[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2488 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  

                  In the Senate of the United States,

                                                         July 30, 1999.
      Resolved, That the bill from the House of Representatives (H.R. 
2488) entitled ``An Act to provide for reconciliation pursuant to 
sections 105 and 211 of the concurrent resolution on the budget for 
fiscal year 2000.'', do pass with the following

                               AMENDMENT:

            Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Taxpayer Refund 
Act of 1999''.
    (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) Section 15 Not To Apply.--No amendment made by this Act shall 
be treated as a change in a rate of tax for purposes of section 15 of 
the Internal Revenue Code of 1986.
    (d) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.

                    TITLE I--BROAD BASED TAX RELIEF

Sec. 101. Reduction of 15 percent individual income tax rate.
Sec. 102. Increase in maximum taxable income for 14 percent rate 
                            bracket.

                 TITLE II--FAMILY TAX RELIEF PROVISIONS

Sec. 201. Combined return to which unmarried rates apply.
Sec. 202. Marriage penalty relief for earned income credit.
Sec. 203. Exclusion for foster care payments to apply to payments by 
                            qualified placement agencies.
Sec. 204. Modification of dependent care credit.
Sec. 205. Allowance of credit for employer expenses for child care 
                            assistance.
Sec. 206. Modification of alternative minimum tax for individuals.
Sec. 207. Long-term capital gains deduction for individuals.
Sec. 208. Credit for interest on higher education loans.
Sec. 209. Elimination of marriage penalty in standard deduction.
Sec. 210. Expansion of adoption credit.
Sec. 211. Modification of tax rates for trusts for individuals who are 
                            disabled.

                TITLE III--RETIREMENT SAVINGS TAX RELIEF

             Subtitle A--Individual Retirement Arrangements

Sec. 301. Modification of deduction limits for IRA contributions.
Sec. 302. Modification of income limits on contributions and rollovers 
                            to Roth IRAs.
Sec. 303. Deemed IRAs under employer plans.
Sec. 304. Tax credit for matching contributions to Individual 
                            Development Accounts.
Sec. 305. Certain coins not treated as collectibles.

                     Subtitle B--Expanding Coverage

Sec. 311. Option to treat elective deferrals as after-tax 
                            contributions.
Sec. 312. Increase in elective contribution limits.
Sec. 313. Plan loans for subchapter S owners, partners, and sole 
                            proprietors.
Sec. 314. Elective deferrals not taken into account for purposes of 
                            deduction limits.
Sec. 315. Reduced PBGC premium for new plans of small employers.
Sec. 316. Reduction of additional PBGC premium for new plans.
Sec. 317. Elimination of user fee for requests to IRS regarding new 
                            pension plans.
Sec. 318. SAFE annuities and trusts.
Sec. 319. Modification of top-heavy rules.

                Subtitle C--Enhancing Fairness for Women

Sec. 321. Catchup contributions for individuals age 50 or over.
Sec. 322. Equitable treatment for contributions of employees to defined 
                            contribution plans.
Sec. 323. Clarification of tax treatment of division of section 457 
                            plan benefits upon divorce.
Sec. 324. Modification of safe harbor relief for hardship withdrawals 
                            from cash or deferred arrangements.
Sec. 325. Faster vesting of certain employer matching contributions.

          Subtitle D--Increasing Portability for Participants

Sec. 331. Rollovers allowed among various types of plans.
Sec. 332. Rollovers of IRAs into workplace retirement plans.
Sec. 333. Rollovers of after-tax contributions.
Sec. 334. Hardship exception to 60-day rule.
Sec. 335. Treatment of forms of distribution.
Sec. 336. Rationalization of restrictions on distributions.
Sec. 337. Purchase of service credit in governmental defined benefit 
                            plans.
Sec. 338. Employers may disregard rollovers for purposes of cash-out 
                            amounts.
Sec. 339. Inclusion requirements for section 457 plans.

       Subtitle E--Strengthening Pension Security and Enforcement

Sec. 341. Repeal of 150 percent of current liability funding limit.
Sec. 342. Extension of missing participants program to multiemployer 
                            plans.
Sec. 343. Excise tax relief for sound pension funding.
Sec. 344. Failure to provide notice by defined benefit plans 
                            significantly reducing future benefit 
                            accruals.
Sec. 345. Protection of investment of employee contributions to 401(k) 
                            plans.
Sec. 346. Treatment of multiemployer plans under section 415.
Sec. 347. Maximum contribution deduction rules modified and applied to 
                            all defined benefit plans.
Sec. 348. Increase in section 415 early retirement limit for 
                            governmental and other plans.

              Subtitle F--Encouraging Retirement Education

Sec. 351. Periodic pension benefits statements.
Sec. 352. Clarification of treatment of employer-provided retirement 
                            advice.

                Subtitle G--Reducing Regulatory Burdens

Sec. 361. Flexibility in nondiscrimination and coverage rules.
Sec. 362. Modification of timing of plan valuations.
Sec. 363. Substantial owner benefits in terminated plans.
Sec. 364. ESOP dividends may be reinvested without loss of dividend 
                            deduction.
Sec. 365. Notice and consent period regarding distributions.
Sec. 366. Repeal of transition rule relating to certain highly 
                            compensated employees.
Sec. 367. Employees of tax-exempt entities.
Sec. 368. Extension to international organizations of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 369. Annual report dissemination.
Sec. 370. Modification of exclusion for employer provided transit 
                            passes and passengers permitted to utilize 
                            otherwise empty seats on aircraft.
Sec. 371. Reporting simplification.

                      Subtitle H--Plan Amendments

Sec. 381. Provisions relating to plan amendments.

               TITLE IV--EDUCATION TAX RELIEF PROVISIONS

Sec. 401. Elimination of 60-month limit and increase in income 
                            limitation on student loan interest 
                            deduction.
Sec. 402. Modifications to qualified tuition programs.
Sec. 403. Exclusion of certain amounts received under the National 
                            Health Service Corps Scholarship Program 
                            and the F. Edward Hebert Armed Forces 
                            Health Professions Scholarship and 
                            Financial Assistance Program.
Sec. 404. Extension of exclusion for employer-provided educational 
                            assistance.
Sec. 405. Additional increase in arbitrage rebate exception for 
                            governmental bonds used to finance 
                            educational facilities.
Sec. 406. Treatment of qualified public educational facility bonds as 
                            exempt facility bonds.
Sec. 407. Federal guarantee of school construction bonds by Federal 
                            Home Loan Banks.
Sec. 408. Certain educational benefits provided by an employer to 
                            children of employees excludable from gross 
                            income as a scholarship.

               TITLE V--HEALTH CARE TAX RELIEF PROVISIONS

Sec. 501. Deduction for health and long-term care insurance costs of 
                            individuals not participating in employer-
                            subsidized health plans.
Sec. 502. Long-term care insurance permitted to be offered under 
                            cafeteria plans and flexible spending 
                            arrangements.
Sec. 503. Additional personal exemption for taxpayer caring for elderly 
                            family member in taxpayer's home.
Sec. 504. Inclusion of certain vaccines against streptococcus 
                            pneumoniae to list of taxable vaccines; 
                            reduction in per dose tax rate.

             TITLE VI--SMALL BUSINESS TAX RELIEF PROVISIONS

Sec. 601. Deduction for 100 percent of health insurance costs of self-
                            employed individuals.
Sec. 602. Increase in expense treatment for small businesses.
Sec. 603. Repeal of Federal unemployment surtax.
Sec. 604. Income averaging for farmers and fishermen not to increase 
                            alternative minimum tax liability.
Sec. 605. Farm, Fishing, and Ranch Risk Management Accounts.
Sec. 606. Exclusion of investment securities income from passive income 
                            test for bank S corporations.
Sec. 607. Treatment of qualifying director shares.
Sec. 608. Increase in estate tax deduction for family-owned business 
                            interest.
Sec. 609. Credit for employee health insurance expenses.

            TITLE VII--ESTATE AND GIFT TAX RELIEF PROVISIONS

    Subtitle A--Reductions of Estate, Gift, and Generation-Skipping 
                             Transfer Taxes

Sec. 701. Reductions of estate, gift, and generation-skipping transfer 
                            taxes.
Sec. 702. Unified credit against estate and gift taxes replaced with 
                            unified exemption amount.

                   Subtitle B--Conservation Easements

Sec. 711. Expansion of estate tax rule for conservation easements.

                   Subtitle C--Annual Gift Exclusion

Sec. 721. Increase in annual gift exclusion.

     Subtitle D--Simplification of Generation-Skipping Transfer Tax

Sec. 731. Retroactive allocation of GST exemption.
Sec. 732. Severing of trusts.
Sec. 733. Modification of certain valuation rules.
Sec. 734. Relief provisions.

            TITLE VIII--TAX EXEMPT ORGANIZATIONS PROVISIONS

Sec. 801. Exemption from income tax for State-created organizations 
                            providing property and casualty insurance 
                            for property for which such coverage is 
                            otherwise unavailable.
Sec. 802. Modifications to section 512(b)(13).
Sec. 803. Simplification of lobbying expenditure limitation.
Sec. 804. Tax-free distributions from individual retirement accounts 
                            for charitable purposes.
Sec. 805. Mileage reimbursements to charitable volunteers excluded from 
                            gross income.
Sec. 806. Charitable contribution deduction for certain expenses 
                            incurred in support of Native Alaskan 
                            subsistence whaling.
Sec. 807. Charitable contributions to certain low income schools may be 
                            made in next taxable year.
Sec. 808. Deduction for portion of charitable contributions to be 
                            allowed to individuals who do not itemize 
                            deductions.
Sec. 809. Increase in limit on charitable contributions as percentage 
                            of AGI.
Sec. 810. Limited exception to excess business holdings rule.
Sec. 811. Certain costs of private foundation in removing hazardous 
                            substances treated as qualifying 
                            distribution.
Sec. 812. Holding period reduced to 12 months for purposes of 
                            determining whether horses are section 1231 
                            assets.

                   TITLE IX--INTERNATIONAL TAX RELIEF

Sec. 901. Interest allocation rules.
Sec. 902. Look-thru rules to apply to dividends from noncontrolled 
                            section 902 corporations.
Sec. 903. Clarification of treatment of pipeline transportation income.
Sec. 904. Subpart F treatment of income from transmission of high 
                            voltage electricity.
Sec. 905. Advance pricing agreements treated as confidential taxpayer 
                            information.
Sec. 906. Airline mileage awards to certain foreign persons.
Sec. 907. Repeal of foreign tax credit limitation under alternative 
                            minimum tax.
Sec. 908. Treatment of military property of foreign sales corporations.

         TITLE X--HOUSING AND REAL ESTATE TAX RELIEF PROVISIONS

                 Subtitle A--Low-Income Housing Credit

Sec. 1001. Modification of State ceiling on low-income housing credit.

                       Subtitle B--Historic Homes

Sec. 1011. Tax credit for renovating historic homes.

    Subtitle C--Provisions Relating to Real Estate Investment Trusts

   Part I--Treatment of Income and Services Provided by Taxable REIT 
                              Subsidiaries

Sec. 1021. Modifications to asset diversification test.
Sec. 1022. Treatment of income and services provided by taxable REIT 
                            subsidiaries.
Sec. 1023. Taxable REIT subsidiary.
Sec. 1024. Limitation on earnings stripping.
Sec. 1025. 100 percent tax on improperly allocated amounts.
Sec. 1026. Effective date.

                       Part II--Health Care REITs

Sec. 1031. Health care REITs.

      Part III--Conformity With Regulated Investment Company Rules

Sec. 1041. Conformity with regulated investment company rules.

 Part IV--Clarification of Exception From Impermissible Tenant Service 
                                 Income

Sec. 1051. Clarification of exception for independent operators.

           Part V--Modification of Earnings and Profits Rules

Sec. 1061. Modification of earnings and profits rules.

          Part VI--Study Relating to Taxable REIT Subsidiaries

Sec. 1071. Study relating to taxable REIT subsidiaries.

              Subtitle D--Private Activity Bond Volume Cap

Sec. 1081. Increase in volume cap on private activity bonds.

            Subtitle E--Leasehold Improvements Depreciation

Sec. 1091. Recovery period for depreciation of certain leasehold 
                            improvements.

                   TITLE XI--MISCELLANEOUS PROVISIONS

Sec. 1101. Repeal of certain motor fuel excise taxes on fuel used by 
                            railroads and on inland waterway 
                            transportation.
Sec. 1102. Tax treatment of Alaska Native Settlement Trusts.
Sec. 1103. Long-term unused credits allowed against minimum tax.
Sec. 1104. 5-year net operating loss carryback for losses attributable 
                            to operating mineral interests of 
                            independent oil and gas producers.
Sec. 1105. Election to expense geological and geophysical expenditures.
Sec. 1106. Election to expense delay rental payments
Sec. 1107. Modification of active business definition under section 
                            355.
Sec. 1108. Temporary suspension of maximum amount of amortizable 
                            reforestation expenditures.
Sec. 1109. Modification of excise tax imposed on arrow components.
Sec. 1110. Increase in threshold for Joint Committee reports on refunds 
                            and credits.
Sec. 1111. Modification of rural airport definition.
Sec. 1112. Payment of dividends on stock of cooperatives without 
                            reducing patronage dividends.
Sec. 1113. Consolidation of life insurance companies with other 
                            corporations.
Sec. 1114. Expansion of exemption from personal holding company tax for 
                            lending or finance companies.
Sec. 1115. Credit for modifications to inter-city buses required under 
                            the Americans With Disabilities Act of 
                            1990.
Sec. 1116. Increased deductibility of business meal expenses for 
                            individuals subject to Federal limitations 
                            on hours of service.
Sec. 1117. Tax-exempt financing of qualified highway infrastructure 
                            construction.
Sec. 1118. Expansion of DC homebuyer tax credit.
Sec. 1119. Extension of DC zero percent capital gains rate.
Sec. 1120. Natural gas gathering lines treated as 7-year property.
Sec. 1121. Exemption from ticket taxes for certain transportation 
                            provided by small seaplanes.
Sec. 1122. No Federal income tax on amounts and lands received by 
                            Holocaust victims or their heirs.
Sec. 1123. 2-Percent floor on miscellaneous itemized deductions not to 
                            apply to qualified professional development 
                            expenses and qualified incidental expenses 
                            of elementary and secondary school 
                            teachers.
Sec. 1124. Expansion of deduction for computer donations to schools.
Sec. 1125. Credit for computer donations to schools and senior centers.
Sec. 1126. Increase in mandatory spending for Child Care and 
                            Development Block Grant.
Sec. 1127. Sense of the Senate regarding savings incentives.
Sec. 1128. Sense of Congress regarding the need for additional Federal 
                            funding and tax incentives for empowerment 
                            zones and enterprise communities authorized 
                            and designated pursuant to 1997 and 1998 
                            laws.
Sec. 1129. Sense of Congress regarding the need to encourage 
                            improvements in Main Street businesses by 
                            expanding existing small business tax 
                            expensing rules to include investments in 
                            buildings and other depreciable real 
                            property.
Sec. 1130. Certain Native American housing assistance disregarded in 
                            determining whether building is federally 
                            subsidized for purposes of the low-income 
                            housing credit.
Sec. 1131. Disclosure of tax information to facilitate combined 
                            employment tax reporting.
Sec. 1132. Treatment of maple syrup production.
Sec. 1133. Treatment of bonds issued to acquire renewable resources on 
                            land subject to conservation easement.
Sec. 1134. Modification of alternative minimum tax for individuals.
Sec. 1135. Exclusion from income of severance payment amounts.
Sec. 1136. Capital gain treatment under section 631(b) to apply to 
                            outright sales by land owner.
Sec. 1137. Credit for clinical testing research expenses attributable 
                            to certain qualified academic institutions 
                            including teaching hospitals.

        TITLE XII--EXTENSION OF EXPIRED AND EXPIRING PROVISIONS

Sec. 1201. Permanent extension and modification of research credit.
Sec. 1202. Subpart F exemption for active financing income.
Sec. 1203. Taxable income limit on percentage depletion for marginal 
                            production.
Sec. 1204. Work opportunity credit and welfare-to-work credit.
Sec. 1205. Extension and modification of credit for producing 
                            electricity from certain renewable 
                            resources.
Sec. 1206. Alaska exemption from dyeing requirements.
Sec. 1207. Extension of expensing of environmental remediation costs.

                      TITLE XIII--REVENUE OFFSETS

                     Subtitle A--General Provisions

Sec. 1301. Modification to foreign tax credit carryback and carryover 
                            periods.
Sec. 1302. Returns relating to cancellations of indebtedness by 
                            organizations lending money.
Sec. 1303. Increase in elective withholding rate for nonperiodic 
                            distributions from deferred compensation 
                            plans.
Sec. 1304. Extension of Internal Revenue Service user fees.
Sec. 1305. Transfer of excess defined benefit plan assets for retiree 
                            health benefits.
Sec. 1306. Tax treatment of income and loss on derivatives.

                      Subtitle B--Loophole Closers

Sec. 1311. Limitation on use of non-accrual experience method of 
                            accounting.
Sec. 1312. Limitations on welfare benefit funds of 10 or more employer 
                            plans.
Sec. 1313. Modification of installment method and repeal of installment 
                            method for accrual method taxpayers.
Sec. 1314. Treatment of gain from constructive ownership transactions.
Sec. 1315. Charitable split-dollar life insurance, annuity, and 
                            endowment contracts.
Sec. 1316. Restriction on use of real estate investment trusts to avoid 
                            estimated tax payment requirements.
Sec. 1317. Prohibited allocations of S corporation stock held by an 
                            ESOP.
Sec. 1318. Modification of anti-abuse rules related to assumption of 
                            liability.
Sec. 1319. Allocation of basis on transfers of intangibles in certain 
                            nonrecognition transactions.
Sec. 1320. Controlled entities ineligible for REIT status.
Sec. 1321. Distributions to a corporate partner of stock in another 
                            corporation.

                    TITLE XIV--TECHNICAL CORRECTIONS

Sec. 1401. Amendments related to Tax and Trade Relief Extension Act of 
                            1998.
Sec. 1402. Amendments related to Internal Revenue Service Restructuring 
                            and Reform Act of 1998.
Sec. 1403. Amendments related to Taxpayer Relief Act of 1997.
Sec. 1404. Other technical corrections.
Sec. 1405. Clerical changes.
Sec. 1406. Technical corrections to Saver Act.

           TITLE XV--COMPLIANCE WITH CONGRESSIONAL BUDGET ACT

Sec. 1501. Sunset of provisions of Act.

                    TITLE I--BROAD BASED TAX RELIEF

SEC. 101. REDUCTION OF 15 PERCENT INDIVIDUAL INCOME TAX RATE.

    (a) Reduction in Rate.--Subsection (f) of section 1 is amended by 
adding at the end the following new paragraph:
            ``(8) Rate reduction.--In prescribing the tables under 
        paragraph (1) which apply with respect to taxable years 
        beginning in a calendar year after 2000, the rate applicable to 
        the lowest income bracket shall be 14 percent.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 1(f)(2) is amended by 
        inserting ``, except as provided in paragraph (8),'' before 
        ``by not changing''.
            (2) Subparagraph (C) of section 1(f)(2) is amended by 
        inserting ``and the reduction under paragraph (8) in the rate 
        of tax'' before the period.
            (3) The heading for subsection (f) of section 1 is amended 
        by inserting ``Rate Reduction;'' before ``Adjustments''.
            (4) Section 1(g)(7)(B)(ii)(II) is amended by striking ``15 
        percent'' and inserting ``14 percent''.
            (5) Section 3402(p)(1)(B) is amended by striking ``15'' and 
        inserting ``14''.
            (6) Section 3402(p)(2) is amended by striking ``15 
        percent'' and inserting ``14 percent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 102. INCREASE IN MAXIMUM TAXABLE INCOME FOR 14 PERCENT RATE 
              BRACKET.

    (a) In General.--Section 1(f) (relating to adjustments in tax 
tables so that inflation will not result in tax increases), as amended 
by section 101, is amended--
            (1) in paragraph (2)--
                    (A) by redesignating subparagraphs (B) and (C) as 
                subparagraphs (C) and (D),
                    (B) by inserting after subparagraph (A) the 
                following:
                    ``(B) in the case of the tables contained in 
                subsections (a), (b), (c), and (d), by increasing 
                (after adjustment under paragraph (8)) the maximum 
                taxable income level for the 14 percent rate bracket 
                and the minimum taxable income level for the 28 percent 
                rate bracket otherwise determined under subparagraph 
                (A) for taxable years beginning in any calendar year 
                after 2005 by the applicable dollar amount for such 
                calendar year,'', and
                    (C) by striking ``subparagraph (A)'' in 
                subparagraph (C) (as so redesignated) and inserting 
                ``subparagraphs (A) and (B)'', and
            (2) by adding at the end the following:
            ``(9) Applicable dollar amount.--For purposes of paragraph 
        (2)(B)--
                    ``(A) In general.--The applicable dollar amount for 
                any calendar year shall be determined as follows:
                            ``(i) Joint returns and surviving 
                        spouses.--In the case of the table contained in 
                        subsection (a)--

                                                             Applicable
``Calendar year:                                         dollar amount:
    2006..........................................              $4,000 
    2007 and thereafter...........................              $5,000.
                            ``(ii) Other tables.--In the case of the 
                        table contained in subsection (b), (c), or 
                        (d)--

                                                             Applicable
``Calendar year:                                         dollar amount:
    2006..........................................              $2,000 
    2007 and thereafter...........................              $2,500.
                    ``(B) Cost-of-living adjustment.--In the case of 
                any taxable year beginning in any calendar year after 
                2007, the applicable dollar amount shall be increased 
                by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of living adjustment 
                        determined under paragraph (3) for the calendar 
                        year in which the taxable year begins, 
                        determined by substituting `calendar year 2006' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.''.
    (b) Rounding.--Section 1(f)(6)(A) is amended by inserting ``(after 
being increased under paragraph (2)(B))'' after ``paragraph (2)(A)''.

                 TITLE II--FAMILY TAX RELIEF PROVISIONS

SEC. 201. COMBINED RETURN TO WHICH UNMARRIED RATES APPLY.

    (a) In General.--Subpart B of part II of subchapter A of chapter 61 
(relating to income tax returns) is amended by inserting after section 
6013 the following new section:

``SEC. 6013A. COMBINED RETURN WITH SEPARATE RATES.

    ``(a) General Rule.--A husband and wife may make a combined return 
of income taxes under subtitle A under which--
            ``(1) a separate taxable income is determined for each 
        spouse by applying the rules provided in this section, and
            ``(2) the tax imposed by section 1 is the aggregate amount 
        resulting from applying the separate rates set forth in section 
        1(c) to each such taxable income.
    ``(b) Treatment of Income.--For purposes of this section--
            ``(1) earned income (within the meaning of section 911(d)), 
        and any income received as a pension or annuity which arises 
        from an employer-employee relationship, shall be treated as the 
        income of the spouse who rendered the services, and
            ``(2) income from property shall be divided between the 
        spouses in accordance with their respective ownership rights in 
        such property (equally in the case of property held jointly by 
        the spouses).
    ``(c) Treatment of Deductions.--For purposes of this section--
            ``(1) except as otherwise provided in this subsection, the 
        deductions described in section 62(a) shall be allowed to the 
        spouse treated as having the income to which such deductions 
        relate,
            ``(2) the deduction for retirement savings described in 
        paragraph (7) of section 62(a) shall be allowed to the spouse 
        whose earned income qualified the savings for the deduction,
            ``(3) the deduction for alimony described in paragraph (10) 
        of section 62(a) shall be allowed to the spouse who has the 
        liability to pay the alimony,
            ``(4) the deduction described in paragraph (16) of section 
        62(a) (relating to contributions to medical savings accounts) 
        shall be allowed to the spouse with respect to whose employment 
        or self-employment such account relates,
            ``(5) the deductions allowable by section 151(b) (relating 
        to personal exemptions for taxpayer and spouse) shall be 
        determined by allocating 1 personal exemption to each spouse,
            ``(6) section 63 shall be applied as if such spouses were 
        not married, except that the election whether or not to itemize 
        deductions shall be made jointly by both spouses and apply to 
        each, and
            ``(7) each spouse's share of all other deductions shall be 
        determined by multiplying the aggregate amount thereof by the 
        fraction--
                    ``(A) the numerator of which is such spouse's 
                adjusted gross income, and
                    ``(B) the denominator of which is the combined 
                adjusted gross incomes of the 2 spouses.
Any fraction determined under paragraph (7) shall be rounded to the 
nearest percentage point.
    ``(d) Treatment of Credits.--Credits shall be determined (and 
applied against the joint liability of the couple for tax determined 
under this section) as if the spouses had filed a joint return.
    ``(e) Treatment as Joint Return.--Except as otherwise provided in 
this section or in the regulations prescribed hereunder, for purposes 
of this title (other than sections 1 and 63(c)) a combined return under 
this section shall be treated as a joint return.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out this section.''.
    (b) Unmarried Rate Made Applicable.--So much of subsection (c) of 
section 1 as precedes the table is amended to read as follows:
    ``(c) Separate or Unmarried Return Rate.--There is hereby imposed 
on the taxable income of every individual (other than a married 
individual (as defined in section 7703) filing a return which is not a 
combined return under section 6013A, a surviving spouse as defined in 
section 2(a), or a head of household as defined in section 2(b)) a tax 
determined in accordance with the following table:''.
    (c) Basic Standard Deduction for Unmarried Individuals Made 
Applicable.--Subparagraph (C) of section 63(c)(2) is amended to read as 
follows:
                    ``(C) $3,000 in the case of an individual other 
                than--
                            ``(i) a married individual filing a return 
                        which is not a combined return under section 
                        6013A,
                            ``(ii) a surviving spouse, or
                            ``(iii) a head of household, or''.
    (d) Clerical Amendment.--The table of sections for subpart B of 
part II of subchapter A of chapter 61 is amended by inserting after the 
item relating to section 6013 the following:

                              ``Sec. 6013A. Combined return with 
                                        separate rates.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 202. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT.

    (a) In General.--Paragraph (2) of section 32(b) (relating to 
percentages and amounts) is amended--
            (1) by striking ``Amounts.--The earned'' and inserting 
        ``Amounts.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                earned'', and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Joint returns.--In the case of a joint 
                return, the phaseout amount determined under 
                subparagraph (A) shall be increased by $2,000.''.
    (b) Inflation adjustment.--Paragraph (1)(B) of section 32(j) 
(relating to inflation adjustments) is amended to read as follows:
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined--
                            ``(i) in the case of amounts in subsections 
                        (b)(1)(A) and (i)(1), by substituting `calendar 
                        year 1995' for `calendar year 1992' in 
                        subparagraph (B) thereof, and
                            ``(ii) in the case of the $2,000 amount in 
                        subsection (b)(1)(B), by substituting `calendar 
                        year 2004' for `calendar year 1992' in 
                        subparagraph (B) of such section 1.''.
    (c) Rounding.--Section 32(j)(2)(A) (relating to rounding) is 
amended by striking ``subsection (b)(2)'' and inserting ``subsection 
(b)(2)(A) (after being increased under subparagraph (B) thereof)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 203. EXCLUSION FOR FOSTER CARE PAYMENTS TO APPLY TO PAYMENTS BY 
              QUALIFIED PLACEMENT AGENCIES.

    (a) In General.--The matter preceding subparagraph (B) of section 
131(b)(1) (defining qualified foster care payment) is amended to read 
as follows:
            ``(1) In general.--The term `qualified foster care payment' 
        means any payment made pursuant to a foster care program of a 
        State or political subdivision thereof--
                    ``(A) which is paid by--
                            ``(i) the State or political subdivision 
                        thereof, or
                            ``(ii) a qualified foster care placement 
                        agency of such State or political subdivision, 
                        and''.
    (b) Qualified Foster Individuals To Include Individuals Placed by 
Qualified Placement Agencies.--Subparagraph (B) of section 131(b)(2) 
(defining qualified foster individual) is amended to read as follows:
                    ``(B) a qualified foster care placement agency.''.
    (c) Qualified Foster Care Placement Agency Defined.--Subsection (b) 
of section 131 is amended by redesignating paragraph (3) as paragraph 
(4) and by inserting after paragraph (2) the following new paragraph:
            ``(3) Qualified foster care placement agency.--The term 
        `qualified foster care placement agency' means any placement 
        agency which is licensed or certified by--
                    ``(A) a State or political subdivision thereof, or
                    ``(B) an entity designated by a State or political 
                subdivision thereof,
        to make foster care payments under the foster care program of 
        such State or political subdivision to providers of foster 
        care.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 204. MODIFICATION OF DEPENDENT CARE CREDIT.

    (a) Increase in Percentage of Employment-Related Expenses Taken 
Into Account.--Subsection (a)(2) of section 21 (relating to expenses 
for household and dependent care services necessary for gainful 
employment) is amended--
            (1) by striking ``30 percent'' and inserting ``40 
        percent'',
            (2) by striking ``$2,000'' and inserting ``$1,000'', and
            (3) by striking ``$10,000'' and inserting ``$30,000''.
    (b) Indexing of Limit on Employment-Related Expenses.--Section 
21(c) (relating to dollar limit on amount creditable) is amended to 
read as follows:
    ``(c) Dollar Limit on Amount Creditable.--
            ``(1) In general.--The amount of the employment-related 
        expenses incurred during any taxable year which may be taken 
        into account under subsection (a) shall not exceed--
                    ``(A) an amount equal to 50 percent of the amount 
                determined under subparagraph (B) if there is 1 
                qualifying individual with respect to the taxpayer for 
                such taxable year, or
                    ``(B) $4,800 if there are 2 or more qualifying 
                individuals with respect to the taxpayer for such 
                taxable year.
        The amount determined under subparagraph (A) or (B) (whichever 
        is applicable) shall be reduced by the aggregate amount 
        excludable from gross income under section 129 for the taxable 
        year.
            ``(2) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2000, the $4,800 amount under paragraph 
                (1)(B) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 1999' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding rules.--If any amount after 
                adjustment under subparagraph (A) is not a multiple of 
                $50, such amount shall be rounded to the next lower 
                multiple of $50.''.
    (c) Minimum Dependent Care Credit Allowed for Stay-at-Home 
Parents.--Section 21(e) (relating to special rules) is amended by 
adding at the end the following:
            ``(11) Minimum credit allowed for stay-at-home parents.--
                    ``(A) In general.--Notwithstanding subsection (d), 
                in the case of any taxpayer with 1 or more qualifying 
                individuals described in subsection (b)(1)(A) under the 
                age of 1, such taxpayer shall be deemed to have 
                employment-related expenses for the taxable year with 
                respect to each such qualifying individual in an amount 
                equal to the sum of--
                            ``(i) $200 for each month in such taxable 
                        year during which such qualifying individual is 
                        under the age of 1, and
                            ``(ii) the amount of employment-related 
                        expenses otherwise incurred for such qualifying 
                        individual for the taxable year (determined 
                        under this section without regard to this 
                        paragraph).
                    ``(B) Election to not apply this paragraph.--This 
                paragraph shall not apply with respect to any 
                qualifying individual for any taxable year if the 
                taxpayer elects to not have this paragraph apply to 
                such qualifying individual for such taxable year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 205. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD CARE 
              ASSISTANCE.

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

``SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the 
employer-provided child care credit determined under this section for 
the taxable year is an amount equal to the sum of--
            ``(1) 25 percent of the qualified child care expenditures, 
        and
            ``(2) 10 percent of the qualified child care resource and 
        referral expenditures,
of the taxpayer for such taxable year.
    ``(b) Dollar Limitation.--The credit allowable under subsection (a) 
for any taxable year shall not exceed $150,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified child care expenditure.--
                    ``(A) In general.--The term `qualified child care 
                expenditure' means any amount paid or incurred--
                            ``(i) to acquire, construct, rehabilitate, 
                        or expand property--
                                    ``(I) which is to be used as part 
                                of an eligible qualified child care 
                                facility of the taxpayer,
                                    ``(II) with respect to which a 
                                deduction for depreciation (or 
                                amortization in lieu of depreciation) 
                                is allowable, and
                                    ``(III) which does not constitute 
                                part of the principal residence (within 
                                the meaning of section 121) of the 
                                taxpayer or any employee of the 
                                taxpayer,
                            ``(ii) for the operating costs of an 
                        eligible qualified child care facility of the 
                        taxpayer, including costs related to the 
                        training of employees of the child care 
                        facility, to scholarship programs, to the 
                        providing of differential compensation to 
                        employees based on level of child care 
                        training, and to expenses associated with 
                        achieving accreditation, or
                            ``(iii) under a contract with a qualified 
                        child care facility to provide child care 
                        services to employees of the taxpayer.
                    ``(B) Exclusion for amounts funded by grants, 
                etc.--The term `qualified child care expenditure' shall 
                not include any amount to the extent such amount is 
                funded by any grant, contract, or otherwise by another 
                person (or any governmental entity).
                    ``(C) Nondiscrimination.--The term `qualified child 
                care expenditure' shall not include any amount expended 
                in relation to any child care services unless the 
                providing of such services to employees of the taxpayer 
                does not discriminate in favor of highly compensated 
                employees (within the meaning of section 404(q)).
            ``(2) Qualified child care facility.--
                    ``(A) In general.--The term `qualified child care 
                facility' means a facility--
                            ``(i) the principal use of which is to 
                        provide child care assistance, and
                            ``(ii) which meets the requirements of all 
                        applicable laws and regulations of the State or 
                        local government in which it is located, 
                        including, but not limited to, the licensing of 
                        the facility as a child care facility.
                Clause (i) shall not apply to a facility which is the 
                principal residence (within the meaning of section 121) 
                of the operator of the facility.
                    ``(B) Eligible qualified child care facility.--A 
                qualified child care facility shall be treated as an 
                eligible qualified child care facility with respect to 
                the taxpayer if--
                            ``(i) enrollment in the facility is open to 
                        employees of the taxpayer during the taxable 
                        year,
                            ``(ii) the facility is not the principal 
                        trade or business of the taxpayer, and
                            ``(iii) at least 30 percent of the 
                        enrollees of such facility are dependents of 
                        employees of the taxpayer.
                    ``(C) Application of subparagraph (b).--In the case 
                of a new facility, the facility shall be treated as 
                meeting the requirement of subparagraph (B)(iii) if not 
                later than 2 years after placing such facility in 
                service at least 30 percent of the enrollees of such 
                facility are dependents of employees of the taxpayer.
            ``(3) Qualified child care resource and referral 
        expenditure.--
                    ``(A) In general.--The term `qualified child care 
                resource and referral expenditure' means any amount 
                paid or incurred under a contract to provide child care 
                resource and referral services to employees of the 
                taxpayer.
                    ``(B) Exclusion for amounts funded by grants, 
                etc.--The term `qualified child care resource and 
                referral expenditure' shall not include any amount to 
                the extent such amount is funded by any grant, 
                contract, or otherwise by another person (or any 
                governmental entity).
                    ``(C) Nondiscrimination.--The term `qualified child 
                care resource and referral expenditure' shall not 
                include any amount expended in relation to any child 
                care resource and referral services unless the 
                providing of such services to employees of the taxpayer 
                does not discriminate in favor of highly compensated 
                employees (within the meaning of section 404(q)).
    ``(d) Recapture of Acquisition and Construction Credit.--
            ``(1) In general.--If, as of the close of any taxable year, 
        there is a recapture event with respect to any eligible 
        qualified child care facility of the taxpayer, then the tax of 
        the taxpayer under this chapter for such taxable year shall be 
        increased by an amount equal to the product of--
                    ``(A) the applicable recapture percentage, and
                    ``(B) the aggregate decrease in the credits allowed 
                under section 38 for all prior taxable years which 
                would have resulted if the qualified child care 
                expenditures of the taxpayer described in subsection 
                (c)(1)(A) with respect to such facility had been zero.
            ``(2) Applicable recapture percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the applicable recapture percentage shall be determined 
                from the following table:

  
                                                         The applicable
  
                                                              recapture
            ``If the recapture event occurs in:
                                                         percentage is:
                Year 1...............................          100     
                Year 2...............................           80     
                Year 3...............................           60     
                Year 4...............................           40     
                Year 5...............................           20     
                Years 6 and thereafter...............            0.    
                    ``(B) Years.--For purposes of subparagraph (A), 
                year 1 shall begin on the first day of the taxable year 
                in which the eligible qualified child care facility is 
                placed in service by the taxpayer.
            ``(3) Recapture event defined.--For purposes of this 
        subsection, the term `recapture event' means--
                    ``(A) Cessation of operation.--The cessation of the 
                operation of the facility as an eligible qualified 
                child care facility.
                    ``(B) Change in ownership.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the disposition of a taxpayer's 
                        interest in an eligible qualified child care 
                        facility with respect to which the credit 
                        described in subsection (a) was allowable.
                            ``(ii) Agreement to assume recapture 
                        liability.--Clause (i) shall not apply if the 
                        person acquiring such interest in the facility 
                        agrees in writing to assume the recapture 
                        liability of the person disposing of such 
                        interest in effect immediately before such 
                        disposition. In the event of such an 
                        assumption, the person acquiring the interest 
                        in the facility shall be treated as the 
                        taxpayer for purposes of assessing any 
                        recapture liability (computed as if there had 
                        been no change in ownership).
            ``(4) Special rules.--
                    ``(A) Tax benefit rule.--The tax for the taxable 
                year shall be increased under paragraph (1) only with 
                respect to credits allowed by reason of this section 
                which were used to reduce tax liability. In the case of 
                credits not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 shall be 
                appropriately adjusted.
                    ``(B) No credits against tax.--Any increase in tax 
                under this subsection shall not be treated as a tax 
                imposed by this chapter for purposes of determining the 
                amount of any credit under subpart A, B, or D of this 
                part.
                    ``(C) No recapture by reason of casualty loss.--The 
                increase in tax under this subsection shall not apply 
                to a cessation of operation of the facility as a 
                qualified child care facility by reason of a casualty 
                loss to the extent such loss is restored by 
                reconstruction or replacement within a reasonable 
                period established by the Secretary.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons which are treated as 
        a single employer under subsections (a) and (b) of section 52 
        shall be treated as a single taxpayer.
            ``(2) Pass-thru in the case of estates and trusts.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of subsection (d) of section 52 shall apply.
            ``(3) Allocation in the case of partnerships.--In the case 
        of partnerships, the credit shall be allocated among partners 
        under regulations prescribed by the Secretary.
    ``(f) No Double Benefit.--
            ``(1) Reduction in basis.--For purposes of this subtitle--
                    ``(A) In general.--If a credit is determined under 
                this section with respect to any property by reason of 
                expenditures described in subsection (c)(1)(A), the 
                basis of such property shall be reduced by the amount 
                of the credit so determined.
                    ``(B) Certain dispositions.--If during any taxable 
                year there is a recapture amount determined with 
                respect to any property the basis of which was reduced 
                under subparagraph (A), the basis of such property 
                (immediately before the event resulting in such 
                recapture) shall be increased by an amount equal to 
                such recapture amount. For purposes of the preceding 
                sentence, the term `recapture amount' means any 
                increase in tax (or adjustment in carrybacks or 
                carryovers) determined under subsection (d).
            ``(2) Other deductions and credits.--No deduction or credit 
        shall be allowed under any other provision of this chapter with 
        respect to the amount of the credit determined under this 
        section.''.
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended--
                    (A) by striking out ``plus'' at the end of 
                paragraph (11),
                    (B) by striking out the period at the end of 
                paragraph (12), and inserting a comma and ``plus'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(13) the employer-provided child care credit determined 
        under section 45D.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

                              ``Sec. 45D. Employer-provided child care 
                                        credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 206. MODIFICATION OF ALTERNATIVE MINIMUM TAX FOR INDIVIDUALS.

    (a) Nonrefundable Personal Credits Fully Allowed Against Regular 
Tax Liability.--
            (1) In general.--Subsection (a) of section 26 (relating to 
        limitation based on amount of tax) 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 taxpayer's regular tax liability for the taxable year.''.
            (2) Child credit.--Subsection (d) of section 24 is amended 
        by striking paragraph (2) and by redesignating paragraph (3) as 
        paragraph (2).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1998.
    (b) Personal Exemptions Allowed in Computing Minimum Tax.--
            (1) In general.--Subparagraph (E) of section 56(b)(1) is 
        amended to read as follows:
                    ``(E) Special rule for certain deductions.--The 
                standard deduction under section 63(c) shall not be 
                allowed and the deduction for personal exemptions under 
                section 151 and the deduction under section 642(b) 
                shall each be allowed, but shall each be reduced by 
                $250.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.

SEC. 207. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

    (a) General Rule.--Part I of subchapter P of chapter 1 (relating to 
treatment of capital gains) is amended by redesignating section 1202 as 
section 1203 and by inserting after section 1201 the following new 
section:

``SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction for the taxable year an amount equal to the 
lesser of--
            ``(1) the net capital gain of the taxpayer for the taxable 
        year, or
            ``(2) $1,000.
    ``(b) Sales Between Related Parties.--Gains from sales and 
exchanges to any related person (within the meaning of section 267(b) 
or 707(b)(1)) shall not be taken into account in determining net 
capital gain.
    ``(c) Special Rule for Section 1250 Property.--Solely for purposes 
of this section, in applying section 1250 to any disposition of section 
1250 property, all depreciation adjustments in respect of the property 
shall be treated as additional depreciation.
    ``(d) Section Not To Apply to Certain Taxpayers.--No deduction 
shall be allowed under this section to--
            ``(1) an individual with respect to whom a deduction under 
        section 151 is allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such individual's 
        taxable year begins,
            ``(2) a married individual (within the meaning of section 
        7703) filing a separate return for the taxable year, or
            ``(3) an estate or trust.
    ``(e) Special Rule for Pass-Thru Entities.--
            ``(1) In general.--In applying this section with respect to 
        any pass-thru entity, the determination of when the sale or 
        exchange occurs shall be made at the entity level.
            ``(2) Pass-thru entity defined.--For purposes of paragraph 
        (1), the term `pass-thru entity' means--
                    ``(A) a regulated investment company,
                    ``(B) a real estate investment trust,
                    ``(C) an S corporation,
                    ``(D) a partnership,
                    ``(E) an estate or trust, and
                    ``(F) a common trust fund.''.
    (b) Coordination With Maximum Capital Gains Rate.--Paragraph (3) of 
section 1(h) (relating to maximum capital gains rate) is amended to 
read as follows:
            ``(3) Coordination with other provisions.--For purposes of 
        this subsection, the amount of the net capital gain shall be 
        reduced (but not below zero) by the sum of--
                    ``(A) the amount of the net capital gain taken into 
                account under section 1202(a) for the taxable year, 
                plus
                    ``(B) the amount which the taxpayer elects to take 
                into account as investment income for the taxable year 
                under section 163(d)(4)(B)(iii).''.
    (c) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62 (defining adjusted gross income) is 
amended by inserting after paragraph (17) the following new paragraph:
            ``(18) Long-term capital gains.--The deduction allowed by 
        section 1202.''.
    (d) Treatment of Collectibles.--
            (1) In general.--Section 1222 (relating to other terms 
        relating to capital gains and losses) is amended by inserting 
        after paragraph (11) the following new paragraph:
            ``(12) Special rule for collectibles.--
                    ``(A) In general.--Any gain or loss from the sale 
                or exchange of a collectible shall be treated as a 
                short-term capital gain or loss (as the case may be), 
                without regard to the period such asset was held. The 
                preceding sentence shall apply only to the extent the 
                gain or loss is taken into account in computing taxable 
                income.
                    ``(B) Treatment of certain sales of interest in 
                partnership, etc.--For purposes of subparagraph (A), 
                any gain from the sale or exchange of an interest in a 
                partnership, S corporation, or trust which is 
                attributable to unrealized appreciation in the value of 
                collectibles held by such entity shall be treated as 
                gain from the sale or exchange of a collectible. Rules 
                similar to the rules of section 751(f) shall apply for 
                purposes of the preceding sentence.
                    ``(C) Collectible.--For purposes of this paragraph, 
                the term `collectible' means any capital asset which is 
                a collectible (as defined in section 408(m) without 
                regard to paragraph (3) thereof).''.
            (2) Charitable deduction not affected.--
                    (A) Paragraph (1) of section 170(e) is amended by 
                adding at the end the following new sentence: ``For 
                purposes of this paragraph, section 1222 shall be 
                applied without regard to paragraph (12) thereof 
                (relating to special rule for collectibles).''.
                    (B) Clause (iv) of section 170(b)(1)(C) is amended 
                by inserting before the period at the end the 
                following: ``and section 1222 shall be applied without 
                regard to paragraph (12) thereof (relating to special 
                rule for collectibles)''.
    (e) Conforming Amendments.--
            (1) Section 57(a)(7) is amended by striking ``1202'' and 
        inserting ``1203''.
            (2) Clause (iii) of section 163(d)(4)(B) is amended to read 
        as follows:
                            ``(iii) the sum of--
                                    ``(I) the portion of the net 
                                capital gain referred to in clause 
                                (ii)(II) (or, if lesser, the net 
                                capital gain referred to in clause 
                                (ii)(I)) taken into account under 
                                section 1202, reduced by the amount of 
                                the deduction allowed with respect to 
                                such gain under section 1202, plus
                                    ``(II) so much of the gain 
                                described in subclause (I) which is not 
                                taken into account under section 1202 
                                and which the taxpayer elects to take 
                                into account under this clause.''.
            (3) Subparagraph (B) of section 172(d)(2) is amended to 
        read as follows:
                    ``(B) the deduction under section 1202 and the 
                exclusion under section 1203 shall not be allowed.''.
            (4) Section 642(c)(4) is amended by striking ``1202'' and 
        inserting ``1203''.
            (5) Section 643(a)(3) is amended by striking ``1202'' and 
        inserting ``1203''.
            (6) Paragraph (4) of section 691(c) is amended inserting 
        ``1203,'' after ``1202,''.
            (7) The second sentence of section 871(a)(2) is amended by 
        inserting ``or 1203'' after ``section 1202''.
            (8) The last sentence of section 1044(d) is amended by 
        striking ``1202'' and inserting ``1203''.
            (9) Paragraph (1) of section 1402(i) is amended by 
        inserting ``, and the deduction provided by section 1202 and 
        the exclusion provided by section 1203 shall not apply'' before 
        the period at the end.
            (10) Section 121 is amended by adding at the end the 
        following new subsection:
    ``(h) Cross Reference.--

                                ``For treatment of eligible gain not 
excluded under subsection (a), see section 1202.''.
            (11) Section 1203, as redesignated by subsection (a), is 
        amended by adding at the end the following new subsection:
    ``(l) Cross Reference.--

                                ``For treatment of eligible gain not 
excluded under subsection (a), see section 1202.''.
            (12) The table of sections for part I of subchapter P of 
        chapter 1 is amended by striking the item relating to section 
        1202 and by inserting after the item relating to section 1201 
        the following new items:

                              ``Sec. 1202. Capital gains deduction.
                              ``Sec. 1203. 50-percent exclusion for 
                                        gain from certain small 
                                        business stock.''.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2005.
            (2) Collectibles.--The amendments made by subsection (d) 
        shall apply to sales and exchanges after December 31, 2005.

SEC. 208. CREDIT FOR INTEREST ON HIGHER EDUCATION LOANS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 25A the following new section:

``SEC. 25B. INTEREST ON HIGHER EDUCATION LOANS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the interest paid by the 
taxpayer during the taxable year on any qualified education loan.
    ``(b) Maximum Credit.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        credit allowed by subsection (a) for the taxable year shall not 
        exceed $1,500.
            ``(2) Limitation based on modified adjusted gross income.--
                    ``(A) In general.--If the modified adjusted gross 
                income of the taxpayer for the taxable year exceeds 
                $50,000 ($80,000 in the case of a joint return), the 
                amount which would (but for this paragraph) be 
                allowable as a credit under this section shall be 
                reduced (but not below zero) by the amount which bears 
                the same ratio to the amount which would be so 
                allowable as such excess bears to $20,000.
                    ``(B) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income determined without regard to sections 911, 931, 
                and 933.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning after 2005, the $50,000 and 
                $80,000 amounts referred to in subparagraph (A) shall 
                be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section (1)(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        by substituting `2004' for `1992'.
                    ``(D) Rounding.--If any amount as adjusted under 
                subparagraph (C) is not a multiple of $50, such amount 
                shall be rounded to the nearest multiple of $50.
    ``(c) Dependents Not Eligible for Credit.--No credit shall be 
allowed by this section to an individual for the taxable year if a 
deduction under section 151 with respect to such individual is allowed 
to another taxpayer for the taxable year beginning in the calendar year 
in which such individual's taxable year begins.
    ``(d) Limit on Period Credit Allowed.--A credit shall be allowed 
under this section only with respect to interest paid on any qualified 
education loan during the first 60 months (whether or not consecutive) 
in which interest payments are required. For purposes of this 
paragraph, any loan and all refinancings of such loan shall be treated 
as 1 loan.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified education loan.--The term `qualified 
        education loan' has the meaning given such term by section 
        221(e)(1).
            ``(2) Dependent.--The term `dependent' has the meaning 
        given such term by section 152.
    ``(f) Special Rules.--
            ``(1) Denial of double benefit.--No credit shall be allowed 
        under this section for any amount taken into account for any 
        deduction under any other provision of this chapter.
            ``(2) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit shall be allowed under subsection (a) only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(3) Marital status.--Marital status shall be determined 
        in accordance with section 7703.''.
    (b) Conforming Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 25A the following new item:

                              ``Sec. 25B. Interest on higher education 
                                        loans.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any qualified education loan (as defined in section 25B(e)(1) 
of the Internal Revenue Code of 1986, as added by this section) 
incurred on, before, or after the date of the enactment of this Act, 
but only with respect to any loan interest payment due after December 
31, 2004.

SEC. 209. 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) Phase-in.--Subsection (c) of section 63 is amended by adding at 
the end the following new paragraph:
            ``(7) Phase-in of increase in basic standard deduction.--In 
        the case of taxable years beginning before January 1, 2008--
                    ``(A) paragraph (2)(A) shall be applied by 
                substituting for `twice'--
                            ``(i) `1.671 times' in the case of taxable 
                        years beginning during 2001,
                            ``(ii) `1.70 times' in the case of taxable 
                        years beginning during 2002,
                            ``(iii) `1.727 times' in the case of 
                        taxable years beginning during 2003,
                            ``(iv) `1.837 times' in the case of taxable 
                        years beginning during 2004,
                            ``(v) `1.951 times' in the case of taxable 
                        years beginning during 2005,
                            ``(vi) `1.953 times' in the case of taxable 
                        years beginning during 2006, and
                            ``(vii) `1.973 times' in the case of 
                        taxable years beginning during 2007, and
                    ``(B) the basic standard deduction for a married 
                individual filing a separate return shall be one-half 
                of the amount applicable under paragraph (2)(A).
        If any amount determined under subparagraph (A) is not a 
        multiple of $50, such amount shall be rounded to the next 
        lowest multiple of $50.''.
    (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, 2000.

SEC. 210. EXPANSION OF ADOPTION CREDIT.

    (a) In General.--Section 23(a)(1) (relating to allowance of credit) 
is amended to read as follows:
            ``(1) In general.--In the case of an individual, there 
        shall be allowed as a credit against the tax imposed by this 
        chapter--
                    ``(A) in the case of an adoption of a child other 
                than a child with special needs, the amount of the 
                qualified adoption expenses paid or incurred by the 
                taxpayer, and
                    ``(B) in the case of an adoption of a child with 
                special needs, $10,000.''.
    (b) Dollar Limitation.--Section 23(b)(1) is amended--
            (1) by striking ``($6,000, in the case of a child with 
        special needs)'', and
            (2) by striking ``subsection (a)'' and inserting 
        ``subsection (a)(1)''.
    (c) Year Credit Allowed.--Section 23(a)(2) is amended by adding at 
the end the following new flush sentence:
        ``In the case of the adoption of a child with special needs, 
        the credit allowed under paragraph (1) shall be allowed for the 
        taxable year in which the adoption becomes final.''.
    (d) Definition of Eligible Child.--Section 23(d)(2) is amended to 
read as follows:
            ``(2) Eligible child.--The term `eligible child' means any 
        individual who--
                    ``(A) has not attained age 18, or
                    ``(B) is physically or mentally incapable of caring 
                for himself.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 211. MODIFICATION OF TAX RATES FOR TRUSTS FOR INDIVIDUALS WHO ARE 
              DISABLED.

    (a) In General.--Section 1(e) (relating to tax imposed on estates 
and trusts) is amended to read as follows:
    ``(e) Estates and Trusts.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there is hereby imposed on the taxable income of--
                    ``(A) every estate, and
                    ``(B) every trust,
        taxable under this subsection a tax determined in accordance 
        with the following table:

``If taxable income is:             The tax is:
    Not over $1,500................
                                        15% of taxable income.
    Over $1,500 but not over $3,500
                                        $225, plus 28% of the excess 
                                                over $1,500.
    Over $3,500 but not over $5,500
                                        $785, plus 31% of the excess 
                                                over $3,500.
    Over $5,500 but not over $7,500
                                        $1,405, plus 36% of the excess 
                                                over $5,500.
    Over $7,500....................
                                        $2,125, plus 39.6% of the 
                                                excess over $7,500.
            ``(2) Special rule for trusts for disabled individuals.--
                    ``(A) In general.--There is hereby imposed on the 
                taxable income of an eligible trust taxable under this 
                subsection a tax determined in the same manner as under 
                subsection (c).
                    ``(B) Eligible trust.--For purposes of subparagraph 
                (A), a trust shall be treated as an eligible trust for 
                any taxable year if, at all times during such year 
                during which the trust is in existence, the exclusive 
                purpose of the trust is to provide reasonable amounts 
                for the support and maintenance of 1 beneficiary who is 
                permanently and totally disabled (within the meaning of 
                section 22(e)(3)). A trust shall not fail to meet the 
                requirements of this subparagraph merely because the 
                corpus of the trust may revert to the grantor or a 
                member of the grantor's family upon the death of the 
                beneficiary.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.

                TITLE III--RETIREMENT SAVINGS TAX RELIEF

             Subtitle A--Individual Retirement Arrangements

SEC. 301. MODIFICATION OF DEDUCTION LIMITS FOR IRA CONTRIBUTIONS.

    (a) Increase in Contribution Limit.--
            (1) In general.--Paragraph (1)(A) of section 219(b) 
        (relating to maximum amount of deduction) is amended by 
        striking ``$2,000'' and inserting ``the deductible amount''.
            (2) Deductible amount.--Section 219(b) is amended by adding 
        at the end the following new paragraph:
            ``(5) Deductible amount.--For purposes of paragraph 
        (1)(A)--
                    ``(A) In general.--The deductible amount shall be 
                determined in accordance with the following table:

``For taxable years                                      The deductible
beginning in:                                                amount is:
    2001..........................................              $3,000 
    2002..........................................              $4,000 
    2003 and thereafter...........................              $5,000.
                    ``(B) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2003, the $5,000 amount under subparagraph (A) 
                        shall be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 2002' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $100, such amount shall be rounded to the 
                        next lower multiple of $100.''.
    (b) Increase in Adjusted Gross Income Limits for Active 
Participants.--
            (1) In general.--Subparagraph (B) of section 219(g)(3) 
        (relating to applicable dollar amount) is amended to read as 
        follows:
                    ``(B) Applicable dollar amount.--The term 
                `applicable dollar amount' means the following:
                            ``(i) In the case of a taxpayer filing a 
                        joint return:

``For taxable years                                      The applicable
beginning in:                                         dollar amount is:
    2001..........................................             $53,000 
    2002..........................................             $54,000 
    2003..........................................             $60,000 
    2004..........................................             $65,000 
    2005..........................................             $70,000 
    2006..........................................             $75,000 
    2007..........................................             $80,000 
    2008..........................................             $84,000 
    2009..........................................             $89,000 
    2010 and thereafter...........................             $94,000.
                            ``(ii) In the case of any other taxpayer 
                        (other than a married individual filing a 
                        separate return):

``For taxable years                                      The applicable
beginning in:                                         dollar amount is:
    2001..........................................             $33,000 
    2002..........................................             $34,000 
    2003..........................................             $40,000 
    2004..........................................             $45,000 
    2005, 2006, and 2007..........................             $50,000 
    2008..........................................             $52,000 
    2009..........................................             $54,500 
    2010 and thereafter...........................          $57,000.''.
            (2) Cost-of-living adjustment.--Section 219(g)(3) is 
        amended by adding at the end the following new subparagraph:
                    ``(C) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2010, the $94,000 amount in subparagraph (B)(i) 
                        and the $57,000 amount in subparagraph(B)(ii) 
                        shall each be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 2009' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $1,000, such amount shall be reduced to the 
                        next lowest multiple of $1,000.''.
    (c) Conforming Amendments.--
            (1) Section 408(a)(1) is amended by striking ``in excess of 
        $2,000 on behalf of any individual'' and inserting ``on behalf 
        of any individual in excess of the amount in effect for such 
        taxable year under section 219(b)(1)(A)''.
            (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
        and inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
            (3) Section 408(b) is amended by striking ``$2,000'' in the 
        matter following paragraph (4) and inserting ``the dollar 
        amount in effect under section 219(b)(1)(A)''.
            (4) Section 408(j) is amended by striking ``$2,000''.
            (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
        inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 302. MODIFICATION OF INCOME LIMITS ON CONTRIBUTIONS AND ROLLOVERS 
              TO ROTH IRAS.

    (a) Repeal of AGI Limit on Contributions.--Section 408A(c)(3) 
(relating to limits based on modified adjusted gross income) is amended 
by striking subparagraph (A) and by redesignating subparagraphs (B), 
(C), and (D) as subparagraphs (A), (B), and (C), respectively.
    (b) Increase in AGI Limit for Rollover Contributions.--Section 
408A(c)(3)(A) (relating to rollover from IRA), as redesignated by 
subsection (a), is amended to read as follows:
                    ``(A) Rollover from ira.--A taxpayer shall not be 
                allowed to make a qualified rollover contribution from 
                an individual retirement plan other than a Roth IRA 
                during any taxable year if, for the taxable year of the 
                distribution to which the contribution relates, the 
                taxpayer's adjusted gross income exceeds $1,000,000.''.
    (c) Conforming Amendments.--
            (1) Subparagraph (B) of section 408A(c)(3), as redesignated 
        by subsection (a) and as in effect before and after the 
        amendments made by the Internal Revenue Service Restructuring 
        and Reform Act of 1998, is amended to read as follows:
                    ``(B) Definition of adjusted gross income.--For 
                purposes of subparagraph (A), adjusted gross income 
                shall be determined--
                            ``(i) after application of sections 86 and 
                        469, and
                            ``(ii) without regard to sections 135, 137, 
                        221, and 911, the deduction allowable under 
                        section 219, or any amount included in gross 
                        income under subsection (d)(3).''.
            (2) Subparagraph (B) of section 408A(c)(3), as amended by 
        paragraph (1), is amended by inserting ``or by reason of a 
        required distribution under a provision described in paragraph 
        (5)'' before the period at the end.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2002.
            (2) Rollovers.--The amendment made by subsection (b) shall 
        apply to taxable years beginning after December 31, 2002.
            (3) Adjusted gross income.--The amendment made by 
        subsection (c)(2) shall apply to taxable years beginning after 
        December 31, 2004.

