[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4579 Placed on Calendar Senate (PCS)]
Calendar No. 665
105th CONGRESS
2d Session
H. R. 4579
_______________________________________________________________________
AN ACT
To provide tax relief for individuals, families, and farming and other
small businesses, to provide tax incentives for education, to extend
certain expiring provisions, to amend the Social Security Act to
establish the Protect Social Security Account into which the Secretary
of the Treasury shall deposit budget surpluses until a reform measure
is enacted to ensure the long-term solvency of the OASDI trust funds,
and for other purposes.
_______________________________________________________________________
September 29, 1998
Read the second time and placed on the calendar
Calendar No. 665
105th CONGRESS
2d Session
H. R. 4579
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 28, 1998
Received and read the first time
September 29, 1998
Read the second time and placed on the calendar
_______________________________________________________________________
AN ACT
To provide tax relief for individuals, families, and farming and other
small businesses, to provide tax incentives for education, to extend
certain expiring provisions, to amend the Social Security Act to
establish the Protect Social Security Account into which the Secretary
of the Treasury shall deposit budget surpluses until a reform
measure is enacted to ensure the long-term solvency of the
OASDI trust funds, 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, ETC.
(a) Short Title.--This Act may be cited as the ``Taxpayer Relief
Act of 1998''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title, etc.
TITLE I--PROVISIONS PRIMARILY AFFECTING INDIVIDUALS AND FAMILIES
Subtitle A--General Provisions
Sec. 101. Elimination of marriage penalty in standard deduction.
Sec. 102. Exemption of certain interest and dividend income from tax.
Sec. 103. Nonrefundable personal credits allowed against alternative
minimum tax.
Sec. 104. 100 percent deduction for health insurance costs of self-
employed individuals.
Sec. 105. Special rule for members of uniformed services and Foreign
Service in determining exclusion of gain
from sale of principal residence.
Sec. 106. $1,000,000 exemption from estate and gift taxes.
Subtitle B--Provisions Relating to Education
Sec. 111. Eligible educational institutions permitted to maintain
qualified tuition programs.
Sec. 112. Modification of arbitrage rebate rules applicable to public
school construction bonds.
Subtitle C--Provisions Relating to Social Security
Sec. 121. Increases in the social security earnings limit for
individuals who have attained retirement
age.
Sec. 122. Recomputation of benefits after normal retirement age.
TITLE II--PROVISIONS PRIMARILY AFFECTING FARMING AND OTHER BUSINESSES
Subtitle A--Increase in Expense Treatment for Small Businesses
Sec. 201. Increase in expense treatment for small businesses.
Subtitle B--Provisions Relating to Farmers
Sec. 211. Income averaging for farmers made permanent.
Sec. 212. 5-year net operating loss carryback for farming losses.
Sec. 213. Production flexibility contract payments.
Subtitle C--Increase in Volume Cap on Private Activity Bonds
Sec. 221. Increase in volume cap on private activity bonds.
TITLE III--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS
Subtitle A--Tax Provisions
Sec. 301. Research credit.
Sec. 302. Work opportunity credit.
Sec. 303. Welfare-to-work credit.
Sec. 304. Contributions of stock to private foundations; expanded
public inspection of private foundations'
annual returns.
Sec. 305. Subpart F exemption for active financing income.
Subtitle B--Generalized System of Preferences
Sec. 311. Extension of Generalized System of Preferences.
TITLE IV--REVENUE OFFSET
Sec. 401. Treatment of certain deductible liquidating distributions of
regulated investment companies and real
estate investment trusts.
TITLE V--TECHNICAL CORRECTIONS
Sec. 501. Definitions; coordination with other titles.
Sec. 502. Amendments related to Internal Revenue Service Restructuring
and Reform Act of 1998.
Sec. 503. Amendments related to Taxpayer Relief Act of 1997.
Sec. 504. Amendments related to Tax Reform Act of 1984.
Sec. 505. Other amendments.
TITLE VI--AMERICAN COMMUNITY RENEWAL ACT OF 1998
Sec. 601. Short title.
Sec. 602. Designation of and tax incentives for renewal communities.
Sec. 603. Extension of expensing of environmental remediation costs to
renewal communities.
Sec. 604. Extension of work opportunity tax credit for renewal
communities.
Sec. 605. Conforming and clerical amendments.
Sec. 606. Evaluation and reporting requirements.
Sec. 607. Exclusion of effects of this Act from paygo scorecard.
TITLE VII--ESTABLISHMENT OF THE PROTECT SOCIAL SECURITY ACCOUNT
Sec. 701. Establishment of special reserve account.
Sec. 702. Effective date.
TITLE I--PROVISIONS PRIMARILY AFFECTING INDIVIDUALS AND FAMILIES
Subtitle A--General Provisions
SEC. 101. ELIMINATION OF MARRIAGE PENALTY IN STANDARD DEDUCTION.
(a) In General.--Paragraph (2) of section 63(c) (relating to
standard deduction) is amended--
(1) by striking ``$5,000'' in subparagraph (A) and
inserting ``twice the dollar amount in effect under
subparagraph (C) for the taxable year'';
(2) by adding ``or'' at the end of subparagraph (B);
(3) by striking ``in the case of'' and all that follows in
subparagraph (C) and inserting ``in any other case.''; and
(4) by striking subparagraph (D).
(b) Additional Standard Deduction for Aged and Blind To Be the Same
for Married and Unmarried Individuals.--
(1) Paragraphs (1) and (2) of section 63(f) are each
amended by striking ``$600'' and inserting ``$750''.
(2) Subsection (f) of section 63 is amended by striking
paragraph (3) and by redesignating paragraph (4) as paragraph
(3).
(c) Technical Amendments.--
(1) Subparagraph (B) of section 1(f)(6) is amended by
striking ``(other than with'' and all that follows through
``shall be applied'' and inserting ``(other than with respect
to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
(2) Paragraph (4) of section 63(c) is amended by adding at
the end the following flush sentence:
``The preceding sentence shall not apply to the amount referred
to in paragraph (2)(A).''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.
SEC. 102. EXEMPTION OF CERTAIN INTEREST AND DIVIDEND INCOME FROM TAX.
(a) In General.--Part III of subchapter B of chapter 1 (relating to
amounts specifically excluded from gross income) is amended by
inserting after section 115 the following new section:
``SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST RECEIVED BY
INDIVIDUALS.
``(a) Exclusion From Gross Income.--Gross income does not include
dividends and interest received during the taxable year by an
individual.
``(b) Limitations.--
``(1) Maximum amount.--The aggregate amount excluded under
subsection (a) for any taxable year shall not exceed $200 ($400
in the case of a joint return).
``(2) Certain dividends excluded.--Subsection (a) shall not
apply to any dividend from a corporation which, for the taxable
year of the corporation in which the distribution is made, or
for the next preceding taxable year of the corporation, is a
corporation exempt from tax under section 501 (relating to
certain charitable, etc., organization) or section 521
(relating to farmers' cooperative associations).
``(c) Special Rules.--For purposes of this section--
``(1) Exclusion not to apply to capital gain dividends from
regulated investment companies and real estate investment
trusts.--
``For treatment of capital gain
dividends, see sections 854(a) and 857(c).
``(2) Certain nonresident aliens ineligible for
exclusion.--In the case of a nonresident alien individual,
subsection (a) shall apply only--
``(A) in determining the tax imposed for the
taxable year pursuant to section 871(b)(1) and only in
respect of dividends and interest which are effectively
connected with the conduct of a trade or business
within the United States, or
``(B) in determining the tax imposed for the
taxable year pursuant to section 877(b).
``(3) Dividends from employee stock ownership plans.--
Subsection (a) shall not apply to any dividend described in
section 404(k).''.
(b) Conforming Amendments.--
(1)(A) Subparagraph (A) of section 135(c)(4) is amended by
inserting ``116,'' before ``137''.
(B) Subsection (d) of section 135 is amended by
redesignating paragraph (4) as paragraph (5) and by inserting
after paragraph (3) the following new paragraph:
``(4) Coordination with section 116.--This section shall be
applied before section 116.''.
(2) Paragraph (2) of section 265(a) is amended by inserting
before the period ``, or to purchase or carry obligations or
shares, or to make deposits, to the extent the interest thereon
is excludable from gross income under section 116''.
(3) Subsection (c) of section 584 is amended by adding at
the end thereof the following new flush sentence:
``The proportionate share of each participant in the amount of
dividends or interest received by the common trust fund and to which
section 116 applies shall be considered for purposes of such section as
having been received by such participant.''.
(4) Subsection (a) of section 643 is amended by
redesignating paragraph (7) as paragraph (8) and by inserting
after paragraph (6) the following new paragraph:
``(7) Dividends or interest.--There shall be included the
amount of any dividends or interest excluded from gross income
pursuant to section 116.''.
(5) Section 854(a) is amended by inserting ``section 116
(relating to partial exclusion of dividends and interest
received by individuals) and'' after ``For purposes of''.
(6) Section 857(c) is amended to read as follows:
``(c) Restrictions Applicable to Dividends Received From Real
Estate Investment Trusts.--
``(1) Treatment for section 116.--For purposes of section
116 (relating to partial exclusion of dividends and interest
received by individuals), a capital gain dividend (as defined
in subsection (b)(3)(C)) received from a real estate investment
trust which meets the requirements of this part shall not be
considered as a dividend.
``(2) Treatment for section 243.--For purposes of section
243 (relating to deductions for dividends received by
corporations), a dividend received from a real estate
investment trust which meets the requirements of this part
shall not be considered as a dividend.''.
(7) The table of sections for part III of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 115 the following new item:
``Sec. 116. Partial exclusion of
dividends and interest received
by individuals.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.
SEC. 103. NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST ALTERNATIVE
MINIMUM TAX.
(a) In General.--Subsection (a) of section 26 is amended to read as
follows:
``(a) Limitation Based on Amount of Tax.--The aggregate amount of
credits allowed by this subpart for the taxable year shall not exceed
the sum of--
``(1) the taxpayer's regular tax liability for the taxable
year; and
``(2) the tax imposed for the taxable year by section
55(a).
For purposes of applying the preceding sentence, paragraph (2) shall be
treated as being zero for any taxable year beginning during 1998.''.
(b) Conforming Amendments.--
(1) Subsection (d) of section 24 is amended by striking
paragraph (2) and by redesignating paragraph (3) as paragraph
(2).
(2) Section 32 is amended by striking subsection (h).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1997.
SEC. 104. 100 PERCENT DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
EMPLOYED INDIVIDUALS.
(a) In General.--Paragraph (1) of section 162(l) (relating to
special rules for health insurance costs of self-employed individuals)
is amended to read as follows:
``(1) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to 100 percent of the amount paid during the
taxable year for insurance which constitutes medical care for
the taxpayer, his spouse, and dependents.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1998.
SEC. 105. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND FOREIGN
SERVICE IN DETERMINING EXCLUSION OF GAIN FROM SALE OF
PRINCIPAL RESIDENCE.
(a) In General.--Subsection (d) of section 121 (relating to
exclusion of gain from sale of principal residence) is amended by
adding at the end the following new paragraph:
``(9) Members of uniformed services and foreign service.--
``(A) In general.--The running of the 5-year period
described in subsection (a) shall be suspended with
respect to an individual during any time that such
individual or such individual's spouse is serving on
qualified official extended duty as a member of the
uniformed services or of the Foreign Service.
``(B) Qualified official extended duty.--For
purposes of this paragraph--
``(i) In general.--The term `qualified
official extended duty' means any period of
extended duty as a member of the uniformed
services or a member of the Foreign Service
during which the member serves at a duty
station which is at least 50 miles from such
property or is under Government orders to
reside in Government quarters.
``(ii) Uniformed services.--The term
`uniformed services' has the meaning given such
term by section 101(a)(5) of title 10, United
States Code, as in effect on the date of the
enactment of the Taxpayer Relief Act of 1998.
``(iii) Foreign service of the united
states.--The term `member of the Foreign
Service' has the meaning given the term `member
of the Service' by paragraph (1), (2), (3),
(4), or (5) of section 103 of the Foreign
Service Act of 1980, as in effect on the date
of the enactment of the Taxpayer Relief Act of
1998.
``(iv) Extended duty.--The term `extended
duty' means any period of active duty pursuant
to a call or order to such duty for a period in
excess of 90 days or for an indefinite
period.''.
(b) Effective Date.--The amendment made by this section shall apply
to sales and exchanges after the date of the enactment of this Act.
SEC. 106. $1,000,000 EXEMPTION FROM ESTATE AND GIFT TAXES.
(a) In General.--Subsection (c) of section 2010 (relating to
applicable credit amount) is amended to read as follows:
``(c) Applicable Credit Amount.--
``(1) In general.--For purposes of this section, the
applicable credit amount is $345,800.
``(2) Applicable exclusion amount.--For purposes of the
provisions of this title which refer to this subsection, the
applicable exclusion amount is $1,000,000.''.
(b) Effective Date.--The amendment made by this section shall apply
to estates of decedents dying, and gifts made, after December 31, 1998.
Subtitle B--Provisions Relating to Education
SEC. 111. ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO MAINTAIN
QUALIFIED TUITION PROGRAMS.
(a) In General.--Paragraph (1) of section 529(b) (defining
qualified State tuition program) is amended by inserting ``or by 1 or
more eligible educational institutions'' after ``maintained by a State
or agency or instrumentality thereof''.
(b) Technical Amendments.--
(1) The texts of sections 72(e)(9), 135(c)(2)(C),
135(d)(1)(D), 529, 530, and 4973(e)(1)(B) are each amended by
striking ``qualified State tuition program'' each place it
appears and inserting ``qualified tuition program''.
(2) The paragraph heading for paragraph (9) of section
72(e) and the subparagraph heading for subparagraph (B) of
section 530(b)(2) are each amended by striking ``state''.
(3) The subparagraph heading for subparagraph (C) of
section 135(c)(2) is amended by striking ``qualified state
tuition program'' and inserting ``qualified tuition programs''.
(4) Sections 529(c)(3)(D)(i) and 6693(a)(2)(C) are each
amended by striking ``qualified State tuition programs'' and
inserting ``qualified tuition programs''.
(5)(A) The section heading of section 529 is amended to
read as follows:
``SEC. 529. QUALIFIED TUITION PROGRAMS.''.
(B) The item relating to section 529 in the table of
sections for part VIII of subchapter F of chapter 1 is amended
by striking ``State''.
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 1999.
SEC. 112. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE TO PUBLIC
SCHOOL CONSTRUCTION BONDS.
