[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 831 Reported in Senate (RS)]





                                                        Calendar No. 34

104th CONGRESS

  1st Session

                               H. R. 831

                          [Report No. 104-16]

_______________________________________________________________________

                                 AN ACT

 To amend the Internal Revenue Code of 1986 to permanently extend the 
deduction for the health insurance costs of self-employed individuals, 
to repeal the provision permitting nonrecognition of gain on sales and 
     exchanges effectuating policies of the Federal Communications 
                  Commission, and for other purposes.

_______________________________________________________________________

               March 20 (legislative day, March 16), 1995

                       Reported with an amendment





                                                        Calendar No. 34
104th CONGRESS
  1st Session
                                H. R. 831

                          [Report No. 104-16]


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 22, 1995

     Received; read twice and referred to the Committee on Finance

               March 20 (legislative day, March 16), 1995

              Reported by Mr. Packwood, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 AN ACT


 
 To amend the Internal Revenue Code of 1986 to permanently extend the 
deduction for the health insurance costs of self-employed individuals, 
to repeal the provision permitting nonrecognition of gain on sales and 
     exchanges effectuating policies of the Federal Communications 
                  Commission, and for other purposes.

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

<DELETED>SECTION 1. PERMANENT EXTENSION OF DEDUCTION FOR HEALTH 
              INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.</DELETED>

<DELETED>    (a) In General.--Subsection (l) of section 162 of the 
Internal Revenue Code of 1986 (relating to special rules for health 
insurance costs of self-employed individuals) is amended by striking 
paragraph (6).</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to taxable years beginning after December 31, 
              1993.</DELETED>

<DELETED>SEC. 2. REPEAL OF NONRECOGNITION ON FCC CERTIFIED SALES AND 
              EXCHANGES.</DELETED>

<DELETED>    (a) In General.--Subchapter O of chapter 1 of the Internal 
Revenue Code of 1986 is amended by striking part V (relating to changes 
to effectuate FCC policy).</DELETED>
<DELETED>    (b) Clerical Amendment.--The table of parts for such 
subchapter O is amended by striking the item relating to part 
V.</DELETED>
<DELETED>    (c) Effective Date.--</DELETED>
        <DELETED>    (1) In general.--The amendments made by this 
        section shall apply to--</DELETED>
                <DELETED>    (A) sales and exchanges on or after 
                January 17, 1995, and</DELETED>
                <DELETED>    (B) sales and exchanges before such date 
                if the FCC tax certificate with respect to such sale or 
                exchange is issued on or after such date.</DELETED>
        <DELETED>    (2) Binding contracts.--</DELETED>
                <DELETED>    (A) In general.--The amendments made by 
                this section shall not apply to any sale or exchange 
                pursuant to a written contract which was binding on 
                January 16, 1995, and at all times thereafter before 
                the sale or exchange, if the FCC tax certificate with 
                respect to such sale or exchange was applied for, or 
                issued, on or before such date.</DELETED>
                <DELETED>    (B) Sales contingent on issuance of 
                certificate.--A contract shall be treated as not 
                binding for purposes of subparagraph (A) if the sale or 
                exchange pursuant to such contract, or the material 
                terms of such contract, were contingent, at any time on 
                January 16, 1995, on the issuance of an FCC tax 
                certificate. The preceding sentence shall not apply if 
                the FCC tax certificate for such sale or exchange is 
                issued on or before January 16, 1995.</DELETED>
        <DELETED>    (3) FCC tax certificate.--For purposes of this 
        subsection, the term ``FCC tax certificate'' means any 
        certificate of the Federal Communications Commission for the 
        effectuation of section 1071 of the Internal Revenue Code of 
        1986 (as in effect on the day before the date of the enactment 
        of this Act).</DELETED>

<DELETED>SEC. 3. NONRECOGNITION ON INVOLUNTARY CONVERSIONS NOT TO APPLY 
              IF REPLACEMENT PROPERTY ACQUIRED FROM RELATED 
PERSON.</DELETED>

<DELETED>    (a) In General.--Section 1033 of the Internal Revenue Code 
of 1986 (relating to involuntary conversions) is amended by 
redesignating subsection (i) as subsection (j) and by inserting after 
subsection (h) the following new subsection:</DELETED>
<DELETED>    ``(i) Nonrecognition Not To Apply if Replacement Property 
Acquired From Related Person.--Subsection (a) shall not apply if the 
replacement property or stock acquired is acquired from a related 
person. For purposes of the preceding sentence, a person is related to 
another person if the relationship between such persons would result in 
a disallowance of losses under section 267 or 707(b).''</DELETED>
<DELETED>    (b) Effective Date.--The amendment made by subsection (a) 
shall apply to replacement property or stock acquired on or after 
February 6, 1995.</DELETED>

