[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1668 Introduced in Senate (IS)]


104th CONGRESS
  2d Session
                                S. 1668

 To improve the job and income security and retirement security of the 
                American worker, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 1996

  Mr. Kennedy introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To improve the job and income security and retirement security of the 
                American worker, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``American Workers 
Economic Security Act''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
                    TITLE I--JOB AND INCOME SECURITY

                   Subtitle A--Most Favored Companies

Sec. 101. 25-percent reduction in corporate tax on taxable income 
                            equaling dividends paid by most favored 
                            companies.
Sec. 102. Evaluation of contract offers by most favored companies.
Sec. 103. Preference in direct financial assistance to most favored 
                            companies.
               Subtitle B--Investment in New Technologies

Sec. 111. Small business technology transfer program.
Sec. 112. Permanent extension of research credit.
Sec. 113. Increase in non-defense research and development spending.
 Subtitle C--Minimizing the Adverse Impacts of Mergers and Acquisitions

Sec. 121. Disallowance of deduction for merger and acquisition 
                            expenses.
Sec. 122. Investigations of certain transactions.
Sec. 123. Additional consideration of harm to workers or communities.
                  Subtitle D--Corporate Restructurings

Sec. 131. Corporate restructurings.
     Subtitle E--Expansion of Educational Opportunities for Workers

Sec. 141. Credit for employee training.
Sec. 142. Deduction for higher education expenses.
   Subtitle F--Elimination of Tax Incentives for Moving Jobs Overseas

Sec. 151. Source of income from certain sales of inventory property.
Sec. 152. Transfer pricing rules.
Sec. 153. Income from runaway plants or from manufacturing operations 
                            located in a country which provides a tax 
                            holiday included in subpart F income.
Sec. 154. Repeal of section 911 exclusion of foreign earned income.
Sec. 155. Revision of tax rules on expatriation.
      Subtitle G--Distressed Community Economic Development Bonds

Sec. 161. Distressed community economic development bonds.
                     TITLE II--RETIREMENT SECURITY

Sec. 201. Short title.
Sec. 202. Findings and purpose.
Sec. 203. Deduction for contributions to individual pension plans.
Sec. 204. Establishment of individual pension plans.
Sec. 205. Employer responsibilities.
Sec. 206. Establishment and responsibilities of regional pension 
                            service centers.
Sec. 207. Secretarial responsibilities.
Sec. 208. Preemption of State law.
                        TITLE III--SEVERABILITY

Sec. 301. Severability.

                    TITLE I--JOB AND INCOME SECURITY

                   Subtitle A--Most Favored Companies

SEC. 101. 25-PERCENT REDUCTION IN CORPORATE TAX ON TAXABLE INCOME 
              EQUALING DIVIDENDS PAID BY MOST FAVORED COMPANIES.

    (a) In General.--Section 11(b) of the Internal Revenue Code of 1986 
(relating to amount of tax) is amended by adding at the end the 
following new paragraph:
            ``(3) 25-percent reduction in rates on taxable income 
        equaling dividends paid by most favored companies.--
                    ``(A) In general.--Notwithstanding paragraph (1) or 
                (2), if a most favored company has paid dividends for 
                the taxable year, then such paragraph shall be 
                applied--
                            ``(i) first, to the taxable income of such 
                        company equal to the amount of such dividends 
                        at rates equal to 75 percent of the otherwise 
                        applicable percentages under such paragraph, 
                        and
                            ``(ii) then, to the balance of the taxable 
                        income of such company at rates determined 
                        without regard to this paragraph.
                    ``(B) Most favored company.--
                            ``(i) In general.--For purposes of this 
                        title, a corporation is a most favored company 
                        for a taxable year if it is certified as such 
                        by the Secretary of Labor upon request.
                            ``(ii) Criteria for certification.--For 
                        purposes of clause (i), the Secretary of Labor 
                        shall use the following certification criteria:
                                    ``(I) Training and education 
                                benefits provided to employees through 
                                any approved training program (as 
                                defined in section 45C(b)(3)).
                                    ``(II) Health care benefits 
                                provided to employees through insurance 
                                or otherwise.
                                    ``(III) Pension benefits provided 
                                to employees.
                                    ``(IV) Child care provided to 
                                employees.
                                    ``(V) Such other criteria as 
                                determined by the Secretary of Labor.
                            ``(iii) Controlled group of corporations.--
                        For purposes of this subparagraph, all 
                        corporations which are members of the same 
                        controlled group of corporations shall be 
                        treated as a single corporation. For purposes 
                        of the preceding sentence, the term `controlled 
                        group of corporations' has the meaning given to 
                        such term by section 1563(a), except that--
                                    ``(I) `more than 50 percent' shall 
                                be substituted for `at least 80 
                                percent' each place it appears in 
                                section 1563(a)(1), and
                                    ``(II) the determination shall be 
                                made without regard to subsections 
                                (a)(4) and (e)(3)(C) of section 
                                1563.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1996.

SEC. 102. EVALUATION OF CONTRACT OFFERS BY MOST FAVORED COMPANIES.

    (a) Preferences.--
            (1) In general.--The Office of Federal Procurement Policy 
        Act (41 U.S.C. 401 et seq.) is amended by adding at the end the 
        following:

``SEC. 38. OFFERS BY MOST FAVORED COMPANIES.

    ``(a) Price Evaluation Preference.--In any case in which a contract 
is to be awarded by the head of an executive agency on the basis of 
full and open competition and in which price is the primary evaluation 
factor for selection of the offeror for award of the contract, the 
price offered by a most favored company shall be deemed as being lower 
than the price offered by another offeror (other than another most 
favored company) if the price offered by the most favored company is 
not more than 10 percent higher than the price offered by the other 
offeror.
    ``(b) Status as Evaluation Factor.--In any case in which price is 
not the primary evaluation factor for selection of an offeror for award 
of a contract by the head of an executive agency, the factors 
prescribed for the evaluation of offers for the contract may include a 
factor that provides credit for status as a most favored company.
    ``(c) Most Favored Company Defined.--In this section, the term 
`most favored company' means an entity that is certified as a most 
favored company in accordance with section 11(b)(3) of the Internal 
Revenue Code of 1986.''.
            (2) Clerical amendment.--The table of contents in section 
        1(b) of such Act is amended by adding at the end the following:

``Sec. 38. Offers by most favored companies.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect 180 days after the date of the enactment of this Act and 
shall apply with respect to solicitations of contract offers that are 
issued on or after that date.

SEC. 103. PREFERENCE IN DIRECT FINANCIAL ASSISTANCE TO MOST FAVORED 
              COMPANIES.

    It is the sense of the Senate that most favored companies (as 
certified under section 11(b)(3) of the Internal Revenue Code of 1986) 
should be given a preference in the provision of direct financial 
assistance, in the form of grants, loans, and loan guarantees from the 
Small Business Administration, the Department of Commerce, the Export-
Import Bank, the Overseas Private Investment Corporation, the United 
States Trade and Development Agency, and other appropriate Federal 
agencies.

               Subtitle B--Investment in New Technologies

SEC. 111. SMALL BUSINESS TECHNOLOGY TRANSFER PROGRAM.

    Section 9(n)(1)(C) of the Small Business Act (15 U.S.C. 
638(n)(1)(C)) is amended to read as follows:
                    ``(C) not less than 0.30 percent of such budget in 
                each of fiscal years 1996 through 2001.''.

SEC. 112. PERMANENT EXTENSION OF RESEARCH CREDIT.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 
(relating to credit for research activities) is amended by striking 
subsection (h).
    (b) New Base Amount.--
            (1) In general.--Subparagraphs (A) and (B)(i) of section 
        41(c)(3) of the Internal Revenue Code of 1986 (relating to 
        fixed-base percentage) are each amended by striking ``after 
        December 31, 1983, and before January 1, 1989'' and inserting 
        ``after December 31, 1990, and before January 1, 1996''.
            (2) Conforming amendments.--
                    (A) Section 41(e)(5)(C) of such Code is amended by 
                striking ``1987'' and inserting ``1994'', by striking 
                ``1983'' each place it appears and inserting ``1990'', 
                and by striking ``1984'' each place it appears and 
                inserting ``1991''.
                    (B) Section 41(e)(7)(B) of such Code is amended by 
                striking ``1983'' and inserting ``1990''.
    (c)  Conforming Amendment.--Section 28(b)(1) of the Internal 
Revenue Code of 1986 is amended by striking subparagraph (D).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after June 30, 1995.

SEC. 113. INCREASE IN NON-DEFENSE RESEARCH AND DEVELOPMENT SPENDING.

    It is the sense of the Senate that the total level of non-defense 
research and development spending in the Federal budget should be 
increased in equal increments over a 5-fiscal year period to 2.77 
percent of the gross domestic product of the United States.

 Subtitle C--Minimizing the Adverse Impacts of Mergers and Acquisitions

SEC. 121. DISALLOWANCE OF DEDUCTION FOR MERGER AND ACQUISITION 
              EXPENSES.

    (a) Deduction Disallowed.--Part IX of subchapter B of chapter 1 of 
subtitle A of the Internal Revenue Code of 1986 (relating to items not 
deductible) is amended by adding at the end the following new section:

``SEC. 280I. DISALLOWANCE OF DEDUCTION FOR MERGER AND ACQUISITION 
              EXPENSES.