(a) In General.--Subparagraph (C) of section 148(f)(4) is amended
by adding at the end the following new clause:
``(xviii) 4-year spending requirement for
public school construction issue.--
``(I) In general.--In the case of a
public school construction issue, the
spending requirements of clause (ii)
shall be treated as met if at least 10
percent of the available construction
proceeds of the construction issue are
spent for the governmental purposes of
the issue within the 1-year period
beginning on the date the bonds are
issued, 30 percent of such proceeds are
spent for such purposes within the 2-
year period beginning on such date, 50
percent of such proceeds are spent for
such purposes within the 3-year period
beginning on such date, and 100 percent
of such proceeds are spent for such
purposes within the 4-year period
beginning on such date.
``(II) Public school construction
issue.--For purposes of this clause,
the term `public school construction
issue' means any construction issue if
no bond which is part of such issue is
a private activity bond and all of the
available construction proceeds of such
issue are to be used for the
construction (as defined in clause
(iv)) of public school facilities to
provide education or training below the
postsecondary level or for the
acquisition of land that is
functionally related and subordinate to
such facilities.
``(III) Other rules to apply.--
Rules similar to the rules of the
preceding provisions of this
subparagraph which apply to clause (ii)
also apply to this clause.''.
(b) Effective Date.--The amendment made by this section shall apply
to obligations issued after December 31, 1998.
Subtitle C--Provisions Relating to Social Security
SEC. 121. INCREASES IN THE SOCIAL SECURITY EARNINGS LIMIT FOR
INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.
(a) In General.--Section 203(f)(8)(D) of the Social Security Act
(42 U.S.C. 403(f)(8)(D)) is amended by striking clauses (iv) through
(vii) and inserting the following new clauses:
``(iv) for each month of any taxable year ending
after 1998 and before 2000, $1,416.66\2/3\;
``(v) for each month of any taxable year ending
after 1999 and before 2001, $1,541.66\2/3\;
``(vi) for each month of any taxable year ending
after 2000 and before 2002, $2,166.66\2/3\;
``(vii) for each month of any taxable year ending
after 2001 and before 2003, $2,500.00;
``(viii) for each month of any taxable year ending
after 2002 and before 2004, $2,608.33\1/3\;
``(ix) for each month of any taxable year ending
after 2003 and before 2005, $2,833.33\1/3\;
``(x) for each month of any taxable year ending
after 2004 and before 2006, $2,950.00;
``(xi) for each month of any taxable year ending
after 2005 and before 2007, $3,066.66\2/3\;
``(xii) for each month of any taxable year ending
after 2006 and before 2008, $3,195.83\1/3\; and
``(xiii) for each month of any taxable year ending
after 2007 and before 2009, $3,312.50.''.
(b) Conforming Amendments.--
(1) Section 203(f)(8)(B)(ii) of such Act (42 U.S.C.
403(f)(8)(B)(ii)) is amended--
(A) by striking ``after 2001 and before 2003'' and
inserting ``after 2007 and before 2009''; and
(B) in subclause (II), by striking ``2000'' and
inserting ``2006''.
(2) The second sentence of section 223(d)(4)(A) of such Act
(42 U.S.C. 423(d)(4)(A)) is amended by inserting ``and section
121 of the Taxpayer Relief Act of 1998'' after ``1996''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to taxable years ending after 1998.
SEC. 122. RECOMPUTATION OF BENEFITS AFTER NORMAL RETIREMENT AGE.
(a) In General.--Section 215(f)(2)(D)(i) of the Social Security Act
(42 U.S.C. 415(f)(2)(D)(i)) is amended to read as follows:
``(i) in the case of an individual who did not die in the
year with respect to which the recomputation is made, for
monthly benefits beginning with benefits for January of--
``(I) the second year following the year with
respect to which the recomputation is made, in any such
case in which the individual is entitled to old-age
insurance benefits, the individual has attained
retirement age (as defined in section 216(l)) as of the
end of the year preceding the year with respect to
which the recomputation is made, and the year with
respect to which the recomputation is made would not be
substituted in recomputation under this subsection for
a benefit computation year in which no wages or self-
employment income have been credited previously to such
individual, or
``(II) the first year following the year with
respect to which the recomputation is made, in any
other such case; or''.
(b) Conforming Amendments.--
(1) Section 215(f)(7) of such Act (42 U.S.C. 415(f)(7)) is
amended by inserting ``, and as amended by section 122(b)(2) of
the Taxpayer Relief Act of 1998,'' after ``This subsection as
in effect in December 1978''.
(2) Subparagraph (A) of section 215(f)(2) of the Social
Security Act as in effect in December 1978 and applied in
certain cases under the provisions of such Act as in effect
after December 1978 is amended--
(A) by striking ``in the case of an individual who
did not die'' and all that follows and inserting ``in
the case of an individual who did not die in the year
with respect to which the recomputation is made, for
monthly benefits beginning with benefits for January
of--''; and
(B) by adding at the end the following:
``(i) the second year following the year with
respect to which the recomputation is made, in any such
case in which the individual is entitled to old-age
insurance benefits, the individual has attained age 65
as of the end of the year preceding the year with
respect to which the recomputation is made, and the
year with respect to which the recomputation is made
would not be substituted in recomputation under this
subsection for a benefit computation year in which no
wages or self-employment income have been credited
previously to such individual, or
``(ii) the first year following the year with
respect to which the recomputation is made, in any
other such case; or''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to recomputations of primary insurance amounts based
on wages paid and self employment income derived after 1997 and with
respect to benefits payable after December 31, 1998.
TITLE II--PROVISIONS PRIMARILY AFFECTING FARMING AND OTHER BUSINESSES
Subtitle A--Increase in Expense Treatment for Small Businesses
SEC. 201. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) General Rule.--Paragraph (1) of section 179(b) (relating to
dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1998.
(c) Study.--The Secretary of the Treasury (or the Secretary's
delegate)--
(1) shall conduct a comprehensive study of the recovery
periods and depreciation methods under section 168 of the
Internal Revenue Code of 1986, and
(2) shall submit the results of such study, together with
recommendations for determining such periods and methods in a
more rational manner, to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance of the
Senate.
Subtitle B--Provisions Relating to Farmers
SEC. 211. INCOME AVERAGING FOR FARMERS MADE PERMANENT.
Subsection (c) of section 933 of the Taxpayer Relief Act of 1997 is
amended by striking ``, and before January 1, 2001''.
SEC. 212. 5-YEAR NET OPERATING LOSS CARRYBACK FOR FARMING LOSSES.
(a) In General.--Paragraph (1) of section 172(b) (relating to net
operating loss deduction) is amended by adding at the end the following
new subparagraph:
``(G) Farming losses.--In the case of a taxpayer
which has a farming loss (as defined in subsection (i))
for a taxable year, such farming loss shall be a net
operating loss carryback to each of the 5 taxable years
preceding the taxable year of such loss.''.
(b) Farming Loss.--Section 172 is amended by redesignating
subsection (i) as subsection (j) and by inserting after subsection (h)
the following new subsection:
``(i) Rules Relating to Farming Losses.--For purposes of this
section--
``(1) In general.--The term `farming loss' means the lesser
of--
``(A) the amount which would be the net operating
loss for the taxable year if only income and deductions
attributable to farming businesses (as defined in
section 263A(e)(4)) are taken into account, or
``(B) the amount of the net operating loss for such
taxable year.
``(2) Coordination with subsection (b)(2).--For purposes of
applying subsection (b)(2), a farming loss for any taxable year
shall be treated in a manner similar to the manner in which a
specified liability loss is treated.
``(3) Election.--Any taxpayer entitled to a 5-year
carryback under subsection (b)(1)(G) from any loss year may
elect to have the carryback period with respect to such loss
year determined without regard to subsection (b)(1)(G). Such
election shall be made in such manner as may be prescribed by
the Secretary and shall be made by the due date (including
extensions of time) for filing the taxpayer's return for the
taxable year of the net operating loss. Such election, once
made for any taxable year, shall be irrevocable for such
taxable year.''.
(c) Coordination With Farm Disaster Losses.--Clause (ii) of section
172(b)(1)(F) is amended by adding at the end the following flush
sentence:
``Such term shall not include any farming loss
(as defined in subsection (i)).''.
(d) Effective Date.--The amendments made by this section shall
apply to net operating losses for taxable years beginning after
December 31, 1997.
SEC. 213. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.
The option under section 112(d)(3) of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7212(d)(3)) shall be
disregarded in determining the taxable year for which the payment for
fiscal year 1999 under a production flexibility contract under subtitle
B of title I of such Act is properly includible in gross income for
purposes of the Internal Revenue Code of 1986.
Subtitle C--Increase in Volume Cap on Private Activity Bonds
SEC. 221. INCREASE IN VOLUME CAP ON PRIVATE ACTIVITY BONDS.
(a) In General.--Subsection (d) of section 146 (relating to volume
cap) is amended by striking paragraph (2), by redesignating paragraphs
(3) and (4) as paragraphs (2) and (3), respectively, and by striking
paragraph (1) and inserting the following new paragraph:
``(1) In general.--The State ceiling applicable to any
State for any calendar year shall be the greater of--
``(A) an amount equal to $75 multiplied by the
State population, or
``(B) $225,000,000.
Subparagraph (B) shall not apply to any possession of the
United States.''.
(b) Conforming Amendment.--Sections 25(f)(3) and 42(h)(3)(E)(iii)
are each amended by striking ``section 146(d)(3)(C)'' and inserting
``section 146(d)(2)(C)''.
(c) Effective Date.--The amendments made by this section shall
apply to calendar years after 1998.
TITLE III--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS
Subtitle A--Tax Provisions
SEC. 301. RESEARCH CREDIT.
(a) Temporary Extension.--
(1) In general.--Paragraph (1) of section 41(h) (relating
to termination) is amended--
(A) by striking ``June 30, 1998'' and inserting
``February 29, 2000'';
(B) by striking ``24-month'' and inserting ``44-
month''; and
(C) by striking ``24 months'' and inserting ``44
months''.
(2) Technical amendment.--Subparagraph (D) of section
45C(b)(1) is amended by striking ``June 30, 1998'' and
inserting ``February 29, 2000''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred after June 30, 1998.
(b) Increase in Percentages Under Alternative Incremental Credit.--
(1) In general.--Subparagraph (A) of section 41(c)(4) is
amended--
(A) by striking ``1.65 percent'' and inserting
``2.65 percent'';
(B) by striking ``2.2 percent'' and inserting ``3.2
percent''; and
(C) by striking ``2.75 percent'' and inserting
``3.75 percent''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after June 30, 1998.
SEC. 302. WORK OPPORTUNITY CREDIT.
(a) Temporary Extension.--Subparagraph (B) of section 51(c)(4)
(relating to termination) is amended by striking ``June 30, 1998'' and
inserting ``February 29, 2000''.
(b) Effective Date.--The amendment made by this section shall apply
to individuals who begin work for the employer after June 30, 1998.
SEC. 303. WELFARE-TO-WORK CREDIT.
Subsection (f) of section 51A (relating to termination) is amended
by striking ``April 30, 1999'' and inserting ``February 29, 2000''.
SEC. 304. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS; EXPANDED
PUBLIC INSPECTION OF PRIVATE FOUNDATIONS' ANNUAL RETURNS.
(a) Special Rule for Contributions of Stock Made Permanent.--
(1) In general.--Paragraph (5) of section 170(e) is amended
by striking subparagraph (D) (relating to termination).
(2) Effective date.--The amendment made by paragraph (1)
shall apply to contributions made after June 30, 1998.
(b) Expanded Public Inspection of Private Foundations' Annual
Returns, Etc.--
(1) In general.--Section 6104 (relating to publicity of
information required from certain exempt organizations and
certain trusts) is amended by striking subsections (d) and (e)
and inserting after subsection (c) the following new
subsection:
``(d) Public Inspection of Certain Annual Returns and Applications
for Exemption.--
``(1) In general.--In the case of an organization described
in subsection (c) or (d) of section 501 and exempt from
taxation under section 501(a)--
``(A) a copy of--
``(i) the annual return filed under section
6033 (relating to returns by exempt
organizations) by such organization; and
``(ii) if the organization filed an
application for recognition of exemption under
section 501, the exempt status application
materials of such organization,
shall be made available by such organization for
inspection during regular business hours by any
individual at the principal office of such organization
and, if such organization regularly maintains 1 or more
regional or district offices having 3 or more
employees, at each such regional or district office;
and
``(B) upon request of an individual made at such
principal office or such a regional or district office,
a copy of such annual return and exempt status
application materials shall be provided to such
individual without charge other than a reasonable fee
for any reproduction and mailing costs.
The request described in subparagraph (B) must be made in
person or in writing. If such request is made in person, such
copy shall be provided immediately and, if made in writing,
shall be provided within 30 days.
``(2) 3-year limitation on inspection of returns.--
Paragraph (1) shall apply to an annual return filed under
section 6033 only during the 3-year period beginning on the
last day prescribed for filing such return (determined with
regard to any extension of time for filing).
``(3) Exceptions from disclosure requirement.--
``(A) Nondisclosure of contributors, etc.--
Paragraph (1) shall not require the disclosure of the
name or address of any contributor to the organization.
In the case of an organization described in section
501(d), subparagraph (A) shall not require the
disclosure of the copies referred to in section 6031(b)
with respect to such organization.
``(B) Nondisclosure of certain other information.--
Paragraph (1) shall not require the disclosure of any
information if the Secretary withheld such information
from public inspection under subsection (a)(1)(D).
``(4) Limitation on providing copies.--Paragraph (1)(B)
shall not apply to any request if, in accordance with
regulations promulgated by the Secretary, the organization has
made the requested documents widely available, or the Secretary
determines, upon application by an organization, that such
request is part of a harassment campaign and that compliance
with such request is not in the public interest.
``(5) Exempt status application materials.--For purposes of
paragraph (1), the term `exempt status applicable materials'
means the application for recognition of exemption under
section 501 and any papers submitted in support of such
application and any letter or other document issued by the
Internal Revenue Service with respect to such application.''.
(2) Conforming amendments.--
(A) Subsection (c) of section 6033 is amended by
adding ``and'' at the end of paragraph (1), by striking
paragraph (2), and by redesignating paragraph (3) as
paragraph (2).
(B) Subparagraph (C) of section 6652(c)(1) is
amended by striking ``subsection (d) or (e)(1) of
section 6104 (relating to public inspection of annual
returns)'' and inserting ``section 6104(d) with respect
to any annual return''.