<DELETED>SEC. 4. PHASEOUT OF EARNED INCOME CREDIT FOR INDIVIDUALS 
              HAVING MORE THAN $2,500 OF TAXABLE INTEREST AND 
              DIVIDENDS.</DELETED>

<DELETED>    (a) In General.--Section 32 of the Internal Revenue Code 
of 1986 is amended by redesignating subsections (i) and (j) as 
subsections (j) and (k), respectively, and by inserting after 
subsection (h) the following new subsection:</DELETED>
<DELETED>    ``(i) Phaseout of Credit for Individuals Having More Than 
$2,500 of Taxable Interest and Dividends.--If the aggregate amount of 
interest and dividends includible in the gross income of the taxpayer 
for the taxable year exceeds $2,500, the amount of the credit which 
would (but for this subsection) be allowed under this section for such 
taxable year shall be reduced (but not below zero) by an amount which 
bears the same ratio to such amount of credit as such excess bears to 
$650.''</DELETED>
<DELETED>    (b) Inflation Adjustment.--Subsection (j) of section 32 of 
such Code (relating to inflation adjustments), as redesignated by 
subsection (a), is amended by striking paragraph (2) and by inserting 
the following new paragraphs:</DELETED>
        <DELETED>    ``(2) Interest and dividend income limitation.--In 
        the case of a taxable year beginning in a calendar year after 
        1996, each dollar amount contained in subsection (i) shall be 
        increased by an amount equal to--</DELETED>
                <DELETED>    ``(A) such dollar amount, multiplied 
                by</DELETED>
                <DELETED>    ``(B) the cost-of-living adjustment 
                determined under section 1(f)(3) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `calendar year 1995' for `calendar year 
                1992' in subparagraph (B) thereof.</DELETED>
        <DELETED>    ``(3) Rounding.--If any amount as adjusted under 
        paragraph (1) or (2) is not a multiple of $10, such dollar 
        amount shall be rounded to the nearest multiple of 
$10.''</DELETED>
<DELETED>    (c) Effective Date.--The amendments made by this section 
shall apply to taxable years beginning after December 31, 
              1995.</DELETED>

SECTION 1. PERMANENT EXTENSION AND INCREASE OF DEDUCTION FOR HEALTH 
              INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

    (a) Permanent Extension.--Subsection (l) of section 162 of the 
Internal Revenue Code of 1986 (relating to special rules for health 
insurance costs of self-employed individuals) is amended by striking 
paragraph (6).
    (b) Increase in Deduction.--Paragraph (1) of section 162(l) of the 
Internal Revenue Code of 1986 is amended by striking ``25 percent'' and 
inserting ``30 percent''.
    (c) Effective Dates.--
            (1) Extension.--The amendment made by subsection (a) shall 
        apply to taxable years beginning after December 31, 1993.
            (2) Increase.--The amendment made by subsection (b) shall 
        apply to taxable years beginning after December 31, 1994.

SEC. 2. REPEAL OF NONRECOGNITION ON FCC CERTIFIED SALES AND EXCHANGES.

    (a) In General.--Subchapter O of chapter 1 of the Internal Revenue 
Code of 1986 is amended by striking part V (relating to changes to 
effectuate FCC policy).
    (b) Conforming Amendments.--Sections 1245(b)(5) and 1250(d)(5) of 
the Internal Revenue Code of 1986 are each amended--
            (1) by striking ``section 1071 (relating to gain from sale 
        or exchange to effectuate polices of FCC) or'', and
            (2) by striking ``1071 and'' in the heading thereof.
    (c) Clerical Amendment.--The table of parts for such subchapter O 
is amended by striking the item relating to part V.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to--
                    (A) sales and exchanges on or after January 17, 
                1995, and
                    (B) sales and exchanges before such date if the FCC 
                tax certificate with respect to such sale or exchange 
                is issued on or after such date.
            (2) Binding contracts.--
                    (A) In general.--The amendments made by this 
                section shall not apply to any sale or exchange 
                pursuant to a written contract which was binding on 
                January 16, 1995, and at all times thereafter before 
                the sale or exchange, if the FCC tax certificate with 
                respect to such sale or exchange was applied for, or 
                issued, on or before such date.
                    (B) Sales contingent on issuance of certificate.--A 
                contract shall be treated as not binding for purposes 
                of subparagraph (A) if the sale or exchange pursuant to 
                such contract, or the material terms of such contract, 
                were contingent, at any time on January 16, 1995, on 
                the issuance of an FCC tax certificate. The preceding 
                sentence shall not apply if the FCC tax certificate for 
                such sale or exchange is issued on or before January 
                16, 1995.
            (3) FCC tax certificate.--For purposes of this subsection, 
        the term ``FCC tax certificate'' means any certificate of the 
        Federal Communications Commission for the effectuation of 
        section 1071 of the Internal Revenue Code of 1986 (as in effect 
        on the day before the date of the enactment of this Act).