    ``(a) In General.--No deduction otherwise allowable under this 
chapter shall be allowed for any amount paid or incurred in connection 
with an applicable acquisition.
    ``(b) Applicable Acquisition.--For purposes of this section--
            ``(1) In general.--The term `applicable acquisition' means 
        the acquisition by a person of ownership interests in, or 
        assets used in the active conduct of a trade or business by, an 
        entity if such acquisition occurs during the 3-year period 
        ending on the date the person acquires control of the entity or 
        the person acquires more than one-half of the assets used in 
        the trade or business.
            ``(2) Exceptions.--The term `applicable acquisition' shall 
        not include--
                    ``(A) except as provided in paragraph (3), any 
                acquisition by a person from an entity which it 
                controls (or which controlled it) immediately before 
                the acquisition, or
                    ``(B) any acquisition described in clause (i), 
                (ii), or (iii) of section 382(l)(3)(B).
            ``(3) Related transactions.--The term `applicable 
        acquisition' shall include any acquisition after the 
        acquisition described in paragraph (1)(A) if such acquisitions 
        are part of a series of related transactions.
    ``(c) Other Definitions and Rules.--For purposes of this section--
            ``(1) Control.--A person shall be treated as in control of 
        another entity if--
                    ``(A) in the case of a corporation, it possesses 
                more than 50 percent of the stock of the corporation 
                (by vote or value), or
                    ``(B) in the case of any other entity, it possesses 
                ownership interests representing more than 50 percent 
                of the capital or profits interest in the entity.
            ``(2) Constructive ownership rules.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the following rules shall apply:
                            ``(i) in the case of a corporation, the 
                        rules of section 267(c);
                            ``(ii) in the case of a partnership, the 
                        rules of section 707(b); and
                            ``(iii) in the case of any other entity, 
                        rules prescribed by the Secretary based on the 
                        principles of the rules described in clauses 
                        (i) and (ii).
                    ``(B) Options.--Except as provided in regulations, 
                a person shall be treated as possessing stock or assets 
                if the person has an option to acquire the stock or 
                assets.
            ``(3) Related parties.--All persons treated as the employer 
        under subsection (a) or (b) of section 52 shall be treated as 1 
        person for purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for such part IX is 
amended by adding after the item relating to section 280H the following 
new item:

                              ``Sec. 280I. Disallowance of deduction 
                                        for merger and acquisition 
                                        expenses.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 1996, for taxable 
years ending after such date.

SEC. 122. INVESTIGATIONS OF CERTAIN TRANSACTIONS.

    Section 7A of the Clayton Act (15 U.S.C. 18a) is amended by adding 
at the end the following new subsection:
    ``(k)(1) A person acquiring any voting securities or assets of any 
other person with respect to any transaction--
            ``(A) for which the filing of a notification is required 
        under this section, and
            ``(B) which would result in a reduction in the overall 
        number of employees or the shutdown of a plant or other 
        facility,
shall submit a plan to be certified by the Secretary of Labor as 
meeting the requirements of paragraph (2).
    ``(2) A plan meets the requirements of this paragraph if it 
includes--
            ``(A) a description of the number of plants or other 
        facilities that would be closed or substantially downsized;
            ``(B) an estimate of the number of employees that would be 
        involuntary terminated, including a description of the employee 
        groups that would be affected; and
            ``(C) a description of the assistance that would be 
        provided to such employees following their termination, 
        including skills upgrading, education, continued health care, 
        and pension benefits.''.

SEC. 123. ADDITIONAL CONSIDERATION OF HARM TO WORKERS OR COMMUNITIES.

    In determining an appropriate remedy for a violation of section 7 
of the Clayton Act (15 U.S.C. 18), including the timing and nature of 
any required divestiture, a court shall consider the interests of 
workers and local communities.

                  Subtitle D--Corporate Restructurings

SEC. 131. CORPORATE RESTRUCTURINGS.

    (a) In General.--Each issuer of securities shall, prior to 
undertaking any restructuring that includes the involuntary termination 
of a significant number of the employees of the issuer, submit a 
detailed plan to the Commission and to the Secretary of Labor that 
meets the requirements of subsection (b).
    (b) Contents of Plans.--Each plan required to be submitted under 
subsection (a) shall specify--
            (1) the number of employees to be involuntarily terminated, 
        as part of the restructuring;
            (2) the amount of termination benefits accrued and treated 
        as deductible expenses of the issuer under the Internal Revenue 
        Code of 1986;
            (3) a description of--
                    (A) the employee groups to be terminated;
                    (B) the employee groups that will be unaffected by 
                the restructuring; and
                    (C) the reasons for such differentiation;
            (4) the plans for and costs of skills training, education, 
        and health and retirement benefits to be provided to employees 
        of the issuer to be involuntarily terminated as part of the 
        restructuring; and
            (5) such other information relating to the restructuring as 
        the Commission considers relevant.
    (c) Definitions.--For purposes of this section--
            (1) the term ``Commission'' means the Securities and 
        Exchange Commission;
            (2) the term ``issuer'' has the same meaning as in section 
        3 of the Securities Exchange Act of 1934; and
            (3) the term ``restructuring'' has the meaning given to 
        such term by rule or regulation of the Commission.

     Subtitle E--Expansion of Educational Opportunities for Workers

SEC. 141. CREDIT FOR EMPLOYEE TRAINING.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45C. EMPLOYEE TRAINING CREDIT.

    ``(a) In General.--For purposes of section 38, the amount of the 
employee training credit determined under this section for any taxable 
year shall be an amount equal to 50 percent of the qualified training 
expenses of the taxpayer for such taxable year.
    ``(b) Qualified Training Expenses.--For purposes of this section--
            ``(1) In general.--The term `qualified training expenses' 
        means the aggregate amount of expenses paid or incurred by the 
        taxpayer during the taxable year in connection with the 
        training of employees under any approved training program.
            ``(2) Only first $2,500 of qualified training expenses 
        taken into account.--The amount of the qualified training 
        expenses which may be taken into account with respect to any 
        employee shall not exceed $2,500.
            ``(3) Approved training programs.--The term `approved 
        training program' means--
                    ``(A) any apprenticeship program registered with or 
                approved by any Federal or State agency or department,
                    ``(B) any employer-designed or employer-sponsored 
                program which meets such minimum requirements with 
                respect to supervised on-the-job experience and 
                classroom instruction as the Secretary of Labor shall 
                prescribe by regulations,
                    ``(C) any cooperative education (within the meaning 
                given to such term by section 521(8) of the Carl D. 
                Perkins Vocational Education Act),
                    ``(D) any training program designated by the 
                Secretary of Labor which is carried out under the 
                supervision of an institution of higher education 
                (within the meaning given to such term by section 
                1201(a) of the Higher Education Act of 1965), or
                    ``(E) any other program for improving job skills 
                directly related to employment which the Secretary of 
                Labor may approve under regulations prescribed by such 
                Secretary.
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Aggregation of qualified training expenses.--
                    ``(A) Controlled group of corporations.--
                            ``(i) In general.--In determining the 
                        amount of the credit under this section--
                                    ``(I) all members of the same 
                                controlled group of corporations shall 
                                be treated as a single taxpayer, and
                                    ``(II) the credit (if any) 
                                allowable by this section to each such 
                                member shall be its proportionate share 
                                of the qualified training expenses 
                                giving rise to the credit.
                            ``(ii) Controlled group of corporations 
                        defined.--The term `controlled group of 
                        corporations' has the same meaning given to 
                        such term by section 1563(a), except that--
                                    ``(I) `more than 50 percent' shall 
                                be substituted for `at least 80 
                                percent' each place it appears in 
                                section 1563(a)(1), and
                                    ``(II) the determination shall be 
                                made without regard to subsections 
                                (a)(4) and (e)(3)(C) of section 1563.
                    ``(B) Common control.--Under regulations prescribed 
                by the Secretary, in determining the amount of the 
                credit under this section--
                            ``(i) all trades or businesses (whether or 
                        not incorporated) which are under common 
                        control shall be treated as a single taxpayer, 
                        and
                            ``(ii) the credit (if any) allowable by 
                        this section to each such trade or business 
                        shall be its proportionate share of the 
                        qualified training expenses giving rise to the 
                        credit.
                The regulations prescribed under this subparagraph 
                shall be based on principles similar to the principles 
                which apply in the case of subparagraph (A).
            ``(2) Allocations.--
                    ``(A) Pass-thru in the case of estates and 
                trusts.--Under regulations prescribed by the Secretary, 
                rules similar to the rules of subsection (d) of section 
                52 shall apply.
                    ``(B) Allocation in the case of partnerships.--In 
                the case of partnerships, the credit shall be allocated 
                among partners under regulations prescribed by the 
                Secretary.
    ``(d) Additional Benefit.--The credit allowable under this section 
with respect to qualified training expenses of the taxpayer shall be in 
addition to any deduction or credit allowed the taxpayer under any 
other provision of this chapter with respect to such expenses.''.
    (b) Employee Training Credit Treated As Other Business Credits.--
Section 38(b) of the Internal Revenue Code of 1986 (defining current 
year business credit) is amended by striking out ``plus'' at the end of 
paragraph (10), by striking out the period at the end of paragraph (11) 
and inserting in lieu thereof ``, plus'', and by adding at the end 
thereof the following new paragraph:
            ``(12) the employee training credit determined under 
        section 45C(a).''.
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

                              ``Sec. 45C. Employee training credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 142. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

    (a) Deduction Allowed.-- Part VII of subchapter B of chapter 1 of 
the Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 220 as 
section 221 and by inserting after section 219 the following new 
section:

``SEC. 220. HIGHER EDUCATION TUITION AND FEES; INTEREST ON STUDENT 
              LOANS.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction an amount equal to the sum of--
            ``(1) the qualified higher education expenses, plus
            ``(2) interest on qualified higher education loans,
paid by the taxpayer during the taxable year.
    ``(b) Qualified Higher Education Expenses.--For purposes of this 
section--
            ``(1) Qualified higher education expenses.--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition and fees charged by 
                an educational institution and required for the 
                enrollment or attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) any dependent of the taxpayer with 
                        respect to whom the taxpayer is allowed a 
                        deduction under section 151,
                as an eligible student at an institution of higher 
                education.
                    ``(B) Exception for education involving sports, 
                etc.--Such term does not include expenses with respect 
                to any course or other education involving sports, 
                games, or hobbies, unless such expenses--
                            ``(i) are part of a degree program, or
                            ``(ii) are deductible under this chapter 
                        without regard to this section.
                    ``(C) Exception for nonacademic fees.--Such term 
                does not include any student activity fees, athletic 
                fees, insurance expenses, or other expenses unrelated 
                to a student's academic course of instruction.
                    ``(D) Eligible student.--For purposes of 
                subparagraph (A), the term `eligible student' means a 
                student who--
                            ``(i) meets the requirements of section 
                        484(a)(1) of the Higher Education Act of 1965 
                        (20 U.S.C. 1091(a)(1)), as in effect on the 
                        date of the enactment of this section, and
                            ``(ii)(I) is carrying at least one-half the 
                        normal full-time work load for the course of 
                        study the student is pursuing, as determined by 
                        the institution of higher education, or
                            ``(II) is enrolled in a course which 
                        enables the student to improve the student's 
                        job skills or to acquire new job skills.
                    ``(E) Identification requirement.--No deduction 
                shall be allowed under subsection (a) to a taxpayer 
                with respect to an eligible student unless the taxpayer 
                includes the name, age, and taxpayer identification 
                number of such eligible student on the return of tax 
                for the taxable year.
            ``(2) Dollar limitation.--The amount taken into account 
        under paragraph (1) for any taxable year shall not exceed 
        $10,000.
            ``(3) Limitation based on modified adjusted gross income.--
                    ``(A) In general.--The amount which would be taken 
                into account under paragraph (1) (after application of 
                paragraph (2)) shall be reduced (but not below zero) by 
                the amount determined under subparagraph (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph equals the amount which bears 
                the same ratio to the deduction (determined without 
                regard to this paragraph) as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $60,000, bears to
                            ``(ii) $15,000.
                    ``(C) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means the adjusted 
                gross income of the taxpayer for the taxable year 
                determined--
                            ``(i) without regard to this section and 
                        sections 911, 931, and 933, and
                            ``(ii) after the application of sections 
                        86, 135, 219 and 469.
                For purposes of sections 86, 135, 219, and 469, 
                adjusted gross income shall be determined without 
                regard to the deduction allowed under this section.
            ``(4) Institution of higher education.--The term 
        `institution of higher education' means an institution which--
                    ``(A) is described in section 481 of the Higher 
                Education Act of 1965 (20 U.S.C. 1088), as in effect on 
                the date of the enactment of this section, and
                    ``(B) is eligible to participate in programs under 
                title IV of such Act.
    ``(c) Qualified Higher Education Loan.--For purposes of this 
section--
            ``(1) In general.--The term `qualified higher education 
        loan' means a loan to a student which is--
                    ``(A) made, insured, or guaranteed by the Federal 
                Government,
                    ``(B) made by a State or a political subdivision of 
                a State,
                    ``(C) made from the proceeds of a qualified student 
                loan bond under section 144(b), or
                    ``(D) made by an institution of higher education 
                (as defined in section 1201(a) of the Higher Education 
                Act of 1965 (20 U.S.C. 1141(a))).
            ``(2) Limitation.--
                    ``(A) In general.--The amount of interest on a 
                qualified higher education loan which is taken into 
                account under subsection (a)(2) shall be reduced by the 
                amount which bears the same ratio to such amount of 
                interest as--
                            ``(i) the proceeds from such loan used for 
                        qualified higher education expenses, bears to
                            ``(ii) the total proceeds from such loan.
                    ``(B) Qualified higher education expenses.--For 
                purposes of subparagraph (A), the term `qualified 
                higher education expenses' has the meaning given such 
                term by subsection (b), except that--
                            ``(i) such term shall include reasonable 
                        living expenses while away from home, and
                            ``(ii) the limitations of paragraphs (2) 
                        and (3) of subsection (b) shall not apply.
    ``(d) Special Rules.--
            ``(1) No double benefit.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) for qualified higher education 
                expenses or interest on qualified higher education 
                loans with respect to which a deduction is allowable to 
                the taxpayer under any other provision of this chapter 
                unless the taxpayer irrevocably waives his right to the 
                deduction of such expenses under such other provision.
                    ``(B) Dependents.--No deduction shall be allowed 
                under subsection (a) to any individual with respect to 
                whom a deduction under section 151 is allowable to 
                another taxpayer for a taxable year beginning in the 
                calendar year in which such individual's taxable year 
                begins.
                    ``(C) Savings bond exclusion.--A deduction shall be 
                allowed under subsection (a) for qualified higher 
                education expenses only to the extent the amount of 
                such expenses exceeds the amount excludable under 
                section 135 for the taxable year.
            ``(2) Limitation on taxable year of deduction.--
                    ``(A) In general.--A deduction shall be allowed 
                under subsection (a) for any taxable year only to the 
                extent the qualified higher education expenses are in 
                connection with enrollment at an institution of higher 
                education during the taxable year.
                    ``(B) Certain prepayments allowed.--Subparagraph 
                (A) shall not apply to qualified higher education 
                expenses paid during a taxable year if such expenses 
                are in connection with an academic term beginning 
                during such taxable year or during the 1st 3 months of 
                the next taxable year.
            ``(3) Adjustment for certain scholarships and veterans 
        benefits.--The amount of qualified higher education expenses 
        otherwise taken into account under subsection (a) with respect 
        to the education of an individual shall be reduced (before the 
        application of subsection (b)) by the sum of the amounts 
        received with respect to such individual for the taxable year 
        as--
                    ``(A) a qualified scholarship which under section 
                117 is not includable in gross income,
                    ``(B) an educational assistance allowance under 
                chapter 30, 31, 32, 34, or 35 of title 38, United 
                States Code, or
                    ``(C) a payment (other than a gift, bequest, 
                devise, or inheritance within the meaning of section 
                102(a)) for educational expenses, or attributable to 
                enrollment at an eligible educational institution, 
                which is exempt from income taxation by any law of the 
                United States.
            ``(4) No deduction for married individuals filing separate 
        returns.--If the taxpayer is a married individual (within the 
        meaning of section 7703), this section shall apply only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(5) Nonresident aliens.--If the taxpayer is a nonresident 
        alien individual for any portion of the taxable year, this 
        section shall apply only if such individual is treated as a 
        resident alien of the United States for purposes of this 
        chapter by reason of an election under subsection (g) or (h) of 
        section 6013.
            ``(6) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary or appropriate to carry out 
        this section, including regulations requiring recordkeeping and 
        information reporting.''.
    (b) Deduction Allowed in Computing Adjusted Gross Income.--Section 
62(a) of the Internal Revenue Code of 1986 (defining adjusted gross 
income) is amended by inserting after paragraph (15) the following new 
paragraph:
            ``(16) Higher education tuition and fees.--The deduction 
        allowed by section 220.''.
    (c) Conforming Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by striking the item relating to section 220 and inserting:

                              ``Sec. 220. Higher education tuition and 
                                        fees.
                              ``Sec. 221. Cross reference.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 1996.

   Subtitle F--Elimination of Tax Incentives for Moving Jobs Overseas

SEC. 151. SOURCE OF INCOME FROM CERTAIN SALES OF INVENTORY PROPERTY.

    (a) General Rule.--Subsection (b) of section 865 of the Internal 
Revenue Code of 1986 (relating to exception for inventory property) is 
amended to read as follows:
    ``(b) Exception for Inventory Property.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, income derived from the sale of inventory property 
        shall be sourced under the rules of sections 861(a)(6), 
        862(a)(6), and 863 and this section shall not apply.
            ``(2) Treatment of certain sales to related persons.--
                    ``(A) In general.--If any inventory property 
                produced (in whole or in part) by the taxpayer is sold 
                by the taxpayer (directly or indirectly) to a related 
                person--
                            ``(i) the portion determined under 
                        subparagraph (B) of the income from such sale 
                        shall be sourced in the United States or 
                        outside the United States depending on where 
                        the production activities occur, and
                            ``(ii) the remaining portion of such income 
                        shall be sourced under the rules of sections 
                        861(a)(6), 862(a)(6), and 863.
                    ``(B) Amount apportioned to production 
                activities.--For purposes of subparagraph (A), the 
                portion determined under this subparagraph is so much 
                of the income from the sale as does not exceed the 
                greater of--
                            ``(i) the portion of such income 
                        apportioned to production activities under 
                        section 863(b), or
                            ``(ii) the portion of the combined income 
                        of the taxpayer and related person attributable 
                        to such property which would have been 
                        apportioned to production activities under 
                        section 863(b) if such taxpayer and related 
                        person were one taxpayer.
                    ``(C) Related person.--For purposes of this 
                paragraph, the term `related person' means any person 
                related (within the meaning of section 482) to the 
                taxpayer.
            ``(3) Certain sales for use in united states.--If--
                    ``(A) a United States resident sells (directly or 
                indirectly) inventory property to another United States 
                resident for use, consumption, or disposition in the 
                United States, and
                    ``(B) such sale is not attributable to an office or 
                other fixed place of business maintained by such United 
                States resident outside the United States,
        any income of such United States resident (or any related 
        person) from such sale shall be sourced in the United 
        States.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales after December 31, 1996.

SEC. 152. TRANSFER PRICING RULES.

    (a) Authority of Secretary When Legal Limits on Transfer by 
Taxpayer.--Section 482 of the Internal Revenue Code of 1986 (relating 
to allocation of income and deductions among taxpayers) is amended by 
adding at the end the following: ``The authority of the Secretary under 
this section shall not be limited by any restriction (by any law or 
agreement) on the ability of such interests, organizations, trades, or 
businesses to transfer or receive money or other property.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1996.

SEC. 153. INCOME FROM RUNAWAY PLANTS OR FROM MANUFACTURING OPERATIONS 
              LOCATED IN A COUNTRY WHICH PROVIDES A TAX HOLIDAY 
              INCLUDED IN SUBPART F INCOME.