SEC. 303. DEEMED IRAS UNDER EMPLOYER PLANS.

    (a) In General.--Section 408 (relating to individual retirement 
accounts) is amended by redesignating subsection (q) as subsection (r) 
and by inserting after subsection (p) the following new subsection:
    ``(q) Deemed IRAs Under Qualified Employer Plans.--
            ``(1) General rule.--If--
                    ``(A) a qualified employer plan elects to allow 
                employees to make voluntary employee contributions to a 
                separate account or annuity established under the plan, 
                and
                    ``(B) under the terms of the qualified employer 
                plan, such account or annuity meets the applicable 
                requirements of this section or section 408A for an 
                individual retirement account or annuity,
        then such account or annuity shall be treated for purposes of 
        this title in the same manner as an individual retirement plan 
        (and contributions to such account or annuity as contributions 
        to an individual retirement plan). For purposes of subparagraph 
        (B), the requirements of subsection (a)(5) shall not apply.
            ``(2) Special rules for qualified employer plans.--For 
        purposes of this title--
                    ``(A) a qualified employer plan shall not fail to 
                meet any requirement of this title solely by reason of 
                establishing and maintaining a program described in 
                paragraph (1), and
                    ``(B) any account or annuity described in paragraph 
                (1), and any contribution to the account or annuity, 
                shall not be subject to any requirement of this title 
                applicable to a qualified employer plan or taken into 
                account in applying any such requirement to any other 
                contributions under the plan.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Qualified employer plan.--The term `qualified 
                employer plan' has the meaning given such term by 
                section 72(p)(4).
                    ``(B) Voluntary employee contribution.--The term 
                `voluntary employee contribution' means any 
                contribution (other than a mandatory contribution 
                within the meaning of section 411(c)(2)(C))--
                            ``(i) which is made by an individual as an 
                        employee under a qualified employer plan which 
                        allows employees to elect to make contributions 
                        described in paragraph (1), and
                            ``(ii) with respect to which the individual 
                        has designated the contribution as a 
                        contribution to which this subsection 
                        applies.''.
    (b) Amendment of ERISA.--
            (1) In general.--Section 4 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1003) is amended by 
        adding at the end the following new subsection:
    ``(c) If a pension plan allows an employee to elect to make 
voluntary employee contributions to accounts and annuities as provided 
in section 408(q) of the Internal Revenue Code of 1986, such accounts 
and annuities (and contributions thereto) shall not be treated as part 
of such plan (or as a separate pension plan) for purposes of any 
provision of this title other than section 403(c), 404, or 405 
(relating to exclusive benefit, and fiduciary and co-fiduciary 
responsibilities).''.
            (2) Conforming amendment.--Section 4(a) of such Act (29 
        U.S.C. 1003(a)) is amended by inserting ``or (c)'' after 
        ``subsection (b)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1999.

SEC. 304. TAX CREDIT FOR MATCHING CONTRIBUTIONS TO INDIVIDUAL 
              DEVELOPMENT ACCOUNTS.

    (a) In General.--Subchapter F of chapter 1 (relating to exempt 
organizations) is amended by adding at the end the following new part:

               ``PART IX--INDIVIDUAL DEVELOPMENT ACCOUNTS

                              ``Sec. 530A. Individual development 
                                        accounts.

``SEC. 530A. INDIVIDUAL DEVELOPMENT ACCOUNTS.

    ``(a) Individual Development Account.--For purposes of this 
section, the term `Individual Development Account' means a custodial 
account established for the exclusive benefit of an eligible individual 
or such individual's beneficiaries, but only if the written governing 
instrument creating the account meets the following requirements:
            ``(1) Except in the case of a qualified rollover (as 
        defined in subsection (c)(2)(E))--
                    ``(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 the lesser of--
                            ``(i) $350, or
                            ``(ii) an amount equal to the compensation 
                        includible in the eligible individual's gross 
                        income for such taxable year.
            ``(2) The custodian of the account is a qualified financial 
        institution.
            ``(3) The interest of an eligible individual in the balance 
        of the account (determined without regard to any such matching 
        contribution or earnings thereon) is nonforfeitable.
            ``(4) The assets of the account will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(5) Except as provided in subsection (c), any amount in 
        the account may be paid out only for qualified expense 
        distributions.
    ``(b) Matching Contributions With Respect To Individual Development 
Accounts.--
            ``(1) In general.--If an eligible individual establishes an 
        Individual Development Account with a qualified financial 
        institution, the qualified financial institution may deposit 
        into a separate, parallel, individual or pooled matching 
        account an eligible matching contribution for the taxable year. 
        The qualified financial institution shall maintain a separate 
        accounting of matching contributions and earnings thereon.
            ``(2) Eligible matching contribution.--For purposes of this 
        section, the term `eligible matching contribution' means a 
        dollar-for-dollar match of the contributions made by the 
        eligible individual into the Individual Development Account 
        described in paragraph (1) with respect to any taxable year.
            ``(3) Allowance of credit for eligible matching 
        contributions.--
                    ``(A) In general.--In the case of a qualified 
                financial institution, there shall be allowed as a 
                credit against the tax imposed by this chapter for the 
                taxable year an amount equal to 85 percent of the 
                eligible matching contributions made by such 
                institution with respect to an eligible individual 
                under this subsection for such taxable year (determined 
                without regard to any amount described in paragraph 
                (4)(B)). If any amount determined under the preceding 
                sentence is not a multiple of $10, such amount shall be 
                rounded to the next highest multiple of $10.
                    ``(B) Limitation based on amount of tax.--The 
                credit allowed under subparagraph (A) for any taxable 
                year shall not exceed the excess of--
                            ``(i) the sum of the regular tax liability 
                        (as defined in section 26(b)) plus the tax 
                        imposed by section 55, over
                            ``(ii) the sum of the credits allowable 
                        under part IV of subchapter A of this chapter.
                    ``(C) Credit treated as allowed under part IV of 
                subchapter A.--For purposes of subtitle F, the credit 
                allowed under subparagraph (A) shall be treated as a 
                credit allowable under part IV of subchapter A of this 
                chapter.
            ``(4) Forfeiture of matching funds.--
                    ``(A) In general.--Amounts in the matching account 
                established under this subsection for an eligible 
                individual shall be reduced by the amount of any 
                distribution from an Individual Development Account of 
                such individual which is not a qualified expense 
                distribution and which is not recontributed as part of 
                a qualified rollover (as defined in subsection 
                (c)(2)(E)).
                    ``(B) Use of forfeited funds.--Eligible matching 
                contributions which are forfeited by an eligible 
                individual under subparagraph (A) shall be used by the 
                qualified financial institution to make eligible 
                matching contributions for other Individual Development 
                Account contributions by eligible individuals.
            ``(5) Exclusion from income.--Gross income of an eligible 
        individual shall not include any eligible matching contribution 
        and the earnings thereon deposited into a matching account 
        under paragraph (1) on behalf of such individual.
            ``(6) Regular reporting of matching contributions.--Any 
        qualified financial institution shall report eligible matching 
        contributions to eligible individuals with Individual 
        Development Accounts on not less than a quarterly basis.
            ``(7) Termination.--No eligible matching contribution may 
        be made for any taxable year beginning after December 31, 2005.
    ``(c) Qualified Expense Distribution.--For purposes of this 
section--
            ``(1) In general.--The term `qualified expense 
        distribution' means any amount paid or distributed out of an 
        Individual Development Account and the matching account 
        established under subsection (b) for an eligible individual if 
        such amount--
                    ``(A) is used exclusively to pay the qualified 
                expenses of such individual or such individual's spouse 
                or dependents,
                    ``(B) is paid by the qualified financial 
                institution directly to the person to whom the amount 
                is due or to another Individual Development Account, 
                and
                    ``(C) is paid after the holder of the Individual 
                Development Account has completed an economic literacy 
                course offered by the qualified financial institution, 
                a nonprofit organization, or a government entity.
            ``(2) Qualified expenses.--
                    ``(A) In general.--The term `qualified expenses' 
                means any of the following:
                            ``(i) Qualified higher education expenses.
                            ``(ii) Qualified first-time homebuyer 
                        costs.
                            ``(iii) Qualified business capitalization 
                        costs.
                            ``(iv) Qualified rollovers.
                    ``(B) Qualified higher education expenses.--
                            ``(i) 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.
                            ``(ii) 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.
                            ``(iii) 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) and by the 
                        amount of such expenses for which a credit or 
                        exclusion is allowed under this chapter for 
                        such taxable year.
                    ``(C) 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 section 72(t)(8)).
                    ``(D) Qualified business capitalization costs.--
                            ``(i) In general.--The term `qualified 
                        business capitalization costs' means qualified 
                        expenditures for the capitalization of a 
                        qualified business pursuant to a qualified 
                        business plan.
                            ``(ii) Qualified expenditures.--The term 
                        `qualified expenditures' means expenditures 
                        included in a qualified business plan, 
                        including capital, plant, equipment, working 
                        capital and inventory expenses.
                            ``(iii) Qualified business.--The term 
                        `qualified business' means any business that 
                        does not contravene any law.
                            ``(iv) Qualified business plan.--The term 
                        `qualified business plan' means a business plan 
                        which meets such requirements as the Secretary 
                        of Housing and Urban Development may specify.
                    ``(E) Qualified rollovers.--The term `qualified 
                rollover' means, with respect to any distribution from 
                an Individual Development Account, the payment, within 
                120 days of such distribution, of all or a portion of 
                such distribution to such account or to another 
                Individual Development Account established in another 
                qualified financial institution for the benefit of the 
                eligible individual. Rules similar to the rules of 
                section 408(d)(3) (other than subparagraph (C) thereof) 
                shall apply for purposes of this subparagraph.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means an individual who--
                            ``(i) has attained the age of 18 years,
                            ``(ii) is a citizen or legal resident of 
                        the United States, and
                            ``(iii) is a member of a household--
                                    ``(I) which is eligible for the 
                                earned income tax credit under section 
                                32,
                                    ``(II) which is eligible for 
                                assistance under a State program funded 
                                under part A of title IV of the Social 
                                Security Act, or
                                    ``(III) the gross income of which 
                                does not exceed 60 percent of the area 
                                median income (as determined by the 
                                Department of Housing and Urban 
                                Affairs) and the net worth of which 
                                does not exceed $10,000.
                    ``(B) Household.--The term `household' means all 
                individuals who share use of a dwelling unit as primary 
                quarters for living and eating separate from other 
                individuals.
                    ``(C) Determination of net worth.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(iii)(III), the net worth of a 
                        household is the amount equal to--
                                    ``(I) the aggregate fair market 
                                value of all assets that are owned in 
                                whole or in part by any member of a 
                                household, minus
                                    ``(II) the obligations or debts of 
                                any member of the household.
                            ``(ii) Certain assets disregarded.--For 
                        purposes of determining the net worth of a 
                        household, a household's assets shall not be 
                        considered to include the primary dwelling unit 
                        and 1 motor vehicle owned by the household.
                    ``(D) Proof of compensation and status as an 
                eligible individual.--Statements under section 6051 and 
                other forms specified by the Secretary proving the 
                eligible individual's wages and other compensation and 
                the status of the individual as an eligible individual 
                shall be presented to the custodian at the time of the 
                establishment of the Individual Development Account and 
                at least once annually thereafter.
            ``(2) Qualified financial institution.--The term `qualified 
        financial institution' means any person authorized to be a 
        trustee of any individual retirement account under section 
        408(a)(2).
            ``(3) Treatment of more than one account.--All Individual 
        Development Accounts of an individual shall be treated as one 
        account.
            ``(4) Other rules to apply.--Rules similar to the rules of 
        paragraphs (1), (2), and (3) of section 219(f), section 
        220(f)(8), paragraphs (4) and (6) of section 408(d), and 
        section 408(m) shall apply for purposes of this section.
            ``(5) Reports.--The custodian of an Individual 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.
    ``(e) Application of Section.--This section shall apply to amounts 
paid to an Individual Development Account for any taxable year 
beginning after December 31, 2000, and before January 1, 2006.''.
    (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) an Individual Development Account (within the meaning 
        of section 530A(a)),''.
            (2) Excess contributions.--Section 4973 is amended by 
        adding at the end the following new subsection:
    ``(g) Individual Development Accounts.--For purposes of this 
section, in the case of Individual Development Accounts, the term 
`excess contributions' means the excess (if any) of--
            ``(1) the amount contributed for the taxable year to the 
        accounts (other than a qualified rollover, as defined in 
        section 530A(c)(2)(E)), over
            ``(2) the amount allowable as a contribution under section 
        530A.
For purposes of this subsection, any contribution which is distributed 
from the Individual Development Account in a distribution to which 
rules similar to the rules of section 408(d)(4) apply by reason of 
section 530A(d)(4) shall be treated as an amount not contributed.''.
    (c) Information Relating to Certain Trusts and Annuity Plans.--
Subsection (c) of section 6047 is amended--
            (1) by inserting ``or section 530A'' after ``section 219''; 
        and
            (2) by inserting ``, of any Individual Development Account 
        described in section 530A(a),'', after ``section 408(a)''.
    (d) Failure To Provide Reports on Individual 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 530(d)(5) (relating to Individual 
                Development Accounts).''.
    (e) Clerical Amendment.--The table of parts for subchapter F of 
chapter 1 is amended by adding at the end the following new item:

                              ``Part IX. Individual development 
                                        accounts.''.
    (f) Funds in Accounts Disregarded for Purposes of Certain Means-
Tested Federal Programs.--Notwithstanding any other provision of the 
Internal Revenue Code of 1986 or the Social Security Act that requires 
consideration of 1 or more financial circumstances of an individual, 
for the purpose of determining eligibility to receive, or the amount 
of, any assistance or benefit authorized by such provision to be 
provided to or for the benefit of such individual, contributions 
(including earnings thereon) in any Individual Development Account and 
applicable matching account under section 530A of such Code shall be 
disregarded for such purpose.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 305. CERTAIN COINS NOT TREATED AS COLLECTIBLES.

    (a) In General.--Subparagraph (A) of section 408(m)(3) (relating to 
exception for certain coins and bullion) is amended to read as follows:
                    ``(A) any coin certified by a recognized grading 
                service and traded on a nationally recognized 
                electronic network, or listed by a recognized wholesale 
                reporting service, and--
                            ``(i) which is or was at any time legal 
                        tender in the United States, or
                            ``(ii) issued under the laws of any State, 
                        or''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

                     Subtitle B--Expanding Coverage

SEC. 311. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
              CONTRIBUTIONS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to deferred compensation, etc.) is amended by inserting after 
section 402 the following new section:

``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS 
              CONTRIBUTIONS.

    ``(a) General Rule.--If an applicable retirement plan includes a 
qualified plus contribution program--
            ``(1) any designated plus contribution made by an employee 
        pursuant to the program shall be treated as an elective 
        deferral for purposes of this chapter, except that such 
        contribution shall not be excludable from gross income, and
            ``(2) such plan (and any arrangement which is part of such 
        plan) shall not be treated as failing to meet any requirement 
        of this chapter solely by reason of including such program.
    ``(b) Qualified Plus Contribution Program.--For purposes of this 
section--
            ``(1) In general.--The term `qualified plus contribution 
        program' means a program under which an employee may elect to 
        make designated plus contributions in lieu of all or a portion 
        of elective deferrals the employee is otherwise eligible to 
        make under the applicable retirement plan.
            ``(2) Separate accounting required.--A program shall not be 
        treated as a qualified plus contribution program unless the 
        applicable retirement plan--
                    ``(A) establishes separate accounts (`designated 
                plus accounts') for the designated plus contributions 
                of each employee and any earnings properly allocable to 
                the contributions, and
                    ``(B) maintains separate recordkeeping with respect 
                to each account.
    ``(c) Definitions and Rules Relating to Designated Plus 
Contributions.--For purposes of this section--
            ``(1) Designated plus contribution.--The term `designated 
        plus contribution' means any elective deferral which--
                    ``(A) is excludable from gross income of an 
                employee without regard to this section, and
                    ``(B) the employee designates (at such time and in 
                such manner as the Secretary may prescribe) as not 
                being so excludable.
            ``(2) Designation limits.--The amount of elective deferrals 
        which an employee may designate under paragraph (1) shall not 
        exceed the excess (if any) of--
                    ``(A) the maximum amount of elective deferrals 
                excludable from gross income of the employee for the 
                taxable year (without regard to this section), over
                    ``(B) the aggregate amount of elective deferrals of 
                the employee for the taxable year which the employee 
                does not designate under paragraph (1).
            ``(3) Rollover contributions.--
                    ``(A) In general.--A rollover contribution of any 
                payment or distribution from a designated plus account 
                which is otherwise allowable under this chapter may be 
                made only if the contribution is to--
                            ``(i) another designated plus account of 
                        the individual from whose account the payment 
                        or distribution was made, or
                            ``(ii) a Roth IRA of such individual.
                    ``(B) Coordination with limit.--Any rollover 
                contribution to a designated plus account under 
                subparagraph (A) shall not be taken into account for 
                purposes of paragraph (1).
    ``(d) Distribution Rules.--For purposes of this title--
            ``(1) Exclusion.--Any qualified distribution from a 
        designated plus account shall not be includible in gross 
        income.
            ``(2) Qualified distribution.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified 
                distribution' has the meaning given such term by 
                section 408A(d)(2)(A) (without regard to clause (iv) 
                thereof).
                    ``(B) Distributions within nonexclusion period.--A 
                payment or distribution from a designated plus account 
                shall not be treated as a qualified distribution if 
                such payment or distribution is made within the 5-
                taxable-year period beginning with the earlier of--
                            ``(i) the 1st taxable year for which the 
                        individual made a designated plus contribution 
                        to any designated plus account established for 
                        such individual under the same applicable 
                        retirement plan, or
                            ``(ii) if a rollover contribution was made 
                        to such designated plus account from a 
                        designated plus account previously established 
                        for such individual under another applicable 
                        retirement plan, the 1st taxable year for which 
                        the individual made a designated plus 
                        contribution to such previously established 
                        account.
                    ``(C) Distributions of excess deferrals and 
                earnings.--The term `qualified distribution' shall not 
                include any distribution of any excess deferral under 
                section 402(g)(2) and any income on the excess 
                deferral.
            ``(3) Aggregation rules.--Section 72 shall be applied 
        separately with respect to distributions and payments from a 
        designated plus account and other distributions and payments 
        from the plan.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Applicable retirement plan.--The term `applicable 
        retirement plan' means--
                    ``(A) an employees' trust described in section 
                401(a) which is exempt from tax under section 501(a), 
                and
                    ``(B) a plan under which amounts are contributed by 
                an individual's employer for an annuity contract 
                described in section 403(b).
            ``(2) Elective deferral.--The term `elective deferral' 
        means any elective deferral described in subparagraph (A) or 
        (C) of section 402(g)(3).''.
    (b) Excess Deferrals.--Section 402(g) (relating to limitation on 
exclusion for elective deferrals) is amended--
            (1) by adding at the end of paragraph (1) the following new 
        sentence: ``The preceding sentence shall not apply to so much 
        of such excess as does not exceed the designated plus 
        contributions of the individual for the taxable year.'', and
            (2) by inserting ``(or would be included but for the last 
        sentence thereof)'' after ``paragraph (1)'' in paragraph 
        (2)(A).
    (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is amended by 
adding at the end the following:
                ``If any portion of an eligible rollover distribution 
                is attributable to payments or distributions from a 
                designated plus account (as defined in section 402A), 
                an eligible retirement plan with respect to such 
                portion shall include only another designated plus 
                account and a Roth IRA.''.
    (d) Reporting Requirements.--
            (1) W-2 information.--Section 6051(a)(8) is amended by 
        inserting ``, including the amount of designated plus 
        contributions (as defined in section 402A)'' before the comma 
        at the end.
            (2) Information.--Section 6047 is amended by redesignating 
        subsection (f) as subsection (g) and by inserting after 
        subsection (e) the following new subsection:
    ``(f) Designated Plus Contributions.--The Secretary shall require 
the plan administrator of each applicable retirement plan (as defined 
in section 402A) to make such returns and reports regarding designated 
plus contributions (as so defined) to the Secretary, participants and 
beneficiaries of the plan, and such other persons as the Secretary may 
prescribe.''.
    (e) Conforming Amendments.--
            (1) Section 408A(e) is amended by adding after the first 
        sentence the following new sentence: ``Such term includes a 
        rollover contribution described in section 402A(c)(3)(A).''.
            (2) The table of sections for subpart A of part I of 
        subchapter D of chapter 1 is amended by inserting after the 
        item relating to section 402 the following new item:

                              ``Sec. 402A. Optional treatment of 
                                        elective deferrals as plus 
                                        contributions.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 312. INCREASE IN ELECTIVE CONTRIBUTION LIMITS.

    (a) Elective Deferrals.--
            (1) In general.--Paragraph (1) of section 402(g) (relating 
        to limitation on exclusion for elective deferrals) is amended 
        to read as follows:
            ``(1) In general.--
                    ``(A) Limitation.--Notwithstanding subsections 
                (e)(3) and (h)(1)(B), the elective deferrals of any 
                individual for any taxable year shall be included in 
                such individual's gross income to the extent the amount 
                of such deferrals for the taxable year exceeds the 
                applicable dollar amount.
                    ``(B) Applicable dollar amount.--For purposes of 
                subparagraph (A), the applicable dollar amount shall be 
                the amount determined in accordance with the following 
                table:

``For taxable years                               The applicable dollar
beginning in calendar year:                                  amount is:
    2001..........................................             $11,000 
    2002..........................................             $12,000 
    2003..........................................             $13,000 
    2004..........................................             $14,000 
    2005 or thereafter............................          $15,000.''.
            (2) Cost-of-living adjustment.--Paragraph (5) of section 
        402(g) is amended to read as follows:
            ``(5) Cost-of-living adjustment.--In the case of taxable 
        years beginning after December 31, 2005, the Secretary shall 
        adjust the $15,000 amount under paragraph (1)(B) at the same 
        time and in the same manner as under section 415(d); except 
        that the base period shall be the calendar quarter beginning 
        July 1, 2004, and any increase under this paragraph which is 
        not a multiple of $500 shall be rounded to the next lowest 
        multiple of $500.''.
            (3) Conforming amendments.--
                    (A) Section 402(g) (relating to limitation on 
                exclusion for elective deferrals), as amended by 
                paragraphs (1) and (2), is further amended by striking 
                paragraph (4) and redesignating paragraphs (5), (6), 
                (7), (8), and (9) as paragraphs (4), (5), (6), (7), and 
                (8), respectively.
                    (B) Paragraph (2) of section 457(c) is amended by 
                striking ``402(g)(8)(A)(iii)'' and inserting 
                ``402(g)(7)(A)(iii)''.
                    (C) Clause (iii) of section 501(c)(18)(D) is 
                amended by striking ``(other than paragraph (4) 
                thereof)''.
    (b) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--
            (1) In general.--Section 457 (relating to deferred 
        compensation plans of State and local governments and tax-
        exempt organizations) is amended--
                    (A) by striking ``$7,500'' each place it appears in 
                subsections (b)(2)(A) and (c)(1) and inserting ``the 
                applicable dollar amount'', and
                    (B) by striking ``$15,000'' in subsection (b)(3)(A) 
                and inserting ``twice the dollar amount in effect under 
                subsection (b)(2)(A)''.
            (2) Applicable dollar amount; cost-of-living adjustment.--
        Paragraph (15) of section 457(e) is amended to read as follows:
            ``(15) Applicable dollar amount.--
                    ``(A) In general.--The applicable dollar amount 
                shall be the amount determined in accordance with the 
                following table:

``For taxable years                               The applicable dollar
beginning in calendar year:                                  amount is:
    2001..........................................              $9,000 
    2002..........................................             $10,000 
    2003..........................................             $11,000 
    2004 or thereafter............................             $12,000.
                    ``(B) Cost-of-living adjustments.--In the case of 
                taxable years beginning after December 31, 2004, the 
                Secretary shall adjust the $12,000 amount specified in 
                the table in subparagraph (A) at the same time and in 
                the same manner as under section 415(d), except that 
                the base period shall be the calendar quarter beginning 
                July 1, 2003, and any increase under this paragraph 
                which is not a multiple of $500 shall be rounded to the 
                next lowest multiple of $500.''.
    (c) Simple Retirement Accounts.--
            (1) Limitation.--Clause (ii) of section 408(p)(2)(A) 
        (relating to general rule for qualified salary reduction 
        arrangement) is amended by striking ``$6,000'' and inserting 
        ``the applicable dollar amount''.
            (2) Applicable dollar amount.--Subparagraph (E) of 
        408(p)(2) is amended to read as follows:
                    ``(E) Applicable dollar amount; cost-of-living 
                adjustment.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(ii), the applicable dollar 
                        amount shall be the amount determined in 
                        accordance with the following table:

``For taxable years                               The applicable dollar
beginning in calendar year:                                  amount is:
    2001..........................................              $7,000 
    2002..........................................              $8,000 
    2003..........................................              $9,000 
    2004 or thereafter............................             $10,000.
                            ``(ii) Cost-of-living adjustment.--In the 
                        case of a year beginning after December 31, 
                        2004, the Secretary shall adjust the $10,000 
                        amount under clause (i) at the same time and in 
                        the same manner as under section 415(d), except 
                        that the base period taken into account shall 
                        be the calendar quarter beginning July 1, 2003, 
                        and any increase under this subparagraph which 
                        is not a multiple of $500 shall be rounded to 
                        the next lower multiple of $500.''.
            (3) Conforming amendments.--
                    (A) Subclause (I) of section 401(k)(11)(B)(i) is 
                amended by striking ``$6,000'' and inserting ``the 
                amount in effect under section 408(p)(2)(A)(ii)''.
                    (B) Section 401(k)(11) is amended by striking 
                subparagraph (E).
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 313. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE 
              PROPRIETORS.

    (a) Amendment to 1986 Code.--Subparagraph (B) of section 4975(f)(6) 
(relating to exemptions not to apply to certain transactions) is 
amended by adding at the end the following new clause:
                            ``(iii) Loan exception.--For purposes of 
                        subparagraph (A)(i), the term `owner-employee' 
                        shall only include a person described in 
                        subclause (II) or (III) of clause (i).''.
    (b) Amendment to ERISA.--Section 408(d)(2) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) is 
amended by adding at the end the following new subparagraph:
    ``(C) For purposes of paragraph (1)(A), the term `owner-employee' 
shall only include a person described in clause (ii) or (iii) of 
subparagraph (A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to loans made after December 31, 2000.

SEC. 314. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF 
              DEDUCTION LIMITS.

    (a) In General.--Section 404 (relating to deduction for 
contributions of an employer to an employees' trust or annuity plan and 
compensation under a deferred payment plan) is amended by adding at the 
end the following new subsection:
    ``(n) Elective Deferrals Not Taken Into Account for Purposes of 
Deduction Limits.--Elective deferrals (as defined in section 402(g)(3)) 
shall not be subject to any limitation contained in paragraph (3), (7), 
or (9) of subsection (a), and such elective deferrals shall not be 
taken into account in applying any such limitation to any other 
contributions.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2000.

SEC. 315. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.

    (a) In General.--Subparagraph (A) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
            (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (F)) maintained by a 
        small employer (as so defined),'' after ``single-employer 
        plan,'',
            (2) in clause (iii), by striking the period at the end and 
        inserting ``, and'', and
            (3) by adding at the end the following new clause:
            ``(iv) in the case of a new single-employer plan (as 
        defined in subparagraph (F)) maintained by a small employer (as 
        so defined) for the plan year, $5 for each individual who is a 
        participant in such plan during the plan year.''.
    (b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)) is amended by adding at the end the following new 
subparagraph:
    ``(F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the 
sponsor or any member of such sponsor's controlled group (or any 
predecessor of either) had not established or maintained a plan to 
which this title applies with respect to which benefits were accrued 
for substantially the same employees as are in the new single-employer 
plan.
    ``(ii)(I) For purposes of this paragraph, the term `small employer' 
means an employer which on the first day of any plan year has, in 
aggregation with all members of the controlled group of such employer, 
100 or fewer employees.
    ``(II) In the case of a plan maintained by 2 or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such sponsors 
shall be aggregated for purposes of determining whether any 
contributing sponsor is a small employer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plans established after December 31, 2000.

SEC. 316. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW PLANS.

    (a) In General.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by adding at the end the following new 
clause:
    ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product of the amount determined under clause (ii) and the 
applicable percentage. For purposes of this clause, the term 
`applicable percentage' means--
            ``(I) 0 percent, for the first plan year.
            ``(II) 20 percent, for the second plan year.
            ``(III) 40 percent, for the third plan year.
            ``(IV) 60 percent, for the fourth plan year.
            ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in 
section 3(35)) maintained by a contributing sponsor shall be treated as 
a new defined benefit plan for its first 5 plan years if, during the 
36-month period ending on the date of the adoption of the plan, the 
sponsor and each member of any controlled group including the sponsor 
(or any predecessor of either) did not establish or maintain a plan to 
which this title applies with respect to which benefits were accrued 
for substantially the same employees as are in the new plan.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to plans established after December 31, 2000.

SEC. 317. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING NEW 
              PENSION PLANS.

    (a) Elimination of Certain User Fees.--The Secretary of the 
Treasury or the Secretary's delegate shall not require payment of user 
fees under the program established under section 7527 of the Internal 
Revenue Code of 1986 for requests to the Internal Revenue Service for 
ruling letters, opinion letters, and determination letters or similar 
requests with respect to the qualified status of a new pension benefit 
plan or any trust which is part of the plan.
    (b) New Pension Benefit Plan.--For purposes of this section--
            (1) In general.--The term ``new pension benefit plan'' 
        means a pension, profit-sharing, stock bonus, annuity, or 
        employee stock ownership plan which is maintained by one or 
        more eligible employers if such employer (or any predecessor 
        employer) has not made a prior request described in subsection 
        (a) for such plan (or any predecessor plan).
            (2) Eligible employer.--The term ``eligible employer'' 
        means an employer (or any predecessor employer) which has not 
        established or maintained a qualified employer plan with 
        respect to which contributions were made, or benefits were 
        accrued for service, in the 3 most recent taxable years ending 
        prior to the first taxable year in which the request is made.
    (c) Effective Date.--The provisions of this section shall apply 
with respect to requests made after December 31, 2000.

SEC. 318. SAFE ANNUITIES AND TRUSTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to deferred compensation, etc.) is amended by inserting after 
section 408A the following new section:

``SEC. 408B. SAFE ANNUITIES AND TRUSTS.

    ``(a) Employer Eligibility.--
            ``(1) In general.--An employer may establish and maintain a 
        SAFE annuity or a SAFE trust for any year only if--
                    ``(A) the employer is an eligible employer (as 
                defined in section 408(p)(2)(C)), and
                    ``(B) the employer does not maintain (and no 
                predecessor of the employer maintains) a qualified plan 
                (other than a permissible plan) with respect to which 
                contributions were made, or benefits were accrued, for 
                service in any year in the period beginning with the 
                year such annuity or trust became effective and ending 
                with the year for which the determination is being 
                made.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Qualified plan.--The term `qualified plan' 
                has the meaning given such term by section 
                408(p)(2)(D)(ii).
                    ``(B) Permissible plan.--The term `permissible 
                plan' means--
                            ``(i) a SIMPLE plan described in section 
                        408(p),
                            ``(ii) a SIMPLE 401(k) plan described in 
                        section 401(k)(11),
                            ``(iii) an eligible deferred compensation 
                        plan described in section 457(b),
                            ``(iv) a collectively bargained plan but 
                        only if the employees eligible to participate 
                        in such plan are not also entitled to a benefit 
                        described in subsection (b)(5) or (c)(5), or
                            ``(v) a plan under which there may be made 
                        only--
                                    ``(I) elective deferrals described 
                                in section 402(g)(3), and
                                    ``(II) employer matching 
                                contributions not in excess of the 
                                amounts described in subclauses (I) and 
                                (II) of section 401(k)(12)(B)(i).
    ``(b) SAFE Annuity.--
            ``(1) In general.--For purposes of this title, the term 
        `SAFE annuity' means an individual retirement annuity (as 
        defined in section 408(b) without regard to paragraph (2) 
        thereof and without regard to the limitation on aggregate 
        annual premiums contained in the flush language of section 
        408(b)) if--
                    ``(A) such annuity meets the requirements of 
                paragraphs (2) through (7), and
                    ``(B) the only contributions to such annuity (other 
                than rollover contributions) are employer 
                contributions.
        Nothing in this section shall be construed as preventing an 
        employer from using a group annuity contract which is divisible 
        into individual retirement annuities for purposes of providing 
        SAFE annuities.
            ``(2) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met for any year only if all employees of 
                the employer who--
                            ``(i) received at least $5,000 in 
                        compensation from the employer during any 2 
                        consecutive preceding years, and
                            ``(ii) received at least $5,000 in 
                        compensation during the year,
                are entitled to the benefit described in paragraph (5) 
                for such year.
                    ``(B) Excludable employees.--An employer may elect 
                to exclude from the requirements under subparagraph (A) 
                employees described in section 410(b)(3).
            ``(3) Vesting.--The requirements of this paragraph are met 
        if the employee's rights to any benefits under the annuity are 
        nonforfeitable.
            ``(4) Benefit form.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the only form of benefit is--
                            ``(i) a benefit payable annually in the 
                        form of a single life annuity with monthly 
                        payments (with no ancillary benefits) beginning 
                        at age 65, or
                            ``(ii) at the election of the participant, 
                        any other form of benefit which is the 
                        actuarial equivalent (based on the assumptions 
                        specified in the SAFE annuity) of the benefit 
                        described in clause (i).
                The requirements of sections 401(a)(11) and 
                411(b)(1)(H) shall apply to the benefits described in 
                this subparagraph.
                    ``(B) Direct transfers and rollovers.--A plan shall 
                not fail to meet the requirements of this paragraph by 
                reason of permitting, at the election of the employee, 
                a trustee-to-trustee transfer or a rollover 
                contribution.
            ``(5) Amount of annual accrued benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met for any year if the accrued benefit 
                of each participant derived from employer contributions 
                for such year, when expressed as a benefit described in 
                paragraph (4)(A), is not less than the applicable 
                percentage of the participant's compensation for such 
                year.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `applicable 
                        percentage' means 3 percent.
                            ``(ii) Election of lower percentage.--An 
                        employer may elect to apply an applicable 
                        percentage of 1 percent, 2 percent or zero 
                        percent for any plan year for all employees 
                        eligible to participate in the plan for such 
                        year if the employer notifies the employees of 
                        such percentage within a reasonable period 
                        before the beginning of such year.
                    ``(C) Compensation limit.--The compensation taken 
                into account under this paragraph for any year shall 
                not exceed the limitation in effect for such year under 
                section 401(a)(17).
                    ``(D) Credit for service before plan adopted.--
                            ``(i) In general.--An employer may elect to 
                        take into account a specified number of years 
                        of service (not greater than 10) performed 
                        before the adoption of the plan (each 
                        hereinafter referred to as a `prior service 
                        year') as service under the plan if the same 
                        specified number of years is available to all 
                        employees eligible to participate in the plan 
                        for the first plan year.
                            ``(ii) Accrual of prior service benefit.--
                        Such an election shall be effective for a prior 
                        service year only if the requirements of this 
                        paragraph are met for an eligible plan year 
                        (with respect to employees entitled to credit 
                        for such prior service year) by doubling the 
                        applicable percentage (if any) for such plan 
                        year. For purposes of the preceding sentence, 
                        an eligible plan year is a plan year in the 
                        period of consecutive plan years (but not more 
                        than the number specified under clause (i)) 
                        beginning with the first plan year that the 
                        plan is in effect.
                            ``(iii) Election may not apply to certain 
                        prior service years.--This subparagraph shall 
                        not apply with respect to any prior service 
                        year of an employee if--
                                    ``(I) for any part of such prior 
                                service year such employee was an 
                                active participant (within the meaning 
                                of section 219(g)(5)) under any defined 
                                benefit plan of the employer (or any 
                                predecessor thereof), or
                                    ``(II) such employee received 
                                during such prior service year less 
                                than $5,000 in compensation from the 
                                employer.
            ``(6) Funding.--
                    ``(A) In general.--The requirements of this 
                paragraph are met only if the employer is required to 
                contribute to the annuity for each plan year the amount 
                necessary to purchase a SAFE annuity in the amount of 
                the benefit accrued for such year for each participant 
                entitled to such benefit.
                    ``(B) Time when contributions deemed made.--For 
                purposes of this paragraph, an employer shall be deemed 
                to have made a contribution on the last day of the 
                preceding taxable year if the payment is 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 (including extensions thereof).
                    ``(C) Penalty for failure to make required 
                contribution.--The taxes imposed by section 4971 shall 
                apply to a failure to make the contribution required by 
                this paragraph in the same manner as if the amount of 
                the failure were an accumulated funding deficiency to 
                which such section applies.
            ``(7) Limitation on distributions.--The requirements of 
        this paragraph are met only if payments under the contract may 
        be made only after the employee attains age 65 or when the 
        employee separates from service, dies, or becomes disabled 
        (within the meaning of section 72(m)(7)).
    ``(c) SAFE Trust.--
            ``(1) In general.--For purposes of this title, the term 
        `SAFE trust' means a trust forming part of a defined benefit 
        plan if--
                    ``(A) such trust meets the requirements of section 
                401(a) as modified by subsection (d),
                    ``(B) a participant's benefits under the plan are 
                based solely on the balance of a separate account in 
                such plan of such participant,
                    ``(C) such plan meets the requirements of 
                paragraphs (2) through (8), and
                    ``(D) the only contributions to such trust (other 
                than rollover contributions) are employer 
                contributions.
            ``(2) Participation requirements.--A plan meets the 
        requirements of this paragraph for any year only if the 
        requirements of subsection (b)(2) are met for such year.
            ``(3) Vesting.--A plan meets the requirements of this 
        paragraph for any year only if the requirements of subsection 
        (b)(3) are met for such year.
            ``(4) Benefit form.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a plan meets the requirements of this 
                paragraph only if the trustee distributes a SAFE 
                annuity that satisfies subsection (b)(4) where the 
                annual benefit described in subsection (b)(4)(A) is not 
                less than the accrued benefit determined under 
                paragraph (5).
                    ``(B) Direct transfers to individual retirement 
                plan or safe annuity.--A plan shall not fail to meet 
                the requirements of this paragraph by reason of 
                permitting, as an optional form of benefit, the 
                distribution of the entire balance to the credit of the 
                employee. If the employee is under age 65, such 
                distribution must be in the form of a direct trustee-
                to-trustee transfer to a SAFE annuity, another SAFE 
                trust, or a SAFE rollover plan (or, in the case of a 
                distribution that does not exceed the dollar limit in 
                effect under section 411(a)(11)(A), any other 
                individual retirement plan).
                    ``(C) SAFE rollover plan.--For purposes of this 
                section, the term `SAFE rollover plan' means an 
                individual retirement plan for the benefit of the 
                employee to which a rollover was made from a SAFE 
                annuity, SAFE trust, or another SAFE rollover plan.
            ``(5) Amount of annual accrued benefit.--A plan meets the 
        requirements of this paragraph for any year only if the 
        requirements of subsection (b)(5) are met for such year.
            ``(6) Funding.--
                    ``(A) In general.--A plan meets the requirements of 
                this paragraph for any year only if--
                            ``(i) the requirements of subsection (b)(6) 
                        are met for such year,
                            ``(ii) in the case of a plan which has an 
                        unfunded annuity amount with respect to the 
                        account of any participant, the plan requires 
                        that the employer make an additional 
                        contribution to such plan (at the time the 
                        annuity contract to which such amount relates 
                        is purchased) equal to the unfunded annuity 
                        amount, and
                            ``(iii) in the case of a plan which has an 
                        unfunded prior year liability as of the close 
                        of such plan year, the plan requires that the 
                        employer make an additional contribution to 
                        such plan for such year equal to the amount of 
                        such unfunded prior year liability no later 
                        than 8\1/2\ months following the end of the 
                        plan year.
                    ``(B) Unfunded annuity amount.--For purposes of 
                this paragraph, the term `unfunded annuity amount' 
                means, with respect to the account of any participant 
                for whom an annuity is being purchased, the excess (if 
                any) of--
                            ``(i) the amount necessary to purchase an 
                        annuity contract which meets the requirements 
                        of subsection (b)(4) in the amount of the 
                        participant's accrued benefit determined under 
                        paragraph (5), over
                            ``(ii) the balance in such account at the 
                        time such contract is purchased.
                    ``(C) Unfunded prior year liability.--For purposes 
                of this paragraph, the term `unfunded prior year 
                liability' means, with respect to any plan year, the 
                excess (if any) of--
                            ``(i) the aggregate of the present value of 
                        the accrued liabilities under the plan as of 
                        the close of the prior plan year, over
                            ``(ii) the value of the plan's assets 
                        determined under section 412(c)(2) as of the 
                        close of the plan year (determined without 
                        regard to any contributions for such plan 
                        year).
                Such present value shall be determined using the 
                assumptions specified in subparagraph (D).
                    ``(D) Actuarial assumptions.--In determining the 
                amount required to be contributed under subparagraph 
                (A)--
                            ``(i) the assumed interest rate shall be 
                        not less than 3 percent, and not greater than 5 
                        percent, per year,
                            ``(ii) the assumed mortality shall be 
                        determined under the applicable mortality table 
                        (as defined in section 417(e)(3), as modified 
                        by the Secretary so that it does not include 
                        any assumption for preretirement mortality), 
                        and
                            ``(iii) the assumed retirement age shall be 
                        65.
                    ``(E) Changes in mortality table.--If, for purposes 
                of this subsection, the applicable mortality table 
                under section 417(e)(3) for any plan year is not the 
                same as such table for the prior plan year, the 
                Secretary shall prescribe regulations for such purposes 
                which phase in the effect of the changes over a 
                reasonable period of plan years determined by the 
                Secretary.
                    ``(F) Penalty for failure to make required 
                contribution.--The taxes imposed by section 4971 shall 
                apply to a failure to make the contribution required by 
                this paragraph in the same manner as if the amount of 
                the failure were an accumulated funding deficiency to 
                which such section applies.
            ``(7) Separate accounts for participants.--A plan meets the 
        requirements of this paragraph for any year only if the plan 
        provides--
                    ``(A) for an individual account for each 
                participant, and
                    ``(B) for benefits based solely on--
                            ``(i) the amount contributed to the 
                        participant's account,
                            ``(ii) any income, expenses, gains and 
                        losses, and any forfeitures of accounts of 
                        other participants which may be allocated to 
                        such participant's account, and
                            ``(iii) the amount of any unfunded annuity 
                        amount with respect to the participant.
            ``(8) Trust may not hold securities which are not readily 
        tradable.--A plan meets the requirements of this paragraph only 
        if the plan prohibits the trust from holding directly or 
        indirectly securities which are not readily tradable on an 
        established securities market or otherwise. Nothing in this 
        paragraph shall prohibit the trust from holding insurance 
        company products regulated by State law.
    ``(d) Special Rules for SAFE Annuities and Trusts.--
            ``(1) Certain requirements treated as met.--For purposes of 
        section 401(a), a SAFE annuity and a SAFE trust shall be 
        treated as meeting the requirements of the following 
        provisions:
                    ``(A) Section 401(a)(4) (relating to 
                nondiscrimination rules).
                    ``(B) Section 401(a)(26) (relating to minimum 
                participation).
                    ``(C) Section 410 (relating to minimum 
                participation and coverage requirements).
                    ``(D) Except as provided in subsection (b)(4(A), 
                section 411(b) (relating to accrued benefit 
                requirements).
                    ``(E) Section 412 (relating to minimum funding 
                standards).
                    ``(F) Section 415 (relating to limitations on 
                benefits and contributions under qualified plans).
                    ``(G) Section 416 (relating to special rules for 
                top-heavy plans).
            ``(2) Contributions not taken into account in applying 
        limits to other plans.--
                    ``(A) Deduction limits.--Contributions to a SAFE 
                annuity or a SAFE trust shall not be taken into account 
                in applying sections 404 to other plans maintained by 
                the employer.
                    ``(B) Benefit limits.--A SAFE annuity or a SAFE 
                trust shall be treated as a defined benefit plan for 
                purposes of section 415.
            ``(3) Use of designated financial institutions.--A rule 
        similar to the rule of section 408(p)(7) (without regard to the 
        last sentence thereof) shall apply for purposes of this 
        section.
            ``(4) Definitions.--The definitions in section 408(p)(6) 
        shall apply for purposes of this section.''.
    (b) Deduction Limits Not To Apply to Employer Contributions.--
            (1) In general.--Section 404 (relating to deductions for 
        contributions of an employer to pension, etc., plans), as 
        amended by section 314, is amended by adding at the end the 
        following new subsection:
    ``(o) Special Rules for SAFE Annuities.--
            ``(1) In general.--Employer contributions to a SAFE annuity 
        shall be treated as if they are made to a plan subject to the 
        requirements of this section.
            ``(2) Deductible limit.--For purposes of subsection 
        (a)(1)(A)(i), the amount necessary to satisfy the minimum 
        funding requirement of section 408B(b)(6) or (c)(6) shall be 
        treated as the amount necessary to satisfy the minimum funding 
        requirement of section 412.''.
            (2) Coordination with deduction under section 219.--
                    (A) Section 219(b) (relating to maximum amount of 
                deduction), as amended by section 301, is amended by 
                adding at the end the following new paragraph:
            ``(6) Special rule for safe annuities.--This section shall 
        not apply with respect to any amount contributed to a SAFE 
        annuity established under section 408B(b).''.
                    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
                of clause (v) and by adding at the end the following 
                new clause:
                            ``(vii) any SAFE annuity (within the 
                        meaning of section 408B), or''.
    (c) Contributions and Distributions.--
            (1) Section 402 (relating to taxability of beneficiary of 
        employees' trust) is amended by adding at the end the following 
        new subsection:
    ``(l) Treatment of SAFE Annuities.--Rules similar to the rules of 
paragraphs (1) and (3) of subsection (h) shall apply to contributions 
and distributions with respect to a SAFE annuities under section 
408B.''.
            (2) Section 408(d)(3) is amended by adding at the end the 
        following new subparagraph:
                    ``(H) SAFE annuities.--This paragraph shall not 
                apply to any amount paid or distributed out of a SAFE 
                annuity (as defined in section 408B) unless it is paid 
                in a trustee-to-trustee transfer into another SAFE 
                annuity.''.
    (d) Increased Penalty on Early Withdrawals.--Section 72(t) 
(relating to additional tax on early distributions) is amended by 
adding at the end the following new paragraph:
            ``(7) Special rules for safe annuities and trusts.--In the 
        case of any amount received from a SAFE annuity or a SAFE trust 
        (within the meaning of section 408B), paragraph (1) shall be 
        applied by substituting `20 percent' for `10 percent'.''.
    (e) Simplified Employer Reports.--
            (1) SAFE annuities.--Section 408(l) (relating to simplified 
        employer reports) is amended by adding at the end the following 
        new paragraph:
            ``(3) SAFE annuities.--
                    ``(A) Simplified report.--The employer maintaining 
                any SAFE annuity (within the meaning of section 408B) 
                shall file a simplified annual return with the 
                Secretary containing only the information described in 
                subparagraph (B).
                    ``(B) Contents.--The return required by 
                subparagraph (A) shall set forth--
                            ``(i) the name and address of the employer,
                            ``(ii) the date the plan was adopted,
                            ``(iii) the number of employees of the 
                        employer,
                            ``(iv) the number of such employees who are 
                        eligible to participate in the plan,
                            ``(v) the total amount contributed by the 
                        employer to each such annuity for such year and 
                        the minimum amount required under section 408B 
                        to be so contributed,
                            ``(vi) the percentage elected under section 
                        408B(b)(5)(B), and
                            ``(vii) the number of employees with 
                        respect to whom contributions are required to 
                        be made for such year under section 
                        408B(b)(5)(D).
                    ``(C) Reporting by issuer of safe annuity.--
                            ``(i) In general.--The issuer of each SAFE 
                        annuity shall provide to the owner of the 
                        annuity for each year a statement setting forth 
                        as of the close of such year--
                                    ``(I) the benefits guaranteed at 
                                age 65 under the annuity, and
                                    ``(II) the cash surrender value of 
                                the annuity.
                            ``(ii) Summary description.--The issuer of 
                        any SAFE annuity shall provide to the employer 
                        maintaining the annuity for each year a 
                        description containing the following 
                        information:
                                    ``(I) The name and address of the 
                                employer and the issuer.
                                    ``(II) The requirements for 
                                eligibility for participation.
                                    ``(III) The benefits provided with 
                                respect to the annuity.
                                    ``(IV) The procedures for, and 
                                effects of, withdrawals (including 
                                rollovers) from the annuity.
                    ``(D) Time and manner of reporting.--Any return, 
                report, or statement required under this paragraph 
                shall be made in such form and at such time as the 
                Secretary shall prescribe.''.
            (2) SAFE trusts.--Section 6059 (relating to actuarial 
        reports) is amended by redesignating subsections (c) and (d) as 
        subsections (d) and (e), respectively, and by inserting after 
        subsection (b) the following new subsection:
    ``(c) SAFE Trusts.--In the case of a SAFE trust (within the meaning 
of section 408B), the Secretary shall require a simplified actuarial 
report which contains information similar to the information required 
in section 408(l)(3)(B).''.
    (f) Conforming Amendments.--
            (1) Section 280G(b)(6) is amended by striking ``or'' at the 
        end of subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, or'' and by adding after 
        subparagraph (D) the following new subparagraph:
                    ``(E) a SAFE annuity described in section 408B.''.
            (2) Clause (ii) of section 408(p)(2)(D) is amended by 
        inserting before the period ``(other than clause (vii) of such 
        subparagraph (A))''.
            (3) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408B,'' after 
        ``408(p),''.
            (4) Section 4972(d)(1)(A) is amended by striking ``and'' at 
        the end of clause (iii), by striking the period at the end of 
        clause (iv) and inserting ``, and'', and by adding after clause 
        (iv) the following new clause:
                            ``(v) any SAFE annuity (within the meaning 
                        of section 408B).''.
            (5) The table of sections for subpart A of part I of 
        subchapter D of chapter 1 is amended by inserting after the 
        item relating to section 408A the following new item:

                              ``Sec. 408B. SAFE annuities and 
                                        trusts.''.
    (g) Modifications of ERISA.--
            (1) Exemption from insurance coverage.--Subsection (b) of 
        section 4021 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1321) is amended by striking ``or'' at the end 
        of paragraph (12), by striking the period at the end of 
        paragraph (13) and inserting ``; or'', and by adding at the end 
        the following new paragraph:
            ``(14) which is established and maintained as part of a 
        SAFE trust (as defined in section 408B of the Internal Revenue 
        Code of 1986).''.
            (2) Reporting requirements.--Section 101 of such Act (29 
        U.S.C. 1021) is amended by redesignating the second subsection 
        (h) as subsection (j) and by inserting after the first 
        subsection (h) the following new subsection:
    ``(i) SAFE Annuities.--
            ``(1) No employer reports.--Except as provided in this 
        subsection, no report shall be required under this section by 
        an employer maintaining a SAFE annuity under section 408B(b) of 
        the Internal Revenue Code of 1986.
            ``(2) Summary description.--The issuer of any SAFE annuity 
        shall provide to the employer maintaining the annuity for each 
        year a description containing the following information:
                    ``(A) The name and address of the employer and the 
                issuer.
                    ``(B) The requirements for eligibility for 
                participation.
                    ``(C) The benefits provided with respect to the 
                annuity.
                    ``(D) The procedures for, and effects of, 
                withdrawals (including rollovers) from the annuity.
            ``(3) Employee notification.--The employer shall provide 
        each employee eligible to participate in the SAFE annuity with 
        the description described in paragraph (2) at the same time as 
        the notification required under section 408B(b)(5)(B) of the 
        Internal Revenue Code of 1986.''.
            (3) Waiver of funding standards.--Section 301(a) of such 
        Act (29 U.S.C. 1081) is amended by striking ``or'' at the end 
        of paragraph (9), by striking the period at the end of 
        paragraph (10) and inserting ``; or'', and by adding at the end 
        the following new paragraph:
            ``(11) any plan providing for the purchase of any SAFE 
        annuity or any SAFE trust (as such terms are defined in section 
        408B of such Code).''.
    (h) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 319. MODIFICATION OF TOP-HEAVY RULES.

    (a) Matching Contributions Taken Into Account for Minimum 
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined 
contribution plans) is amended by adding at the end the following: 
``Employer matching contributions (as defined in section 401(m)(4)(A)) 
shall be taken into account for purposes of this subparagraph.''.
    (b) Elimination of Family Attribution.--Section 416(i)(1)(B) 
(defining 5-percent owner) is amended by adding at the end the 
following new clause:
                            ``(iv) Family attribution disregarded.--
                        Solely for purposes of applying this paragraph 
                        (and not for purposes of any provision of this 
                        title which incorporates by reference the 
                        definition of a key employee or 5-percent owner 
                        under this paragraph), section 318 shall be 
                        applied without regard to subsection (a)(1) 
                        thereof in determining whether any person is a 
                        5-percent owner.''.
    (c) Definition of Top-Heavy Plans.--Paragraph (4) of section 416(g) 
(relating to other special rules for top-heavy plans) is amended by 
adding at the end the following new subparagraph:
                    ``(H) Cash or deferred arrangements using 
                alternative methods of meeting nondiscrimination 
                requirements.--The term `top-heavy plan' shall not 
                include a plan which consists solely of--
                            ``(i) a cash or deferred arrangement which 
                        meets the requirements of section 401(k)(12), 
                        and
                            ``(ii) matching contributions with respect 
                        to which the requirements of section 401(m)(11) 
                        are met.
                If, but for this subparagraph, a plan would be treated 
                as a top-heavy plan because it is a member of an 
                aggregation group which is a top-heavy group, 
                contributions under the plan may be taken into account 
                in determining whether any other plan in the group 
                meets the requirements of subsection (c)(2).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

                Subtitle C--Enhancing Fairness for Women

SEC. 321. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER.

    (a) Elective Deferrals.--Section 414 (relating to definitions and 
special rules) is amended by adding at the end the following new 
subsection:
    ``(v) Catchup Contributions for Individuals Age 50 or Over.--
            ``(1) In general.--An applicable employer plan shall not be 
        treated as failing to meet any requirement of this title solely 
        because the plan permits an eligible participant to make 
        additional elective deferrals in any plan year.
            ``(2) Limitation on amount of additional deferrals.--
                    ``(A) In general.--A plan shall not permit 
                additional elective deferrals under paragraph (1) for 
                any year in an amount greater than the lesser of--
                            ``(i) the applicable percentage of the 
                        applicable dollar amount for such elective 
                        deferrals for such year, or
                            ``(ii) the excess (if any) of--
                                    ``(I) the participant's 
                                compensation for the year, over
                                    ``(II) any other elective deferrals 
                                of the participant for such year which 
                                are made without regard to this 
                                subsection.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage shall be 
                determined in accordance with the following table:

``For taxable years                                      The applicable
beginning in:                                            percentage is:
    2001..........................................          10 percent 
    2002..........................................          20 percent 
    2003..........................................          30 percent 
    2004..........................................          40 percent 
    2005 and thereafter...........................          50 percent.
            ``(3) Treatment of contributions.--In the case of any 
        contribution to a plan under paragraph (1)--
                    ``(A) such contribution shall not, with respect to 
                the year in which the contribution is made--
                            ``(i) be subject to any otherwise 
                        applicable limitation contained in section 
                        402(g), 402(h), 403(b), 404(a), 404(h), 408, 
                        415, or 457, or
                            ``(ii) be taken into account in applying 
                        such limitations to other contributions or 
                        benefits under such plan or any other such 
                        plan, and
                    ``(B) such plan shall not be treated as failing to 
                meet the requirements of section 401(a)(4), 401(a)(26), 
                401(k)(3), 401(k)(11), 401(k)(12), 401(m), 403(b)(12), 
                408(k), 408(p), 408B, 410(b), or 416 by reason of the 
                making of (or the right to make) such contribution.
            ``(4) Eligible participant.--For purposes of this 
        subsection, the term `eligible participant' means, with respect 
        to any plan year, a participant in a plan--
                    ``(A) who has attained the age of 50 before the 
                close of the plan year, and
                    ``(B) with respect to whom no other elective 
                deferrals may (without regard to this subsection) be 
                made to the plan for the plan year by reason of the 
                application of any limitation or other restriction 
                described in paragraph (3) or contained in the terms of 
                the plan.
            ``(5) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Applicable dollar amount.--The term 
                `applicable dollar amount' means, with respect to any 
                year, the amount in effect under section 402(g)(1)(B), 
                408(p)(2)(E)(i), or 457(e)(15)(A), whichever is 
                applicable to an applicable employer plan, for such 
                year.
                    ``(B) Applicable employer plan.--The term 
                `applicable employer plan' means--
                            ``(i) an employees' trust described in 
                        section 401(a) which is exempt from tax under 
                        section 501(a),
                            ``(ii) a plan under which amounts are 
                        contributed by an individual's employer for an 
                        annuity contract described in section 403(b),
                            ``(iii) an eligible deferred compensation 
                        plan under section 457 of an eligible employer 
                        as defined in section 457(e)(1)(A), and
                            ``(iv) an arrangement meeting the 
                        requirements of section 408 (k) or (p).
                    ``(C) Elective deferral.--The term `elective 
                deferral' has the meaning given such term by subsection 
                (u)(2)(C).
                    ``(D) Exception for section 457 plans.--This 
                subsection shall not apply to an applicable employer 
                plan described in paragraph (5)(B)(iii) for any year to 
                which section 457(b)(3) applies.''.
    (b) Individual Retirement Plans.--Section 219(b), as amended by 
sections 301 and 318, is amended by adding at the end the following new 
paragraph:
            ``(7) Catchup contributions.--
                    ``(A) In general.--In the case of an individual who 
                has attained the age of 50 before the close of the 
                taxable year, the dollar amount in effect under 
                paragraph (1)(A) for such taxable year shall be equal 
                to the applicable percentage of such amount determined 
                without regard to this paragraph.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage shall be 
                determined in accordance with the following table:

``For taxable years                                      The applicable
beginning in:                                            percentage is:
    2001..........................................         110 percent 
    2002..........................................         120 percent 
    2003..........................................         130 percent 
    2004..........................................         140 percent 
    2005 and thereafter...........................      150 percent.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to contributions in taxable years beginning after December 31, 2000.

SEC. 322. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED 
              CONTRIBUTION PLANS.