SEC. 3. SPECIAL RULES RELATING TO INVOLUNTARY CONVERSIONS.

    (a) Replacement Property Acquired by Corporations From Related 
Persons.--
            (1) In general.--Section 1033 of the Internal Revenue Code 
        of 1986 (relating to involuntary conversions) is amended by 
        redesignating subsection (i) as subsection (j) and by inserting 
        after subsection (h) the following new subsection:
    ``(i) Nonrecognition Not To Apply if Corporation Acquires 
Replacement Property From Related Person.--
            ``(1) In general.--In the case of a C corporation, 
        subsection (a) shall not apply if the replacement property or 
        stock is acquired from a related person. The preceding sentence 
        shall not apply to the extent that the related person acquired 
        the replacement property or stock from an unrelated person 
        during the period described in subsection (a)(2)(B).
            ``(2) Related person.--For purposes of this subsection, a 
        person is related to another person if the person bears a 
        relationship to the other person described in section 267(b) or 
        707(b)(1).''
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to involuntary conversions occurring on or after 
        February 6, 1995.
    (b) Application of Section 1033 to Certain Sales Required for 
Microwave Relocation.--
            (1) In general.--Section 1033 of the Internal Revenue Code 
        of 1986 (relating to involuntary conversions), as amended by 
        subsection (a), is amended by redesignating subsection (j) as 
        subsection (k) and by inserting after subsection (i) the 
        following new subsection:
    ``(j) Sales or Exchanges To Implement Microwave Relocation 
Policy.--
            ``(1) In general.--For purposes of this subtitle, if a 
        taxpayer elects the application of this subsection to a 
        qualified sale or exchange, such sale or exchange shall be 
        treated as an involuntary conversion to which this section 
        applies.
            ``(2) Qualified sale or exchange.--For purposes of 
        paragraph (1), the term `qualified sale or exchange' means a 
        sale or exchange before January 1, 2000, which is certified by 
        the Federal Communications Commission as having been made by a 
        taxpayer in connection with the relocation of the taxpayer from 
        the 1850-1990MHz spectrum by reason of the Federal 
        Communications Commission's reallocation of that spectrum for 
        use for personal communications services. The Commission shall 
        transmit copies of certifications under this paragraph to the 
        Secretary.''
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to sales or exchanges after March 14, 1995.

SEC. 4. DENIAL OF EARNED INCOME CREDIT FOR INDIVIDUALS HAVING MORE THAN 
              $2,450 OF INVESTMENT INCOME.

    (a) In General.--Section 32 of the Internal Revenue Code of 1986 is 
amended by redesignating subsections (i) and (j) as subsections (j) and 
(k), respectively, and by inserting after subsection (h) the following 
new subsection:
    ``(i) Denial of Credit for Individuals Having More Than $2,450 of 
Investment Income.--
            ``(1) In general.--No credit shall be allowed under 
        subsection (a) for the taxable year if the aggregate amount of 
        disqualified income of the taxpayer for the taxable year 
        exceeds $2,450.
            ``(2) Disqualified income.--For purposes of paragraph (1), 
        the term `disqualified income' means--
                    ``(A) interest which is received or accrued during 
                the taxable year (whether or not exempt from tax),
                    ``(B) dividends to the extent includible in gross 
                income for the taxable year, and
                    ``(C) the excess (if any) of--
                            ``(i) gross income from rents or royalties 
                        not derived in the ordinary course of a trade 
                        or business, over
                            ``(ii) the sum of--
                                    ``(I) expenses (other than 
                                interest) which are clearly and 
                                directly allocable to such gross 
                                income, plus
                                    ``(II) interest expenses properly 
                                allocable to such gross income.''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 5. REVISION OF TAX RULES ON EXPATRIATION.

