clause shall be applied only with respect
to an individual who is an employee without
regard to section 401(c)(1), and subclause (IV)
shall be applied only with respect to an
employee within the meaning of section
401(c)(1). For purposes of this clause, a
distribution to two or more trusts shall be
treated as a distribution to one recipient. For
purposes of this paragraph, the balance to the
credit of the employee does not include the
accumulated deductible employee contributions
under the plan (within the meaning of section
72(o)(5)).
``(ii) Aggregation of certain trusts and
plans.--For purposes of determining the balance
to the credit of an employee under clause (i)--
``(I) all trusts which are part of
a plan shall be treated as a single
trust, all pension plans maintained by
the employer shall be treated as a
single plan, all profit-sharing plans
maintained by the employer shall be
treated as a single plan, and all stock
bonus plans maintained by the employer
shall be treated as a single plan, and
``(II) trusts which are not
qualified trusts under section 401(a)
and annuity contracts which do not
satisfy the requirements of section
404(a)(2) shall not be taken into
account.
``(iii) Community property laws.--The
provisions of this paragraph shall be applied
without regard to community property laws.
``(iv) Amounts subject to penalty.--This
paragraph shall not apply to amounts described
in subparagraph (A) of section 72(m)(5) to the
extent that section 72(m)(5) applies to such
amounts.
``(v) Balance to credit of employee not to
include amounts payable under qualified
domestic relations order.--For purposes of this
paragraph, the balance to the credit of an
employee shall not include any amount payable
to an alternate payee under a qualified
domestic relations order (within the meaning of
section 414(p)).
``(vi) Transfers to cost-of-living
arrangement not treated as distribution.--For
purposes of this paragraph, the balance to the
credit of an employee under a defined
contribution plan shall not include any amount
transferred from such defined contribution plan
to a qualified cost-of-living arrangement
(within the meaning of section 415(k)(2)) under
a defined benefit plan.
``(vii) Lump-sum distributions of alternate
payees.--If any distribution or payment of the
balance to the credit of an employee would be
treated as a lump-sum distribution, then, for
purposes of this paragraph, the payment under a
qualified domestic relations order (within the
meaning of section 414(p)) of the balance to
the credit of an alternate payee who is the
spouse or former spouse of the employee shall
be treated as a lump-sum distribution. For
purposes of this clause, the balance to the
credit of the alternate payee shall not include
any amount payable to the employee.''.
(2) Section 402(c) (relating to rules applicable to
rollovers from exempt trusts) is amended by striking paragraph
(10).
(3) Paragraph (1) of section 55(c) (defining regular tax)
is amended by striking ``shall not include any tax imposed by
section 402(d) and''.
(4) Paragraph (8) of section 62(a) (relating to certain
portion of lump-sum distributions from pension plans taxed
under section 402(d)) is hereby repealed.
(5) Section 401(a)(28)(B) (relating to coordination with
distribution rules) is amended by striking clause (v).
(6) Subparagraph (B)(ii) of section 401(k)(10) (relating to
distributions that must be lump-sum distributions) is amended
to read as follows:
``(ii) Lump-sum distribution.--For purposes
of this subparagraph, the term `lump-sum
distribution' has the meaning given such term
by section 402(e)(4)(D) (without regard to
subclauses (I), (II), (III), and (IV) of clause
(i) thereof).''.
(7) Section 406(c) (relating to termination of status as
deemed employee not to be treated as separation from service
for purposes of limitation of tax) is hereby repealed.
(8) Section 407(c) (relating to termination of status as
deemed employee not to be treated as separation from service
for purposes of limitation of tax) is hereby repealed.
(9) Section 691(c) (relating to deduction for estate tax)
is amended by striking paragraph (5).
(10) Paragraph (1) of section 871(b) (relating to
imposition of tax) is amended by striking ``section 1, 55, or
402(d)(1)'' and inserting ``section 1 or 55''.
(11) Subsection (b) of section 877 (relating to alternative
tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and
inserting ``section 1 or 55''.
(12) Section 4980A(c)(4) is amended--
(A) by striking ``to which an election under
section 402(d)(4)(B) applies'' and inserting ``(as
defined in section 402(e)(4)(D)) with respect to which
the individual elects to have this paragraph apply'',
(B) by adding at the end the following new flush
sentence:
``An individual may elect to have this paragraph apply to only
one lump-sum distribution.'', and
(C) by striking the heading and inserting:
``(4) Special one-time election.--''.
(13) Section 402(e) is amended by striking paragraph (5).
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.
(2) Retention of certain transition rules.--Notwithstanding
any other provision of this section, the amendments made by
this section shall not apply to any distribution for which the
taxpayer elects the benefits of section 1122 (h)(3) or (h)(5)
of the Tax Reform Act of 1986. For purposes of the preceding
sentence, the rules of sections 402(c)(10) and 402(d) of the
Internal Revenue Code of 1986 (as in effect before the
amendments made by this Act) shall apply.
SEC. 1402. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS.
(a) In General.--Subsection (b) of section 101 is hereby repealed.
(b) Conforming Amendments.--
(1) Subsection (c) of section 101 is amended by striking
``subsection (a) or (b)'' and inserting ``subsection (a)''.
(2) Sections 406(e) and 407(e) are each amended by striking
paragraph (2) and by redesignating paragraph (3) as paragraph
(2).
(3) Section 7701(a)(20) is amended by striking ``, for the
purpose of applying the provisions of section 101(b) with
respect to employees' death benefits''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to decedents dying after the date of the enactment
of this Act.
SEC. 1403. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER
CERTAIN EMPLOYER PLANS.
(a) General Rule.--Subsection (d) of section 72 (relating to
annuities; certain proceeds of endowment and life insurance contracts)
is amended to read as follows:
``(d) Special Rules for Qualified Employer Retirement Plans.--
``(1) Simplified method of taxing annuity payments.--
``(A) In general.--In the case of any amount
received as an annuity under a qualified employer
retirement plan--
``(i) subsection (b) shall not apply, and
``(ii) the investment in the contract shall
be recovered as provided in this paragraph.
``(B) Method of recovering investment in
contract.--
``(i) In general.--Gross income shall not
include so much of any monthly annuity payment
under a qualified employer retirement plan as
does not exceed the amount obtained by
dividing--
``(I) the investment in the
contract (as of the annuity starting
date), by
``(II) the number of anticipated
payments determined under the table
contained in clause (iii) (or, in the
case of a contract to which subsection
(c)(3)(B) applies, the number of
monthly annuity payments under such
contract).
``(ii) Certain rules made applicable.--
Rules similar to the rules of paragraphs (2)
and (3) of subsection (b) shall apply for
purposes of this paragraph.
``(iii) Number of anticipated payments.--
``If the age of the
primary annuitant on
The number
the annuity starting
of anticipated
date is:
payments is:
Not more than 55...... 360
More than 55 but not 310
more than 60.
More than 60 but not 260
more than 65.
More than 65 but not 210
more than 70.
More than 70.......... 160.
``(C) Adjustment for refund feature not
applicable.--For purposes of this paragraph, investment
in the contract shall be determined under subsection
(c)(1) without regard to subsection (c)(2).
``(D) Special rule where lump sum paid in
connection with commencement of annuity payments.--If,
in connection with the commencement of annuity payments
under any qualified employer retirement plan, the
taxpayer receives a lump sum payment--
``(i) such payment shall be taxable under
subsection (e) as if received before the
annuity starting date, and
``(ii) the investment in the contract for
purposes of this paragraph shall be determined
as if such payment had been so received.
``(E) Exception.--This paragraph shall not apply in
any case where the primary annuitant has attained age
75 on the annuity starting date unless there are fewer
than 5 years of guaranteed payments under the annuity.
``(F) Adjustment where annuity payments not on
monthly basis.--In any case where the annuity payments
are not made on a monthly basis, appropriate
adjustments in the application of this paragraph shall
be made to take into account the period on the basis of
which such payments are made.
``(G) Qualified employer retirement plan.--For
purposes of this paragraph, the term `qualified
employer retirement plan' means any plan or contract
described in paragraph (1), (2), or (3) of section
4974(c).
``(2) Treatment of employee contributions under defined
contribution plans.--For purposes of this section, employee
contributions (and any income allocable thereto) under a
defined contribution plan may be treated as a separate
contract.''.
(b) Effective Date.--The amendment made by this section shall apply
in cases where the annuity starting date is after the 90th day after
the date of the enactment of this Act.
SEC. 1404. REQUIRED DISTRIBUTIONS.
(a) In General.--Section 401(a)(9)(C) (defining required beginning
date) is amended to read as follows:
``(C) Required beginning date.--For purposes of
this paragraph--
``(i) In general.--The term `required
beginning date' means April 1 of the calendar
year following the later of--
``(I) the calendar year in which
the employee attains age 70\1/2\, or
``(II) the calendar year in which
the employee retires.
``(ii) Exception.--Subclause (II) of clause
(i) shall not apply--
``(I) except as provided in section
409(d), in the case of an employee who
is a 5-percent owner (as defined in
section 416) with respect to the plan
year ending in the calendar year in
which the employee attains age 70\1/2\,
or
``(II) for purposes of section 408
(a)(6) or (b)(3).
``(iii) Actuarial adjustment.--In the case
of an employee to whom clause (i)(II) applies
who retires in a calendar year after the
calendar year in which the employee attains age
70\1/2\, the employee's accrued benefit shall
be actuarially increased to take into account
the period after age 70\1/2\ in which the
employee was not receiving any benefits under
the plan.
``(iv) Exception for governmental and
church plans.--Clauses (ii) and (iii) shall not
apply in the case of a governmental plan or
church plan. For purposes of this clause, the
term `church plan' means a plan maintained by a
church for church employees, and the term
`church' means any church (as defined in
section 3121(w)(3)(A)) or qualified church-
controlled organization (as defined in section
3121(w)(3)(B)).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 1996.
CHAPTER 2--INCREASED ACCESS TO PENSION PLANS
Subchapter A--Simple Savings Plans
SEC. 1421. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES
OF SMALL EMPLOYERS.
(a) In General.--Section 408 (relating to individual retirement
accounts) is amended by redesignating subsection (p) as subsection (q)
and by inserting after subsection (o) the following new subsection:
``(p) Simple Retirement Accounts.--
``(1) In general.--For purposes of this title, the term
`simple retirement account' means an individual retirement plan
(as defined in section 7701(a)(37))--
``(A) with respect to which the requirements of
paragraphs (3), (4), and (5) are met; and
``(B) with respect to which the only contributions
allowed are contributions under a qualified salary
reduction arrangement.
``(2) Qualified salary reduction arrangement.--
``(A) In general.--For purposes of this subsection,
the term `qualified salary reduction arrangement' means
a written arrangement of an eligible employer under
which--
``(i) an employee eligible to participate
in the arrangement may elect to have the
employer make payments--
``(I) as elective employer
contributions to a simple retirement
account on behalf of the employee, or
``(II) to the employee directly in
cash,
``(ii) the amount which an employee may
elect under clause (i) for any year is required
to be expressed as a percentage of compensation
and may not exceed a total of $6,000 for any
year,
``(iii) the employer is required to make a
matching contribution to the simple retirement
account for any year in an amount equal to so
much of the amount the employee elects under
clause (i)(I) as does not exceed the applicable
percentage of compensation for the year, and
``(iv) no contributions may be made other
than contributions described in clause (i) or
(iii).
``(B) Employer may elect 2-percent nonelective
contribution.--An employer shall be treated as meeting
the requirements of subparagraph (A)(iii) for any year
if, in lieu of the contributions described in such
clause, the employer elects to make nonelective
contributions of 2 percent of compensation for each
employee who is eligible to participate in the
arrangement and who has at least $5,000 of compensation
from the employer for the year. If an employer makes an
election under this subparagraph for any year, the
employer shall notify employees of such election within
a reasonable period of time before the 30-day period
for such year under paragraph (5)(C).
``(C) Definitions.--For purposes of this
subsection--
``(i) Eligible employer.--The term
`eligible employer' means an employer who
employs 100 or fewer employees on any day
during the year.
``(ii) Applicable percentage.--
``(I) In general.--The term
`applicable percentage' means 3
percent.
``(II) Election of lower
percentage.--An employer may elect to
apply a lower percentage (not less than
1 percent) for any year for all
employees eligible to participate in
the plan for such year if the employer
notifies the employees of such lower
percentage within a reasonable period
of time before the 30-day election
period for such year under paragraph
(5)(C). An employer may not elect a
lower percentage under this subclause
for any year if that election would
result in the applicable percentage
being lower than 3 percent in more than
2 of the years in the 5-year period
ending with such year.
``(III) Special rule for years
arrangement not in effect.--If any year
in the 5-year period described in
subclause (II) is a year prior to the
first year for which any qualified
salary reduction arrangement is in
effect with respect to the employer (or
any predecessor), the employer shall be
treated as if the level of the employer
matching contribution was at 3 percent
of compensation for such prior year.
``(D) Arrangement may be only plan of employer.--
``(i) In general.--An arrangement shall not
be treated as a qualified salary reduction
arrangement for any year if the employer (or
any predecessor employer) maintained a
qualified plan with respect to which
contributions were made, or benefits were
accrued, for service in any year in the period
beginning with the year such arrangement became
effective and ending with the year for which
the determination is being made.
``(ii) Qualified plan.--For purposes of
this subparagraph, the term `qualified plan'
means a plan, contract, pension, or trust
described in subparagraph (A) or (B) of section
219(g)(5).
``(E) Cost-of-living adjustment.--The Secretary
shall adjust the $6,000 amount under subparagraph
(A)(ii) at the same time and in the same manner as
under section 415(d), except that the base period taken
into account shall be the calendar quarter ending
September 30, 1995, and any increase under this
subparagraph which is not a multiple of $500 shall be
rounded to the next lower multiple of $500.
``(3) Vesting requirements.--The requirements of this
paragraph are met with respect to a simple retirement account
if the employee's rights to any contribution to the simple
retirement account are nonforfeitable. For purposes of this
paragraph, rules similar to the rules of subsection (k)(4)
shall apply.
``(4) Participation requirements.--
``(A) In general.--The requirements of this
paragraph are met with respect to any simple retirement
account for a year only if, under the qualified salary
reduction arrangement, all employees of the employer
who--
``(i) received at least $5,000 in
compensation from the employer during any 2
preceding years, and
``(ii) are reasonably expected to receive
at least $5,000 in compensation during the
year,
are eligible to make the election under paragraph
(2)(A)(i) or receive the nonelective contribution
described in paragraph (2)(B).
``(B) Excludable employees.--An employer may elect
to exclude from the requirement under subparagraph (A)
employees described in section 410(b)(3).
``(5) Administrative requirements.--The requirements of
this paragraph are met with respect to any simplified
retirement account if, under the qualified salary reduction
arrangement--
``(A) an employer must--
``(i) make the elective employer
contributions under paragraph (2)(A)(i) not
later than the close of the 30-day period
following the last day of the month with
respect to which the contributions are to be
made, and
``(ii) make the matching contributions
under paragraph (2)(A)(iii) or the
nonelective contributions under paragraph
(2)(B) not later than the date described in
section 404(m)(2)(B),
``(B) an employee may elect to terminate
participation in such arrangement at any time during
the year, except that if an employee so terminates, the
arrangement may provide that the employee may not elect
to resume participation until the beginning of the next
year, and
``(C) each employee eligible to participate may
elect, during the 30-day period before the beginning of
any year (and the 30-day period before the first day
such employee is eligible to participate), to
participate in the arrangement, or to modify the
amounts subject to such arrangement, for such year.
``(6) Definitions.--For purposes of this subsection--
``(A) Compensation.--
``(i) In general.--The term `compensation'
means amounts described in paragraphs (3) and
(8) of section 6051(a).