    (a) Equitable Treatment.--
            (1) In general.--Subparagraph (B) of section 415(c)(1) 
        (relating to limitation for defined contribution plans) is 
        amended by striking ``25 percent'' and inserting ``100 
        percent''.
            (2) Application to section 403(b).--Section 403(b) is 
        amended--
                    (A) by striking ``the exclusion allowance for such 
                taxable year'' in paragraph (1) and inserting ``the 
                applicable limit under section 415'',
                    (B) by striking paragraph (2), and
                    (C) by inserting ``or any amount received by a 
                former employee after the 5th taxable year following 
                the taxable year in which such employee was 
                terminated'' before the period at the end of the second 
                sentence of paragraph (3).
            (3) Conforming amendments.--
                    (A) Subsection (f) of section 72 is amended by 
                striking ``section 403(b)(2)(D)(iii))'' and inserting 
                ``section 403(b)(2)(D)(iii), as in effect before the 
                enactment of the Taxpayer Refund Act of 1999)''.
                    (B) Section 404(a)(10)(B) is amended by striking 
                ``, the exclusion allowance under section 403(b)(2),''.
                    (C) Section 415(a)(2) is amended by striking ``, 
                and the amount of the contribution for such portion 
                shall reduce the exclusion allowance as provided in 
                section 403(b)(2)''.
                    (D) Section 415(c)(3) is amended by adding at the 
                end the following new subparagraph:
                    ``(E) Annuity contracts.--In the case of an annuity 
                contract described in section 403(b), the term 
                `participant's compensation' means the participant's 
                includible compensation determined under section 
                403(b)(3).''.
                    (E) Section 415(c) is amended by striking paragraph 
                (4).
                    (F) Section 415(c)(7) is amended to read as 
                follows:
            ``(7) Certain contributions by church plans not treated as 
        exceeding limit.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection, at the election of a 
                participant who is an employee of a church or a 
                convention or association of churches, including an 
                organization described in section 414(e)(3)(B)(ii), 
                contributions and other additions for an annuity 
                contract or retirement income account described in 
                section 403(b) with respect to such participant, when 
                expressed as an annual addition to such participant's 
                account, shall be treated as not exceeding the 
                limitation of paragraph (1) if such annual addition is 
                not in excess of $10,000.
                    ``(B) $40,000 aggregate limitation.--The total 
                amount of additions with respect to any participant 
                which may be taken into account for purposes of this 
                subparagraph for all years may not exceed $40,000.
                    ``(C) Annual addition.--For purposes of this 
                paragraph, the term `annual addition' has the meaning 
                given such term by paragraph (2).''.
                    (G) Subparagraph (B) of section 402(g)(7) (as 
                redesignated by section 312(a)) is amended by inserting 
                before the period at the end the following: ``(as in 
                effect before the enactment of the Taxpayer Refund Act 
                of 1999)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
    (b) Special Rules for Sections 403(b) and 408.--
            (1) In general.--Subsection (k) of section 415 is amended 
        by adding at the end the following new paragraph:
            ``(4) Special rules for sections 403(b) and 408.--For 
        purposes of this section, any annuity contract described in 
        section 403(b) for the benefit of a participant shall be 
        treated as a defined contribution plan maintained by each 
        employer with respect to which the participant has the control 
        required under subsection (b) or (c) of section 414 (as 
        modified by subsection (h)). For purposes of this section, any 
        contribution by an employer to a simplified employee pension 
        plan for an individual for a taxable year shall be treated as 
        an employer contribution to a defined contribution plan for 
        such individual for such year.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to limitation years beginning after December 31, 
        2000.
    (c) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--
            (1) In general.--Subparagraph (B) of section 457(b)(2) 
        (relating to salary limitation on eligible deferred 
        compensation plans) is amended by striking ``33\1/3\ percent'' 
        and inserting ``100 percent''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 2000.

SEC. 323. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 
              PLAN BENEFITS UPON DIVORCE.

    (a) In General.--Section 414(p)(11) (relating to application of 
rules to governmental and church plans) is amended--
            (1) by inserting ``or an eligible deferred compensation 
        plan (within the meaning of section 457(b))'' after 
        ``subsection (e))'', and
            (2) in the heading, by striking ``governmental and church 
        plans'' and inserting ``certain other plans''.
    (b) Waiver of Certain Distribution Requirements.--Paragraph (10) of 
section 414(p) is amended by striking ``and section 409(d)'' and 
inserting ``section 409(d), and section 457(d)''.
    (c) Tax Treatment of Payments From a Section 457 Plan.--Subsection 
(p) of section 414 is amended by redesignating paragraph (12) as 
paragraph (13) and inserting after paragraph (11) the following new 
paragraph:
            ``(12) Tax treatment of payments from a section 457 plan.--
        If a distribution or payment from an eligible deferred 
        compensation plan described in section 457(b) is made pursuant 
        to a qualified domestic relations order, rules similar to the 
        rules of section 402(e)(1)(A) shall apply to such distribution 
        or payment.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transfers, distributions, and payments made after December 31, 
2000.

SEC. 324. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP WITHDRAWALS 
              FROM CASH OR DEFERRED ARRANGEMENTS.

    (a) In General.--The Secretary of the Treasury shall revise the 
regulations relating to hardship distributions under section 
401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide 
that the period an employee is prohibited from making elective and 
employee contributions in order for a distribution to be deemed 
necessary to satisfy financial need shall be equal to 6 months.
    (b) Effective Date.--The revised regulations under subsection (a) 
shall apply to years beginning after December 31, 2000.

SEC. 325. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.

    (a) Amendments to 1986 Code.--Section 411(a) (relating to minimum 
vesting standards) is amended--
            (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (12), a plan'', and
            (2) by adding at the end the following:
            ``(12) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A)), paragraph (2) shall be applied--
                    ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                    ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................              100.''.
    (b) Amendments to ERISA.--Section 203(a) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
            (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (4), a plan'', and
            (2) by adding at the end the following:
            ``(4) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A) of the Internal Revenue Code of 1986), paragraph 
        (2) shall be applied--
                    ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                    ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................              100.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        for plan years beginning after December 31, 2000.
            (2) Collective bargaining agreements.--In the case of a 
        plan maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of enactment of this Act, the 
        amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                            (ii) January 1, 2001, or
                    (B) January 1, 2005.
            (3) Service required.--With respect to any plan, the 
        amendments made by this section shall not apply to any employee 
        before the date that such employee has 1 hour of service under 
        such plan in any plan year to which the amendments made by this 
        section apply.

          Subtitle D--Increasing Portability for Participants

SEC. 331. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

    (a) Rollovers From and to Section 457 Plans.--
            (1) Rollovers from section 457 plans.--
                    (A) In general.--Section 457(e) (relating to other 
                definitions and special rules) is amended by adding at 
                the end the following:
            ``(16) Rollover amounts.--
                    ``(A) General rule.--In the case of an eligible 
                deferred compensation plan established and maintained 
                by an employer described in subsection (e)(1)(A), if--
                            ``(i) any portion of the balance to the 
                        credit of an employee in such plan is paid to 
                        such employee in an eligible rollover 
                        distribution (within the meaning of section 
                        402(c)(4) without regard to subparagraph (C) 
                        thereof),
                            ``(ii) the employee transfers any portion 
                        of the property such employee receives in such 
                        distribution to an eligible retirement plan 
                        described in section 402(c)(8)(B), and
                            ``(iii) in the case of a distribution of 
                        property other than money, the amount so 
                        transferred consists of the property 
                        distributed,
                then such distribution (to the extent so transferred) 
                shall not be includible in gross income for the taxable 
                year in which paid.
                    ``(B) Certain rules made applicable.--The rules of 
                paragraphs (2) through (7) (other than paragraph 
                (4)(C)) and (9) of section 402(c) and section 402(f) 
                shall apply for purposes of subparagraph (A).
                    ``(C) Reporting.--Rollovers under this paragraph 
                shall be reported to the Secretary in the same manner 
                as rollovers from qualified retirement plans (as 
                defined in section 4974(c)).''.
                    (B) Deferral limit determined without regard to 
                rollover amounts.--Section 457(b)(2) (defining eligible 
                deferred compensation plan) is amended by inserting 
                ``(other than rollover amounts)'' after ``taxable 
                year''.
                    (C) Direct rollover.--Paragraph (1) of section 
                457(d) is amended by striking ``and'' at the end of 
                subparagraph (A), by striking the period at the end of 
                subparagraph (B) and inserting ``, and'', and by 
                inserting after subparagraph (B) the following:
                    ``(C) in the case of a plan maintained by an 
                employer described in subsection (e)(1)(A), the plan 
                meets requirements similar to the requirements of 
                section 401(a)(31).
        Any amount transferred in a direct trustee-to-trustee transfer 
        in accordance with section 401(a)(31) shall not be includible 
        in gross income for the taxable year of transfer.''.
                    (D) Withholding.--
                            (i) Paragraph (12) of section 3401(a) is 
                        amended by adding at the end the following:
                    ``(E) under or to an eligible deferred compensation 
                plan which, at the time of such payment, is a plan 
                described in section 457(b) maintained by an employer 
                described in section 457(e)(1)(A); or''.
                            (ii) Paragraph (3) of section 3405(c) is 
                        amended to read as follows:
            ``(3) Eligible rollover distribution.--For purposes of this 
        subsection, the term `eligible rollover distribution' has the 
        meaning given such term by section 402(f)(2)(A).''.
                            (iii) Liability for withholding.--
                        Subparagraph (B) of section 3405(d)(2) is 
                        amended by striking ``or'' at the end of clause 
                        (ii), by striking the period at the end of 
                        clause (iii) and inserting ``, or'', and by 
                        adding at the end the following:
                            ``(iv) section 457(b).''.
            (2) Rollovers to section 457 plans.--
                    (A) In general.--Section 402(c)(8)(B) (defining 
                eligible retirement plan) is amended by striking 
                ``and'' at the end of clause (iii), by striking the 
                period at the end of clause (iv) and inserting ``, 
                and'', and by inserting after clause (iv) the following 
                new clause:
                            ``(v) an eligible deferred compensation 
                        plan described in section 457(b) of an employer 
                        described in section 457(e)(1)(A).''.
                    (B) Separate accounting.--Section 402(c) is amended 
                by adding at the end the following new paragraph:
            ``(11) Separate accounting.--Unless a plan described in 
        clause (v) of paragraph (8)(B) agrees to separately account for 
        amounts rolled into such plan from eligible retirement plans 
        not described in such clause, the plan described in such clause 
        may not accept transfers or rollovers from such retirement 
        plans.''.
                    (C) 10 percent additional tax.--Subsection (t) of 
                section 72 (relating to 10-percent additional tax on 
                early distributions from qualified retirement plans) is 
                amended by adding at the end the following new 
                paragraph:
            ``(9) Special rule for rollovers to section 457 plans.--For 
        purposes of this subsection, a distribution from an eligible 
        deferred compensation plan (as defined in section 457(b)) of an 
        employer described in section 457(e)(1)(A) shall be treated as 
        a distribution from a qualified retirement plan described in 
        4974(c)(1) to the extent that such distribution is attributable 
        to an amount transferred to an eligible deferred compensation 
        plan from a qualified retirement plan (as defined in section 
        4974(c)).''.
    (b) Allowance of Rollovers From and to 403(b) Plans.--
            (1) Rollovers from section 403(b) plans.--Section 
        403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
        striking ``such distribution'' and all that follows and 
        inserting ``such distribution to an eligible retirement plan 
        described in section 402(c)(8)(B), and''.
            (2) Rollovers to section 403(b) plans.--Section 
        402(c)(8)(B) (defining eligible retirement plan), as amended by 
        subsection (a), is amended by striking ``and'' at the end of 
        clause (iv), by striking the period at the end of clause (v) 
        and inserting 
        ``, and'', and by inserting after clause (v) the following new 
        clause:
                            ``(vi) an annuity contract described in 
                        section 403(b).''.
    (c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to 
recipients of distributions eligible for rollover treatment) 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) of the provisions under which distributions 
                from the eligible retirement plan receiving the 
                distribution may be subject to restrictions and tax 
                consequences which are different from those applicable 
                to distributions from the plan making such 
                distribution.''.
    (d) Spousal Rollovers.--Section 402(c)(9) (relating to rollover 
where spouse receives distribution after death of employee) is amended 
by striking ``; except that'' and all that follows up to the end 
period.
    (e) Conforming Amendments.--
            (1) Section 72(o)(4) is amended by striking ``and 
        408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
        457(e)(16)''.
            (2) Section 219(d)(2) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
            (3) Section 401(a)(31)(B) is amended by striking ``and 
        403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
        457(e)(16)''.
            (4) Subparagraph (A) of section 402(f)(2) is amended by 
        striking ``or paragraph (4) of section 403(a)'' and inserting 
        ``, paragraph (4) of section 403(a), subparagraph (A) of 
        section 403(b)(8), or subparagraph (A) of section 457(e)(16)''.
            (5) Paragraph (1) of section 402(f) is amended by striking 
        ``from an eligible retirement plan''.
            (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
        amended by striking ``another eligible retirement plan'' and 
        inserting ``an eligible retirement plan''.
            (7) Subparagraph (B) of section 403(b)(8) is amended to 
        read as follows:
                    ``(B) Certain rules made applicable.--The rules of 
                paragraphs (2) through (7) and (9) of section 402(c) 
                and section 402(f) shall apply for purposes of 
                subparagraph (A), except that section 402(f) shall be 
                applied to the payor in lieu of the plan 
                administrator.''.
            (8) Section 408(a)(1) is amended by striking ``or 
        403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
            (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
        amended by striking ``and 408(d)(3)'' and inserting 
        ``403(b)(8), 408(d)(3), and 457(e)(16)''.
            (10) Section 415(c)(2) is amended by striking ``and 
        408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
            (11) Section 4973(b)(1)(A) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
    (f) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after December 31, 2000.
            (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 shall not apply to any distribution from an 
        eligible retirement plan (as defined in clause (iii) or (iv) of 
        section 402(c)(8)(B) of the Internal Revenue Code of 1986) on 
        behalf of an individual if there was a rollover to such plan on 
        behalf of such individual which is permitted solely by reason 
        of any amendment made by this section.

SEC. 332. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

    (a) In General.--Subparagraph (A) of section 408(d)(3) (relating to 
rollover amounts) is amended by adding ``or'' at the end of clause (i), 
by striking clauses (ii) and (iii), and by adding at the end the 
following:
                            ``(ii) the entire amount received 
                        (including money and any other property) is 
                        paid into an eligible retirement plan for the 
                        benefit of such individual not later than the 
                        60th day after the date on which the payment or 
                        distribution is received, except that the 
                        maximum amount which may be paid into such plan 
                        may not exceed the portion of the amount 
                        received which is includible in gross income 
                        (determined without regard to this paragraph).
                For purposes of clause (ii), the term `eligible 
                retirement plan' means an eligible retirement plan 
                described in clause (iii), (iv), (v), or (vi) of 
                section 402(c)(8)(B).''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 403(b) is amended by striking 
        ``section 408(d)(3)(A)(iii)'' and inserting ``section 
        408(d)(3)(A)(ii)''.
            (2) Clause (i) of section 408(d)(3)(D) is amended by 
        striking ``(i), (ii), or (iii)'' and inserting ``(i) or (ii)''.
            (3) Subparagraph (G) of section 408(d)(3) is amended to 
        read as follows:
                    ``(G) Simple retirement accounts.--In the case of 
                any payment or distribution out of a simple retirement 
                account (as defined in subsection (p)) to which section 
                72(t)(6) applies, this paragraph shall not apply unless 
                such payment or distribution is paid into another 
                simple retirement account.''.
    (c) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after December 31, 2000.
            (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 shall not apply to any distribution from an 
        eligible retirement plan (as defined in clause (iii) or (iv) of 
        section 402(c)(8)(B) of the Internal Revenue Code of 1986) on 
        behalf of an individual if there was a rollover to such plan on 
        behalf of such individual which is permitted solely by reason 
        of the amendments made by this section.

SEC. 333. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

    (a) Rollovers From Exempt Trusts.--Paragraph (2) of section 402(c) 
(relating to maximum amount which may be rolled over) is amended by 
adding at the end the following: ``The preceding sentence shall not 
apply to such distribution to the extent--
                    ``(A) such portion is transferred in a direct 
                trustee-to-trustee transfer to a qualified trust which 
                is part of a plan which is a defined contribution plan 
                and which agrees to separately account for amounts so 
                transferred, including separately accounting for the 
                portion of such distribution which is includible in 
                gross income and the portion of such distribution which 
                is not so includible, or
                    ``(B) such portion is transferred to an eligible 
                retirement plan described in clause (i) or (ii) of 
                paragraph (8)(B).''.
    (b) Optional Direct Transfer of Eligible Rollover Distributions.--
Subparagraph (B) of section 401(a)(31) (relating to limitation) is 
amended by adding at the end the following: ``The preceding sentence 
shall not apply to such distribution if the plan to which such 
distribution is transferred--
                            ``(i) agrees to separately account for 
                        amounts so transferred, including separately 
                        accounting for the portion of such distribution 
                        which is includible in gross income and the 
                        portion of such distribution which is not so 
                        includible, or
                            ``(ii) is an eligible retirement plan 
                        described in clause (i) or (ii) of section 
                        402(c)(8)(B).''.
    (c) Rules for Applying Section 72 to IRAs.--Paragraph (3) of 
section 408(d) (relating to special rules for applying section 72) is 
amended by inserting at the end the following:
                    ``(H) Application of section 72.--
                            ``(i) In general.--If--
                                    ``(I) a distribution is made from 
                                an individual retirement plan, and
                                    ``(II) a rollover contribution is 
                                made to an eligible retirement plan 
                                described in section 402(c)(8)(B)(iii), 
                                (iv), (v), or (vi) with respect to all 
                                or part of such distribution,
                        then, notwithstanding paragraph (2), the rules 
                        of clause (ii) shall apply for purposes of 
                        applying section 72.
                            ``(ii) Applicable rules.--In the case of a 
                        distribution described in clause (i)--
                                    ``(I) section 72 shall be applied 
                                separately to such distribution,
                                    ``(II) notwithstanding the pro rata 
                                allocation of income on, and investment 
                                in the contract, to distributions under 
                                section 72, the portion of such 
                                distribution rolled over to an eligible 
                                retirement plan described in clause (i) 
                                shall be treated as from income on the 
                                contract (to the extent of the 
                                aggregate income on the contract from 
                                all individual retirement plans of the 
                                distributee), and
                                    ``(III) appropriate adjustments 
                                shall be made in applying section 72 to 
                                other distributions in such taxable 
                                year and subsequent taxable years.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2000.

SEC. 334. HARDSHIP EXCEPTION TO 60-DAY RULE.

    (a) Exempt Trusts.--Paragraph (3) of section 402(c) (relating to 
transfer must be made within 60 days of receipt) is amended to read as 
follows:
            ``(3) Transfer must be made within 60 days of receipt.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), paragraph (1) shall not apply to any 
                transfer of a distribution made after the 60th day 
                following the day on which the distributee received the 
                property distributed.
                    ``(B) Hardship exception.--The Secretary may waive 
                the 60-day requirement under subparagraph (A) where the 
                failure to waive such requirement would be against 
                equity or good conscience, including casualty, 
                disaster, or other events beyond the reasonable control 
                of the individual subject to such requirement.''.
    (b) IRAs.--Paragraph (3) of section 408(d) (relating to rollover 
contributions), as amended by section 333, is amended by adding after 
subparagraph (H) the following new subparagraph:
                    ``(I) Waiver of 60-day requirement.--The Secretary 
                may waive the 60-day requirement under subparagraphs 
                (A) and (D) where the failure to waive such requirement 
                would be against equity or good conscience, including 
                casualty, disaster, or other events beyond the 
                reasonable control of the individual subject to such 
                requirement.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2000.

SEC. 335. TREATMENT OF FORMS OF DISTRIBUTION.

    (a) Plan Transfers.--
            (1) Amendment to internal revenue code of 1986.--Paragraph 
        (6) of section 411(d) (relating to accrued benefit not to be 
        decreased by amendment) is amended by adding at the end the 
        following:
                    ``(D) Plan transfers.--
                            ``(i) A defined contribution plan (in this 
                        subparagraph referred to as the `transferee 
                        plan') shall not be treated as failing to meet 
                        the requirements of this subsection merely 
                        because the transferee plan does not provide 
                        some or all of the forms of distribution 
                        previously available under another defined 
                        contribution plan (in this subparagraph 
                        referred to as the `transferor plan') to the 
                        extent that--
                                    ``(I) the forms of distribution 
                                previously available under the 
                                transferor plan applied to the account 
                                of a participant or beneficiary under 
                                the transferor plan that was 
                                transferred from the transferor plan to 
                                the transferee plan pursuant to a 
                                direct transfer rather than pursuant to 
                                a distribution from the transferor 
                                plan,
                                    ``(II) the terms of both the 
                                transferor plan and the transferee plan 
                                authorize the transfer described in 
                                subclause (I),
                                    ``(III) the transfer described in 
                                subclause (I) was made pursuant to a 
                                voluntary election by the participant 
                                or beneficiary whose account was 
                                transferred to the transferee plan,
                                    ``(IV) the election described in 
                                subclause (III) was made after the 
                                participant or beneficiary received a 
                                notice describing the consequences of 
                                making the election,
                                    ``(V) if the transferor plan 
                                provides for an annuity as the normal 
                                form of distribution under the plan in 
                                accordance with section 417, the 
                                transfer is made with the consent of 
                                the participant's spouse (if any), and 
                                such consent meets requirements similar 
                                to the requirements imposed by section 
                                417(a)(2), and
                                    ``(VI) the transferee plan allows 
                                the participant or beneficiary 
                                described in subclause (III) to receive 
                                any distribution to which the 
                                participant or beneficiary is entitled 
                                under the transferee plan in the form 
                                of a single sum distribution.
                            ``(ii) Clause (i) shall apply to plan 
                        mergers and other transactions having the 
                        effect of a direct transfer, including 
                        consolidations of benefits attributable to 
                        different employers within a multiple employer 
                        plan.
                    ``(E) Elimination of form of distribution.--Except 
                to the extent provided in regulations, a defined 
                contribution plan shall not be treated as failing to 
                meet the requirements of this section merely because of 
                the elimination of a form of distribution previously 
                available thereunder. This subparagraph shall not apply 
                to the elimination of a form of distribution with 
                respect to any participant unless--
                            ``(i) a single sum payment is available to 
                        such participant at the same time or times as 
                        the form of distribution being eliminated, and
                            ``(ii) such single sum payment is based on 
                        the same or greater portion of the 
                        participant's account as the form of 
                        distribution being eliminated.''.
            (2) Amendment to erisa.--Section 204(g) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
        amended by adding at the end the following:
    ``(4)(A) A defined contribution plan (in this subparagraph referred 
to as the `transferee plan') shall not be treated as failing to meet 
the requirements of this subsection merely because the transferee plan 
does not provide some or all of the forms of distribution previously 
available under another defined contribution plan (in this paragraph 
referred to as the `transferor plan') to the extent that--
            ``(i) the forms of distribution previously available under 
        the transferor plan applied to the account of a participant or 
        beneficiary under the transferor plan that was transferred from 
        the transferor plan to the transferee plan pursuant to a direct 
        transfer rather than pursuant to a distribution from the 
        transferor plan;
            ``(ii) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in clause (i);
            ``(iii) the transfer described in clause (i) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the transferee 
        plan;
            ``(iv) the election described in clause (iii) was made 
        after the participant or beneficiary received a notice 
        describing the consequences of making the election;
            ``(v) if the transferor plan provides for an annuity as the 
        normal form of distribution under the plan in accordance with 
        section 417, the transfer is made with the consent of the 
        participant's spouse (if any), and such consent meets 
        requirements similar to the requirements imposed by section 
        417(a)(2); and
            ``(vi) the transferee plan allows the participant or 
        beneficiary described in subclause (III) to receive any 
        distribution to which the participant or beneficiary is 
        entitled under the transferee plan in the form of a single sum 
        distribution.
    ``(B) Subparagraph (A) shall apply to plan mergers and other 
transactions having the effect of a direct transfer, including 
consolidations of benefits attributable to different employers within a 
multiple employer plan.
    ``(5) Elimination of form of distribution.--Except to the extent 
provided in regulations, a defined contribution plan shall not be 
treated as failing to meet the requirements of this section merely 
because of the elimination of a form of distribution previously 
available thereunder. This paragraph shall not apply to the elimination 
of a form of distribution with respect to any participant unless--
            ``(A) a single sum payment is available to such participant 
        at the same time or times as the form of distribution being 
        eliminated; and
            ``(B) such single sum payment is based on the same or 
        greater portion of the participant's account as the form of 
        distribution being eliminated.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
    (b) Regulations.--
            (1) Amendment to internal revenue code of 1986.--The last 
        sentence of paragraph (6)(B) of section 411(d) (relating to 
        accrued benefit not to be decreased by amendment) is amended to 
        read as follows: ``The Secretary may by regulations provide 
        that this subparagraph shall not apply to any plan amendment 
        that does not adversely affect the rights of participants in a 
        material manner.''.
            (2) Amendment to erisa.--The last sentence of section 
        204(g)(2) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows: 
        ``The Secretary of the Treasury may by regulations provide that 
        this paragraph shall not apply to any plan amendment that does 
        not adversely affect the rights of participants in a material 
        manner.''.
            (3) Secretary directed.--Not later than December 31, 2001, 
        the Secretary of the Treasury is directed to issue final 
        regulations under section 411(d)(6) of the Internal Revenue 
        Code of 1986 and section 204(g)(2) of the Employee Retirement 
        Income Security Act of 1974. Such regulations shall apply to 
        plan years beginning after December 31, 2001, or such earlier 
        date as is specified by the Secretary of the Treasury.

SEC. 336. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

    (a) Modification of Same Desk Exception.--
            (1) Section 401(k).--
                    (A) Section 401(k)(2)(B)(i)(I) (relating to 
                qualified cash or deferred arrangements) is amended by 
                striking ``separation from service'' and inserting 
                ``severance from employment''.
                    (B) Subparagraph (A) of section 401(k)(10) 
                (relating to distributions upon termination of plan or 
                disposition of assets or subsidiary) is amended to read 
                as follows:
                    ``(A) In general.--An event described in this 
                subparagraph is the termination of the plan without 
                establishment or maintenance of another defined 
                contribution plan (other than an employee stock 
                ownership plan as defined in section 4975(e)(7)).''.
                    (C) Section 401(k)(10) is amended--
                            (i) in subparagraph (B)--
                                    (I) by striking ``An event'' in 
                                clause (i) and inserting ``A 
                                termination'', and
                                    (II) by striking ``the event'' in 
                                clause (i) and inserting ``the 
                                termination'',
                            (ii) by striking subparagraph (C), and
                            (iii) by striking ``or disposition of 
                        assets or subsidiary'' in the heading.
            (2) Section 403(b).--
                    (A) Paragraphs (7)(A)(ii) and (11)(A) of section 
                403(b) are each amended by striking ``separates from 
                service'' and inserting ``has a severance from 
                employment''.
                    (B) The heading for paragraph (11) of section 
                403(b) is amended by striking ``separation from 
                service'' and inserting ``severance from employment''.
            (3) Section 457.--Clause (ii) of section 457(d)(1)(A) is 
        amended by striking ``is separated from service'' and inserting 
        ``has a severance from employment''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2000.

SEC. 337. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT 
              PLANS.

    (a) 403(b) Plans.--Subsection (b) of section 403 is amended by 
adding at the end the following new paragraph:
            ``(13) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                    ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                    ``(B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.''.
    (b) 457 Plans.--
            (1) Subsection (e) of section 457 is amended by adding 
        after paragraph (17) the following new paragraph:
            ``(18) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                    ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                    ``(B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.''.
            (2) Section 457(b)(2) is amended by striking ``(other than 
        rollover amounts)'' and inserting ``(other than rollover 
        amounts and amounts received in a transfer referred to in 
        subsection (e)(16))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to trustee-to-trustee transfers after December 31, 2000.

SEC. 338. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT 
              AMOUNTS.

    (a) Qualified Plans.--
            (1) Amendment to internal revenue code of 1986.--Section 
        411(a)(11) (relating to restrictions on certain mandatory 
        distributions) is amended by adding at the end the following:
                    ``(D) Special rule for rollover contributions.--A 
                plan shall not fail to meet the requirements of this 
                paragraph if, under the terms of the plan, the present 
                value of the nonforfeitable accrued benefit is 
                determined without regard to that portion of such 
                benefit which is attributable to rollover contributions 
                (and earnings allocable thereto). For purposes of this 
                subparagraph, the term `rollover contributions' means 
                any rollover contribution under sections 402(c), 
                403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
                457(e)(16).''.
            (2) Amendment to erisa.--Section 203(e) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
        amended by adding at the end the following:
    ``(4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value of the 
nonforfeitable accrued benefit is determined without regard to that 
portion of such benefit which is attributable to rollover contributions 
(and earnings allocable thereto). For purposes of this subparagraph, 
the term `rollover contributions' means any rollover contribution under 
sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) 
of the Internal Revenue Code of 1986.''.
    (b) Eligible Deferred Compensation Plans.--Clause (i) of section 
457(e)(9)(A) is amended by striking ``such amount'' and inserting ``the 
portion of such amount which is not attributable to rollover 
contributions (as defined in section 411(a)(11)(D))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2000.

SEC. 339. INCLUSION REQUIREMENTS FOR SECTION 457 PLANS.

    (a) Year of Inclusion.--Subsection (a) of section 457 (relating to 
year of inclusion in gross income) is amended to read as follows:
    ``(a) Year of Inclusion in Gross Income.--
            ``(1) In general.--Any amount of compensation deferred 
        under an eligible deferred compensation plan, and any income 
        attributable to the amounts so deferred, shall be includible in 
        gross income only for the taxable year in which such 
        compensation or other income--
                    ``(A) is paid to the participant or other 
                beneficiary, in the case of a plan of an eligible 
                employer described in subsection (e)(1)(A), and
                    ``(B) is paid or otherwise made available to the 
                participant or other beneficiary, in the case of a plan 
                of an eligible employer described in subsection 
                (e)(1)(B).
            ``(2) Special rule for rollover amounts.--To the extent 
        provided in section 72(t)(9), section 72(t) shall apply to any 
        amount includible in gross income under this subsection.''.
    (b) Conforming Amendment.--So much of paragraph (9) of section 
457(e) as precedes subparagraph (A) is amended to read as follows:
            ``(9) Benefits of tax exempt organization plans not treated 
        as made available by reason of certain elections, etc.--In the 
        case of an eligible deferred compensation plan of an employer 
        described in paragraph (1)(B)--''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2000.

       Subtitle E--Strengthening Pension Security and Enforcement

SEC. 341. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.

    (a) Amendment to Internal Revenue Code of 1986.--Section 412(c)(7) 
(relating to full-funding limitation) is amended--
            (1) by striking ``the applicable percentage'' in 
        subparagraph (A)(i)(I) and inserting ``in the case of plan 
        years beginning before January 1, 2004, the applicable 
        percentage'', and
            (2) by amending subparagraph (F) to read as follows:
                    ``(F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable percentage shall 
                be determined in accordance with the following table:

                ``In the case of any plan year
                                                         The applicable
                  beginning in--
                                                        percentage is--
                    2001...................................        160 
                    2002...................................        165 
                    2003...................................     170.''.
    (b) Amendment to ERISA.--Section 302(c)(7) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) is 
amended--
            (1) by striking ``the applicable percentage'' in 
        subparagraph (A)(i)(I) and inserting ``in the case of plan 
        years beginning before January 1, 2004, the applicable 
        percentage'', and
            (2) by amending subparagraph (F) to read as follows:
                    ``(F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable percentage shall 
                be determined in accordance with the following table:

                ``In the case of any plan year
                                                         The applicable
                  beginning in--
                                                        percentage is--
                    2001...................................        160 
                    2002...................................        165 
                    2003...................................     170.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

SEC. 342. EXTENSION OF MISSING PARTICIPANTS PROGRAM TO MULTIEMPLOYER 
              PLANS.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.''.
    (b) Conforming Amendment.--Section 206(f) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is amended 
by striking ``the plan shall provide that,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after final regulations implementing 
subsection (c) of section 4050 of the Employee Retirement Income 
Security Act of 1974 (as added by subsection (a)) are prescribed.

SEC. 343. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

    (a) In General.--Subsection (c) of section 4972 (relating to 
nondeductible contributions) is amended by adding at the end the 
following new paragraph:
            ``(7) Defined benefit plan exception.--In determining the 
        amount of nondeductible contributions for any taxable year, an 
        employer may elect for such year not to take into account any 
        contributions to a defined benefit plan except to the extent 
        that such contributions exceed the full-funding limitation (as 
        defined in section 412(c)(7), determined without regard to 
        subparagraph (A)(i)(I) thereof). For purposes of this 
        paragraph, the deductible limits under section 404(a)(7) shall 
        first be applied to amounts contributed to defined contribution 
        plans and then to amounts described in this paragraph. If an 
        employer makes an election under this paragraph for a taxable 
        year, paragraph (6) shall not apply to such employer for such 
        taxable year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 344. FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT PLANS 
              SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.

    (a) Excise Tax.--
            (1) In general.--Chapter 43 of subtitle D (relating to 
        qualified pension, etc., plans) is amended by adding at the end 
        the following new section:

``SEC. 4980F. FAILURE OF DEFINED BENEFIT PLANS REDUCING BENEFIT 
              ACCRUALS TO SATISFY NOTICE REQUIREMENTS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of an applicable pension plan to meet the requirements of 
subsection (e) with respect to any applicable individual.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any applicable 
        individual shall be $100 for each day in the noncompliance 
        period with respect to such failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the failure is corrected.
            ``(3) Minimum tax for noncompliance period where failure 
        discovered after notice of examination.--Notwithstanding 
        paragraphs (1) and (2) of subsection (c)--
                    ``(A) In general.--In the case of 1 or more 
                failures with respect to an applicable individual--
                            ``(i) which are not corrected before the 
                        date a notice of examination of income tax 
                        liability is sent to the employer, and
                            ``(ii) which occurred or continued during 
                        the period under examination,
                the amount of tax imposed by subsection (a) by reason 
                of such failures with respect to such beneficiary shall 
                not be less than the lesser of $2,500 or the amount of 
                tax which would be imposed by subsection (a) without 
                regard to such paragraphs.
                    ``(B) Higher minimum tax where violations are more 
                than de minimis.--To the extent violations by the 
                employer (or the plan in the case of a multiemployer 
                plan) for any year are more than de minimis, 
                subparagraph (A) shall be applied by substituting 
                `$15,000' for `$2,500' with respect to the employer (or 
                such plan).
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that none of 
        the persons referred to in subsection (d) knew, or exercising 
        reasonable diligence would have known, that the failure 
        existed.
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the first date any of the persons 
                referred to in subsection (d) knew, or exercising 
                reasonable diligence would have known, that such 
                failure existed.
            ``(3) Overall limitation for unintentional failures.--
                    ``(A) In general.--In the case of failures that are 
                due to reasonable cause and not to willful neglect, the 
                tax imposed by subsection (a) for failures during the 
                taxable year of the employer (or, in the case of a 
                multiemployer plan, the taxable year of the trust 
                forming part of the plan) shall not exceed $500,000. 
                For purposes of the preceding sentence, all 
                multiemployer plans of which the same trust forms a 
                part shall be treated as 1 plan.
                    ``(B) Taxable years in the case of certain 
                controlled groups.--For purposes of this paragraph, if 
                all persons who are treated as a single employer for 
                purposes of this section do not have the same taxable 
                year, the taxable years taken into account shall be 
                determined under principles similar to the principles 
                of section 1561.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
            ``(1) In the case of a plan other than a multiemployer 
        plan, the employer.
            ``(2) In the case of a multiemployer plan, the plan.
    ``(e) Notice Requirements for Plans Significantly Reducing Benefit 
Accruals.--
            ``(1) In general.--If a defined benefit plan adopts an 
        amendment which has the effect of significantly reducing the 
        rate of future benefit accrual of 1 or more participants 
        (including any elimination or reduction of an early retirement 
        benefit or retirement-type subsidy), the plan administrator 
        shall, not later than the 30th day before the effective date of 
        the amendment, provide written notice to each applicable 
        individual (and to each employee organization representing 
        applicable individuals) which--
                    ``(A) sets forth the plan amendment and its 
                effective date, and
                    ``(B) includes sufficient information (as 
                determined in accordance with regulations prescribed by 
                the Secretary) to allow such participants and 
                beneficiaries to understand how the amendment generally 
                affects different classes of employees.
            ``(2) Additional notice required in certain cases.--
                    ``(A) In general.--If a plan amendment to which 
                paragraph (1) applies--
                            ``(i) either--
                                    ``(I) provides for a significant 
                                change in the manner in which the 
                                accrued benefit of an applicable 
                                individual is determined under the 
                                plan, or
                                    ``(II) requires an applicable 
                                individual to choose between 2 or more 
                                benefit formulas, and
                            ``(ii) may reasonably be expected to affect 
                        such applicable individual,
                the plan shall, not later than the date which is 6 
                months after the effective date of the amendment, 
                provide written notice to such applicable individual 
                which includes the information described in 
                subparagraph (B).
                    ``(B) Additional information.--The notice under 
                subparagraph (A) shall include the following 
                information:
                            ``(i) The accrued benefit (and if the 
                        amendment adds the option of an immediate lump 
                        sum distribution, the present value of the 
                        accrued benefit) as of the effective date, 
                        determined under the terms of the plan in 
                        effect immediately before the effective date.
                            ``(ii) The accrued benefit as of the 
                        effective date, determined under the terms of 
                        the plan in effect on the effective date and 
                        without regard to any minimum accrued benefit 
                        required by reason of section 411(d)(6).
                            ``(iii) Sufficient information (as 
                        determined in accordance with regulations 
                        prescribed by the Secretary) for an applicable 
                        individual to compute their projected accrued 
                        benefit under the terms of the plan in effect 
                        on the effective date or to acquire information 
                        necessary to compute such projected accrued 
                        benefit.
                    ``(C) Option to provide projected accrued 
                benefit.--A plan may, in lieu of the information 
                described in subparagraph (B)(iii), include a 
                determination of an applicable individual's projected 
                accrued benefit under the terms of the plan in effect 
                on the effective date. Such determination shall include 
                a disclosure of the assumptions used by the plan in 
                determining such benefit and such assumptions must be 
                reasonable in the aggregate.
                    ``(D) Rules for computing benefits.--For purposes 
                of this paragraph, an applicable individual's accrued 
                benefit and projected accrued benefit shall be 
                computed--
                            ``(i) as if the accrued benefit were in the 
                        form of a single life annuity commencing at 
                        normal retirement age (and by taking into 
                        account any early retirement subsidy), and
                            ``(ii) by using the applicable mortality 
                        table and the applicable interest rate under 
                        section 417(e)(3)(A).
            ``(3) Secretary may change notice and time for notice.--If 
        a plan amendment to which paragraph (1) applies requires an 
        applicable individual to choose between 2 or more benefit 
        formulas, the Secretary may, after consultation with the 
        Secretary of Labor--
                    ``(A) require additional information to be provided 
                in either of the notices described in paragraph (1) or 
                (2), and
                    ``(B) require either of such notices to be provided 
                at a time other than the time required under either 
                such paragraph.
            ``(4) Notice before adoption of amendment.--A plan shall 
        not be treated as failing to meet the requirements of paragraph 
        (1) or (2) merely because notice is provided before the 
        adoption of the plan amendment if no material modification of 
        the amendment occurs before the amendment is adopted.
            ``(5) Notice to designee.--Any notice under paragraph (1) 
        or (2) may be provided to a person designated, in writing, by 
        the person to which it would otherwise be provided.
    ``(f) Applicable Individual.--For purposes of this section--
            ``(1) In general.--The term `applicable individual' means, 
        with respect to any plan amendment--
                    ``(A) any participant in the plan, and
                    ``(B) any beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under an 
                applicable qualified domestic relations order (within 
                the meaning of section 414(p)(1)(A)).
            ``(2) Exception for participants with less than 1 year of 
        participation.--Such term shall not include a participant who 
        has less than 1 year of participation (within the meaning of 
        section 411(b)(4)) under the plan as of the effective date of 
        the plan amendment.
            ``(3) Participants getting higher of benefits.--Such term 
        shall not include a participant or beneficiary who, under the 
        terms of the plan as of the effective date of the plan 
        amendment, is entitled to the greater of the accrued benefit 
        under such terms or the accrued benefit under the terms of the 
        plan in effect immediately before the effective date.
    ``(g) Applicable Pension Plan.--For purposes of this section, the 
term `applicable pension plan' means--
            ``(1) a defined benefit plan, or
            ``(2) an individual account plan which is subject to the 
        funding standards of section 412.
Such term shall not include a governmental plan (within the meaning of 
section 414(d)) or a church plan (within the meaning of section 414(e)) 
with respect to which an election under section 410(d) has not been 
made.''.
            (2) Conforming amendment.--The table of sections for 
        chapter 43 of subtitle D is amended by adding at the end the 
        following new item:

                              ``Sec. 4980F. Failure of defined benefit 
                                        plans reducing benefit accruals 
                                        to satisfy notice 
                                        requirements.''.
    (b) Amendment to ERISA.--Section 204(h) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1054(h)) is amended to read as 
follows:
    ``(h)(1) An applicable pension plan may not adopt an amendment 
which has the effect of significantly reducing the rate of future 
benefit accrual of 1 or more participants (including any elimination or 
reduction of an early retirement benefit or retirement-type subsidy) 
unless the plan administrator provides, not later than the 30th day 
before the effective date of the amendment, written notice to each 
applicable individual (and to each employee organization representing 
applicable individuals) which--
            ``(A) sets forth the plan amendment and its effective date, 
        and
            ``(B) includes sufficient information (as determined in 
        accordance with regulations prescribed by the Secretary of the 
        Treasury) to allow applicable individuals to understand how the 
        amendment generally affects different classes of employees.
    ``(2)(A) If a plan amendment to which paragraph (1) applies--
            ``(i) either--
                    ``(I) provides for a significant change in the 
                manner in which the accrued benefit is determined under 
                the plan, or
                    ``(II) requires an applicable individual to choose 
                between 2 or more benefit formulas, and
            ``(ii) may reasonably be expected to affect such applicable 
        individual,
the plan shall, not later than the date which is 6 months after the 
effective date of the amendment, provide written notice to such 
applicable individual which includes the information described in 
subparagraph (B).
    ``(B) The notice under subparagraph (A) shall include the following 
information:
            ``(i) The accrued benefit (and if the amendment adds the 
        option of an immediate lump sum distribution, the present value 
        of the accrued benefit) as of the effective date, determined 
        under the terms of the plan in effect immediately before the 
        effective date.
            ``(ii) The accrued benefit as of the effective date, 
        determined under the terms of the plan in effect on the 
        effective date and without regard to any minimum accrued 
        benefit required by reason of section 204(g).
            ``(iii) Sufficient information (as determined in accordance 
        with regulations prescribed by the Secretary of the Treasury) 
        for an applicable individual to compute their projected accrued 
        benefit under the terms of the plan in effect on the effective 
        date or to acquire information necessary to compute such 
        projected accrued benefit.
    ``(C) A plan may, in lieu of the information described in 
subparagraph (B)(iii), include a determination of an applicable 
individual's projected accrued benefit under the terms of the plan in 
effect on the effective date. Such determination shall include a 
disclosure of the assumptions used by the plan in determining such 
benefit and such assumptions must be reasonable in the aggregate.
    ``(D) For purposes of this paragraph, an applicable individual's 
accrued benefit and projected accrued benefit shall be computed--
            ``(i) as if the accrued benefit were in the form of a 
        single life annuity commencing at normal retirement age (and by 
        taking into account any early retirement subsidy), and
            ``(ii) by using the applicable mortality table and the 
        applicable interest rate under section 205(g)(3)(A).
    ``(3) If a plan amendment to which paragraph (1) applies requires 
an applicable individual to choose between 2 or more benefit formulas, 
the Secretary of the Treasury may, after consultation with the 
Secretary--
            ``(A) require additional information to be provided in 
        either of the notices described in paragraph (1) or (2), and
            ``(B) require either of such notices to be provided at a 
        time other than the time required under either such paragraph.
    ``(4) A plan shall not be treated as failing to meet the 
requirements of paragraph (1) or (2) merely because notice is provided 
before the adoption of the plan amendment if no material modification 
of the amendment occurs before the amendment is adopted.
    ``(5) Any notice under paragraph (1) or (2) may be provided to a 
person designated, in writing, by the person to which it would 
otherwise be provided.
    ``(6)(A) For purposes of this subsection, the term `applicable 
individual' means, with respect to any plan amendment--
            ``(i) any participant in the plan, and
            ``(ii) any beneficiary who is an alternate payee (within 
        the meaning of section 206(d)(3)(K)) under an applicable 
        qualified domestic relations order (within the meaning of 
        section 206(d)(3)(B)).
    ``(B) Such term shall not include a participant who has less than 1 
year of participation (within the meaning of section 204(b)(4)) under 
the plan as of the effective date of the plan amendment.
    ``(C) Such term shall not include a participant or beneficiary who, 
under the terms of the plan as of the effective date of the plan 
amendment, is entitled to the greater of the accrued benefit under such 
terms or the accrued benefit under the terms of the plan in effect 
immediately before the effective date.
    ``(7) For purposes of this subsection, the term `applicable pension 
plan' means--
            ``(A) a defined benefit plan, or
            ``(B) an individual account plan which is subject to the 
        funding standards of section 302.
Such term shall not include a governmental plan (within the meaning of 
section 3(32)) or a church plan (within the meaning of section 3(33)) 
with respect to which an election under section 410(d) of the Internal 
Revenue Code of 1986 has not been made.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan amendments taking effect on or after the date of 
        the enactment of this Act.
            (2) Special rule for collectively bargained plans.--In the 
        case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified by the date of the enactment of this 
        Act, the amendments made by this section shall not apply to 
        plan amendments taking effect before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                            (ii) January 1, 2000, or
                    (B) January 1, 2002.
            (3) Special rule.--The period for providing any notice 
        required by the amendments made by this section shall not end 
        before the date which is 3 months after the date of the 
        enactment of this Act.

SEC. 345. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K) 
              PLANS.

    (a) In General.--Section 1524(b) of the Taxpayer Relief Act of 1997 
is amended to read as follows:
    ``(b) Effective Date.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to elective 
        deferrals for plan years beginning after December 31, 1998.
            ``(2) Nonapplication to previously acquired property.--The 
        amendments made by this section shall not apply to any elective 
        deferral used to acquire an interest in the income or gain from 
        employer securities or employer real property acquired--
                    ``(A) before January 1, 1999, or
                    ``(B) after such date pursuant to a written 
                contract which was binding on such date and at all 
                times thereafter on such plan.''.
    (b) Effective Date.--The amendment made by this section shall apply 
as if included in the provision of the Taxpayer Relief Act of 1997 to 
which it relates.

SEC. 346. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

    (a) Compensation Limit.--Paragraph (11) of section 415(b) (relating 
to limitation for defined benefit plans) is amended to read as follows:
            ``(11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental plan (as 
        defined in section 414(d)) or a multiemployer plan (as defined 
        in section 414(f)), subparagraph (B) of paragraph (1) shall not 
        apply.''.
    (b) Combining and Aggregation of Plans.--
            (1) Combining of plans.--Subsection (f) of section 415 
        (relating to combining of plans) is amended by adding at the 
        end the following:
            ``(3) Exception for multiemployer plans.--Notwithstanding 
        paragraph (1) and subsection (g), a multiemployer plan (as 
        defined in section 414(f)) shall not be combined or aggregated 
        with any other plan maintained by an employer for purposes of 
        applying the limitations established in this section. The 
        preceding sentence shall not apply for purposes of applying 
        subsection (b)(1)(A) to a plan which is not a multiemployer 
        plan.''.
            (2) Conforming amendment for aggregation of plans.--
        Subsection (g) of section 415 (relating to aggregation of 
        plans) is amended by striking ``The Secretary'' and inserting 
        ``Except as provided in subsection (f)(3), the Secretary''.
    (c) Application of Special Early Retirement Rules.--Section 
415(b)(2)(F) (relating to plans maintained by governments and tax-
exempt organizations) is amended--
            (1) by inserting ``a multiemployer plan (within the meaning 
        of section 414(f)),'' after ``section 414(d)),'', and
            (2) by striking the heading and inserting:
                    ``(F) Special early retirement rules for certain 
                plans.--''.
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1999.

SEC. 347. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND APPLIED TO 
              ALL DEFINED BENEFIT PLANS.

    (a) In General.--Subparagraph (D) of section 404(a)(1) (relating to 
special rule in case of certain plans) is amended to read as follows:
                    ``(D) Special rule in case of certain plans.--
                            ``(i) In general.--In the case of any 
                        defined benefit plan, except as provided in 
                        regulations, the maximum amount deductible 
                        under the limitations of this paragraph shall 
                        not be less than the unfunded termination 
                        liability (determined as if the proposed 
                        termination date referred to in section 
                        4041(b)(2)(A)(i)(II) of the Employee Retirement 
                        Income Security Act of 1974 were the last day 
                        of the plan year).
                            ``(ii) Plans with less than 100 
                        participants.--For purposes of this 
                        subparagraph, in the case of a plan which has 
                        less than 100 participants for the plan year, 
                        termination liability shall not include the 
                        liability attributable to benefit increases for 
                        highly compensated employees (as defined in 
                        section 414(q)) resulting from a plan amendment 
                        which is made or becomes effective, whichever 
                        is later, within the last 2 years before the 
                        termination date.
                            ``(iii) Rule for determining number of 
                        participants.--For purposes of determining 
                        whether a plan has more than 100 participants, 
                        all defined benefit plans maintained by the 
                        same employer (or any member of such employer's 
                        controlled group (within the meaning of section 
                        412(l)(8)(C))) shall be treated as 1 plan, but 
                        only employees of such member or employer shall 
                        be taken into account.
                            ``(iv) Plans established and maintain by 
                        professional service employers.--Clause (i) 
                        shall not apply to a plan described in section 
                        4021(b)(13) of the Employee Retirement Income 
                        Security Act of 1974.''.
    (b) Conforming Amendment.--Paragraph (6) of section 4972(c) is 
amended to read as follows:
            ``(6) Exceptions.--In determining the amount of 
        nondeductible contributions for any taxable year, there shall 
        not be taken into account so much of the contributions to 1 or 
        more defined contribution plans which are not deductible when 
        contributed solely because of section 404(a)(7) as does not 
        exceed the greater of--
                    ``(A) the amount of contributions not in excess of 
                6 percent of compensation (within the meaning of 
                section 404(a)) paid or accrued (during the taxable 
                year for which the contributions were made) to 
                beneficiaries under the plans, or
                    ``(B) the sum of--
                            ``(i) the amount of contributions described 
                        in section 401(m)(4)(A), plus
                            ``(ii) the amount of contributions 
                        described in section 402(g)(3)(A).
        For purposes of this paragraph, the deductible limits under 
        section 404(a)(7) shall first be applied to amounts contributed 
        to a defined benefit plan and then to amounts described in 
        subparagraph (B).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

SEC. 348. INCREASE IN SECTION 415 EARLY RETIREMENT LIMIT FOR 
              GOVERNMENTAL AND OTHER PLANS.

    (a) In General.--Subclause (II) of section 415(b)(2)(F)(i), as 
amended by section 346(c), is amended--
            (1) by striking ``$75,000'' and inserting ``80 percent of 
        the dollar amount in effect under paragraph (1)(A)'', and
            (2) by striking ``the $75,000 limitation'' and inserting 
        ``80 percent of such dollar amount''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1999.

              Subtitle F--Encouraging Retirement Education

SEC. 351. PERIODIC PENSION BENEFITS STATEMENTS.

    (a) In General.--Section 105(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to read as 
follows:
    ``(a)(1) Except as provided in paragraph (2)--
            ``(A) the administrator of an individual account plan shall 
        furnish a pension benefit statement--
                    ``(i) to a plan participant at least once annually, 
                and
                    ``(ii) to a plan beneficiary upon written request, 
                and
            ``(B) the administrator of a defined benefit plan shall 
        furnish a pension benefit statement--
                    ``(i) at least once every 3 years to each 
                participant with a nonforfeitable accrued benefit who 
                is employed by the employer maintaining the plan at the 
                time the statement is furnished to participants, and
                    ``(ii) to a participant or beneficiary of the plan 
                upon written request.
    ``(2) Notwithstanding paragraph (1), the administrator of a plan to 
which more than 1 unaffiliated employer is required to contribute shall 
only be required to furnish a pension benefit statement under paragraph 
(1) upon the written request of a participant or beneficiary of the 
plan.
    ``(3) A pension benefit statement under paragraph (1)--
            ``(A) shall indicate, on the basis of the latest available 
        information--
                    ``(i) the total benefits accrued, and
                    ``(ii) the nonforfeitable pension benefits, if any, 
                which have accrued, or the earliest date on which 
                benefits will become nonforfeitable,
            ``(B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
            ``(C) may be provided in written, electronic, telephonic, 
        or other appropriate form.
    ``(4) In the case of a defined benefit plan, the requirements of 
paragraph (1)(B)(i) shall be treated as met with respect to a 
participant if the administrator provides the participant at least once 
each year with notice of the availability of the pension benefit 
statement and the ways in which the participant may obtain such 
statement. Such notice shall be provided in written, electronic, 
telephonic, or other appropriate form, and may be included with other 
communications to the participant if done in a manner reasonably 
designed to attract the attention of the participant.''.
    (b) Conforming Amendments.--
            (1) Section 105 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1025) is amended by striking subsection 
        (d).
            (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
        amended to read as follows:
    ``(b) In no case shall a participant or beneficiary of a plan be 
entitled to more than one statement described in subsection (a)(1)(A) 
or (a)(1)(B)(ii), whichever is applicable, in any 12-month period.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

SEC. 352. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT 
              ADVICE.

    (a) In General.--Subsection (a) of section 132 (relating to 
exclusion from gross income) is amended by striking ``or'' at the end 
of paragraph (5), by striking the period at the end of paragraph (6) 
and inserting ``, or'', and by adding at the end the following new 
paragraph:
            ``(7) qualified retirement planning services.''.
    (b) Qualified Retirement Planning Services Defined.--Section 132 is 
amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following:
    ``(m) Qualified Retirement Planning Services.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified retirement planning services' means any retirement 
        planning service provided to an employee and his spouse by an 
        employer maintaining a qualified employer plan.
            ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
        apply in the case of highly compensated employees only if such 
        services are available on substantially the same terms to each 
        member of the group of employees normally provided education 
        and information regarding the employer's qualified employer 
        plan.
            ``(3) Qualified employer plan.--For purposes of this 
        subsection, the term `qualified employer plan' means a plan, 
        contract, pension, or account described in section 
        219(g)(5).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

                Subtitle G--Reducing Regulatory Burdens

SEC. 361. FLEXIBILITY IN NONDISCRIMINATION AND COVERAGE RULES.

    (a) Nondiscrimination.--
            (1) In general.--The Secretary of the Treasury shall, by 
        regulation, provide that a plan shall be deemed to satisfy the 
        requirements of section 401(a)(4) of the Internal Revenue Code 
        of 1986 if such plan satisfies the facts and circumstances test 
        under section 401(a)(4) of such Code, as in effect before 
        January 1, 1994, but only if--
                    (A) the plan satisfies conditions prescribed by the 
                Secretary to appropriately limit the availability of 
                such test, and
                    (B) the plan is submitted to the Secretary for a 
                determination of whether it satisfies such test.
        Subparagraph (B) shall only apply to the extent provided by the 
        Secretary.
            (2) Effective dates.--
                    (A) Regulations.--The regulation required by 
                subsection (a) shall apply to years beginning after 
                December 31, 2000.
                    (B) Conditions of availability.--Any condition of 
                availability prescribed by the Secretary under 
                paragraph (1)(A) shall not apply before the first year 
                beginning not less than 120 days after the date on 
                which such condition is prescribed.
    (b) Coverage Test.--
            (1) In general.--Section 410(b)(1) (relating to minimum 
        coverage requirements) is amended by adding at the end the 
        following:
                    ``(D) In the case that the plan fails to meet the 
                requirements of subparagraphs (A), (B) and (C), the 
                plan--
                            ``(i) satisfies subparagraph (B), as in 
                        effect immediately before the enactment of the 
                        Tax Reform Act of 1986,
                            ``(ii) is submitted to the Secretary for a 
                        determination of whether it satisfies the 
                        requirement described in clause (i), and
                            ``(iii) satisfies conditions prescribed by 
                        the Secretary by regulation that appropriately 
                        limit the availability of this subparagraph.
                Clause (ii) shall apply only to the extent provided by 
                the Secretary.''.
            (2) Effective dates.--
                    (A) In general.--The amendment made by subsection 
                (a) shall apply to years beginning after December 31, 
                2000.
                    (B) Conditions of availability.--Any condition of 
                availability prescribed by the Secretary under 
                regulations prescribed by the Secretary under section 
                410(b)(1)(D) of the Internal Revenue Code of 1986 shall 
                not apply before the first year beginning not less than 
                120 days after the date on which such condition is 
                prescribed.

SEC. 362. MODIFICATION OF TIMING OF PLAN VALUATIONS.