    (a) In General.--Subpart A of part II of subchapter N of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 877 the following new section:

``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

    ``(a) General Rule.--For purposes of this subtitle, if any United 
States citizen relinquishes his citizenship during a taxable year--
            ``(1) except as provided in subsection (f)(2), all property 
        held by such citizen at the time immediately before such 
        relinquishment shall be treated as sold at such time for its 
        fair market value, and
            ``(2) notwithstanding any other provision of this title, 
        any gain or loss shall be taken into account for such taxable 
        year.
Paragraph (2) shall not apply to amounts excluded from gross income 
under part III of subchapter B.
    ``(b) Exclusion for Certain Gain.--The amount which would (but for 
this subsection) be includible in the gross income of any individual by 
reason of subsection (a) shall be reduced (but not below zero) by 
$600,000.
    ``(c) Property Treated as Held.--For purposes of this section, 
except as otherwise provided by the Secretary, an individual shall be 
treated as holding--
            ``(1) all property which would be includible in his gross 
        estate under chapter 11 were such individual to die at the time 
        the property is treated as sold,
            ``(2) any other interest in a trust which the individual is 
        treated as holding under the rules of subsection (f)(1), and
            ``(3) any other interest in property specified by the 
        Secretary as necessary or appropriate to carry out the purposes 
        of this section.
    ``(d) Exceptions.--The following property shall not be treated as 
sold for purposes of this section:
            ``(1) United states real property interests.--Any United 
        States real property interest (as defined in section 
        897(c)(1)), other than stock of a United States real property 
        holding corporation which does not, on the date the individual 
        relinquishes his citizenship, meet the requirements of section 
        897(c)(2).
            ``(2) Interest in certain retirement plans.--
                    ``(A) In general.--Any interest in a qualified 
                retirement plan (as defined in section 4974(c)), other 
                than any interest attributable to contributions which 
                are in excess of any limitation or which violate any 
                condition for taxfavored treatment.
                    ``(B) Foreign pension plans.--
                            ``(i) In general.--Under regulations 
                        prescribed by the Secretary, interests in 
                        foreign pension plans or similar retirement 
                        arrangements or programs.
                            ``(ii) Limitation.--The value of property 
                        which is treated as not sold by reason of this 
                        subparagraph shall not exceed $500,000.
    ``(e) Relinquishment of Citizenship.--For purposes of this section, 
a citizen shall be treated as relinquishing his United States 
citizenship on the earliest of--
            ``(1) the date the individual renounces his United States 
        nationality before a diplomatic or consular officer of the 
        United States pursuant to paragraph (5) of section 349(a) of 
        the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
            ``(2) the date the individual furnishes to the United 
        States Department of State a signed statement of voluntary 
        relinquishment of United States nationality confirming the 
        performance of an act of expatriation specified in paragraph 
        (1), (2), (3), or (4) of section 349(a) of the Immigration and 
        Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
            ``(3) the date the United States Department of State issues 
        to the individual a certificate of loss of nationality, or
            ``(4) the date a court of the United States cancels a 
        naturalized citizen's certificate of naturalization.
Paragraph (1) or (2) shall not apply to any individual unless the 
renunciation or voluntary relinquishment is subsequently approved by 
the issuance to the individual of a certificate of loss of nationality 
by the United States Department of State.
    ``(f) Special Rules Applicable to Beneficiaries' Interests in 
Trust.--
            ``(1) Determination of beneficiaries' interest in trust.--
        For purposes of this section--
                    ``(A) General rule.--A beneficiary's interest in a 
                trust shall be based upon all relevant facts and 
                circumstances, including the terms of the trust 
                instrument and any letter of wishes or similar 
                document, historical patterns of trust distributions, 
                and the existence of and functions performed by a trust 
                protector or any similar advisor.
                    ``(B) Special rule.--In the case of beneficiaries 
                whose interests in a trust cannot be determined under 
                subparagraph (A)--
                            ``(i) the beneficiary having the closest 
                        degree of kinship to the grantor shall be 
                        treated as holding the remaining interests in 
                        the trust not determined under subparagraph (A) 
                        to be held by any other beneficiary, and
                            ``(ii) if 2 or more beneficiaries have the 
                        same degree of kinship to the grantor, such 
                        remaining interests shall be treated as held 
                        equally by such beneficiaries.
                    ``(C) Constructive ownership.--If a beneficiary of 