``(ii) Self-employed.--In the case of an
employee described in subparagraph (B), the
term `compensation' means net earnings from
self-employment determined under section
1402(a) without regard to any contribution
under this subsection.
``(B) Employee.--The term `employee' includes an
employee as defined in section 401(c)(1).
``(C) Year.--The term `year' means the calendar
year.''.
(b) Tax Treatment of Simple Retirement Accounts.--
(1) Deductibility of contributions by employees.--
(A) Section 219(b) (relating to maximum amount of
deduction) is amended by adding at the end the
following new paragraph:
``(4) Special rule for simple retirement accounts.--This
section shall not apply with respect to any amount contributed
to a simple retirement account established under section
408(p).''.
(B) Section 219(g)(5)(A) (defining active
participant) is amended by striking ``or'' at the end
of clause (iv) and by adding at the end the following
new clause:
``(vi) any simple retirement account
(within the meaning of section 408(p)), or''.
(2) Deductibility of employer contributions.--Section 404
(relating to deductions for contributions of an employer to
pension, etc. plans) is amended by adding at the end the
following new subsection:
``(m) Special Rules for Simple Retirement Accounts.--
``(1) In general.--Employer contributions to a simple
retirement account shall be treated as if they are made to a
plan subject to the requirements of this section.
``(2) Timing.--
``(A) Deduction.--Contributions described in
paragraph (1) shall be deductible in the taxable year
of the employer with or within which the calendar year
for which the contributions were made ends.
``(B) Contributions after end of year.--For
purposes of this subsection, contributions shall be
treated as made for a taxable year if they are made on
account of the taxable year and are made not later than
the time prescribed by law for filing the return for
the taxable year (including extensions thereof).''.
(3) Contributions and distributions.--
(A) Section 402 (relating to taxability of
beneficiary of employees' trust) is amended by adding
at the end the following new subsection:
``(k) Treatment of Simple Retirement Accounts.--Rules similar to
the rules of paragraphs (1) and (3) of subsection (h) shall apply to
contributions and distributions with respect to a simple retirement
account under section 408(p).''.
(B) Section 408(d)(3) is amended by adding at the
end the following new subparagraph:
``(G) Simple retirement accounts.--This paragraph
shall not apply to any amount paid or distributed out
of a simple retirement account (as defined in section
408(p)) unless--
``(i) it is paid into another simple
retirement account, or
``(ii) in the case of any payment or
distribution to which section 72(t)(8) does not
apply, it is paid into an individual retirement
plan.''.
(C) Clause (i) of section 457(c)(2)(B) is amended
by striking ``section 402(h)(1)(B)'' and inserting
``section 402(h)(1)(B) or (k)''.
(4) Penalties.--
(A) Early withdrawals.--Section 72(t) (relating to
additional tax in early distributions), as amended by
this Act, is amended by adding at the end the following
new paragraph:
``(6) Special rules for simple retirement accounts.--In the
case of any amount received from a simple retirement account
(within the meaning of section 408(p)) during the 2-year period
beginning on the date such individual first participated in any
qualified salary reduction arrangement maintained by the
individual's employer under section 408(p)(2), paragraph (1)
shall be applied by substituting `25 percent' for `10
percent'.''.
(B) Failure to report.--Section 6693 is amended by
redesignating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new
subsection:
``(c) Penalties Relating to Simple Retirement Accounts.--
``(1) Employer penalties.--An employer who fails to provide
1 or more notices required by section 408(l)(2)(C) shall pay a
penalty of $50 for each day on which such failures continue.
``(2) Trustee penalties.--A trustee who fails--
``(A) to provide 1 or more statements required by
the last sentence of section 408(i) shall pay a penalty
of $50 for each day on which such failures continue, or
``(B) to provide 1 or more summary descriptions
required by section 408(l)(2)(B) shall pay a penalty of
$50 for each day on which such failures continue.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection with respect to any failure which
the taxpayer shows was due to reasonable cause.''.
(5) Reporting requirements.--
(A) Section 408(l) is amended by adding at the end
the following new paragraph:
``(2) Simple retirement accounts.--
``(A) No employer reports.--Except as provided in
this paragraph, no report shall be required under this
section by an employer maintaining a qualified salary
reduction arrangement under subsection (p).
``(B) Summary description.--The trustee of any
simple retirement account established pursuant to a
qualified salary reduction arrangement under subsection
(p) shall provide to the employer maintaining the
arrangement, each year a description containing the
following information:
``(i) The name and address of the employer
and the trustee.
``(ii) The requirements for eligibility for
participation.
``(iii) The benefits provided with respect
to the arrangement.
``(iv) The time and method of making
elections with respect to the arrangement.
``(v) The procedures for, and effects of,
withdrawals (including rollovers) from the
arrangement.
``(C) Employee notification.--The employer shall
notify each employee immediately before the period for
which an election described in subsection (p)(5)(C) may
be made of the employee's opportunity to make such
election. Such notice shall include a copy of the
description described in subparagraph (B).''.
(B) Section 408(l) is amended by striking ``An
employer'' and inserting the following:
``(1) In general.--An employer''.
(6) Reporting requirements.--Section 408(i) is amended by
adding at the end the following new flush sentence:
``In the case of a simple retirement account under subsection (p), only
one report under this subsection shall be required to be submitted each
calendar year to the Secretary (at the time provided under paragraph
(2)) but, in addition to the report under this subsection, there shall
be furnished, within 30 days after each calendar year, to the
individual on whose behalf the account is maintained a statement with
respect to the account balance as of the close of, and the account
activity during, such calendar year.''.
(7) Exemption from top-heavy plan rules.--Section 416(g)(4)
(relating to special rules for top-heavy plans) is amended by
adding at the end the following new subparagraph:
``(G) Simple retirement accounts.--The term `top-
heavy plan' shall not include a simple retirement
account under section 408(p).''.
(8) Employment taxes.--
(A) Paragraph (5) of section 3121(a) is amended by
striking ``or'' at the end of subparagraph (F), by
inserting ``or'' at the end of subparagraph (G), and by
adding at the end the following new subparagraph:
``(H) under an arrangement to which section 408(p)
applies, other than any elective contributions under
paragraph (2)(A)(i) thereof,''.
(B) Section 209(a)(4) of the Social Security Act is amended
by inserting ``, or (J) under an arrangement to which section
408(p) of such Code applies, other than any elective
contributions under paragraph (2)(A)(i) thereof'' before the
semicolon at the end thereof.
(C) Paragraph (5) of section 3306(b) is amended by striking
``or'' at the end of subparagraph (F), by inserting ``or'' at
the end of subparagraph (G), and by adding at the end the
following new subparagraph:
``(H) under an arrangement to which section 408(p)
applies, other than any elective contributions under
paragraph (2)(A)(i) thereof,''.
(D) Paragraph (12) of section 3401(a) is amended by adding
the following new subparagraph:
``(D) under an arrangement to which section 408(p)
applies; or''.
(9) Conforming amendments.--
(A) Section 280G(b)(6) is amended by striking
``or'' at the end of subparagraph (B), by striking the
period at the end of subparagraph (C) and inserting ``,
or'' and by adding after subparagraph (C) the following
new subparagraph:
``(D) a simple retirement account described in
section 408(p).''.
(B) Section 402(g)(3) is amended by striking
``and'' at the end of subparagraph (B), by striking the
period at the end of subparagraph (C) and inserting ``,
and'', and by adding after subparagraph (C) the
following new subparagraph:
``(D) any elective employer contribution under
section 408(p)(2)(A)(i).''.
(C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B)
of section 414 are each amended by inserting
``408(p),'' after ``408(k),''.
(D) Section 4972(d)(1)(A) is amended by striking
``and'' at the end of clause (ii), by striking the
period at the end of clause (iii) and inserting ``,
and'', and by adding after clause (iii) the following
new clause:
``(iv) any simple retirement account
(within the meaning of section 408(p)).''.
(c) Repeal of Salary Reduction Simplified Employee Pensions.--
Section 408(k)(6) is amended by adding at the end the following new
subparagraph:
``(H) Termination.--This paragraph shall not apply
to years beginning after December 31, 1996. The
preceding sentence shall not apply to a simplified
employee pension if the terms of such pension, as in
effect on December 31, 1996, provide that an employee
may make the election described in subparagraph (A).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 1422. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.
(a) Alternative Method of Satisfying Section 401(k)
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred
arrangements) is amended by adding at the end the following new
paragraph:
``(11) Adoption of simple plan to meet nondiscrimination
tests.--
``(A) In general.--A cash or deferred arrangement
maintained by an eligible employer shall be treated as
meeting the requirements of paragraph (3)(A)(ii) if
such arrangement meets--
``(i) the contribution requirements of
subparagraph (B),
``(ii) the exclusive benefit requirements
of subparagraph (C), and
``(iii) the vesting requirements of section
408(p)(3).
``(B) Contribution requirements.--
``(i) In general.--The requirements of this
subparagraph are met if, under the
arrangement--
``(I) an employee may elect to have
the employer make elective
contributions for the year on behalf of
the employee to a trust under the plan
in an amount which is expressed as a
percentage of compensation of the
employee but which in no event exceeds
$6,000,
``(II) the employer is required to
make a matching contribution to the
trust for the year in an amount equal
to so much of the amount the employee
elects under subclause (I) as does not
exceed 3 percent of compensation for
the year, and
``(III) no other contributions may
be made other than contributions
described in subclause (I) or (II).
``(ii) Employer may elect 2-percent
nonelective contribution.--An employer shall be
treated as meeting the requirements of clause
(i)(II) for any year if, in lieu of the
contributions described in such clause, the
employer elects (pursuant to the terms of the
arrangement) to make nonelective contributions
of 2 percent of compensation for each employee
who is eligible to participate in the
arrangement and who has at least $5,000 of
compensation from the employer for the year. If
an employer makes an election under this
subparagraph for any year, the employer shall
notify employees of such election within a
reasonable period of time before the 30th day
before the beginning of such year.
``(C) Exclusive benefit.--The requirements of this
subparagraph are met for any year to which this
paragraph applies if no contributions were made, or
benefits were accrued, for services during such year
under any qualified plan of the employer on behalf of
any employee eligible to participate in the cash or
deferred arrangement, other than contributions
described in subparagraph (B).
``(D) Definitions and special rule.--
``(i) Definitions.--For purposes of this
paragraph, any term used in this paragraph
which is also used in section 408(p) shall have
the meaning given such term by such section.
``(ii) Coordination with top-heavy rules.--
A plan meeting the requirements of this
paragraph for any year shall not be treated as
a top-heavy plan under section 416 for such
year.''.
(b) Alternative Methods of Satisfying Section 401(m)
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination
test for matching contributions and employee contributions) is amended
by redesignating paragraph (10) as paragraph (11) and by adding after
paragraph (9) the following new paragraph:
``(10) Alternative method of satisfying tests.--A defined
contribution plan shall be treated as meeting the requirements
of paragraph (2) with respect to matching contributions if the
plan--
``(A) meets the contribution requirements of
subparagraph (B) of subsection (k)(11),
``(B) meets the exclusive benefit requirements of
subsection (k)(11)(C), and
``(C) meets the vesting requirements of section
408(p)(3).''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 1996.
Subchapter B--Other Provisions
SEC. 1426. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).
(a) In General.--Subparagraph (B) of section 401(k)(4) is amended
to read as follows:
``(B) Eligibility of state and local governments
and tax-exempt organizations.--
``(i) Tax-exempts eligible.--Except as
provided in clause (ii), any organization
exempt from tax under this subtitle may include
a qualified cash or deferred arrangement as
part of a plan maintained by it.
``(ii) Governments ineligible.--A cash or
deferred arrangement shall not be treated as a
qualified cash or deferred arrangement if it is
part of a plan maintained by a State or local
government or political subdivision thereof, or
any agency or instrumentality thereof. This
clause shall not apply to a rural cooperative
plan or to a plan of an employer described in
clause (iii).
``(iii) Treatment of indian tribal
governments.--An employer which is an Indian
tribal government (as defined in section
7701(a)(40)), a subdivision of an Indian tribal
government (determined in accordance with
section 7871(d)), an agency or instrumentality
of an Indian tribal government or subdivision
thereof, or a corporation chartered under
Federal, State, or tribal law which is owned in
whole or in part by any of the foregoing shall
be treated as an organization exempt from tax
under this subtitle for purposes of clause
(i).''.
(b) Effective Date.--The amendment made by this section shall apply
to plan years beginning after December 31, 1996, but shall not apply to
any cash or deferred arrangement to which clause (i) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
CHAPTER 3--NONDISCRIMINATION PROVISIONS
SEC. 1431. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL OF FAMILY
AGGREGATION.
(a) In General.--Paragraph (1) of section 414(q) (defining highly
compensated employee) is amended to read as follows:
``(1) In general.--The term `highly compensated employee'
means any employee who--
``(A) was a 5-percent owner at any time during the
year or the preceding year, or
``(B) for the preceding year--
``(i) had compensation from the employer in
excess of $80,000, and
``(ii) was in the top-paid group of the
employer.
The Secretary shall adjust the $80,000 amount under
subparagraph (B) at the same time and in the same manner as
under section 415(d), except that the base period shall be the
calendar quarter ending September 30, 1996.''.
(b) Repeal of Family Aggregation Rules.--
(1) In general.--Paragraph (6) of section 414(q) is hereby
repealed.
(2) Compensation limit.--Paragraph (17)(A) of section
401(a) is amended by striking the last sentence.
(3) Deduction.--Subsection (l) of section 404 is amended by
striking the last sentence.
(c) Conforming Amendments.--
(1)(A) Subsection (q) of section 414 is amended by striking
paragraphs (2), (5), (8), and (12) and by redesignating
paragraphs (3), (4), (7), (9), (10), and (11) as paragraphs (2)
through (7), respectively.
(B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C),
and 416(i)(1)(D) are each amended by striking ``section
414(q)(7)'' and inserting ``section 414(q)(4)''.
(C) Section 416(i)(1)(A) is amended by striking ``section
414(q)(8)'' and inserting ``section 414(r)(9)''.
(2)(A) Section 414(r) is amended by adding at the end the
following new paragraph:
``(9) Excluded employees.--For purposes of this subsection,
the following employees shall be excluded:
``(A) Employees who have not completed 6 months of
service.
``(B) Employees who normally work less than 17\1/2\
hours per week.
``(C) Employees who normally work not more than 6
months during any year.
``(D) Employees who have not attained the age of
21.
``(E) Except to the extent provided in regulations,
employees who are included in a unit of employees
covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement between
employee representatives and the employer.
Except as provided by the Secretary, the employer may elect to
apply subparagraph (A), (B), (C), or (D) by substituting a
shorter period of service, smaller number of hours or months,
or lower age for the period of service, number of hours or
months, or age (as the case may be) specified in such
subparagraph.''.
(B) Subparagraph (A) of section 414(r)(2) is amended by
striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
(3) Section 1114(c)(4) of the Tax Reform Act of 1986 is
amended by adding at the end the following new sentence: ``Any
reference in this paragraph to section 414(q) shall be treated
as a reference to such section as in effect on the day before
the date of the enactment of the Small Business Job Protection
Act of 1996.''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 1996, except that
in determining whether an employee is a highly compensated
employee for years beginning in 1997, such amendments shall be
treated as having been in effect for years beginning in 1996.
(2) Family aggregation.--The amendments made by subsection
(b) shall apply to years beginning after December 31, 1996.
SEC. 1432. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.
(a) General Rule.--Section 401(a)(26)(A) (relating to additional
participation requirements) is amended to read as follows:
``(A) In general.--In the case of a trust which is
a part of a defined benefit plan, such trust shall not
constitute a qualified trust under this subsection
unless on each day of the plan year such trust benefits
at least the lesser of--
``(i) 50 employees of the employer, or
``(ii) the greater of--
``(I) 40 percent of all employees
of the employer, or
``(II) 2 employees (or if there is
only 1 employee, such employee).''.
