[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 546 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 546

To amend the Internal Revenue Code of 1986 to provide tax benefits for 
  small businesses, to amend the Fair Labor Standards Act of 1938 to 
           increase the minimum wage, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 8, 2001

  Mr. Quinn introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Education and the Workforce, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide tax benefits for 
  small businesses, to amend the Fair Labor Standards Act of 1938 to 
           increase the minimum wage, and for other purposes.

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

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Business Tax 
Fairness Act of 2001''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; references; table of contents.
                   TITLE I--SMALL BUSINESS PROVISIONS

Sec. 101. Deduction for 100 percent of health insurance costs of self-
                            employed individuals.
Sec. 102. Increase in expense treatment for small businesses.
Sec. 103. Increased deduction for meal expenses.
Sec. 104. Increased deductibility of business meal expenses for 
                            individuals subject to Federal limitations 
                            on hours of service.
Sec. 105. Income averaging for farmers and fishermen not to increase 
                            alternative minimum tax liability.
Sec. 106. Repeal of occupational taxes relating to distilled spirits, 
                            wine, and beer.
                      TITLE II--PENSION PROVISIONS

                     Subtitle A--Expanding Coverage

Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole 
                            proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of 
                            deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation 
                            plans of State and local governments and 
                            tax-exempt organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension 
                            plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax 
                            contributions.
                Subtitle B--Enhancing Fairness for Women

Sec. 221. Catchup contributions for individuals age 50 or over.
Sec. 222. Equitable treatment for contributions of employees to defined 
                            contribution plans.
Sec. 223. Faster vesting of certain employer matching contributions.
Sec. 224. Simplify and update the minimum distribution rules.
Sec. 225. Clarification of tax treatment of division of section 457 
                            plan benefits upon divorce.
Sec. 226. Modification of safe harbor relief for hardship withdrawals 
                            from cash or deferred arrangements.
          Subtitle C--Increasing Portability for Participants

Sec. 231. Rollovers allowed among various types of plans.
Sec. 232. Rollovers of IRAs into workplace retirement plans.
Sec. 233. Rollovers of after-tax contributions.
Sec. 234. Hardship exception to 60-day rule.
Sec. 235. Treatment of forms of distribution.
Sec. 236. Rationalization of restrictions on distributions.
Sec. 237. Purchase of service credit in governmental defined benefit 
                            plans.
Sec. 238. Employers may disregard rollovers for purposes of cash-out 
                            amounts.
Sec. 239. Minimum distribution and inclusion requirements for section 
                            457 plans.
       Subtitle D--Strengthening Pension Security and Enforcement

Sec. 241. Repeal of 150 percent of current liability funding limit.
Sec. 242. Maximum contribution deduction rules modified and applied to 
                            all defined benefit plans.
Sec. 243. Excise tax relief for sound pension funding.
Sec. 244. Excise tax on failure to provide notice by defined benefit 
                            plans significantly reducing future benefit 
                            accruals.
Sec. 245. Treatment of multiemployer plans under section 415.
                Subtitle E--Reducing Regulatory Burdens

Sec. 261. Modification of timing of plan valuations.
Sec. 262. ESOP dividends may be reinvested without loss of dividend 
                            deduction.
Sec. 263. Repeal of transition rule relating to certain highly 
                            compensated employees.
Sec. 264. Employees of tax-exempt entities.
Sec. 265. Clarification of treatment of employer-provided retirement 
                            advice.
Sec. 266. Reporting simplification.
Sec. 267. Improvement of employee plans compliance resolution system.
Sec. 268. Modification of exclusion for employer provided transit 
                            passes.
Sec. 269. Repeal of the multiple use test.
Sec. 270. Flexibility in nondiscrimination, coverage, and line of 
                            business rules.
Sec. 271. Extension to international organizations of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 272. Notice and consent period regarding distributions.
                      Subtitle F--Plan Amendments

Sec. 281. Provisions relating to plan amendments.
                      TITLE III--ESTATE TAX RELIEF

          Subtitle A--Reductions of Estate and Gift Tax Rates

Sec. 301. Reductions of estate and gift tax rates.
Sec. 302. Sense of the Congress concerning repeal of the death tax.
   Subtitle B--Unified Credit Replaced With Unified Exemption Amount

Sec. 311. Unified credit against estate and gift taxes replaced with 
                            unified exemption amount.
     Subtitle C--Modifications of Generation-Skipping Transfer Tax

Sec. 321. Deemed allocation of GST exemption to lifetime transfers to 
                            trusts; retroactive allocations.
Sec. 322. Severing of trusts.
Sec. 323. Modification of certain valuation rules.
Sec. 324. Relief provisions.
                   Subtitle D--Conservation Easements

Sec. 331. Expansion of estate tax rule for conservation easements.
                       TITLE IV--TIMBER INCENTIVE

Sec. 401. Temporary suspension of maximum amount of amortizable 
                            reforestation expenditures.
                    TITLE V--REAL ESTATE PROVISIONS

              Subtitle A--Private Activity Bond Volume Cap

Sec. 501. Acceleration of phase-in of increase in volume cap on private 
                            activity bonds.
 Subtitle B--Exclusion From Gross Income for Certain Forgiven Mortgage 
                              Obligations

Sec. 502. Exclusion from gross income for certain forgiven mortgage 
                            obligations.
      TITLE VI--AMENDMENTS TO THE FAIR LABOR STANDARDS ACT OF 1938

Sec. 601. Short title.
Sec. 602. Minimum Wage.
Sec. 603. Exemption for computer professionals.
Sec. 604. Exemption for certain sales employees.
Sec. 605. Exemption for funeral directors.

                   TITLE I--SMALL BUSINESS PROVISIONS

SEC. 101. 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) 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, 2000.

SEC. 102. 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, 2000.

SEC. 103. INCREASED DEDUCTION FOR MEAL EXPENSES.

    (a) In General.--Paragraph (1) of section 274(n) (relating to only 
50 percent of meal and entertainment expenses allowed as deduction) is 
amended by striking ``50 percent'' in the text and inserting ``the 
allowable percentage''.
    (b) Allowable Percentages.--Subsection (n) of section 274 is 
amended by redesignating paragraphs (2) and (3) as paragraphs (3) and 
(4), respectively, and by inserting after paragraph (1) the following 
new paragraph:
            ``(2) Allowable percentage.--For purposes of paragraph (1), 
        the allowable percentage is--
                    ``(A) in the case of amounts for items described in 
                paragraph (1)(B), 50 percent, and
                    ``(B) in the case of expenses for food or 
                beverages, 60 percent (55 percent for taxable years 
                beginning during 2001).''.
    (c) Conforming Amendment.--The heading for subsection (n) of 
section 274 is amended by striking ``50 Percent'' and inserting 
``Limited Percentages''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2000.

SEC. 104. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES FOR 
              INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS ON HOURS OF 
              SERVICE.

    (a) In General.--Paragraph (4) of section 274(n) (relating to 
limited percentages of meal and entertainment expenses allowed as 
deduction), as redesignated by section 103, is amended to read as 
follows:
            ``(4) Special rule for individuals subject to federal hours 
        of service.--In the case of any expenses for food or beverages 
        consumed while away from home (within the meaning of section 
        162(a)(2)) by an individual during, or incident to, the period 
        of duty subject to the hours of service limitations of the 
        Department of Transportation, paragraph (2)(B) shall be applied 
        by substituting `80 percent' for the percentage otherwise 
        applicable under paragraph (2)(B).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2000.

SEC. 105. 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) In general.--Section 1301(a) is amended by striking 
        ``farming business'' and inserting ``farming business or 
        fishing business,''.
            (2) Definition of elected farm income.--
                    (A) In general.--Clause (i) of section 
                1301(b)(1)(A) is amended by inserting ``or fishing 
                business'' before the semicolon.
                    (B) Conforming amendment.--Subparagraph (B) of 
                section 1301(b)(1) is amended by inserting ``or fishing 
                business'' after ``farming business'' both places it 
                occurs.
            (3) Definition of fishing business.--Section 1301(b) is 
        amended by adding at the end the following new paragraph:
            ``(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, 2000.

SEC. 106. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED SPIRITS, 
              WINE, AND BEER.