    (a) In General.--Section 412(c)(9) (relating to annual valuation) 
is amended--
            (1) by striking ``For purposes'' and inserting the 
        following:
                    ``(A) In general.--For purposes'', and
            (2) by adding at the end the following:
                    ``(B) Election to use prior year valuation.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), if, for any plan year--
                                    ``(I) an election is in effect 
                                under this subparagraph with respect to 
                                a plan, and
                                    ``(II) the assets of the plan are 
                                not less than 125 percent of the plan's 
                                current liability (as defined in 
                                paragraph (7)(B)), determined as of the 
                                valuation date for the preceding plan 
                                year,
                        then this section shall be applied using the 
                        information available as of such valuation 
                        date.
                            ``(ii) Exceptions.--
                                    ``(I) Actual valuation every 3 
                                years.--Clause (i) shall not apply for 
                                more than 2 consecutive plan years and 
                                valuation shall be under subparagraph 
                                (A) with respect to any plan year to 
                                which clause (i) does not apply by 
                                reason of this subclause.
                                    ``(II) Regulations.--Clause (i) 
                                shall not apply to the extent that more 
                                frequent valuations are required under 
                                the regulations under subparagraph (A).
                            ``(iii) Adjustments.--Information under 
                        clause (i) shall, in accordance with 
                        regulations, be actuarially adjusted to reflect 
                        significant differences in participants.
                            ``(iv) Election.--An election under this 
                        subparagraph, once made, shall be irrevocable 
                        without the consent of the Secretary.''.
    (b) Amendments to ERISA.--Paragraph (9) of section 302(c) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
amended--
            (1) by inserting ``(A)'' after ``(9)'', and
            (2) by adding at the end the following:
    ``(B)(i) Except as provided in clause (ii), if, for any plan year--
            ``(I) an election is in effect under this subparagraph with 
        respect to a plan, and
            ``(II) the assets of the plan are not less than 125 percent 
        of the plan's current liability (as defined in paragraph 
        (7)(B)), determined as of the valuation date for the preceding 
        plan year,
then this section shall be applied using the information available as 
of such valuation date.
    ``(ii)(I) Clause (i) shall not apply for more than 2 consecutive 
plan years and valuation shall be under subparagraph (A) with respect 
to any plan year to which clause (i) does not apply by reason of this 
subclause.
    ``(II) Clause (i) shall not apply to the extent that more frequent 
valuations are required under the regulations under subparagraph (A).
    ``(iii) Information under clause (i) shall, in accordance with 
regulations, be actuarially adjusted to reflect significant differences 
in participants.
    ``(iv) An election under this subparagraph, once made, shall be 
irrevocable without the consent of the Secretary of the Treasury.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

SEC. 363. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

    (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322(b)(5)) is amended to read as follows:
    ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
            ``(i) owns the entire interest in an unincorporated trade 
        or business,
            ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).
    ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal the 
product of--
            ``(i) a fraction (not to exceed 1) the numerator of which 
        is the number of years from the later of the effective date or 
        the adoption date of the plan to the termination date, and the 
        denominator of which is 10, and
            ``(ii) the amount of benefits that would be guaranteed 
        under this section if the participant were not a majority 
        owner.''.
    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
            (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following:
            ``(3) If assets available for allocation under paragraph 
        (4) of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''.
    (c) Conforming Amendments.--
            (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                    (A) in subsection (b)(9), by striking ``as defined 
                in section 4022(b)(6)'', and
                    (B) by adding at the end the following:
    ``(d) For purposes of subsection (b)(9), the term `substantial 
owner' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
            ``(1) owns the entire interest in an unincorporated trade 
        or business,
            ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).''.
    (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is 
amended by striking ``section 4022(b)(6)'' and inserting ``section 
4021(d)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                    (A) under section 4041(c) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1341(c)) with respect to which notices of intent to 
                terminate are provided under section 4041(a)(2) of such 
                Act (29 U.S.C. 1341(a)(2)) after December 31, 2000, and
                    (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation after such date.
            (2) Conforming amendments.--The amendments made by 
        subsection (c) shall take effect on the date of enactment of 
        this Act.

SEC. 364. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND 
              DEDUCTION.

    (a) In General.--Section 404(k)(2)(A) (defining applicable 
dividends) is amended by striking ``or'' at the end of clause (ii), by 
redesignating clause (iii) as clause (iv), and by inserting after 
clause (ii) the following new clause:
                            ``(iii) is, at the election of such 
                        participants or their beneficiaries--
                                    ``(I) payable as provided in clause 
                                (i) or (ii), or
                                    ``(II) paid to the plan and 
                                reinvested in qualifying employer 
                                securities, or''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 365. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) In general.--
                    (A) Amendment of internal revenue code of 1986.--
                Subparagraph (A) of section 417(a)(6) is amended by 
                striking ``90-day'' and inserting ``1-year''.
                    (B) Amendment to erisa.--Subparagraph (A) of 
                section 205(c)(7) of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1055(c)(7)) is amended 
                by striking ``90-day'' and inserting ``1-year''.
            (2) Modification of regulations.--The Secretary of the 
        Treasury shall modify the regulations under sections 402(f), 
        411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
        substitute ``1-year'' for ``90 days'' each place it appears in 
        Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c), and 
        1.417(e)-1(b).
            (3) Effective date.--The amendments made by paragraph (1) 
        and the modifications required by paragraph (2) shall apply to 
        years beginning after December 31, 2000.
    (b) Consent Regulation Inapplicable to Certain Distributions.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 to provide that the description of a 
        participant's right, if any, to defer receipt of a distribution 
        shall also describe the consequences of failing to defer such 
        receipt.
            (2) Effective date.--The modifications required by 
        paragraph (1) shall apply to years beginning after December 31, 
        2000.

SEC. 366. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY 
              COMPENSATED EMPLOYEES.

    (a) In General.--Paragraph (4) of section 1114(c) of the Tax Reform 
Act of 1986 is hereby repealed.
    (b) Effective Date.--The repeal made by subsection (a) shall apply 
to plan years beginning after December 31, 1999.

SEC. 367. EMPLOYEES OF TAX-EXEMPT ENTITIES.

    (a) In General.--The Secretary of the Treasury shall modify 
Treasury Regulations section 1.410(b)-6(g) to provide that employees of 
an organization described in section 403(b)(1)(A)(i) of the Internal 
Revenue Code of 1986 who are eligible to make contributions under 
section 403(b) of such Code pursuant to a salary reduction agreement 
may be treated as excludable with respect to a plan under section 401 
(k) or (m) of such Code that is provided under the same general 
arrangement as a plan under such section 401(k), if--
            (1) no employee of an organization described in section 
        403(b)(1)(A)(i) of such Code is eligible to participate in such 
        section 401(k) plan or section 401(m) plan, and
            (2) 95 percent of the employees who are not employees of an 
        organization described in section 403(b)(1)(A)(i) of such Code 
        are eligible to participate in such plan under such section 401 
        (k) or (m).
    (b) Effective Date.--The modification required by subsection (a) 
shall apply as of the same date set forth in section 1426(b) of the 
Small Business Job Protection Act of 1996.

SEC. 368. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

    (a) In General.--Subparagraph (G) of section 401(a)(5), 
subparagraph (H) of section 401(a)(26), subparagraph (G) of section 
401(k)(3), and paragraph (2) of section 1505(d) of the Taxpayer Relief 
Act of 1997 are each amended by inserting ``or by an international 
organization which is described in section 414(d)'' after ``or 
instrumentality thereof)''.
    (b) Conforming Amendments.--
            (1) The headings for subparagraph (G) of section 401(a)(5) 
        and subparagraph (H) of section 401(a)(26) are each amended by 
        inserting ``and international organization'' after 
        ``governmental''.
            (2) Subparagraph (G) of section 401(k)(3) is amended by 
        inserting ``State and local governmental and international 
        organization plans.--'' after ``(G)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 369. ANNUAL REPORT DISSEMINATION.

    (a) In General.--Section 104(b)(3) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is amended by 
striking ``shall furnish'' and inserting ``shall make available for 
examination (and, upon request, shall furnish)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to reports for years beginning after December 31, 1998.

SEC. 370. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED TRANSIT 
              PASSES AND PASSENGERS PERMITTED TO UTILIZE OTHERWISE 
              EMPTY SEATS ON AIRCRAFT.

    (a) In General.--Section 132(f)(3) (relating to cash 
reimbursements) is amended by striking the last sentence.
    (b) Subsection (h) of section 132 of the Internal Revenue Code of 
1986 (relating to certain fringe benefits) is amended by adding at the 
end thereof the following new paragraph:
            ``(4) Special rule for passengers traveling on 
        noncommercial aircraft.--Any use of noncommercial air 
        transportation by an individual shall be treated as use by an 
        employee if no regularly scheduled commercial flight is 
        available that day from the air facility at the individual's 
        location.''.
    (c) Subsection (j) of section 132 of the Internal Revenue Code of 
1986 (relating to certain fringe benefits) is amended by adding at the 
end thereof the following new paragraph:
            ``(9) Special rule for certain noncommercial air 
        transportation.--For the purposes of subsection (b) the term 
        `no-additional-cost service' includes the value of 
        transportation provided by an employer to an employee on a 
        noncommercially operated aircraft if--
                    ``(A) such transportation is provided on a flight 
                made in the ordinary course of the trade or business of 
                the employer owning or leasing such aircraft for use in 
                such trade or business,
                    ``(B) the flight on which the transportation is 
                provided by the employer would have been made whether 
                or not such employee was transported on the flight, and
                    ``(C) the employer incurs no substantial additional 
                cost in providing such transportation to such employee.
        For purposes of this paragraph, an aircraft is noncommercially 
        operated if transportation provided by the employer is not 
        provided or made available to the general public by purchase of 
        a ticket or other fare.''.
    (d) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 371. REPORTING SIMPLIFICATION.

    (a) Simplified Annual Filing Requirement for Owners and Their 
Spouses.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the requirements for filing annual returns with respect to one-
        participant retirement plans to ensure that such plans with 
        assets of $500,000 or less as of the close of the plan year 
        need not file a return for that year.
            (2) One-participant retirement plan defined.--For purposes 
        of this subsection, the term ``one-participant retirement 
        plan'' means a retirement plan that--
                    (A) on the first day of the plan year--
                            (i) covered only the employer (and the 
                        employer's spouse) and the employer owned the 
                        entire business (whether or not incorporated), 
                        or
                            (ii) covered only one or more partners (and 
                        their spouses) in a business partnership 
                        (including partners in an S or C corporation),
                    (B) meets the minimum coverage requirements of 
                section 410(b) of the Internal Revenue Code of 1986 
                without being combined with any other plan of the 
                business that covers the employees of the business,
                    (C) does not provide benefits to anyone except the 
                employer (and the employer's spouse) or the partners 
                (and their spouses),
                    (D) does not cover a business that is a member of 
                an affiliated service group, a controlled group of 
                corporations, or a group of businesses under common 
                control, and
                    (E) does not cover a business that leases 
                employees.
            (3) Other definitions.--Terms used in paragraph (2) which 
        are also used in section 414 of the Internal Revenue Code of 
        1986 shall have the respective meanings given such terms by 
        such section.
    (b) Simplified Annual Filing Requirement for Plans With Fewer Than 
25 Employees.--In the case of a retirement plan which covers less than 
25 employees on the 1st day of the plan year and meets the requirements 
described in subparagraphs (B), (D), and (E) of subsection (a)(2), the 
Secretary of the Treasury shall provide for the filing of a simplified 
annual return that is substantially similar to the annual return 
required to be filed by a one-participant retirement plan.
    (c) Effective Date.--The provisions of this section shall take 
effect on January 1, 2001.

                      Subtitle H--Plan Amendments

SEC. 381. PROVISIONS RELATING TO PLAN AMENDMENTS.

    (a) In General.--If this section applies to any plan or contract 
amendment--
            (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan during the 
        period described in subsection (b)(2)(A), and
            (2) such plan shall not fail to meet the requirements of 
        section 411(d)(6) of the Internal Revenue Code of 1986 by 
        reason of such amendment.
    (b) Amendments to Which Section Applies.--
            (1) In general.--This section shall apply to any amendment 
        to any plan or annuity contract which is made--
                    (A) pursuant to any amendment made by this title, 
                or pursuant to any regulation issued under this title, 
                and
                    (B) on or before the last day of the first plan 
                year beginning on or after January 1, 2003.
        In the case of a government plan (as defined in section 414(d) 
        of the Internal Revenue Code of 1986), this paragraph shall be 
        applied by substituting ``2005'' for ``2003''.
            (2) Conditions.--This section shall not apply to any 
        amendment unless--
                    (A) during the period--
                            (i) beginning on the date the legislative 
                        or regulatory amendment described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative or regulatory amendment, the 
                        effective date specified by the plan), and
                            (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect, and
                    (B) such plan or contract amendment applies 
                retroactively for such period.

               TITLE IV--EDUCATION TAX RELIEF PROVISIONS

SEC. 401. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN INCOME 
              LIMITATION ON STUDENT LOAN INTEREST DEDUCTION.

    (a) Elimination of 60-Month Limit.--
            (1) In general.--Section 221 (relating to interest on 
        education loans) is amended by striking subsection (d) and by 
        redesignating subsections (e), (f), and (g) as subsections (d), 
        (e), and (f), respectively.
            (2) Conforming amendment.--Section 6050S(e) is amended by 
        striking ``section 221(e)(1)'' and inserting ``section 
        221(d)(1)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply with respect to any loan interest paid after 
        December 31, 1999, in taxable years ending after such date.
    (b) Increase in Income Limitation.--
            (1) In general.--Section 221(b)(2)(B) (relating to amount 
        of reduction) is amended by striking clauses (i) and (ii) and 
        inserting the following:
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for such taxable 
                                year, over
                                    ``(II) $50,000 (twice such dollar 
                                amount in the case of a joint return), 
                                bears to
                            ``(ii) $15,000.''.
            (2) Conforming amendment.--Section 221(g)(1) is amended by 
        striking ``$40,000 and $60,000 amounts'' and inserting 
        ``$50,000 amount''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years ending after December 31, 1999.

SEC. 402. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

    (a) Short Title.--This section may be cited as the ``Collegiate 
Learning and Student Savings (CLASS) Act''.
    (b) Eligible Educational Institutions Permitted To Maintain 
Qualified Tuition Programs.--
          (1) In general.--Section 529(b)(1) (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''.
            (2) Private qualified tuition programs limited to benefit 
        plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
        inserting ``in the case of a program established and maintained 
        by a State or agency or instrumentality thereof,'' before ``may 
        make''.
            (3) Conforming amendments.--
                    (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 
                529, 530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are each 
                amended by striking ``qualified State tuition'' each 
                place it appears and inserting ``qualified tuition''.
                    (B) The headings for sections 72(e)(9) and 
                135(c)(2)(C) are each amended by striking ``qualified 
                state tuition'' and inserting ``qualified tuition''.
                    (C) The headings for sections 529(b) and 
                530(b)(2)(B) are each amended by striking ``Qualified 
                state tuition'' and inserting ``Qualified tuition''.
                    (D) The heading for section 529 is amended by 
                striking ``state''.
                    (E) 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) Exclusion From Gross Income of Education Distributions From 
Qualified Tuition Programs.--
            (1) In general.--Section 529(c)(3)(B) (relating to 
        distributions) is amended to read as follows:
                    ``(B) Distributions for qualified higher education 
                expenses.--For purposes of this paragraph--
                            ``(i) In-kind distributions.--No amount 
                        shall be includible in gross income under 
                        subparagraph (A) by reason of a distribution 
                        which consists of providing a benefit to the 
                        distributee which, if paid for by the 
                        distributee, would constitute payment of a 
                        qualified higher education expense.
                            ``(ii) Cash distributions.--In the case of 
                        distributions not described in clause (i), if--
                                    ``(I) such distributions do not 
                                exceed the qualified higher education 
                                expenses (reduced by expenses described 
                                in clause (i)), no amount shall be 
                                includible in gross income, and
                                    ``(II) in any other case, the 
                                amount otherwise includible in gross 
                                income shall be reduced by an amount 
                                which bears the same ratio to such 
                                amount as such expenses bear to such 
                                distributions.
                            ``(iii) Exception for institutional 
                        programs.--In the case of any taxable year 
                        beginning before January 1, 2004, clauses (i) 
                        and (ii) shall not apply with respect to any 
                        distribution during such taxable year under a 
                        qualified tuition program established and 
                        maintained by 1 or more eligible educational 
                        institutions.
                            ``(iv) Treatment as distributions.--Any 
                        benefit furnished to a designated beneficiary 
                        under a qualified tuition program shall be 
                        treated as a distribution to the beneficiary 
                        for purposes of this paragraph.
                            ``(v) Coordination with hope and lifetime 
                        learning credits.--The total amount of 
                        qualified higher education expenses with 
                        respect to an individual for the taxable year 
                        shall be reduced--
                                    ``(I) as provided in section 
                                25A(g)(2), and
                                    ``(II) by the amount of such 
                                expenses which were taken into account 
                                in determining the credit allowed to 
                                the taxpayer or any other person under 
                                section 25A.
                            ``(vi) Coordination with education 
                        individual retirement accounts.--If, with 
                        respect to an individual for any taxable year--
                                    ``(I) the aggregate distributions 
                                to which clauses (i) and (ii) and 
                                section 530(d)(2)(A) apply, exceed
                                    ``(II) the total amount of 
                                qualified higher education expenses 
                                otherwise taken into account under 
                                clauses (i) and (ii) (after the 
                                application of clause (v)) for such 
                                year,
                        the taxpayer shall allocate such expenses among 
                        such distributions for purposes of determining 
                        the amount of the exclusion under clauses (i) 
                        and (ii) and section 530(d)(2)(A).''.
            (2) Conforming amendments.--
                    (A) Section 135(d)(2)(B) is amended by striking 
                ``the exclusion under section 530(d)(2)'' and inserting 
                ``the exclusions under sections 529(c)(3)(B)(i) and 
                530(d)(2)''.
                    (B) Section 221(e)(2)(A) is amended by inserting 
                ``529,'' after ``135,''.
    (d) Coordination With Hope and Lifetime Learning Credits and 
Qualified Tuition Programs.--
            (1) In general.--Section 530(d)(2)(C) is amended to read as 
        follows:
                    ``(C) Coordination with hope and lifetime learning 
                credits and qualified tuition programs.--For purposes 
                of subparagraph (A)--
                            ``(i) Credit coordination.--The total 
                        amount of qualified higher education expenses 
                        with respect to an individual for the taxable 
                        year shall be reduced--
                                    ``(I) as provided in section 
                                25A(g)(2), and
                                    ``(II) by the amount of such 
                                expenses which were taken into account 
                                in determining the credit allowed to 
                                the taxpayer or any other person under 
                                section 25A.
                            ``(ii) Coordination with qualified tuition 
                        programs.--If, with respect to an individual 
                        for any taxable year--
                                    ``(I) the aggregate distributions 
                                during such year to which subparagraph 
                                (A) and section 529(c)(3)(B) apply, 
                                exceed
                                    ``(II) the total amount of 
                                qualified higher education expenses 
                                otherwise taken into account under 
                                subparagraph (A) (after the application 
                                of clause (i)) for such year,
                        the taxpayer shall allocate such expenses among 
                        such distributions for purposes of determining 
                        the amount of the exclusion under subparagraph 
                        (A) and section 529(c)(3)(B).''.
            (2) Conforming amendments.--
                    (A) Subsection (e) of section 25A is amended to 
                read as follows:
    ``(e) Election To Have Section Apply.--No credit shall be allowed 
under subsection (a) for a taxable year with respect to the qualified 
tuition and related expenses of an individual unless the taxpayer 
elects to have this section apply with respect to such individual for 
such year.''.
                    (B) Section 135(d)(2)(A) is amended by striking 
                ``allowable'' and inserting ``allowed''.
                    (C) Section 530(d)(2)(D) is amended--
                            (i) by striking ``or credit'', and
                            (ii) by striking ``credit or'' in the 
                        heading.
    (e) Rollover to Different Program for Benefit of Same Designated 
Beneficiary.--Section 529(c)(3)(C) (relating to change in 
beneficiaries) is amended--
            (1) by striking ``transferred to the credit'' in clause (i) 
        and inserting ``transferred--
                                    ``(I) to another qualified tuition 
                                program for the benefit of the 
                                designated beneficiary, or
                                    ``(II) to the credit'',
            (2) by adding at the end the following new clause:
                            ``(iii) Limitation on certain rollovers.--
                        Clause (i)(I) shall not apply to any amount 
                        transferred with respect to a designated 
                        beneficiary if, at any time during the 1-year 
                        period ending on the day of such transfer, any 
                        other amount was transferred with respect to 
                        such beneficiary which was not includible in 
                        gross income by reason of clause (i)(I).'', and
            (3) by inserting ``or programs'' after ``beneficiaries'' in 
        the heading.
    (f) Member of Family Includes First Cousin.--Section 529(e)(2) 
(defining member of family) is amended by striking ``and'' at the end 
of subparagraph (B), by striking the period at the end of subparagraph 
(C) and by inserting ``; and'', and by adding at the end the following 
new subparagraph:
                    ``(D) any first cousin of such beneficiary.''.
    (g) Definition of Qualified Higher Education Expenses.--
            (1) In general.--Subparagraph (A) of section 529(e)(3) 
        (relating to definition of qualified higher education expenses) 
        is amended to read as follows:
                    ``(A) In general.--The term `qualified higher 
                education expenses' means--
                            ``(i) tuition and fees required for the 
                        enrollment or attendance of a designated 
                        beneficiary at an eligible educational 
                        institution for courses of instruction of such 
                        beneficiary at such institution, and
                            ``(ii) expenses for books, supplies, and 
                        equipment which are incurred in connection with 
                        such enrollment or attendance, but not to 
                        exceed the allowance for books and supplies 
                        included in the cost of attendance (as defined 
                        in section 472 of the Higher Education Act of 
                        1965 (20 U.S.C. 1087ll), as in effect on the 
                        date of enactment of the Taxpayer Refund Act of 
                        1999) as determined by the eligible educational 
                        institution.''.
            (2) Exception for education involving sports, etc.--
        Paragraph (3) of section 529(e) (relating to qualified higher 
        education expenses) is amended by adding at the end the 
        following new subparagraph:
                    ``(C) Exception for education involving sports, 
                etc.--The term `qualified higher education expenses' 
                shall not include expenses with respect to any course 
                or other education involving sports, games, or hobbies 
                unless such course or other education is part of the 
                beneficiary's degree program or is taken to acquire or 
                improve job skills of the beneficiary.''.
    (h) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1999.
            (2) Qualified higher education expenses.--The amendments 
        made by subsection (g) shall apply to amounts paid for courses 
        beginning after December 31, 1999.

SEC. 403. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE NATIONAL 
              HEALTH SERVICE CORPS SCHOLARSHIP PROGRAM AND THE F. 
              EDWARD HEBERT ARMED FORCES HEALTH PROFESSIONS SCHOLARSHIP 
              AND FINANCIAL ASSISTANCE PROGRAM.

    (a) In General.--Section 117(c) (relating to the exclusion from 
gross income amounts received as a qualified scholarship) is amended--
            (1) by striking ``Subsections (a)'' and inserting the 
        following:
            ``(1) In general.--Except as provided in paragraph (2), 
        subsections (a)'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Exceptions.--Paragraph (1) shall not apply to any 
        amount received by an individual under--
                    ``(A) the National Health Service Corps Scholarship 
                program under section 338A(g)(1)(A) of the Public 
                Health Service Act, or
                    ``(B) the Armed Forces Health Professions 
                Scholarship and Financial Assistance program under 
                subchapter I of chapter 105 of title 10, United States 
                Code.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to amounts received in taxable years beginning after December 31, 
1993.

SEC. 404. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED EDUCATIONAL 
              ASSISTANCE.

    (a) In General.--Section 127(d) (relating to termination of 
exclusion for educational assistance programs) is amended by striking 
``May 31, 2000'' and inserting ``December 31, 2003''.
    (b) Repeal of Limitation on Graduate Education.--
            (1) In general.--The last sentence of section 127(c)(1) is 
        amended by striking ``, and such term also does not include any 
        payment for, or the provision of any benefits with respect to, 
        any graduate level course of a kind normally taken by an 
        individual pursuing a program leading to a law, business, 
        medical, or other advanced academic or professional degree''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply with respect to expenses relating to courses 
        beginning after December 31, 1999.

SEC. 405. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION FOR 
              GOVERNMENTAL BONDS USED TO FINANCE EDUCATIONAL 
              FACILITIES.

    (a) In General.--Section 148(f)(4)(D)(vii) (relating to increase in 
exception for bonds financing public school capital expenditures) is 
amended by striking ``$5,000,000'' the second place it appears and 
inserting ``$10,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to obligations issued in calendar years beginning after December 
31, 1999.

SEC. 406. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL FACILITY BONDS AS 
              EXEMPT FACILITY BONDS.

    (a) Treatment as Exempt Facility Bond.--Subsection (a) of section 
142 (relating to exempt facility bond) is amended by striking ``or'' at 
the end of paragraph (11), by striking the period at the end of 
paragraph (12) and inserting ``, or'', and by adding at the end the 
following new paragraph:
            ``(13) qualified public educational facilities.''.
    (b) Qualified Public Educational Facilities.--Section 142 (relating 
to exempt facility bond) is amended by adding at the end the following 
new subsection:
    ``(k) Qualified Public Educational Facilities.--
            ``(1) In general.--For purposes of subsection (a)(13), the 
        term `qualified public educational facility' means any school 
        facility which is--
                    ``(A) part of a public elementary school or a 
                public secondary school, and
                    ``(B) owned by a private, for-profit corporation 
                pursuant to a public-private partnership agreement with 
                a State or local educational agency described in 
                paragraph (2).
            ``(2) Public-private partnership agreement described.--A 
        public-private partnership agreement is described in this 
        paragraph if it is an agreement--
                    ``(A) under which the corporation agrees--
                            ``(i) to do 1 or more of the following: 
                        construct, rehabilitate, refurbish, or equip a 
                        school facility, and
                            ``(ii) at the end of the term of the 
                        agreement, to transfer the school facility to 
                        such agency for no additional consideration, 
                        and
                    ``(B) the term of which does not exceed the last 
                maturity date of any bond which is a part of the issue 
                to be used to finance the activities described in 
                subparagraph (A)(i).
            ``(3) School facility.--For purposes of this subsection, 
        the term `school facility' means--
                    ``(A) school buildings,
                    ``(B) functionally related and subordinate 
                facilities and land with respect to such buildings, 
                including any stadium or other facility primarily used 
                for school events, and
                    ``(C) any property, to which section 168 applies 
                (or would apply but for section 179), for use in the 
                facility.
            ``(4) Public schools.--For purposes of this subsection, the 
        terms `elementary school' and `secondary school' have the 
        meanings given such terms by section 14101 of the Elementary 
        and Secondary Education Act of 1965 (20 U.S.C. 8801), as in 
        effect on the date of the enactment of this subsection.
            ``(5) Annual aggregate face amount of tax-exempt 
        financing.--
                    ``(A) In general.--An issue shall not be treated as 
                an issue described in subsection (a)(13) if the 
                aggregate face amount of bonds issued by the State 
                pursuant thereto (when added to the aggregate face 
                amount of bonds previously so issued during the 
                calendar year) exceeds an amount equal to the greater 
                of--
                            ``(i) $10 multiplied by the State 
                        population, or
                            ``(ii) $5,000,000.
                    ``(B) Allocation rules.--
                            ``(i) In general.--Except as otherwise 
                        provided in this subparagraph, the State may 
                        allocate the amount described in subparagraph 
                        (A) for any calendar year in such manner as the 
                        State determines appropriate.
                            ``(ii) Rules for carryforward of unused 
                        limitation.--A State may elect to carry forward 
                        an unused limitation for any calendar year for 
                        3 calendar years following the calendar year in 
                        which the unused limitation arose under rules 
                        similar to the rules of section 146(f), except 
                        that the only purpose for which the 
                        carryforward may be elected is the issuance of 
                        exempt facility bonds described in subsection 
                        (a)(13).''.
    (c) Exemption From General State Volume Caps.--Paragraph (3) of 
section 146(g) (relating to exception for certain bonds) is amended--
            (1) by striking ``or (12)'' and inserting ``(12), or 
        (13)'', and
            (2) by striking ``and environmental enhancements of 
        hydroelectric generating facilities'' and inserting 
        ``environmental enhancements of hydroelectric generating 
        facilities, and qualified public educational facilities''.
    (d) Exemption From Limitation on Use for Land Acquisition.--Section 
147(h) (relating to certain rules not to apply to mortgage revenue 
bonds, qualified student loan bonds, and qualified 501(c)(3) bonds) is 
amended by adding at the end the following new paragraph:
            ``(3) Exempt facility bonds for qualified public-private 
        schools.--Subsection (c) shall not apply to any exempt facility 
        bond issued as part of an issue described in section 142(a)(13) 
        (relating to qualified public educational facilities).''.
    (e) Conforming Amendment.--The heading for section 147(h) is 
amended by striking ``Mortgage Revenue Bonds, Qualified Student Loan 
Bonds, and Qualified 501(c)(3) Bonds'' and inserting ``Certain Bonds''.
    (f) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 1999.

SEC. 407. FEDERAL GUARANTEE OF SCHOOL CONSTRUCTION BONDS BY FEDERAL 
              HOME LOAN BANKS.

    (a) In General.--Section 149(b)(3) (relating to exceptions) is 
amended by adding at the end the following new subparagraph:
                    ``(E) Certain guaranteed school construction 
                bonds.--Any bond issued as part of an issue 95 percent 
                or more of the net proceeds of which are used for 
                public school construction shall not be treated as 
                federally guaranteed by reason of any guarantee by any 
                Federal Home Loan Bank under the Federal Home Loan Bank 
                Act (12 U.S.C. 1421 et seq.), to the extent the Federal 
                Housing Finance Board allocates authority to such Bank 
                to so guarantee such bond. For purposes of the 
                preceding sentence, the aggregate face amount of such 
                bonds which may be so guaranteed may not exceed 
                $500,000,000 in any calendar year.''.
    (b) Effective Date.--Subparagraph (E) of section 149(b)(3) of the 
Internal Revenue Code of 1986, as added by the amendment made by 
subsection (a), shall take effect upon the enactment, after the date of 
the enactment of this Act, of legislation authorizing the Federal 
Housing Finance Board to allocate authority to Federal Home Loan Banks 
to guarantee any bond described in such subparagraph, but only if such 
legislation makes specific reference to such subparagraph.

SEC. 408. CERTAIN EDUCATIONAL BENEFITS PROVIDED BY AN EMPLOYER TO 
              CHILDREN OF EMPLOYEES EXCLUDABLE FROM GROSS INCOME AS A 
              SCHOLARSHIP.

    (a) In General.--Section 117 (relating to qualified scholarships) 
is amended by adding at the end the following:
    ``(e) Employer-Provided Educational Benefits Provided to Children 
of Employees.--
            ``(1) In general.--In determining whether any amount is a 
        qualified scholarship for purposes of subsection (a), the fact 
        that such amount is provided in connection with an employment 
        relationship shall be disregarded if--
                    ``(A) such amount is provided by the employer to a 
                child (as defined in section 161(c)(3)) of an employee 
                of such employer,
                    ``(B) such amount is provided pursuant to a plan 
                which meets the nondiscrimination requirements of 
                subsection (d)(3), and
                    ``(C) amounts provided under such plan are in 
                addition to any other compensation payable to employees 
                and such plan does not provide employees with a choice 
                between such amounts and any other benefit.
        For purposes of subparagraph (C), the business practices of the 
        employer (as well as such plan) shall be taken into account.
            ``(2) Dollar limitations.--
                    ``(A) Per child.--The amount excluded from the 
                gross income of the employee by reason of paragraph (1) 
                for a taxable year with respect to amounts provided to 
                each child of such employee shall not exceed $2,000.
                    ``(B) Aggregate limit.--The amount excluded from 
                the gross income of the employee by reason of paragraph 
                (1) for a taxable year (after the application of 
                subparagraph (A)) shall not exceed the excess of the 
                dollar amount contained in section 127(a)(2) over the 
                amount excluded from the employee's gross income under 
                section 127 for such year.
            ``(3) Principal shareholders and owners.--Paragraph (1) 
        shall not apply to any amount provided to any child of any 
        individual if such individual (or such individual's spouse) 
        owns (on any day of the year) more than 5 percent of the stock 
        or of the capital or profits interest in the employer.
            ``(4) Degree requirement not to apply.--In the case of an 
        amount which is treated as a qualified scholarship by reason of 
        this subsection, subsection (a) shall be applied without regard 
        to the requirement that the recipient be a candidate for a 
        degree.
            ``(5) Certain other rules to apply.--Rules similar to the 
        rules of paragraphs (4), (5), and (7) of section 127(c) shall 
        apply for purposes of this subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of enactment of this Act.

               TITLE V--HEALTH CARE TAX RELIEF PROVISIONS

SEC. 501. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF 
              INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED 
              HEALTH PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by redesignating section 222 as section 223 and by inserting after 
section 221 the following new section:

``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
the amount paid during the taxable year for insurance which constitutes 
medical care for the taxpayer and the taxpayer's spouse and dependents.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage shall be determined in accordance with the 
following table:

``For taxable years beginning
                                                         The applicable
  in calendar year--
                                                        percentage is--
    2001, 2002, 2003.......................................        25  
    2004 and 2005..........................................        50  
    2006 and thereafter....................................      100.  
    ``(c) Limitation Based on Other Coverage.--
            ``(1) Coverage under certain subsidized employer plans.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any taxpayer for any calendar month for which the 
                taxpayer participates in any health plan maintained by 
                any employer of the taxpayer or of the spouse of the 
                taxpayer if 50 percent or more of the cost of coverage 
                under such plan (determined under section 4980B and 
                without regard to payments made with respect to any 
                coverage described in subsection (e)) is paid or 
                incurred by the employer.
                    ``(B) Employer contributions to cafeteria plans, 
                flexible spending arrangements, and medical savings 
                accounts.--Employer contributions to a cafeteria plan, 
                a flexible spending or similar arrangement, or a 
                medical savings account which are excluded from gross 
                income under section 106 shall be treated for purposes 
                of subparagraph (A) as paid by the employer.
                    ``(C) Aggregation of plans of employer.--A health 
                plan which is not otherwise described in subparagraph 
                (A) shall be treated as described in such subparagraph 
                if such plan would be so described if all health plans 
                of persons treated as a single employer under 
                subsections (b), (c), (m), or (o) of section 414 were 
                treated as one health plan.
                    ``(D) Separate application to health insurance and 
                long-term care insurance.--Subparagraphs (A) and (C) 
                shall be applied separately with respect to--
                            ``(i) plans which include primarily 
                        coverage for qualified long-term care services 
                        or are qualified long-term care insurance 
                        contracts, and
                            ``(ii) plans which do not include such 
                        coverage and are not such contracts.
            ``(2) Coverage under certain federal programs.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any amount paid for any coverage for an individual 
                for any calendar month if, as of the first day of such 
                month, the individual is covered under any medical care 
                program described in--
                            ``(i) title XVIII, XIX, or XXI of the 
                        Social Security Act,
                            ``(ii) chapter 55 of title 10, United 
                        States Code,
                            ``(iii) chapter 17 of title 38, United 
                        States Code,
                            ``(iv) chapter 89 of title 5, United States 
                        Code, or
                            ``(v) the Indian Health Care Improvement 
                        Act.
                    ``(B) Exceptions.--
                            ``(i) Qualified long-term care.--
                        Subparagraph (A) shall not apply to amounts 
                        paid for coverage under a qualified long-term 
                        care insurance contract.
                            ``(ii) Continuation coverage of fehbp.--
                        Subparagraph (A)(iv) shall not apply to 
                        coverage which is comparable to continuation 
                        coverage under section 4980B.
    ``(d) Long-Term Care Deduction Limited to Qualified Long-Term Care 
Insurance Contracts.--In the case of a qualified long-term care 
insurance contract, only eligible long-term care premiums (as defined 
in section 213(d)(10)) may be taken into account under subsection (a).
    ``(e) Deduction Not Available for Payment of Ancillary Coverage 
Premiums.--Any amount paid as a premium for insurance which provides 
for--
            ``(1) coverage for accidents, disability, dental care, 
        vision care, or a specified illness, or
            ``(2) making payments of a fixed amount per day (or other 
        period) by reason of being hospitalized.
shall not be taken into account under subsection (a).
    ``(f) Special Rules.--
            ``(1) Coordination with deduction for health insurance 
        costs of self-employed individuals.--The amount taken into 
        account by the taxpayer in computing the deduction under 
        section 162(l) shall not be taken into account under this 
        section.
            ``(2) Coordination with medical expense deduction.--The 
        amount taken into account by the taxpayer in computing the 
        deduction under this section shall not be taken into account 
        under section 213.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section, including regulations 
requiring employers to report to their employees and the Secretary such 
information as the Secretary determines to be appropriate.''.
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 is amended by inserting after 
paragraph (17) the following new item:
            ``(18) Health and long-term care insurance costs.--The 
        deduction allowed by section 222.''.
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 is amended by striking the last item and 
inserting the following new items:

                              ``Sec. 222. Health and long-term care 
                                        insurance costs.
                              ``Sec. 223. Cross reference.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 502. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER 
              CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

    (a) Cafeteria Plans.--
            (1) In general.--Subsection (f) of section 125 (defining 
        qualified benefits) is amended by inserting before the period 
        at the end ``; except that such term shall include the payment 
        of premiums for any qualified long-term care insurance contract 
        (as defined in section 7702B) to the extent the amount of such 
        payment does not exceed the eligible long-term care premiums 
        (as defined in section 213(d)(10)) for such contract.''.
    (b) Flexible Spending Arrangements.--Section 106 (relating to 
contributions by employer to accident and health plans) is amended by 
striking subsection (c).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 503. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY 
              FAMILY MEMBER IN TAXPAYER'S HOME.

    (a) In General.--Section 151 (relating to allowance of deductions 
for personal exemptions) is amended by adding at the end redesignating 
subsection (e) as subsection (f) and by inserting after subsection (d) 
the following new subsection:
    ``(e) Additional Exemption for Certain Elderly Family Members 
Residing With Taxpayer.--
            ``(1) In general.--An exemption of the exemption amount for 
        each qualified family member of the taxpayer.
            ``(2) Qualified family member.--For purposes of this 
        subsection, the term `qualified family member' means, with 
        respect to any taxable year, any individual--
                    ``(A) who is--
                            ``(i) the father or mother, or an ancestor 
                        of either, or
                            ``(ii) a stepfather or stepmother,
                of the taxpayer or of the taxpayer's spouse or former 
                spouse,
                    ``(B) who is a member for the entire taxable year 
                of a household maintained by the taxpayer, and
                    ``(C) who has been certified, before the due date 
                for filing the return of tax for the taxable year 
                (without extensions), by a physician (as defined in 
                section 1861(r)(1) of the Social Security Act) as being 
                an individual with long-term care needs described in 
                paragraph (3) for a period--
                            ``(i) which is at least 180 consecutive 
                        days, and
                            ``(ii) a portion of which occurs within the 
                        taxable year.
                Such term shall not include any individual otherwise 
                meeting the requirements of the preceding sentence 
                unless within the 39\1/2\ month period ending on such 
                due date (or such other period as the Secretary 
                prescribes) a physician (as so defined) has certified 
                that such individual meets such requirements.
            ``(3) Individuals with long-term care needs.--An individual 
        is described in this paragraph if the individual--
                    ``(A) is unable to perform (without substantial 
                assistance from another individual) at least 2 
                activities of daily living (as defined in section 
                7702B(c)(2)(B)) due to a loss of functional capacity, 
                or
                    ``(B) requires substantial supervision to protect 
                such individual from threats to health and safety due 
                to severe cognitive impairment and is unable to 
                perform, without reminding or cuing assistance, at 
                least 1 activity of at least 1 activity of daily living 
                (as so defined) or to the extent provided in 
                regulations prescribed by the Secretary (in 
                consultation with the Secretary of Health and Human 
                Services), is unable to engage in age appropriate 
                activities.
            ``(4) Special rules.--Rules similar to the rules of 
        paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall 
        apply for purposes of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 504. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS 
              PNEUMONIAE TO LIST OF TAXABLE VACCINES; REDUCTION IN PER 
              DOSE TAX RATE.

    (a) Inclusion of Vaccines.--
            (1) In general.--Section 4132(a)(1) (defining taxable 
        vaccine) is amended by adding at the end the following new 
        subparagraph:
                    ``(L) Any conjugate vaccine against streptococcus 
                pneumoniae.''.
            (2) Effective date.--
                    (A) Sales.--The amendment made by this subsection 
                shall apply to vaccine sales beginning on the day after 
                the date on which the Centers for Disease Control makes 
                a final recommendation for routine administration to 
                children of any conjugate vaccine against streptococcus 
                pneumoniae, but shall not take effect if subsection (c) 
                does not take effect.
                    (B) Deliveries.--For purposes of subparagraph (A), 
                in the case of sales on or before the date described in 
                such subparagraph for which delivery is made after such 
                date, the delivery date shall be considered the sale 
                date.
    (b) Reduction in Per Dose Tax Rate.--
            (1) In general.--Section 4131(b)(1) (relating to amount of 
        tax) is amended by striking ``75 cents'' and inserting ``25 
        cents''.
            (2) Effective date.--
                    (A) Sales.--The amendment made by this subsection 
                shall apply to vaccine sales after December 31, 2004, 
                but shall not take effect if subsection (c) does not 
                take effect.
                    (B) Deliveries.--For purposes of subparagraph (A), 
                in the case of sales on or before the date described in 
                such subparagraph for which delivery is made after such 
                date, the delivery date shall be considered the sale 
                date.
            (3) Limitation on certain credits or refunds.--For purposes 
        of applying section 4132(b) of the Internal Revenue Code of 
        1986 with respect to any claim for credit or refund filed after 
        August 31, 2004, the amount of tax taken into account shall not 
        exceed the tax computed under the rate in effect on January 1, 
        2005.
    (c) Vaccine Tax and Trust Fund Amendments.--
            (1) Sections 1503 and 1504 of the Vaccine Injury 
        Compensation Program Modification Act (and the amendments made 
        by such sections) are hereby repealed.
            (2) Subparagraph (A) of section 9510(c)(1) is amended by 
        striking ``August 5, 1997'' and inserting ``October 21, 1998''.
            (3) The amendments made by this subsection shall take 
        effect as if included in the provisions of the Tax and Trade 
        Relief Extension Act of 1998 to which they relate.
    (d) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Comptroller General of the United States shall prepare 
and submit a report to the Committee on Ways and Means of the House of 
Representatives and the Committee on Finance of the Senate on the 
operation the Vaccine Injury Compensation Trust Fund and on the 
adequacy of such Fund to meet future claims made under the Vaccine 
Injury Compensation Program.

             TITLE VI--SMALL BUSINESS TAX RELIEF PROVISIONS

SEC. 601. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) 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 and the taxpayer's spouse and dependents.''.
    (b) Clarification of Limitations on Other Coverage.--The first 
sentence of section 162(l)(2)(B) of the Internal Revenue Code of 1986 
is amended to read as follows: ``Paragraph (1) shall not apply to any 
taxpayer for any calendar month for which the taxpayer participates in 
any subsidized health plan maintained by any employer (other than an 
employer described in section 401(c)(4)) of the taxpayer or the spouse 
of the taxpayer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

 SEC. 602. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

    (a) In General.--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 $30,000.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 603. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.

    Section 3301 (relating to rate of Federal unemployment tax) is 
amended--
            (1) by striking ``2007'' and inserting ``2004'', and
            (2) by striking ``2008'' and inserting ``2005''.

SEC. 604. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO INCREASE 
              ALTERNATIVE MINIMUM TAX LIABILITY.

    (a) In General.--Section 55(c) (defining regular tax) is amended by 
redesignating paragraph (2) as paragraph (3) and by inserting after 
paragraph (1) the following:
            ``(2) Coordination with income averaging for farmers and 
        fishermen.--Solely for purposes of this section, section 1301 
        (relating to averaging of farm and fishing income) shall not 
        apply in computing the regular tax.''.
    (b) Allowing Income Averaging for Fishermen.--(1) Section 1301(a) 
of the Internal Revenue Code of 1986 is amended by striking ``farming 
business'' and inserting ``farming business or fishing business,''.
    (2) Section 1301(b)(1)(A)(i) is amended by striking ``and'' and 
inserting ``or'', and by striking subsection (b)(1)(A)(ii) and 
replacing it with ``(b)(1)(A)(ii) a fishing business; and'' and by 
redesignating subsection (b)(1)(A)(ii) as subsection (b)(1)(A)(iii).
    (3) Section 1301(b) is amended by inserting the following paragraph 
after subsection (b)(3):
            ``(4) Fishing business.--The term fishing business means 
        the conduct of commercial fishing as defined in section 3 of 
        the Magnuson-Stevens Fishery Conservation and Management Act 
        (16 U.S.C. 1802).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 605. FARM, FISHING, AND RANCH RISK MANAGEMENT ACCOUNTS.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
(relating to taxable year for which deductions taken) is amended by 
inserting after section 468B the following:

``SEC. 468C. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual engaged in 
an eligible farming business or commercial fishing, there shall be 
allowed as a deduction for any taxable year the amount paid in cash by 
the taxpayer during the taxable year to a Farm, Fishing, and Ranch Risk 
Management Account (hereinafter referred to as the `FFARRM Account').
    ``(b) Limitation.--(1) The amount which a taxpayer may pay into the 
FFARRM Account for any taxable year shall not exceed 20 percent of so 
much of the taxable income of the taxpayer (determined without regard 
to this section) which is attributable (determined in the manner 
applicable under section 1301) to any eligible farming business or 
commercial fishing.
    ``(2) Distributions from a FFARRM Account may not be used to 
purchase, lease, or finance any new fishing vessel, add capacity to any 
fishery, or otherwise contribute to the overcapitalization of any 
fishery. The Secretary of Commerce shall implement regulations to 
enforce this paragraph.
    ``(c) Eligible Farming Business.--(1) For purposes of this section, 
the term `eligible farming business' means any farming business (as 
defined in section 263A(e)(4)) which is not a passive activity (within 
the meaning of section 469(c)) of the taxpayer.
    ``(2) Commercial Fishing.--For purposes of this section, the term 
`commercial fishing' is defined under section (3) of the Magnuson-
Stevens Fishery Conservation and Management Act (16 U.S.C. 1802).
    ``(d) FFARRM Account.--For purposes of this section--
            ``(1) In general.--The term `FFARRM Account' means a trust 
        created or organized in the United States for the exclusive 
        benefit of the taxpayer, but only if the written governing 
        instrument creating the trust meets the following requirements:
                    ``(A) No contribution will be accepted for any 
                taxable year in excess of the amount allowed as a 
                deduction under subsection (a) for such year.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) The assets of the trust consist entirely of 
                cash or of obligations which have adequate stated 
                interest (as defined in section 1274(c)(2)) and which 
                pay such interest not less often than annually.
                    ``(D) All income of the trust is distributed 
                currently to the grantor.
                    ``(E) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Account taxed as grantor trust.--The grantor of a 
        FFARRM Account shall be treated for purposes of this title as 
        the owner of such Account and shall be subject to tax thereon 
        in accordance with subpart E of part I of subchapter J of this 
        chapter (relating to grantors and others treated as substantial 
        owners).
    ``(e) Inclusion of Amounts Distributed.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there shall be includible in the gross income of the taxpayer 
        for any taxable year--
                    ``(A) any amount distributed from a FFARRM Account 
                of the taxpayer during such taxable year, and
                    ``(B) any deemed distribution under--
                            ``(i) subsection (f)(1) (relating to 
                        deposits not distributed within 5 years),
                            ``(ii) subsection (f)(2) (relating to 
                        cessation in eligible farming business), and
                            ``(iii) subparagraph (A) or (B) of 
                        subsection (f)(3) (relating to prohibited 
                        transactions and pledging account as security).
            ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
                    ``(A) any distribution to the extent attributable 
                to income of the Account, and
                    ``(B) the distribution of any contribution paid 
                during a taxable year to a FFARRM Account to the extent 
                that such contribution exceeds the limitation 
                applicable under subsection (b) if requirements similar 
                to the requirements of section 408(d)(4) are met.
        For purposes of subparagraph (A), distributions shall be 
        treated as first attributable to income and then to other 
        amounts.
    ``(f) Special Rules.--
            ``(1) Tax on deposits in account which are not distributed 
        within 5 years.--
                    ``(A) In general.--If, at the close of any taxable 
                year, there is a nonqualified balance in any FFARRM 
                Account--
                            ``(i) there shall be deemed distributed 
                        from such Account during such taxable year an 
                        amount equal to such balance, and
                            ``(ii) the taxpayer's tax imposed by this 
                        chapter for such taxable year shall be 
                        increased by 10 percent of such deemed 
                        distribution.
                The preceding sentence shall not apply if an amount 
                equal to such nonqualified balance is distributed from 
                such Account to the taxpayer before the due date 
                (including extensions) for filing the return of tax 
                imposed by this chapter for such year (or, if earlier, 
                the date the taxpayer files such return for such year).
                    ``(B) Nonqualified balance.--For purposes of 
                subparagraph (A), the term `nonqualified balance' means 
                any balance in the Account on the last day of the 
                taxable year which is attributable to amounts deposited 
                in such Account before the 4th preceding taxable year.
                    ``(C) Ordering rule.--For purposes of this 
                paragraph, distributions from a FFARRM Account (other 
                than distributions of current income) shall be treated 
                as made from deposits in the order in which such 
                deposits were made, beginning with the earliest 
                deposits.
            ``(2) Cessation in eligible business.--At the close of the 
        first disqualification period after a period for which the 
        taxpayer was engaged in an eligible farming business or 
        commercial fishing, there shall be deemed distributed from the 
        FFARRM Account of the taxpayer an amount equal to the balance 
        in such Account (if any) at the close of such disqualification 
        period. For purposes of the preceding sentence, the term 
        `disqualification period' means any period of 2 consecutive 
        taxable years for which the taxpayer is not engaged in an 
        eligible farming business or commercial fishing.
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 220(f)(8) (relating to treatment on 
                death).
                    ``(B) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(C) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
            ``(4) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to a 
        FFARRM Account on the last day of a taxable year if such 
        payment is made on account of such taxable year and is made on 
        or before the due date (without regard to extensions) for 
        filing the return of tax for such taxable year.
            ``(5) Individual.--For purposes of this section, the term 
        `individual' shall not include an estate or trust.
            ``(6) Deduction not allowed for self-employment tax.--The 
        deduction allowable by reason of subsection (a) shall not be 
        taken into account in determining an individual's net earnings 
        from self-employment (within the meaning of section 1402(a)) 
        for purposes of chapter 2.
    ``(g) Reports.--The trustee of a FFARRM Account shall make such 
reports regarding such Account to the Secretary and to the person for 
whose benefit the Account is maintained with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such persons at 
such time and in such manner as may be required by such regulations.''.
    (b) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 (relating to tax on 
        excess contributions to certain tax-favored accounts and 
        annuities), as amended by section 304(b)(1), is amended by 
        striking ``or'' at the end of paragraph (4), by redesignating 
        paragraphs (4) and (5) as paragraphs (5) and (6), respectively, 
        and by inserting after paragraph (3) the following:
            ``(4) a FFARRM Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973, as amended by section 304(b)(2), is 
        amended by adding at the end the following:
    ``(h) Excess Contributions to FFARRM Accounts.--For purposes of 
this section, in the case of a FFARRM Account (within the meaning of 
section 468C(d)), the term `excess contributions' means the amount by 
which the amount contributed for the taxable year to the Account 
exceeds the amount which may be contributed to the Account under 
section 468C(b) for such taxable year. For purposes of this subsection, 
any contribution which is distributed out of the FFARRM Account in a 
distribution to which section 468C(e)(2)(B) applies shall be treated as 
an amount not contributed.''.
            (3) The section heading for section 4973 is amended to read 
        as follows:

``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, ANNUITIES, 
              ETC.''.

            (4) The table of sections for chapter 43 is amended by 
        striking the item relating to section 4973 and inserting the 
        following:

                              ``Sec. 4973. Excess contributions to 
                                        certain accounts, annuities, 
                                        etc.''.
    (c) Tax on Prohibited Transactions.--
            (1) Subsection (c) of section 4975 (relating to tax on 
        prohibited transactions) is amended by adding at the end the 
        following:
            ``(6) Special rule for ffarrm accounts.--A person for whose 
        benefit a FFARRM Account (within the meaning of section 
        468C(d)) is established 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 FFARRM Account by reason of the application of section 
        468C(f)(3)(A) to such account.''.
            (2) Paragraph (1) of section 4975(e) is amended by 
        redesignating subparagraphs (E) and (F) as subparagraphs (F) 
        and (G), respectively, and by inserting after subparagraph (D) 
        the following:
                    ``(E) a FFARRM Account described in section 
                468C(d),''.
    (d) Failure To Provide Reports on FFARRM Accounts.--Paragraph (2) 
of section 6693(a) (relating to failure to provide reports on certain 
tax-favored accounts or annuities), as amended by section 304(d), is 
amended by redesignating subparagraphs (C), (D), and (E) as 
subparagraphs (D), (E), and (F), respectively, and by inserting after 
subparagraph (B) the following:
                    ``(C) section 468C(g) (relating to FFARRM 
                Accounts),''.
    (e) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 is amended by inserting after the 
item relating to section 468B the following:

                              ``Sec. 468C. Farm, Fishing and Ranch Risk 
                                        Management Accounts.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 606. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM PASSIVE INCOME 
              TEST FOR BANK S CORPORATIONS.

    (a) In General.--Section 1362(d)(3)(C) (defining passive investment 
income) is amended by adding at the end the following:
                            ``(v) Exception for banks; etc.--In the 
                        case of a bank (as defined in section 581), a 
                        bank holding company (as defined in section 
                        246A(c)(3)(B)(ii)), or a qualified subchapter S 
                        subsidiary bank, the term `passive investment 
                        income' shall not include--
                                    ``(I) interest income earned by 
                                such bank, bank holding company, or 
                                qualified subchapter S subsidiary bank, 
                                or
                                    ``(II) dividends on assets required 
                                to be held by such bank, bank holding 
                                company, or qualified subchapter S 
                                subsidiary bank to conduct a banking 
                                business, including stock in the 
                                Federal Reserve Bank, the Federal Home 
                                Loan Bank, or the Federal Agricultural 
                                Mortgage Bank or participation 
                                certificates issued by a Federal 
                                Intermediate Credit Bank.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 607. TREATMENT OF QUALIFYING DIRECTOR SHARES.

    (a) In General.--Section 1361 is amended by adding at the end the 
following:
    ``(f) Treatment of Qualifying Director Shares.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) qualifying director shares shall not be 
                treated as a second class of stock, and
                    ``(B) no person shall be treated as a shareholder 
                of the corporation by reason of holding qualifying 
                director shares.
            ``(2) Qualifying director shares defined.--For purposes of 
        this subsection, the term `qualifying director shares' means 
        any shares of stock in a bank (as defined in section 581) or in 
        a bank holding company registered as such with the Federal 
        Reserve System--
                            ``(i) which are held by an individual 
                        solely by reason of status as a director of 
                        such bank or company or its controlled 
                        subsidiary; and
                            ``(ii) which are subject to an agreement 
                        pursuant to which the holder is required to 
                        dispose of the shares of stock upon termination 
                        of the holder's status as a director at the 
                        same price as the individual acquired such 
                        shares of stock.
            ``(3) Distributions.--A distribution (not in part or full 
        payment in exchange for stock) made by the corporation with 
        respect to qualifying director shares shall be includible as 
        ordinary income of the holder and deductible to the corporation 
        as an expense in computing taxable income under section 1363(b) 
        in the year such distribution is received.''.
    (b) Conforming Amendments.--
            (1) Section 1361(b)(1) is amended by inserting ``, except 
        as provided in subsection (f),'' before ``which does not''.
            (2) Section 1366(a) is amended by adding at the end the 
        following:
            ``(3) Allocation with respect to qualifying director 
        shares.--The holders of qualifying director shares (as defined 
        in section 1361(f)) shall not, with respect to such shares of 
        stock, be allocated any of the items described in paragraph 
        (1).''.
            (3) Section 1373(a) is amended by striking ``and'' at the 
        end of paragraph (1), by striking the period at the end of 
        paragraph (2) and inserting ``, and'', and adding at the end 
        the following:
            ``(3) no amount of an expense deductible under this 
        subchapter by reason of section 1361(f)(3) shall be apportioned 
        or allocated to such income.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 608. INCREASE IN ESTATE TAX DEDUCTION FOR FAMILY-OWNED BUSINESS 
              INTEREST.

    (a) In General.--Section 2057(a)(2) (relating to maximum deduction) 
is amended by striking ``$675,000'' and inserting ``$1,975,000''.
    (b) Conforming Amendments.--Section 2057(a)(3)(B) (relating to 
coordination with unified credit) is amended by striking ``$675,000'' 
each place it appears in the text and heading and inserting 
``$1,975,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 2000.

SEC. 609. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

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

``SEC. 45E. EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
small employer, the employee health insurance expenses credit 
determined under this section is an amount equal to the applicable 
percentage of the amount paid by the taxpayer during the taxable year 
for qualified employee health insurance expenses.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is equal to--
            ``(1) 60 percent in the case of self-only coverage, and
            ``(2) 70 percent in the case of family coverage (as defined 
        in section 220(c)(5)).
    ``(c) Per Employee Dollar Limitation.--The amount of qualified 
employee health insurance expenses taken into account under subsection 
(a) with respect to any qualified employee for any taxable year shall 
not exceed--
            ``(1) $1,000 in the case of self-only coverage, and
            ``(2) $1,715 in the case of family coverage (as so 
        defined).
    ``(d) Definitions.--For purposes of this section--
            ``(1) Small employer.--
                    ``(A) In general.--The term `small employer' means, 
                with respect to any calendar year, any employer if such 
                employer employed an average of 9 or fewer employees on 
                business days during either of the 2 preceding calendar 
                years. For purposes of the preceding sentence, a 
                preceding calendar year may be taken into account only 
                if the employer was in existence throughout such year.
                    ``(B) Employers not in existence in preceding 
                year.--In the case of an employer which was not in 
                existence throughout the 1st preceding calendar year, 
                the determination under subparagraph (A) shall be based 
                on the average number of employees that it is 
                reasonably expected such employer will employ on 
                business days in the current calendar year.
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage to the extent 
                such amount is attributable to coverage provided to any 
                employee while such employee is a qualified employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
                    ``(C) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                section 9832(b)(1).
            ``(3) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee of an 
                employer if the total amount of wages paid or incurred 
                by such employer to such employee at an annual rate 
                during the taxable year exceeds $5,000 but does not 
                exceed $16,000.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee'--
                            ``(i) shall not include an employee within 
                        the meaning of section 401(c)(1), but
                            ``(ii) shall include a leased employee 
                        within the meaning of section 414(n).
                    ``(C) Wages.--The term `wages' has the meaning 
                given such term by section 3121(a) (determined without 
                regard to any dollar limitation contained in such 
                section).
                    ``(D) Inflation adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2001, the $16,000 amount contained in 
                        subparagraph (A) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment under section 1(f)(3) for 
                                the calendar year in which the taxable 
                                year begins, determined by substituting 
                                `calendar year 2000' for `calendar year 
                                1992' in subparagraph (B) thereof.
                            ``(ii) Rounding.--If any increase 
                        determined under clause (i) is not a multiple 
                        of $100, such amount shall be rounded to the 
                        nearest multiple of $100.
    ``(e) Certain rules made applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(f) Denial of Double Benefit.--No deduction or credit under any 
other provision of this chapter shall be allowed with respect to 
qualified employee health insurance expenses taken into account under 
subsection (a).''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) 
(relating to current year business credit) is amended by striking 
``plus'' at the end of paragraph (13), by striking the period at the 
end of paragraph (14) and inserting ``, plus'', and by adding at the 
end the following:
            ``(15) the employee health insurance expenses credit 
        determined under section 45E.''.
    (c) No Carrybacks.--Subsection (d) of section 39 (relating to 
carryback and carryforward of unused credits) is amended by adding at 
the end the following:
            ``(10) No carryback of section 45E credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45E may be carried 
        back to a taxable year ending before January 1, 2001.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following:

                              ``Sec. 45E. Employee health insurance 
                                        expenses.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2000.