(b) Separate Line of Business Test.--Section 401(a)(26)(G)
(relating to separate line of business) is amended by striking
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1996.
SEC. 1433. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED
ARRANGEMENTS AND MATCHING CONTRIBUTIONS.
(a) Alternative Methods of Satisfying Section 401(k)
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred
arrangements), as amended by section 1422, is amended by adding at the
end the following new paragraph:
``(12) Alternative methods of meeting nondiscrimination
requirements.--
``(A) In general.--A cash or deferred arrangement
shall be treated as meeting the requirements of
paragraph (3)(A)(ii) if such arrangement--
``(i) meets the contribution requirements
of subparagraph (B) or (C), and
``(ii) meets the notice requirements of
subparagraph (D).
``(B) Matching contributions.--
``(i) In general.--The requirements of this
subparagraph are met if, under the arrangement,
the employer makes matching contributions on
behalf of each employee who is not a highly
compensated employee in an amount equal to--
``(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee's
compensation, and
``(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee's compensation.
``(ii) Rate for highly compensated
employees.--The requirements of this
subparagraph are not met if, under the
arrangement, the rate of matching contribution
with respect to any elective contribution of a
highly compensated employee at any rate of
elective contribution is greater than that with
respect to an employee who is not a highly
compensated employee.
``(iii) Alternative plan designs.--If the
rate of any matching contribution with respect
to any rate of elective contribution is not
equal to the percentage required under clause
(i), an arrangement shall not be treated as
failing to meet the requirements of clause (i)
if--
``(I) the rate of an employer's
matching contribution does not increase
as an employee's rate of elective
contributions increase, and
``(II) the aggregate amount of
matching contributions at such rate of
elective contribution is at least equal
to the aggregate amount of matching
contributions which would be made if
matching contributions were made on the
basis of the percentages described in
clause (i).
``(C) Nonelective contributions.--The requirements
of this subparagraph are met if, under the arrangement,
the employer is required, without regard to whether the
employee makes an elective contribution or employee
contribution, to make a contribution to a defined
contribution plan on behalf of each employee who is not
a highly compensated employee and who is eligible to
participate in the arrangement in an amount equal to at
least 3 percent of the employee's compensation.
``(D) Notice requirement.--An arrangement meets the
requirements of this paragraph if, under the
arrangement, each employee eligible to participate is,
within a reasonable period before any year, given
written notice of the employee's rights and obligations
under the arrangement which--
``(i) is sufficiently accurate and
comprehensive to appraise the employee of such
rights and obligations, and
``(ii) is written in a manner calculated to
be understood by the average employee eligible
to participate.
``(E) Other requirements.--
``(i) Withdrawal and vesting
restrictions.--An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) of this paragraph
unless the requirements of subparagraphs (B)
and (C) of paragraph (2) are met with respect
to all employer contributions (including
matching contributions) taken into account in
determining whether the requirements of
subparagraphs (B) and (C) of this paragraph are
met.
``(ii) Social security and similar
contributions not taken into account.--An
arrangement shall not be treated as meeting the
requirements of subparagraph (B) or (C) unless
such requirements are met without regard to
subsection (l), and, for purposes of subsection
(l), employer contributions under subparagraph
(B) or (C) shall not be taken into account.
``(F) Other plans.--An arrangement shall be treated
as meeting the requirements under subparagraph (A)(i)
if any other plan maintained by the employer meets such
requirements with respect to employees eligible under
the arrangement.''.
(b) Alternative Methods of Satisfying Section 401(m)
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination
test for matching contributions and employee contributions), as amended
by this Act, is amended by redesignating paragraph (11) as paragraph
(12) and by adding after paragraph (10) the following new paragraph:
``(11) Alternative method of satisfying tests.--
``(A) In general.--A defined contribution plan
shall be treated as meeting the requirements of
paragraph (2) with respect to matching contributions if
the plan--
``(i) meets the contribution requirements
of subparagraph (B) or (C) of subsection
(k)(12),
``(ii) meets the notice requirements of
subsection (k)(12)(D), and
``(iii) meets the requirements of
subparagraph (B).
``(B) Limitation on matching contributions.--The
requirements of this subparagraph are met if--
``(i) matching contributions on behalf of
any employee may not be made with respect to an
employee's contributions or elective deferrals
in excess of 6 percent of the employee's
compensation,
``(ii) the rate of an employer's matching
contribution does not increase as the rate of
an employee's contributions or elective
deferrals increase, and
``(iii) the matching contribution with
respect to any highly compensated employee at
any rate of an employee contribution or rate of
elective deferral is not greater than that with
respect to an employee who is not a highly
compensated employee.''.
(c) Year for Computing Nonhighly Compensated Employee Percentage.--
(1) Cash or deferred arrangements.--Clause (ii) of section
401(k)(3)(A) is amended--
(A) by striking ``such year'' and inserting ``the
plan year'',
(B) by striking ``for such plan year'' and
inserting ``for the preceding plan year'', and
(C) by adding at the end the following new
sentence: ``An arrangement may apply this clause by
using the plan year rather than the preceding plan year
if the employer so elects, except that if such an
election is made, it may not be changed except as
provided by the Secretary.''.
(2) Matching and employee contributions.--Section
401(m)(2)(A) is amended--
(A) by inserting ``for such plan year'' after
``highly compensated employees'',
(B) by inserting ``for the preceding plan year''
after ``eligible employees'' each place it appears in
clause (i) and clause (ii), and
(C) by adding at the end the following flush
sentence: ``This subparagraph may be applied by using
the plan year rather than the preceding plan year if
the employer so elects, except that if such an election
is made, it may not be changed except as provided the
Secretary.''.
(d) Special Rule for Determining Average Deferral Percentage for
First Plan Year, Etc.--
(1) Paragraph (3) of section 401(k) is amended by adding at
the end the following new subparagraph:
``(E) For purposes of this paragraph, in the case
of the first plan year of any plan (other than a
successor plan), the amount taken into account as the
actual deferral percentage of nonhighly compensated
employees for the preceding plan year shall be--
``(i) 3 percent, or
``(ii) if the employer makes an election
under this subclause, the actual deferral
percentage of nonhighly compensated employees
determined for such first plan year.''.
(2) Paragraph (3) of section 401(m) is amended by adding at
the end the following: ``Rules similar to the rules of
subsection (k)(3)(E) shall apply for purposes of this
subsection.''.
(e) Distribution of Excess Contributions and Excess Aggregate
Contributions.--
(1) Subparagraph (C) of section 401(k)(8) (relating to
arrangement not disqualified if excess contributions
distributed) is amended by striking ``on the basis of the
respective portions of the excess contributions attributable to
each of such employees'' and inserting ``on the basis of the
amount of contributions by, or on behalf of, each of such
employees''.
(2) Subparagraph (C) of section 401(m)(6) (relating to
method of distributing excess aggregate contributions) is
amended by striking ``on the basis of the respective portions
of such amounts attributable to each of such employees'' and
inserting ``on the basis of the amount of contributions on
behalf of, or by, each such employee''.
(f) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 1998.
(2) Exceptions.--The amendments made by subsections (c),
(d), and (e) shall apply to years beginning after December 31,
1996.
SEC. 1434. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.
(a) General Rule.--Section 415(c)(3) (defining participant's
compensation) is amended by adding at the end the following new
subparagraph:
``(D) Certain deferrals included.--The term
`participant's compensation' shall include--
``(i) any elective deferral (as defined in
section 402(g)(3)), and
``(ii) any amount which is contributed by
the employer at the election of the employee
and which is not includible in the gross income
of the employee under section 125 or 457.''.
(b) Conforming Amendments.--
(1) Section 414(q)(4), as redesignated by section 1431, is
amended to read as follows:
``(4) Compensation.--For purposes of this subsection, the
term `compensation' has the meaning given such term by section
415(c)(3).''.
(2) Section 414(s)(2) is amended by inserting ``not'' after
``elect'' in the text and heading thereof.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1997.
CHAPTER 4--MISCELLANEOUS PROVISIONS
SEC. 1441. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.
(a) Aggregation Rules.--Section 401(d) (relating to additional
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
``(d) Contribution Limit on Owner-Employees.--A trust forming part
of a pension or profit-sharing plan which provides contributions or
benefits for employees some or all of whom are owner-employees shall
constitute a qualified trust under this section only if, in addition to
meeting the requirements of subsection (a), the plan provides that
contributions on behalf of any owner-employee may be made only with
respect to the earned income of such owner-employee which is derived
from the trade or business with respect to which such plan is
established.''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1996.
SEC. 1442. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.
(a) In General.--Paragraph (2) of section 411(a) (relating to
minimum vesting standards) is amended--
(1) by striking ``subparagraph (A), (B), or (C)'' and
inserting ``subparagraph (A) or (B)''; and
(2) by striking subparagraph (C).
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning on or after the earlier of--
(1) the later of--
(A) January 1, 1997, or
(B) the date on which the last of the collective
bargaining agreements pursuant to which the plan is
maintained terminates (determined without regard to any
extension thereof after the date of the enactment of
this Act), or
(2) January 1, 1999.
Such amendments shall not apply to any individual who does not have
more than 1 hour of service under the plan on or after the 1st day of
the 1st plan year to which such amendments apply.
SEC. 1443. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.
(a) Distributions for Hardship or After a Certain Age.--Section
401(k)(7) is amended by adding at the end the following new
subparagraph:
``(C) Special rule for certain distributions.--A
rural cooperative plan which includes a qualified cash
or deferred arrangement shall not be treated as
violating the requirements of section 401(a) or of
paragraph (2) merely by reason of a hardship
distribution or a distribution to a participant after
attainment of age 59\1/2\. For purposes of this
section, the term `hardship distribution' means a
distribution described in paragraph (2)(B)(i)(IV)
(without regard to the limitation of its application to
profit-sharing or stock bonus plans).''.
(b) Public Utility Districts.--Clause (i) of section 401(k)(7)(B)
(defining rural cooperative) is amended to read as follows:
``(i) any organization which--
``(I) is engaged primarily in
providing electric service on a mutual
or cooperative basis, or
``(II) is engaged primarily in
providing electric service to the
public in its area of service and which
is exempt from tax under this subtitle
or which is a State or local government
(or an agency or instrumentality
thereof), other than a municipality (or
an agency or instrumentality
thereof),''.
(c) Effective Dates.--
(1) Distributions.--The amendments made by subsection (a)
shall apply to distributions after the date of the enactment of
this Act.
(2) Rural cooperative.--The amendments made by subsection
(b) shall apply to plan years beginning after December 31,
1996.
SEC. 1444. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.
(a) Compensation Limit.--Subsection (b) of section 415 is amended
by adding immediately after paragraph (10) the following new paragraph:
``(11) Special limitation rule for governmental plans.--In
the case of a governmental plan (as defined in section 414(d)),
subparagraph (B) of paragraph (1) shall not apply.''.
(b) Treatment of Certain Excess Benefit Plans.--
(1) In general.--Section 415 is amended by adding at the
end the following new subsection:
``(m) Treatment of Qualified Governmental Excess Benefit
Arrangements.--
``(1) Governmental plan not affected.--In determining
whether a governmental plan (as defined in section 414(d))
meets the requirements of this section, benefits provided under
a qualified governmental excess benefit arrangement shall not
be taken into account. Income accruing to a governmental plan
(or to a trust that is maintained solely for the purpose of
providing benefits under a qualified governmental excess
benefit arrangement) in respect of a qualified governmental
excess benefit arrangement shall constitute income derived from
the exercise of an essential governmental function upon which
such governmental plan (or trust) shall be exempt from tax
under section 115.
``(2) Taxation of participant.--For purposes of this
chapter--
``(A) the taxable year or years for which amounts
in respect of a qualified governmental excess benefit
arrangement are includible in gross income by a
participant, and
``(B) the treatment of such amounts when so
includible by the participant,
shall be determined as if such qualified governmental excess
benefit arrangement were treated as a plan for the deferral of
compensation which is maintained by a corporation not exempt
from tax under this chapter and which does not meet the
requirements for qualification under section 401.
``(3) Qualified governmental excess benefit arrangement.--
For purposes of this subsection, the term `qualified
governmental excess benefit arrangement' means a portion of a
governmental plan if--
``(A) such portion is maintained solely for the
purpose of providing to participants in the plan that
part of the participant's annual benefit otherwise
payable under the terms of the plan that exceeds the
limitations on benefits imposed by this section,
``(B) under such portion no election is provided at
any time to the participant (directly or indirectly) to
defer compensation, and
``(C) benefits described in subparagraph (A) are
not paid from a trust forming a part of such
governmental plan unless such trust is maintained
solely for the purpose of providing such benefits.''.
(2) Coordination with section 457.--Subsection (e) of
section 457 is amended by adding at the end the following new
paragraph:
``(14) Treatment of qualified governmental excess benefit
arrangements.--Subsections (b)(2) and (c)(1) shall not apply to
any qualified governmental excess benefit arrangement (as
defined in section 415(m)(3)), and benefits provided under such
an arrangement shall not be taken into account in determining
whether any other plan is an eligible deferred compensation
plan.''.
(3) Conforming amendment.--Paragraph (2) of section 457(f)
is amended by striking ``and'' at the end of subparagraph (C),
by striking the period at the end of subparagraph (D) and
inserting ``, and'', and by inserting immediately thereafter
the following new subparagraph:
``(E) a qualified governmental excess benefit
arrangement described in section 415(m).''.
(c) Exemption for Survivor and Disability Benefits.--Paragraph (2)
of section 415(b) is amended by adding at the end the following new
subparagraph:
``(I) Exemption for survivor and disability
benefits provided under governmental plans.--
Subparagraph (C) of this paragraph and paragraph (5)
shall not apply to--
``(i) income received from a governmental
plan (as defined in section 414(d)) as a
pension, annuity, or similar allowance as the
result of the recipient becoming disabled by
reason of personal injuries or sickness, or
``(ii) amounts received from a governmental
plan by the beneficiaries, survivors, or the
estate of an employee as the result of the
death of the employee.''.
(d) Revocation of Grandfather Election.--
(1) In general.--Subparagraph (C) of section 415(b)(10) is
amended by adding at the end the following new clause:
``(ii) Revocation of election.--An election
under clause (i) may be revoked not later than
the last day of the third plan year beginning
after the date of the enactment of this clause.
The revocation shall apply to all plan years to
which the election applied and to all
subsequent plan years. Any amount paid by a
plan in a taxable year ending after the
revocation shall be includible in income in
such taxable year under the rules of this
chapter in effect for such taxable year, except
that, for purposes of applying the limitations
imposed by this section, any portion of such
amount which is attributable to any taxable
year during which the election was in effect
shall be treated as received in such taxable
year.''.
(2) Conforming amendment.--Subparagraph (C) of section
415(b)(10) is amended by striking ``This'' and inserting:
``(i) In general.--This''.
(e) Effective Date.--
(1) In general.--The amendments made by subsections (a),
(b), and (c) shall apply to years beginning after December 31,
1994. The amendments made by subsection (d) shall apply with
respect to revocations adopted after the date of the enactment
of this Act.
(2) Treatment for years beginning before january 1, 1995.--
Nothing in the amendments made by this section shall be
construed to infer that a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of 1986) fails to
satisfy the requirements of section 415 of such Code for any
taxable year beginning before January 1, 1995.
SEC. 1445. UNIFORM RETIREMENT AGE.
(a) Discrimination Testing.--Paragraph (5) of section 401(a)
(relating to special rules relating to nondiscrimination requirements)
is amended by adding at the end the following new subparagraph:
``(F) Social security retirement age.--For purposes
of testing for discrimination under paragraph (4)--
``(i) the social security retirement age
(as defined in section 415(b)(8)) shall be
treated as a uniform retirement age, and
``(ii) subsidized early retirement benefits
and joint and survivor annuities shall not be
treated as being unavailable to employees on
the same terms merely because such benefits or
annuities are based in whole or in part on an
employee's social security retirement age (as
so defined).''