    (a) Foreign Base Company Manufacturing Related Income Added to 
Currently Taxed Amounts.--Subsection (a) of section 954 of the Internal 
Revenue Code of 1986 (defining foreign base company income) is amended 
by striking ``and'' at the end of paragraph (4), by striking the period 
at the end of paragraph (5) and inserting ``, and'', and by adding at 
the end thereof the following new paragraph:
            ``(6) the foreign base company manufacturing related income 
        for the taxable year (determined under subsection (h) and 
        reduced as provided in subsection (b)(5)).''.
    (b) Definition of Foreign Base Company Manufacturing Related 
Income.--Section 954 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(h) Foreign Base Company Manufacturing Related Income.--
            ``(1) In general.--For purposes of this section, the term 
        `foreign base company manufacturing related income' means 
        income (whether in the form of profits, commissions, fees, or 
        otherwise) derived in connection with the manufacture for or 
        sale to any person of personal property by the controlled 
        foreign corporation where the property sold was manufactured by 
        the controlled foreign corporation in any country other than 
        the United States if such property or any component of such 
        property was manufactured--
                    ``(A) in a tax holiday plant, or
                    ``(B) in a runaway plant.
            ``(2) Other definitions; special rules.--For purposes of 
        this subsection--
                    ``(A) Tax holiday plant defined.--The term `tax 
                holiday plant' means any facility--
                            ``(i) operated by the controlled foreign 
                        corporation in connection with the manufacture 
                        of personal property, and
                            ``(ii) with respect to which any economic 
                        benefit under any tax law of the country in 
                        which such facility is located accrued--
                                    ``(I) to such corporation,
                                    ``(II) for the purpose of providing 
                                an incentive to such corporation to 
                                establish, maintain, or expand such 
                                facility, and
                                    ``(III) for the taxable year of 
                                such corporation during which the 
                                personal property referred to in 
                                paragraph (1) was manufactured.
                    ``(B) Runaway plant defined.--The term `runaway 
                plant' means any facility--
                            ``(i) for the manufacture of personal 
                        property of which not less than 10 percent is 
                        used, consumed, or otherwise disposed of in the 
                        United States, and
                            ``(ii) which is established or maintained 
                        by the controlled foreign corporation in a 
                        country in which the effective tax rate imposed 
                        by such country on the corporation is less than 
                        90 percent of the effective tax rate which 
                        would be imposed on such corporation under this 
                        title.
                    ``(C) Economic benefit under any tax law defined.--
                The term `economic benefit under any tax law' 
                includes--
                            ``(i) any exclusion or deduction of any 
                        amount from gross income derived in connection 
                        with--
                                    ``(I) the operation of any 
                                manufacturing facility, or
                                    ``(II) the manufacture or sale of 
                                any personal property,
                        which would otherwise be subject to tax under 
                        the law of such country;
                            ``(ii) any reduction in the rate of any tax 
                        which would otherwise be imposed under the laws 
                        of such country with respect to any facility or 
                        property referred to in clause (i) (including 
                        any ad valorem tax or excise tax with respect 
                        to such property);
                            ``(iii) any credit against any tax which 
                        would otherwise be assessed against any such 
                        facility or property or any income derived in 
                        connection with the operation of any such 
                        facility or the manufacture or sale of any such 
                        property; and
                            ``(iv) any abatement of any amount of tax 
                        otherwise due and any other reduction in the 
                        actual amount of tax paid to such country.
                    ``(D) Manufacture defined.--The term `manufacture' 
                or `manufacturing' includes any production, processing, 
                assembling, or finishing of any personal property or 
                any component of property not yet assembled and any 
                packaging, handling, or other activity incidental to 
                the shipment or delivery of such property to any buyer.
                    ``(E) Corporation includes any related person.--The 
                term `controlled foreign corporation' includes any 
                related person with respect to such corporation.
                    ``(F) Special rule for determining which taxable 
                year an economic benefit was obtained.--An economic 
                benefit under any tax law shall be treated as having 
                accrued in the taxable year of the controlled foreign 
                corporation in which such corporation actually obtained 
                the benefit, notwithstanding the fact that such benefit 
                may have been allowable for any preceding or succeeding 
                taxable year and was carried forward or back, for any 
                reason, to the taxable year.
            ``(3) Limitation on application of paragraph (1) in certain 
        cases.--For purposes of this section--
                    ``(A) In general.--The term `foreign base company 
                manufacturing related income' shall not include any 
                income of a controlled foreign corporation from the 
                manufacture or sale of personal property if--
                            ``(i) such corporation is not a corporation 
                        significantly engaged in manufacturing,
                            ``(ii) the investment in the expansion of 
                        an existing facility which gave rise to a tax 
                        holiday for such facility was not a substantial 
                        investment, or
                            ``(iii) the personal property was used, 
                        consumed, or otherwise disposed of in the 
                        country in which such property was 
                        manufactured.
                    ``(B) Corporation significantly engaged in 
                manufacturing defined.--
                            ``(i) General rule.--A corporation shall be 
                        deemed to be significantly engaged in 
                        manufacturing if the value of real property and 
                        other capital assets owned or controlled by the 
                        corporation and dedicated to manufacturing 
                        operations is more than 10 percent of the total 
                        value of all real property and other capital 
                        assets owned or controlled by such corporation.
                            ``(ii) Special rule for assessing property 
                        value.--The value of any property owned by the 
                        corporation is the basis of such corporation in 
                        such property. The basis of the corporation in 
                        any property which was acquired other than by 
                        purchase shall be the fair market value of such 
                        property at the time of such acquisition. Any 
                        property controlled but not owned by such 
                        corporation under any lease (or any other 
                        instrument which gives such corporation any 
                        right of use or occupancy with respect to such 
                        property) shall be treated as property acquired 
                        other than by purchase in the manner provided 
                        in the preceding sentence.
                    ``(C) Substantial investment defined.--The term 
                `substantial investment' means any amount which--
                            ``(i) was added to the capital account for 
                        an existing facility during the 3-year period 
                        ending on the last day of any taxable year with 
                        respect to which such facility is a tax holiday 
                        plant, and
                            ``(ii) caused the sum of all amounts added 
                        to such account during such period to exceed 20 
                        percent of the total value of such facility 
                        (determined in the manner provided in 
                        subparagraph (B)(ii)) on the first day of such 
                        period.''.
    (c) Technical and Conforming Amendments.--
            (1) The last sentence of subsection (b)(4) of such section 
        954 is amended by striking out ``subsection (a)(5).'' and by 
        inserting in lieu thereof ``subsection (a)(5) or foreign base 
        company manufacturing related income described in subsection 
        (a)(6).''
            (2) Subsection (b)(5) of such section 954 is amended by 
        striking out ``and the foreign base company oil related 
        income'' and by inserting in lieu thereof ``the foreign base 
        company oil related income, and the foreign base company 
        manufacturing related income''.
            (3) Subsection (b) of such section 954 is amended by 
        inserting at the end thereof the following new paragraph:
            ``(9) Foreign base company manufacturing related income not 
        treated as another kind of base company income.--Income of a 
        corporation which is foreign base company manufacturing related 
        income shall not be treated as foreign base company income of 
        such corporation under any paragraph of subsection (a) other 
        than paragraph (6).''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years of foreign corporations beginning after 
        December 31, 1988, and to taxable years of United States 
        shareholders in which, or with which, such taxable years of 
        foreign corporations end.
            (2) Investments before the date of enactment not taken into 
        account.--No facility of a foreign controlled corporation shall 
        be treated as a tax holiday plant (within the meaning of 
        section 954(h)(2)(A) of the Internal Revenue Code of 1986, as 
        amended by this section) or as a runaway plant (within the 
        meaning of section 954(h)(2)(B) of such Code, as amended by 
        this section) on the basis of any amount paid or incurred with 
        respect to such facility and added to the capital account for 
        such facility before the date of the enactment of this Act.

SEC. 154. REPEAL OF SECTION 911 EXCLUSION OF FOREIGN EARNED INCOME.

    Subsection (a) of section 911 of the Internal Revenue Code of 1986 
(relating to citizens or residents of the United States living abroad) 
is amended by striking ``under this subtitle'' and all that follows 
through ``individual.'' and inserting ``under this subtitle--
            ``(1) for any taxable year beginning before January 1, 
        1997, the foreign earned income of such individual, and
            ``(2) for any taxable year, the housing cost amount of such 
        individual.''.