    (a) Repeal of Occupational Taxes.--
            (1) In general.--The following provisions of part II of 
        subchapter A of chapter 51 of the Internal Revenue Code of 1986 
        (relating to occupational taxes) are hereby repealed:
                    (A) Subpart A (relating to proprietors of distilled 
                spirits plants, bonded wine cellars, etc.).
                    (B) Subpart B (relating to brewer).
                    (C) Subpart D (relating to wholesale dealers) 
                (other than sections 5114 and 5116).
                    (D) Subpart E (relating to retail dealers) (other 
                than section 5124).
                    (E) Subpart G (relating to general provisions) 
                (other than sections 5142, 5143, 5145, and 5146).
            (2) Nonbeverage domestic drawback.--Section 5131 is amended 
        by striking ``, on payment of a special tax per annum,''.
            (3) Industrial use of distilled spirits.--Section 5276 is 
        hereby repealed.
    (b) Conforming Amendments.--
            (1)(A) The heading for part II of subchapter A of chapter 
        51 and the table of subparts for such part are amended to read 
        as follows:

                  ``PART II--MISCELLANEOUS PROVISIONS

                              ``Subpart A. Manufacturers of stills.
                              ``Subpart B. Nonbeverage domestic 
                                        drawback claimants.
                              ``Subpart C. Recordkeeping by dealers.
                              ``Subpart D. Other provisions.''.
            (B) The table of parts for such subchapter A is amended by 
        striking the item relating to part II and inserting the 
        following new item:

                              ``Part II. Miscellaneous provisions.''.
            (2) Subpart C of part II of such subchapter (relating to 
        manufacturers of stills) is redesignated as subpart A.
            (3)(A) Subpart F of such part II (relating to nonbeverage 
        domestic drawback claimants) is redesignated as subpart B and 
        sections 5131 through 5134 are redesignated as sections 5111 
        through 5114, respectively.
            (B) The table of sections for such subpart B, as so 
        redesignated, is amended--
                    (i) by redesignating the items relating to sections 
                5131 through 5134 as relating to sections 5111 through 
                5114, respectively; and
                    (ii) by striking ``and rate of tax'' in the item 
                relating to section 5111, as so redesignated.
            (C) Section 5111, as redesignated by subparagraph (A), is 
        amended--
                    (i) by striking ``and rate of tax'' in the section 
                heading;
                    (ii) by striking ``(a) Eligibility for Drawback.--
                ''; and
                    (iii) by striking subsection (b).
            (4) Part II of subchapter A of chapter 51 is amended by 
        adding after subpart B, as redesignated by paragraph (3), the 
        following new subpart:

                 ``Subpart C--Recordkeeping by Dealers

                              ``Sec. 5121. Recordkeeping by wholesale 
                                        dealers.
                              ``Sec. 5122. Recordkeeping by retail 
                                        dealers.
                              ``Sec. 5123. Preservation and inspection 
                                        of records, and entry of 
                                        premises for inspection.''.
            (5)(A) Section 5114 (relating to records) is moved to 
        subpart C of such part II and inserted after the table of 
        sections for such subpart.
            (B) Section 5114 is amended--
                    (i) by striking the section heading and inserting 
                the following new heading:

``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'';

                and
                    (ii) by redesignating subsection (c) as subsection 
                (d) and by inserting after subsection (b) the following 
                new subsection:
    ``(c) Wholesale Dealers.--For purposes of this part--
            ``(1) Wholesale dealer in liquors.--The term `wholesale 
        dealer in liquors' means any dealer (other than a wholesale 
        dealer in beer) who sells, or offers for sale, distilled 
        spirits, wines, or beer, to another dealer.
            ``(2) Wholesale dealer in beer.--The term `wholesale dealer 
        in beer' means any dealer who sells, or offers for sale, beer, 
        but not distilled spirits or wines, to another dealer.
            ``(3) Dealer.--The term `dealer' means any person who 
        sells, or offers for sale, any distilled spirits, wines, or 
        beer.
            ``(4) Presumption in case of sale of 20 wine gallons or 
        more.--The sale, or offer for sale, of distilled spirits, 
        wines, or beer, in quantities of 20 wine gallons or more to the 
        same person at the same time, shall be presumptive evidence 
        that the person making such sale, or offer for sale, is engaged 
        in or carrying on the business of a wholesale dealer in liquors 
        or a wholesale dealer in beer, as the case may be. Such 
        presumption may be overcome by evidence satisfactorily showing 
        that such sale, or offer for sale, was made to a person other 
        than a dealer.''.
            (C) Paragraph (3) of section 5121(d), as so redesignated, 
        is amended by striking ``section 5146'' and inserting ``section 
        5123''.
            (6)(A) Section 5124 (relating to records) is moved to 
        subpart C of part II of subchapter A of chapter 51 and inserted 
        after section 5121.
            (B) Section 5124 is amended--
                    (i) by striking the section heading and inserting 
                the following new heading:

``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'';

                    (ii) by striking ``section 5146'' in subsection (c) 
                and inserting ``section 5123''; and
                    (iii) by redesignating subsection (c) as subsection 
                (d) and inserting after subsection (b) the following 
                new subsection:
    ``(c) Retail Dealers.--For purposes of this section--
            ``(1) Retail dealer in liquors.--The term `retail dealer in 
        liquors' means any dealer (other than a retail dealer in beer) 
        who sells, or offers for sale, distilled spirits, wines, or 
        beer, to any person other than a dealer.
            ``(2) Retail dealer in beer.--The term `retail dealer in 
        beer' means any dealer who sells, or offers for sale, beer, but 
        not distilled spirits or wines, to any person other than a 
        dealer.
            ``(3) Dealer.--The term `dealer' has the meaning given such 
        term by section 5121(c)(3).''.
            (7) Section 5146 is moved to subpart C of part II of 
        subchapter A of chapter 51, inserted after section 5122, and 
        redesignated as section 5123.
            (8) Part II of subchapter A of chapter 51 is amended by 
        inserting after subpart C the following new subpart:

                     ``Subpart D--Other Provisions

                              ``Sec. 5131. Packaging distilled spirits 
                                        for industrial uses.
                              ``Sec. 5132. Prohibited purchases by 
                                        dealers.''.
            (9) Section 5116 is moved to subpart D of part II of 
        subchapter A of chapter 51, inserted after the table of 
        sections, redesignated as section 5131, and amended by 
        inserting ``(as defined in section 5121(c))'' after ``dealer'' 
        in subsection (a).
            (10) Subpart D of part II of subchapter A of chapter 51 is 
        amended by adding at the end thereof the following new section:

``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.

    ``(a) In General.--Except as provided in regulations prescribed by 
the Secretary, it shall be unlawful for a dealer to purchase distilled 
spirits from any person other than a wholesale dealer in liquors who is 
required to keep the records prescribed by section 5121.
    ``(b) Penalty and Forfeiture.--

                                ``For penalty and forfeiture provisions 
applicable to violations of subsection (a), see sections 5687 and 
7302.''.
            (11) Subsection (b) of section 5002 is amended--
                    (A) by striking ``section 5112(a)'' and inserting 
                ``section 5121(c)(3)'';
                    (B) by striking ``section 5112'' and inserting 
                ``section 5121(c)''; and
                    (C) by striking ``section 5122'' and inserting 
                ``section 5122(c)''.
            (12) Subparagraph (A) of section 5010(c)(2) is amended by 
        striking ``section 5134'' and inserting ``section 5114''.
            (13) Subsection (d) of section 5052 is amended to read as 
        follows:
    ``(d) Brewer.--For purposes of this chapter, the term `brewer' 
means any person who brews beer or produces beer for sale. Such term 
shall not include any person who produces only beer exempt from tax 
under section 5053(e).''.
            (14) The text of section 5182 is amended to read as 
        follows:

                                ``For provisions requiring 
recordkeeping by wholesale liquor dealers, see section 5112, and by 
retail liquor dealers, see section 5122.''.
            (15) Subsection (b) of section 5402 is amended by striking 
        ``section 5092'' and inserting ``section 5052(d)''.
            (16) Section 5671 is amended by striking ``or 5091''.
            (17)(A) Part V of subchapter J of chapter 51 is hereby 
        repealed.
            (B) The table of parts for such subchapter J is amended by 
        striking the item relating to part V.
            (18)(A) Sections 5142, 5143, and 5145 are moved to 
        subchapter D of chapter 52, inserted after section 5731, 
        redesignated as sections 5732, 5733, and 5734, respectively, 
        and amended--
                    (i) by striking ``this part'' each place it appears 
                and inserting ``this subchapter''; and
                    (ii) by striking ``this subpart'' in section 
                5732(c)(2) (as so redesignated) and inserting ``this 
                subchapter''.
            (B) Section 5732, as redesignated by subparagraph (A), is 
        amended by striking ``(except the tax imposed by section 
        5131)'' each place it appears.
            (C) Subsection (c) of section 5733, as redesignated by 
        subparagraph (A), is amended by striking paragraph (2) and by 
        redesignating paragraph (3) as paragraph (2).
            (D) The table of sections for subchapter D of chapter 52 is 
        amended by adding at the end thereof the following:

                              ``Sec. 5732. Payment of tax.
                              ``Sec. 5733. Provisions relating to 
                                        liability for occupational 
                                        taxes.
                              ``Sec. 5734. Application of State 
                                        laws.''.
            (E) Section 5731 is amended by striking subsection (c) and 
        by redesignating subsection (d) as subsection (c).
            (19) Subsection (c) of section 6071 is amended by striking 
        ``section 5142'' and inserting ``section 5732''.
            (20) Paragraph (1) of section 7652(g) is amended--
                    (A) by striking ``subpart F'' and inserting 
                ``subpart B''; and
                    (B) by striking ``section 5131(a)'' and inserting 
                ``section 5111(a)''.
            (21) The table of sections for subchapter D of chapter 51 
        is amended by striking the item relating to section 5276.
    (c) Effective Date.--The amendments made by this section shall take 
effect on July 1, 2001, but shall not apply to taxes imposed for 
periods before such date.

                      TITLE II--PENSION PROVISIONS

                     Subtitle A--Expanding Coverage

SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.

    (a) Defined Benefit Plans.--
            (1) Dollar limit.--
                    (A) Subparagraph (A) of section 415(b)(1) (relating 
                to limitation for defined benefit plans) is amended by 
                striking ``$90,000'' and inserting ``$160,000''.
                    (B) Subparagraphs (C) and (D) of section 415(b)(2) 
                are each amended by striking ``$90,000'' each place it 
                appears in the headings and the text and inserting 
                ``$160,000''.
                    (C) Paragraph (7) of section 415(b) (relating to 
                benefits under certain collectively bargained plans) is 
                amended by striking ``the greater of $68,212 or one-
                half the amount otherwise applicable for such year 
                under paragraph (1)(A) for `$90,000''' and inserting 
                ``one-half the amount otherwise applicable for such 
                year under paragraph (1)(A) for `$160,000'''.
            (2) Limit reduced when benefit begins before age 62.--
        Subparagraph (C) of section 415(b)(2) is amended by striking 
        ``the social security retirement age'' each place it appears in 
        the heading and text and inserting ``age 62''.
            (3) Limit increased when benefit begins after age 65.--
        Subparagraph (D) of section 415(b)(2) is amended by striking 
        ``the social security retirement age'' each place it appears in 
        the heading and text and inserting ``age 65''.
            (4) Cost-of-living adjustments.--Subsection (d) of section 
        415 (related to cost-of-living adjustments) is amended--
                    (A) by striking ``$90,000'' in paragraph (1)(A) and 
                inserting ``$160,000''; and
                    (B) in paragraph (3)(A)--
                            (i) by striking ``$90,000'' in the heading 
                        and inserting ``$160,000''; and
                            (ii) by striking ``October 1, 1986'' and 
                        inserting ``July 1, 2000''.
            (5) Conforming amendment.--Section 415(b)(2) is amended by 
        striking subparagraph (F).
    (b) Defined Contribution Plans.--
            (1) Dollar limit.--Subparagraph (A) of section 415(c)(1) 
        (relating to limitation for defined contribution plans) is 
        amended by striking ``$30,000'' and inserting ``$40,000''.
            (2) Cost-of-living adjustments.--Subsection (d) of section 
        415 (related to cost-of-living adjustments) is amended--
                    (A) by striking ``$30,000'' in paragraph (1)(C) and 
                inserting ``$40,000''; and
                    (B) in paragraph (3)(D)--
                            (i) by striking ``$30,000'' in the heading 
                        and inserting ``$40,000''; and
                            (ii) by striking ``October 1, 1993'' and 
                        inserting ``July 1, 2000''.
    (c) Qualified Trusts.--
            (1) Compensation limit.--Sections 401(a)(17), 404(l), 
        408(k), and 505(b)(7) are each amended by striking ``$150,000'' 
        each place it appears and inserting ``$200,000''.
            (2) Base period and rounding of cost-of-living 
        adjustment.--Subparagraph (B) of section 401(a)(17) is 
        amended--
                    (A) by striking ``October 1, 1993'' and inserting 
                ``July 1, 2000''; and
                    (B) by striking ``$10,000'' both places it appears 
                and inserting ``$5,000''.
    (d) 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
                    beginning in
                                                         dollar amount:
                    calendar year:
                    2001...................................    $11,000 
                    2002...................................    $12,000 
                    2003...................................    $13,000 
                    2004 or thereafter..................... $14,000.''.
            (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, 2004, the Secretary shall 
        adjust the $14,000 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, 2003, 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)''.
    (e) 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) in subsections (b)(2)(A) and (c)(1) by striking 
                ``$7,500'' each place it appears and inserting ``the 
                applicable dollar amount''; and
                    (B) in subsection (b)(3)(A) by striking ``$15,000'' 
                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
                    beginning in
                                                         dollar amount:
                    calendar year:
                    2001...................................    $11,000 
                    2002...................................    $12,000 
                    2003...................................    $13,000 
                    2004 or thereafter.....................    $14,000.
                    ``(B) Cost-of-living adjustments.--In the case of 
                taxable years beginning after December 31, 2004, the 
                Secretary shall adjust the $14,000 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.''.
    (f) 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
                    beginning in
                                                         dollar amount:
                    calendar year:
                              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) Clause (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).
    (g) Rounding Rule Relating to Defined Benefit Plans and Defined 
Contribution Plans.--Paragraph (4) of section 415(d) is amended to read 
as follows:
            ``(4) Rounding.--
                    ``(A) $160,000 amount.--Any increase under 
                subparagraph (A) of paragraph (1) which is not a 
                multiple of $5,000 shall be rounded to the next lowest 
                multiple of $5,000.
                    ``(B) $40,000 amount.--Any increase under 
                subparagraph (C) of paragraph (1) which is not a 
                multiple of $1,000 shall be rounded to the next lowest 
                multiple of $1,000.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 202. 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) Effective Date.--The amendment made by this section shall apply 
to loans made after December 31, 2000.

SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

    (a) Simplification of Definition of Key Employee.--
            (1) In general.--Section 416(i)(1)(A) (defining key 
        employee) is amended--
                    (A) by striking ``or any of the 4 preceding plan 
                years'' in the matter preceding clause (i);
                    (B) by striking clause (i) and inserting the 
                following:
                            ``(i) an officer of the employer having an 
                        annual compensation greater than $150,000,'';
                    (C) by striking clause (ii) and redesignating 
                clauses (iii) and (iv) as clauses (ii) and (iii), 
                respectively; and
                    (D) by striking the second sentence in the matter 
                following clause (iii), as redesignated by subparagraph 
                (C).
            (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
        amended by striking ``and subparagraph (A)(ii)''.
    (b) 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.''.
    (c) Distributions During Last Year Before Determination Date Taken 
Into Account.--
            (1) In general.--Paragraph (3) of section 416(g) is amended 
        to read as follows:
            ``(3) Distributions during last year before determination 
        date taken into account.--
                    ``(A) In general.--For purposes of determining--
                            ``(i) the present value of the cumulative 
                        accrued benefit for any employee, or
                            ``(ii) the amount of the account of any 
                        employee,
                such present value or amount shall be increased by the 
                aggregate distributions made with respect to such 
                employee under the plan during the 1-year period ending 
                on the determination date. The preceding sentence shall 
                also apply to distributions under a terminated plan 
                which if it had not been terminated would have been 
                required to be included in an aggregation group.
                    ``(B) 5-year period in case of in-service 
                distribution.--In the case of any distribution made for 
                a reason other than separation from service, death, or 
                disability, subparagraph (A) shall be applied by 
                substituting `5-year period' for `1-year period'.''.
            (2) Benefits not taken into account.--Subparagraph (E) of 
        section 416(g)(4) is amended--
                    (A) by striking ``last 5 years'' in the heading and 
                inserting ``last year before determination date''; and
                    (B) by striking ``5-year period'' and inserting 
                ``1-year period''.
    (d) 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).''.
    (e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined benefit 
plans) is amended--
                    (A) by striking ``clause (ii)'' in clause (i) and 
                inserting ``clause (ii) or (iii)''; and
                    (B) by adding at the end the following:
                            ``(iii) Exception for frozen plan.--For 
                        purposes of determining an employee's years of 
                        service with the employer, any service with the 
                        employer shall be disregarded to the extent 
                        that such service occurs during a plan year 
                        when the plan benefits (within the meaning of 
                        section 410(b)) no employee or former 
                        employee.''.
    (f) 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.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 204. 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. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION 
              PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT 
              ORGANIZATIONS.