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 1996.
SEC. 1446. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.
(a) All Disabled Participants Receiving Contributions.--Section
415(c)(3)(C) is amended by adding at the end the following: ``If a
defined contribution plan provides for the continuation of
contributions on behalf of all participants described in clause (i) for
a fixed or determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 1996.
SEC. 1447. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) Special Rules for Plan Distributions.--Paragraph (9) of section
457(e) (relating to other definitions and special rules) is amended to
read as follows:
``(9) Benefits not treated as made available by reason of
certain elections, etc.--
``(A) Total amount payable is $3,500 or less.--The
total amount payable to a participant under the plan
shall not be treated as made available merely because
the participant may elect to receive such amount (or
the plan may distribute such amount without the
participant's consent) if--
``(i) such amount does not exceed $3,500,
and
``(ii) such amount may be distributed only
if--
``(I) no amount has been deferred
under the plan with respect to such
participant during the 2-year period
ending on the date of the distribution,
and
``(II) there has been no prior
distribution under the plan to such
participant to which this subparagraph
applied.
A plan shall not be treated as failing to meet the
distribution requirements of subsection (d) by reason
of a distribution to which this subparagraph applies.
``(B) Election to defer commencement of
distributions.--The total amount payable to a
participant under the plan shall not be treated as made
available merely because the participant may elect to
defer commencement of distributions under the plan if--
``(i) such election is made after amounts
may be available under the plan in accordance
with subsection (d)(1)(A) and before
commencement of such distributions, and
``(ii) the participant may make only 1 such
election.''.
(b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457, as amended by section 1444(b)(2)
(relating to governmental plans), is amended by adding at the end the
following new paragraph:
``(15) Cost-of-living adjustment of maximum deferral
amount.--The Secretary shall adjust the $7,500 amount specified
in subsections (b)(2) and (c)(1) at the same time and in the
same manner as under section 415(d), except that the base
period shall be the calendar quarter ending September 30, 1994,
and any increase under this paragraph which is not a multiple
of $500 shall be rounded to the next lowest multiple of
$500.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
SEC. 1448. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS.
(a) In General.--Section 457 is amended by adding at the end the
following new subsection:
``(g) Governmental Plans Must Maintain Set-Asides for Exclusive
Benefit of Participants.--
``(1) In general.--A plan maintained by an eligible
employer described in subsection (e)(1)(A) shall not be treated
as an eligible deferred compensation plan unless all assets and
income of the plan described in subsection (b)(6) are held in
trust for the exclusive benefit of participants and their
beneficiaries.
``(2) Taxability of trusts and participants.--For purposes
of this title--
``(A) a trust described in paragraph (1) shall be
treated as an organization exempt from taxation under
section 501(a), and
``(B) notwithstanding any other provision of this
title, amounts in the trust shall be includible in the
gross income of participants and beneficiaries only to
the extent, and at the time, provided in this section.
``(3) Custodial accounts and contracts.--For purposes of
this subsection, custodial accounts and contracts described in
section 401(f) shall be treated as trusts under rules similar
to the rules under section 401(f).''.
(b) Conforming Amendment.--Paragraph (6) of section 457(b) is
amended by inserting ``except as provided in subsection (g),'' before
``which provides that''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to assets and
income described in section 457(b)(6) of the Internal Revenue
Code of 1986 held by a plan on and after the date of the
enactment of this Act.
(2) Transition rule.--In the case of assets and income
described in paragraph (1) held by a plan on the date of the
enactment of this Act, a trust need not be established by reason of the
amendments made by this section before January 1, 1999.
SEC. 1449. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS UNDER SECTION
415 LIMITATIONS.
(a) In General.--Subparagraph (A) of section 767(d)(3) of the
Uruguay Round Agreements Act is amended to read as follows:
``(A) Exception.--A plan that was adopted and in
effect before December 8, 1994, shall not be required
to apply the amendments made by subsection (b) with
respect to benefits accrued before the earlier of--
``(i) the later of the date a plan
amendment applying such amendment is adopted or
made effective, or
``(ii) the first day of the first
limitation year beginning after December 31,
1999.
Determinations under section 415(b)(2)(E) of the
Internal Revenue Code of 1986 before such earlier date
shall be made with respect to such benefits on the
basis of such section as in effect on December 7, 1994
(except that the modification made by section 1449(b)
of the Small Business Job Protection Act of 1996 shall
be taken into account), and the provisions of the plan
as in effect on December 7, 1994, but only if such
provisions of the plan meet the requirements of such
section (as so in effect).''.
(b) Modification of Certain Assumptions for Adjusting Benefits of
Defined Benefit Plans for Early Retirees.--Subparagraph (E) of section
415(b)(2) (relating to limitation on certain assumptions) is amended--
(1) by striking ``Except as provided in clause (ii), for
purposes of adjusting any benefit or limitation under
subparagraph (B) or (C),'' in clause (i) and inserting ``For
purposes of adjusting any limitation under subparagraph (C)
and, except as provided in clause (ii), for purposes of
adjusting any benefit under subparagraph (B),'', and
(2) by striking ``For purposes of adjusting the benefit or
limitation of any form of benefit subject to section
417(e)(3),'' in clause (ii) and inserting ``For purposes of
adjusting any benefit under subparagraph (B) for any form of
benefit subject to section 417(e)(3),''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in the provisions of section 767 of the Uruguay
Round Agreements Act.
(d) Transitional Rule.--In the case of a plan that was adopted and
in effect before December 8, 1994, if--
(1) a plan amendment was adopted or made effective on or
before the date of the enactment of this Act applying the
amendments made by section 767 of the Uruguay Round Agreements
Act, and
(2) within 1 year after the date of the enactment of this
Act, a plan amendment is adopted which repeals the amendment
referred to in paragraph (1),
the amendment referred to in paragraph (1) shall not be taken into
account in applying section 767(d)(3)(A) of the Uruguay Round
Agreements Act, as amended by subsection (a).
SEC. 1450. MODIFICATIONS OF SECTION 403(b).
(a) Multiple Salary Reduction Agreements Permitted.--
(1) General rule.--For purposes of section 403(b) of the
Internal Revenue Code of 1986, the frequency that an employee
is permitted to enter into a salary reduction agreement, the
salary to which such an agreement may apply, and the ability to
revoke such an agreement shall be determined under the rules
applicable to cash or deferred elections under section 401(k)
of such Code.
(2) Effective date.--This subsection shall apply to taxable
years beginning after December 31, 1995.
(b) Treatment of Indian Tribal Governments.--
(1) In general.--In the case of any contract purchased in a
plan year beginning before January 1, 1995, section 403(b) of
the Internal Revenue Code of 1986 shall be applied as if any
reference to an employer described in section 501(c)(3) of the
Internal Revenue Code of 1986 which is exempt from tax under
section 501 of such Code included a reference to an employer
which is an Indian tribal government (as defined by section
7701(a)(40) of such Code), a subdivision of an Indian tribal
government (determined in accordance with section 7871(d) of
such Code), an agency or instrumentality of an Indian tribal
government or subdivision thereof, or a corporation chartered
under Federal, State, or tribal law which is owned in whole or
in part by any of the foregoing.
(2) Rollovers.--Solely for purposes of applying section
403(b)(8) of such Code to a contract to which paragraph (1)
applies, a qualified cash or deferred arrangement under section
401(k) of such Code shall be treated as if it were a plan or
contract described in clause (ii) of section 403(b)(8)(A) of
such Code.
(c) Elective Deferrals.--
(1) In general.--Subparagraph (E) of section 403(b)(1) is
amended to read as follows:
``(E) in the case of a contract purchased under a
salary reduction agreement, the contract meets the
requirements of section 401(a)(30),''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 1995, except
a contract shall not be required to meet any change in any
requirement by reason of such amendment before the 90th day
after the date of the enactment of this Act.
SEC. 1451. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR ANNUITY
EXPLANATION BEFORE ANNUITY STARTING DATE.
(a) General Rule.--For purposes of section 417(a)(3)(A) of the
Internal Revenue Code of 1986 (relating to plan to provide written
explanations), the minimum period prescribed by the Secretary of the
Treasury between the date that the explanation referred to in such
section is provided and the annuity starting date shall not apply
if waived by the participant and, if applicable, the participant's
spouse.
(b) Effective Date.--Subsection (a) shall apply to plan years
beginning after December 31, 1996.
SEC. 1452. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT PLAN AND
DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE; EXCESS
DISTRIBUTIONS.
(a) In General.--Section 415(e) is repealed.
(b) Excess Distributions.--Section 4980A is amended by adding at
the end the following new subsection:
``(g) Limitation on Application.--This section shall not apply to
distributions during years beginning after December 31, 1995, and
before January 1, 1999, and such distributions shall be treated as made
first from amounts not described in subsection (f).''.
(c) Conforming Amendments.--
(1) Paragraph (1) of section 415(a) is amended--
(A) by adding ``or'' at the end of subparagraph
(A),
(B) by striking ``, or'' at the end of subparagraph
(B) and inserting a period, and
(C) by striking subparagraph (C).
(2) Subparagraph (B) of section 415(b)(5) is amended by
striking ``and subsection (e)''.
(3) Paragraph (1) of section 415(f) is amended by striking
``subsections (b), (c), and (e)'' and inserting ``subsections
(b) and (c)''.
(4) Subsection (g) of section 415 is amended by striking
``subsections (e) and (f)'' in the last sentence and inserting
``subsection (f)''.
(5) Clause (i) of section 415(k)(2)(A) is amended to read
as follows:
``(i) any contribution made directly by an
employee under such an arrangement shall not be
treated as an annual addition for purposes of
subsection (c), and''.
(6) Clause (ii) of section 415(k)(2)(A) is amended by
striking ``subsections (c) and (e)'' and inserting ``subsection
(c)''.
(7) Section 416 is amended by striking subsection (h).
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to limitation years
beginning after December 31, 1998.
(2) Excess distributions.--The amendment made by subsection
(b) shall apply to years beginning after December 31, 1995.
SEC. 1453. TAX ON PROHIBITED TRANSACTIONS.
(a) In General.--Section 4975(a) is amended by striking ``5
percent'' and inserting ``10 percent''.
(b) Effective Date.--The amendment made by this section shall apply
to prohibited transactions occurring after the date of the enactment of
this Act.
SEC. 1454. TREATMENT OF LEASED EMPLOYEES.
(a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining
leased employee) is amended to read as follows:
``(C) such services are performed under primary
direction or control by the recipient.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 1996, but shall not apply
to any relationship determined under an Internal Revenue Service ruling
issued before the date of the enactment of this Act pursuant to section
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the
day before such date) not to involve a leased employee.
SEC. 1455. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN PENSION
REPORTING REQUIREMENTS.
(a) Penalties.--
(1) Statements.--Paragraph (1) of section 6724(d) is
amended by striking ``and'' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and
inserting ``, and'', and by inserting after subparagraph (B)
the following new subparagraph:
``(C) any statement of the amount of payments to
another person required to be made to the Secretary
under--
``(i) section 408(i) (relating to reports
with respect to individual retirement accounts
or annuities), or
``(ii) section 6047(d) (relating to reports
by employers, plan administrators, etc.).''.
(2) Reports.--Paragraph (2) of section 6724(d), as amended
by section 1116, is amended by striking ``or'' at the end of
subparagraph (T), by striking the period at the end of
subparagraph (U) and inserting a comma, and by inserting after
subparagraph (U) the following new subparagraphs:
``(V) section 408(i) (relating to reports with
respect to individual retirement plans) to any person
other than the Secretary with respect to the amount of
payments made to such person, or
``(W) section 6047(d) (relating to reports by plan
administrators) to any person other than the Secretary
with respect to the amount of payments made to such
person.''.
(b) Modification of Reportable Designated Distributions.--
(1) Section 408.--Subsection (i) of section 408 (relating
to individual retirement account reports) is amended by
inserting ``aggregating $10 or more in any calendar year''
after ``distributions''.
(2) Section 6047.--Paragraph (1) of section 6047(d)
(relating to reports by employers, plan administrators, etc.)
is amended by adding at the end the following new sentence:
``No return or report may be required under the preceding
sentence with respect to distributions to any person during any
year unless such distributions aggregate $10 or more.''.
(c) Qualifying Rollover Distributions.--Section 6652(i) is
amended--
(1) by striking ``the $10'' and inserting ``$100'', and
(2) by striking ``$5,000'' and inserting ``$50,000''.
(d) Conforming Amendments.--
(1) Paragraph (1) of section 6047(f) is amended to read as
follows:
``(1) For provisions relating to
penalties for failures to file returns and reports required under this
section, see sections 6652(e), 6721, and 6722.''.
(2) Subsection (e) of section 6652 is amended by adding at
the end the following new sentence: ``This subsection shall not
apply to any return or statement which is an information return
described in section 6724(d)(1)(C)(ii) or a payee statement
described in section 6724(d)(2)(W).''.
(3) Subsection (a) of section 6693 is amended by adding at
the end the following new sentence: ``This subsection shall not
apply to any report which is an information return described in
section 6724(d)(1)(C)(i) or a payee statement described in
section 6724(d)(2)(V).''.
(e) Effective Date.--The amendments made by this section shall
apply to returns, reports, and other statements the due date for which
(determined without regard to extensions) is after December 31, 1996.
SEC. 1456. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO TAX ON NET
EARNINGS FROM SELF-EMPLOYMENT.
(a) In General.--Section 1402(a)(8) (defining net earning from
self-employment) is amended by inserting ``, but shall not include in
such net earnings from self-employment the rental value of any
parsonage (whether or not excludable under section 107) provided after
the individual retires, or any other retirement benefit received by
such individual from a church plan (as defined in section 414(e)) after
the individual retires'' before the semicolon at the end.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning before, on, or after December 31, 1994.
SEC. 1457. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this subtitle requires an amendment to any
plan or annuity contract, such amendment shall not be required to be
made before the first day of the first plan year beginning on or after
January 1, 1997, if--
(1) during the period after such amendment takes effect and
before such first plan year, the plan or contract is operated
in accordance with the requirements of such amendment, and
(2) such amendment applies retroactively to such period.
In the case of a governmental plan (as defined in section 414(d) of the
Internal Revenue Code of 1986), this section shall be applied by
substituting ``1999'' for ``1997''.
Subtitle E--Foreign Simplification
SEC. 1501. REPEAL OF INCLUSION OF CERTAIN EARNINGS INVESTED IN EXCESS
PASSIVE ASSETS.
(a) In General.--
(1) Repeal of inclusion.--Paragraph (1) of section 951(a)
(relating to amounts included in gross income of United States
shareholders) is amended by striking subparagraph (C), by
striking ``; and'' at the end of subparagraph (B) and inserting
a period, and by adding ``and'' at the end of subparagraph (A).
(2) Repeal of inclusion amount.--Section 956A (relating to
earnings invested in excess passive assets) is repealed.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 956(b) is amended to read as
follows:
``(1) Applicable earnings.--For purposes of this section,
the term `applicable earnings' means, with respect to any
controlled foreign corporation, the sum of--
``(A) the amount (not including a deficit) referred
to in section 316(a)(1), and
``(B) the amount referred to in section 316(a)(2),
but reduced by distributions made during the taxable year.''.
(2) Paragraph (3) of section 956(b) is amended to read as
follows:
``(3) Special rule where corporation ceases to be
controlled foreign corporation.--If any foreign corporation
ceases to be a controlled foreign corporation during any
taxable year--
``(A) the determination of any United States
shareholder's pro rata share shall be made on the basis
of stock owned (within the meaning of section 958(a))
by such shareholder on the last day during the taxable
year on which the foreign corporation is a controlled
foreign corporation,
``(B) the average referred to in subsection
(a)(1)(A) for such taxable year shall be determined by
only taking into account quarters ending on or before
such last day, and
``(C) in determining applicable earnings, the
amount taken into account by reason of being described
in paragraph (2) of section 316(a) shall be the portion
of the amount so described which is allocable (on a pro
rata basis) to the part of such year during which the
corporation is a controlled foreign corporation.''.