            TITLE VII--ESTATE AND GIFT TAX RELIEF PROVISIONS

    Subtitle A--Reductions of Estate, Gift, and Generation-Skipping 
                             Transfer Taxes

SEC. 701. REDUCTIONS OF ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER 
              TAXES.

    (a) Maximum Rate of Tax Reduced to 53 Percent.--The table contained 
in section 2001(c)(1) is amended by striking the 2 highest brackets and 
inserting the following:

    ``Over $2,500,000..............
                                        $1,025,800, plus 53% of the 
                                                excess over 
                                                $2,500,000.''.
    (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) of 
section 2001 is amended by striking paragraph (2).
    (c) Effective Dates.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply to estates of decedents dying, and gifts made, 
        after December 31, 2000.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall apply to estates of decedents dying, and gifts made, 
        after December 31, 2003.

SEC. 702. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH 
              UNIFIED EXEMPTION AMOUNT.

    (a) In General.--
            (1) Estate tax.--Part IV of subchapter A of chapter 11 is 
        amended by inserting after section 2051 the following new 
        section:

``SEC. 2052. EXEMPTION.

    ``(a) In general.--For purposes of the tax imposed by section 2001, 
the value of the taxable estate shall be determined by deducting from 
the value of the gross estate an amount equal to the excess (if any) 
of--
            ``(1) the exemption amount for the calendar year in which 
        the decedent died, over
            ``(2) the sum of--
                    ``(A) the aggregate amount allowed as an exemption 
                under section 2521 with respect to gifts made by the 
                decedent after December 31, 2003, and
                    ``(B) the aggregate amount of gifts made by the 
                decedent for which credit was allowed by section 2505 
                (as in effect on the day before the date of the 
                enactment of the Taxpayer Refund Act of 1999).
Gifts which are includible in the gross estate of the decedent shall 
not be taken into account in determining the amounts under paragraph 
(2).
    ``(b) Exemption Amount.--For purposes of subsection (a), the term 
`exemption amount' means the amount determined in accordance with the 
following table:

        ``In the case of
                                                          The exemption
          calendar year:
                                                             amount is:
                  2004...............................         $850,000 
                  2005...............................         $950,000 
                  2006...............................       $1,000,000 
                  2007 or thereafter.................    $1,500,000.''.
            (2) Gift tax.--Subchapter C of chapter 12 (relating to 
        deductions) is amended by inserting before section 2522 the 
        following new section:

``SEC. 2521. EXEMPTION.

    ``(a) In General.--In computing taxable gifts for any calendar 
year, there shall be allowed as a deduction in the case of a citizen or 
resident of the United States an amount equal to the excess of--
            ``(1) the exemption amount determined under section 2052 
        for such calendar year, over
            ``(2) the sum of--
                    ``(A) the aggregate amount allowed as an exemption 
                under this section for all preceding calendar years 
                after 2003, and
                    ``(B) the aggregate amount of gifts for which 
                credit was allowed by section 2505 (as in effect on the 
                day before the date of the enactment of the Taxpayer 
                Refund Act of 1999).''.
    (b) Repeal of Unified Credits.--
            (1) Section 2010 (relating to unified credit against estate 
        tax) is hereby repealed.
            (2) Section 2505 (relating to unified credit against gift 
        tax) is hereby repealed.
    (c) Conforming Amendments.--
            (1)(A) Subparagraph (B) of section 2001(b)(1) is amended by 
        inserting before the comma ``reduced by the amount described in 
        section 2052(a)(2)''.
            (B) Subsection (b) of section 2001 is amended by adding at 
        the end the following new sentence: ``For purposes of paragraph 
        (2), the amount of the tax payable under chapter 12 shall be 
        determined without regard to the credit provided by section 
        2505 (as in effect on the day before the date of the enactment 
        of the Taxpayer Refund Act of 1999).''.
            (2) Subsection (f) of section 2011 is amended by striking 
        ``, reduced by the amount of the unified credit provided by 
        section 2010''.
            (3) Subsection (a) of section 2012 is amended by striking 
        ``and the unified credit provided by section 2010''.
            (4) Subsection (b) of section 2013 is amended by inserting 
        before the period at the end of the first sentence ``and 
        increased by the exemption allowed under section 2052 or 
        2106(a)(4) (or the corresponding provisions of prior law) in 
        determining the taxable estate of the transferor for purposes 
        of the estate tax''.
            (5) Subparagraph (A) of section 2013(c)(1) is amended by 
        striking ``2010,''.
            (6) Paragraph (2) of section 2014(b) is amended by striking 
        ``2010,''.
            (7) Clause (ii) of section 2056A(b)(12)(C) is amended to 
        read as follows:
                            ``(ii) to treat any reduction in the tax 
                        imposed by paragraph (1)(A) by reason of the 
                        credit allowable under section 2010 (as in 
                        effect on the day before the date of the 
                        enactment of the Taxpayer Refund Act of 1999) 
                        or the exemption allowable under section 2052 
                        with respect to the decedent as such a credit 
                        or exemption (as the case may be) allowable to 
                        such surviving spouse for purposes of 
                        determining the amount of the exemption 
                        allowable under section 2521 with respect to 
                        taxable gifts made by the surviving spouse 
                        during the year in which the spouse becomes a 
                        citizen or any subsequent year,''.
            (8) Section 2102 is amended by striking subsection (c).
            (9) Subsection (a) of section 2106 is amended by adding at 
        the end the following new paragraph:
            ``(4) Exemption.--
                    ``(A) In general.--An exemption of $60,000.
                    ``(B) Residents of possessions of the United 
                States.--In the case of a decedent who is considered to 
                be a nonresident not a citizen of the United States 
                under section 2209, the exemption under this paragraph 
                shall be the greater of--
                            ``(i) $60,000, or
                            ``(ii) that proportion of $175,000 which 
                        the value of that part of the decedent's gross 
                        estate which at the time of his death is 
                        situated in the United States bears to the 
                        value of his entire gross estate wherever 
                        situated.
                    ``(C) Special rules.--
                            ``(i) Coordination with treaties.--To the 
                        extent required under any treaty obligation of 
                        the United States, the exemption allowed under 
                        this paragraph shall be equal to the amount 
                        which bears the same ratio to the exemption 
                        amount under section 2052 (for the calendar 
                        year in which the decedent died) as the value 
                        of the part of the decedent's gross estate 
                        which at the time of his death is situated in 
                        the United States bears to the value of his 
                        entire gross estate wherever situated. For 
                        purposes of the preceding sentence, property 
                        shall not be treated as situated in the United 
                        States if such property is exempt from the tax 
                        imposed by this subchapter under any treaty 
                        obligation of the United States.
                            ``(ii) Coordination with gift tax exemption 
                        and unified credit.--If an exemption has been 
                        allowed under section 2521 (or a credit has 
                        been allowed under section 2505 as in effect on 
                        the day before the date of the enactment of the 
                        Taxpayer Refund Act of 1999) with respect to 
                        any gift made by the decedent, each dollar 
                        amount contained in subparagraph (A) or (B) or 
                        the exemption amount applicable under clause 
                        (i) of this subparagraph (whichever applies) 
                        shall be reduced by the exemption so allowed 
                        under 2521 (or, in the case of such a credit, 
                        by the amount of the gift for which the credit 
                        was so allowed).''.
            (10) Subsection (c) of section 2107 is amended--
                    (A) by striking paragraph (1) and by redesignating 
                paragraphs (2) and (3) as paragraphs (1) and (2), 
                respectively, and
                    (B) by striking the second sentence of paragraph 
                (2) (as so redesignated).
            (11) Section 2206 is amended by striking ``the taxable 
        estate'' in the first sentence and inserting ``the sum of the 
        taxable estate and the amount of the exemption allowed under 
        section 2052 or 2106(a)(4) in computing the taxable estate''.
            (12) Section 2207 is amended by striking ``the taxable 
        estate'' in the first sentence and inserting ``the sum of the 
        taxable estate and the amount of the exemption allowed under 
        section 2052 or 2106(a)(4) in computing the taxable estate''.
            (13) Subparagraph (B) of section 2207B(a)(1) is amended to 
        read as follows:
                    ``(B) the sum of the taxable estate and the amount 
                of the exemption allowed under section 2052 or 
                2106(a)(4) in computing the taxable estate.''.
            (14) Subsection (a) of section 2503 is amended by striking 
        ``section 2522'' and inserting ``section 2521''.
            (15) Paragraph (1) of section 6018(a) is amended by 
        striking ``the applicable exclusion amount'' and inserting 
        ``the exemption amount under section 2052 for the calendar year 
        which includes the date of death''.
            (16) Subparagraph (A) of section 6601(j)(2) is amended to 
        read as follows:
                    ``(A)(i) the amount of the tax which would be 
                imposed by chapter 11 on an amount of taxable estate 
                equal to the sum of $1,000,000 and the exemption amount 
                allowable under section 2052, reduced by
                    ``(ii) the amount of tax which would be so imposed 
                if the taxable estate equaled such exemption amount, 
                or''.
            (17) The table of sections for part II of subchapter A of 
        chapter 11 is amended by striking the item relating to section 
        2010.
            (18) The table of sections for subchapter A of chapter 12 
        is amended by striking the item relating to section 2505.
    (d) Effective Date.--The amendments made by this section--
            (1) insofar as they relate to the tax imposed by chapter 11 
        of the Internal Revenue Code of 1986, shall apply to estates of 
        decedents dying after December 31, 2003, and
            (2) insofar as they relate to the tax imposed by chapter 12 
        of such Code, shall apply to gifts made after December 31, 
        2003.

                   Subtitle B--Conservation Easements

SEC. 711. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASEMENTS.

    (a) Where Land Is Located.--
            (1) In general.--Clause (i) of section 2031(c)(8)(A) 
        (defining land subject to a conservation easement) is amended--
                    (A) by striking ``25 miles'' both places it appears 
                and inserting ``50 miles'', and
                    (B) striking ``10 miles'' and inserting ``25 
                miles''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to estates of decedents dying after December 31, 
        1999.
    (b) Clarification of Date for Determining Value of Land and 
Easement.--
            (1) In general.--Section 2031(c)(2) (defining applicable 
        percentage) is amended by adding at the end the following new 
        sentence: ``The values taken into account under the preceding 
        sentence shall be such values as of the date of the 
        contribution referred to in paragraph (8)(B).''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to estates of decedents dying after December 31, 
        1997.

                   Subtitle C--Annual Gift Exclusion

SEC. 721. INCREASE IN ANNUAL GIFT EXCLUSION.

    (a) In General.--Section 2503(b) (relating to exclusions from 
gifts) is amended--
            (1) by striking the following:
    ``(b) Exclusions From Gifts.--
            ``(1) In general.--In the case of gifts'',
            (2) by inserting the following:
    ``(b) Exclusions From Gifts.--In the case of gifts'',
            (3) by striking paragraph (2), and
            (4) by striking ``$10,000'' and inserting ``$20,000''.
    (b) Effective Date.--The amendments made by this section shall 
apply to gifts made after December 31, 2004.

     Subtitle D--Simplification of Generation-Skipping Transfer Tax

SEC. 731. RETROACTIVE ALLOCATION OF GST EXEMPTION.

    (a) In General.--Section 2632 (relating to special rules for 
allocation of GST exemption) is amended by redesignating subsection (c) 
as subsection (d) and by inserting after subsection (b) the following 
new subsection:
    ``(c) Retroactive Allocations.--
            ``(1) In general.--If--
                    ``(A) a non-skip person has an interest or a future 
                interest in a trust to which any transfer has been 
                made,
                    ``(B) such person--
                            ``(i) is a lineal descendant of a 
                        grandparent of the transferor or of a 
                        grandparent of the transferor's spouse, and
                            ``(ii) is assigned to a generation below 
                        the generation assignment of the transferor, 
                        and
                    ``(C) such person predeceases the transferor,
        then the transferor may make an allocation of any of such 
        transferor's unused GST exemption to any previous transfer or 
        transfers to the trust on a chronological basis.
            ``(2) Special rules.--If the allocation under paragraph (1) 
        by the transferor is made on a gift tax return filed on or 
        before the date prescribed by section 6075(b) for gifts made 
        within the calendar year within which the non-skip person's 
        death occurred--
                    ``(A) the value of such transfer or transfers for 
                purposes of section 2642(a) shall be determined as if 
                such allocation had been made on a timely filed gift 
                tax return for each calendar year within which each 
                transfer was made,
                    ``(B) such allocation shall be effective 
                immediately before such death, and
                    ``(C) the amount of the transferor's unused GST 
                exemption available to be allocated shall be determined 
                immediately before such death.
            ``(3) Future interest.--For purposes of this subsection, a 
        person has a future interest in a trust if the trust may permit 
        income or corpus to be paid to such person on a date or dates 
        in the future.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to deaths of non-skip persons occurring after the date of the 
enactment of this Act.

SEC. 732. SEVERING OF TRUSTS.

    (a) In General.--Subsection (a) of section 2642 (relating to 
inclusion ratio) is amended by adding at the end the following new 
paragraph:
            ``(3) Severing of trusts.--
                    ``(A) In general.--If a trust is severed in a 
                qualified severance, the trusts resulting from such 
                severance shall be treated as separate trusts 
                thereafter for purposes of this chapter.
                    ``(B) Qualified severance.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--The term `qualified 
                        severance' means the division of a single trust 
                        and the creation (by any means available under 
                        the governing instrument or under local law) of 
                        2 or more trusts if--
                                    ``(I) the single trust was divided 
                                on a fractional basis, and
                                    ``(II) the terms of the new trusts, 
                                in the aggregate, provide for the same 
                                succession of interests of 
                                beneficiaries as are provided in the 
                                original trust.
                            ``(ii) Trusts with inclusion ratio greater 
                        than zero.--If a trust has an inclusion ratio 
                        of greater than zero and less than 1, a 
                        severance is a qualified severance only if the 
                        single trust is divided into 2 trusts, one of 
                        which receives a fractional share of the total 
                        value of all trust assets equal to the 
                        applicable fraction of the single trust 
                        immediately before the severance. In such case, 
                        the trust receiving such fractional share shall 
                        have an inclusion ratio of zero and the other 
                        trust shall have an inclusion ratio of 1.
                            ``(iii) Regulations.--The term `qualified 
                        severance' includes any other severance 
                        permitted under regulations prescribed by the 
                        Secretary.
                    ``(C) Timing and manner of severances.--A severance 
                pursuant to this paragraph may be made at any time. The 
                Secretary shall prescribe by forms or regulations the 
                manner in which the qualified severance shall be 
                reported to the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to severances after the date of the enactment of this Act.

SEC. 733. MODIFICATION OF CERTAIN VALUATION RULES.

    (a) Gifts for Which Gift Tax Return Filed or Deemed Allocation 
Made.--Paragraph (1) of section 2642(b) (relating to valuation rules, 
etc.) is amended to read as follows:
            ``(1) Gifts for which gift tax return filed or deemed 
        allocation made.--If the allocation of the GST exemption to any 
        transfers of property is made on a gift tax return filed on or 
        before the date prescribed by section 6075(b) for such transfer 
        or is deemed to be made under section 2632(b)(1)--
                    ``(A) the value of such property for purposes of 
                subsection (a) shall be its value as finally determined 
                for purposes of chapter 12 (within the meaning of 
                section 2001(f)(2)), or, in the case of an allocation 
                deemed to have been made at the close of an estate tax 
                inclusion period, its value at the time of the close of 
                the estate tax inclusion period, and
                    ``(B) such allocation shall be effective on and 
                after the date of such transfer, or, in the case of an 
                allocation deemed to have been made at the close of an 
                estate tax inclusion period, on and after the close of 
                such estate tax inclusion period.''.
    (b) Transfers at Death.--Subparagraph (A) of section 2642(b)(2) is 
amended to read as follows:
                    ``(A) Transfers at death.--If property is 
                transferred as a result of the death of the transferor, 
                the value of such property for purposes of subsection 
                (a) shall be its value as finally determined for 
                purposes of chapter 11; except that, if the 
                requirements prescribed by the Secretary respecting 
                allocation of post-death changes in value are not met, 
                the value of such property shall be determined as of 
                the time of the distribution concerned.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 1431 of the Tax 
Reform Act of 1986.

SEC. 734. RELIEF PROVISIONS.

    (a) In General.--Section 2642 is amended by adding at the end the 
following new subsection:
    ``(g) Relief Provisions.--
            ``(1) Relief for late elections.--
                    ``(A) In general.--The Secretary shall by 
                regulation prescribe such circumstances and procedures 
                under which extensions of time will be granted to 
                make--
                            ``(i) an allocation of GST exemption 
                        described in paragraph (1) or (2) of subsection 
                        (b), and
                            ``(ii) an election under section 
                        2632(b)(3).
                Such regulations shall include procedures for 
                requesting comparable relief with respect to transfers 
                made before the date of enactment of this paragraph.
                    ``(B) Basis for determinations.--In determining 
                whether to grant relief under this paragraph, the 
                Secretary shall take into account all relevant 
                circumstances, including evidence of intent contained 
                in the trust instrument or instrument of transfer and 
                such other factors as the Secretary deems relevant. For 
                purposes of determining whether to grant relief under 
                this paragraph, the time for making the allocation (or 
                election) shall be treated as if not expressly 
                prescribed by statute.
            ``(2) Substantial compliance.--An allocation of GST 
        exemption under section 2632 that demonstrates an intent to 
        have the lowest possible inclusion ratio with respect to a 
        transfer or a trust shall be deemed to be an allocation of so 
        much of the transferor's unused GST exemption as produces the 
        lowest possible inclusion ratio. In determining whether there 
        has been substantial compliance, all relevant circumstances 
        shall be taken into account, including evidence of intent 
        contained in the trust instrument or instrument of transfer and 
        such other factors as the Secretary deems relevant.''.
    (b) Effective Dates.--
            (1) Relief for late elections.--Section 2642(g)(1) (as 
        added by subsection (a)) shall apply to requests pending on, or 
        filed after, the date of the enactment of this Act.
            (2) Substantial compliance.--Section 2642(g)(2) (as so 
        added) shall take effect on the date of the enactment of this 
        Act and shall apply to allocations made prior to such date for 
        purposes of determining the tax consequences of generation-
        skipping transfers with respect to which the period of time for 
        filing claims for refund has not expired. No implication is 
        intended with respect to the availability of relief for late 
        elections or the application of a rule of substantial 
        compliance before the enactment of this amendment.

            TITLE VIII--TAX EXEMPT ORGANIZATIONS PROVISIONS

SEC. 801. EXEMPTION FROM INCOME TAX FOR STATE-CREATED ORGANIZATIONS 
              PROVIDING PROPERTY AND CASUALTY INSURANCE FOR PROPERTY 
              FOR WHICH SUCH COVERAGE IS OTHERWISE UNAVAILABLE.

    (a) In General.--Subsection (c) of section 501 (relating to 
exemption from tax on corporations, certain trusts, etc.) is amended by 
adding at the end the following new paragraph:
            ``(28)(A) Any association created before January 1, 1999, 
        by State law and organized and operated exclusively to provide 
        property and casualty insurance coverage for property located 
        within the State for which the State has determined that 
        coverage in the authorized insurance market is limited or 
        unavailable at reasonable rates, if--
                    ``(i) no part of the net earnings of which inures 
                to the benefit of any private shareholder or 
                individual,
                    ``(ii) except as provided in clause (v), no part of 
                the assets of which may be used for, or diverted to, 
                any purpose other than--
                            ``(I) to satisfy, in whole or in part, the 
                        liability of the association for, or with 
                        respect to, claims made on policies written by 
                        the association,
                            ``(II) to invest in investments authorized 
                        by applicable law,
                            ``(III) to pay reasonable and necessary 
                        administration expenses in connection with the 
                        establishment and operation of the association 
                        and the processing of claims against the 
                        association, or
                            ``(IV) to make remittances pursuant to 
                        State law to be used by the State to provide 
                        for the payment of claims on policies written 
                        by the association, purchase reinsurance 
                        covering losses under such policies, or to 
                        support governmental programs to prepare for or 
                        mitigate the effects of natural catastrophic 
                        events,
                    ``(iii) the State law governing the association 
                permits the association to levy assessments on 
                insurance companies authorized to sell property and 
                casualty insurance in the State, or on property and 
                casualty insurance policyholders with insurable 
                interests in property located in the State to fund 
                deficits of the association, including the creation of 
                reserves,
                    ``(iv) the plan of operation of the association is 
                subject to approval by the chief executive officer or 
                other executive branch official of the State, by the 
                State legislature, or both, and
                    ``(v) the assets of the association revert upon 
                dissolution to the State, the State's designee, or an 
                entity designated by the State law governing the 
                association, or State law does not permit the 
                dissolution of the association.
            ``(B)(i) An entity described in clause (ii) shall be 
        disregarded as a separate entity and treated as part of the 
        association described in subparagraph (A) from which it 
        receives remittances described in clause (ii) if an election is 
        made within 30 days after the date that such association is 
        determined to be exempt from tax.
            ``(ii) An entity is described in this clause if it is an 
        entity or fund created before January 1, 1999, pursuant to 
        State law and organized and operated exclusively to receive, 
        hold, and invest remittances from an association described in 
        subparagraph (A) and exempt from tax under subsection (a) and 
        to make disbursements to pay claims on insurance contracts 
        issued by such association, and to make disbursements to 
        support governmental programs to prepare for or mitigate the 
        effects of natural catastrophic events.''.
    (b) Unrelated Business Taxable Income.--Subsection (a) of section 
512 (relating to unrelated business taxable income) is amended by 
adding at the end the following new paragraph:
            ``(6) Special rule applicable to organizations described in 
        section 501(c)(28).--In the case of an organization described 
        in section 501(c)(28), the term `unrelated business taxable 
        income' means taxable income for a taxable year computed 
        without the application of section 501(c)(28) if, at the end of 
        the immediately preceding taxable year, the organization's net 
        equity exceeded 15 percent of the total coverage in force under 
        insurance contracts issued by the organization and outstanding 
        at the end of such preceding year.''.
    (c) Transitional Rule.--No income or gain shall be recognized by an 
association as a result of a change in status to that of an association 
described by section 501(c)(28) of the Internal Revenue Code of 1986, 
as amended by subsection (a).
    (d) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1999.

SEC. 802. MODIFICATIONS TO SECTION 512(B)(13).

    (a) In General.--Paragraph (13) of section 512(b) is amended by 
redesignating subparagraph (E) as subparagraph (F) and by inserting 
after subparagraph (D) the following new paragraph:
                    ``(E) Paragraph to apply only to excess payments.--
                            ``(i) In general.--Subparagraph (A) shall 
                        apply only to the portion of a specified 
                        payment received by the controlling 
                        organization which exceeds the amount which 
                        would have been paid if such payment met the 
                        requirements prescribed under section 482.
                            ``(ii) Addition to tax for valuation 
                        misstatements.--The tax imposed by this chapter 
                        on the controlling organization shall be 
                        increased by an amount equal to 20 percent of 
                        such excess.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply to payments received or accrued after December 31, 1999.
            (2) Payments subject to binding contract transition rule.--
        If the amendments made by section 1041 of the Taxpayer Relief 
        Act of 1997 do not apply to any amount received or accrued 
        after the date of the enactment of this Act under any contract 
        described in subsection (b)(2) of such section, such amendments 
        also shall not apply to amounts received or accrued under such 
        contract before January 1, 2000.

SEC. 803. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.

    (a) Repeal of Grassroots Expenditure Limit.--Paragraph (1) of 
section 501(h) (relating to expenditures by public charities to 
influence legislation) is amended to read as follows:
            ``(1) General rule.--In the case of an organization to 
        which this subsection applies, exemption from taxation under 
        subsection (a) shall be denied because a substantial part of 
        the activities of such organization consists of carrying on 
        propaganda, or otherwise attempting, to influence legislation, 
        but only if such organization normally makes lobbying 
        expenditures in excess of the lobbying ceiling amount for such 
        organization for each taxable year.''.
    (b) Conforming Amendments.--
            (1) Section 501(h)(2) is amended by striking subparagraphs 
        (C) and (D).
            (2) Section 4911(b) is amended to read as follows:
    ``(b) Excess Lobbying Expenditures.--For purposes of this section, 
the term `excess lobbying expenditures' means, for a taxable year, the 
amount by which the lobbying expenditures made by the organization 
during the taxable year exceed the lobbying nontaxable amount for such 
organization for such taxable year.''.
            (3) Section 4911(c) is amended by striking paragraphs (3) 
        and (4).
            (4) Paragraph (1)(A) of section 4911(f) is amended by 
        striking ``limits of section 501(h)(1) have'' and inserting 
        ``limit of section 501(h)(1) has''.
            (5) Paragraph (1)(C) of section 4911(f) is amended by 
        striking ``limits of section 501(h)(1) are'' and inserting 
        ``limit of section 501(h)(1) is''.
            (6) Paragraphs (4)(A) and (4)(B) of section 4911(f) are 
        each amended by striking ``limits of section 501(h)(1)'' and 
        inserting ``limit of section 501(h)(1)''.
            (7) Paragraph (8) of section 6033(b) (relating to certain 
        organizations described in section 501(c)(3)) is amended by 
        inserting ``and'' at the end of subparagraph (A) and by 
        striking subparagraphs (C) and (D).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 804. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS 
              FOR CHARITABLE PURPOSES.

    (a) In General.--Subsection (d) of section 408 (relating to 
individual retirement accounts) is amended by adding at the end the 
following new paragraph:
            ``(8) Distributions for charitable purposes.--
                    ``(A) In general.--In the case of a qualified 
                charitable distribution from an individual retirement 
                account to an organization described in section 170(c), 
                no amount shall be includible in the gross income of 
                the distributee.
                    ``(B) Special rules relating to charitable 
                remainder trusts, pooled income funds, and charitable 
                gift annuities.--
                            ``(i) In general.--In the case of a 
                        qualified charitable distribution from an 
                        individual retirement account--
                                    ``(I) to a charitable remainder 
                                annuity trust or a charitable remainder 
                                unitrust (as such terms are defined in 
                                section 664(d)),
                                    ``(II) to a pooled income fund (as 
                                defined in section 642(c)(5)), or
                                    ``(III) for the issuance of a 
                                charitable gift annuity (as defined in 
                                section 501(m)(5)),
                        no amount shall be includible in gross income 
                        of the distributee. The preceding sentence 
                        shall apply only if no person holds any 
                        interest in the amounts in the trust, fund, or 
                        annuity attributable to such distribution other 
                        than one or more of the following: the 
                        individual for whose benefit such account is 
                        maintained, the spouse of such individual, or 
                        any organization described in section 170(c).
                            ``(ii) Determination of inclusion of 
                        amounts distributed.--In determining the amount 
                        includible in the gross income of the 
                        distributee of a distribution from a trust 
                        described in clause (i)(I) or an annuity (as 
                        described in clause (i)(III)), the portion of 
                        any qualified charitable distribution to such 
                        trust or for such annuity which would (but for 
                        this subparagraph) have been includible in 
                        gross income--
                                    ``(I) in the case of any such 
                                trust, shall be treated as income 
                                described in section 664(b)(1), or
                                    ``(II) in the case of any such 
                                annuity, shall not be treated as an 
                                investment in the contract.
                            ``(iii) No inclusion for distribution to 
                        pooled income fund.--No amount shall be 
                        includible in the gross income of a pooled 
                        income fund (as so defined) by reason of a 
                        qualified charitable distribution to such fund.
                    ``(C) Qualified charitable distribution.--For 
                purposes of this paragraph, the term `qualified 
                charitable distribution' means any distribution from an 
                individual retirement account--
                            ``(i) which is made on or after the date 
                        that the individual for whose benefit the 
                        account is maintained has attained age 70\1/2\, 
                        and
                            ``(ii) which is a charitable contribution 
                        (as defined in section 170(c)) made directly 
                        from the account to--
                                    ``(I) an organization described in 
                                section 170(c), or
                                    ``(II) a trust, fund, or annuity 
                                described in subparagraph (B).
                    ``(D) Denial of deduction.--The amount allowable as 
                a deduction to the taxpayer for the taxable year under 
                section 170 for qualified charitable distributions 
                shall be reduced (but not below zero) by the sum of the 
                amounts of the qualified charitable distributions 
                during such year which (but for this paragraph) would 
                have been includible in the gross income of the 
                taxpayer for such year.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2000.

SEC. 805. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS EXCLUDED FROM 
              GROSS INCOME.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by inserting after section 138 the following new section:

``SEC. 138A. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.

    ``(a) In General.--Gross income of an individual does not include 
amounts received, from an organization described in section 170(c), as 
reimbursement of operating expenses with respect to use of a passenger 
automobile for the benefit of such organization for which a deduction 
would otherwise be allowable under section 170. The preceding sentence 
shall apply only to the extent that such reimbursement would be 
deductible under section 274(d) (determined by applying the standard 
business mileage rate established pursuant to section 274(d)) if the 
organization were not so described and such individual were an employee 
of such organization.
    ``(b) No Double Benefit.--Subsection (a) shall not apply with 
respect to any expenses if the individual claims a deduction or credit 
for such expenses under any other provision of this title.
    ``(c) Exemption From Reporting Requirements.--Section 6041 shall 
not apply with respect to reimbursements excluded from income under 
subsection (a).''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 138 the following new items:

                              ``Sec. 138A. Reimbursement for use of 
                                        passenger automobile for 
                                        charity.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 806. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN EXPENSES 
              INCURRED IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE 
              WHALING.

    (a) In General.--Section 170 (relating to charitable, etc., 
contributions and gifts) is amended by redesignating subsection (m) as 
subsection (n) and by inserting after subsection (l) the following new 
subsection:
    ``(m) Expenses Paid by Certain Whaling Captains in Support of 
Native Alaskan Subsistence Whaling.--
            ``(1) In general.--In the case of an individual who is 
        recognized by the Alaska Eskimo Whaling Commission as a whaling 
        captain charged with the responsibility of maintaining and 
        carrying out sanctioned whaling activities and who engages in 
        such activities during the taxable year, the amount described 
        in paragraph (2) (to the extent such amount does not exceed 
        $7,500 for the taxable year) shall be treated for purposes of 
        this section as a charitable contribution.
            ``(2) Amount described.--
                    ``(A) In general.--The amount described in this 
                paragraph is the aggregate of the reasonable and 
                necessary whaling expenses paid by the taxpayer during 
                the taxable year in carrying out sanctioned whaling 
                activities.
                    ``(B) Whaling expenses.--For purposes of 
                subparagraph (A), the term `whaling expenses' includes 
                expenses for--
                            ``(i) the acquisition and maintenance of 
                        whaling boats, weapons, and gear used in 
                        sanctioned whaling activities,
                            ``(ii) the supplying of food for the crew 
                        and other provisions for carrying out such 
                        activities, and
                            ``(iii) storage and distribution of the 
                        catch from such activities.
            ``(3) Sanctioned whaling activities.--For purposes of this 
        subsection, the term `sanctioned whaling activities' means 
        subsistence bowhead whale hunting activities conducted pursuant 
        to the management plan of the Alaska Eskimo Whaling 
        Commission.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to taxable years beginning after December 31, 1999.

SEC. 807. CHARITABLE CONTRIBUTIONS TO CERTAIN LOW INCOME SCHOOLS MAY BE 
              MADE IN NEXT TAXABLE YEAR.

    (a) In General.--Section 170(f) (relating to disallowance of 
deduction in certain cases and special rules) is amended by adding at 
the end the following new paragraph:
            ``(10) Time when certain contributions deemed made.--
                    ``(A) In general.--At the election of the taxpayer, 
                a qualified low-income school contribution shall be 
                deemed to be made 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). The 
                election may be made at the time of the filing of the 
                return for such table year, and shall be made and 
                substantiated in such manner as the Secretary shall by 
                regulations prescribe.
                    ``(B) Qualified low-income school contribution.--
                For purposes of subparagraph (A), the term `qualified 
                low-income school contribution' means a charitable 
                contribution to an educational organization described 
                in subsection (b)(1)(A)(ii)--
                            ``(i) which is a public, private, or 
                        sectarian school which provides elementary or 
                        secondary education (through grade 12), as 
                        determined under State law, and
                            ``(ii) with respect to which at least 50 
                        percent of the students attending such school 
                        are eligible for free or reduced-cost lunches 
                        under the school lunch program established 
                        under the National School Lunch Act.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 808. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS TO BE 
              ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE DEDUCTIONS.

    (a) In General.--Section 170 (relating to charitable, etc., 
contributions and gifts), as amended by section 806, is amended by 
redesignating subsection (n) as subsection (o) and by inserting after 
subsection (m) the following new subsection:
    ``(n) Deduction for Individuals Not Itemizing Deductions.--In the 
case of an individual who does not itemize his deductions for the 
taxable year, there shall be taken into account as a direct charitable 
deduction under section 63 an amount equal to the lesser of--
            ``(1) the amount allowable as a deduction under subsection 
        (a) for the taxable year, or
            ``(2) $50 ($100 in the case of a joint return).''.
    (b) Direct Charitable Deduction.--
            (1) In general.--Subsection (b) of section 63 is amended by 
        striking ``and'' at the end of paragraph (1), by striking the 
        period at the end of paragraph (2) and inserting ``, and'', and 
        by adding at the end thereof the following new paragraph:
            ``(3) the direct charitable deduction.''.
            (2) Definition.--Section 63 is amended by redesignating 
        subsection (g) as subsection (h) and by inserting after 
        subsection (f) the following new subsection:
    ``(g) Direct Charitable Deduction.--For purposes of this section, 
the term `direct charitable deduction' means that portion of the amount 
allowable under section 170(a) which is taken as a direct charitable 
deduction for the taxable year under section 170(n).''.
            (3) Conforming amendment.--Subsection (d) of section 63 is 
        amended by striking ``and'' at the end of paragraph (1), by 
        striking the period at the end of paragraph (2) and inserting 
        ``, and'', and by adding at the end thereof the following new 
        paragraph:
            ``(3) the direct charitable deduction.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004, and before 
January 1, 2007.

SEC. 809. INCREASE IN LIMIT ON CHARITABLE CONTRIBUTIONS AS PERCENTAGE 
              OF AGI.

    (a) In General.--
            (1) Individual limit.--Section 170(b)(1) (relating to 
        percentage limitations) is amended--
                    (A) by striking ``50 percent'' in subparagraph (A) 
                and inserting ``the applicable percentage'', and
                    (B) by striking ``30 percent'' each place it 
                appears in subparagraph (C) and inserting ``the 
                applicable percentage''.
            (2) Corporate limit.--Section 170(b)(2) is amended by 
        striking ``10 percent'' and inserting ``the applicable 
        percentage''.
    (b) Applicable Percentage.--Section 170(b) is amended by adding at 
the end the following new paragraph:
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the applicable percentage shall be determined under 
        the following tables:
                    ``(A) In the case of paragraph (1)(A):

                ``For taxable year--
                                         The applicable percentage is--
                    2002...................................         52 
                    2003...................................         54 
                    2004...................................         56 
                    2005...................................         58 
                    2006...................................         60 
                    2007 and thereafter....................         70.
                    ``(B) In the case of paragraph (1)(C):

                ``For taxable year--
                                         The applicable percentage is--
                    2002...................................         32 
                    2003...................................         34 
                    2004...................................         36 
                    2005...................................         38 
                    2006...................................         40 
                    2007 and thereafter....................         50.
                    ``(C) In the case of paragraph (2):

                ``For taxable year--
                                         The applicable percentage is--
                    2002...................................         12 
                    2003...................................         14 
                    2004...................................         16 
                    2005...................................         18 
                    2006 and thereafter....................      20.''.
    (c) Conforming Amendment.--Section 170(d)(1)(A) is amended by 
striking ``50 percent'' each place it appears and inserting ``the 
applicable percentage in effect under subsection (b)(1)(A)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

SEC. 810. LIMITED EXCEPTION TO EXCESS BUSINESS HOLDINGS RULE.

    (a) In General.--Section 4943(c)(2) (relating to permitted holdings 
in a corporation) is amended by adding at the end the following new 
subparagraphs:
                    ``(D) Rule where voting stock is publicly traded.--
                            ``(i) In general.--If--
                                    ``(I) the private foundation and 
                                all disqualified persons together do 
                                not own more than the applicable 
                                percentage of the voting stock and not 
                                more than the applicable percentage in 
                                value of all outstanding shares of all 
                                classes of stock of an incorporated 
                                business enterprise,
                                    ``(II) the voting stock owned by 
                                the private foundation and all 
                                disqualified persons together is stock 
                                for which market quotations are readily 
                                available on an established securities 
                                market, and
                                    ``(III) the requirements of clause 
                                (ii) are met,
                        then subparagraph (A) shall be applied by 
                        substituting `the applicable percentage' for 
                        `20 percent'.
                            ``(ii) Requirements to be met.--The 
                        requirements of this clause are met during any 
                        taxable year--
                                    ``(I) in which disqualified persons 
                                with respect to the private foundation 
                                do not receive compensation (as an 
                                employee or otherwise) from the 
                                corporation or engage in any act with 
                                such corporation which would constitute 
                                self-dealing within the meaning of 
                                section 4941(d) if such corporation 
                                were a private foundation and if each 
                                such disqualified person were a 
                                disqualified person with respect to 
                                such corporation,
                                    ``(II) in which disqualified 
                                persons with respect to such private 
                                foundation do not own in the aggregate 
                                more than 2 percent of the voting stock 
                                and not more than 2 percent in value of 
                                all outstanding shares of all classes 
                                of stock in such corporation, and
                                    ``(III) for which there is 
                                submitted with the annual return of the 
                                private foundation for such year (filed 
                                within the time prescribed by law, 
                                including extensions, for filing such 
                                return) a certification which is signed 
                                by all the members of an audit 
                                committee of the Board of Directors of 
                                such corporation consisting of a 
                                majority of persons who are not 
                                disqualified persons with respect to 
                                such private foundation and which 
                                certifies that such members, after due 
                                inquiry, are not aware that any 
                                disqualified person has received 
                                compensation from such corporation or 
                                has engaged in any act with such 
                                corporation that would constitute self-
                                dealing within the meaning of section 
                                4941(d) if such corporation were a 
                                private foundation and if each such 
                                disqualified person were a disqualified 
                                person with respect to such 
                                corporation.
                        For purposes of this clause, the fact that a 
                        disqualified person has received compensation 
                        from such corporation or has engaged in any act 
                        with such corporation which would constitute 
                        self-dealing within the meaning of section 
                        4941(d) shall be disregarded if such receipt or 
                        act is corrected not later than the due date 
                        (not including extensions thereof) for the 
                        filing of the private foundation's annual 
                        return for the year in which the receipt or act 
                        occurs and on the terms that would be necessary 
                        to correct such receipt or act and thereby 
                        avoid imposition of tax under section 4941(b).
                    ``(E) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage shall be 
                determined under the following table:

                ``For taxable year--
                                         The applicable percentage is--
                    2007...................................         40 
                    2008 and thereafter....................      49.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to foundations established by bequest of decedents dying after December 
31, 2006.

SEC. 811. CERTAIN COSTS OF PRIVATE FOUNDATION IN REMOVING HAZARDOUS 
              SUBSTANCES TREATED AS QUALIFYING DISTRIBUTION.

    (a) In General.--In the case of any taxable year beginning after 
December 31, 1999, the distributable amount of a private foundation for 
such taxable year for purposes of section 4942 of the Internal Revenue 
Code of 1986 shall be reduced (but not below zero) by any amount paid 
or incurred (or set aside) by such private foundation for the 
investigatory costs and direct costs of removal or taking remedial 
action with respect to a hazardous substance released at a facility 
which was owned or operated by such private foundation.
    (b) Limitations.--Subsection (a) shall only apply to costs--
            (1) incurred with respect to hazardous substances disposed 
        of at a facility owned or operated by the private foundation 
        but only if--
                    (A) such facility was transferred to such 
                foundation by bequest before December 11, 1980, and
                    (B) the active operation of such facility by such 
                foundation was terminated before December 12, 1980, and
            (2) which were not incurred pursuant to a pending order 
        issued to the private foundation unilaterally by the President 
        or the President's assignee under section 106 of the 
        Comprehensive Environmental Response, Compensation, and 
        Liability Act of 1980 (42 U.S.C. 9606), or pursuant to a 
        nonconsensual judgment against the private foundation issued in 
        a governmental cost recovery action under section 107 of such 
        Act (42 U.S.C. 9607).
    (c) Hazardous Substance.--For purposes of this section, the term 
``hazardous substance'' has the meaning given such term by section 
101(14) of the Comprehensive Environmental Response, Compensation, and 
Liability Act of 1980 (42 U.S.C. 9601(14)).

SEC. 812. HOLDING PERIOD REDUCED TO 12 MONTHS FOR PURPOSES OF 
              DETERMINING WHETHER HORSES ARE SECTION 1231 ASSETS.

    (a) In General.--Subparagraph (A) of section 1231(b)(3) (relating 
to definition of property used in the trade or business) is amended by 
striking ``and horses''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2000.

                   TITLE IX--INTERNATIONAL TAX RELIEF

SEC. 901. INTEREST ALLOCATION RULES.

    (a) Election To Allocate Interest on a Worldwide Basis.--Subsection 
(e) of section 864 (relating to rules for allocating interest, etc.) is 
amended by redesignating paragraphs (6) and (7) as paragraphs (7) and 
(8), respectively, and by inserting after paragraph (5) the following 
new paragraph:
            ``(6) Election to allocate interest on a worldwide basis.--
                    ``(A) In general.--Except as provided in this 
                paragraph, this subsection shall be applied by treating 
                a worldwide affiliated group for which an election is 
                in effect under this paragraph as an affiliated group 
                solely for purposes of allocating and apportioning 
                interest expense of each domestic corporation which is 
                a member of such group.
                    ``(B) Worldwide affiliated group.--For purposes of 
                this paragraph, the term `worldwide affiliated group' 
                means the group of corporations which consists of--
                            ``(i) all corporations in an affiliated 
                        group (as defined in paragraph (5)(A), except 
                        that section 1504 shall also be applied without 
                        regard to subsection (b)(2) thereof), and
                            ``(ii) all foreign corporations (other than 
                        a FSC, as defined in section 922(a)) which 
                        would be a member of such affiliated group if 
                        paragraph (3) of section 1504 (b) did not 
                        apply.
                    ``(C) Treatment of worldwide affiliated group.--For 
                purposes of applying paragraph (1), the taxable income 
                of the domestic members of a worldwide affiliated group 
                from sources outside the United States shall be 
                determined by allocating and apportioning the interest 
                expense of such domestic members to such income in an 
                amount equal to the excess (if any) of--
                            ``(i) the total interest expense of the 
                        worldwide affiliated group multiplied by the 
                        ratio which the foreign assets of the worldwide 
                        affiliated group bears to all the assets of the 
                        worldwide affiliated group, over
                            ``(ii) the interest expense of all foreign 
                        corporations which are members of the worldwide 
                        affiliated group to the extent such interest 
                        expense of such foreign corporations would have 
                        been allocated and apportioned to foreign 
                        source income if this subsection were applied 
                        to a group consisting of all the foreign 
                        corporations in such worldwide affiliated 
                        group.
                    ``(D) Election.--An election under this paragraph 
                with respect to any worldwide affiliated group may be 
                made only by the common parent of the affiliated group 
                referred to in subparagraph (B)(i) and may be made only 
                for the first taxable year beginning after December 31, 
                2004, in which a worldwide affiliated group exists 
                which includes such affiliated group and at least 1 
                corporation described in subparagraph (B)(ii). Such an 
                election, once made, shall apply to such common parent 
                and all other corporations which are members of such 
                worldwide affiliated group for such taxable year and 
                all subsequent years unless revoked with the consent of 
                the Secretary.''.
    (b) Election To Expand Financial Institution Group of Worldwide 
Group.--Section 864 is amended by redesignating subsection (f) as 
subsection (g) and by inserting after subsection (e) the following new 
subsection:
    ``(f) Election To Expand Financial Institution Group of Worldwide 
Group.--
            ``(1) In general.--If a worldwide affiliated group for 
        which an election under subsection (e)(6) is in effect elects 
        the application of this subsection, all financial corporations 
        which--
                    ``(A) are members of such worldwide affiliated 
                group, but
                    ``(B) are not corporations described in subsection 
                (e)(5)(C),
        shall be treated as described in subsection (e)(5)(C) for 
        purposes of applying subsection (e)(5)(B). Subsection (e) shall 
        apply to any such group in the same manner as subsection (e) 
        applies to the pre-election worldwide affiliated group of which 
        such group is a part.
            ``(2) Financial corporation.--For purposes of this 
        subsection, the term `financial corporation' means any 
        corporation if at least 80 percent of its gross income is 
        income described in section 904(d)(2)(C)(ii) and the 
        regulations thereunder which is derived from transactions with 
        persons not bearing a relationship described in section 267(b) 
        or 707(b)(1) to the corporation.
            ``(3) Antiabuse rules.--In the case of a corporation which 
        is a member of an electing financial institution group, to the 
        extent that such corporation--
                    ``(A) distributes dividends or makes other 
                distributions with respect to its stock after the date 
                of the enactment of this paragraph to any member of the 
                pre-election worldwide affiliated group (other than to 
                a member of the electing financial institution group) 
                in excess of the greater of--
                            ``(i) its average annual dividend 
                        (expressed as a percentage of current earnings 
                        and profits) during the 5-taxable-year period 
                        ending with the taxable year preceding the 
                        taxable year, or
                            ``(ii) 25 percent of its average annual 
                        earnings and profits for such 5 taxable year 
                        period, or
                    ``(B) deals with any person in any manner not 
                clearly reflecting the income of the corporation (as 
                determined under principles similar to the principles 
                of section 482),
        an amount of indebtedness of the electing financial institution 
        group equal to the excess distribution or the understatement or 
        overstatement of income, as the case may be, shall be 
        recharacterized (for the taxable year and subsequent taxable 
        years) for purposes of this subsection as indebtedness of the 
        worldwide affiliated group (excluding the electing financial 
        institution group). If a corporation has not been in existence 
        for 5 taxable years, this subparagraph shall be applied with 
        respect to the period it was in existence.
            ``(4) Election.--An election under this subsection with 
        respect to any financial institution group may be made only by 
        the common parent of the pre-election worldwide affiliated 
        group and may be made only for the first taxable year beginning 
        after December 31, 2004, in which such affiliated group 
        includes 1 or more financial corporations described in 
        paragraph (1)(B). Such an election, once made, shall apply to 
        all financial corporations which are members of the electing 
        financial institution group for such taxable year and all 
        subsequent years unless revoked with the consent of the 
        Secretary.
            ``(5) Definitions relating to groups.--For purposes of this 
        subsection--
                    ``(A) Pre-election worldwide affiliated group.--The 
                term `pre-election worldwide affiliated group' means, 
                with respect to a corporation, the worldwide affiliated 
                group of which such corporation would (but for an 
                election under this subsection) be a member for 
                purposes of applying subsection (e).
                    ``(B) Electing financial institution group.--The 
                term `electing financial institution group' means the 
                group of corporations to which subsection (e) applies 
                separately by reason of the application of subsection 
                (e)(5)(B) and which includes financial corporations by 
                reason of an election under paragraph (1).
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as may be appropriate to carry out this subsection 
        and subsection (e), including regulations--
                    ``(A) providing for the direct allocation of 
                interest expense in other circumstances where such 
                allocation would be appropriate to carry out the 
                purposes of this subsection,
                    ``(B) preventing assets or interest expense from 
                being taken into account more than once, and
                    ``(C) dealing with changes in members of any group 
                (through acquisitions or otherwise) treated under this 
                subsection as an affiliated group for purposes of 
                subsection (e).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 902. LOOK-THRU RULES TO APPLY TO DIVIDENDS FROM NONCONTROLLED 
              SECTION 902 CORPORATIONS.

    (a) In General.--Section 904(d)(4) (relating to application of 
look-thru rules to dividends from noncontrolled section 902 
corporations) is amended to read as follows:
            ``(4) Look-thru applies to dividends from noncontrolled 
        section 902 corporations.--
                    ``(A) In general.--For purposes of this subsection, 
                any dividend from a noncontrolled section 902 
                corporation with respect to the taxpayer shall be 
                treated as income in a separate category in proportion 
                to the ratio of--
                            ``(i) the portion of earnings and profits 
                        attributable to income in such category, to
                            ``(ii) the total amount of earnings and 
                        profits.
                    ``(B) Special rules.--For purposes of this 
                paragraph--
                            ``(i) In general.--Rules similar to the 
                        rules of paragraph (3)(F) shall apply, except 
                        that the term `separate category' shall include 
                        the category of income described in paragraph 
                        (1)(I).
                            ``(ii) Earnings and profits.--
                                    ``(I) In general.--The rules of 
                                section 316 shall apply.
                                    ``(II) Regulations.--The Secretary 
                                may prescribe regulations regarding the 
                                treatment of distributions out of 
                                earnings and profits for periods before 
                                the taxpayer's acquisition of the stock 
                                to which the distributions relate.
                            ``(iii) Dividends not allocable to separate 
                        category.--The portion of any dividend from a 
                        noncontrolled section 902 corporation which is 
                        not treated as income in a separate category 
                        under subparagraph (A) shall be treated as a 
                        dividend to which subparagraph (A) does not 
                        apply.
                            ``(iv) Look-thru with respect to 
                        carryforwards of credit.--Rules similar to 
                        subparagraph (A) also shall apply to any 
                        carryforward under subsection (c) from a 
                        taxable year beginning before January 1, 2005, 
                        of tax allocable to a dividend from a 
                        noncontrolled section 902 corporation with 
                        respect to the taxpayer.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (E) of section 904(d)(1), as in effect 
        both before and after the amendments made by section 1105 of 
        the Taxpayer Relief Act of 1997, is hereby repealed.
            (2) Section 904(d)(2)(C)(iii), as so in effect, is amended 
        by striking subclause (II) and by redesignating subclause (III) 
        as subclause (II).
            (3) The last sentence of section 904(d)(2)(D), as so in 
        effect, is amended to read as follows: ``Such term does not 
        include any financial services income.''.
            (4) Section 904(d)(2)(E) is amended by striking clauses 
        (ii) and (iv) and by redesignating clause (iii) as clause (ii).
            (5) Section 904(d)(3)(F) is amended by striking ``(D), or 
        (E)'' and inserting ``or (D)''.
            (6) Section 864(d)(5)(A)(i) is amended by striking 
        ``(C)(iii)(III)'' and inserting ``(C)(iii)(II)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE TRANSPORTATION INCOME.

    (a) In General.--Section 954(g)(1) (defining foreign base company 
oil related income) is amended by striking ``or'' at the end of 
subparagraph (A), by striking the period at the end of subparagraph (B) 
and inserting ``, or'', and by inserting after subparagraph (B) the 
following new subparagraph:
                    ``(C) the pipeline transportation of oil or gas 
                within such foreign country.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of controlled foreign corporations beginning after 
December 31, 2002, and taxable years of United States shareholders with 
or within which such taxable years of controlled foreign corporations 
end.

SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANSMISSION OF HIGH 
              VOLTAGE ELECTRICITY.

    (a) In General.--Paragraph (2) of section 954(e) (relating to 
foreign base company services income) is amended by striking ``or'' at 
the end of subparagraph (A), by striking the period at the end of 
subparagraph (B) and inserting ``, or'', and by inserting after 
subparagraph (B) the following new subparagraph:
                    ``(C) the transmission of high voltage 
                electricity.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of controlled foreign corporations beginning after 
December 31, 2002, and taxable years of United States shareholders with 
or within which such taxable years of controlled foreign corporations 
end.

SEC. 905. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDENTIAL TAXPAYER 
              INFORMATION.

    (a) In General.--
            (1) Treatment as return information.--Paragraph (2) of 
        section 6103(b) (defining return information) is amended by 
        striking ``and'' at the end of subparagraph (A), by inserting 
        ``and'' at the end of subparagraph (B), and by inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) any advance pricing agreement entered into by 
                a taxpayer and the Secretary and any background 
                information related to such agreement or any 
                application for an advance pricing agreement,''.
            (2) Exception from public inspection as written 
        determination.--Paragraph (1) of section 6110(b) (defining 
        written determination) is amended by adding at the end the 
        following new sentence: ``Such term shall not include any 
        advance pricing agreement entered into by a taxpayer and the 
        Secretary and any background information related to such 
        agreement or any application for an advance pricing 
        agreement.''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.
    (b) Annual Report Regarding Advance Pricing Agreements.--
            (1) In general.--Not later than 90 days after the end of 
        each calendar year, the Secretary of the Treasury shall prepare 
        and publish a report regarding advance pricing agreements.
            (2) Contents of report.--The report shall include the 
        following for the calendar year to which such report relates:
                    (A) Information about the structure, composition, 
                and operation of the advance pricing agreement program 
                office.
                    (B) A copy of each model advance pricing agreement.
                    (C) The number of--
                            (i) applications filed during such calendar 
                        year for advanced pricing agreements;
                            (ii) advance pricing agreements executed 
                        cumulatively to date and during such calendar 
                        year;
                            (iii) renewals of advanced pricing 
                        agreements issued;
                            (iv) pending requests for advance pricing 
                        agreements;
                            (v) pending renewals of advance pricing 
                        agreements;
                            (vi) for each of the items in clauses (ii) 
                        through (v), the number that are unilateral, 
                        bilateral, and multilateral, respectively;
                            (vii) advance pricing agreements revoked or 
                        canceled, and the number of withdrawals from 
                        the advance pricing agreement program; and
                            (viii) advanced pricing agreements 
                        finalized or renewed by industry.
                    (D) General descriptions of--
                            (i) the nature of the relationships between 
                        the related organizations, trades, or 
                        businesses covered by advance pricing 
                        agreements;
                            (ii) the covered transactions and the 
                        business functions performed and risks assumed 
                        by such organizations, trades, or businesses;
                            (iii) the related organizations, trades, or 
                        businesses whose prices or results are tested 
                        to determine compliance with transfer pricing 
                        methodologies prescribed in advanced pricing 
                        agreements;
                            (iv) methodologies used to evaluate tested 
                        parties and transactions and the circumstances 
                        leading to the use of those methodologies;
                            (v) critical assumptions made and sources 
                        of comparables used;
                            (vi) comparable selection criteria and the 
                        rationale used in determining such criteria;
                            (vii) the nature of adjustments to 
                        comparables or tested parties;
                            (viii) the nature of any ranges agreed to, 
                        including information regarding when no range 
                        was used and why, when interquartile ranges 
                        were used, and when there was a statistical 
                        narrowing of the comparables;
                            (ix) adjustment mechanisms provided to 
                        rectify results that fall outside of the agreed 
                        upon advance pricing agreement range;
                            (x) the various term lengths for advance 
                        pricing agreements, including rollback years, 
                        and the number of advance pricing agreements 
                        with each such term length;
                            (xi) the nature of documentation required; 
                        and
                            (xii) approaches for sharing of currency or 
                        other risks.
                    (E) Statistics regarding the amount of time taken 
                to complete new and renewal advance pricing agreements.
            (3) Confidentiality.--The reports required by this 
        subsection shall be treated as authorized by the Internal 
        Revenue Code of 1986 for purposes of section 6103 of such Code, 
        but the reports shall not include information--
                    (A) which would not be permitted to be disclosed 
                under section 6110(c) of such Code if such report were 
                a written determination as defined in section 6110 of 
                such Code, or
                    (B) which can be associated with, or otherwise 
                identify, directly or indirectly, a particular 
                taxpayer.
            (4) First report.--The report for calendar year 1999 shall 
        include prior calendar years after 1990.
    (c) User Fee.--Section 7527, as added by this Act, is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:
    ``(c) Advance Pricing Agreements.--
            ``(1) In general.--In addition to any fee otherwise imposed 
        under this section, the fee imposed for requests for advance 
        pricing agreements shall be increased by $500.
            ``(2) Reduced fee for small businesses.--The Secretary 
        shall provide an appropriate reduction in the amount imposed by 
        reason of paragraph (1) for requests for advance pricing 
        agreements for small businesses.''.
    (d) Regulations.--The Secretary of the Treasury or the Secretary's 
delegate shall prescribe such regulations as may be necessary or 
appropriate to carry out the purposes of section 6103(b)(2)(C), and the 
last sentence of section 6110(b)(1), of the Internal Revenue Code of 
1986, as added by this section.

SEC. 906. AIRLINE MILEAGE AWARDS TO CERTAIN FOREIGN PERSONS.

    (a) In General.--The last sentence of section 4261(e)(3)(C) 
(relating to regulations) is amended by inserting ``and mileage awards 
which are issued to individuals whose mailing addresses on record with 
the person providing the right to air transportation are outside the 
United States'' before the period at the end thereof.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid after December 31, 2004.

SEC. 907. REPEAL OF FOREIGN TAX CREDIT LIMITATION UNDER ALTERNATIVE 
              MINIMUM TAX.

    (a) In General.--Section 59(a) (relating to alternative minimum tax 
foreign tax credit) is amended by striking paragraph (2) and by 
redesignating paragraphs (3) and (4) as paragraphs (2) and (3), 
respectively.
    (b) Conforming Amendment.--Section 53(d)(1)(B)(i)(II) is amended by 
striking ``and if section 59(a)(2) did not apply''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 908. TREATMENT OF MILITARY PROPERTY OF FOREIGN SALES CORPORATIONS.

    (a) In General.--Section 923(a) (defining exempt foreign trade 
income) is amended by striking paragraph (5) and by redesignating 
paragraph (6) as paragraph (5).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2004.

         TITLE X--HOUSING AND REAL ESTATE TAX RELIEF PROVISIONS

                 Subtitle A--Low-Income Housing Credit

SEC. 1001. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING CREDIT.

    (a) In General.--Clauses (i) and (ii) of section 42(h)(3)(C) 
(relating to State housing credit ceiling) are amended to read as 
follows:
                            ``(i) the unused State housing credit 
                        ceiling (if any) of such State for the 
                        preceding calendar year,
                            ``(ii) the greater of--
                                    ``(I) the applicable amount under 
                                subparagraph (H) multiplied by the 
                                State population, or
                                    ``(II) $2,000,000,''.
    (b) Applicable Amount.--Paragraph (3) of section 42(h) (relating to 
housing credit dollar amount for agencies) is amended by adding at the 
end the following new subparagraph:
                    ``(H) Applicable amount of state ceiling.--For 
                purposes of subparagraph (C)(ii), the applicable amount 
                shall be determined under the following table:

                ``For calendar year--
                                             The applicable amount is--
                    2001...................................      $1.35 
                    2002...................................       1.45 
                    2003...................................       1.55 
                    2004...................................       1.65 
                    2005 and thereafter....................    1.75.''.
    (c) Adjustment of State Ceiling for Increases in Cost-of-Living.--
Paragraph (3) of section 42(h) (relating to housing credit dollar 
amount for agencies), as amended by subsection (b), is amended by 
adding at the end the following new subparagraph:
                    ``(I) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 2005, the $1.75 amount in 
                        subparagraph (H) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year by 
                                substituting `calendar year 2004' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding.--Any increase under clause 
                        (i) which is not a multiple of 5 cents shall be 
                        rounded to the next lowest multiple of 5 
                        cents.''.
    (d) Conforming Amendments.--
            (1) Section 42(h)(3)(C), as amended by subsection (a), is 
        amended--
                    (A) by striking ``clause (ii)'' in the matter 
                following clause (iv) and inserting ``clause (i)'', and
                    (B) by striking ``clauses (i)'' in the matter 
                following clause (iv) and inserting ``clauses (ii)''.
            (2) Section 42(h)(3)(D)(ii) is amended--
                    (A) by striking ``subparagraph (C)(ii)'' and 
                inserting ``subparagraph (C)(i)'', and
                    (B) by striking ``clauses (i)'' in subclause (II) 
                and inserting ``clauses (ii)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to calendar years after 2000.