    (a) In General.--Subsection (c) of section 457 (relating to 
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 211, is amended to read as 
follows:
    ``(c) Limitation.--The maximum amount of the compensation of any 
one individual which may be deferred under subsection (a) during any 
taxable year shall not exceed the amount in effect under subsection 
(b)(2)(A) (as modified by any adjustment provided under subsection 
(b)(3)).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 2000.

SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING 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 
determination letters with respect to the qualified status of a pension 
benefit plan maintained solely by one or more eligible employers or any 
trust which is part of the plan. The preceding sentence shall not apply 
to any request--
            (1) made after the fifth plan year the pension benefit plan 
        is in existence; or
            (2) made by the sponsor of any prototype or similar plan 
        which the sponsor intends to market to participating employers.
    (b) Pension Benefit Plan.--For purposes of this section, the term 
``pension benefit plan'' means a pension, profit-sharing, stock bonus, 
annuity, or employee stock ownership plan.
    (c) Eligible Employer.--For purposes of this section, the term 
``eligible employer'' has the same meaning given such term in section 
408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986. The 
determination of whether an employer is an eligible employer under this 
section shall be made as of the date of the request described in 
subsection (a).
    (d) Effective Date.--The provisions of this section shall apply 
with respect to requests made after December 31, 2000.

SEC. 207. DEDUCTION LIMITS.

    (a) In General.--Section 404(a) (relating to general rule) is 
amended by adding at the end the following:
            ``(12) Definition of compensation.--For purposes of 
        paragraphs (3), (7), (8), and (9), the term `compensation' 
        shall include amounts treated as participant's compensation 
        under subparagraph (C) or (D) of section 415(c)(3).''.
    (b) Conforming Amendment.--Subparagraph (B) of section 404(a)(3) is 
amended by striking the last sentence thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2000.

SEC. 208. 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 first 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 first 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.

                Subtitle B--Enhancing Fairness for Women

SEC. 221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER.

    (a) In General.--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 and thereafter...........................          40 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 subparagraph (B)(iii) for any year to 
                which section 457(b)(3) applies.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions in taxable years beginning after December 31, 2000.

SEC. 222. 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 fifth 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 Small Business Tax Fairness Act of 
                2001)''.
                    (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 211) is amended by inserting 
                before the period at the end the following: ``(as in 
                effect before the enactment of the Small Business Tax 
                Fairness Act of 2001)''.
            (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.--
                    (A) In general.--The amendment made by paragraph 
                (1) shall apply to limitation years beginning after 
                December 31, 1999.
                    (B) Exclusion allowance.--Effective for limitation 
                years beginning in 2000, in the case of any annuity 
                contract described in section 403(b) of the Internal 
                Revenue Code of 1986, the amount of the contribution 
                disqualified by reason of section 415(g) of such Code 
                shall reduce the exclusion allowance as provided in 
                section 403(b)(2) of such Code.
            (3) Modification of 403(b) exclusion allowance to conform 
        to 415 modification.--The Secretary of the Treasury shall 
        modify the regulations regarding the exclusion allowance under 
        section 403(b)(2) of the Internal Revenue Code of 1986 to 
        render void the requirement that contributions to a defined 
        benefit pension plan be treated as previously excluded amounts 
        for purposes of the exclusion allowance. For taxable years 
        beginning after December 31, 1999, such regulations shall be 
        applied as if such requirement were void.
    (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. 223. 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) 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 one or more collective bargaining 
        agreements between employee representatives and one or more 
        employers ratified by the date of the 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 the 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.

SEC. 224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.

    (a) Simplification and Finalization of Minimum Distribution 
Requirements.--
            (1) In general.--The Secretary of the Treasury shall--
                    (A) simplify and finalize the regulations relating 
                to minimum distribution requirements under sections 
                401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 
                457(d)(2) of the Internal Revenue Code of 1986; and
                    (B) modify such regulations to--
                            (i) reflect current life expectancy; and
                            (ii) revise the required distribution 
                        methods so that, under reasonable assumptions, 
                        the amount of the required minimum distribution 
                        does not decrease over a participant's life 
                        expectancy.
            (2) Fresh start.--Notwithstanding subparagraph (D) of 
        section 401(a)(9) of such Code, during the first year that 
        regulations are in effect under this subsection, required 
        distributions for future years may be redetermined to reflect 
        changes under such regulations. Such redetermination shall 
        include the opportunity to choose a new designated beneficiary 
        and to elect a new method of calculating life expectancy.
            (3) Effective date for regulations.--Regulations referred 
        to in paragraph (1) shall be effective for years beginning 
        after December 31, 2000, and shall apply in such years without 
        regard to whether an individual had previously begun receiving 
        minimum distributions.
    (b) Repeal of Rule Where Distributions Had Begun Before Death 
Occurs.--
            (1) In general.--Subparagraph (B) of section 401(a)(9) is 
        amended by striking clause (i) and redesignating clauses (ii), 
        (iii), and (iv) as clauses (i), (ii), and (iii), respectively.
            (2) Conforming changes.--
                    (A) Clause (i) of section 401(a)(9)(B) (as so 
                redesignated) is amended--
                            (i) by striking ``for other cases'' in the 
                        heading; and
                            (ii) by striking ``the distribution of the 
                        employee's interest has begun in accordance 
                        with subparagraph (A)(ii)'' and inserting ``his 
                        entire interest has been distributed to him,''.
                    (B) Clause (ii) of section 401(a)(9)(B) (as so 
                redesignated) is amended by striking ``clause (ii)'' 
                and inserting ``clause (i)''.
                    (C) Clause (iii) of section 401(a)(9)(B) (as so 
                redesignated) is amended--
                            (i) by striking ``clause (iii)(I)'' and 
                        inserting ``clause (ii)(I)'';
                            (ii) by striking ``clause (iii)(III)'' in 
                        subclause (I) and inserting ``clause 
                        (ii)(III)'';
                            (iii) by striking ``the date on which the 
                        employee would have attained the age 70\1/2\,'' 
                        in subclause (I) and inserting ``April 1 of the 
                        calendar year following the calendar year in 
                        which the spouse attains 70\1/2\,''; and
                            (iv) by striking ``the distributions to 
                        such spouse begin,'' in subclause (II) and 
                        inserting ``his entire interest has been 
                        distributed to him,''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
    (c) Reduction in Excise Tax.--
            (1) In general.--Subsection (a) of section 4974 is amended 
        by striking ``50 percent'' and inserting ``10 percent''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 2000.

SEC. 225. 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. 226. 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.

          Subtitle C--Increasing Portability for Participants

SEC. 231. 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. 232. 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. 233. 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. 234. 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 233, 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. 235. 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 clause (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) Effective date.--The amendment 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 shall 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) 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, including the regulations required by the 
        amendments made by this subsection. 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. 236. 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. 237. 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 (16) the following new paragraph:
            ``(17) 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)(17))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to trustee-to-trustee transfers after December 31, 2000.

SEC. 238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT 
              AMOUNTS.

    (a) Qualified Plans.--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).''.
    (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. 239. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR SECTION 
              457 PLANS.