SEC. 155. 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 Rules.--For purposes of this subtitle--
            ``(1) Mark to market.--Except as provided in subsection 
        (f)(2), all property held by an expatriate immediately before 
        the expatriation date shall be treated as sold at such time for 
        its fair market value.
            ``(2) Recognition of gain or loss.--In the case of any sale 
        under paragraph (1)--
                    ``(A) notwithstanding any other provision of this 
                title, any gain arising from such sale shall be taken 
                into account for the taxable year of the sale unless 
                such gain is excluded from gross income under part III 
                of subchapter B, and
                    ``(B) any loss arising from such sale shall be 
                taken into account for the taxable year of the sale to 
                the extent otherwise provided by this title, except 
                that section 1091 shall not apply (and section 1092 
                shall apply) to any such loss.
            ``(3) Election to continue to be taxed as united states 
        citizen.--
                    ``(A) In general.--If an expatriate elects the 
                application of this paragraph with respect to any 
                property--
                            ``(i) this section (other than this 
                        paragraph) shall not apply to such property, 
                        but
                            ``(ii) such property shall be subject to 
                        tax under this title in the same manner as if 
                        the individual were a United States citizen.
                    ``(B) Limitation on amount of estate, gift, and 
                generation-skipping transfer taxes.--The aggregate 
                amount of taxes imposed under subtitle B with respect 
                to any transfer of property by reason of an election 
                under subparagraph (A) shall not exceed the amount of 
                income tax which would be due if the property were sold 
                for its fair market value immediately before the time 
                of the transfer or death (taking into account the rules 
                of subsection (a)(2)).
                    ``(C) Requirements.--Subparagraph (A) shall not 
                apply to an individual unless the individual--
                            ``(i) provides security for payment of tax 
                        in such form and manner, and in such amount, as 
                        the Secretary may require,
                            ``(ii) consents to the waiver of any right 
                        of the individual under any treaty of the 
                        United States which would preclude assessment 
                        or collection of any tax which may be imposed 
                        by reason of this paragraph, and
                            ``(iii) complies with such other 
                        requirements as the Secretary may prescribe.
                    ``(D) Election.--An election under subparagraph (A) 
                shall apply only to the property described in the 
                election and, once made, shall be irrevocable.
    ``(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 if such individual were a citizen or 
        resident of the United States (within the meaning of chapter 
        11) who died 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 expatriation date, 
        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 tax-favored 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) Definitions.--For purposes of this section--
            ``(1) Expatriate.--The term `expatriate' means--
                    ``(A) any United States citizen who relinquishes 
                his citizenship, or
                    ``(B) any long-term resident of the United States 
                who--
                            ``(i) ceases to be a lawful permanent 
                        resident of the United States (within the 
                        meaning of section 7701(b)(6)), or
                            ``(ii) commences to be treated as a 
                        resident of a foreign country under the 
                        provisions of a tax treaty between the United 
                        States and the foreign country and who does not 
                        waive the benefits of such treaty applicable to 
                        residents of the foreign country.
        An individual shall not be treated as an expatriate for 
        purposes of this section by reason of the individual 
        relinquishing United States citizenship before attaining the 
        age of 18\1/2\ if the individual has been a resident of the 
        United States (as defined in section 7701(b)(1)(A)(ii)) for 
        less than 5 taxable years before the date of relinquishment.
            ``(2) Expatriation date.--The term `expatriation date' 
        means--
                    ``(A) the date an individual relinquishes United 
                States citizenship, or
                    ``(B) in the case of a long-term resident of the 
                United States, the date of the event described in 
                clause (i) or (ii) of paragraph (1)(B).
            ``(3) Relinquishment of citizenship.--A citizen shall be 
        treated as relinquishing his United States citizenship on the 
        earliest of--
                    ``(A) 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)),
                    ``(B) 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)),
                    ``(C) the date the United States Department of 
                State issues to the individual a certificate of loss of 
                nationality, or
                    ``(D) the date a court of the United States cancels 
                a naturalized citizen's certificate of naturalization.
        Subparagraph (A) or (B) 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.
            ``(4) Long-term resident.--
                    ``(A) In general.--The term `long-term resident' 
                means any individual (other than a citizen of the 
                United States) who is a lawful permanent resident of 
                the United States in at least 8 taxable years during 
                the period of 15 taxable years ending with the taxable 
                year during which the sale under subsection (a)(1) is 
                treated as occurring. For purposes of the preceding 
                sentence, an individual shall not be treated as a 
lawful permanent resident for any taxable year if such individual is 
treated as a resident of a foreign country for the taxable year under 
the provisions of a tax treaty between the United States and the 
foreign country and does not waive the benefits of such treaty 
applicable to residents of the foreign country.
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), there shall not be taken into account--
                            ``(i) any taxable year during which any 
                        prior sale is treated under subsection (a)(1) 
                        as occurring, or
                            ``(ii) any taxable year prior to the 
                        taxable year referred to in clause (i).
    ``(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.--The remaining interests in the 
                trust not determined under subparagraph (A) to be held 
                by any beneficiary shall be allocated first to the 
                grantor, if a beneficiary, and then to other 
                beneficiaries under rules prescribed by the Secretary 
                similar to the rules of intestate succession.
                    ``(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 is an expatriate 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 
                expatriation date 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 (C)(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 expatriation date, 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 expatriation date.
                    ``(B) Due date.--The due date for any tax imposed 
                by subparagraph (A) shall be the 90th day after the 
                expatriation date.
                    ``(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 payment of any tax attributable 
        to amounts included in gross income under subsection (a) may be 
        deferred to the same extent, and in the same manner, as any tax 
        imposed by chapter 11, except that the Secretary may extend the 
        period for extension of time for paying tax under section 6161 
        to such number of years as the Secretary determines 
        appropriate.
            ``(3) Rules relating to security interests.--
                    ``(A) Adequacy of security interests.--In 
                determining the adequacy of any security to be provided 
                under this section, the Secretary may take into account 
                the principles of section 2056A.
                    ``(B) Special rule for trust.--If a taxpayer is 
                required by this section to provide security in 
                connection with any tax imposed by reason of this 
                section with respect to the holding of an interest in a 
                trust and any trustee of such trust is an individual 
                citizen of the United States or a domestic corporation, 
                such trustee shall be required to provide such security 
                upon notification by the taxpayer of such requirement.
    ``(i) Coordination with Estate and Gift Taxes.--If subsection (a) 
applies to property held by an individual for any taxable year and--
            ``(1) such property is includible in the gross estate of 
        such individual solely by reason of section 2107, or
            ``(2) section 2501 applies to a transfer of such property 
        by such individual solely by reason of section 2501(a)(3),
then there shall be allowed as a credit against the additional tax 
imposed by section 2101 or 2501, whichever is applicable, solely by 
reason of section 2107 or 2501(a)(3) an amount equal to the increase in 
the tax imposed by this chapter for such taxable year by reason of this 
section.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations to prevent double taxation by ensuring 
that--
            ``(1) appropriate adjustments are made to basis to reflect 
        gain recognized by reason of subsection (a) and the exclusion 
        provided by subsection (b),
            ``(2) no interest in property is treated as held for 
        purposes of this section by more than one taxpayer, and
            ``(3) any gain by reason of a deemed sale under subsection 
        (a) of an interest in a corporation, partnership, trust, or 
        estate is reduced to reflect that portion of such gain which is 
        attributable to an interest in a trust which a shareholder, 
        partner, or beneficiary is treated as holding directly under 
        subsection (f)(1)(C).
    ``(k) Cross Reference.--

                                ``For income tax treatment of 
individuals who terminate United States citizenship, 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)(3).''
    (c) Conforming Amendments.--
            (1) 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)(3)) United 
States citizenship on or after February 6, 1995.''
            (2) Section 2107(c) of such Code is amended by adding at 
        the end the following new paragraph:
            ``(3) Cross reference.--For credit against the tax imposed 
        by subsection (a) for expatriation tax, see section 877A(i).''
            (3) Section 2501(a)(3) of such Code is amended by adding at 
        the end the following new flush sentence:
        ``For credit against the tax imposed under this section by 
        reason of this paragraph, see section 877A(i).''
            (4) Section 6851 of such Code is amended by striking 
        subsection (d) and by redesignating subsection (e) as 
        subsection (d).
            (5) Paragraph (10) of section 7701(b) of such Code is 
        amended by adding at the end the following new sentence: ``This 
        paragraph shall not apply to any long-term resident of the 
        United States who is an expatriate (as defined in section 
        877A(e)(1)).''
    (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 expatriates (within the meaning of section 877A(e) of 
        the Internal Revenue Code of 1986, as added by this section) 
        whose expatriation date (as so defined) occurs 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.

      Subtitle G--Distressed Community Economic Development Bonds

SEC. 161. DISTRESSED COMMUNITY ECONOMIC DEVELOPMENT BONDS.