(C) Subparagraph (D) of section 6652(c)(1) is
amended by striking ``section 6104(e)(2) (relating to
public inspection of applications for exemption)'' and
inserting ``section 6104(d) with respect to any exempt
status application materials (as defined in such
section)''.
(D) Section 6685 is amended by striking ``or (e)''.
(E) Section 7207 is amended by striking ``or (e)''.
(3) Effective date.--
(A) In general.--Except as provided in subparagraph
(B), the amendments made by this subsection shall apply
to requests made after the later of December 31, 1998,
or the 60th day after the Secretary of the Treasury
first issues the regulations referred to such section
6104(d)(4) of the Internal Revenue Code of 1986, as
amended by this section.
(B) Publication of annual returns.--Section 6104(d)
of such Code, as in effect before the amendments made
by this subsection, shall not apply to any return the
due date for which is after the date such amendments
take effect under subparagraph (A).
SEC. 305. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.
(a) Income Derived From Banking, Financing or Similar Businesses.--
Section 954(h) (relating to income derived in the active conduct of
banking, financing, or similar businesses) is amended to read as
follows:
``(h) Special Rule for Income Derived in the Active Conduct of
Banking, Financing, or Similar Businesses.--
``(1) In general.--For purposes of subsection (c)(1),
foreign personal holding company income shall not include
qualified banking or financing income of an eligible controlled
foreign corporation.
``(2) Eligible controlled foreign corporation.--For
purposes of this subsection--
``(A) In general.--The term `eligible controlled
foreign corporation' means a controlled foreign
corporation which--
``(i) is predominantly engaged in the
active conduct of a banking, financing, or
similar business; and
``(ii) conducts substantial activity with
respect to such business.
``(B) Predominantly engaged.--A controlled foreign
corporation shall be treated as predominantly engaged
in the active conduct of a banking, financing, or
similar business if--
``(i) more than 70 percent of the gross
income of the controlled foreign corporation is
derived directly from the active and regular
conduct of a lending or finance business from
transactions with customers which are not
related persons,
``(ii) it is engaged in the active conduct
of a banking business and is an institution
licensed to do business as a bank in the United
States (or is any other corporation not so
licensed which is specified by the Secretary in
regulations), or
``(iii) it is engaged in the active conduct
of a securities business and is registered as a
securities broker or dealer under section 15(a)
of the Securities Exchange Act of 1934 or is
registered as a Government securities broker or
dealer under section 15C(a) of such Act (or is
any other corporation not so registered which
is specified by the Secretary in regulations).
``(3) Qualified banking or financing income.--For purposes
of this subsection--
``(A) In general.--The term `qualified banking or
financing income' means income of an eligible
controlled foreign corporation which--
``(i) is derived in the active conduct of a
banking, financing, or similar business by--
``(I) such eligible controlled
foreign corporation; or
``(II) a qualified business unit of
such eligible controlled foreign
corporation,
``(ii) is derived from one or more
transactions--
``(I) with customers located in a
country other than the United States;
and
``(II) substantially all of the
activities in connection with which are
conducted directly by the corporation
or unit in its home country; and
``(iii) is treated as earned by such
corporation or unit in its home country for
purposes of such country's tax laws.
``(B) Limitation on nonbanking and nonsecurities
businesses.--No income of an eligible controlled
foreign corporation not described in clause (ii) or
(iii) of paragraph (2)(B) (or of a qualified business
unit of such corporation) shall be treated as qualified
banking or financing income unless more than 30 percent
of such corporation's or unit's gross income is derived
directly from the active and regular conduct of a
lending or finance business from transactions with
customers which are not related persons and which are
located within such corporation's or unit's home
country.
``(C) Substantial activity requirement for cross
border income.--The term `qualified banking or
financing income' shall not include income derived from
1 or more transactions with customers located in a
country other than the home country of the eligible
controlled foreign corporation or a qualified business
unit of such corporation unless such corporation or
unit conducts substantial activity with respect to a
banking, financing, or similar business in its home
country.
``(D) Determinations made separately.--For purposes
of this paragraph, the qualified banking or financing
income of an eligible controlled foreign corporation
and each qualified business unit of such corporation
shall be determined separately for such corporation and
each such unit by taking into account--
``(i) in the case of the eligible
controlled foreign corporation, only items of
income, deduction, gain, or loss and activities
of such corporation not properly allocable or
attributable to any qualified business unit of
such corporation; and
``(ii) in the case of a qualified business
unit, only items of income, deduction, gain, or
loss and activities properly allocable or
attributable to such unit.
``(4) Lending or finance business.--For purposes of this
subsection, the term `lending or finance business' means the
business of--
``(A) making loans;
``(B) purchasing or discounting accounts
receivable, notes, or installment obligations;
``(C) engaging in leasing (including entering into
leases and purchasing, servicing, and disposing of
leases and leased assets);
``(D) issuing letters of credit or providing
guarantees;
``(E) providing charge and credit card services; or
``(F) rendering services or making facilities
available in connection with activities described in
subparagraphs (A) through (E) carried on by--
``(i) the corporation (or qualified
business unit) rendering services or making
facilities available; or
``(ii) another corporation (or qualified
business unit of a corporation) which is a
member of the same affiliated group (as defined
in section 1504, but determined without regard
to section 1504(b)(3)).
``(5) Other definitions.--For purposes of this subsection--
``(A) Customer.--The term `customer' means, with
respect to any controlled foreign corporation or
qualified business unit, any person which has a
customer relationship with such corporation or unit and
which is acting in its capacity as such.
``(B) Home country.--Except as provided in
regulations--
``(i) Controlled foreign corporation.--The
term `home country' means, with respect to any
controlled foreign corporation, the country
under the laws of which the corporation was
created or organized.
``(ii) Qualified business unit.--The term
`home country' means, with respect to any
qualified business unit, the country in which
such unit maintains its principal office.
``(C) Located.--The determination of where a
customer is located shall be made under rules
prescribed by the Secretary.
``(D) Qualified business unit.--The term `qualified
business unit' has the meaning given such term by
section 989(a).
``(E) Related person.--The term `related person'
has the meaning given such term by subsection (d)(3).
``(6) Coordination with exception for dealers.--Paragraph
(1) shall not apply to income described in subsection
(c)(2)(C)(ii) of a dealer in securities (within the meaning of
section 475) which is an eligible controlled foreign
corporation described in paragraph (2)(B)(iii).
``(7) Anti-abuse rules.--For purposes of applying this
subsection and subsection (c)(2)(C)(ii)--
``(A) there shall be disregarded any item of
income, gain, loss, or deduction with respect to any
transaction or series of transactions one of the
principal purposes of which is qualifying income or
gain for the exclusion under this section, including
any transaction or series of transactions a principal
purpose of which is the acceleration or deferral of any
item in order to claim the benefits of such exclusion
through the application of this subsection;
``(B) there shall be disregarded any item of
income, gain, loss, or deduction of an entity which is
not engaged in regular and continuous transactions with
customers which are not related persons;
``(C) there shall be disregarded any item of
income, gain, loss, or deduction with respect to any
transaction or series of transactions utilizing, or
doing business with--
``(i) one or more entities in order to
satisfy any home country requirement under this
subsection; or
``(ii) a special purpose entity or
arrangement, including a securitization,
financing, or similar entity or arrangement,
if one of the principal purposes of such transaction or
series of transactions is qualifying income or gain for
the exclusion under this subsection; and
``(D) a related person, an officer, a director, or
an employee with respect to any controlled foreign
corporation (or qualified business unit) which would
otherwise be treated as a customer of such corporation
or unit with respect to any transaction shall not be so
treated if a principal purpose of such transaction is
to satisfy any requirement of this subsection.
``(8) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection, subsection (c)(1)(B)(i),
subsection (c)(2)(C)(ii), and the last sentence of subsection
(e)(2).
``(9) Application.--This subsection, subsection
(c)(2)(C)(ii), and the last sentence of subsection (e)(2) shall
apply only to the first taxable year of a foreign corporation
beginning after December 31, 1998, and before January 1, 2000,
and to taxable years of United States shareholders with or
within which such taxable year of such foreign corporation
ends.''.
(b) Income Derived From Insurance Business.--
(1) Income attributable to issuance or reinsurance.--
(A) In general.--Section 953(a) (defining insurance
income) is amended to read as follows:
``(a) Insurance Income.--
``(1) In general.--For purposes of section 952(a)(1), the
term `insurance income' means any income which--
``(A) is attributable to the issuing (or
reinsuring) of an insurance or annuity contract; and
``(B) would (subject to the modifications provided
by subsection (b)) be taxed under subchapter L of this
chapter if such income were the income of a domestic
insurance company.
``(2) Exception.--Such term shall not include any exempt
insurance income (as defined in subsection (e)).''.
(B) Exempt insurance income.--Section 953 (relating
to insurance income) is amended by adding at the end
the following new subsection:
``(e) Exempt Insurance Income.--For purposes of this section--
``(1) Exempt insurance income defined.--
``(A) In general.--The term `exempt insurance
income' means income derived by a qualifying insurance
company which--
``(i) is attributable to the issuing (or
reinsuring) of an exempt contract by such
company or a qualifying insurance company
branch of such company; and
``(ii) is treated as earned by such company
or branch in its home country for purposes of
such country's tax laws.
``(B) Exception for certain arrangements.--Such
term shall not include income attributable to the
issuing (or reinsuring) of an exempt contract as the
result of any arrangement whereby another corporation
receives a substantially equal amount of premiums or
other consideration in respect of issuing (or
reinsuring) a contract which is not an exempt contract.
``(C) Determinations made separately.--For purposes
of this subsection and section 954(i), the exempt
insurance income and exempt contracts of a qualifying
insurance company or any qualifying insurance company
branch of such company shall be determined separately
for such company and each such branch by taking into
account--
``(i) in the case of the qualifying
insurance company, only items of income,
deduction, gain, or loss, and activities of
such company not properly allocable or
attributable to any qualifying insurance
company branch of such company; and
``(ii) in the case of a qualifying
insurance company branch, only items of income,
deduction, gain, or loss and activities
properly allocable or attributable to such
unit.
``(2) Exempt contract.--
``(A) In general.--The term `exempt contract' means
an insurance or annuity contract issued or reinsured by
a qualifying insurance company or qualifying insurance
company branch in connection with property in,
liability arising out of activity in, or the lives or
health of residents of, a country other than the United
States.
``(B) Minimum home country income required.--
``(i) In general.--No contract of a
qualifying insurance company or of a qualifying
insurance company branch shall be treated as an
exempt contract unless such company or branch
derives more than 30 percent of its net written
premiums from exempt contracts (determined
without regard to this subparagraph)--
``(I) which cover applicable home
country risks; and
``(II) with respect to which no
policyholder, insured, annuitant, or
beneficiary is a related person (as
defined in section 954(d)(3)).
``(ii) Applicable home country risks.--The
term `applicable home country risks' means
risks in connection with property in, liability
arising out of activity in, or the lives or
health of residents of, the home country of the
qualifying insurance company or qualifying
insurance company branch, as the case may be,
issuing or reinsuring the contract covering the
risks.
``(C) Substantial activity requirements for cross
border risks.--A contract issued by a qualifying
insurance company or qualifying insurance company
branch which covers risks other than applicable home
country risks (as defined in subparagraph (B)(ii))
shall not be treated as an exempt contract unless such
company or branch, as the case may be--
``(i) conducts substantial activity with
respect to an insurance business in its home
country; and
``(ii) performs in its home country
substantially all of the activities necessary
to give rise to the income generated by such
contract.
``(3) Qualifying insurance company.--The term `qualifying
insurance company' means any controlled foreign corporation
which--
``(A) is subject to regulation as an insurance (or
reinsurance) company by its home country, and is
licensed, authorized, or regulated by the applicable
insurance regulatory body for its home country to sell
insurance, reinsurance, or annuity contracts to persons
other than related persons (within the meaning of
section 954(d)(3)) in such home country;
``(B) derives more than 50 percent of its aggregate
net written premiums from the issuance or reinsurance
by such controlled foreign corporation and each of its
qualifying insurance company branches of contracts--
``(i) covering applicable home country
risks (as defined in paragraph (2)) of such
corporation or branch, as the case may be; and
``(ii) with respect to which no
policyholder, insured, annuitant, or
beneficiary is a related person (as defined in
section 954(d)(3));
except that in the case of a branch, such premiums
shall only be taken into account to the extent such
premiums are treated as earned by such branch in its
home country for purposes of such country's tax laws;
and
``(C) is engaged in the insurance business and
would be subject to tax under subchapter L if it were a
domestic corporation.
``(4) Qualifying insurance company branch.--The term
`qualifying insurance company branch' means a qualified
business unit (within the meaning of section 989(a)) of a
controlled foreign corporation if--
``(A) such unit is licensed, authorized, or
regulated by the applicable insurance regulatory body
for its home country to sell insurance, reinsurance, or
annuity contracts to persons other than related persons
(within the meaning of section 954(d)(3)) in such home
country; and
``(B) such controlled foreign corporation is a
qualifying insurance company, determined under
paragraph (3) as if such unit were a qualifying
insurance company branch.
``(5) Life insurance or annuity contract.--For purposes of
this section and section 954, the determination of whether a
contract issued by a controlled foreign corporation or a
qualified business unit (within the meaning of section 989(a))
is a life insurance contract or an annuity contract shall be
made without regard to sections 72(s), 101(f), 817(h), and 7702
if--
``(A) such contract is regulated as a life
insurance or annuity contract by the corporation's or
unit's home country; and
``(B) no policyholder, insured, annuitant, or
beneficiary with respect to the contract is a United
States person.
``(6) Home country.--For purposes of this subsection,
except as provided in regulations--
``(A) Controlled foreign corporation.--The term
`home country' means, with respect to a controlled
foreign corporation, the country in which such
corporation is created or organized.
``(B) Qualified business unit.--The term `home
country' means, with respect to a qualified business
unit (as defined in section 989(a)), the country in
which the principal office of such unit is located and
in which such unit is licensed, authorized, or
regulated by the applicable insurance regulatory body
to sell insurance, reinsurance, or annuity contracts to
persons other than related persons (as defined in
section 954(d)(3)) in such country.