    (a) Minimum Distribution Requirements.--Paragraph (2) of section 
457(d) (relating to distribution requirements) is amended to read as 
follows:
            ``(2) Minimum distribution requirements.--A plan meets the 
        minimum distribution requirements of this paragraph if such 
        plan meets the requirements of section 401(a)(9).''.
    (b) Inclusion in Gross Income.--
            (1) 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.''.
            (2) Conforming amendments.--
                    (A) 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 subsection (e)(1)(B)--''.
                    (B) Section 457(d) is amended by adding at the end 
                the following new paragraph:
            ``(3) Special rule for government plan.--An eligible 
        deferred compensation plan of an employer described in 
        subsection (e)(1)(A) shall not be treated as failing to meet 
the requirements of this subsection solely by reason of making a 
distribution described in subsection (e)(9)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2000.

       Subtitle D--Strengthening Pension Security and Enforcement

SEC. 241. 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) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

SEC. 242. 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 one 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 one 
        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. 243. 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. 244. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT 
              PLANS SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.

    (a) Amendment to 1986 Code.--Chapter 43 (relating to qualified 
pension, etc., plans) is amended by adding at the end the following new 
section:

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

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any 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.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Overall limitation for unintentional failures.--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 one plan. 
        For purposes of this paragraph, if not all persons who are 
        treated as a single employer for purposes of this section have 
        the same taxable year, the taxable years taken into account 
        shall be determined under principles similar to the principles 
        of section 1561.
            ``(2) 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 an applicable pension plan is amended 
        to provide for a significant reduction in the rate of future 
        benefit accrual, the plan administrator shall provide written 
        notice to each applicable individual (and to each employee 
        organization representing applicable individuals).
            ``(2) Notice.--The notice required by paragraph (1) shall 
        be written in a manner calculated to be understood by the 
        average plan participant and shall provide sufficient 
        information (as determined in accordance with regulations 
        prescribed by the Secretary) to allow applicable individuals to 
        understand the effect of the plan amendment.
            ``(3) Timing of notice.--Except as provided in regulations, 
        the notice required by paragraph (1) shall be provided within a 
        reasonable time before the effective date of the plan 
        amendment.
            ``(4) Designees.--Any notice under paragraph (1) may be 
        provided to a person designated, in writing, by the person to 
        which it would otherwise be provided.
            ``(5) Notice before adoption of amendment.--A plan shall 
        not be treated as failing to meet the requirements of paragraph 
        (1) 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.
    ``(f) Applicable Individual; Applicable Pension Plan.--For purposes 
of this section--
            ``(1) Applicable individual.--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)),
        who may reasonably be expected to be affected by such plan 
        amendment.
            ``(2) Applicable pension plan.--The term `applicable 
        pension plan' means--
                    ``(A) any defined benefit plan, or
                    ``(B) an individual account plan which is subject 
                to the funding standards of section 412,
        which had 100 or more participants who had accrued a benefit, 
        or with respect to whom contributions were made, under the plan 
        (whether or not vested) as of the last day of the plan year 
        preceding the plan year in which the plan amendment becomes 
        effective. 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 the 
        election provided by section 410(d) has not been made.''.
    (b) Clerical Amendment.--The table of sections for chapter 43 is 
amended by adding at the end the following new item:

                               ``Sec. 4980F. Failure of applicable 
                                        plans reducing benefit accruals 
                                        to satisfy notice 
                                        requirements.''.
    (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) Transition.--Until such time as the Secretary of the 
        Treasury issues regulations under sections 4980F(e)(2) and (3) 
        of the Internal Revenue Code of 1986 (as added by the 
        amendments made by this section), a plan shall be treated as 
        meeting the requirements of such sections if it makes a good 
        faith effort to comply with such requirements.
            (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. 245. 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) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2000.

                Subtitle E--Reducing Regulatory Burdens

SEC. 261. MODIFICATION OF TIMING OF PLAN VALUATIONS.

    (a) Amendments to 1986 Code.--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) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2000.

SEC. 262. 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. 263. 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, 2000.

SEC. 264. 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. 265. 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.

SEC. 266. 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 $250,000 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 first 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.

SEC. 267. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

    The Secretary of the Treasury shall continue to update and improve 
the Employee Plans Compliance Resolution System (or any successor 
program) giving special attention to--
            (1) increasing the awareness and knowledge of small 
        employers concerning the availability and use of the program;
            (2) taking into account special concerns and circumstances 
        that small employers face with respect to compliance and 
        correction of compliance failures;
            (3) extending the duration of the self-correction period 
        under the Administrative Policy Regarding Self-Correction for 
        significant compliance failures;
            (4) expanding the availability to correct insignificant 
        compliance failures under the Administrative Policy Regarding 
        Self-Correction during audit; and
            (5) assuring that any tax, penalty, or sanction that is 
        imposed by reason of a compliance failure is not excessive and 
        bears a reasonable relationship to the nature, extent, and 
        severity of the failure.

SEC. 268. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED TRANSIT 
              PASSES.

    (a) In General.--Section 132(f)(3) (relating to cash 
reimbursements) is amended by striking the last sentence.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2000.

SEC. 269. REPEAL OF THE MULTIPLE USE TEST.

    (a) In General.--Paragraph (9) of section 401(m) is amended to read 
as follows:
            ``(9) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection and subsection (k), including regulations 
        permitting appropriate aggregation of plans and 
        contributions.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2000.

SEC. 270. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND LINE OF 
              BUSINESS 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 
                paragraph (1) 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 paragraph 
                (1) 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.
    (c) Line of Business Rules.--The Secretary of the Treasury shall, 
on or before December 31, 2000, modify the existing regulations issued 
under section 414(r) of the Internal Revenue Code of 1986 in order to 
expand (to the extent that the Secretary determines appropriate) the 
ability of a pension plan to demonstrate compliance with the line of 
business requirements based upon the facts and circumstances 
surrounding the design and operation of the plan, even though the plan 
is unable to satisfy the mechanical tests currently used to determine 
compliance.

SEC. 271. 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. 272. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) Amendment to 1986 code.--Subparagraph (A) of section 
        417(a)(6) is amended by striking ``90-day'' and inserting 
        ``180-day''.
            (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 ``180 days'' 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 amendment 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.

                      Subtitle F--Plan Amendments

SEC. 281. 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 governmental 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 III--ESTATE TAX RELIEF

          Subtitle A--Reductions of Estate and Gift Tax Rates

SEC. 301. REDUCTIONS OF ESTATE AND GIFT TAX RATES.

    (a) Maximum Rate of Tax Reduced to 50 Percent.--
            (1) In general.--The table contained in section 2001(c)(1) 
        is amended by striking the two highest brackets and inserting 
        the following:

    ``Over $2,500,000..............
                                        $1,025,800, plus 50% of the 
                                                excess over 
                                                $2,500,000.''.
            (2) Phase-in of reduced rate.--Subsection (c) of section 
        2001 is amended by adding at the end the following new 
        paragraph:
            ``(3) Phase-in of reduced rate.--In the case of decedents 
        dying, and gifts made, during 2001, the last item in the table 
        contained in paragraph (1) shall be applied by substituting 
        `53%' for `50%'.''.
    (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) of 
section 2001 is amended by striking paragraph (2) and redesignating 
paragraph (3), as added by subsection (a), as paragraph (2).
    (c) Additional Reductions of Rates of Tax.--Subsection (c) of 
section 2001, as so amended, is amended by adding at the end the 
following new paragraph:
            ``(3) Phasedown of tax.--In the case of estates of 
        decedents dying, and gifts made, during any calendar year after 
        2002--
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the tentative tax under this 
                subsection shall be determined by using a table 
                prescribed by the Secretary (in lieu of using the table 
                contained in paragraph (1)) which is the same as such 
                table; except that--
                            ``(i) each of the rates of tax shall be 
                        reduced by the number of percentage points 
                        determined under subparagraph (B), and
                            ``(ii) the amounts setting forth the tax 
                        shall be adjusted to the extent necessary to 
                        reflect the adjustments under clause (i).
                    ``(B) Percentage points of reduction.--

                  
                                                        The number of  
                ``For calendar year:
                                                  percentage points is:
                    2003...................................        1.0 
                    2004...................................        2.0.
                    ``(C) Table for years after 2004.--The table 
                applicable under this subsection to estates of 
                decedents dying, and gifts made, during calendar year 
                2004 shall apply to estates of decedents dying, and 
                gifts made, after calendar year 2004.
                    ``(D) Coordination with credit for state death 
                taxes.--Rules similar to the rules of subparagraph (A) 
                shall apply to the table contained in section 2011(b) 
                except that the Secretary shall prescribe percentage 
                point reductions which maintain the proportionate 
                relationship (as in effect before any reduction under 
                this paragraph) between the credit under section 2011 
                and the tax rates under subsection (c).''.
    (d) Effective Dates.--
            (1) Subsections (a) and (b).--The amendments made by 
        subsections (a) and (b) shall apply to estates of decedents 
        dying, and gifts made, after December 31, 2000.
            (2) Subsection (c).--The amendment made by subsection (c) 
        shall apply to estates of decedents dying, and gifts made, 
        after December 31, 2002.