(3) Subsection (a) of section 959 (relating to exclusion
from gross income of previously taxed earnings and profits) is
amended by adding ``or'' at the end of paragraph (1), by
striking ``or'' at the end of paragraph (2), and by striking
paragraph (3).
(4) Subsection (a) of section 959 is amended by striking
``paragraphs (2) and (3)'' in the last sentence and inserting
``paragraph (2)''.
(5) Subsection (c) of section 959 is amended by adding at
the end the following flush sentence:
``References in this subsection to section 951(a)(1)(C) and subsection
(a)(3) shall be treated as references to such provisions as in effect
on the day before the date of the enactment of the Small Business Job
Protection Act of 1996.''.
(6) Paragraph (1) of section 959(f) is amended to read as
follows:
``(1) In general.--For purposes of this section, amounts
that would be included under subparagraph (B) of section
951(a)(1) (determined without regard to this section) shall be
treated as attributable first to earnings described in
subsection (c)(2), and then to earnings described in subsection
(c)(3).''.
(7) Paragraph (2) of section 959(f) is amended by striking
``subparagraphs (B) and (C) of section 951(a)(1)'' and
inserting ``section 951(a)(1)(B)''.
(8) Subsection (b) of section 989 is amended by striking
``subparagraph (B) or (C) of section 951(a)(1)'' and inserting
``section 951(a)(1)(B)''.
(9) Paragraph (9) of section 1297(b) is amended by striking
``subparagraph (B) or (C) of section 951(a)(1)'' and inserting
``section 951(a)(1)(B)''.
(10) Subsections (d)(3)(B) and (e)(2)(B)(ii) of section
1297 are each amended by striking ``or section 956A''.
(c) Clerical Amendment.--The table of sections for subpart F of
part III of subchapter N of chapter 1 is amended by striking the item
relating to section 956A.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 1996, and to taxable years of United States shareholders within
which or with which such taxable years of foreign corporations end.
Subtitle F--Revenue Offsets
SEC. 1601. TERMINATION OF PUERTO RICO AND POSSESSION TAX CREDIT.
(a) In General.--Section 936 is amended by adding at the end the
following new subsection:
``(j) Termination.--
``(1) In general.--Except as otherwise provided in this
subsection, this section shall not apply to any taxable year
beginning after December 31, 1995.
``(2) Transition rules for active business income credit.--
Except as provided in paragraph (3)--
``(A) Economic activity credit.--In the case of an
existing credit claimant--
``(i) with respect to a possession other
than Puerto Rico, and
``(ii) to which subsection (a)(4)(B) does
not apply,
the credit determined under subsection (a)(1)(A) shall
be allowed for taxable years beginning after December
31, 1995, and before January 1, 2002.
``(B) Special rule for reduced credit.--
``(i) In general.--In the case of an
existing credit claimant to which subsection
(a)(4)(B) applies, the credit determined under
subsection (a)(1)(A) shall be allowed for
taxable years beginning after December 31,
1995, and before January 1, 1998.
``(ii) Election irrevocable after 1997.--An
election under subsection (a)(4)(B)(iii) which
is in effect for the taxpayer's last taxable
year beginning before 1997 may not be revoked
unless it is revoked for the taxpayer's first
taxable year beginning in 1997 and all
subsequent taxable years.
``(C) Economic activity credit for puerto rico.--
``For economic activity credit for
Puerto Rico, see section 30A.
``(3) Additional restricted credit.--
``(A) In general.--In the case of an existing
credit claimant--
``(i) the credit under subsection (a)(1)(A)
shall be allowed for the period beginning with
the first taxable year after the last taxable
year to which subparagraph (A) or (B) of
paragraph (2), whichever is appropriate,
applied and ending with the last taxable year
beginning before January 1, 2006, except that
``(ii) the aggregate amount of taxable
income taken into account under subsection
(a)(1)(A) for any such taxable year shall not
exceed the adjusted base period income of such
claimant.
``(B) Coordination with subsection (a)(4).--The
amount of income described in subsection (a)(1)(A)
which is taken into account in applying subsection
(a)(4) shall be such income as reduced under this
paragraph.
``(4) Adjusted base period income.--For purposes of
paragraph (3)--
``(A) In general.--The term `adjusted base period
income' means the average of the inflation-adjusted
possession incomes of the corporation for each base
period year.
``(B) Inflation-adjusted possession income.--For
purposes of subparagraph (A), the inflation-adjusted
possession income of any corporation for any base
period year shall be an amount equal to the sum of--
``(i) the possession income of such
corporation for such base period year, plus
``(ii) such possession income multiplied by
the inflation adjustment percentage for such
base period year.
``(C) Inflation adjustment percentage.--For
purposes of subparagraph (B), the inflation adjustment
percentage for any base period year means the
percentage (if any) by which--
``(i) the CPI for 1995, exceeds
``(ii) the CPI for the calendar year in
which the base period year for which the
determination is being made ends.
For purposes of the preceding sentence, the CPI for any
calendar year is the CPI (as defined in section
1(f)(5)) for such year under section 1(f)(4).
``(D) Increase in inflation adjustment percentage
for growth during base years.--The inflation adjustment
percentage (determined under subparagraph (C) without
regard to this subparagraph) for each of the 5 taxable
years referred to in paragraph (5)(A) shall be
increased by--
``(i) 5 percentage points in the case of a
taxable year ending during the 1-year period
ending on October 13, 1995;
``(ii) 10.25 percentage points in the case
of a taxable year ending during the 1-year
period ending on October 13, 1994;
``(iii) 15.76 percentage points in the case
of a taxable year ending during the 1-year
period ending on October 13, 1993;
``(iv) 21.55 percentage points in the case
of a taxable year ending during the 1-year
period ending on October 13, 1992; and
``(v) 27.63 percentage points in the case
of a taxable year ending during the 1-year
period ending on October 13, 1991.
``(5) Base period year.--For purposes of this subsection--
``(A) In general.--The term `base period year'
means each of 3 taxable years which are among the 5
most recent taxable years of the corporation ending
before October 14, 1995, determined by disregarding--
``(i) one taxable year for which the
corporation had the largest inflation-adjusted
possession income, and
``(ii) one taxable year for which the
corporation had the smallest inflation-adjusted
possession income.
``(B) Corporations not having significant
possession income throughout 5-year period.--
``(i) In general.--If a corporation does
not have significant possession income for each
of the most recent 5 taxable years ending
before October 14, 1995, then, in lieu of
applying subparagraph (A), the term `base
period year' means only those taxable years (of
such 5 taxable years) for which the corporation
has significant possession income; except that,
if such corporation has significant possession
income for 4 of such 5 taxable years, the rule
of subparagraph (A)(ii) shall apply.
``(ii) Special rule.--If there is no year
(of such 5 taxable years) for which a
corporation has significant possession income--
``(I) the term `base period year'
means the first taxable year ending on
or after October 14, 1995, but
``(II) the amount of possession
income for such year which is taken
into account under paragraph (4) shall
be the amount which would be determined
if such year were a short taxable year
ending on September 30, 1995.
``(iii) Significant possession income.--For
purposes of this subparagraph, the term
`significant possession income' means
possession income which exceeds 2 percent of
the possession income of the taxpayer for the
taxable year (of the period of 6 taxable years
ending with the first taxable year ending on or
after October 14, 1995) having the greatest
possession income.
``(C) Election to use one base period year.--
``(i) In general.--At the election of the
taxpayer, the term `base period year' means--
``(I) only the last taxable year of
the corporation ending in calendar year
1992, or
``(II) a deemed taxable year which
includes the first ten months of
calendar year 1995.
``(ii) Base period income for 1995.--In
determining the adjusted base period income of
the corporation for the deemed taxable year
under clause (i)(II), the possession income
shall be annualized and shall be determined
without regard to any extraordinary item.
``(iii) Election.--An election under this
subparagraph by any possession corporation may
be made only for the corporation's first
taxable year beginning after December 31, 1995,
for which it is a possession corporation. The
rules of subclauses (II) and (III) of
subsection (a)(4)(B)(iii) shall apply to the
election under this subparagraph.
``(D) Acquisitions and dispositions.--Rules similar
to the rules of subparagraphs (A) and (B) of section
41(f)(3) shall apply for purposes of this subsection.
``(6) Possession income.--For purposes of this subsection,
the term `possession income' means, with respect to any
possession, the income referred to in subsection (a)(1)(A)
determined with respect to that possession. In no event shall
possession income be treated as being less than zero.
``(7) Short years.--If the current year or a base period
year is a short taxable year, the application of this
subsection shall be made with such annualizations as the
Secretary shall prescribe.
``(8) Special rules for certain possessions.--
``(A) In general.--In the case of an existing
credit claimant with respect to an applicable
possession, this section (other than the preceding
paragraphs of this subsection) shall apply to such
claimant with respect to such applicable possession for
taxable years beginning after December 31, 1995, and
before January 1, 2006.
``(B) Applicable possession.--For purposes of this
paragraph, the term `applicable possession' means Guam,
American Samoa, and the Commonwealth of the Northern
Mariana Islands.
``(9) Existing credit claimant.--For purposes of this
subsection--
``(A) In general.--The term `existing credit
claimant' means a corporation--
``(i) which was actively conducting a trade
or business in a possession on October 13,
1995, and
``(ii) with respect to which an election
under this section is in effect for the
corporation's taxable year which includes
October 13, 1995.
``(B) New lines of business prohibited.--If, after
October 13, 1995, a corporation which would (but for
this subparagraph) be an existing credit claimant adds
a substantial new line of business, such corporation
shall cease to be treated as an existing credit
claimant as of the close of the taxable year ending
before the date of such addition.
``(C) Binding contract exception.--If, on October
13, 1995, and at all times thereafter, there is in
effect with respect to a corporation a binding contract
for the acquisition of assets to be used in, or for the
sale of assets to be produced from, a trade or
business, the corporation shall be treated for purposes
of this paragraph as actively conducting such trade or
business on October 13, 1995. The preceding sentence
shall not apply if such trade or business is not
actively conducted before January 1, 1996.
``(10) Separate application to each possession.--For
purposes of determining--
``(A) whether a taxpayer is an existing credit
claimant, and
``(B) the amount of the credit allowed under this
section,
this subsection (and so much of this section as relates to this
subsection) shall be applied separately with respect to each
possession.''.
(b) Economic Activity Credit for Puerto Rico.--
(1) In general.--Subpart B of part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 30A. PUERTO RICAN ECONOMIC ACTIVITY CREDIT.
``(a) Allowance of Credit.--
``(1) In general.--Except as otherwise provided in this
section, if the conditions of both paragraph (1) and paragraph
(2) of subsection (b) are satisfied with respect to a qualified
domestic corporation, there shall be allowed as a credit
against the tax imposed by this chapter an amount equal to the
portion of the tax which is attributable to the taxable income,
from sources without the United States, from--
``(A) the active conduct of a trade or business
within Puerto Rico, or
``(B) the sale or exchange of substantially all of
the assets used by the taxpayer in the active conduct
of such trade or business.
In the case of any taxable year beginning after December 31,
2001, the aggregate amount of taxable income taken into account
under the preceding sentence (and in applying subsection (d))
shall not exceed the adjusted base period income of such
corporation, as determined in the same manner as under section
936(j).
``(2) Qualified domestic corporation.--For purposes of
paragraph (1), the term `qualified domestic corporation' means
a domestic corporation--
``(A) which is an existing credit claimant with
respect to Puerto Rico, and
``(B) with respect to which section 936(a)(4)(B)
does not apply for the taxable year.
``(3) Separate application.--For purposes of determining--
``(A) whether a taxpayer is an existing credit
claimant with respect to Puerto Rico, and
``(B) the amount of the credit allowed under this
section,
this section (and so much of section 936 as relates to this
section) shall be applied separately with respect to Puerto
Rico.
``(b) Conditions Which Must Be Satisfied.--The conditions referred
to in subsection (a) are--
``(1) 3-year period.--If 80 percent or more of the gross
income of the qualified domestic corporation for the 3-year
period immediately preceding the close of the taxable year (or
for such part of such period immediately preceding the close of
such taxable year as may be applicable) was derived from
sources within a possession (determined without regard to
section 904(f)).
``(2) Trade or business.--If 75 percent or more of the
gross income of the qualified domestic corporation for such
period or such part thereof was derived from the active conduct
of a trade or business within a possession.
``(c) Credit Not Allowed Against Certain Taxes.--The credit
provided by subsection (a) shall not be allowed against the tax imposed
by--
``(1) section 59A (relating to environmental tax),
``(2) section 531 (relating to the tax on accumulated
earnings),
``(3) section 541 (relating to personal holding company
tax), or
``(4) section 1351 (relating to recoveries of foreign
expropriation losses).
``(d) Limitations on Credit for Active Business Income.--The amount
of the credit determined under subsection (a) for any taxable year
shall not exceed the sum of the following amounts:
``(1) 60 percent of the sum of--
``(A) the aggregate amount of the qualified
domestic corporation's qualified possession wages for
such taxable year, plus
``(B) the allocable employee fringe benefit
expenses of the qualified domestic corporation for such
taxable year.
``(2) The sum of--
``(A) 15 percent of the deprecation allowances for
the taxable year with respect to short-life qualified
tangible property,
``(B) 40 percent of the depreciation allowances for
the taxable year with respect to medium-life qualified
tangible property, and
``(C) 65 percent of the depreciation allowances for
the taxable year with respect to long-life qualified
tangible property.
``(3) If the qualified domestic corporation does not have
an election to use the method described in section
936(h)(5)(C)(ii) (relating to profit split) in effect for the
taxable year, the amount of the qualified possession income
taxes for the taxable year allocable to nonsheltered income.
``(e) Administrative Provisions.--For purposes of this title--
``(1) the provisions of section 936 (including any
applicable election thereunder) shall apply in the same manner
as if the credit under this section were a credit under section
936(a)(1)(A) for a domestic corporation to which section
936(a)(4)(A) applies,
``(2) the credit under this section shall be treated in the
same manner as the credit under section 936, and
``(3) a corporation to which this section applies shall be
treated in the same manner as if it were a corporation electing
the application of section 936.
``(f) Definitions.--For purposes of this section, any term used in
this section which is also used in section 936 shall have the same
meaning given such term by section 936.
``(g) Application of Section.--This section shall apply to taxable
years beginning after December 31, 1995, and before January 1, 2006.''.
(2) Conforming amendments.--
(A) Paragraph (1) of section 55(c) is amended by
striking ``and the section 936 credit allowable under
section 27(b)'' and inserting ``, the section 936
credit allowable under section 27(b), and the Puerto
Rican economic activity credit under section 30A''.
(B) Subclause (I) of section 56(g)(4)(C)(ii) is
amended--
(i) by inserting ``30A,'' before ``936'',
and
(ii) by striking ``and (i)'' and inserting
``, (i), and (j)''.
(C) Clause (iii) of section 56(g)(4)(C) is amended
by adding at the end the following new subclause:
``(VI) Application to section 30a
corporations.--References in this
clause to section 936 shall be treated
as including references to section
30A.''.
(D) Subsection (b) of section 59 is amended by
striking ``section 936,'' and all that follows and
inserting ``section 30A or 936, alternative minimum
taxable income shall not include any income with
respect to which a credit is determined under section
30A or 936.''.
(E) The table of sections for subpart B of part IV
of subchapter A of chapter 1 is amended by adding at
the end the following new item:
``Sec. 30A. Puerto Rican economic activity credit.''.