``(7) Anti-abuse rules.--For purposes of applying this
subsection and section 954(i)--
``(A) the rules of section 954(h)(7) (other than
subparagraph (B) thereof) shall apply;
``(B) there shall be disregarded any item of
income, gain, loss, or deduction of, or derived from,
an entity which is not engaged in regular and
continuous transactions with persons which are not
related persons;
``(C) there shall be disregarded any change in the
method of computing reserves a principal purpose of
which is the acceleration or deferral of any item in
order to claim the benefits of this subsection or
section 954(i);
``(D) a contract of insurance or reinsurance shall
not be treated as an exempt contract (and premiums from
such contract shall not be taken into account for
purposes of paragraph (2)(B) or (3)) if--
``(i) any policyholder, insured, annuitant,
or beneficiary is a resident of the United
States and such contract was marketed to such
resident and was written to cover a risk
outside the United States; or
``(ii) the contract covers risks located
within and without the United States and the
qualifying insurance company or qualifying
insurance company branch does not maintain such
contemporaneous records, and file such reports,
with respect to such contract as the Secretary
may require;
``(E) the Secretary may prescribe rules for the
allocation of contracts (and income from contracts)
among 2 or more qualifying insurance company branches
of a qualifying insurance company in order to clearly
reflect the income of such branches; and
``(F) premiums from a contract shall not be taken
into account for purposes of paragraph (2)(B) or (3) if
such contract reinsures a contract issued or reinsured
by a related person (as defined in section 954(d)(3)).
For purposes of subparagraph (D), the determination of where
risks are located shall be made under the principles of section
953.
``(8) Coordination with subsection (c).--In determining
insurance income for purposes of subsection (c), exempt
insurance income shall not include income derived from exempt
contracts which cover risks other than applicable home country
risks.
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection and section 954(i).
``(10) Application.--This subsection and section 954(i)
shall apply only to the first taxable year of a foreign
corporation beginning after December 31, 1998, and before
January 1, 2000, and to taxable years of United States
shareholders with or within which such taxable year of such
foreign corporation ends.
``(11) Cross reference.--
``For income exempt from foreign
personal holding company income, see section 954(i).''.
(2) Exemption from foreign personal holding company
income.--Section 954 (defining foreign base company income) is
amended by adding at the end the following new subsection:
``(i) Special Rule for Income Derived in the Active Conduct of
Insurance Business.--
``(1) In general.--For purposes of subsection (c)(1),
foreign personal holding company income shall not include
qualified insurance income of a qualifying insurance company.
``(2) Qualified insurance income.--The term `qualified
insurance income' means income of a qualifying insurance
company which is--
``(A) received from a person other than a related
person (within the meaning of subsection (d)(3)) and
derived from the investments made by a qualifying
insurance company or a qualifying insurance company
branch of its reserves allocable to exempt contracts or
of 80 percent of its unearned premiums from exempt
contracts (as both are determined in the manner
prescribed under paragraph (4)), or
``(B) received from a person other than a related
person (within the meaning of subsection (d)(3)) and
derived from investments made by a qualifying insurance
company or a qualifying insurance company branch of an
amount of its assets allocable to exempt contracts
equal to--
``(i) in the case of property, casualty, or
health insurance contracts, one-third of its
premiums earned on such insurance contracts
during the taxable year (as defined in section
832(b)(4)); and
``(ii) in the case of life insurance or
annuity contracts, 10 percent of the reserves
described in subparagraph (A) for such
contracts.
``(3) Principles for determining insurance income.--Except
as provided by the Secretary, for purposes of subparagraphs (A)
and (B) of paragraph (2)--
``(A) in the case of any contract which is a
separate account-type contract (including any variable
contract not meeting the requirements of section 817),
income credited under such contract shall be allocable
only to such contract; and
``(B) income not allocable under subparagraph (A)
shall be allocated ratably among contracts not
described in subparagraph (A).
``(4) Methods for determining unearned premiums and
reserves.--For purposes of paragraph (2)(A)--
``(A) Property and casualty contracts.--The
unearned premiums and reserves of a qualifying
insurance company or a qualifying insurance company
branch with respect to property, casualty, or health
insurance contracts shall be determined using the same
methods and interest rates which would be used if such
company or branch were subject to tax under subchapter
L, except that--
``(i) the interest rate determined for the
functional currency of the company or branch,
and which, except as provided by the Secretary,
is calculated in the same manner as the Federal
mid-term rate under section 1274(d), shall be
substituted for the applicable Federal interest
rate; and
``(ii) such company or branch shall use the
appropriate foreign loss payment pattern.
``(B) Life insurance and annuity contracts.--The
amount of the reserve of a qualifying insurance company
or qualifying insurance company branch for any life
insurance or annuity contract shall be equal to the
greater of--
``(i) the net surrender value of such
contract (as defined in section 807(e)(1)(A)),
or
``(ii) the reserve determined under
paragraph (5).
``(C) Limitation on reserves.--In no event shall
the reserve determined under this paragraph for any
contract as of any time exceed the amount which would
be taken into account with respect to such contract as
of such time in determining foreign statement reserves
(less any catastrophe, deficiency, equalization, or
similar reserves).
``(5) Amount of reserve.--The amount of the reserve
determined under this paragraph with respect to any contract
shall be determined in the same manner as it would be
determined if the qualifying insurance company or qualifying
insurance company branch were subject to tax under subchapter
L, except that in applying such subchapter--
``(A) the interest rate determined for the
functional currency of the company or branch, and
which, except as provided by the Secretary, is
calculated in the same manner as the Federal mid-term
rate under section 1274(d), shall be substituted for
the applicable Federal interest rate;
``(B) the highest assumed interest rate permitted
to be used in determining foreign statement reserves
shall be substituted for the prevailing State assumed
interest rate; and
``(C) tables for mortality and morbidity which
reasonably reflect the current mortality and morbidity
risks in the company's or branch's home country shall
be substituted for the mortality and morbidity tables
otherwise used for such subchapter.
The Secretary may provide that the interest rate and mortality
and morbidity tables of a qualifying insurance company may be
used for 1 or more of its qualifying insurance company branches
when appropriate.
``(6) Definitions.--For purposes of this subsection, any
term used in this subsection which is also used in section
953(e) shall have the meaning given such term by section
953.''.
(3) Reserves.--Section 953(b) is amended by redesignating
paragraph (3) as paragraph (4) and by inserting after paragraph
(2) the following new paragraph:
``(3) Reserves for any insurance or annuity contract shall
be determined in the same manner as under section 954(i).''.
(c) Special Rules for Dealers.--Section 954(c)(2)(C) is amended to
read as follows:
``(C) Exception for dealers.--Except as provided by
regulations, in the case of a regular dealer in
property which is property described in paragraph
(1)(B), forward contracts, option contracts, or similar
financial instruments (including notional principal
contracts and all instruments referenced to
commodities), there shall not be taken into account in
computing foreign personal holding company income--
``(i) any item of income, gain, deduction,
or loss (other than any item described in
subparagraph (A), (E), or (G) of paragraph (1))
from any transaction (including hedging
transactions) entered into in the ordinary
course of such dealer's trade or business as
such a dealer; and
``(ii) if such dealer is a dealer in
securities (within the meaning of section 475),
any interest or dividend or equivalent amount
described in subparagraph (E) or (G) of
paragraph (1) from any transaction (including
any hedging transaction or transaction
described in section 956(c)(2)(J)) entered into
in the ordinary course of such dealer's trade
or business as such a dealer in securities, but
only if the income from the transaction is
attributable to activities of the dealer in the
country under the laws of which the dealer is
created or organized (or in the case of a
qualified business unit described in section
989(a), is attributable to activities of the
unit in the country in which the unit both
maintains its principal office and conducts
substantial business activity).''.
(d) Exemption From Foreign Base Company Services Income.--Paragraph
(2) of section 954(e) is amended by inserting ``or'' at the end of
subparagraph (A), by striking ``, or'' at the end of subparagraph (B)
and inserting a period, by striking subparagraph (C), and by adding at
the end the following new flush sentence:
``Paragraph (1) shall also not apply to income which is exempt
insurance income (as defined in section 953(e)) or which is not
treated as foreign personal holding income by reason of
subsection (c)(2)(C)(ii), (h), or (i).''.
(e) Exemption for Gain.--Section 954(c)(1)(B)(i) (relating to net
gains from certain property transactions) is amended by inserting
``other than property which gives rise to income not treated as foreign
personal holding company income by reason of subsection (h) or (i) for
the taxable year'' before the comma at the end.
Subtitle B--Generalized System of Preferences
SEC. 311. EXTENSION OF GENERALIZED SYSTEM OF PREFERENCES.
(a) Extension of Duty-Free Treatment Under System.--Section 505 of
the Trade Act of 1974 (29 U.S.C. 2465) is amended by striking ``June
30, 1998'' and inserting ``February 29, 2000''.
(b) Retroactive Application for Certain Liquidations and
Reliquidations.--
(1) In general.--Notwithstanding section 514 of the Tariff
Act of 1930 or any other provision of law, and subject to
paragraph (2), any entry--
(A) of an article to which duty-free treatment
under title V of the Trade Act of 1974 would have
applied if such title had been in effect during the
period beginning on July 1, 1998, and ending on the day
before the date of the enactment of this Act; and
(B) that was made after June 30, 1998, and before
the date of the enactment of this Act,
shall be liquidated or reliquidated as free of duty, and the
Secretary of the Treasury shall refund any duty paid with
respect to such entry. As used in this subsection, the term
``entry'' includes a withdrawal from warehouse for consumption.
(2) Requests.--Liquidation or reliquidation may be made
under paragraph (1) with respect to an entry only if a request
therefor is filed with the Customs Service, within 180 days
after the date of the enactment of this Act, that contains
sufficient information to enable the Customs Service--
(A) to locate the entry; or
(B) to reconstruct the entry if it cannot be
located.
TITLE IV--REVENUE OFFSET
SEC. 401. TREATMENT OF CERTAIN DEDUCTIBLE LIQUIDATING DISTRIBUTIONS OF
REGULATED INVESTMENT COMPANIES AND REAL ESTATE INVESTMENT
TRUSTS.
(a) In General.--Section 332 (relating to complete liquidations of
subsidiaries) is amended by adding at the end the following new
subsection:
``(c) Deductible Liquidating Distributions of Regulated Investment
Companies and Real Estate Investment Trusts.--If a corporation receives
a distribution from a regulated investment company or a real estate
investment trust which is considered under subsection (b) as being in
complete liquidation of such company or trust, then, notwithstanding
any other provision of this chapter, such corporation shall recognize
and treat as a dividend from such company or trust an amount equal to
the deduction for dividends paid allowable to such company or trust by
reason of such distribution.''.
(b) Conforming Amendments.--
(1) The material preceding paragraph (1) of section 332(b)
is amended by striking ``subsection (a)'' and inserting ``this
section''.
(2) Paragraph (1) of section 334(b) is amended by striking
``section 332(a)'' and inserting ``section 332''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after May 21, 1998.
TITLE V--TECHNICAL CORRECTIONS
SEC. 501. DEFINITIONS; COORDINATION WITH OTHER TITLES.
(a) Definitions.--For purposes of this title--
(1) 1986 code.--The term ``1986 Code'' means the Internal
Revenue Code of 1986.
(2) 1998 act.--The term ``1998 Act'' means the Internal
Revenue Service Restructuring and Reform Act of 1998 (Public
Law 105-206).
(3) 1997 act.--The term ``1997 Act'' means the Taxpayer
Relief Act of 1997 (Public Law 105-34).
(b) Coordination With Other Titles.--For purposes of applying the
amendments made by any title of this Act other than this title, the
provisions of this title shall be treated as having been enacted
immediately before the provisions of such other titles.
SEC. 502. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE RESTRUCTURING
AND REFORM ACT OF 1998.
(a) Amendment Related to Section 1101 of 1998 Act.--Paragraph (5)
of section 6103(h) of the 1986 Code, as added by section 1101(b) of the
1998 Act, is redesignated as paragraph (6).
(b) Amendment Related to Section 3001 of 1998 Act.--Paragraph (2)
of section 7491(a) of the 1986 Code is amended by adding at the end the
following flush sentence:
``Subparagraph (C) shall not apply to any qualified revocable
trust (as defined in section 645(b)(1)) with respect to
liability for tax for any taxable year ending after the date of
the decedent's death and before the applicable date (as defined
in section 645(b)(2)).''.
(c) Amendments Related to Section 3201 of 1998 Act.--
(1) Section 7421(a) of the 1986 Code is amended by striking
``6015(d)'' and inserting ``6015(e)''.
(2) Subparagraph (A) of section 6015(e)(3) is amended by
striking ``of this section'' and inserting ``of subsection (b)
or (f)''.
(d) Amendment Related to Section 3301 of 1998 Act.--Paragraph (2)
of section 3301(c) of the 1998 Act is amended by striking ``The
amendments'' and inserting ``Subject to any applicable statute of
limitation not having expired with regard to either a tax underpayment
or a tax overpayment, the amendments''.
(e) Amendment Related to Section 3401 of 1998 Act.--Section 3401(c)
of the 1998 Act is amended--
(1) in paragraph (1), by striking ``7443(b)'' and inserting
``7443A(b)''; and
(2) in paragraph (2), by striking ``7443(c)'' and inserting
``7443A(c)''.
(f) Amendment Related to Section 3433 of 1998 Act.--Section 7421(a)
of the 1986 Code is amended by inserting ``6331(i),'' after
``6246(b),''.
(g) Amendment Related to Section 3708 of 1998 Act.--Subparagraph
(A) of section 6103(p)(3) of the 1986 Code is amended by inserting
``(f)(5),'' after ``(c), (e),''.
(h) Amendment Related to Section 5001 of 1998 Act.--
(1) Subparagraph (B) of section 1(h)(13) of the 1986 Code
is amended by striking ``paragraph (7)(A)'' and inserting
``paragraph (7)(A)(i)''.
(2)(A) Subparagraphs (A)(i)(II), (A)(ii)(II), and (B)(ii)
of section 1(h)(13) of the 1986 Code shall not apply to any
distribution after December 31, 1997, by a regulated investment
company or a real estate investment trust with respect to--
(i) gains and losses recognized directly by such
company or trust; and
(ii) amounts properly taken into account by such
company or trust by reason of holding (directly or
indirectly) an interest in another such company or
trust to the extent that such subparagraphs did not
apply to such other company or trust with respect to
such amounts.
(B) Subparagraph (A) shall not apply to any distribution
which is treated under section 852(b)(7) or 857(b)(8) of the
1986 Code as received on December 31, 1997.
(C) For purposes of subparagraph (A), any amount which is
includible in gross income of its shareholders under section
852(b)(3)(D) or 857(b)(3)(D) of the 1986 Code after December
31, 1997, shall be treated as distributed after such date.