SEC. 302. SENSE OF THE CONGRESS CONCERNING REPEAL OF THE DEATH TAX.

    (a) Findings.--Congress finds the following:
            (1) The death tax stifles economic growth by taking 
        productive resources out of the private sector, thereby causing 
        unemployment and inhibiting job creation.
            (2) The death tax penalizes hard work and entrepreneurial 
        activity by causing the demise of small, family-owned 
        businesses when an owner dies.
            (3) The death tax rates in the United States are the second 
        highest among all industrialized nations.
            (4) The death tax prevents minorities from gaining an 
        economic foothold in the economy since it limits the inter-
        generational transfer of wealth, which is critical to 
        establishing a legacy and power base for minorities in our 
        society.
            (5) The death tax presents serious challenges for farmers 
        whose value is in their land, not liquid assets, and who must 
        sell land to pay the tax, thereby jeopardizing the future 
        existence of the already-struggling family farm.
            (6) The death tax contributes to the development of rural 
        areas by causing farms and ranches to be sold and subdivided.
            (7) Previous attempts by Congress to create death tax 
        exemptions have been ineffective due to an inability to 
        legislatively duplicate the complex family relationships that 
        exist in our society.
            (8) Increasing entrepreneurship and investment in 
        retirement will bring a whole new class of people under the 
        death tax.
    (b) Sense of Congress.--It is the sense of the Congress that the 
death tax relief in this Act is considered a first step in our effort 
to ultimately repeal this onerous tax.

   Subtitle B--Unified Credit Replaced With Unified Exemption Amount

SEC. 311. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES REPLACED WITH 
              UNIFIED EXEMPTION AMOUNT.

    (a) In General.--
            (1) Estate tax.--Subsection (b) of section 2001 (relating 
        to computation of tax) is amended to read as follows:
    ``(b) Computation of Tax.--
            ``(1) In general.--The tax imposed by this section shall be 
        the amount equal to the excess (if any) of--
                    ``(A) the tentative tax determined under paragraph 
                (2), over
                    ``(B) the aggregate amount of tax which would have 
                been payable under chapter 12 with respect to gifts 
                made by the decedent after December 31, 1976, if the 
                provisions of subsection (c) (as in effect at the 
                decedent's death) had been applicable at the time of 
                such gifts.
            ``(2) Tentative tax.--For purposes of paragraph (1), the 
        tentative tax determined under this paragraph is a tax computed 
        under subsection (c) on the excess of--
                    ``(A) the sum of--
                            ``(i) the amount of the taxable estate, and
                            ``(ii) the amount of the adjusted taxable 
                        gifts, over
                    ``(B) the exemption amount for the calendar year in 
                which the decedent died.
            ``(3) Exemption amount.--For purposes of paragraph (2), the 
        term `exemption amount' means the amount determined in 
        accordance with the following table:

``In the case of
                                                          The exemption
  calendar year:
                                                             amount is:
        2001.........................................         $675,000 
        2002 and 2003................................         $700,000 
        2004.........................................         $850,000 
        2005.........................................         $950,000 
        2006 or thereafter...........................       $1,000,000.
            ``(4) Adjusted taxable gifts.--For purposes of paragraph 
        (2), the term `adjusted taxable gifts' means the total amount 
        of the taxable gifts (within the meaning of section 2503) made 
        by the decedent after December 31, 1976, other than gifts which 
        are includible in the gross estate of the decedent.''.
            (2) Gift tax.--Subsection (a) of section 2502 (relating to 
        computation of tax) is amended to read as follows:
    ``(a) Computation of Tax.--
            ``(1) In general.--The tax imposed by section 2501 for each 
        calendar year shall be the amount equal to the excess (if any) 
        of--
                    ``(A) the tentative tax determined under paragraph 
                (2), over
                    ``(B) the tax paid under this section for all prior 
                calendar periods.
            ``(2) Tentative tax.--For purposes of paragraph (1), the 
        tentative tax determined under this paragraph for a calendar 
        year is a tax computed under section 2001(c) on the excess of--
                    ``(A) the aggregate sum of the taxable gifts for 
                such calendar year and for each of the preceding 
                calendar periods, over
                    ``(B) the exemption amount under section 2001(b)(3) 
                for such calendar year.''.
    (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) Subsection (b) of section 2011 is amended--
                    (i) by striking ``adjusted'' in the table; and
                    (ii) by striking the last sentence.
            (B) Subsection (f) of section 2011 is amended by striking 
        ``, reduced by the amount of the unified credit provided by 
        section 2010''.
            (2) Subsection (a) of section 2012 is amended by striking 
        ``and the unified credit provided by section 2010''.
            (3) Subparagraph (A) of section 2013(c)(1) is amended by 
        striking ``2010,''.
            (4) Paragraph (2) of section 2014(b) is amended by striking 
        ``2010,''.
            (5) 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 Small Business Tax Fairness 
                        Act of 2001) or the exemption amount allowable 
                        under section 2001(b) with respect to the 
                        decedent as a credit under section 2505 (as so 
in effect) or exemption under section 2521 (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,''.
            (6) Subsection (a) of section 2057 is amended by striking 
        paragraphs (2) and (3) and inserting the following new 
        paragraph:
            ``(2) Maximum deduction.--The deduction allowed by this 
        section shall not exceed the excess of $1,300,000 over the 
        exemption amount (as defined in section 2001(b)(3)).''.
            (7)(A) Subsection (b) of section 2101 is amended to read as 
        follows:
    ``(b) Computation of Tax.--
            ``(1) In general.--The tax imposed by this section shall be 
        the amount equal to the excess (if any) of--
                    ``(A) the tentative tax determined under paragraph 
                (2), over
                    ``(B) a tentative tax computed under section 
                2001(c) on the amount of the adjusted taxable gifts.
            ``(2) Tentative tax.--For purposes of paragraph (1), the 
        tentative tax determined under this paragraph is a tax computed 
        under section 2001(c) on the excess of--
                    ``(A) the sum of--
                            ``(i) the amount of the taxable estate, and
                            ``(ii) the amount of the adjusted taxable 
                        gifts, over
                    ``(B) the exemption amount for the calendar year in 
                which the decedent died.
            ``(3) Exemption amount.--
                    ``(A) In general.--The term `exemption amount' 
                means $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 amount 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 amount allowed 
                        under this paragraph shall be equal to the 
                        amount which bears the same ratio to the 
                        exemption amount under section 2001(b)(3) (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 
                        Small Business Tax Fairness Act of 2001) 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).''.
            (8) Section 2102 is amended by striking subsection (c).
            (9)(A) Subsection (a) of section 2107 is amended by adding 
        at the end the following new paragraph:
            ``(3) Limitation on exemption amount.--Subparagraphs (B) 
        and (C) of section 2101(b)(3) shall not apply in applying 
        section 2101 for purposes of this section.''.
            (B) Subsection (c) of section 2107 is amended--
                    (i) by striking paragraph (1) and by redesignating 
                paragraphs (2) and (3) as paragraphs (1) and (2), 
                respectively; and
                    (ii) by striking the second sentence of paragraph 
                (2) (as so redesignated).
            (10) Paragraph (1) of section 6018(a) is amended by 
        striking ``the applicable exclusion amount in effect under 
        section 2010(c)'' and inserting ``the exemption amount under 
        section 2001(b)(3)''.
            (11) Subparagraph (A) of section 6601(j)(2) is amended to 
        read as follows:
                    ``(A) the amount of the tentative tax which would 
                be determined under the rate schedule set forth in 
                section 2001(c) if the amount with respect to which 
                such tentative tax is to be computed were $1,000,000, 
                or''.
            (12) The table of sections for part II of subchapter A of 
        chapter 11 is amended by striking the item relating to section 
        2010.
            (13) The table of sections for subchapter A of chapter 12 
        is amended by striking the item relating to section 2505.
            (14) The table of sections for subchapter C of chapter 12 
        is amended by inserting before the item relating to section 
        2522 the following new item:

                              ``Sec. 2521. Exemption.''.
    (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, 2000; and
            (2) insofar as they relate to the tax imposed by chapter 12 
        of such Code, shall apply to gifts made after December 31, 
        2000.