    (a) In General.--Paragraph (1) of section 141(e) of the Internal 
Revenue Code of 1986 (defining qualified bond) is amended by striking 
``or'' at the end of subparagraph (F), by striking the period at the 
end of subparagraph (G) and inserting ``, or'', and by adding at the 
end the following new subparagraph:
                    ``(H) a distressed community economic development 
                bond.''
    (b) Distressed Community Economic Development Bond Defined.--
            (1) In general.--Section 144 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(d) Distressed Community Economic Development Bond.--For purposes 
of this subpart--
            ``(1) In general.--The term `distressed community economic 
        development bond' means any bond issued as part of an issue 95 
        percent or more of the net proceeds of which are to be used for 
        distressed community economic development purposes.
            ``(2) Distressed community economic development purposes.--
        For purposes of this subsection, the net proceeds of any issue 
        shall be treated as used for distressed community economic 
        development purposes to the extent such proceeds are used--
                    ``(A) to provide qualified economic development 
                facilities or land which is functionally related and 
                subordinate to such facilities, or
                    ``(B) to provide working capital required in 
                connection with the establishment of a qualified 
                business in a distressed community or the expansion of 
                such a business in such a community.
            ``(3) Qualified economic development facilities.--For 
        purposes of this subsection, the term `qualified economic 
        development facilities' means any property to which section 168 
        applies (or would apply but for section 179) if--
                    ``(A) such property was acquired by purchase (as 
                defined in section 179(d)(2)) after the date on which 
                the designation of the distressed community took 
                effect,
                    ``(B) the original use of which in the distressed 
                community commences with the person to whom the 
                financing is provided under the issue, and
                    ``(C) substantially all the use of which is in a 
                distressed community and in the active conduct of a 
                qualified business.
        For purposes of the preceding sentence, rules similar to the 
        rules of subsections (a)(2) and (b) of section 1397C shall 
        apply.
            ``(4) Qualified business.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `qualified business' means any 
                trade or business.
                    ``(B) Rental of real property.--The rental of any 
                building or structure located in a distressed community 
                shall be treated as a qualified business if and only 
                if--
                            ``(i) the property is not residential 
                        rental property (as defined in section 
                        168(e)(2), and
                            ``(ii) at least 50 percent of the gross 
                        rental income from the building or structure is 
                        from other qualified businesses in such 
                        community.
                    ``(C) Rental of tangible personal property.--The 
                rental of tangible personal property shall be treated 
                as a qualified business if and only if substantially 
                all of the rental of such property is by qualified 
                businesses in the distressed community or by individual 
                residents of the distressed community.
                    ``(D) Treatment of business holding intangibles.--
                The term `qualified business' shall not include any 
                trade or business consisting predominantly of the 
                development or holding of intangibles for sale or 
                license.
                    ``(E) Certain businesses excluded.--The term 
                `qualified business' shall not include any trade or 
                business consisting of--
                            ``(i) the operation of any facility 
                        described in subsection (c)(6)(B), or
                            ``(ii) operating a trade or business the 
                        principal activity of which is farming (within 
                        the meaning of subparagraph (A) or (B) of 
                        section 2032A(e)(5)), but only if, as of the 
                        close of the preceding taxable year, the sum of 
                        the following exceeds $500,000--
                                    ``(I) the aggregate unadjusted 
                                bases (or, if greater, the fair market 
                                value) of the assets owned by the 
                                taxpayer and used in such trade or 
                                business, and
                                    ``(II) the aggregate value of the 
                                assets leased by the taxpayer and used 
                                in such trade or business.
                        For purposes of subclause (II), rules similar 
                        to the rules of section 1397(b) shall apply.
            ``(5) Distressed community.--For purposes of this 
        subsection, the term `distressed community' means, with respect 
        to periods in any calendar year, any area--
                    ``(A) which is the area over which a general 
                purpose local governmental unit has jurisdiction and 
                which is designated for purposes of this subsection by 
                the governing body of such unit, and
                    ``(B) which (as of the beginning of such year) 
                meets the requirements of clause (i), (ii), or (iii) of 
                this subparagraph:
                            ``(i) Chronic economic distress.--An area 
                        meets the requirements of this clause if--
                                    ``(I) the area has experienced 
                                population loss (as determined by the 
                                1990 or subsequent census data) of not 
                                less than 5 percent, or
                                    ``(II) the area has experienced an 
                                average unemployment rate over the last 
                                5 years (as determined by the Bureau of 
                                Labor Statistics) of not less than 8 
                                percent.
                            ``(ii) Slow job growth.--An area meets the 
                        requirements of this clause if, over the last 5 
                        years--
                                    ``(I) the area has experienced job 
                                growth in the retail and manufacturing 
                                sectors of less than 3 percent, or
                                    ``(II) if data are available only 
                                for the manufacturing sector, the 
                                community has experienced no job growth 
                                in such sector, or if data are 
                                available only for the retail sector, 
                                the area has experienced job growth in 
                                such sector of less than 8.5 percent.
                            ``(iii) Major base closing.--An area meets 
                        the requirements of this clause if--
                                    ``(I) there has been a military 
                                base closing within its boundaries or 
                                adjacent thereto within the last 2 
                                years which has resulted, or will 
                                result, in the loss of not less than 
                                500 jobs, or
                                    ``(II) there has been an official 
                                notification of a military base closing 
                                within its boundaries or adjacent 
                                thereto within the next 6 months, which 
                                will result in the loss of not less 
                                than 500 jobs.
            ``(6) Prohibition of assistance for business relocations.--
                    ``(A) In general.--This subsection shall not apply 
                to any bonds issued as part of an issue if any of the 
                proceeds of such an issue are used to assist any 
                establishment in relocating from an area outside the 
                distressed community to the distressed community.
                    ``(B) Exception.--The limitation established in 
                subparagraph (A) shall not be construed to prohibit 
                assistance for the expansion of an existing business 
                entity through the establishment of a new branch 
                affiliate, or subsidiary if--
                            ``(i) the establishment of the new branch, 
                        affiliate, or subsidiary will not result in a 
                        decrease in employment in the area of original 
                        location or in any other area where the 
                        existing business entity conducts business 
                        operations, and
                            ``(ii) there is no reason to believe that 
                        the new branch, affiliate, or subsidiary 
is being established with the intention of closing down the operations 
of the existing business entity in the area of its original location or 
in any other area where the existing business entity conducts business 
operations.''.
            (2) Clerical amendments.--
                    (A) The section heading for section 144 of such 
                Code is amended by striking ``qualified redevelopment 
                bond.'' and inserting ``etc.''.
                    (B) The table of sections for subpart A of part IV 
                of subchapter B of chapter 1 of such Code is amended by 
                striking ``qualified redevelopment bond.'' in the item 
                relating to section 144 and inserting ``etc.''.
    (c) Certain Rules Not To Apply.--
            (1) Subsection (h) of section 147 of the Internal Revenue 
        Code of 1986 (relating to certain rules which do not apply) is 
        amended by adding at the end thereof the following new 
        paragraph:
            ``(3) Bonds for distressed community economic development 
        facilities.--Subsection (c)(1)(A) shall be applied by 
        substituting `50 percent' for `25 percent' and subsection (d) 
        shall not apply to any bond issued as part of an issue 
        described in section 144(d)(1).''.
            (2) The subsection heading for subsection (h) of section 
        147 of such Code is amended to read as follows:
    ``(h) Special Rules for Certain Bonds.--''.
    (d) Volume Cap Only Charged With 50 Percent of Distressed Community 
Economic Development Bonds.--Subsection (g) of section 146 of the 
Internal Revenue Code of 1986 (relating to an exception for certain 
bonds from volume cap) 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 inserting after paragraph (4) the following 
new paragraph:
            ``(5) 50 percent of any bond issued as part of an issue 
        described in section 144(d)(1) (relating to distressed 
        community economic development facilities).''.
    (e) Penalties for Loans Made to Businesses That Cease To Be 
Distressed Community Economic Development Businesses, Etc.--Subsection 
(b) of section 150 of the Internal Revenue Code of 1986 (relating to 
change in use) is amended by adding at the end the following new 
paragraph:
            ``(7) Distressed community economic development bonds.--In 
        the case of any qualified economic development facility with 
        respect to which financing was provided by an issue described 
        in section 144(d)(1):
                    ``(A) No deduction allowed.--No deduction shall be 
                allowed under this chapter for interest on such 
                financing which accrues during the period beginning on 
                the first day of the calendar year which includes the 
                date on which--
                            ``(i) the trade or business to which the 
                        financing was provided ceases to be a qualified 
                        business, or
                            ``(ii) substantially all of the use of such 
                        facility with respect to which the financing 
                        was provided ceases to be in a distressed 
                        community.
                 For purposes of this subparagraph, the term 
                `distressed community' means any area which qualifies 
                as a distressed community under section 144(d)(5) as of 
                the time the financing was provided without regard to 
                any subsequent revocation or termination.
                    ``(B) Penalty imposed on distressed community 
                economic development business.--If at any time while 
                such financing is outstanding--
                            ``(i) such facility ceases to be in use in 
                        a qualified business, or
                            ``(ii) substantially all of the use of such 
                        facility ceases to be in a distressed community 
                        (as so defined),
                 there is hereby imposed on such business to which such 
                financing was provided a penalty equal to 1.25 percent 
                of the portion of such financing which is outstanding 
                immediately before such cessation. Such penalty shall 
                be assessed and collected by the Secretary.
                    ``(C) Exception for bankruptcy.--Subparagraphs (A) 
                and (B) shall not apply to any cessation resulting from 
                bankruptcy.''.
    (f) Bank Interest Deduction.--
            (1) In general.--Clause (ii) of section 265(b)(3)(B) of the 
        Internal Revenue Code of 1986 (relating to exception for 
        certain tax-exempt obligations) is amended--
                    (A) by striking ``or'' at the end of subclause (I),
                    (B) by redesignating subclause (II) as subclause 
                (III), and
                    (C) by inserting after subclause (I) the following 
                new subclause:
                                    ``(II) any bond issued as part of 
                                an issue described in section 
                                144(d)(1), or''.
            (2) Conforming agreement.--Subclause (I) of section 
        265(b)(3)(B)(i) of such Code (defining qualified tax-exempt 
        obligation) is amended by inserting ``or is an obligation 
        issued as part of an issue described in section 144(d)(1)'' 
        after ``issuer''.
    (g) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

                     TITLE II--RETIREMENT SECURITY

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Workers Pension Act of 1996''.

SEC. 202. FINDINGS AND PURPOSE.

    (a) Statement of Findings.--The Senate finds that--
            (1) most workers, over one-half of the Nation's workforce, 
        do not have a private pension plan;
            (2) most of these workers do not have pensions because 
        their employers do not offer pension plans or limit pension 
        coverage only to certain workers;
            (3) workers without employer-sponsored pensions are most 
        likely to be individuals who work for small- or medium-size 
        firms, who work in service industries, who are women, or are 
        individuals who are in and out of the labor force during their 
        careers;
            (4) workers who have employer-sponsored pension plans 
        receive large Federal tax benefits;
            (5) in 1995, the Federal tax subsidies for employer-
        sponsored pension plans equaled $52,000,000,000;
            (6) workers who do not have employer-sponsored pensions are 
        not eligible for these tax benefits;
            (7) simplified employer plans and other efforts to 
        encourage employers to offer more pensions have not resulted in 
        coverage for most of those who have lacked employer-sponsored 
        pensions;
            (8) economic growth can be improved by a higher national 
        savings rate and better labor mobility;
            (9) improved pension arrangements can raise national 
        savings, and pension portability can increase workers' 
        willingness to move to jobs offered by newer and smaller 
        companies;
            (10) the vulnerability of future retirees to potential 
        social security and medicare cutbacks would be reduced, and 
        their standards of living improved, if they had greater 
        personal retirement savings;
            (11) workers can have good pensions through arrangements 
        that do not require each employer to set up and manage its own 
        pension benefits program; and
            (12) the Teachers Insurance Annuity Association, for 
        example, is a nationwide pension system--
                    (A) which covers workers with many different 
                employers,
                    (B) which provides individual workers with their 
                own pension accounts, and
                    (C) which allows workers to keep these same 
                accounts when they change jobs between participating 
                institutions.
    (b) Statement of Purpose.--It is the purpose of this Act--
            (1) to insure that workers who do not have an employer-
        sponsored pension plan are able to establish individual pension 
        plans;
            (2) to provide the same tax advantages for these individual 
        pension plans as for employer-sponsored pension plans;
            (3) to insure that individual pension plans will have the 
        same quality of investments as employer-sponsored pensions, and 
        to require those who manage individual pensions plans to meet 
        the same fiduciary responsibility standards as those who manage 
        employer-sponsored pension plans;
            (4) to provide workers with comparative information on 
        individual pension plan options so that they are able to select 
        qualified pension managers and investments that best meet their 
        needs;
            (5) to guarantee that individual pension plan contributions 
        will be immediately and fully vested, and that such pension 
        plans will be fully portable if a worker changes jobs; and
            (6) to insure that the individual pension plan contribution 
        system will work as easily and conveniently as possible for 
        workers and their employers.

SEC. 203. DEDUCTION FOR CONTRIBUTIONS TO INDIVIDUAL PENSION PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals), as amended by section 142, is amended by 
redesignating section 221 as section 222 and by inserting after section 
220 the following new section:

``SEC. 221. CONTRIBUTIONS TO INDIVIDUAL PENSION PLANS.