(F)(i) The heading for subpart B of part IV of
subchapter A of chapter 1 is amended to read as
follows:
``Subpart B--Other Credits''.
(ii) The table of subparts for part IV of
subchapter A of chapter 1 is amended by striking the
item relating to subpart B and inserting the following
new item:
``Subpart B. Other credits.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1995.
SEC. 1602. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO ACQUIRE
EMPLOYER SECURITIES.
(a) In General.--Section 133 (relating to interest on certain loans
used to acquire employer securities) is hereby repealed.
(b) Conforming Amendments.--
(1) Subparagraph (B) of section 291(e)(1) is amended by
striking clause (iv) and by redesignating clause (v) as clause
(iv).
(2) Section 812 is amended by striking subsection (g).
(3) Paragraph (5) of section 852(b) is amended by striking
subparagraph (C).
(4) Paragraph (2) of section 4978(b) is amended by striking
subparagraph (A) and all that follows and inserting the
following:
``(A) first from qualified securities to which
section 1042 applied acquired during the 3-year period
ending on the date of the disposition, beginning with
the securities first so acquired, and
``(B) then from any other employer securities.
If subsection (d) applies to a disposition, the disposition
shall be treated as made from employer securities in the
opposite order of the preceding sentence.''.
(5)(A) Section 4978B (relating to tax on disposition of
employer securities to which section 133 applied) is hereby
repealed.
(B) The table of sections for chapter 43 is amended by
striking the item relating to section 4978B.
(6) Subsection (e) of section 6047 is amended by striking
paragraphs (1), (2), and (3) and inserting the following new
paragraphs:
``(1) any employer maintaining, or the plan administrator
(within the meaning of section 414(g)) of, an employee stock
ownership plan which holds stock with respect to which section
404(k) applies to dividends paid on such stock, or
``(2) both such employer or plan administrator,''.
(7) Subsection (f) of section 7872 is amended by striking
paragraph (12).
(8) The table of sections for part III of subchapter B of
chapter 1 is amended by striking the item relating to section
133.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to loans made after October 13, 1995.
(2) Refinancings.--The amendments made by this section
shall not apply to loans made after October 13, 1995, to
refinance securities acquisition loans (determined without
regard to section 133(b)(1)(B) of the Internal Revenue Code of
1986, as in effect on the day before the date of the enactment
of this Act) made on or before such date or to refinance loans
described in this paragraph if--
(A) the refinancing loans meet the requirements of
section 133 of such Code (as so in effect),
(B) immediately after the refinancing the principal
amount of the loan resulting from the refinancing does
not exceed the principal amount of the refinanced loan
(immediately before the refinancing), and
(C) the term of such refinancing loan does not
extend beyond the last day of the term of the original
securities acquisition loan.
For purposes of this paragraph, the term ``securities
acquisition loan'' includes a loan from a corporation to an
employee stock ownership plan described in section 133(b)(3) of
such Code (as so in effect).
(3) Exception.--Any loan made pursuant to a binding written
contract in effect on October 13, 1995, and at all times
thereafter before such loan is made, shall be treated for
purposes of paragraphs (1) and (2) as a loan made before such
date.
SEC. 1603. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS TREATED AS
UNRELATED BUSINESS TAXABLE INCOME.
(a) General Rule.--Subsection (b) of section 512 (relating to
modifications) is amended by adding at the end the following new
paragraph:
``(17) Treatment of certain amounts derived from foreign
corporations.--
``(A) In general.--Notwithstanding paragraph (1),
any amount included in gross income under section
951(a)(1)(A) shall be included as an item of gross
income derived from an unrelated trade or business to
the extent the amount so included is attributable to
insurance income (as defined in section 953) which, if
derived directly by the organization, would be treated
as gross income from an unrelated trade or business.
There shall be allowed all deductions directly
connected with amounts included in gross income under
the preceding sentence.
``(B) Exception.--Subparagraph (A) shall not apply
to income attributable to a policy of insurance or
reinsurance with respect to which the person (directly
or indirectly) insured is--
``(i) such organization,
``(ii) an affiliate of such organization
which is exempt from tax under section 501(a),
or
``(iii) a director or officer of, or an
individual who (directly or indirectly)
performs services for, such organization or
affiliate but only if the insurance covers
primarily risks associated with the performance
of services in connection with such
organization or affiliate.
For purposes of this subparagraph, the determination as
to whether an entity is an affiliate of an organization
shall be made under rules similar to the rules of
section 168(h)(4)(B).
``(C) Regulations.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this paragraph, including
regulations for the application of this paragraph in
the case of income paid through 1 or more entities or
between 2 or more chains of entities.''.
(b) Effective Date.--The amendment made by this section shall apply
to amounts included in gross income in any taxable year beginning after
December 31, 1995.
SEC. 1604. DEPRECIATION UNDER INCOME FORECAST METHOD.
(a) General Rule.--Section 167 (relating to depreciation) is
amended by redesignating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new subsection:
``(g) Depreciation Under Income Forecast Method.--
``(1) In general.--If the depreciation deduction allowable
under this section to any taxpayer with respect to any property
is determined under the income forecast method or any similar
method--
``(A) the income from the property to be taken into
account in determining the depreciation deduction under
such method shall be equal to the amount of income
earned in connection with the property before the close
of the 10th taxable year following the taxable year in
which the property was placed in service,
``(B) the adjusted basis of the property shall only
include amounts with respect to which the requirements
of section 461(h) are satisfied,
``(C) the depreciation deduction under such method
for the 10th taxable year beginning after the taxable
year in which the property was placed in service shall
be equal to the adjusted basis of such property as of
the beginning of such 10th taxable year, and
``(D) such taxpayer shall pay (or be entitled to
receive) interest computed under the look-back method
of paragraph (2) for any recomputation year.
``(2) Look-back method.--The interest computed under the
look-back method of this paragraph for any recomputation year
shall be determined by--
``(A) first determining the depreciation deductions
under this section with respect to such property which
would have been allowable for prior taxable years if
the determination of the amounts so allowable had been
made on the basis of the sum of the following (instead
of the estimated income from such property)--
``(i) the actual income earned in
connection with such property for periods
before the close of the recomputation year, and
``(ii) an estimate of the future income to
be earned in connection with such property for
periods after the recomputation year and before
the close of the 10th taxable year following
the taxable year in which the property was
placed in service,
``(B) second, determining (solely for purposes of
computing such interest) the overpayment or
underpayment of tax for each such prior taxable year
which would result solely from the application of
subparagraph (A), and
``(C) then using the adjusted overpayment rate (as
defined in section 460(b)(7)), compounded daily, on the
overpayment or underpayment determined under
subparagraph (B).
For purposes of the preceding sentence, any cost incurred after
the property is placed in service (which is not treated as a
separate property under paragraph (5)) shall be taken into
account by discounting (using the Federal mid-term rate
determined under section 1274(d) as of the time such cost is
incurred) such cost to its value as of the date the property is
placed in service. The taxpayer may elect with respect to any
property to have the preceding sentence not apply to such
property.
``(3) Exception from look-back method.--Paragraph (1)(D)
shall not apply with respect to any property which, when placed
in service by the taxpayer, had a basis of $100,000 or less.
``(4) Recomputation year.--For purposes of this subsection,
except as provided in regulations, the term `recomputation
year' means, with respect to any property, the 3d and the 10th
taxable years beginning after the taxable year in which the
property was placed in service, unless the actual income earned
in connection with the property for the period before the close
of such 3d or 10th taxable year is within 10 percent of the
income earned in connection with the property for such period
which was taken into account under paragraph (1)(A).
``(5) Special rules.--
``(A) Certain costs treated as separate property.--
For purposes of this subsection, the following costs
shall be treated as separate properties:
``(i) Any costs incurred with respect to
any property after the 10th taxable year
beginning after the taxable year in which the
property was placed in service.
``(ii) Any costs incurred after the
property is placed in service and before the
close of such 10th taxable year if such costs
are significant and give rise to a significant
increase in the income from the property which
was not included in the estimated income from
the property.
``(B) Syndication income from television series.--
In the case of property which is an episode in a
television series, income from syndicating such series
shall not be required to be taken into account under
this subsection before the earlier of--
``(i) the 4th taxable year beginning after
the date the first episode in such series is
placed in service, or
``(ii) the earliest taxable year in which
the taxpayer has an arrangement relating to the
future syndication of such series.
``(C) Special rules for financial exploitation of
characters, etc.--For purposes of this subsection, in
the case of television and motion picture films, the
income from the property shall include income from the
exploitation of characters, designs, scripts, scores,
and other incidental income associated with such films,
but only to the extent that such income is earned in
connection with the ultimate use of such items by, or
the ultimate sale of merchandise to, persons who are
not related persons (within the meaning of section
267(b)) to the taxpayer.
``(D) Collection of interest.--For purposes of
subtitle F (other than sections 6654 and 6655), any
interest required to be paid by the taxpayer under
paragraph (1) for any recomputation year shall be
treated as an increase in the tax imposed by this
chapter for such year.
``(E) Determinations.--For purposes of paragraph
(2), determinations of the amount of income earned in
connection with any property shall be made in the same
manner as for purposes of applying the income forecast
method; except that any income from the disposition of
such property shall be taken into account.
``(F) Treatment of pass-thru entities.--Rules
similar to the rules of section 460(b)(4) shall apply
for purposes of this subsection.''.
(b) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
apply to property placed in service after September 13, 1995.
(2) Binding contracts.--The amendment made by subsection
(a) shall not apply to any property produced or acquired by the
taxpayer pursuant to a written contract which was binding on
September 13, 1995, and at all times thereafter before such
production or acquisition.
SEC. 1605. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR DAMAGES NOT
ATTRIBUTABLE TO PHYSICAL INJURIES OR SICKNESS.
(a) In General.--Paragraph (2) of section 104(a) (relating to
compensation for injuries or sickness) is amended to read as follows:
``(2) the amount of any damages (other than punitive
damages) received (whether by suit or agreement and whether as
lump sums or as periodic payments) on account of personal
physical injuries or physical sickness;''.
(b) Emotional Distress as Such Treated as Not Physical Injury or
Physical Sickness.--Section 104(a) is amended by striking the last
sentence and inserting the following new sentence: ``For purposes of
paragraph (2), emotional distress shall not be treated as a physical
injury or physical sickness. The preceding sentence shall not apply to
an amount of damages not in excess of the amount paid for medical care
(described in subparagraph (A) or (B) of section 213(d)(1))
attributable to emotional distress.''.
(c) Application of Prior Law for States in Which Only Punitive
Damages May Be Awarded in Wrongful Death Actions.--Section 104 is
amended by redesignating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new subsection:
``(c) Application of Prior Law in Certain Cases.--The phrase
`(other than punitive damages)' shall not apply to punitive damages
awarded in a civil action--
``(1) which is a wrongful death action, and
``(2) with respect to which applicable State law (as in
effect on September 13, 1995 and without regard to any
modification after such date) provides, or has been construed
to provide by a court of competent jurisdiction pursuant to a
decision issued on or before September 13, 1995, that only
punitive damages may be awarded in such an action.
This subsection shall cease to apply to any civil action filed on or
after the first date on which the applicable State law ceases to
provide (or is no longer construed to provide) the treatment described
in paragraph (2).''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts received
after June 30, 1996, in taxable years ending after such date.
(2) Exception.--The amendments made by this section shall
not apply to any amount received under a written binding
agreement, court decree, or mediation award in effect on (or
issued on or before) September 13, 1995.
SEC. 1606. REPEAL OF DIESEL FUEL TAX REBATE TO PURCHASERS OF DIESEL-
POWERED AUTOMOBILES AND LIGHT TRUCKS.
(a) In General.--Section 6427 (relating to fuels not used for
taxable purposes) is amended by striking subsection (g).
(b) Conforming Amendments.--
(1) Paragraph (3) of section 34(a) is amended to read as
follows:
``(3) under section 6427 with respect to fuels used for
nontaxable purposes or resold during the taxable year
(determined without regard to section 6427(k)).''.
(2) Paragraphs (1) and (2)(A) of section 6427(i) are each
amended--
(A) by striking ``(g),'', and
(B) by striking ``(or a qualified diesel powered
highway vehicle purchased)'' each place it appears.
(c) Effective Date.--The amendments made by this section shall
apply to vehicles purchased after the date of the enactment of this
Act.
Subtitle G--Technical Corrections
SEC. 1701. COORDINATION WITH OTHER SUBTITLES.
For purposes of applying the amendments made by any subtitle of
this title other than this subtitle, the provisions of this subtitle
shall be treated as having been enacted immediately before the
provisions of such other subtitles.
SEC. 1702. AMENDMENTS RELATED TO REVENUE RECONCILIATION 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 inserting ``section
1(g)(3)(B)''.
(2) Clause (i) of section 151(d)(3)(C) is amended 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 inserting ``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
subdivision thereof''.
(B) Paragraph (4) of section 6427(l), as in effect 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 amended by striking
``chapter 32 or by section 4051'' and inserting ``chapter 31 or
32''.
(4) Section 7012 is amended--
(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 redesignating
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 following 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 removed
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 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 prescribe such
regulations as may be necessary to carry out the purposes of
this subsection, including regulations--
``(A) to prevent the credit provided in this
subsection from benefiting any person who produces 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 amended to read as
follows:
``(3) section 5041(f),''.
(7) Section 5354 is amended by inserting ``(taking into
account the appropriate amount of credit with respect to such
wine under section 5041(c))'' after ``any one time''.
(c) Amendments Related to Subtitle C.--
(1) Paragraph (4) of section 56(g) is amended by
redesignating subparagraphs (I) and (J) as subparagraphs (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 Revenue Reconciliation Act of
1990 applies shall be determined without regard to any
deduction allowed under such section; except that, for purposes
of applying 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--
(A) by striking ``any transaction to which the
summons relates'' and inserting ``any affected taxable
year'', and
(B) by adding at the end thereof the following new
sentence: ``For purposes of this subparagraph, 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
transaction 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 without
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.
(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 inserting ``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 alternative 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 the
amendments made by section 1915 of the Energy Policy Act of
1992.
(2) Clause (i) of section 613A(c)(3)(A) is amended by
striking ``the table contained in''.
(3) Section 6501 is amended--
(A) by striking subsection (m) (relating to
deficiency attributable to election under section 44B)
and by redesignating subsections (n) and (o) as
subsections (m) and (n), respectively, and
(B) by striking ``section 40(f) or 51(j)'' in
subsection (m) (as redesignated by subparagraph (A))
and inserting ``section 40(f), 43, or 51(j)''.
(4) Subparagraph (C) of section 38(c)(2) (as in effect on
the day before the date of the enactment of the Revenue
Reconciliation Act of 1990) is amended by inserting before the
period at the end of the first sentence the following: ``and
without regard to the deduction under section 56(h)''.
(5) The amendment made by section 1913(b)(2)(C)(i) of the
Energy Policy Act of 1992 shall apply to taxable years
beginning after December 31, 1990.
(f) Amendments Related to Subtitle F.--
(1)(A) Section 2701(a)(3) is amended by adding at the end
thereof the following new subparagraph:
``(C) Valuation of qualified payments where no
liquidation, etc. rights.--In the case of an applicable
retained interest which is described in subparagraph
(B)(i) but not subparagraph (B)(ii), the value of the
distribution right shall be determined without regard
to this section.''.
(B) Section 2701(a)(3)(B) is amended by inserting
``certain'' before ``qualified'' in the heading thereof.
(C) Sections 2701 (d)(1) and (d)(4) are each amended by
striking ``subsection (a)(3)(B)'' and inserting ``subsection
(a)(3) (B) or (C)''.
(2) Clause (i) of section 2701(a)(4)(B) is amended by
inserting ``(or, to the extent provided in regulations, the
rights as to either income or capital)'' after ``income and
capital''.