     Subtitle C--Modifications of Generation-skipping Transfer Tax

SEC. 321. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME TRANSFERS TO 
              TRUSTS; RETROACTIVE ALLOCATIONS.

    (a) In General.--Section 2632 (relating to special rules for 
allocation of GST exemption) is amended by redesignating subsection (c) 
as subsection (e) and by inserting after subsection (b) the following 
new subsections:
    ``(c) Deemed Allocation to Certain Lifetime Transfers to GST 
Trusts.--
            ``(1) In general.--If any individual makes an indirect skip 
        during such individual's lifetime, any unused portion of such 
        individual's GST exemption shall be allocated to the property 
        transferred to the extent necessary to make the inclusion ratio 
        for such property zero. If the amount of the indirect skip 
        exceeds such unused portion, the entire unused portion shall be 
        allocated to the property transferred.
            ``(2) Unused portion.--For purposes of paragraph (1), the 
        unused portion of an individual's GST exemption is that portion 
        of such exemption which has not previously been--
                    ``(A) allocated by such individual,
                    ``(B) treated as allocated under subsection (b) 
                with respect to a direct skip occurring during or 
                before the calendar year in which the indirect skip is 
                made, or
                    ``(C) treated as allocated under paragraph (1) with 
                respect to a prior indirect skip.
            ``(3) Definitions.--
                    ``(A) Indirect skip.--For purposes of this 
                subsection, the term `indirect skip' means any transfer 
                of property (other than a direct skip) subject to the 
                tax imposed by chapter 12 made to a GST trust.
                    ``(B) GST trust.--The term `GST trust' means a 
                trust that could have a generation-skipping transfer 
                with respect to the transferor unless--
                            ``(i) the trust instrument provides that 
                        more than 25 percent of the trust corpus must 
                        be distributed to or may be withdrawn by one or 
                        more individuals who are non-skip persons--
                                    ``(I) before the date that the 
                                individual attains age 46,
                                    ``(II) on or before one or more 
                                dates specified in the trust instrument 
                                that will occur before the date that 
                                such individual attains age 46, or
                                    ``(III) upon the occurrence of an 
                                event that, in accordance with 
                                regulations prescribed by the 
                                Secretary, may reasonably be expected 
                                to occur before the date that such 
                                individual attains age 46;
                            ``(ii) the trust instrument provides that 
                        more than 25 percent of the trust corpus must 
                        be distributed to or may be withdrawn by one or 
                        more individuals who are non-skip persons and 
                        who are living on the date of death of another 
                        person identified in the instrument (by name or 
                        by class) who is more than 10 years older than 
                        such individuals;
                            ``(iii) the trust instrument provides that, 
                        if one or more individuals who are non-skip 
                        persons die on or before a date or event 
                        described in clause (i) or (ii), more than 25 
                        percent of the trust corpus either must be 
                        distributed to the estate or estates of one or 
                        more of such individuals or is subject to a 
                        general power of appointment exercisable by one 
                        or more of such individuals;
                            ``(iv) the trust is a trust any portion of 
                        which would be included in the gross estate of 
                        a non-skip person (other than the transferor) 
                        if such person died immediately after the 
                        transfer;
                            ``(v) the trust is a charitable lead 
                        annuity trust (within the meaning of section 
                        2642(e)(3)(A)) or a charitable remainder 
                        annuity trust or a charitable remainder 
                        unitrust (within the meaning of section 
                        664(d)); or
                            ``(vi) the trust is a trust with respect to 
                        which a deduction was allowed under section 
                        2522 for the amount of an interest in the form 
                        of the right to receive annual payments of a 
                        fixed percentage of the net fair market value 
                        of the trust property (determined yearly) and 
                        which is required to pay principal to a non-
                        skip person if such person is alive when the 
                        yearly payments for which the deduction was 
                        allowed terminate.
                For purposes of this subparagraph, the value of 
                transferred property shall not be considered to be 
                includible in the gross estate of a non-skip person or 
                subject to a right of withdrawal by reason of such 
                person holding a right to withdraw so much of such 
                property as does not exceed the amount referred to in 
                section 2503(b) with respect to any transferor, and it 
                shall be assumed that powers of appointment held by 
                non-skip persons will not be exercised.
            ``(4) Automatic allocations to certain gst trusts.--For 
        purposes of this subsection, an indirect skip to which section 
        2642(f) applies shall be deemed to have been made only at the 
        close of the estate tax inclusion period. The fair market value 
of such transfer shall be the fair market value of the trust property 
at the close of the estate tax inclusion period.
            ``(5) Applicability and effect.--
                    ``(A) In general.--An individual--
                            ``(i) may elect to have this subsection not 
                        apply to--
                                    ``(I) an indirect skip, or
                                    ``(II) any or all transfers made by 
                                such individual to a particular trust, 
                                and
                            ``(ii) may elect to treat any trust as a 
                        GST trust for purposes of this subsection with 
                        respect to any or all transfers made by such 
                        individual to such trust.
                    ``(B) Elections.--
                            ``(i) Elections with respect to indirect 
                        skips.--An election under subparagraph 
                        (A)(i)(I) shall be deemed to be timely if filed 
                        on a timely filed gift tax return for the 
                        calendar year in which the transfer was made or 
                        deemed to have been made pursuant to paragraph 
                        (4) or on such later date or dates as may be 
                        prescribed by the Secretary.
                            ``(ii) Other elections.--An election under 
                        clause (i)(II) or (ii) of subparagraph (A) may 
                        be made on a timely filed gift tax return for 
                        the calendar year for which the election is to 
                        become effective.
    ``(d) 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 or 
                        former 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) Conforming Amendment.--Paragraph (2) of section 2632(b) is 
amended by striking ``with respect to a direct skip'' and inserting 
``or subsection (c)(1)''.
    (c) Effective Dates.--
            (1) Deemed allocation.--Section 2632(c) of the Internal 
        Revenue Code of 1986 (as added by subsection (a)), and the 
        amendment made by subsection (b), shall apply to transfers 
        subject to chapter 11 or 12 made after December 31, 1999, and 
        to estate tax inclusion periods ending after December 31, 1999.
            (2) Retroactive allocations.--Section 2632(d) of the 
        Internal Revenue Code of 1986 (as added by subsection (a)) 
        shall apply to deaths of non-skip persons occurring after 
        December 31, 1999.

SEC. 322. 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 
                        two 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 two 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 December 31, 1999.

SEC. 323. 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) or (c)(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 
apply to transfers subject to chapter 11 or 12 of the Internal Revenue 
Code of 1986 made after December 31, 1999.

SEC. 324. 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 subsection (b)(3) 
                        or (c)(5) of section 2632.
                Such regulations shall include procedures for 
                requesting comparable relief with respect to transfers 
                made before the date of the 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) of the 
        Internal Revenue Code of 1986 (as added by subsection (a)) 
        shall apply to requests pending on, or filed after, December 
        31, 1999.
            (2) Substantial compliance.--Section 2642(g)(2) of such 
        Code (as so added) shall take effect on the date of the 
        enactment of this Act and shall apply to transfers subject to 
        chapter 11 or 12 of the Internal Revenue Code of 1986 made 
        after December 31, 1999.

                   Subtitle D--Conservation Easements

SEC. 331. 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.

                       TITLE IV--TIMBER INCENTIVE

SEC. 401. 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, 2000, 
        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, 2000.