(D)(i) For purposes of subparagraph (A), in the case of a
qualified partnership with respect to which a regulated
investment company meets the holding requirement of clause
(iii)--
(I) the subparagraphs referred to in subparagraph
(A) shall not apply to gains and losses recognized
directly by such partnership for purposes of
determining such company's distributive share of such
gains and losses; and
(II) such company's distributive share of such
gains and losses (as so determined) shall be treated as
recognized directly by such company.
The preceding sentence shall apply only if the qualified
partnership provides the company with written documentation of
such distributive share as so determined.
(ii) For purposes of clause (i), the term ``qualified
partnership'' means, with respect to a regulated investment
company, any partnership if--
(I) the partnership is an investment company
registered under the Investment Company Act of 1940;
(II) the regulated investment company is permitted
to invest in such partnership by reason of section
12(d)(1)(E) of such Act or an exemptive order of the
Securities and Exchange Commission under such section;
and
(III) the regulated investment company and the
partnership have the same taxable year.
(iii) A regulated investment company meets the holding
requirement of this clause with respect to a qualified
partnership if (as of January 1, 1998)--
(I) the value of the interests of the regulated
investment company in such partnership is 35 percent or
more of the value of such company's total assets; or
(II) the value of the interests of the regulated
investment company in such partnership and all other
qualified partnerships is 90 percent or more of the
value of such company's total assets.
(i) Effective Date.--The amendments made by this section shall take
effect as if included in the provisions of the 1998 Act to which they
relate.
SEC. 503. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.
(a) Amendment Related to Section 202 of 1997 Act.--Paragraph (2) of
section 163(h) of the 1986 Code is amended by striking ``and'' at the
end of subparagraph (D), by striking the period at the end of
subparagraph (E) and inserting ``, and'', and by adding at the end the
following new subparagraph:
``(F) any interest allowable as a deduction under
section 221 (relating to interest on educational
loans).''.
(b) Provision Related to Section 311 of 1997 Act.--In the case of
any capital gain distribution made after 1997 by a trust to which
section 664 of the 1986 Code applies with respect to amounts properly
taken into account by such trust during 1997, paragraphs (5)(A)(i)(I),
(5)(A)(ii)(I), and (13)(A) of section 1(h) of the 1986 Code (as in
effect for taxable years ending on December 31, 1997) shall not apply.
(c) Amendment Related to Section 506 of 1997 Act.--
(1) Section 2001(f)(2) of the 1986 Code is amended by
adding at the end the following:
``For purposes of subparagraph (A), the value of an item shall
be treated as shown on a return if the item is disclosed in the
return, or in a statement attached to the return, in a manner
adequate to apprise the Secretary of the nature of such
item.''.
(2) Paragraph (9) of section 6501(c) of the 1986 Code is
amended by striking the last sentence.
(d) Amendments Related to Section 904 of 1997 Act.--
(1) Paragraph (1) of section 9510(c) of the 1986 Code is
amended to read as follows:
``(1) In general.--Amounts in the Vaccine Injury
Compensation Trust Fund shall be available, as provided in
appropriation Acts, only for--
``(A) the payment of compensation under subtitle 2
of title XXI of the Public Health Service Act (as in
effect on August 5, 1997) for vaccine-related injury or
death with respect to any vaccine--
``(i) which is administered after September
30, 1988; and
``(ii) which is a taxable vaccine (as
defined in section 4132(a)(1)) at the time
compensation is paid under such subtitle 2, or
``(B) the payment of all expenses of administration
(but not in excess of $9,500,000 for any fiscal year)
incurred by the Federal Government in administering
such subtitle.''.
(2) Section 9510(b) of the 1986 Code is amended by adding
at the end the following new paragraph:
``(3) Limitation on transfers to vaccine injury
compensation trust fund.--No amount may be appropriated to the
Vaccine Injury Compensation Trust Fund on and after the date of
any expenditure from the Trust Fund which is not permitted by
this section. The determination of whether an expenditure is so
permitted shall be made without regard to--
``(A) any provision of law which is not contained
or referenced in this title or in a revenue Act; and
``(B) whether such provision of law is a
subsequently enacted provision or directly or
indirectly seeks to waive the application of this
paragraph.''.
(e) Amendments Related to Section 915 of 1997 Act.--
(1) Section 915 of the Taxpayer Relief Act of 1997 is
amended--
(A) in subsection (b), by inserting ``or 1998''
after ``1997''; and
(B) by amending subsection (d) to read as follows:
``(d) Effective Date.--This section shall apply to taxable years
ending with or within calendar year 1997.''.
(2) Paragraph (2) of section 6404(h) of the 1986 Code is
amended by inserting ``Robert T. Stafford'' before
``Disaster''.
(f) Amendments Related to Section 1012 of 1997 Act.--
(1) Paragraph (2) of section 351(c) of the 1986 Code, as
amended by section 6010(c) of the 1998 Act, is amended by
inserting ``, or the fact that the corporation whose stock was
distributed issues additional stock,'' after ``dispose of part
or all of the distributed stock''.
(2) Clause (ii) of section 368(a)(2)(H) of the 1986 Code,
as amended by section 6010(c) of the 1998 Act, is amended by
inserting ``, or the fact that the corporation whose stock was
distributed issues additional stock,'' after ``dispose of part
or all of the distributed stock''.
(g) Amendment Related to Section 1082 of 1997 Act.--Subparagraph
(F) of section 172(b)(1) of the 1986 Code is amended by adding at the
end the following new clause:
``(iv) Coordination with paragraph (2).--
For purposes of applying paragraph (2), an
eligible loss for any taxable year shall be
treated in a manner similar to the manner in
which a specified liability loss is treated.''.
(h) Amendment Related to Section 1084 of 1997 Act.--Paragraph (3)
of section 264(f) of the 1986 Code is amended by adding at the end the
following flush sentence:
``If the amount described in subparagraph (A) with respect to
any policy or contract does not reasonably approximate its
actual value, the amount taken into account under subparagraph
(A) shall be the greater of the amount of the insurance company
liability or the insurance company reserve with respect to such
policy or contract (as determined for purposes of the annual
statement approved by the National Association of Insurance
Commissioners) or shall be such other amount as is determined
by the Secretary.''.
(i) Amendment Related to Section 1205 of 1997 Act.--Paragraph (2)
of section 6311(d) of the 1986 Code is amended by striking ``under such
contracts'' in the last sentence and inserting ``under any such
contract for the use of credit or debit cards for the payment of taxes
imposed by subtitle A''.
(j) Effective Date.--The amendments made by this section shall take
effect as if included in the provisions of the Taxpayer Relief Act of
1997 to which they relate.
SEC. 504. AMENDMENTS RELATED TO TAX REFORM ACT OF 1984.
(a) In General.--Subparagraph (C) of section 172(d)(4) of the 1986
Code is amended to read as follows:
``(C) any deduction for casualty or theft losses
allowable under paragraph (2) or (3) of section 165(c)
shall be treated as attributable to the trade or
business; and''.
(b) Conforming Amendments.--
(1) Paragraph (3) of section 67(b) of the 1986 Code is
amended by striking ``for losses described in subsection (c)(3)
or (d) of section 165'' and inserting ``for casualty or theft
losses described in paragraph (2) or (3) of section 165(c) or
for losses described in section 165(d)''.
(2) Paragraph (3) of section 68(c) of the 1986 Code is
amended by striking ``for losses described in subsection (c)(3)
or (d) of section 165'' and inserting ``for casualty or theft
losses described in paragraph (2) or (3) of section 165(c) or
for losses described in section 165(d)''.
(3) Paragraph (1) of section 873(b) is amended to read as
follows:
``(1) Losses.--The deduction allowed by section 165 for
casualty or theft losses described in paragraph (2) or (3) of
section 165(c), but only if the loss is of property located
within the United States.''.
(c) Effective Dates.--
(1) The amendments made by subsections (a) and (b)(3) shall
apply to taxable years beginning after December 31, 1983.
(2) The amendment made by subsection (b)(1) shall apply to
taxable years beginning after December 31, 1986.
(3) The amendment made by subsection (b)(2) shall apply to
taxable years beginning after December 31, 1990.
SEC. 505. OTHER AMENDMENTS.
(a) Amendments Related to Section 6103 of 1986 Code.--
(1) Subsection (j) of section 6103 of the 1986 Code is
amended by adding at the end the following new paragraph:
``(5) Department of agriculture.--Upon request in writing
by the Secretary of Agriculture, the Secretary shall furnish
such returns, or return information reflected thereon, as the
Secretary may prescribe by regulation to officers and employees
of the Department of Agriculture whose official duties require
access to such returns or information for the purpose of, but
only to the extent necessary in, structuring, preparing, and
conducting the census of agriculture pursuant to the Census of
Agriculture Act of 1997 (Public Law 105-113).''.
(2) Paragraph (4) of section 6103(p) of the 1986 Code is
amended by striking ``(j)(1) or (2)'' in the material preceding
subparagraph (A) and in subparagraph (F) and inserting
``(j)(1), (2), or (5)''.
(3) The amendments made by this subsection shall apply to
requests made on or after the date of the enactment of this
Act.
(b) Amendment Related to Section 9004 of Transportation Equity Act
for the 21st Century.--
(1) Paragraph (2) of section 9503(f) of the 1986 Code is
amended to read as follows:
``(2) notwithstanding section 9602(b), obligations held by
such Fund after September 30, 1998, shall be obligations of the
United States which are not interest-bearing.''.
(2) The amendment made by paragraph (1) shall take effect
on October 1, 1998.
(c) Clerical Amendments.--
(1) Clause (i) of section 51(d)(6)(B) of the 1986 Code is
amended by striking ``rehabilitation plan'' and inserting
``plan for employment''. The reference to plan for employment
in such clause shall be treated as including a reference to the
rehabilitation plans referred to in such clause as in effect
before the amendment made by the preceding sentence.
(2) Subparagraphs (C) and (D) of section 6693(a)(2) of the
1986 Code are each amended by striking ``Section'' and
inserting ``section''.
TITLE VI--AMERICAN COMMUNITY RENEWAL ACT OF 1998
SEC. 601. SHORT TITLE.
This title may be cited as the ``American Community Renewal Act of
1998''.
SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL COMMUNITIES.
(a) In General.--Chapter 1 is amended by adding at the end the
following new subchapter:
``Subchapter X--Renewal Communities
``Part I. Designation.
``Part II. Renewal community capital
gain; renewal community
business.
``Part III. Family development accounts.
``Part IV. Additional incentives.
``PART I--DESIGNATION
``Sec. 1400E. Designation of renewal
communities.
``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
``(a) Designation.--
``(1) Definitions.--For purposes of this title, the term
`renewal community' means any area--
``(A) which is nominated by one or more local
governments and the State or States in which it is
located for designation as a renewal community
(hereinafter in this section referred to as a
`nominated area'); and
``(B) which the Secretary of Housing and Urban
Development designates as a renewal community, after
consultation with--
``(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury; the Director
of the Office of Management and Budget; and the
Administrator of the Small Business
Administration; and
``(ii) in the case of an area on an Indian
reservation, the Secretary of the Interior.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and
Urban Development may designate not more than 20
nominated areas as renewal communities.
``(B) Minimum designation in rural areas.--Of the
areas designated under paragraph (1), at least 4 must
be areas--
``(i) which are within a local government
jurisdiction or jurisdictions with a population
of less than 50,000,
``(ii) which are outside of a metropolitan
statistical area (within the meaning of section
143(k)(2)(B)), or
``(iii) which are determined by the
Secretary of Housing and Urban Development,
after consultation with the Secretary of
Commerce, to be rural areas.
``(3) Areas designated based on degree of poverty, etc.--
``(A) In general.--Except as otherwise provided in
this section, the nominated areas designated as renewal
communities under this subsection shall be those
nominated areas with the highest average ranking with
respect to the criteria described in subparagraphs (B),
(C), and (D) of subsection (c)(3). For purposes of the
preceding sentence, an area shall be ranked within each
such criterion on the basis of the amount by which the
area exceeds such criterion, with the area which
exceeds such criterion by the greatest amount given the
highest ranking.
``(B) Exception where inadequate course of action,
etc.--An area shall not be designated under
subparagraph (A) if the Secretary of Housing and Urban
Development determines that the course of action
described in subsection (d)(2) with respect to such
area is inadequate.
``(C) Priority for empowerment zones and enterprise
communities with respect to first half of
designations.--With respect to the first 10
designations made under this section--
``(i) 10 shall be chosen from nominated
areas which are empowerment zones or enterprise
communities (and are otherwise eligible for
designation under this section); and
``(ii) of such 10, 2 shall be areas
described in paragraph (2)(B).
``(4) Limitation on designations.--
``(A) Publication of regulations.--The Secretary of
Housing and Urban Development shall prescribe by
regulation no later than 4 months after the date of the
enactment of this section, after consultation with the
officials described in paragraph (1)(B)--
``(i) the procedures for nominating an area
under paragraph (1)(A);
``(ii) the parameters relating to the size
and population characteristics of a renewal
community; and
``(iii) the manner in which nominated areas
will be evaluated based on the criteria
specified in subsection (d).
``(B) Time limitations.--The Secretary of Housing
and Urban Development may designate nominated areas as
renewal communities only during the 24-month period
beginning on the first day of the first month following
the month in which the regulations described in
subparagraph (A) are prescribed.
``(C) Procedural rules.--The Secretary of Housing
and Urban Development shall not make any designation of
a nominated area as a renewal community under paragraph
(2) unless--
``(i) the local governments and the States
in which the nominated area is located have the
authority--
``(I) to nominate such area for
designation as a renewal community;
``(II) to make the State and local
commitments described in subsection
(d); and
``(III) to provide assurances
satisfactory to the Secretary of
Housing and Urban Development that such
commitments will be fulfilled,
``(ii) a nomination regarding such area is
submitted in such a manner and in such form,
and contains such information, as the Secretary
of Housing and Urban Development shall by
regulation prescribe; and
``(iii) the Secretary of Housing and Urban
Development determines that any information
furnished is reasonably accurate.
``(5) Nomination process for indian reservations.--For
purposes of this subchapter, in the case of a nominated area on
an Indian reservation, the reservation governing body (as
determined by the Secretary of the Interior) shall be treated
as being both the State and local governments with respect to
such area.
``(b) Period for Which Designation Is in Effect.--
``(1) In general.--Any designation of an area as a renewal
community shall remain in effect during the period beginning on
the date of the designation and ending on the earliest of--
``(A) December 31, 2006,
``(B) the termination date designated by the State
and local governments in their nomination, or
``(C) the date the Secretary of Housing and Urban
Development revokes such designation.