(3)(A) Section 2701(b)(2) is amended by adding at the end
thereof the following new subparagraph:
``(C) Applicable family member.--For purposes of
this subsection, the term `applicable family member'
includes any lineal descendant of any parent of the
transferor or the transferor'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 respect
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 elects not to treat such
payments as qualified 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 subparagraph) 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 subparagraph (A)) shall not expire
before the due date (including extensions) for filing the
transferor's return 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''.
(7) Subclause (I) of section 2701(d)(3)(B)(ii) is amended
by inserting ``or the exclusion under section 2503(b),'' after
``section 2523,''.
(8) Section 2701(e)(5) is amended--
(A) by striking ``such contribution to capital or
such redemption, recapitalization, or other change'' in
subparagraph (A) and inserting ``such transaction'',
and
(B) by striking ``the transfer'' in subparagraph
(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 paragraph (3)(A)(ii)
involving a transfer of an applicable 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 inserting ``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 inserting
``if'' in clause (i),
(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 following new
clause:
``(iii) to the extent that regulations
provide that such transfer is not inconsistent
with the purposes of this section.''.
(B)(i) Section 2702(a)(3) is amended by striking
``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 person
receives a distribution from a foreign corporation
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 following new
sentence: ``For purposes of this section, a United
States person shall be treated as having 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 amended 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 amended to read as
follows:
``(1) In general.--If any shareholder of a 10-percent
corporate shareholder of a foreign corporation exchanges stock
of the 10-percent corporate shareholder for stock of the
foreign corporation, such 10-percent corporate shareholder
shall recognize 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
``(B) then distributed by the 10-percent corporate
shareholder to such shareholder in redemption or
liquidation (whichever is appropriate).
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 subsection (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 amended 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 repealed, and section 7108(r)(2) of the
Revenue Reconciliation Act of 1989 shall be applied as if such
paragraph (and amendment) had never been enacted.
(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 (B) of section 168(e)(3) (relating to 5-
year property) is amended by adding at the end the following
flush sentence:
``Nothing in any provision of law shall be construed to
treat property as not being described in clause (vi)(I)
(or the corresponding provisions of prior law) by
reason of being public utility property (within the
meaning of section 48(a)(3)).''.
(C) 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)''.
(3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II), and
832(b)(5)(D)(ii)(II) are each amended by striking ``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 inserting ``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 section 1504(a), except
that for such purposes sections 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 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
received--
``(i) 1 or more members of the affiliated
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 amended by striking
``in a trade or business'' and inserting ``a trade or
business''.
(11) Subparagraph (E) of section 50(a)(2) is amended by
striking ``section 48(a)(5)(A)'' and inserting ``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 incentive stock option,
an option granted under an employee stock purchase plan, or a
restricted stock option'' 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 inserting ``subsection
(b)(1)(E)''.
(17) Section 6503 is amended--
(A) by redesignating the subsection relating to
extension in case of certain summonses as subsection
(j), and
(B) by redesignating the subsection relating 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 Reconciliation 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 included in the provision of the
Revenue Reconciliation Act of 1990 to which such amendment
relates.
SEC. 1703. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT OF 1993.
(a) Amendment Related to Section 13114.--Paragraph (2) of section
1044(c) is amended to read as follows:
``(2) Purchase.--The taxpayer shall be considered to have
purchased any property if, but for subsection (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 authority, and
prohibited discrimination.--The amendments made by
paragraphs (2), (3), and (4) shall take effect on the
date of the enactment 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--
``(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 inserting before the period at the end
thereof the following: ``, determined by substituting `calendar year
1989' for `calendar 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 minimum tax'',
(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 tentative 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 striking ``last sentence'' each place it
appears and inserting ``last 2 sentences''.
(g) Amendments Related to Section 13222.--
(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 inserting ``subparagraph
(B) or (C) of section 951(a)(1)''.
(2) Paragraph (1) of section 956A(b) is amended to read as
follows:
``(1) the amount (not including a deficit) referred to in
section 316(a)(1) to the extent such amount was accumulated in
prior taxable years beginning 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 subsections (c)(3)(A) and (d)''.
(4) Subsection (b) of section 958 is amended by striking
``956(b)(2)'' each place it appears and inserting
``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 account 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:
``(B) for any period before January 1, 2001, during
which the rates of tax under section 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 Reconciliation Act of 1993 is amended by
striking ``by the taxpayer'' and inserting ``by the taxpayer or a
related person''.
(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 inserting ``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 amended by
striking ``which is a'' and inserting ``which is''.
(5) Subparagraph (A) of section 1017(b)(4) is amended by
striking ``subsection (b)(2)(D)'' and inserting ``subsection
(b)(2)(E)''.
(6) So much of section 1245(a)(3) as precedes subparagraph
(A) thereof is amended to read as follows:
``(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
depreciation provided in section 167 and is either--''.
(7) Paragraph (2) of section 1394(e) is amended--
(A) by striking ``(i)'' and inserting ``(A)'', and
(B) by striking ``(ii)'' and inserting ``(B)''.
(8) Subsection (m) of section 6501 (as redesignated by
section 1602) 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 subchapter B of
chapter 68 is amended by striking ``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 is amended by striking ``this
section'' and inserting ``this subsection''.
(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.
SEC. 1704. 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 provision, 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 reinvestment
or redemption.--Amounts held for not more than
30 days pending reinvestment 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 Reconciliation Act of 1989.
(c) Treatment of Certain Distributions Under Section 1445.--
(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
corporation.''.
(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 Section 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 sentence 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.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning 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 realized on
such disposition is recognized, the excess of--
``(i) any loss from such activity for such
taxable year (determined after the application
of subsection (b)), over
``(ii) any net income or gain for such
taxable year from all other passive activities
(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 beginning after December 31, 1986.
(f) Miscellaneous Amendments to Foreign Provisions.--
(1) Coordination of unified estate tax credit with
treaties.--Subparagraph (A) of section 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) 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) Subsection (j) of section 163 is amended by
redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new
paragraph:
``(7) Coordination with passive loss rules, etc.--This
subsection shall be applied before sections 465 and 469.''.
(C) The amendments made by this paragraph shall
apply as if included 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.--
(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 ``reasonably
expected'' and all that follows down through
the period at the end thereof and inserting
``reasonably expected to be allocable
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 effectively connected (or treated
as effectively connected) 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.
(4) Clarification of source rule.--
(A) In general.--Paragraph (2) of section 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 subparagraph (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 paragraph (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 sentence: ``A facility shall not fail to be
treated as described in this subparagraph by reason of an
assignment (or an agreement to an assignment) by the
governmental unit on whose behalf the bonds are issued of any
part of its interest in the property financed 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 follows:
``(V) Medicare entitlement followed
by qualifying event.--In the case of a
qualifying event described in paragraph
(3)(B) that occurs less than 18 months
after the date the covered employee
became entitled to benefits under title
XVIII of the Social Security Act, the
period of coverage for qualified
beneficiaries other than the covered
employee shall not terminate under this
clause before the close of the 36-month
period beginning on the date the
covered employee 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 followed by
qualifying event.--In the case of a qualifying
event described in section 603(2) that occurs
less than 18 months after the date the covered
employee became entitled to benefits under
title XVIII of the Social Security Act, the
period of coverage for qualified beneficiaries
other than the covered employee shall not
terminate under this subparagraph before the
close of the 36-month period beginning on the
date the covered employee 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 followed by
qualifying event.--In the case of a qualifying
event described in section 2203(2) that occurs
less than 18 months after the date the covered
employee became entitled to benefits under
title XVIII of the Social Security Act, the
period of coverage for qualified beneficiaries
other than the covered employee shall not
terminate under this subparagraph before the
close of the 36-month period beginning on the
date the covered employee became so
entitled.''.
(2) Effective date.--The amendments made by this subsection
shall apply to plan years beginning 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 chapter--
``(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,
``(B) the alternative minimum taxable income 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 taxable year, and
``(C) any excess inclusion shall be disregarded for
purposes of computing the alternative tax net operating
loss deduction.
The preceding sentence shall not apply to any organization to
which section 593 applies, except to the extent provided in
regulations prescribed by the Secretary 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 Reform 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, Hawaii, and possessions)
is amended by inserting before the period the following: ``, or
passengers transported on United States flag vessels operating
solely within the State waters of Alaska or Hawaii and adjacent
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 Provisions of Energy Policy Act
of 1992.--
(1) Effective with respect to taxable years beginning after
December 31, 1990, subclause (II) of section 53(d)(1)(B)(iv) is
amended to read as follows:
``(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 redesignated 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 amended--
(i) by inserting ``(determined without regard to
subsection (b)(3))'' before the period at the end of
paragraph (1) thereof, and
(ii) by adding at the end thereof the following 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 redesignated by
section 1602) is amended by striking ``section 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 inserting ``section 101(7)''
and by striking ``1752(6)'' and inserting ``1752(7)''.
(6) Paragraph (1) of section 1917(b) of the Energy Policy
Act of 1992 shall be applied as if ``at a rate'' appeared
instead of ``at the rate'' in the material proposed to be
stricken.
(7) Paragraph (2) of section 1921(b) of the Energy Policy
Act of 1992 shall be applied as if a comma appeared after
``(2)'' in the material proposed to be stricken.
(8) Subsection (a) of section 1937 of the Energy Policy Act
of 1992 shall be applied as if ``Subpart B'' appeared instead
of ``Subpart C''.
(l) Treatment of Qualified Football Coaches Plan.--
(1) In general.--Subparagraph (F) of section 3(37) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1002(37)(F)) is amended by redesignating clause (ii) as clause
(iii) and by inserting after clause (i) the following new
clause:
``(ii) For purposes of the Internal Revenue Code of 1986--
``(I) clause (i) shall apply, and
``(II) a qualified football coaches plan shall be treated
as a multiemployer collectively bargained plan.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to years beginning after December 22, 1987.
(m) Determination of Unrecovered Investment in Annuity Contract.--
(1) In general.--Subparagraph (A) of section 72(b)(4) is
amended by inserting ``(determined without regard to subsection
(c)(2))'' after ``contract''.
(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 paragraph
(4)(A)(ii)(I)'', and
(B) by amending subclause (II) of clause (ii) to
read as follows:
``(II) for each such child, 15
percent of the lesser of the amount
described in paragraph (4)(A)(ii)(I) or
the excess of the gross income of such
child over the amount so described,
and''.
(3) Minimum tax.--Subparagraph (B) of section 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 beginning after December 31, 1995.
(o) Treatment of Certain Veterans' Reemployment Rights.--
(1) In general.--Section 414 is amended by adding at the
end the following new subsection:
``(u) Special Rules Relating to Veterans' Reemployment Rights Under
USERRA.--
``(1) Treatment of certain contributions made pursuant to
veterans' reemployment rights.--If any contribution is made by
an employer or an employee under an individual account plan
with respect to an employee, or by an employee to a defined
benefit plan that provides for employee contributions, and such
contribution is required by reason of such employee's rights
under chapter 43 of title 38, United States Code, resulting
from qualified military service, then--
``(A) such contribution shall not be subject to any
otherwise applicable limitation contained in section
402(g), 402(h), 403(b), 404(a), 404(h), 408, 415, or
457, and shall not be taken into account in applying
such limitations to other contributions or benefits
under such plan or any other plan, with respect to the
year in which the contribution is made,
``(B) such contribution shall be subject to the
limitations referred to in subparagraph (A) with
respect to the year to which the contribution relates
(in accordance with rules prescribed by the Secretary),
and
``(C) such plan shall not be treated as failing to
meet the requirements of section 401(a)(4), 401(a)(26),
401(k)(3), 401(k)(11), 401(k)(12), 401(m), 403(b)(12),
408(k)(3), 408(k)(6), 408(p), 410(b), or 416 by reason
of the making of (or the right to make) such
contribution.
For purposes of the preceding sentence, any elective deferral
or employee contribution made under paragraph (2) shall be
treated as required by reason of the employee's rights under
such chapter 43.
``(2) Reemployment rights under userra with respect to
elective deferrals.--
``(A) In general.--For purposes of this subchapter
and section 457, if an employee is entitled to the
benefits of chapter 43 of title 38, United States Code,
with respect to any plan which provides for elective
deferrals, the employer sponsoring the plan shall be
treated as meeting the requirements of such chapter 43
with respect to such elective deferrals only if such
employer--
``(i) permits such employee to make
additional elective deferrals under such plan
(in the amount determined under subparagraph
(B) or such lesser amount as is elected by the
employee) during the period which begins on the date of the
reemployment of such employee with such employer and has the same
length as the lesser of--
``(I) the product of 3 and the
period of qualified military service
which resulted in such rights, and
``(II) 5 years, and
``(ii) makes a matching contribution with
respect to any additional elective deferral
made pursuant to clause (i) which would have
been required had such deferral actually been
made during the period of such qualified
military service.
``(B) Amount of makeup required.--The amount
determined under this subparagraph with respect to any
plan is the maximum amount of the elective deferrals
that the individual would have been permitted to make
under the plan in accordance with the limitations
referred to in paragraph (1)(A) during the period of
qualified military service if the individual had
continued to be employed by the employer during such
period and received compensation as determined under
paragraph (7). Proper adjustment shall be made to the
amount determined under the preceding sentence for any
elective deferrals actually made during the period of
such qualified military service.
``(C) Elective deferral.--For purposes of this
paragraph, the term `elective deferral' has the meaning
given such term by section 402(g)(3); except that such
term shall include any deferral of compensation under
an eligible deferred compensation plan (as defined in
section 457(b)).
``(D) After-tax employee contributions.--References
in subparagraphs (A) and (B) to elective deferrals
shall be treated as including references to employee
contributions.
``(3) Certain retroactive adjustments not required.--For
purposes of this subchapter and subchapter E, no provision of
chapter 43 of title 38, United States Code, shall be construed
as requiring--
``(A) any crediting of earnings to an employee with
respect to any contribution before such contribution is
actually made, or
``(B) any allocation of any forfeiture with respect
to the period of qualified military service.
``(4) Loan repayment suspensions permitted.--If any plan
suspends the obligation to repay any loan made to an employee
from such plan for any part of any period during which such
employee is performing service in the uniformed services (as
defined in chapter 43 of title 38, United States Code), whether
or not qualified military service, such suspension shall not be
taken into account for purposes of section 72(p), 401(a), or
4975(d)(1).
``(5) Qualified military service.--For purposes of this
subsection, the term `qualified military service' means any
service in the uniformed services (as defined in chapter 43 of
title 38, United States Code) by any individual if such
individual is entitled to reemployment rights under such
chapter with respect to such service.
``(6) Individual account plan.--For purposes of this
subsection, the term `individual account plan' means any
defined contribution plan (including any tax-sheltered annuity
plan under section 403(b), any simplified employee pension
under section 408(k), any qualified salary reduction
arrangement under section 408(p), and any eligible deferred
compensation plan (as defined in section 457(b)).
``(7) Compensation.--For purposes of sections 403(b)(3),
415(c)(3), and 457(e)(5), an employee who is in qualified
military service shall be treated as receiving compensation
from the employer during such period of qualified military
service equal to--
``(A) the compensation the employee would have
received during such period if the employee were not in
qualified military service, determined based on the
rate of pay the employee would have received from the
employer but for absence during the period of qualified
military service, or
``(B) if the compensation the employee would have
received during such period was not reasonably certain,
the employee's average compensation from the employer
during the 12-month period immediately preceding the
qualified military service (or, if shorter, the period
of employment immediately preceding the qualified
military service).
``(8) USERRA requirements for qualified retirement plans.--
For purposes of this subchapter and section 457, an employer
sponsoring a retirement plan shall be treated as meeting the
requirements of chapter 43 of title 38, United States Code,
only if each of the following requirements is met:
``(A) An individual reemployed under such chapter
is treated with respect to such plan as not having
incurred a break in service with the employer
maintaining the plan by reason of such individual's
period of qualified military service.