                       Subtitle B--Historic Homes

SEC. 1011. TAX CREDIT FOR RENOVATING HISTORIC HOMES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 25A the following new section:

``SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION CREDIT.

    ``(a) General Rule.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to 20 percent of the qualified 
rehabilitation expenditures made by the taxpayer with respect to a 
qualified historic home.
    ``(b) Dollar Limitation.--The credit allowed by subsection (a) with 
respect to any residence of a taxpayer shall not exceed $20,000 
($10,000 in the case of a married individual filing a separate return).
    ``(c) Qualified Rehabilitation Expenditure.--For purposes of this 
section--
            ``(1) In general.--The term `qualified rehabilitation 
        expenditure' means any amount properly chargeable to capital 
        account--
                    ``(A) in connection with the certified 
                rehabilitation of a qualified historic home, and
                    ``(B) for property for which depreciation would be 
                allowable under section 168 if the qualified historic 
                home were used in a trade or business.
            ``(2) Certain expenditures not included.--
                    ``(A) Exterior.--Such term shall not include any 
                expenditure in connection with the rehabilitation of a 
                building unless at least 5 percent of the total 
                expenditures made in the rehabilitation process are 
                allocable to the rehabilitation of the exterior of such 
                building.
                    ``(B) Other rules to apply.--Rules similar to the 
                rules of clauses (ii) and (iii) of section 47(c)(2)(B) 
                shall apply.
            ``(3) Mixed use or multifamily building.--If only a portion 
        of a building is used as the principal residence of the 
        taxpayer, only qualified rehabilitation expenditures which are 
        properly allocable to such portion shall be taken into account 
        under this section.
    ``(d) Certified Rehabilitation.--For purposes of this section:
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `certified rehabilitation' has the meaning 
        given such term by section 47(c)(2)(C).
            ``(2) Factors to be considered in the case of targeted area 
        residences, etc.--
                    ``(A) In general.--For purposes of applying section 
                47(c)(2)(C) under this section with respect to the 
                rehabilitation of a building to which this paragraph 
                applies, consideration shall be given to--
                            ``(i) the feasibility of preserving 
                        existing architectural and design elements of 
                        the interior of such building,
                            ``(ii) the risk of further deterioration or 
                        demolition of such building in the event that 
                        certification is denied because of the failure 
                        to preserve such interior elements, and
                            ``(iii) the effects of such deterioration 
                        or demolition on neighboring historic 
                        properties.
                    ``(B) Buildings to which this paragraph applies.--
                This paragraph shall apply with respect to any 
                building--
                            ``(i) any part of which is a targeted area 
                        residence within the meaning of section 
                        143(j)(1), or
                            ``(ii) which is located within an 
                        enterprise community or empowerment zone as 
                        designated under section 1391,
                but shall not apply with respect to any building which 
                is listed in the National Register.
            ``(3) Approved state program.--The term `certified 
        rehabilitation' includes a certification made by--
                    ``(A) a State Historic Preservation Officer who 
                administers a State Historic Preservation Program 
                approved by the Secretary of the Interior pursuant to 
                section 101(b)(1) of the National Historic Preservation 
                Act, as in effect on July 21, 1999, or
                    ``(B) a local government, certified pursuant to 
                section 101(c)(1) of the National Historic Preservation 
                Act, as in effect on July 21, 1999, and authorized by a 
                State Historic Preservation Officer, or the Secretary 
                of the Interior where there is no approved State 
                program),
        subject to such terms and conditions as may be specified by the 
        Secretary of the Interior for the rehabilitation of buildings 
        within the jurisdiction of such officer (or local government) 
        for purposes of this section.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified historic home.--The term `qualified 
        historic home' means a certified historic structure--
                    ``(A) which has been substantially rehabilitated, 
                and
                    ``(B) which (or any portion of which)--
                            ``(i) is owned by the taxpayer, and
                            ``(ii) is used (or will, within a 
                        reasonable period, be used) by such taxpayer as 
                        his principal residence.
            ``(2) Substantially rehabilitated.--The term `substantially 
        rehabilitated' has the meaning given such term by section 
        47(c)(1)(C); except that, in the case of any building described 
        in subsection (d)(2), clause (i)(I) thereof shall not apply.
            ``(3) Principal residence.--The term `principal residence' 
        has the same meaning as when used in section 121.
            ``(4) Certified historic structure.--
                    ``(A) In general.--The term `certified historic 
                structure' means any building (and its structural 
                components) which--
                            ``(i) is listed in the National Register, 
                        or
                            ``(ii) is located in a registered historic 
                        district (as defined in section 47(c)(3)(B)) 
                        within which only qualified census tracts (or 
                        portions thereof) are located, and is certified 
                        by the Secretary of the Interior to the 
                        Secretary as being of historic significance to 
                        the district.
                    ``(B) Certain structures included.--Such term 
                includes any building (and its structural components) 
                which is designated as being of historic significance 
                under a statute of a State or local government, if such 
                statute is certified by the Secretary of the Interior 
                to the Secretary as containing criteria which will 
                substantially achieve the purpose of preserving and 
                rehabilitating buildings of historic significance.
                    ``(C) Qualified census tracts.--For purposes of 
                subparagraph (A)(ii)--
                            ``(i) In general.--The term `qualified 
                        census tract' means a census tract in which the 
                        median family income is less than twice the 
                        statewide median family income.
                            ``(ii) Data used.--The determination under 
                        clause (i) shall be made on the basis of the 
                        most recent decennial census for which data are 
                        available.
            ``(5) Rehabilitation not complete before certification.--A 
        rehabilitation shall not be treated as complete before the date 
        of the certification referred to in subsection (d).
            ``(6) Lessees.--A taxpayer who leases his principal 
        residence shall, for purposes of this section, be treated as 
        the owner thereof if the remaining term of the lease (as of the 
        date determined under regulations prescribed by the Secretary) 
        is not less than such minimum period as the regulations 
        require.
            ``(7) Tenant-stockholder in cooperative housing 
        corporation.--If the taxpayer holds stock as a tenant-
        stockholder (as defined in section 216) in a cooperative 
        housing corporation (as defined in such section), such 
        stockholder shall be treated as owning the house or apartment 
        which the taxpayer is entitled to occupy as such stockholder.
            ``(8) Allocation of expenditures relating to exterior of 
        building containing cooperative or condominium units.--The 
        percentage of the total expenditures made in the rehabilitation 
        of a building containing cooperative or condominium residential 
        units allocated to the rehabilitation of the exterior of the 
        building shall be attributed proportionately to each 
        cooperative or condominium residential unit in such building 
        for which a credit under this section is claimed.
    ``(f) When Expenditures Taken Into Account.--In the case of a 
building other than a building to which subsection (g) applies, 
qualified rehabilitation expenditures shall be treated for purposes of 
this section as made on the date the rehabilitation is completed.
    ``(g) Allowance of Credit for Purchase of Rehabilitated Historic 
Home.--
            ``(1) In general.--In the case of a qualified purchased 
        historic home, the taxpayer shall be treated as having made (on 
        the date of purchase) the qualified rehabilitation expenditures 
        made by the seller of such home. For purposes of the preceding 
        sentence, expenditures made by the seller shall be deemed to be 
        qualified rehabilitation expenditures if such expenditures, if 
        made by the purchaser, would be qualified rehabilitation 
        expenditures.
            ``(2) Qualified purchased historic home.--For purposes of 
        this subsection, the term `qualified purchased historic home' 
        means any substantially rehabilitated certified historic 
        structure purchased by the taxpayer if--
                    ``(A) the taxpayer is the first purchaser of such 
                structure after the date rehabilitation is completed, 
                and the purchase occurs within 5 years after such date,
                    ``(B) the structure (or a portion thereof) will, 
                within a reasonable period, be the principal residence 
                of the taxpayer,
                    ``(C) no credit was allowed to the seller under 
                this section or section 47 with respect to such 
                rehabilitation, and
                    ``(D) the taxpayer is furnished with such 
                information as the Secretary determines is necessary to 
                determine the credit under this subsection.
    ``(h) Historic Rehabilitation Mortgage Credit Certificate.--
            ``(1) In general.--The taxpayer may elect, in lieu of the 
        credit otherwise allowable under this section, to receive a 
        historic rehabilitation mortgage credit certificate. An 
        election under this paragraph shall be made--
                    ``(A) in the case of a building to which subsection 
                (g) applies, at the time of purchase, or
                    ``(B) in any other case, at the time rehabilitation 
                is completed.
            ``(2) Historic rehabilitation mortgage credit 
        certificate.--For purposes of this subsection, the term 
        `historic rehabilitation mortgage credit certificate' means a 
        certificate--
                    ``(A) issued to the taxpayer, in accordance with 
                procedures prescribed by the Secretary, with respect to 
                a certified rehabilitation,
                    ``(B) the face amount of which shall be equal to 
                the credit which would (but for this subsection) be 
                allowable under subsection (a) to the taxpayer with 
                respect to such rehabilitation,
                    ``(C) which may only be transferred by the taxpayer 
                to a lending institution (including a non-depository 
                institution) in connection with a loan--
                            ``(i) that is secured by the building with 
                        respect to which the credit relates, and
                            ``(ii) the proceeds of which may not be 
                        used for any purpose other than the acquisition 
                        or rehabilitation of such building, and
                    ``(D) in exchange for which such lending 
                institution provides the taxpayer--
                            ``(i) a reduction in the rate of interest 
                        on the loan which results in interest payment 
                        reductions which are substantially equivalent 
                        on a present value basis to the face amount of 
                        such certificate, or
                            ``(ii) if the taxpayer so elects with 
                        respect to a specified amount of the face 
                        amount of such a certificate relating to a 
                        building--
                                    ``(I) which is a targeted area 
                                residence within the meaning of section 
                                143(j)(1), or
                                    ``(II) which is located in an 
                                enterprise community or empowerment 
                                zone as designated under section 1391,
                        a payment which is substantially equivalent to 
                        such specified amount to be used to reduce the 
                        taxpayer's cost of purchasing the building (and 
                        only the remainder of such face amount shall be 
                        taken into account under clause (i)).
            ``(3) Method of discounting.--The present value under 
        paragraph (2)(D)(i) shall be determined--
                    ``(A) for a period equal to the term of the loan 
                referred to in subparagraph (D)(i),
                    ``(B) by using the convention that any payment on 
                such loan in any taxable year within such period is 
                deemed to have been made on the last day of such 
                taxable year,
                    ``(C) by using a discount rate equal to 65 percent 
                of the average of the annual Federal mid-term rate and 
                the annual Federal long-term rate applicable under 
                section 1274(d)(1) to the month in which the taxpayer 
                makes an election under paragraph (1) and compounded 
                annually, and
                    ``(D) by assuming that the credit allowable under 
                this section for any year is received on the last day 
                of such year.
            ``(4) Use of certificate by lender.--The amount of the 
        credit specified in the certificate shall be allowed to the 
        lender only to offset the regular tax (as defined in section 
        55(c)) of such lender. The lender may carry forward all unused 
        amounts under this subsection until exhausted.
            ``(5) Historic rehabilitation mortgage credit certificate 
        not treated as taxable income.--Notwithstanding any other 
        provision of law, no benefit accruing to the taxpayer through 
        the use of an historic rehabilitation mortgage credit 
        certificate shall be treated as taxable income for purposes of 
        this title.
    ``(i) Recapture.--
            ``(1) In general.--If, before the end of the 5-year period 
        beginning on the date on which the rehabilitation of the 
        building is completed (or, if subsection (g) applies, the date 
        of purchase of such building by the taxpayer, or, if subsection 
        (h) applies, the date of the loan)--
                    ``(A) the taxpayer disposes of such taxpayer's 
                interest in such building, or
                    ``(B) such building ceases to be used as the 
                principal residence of the taxpayer,
        the taxpayer's tax imposed by this chapter for the taxable year 
        in which such disposition or cessation occurs shall be 
        increased by the recapture percentage of the credit allowed 
        under this section for all prior taxable years with respect to 
        such rehabilitation.
            ``(2) Recapture percentage.--For purposes of paragraph (1), 
        the recapture percentage shall be determined in accordance with 
        the following table:

``If the disposition or cessation   The recapture percentage is--
        occurs within--
    (i) One full year after the taxpayer becomes                   100 
        entitled to the credit.
    (ii) One full year after the close of the                       80 
        period described in clause (i).
    (iii) One full year after the close of the                      60 
        period described in clause (ii).
    (iv) One full year after the close of the                       40 
        period described in clause (iii).
    (v) One full year after the close of the                     20.''.
        period described in clause (iv).
    ``(j) Basis Adjustments.--For purposes of this subtitle, if a 
credit is allowed under this section for any expenditure with respect 
to any property (including any purchase under subsection (g) and any 
transfer under subsection (h)), the increase in the basis of such 
property which would (but for this subsection) result from such 
expenditure shall be reduced by the amount of the credit so allowed.
    ``(k) Denial of Double Benefit.--No credit shall be allowed under 
this section for any amount for which credit is allowed under section 
47.
    ``(l) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out the purposes of this section, 
including regulations where less than all of a building is used as a 
principal residence and where more than 1 taxpayer use the same 
dwelling unit as their principal residence.''.
    (b) Conforming Amendment.--Subsection (a) of section 1016 is 
amended by striking ``and'' at the end of paragraph (26), by striking 
the period at the end of paragraph (27) and inserting ``, and'', and by 
adding at the end the following new item:
            ``(28) to the extent provided in section 25B(j).''.
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 25A the following new item:

                              ``Sec. 25B. Historic homeownership 
                                        rehabilitation credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 1999.

    Subtitle C--Provisions Relating to Real Estate Investment Trusts

   PART I--TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT 
                              SUBSIDIARIES

SEC. 1021. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.

    (a) In General.--Subparagraph (B) of section 856(c)(4) is amended 
to read as follows:
                    ``(B)(i) not more than 25 percent of the value of 
                its total assets is represented by securities (other 
                than those includible under subparagraph (A)), and
                    ``(ii) except with respect to a taxable REIT 
                subsidiary and securities includible under subparagraph 
                (A)--
                            ``(I) not more than 5 percent of the value 
                        of its total assets is represented by 
                        securities of any 1 issuer,
                            ``(II) the trust does not hold securities 
                        possessing more than 10 percent of the total 
                        voting power of the outstanding securities of 
                        any 1 issuer, and
                            ``(III) the trust does not hold securities 
                        having a value of more than 10 percent of the 
                        total value of the outstanding securities of 
                        any 1 issuer.''.
    (b) Exception for Straight Debt Securities.--Subsection (c) of 
section 856 is amended by adding at the end the following new 
paragraph:
            ``(7) Straight debt safe harbor in applying paragraph 
        (4).--Securities of an issuer which are straight debt (as 
        defined in section 1361(c)(5) without regard to subparagraph 
        (B)(iii) thereof) shall not be taken into account in applying 
        paragraph (4)(B)(ii)(III) if--
                    ``(A) the issuer is an individual, or
                    ``(B) the only securities of such issuer which are 
                held by the trust or a taxable REIT subsidiary of the 
                trust are straight debt (as so defined), or
                    ``(C) the issuer is a partnership and the trust 
                holds at least a 20 percent profits interest in the 
                partnership.''.

SEC. 1022. TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT 
              SUBSIDIARIES.

    (a) Income From Taxable REIT Subsidiaries Not Treated as 
Impermissible Tenant Service Income.--Clause (i) of section 
856(d)(7)(C) (relating to exceptions to impermissible tenant service 
income) is amended by inserting ``or through a taxable REIT subsidiary 
of such trust'' after ``income''.
    (b) Certain Income From Taxable REIT Subsidiaries Not Excluded From 
Rents From Real Property.--
            (1) In general.--Subsection (d) of section 856 (relating to 
        rents from real property defined) is amended by adding at the 
        end the following new paragraphs:
            ``(8) Special rule for taxable reit subsidiaries.--For 
        purposes of this subsection, amounts paid to a real estate 
        investment trust by a taxable REIT subsidiary of such trust 
        shall not be excluded from rents from real property by reason 
        of paragraph (2)(B) if the requirements of subparagraph (A) or 
        (B) are met.
                    ``(A) Limited rental exception.--The requirements 
                of this subparagraph are met with respect to any 
                property if at least 90 percent of the leased space of 
                the property is rented to persons other than taxable 
                REIT subsidiaries of such trust and other than persons 
                described in section 856(d)(2)(B). The preceding 
                sentence shall apply only to the extent that the 
                amounts paid to the trust as rents from real property 
                (as defined in paragraph (1) without regard to 
                paragraph (2)(B)) from such property are substantially 
                comparable to such rents made by the other tenants of 
                the trust's property for comparable space.
                    ``(B) Exception for certain lodging facilities.--
                The requirements of this subparagraph are met with 
                respect to an interest in real property which is a 
                qualified lodging facility leased by the trust to a 
                taxable REIT subsidiary of the trust if the property is 
                operated on behalf of such subsidiary by a person who 
                is an eligible independent contractor.
            ``(9) Eligible independent contractor.--For purposes of 
        paragraph (8)(B)--
                    ``(A) In general.--The term `eligible independent 
                contractor' means, with respect to any qualified 
                lodging facility, any independent contractor if, at the 
                time such contractor enters into a management agreement 
                or other similar service contract with the taxable REIT 
                subsidiary to operate the facility, such contractor (or 
                any related person) is actively engaged in the trade or 
                business of operating qualified lodging facilities for 
                any person who is not a related person with respect to 
                the real estate investment trust or the taxable REIT 
                subsidiary.
                    ``(B) Special rules.--Solely for purposes of this 
                paragraph and paragraph (8)(B), a person shall not fail 
                to be treated as an independent contractor with respect 
                to any qualified lodging facility by reason of any of 
                the following:
                            ``(i) The taxable REIT subsidiary bears the 
                        expenses for the operation of the facility 
                        pursuant to the management agreement or other 
                        similar service contract.
                            ``(ii) The taxable REIT subsidiary receives 
                        the revenues from the operation of such 
                        facility, net of expenses for such operation 
                        and fees payable to the operator pursuant to 
                        such agreement or contract.
                            ``(iii) The real estate investment trust 
                        receives income from such person with respect 
                        to another property that is attributable to a 
                        lease of such other property to such person 
                        that was in effect as on the later of--
                                    ``(I) January 1, 1999, or
                                    ``(II) the earliest date that any 
                                taxable REIT subsidiary of such trust 
                                entered into a management agreement or 
                                other similar service contract with 
                                such person with respect to such 
                                qualified lodging facility.
                    ``(C) Renewals, etc., of existing leases.--For 
                purposes of subparagraph (B)(iii)--
                            ``(i) a lease shall be treated as in effect 
                        on January 1, 1999, without regard to its 
                        renewal after such date, so long as such 
                        renewal is pursuant to the terms of such lease 
                        as in effect on whichever of the dates under 
                        subparagraph (B)(iii) is the latest, and
                            ``(ii) a lease of a property entered into 
                        after whichever of the dates under subparagraph 
                        (B)(iii) is the latest shall be treated as in 
                        effect on such date if--
                                    ``(I) on such date, a lease of such 
                                property from the trust was in effect, 
                                and
                                    ``(II) under the terms of the new 
                                lease, such trust receives a 
                                substantially similar or lesser benefit 
                                in comparison to the lease referred to 
                                in subclause (I).
                    ``(D) Qualified lodging facility.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `qualified 
                        lodging facility' means any lodging facility 
                        unless wagering activities are conducted at or 
                        in connection with such facility by any person 
                        who is engaged in the business of accepting 
                        wagers and who is legally authorized to engage 
                        in such business at or in connection with such 
                        facility.
                            ``(ii) Lodging facility.--The term `lodging 
                        facility' means a hotel, motel, or other 
                        establishment more than one-half of the 
                        dwelling units in which are used on a transient 
                        basis.
                            ``(iii) Customary amenities and 
                        facilities.--The term `lodging facility' 
                        includes customary amenities and facilities 
                        operated as part of, or associated with, the 
                        lodging facility so long as such amenities and 
                        facilities are customary for other properties 
                        of a comparable size and class owned by other 
                        owners unrelated to such real estate investment 
                        trust.
                    ``(E) Operate includes manage.--References in this 
                paragraph to operating a property shall be treated as 
                including a reference to managing the property.
                    ``(F) Related person.--Persons shall be treated as 
                related to each other if such persons are treated as a 
                single employer under subsection (a) or (b) of section 
                52.''.
            (2) Conforming amendment.--Subparagraph (B) of section 
        856(d)(2) is amended by inserting ``except as provided in 
        paragraph (8),'' after ``(B)''.
            (3) Determining rents from real property.--
                    (A)(i) Paragraph (1) of section 856(d) is amended 
                by striking ``adjusted bases'' in each place that it 
                occurs and inserting ``fair market values'' in each 
                such place.
                    (ii) The amendment made by this paragraph shall 
                apply to taxable years beginning after December 31, 
                1999.
                    (B)(i) Clause (i) of section 856(d)(2)(B) is 
                amended by striking ``number'' and inserting ``value''.
                    (ii) The amendment made by this paragraph shall 
                apply to amounts received or accrued in taxable years 
                beginning after December 31, 1999, except for amounts 
                paid pursuant to leases in effect on July 12, 1999 or 
                pursuant to a binding contract in effect on such date 
                and at all times thereafter.

SEC. 1023. TAXABLE REIT SUBSIDIARY.

    (a) In General.--Section 856 is amended by adding at the end the 
following new subsection:
    ``(l) Taxable REIT Subsidiary.--For purposes of this part--
            ``(1) In general.--The term `taxable REIT subsidiary' 
        means, with respect to a real estate investment trust, a 
        corporation (other than a real estate investment trust) if--
                    ``(A) such trust directly or indirectly owns stock 
                in such corporation, and
                    ``(B) such trust and such corporation jointly elect 
                that such corporation shall be treated as a taxable 
                REIT subsidiary of such trust for purposes of this 
                part.
        Such an election, once made, shall be irrevocable unless both 
        such trust and corporation consent to its revocation. Such 
        election, and any revocation thereof, may be made without the 
        consent of the Secretary.
            ``(2) 35 percent ownership in another taxable reit 
        subsidiary.--The term `taxable REIT subsidiary' includes, with 
        respect to any real estate investment trust, any corporation 
        (other than a real estate investment trust) with respect to 
        which a taxable REIT subsidiary of such trust owns directly or 
        indirectly--
                    ``(A) securities possessing more than 35 percent of 
                the total voting power of the outstanding securities of 
                such corporation, or
                    ``(B) securities having a value of more than 35 
                percent of the total value of the outstanding 
                securities of such corporation.
        The preceding sentence shall not apply to a qualified REIT 
        subsidiary (as defined in subsection (i)(2)). The rule of 
        section 856(c)(7) shall apply for purposes of subparagraph (B).
            ``(3) Exceptions.--The term `taxable REIT subsidiary' shall 
        not include--
                    ``(A) any corporation which directly or indirectly 
                operates or manages a lodging facility or a health care 
                facility, and
                    ``(B) any corporation which directly or indirectly 
                provides to any other person (under a franchise, 
                license, or otherwise) rights to any brand name under 
                which any lodging facility or health care facility is 
                operated.
        Subparagraph (B) shall not apply to rights provided to an 
        eligible independent contractor to operate or manage a lodging 
        facility if such rights are held by such corporation as a 
        franchisee, licensee, or in a similar capacity and such lodging 
        facility is either owned by such corporation or is leased to 
        such corporation from the real estate investment trust.
            ``(4) Definitions.--For purposes of paragraph (3)--
                    ``(A) Lodging facility.--The term `lodging 
                facility' has the meaning given to such term by 
                paragraph (9)(D)(ii).
                    ``(B) Health care facility.--The term `health care 
                facility' has the meaning given to such term by 
                subsection (e)(6)(D)(ii).''.
    (b) Conforming Amendment.--Paragraph (2) of section 856(i) is 
amended by adding at the end the following new sentence: ``Such term 
shall not include a taxable REIT subsidiary.''.

SEC. 1024. LIMITATION ON EARNINGS STRIPPING.

    Paragraph (3) of section 163(j) (relating to limitation on 
deduction for interest on certain indebtedness) is amended by striking 
``and'' at the end of subparagraph (A), by striking the period at the 
end of subparagraph (B) and inserting ``, and'', and by adding at the 
end the following new subparagraph:
                    ``(C) any interest paid or accrued (directly or 
                indirectly) by a taxable REIT subsidiary (as defined in 
                section 856(l)) of a real estate investment trust to 
                such trust.''.

SEC. 1025. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.

    (a) In General.--Subsection (b) of section 857 (relating to method 
of taxation of real estate investment trusts and holders of shares or 
certificates of beneficial interest) is amended by redesignating 
paragraphs (7) and (8) as paragraphs (8) and (9), respectively, and by 
inserting after paragraph (6) the following new paragraph:
            ``(7) Income from redetermined rents, redetermined 
        deductions, and excess interest.--
                    ``(A) Imposition of tax.--There is hereby imposed 
                for each taxable year of the real estate investment 
                trust a tax equal to 100 percent of redetermined rents, 
                redetermined deductions, and excess interest.
                    ``(B) Redetermined rents.--
                            ``(i) In general.--The term `redetermined 
                        rents' means rents from real property (as 
                        defined in subsection 856(d)) the amount of 
                        which would (but for subparagraph (E)) be 
                        reduced on distribution, apportionment, or 
                        allocation under section 482 to clearly reflect 
                        income as a result of services furnished or 
                        rendered by a taxable REIT subsidiary of the 
                        real estate investment trust to a tenant of 
                        such trust.
                            ``(ii) Exception for certain services.--
                        Clause (i) shall not apply to amounts received 
                        directly or indirectly by a real estate 
                        investment trust for services described in 
                        paragraph (1)(B) or (7)(C)(i) of section 
                        856(d).
                            ``(iii) Exception for de minimis amounts.--
                        Clause (i) shall not apply to amounts described 
                        in section 856(d)(7)(A) with respect to a 
                        property to the extent such amounts do not 
                        exceed the one percent threshold described in 
                        section 856(d)(7)(B) with respect to such 
                        property.
                            ``(iv) Exception for comparably priced 
                        services.--Clause (i) shall not apply to any 
                        service rendered by a taxable REIT subsidiary 
                        of a real estate investment trust to a tenant 
                        of such trust if--
                                    ``(I) such subsidiary renders a 
                                significant amount of similar services 
                                to persons other than such trust and 
                                tenants of such trust who are unrelated 
                                (within the meaning of section 
                                856(d)(8)(F)) to such subsidiary, 
                                trust, and tenants, but
                                    ``(II) only to the extent the 
                                charge for such service so rendered is 
                                substantially comparable to the charge 
                                for the similar services rendered to 
                                persons referred to in subclause (I).
                            ``(v) Exception for certain separately 
                        charged services.--Clause (i) shall not apply 
                        to any service rendered by a taxable REIT 
                        subsidiary of a real estate investment trust to 
                        a tenant of such trust if--
                                    ``(I) the rents paid to the trust 
                                by tenants (leasing at least 25 percent 
                                of the net leasable space in the 
                                trust's property) who are not receiving 
                                such service from such subsidiary are 
                                substantially comparable to the rents 
                                paid by tenants leasing comparable 
                                space who are receiving such service 
                                from such subsidiary, and
                                    ``(II) the charge for such service 
                                from such subsidiary is separately 
                                stated.
                            ``(vi) Exception for certain services based 
                        on subsidiary's income from the services.--
                        Clause (i) shall not apply to any service 
                        rendered by a taxable REIT subsidiary of a real 
                        estate investment trust to a tenant of such 
                        trust if the gross income of such subsidiary 
                        from such service is not less than 150 percent 
                        of such subsidiary's direct cost in furnishing 
                        or rendering the service.
                            ``(vii) Exceptions granted by secretary.--
                        The Secretary may waive the tax otherwise 
                        imposed by subparagraph (A) if the trust 
                        establishes to the satisfaction of the 
                        Secretary that rents charged to tenants were 
                        established on an arms' length basis even 
                        though a taxable REIT subsidiary of the trust 
                        provided services to such tenants.
                    ``(C) Redetermined deductions.--The term 
                `redetermined deductions' means deductions (other than 
                redetermined rents) of a taxable REIT subsidiary of a 
                real estate investment trust if the amount of such 
                deductions would (but for subparagraph (E)) be 
                decreased on distribution, apportionment, or allocation 
                under section 482 to clearly reflect income as between 
                such subsidiary and such trust.
                    ``(D) Excess interest.--The term `excess interest' 
                means any deductions for interest payments by a taxable 
                REIT subsidiary of a real estate investment trust to 
                such trust to the extent that the interest payments are 
                in excess of a rate that is commercially reasonable.
                    ``(E) Coordination with section 482.--The 
                imposition of tax under subparagraph (A) shall be in 
                lieu of any distribution, apportionment, or allocation 
                under section 482.
                    ``(F) Regulatory authority.--The Secretary shall 
                prescribe such regulations as may be necessary or 
                appropriate to carry out the purposes of this 
                paragraph. Until the Secretary prescribes such 
                regulations, real estate investment trusts and their 
                taxable REIT subsidiaries may base their allocations on 
                any reasonable method.''.
    (b) Amount Subject to Tax Not Required To Be Distributed.--
Subparagraph (E) of section 857(b)(2) (relating to real estate 
investment trust taxable income) is amended by striking ``paragraph 
(5)'' and inserting ``paragraphs (5) and (7)''.

SEC. 1026. EFFECTIVE DATE.

    (a) In General.--The amendments made by this part shall apply to 
taxable years beginning after December 31, 2000.
    (b) Transitional Rules Related to Section 1021.--
            (1) Existing arrangements.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendment made by section 1021 
                shall not apply to a real estate investment trust with 
                respect to--
                            (i) securities of a corporation held 
                        directly or indirectly by such trust on July 
                        12, 1999,
                            (ii) securities of a corporation held by an 
                        entity on July 12, 1999, if such trust acquires 
                        control of such entity pursuant to a written 
                        binding contract in effect on such date and at 
                        all times thereafter before such acquisition,
                            (iii) securities received by such trust (or 
                        a successor) in exchange for, or with respect 
                        to, securities described in clause (i) or (ii) 
                        in a transaction in which gain or loss is not 
                        recognized, and
                            (iv) securities acquired directly or 
                        indirectly by such trust as part of a 
                        reorganization (as defined in section 368(a)(1) 
                        of the Internal Revenue Code of 1986) with 
                        respect to such trust if such securities are 
                        described in clause (i), (ii), or (iii) with 
                        respect to any other real estate investment 
                        trust.
                Notwithstanding the preceding sentence, such securities 
                shall be taken into account in determining whether such 
                trust fails to meet the requirements of section 
                856(c)(4)(B) of such Code (as amended by such 
                amendments) if such trust acquires or receives 
                securities to which the preceding sentence does not 
                apply.
                    (B) New trade or business or substantial new 
                assets.--Subparagraph (A) shall cease to apply to 
                securities of a corporation as of the first day after 
                July 12, 1999, on which such corporation engages in a 
                substantial new line of business, or acquires any 
                substantial asset, other than--
                            (i) pursuant to a binding contract in 
                        effect on such date and at all times thereafter 
                        before the acquisition of such asset,
                            (ii) in a transaction in which gain or loss 
                        is not recognized by reason of section 1031 or 
                        1033 of the Internal Revenue Code of 1986, or
                            (iii) in a reorganization (as so defined) 
                        with another corporation the securities of 
                        which are described in paragraph (1)(A) of this 
                        subsection.
                    (C) Limitation on transition rules.--Subparagraph 
                (A) shall cease to apply to securities of a corporation 
                held, acquired, or received, directly or indirectly, by 
                a real estate investment trust as of the first day 
                after July 12, 1999, on which such trust acquires any 
                additional securities of such corporation other than--
                            (i) pursuant to a binding contract in 
                        effect on such date and at all times 
                        thereafter, or
                            (ii) in a reorganization (as so defined) 
                        with another corporation the securities of 
                        which are described in paragraph (1)(A) of this 
                        subsection.
            (2) Tax-free conversion.--If--
                    (A) at the time of an election for a corporation to 
                become a taxable REIT subsidiary, the amendment made by 
                section 1021 does not apply to such corporation by 
                reason of paragraph (1), and
                    (B) such election first takes effect before January 
                1, 2004,
        such election shall be treated as a reorganization qualifying 
        under section 368(a)(1)(A) of such Code.

                       PART II--HEALTH CARE REITS

SEC. 1031. HEALTH CARE REITS.

    (a) Special Foreclosure Rule for Health Care Properties.--
Subsection (e) of section 856 (relating to special rules for 
foreclosure property) is amended by adding at the end the following new 
paragraph:
            ``(6) Special rule for qualified health care properties.--
        For purposes of this subsection--
                    ``(A) Acquisition at expiration of lease.--The term 
                `foreclosure property' shall include any qualified 
                health care property acquired by a real estate 
                investment trust as the result of the termination of a 
                lease of such property (other than a termination by 
                reason of a default, or the imminence of a default, on 
                the lease).
                    ``(B) Grace period.--In the case of a qualified 
                health care property which is foreclosure property 
                solely by reason of subparagraph (A), in lieu of 
                applying paragraphs (2) and (3)--
                            ``(i) the qualified health care property 
                        shall cease to be foreclosure property as of 
                        the close of the second taxable year after the 
                        taxable year in which such trust acquired such 
                        property, and
                            ``(ii) if the real estate investment trust 
                        establishes to the satisfaction of the 
                        Secretary that an extension of the grace period 
                        in clause (i) is necessary to the orderly 
                        leasing or liquidation of the trust's interest 
                        in such qualified health care property, the 
                        Secretary may grant 1 or more extensions of the 
                        grace period for such qualified health care 
                        property.
                Any such extension shall not extend the grace period 
                beyond the close of the 6th year after the taxable year 
                in which such trust acquired such qualified health care 
                property.
                    ``(C) Income from independent contractors.--For 
                purposes of applying paragraph (4)(C) with respect to 
                qualified health care property which is foreclosure 
                property by reason of subparagraph (A) or paragraph 
                (1), income derived or received by the trust from an 
                independent contractor shall be disregarded to the 
                extent such income is attributable to--
                            ``(i) any lease of property in effect on 
                        the date the real estate investment trust 
                        acquired the qualified health care property 
                        (without regard to its renewal after such date 
                        so long as such renewal is pursuant to the 
                        terms of such lease as in effect on such date), 
                        or
                            ``(ii) any lease of property entered into 
                        after such date if--
                                    ``(I) on such date, a lease of such 
                                property from the trust was in effect, 
                                and
                                    ``(II) under the terms of the new 
                                lease, such trust receives a 
                                substantially similar or lesser benefit 
                                in comparison to the lease referred to 
                                in subclause (I).
                    ``(D) Qualified health care property.--
                            ``(i) In general.--The term `qualified 
                        health care property' means any real property 
                        (including interests therein), and any personal 
                        property incident to such real property, 
                        which--
                                    ``(I) is a health care facility, or
                                    ``(II) is necessary or incidental 
                                to the use of a health care facility.
                            ``(ii) Health care facility.--For purposes 
                        of clause (i), the term `health care facility' 
                        means a hospital, nursing facility, assisted 
                        living facility, congregate care facility, 
                        qualified continuing care facility (as defined 
                        in section 7872(g)(4)), or other licensed 
                        facility which extends medical or nursing or 
                        ancillary services to patients and which, 
                        immediately before the termination, expiration, 
                        default, or breach of the lease of or mortgage 
                        secured by such facility, was operated by a 
                        provider of such services which was eligible 
                        for participation in the medicare program under 
                        title XVIII of the Social Security Act with 
                        respect to such facility.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2000.

      PART III--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES

SEC. 1041. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

    (a) Distribution Requirement.--Clauses (i) and (ii) of section 
857(a)(1)(A) (relating to requirements applicable to real estate 
investment trusts) are each amended by striking ``95 percent (90 
percent for taxable years beginning before January 1, 1980)'' and 
inserting ``90 percent''.
    (b) Imposition of Tax.--Clause (i) of section 857(b)(5)(A) 
(relating to imposition of tax in case of failure to meet certain 
requirements) is amended by striking ``95 percent (90 percent in the 
case of taxable years beginning before January 1, 1980)'' and inserting 
``90 percent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

 PART IV--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE 
                                 INCOME

SEC. 1051. CLARIFICATION OF EXCEPTION FOR INDEPENDENT OPERATORS.

    (a) In General.--Paragraph (3) of section 856(d) (relating to 
independent contractor defined) is amended by adding at the end the 
following flush sentence:
        ``In the event that any class of stock of either the real 
        estate investment trust or such person is regularly traded on 
        an established securities market, only persons who own, 
        directly or indirectly, more than 5 percent of such class of 
        stock shall be taken into account as owning any of the stock of 
        such class for purposes of applying the 35 percent limitation 
        set forth in subparagraph (B) (but all of the outstanding stock 
        of such class shall be considered outstanding in order to 
        compute the denominator for purpose of determining the 
        applicable percentage of ownership).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2000.

           PART V--MODIFICATION OF EARNINGS AND PROFITS RULES

SEC. 1061. MODIFICATION OF EARNINGS AND PROFITS RULES.

    (a) Rules for Determining Whether Regulated Investment Company Has 
Earnings and Profits From Non-RIC Year.--Subsection (c) of section 852 
is amended by adding at the end the following new paragraph:
            ``(3) Distributions to meet requirements of subsection 
        (a)(2)(B).--Any distribution which is made in order to comply 
        with the requirements of subsection (a)(2)(B)--
                    ``(A) shall be treated for purposes of this 
                subsection and subsection (a)(2)(B) as made from the 
                earliest earnings and profits accumulated in any 
                taxable year to which the provisions of this part did 
                not apply rather than the most recently accumulated 
                earnings and profits, and
                    ``(B) to the extent treated under subparagraph (A) 
                as made from accumulated earnings and profits, shall 
                not be treated as a distribution for purposes of 
                subsection (b)(2)(D) and section 855.''.
    (b) Clarification of Application of REIT Spillover Dividend Rules 
to Distributions To Meet Qualification Requirement.--Subparagraph (B) 
of section 857(d)(3) is amended by inserting before the period ``and 
section 858''.
    (c) Application of Deficiency Dividend Procedures.--Paragraph (1) 
of section 852(e) is amended by adding at the end the following new 
sentence: ``If the determination under subparagraph (A) is solely as a 
result of the failure to meet the requirements of subsection (a)(2), 
the preceding sentence shall also apply for purposes of applying 
subsection (a)(2) to the non-RIC year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2000.

          PART VI--STUDY RELATING TO TAXABLE REIT SUBSIDIARIES

SEC. 1071. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.

    The Commissioner of the Internal Revenue shall conduct a study to 
determine how many taxable REIT subsidiaries are in existence and the 
aggregate amount of taxes paid by such subsidiaries. The Secretary 
shall submit a report to the Congress describing the results of such 
study.

              Subtitle D--Private Activity Bond Volume Cap

SEC. 1081. INCREASE IN VOLUME CAP ON PRIVATE ACTIVITY BONDS.

    (a) In General.--The table contained in section 146(d)(2) (relating 
to per capita limit; aggregate limit) is amended by striking ``2002'', 
``2003'', ``2004'', ``2005'', ``2006'', and ``2007'' and inserting 
``2000'', ``2001'', ``2002'', ``2003'', ``2004'', and ``2005'', 
respectively.
    (b) Effective Date.--The amendments made by this section shall 
apply to calendar years after 2000.

            Subtitle E--Leasehold Improvements Depreciation

SEC. 1091. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN LEASEHOLD 
              IMPROVEMENTS.

    (a) 15-Year Recovery Period.--Subparagraph (E) of section 168(e)(3) 
(relating to 15-year property) 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) any qualified leasehold improvement 
                        property.''.
    (b) Qualified Leasehold Improvement Property.--Subsection (e) of 
section 168 is amended by adding at the end the following new 
paragraph:
            ``(6) Qualified leasehold improvement property.--
                    ``(A) In general.--The term `qualified leasehold 
                improvement property' means any improvement to an 
                interior portion of a building which is nonresidential 
                real property if--
                            ``(i) such improvement is made under or 
                        pursuant to a lease (as defined in subsection 
                        (h)(7))--
                                    ``(I) by the lessee (or any 
                                sublessee) of such portion, or
                                    ``(II) by the lessor of such 
                                portion,
                            ``(ii) the original use of such improvement 
                        begins with the lessee and after December 31, 
                        2002,
                            ``(iii) such portion is to be occupied 
                        exclusively by the lessee (or any sublessee) of 
                        such portion, and
                            ``(iv) such improvement is placed in 
                        service more than 3 years after the date the 
                        building was first placed in service.
                    ``(B) Certain improvements not included.--Such term 
                shall not include any improvement for which the 
                expenditure is attributable to--
                            ``(i) the enlargement of the building,
                            ``(ii) any elevator or escalator,
                            ``(iii) any structural component benefiting 
                        a common area, and
                            ``(iv) the internal structural framework of 
                        the building.
                    ``(C) Definitions and special rules.--For purposes 
                of this paragraph--
                            ``(i) Commitment to lease treated as 
                        lease.--A commitment to enter into a lease 
                        shall be treated as a lease, and the parties to 
                        such commitment shall be treated as lessor and 
                        lessee, respectively, if the lease is in effect 
                        at the time the property is placed in service.
                            ``(ii) Related persons.--A lease between 
                        related persons shall not be considered a 
                        lease. For purposes of the preceding sentence, 
                        the term `related persons' means--
                                    ``(I) members of an affiliated 
                                group (as defined in section 1504), and
                                    ``(II) persons having a 
                                relationship described in subsection 
                                (b) of section 267(b) or 707(b)(1); 
                                except that, for purposes of this 
                                clause, the phrase `80 percent or more' 
                                shall be substituted for the phrase 
                                `more than 50 percent' each place it 
                                appears in such subsections.''.
    (c) Requirement To Use Straight Line Method.--Paragraph (3) of 
section 168(b) is amended by adding at the end the following new 
subparagraph:
                    ``(G) Qualified leasehold improvement property 
                described in subsection (e)(6).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to qualified leasehold improvement property placed in service 
after December 31, 2002.

                   TITLE XI--MISCELLANEOUS PROVISIONS

SEC. 1101. REPEAL OF CERTAIN MOTOR FUEL EXCISE TAXES ON FUEL USED BY 
              RAILROADS AND ON INLAND WATERWAY TRANSPORTATION.

    (a) Repeal of 4.3-Cent Motor Fuel Excise Taxes on Railroads and 
Inland Waterway Transportation Which Remain in General Fund.--
            (1) Taxes on trains.--
                    (A) In general.--Subparagraph (A) of section 
                4041(a)(1) is amended by striking ``or a diesel-powered 
                train'' each place it appears and by striking ``or 
                train''.
                    (B) Conforming amendments.--
                            (i) Subparagraph (C) of section 4041(a)(1) 
                        is amended by striking clause (ii) and by 
                        redesignating clause (iii) as clause (ii).
                            (ii) Subparagraph (C) of section 4041(b)(1) 
                        is amended by striking all that follows 
                        ``section 6421(e)(2)'' and inserting a period.
                            (iii) Paragraph (3) of section 4083(a) is 
                        amended by striking ``or a diesel-powered 
                        train''.
                            (iv) Section 6427(l) is amended by striking 
                        paragraph (3) and by redesignating paragraphs 
                        (4) and (5) as paragraphs (3) and (4), 
                        respectively.
            (2) Fuel used on inland waterways.--
                    (A) In general.--Paragraph (1) of section 4042(b) 
                is amended by adding ``and'' at the end of subparagraph 
                (A), by striking ``, and'' at the end of subparagraph 
                (B) and inserting a period, and by striking 
                subparagraph (C).
                    (B) Conforming amendment.--Paragraph (2) of section 
                4042(b) is amended by striking subparagraph (C).
    (b) Effective Date.--The amendments made by this subsection shall 
take effect on October 1, 2000.

SEC. 1102. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.

    (a) Tax Exemption.--Section 501(c), as amended by section 801(a), 
is amended by adding at the end the following new paragraph:
            ``(29) A trust which--
                    ``(A) constitutes a Settlement Trust under section 
                39 of the Alaska Native Claims Settlement Act (43 
                U.S.C. 1629e), and
                    ``(B) with respect to which an election under 
                subsection (p)(2) is in effect.''.
    (b) Special Rules Relating to Taxation of Alaska Native Settlement 
Trusts.--Section 501 is amended by redesignating subsection (p) as 
subsection (q) and by inserting after subsection (o) the following new 
subsection:
    ``(p) Special Rules for Taxation of Alaska Native Settlement 
Trusts.--
            ``(1) In general.--For purposes of this title, the 
        following rules shall apply in the case of a Settlement Trust:
                    ``(A) Electing trust.--If an election under 
                paragraph (2) is in effect for any taxable year--
                            ``(i) no amount shall be includible in the 
                        gross income of a beneficiary of the Settlement 
                        Trust by reason of a contribution to the 
                        Settlement Trust made during such taxable year, 
                        and
                            ``(ii) except as provided in this 
                        subsection, the provisions of subchapter J and 
                        section 1(e) shall not apply to the Settlement 
                        Trust and its beneficiaries for such taxable 
                        year.
                    ``(B) Nonelecting trust.--If an election is not in 
                effect under paragraph (2) for any taxable year, the 
                provisions of subchapter J and section 1(e) shall apply 
                to the Settlement Trust and its beneficiaries for such 
                taxable year.
            ``(2) One-time election.--
                    ``(A) In general.--A Settlement Trust may elect to 
                have the provisions of this subsection and subsection 
                (c)(29) apply to the trust and its beneficiaries.
                    ``(B) Time and method of election.--An election 
                under subparagraph (A) shall be made--
                            ``(i) on or before the due date (including 
                        extensions) for filing the Settlement Trust's 
                        return of tax for the 1st taxable year of the 
                        Settlement Trust ending after December 31, 
                        1999, and
                            ``(ii) by attaching to such return of tax a 
                        statement specifically providing for such 
                        election.
                    ``(C) Period election in effect.--Except as 
                provided in paragraph (3), an election under 
                subparagraph (A)--
                            ``(i) shall apply to the 1st taxable year 
                        described in subparagraph (B)(i) and all 
                        subsequent taxable years, and
                            ``(ii) may not be revoked once it is made.
            ``(3) Special rules where transfer restrictions modified.--
                    ``(A) Transfer of beneficial interests.--If, at any 
                time, a beneficial interest in a Settlement Trust may 
                be disposed of in a manner which would not be permitted 
                by section 7(h) of the Alaska Native Claims Settlement 
                Act (43 U.S.C. 1606(h)) if the interest were Settlement 
                Common Stock--
                            ``(i) no election may be made under 
                        paragraph (2)(A) with respect to such trust, 
                        and
                            ``(ii) if an election under paragraph 
                        (2)(A) is in effect as of such time--
                                    ``(I) such election is revoked as 
                                of the 1st day of the taxable year 
                                following the taxable year in which 
                                such disposition is first permitted, 
                                and
                                    ``(II) there is hereby imposed on 
                                such trust a tax equal to the product 
                                of the fair market value of the assets 
                                held by the trust as of the close of 
                                the taxable year in which such 
                                disposition is first permitted and the 
                                highest rate of tax under section 1(e) 
                                for such taxable year.
                The tax imposed by clause (ii)(II) shall be in lieu of 
                any other tax imposed by this chapter for the taxable 
                year.
                    ``(B) Stock in corporation.--If--
                            ``(i) the Settlement Common Stock in any 
                        Native Corporation which transferred assets to 
                        a Settlement Trust making an election under 
                        paragraph (2)(A) may be disposed of in a manner 
                        not permitted by section 7(h) of the Alaska 
                        Native Claims Settlement Act (43 U.S.C. 
                        1606(h)), and
                            ``(ii) at any time after such disposition 
                        of stock is first permitted, such corporation 
                        transfers assets to such trust,
                clause (ii) of subparagraph (A) shall be applied to 
                such trust on and after the date of the transfer in the 
                same manner as if the trust permitted dispositions of 
                beneficial interests in the trust in a manner not 
                permitted by such section 7(h).
                    ``(C) Administrative provisions.--For purposes of 
                subtitle F, any tax imposed by subparagraph (A)(ii)(II) 
                shall be treated as an excise tax with respect to which 
                the deficiency procedures of such subtitle apply.
            ``(4) Distribution requirement on electing settlement 
        trust.--
                    ``(A) In general.--If an election is in effect 
                under paragraph (2) for any taxable year, a Settlement 
                Trust shall distribute at least 55 percent of its 
                adjusted taxable income for such taxable year.
                    ``(B) Tax imposed if insufficient distribution.--If 
                a Settlement Trust fails to meet the distribution 
                requirement of subparagraph (A) for any taxable year, 
                then, notwithstanding subsection (c)(29), a tax shall 
                be imposed on the trust under section 1(e) on an amount 
                of taxable income equal to the amount of such failure.
                    ``(C) Designation of distribution.--Solely for 
                purposes of meeting the requirements of this paragraph, 
                a Settlement Trust may elect to treat any distribution 
                (or portion) during the 65-day period following the 
                close of any taxable year as made on the last day of 
                such taxable year. Any such distribution (or portion) 
                may not be taken into account under this paragraph for 
                any other taxable year.
                    ``(D) Adjusted taxable income.--For purposes of 
                this paragraph, the term `adjusted taxable income' 
                means taxable income determined under section 641(b) 
                without regard to any deduction under section 651 or 
                661.
            ``(5) Tax treatment of distributions to beneficiaries.--
                    ``(A) Electing trust.--If an election is in effect 
                under paragraph (2) for any taxable year, any 
                distribution to a beneficiary shall be included in 
                gross income of the beneficiary as ordinary income.
                    ``(B) Nonelecting trusts.--Any distribution to a 
                beneficiary from a Settlement Trust not described in 
                subparagraph (A) shall be includible in income as 
                provided under subchapter J.
                    ``(C) Earnings and profits.--The earnings and 
                profits of any Native Corporation making a contribution 
                to a Settlement Trust shall not be reduced on account 
                thereof at the time of such contribution, but such 
                earnings and profits shall be reduced (up to the amount 
                of such contribution) as distributions are thereafter 
                made by the Settlement Trust which exceed the sum of--
                            ``(i) such Trust's total undistributed net 
                        income for all prior years during which an 
                        election under paragraph (2) is in effect, and
                            ``(ii) such Trust's distributable net 
                        income.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Native corporation.--The term `Native 
                Corporation' has the meaning given such term by section 
                3(m) of the Alaska Native Claims Settlement Act (43 
                U.S.C. 1602(m)).
                    ``(B) Settlement trust.--The term `Settlement 
                Trust' means a trust which constitutes a Settlement 
                Trust under section 39 of the Alaska Native Claims 
                Settlement Act (43 U.S.C. 1629e).''.
    (c) Withholding on Distributions by Electing ANCSA Settlement 
Trusts.--Section 3402 is amended by adding at the end the following new 
subsection:
    ``(t) Tax Withholding on Distributions by Electing ANCSA Settlement 
Trusts.--
            ``(1) In general.--Any Settlement Trust (as defined in 
        section 501(p)(6)(B)) which is exempt from income tax under 
        section 501(c)(29) (in this subsection referred to as an 
        `electing trust') and which makes a payment to any beneficiary 
        shall deduct and withhold from such payment a tax in an amount 
        equal to such payment's proportionate share of the annualized 
        tax.
            ``(2) Exception.--The tax imposed by paragraph (1) shall 
        not apply to any payment to the extent that such payment, when 
        annualized, does not exceed an amount equal to the amount in 
        effect under section 6012(a)(1)(A)(i) for taxable years 
        beginning in the calendar year in which the payment is made.
            ``(3) Annualized tax.--For purposes of paragraph (1), the 
        term `annualized tax' means, with respect to any payment, the 
        amount of tax which would be imposed by section 1(c) 
        (determined without regard to any rate of tax in excess of 31 
        percent) on an amount of taxable income equal to the excess 
        of--
                    ``(A) the annualized amount of such payment, over
                    ``(B) the amount determined under paragraph (2).
            ``(4) Annualization.--For purposes of this subsection, 
        amounts shall be annualized in the manner prescribed by the 
        Secretary.
            ``(5) Alternate withholding procedures.--At the election of 
        an electing trust, the tax imposed by this subsection on any 
        payment made by such trust shall be determined in accordance 
        with such tables or computational procedures as may be 
        specified in regulations prescribed by the Secretary (in lieu 
        of in accordance with paragraphs (2) and (3)).
            ``(6) Coordination with other sections.--For purposes of 
        this chapter and so much of subtitle F as relates to this 
        chapter, payments which are subject to withholding under this 
        subsection shall be treated as if they were wages paid by an 
        employer to an employee.''.
    (d) Reporting.--Section 6041 is amended by adding at the end the 
following new subsection:
    ``(f) Application to Alaska Native Settlement Trusts.--In the case 
of any distribution from a Settlement Trust (as defined in section 
501(p)(6)(B)) to a beneficiary, this section shall apply, except that--
            ``(1) this section shall apply to such distribution without 
        regard to the amount thereof,
            ``(2) the Settlement Trust shall include on any return or 
        statement required by this section information as to the 
        character of such distribution (if applicable) and the amount 
        of tax imposed by chapter 1 which has been deducted and 
        withheld from such distribution, and
            ``(3) the filing of any return or statement required by 
        this section shall satisfy any requirement to file any other 
        form or schedule under this title with respect to distributive 
        share information (including any form or schedule to be 
        included with the trust's tax return).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years of Settlement Trusts ending after December 31, 
1999, and to contributions to such trusts after such date.

SEC. 1103. LONG-TERM UNUSED CREDITS ALLOWED AGAINST MINIMUM TAX.

    (a) In General.--Subsection (c) of section 53 (relating to 
limitation) is amended by adding at the end the following:
            ``(2) Special rule for corporations with long-term unused 
        credits.--
                    ``(A) In general.--If--
                            ``(i) a corporation to which section 56(g) 
                        applies has a long-term unused minimum tax 
                        credit for a taxable year, and
                            ``(ii) no credit would be allowable under 
                        this section for the taxable year by reason of 
                        paragraph (1),
                then there shall be allowed a credit under subsection 
                (a) for the taxable year in the amount determined under 
                subparagraph (B).
                    ``(B) Amount of credit.--For purposes of 
                subparagraph (A), the amount of the credit shall be 
                equal to the least of the following for the taxable 
                year:
                            ``(i) The long-term unused minimum tax 
                        credit.
                            ``(ii) 50 percent of the taxpayer's 
                        tentative minimum tax.
                            ``(iii) The excess (if any) of the amount 
                        under paragraph (1)(B) over the amount under 
                        paragraph (1)(A).
                    ``(C) Long-term unused minimum tax credit.--For 
                purposes of this paragraph--
                            ``(i) In general.--The long-term unused 
                        minimum tax credit for any taxable year is the 
                        portion of the minimum tax credit determined 
                        under subsection (b) attributable to the 
                        adjusted net minimum tax for taxable years 
                        beginning after 1986 and ending before the 5th 
                        taxable year immediately preceding the taxable 
                        year for which the determination is being made.
                            ``(ii) First-in, first-out ordering rule.--
                        For purposes of clause (i), credits shall be 
                        treated as allowed under subsection (a) on a 
                        first-in, first-out basis.''.
    (b) Conforming Amendments.--Section 53(c) (as in effect before the 
amendment made by subsection (a)) is amended--
            (1) by striking ``The'' and inserting the following:
            ``(1) In general.--The''; and
            (2) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 1104. 5-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE 
              TO OPERATING MINERAL INTERESTS OF INDEPENDENT OIL AND GAS 
              PRODUCERS.

    (a) In General.--Paragraph (1) of section 172(b) (relating to years 
to which loss may be carried) is amended by adding at the end the 
following new subparagraph:
                    ``(H) Losses on operating mineral interests of 
                independent oil and gas producers.--In the case of a 
                taxpayer--
                            ``(i) which has an eligible oil and gas 
                        loss (as defined in subsection (j)) for a 
                        taxable year, and
                            ``(ii) which is not an integrated oil 
                        company (as defined in section 291(b)(4)),
                such eligible oil and gas loss shall be a net operating 
                loss carryback to each of the 5 taxable years preceding 
                the taxable year of such loss.''.
    (b) Eligible Oil and Gas Loss.--Section 172 is amended by 
redesignating subsection (j) as subsection (k) and by inserting after 
subsection (i) the following new subsection:
    ``(j) Eligible Oil and Gas Loss.--For purposes of this section--
            ``(1) In general.--The term `eligible oil and gas 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 operating mineral interests (as defined 
                in section 614(d)) in oil and gas wells 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), an eligible oil and gas 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)(H) from any loss year may 
        elect to have the carryback period with respect to such loss 
        year determined without regard to subsection (b)(1)(H).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to net operating losses for taxable years beginning after 
December 31, 1998.

SEC. 1105. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.

    (a) In General.--Section 263 (relating to capital expenditures) is 
amended by adding at the end the following:
    ``(j) Geological and Geophysical Expenditures for Domestic Oil and 
Gas Wells.--Notwithstanding subsection (a), a taxpayer may elect to 
treat geological and geophysical expenses incurred in connection with 
the exploration for, or development of, oil or gas within the United 
States (as defined in section 638) as expenses which are not chargeable 
to capital account. Any expenses so treated shall be allowed as a 
deduction in the taxable year in which paid or incurred.''.
    (b) Conforming Amendment.--Section 263A(c)(3) is amended by 
inserting ``263(j),'' after ``263(i),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 1999.