``(2) Revocation of designation.--The Secretary of Housing
and Urban Development may revoke the designation under this
section of an area if such Secretary determines that the local
government or the State in which the area is located--
``(A) has modified the boundaries of the area, or
``(B) is not complying substantially with, or fails
to make progress in achieving, the State or local
commitments, respectively, described in subsection (d).
``(c) Area and Eligibility Requirements.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate a nominated area as a renewal
community under subsection (a) only if the area meets the
requirements of paragraphs (2) and (3) of this subsection.
``(2) Area requirements.--A nominated area meets the
requirements of this paragraph if--
``(A) the area is within the jurisdiction of one or
more local governments;
``(B) the boundary of the area is continuous; and
``(C) the area--
``(i) has a population, of at least--
``(I) 4,000 if any portion of such
area (other than a rural area described
in subsection (a)(2)(B)(i)) is located
within a metropolitan statistical area
(within the meaning of section
143(k)(2)(B)) which has a population of
50,000 or greater; or
``(II) 1,000 in any other case; or
``(ii) is entirely within an Indian
reservation (as determined by the Secretary of
the Interior).
``(3) Eligibility requirements.--A nominated area meets the
requirements of this paragraph if the State and the local
governments in which it is located certify (and the Secretary
of Housing and Urban Development, after such review of
supporting data as he deems appropriate, accepts such
certification) that--
``(A) the area is one of pervasive poverty,
unemployment, and general distress;
``(B) the unemployment rate in the area, as
determined by the most recent available data, was at
least 1\1/2\ times the national unemployment rate for
the period to which such data relate;
``(C) the poverty rate for each population census
tract within the nominated area is at least 20 percent;
and
``(D) in the case of an urban area, at least 70
percent of the households living in the area have
incomes below 80 percent of the median income of
households within the jurisdiction of the local
government (determined in the same manner as under
section 119(b)(2) of the Housing and Community
Development Act of 1974).
``(4) Consideration of high incidence of crime.--The
Secretary of Housing and Urban Development shall take into
account, in selecting nominated areas for designation as
renewal communities under this section, the extent to which
such areas have a high incidence of crime.
``(5) Consideration of communities identified in gao
study.--The Secretary of Housing and Urban Development shall
take into account, in selecting nominated areas for designation
as renewal communities under this section, if the area has
census tracts identified in the May 12, 1998, report of the
Government Accounting Office regarding the identification of
economically distressed areas.
``(d) Required State and Local Commitments.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate any nominated area as a renewal
community under subsection (a) only if--
``(A) the local government and the State in which
the area is located agree in writing that, during any
period during which the area is a renewal community,
such governments will follow a specified course of
action which meets the requirements of paragraph (2)
and is designed to reduce the various burdens borne by
employers or employees in such area; and
``(B) the economic growth promotion requirements of
paragraph (3) are met.
``(2) Course of action.--
``(A) In general.--A course of action meets the
requirements of this paragraph if such course of action
is a written document, signed by a State (or local
government) and neighborhood organizations, which
evidences a partnership between such State or
government and community-based organizations and which
commits each signatory to specific and measurable
goals, actions, and timetables. Such course of action
shall include at least five of the following:
``(i) A reduction of tax rates or fees
applying within the renewal community.
``(ii) An increase in the level of
efficiency of local services within the renewal
community.
``(iii) Crime reduction strategies, such as
crime prevention (including the provision of
such services by nongovernmental entities).
``(iv) Actions to reduce, remove, simplify,
or streamline governmental requirements
applying within the renewal community.
``(v) Involvement in the program by private
entities, organizations, neighborhood
organizations, and community groups,
particularly those in the renewal community,
including a commitment from such private
entities to provide jobs and job training for,
and technical, financial, or other assistance
to, employers, employees, and residents from
the renewal community.
``(vi) State or local income tax benefits
for fees paid for services performed by a
nongovernmental entity which were formerly
performed by a governmental entity.
``(vii) The gift (or sale at below fair
market value) of surplus real property (such as
land, homes, and commercial or industrial
structures) in the renewal community to
neighborhood organizations, community
development corporations, or private companies.
``(B) Recognition of past efforts.--For purposes of
this section, in evaluating the course of action agreed
to by any State or local government, the Secretary of
Housing and Urban Development shall take into account
the past efforts of such State or local government in
reducing the various burdens borne by employers and
employees in the area involved.
``(3) Economic growth promotion requirements.--The economic
growth promotion requirements of this paragraph are met with
respect to a nominated area if the local government and the
State in which such area is located certify in writing that
such government and State, respectively, have repealed or
otherwise will not enforce within the area, if such area is
designated as a renewal community--
``(A) licensing requirements for occupations that
do not ordinarily require a professional degree;
``(B) zoning restrictions on home-based businesses
which do not create a public nuisance;
``(C) permit requirements for street vendors who do
not create a public nuisance;
``(D) zoning or other restrictions that impede the
formation of schools or child care centers; and
``(E) franchises or other restrictions on
competition for businesses providing public services,
including but not limited to taxicabs, jitneys, cable
television, or trash hauling,
except to the extent that such regulation of businesses and
occupations is necessary for and well-tailored to the
protection of health and safety.
``(e) Coordination With Treatment of Empowerment Zones and
Enterprise Communities.--For purposes of this title, if there are in
effect with respect to the same area both--
``(1) a designation as a renewal community; and
``(2) a designation as an empowerment zone or enterprise
community,
both of such designations shall be given full effect with respect to
such area.
``(f) Definitions and Special Rules.--For purposes of this
subchapter--
``(1) Governments.--If more than one government seeks to
nominate an area as a renewal community, any reference to, or
requirement of, this section shall apply to all such
governments.
``(2) State.--The term `State' includes Puerto Rico, the
Virgin Islands of the United States, Guam, American Samoa, the
Northern Mariana Islands, and any other possession of the
United States.
``(3) Local government.--The term `local government'
means--
``(A) any county, city, town, township, parish,
village, or other general purpose political subdivision
of a State;
``(B) any combination of political subdivisions
described in subparagraph (A) recognized by the
Secretary of Housing and Urban Development; and
``(C) the District of Columbia.
``(4) Application of rules relating to census tracts and
census data.--The rules of sections 1392(b)(4) and 1393(a)(9)
shall apply.
``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS
``Sec. 1400F. Renewal community capital
gain.
``Sec. 1400G. Renewal community business
defined.
``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
``(a) General Rule.--Gross income does not include any qualified
capital gain recognized on the sale or exchange of a qualified
community asset held for more than 5 years.
``(b) Qualified Community Asset.--For purposes of this section--
``(1) In general.--The term `qualified community asset'
means--
``(A) any qualified community stock;
``(B) any qualified community partnership interest;
and
``(C) any qualified community business property.
``(2) Qualified community stock.--
``(A) In general.--Except as provided in
subparagraph (B), the term `qualified community stock'
means any stock in a domestic corporation if--
``(i) such stock is acquired by the
taxpayer after December 31, 1999, and before
January 1, 2007, at its original issue
(directly or through an underwriter) from the
corporation solely in exchange for cash;
``(ii) as of the time such stock was
issued, such corporation was a renewal
community business (or, in the case of a new
corporation, such corporation was being
organized for purposes of being a renewal
community business); and
``(iii) during substantially all of the
taxpayer's holding period for such stock, such
corporation qualified as a renewal community
business.
``(B) Redemptions.--A rule similar to the rule of
section 1202(c)(3) shall apply for purposes of this
paragraph.
``(3) Qualified community partnership interest.--The term
`qualified community partnership interest' means any interest
in a partnership if--
``(A) such interest is acquired by the taxpayer
after December 31, 1999, and before January 1, 2007;
``(B) as of the time such interest was acquired,
such partnership was a renewal community business (or,
in the case of a new partnership, such partnership was
being organized for purposes of being a renewal
community business); and
``(C) during substantially all of the taxpayer's
holding period for such interest, such partnership
qualified as a renewal community business.
A rule similar to the rule of paragraph (2)(B) shall apply for
purposes of this paragraph.
``(4) Qualified community business property.--
``(A) In general.--The term `qualified community
business property' means tangible property if--
``(i) such property was acquired by the
taxpayer by purchase (as defined in section
179(d)(2)) after December 31, 1999, and before
January 1, 2007;
``(ii) the original use of such property in
the renewal community commences with the
taxpayer; and
``(iii) during substantially all of the
taxpayer's holding period for such property,
substantially all of the use of such property
was in a renewal community business of the
taxpayer.
``(B) Special rule for substantial improvements.--
The requirements of clauses (i) and (ii) of
subparagraph (A) shall be treated as satisfied with
respect to--
``(i) property which is substantially
improved (within the meaning of section
1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2007; and
``(ii) any land on which such property is
located.
``(c) Certain Rules To Apply.--Rules similar to the rules of
paragraphs (5), (6), and (7) of subsection (b), and subsections (e),
(f), and (g), of section 1400B shall apply for purposes of this
section.
``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
``For purposes of this part, the term `renewal community business'
means any entity or proprietorship which would be a qualified business
entity or qualified proprietorship under section 1397B if--
``(1) references to renewal communities were substituted
for references to empowerment zones in such section; and
``(2) `80 percent' were substituted for `50 percent' in
subsections (b)(2) and (c)(1) of such section.
``PART III--FAMILY DEVELOPMENT ACCOUNTS
``Sec. 1400H. Family development accounts
for renewal community EITC
recipients.
``Sec. 1400I. Demonstration program to
provide matching contributions
to family development accounts
in certain renewal communities.
``Sec. 1400J. Designation of earned
income tax credit payments for
deposit to family development
account.
``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL COMMUNITY EITC
RECIPIENTS.
``(a) Allowance of Deduction.--
``(1) In general.--There shall be allowed as a deduction--
``(A) in the case of a qualified individual, the
amount paid in cash for the taxable year by such
individual to any family development account for such
individual's benefit; and
``(B) in the case of any person other than a
qualified individual, the amount paid in cash for the
taxable year by such person to any family development
account for the benefit of a qualified individual but
only if the amount so paid is designated for purposes
of this section by such individual.
No deduction shall be allowed under this paragraph for any
amount deposited in a family development account under section
1400I (relating to demonstration program to provide matching
amounts in renewal communities).
``(2) Limitation.--
``(A) In general.--The amount allowable as a
deduction to any individual for any taxable year by
reason of paragraph (1)(A) shall not exceed the lesser
of--
``(i) $2,000, or
``(ii) an amount equal to the compensation
includible in the individual's gross income for
such taxable year.
``(B) Persons donating to family development
accounts of others.--The amount which may be designated
under paragraph (1)(B) by any qualified individual for
any taxable year of such individual shall not exceed
$1,000.
``(3) Special rules for certain married individuals.--Rules
similar to rules of section 219(c) shall apply to the
limitation in paragraph (2)(A).
``(4) Coordination with ira's.--No deduction shall be
allowed under this section to any person by reason of a payment
to an account for the benefit of a qualified individual if any
amount is paid into an individual retirement account (including
a Roth IRA) for the benefit of such individual.
``(5) Rollovers.--No deduction shall be allowed under this
section with respect to any rollover contribution.
``(b) Tax Treatment of Distributions.--
``(1) Inclusion of amounts in gross income.--Except as
otherwise provided in this subsection, any amount paid or
distributed out of a family development account shall be
included in gross income by the payee or distributee, as the
case may be.
``(2) Exclusion of qualified family development
distributions.--Paragraph (1) shall not apply to any qualified
family development distribution.
``(c) Qualified Family Development Distribution.--For purposes of
this section--
``(1) In general.--The term `qualified family development
distribution' means any amount paid or distributed out of a
family development account which would otherwise be includible
in gross income, to the extent that such payment or
distribution is used exclusively to pay qualified family
development expenses for the holder of the account or the
spouse or dependent (as defined in section 152) of such holder.
``(2) Qualified family development expenses.--The term
`qualified family development expenses' means any of the
following:
``(A) Qualified higher education expenses.
``(B) Qualified first-time homebuyer costs.
``(C) Qualified business capitalization costs.
``(D) Qualified medical expenses.
``(E) Qualified rollovers.
``(3) Qualified higher education expenses.--
``(A) In general.--The term `qualified higher
education expenses' has the meaning given such term by
section 72(t)(7), determined by treating postsecondary
vocational educational schools as eligible educational
institutions.
``(B) Postsecondary vocational education school.--
The term `postsecondary vocational educational school'
means an area vocational education school (as defined
in subparagraph (C) or (D) of section 521(4) of the
Carl D. Perkins Vocational and Applied Technology
Education Act (20 U.S.C. 2471(4))) which is in any
State (as defined in section 521(33) of such Act), as
such sections are in effect on the date of the
enactment of this section.
``(C) Coordination with other benefits.--The amount
of qualified higher education expenses for any taxable
year shall be reduced as provided in section 25A(g)(2).
``(4) Qualified first-time homebuyer costs.--The term
`qualified first-time homebuyer costs' means qualified
acquisition costs (as defined in section 72(t)(8) without
regard to subparagraph (B) thereof) with respect to a principal
residence (within the meaning of section 121) for a qualified
first-time homebuyer (as defined in such section).
``(5) Qualified business capitalization costs.--
``(A) In general.--The term `qualified business
capitalization costs' means qualified expenditures for
the capitalization of a qualified business pursuant to
a qualified plan.
``(B) Qualified expenditures.--The term `qualified
expenditures' means expenditures included in a
qualified plan, including capital, plant, equipment,
working capital, and inventory expenses.
``(C) Qualified business.--The term `qualified
business' means any business that does not contravene
any law.
``(D) Qualified plan.--The term `qualified plan'
means a business plan which meets such requirements as
the Secretary may specify.
``(6) Qualified medical expenses.--The term `qualified
medical expenses' means any amount paid during the taxable
year, not compensated for by insurance or otherwise, for
medical care (as defined in section 213(d)) of the taxpayer,
his spouse, or his dependent (as defined in section 152).
``(7) Qualified rollovers.--The term `qualified rollover'
means any amount paid from a family development account of a
taxpayer into another such account established for the benefit
of--
``(A) such taxpayer, or
``(B) any qualified individual who is--
``(i) the spouse of such taxpayer, or
``(ii) any dependent (as defined in section
152) of the taxpayer.
Rules similar to the rules of section 408(d)(3) shall apply for
purposes of this paragraph.