                a trust is a corporation, partnership, trust, or 
                estate, the shareholders, partners, or beneficiaries 
                shall be deemed to be the trust beneficiaries for 
                purposes of this section.
                    ``(D) Taxpayer return position.--A taxpayer shall 
                clearly indicate on its income tax return--
                            ``(i) the methodology used to determine 
                        that taxpayer's trust interest under this 
                        section, and
                            ``(ii) if the taxpayer knows (or has reason 
                        to know) that any other beneficiary of such 
                        trust is using a different methodology to 
                        determine such beneficiary's trust interest 
                        under this section.
            ``(2) Deemed sale in case of trust interest.--If an 
        individual who relinquishes his citizenship during the taxable 
        year is treated under paragraph (1) as holding an interest in a 
        trust for purposes of this section--
                    ``(A) the individual shall not be treated as having 
                sold such interest,
                    ``(B) such interest shall be treated as a separate 
                share in the trust, and
                    ``(C)(i) such separate share shall be treated as a 
                separate trust consisting of the assets allocable to 
                such share,
                    ``(ii) the separate trust shall be treated as 
                having sold its assets immediately before the 
                relinquishment for their fair market value and as 
                having distributed all of its assets to the individual 
                as of such time, and
                    ``(iii) the individual shall be treated as having 
                recontributed the assets to the separate trust.
        Subsection (a)(2) shall apply to any income, gain, or loss of 
        the individual arising from a distribution described in 
        subparagraph (B)(ii).
    ``(g) Termination of Deferrals, Etc.--On the date any property held 
by an individual is treated as sold under subsection (a), 
notwithstanding any other provision of this title--
            ``(1) any period during which recognition of income or gain 
        is deferred shall terminate, and
            ``(2) any extension of time for payment of tax shall cease 
        to apply and the unpaid portion of such tax shall be due and 
        payable at the time and in the manner prescribed by the 
        Secretary.
    ``(h) Rules Relating to Payment of Tax.--
            ``(1) Imposition of tentative tax.--
                    ``(A) In general.--If an individual is required to 
                include any amount in gross income under subsection (a) 
                for any taxable year, there is hereby imposed, 
                immediately before the individual relinquishes United 
                States citizenship, a tax in an amount equal to the 
                amount of tax which would be imposed if the taxable 
                year were a short taxable year ending on the date of 
                such relinquishment.
                    ``(B) Due date.--The due date for any tax imposed 
                by subparagraph (A) shall be the 90th day after the 
                date the individual relinquishes United States 
                citizenship.
                    ``(C) Treatment of tax.--Any tax paid under 
                subparagraph (A) shall be treated as a payment of the 
                tax imposed by this chapter for the taxable year to 
                which subsection (a) applies.
            ``(2) Deferral of tax.--The provisions of section 6161 
        shall apply to the portion of any tax attributable to amounts 
        included in gross income under subsection (a) in the same 
        manner as if such portion were a tax imposed by chapter 11.
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations providing appropriate adjustments to 
basis to reflect gain recognized by reason of subsection (a) and the 
exclusion provided by subsection (b).
    ``(j) Cross Reference.--

                                ``For termination of United States 
citizenship for tax purposes, see section 7701(a)(47).''
    (b) Definition of Termination of United States Citizenship.--
Section 7701(a) of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new paragraph:
            ``(47) Termination of united states citizenship.--An 
        individual shall not cease to be treated as a United States 
        citizen before the date on which the individual's citizenship 
        is treated as relinquished under section 877A(e).''
    (c) Conforming Amendment.--Section 877 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new subsection:
    ``(f) Application.--This section shall not apply to any individual 
who relinquishes (within the meaning of section 877A(e)) United States 
citizenship on and after February 6, 1995.''
    (d) Clerical Amendment.--The table of sections for subpart A of 
part II of subchapter N of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 877 the 
following new item:

                              ``Sec. 877A. Tax responsibilities of 
                                        expatriation.''
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to United States citizens who relinquish (within the 
        meaning of section 877A(e) of the Internal Revenue Code of 
        1986, as added by this section) United States citizenship on or 
        after February 6, 1995.
            (2) Due date for tentative tax.--The due date under section 
        877A(h)(1)(B) of such Code shall in no event occur before the 
        90th day after the date of the enactment of this Act.
HR 831 RS----2