SEC. 1106. ELECTION TO EXPENSE DELAY RENTAL PAYMENTS

    (a) In general.--Section 263 (relating to capital expenditures), as 
amended by section 1105(a), is amended by adding at the end the 
following:
    ``(k) Delay Rental Payments for Domestic Oil and Gas Wells.--
            ``(1) In general.--Notwithstanding subsection (a), a 
        taxpayer may elect to treat delay rental payments incurred in 
        connection with the development of oil or gas within the United 
        States (as defined in section 638) as payments which are not 
        chargeable to capital account. Any payments so treated shall be 
        allowed as a deduction in the taxable year in which paid or 
        incurred.
            ``(2) Delay rental payments.--For purposes of paragraph 
        (1), the term `delay rental payment' means an amount paid for 
        the privilege of deferring development of an oil or gas 
        well.''.
    (b) Conforming Amendment.--Section 263A(c)(3), as amended by 
section 1105(b), is amended by inserting ``263(k),'' after ``263(j),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made or incurred in taxable years beginning after 
December 31, 1999.

SEC. 1107. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER SECTION 
              355.

    (a) In General.--Section 355(b) (defining active conduct of a trade 
or business) is amended by adding at the end the following new 
paragraph:
            ``(3) Special rules relating to active business 
        requirement.--
                    ``(A) In general.--For purposes of determining 
                whether a corporation meets the requirement of 
                paragraph (2)(A), all members of such corporation's 
                separate affiliated group shall be treated as 1 
                corporation. For purposes of the preceding sentence, a 
                corporation's separate affiliated group is the 
                affiliated group which would be determined under 
                section 1504(a) if such corporation were the common 
                parent and section 1504(b) did not apply.
                    ``(B) Control.--For purposes of paragraph (2)(D), 
                all distributee corporations which are members of the 
                same affiliated group (as defined in section 1504(a) 
                without regard to section 1504(b)) shall be treated as 
                1 distributee corporation.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (A) of section 355(b)(2) is amended to 
        read as follows:
                    ``(A) it is engaged in the active conduct of a 
                trade or business,''.
            (2) Section 355(b)(2) is amended by striking the last 
        sentence.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to distributions after the date of the enactment of this 
        Act.
            (2) Transition rule.--The amendments made by this section 
        shall not apply to any distribution pursuant to a transaction 
        which is--
                    (A) made pursuant to an agreement which was binding 
                on such date and at all times thereafter,
                    (B) described in a ruling request submitted to the 
                Internal Revenue Service on or before such date, or
                    (C) described on or before such date in a public 
                announcement or in a filing with the Securities and 
                Exchange Commission.
            (3) Election to have amendments apply.--Paragraph (2) shall 
        not apply if the distributing corporation elects not to have 
        such paragraph apply to distributions of such corporation. Any 
        such election, once made, shall be irrevocable.

SEC. 1108. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF AMORTIZABLE 
              REFORESTATION EXPENDITURES.

    (a) Increase in Dollar Limitation.--Paragraph (1) of section 194(b) 
(relating to amortization of reforestation expenditures) is amended by 
striking ``$10,000 ($5,000'' and inserting ``$25,000 ($12,500''.
    (b) Temporary Suspension of Increased Dollar Limitation.--
Subsection (b) of section 194(b) (relating to amortization of 
reforestation expenditures) is amended by adding at the end the 
following new paragraph:
            ``(5) Suspension of dollar limitation.--Paragraph (1) shall 
        not apply to taxable years beginning after December 31, 1999, 
        and before January 1, 2004.
    (c) Conforming Amendment.--Paragraph (1) of section 48(b) is 
amended by striking ``section 194(b)(1)'' and inserting ``section 
194(b)(1) and without regard to section 194(b)(5)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 1109. MODIFICATION OF EXCISE TAX IMPOSED ON ARROW COMPONENTS.

    (a) In General.--Paragraph (2) of section 4161(b) (relating to bows 
and arrows, etc.) is amended to read as follows:
            ``(2) Arrows.--
                    ``(A) In general.--There is hereby imposed on the 
                sale by the manufacturer, producer, or importer of any 
                shaft, point, article used to attach a point to a 
                shaft, nock, or vane of a type used in the manufacture 
                of any arrow which after its assembly--
                            ``(i) measures 18 inches overall or more in 
                        length, or
                            ``(ii) measures less than 18 inches overall 
                        in length but is suitable for use with a bow 
                        described in paragraph (1)(A),
                a tax equal to 12.4 percent of the price for which so 
                sold.
                    ``(B) Reduced rate on certain hunting points.--
                Subparagraph (A) shall be applied by substituting `11 
                percent' for `12.4 percent' in the case of a point 
                which is designed primarily for use in hunting fish or 
                large animals.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to articles sold by the manufacturer, producer, or importer after the 
close of the first calendar month ending more than 30 days after the 
date of the enactment of this Act.

SEC. 1110. INCREASE IN THRESHOLD FOR JOINT COMMITTEE REPORTS ON REFUNDS 
              AND CREDITS.

    (a) General Rule.--Subsections (a) and (b) of section 6405 are each 
amended by striking ``$1,000,000'' and inserting ``$2,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act, except that such 
amendment shall not apply with respect to any refund or credit with 
respect to a report that has been made before such date of enactment 
under section 6405 of the Internal Revenue Code of 1986.

SEC. 1111. MODIFICATION OF RURAL AIRPORT DEFINITION.

    (a) In General.--Clause (ii) of section 4261(e)(1)(B) (defining 
rural airport) is amended by striking the period at the end of 
subclause (II) and inserting ``, or'', and by adding at the end the 
following new subclause:
                                    ``(III) is not connected by paved 
                                roads to another airport.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after 1999.

SEC. 1112. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES WITHOUT 
              REDUCING PATRONAGE DIVIDENDS.

    (a) In General.--Subsection (a) of section 1388 (relating to 
patronage dividend defined) is amended by adding at the end the 
following: ``For purposes of paragraph (3), net earnings shall not be 
reduced by amounts paid during the year as dividends on capital stock 
or other proprietary capital interests of the organization to the 
extent that the articles of incorporation or bylaws of such 
organization or other contract with patrons provide that such dividends 
are in addition to amounts otherwise payable to patrons which are 
derived from business done with or for patrons during the taxable 
year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions in taxable years beginning after the date of the 
enactment of this Act.

SEC. 1113. CONSOLIDATION OF LIFE INSURANCE COMPANIES WITH OTHER 
              CORPORATIONS.

    (a) In General.--Section 1504(b) (defining includible corporation) 
is amended by striking paragraph (2).
    (b) Conforming Amendments.--
            (1) Section 1504 is amended by striking subsection (c) and 
        by redesignating subsections (d), (e), and (f) as subsections 
        (c), (d), and (e), respectively.
            (2) Section 1503(c)(1) (relating to special rule for 
        application of certain losses against income of insurance 
        companies taxed under section 801) is amended by striking ``an 
        election under section 1504(c)(2) is in effect for the taxable 
        year and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.
    (d) No Carryback Before January 1, 2001.--To the extent that a 
consolidated net operating loss is allowed or increased by reason of 
the amendments made by this section, such loss may not be carried back 
to a taxable year beginning before January 1, 2001.
    (e) Nontermination of Group.--No affiliated group shall terminate 
solely as a result of the amendments made by this section.
    (f) Waiver of 5-Year Waiting Period.--Under regulations prescribed 
by the Secretary of the Treasury or his delegate, an automatic waiver 
from the 5-year waiting period for reconsolidation provided in section 
1504(a)(3) of the Internal Revenue Code of 1986 shall be granted to any 
corporation which was previously an includible corporation but was 
subsequently deemed a nonincludible corporation as a result of becoming 
a subsidiary of a corporation which was not an includible corporation 
solely by operation of section 1504(c)(2) of such Code (as in effect on 
the day before the date of the enactment of this Act).

SEC. 1114. EXPANSION OF EXEMPTION FROM PERSONAL HOLDING COMPANY TAX FOR 
              LENDING OR FINANCE COMPANIES.

    (a) In General.--Paragraph (6) of section 542(c) (defining personal 
holding company) is amended--
            (1) by striking ``rents,'' in subparagraph (B), and
            (2) by adding ``and'' at the end of subparagraph (B),
            (3) by striking subparagraph (C), and
            (4) by redesignating subparagraph (D) as subparagraph (C).
    (b) Exception for Lending or Finance Companies Determined on 
Affiliated Group Basis.--Subsection (d) of section 542 is amended by 
striking paragraphs (1) and (2) and inserting the following new 
paragraphs:
            ``(1) Lending or finance business defined.-- For purposes 
        of subsection (c)(6), the term `lending or finance business' 
        means a 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) rendering services or making facilities 
                available in the ordinary course of a lending or 
                finance business.
                    ``(E) rendering services or making facilities 
                available in connection with activities described in 
                subparagraphs (A), (B), and (C) carried on by the 
                corporation rendering services or making facilities 
                available, or
                    ``(F) rendering services or making facilities 
                available to another corporation which is engaged in 
                the lending or finance business (within the meaning of 
                this paragraph), if such services or facilities are 
                related to the lending or finance business (within such 
                meaning) of such other corporation and such other 
                corporation and the corporation rendering services or 
                making facilities available are members of the same 
                affiliated group (as defined in section 1504).
            ``(2) Exception determined on an affiliated group basis.--
        In the case of a lending or finance company which is a member 
        of an affiliated group (as defined in section 1504), such 
        company shall be treated as meeting the requirements of 
        subsection (c)(6) if such group (determined by taking into 
        account only members of such group which are engaged in a 
        lending or finance business) meets such requirements.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1999.

SEC. 1115. CREDIT FOR MODIFICATIONS TO INTER-CITY BUSES REQUIRED UNDER 
              THE AMERICANS WITH DISABILITIES ACT OF 1990.

    (a) In General.--Subsection (a) of section 44 (relating to 
expenditures to provide access to disabled individuals) is amended to 
read as follows:
    ``(a) General Rule.--For purposes of section 38, the amount of the 
disabled access credit determined under this section for any taxable 
year shall be an amount equal to the sum of--
            ``(1) in the case of an eligible small business, 50 percent 
        of so much of the eligible access expenditures for the taxable 
        year as exceed $250 but do not exceed $10,250, and
            ``(2) 50 percent of so much of the eligible bus access 
        expenditures for the taxable year with respect to each eligible 
        bus as exceed $250 but do not exceed $30,250.''.
    (b) Eligible Bus Access Expenditures.--Section 44 is amended by 
redesignating subsections (d) and (e) as subsections (e) and (f), 
respectively, and by inserting after subsection (c) the following new 
subsection:
    ``(d) Eligible Bus Access Expenditures.--For purposes of this 
section--
            ``(1) In general.--The term `eligible bus access 
        expenditures' means amounts paid or incurred by the taxpayer 
        for the purpose of enabling the taxpayer's eligible bus to 
        comply with applicable requirements under the Americans With 
        Disabilities Act of 1990 (as in effect on the date of the 
        enactment of this subsection).
            ``(2) Certain expenditures not included.--The amount of 
        eligible bus access expenditures otherwise taken into account 
        under subsection (a)(2) shall be reduced to the extent that 
        funds for such expenditures are received under any Federal, 
        State, or local program.
            ``(3) Eligible bus.--The term `eligible bus' means any 
        automobile bus eligible for a refund under section 6427(b) by 
        reason of transportation described in section 6427(b)(1)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999, and before 
January 1, 2012.

SEC. 1116. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES FOR 
              INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS ON HOURS OF 
              SERVICE.

    The table in section 274(n)(3)(B) (relating to special rule for 
individuals subject to Federal hours of service) is amended--
            (1) by striking ``or 2007'', and
            (2) by striking ``2008'' and inserting ``2007''.

SEC. 1117. TAX-EXEMPT FINANCING OF QUALIFIED HIGHWAY INFRASTRUCTURE 
              CONSTRUCTION.

    (a) Treatment as Exempt Facility Bond.--A bond described in 
subsection (b) shall be treated as described in section 141(e)(1)(A) of 
the Internal Revenue Code of 1986, except that--
            (1) section 146 of such Code shall not apply to such bond, 
        and
            (2) section 147(c)(1) of such Code shall be applied by 
        substituting ``any portion of'' for ``25 percent or more''.
    (b) Bond Described.--
            (1) In general.--A bond is described in this subsection if 
        such bond is issued after December 31, 1999, as part of an 
        issue--
                    (A) 95 percent or more of the net proceeds of which 
                are to be used to provide a qualified highway 
                infrastructure project, and
                    (B) to which there has been allocated a portion of 
                the allocation to the project under paragraph 
                (2)(C)(ii) which is equal to the aggregate face amount 
                of bonds to be issued as part of such issue.
            (2) Qualified highway infrastructure projects.--
                    (A) In general.--For purposes of paragraph (1), the 
                term ``qualified highway infrastructure project'' means 
                a project--
                            (i) for the construction or reconstruction 
                        of a highway, and
                            (ii) designated under subparagraph (B) as 
                        an eligible pilot project.
                    (B) Eligible pilot project.--
                            (i) In general.--The Secretary of 
                        Transportation, in consultation with the 
                        Secretary of the Treasury, shall select not 
                        more than 15 highway infrastructure projects to 
                        be pilot projects eligible for tax-exempt 
                        financing.
                            (ii) Eligibility criteria.--In determining 
                        the criteria necessary for the eligibility of 
                        pilot projects, the Secretary of Transportation 
                        shall include the following:
                                    (I) The project must serve the 
                                general public.
                                    (II) The project is necessary to 
                                evaluate the potential of the private 
                                sector's participation in the provision 
                                of the highway infrastructure of the 
                                United States.
                                    (III) The project must be located 
                                on publicly-owned rights-of-way.
                                    (IV) The project must be publicly 
                                owned or the ownership of the highway 
                                constructed or reconstructed under the 
                                project must revert to the public.
                                    (V) The project must be consistent 
                                with a transportation plan developed 
                                pursuant to section 134(g) or 135(e) of 
                                title 23, United States Code.
                    (C) Aggregate face amount of tax-exempt 
                financing.--
                            (i) In general.--The aggregate face amount 
                        of bonds issued pursuant to this section shall 
                        not exceed $15,000,000,000, determined without 
                        regard to any bond the proceeds of which are 
                        used exclusively to refund (other than to 
                        advance refund) a bond issued pursuant to this 
                        section (or a bond which is a part of a series 
                        of refundings of a bond so issued) if the 
                        amount of the refunding bond does not exceed 
                        the outstanding amount of the refunded bond.
                            (ii) Allocation.--The Secretary of 
                        Transportation, in consultation with the 
                        Secretary of the Treasury, shall allocate the 
                        amount described in clause (i) among the 
                        eligible pilot projects designated under 
                        subparagraph (B).
                            (iii) Reallocation.--If any portion of an 
                        allocation under clause (ii) is unused on the 
                        date which is 3 years after such allocation, 
                        the Secretary of Transportation, in 
                        consultation with the Secretary of the 
                        Treasury, may reallocate such portion among the 
                        remaining eligible pilot projects.
    (c) Report.--
            (1) In general.--Not later than the earlier of--
                    (A) 1 year after either \1/2\ of the projects 
                authorized under this section have been identified or 
                \1/2\ of the total bonds allowable for the projects 
                under this section have been issued, or
                    (B) 7 years after the date of the enactment of this 
                Act,
        the Secretary of Transportation, in consultation with the 
        Secretary of the Treasury, shall submit the report described in 
        paragraph (2) to the Committees on Finance and on Environment 
        and Public Works of the Senate and the Committees on Ways and 
        Means and on Transportation and Infrastructure of the House of 
        Representatives.
            (2) Contents.--The report under paragraph (1) shall 
        evaluate the overall success of the program conducted pursuant 
        to this section, including--
                    (A) a description of each project under the 
                program,
                    (B) the extent to which the projects used new 
                technologies, construction techniques, or innovative 
                cost controls that resulted in savings in building the 
                project, and
                    (C) the use and efficiency of the Federal tax 
                subsidy provided by the bond financing.

SEC. 1118. EXPANSION OF DC HOMEBUYER TAX CREDIT.

    (a) Extension.--Section 1400C(i) (relating to application of 
section) is amended by striking ``2001'' and inserting ``2002''.
    (b) Expansion of Income Limitation.--Section 1400C(b)(1) (relating 
to limitation based on modified adjusted gross income) is amended--
            (1) by striking ``$110,000'' in subparagraph (A)(i) and 
        inserting ``$140,000'', and
            (2) by inserting ``($40,000 in the case of a joint 
        return)'' after ``$20,000'' in subparagraph (B).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 1119. EXTENSION OF DC ZERO PERCENT CAPITAL GAINS RATE.

    (a) In General.--Section 1400B (relating to zero percent capital 
gains rate) is amended by adding at the end the following new 
subsection:
    ``(h) Extension to Entire District of Columbia.--In determining 
whether any stock or partnership interest which is originally issued 
after December 31, 1999, or any tangible property acquired by the 
taxpayer by purchase after December 31, 1999, is a DC Zone asset, 
subsection (d) shall be applied without regard to paragraph (2) 
thereof.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2000.

SEC. 1120. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR PROPERTY.

    (a) In General.--Subparagraph (C) of section 168(e)(3) (relating to 
classification of certain property) is amended by redesignating clause 
(ii) as clause (iii) and by inserting after clause (i) the following 
new clause:
                            ``(ii) any natural gas gathering line, 
                        and''.
    (b) Natural Gas Gathering Line.--Subsection (i) of section 168 is 
amended by adding at the end the following new paragraph:
            ``(15) Natural gas gathering line.--The term `natural gas 
        gathering line' means--
                    ``(A) the pipe, equipment, and appurtenances 
                determined to be a gathering line by the Federal Energy 
                Regulatory Commission, or
                    ``(B) the pipe, equipment, and appurtenances used 
                to deliver natural gas from the wellhead or a common 
                point to the point at which such gas first reaches--
                            ``(i) a gas processing plant,
                            ``(ii) an interconnection with a 
                        transmission pipeline certificated by the 
                        Federal Energy Regulatory Commission as an 
                        interstate transmission pipeline,
                            ``(iii) an interconnection with an 
                        intrastate transmission pipeline, or
                            ``(iv) a direct interconnection with a 
                        local distribution company, a gas storage 
                        facility, or an industrial consumer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service on or after the date of the 
enactment of this Act.

SEC. 1121. EXEMPTION FROM TICKET TAXES FOR CERTAIN TRANSPORTATION 
              PROVIDED BY SMALL SEAPLANES.

    (a) In General.--Section 4281 (relating to small aircraft on 
nonestablished lines) is amended to read as follows:

``SEC. 4281. SMALL AIRCRAFT.

    ``The taxes imposed by sections 4261 and 4271 shall not apply to--
            ``(1) transportation by an aircraft having a maximum 
        certificated takeoff weight of 6,000 pounds or less, except 
        when such aircraft is operated on an established line, and
            ``(2) transportation by a seaplane having a maximum 
        certificated takeoff weight of 6,000 pounds or less with 
        respect to any segment consisting of a takeoff from, and a 
        landing on, water.
For purposes of the preceding sentence, the term `maximum certificated 
takeoff weight' means the maximum such weight contained in the type 
certificate or airworthiness certificate.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter C of chapter 33 is amended by striking ``on nonestablished 
lines'' in the item relating to section 4281.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act but shall not apply to 
any amount paid on or before such date with respect to taxes imposed by 
sections 4261 and 4271 of the Internal Revenue Code of 1986.

SEC. 1122. NO FEDERAL INCOME TAX ON AMOUNTS AND LANDS RECEIVED BY 
              HOLOCAUST VICTIMS OR THEIR HEIRS.

    (a) In General.--For purposes of the Internal Revenue Code of 1986, 
gross income shall not include--
            (1) any amount received by an individual (or any heir of 
        the individual)--
                    (A) from the Swiss Humanitarian Fund established by 
                the Government of Switzerland or from any similar fund 
                established by any foreign country, or
                    (B) as a result of the settlement of the action 
                entitled ``In re Holocaust Victims' Asset Litigation'', 
                (E.D. NY), C.A. No. 96-4849, or as a result of any 
                similar action; and
            (2) the value of any land (including structures thereon) 
        recovered by an individual (or any heir of the individual) from 
        a government of a foreign country as a result of a settlement 
        of a claim arising out of the confiscation of such land in 
        connection with the Holocaust.
    (b) Effective Date.--This section shall apply to any amount 
received before, on, or after the date of the enactment of this Act.

SEC. 1123. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED DEDUCTIONS NOT TO 
              APPLY TO QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES AND 
              QUALIFIED INCIDENTAL EXPENSES OF ELEMENTARY AND SECONDARY 
              SCHOOL TEACHERS.

    (a) Qualified Professional Development Expenses Deduction.--
            (1) In general.--Section 67(b) (defining miscellaneous 
        itemized deductions) is amended by striking ``and'' at the end 
        of paragraph (11), by striking the period at the end of 
        paragraph (12) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(13) any deduction allowable for the qualified 
        professional development expenses of an eligible teacher.''.
            (2) Definitions.--Section 67 (relating to 2-percent floor 
        on miscellaneous itemized deductions) is amended by adding at 
        the end the following new subsection:
    ``(g) Qualified Professional Development Expenses of Eligible 
Teachers.--For purposes of subsection (b)(13)--
            ``(1) Qualified professional development expenses.--
                    ``(A) In general.--The term `qualified professional 
                development expenses' means expenses--
                            ``(i) for tuition, fees, books, supplies, 
                        equipment, and transportation required for the 
                        enrollment or attendance of an individual in a 
                        qualified course of instruction, and
                            ``(ii) with respect to which a deduction is 
                        allowable under section 162 (determined without 
                        regard to this section).
                    ``(B) Qualified course of instruction.--The term 
                `qualified course of instruction' means a course of 
                instruction which--
                            ``(i) is--
                                    ``(I) at an institution of higher 
                                education (as defined in section 481 of 
                                the Higher Education Act of 1965 (20 
                                U.S.C. 1088), as in effect on the date 
                                of the enactment of this subsection), 
                                or
                                    ``(II) a professional conference, 
                                and
                            ``(ii) is part of a program of professional 
                        development which is approved and certified by 
                        the appropriate local educational agency as 
                        furthering the individual's teaching skills.
            ``(C) Local educational agency.--The term `local 
        educational agency' has the meaning given such term by section 
        14101 of the Elementary and Secondary Education Act of 1965, as 
        so in effect.
            ``(2) Eligible teacher.--
                    ``(A) In general.--The term `eligible teacher' 
                means an individual who is a kindergarten through grade 
                12 classroom teacher, instructor, counselor, aide, or 
                principal in an elementary or secondary school.
                    ``(B) Elementary or secondary school.--The terms 
                `elementary school' and `secondary school' have the 
                meanings given such terms by section 14101 of the 
                Elementary and Secondary Education Act of 1965 (20 
                U.S.C. 8801), as so in effect.''.
            (3) Effective Date.--The amendments made by this section 
        shall apply to taxable years beginning after December 31, 2000, 
        and ending before December 31, 2004.
    (b) Qualified Incidental Expenses.--
            (1) In general.--Section 67(g)(1)(A), as added by 
        subsection (a)(2), is amended by striking ``and'' at the end of 
        clause (i), by redesignating clause (ii) as clause (iii), and 
        by inserting after clause (i) the following new clause:
                            ``(ii) for qualified incidental expenses, 
                        and''.
            (2) Definition.--Section 67(g), as added by subsection 
        (a)(2), is amended by adding at the end the following new 
        paragraph:
            ``(3) Qualified incidental expenses.--
                    ``(A) In general.--The term `qualified incidental 
                expenses' means expenses paid or incurred by an 
                eligible teacher in an amount not to exceed $125 for 
                any taxable year for books, supplies, and equipment 
                related to instruction, teaching, or other educational 
                job-related activities of such eligible teacher.
                    ``(B) Special rule for homeschooling.--Such term 
                shall include expenses described in subparagraph (A) in 
                connection with education provided by homeschooling if 
                the requirements of any applicable State or local law 
                are met with respect to such education.''.
            (3) Effective date.--The amendments made by this section 
        shall apply to taxable years beginning after December 31, 2000, 
        and ending before December 31, 2004.

SEC. 1124. EXPANSION OF DEDUCTION FOR COMPUTER DONATIONS TO SCHOOLS.

    (a) Extension of Age of Eligible Computers.--Section 
170(e)(6)(B)(ii) (defining qualified elementary or secondary 
educational contribution) is amended--
            (1) by striking ``2 years'' and inserting ``3 years'', and
            (2) by inserting ``for the taxpayer's own use'' after 
        ``constructed by the taxpayer''.
    (b) Reacquired Computers Eligible for Donation.--
            (1) In general.--Section 170(e)(6)(B)(iii) (defining 
        qualified elementary or secondary educational contribution) is 
        amended by inserting ``, the person from whom the donor 
        reacquires the property,'' after ``the donor''.
            (2) Conforming amendment.--Section 170(e)(6)(B)(ii) is 
        amended by inserting ``or reacquired'' after ``acquired''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years ending after the date of 
the enactment of this Act.

SEC. 1125. CREDIT FOR COMPUTER DONATIONS TO SCHOOLS AND SENIOR CENTERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits), as amended by this Act, is 
amended by adding at the end the following:

``SEC. 45E. CREDIT FOR COMPUTER DONATIONS TO SCHOOLS AND SENIOR 
              CENTERS.

    ``(a) General Rule.--For purposes of section 38, the computer 
donation credit determined under this section is an amount equal to 30 
percent of the qualified computer contributions made by the taxpayer 
during the taxable year.
    ``(b) Qualified Computer Contribution.--For purposes of this 
section, the term `qualified computer contribution' has the meaning 
given the term `qualified elementary or secondary educational 
contribution' by section 170(e)(6)(B), except that--
            ``(1) such term shall include the contribution of a 
        computer (as defined in section 168(i)(2)(B)(ii)) only if 
        computer software (as defined in section 197(e)(3)(B)) that 
        serves as a computer operating system has been lawfully 
        installed in such computer, and
            ``(2) for purposes of clauses (i) and (iv) of section 
        170(e)(6)(B), such term shall include the contribution of 
        computer technology or equipment to multipurpose senior centers 
        (as defined in section 102(35) of the Older Americans Act of 
        1965 (42 U.S.C. 3002(35)) to be used by individuals who have 
        attained 60 years of age to improve job skills in computers.
    ``(c) Increased Percentage for Contributions to Entities in 
Empowerment Zones, Enterprise Communities, and Indian Reservations.--In 
the case of a qualified computer contribution to an entity located in 
an empowerment zone or enterprise community designated under section 
1391 or an Indian reservation (as defined in section 168(j)(6)), 
subsection (a) shall be applied by substituting `50 percent' for `30 
percent'.
    ``(d) Certain Rules Made Applicable.--For purposes of this section, 
rules similar to the rules of paragraphs (1) and (2) of section 41(f) 
and of section 170(e)(6)(A) shall apply.
    ``(e) Termination.--This section shall not apply to taxable years 
beginning on or after the date which is 3 years after the date of the 
enactment of the Taxpayer Refund Act of 1999.''.
    (b) Current Year Business Credit Calculation.--Section 38(b) 
(relating to current year business credit), as amended by this Act, is 
amended by striking ``plus'' at the end of paragraph (12), by striking 
the period at the end of paragraph (13) and inserting ``, plus'', and 
by adding at the end the following:
            ``(14) the computer donation credit determined under 
        section 45E(a).''.
    (c) Disallowance of Deduction by Amount of Credit.--Section 280C 
(relating to certain expenses for which credits are allowable) is 
amended by adding at the end the following:
    ``(d) Credit for Computer Donations.--No deduction shall be allowed 
for that portion of the qualified computer contributions (as defined in 
section 45E(b)) made during the taxable year that is equal to the 
amount of credit determined for the taxable year under section 45E(a). 
In the case of a corporation which is a member of a controlled group of 
corporations (within the meaning of section 52(a)) or a trade or 
business which is treated as being under common control with other 
trades or businesses (within the meaning of section 52(b)), this 
subsection shall be applied under rules prescribed by the Secretary 
similar to the rules applicable under subsections (a) and (b) of 
section 52.''.
    (d) Limitation on Carryback.--Subsection (d) of section 39 
(relating to carryback and carryforward of unused credits) is amended 
by adding at the end the following:
            ``(9) No carryback of computer donation credit before 
        effective date.--No amount of unused business credit available 
        under section 45E may be carried back to a taxable year 
        beginning on or before the date of the enactment of this 
        paragraph.''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1, as amended by this Act, is 
amended by inserting after the item relating to section 45D the 
following:

                              ``Sec. 45E. Credit for computer donations 
                                        to schools and senior 
                                        centers.''.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        made in taxable years beginning after the date of the enactment 
        of this Act.
            (2) Certain contributions.--The amendments made by this 
        section shall apply to contributions made to an organization or 
        entity not described in section 45E(c) of the Internal Revenue 
        Code of 1986, as added by subsection (a), in taxable years 
        beginning after the date that is one year after the date of the 
        enactment of this Act.

SEC. 1126. INCREASE IN MANDATORY SPENDING FOR CHILD CARE AND 
              DEVELOPMENT BLOCK GRANT.

    Section 418(a)(3) of the Social Security Act (42 U.S.C. 618(a)(3)) 
is amended--
            (1) in subparagraph (E), by striking ``and'' at the end;
            (2) in subparagraph (F), by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(E) $3,918,000,000 for fiscal year 2002;
                    ``(F) $3,979,000,000 for fiscal year 2003;
                    ``(G) $4,010,000,000 for fiscal year 2004;
                    ``(H) $3,860,000,000 for fiscal year 2005;
                    ``(I) $3,954,000,000 for fiscal year 2006;
                    ``(J) $4,004,000,000 for fiscal year 2007;
                    ``(K) $4,073,000,000 for fiscal year 2008; and
                    ``(L) $4,075,000,000 for fiscal year 2009.''.

SEC. 1127. SENSE OF THE SENATE REGARDING SAVINGS INCENTIVES.

    It is the sense of the Senate that before December 31, 1999, 
Congress should pass legislation that creates savings incentives by 
providing a partial Federal income tax exclusion for income derived 
from interest and dividends of no less than $400 for married taxpayers 
and $200 for single taxpayers.

SEC. 1128. SENSE OF CONGRESS REGARDING THE NEED FOR ADDITIONAL FEDERAL 
              FUNDING AND TAX INCENTIVES FOR EMPOWERMENT ZONES AND 
              ENTERPRISE COMMUNITIES AUTHORIZED AND DESIGNATED PURSUANT 
              TO 1997 AND 1998 LAWS.

    (a) Findings.--The Senate finds that--
            (1) providing Federal tax incentives and other incentives 
        to distressed communities across the Nation to help them 
        rebuild and grow was one of the important goals of the Taxpayer 
        Relief Act of 1997 and the Omnibus Consolidated and Emergency 
        Supplemental Appropriations Act, 1999;
            (2) to help reach that goal, the Taxpayer Relief Act of 
        1997 authorized 20 additional empowerment zones, 15 urban and 5 
        rural, followed by 20 new rural enterprise communities 
        authorized in 1998;
            (3) the 1997 law authorizing this second round of 
        empowerment zones (EZs) was also significant and important 
        because it broadened empowerment zone eligibility, for the 
        first time, to Indian tribes and rural regions suffering from 
        massive out-migration;
            (4) many of our urban and rural communities are not sharing 
        in the benefits of the prolonged economic expansion now enjoyed 
        by many other parts of our country;
            (5) a total of more than 250 economically distressed urban 
        and rural communities competed for the 20 new empowerment zones 
        and 20 new rural enterprise communities, and those areas 
        designated as zones and communities should be provided with the 
        Federal incentives and encouragement they need to attract new 
        businesses, and the jobs they provide, in order to stimulate 
        economic growth and improvement;
            (6) unfortunately, those areas that are designated EZs or 
        ECs under the 1997 and 1998 laws or rural economic area 
        partnerships (REAPs) by the Department of Agriculture, are not 
        given the full advantage of Social Services Block Grant funds, 
        tax credits, and some other Federal incentives that Congress 
        provided to the first round of empowerment zones and enterprise 
        communities authorized pursuant to 1993 budget legislation;
            (7) Congress should act swiftly to provide such designated 
        areas an equal share of tax incentives, grant benefits, and 
        other Federal support at aggregate levels of at least that 
        provided by Congress to distressed urban and rural empowerment 
        zones and enterprise communities pursuant to the 1993 omnibus 
        budget reconciliation bill; and
            (8) a fully funded second round of EZs and ECs is estimated 
        to create and retain about 90,000 jobs and stimulate 
        $10,000,000,000 in private and public investments over the next 
        decade.
    (b) Sense of Congress.--It is the sense of Congress that--
            (1) if Congress and the President agree to a substantial 
        tax relief measure, it should ensure that such measure includes 
        full funding for the second round of empowerment zones and 
        enterprise communities authorized in 1997 and 1998 as well as 
        those areas currently designated rural economic area 
        partnerships (REAPs) by the Department of Agriculture; and
            (2) all such designated distressed areas, rural and urban, 
        should equally share at least the same aggregate level of 
        funding, tax incentives, and other Federal support that 
        Congress provided to urban and rural empowerment zones and 
        enterprise communities authorized by the 1993 omnibus budget 
        reconciliation bill.

SEC. 1129. SENSE OF CONGRESS REGARDING THE NEED TO ENCOURAGE 
              IMPROVEMENTS IN MAIN STREET BUSINESSES BY EXPANDING 
              EXISTING SMALL BUSINESS TAX EXPENSING RULES TO INCLUDE 
              INVESTMENTS IN BUILDINGS AND OTHER DEPRECIABLE REAL 
              PROPERTY.

    (a) Findings.--Congress finds that--
            (1) under current tax law, small businesses can immediately 
        deduct, that is, ``expense'', up to $19,000 in purchases of 
        equipment and similar assets;
            (2) there is bipartisan support for increasing the amount 
        of this expensing provision because it helps many small 
        businesses make the investments in equipment and machinery they 
        need by allowing them to immediately write off the costs of 
        such investments and bolstering their cash flow;
            (3) this expensing provision, however, is not as helpful as 
        it could be for some small businesses because it does not cover 
        their investments in improving the storefront or the buildings 
        in which they conduct their business;
            (4) in many small towns, the local drug store, shoe store, 
        or grocery store doesn't have much need for new equipment, but 
        it does need to improve the storefront or the interior;
            (5) although such investments are good for Main Streets 
        across this Nation, our current tax law creates a disincentive 
        to make them by requiring a small business owner to depreciate 
        the costs of the building improvements over 39 years for tax 
        purposes;
            (6) legislation to expand the current expensing provision 
        to cover investments in depreciable real property was recently 
        introduced in the Senate with broad bipartisan cosponsorship, 
        including the leaders of the Republican and Democratic parties;
            (7) this proposal is also strongly supported by small 
        business-oriented trade groups, including the National 
        Federation of Independent Business, the Small Business 
        Legislative Council, and the National Association of Realtors;
            (8) the Department of the Treasury is currently conducting 
        a comprehensive study of all depreciation provisions in our tax 
        laws; and
            (9) Congress should consider expanding the existing 
        expensing provision to cover investments in storefront 
        improvements and other depreciable real property in any reform 
        legislation that results from this study or, if possible, in 
        any earlier legislation.
    (b) Sense of Congress.--It is the sense of Congress that--
            (1) many small businesses trying to improve their 
        storefronts on Main Street or investing to upgrade their 
        property would benefit if Congress expanded the existing 
        expensing provision to cover investments in depreciable real 
        property; and
            (2) Congress should consider including this proposal in any 
        future tax legislation.

SEC. 1130. CERTAIN NATIVE AMERICAN HOUSING ASSISTANCE DISREGARDED IN 
              DETERMINING WHETHER BUILDING IS FEDERALLY SUBSIDIZED FOR 
              PURPOSES OF THE LOW-INCOME HOUSING CREDIT.

    (a) In General.--Subparagraph (E) of section 42(i)(2) of the 
Internal Revenue Code of 1986 (relating to determination of whether 
building is federally subsidized) is amended--
            (1) in clause (i), by inserting ``or the Native American 
        Housing Assistance and Self-Determination Act of 1996 (25 
        U.S.C. 4101 et seq.) (as in effect on October 1, 1997)'' after 
        ``this subparagraph)'', and
            (2) in the subparagraph heading, by inserting ``or native 
        american housing assistance'' after ``home assistance''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to periods after the date of the enactment of this Act.

SEC. 1131. DISCLOSURE OF TAX INFORMATION TO FACILITATE COMBINED 
              EMPLOYMENT TAX REPORTING.

    Section 6103(d)(5) of the Internal Revenue Code of 1986 is amended 
to read as follows:
            ``(5) Disclosure for combined employment tax reporting.--
        The Secretary may disclose taxpayer identity information and 
        signatures to any agency, body, or commission of any State for 
        the purpose of carrying out with such agency, body, or 
        commission a combined Federal and State employment tax 
        reporting program approved by the Secretary. Subsections (a)(2) 
        and (p)(4) and sections 7213 and 7213A shall not apply with 
        respect to disclosures or inspections made pursuant to this 
        paragraph.''.

SEC. 1132. TREATMENT OF MAPLE SYRUP PRODUCTION.

    Line 3 of subsection (k) of section 3306 of the Internal Revenue 
Code of 1986 is amended by inserting after ``chapter'' the following: 
``agricultural labor includes labor connected to the harvesting or 
production of maple sap into maple syrup or sugar, and''.

SEC. 1133. TREATMENT OF BONDS ISSUED TO ACQUIRE RENEWABLE RESOURCES ON 
              LAND SUBJECT TO CONSERVATION EASEMENT.

    (a) In General.--Section 145 (defining qualified 501(c)(3) bond) is 
amended by redesignating subsection (e) as subsection (f) and by 
inserting after subsection (d) the following new subsection:
    ``(e) Bonds Issued To Acquire Renewable Resources on Land Subject 
to Conservation Easement.--
            ``(1) In general.--If--
                    ``(A) the proceeds of any bond are used to acquire 
                land (or a long-term lease thereof) together with any 
                renewable resource associated with the land (including 
                standing timber, agricultural crops, or water rights) 
                from an unaffiliated person,
                    ``(B) the land is subject to a conservation 
                restriction--
                            ``(i) which is granted in perpetuity to an 
                        unaffiliated person that is--
                                    ``(I) a 501(c)(3) organization, or
                                    ``(II) a Federal, State, or local 
                                government conservation organization,
                            ``(ii) which meets the requirements of 
                        clauses (ii) and (iii)(II) of section 
                        170(h)(4)(A),
                            ``(iii) which exceeds the requirements of 
                        relevant environmental and land use statutes 
                        and regulations, and
                            ``(iv) which obligates the owner of the 
                        land to pay the costs incurred by the holder of 
                        the conservation restriction in monitoring 
                        compliance with such restriction,
                    ``(C) a management plan which meets the 
                requirements of the statutes and regulations referred 
                to in subparagraph (B)(iii) is developed for the 
                conservation of the renewable resources, and
                    ``(D) such bond would be a qualified 501(c)(3) bond 
                (after the application of paragraph (2)) but for the 
                failure to use revenues derived by the 501(c)(3) 
                organization from the sale, lease, or other use of such 
                resource as otherwise required by this part,
        such bond shall not fail to be a qualified 501(c)(3) bond by 
        reason of the failure to so use such revenues if the revenues 
        which are not used as otherwise required by this part are used 
        in a manner consistent with the stated charitable purposes of 
        the 501(c)(3) organization.
            ``(2) Treatment of timber, etc.--
                    ``(A) In general.--For purposes of subsection (a), 
                the cost of any renewable resource acquired with 
                proceeds of any bond described in paragraph (1) shall 
                be treated as a cost of acquiring the land associated 
                with the renewable resource and such land shall not be 
                treated as used for a private business use because of 
                the sale or leasing of the renewable resource to, or 
                other use of the renewable resource by, an unaffiliated 
                person to the extent that such sale, leasing, or other 
                use does not constitute an unrelated trade or business, 
                determined by applying section 513(a).
                    ``(B) Application of bond maturity limitation.--For 
                purposes of section 147(b), the cost of any land or 
                renewable resource acquired with proceeds of any bond 
                described in paragraph (1) shall have an economic life 
                commensurate with the economic and ecological 
                feasibility of the financing of such land or renewable 
                resource.
                    ``(C) Unaffiliated person.--For purposes of this 
                subsection, the term `unaffiliated person' means any 
                person who controls not more than 20 percent of the 
                governing body of another person.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 1134. MODIFICATION OF ALTERNATIVE MINIMUM TAX FOR INDIVIDUALS.

    Section 56(b)(1)(E), as amended by section 206, is amended by 
striking ``$250'' and inserting ``$300''.

SEC. 1135. EXCLUSION FROM INCOME OF SEVERANCE PAYMENT AMOUNTS.

    (a) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by 
redesignating section 139 as section 140 and by inserting after section 
138 the following new section:

``SEC. 139. SEVERANCE PAYMENTS.

    ``(a) In General.--In the case of an individual, gross income shall 
not include any qualified severance payment.
    ``(b) Limitation.--The amount to which the exclusion under 
subsection (a) applies shall not exceed $2,000 with respect to any 
separation from employment.
    ``(c) Qualified Severance Payment.--For purposes of this section--
            ``(1) In general.--The term `qualified severance payment' 
        means any payment received by an individual if--
                    ``(A) such payment was paid by such individual's 
                employer on account of such individual's separation 
                from employment,
                    ``(B) such separation was in connection with a 
                reduction in the work force of the employer, and
                    ``(C) such individual does not attain employment 
                within 6 months of the date of such separation in which 
                the amount of compensation is equal to or greater than 
                95 percent of the amount of compensation for the 
                employment that is related to such payment.
            ``(2) Limitation.--Such term shall not include any payment 
        received by an individual if the aggregate payments received 
        with respect to the separation from employment exceed 
        $75,000.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 139 and inserting the following new items:

                              ``Sec. 139. Severance payments.
                              ``Sec. 140. Cross references to other 
                                        Acts.''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to taxable years beginning after December 31, 2000, and 
before January 1, 2002.

SEC. 1136. CAPITAL GAIN TREATMENT UNDER SECTION 631(B) TO APPLY TO 
              OUTRIGHT SALES BY LAND OWNER.

    (a) In General.--Subsection (b) of section 631 (relating to 
disposal of timber with a retained economic interest) is amended--
            (1) by inserting ``and Outright Sales of Timber'' after 
        ``Economic Interest'' in the subsection heading, and
            (2) by adding before the last sentence the following new 
        sentence: ``The requirement in the first sentence of this 
        subsection to retain an economic interest in timber shall not 
        apply to an outright sale of such timber by the owner thereof 
        if such owner owned the land (at the time of such sale) from 
        which the timber is cut.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to sales after the date of the enactment of this Act.

SEC. 1137. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE 
              TO CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING 
              TEACHING HOSPITALS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by inserting after 
section 41 the following:

``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.

    ``(a) General Rule.--For purposes of section 38, the medical 
innovation credit determined under this section for the taxable year 
shall be an amount equal to 40 percent of the excess (if any) of--
            ``(1) the qualified medical innovation expenses for the 
        taxable year, over
            ``(2) the medical innovation base period amount.
    ``(b) Qualified Medical Innovation Expenses.--For purposes of this 
section--
            ``(1) In general.--The term `qualified medical innovation 
        expenses' means the amounts which are paid or incurred by the 
        taxpayer during the taxable year directly or indirectly to any 
        qualified academic institution for clinical testing research 
        activities.
            ``(2) Clinical testing research activities.--
                    ``(A) In general.--The term `clinical testing 
                research activities' means human clinical testing 
                conducted at any qualified academic institution in the 
                development of any product, which occurs before--
                            ``(i) the date on which an application with 
                        respect to such product is approved under 
                        section 505(b), 506, or 507 of the Federal 
                        Food, Drug, and Cosmetic Act (as in effect on 
                        the date of the enactment of this section),
                            ``(ii) the date on which a license for such 
                        product is issued under section 351 of the 
                        Public Health Service Act (as so in effect), or
                            ``(iii) the date classification or approval 
                        of such product which is a device intended for 
                        human use is given under section 513, 514, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (as so in effect).
                    ``(B) Product.--The term `product' means any drug, 
                biologic, or medical device.
            ``(3) Qualified academic institution.--The term `qualified 
        academic institution' means any of the following institutions:
                    ``(A) Educational institution.--A qualified 
                organization described in section 170(b)(1)(A)(iii) 
                which is owned by, or affiliated with, an institution 
                of higher education (as defined in section 3304(f)).
                    ``(B) Teaching hospital.--A teaching hospital 
                which--
                            ``(i) is publicly supported or owned by an 
                        organization described in section 501(c)(3), 
                        and
                            ``(ii) is affiliated with an organization 
                        meeting the requirements of subparagraph (A).
                    ``(C) Foundation.--A medical research organization 
                described in section 501(c)(3) (other than a private 
                foundation) which is affiliated with, or owned by--
                            ``(i) an organization meeting the 
                        requirements of subparagraph (A), or
                            ``(ii) a teaching hospital meeting the 
                        requirements of subparagraph (B).
                    ``(D) Charitable research hospital.--A hospital 
                that is designated as a cancer center by the National 
                Cancer Institute.
            ``(4) Exclusion for amounts funded by grants, etc.--The 
        term `qualified medical innovation expenses' shall not include 
        any amount to the extent such amount is funded by any grant, 
        contract, or otherwise by another person (or any governmental 
        entity).
    ``(c) Medical Innovation Base Period Amount.--For purposes of this 
section, the term `medical innovation base period amount' means the 
average annual qualified medical innovation expenses paid by the 
taxpayer during the 3-taxable year period ending with the taxable year 
immediately preceding the first taxable year of the taxpayer beginning 
after December 31, 1998.
    ``(d) Special Rules.--
            ``(1) Limitation on foreign testing.--No credit shall be 
        allowed under this section with respect to any clinical testing 
        research activities conducted outside the United States.
            ``(2) Certain rules made applicable.--Rules similar to the 
        rules of subsections (f) and (g) of section 41 shall apply for 
        purposes of this section.
            ``(3) Election.--This section shall apply to any taxpayer 
        for any taxable year only if such taxpayer elects to have this 
        section apply for such taxable year.
            ``(4) Coordination with credit for increasing research 
        expenditures and with credit for clinical testing expenses for 
        certain drugs for rare diseases.--Any qualified medical 
        innovation expense for a taxable year to which an election 
        under this section applies shall not be taken into account for 
        purposes of determining the credit allowable under section 41 
        or 45C for such taxable year.''.
    (b) Credit To Be Part of General Business Credit.--
            (1) In general.--Section 38(b) (relating to current year 
        business credits), as amended by this Act, is amended by 
        striking ``plus'' at the end of paragraph (14), by striking the 
        period at the end of paragraph (15) and inserting ``, plus'', 
        and by adding at the end the following:
            ``(16) the medical innovation expenses credit determined 
        under section 41A(a).''.
            (2) Transition rule.--Section 39(d), as amended by this 
        Act, is amended by adding at the end the following new 
        paragraph:
            ``(11) No carryback of section 41a credit before 
        enactment.--No portion of the unused business credit for any 
        taxable year which is attributable to the medical innovation 
        credit determined under section 41A may be carried back to a 
        taxable year beginning before January 1, 1999.''.
    (c) Denial of Double Benefit.--Section 280C, as amended by this 
Act, is amended by adding at the end the following new subsection:
    ``(e) Credit for Increasing Medical Innovation Expenses.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the qualified medical innovation expenses (as 
        defined in section 41A(b)) otherwise allowable as a deduction 
        for the taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 41A(a).
            ``(2) Certain rules to apply.--Rules similar to the rules 
        of paragraphs (2), (3), and (4) of subsection (c) shall apply 
        for purposes of this subsection.''.
    (d) Deduction for Unused Portion of Credit.--Section 196(c) 
(defining qualified business credits) is amended by redesignating 
paragraphs (5) through (8) as paragraphs (6) through (9), respectively, 
and by inserting after paragraph (4) the following new paragraph:
            ``(5) the medical innovation expenses credit determined 
        under section 41A(a) (other than such credit determined under 
        the rules of section 280C(d)(2)),''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding after the 
item relating to section 41 the following:

                              ``Sec. 41A. Credit for medical innovation 
                                        expenses.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

        TITLE XII--EXTENSION OF EXPIRED AND EXPIRING PROVISIONS

SEC. 1201. PERMANENT EXTENSION AND MODIFICATION OF RESEARCH CREDIT.

    (a) Permanent Extension.--
            (1) In general.--Section 41 (relating to credit for 
        increasing research activities) is amended by striking 
        subsection (h).
            (2) Conforming amendment.--Paragraph (1) of section 45C(b) 
        is amended by striking subparagraph (D).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred after June 30, 1999.
    (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, 1999.

SEC. 1202. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

    (a) In General.--Sections 953(e)(10) and 954(h)(9) are each 
amended--
            (1) by striking ``the first taxable year'' and inserting 
        ``taxable years'', and
            (2) by striking ``January 1, 2000'' and inserting ``January 
        1, 2005''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 1203. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR MARGINAL 
              PRODUCTION.

    (a) In General.--Subparagraph (H) of section 613A(c)(6) is amended 
by striking ``January 1, 2000'' and inserting ``January 1, 2005''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1999.

SEC. 1204. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

    (a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f) (relating 
to termination) are each amended by striking ``June 30, 1999'' and 
inserting ``June 30, 2004''.
    (b) Clarification of First Year of Employment.--Paragraph (2) of 
section 51(i) is amended by striking ``during which he was not a member 
of a targeted group''.
    (c) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after June 30, 
1999.

SEC. 1205. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING 
              ELECTRICITY FROM CERTAIN RENEWABLE RESOURCES.

    (a) Extension and Modification of Placed-in-Service Rules.--
Paragraph (3) of section 45(c) is amended to read as follows:
            ``(3) Qualified facility.--
                    ``(A) Wind facility.--In the case of a facility 
                using wind to produce electricity, the term `qualified 
                facility' means any facility owned by the taxpayer 
                which is originally placed in service after December 
                31, 1993, and before July 1, 2004.
                    ``(B) Closed-loop biomass facility.--In the case of 
                a facility using closed-loop biomass to produce 
                electricity, the term `qualified facility' means any 
                facility owned by the taxpayer which is originally 
                placed in service after December 31, 1992, and before 
                July 1, 2004.
                    ``(C) Biomass facility.--In the case of a facility 
                using biomass (other than closed-loop biomass) to 
                produce electricity, the term `qualified facility' 
                means any facility owned by the taxpayer which is 
                originally placed in service before January 1, 2003.
                    ``(D) Landfill gas or poultry waste facility.--
                            ``(i) In general.--In the case of a 
                        facility using landfill gas or poultry waste to 
                        produce electricity, the term `qualified 
                        facility' means any facility of the taxpayer 
                        which is originally placed in service after 
                        December 31, 1999, and before July 1, 2004.
                            ``(ii) Landfill gas.--In the case of a 
                        facility using landfill gas, such term shall 
                        include equipment and housing (not including 
                        wells and related systems required to collect 
                        and transmit gas to the production facility) 
                        required to generate electricity which are 
                        owned by the taxpayer and so placed in service.
                    ``(E) Special rule.--In the case of a qualified 
                facility described in subparagraph (C), the 10-year 
                period referred to in subsection (a) shall be treated 
                as beginning no earlier than January 1, 2000.''.
    (b) Expansion of Qualified Energy Resources.--
            (1) In general.--Section 45(c)(1) (defining qualified 
        energy resources) is amended by striking ``and'' at the end of 
        subparagraph (A), by striking the period at the end of 
        subparagraph (B) and inserting a comma, and by adding at the 
        end the following new subparagraphs:
                    ``(C) biomass (other than closed-loop biomass),
                    ``(B) landfill gas, and
                    ``(C) poultry waste.''.
            (2) Definitions.--Section 45(c) is amended by redesignating 
        paragraph (3) as paragraph (6) and inserting after paragraph 
        (2) the following new paragraphs:
            ``(3) Biomass.--The term `biomass' means any solid, 
        nonhazardous, cellulosic waste material which is segregated 
        from other waste materials and which is derived from--
                    ``(A) any of the following forest-related 
                resources: mill residues, precommercial thinnings, 
                slash, and brush, but not including old-growth timber,
                    ``(B) urban sources, including waste pallets, 
                crates, and dunnage, manufacturing and construction 
                wood wastes, and landscape or right-of-way tree 
                trimmings, but not including unsegregated municipal 
                solid waste (garbage) or paper that is commonly 
                recycled, or
                    ``(C) agriculture sources, including orchard tree 
                crops, vineyard, grain, legumes, sugar, and other crop 
                by-products or residues.
            ``(4) Landfill gas.--The term `landfill gas' means gas from 
        the decomposition of any household solid waste, commercial 
        solid waste, and industrial solid waste disposed of in a 
        municipal solid waste landfill unit (as such terms are defined 
        in regulations promulgated under subtitle D of the Solid Waste 
        Disposal Act (42 U.S.C. 6941 et seq.)).
            ``(5) Poultry waste.--The term `poultry waste' means 
        poultry manure and litter, including wood shavings, straw, rice 
        hulls, and other bedding material for the disposition of 
        manure.''.
    (c) Special Rules.--Section 45(d) (relating to definitions and 
special rules) is amended by adding at the end the following new 
paragraphs:
            ``(6) Credit eligibility in the case of government-owned 
        facilities using poultry waste.--In the case of a facility 
        using poultry waste to produce electricity and owned by a 
        governmental unit, the person eligible for the credit under 
        subsection (a) is the lessor or the operator of such facility.
            ``(7) Proportional credit for facility using coal to co-
        fire with certain biomass.--In the case of a qualified facility 
        as defined in subsection (c)(3)(C) using coal to co-fire with 
        biomass (other than closed-loop biomass), the amount of the 
        credit determined under subsection (a) for the taxable year 
        shall be reduced by the percentage coal comprises (on a Btu 
        basis) of the average fuel input of the facility for the 
        taxable year.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 1206. ALASKA EXEMPTION FROM DYEING REQUIREMENTS.

    (a) Exception to Dyeing Requirements for Exempt Diesel Fuel and 
Kerosene.--Paragraph (1) of section 4082(c) (relating to exception to 
dyeing requirements) is amended to read as follows:
            ``(1) removed, entered, or sold in the State of Alaska for 
        ultimate sale or use in such State, and''.
    (b) Effective Date.--The amendment made by this section applies 
with respect to fuel removed, entered, or sold on or after the date of 
the enactment of this Act.

SEC. 1207. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

    (a) Extension of Termination Date.--Subsection (h) of section 198 
is amended by striking ``December 31, 2000'' and inserting ``June 30, 
2004''.
    (b) Expansion of Qualified Contaminated Site.--Section 198(c) is 
amended to read as follows:
    ``(c) Qualified Contaminated Site.--For purposes of this section--
            ``(1) In general.--The term `qualified contaminated site' 
        means any area--
                    ``(A) which is held by the taxpayer for use in a 
                trade or business or for the production of income, or 
                which is property described in section 1221(1) in the 
                hands of the taxpayer, and
                    ``(B) at or on which there has been a release (or 
                threat of release) or disposal of any hazardous 
                substance.
            ``(2) National priorities listed sites not included.--Such 
        term shall not include any site which is on, or proposed for, 
        the national priorities list under section 105(a)(8)(B) of the 
        Comprehensive Environmental Response, Compensation, and 
        Liability Act of 1980 (as in effect on the date of the 
        enactment of this section).
            ``(3) Taxpayer must receive statement from state 
        environmental agency.--An area shall be treated as a qualified 
        contaminated site with respect to expenditures paid or incurred 
        during any taxable year only if the taxpayer receives a 
        statement from the appropriate agency of the State in which 
        such area is located that such area meets the requirement of 
        paragraph (1)(B).
            ``(4) Appropriate state agency.--For purposes of paragraph 
        (2), the chief executive officer of each State may, in 
        consultation with the Administrator of the Environmental 
        Protection Agency, designate the appropriate State 
        environmental agency within 60 days of the date of the 
        enactment of this section. If the chief executive officer of a 
        State has not designated an appropriate State environmental 
        agency within such 60-day period, the appropriate environmental 
        agency for such State shall be designated by the Administrator 
        of the Environmental Protection Agency.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred after December 31, 1999.

                      TITLE XIII--REVENUE OFFSETS

                     Subtitle A--General Provisions

SEC. 1301. MODIFICATION TO FOREIGN TAX CREDIT CARRYBACK AND CARRYOVER 
              PERIODS.

    (a) In General.--Section 904(c) (relating to limitation on credit) 
is amended--
            (1) by striking ``in the second preceding taxable year,'', 
        and
            (2) by striking ``or fifth'' and inserting ``fifth, sixth, 
        or seventh''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to credits arising in taxable years beginning after December 31, 
1999.

SEC. 1302. RETURNS RELATING TO CANCELLATIONS OF INDEBTEDNESS BY 
              ORGANIZATIONS LENDING MONEY.

    (a) In General.--Paragraph (2) of section 6050P(c) (relating to 
definitions and special rules) is amended by striking ``and'' at the 
end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, and'', and by inserting after 
subparagraph (C) the following new subparagraph:
                    ``(D) any organization a significant trade or 
                business of which is the lending of money.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to discharges of indebtedness after December 31, 1999.

SEC. 1303. INCREASE IN ELECTIVE WITHHOLDING RATE FOR NONPERIODIC 
              DISTRIBUTIONS FROM DEFERRED COMPENSATION PLANS.

    (a) In General.--Section 3405(b)(1) (relating to withholding) is 
amended by striking ``10 percent'' and inserting ``15 percent''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions after December 31, 2000.

SEC. 1304. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section:

``SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.

    ``(a) General Rule.--The Secretary shall establish a program 
requiring the payment of user fees for--
            ``(1) requests to the Internal Revenue Service for ruling 
        letters, opinion letters, and determination letters, and
            ``(2) other similar requests.
    ``(b) Program Criteria.--
            ``(1) In general.--The fees charged under the program 
        required by subsection (a)--
                    ``(A) shall vary according to categories (or 
                subcategories) established by the Secretary,
                    ``(B) shall be determined after taking into account 
                the average time for (and difficulty of) complying with 
                requests in each category (and subcategory), and
                    ``(C) shall be payable in advance.
            ``(2) Exemptions, etc.--The Secretary shall provide for 
        such exemptions (and reduced fees) under such program as the 
        Secretary determines to be appropriate.
            ``(3) Average fee requirement.--The average fee charged 
        under the program required by subsection (a) shall not be less 
        than the amount determined under the following table:

``Category                                                  Average Fee
    Employee plan ruling and opinion..............                $250 
    Exempt organization ruling....................                $350 
    Employee plan determination...................                $300 
    Exempt organization determination.............                $275 
    Chief counsel ruling..........................                $200.
    ``(c) Termination.--No fee shall be imposed under this section with 
respect to requests made after September 30, 2009.''.
    (b) Conforming Amendments.--
            (1) The table of sections for chapter 77 is amended by 
        adding at the end the following new item:

                              ``Sec. 7527. Internal Revenue Service 
                                        user fees.''.
            (2) Section 10511 of the Revenue Act of 1987 is repealed.
    (c) Effective Date.--The amendments made by this section shall 
apply to requests made after the date of the enactment of this Act.