``(d) Tax Treatment of Accounts.--
``(1) In general.--Any family development account is exempt
from taxation under this subtitle unless such account has
ceased to be a family development account by reason of
paragraph (2). Notwithstanding the preceding sentence, any such
account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business income of
charitable, etc., organizations). Notwithstanding any other
provision of this title (including chapters 11 and 12), the
basis of any person in such an account is zero.
``(2) Loss of exemption in case of prohibited
transactions.--For purposes of this section, rules similar to
the rules of section 408(e) shall apply.
``(3) Other rules to apply.--Rules similar to the rules of
paragraphs (4), (5), and (6) of section 408(d) shall apply for
purposes of this section.
``(e) Family Development Account.--For purposes of this title, the
term `family development account' means a trust created or organized in
the United States for the exclusive benefit of a qualified individual
or his beneficiaries, but only if the written governing instrument
creating the trust meets the following requirements:
``(1) Except in the case of a qualified rollover (as
defined in subsection (c)(7))--
``(A) no contribution will be accepted unless it is
in cash; and
``(B) contributions will not be accepted for the
taxable year in excess of $3,000 (determined without
regard to any contribution made under section 1400I
(relating to demonstration program to provide matching
amounts in renewal communities)).
``(2) The requirements of paragraphs (2) through (6) of
section 408(a) are met.
``(f) Qualified Individual.--For purposes of this section, the term
`qualified individual' means, for any taxable year, an individual--
``(1) who is a bona fide resident of a renewal community
throughout the taxable year; and
``(2) to whom a credit was allowed under section 32 for the
preceding taxable year.
``(g) Other Definitions and Special Rules.--
``(1) Compensation.--The term `compensation' has the
meaning given such term by section 219(f)(1).
``(2) Married individuals.--The maximum deduction under
subsection (a) shall be computed separately for each
individual, and this section shall be applied without regard to
any community property laws.
``(3) Time when contributions deemed made.--For purposes of
this section, a taxpayer shall be deemed to have made a
contribution to a family development account on the last day of
the preceding taxable year if the contribution is made on
account of such taxable year and is made not later than the
time prescribed by law for filing the return for such taxable
year (not including extensions thereof).
``(4) Employer payments; custodial accounts.--Rules similar
to the rules of sections 219(f)(5) and 408(h) shall apply for
purposes of this section.
``(5) Reports.--The trustee of a family development account
shall make such reports regarding such account to the Secretary
and to the individual for whom the account is maintained with
respect to contributions (and the years to which they relate),
distributions, and such other matters as the Secretary may
require under regulations. The reports required by this
paragraph--
``(A) shall be filed at such time and in such
manner as the Secretary prescribes in such regulations;
and
``(B) shall be furnished to individuals--
``(i) not later than January 31 of the
calendar year following the calendar year to
which such reports relate; and
``(ii) in such manner as the Secretary
prescribes in such regulations.
``(6) Investment in collectibles treated as
distributions.--Rules similar to the rules of section 408(m)
shall apply for purposes of this section.
``(h) Penalty for Distributions Not Used for Qualified Family
Development Expenses.--
``(1) In general.--If any amount is distributed from a
family development account and is not used exclusively to pay
qualified family development expenses for the holder of the
account or the spouse or dependent (as defined in section 152)
of such holder, the tax imposed by this chapter for the taxable
year of such distribution shall be increased by the sum of--
``(A) 100 percent of the portion of such amount
which is includible in gross income and is attributable
to amounts contributed under section 1400I (relating to
demonstration program to provide matching amounts in
renewal communities); and
``(B) 10 percent of the portion of such amount
which is includible in gross income and is not
described in subparagraph (A).
For purposes of this subsection, distributions which are
includable in gross income shall be treated as attributable to
amounts contributed under section 1400I to the extent thereof.
For purposes of the preceding sentence, all family development
accounts of an individual shall be treated as one account.
``(2) Exception for certain distributions.--Paragraph (1)
shall not apply to distributions which are--
``(A) made on or after the date on which the
account holder attains age 59\1/2\,
``(B) made to a beneficiary (or the estate of the
account holder) on or after the death of the account
holder, or
``(C) attributable to the account holder's being
disabled within the meaning of section 72(m)(7).
``(i) Termination.--No deduction shall be allowed under this
section for any amount paid to a family development account for any
taxable year beginning after December 31, 2006.
``SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE MATCHING CONTRIBUTIONS
TO FAMILY DEVELOPMENT ACCOUNTS IN CERTAIN RENEWAL
COMMUNITIES.
``(a) Designation.--
``(1) Definitions.--For purposes of this section, the term
`FDA matching demonstration area' means any renewal community--
``(A) which is nominated under this section by each
of the local governments and States which nominated
such community for designation as a renewal community
under section 1400E(a)(1)(A); and
``(B) which the Secretary of Housing and Urban
Development designates as an FDA matching demonstration
area after consultation with--
``(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury, the Director
of the Office of Management and Budget, and the
Administrator of the Small Business
Administration; and
``(ii) in the case of a community on an
Indian reservation, the Secretary of the
Interior.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and
Urban Development may designate not more than 5
communities as FDA matching demonstration areas.
``(B) Minimum designation in rural areas.--Of the
areas designated under subparagraph (A), at least 2
must be areas described in section 1400E(a)(2)(B).
``(3) Limitations on designations.--
``(A) Publication of regulations.--The Secretary of
Housing and Urban Development shall prescribe by
regulation no later than 4 months after the date of the
enactment of this section, after consultation with the
officials described in paragraph (1)(B)--
``(i) the procedures for nominating a
renewal community under paragraph (1)(A)
(including procedures for coordinating such
nomination with the nomination of an area for
designation as a renewal community under
section 1400E); and
``(ii) the manner in which nominated
renewal communities will be evaluated for
purposes of this section.
``(B) Time limitations.--The Secretary of Housing
and Urban Development may designate renewal communities
as FDA matching demonstration areas only during the 24-
month period beginning on the first day of the first
month following the month in which the regulations
described in subparagraph (A) are prescribed.
``(4) Designation based on degree of poverty, etc.--The
rules of section 1400E(a)(3) shall apply for purposes of
designations of FDA matching demonstration areas under this
section.
``(b) Period for Which Designation Is in Effect.--Any designation
of a renewal community as an FDA matching demonstration area shall
remain in effect during the period beginning on the date of such
designation and ending on the date on which such area ceases to be a
renewal community.
``(c) Matching Contributions to Family Development Accounts.--
``(1) In general.--Not less than once each taxable year,
the Secretary shall deposit (to the extent provided in
appropriation Acts) into a family development account of each
qualified individual (as defined in section 1400H(f))--
``(A) who is a resident throughout the taxable year
of an FDA matching demonstration area; and
``(B) who requests (in such form and manner as the
Secretary prescribes) such deposit for the taxable
year,
an amount equal to the sum of the amounts deposited into all of
the family development accounts of such individual during such
taxable year (determined without regard to any amount
contributed under this section).
``(2) Limitations.--
``(A) Annual limit.--The Secretary shall not
deposit more than $1000 under paragraph (1) with
respect to any individual for any taxable year.
``(B) Aggregate limit.--The Secretary shall not
deposit more than $2000 under paragraph (1) with
respect to any individual for all taxable years.
``(3) Exclusion from income.--Except as provided in section
1400H, gross income shall not include any amount deposited into
a family development account under paragraph (1).
``(d) Notice of Program.--The Secretary shall provide appropriate
notice to residents of FDA matching demonstration areas of the
availability of the benefits under this section.
``(e) Termination.--No amount may be deposited under this section
for any taxable year beginning after December 31, 2006.
``SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CREDIT PAYMENTS FOR
DEPOSIT TO FAMILY DEVELOPMENT ACCOUNT.
``(a) In General.--With respect to the return of any qualified
individual (as defined in section 1400H(f)) for the taxable year of the
tax imposed by this chapter, such individual may designate that a
specified portion (not less than $1) of any overpayment of tax for such
taxable year which is attributable to the earned income tax credit
shall be deposited by the Secretary into a family development account
of such individual. The Secretary shall so deposit such portion
designated under this subsection.
``(b) Manner and Time of Designation.--A designation under
subsection (a) may be made with respect to any taxable year--
``(1) at the time of filing the return of the tax imposed
by this chapter for such taxable year, or
``(2) at any other time (after the time of filing the
return of the tax imposed by this chapter for such taxable
year) specified in regulations prescribed by the Secretary.
Such designation shall be made in such manner as the Secretary
prescribes by regulations.
``(c) Portion Attributable to Earned Income Tax Credit.--For
purposes of subsection (a), an overpayment for any taxable year shall
be treated as attributable to the earned income tax credit to the
extent that such overpayment does not exceed the credit allowed to the
taxpayer under section 32 for such taxable year.
``(d) Overpayments Treated as Refunded.--For purposes of this
title, any portion of an overpayment of tax designated under subsection
(a) shall be treated as being refunded to the taxpayer as of the last
date prescribed for filing the return of tax imposed by this chapter
(determined without regard to extensions) or, if later, the date the
return is filed.
``(e) Termination.--This section shall not apply to any taxable
year beginning after December 31, 2006.
``PART IV--ADDITIONAL INCENTIVES
``Sec. 1400K. Commercial revitalization
credit.
``Sec. 1400L. Increase in expensing under
section 179.
``SEC. 1400K. COMMERCIAL REVITALIZATION CREDIT.
``(a) General Rule.--For purposes of section 46, except as provided
in subsection (e), the commercial revitalization credit for any taxable
year is an amount equal to the applicable percentage of the qualified
revitalization expenditures with respect to any qualified
revitalization building.
``(b) Applicable Percentage.--For purposes of this section--
``(1) In general.--The term `applicable percentage' means--
``(A) 20 percent for the taxable year in which a
qualified revitalization building is placed in service,
or
``(B) at the election of the taxpayer, 5 percent
for each taxable year in the credit period.
The election under subparagraph (B), once made, shall be
irrevocable.
``(2) Credit period.--
``(A) In general.--The term `credit period' means,
with respect to any building, the period of 10 taxable
years beginning with the taxable year in which the
building is placed in service.
``(B) Applicable rules.--Rules similar to the rules
under paragraphs (2) and (4) of section 42(f) shall
apply.
``(c) Qualified Revitalization Buildings and Expenditures.--For
purposes of this section--
``(1) Qualified revitalization building.--The term
`qualified revitalization building' means any building (and its
structural components) if--
``(A) such building is located in a renewal
community and is placed in service after December 31,
1999;
``(B) a commercial revitalization credit amount is
allocated to the building under subsection (e); and
``(C) depreciation (or amortization in lieu of
depreciation) is allowable with respect to the
building.
``(2) Qualified revitalization expenditure.--
``(A) In general.--The term `qualified
revitalization expenditure' means any amount properly
chargeable to capital account--
``(i) for property for which depreciation
is allowable under section 168 and which is--
``(I) nonresidential real property;
or
``(II) an addition or improvement
to property described in subclause (I);
and
``(ii) in connection with the construction
of any qualified revitalization building which
was not previously placed in service or in
connection with the substantial rehabilitation
(within the meaning of section 47(c)(1)(C)) of
a building which was placed in service before
the beginning of such rehabilitation.
``(B) Dollar limitation.--The aggregate amount
which may be treated as qualified revitalization
expenditures with respect to any qualified
revitalization building for any taxable year shall not
exceed the excess of--
``(i) $10,000,000, reduced by
``(ii) any such expenditures with respect
to the building taken into account by the
taxpayer or any predecessor in determining the
amount of the credit under this section for all
preceding taxable years.
``(C) Certain expenditures not included.--The term
`qualified revitalization expenditure' does not
include--
``(i) Straight line depreciation must be
used.--Any expenditure (other than with respect
to land acquisitions) with respect to which the
taxpayer does not use the straight line method
over a recovery period determined under
subsection (c) or (g) of section 168. The
preceding sentence shall not apply to any
expenditure to the extent the alternative
depreciation system of section 168(g) applies
to such expenditure by reason of subparagraph
(B) or (C) of section 168(g)(1).
``(ii) Acquisition costs.--The costs of
acquiring any building or interest therein and
any land in connection with such building to
the extent that such costs exceed 30 percent of
the qualified revitalization expenditures
determined without regard to this clause.
``(iii) Other credits.--Any expenditure
which the taxpayer may take into account in
computing any other credit allowable under this
title unless the taxpayer elects to take the
expenditure into account only for purposes of
this section.
``(d) When Expenditures Taken Into Account.--
``(1) In general.--Qualified revitalization expenditures
with respect to any qualified revitalization building shall be
taken into account for the taxable year in which the qualified
revitalization building is placed in service. For purposes of
the preceding sentence, a substantial rehabilitation of a
building shall be treated as a separate building.
``(2) Progress expenditure payments.--Rules similar to the
rules of subsections (b)(2) and (d) of section 47 shall apply
for purposes of this section.
``(e) Limitation on Aggregate Credits Allowable With Respect to
Buildings Located in a State.--
``(1) In general.--The amount of the credit determined
under this section for any taxable year with respect to any
building shall not exceed the commercial revitalization credit
amount (in the case of an amount determined under subsection
(b)(1)(B), the present value of such amount as determined under
the rules of section 42(b)(2)(C)) allocated to such building
under this subsection by the commercial revitalization credit
agency. Such allocation shall be made at the same time and in
the same manner as under paragraphs (1) and (7) of section
42(h).
``(2) Commercial revitalization credit amount for
agencies.--
``(A) In general.--The aggregate commercial
revitalization credit amount which a commercial
revitalization credit agency may allocate for any
calendar year is the amount of the State commercial
revitalization credit ceiling determined under this
paragraph for such calendar year for such agency.
``(B) State commercial revitalization credit
ceiling.--The State commercial revitalization credit
ceiling applicable to any State--
``(i) for each calendar year after 1999 and
before 2007 is $2,000,000 for each renewal
community in the State; and
``(ii) zero for each calendar year
thereafter.
``(C) Commercial revitalization credit agency.--For
purposes of this section, the term `commercial
revitalization credit agency' means any agency
authorized by a State to carry out this section.
``(f) Responsibilities of Commercial Revitalization Credit
Agencies.--
``(1) Plans for allocation.--Notwithstanding any other
provision of this section, the commercial revitalization credit
amount with respect to any building shall be zero unless--
``(A) such amount was allocated pursuant to a
qualified allocation plan of the commercial
revitalization credit agency which is approved (in
accordance with rules similar to the rules of section
147(f)(2) (other than subparagraph (B)(ii) thereof)) by
the governmental unit of which such agency is a part;
and
``(B) such agency notifies the chief executive
officer (or its equivalent) of the local jurisdiction
within which the building is located of such allocation
and provides such individual a reasonable opportunity
to comment on the allocation.