                    TITLE V--REAL ESTATE PROVISIONS

              Subtitle A--Private Activity Bond Volume Cap

SEC. 501. ACCELERATION OF PHASE-IN OF 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 to read as follows:
      

 
       ``Calendar Year           Per Capita Limit      Aggregate Limit
------------------------------------------------------------------------
  2001.......................         $55.00            $165,000,000
  2002.......................          60.00             180,000,000
  2003.......................          65.00             195,000,000
  2004, 2005, and 2006.......          70.00             210,000,000
  2007 and thereafter........          75.00           225,000,000.''.

    (b) Effective Date.--The amendment made by this section shall apply 
to calendar years beginning after 2000.

 Subtitle B--Exclusion From Gross Income for Certain Forgiven Mortgage 
                              Obligations

SEC. 502. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN MORTGAGE 
              OBLIGATIONS.

    (a) In General.--Paragraph (1) of section 108(a) (relating to 
exclusion from gross income) is amended by striking ``or'' at the end 
of both subparagraphs (A) and (C), by striking the period at the end of 
subparagraph (D) and inserting ``, or'', and by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E) in the case of an individual, the 
                indebtedness discharged is qualified residential 
                indebtedness.''.
    (b) Qualified Residential Indebtedness Shortfall.--Section 108 
(relating to discharge of indebtedness) is amended by adding at the end 
the following new subsection:
    ``(h) Qualified Residential Indebtedness.--
            ``(1) Limitations.--The amount excluded under subparagraph 
        (E) of subsection (a)(1) with respect to any qualified 
        residential indebtedness shall not exceed the excess (if any) 
        of--
                    ``(A) the outstanding principal amount of such 
                indebtedness (immediately before the discharge), over
                    ``(B) the sum of--
                            ``(i) the amount realized from the sale of 
                        the real property securing such indebtedness 
                        reduced by the cost of such sale, and
                            ``(ii) the outstanding principal amount of 
                        any other indebtedness secured by such 
                        property.
            ``(2) Qualified residential indebtedness.--
                    ``(A) In general.--The term `qualified residential 
                indebtedness' means indebtedness which--
                            ``(i) was incurred or assumed by the 
                        taxpayer in connection with real property used 
                        as the principal residence (within the meaning 
                        of section 121) of the taxpayer and is secured 
                        by such real property,
                            ``(ii) is incurred or assumed to acquire, 
                        construct, reconstruct, or substantially 
                        improve such real property, and
                            ``(iii) with respect to which such taxpayer 
                        makes an election to have this paragraph apply.
                    ``(B) Refinanced indebtedness.--Such term shall 
                include indebtedness resulting from the refinancing of 
                indebtedness under subparagraph (A)(ii), but only to 
                the extent the amount of the indebtedness resulting 
                from such refinancing does not exceed the amount of the 
                refinanced indebtedness.
                    ``(C) Exceptions.--Such term shall not include 
                qualified farm indebtedness or qualified real property 
                business indebtedness.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 108(a) is amended--
                    (A) in subparagraph (A) by striking ``and (D)'' and 
                inserting ``(D), and (E)''; and
                    (B) by amending subparagraph (B) to read as 
                follows:
                    ``(B) Insolvency exclusion takes precedence over 
                qualified farm exclusion; qualified real property 
                business exclusion; and qualified residential shortfall 
                exclusion.--Subparagraphs (C), (D), and (E) of 
                paragraph (1) shall not apply to a discharge to the 
                extent the taxpayer is insolvent.''.
            (2) Paragraph (1) of section 108(b) is amended by striking 
        ``or (C)'' and inserting ``(C), or (E)''.
            (3) Subsection (c) of section 121 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(4) Special rule relating to discharge of indebtedness.--
        The amount of gain which (but for this paragraph) would be 
        excluded from gross income under subsection (a) with respect to 
        a principal residence shall be reduced by the amount excluded 
        from gross income under section 108(a)(1)(E) with respect to 
        such residence.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to discharges after December 31, 2000.

      TITLE VI--AMENDMENTS TO THE FAIR LABOR STANDARDS ACT OF 1938

SEC. 601. SHORT TITLE.

    This title may be cited as the ``Minimum Wage Increase Act of 
2001''.

SEC. 602. MINIMUM WAGE.

    Section 6(a)(1) of the Fair Labor Standards Act of 1938 (29 U.S.C. 
206(a)(1)) is amended to read as follows:
            ``(1) except as otherwise provided in this section, not 
        less than--
                    ``(A) $5.15 an hour beginning September 1, 1997,
                    ``(B) $5.65 an hour during the year beginning April 
                1, 2001, and
                    ``(C) $6.15 an hour beginning April 1, 2002;''.

SEC. 603. EXEMPTION FOR COMPUTER PROFESSIONALS.

    Section 13(a) of the Fair Labor Standards Act of 1938 (29 U.S.C. 
213(a)) is amended by amending paragraph (17) to read as follows:
            ``(17) any employee who is a computer systems, network, or 
        database analyst, designer, developer, programmer, software 
        engineer, or other similarly skilled worker--
                    ``(A) whose primary duty is--
                            ``(i) the application of systems or network 
                        or database analysis techniques and procedures, 
                        including consulting with users, to determine 
                        hardware, software, systems, network, or 
                        database specifications (including functional 
                        specifications);
                            ``(ii) the design, configuration, 
                        development, integration, documentation, 
                        analysis, creation, testing, securing, or 
                        modification of, or problem resolution for, 
                        computer systems, networks, databases, or 
                        programs, including prototypes, based on and 
                        related to user, system, network, or database 
                        specifications, including design specifications 
                        and machine operating systems;
                            ``(iii) the management or training of 
                        employees performing duties described in clause 
                        (i) or (ii); or
                            ``(iv) a combination of duties described in 
                        clauses (i), (ii), or (iii) the performance of 
                        which requires the same level of skills; and
                    ``(B) who, in the case of an employee who is 
                compensated on an hourly basis, is compensated at a 
                rate of not less than $27.63 an hour.
        For purposes of this paragraph, the term `network' includes the 
        Internet and intranet networks and the world wide web. An 
        employee who meets the exemption provided by this paragraph 
        shall be considered an employee in a professional capacity 
        pursuant to paragraph (1); or''.

SEC. 604. EXEMPTION FOR CERTAIN SALES EMPLOYEES.

    (a) Amendment.--Section 13(a) of the Fair Labor Standards Act of 
1938 (29 U.S.C. 213(a)) is further amended by adding after paragraph 
(17) the following:
            ``(18) any employee employed in a sales position if--
                    ``(A) the employee has specialized or technical 
                knowledge related to products or services being sold;
                    ``(B) the employee's--
                            ``(i) sales are predominantly to persons or 
                        entities to whom the employee's position has 
                        made previous sales; or
                            ``(ii) position does not involve initiating 
                        sales contacts;
                    ``(C) the employee has a detailed understanding of 
                the needs of those to whom the employee is selling;
                    ``(D) the employee exercises discretion in offering 
                a variety of products and services;
                    ``(E) the employee receives--
                            ``(i) base compensation, determined without 
                        regard to the number of hours worked by the 
                        employee, of not less than an amount equal to 
                        one and one-half times the minimum wage in 
                        effect under section 6(a)(1) multiplied by 
                        2,080; and
                            ``(ii) in addition to the employee's base 
                        compensation, compensation based upon each sale 
                        attributable to the employee;
                    ``(F) the employee's aggregate compensation based 
                upon sales attributable to the employee is not less 
                than 40 percent of one and one-half times the minimum 
                wage multiplied by 2,080;
                    ``(G) the employee receives a rate of compensation 
                based upon each sale attributable to the employee which 
                is beyond sales required to reach the compensation 
                required by subparagraph (F) which rate is not less 
                than the rate on which the compensation required by 
                subparagraph (F) is determined; and
                    ``(H) the rate of annual compensation or base 
                compensation for any employee who did not work for an 
                employer for an entire calendar year is prorated to 
                reflect annual compensation which would have been 
                earned if the employee had been compensated at the same 
                rate for the entire calendar year; or''.
    (b) Construction.--The amendment made by subsection (a) may not be 
construed to apply to individuals who are employed as route sales 
drivers.

SEC. 605. EXEMPTION FOR FUNERAL DIRECTORS.

    Section 13(a) of the Fair Labor Standards Act of 1938 (29 U.S.C. 
213(a)) is further amended by adding after paragraph (18) the 
following:
            ``(19) any employee employed as a licensed funeral director 
        or a licensed embalmer.''.
                                 <all>