    ``(a) Deduction Allowed.--In the case of an eligible individual, 
there shall be allowed as a deduction the amounts paid during the 
taxable year--
            ``(1) through a qualified payroll deduction plan by such 
        individual, and
            ``(2) as optional contributions by the employer of such 
        individual,
to an individual pension plan for the benefit of such individual.
    ``(b) Limitation.--The amount allowable as a deduction under 
subsection (a) with respect to any individual for the taxable year 
shall not exceed the excess (if any) of--
            ``(1) the maximum dollar limit allowed for a section 401(k) 
        salary reduction plan for such taxable year, over
            ``(2) any contributions made by or on behalf of the 
        individual to any plan described in section 219(g)(5).
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible individual.--The term `eligible individual' 
        means, with respect to any taxable year any individual--
                    ``(A) who has earned income reportable as wages on 
                a W-2 form, and
                    ``(B) who elects for such year to participate in a 
                qualified payroll deduction plan of the individual's 
                employer.
            ``(2) Individual pension plan.--The term `individual 
        pension plan' has the meaning given such term by section 408A.
            ``(3) Qualified payroll deduction plan.--The term 
        `qualified payroll deduction plan' means a written plan of an 
        employer if--
                    ``(A) the plan applies only with respect to wages 
                of eligible individuals,
                    ``(B) under such plan, contributions will be 
                deducted from the employee's wages and paid to the 
                individual pension plan specified by the individual in 
                an amount specified by such individual,
                    ``(C) under such plan, the employer is required to 
                pay the amount so deducted with respect to the 
                specified individual pension plan pursuant to section 
                205(a)(5) of the Workers Pension Act of 1996,
                    ``(D) the employer receives no compensation for the 
                cost of administering the payroll deduction plan, and
                    ``(E) the employer does not make any endorsement 
                with respect to any individual pension plan.
            ``(4) Period for election.--An election may be made under 
        paragraph (1)(B) in January of each year, or if necessary, upon 
        the filing of a W-4 form.''
    (b) Deduction Allowed Against Gross Income.--Subsection (a) of 
section 62 of the Internal Revenue Code of 1986 (defining adjusted 
gross income), as amended by section 142, is amended by inserting after 
paragraph (16) the following new paragraph:
            ``(17) Individual pension plans.--The deduction allowed by 
        section 221.''
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986, as 
amended by section 142, is amended by striking the last item and 
inserting the following new items:

                              ``Sec. 221. Contributions to individual 
                                        pension plans.
                              ``Sec. 222. Cross reference.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 204. ESTABLISHMENT OF INDIVIDUAL PENSION PLANS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section 
408 the following new section:

``SEC. 408A. INDIVIDUAL PENSION PLANS.

    ``(a) General Rule.--Except as provided in this chapter, an 
individual pension plan shall be treated for purposes of this title in 
the same manner as an individual retirement plan.
    ``(b) Individual Pension Plan.--For purposes of this title--
            ``(1) In general.--The term `individual pension plan' means 
        an individual retirement plan which is a standard individual 
        pension plan or a supplementary social security account made 
        available by a qualified pension agency and which is designated 
        at the time of establishment of the plan as an individual 
        pension plan.
            ``(2) Qualified pension agency.--
                    ``(A) In general.--The term `qualified pension 
                agency' means an organization which--
                            ``(i) meets the requirements of 
                        subparagraph (B), and
                            ``(ii) is certified by the Secretary as 
                        meeting such requirements on an on-going basis.
                    ``(B) Requirements.--The requirements of this 
                subparagraph are as follows:
                            ``(i) A qualified pension agency must be a 
                        bank (as defined in section 408(n), insurance 
                        company, mutual fund company, labor union, 
                        Taft-Hartley plan, multiple employer welfare 
                        arrangement, or other organization which is 
                        responsible for employer-sponsored pension 
                        funds.
                            ``(ii) A qualified pension agency has the 
                        same fiduciary and trustee responsibilities for 
                        individual pension plans as are required of 
                        trustees for employee benefit plans under 
                        sections 402 through 406 of the Employee 
                        Retirement Income Security Act of 1974.
                            ``(iii) A qualified pension agency must--
                                    ``(I) offer individual pension 
                                plans that meet the requirements of 
                                this section;
                                    ``(II) establish and maintain such 
                                plans pursuant to a written document 
                                which shall provide for one or more 
                                named fiduciaries who jointly or 
                                severally shall have authority to 
                                control and manage the operation and 
                                administration of the plan;
                                    ``(III) provide information to the 
                                Secretary on its performance with 
                                respect to financial security, 
                                investments and investment performance, 
                                administrative expenses, customer 
                                service, contributions and 
                                disbursements, annual audits, and other 
                                information requested by the Secretary 
                                to insure compliance with standards, 
                                sound financial and business practices, 
                                and to assess comparative performance;
                                    ``(IV) provide annual reports to 
                                participants in individual pension 
                                plans which provide participants with 
                                information on their account status and 
                                activity during the prior year, compare 
                                the agency's performance, using 
                                information provided by the Secretary, 
                                to those of other qualified pension 
                                agencies, and other investment 
                                indicators, and use uniform formats as 
                                specified by the Secretary;
                                    ``(V) provide for qualified 
                                transfers or for disbursement of funds 
                                to participants, on their written 
                                request;
                                    ``(VI) participate in arrangements, 
                                approved by the Secretary, for the 
                                transfer of payroll deductions and 
                                optional contributions from employers 
                                to individual pension plans at no 
                                charge to the employers; and
                                    ``(VII) disclose such 
                                administrative charges as it may impose 
                                on participants.
                            ``(iv) A qualified pension agency shall 
                        meet such other requirements and performance 
                        standards as the Secretary determines are in 
                        the best interests of the investors in 
                        individual pension plans.
                    ``(C) De minimis rule.--A qualified pension agency 
                may require that a qualified transfer among individual 
                pension plans be at least $500, and may decline to 
                accept payroll contributions which, on an annualized 
                basis, are less than $200.
            ``(3) Standard individual pension plan.--The term `standard 
        individual pension plan' means an individual pension plan which 
        has been certified by the Secretary as meeting the requirements 
        of this section.
            ``(4) Supplementary social security account.--The term 
        `supplementary social security account' means an individual 
        pension plan which has been certified by the Commissioner of 
        Social Security as meeting the requirements of this section and 
        section 234 of the Social Security Act.
    ``(c) Special Rules.--
            ``(1) Deduction allowed.--A deduction shall be allowed 
        under section 221 for a contribution to an individual pension 
        plan.
            ``(2) Contribution limit.--The aggregate amount of 
        contributions for any taxable year to all individual pension 
        plans maintained for the benefit of an individual shall not 
        exceed the maximum amount allowable as a deduction under 
        section 221 with respect to such individual for such taxable 
        year.
            ``(3) Special rules for qualified transfers.--
                    ``(A) In general.--No rollover contribution may be 
                made to an individual pension plan unless it is a 
                qualified transfer.
                    ``(B) Limit not to apply.--The limitation under 
                paragraph (2) shall not apply to a qualified transfer 
                to an individual pension plan.
                    ``(C) Special rule relating to certain transfers.--
                Notwithstanding any other provision of law, in the case 
                of a qualified transfer to an individual pension plan 
                from an individual retirement plan which is not an 
                individual pension plan--
                            ``(i) there shall be included in gross 
                        income any amount which, but for the qualified 
                        transfer, would be includible in gross income, 
                        but
                            ``(ii) section 72(t) shall not apply to 
                        such amount.
                    ``(D) Qualified transfer.--For purposes of this 
                section, the term `qualified transfer' means a transfer 
                to an individual pension plan from another such plan or 
                from an individual retirement plan but only if such 
                transfer meets the requirements of section 408(d)(3).
            ``(4) Limitation on ira contributions.--For purposes of 
        section 219(g) only, an individual pension plan shall be 
        considered a plan described in paragraph (5) thereof.
            ``(5) Cross references.--

                                ``For tax treatment of plans and 
distributions from plans, see section 408.
                                ``For additional tax for early 
withdrawal, see section 72(t).
                                ``For tax on excess contributions, see 
section 4973.
                                ``For tax on prohibited transactions, 
see section 4975.
                                ``For failure to provide reports, see 
section 6693.''
    (b) Penalty-Free Distributions From Individual Pension Plans to Pay 
Educational Expenses or for the Unemployed.--
            (1) Educational expenses.--
                    (A) In general.--Paragraph (2) of section 72(t) of 
                the Internal Revenue Code of 1986 (relating to 
                exceptions to 10-percent additional tax on early 
                distributions from qualified retirement plans) is 
                amended by adding at the end the following new 
                subparagraph:
                    ``(D) Distributions from certain plans for 
                educational expenses.--Distributions to an individual 
                from an individual pension plan to the extent such 
distributions do not exceed the qualified higher education expenses (as 
defined in paragraph (6)) of the taxpayer for the taxable year.''
                    (B) Definition.--Section 72(t) of such Code is 
                amended by adding at the end the following new 
                paragraph:
            ``(6) Qualified higher education expenses.--For purposes of 
        paragraph (2)(D)--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition and fees required for 
                the enrollment or attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse,
                            ``(iii) a dependent of the taxpayer with 
                        respect to whom the taxpayer is allowed a 
                        deduction under section 151, or
                            ``(iv) the taxpayer's child (as defined in 
                        section 151(c)(3)) or grandchild,
                as an eligible student at an institution of higher 
                education (as defined in section 220(b)(4)).
                    ``(B) Coordination with savings bond provisions.--
                The amount of qualified higher education expenses for 
                any taxable year shall be reduced by any amount 
                excludable from gross income under section 135.''
            (2) Distributions for certain unemployed individuals.--
        Paragraph (2) of section 72(t), as amended by paragraph (1) of 
        this subsection, is amended by adding at the end the following 
        new subparagraph:
                    ``(E) Distributions to unemployed individuals.--A 
                distribution from an individual pension plan to an 
                individual after separation from employment, if--
                            ``(i) such individual has received 
                        unemployment compensation for 12 consecutive 
                        weeks under any Federal or State unemployment 
                        compensation law by reason of such separation, 
                        and
                            ``(ii) such distributions are made during 
                        any taxable year during which such unemployment 
                        compensation is paid or the succeeding taxable 
                        year.''
    (c) Excess Contributions.--Section 4973(b) of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
sentence: ``In the case of an individual pension plan, paragraphs 
(1)(B) and (2)(C) shall be applied by substituting `section 221' for 
`section 219'.''
    (d) Supplementary Social Security Accounts.--Title II of the Social 
Security Act (42 U.S.C. 401 et seq.) is amended by adding at the end 
the following new section:

                ``supplementary social security accounts

    ``Sec. 234. (a) In General.--Any employee may designate to an 
employer a supplementary social security account as the employee's 
individual pension plan under section 408A of the Internal Revenue Code 
of 1986. Any such designation shall be made in such form and manner as 
may be prescribed in regulations of the Commissioner of Social 
Security.
    ``(b) Responsibilities of Commissioner.--The Commissioner of Social 
Security shall--
            ``(1) invest contributions to a supplementary social 
        security account in United States Treasury securities;
            ``(2) separately account for the amount of such 
        contributions and investment earnings and not commingle such 
        amount with the Trust Funds under this Act; and
            ``(3) provide, by regulation, for several withdrawal 
        options for such contributions and earnings, including--
                    ``(A) lump sum distributions;
                    ``(B) increased payments of benefits under this 
                title; and
                    ``(C) use as premium payments of supplementary 
                medical insurance or other supplemental health or long 
                term care benefits.''
    (e) Conforming Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 408 the 
following new item:

                              ``Sec. 408A. Individual pension plans.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 205. EMPLOYER RESPONSIBILITIES.