SEC. 1305. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR RETIREE 
              HEALTH BENEFITS.

    (a) Extension.--
            (1) In General.--Paragraph (5) of section 420(b) (relating 
        to expiration) is amended by striking ``in any taxable year 
        beginning after December 31, 2000'' and inserting ``made after 
        September 30, 2009''.
            (2) Conforming amendments.--
                    (A) Section 101(e)(3) of the Employee Retirement 
                Income Security Act of 1974 (29 U.S.C. 1021(e)(3)) is 
                amended by striking ``1995'' and inserting ``2001''.
                    (B) Section 403(c)(1) of such Act (29 U.S.C. 
                1103(c)(1)) is amended by striking ``1995'' and 
                inserting ``2001''.
                    (C) Paragraph (13) of section 408(b) of such Act 
                (29 U.S.C. 1108(b)(13)) is amended--
                            (i) by striking ``in a taxable year 
                        beginning before January 1, 2001'' and 
                        inserting ``made before October 1, 2009'', and
                            (ii) by striking ``1995'' and inserting 
                        ``2001''.
    (b) Application of Minimum Cost Requirements.--
            (1) In general.--Paragraph (3) of section 420(c) is amended 
        to read as follows:
            ``(3) Minimum cost requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if each group health plan or 
                arrangement under which applicable health benefits are 
                provided provides that the applicable employer cost for 
                each taxable year during the cost maintenance period 
                shall not be less than the higher of the applicable 
                employer costs for each of the 2 taxable years 
                immediately preceding the taxable year of the qualified 
                transfer.
                    ``(B) Applicable employer cost.--For purposes of 
                this paragraph, the term `applicable employer cost' 
                means, with respect to any taxable year, the amount 
                determined by dividing--
                            ``(i) the qualified current retiree health 
                        liabilities of the employer for such taxable 
                        year determined--
                                    ``(I) without regard to any 
                                reduction under subsection (e)(1)(B), 
                                and
                                    ``(II) in the case of a taxable 
                                year in which there was no qualified 
                                transfer, in the same manner as if 
                                there had been such a transfer at the 
                                end of the taxable year, by
                            ``(ii) the number of individuals to whom 
                        coverage for applicable health benefits was 
                        provided during such taxable year.
                    ``(C) Election to compute cost separately.--An 
                employer may elect to have this paragraph applied 
                separately with respect to individuals eligible for 
                benefits under title XVIII of the Social Security Act 
                at any time during the taxable year and with respect to 
                individuals not so eligible.
                    ``(D) Cost maintenance period.--For purposes of 
                this paragraph, the term `cost maintenance period' 
                means the period of 5 taxable years beginning with the 
                taxable year in which the qualified transfer occurs. If 
                a taxable year is in 2 or more overlapping cost 
                maintenance periods, this paragraph shall be applied by 
                taking into account the highest applicable employer 
                cost required to be provided under subparagraph (A) for 
                such taxable year.''.
            (2) Conforming amendments.--
                    (A) Clause (iii) of section 420(b)(1)(C) is amended 
                by striking ``benefits'' and inserting ``cost''.
                    (B) Subparagraph (D) of section 420(e)(1) is 
                amended by striking ``and shall not be subject to the 
                minimum benefit requirements of subsection (c)(3)'' and 
                inserting ``or in calculating applicable employer cost 
                under subsection (c)(3)(B)''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to qualified transfers occurring after the date of the 
        enactment of this Act.
            (2) Transition rule.--If the cost maintenance period for 
        any qualified transfer after the date of the enactment of this 
        Act includes any portion of a benefit maintenance period for 
        any qualified transfer on or before such date, the amendments 
        made by subsection (b) shall not apply to such portion of the 
        cost maintenance period (and such portion shall be treated as a 
        benefit maintenance period).

SEC. 1306. TAX TREATMENT OF INCOME AND LOSS ON DERIVATIVES.

    (a) In General.--Section 1221 (defining capital assets) is 
amended--
            (1) by striking ``For purposes'' and inserting the 
        following:
    ``(a) In General.--For purposes'',
            (2) by striking the period at the end of paragraph (5) and 
        inserting a semicolon, and
            (3) by adding at the end the following:
            ``(6) any commodities derivative financial instrument held 
        by a commodities derivatives dealer, unless--
                    ``(A) it is established to the satisfaction of the 
                Secretary that such instrument has no connection to the 
                activities of such dealer as a dealer, and
                    ``(B) such instrument is clearly identified in such 
                dealer's records as being described in subparagraph (A) 
                before the close of the day on which it was acquired, 
                originated, or entered into (or such other time as the 
                Secretary may by regulations prescribe);
            ``(7) any hedging transaction which is clearly identified 
        as such before the close of the day on which it was acquired, 
        originated, or entered into (or such other time as the 
        Secretary may by regulations prescribe); or
            ``(8) supplies of a type regularly used or consumed by the 
        taxpayer in the ordinary course of a trade or business of the 
        taxpayer.
    ``(b) Definitions and Special Rules.--
            ``(1) Commodities derivative financial instruments.--For 
        purposes of subsection (a)(6)--
                    ``(A) Commodities derivatives dealer.--The term 
                `commodities derivatives dealer' means a person which 
                regularly offers to enter into, assume, offset, assign, 
                or terminate positions in commodities derivative 
                financial instruments with customers in the ordinary 
                course of a trade or business.
                    ``(B) Commodities derivative financial 
                instrument.--
                            ``(i) In general.--The term `commodities 
                        derivative financial instrument' means any 
                        contract or financial instrument with respect 
                        to commodities (other than a share of stock in 
                        a corporation, a beneficial interest in a 
                        partnership or trust, a note, bond, debenture, 
                        or other evidence of indebtedness, or a section 
                        1256 contract (as defined in section 1256(b)), 
                        the value or settlement price of which is 
                        calculated by or determined by reference to a 
                        specified index.
                            ``(ii) Specified index.--The term 
                        `specified index' means any one or more or any 
                        combination of--
                                    ``(I) a fixed rate, price, or 
                                amount, or
                                    ``(II) a variable rate, price, or 
                                amount,
                        which is based on any current, objectively 
                        determinable financial or economic information 
                        with respect to commodities which is not within 
                        the control of any of the parties to the 
                        contract or instrument and is not unique to any 
                        of the parties' circumstances.
            ``(2) Hedging transaction.--
                    ``(A) In general.--For purposes of this section, 
                the term `hedging transaction' means any transaction 
                entered into by the taxpayer in the normal course of 
                the taxpayer's trade or business primarily--
                            ``(i) to manage risk of price changes or 
                        currency fluctuations with respect to ordinary 
                        property which is held or to be held by the 
                        taxpayer,
                            ``(ii) to manage risk of interest rate or 
                        price changes or currency fluctuations with 
                        respect to borrowings made or to be made, or 
                        ordinary obligations incurred or to be 
                        incurred, by the taxpayer, or
                            ``(iii) to manage such other risks as the 
                        Secretary may prescribe in regulations.
                    ``(B) Treatment of nonidentification or improper 
                identification of hedging transactions.--
                Notwithstanding subsection (a)(7), the Secretary shall 
                prescribe regulations to properly characterize any 
                income, gain, expense, or loss arising from a 
                transaction--
                            ``(i) which is a hedging transaction but 
                        which was not identified as such in accordance 
                        with subsection (a)(7), or
                            ``(ii) which was so identified but is not a 
                        hedging transaction.
            ``(3) Regulations.--The Secretary shall prescribe such 
        regulations as are appropriate to carry out the purposes of 
        paragraph (6) and (7) of subsection (a) in the case of 
        transactions involving related parties.''.
    (b) Management of Risk.--
            (1) Section 475(c)(3) is amended by striking ``reduces'' 
        and inserting ``manages''.
            (2) Section 871(h)(4)(C)(iv) is amended by striking ``to 
        reduce'' and inserting ``to manage''.
            (3) Clauses (i) and (ii) of section 988(d)(2)(A) are each 
        amended by striking ``to reduce'' and inserting ``to manage''.
            (4) Paragraph (2) of section 1256(e) is amended to read as 
        follows:
            ``(2) Definition of hedging transaction.--For purposes of 
        this subsection, the term `hedging transaction' means any 
        hedging transaction (as defined in section 1221(b)(2)(A)) if, 
        before the close of the day on which such transaction was 
        entered into (or such earlier time as the Secretary may 
        prescribe by regulations), the taxpayer clearly identifies such 
        transaction as being a hedging transaction.''.
    (c) Conforming Amendments.--
            (1) Each of the following sections are amended by striking 
        ``section 1221'' and inserting ``section 1221(a)'':
                    (A) Section 170(e)(3)(A).
                    (B) Section 170(e)(4)(B).
                    (C) Section 367(a)(3)(B)(i).
                    (D) Section 818(c)(3).
                    (E) Section 865(i)(1).
                    (F) Section 1092(a)(3)(B)(ii)(II).
                    (G) Subparagraphs (C) and (D) of section 
                1231(b)(1).
                    (H) Section 1234(a)(3)(A).
            (2) Each of the following sections are amended by striking 
        ``section 1221(1)'' and inserting ``section 1221(a)(1)'':
                    (A) Section 198(c)(1)(A)(i).
                    (B) Section 263A(b)(2)(A).
                    (C) Clauses (i) and (iii) of section 267(f)(3)(B).
                    (D) Section 341(d)(3).
                    (E) Section 543(a)(1)(D)(i).
                    (F) Section 751(d)(1).
                    (G) Section 775(c).
                    (H) Section 856(c)(2)(D).
                    (I) Section 856(c)(3)(C).
                    (J) Section 856(e)(1).
                    (K) Section 856(j)(2)(B).
                    (L) Section 857(b)(4)(B)(i).
                    (M) Section 857(b)(6)(B)(iii).
                    (N) Section 864(c)(4)(B)(iii).
                    (O) Section 864(d)(3)(A).
                    (P) Section 864(d)(6)(A).
                    (Q) Section 954(c)(1)(B)(iii).
                    (R) Section 995(b)(1)(C).
                    (S) Section 1017(b)(3)(E)(i).
                    (T) Section 1362(d)(3)(C)(ii).
                    (U) Section 4662(c)(2)(C).
                    (V) Section 7704(c)(3).
                    (W) Section 7704(d)(1)(D).
                    (X) Section 7704(d)(1)(G).
                    (Y) Section 7704(d)(5).
            (3) Section 818(b)(2) is amended by striking ``section 
        1221(2)'' and inserting ``section 1221(a)(2)''.
            (4) Section 1397B(e)(2) is amended by striking ``section 
        1221(4)'' and inserting ``section 1221(a)(4)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to any instrument held, acquired, or entered into, any 
transaction entered into, and supplies held or acquired on or after the 
date of enactment of this Act.

                      Subtitle B--Loophole Closers

SEC. 1311. LIMITATION ON USE OF NON-ACCRUAL EXPERIENCE METHOD OF 
              ACCOUNTING.

    (a) In General.--Section 448(d)(5) (relating to special rule for 
services) is amended--
            (1) by inserting ``in fields described in paragraph 
        (2)(A)'' after ``services by such person'', and
            (2) by inserting ``certain personal'' before ``services'' 
        in the heading.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after the date of the enactment 
        of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account over a period (not greater than 4 taxable 
                years) beginning with such first taxable year.

SEC. 1312. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10 OR MORE EMPLOYER 
              PLANS.

    (a) Benefits to Which Exception Applies.--Section 419A(f)(6)(A) 
(relating to exception for 10 or more employer plans) is amended to 
read as follows:
                    ``(A) In general.--This subpart shall not apply to 
                a welfare benefit fund which is part of a 10 or more 
                employer plan if the only benefits provided through the 
                fund are 1 or more of the following:
                            ``(i) Medical benefits.
                            ``(ii) Disability benefits.
                            ``(iii) Group term life insurance benefits 
                        which do not provide directly or indirectly for 
                        any cash surrender value or other money that 
                        can be paid, assigned, borrowed, or pledged for 
                        collateral for a loan.
                The preceding sentence shall not apply to any plan 
                which maintains experience-rating arrangements with 
                respect to individual employers.''.
    (b) Limitation on Use of Amounts for Other Purposes.--Section 
4976(b) (defining disqualified benefit) is amended by adding at the end 
the following new paragraph:
            ``(5) Special rule for 10 or more employer plans exempted 
        from prefunding limits.--For purposes of paragraph (1)(C), if--
                    ``(A) subpart D of part I of subchapter D of 
                chapter 1 does not apply by reason of section 
                419A(f)(6) to contributions to provide 1 or more 
                welfare benefits through a welfare benefit fund under a 
                10 or more employer plan, and
                    ``(B) any portion of the welfare benefit fund 
                attributable to such contributions is used for a 
                purpose other than that for which the contributions 
                were made,
        then such portion shall be treated as reverting to the benefit 
        of the employers maintaining the fund.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions paid or accrued after June 9, 1999, in taxable 
years ending after such date.

SEC. 1313. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF INSTALLMENT 
              METHOD FOR ACCRUAL METHOD TAXPAYERS.

    (a) Repeal of Installment Method for Accrual Basis Taxpayers.--
            (1) In general.--Subsection (a) of section 453 (relating to 
        installment method) is amended to read as follows:
    ``(a) Use of Installment Method.--
            ``(1) In general.--Except as otherwise provided in this 
        section, income from an installment sale shall be taken into 
        account for purposes of this title under the installment 
        method.
            ``(2) Accrual method taxpayer.--The installment method 
        shall not apply to income from an installment sale if such 
        income would be reported under an accrual method of accounting 
        without regard to this section. The preceding sentence shall 
        not apply to a disposition described in subparagraph (A) or (B) 
        of subsection (l)(2).''.
            (2) Conforming amendments.--Sections 453(d)(1), 453(i)(1), 
        and 453(k) are each amended by striking ``(a)'' each place it 
        appears and inserting ``(a)(1)''.
    (b) Modification of Pledge Rules.--Paragraph (4) of section 453A(d) 
(relating to pledges, etc., of installment obligations) is amended by 
adding at the end the following: ``A payment shall be treated as 
directly secured by an interest in an installment obligation to the 
extent an arrangement allows the taxpayer to satisfy all or a portion 
of the indebtedness with the installment obligation.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales or other dispositions occurring on or after the date of 
the enactment of this Act.

SEC. 1314. TREATMENT OF GAIN FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

    (a) In General.--Part IV of subchapter P of chapter 1 (relating to 
special rules for determining capital gains and losses) is amended by 
inserting after section 1259 the following new section:

``SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

    ``(a) In General.--If the taxpayer has gain from a constructive 
ownership transaction with respect to any financial asset and such gain 
would (without regard to this section) be treated as a long-term 
capital gain--
            ``(1) such gain shall be treated as ordinary income to the 
        extent that such gain exceeds the net underlying long-term 
        capital gain, and
            ``(2) to the extent such gain is treated as a long-term 
        capital gain after the application of paragraph (1), the 
        determination of the capital gain rate (or rates) applicable to 
        such gain under section 1(h) shall be determined on the basis 
        of the respective rate (or rates) that would have been 
        applicable to the net underlying long-term capital gain.
    ``(b) Interest Charge on Deferral of Gain Recognition.--
            ``(1) In general.--If any gain is treated as ordinary 
        income for any taxable year by reason of subsection (a)(1), the 
        tax imposed by this chapter for such taxable year shall be 
        increased by the amount of interest determined under paragraph 
        (2) with respect to each prior taxable year during any portion 
        of which the constructive ownership transaction was open. Any 
        amount payable under this paragraph shall be taken into account 
        in computing the amount of any deduction allowable to the 
        taxpayer for interest paid or accrued during such taxable year.
            ``(2) Amount of interest.--The amount of interest 
        determined under this paragraph with respect to a prior taxable 
        year is the amount of interest which would have been imposed 
        under section 6601 on the underpayment of tax for such year 
        which would have resulted if the gain (which is treated as 
        ordinary income by reason of subsection (a)(1)) had been 
        included in gross income in the taxable years in which it 
        accrued (determined by treating the income as accruing at a 
        constant rate equal to the applicable Federal rate as in effect 
        on the day the transaction closed). The period during which 
        such interest shall accrue shall end on the due date (without 
        extensions) for the return of tax imposed by this chapter for 
        the taxable year in which such transaction closed.
            ``(3) Applicable federal rate.--For purposes of paragraph 
        (2), the applicable Federal rate is the applicable Federal rate 
        determined under 1274(d) (compounded semiannually) which would 
        apply to a debt instrument with a term equal to the period the 
        transaction was open.
            ``(4) No credits against increase in tax.--Any increase in 
        tax under paragraph (1) shall not be treated as tax imposed by 
        this chapter for purposes of determining--
                    ``(A) the amount of any credit allowable under this 
                chapter, or
                    ``(B) the amount of the tax imposed by section 55.
    ``(c) Financial Asset.--For purposes of this section--
            ``(1) In general.--The term `financial asset' means--
                    ``(A) any equity interest in any pass-thru entity, 
                and
                    ``(B) to the extent provided in regulations--
                            ``(i) any debt instrument, and
                            ``(ii) any stock in a corporation which is 
                        not a pass-thru entity.
            ``(2) Pass-thru entity.--For purposes of paragraph (1), the 
        term `pass-thru entity' means--
                    ``(A) a regulated investment company,
                    ``(B) a real estate investment trust,
                    ``(C) an S corporation,
                    ``(D) a partnership,
                    ``(E) a trust,
                    ``(F) a common trust fund,
                    ``(G) a passive foreign investment company (as 
                defined in section 1297 without regard to subsection 
                (e) thereof),
                    ``(H) a foreign personal holding company,
                    ``(I) a foreign investment company (as defined in 
                section 1246(b)), and
                    ``(J) a REMIC.
    ``(d) Constructive Ownership Transaction.--For purposes of this 
section--
            ``(1) In general.--The taxpayer shall be treated as having 
        entered into a constructive ownership transaction with respect 
        to any financial asset if the taxpayer--
                    ``(A) holds a long position under a notional 
                principal contract with respect to the financial asset,
                    ``(B) enters into a forward or futures contract to 
                acquire the financial asset,
                    ``(C) is the holder of a call option, and is the 
                grantor of a put option, with respect to the financial 
                asset and such options have substantially equal strike 
                prices and substantially contemporaneous maturity 
                dates, or
                    ``(D) to the extent provided in regulations 
                prescribed by the Secretary, enters into 1 or more 
                other transactions (or acquires 1 or more positions) 
                that have substantially the same effect as a 
                transaction described in any of the preceding 
                subparagraphs.
            ``(2) Exception for positions which are marked to market.--
        This section shall not apply to any constructive ownership 
        transaction if all of the positions which are part of such 
        transaction are marked to market under any provision of this 
        title or the regulations thereunder.
            ``(3) Long position under notional principal contract.--A 
        person shall be treated as holding a long position under a 
        notional principal contract with respect to any financial asset 
        if such person--
                    ``(A) has the right to be paid (or receive credit 
                for) all or substantially all of the investment yield 
                (including appreciation) on such financial asset for a 
                specified period, and
                    ``(B) is obligated to reimburse (or provide credit 
                for) all or substantially all of any decline in the 
                value of such financial asset.
            ``(4) Forward contract.--The term `forward contract' means 
        any contract to acquire in the future (or provide or receive 
        credit for the future value of) any financial asset.
    ``(e) Net Underlying Long-Term Capital Gain.--For purposes of this 
section, in the case of any constructive ownership transaction with 
respect to any financial asset, the term `net underlying long-term 
capital gain' means the aggregate net capital gain that the taxpayer 
would have had if--
            ``(1) the financial asset had been acquired for fair market 
        value on the date such transaction was opened and sold for fair 
        market value on the date such transaction was closed, and
            ``(2) only gains and losses that would have resulted from 
        the deemed ownership under paragraph (1) were taken into 
        account.
The amount of the net underlying long-term capital gain with respect to 
any financial asset shall be treated as zero unless the amount thereof 
is established by clear and convincing evidence.
    ``(f) Special Rule Where Taxpayer Takes Delivery.--Except as 
provided in regulations prescribed by the Secretary, if a constructive 
ownership transaction is closed by reason of taking delivery, this 
section shall be applied as if the taxpayer had sold all the contracts, 
options, or other positions which are part of such transaction for fair 
market value on the closing date. The amount of gain recognized under 
the preceding sentence shall not exceed the amount of gain treated as 
ordinary income under subsection (a). Proper adjustments shall be made 
in the amount of any gain or loss subsequently realized for gain 
recognized and treated as ordinary income under this subsection.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) to permit taxpayers to mark to market constructive 
        ownership transactions in lieu of applying this section, and
            ``(2) to exclude certain forward contracts which do not 
        convey substantially all of the economic return with respect to 
        a financial asset.''.
    (b) Clerical Amendment.--The table of sections for part IV of 
subchapter P of chapter 1 is amended by adding at the end the following 
new item:

                              ``Sec. 1260. Gains from constructive 
                                        ownership transactions.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions entered into after July 11, 1999.

SEC. 1315. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND 
              ENDOWMENT CONTRACTS.

    (a) In General.--Subsection (f) of section 170 (relating to 
disallowance of deduction in certain cases and special rules), as 
amended by section 807, is amended by adding at the end the following 
new paragraph:
            ``(11) Split-dollar life insurance, annuity, and endowment 
        contracts.--
                    ``(A) In general.--Nothing in this section or in 
                section 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), 
                or 2522 shall be construed to allow a deduction, and no 
                deduction shall be allowed, for any transfer to or for 
                the use of an organization described in subsection (c) 
                if in connection with such transfer--
                            ``(i) the organization directly or 
                        indirectly pays, or has previously paid, any 
                        premium on any personal benefit contract with 
                        respect to the transferor, or
                            ``(ii) there is an understanding or 
                        expectation that any person will directly or 
                        indirectly pay any premium on any personal 
                        benefit contract with respect to the 
                        transferor.
                    ``(B) Personal benefit contract.--For purposes of 
                subparagraph (A), the term `personal benefit contract' 
                means, with respect to the transferor, any life 
                insurance, annuity, or endowment contract if any direct 
                or indirect beneficiary under such contract is the 
                transferor, any member of the transferor's family, or 
                any other person (other than an organization described 
                in subsection (c)) designated by the transferor.
                    ``(C) Application to charitable remainder trusts.--
                In the case of a transfer to a trust referred to in 
                subparagraph (E), references in subparagraphs (A) and 
                (F) to an organization described in subsection (c) 
                shall be treated as a reference to such trust.
                    ``(D) Exception for certain annuity contracts.--If, 
                in connection with a transfer to or for the use of an 
                organization described in subsection (c), such 
                organization incurs an obligation to pay a charitable 
                gift annuity (as defined in section 501(m)) and such 
                organization purchases any annuity contract to fund 
                such obligation, persons receiving payments under the 
                charitable gift annuity shall not be treated for 
                purposes of subparagraph (B) as indirect beneficiaries 
                under such contract if--
                            ``(i) such organization possesses all of 
                        the incidents of ownership under such contract,
                            ``(ii) such organization is entitled to all 
                        the payments under such contract, and
                            ``(iii) the timing and amount of payments 
                        under such contract are substantially the same 
                        as the timing and amount of payments to each 
                        such person under such obligation (as such 
                        obligation is in effect at the time of such 
                        transfer).
                    ``(E) Exception for certain contracts held by 
                charitable remainder trusts.--A person shall not be 
                treated for purposes of subparagraph (B) as an indirect 
                beneficiary under any life insurance, annuity, or 
                endowment contract held by a charitable remainder 
                annuity trust or a charitable remainder unitrust (as 
                defined in section 664(d)) solely by reason of being 
                entitled to any payment referred to in paragraph (1)(A) 
                or (2)(A) of section 664(d) if--
                            ``(i) such trust possesses all of the 
                        incidents of ownership under such contract, and
                            ``(ii) such trust is entitled to all the 
                        payments under such contract.
                    ``(F) Excise tax on premiums paid.--
                            ``(i) In general.--There is hereby imposed 
                        on any organization described in subsection (c) 
                        an excise tax equal to the premiums paid by 
                        such organization on any life insurance, 
                        annuity, or endowment contract if the payment 
                        of premiums on such contract is in connection 
                        with a transfer for which a deduction is not 
                        allowable under subparagraph (A), determined 
                        without regard to when such transfer is made.
                            ``(ii) Payments by other persons.--For 
                        purposes of clause (i), payments made by any 
                        other person pursuant to an understanding or 
                        expectation referred to in subparagraph (A) 
                        shall be treated as made by the organization.
                            ``(iii) Reporting.--Any organization on 
                        which tax is imposed by clause (i) with respect 
                        to any premium shall file an annual return 
                        which includes--
                                    ``(I) the amount of such premium 
                                paid during the year and the name and 
                                TIN of each beneficiary under the 
                                contract to which the premium relates, 
                                and
                                    ``(II) such other information as 
                                the Secretary may require.
                        The penalties applicable to returns required 
                        under section 6033 shall apply to returns 
                        required under this clause. Returns required 
                        under this clause shall be furnished at such 
                        time and in such manner as the Secretary shall 
                        by forms or regulations require.
                            ``(iv) Certain rules to apply.--The tax 
                        imposed by this subparagraph shall be treated 
                        as imposed by chapter 42 for purposes of this 
                        title other than subchapter B of chapter 42.
                    ``(G) Special rule where state requires 
                specification of charitable gift annuitant in 
                contract.--In the case of an obligation to pay a 
                charitable gift annuity referred to in subparagraph (D) 
                which is entered into under the laws of a State which 
                requires, in order for the charitable gift annuity to 
                be exempt from insurance regulation by such State, that 
                each beneficiary under the charitable gift annuity be 
                named as a beneficiary under an annuity contract issued 
                by an insurance company authorized to transact business 
                in such State, the requirements of clauses (i) and (ii) 
                of subparagraph (D) shall be treated as met if--
                            ``(i) such State law requirement was in 
                        effect on February 8, 1999,
                            ``(ii) each such beneficiary under the 
                        charitable gift annuity is a bona fide resident 
                        of such State at the time the obligation to pay 
                        a charitable gift annuity is entered into, and
                            ``(iii) the only persons entitled to 
                        payments under such contract are persons 
                        entitled to payments as beneficiaries under 
                        such obligation on the date such obligation is 
                        entered into.
                    ``(H) Member of family.--For purposes of this 
                paragraph, an individual's family consists of the 
                individual's grandparents, the grandparents of such 
                individual's spouse, the lineal descendants of such 
                grandparents, and any spouse of such a lineal 
                descendant.
                    ``(I) Regulations.--The Secretary shall prescribe 
                such regulations as may be necessary or appropriate to 
                carry out the purposes of this paragraph, including 
                regulations to prevent the avoidance of such 
                purposes.''.
    (b) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        section, the amendment made by this section shall apply to 
        transfers made after February 8, 1999.
            (2) Excise tax.--Except as provided in paragraph (3) of 
        this subsection, section 170(f)(11)(F) of the Internal Revenue 
        Code of 1986 (as added by this section) shall apply to premiums 
        paid after the date of the enactment of this Act.
            (3) Reporting.--Clause (iii) of such section 170(f)(11)(F) 
        shall apply to premiums paid after February 8, 1999 (determined 
        as if the tax imposed by such section applies to premiums paid 
        after such date).

SEC. 1316. RESTRICTION ON USE OF REAL ESTATE INVESTMENT TRUSTS TO AVOID 
              ESTIMATED TAX PAYMENT REQUIREMENTS.

    (a) In General.--Subsection (e) of section 6655 (relating to 
estimated tax by corporations) is amended by adding at the end the 
following new paragraph:
            ``(5) Treatment of certain reit dividends.--
                    ``(A) In general.--Any dividend received from a 
                closely held real estate investment trust by any person 
                which owns (after application of subsections (d)(5) and 
                (l)(3)(B) of section 856) 10 percent or more (by vote 
                or value) of the stock or beneficial interests in the 
                trust shall be taken into account in computing 
                annualized income installments under paragraph (2) in a 
                manner similar to the manner under which partnership 
                income inclusions are taken into account.
                    ``(B) Closely held reit.--For purposes of 
                subparagraph (A), the term `closely held real estate 
                investment trust' means a real estate investment trust 
                with respect to which 5 or fewer persons own (after 
                application of subsections (d)(5) and (l)(3)(B) of 
                section 856) 50 percent or more (by vote or value) of 
                the stock or beneficial interests in the trust.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to estimated tax payments due on or after September 15, 1999.

SEC. 1317. PROHIBITED ALLOCATIONS OF S CORPORATION STOCK HELD BY AN 
              ESOP.

    (a) In General.--Section 409 (relating to qualifications for tax 
credit employee stock ownership plans) is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
    ``(p) Prohibited Allocation of Securities in an S Corporation.--
            ``(1) In general.--An employee stock ownership plan holding 
        employer securities consisting of stock in an S corporation 
        shall provide that no portion of the assets of the plan 
        attributable to (or allocable in lieu of) such employer 
        securities may, during a nonallocation year, accrue (or be 
        allocated directly or indirectly under any plan of the employer 
        meeting the requirements of section 401(a)) for the benefit of 
        any disqualified individual.
            ``(2) Failure to meet requirements.--If a plan fails to 
        meet the requirements of paragraph (1)--
                    ``(A) the plan shall be treated as having 
                distributed to any disqualified individual the amount 
                allocated to the account of such individual in 
                violation of paragraph (1) at the time of such 
                allocation,
                    ``(B) the provisions of section 4979A shall apply, 
                and
                    ``(C) the statutory period for the assessment of 
                any tax imposed by section 4979A shall not expire 
                before the date which is 3 years from the later of--
                            ``(i) the allocation of employer securities 
                        resulting in the failure under paragraph (1) 
                        giving rise to such tax, or
                            ``(ii) the date on which the Secretary is 
                        notified of such failure.
            ``(3) Nonallocation year.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `nonallocation year' 
                means any plan year of an employee stock ownership plan 
                if, at any time during such plan year--
                            ``(i) such plan holds employer securities 
                        consisting of stock in an S corporation, and
                            ``(ii) disqualified individuals own at 
                        least 50 percent of the number of outstanding 
                        shares of stock in such S corporation.
                    ``(B) Attribution rules.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--The rules of section 
                        318(a) shall apply for purposes of determining 
                        ownership, except that--
                                    ``(I) in applying paragraph (1) 
                                thereof, the members of an individual's 
                                family shall include members of the 
                                family described in paragraph (4)(D), 
                                and
                                    ``(II) paragraph (4) thereof shall 
                                not apply.
                            ``(ii) Deemed-owned shares.--
                        Notwithstanding the employee trust exception in 
                        section 318(a)(2)(B)(i), disqualified 
                        individuals shall be treated as owning deemed-
                        owned shares.
            ``(4) Disqualified individual.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `disqualified 
                individual' means any individual who is a participant 
                or beneficiary under the employee stock ownership plan 
                if--
                            ``(i) the aggregate number of deemed-owned 
                        shares of such individual and the members of 
                        the individual's family is at least 20 percent 
                        of the number of outstanding shares of stock in 
                        the S corporation constituting employer 
                        securities of such plan, or
                            ``(ii) if such individual is not described 
                        in clause (i), the number of deemed-owned 
                        shares of such individual is at least 10 
                        percent of the number of outstanding shares of 
                        stock in such corporation.
                    ``(B) Treatment of family members.--In the case of 
                a disqualified individual described in subparagraph 
                (A)(i), any member of the individual's family with 
                deemed-owned shares shall be treated as a disqualified 
                individual if not otherwise a disqualified individual 
                under subparagraph (A).
                    ``(C) Deemed-owned shares.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `deemed-owned 
                        shares' means, with respect to any participant 
                        or beneficiary under the employee stock 
                        ownership plan--
                                    ``(I) the stock in the S 
                                corporation constituting employer 
                                securities of such plan which is 
                                allocated to such participant or 
                                beneficiary under the plan, and
                                    ``(II) such participant's or 
                                beneficiary's share of the stock in 
                                such corporation which is held by such 
                                trust but which is not allocated under 
                                the plan to employees.
                            ``(ii) Individual's share of unallocated 
                        stock.--For purposes of clause (i)(II), an 
                        individual's share of unallocated S corporation 
                        stock held by the trust is the amount of the 
                        unallocated stock which would be allocated to 
                        such individual if the unallocated stock were 
                        allocated to individuals in the same 
                        proportions as the most recent stock allocation 
                        under the plan.
                    ``(D) Member of family.--For purposes of this 
                paragraph, the term `member of the family' means, with 
                respect to any individual--
                            ``(i) the spouse of the individual,
                            ``(ii) an ancestor or lineal descendant of 
                        the individual or the individual's spouse,
                            ``(iii) a brother or sister of the 
                        individual or the individual's spouse and any 
                        lineal descendant of the brother or sister, and
                            ``(iv) the spouse of any person described 
                        in clause (ii) or (iii).
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Employee stock ownership plan.--The term 
                `employee stock ownership plan' has the meaning given 
                such term by section 4975(e)(7).
                    ``(B) Employer securities.--The term `employer 
                security' has the meaning given such term by section 
                409(l).
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including regulations providing for the 
        treatment of any stock option, restricted stock, stock 
        appreciation right, phantom stock unit, performance unit, or 
        similar instrument granted by an S corporation as stock or not 
        stock.''.
    (b) Excise Tax.--
            (1) In general.--Section 4979A(b) (defining prohibited 
        allocation) is amended by striking ``and'' at the end of 
        paragraph (1), by striking the period at the end of paragraph 
        (2) and inserting ``, and'', and by adding at the end the 
        following new paragraph:
            ``(3) any allocation of employer securities which violates 
        the provisions of section 409(p).''.
            (2) Liability.--Section 4979A(c) (defining liability for 
        tax) is amended by adding at the end the following new 
        sentence: ``In the case of a prohibited allocation described in 
        subsection (b)(3), such tax shall be paid by the S corporation 
        the stock in which was allocated in violation of section 
        409(p).''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2000.
            (2) Exception for certain plans.--In the case of any--
                    (A) employee stock ownership plan established after 
                July 14, 1999, or
                    (B) employee stock ownership plan established on or 
                before such date if employer securities held by the 
                plan consist of stock in a corporation with respect to 
                which an election under section 1362(a) of the Internal 
                Revenue Code of 1986 is not in effect on such date,
        the amendments made by this section shall apply to plan years 
        ending after July 14, 1999.

SEC. 1318. MODIFICATION OF ANTI-ABUSE RULES RELATED TO ASSUMPTION OF 
              LIABILITY.

    (a) In General.--Section 357(b)(1) (relating to tax avoidance 
purpose) is amended--
            (1) by striking ``the principal purpose'' and inserting ``a 
        principal purpose'', and
            (2) by striking ``on the exchange'' in subparagraph (A).
    (b) Effective Date.--The amendments made by this section shall 
apply to assumptions of liability after July 14, 1999.

SEC. 1319. ALLOCATION OF BASIS ON TRANSFERS OF INTANGIBLES IN CERTAIN 
              NONRECOGNITION TRANSACTIONS.

    (a) Transfers to Corporations.--Section 351 (relating to transfer 
to corporation controlled by transferor) is amended by redesignating 
subsection (h) as subsection (i) and by inserting after subsection (g) 
the following new subsection:
    ``(h) Treatment of Transfers of Intangible Property.--
            ``(1) Transfers of less than all substantial rights.
                    ``(A) In general.--A transfer of an interest in 
                intangible property (as defined in section 
                936(h)(3)(B)) shall be treated under this section as a 
                transfer of property even if the transfer is of less 
                than all of the substantial rights of the transferor in 
                the property.
                    ``(B) Allocation of basis.--In the case of a 
                transfer of less than all of the substantial rights of 
                the transferor in the intangible property, the 
                transferor's basis immediately before the transfer 
                shall be allocated among the rights retained by the 
                transferor and the rights transferred on the basis of 
                their respective fair market values.
            ``(2) Nonrecognition not to apply to intangible property 
        developed for transferee.--This section shall not apply to a 
        transfer of intangible property developed by the transferor or 
        any related person if such development was pursuant to an 
        arrangement with the transferee.''.
    (b) Transfers to Partnerships.--Subsection (d) of section 721 is 
amended to read as follows:
    ``(d) Transfers of Intangible Property.--
            ``(1) In general.--Rules similar to the rules of section 
        351(h) shall apply for purposes of this section.
            ``(2) Transfers to foreign partnerships.--For regulatory 
        authority to treat intangibles transferred to a partnership as 
        sold, see section 367(d)(3).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers on or after the date of the enactment of this Act.

SEC. 1320. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.

    (a) In General.--Subsection (a) of section 856 (relating to 
definition of real estate investment trust) is amended by striking 
``and'' at the end of paragraph (6), by redesignating paragraph (7) as 
paragraph (8), and by inserting after paragraph (6) the following new 
paragraph:
            ``(7) which is not a controlled entity (as defined in 
        subsection (l)); and''.
    (b) Controlled Entity.--Section 856 is amended by adding at the end 
the following new subsection:
    ``(l) Controlled Entity.--
            ``(1) In general.--For purposes of subsection (a)(7), an 
        entity is a controlled entity if, at any time during the 
        taxable year, one person (other than a qualified entity)--
                    ``(A) in the case of a corporation, owns stock--
                            ``(i) possessing at least 50 percent of the 
                        total voting power of the stock of such 
                        corporation, or
                            ``(ii) having a value equal to at least 50 
                        percent of the total value of the stock of such 
                        corporation, or
                    ``(B) in the case of a trust, owns beneficial 
                interests in the trust which would meet the 
                requirements of subparagraph (A) if such interests were 
                stock.
            ``(2) Qualified entity.--For purposes of paragraph (1), the 
        term `qualified entity' means--
                    ``(A) any real estate investment trust, and
                    ``(B) any partnership in which one real estate 
                investment trust owns at least 50 percent of the 
                capital and profits interests in the partnership.
            ``(3) Attribution rules.--For purposes of this paragraphs 
        (1) and (2)--
                    ``(A) In general.--Rules similar to the rules of 
                subsections (d)(5) and (h)(3) shall apply.
                    ``(B) Stapled entities.--A group of entities which 
                are stapled entities (as defined in section 269B(c)(2)) 
                shall be treated as 1 person.
            ``(4) Exception for certain new reits.--
                    ``(A) In general.--The term `controlled entity' 
                shall not include an incubator REIT.
                    ``(B) Incubator reit.--A corporation shall be 
                treated as an incubator REIT for any taxable year 
                during the eligibility period if it meets all the 
                following requirements for such year:
                            ``(i) The corporation elects to be treated 
                        as an incubator REIT.
                            ``(ii) The corporation has only voting 
                        common stock outstanding.
                            ``(iii) Not more than 50 percent of the 
                        corporation's real estate assets consist of 
                        mortgages.
                            ``(iv) From not later than the beginning of 
                        the last half of the second taxable year, at 
                        least 10 percent of the corporation's capital 
                        is provided by lenders or equity investors who 
                        are unrelated to the corporation's largest 
                        shareholder.
                            ``(v) The corporation annually increases 
                        the value of its real estate assets by at least 
                        10 percent.
                            ``(vi) The directors of the corporation 
                        adopt a resolution setting forth an intent to 
                        engage in a going public transaction.
                No election may be made with respect to any REIT if an 
                election under this subsection was in effect for any 
                predecessor of such REIT.
                    ``(C) Eligibility period.--
                            ``(i) In general.--The eligibility period 
                        (for which an incubator REIT election can be 
                        made) begins with the REIT's second taxable 
                        year and ends at the close of the REIT's third 
                        taxable year, except that the REIT may, subject 
                        to clauses (ii), (iii), and (iv), elect to 
                        extend such period for an additional 2 taxable 
                        years.
                            ``(ii) Going public transaction.--A REIT 
                        may not elect to extend the eligibility period 
                        under clause (i) unless it enters into an 
                        agreement with the Secretary that if it does 
                        not engage in a going public transaction by the 
                        end of the extended eligibility period, it 
                        shall pay Federal income taxes for the 2 years 
                        of the extended eligibility period as if it had 
                        not made an incubator REIT election and had 
                        ceased to qualify as a REIT for those 2 taxable 
                        years.
                            ``(iii) Returns, interest, and notice.--
                                    ``(I) Returns.--In the event the 
                                corporation ceases to be treated as a 
                                REIT by operation of clause (ii), the 
                                corporation shall file any appropriate 
                                amended returns reflecting the change 
                                in status within 3 months of the close 
                                of the extended eligibility period.
                                    ``(II) Interest.--Interest shall be 
                                payable on any tax imposed by reason of 
                                clause (ii) for any taxable year but, 
                                unless there was a finding under 
                                subparagraph (D), no substantial 
                                underpayment penalties shall be 
                                imposed.
                                    ``(III) Notice.--The corporation 
                                shall, at the same time it files its 
                                returns under subclause (I), notify its 
                                shareholders and any other persons 
                                whose tax position is, or may 
                                reasonably be expected to be, affected 
                                by the change in status so they also 
                                may file any appropriate amended 
                                returns to conform their tax treatment 
                                consistent with the corporation's loss 
                                of REIT status.
                                    ``(IV) Regulations.--The Secretary 
                                shall provide appropriate regulations 
                                setting forth transferee liability and 
                                other provisions to ensure collection 
                                of tax and the proper administration of 
                                this provision.
                            ``(iv) Clauses (ii) and (iii) shall not 
                        apply if the corporation allows its incubator 
                        REIT status to lapse at the end of the initial 
                        2-year eligibility period without engaging in a 
                        going public transaction if the corporation is 
                        not a controlled entity as of the beginning of 
                        its fourth taxable year. In such a case, the 
                        corporation's directors may still be liable for 
                        the penalties described in subparagraph (D) 
                        during the eligibility period.
                    ``(D) Special penalties.--If the Secretary 
                determines that an incubator REIT election was filed 
                for a principal purpose other than as part of a 
                reasonable plan to undertake a going public 
                transaction, an excise tax of $20,000 shall be imposed 
                on each of the corporation's directors for each taxable 
                year for which an election was in effect.
                    ``(E) Going public transaction.--For purposes of 
                this paragraph, a going public transaction means--
                            ``(i) a public offering of shares of the 
                        stock of the incubator REIT;
                            ``(ii) a transaction, or series of 
                        transactions, that results in the stock of the 
                        incubator REIT being regularly traded on an 
                        established securities market and that results 
                        in at least 50 percent of such stock being held 
                        by shareholders who are unrelated to persons 
                        who held such stock before it began to be so 
                        regularly traded; or
                            ``(iii) any transaction resulting in 
                        ownership of the REIT by 200 or more persons 
                        (excluding the largest single shareholder) who 
                        in the aggregate own at least 50 percent of the 
                        stock of the REIT.
                For the purposes of this subparagraph, the rules of 
                paragraph (3) shall apply in determining the ownership 
                of stock.
                    ``(F) Definitions.--The term `established 
                securities market' shall have the meaning set forth in 
                the regulations under section 897.''.
    (c) Conforming Amendment.--Paragraph (2) of section 856(h) is 
amended by striking ``and (6)'' each place it appears and inserting ``, 
(6), and (7)''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after July 14, 1999.
            (2) Exception for existing controlled entities.--The 
        amendments made by this section shall not apply to any entity 
        which is a controlled entity (as defined in section 856(l) of 
        the Internal Revenue Code of 1986, as added by this section) as 
        of July 14, 1999, which is a real estate investment trust for 
        the taxable year which includes such date, and which has 
        significant business assets or activities as of such date. For 
        purposes of the preceding sentence, an entity shall be treated 
        as such a controlled entity on July 14, 1999, if it becomes 
        such an entity after such date in a transaction--
                    (A) made pursuant to a written agreement which was 
                binding on such date and at all times thereafter, or
                    (B) described on or before such date in a filing 
                with the Securities and Exchange Commission required 
                solely by reason of the transaction.

SEC. 1321. DISTRIBUTIONS TO A CORPORATE PARTNER OF STOCK IN ANOTHER 
              CORPORATION.

    (a) In General.--Section 732 (relating to basis of distributed 
property other than money) is amended by adding at the end the 
following new subsection:
    ``(f) Corresponding Adjustment to Basis of Assets of a Distributed 
Corporation Controlled by a Corporate Partner.--
            ``(1) In general.--If--
                    ``(A) a corporation (hereafter in this subsection 
                referred to as the `corporate partner') receives a 
                distribution from a partnership of stock in another 
                corporation (hereafter in this subsection referred to 
                as the `distributed corporation'),
                    ``(B) the corporate partner has control of the 
                distributed corporation immediately after the 
                distribution or at any time thereafter, and
                    ``(C) the partnership's adjusted basis in such 
                stock immediately before the distribution exceeded the 
                corporate partner's adjusted basis in such stock 
                immediately after the distribution,
        then an amount equal to such excess shall be applied to reduce 
        (in accordance with subsection (c)) the basis of property held 
        by the distributed corporation at such time (or, if the 
        corporate partner does not control the distributed corporation 
        at such time, at the time the corporate partner first has such 
        control).
            ``(2) Exception for certain distributions before control 
        acquired.--Paragraph (1) shall not apply to any distribution of 
        stock in the distributed corporation if--
                    ``(A) the corporate partner does not have control 
                of such corporation immediately after such 
                distribution, and
                    ``(B) the corporate partner establishes to the 
                satisfaction of the Secretary that such distribution 
                was not part of a plan or arrangement to acquire 
                control of the distributed corporation.
            ``(3) Limitations on basis reduction.--
                    ``(A) In general.--The amount of the reduction 
                under paragraph (1) shall not exceed the amount by 
                which the sum of the aggregate adjusted bases of the 
                property and the amount of money of the distributed 
                corporation exceeds the corporate partner's adjusted 
                basis in the stock of the distributed corporation.
                    ``(B) Reduction not to exceed adjusted basis of 
                property.--No reduction under paragraph (1) in the 
                basis of any property shall exceed the adjusted basis 
                of such property (determined without regard to such 
                reduction).
            ``(4) Gain recognition where reduction limited.--If the 
        amount of any reduction under paragraph (1) (determined after 
        the application of paragraph (3)(A)) exceeds the aggregate 
        adjusted bases of the property of the distributed corporation--
                    ``(A) such excess shall be recognized by the 
                corporate partner as long-term capital gain, and
                    ``(B) the corporate partner's adjusted basis in the 
                stock of the distributed corporation shall be increased 
                by such excess.
            ``(5) Control.--For purposes of this subsection, the term 
        `control' means ownership of stock meeting the requirements of 
        section 1504(a)(2).
            ``(6) Indirect distributions.--For purposes of paragraph 
        (1), if a corporation acquires (other than in a distribution 
        from a partnership) stock the basis of which is determined in 
        whole or in part by reference to subsection (a)(2) or (b), the 
        corporation shall be treated as receiving a distribution of 
        such stock from a partnership.
            ``(7) Special rule for stock in controlled corporation.--If 
        the property held by a distributed corporation is stock in a 
        corporation which the distributed corporation controls, this 
        subsection shall be applied to reduce the basis of the property 
        of such controlled corporation. This subsection shall be 
        reapplied to any property of any controlled corporation which 
        is stock in a corporation which it controls.
            ``(8) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including regulations to avoid double counting 
        and to prevent the abuse of such purposes.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions made after July 14, 1999.

                    TITLE XIV--TECHNICAL CORRECTIONS

SEC. 1401. AMENDMENTS RELATED TO TAX AND TRADE RELIEF EXTENSION ACT OF 
              1998.

    (a) Amendment Related to Section 1004(b) of the Act.--Subsection 
(d) of section 6104 is amended by adding at the end the following new 
paragraph:
            ``(6) Application to nonexempt charitable trusts and 
        nonexempt private foundations.--The organizations referred to 
        in paragraphs (1) and (2) of section 6033(d) shall comply with 
        the requirements of this subsection relating to annual returns 
        filed under section 6033 in the same manner as the 
        organizations referred to in paragraph (1).''.
    (b) Amendment Related to Section 4003 of the Act.--Subsection (b) 
of section 4003 of the Tax and Trade Relief Extension Act of 1998 is 
amended by inserting ``(7)(A)(i)(II),'' after ``(5)(A)(ii)(I),''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Tax and Trade Relief 
Extension Act of 1998 to which they relate.

SEC. 1402. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE RESTRUCTURING 
              AND REFORM ACT OF 1998.

    (a) Amendment Related to 1103  of the Act.--Paragraph (6) of 
section 6103(k) is amended--
            (1) by inserting ``and an officer or employee of the Office 
        of Treasury Inspector General for Tax Administration'' after 
        ``internal revenue officer or employee'', and
            (2) by striking ``internal revenue'' in the heading and 
        inserting ``certain''.
    (b) Amendment Related to Section 3509 of the Act.--Subparagraph (A) 
of section 6110(g)(5) is amended by inserting ``, any Chief Counsel 
advice,'' after ``technical advice memorandum''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Internal Revenue Service 
Restructuring and Reform Act of 1998 to which they relate.

SEC. 1403. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.

    (a) Amendment Related to Section 302 of the Act.--The last sentence 
of section 3405(e)(1)(B) is amended by inserting ``(other than a Roth 
IRA)'' after ``individual retirement plan''.
    (b) Amendments Related to Section  1072 of the Act.--
            (1) Clause (ii) of section 415(c)(3)(D) and subparagraph 
        (B) of section 403(b)(3) are each amended by striking ``section 
        125 or'' and inserting ``section 125, 132(f)(4), or''.
            (2) Paragraph (2) of section 414(s) is amended by striking 
        ``section 125, 402(e)(3)'' and inserting ``section 125, 
        132(f)(4), 402(e)(3)''.
    (c) Amendment Related to Section  1454 of the Act.--Subsection (a) 
of section 7436 is amended by inserting before the period at the end of 
the first sentence ``and the proper amount of employment tax under such 
determination''.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of the Taxpayer Relief of 1997 
to which they relate.

SEC. 1404. OTHER TECHNICAL CORRECTIONS.

    (a) Affiliated Corporations in Context of Worthless Securities.--
            (1) Subparagraph (A) of section 165(g)(3) is amended to 
        read as follows:
                    ``(A) the taxpayer owns directly stock in such 
                corporation meeting the requirements of section 
                1504(a)(2), and''.
            (2) Paragraph (3) of section 165(g) is amended by striking 
        the last sentence.
            (3) The amendments made by this subsection shall apply to 
        taxable years beginning after December 31, 1984.
    (b) Reference to Certain State Plans.--
            (1) Subparagraph (B) of section 51(d)(2) is amended--
                    (A) by striking ``plan approved'' and inserting 
                ``program funded'', and
                    (B) by striking ``(relating to assistance for needy 
                families with minor children)''.
            (2) The amendment made by paragraph (1) shall take effect 
        as if included in the amendments made by section 1201 of the 
        Small Business Job Protection Act of 1996.
    (c) Amount of IRA Contribution of Lesser Earning Spouse.--
            (1) Clause (ii) of section 219(c)(1)(B) is amended by 
        striking ``and'' at the end of subclause (I), by redesignating 
        subclause (II) as subclause (III), and by inserting after 
        subclause (I) the following new subclause:
                                    ``(II) the amount of any designated 
                                nondeductible contribution (as defined 
                                in section 408(o)) on behalf of such 
                                spouse for such taxable year, and''.
            (2) The amendment made by paragraph (1) shall take effect 
        as if included in section 1427 of the Small Business Job 
        Protection Act of 1996.
    (d) Modified Endowment Contracts.--
            (1) Paragraph (2) of section 7702A(a) is amended by 
        inserting ``or this paragraph'' before the period.
            (2) Clause (ii) of section 7702A(c)(3)(A) is amended by 
        striking ``under the contract'' and inserting ``under the old 
        contract''.
            (3) The amendments made by this subsection shall take 
        effect as if included in the amendments made by section 5012 of 
        the Technical and Miscellaneous Revenue Act of 1988.
    (e) Lump-Sum Distributions.--
            (1) Clause (ii) of section 401(k)(10)(B) is amended by 
        adding at the end the following new sentence: ``Such term 
        includes a distribution of an annuity contract from--
                                    ``(I) a trust which forms a part of 
                                a plan described in section 401(a) and 
                                which is exempt from tax under section 
                                501(a), or
                                    ``(II) an annuity plan described in 
                                section 403(a).''.
            (2) The amendment made by paragraph (1) shall take effect 
        as if included in section 1401 of the Small Business Job 
        Protection Act of 1996.
    (f) Tentative Carryback Adjustments of Losses From Section 1256 
Contracts.--
            (1) Subsection (a) of section 6411 is amended by striking 
        ``section 1212(a)(1)'' and inserting ``subsection (a)(1) or (c) 
        of section 1212''.
            (2) The amendment made by paragraph (1) shall take effect 
        as if included in the amendments made by section 504 of the 
        Economic Recovery Tax Act of 1981.

SEC. 1405. CLERICAL CHANGES.

            (1) Subsection (f) of section 67 is amended by striking 
        ``the last sentence'' and inserting ``the second sentence''.
            (2) The heading for paragraph (5) of section 408(d) is 
        amended to read as follows:
            ``(5) Distributions of excess contributions after due date 
        for taxable year and certain excess rollover contributions.--
        ''.
            (3) The heading for subparagraph (B) of section 529(e)(3) 
        is amended by striking ``under guaranteed plans''.
            (4)(A) Subsection (e) of section 678 is amended by striking 
        ``an electing small business corporation'' and inserting ``an S 
        corporation''.
            (B) Clause (v) of section 6103(e)(1)(D) is amended to read 
        as follows:
                            ``(v) if the corporation was an S 
                        corporation, any person who was a shareholder 
                        during any part of the period covered by such 
                        return during which an election under section 
                        1362(a) was in effect, or''.
            (5) Subparagraph (B) of section 995(b)(3) is amended by 
        striking ``the Military Security Act of 1954 (22 U.S.C. 1934)'' 
        and inserting ``section 38 of the International Security 
        Assistance and Arms Export Control Act of 1976 (22 U.S.C. 
        2778)''.
            (6) Subparagraph (B) of section 4946(c)(3) is amended by 
        striking ``the lowest rate of compensation prescribed for GS-16 
        of the General Schedule under section 5332'' and inserting 
        ``the lowest rate of basic pay for the Senior Executive Service 
        under section 5382''.

SEC. 1406. TECHNICAL CORRECTIONS TO SAVER ACT.

    Section 517 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1147) is amended--
            (1) in subsection (a), by striking ``2001 and 2005 on or 
        after September 1 of each year involved'' and inserting ``2001, 
        2005, and 2009 in the month of September of each year 
        involved'';
            (2) in subsection (b), by adding at the end the following 
        new sentence: ``To effectuate the purposes of this paragraph, 
        the Secretary may enter into a cooperative agreement, pursuant 
        to the Federal Grant and Cooperative Agreement Act of 1977 (31 
        U.S.C. 6301 et seq.), with the American Savings Education 
        Council.'';
            (3) in subsection (e)(2)--
                    (A) by striking ``Committee on Labor and Human 
                Resources'' in subparagraph (B) and inserting 
                ``Committee on Health, Education, Labor, and 
                Pensions'';
                    (B) by striking subparagraph (D) and inserting the 
                following:
                    ``(D) the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human Services, and 
                Education of the Committee on Appropriations of the 
                House of Representatives and the Chairman and Ranking 
                Member of the Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the Senate;'';
                    (C) by redesignating subparagraph (G) as 
                subparagraph (J); and
                    (D) by inserting after subparagraph (F) the 
                following new subparagraphs:
                    ``(G) the Chairman and Ranking Member of the 
                Committee on Finance of the Senate;
                    ``(H) the Chairman and Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives;
                    ``(I) the Chairman and Ranking Member of the 
                Subcommittee on Employer-Employee Relations of the 
                Committee on Education and the Workforce of the House 
                of Representatives; and'';
            (4) in subsection (e)(3)(A)--
                    (A) by striking ``There shall be no more than 200 
                additional participants.'' and inserting ``The 
                participants in the National Summit shall also include 
                additional participants appointed under this 
                subparagraph.'';
                    (B) by striking ``one-half shall be appointed by 
                the President,'' in clause (i) and inserting ``not more 
                than 100 participants shall be appointed under this 
                clause by the President,'', and by striking ``and'' at 
                the end of clause (i);
                    (C) by striking ``one-half shall be appointed by 
                the elected leaders of Congress'' in clause (ii) and 
                inserting ``not more than 100 participants shall be 
                appointed under this clause by the elected leaders of 
                Congress'', and by striking the period at the end of 
                clause (ii) and inserting ``; and''; and
                    (D) by adding at the end the following new clause:
                            ``(iii) The President, in consultation with 
                        the elected leaders of Congress referred to in 
                        subsection (a), may appoint under this clause 
                        additional participants to the National Summit. 
                        The number of such additional participants 
                        appointed under this clause may not exceed the 
                        lesser of 3 percent of the total number of all 
                        additional participants appointed under this 
                        paragraph, or 10. Such additional participants 
                        shall be appointed from persons nominated by 
                        the organization referred to in subsection 
                        (b)(2) which is made up of private sector 
                        businesses and associations partnered with 
                        Government entities to promote long term 
                        financial security in retirement through 
                        savings and with which the Secretary is 
                        required thereunder to consult and cooperate 
                        and shall not be Federal, State, or local 
                        government employees.'';
            (5) in subsection (e)(3)(B), by striking ``January 31, 
        1998'' in subparagraph (B) and inserting ``May 1, 2001, May 1, 
        2005, and May 1, 2009, for each of the subsequent summits, 
        respectively'';
            (6) in subsection (f)(1)(C), by inserting ``, no later than 
        90 days prior to the date of the commencement of the National 
        Summit,'' after ``comment'' in paragraph (1)(C);
            (7) in subsection (g), by inserting ``, in consultation 
        with the congressional leaders specified in subsection 
        (e)(2),'' after ``report'';
            (8) in subsection (i)--
                    (A) by striking ``beginning on or after October 1, 
                1997'' in paragraph (1) and inserting ``2001, 2005, and 
                2009''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(3) Reception and representation authority.--The 
        Secretary is hereby granted reception and representation 
        authority limited specifically to the events at the National 
        Summit. The Secretary shall use any private contributions 
        received in connection with the National Summit prior to using 
        funds appropriated for purposes of the National Summit pursuant 
        to this paragraph.''; and
            (9) in subsection (k)--
                    (A) by striking ``shall enter into a contract on a 
                sole-source basis'' and inserting ``may enter into a 
                contract on a sole-source basis''; and
                    (B) by striking ``fiscal year 1998'' and inserting 
                ``fiscal years 2001, 2005, and 2009''.

           TITLE XV--COMPLIANCE WITH CONGRESSIONAL BUDGET ACT

SEC. 1501. SUNSET OF PROVISIONS OF ACT.

    All provisions of, and amendments made by, this Act which are in 
effect on September 30, 2009, shall cease to apply as of the close of 
September 30, 2009.

            Attest:

                                                             Secretary.
106th CONGRESS

  1st Session

                               H. R. 2488

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                               AMENDMENT

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