``(2) Qualified allocation plan.--For purposes of this
subsection, the term `qualified allocation plan' means any
plan--
``(A) which sets forth selection criteria to be
used to determine priorities of the commercial
revitalization credit agency which are appropriate to
local conditions;
``(B) which considers--
``(i) the degree to which a project
contributes to the implementation of a
strategic plan that is devised for a renewal
community through a citizen participation
process;
``(ii) the amount of any increase in
permanent, full-time employment by reason of
any project; and
``(iii) the active involvement of residents
and nonprofit groups within the renewal
community; and
``(C) which provides a procedure that the agency
(or its agent) will follow in monitoring compliance
with this section.
``(g) Termination.--This section shall not apply to any building
placed in service after December 31, 2006.
``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
``(a) General Rule.--In the case of a renewal community business
(as defined in section 1400G), for purposes of section 179--
``(1) the limitation under section 179(b)(1) shall be
increased by the lesser of--
``(A) $35,000; or
``(B) the cost of section 179 property which is
qualified renewal property placed in service during the
taxable year; and
``(2) the amount taken into account under section 179(b)(2)
with respect to any section 179 property which is qualified
renewal property shall be 50 percent of the cost thereof.
``(b) Recapture.--Rules similar to the rules under section
179(d)(10) shall apply with respect to any qualified renewal property
which ceases to be used in a renewal community by a renewal community
business.
``(c) Qualified Renewal Property.--For purposes of this section--
``(1) In general.--The term `qualified renewal property'
means any property to which section 168 applies (or would apply
but for section 179) if--
``(A) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after
December 31, 1999, and before January 1, 2007; and
``(B) such property would be qualified zone
property (as defined in section 1397C) if references to
renewal communities were substituted for references to
empowerment zones in section 1397C.
``(2) Certain rules to apply.--The rules of subsections
(a)(2) and (b) of section 1397C shall apply for purposes of
this section.''.
SEC. 603. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS TO
RENEWAL COMMUNITIES.
(a) Extension.--Paragraph (2) of section 198(c) (defining targeted
area) is amended by redesignating subparagraph (C) as subparagraph (D)
and by inserting after subparagraph (B) the following new subparagraph:
``(C) Renewal communities included.--Except as
provided in subparagraph (B), such term shall include a
renewal community (as defined in section 1400E).''.
(b) Extension of Termination Date for Renewal Communities.--
Subsection (h) of section 198 is amended by inserting before the period
``(December 31, 2006, in the case of a renewal community, as defined in
section 1400E).''.
SEC. 604. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR RENEWAL
COMMUNITIES
(a) Extension.--Subsection (c) of section 51 (relating to
termination) is amended by adding at the end the following new
paragraph:
``(5) Extension of credit for renewal communities.--
``(A) In general.--In the case of an individual who
begins work for the employer after the date contained
in paragraph (4)(B), for purposes of section 38--
``(i) in lieu of applying subsection (a),
the amount of the work opportunity credit
determined under this section for the taxable
year shall be equal to--
``(I) 15 percent of the qualified
first-year wages for such year; and
``(II) 30 percent of the qualified
second-year wages for such year;
``(ii) subsection (b)(3) shall be applied
by substituting `$10,000' for `$6,000';
``(iii) paragraph (4)(B) shall be applied
by substituting for the date contained therein
the last day for which the designation under
section 1400E of the renewal community referred
to in subparagraph (B)(i) is in effect; and
``(iv) rules similar to the rules of
section 51A(b)(5)(C) shall apply.
``(B) Qualified first- and second-year wages.--For
purposes of subparagraph (A)--
``(i) In general.--The term `qualified
wages' means, with respect to each 1-year
period referred to in clause (ii) or (iii), as
the case may be, the wages paid or incurred by
the employer during the taxable year to any
individual but only if--
``(I) the employer is engaged in a
trade or business in a renewal
community throughout such 1-year
period;
``(II) the principal place of abode
of such individual is in such renewal
community throughout such 1-year
period; and
``(III) substantially all of the
services which such individual performs
for the employer during such 1-year
period are performed in such renewal
community.
``(ii) Qualified first-year wages.--The
term `qualified first-year wages' means, with
respect to any individual, qualified wages
attributable to service rendered during the 1-
year period beginning with the day the
individual begins work for the employer.
``(iii) Qualified second-year wages.--The
term `qualified second-year wages' means, with
respect to any individual, qualified wages
attributable to service rendered during the 1-
year period beginning on the day after the last
day of the 1-year period with respect to such
individual determined under clause (ii).''.
(b) Congruent Treatment of Renewal Communities and Enterprise Zones
for Purposes of Youth Residence Requirements.--
(1) High-risk youth.--Subparagraphs (A)(ii) and (B) of
section 51(d)(5) are each amended by striking ``empowerment
zone or enterprise community'' and inserting ``empowerment
zone, enterprise community, or renewal community''.
(2) Qualified summer youth employee.--Clause (iv) of
section 51(d)(7)(A) is amended by striking ``empowerment zone
or enterprise community'' and inserting ``empowerment zone,
enterprise community, or renewal community''.
(3) Headings.--Paragraphs (5)(B) and (7)(C) of section
51(d) are each amended by inserting ``or community'' in the
heading after ``zone''.
SEC. 605. CONFORMING AND CLERICAL AMENDMENTS.
(a) Deduction for Contributions to Family Development Accounts
Allowable Whether or Not Taxpayer Itemizes.--Subsection (a) of section
62 (relating to adjusted gross income defined) is amended by inserting
after paragraph (17) the following new paragraph:
``(18) Family development accounts.--The deduction allowed
by section 1400H(a)(1)(A).''.
(b) Tax on Excess Contributions.--
(1) Tax imposed.--Subsection (a) of section 4973 is amended
by striking ``or'' at the end of paragraph (3), adding ``or''
at the end of paragraph (4), and inserting after paragraph (4)
the following new paragraph:
``(5) a family development account (within the meaning of
section 1400H(e)),''.
(2) Excess contributions.--Section 4973 is amended by
adding at the end the following new subsection:
``(g) Family Development Accounts.--For purposes of this section,
in the case of a family development account, the term `excess
contributions' means the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed for the taxable year
to the account (other than a qualified rollover, as
defined in section 1400H(c)(7), or a contribution under
section 1400I), over
``(B) the amount allowable as a deduction under
section 1400H for such contributions; and
``(2) the amount determined under this subsection for the
preceding taxable year reduced by the sum of--
``(A) the distributions out of the account for the
taxable year which were included in the gross income of
the payee under section 1400H(b)(1);
``(B) the distributions out of the account for the
taxable year to which rules similar to the rules of
section 408(d)(5) apply by reason of section
1400H(d)(3); and
``(C) the excess (if any) of the maximum amount
allowable as a deduction under section 1400H for the
taxable year over the amount contributed to the account
for the taxable year (other than a contribution under
section 1400I).
For purposes of this subsection, any contribution which is distributed
from the family development account in a distribution to which rules
similar to the rules of section 408(d)(4) apply by reason of section
1400H(d)(3) shall be treated as an amount not contributed.''.
(c) Tax on Prohibited Transactions.--Section 4975 is amended--
(1) by adding at the end of subsection (c) the following
new paragraph:
``(6) Special rule for family development accounts.--An
individual for whose benefit a family development account is
established and any contributor to such account shall be exempt
from the tax imposed by this section with respect to any
transaction concerning such account (which would otherwise be
taxable under this section) if, with respect to such
transaction, the account ceases to be a family development
account by reason of the application of section 1400H(d)(2) to
such account.''; and
(2) in subsection (e)(1), by striking ``or'' at the end of
subparagraph (E), by redesignating subparagraph (F) as
subparagraph (G), and by inserting after subparagraph (E) the
following new subparagraph:
``(F) a family development account described in
section 1400H(e), or''.
(d) Information Relating to Certain Trusts and Annuity Plans.--
Subsection (c) of section 6047 is amended--
(1) by inserting ``or section 1400H'' after ``section
219''; and
(2) by inserting ``, of any family development account
described in section 1400H(e),'', after ``section 408(a)''.
(e) Inspection of Applications for Tax Exemption.--Clause (i) of
section 6104(a)(1)(B) is amended by inserting ``a family development
account described in section 1400H(e),'' after ``section 408(a),''.
(f) Failure To Provide Reports on Family Development Accounts.--
Paragraph (2) of section 6693(a) is amended by striking ``and'' at the
end of subparagraph (C), by striking the period and inserting ``, and''
at the end of subparagraph (D), and by adding at the end the following
new subparagraph:
``(E) section 1400H(g)(6) (relating to family
development accounts).''.
(g) Conforming Amendments Regarding Commercial Revitalization
Credit.--
(1) Section 46 (relating to investment credit) is amended
by striking ``and'' at the end of paragraph (2), by striking
the period at the end of paragraph (3) and inserting ``, and'',
and by adding at the end the following new paragraph:
``(4) the commercial revitalization credit provided under
section 1400K.''.
(2) Section 39(d) is amended by adding at the end the
following new paragraph:
``(9) No carryback of section 1400k credit before date of
enactment.--No portion of the unused business credit for any
taxable year which is attributable to any commercial
revitalization credit determined under section 1400K may be
carried back to a taxable year ending before the date of the
enactment of section 1400K.''.
(3) Subparagraph (B) of section 48(a)(2) is amended by
inserting ``or commercial revitalization'' after
``rehabilitation'' each place it appears in the text and
heading.
(4) Subparagraph (C) of section 49(a)(1) is amended by
striking ``and'' at the end of clause (ii), by striking the
period at the end of clause (iii) and inserting ``, and'', and
by adding at the end the following new clause:
``(iv) the portion of the basis of any
qualified revitalization building attributable
to qualified revitalization expenditures.''.
(5) Paragraph (2) of section 50(a) is amended by inserting
``or 1400K(d)(2)'' after ``section 47(d)'' each place it
appears.
(6) Subparagraph (A) of section 50(a)(2) is amended by
inserting ``or qualified revitalization building
(respectively)'' after ``qualified rehabilitated building''.
(7) Subparagraph (B) of section 50(a)(2) is amended by
adding at the end the following new sentence: ``A similar rule
shall apply for purposes of section 1400K.''.
(8) Paragraph (2) of section 50(b) is amended by striking
``and'' at the end of subparagraph (C), by striking the period
at the end of subparagraph (D) and inserting ``; and'', and by
adding at the end the following new subparagraph:
``(E) a qualified revitalization building (as
defined in section 1400K) to the extent of the portion
of the basis which is attributable to qualified
revitalization expenditures (as defined in section
1400K).''.
(9) The last sentence of section 50(b)(3) is amended to
read as follows: ``If any qualified rehabilitated building or
qualified revitalization building is used by the tax-exempt
organization pursuant to a lease, this paragraph shall not
apply for purposes of determining the amount of the
rehabilitation credit or the commercial revitalization
credit.''.
(10) Subparagraph (C) of section 50(b)(4) is amended--
(A) by inserting ``or commercial revitalization''
after ``rehabilitated'' in the text and heading; and
(B) by inserting ``or commercial revitalization''
after ``rehabilitation''.
(11) Subparagraph (C) of section 469(i)(3) is amended--
(A) by inserting ``or section 1400K'' after
``section 42''; and
(B) by striking ``credit'' in the heading and
inserting ``and commercial revitalization credits''.
(h) Clerical Amendments.--The table of subchapters for chapter 1 is
amended by adding at the end the following new item:
``Subchapter X. Renewal Communities.''.
SEC. 606. EVALUATION AND REPORTING REQUIREMENTS.
Not later than the close of the fourth calendar year after the year
in which the Secretary of Housing and Urban Development first
designates an area as a renewal community under section 1400E of the
Internal Revenue Code of 1986, and at the close of each fourth calendar
year thereafter, such Secretary shall prepare and submit to the
Congress a report on the effects of such designations in stimulating
the creation of new jobs, particularly for disadvantaged workers and
long-term unemployed individuals, and promoting the revitalization of
economically distressed areas.
SEC. 607. EXCLUSION OF EFFECTS OF THIS ACT FROM PAYGO SCORECARD.
Upon the enactment of this Act, the Director of the Office of
Management and Budget shall not make any estimates of changes in
receipts under section 252(d) of the Balanced Budget and Emergency
Deficit Control Act of 1985 resulting from the enactment of this Act.
TITLE VII--ESTABLISHMENT OF THE PROTECT SOCIAL SECURITY ACCOUNT
SEC. 701. ESTABLISHMENT OF SPECIAL RESERVE ACCOUNT.
Section 201 of the Social Security Act is amended by adding at the
end the following new subsection:
``(n)(1) There is established within the Treasury a special reserve
account to be known as the `Protect Social Security Account'
(hereinafter in this subsection referred to as the `account'). The
account shall be used to save budget surpluses until a reform measure
is enacted to ensure the long-term solvency of the OASDI trust funds.
``(2) The Secretary of the Treasury shall pay into the account
annually at the end of each fiscal year during the fiscal-year period
beginning on October 1, 1997, and ending on September 30, 2008, amounts
totalling, in the aggregate, 90 percent of the projected surplus, if
any, in the total budget of the United States Government for that
fiscal-year period.
``(3) For purposes of determining budget surpluses under paragraph
(2), within 10 days after the date of enactment of this subsection, the
Secretary of the Treasury, in consultation with the Director of the
Office of Management and Budget, shall project the budget surplus, if
any, for the total budget of the United States Government for the
fiscal-year period beginning on October 1, 1997, and ending on
September 30, 2008.
``(4) The Secretary of the Treasury shall invest the funds held in
the account pending enactment of the reform measure referred to in
paragraph (1). The purposes for which obligations of the United States
may be issued under chapter 31 of title 31, United States Code, are
hereby extended to authorize, in the manner provided in subsection (d),
the issuance at par of public-debt obligations for purchase for the
account. The interest on, and the proceeds from redemption of, any
obligations held in the account shall be credited to and form a part of
the account.
``(5) As used in this subsection, the term `total budget of the
United States Government' means all spending and receipt accounts of
the United States Government that are designated as on-budget or off-
budget accounts.''.
SEC. 702. EFFECTIVE DATE.
The amendment made by section 701 shall apply to fiscal years
beginning on or after October 1, 1997.
Passed the House of Representatives September 26, 1998.
Attest:
ROBIN H. CARLE,
Clerk.