    (a) In General.--Employers of individuals eligible to contribute to 
an individual pension plan (as defined in section 408A(b)(1) of the 
Internal Revenue Code of 1986) shall--
            (1) notify all such individuals, in writing, at the time of 
        hiring, of their right to make payroll deductions for an 
        individual pension plan;
            (2) notify all such individuals employed on the date of the 
        enactment of this Act of such right, as provided in regulations 
        of the Secretary of the Treasury, at the first general 
        enrollment period following such date;
            (3) include in the notification--
                    (A) such information as provided by the Secretary 
                of the Treasury on available qualified pension agencies 
                (as defined in section 408A(b)(2) of such Code), 
                investment options, and agency performance data,
                    (B) how an individual may obtain detailed 
                information from qualified pension agencies, and
                    (C) how an individual may establish an individual 
                pension plan;
            (4) deduct the amounts requested by such an eligible 
        individual up to the maximum contribution amount per pay period 
        permitted;
            (5) remit such amounts to a regional pension service center 
        or to an individual's plan, at the employer's discretion, on a 
        timely basis, as determined by the Secretary of the Treasury;
            (6) notify each employee participating in an individual 
        pension plan on each wage statement of the contributions 
        deducted from the employee's salary; and
            (7) notify employees on their W-2 forms of the total amount 
        of individual pension plan contributions made during a calendar 
        year.
An employer may refuse to deduct individual pension plan contributions 
that, on an annual basis, would be less than $200.
    (b) Conforming Amendment.--Subsection (a) of section 6051 of the 
Internal Revenue Code of 1986 (relating to receipts for employees) is 
amended by striking ``and'' at the end of paragraph (9), striking the 
period at the end of paragraph (10) and inserting ``, and'', and by 
inserting after paragraph (10) the following new paragraph:
            ``(11) the total amount of payroll deductions and optional 
        employer contributions to the employee's individual pension 
        plan under section 408A.''
    (c) Application of ERISA and Other Requirements.--In forwarding an 
employee's payroll deduction to the employee's individual pension plan, 
an employer is not offering a plan under title I of the Employee 
Retirement Income Security Act of 1974. This title does not require 
employers, with respect to individual pension plans, to maintain a 
written pension plan, accept fiduciary responsibility for their 
employees' investments, or meet non-discrimination tests for employer 
pension benefits.

SEC. 206. ESTABLISHMENT AND RESPONSIBILITIES OF REGIONAL PENSION 
              SERVICE CENTERS.

    (a) Establishment.--The Secretary of the Treasury shall designate 
and enter into an agreement with an organization to serve as a regional 
pension service center for each area of the United States.
    (b) Responsibilities.--Under an agreement described in subsection 
(a), the responsibilities of a regional pension service center shall 
be--
            (1) to receive payroll deductions for individual pension 
        plans (as defined in section 408A(b)(1) of the Internal Revenue 
        Code of 1986) from employers who are required to make such 
        deductions at no charge to such employers;
            (2) to forward such deductions to the proper qualified 
        pension agency (as defined in section 408A(b)(2) of such Code) 
        for deposit to the individual pension plan of the employee 
        making the contribution;
            (3) to assist employees, employers, and qualified pension 
        agencies through the provision of information and other 
        activities that will facilitate implementation of the 
        provisions of this title and section 408A of such Code;
            (4) to arrange to receive employer payments in ways which 
        serve employers well, including using the same procedures and 
        schedule by which employers deposit payroll taxes under the 
        Internal Revenue Code of 1986; and
            (5) to disclose such administrative charges as such center 
        may impose on qualified pension agencies.

SEC. 207. SECRETARIAL RESPONSIBILITIES.

    (a) In General.--The Secretary of the Treasury shall have primary 
responsibility for the administration of this title and for 
implementing the amendments made to the Internal Revenue Code of 1986.
    (b) Notification of Availability of Plans.--
            (1) In general.--The Secretary of the Treasury, in a joint 
        effort with the Secretary of Labor, shall insure that--
                    (A) all eligible employees are notified of their 
                rights to participate in individual pension plans (as 
                defined in section 408A(b)(1) of the Internal Revenue 
                Code of 1986) and their responsibilities;
                    (B) all employers are notified of their 
                responsibilities with respect to individual pension 
                plans; and
                    (C) accurate and complete information about 
                qualified pension agencies (as defined in section 
                408A(b)(2) of such Code), individual pension plan 
                options, and administrative procedures are made 
                available to eligible employees and employers on a 
                timely basis for them to exercise their rights and 
                carry out their responsibilities.
            (2) Use of qualified pension agencies.--If the Secretary of 
        the Treasury determines that a private market is not working 
        well, in some instances, to insure that individual pension plan 
        options are available to all eligible employees, or that 
        available qualified pension agencies are not performing well, 
        the Secretary may, at the Secretary's discretion, contract on a 
        competitive basis with one or more qualified pension agencies 
        to facilitate their entry and competition for improved service 
        in such markets.
    (c) Standards for Individual Pension Plans and Qualified Pension 
Agencies.--
            (1) Standard individual pension plan.--The Secretary of the 
        treasury shall specify at least 3 standard individual pension 
        plans that must be made available by all qualified pension 
        agencies offering such plans to an industry or occupational 
        group, or on a regional basis. In determining such model plans, 
        the Secretary shall consider--
                    (A) the characteristics of the most widely adopted 
                private sector pension plans;
                    (B) surveys of potential participants in individual 
                pension plans concerning their preferences in plan 
                characteristics; and
                    (C) the preferences of industry, occupational 
                associations, and other groups concerning such 
                characteristics.
            (2) Consultation.--In carrying out the responsibilities to 
        set standards for qualified pension agencies and for individual 
        pension plans, the Secretary of the Treasury--
                    (A) shall consult with--
                            (i) investors in individual pension plans,
                            (ii) the Securities and Exchange Commission 
                        and the Department of Labor, and
                            (iii) experts in financial matters and 
                        retirement planning; and
                    (B) may establish a formal advisory committee to 
                assist in this process.
    (d) Administrative Arrangements and Performance Standards.--
            (1) In general.--The Secretary of the Treasury shall insure 
        an efficient, well-functioning system for individual pension 
        plans.
            (2) National standards.--Among the areas in which the 
        Secretary shall set national standards, as needed, are--
                    (A) procedures to be followed by employers, 
                regional pension service centers, and qualified pension 
                agencies;
                    (B) account coding for individual pension plans 
                that will facilitate accurate and timely record-keeping 
                and financial transaction and electronic funds 
                transfers;
                    (C) limits on reasonable charges that may be 
                imposed by qualifying pension agencies, offerers of 
                individual pension plans, and others for their 
                services; and
                    (D) such other requirements for employers, 
                employees, qualified pension agencies, and individual 
                pension plans that will facilitate a well-functioning 
                system in the best interests of participants in 
                individual pension plans.
            (3) Consultation.--In carrying out these functions, the 
        Secretary--
                    (A) shall consult with employers required to make 
                payroll deductions for individual pension plans, 
                financial service companies that perform payroll and 
                accounting functions for such employers, financial 
                institutions, qualified pension agencies, offerers of 
                individual pension plans, participants in such plans, 
                the Federal Reserve Board, and experts in such 
                administrative issues; and
                    (B) may establish one or more advisory committees 
                to assist in these efforts.
    (e) Investigatory and Oversight Responsibilities.--The Secretary of 
the Treasury is authorized to undertake audits, studies, and 
investigations as necessary to assess the performance of the individual 
pension plan system and provide for its improved administration.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated not more than $15,000,000 to the Treasury Department for 
startup and initial implementation expenses, including assistance for 
the startup expenses of regional pension service centers, and not more 
than $10,000,000 annually beginning with fiscal year 1998 for the on-
going administration of its responsibilities under this section.
    (g) Licensing Fees.--The Secretary of the Treasury shall establish 
annual licensing fees for qualified pension agencies--
            (1) based on the amount of individual pension plan balances 
        held by an agency and the Secretary's workload for qualified 
        pension agencies with differing characteristics;
            (2) designed to cover the Federal appropriation for the on-
        going administration under this section; and
            (3) deposited into the general fund of the Treasury.

SEC. 208. PREEMPTION OF STATE LAW.

    (a) In General.--The provisions of, and amendments made by, this 
title shall preempt State laws that conflict with the provisions and 
requirements with respect to individual pension plans, regional pension 
service centers, and qualified pension agencies.
    (b) Waiver Authorized.--Upon written application from a State, the 
Secretary of the Treasury is authorized to waive such preemption to the 
extent the Secretary determines that a State's requirements will better 
serve contributors to individual pension plans. The Secretary will 
notify affected parties if it is considering such a waiver and provide 
them with an opportunity to comment on the proposed waiver.

                        TITLE III--SEVERABILITY

SEC. 301. SEVERABILITY.

    If any provision of this Act or the application thereof is held 
invalid, the remainder of this Act shall not be affected by the 
invalidation.
                                 <all>