``(B) Each period of qualified military service
served by an individual is, upon reemployment under
such chapter, deemed with respect to such plan to
constitute service with the employer maintaining the
plan for the purpose of determining the
nonforfeitability of the individual's accrued benefits
under such plan and for the purpose of determining the
accrual of benefits under such plan.
``(C) An individual reemployed under such chapter
is entitled to accrued benefits that are contingent on
the making of, or derived from, employee contributions
or elective deferrals only to the extent the individual
makes payment to the plan with respect to such
contributions or deferrals. No such payment may exceed
the amount the individual would have been permitted or
required to contribute had the individual remained
continuously employed by the employer throughout the
period of qualified military service. Any payment to
such plan shall be made during the period beginning
with the date of reemployment and whose duration is 3
times the period of the qualified military service (but
not greater than 5 years).
``(9) Plans not subject to title 38.--This subsection shall
not apply to any retirement plan to which chapter 43 of title
38, United States Code, does not apply.
``(10) References.--For purposes of this section, any
reference to chapter 43 of title 38, United States Code, shall
be treated as a reference to such chapter as in effect on
December 12, 1994 (without regard to any subsequent
amendment).''.
(2) Effective date.--The amendment made by this subsection
shall be effective as of December 12, 1994.
(p) Reporting of Real Estate Transactions.--
(1) In general.--Paragraph (3) of section 6045(e) (relating
to prohibition of separate charge for filing return) is amended
by adding at the end the following new sentence: ``Nothing in
this paragraph shall be construed to prohibit the real estate
reporting person from taking into account its cost of complying
with such requirement in establishing its charge (other than a
separate charge for complying with such requirement) to any
customer for performing services in the case of a real estate
transaction.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in section 1015(e)(2)(A) of
the Technical and Miscellaneous Revenue Act of 1988.
(q) Clarification of Denial of Deduction for Stock Redemption
Expenses.
(1) In general.--Paragraph (1) of section 162(k) is amended
by striking ``the redemption of its stock'' and inserting ``the
reacquisition of its stock or of the stock of any related
person (as defined in section 465(b)(3)(C))''.
(2) Certain deductions permitted.--Subparagraph (A) of
section 162(k)(2) is amended by striking ``or'' at the end of
clause (i), by redesignating clause (ii) as clause (iii), and
by inserting after clause (i) the following new clause:
``(ii) deduction for amounts which are
properly allocable to indebtedness and
amortized over the term of such indebtedness,
or''.
(3) Clerical amendment.--The subsection heading for
subsection (k) of section 162 is amended by striking
``Redemption'' and inserting ``Reacquisition''.
(4) Effective date.--
(A) In general.--Except as provided in subparagraph
(B), the amendments made by this subsection shall apply
to amounts paid or incurred after September 13, 1995,
in taxable years ending after such date.
(B) Paragraph (2).--The amendment made by paragraph
(2) shall take effect as if included in the amendment
made by section 613 of the Tax Reform Act of 1986.
(r) Clerical Amendment to Section 404.--
(1) In general.--Paragraph (1) of section 404(j) is amended
by striking ``(10)'' and inserting ``(9)''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 713(d)(4)(A) of the Deficit Reduction Act of 1984.
(s) Passive Income Not To Include FSC Income, Etc.--
(1) In general.--Paragraph (2) of section 1296(b) is
amended by striking ``or'' at the end of subparagraph (B), by
striking the period at the end of subparagraph (C) and
inserting ``, or'', and by inserting after subparagraph (C) the
following new subparagraph:
``(D) which is foreign trade income of a FSC or
export trade income of an export trade corporation (as
defined in section 971).''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 1235 of the Tax Reform Act of 1986.
(t) Miscellaneous Clerical Amendments.--
(1) Subclause (II) of section 56(g)(4)(C)(ii) is amended by
striking ``of the subclause'' and inserting ``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 ``combat zone compensation''.
(B) The item relating to section 112 in the table of
sections for part III of subchapter B of chapter 1 is amended
by striking ``combat pay'' and inserting ``combat zone
compensation''.
(C) Paragraph (1) of section 3401(a) is amended by striking
``combat pay'' and inserting ``combat zone compensation''.
(5) Clause (i) of section 172(h)(3)(B) is amended by
striking the comma at the end thereof and inserting 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 ``section 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''.
(12) Paragraph (3) of section 5134(c) is amended by
striking ``section 6662(a)'' and inserting ``section 6665(a)''.
(13) Paragraph (2) of section 5206(f) is amended by
striking ``section 5(e)'' and inserting ``section 105(e)''.
(14) Paragraph (1) of section 6050B(c) is amended by
striking ``section 85(c)'' and inserting ``section 85(b)''.
(15) Subsection (k) of section 6166 is amended by striking
paragraph (6).
(16) 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).''.
(17) The section heading for section 6043 is amended by
striking the semicolon and inserting a comma.
(18) The item relating to section 6043 in the table of
sections for subpart B of part III of subchapter A of chapter
61 is amended by striking the semicolon and inserting a comma.
(19) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to section
6662.
(20)(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 subchapter A of
chapter 75 is amended by striking ``lubricating oil,'' in the
item relating to section 7232.
(21) Paragraph (1) of section 6701(a) of the Omnibus Budget
Reconciliation Act of 1989 is amended by striking ``subclause
(IV)'' and inserting ``subclause (V)''.
(22) Clause (ii) of section 7304(a)(2)(D) of such Act is
amended by striking ``subsection (c)(2)'' and inserting
``subsection (c)''.
(23) Paragraph (1) of section 7646(b) of such Act is
amended by striking ``section 6050H(b)(1)'' and inserting
``section 6050H(b)(2)''.
(24) Paragraph (10) of section 7721(c) of such Act is
amended by striking ``section 6662(b)(2)(C)(ii)'' and inserting
``section 6661(b)(2)(C)(ii)''.
(25) Subparagraph (A) of section 7811(i)(3) of such Act is
amended by inserting ``the first place it appears'' before ``in
clause (i)''.
(26) Paragraph (10) of section 7841(d) of such Act is
amended by striking ``section 381(a)'' and inserting ``section
381(c)''.
(27) Paragraph (2) of section 7861(c) of such Act is
amended by inserting ``the second place it appears'' before
``and inserting''.
(28) Paragraph (1) of section 460(b) is amended by striking
``the look-back method of paragraph (3)'' and inserting ``the
look-back method of paragraph (2)''.
(29) Subparagraph (C) of section 50(a)(2) is amended by
striking ``subsection (c)(4)'' and inserting ``subsection
(d)(5)''.
(30) Subparagraph (B) of section 172(h)(4) is amended by
striking the material following the heading and preceding
clause (i) and inserting ``For purposes of subsection (b)(2)--
''.
(31) Subparagraph (A) of section 355(d)(7) is amended by
inserting ``section'' before ``267(b)''.
(32) Subparagraph (C) of section 420(e)(1) is amended by
striking ``mean'' and inserting ``means''.
(33) Paragraph (4) of section 537(b) is amended by striking
``section 172(i)'' and inserting ``section 172(f)''.
(34) Subparagraph (B) of section 613(e)(1) is amended by
striking the comma at the end thereof and inserting a period.
(35) Paragraph (4) of section 856(a) is amended by striking
``section 582(c)(5)'' and inserting ``section 582(c)(2)''.
(36) 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)''.
(37) Subsection (b) of section 936 is amended by striking
``subparagraphs (D)(ii)(I)'' and inserting ``subparagraphs
(D)(ii)''.
(38) Subsection (c) of section 2104 is amended by striking
``subparagraph (A), (C), or (D) of section 861(a)(1)'' and
inserting ``section 861(a)(1)(A)''.
(39) Subparagraph (A) of section 280A(c)(1) is amended to
read as follows:
``(A) as the principal place of business for any
trade or business of the taxpayer,''.
(40) Section 6038 is amended by redesignating the
subsection relating to cross references as subsection (f).
(41) 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);''.
(42) 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 redesignated as subsection (g).
(43) Subsection (b) of section 7454 is amended by striking
``section 4955(e)(2)'' and inserting ``section 4955(f)(2)''.
(44) 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.
(45) Paragraph (1) of section 11303(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``paragraph''
appeared instead of ``subparagraph'' in the material proposed
to be stricken.
(46) Subsection (f) of section 11701 of the Revenue
Reconciliation Act of 1990 is amended by inserting ``(relating
to definitions)'' after ``section 6038(e)''.
(47) Subsection (i) of section 11701 of the Revenue
Reconciliation Act of 1990 shall be applied as if
``subsection'' appeared instead of ``section'' in the material
proposed to be stricken.
(48) 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)''.
(49) 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.
(50) 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 instead of ``section 1042(c)(2)(B)''.
(51) 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)''.
(52) 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 stricken.
(53) 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).
(54) 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.
(55) 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.
(56) 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 redesignated by section 11801,''
appeared instead of ``Paragraph (21) of section 1016(a)''.
(57) Paragraph (5) section 8002(a) of the Surface
Transportation Revenue Act of 1991 shall be applied as if
``4481(e)'' appeared instead of ``4481(c)''.
(58) Section 7872 is amended--
(A) by striking ``foregone'' each place it appears
in subsections (a) and (e)(2) and inserting
``forgone'', and
(B) by striking ``Foregone'' in the heading for
subsection (e) and the heading for paragraph (2) of
subsection (e) and inserting ``Forgone''.
(59) Paragraph (7) of section 7611(h) is amended by
striking ``approporiate'' and inserting ``appropriate''.
(60) The heading of paragraph (3) of section 419A(c) is
amended by striking ``severence'' and inserting ``severance''.
(61) Clause (ii) of section 807(d)(3)(B) is amended by
striking ``Commissoners' '' and inserting ``Commissioners' ''.
(62) Subparagraph (B) of section 1274A(c)(1) is amended by
striking ``instument'' and inserting ``instrument''.
(63) Subparagraph (B) of section 724(d)(3) by striking
``Subparagaph'' and inserting ``Subparagraph''.
(64) The last sentence of paragraph (2) of section 42(c) is
amended by striking ``of 1988''.
(65) Paragraph (1) of section 9707(d) is amended by
striking ``diligence,'' and inserting ``diligence''.
(66) Subsection (c) of section 4977 is amended by striking
``section 132(i)(2)'' and inserting ``section 132(h)''.
(67) The last sentence of section 401(a)(20) is amended by
striking ``section 211'' and inserting ``section 521''.
(68) Subparagraph (A) of section 402(g)(3) is amended by
striking ``subsection (a)(8)'' and inserting ``subsection
(e)(3)''.
(69) The last sentence of section 403(b)(10) is amended by
striking ``an direct'' and inserting ``a direct''.
(70) Subparagraph (A) of section 4973(b)(1) is amended by
striking ``sections 402(c)'' and inserting ``section 402(c)''.
(71) Paragraph (12) of section 3405(e) is amended by
striking ``(b)(3)'' and inserting ``(b)(2)''.
(72) Paragraph (41) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if
``section'' appeared instead of ``sections'' in the material
proposed to be stricken.
(73) 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)''.
(74) Paragraph (5) of section 860F(a) is amended by
striking ``paragraph (1)'' and inserting ``paragraph (2)''.
(75) Paragraph (1) of section 415(k) is amended by adding
``or'' at the end of subparagraph (C), by striking
subparagraphs (D) and (E), and by redesignating subparagraph
(F) as subparagraph (D).
(76) Paragraph (2) of section 404(a) is amended by striking
``(18),''.
(77) 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 government plan.''.
(78) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i) are each
amended by striking ``section 6662(d)(2)(C)(ii)'' and inserting
``section 6662(d)(2)(C)(iii)''.
(79) Subsection (a) of section 164 is amended by striking
the paragraphs relating to the generation-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 distributions.
``(5) The environmental tax imposed by section 59A.''.
(u) Certain Property Not Treated as Section 179 Property.--
(1) In general.--Paragraph (1) of section 179(d) is amended
by adding at the end thereof the following new sentence: ``Such
term shall not include any property described in section 50(b)
and shall not include air conditioning or heating units and
horses.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to property placed in service after May 14, 1996.
TITLE II--PAYMENT OF WAGES
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Employee Commuting Flexibility Act
of 1996''.
SEC. 2. PROPER COMPENSATION FOR USE OF EMPLOYER VEHICLES.
Section 4(a) of the Portal-to-Portal Act of 1947 (29 U.S.C. 254(a))
is amended by adding at the end the following: ``For purposes of this
subsection, the use of an employer's vehicle for travel by an employee
and activities performed by an employee which are incidental to the use
of such vehicle for commuting shall not be considered part of the
employee's principal activities if the use of such vehicle for travel
is within the normal commuting area for the employer's business or
establishment and the use of the employer's vehicle is subject to an
agreement on the part of the employer and the employee or
representative of such employee.''.
SEC. 3. EFFECTIVE DATE.
The amendment made by section 1 shall take effect on the date of
the enactment of this Act and shall apply in determining the
application of section 4 of the Portal-to-Portal Act of 1947 to an
employee in any civil action brought before such date of enactment but
pending on such date.
SEC. 4. MINIMUM WAGE INCREASE.
(a) Short Title.--This section may be cited as the ``Minimum Wage
Increase Act of 1996''.
(b) Amendment.--Paragraph (1) of section 6(a) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 206(a)) is amended to read as follows:
``(1) except as otherwise provided in this section, not
less than $4.25 an hour during the period ending on June 30,
1996, not less than $4.75 an hour during the year beginning on
July 1, 1996, and not less than $5.15 an hour after the
expiration of such year;''.
SEC. 5. FAIR LABOR STANDARDS ACT AMENDMENTS.
(a) Computer Professionals.--Section 13(a) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 213(a)) is amended by striking the
period at the end of paragraph (16) and inserting ``; or'' and by
adding after that paragraph the following:
``(17) any employee who is a computer systems analyst,
computer programmer, software engineer, or other similarly
skilled worker, whose primary duty is--
``(A) the application of systems analysis
techniques and procedures, including consulting with
users, to determine hardware, software, or system
functional specifications;
``(B) the design, development, documentation,
analysis, creation, testing, or modification of
computer systems or programs, including prototypes,
based on and related to user or system design
specifications;
``(C) the design, documentation, testing, creation,
or modification of computer programs related to machine
operating systems; or
``(D) a combination of duties described in
subparagraphs (A), (B), and (C) the performance of
which requires the same level of skills, and
who, in the case of an employee who is compensated on an hourly
basis, is compensated at a rate of not less than $27.63 an
hour.''.
(b) Tip Credit.--The next to last sentence of section 3(m) of the
Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)) is amended to read
as follows: ``In determining the wage an employer is required to pay a
tipped employee, the amount paid such employee by the employee's
employer shall be an amount equal to--
``(1) the cash wage paid such employee which for purposes
of such determination shall be not less than the cash wage
required to be paid such an employee on the date of the
enactment of this paragraph; and
``(2) an additional amount on account of the tips received
by such employee which amount is equal to the difference
between the wage specified in paragraph (1) and the cash wage
in effect under section 6(a)(1).
The additional amount on account of tips may not exceed the value of
the tips actually received by an employee.''.
(c) Opportunity Wage.--Section 6 of the Fair Labor Standards Act of
1938 (29 U.S.C. 206) is amended by adding at the end the following:
``(g)(1) In lieu of the rate prescribed by subsection (a)(1), any
employer may pay any employee of such employer, during the first 90
consecutive calendar days after such employee is initially employed by
such employer, a wage which is not less than $4.25 an hour.
``(2) No employer may take any action to displace employees
(including partial displacements such as reduction in hours, wages, or
employment benefits) for purposes of hiring individuals at the wage
authorized in paragraph (1).
``(3) Any employer who violates this subsection shall be considered
to have violated section 15(a)(3).
``(4) This subsection shall only apply to an employee who has not
attained the age of 20 years.''.
Passed the House of Representatives May 22, 1996.
Attest:
Clerk.